Professional Documents
Culture Documents
i. Meeting of minds or consensus ad idem of the parties that enter into the
agreement to sell.
ii. Under the Transfer of Property Act, the subject matter of sale is immoveable
property, and its essential that the same should be in existence when the entire contract
is made
iii. The person offering to make the sale, should have the right to sell the
property. The seller should be one who has absolute interest in the property, for it is
this interest that gets vested on the buyer after sale.
iv. The transaction should involve some monetary consideration. The quantum
of the same is not importance but only that it should be present. For instance, a person
can agree to sell his property worth 10 lakh in Viman Nagar even for 10,000 rupees.
v. When the quantum is not important, it does not mean that the buyer can
coerce or fraudulently make the seller to devalue the property without any consent. The
quantum is such that, according to the seller, he is willing to transfer his rights for the
amount that he thinks is fit.
All the above basic aspects being satisfied, the transaction is deemed to be a sale.
Section 54 : titled “Sale” defined, it is the introductory provision to Chapter III of the Act, that
deals with sale of immoveable property.
The seller must be competent party to transfer the rights to the buyer. Referring to
Section 7 of the Act, he must be competent to contract, and entitled to transferable
property or must be authorised to dispose of the transferable property that is not
his own.
As far as the buyer is concerned, he should not be one who is legally disqualified to be
a transferee, as stipulated under Section 6(h)(3).
As to what does not constitute an immoveable property, is what is laid down in Section
3 of the Act, which excludes, standing timber, grass or growing crops. Section 3(26)
of the General Clauses Act defines immoveable property as to include land, the
benefits arising out of the same, things attached to the earth, or anything that is
permanently fixed to the former. Land includes the surface of the soil, and when we
talk about property, it includes everything above and below the land surface. The
definition also has included the benefits arising out land, which basically includes any
aspect that enhances the value of the property in terms of monetary, aesthetic values,
etc.
· Transfer or Conveyance :
The main essence of sale under the Transfer of Property Act is that it is the transfer of
rights that is taking place from the transferor to the transferee. In sale, it is the absolute
interest in the property that gets transferred, and this is the main differentiating point
between sale and any other forms of transaction, for if the conveyance of interest is
less than that of being absolute, then it is not sale. Once the transaction gets completed,
the transferee gets all liberty to enjoy the property in the way he wants, and cannot be
restricted by any limitations put up by the early owner, given how absolute possession
has got transferred.
There are two modes by which the transfer of the property can happen– through a
registered instrument, or by simple delivery of possession.
It is also important to note how the provision of the Act laying down these two modes
of transfer, is exhaustive in nature, meaning how sale cannot be effected in any other
way, and this has been observed in many of the case laws. As to the question of when
ownership gets transferred in cases of registration required, it was observed in
Kameshwar Choudhary v. State of Bihar, 1998 Patna High Court, that the ownership
under the sale deed gets transferred on the date of execution of the deed, and not the
date of registration. Taking cue from this observation, if a sale deed had been registered
after a suit had been filed, it will not be subject to the doctrine of lis pendens, if the
deed was executed before the filing of the suit.
The general understanding on how property gets transferred once the deed gets
registered is not followed in cases where the intention of the parties were different. As
Mulla in his commentary on the Transfer of Property Act states, registration amounts
to a prima facie proof to the intention to transfer, but is no proof to an operative transfer
of the property, if there is some condition precedent to the same, like payment of
consideration, etc. A conjoint interpretation of Sections 8 and 54, suggests as to how
though it the case that absolute interests gets transferred to the transferee with the
registration and execution of the sale deed, it could be subject to the conditions laid
down, indicating the intention of the parties. As was observed in Bishundeo Narain
Rai v. Anmol Devi, 1998 Supreme Court case, the primary way of identifying the
intention is by referring to the averment in the sale deed, and it is only in the absence
or ambiguity of the same that extraneous evidences will be sought for.
Delivery of Property :
This is where the transferee is made in possession of the property by the transferor, and
this is the recognised mode of transfer in case of tangible immoveable property of value
less than 100. Possession could either be physical or constructive, an example for the
latter case being the handing over of the keys of an apartment.
Payment of price is not a condition precedent to the completion of the sale, for the
provision clearly gives an opportunity for future payment as well. In this regard, the
terms of the contract, coupled with the intention of the parties, is of paramount
importance in determining the same.
In the event of the buyer not having paid the consideration within the stipulated time
period, after the property has been delivered, the seller can sue him for the price and
all will enjoy charge over the property for the purchase money unpaid.
· A contract for sale is entered into during that interim time period where the
buyer conducts all due diligence procedures with respect to the property to be
bought, the seller’s title to the same, with respect to necessary documents, etc. As
was held in Satya Prakash Goel v. Ram Krishan Mission & Ors, AIR 1991 All
343., a contract for sale is one where the terms of the transactions gets settled
between the parties and is essential for the completion of the same.
· The basic objective behind entering into such a contract, is to safeguard the
interests of the parties, and to ensure that they do not give up on the consensus
reached, at the last moment, thereby causing loss to the other party.
· No specific right is created by this contract, but in the event of either of the party
committing a breach, the other can approach the Court for specific performance.
· Given how it is a contract, all essentials under Section 10 of the Indian Contract
Act, has to be satisfied.
· A contract for sale entered into by a minor is void, but a contract for sale to a
minor is valid, when read with Section 6(h) of the Transfer of Property Act, that
talks about minor as a transferee.
· It is also during this interim period that the good faith money, or token money,
is paid by the buyer to the seller.
· The sections deals with the rights and liabilities of both the parties, under two
circumstances,
· The chart below, show the list of rights and liabilities of the parties, before completion
of sale,
· The chart below, show the list of rights and liabilities of the parties, after completion
of sale,
· The exception to the enumerated rights and liabilities is when the parties themselves
have decided to the contrary, by means of a contract.
· Section 55(1)(a): it lays down the binding obligation on the seller to disclose to the
buyer,
The material defect should be such that the seller is aware but the buyer is not, and
the latter even with ordinary care cannot discover the same.
· With regards to the interpretation as to what constitutes a material defect in the property,
following are the possible ones,
i. The defect would be one that, if the buyer be aware of the same,
he would not go ahead with his decision to buy the property, (this
principle was laid down in the English case of Flight v. Booth,
1834) and
ii. Whether the buyer would be ready to buy it at the same price that
was quoted before he had come to know of the defect.
· Jut as to how it is the duty of the seller, it also qualifies as the right of the buyer. The
provision also expects the buyer to act as a man of ordinary prudence, to check out for
any possible defects that can be discovered. It is for those latent defects that is not possibly
discoverable, that the buyer gets protection.
· Under the English law jurisprudence, the law that was laid down with respect to sale of
chattel in Horsfall v. Thomas, (1862) 1 H & C 90., is that it is the duty of the manufacturer
to reveal to the buyer any defect known to him, and which cannot be discovered on
inspection.
· With respect to patent defects, and those which are unaware even to the seller, the
principle of caveat emptor applies.
· Consider the following two situations to distinguish between patent and latent defects
to the property.
It is patent defect if it is obvious from the geographical position of the property that a third
person or public in general enjoys a right of way.
While it is a latent defect, if the property does not give any indication of the right of way being
enjoyed by a third party or public.
· The defect could also be with respect to the title enjoyed by the seller over the property
under consideration to be sold, for a defective title-holder cannot transfer any interest to the
buyer, when he himself does not enjoy any.
· Defects in title come under the category of latent defect, and it an obligation upon the
seller to act in utmost good faith in this regard. Some instances that qualify as a defect in
the title are, any encumbrance, notice as to acquisition under the provisions of the Land
Acquisition At, an easement, etc.
· In the event of such undisclosed material defect being discovered by the buyer, he can
either sue for damages, or revoke the entire contract on the ground of misrepresentation
and fraud.
This material fact is one that directly impinges on the seller’s interest in the property, in the
event of him being unaware of the same, but the buyer is aware. The fact is such that the buyer
with reasonable prudence knows that the seller will not know about the same, and is one that
can materially increase the value of the seller’s interest.
This is the case of the fact being latent in its nature, and the buyer having the benefit of better
understanding and knowledge, because of which he come to know the same, and hence he is
not to unfairly use it.
In the English case of Summer v. Griffiths, 1866, the seller sold her property at a very devalued
rate because she thought that she could not make out a good title to the same. But the buyer
knew she could, but still went ahead with the transaction. The buyer was held liable for
committing suppressio veri and the transaction was set aside on the ground of fraud.
In the case of Sukhdev Kaur v. Gurdev Singh, 2011 Punjab and Haryana High Court, there
was an agreement for sale that was executed between the buyer and seller, with the token
money having been paid by the former. Regarding the property under sale, in the instance of
only a proposal for notification and not actual notification, that existed in regard to the
acquisition of land for establishment of a military cantonment, it was held how the same did
not amount toa material defect and the seller not being bound to disclose the same, the act of
the buyer from refusing to go ahead with the agreement, led him to lose the token money.
In every transaction relating to property, the most important or rather the quintessential
component, is relevant documents. The current provision lays down an obligation upon the
seller to produce before the buyer, on latter’s request, all important documents of title in
relation to the property that is intended to be sold. One important thing to notice here is that,
the obligation becomes mandatory only in the event of the seller being either in possession or
in power, of the same documents that have been requested for by the buyer.
If one analyses the scheme of this section, the obligation is not only on the seller, but also on
the buyer, for it is only if he makes the request for the documents that the same be provided
with. This is for the benefit of the buyer only, to assist him in the due diligence procedures,
before he jumps into the conclusion of buying the property. in the event of the inspection not
having been made, the buyer later on cannot move the competent court on the ground that the
seller did not provide him with the documents. The court will presume a constructive notice of
the defect later discovered, to have been given by the seller.
This provision is to be read in conjunction with Section 55(1)(c), which is an obligation that is
again put on the shoulders of the seller, to answer any relevant questions relating to the
property or its title, that is put before him by the buyer, to the best of his information. This is
an extension to the right that the buyer enjoys, while he is conducting the due diligence process
with respect to the property. It is a beneficiary provision that the statute extends, in the interest
of the buyer, so that he be clear with the transferability of the respective property, and also so
that the courts may not be overburdened with litigation due to carelessness from his part.
Once the examination has been completed, if not satisfied, the buyer can make requisitions
or objections, either in relation to the title of the property, or it could also be relevant and
significant inquiries being made, so as to satisfy his decision to go ahead with the purchase. In
the case of Hirachand Amersey v. Jayago 1925 Bombay High Court, the facts of the case
were that the plaintiff was not satisfied by the answers given by the defendant with respect to
the title of the property, along with ither demands being made. On the event of his refusing to
go ahead with the contract, the defendant withheld the token money. In a suit to recover the
money, the Court held that the plaintiff was correct in the objections as well as the demands
that he had made.
When it comes to the reply to the inquiries that have been put forth, the duty of the seller to
answer, is limited to the extend of only answering those which are relevant and specific, and
to the best of his information.
In the English case of re Stone and Saville’s Contract, 1963, the issue under consideration was
the purchaser’s decision to rescind a contract of sale with the vendor, on the ground of him not
having given answers to the requisitions on title having been made. Though, the general
practise or expectation is that the purchase makes time as an essence for the answers to be
made, in this case, the purchaser’s decision to rescind was upheld, for analysing the facts and
circumstances of the case, it was understood how the reply would never have been made.
While understanding the buyer’s right to raise requisitions, it is also important to note how he
can waive of the same, either expressly or in an implied manner. An implied way could be
when, subject to absence of anything to the contrary being mentioned in the contract, not
stressing on any time within which the reply has to be made, payment of price, full or part
possession of the property, etc., before the reply has been given by the seller, for it is assumed
that the buyer is satisfied with the due diligence process, even in the absence of the seller’s
reply. But again, this is a very subjective assumption that is made, and it differs on a case-to-
case basis.
The property to be sold, should be free from all encumbrances at the date of sale, and if it
happens to be the contrary, the buyer can retain a part of the purchase money, to the extend of
encumbrance that exists on the date of sale, and pay it off to the person entitled to the same.
An encumbrance can be understood as a third party claim over the property, and the same is
enforceable against the owner of the property, by means of law. Th effects of an encumbrance
is that it creates a charge in the property, which is some sort of restricted rights that the third
party might enjoy. Further, encumbrances can be of three types, it could be statutory, like
pending electricity or water bills, or municipality taxes, or legal, like a property that is sealed,
or it could also be contractual, s in the cases of mortgage, lease, etc.
The duty of the buyer to pay the price is reciprocal to the duty of the seller to convey the
property, and hence it functions on a quid pro quo basis. Completion of sale happens when
the seller executes the sale deed, thereby giving effect to conveyance of the property, and
the buyer on the other hand, pays the purchase money. The conveyance happens only when
the sale deed is executed and not on registration.
Unless the encumbrances are removed from the property, the buyer has the right to refrain
himself from making the payment, and can even go to the extent of compelling the seller to
discharge the same, under applicable provisions of the Specific Relief Act.
In the case of Muhammad Siddiq v. Muhammad Nasirullah, 1899, the scenario was such that
the encumbrance to be discharged was greater than the purchase of the property, agreed to by
the buyer and seller. In such a scenario, the buyer can withhold the purchase money as a
security, for the seller to discharge the encumbrance that is there.
In another situation, suppose if the seller, has given some money to the buyer himself to
discharge the encumbrance, in the event of the same being less to the money given in the former
case, the balance will have to be returned to the seller. In this regard, the case in point is Ram
Ratan v. Abdul Wabid.
The provision, talks about the duty of the seller to make a proper conveyance of the property,
on the event of the buyer having made either the payment of the purchase money that is due,
or tendered the same, at an appropriate time and place. This is the time, when the seller conveys
the absolute rights of enjoyment of the property to the buyer, after the latter having either made
or tendered the price.
For the conveyance to take into effect, all due procedures have to be followed, especially with
respect to the technicalities that are attached to the procedural requirements in the case of
executing the sale deed.
As to the ‘appropriateness of time and place’, there is no such standard rule or procedure that
the Act lays down, and it is for the parties to decide on the same in their terms of contract of
sale. In the event of no specific terms having been laid down in the contract, reasonable time,
is presumed for the conveyance to happen, and the event of the seller having failed to do the
same, a notice can be given by the buyer wherein ‘time is laid down an essence of the contract’,
as was observed in the case of Jamshed v. Burjorji, 1934 Bombay High Court.
Having understood how payment of price and execution of conveyance are reciprocal duties,
both parties should be vigilant enough to complete the same within a reasonable time, and
should not exhibit a lackadaisical attitude, for in the event of ither of the party suing the
other for specific performance, they should be able to prove that they were willing and ready
to their part, but it was the lax attitude of the other party which did not lead to completion of
sale.
In the case of Jagannath Malik v. Surendra Gartia, 2017 Orissa High Court, the Court laid
down the obligation and requirement on part of the buyer, to notify the seller and request that
he execute a sale deed. The buyer has no right to sue for specific performance of the contract
if such a notice is not sent. In the given case, the facts where that the buyer made a request to
the seller to execute a sale deed, assuring that he would clear all due consideration amount to
the effect of purchase of the property, remained. But the seller instead, executed a lease deed
in favour of a third party, and when a suit for specific performance was brought up by the
buyer, the Court refused to entertain the same on the ground that, the notice was not send by
the buyer.
As to the technical requirement of paying the stamp duty, unless otherwise mentioned in
express terms, according to Section 29(c) of the Indian Stamp act, 1899, it is the buyer who
has to pay the same.
· Section 55(1)(e): Care of property that has to be taken by the erstwhile owner
This provision stipulates the duty that is cast on the seller to take the maximum possible care
of the property sold as well as the documents of title relating to the property title, till the
possession gets transferred to the buyer, after the completion of the contract for sale. The
standard of care that the provision stipulates, is that of an ordinary prudent owner of the
property as well as the relevant documents, and not any extraordinary efforts that he have to
showcase. As to what constitutes this ordinary prudence, it is very subjective and changes on a
case-to-case basis.
The same duty has to performed only till the delivery of property takes place, and the period
envisaged is the one post-conveyance and registration of sale deed. In the event of the seller
not having discharged this duty, and any damage that happens either to the property or the title
deed, which could have been avoided had the care of ordinary prudence been taken, then the
loss suffered by the buyer, who is now the owner of the property, will have to be compensated
by the seller.
The nature of this obligation, can also be understood as the one where the seller acts as the
trustee on behalf of the buyer, and takes up a personal obligation to care for the property, as an
ordinary prudent man. This duty can also be better understood by making a conjoint
interpretation with Section 15 of the Indian Trusts Act, 1882, which stipulates the standard
of care that has to be taken by the trustee.
In the case of Hornby v. Matcham, 1848, as to the importance of the duty of the seller to take
care of the title deed, it was observed as to how any damage or loss to the same, can lead to an
effect of the property’s value getting depreciated.
The above duty upon the buyer, vests in him after the sale has been completed, and is a logical
corollary to the duty that the seller has under Section 55(1)(e). This gets attracted once the sale
has completed and the ownership has passed on to him, through the execution of an instrument
of conveyance. Here, the discussion is limited to those situations, where the destruction of the
property happened, or some injury or decrease in value of the same, and all these have
happened, independent of any involvement from the part of the seller. This could have
happened before the possession might have got transferred, and the loss suffered by the buyer,
will have to be taken up all alone by himself. Another interpretation to be taken into
consideration in this regard is that, any of the aforesaid instances, which led to the buyer
suffering the loss, might have been outside the ambits of the ordinary prudence, exercisable
from the seller’s part.
· Section 55(1)(f): Possession to be handed over
After the contract of sale has completed, with the purchase money having been paid and the
sale deed been executed, it is of significant importance that the possession of the property be
handed over to the buyer, for he is the owner of the property and is entitled to an unqualifies
and absolute enjoyment of the same. The delivery can be either made directly to the buyer or
to anyone else, as he directs. As to the nature of delivery of possession being made, it can
either be actual physical control being given in the case of tangible immoveable property, while
it is symbolic, with regards to intangible immoveable property.
This duty of the seller, is construed to be an implied contract, the specific performance of which
is enforceable by a Court, as was in the case of Babu Lal v. Hazari Lal Kishori Lal, 1982
Supreme Court, where it was observed how the Court is competent to order delivery of
possession of an immoveable property, in appropriate cases where specific performance has
been sought for.
In a scenario where the possession has not been delivered by the seller, and him enjoying a
charge on the property under Section 55(4)(b) to the extent of the purchase-money due on part
of the buyer, if a suit for specific performance has been instituted by the buyer for handing over
the possession, there have been varied observations of the judiciary with regard to what the
approach should be. One was that the buyer has to deposit the due amount within a specified
time period, failure of which will lead to dismissal of the suit, or, another observation being
that both these duties cannot be analysed on an equitable platform, or yet another observation
was that a decree for possession be passed , which may incorporate within the same the
existence of the charge over the property.
In the case of Vuddandam v. Venkatakameswara Rao, 1951 Madras High Court, the issue
under consideration was the was entitled to rescind the contract of purchase of the defendant's
land, on discovering that the defendant was not in a position to deliver vacant possession of
the same. The Court observed as to how Section 55(1)(f), imposes a statutory liability on the
seller to deliver to the buyer the possession of the property as its nature admits, and the same
is to be discharged accordingly, in the absence of any contrary contractual terms. Reference
was made to the case of Panchapakesa Aiyar v. Arunacliala Mudaliar, 1932, where the
learned judges held how that the buyer is free to rescind a contract of sale in the event of him
discovering that his legitimate expectation of vacant possession of the property, is not going
to take place. If under the contract, the terms were such that the buyer was to be put in
immediate possession of the property, and the same is not going to happen, then he can
terminate the contract under Section 39 of the Indian contract Act, even before he has paid the
agreed consideration.
Another interpretative exercise, that was taken up in the above case of 1932 was that, when a
holistic and wholesome interpretation of Section 55 of the Transfer of Property Act is made,
there is no justification for interpreting buyer and seller to mean individuals who have really
completed a transfer. The segment also includes those who are in the process of selling
something. As a result, during the course of a transaction, a buyer who can demonstrate that a
seller is unable to perform his commitment in its totality is justified in terminating that contract.
In understanding the phrase “as its nature permits”, the following case can be of great help. In
Sashi Bhusan Dey v. Rai Chand Bural, 1949 Calcutta High Court, the contention of the
plaintiff was that she was entitled to be delivered with the vacant possession of the property,
without any trespassers being in unlawful possession of the same, and the delay in completion
of the sale was solely the fault on the part of the defendant seller. On the claim made by the
defendants that they were not liable for the property being in possession of the trespassers, the
learned judge did not agree with the same. The same was construe as the duty cast on the seller
to take care of the property as an ordinary prudent man would do, had he been the owner of the
property, and it was seen in this case as to how, no such care was taken from his part. The Court
was of the opinion that the phrase 'its nature', refers to an incident that is inherent in the
property and could be referred to as its nature. Hence, unless any contractual terms to the
contrary exists, if the sale results in an absolute interest being vested on the buyer, the
possession anticipated under Section 55(1)(f) of the Transfer of Property Act is vacant
possession.
· Section 55(1)(g): Payment of all public charges and discharging of encumbrances in the
property.
It is duty of the seller to sell the property free of all charges and encumbrances of any types,
for the same is quintessential to the absolute and unqualified enjoyment of the property by the
buyer. This is to make the title clear and marketable. Some of the payments that have to be
made by the seller has been mentioned in the provision itself, and these include rent, public
charges, any other encumbrances, etc., and his duty to pay the same, extends only to those
payments that exist till and as on the date of completion of the sale. The only statutory
exception to this duty to pay and sell the property free of all encumbrances, is when the
contractual terms stipulate any contrary terms. In the case specifying for the exception, the
seller becomes absolved of the liability to discharge the charge or encumbrance.
The seller of a leasehold property is obligated to pay rentals that have accrued up to the date
of sale. Similarly, Section 55(5)(d) requires the buyer to pay rentals that accrued after
ownership has passed to him.
Taxes payable to statutory authorities, like government revenue, municipal taxes, payments
recoverable against the land, etc., would be considered public charges. If the buyer is required
to pay such expenses as a result of the seller's default, he has the same right to indemnity as in
the event of an encumbrance. The public authority issuing the tax will impose it on the party
that is now the owner and is unconcerned on the question of who is rightfully liable to pay the
same.
In the case of Diamond Infotech Pvt ltd v. Kolkata MC, 2011 Calcutta High Court, the order
of the local authority placing liability on either of the parties to sale, to discharge the property
tax due post completion of sale, was held not proper, for the same lies only on the buyer and
not the seller in this case, given how sale has got completed.
In the case of Nathu Khan v. Burtonath, 1922 Bombay High Court, it was observed as to how
in the event of the seller having failed to discharge of his liability of clearing the property of
all encumbrances, and if the same falls on the buyer, the seller is liable to reimburse the same,
according to Section 69 of the Indian Contract Act.
An analysis of the provision, boils down to the understanding that, this duty on the seller to
clear or discharge all payments that are due against the property, as on the date of sale, boils
down to the fact that he is one entrusted to see to it that the completion of the sale happens. For
instance, it has been observed by the judiciary, with equal affirmation being given by the
Supreme Court as well that, in a situation where the property agreed to be sold is one where
the rights can be transferred only after necessary sanction has given by the concerned statutory
authorities, the application for that sanction has to be made by the seller himself.
In this regard, the liability that existed with the seller before the completion of sale to make the
property free of all charges and encumbrances, shifts to the buyer, after the sale has been
completed. The duty to pay the public charges, rent, any other payment in due of other
encumbrances, becomes due on him, once the ownership has completely transferred. As was
observed in the case of Gangi v. Govinda, 1924 Madras High Court, this liability is not
something that is contractual in nature, or arising solely as an effect of the contractual terms,
but rather it is statutory in nature.
Once the completion of the sale happens, in the sale deed that is being executed, it is deemed
that the seller is contracting with the buyer, on the right or interest that he enjoys in the property,
and which is in subsistence, and also that he enjoys the power to transfer the same. This is
what is called a covenant for title, and the same is implied in the sale deed that has been
registered and executed. There is no need for the same to be mentioned expressly in the deed.
Following are the outcomes or effects of this covenant,
a) It can be perceived as an instrument that acts as a warranty to the title that
the seller enjoyed, and had the power to transfer,
b) The liability that arises at any time, out of this implied contract, is limited
to the extent of interest or right, that the seller intends to transfer,
c) The liability of the seller arises when the buyer suffers any loss, after
completion of sale, as a consequence of the seller’s title over the property
having been defective. In this regard, the buyer can either sue for damages,
or claim back the purchase-money, in the event of him being dispossessed
from the property,
d) Yet another important feature is that, the so-called covenant, does not cease
to exist after the completion of a transaction, but it exists as long as the
property exists, and can be enforced by the concerned parties in prospective
transactions.
The scenario changes in the case of a sale that is made by the seller in a fiduciary capacity, like
in the case of a guardian of a minor, for in this case, it is not the covenant for title that is effected
, but rather the implied contract in this case stipulates the condition that there is absence of any
act from the part of the seller which has either encumbered the property or, by reason of which
he is hindered from transferring it.
Further, the provision also states that the covenant for the title as well as the benefit arising out
of the same, runs with the land, the same can be enforced by persons, who gets vested with the
interest on the property, at all prospective times.
If one analyses the provisions under Section 55(1), the same is to provide with all means to see
to it that the buyer is enabled to conduct all the due diligence with respect to the title of the
property, etc., for his negligence at this stage, costs him available remedies, if issues start
arising after sale has been completed. Section 55(2), is a departure from the English rule of
caveat emptor, which is the situation of the buyer, generally, once sae has been completed.
This provision is the remedy available in that situation where the single cause of action become
the defective title, and hence, by incorporating the implied covenant for title, an absolute
warranty in the same regard, has been given.
Exchange
· Section 118 of the Transfer of Property Act, introduces the concept of exchange, the
definition of which can be divided into two components for better understanding,
· Unlike in sale where ownership transfers from one person to another for a monetary
consideration, or the case of gift, where such transfer happens without any such
consideration, in exchange, a system that somewhat resembles a barter kind takes place,
where ownership of one thing gets transferred for that of another.
· Further, the provision also states that when the transfer of property is effected in the
way of exchange, the same can be made only in the method that have been provided for
effecting a transfer by sale.
· It is called an exchange, when either both things are money only, and none of them
are money. This means that, suppose the ownership of the property gets transferred for
money, then it is not exchange, but rather sale.
· But it will qualify as an exchange, if some money is included along with the ownership
that is being transferred.
· A sale should always be for a price, but in the event of an exchange, the transfer of
ownership of one object is for the transfer of another thing, and not for any price paid or
promised.
· Incorporating the changes that have happened in the light of the procedural
requirements, oral exchange, has been held impermissible with the 1929 Amendment that
happened to Section 49 of the Registration Act. By this, if the exchange under consideration
involves immoveable property of valuation above 100 INR, then the same has to be effected
only through the help of a registered deed, otherwise, the same will not be considered as
an evidence for any transaction to the effect of some ownership to have got transferred
through exchange.
In the case of Shyam Narayan Prasad v. Krishna Prasad, 2018 Supreme Court, the necessity
of a registered instrument in the case of immoveable property, was affirmed, in the context of
making an unregistered deed of exchange of immoveable property, inadmissible as an
evidence.
· On differentiating between sale and exchange, there are two main points to be
considered, and in all other aspects it is the same as exchange, like when it comes to rights
and liabilities of the parties, it is same as that of the buyer and seller;
· Section 119: Right of the party who got deprived of the thing he received in exchange
This section, discusses the consequences that arise, when one of the parties to an exchange,
gets deprived of the possession of the property, that he received in exchange, on account of
some defects in the title of the other party.
i. Liability of the party with defective title, for the loss that
the other party has suffered due to such defect in the property,
The only exception to the availability of the above two recourses is the presence of any
contractual terms between the parties, existing contrary to the above. An example to such a
case for exception, in the case of Subramania Ayyar v Saminatha, 1898 Madras High Court,
where, the terms and conditions laid down in the exchange deed was that, “If any claim or
dispute arises, I hereby bind myself to settle it. If I do not get (the dispute) settled, I hereby bind
myself to pay an amount not exceeding ₹4,014-8-6 at the rate of ₹1-4-0 per kuli of land for
lands which go out of your possession”. This is a perfect example to the statutory exception,
whereby, the plaintiff has been excluded of the rights he could have otherwise claimed under
Section 119.
An interpretative exercise of this section was taken up by the Orissa High Court, in the case of
Ch Seetharamaswamy v. Narasingha Panda, 1975, wherein the court held that, the concept
of section 119 also applies when, instead of eventual deprivation of the property transferred,
the property indicated as the property to be received in exchange is not received. Section
119 implies that if a party to an exchange fails to obtain possession of the property to which he
is entitled in exchange, he is also entitled to the statutory recourses that have been stipulated,
if the property is still in possession of the other party, or his legal representative, or a transferee
from him without consideration.
Section 120, makes a general statement as to how the rights and duties of the parties to an
exchange is same as that of the rights and liabilities of the buyer and seller, respectively, and
hence recourse to the same can be made under Section 55. The way the provision has been
drafted, has led to superfluity in the statutory language being avoided. In the event of both the
exchanged property being movable property, then reference is to be made to Sale of Goods
Act, 1932.
Under Section 121, the provision in regard to exchange of money is being discussed, and in
this regard, the entire transaction is deemed to be based on the trust that one party has on the
other, with respect to the genuineness of the money that is being exchanged.
Gift
· Section 122 of the Act, defines gift as the transfer of existing moveable or immoveable
property, by the donor to the donee or anyone on his behalf, without any consideration
and voluntarily.
· The section also stresses on the importance of acceptance of the gift, for the same has
to be made during the lifetime of the donor, for otherwise, the gift becomes void.
· Another interpretative exercise that’s is of great importance is with respect to the facts
that the property that is being transferred under gift, should be one that is in existence at
the time of gift being made, and the same does not extend to a future property.
· The gift that is contemplated by the Act, under Section 5 which talks about the transfer
of property, is that which happens inter vivos or between two living persons. Will as a gift,
does not come under the purview if Section 122.
· In the case of Mathai Samuel v. Eapen Eapen, 2012, the Court laid down the
differentiating test between a gift and a will, which was qualified to being the only reliable
test. Accordingly, the same was to identify what the words in the document state-whether
to transfer the property at present, or intending to transfer the same after the death of the
expected donors. In the latter case, it becomes a will.
A gift does not imply the payment of any consideration or compensation since it is a voluntary
transfer of property devoid of any consideration in return. In the parting of the property by the
owner while making a gift deed, he or she does not intent to make any monetary advantage.
In a gift deed, the executor's intention must be obvious for the gift to be valid, as simply
purchasing property in someone's name would not constitute a lawful gift in his favour without
any other proof supporting the claim. The payment of stamp duty, will not come under the
purview of consideration, for the same is a statutory requirement in the respective transaction,
a means of revenue for the state, and not for any pecuniary advantage for the donor.
To demonstrate that the deed was completed with the donor's free and voluntary permission, it
must be demonstrated that the physical act of signing the deed corresponded with the animus
or the intention to execute the gift. In assessing whether a gift is voluntary, the rules outlined
in the Indian Contract Act of 1872 would apply, in conjoint interpretation with Section 4 of the
TP Act of 1882. In the case of where parties raise the contention that the said gift deed was
signed under fraud or undue influence, the onus is on the parties alleging the same to bring
forth the particulars in this regard, as observed by the Supreme Court in, Subhas Chandra v
Ganga Prosad, 1967 Supreme Court.
In the case of Sulender Singh v Pritam, 2013 Himachal Pradesh High Court, in the case of a
gift deed that was executed by an aged and ailing donor, the registrar failed to ascertain whether
the same was made by the lady herself, and she understood the same. The Court found the
donees to have taken undue advantage, and the gift deed was held invalid. In the same case,
the it was made satisfactory to the Court that the aged donor always wanted to gift ‘a portion’
of the property to the donee, and in this regard, gift to the extent of the same was held valid.
When it came to the case for determining the possibility of undue influence existing, the Apex
Court in the case of Pratima Choudhury v. Kalpana Mukherjee, 2014, observed how two
questions in this regard would be of help, whether the relation between the parties is such that
one can exercise some sort of undue influence over the other, and secondly, whether there has
been an actual exercise of the undie influence.
In the event of making a highly unreasonable transaction through a gift deed, in the context of
the same being challenged on ground of it being made under undue influence, the onus is on
the party in the dominating position, to prove otherwise. This becomes of great importance, in
India especially, if one sees cases where believers or devotees giving everything that they are
having to self-styled Godmans, in the name of spirituality and attainment of salvation.
In the case of Pulakesh Datta v. Parimal Dey, 2015, the facts of the case were that the donor
in this case, was not in the right of state mind, even to the extend that she was unable to look
after herself. In such a situation, she was made to execute a gift deed, and she signed the same
even without knowing what the same was. The requirement of witness attestation was also not
proper, for the witnesses were unknown to her and came from a different village. Court held
the gift to be invalid on the ground of fraud.
Donor is the party who gifts the property. Because a minor is unable to contract, he or she is
also unable to transfer, and any gift made by the minor is void. A minor's guardian cannot make
a legal gift of the minor's property. He can, however, accept a gift on behalf of a child.
The donee is the recipient of the gift. Acceptance must come from the donee, not the donor. A
gift may be accepted by or on behalf of a person who lacks the legal capacity to contract and
hence, a minor can be a donee. Because the donee must be an identifiable individual, the
general public cannot be a donee under this clause, nor can a gift be given to an unregistered
society. Gifts to an idol, despite the fact that it is a juristic person capable of holding property,
are not considered gifts under this provision because an idol is not a living person.
· Subject matter of gift
The gift must be of a specific existing mobile or immovable property. It could be land, goods
or actionable claims. Section 6 requires that it be transferrable. It cannot, however, be future
property, for example, a coparcener cannot make a lawful gift of his undivided part in a
coparcenary. Another important requirement is that the property that has been transferred
through a gift deed, must be in subsistence, when the same was made. Under Section 124, gift
of a future property, is void in nature. In the instance where the gift includes both present and
future property, the voidness of the gift, is only with respect to the future property.
· Transfer of Ownership
The essence of gift is that the ownership in the property is getting transferred, without any
consideration, and the same is between the donor and the donee. It is in this stage, that it gets
to be determined whether the same was a document or a will, for in the latter case, the transfer
is effected after the death of the donor.
This is a necessary step towards completion of the transfer of property through means of a gift,
where the acceptance of the same has to be made by the donee, during the lifetime of the
donor, and when he is capable of gifting the same. Unlike will, gift is an inter vivos transaction
of property. If the acceptance is not done prior to the death of the donor or him becoming
incompetent to transfer, an acceptance later on becomes void.
There is no specific manner of acceptance required, could be either express or implied, and
the circumstances shed light on that. To be complete, a gift transaction must be accepted by the
donee during the donor's lifetime. Different situations, such as the donee gaining possession of
a property or being in possession of the deed of gift alone, can prove the factum of acceptance.
If the donor hands over a gift document to the donee after it has been executed or registered in
his favour, and he accepts it, this amounts to a legitimate acceptance of gift in law.
In the scenario where the donee is an incompetent person to contract, say a person with unsound
mind, the gift mist be accepted by a competent person on his behalf. Also, the property cannot
be transferred by a minor, for he is an incompetent person to contract.
A presumption develops where there is a particular recital in the gift deed that possession has
been given over to the donee. When title passes to the donee upon acceptance of the gift,
possession of the property is deemed to have gone along with such title. When a father makes
a gift to his daughter and, upon her acceptance, she allowed her father to enjoy the income from
the assets settled, it cannot be stated that there was no acceptance of gift by the donee, even
though the donor remained to be in ownership and enjoyment of the property provided, as seen
in the case of Kamakshi Ammal v. Rajalakshmi, 1995 Madras High Court. Possession of the
gifted property is not an absolute need for the gift to be complete or valid.
Gifts between fiduciary parties are frequently challenged on the basis of fraud, deception, or
undue influence. When a party in a litigation alleges fraud, misrepresentation, or undue
influence, the burden is typically on him to establish such fraud, undue influence, or
misrepresentation. However, when one person has a fiduciary relationship with another and the
latter is in a position of active confidence, the burden of proving the absence of fraud,
misrepresentation, or undue influence falls on the person in the dominant position, who must
demonstrate that there was fair play in the transaction and that the apparent is real, in other
words, that the transaction is genuine and bona fide. A person in a fiduciary relationship to
another has a duty to defend the interest entrusted to his care, and the Court closely monitors
all transactions between such parties to ensure that the protector does not abuse his influence
or confidence. When the complaining party demonstrates such a relationship, the law presumes
everything against the transaction, and the onus is placed on the person holding the position of
confidence or trust to demonstrate the fairness and reasonability of the transaction.
· Legal Validity
A third party cannot contest the legality of a gift deed. A third party cannot file a challenge on
behalf of the donor or others who claim under him. It is futile to challenge the validity of the
gift deed when the donor is not even a party to the suit. Even if a person remained to occupy
the house and enjoy the property at the time of the execution and acceptance of the gift deed,
he cannot challenge the transfer of title and legal control of the property in favour of the donee
based only on that fact. Anyone claiming adverse possession of the donor's or donee's property
must show his antecedent ownership to such property or adverse possession.
In the absence of any recital in the document that the document would be effective only on the
death of the executant, such deed would be a gift and not a Will if the executant transferred the
property in favour of her grandsons while reserving in her own favour a right to reside, possess,
and enjoy the property during her life time and a right of residence in favour of her daughter in
law but prohibiting her from alienating the property. She did not reserve in her favour the power
to revoke the deed in any circumstance, and hence, revocation without completing the condition
would be invalid, and the deed would confer a legitimate title in favour of the grandchildren.
This was observed in the case of Pattila Chinnamma v. Bignu Rama Reddi, 2017 Orissa High
Court.
Section 123 states that a registered instrument signed by or on behalf of the donor and
attested by at least two witnesses must be used to make a gift of immovable property. This
rule precludes any other manner of transfer, and even if the intended donee is placed in
possession, a gift of immovable property is void in the absence of a registered instrument. An
oral gift is unlawful in law in circumstances where the Act, 1882 applies, unless there is a
particular statutory provision dispensing with the formalities for gifts as given out under the
same.
The donor must sign the deed, and the same should be attested by at the least, two witnesses.
In the case of a deed signed by the intended donee, the same has no effect on the transfer. The
essential conditions for a valid attestation under section 3 of the Act are that two or more
witnesses must have seen the executant sign the instrument or have personal knowledge of his
signature, and each of them must have signed the instrument in the presence of the executant
in order to attest or bear witness to this fact. It is vital that the witnesses have signed animo
attestandi.
In the case of Samrathi Devi v Parasuram Pandey, 1975 Patna High Court, a gift deed
becomes void in the absence of the same being attested by the witnesses.
The gift deed also needs to be registered, for the title in the property will not get transferred to
the donee in the absence of the same. But at the same time, it also to be noted the observation
made by the Patna High Court in Deo Saran v. Deoki Bharthi, 1924, wherein they held how
the registration of the gift deed is not a solution or medium that can make an imperfect gift
deed lacking in all of its essential elements, a perfect gift.
The gift of immovable property shall be made only for the purpose of transferring the donor's
right, title, and interest to the donee via a registered instrument signed by or on behalf of the
donor and attested by at least two witnesses. The donor's pre-existing right, title, and interest
are thereby divested in the donee by the operation of Section 17 of the Registration Act only
after the gift deed is correctly registered, and the donor loses title to the property subsequently.
A gift of immovable property that is not registered is illegal and does not transfer ownership to
the donee.
The question of whether a donor may revoke a gift after delivery of the deed and before
registration has been considered by Indian courts in several cases, and it was finally settled by
the Privy Council in the case of Kalyan Sundaram v Karuppa, 1927, which decided that the
donor cannot revoke a gift after delivery of the deed and before registration. On the difficulty
in a conjoint interpretation of Section 123 of the Transfer of Property Act with Section 47 of
the Registration Act, it was observed as to how, when the donor hands over the instrument of
gift to the donee and accepts it, the former has done everything in his ability to complete the
contribution and make it effective. Registration is not dependent on his consent, but rather on
the conduct of a lawfully designated person.
With respect to the statutorily prescribes mode of transfer for movable property, there are two
options – either there could be a registered deed signed by or on behalf of the donor, or, delivery
of possession.
The concept an onerous gift, is based on the maxim of qui sentit commodum sentire debetet
onus, which means that the he who gets entitled to the benefits accruing from say an
immoveable property, also gets entitled to receive the burdens or obligations arising from the
land. He cannot elect to avoid the latter and keep only the benefits. Hence, a gift is construed
to be onerous in nature, when the same is embedded with some obligation or liability, that gets
vested on the respective party.
The provision under Section 127, has been divided into two parts, with two illustrations
appended to the Section, which are adaptations of landmark English cases in this regard.
The understanding of the first part can be made from the following bifurcation,
iv. Out of the many constituents of the gift, one is burdened with an
obligation, while the others are not.
In the above case, the donee is at no liberty to make a partial acceptance, and he can either
accept the gift fully, or reject the same. The illustration in this regard is the facts pertaining to
the case of Moffet v. Bates, 1857.
The onerous gift requirement under this part, is equivalent to the election rule in section 35.
According to that section, if an instrument confers a benefit while purporting to divest the
beneficiary of other property, the latter cannot choose to make himself enjoy the benefits
without agreeing to give up the property, because he must either take under the instrument or
against it.
The second part to the provision on onerous gift, talks about that instance where the departures
that have happened when compared to the above case is with respect to the aspects that the gift
under this is not in the form of a single transfer, but as sperate and different independent
transfers, and the donee to whom it is made, has the liberty to elect which gift he would accept.
The illustration that has been appended in the statute In this regard, is adaptation of the facts of
the English case of Warren v. Rudall Godfrey, 1860.
MORTGAGES
INTRODUCTION
A mortgage corresponds to the 'Hypotheca' of Roman Law. The creditor, on the failure of the
debtor to pay the debt, could bring the debtor's property to sale and recoup himself. Hindu and
Muslim Laws also recognised the mortgage under which the property was pledged to the
creditor and the debtor was kept out of possession till the debt was repaid, the creditor taking
the profits in lieu of the interest.
Loans may be secured or unsecured. Where the loan is secured against any movable property,
it is called a pledge. Where the loan is secured against some immovable property of the debtor,
it is called mortgage. A mortgage is a transfer of an interest in specific immovable property as
security for the repayment of debt. Justice Mahmood observed: "Mortgage as understood in
this country cannot be defined better than by the definition adopted by the Legislature in
Section 58, TPA.”
The Supreme Court in Kedar Lal v. Hari Lal (AIR 1952 SC 47) has observed that the whole
law of mortgage in India is embodied in the T.P. Act read with Civil Procedure Code. Order
34, Rules 1 to 15, CPC deals with suits relating to mortgages of immovable property. The
Court cannot travel beyond these statutory provisions.
“A mortgage is the transfer of an interest in specific immovable property for the purpose of
securing:
(a) the payment of money advanced or to be advanced by way of loan,
(b) an existing or future debt, or
(c) the performance of an engagement which may give rise to a pecuniary liability."
Mortgage is another "specific transfer" provided in the TPA. In order to constitute a mortgage,
the following elements must be present in the transaction:
If above conditions are fulfilled, the transaction is mortgage irrespective of its form. If any one
of the above essentials is absent, the transaction will not be mortgage.
(1) Transfer of an Interest: The words "transfer of an interest" signify that the interest which
passes to the mortgagee is not ownership or dominion which, notwithstanding the mortgage,
resides in the mortgagor (redemption). The right of the mortgagee is only an accessory right
which is intended merely to secure the due payment of the debt. Thus, a mortgage-debt is
not an actionable claim but transfer of an interest in the immovable property. The Interest
transferred in the several classes of mortgages are, however, not identical. What type of interest
is transferred to the mortgage decides the kind f mortgage. The quantity and the nature of
the interests or rights ransferred will depend upon the kind/form of the mortgage. But in
each case, whatever there be the form of mortgage, there is a transfer of partial aterest only,
and not the transfer of whole of the interest of the transferor/ mortgagor. Since a mortgage
creates a right in rem, such right is available against all subsequent transferees of the
mortgaged property irrespective of notice.
(2) Specific Immovable Property: In order to create a mortgage. it is essential to specify the
immovable property. The immovable property must be distinctly and specifically mentioned
in the deed. Otherwise it would be void for vagueness. It must be mentioned in a reasonable
certain manner so that it can be identified as to which property has been mortgaged. The
property must not be described in general terms, such as. "my all properties” or. "my house and
landed properties".
A transfer which is made not for the purpose of securing a debt or other obligation but by way
of discharging a debt/liability is not a mortgage. Where the earnest money was paid in
pursuance of agreement of sale relating to a land as the sale did not come off, the vendor-owner
executed what was styled’ as lease deed in favour of prospective purchaser for a specified
period in order to repay the earnest money received. the document was only a lease deed and
not mortgage
KINDS OF MORTGAGE
(Section 58(b), (c), (d), (e), (1) & (g)]
No Delivery of Possession: In Simple Mortgage, possession remains with the mortgagor. The
security which the mortgagee obtains is that of the mortgaged property and not of the rents and
profits arising out of it. If simple mortgagee sues for enforcement of his security, a decree for
possession would be illegal (Section 68). It would also not operate as foreclosure. At the most
it would convert a simple mortgagee into a mortgagee with possession. A simple mortgage
with possession is a simple mortgage usufructuary or an anomalous mortgage.
Right to cause the property sold: The mortgagee has the power to cause the property to be
sold in the event of the non-payment of the mortgaged money. The word 'cause the property to
be sold” indicate that the power of sale is not to be exercised without the intervention of the
court. Mortgagee himself has no power to sell the property; he has to get a decree from the
Court for the sale. When the property is sold by intervention of the Court, the Mortgagee shall
get the money advanced by him with interest. Remaining part of the proceeds of sale is given
to the mortgagor whose property was sold.
Registration: Simple mortgage can be made only through a registered document. Even if the
sum of money secured is less than Rs. 100, a simple mortgage must be effected by a registered
instrument (Section 59).
Mortgagee's Remedy: In a simpie mortgage, if the mortgagor fails 10 repay the loan within
stipulated date, following two remedies are available to the mortgagee:
(i) Since in simple mortgage the mortgagor takes personal obligation 10 repay the loan, the
mortgagee may sue the mortgagor personally for recovery of the money. In such a case, he
shall get simple money decree.
(ii) The mortgagee may also move the Court for the sale of mortgage- property so that he may
recover his money. In such a case he gets a decree for the sale of property.
However, the mortgagee may put both the cause of actions in one suit.He may sue the
mortgagor personally and may also request the Court for a decree in his favour for the sale of
property. But, in all the cases, the suit must be filed within twelve years from the date on which
the loan (mortgage money) becomes due.
Clause (c) of Section S8 says that "where, the mortgagor ostensibly sells the mortgaged
property on condition that:
(a) on default of payment of the mortgage-money on a certain date, the
sale shall become absolute, or
(b) on such payment being made the sale shall become void, or
(c) on such payment being made the buyer shall transfer the property to
the seller.
It is an ostensible sale on condition that upon repayment the buyer shall transfer the property
to the seller. The personal liability is not an essential ingredient of a mortgage by conditional
sale. It has been said that this: circumstance makes mortgages by conditional sale an exception
to the rule no debt no mortgage. The remedy of mortgagee by conditional sale is to sue for
foreclosure only.
Essentials: In a mortgage by conditional sale,
(i) The mortgagor must ostensibly seil the immovable property
(ii) There must be a condition that either,
(a) on the repayment of the money due under the mortgage on a certain date, the sale shall
become void or the buyer shall transfer the property to the seller, or
(b) in default of payment on that date the sale shall become absolute.
iii) The condition must be embodied in the same document.
This is a mortgage in which the ostensible sale is conditional, and intended as a security for the
debt and the right of redemption subsists notwithstanding that the mortgagor has failed to pay
at the time stated. The term ostensible means that it has an appearance of sale and it is not a
sale in reality. It must be noted that in ancient India there was no right of redemption in
mortgage by conditional sale after the default was made in payment as agreed upon. In
Thumbuswamy v. Hossain Rowthen, (1875) 1 Mad. (16) (PC), the Privy Council observed:
"the essential characteristics of a mortgage by conditional sale was that, on the breach of the
condition, the contract executed itself, and that the transaction was closed and become absolute
sale without any further act of the parties or accountability between them.”
Proviso: Condition in the same deed: The proviso to the Section envisages that the condition
affecting a sale as a mortgage transaction must be incorporated in one and the same deed.
Where there are separate deeds the mortgagor will be debarred from saying that the transaction
was in the nature of mortgage by conditional sale. In Pandit Chunchun Jha v. Sheikh Ebadat
All, AIR 1954 SC 345, the Supreme Court observed that "if the sale and agreement to
repurchase are embodied in separate documents then the transaction cannot be a mortgage
whether the documents are contemporaneously executed or not. But the converse does not
hold good, that is to say, the mere fact that there is only one document does not necessarily
mean that it must be a mortgage and cannot be a sale." The determining factor is the intention
of the parties, which must be ascertained from the surrounding circumstances.
Mortgagee’s remedies: Generally a mortgagee has two remedies, namely, the sale or the
foreclosure. In a mortgage by conditional sale, the mortgage itself works out into a sale, or the
conditional sale becomes absolute in case of non-payment of money. And, therefore, a
mortgagee under Clause (b) has the only remedy of foreclosure. There can be no
foreclosure direct. It can be only by decree of the Court. The provisions of Section 67, TPA
and Rules 2 & 3 of Order 34, CPC make it clear that subject to the law of limitation a
mortgagee by conditional sale can file a suit praying for decree of foreclosure and thus could
enforce the payment of the amount due under the mortgage.
In Ismail Khatri v. Muljibhai Brahmabhatt (AIR I994 Guj. 8), the first part of the document
spoke of an outright sale, whereas the second part contained provisions for redemption of the
land. The court observed that the document must be read as a whole, and held that it was a
mortgage by conditional sale and not a sale with a right to repurchase.
In Mishee Lal v. Jagarnath, AIR 2007 Pat. 145, the sale and the condition of retransfer were
embodied in one and the same document, if consideration amount was paid by the vender
within 5 years, same valuation was fixed for re-transfer with the condition that the purchaser
had no right to mutate property in his name and if the purchaser refused to transfer land, the
vender was entitled to take back the possession of the property by depositing the consideration
in Court. In view of these facts it was held that the content of the deed established beyond doubt
thät it was a document of mortgage by conditional sale and not out and out a sale.
Delivery of Possession: The possession of the mortgaged property is handed over to the
mortgagee by the mortgagor as a security for the paymentg of mortgage-money. So long the
debt remain unsatisfied, the mortgagee is entitled to remain in possession of the property. It is
not necessary that the physical delivery of possession must be made at the time of execution of
the deed. The mortgagor may either give express or implied undertaking to deliver possession.
There cannot be two different usufructuary mortgages of the same property at the same time,
as the possession can be given to one only.
Rent and Profits: The mortgagee becomes entitled to receive rent a profits of the property
mortgaged till the money is repaid. The method which the rents and profits are to be
appropriated depends upon the terms the mortgage-deed. The rents and profits or part of the
rents and profits n be appropriated,-
(1) in lieu of interest,
(2) in lieu of principal, or
(3) in lieu of principal and interest.
In the first case, the mortgagor recovers possession when he pays the principal. In the second
case, the mortgagor continues to pay interest and is money entitled to recover possession when
the rents and profits received by the mortgaged equal the amount of the principal. In the last
case, the mortgagor is not to recover possession until the principal and interest are paid out of
the rents and profits.
No personal liability of the mortgagor: In a usufructuary mortgage, the mortgagor does not
take any kind of personal responsibility regarding the payment of mortgage money. The
mortgagee himself has to utilize rents and profits accruing from the property for the satisfaction
of his mortgage money as well as rents. In usufructuary mortgage no time limit is fixed during
which the mortgage is to subsist, because it is difficult to predict within what time the debt will
be satisfied. How the rents and profits should be appropriated depends upon the terms of the
contract but mortgagee is supposed to maintain an account of rents and profits obtained by him.
Mortgagee's remedies: Where the mortgagor fails to deliver possession of property, the
mortgagee can sue for possession or for recovery of money advanced. But if he has got
possession, his only remedy is to retain property till his debts are satisfied. The right of
foreclosure or sale is not available to the usufructuary mortgagees. In a usufructuary mortgage,
the mortgagee has the advantage to repay himself. While in a mortgage by conditional sale, as
no delivery of possession is given under it, there is no such advantage to a mortgagee.
In Pratap Bahadur v. Gajadhar ((1902) 24 All, 512] the mortgagor promised to put the
mortgagee in possession of a certain village on a subsequent date, and to pay interest at 24 per
cent until possession was delivered. It was held to be a case of usufructuary mortgage. In
Yashwani v. Vithal ( (1897) 21 Bom. 267] there was a covenant by the mortgagor to pay
interest every year but if he failed the mortgagee could take possession and appropriate rents
and profits towards interest. It was held to be a case of simple mortgage.
Rights of usufructuary mortgagor: Under Section 62, a usufructurary morigagor has been
given a right to recover possession of the mortgaged property from the mortgagee when:
(i) Where the mortgagee was authroised to pay himself the amount of mortgage-money from
the rents and profits of the property and the money is paid,
(ii) Where the mortgagee is authorised to pay himself from rents and profits and the terms
prescribed for the payment of the mortgage- money has expired and the mortgagor pays the
mortgage-money or balance of it to the mortgagee or deposits it in the court.
The chief characteristic of this mortgage is that the operative word should be the same as in an
absolute conveyance.
Personal liability: Every mortgage implies a loan, and every loan implies debt for which
mortgagor's (debtor's) estate is personally liable. In English mortgage, the mortgagor takes a
personal liability to repay the mortgage-debt on a certain date. Covenant to pay is an
essential element of such a mortgage. An option to earlier payment or extention of time for
repayment is a matter of grace and in no way affects the undertaking to repay on a certain date.
The object being that it should be known with certainty when the mortgagor will redeem or
when the mortgagee will proceed to enforce the mortgage by foreclosure or sale. If no date is
fixed for payment, the mortgage a not in the English form.
Rights of Possessor: The mortgagee in the English form acquires the right to take possession
as soon as the mortgage is executed whether the right of entry is expressly covenanted or not,
and can retain the same till the mortgage-money is not paid to him. But when the mortgagor is
in possession, he is entitled to profits and need not account to the mortgagee. When the
mortgagee takes possession of the hypothecated property or receives the rents. he has to
account for the profits and rets received and apply them in reduction to mortgagee's dies.
Proviso for reconveyance: One of the basic characteristic of an English mortgage is that the
proviso must be for retranster of the property “upon payment of the mortgage-money as
agreed", on a certain date. There must be a clear provision or agreement in the mortgage that
as soon as the mortgage-money is paid. the absolute interest transferred in the property
mortgaged shall revert back to the mortgagor.
In English law a mortgage of this type is called an "equitable mortgage” as opposed to a "legal
mortgage" because in this kind of mortgage there is simply a deposit of document of title
without anything more, without writing or without any other formalities. The term 'equitable
mortgage' not being appropriate in India on account of the absence of classification or division
of estates or rights into legal and equitable; and it is called a mortgage by deposit of title deeds.
The object of the legislature in providing for such a mortgage is to give facilities to the
mercantile community in cases where it mav be necessary to raise money all of a sudden before
an opportunity can be afforded of preparing the morgage deed. This mortgage, therefore,
does not require any writing and being an oral transaction is not affected by the Law of
Registration.
Existence of debt: Debt may either be an existing debt or a future debt. Any transfer of an
interest in any property to secure the payment of money. advanced or to be advanced, or an
existing or future debt, or the performance of an engagement which may give rise to a pecuniary
liability is a morgage and clause (f) defining equitable mortgage prescribes merely one of the
modes of creating a mortgage.
Deposit of title-deeds: Physical delivery of documents is not the only mode of deposit,
constructive delivery of documents is sufficient. For a valid equitable mortgage it is not
necessary that all the documents of title should be deposited or, that the documents deposited
should show a complete title. It is sufficient if the deeds, deposited bona fide, relate to the
property and are material evidence of title. If the document deposited do not show any title at
all and there are documents in existence showing his title to the property but they are not
deposited then, an equitable mortgage is not created.
Intention to create security: The intention that the title deeds shall be security for the debt is
the essence of the transaction. The mere fact that the title deeds are handed over by A to B does
not establish a mortgage. deeds are to be delivered in performance of that agreement that they
are sec for the money borrowed (debt). There is no equitable mortgage unless is a connecting
link between the debt and the possession of title suggesting a definite intention on the part of
the debtor that deeds a possession of creditor as security for the debt.
The intention to create security is a question of fact, and not of law, which must be determined
in every case like other facts. The said fact will have to be decided just like any other fact on:
(i) presumptions; and (ii) oral, documentary or circumstantial evidence. The intention cannot
be presumed from possession for mere possession of the deeds is not enough without evidence
as to the manner in which the possession originated so that the contract may be inferred.
(6) Anomalous Mortgage (Section 58(g)|
Many of the customary mortgages prevailing in various parts of the country. It is to protect
them that Clause (g) has been enacted. In fact, the terms of the contract between the parties
could be anything provided the right of the mortgagor to redeem is not affected. Clause (g) of
Section 58 says that "A mortgage which is not a simple mortgage, a mortgage by conditional
sale, an usufructuary mortgage, an English mortgage or a mortgage by deposit of title-deeds
within the meaning of this Section is called an anomalous mortgage."
Section 98 may be read along with this Section. It reads: "Rights and Liabilities of Parties to
anomalous mortgages: In the case of an anomalous mortgage the rights and liabilities of the
parties shall be determined by their contract as evidenced in the mortgage-deed, and, so far as
such contract does not extend, by local usage.”
Suppose possession of the mortgaged property is given to the mortgagee, the terms of the
mortgage being that the rents and profits of the property should be appropriated towards interest
and that if the principal amount is not paid by a particular date, the property is deemed to be
sold to the mortgagee. It partakes of the characteristics of both a mortgage by conditional sale
as well as a usufructuary mortgage. Such a mortgage again would be an anomalous mortgage.
Such mortgages may take innumerable forms moulded either by the custom or the caprice of
the creditor. In this, the possession may or may not be given. If the mortgaged money is Rs.
100 or more, it must be registered but if less than Rs. 100, it may be by a registered deed or by
delivery of possession.
Remedies of mortgagee: The mortgagee's remedy is by sale and foreclosure, where the terms
of the mortgage permits it [Section 67(a)]
Mortgagor has a right of redemption: It is true, that a right of redemption under a mortgage
deed can come to an end but only in a manner known to law. Such extinguishment of right can
take place by contract between parties or by a decree of the Court or by a statutory provision
which debars the mortgagors from redeeming the mortgage. The mortgagor's right of
redemption is exercised by the payment or tender to the mortgagee at the proper time and at
the proper place, of the mortgage money. When it is extinguished by the act of parties the act
must take the shape and observe the formalities which the law prescribes. The expression "act
of parties" refers to some transaction subsequent to the mortgage and standing apart from the
mortgage transaction.
RIGHTS OF A MORTGAGOR
Mortgagor: The person who actually mortgages the property is a mortgagor. He is the owner
who has parted with some rights of ownership. A person, to become a mortgagor must transfer
an interest in specific immovable property by creating a mortgage. As per Section 59A, the
term mortgagor includes a person who derives his title under original mortgagor. And,
therefore, this term includes successors, executors and administrators, who derive their title
from the original mortgagor. But the term does not include a transferee of the mortgagor in
Section 68(a) as the transferee of the mortgagor is not bound by the mortgagor's personal
covenant, though in clause (c) the Section a subsequent purchaser would be included. It also
includes execution purchaser of whole or part of the equity of redemption.
Illustration: A and B join in a mortgage as mortgagor, but the property mortgaged is only of
B and no property of A is included in the mortgage. A is not a 'mortgagor'. This is because a
person in order to become a ‘mortgagor' must transfer an interest in his property. Here A has
not transferred any interest in property.
The rules which apply to decide the competence of a person to be a transferor, equally apply
to the case of a mortgagor. Accordingly, when a mortgage is executed by several persons, some
of whom are minors and some are pardanashin ladies who have not executed the deed in
accordance with law, the execution is invalid as regard the rest, but for others, the mortgage is
valid and binding on them. A mortgage by the minor, who is incompetent to contract is void.
The creditor cannot recover money even under Sections 64 and 65 of the Contract Act.
Rights of Mortgagor: Sections 60 to 66 and 95, TPA deal with rights and liabilities of
mortgagor. The mortgagor has several rights like (a) Redemption, (b) Inspection and
production of documents, (c) right to accessions, (d) right to let out, (e) right to reasonable
waste and (f) right to direct that mortgaged property be passed on to someone else other than
he himself.
The most important, fundamental and basic right possessed by the mortgagor is the right to
redeem the mortgage. It is an essential attribute of the transaction of mortgage; it is inherent in
thing itself. This right is not merely a contractual right, it is a legal/statutory right given to the
mortgagor by Section 60, TPA which cannot be fettered by any condition which impedes or
prevents redemption. Any such condition is void as clog on redemption. The right of
redemption is invaluable in the sense that it cannot be denied to the mortgagor even though he
may by express contract abandon his right to redeem the property. Equity is insistence upon
the principle that a mortgage is intended merely to afford security to the lender and thus an
agreement which prevents redemption is void. The right of redemption, therefore, cannot be
taken away. The Courts will ignore any contract, the effect of which is to deprive the mortgagor
of his right to redeem the mortgage.
Meaning of redemption: The property mortgaged is only a security for the payment of the
money lent, the mortgagor is entitled to get back his property on payment of the principal and
interest after the expirty of the due date for the repayment of the mortgagee money. This right
of mortgagor is called the right of redemption. Redemption involves two things:-
(a) re-transfer of the interest which had been originally transferred to
the mortgagee, and
(b) delivery of the possession.
Section 60 reads:
"Right of mortgagor to redeem: At any time after the principal money
has become due, the mortgagor has a right, on payment or tender, at a proper
time and place, of the mortgage-money, to require the mortgagee:
(a) to deliver to the mortgagor the mortgage-deed and all documents
relating to the mortgaged property which are in the possession or
power of the mortgagee,
(b) where the mortgagee is in possession of the mortgaged property, to
deliver possession thereof to the mortgagor, and
(c) at the cost of the mortgagor either to re-transfer the mortgaged property
to him or to such third person as he may direct, or to execute and
(where the mortgage has been effected by a registered instrument) to
have registered an acknowledgment in writing that any right in
derogation of his interest transferred to the mortgagee has been.
extinguished:
Provided that the right conferred by this Section has not been extinguished
by act of the parties or by decree of a Court.
The right conferred by this Section is called a right to redeem and a suit
to enforce it is called a suit for redemption.
Section 61 reads:
"Right to redeem separately or simultaneously: A mortgagor who has
executed two or more mortgages in favour of the same mortgagee shall, in the
absence of a contract to the contrary, when the principal money of any two or
more of the mortgages has become due, be entitled to redeem any one such
mortgage separately, or any two or more of such mortgages together.”
Section 60 deals with the different aspects of right of redemption i.e.,when it arises; how it is
to be exercised and what are the rights of the mortgagor on redemption i.e., effect of
redemption. Section 60 consists of five paragraphs:
First para elaborates right to redeem. This right arises when principal money has become due
and mortgage money is paid or tendered at a right place and right time. Redemption consists
of Right to get back all documents given or executed at time of mortgage including mortgage
deed and other documents. Right to get back possession or liberty to get mortgaged property
retransferred to him or to someone else. Mortgage has duty to do all these three.
Second para puts a limitation on right to redeem. It is not available if right to redeem has been
extinguished by act of parties or Court decree.
Third para talks about this right as right to redeem and suit as one of
redemption.
Fourth para says that notice may be required before exercise of right to
redeem.
Right of redemption: When arises: Right of redemption under Section 60 arises when the
principal money has become ‘due'. Thus, where a mortgage-deed provides for a period of
payment of the mortgage money, the mortgagor’s right to redeem will arise only after the expiry
of the said period and not before because before the expiry of such period mortgage-money
would not be "due', in the sense that the mortgagee could sue to recover it.
Where in a mortgage deed no time is specified for redemption, the right of redemption arises
soon after the creation of the mortgage. And, therefore, in case of a usufructuary mortgage the
right of redemption arises as soon as the mortgage deed is executed. Hence, the period of
limitation starts running from the date of the deed.
There is nothing in law to prevent the parties making a provision that the mortgage may be
redeemed even before the expiry of the agreed period. This Section does not prevent the parties
from entering into an agreement that the mortgage may be redeemed even before the debt has
become ‘due' and such agreement is valid.
The mortgagor is not entitled to redeem before the mortgage money is due i.e. before the time
fixed for payment of mortgage money. Under Section 60 at any time after the principal money
has become due the mortgagor has a right, on payment or tender of the mortgage money to
require the mortgagee to recover the mortgage property to him. This remedy is not available to
the mortgagor after the mortgagee has filed a suit for enforcement of the mortgage. The
mortgagor can exercise the right before it is extinguished by the act of the parties or by
operation of law. This right is also extinguished by a decree of Court.
Mode of exercising Right of redemption (Sections 60, 83, 84, 91): A mortgagor may exercise
his right of redemption in any of the following manner:
(1) Payment or tender of mortgage-money: The payment of the mortgage-money may be made
directly to the mortgagee or his agent "Tendering" means making unconditional offer for the
payment of debt in such manner that mortgagee gets the money. When there are two or more
joint mortgagees, the payment must be made to all of them jointly. Payment of mortgage money
to only one of the mortgagees does not discharge the debt against the remaining mortgagees.
(2) Deposit in the Court: The second mode of redeeming a mortgage is by depositing the whole
amount due in Court when the mortgage-money becomes due (Sections 83 & 84). As soon as
it is deposited in the Court, the Court shall send a notice to mortgagee that such a deposit has
been made.
(3) Filing a Suit for redemption: The mortgagor may file a suit for redemption in a Court of
law after the principal money has become due (Section 91). The suit must be filed during the
subsistence of mortgagor's right of redemption.
Effect of redemption (Sections 60, 60A, 62, 63, 63A and 64): After redemption the mortgagor
becomes entitled to the following rights:
(a) The right to deposit mortgage money in same court, in account and name of creditor, which
has jurisdiction in suit for foreclosure. (Section 83)
(b) The interest ceases to run after deposit in court. (Section 84)
(c) He will claim back the mortgage deed and all the documents relating to mortgage if they
are in possession of the mortgagee. The mortgagee is bound to return not only the mortgage
deed but all such documents which are in his possession or power.
(d) He is entitled to get back the possession of the property. Since usufructuary mortgage
requires delivery of possession of the mortgage property, the effect of redemption in such case
would be to compel the mortgagee to give back the possession to him and the mortgagee will
be bound to deliver the possession.
(e) He is entitled to compel the mortgagee to retransfer the mortgaged property. Such a right is
available in an English mortgage, as such a mortgagor binds himself to repay the loan on a
certain date and the mortgagee is required to transfer the mortgage property, which was
transferred to him, to the mortgagor. Thus in English mortgage the mortgagor on redemption
acquires the right to compel mortgagee to retransfer the property absolutely to him.
Redemption of portion of security (Section 60): This is not allowed. The security is one, loan
is one, liability is one. The security is indivisible Security is for whole debt. The whole debt is
repayable. Any body among debtors may pay whole and redeem whole. A share of the debt
cannot be paid and part cannot be redeemed, For example, A, B and C take loan of Rs. 40,000/.
A pays fifty percent of security and takes Rs. 20,000/- of loan money. B and C give ¼ security
and take Rs. 10,000/-each out of loan money. Later on, there is a dispute. A wants to pay 50%
of mortgage money and take his 50% interest in security. Can he be allowed? 'No'
(a) By act of parties: By act of parties, the right may be extinguished in the following manner:
(i) Redemption of mortgage by mortgagor;
(i) Sale by mortgagor of his equity of redemption;
(iii) Foreclosure of mortgage by mortgagee under Section 67;
(iv) Sale by mortgagee under Section 68;
(v) Lapse of time i.e. the exercise of right becomes barred by limitation.
The "act of parties" extinguishing the right of redemption refers to ‘act of parties' which is
independent of the mortgage transaction and not a part and parcel of it. Such 'act of parties'
must also be subsequent to the transaction of mortgage, otherwise it would be invalid as a clog
on redemption.
(b) By decree of a Court: Right of redemption is also extinguished by a decree of the Court.
Decree here means a final decree in a suit for foreclosure by mortgagee or in a suit for
redemption by the mortgagor. It is by these decrees that the right of redemption is extinguished.
(c) By operation of Law: Extinguishment of the right of redemption by operation of law has
not been included in Section 60. But, the right is lost also by operation of law. For example,
where mortgagee obtains the right of redemption by succession or by adverse possession or the
mortgagor gets mortgagee's right of inheritance, the right is terminated by operation of law.
The mortgagor's right of redemption as laid down in Section 60, TPA is a legal/statutory right.
This Section has not used the expression " in the absence of any contract to the contrary". This
means to suggest that any contract by mutual agreement between the parties which is against
its provisions has not been contemplated by Section 60 and cannot be regarded as valid. In
Balbhaddar Prasad v. Dhanpat Dayal, AIR 1924 Oudh 193, it was observed that the object
of Section 60 appears to legalise the equitable right to redeem and permit redemption even
when the right is expressly abandoned or even postponed by the contract of mortgage which is
the subject-matter of the suit
a for redemption.
The right of redemption in India is based on English equity of redemption. The doctrine of the
equity of redemption flows from the early development of case law on the subject by the Courts
in England to the effect that although a transaction of a mortgage pertains to immovable
property, it is also a contract between the parties relating to such property. Since it is a
transaction in the nature of a contract, it is not beyond the scope and ambit of the law
pertaining to contracts. Normally Courts would bind each party and make tach of them
responsible for the mutual rights and obligations created by such a contract voluntarily entered
into by the parties. However, the Courts have always refused to recognize or enforce contracts
which are unconscionable, opposed to public policy, immoral contracts, etc:
The doctrine "clog on the equity of redemption" is also an extended rule of equity, justice
and good conscience. The doctrine is this: "A mortgage is a conveyance of an immovable
property as a security for the payment of a debt or the discharge of some other obligation for
which it is given. This is the idea of a mortgage: and the security is redeemable on the payment
or discharge of such debt or obligation, any provision to the contrary notwithstanding. Any
provision inserted to prevent redemption on payment or performance of the debt or obligation
for which the security was given is what is meant by a clog or fetter on the equity of redemption
and is therefore void."
The doctrine of clog on equity of redemption is similar to the "rule against perpetuity". The
principle is that no one can take away the right which the law vests in him. The doctrine implies
that no contract between a mortgagor and a mortgagee made at the time of mortgage and as a
part of mortgage) transaction can be valid if it prevents the mortgagor from taking back his
property on paying off what is due on security. One must be careful that the doctrine relates
only to dealings which take place between the parties to a, mortgage at the time when the
contract of mortgage is entered into. It does; not apply where they subsequently vary the terms
upon which the mortgage, may be redeemed. The doctrine is also subject to the mortgagee's
rights prior to the mortgage.
The Courts too have accepted that the doctrine of clog on equity of redemption being a rule of
justice and good conscience, it must be given: recognition. Accordingly, a clog on mortgagor's
right of redemption is void: as being against the provisions of Section 60 as well as violative
of them principles of equity. The result is that even mortgagor cannot stipulate against his own
right of redemption. If he does so, it may be void as being a 'clog' on. his right of redemption.
If he does so, it may be void as being a "clog' on his right of redemption. However, a condition
or stipulation is a 'clog', and thereby void, only in the following circumstances:
(i) The condition or stipulation has been imposed only by the mortgagee,
not by any other person who is stranger to transaction.
(i) The condition or stipulation must be incorporated in the mortgage-
deed itself. Parties are free to stipulate otherwise by any independent
contact outside the mortgage-deed.
(ili) The condition or stipulation included in the deed must be
unreasonable, against public policy and with mala fide intention.
(iv) The condition or stipulation puts either absolute restraint on
mortgagor's right of redemption or prevents him from redeeming
the mortgage for unreasonably long period.
What is clog on redemption is a matter of fact in each case. Whether in the facts and
circumstance of the cases the mortgage transaction amounted to clog on redemption is a mixed
question of law and fact. Following instances would make it clear.
1. Condition of sale in default: The courts will ignore any contract the effect of which is to
deprive the mortgagor of his right to redeem the mortgage. Accordingly if one of the terms of
the mortgage is that on the failure of the mortgagor to redeem the mortgage within the specified
period, the mortgagor will have no claim over the mortgaged property and the mortgage deed
will be deemed to be a deed of sale in favour of the mortgagee, it cannot be given effect to. It
plainly takes away altogether the mortgagor's right to redeem the mortgage after the specified
period. This is not permissible for "once a mortgage always a mortgage" and therefore always
redeemable.
2. Long term for redemption: A long term is not necessarily a clog on redemption. Whether
long term of redemption is a clog or not will depend on the circumstances of each case. This is
so because in certain cases postponement of the right of redemption for a long term may be
convenient for both the parties. It may be convenient for the mortgagor who will not have to
search out another creditor. It may suit mortgagee as being a long term investment with an
increasing interest. In Seth Ganga Dhar v. Shankar Lal, AIR 1958 SC 770, the Supreme
Court held that postponement of redemption for 85 years was not a clog on right of redemption
under the circumstances of the case because it was not unreasonable. The postponement is
unreasonable " if the bargain is oppressive or unconscionable. But, this all depends on the facts
and circumstances of each case.
In a recent decision in Pomal Kanji v. Vrajlal Purohit, AIR 1989 SC 436, the Supreme Court
cautioned that though long term as period of redemption is not itself necessarily a clog on
equity but in the changing circumstances of inflation and phenomenal increase in the prices of
real estates, in this age of population explosion and consciousness and need for habitat, a very
long-term, taken with other relevant factors would create a presumption that it is clog on equity
of redemption. Commenting on Seth Gangadhar’s Case (1958), the Supreme Court held that
the English authorities relied upon by Justice Sarkar and the principles propounded by the Court
in that case were in background of a sedate and fixed state of affairs and hence no longer good
law and should be distinguished in the light of circumstances of each case.
Section 67 is the counterpart of Section 60, and gives the mortgagee a right of foreclosure or
sale in default of redemption by the mortgagor. If the mortgagor has paid or deposited the
mortgaged money, there is no occasion for the exercise of the right of foreclosure or sale.
Again, if a decree for redemption is made, a suit for foreclosure or sale would be infructuous,
especially as a redemption decree itself provides for sale or foreclosure in default of payment.
Section 67 reads:
Mortgagee's remedies: Whatever form the mortgage takes, the mortgagee is never really
considered in any sense owner of the mortgaged property. He has only a security over the
property, and this security consists of nothing more than the aggregate of the various rights. He
has to enforce the security if the mortgagor defaults to pay the mortgage-debt. Those right are,
firstly. against the mortgaged property, and, secondly, against the mortgagee personally. This
Section refers to the remedy against the property mortgaged, while Section 68 provides for the
personal remedy of the mortgagee. Under certain conditions, the mortgagee is given power
under Section 69A to have a receiver of the mortgaged property appointed.
There is, however, one fundamental point of difference between the mortgagor's right of
redemption and the mortgagee's right to foreclosure or sale. The difference is that the right of
redemption is not subject to a contract to the contrary, while the right to foreclosure or sale
may be curtailed by agreement of the parties. This is quite clear from the opening words of
Sections 60 and 67. Section 60 is not prefaced by any such words as "In the absence of a
contract to the contrary". The reason for the distinction is that the mortgagor requires protection
against oppression, while the mortgagee not being in need of the same protection may curtail
his right.
Effect of foreclosure: The effect of a decree of foreclosure is that it puts to an end the right of
the mortgagor to redeem and makes the mortgagee an absolute owner of the mortgaged
property from the date of the decree. In other words, it amounts to an out and out transfer of
the property to the mortgagee. But an order permitting foreclosure can be passed only upon
ascertaining the nature of the mongage and the rights of the parties thereunder.
Effect of sale: A mortgage security is extinguished only when a final decree for sale or actual
sale passed by the Court is 'confirmed' also. The net effect of it is to pass the interest of both
mortgagor and the mortgagee to the purchaser.
Clause (a) of this Section provides which of the two remedies viz., foreclosure and sale is
available to a mortgagee under different forms of the mortgage.
Simple Mortgage: A simple mortgagee cannot foreclose as the real right transferred is a right
of sale. The right to sale can be exercised only with the prior permission of the court. A suit for
sale must be filed within 12 years from the date on which the mortgage money becomes due.
If the net income from sale is not sufficient to satisfy the mortgage money, a personal decree
will be passed against the mortgagor for the balance if the mortgagor is personally liable and
if the personal claim is not barred by limitation.
English Mortgage: The mortgagee's remedy, in an English mortgage, is by way of sale of the
mortgaged property and foreclosure is not possible under this Section.
Mortgage by Deposit of Title Deed: The remedy of the mortgagee by deposit of title deeds, is
a suit for sale of the mortgaged property.
Anomalous Mortgage: In an anomalous mortgage. the right of the mortgagee depends upon the
terms of the deed. A suit for foreclosure can be instituted by him only if the deed specially
empowers him. If not so empowered, he can institute a suit for sale, even if there is no clause
in the deed specifically empowering sale, provided of course the deed does not contain a
provision to the contrary.
Where Mortgagor is Trustee for the Mortgagee: Clause (b) provides that if the mortgagor
is a trustee or legal representative of the mortgagee, he cannot in his representative character
foreclose. He can only institute a suit for sale. So also when the mortgagee is a trustee of the
mortgagor for he would be acquiring property, which he was under a duty to preserve for his
beneficiary.
Right of Mortgagee where the Property is a Public Property: Clause (c) provides that a
mortgage of a railway canal or other work in the maintenance of which public is interested,
cannot institute a suit either for foreclosure or sale. The proper remedy in such a case is the
appointment of a receiver of the mortgaged property charged with the duty of realizing the
earnings of the undertaking as a going concern.
Partial Foreclosure or Sale: Clause (d) deals with partial foreclosure. A partial foreclosure is
not allowed because this clause provides that where a person is interested in part only of the
mortgage money, he cannot institute a suit relating only to a corresponding part of the
mortgaged property. But a mortgagee, who with the consent of the mortgagor, has several
interest under the mortgage, can sue.
Marshalling
The remedy of Marshalling is contained in Sections 56 and 81 of the Transfer of Property Act.
Under section 56, marshalling is aimed at protecting the rights of the purchaser of a mortgaged
property. As per this section, if the owner of two or more properties mortgages the properties
to one person and then sells one or more properties to another person, then the buyer of the
property is entitled to have the mortgage debt satisfied out of the property that is not sold to
him. If all the properties have been sold by the mortgagor, then the buyers have the right to
have the mortgage debt satisfied proportionately from all the properties.
Under section 81, marshalling is aimed at protecting the rights of the subsequent mortgagee.
As per this section, if the owner of two or more properties mortgages the properties to one
person and then mortgages one or more properties to another person, the subsequent mortgagee,
has the right to have the prior mortgage debt be satisfied from the properties which are not
mortgaged to him. This right is available to the subsequent mortgagee in the absence of any
contract to the contrary.
Under both the sections, it is essential that the right of more Schilling marshalling, does not
prejudice the rights of the mortgagee or the prior mortgagee as the case maybe, and any
representative or person who has an interest in any of these were properties.
Contribution
For determining the value of each share of the mortgage years, the value of the property is
taken as it existed on the date of the mortgage, after the deduction of any amount which may
have been subject on the property on that date.
Furthermore, the remedy also deals with situations when two or more properties belonging to
the same owner have been used to secure a debt and the former property has been used to secure
another debt also. In such a situation, the properties are required to proportionately contribute
to the latter debt, after the former debt has been paid from the value of the former property.
The remedy of marshalling supersedes the remedy of contribution.
Subrogation
The remedy of Subrogation is contained in Section 92 of the Transfer of Property Act. The
remedy is based on the principles of equity, justice and good conscience and seeks to protect
the party who pays off the mortgage. The remedy places any person mentioned in Section 91,
other than the mortgage and any co-mortgagor, at the same position as the mortgagee by
providing him the same rights as the mortgagee, that is, the right regarding redemption,
foreclosure or sale of the mortgaged property, upon redeeming the mortgage property. When
the mortgagor himself redeems the property, the remedy of subrogation is not applicable.
Loan The loan amount The loan amount The loan amount
Amount in case of pledge is in case of in case of
moderate hypothecation is mortgage is
the lowest highest
● A mortgage is taken for a huge amount, whereas hypothecation is done for a small
amount.
● A mortgage is done for immovable properties like land, building, warehouse, etc. On
the other hand, hypothecation is done for movable properties like cars, vehicles, stocks,
etc.
● Under the mortgage, the interest of the asset would be transferred to the lender first,
and then once the amount is paid off, it is re-transferred. But if the borrower can’t pay
the amount, then the immovable property is sold off. Under hypothecation
● , the interest of the asset isn’t transferred. Rather, when the borrower cannot pay the
amount due, the movable property is possessed and then sold off to get back the
proceeds.
● For a mortgage, a mortgage deed is required as a legal document. For hypothecation,
the hypothecation deed is necessary as a legal document.
● The tenure of a mortgage is more since the loan amount is huge. But in the case of
hypothecation, the term is lesser since the amount of loan is lower.
After a discussion and comparative analysis between the mortgage and the hypothecation, it is
not wise to say that one is better than another; because both serve different purposes. Depending
on the purpose you have, you need to take the loan. However, in terms of convenience and
flexibility, hypothecation is much better; because there’s less risk, and you will also pay lower
interests.
In the case of a mortgage, you need to pay more because the amount is huge, and you can lose
your property any time if you default. As an individual, it’s important that you understand both
of them well and then act on your knowledge. The decision to take the mortgage or the
hypothecation would depend on what purpose you have for taking the loan.
Pledge – The bailment of goods as security for payment of a debt or performance of a promise
is called pledge’. The bailor is, in this case, called the ‘pawnor’ or ‘pledger’ and the bailee is
called the ‘pawnee’ or ‘pledgee’.
===================
Introduction
A lease is a contract for the transfer of the right of enjoyment of an immovable property made
for a certain amount of time, or in perpetuity, in consideration of a sum of money paid or
promised, a service, or anything of value, to be rendered periodically or on specified instances
by the transferor (the lessor) to the transferee (the lessee), who accepts the aforementioned
transfer on such terms.
It is the partial, temporary transfer of the right of enjoyment in a property for a consideration
of something pecuniary. In a transaction of a lease, the transferor is the lessor, the transferee is
the lessee, the price to be paid is called a premium and the pecuniary consideration is termed
as rent.
Provisions of Law
Chapter V of the Transfer of Property Act of 1882 (Of Leases of Immovable Property)
containing Sections 105 to 117, deal with the transaction of lease of an immovable property.
Essentials of a Lease
In the case of B Arvind Kumar v. Government of India (2007), the Supreme Court of India
held the essential ingredients of the lease to be the following:
Under the Act of 1882, the essential elements of a transaction of lease are as follows:
A. Subject-Matter of a Lease
The specific subject matter of any contract of lease is the immovable property in question.
Under Section 105, “immovable property” includes not only land and buildings, but also
the benefits arising out of fisheries, ferries, minerals, etc. There may also be a transaction
of “composite lease” for example, lease of a building along with the equipment inside it.
In the case of Annick Chaymotti Devyani v. Prem Mohini Mehra (2003), a leased
premise is not just the building or part of it, but also the land and the other furniture and
fixture provided by the landlord.
Also, as per the precedent of Puthu Parangodan v. Puthu Parameswaran (2002), when
a lease is agreed for a building and the building is demolished, the lease stands terminated.
B. Transfer of Right
The transfer of the right of enjoyment of a property that takes place in a lease contract
goes hand in hand with the transfer of possession. The contract of lese is a transfer of
‘partial interest’ in the property and is called a transfer of a limited estate, also known
as “demise”. The transfer of a leased property takes place after the spate from ownership
of the transferor, which creates a right in rem.
The estate transferred to the lessee is called the “leasehold property”. The interests of the
lessor and lessee in the leasehold property are heritable, and vests in the heirs of the two
parties after their death. In Collector, Dist. Gwalior v. Cine Exhibitors Pvt. Ltd. (2012),
the lease will be void once the purported lessor does not have a right in the property
sought to be leased.
C. Duration of Lease
The lease must be transferred under the Act for a “certain time”, or in perpetuity. Thus,
every contract of lease must stipulate the time period of the operation of the lease, and
when it will commence. The date of commencement must be certain or capable of being
made out afterwards.
In the case of Chittoor Chegaiah v. Pedda Jeeyanagar Mutt (2010), it was held by the
SC that the only pre-condition of the creation of a permanent lease is that the contract
must allow the landlord to evict the tenant at any point in time. Furthermore, periodic
leases are those that are on a month to month or year to year basis. A lease from year to
year is a lease that continues from period to period at a continuous amount of time.
D. Consideration
E. Parties to a Lease
Every transaction of lease must have two parties to the transaction- a transferor and a
transferee; i.e. lessor and lessee, respectively. In the transaction of a lease, the person
transferring the right of enjoyment in a property to another is a lessor, and the person
receiving this right is the lessee.
To enter into a contract of lease, the lessor must be competent to contract and entitled to
transferable property or be authorized to dispose of transferable property that is not his
own. An absolute owner can lease his property out for any amount of time, whereas a
limited owner can only lease his property out of a limited period of time. A lessee must
also be competent to enter into a contract, and under Motilal v. Kartar Singh (1930), in
the case of a joint-tenancy (more than one lessee), the entire group of tenants is considered
as a single tenant.
In the case of West Bengal State Electrical Board v. Sevoke Properties Pvt. Ltd. (2019),
it was held that the mere fact that the lease deed is unregistered will not affect the legal
relation between lessor and lessee under law.
A Lessor and Lessee are essential elements of a lease and have certain fixed rights and liabilities
under Section 108. The following are the Rights and Liabilities of the Lessor and Lessee.
REGISTRATION OF LEASE
INTRODUCTION
More often than not, the central procedural question on the minds of parties entering into a
lease deed is whether the registration thereof is mandatory. This central query pervades the
gamut of situations ranging from lease of residential to commercial properties, and from short-
term to long-term leases.
The law governing registration of lease deeds is primarily contained in the Registration Act,
1908 (“Registration Act”) and the Transfer of Property Act, 1882 (“TOPA”). A lease of an
immovable property is a transfer of a right to enjoy such property, made for a certain time,
express or implied, or in perpetuity, in consideration of a price paid or promised or of money,
a share of crops, service or any other thing of value to be rendered periodically or on specified
occasions to the transferor by the transferee, who accepts the transfer on such terms as defined
in Section 105 of TOPA. According to the Registration Act, ‘lease includes a counterpart,
kabuliyat, an undertaking to cultivate or occupy, and an agreement to lease[1]’.
REGISTRATION OF LEASE
Section 17(1)(d)[2] of the Registration Act and Section 107[3] of the TOPA mandate
registration of lease deeds in case an immovable property is leased
Thus, a lease for a period exceeding one year can only be made by way of a registered
instrument. All other leases of immoveable property may be made either by a registered
instrument or by oral agreement accompanied by delivery of possession[5]. Similarly, Section
18(c) of the Registration Act exempts a lease deed granting lease of an immovable property for
any term less than one year from compulsory registration.
Section 23 of the Registration Act provides a window of four months from the date of execution
for presenting the document for registration before the competent authority. However, the
competent authority is empowered to condone such delay (not exceeding four months from the
expiration of the aforesaid time period) on account of an urgent necessity or an unavoidable
accident.[6] In such cases, the party in delay is required to pay a fine not exceeding ten times
the amount of the appropriate registration fee.[7]
Duration of lease in certain cases
Section 106 of the TOPA clarifies that in the absence of a written contract or local law or usage,
a lease of immovable property (except for agricultural and manufacturing) shall be deemed to
be a lease from month to month, terminable, on the part of either lessor or lessee, by 15 days’
notice. Recently, the Supreme Court in Siri Chand (Deceased) thr. L.Rs. v. Surinder Singh[8]
observed that in cases where a lease deed does not mention the period of tenancy, other
conditions in the lease deed as well as intention of the parties have to be gathered to find out
the true nature of the lease deed.
Section 49 of the Registration Act, 1908, sets out the consequences of non-registration of
documents, which are required to be compulsorily registered. Section 49 makes it clear that a
lease deed which is compulsorily registerable, if not registered, will not affect the immovable
property comprised therein in any manner. Such a lease deed will also not be received as
evidence of any transaction affecting such property, except for two limited purposes (i) as
evidence of a contract in a suit for specific performance; and (ii) as evidence of any collateral
transaction which by itself is not required to be effected by a registered instrument. In this
regard, the Supreme Court in K.B Saha And Sons Private Limited v. Development Consultant
Limited[9] has inter alia set out the following: (i) a document required to be registered, if
unregistered is not admissible into evidence under Section 49 of the Registration Act; (ii) such
unregistered document can, however, be used as an evidence of collateral purpose as provided
in the proviso to Section 49 of the Registration Act; (iii) a collateral transaction must be
independent of, or divisible from, the transaction to effect which the law required registration;
(iv) a collateral transaction must be a transaction that will not require to be effected by a
registered document, that is, a transaction creating any right, title or interest in immovable
property of the value of one hundred rupees and upwards; (v) if a document is inadmissible in
evidence for want of registration, none of its terms can be admitted in evidence; and to use a
document for the purpose of proving an important clause would not be using it as a collateral
purpose.
Presumption of lease:
As discussed above, a lease for a period exceeding one year can only be made by way of a
registered instrument. However, a presumption of the existence of a lease can be made from
the actions of the party (delivery of possession, payment of rent, etc.).
In Anthony v. KC Ittoop and Sons and Others[10], the Supreme Court held that an unregistered
instrument cannot create a contractual lease exceeding one year due to the three-pronged
statutory restrictions under law (i.e. under Sections 17 and 49 of the Registration Act and
Section 107 of TOPA). However, it also held that ‘the presumption, that a lease not exceeding
one year stood created by conduct of parties, was un-rebutted’.
This principle was reiterated by the Supreme Court in Park Street Properties (Pvt.) Ltd. v. Dipak
Kumar Singh and Ors.[11] wherein it was inter alia held that ‘in absence of a registered
instrument, the courts are not precluded from determining the factum of tenancy from the other
evidence on record as well as the conduct of the parties. The duration of such a lease shall be
on a month-to-month basis as provided under Section 106 of TOPA.
CONCLUSION
All leases for immoveable property with a term exceeding one year are required to be
mandatorily registered at the earliest, regardless of the four-month window provided under law
to effectuate the same. In consonance with the principles of TOPA, such a lease shall only be
enforceable once registered. As mentioned hereinabove, if there has been a delivery of
possession, payment and acceptance of rent, the lease shall, however, be construed as one
between the parties on a month-to-month basis, which can be terminated by giving a 15-day
notice.
EXECUTION OF LEASE
Some steps need to get followed in the execution of a lease deed. These are: -
1. Primary Step: After preparing the lease deed, the duration of the lease, consideration,
mode of payments, terms and conditions should get discussed clearly without
concealing material facts.
2. Documentation: The parties should formulate a Memorandum of Understanding
(MOU) concerning the commercial aspects, duties and other related obligations.
3. Due Diligence: The lease deed must get conveyed to the lessee. The lessee should go
through it. If any doubt arises in the deed, it must be clarified, and the property details
should get verified like the documents concerned.
4. Drafting, Notarisation, registration: After depositing the required amount of money and
consideration, the possession of the property should get transferred to the lessee. The
deed should be signed and dated by the lessor and lessee. And, the deed should get
attested in the presence of witnesses for the execution of the deed.
5. The deed, once executed, must be notarized on the stamp paper and can be put up for
registration at the Office of the concerned Sub-Registrar of Assurances having relevant
jurisdiction over the property.
6. Post Registration: After the possession of the property is transferred to the lessee, the
lessee must inform the various governmental and semi-governmental bodies having
jurisdiction over the concerned property in writing about the change of holder and
transfer of the property.
LESSOR
There is no specific distinction between the rights and liabilities of a lessor, which are as
follows:
a. Duty of Disclosure
This duty entails the lessor to be bound by law to disclose to the lessee any material
defects in the property, which the lessee is not aware of, or cannot, discover with ordinary
care, i.e. latent defects.
The lessor is bound by law to put the lessee in possession of the property, only when the
lessee makes a request of the lessor in this respect. Where the lessor does not put the
lessee in possession despite the request being made, the lessee can sue the lessor to obtain
possession. If the lessee has already paid rent without getting possession, he may sue for
damages as well as recovery for the amount of rent paid.
This duty entails, that if the lessee pays the rent to the lessor on time and performs any
contract binding on him, the lessee is allowed to hold the property for the duration of the
lease, without interruption. It is the duty of the lessor to ensure that the lessee is not
interfered with during the period of the lease either by him or by anyone else.
LESSEE
Section 108 provides that if, during the duration of the lease, any accretions are made to
the property, such accretions will be deemed to be comprised in the lease. The lessee is
entitled to the use of accretions during the lease, but not after.
If in the case of a fire, tempest, flood, or violence, inter alia, any material or part of the
property is either wholly destroyed or rendered unfit for the purposes for which it was
given on lease, the lease will be void at the option of the lessee.
c. Right to Make Repairs in the Case of Neglect of the Lessor, and Deduct the Costs
from the Rent Amount
In the case that the lessor neglects the care of the property after notice, and within a
reasonable time, the lessee may himself make repairs and deduct the amount of repairs
from the rent, or otherwise recover it from the lessor.
The lessor is not bound by law to make repairs, unless he agrees to do so under the lease
agreement.
Section 108 provides that the lessee may transfer by way of mortgage or sub-lease, the
whole or any part of his interest in the property, and any transferee of such interest may
transfer it further. By the executing of such a transfer however, the lessee does not cease
to be liable under the lease deed.
a. Duty to Disclose Facts that Materially Increase the Value of the Property
The lessee is bound under Section 108 to disclose to the lessor of any facts as to the nature
and extent of interest which the lessee is about to take, of which the lessee is aware and
the lessor is not, which materially increases the value of such interest.
Since the lessor is liable to inform the lessee of any material facts relating to leased
property, so is the lessee liable to inform the lessor of any fact that increases the value of
the property.
The lessee is bound to tender at the proper time and place, the premium or rent to the
lessor or his agent as per the terms of the lease agreement. As per the precedent of Abdul
Wahab v TV Satyapal (2007), when the lessee fails to pay the rent according to the lese-
deed, the lessor can sue to the arrears of rent along with interest and start eviction
proceedings after giving proper notice.
c. Duty to Maintain the Property and to Use the Property in a Reasonable Manner
The lessee is bound to maintain the property of the lessor for the duration of the lease, as
well as restore the property to as good a condition as when it was put in his possession,
on the date of termination of lease.
Furthermore, the lessee must use the property and its fixtures only as a person of ordinary
prudence would use them if they were his own. He must not use the property for any
condition other than that for which it was leased.
The lessee must not, except for agricultural purposes, erect any permanent structure on
the property of lessor, without his consent. Only in the case of agricultural land, a lessee
is entitled to erect a permanent structure on leased property, for agricultural purposes.
Determination of Lease + Illustrations
Introduction
The determination of a lease refers to the process of terminating the right of enjoyment of the
lessee via the lease deed. In the case of lease, the determination would render the contract
terminated, and the right of enjoyment will come to an end, and thus the lessee is bound to
deliver possession of the property to the lessor.
Provisions of Law
Chapter V of the Transfer of Property Act of 1882 (Of Leases of Immovable Property)
containing Section 111, deals with the determination of the lease of an immovable property.
Analysis
Under Section 111 of the Act, the following are the methods of determination of a lease of
immovable property:
1. BY EFFLUX OF TIME
When a lease has a fixed term, it determines after the expiry of time-period. It terminates
on the last day of the time period, and the lessor is entitled to take back possession of the
property. In the case of Maheshwar Singh v. Rashamadhab Thakur (2007), it was ruled
that in the in the case of a lease for a fixed period, no notice to quit was necessary.
Determination of lease is available when the duration of the lease is fixed by a valid lease.
However, such a condition is not applicable to an unregistered lease deed, under the
precedent of West Bengal Electricity Board v. Sevoke Properties Pvt. Ltd. (2019). Where
a lease specifies a time period, there is no need for filing a suit of eviction. Where there
is a covenant for renewal of lease, the lessee may ask for a renewal of lease before he is
evicted. Furthermore, if the lessee continues to keep possession of the property after the
date of the lease, he will be known as a “lessee at sufferance”, and will have to be
dispossessed by a suit of eviction. It was ruled in Yar Mohammed v Lakshmi Das (1959)
that the law will not permit the lessor to forcible take possession of his property without
obtaining permission to evict from the Court.
Section 111 states that the lease of property determines where such time period of lease
is limited conditionally on the happening of some event, and the event takes place. Where
the lease contains a condition that the lease will terminate on the happening of a certain
event, the lease will terminate on the happening of that event.
So long as the event does not happen, the lessee has a right to enjoyment of the property.
When the interest of the lessor in the property terminates, or his power to dispose of the
property is conditional upon the occurrence of particular event, the lease of the property
determines. When a lessor has only limited interest or power to grant a lease, the lease is
determined when the lessor loses that interest.
Illustration: If a Hindu widow takes out a lease entitled only to a life-estate, the lease is
determined upon her death.
4. BY MERGER
The lease of an immovable property determines in the case that the interests of the lessee
and lessor in the property become vested, at the same time, in one person, in the same
right. This is known as the doctrine of merger, and it contemplates the following criteria:
i. Coalescence of the interest of the lessee and lessor,
ii. In the whole property,
iii. At the same time,
iv. In one person,
v. In the same right.
Thus, it is important for the merger for the same property to come into the hands of the
same person, in respect of the whole property. Illustration: In the instance that a tenant
of the property buys the premises from the lessor, a merger takes place, which will
determine the lease agreement. A merger is prevented from happening if an immediate
estate is outstanding with another person at the relevant time.
It was held under Arun Kumar v. Akash Telecom Pvt. Ltd. (2010), that a merger takes
place when the tenant himself becomes the absolute owner of the property. In order for
the tenancy to end, the merger should be complete in that the interest of the landlord and
the tenant must come to vest into the interest of the tenant in its entirety.
5. BY EXPRESS SURRENDER
A lease is determined under Section 111, when the lessee yields his interest under the
lease to the lessor by an agreement between them.
This surrender consists of two parts, namely, the yielding of the term of the lease as well
as the delivery of possession. The surrender brings the extinction of the lease, and the
relationship between lessor and lessee comes to an end.
6. BY IMPLIED SURRENDER
7. BY FORFIETURE
A lease between lessor and lessee, determines by forfeiture under Section 111 (g), in the
following circumstances:
i. In case the lessee breaks an express condition, which provides that on breach of it, the
lessor may re-enter the property.
ii. In the case when the lessee renounces his character by setting up a title in the third
person or by claiming title to the property in himself.
iii. In the case that the lessee has been declared an insolvent and the lease provides that the
lessor may re-enter the property in such an event.
It was held in Melo Leather v. PLN Natarajan (2007) that, in the happening of any of
the above events, the lessor or his transferee may give notice in writing to the lessee of
their intention to determine the lease.
Thus, the above are the modes of determination of lease, under the Transfer of Property Act,
1882.
All properties apart from those mentioned in Section 6 are transferrable properties.
The chance of obtaining a legacy (gift by will) on death of a kinsman and chance of heir
succeeding to an estate and any other mere possibility of a similar nature is prohibited.
Examples: Widow’s right to maintenance against husband’s property, Easement in gross (i.e.
an easement apart from dominant heritage), Interest of reversioner (transfer is a nullity), mere
right to sue
The right to resume possession of land which had been given to another person for a certain
time is a right to re-entry. Usually, lessors incorporate this right into leases which enables them
to re-enter the property if there has been some breach of the clauses in the lease or if the rent is
in arrear for a period of time.
c. Easement – S.6 (c)
d. Restricted interests – S.6 (d)
You can refer to other qs for this. Also refer to pdf ‘Property of ‘any kind’ may be transferred’
pls.
As per Section 9 of the TPA, a transfer of property can be made without writing in cases where
“writing is not expressly required by law”. Where writing Is not necessary, registration is also
not necessary.
The Court in Sarandaya Pillay v. Sankarlingam Pillai, observed that there are no express
provisions of law that require a transfer of property to be in writing. The Court, in the same
case held that a contract to settle property in consideration of marriage need not be in writing.
Modes of transfer:
1. Delivery by possession –
Some properties can be transferred orally, meaning only by delivery of possession and with no
written deed. Usually, movable properties are transferred using only delivery of possession.
Some other kinds of properties which do not require writing as per the Act can also be
transferred by delivery of possession only. For instance, sale of immovable property worth less
than one hundred rupees (except in UP), mortgage by deposit of title deeds, month to month
tenancy and exchange of immovable property worth less than one hundred rupees can be done
orally and does not require any writing.
2. Registration –
When registration of the transfer is necessary, the transfer must be in writing. As per the TPA,
some transfers must be made only through a written deed duly registered. Some of them are:
For transfer of actionable claims (S.130) requires writing but registration is not necessary.