KES’ Shri Jayantilal H.

Patel Law College, Mumbai

Transfer Of Property By Act Of Parties

Transfer Of Property Act, 1882

A project submitted in partial fulfillment of the requirements for

The 3rd Semester of LL.B Course

Khushi R. Kothari
Second Year LL.B
Div: B
Roll No.: 12

Under the Supervision of

Prof. Shivani Negi
Date of submission – November 29, 2023

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 Table of Contents

Sr. No Topic Page No.

1 Defination and General clauses 2-8

2 Immovable and Movable Property 9

3 Sale under transfer of property 10 - 11

4 Mortgages and Charges 11 - 13

5 Lease 14 - 15

6 Exchange 15 - 17

7 Gifts 17 - 18

8 Actionable Claims 18 – 20

9 References 21

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 Transfer Of Property By Act Of Parties.

Section 5 – Definition.
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, 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
the transfer of property to or by companies, associations, or bodies of individuals.
A juristic person was defined in the case Shiromanigurudwara Prabhandak committee, Amritsar v. Sri
Somnath Dass. In this case, the court said that a juristic person can be an individual, firm, corporate
company, association, society, not including partnership firm. Any individual who can sue or be sued under
law would satisfy this requirement.
General clauses pertaining to transfer of property by act of parties :
Section 6 – What may be transferred
Property of any kind may be transferred, except as otherwise provided by the Act or by any other law for the
time being in force.
(a) The chance of an heir-apparent succeeding to an estate, the chance of a relation obtaining a legacy on the
death of a kinsman, or any other mere possibility of a like nature, cannot be transferred.
(b) A mere right of re-entry for breach of a condition subsequent cannot be transferred to anyone except the
owner of the property affected thereby.
(c) An easement cannot be transferred apart from the dominant heritage.
(d) An interest in property restricted in its enjoyment to the owner personally cannot be transferred by him.
(dd) A right to future maintenance, in whatsoever manner arising, secured or determined, cannot be
transferred.
(e) A mere right to sue cannot be transferred.
(f) A public office cannot be transferred, nor can the salary of a public officer, whether before or after it has
become payable.
(g) Stipends allowed to military, naval, air-force and civil pensioners of the government and political
pensions cannot be transferred.
(i) Nothing shall be deemed to authorize 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.
Section 7 - Persons competent to transfer.
Every person competent to contract and entitled to the transferable property, or authorized to dispose of
transferable property not his own, is competent to transfer such property either wholly or in part, and either

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absolutely or conditionally, in the circumstances, to the extent and in the manner, allowed and prescribed by
any law for the time being in force
Section 8 - Operation of transfer
Unless a different intention is expressed or necessarily implied, a transfer of property passes forthwith to the
transferee all the interest which the transferor is then capable of passing in the property and in the legal
incidents thereof.

Such incidents include, when the property is land, the easements annexed thereto, the rents and profits
thereof accruing after the transfer, and all things attached to the earth; and, where the property is machinery
attached to the earth, the movable parts thereof; and, where the property is a house, the easements annexed
thereto, the rent thereof accruing after the transfer, and the locks, keys, bars, doors, windows, and all other
things provided for permanent use therewith; and, where the property is a debtor other actionable claims, the
securities therefor (except where they are also for other debts or claims not transferred to the transferee), but
not arrears of interest accrued before the transfer; and, where the property is money or other property
yielding income, the interest or income thereof accruing after the transfer takes effect.

Section 9 - Oral transfer.

Section 9 of the transfer of property act, 1882 elaborates the concept of oral transfer. It mentions that
property may be transferred orally in cases wherein it has not been expressly mentioned that the property
must be by law transferred in writing. Writing is necessary in the following cases:

(i) Sale of immovable property having a value of more than rupees hundred. (Provided under section 54 of
the Transfer of Property Act, 1882)

(ii) Sale or reversion of other intangible things. (Provided under section 54 of the Transfer of Property Act,
1882)

(iii) Simple mortgage. (Provided under section 59 of the Transfer of Property Act, 1882)

(iv) All other mortgages are securing rupees hundred or more. (Provided under section 59 of the Transfer of
Property Act, 1882)

(v) Leases of immovable property from year to year or for a term exceeding one year or reserving a yearly
rent. (Provided under section 107 of the Transfer of Property Act, 1882 )

(vi) Exchange. (Provided under section 108 of the Transfer of Property Act, 1882)

(vii) Gift of immovable property. (Provided under section 123 of the Transfer of Property Act, 1882)

(viii) Transfer of actionable claim.(Provided under section 130 of the Transfer of Property Act, 1882)

Section 10 - Condition restraining alienation

Where property is transferred subject to a condition or limitation absolutely restraining the transferee or any
person claiming under him from parting with or disposing of his interest in the property, the condition or
limitation is void, except in the case of a lease where the condition is for the benefit of the lessor or those
claiming under him.

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PROVIDED that property may be transferred to or for the benefit of a women (not being a Hindu,
Muhammadan or Buddhist), so that she shall not have power during her marriage to transfer or charge the
same or her beneficial interest therein.

Section 11 - Restriction repugnant to interest created

Where, on a transfer of property, an interest is created absolutely in favor of any person, but the terms of the
transfer direct that such interest shall be applied or enjoyed by him in a particular manner, he shall be
entitled to receive and dispose of such interest as if there were no such direction.

Where any such direction has been made in respect of one piece of immovable property for the purpose of
securing the beneficial enjoyment of another piece of such property, nothing in this section shall be deemed
to affect any right that the transferor may have to enforce such direction or any remedy which he may have
in respect of a breach thereof.

Section 12 - Condition making interest determinable on insolvency or attempted alienation

Where property is transferred subject to a condition or limitation making any interest therein, reserved or
given to or for the benefit of any person, to cease on his becoming insolvent or endeavoring to transfer or
dispose of the same, such condition or limitation is void.

Nothing in this section applies to a condition in a lease for the benefit of the lessor or those claiming under
him.

Transfer for benefit of unborn person - Section 13

Where, on a transfer of property, an interest therein is created for the benefit of a person not in existence at
the date of 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 transfer in
the property.
Section 13 gives effect to the general rule that a transfer can be effected only between living persons. There
cannot be a direct transfer to a person who is not in existence or is unborn. This is the reason why section 13
uses the expression transfer ‘for the benefit of' and not transfer to an unborn person.
A child in the mother's womb is considered to be a competent transferee. Therefore, the property can be
transferred to a child in the mother's womb because the child exists at that time but not to an unborn person
who does not even exist in the mother's womb. Every transfer of property involves the transfer of interest.
As soon as the property is transferred, the transferor is divested of that interest and the interest is vested in
the transferee. For vesting of interest, therefore, it is necessary that the transferee must be in existence.
Otherwise, the interest will remain in abeyance till the transferee comes into existence. This is against the
very concept of an interest.
Section 13 provides that the property cannot be transferred directly to an unborn person but it can be
transferred for the benefit of an unborn person.

Pre-Requisites For A Valid Transfer Of Property To An Unborn Person

Section 13 provides a mechanism for a specific mechanism for transferring property validly for the benefit of
unborn persons. The procedure as follows:

• The person intending to transfer the property for the benefit of an unborn person should first create a
life estate in favor of a living person and after it, an absolute estate in favor of the unborn person.

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 • Till the person, in whose favor a life interest is created is alive, he would hold the possession of the
property, enjoy its usufruct i.e. enjoyment the property.
• During his lifetime if the person, (who on the day of creation of the life estate was unborn) is born, the
title of the property would immediately vest in him, but he will get the possession of the property only
on the death of the life holder.

Creation of a Prior Life Interest

As far as the creation of a prior interest is concerned, first, the property is given for life to a living person. It
is not necessary that life interest should be created in favor of only one living person. The transfer is
competent to create successive life interests in favor of several living persons at the same time.

As far as the unborn is concerned, no life interest can be created for the benefit of an unborn person. Section
13, specifically prohibits that, by the use of the expression, ‘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.

It means that the transfer must convey to the unborn person, whatever interest he had in the property,
without retaining anything with him. Thus, no limited estate can be conferred for the benefit of the unborn
person. If limited interest in the property is settled for him, the same would be void.

So, when property is transferred in favour of an unborn person, the transferor first gives a life interest to an
existing person. After transferring it, he retains with him the remaining interest of the property. This
remaining interest with the transferor must be given to the unborn so after the termination of prior life
interest, the unborn gets the whole or absolute interest in the property.

Rule against perpetuity:

It is basic rule of Transfer of Property that one must enjoy the property absolutely during his lifetime. One
cannot be deprived of his right of enjoyment in respect of the property as he like in his lifetime. The policy
of the law has been to prevent property from being tied up forever. Perpetuity is an interest, which will not
vest till a remote period. One cannot postpone the vesting of the property in the transferee beyond a certain
limit. The period for which vesting may be lawfully postponed is called: perpetuity period.

Vested and Contingent Interest (Section 19 & 21)

Where, on a transfer of property, an interest therein is created in favour of a person without specifying the
time when it is to take effect, or in terms specifying that it is to take effect forthwith or on the happening of
an event which must happen, such interest is vested, unless a contrary intention appears from the terms of
the transfer. A vested interest is not defeated by the death of the transferee before he obtains possession.

Where, on a transfer of property, an interest therein is created in favour of a person to take effect only on the
happening of a specified uncertain event, or if a specified uncertain event shall not happen, such person
thereby acquires a contingent interest in the property. Such interest becomes a vested interest, in the former
case, on the happening of the event, in the latter, when the happening of the event becomes impossible.

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Doctrine of Priority (Section 48)

This rule is based on the maxim “Qui prior est tempore potior est jure” which means that “he who is prior in
time is better in law, meaning that the subsequent dealings by the transferor of the same property cannot
prejudice the rights of the transferee of the same property (prior transferee)”.

When a transferor transfers the same property in favour of several transferees, each transferee will take the
property with the rights of the former transferee. It is also based upon the principle that no man can transfer
the title other than which he is entitled to.

Transfer by Ostensible owner (Section 41):

Transfer by ostensible owner : “Where, with the consent, express or implied, of the persons interested in
immoveable property, a person is the ostensible owner of such property and transfers the same for
consideration, the transfer shall not be voidable on the ground that the transferor was not authorised to make
it: provided that the transferee, after taking reasonable care to ascertain that the transferor had power to make
the transfer, has acted in good faith.”

Section 41 says that, following are the essential which shall keep into mind these are:

A. There is a transfer of immovable property.

B. Transfer is by Ostensible Owner.

C. Consent must be obtained from the Real Owner and it may be express or implied.

D. The transfer is for Consideration.

E. The transferee has acted in good faith.

F. The transferee (Third party) has exercised reasonable care in finding out the power of the transferor to
make the transfer.

Rule of Estoppel (Section 43)

The doctrine of feeding the grant by estoppel is based on the maxim ‘nemo dat quod nonhabet’ which
implies that ‘no one can give to another, which he himself does not possess’.

Section 43 of the Transfer of Property Act lays down “where a person fraudulently or erroneously represents
that he is authorized to transfer certain immovable property and professes to transfer such property for
consideration, such transfer shall at the option of the transferee, operate on any interest which the transferor
may acquire in such property at any time during which the contract of transfer subsists”.

Doctrine of lis Pendence (Section 52)

During the pendency in 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 property is directly and specifically in question, the
property cannot be transferred or otherwise dealt with by any party to the suit or proceeding so as to affect

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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 terms as it may impose.

Essentials of doctrine of Lis Pendence

A. Pendency of suit or proceeding.

B. Pending in the court of competent jurisdiction.

C. There is a right involved which is of immovable property.

D.Suit or proceeding must not be collusive.

E. Property in dispute must be transferred.

F. Transfer affects the right of other party.

Case Law : Bellany vs. Sabine

In this English case, it was held that, if there is any dispute regarding any property which is immovable one,
in such situation property cannot be transferred when the litigation on that property is pending in the court of
law.

Fraudulent Transfer (Section 53)

In order to attract this section, there must be a transfer. The transfer must be of immovable property. The
transfer must be a real one which creates a vested title in favour of the third party. Fictitious transfers do not
attract this section. The fictitious transfer is where the transferor remains the real owner of the
property. Hence, in order to set aside the transfer under section 53, it has to be proved that the transfer was a
real one and not a sham one.

Rule of Part Performance (Section 53A):

Doctrine of Part Performance prevents a transferor from taking any advantage on account of non registration
of documents, the provison this is that the transferee has performed his part of the contract and in pursuance
to that performance; the transferee has taken possession of some part of the property.

Case Law : D.S. Parvarthamma v. A. Srinivasan

In this case it was held that, where a person is already in possession of a property prior to contract, some act
of part-performance done in furtherance of the contract would reap benefit to the transferee.

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 Transfer of Property by act of parties

Transfer by act of parties shall include:

A. Testamentary (takes effect after death and governed by the Indian Succession Act)

B. Inter vivos (takes effect between two living persons and governed by the T.P. Act.), which includes -

1. Transfer of Property whether Moveable or Immoveable

2. Special Transfers of Immoveable Property, which includes -

i. Sales
ii. Mortgages and charges
iii. Leases
iv. Exchanges
v. Gifts
vi. Actionable claims

Immovable Property

As per Section 3(25), General Clauses Act, 1897 Immovable property shall include land, benefits to arise out
of land and things attached to the earth, or permanently fastened to anything attached to the earth.The
word property has not been defined in the Act, but it has a very wide meaning and includes properties of all
descriptions. It includes movable properties such as case, books, etc., and includes immovable properties
also such as lands or houses. It also includes intangible properties such as ownership, tenancy, copyrights,
etc.

As per Section 3, immovable property does not include standing timber, growing crop and grass. The word
standing timber includes Babool Tree, Shisham, Nimb, Papal Banyan, Teak, Bamboo, etc. The fruit bearing
trees like Mango, Mahua, Jackfruit, Jamun, etc., are not standing timber, and they are immovable properties
( Fatimabibi v. Arrfana Begum, AIR 1980 All 394).

Whether trees can be regarded as movable or immovable depends upon the circumstances of the case. If the
intention is that trees should continue to have the benefit of further sustenance or nutriment by the soil
(land), e.g., enjoining their fruits, then such tree is immovable property. But if the intention is to cut them
down sooner or later for the purpose utilising the wood for building or other industrial purposes, they would
be timber and of accordingly be regarded as movable property (Shantabai v. State of Bombay, AIR 1958
SC 532)

Movable Property

Movable property refers to property that can be moved from one place to another without causing any
change to its quality, capacity or quantity. Personal property, growing grass/crops, vehicles, books, standing
timber, etc., are a few examples of movable property.

Just the delivery of movable property with an intention to transfer it completes the process of its transfer.
Additionally, the registration of the movable property is optional under the Indian Registration Act, 1908

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 Sale – Section 54

Definition

Section 54 of the Transfer of Property Act, 1882, defines “sale” as the transfer of ownership in exchange for
a price. The term “price” is to be interpreted as a price in terms of money and not otherwise. If the transfer
involves any other kind of consideration, it is not a sale. Further, the Section also provides that the price
need not be paid simultaneously with the transfer. The price may either be paid in full or partially, or partly
paid and partly promised. The transfer will be deemed complete in all three cases. Thus, what is relevant is
not the immediate payment but the reference as to when and how the payment is to be made.

The subject matter of the sale under the said Act is immoveable properties. Section 54 includes immoveable
properties, both tangible and intangible. The tangible properties are those that are visible, such as lands,
houses, etc. The intangible properties are those that do not have a physical existence, such as copyrights,
trade secrets, the right to ferries or fisheries, or a right to mortgage debt, etc. This Section provides two
specific methods for how a sale can be made and executed. According to this Section, a sale can be
completed by a “registered instrument” in cases of

• Transfer of tangible immoveable property of the value of Rs. 100 or upwards;

• Transfer due to reversion; or,
• Transfer of intangible immoveable property.

Contract for sale

Section 54 further incorporates the concept of “contract for sale.” It is an agreement between the parties that
a sale will be effectuated in the future by executing a sale deed on mutually settled terms. In English law,
such a contract transfers an equitable estate in favour of the purchaser. However, under Indian law, a
contract for sale does not transfer any title, nor does it create a charge or interest on the property. It is merely
a promise to create a right to obtain another document, i.e., a deed of sale. Therefore, it does not require
registration, as held in the case of Dave Ramshankar Jivatram v. Bai Kailasgauri (1972). The Gujarat
High Court in this case also held that it is not enforceable in any court of law. For instance, A agreed to sell
the property to B, but they did not execute any documents. Later on, A sold the property to C. In this case, B
cannot approach the court to enforce his right to specific performance.

However, as the courts in India developed from the common law approach to equity courts in contractual
matters, this difference has become insignificant to a great extent. Various judgements have laid down that if
an overt act, such as payment of advance money, delivery of possession, or any similar act, has been done in
pursuance of the agreement, the transferee becomes entitled to obtain relief from the courts. For instance, in
the case of Kodapalli Satyanarayan v. Kondapalli Mavullu (1998), the Andhra High Court observed that
if a property has been transferred to someone other than the prior agreement holder and the subsequent
transferee has notice of the earlier transaction, then he will be deemed to hold that property in trust for the
former party.

Parties to sale

In every sale, there are always two parties. The person who transfers the property is known as the “seller,”
and the person who receives such property in exchange for monetary consideration paid by him is known as
the “buyer.” They both must be competent in the eyes of the law to effectuate a valid sale deed.

Rescission of a contract of sale

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To rescind a contract means to do away with it. Rescission is an equitable remedy that allows the contracting
parties to cancel the contract and return to the position they would have had if the contract had not been
made. A sale transaction is similar to a contract. It can also be rescinded by the parties in the same manner as
other contracts.

Rescission of a contract is governed under Sections 27-30 of the Specific Relief Act, 1963. Section 27(1) of
this Act provides the ground of rescission, which can be claimed by any person interested in the contract.

Case laws

1. Vidhyadhar v. Manikrao (1999)

The Supreme Court held that to constitute a ‘sale’ the parties must intend to transfer the ownership of the
property. The intention is to be gathered from the recitals in the sale deed, the conduct of the parties, and the
evidence on record.

2. Commissioner of Income Tax v. M/s. Motor and General Stores (1967)

The Apex Court opined that the price, in the ordinary sense connotes monetary consideration for the sale of
the property. It also observed that if some other valuable consideration is kept, the transaction is not a sale
but can be an exchange or barter.

3. The Allahabad High Court in Hakim Singh v. Ram Sanehi (2001)

It was observed that inadequacy of consideration is not a relevant factor in a sale. Even when the price or the
consideration is found by the Court to be less than the market value of the property, the sale is valid.

Mortgages and charges – Section 58

As per Section 58 of the Transfer of Property Act, 1882, a Mortgage is defined as

A mortgage is the transfer of an interest in immovable property for the purpose of securing the payment of
money advanced, an existing or future debt or the performance of an engagement which may give rise to a
pecuniary liability.

Meaning

A mortgage is a transfer of an interest in immovable property and it is given as a security for a loan. The
ownership of an immovable property remains with the mortgagor itself but some interest in the property is
transferred to the mortgagee who has given a loan.

Essential conditions of a mortgage:

1. There is a transfer of interest to the mortgagee.

2. The interest created in specific immovable property.
3. The mortgage should be supported by consideration.

Types of mortgages as per section 58

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1. 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.
2. 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: 1[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.
3. 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.
4. 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. 4[(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 8[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 immoveable property, with intent to create a security thereon,
the transaction is called a mortgage by deposit of title-deeds.
5. 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.

Charge - Section 100

Where immovable property of one person is by an act of parties or operation of law made security for the
payment of money to another, and the transaction does not amount to a mortgage, the latter person is said to
have a charge on the property; and all the provisions hereinbefore contained which apply to a simple mortgage
shall, so far as may be, apply to such charge.

The parties themselves create a charge by entering into an agreement. No particular form of words or
language is required to create a charge. It will be sufficient to create a charge if it can be seen from the
document that there is a clear intention to use the property as a security for the payment of the money, without
transferring any interest or right in the property. The remedy of the holder of the charge is against the property
charged only.

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For example- A inherited a property from his grandmother. He receives a certain amount of rent from that
property. Now on his own volition, he executed an agreement to pay a certain portion of the rent to B. B will
have a charge over the said property.

Types of Charge

Fixed Charge

∙ The charge is created over ascertainable assets i.e. land, building, machinery, goodwill, copyright etc.
∙ At the time of the creation of the charge, there is a clearly specified and defined property, the identity
of which doesn’t change during the period of the loan.
∙ In such an arrangement, the borrower is only left with the possession of the asset and the lender has
full control over the asset.
∙ The borrower doesn’t have the right to sell, transfer or dispose of and prior permission is required.
∙ There is an obligation to pay off the due amount first.

Floating Charge

∙ The charge is created over unascertainable assets i.e. assets, vehicles, debtors, etc.
∙ It is dynamic in nature i.e. the value and quantity fluctuate periodically.
∙ The borrower has the right to sell, transfer or dispose of and no prior permission is required.
∙ No obligation to pay off the due amount first.

Crystallization is a process in which the floating charge is converted into a fixed charge. It generally occurs
when:

i. The borrower defaults on payment and the lender takes action to recover the debt.
ii. At the time of winding up of the company.
iii. The company ceases to exist or carry on the business.
iv. Appointment of a receiver by court.

Registration of Charges

Under section 77 of the Companies Act, 2013 every company creating a charge shall register the particulars
of the charge signed by the company and its charge-holder together with the instruments created. Therefore
all types of charges are required to be registered in accordance with the Act, whether created within or
outside India.

A company must file with the Registrar detailed information of the charge, along with the Charge Instrument
or its authenticated copy, in respect of certain charges, within 30 days of the creation of a charge. If it is not
filed, it shall be void against the liquidator and any other creditor of the company. This does not, however,
mean that the charge is altogether void and the debt is not recoverable. So long as the company does not go
into liquidation, the charge is good and maybe enforced.

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 Lease - Section 105

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.

Essential elements of a Lease

The following are the essential ingredients to constitute a ‘valid lease’ of an immovable property:

i. The parties to the lease i.e., lessor and lessee, are necessary. Lease is based on an agreement between
parties competent to contract. A lease granted by minor is void. The parties should be competent to
enter into a contract. A lease granted by minor is void.
ii. The Demise: Lease is a transfer of an interest (right of enjoyment) in an immovable property. It is a
transfer of limited estate and this limited estate or right of enjoyment, is called demise.
iii. Duration of lease: The interest which is created in the property could be for a specified period or even
in perpetuity. The parties to the lease are free to decide the duration of the lease i.e., the duration can
be relaxed at the option of the parties.
iv. Consideration: There should be a valid consideration paid to the lessor by the lessee, either
periodically or on specified occasions.

Duration of the lease in the absence of lease agreement

Section 106 of the Act lays down that in the absence of a contract, both the parties can end the lease by
issuing a notice to quit. The date when the notice to quit is received the prescribed time period
commences. This notice should be written and conveyed to the party and the party is required to abide by it.
The period of the lease is only where there is no agreement expressly laid down in the lease.

In the case, Shanti Prasad Devi v. Shankar Mahto, the expiry before term and its subsequent renewal was
provided in the agreement of lease. The apex court held that mere acceptance of rents on expiry of the period
of lease would not amount to as an assent to the continuance of lease.

This section has classified the lease into two categories to ascertain the term of a lease:

1. When a lease is made for agricultural or manufacturing purpose and is deemed to be of year, then it will
attract a 6-month notice regarding the end of the lease on the expiry of 1 year.
2. When a lease is made for some other purpose and is deemed to be of month to month, then it will attract a
15-day notice regarding the end of the lease on the expiry of 1 month.

Term of Lease

Section 107 of the Transfer of Property Act, 1882, provided for the two modes of creation of leases

(a) Leases which can be made only by registration and

(b) Where registration is optional.

In the event, the same is not made through a registered instrument, then, contrary to what is mentioned in the
said lease, the duration of the lease will be assumed to be of a month, and the same may be terminated by

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either party by providing a fifteen days’ notice. However, in case the term is less than a year, then the said
lease may be made either by oral agreement accompanied by delivery of possession of the immovable
property, or by a registered instrument.

A lease of immovable property from year to year, or for any term exceeding one year or reserving a yearly
rent, can be made only by a registered instrument. All other leases of immovable property may be made
either by a registered instrument or by oral agreement accompanied by delivery of possession.

Where a lease of immovable property is made by a registered instrument, such instrument or, where there are
more instruments than one, each such instruments shall be executed by both the lesser and the lessee.

Provided that the State Government may from time to time, by notification in the official Gazette, direct that
leases of immovable property, other than leases from year to year, or for any term exceeding one year, or
reserving a yearly rent, or any class of such leases, may be made by unregistered instrument or by oral
agreement without delivery of possession.

In simpler words, Section 107 of the Act covers three aspects:

1. Registered Deed: When the lease of immovable property is for a term of 1 year or more.
2. Other leases of immovable property can be either made by a registered deed or by an oral
agreement accompanied by the transfer of possession.
3. A lease will be made by both the parties when the lease is of multiple properties that require
multiple deeds.

The court in the case, Punjab National Bank v. Ganga Narain Kapur held that the provisions of Section
106 of the Act will apply if the lease is done through an oral agreement.

Exchange

Section 118 Of the Transfer Of Property Act, 1882 defines exchange as :

when two persons mutually transfer ownership of one thing for the ownership of another, neither thing or
both things being money only, the transaction is called an “Exchange”. From above we understand that for
being an “Exchange”; i. There must be two people transferring ownership of one thing for the ownership of
another; ii. Neither thing or both things are money only.

There may be both immovable or movable property, which can be transferred through exchange. In some
cases where the transfer of ownership of a property along with some money against some ownership of
another property happens, it also comes under the definition of exchange.

Features Of Exchange;

1. Transfer of ownership; Exchange involves transfer of ownership in some existing property. In the
transfer of ownership, the absolute interest of the owner is transferred. A partition of immovable
property is not considered an exchange.
2. Property need not be immovable property; In Exchange, properties may be immovable or movable. An
immovable property can be transferred against a movable property and vice versa.

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 3. Exchange includes “Barter”; the Exchange of one immovable property with another immovable property
is known as “Barter” and the same in case of transfer of one movable property against another moveable
property.
4. Mode of Transfer;
i. Section 118 provides that a transfer of property in completion of an exchange can be made only in a
manner prescribed for the transfer of such property by “Sale”. The formalities of Section 54
(dealing with sale of properties) will be complied with;
ii. Where both properties are of movable, then exchange may be affected by the delivery of properties
and registration is not essential;
iii. Where properties are immovable, but the value is less than Rs. 100, then registration is optional;
iv. Where the properties exchanged are immovable properties and their value is more than Rs. 100/-
then registration of exchange of ownership through an instrument is necessary.

It is necessary that the Deed of Exchange is a valid contract and not void under the Contract Act. Suppose
persons are exchanging ownership of their properties to hide act of crime or financial crime or benami
properties then the instrument of exchange becomes void. [ Srihari Jena Vs. Khetramohan Jena, AIR
(2002) Orissa 195; 2002 (4) Civ LJ 279].
When in an exchange of properties one party did not get possession of the property he was entitled to receive
in exchange, he was held entitled to return property transferred by him. Hari Shankar Mishra Vs. Vice
Chairman, Kanpur Development Authority, AIR 2001 All 139;2001(42) ALL LR 839.
Balakrishnan Bhagwanji Lodi Vs. Prakash Sheshrao Lodi, AIR 2005 NOC 89(Bombay); it was held
that in case of partition of joint family property, once partition is affected, whether by way of family
arrangement or deed of partition, there is severance of jointness of properties. Two brothers thereafter
exchanged properties which were held by them seperately. The properties being worth more than Rs. 100/- in
value. They could exchange them only through registered instruments.

Right Of A Party Deprived Of Thing Received In Exchange - Section 119 of the Transfer of Property
Act, 1882

If any party to an exchange or any person claiming through or under such party is by reason of any defect in
the title of the other party deprived of the thing or part of the thing received by him in exchange, then, unless
a contrary intention appears from the terms of the exchange, such other party is liable to him or any person
claiming through or under him for loss caused thereby, or at the option of the person so deprived for the
return of thing transferred, if still in the possession of such other party or his legal representative or a
transferee from him without consideration.
From above we understand that if a party has been deprived from the thing, whose ownership has been
transferred in exchange due to the defective title of the other party, he has two remedies under Section 119;
i. He can recover for compensation for loss suffered by him;
ii. He can take back things transferred by him.

Note: The second remedy is available only in below mentioned cases; i. Where property is still in
possession of the other party, or ii. In possession of his legal representatives, or

i. Where property is still in possession of other party, or

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 ii. In possession of his legal representatives, or
iii. A transferee from him without consideration.
iv.

Case Study

Jattu Ram Vs. Hakama Singh, AIR 1994 SC 1653; 1994 where there was a defect in the title of land
received by one party to exchange due to false entries made by patwari and the party was deprived from
some portion of land as per Deed of Exchange. It was held by Supreme Court that entries made by patwari
in the official records do not create title, therefore the opposite party was liable to return land(property) to
theextent.

Gift – Section 122

Section 122 of Transfer of Property Act defines a gift as the transfer of an existing moveable or immovable
property. Such transfers must be made voluntarily and without consideration. The transferor is known as
the donor and the transferee is called the donee. The gift must be accepted by the donee. This Section
defines a gift as a gratuitous transfer of ownership in some property that is already existing. The definition
includes the transfer of both immovable and moveable property.

Essential elements of gift :

There are the following five essentials of a valid gift:
i. Transfer of ownership
ii. Existing property
iii. Transfer without consideration
iv. Voluntary transfer with free consent
v. Acceptance of the gift

Modes of making a gift

Section 123 of the Transfer of Property Act deals with the formalities necessary for the completion of a gift.
The gift is enforceable by law only when these formalities are observed. This Section lays down two modes
for effecting a gift depending upon the nature of the property. For the gift of immovable property,
registration is necessary. In case the property is movable, it may be transferred by the delivery of possession.
Mode of transfer of various types of properties are discussed below:

Immovable properties
In the case of immovable property, registration of the transfer is necessary irrespective of the value of the
property. Registration of a document including gift-deed implies that the transaction is in writing, signed by
the executant (donor), attested by two competent persons and duly stamped before the registration
formalities are officially completed. In the case of Gomtibai v. Mattulal, it was held by the Supreme Court
that in the absence of written instrument executed by the donor, attestation by two witnesses, registration of
the instrument and acceptance thereof by the donee, the gift of immovable property is incomplete.

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The doctrine of part performance is not applicable to gifts, therefore all the conditions must be complied
with. A donee who takes possession of the land under unregistered gift-deed cannot defend his possession on
being evicted. The following must be kept in mind regarding the requirement of registration:

Registration of the gift of immovable property is must, however, the gift is not suspended till registration. A
gift may be registered and made enforceable by law even after the death of the donor, provided that the
essential elements of the gift are all present.
In case the essential elements of a valid gift are not present, the registration shall not validate the gift.
It has been observed by the courts that under the provisions of the Transfer of Property Act, Section 123,
there is no requirement for delivery of possession in case of an immovable gift. The same has been held in
the case of Renikuntla Rajamma v. K. Sarwanamma that the mere fact that the donor retained the right to
use the property during her lifetime did not affect the transfer of ownership of the property from herself to
the donee as the gift was registered and accepted by the donee.

Movable properties
In the case of movable properties, it may be completed by the delivery of possession. Registration in such
cases is optional. The gift of a movable property effected by delivery of possession is valid, irrespective of
the valuation of the property. The mode of delivering the property depends upon the nature of the property.
The only things necessary are the transfer of the title and possession in favour of the donee. Anything which
the parties agree to consider as delivery may be done to deliver the goods or which has the effect of putting
the property in the possession of the transferee may be considered as a delivery.

Actionable claims
Actionable claims are defined under Section 3 of the Transfer of Property Act. It may be unsecured money
debts or right to claim movables not in possession of the claimant. Actionable claims are beneficial interests
in movable. They are thus intangible movable properties. Transfer of actionable claims comes under the
purview of Section 130 of the Act. Actionable claims may be transferred as gift by an instrument in writing
signed by the transferor or his duly authorised agent. Registration and delivery of possession are not
necessary.

A gift of future property

Gift of future property is merely a promise which is unenforceable by law. Thus, Section 124 of the Transfer
of Property Act renders the gift of future property void. If a gift is made which consists of both present as
well as future property, i.e., one of the properties is in existence at the time of making the gift and the other is
not, the whole gift is not considered void. Only the part relating to the future property is considered void.
Gift of future income of a property before it had accrued would also be void under Section 124.

Actionable Claim

Section 3 of the Transfer of Property Act, 1882 defines "actionable claim as "'actionable claim' means a
claim to any debt, other than a debt secured by mortgage of immovable property or by hypothecation or
pledge of movable property, or to any beneficial interest in movable property not in the possession, either
actual or constructive, of the claimant, which the Civil Courts recognise as affording grounds for relief,
whether such debt or beneficial interest be existent, accruing, conditional or contingent."4

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Thus, as per this section, an actionable claim is a claim to:
i) "any unsecured debt, or
ii) any beneficial interest in a movable property that is not in the claimant's possession, either actual or
constructive."
The two above-mentioned claims are aptly recognised by the Courts to afford relief. Apart from these two,
there are other kinds of claims as well that are actionable in nature and can afford relief. A claim for secured
debt, tortuous suits of nuisance or defamation, etc., is an example of such claims. However, these are not
covered under the definition of actionable claims as provided under the Transfer of Property Act, 1882.
In order to understand what all constitutes an actionable claim, a proper perusal of "unsecured debt" and
"beneficial interest in movable property" needs to be undertaken.

General Principles
Ss. 130 to 137 of Chapter VIII of the Transfer of Property Act, 1882 deal with the transfer of actionable
claims.This Chapter provides general principles that must be borne in mind while transferring actionable
claims.

S. 130: Transfer of Actionable Claim

This section states that an actionable claim can be transferred:
i) "with or without consideration
ii) by way of an instrument in writing duly signed by the transferor or his agent duly authorised in this
respect."
Thus, oral transfer of actionable claims is not permitted. However, its registration is not necessary, and no
separate instrument of transfer is to be effected.
Example: an endorsement of the promissory note transferring the actionable claim is sufficient.
When he puts his signature or thumb impression on the instrument, it executes the actionable claim. On such
transfer, the transferee of an actionable claim gets all the transferor's rights, liabilities, and remedies. The
transferee can enforce it without the need to take the consent of the transferor or make him a party to the suit
thereto. He can sue in his own name.
Marine and fire insurance and S. 38 of the Insurance Act, 1938 are exempted from the application of this
provision. This is attributable to the fact that the mere assignment of these insurance policies does not
amount to entitling the transferee to the ownership of the subject matter insured.

S. 131: Notice to be in writing, signed

The notice is not necessary to ensure the perfection of the transferee's title of actionable claim. However, the
dealings of the debtor with the creditor are protected until the former receives the notice of such an
assignment in observance of the conditions enumerated under S.131 of the Act. It states that:
i) The notice of transfer of the actionable claim has to be made in writing.
ii) It must be signed by the transferor or his agent authorized on his behalf.
iii) However, if the transferor refuses to sign it, then, in that case, it must be signed by the transferee of the
actionable claim or his duly authorized agent.
The Hon'ble Apex Court has clarified that S. 131 of the Act does not prescribe any time limit for the service
of notice. It must be within a reasonable period of time and unconditional.

S. 132: Liability of Transferee of Actionable Claim

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The principle behind this section is that the transferee gets no better title than the transferor. Thus, the
transferee takes all the equities and also the liabilities of the transferor to which the latter was subject at the
time of such assignment.

S. 133: Warranty of Solvency of Debtor

In the case of the assignment of a debt, the transferee runs the risk of losing the claim when the debtor
becomes insolvent. Therefore, as a precaution, the transferor of the actionable claim warrants the solvency of
the debtor at the date of assignment. But this is subject to a contract to the contrary. Further, it is limited only
to the amount or value of the consideration for which it is transferred.

S. 134: Mortgaged Debt

Since an actionable claim is a property, its transfer by way of a mortgage is possible. When one debt is
transferred to cover another debt, whether existent debt or future debt, it is referred to as a transfer of
actionable claim by way of a mortgage. This section provides the below-mentioned preposition under which
the amount so realized could be appropriated.
i) the debt received by the transferor or recovered by the transferee is to be applied in payment of the cost of
such recovery.
ii) it is to be applied towards satisfaction of the amount secured by the transfer.
iii) if any residue remains after the above-mentioned payments, the remainder is to be given to the transferor.

S. 135: Assignment of Rights under Policy of Insurance against Fire

This provision was inserted by the Amendment Act of 1944. It states that the asignee of fire insurance policy
in whom the property of the subject matter of policy is absolutely vested at the date of assignment, it would
have the effect of transferring and vesting in him all the rights to sue just as if the insurance policy was
entered into by him.

S. 136: Incapacity of Officers Connected with Courts of Justice

The persons mentioned under this section are not legally qualified to make transfers of actionable claims.
The object behind this disqualification of "Judges, legal practitioners and officers connected with Courts of
Justice" is to ensure that the judiciary remains impartial. The observation of the Privy Council is relevant in
this regard: "It is of great importance that no officer of a Court of Justice should be even exposed to the
suspicion that in the discharge of his official duties, his conduct may be influenced by any personal
consideration.

S. 137: Saving of Negotiable Instruments

Furthermore, this Chapter is not applicable to negotiable instruments and other instruments mentioned
thereunder. This is because they are governed by other laws and statutes.

Example: Negotiable instruments are governed under S. 137 of the Negotiable Instruments Act, 1881.
Therefore, for a valid transfer of actionable claim, transferor and transferee both must be qualified and
competent to effectuate such transfer. The property so transferred should be transferrable within the
provisions of S. 6 of the Act.

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 Referances

∙ Manupatra https://articles.manupatra.com/
∙ IndianKanoon
∙ Ipleaders
∙ Legalservicesindia.com
∙ Transfer of Property Act, 1882
∙ India Code

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