Doctrine of feeding the grant by Estoppel

estoppel

The doctrine of feeding the grant by estoppel is based on the maxim ‘nemo dat quod nonhabet which implies that no one can give to another, which he himself does not possess’. Section 43 of the Transfer of Property Act lays down “where a person fraudulently or erroneously represents that he is authorized to transfer certain immovable property and professes to transfer such property for consideration, such transfer shall at the option of the transferee, operate on any interest which the transferor may acquire in such property at any time during which the contract of transfer subsists”.

This general rule lays down that no property can be transferred by any person who is not authorised to do so. Thus if a person does not have a title to property, he cannot validly transfer the same to another. But this rule has been relaxed in practice due to “adjustment of equities” between such person and the transferee. One of such exceptions to this rule is provided in sec. 43, T.P. Act.

The principle of law on which the provisions of sec.43 rest is a well known rule of estoppel, sometimes referred to as ‘feeding the grant by estoppel’. This means that if a person who although has no title to a property, yet grants it to another by conveyance, fraudulently causing loss to the other, will loose his subsequent interest in the property to the other, in case of any subsequent transfer of such property in his favour. An estoppel arises against the transferor for his conduct, and the law obliges him to ‘feed’ that estoppel by reason of his subsequent acquisition. Thus the principle underlying this section is based partly on doctrine of estoppel and partly on the equitable doctrine that a man who had promised more than he can give, ought to give when he acquires what he initially claimed.

The doctrine of feeding the grant by estoppel compels a man to perform when the performance becomes possible. It does give the transferor the option of going ahead with the transfer, it then completely depends upon the transferee if he is still willing to go ahead with the transfer after the transfer becomes a viable option.

In Ram Bhawan Singh v Jagdish [(1990) 4 SCC 309] the court observed that “when a person having a limited interest in the property transfers a larger interest to the transferee on a representation, and subsequently acquires the larger interest, the larger interest passes to the transferee at the latter’s option. This doctrine not only applies to sale but also applies to a mortgage, lease, charge, and exchange. Where no grant or interest in immovable property is involved, the doctrine would not apply. The doctrine also does not apply in cases where the transferor has acquired interest not in the property which is the subject matter of the transfer, but in some other property.

Essential Requisites of the doctrine of ‘feeding the grant by estoppel’ –

A fraudulent or erroneous representation of ownership

The estoppel rests on the representation(express or implied) made by the transferor that he is authorized to transfer, which representation subsequently turns out to be erroneous. It makes no difference that the transferor had no interest whatsoever in the property or the interest therein that of an expectant heir. Further, it is immaterial whether the transferor acts bona fide or fraudulently in making the representation. What is material is that he did make a representation and the transferee acted on it and thus has been misled. In other words the doctrine applies only when the transferee has been misled into believing a false representation and not otherwise. The doctrine also applies in cases where the transferor has a duty to speak and he fails to do so. Where a person sold the property as an agent of the widow, and later became her heir, the doctrine did not apply, as there was no erroneous representation (Peyare Lal v Misri AIR 1940 All 453)

A transfer for consideration 

The doctrine of ‘feeding the grant by estoppel’ is applicableonly to the transfers of properties for value. This section is not applicable where the transfer is gratuitous, i.e. without consideration. Thus, the provisions of this section are not applicable to transfer of property by way of a gift where the donor has no present fixed right at the date of transfer, making it a void transaction.

At the option of the transferee 

The transfer becomes valid when the transferee exercises the option and the title of the transferor becomes perfect. Where the official receiver transfers property before it vests in him, the implied covenant will be treated as erroneous representation, and the purchaser’s title would be complete as soon as the property vests in him( Muthiya Chettiar v Doraswami (AIR 1927 Mad 1091). Similarly where a partner sells the property of a firm in his right and subsequently on the dissolution of the firm is allotted the same property, the transferee gets the benefit of such allotment (Syed Nurul Hossein v Sheosahai (1893) ILR 20Cal 1).

Further, the interest acquired by the transferor does not automatically pass on to the transferee but only when he claims his interest in such property

A subsisting contract of transfer 

The option of the transfer can only be exercised in respect of an interest acquired by the transferee whilst the contract of transfer “still subsists”. If the transferee (purchaser) had repudiated or cancelled that transaction, or had recovered his purchase money, or if the transaction were one of mortgage and the mortgage money had been repaid, then the relation of the transferor and the transferee has ceased to exist, and no claim in respect of the property can be made by the latter.

Exceptions to the doctrine of ‘feeding the grant by estoppel’-

When the transferee is aware of the true transaction

The benefit of this section cannot be claimed by the transferee if he did not believe in or act upon the representation. There doctrine of estoppel does not operate when both the parties are aware of the true transaction. Accordingly, if he is aware of the defect in title of the transferor, he cannot get the benefit of Sec. 43. Thus, when an undivided Hindu father had two sons A and B. A who was entitled only to 1/3 of property, mortgaged ½ of property to C, who knew that A was entitled to 1/3.Later, A’s father died and A having become entitled to a half share, C sued on the mortgage seeking to make A’s half share liable, it was held that C could avail only 1/3 share.

When the transfer is forbidden by law

The provisions of sec. 43 does not apply if the transfer is invalid as being forbidden by law or contrary to public policy. Section 43 does not operate on illegal transactions. Transfer by a minor or lunatic also do not qualify for the application of sec. 43.

When the second transferee acquires rights

The second paragraph of section 43 protects the rights of the second transferee in good faith and for consideration who has no notice of the option in favour of the first transferee. Thus, the only person who can defeat the right of an original transferee is a subsequent transferee. Usually, the deed of transfer is registered, which operates as a notice of the existence of such contract to the entire world. If however, the deed is not registered, the original transferee is in a vulnerable position.

Comparison with English Law

In English law, the subsequent estate passes to the transferee without any further act of the     transferor. But it departs from the English doctrine in two respects. First, the estate does not pass instantly but at the option of the transferee. Under English law, the transfer is automatically validated, without the need for any other action on part of either the transferee or the transferor. Under Indian law, for it’s validation, the option must be exercised by the transferee, for which three conditions must be fulfilled; the contract should be subsisting; the property should be available and, the transferee should be willing to go ahead with the transfer. Second, the transferee maybe defeated by a purchase for value without notice. Under English law, as the original transfer is perfected the moment transferor acquires competency to transfer the property, and the transfer is validated instantaneously, the scope of property not being available due to the chances of the entry of a bona fide transferee for consideration does not arise.

Illustrations

1. X, a Hindu wife executed a mortgage of her husband’s property as if it belonged to her five years after he had disappeared. The mortgage was invalid, as the presumption of death does not arise until seven years.

2. A and B, two sisters inherit property on the death of their father. A even though entitled to only ½ share sells the entire property to C representing himself to be the sole owner. B dies and inherits A’s share, C is now entitled to claim interest in that share.

3. X a person sold the property as an agent of Y(a widow), and later became the heir of X’s property. The doctrine does not apply in this situation as there is no erroneous representation.

4. A and B entered into a contract with A falsely representing the facts. B after knowing this terminated the contract. A later on claims interest in the subject of the contract. The doctrine does not apply as the contract no longer subsists.

Conclusion

The doctrine of feeding the grant by estoppel operates to preserve the rights of the transferee in situations where there has been a false representation by the transferor. Thus, the above article is an overview of the application of doctrine under various circumstances.

Frequently Asked Questions

1. What does estoppel mean?

Estoppel means when a person claims something, he cannot go back on what he so claimed.

2. What are the essential requirements of feeding empty grant by estoppel?

A fraudulent or erroneous representation of ownership, A transfer by the wrong owner, A transfer for consideration and A subsisting contract of transfer are the essential components of the doctrine.

3. What is the point of comparison between the application of section 6(a) and 43?

The two provisions thus operate on different fields and under different conditions and there is no ground for reading a conflict between, or cutting down the ambit of the one by reference to the other.

4. What are the remedies available to second transferees?

If the second transferee is a prudent purchaser with a bona fide intention, his rights prevail over the original transferee under certain circumstances.

Edited by Shikhar Shrivastava

Approved & Published – Sakshi Raje 

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I am Alisha Luthra pursuing LLB from Campus Law Centre, Faculty of Law, Delhi University. The endless minutiaes of law is what drives me to read and learn more about it every day. I have been a literature enthusiastic, always nabbing the first seat trying to grasp a little extra information about the subject. Knowledge is what excites me the most to read more and try a hand at writing. Apart from the academic interests I've loved traveling to the mountains since I was a kid. It is these travel and reading experiences that have shaped me to be the person I am today. This internship has been a helpful and learning experience giving me the opportunity to try a hand at writing while grasping in depth knowledge about the various intricacies of contract law.