Modes of transfer of property – Transfer of Property Act,1882

Modes of transfer of property – Transfer of Property Act, 1882

Transfer of property is regulated under the Transfer of Property Act, 1882. It includes both movable and immovable property. The act came into force on 1^st July 1882.

Main objective of the Transfer of Property Act is to bring the rules which regulate the transmission or transition of the property between two living people.

Chapter II of the act, from Section 5 to 37 mostly deals with movable and immovable property and chapter II to VIII, from Section 38 to 137 deals with immovable property.

Section 5 of the Transfer of Property Act, 1882 , defines the term “ Transfer of Property”  as “act by which a living person conveys property, in present or in future, to one or more living person or to himself and one or more other living persons”. ‘Transferor’ is the one who transfers the property, while the one who receive such property is ‘Transferee’. Term “Living Person” not only include living person but legal entity such as companies, private association or body individuals. There are 2 broad categories of property under the Transfer of Property Act-

1. Immovable Property

Transfer of Property Act, does not define this term, but it gives exhaustive definition in regards to immovable property. Section 3 of the act lays down that immovable property does not include standing timber, growing crops or grass.

2. Movable Property

Act does not define the term ‘immovable property’ properly and gives a very vague definition that movable property are those property which are not immovable property.

In Prethi Singh vs Ganesh[1], It was held that the term property includes property Outside India or Territories, where the act does not apply.

There are certain Modes of Transfer of Property under Transfer of Property Act-

Sale (Section 54)

Defined under Section 54 “Sale is a transfer of ownership in exchange for a price paid or promised, part paid or promised”.

Essential Elements of Sale

• Seller and Buyer must be competent to transfer the property (Section 7)

In Misabul Enterprises vs Vijay Shrivastava[2] , It was held that a contract of sale must be based on a mutual agreement between the seller and buyer and the transferor should either be the owner of the property or should be authorized to dispose off the property.

In Sarup Chand vs Surjit Kumar, 2002[3], It was decided that an agent having Power of Attorney to sell the property can also sell it without being the owner of the property.

• Subject matter must be transferable Immovable Property (Section 6)

Immovable property can be Tangible and Intangible. Tangible Properties are those property which can be touched, such as House, a tree etc while Intangible property are those property that cannot be touched such as Right of way, Right to fishery etc.

• There must be a factor of Money Consideration.

Price is at the centre of contract of sale. It can be paid in lumpsum or in instalments as agreed between the parties. An agreement between parties cannot be declared null or void on the ground that consideration was not adequate.

Two modes of transfer by sale

• By Registered Instrument

Where the value of tangible immovable property is 100 or more than 100 rupees than in that case, sale can only be made by Registered Instrument.

• Delivery of Possession

Where the property is valued less than 100 rupees transfer of property can be made either by a registered instrument or delivery of possession. Registered instrument is not mandatory.

Mortgage (Section 58)

Section 58 (a) of Transfer of Property Act, lays down the definition of Mortgage as a “transfer of an interest in a specific immovable property for the purpose of securing payment of money advanced by the way of loan, an existing or future debt and the performance of an engagement which may give rise to a pecuniary liability.

Transferor is called ‘Mortgagor’ and the transferee a ‘Mortgagee’. The principal money and interest of which payment is secured for the first time being are called ‘ Mortgage Money’ and the instrument by which the transfer is effected is called ‘Mortgage deed’.

There are 6 Types of Mortgages

Simple Mortgage [Section 58(b)]

In simple mortgage possession of the property is not given to the mortgagee and the mortgagor binds himself personally to pay the mortgage money and if the mortgagor fails to do so, mortgagee will have right to cause mortgaged property to be sold.

Essentials of Simple Mortgage

• There must be a transfer of interest to the mortgagee.
• Interest created in a specific immovable property.
• The mortgage should be supported by consideration

Mortgage by Conditional Sale [Section 58(c)]

Mortgagor ostensibly sells the mortgage property, on condition that, on default of payment of the mortgage money on a specified date, the sale is to become absolute or complete, on such payment being made, the mortgagee is to transfer the property to the mortgagor.

Right of the mortgagee on the default of payment cannot be enforced privately but only by a suit for foreclosure.

Section 59 of Transfer of Property Act, 1882 talks about how the conditional sale by mortgage is effected-

• When the principal amount is 100 rupees or more than 100 rupees, then registered instrument signed by the mortgagor and should be attested by at least two witnesses.
• When the principal amount is less than 100 rupees, then registered instrument or delivery of possession can be done to give effect of mortgage by conditional sale.

Essentials of Mortgage by Conditional Sale

• Contract of mortgage execute itself
• Mortgage by conditional sale is non-possessory
• There is a clause in regard to default of payment

Usufructuary Mortgage [Section 59 (d)]

In this type of mortgage, the mortgagor delivers the possession of the property to the mortgagee and authorizes mortgagee to retain such possession until the payment of the mortgage money.

This authorization includes right to receive rents and profits accruing from the property and to appropriate the same instead of payment of interest. Transaction is called Usufructuary Mortgage and the mortgagee is called Usufructuary mortgagee.

Usufructuary mortgagee cannot sue either for sale or for foreclosure, his only remedy is to retain the possession of the property till the mortgage money is paid up. When the possession of property is disturbed the usufructuary mortgagee can opt for personal remedy under Section 68 [4]of the Act.

Essentials of Usufructuary Mortgage

• Possession is delivered to the mortgagee.
• Mortgagee is entitled to rents and profits accruing from the said property.
• No personal liability of mortgagor.
• No time limit is fixed for repayment of the due amount.
• Mortgagee is entitled to redeem the amount due, from the rents and profits received from the property.

English Mortgage [Section 58(e)]

In this type of mortgage, the mortgagor transfers the property absolutely to the mortgagee and the mortgagor is personally liable to repay the mortgage money, on particular date and lays down a condition that on payment of money the mortgagee shall retransfer the property.

In this case, mortgagee can sue for sale, and has a power of sale without the intervention of court in certain cases (Section 69[5]). Sale is a remedy available at mortgagor’s disposal.

Essentials of English Mortgage

• There is a delivery of possession
• It is effected by absolute transfer of property with a provision of re-transfer in case of repayment of the due amount.
• There is a personal liability to pay the amount.

Mortgage By Deposit of Title Deed [Section 58(f)]

Where the person is from the Calcutta, Madras and Bombay, and in any other town as specified by the state government and the mortgagor delivers documents of the title of immovable property with an intent to create security is called Mortgage by deposit of title deed. This type of mortgage is popularly known as equitable mortgage on the analogy of a similar expression used in English law.

Section 96[6] of the Act, puts equitable mortgage on the same footing as simple mortgage. Therefore, the remedy available to the mortgagee is by a suit for sale. In Nityananda vs Rajpur  Chhaya Bani Cinema. Ltd[7], It was held that mortgagee can also sue for the mortgage money.

Essentials of Mortgage by Deposit of Title Deed

• Can only be consummated in the towns of Calcutta, Madras and Bombay and in any other town specified by the state government.
• Not necessary to deposit all the deeds, it is sufficient if material documents are deposited.
• No delivery of possession of property takes place.

Anomalous Mortgage [Section 58(g)]

A mortgage which is not simple mortgage, a mortgage by conditional sale, a usufructuary mortgage, an English mortgage or a mortgage by deposit of title deed is known as an anomalous mortgage.

The rights and liabilities of the parties to such a mortgage are to be ascertain by their contract and failing of that local usage. Section 67 (a), [8]Mortgagee can opt for remedy by sale and foreclosure, if the terms of mortgage allow it.

Lease (Section 105)

Transfer of a right to enjoy immovable property for a certain time (express or implied), in consideration of a price paid or promised or money or a share of crops, service or any other thing of value, to be rendered periodically or on a special occasion to the transferor by the transferee, who accepts the transfer on such terms. The one who transfers the property is called ‘Lessor’ and the one who accept it is called ‘Lessee’. The price involved is called Premium and services and other things which is rendered is called Rent.

According to Section 106 [9]of Transfer of Property Act 1882, in case of absence of written contract, a lease of immovable property for the purpose of manufacturing and agriculture lease will valid till the time until terminated by one of the party by 6 months prior notice and in any other purposes except agriculture and manufacturing then it will be terminated by 15 days prior notice.

Essentials of Lease

• Lessor and Lessee must be Competent, must be of sound mind and should not be disqualified by any contrary law.
• Subject matter involved in lease must be an immovable property, lease will not constitute if the subject matter is movable property.
• A lease must be made for a certain period of time (express or implied).
• A lease must be made of consideration, which can be in form of Premium or Rent.
• In lease, right to enjoy the property is transferred.
• Ownership is not transferred in the lease , only possession is transferred to the lessee.
• The lessee must accept the transfer.

Exchange (Section 118)

Section 118 of Transfer of Property Act, 1882 defines Exchange as when two persons transfers the ownership of one thing for the ownership of other, neither thing or both thing being money only. It can be understood by the definition that exchange is an act of giving one thing and receiving another in return. The phrase in the definition “ Neither thing or both thing being money only”  means that either the exchange will be of money for money or either it will be thing for a thing, it cannot be an exchange of a horse for 5 lakhs.

In Ismail vs Saleh Muhammad (1927) 7 Lah. J. 18, it was held that when in an exchange if one property is valued more than the other, the transaction would be nonetheless an exchange, even if one party is paying the difference amount in cash.

Section 118 of Transfer of Property Act, 1882 talks about how an exchange is effected, an exchange is effected in a same way as in the case of sale and thus registered instrument is necessary in tangible immovable property of the value of 100 and upwards.

In Hari Shankar Mishra vs Vice Chairman, Kanpur Development Authority, [10]it was held that when in an exchange of properties, one party did not get the possession of the property he was entitled to receive, then he is entitled to receive property transferred by him.

Essentials of an Exchange

• Exchange involved transfer of ownership.
• Property may be movable and immovable in an exchange.
• Exchange involve barter one thing in lieu of another

Gifts (Section 122)

A gift is transfer of movable and immovable property and made voluntarily without any consideration, by one person called the donor, to another person called done and accepted by the done. It can be understood as a transaction where the sender willingly brings into the effect such transfer without any consideration in monetary value. The transferee is called ‘Donee’ and the transferor is called ‘Donor’.

Section 123 of Transfer of Property Act, 1882 talks about how a gift is effected-

• When it is immovable property, registered instrument signed by donor and donee and attested by at least two witnesses.
• When it is movable property either by registered instrument signed and attested as above or by delivery od possession.

Section 126[11] talks about revocation of gift, revocation means annulment. Section 126 states revocation of gift can always done before its acceptance.

Essentials of a gift

• There should be a donor and a done.
• Gift must be free will of donor and free consent without any coercion, force or undue influence.
• There must be an acceptance done by donee, with regards to the gift.

 

[1]  AIR 1951 All 462

[2] AIR 2003 Delhi 15, 100 (2002) DLT 290

[3] Second Appeal No. 2174 of 1980

[4] https://indiankanoon.org/doc/1166338/

[5] https://indiankanoon.org/doc/792696/

[6] https://indiankanoon.org/doc/1424554/

[7] AIR 1953 Cal 208

[8] https://indiankanoon.org/doc/413258/

[9] https://indiankanoon.org/doc/80042/

[10] Civil Misc. Writ Petn. 23061 of 1999

[11] https://indiankanoon.org/doc/1856197/

Author: sarthbodhi wankhade,
Symbiosis Law School and 5th Year (BA LLB)