Unit 4- Transfer of Immovable Property

(Sec 38-53A)

Introduction
Part B of Chapter II deals with the transfer of immovable property. The primary things it deals
with are –
• Transfer by someone other than full owner (Sec 38,41)
• Protection of third-party rights (Sec 39, 40)
• Transfer by co-owners (Sec 44)
• Joint Transfer (Sec 45)
• Bona fide holders under defective title (Sec 51)
• Lis Pendens (Sec 52)
• Fraudulent Transfer (Sec 53)
• Part Performance (Sec 53A)

Section 38
• Powers of transferor are limited such that they are only available under specific conditions.
• For transfer under this section to be valid, transferee must-
a) Use reasonable care to ascertain the existence of the “specific conditions”
b) Act in good faith
• Principles of Sec 38 laid down in Hanooman Prasad v. Mst. Babooe
• Criteria for application of Sec 38-
a) Transferor must have restricted rights of alienation of property
b) Transferor must be authorised to alienate property only under specific conditions
c) Transferor must allege presence of these special circumstances at time of transfer
d) Transferor must transfer for consideration
e) Transferee must use reasonable care to determine the existence of the conditions
f) Must act in good faith

Section 39 (skip)
• Person must have right to receive maintenance or have a provision for advancement or
marriage

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• From the profit of the immovable property which is transferred
• The right must be on the property and not against a person
• The aforementioned rights are only enforceable if-
a) Transferee had notice of the burden on the property
b) Transfer is gratuitous
• Looks to protect the right of maintenance of widows and children.
• Kaveri Amma v. Parameswari Amma- Amount of maintenance from property can be
increased in future if there is a change in the circumstances.

Section 40
• First paragraph enshrines concept of Restrictive/Negative Covenants.
• The benefit must arise out of contract or must be annexed to ownership of land.
• Can only be enforced against-
a) Transferee with notice
b) Gratuitous transferee.
• Covenants are agreements or contracts wrt to property. Restrictive covenants limit rights.
• Covenant must be for increasing the beneficial enjoyment of the transferor’s property
(transferor in this case is the first person who sells the property)
• Tulk v. Moxhay- Covenant runs with the land. Covenant attached to the land is applicable
even if the land undergoes subsequent transfers so as long as the transferee has notice of
the covenant. In this case, after several transfers of the land, the final transferee tried
developing land despite having notice of the covenant. Court upheld covenant.
• Second Paragraph deals with personal rights arising out of contract annexed to ownership
of property.
• Any obligation arising out of a contract can be imposed against transferee for value as long
as he had notice.
• If transfer is gratuitous, then notice of covenant or contractual obligation is not necessary.

Section 41
• The primary condition is that the person who is transferring the property should be
ostensible owner.
• There should be consent form the real owner, which can be implied or express form.
• The ostensible owner should get some consideration in return of the property.

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• Reasonable care has to be taken by the transferee about the authority of transferor to the
property and the transferee had acted in good faith.
• General principle of property law- nemo dat quod non-habet (no one can transfer better
title than he himself has).
• Ostensible owner is an exception to this rule.
• Rajcoomar Kondoo v. John & Maria McQueen- plaintiff inherited property through will
but realised that the property had already been purchased by someone else and subsequently
sold to a third party. Court held that transfer cannot be undone and was legitimate in the
eyes of the law. Established the concept of ostensible owner in Indian law.
• Ostensible owner is a person who seems to possess the characteristics of an actual owner
of the property after reasonable inspection by the transferee.
• He has acquired that right by the wilful neglect or acquiesces by the real owner of the
property thereby making him an ostensible owner.
• Bhim Singh v. Kam Singh- Ostensible owners have apparent and unconditional complete
authority to deal with the property unlike benamidars who merely lend name for property
while actual authority is in hands of person providing consideration.
• Essentials (establish doctrine of Holding out)-
a) Transfer must be carried out by ostensible owner
b) Express or implied consent between real owner and ostensible owner
c) Transfer by ostensible owner must be for consideration
d) Transferee must act in good faith, take reasonable care.
• Consent must be real (no fraud, misrepresentational, coercion, etc)
• If valid consent is there and ostensible owner transfers property to 3rd party for
consideration, real owner cannot claim land back.
• Good faith- transferee legitimately believed that ostensible owner was competent person to
transfer property (Bona fide intention).
• Khwaja Afzal v. Md. Saheb- Mere good faith is not enough, transferee needs to establish
reasonable care into finding out who the actual owner of the land is
• Subsequent transferees also protected under Sec 41 if-
a) Transfer is for consideration
b) Without notice of real owner’s title
c) Good faith and Reasonable Enquiry

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 Section 43
• Feeding the Grant by Estopple- A person who has interest in an immovable property can
transfer it however, a person who has no interest cannot do so. When a person with no
authority agrees to transfer such property, he is estopped from denying the transfer when
he subsequently acquires the interest/authority.
• The aforementioned doctrine comes into force when a person transfers property to which
he has no title based on a representation that he has an interest which is present and
transferable in the said property and based off this representation, the transferee agrees to
transfer for consideration.
• Doctrine laid down in English case of Rajapakse v. Fernando.
• Essentials-
a) Fraudulent or Erroneous representation about authority to transfer property.
b) Transfer for consideration
c) Transferor subsequently acquires interest.
• If transferee has knowledge about the lack of authority of transferor at time of formulation
of agreement, he cannot claim protection under Sec 43.
• No estopple can arise by reason of a false statement when the truth is known by both parties.
• Section not applicable in cases where transfer is without consideration, forbidden by law
or is involuntary in nature.
• Read differences between sec 41 and 43 from pg 127. Very important.
Section 44 (skip)
• Deals with transfer by co-owners of property.
• Transferee acquires transferor’s right to joint possession, part enjoyment and to enforce
partition of property.
• Exception- transferee cannot have joint possession or part enjoyment if he is not a member
of the family. “Dwelling house”.
• Hafizullah Sheikh v. Puran Chand Jain- House used for commercial purpose and no
residential purpose at all is not dwelling house.
• This section is applicable when co-owner transfers property by way of gift, lease, sale or
mortgage.
• Ashim Ranjan Das v. Bimal Ghose- if co-owner who is not part of undivided family tries
entering house, court can pass injunction restraining him from doing so.
• Exception not applicable in cases where part of house occupied by strangers post partition.

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• Exception further codified under Section 4 of Partition Act, 1893.

Section 45 (skip)
• Deals with joint transfers.
• When property is transferred to two or more people for consideration
• The consideration is paid out of a common fund belonging to them
• The interest in the property is identical to their interest in the common fund
• If consideration is paid out of separate funds, shares or interest in property is proportional
to the consideration paid.
• If interest in common fund cannot be determined, there is a presumption of equality.
• Co-ownership is a relationship which is based on consensus and/or contract.
• State of Maharashtra v. BE Billimoria- in a case where land was jointly acquired by two
strangers, the absence of evidence regarding their shares in the fund meant that they should
be assumed to be the owners of equal shares of the land.
• A joint transfer cannot be regulated by Sec 45 if there is a contract contrary to the provisions
of said act.

Section 51 (skip)
• Deals with compensation of owners with defective titles for improvements made.
• Applicable in cases where transferee makes improvements to property in good faith
believing that he is entitled to do so but is evicted by a person having a better title.
• Such transferee has the right to-
a) Have the improvements estimated and paid or secured to him by the evictor.
b) To buy the interest in the property at its market value exclusive of the value of the
improvement
• In case of crops grown or planted by transferee, he has right to ingress and egress to gather
and carry his crops.
• Based on principle “he who seeks equity must do equity”
• Essentials-
a) Transferee must prove that he is “transferee”
b) Must have made improvements in good faith
c) Must have been evicted by person with better title.

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• Person in wrongful possession cannot recover compensation for improvements of land.
(Illegal construction in this case despite owner’s objection)
• Kidar Nath v. Mathumal- Compensation determined not by amount spent to make
improvements but by how much they have increased the value of the property.

Section 52
• If suit is pending in a court of competent jurisdiction which is not collusive and involves a
dispute regarding rights of an immovable property cannot be transferred by any party such
that it affects rights of the other party under any decree which may be passed later on.
• Exception- Property can be transferred or dealt with only under authority of the court on
terms mandated by it.
• Lis Pendens- property which is in dispute should not be sold or dealt with by any party to
a dispute during the pendency of the suit. If such property is transferred, then the transferee
is bound by the result of the suit regardless of him having notice of the suit or not.
• Bellamy v. Sabine- principle on the basis of which doctrine of lis pendens rests was laid
down.
• Faiyaz Hussain Khan v. Prag Narain- Whether subsequent transferee would be affected
by decree of court? Court cited Bellamy v. Sabine and said concept of lis pendens is
applicable in India, therefore subsequent transferee would be affected by the decree of the
court even if he had no notice of the pendency of the suit.
• When a suit is pending before a court which has no proper jurisdiction to entertain it, the
doctrine of lis pendens will not apply.
• Essentials-
a) There must be a pending suit.
b) Suit must be pending in a competent court.
c) Suit must not be collusive.
d) Right relating to immovable property must be in question.
e) Disputed property must be transferred or dealt with by any party.
f) Alienation must affect the rights of other party to dispute.
• Suit or proceeding continues until-
a) Final decree or order has been obtained
b) Final decree or order becomes unobtainable due to lapse of limitation period.

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• Transfer of property for institution of suit in this case includes sale, lease, mortgage and
exchange.
• Temporary injunctions are often passed during the course of cases related to property rights
however, it is not necessary for them to pass it in every case.
• Lis pendens is applicable to involuntary transfers (transfers by operation of law)

Section 53
• Deals with fraudulent transfer.
• First rule talks about transfer of property made with the intent to defeat or delay creditors
shall be voidable at the option of such creditors and will not affect the rights of transferee
who acted in good faith.
• Second rule talks about transfer of property made without consideration with the intent to
defraud subsequent transferee and will be voidable at the option of such transferee.
• Not all transfers made without considerations where the property was later transferred for
consideration will be deemed to be fraudulent transfers.
• Laws of insolvency remain unaffected.
• Essentials-
a) Transfer of Immovable property
b) Transfer must be made with intent to defeat or delay creditors
• Does not cover sham or simulated transfers as there is no intent to transfer property.
• Only applies to transfers as defined under Section 5.
• Creditors includes people who to whom a debt is owed in the present as well as those who
become creditors after the date of transfer.
• Suit instituted by creditor can be on his own behalf or on behalf of all creditors together.
• Intent to defeat or delay creditors can be inferred by determining if following conditions
are present-
a) Debtor sells property keeping nothing for himself
b) Inadequate consideration
c) Transfer made secretly
d) Transferor tries to take the property out of reach of those who might become creditors.
• Ramaswami Chettiar v. Mallappa Reddiar- A sold property to B to defraud his creditors.
C, a creditor attached the property in a decree executed against A. B objected however,

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 court said that C could plead that the transfer was carried out with intent to defraud A’s
creditors.
• Exceptions- Rights of transferee acting in good faith will not be impaired. No laws related
to insolvency will be affected by this section.

Section 53A
• Deals with part performance.
• Added by an amendment act in 1929.
• Maddison v. Alderson- Doctrine of part performance established in England in this case.
• A person must have contracted to transfer immovable property for a consideration.
• The transfer should be in writing and duly signed by either the transferor or his agent.
• the transferee must have in part performance of the contract, taken possession of the
property or any part of the property.
• In case the transferee is already in possession of the property, he should continue in
possession in part performance of the contract and must have also done some act in
furtherance of the contract.
• The transferor is debarred from enforcing any right in respect of the property against the
transferee.
• He can only enforce a right expressly provided by the terms of the contract entered into
between the parties.
• Contract between the two parties must be in writing.
• Md. Musa v. Aghore Kumar Ganguly- Doctrine of Part Performance applicable in India
on the principle of justice, equity, and good conscience.
• Transferor does not have the right to disturb possession of the proposed transferee once he
has taken possession.
• Essentials (laid down in the case of Nathulal v. Phoolchand)-
a) There must be a contract to transfer immovable property for consideration.
b) Contract should be written and terms should be ascertainable with reasonable clarity.
c) Possession by transferee & some act by him in furtherance of contract.
d) Transferee is willing to perform his part of contract.
• If transferee once had possession but has now lost it does not deprive him of his rights
under Section 53 A.

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• Part possession of the property is also valid. Taking possession of whole property not
mandatory.
• If transferee has no notice of the contract for part performance, he cannot be affected by
this provision.
• Section can come into force even if the instrument of transfer is not completed in the
manner prescribed by the registration act so as long as it is signed.
• Unregistered sale deeds in this case can be used by courts as a grounds for granting
injunctions to restrain transferor from interfering with the processionary rights of
transferee.
• The differences in the doctrine of part performance in English law and Indian law are listed
below:
English Law Indian Law

Applicable to written as well as oral Applicable only to written agreements

agreements

Equity of part-performance is active as Section 53A does not give any right of
well as passive. Transferee is entitled to action to the transferee. Part-performance
defend his possession as well as enforce can only be used for a passive purpose.
his right in an independent suit.

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 UNIT 5 – SALE OF IMMOVABLE PROPERTY

Section 54 –
• Sale – transfer of ownership for a price paid/ promised/ partly paid and partly promised. Therefore,
it is a transfer for money consideration, making it different from exchange (transfer in exchange
of property) and gift (transfer without consideration).
• It implies the transfer of all rights and liabilities in the property. No rights are retained by the
transferor. Therefore, sale is different from mortgage (ownership and possession retained, interest
created), lease (ownership retained, possession given), and hire-purchase (ownership retained,
possession given).
• Time is not of essence to a sale, unless so stipulated in the contract.
• Essentials of section 54:
1. Parties –
➢ There have to be at least two parties to the sale (transferor/seller/vendor and
transferee/buyer/vendee). Both have to be natural or juristic persons according to law.
➢ The parties should be competent, i.e. they must be of sound mind, age of majority and the seller
must have legal title over the property (Inder Chand v. Jethi – Transferor owned 2/3rd share in
property but he sold the entire property, sale not valid for the 1/3rd share that he didn’t own) and
the purchaser should not be disqualified from purchasing the property (e.g.: u/s 136 of ToP Act,
a judge/ legal practitioner/ court official cannot purchase actionable claims).
➢ A sale executed from a general power of attorney or through will is invalid. It has to be executed
through a sale deed – Suraj Lamp and Industries v. State of Bihar.
2. Subject-matter
➢ The section only pertains to sale of immovable property. This is of two kinds – tangible and
intangible.
3. Money-consideration
➢ Price, i.e., expressed in terms of money/currency is an essential element. It is defined under Sale
of Goods Act, 1930 (monetary consideration or value decided for the goods).
➢ The price has to be ascertained at the time of agreement to sell but it may be paid later. If it is not
so ascertained, the sale is void. However, payment can be made prior to, during or after the
execution of the sale. Thus, non-payment doesn’t vitiate a sale as long as price is promised to be
paid. However, false assertion of payment renders the sale invalid.
➢ Therefore, there has to be an intention to transfer as well as an intention to pay, which can be
gathered from the recital of the sale deed, the conduct of the parties and the evidence on record.
➢ Inadequacy of consideration doesn’t invalidate a sale, its absence does. However, very low or
illusionary consideration can be relied upon to infer fraudulent or sham transfer.
Hakim Singh v. Ram Sanehi - If the property is sold for a value below the market price, it is not an
invalid sale.
Currie v. Misa – A valuable consideration in the sense of law may consist either in some right,
interest, profit or benefit accruing to one party or some forbearance, detriment, loss or
responsibility given, suffered or undertaken by the other”.
4. Conveyance
Property may be transferred either through delivery of possession or registration of sale deed.

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➢ Registration – For sale of tangible immovable property of value greater than Rs.100 and intangible
movable property, including reversion, registration of the sale deed is mandatory. However,
ownership is deemed to be transferred on the date of execution of sale deed, not registration.
➢ Delivery of Possession – Tangible immovable property of a value less than Rs.100 can be sold by
delivery of possession or registration of sale deed (optional). Thus, an oral sale is also valid.
Delivery takes place when the transferor puts the transferee or ay other person as he may direct in
possession of the property, i.e., he transfers physical control of the property. Where there is
compulsory registration, delivery of possession occurs when the sale deed is executed and proper
delivery is made (entering on the land/ handing over keys/ if there is a tenant residing on land then
handing over title deeds).
• Contract for Sale – A contract for sale of a property indicates that property shall be transferred
according to the terms agreed to by the parties. It means that the transferee has the right to obtain
a duly executed sale deed. But it does not create an interest or charge in the property. The contract
for sale may be affected prior to or after the sale. If the contract entails a contingent agreement
where property is to be transferred on fulfilment of a condition, the right to enforce and obtain a
deed is obtained only after the condition is fulfilled.
Sale Contract of Sale
Transfer of ownership Agreement for sale of property in the future
in accordance with terms settled between the
parties
After sale, all rights and liabilities of the No interests are created in the transferee
transferor are transferred to the transferee
Conveys a legal title and absolute interest Nope…
Right in rem Right in personam
Registration is compulsory for intangible No compulsory registration
immovable property, reversion and tangible
immovable property of value greater than Rs.100

Section 55 –
Enumerates rights and liabilities of a buyer and seller in the absence of a contract to the contrary (so
any of these clauses can be made inoperative w a contract – A.K. Lakshmidas v. Lahoti Charitable
Trust). The contract may be express or implied but it has to be clear and unambiguous. So, if there
is no contract (i.e., if the sale is open), the provisions of this sections serve as terms of the contract.
(1)Duties of a Seller:
(a)Duty to disclose defect in property or seller’s title –
➢ If there is a latent defect in the property/title (a defect that the buyer would not be able to discover
through ordinary diligence), and the seller is aware of such a defect, and the defect is of a material
nature (i.e., it would affect the decision of the buyer to buy the property), the seller is bound to
disclose it before the completion of the execution of sale deed.
➢ If there is a patent defect that the buyer can discover with ordinary care, the seller has no such
obligation.

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➢ Defect in title is a defect in property but the point of difference is that a defect in property prevents
the full enjoyment of the property (e.g.: an easementary right held by third party). Defect in title
opens him up to claims by third party.
➢ If the buyer discovers defect prior to completion of the sale, he can rescind the contract, seller
cannot specifically enforce it. If he discovers it after the sale, he can claim damages or sue to have
the sale set aside as non-disclosure amounts to fraud (Section 55(6)) and also enforce a charge on
the property for any prepaid purchase money.
➢ Failure to disclose defect amounts to fraud.
Haryana Financial Corp. v. Rajesh Gupta – there was no independent passage to the property – seller
failed to disclose – buyer had already paid earnest money before he discovered absence of passage
– Court held that forfeiture of earnest money would be unfair and arbitrary, buyer could not take
advantage of his own wrongdoing.
(b) Duty to produce documents of title – If the purchaser requests, the seller must produce
documents of title deed relating to the property for examination before execution of the sale deed.
(c) Duty to answer buyer’s queries – The seller has a duty to answer, to the best of his knowledge,
all the buyer’s queries regarding the property and title before the completion of the sale deed. If
the seller fails to answer, buyer can rescind contract.
(d) Duty to execute proper conveyance on payment – The buyer must tender the deed to the seller,
he must also make the payment (in accordance w terms of the contract) after which the seller must
execute proper conveyance (i.e., deliver possession and registration). Once the deed is executed,
the purchaser must get it registered but the seller must accompany him to answer questions put to
him by the Registrar. The execution must be done at a proper place and time (reasonable time if
the time is not specified in the contract).
(e) Duty to take reasonable care of property and documents during process of sale – Take care
of property and documents of title as an owner of ordinary prudence would do in the period
between execution of sale and delivery of property. If he fails to take such care, purchaser can
reduce price or sue for damages.
(f) Duty to hand over possession of property – Hand over possession of the property to the buyer
or any person as directed after execution of sale deed (manner of delivery will depend on nature
of property). He cannot refuse to do so on the grounds of price not being paid (payment of price
is not essential to the sale). If the purchaser has paid the price and the ownership has not passed
and seller doesn’t deliver, buyer can enforce charge (section 55(6)(b)). If ownership has passed
and seller doesn’t deliver, he can sue for possession/ rescind contract and then sue for price paid.
(g) Duty to clear dues on the property accruing up to sale – The seller must pay all public charges,
rent, and interest on encumbrances on the property up to the date of sale unless the property is
sold subject to encumbrances, to discharge all the encumbrances on the property.
(2) Duty to assure that seller has saleable subsisting interest in the property and the right to
transfer – This section consists of implied covenants that a vendor makes. The vendor covenants
that he has a subsisting interest in the property and title and a right to transfer the same. The title
should be marketable, i.e., it should be free from any reasonable doubts (so if the purchaser is later
evicted lawfully, he may sue the seller). Thus, the purchaser can ensure good title u/s 55(1) and
rescind contract if it’s not good but u/s 55(2), he can ask for the money back, sue for damages and
if there is no title at all, annul the contract.

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 If a trustee (person in a fiduciary relationship) is the seller, he must covenant that he has not done
any act that would make the property encumbered or would limit him from transferring it. But if
he makes the sale as an ordinary owner, he becomes subject to the implied covenant.
The third paragraph states that it is a covenant that runs with the land (?)
(3) Delivery of documents of title on payment – Once the purchase money is paid, the seller is
bound to deliver all documents of title to the buyer which are in his possession or those which he
has the power to produce. (before sale completion – produce for inspection. After sale completion
– deliver). He doesn’t have to deliver them if he retains any part of the property mentioned in the
documents (then he can retain all the documents) or if the property is sold to different buyers
(buyer of greatest value is entitled to documents). But in both instances, upon a reasonable request
being made by the purchaser, they must produce the true copies/ extracts therefrom as requested.
They also have a duty to keep the documents safe, uncancelled and undefaced unless prevented
to do so by a fire or an inevitable accident.
(4) Rights of the Seller -
(a) Rents and Profits belong to the Seller till passing of Ownership – Before completion of the
sale, the seller is entitled to all rents and profits accruing from the property.
(b) Charge on property for unpaid purchase amount – If the purchase money has not been paid
in full before ownership is transferred and possession is delivered, the seller is entitled to a charge
on the property that is possession of the buyer, any transferee without consideration or any
transferee without with notice of non-payment. The charge is of the purchase price or the amount
that remains unpaid and the seller is entitled to interest on that amount as well, from the date on
which possession is delivered. This right is known as vendor’s lien; however, it is not a possessory
right, it only creates a charge which is enforceable under Section 100 of the ToP Act.
(5) Duties of the Buyer -
(a) Duty to disclose nature and extent of seller’s interest in property – Before the completion of
the sale, the buyer is obligated to inform the seller of any fact regarding the nature and extent of
the seller’s interest in the property of which he is aware but the seller is not. It should be of a
nature that materially increases the value of the interest. Any non-disclosure amounts to fraud.
(b) Payment of Purchase money – At the time and place of completion of the sale, the buyer must
pay the purchase money to the seller or any person that he may direct. However, if there are any
encumbrances but the property is being sold free of encumbrances, the buyer can retain the portion
of the purchase money the amount of the encumbrances. Once the vendor has rendered the
property free of encumbrances, he may receive that retained amount from the buyer (Or the buyer
may pay it off himself). This money is retained also because if the person causing the encumbrance
(e.g. A mortgagee) sues the buyer, the buyer will be under a duty to pay him. But if the mortgagee
sues the seller directly, the seller can then recover the retained amount from the buyer.
(c) After passing ownership, loss in value to be borne by buyer – After completion of the sale,
any loss arising from destruction, injury or decrease in value has to be borne by the buyer if it has
not been caused by the seller.
(d) Buyer dues payable on completion of the sale – After the sale is completed, the buyer is
obligated to pay all public charges, rent on the property, principal amount on the encumbrances
subject to which the property was sold and interests that accrue thereof.
(6)Rights of the Buyer -

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(a) Profits and benefits after sale – The buyer is entitled to the benefits of any improvements in or
the increase in the value of the property after ownership has passed.
Izzat – un – Nizza Begam v. Kunwar Pratab Singh – property was sold subject to two mortgages
and thus the buyer retained part of the purchase money. After the sale, the mortgages were
declared invalid so the seller sued for the retained amount. The court held that the seller couldn’t
claim the benefits after sale of the property. (However, had the property been sold free of
encumbrances, the buyer is acting as an agent of the seller while paying off the encumbrances
and thus, if there is a surplus, the seller is entitled to it).
(b) Buyer’s right to conveyance on payment – If the buyer has paid the purchase money but the
seller has failed to deliver possession, the buyer can create a charge on the property against the
seller and all persons claiming under him, enforceable u/s 100. The charge is up to the extent of
the seller’s interest in the property and the amount is the amount of purchase money paid, the
interest on this amount. However, this right is not available to him if he improperly declined to
accept delivery. If he properly declines to accept the delivery, he may also create a charge for the
earnest money, and the costs he has incurred in a suit to compel specific performance of the
contract or to obtain a decree of recession.

Section 56 – Doctrine of Marshalling

• The owner of two or more properties mortgages them to one person and then sells one or more
of those properties to someone else. If he fails to pay the mortgage debt, according to this section,
the mortgagor is to first satisfy the mortgage debt from those properties of the seller that have not
been sold. If the mortgage debt remains unsatisfied, only then can he move against the property
purchased by the buyer (in absence of contract to the contrary).
• This is the right of a buyer against the seller. This rule should not be exercised in a manner that
would affect the rights of the mortgagee (or anyone claiming under him) or any person; who has
acquired an interest with consideration in any of the properties (i.e., the buyer(s)/subsequent
purchaser). This right exists when the property is sold free from encumbrance. If the mortgagee
realises his debt from the buyer’s property, the buyer may recover the amount from the seller.
• However, if there is more than one buyer and the mortgage has to be satisfied out to their
properties, they both have to bear the liability proportionately. The mortgagee cannot enforce
interest only on one property to the disadvantage of the that buyer.
• For example:
A has properties X, Y and Z. All are mortgaged with B. Then A sells X to C, free from
encumbrance. If A defaults on the debt to B, B must first satisfy the debt from Y and Z properties,
and only if insufficient, move against C’s property X.
If A had sold Y as well to D, B would have to satisfy the debt only from Z. If it had been
insufficient, he would then move against both X and Y properties, not just one.
If A had sold X free from encumbrance but Y subject to encumbrance (the mortgage), then the
mortgagee must try to satisfy the debt from Y property before X property.
• Kosuri Koteswara Rao vs Kothu Venkataramana Rao – A and B owned separate properties but
mortgaged them jointly to C. B sold his properties to D. The Court held that C had a right to
move against any of the items of the properties. Section 56 had no application in the present case.
Section 56 is only applicable when there is a sole debtor.

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 UNIT 6- MORTGAGE OF IMMOVABLE PROPERTY
(SECTION 58-98)

Chapter IV of the Transfer of Property Act deals with mortgage of immovable property.

Section 58
• Mortgage is the transfer of interest in an immovable property from the debtor (mortgagor)
to the creditor (mortgagee) as security for a loan.
• Mortgagee does not become the owner of the property. Merely obtains certain interests of
the mortgagor.
• In case mortgagor fails to pay the debt, mortgagee can use his interest in the property to
recover his money which is also why the property is classified as a security against the debt.
• Elements-
a) Transfer of interest
b) Interest must be related to immovable property
c) Transfer must be with the intent to secure loan of money already granted or to be
granted in the future, debt or performance of an engagement which may give rise to
pecuniary liability.
• Different from sale because no complete transfer of interest.
• Mortgage is not an actionable claim, merely transfer of interest.
• The mortgage deed needs to define the property in a detailed manner (dimensions,
directions, plot number, etc)
• Read 58.3, 58.4 from textbook.
• Principal money and its interest secured through mortgage is known as mortgage money.
• Kinds of mortgage-
a) Simple Mortgage-
Without delivering possession of mortgaged property, mortgagor agrees to pay
mortgage money and agrees (expressly or impliedly) that the mortgagee can sell his
property to recover money in case of failure to pay.
b) Mortgage by conditional sale-
i. Mortgagor ostensibly sells his property on the condition that upon failure to pay
mortgage money on certain date, sale becomes absolute or on payment of the money,

15
 the sale becomes void or in payment of the money, the buyer will transfer the
property back to the seller.
ii. These conditions need to be embodied in the sale deed for it to be considered as a
mortgage by conditional sale.
iii. No personal liability of the mortgagor.
iv. Ostensible sale in this case refers to a transaction which looks like a sale but is not
one because it is merely security for a debt.
v. Mortgagee is not entitled to possession of property.
vi. Intention of parties looked into while determining whether a sale deed calls for such
mortgage.
c) Usufructuary Mortgage-
i. Possession of property given to mortgagee and/or is given the right to the usufruct
of the property (rent, produce, etc).
ii. Mortgagor is not personally liable as the mortgagee is allowed to take possession or
pay himself off out of the rents and produce of the property
iii. Essentials-
- Delivery of possession/ explicit or implied agreement to deliver such possession
- Retention of possession by mortgagee till repayment of debt or can receive rents
and profits of the property as repayment of principal sum and interest.
- No personal liability of mortgagor
- Mortgagee cannot foreclose or sue for sale of mortgage property
- Mortgagor entitled to redeem property when debt is cleared
- No time limit for repayment
- Mortgage of Rs. 100 or more needs to be registered.
iv. If mortgagee loses possession of property upon sale of mortgaged land by
mortgagor, he can sue for possession, mesne profits and for mortgage money under
Sec 68.
d) English Mortgage-
Mortgagor binds himself to pay the debt on a fixed date and transfers property to
mortgagee absolutely subject to the proviso that it will be retransferred to mortgagor
upon payment of mortgage money. (Underlined parts are the 3 essentials).

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17
e) Mortgage by deposit of Title-deeds-
i. Securing an existing debt by depositing title deeds with the creditor or his agent.
ii. Execution of mortgage deed not necessary, does not need registration.
iii. It is not necessary that all deeds not to be deposited. If the deed(s) deposited
sufficiently indicate their relation to the property, and are material evidence of the
title, then in the eyes of the court, those are adequate.
iv. Constructive delivery of the title deeds is acceptable.
v. Mortgagee can sue for redemption under Sec 96.

f) Anomalous Mortgage-
i. Mortgage which is not simple mortgage, mortgage by conditional sale, usufructuary
mortgage, English mortgage or mortgage by deposit of title deed.
ii. Recognises different forms of mortgage which have developed through custom
across the country.
iii. If value is above Rs. 100, must be registered.
iv. It is usually a combination of simple mortgage and usufructuary mortgage because
the mortgagee has possession and pays himself out of the rents and profits of the
land while the mortgagor also has a personal covenant to pay back the mortgagee.

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 v. Combination of usufructuary mortgage along with mortgage for conditional sale
wherein if the debt is not paid in time to the usufructuary mortgagee, he becomes
mortgagee by conditional sale is another common anomalous mortgage.

Section 59
• Applicable only if principal sum secured is above 100 rupees
• Mortgage of such value can only be brought into force by a registered instrument signed
by the mortgagor and attested by two witnesses except in cases where it is a mortgage by
deposit of title deeds.
• Mortgages of value less than 100 rupees can be affected by delivery of possession to
mortgagee.
• If mortgage requiring registration is not registered, mortgage cannot be converted to charge
but can only bring in personal liability. Mortgagor cannot sue for redemption but can sue
for possession upon his offer to repay debt.

Rights of Mortgagor
• Right of redemption;
• Right to transfer to a third party instead of re-transfer to himself;
• Right to inspection and production of documents;
• Right to accession/improvement;
• Right to confer a lease, and;
• Right to Get Back the Possession of the Property;
• Right to Get Back the Documents relating to the Mortgaged Property;
• Right of Usufructuary Mortgagor to recover possession.

Section 60
• Mortgagor upon payment of the mortgage-money can require the mortgagee to deliver to
the mortgagor the mortgage deed and all documents regarding the mortgaged property
along with the possession of the property to the mortgagor or to retransfer the property to
the mortgagor or to any other person as directed by mortgagor.
• Mortgagee is entitled to reasonable notice before payment of debt.
• Concept of redemption was initially established by the courts of equity in England.

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• The maxim ‘once a mortgage always a mortgage’ means that there can no covenant that
modifies the character of the mortgage agreed between the parties that would stop the
mortgagor to redeem his property back on payment of the principal and respective interests.
• The right of a mortgagor to redeem his property after payment of the debt cannot be taken
away by any contract or law.
• Any provision in the mortgage deed which prevents or impedes the right of the mortgagor
to pay the debt is known as a clog on redemption and is void.
• Concept of clog established in Stanley v. Wilde.
• In most of the cases that the mortgagor enters into such an agreement because of some
financial predicament. The law recognizes the power of the dominant party to insert clauses
which will serve his personal interests by creating impediments on the right to redeem the
property.
• Modes of exercising Right of Redemption-
a) By paying or tendering the mortgage money to the mortgagee or his agent.
b) Depositing money in court.
c) Filing suit for redemption.
• Right to redemption can be extinguished if-
a) By act of parties- mortgagor sells his right of redemption and extinguishes it.
b) By order of court where a decree is passed in foreclosure suit.
• Effects of redemption-
a) Return of documents and possession of property.
b) Mortgage property can be assigned to third party at the request of mortgagor.
c) Mortgagor is entitled to all accessions and improvements to the property or to a renewed
mortgage lease.

Section 60A
• Mortgagor can have mortgaged property transferred to a third party of his choice from the
mortgagee.
• Provision put in place to enable the mortgagor to pay off the debt of the mortgagee by
taking a loan from another person on the security of the same property.

Section 60B
• Mortgagor has the right to inspect all the documents handed over to the mortgagee.

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• The right can only be exercised at a reasonable time and the costs are incurred by
mortgagor.
• Mortgagor also has the right to make copies or abstracts of the documents.

Section 61
• Mortgagor who has executed two or more mortgages in favour of the same mortgagee shall
be entitled to redeem any one property separately or multiple properties/mortgages
together.
• Doctrine of Consolidation- The Mortgagee of different properties mortgaged by the same
mortgagor can force the mortgagor to redeem all his properties together or prevent him
from redeeming one without redeeming the other. Looks to protect the interests of the
mortgagee. Sec 61 allows consolidation through mutual consent “contract to contrary”.
Codified under Section 67A.

Section 62
• Usufructuary mortgagor can recover possession of land if mortgagee has received enough
money from the rents and profits of the property to pay off the debt or if tender of the
remainder of the money is made or deposited in court.
• Period of limitation for redemption- 30 years from the date of offer of money.

Section 63A
• Usually mortgagor not obligated to pay costs for improvements made to mortgage property
by mortgagee. Sec 63A has certain conditions under which he can be held liable to pay.
• If improvements made-
a) Were necessary to preserve property from destruction or deterioration
b) Were necessary to prevent security from becoming insufficient
c) Were in compliance with an order passed by a public servant or authority
The mortgagor will be liable to pay the proper cost of such addition to the principal
amount with interest unless there is contract to the contrary.
• Essentials-
a) Mortgage property in possession of mortgagee
b) Improvements made during the period of mortgage
c) Improvements made at the cost of the mortgagee

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 Section 65A
• Mortgagor who is in lawful possession of the mortgaged property can lease the property
and it shall be binding on the mortgagee as long as the lease is in accordance with local
laws and customs.
• No rent can be paid in advance and no premium shall be paid by the lessee.
• The lease agreement cannot contain a provision for renewal.
• The lease needs to come into force within 6 months of its execution.
• If lease made in violation of any of these provisions, it is not binding upon mortgagee.

Rights of Mortgagee
• Right to foreclosure or sale
• Right to sue for mortgage money
• Right to sell
• Right to accession
• Right to renewal of lease
• Right to improve mortgage property, spend money

Section 67
• Deals with right to foreclose or sale.
• Foreclosure is a suit to obtain a decree to absolutely debar the mortgagor from redeeming
the mortgaged property.
• Any time after the mortgage money has become due and before decree has been made for
the redemption of the property, or the mortgage money has been paid or deposited, the
mortgagee can obtain a decree that the mortgagor shall be debarred of right to redeem
absolutely or decree that the property be sold.
• Decree of foreclosure depends on the nature of the mortgage as the parties’ rights vary in
the different kinds of mortgage.
• Period of limitation for filing suit is 12 years.
• Simple Mortgage- No foreclosure. Remedy is to bring a suit for the sale of the mortgaged
property to recover debt.
• Usufructuary Mortgage- Cannot sue for foreclosure or sale because possession of
mortgaged property is with Mortgagee.

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• Mortgage by conditional sale- provision for sale upon default of payment already included
in agreement. Only remedy is to file for foreclosure.
• English Mortgage- file suit for sale of property.
• Mortgage by deposit of title deeds- Remedy is suit for sale of property.
• Anomalous Mortgage- depends on terms of agreement. Can have both rights or either of
the two rights.

Section 67A
• If a mortgagee who holds two or more mortgages executed by the same mortgagor brings
an action under Sec 67 for one mortgage, shall be liable to sue on all mortgages whose
mortgage money has become due.
• This section enshrines the rule of consolidation.

Section 68
• Mortgagee can file suit for mortgage money -
a) When mortgagor binds himself to repay the money
b) Where mortgaged property is destroyed by the act or fault of either of the parties
c) Where mortgagee is deprived of the whole or part of the security by the wrongful act
or default of mortgagor
d) Where mortgagor fails to deliver possession to mortgagee when the mortgagee has a
right to the same.

Section 69
• Right of mortgagee to sell property without intervention of the court to recover the debt in
case of default by mortgagor to return mortgage money.
• Only applicable in cases where the mortgage is an English mortgage and neither of the
parties is Muslim, Hindu, Buddhist or belonging to sect or tribe recognised by State
government.
• The power is expressly conferred to the mortgagee in the mortgage-deed.
• Notice for sale must be provided to the mortgagor 3 months in advance. If money not paid
within that period, property or any part of it can be sold.

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 Section 70
• Accessions are additions made to the property.
• If any accession is made to a mortgaged property after the execution of the mortgage, the
mortgagee will be entitled to such accessions for the purpose of security of his debt.
• Sidheshwar Singh cgt v. Ram Singh- The application of section 70 is not limited to
physical accretions, an increase of interest or enlargement of the estate also amounts to be
an accession for the purpose of this section rendering the mortgagee entitled to the same.
• This right is only available in the absence of contract to the contrary.

Section 71
• When mortgaged property is a lease, mortgagee is entitled to the new lease in case where
the mortgagor gets renewal.

Section 72
• This section lays down the circumstances under which the mortgagee may spend money in
relation to the mortgaged property.
• Dryden v. Frost- Principles of section 72 were first laid down in this English case. Court
held that mortgagee is entitled to be indemnified against all expenses as long as he acts
reasonably.
• The mortgagee is entitled to spend money only when it is necessary to do so and cannot
spend more than what is required, therefore, it is not an absolute right.
• Mortgagee can spend money in the following cases-
a) For the preservation of the mortgaged property from destruction, forfeiture or sale
b) For supporting mortgagor’s title to property
c) For defending his own title against the mortgagor
d) For renewal of lease when mortgaged property is a renewable lease.
• The primary reason behind this provision is to protect the security the mortgagee has
received for providing the mortgagor with a loan. If the security is lost, mortgagee will not
be able to recover his money which is against the principles of equity and justice.

Section 76
• Deals with the liabilities of mortgagee in possession.

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• He is bound by certain obligations when in possession of mortgaged property to ensure that
the mortgaged property is maintained and looked after in a reasonable manner.
• The duties include-
a) Managing property as a person of ordinary prudence.
b) Collecting rents and profits of the property to his best endeavour.
c) Pay government dues unless there is a contract to the contrary.
d) Make necessary repairs unless there is a contract to the contrary.
e) Not committing any act which may damage or destroy the property permanently.
f) Utilise insurance money in reinstating property or in reduction of mortgage money.
g) To keep proper record of all money received and spent.
h) Apply rents and profits in discharge of interest after deducting expenses for
maintenance of property.

Section 81
• Deals with marshalling.
• Applicable in cases where one mortgagor mortgages one or more of his properties to 2
mortgagees.
• This looks to preserve the interests of both mortgagers irrespective of who entered into the
agreement first.
• The mortgage debt of the first mortgagor should be looked to paid off through the properties
which haven’t subsequently been mortgaged to the second mortgagor.
• In a case where debts of prior mortgage are not settled through the included properties, then
the courts can allow prior mortgagor to recover debt from the property which was
subsequently mortgaged as well.
• Principle of Marshalling first laid down in the case of Aldrich v. Cooper.
• It is a rule of equity and cannot be enforced to work injustice to the prior creditor.
• The subsequent mortgagee has a right to “marshal” assets in order to protect his interest
unless there is a contract to the contrary.

Section 82
• When there is a mortgaged property that belongs to two persons having distinct and
separate rights of ownership (one mortgagee and several mortgagors), in the absence of a

25
 contract to the contrary, each mortgagor is liable to contribute proportionately towards the
debt secured by the mortgage.
• To determine their share of contribution, the debt of each person will be deemed to be the
value on the date of the mortgage, after deducting the value of any charge or mortgage
which it may have been subject to on that date.
• Therefore, the burden of repayment falls on all the debtors, proportionately.
• Kampta Singh v. Chaturbhuj - When the mortgaged property is owned by more than one
person but the debt has been paid off from a single mortgagor's property, he is entitled to
call upon the other mortgagors to bear their proportion of the burden.
• When the mortgagor has two properties where he mortgages one to secure one debt and
then both to secure another, the first property should be utilised to pay off the first debt.
Subsequently, in the absence of a contract to the contrary, each property is liable to
contribute proportionately for repayment of second debt, after the first debt amount has
been deducted from the value of the first property.
• This section doesn't apply to liability and claims under section 81. Here, there is a liability
on property, not persons. The properties are liable to contribute in proportion to their
values.

Section 91
• Deals with people who can sue for redemption.
• Mortgagor, Co-Mortgagor
• Sub Mortgagee, Puisne Mortgagee
• Any person other than mortgagee who has an interest or a charge on the property
• Surety for the payment of mortgage debt
• Creditor of mortgagor who has obtained a decree for the sale of property (mainly applicable
in cases where the mortgagor is deceased).
• Chandulal Reshwani v. Blawant Singh- Puisne mortgagee can file a suit for redemption
under Sec 91 as there is a creation of a valid interest in the mortgage property which is not
affected or less important because of the prior mortgage on the same property.

Section 92
• Applies to those people who are referred to in section 91 and co-mortgagors who upon
redeeming the property obtain the mortgagee’s right to redemption and foreclosure.

26
• Ganeshi Lal v. Jyoti Pershad- The supreme court made this doctrine applicable all across
the country, even in parts where the act was not in force to promote justice equity and good
conscience.
• Doctrine not applicable when the mortgagor himself redeems the property as he is
discharging his own obligation to the creditor.
• Two types of subrogation-
a) Legal subrogation
Person who has interest in property pays the debt of the debtor. Legal subrogation looks
to reimburse this person with the interest in the property. Can be claimed by Pusine
mortgagee, co-mortgagor, surety, purchaser of right to redemption.
b) Conventional Subrogation
When person with no interest in property pays off debt on the basis of an agreement
through the means of a registered instrument.

Section 98
• Rights and liabilities of parties to anomalous mortgage determined by the mortgage deed.
• Mohammed Sher Khan v. Seth Swami Dayal- Provisions of anomalous mortgage
agreement under sec 98 cannot be used to defeat the provisions of sec 60 (rights of
mortgagor).

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 UNIT 7 – LEASE OF IMMOVABLE PROPERTY
Chapter V OF the Act deals with lease of immovable property.
Section 105
• Lease is the partial transfer of rights, mainly the right of enjoyment of an immovable
property for a fixed period in consideration for a price paid, share of crops, service or
anything of value given periodically or on specified occasions.

• Essentials (Arvind Kumar v. Govt. of India)-

1. Parties- lessor and lessee
i. Both parties need to be competent to contract
ii. lessee cannot be granted to oneself because tenancy is based upon an agreement
between two parties and since a man cannot enter into an agreement with himself,
he cannot grant tenancy to himself
iii. Every person who is the absolute owner of a property and competent to contract and
not barred from transferring such property can grant a lease.
iv. People with limited interest cannot transfer property beyond the extent of the law or
their interest (Person with life interest cannot lease land beyond his life).
v. Lessee can further grant a lease- Sub-lease or under-lease
vi. Lease by person who is not the owner is void
2. Subject matter needs to be immovable property
i. Lease of building is not only of the superstructure but also of the site is based on. It
also further includes things placed on the land such as furniture and any other
fixtures provided by the lessor.
3. Transfer of right of enjoyment
i. Transfer of limited interest in case of lease is known as demise.
ii. It is a right in rem
iii. The right is heritable and vests in the heirs after death of lessee.
4. Fixed duration
i. The right to enjoy must be transferred for a certain time or in perpetuity.
ii. It can commence in the present or the future or on the happening of a certain
contingency.
iii. Types of lease-
- Lease for a certain period (Eg- lease for life)

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 - Periodic Lease (Eg- Monthly lease)
- Lease in perpetuity (Not recognised in English law)
5. Consideration
i. Consideration can either be premium or rent.
ii. When the whole amount is payable as a lump sum, it is called premium.
iii. Consideration paid periodically is rent.
iv. Consideration need not necessarily be money.
6. Acceptance of transfer of right by lessee
• Agreement to lease indicates that there is no transfer of possession or the right to enjoy
with immediate effect. It is a promise to grant lease on a future date. It is different from
lease because it does not create a right in rem, does not transfer property rights and does
not establish tenant-landlord relationship between parties.
• Difference between lease and licence-
Lease Licence
Transfer of an interest in immovable property. No transfer of interest (licensee only acquires right
to occupy property)
Accretions in property during period of lease Licensee acquires no right in the property
deemed to be included in lease
Transferable and heritable Non-transferable and non-heritable
Lease does not come to an end with death of either Licence comes to an end with death of either of the
of the parties parties
Lease cannot be revoked at pleasure and notice Licence can be revoked at pleasure with no notice
necessary before eviction. necessary
Lease continues even after transfer of the property Licence does not continue after transfer of the
to a third party. property to a third party.
Lessee entitled to maintain suit in his own name. Licensee not entitled to maintain any such suit

Section 106
• In absence of contract to the contrary or local laws and usages, lease of immovable property
for agricultural and manufacturing purposes will be deemed to be a lease from year to year
which is terminable on the part of either of the parties by the provision of a notice 6 months
in advance such that the lease ends at the end of a year of the tenancy.
• In absence of contract to the contrary or local laws and usages, lease of immovable property
for any other purpose will be a lease from month to month which is terminable at the option

29
 of either of the parties by the provision of 15 days’ notice such that it expires at the end of
a month of tenancy.
• Notice needs to be given in writing and needs to be signed by the party providing the notice.
The notice should be clear and definite. A vague notice is invalid.
• No notice is necessary when tenancy is for a specified period. If the agreement was for a
fixed period, then the tenancy is terminated by the efflux of such time.
• Navin Chand v. Nagarjuna Travels & Hotels Pvt. Ltd.- If a lease deed contained a
covenant about renewal but the terms were not mentioned in the deed, the right of renewal
was vague and therefore, not enforceable.
• Tenancy at will- tenancy under which the tenant is in possession and which is determinable
at the will of either the landlord or the tenant.
• Tenancy of sufferance- when tenant continues to remain in possession even after the expiry
of notice to quit. He shall not be treated as trespasser but a tenant holding over the property
with no legal right.
• Lease is not terminated by the destruction of building. Landlord still entitled to recover the
land or the rent.

Section 107
• Deals with the modes of creation of lease.
• Lease from year to year for a period of more than one year or reversing a yearly rent needs
to be made through a registered instrument.
• Other leases can be made through registered instruments or through oral agreements which
need to be accompanied by delivery of possession.
• All instruments need to be executed by both parties.
• Renewal of lease subject to discretion of lessor and no court can compel him to do so.
• Failure to register lease renders it to be invalid.

Section 108
• Provides for both, the rights and liabilities of both lessor and lessee which are subject to a
contract to the contrary.
• Local customs and usages gain precedence over Sec 108.
• Liabilities of Lessor-
a. Duty of disclosure

30
 Lessor bound to disclose latent defects i.e., defects which cannot be discovered by
ordinary care. If the defect affects the enjoyment of the property, it is necessary to
disclose such a defect which affects enjoyment is known as material defect. Since title
is not transferred, lessor need not disclose defect in title.
b. Duty to give possession
Lessor is obligated to deliver possession only upon request by lessee. If possession is
not delivered, lessee can sue for possession and if he has paid the rent, he can sue for
damages as well as demand a return of such amount. If only part possession given, lessee
can repudiate lease.
c. Covenant for quite enjoyment
If lessee pays the rent and performs the contract, he can hold the property for the time
mentioned in the lease agreement without interruption. The lessor has a responsibility
to ensure that lessee is not interrupted during the fixed period by him or any third party.
Covenant running with the land. If interrupted, lessee can sue for damages equivalent of
prospective profits of which he was deprived.
• Rights of Lessee-
a. Right to enjoy accretions
Accessions made to the property during the continuance of lease shall be deemed to be
comprised in the lease.
b. Right to avoid lease in case of destruction of property
If fire, tempest, flood, violence of army or mob or any irresistible force destroys property
or a part of it or renders it unfit for the purpose it was leased out shall render the lease
voidable at the option of the lessee.
Jagdish Chand v. Praveen Kumar- Destruction to property must be substantial and
permanent and not caused by wrongful act of lessee.
c. Right to repair property
If lessor agrees to carry out repairs in the agreement but fails to do so upon receiving
notice from lessee, lessee can make repairs and deduct the amount with interest from the
rent or can recover it from the lessor.
d. Right to make lessor’s obligatory payments and deduct that from rent
If lessee makes payment which lessor was bound to pay, the lessee can recover the
amount from lessor or deduct it from the rent with interest.
e. Right to remove fixtures made by him during tenancy

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 Exception to the rule – things attached to the earth become a part of it. While removing
the fixtures, lessee must make sure he leaves it behind in the same condition he received
it in.
f. Right to have benefit of crops growing on the land planted by him
Right of free ingress and egress to visit the property to gather and carry the crops grown.
g. Right to assign his interest in the property
In absence of contract to the contrary, lessee may transfer the whole or a part of his
interest. It can be transferred absolutely by way of mortgage or sub-lease. The
subsequent transferee can also transfer his interest again.
• Rights of lessor not mentioned but are derived from liabilities of lessee.
• Liabilities of lessee-
a. Duty to disclose facts materially increasing value of property
Omission or failure to disclose such information does not give lessor to terminate lease
but he can sue for damages.
b. Duty to pay rent or consideration at proper time and place
“Proper time” is after the lessee has taken possession and not when he signs the lease
deed.
c. Duty to maintain property
Maintain property as a man of ordinary prudence would. Also imposes obligation on
lessee to restore the property in as good a condition he received it in. Lessor can inspect
and give notice of any defect. Lessee is bound to fix such defect within 3 months of
notice if the defect was caused by him or any of his agents or servants.
d. Duty to give notice of any encroachment on lease property
Notice to be given by reasonable diligence (inform lessor about encroachment in timely
manner to enable him to take action to protect his interest).
e. Duty to use the property in reasonable manner
Use property and its produce in the same manner as a man of ordinary prudence would.
Cannot use land for any other purpose other than that for which it was leased.
f. Duty not to erect permanent structure
Lessee cannot erect permanent structure without permission of the lessor except in
cases where the structure is for agricultural purposes. Lessee needs to take the structure
down without damaging property. Failure to take down such property results in it being
transferred to the Lessor upon expiry of mortgage.

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 g. Duty to re-transfer possession on determination
Failure to re-transfer property after determination of lease means that the lessee is in
unauthorised possession and the Lessor can claim mesne profits.
• Lease deed is read in its entirety. Isolated sentences are not taken up separately to make
inferences from.

Section 109
• The remainder of the lessor’s interest in the property after the execution of lease is known
as reversion.
• This section deals with a situation where the lessor transfers leased property to another
person. The transferee becomes entitled to all the rights and liabilities of the lessor.
• Entitlements dependent on a contract to the contrary.

Section 110
• If lease deed expressly mentions that it shall commence from a particular day, that day shall
be excluded while computing the period of such lease.
• If date not mentioned, then the lease begins from the time of its execution.
• In case of lease for a year or fixed number of years, lease will last during the whole
anniversary of the day from which it commences.
• If agreement allows termination of lease before expiration of term without mentioning at
whose option, lessee and not the lessor can avail the right.

Section 112
• Forfeiture is waived by lessor when-
a. Lessor accepts rent which has been incurred
b. By distress for rent (lawful extrajudicial seizure of chattels to enforce payment)
c. Act done to show intent to uphold lease

Section 113
• Waiver of notice to quit can be established if-
a. Express or implied consent with person to whom notice was given to waive notice.
b. Person who gives notice must carry out act to show intent to uphold lease.

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 Section 114
• If lessee does not vacate after expiry of notice to quit and does not pay the rent due, lessor
can file a suit for ejectment of lessee. However, if at the hearing, the lessee pays or tenders
the arrears of rent along with compensation, court can pass an order relieving lessee from
ejectment.
• Court in such a case will mandate lessee to pay arrears of rent, compensation and costs of
the suit or give security for the same within 15 days.

Section 114A
• Relief to lessee against forfeiture for breach of express conditions of lease agreement which
grants lessor right off re-entry.
• Suit for ejectment shall not lie unless notice is given stating-
a. What the breach was
b. Whether the breach can be remedied and if yes, how so
• If lessee fails to act in a reasonable time from receipt of notice, lessor may forfeit.

Section 116
• If lessee remains or continues in possession after the determination of lease and the lessor
accepts rent from the lessee or assents to his continuing in possession, the lease is renewed
from year to year or month to month
• Purpose for lease remains the same.
• The new tenancy instituted is known as tenancy by holding over.
• Presumption of holding over can be excluded by an agreement to the contrary where the
agreement determines the terms and duration of the renewed lease.
• Unlike tenant at sufferance, tenant holding over remains in possession with the consent of
the lessor and can transfer his interest to anyone else.

Section 117
• Provisions of TP act not applicable to lease for agricultural purposes unless state
governments by notification declare such provisions to be applicable.
• Legislature wanted to let special provisions of Rents Act and the usages to remain in force
for agricultural leases.

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 UNIT 8 - GIFTS
(SECTION 122 – 129)

Chapter VII of the Act – applicable to both movable and immovable property

Section 122
1. Existing movable or immovable property –
• Transfer of future property is void. The property must also not be encumbered by any
restrictions under Section 6, thus it should be transferable.
• The value of the property falls under “income from other sources” and is thus taxable, unless
it is given by a relative.
2. Transfer should be made voluntarily
Free consent u/s 14 of Indian Contract Act, 1872 is necessary.
3. Without consideration
There should be no “valuable” consideration. The chapter only deals with inter vivos transfers;
gifts mortis causa and those by way of will are not covered under the Act.
4. By donor
The donor must be competent to contract (as per ICA) and also have rights over the property
to transfer it (section 7).
5. To donee
The donee must be an existing and ascertainable person (can’t be made to general public; can
be made to idol). Property may be gifted to a child in its mother’s womb as long as it has
been properly accepted on his behalf. A minor can be a donee unless it is an onerous transfer
(Section 127) as the gift can be accepted “on behalf of the donee”. So, for an effective
transfer by gift to a minor, a caretaker has to be designated
6. Acceptance – by or on behalf of donee
• Acceptance should be made during the lifetime of the donor, while he is still capable of
giving the giving the gift. If the donee dies before acceptance, the gift is void, so legal
representatives cannot make an acceptance.
• Acceptance is essential in Indian Law (not in English Law), which is why the donee must
be an ascertainable person). The acceptance need not be explicit, implied acceptance like
by silence can also be inferred from circumstances.

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• K. Balakrishnan v. K. Kamalam (2004): Property was transferred by a mother (natural
guardian) to her 16-year-old son (16-17 years is age of discretion). There was no explicit
acceptance and the right to possession and enjoyment was retained by her. The SC held that
the transfer was not revocable on the grounds of non-acceptance by the minor. The donee
was an educated person of 16 years and had knowledge of the gift executed in his favour,
therefore acceptance by silence and ownership could be presumed. The fact that the
possession was not delivered or that his right was not exercised by him on attaining majority
did not negate his implied acceptance.

Section 123
1. Immovable property –
• The gift is to be made through a registered document signed by or on behalf of the donor
and attested by two witnesses. If the gift deed is duly executed and attested and handed over
to the donee who has accepted it, the gift cannot be revoked prior to the registration. The
donee now has the power to get it registered and make the gift deed effective and must do
so within the prescribed period. (thus, acceptance > registration. Registration can be later)
• The gift takes effect from the date of execution of the deed, not the registration date.
• Delivery of possession of immovable property is not necessary.
• If there is an error in the gift deed, that may be rectified with necessary documents, the gift
cannot be revoked on the grounds of that error.

2. Movable property –
Gift can be made either through a registered document or by delivery of possession. Delivery
may be made in the same way as goods sold may be delivered (u/s 33 of the Sale of Goods
Act, 1930, delivery is made either by putting the goods in possession of the buyer/ any
person authorized by him to hold them on his behalf or by doing anything else that the
parties agree to).

3. Gift to an Idol –
Sainath Mandir Trust v. Vijaya (2011) – The SC stated that a gift to an idol (juristic person) is
outside the purview of the ToP Act and therefore doesn’t require registration. The donor may
choose to register or may even make an oral transfer.

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 Section 124
Gift can be made only of existing property, not future property (void to that extent). A gift of
future property is essentially a promise to be performed in the future, promise must include
consideration or else it is void and unenforceable.

Section 125
When a gift is made to two or more donees and someone doesn’t make an acceptance, their
interest will revert back to the donor and the remaining transfer to the other donees is valid.
However, if there is a condition like survivorship, where gift is transferred to two persons and
one of them doesn’t accept and then dies, the entire property can be claimed by the other on
grounds of survivorship.

Section 126
1. Conditional gift–
• The condition (either precedent or subsequent) must be agreed to by the donor as well as
the donee, it should be express and not in violation of Sections 10 an 11. If it is a condition
precedent, the gift is valid only after fulfilment of the condition. If it is a condition
subsequent, the gift is valid but can be revoked on non-fulfilment of the condition.
• The agreement to revoke the gift must be made at the time of executing the gift or else the
gift becomes absolute.
2. Will of the donor –
Revocation dependent on the will of the donor renders the revocation void, and if it is partly
dependent on will of the donor, void to that extent.
3. Revocation if essentials of a valid contract (except consideration) aren’t fulfilled –
• If the gift is such that had it been a contract, it could’ve been rescinded (except failure of
consideration), i.e., in the case of coercion, undue influence, fraud or misrepresentation (u/s
19 of ICA), the donor may revoke the gift.
• If the donor doesn’t exercise his right of revocation, the gift becomes absolute. On his death,
his legal representatives may sue for revocation. But there is a limitation period of 3 years
from when the donor became aware of such grounds.
• If the donor ratifies the gift with his express or implied conduct, the right of revocation is
lost.
• The deed may also be revoked if essentials under ToP Act, i.e., section 122 aren’t fulfilled.

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4. Right of a bona fide transferee –
If the donee transfers the property to a third party for valuable consideration and doesn’t give
them notice of the donor’s right to revoke the gift, the transferee’s rights will not be affected
and the donor cannot exercise his right of revocation.

Section 127
1. Difference between void and onerous gifts –
A void gift is one made in violation of section 6 or by a person incompetent to contract or one
not accepted before the death of the donor or if the property is future property.
Onerous Gift is where the property is burdened with a liability or obligation.

2. Single transfer –
A gift by single transfer of two or more things, one of which is burdened by an obligation can
either be accepted in full or not at all, i.e., a donee cannot take a part of the gift and not another.
Moffet v. Bates – The donee can take nothing by the gift unless he accepts it completely.

3. Two or more transfers –

Two or more separate and individual transfers – donee may accept one and not the other.
Warren v. Rudall Godfrey – Illustration (b)?

4. Transfer to a minor –
A donee not competent to contract is not bound by his acceptance. However, if on attaining
competency, he retains the property, he is bound by the acceptance.

Section 128
• If the property consists of the donor’s whole property (i.e., movable and immovable), the
donee is personally liable for all the debts and liabilities of the donor at the time of execution
of the gift and to the extent of the property comprised therein.
• The entire property, movable, immovable and the accruing assets and liabilities have to be
transferred, only then is the donee a universal donee.
• The universal donee’s liability is limited to the value of the property donated, so if the
liabilities exceed the assets, he will not be personally liable.

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• If the universal donee is not a person competent to contract, he is not liable under this section
unless he retains the property once he attains competency.

Section 129
• Gifts made in contemplation of death/ on the deathbed (mortis causa) – Section 191, Indian
Succession Act.
• Mohammedan Law – if the donor is a Muslim (donee need not be), the gift is called “Hiba”
and is governed by Muslim personal law.

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