Rules relating to transfer of property

Rules relating to transfer of property

The Transfer of Property Act 1882 came into force on 1st July 1882. It regulates the rules relating to the transmission of property between living persons in harmony with the rules affecting its devolution on death. It also completes the code of contract law as far as it relates to immovable property. This Act does not cover the entire dimension of transfer of property, it merely deals with the transfer of immovable property among living persons.

Scope 

The Act is limited to the transfer of property by the act of parties that is, through sale, exchange, gift, actionable claim, mortgage and lease. It does not cover the transfer of property by the operation of law. It deals with the transfer of immovable property inter vivos that is, between living persons. It pertains to voluntary transfers executed by the act of parties and does not cover transfers by the operation of law in form of inheritance, insolvency, forfeiture or sale in execution of a decree. The Act has no application to the disposal of property by will and does not deal with cases of succession of property.

Rules relating to transfer of property under the Act

1. It is important to draw a line between immovable and movable property. Only an immovable property and in exceptional cases the movable property can be legally transferred under the provisions of this Act.

Section 3 of this Act lays down the meaning of immovable property. Immovable property means a property which does not include standing timber, growing crops (that is in the form of vegetable produce which have separate existence except for their produce) or grass. Hence the meaning is an exclusive definition.

In Babu Lal v. Bhawani Das and Ors[i], the court held that section 3(25) of the General Clauses Act which defines immovable property can be applied to Transfer of Property Act 1882. Under the General Clauses Act immovable property is defined as one which includes land, benefits arising out of the land (eg. Right to catch fish), things attached to the land (like trees and shrubs having no independent use except for produce, for example, mango trees, orange trees)  or things that are permanently fastened to anything that is attached to the earth (like windows, doors, walls etc.). Additionally, the court held that the right of way, right to collect rent, a Hindu widow’s life interest of the income of the husband’s property, a factory, furniture, fixtures, windows, doors, office of a hereditary priest of the temple etc. are all immovable property.

The term movable property has not been defined in the Transfer of Property Act 1882. However, in general sense, movable property is a property which can be shifted or moved from one place to another without harm to its surroundings. The General Clauses Act defines movable property as property of every description except immovable property.

2. To validly transfer a property there are certain requirements to be complied with to safeguard the properties from future disputes and for evidentiary value. A property must be transferred by a valid instrument which is executed by the transferor in writing and is attested and registered. A transfer of property can be executed without a written instrument where writing is not expressly necessary under the law. There are some instruments under the Act which are required to be in writing though they may not be registered like, sale of immovable property of value of rupees 100 and above, exchange, gift etc. Also there are some which must be in writing and registered with the relevant authority like, sale of tangible immovable property of rupees 100 or more, charges, gift of immovable property etc.[ii]

Narasimha Rao and Anr. vs Sai Vishnu,[iii] The Court held that an unstamped instrument is not admissible as evidence even if it is for a collateral purpose. But if an instrument which is originally not stamped and if it is stamped subsequently it can be admitted as evidence although it is unregistered for a collateral purpose but the terms mentioned in the instrument cannot be taken into consideration.

3. Section 5 of the Act defines Transfer of Property. Transfer of property is an act by which a living person conveys property in present or future to one or more living persons or to himself or to himself and one or more living persons. The term person is not restricted to human beings but include a company, association of persons and body of individuals. Thus for a valid transfer, there must be an act of conveyance by living persons. It can be a transfer of an entire interest in a property or partial interest.

Prethi Singh v. Ganesh[iv] the transfer of property includes a property situated outside India where the Act does not apply. The rights and liabilities of the parties in such a case will be determined by the provisions of the Act. It is immaterial that the property is situated outside the Indian territory.

4. There are different kinds of transfer of property under the Act. Sale is defined as the transfer of ownership of a property in exchange for a price paid or promised or part paid or part promised. Exchange is when two people mutually transfer the ownership of one thing for the ownership of another neither thing or both the things being money only, the transaction is called an exchange. The third form is a gift, gift means a transfer of certain existing movable or immovable property made voluntarily and without consideration by one person to another accepted by the donee. Such an acceptance must be made during the lifetime of the donor and while he is still capable of giving.

The next form is mortgage, it is a transfer of an interest in specific immovable property to secure the payment of money advanced or to be advanced by way of loan or an existing or future debt or the performance of an engagement which may give rise to a pecuniary liability. Lease is a transfer of immovable property to enjoy such property for a certain time or in perpetuity in consideration of a price paid or promised or money or share of crops or service or any other valuable thing to be rendered periodically or on specified occasions to the transferee by the transferor who accepts the transfer on such terms. Lastly actionable claim is a claim to any debt other than a debt secured or any beneficial interest in immovable property by a mortgage or by hypothecation or pledge of movable property not in possession of the claimant. 

5. Section 6 lays down 13 kinds of property which cannot be transferred, other than those enumerated below all kinds of property can be transferred.

a. The chance of heir-apparent succeeding to an estate, called as spes successionis. Such a chance is not property as contemplated by that Act. It implies to a mere hope of succession.

b. The chance of a relation obtaining legacy on the death of a kinsman cannot likewise be transferred

c. Any other mere possibility of a like nature that is of a nature similar to those mentioned above cannot be transferred.

d. A right of re-entry cannot be transferred to anyone except the owner of the property affected thereby.

e. An easement apart from the dominant heritage cannot be transferred.

f. An interest in the property restricted in its enjoyment to the owner personally, for example, religious offices, services tenures, an inalienable raj etc. cannot be transferred.

g. A right to future maintenance in whatsoever manner arising secured or determined cannot be transferred.

h. A mere right to sue is not capable of being transferred. Claims for past mesne profits, for damages for breach of contract, for suing an agent for accounts and pre-emption are all mere rights to sue which cannot be transferred.

i. A public office or the salary of a public officer whether before or after it has become payable cannot be transferred.

j. Stipends allowed to military, naval, air force and civil pensioners of Government as well as political pensions cannot be transferred.

k. No transfer can be made which is opposed to the nature of interest affected thereby. Thus an attempted ‘transfer’ of a service inam by the Inamdar or a purported ‘transfer’ of res nullius like air or water from a river, will be void.

l. No transfer can be made of an unlawful object or consideration.

m. Lastly, no transfer can be made to a person who is legally disqualified to be a transferee.[v]

The transfer of property cannot be restricted by judgment or on any direction given, it can only be done so by the provisions of law [vi]

6. Persons competent to transfer

The transferor must be competent to contract and entitled to transfer property or authorized to dispose of transferable property which is not his own. Under section 7 of the Act, a person will be competent to transfer a property if he fulfils the necessary criteria under section 11 of the Indian Contract Act 1872. Under section 11 a person will be competent to contract when he fulfils the criteria of being a major that is one who has attained 18 years of age, of sound mind- who is capable of understanding the terms of the contract and its implications and can formulate a rational judgment and one who is not disqualified by law. Thus the following will be competent to transfer a property or authorized to dispose of transferable property which is not his own either wholly or partly and either absolutely or conditionally. A minor is a person who has not completed the age of 18 years. He cannot be a competent transferor but there is no provision in law disqualifying a minor to be a transferee.[vii]

7. Oral transfer

Oral transfer is a transfer of property which does not require it to be in writing. The law does not mandate for a compulsory requirement of a written instrument for executing such a transfer of property. To qualify as an oral transfer it should be expressly mentioned under the law. If there is no express mention of a written instrument necessary for transfer then the law will permit it to be made without writing and vice versa. [viii]

8. Transfer of future property how far valid-Section 5 of the Act defines Transfer of Property. Transfer of property is an act by which a living person conveys property in present or future to one or more living persons or to himself or to himself and one or more living persons. The transfer of property does not include transfer of future, non-existent property. Therefore a transfer of future property is not as much valid in India. But a conveyance of such property maybe valid as a contract to assign and then the property comes into existence, equity fastens upon the property and the contract to assign becomes a complete assignment.[ix]

Frequently Asked Questions 

What are the essentials of transfer of property?

1. The transfer of property must take place between two or more living persons

2. The property transferred must be transferable

3. The transfer must not be opposed to the nature of the interest affected thereby or for an unlawful object or consideration or to a person legally disqualified to be a transferee.

4. The transferor must be competent to contract and entitled to transfer property or authorized to dispose of transferable property which is not his own.

5. The transfer must be made in the mode prescribed by the Act. Thus all necessary attestation and registration must be complied with.

6. The transfer must not offend the rule against perpetuity

7. If on transfer an interest is created in favour of an unborn child subject to prior interest created by the same transfer, it must exhaust the whole of the remaining interest of the transferor.

8. If the transfer is conditional, the condition must not be illegal, impossible, immoral or opposed to public policy.

Edited by Sakshi Agarwal

Approved & Published – Sakshi Raje

Reference

[i] AIR 1912

[ii] Transfer of Property Act, section 9

[iii]2005 (5) ALT 653

[iv]AIR 1951 All. 462

[v] Transfer of Property Act, section 6

[vi]KansingKalusingThakore And Ors vs RabariMaganbhaiVashrambhai AIR 2006

[vii]Raja Balwant Singh vs The Rev. Rockwell Clancy And Rao (1912) 14 BOMLR 42

[viii]Sarandaya Pillay v Sankarlinga Pillai AIR 1959 2 MLJ. 502

[ix]Purna v. Birma ILR 1939 2 Cal. 341

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I am Dhruvi Dharia from University of Mumbai Law Academy (UMLA), pursuing B.B.A.-LL.B.(Hons.) I have a penchant for studying Corporate laws like Companies Act, Securities Law, Insolvency and Bankruptcy Code, mergers and acquisitions etc. and strong inclination towards numbers. I am also a budding Company Secretary and one level away from becoming one. I aspire to become a Corporate Lawyer in the future. I have always enjoyed reading and working on various legal matters whenever given a chance to. I constantly try to better myself by reading various Acts, articles, interviews of eminent lawyers and professionals and researching on various topics. I like reading on various contemporary legal issues and articles and I sometimes attempt writing on the same. Apart from academics in my free time I like drawing, painting and travelling to new destinations.