There are various modes of transferring the immovable property, but most
frequently used mode is sale. Any sale or purchase has to conform to certain
legal requirements. The Indian Contract Act 1862, and Transfer of Property Act
1882 are two important Acts governing the transfer of immovable property. The
words 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.
Essentials of Valid
Contract
The agreement for sale is contract. It has to comply with
the stipulations of Indian Contract Act. The Act stipulates that any contract
has to be made between the parties competent to contract. The competent parties
are the persons who have attained the age of majority. The persons who have
completed the age of eighteen 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 time being, like insolvency Act etc. Though the parties are
majors 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 out of 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, misrepresentation or mistake. If the consent is not free
it is not void but voidable. There is subtle difference between void and
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 the 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 to the property. The sections 10 & 11 of Indian
Contract Act deal with the above points.
Essentials of Valid
Transfer
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. We may add here that a minor cannot
transfer any property, but he can be transferee, he may purchase, receive the
property.
Transfer by persons other than owner
Apart from the discussed requirements of valid contract
and valid transfer, the most important is the title of the transferor should
have legal marketable title to the property. A person having a defective or no
title to the property cannot pass on a better title to 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 :
- Ostensible
owner.
- Unauthorised person who subsequently acquires valid
title.
- The person authorized under certain circumstances only.
We shall discuss each of the above.
Ostensible Owner :
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 acts as an owner of some immovable property with the consent
of the real owners any transfer by such ostensible owner is valid. The consent
by the real owner may be expressed in the form of writing or may be implied;
where the action of real owner makes the purchaser to believe that the
ostensible owner has consent. Other requirements are that the transfer is for
consideration and the purchaser has exercised reasonable care to ascertain that
the ostensible owner has power to transfer that 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 the transferee cannot be
expected to make any searching enquiry in the absence of any ground for
suspicion that the transferor may not be the real owner. The standard and
nature of the necessary enquiry by the transferee must therefore vary according
to the different 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 26ALL, 490 “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 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.
Transfer by unauthorized person, who subsequently
acquires interest in property transferred. 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 owners 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 (seller)gets valid title. Such transfer is also valid. The relevant section 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 for consideration.
C. The transferee has not rescinded that 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 the subsistence of contract.
The use of word “option” in 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 unauthorized 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.
Transfer by persons having limited powers :
Various laws have prescribed limited rights to certain
individuals to transfer that property, though they are not owners. Such
transfers have to be done only under special circumstances enunciated in
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 power of sale only for compelling and
legal necessities. If these persons as transferors allege the existence of such
circumstances and the transferee has made and inquiry and after using
reasonable care has acted in good faith, then transferee will get a good title
to the property.
In case of sale of minor's property by his natural or
legal guardian is that there should be a legal necessity for the transfer
itself and court permission is necessary for any 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 a transfer of such property without enquiring into 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.
Sec 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 and settle any other claims if he has
notice of such rights or claims. In case if such transfer is gratuitous such
rights or claims can be enforced against transferee.
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