Transfer by Unauthorised Person who subsequently acquires interest in property

transferred [S.43]
 This section is based on English law of estoppels by deed. Where a grantor purports to grant
an interest in land which he did not have at the time, but subsequently acquires, the benefit
of subsequent acquisition automatically goes to the earlier grantee, or as it is usually
expressed, “feeds the estoppel by grant. ”
The section is also based on equitable doctrine i.e. if a man who has promised more than he
can perform must make good his contract when he acquires the power of performance. The
principle was enunciated in Holroyd vs. Marshall (1862) 10 HLC 191; Collyer vs. Issacses
(1881) 19 Ch. D. 342 and Tailby vs. Official Receiver (1888) 13 App. Cas. 523.
Essentials of Section 43:
(i) A fraudulent or erroneous representation that transferor had authority to transfer the
property
(ii) Transfer is for consideration
(iii) Transferor subsequently acquires interest in the property which he had professed to
transfer.
Example:
Hardeo Singh vs. Gurmail Singh AIR 2007 SC 1058 – In this case husband transferred
property which he had given to wife in lieu of maintenance, in order to frustrate claim of
wife. Wife challenged the transfer. During pendency of the suit wife died. The husband
being legal heir became owner of the property. Provision of Section 43 applied.
1. Fraudulent or Erroneous Representation –
For application of Section 43, there must be a representation by the transferor whether
fraudulent or erroneous that he is authorized to transfer the property. The representation
by the transferor need not be intentionally false, it may be erroneous also that is
provision of Section 43 will be applicable even if transferor believes that he is
authorized to transfer but actually he was not authorized to transfer and later on, he
acquires interest in the property. For example, when the head of a joint Hindu family
mortgaged joint family property representing that he had a right to do so, he was bound
to make good his representation to the extent of share which came to him afterwards on
partition.
In Mulraj vs. Inder Singh (1926) 48 All 150 it was held that the word ‘represents’
shows that transferee must have acted on representation. He must have been misled to
have impression that the transferor had power to transfer. If transferee is aware of the
fact and knew that he is buying a defective title, and paid less or bargained, he cannot
claim benefit of this section. In this case Mortgagor of the property had only a
reversionary interest in the property on the death of a certain lady at the date of the
mortgage. After the mortgage the lady died but the property was sold to some other
person in an auction sale. Mortgagee claimed the property on the basis of mortgage. It
was held that mortgagee was not entitled to the property as he was aware of the fact
that he took the mortgage from a person who had only a reversionary interest.
Similarly in E. A. Patra vs. E.R. Patra AIR 1980 Orissa 95 – A mortgaged half of the
property while he was entitled to only 1/3rd share under HUF. It was held that
mortgagee was valid only for 1/3rd share as the mortgagee was aware of the fact that
mortgagor was entitled to only 1/3rd share.
No plea of proper enquiry by transferor – Unlike S. 41, S.43 does not impose a duty
of enquiry on transferee. A good example is Rampyare vs. Ram Narain AIR 1985 SC
694 – In this case a Sirdar A deposited money (ten times of land revenue i.e. das guna)
for acquiring Bhumidari right and on the same day he sold the land to B. A person
could get Bhumidari right when a certificate to this effect was issued under Sections
137 of the U.P. Zamindari Abolition and Land Reforms Act, 1950. Before getting
Bhumidari Certificate he had sold the land to B making erroneous representation that
he had Bhumidari right certificate. B did not enquire about the certificate. Certificate
was issued after two days of depositing the money. B’s son filed suit for cancellation of
the sale deed. Held – Estoppel under Section 43 was applicable as B acted on
representation. It was also held that if B knew the fact of non issuance of the
certificate, then he would not have been entitled to benefit of S. 43.
2. Transfer should be for Consideration: S.43 does not apply to gifts.
Invalid Transfers – S. 43 does not apply to invalid transfers. For example when a
transfer is made by a minor, even if minor represents himself as major. [Sadiq Ali
Khan vs. Jai Kishore] AIR 1928 PC 152 S. 43 applies where transfer is defective for
want of title not for want of capacity.
Similarly, in Johri vs. Mahila Draupadi AIR 1991 MP 340 where owner of the
property was lunatic and this fact was known to the transferee, benefit of S. 43 did not
apply.
Jumma Masjid vs. Kadimanindra Deviah AIR 1962 SC 847
In this case it was held that where a person transfers property representing that he has
a present interest therein, whereas he has, in fact, only a spes successions, the
transferee is entitled to the benefit of Section 43 of the Transfer of Property Act, 1882,
if he has taken the transfer for consideration and on the faith of the representation. In
this case property was sold by reversioners fraudulently representing that they had
present transferable interests. Later, they acquired the property on death of the widow.
Held transferee was entitled to protection of Section 43.
In Delhi Development Authority vs. Ravindra Mohan Agrawal AIR 1991 SC 1256,
DDA put on auction a plot and respondent was the highest bidder. Respondent
deposited 25% of the sale price. However, auction sale was stayed by the High Court
on the ground that the plot was under green belt, hence, DDA has no authority to sell
the same. Later plot was converted into residential area. The respondent then pleaded
S., 43 and demanded the plot. However, S.C. held that DDA was not bound to give the
plot on the earlier price (i.e. price 14 years ago). There is no estoppel against a statute
of legislature. Further by depositing only 25% of the auction price, the auction was not
complete, hence there was no transfer by DDA in favour of respondent.
Voluntary Transfer: Section 43 applies to voluntary transfers. Therefore, an auction
purchaser cannot invoke the provisions of S.43 for his benefit. The Supreme Court in Jote
Singh vs. Ram Das Mahto AIR 1996 SC 2773 held that provisions of Section 41 and 43
apply to voluntary transfers and not to sale by Court. In this case a Hindu died leaving
behind his widow ‘W’. W gifted the property to her daughter’s son Ram Das Mahto.
Property of Ram Das Mahto was purchased by Jote Singh in auction purchase. W’s
daughter brought a suit against Jote Singh on the ground that her mother W was having
limited ownership and hence she could not gift the property and pleaded for return of the
property. The suit was decreed by the trial court and confirmed by the first appellate court
of the Additional District Judge. When second appeal before the High Court was pending,
W’s daughter died and Ram Das Mahto who was defendant in the suit succeeded to the
property. It was then pleaded before the High Court that defect in title stood rectified by
the thrust of the provisions of S.41 and 43. The High Court accepted the argument.
However, on appeal the Supreme Court held that auction purchaser cannot take benefit of
Sections 41 or 43 as such sections apply only in voluntary sales and not to sales by court.
3. Subsequent Acquisition of Interest:
The provisions of this section will operate on any interest which the transferor may acquire
after the date of the transfer in the property whether such interest is acquired by
inheritance or by transfer inter vivos or in an auction purchase made by court. It is also not
necessary that the interest acquired should be such as to fully satisfy the transferee.
For example, A sells the property to B which A was not authorised to sell. A later
obtains a lease or mortgage of the same property. If the transferee desires, he may claim
the leasehold interest or the mortgaged interest.
When the transferor has no interest but subsequently acquires a charge upon part of the
property, the benefit of that charge will pass to the transferee.
In such property: The section applies when the transferor gets interest in the same
property which is the subject-matter of transfer and not where interest is acquired in
any other property.
Interest should be acquired in the same capacity in which he transferred the
Property:
Suppose A transfers a property to B representing that he is owner of the property
whereas he was not the owner of that property nor he was authorised to transfer the
same. Later, the property is sold by the real owner to a company. A is appointed as
Managing Director of the company and gets possession of the property for the company
as Managing Director. The property will not go to B.
Other Conditions:
(i) At the option of the transferee:
The word “ option ” indicates that the transferee may or may not take subsequently
acquired interest. The subsequently acquired interest cannot be forced upon him. The
subsequently acquired interest does not automatically vest in the transferee. It goes to
transferee only when transferee makes a demand for the same.
Here Indian law differs from English law. Under English law the subsequent acquired
interest automatically goes to the grantee. Under Indian law it goes to transferee only at
the option of the transferee. However, for exercise of option no any particular
form is required. Any act or conduct of the transferee showing intention to take the
property will be sufficient. For example, the transferee may take possession of the
subsequently acquired interest.
(ii) Any time when the Contract of Transfer Subsists:
These words indicate that option can be exercised by the transferee only so long as the
contract of transfer subsists. If transferee has rescinded the contract and elected for
damages, S. 43 will not apply and transferee cannot claim the subsequently acquired
interest of the transferor in the property.
Proviso: The proviso protects transferees in good faith without notice of the
option. The option can be exercised against an heir of the transferor and all persons
claiming under him except a purchaser in good faith for consideration without notice of
the existence of the option. For example, A transfers a property to B which he was not
authorised to transfer. Later A acquires the property and sells the same to C before B
exercises his option to take the property. C has no notice of B’s option. C’s interest is
protected by the proviso.
Difference between S. 41 and S.43:
1. Section 41 casts a duty on transferee of reasonable care i.e. an enquiry to
ascertain that transferor had power to make the transfer. U/s. 43 no such duty
is on transferee.
2. Under Section 41 transferee gets a property which does not belong to the
transferor. Under Section 43 transferee gets the property which at the time of
transfer did not belong to the transferor but later it came to transferor.
3. Under Section 41 estoppel operates against the real owner. Under Section
43 estoppel operates against the transferor.