Law of Property

Matters relating to property are governed by the Transfer of Property Act, 1882 in India. The object of the Transfer of Property Act (TPA) is to regulate the transfer of property between living persons. It shall also serve as the code of contract law governing immovable property. The Transfer of Property Act, 1882 provides clarity on the subject: it is a systematic and uniform law on the transfer of immovable property in India.

Types of Property: Movable and Immovable

The term 'Property' or the term Transfer of Property are not defined in the Act. Though not defined, the word 'property' has been used in a broad sense throughout the Act. Every interest or right that has an economic value denotes property. Property is of two kinds - movable and immovable. Movable property is one which can be transferred from one place to another and is governed by the Sale of Goods Act.

Immovable property governed by the Transfer of Property Act is not defined in the Act. However, under Section 3, immovable property does not include standing timber, growing crops or grass. Immovable property includes lands, buildings and benefits arising out of land and things attached to the earth. In simple words, any property that is attached to the earth and cannot be transferred from one place to another is called immovable property.

In Shanta Bai v. State of Bombay (1958 SC 532), the distinction between movable and immovable property was observed. If the intention is to reap fruits from the trees, then it is regarded as an immovable property. But if the intention is to cut down the tree and use it as timber, it would be regarded as movable property.

In Marshall v. reen (33 LT 404), there was sale of trees wherein the trees were cut and taken away. The Court held that the sale was not that of immovable property.

Transfer of Property

Who can transfer property?

Any person who is competent to contract (person above 18 years of age, having sound mind and not disqualified by any law in force) and authorized to dispose off property viz., owner of the property or any person authorized to sell the property, can make a transfer. The person who Transfers the property is called the Transferor and the person to whom the transfer is made is called the Transferee.

How can property be transferred?

The mode of transfer of property varies according to the value of the property. If the value of the property is more than Rs.100/-, then transfer has to be made only by a registered instrument. If the property is tangible and the value of the property is less than Rs.100/-, irrespective of the value of the property, then transfer has to be made only by delivery; whereas for intangible property, irrespective of the value of the property, transfer has to be made only by registered instrument. A registered instrument contains the records of the owner of the property - for example: shares, bonds, etc.

A registered instrument has to be attested at least by two persons who are parties to the transfer. Attestation means affixing the signature in the registered instrument. The witnesses should mark their signature too on the instrument with an intention to attest. Registration of the instrument is an essential legal formality.

During registration, the parties to the transfer must be present to affix their signatures in the document and complete the transaction with regard to immovable property. While doing so, the document containing the rights, obligations and liabilities of the parties should be clearly mentioned in the document which is registered. Registration shall take place by affixing a seal of the Registrar office which shall be subsequently included in the official records.

Essentials for a Valid Transfer

The following are the essentials for a valid transfer:

  • In a transfer of property, the transfer should be between two or more living persons.
  • The property that is going to be transferred should be free from encumbrances (hindrances of any form) and be of a transferable nature.
  • The transfer should not be:
    • for an unlawful object or an unlawful consideration.
    • involving a person legally disqualified to be a transferor or transferee.
  • The transferor who transfers the property must:
    • be competent to make the transfer;
    • be entitled to the transferable property;
    • be authorized to dispose off the property if the property is not his own property.
  • The transfer should be made according to the appropriate mode of transfer. Necessary formalities like registration, attestation, etc. should be complied with.
  • In the case of a conditional transfer, where an interest is created on the fulfilment of a condition, the condition should not be illegal, immoral, impossible or opposed to public policy.

Doctrine of Election

According to the principle of Doctrine of Election (Section 35 of the TPA), a party to the transfer cannot accept as well as reject in a single transaction. In other words, while claiming advantage of an instrument, the burden of the instrument should also be accepted. If a person to the transfer gets two selections (a benefit and a burden), then he has to accept both the benefit and the burden or none. He cannot accept the benefit and reject the burden in a single transaction.

Illustration: A sells his garden as well as his house through one instrument to B. Whereas, B wants to retain only the house and wants to cancel the transfer regarding the garden. According to the Doctrine of Election, B has to retain the garden if he wants to retain the house, or cancel the whole transaction. B cannot retain the house and cancel the transfer regarding the garden.

In Cooper v. Cooper 1874, LR 7 HL 53, the Court held that the doctrine of election applied on every instrument and all types of property. 

Doctrine of Lis Pendens

The Doctrine of lis pendens emerged from the Latin maxim 'ut lite pendent nihil innoveteur' meaning 'nothing new should be introduced in a pending litigation'. 

When a suit or litigation is pending on an immovable property, then that immovable property cannot be transferred. To constitute lis pendens, the following conditions should be satisfied:

  • A suit or proceeding involving the immovable property should be pending
  • The right to the immovable property must be in question in the suit or proceeding
  • The property in litigation should be transferred
  • The transferred property should affect the rights of the other person to the transfer

Illustration: A has a litigation in determining the title of the property with X. During the period of litigation, A initiates a sale of the property in favour of B. According to the Doctrine of Lis Pendens, the property cannot be sold because the property is involved in litigation. 

Sale

Sale means a transfer of ownership (right to possess something) of the property in exchange for a price (money) (Section 54 of the TPA). Seller is the person who transfers the property and buyer is the person to whom the property is transferred. The consideration in a sale is usually money.

Illustration: A sells his house for Rs. 2 lakhs to B. This is called sale. Here, A is the seller and B is the buyer. Rs. 2 lakhs is the consideration which is money.

The following are the essentials for a sale to be valid:

  • There should be two different parties - the seller and the buyer
  • Both the parties should be competent to transfer
  • The property to be transferred should be in existence
  • Consideration for the transfer should be money
  • The contract should be in accordance with law

Liabilities sf Seller:

  • Disclose defects of the property which is known to the seller and is not known to the buyer
  • Produce to the buyer all documents of title (documents regarding ownership) relating to the property
  • Answer all the questions put to him by the buyer in relation to the property
  • Take care and preserve the property and the documents of title between the date of the contract of sale and the delivery of the property
  • Bear all public charges and rent with regard to the property up to the date of sale
  • To give the buyer possession of the property

Rights of Seller:

  • Collect the rents and profits of the property till the ownership passes to the buyer
  • When ownership has passed on to the buyer from the seller before payment of money in full, claim the amount from the buyer that is due to him

Liabilities of Buyer:

  • Disclose to the seller any fact with regard to the property that will increase the value of the property that is known to him
  • Pay to the seller purchase money at the time of completing the sale
  • To bear any loss that arises from the destruction, injury or decrease in value of the property after the ownership has passed to the buyer
  • To pay all public charges and rent that becomes payable after the ownership passed to the buyer

Rights of Buyer:

  • After the ownership has passed to the buyer, perform any lawful action to increase the value of property and the rents and profits with regard to the property
  • Where the buyer has paid the purchase money, he can compel the seller for registration of sale

In Madam Pillai V. Badar Kali (45 Mad 612 (FB), the plaintiff being the first wife made a claim for maintenance to her husband. The husband orally transferred his lands of the value of Rs. 100/- to the plaintiff. Later, he executed an instrument of sale in favour of the defendant for the same property. The plaintiff initiated a suit stating that the transfer was initially made in her favour and the subsequent sale to the defendant was not valid. The defendant stated that the transfer in favour of the plaintiff failed for want of a registered instrument. The Court held that - the plaintiff acquired a title by way of oral transfer and she is entitled to the property though the instrument of sale was not registered.

Lease

Some people give possession of the property to another for some period of time for money but does not constitute sale. It is called lease. Lease is a transfer of right to enjoy a property for a specific period of time in consideration for a price. Lessor is the person who lets out the property for lease or transferor, and lessee is the person to whom the property is leased or the transferee in a lease. The lessee can also sub-let the lease and the relation between the lessee and the sub-lessee will be that of lessor and lessee.

Illustration: A for a period of 3 years lets out his property for use to B for a sum of Rs. 50,000. This is called lease. A is the lessor and B is the lessee. If B sublets the property to C, then B will be the lessee and C will be the sub-lessee. The relation between B and C will be of that relation that is between A and B.

Rights and Liabilities of the Lessor

  • Disclose defects of the property which is known to him and is not known to the lessee
  • Give possession of the property to the lessee
  • The lessor shall let out the property for lease to the lessee and make sure the lessee enjoys the property without any interruption upon payment of money.

Rights and Liabilities of the Lessee

  • If any addition is made to the lease property during the lease period, then the addition can be comprised in the lease
  • If any part of the lease property is destroyed or made unfit by flood, fire, etc. then the lease shall be voidable by the lessee (the lessee gets a right to accept or reject depending on his wish)
  • If the lessor fails to make repairs to the leased property, the lessee may make the repairs himself and recover the amount for the repairs from the lessor
  • If the lessor fails to make any payment with respect to the property and is recovered from the lessee, the lessee shall get it reimbursed from the lessor
  • At the time of completion of the lease, the lessee should hand over the property to the lessor in the state in which it was received
  • The lessee may transfer, rent or sub-let the leased property with the consent of the lessor
  • Disclose to the lessor any fact that lies in the property that will increase the value of the property
  • The lessee should pay rent at a proper time and place as specified by the lessor
  • The lessee is bound to keep the leased property in good condition when he is in possession of the property
  • When notice of any defect is given to the lessee, he is bound to rectify it within a period of three months
  • The lessee may use the property and its products and must not do anything that is destructive to the property
  • The lessee should not erect any permanent structure in the property without the consent of the lessor
  • The lessee is bound to put the lessor in possession of the property for determination of lease

In Gajadhar v. Rombhaee 1938 Nag. 439, a theatre was sub-leased and the sub-lessee was prevented from using the theatre by the original lessor on the ground that a notice was served on the lessee for determining the lease. The sub-lessee had to pay an additional amount to the proprietor (the original lessor) and then take the lease. It was held that there is violation on the part of the original lessor and the sub-lessee can sue the original lessor for damages for violation of quiet enjoyment of the property.

Exchange

When two persons transfer ownership of one thing for the ownership of another, it is called exchange (Section 118 of the TPA). Transfer of property by exchange can be made only by way of sale. The rights and liabilities of the parties to exchange shall be that of the rights and liabilities of the buyer to the extent of receiving and that of the seller to the extent of giving.

Illustration: A offers to sell his cottage to B. B in consideration of the cottage sells his farm to A. Instead of getting money for his cottage, A has received a farm from B. This is an example for Exchange. The rights and liabilities of A will be that of seller towards the sale of the cottage and will be that of buyer towards the sale of the farm. Similarly, the rights and liabilities of B will be that of buyer towards the sale of the cottage and that of seller towards the sale of the farm. 

Gift

A transfer of ownership of property that is made voluntarily and without consideration is called Gift (Section 122 of the TPA). The person making the transfer is called the donor and the person to whom it is made is called the donee. If the donee expires before accepting the gift, it becomes void. 

Illustration: A gives his car to B. B accepts the car. But B does not pay anything in return for the car. This is known as ift. In this case, A is the donor and B is the donee. 

Intellectual Property

Intellectual property is another kind of property which does not involve movable or immovable property. Any work such as invention, artistic work or literary work, design, symbol, name, image, etc. created by the knowledge or intellectual capacity of a person is called intellectual property. Such intellectual property can be protected by law.

The following are the types of intellectual property:

  • Trademarks
  • Patents
  • Copyrights
  • Designs
  • Geographical indications

Trademarks: Any mark put on the product such as the name of a product or service (Brand name) which helps people to distinguish it from other products and services is called a Trademark. The names of a products, companies, etc. are Trademarks. (Example: Apollo Pharmacy, Titan watches, etc.)

Patents: The right granted over the invention of a product is called Patent. In other words, when a person makes a new product, he can get a patent for the product. The person who made the invention is called patent owner. The patent owner can decide upon the usage of the product and who should use the product.

Copyrights: Copyright is the right obtained over the creation of any literary or artistic work. Books, music, films, paintings, scriptures, etc. are covered under copyright. Any person who wants to write a book or make a film based on the writing or idea of another person should seek his permission for the idea that he has used.

Designs: Any design invented by a person shall be protected by Designs. Shape, colour, line, pattern, etc. are covered under Designs. (Example: Design of the wrapper of a biscuit or chocolate, Design of a car, Design of the shape of a cold drink bottle, etc.)

Geographical Indications: Certain products or goods have a specific geographical origin and possess characteristics that attribute to the place of origin. Such goods and products bear the name of the geographical origin. This is called geographical indication. (Example: Darjeeling tea, Tirupathi laddu, etc.)