Article 21 of the Constitution of India:

Protection of life and personal liberty: No person shall be deprived of his life or personal liberty except according to procedure established by law.

Article 14 of the Constitution of India:

Equality before law: The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India Prohibition of discrimination on grounds of religion, race, caste, sex or place of birth

Section 11 of the Indian Penal Code, 1866:

Person: The word “person” includes any Company or Associa­tion or body of persons, whether incorporated or not.

General Clauses Act, 1897, defines the term “person” exactly same way as it is done in the Indian Penal Code.

In all above provisions, the word “person” is used. It means it is applicable to all persons i.e. citizens and foreigners. But it is not including the word “unborn child” in its definition. Hence there is some discrepancies in the status of unborn child.

The definition, as is clear from the language of this section, is not exhaustive but inclusive. The word ‘person’ includes a juridical person and as such an idol being a juridical person capable of owning property is a ‘person’ within the meaning of this section. An unborn child may be called a person if its body is sufficiently developed in its mother’s womb to call it a child.

From the general term “person” we can come to conclusion that the right to life has been guaranteed as a fundamental right to everyone under this article, which may be deemed to include an unborn child. Therefore, the State is under an obligation under Article 21 not only to protect the life of an unborn child from arbitrary and unjust destruction but also not to deny it equal protection under Article 14

In Elliot v. Lord Joicey, 1935 AC 209 case, the Court held that an unborn child is taken care of just as much as if it were in existence, in any case in which the child’s own advantage comes in question; though no one else can derive any benefit through the child before birth.

In Roe v. Wade, 410 US 113 (1973) case, the Court held that State’s interest in potential human life becomes compelling at a point of viability.

In Webster v. Reproduction Health Services, 1061 Ed 2d 410 (1989) case, the Supreme Court of America upheld a Missouri Statute which declared that the life of each human being begins at conception and that unborn children have a protectable interest in life, health, and well-being.

In Davis v. Davis, (1989) 15 FLR 2097 case, the Court held that as a matter of law, human life begins at conception.

In Walker v. Great Northern Railway Company of Ireland, (1890) 28 L.R. Ir. 69 case, where the plaintiff’s pregnant mother travelled on the defendant’s railway. There was an accident of the railway. Plaintiff’s claim was he had been born crippled and deformed because the injury was caused to it by the accident due to the railway’s negligence and hence he should be compensated by the defendant. The Court held that the defendants are not liable to pay damages due to the following two reasons:

1. The defendants did not owe any duty or care to the plaintiff as they did not know about his existence; and
2. The medical evidence to prove the plaintiff’s claim was very uncertain.

In Tagore v. Tagore, (1872) I 1A Suppl. 47 case, the Supreme Court observed that an infant in the womb is a person in existence for the purpose of making a gift to an unborn person. It is to be noted that this judgment is applicable to an unborn child for the purpose of a gift only.

In Jabbar v State AIR 1966 All 590 case, the Court observed that the term ‘person’ would include an unborn child in the mother’s womb after seven months of pregnancy, that means it is capable of being spoken of as a person if its body is developed sufficiently. It is to be noted that this decision is applicable to a foetus who has completed its seven months. Thus the exact definition of “unborn child” is not given in any Act or by Indian Court.

Meaning of Transfer of Property:

Section 5 of Transfer of Property Act, 1882:

Transfer of property defined – In the following sections “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. In this section “living person” includes a company or association or body of individuals, whether incorporated or not, but nothing herein contained shall affect any law for the time being in force relating to transfer of property to or by companies, associations or bodies of individuals.

According to the definition of transfer of property (Section 5 of the Transfer of Property Act, 1882) , we can write the following characteristics of a Transfer of a Property.

• It is an act of conveyance
• Conveyance is inter vivos means between living persons.
• Property may be conveyed to one or more other living persons, or to himself, or to himself and one or more other living persons.
• Property may be transferred in the future or in present.
• The term ‘person’ includes company or association or body of individuals, whether incorporated or not

Under T. P. Act, 1882, there are 6 modes of transfer of property which are Sale, Mortgage, Lease, Exchange, Gift, and Actionable claim. Under T. P. Act, 1882, Partition, Relinquishment, Surrender, Easement, Will, Compromise, Family Settlements, are not considered as a transfer of property.

According to Section 5 of the Transfer of Property Act, 1882, transfer under this section, is limited to living persons only. Hence a transfer of property cannot be made directly to an unborn person under this Section.

Section 13 of the Transfer of Property Act, 1882:

Transfer for benefit of unborn person: Where, on a transfer of property, an interest therein is created for the benefit of a person not in existence at the date of the transfer, subject to a prior interest created by the same transfer, the interest created for the benefit of such person shall not take effect, unless it extends to the whole of the remaining interest of the transferor in the property.

The transfer of property to unborn chid can be done using provisions of Section 13 of the Act. The interest created in favour of an unborn under this Section is contingent on the occurrence of birth.

Essentials of Transfer for Benefit of Unborn Person:

There cannot be a direct transfer of property to Unborn Person:

According to the provisions of Section 5 of the Transfer of Property Act, 1882, property may be conveyed to one or more other living persons, or to himself, or to himself and one or more other living persons. Thus under Section 5 of the Transfer of Property Act, 1882, cannot be transferred directly. If such a transfer of property is made to an unborn person, it will lead to a scenario wherein the property will remain without an owner from the date of transfer of property till the date the unborn person comes into existence.

Transfer of a property to unborn child can be effected by creating prior interest:

Such transfer can be effected using the provisions of Section 13 of the Transfer of Property Act, 1882. As per the provisions, in order to transfer a property for the benefit of an unborn person on the date of the transfer, it is imperative that the property must first be transferred by the mechanism of trusts in favour of some person living other than the inborn person on the date of transfer. Thus to create the interest of unborn child, first prior interest should be created. The prior interest persists from the date of transfer and the date when the unborn child comes into existence. As soon as the unborn child takes birth, the property rights immediately get transferred in his/her name. Post which he or she will be the sole owner of the property.

The transfer of property to unborn child under Section 13 of the Transfer of Property Act, 1882 must be absolute:

When an interest is created in favour of an unborn child, such interest shall take effect only if it extends to the whole of the remaining interest of the person transferring the property in the property, thereby making it impossible to confer an estate for life on an unborn child. Thus absolute transfer of interest means The entire property must be transferred to the unborn person. The transfer to an unborn person must be absolute and there should be no further transfer from him to any other person. The principle behind such a provision is that a person disposing of property to another person shall not cause obstruction in the free disposition of that property in the hands of more than one generation. This concept can be understood by reading, the illustration attached to the Section 13.

Illustration: A transfers property of which he is the owner to B in trust for A and his intended wife successively for their lives, and, after the death of the survivor, for the eldest son of the intended marriage for life, and after his death for A’s second son. The interest so created for the benefit of the eldest son does not take effect, because it does not extend to the whole of A’s remaining interest in the property.

Section 20 of the Transfer of Property Act, 1882:

When unborn person acquires vested interest on transfer for his benefit.—

Where, on a transfer of property, an interest therein is created for the benefit of a person not then living, he acquires upon his birth, unless a contrary intention appears from the terms of the transfer, a vested interest, although he may not be entitled to the enjoyment thereof immediately on his birth.

According to this provision, unborn person may not be able to enjoy the possession of property as soon as he is born but he may, however, acquire a vested interest in the property since his birth.  The mentioned provision however may be waived off if the terms of the agreement mention a contrary clause.

For example, if “A” transfers an estate to trustees for the benefit of A’s unborn son with a direction to accumulate the income of such estate for a period of ten years from the date of the birth of A’s son and then to hand over the funds to him. A’s unborn son acquires a vested interest upon his birth, although he is not entitled to take and enjoy the income of the property for a period of ten years.

Interest created in favour of unborn person such as referred in Section 13 is dissimilar to the interest envisaged by Section 20. Section 20 refers to the creation of a limited interest by the transferor in favour of someone in the first instance and creation of successive interest in someone else thereafter.

In K. Vasanthappa v. Channabasappa, AIR 1962 Mys 98 (100) case, where A donor transferred his property by a gift in favour of H a living son of his daughter (donor’s daughter). In the gift deed, it was also provided that the property gifted shall also be enjoyed by other sons who might be born to the donor’s daughter before H attained the majority. T was born to the donor’s daughter before H attained the majority. H transferred the entire gifted property. It was held that T, on birth acquired ½ share in the gifted property in view of Section 20, and T was entitled to petition and recover possession of his ½ share in the property. Court also held that Section 20 is not controlled by the provisions of Section 13.

In F. M. Devaru Ganapathi Bhat v. Prabhakar Ganapathi Bhat, AIR 2004 SC 2665 (2668) case, where a donor by gift deed gave the property to her brother’s son then living and also stated in the gift deed that other male children born to her brother would also be joint holders with the donee. The Court held that the gift deed was valid in view of the provisions of Section 20 and was not hit by the provisions of Section 13 of the T.P. Act.

Transfer of Property to Unborn Child under Personal laws:

Under Hindu Law and Mahomedan Law, a gift or bequest to a person unborn is void.

Conclusion:

The transfer of property to unborn child cannot be executed in respect of unborn persons directly but it can be executed indirectly by the machinery of trusts (i.e. by creating a prior interest). The prior interest persists from the date of transfer and the date when the unborn child comes into existence. As soon as the unborn child takes birth, the property rights immediately get transferred in his/her name. Post which he or she will be the sole owner of the property. The underlying fundamental principle enshrined under section 13 of the Transfer of Property Act is that a person disposing off property to another person shall not create hurdles for the free disposition of that property in the hands of one or more generations.

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Section 52 of the Transfer of Property Act states that: “During the pendency of any court having authority within the limits of India excluding the state of Jammu and Kashmir or established beyond such limits by the Central Government of any suit or proceeding which is not collusive and in which any right to immovable directly or substantially in question, the property cannot be transferred or otherwise dealt with by any party to the suit or proceeding so as to affect the rights of any other party thereto under any decree or order which may be made therein except under the authority of the Court and on such as may be prescribed.”

For the purpose of this section the  dependency of a suit or proceeding shall be deemed to commence from the date of the presentation of the plaint or the Institution of the  proceeding  in a court of competent jurisdiction,  and to continue until the suit or proceeding has been disposed of by a final decree or order and complete satisfaction or discharge of such decree or order has been obtained,  or has become unobtainable by reason of the expiration of any period of limitation prescribed for the execution thereof by any law for the time being in force.

Objects of the Doctrine:

The preliminary assumption behind the doctrine of lis pendens is that if the parties to a dispute are not prohibited from transferring any of the property then successive alienations and litigations shall take place. In such a situation it would become impossible that the action or suit be successfully terminated. With this as a consequence, the court would be unable to dispense its function of protecting the suitors from future injuries.  Hence the real aim of this doctrine is to prevent the multiplicity of suits. It would be plainly impossible that any action could be brought to a successful termination if pending litigation were permitted to prevail. The plaintiff would be liable to be defeated in every case and would be driven to commence his proceedings afresh subject against to be defeated by the same course of proceedings. Thus the object of doctrine is to avoid endless litigation, protect either party to the litigation against the act of the other, and to avoid abuse of legal process.

 in Bellamy v. Sabine, (1857) 1 De G & J 566 case, the Court observed: “ “It is, as I think, a doctrine common to the Courts both of law and Equity and rests as I apprehend, on the foundation that it would plainly be impossible that any action or suit could be brought to a successful termination, if alienations pendent lite were permitted to prevail. The plaintiff would be liable in every case to be defeated by the defendants alienating before the judgment or decree, and would be driven to commence his proceedings de novo, subject again to be defeated by the same course of proceedings.”  

In Rajender Singh v. Santa Singh, AIR 1973 SC 2537 case, the Supreme Court observed that the doctrine of lis pendens was intended to strike at attempts by parties to a litigation to circumvent the jurisdiction of a Court, in which a dispute on rights or interests in immovable property is pending, by private dealings which may remove the subject matter of litigation from the ambit of the court’s power to decide a pending dispute or frustrate its decree. Alienees acquiring any immovable property during the pending litigation, are held to be bound by an application of the doctrine, by the decree passed in the suit even though they may not have been impleaded in it. The whole object of the doctrine of lis pendens is to subject parties to the litigation as well as others, who seek to acquire rights in immovable property, which are the subject matter of litigation, to the power and jurisdiction of the Court so as to prevent the object of a pending action from being defeated.

In Lov Raj Kumar v. Dr. Major Daya Shanker, AIR 1986 Del. 364 case, the Delhi High Court observed that the ‘principles contained in Section 52 of Transfer of Property Act are in accordance with the principle of equity, good conscience or justice, because they rest upon an equitable and just foundation, that it will be impossible to bring an action or suit to a successful termination if alienations are permitted to prevail. Allowing alienations made during the pendency of a suit or an action to defeat the rights of a Plaintiff will be paying a premium to cleverness of a Defendant and thus defeat the ends of justice and throw away all principles of equity’.

Essential Ingredients of Lis pendens:

Pendency of Suite:

To apply this doctrine there must be a suit or proceeding pending before the court. Section 52 of Transfer of Property Act, 1882 or the Doctrine of lis pendens only applies when the property transferred during the pendency of suit or proceeding. Pendency of suit or proceeding is that period during which a suit remains before a court for its final disposal. A suit is instituted by filing a plaint, that is the first step of a suit and the last step of the suit is passing decree by Court. So a suit starts with filing a suit and ends with passing a decree by court. So, the pendency of suit begins from the date on which the plant is presented and pendency of suit terminates on the date when the final decree passed by Court.

Pendency of suit in a court of competent jurisdiction:

The suit or proceeding must be pending before a competent court having jurisdiction to try it. When a suit is pending before a court which has no proper jurisdiction to entertain it, the doctrine of lis pendens shall not apply.

Right to immovable property must be involved:

The subject matter of the suit or proceedings must be directly or substantially related to the right of immovable property. The litigation should be regarding the title or interest of that property. Where the question involving the suit or proceeding does not relate to the title or interest in immovable property, the doctrine of lis pendens is not applied.

For example, where a suit is pending between landlord and tenant regarding payment of rent, and during that time landlord transfers his property, the transfer shall not affect by the doctrine of lis pendens because the litigation was not regarded to the title or interest of immovable property. The suit involves the payment of rents.

The Suit must not be collusive:

A suit is collusive if it was instituted with a mala fide intention. To apply the doctrine of lis pendens the suit or proceeding must not be collusive. However if any suit at the beginning was bona fide, but during the pendency of suit there is a secret agreement between the parties in form of compromise, in that case too lis pendens is applicable.

Property is transferred or otherwise dealt with:

Either party to the suit or proceeding shall transfer or otherwise deal with immovable property, which is the subject matter of such a suit. The transfer includes sale, exchange, lease, and mortgage. In such cases the doctrine of lis pendens is applicable and the transfer would be the subject of the decision of Court. Surrender, release or partition as transfer, a contract of sale has been regarded as a transfer within the meaning of “otherwise dealt with.”

Transfer affects the rights of any other party:

The transfer by any party to the suit must affect the right of other parties till the time the case is finally disposed of. The principle of lis pendens is intended to safeguard the parties to litigation against transfers by their opponents.

 Case Laws:

In Dev Raj Dogra and others v. Gyan Chand Jain, AIR 1981 SC 981 case, the Court construed the meaning of Section 52 of the Transfer of Property Act and laid down following conditions:

1. A suit or a proceeding in which any right to immovable property is directly and specifically in question must be pending;
2. The suit or proceeding should be pending in a court of competent jurisdiction;
3. The suit or the proceeding should not be a collusive one;
4. Litigation must be one in which the right to immovable property is directly and specifically in question;
5. Any transfer of such immovable property or any dealing with such property during the pendency of the suit is prohibited except under the authority of Court, if such transfer or otherwise dealing with the property by any party to the suit or proceeding affects the right of any other party to the suit or proceeding under any order or decree which may be passed in the said suit or proceeding.

In Jayaram Mudaliar vs. Ayyaswami, AIR 1973 SC 569 case, the Court held that the objective of this section is not to deprive the parties of any just or equitable claim but to ensure that the parties subject themselves to the jurisdiction and authority of the court which shall decide the claims that are put before it.

In Hardev Singh v. Gurmail Singh, Civil Appeal No. 6222 of 2000  case, the Court held that the Section 52 does not render any transfer of a disputed property void or illegal, but instead brings the purchaser within the binding limit of the judgment that shall be pronounced on the disposal of dispute. 

In Koyalee v. State of Rajasthan, AIR 2009 Raj. 28 case, the land in dispute was originally recorded in the name of petitioner’s husband and after his death his brother ’G’ knowing it well that his brother’s wife was alive and being sole legal heir, without impleading her, filed a suit seeking declaration of Khatedari rights, and thereafter she has been litigating being sole legal heir of the recorded Khatedar. Despite the pendency of the suit and suit property is being prohibited from being alienation or transfer during the pendency of the suit, yet the respondent brother went on transferring the land and thereafter subsequent purchasers went on transferring land. Such transfer would be hit by the doctrine of lis pendens.

Effect of the Doctrine:

Section 52 of the Transfer of Property Act creates only a right to be enforced to avoid a transfer made pendent lite because such transfers are not void but voidable and that too at the option of the affected party to the proceeding, pending which the transfer is effected. Thus the effect of the doctrine of lis pendens is not to invalidate or avoid the transfer, but to make it subject to the result of the litigation.

Non – applicability of the Doctrine of Lis Pendens:

Lis pendens does not necessarily get applied in every case. Following are Certain instances where this doctrine does not get applied:

• A sale made by the mortgagee in the exercise of the power as conferred by the mortgage deed.
• In matters of review;
• In cases where the transferor is the only party affected;
• In cases of friendly suits;
• In cases where the proceedings are collusive;
• In cases of execution proceedings where the order is passed against the intervener. In such matters, an appropriate remedy shall be a suit filed under the Order 2, rule 63 of the Code of Civil Procedure, 1908;
• In case of suits involving pending transfers by a person who is not a party to the suit;
• In cases where the property has not been properly described in the plaint;
• In cases where the subject matter of rights concerned in the suit and that which are alienated by transfer are different.

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Notice:

A person is said to have a notice of a fact when he actually knows that fact, or when, but for wilful abstention from an inquiry or search which he ought to have made or gross negligence, he would have known it (Section 3).

Section 3 of Transfer of Property Act enumerates three kinds of notices—

• Actual or express notice
• Constructive or implies notice
• Imputed notice.

 Actual notice: 

A person is said to have actual notice/express notice of a fact if he actually knows it. It must be definite information given in the course of negotiations by a person interested in the property. A person is not bound to attend vague rumors.

Ingredients of Actual Notice:

• The person must actually know the definite information (facts) about the subject in the notice.
• It should neither be a rumour (vague report) nor mere suspicion.       
• The information should be related to the property under transfer.

A wants to purchase property X from B. A reads an advertisement in the newspaper that property X is under litigation and should not be dealt with. Now, this is definite information obtained by A. Then it is actual notice for A.

A wants to purchase property X from B. A hears gossip in a coffee shop that property X may is under litigation. This is not definite information to A. It may be a rumour or mere suspicion, then it is not an actual notice for A.

A wants to purchase property X from B. A comes to know that the adjacent property Y has heavy litigation on it. The information is not about property X, then it is not an actual notice for A.

Constructive Notice: 

It is a notice which treats a person who ought to have known a fact as if he actually knows it. A person has constructive notice of all the facts of which he would have acquired actual notice had he made those inquiries which he ought reasonably to have made. Constructive notice has roughly been defined as knowledge which the court imputes to a person upon a presumption so strong that it cannot be rebutted that the knowledge must be obtained. Not having knowledge of such things cannot be taken as defence in the Court. In short, the doctrine of constructive knowledge is that a person who is bound to make an inquiry and fails to do it, should be held to have notice of all the facts, which would have come to his knowledge had he made the inquiry.

In Bepin v. Priyabrata, AIR 1921 Cal 730 case, the Court observed: “Constructive notice is the knowledge which the Courts impute to a party upon a presumption so strong that it cannot be allowed to be rebutted that knowledge must have been communicated.”

The Court presumes that there was knowledge of the fact to the person before entering into a contract in the following cases.

Willful Abstention From an Inquiry or Search:

Willful abstention is a conscious abstention by an obligor from doing that which reasonably and under the terms of the obligation he should have done. The words “willful abstention” imply more than negligence or carelessness. The word willful means intentional and the word abstention means transgression. Thus it is intentional abstention on behalf of the obligor. It should be noted that the abstention from inquiry must be with some purpose or design and due to a desire to avoid an inquiry would lead to ultimate knowledge.

In Kausalsi Ammal v. Shankarmthiar, AIR 1941 Mad 707 case, the Court held that the use of the word “willful” in the definition shows that the abstention from inquiry should be designed and due to a desire to avoid an inquiry which would lead him to ultimate knowledge. It means such abstention from inquiry as would show want of bona fides.

In Jogendra v. Dwarkar, 15 Cal. 681 case, a person refusing a registered letter sent by post is deemed to have constructive notice of its contents, and he cannot afterward plead ignorance of its contents, because he had willfully abstained from receiving it and acquainting himself with its contents.

In Bank of Bombay v. Sulaiman, 33 Bom 1 (PC) case, Sulaiman left his house and land to his sons by his first wife and appointed them the executors of his will. By the will he bequeathed Rs. 30,000 to the sons of his second wife. The sons of the first wife mortgaged the house and land with the Bank by depositing title deeds of the house and land.  Here Bank must have inquired with the sons of the first wife about the way of transfer of title to them from the original owner (Sulaiman). They would have obtained the information of the will and thus the charge in favour of the sons of the second wife. The Court held it to be constructive notice and the charge prevailed over the mortgage to the Bank.

In Alwar Chetty v. Jagannatha, (54 Mad LJ 109 case, B borrowed money from C, and by way of an equitable mortgage, deposited with C, the Sale-Deed by which he had purchased his property from X. There was a recital in this deed that part of the purchase money had been retained by B to meet X’s debts, which B had not paid, and of which C made no inquiries. Upon these facts, the Court held that C had constructive notice of X’s linen for the unpaid purchase money and that the mortgage was subject to X’s linen.

In Hunt v. Lack, (1902) 1 Ch 429 case, A proposed to sell his property to B, who at the same time knew that rents due in respect of the property are paid by the tenants to a third person X. The Court fixed B with the constructive notice of the right of X.

In Ismail Khan’ v. Kali Krishna, (1901) 6 Cal WN 134 case, A refused a registered letter, which contains information relating to property which A proposes to purchase. A will be deemed to have notice of the contents of the latter.

Gross Negligence: 

Negligence means carelessness or omission to do such an act which a man of ordinary prudence would do. The doctrine of constructive notice applies when a person, but his gross negligence would have known the fact. Mere negligence is not penalized.

In Blyth v. Birmingham Waterworks C., 11 Ex. P. 784 case, the Court observed: “Negligence may be stated to be the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do or doing something which a prudent and reasonable man would not do.”

In Hudston v. Vincy, (1921) 1 Ch 98, Eve J. said, “Gross negligence does not mean mere carelessness, but means carelessness of so aggravated nature as to indicate an attitude of mental indifference to obvious risk.” It can be described as ‘a degree of negligence so gross that a court of justice may treat it as evidence of fraud, impute a fraudulent motive to it and visit it with the consequences of fraud’.

In Lloyds Bank Ltd. v. P.E. Guzders and Co. Ltd., (1929) 56 Cal 868, a person A deposited title deeds of his house in Calcutta with Bank N to secure an overdraft from the bank. Subsequently, A, represented the Bank that intending purchaser of the house wanted to see the title deeds. Bank N said that the purchaser can inspect the deed in Bank’s solicitor’s office. A told bank that he would not get a good price for the house if the purchaser came to know that the Bank had the deeds. The bank returned the deeds to A, who deposited the deeds with another bank L in order to secure a loan. It was held that Bank N, on account of gross negligence in parting with the deed has lost its prior rights with respect to the house.

In Imperial Bank of India v. U. Raj Gyaw, (1923) 50 IA 283 case, a purchase was informed that the title deeds were in possession of a bank for safe custody and omitted to make any inquiry from the bank. It was held that he was guilty of gross negligence and was deemed to have notice of the rights of the bank which had the custody of the deeds.

In Nawal Kishore v. The Municipal Board, Agra, AIR 1943 All 115  case, the court felt that there was a principle on which question of constructive notice could rest, that principle being that all intending purchasers of the property in municipal areas where the property is subject to a municipal tax which has been made a charge on the property by statute have a constructive knowledge of the tax and of the possibility of some arrears being due with the result that it becomes their duty before acquiring the property to make enquiries as to the amount of tax which is due or which may be due and if they fail to make this enquiry such failure amounts to a willful abstention or gross negligence within the meaning of Section 3 of the Transfer of Property Act and notice must be imputed to them.

In Ahmedabad Municipality v. Hazi Abdul, (1971) ASC 1201 case, the Supreme Court held that there is no such rule relating to knowledge of tax liability. There is no such duty. The duty to enquire shall depend on facts of each case.

Difference Between Wilful Abstention and Gross Negligence:

In willful abstention, there is intentional or conscious abstention by an obligor from doing that which reasonably and under the terms of the obligation he should have done. In the case of gross negligence, there is no intention of the obligor but as a prudent person, he must notice the things using alertness, common sense.

Registration as Notice:  

The doctrine of constructive notice applies also in case of documents which are required by law to be registered. Where any transaction relating to immovable property is required by law to be and has been, effected by a registered instrument, any person acquiring such property, shall be deemed to have notice of such instrument from the date of registration.

Explanation I to Section 3 provides that ‘where any transaction relating to immovable property is required by law to be and has been effected by a registered instrument, any person acquiring such property or any part, or share or interest in such property shall be deemed to have notice of such instrument as from the date of registration. After registration, the document becomes a public document and the title can be confirmed in the Registrar’s office.

Any person interested in the transaction which is registered under the provisions of the Indian Registration Act, 1908 cannot plead that he has no notice of the transfer made under the deed. In order that registration may be treated as constructive notice of its content, the following conditions must be satisfied:

1. The instrument must be compulsorily registrable.
2. All the formalities prescribed under the Registration Act are duly completed in the manner prescribed.
3. The instrument and particulars must be correctly entered in the registers and indices kept under Registration Act.

A mistake of the Registration department in entering a transaction in the wrong book does not invalidate the transfer. It is a mistake of procedure under Section 87 of the Registration Act. If the instrument has been registered in the same registration sub-district as that in which the property is situated, it operates as notice from the date of registration. If, however, the property is situated in several sub-districts, or if the registration has been effected in another district, the registered deed will not operate as notice until a memorandum of such registration has been received and filed by the Sub-Registrar of sub-district in which the property is situated.

Actual Possession as Notice of Title: 

Explanation II of Section 3 provides that, “any person acquiring any immovable property or any share or interest in such property shall be deemed to have notice of the title, if any, of any person who is for the time being in actual possession thereof. “Thus in order to operate as constructive notice, possession must be actual, i.e., de facto possession. It amounts to the notice of title in another

In Deniels v. Davison, (1809) 16 Ves 240 case, A leased a house and garden to B who takes possession of the properties. A then sells the said properties to C. C is deemed to have constructive notice of B’s rights over these properties, i.e., C cannot plead that he had no knowledge (notice) of the fact of B’s possession on the properties. Whenever purchaser observes such possession, he is expected to carry out the necessary inquiry.

In order to operate as constructive notice possession must be an actual possession. Thus, if a tenant is not in the actual occupation of the land, his occupation is not constructive notice. Where a certain party is not in possession, the presumption under the explanation to Sec. 3, does not arise, that the person purchasing the property title shall be deemed to have notice of the title, if any, of any person who is not in actual possession.

In National Bank of Australia v. Paul Hamilton, AIR 1929 PC 274 case, the Court observed: “It has always been held that such possession is in itself notice of the title under which such possession is retained, which anyone dealing with property cannot, without risk, ignore.”

In Krishnamma v. Suranna, 6 MLJ 24 (FB) and Nani Bibi v. Hafizullah, 10 cal 1073 case, the Court held that the possession, though not conclusive, is very cogent evidence of the title of the person in possession.

Imputed notice to Principal or Notice to Agent:

This is based on the maxim Qui facit per alium facit per se, i.e., he who does by another, does by himself. Explanation III to Section 3 provides that, “A person shall be deemed to have had notice of any fact if his agent acquires notice thereof whilst acting on his behalf  in the course of business to which that fact is material:

Provided that, if the agent fraudulently conceals the fact, the principal shall not be charged with notice thereof as against any person who was a party to or otherwise cognizant of the fraud”

The general principle of the agency law is that an agent stands in the place of the principal for the purpose of the business in hand, his acts, and knowledge being considered as the acts and knowledge of the principal. The general rule that the knowledge of the agent is the knowledge of the principal has certain limitations. The notice should have been received by the agent:

• as an agent,
• during the agency,
• in the course of the agency business,
• in a matter material to the agency business.

The knowledge of an agent will not be imputed to his principal if the agent fraudulently conceals the facts. It is not sufficient to show that the agent concealed the fact. It must be shown that the party charging the principal with notice was party to the fraud or otherwise knew of the fraud.

To apply this doctrine following conditions should be satisfied.

• The agent must have received the notice during the agency.
• The knowledge must come to him as agent
• It must be in the same transaction
• It must be material to the transaction
• It must not have been fraudulently withheld from principal.

In Mohori Bibee v. D. Gliosh, (1903) 30 Cal 539, the Court held that although the principal was absent from Calcutta and did not take part in the transaction personally, his agent in Calcutta  stood in his place for the purposes of the transaction and the acts and knowledge of the latter were the acts and knowledge of the principal.

In Raja Gokul das v. Eastern Mortgage & Agency Co., 10 C.W.N. 216 case, the Court held that knowledge or information obtained by a solicitor or Muktear, in any case, will bind his client.

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Section 122: Transfer of Property Act, 1882:

“Gift” defined

“Gift” is the transfer of certain existing movable or immovable property made voluntarily and without consideration, by one person, called the donor, to another, called the donee, and accepted by or on behalf of the donee.

Acceptance when to be made-

Such acceptance must be made during the lifetime of the donor and while he is still capable of giving.

If the donee dies before acceptance, the gift is void.

In Padma Chand v. Lakshmi Devi, 2010 (173) DLT 604 (Delhi) case the Court held that gift is a voluntary transfer of property without consideration and parting by the owner of the property without any pecuniary benefit.

In Vimala v. Narayanaswamy, 1996 AIHC 4170 Kar case, the Court held that where the deed is to take with immediate effect, the property to be transferred during the executant’s life, it would be a gift deed and not a will.

Essential Requisites of Gift:

Sec 122 of the Transfer of Property Act defines a gift which has the following essential requisites:-

1. There should be a donor and a donee;
2. There must be a transfer of ownership of a property from the donor to the donee;
3. The property should be certain (capable of identification) and existing property. Thus there cannot be a gift of future property;
4. The transfer should be voluntary;
5. It shall be without consideration;
6. It can be of movable or immovable property;
7. In the case of immovable property, there must be either a registered instrument properly attested by at least two witnesses. In case of movable property either by a registered instrument properly attested or delivery of possession;
8. The transfer should be accepted by the donee in his lifetime from the donor;
9. The acceptance of the transfer by done must be during the lifetime of the donor and he must be still capable of giving;
10. Thus during gift, both the donor and done should be living persons;
11. In the event of the donor dies before acceptance, the gift is void.

Note:

1. As consideration is absent, Gift is not a contract.
2. It should be by free consent and must be voluntary.
3. It becomes irrevocable once the deed of gift is delivered to the donee, even before its registration.
4. Registration should be in accordance with the Indian Registration Act.
5. Once the deed is executed and it is accepted during the lifetime of the donor, the deed of the gift may even be registered after the death of the donor.
6. Unregistered deed of gift cannot be used under the doctrine of past performance.

In Commissioner of Income Tax v. Mayawati, 2011 (183) 617 case, the Court held that if all the above elements are fulfilled, there will be a valid gift, if not it will have no legal consequence.

Transfer by Gift:

Section 123: Transfer of Property Act, 1882:

Transfer how effected

For the purpose of making a gift of immovable property, the transfer must be effected by a registered instrument signed by or on behalf of the donor, and attested by at least two witnesses.

For the purpose of making a gift of movable property, the transfer may be effected either by a registered instrument signed as aforesaid or by delivery.

Such delivery may be made in the same way as goods sold may be delivered.

Gift of Immovable Property:

Sec 123 of the Transfer of Property Act makes a reference ‘to delivery’. This section deals with the mode of transfer in the case of gifts. It provides separate provisions for the gift of immovable and movable properties. With regard to gifts of immovable property, Sec 123 provides the transfer must be effected by a registered instrument signed by or on behalf of the donor and attested by at least two witnesses. Registration is compulsory in case of a gift of immovable property, whatever may be the value of the property. There is no mention that the deed should be registered by the donor himself.

No mention is made with regard to the delivery of possession. One of the prerequisites for registration is the transfer must be in writing and cannot be done orally. The registration must be completed in the manner prescribed by the Indian Registration Act, 1908.

In Ram Niwas Awasthy v. Narayan Prasad, 2007 (2) MPLJ 332 (335) (MP) case, the Court held that the question whether a document is a gift or not depends upon the language used in the document and from the perusal of entire document if it is gift then the provisions of Sections 122 and 123 shall apply.

In Sahadev Vs. Shekh Papa (1905)29 Bom. P.119 case, the Court held that gifts of immovable property are compulsorily registrable and it amounts to notice for a subsequent transfer and not for earlier transactions prior to registration.

In D.N.Dawar Vs. Ganga Ram Saran Dhama, AIR 1993 Del P.19 case the Court held that in case of a gift of immovable property if the document is not registered, mere delivery of possession cannot pass a title to the donee.

Gift of Movable Property:

With regard to movable property, the gifts can be effected either by a registered instrument signed as aforesaid (signed by the donor or on his behalf) or by delivery. Even in the case of movable property, registration is made optional when delivery of possession takes place. No delivery of possession is required when it is made through a registered document. Sec 123 provides that delivery may be made in the same manner as goods sold are made i.e., which the parties agree to constitute delivery or putting the goods in possession of the buyer.

Gifts Under Hindu Law:

In general, whatever is given in the Transfer of Property Act is applied to Hindus. A gift in Hindu law is not mandatory to be in writing. For a valid gift, it is required that there must be the delivery of physical possession from the donor to the donee.

• A Hindu person may dispose of his separate or self-acquired property by way of gift, subject in certain cases to the claims for maintenance of those who are legally bound to be maintained.
• A coparcener may dispose of his coparcenary interest by way of gift subject to the claims of those who are entitled to be maintained by him.
• A father may by way of gift dispose of the whole of his property, whether ancestral or self-acquired, subject to the claims of those who are entitled to be maintained by him.
• A female may dispose of her stridhana by way of gift, subject to the consent of her husband.
• A widow may in certain cases dispose of by way of gift a small portion of the property inherited by her from her husband, but she cannot do so by will.
• The owner of a joint property may dispose of that by way of the gift unless there is a special custom prohibiting alienation or the tenure is of such a nature that it cannot be alienated.
• In Hindu law, it is not allowed to make a gift in favor of an unborn persons.

In Deo Saran v. Deoki Bharthi, (1924) 3 Pat 842 case, the Court held that under Hindu Law the essential ingredients which constitute a gift, whether of movable or immovable property, are the Sankalpa and Samarpan whereby property is completely given away and the owner completely divests himself of the ownership in the property. The Court further observed that the Hindu Law of Gift has been expressly abrogated by Section 129 of the Transfer of Property Act, 1882.

In Srinivasa Padyachi v. Parvathiammal, AIR 1970 Md 113 case the Court held that a gift by a coparcener of his undivided share in a joint family property is void and does not bind even the alienor. But according to Mitakshara law prevailing in Madras, a coparcener has the power to alienate for value his undivided interest in the property without the consent of other coparceners.

Gifts Under Mohammadan Law:

The concept of gift is different in Muslim law than that given in the Transfer of Property Act. Here it is a transfer of property or right by one individual to another according to the Muslim law and it also includes

• A hiba, which is an immediate and unconditional transfer of the ownership of some property or of some right, without any consideration and
• An ariat, which means giving of some limited interest to someone in respect of the use or usufruct of some property or right.
• If a gift of any property or right is made without consideration and the object of such gift is to get religious merit, it is called sadaqah.

Under the Mohammadan Law, the essentials of a gift are

1. a declaration of gift by the donor;
2. acceptance of the gift by the donee;
3. if possible, delivery of possession

The registered instrument is not necessary to validate the gift of immovable property. In Muslim law gift in favor of a child in the womb of the mother is valid if the child is born within six months from the date of the gift because in that case it is presumed that the child actually existed.

Types of Gifts:

Void Gifts

There are certain gifts which are declared void by the Act. These are –

• Gifts for an unlawful purpose which is unlawful as per the law of land (Section 6)
• Gifts which are made subject to a condition which is impossible to fulfill or re forbidden (Section 6)
• If the donee dies without acceptance of gift such gift is void. (Section 122)
• A gift made by a person who is incompetent in law, for example, idiot, minor, lunatic. (Section 7)
•  A gift comprising existing and the future property is void as to the later (Section 124)
• A gift of a thing to two or more donees, of whom one does not accept it, is void as to the interest which he would have taken, had the accepted (Section 125)
• A gift which, under an agreement between the parties, is revocable, wholly or in part, at the mere will of the donor, is void wholly or in part as the case may be (Section 126)

Onerous Gifts

A gift may not always be of a beneficial character, but may at times burdened with an obligation. The said gift is known as an onerous gift. Section 127 of TPA talks about the onerous gift-  it says that when a gift is in the form of a single transfer of several things to the same person of which one is burdened by an obligation, and the others are not, the donee can take nothing by the gift unless he fully accepts it. Where a gift is in the form of two or more than two separate and independent transfers to the same person of several things, the donee can accept one of them and can refuse the others, although the former one may be beneficial and the latter one may be onerous.

In this situation, only one thing is different, in single transfer either the whole transfer to be accepted or the whole transfer should be rejected. In case of separate transfer, liberty is given to reject one and to accept others.

An onerous Gift to Disqualified Person:

A donee who is not competent to contract even but still accepting property burdened by any obligation cannot be bound by his acceptance. But if he becomes competent to contract and then being aware of the obligation if he retains the property given, he becomes bound by acceptance.

Lifetime Gifts:

When the donor has the intention to deliver any gift to the donee during the lifetime period of the donor then that gift shall be considered as Lifetime Gifts. Lifetime Gifts are mainly given to the donee by the donor on the basis of some occasions like Birthday Party, Weeding Ceremony, etc.

Donatio Mortis Causa:

It means death bed gift. Deathbed gifts are future gifts which shall be expected to deliver to the donee after the death of the donor on the basis of intention made by the donor. When the donor is in critical condition and dies meanwhile if gift is made it is called death bed gift. It can be of immoveable/moveable property and it is valid only after the death of donor not before that.

Universal Donee:

A universal donee is one to whom all the properties of the donor have been given and he is liable for all the debts and liabilities of the donor at the time of the gift. The object of this is to protect the creditors of the donor.

Revocation or Suspension of Gifts:

A gift once made irrevocable except in the following two cases:

• A gift is revocable if donor and donee have agreed that on the happening of a specified event ( not depending upon the will of the donor), gift should be suspended or revoked.
• A gift can also be revoked in those cases in which a contract can be rescinded. For example, fraud, misrepresentation, etc.
• These rules do not, however, affect the rights of a transferee for consideration without notice.

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The classification of mortgage has been made on the basis of the nature of the interest which is transferred for securing the loan. Accordingly, there is a difference in the rights and liabilities in each kind of mortgage. These six types of mortgages also differ regarding the formalities that are necessary for effecting them.

As per Section 58, six types of mortgages are Simple mortgage, Mortgage by Conditional Sale, Usufructuary mortgage, English mortgage, Mortgage by deposit of title-deeds, and Anomalous mortgage.

Simple Mortgage:

Section 58(b): Simple mortgage.

Where, without delivering possession of the mortgaged property, the mortgagor binds himself personally to pay the mortgage-money, and agrees, expressly or impliedly, that, in the event of his failing to pay according to his contract, the mortgagee shall have a right to cause the mortgaged property to be sold and the proceeds of sale to be applied, so far as may be necessary, in payment of the mortgage-money, the transaction is called a simple mortgage and the mortgagee a simple mortgagee.

As per Section 58 (b). Where the mortgagor promises to pay the mortgage-money (loan) without delivering possession of the mortgagor-property and agrees expressly or impliedly that in case of non-payment of the loan, the mortgagee shall have the right to cause the mortgaged property to be sold through a decree or order from the Court, the mortgage is a simple mortgage. Thus in a simple mortgage, the mortgagee is not put into possession of the property pledged to him. The mortgagor merely parts with the right of sale and nothing more.

The mortgagee cannot foreclose i.e. keep the property in lieu of the mortgage-money but acquires right of sale the property by the intervention of the Court.

Characteristics of a simple Mortgage:

• In such a mortgage, the mortgagor takes a personal undertaking to pay the loan.
• In such a mortgage, the possession of the mortgagee-property is not given to the mortgage.
• In such mortgage in the case of non-payment of the loan, the mortgagee has the right to have the mortgage-property sold through the intervention of Court.
• A simple mortgage can be made only through a registered document irrespective of the sum of money secured. (Section 59 of the Act)
• A simple mortgagee is entitled to a decree for sale as a matter of course. He cannot acquire absolute ownership by foreclosure.
• In a simple mortgage, the security for the debt is two-fold: (i) the personal obligation; and (ii) The property.

Case Laws:

In Ram Narayan Singh v. Adhindra Nath, AIR (1916) PC 119 the Court held that the fact that some immovable property has been mentioned as security for its repayment does not displace the personal liability of mortgagor to repay the loan with interest.

In Kishan Lai v Ganga Ram (1891) 13 Allahabad 28 case, the Court held that the very words “right to cause the property to be sold” in section 58 (b) of the Transfer of Property Act, 1882 indicates that the power of sale is not to be exercised by the mortgagee without the intervention of the court.

Mortgage by Conditional Sale:

Section 58 (c): Mortgage by conditional sale:

Where, the mortgagor ostensibly sells the mortgaged property— on condition that on default of payment of the mortgage-money on a certain date the sale shall become absolute, or on condition that on such payment being made the sale shall become void, or on condition that on such payment being made the buyer shall transfer the property to the seller, the transaction is called mortgage by conditional sale and the mortgagee a mortgagee by conditional sale: Provided that no such transaction shall be deemed to be a mortgage, unless the condition is embodied in the document which effects or purports to effect the sale.

As per section 58(c) of the Transfer of Property Act, the sale with a condition that upon repayment of the consideration amount, the purchaser shall retransfer the property to the seller is known as Mortgage by conditional sale. Although, the whole transaction looks like a conditional sale, yet, in the intention of the parties is to secure the money (an essential ingredient of the mortgage) which the seller takes as a loan from the purchaser.

Characteristics of Mortgage by Conditional Sale:

• There is an ostensible (appearing to be true but not necessarily so) sale of immovable property.
• It is a conditional sale. The sale is subject to any of the following conditions: (i) On non-payment of mortgage-money (price) the sale would become absolute or, (ii) On payment of mortgage money the sale shall become void or the buyer shall retransfer the said property to the seller.
• The condition must be embodied in the same document.

Case Laws:

In Rama v Samiyappa ILR (1881) 4 Mad 179 183 184 case, the Court held that the essential of this form of mortgage is that with the default of payment the transaction is closed and the mortgage security becomes the absolute property of the mortgagee. There is no personal liability on the part of the mortgagor to repay the debt. The mortgagor’s right of redemption will be lost only by a decree for foreclosure.

In Natesa Pathar v Pakkirisamy Pathar, AIR 1997 Mad 105 case, the condition of sale and resale was engrafted in the same document. The purchaser was specifically prohibited from encumbering the property within the period of five years stipulated for repurchase. There was a substantial difference between the actual value of the property and consideration as stipulated in the deed. The transaction was held to be a mortgage by conditional sale.

In Chunchun Jha v. Ibadat Ali, AIR 1954 SC 345 case, the Court held that if the sale and repurchase are embodied in separate documents then the transaction cannot be a mortgage whether the documents are contemporaneously executed or not.

In Prakasam v. Rajambal, AIR 1975 Mad. 282 case, the document was described as a sale deed but the stamp paper was provided by the transferor and the consideration (price) was much less than the actual value of the property. There was a specific condition that on payment of ‘principal’ amount the property should be reconvened. It was held by the Madras High Court that the transaction was a mortgage by conditional sale and not an outright sale.

In Kamal Shivajirao Katkar v. Gajrabai Sopanrao Algude, AIR 2001 Bom. 369 case, where A, the owner of the land, gave possession of his land of B on receipt of money from him, and under the agreement B was to execute reconveyance on payment of the amount by A otherwise the sale was to be confirmed. In this case, payment of interest was not stipulated in the agreement. Accordingly, the court found that there was no intention of parties to treat the transfer of land as ‘security for debt’ which is an essential feature of a mortgage. The Bombay High Court held that the transaction was sale with the condition to repurchase and not a mortgage by conditional sale.

Usufructuary Mortgage:

Section 58 (d): Usufructuary mortgage:

Where the mortgagor delivers possession 1[or expressly or by implication binds himself to deliver possession] of the mortgaged property to the mortgagee, and authorises him to retain such possession until payment of the mortgage-money, and to receive the rents and profits accruing from the property 2[or any part of such rents and profits and to appropriate the same] in lieu of interest, or in payment of the mortgage-money, or partly in lieu of interest 3[or] partly in payment of the mortgage-money, the transaction is called an usufructuary mortgage and the mortgagee an usufructuary mortgagee.

As per section 58(d) of the Transfer of Property Act, when the mortgagor gives possession of the property to the mortgagee, then the mortgage is called usufructuary mortgage. Since possession is with the mortgagee, he enjoys the fruits of the property i.e. produce, benefits, rents or profits of the mortgage-property in lieu of interest on the principal money (debt) advanced by him. Therefore, on payment of a debt (principal money). The mortgagee has no right of possession.

Characteristics of Usufructuary Mortgage:

• Delivery of possession of the mortgage-property or, an express or implied undertaking by the mortgagor to deliver such possession.
• Enjoyment or use of the property by mortgagee until his dues are paid off.
• There is a transfer to the mortgagee of one of the incidents of ownership, namely, the right of possession and enjoyment of the usufruct.
• No personal liability of the mortgagor.
• The mortgagee cannot foreclose or sue for sale of mortgage-property.
• In this form of mortgage, no time-limit is fixed for the payment.

Case Laws:

In Chathu v Kunjan (1889) 12 Madras 109 case, the Court held that since there is no personal liability on the part of the mortgagor to repay the mortgage – money the mortgagor cannot be sued personally for the debt.

In Butto Kkristo v. Govindram, AIR (1939) Pat 540 case, where the mortgage-property is a tenanted house the only way in which possession can be given to mortgagee is to give him the right to collect the rents and appropriate them towards the debt.

In Hikmatulla v. Imam Ali, (1890) 12 All 203 case, the Court held that mortgagee is entitled to retain possession until the money due is paid. In a usufructuary mortgage, the time up to which money may be paid by mortgagor is uncertain. If any time is fixed the mortgage would not be a
usufructuary mortgage.

English Mortgage:

Section 58 (e): English mortgage:

Where the mortgagor binds himself to repay the mortgage-money on a certain date, and transfers the mortgaged property absolutely to the mortgagee, but subject to a proviso that he will re-transfer it to the mortgagor upon payment of the mortgage-money as agreed, the transaction is called an English mortgage.

As per section 58(e) of the Transfer of Property Act, in English mortgage, there is an absolute transfer of property to mortgagee with a condition that when the debt is paid off on a certain date, he (mortgagee) shall re-transfer the property to the mortgagor. According to section 58 (e) of this Act, where mortgagor binds himself to repay the money (debt) on a certain date and transfers the mortgage-property absolutely subject to the proviso that mortgagee will re-transfer it to mortgagor on payment of debt as agreed, the mortgage is English mortgage. In an English Mortgage, the ownership of the property is transferred with a promise to repay the debt on a certain date. And the mortgagee is entitled to the possession of the property and to the enjoyment of the profits arising therefrom.

Characteristics of English Mortgage:

• The mortgagor binds himself to repay the mortgage money (debt) on a certain date.
• The mortgage-property is transferred absolutely to the mortgagee.
• The absolute transfer is subject to a proviso that mortgagee will re-transfer the property to mortgagor on payment of mortgage-money on the said date.
• It is known to mortgagee with certainty when the mortgagor is to redeem or he to proceed to foreclose or sell.

Case Laws:

In Narayana v Venkataramana, ILR (1902) 25 Madras 220 (235) (FB) case the court opined that the English Mortgage has three essential ingredients. First, the mortgagor has to bind himself to repay the mortgage money on a certain day. Secondly, the property mortgaged is transferred “absolutely” to the mortgagee. Thirdly, this transfer is subject to a proviso that the mortgagee will reconvey the property to the mortgagor upon payment of the mortgage – money on the date fixed for repayment.

The statutory power of sale by an English mortgagee arises when the mortgagor and the mortgagee are not Hindus, Muhammadans or Buddhists or members of any other race, sect, tribe or class from time to time specified in this behalf by the State Government in the Official Gazette. This means that majority of people in India, though entitled to go in for English mortgage, cannot have the statutory power of sale due to confinement of this power only to certain communities such as Christians, people of English origin only.

Mortgage by Deposit of Title deeds:

Section 58 (f): Mortgage by deposit of title-deeds:

Where a person in any of the following towns, namely, the towns of Calcutta, Madras, and Bombay, and in any other town which the State Government concerned may, by notification in the Official Gazette, specify in this behalf, delivers to a creditor or his agent documents of title to immovable property, with intent to create a security thereon, the transaction is called a mortgage by deposit of title-deeds

Section 58(f) provides for the mortgage by way of deposit of Title deeds. Mortgage by deposit of title-deeds is a peculiar kind of mortgage. It is peculiar in the sense that in this mortgage, execution of mortgage-deed by mortgagor is not necessary. Mere deposit of title-deeds of immovable property by a mortgagor to mortgagee is sufficient. Title-deeds
are those documents which are legal proof that a person owns a particular property. The object of this kind of mortgage is to provide easy
mode of taking loans in urgent need particularly by a trading community of the commercial towns. This is called in English law an equitable mortgage. The towns specified in the section are called notified towns. Many other places have been notified by the State Governments for depositing title – deeds for creation of mortgages. There are territorial Restrictions for application of this form of a mortgage. In accordance with the provisions of Section 96 of the Transfer of Property Act, 1882, mortgage by deposit of title deeds, though without writing or by any deed, is equivalent to a simple mortgage. Bankers, in most of the cases, adopt the mortgage by deposit of title deeds since it is simple, inexpensive and non-time-consuming. The remedy of this mortgagee lies in filing a suit for sale of the mortgaged property. Title-deeds may also be deposited with banks to secure an overdraft account. This is a common practice among the trading community or persons involved in the business.

Characteristics of Mortgage by Deposit of Title deeds:

• Existence of a debt. The debt may be an existing or future debt.
• Deposit of title-deeds in notified town,
• Intention to create security, and

Case laws:

In K.J. Nathan, S. Maruthi, AIR (1965) SC 430 case the physical delivery of the title-deeds had taken place outside the towns specified. But the intention to create equitable mortgage by these deeds was formed after delivery of the deeds and in a town which was within the notified area. The Supreme Court held that an equitable mortgage was created under section 58 (f) of the Transfer of Property Act. The Court opined that there must be a bona fide intention that possession of title-deeds with the creditor is by way of security for the money advanced by him. However, the intention to create security by the deposit of title-deeds is a question of fact and not of law.

In Jethibai v. Putlibai, (1961) 14 Bom. L.R. 1020 case, the Court held that there is no equitable mortgage unless there is a connecting link between the debt and the possession of title-deeds suggesting a definite intention on the part of the debtor that deeds are in possession of creditor as security for the debt.

Anomalous Mortgage:

Section 58(g): Anomalous mortgage:

A mortgage which is not a simple mortgage, a mortgage by conditional sale, an usufructuary mortgage, an English mortgage or a mortgage by deposit of title-deeds within the meaning of this section is called an anomalous mortgage.

According to section 58 (g), a mortgage is an anomalous mortgage if it is not a simple mortgage, a mortgage by conditional sale, a usufructuary mortgage, an English mortgage or, a mortgage by deposit of title-deeds.

When a transaction is a mortgage in all respects i.e. there is the existence of debt and security of immovable property for re-payment of that debt but the agreement between the debtor and creditor is of such nature that it cannot be included in any specific category of mortgage, the transaction is an anomalous mortgage. It may also be combination of any two or more forms of specific categories of mortgage.

In Madho Rao v Gulam Mohiuddin AIR 1919 PC 121 case, the Court held that while considering an anomalous mortgage, the intention of the parties must be gathered from the terms of the instrument as controlled by the provisions of the Act.

Some of the forms of anomalous mortgages are given below :

• A mortgage with possession containing a covenant to pay the principal and interest (Ramanarayanimgar v Maharaja of Venkatagiri AIR 1927 PC 32 (36)).
• A mortgage with possession having a stipulation that the transferee should appropriate the rents and profits for a specified term of years and then give back the land (Tukaram v Ramchand ILR (1902) 26 Bom 252 (258)).
• A mortgage with the mortgagee to remain in possession and the mortgagor to repay in installments with interest or to redeem at any time.
• A mortgage without possession with the mortgagor not to redeem before five years and the mortgagee has given a right of foreclosure (Ujagar Lai v Lokendra Singh AIR 1941 Allahabad 169 (171)).
• A mortgage having a covenant to pay interest, but without any covenant to repay the principal and the mortgagor subsequently depositing certain title – deeds not mentioned in the mortgage as additional security.

Law > Civil Laws > Transfer of Property Act > Types of Mortgages

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Section 58: “Mortgage”, “mortgagor”, “mortgagee”, “mortgage-money” and “mortgage-deed” defined.—

(a) A mortgage is the transfer of an interest in specific immoveable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability. The transferor is called a mortgagor, the transferee a mortgagee; the principal money and interest of which payment is secured for the time being are called the mortgage-money, and the instrument (if any) by which the transfer is effected is called a mortgage-deed.

In Gopal v. Parsotam (1883) ILR 5 All 121, (157) case  Justice Mahmood has defined mortgage as under: “Mortgage, as understood in this country, cannot be defined better than by the definition adopted by the Legislature in section 58 of the Transfer of Property Act (IV of l882). That definition has not in any way altered the law, but, on the contrary, has only formulated in clear language the notions of the mortgage as understood by all the writers of textbooks on Indian mortgages. Every word of the definition is borne out by the decisions of Indian Courts of Justice.”

In Kedar Lal v. Hari Lal, AIR 1952 SC  50 case, the Supreme Court has observed that the whole law of mortgage in India, including the law of contribution arising out of a transaction of mortgage, is now statutory and is embodied in the Transfer of Property Act read with the Code of Civil Procedure. The court cannot travel beyond these statutory provisions.

Mortgage, as defined in this section is the transfer of an interest in some immovable property. It is not a transfer of all the interests but only of some interest in the property. The purpose of this transfer of interest is to give security for repayment of the loan. Therefore, where a person mortgages his property, the legal effect is that there is a transfer of an interest‘ of that property in consideration of money advanced to him by the money-lender.

The person who takes a loan under a mortgage i.e: transfers the interest in his immovable property, is called mortgagor. The person in whose favour, the property is mortgaged i.e. who advances loan, is called mortgage. The sum of money and the instrument or deed of transfer are called mortgage money and mortgage-deed respectively.

A sale with a condition of retransfer is not mortgage, for the relationship of debtor and creditor does not subsist and there is no debt for which the transfer is as security.

In Natesa Pathar v Pakkirisamy Pathar AIR 1997 Mad 105 before the Madras High Court, the condition of sale and resale was engrafted in the same document, wherein the purchaser was specifically prohibited from encumbering the property within a period of five years stipulated for repurchase. There were also substantial differences between the actual value of the property and consideration as stipulated in the deed. It was held that it was a mortgage by conditional sale and not a sale with a condition for retransfer.

Characteristics of Mortgage:

Transfer of Interest:

In a mortgage, there is a transfer of only an ‘interest’ of the immovable property. There is no-transfer of absolute interest or ownership. The owner transfers some of the rights of ownership to the mortgagee and retains the remaining rights with himself. For example, a mortgagor retains the right to redeem the property mortgaged.

In Ali Hussain v. Nilla Kanden, (1864) 1 Mad. 356 case, the Court held that the ‘interest of property’ is transferred in favour of the mortgagee who advances the money as a loan. It is the ‘interest of property’ which gives him (mortgagee) the right to recover his money from mortgagor’s property. A peculiar feature of the interest transferred is that such ‘interest’ itself is an ‘immovable property’. However, the mortgage is not a transfer of all the interests. After transferring this interest in favour of mortgage, there still remains a vested remainder with the mortgagor.

In Papamma Rao v Pratapa Korkonda (1896) 19 Mad 249, 252, 23 LA 32 case, the Court held that the right transferred to the mortgagee is not ownership.

Specific Immovable Property:

The property which is being mortgaged must be specific immovable property i.e., it can be identified by its size, location, boundaries etc. It must be specifically mentioned in the deed. Thus it can be identified as to which property has been mortgaged. The property must not be described in general terms.

In Darshan Singh v. Hanwanta, (1876) 1 All 274 case, the Court held that it is necessary that there should be an accurate description of the property so as to render it capable of identification. No particular form of description is needed.

In Indian Insurance & Banking Corpn v Paramasiva Mudaliar, AIR 1957 Mad 610 case, the Court held that machinery in a mortgaged building does not form part of the security unless it is attached to the building for the permanent beneficial enjoyment thereof.

The Purpose of Mortgage:

The object of transfer of an interest in the property must be to secure a loan or performance of a contract which results in monetary obligation (pecuniary liability). A transfer made for the purpose of discharging debt is not a mortgage.

In Kottayya v Annapumamma, AIR 1945 Mad 189 case, a debtor who was not able to repay the amount of the debt granted to the creditor a right to occupy and enjoy certain land for a period of 20 years. It was held that the transaction was not a mortgage but a lease.

Possession of Property:

The actual possession of the mortgaged property need not always be transferred to the mortgagee. In certain cases (particularly home loans), the mortgagor and keep possession of the property and can enjoy it.

Reconveyance of Interest of Property:

The interest in the mortgaged property is re-conveyed to the mortgage on repayment of the loan with the interest due on.

Failure to Repay Loan by Mortgagor:

In case the mortgager fails to repay the loan, the mortgagee gets the right to recover the debt out of the sale proceeds of the mortgaged property adopting legal ways.

Difference Between Mortgage and Sale:

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Section 108 of the Act deals with the liabilities and rights of the lessor and lessee of immovable property. In this article, we shall discuss the liabilities of lessee. Section 108 clauses (k) to (q) deals with the liabilities of lessee

Section 108: Rights and liabilities of lessor and lessee:

In the absence of a contract or local usage to the contrary, the lessor and the lessee of immoveable property, as against one another, respectively, possess the rights and are subject to the liabilities mentioned in the rules next following, or such of them as are applicable to the property leased:

(A) ………………

(B) Rights and Liabilities of the Lessee

(a) ………… (j)

(k) the lessee is bound to disclose to the lessor any fact as to the nature or extent of the interest which the lessee is about to take, of which the lessee is, and the lessor is not, aware, and which materially increases the value of such interest;

(l) the lessee is bound to pay or tender, at the proper time and place, the premium or rent to the lessor or his agent in this behalf;

(m) the lessee is bound to keep, and on the termination of the lease to restore, the property in as good condition as it was in at the time when he was put in possession, subject only to the changes caused by reasonable wear and tear or irresistible force, and to allow the lessor and his agents, at all reasonable times during the term, to enter upon the property and inspect the condition thereof and give or leave notice of any defect in such condition; and, when such defect has been caused by any act or default on the part of the lessee, his servants or agents, he is bound to make it good within three months after such notice has been given or left;

(n) if the lessee becomes aware of any proceeding to recover the property or any part thereof, or of any encroachment made upon, or any interference with, the lessor’s rights concerning such property, he is bound to give, with reasonable diligence, notice thereof to the lessor;

(o) the lessee may use the property and its products (if any) as a person of ordinary prudence would use them if they were his own; but he must not use, or permit another to use, the property for a purpose other than that for which it was leased, or fell 3[or sell] timber, pull down or damage buildings 3[belonging to the lessor, or] work mines or quarries not open when the lease was granted, or commit any other act which is destructive or permanently injurious thereto;

(p) he must not, without the lessor’s consent, erect on the property any permanent structure, except for agricultural purposes;

(q) on the determination of the lease, the lessee is bound to put the lessor into possession of the property.

• Section 108 (k) lays down that the lessee is under an obligation to disclose all related material facts which are likely to increase the value of the property for which the lessee has an interest in and the lessor is not aware of. There is no such duty when there is a contract or local usage to the contrary. This clause is not applicable to agricultural leases. In the event of non-disclosure by the lessee of an advantage taken by him, the lessor’s remedy would be not the avoidance of leases but compensation or damages.

• Section 108 (l) lays down that the lessee is under an obligation to pay the rent or premium which is settled upon in the agreement to the lessor or his agent within the prescribed time. This clause is not applicable when there is a contract or local usage to the contrary. This clause is not applicable to agricultural leases.

In Rameshwar Dayal v. Mani Lal. AIR 1977 All 534 (535) case, the Court held that once remittance of rent is proved, the presumption would arise under S. 114 of the Indian Evidence Act that ordinary course of events was followed and the amount must have been tendered to the addressee and received by him.

• Section 108 (m) lays down that the lessee is under an obligation to maintain the property in the condition that he initially got the property on commencement of the lease and he has to return it in the same condition. The changes caused by reasonable wear and tear or irresistible force are acceptable. This Section allows lessor and his agent during the term of the lease and at a reasonable time to enter upon the property and inspect its condition. The lessor is powered to give notice of any defect found and is entitled to make good, within three months after notice.

In Paritosh Ghosh v. Ashim Kumar Gupta, 2003 AIHC 291 (297,  298) (Cal) case, where the tenant made holes in walls for fixing air coolers, replaced brass water caps by plastic caps, in violation of leases agreement, the eviction of the tenant was held proper.

• Section 108 (n) lays down that if lessee gets to know about any proceedings relating to the property or any encroachment or any interference, then lessee is under an obligation to give notice to the lessor. This clause is for protection of the lessor’s interest in the property. This clause is not applicable when there is a contract or local usage to the contrary. This clause is not applicable to agricultural leases.

• Section 108 (o) lays down that the lessee has a right to use all the assets and goods which are on the property as an owner would use which is preserving it to the best of its nature. He is although under obligation to prevent any other person from using that asset or good for any other purpose from what was prescribed in the lease agreement.

• Section 108 (p) lays down that the lessee cannot attach any permanent structure without the consent of the lessor except for the purpose of agriculture.

In Rameshwar Roy v. Baidendra Kinkar Patra, AIR 1998 Cal 292 (298) case, the Court held that the clauses (m), (o) and (p) would apply only to premises demised, and none of this clause would apply in respect of other property, as property mentioned in these clauses would mean only the premises demised and not any other property or premises.

• Section 108 (q) lays down that the lessee is under an obligation to give the possession of the property back to the lessor after the expiry of the prescribed term of the lease.

In Sky Land International Pvt. Ltd. v. Kavita P. Lalwani, 2012 (191) DLT 594 (Del) case, the Court held that upon expiry of the term of the lease or termination of monthly leases by notice to quit, the lessee must vacate the property on his own and not wait for lessor to bring a suit where he can raise all kinds of contests in order to profit from Court delays.

In Santsaran v. Bankeylal Ramlal, AIR 1955 NUC 52 (MP) case, the Court held that even where the tenant has constructed a building on the land, the lessee’s obligation to restore possession to the lessor on the expiry of the leases is absolute.

In Hirabai v. Jivanlal, AIR 1955 Nag 134 (DB) case, the Court held that where the lessee wrongfully refuses to deliver possession, the lessee must pay damages to the lessor to the extent of the loss of rent suffered by latter during the period he remained out of possession.

Law > Civil Laws > Transfer of Property Act > Liabilities of Lessee

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Section 108 of the Act deals with the liabilities and rights of the lessor and lessee of immovable property. In this article, we shall discuss the rights of lessee.

Section 108: Rights and liabilities of lessor and lessee:

In the absence of a contract or local usage to the contrary, the lessor and the lessee of immoveable property, as against one another, respectively, possess the rights and are subject to the liabilities mentioned in the rules next following, or such of them as are applicable to the property leased:

(A) ………………

(B) Rights and Liabilities of the Lessee

(d) If during the continuance of the lease any accession is made to the property, such accession (subject to the law relating to alluvion for the time being in force) shall be deemed to be comprised in the lease;

(e) if by fire, tempest or flood, or violence of an army or of a mob, or other irresistible force, any material part of the property be wholly destroyed or rendered substantially and permanently unfit for the purposes for which it was let, the lease shall, at the option of the lessee, be void: Provided that, if the injury be occasioned by the wrongful act or default of the lessee, he shall not be entitled to avail himself of the benefit of this provision;

(f) if the lessor neglects to make, within a reasonable time after notice, any repairs which he is bound to make to the property, the lessee may make the same himself, and deduct the expense of such repairs with interest from the rent, or otherwise recover it from the lessor;

(g) if the lessor neglects to make any payment which he is bound to make, and which, if not made by him, is recoverable from the lessee or against the property, the lessee may make such payment himself, and deduct it with interest from the rent, or otherwise recover it from the lessor;

(h) the lessee may 1[even after the determination of the lease] remove, at any time 2[whilst he is in possession of the property leased but not afterwards] all things which he has attached to the earth; provided he leaves the property in the state in which he received it;

(i) when a lease of uncertain duration determines by any means except the fault of the lessee, he or his legal representative is entitled to all the crops planted or sown by the lessee and growing upon the property when the lease determines, and to free ingress and egress to gather and carry them;

(j) the lessee may transfer absolutely or by way of mortgage or sub-lease the whole or any part of his interest in the property, and any transferee of such interest or part may again transfer it. The lessee shall not, by reason only of such transfer, cease to be subject to any of the liabilities attaching to the lease; Nothing in this clause shall be deemed to authorise a tenant having an untransferable right of occupancy, the farmer of an estate in respect of which default has been made in paying revenue, or the lessee of an estate under the management of a Court of Wards, to assign his interest as such tenant, farmer or lessee;

(k) …………. (q)

Rights of Lessee:

• Section 108 (d) lays down that during the period lease is in effect if any alteration is made (alluvion for the time being in force) then that alteration will come under that same lease. This rule would not apply where the parties are governed by their contract or local usage. This clause is also not applicable to agricultural leases (S. 117 of the Act).

In Tabor v. Godfrey, (1895) 64 LJQB 245 case, the Court held that the clause deals with increament when during the currency of the lease the original land is increased by addition to it. According to the clause, in the absence of express stipulation or local usage to the contrary, such additions are deemed to be included in the land originally leased and subject to the same terms of tenancy as the parent land. This rule would not apply where the parties are governed by their contract or local usage.

• Section 108 (e) lays down that if a significant part of the property that has been leased is destroyed wholly or partly by fire, by flood, by war, by the violent acts of the mob or by any other means resulting in its inefficiency of being a benefit for the lessee. If this happens, the lease is voidable at lessee’s option. There is a provision to this section that if the damage is done due to any act of the lessee himself, this remedy will not be available for him.

In Dada Siba Estate v. Raja Dharmdev Chand, AIR 1961 Punj 143 (DB) case, the Court held that under the clause 108(e) the option of continuance of leases remains with the lessee.

In George J. Ovungal v. Peter, AIR 1991 Ker 55 case, the Court held that ton the destruction of leased property, landlord tenant relationship would not automatically terminate and come to an end.

• Section 108 (f) lays down that lessee has the right to deduct any expenses he has made for repairs in the property from the rent if the lessor has failed to in reasonable time after sending notice. This clause would not apply where the parties are governed by their contract or local usage. This clause is also not applicable to agricultural leases (S. 117 of the Act).

In Home School NO. 16, 17, & 18 v. M. Shafi Ul Huq, 2002 AIHC 753 (754) case, the Court held that to effe4ct repairs, the tenant is expected to give notice to the landlord.

In Pritam Prakash Davar & Sons HUF v. Krisan Kumar Bhasin, 2009 (158) DLT 662 case the Court held that where landlord neglects to effect repairs in a reasonable time, the tenant has right to effect the repairs and recover costs from the landlord.

In V. G. K. Design & Development Engineering Pvt. Ltd. v. H. N. Narayana Reddy, AIR 2008 (NOC) 739 (Kar) case, the Court held that where the tenant has not given notice to the lessor and obtained his implied or express consent he would not be entitled to recover the expenses incurred by him in carrying out the repairs in tenanted premises.

• Section 108 (g) lays down that lessee has a right to recover any such payment which a lessor is bound to make by can deducting it from the interest of the rent or directly from the lessor. He has this right when the lessor has neglected to make that required payment. This clause would not apply where the parties are governed by their contract or local usage. This clause is also not applicable to agricultural leases (S. 117 of the Act).

In Shakuntala Devi Darak v. Transport Corporatiuon of India Ltd., 2011 (6) ALT 47 (A.P.) case, the Court held that Section 108(g) is only subject to any agreement between the landlady/landlord and tenant.

• Section 108 (h) lays down that lessee has a right to detach all things that he may have attached in the property or earth. His only obligation is that he has to leave the property in the same condition as he received it. He can remove the things attached to the earth at any time whilst he is in possession but not afterwards. This clause would not apply where the parties are governed by their contract or local usage. This clause is applicable to agricultural leases (S. 117 of the Act).

In Narayan Das v. Jatindranath, AIR 1927 PC 135 case, the Court held that there may be separation of the ownership of the buildings from the ownership of the land, and there is no rule of law that whatever affixed or built on the soil becomes part of it and is subjected to the same rights of property as the soil itself.

In Kakalpudi Rangaraju v. Happavaluri Sitaramaya, AIR 1955 AP 62 case, the Court held that the trees of spontaneous growth on the land belong to the owner; the lessee cannot remove or cut such trees. The lessee can remove only such trees as have been planted by him after the leases.

• Section 108 (i) lays down that when a lease is of unspecified duration in the lease agreement, lessee or his legal representative have a right to collect all the profits or benefits from the crops which were sown by the lessee at that property. They also have a right of free ingress and egress from such property even if the lease ends. The provisions of this clause do not apply when such a lease determines by fault of the lessee. This clause is not applicable to agricultural leases (S. 117 of the Act).

• Meaning of ingress and egress: The tenant and his servants are given right to enter upon the leases after the termination of the leases to gather and carry the crops. The tenant cannot claim to retain possession until the crops are cut. Thus by this clause pass and repass for the carts carrying crops is allowed.

• Section 108 (j) lays down that lessee has a right to transfer absolutely the property or any part of his interest in that property by sub-leasing or through mortgaging. Lessee is not independent of the terms and conditions mentioned in the lease agreement.

In Maa Durga Enterprises v. State of Bihar, 2009 (74) AIC 432 (345) (Pat) case, the Court held that under Section 108 (j), a lessee has been given right to sublease whole or any part of his interest in his property with further right to transferring it upon the sub-lease.

Veeran Devi v. Lt. Governor, Delhi AIR 1982 Del 470 (473) (FB) case, the Court held that where lessee assigns the rights adjuncted to lease, to a third person, the provisions of Section 18 (j) may apply subject to a contract to contrary.

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Law > Civil Laws > Transfer of Property Act > Rights of Lessee

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Section 108 of the Act deals with the liabilities and rights of the lessor and lessee of immovable property. In this article, we shall discuss the liabilities and rights of lessor.

Section 108: Rights and liabilities of lessor and lessee.

In the absence of a contract or local usage to the contrary, the lessor and the lessee of immoveable property, as against one another, respectively, possess the rights and are subject to the liabilities mentioned in the rules next following, or such of them as are applicable to the property leased:

(A) Rights and Liabilities of the Lessor

(a) The lessor is bound to disclose to the lessee any material defect in the property, with reference to its intended use, of which the former is and the latter is not aware, and which the latter could not with ordinary care discover;

(b) the lessor is bound on the lessee’s request to put him in possession of the property;

(c) the lessor shall be deemed to contract with the lessee that, if the latter pays the rent reserved by the lease and performs the contracts binding on the lessee, he may hold the property during the time limited by the lease without interruption. The benefit of such contract shall be annexed to and go with the lessee’s interest as such, and may be enforced by every person in whom that interest is for the whole or any part thereof from time to time vested.

In Megh Lal v. Raj Kumar (1907) 34 Cal 358 case, the Court held that If the contract between the parties is silent in reference to matters dealt within the Section 108 of the Act, the law implies covenant to that effect. The covenants dealt with in the section need not be enumerated in the contracts. They are what are known as implied covenants as oppose to express covenants. When the parties regulate their contract in express terms, the latter would exclude the application of the provisions of the Section.

Liabilities of the Lessor

Liabilities of the lessor are laid down in Section 108(a) to Section 108(c)

• Section 108(a) lays down that the lessor has to disclose any material defect relating to the property which the lessee does not know and cannot with ordinary supervision find out. Thus lessor is under an obligation to reveal to the lessee all defects in the demised premises as are materials that is, such as would affect the use to which they are to be subjected by the lessee. There is no duty to disclose defects which are either known to the lessee or which the lessee would with ordinary care discover.

In Radha Krishna v. W. C. O. Flaherty (1869) 3 Beng LR 277 case, A lessor impliedly contracts with the lessee that premises are fit for the intended user. So where the plaintiff hired a dwelling house of the defendant, and in lighting a fire in the fireplace in one of the rooms, the chimney took fire, there was no vent, and the plaintiff’s furniture was destroyed, it was held that the defendant was liable for the loss.

In Keates v. Cadogan, (1851) 10 CP 591 case, the Court held that when the house is in a ruinous condition, there is no implied duty to inform the proposed tenant that it is unfit for human habitation and no action lies against the landlord.

In Syed Mukhtar v. rani Sunder Koer 17 C.W.N. 960 case, the Court held that a defect in the lessor’s title cannot be said to be a material defect in a property within the meaning of Section 108(a).

• Section 108 (b) lays down that the lessor is bound by the request of the lessee to give him the right of possession over his property.

In Harish Chander v. Mohinee Mohun case (1868) 9 WR 582 case, the Court held that a suit of rent will not lie when the lessee has not obtained possession.

In Munne Dutt v. William Cumpbell, (1869) 11 WR 278 case, the Court held that for in every case there is an implied contract that lessor will give peaceful possession of the land leased to the lessee.

In Pemmarazu v. The secretary of State of India, (1911) 34 Mad 108 case, the Court held that when the lessor is unable to put lessee in possession of area stipulated in the leases, he is liable to compensate the lessee by the way of damages.

• Section 108 (c) lays down that the lessor can enter into a contract with the lessee if he agrees to abide by all terms and conditions prescribed in the agreement, he can enjoy the property for the rest of the time period without any interference with an obligation to pay the rent later on.

In State Bank of Hyderabad v. Nehru Palace Hotels, AIR 1991 SC 2130 case, the Court held that a lease entails transfer of right to enjoy such property in respect of which a lease is made out for a defined time which is express or implied or even in perpetuity in consideration of price paid or promised to be paid in cash or anything of value which is to be rendered periodically or on specified occasions.

Rights of the Lessor:

Liabilities of Lessee are laid down in Sections 108(k) to Section 108(q), which can be considered as rights of lessor.

• Section 108 (l) lays down that the lessor has a right to recover the rent from the lease which was mentioned in the lease agreement.

• Section 108 (c) the lessor has a right to take back the possession of his property from the lessee if the lessee commits any breach of condition.

In Paritosh Ghosh v. Ashim Kumar Gupta, 2003 AIHC 291 (297,  298) (Cal) case, where the tenant made holes in walls for fixing air coolers, replaced brass water caps by plastic caps, in violation of leases agreement, the eviction of the tenant was held proper.

• Section 108 (m) lays down that the lessor has a right to recover the amount for damages from the lessee if there is any damage done to the property. This Section allows lessor and his agent during the term of the lease and at a reasonable time to enter upon the property and inspect its condition. The lessor is powered to give notice of any defect found and is entitled to make good, within three months after notice.

• Section 108 (q) lays down that the lessor has a right to take back the possession of his property from the lessee on the termination of the lease term prescribed in the agreement.

In Yashpal Lala Shiv Narain v. Allatala Tala Malik Waqf Ajakhan Mus, AIR 2006 All 115 (134) case, The provision in Section 108(q) of the Act in absence of any contract or local usage to contrary, overrates, is a statutory condition and is implied in every case.

In Sky Land International Pvt. Ltd. v. Kavita P. Lalwani, 2012 (191) DLT 594 (Del) case, the Court held that upon expiry of the term of the lease or termination of monthly leases by notice to quit, the lessee must vacate the property on his own and not wait for lessor to bring a suit where he can raise all kinds of contests in order to profit from Court delays.

In Santsaran v. Bankeylal Ramlal, AIR 1955 NUC 52 (MP) case, the Court held that even where the tenant has constructed a building on the land, the lessee’s obligation to restore possession to the lessor on the expiry of the leases is absolute.

In Hirabai v. Jivanlal, AIR 1955 Nag 134 (DB) case, the Court held that where the lessee wrongfully refuses to deliver possession, the lessee must pay damages to the lessor to the extent of the loss of rent suffered by latter during the period he remained out of possession.

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Law > Civil Laws > Transfer of Property Act > Liabilities and Rights of Lessor

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One of the modes of transfer of immovable property for a particular period of time is Lease. A lease is a transfer of an interest in the property for a stipulated period of time without transferring the ownership of that property. In a lease, right of possession is transferred instead of the right of ownership. Transferor here is called the lessor and the transferee i.e. the one enjoying the property for a period is called lessee. A lease is governed by the Transfer of Property Act, 1882 under Sections 105 to 117.

Section 105: Lease defined:

A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms.

Lessor, lessee, premium and rent defined: 

The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and the money, share, service or other thing to be so rendered is called the rent.

The definition of a lease is explained by the Supreme Court in the following case. In State Bank of Hyderabad v. Nehru Palace Hotels, AIR 1991 SC 2130 case, the Court held that a lease entails transfer of right to enjoy such property in respect of which a lease is made out for a defined time which is express or implied or even in perpetuity in consideration of price paid or promised to be paid in cash or anything of value which is to be rendered periodically or on specified occasions.

Essential Elements of a Lease:

Requirement of Two Parties:

There should be two parties in a lease agreement.

In Rye v. Rye, 1962A.V. 496 the Court held that a man could not grant a lease to himself.

Competency:

The lessor (The transferor, who is able to make a lease) and the lessee (The transferee) must be competent.  A lease to a minor is void. Agreement of lease is a contract. Hence it must satisfy all the criteria of a valid contract.

In Shri Narain Gosain v. Collector, Cuttack, AIR 1986 Ori 46 case, the Court held that the lessor and the lessee must also be persons who are competent to contract. A lawful agreement of lease of immovable property is a contract within the meaning of Section 10 of the Indian Contract Act, 1872.

The Lessor:

The owner or the titleholder of the leased asset or property is called the lessor. He is the transferor in the lease arrangement. He must have title or authority or absolute right of the property being transferred under leases. He must be competent to execute the lease.

In Rentala Lachaiah v. Chimmapudi Subrahmanyam, AIR 1967 SC 1793 case, the Court held that tenancy right cannot be created by a person who has no title in the property.

In Lov Raj Kumar v. Daya Shankar, AIR 1986 Del 364 (368) case, the Court opined that a person who himself is not possessed of any right or title in the property cannot pass any interest and cannot create a lease.

The Lessee:

User or renter of the leased asset or property is called lessee. He is the transferee in the lease arrangement. He must be competent to execute the lease.

Subject Matter:

The subject matter of the lease must be transfer of immovable property.

In Bengal A & I Corporation v. Corporation of Calcutta, AIR 1960 Cal 123 (133) case, the Court held that the subject matter of lease must be ascertained, and clearly defined. If the land is yet to be ascertained and carved out of a larger parcel of land, there cannot be a demise. (Demise refers to premises that have been transferred by lease, as opposed to the ‘retained parts’ which are not transferred but are retained by the landlord.)

Transfer of Right of Enjoyment:

Ownership rights are not transferred in a lease, only the possession of the property and right to enjoy such property is transferred. In a lease, there is a separation of ownership (with lessor) and possession (with lessee).

In Ramdas Bansal v.  Kharak singh Baid, 2007 (3) Cal HN 851 (858) case, the Court held that lease is a doctrine of separation of possession from ownership. By virtue of the execution of a lease deed, the title remains with lessor while the right of enjoyment passes to the lessee.

In Associated Hotels of India v. R. N. Kapoor, AIR 1959 SC 126 case, the Court opined that A lease is a transfer of an interest in the land. The interest transferred is called the leasehold interest. The lessor parts with his right to enjoy the property during the term of the leases and the lessee get that right to the exclusion of the lessor.

In Jaswant Singh Mathura Singh v. Ahmedabad Municipal Corporation, AIR 1991 SC 2130 case, the Court held that a lease creates a right or an interest in enjoyment of demised property and a tenant or a subtenant is entitled to remain in possession of the demised property until the leases are dully terminated and eviction takes place in accordance with the law.

Duration of Lease:

The lease must be made for the specific period (a certain time), express or implied or in perpetuity.

In Makali Engg. Works Pvt. Ltd. v. Dalhousie Properties Ltd. 2006 (1) Cal HN 419 case, the Court held that to execute legally binding lease agreement, one of the essential elements is that it has definite period unless it is a lease in perpetuity.

Consideration:

The consideration which may be premium or rent or both. A lease premium is a non-refundable lump sum payment made or a price paid by the tenant to the owner upon the signing of the tenancy agreement.

In NIIT v. West Star Constructions Pvt. Ltd. 2009 (2) ArbLR 535 (Del) (DB) case, the Court held that a transfer of right to enjoy a property in consideration of a price paid or promised to be rendered periodically as on specified occasion is the basic fabric for a valid lease. Such a transfer can be made expressly or by implication. Once there is such a transfer of the right to enjoy the property, a lease stands created.

Acceptance:

Lessee, who is to get the interest in the property after lease, has to accept the lease agreement along with the time period and terms & conditions imposed on the transfer.

Legal Aspect:

The lease must be created as per the provision prescribed in section 107 of the Transfer of Property Act, 1882. 

Other Case Laws:

In Vijay Kumar v. Inder Sain, AIR 1982 Del 260 Case, the Court opined that the rate of rent, duration of a lease, the purpose of letting, etc. are all governed by the terms of the contract entered into.  Thus under the ordinary law, the landlord can evict his tenant on the expiry of the period for which premises were let out.

In Ram Prakash v. Shambhu Daya Agarwal, AIR 1960 All 395 case, the Court held that a paying guest is not a tenant nor a sub-tenancy is created by inducting a paying guest. To prove sub-tenancy there must be cogent evidence that exclusive possession of premises was given.

Types of Lease of Immovable Property:

In Sky Land International Pvt. Ltd. v. Kavita P. Lalwani (2012) 191 DLT 549 (Del) case, the Court opined that the leases of immovable properties are of various types, namely, lease in perpetuity, lease for a fixed term, leave from month to month term, and tenant at sufferance.

• Perpetual Lease: A perpetual lease is a regular lease except for one aspect – the right of renewal rests with lessee (the individual who has taken the lease) and not with the lessor. 
• Term Lease: This lease is for a specific period say for 10 years or 20 years, etc.
• Periodic lease: These leases are to be renewed on monthly or yearly bases. A lease for an agricultural or manufacturing purpose is presumed to be a yearly lease. A lease for any other purpose is presumed to be a monthly lease.
• Tenancy at will: In this either party may put an end to the lease at any time.
• Tenancy by holding over (Tenant at Sufferance): When a lease for a term comes to an end, if the tenant continues in the possession and the lessor has received rent or otherwise agrees to his continuing in possession, the lease is renewed, in the absence of a contract to the contrary. The renewed lease is a periodic lease. It is yearly if the lease is for agricultural or manufacturing purposes and monthly if the lease if for any other purpose.

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Law > Civil Laws > Transfer of Property Act > Introduction to Lease

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