GENERAL RULES AND DOCTRINES REGARDING TRANSFER OF PROPERTY

GENERAL RULES AND DOCTRINES REGARDING TRANSFER OF PROPERTY

Actionable Claim

Actionable claim means a debt or a claim on which action can be started in a Court of law for comfort or relief. The actionable claim is defined under section 3 of the Transfer of Property Act, 1882.

• Introduction 

Actionable claim means a debt or a claim on which action can be started in a Court of law for comfort or relief. The civil Courts recognized as giving the grounds for relief whether such claims are conditional, accruing and other. The actionable claim is defined under section 3 of the Transfer of Property Act, 1882. In general terms, an actionable claim is a debt or claim for which the person can take an action and also approach the Court for recovery his debt or claim.

Tangible or touchable movables such as chairs or bikes and many have physical existence and can be possessed. Some movable property is an actionable claim. It is also a claim for unsecured debt and any beneficial interest in the movables and the property is not in any kind of possession.

Like example- X is a person who needs a loan or money from Y. Then X takes loan 50,000/- from Y. And Y does not take any security. It means X takes loan 50,000/- from Y without any security. So, the debt or claim given by Y is an actionable claim. And if the X failure on his part or not repay the money then Y can approach the Court.

• Definition

According to section 3 of the Transfer of Property Act, the actionable claim is a claim to any debt which is not secured by a mortgage, pledge, and hypothecation. The mortgage of immovable property does not come under section 3 of Transfer of Property Act and also the pledge OR hypothecation of moveable property is not an actionable claim. An actionable claim is transferable under the Transfer of Property Act. The transfer of actionable claim is given under chapter eight of the Transfer of Property Act. Chapter eight of the Transfer of Property Actis the last chapter of the Transfer of Property Act and it covers section 130 to 137.

• Important Provisions dealing with Actionable Claim under Transfer of Property Act

• Under Section 130 of the Transfer of Property Act, the mode of transfer of actionable claim is described. According to Section 130,

1. The transfer can be done by only a written instrument;
2. And signed by the transferor or his legal agent; and
3. The transfer will be complete.

• Exceptions of the Sec 130-Sec 130 does not apply on the transfer of marine and insurance of fire policy.

In the case of Simon Thomas vs. State Bank of Travancore, in this case, there should be an intention to transfer the debt represented by the written receipts.

• Under Section 132 of the Transfer of Property Act, defines the liability of the transferee of actionable claim. The liabilities and equities of the transferor are transferred to the transferee.

Some examples of actionable claim, these following claims are the actionable claim-:

1. Claim for arrear rent.

2. Claim for rent to fall due in future.

3. A choice offered to repurchase the property once again.

4. Book debts or claims

5. The right to claims maintenance.

6. Claim the benefit of the contract.

7. Deposit receipt.

The following claims are not the actionable claim-:

1. A claim which is decreed.

2. “Right to sue”, it is a right but it is not an actionable claim.

3. The claim for the main profits.

In the case of the Jugalkishore Saraf Vs Raw Cotton Co. Ltd., the Supreme Court held that a judgment debt or decree is not an actionable claim for action is necessary.

In the leading case Lachmi Koeri Vs the State of Bihar, the Court has been pointed out the transfer of arrears of rent is a type of a transfer of actionable claim. And the transfer of arrears of rent could be transferred in accordance with the provisions of the Transfer of Property Act.

In the case of Rekhath Koeri, where the Court said that the transfer of arrears of rent is really a transfer of actionable claim and it could be transferred in accordance with the rules and regulations of Transfer of Property Act.

• Section 133 of the Transfer of Property Act described the warranty of solvency of the debtor. In this section when a claim is transferred the transferee may run the chance or risk of losing the debt, in this case, the debtor is insolvent. So as a precautionary measure, the transferee should be assured that the debtor is solvent.

• Section 134 of the Transfer of Property Act is deals with the mortgaged debt. And section 135 of the Transfer of Property Act deals with the assignment of rights under the policy of insurance against fire. 

• Section 136 deals with the incapacity of officers connected with the Court of justice. The person who includes in section 136 are:-

1. Legal practitioner;
2. Judges of the Court; and
3. The legal or officer who concerned with the justice of the Court.

• And the last Section 137 describes the saving of negotiable instruments and etc.

In the case, State of Kerala and Ors. Vs. Mini Shamsudin and Ors., the Court said that actionable claims are goods and movable property but it is not for the purpose of the sales tax acts.

Vested and Contingent Interest

• Introduction to Vested and Contingent Interest

Transfer of Property Act deals with vested and contingent interest. Vested Interest is created where there is a condition of the happening of a specified certain event. While Contingent Interest is created on fulfilling a condition of happening of a specified uncertain event.

• Vested Interest

Section 19 of the Transfer of Property Act, 1882 talks about Vested Interest. It is an interest which is created in favour of a person where there is a condition of the happening of a specified certain event and time is not specified. The person having the vested interest does not obtain the possession of that property but expects to receive it upon happening of a specified certain event.

Example- A promises to transfer to property to B on him attaining the age of 21. B will have vested interest in A’s property till the time he does not become 21 years old and gets the possession of it. After death, the person (promise) who is having this interest will not have any right over that property and the interest will vest in his legal heirs.

In the above example, if B dies at the age of 20, then the interest vested in B will pass on to the legal successors of B and they will get the charge over the property in the mentioned time period.

All the aforementioned important aspects of a vested interest are written in detail below:

1. Interest should be vested: This basic postulate lays down that interest should be created in favour of a person where time is not specified or a condition of the happening of a specified certain event is provided. A person should proclaim to transfer a particular property in order for this interest to be created.

2. Right to enjoy property is postponed: When interest is vested in a person, he does not immediately get the possession of that property and hence cannot enjoy that property.

But any person who is not a major and has a guardian is only entitled to the vested interest after he attains majority. Example- X agrees to transfer the property ‘O’ to Y and commands his guardian Z to give him the property when he attains the age of 20. Y gets vested interest once he attains the age of 18, the age of majority.

Other important point to remember: –

1. Contrary Intention: The transferor can specify a time slot as to vest the interest in the person who will receive the property.
2. Death of the transferee: If the transferee dies before getting the property in his possession, the interest vested in him will be vested in his legal heirs and they will get the possession of that property after the condition is fulfilled.
3. Time of vesting: The interest is vested right after the moment when the transfer is initiated.

In the case of Lachman v. Baldeo, a person transferred a deed of gift in favour of another person but directed him that he will get the possession of that property only when the transferor himself dies. The transferee will have a vested interest even though his right of enjoyment is postponed till the death event.

Characteristics

1. Vested interest creates a current right that comes in effect immediately, although the enjoyment is postponed to the time prescribed in the transfer. It does not entirely dependent on the condition as the condition involves a certain event.
2. Vested interest is a Transferable and heritable right.
3. Death of transferee will not make the transfer invalid as the interest will pass on to his legal heirs.

Section 20 of the Transfer of Property Act, 1882 talks about vested interest to an unborn child. The interest in the property will be vested in him once he is born. The unborn child might not get the right of enjoyment of the property immediately after having vested interest.

• Contingent Interest

Section 21 of the Transfer of Property Act, 1882 states about Contingent Interest. It is an interest which is created in favour of a person on fulfilling a condition of happening of a specified uncertain event. The person having the contingent interest does not get the possession of the property but receives it upon happening of that event but will not receive the property if the event does not happen. Contingent interest is entirely dependent on the condition imposed on the transfer.

Example- A agrees to transfer the car ‘X’ to B on the condition that he shall secure 80 % in his exams. This condition is uncertain on the happening of the event or not happening and therefore B here acquires a contingent interest in the car ‘X’. He shall get the property only if he gets 80 % and when the condition is fulfilled.

In the case of Leake v. Robinson (2)[ii], the court upheld that when a condition involves an event that is to be given ‘at’ a particular age or ‘upon attaining’ a particular age or ‘after’ attaining this particular age, then it can be derived that the transfer involves a contingent interest.

Characteristics 

1. This interest only happens when the condition is fulfilled. 
2. Contingent interest is a transferable right, but the condition of heritability depends upon the nature of such any transfer and the condition.
3. Death of the transferee before getting the possession of the property will result in the failure of continent interest and the property will remain with the transferor.

Some important aspects of contingent interest are explained in detail below:

1. Interest: In a transfer if a condition is such that the transfer will take effect only upon the fulfilment of that condition and till that time, the interest is contingent.

2. Exception: When a person who has an expectancy in the rights of ownership of a specific property, and he for the time being till the happening of the event, gets any sort of income that arises from that property. This interest in the property does not come under the aspect of contingent interest.

The following sections of Transfer of Property Act lay down the conditions for contingent interest.

• Section 22 talks about the transfer to a group or class of members with a contingent interest. Example: – there is a transfer to a group of 4 people, and the condition is that the property will be vested in persons who attain the age of 40 years on a particular date. The persons who have attained that age will get an interest in the property and people who have not attained, will not get an interest in that property.

• Section 23 talks about a transfer which happens after happening of an event that was mentioned in the transfer which involves contingent interest. This section writes about what happens after the happening of the specified uncertain event.

• Section 24 states about a transfer to a group or class of members who will get the property on a condition that they shall be living at the specified date. This is also a contingent interest as an uncertain event. The transfer will only take place for those people who satisfy the condition of surviving at a particular date. The legal heirs of the deceased cannot claim an interest in that property as a transfer involving a contingent interest solely depends upon the fulfillment of the condition. 

Rule Against Perpetuity

The term perpetuity literally means forever or eternity or for unlimited time period. Transfer of Property Act deals with Rule Against Perpetuity in India.

• Transfer in Perpetuity

When a property is being transferred in such a way that it becomes inalienable in future for an indefinite period of time, this is called transfer in perpetuity. Transfer in perpetuity may arise in two ways: –

1. By taking away from the transferee his power to transfer;
2. By creating future improbable interest.

However, section 10 of Transfer of property Act states that a condition restricting transferee’s power to transfer is void.

• Rule Against Perpetuity

The concept of rule against perpetuity is that according to this rule transfer cannot be made inalienable for an indefinite period or forever. This rule has been incorporated in Section 14 of the Act.

• The Period of The Rule

1. Lives in being- According to the rule, interest must be conferred within 21 years of the person’s death.
2. Plus twenty-one years- This is the period in gross.
3. Periods of Gestation- The period of gestation may extend at the beginning and end of “lives in being” and at the end of 21 year.

• Object of Rule Against Perpetuity

The purpose of this rule is to enable free circulation of the property for: –

To prevent the property from being tied up forever; Betterment in trade and commerce; Betterment of the property. Protecting the interest of owner of the property otherwise he will not be able to dispose of the property even in case of emergency.

• Principle Behind the Rule

The basic principle upon which this rule is made is public policy. In absence of this rule against perpetuity, all the properties in the world would have been static and of no use to he economy as a whole.

• Conditions Necessary

1. There is an alienation of property.
2. The transfer being made is for the benefit of an unborn child giving him absolute interest.
3. The transfer of interest to beneficiary is herald by life or limited interest of living persons.
4. The unborn person in favor of whom the transfer is done must be born before the death of last preceding living person.
5. Conferring of interest to beneficiary may be postponed only to the life of living person plus minority of the beneficiary; not beyond that.

• Exceptions To the Rule Against Perpetuity

1. Transfer for the benefit of public-where the property has been transferred for the benefit of the public in the advancement of religion, knowledge, commerce, health, safety, etc.
2. On personal agreement- personal agreement which do not create any interest in property are exempted from the rule against perpetuity as this rule is applicable only on transfer of property and not on personal agreement or contract.

Position and Legal Status of Minor: According to Transfer of Property Act, 1882

A minor is a person who is not competent to contract in Transfer of Property Act but the Transfer of Property Act; a minor can accept the gift of an Immovable property and also without the intervention of his guardians. According to the Transfer of Property Act, the property can be transferable to the unborn child as per Section 13; the Transfer of Property Act 1882 defines the unborn child or a child who is in mother womb. The property can be transferred to the unborn child, for this transfer a life interest or a life holder is created. A person who is a life interest he can enjoy the property behalf the unborn child but he cannot transfer the property. A minor can acquire the immovable property out of his funds.

Doctrine of Lis Pendens and Section 52 of Transfer of Property Act

“Lis Pendens,” when translated, means “pending suit or cause.” In this context, “Lis” signifies an action or lawsuit, while “Pendens” indicates that the matter is still awaiting resolution.

This concept finds its roots in the Latin proverb “Ut pendent nihil innovetur,” which emphasizes that nothing should undergo changes or alterations while a legal case is ongoing.

• What is Doctrine of Lis Pendens?

The Doctrine of Lis Pendens, derived from Latin, translates to “pending litigation.” It is a legal principle that pertains to immovable property and is dealt with in Section 52 of the Transfer of Property Act, 1882, in India. This doctrine serves to protect the rights and interests of parties involved in a pending lawsuit concerning a specific property.

The doctrine of lis pendens can be defined as the legal authority, control, or jurisdiction that a court holds over the property in question during the entire duration of a lawsuit, extending until a final judgment is reached. It encompasses the set of laws, norms, and principles that govern and restrict the application of the common law maxim, which stipulates that no modifications regarding the subject of a lawsuit can be made while it remains unresolved.

The underlying rationale behind doctrine of lis pendens is to prevent the subject matter of a lawsuit from being transferred to a third party while the case is still pending. In situations involving immovable property, any transfer of ownership must comply with the court’s decision, and the transferee is bound by the court’s judgment.

• Section 52 of Transfer of Property Act

One of the most fundamental rights of a property owner is the freedom to transfer or dispose of their property as they see fit. However, certain circumstances, such as when a legal dispute or action involving the property is ongoing, may restrict or prohibit the owner from selling or otherwise disposing of the property for a specified period.

Section 52 of Transfer of Property Act, 1882 reads as:

“52. Transfer of property pending suit relating thereto.—During the 1[pendency] in any Court having authority 2[3[within the limits of India excluding the State of Jammu and Kashmir] or established beyond such limits] by 4[the Central Government 5***] of 6[any] suit or proceeding 7[which is not collusive and] in. which any right to immoveable property is directly and specifically in question, the property cannot be transferred or otherwise dealt with by any party to the suit or proceeding so as to affect the rights of any other party thereto under any decree or order which may be made therein, except under the authority of the Court and on such terms as it may impose.”

Section 52 of Transfer of Property Act of 1882 delineates conditions under which property transfers are permissible. These conditions may include instances where the court grants explicit permission or when the lawsuit itself has an element of collusion. Exceptions to the doctrine encompass lawsuits primarily seeking monetary compensation for debts or damages, as well as those aimed at the recovery of personal property.

The Transfer of Property Act is a crucial piece of legislation in India that governs the transfer of immovable property. It provides a comprehensive set of rules and regulations for various aspects related to the transfer of property, such as sale, lease, mortgage, exchange, and gift. The Act also deals with the rights and obligations of parties involved in property transactions.

Over time, courts have established specific scenarios in which doctrine of lis pendens does not apply, such as when only the transferor is affected, when the litigation is of a collusive or amicable nature, or when a transfer is executed by an individual who is not a party to the lawsuit, among others. Furthermore, it has been clarified by the courts that the doctrine is applicable in cases involving disputes over immovable property rights, including partition proceedings, mortgage cases, easements, and similar matters.

• The Purpose of the Doctrine of Lis Pendens

The doctrine of lis pendens is essential as it prevents Transfer of the title of any disputed property without the Court’s consent, there can be endless litigation, and it will become impossible to bring a lawsuit to a successful termination if alienations are permitted to prevail, and covenants are not imposed. The ‘Transferee pendente lite’ is bound by the verdict just as if he were a party to the suit and the transfer shall be subservient to the result of the pending lawsuit.

• Essential Conditions for Doctrine of Lis Pendens under Section 52 of Transfer of Property Act, 1882

Section 52 serves the purpose of preventing the parties involved in a lawsuit from being deprived of their interests by the opposing party while the case is still unresolved, and it is rooted in principles of equity and fairness. However, it’s important to note that merely mentioning an immovable property in the lawsuit is insufficient to trigger the application of this section. What activates Section 52 is the explicit and immediate involvement of property rights in the dispute. As a result, the transfer of an immovable property is restricted only when the rights related to the property are directly and substantially contested during the ongoing lawsuit.

Furthermore, for the doctrine of Lis Pendens to apply, the lawsuit must be pursued in good faith, devoid of collusion or malicious intent. If the lawsuit is found to be tainted by collusion or ill-intent, the doctrine will not be applicable. Additionally, the lawsuit must be filed in a court with the requisite jurisdiction, whether it pertains to pecuniary or territorial jurisdiction. If the lawsuit is initiated in a court lacking the necessary jurisdiction, the principles of Lis Pendens would not come into play.

The application of the doctrine of Lis Pendens is not automatic when a lawsuit involving immovable property is initiated. Certain specific requirements must be met for this doctrine to take effect. These conditions were elucidated by the Hon’ble Justice A.N. Sen in the case of Dev Raj Dogra v. Gyan Chand Jain, and they consist of the following key elements:

1. A lawsuit or legal proceeding concerning a right to immovable property must be actively pending.
2. The lawsuit or proceeding should not be the result of collusion between the involved parties.

During the pendency of such a suit or proceeding, no party to the case can transfer or deal with the property in question in a way that would affect the rights of any other party involved, except with the authorization of the court. In essence, any transfer or action related to the property during the lawsuit’s pendency requires court approval if it has the potential to impact the rights established by any decree or order that may be issued as part of the lawsuit.

From these guidelines and the language of the section 52 itself, it can be inferred that the necessary conditions for the application of the doctrine of lis pendens are as follows:

• There must be a pending suit or proceeding.
• The suit or proceeding must be within the jurisdiction of a competent court.
• The suit must directly and explicitly involve a right to immovable property.
• The suit or proceeding must not be collusive.
• Any transfer or action related to the property in dispute must involve a party to the suit.
• Such a transfer or action must impact the rights of the other party involved in the litigation.

In the case of Balwant Singh v. Buta Ram, the court held that when a situation meets all of the aforementioned requirements, the doctrine comes into effect. During a legitimate lawsuit in a court with appropriate jurisdiction, where ownership of immovable property is directly and substantially contested, the property cannot be transferred without the court’s permission. If such a transfer occurs, the buyer of the immovable property will be bound by the court’s ruling.

In summary, the rule of Lis Pendens under Section 52 of Transfer of Property Act applies to property transfers that pertain to a pending suit or proceeding. This includes transfers made after the initiation of the suit or proceeding and before its resolution by a party to the case as well as to third parties. If these essential conditions are not met, the rule of Lis Pendens does not apply.

• Exceptions to Doctrine of Lis Pendens under Section 52 of Transfer of Property Act

While the specified conditions must generally be met for the doctrine of Lis Pendens to be applicable, there are exceptions, one of which is when a transfer is made with the court’s consent. Section 52 of Transfer of Property Act, 1882, explicitly states, “except under the authority of the Court and on such terms as it may impose.”

Consequently, in a lawsuit directly and explicitly involving issues related to the rights of immovable property, the court has the discretion to permit any party to dispose of the property while the case is ongoing, subject to any conditions imposed by the court. This aspect sets apart the Lis Pendens principle.

In certain situations, the court meticulously examines the facts and circumstances of each case to ensure that the rights of any parties involved are not jeopardized by such an authorized transfer. For instance, in the case of Vinod Seth v. Devinder Bajaj, the court, after a thorough examination of the case’s facts and circumstances, determined that it was appropriate to exempt the case from the Lis Pendens doctrine, provided that security was provided. In this specific instance, upon providing a security deposit of Rs. 3,000,000, the court allowed the defendants to sell the property even while the case was still pending.

• Effect of Doctrine of Lis Pendens

A transfer or action taken by a party to a lawsuit during the pendency of the suit or proceeding is not automatically void. Instead, it is only considered voidable if it has the potential to impact the rights of any other party to the suit under any decree or order that may be issued as part of the lawsuit. Section 52 of Transfer of Property Act creates a right that can be enforced to set aside a transfer made during the pendency of the suit, as these transfers are not inherently void but rather voidable. Importantly, this voidability depends on the choice of the party affected by the ongoing proceeding, during which the transfer occurred.

In essence, the rule of lis pendens does not aim to invalidate or automatically void the transfer but rather places it under the purview of the litigation’s outcome. According to this rule, anyone who acquires a property during the pendency of a lawsuit is bound by the judgment that may be rendered against the person from whom they acquired the title, even if such a purchaser was not a party to the lawsuit or had no prior notice of the ongoing litigation.

Fraudulent Transfer of Property

Section 53 of the Transfer of the Property Act, 1882 deals with the requirement of the fraudulent transfer of the property. A transfer is a fraudulent transfer of Property if it is made to defeat or delay the creditors of the transferor or without consideration with intent to defraud a subsequent transferee.

• Section 53 of the Transfer of the Property Act and Fraudulent Transfer of Property 

1. Object– In Thakurji vs. Narsinghji (1928), the Patna High Court observed that the primary object of sub-section (1) of Section 53 of the Act is to make assets of the Transferor available to the general body of the creditors.
2. Scope– The application of the section will be in force even if the transfer doesn’t “defeat” but only “delays” the creditors. In the case of C. Abdul Shukoor Saheb vs. Arji Papa Rao (1963), the fact that the entire debtor’s property was not sold cannot by itself negative the applicability of the section unless there is cogent proof that there is another property left, sufficient in value and of easy availability to render the alienation in question immaterial for the creditors.
3. Requirement-The requirement of the section is to avoid the possibility of the retention of all the benefits by the debtor. In case of Chogmal Bhandari vs. Dy. CTO (1976), it was held that, if a person proves challenges the validity of a transaction under Section 53 of the Act, he has to prove that the document in question was executed with a clear intention to defraud or delay the creditors.
4. Wide Extent– In the case of Sushila vs. Anandilal (1983), the court stated that, even though the section may not apply in terms, its principle would apply in cases of fraudulent transfers.
5. Applicability-In the case of Mahendra vs. Suraj Prasad (1957), the court held that the provisions of Section 53 of the Act come into operation only where the document is fraudulent in the sense that, though the transfer is real, the object was to defraud the creditors of the transferor. In the case of V.S. Murthy vs. Laksho Narayana (1960), the court held that if a father transfers the property to his son for a sum of Rs. 5000, while the debt due from the father to the son did not amount to even Rs. 4000, there is evidence of an intent to defraud creditors generally and the transfer will be hit by the section.
6. Voidable Transfers– Chief Justice Wallis in the case of Rama Swami Chettiar vs. Mallappa Reddiar, held that, “It is open to the judgement-debtor, property which has been fraudulently transferred to the claimant with intent to defeat or delay creditors. If he knows of the transfer when he applies for attachment, the application is sufficient evidence of his intention to avoid it; if he hears of the transfer when a claim petition is preferred under Order 21, Rule 58, and still maintains his right to attach, that again is a sufficient exercise of this option to avoid.
7. Transfer meaning– In the case of Natha vs. Dhunbaji, it was stated that the word ‘transfer’ mentioned in the Section includes a settlement by which the settlor conveys all his interest in the property to trustees or a surrender by a Hindu widow of her life interest in favour of the reversionary.
8. “Intent” explained– In the case of Bhagwant vs. Kedari Sahu, the court observed that the term ‘intent’ referred to in the section implies “aim” and connotes the one object for which the transfer is made. It references the dominant motive without which it would not have been made.
9. Defeat or Delay– In the case of Mohammad Ali vs. Bisneillah (1930), a person carrying in business which was certain extent hazardous and with the opportunity of utilizing the property of another for his own purpose, executed a gift deed in favour of his wife. It was held that the effect of the deed would delay or defeat any future acclaims and thus was bad in nature.
10. Factors constituting Fraudulent transfer– In the case of Muniayammal vs. Thyagaraja (1958), the court laid down the following factors relating to fraudulent transfer such as:

• Continuance of the transferor in possession of the property he has purported to transfer when such continuance in possession is not in accordance with the tenor and object of the transfer
• Insolvency or indebtedness of the transferor
• Lack of consideration for the transfer
• Reservation of benefit to the transferor
• Relationship between the transferor and the transferee
• Pendency or threat of litigation, secrecy or concealment
• Transfer of the debtor’s entire estate, or substantially the whole of the estate
• The fact that the transfer is made after execution has been issued or a writ has been issued against the transferor

Apportionment of Property in India

‘Apportionment’ means distribution in proper shares. Section 36 and 37 of the Transfer of Property Act deals with Apportionment of Property in India.

• Introduction to Apportionment of Property

This article deals with apportionment of property in India. The legal term ‘apportionment’ means distribution or allotment in proper shares. The expression ‘apportionment’ means division of a common fund between several claimants.

In law this term is used in various senses even various statutes define it in various ways and as per the laws regulating this apportionment the process of determine the apportioned amount also changes. Section 36 & 37 of the Transfer of Property Act lay down the rules regarding the principle of apportionment. 

• Apportionment of Property by time

Section 36 deals with the apportionment of time, which states- “In the absence of a contract or local usage to the contrary, all rents, annuities, pensions, dividends and other periodical payments in the nature of income shall, upon the transfer of the interest of the person entitled to receive such payments, be deemed, as between the transferor and transferee, to accrue due from day to day and apportionable accordingly but to be payable on the days appointed for the payment thereof”.

This principle does not apply on tractions which take place by operation of law but to those transaction based on equity. When a property generates certain kind of periodical income, apportionment of income between the transferor and transferee arises. The general rule in regards to the transfer of Income between the transferor and transferee is dealt in section 8 of the Act and is inapplicable on transaction of periodical nature requiring apportionment.

Liability of the tenant – section 6 of the Act specifies that the section is applicable for transaction held between transferor and transferee and does not make tenant liable.

Concept of Transfer – The Transfer of Property Act, 1882 says that when a property is lent to several owners, any of those several owners on the basis of being the co-owner cannot ask for proportion of rent of evection in case of non-payment. The apportionment created by the Apportionment Act 1870 statute is “apportionment in respect of time.” The cases to which it applies are mainly cases of either:

• apportionment of rent due under leases where at a time between the dates fixed for payment the lessor or lessee dies, or some other alteration in the position of parties occurs
• apportionment of income between the representatives of a limited owner and the remainder-man when the limited interest determines at a time between the date when such income became due.
• Apportionment of Property by Estate

Apportionment in respect of estate may result either from the act of the parties or from the operation of law. Section 37 deals with this kind of apportionment stating that “ When, in consequence of a transfer, property is being divided and held in several shares, and thereupon the benefit of any obligation relating to the property as a whole passes from one to several owners of the property, the corresponding duty shall, in the absence of a contract, to the contrary amongst the owners, be performed in favour of each of such owners in proportion to the value of his share in the property, provided that the duty can be severed and that the severance does not substantially increase the burden of the obligation the duty shall be performed for the benefit of such one of the several owners as they shall jointly designate for that purpose:

Provided that no person on whom the burden of the obligation lies shall be answerable for failure to discharge it in manner provided by this section, unless and until he has had reasonable notice of the severance. Nothing in this section applies to leases for agricultural purposes unless and until the State Government by notification in the Official Gazette so directs”.

when the whole of a property is transferred to more than one person, any benefit arising out of obligation to the property is transferred to the several owners. Apportionment by estate simply means transferring of property to several person whereby distribution of benefits and obligation arising out of property between those several owners take place.

Section 37 i.e. apportionment by estate highlights a situation where income arising out of the property is apportionment between owners on the basis of share in the property. How the payment is to be done whether separately to owner or to single has to be contemplated. This section basically deals with apportionment in case tenancy be liable only singly.

• Apportionment by act of the parties

Where a lessee is evicted or he forfeits part possession of the leased property he becomes liable to pay the apportioned value of rent which he retains

• Apportionment by Operation of Law

Apportionment by operation of law may be brought about where by due to some reasons like by the “act of God”, as, for instance, where part of an estate is submerged by the encroachments of the sea it becomes inoperative as regards to its subject matter.

Doctrine of Election

• Introduction to Doctrine of Election

Election means choosing between two alternative rights. If two rights are endowed on a person under any instrument in such a manner that one right is more preferable than the other, he is bound to elect or choose only one of them. Section 35 of the Transfer of Property Act, 1882 deals with Doctrine of election. It subsumes the Doctrine of election along with Sections 180-190 of the Indian Succession Act 1925.

Theme behind Section 35- Allegans contraria non est audiendus : he is not to be heard who alleges things contradictory to each other.

• Understanding the Doctrine of Election

This doctrine is universal in nature and is applicable to Hindus, Muslims, Christians. This doctrine consists of the principle of a person exercising a choice out of his own free will to do one thing and is founded on the equitable doctrine that he who accepts the benefit under an instrument or transaction of its choice must adopt the whole of it or renounce everything. 

This principle was determined in the case of Codrington v Codrington (1857) 7 HL 854, 861.

• Essential Conditions for application of the Doctrine of Election

From the case of Dhanpati v. Devi Prasad and others (1970) (3) SCC 776 (778), it was determined that before election following conditions must be fulfilled-

1. A person having no right to transfer, transferring property

2. He must transfer some benefit on the owner of the property, as part of the same transaction

3. The owner must elect either to confirm the transfer or to dissent from it.

Effect of election against the transfer-

Where the owner dissents from the transfer of his property –

1. He must forgo the benefit

2. The benefit contemplated for him would then go back to the transferor.

• Exceptions to Doctrine of Election

Where a particular benefit is expressed to be conferred on the owner of the property which the transferor possesses to transfer, and such benefit is in lieu of that property, if such owner claims the property, he is not bound to relinquish any other benefit that he achieves through the same transaction.

The acceptance of the benefit by the original owner will be considered to be an election by him to confirm the transfer, if he is aware of his duties and responsibilities and of the circumstances that might influence a prudent (reasonable) man into making an election.

This knowledge of the circumstances can be assumed if the person who gets the benefit enjoys it for a period of more than two years without doing any act to express dissent.

The transferor would ask him to elect his choice, if the original owner does not elect his option within a year of the transfer of property. Even after the reasonable time, if he still does not elect, the original owner shall be presumed to have elected the validation of the property transfer as his choice.

In context of a minor, the period of election shall be adjourned till the individual attains majority unless he is represented by a guardian.

• Modes of Election

The election by the owner can either be direct or indirect.

In direct election, one just needs to simply communicate about the elected choice or option. Though, in case of an indirect election, the acceptance of the benefit by the owner is subject to two conditions:

1. He has to have the knowledge of his responsibility to elect.

2. There must be proof of knowledge of circumstances which would influence the judgment of a prudent man to make an election. 

The election shall be presumed when the donee acts in such a manner with the property gifted to him that it becomes impossible to return it to the original owner in its original state.

Difference between English Law and the Indian Law Perspective-

The English law depends upon the principle of compensation which states that if the original owner does not validate the transfer, he will be able to retain the property and also the benefit accrued, subject to compensation provided to the donee, to the extent to which he had suffered a loss.

But in the Indian law, this doctrine is affected by the principle of forfeiture which says that if the real owner does not confirm the transfer, the donee incurs a forfeiture of the granted benefit which goes back to the transferor.

• Compensation

The estimated cost of the property which is to be transferred to the transferee is the approximate value of the compensation that he will receive. But in case of immovable properties, the issue of changing value of the properties according to the lapse of time arises. Thus, this valuation needs to take place at the time of the instrument coming into force rather than at the time of election.