There are various modes of
transferring the immovable property, but most frequently used mode is sale.
Every sale or purchase of property has to conform to certain legal requirements. The Indian Contract Act 1862 and Transfer of Property Act 1882
are two important Acts. The word seller, vendor, purchaser, vendee are used to
describe the parties. In general, the word transferor is used to refer to the owner of the property or his authorized representatives. The word transferee
means the purchaser.
An agreement for sale is a
contract. It has to comply with the stipulations of Indian Contract Act. The
Act stipulates that the contract has to be made between parties who are
competent to contract. The competent parties are the persons who have attained
the age of majority. The persons who have completed age of 18 years are majors.
Apart from attaining majority, the parties should be of sound mind and not
disqualified by provisions of any law in force for the time being, like
insolvency Act etc. Though the parties are major and of sound mind, if they are
disqualified under provisions of any law in force, they are not competent to
contract.
The parties to contract should
agree to the terms of contract with free consent. Consent means, agreement of
the parties upon the same thing in the same sense. Consent is said to be free,
when it is not caused by compulsion, force, undue influence, coercion, fraud,
misrepresentation or mistake. If the consent is not free the contractor is not
void but voidable. The contract is said to be voidable, if the parties to the
contract have an option to cancel the contract or to abide by it. Contract is
void, if it is not enforceable by the parties as per the provisions of law. In
case of void contract, the parties have no option, as the law treats such
contracts as void. If the sale of immovable property is not out of free
consent, the seller has an option to treat the sale as valid, or invalid, and
the title of the purchaser is subject to the option exercised by the seller.
Other important ingredients of valid contracts are, the lawful consideration
and for lawful object. In case the transfer of immovable property is made for
illegal consideration and for illegal object, the transfer is void, that is law
treats such transfers as illegal and parties have no option. The transferee
does not get any legally valid title over the property. Sections 10 and 11 of
Indian Contract Act deal with the above aspects.
The Transfer of Property Act 1882
has prescribed certain conditions for legally valid transfer under section 5.
The conditions are that, both the parties must be living; the transfer may be
either in present or future. The word living persons means legal persons, which
includes a company, association and body of individuals. A minor cannot
transfer any property, but he can be transferee, he may purchase, receive the property, through his guardian.
Apart from the above requirements
of valid contract and valid transfer, the most important is the title of the
transferor to the property. The transferor should have legally marketable title
over the property. A person having a defective or no title to the property
cannot pass on a better title to the purchaser than what he has, and the
purchaser will acquire defective or no title.
There are certain exceptions to
this, which are dealt in Transfer of Property Act. They are transfer by:
a) Ostensible owner.
b) Unauthorized person who
subsequently acquires valid title.
c) The person authorized under
certain circumstances only.
We shall discuss each of the
above.
Section 41 of the Act deals with
the transfer of immovable property by ostensible owner. The word ‘ostensible’
is described in the dictionary as apparent, stated or claimed but not
necessarily true. In simple words, “appears like to be an owner but not truly an
owner”. But the Act differentiates between a person who poses as owner to
defraud the purchaser and a person who act as owner with the free consent of
the owner. If some person acts as an owner of some immovable property with the
consent of the real owner any transfer by such ostensible owner is valid. The
consent by the real owner may be expressed in writing or may be implied; where
the action of real owner makes the purchaser to believe that the ostensible
owner has his consent. The other requirement are that the transfer is for
consideration and the purchaser has exercised reasonable care to ascertain that
the ostensible owner has power to transfer the property and has acted in good
faith. Reasonable care means the care that a man of average intelligence takes
without negligence.
In some cases, if the ostensible
owner is in possession of the property and he also produces the title deeds,
then the transferee cannot be expected to make any searing enquiry in the
absence of any ground for suspicion that the transferor may not be the real
owner. The standard and nature of enquiry by the transferee shall therefore
vary according to the circumstances of each case.
To understand the extent of care
required to be taken by the transferee, it will be useful to refer to the case
of Khwaja Muhammad Khan V/s. Muhammad Ibrahim (ILR 26 ALL, 490) wherein it has
been observed “It is manifest that the
transferee need not make a very detailed enquiry in order that he may be said
to have taken reasonable care unless there are some circumstances or clue which
should lead him as an ordinary man of business to make a full enquiry so as to
satisfy himself with a reasonable amount of certainty that his transferor is
entitled to make the transfer”.
The transferee must act in good faith.
The General Clauses Act defines “good faith” as 'A thing shall be deemed to be
done in good faith where it is in fact done honestly whether it is done
negligently or not. The Limitation Act prescribes higher standard as it defines
good faith as “nothing is seemed to be done in good faith, which is not done
with due care and attention.
This is slightly a different
situation from a transfer by ostensible owner. Here the transferor is not
ostensible owner, does not have consent of the owner to act as owner. The
transferor fraudulently or erroneously represents that he is authorized to
transfer the property. But, subsequent to such transfer, the transferor gets
valid title. Such transfer is also valid. The relevant Sec. 43 of the Transfer
of Property Act 1882 stipulates certain conditions.
a) The transferor erroneously /fraudulently represents that he is authorized to transfer the immovable
property.
b) The transfer is for
consideration.
c) The transferee has not
rescinded the contract, opts for transfer.
d) There are no other transferees
for consideration, who have acted in good faith and not aware of existence of
such option / transfer.
e) The transferor subsequently
acquires title in the immovable property transferred during subsistence of the contract.
The Act has given various
remedies to the purchaser; he may cancel the contract, and elect to ask for
damages or get the property transferred to him. The important thing is that the
transferor, who was unathorised to transfer the property, acquires the title in
same property transferred subsequently. If the transferor does not get any
title during the subsistence of contract, the section does not apply.
Example : 'A' transfers property
to 'B' by falsely representing that he is owner of property. Later 'A' acquires
that property, then 'B' has right to take the property as transferee without
further act on the part of the transferor.
Various laws have prescribed
limited rights to certain individuals to transfer the property, though they are
not owners. Such transfers have to be done only under special circumstances
enunciated in the respective laws. Section 38 deals with this situation. Some
of such persons are
- The Kartha of a mitakshara
family
- Executor
- a mortgagee
- a guardian of minor's property
These persons have the power to
sell only under compelling circumstances and to sell legal necessities. If
these persons as transferors allege the existence of such circumstances and the
transferee has made an inquiry and after using reasonable care has acted in
good faith, then transferee will get a good title over the property.
In case of sale of minor's
property by his natural or legal guardian there should be a legal necessity for
the transfer and the court’s permission is necessary for such sale. The burden
in all such cases is laid on the transferee to justify the transfer in his
favour. The reason for this rule is that, no transferee of immovable property
can safely take transfer of such property without enquiring in to the title of
the person who is his proposed transferor. If the latter's title is perfect,
then the question of enquiry becomes immaterial. But if it was dependent upon
variable circumstances, then the transferee must justify his transfer.
In case of wife and children of
transferor has right to maintenance over the transferred property, then such
wife and children are entitled to enforce right to maintenance against such
transferee on the transferred property, u/s 39 of Transfer of Property Act. But
this right is not exercisable against transferee for consideration and in cases
where transferee does not have notice of such right.
Section 39 of Transfer of Property Act provides that a person shall not transfer the immovable property
without the concurrence of wife and children who have a right to receive
maintenance or a provision for advancement or marriage for the profits of
immovable property. In case such property is transferred without concurrence it
is not that transferee will not get a title, he will get a title but he is
liable to give maintenance, from the profits of immovable property, which he
acquired to settle all other claims if he has notice of such rights or claims.
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