SECTION 5 Flashcards
TRANSFER OF PROPERTY
“transfer of property” means an act by which a living person conveys property, in present or in future, to one or more other living persons, or to himself, or to himself and one or more other living
persons; and “to transfer property” is to perform such act.
Property from one person to another can be transferred in several ways, such as by way
of private or a court sale, gift, Will, inheritance, relinquishment, dedication, etc., yet, all
these kinds of transfers are not subject to the application of TP Act, 1882. Under section 5 of the Act, the term ‘transfer’ has been defined as an act of a living person whereby he conveys existing property to one or more living persons, and only those transactions that are covered under the term ‘transfer’ are subject to the application of
this Act.
Transfers of title that take place in other ways are governed by different enactments. For example, testamentary succession is regulated primarily by the Indian Succession Act, 1925 and for Muslims by their Quranic law; and intestate succession is subject to the rules laid down by the respective personal laws to which the deceased
was subject to.
Similarly, dedication of property for religious and charitable purposes is governed by several religious and charitable endowment Acts passed for this very purpose
Living Person
The term ‘living person’ includes a juristic person, a company, or association or body of individuals, whether incorporated or not, but does not include an idol of God or a temple or even a court.
It does not mean that the property cannot be transferred to God or an idol, but it means
that if a person dedicates property to God, this transfer would not be subject to the rules of the TP Act, 1882, but instead, would be governed by the relevant religious or charitable endowment Acts.
As Company or association or body of individuals, whether incorporated or not, have been included in the term ‘living person’ in this section, it clearly brings out that a company can effect transfer of property, but the same would not be regulated by the provisions of this section.
As a Will operates from the death of a testator and not during his lifetime, it is also not a transfer within the meaning of the Act, but is subject to the rules provided under the Indian Succession Act, 1925. For instance, if A gifts land to B, the transfer is subject to the rules of TP Act, 1882, as both
of them were living on the day of the transfer.
However, if A leaves his property to B under a Will, this conveyance would not be subject to the rules contained in the TP Act, 1882. Similarly, the court is not a living person and transfers made by the order of the court are also outside the application of the Act.
Conveyance of Property
Conveying of property involves creation of new title or interest in favour of the transferee.
In conveyance, through this instrument of transfer, the title or rights are conveyed to the transferee, for the first time. The transferor is divested of the right conveyed and the transferee acquires it for the first time under this instrument.
For example, a person A is the owner of a house, and permits B to stay in it. Such permission does not convey any right in favour of B with respect to the house, as it can be withdrawn at any time. After a month, B agrees to pay a rent of Rs 5000 per month, and A executes a lease deed in his favour. This lease is a transfer of an interest in his
favour i.e., a right of owner to possess and enjoy his property. This right through this lease deed (an instrument of transfer) is conveyed in favour of B.
The right that B acquires is a right in immovable property and he does that with the help of this
instrument. It is now a right and not a mere permission, and his stay in the house will
be governed by the terms of the lease agreement and not by A’s directions.
Through this conveyance, B is vested now with a legal right to possess and enjoy A’s house and
during his lawful occupation, A is divested of the right to possession and enjoyment of his own house. If, after a month, A executes a sale deed in favour of B, B now becomes the owner and through this sale deed, all the remaining rights in the house are also conveyed to him. The right to possess and enjoy was already conveyed, but what are now conveyed are the rights of title and of alienation. At the same time, A is deprived of
these rights.
A power of attorney does not constitute an instrument of transfer of an immovable property.
A General Power of Attorney (GPA)/Will or Special Power of Attorney (SA) does not ipso facto constitute an instrument of transfer of an immovable property even where some clauses are introduced in it holding it to be irrevocable or authorizing the attorney holder to effect sale of the immovable property on behalf of the grantor. It would not ipso facto change the character of the document transforming it into a conveyance
deed.
As immovable property can be legally and lawfully transferred/conveyed only by a registered deed of conveyance, GPA Sales or Sale Agreement or Will transfers’ cannot be used to transfer immovable property. Both the descriptions are misnomers as there cannot be a sale by execution of a power of attorney nor can there be a transfer by
execution of an agreement of sale and a Power of Attorney and Will.
Consequently, a Power of Attorney is not an instrument of transfer in regard to any right, title or interest in an immovable property. It is creation of an agency whereby the grantor authorizes the grantee to do the acts specified therein, on behalf of grantor, which when executed will be binding on the grantor as if done by him. It is revocable or terminable at any time unless it is made irrevocable in a manner known to law.
Interests in Property
The term property includes an interest in property. An owner has three basic rights in the property, i.e., a right of ownership, of having the title to the property, secondly, an exclusive right to possess and enjoy the property and thirdly, an exclusive right to alienate the property in any manner that he likes. These rights are called interests in the
property under Indian law, and are referred to as ‘real rights’ under English law.
Where, either the complete rights in the property are transferred, or even one or two of these
basic rights are transferred as between living persons, the transfer would be subject to
the provisions of the Act. Transfer under the Act may refer to transfer of possession as well as transfer of ownership. Where all the rights in the property are transferred, it would be a transfer of property, but where only some rights are transferred, it would be a transfer of an interest in the property.
In the Present or Future
The term ‘in present or in future’ qualifies the word ‘conveys’ and not the term ‘property’
It means that a transfer is a conveyance of such property that must be in existence at present, but whose conveyance may take place depending upon the terms of the contract concluded between the parties not only at present, but also in the future.
It does not, therefore, refer to the conveyance of future property, but may include conveyance of an existing property in future.
An assignment of an estate or interest which has no existence on the date of transfer, can, neither in law nor in equity operate according to its tenor.
Such a purported transfer can only operate as an agreement to transfer and when the future assets come into existence it is seized on in equity by reason of such agreement.
If there is an attempted conveyance of non-existent property, it cannot operate as an immediate alienation. Made for consideration, it may be valid as a contract, and when the object to
which it refers to comes into existence, equity taking as done that which ought to be done, fastens upon that property and the contract to assign thus becomes a complete assignment.
Transferor and Transferee the Same Person
Though normally the transferor and the transferee would be two separate individuals or group of individuals, the expression ‘or to himself’ in section 5 indicates that there may be a situation where the transferor and the transferee can be the same person.
No person can transfer property to himself in the same capacity, but if he transfers property in one capacity to himself and receives it in some other capacity, then, such transfer is permissible.
An apt illustration of it is that a person creating a trust can transfer the property from his individual capacity to himself as a trustee.
Ordinarily, the trustee is the owner of the trust and has the title to the property, but where the trust specifies a category of beneficiaries or a specific purpose for which it was set up, the trustee cannot deviate from the purpose, or use the property for his own benefit.
He does not possess a right to enjoy the property for his personal benefit, unlike an ordinary owner having the title to the property. So long as the purpose of the trust remains unfulfilled, the trustee does not acquire the power to sell the property at his pleasure. Similarly, if the beneficiaries, under the trust, create a separate class, till any one of them is alive, the property can be used only for their benefit and not at the
pleasure of the trustee.
It is only when either the purpose for which the trust was set up is fulfilled, or the class of beneficiaries for whose benefit it was created comes to an end by death, that the trustee in accordance, with the terms of the trust, may acquire the power to sell it.
Only when the trustee becomes competent to sell the trust property can he sell it to either any one or even to himself. In such a case, he sells it as the
trustee to himself in his individual capacity. These limited powers of sale vested in a trustee are conveyed to himself, and as an ordinary person he acquires a right to possess and sell it at his pleasure.
Will
There is a difference between a transfer of property and a bequest under Will. TP Act,
1882 deals with transfers inter vivos, that is, by a living person who conveys the property to one or more living persons. While a transfer is a conveyance of an existing property by one living person to another, a Will is a legal expression of a wish and intention of a person with respect to his properties.
Since a Will takes effect from the death of the testator, it is not a transfer inter vivos, or between living persons, but is from a person, who is dead to the legatee and therefore, it will not be subject to the provisions of the TP Act, 1882. It would be governed by the rules provided under the
Indian Succession Act, 1925. A deed executed by the husband and wife jointly providing that on the death of any of them the surviving executant shall possess the same with absolute rights of alienation and upon the death of such surviving executant, the property would go to their children, the deed would be a Will and consequently not a
transfer as there was no transfer of right in praesenti in favour of the surviving executant or the children.
Definition of Transfer of Property
“Transfer of Property” means an act by which a living person conveys property, in present or in future—
(a) to one or more other living persons; or
(b) to himself; or
(c) to himself and one or more other living persons.
The performance of such an act is to be regarded as transfer the property. According to
this section, “living person” includes a company or association or body of individuals, whether incorporated or not. However, the general provisions of this Act will not affect provisions of any special law dealing with transfers of property by companies, associations or body of individuals.
Act of Conveyance
For transfer of property it is necessary that the property must be conveyed i.e., it must be handed over to other person. The Act has nowhere indicated that the owner of the property must handover the property. It is also not necessary that all the rights or interest in the property must be conveyed to another person. It implies that the person conveying property is entitled to the property sought to be conveyed and it is being conveyed to a person who has no title to it otherwise.
Charge
The creation of a charge does not involve conveyance of any interest in the property of
another. It only secures payment out of certain properties. A charge is, therefore, not a
transfer of property.
Can Future Property be Transferred?
Future property is that property which will come into existence in future. If a contract to transfer future property is made, it will not be enforced before the property comes into existence. The contract to transfer future property will be specifically performed only on coming into existence of that property.
In this case, the owner of certain machinery transferred it to T to be held in trust for H. The subject matter of the trust was both the existing machinery as well as machinery which will be bought in future. Certain new machinery was
purchased and the question arose whether that property would be claimed by H as against execution creditors of the owner.
The following rule was laid down by Lord Westbury: “If a vendor or a mortgagor agrees to sell or mortgage property, real and personal, of which he is not possessed at the time and he receives the consideration for contract and afterwards becomes possessed of property answering to the description in the contract, there is no doubt that the contract would in equity transfer the beneficial interest to the mortgage or purchaser immediately on the property being
acquired.
