Vepa Sarathi Textbook Chapter 7-12

Chapter 7
Certain Equitable Rules

When Rights Conflict
CONFLICT OF RIGHTS
Sections 5 to 37 deal with transfers of both movable and immovable prop
erty. Sections 38 to 53-A deal only with immovable property. Of these,
Sections 38 to 43 and 48 to 53 deal with conflict of rights. Sections 44 to
47 deal with joint ownership and Section 53-A deals with the doctrine of
part performance.
In this chapter, we deal with conflict of rights.
PRIORITY [S. 48]

48. Priority of rights created by transfer.—Where a person purports to create
by transfer at different times rights in or over the same immovable property, and
such rights cannot all exist or be exercised to their full extent together, each later
created right shall, in the absence of a special contract or reservation binding the
earlier transferees, be subject to the rights previously created.1
One of the modes of acquiring property is Qui prior est tempore potior
est jure, that is, he has the better title who was first in point of time. But
this rule is very much restricted with the advance of civilization, that we
find the French economist Pierre Proudhon, at the other extreme, assert
ing that “property is theft” and George Bernard Shaw commending it
by saying, “This is the only perfect truism that has been uttered on the
subject of property.” They do not agree with the maxim quod nullius est
id ratione naturali occupanti conceditur, which means that which is the
property of no one is given by natural reason to the first occupant.1
1. Varadaraja Iyengar v Lakshniinarayana Setty, 1985 SCC OnLine Kar 44: AIR 1985 Kar
245; Manni Deui v Ramayan Singh, 1984 SCC OnLine Pat 143: AIR 1985 Pat 35; ICICI
Bank Ltd v SIDCO Leathers Ltd, (2.006) 10 SCC 452, the first charge holder has to be
paid first where all the charges cannot be fully satisfied.
122 LAW OF TRANSFER OF PROPERTY [Chap. 7
Where there are conflicting rights as to immovable property, courts

will inquire not which party was first in possession, but under what
instrument he was in possession, and when his right commenced. It is
the general rule between encumbrancers, and also between purchasers,
but not between a mortgagee and a purchaser, because the rule applies
only between two conflicting transfers and not when legal effect can be
given to both.
Suppose A executes a sale deed in favour of B and a few days later
before the sale deed was registered, executes another sale deed in favour
of C. Even if C’s sale deed is registered first the document executed earlier
though registered later will prevail because of Section 47, Registration
Act. Suppose again, it is the case of two mortgages, and the second mort
gage is registered. If the first is registered later, the same rule applies. But,
if the first mortgage though compulsorily registrable, was not registered
then it will not have any priority because it is not a completed transac
tion. But, if the second mortgagee has notice of the first then the first will
prevail, because of Section 40.
Suppose a contingent interest is created in a property and thereafter
an absolute interest. The contingency contemplated happens and the first
transferee’s interest also becomes absolute. The fact that the contingent
interest became vested later will not deprive the first transferee of his
right of priority.
POWER TO REVOKE
The rule applies only in the absence of a contract or reservation to the
contrary. For example, Section 42 states:
42. Transfer by person having authority to revoke former transfer.—Where
a person transfers any immovable property, reserving power to revoke the trans
fer, and subsequently transfers the property for consideration to another trans
feree, such transfer operates in favour of such transferee (subject to any condition
attached to the exercise of the power) as a revocation of the former transfer to
the extent of the power.
Illustration
A lets a house to B, and reserves power to revoke the lease if, in the opin
ion of a specified surveyor, B should make a use of it detrimental to its value.
Afterwards, A, thinking that such a use has been made, lets the house to C. This
operates as a revocation of B’s lease subject to the opinion of the surveyor as to
B’s use of the house having been detrimental to its value.
But see, Section 126 which provides that except in the special case men
tioned therein a gift is irrevocable.
Section 42 requires that the subsequent transfer should be for consid
eration. Therefore, if the subsequent transfer is to be a gift, the first trans
fer must be expressly revoked, because the presumption in the section
s. 38] CERTAIN EQUITABLE RULES WHEN RIGHTS CONFLICT 123
cannot be drawn in such a case. If, however, the subsequent transfer is

for consideration, such transfer itself operates as a revocation of the ear
lier transfer, because the section allows such a presumption of revocation
to be drawn. If the power of revocation depends upon a condition and its
fulfilment becomes impossible, the power cannot be exercised.
Further, if the party with the earlier right is guilty of fraud or other
inequitable conduct, he cannot claim such priority. See, Section 78 below.
Maritime lien also constitutes an exception to the operation of
Section 48 where a lien is created for moneys advanced for the purpose
of saving property from destruction or forfeiture, it constitutes an excep
tion to Section 48? Provisions of other Acts may have overriding effect.
For example, the provisions of the Companies Act, when a company is
in winding up, create their own category of preferential payments which
have an overriding effect. The rule stated in Section 48 was held to be
applicable where there was a prior charge on the property which was
created before commencement of winding up.234
LIMITED POWER OF TRANSFER [S. 38]

38. Transfer by person authorised only under certain circumstances to trans
fer.—Where any person, authorised only under circumstances in their nature
variable to dispose of immovable property, transfers such property for consid
eration, alleging the existence of such circumstances, they shall, as between the
transferee on the one part and the transferor and other persons (if any), affected
by the transfer on the other part, be deemed to have existed, if the transferee,
after using reasonable care to ascertain the existence of such circumstances, has
acted in good faith.
Illustration
A, a Hindu widow, whose husband has left collateral heirs, alleging that the
property held by her as such is insufficient for her maintenance, agrees, for pur
poses neither religious nor charitable, to sell a field, part of such property to
B. B satisfies himself by reasonable enquiry that the income of the property is
insufficient for A’s maintenance, and that the sale of the field is necessary and,
acting in good faith, buys the field from A. As between B on the one part and A
and the collateral heirs on the other part, a necessity for the sale shall be deemed
to have existed.
The powers of a manager of a joint Hindu family and of a widow of a
Hindu (before the Hindu Succession Act, 1956) to deal with the family
property or the husband’s property, could be exercised only when legal
necessity is shown to exist. [See, Hunoomanpersaud Panday v Babooee
Munraj KoonwereeA] The section is enacted to protect a person who pur
chases property from such manager or Hindu widow. It must, however,
2. ICICI Bank Ltd v SIDCO Leathers Ltd, {2006) 10 SCC 452.

3. SFL Industries Ltd v Reliance Capital Ltd, AIR 2015 P&H 116.
4. 1856 SCC OnLine PC 7: (1854-57) 6 MIA 393.
be noted that a bare representation by the transferor is not sufficient, but

the transferee must make reasonable inquiries. Since the circumstances
are variable, the legality of the transaction would be judged only accord
ing to the circumstances existing at the time of the transaction.
RIGHT OF PERSONS ENTITLED TO MAINTENANCE [S. 39]

39. Transfer where third person is entitled to maintenance.—Where a third
person has a right to receive maintenance, or a provision for advancement or
marriage, from the profits of immovable property, and such property is trans
ferred, the right may be enforced against the transferee, if he has notice thereof
or if the transfer is gratuitous; but not against a transferee for consideration and
without notice of the right, nor against such property in his hands.
The section was amended by Act 2.0 of 192.9 and prior to the amend
ment, persons, who had a right of maintenance, were protected only
when it was established that the transfer was made with the intention
of defeating such right, but such proof is no longer necessary.5 Since the
amendment is retrospective if a property was transferred before 1 April
1930, but the suit by the maintenance holder was filed thereafter, the
claimant was not obliged to prove the intention but only the notice as
required by the present amended section.
This section does not deal with a charge on the property. That is dealt
with in Section 100 of the Act. The difference between the two lies in
this. If family property is sold for paying off the debts of the family, if
there was no charge for maintenance, the purchaser would get a good
title even if he had notice of the right to maintenance. If, however, the
property was subject to a charge, then the charge has precedence pro
vided the purchaser had notice of it.6
The obligation of a father-in-law to maintain his daughter-in-law
arises only on death of the husband. Such an obligation can be met from
the properties in which the husband is a co-sharer.7
ADVANCEMENT
It is an irrevocable gift in praesenti of money or property, to a child, by
a parent, to enable the donee to anticipate his or her inheritance to the
extent of the gift, as for example, marriage expenses. It is a payment to
persons before they become absolutely entitled to an estate, but who are
entitled to have a vested or contingent interest in the estate or legacy.
5. Ibrahim Fathima v Mohd Seleem, 1978 SCC OnLine Mad 167: AIR 1980 Mad 82;
Siddegowda v Lakkamma, 1980 SCC OnLine Kar 230: AIR 1981 Kar 24; Sadhu Singh v
CASE PILOT
Gurdwara Sahib Narike, (2006) 8 SCC 75, the section is in pari materia with S. 28, Hindu
Adoption and Maintenance Act, 1956.
6. Dan Kuer v Sarla Devi, 1946 SCC OnLine PC 26: AIR 1947 PC 8.
7. Muthammal v V. Pavunambal, (2012) 2 LW 711.
S. 41] CERTAIN EQUITABLE RULES WHEN RIGHTS CONFLICT 125
HOLDING OUT [Ss. 41 AND 43]

The other cases where equities between conflicting rights require
adjustment are set out in Sections 41 and 43. I have already dealt with
Section 43. Section 41 provides:
41. Transfer by ostensible owner.—Where, with the consent, express or
implied, of the persons in terested in immovable property, a person is the ostensi
ble 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.
The requisites for taking benefit of the section are: 1) the transfer must be
by an ostensible owner; 2) the transferor must have become the ostensible
owner with the express or implied consent of the real owner; 3) the trans
fer must be for some consideration; 4) the transferee must have acted in
good faith with reasonable care in ascertaining that the transferor has
the power to make a transfer.
All these requirements must be satisfied for taking benefit of the sec
tion. The transferee has to prove that the transferor was the ostensible
owner of the property with the consent of the real owner. The transfer is
for some consideration. The buyer purchased the property in good faith
after making reasonable inquiry.8
The section deals with what is known as the doctrine of holding out.
It forms an exception to the general principle of contracts nemo dat quod
non habet, which means that a person cannot convey a better title than
he himself has, and resolves the dispute which arises when the rights
of two innocent persons come into conflict. When members of a joint
Hindu family live together, if their property stands in the name of one
of the members, a purchaser or other persons dealing with such a family
have to make more than ordinary enquiries and satisfy themselves that
the person conveying the property has the right to do so. That is because,
as the Privy Council said in Ramcoomar v Macqueen9, the existence of
CASE PILOT
8. V. Chandrasekaran v Administrative Officer, (2.012.) 12. SCC 133.
9. 1872 SCC OnLine PC 29: (1872-73) Supp IA 40; Shiv Das v Devki, AIR 1978 P&H 285;
Satish Chandra v Saila Bala, 1978 SCC OnLine Cal 157: AIR 1978 Cal 499; Syed Abdul
Khader v Rami Reddy, (1979) 2 SCC 601; Amit Mukherjee v Bibhabati Dasi, 1979 SCC
OnLine Cal 30: AIR 1979 Cal 344 (Insolvent cannot be treated as ostensible owner);
Jokhan v Joint Director of Consolidation, 1980 SCC OnLine All 90: AIR 1980 All 215;
Gapadibai v State of M.P., (1980) 2 SCC 327 (benami transaction); Bhim Singh v Kan
Singh, (1980) 3 SCC 72; Abdur Rahim Jiivani v Vithaldas Ramdas, 1980 SCC OnLine
Bom 192: AIR 1981 Bom 58; Mehdi Hasan v Ram Ker, 1981 SCC OnLine All 607: AIR
1982 All 92; Radheshyam Agartualla v Bahadur Singh, 1981 SCC OnLine Cal 160: AIR
1982 Cal 571; State of W.B. v Subimal Kumar Mondal, 1981 SCC OnLine Cal 84: AIR
1982 Cal 251; Bhramar Pradhan v Govinda Mahapatra, 1982 SCC OnLine Ori 75: AIR
1983 Ori 36; Qandhara Singh v Union of India, 1983 SCC OnLine P&H 295: AIR 1984
P&H 51; Raj Narain Aggarwal v Baij Nath Khanna, 1983 SCC OnLine Del 177: AIR
the joint family is a “circumstance which ought to have put him upon
an inquiry that, if prosecuted would have led to a discovery of it”. Such
a person is not the ostensible owner. An ostensible owner is one who,
on inquiry by a prospective purchaser, which a prudent and careful man
would make in the circumstances of the case, appears to have all the
characteristics of a real owner and the real owner himself does not dispel
the impression. Whether a person is holding himself out as the ostensible
owner with the consent of the real owner is therefore a question of fact
depending upon the circumstances of each case. For example, an entry in
the municipal registers of the name of a person as the real owner of the
property without the knowledge of the real owner will not estop the real
owner. The section cannot be invoked against minors,10 because they
are incapable in law of giving the necessary consent either expressly or
by implication. In this country where the benami system prevails and is
legally recognised, the benamidar is the ostensible owner. But seey the
Benami Transactions (Prohibition) Act, 1988.
In one case, a husband purchased property in the name of his wife and
held her out as the true owner. She was the benamidar and mortgaged
the property as the ostensible owner. Later, in execution of a decree
obtained against the husband a purchaser purchased the same property
A as that of the husband. It was held he was not entitled to dispute the title
of the mortgagee from the wife. In Phool Kuer v Prem Kuer11, a Hindu
.ase pilot widow surrendered the property inherited by her in favour of A who was
not the nearest reversioner. A sold the property to B. After the widow’s
death, C, the nearest reversioner, claimed the property. He is entitled to
succeed because at the time when the widow surrendered to A, C was
not the real owner (he was only a possible reversioner), and so, no ques
tion of holding out by the real owner arises. The section is based on the
principle of estoppel enunciated in Section 115, Evidence Act. Therefore,
to imply consent of the real owner, it is not suffi cient to prove that he
was silent, until it is also shown that he had a duty to speak. [See, The
Law of Evidence by Vepa P. Sarathi, p. 149.] It is not only the person
holding out but also those claiming under him that are estopped. But the
estoppel arises only as against the transferee from the ostensible owner.
If, in the above illustration, the contest was between the court-auction
purchaser and the ostensible owner himself, the purchaser will not be
estopped from proving that the benamidar had no title to the property.
1984 Del 155; Avtar Singh v Hazura Singh, 1983 SCC OnLine P&H 489: AIR 1984 P&H
211; Raj Ballav Das v Haripada Das, 1983 SCC OnLine Cal 114: AIR 1985 Cal 2; Digpal
Singh v Wife ofLaldhan Ojha, AIR 1955 Pat no; Rajammal v Raman, 1984 SCC OnLine
Mad 188: AIR 1985 Mad 222; Banga Chandra Dhur Biswas v Jagat Kishore Chotvdhuri,
1916 SCC OnLine PC 50: (1915-16) 43 IA 249.
10. B. Sitaram Rao v Bibhisano Pradhan, 1978 SCC OnLine Ori 86: AIR 1978 Ori 222.
11. AIR 1952 SC 207; Jote Singh v Ram Das Mahto, (1996) 5 SCC 524.
A wife purchased property in her name acting through her power of

attorney. The husband was the attesting witness to the power of attor
ney. He therefore knew that the transaction was that of his wife. An
insurance policy was also taken out in her name. The property was also
mutated in the name of the wife immediately. The Hindu Women’s Right
to Property Act, 1935 had not yet come into force. The couple had a son
and seven minor daughters. The court said that the intention of the hus
band to provide for security of wife and children could be inferred. The
transaction was held to be not a benami transaction.12
In Ramrao Jankiram Kadam v State of Bombay13, property of the
appellant was brought to sale for recovery of excise dues. As there were CASE PILOT
no purchasers, by virtue of a government order, the government pur
chased the lands at a nominal bid of at the next auction and sold the
land for adequate consideration. In a suit by the appellant to set aside the
sale, the purchaser relied upon Section 41. It was held:
The basis for this argument was that some time after the sale the second
defendant had purchased the plot...from the Government while the fifth
defendant similarly purchased plots...and that the in action of the plaintiff
[in not] taking proceedings to set aside the sale constituted a representation
to the world that the Government were properly the owners of the property
which they had purchased for nominal bids; and this was the reasoning by
which Section 41 of the Transfer of Property Act was sought to be invoked.
But the respondent did not rely on any representation or any act or conduct
on the part of the appellant but on their belief that Government had acquired
title by reason of their purchase at the revenue sale. If the Government had no
title to convey, it is manifest the respondents cannot acquire any. They would
clearly be trespassers. In the circumstances we consider there is no scope for
invoking the rule as to estoppel contained in Section 41 of the Transfer of
Property Act.
Lack of good faith.—The doctrine of feeding the grant by estoppel
does not apply where the transferee colluded with the transferor because
he knew that the transferor had no title. The sale deed was set aside
because of the fraud involved.14 Where the transferee had full knowledge
of the fact that his transferor was not owner of the property because it
belonged to his grandmother, the court held that he could get no title.
The consent letter, which was perhaps doubtful, could not help the cause
of the plaintiff. It could not have lent legality to the conveyance.15 Where
the transferor did not handover the original title deeds to his transferee,
the transaction should not be considered to have been done in good faith.
The title deeds were lying with a bank as a security. The bank’s claim
12. Binapani Paul v Pratima Ghosh, (2007) 6 SCC 100.

13. AIR 1963 SC 827.
14. Jharu Ram Roy v Kamjit Roy, (2009) 4 SCC 60.
15. Atal Srivastaua v Devprasad, AIR 2012 Chh 117.
3
over the property was allowed.16 Where the property in question was a
joint family property which had not been partitioned and the transferees
did not care to ascertain whether his transferor had power to deal with
the property, the court said that there was no good faith and no protec
tion of the section.17
We may compare this section with Section 43:
1. Under Section 41 the transferee makes an independent inquiry
while under Section 43, the transferee believes the transferor’s
representation.
2. Under the former section the transferee gets a property which is not
that of the transferor, but under the latter, he can get the property
only if the whole or part of such property somehow becomes that
of the transferor.
3. Under both sections, it is the real owner who is estopped, in the
former case by allowing the ostensible owner to deal, and in the
latter by a future acquisition of the property.
4. Under the former the transferee should not have notice of the real
owner’s title, whereas under the latter, the second transferee should
not have notice of the existence of the option in the first transfer
ee’s favour. Also, under this section [S. 43], there is no obligation
requiring the transferee to make enquiry as is found in Section 41.
A few more points may be noted with respect to Section 43. The right
under this section is available to the transferee only if the contract sub
sists and he has not obtained any other redress as by filing a suit and
obtaining a decree for damages. The transferee entitled to the right must
have paid consideration. But, unlike in English Law, where if the trans
feror acquires subsequently the interest or estate, it passes immediately to
the transferee, under Section 43, the transferee must exercise the option.
If before he does so, the property is transferred to another who has no
notice of the earlier transfer and such subsequent transfer is for consid
eration, the bona fide transferee for value without notice gets the prior
claim. Except in the case of such a bona fide transferee, the first trans
feree’s rights are available against everyone including the heirs of the
transferor.
The requirements of Section 43 are that at the initial stage the transfer
is by an unauthorised person, and it is for consideration, and finally, the
unauthorised becomes authorised. He then becomes bound by his grant.
The unauthorised person makes a fraudulent or erroneous representa
tion about his authority. The court found no fraud where both parties
16. Amrit Kaur v Recovery Officer, AIR 2012 NOC 418 (P&H).
17. Manjari Devi v Usha Devi, 2013 SCC OnLine Chh 169: AIR 2014 Chh 22; Baby Rani
Deb v Manik Dey, 2013 SCC OnLine Gau 315: AIR 2014 Gau 56, no care exercised to
ascertain title.
happened to believe that an allotment letter for a house issued by the

Development Authority was a final act in making the allottee an owner,
and the allottee had failed to secure registration in his favour.18
The transferee has to exercise his right to become owner of the prop
erty when the transferor becomes an authorised person to effect the
transfer. The section applies when the transferor has an interest in the
property but he had not yet acquired the right to transfer it. When he
becomes entitled to transfer and the bona fide transferee is insisting upon
completion of the transaction, he cannot escape. He becomes estopped
by his representation. His grant becomes supported by an estoppel, feed
ing the grant by an estoppel.19 No estoppel arises where the unauthor
ised transferor is not able to get any right in succession to deal with the
property.20
Section 43 also does not apply when the transfer in question is forbid
den by law such as, for example, by a minor or some other disqualified
person or one against21 public policy. The degree of care and caution
which is required under Section 41 in purchase of property is not req
uisite under Section 43, because there is the representation by the trans
feror which may in circumstances be believe worthy.22
Benami Transactions (Prohibition) Act, 1988.—The Act was not
enforced with retrospective effect. A suit for recovery of property held STATUTE PILOT
benami was filed before enforcement date of the Act. The Supreme Court
held that it was not to be considered as a prohibited transaction under
Section 4 of the Act.23
TRANSFEREE’S RIGHT UNDER INSURANCE POLICY [S. 49]

49. Transferee’s right under policy.—Where immovable property is trans
ferred for consideration, and such property or any part thereof is at the date of
transfer insured against loss or damage by fire, the transferee, in case of such loss
or damage, may, in the absence of a contract to the contrary, require any money
which the transferor actually receives under the policy, or so much thereof as may
be necessary, to be applied in reinstating the property.
The section applies only when property is transferred, that is, not when
there is a mere contract to transfer. Under Section 55(5)^), in the case of
a sale, the buyer is bound to bear the loss arising from the destruction
18. M. Rathnam v Susheelamma, 2008 SCC OnLine Kar 449: AIR 2009 Kar 79; Jameela
Beevi v Basheer, 2012 SCC OnLine Ker 31596: AIR 2012 Ker 107, person entitled to
succeed made a representation to that effect and found his paternal uncle as purchaser for
consideration, the court upheld the transfer.
19. Premnath Khanna v State of Orissa, 2009 SCC OnLine Ori 1: AIR 2009 Ori 166.
20. Agricultural Produce Mktg Committee v Bannamma, (2015) 5 SCC 691.
21. N. Srinivasa Rao v Special Court, (2.006) 4 SCC 214.
22. Hardev Singh v Gurmail Singh, (2007) 2 SCC 404.
23. Samittri Devi v Sampuran Singh, (2011) 3 SCC 556.
or injury to the property. But if the property is insured, and if the seller
receives the insurance money, the purchaser can invoke this section.
Under Section 135, the policy could be assigned to the transferee of the
property in which case the transferee can proceed directly against the
insurance company. But if the policy is not assigned to the transferee, he
cannot proceed against the insurance company, since there is no privity
of contract between them, but the transferee can invoke this section and
make the transferor pay.
In cases of destruction of property, Section 68(b) and Section 108(e)
come into play when the property is mortgaged or leased. In the case
of sale, the section operates only if the “transferor actually receives the
money”. Ordinarily, if the transferor sues the insurer, the latter can suc
cessfully defend itself by saying that since the contract of fire insurance
is a contract of indemnity, and since the transferor has transferred the
property, he has not suffered any loss. Equally, if the transferee sues, the
insurer can say that it is not liable, because there is no privity of contract
between them. The safe course is for the transferor to take over the pol
icy of insurance under Section 135.
PAYMENTS TO HOLDERS WITH DEFECTIVE TITLE [S. 50]

50. Rent bona fide paid to holder under defective title.—No person shall be
chargeable with any rents or profits of any immovable property which he has in
good faith paid or delivered to any person for whom he in good faith held such
property, notwithstanding it may afterwards appear that the person to whom
such payment or delivery was made had no right to receive such rents or profits.
Illustration
A lets a field to B at a rent of Rs 50, and then transfers the field to C.'B, having
no notice of the transfer, in good faith pays the rent to A. B is not chargeable
with the rent so paid.
This section may be compared with Section 109.
IMPROVEMENTS [S. 51]

51. Improvements made by bona fide holders under defective titles.—When
the transferee of immovable property makes any improvement on the property,
believing in good faith that he is absolutely entitled thereto, and he is subse
quently evicted therefrom by any person having a better title the transferee has
a right to require the person causing the eviction either to have the value of the
improvement estimated and paid or secured to the transferee, or to sell his inter
est in the property to the transferee at the then market-value thereof, irrespective
of the value of such improvement.
The amount to be paid or secured in respect of such improvement shall
be the estimated value thereof at the time of eviction.
When, under the circumstances aforesaid, the transferee has planted

or sown on the property crops which are growing when he is evicted
therefrom, he is entitled to such crops and to free ingress and egress to
gather and carry them.24
ENGLISH LAW
The rule in English Law is that a court will not permit a man knowingly,
though passively, to encourage another to spend money under a mis
take regarding his title, be cause the passive looking on is equivalent to
active encouragement. Therefore, if the real owner was ignorant of such
expenditure no equity can be raised against him. The rule in English
Law is thus based on estoppel, though if the real owner wants to evict
the person under a mistake, he will, in equity, be compelled to do equity
by paying compensation.
Under the section, however, it is not necessary to show the passive or
active encouragement by the real owner. It is sufficient if the transferee
believed in good faith to be the owner and once that is established, he
can always claim compensation from the real owner.
WHAT IS GOOD FAITH?

Mere negligence in investigating title does not show want of good faith.
But he must honestly believe that he had good title to the property and
whether he had such honest belief is a question of fact depending upon
the circumstances of each case.
MEASURE OF COMPENSATION
The real question is not the amount of expenditure incurred, but the rise
in the market value of the property on the date on which actual eviction
is sought to be enforced.25
In a suit for possession it was found that the defendant, whose title
was defective, had constructed a building on the property from which he
was being evicted. The trial court gave the plaintiff the option either to
sell the property to the defendant, or pay compensation for the building.
The plaintiff chose the latter alternative, but took possession three
years later. The plaintiff will have to pay compensation valued on the
date of actual eviction and not as on the date of his election.
The right to the crops is known as the right to away-going crops or
emblements.
24. KJ. Nathan v S.V. Maruty Reddy, AIR 1965 SC 430: (1964) 6 SCR 717; Thakur Kishan
Singh v AruindKumar, (1994) 6 SCC 591.
25. A.P. Wakf Board v Bowlat Bibi, 1982. SCC OnLine AP 120: AIR 1983 AP 57;/. Narayana
Rao v Y.G. Basavarayappa, AIR 1956 SC 727.
The section operates only in favour of a person believing to be

“owner”, that is, one entitled to absolute title. Therefore, mortgagees,
even in possession, and lessees—including permanent lessees—are not
entitled to the right. In Ramsden v Dyson26, a lessee claimed the right
and the House of Lords rejected his claim holding that he could not
invoke the doctrine of equitable estoppel. The principles of this doctrine
are that when a person, in ignorance of the defect in his title or his rights,
spends money, and the real owner, knowing that the other is acting in
ignorance, allows him to spend, either by silence or by encouraging
him, then he will be estopped against putting forth his title. This is the
rule corresponding to Section 51, Transfer of Property Act, in English
cA Law. Whatever it may be in that jurisprudence, as pointed out in R.S.
Maddanappa v Chandramma27, by the Supreme Court of India that it is
case pilot doubtful while determining whether the conduct of a particular person
amounts to an estoppel, that the Indian court could travel beyond the
provisions of Section 115, Evidence Act and rely upon what is called
“Equitable estoppel”. In fact, the principles stated above are nothing
more than what is provided in Section 115, Evidence Act.
In the case of a mortgagee in possession, see however Section 63-A,
Transfer of Property Act.
Further, unlike the case of estoppel, the conduct of the true owner is
irrelevant.
LIS PENDENS [S. 52]

Section 52 deals with the doctrine known as the doctrine of Us pendens.
52. Transfer of property pending suit relating thereto.—During the pen
dency 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 proceed
ing so as to affect the rights of any other party thereto under the decree or order
which may be made therein, except under the authority of the Court and on such
terms as it may impose.
Explanation.—For the purposes of this section, the pendency 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.
26. (1865-66) 1 HL 119.

27. AIR 1965 SC 1812.: (1965) 3 SCR 283.
ENGLISH LAW
The object of the rule is to secure the property till litigation is over, so
that if one of the parties deals with it, the decision of the court will be
binding on such transferees deriving title from a party to the proceeding
by an alienation made pendente lite. (This phrase does not mean a chan
delier as was once suggested by Punch.) It means that “when litigation
is pending”. Otherwise, “the plaintiff would be liable in every case to
be defeated by the defendant alienating before judgment or decree, and
would be driven to commence his proceedings de novo, subject again to
be defeated by the same course of proceeding”.
The English Law on the doctrine of Us pendens is that i) an alienee
with notice is bound by the decision of the court; 2) if the proceeding is
registered as a Us pendens (that is, a pending litigation) even an alienee
who had no notice would be bound. The court had power to cancel the
registration in certain cases.
AMENDMENT
The section has been amended by Act 20 of 1929 and this section is not
one of those mentioned in Section 63 of the Amending Act. The amended
section is held to be retrospective, but pending proceedings are saved.
PENDENCY OF SUIT OR PROCEEDING

If a suit is instituted in a court not having jurisdiction, even if due to a
bona fide error, it cannot be said that a Us has commenced. The pen
dency however continues during the appellate proceedings also. If a suit
is dismissed for default and later restored the suit is deemed to be pend
ing from the date of the first presentation of the plaint, so that, if there
is an alienation between the dismissal and restoration, it is affected by
the doctrine. Since review proceedings are not, like appeals, continuation
of the suits, alienations before the review proceedings were commenced
would not be affected by this doctrine. Perhaps, a revision also is not a
continuation of a proceeding as there is no reference to a “revision” in
the Explanation.
Suppose A has made a gift of property to B. Thereafter C, As widowed
sister-in-law, filed a suit against A for maintenance and also claimed a
charge on the property gifted. During the pendency of this suit, B sold
the property to D. Because A died, B was impleaded in C’s suit as A’s
legal representative and the suit was decreed. But C cannot claim the
property because of Us pendens since the gift to B was before the suit
and B's sale to D was before B was impleaded in the suit. As long as
the decree is capable of being executed, mere delay in taking execution
proceedings would not enable the opposite party in suit to transfer the
property and if such alienation takes place it is affected by the doctrine.

If a deed of sale is executed after the commencement of a proceeding in
pursuance of a contract entered into before, or if the deed is registered
after the commencement of the proceeding but was executed before, the
doctrine may not apply. There is no Us if a petition for leave to appeal to
Supreme Court is pending.28
ANY OTHER PARTY

That is between one party and the person alienating there should be an
issue for adjudication. Therefore, the doctrine, like the principle of res
judicata, will not apply between parties on the same side and between
whom there is no issue requiring adjudication in the suit or pending
proceeding.29
Though the Act applies to voluntary sales inter vivos, the doctrine of
Us pendens applies to involuntary sales, because what the vendor cannot
do the court will not do and defeat the result of the litigation.
EFFECT OF TRANSFER PENDENTE LITE

The transfer is valid, but cannot affect the rights of a party arising out of
the result of the suit or proceeding.
The doctrine of Us pendens is based on the ground that it is necessary
for administration of justice that the decision of a court in a suit should
be binding not only upon litigating parties but also on those who derive
title pendente lite. The section does not annul a conveyance or transfer
or make it void. It only renders the pendente Ute dealing subservient to
the rights of parties as may be eventually determined by the courts. Such
transfer becomes subject to riders and restraints, if any, passed by the
court.30 The court also explained the effect of a pendente Ute transfer
in violation of injunction or restraint orders issued by the court. The
court said that the party committing such breach may incur liability to
be punished, but the sale is to remain valid subject only to directions of
the court.31
28. Rajendra Singh v Santa Singh, (1973) 2 SCC 705; Supreme General Films Exchange Ltd
v Brijnath Singhji Deo, (1975) 2 SCC 530; Nirupoma Basak v Baidyanath Pramanick,
CASE PILOT
1984 SCC OnLine Cal 205: AIR 1985 Cal 406; Rukmani v Thirumalai, AIR 1985 Mad
283. K. Padnta v K. Ramachandra, AIR 2015 Kar 40, bank realising its dues from the
property in question through DRT order. A suit was filed, after realisation, about an
agreement for sale of the same property, the purpose being to defeat the claim. The auc
tion-purchaser (petitioner) could challenge the sale. The court imposed exemplary costs
of 1,50,000 on each of the respondents who brought in the claim of false sale.
29. Sohan Lal v Raghunath Prasad, 1981 SCC OnLine All 245: AIR 1981 All 235;
CASE PILOT Paramesiuaran v Podiyan, AIR 1984 Ker 134.
30. Thomson Press (India) Ltd v Nanak Builders & Investors (P) Ltd, (2013) 5 SCC 397;
K.N. Aswathnarayana Setty v State of Karnataka, (2014) 15 SCC 394 to the same effect.
31. Ibid; Sanjay Verma v Manik Roy, (2006) 13 SCC 608, the pendency of a suit does not pre
vent the owner from dealing with the property, the section only postulates the condition
CASE PILOT
The section must be interpreted strictly. Any transfer outside the

period of litigation is not to be affected by the section. Where a society
had allotted the land in question to some persons before institution of the
suit, the court said that Section 52 was not attracted.*32
It is important that the doctrine of Us pendens is not a facet of the
doctrine of notice. It does not matter at all whether or not the transferee
knew or could have known that a suit of proceedings were pending in
respect of the transferred property. It is rather a doctrine based on public
policy that no one can be permitted to defeat the final outcome of litiga
tion by simply transferring away property which is the subject-matter of
a suit during the pendency of the suit. Therefore, whether the transferee
was or was not aware of the pending litigation, the transfer which took
place during the pendency of the suit can take effect subject to the final
outcome in the suit.
In Nagubai Ammal v B. Shama Rao33, a widow filed suits in forma
pauperis in 1919, against her stepson for maintenance and marriage CASE PILOT
expenses, and for a charge against the suit properties which were sub
ject-matter of a mortgage. The suit was decreed in 1921. Meanwhile,
in 1920, the stepson sold the properties to the predecessor of the appel
lant and in 1926 the stepson was adjudicated insolvent. In execution of
the maintenance decree which also created a charge on the suit proper
ties, the decree-holder purchased the properties in 1928, but the Official
Receiver was not made a party to those proceedings. The widow con
that the dealing will be subject to decision of the court. M. Narayanamma v Lakshmidevi,
AIR 2015 NOC 680 (Kar), transfer in flagrant violation of order of temporary injunction
of trial court, hit by S. 52. A bequest under will would attract S. 52. Sumitra Devi v
Sitasharan Babua, AIR 2009 Pat 83, preliminary decree was passed in a suit for parti
tion, property was alienated during pendency of the final decree, proceedings without
taking court permission, the alienation was hit by S. 52. 5. Mallieshtuar Rao v Bokka
Venkateshwara Rao, AIR 2013 Kar 88, a suit or appeal remain in a state of pendency till
the decree is satisfied. A sale before payment of decree is hit by S. 52.
32. Mohammadia Coop Building Society Ltd v Lakshmi Srinivasa Coop Building Society
Ltd, (2008) 7 SCC 310.
33. AIR 1956 SC 593; Suraj Bhan v Gaj Raj Singh, 1980 SCC OnLine All 537: AIR 1981 All
149 (court-sale); Sher Singh v Mohd Ismail, 1981 SCC OnLine All 36: AIR 1981 All 114;
Dev Raj Dogra v Gyan Chand Jain, (1981) 2 SCC 675; B.J. Patel v Vadilal Dolatram and
Sons, 1981 SCC OnLine Bom 20: AIR 1982 Bom 66; Charanjit Lal v Ram Sarup, 1981
SCC OnLine P&H 131: AIR 1982 P&H 44 (Pre-emption); Varkey Varkey v N.M. Kurian,
1981 SCC OnLine Ker 187: AIR 1982 Ker 222; Shankar Ganpat Sarphare v Maruti
Haibat Sarphare, 1981 SCC OnLine Bom 116: AIR 1982 Bom 19; Shanti v Chhoto, 1983
SCC OnLine P&H 216: AIR 1983 P&H 321; Sayar Bai v Yashoda Bai, 1982 SCC OnLine
Raj 60: AIR 1983 Raj 161; Ram Niivas v Omkari, 1983 SCC OnLine All 326: AIR 1983
All 310; Teluguntla Hetna Bala Sundari v Pandiri Sakuntalamma, 1982 SCC OnLine
AP 134: AIR 1983 AP 49; Khemchand Shankar Chaudhari v Vishnu Hari Patil, (1983) 1
SCC 18; Ram Lakhan Singh v Director of Consolidation, 1986 Supp SCC 682; Silverline
Forum (P) Ltd v Rajiv Trust, (1998) 3 SCC 723; Krishna Kumari Khemka v Grindlays
Bank P.L.C., (1990) 3 SCC 669; Bibi Zubaida Khatoon v Nabi Hassan Saheb, (2004)
1 SCC 191; Raj Kumar v Sardari Lal, (2004) 2 SCC 601; Videocon Properties Ltd v
Bhalchandra Laboratories, (2004) 3 SCC 711.
tended that the sale of 1920 was hit by the doctrine of Us pendens, while
the purchaser under the sale of 1920 attacked the sale of 1928 as null and
void. It was held:
Since the widow’s suit praying for a charge was presented in 1919 and the
sale was in 1920, it would prima facie be within the mischief of Section 52
of the Act.... The estate of the stepson had vested in the Official Receiver
in 1926 when he was adjudicated insolvent, but the properties which were
sold in 1928 did not vest in the Official Receiver as they had been transferred
long prior under the sale deed of 1920 which formed the root of the appel
lant’s title. That sale was no doubt pendente lite, but the effect of Section 52
is not to wipe it out altogether, but to subordinate it to the rights based on
the decree in the suit. As between the parties to the transaction, it was per
fectly valid and operated to vest the title of the transferor in the transferee....
The words ‘so as to affect the rights of any other party thereto under any
decree or order which may be made therein’, make it clear that the transfer
is good except to the extent that it might conflict with rights decreed under
the decree or order.... It will be inconsistent to hold that the sale deed of
1920 is effective to convey title to the properties to the appellants, and that,
at the same time, it was the insolvent stepson who must be deemed to pos
sess that title. We are, therefore, unable to accede to the contention that a
transferor pendente lite must, for purposes of Section 52, be treated as still
retaining title to the properties.... It has been held by the Privy Council in
Kala Chand Banerjee v Jagannath Marwari34, that when in execution of a
mortgage decree properties are sold without notice to the Official Receiver
in whom the equity of redemption had vested prior to the sale, such sale
would not be binding on him. But here, it is not the Official Receiver, who
impeaches the sale as bad.... It is the purchaser pendente lite in the charge
suit that now attacks the sale of 1928 .... The observations in Wood v Surr3S,
directly cover the point now in controversy, and they embody a principle
adopted in the law of this country as to the effect of a sale in execution of a
decree passed in a defectively constituted mortgage suit. Such a sale, it has
been held, does not affect the rights of redemption of persons interested in
the equity of redemption, who have not been impleaded as parties to the
action as they should have been under Order 34, Rule 1, CPC, but it is valid
and effective as against parties to the action. This rule has been affirmed even
when the person in whom the equity of redemption had vested is the Official
Receiver, and he had not been made a party to the proceedings resulting in
sale. Vide: Inamullah Khan v Shambhu Dayal36 and Subbaiah v Ramasami
Goundan37. We should accordingly hold that even assuming that the equity
of redemption in the suit properties vested in the Official Receiver on adju
dication of the stepson, his non-joinder in the execution proceedings did not
render the purchase by the widow in 1928 a nullity, and that under the sale
she acquired a good and impeccable title, and it is not open to attack by the
transferee pendente lite under the deed of 1920.
34. 1927 SCC OnLine PC 21: (1926-27) 54 IA 190.
35. ILR 1954 Mad 80.
36. 1930 SCC OnLine All 253: AIR 1931 All 159.
37. ILR 1954 Mad 80.
This decision also shows that the doctrine applies in cases where a wife
or widow sues for maintenance and claims a charge on the husband’s
properties, if any item of the properties is transferred pendente lite. That
is so even though “a right to immovable property is not directly or spe
cifically” strictly in question.
In Kedar Nath Lal v Ganesh Ram38, a certain property was mortgaged
to a cooperative society but was later released in 1931 on a condition. CASE PILOT
It was attached before judgment in a suit on 23 April 1934, and in exe
cution of the decree the decree-holder obtained possession of it in 1935.
Since the condition imposed on the mortgagor was not performed, both
the mortgagor and the mortgagee (cooperative society) were under the
impression that the property continued to be subject to the mortgage. On
26 April 1934, the cooperative society applied for a mortgage award and
the Registrar of Cooperative Societies first passed a money award and
later corrected it to a mortgage award and in execution of the award the
society purchased the same property. Later, the society went into liquida
tion and the property was purchased by the appellant. The respondents
were lessees from the decree-holder who purchased the property in 1935.
On the question whether the appellant’s purchase was hit by the doctrine
of Us pendens., it was held:
The first argument is that there could be no Us pendens till August 16, when
the money award was is sued [by the Registrar] because a money suit or
proceeding cannot lead to the application of the doctrine of Us pendens....
But the proceeding was to get a mortgage award, the equivalent of a mort
gage decree. The Registrar made a mistake and treated it as a proceeding
for a money decree. When the Registrar corrected the order, the mortgage
award related back to the petition as made, and the whole proceeding must
be treated as covered by the doctrine....
The second ground of attack is that before the proceedings commenced
before the Registrar these fields had been attached and, therefore, the
doctrine of Us pendens again cannot apply. We are unable to accept this
argument either. If the property was acquired pendente lite, the acquirer
is bound by the decree ultimately obtained in the proceedings pending at
the time of acquisition. This result is not avoided by reason of the earlier
attachment. Attachment of property is only effective in preventing alienation
but it is not intended to create any title to the property. On the other hand,
Section 52 places a complete embargo on the transfer of immovable property
right to which is directly and specifically in question in a pending litigation.
Therefore, the attachment was in effective against the doctrine. Authority for
this clear position is hardly necessary but if one is desired it will be found in
Moti Lal v Karrab-Ul-Din39.
[Further still] it was contended that the sale was by Court action [by the
Registrar] and the doctrine of Us pendens would not apply to such a sale.
38. (1969) 2 SCC 787.

39. 1897 SCC OnLine PC 16: (1896-97) 24 IA 170.
This point was considered in Samarendra Nath Sinha v Krishna Kumar

Nag40 by one of us (Shelat, J) and it was observed as follows:
The purchaser pendente lite under this doctrine is bound by the result of
the litigation on the principle that since the result must bind the party to
it so must it bind the person deriving his right, title and interest from or
through him. This principle is well illustrated in Radhamadhub Holdarv
Manohur Mookerji41, where the facts were almost similar to those in the
instant case. It is true that Section 52. strictly speaking does not apply to
involuntary alienations such as court sales but it is well-established that
the principle of lis pendens applies to such alienations.42 This ground also
has no validity.
Lastly, it was argued that if the fields were released from the operation of
the mortgage they could not be made the subject of a mortgage decree, and
whatever was done in the mortgage proceedings was not of any consequence.
To this there are two answers. Firstly, the respondent before the Registrar
(mortgagor) made no objection to the inclusion of the plots in the petition for
a mortgage award. Secondly, the doctrine of lis pendens applies irrespective
of the strength or weakness of the case on the one side or the other.43 There
is, however, one condition that the proceedings must be bona fide. Here no
doubt the Society knew that the plots had been released from the mortgage,
but it was also clear that the release was to enable the mortgagor to dispose of
some of the plots and make a payment to the Society. This amount was never
paid and the Society must have bona fide felt that the plots still remained
encumbered. In fact the attitude of the mortgagor in not claiming that these
plots be removed from the mortgage award shows that he too felt that this
was the true position. In Gouri Dutt Maharaj case referred to by us, it was
said that if the proceedings were bona fide, the applicability of Section 52
was not avoided.44
In Sefali Roy Chowdhary v A.K. Dutta45, the Supreme Court held as
CASE PILOT follows:
The doctrine of lis pendens means that no party to the litigation can alienate
the property in dispute so as to affect the other party, and rests upon this
foundation that it would plainly be impossible that any action or suit could
be brought to a successful termination if alienations pendente lite were per
mitted to prevail. (Observation of Turner, LJ in Bellamy v Sabine46, quoted
with approval by the Privy Council in Faiyaz Husain Khan v Munshi Prag
40. AIR 1967 SC 1440.
41. 1888 SCC OnLine PC 8: (1887-88) 15 IA 97.
42. Nilakant v Suresh Chander, 1885 SCC OnLine PC 18: (1884-85) 12 IA 171 and Moti Lal
v Karrab-Ul-Din, 1897 SCC OnLine PC 16: (1896-97) 24 IA 170; Jayaram Mudaliarv
Ayyaswami, (1972) 2 SCC 200 (Partition).
43. See, Gouri Dutt Maharaj v Sk Sukur Mohammed, 1948 SCC OnLine PC 27: (1947-48)
75 IA 165.
44. Tikkachand Rantvilas Gilda v Jankibai Pyarelal Shrivas, AIR 2015 NOC 546 (Bom), a
suit was pending between mortgagor and mortgagee, property transferred during pen
CASE PILOT
dency, hit by the principle of lis pendens.
45. (1976) 3 SCC 602; Ram Harakh v Hamid Ahmed Khan, (1998) 7 SCC 484.
46. (1857) 1 DG & J 566, 584; Indu Kakkar v Haryana State Industrial Development
Corpn Ltd, (1999) 2 SCC 37. Joginder Singh v Kewal Singh, AIR 2015 NOC 586 (P&H),
Narain* 47). But a sub-tenant who avails of the provisions of Section 16(3) of
the West Bengal Premises Tenancy Act which extinguishes the tenant’s inter
est in the portion of the premises sublet and confers on the sub-tenant the
right to hold the tenancy directly under the superior landlord, cannot be said
to have alienated the property pendente lite. Section 5 of the Transfer of
Property Act defines transfer of property as an act by which a living person
conveys property to another. When the legislature in exercise of its sovereign
powers regulates the relations of landlord and tenant altering or abridging
their rights what it does is not a transfer of property attracting the doctrine
of lis pendens.
Specific performance disputes.—The doctrine applies to suits for
specific performance of a contract to sell immovable property and
pre-emption suits.48
The owner of a property who was a party to the suit about the sale,
sold the property to a second purchaser. The sale was effected at a time
when the first buyer had already filed a suit for specific performance
of the sale to him. The court said that the doctrine of lis pendens was
attracted notwithstanding the fact that the right of the second purchaser
could be protected under Section 19(b), Specific Relief Act, 1963.49
An agreement for sale of a property was made during the pendency of
a suit. The agreement holder sold it to a third party. A suit for specific
performance was filed against such reseller. A further sale was effected
by the third party. This was held to be valid. The seller was impleaded
subsequently. The deemed date of commencement of the suit was the
date of service of summons on him. He had effected the transfer before
that date.50
A suit decided ex parte or compromised is not tainted by fraud or
collusion.
Pendency of injunction order.—An injunction was granted by the
court before the plaint was presented before the court of competent juris
diction. The court said that an injunction order is not without any signif
icance. The sale deed executed during subsistence of the order and in its
contravention was held to be void.51
property already partitioned between three brothers and they were put in possession of
their respective shares. Sale effected by owner of his share, not hit by lis pendens.
47. 1907 SCC OnLine PC 6: (1906-07) 34 IA 102.
48. Ram Peary v Gauri, 1977 SCC OnLine All 455: AIR 1978 All 318. The onus of proving
fraud lies upon the person alleging it. (Chandradip Singh v Board of Revenue, 1977 SCC
OnLine Pat 75: AIR 1978 Pat 148.) Kirpal Kaur v Jitender Pal Singh, (2015) 9 SCC 356,
the first donee transferred the property to the second donee. This fact was not disclosed
right up to the Supreme Court. Hence, S. 52 (doctrine of lis pendens} applied. The suit was
for partition. This right was not likely to be affected by S. 52.
49. Gurusiuamy Nadar v P. Lakshmi Ammal, (2008) 5 SCC 796.
50. Seenivasan v Peter Jebaraj, (2008) 12 SCC 316.
51. Jehal Tanti v Nageshtuar Singh, (2013) 14 SCC 689; Prataprao Narayan Pawar v
Ramchandra Dalichand Sancheti, AIR 2008 NOC 1412 (Bom), purchaser of property
during the continuance of a prohibitory order, acquired no rights.
Dealing with mortgaged property in dispute.—The mortgagor

inducted a tenant into the mortgaged property during pendency of a suit.
The court said that the right of a mortgagor to create a lease and rights
of lessee of any such lease are all subject to the decision under Section 52.
The mortgagor cannot induct any person as a tenant into the mortgaged
property which is the subject-matter of litigation between the mortgagor
and mortgagee, which would be detrimental to the rights of the mortga
gee. Such lessee is bound by the decision of the court when the lessee is
inducted at a time when a suit for sale by the mortgagee is pending. The
lessee cannot resist the claim for possession of the auction-purchaser in
the mortgage sale.52
Suit must not be collusive.—A collusive suit, which is not filed by
reason of any bona fide ground of litigation, does not attract the doctrine
of lis pendens. Explaining the purport of such a suit, the Supreme Court
said:
In a collusive proceeding the claim put forward is fictitious, the contest over
it is unreal, and a decree passed therein is a mere mash having the similitude
of a judicial determination and worn by the parties with the object of con
founding third parties.53
Impleadment of lis pendens transferee.—A suit was filed by the
plaintiff landlord for eviction, recovery of arrears of rent, etc. While the
suit was still pending she disposed of her right, title and interest in the
property, and thereafter abandoned the suit, not pursuing it any further.
The court said that in such circumstances impleadment of the lis pen
dens transferee had become necessary. Without such impleadment there
would be no effectual adjudication. It was also necessary for avoidance
of multiplicity of litigation.54
An impleadment of this kind may not become necessary in all cases,
particularly, when such transferee is already aware. A family member
in a suit for partition had obtained a preliminary decree. The matter of
final decree was still pending. At this stage he entered into partnership
with another person and brought in his share. The partnership became a
pendente lite transferee. Its impleadment was considered to be not neces
sary. The fact being already within its knowledge.55 Where the interest of
the pendente lite transferee in the subject-matter of the suit was of sub
stantial nature, it was held that he should have an opportunity to defend
52. Sunita Jugalkishore Gilda v Rainanlal Udhoji Tanna, (2.013) 10 SCC Z58.
53. Nagubai Animal v B. Shama Rao, AIR 1956 SC 593, in this case a bogus charge on the
property was created. That did not affect the bona fide sale. Bhagu/an Bai v Chiranji Lal,
AIR 1009 NOC 1701 (P&H), the court has to examine the genuineness of the litigation.
54. Shuuam Construction (P) Ltd v Babita Mohanty, 2.009 SCC OnLine Ori 6z: AIR zoio
Ori 65.
55. Nagananda v Gowramma, 2013 SCC OnLine Kar 1631: AIR Z013 Kar 137, application
for impleadment was rejected.
his cause by joining the suit as an essential party instead of compelling

him to file a separate suit bringing about multiplicity of suits.56
Whether impleaded or not, such transferee becomes bound by the ulti
mate decision as much as any other party. He cannot raise any objection
under Order 21, Rule 97, CPC.5758
FRAUDULENT TRANSFER [S. 53]

Section 53 deals with the doctrine of fraudulent transfer.
53. Fraudulent transfer. — (1) Every transfer of immovable property made
with intent to defeat or delay the creditors of the transferor shall be voidable at
the option of any creditor so defeated or delayed.
Nothing in this sub-section shall impair the rights of a transferee in good faith
and for consideration.
Nothing in this sub-section shall affect any law for the time being in force
relating to insolvency.
A suit instituted by a creditor (which term includes a decree-holder whether he
has or has not applied for execution of his decree) to avoid transfer on the ground
that it has been made with intent to defeat or delay the creditors of the transferor
shall be instituted on behalf of, or for the benefit of, all the creditors.
(2) Every transfer of immovable property made without consideration with
intent to defraud a subsequent transferee shall be voidable at the option of such
transferee.
For the purposes of this sub-section, no transfer made without consideration
shall be deemed to have been made with intent to defraud by reason only that a
subsequent transfer for consideration was made.
The section does not apply to government grants or transfers.
ENGLISH LAW
The English Law on the subject is based upon the Twyne case53, Smith’s
Leading Cases 1. In that case Pierce was indebted to Twyne and also to
C. C brought an action of debt against Pierce, and pending the writ,
Pierce, being possessed of goods and chattels, in secret made a general
deed of gift of all his goods and chattels, real and personal whatsoever
to Twyne, in satisfaction of his debt; notwithstanding that Pierce contin
ued in possession of the goods, and marked them with his own mark.
Afterwards, C had judgment against Pierce and when his goods were
sought to be seized in execution of the judgment, Twyne and others
resisted. On the question whether the gift in favour of Twyne was fraud
ulent, it was held:
56. Bhanumani Sahu v State of Orissa, 2.012. SCC OnLine Ori 272: AIR 2013 Ori 52.
57. Haji Abdul Mateen v Sk Haji Firozuddin, 2014 SCC OnLine Del 1397: AIR 2014 Del
in.
58. (1601) 3 Co Rep 80b: 76 ER 809.
(i) That this gift had the signs and marks of fraud, because the gift is gen
eral, without exception of his apparel, or of anything of necessity, for it
is commonly said, quod dolus versatur in generalibus.
(z) The donor continued in possession, and used them as his own; and by
reason thereof he traded and trafficked with others, and defrauded and
deceived them.
(3) It was made in secret, et dona clandestina sunt semper suspiciosa.
(4) It was made pending the writ.
(5) Here was a trust between the parties, for the donor possessed all, and
had them as his proper goods, and fraud is always apparelled and clad
with a trust, and trust is the cover of fraud.
(6) The deed contains, that the gift was made honestly, truly and bona
fide-, et clausulae inconsuet’ semper inducunt suspicionem.
Notwithstanding here was a true debt due to Twyne, and a good consid
eration of the gift, yet it was not made on a good consideration and bona
fide, be cause no gift shall be deemed to be bona fide which is accompa
nied with any trust (in favour of the donor).
The law was enacted in 13 Elizabeth c. 5 and 27 Eliza beth c. 4 and
finally in Section 173, Law of Property Act, 1925, repealing the earlier
laws.
INDIAN LAW
Section 53 of the Indian Act as it originally stood was based on the stat
utes of Elizabeth. The section is now recast and is in consonance with
that of the English statute. The first part deals with transfers in fraud
of creditors, the second in fraud of subsequent purchaser. The onus of
proving fraud lies upon the person alleging it.59 A transfer though it may
not offend this section could still be avoided either under Section 55,
Presidency Towns Insolvency Act, or Section 53, Provincial Insolvency
Act, and a provision saving insolvency law is introduced in the section.
Such a provision is necessary because a transaction which prefers one
creditor to another is not a transfer which defeats or delays creditors. It
is only when property is removed from all the creditors for the benefit of
the debtor that the section is attracted. Whether a transaction is of that
nature would depend on the facts and circumstances of each case. If the
transfer is fictitious there is no difficulty, but if it is supported by con
sideration then collusion with the transferee will have to be established.
This naturally raises the question as to the position when the con sid
eration is good in part. Even in such a case if the transfer was for the
59. Chandradip Singh v Board of Revenue, 1977 SCC OnLine Pat 75: AIR 1978 Pat 148.
Mina Kuniari Bibi v Bijoy Singh Dudhuria, 1916 SCC OnLine PC 86: AIR 1916 PC
238, decision about fraudulent nature of the transaction must be taken on legal grounds
as shown by legal testimony. Gurcharan Kaur v Sukhiuant Singh, AIR 2013 P&H 42, a
claim through adverse possession could not be perfected, revenue records showed permis
sive tenancy.
purpose of delaying or defeating creditors, then, there being fraud, the

transaction will be set aside in toto. But if a part of the consideration is
utilised for paying off a mortgage debt of the transferor (but not a money
debt), then either the transfer would be treated as valid to that extent or
if the transfer is set aside the vendee is given a charge on the property.
In C. Abdul Shukoor Saheb v Arji Papa Rao60, a sale deed was exe
cuted in 1949 with respect to a part of the assets of the vendors. A cred CASE PILOT
itor of the vendors filed a suit for recovery of his debt and attached that
very property before judgment. A claim petition by the purchaser was
dismissed under Order 21, Rule 63, CPC, and the attachment was con
firmed. The purchaser filed a suit to have the summary order set aside STATUTE PILOT
and the creditor contended that the sale was for the purpose of delaying
or defrauding creditors and that the purchaser was not a bona fide pur
chaser for value. It was held:
(1) The fact that the entirety of the debtor’s property was not sold can
not by itself negative the applicability of Section 53(1) unless there is
cogent proof that there is other property left sufficient in value and of
easy availability to render the alienation in question immaterial for the
creditors.
(2) On the evidence, (a) the object of the transaction was to put the prop
erty out of the reach of the creditors; and (b) the plaintiff was not a
transferee in good faith.
(3) A transfer which is voidable under Section 53(1) of the Transfer of
Property Act can be avoided not only by a suit filed by a creditor
impugning the transfer on behalf of himself and the other creditors,
but also by way of defence to a suit under Order XXI, Rule 63, Civil
Procedure Code, by a claimant whose application has been rejected in
summary proceedings.
In coming to this conclusion Their Lordships quoted extensively with
approval from Ramaswami Chettiar v Mallappa Reddiar61, where the
learned judges of the Madras High Court, said: CASE PILOT
A creditor decree-holder who is in most cases a stranger, can not reasonably

be expected to know of his own knowledge whether a transfer by his judg
ment-debtor is only fraudulent or is wholly nominal or partly nominal and
partly fraudulent, and whether the transferee is in possession and if in pos
session, whether he is so for himself or for the judgment-debtor. He would
therefore, usually both in the claim petition and in the suit which afterwards
arises out of the order against the claimant, be obliged to raise and be jus
tified in raising alternatively all the pleas open to him, and the Court which
decided the claim against the claimant might, in its conclusions on each of
the points, be either right or wrong. To hold that a plea based on the transfer
being voidable under Section 53(1) could not be raised in defence to a suit
60. AIR 1963 SC 1150: 1963 Supp (2) SCR 55; Chogmal Bhandari v CTO, (1976) 3 SCC 749.
61. 1920 SCC OnLine Mad 128: AIR 1920 Mad 748.
to set aside a summary order would mean that ‘the creditor decree-holder
would be in a much worse position for his success in the summary claim pro
ceedings than if he had lost in those proceedings’.... If the creditor knowing
of the transfer applies for attachment, the application is sufficient evidence of
his intention to avoid it; if he only hears of the transfer when a claim petition
is preferred under Order 21, Rule 58, and still maintains his right to attach,
that again is a sufficient exercise of his option to avoid and entitles him to
succeed in the subsequent suit under Rule 63 ....
The suit under Rule 63 is by the unsuccessful party to the claim-petition ‘to
establish the right which he claims to the property in dispute’. Whether this
suit be instituted by the attaching decree-holder or by the transferee-claim
ant, it must equally be decided in favour of the former if the transfer is shown
to have been fraudu lent; because in consequence of the fraudulent character
of the transfer and its avoidance by the judgment-creditor, the result is that
the transferee has not the right which he claims, namely, to hold the property
free from attachment in execution by the judgment-creditor.
In the Abdul Shakoor case62, the Supreme Court then examined if any
change was brought about in the law as a result of the amendment by
Act 20 of 1929 and held:
In decisions rendered prior to the amendment, there were a large number
in which it was held, following certain English cases decided with reference
to 13 Eliz. c. 5 on which Section 53(1) was based, that suits by creditors for
avoiding a transfer under Section 53(1) was a representative action. To that
general rule however, an exception was recognised in a number of decisions
when the suit was to set aside a summary order under Order XXI, Rule 63,
and was brought by an attaching decree-holder against whom an adverse
order had been made in the summary proceedings, it being held that such a
suit need not be in a representative capacity. The decisions on this point were
however not uniform. It was merely to have a uniform rule and to avoid these
conflicting decisions that the third paragraph was inserted so that after the
amendment the rule that a suit by a creditor should be brought in a repre
sentative capacity would apply as much to a suit to set aside a summary order
under Order 21, Rule 63, as to other suits. It was not suggested that there
was any thing in the terms of the amended Section 53(1) which referred to a
defence to a suit and, in fact, learned counsel did not contend that if a defence
under Section 53(1) could be raised by a defeated attaching-creditor such a
de fence had to be in a representative capacity. From a provision as to how a
plaintiff, if he filed a suit, should frame it, we can see no logical process by
which it could be held that a defendant cannot impugn the validity of the sale
which is voidable at his instance.
In T.P. Petherpermal Chetty v R. Muniandi Servai63, in June 1895, a sale
CASE PILOT deed was executed, of land, in favour of the predecessor of the appellant.
The transaction was not real but benami. In September 1895, an e9u^
table mortgagee of the land sued to establish his lien on the ground that
62. C. Abdul Shukoor Saheb v Arji Papa Rao, AIR 1963 SC 1150: 1963 Supp (2) SCR 55.
63. 1908 SCC OnLine PC 5: (1907-08) 35 IA 98.
S. 531 CERTAIN EQUITABLE RULES WHEN RIGHTS CONFLICT 145
the sale was intended to defraud creditors and obtained a decree with the
result that the equitable mortgagee was paid off and the mortgage was
discharged. On the death of the vendor of the land, the respondent who
was his heir sued the appellant, the legal representative of the purchaser
for the recovery of the land. The defence raised was that the plaintiff,
on account of his participation in the fraudulent attempt to defeat his
creditor, was not entitled to recover possession of the land. It was held:
Persons have been allowed to recover property which they had assigned
away, where they had intended to defraud creditors, who, in fact, were never
injured.... But when the fraudulent or illegal purpose has actually been
effected by means of the colourable grant, then the maxim applies, in pari
delicto potior est conditio possidentis. The Court will help neither party. Let
the estate lie where it falls....
To enable a fraudulent confederate to retain property transferred to him in
order to effect a fraud the contemplated fraud must, according to the author
ities, be effected. Then, and then alone, does the fraudulent grantor, or giver,
lose the right to claim the aid of the law to recover the property he has parted
with.
The principle of this case will not however apply if the transferor seeks for
possession from the transferee before the fraud is effectuated.
In Immami Appa Rao v Gollapalli Ramalingamurthi64, a sale of prop- kFEEz
erty was effected with the mutual consent of the vendor and vendee to case pilot
defraud the creditors of the vendor. The transfer was not supported by
any consideration and the transferee agreed to act as the benamidar
until the transferor required him to reconvey the property to his sons.
After the creditors had thus been defrauded, the transferor and his sons
trespassed and occupied the property. The transferee thereupon, filed
the suit to recover possession. The transferor, in defence, urged that the
transferee could not claim the properties, because it was a fraudulent
transfer. It was held:
Reported decisions bearing on this question show that consideration of this
problem often gives rise to what may be described as a battle of legal maxims.
The appellants emphasised that the doctrine which is pre-eminently applica
ble to the present case is ex dolo malo non oritur actio or ex turpi causa non
oritur actio. In other words, they contended that the right of action cannot
arise out of fraud or out of transgression of law; and according to them it
is necessary in such a case that possession should rest where it lies in pari
delicto potior est conditio possidentis; where each party is equally in fraud
the law favours him who is actually in possession, or where both parties are
equally guilty the estate will lie where it falls.... Said Lord Mansfield, C.J. in
Holman v Johnson65
‘... the objection that a contract is immoral or illegal as between plaintiff
and defendant sounds at all times very ill in the mouth of the defendant.
64. AIR 1962 SC 370: (1962) 3 SCR 739.
65. (1775) 1 Cowp 341.
It is not for his sake, however, that the objection is ever allowed: but it is
founded in general principles of policy which the defendant has advantage
of, contrary to the real justice, as between him and the plaintiff, by acci
dent if I may say so. The principle of public policy is this: ex dolo malo
non oritur actio. No court will lend its aid to a man who founds his cause
of action upon an immoral or illegal act. If, from the plaintiff’s own stat
ing or otherwise the cause of action appears to arise ex turpi causa or the
transgression of a positive law of this country, there the court says he has
no right to be assisted. It is upon that ground the court goes: not for the
sake of the defendant, but be cause they will not lend their aid to such a
plaintiff’.
There can be no question of estoppel in such a case for the obvious reason
that the fraud in question was agreed by both the parties and both parties
have assisted each other in carrying out the fraud. When it is said that a
person cannot plead his own fraud it really means that a person cannot be
permitted to go to a court of law to seek for its assistance of relief and yet
base his claim for the court’s assistance on the ground of his fraud. In this
connection it would be relevant to remember that the transferee can be said
to be guilty of a double fraud; first he joined the transferor in his fraudulent
scheme and participated in the commission of fraud the object of which was
to defeat the creditors of the transferor, and then he committed another fraud
in suppressing from the Court the fraudulent character of the transfer when
he made out the claim for the recovery of the properties conveyed to him.
The conveyance in his favour is not supported by any consideration and is the
result of fraud; as such it conveys no title to him. Yet, if the plea of fraud is not
allowed to be raised in defence the Court would in substance be giving effect
to a document which is void ab initio. Therefore, we are inclined to hold that
the paramount consideration of public interest requires that the plea of fraud
should be allowed to be raised and tried, and if it is upheld the estate should
be allowed to remain where it rests. The adoption of this course, we think, is
less injurious to public interest than the alternative course of giving effect to
a fraudulent transfer.
Whatever the rights between a transferor and a benami transferee may
be when the transaction is entered into for the purpose of defeating cred
itors, a creditor himself can ignore a benami transaction and proceed
against the property as if it was that of the transferor. The creditor need
not have it set aside under this section, because the transaction is not a
4 (—\ transfer at all.
In Chogmal Bhandari v CTO66, a partnership of two partners stood
case pilot dissolved in 1963. They executed a registered deed of trust by which
properties mentioned therein were vested in the trustees for the pur
pose of paying off the creditors who were named therein. Subsequently,
a business was started by the grandson of one of the partners and for
the years 1966-1969 provisional assessments were made in his name. In
1971, the Sales Tax Authorities made the assessments in the name of the
66. (1976) 3 SCC 749.
joint Hindu family for the first time but found that the tax could not be
realised from the assessees on account of the trust deed, and therefore,
treated the deed as void and fraudulent as having been brought about to
defeat the debts of the Sales Tax Department in the shape of assessments
made against the joint Hindu family. The facts found were:
i. That at the time when the trust deed was executed no assessment
order against the joint Hindu family had been passed. Thus, there
was no real debt due from one of the executants of the trust at the
time the trust was executed.
2. The trust did not have for its object any unlawful purpose.
3. The names of the creditors were clearly mentioned as also the prop
erties some of which had been sold to liquidate the debts of the
settlors.
4. Under the trust the executants did not reserve any advantage or
benefit for themselves.
5. There was no material to show that the creditors had obtained col
lusive decrees or that they were aware of the debts owed by one of
the executants to the Sales Tax Department before the execution of
the trust deed. On the question whether the trust deed was hit by
Section 53, Transfer of Property Act, the Supreme Court held:
In the facts and circumstances of the case it can not be said that the
trust deed was executed to defraud the creditors, namely, the Sales Tax
Department. Under the section a person who challenges the validity of
the transaction must prove two facts: 1) that a document was executed
by the settlor; and 2) that the said document was executed with a clear
intention to defraud or delay the creditors. How the intention is proved
would be a matter which would largely depend on the facts and circum
stances of each case. It is well settled that a mere fact that the debtor
chooses to prefer one creditor to the other either because of the priority
of the debt or otherwise, by itself cannot lead to the irresistible inference
that the intention was to defeat the other creditors.
In Musahar Sahu v Hakim Lal67, the Privy Council observed as
follows: CASE PILOT
The transfer if defeats or delays the creditors is not an instrument which

prefers one creditor to another, but an instrument which removes property
from the creditors to the benefit of the debtor. The debtor must not retain a
benefit for himself. He may pay one creditor and leave another unpaid.68 So
soon as it is found that the transfer here impeached was made for adequate
consideration in satisfaction of the genuine debts and without reservation
of any benefit to the debtor, it follows that no ground for impeaching it lies
in the fact that the plaintiff who also was a creditor was a loser by payment
67. 1915 SCC OnLine PC 50: (1915-16) 43 IA 104.

68. Middleton v Pollock, (1876) LR 2 Ch D 104.
being made to this preferred creditor—there being in the case no question

of bankruptcy. This decision was endorsed by the Privy Council in Ma Piva
May v S.R.M.M.A. Chettyar Firm69, where the Judicial Committee observed
as follows: ‘A debtor is entitled to prefer a creditor unless the transaction
can be challenged in bankruptcy and such a preference cannot in itself be
impeached as falling within Section 53 ...
It may be noted that in Section 53, Transfer of Property Act if a transfer
is made with intent to defeat or delay the creditors it is not void but only
voidable. If the transfer is voidable then the Sales Tax Authorities cannot
ignore or disregard it but have to get it set aside through a properly con
stituted suit after impleading the necessary parties and praying for the
r-A desired relief.
In Chutterput Singh v Maharaj Bahadoor7071 , the Privy Council
case pilot observed as follows:
No issue was stated in the suit whether the transfers were or were not liable
to be set aside at the instance of Dhanput under Section 53 of the Transfer
of Property Act and no decree has been made for setting them aside. Such an
issue could be raised and such a decree could be made only in a suit properly
constituted for that purpose, and this suit was not so constituted either as to
parties or otherwise.
To the same effect is a latter decision of the Privy Council in Zafrul

Hasan v Farid-Ud-Din7[, where Lord Thankerton made the fol lowing
observation:
Further, under Section 53, the Wakfnama would only be voidable at the
option of the person so defrauded or delayed.... Until so voided the deed
remains valid.
The basis of the section is that one ought to be just before being gener
ous. 1) If the transfer is for valuable consideration and in good faith, that
is, good faith of the transferee, the transfer will be unassailable; 2) if the
transfer is for good consideration and in good faith, that is good faith of
the transferor, the transfer will be protected;72 3) if the transfer is a gift
to a stranger, the transferee’s good faith is irrelevant. It is the transfer
or’s mind one has to consider for deciding whether he had an intention
to defraud. Another important point to be noticed is that the section
69. 1929 SCC OnLine PC 69: AIR 1929 PC 279.

70. 1904 SCC OnLine PC 25: (1904-05) 32 IA 1.
71. 1944 SCC OnLine PC 17: AIR 1946 PC 177; V. Prasad v Govindasiuami Mudaliar, (1982)
1 SCC 185; Jangali Tetvari v Babban Tewari, 1982 SCC OnLine All 364: AIR 1982 All
316 (Sham transfer); Phoolan v Surendra, 1983 SCC OnLine AH 412: AIR 1983 All 440;
Sushilabehn v Anandilal Bapalal, 1982 SCC OnLine Guj 131: AIR 1983 Guj 126; Union
of India v Ram Peary, AIR 1984 Cal 215; Union of India v Rajeswari and Co, (1986) 3
SCC 426; Hamda Amnial v Avadiappa Pathar, (1991) 1 SCC 715.
72. Standard Chartered Bank v Andhra Bank Financial Services Ltd, (2006) 6 SCC 94, a
transaction resulting in rights and obligations cannot be treated as a sham transaction.
applies to creditors existing at the time of transfer as well as subsequent

creditors. That is, where a person first transfers all his property and then
acquires debts.
The two rules of insolvency law relevant for this section are: i) a vol
untary transfer other than in consideration of marriage will be invalid if
a transferor becomes insolvent within two years; and 2) if one creditor
is preferred to another within three months of the insolvency, the acts of
preference will be set aside if, (a) they are voluntary, and (b) insolvency
was imminent at the time of the acts of preference. x (~rA
An example of lack of good faith is to be found in Samittri Devi v Uzzz/
Sampuran Singh73. As soon as the landowner came to know that his case pilot
property was being sold in a clandestine manner, he sent a notice under a

certificate of posting. A copy of the notice and of the certificate of post
ing was produced in evidence. The agreement of purchase was signed five
days after despatch of the notice. The Supreme Court came to the con
clusion that it could be presumed that the notice was duly served before
the agreement of purchase was signed. Hence, there was not a bona fide
purchase for value without notice. The real owner obtained the decree
in his favour.
EXERCISES
i. When is a transferee from the ostensible owner protected as against
the real owner? (pp. 123-127)
2. Explain the maxim—Nemo dat quod non habet. (p. 123)
3. When can a holder under a defective title claim compensation for
improvements made by him? (pp. 128-130)
4. WhatistheprinciplebehindandthelimitsofthedoctrineofZ/spendens?
(PP- I3o-i39)
5. What was decided in the Twyne case? (p. 139)
6. Explain the “doctrine of fraudulent transfer”, (pp. 139-147)
73. (2011) 3 SCC 556.

150 LAW OF TRANSFER OF PROPERTY
Visit ebcexplorer.com to access cases

and statutes referred to in the book
through EBC Explorer™ on SCC Online*;
along with updates, articles, videos, blogs
and a host of different resources.
The following statutes from this chapter ar

available through EBC Explorer™:
• Benami Transactions (Prohibition) Act,
• Code of Civil Procedure, 1908
The following cases from this chapter are a

through EBC Explorer™:
• C. Abdul Shukoor Saheb v Arji Papa Rao, AIR 1963 SC case pilot
1150: 1963 Supp (2) SCR 55
• Chogmal Bhandari v CTO, (1976) 3 SCC 749
• Chutterput Singh v Maharaj Bahadoor Bahadoor, 1904 SCC OnLine
PC 25: (1904-05) 32 IA 1
• Ibrahim Fathima v Mohd Seleem, 1978 SCC OnLine Mad 167
• Immami Appa Rao v Gollapalli Ramalingamurthi, AIR 1962 SC 370
• Kedar Nath Lal v Ganesh Ram, (1969) 2 SCC 787
• Musahar Sahu v Hakim Lal, 1915 SCC OnLine PC 50
• Nagubai Ammal v B. Shama Rao, AIR 1956 SC 593
• Phool Kuer v Prem Kuer, AIR 1952 SC 207
• R.S. Maddanappa v Chandramma, AIR 1965 SC 1812
• Rajendra Singh v Santa Singh, (1973) 2 SCC 705
• Ramaswami Chettiar v Mallappa Reddiar, 1920 SCC OnLine
Mad 128
• Ramcoomar v Macqueen, 1872 SCC OnLine PC 29
• Ramrao Jankiram Kadam v State of Bombay, AIR 1963 SC 827
• Samittri Devi v Sampuran Singh, (2011) 3 SCC 556
• Sanjay Verma v Manik Roy, (2006) 13 SCC 608
• Sefali Roy Chotudhary v A.K. Dutta, (1976) 3 SCC 602
• Sohan Lal v Raghunath Prasad, 1981 SCC OnLine All 245
• T.P. Petherpermal Chetty v R. Muniandi Servai, 1908 SCC OnLine
PC 5
• Tikkachand Ramvilas Gilda v Jankibai Pyarelal Shrivas, AIR 2015
NOC 546 (Bom)
Chapter 8
Undivided Ownership
JOINT OWNERSHIP [S. 44]

As I have already indicated the relevant sections are Sections 44 to 47.
Their scope is as follows:
Section 44 deals with transfer by one co-owner.
44. Transfer by one co-owner.—Where one of two or more co-owners of
immovable property legally competent in that behalf transfers his share of such
property or any interest therein, the transferee acquires, as to such share or inter
est, and so far as is necessary to give effect to the transfer, the transferor’s right
to joint possession or other common or part enjoyment of the property, and to
enforce a partition of the same, but subject to the conditions and liabilities affect
ing, at the date of transfer, the share or interest so transferred.
Where the transferee of a share of a dwelling-house belonging to an undivided
family is not a member of the family, nothing in this section shall be deemed to
entitle him to joint possession or other common or part enjoyment of the house.
CO-OWNERS
There are three types of co-ownership, namely, joint tenancy,
tenancy-in-common and coparcenary. Joint tenancy or co-tenancy arises
when there is benefit of survivorship or jus accrescendi among the joint
tenants, that is, if one of them died, his interest went to the co-tenants
and not to the heirs and representatives of the deceased.
The term “tenants” in this context is used in the sense of possession or
occupation and not in the sense of a tenant-landlord relationship.
Joint tenancy in English Law has the characteristics known as unity
of possession, unity of interest, unity of title and unity of time. The unity
of possession is described in old French as seisin per my et per tout, that
is, possession of every piece and the whole. Unity of interest indicates
identity of interest; unity of title arises when all the co-tenants derive
their title by the same instrument and unity of time arises when the inter
est vests in them at the same moment of time. The right of survivorship
w rrw n
which is its chief characteristic is such that, though a co-tenant could
transfer his interest inter vivos he could not do so by will, because at the
mn hi iwimurnir ’
moment of death survivorship operates, taking precedence over the will.
Under modern English Law, there can be only four joint tenants. If a con
veyance is made to more than four persons say A, B, C, D, E and F, then
A, B, C and D will hold the property at law jointly as trustees for sale,
in trust for all the six persons jointly in equity. Both under common law
and modern law, in England, one joint tenant can not convey his interest
at law to a stranger. Joint tenants are persons who claim the right of
occupation under the same title, possess the property in the same sense
and have common interests and whose title commences from the same
source. In the case of joint tenancy, a right of survivorship is created as
between the joint tenants as between themselves. This principle has been
adopted into the Indian law of succession from the British law.
In the case of coparcenary, it could arise by custom or common law in
England. The custom was recognised in the tenure known as Gavelkind
but is now abolished. Under common law it arose only among female
heirs and their descendents, and the position is the same in modern law.
The jus accrescendi was not recognised among coparceners, nor was the
unity of time since the descendents could hold with ancestors.
In tenancy-in-common, there is only unity of possession, that is, such
a tenant holds property per my but not per tout, there is obviously no jus
accrescendi. Tenants-in-common are in occupation of property together
and may even have unity of commencement of title, but their interests in
the property are separate and distinct. Under Hindu law there is a pre
sumption that co-sharers of a property are tenants-in-common, since the
principle of joint tenancy is unknown in Hindu law.
All these kinds of co-ownership could be put an end to by partition.
The position in Hindu Law (customary) is: That there is no joint ten
ancy of the English kind at all. But by use of appropriate words a joint
family property with right of survivorship could have been created but
not now. But even in such a case, sons of the members of the family
* cz?\ have rights and widows of such members have substantial rights of main-
^—/ tenance. Therefore, it is that the Judicial Committee said in Jogeswar
case pilot Narain Deo v Ram Chund Dutt1, that the principle of joint tenancy as
obtaining in England is quite foreign to Hindu Law. In spite of this cat
egorical statement, we find Mr Justice V. Krishnaswami Iyer stating in
Chinnu Pillai v Kalimuthu Pillai1, while dealing with a joint Hindu fam
ily coparcenary: “The fluctuating character of a joint tenant’s interest
ceases in the hands of his alienee. Williams’ Real Property, zoth Edn.,1 2
1. 1896 SCC OnLine PC 5: (1895-96) 23 IA 37.

2. ILR (1910) 35 Mad 47, 59; I. Gouri v C.H. Ibrahim, 1979 SCC OnLine Ker 198: AIR
1980 Ker 94; Neelavathi v N. Natarajan, (1980) 2 SCC 247; Balaram Pramanik v Arbinda
Pramanik, 1981 SCC OnLine Cal 53: AIR 1981 Cal 266.
S. 44] UNDIVIDED OWNERSHIP 153
p. 138” as if it is the same as a joint tenancy in the English Law of Real

Property. The nearest we have is, when, under the Mitakshara School,
an estate is inherited by two or more widows or daughters, they hold the
property as co-tenants with rights of survivorship.
The joint Hindu family is, however, called a coparcenary in India. It
has to some extent the unities of possession and title, but not those of
time and interest, and unlike the English coparcenary, survivorship is its
prominent characteristic.
Tenancy-in-common is very common in India. Whenever there is
undivided ownership without right of survivorship, when the members
of a Mitakshara Hindu family are divided in status but hold the property
in common without a partition by metes and bounds, and finally under
the Dayabhaga system, the members of the Hindu family hold as ten-
ants-in-common, because there is no right of survivorship among them.
Under the Act there can be any kind of co-ownership, provided it is
not opposed to the personal law of the parties. Since the words “undi
vided family” are general they are not restricted to Hindus only. In the
case of a sale of a dwelling house therefore the purchaser’s remedy is only
to sue for partition and the other co-owners will be entitled to purchase
the stranger’s share at a price fixed by the court.3
When any member of a joint family sells his portion of the family
property which has not been marked out by partition or otherwise, the
purchaser can file a suit for partition and delivery of possession of the
portion to which the selling member is entitled.4 The Supreme Court
restrained a suit for partition filed by the buyer of an undivided share
because the circumstances showed that irreparable damage would have
been caused to the family as a whole if an outsider found entry into the
house.5 The provisions of Transfer of Property Act and Partition Act,
1893 [S. 4] relate to dwelling houses. Sale of an undivided property to a
stranger by the defendant coheir was held to be illegal. A civil suit seek
ing decree for pre-emption in respect of the property so sold was held to
be maintainable.6 A sale by a co-sharer of his share in the dwelling house
attracted Section 44 even if the share was indicated by details. There
was the concurrent decision that the sale was not valid. The High Court
upheld the same.7
This section is based on the principle of substitution. The effect of
this section is that when a co-owner transfers his share of property to a
transferee, the transferee steps into the shoes of the transferor as against
3. Bhim Singh v Ratnakar Singh, 1970 SCC OnLine Ori 41: AIR 1971 Ori 198; Khirode
Chandra Ghoshal v Saroda Prasad Mitra, (1910) 12 Cal LJ 325: (1910) 7 IC 436.
4. Sri Ram v Ram Kishan, 2010 SCC OnLine All 530: AIR 2010 All 125.
5. Dorab Cawasji Warden v Coomi Sarob Warden, (1990) 2 SCC 117.
6. Bina Sukla v Meera Deui Panch, 2008 SCC OnLine Ori 23: AIR 2008 Ori 156.
CASE PILOT
7. Anjan Barman Chondhury v Ranjan Barman Choudhury, 2012 SCC OnLine Gau 569:
AIR 2013 Gau 42.
all the other co-owners and assumes all the rights and liabilities of the
previous co-owner.
A co-owner who holds an undivided share in property has the right to
enjoy the property in common with all the other co-owners. He cannot
claim to be entitled to any particular portion of the property to the exclu
sion of the others. His other right is to have the property partitioned and
it is only after partition has been effected, can he claim an exclusive right
to his share of the property.
As a general rule, the principle of subrogation or substitution applies
when the co-owner of a property transfers his undivided share in the
property to a transferee. The transferee can now claim all the rights held
by the original co-owner. The exception to this is when the property
being transferred is a share in a dwelling house. This exception is based
on convenience. This exception has been carved out to prevent that a
family living together are not forced to reside with a stranger for the only
reason that one member of the family has sold his share in the family
dwelling house to a third party. Therefore, in this situation the transferee
cannot claim a right to reside in the dwelling house along with the family
of the transferor, even though the transferor himself had that right. The
only right that such a transferee can claim is a right to have the property
partitioned.
JOINT TRANSFEREES [S. 45]

45. Joint transfer for consideration.—Where immovable property is trans
ferred for consideration to two or more persons, and such consideration is paid
out of a fund belonging to them in common, they are, in the absence of a contract
to the contrary, respectively entitled to interests in such property identical, as
nearly as may be, with the interests to which they were respectively entitled in
the fund; and, where such consideration is paid out of separate funds belonging
to them respectively, they are in the absence of a contract to the contrary, respec
tively entitled to interests in such property in proportion to the shares of the
consideration which they respectively advanced.
In the absence of evidence as to the interests in the fund to which they were
respectively entitled, or as to the shares which they respectively advanced, such
persons shall be presumed to be equally interested in the property.
This section does not apply to gifts.
It is submitted that if the transferees are Hindus they take the property
as tenants-in-common because joint tenancy other than a coparcenary is
foreign to Hindu Law [see, p. 150].8 However, the presumption of joint
tenancy is drawn among Christians and Parsees.
This section deals with the determination of shares of co-transferees
in a property when there is no contract between them and no agreement
8. Debaraj Pradhan v Ghanshyam, 1979 SCC OnLine Ori 160: AIR 1979 Ori i6z; Mohan
Lal v Board of Revenue, 198Z SCC OnLine All 141: AIR 1982 All 273.
S. 46] UNDIVIDED OWNERSHIP 155
to show what is the distribution of shares as between them. The distribu

tion of shares will be as follows:
i. Where a transfer is made to two or more persons who each,
directly pay consideration to the transferor, the share of each of the
co-transferees is in the proportion to the share of the consideration
advanced by them.
2.. Where the consideration for the transfer is paid out of a common
fund, the share of each co-transferee will be the same as their share
in the common fund.
3. All of this is under the assumption that there is no contract or
agreement which may specifically define the shares of each of the
co-transferees.
4. Where the property is purchased in the name of only one of the
persons, this will not change the facts that all persons who have
advanced consideration are yet co-owners or co-sharers as long as
it is shown that the purchase in the name of one of the co-owners
was with the consent of all and the consideration for the transfer
arose out of a common fund.
TRANSFERS BY PERSONS HAVING

DISTINCT INTERESTS [S. 46]
46. Transfer for consideration by persons having distinct interests.—Where
immovable property is transferred for consideration by persons having distinct
interests therein, the transferors are, in the absence of a contract to the contrary,
entitled to share in the consideration equally, where their interests in the property
were of equal value, and, where such interests were of unequal value, proportion
ately to the value of their respective interests.
Illustrations
(a) A, owning a moiety, and B and C each a quarter share, of mauza Sultanpur,
exchange an eighth share of that mauza for a quarter share of mauza Lalpura.
There being no agreement to the contrary, A is entitled to an eighth share in
Lalpura and B and C each to a sixteenth share in that mauza.
(b) A, being entitled to a life-interest in mauza Atrali and B and C to the
reversion sell the mauza for Rs 1000. A’s life-interest is ascertained to be worth
Rs 600, the reversion Rs 400. A is entitled to receive Rs 600 out of the pur
chase-money, B and C to receive Rs 400.
This section deals with the distribution of shares in the consideration
paid by a transferee to co-transferors. The section provides that co-trans-
ferors will be entitled to share the consideration paid by a transferee
amongst themselves in the same proportion as the shares which they held
in the property which was transferred. This rule will apply in the absence
of a contract to the contrary.
156 LAW OF TRANSFER OF PROPERTY [Chap. 8]
TRANSFERS BY CO-OWNERS OF A SHARE [S. 47]

47. Transfer by co-owners of share in common property.—Where several
co-owners of immovable property transfer a share therein without specifying
that the transfer is to take effect on any particular share or shares of the transfer
ors, the transfer, as among such transferors, takes effect on such shares equally
where the shares were equal, and, where they were unequal, proportionately to
the extent of such shares.
Illustration
A, the owner of an eight-anna share, and B and C each the owner of a four-
anna share, in mauza Sultanpur, transfer a two-anna share in the mauza to D
without specifying from which of their several shares the transfer is made. To
give effect to the transfer one-anna share is taken from the share of A, and half
an anna share from each of the shares of B and C.9
9. Taraknath v Sushil Chandra Dey, (1996) 4 SCC 697.

The following cases from this chapter are available

• Dorab Cawasji Warden v Coomi Sarob Warden, (1990) 2. CASE PILOT
SCC 117
• Jogeswar Narain Deo v Ram Chund Dutt, 1896 SCC OnLine PC 5
Chapter 9
Doctrine o£ Part Performance
PART PERFORMANCE [S. 53-A]

Section 53-A deals with the doctrine.
53-A. Part performance.—Where any person contracts to transfer for con
sideration any immovable property by writing signed by him or on his behalf
from which the terms necessary to constitute the transfer can be ascertained with
reasonable certainty:
and the transferee has, in part performance of the contract, taken possession
of the property or any part thereof, or the transferee, being already in possession,
continues in possession in part performance of the contract and has done some
act in furtherance of the contract,
and the transferee has performed or is willing to perform his part of the
contract,
then, notwithstanding that where there is an instrument of transfer, that the
transfer has not been completed in the manner prescribed therefor by the law for
the time being in force, the transferor or any person claiming under him shall
be debarred from enforcing against the transferee and persons claiming under
him any right in respect of the property of which the transferee has taken or
continued in possession, other than a right expressly provided by the terms of
the contract:
Provided that nothing in this section shall affect the rights of a transferee
for consideration who has no notice of the contract or of the part performance
thereof.
In Maneklal Mansukhbhai v Hormusji Jamshedji Ginwalla & Sons1,
there was an agreement to lease evidenced by the correspondence
1. AIR 1950 SC 1: 1950 SCR 75; Durga Prasad v Kanhiyalal, 1979 SCC OnLine Raj 32:
AIR 1979 Raj 200 (tenant in possession of a part of the property); Chinna Theuar v
Gnanaprakasi Animal, 1978 SCC OnLine Mad 16: AIR 1979 Mad 47; Amveerappa v
Shetty Thamanna, 1978 SCC OnLine AP 144: AIR 1979 AP 156 (Mortgage in possession);
C.V. Narayan Reddy v Katanguru, 1979 SCC OnLine AP 130: AIR 1980 AP 89 (Alienation
prohibited); Narendra Bahadur Tandon v Shankar Lal, (1980) 2 SCC 253; Bishnu Kala
Karki Dholi v Bishnu Maya Darjeeni, 1978 SCC OnLine Sikk 9: AIR 1980 Sikk 1 (not a
rule of justice, equity and good conscience); Ekadasi v Ganga, 1981 SCC OnLine All 481:
AIR 1981 All 373; C. Ramaiah v Mohammadunnisa Begum, 1980 SCC OnLine AP 47:
AIR 1981 AP 38; Bhanabhai Khalpabhai Patel v Collector, 1980 SCC OnLine GDD 6:
between the parties. The lessee (defendant) was put in possession and
rent was accepted from him for several years. No formal lease deed was
however executed. In a suit by the plaintiff to eject the defendant on the
ground that he was a trespasser, it was held:
Section 53-A is a partial importation in the statute law of India of the English
doctrine of part performance. It furnishes a statutory defence to a person
who has no registered title deed in his favour to maintain his possession if he
can prove a written and signed contract in his favour and some action on his
part in part performance of that contract.
WHAT IS THE ENGLISH LAW DOCTRINE

Take a parol contract of sale of land. Suppose, the purchaser has paid the
purchase money, the vendor puts him in possession and the purchaser
spends money on costly structures and leases out the land to lessees. In
fact both sides have done everything except the execution of the deed
of conveyance. If at that stage the vendor brings an action in ejectment
alleging that the purchaser got no title, the court has to choose between
strict adherence to law setting aside all that has been done, or, give relief
to the defendant on the basis that the required formality has been com
plied with; and an English court of equity deeming the first alternative
unjust has chosen the second. Certain limitations are, however, placed
before the defendant is given relief. They are:
1. the act of part performance must be referable to the alleged con
tract and must not be referable to any other title;
2. it must be by the party seeking to avail himself of the equity and
not the act of the other party;
3. it must constitute fraud in either the plaintiff or defendant to take
advantage of the want of formalities in the contract;
4. the contract must be enforceable by court, that is, performance of
the formalities prescribed should not make such contract or trans
fer illegal or of no avail in law, for any purpose;
5. the terms of the contract must be capable of being ascertained;
AIR 1981 GDD 25; Krishnamoorthy Koundar v Paramasiva Koundar, 1981 SCC OnLinc
Mad 74: AIR 1981 Mad 310; Tshering Wongdi Bhatia v Sonant Pintso, 1980 SCC OnLine
Sikk 2: AIR 1981 Sikk 1; Chantan Lal v Surinder Kuntari, 1983 SCC OnLine P&H 188:
AIR 1983 P&H 323; Venkat Dharmaji Gontahvar v Vishiuanath Santbhaji Vertdkar,
1982 SCC OnLine Bom 279: AIR 1983 Bom 413; Barnikana Appalanaidu v Barnikana
Appayyantnta, 1982 SCC OnLine AP 168: AIR 1983 AP 177; Shesh Mai v Harak Chand,
1982 SCC OnLine Raj 22: AIR 1983 Raj 109; Baruna Giri v Rajakishore Giri, 1982 SCC
OnLine Ori 82: AIR 1983 Ori 107; Juharntal v Kapoor Chand, 1982 SCC OnLine Raj 46:
AIR 1983 Raj 139; Teja Singh v Rant Parkash TaIwar, 1983 SCC OnLine P&H 472: AIR
1984 P&H 95; M. Mariappa v A.K, Sathyanarayana Setty, 1983 SCC OnLine Kar 45:
AIR 1984 Kar 50; Gopal Singh v State of Rajasthan, 1983 SCC OnLine Raj 29: AIR 1984
Raj 174; Goswanti Malti Vahuji Maharaj v Purushottam Lal Poddar, 1984 SCC OnLine
Cai 123: AIR 1984 Cal 297.
S. 53-A] DOCTRINE OF PART PERFORMANCE 159
6. the contract must be respecting land; and

7. the formalities should be merely prescribed, that is, it should not
be stated in the enactment prescribing the formalities that absence
of the formalities makes the contract illegal or of no avail for any
purpose.
These limitations are derived from Elizabeth Maddison v John Alderson2.
Generally, putting the purchaser in possession has been considered as CASE PILOT
an act of part performance, but if the purchaser was in possession under
some other antecedent title, mere continuance in possession would not
be regarded as such an act.
The Law of Property Act, 1925, has recognised the doctrine in England.
INDIAN LAW
The Privy Council had at one stage3 decided that this equitable doc
trine was not applicable in India as it would have the effect of set
ting at nought the provisions of the Indian statute law, especially the
Registration Act, 1908. For example, Section 54 provides that a sale of
immovable property of value more than 100 can be made only by a reg
istered instrument; whereas in English Law, the contract was merely not
enforceable without a memorandum of the contract. The Indian legisla
ture, therefore, introduced Section 53-A by Act 20 of 1929. The section
requires, unlike the English Law, a contract in writing duly signed and
containing the terms of the transfer couched in language of reasonable
certainty. Also, putting the vendee in possession and, where he is already
in possession—some further act in execution of the contract—is neces
sary to constitute an act of part performance. When the transferee is not
in possession, there must be a transfer of possession in part performance
of the contract and no other act, however unequivocal it may be, would
suffice. Where the defendant claimed that he was put in possession in
part performance of the agreement and produced an irrevocable power
of attorney in his favour, but the court found that the recitals in the
power of attorney showed that the owner was still in possession, the
Supreme Court held that the finding of the High Court that the defend
ant was not in possession was justified.4 Another requirement is that
the transferee must have either performed his part of the contract or is
willing to do so. The section is not retrospective, that is, in transactions
before 1 April 1930, Indian law does not recognise the doctrine.
The Supreme Court stated the requirements of the section to be some
thing like this:
2. (1888) LR 8 AC 467.
3. G.H.C. Ariffv Rai Jadunath Majumdar Bahadur, 1931 SCC OnLine PC 10: (1931) 33
LW 586.
4. Nanjegoivda v Gangamma, (2011) 13 SCC 232.
I. the contract should be in writing signed by or on behalf of the

transferor;
2. the transferee should have got possession of the immovable prop
erty covered by the contract;
3. the transferee should have done some act in furtherance of the
contract;
4. the transferee has either performed his part of the contract or is
willing to perform it.
Fulfilment of all these conditions is a sine qua non for taking the defence
permitted under the section. In this case, the title over the suit property
was claimed by the appellant on the ground of possession of the property
based on the agreement and the general power of attorney. The fact,
however, appeared from the power of attorney that up to the time of its
execution the property was in possession of the owner. Hence, one of the
requirements was missing. Benefit of Section 53-A could not be allowed.5
There are two matters which may be noticed in connection with
this doctrine. They are 1) the doctrine in Walsh v Lonsdale6, and
2) Section 27-A, Specific Relief Act, 1877, omitted in the Specific Relief
Act, 1963.
Walsh v Lonsdale was a case of lessor and lessee. It was held that
a tenant holding under an agreement to lease, if he could enforce spe
cific performance of the contract, then such a right is a good defence in
an action in ejectment. The scope of the doctrine is explained thus in
Manchester Brewery Co v Coombs (i)7:
CASE PILOT
It applies only to cases where there is a contract to transfer legal title, and
an act has to be justified or an action maintained by force of the legal title
to which such contract relates. It involves two questions: (1) Is there a con
tract of which specific performance can be obtained? (2) If yes, will the title
acquired by such specific performance justify at law the act complained of,
or support at law the action in question? It is to be treated as though before
the Judicature Acts there had been, first, a suit in equity for specific perfor
mance, and then an action at law between the same parties; and the doctrine
is applicable only in those cases where specific performance can be obtained
between the same parties in the same court, and at the same time as the sub
sequent legal question falls to be determined.
The doctrine is of general application and has been invoked in the case of
sales, exchanges and mortgages, etc. though the case is one of lease.8 There
has to be a contract for value for transfer of an immovable property. In this
case there was an agreement to sell a property. It contained a statement which
5. Nanjegowda v Gangamma, (2.011) 13 SCC 232.

6. (1882) LR 21 Ch D 9 (CA).
CASE PILOT
7. (1901) 2 Ch 608.
8. Shankar Gopinath Apte v Gangabai Hariharrao Pattuardhan, (1976) 4 SCC 112 (case of
person holding under power of attorney, section held not applicable).
S.27-A] * DOCTRINE OF PART PERFORMANCE 161
showed that it was for transfer of a right in property and was in the nature
of part performance. The court said that the validity of such a document
could not be doubted merely on the ground of confusion about consideration
especially when the agreement was admittedly signed by the vendor and his
witness.9
The contract must be in writing because the section is not applicable to
oral transfers.1011
Section 2,7-A, Specific Relief Act, 1877 was in the following terms:
27-A. Specific performance in case of part performance of contract to
lease. — Subject to the provisions of this Chapter, where a contract to lease
immovable property is made in writing signed by the parties thereto or on their
behalf, either party may, notwithstanding that the contract, though required to
be registered, has not been registered, sue the other for specific performance of
the contract if
(a) where specific performance is claimed by the lessor, he has delivered pos
session of the property to the lessee, in part performance of the contract;
and
(b) where specific performance is claimed by the lessee, he has, in part perfor
mance of the contract, taken possession of the property, or being already
in possession, continues in possession in part performance of the con
tract, and has done some act in furtherance of the contract:
Provided that nothing in this section shall affect the rights of a transferee
for consideration who has no notice of the contract or of the part performance
thereof.
Under this section, both the lessor and lessee could invoke the doctrine of
part performance but under Section 53-A, Transfer of Property Act, it is
only the transferee that has the right to rely on the doctrine. The doctrine
of Walsh v Lonsdale11 and the conditions laid down therein, namely, that
the contract must be capable of specific performance, are not applicable
to cases coming under Section 53-A.
9. Ashok Indoria v Vidyaiuanti, 1014 SCC OnLine Del 2905: AIR 2015 Del 5.
10. V. R. Sttdhakara Rao v T.V. Kamesivari, (2007) 6 SCC 650, benefit of the section is not
available to a person who is in possession under an oral agreement of sale. Another sim
ilar ruling is Karam Chand v Labh Chand, AIR 2009 NOC 868 (Raj); Gouind Prasad
Dubey v Chandra Mohan Agnihotri, 2009 SCC OnLine MP 197: AIR 2009 MP 159, an
oral buyer not entitled to be impleaded. Manglu Mool Singh v Kunjlal, AIR 2014 Chh 31,
contract of sale not in writing, does not fall under the section. Official Trustee of W.B. v
Stephen Court Ltd, (2006) 13 SCC 401, there was an imperfect lease for 99 years, official
trustee kept on collecting rent on monthly basis and also allowed a huge structure to be
raised. The court allowed protection of possession of the lease under S. 53-A as well as
under S. 107. Parimi Vishnumurthy v Vundaualli Dorayya, 2009 SCC OnLine AP 334:
AIR 2009 AP 187, the agreement was genuine, the transferee was ready and willing to pay
balance amount of the price, sale deed could not be executed because of the transferor’s
migration to another State, benefit of S. 53-A allowed to the transferee. N. Basavaraj v B.
Sridhar, AIR 2009 NOC 2691 (Kar), the transferee was entitled to defend his possession
without filing suit for specific performance, it was immaterial, specific performance was
time-barred.
11. (1882) LR 21 Ch D 9 (CA).
The scope of the section is explained in Yenugu Achayya v Eranki

Venkata Subba Raoi2. In that case, a sale deed of land was executed in
favour of the plaintiffs by the second defendant. The plaintiffs were put
in possession, the consideration having been paid; but the document was
not registered. The first defendant who was interested in the property
paid the taxes due and filed a suit for recovery of the amount against the
second defendant. The suit was decreed and the land was brought to sale
as that of the second defendant. Plaintiffs filed the suit for a declaration
that the land belonged to them and relied on Section 53-A. It was held:
If the conditions of the section are fulfilled the transferor or any person
claiming under him shall be debarred from enforcing against the transferee
and persons claiming under him any right in respect of that property.... The
section does not either expressly or by necessary implication indicate that the
right conferred on the transferee thereunder can only be invoked as a defend
ant and not as plaintiff....
In Vedangi Veera Raghava Rao v Vedangi Gopala Rao13, it was observed:
CASE PILOT The limits of the application of the doctrine of part performance have now
been defined in Section 53-A of the Act and it is plain that the provision only
entitles a person in possession to invoke the doctrine as a shield to protect
such possession if the conditions therein referred to are satisfied and does not
enable a person who has lost possession to sue for recovery of it....
In Probodh Kumar Das v Dantmara Tea Co Ltd14, the Judicial Committee
observed:
Their Lordships agree with the view expressed by Mitter J in the High Court
that ‘the right conferred by Section 53-A is a right available only to the
defendant to protect his possession’. They note that this was also the view
of their late distinguished colleague, Sir Dinshah Mulla, as stated in the sec
ond edition of his Treatise on the Transfer of Property Act at page 262. The
section is so framed as to impose a statutory bar on the transferor; it confers
no active title on the transferee. Indeed any other reading of it would make a
serious inroad on the whole scheme of the Transfer of Property Act.
No doubt, the observations are rather wide and, if literally understood
they support the appellants’ (first and second defendant) contention that
Section 53-A can be relied upon by a transferee as a defendant and not as a
plaintiff. But, we do not think that the Judicial Committee intended to lay
12. 1956 SCC OnLinc AP 67: AIR 1957 AP 854; Gaddam Narsa Reddy v Collector, 1981
SCC OnLine AP 94: AIR 1981 AP 1; Sitaram v Chunnilal, 1981 SCC OnLine Raj 51:
AIR 1982 Raj 73; Raghuendra Shaha v Motilal, AIR 1982. All 304 (Plaintiff invoking
doctrine); Babu Rani v Basdeo, 1982. SCC OnLine All 539: AIR 1982 All 414.
13. 1941 SCC OnLine Mad 265: AIR 1942 Mad 125.
14. 1939 SCC OnLine PC 48: AIR 1940 PC 1; Seuak Nayak v Ramkrushna Mollana, 1977
SCC OnLine Ori 78: AIR 1978 Ori 82; Madho Singh v State of Bihar, 1977 SCC OnLine
Pat 104: AIR 1978 Pat 172; Wali Mohammad v Faqir Mohamad, 1978 SCC OnLine J&K
8: AIR 1978 J&K 92; Prabhat Kumar Behera v Tahara Khatun, 1977 SCC OnLine Ori
62: AIR 1978 Ori 219 (Oral contract); B. Sitaram Rao v Bibhisano Pradhan, 1978 SCC
OnLine Ori 86: AIR 1978 Ori 222.
down, irrespective of the nature of the relief claimed, that, under no circum
stances, could the transferee rely upon the provisions of the Act as a plaintiff.
We respectfully accept the statement of law that the section imposes a stat
utory bar on the transferor but it confers no active title on the transferee....
In Ram Chander v Maharaj Kunwar15, the learned judges observed:
Now, in the present case, what is it that the plaintiff is attempting to do?
He is not attempting to set up a transfer which is invalid; he has not insti
tuted a suit for the declaration of the validity of the transfer; he has not
instituted a suit in which he claims an order against the defendant directing
him to perform any covenant of the transfer. What he is seeking to do is to
debar the defendants from interfering with his possession into which he has
entered with the consent of his transferor after the execution of a transfer
in his favour. He is, in other words, seeking to defend the rights to which
he is entitled under Section 53-A of the Transfer of Property Act.... It is the
defendants who are seeking to assert rights covered by the contract. The
plaintiff seeks merely to debar them from doing so; the plaintiff is seeking to
protect his rights. In a sense, in the proceedings he is really a defendant and
we see nothing in the terms of Section 53-A of the Transfer of Property Act
to disentitle him from maintaining the present suit.
We respectfully agree with the aforesaid observations.1617
In Ewaz Ali v Firdaus Jehan MusammaP7, the court made the follow
ing observations on the observations of the Judicial Committee in the
Probodh Kumar case-.
We are unable to consider that their Lordships of the Privy Council by the
use of the word ‘defendant’... intended to mean that the right conferred by S.
53-A was not available to a person in the position of... [the respondent] and
that the mere position of a party in the heading of a suit would determine
whether he is or is not entitled to the benefits of the section. The subsequent
sentence makes this clear. When they use the word ‘defendant’, they use it to
describe the position of a person who pleads S. 53-A, and they say his posi
tion must be that of a person who invokes it for defending himself against
his transferor.
...It is not necessary to multiply cases. It is settled law that under
Section 53-A of the Transfer of Property Act, no title passes to the transferee.
He cannot file a suit for a declaration of his title to the property or seek to
recover possession of the same on the basis of any title conferred on him.
But, if the conditions laid down in the section are complied with, it enables
the transferee to defend his possession if the transferor seeks to enforce his
rights against the property. This statutory right he can avail himself of both
as a plaintiff and as a defendant provided that he is using his right as a shield
and not as a sword. Or to put it in other words, he cannot seek to enforce his
title, but he can resist the attack made by a transferor.
15. ILR 1939 All 809.

16. Chaitan Das v Murali Dalai, 1969 SCC OnLine Ori 73: AIR 1971 Ori 41.
17. ILR (1944) 19 Luck 566.
The doctrine does not ordinarily apply to family settlements (M. Pappu
Reddiarv Amaravathi Ammal1*), but applies to transfers in lieu of dower
under Muslim Law (Haji Mokshed Mondal v Del Rouson BibP9). It also
applies in case of exchange (Rajendra Nath v Gour Gopal2Q).
In Shankar Gopinath Apte v Gangabai Hariharrao Pattvardhan2^
certain lands originally belonged to the respondent’s husband. After his
death the respondent executed a power of attorney in favour of the appel
lant. By a letter written by the appellant to the respondent, the former
agreed to undertake the duties specified in the power of attorney, namely,
to manage the respondent’s lands and to pay her a sum of ^2000 annu
ally from the net income and retain the rest as his honorarium. Within
two or three weeks of the execution of the power of attorney the appel
lant succeeded in obtaining possession of the lands and continued in pos
session from year to year paying the respondent the agreed sum. Later,
however, he got his name entered in the record of rights as a tenant of
the respondent and thereafter put forth a claim to purchase the property
under the Bombay Tenancy and Agricultural Lands Act. The respondent
disputed the appellant’s claim and filed a suit for accounts and for injunc
tion to restrain the appellant from obstructing her in the enjoyment of
the property and alternatively for a decree for possession of the lands.
Though the appellant’s main defence was that he was in possession of
the lands as a tenant, at the hearing of the suit he put forth a claim that
he was in possession of the lands under an agreement of sale and was,
therefore, entitled to protect his possession under Section 53-A, Transfer
of Property Act. The suit was decreed by the trial court and the High
Court. Dismissing the appeal to it, the Supreme Court held:
The first and foremost difficulty in the appellant’s case is that there is no
written contract at all under which the respondent can be said to have agreed
to sell the property to the appellant. The letter said to have been written by
the respondent’s brother to the appellant on which the appellant relied on
as constituting a written contract of sale only refers to an oral agreement
between the appellant and the respondent under which the latter had agreed
to sell the lands to the former. At best the letter is a written evidence of
an oral contract of sale but is not a written contract itself. Besides, many a
condition of the section is unfulfilled. The terms necessary to constitute the
transfer cannot be ascertained with reasonable certainty from the letter. The
respondent was obviously unwilling to perform her part of the contract and
the appellant was not put in possession in part performance of the contract.
18. 1970 SCC OnLine Mad 106: AIR 1971 Mad 182; Meram Pocham v Collector, 1977
SCC OnLine AP 177: AIR 1978 AP 242 (Case of a contract forbidden by law); R.
Chandevarappa v State of Karnataka, (1995) 6 SCC 309.
19. 1970 SCC OnLine Cal 79: AIR 1971 Cal 162.
20. 1970 SCC OnLine Cal 24: AIR 1971 Cal 163; Taibai v Annasaheb Goudappa Patil,
(1996) 1 SCC 585 (transferor had no title).
21. (1976) 4 SCC 112; Patel Natwarlal Rupji v Kondh Group Kheti Vishayak, (1996) 7 SCC
690.
Admittedly he obtained possession under the power of attorney and there is

nothing on record to show that the character of his possession ever changed
as a result of the contract of sale. The appellant continued to remit the agreed
annual sum of Rs 2000 to the respondent which is entirely inconsistent with
his character as potential purchaser of the lands. x
In Technicians Studio (P) Ltd v Lila Ghosh22:
The predecessor-in-interest of the first respondent filed a suit against his ten- CASE PIL0T
ants for their ejectment and impleaded the appellant who was a sub-lessee
as a defendant. The suit was decreed against all the defendants and when
the matter reached the High Court in revision, ended in a compromise. The
terms of the compromise were (1) the appellant would become a direct tenant
at a monthly rent of 1000 and (2) the lease would be for a period of 16 years
from May 19, 1954. But no lease deed was executed nor the compromise peti
tion registered. The property devolved on the respondent as the sole owner
and she, on the expiry of the period of the lease mentioned in the compro
mise, served a notice on the appellant to quit and thereafter filed a suit for
recovery of possession. The appellant’s defence was that by payment and
acceptance of rent during the period of 16 years a monthly tenancy has been
created in its favour and though no payment was made thereafter, monthly
tenancy was continued even after the expiry of the period of 16 years. The
trial court found that the petition of compromise required registration and
was therefore not effective as a lease, and that the compromise would, how
ever, protect the possession of the appellant for a period of 16 years under
Section 53-A of the Transfer of Property Act. It further held that the payment
and acceptance of rent made in terms of the unregistered compromise peti
tion did not give rise to a right of tenancy and the payments by the appel
lant to the respondent were made only in part performance of the contract
of lease contained in the unregistered compromise petition. The trial court
accordingly decreed the suit. The decree was confirmed by the first appellate
court and the High Court.
Dismissing the appeal, the Supreme Court held:
(1) The petition of compromise seeking to create a lease for 16 years was
required to be registered and since it was not registered it would not affect
the immovable property to which it related; but it was admissible as evidence
of part performance of the contract for the purpose of Section 53-A of the
Transfer of Property Act. In order to be entitled to the protection of that
Section the transferee must perform or must be willing to perform its part of
the contract. In this case one of the terms was that the appellant should pay a
monthly rent of 1000 and the payment, therefore, should be related only to
the contract as found by the lower courts. A person who is let into possession
on the strength of a void lease does not acquire any interest in the property
but only gets a right to defend his position under Section 53-A. From the fact
that the appellant had performed his part of the contract, it is not possible to
conclude that the tenancy was brought into existence.
22. (1977) 4 SCC 324; State ofU.P. v District Judge, (1997) 1 SCC 496.
166 LAW OF TRANSFER OF PROPERTY [Chap, 9
(2.) It does not, however, mean that there cannot be relationship of land
lord and tenant in every case where the transferee has taken possession of
the property under void lease or in part performance of a contract and is
entitled only to protection of Section 53-A. Whether the relationship of a
landlord and tenant exists between the parties depends on whether the par
ties intended to create a tenancy...
In Ranchhoddas Chhaganlal v Devaji Supdu Dorik23:
There was an oral agreement to sell the agricultural land for ^17,000. The
respondent buyer who was also in possession of the property from time to
time, paid ^12,000. On failure to pay the remaining amount, the plain
tiff-appellant filed the present suit, for possession or in the alternative for
^5000 with interest.
The trial court found ^17,000 to be the agreed price and passed a decree
for possession. The High Court substituted a decree for ^5000 with interest
and refused the prayer for possession...
[The Supreme Court held that] [t]he respondent has never been ready and
willing to perform the agreement alleged by the appellant. The respondent
relied on the doctrine of part performance. One of the limbs of the doctrine
of part performance is that the transferee has in the part performance of the
contract taken possession of the property. The most important consideration
here is the contract. The true principle of the operation of the acts of part
performance seems to require that the act in question must be referred to
some contract and must be referred to the alleged one; that they prove the
existence of some contract, and are consistent with the contract alleged. The
doctrine of part performance is a defence. It is generally not a sword but a
shield. It is a right to protect his possession against any challenge to it by the
transferor contrary to the terms of the contract. The appellant is right in the
contention that there was never any performance in part by the respondent
of the contract between the parties.
A purchaser of property had acquired its possession. He had also put
buildings by spending more than crore. He had exercised all these
rights under an agreement of sale. The purchaser filed a suit for specific
performance seeking order to the seller for execution of the regular sale
deed, for which no time was fixed. The court said that he should have
23. (1977) 3 SCC 584; Sardar Govindrao Mahadik v Devi Sahai, (1982) 1 SCC 237; (Payment
of money) Arnrao Singh v Sanatan D haram Sabha, 1984 SCC OnLine P&H 164: AIR
1985 P&H 195; Mahendra Chandra Bhattacharjee v Abani Bhusan Bhattacharjee, 1984
SCC OnLine Cal 124: AIR 1985 Cal 108; Chander Mohan Mittal v Bihari Lal Gupta,
1985 SCC OnLine P&H 146: AIR 1985 P&H 226; Delhi Motor Co v U.A. Basrurkar,
AIR 1968 SC 794: (1968) 2 SCR 720; Thakamma Mathew v M. Azamathulla Khan,
1993 Supp (4) SCC 492; Mohan Lal v Mirza Abdul Gaffar, (1996) 1 SCC 639; Roop
Singh v Ram Singh, (2.000) 3 SCC 708; Moot Chand Bakhru v Rohan, (2.002.) 2 SCC
612; Shrimant Shamrao Suryavanshi v Pralhad Bhairoba Suryavanshi, (2002) 3 SCC 676;
Shashi Kapila v R.P. Ashwin, (2002) 1 SCC 583; D.S. Parvathamma v A. Srinivasan,
(2003) 4 SCC 705, tenant claimed himself to be in possession of the house in part perfor
mance of the mutual agreement, the suit for specific performance Was dismissed, tenant
not proving his readiness and willingness, he could not prove that he was put in posses
sion in part performance of the agreement.
filed the suit within three years from the date of the sale deed. He had
lost that time and therefore his suit was not maintainable. The court
however added that the right acquired by him by part performance could
not be taken away.24
An agreement under which possession has been taken or is claimed
has to be proved. A judgement-debtor was ordered to deliver vacant pos
session of the suit property to the decree-holder. The appellant in this
case objected to delivery of possession of the property since six years
under an oral agreement. But he neither could mention the date of such
agreement, nor file a suit for specific performance. Thus, he miserably
failed to prove his lawful possession of the property. He could not invoke
Section 53-A. He had to surrender possession to the decree-holder.25
No proof of validity of possession.—A temporary injunction was
sought to prevent the sale or alienation of the suit property to save his
possession. It was not elaborated in the plaint how the plaintiffs came
into possession. There was no agreement for sale of the property to plain
tiffs under which they might have obtained possession. The prayer for
injunction was not granted.26
Section 53-A requires a positive act of readiness and willingness on
part of the transferee to perform the agreement.
Where the consideration was paid and the transferee was put in pos
session, the court considered it to be immaterial that the instrument of
transfer was not registered, or that the instrument was not made in the
prescribed manner. The transferor was not allowed to take advantage
of his own default in not giving the necessary registered document.27
Where possession of a tea estate was handed over to the purchaser and
he was to discharge a definite obligation under the agreement, the court
said that his failure to do so amounted to a breach of the agreement, and
therefore, protection of Section 53-A was not available. His right to seek
arbitration under the agreement was not defeated.28
In Maneklal Mansukhbhai v Hormusji Jamshedji Gintvalla & Sons29,
there was a contract of permanent lease for building a factory. The
building of the factory was construed by the Supreme Court as an act of
part performance. The court may spell out an agreement from the cor
respondence to infer a contract to lease in writing. But, the construction
of a building will amount to an act of part performance by the lessee
already in possession, only, if the lease contemplates such a building.
24. Universal Associates Developers and Promoters v Bhupat Ratilal Chouda, AIR 2015
NOC 681 (Kar).
25. G.G. Bharathidasan v Malini Mai, AIR 2015 NOC 701 (Mad).
26. Mohan Developers v Chandrama Prasad Verma, AIR 2015 NOC 1201 (Cal).
27. Udai Sapkota v Laxmi Prasad Sapkota, AIR 2013 Sikk 21.
28. Tongani Tea Co Ltd v Rossell India Ltd, 2013 SCC OnLine Gau 258: AIR 2014 Gau 41.
29. AIR 1950 SC 1: 1950 SCR 75.
Agreement to sell.—An agreement to sell does not create any right,

interest or title in the property. Such rights are created only by a reg
istered sale deed. An agreement is not required to be registered, it is
admissible in evidence in a suit for specific performance.30 As against the
landlord’s notice to quit, the tenant contended that he had agreed with
the landlord to purchase the property. The court found that the agree
ment in question did not mention any consideration. It was held that an
agreement without consideration being void under Section 23, Contract
Act, 1872, it could not be any source of protection under Section 53-A.31
The section is now amended and the contracts on the basis of which the
purchaser is put in possession in part performance, requires registration.
Section 53-A embodies passive equity and not aright of action.—This
was established through the decision of the Privy Council in Probodh
Kumar32. An observation of the Supreme Court is as follows:
uue pilot The benefit of the section is not available to a transferee who remains pas
sive. The suit was for declaration of title and possession by the purchaser
of property. The defendants claimed that they had been put in possession
in part performance of the earlier agreement of sale. They did not intimate
their intention to perform their part of the contract. There was no evidence
to show that the plaintiff had notice of the earlier agreement. The defendants
were not allowed protection of Section 53-A.33
Rights of subsequent transferee for value.—A subsequent transferee
for value who had no knowledge of any previous transaction gets title and
ownership. His rights are not affected by the fact of part performance by
delivery of possession if he is a bona fide buyer otherwise.34 The burden
of proving that the subsequent transferee had notice of the earlier trans
action is on the party who wants to take benefit of part performance.35
EXERCISES
i. What condition must be satisfied before the doctrine of part per
formance can be applied? (pp. 157-158)
2. What is the difference between English and Indian law in relation
to the doctrine of part performance? (p. 159)
3. Compare Section 53-A with the doctrine in Walsh v Lonsdale.
(pp. 158-160)
30. Sukhwinder Kaur v Amarjit Singh, 2012 SCC OnLine P&H 935: AIR 2.012 P&H 97.
31. Thakurmal v Chakradhar Rao Bhosle, 2008 SCC OnLine Chh 21: AIR 2009 Chh 27.
32. Probodh Kumar Das v Dantmara Tea Co Ltd, 1939 SCC OnLine PC 48: AIR 1940 PC 1.
33. A. Lewis v M.T. Ramamurthy, (2007) 14 SCC 87.
34. Malla Sasirekhamma v Garbham Suramma, 1950 SCC OnLine Ori 74: AIR 1952 Ori 163.
35. Parmanancl v Kailash Chand, AIR 2012 Chh 64, the subsequent transferee had no knowl
edge of the original transaction, the original transferee was neither performing, nor will
ing to do so.
DOCTRINE OF PART PERFORMANCE 169

through EBC Explorer™ on SCC Online®;
The following cases from this chapter are available c=X"

• Elizabeth Maddison v John Alderson, (1888) LR 8 AC 467 case pilot
• Manchester Brewery Co v Coombs (1), (1901) 2 Ch 608

• Nanjegowda v Gangamma, (2011) 13 SCC 232
• Probodh Kumar Das v Dantmara Tea Co Ltd, 1939 SCC OnLine
PC 48
• Technicians Studio (P) Ltd v Lila Ghosh, (1977) 4 SCC 324
• Vedangi Veera Raghava Rao v Vedangi Gopala Rao, 1941 SCC
OnLine Mad 265
Chapter 10
Sale of Immovable Property
SALE
The relevant sections in the Act are Sections 54 to 57.
Section 54 provides:
54. “Sale” defined.—Sale is a transfer of ownership in exchange for a price
paid or promised or part-paid and part-promised.
Sale how made—Such transfer, in the case of tangible immovable property
of the value of one hundred rupees and upwards, or in the case of a reversion or
other intangible thing, can be made only by a registered instrument.
In the case of tangible immovable property, of a value less than one hundred
rupees, such transfer may be made either by a registered instrument or by deliv
ery of the property.
Delivery of tangible immovable property takes place when the seller places the
buyer, or such person as he directs, in possession of the property.
Contract of sale—A contract for the sale of immovable property is a contract
that a sale of such property shall take place on terms settled between the parties.
It does not, of itself, create any interest in or charge on such property.
The rest of the Act except Section 12.9 applies to Mohammedans also.
TANGIBLE PROPERTY
By “tangible property” is meant lands, buildings, etc. which immedi
ately or through the medium of tenants may be the subject of possession
which can be delivered by the vendor to the purchaser. It is something
capable of being touched and therefore capable of being possessed. The
phrase “reversion or other intangible thing” means the various inter
ests which are included under the head of immovable property without
involving possession; for example a vested interest. Reversion is, how
ever, dealt with specially as intangible property, because, ordinarily, the
lessor is deemed to be in possession of property through his tenant and
[S. 54] SALE OF IMMOVABLE PROPERTY 171
should be treated as tangible property. These principles are not however

easy of application.1
WHAT IS PRICE
The transfer must be for money (price), for if it is in return of anything
else, it would be exchange. It would be exchange even if there was part
payment of money and the rest in something else.1 2
The price may be paid at the time of execution of the sale deed, or
in advance or subsequently. It may be paid in agreed installments. All
that is necessary is that price should appear as a figure in the sale deed.3
Price has to be calculated in terms of currency, otherwise it would be an
exchange. If there is part payment in currency, the rest may be paid by
delivery of goods but their price should be worked out in terms of money.
If the transferor is already indebted to the transferee, the transferor of
property for discharge of such debt was held to be a sale in terms of
money.4
Price may be paid or undertaken to be paid. Even in such a case pass
ing of property becomes effected on registration of sale deed.5
There is a difference between a transfer of property as dower and
a transfer in lieu of dower already due. In the former case there is no
transfer for any price; but in the latter case, property is exchanged for a
price. Therefore, an oral sale by a Muslim husband to his wife in consid
eration of the discharge of the dower debt due to her would be a “sale”
and hence invalid for want of a registered document. The same principle
applies in the case of arrears of maintenance and future maintenance.
Suppose, A executes a usufructuary mortgage in favour of B and puts
B in possession. He then orally sells the property to C. In such a case,
1. Ramasivami Pattar v Chinnar Asar, ILR 24 Mad 449; Sohan Lal v Mohan Lal, ILR
50 All 986; Tukaram Ganpatrao Surve v Atmaram Vinayak Gondhalekar, 1938 SCC
OnLine Bom 22: AIR 1939 Bom 31.
2. Pulla Gavarayanima v Talisetti Suryanarayana, 1977 SCC OnLine AP 104: AIR 1978
AP 1 (case of consideration being adulterous intercourse); Btmal Kumar v Corpn of
Calcutta, 1978 SCC OnLine Cal 184: AIR 1978 Cal 420; CIT v Syed Saddique Imam,
1977 SCC OnLine Pat 105: AIR 1978 Pat 197 (transfer in lieu of dower); Munnan Khan v
Ashrafunnisan, AIR 1983 All 363; Sunder Bai v Anandi Lal, 1982 SCC OnLine All 637:
AIR 1983 All 23; Giodhan v Ramnaik, AIR 1983 All 84.
3. Kammana Sambamtirthy v Kalipatnapu Atchutamma, (2011) n SCC 153, price paid on
two occasions, one on execution of sale deed, the other on registration. Matadin Yadav v
Midas Lids (P) Ltd, AIR 2014 NOC 295 (Del), entire price paid in advance.
4. CIT v Motors and General Stores (P) Ltd, AIR 1968 SC 200; Madam Pillai v Badrakali
Animal, 1922 SCC OnLine Mad 3: AIR 1992 Mad 311.
5. Dulana Dei v Balaram Sahu, 1992 SCC OnLine Ori 58: AIR 1993 Ori 59; Jaideo Yadav
v Raghunath Yadav, AIR 2009 NOC 1926 (Pat), sale deed not allowed to be cancelled
because all formalities including payment of price and handing over were complied with.
Janak Dulari Devi v Kapildeo Rai, (2011) 6 SCC 555, failure to pay price, no specific
relief. Bhartu v Naival, 2012 SCC OnLine All 177: AIR 2012 All 91, assertion in the sale
deed that price had been paid found to be false, no sale.
the right of redemption in A is immovable property, but it is intangible.

Therefore, it can only be transferred by a registered document and hence,
the sale in favour of C is invalid.
When there is delivery of property of less than ^100 and also an
unregistered document of sale, there are three views:
i. If the sale and document are simultaneous there could not be any
proof of the sale as the document is inadmissible under Section 91,
Evidence Act and hence, the sale fails.
2. In such a case, the unregistered instrument can be used for the col
lateral purpose of proving the character of possession though not
the transfer of ownership.
3. If the oral sale and the document can be dissociated, the
non-registration of the document would not be fatal to the validity
of the sale.
A stipulation in a sale deed that if the price is not paid within a pre
scribed time, the sale will be void, is ineffective. If a sale has taken place,
the only rights of the vendor are either a charge on the property for
unpaid purchase money or a suit for the unpaid purchase money.6
Similarly, a contract of sale would not become a sale by payment of
money because a sale requires a registered document.
An oral transfer to an idol or a temple would be valid, because it is not
a transfer within the meaning of the Act since it is not a living person.
Suppose, A sells his house to B. The sale deed provides that B gets a
life estate and the remainder to C. B sells the property to D. On B's death
there is a conflict between C and D. One view is that since it is a sale
deed, B was full owner and so D got a better title. Another view is that
a sale deed of ownership can give part of the ownership (life estate) to B
and the rest (remainder) to C and so C has the better title.
TRUSTS
In the case of trusts the trustee is deemed to be the owner of the property
and the title of the beneficiary would be complete only when the trustee
transfers his ownership to such beneficiary.
TRANSFER OF OWNERSHIP HOW MADE

(REGISTRATION OR DELIVERY)
Only two methods of transfer of ownership are recognised: 1) registra
tion; and 2) delivery, where it is permitted under the section. In the case
6. See, Arumugha Chettiar v Rahntanbee, 1995 Supp (4) SCC 536; Hamda Ammal v
Avadiappa Pathar, (1991) 1 SCC 715; Balbir Singh v Gurbachan Kaur, 1994 Supp (2) SCC
545 (1); Bishundeo Narain Rai v Anmol Devi, (1998) 7 SCC 498 (Intention of Parties).
S. 54] SALE OF IMMOVABLE PROPERTY 173
of registration the ownership is deemed to pass not on the date of regis

tration but on the date of the instrument. [See, S. 47, Registration Act,
1908.] But in a case where the vendor refused to deliver the property or
the registered deed, because he had not been paid the price, it may be
inferred that there was no transfer of ownership, because there was no
intention to transfer. In the case of delivery, it must be actual and not
constructive.7 Where actual physical delivery is not possible as when a
house is in possession of a tenant, delivery of title deeds is sufficient.
Actual delivery is made, in the case of lands, by entering the land and
in the case of any empty house by handing over the keys. Suppose, how
ever, a case where there is an unregistered sale deed of property worth
less than a hundred rupees and there was no actual delivery of property.
In such a case the purchaser cannot rely on the unregistered document
to prove delivery. Therefore, he cannot sue for title on such a document.
But if there is delivery, a subsequent purchaser under a registered deed
does not get any right, because the purchaser’s possession is deemed to
be notice under Section 3. Therefore, ordinarily, ownership passes, when
registration is compulsory, on the execution of the sale deed and where
delivery is the proper method by delivery of possession of the property.8
Registration becomes effective to pass property not from the date
of registration but from the date of the deed. Much however depends
7. But see, Mnthnkaruppan Samban v Muthu Samban, 1914 SCC OnLine Mad 113: ILR
38 Mad 1158; Sohan Lal v Mohan Lal, ILR 50 All 986; Sibendrapada Banerjee v Secy
of State, ILR 34 Cal 2.07; Tribeni Prasad Rastogi v Basudeo Prasad Rastogi, 1980 SCC
OnLine Pat 61: AIR 1980 Pat 220; Shesh Mai v Harak Chand, 1982 SCC OnLine Raj
22: AIR 1983 Raj 109; Kokila Dei v Balakrushna Behera, 1983 SCC OnLine On 62:
AIR 1984 Ori in; Kali Charan Naskar v Stidhir Chandra Naskar, 1984 SCC OnLine
Cal 187: AIR 1985 Cal 66; Ganesh Prasad v Deo Nandan Raia, 1984 SCC OnLine Pat
106: AIR 1985 Pat 94; K.V. Siuamynathan v E.V. Padmanabhan, 1990 Supp (3) SCR 709;
Ishwari Deui v Sarla Deni, 1995 Supp (2) SCC 86; Ram Bilas v Jagat Narain Shrivastaua,
1994 Supp (2) SCC 113 (non-participation of owner unheard of for more than 7 years);
Bishundeo Narain Rai v Anmol Deui, (1998) 7 SCC 498; M.T.W. Tenzing Namgyal v
Motilal Lakhotia, (2003) 5 SCC 1.
8. Vijay Kumar Sharma v Deuesh Bebari Saxena, 2007 SCC OnLine All 809: AIR 2008 All
66, ownership of a plot on payment of full value, the document constitute a sale not lease.
Sitaram Agarwal v Subarata Chandra, (2008) 7 SCC 716, the transferee automatically
gets the right of further transfer and alienation, such rights have not to be specifically
conferred. The burden of proving that the name of the deity was mistakenly entered in the
sale deed is on the person who says so. Syndicate Bank v APIIC Ltd, (2007) 8 SCC 361,
S. 54 provides the mode by which complete ownership of property can be transferred.
Udai Sapkota v Laxmi Prasad Sapkota, AIR 2013 Sikk 21, execution of the sale deed
was proved by personal appearance of the scribe and witness, it was not necessary that
the executant should have personally come to the witness box. Bhikari Naik v Baban
Sahoo, 2008 SCC OnLine Ori 24: AIR 2009 Ori 38, a mortgagee paid the price for a
part of the mortgaged property whole of which was in his possession. It remained an oral
sale. The court said that it was valid because an oral sale is not in contravention of S. 54.
Karan Madaan v Nageshwar Pandey, AIR 2015 NOC 86 (Del), delivery of possession is
necessary where sale deed has been executed and registered. Sale in such a case does not
become a transaction of loan. Rabi Biswas v Pramila Das, AIR 2015 NOC 946 (Gau),
annual Patta can be transferred only by registered deed of transfer.
upon the intention of the parties. Parties can intend something different
from date of the deed.9 Registered sale deed cannot be unilaterally can
celled. It requires an order of the court under Section 31, Specific Relief
Act, 1963.1011
UP Amendment.—In the State of Uttar Pradesh, registration
has been made compulsory irrespective of value of property. A prop
erty worth ^100 only can be transferred by a registered deed. [S. 36
of the Amendment of 1976 in Uttar Pradesh Civil Laws (Reforms and
Amendment) Act, 1976.]
CONTRACT FOR SALE

This does not create any interest in the prospective purchaser and is one
of the important aspects on which Indian and English Laws differ. Such
a contract does not therefore require registration, even when it relates to
immovable property worth over ^100. Sale itself is sometimes described
as contract of sale to distinguish it from a contract for sale. The contract
for sale, like any other contract can be enforced by a suit for specific
performance in appropriate cases, and in case of breach, damages can
be recovered.11
In Radhakishan Laxminarayan Toshniwal v Shridhar Ramchandra
Alshi12, the vendors executed an agreement to sell in April 1943, and
executed the sale deed in 1944, in favour of the appellant. In September
1943, before the sale deed was executed, the respondent filed a suit for
pre-emption. It was held:
The transfer of property where the Transfer of Property Act applies has to be
under the provisions of the Transfer of Property Act only, and Mohammedan
Law of transfer of property cannot override the statute law. Mahmood, J.,
in Janki v Girjadat13, though in a minority, was of the opinion that a valid
and perfected sale was a condition precedent to the exercise of the right of
9. Lakshmi Narain Barmval v Jagdish Singh, 1990 SCC OnLine Pat 63: AIR 1991 Pat 99.
Kaliaperuntai v Rajagopal, (2009) 4 SCC 193, execution and registration of sale deed is
not in itself proof of passing of ownership. Intention of the parties has to be ascertained.
10. Latif Estate Line India Ltd v Hadeeja Animal, 2011 SCC OnLine Mad 215: AIR 2011
Mad 66. V. Ethiraj v S. Sridevi, AIR 2014 Kar 58, unilaterally executed cancellation deed
not allowed to be registered.
11. Baldeo Singh v Divarika Singh, 1977 SCC OnLine Pat 89: AIR 1978 Pat 97.
12. AIR i960 SC 1368; Sukhilal Sah v AngrahitJha, AIR 1980 Pat 18; Munna Lal v Krishna
Kuntari, 1982 SCC OnLine All 630: AIR 1983 All 5; Sujan Singh Sadhana v Mohkant
Chand Jain, 1982 SCC OnLine P&H 265: AIR 1983 Pat 180; Shafiq Ahmad v Sayeedan,
1983 SCC OnLine All 859: AIR 1984 All 140; Ram Swarup v Ratiram, 1984 SCC OnLine
All 509: AIR 1984 All 369; Khato Lal Dass v Mohd Jahiruddin Babar, 1984 SCC OnLine
Pat 53: AIR 1984 Pat 239; Nanideo v Collector, (1995) 5 SCC 598; K. Basauarajappa v
Tax Recovery Commr, (1996) 11 SCC 632; Dev Raj v Harbans Singh, (1996) 3 SCC 596;
Sadasivant v K. Doraisamy, (1996) 8 SCC 624; K.S. Vidyanadam v Vairavan, (1997) 3
SCC 1.
13. ILR (1885) 7 All 482.
pre-emption and until such sale had been effected the right of pre-emption
could not arise.... Under Section 54 of the Transfer of Property Act a con
tract of [for] sale does not of itself create any interest in or charge on immov
able property and consequently the contract in the instant case created no
interest in favour of the vendee and the proprietary title did not validly pass
from the vendors to the vendee and until that was completed no right to
enforce pre-emption arose.14
In a lease one has the right only to enjoy the property, but in a sale one
has the right to take it away.15
A development agreement is an agreement for conditional sale. Hence,
a developer can sue for its specific performance under the Specific Relief
Act, 1963.16 A hire-purchase agreement is not a sale.17
The provisions of the Act do not bar benami transactions. There is
nothing to prevent the property being registered in the name of one person
when the real beneficiary of the transaction may be another person.18
The property must be transferable within the meaning of Section 6.
A seller has no right to handover a property to the buyer which is not
transferable under the Act.19
Two sisters, being the only legal heir of their deceased father, inherited
the property being class I heirs. The husband of one of them purchased
the property from their widowed mother taking advantage of her age.
The court said that the widow alone had no right to sell the property.
The sale did not bind the sisters to the extent of their share.20 Sale of
a joint family property by the Karta (Manager) of the family for the
welfare of the minor member was held to be valid. The sale, however,
could not go through because the buyer did not perform his part of it,
nor showed any readiness and willingness to do so.21 A Hindu widow
married a Christian and converted to Christianity. She disposed of her
share in her former husband’s property. The court held the sale to be
valid. She had not lost her right to succession to her former husband’s
property.22
14. Jhandoo v Ramesh Chandra, 1970 SCC OnLine All 79: AIR 1971 All 189.
15. Tulsa Singh v Board of Revenue, 1971 SCC OnLine All 71: AIR 1971 All 430.
16. Ashok Kumar Jaistval v Ashim Kumar Kar, 2.014 SCC OnLine Cal 3497: AIR 2014 Cal
92.
17. K.L. Johar & Co v CTO, AIR 1965 SC 1082: (1965) 2 SCR rix.
18. Jai Narain Parasrampuria v Pushpa Devi Saraf, (2006) 7 SCC 756.
19. Ramdas v Sitabai, (2.009) 7 SCC 444, an undivided share in property cannot be trans
ferred till its possession can be delivered by partition. Anu Dutta v Lolit Kalita, 2013
SCC OnLine Gau 196: AIR 2013 Gau 178, a successor-in-interest cannot transfer during
lifetime of owner.
20. Ratanbai v Basantibai, AIR 2008 NOC 1172 (MP). Another case of the same kind is V.
Ethiraj v S. Sridevi, AIR 2014 Kar 58.
21. Annamalai v Shanmugham, AIR 2008 NOC 2889 (Mad).
22. K. Sivanandan v Maragathammal, 2012 SCC OnLine Mad 1936: AIR 2013 Mad 30.
Harminder Khullar v Swaran Kanta Juneja, AIR 2014 NOC 6 (Del), plaintiff, being not
the sole owner of the property, not entitled to the whole of sale price.
RIGHTS AND LIABILITIES OF BUYER AND SELLER

These are set out in Section 55 which is as follows:
55. Rights and liabilities of buyer and seller.—In the absence of a contract to
the contrary, the buyer and seller of immovable property respectively are subject
to the liabilities, and have the rights, mentioned in the rules next following, or
such of them as are applicable to the property sold:
(1) The seller is bound —
(a) to disclose to the buyer any material defect in the property or in the
seller’s title thereto of which the seller is, and the buyer is not, aware
and which the buyer could not with ordinary care discover;
(b) to produce to the buyer on his request for examination all documents
of title relating to the property which are in the seller’s possession or
power;
(c) to answer to the best of his information all relevant questions put to
him by the buyer in respect to the property or the title thereto;
(d) on payment or tender of the amount due in respect of the price, to
execute a proper conveyance of the property when the buyer tenders
it to him for execution at a proper time and place;
(e) between the date of the contract of sale and the delivery of the prop
erty, to take as much care of the property and all documents of title
relating thereto which are in his possession, as an owner of ordinary
prudence would take of such property and documents;
(f) to give, on being so required, the buyer or such person as he directs,
such possession of the property as its nature admits;
(g) to pay all public charges and rent accrued due in respect of the prop
erty up to the date of the sale, the interest on all encumbrances on
such property due on such date, and, except where the property is
sold subject to encumbrances, to discharge all encumbrances on the
property then existing.
(2) The seller shall be deemed to contract with the buyer that the interest
which the seller professes to transfer to the buyer subsists and that he has power
to transfer the same:
Provided that, where the sale is made by a person in a fiduciary character he
shall be deemed to contract with the buyer that the seller has done no act whereby
the property is encumbered or whereby he is hindered from transferring it.
The benefit of the contract mentioned in this rule shall be annexed to, and
shall go with, the interest of the transferee 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.
(3) Where the whole of the purchase-money has been paid to the seller, he is
also bound to delivery to the buyer all documents of title relating to the property
which are in the seller’s possession or power:
Provided that, (a) where the seller retains any part of the property comprised
in such documents, he is entitled to retain them all, and, (b) where the whole of
such property is sold to different buyers, the buyer of the lot of greatest value is
entitled to such documents. But in case (a) the seller, and in case (b) the buyer of
the lot of greatest value, is bound, upon every reasonable request by the buyer,
or by any of the other buyers as the case may be, and at the cost of the person
making the request, to produce the said documents and furnish such true copies
thereof or extracts therefrom as he may require; and in the meantime, the seller,
or the buyer of the lot of greatest value, as the case may be, shall keep the said
documents safe, uncancelled and undefaced, unless prevented from so doing by
fire or other inevitable accident.
(4) The seller is entitled —
(a) to the rents and profits of the property till the ownership thereof
passes to the buyer;
(b) where the ownership of the property has passed to the buyer before
payment of the whole of the purchase-money, to a charge upon the
property in the hands of the buyer, any transferee without considera
tion or any transferee with notice of the non-payment, for the amount
of purchase-money, or any part thereof remaining unpaid, and for
interest on such amount or part from the date on which possession
has been delivered.
(5) The buyer is bound —
(a) to disclose to the seller any fact as to the nature or extent of the
seller’s interest in the property of which the buyer is aware, but of
which he has reason to believe that the seller is not aware, and which
materially increases the value of such interest;
(b) to pay or tender, at the time and place of completing the sale, the pur-
chase-money to the seller or such person as he directs: provided that,
where the property is sold free from encumbrances the buyer may
retain out of the purchase-money the amount of any encumbrances
on the property existing at the date of the sale, and shall pay the
amount so retained to the persons entitled thereto;
(c) where the ownership of the property has passed to the buyer, to bear
any loss arising from the destruction, injury or decrease in value of
the property not caused by the seller;
(d) where the ownership of the property has passed to the buyer, as
between himself and the seller, to pay all public charges and rent
which may become payable in respect of the property, the principal
moneys due on any encumbrances, subject to which the property is
sold, and the interest thereon afterwards accruing due.
(6) The buyer is entitled —
(a) where the ownership of the property has passed to him, to the benefit
of any improvement in, or increase in value of, the property, and to
the rents and profits thereof;
(b) unless he has improperly declined to accept delivery of the property to
a charge on the property, as against the seller and all persons claim
ing under him, to the extent of the seller’s interest in the property,
for the amount of any purchase-money properly paid by the buyer
in anticipation of the delivery and for interest on such amount; and,
when he properly declines to accept the delivery, also for the earnest
money (if any) and for the costs (if any) awarded to him of a suit to
compel specific performance of the contract or to obtain a decree for
its rescission.
An omission to make such disclosures as are mentioned in this section, para
graph (1) clause (a), and paragraph (5), clause (a), is fraudulent.
The rules set out in this section are derived with modifications from the
Latin maxim caveat emptor, qui ignorare non debuit quod jus alienum
emit, which means, let a purchaser, who ought not to be ignorant of
the amount and nature of the interest which he is about to buy, exer
cise proper caution. When Scarlett O’Hara, the sexy heroine of Gone
with the Wind who believed in doing anything for money decided to
change the name of her store, she asked Rhett Butler to think of a name
that would include the word “emporium”. Rhett suggested—“Caveat
Emptorium” assuring her that it would be a title most in keeping with
the type of goods sold in the store.
“IN THE ABSENCE OF A CONTRACT TO

THE CONTRARY”, SCOPE OF
This clause shows that the liability under or the operation of the section
could be excluded by such a contract.23 It may be express or implied,
but it should be clear and unambiguous. If there is any ambiguity it will
be resolved in favour of the purchaser. If, therefore, there is no contract
to the contrary, the rights and liabilities of the seller and purchaser are
those set out in the section. This is sometimes expressed by saying that
when the contract for sale is open (that is, when there is no contract to
the contrary), the rights and liabilities of the parties as set out in the sec
tion will be implied as terms of such a contract.
CLAUSE (l)(a): DUTY TO DISCLOSE DEFECT IN

PROPERTY OR SELLER’S TITLE
This is a seller’s liability to disclose latent defects known to him, before
the completion of the execution of the sale deed. Such a latent defect
should be material, that is, it should be such as would influence the buy
er’s decision if he knew about it. A latent defect is one which a purchaser
would not be able to discover by ordinary diligence. If it could be then
it is a patent defect and there is no obligation on the vendor to disclose
it. In one sense a defect in title is also a defect in property but in practice
one differs from the other. A defect in property prevents the purchaser
from enjoying the property fully, for example, as easement of right of
way across the property in favour of a third party. A defect in title may
subject the purchaser to claims by third parties, for example, an encum
brance or charge on the property. If the buyer discovers the defect him
self before the completion of the sale he can rescind the contract, and if
the vendor files a suit for specific performance he can successfully resist
it. If he discovers it after the completion of the sale he can claim dam
ages, or sue for having the sale set aside, because under the last clause
of the section such non-disclosure amounts to the vendor perpetrating a
fraud on the purchaser.24
23. A.K. Lakshntipathy v Rai Saheb Pannalal H. Lahoti Charitable Trust, (2010) i SCC 287.
24. Haji Essa Suileman v Dayabhai Parmanandas, ILR (1895) zo Bom 522; Eastern Mortgage
CASE PILOT
and Agency Co Ltd v Mohd Fazlul Karim, 1925 SCC OnLine Cal 335: ILR (1925) 52 Cal
Other examples in defects in title are: i) restrictive covenants; z) lia

bility to compulsory acquisition; 3) allotment of property to another
co-owner under a partition deed not known to the purchaser; 4) voidable
title. If A agreed to sell a property to B and puts B in possession, but
B discovers a defect in A’s title before the sale deed is executed, B may
1) have the contract rescinded under Section 27, Specific Relief Act, 1963;
2) oppose a suit for specific performance; 3) sue for damages for breach;
and 4) enforce a charge on the property for any prepaid purchase money.
The seller failed to disclose that there was no independent passage to
the property under sale. The buyer deposited his earnest money under
an assurance that passage would be provided. But it was not done. He
did not therefore make any further payment. Forfeiture of his earnest
money was held to be unfair and arbitrary. The seller could not take
advantage of his own wrong in not disclosing the truth about the state
of the property.25
CLAUSE (1)(6); DUTY TO PRODUCE DOCUMENTS OF TITLE

This duty to produce title deeds is a seller’s liability before the comple
tion of the execution of the sale deed but only if the purchaser requests.
It is for the purpose of enabling the purchaser to examine the deeds
and satisfy himself about the vendor’s title. As regards their delivery see,
Section 55(3). The clause is however silent as to the place of production.
But in practice it is given at the place of the vendor or his lawyer. If the
purchaser insists on any other place, he has to pay the expense.
It is, however, respectfully submitted that the legislature may prescribe
the place of production of title deeds.
CLAUSE (l)(c): DUTY TO ANSWER SELLER’S

QUERIES RELATING TO PROPERTY
This is also the seller’s liability before the completion of the sale deed. If
the seller does not answer such relevant questions, the buyer can cancel
the contract. This duty is imposed on the seller because he must make
out a good title in himself. The documents produced by him may show
that he has a good title but if doubts arise and questions are asked, the
vendor must answer them if they are relevant and then only he makes out
a good title in himself.
914; Lallubhai Rupchand v Chimanlal Manila!, 1934 SCC OnLine Bom 1: ILR (1935) 59
Bom 83 and Bai Dosibai v Bai Dhanbat, 1924 SCC OnLine Bom 112: AIR 1925 Bom 85.
25. Haryana Financial Corpn v Rajesh Gupta, (2010) 1 SCC 655; A.K. Lakshmipathy v Rai
Saheb Pannalal H. Lahoti Charitable Trust, (2010) 1 SCC 287, no clause in the contract
that the seller would obtain a certificate from the Endowments Department for the trans
fer. The seller was held to be under no such obligation.
CLAUSE (1)(J): DUTY TO EXECUTE PROPER

CONVEYANCE ON PAYMENT
This liability is necessarily before the completion of the sale deed, because
it is only after the execution of the conveyance that the sale is complete.
The clause requires the purchaser to tender the instrument. The question
naturally arises what would happen if there is unreasonable delay on
either side. The purchaser may not pay the price or tender the document
even though the vendor has made out his good title, or the purchaser
might tender the document and the vendor does not take steps to execute
$ <—A and register it.
In Jamshed Khodaram Irani v Burjorji Dhunjibhai26, the respondent
case pilot agreed to sell to the appellant certain land for ^85,000 and ^4000 was
paid as earnest money. It was agreed: 1) ^80,500 would be paid on the
signing of the conveyance which was to be prepared within two months
of the date of the agreement; 2.) ^500 to be paid on transfer after regis
tration; and 3) if the amount is not paid within the time fixed, the earnest
money could be forfeited. As the vendee failed to perform his part within
the two months, the vendor forfeited the earnest money. Therefore, the
vendee filed a suit for specific performance. It was held:
Under the law of England, Equity, which governs the rights of parties in
cases of specific performance of contracts to sell real estate, looks not at the
letter but at the substance of the agreement in order to ascertain whether the
parties, notwithstanding that they named a specific time within which com
pletion was to take place, really and in substance intended more than that
it should take place within a reasonable time. The principle may be stated
concisely in the language used by Lord Cairns in Tilley v Thomas2728 .
‘The construction is and must be in equity the same as in a court of law.
A Court of Equity will indeed relieve against and enforce specific per
formance, notwithstanding a failure to keep the dates assigned by the
contract; either for completion or for the steps towards completion, if it
can do justice between the parties, and if as Lord Justice Turner said in
Roberts v Berry26 there is nothing in the “express stipulations between
the parties, the nature of the property, or the surrounding circumstances”,
which would make it inequitable to interfere with and modify the legal
right. That is what is meant, and all that is meant, when it is said that in
equity time is not of the essence of contract. Of the three grounds men
tioned by Lord Turner “express stipulations” requires no comment. The
“nature of the property” is illustrated by case of reversions, trusts, or
trades. The “surrounding circumstances” must depend on the facts of
each particular case.’
Their Lordships will add to the statement just quoted these observations.
The special jurisdiction of equity to disregard the letter of the contract in
26. 1915 SCC OnLine PC 56: (1915-16) 43 IA 26.

27. (1867) LR 8 Ch 61.
28. (1853) 3 DM&G 284.
ascertaining what the parties to the contract are to be taken as having really
and in substance intended as regards the time of its performance may be
excluded by the plainly expressed stipulation. But to have this effect the lan
guage of the stipulation must show that the intention was to make the rights
of the parties depend on the observation of the time limits prescribed in a
fashion which is unmistakable.
In the absence of a contract to the contrary the place of execution of the
deed is the vendor’s place or that of his advocate. The costs of execution
are generally made subject to the terms of the contract between the par
ties. After the execution of the deed it is the purchaser who presents the
document for registration, but the vendor must also appear before the
Registrar and answer the questions put by him. But a conveyance is liable
to stamp duty even if it is not registered.29
CLAUSE (l)(e): DUTY TO TAKE REASONABLE CARE OF

PROPERTY AND DOCUMENTS DURING PROCESS OF SALE
This also should be considered as a seller’s liability before completion of
the sale deed. But since the obligation of the vendor subsists till delivery
of the property, the seller’s liability under this clause continues even after
the execution of the sale deed. If any damage is caused to the property
between the dates mentioned in the section, the purchaser can make an
appropriate deduction in the price to be paid by him and he can also
sue for damages, after taking delivery of the property, for breach of the
original contract for sale. Though the section uses the words “contract
of sale”, they have been understood only as meaning a contract for sale.
CLAUSE (l)(f): DUTY TO HANDOVER

POSSESSION OF PROPERTY
The seller’s liability to give possession arises ordinarily immediately after
completion of execution of the sale deed. The vendor cannot refuse to do
so on the ground that the price was not yet paid. [See, S. 54—Transfer
of ownership, how made]. If the purchaser sues for possession without
paying the price the question has arisen as to whether the purchaser
could also be compelled by court to pay the price when the vendor is
being compelled by the court to deliver possession. The High Courts
have taken different views, one view being that it is equitable to make
delivery of possession conditional on payment of price; and the other,
that the plain language of the section must be given effect to without
importing equitable considerations. The possession contemplated is such
as its nature permits. If the purchaser has paid the price and does not get
possession and the ownership has not passed to him, he can enforce his
29. Anna Rao v Bandappa, 1970 SCC OnLine Kar 43: AIR 1971 Mys 63.
charge under Section 55(6)0). If ownership passes, he can sue the seller
for delivery of possession or he can rescind the contract and sue for the
price paid by him.30
CLAUSE (l)(g): DUTY TO CLEAR DUES ON THE

PROPERTY ACCRUING UP TO SALE
This also is a seller’s liability before completion of the sale, and can be
enforced by the purchaser after completion, under Section 69, Contract
Act.31 Knowledge of the vendee about the existence of an encumbrance
does not absolve the vendor from his duty to discharge it, unless the
property is sold subject to the encumbrance.
CLAUSE 2: DUTY TO ASSURE THAT SELLER HAS

SALEABLE SUBSISTING INTEREST IN PROPERTY AND
RIGHT TO TRANSFER
This is known as the covenant for title, and the vendor’s liability with
respect to this covenant arises after the completion of the sale. It is an
implied covenant. Under Section 55(1) the purchaser can satisfy himself
whether the vendor has a good title. If, even after he so satisfies him
self, he is dispossessed on account of a defect in title, which the vendor
professed to have, under Section 55(2), he can claim back from the ven
dor the purchase money and sue him for damages, whether or not the
purchaser was aware of the defect. What the vendor covenants is that
he has in law the estate he claims to have, that he has the title which he
professes and that the title is marketable. A title is said to be marketable
when it is free from reasonable doubt, not only that it is good but that it
is indubitable; a title, reasonably free from such doubts as would affect
the market value of the property. A purchaser is liable to pay interest on
the sale price from the time when a good title is shown-, and the vendor
will be liable to pay costs of inquiry into the vendor’s title, also up to that
time. Generally, time is not considered to be the essence of the contract
in the case of sales of immovable property. Unlike the covenant for title
in English Law, there is no covenant for quiet enjoyment in Indian law.
But the English covenant is available only against any acts of the vendor,
whereas, the covenant under the section comes into play when the pur
chaser is evicted by anyone on account of a defect in the title. But since
30. Chaudhary Rambabu Singh v Dalip Kumar, 1980 SCC OnLine MP 133: AIR 1981 MP
158; Babu Lal v Hazari Lal Kishori Lal, (1982) 1 SCC 525. Abdul Hameed v Shahjahan
Begum, AIR 2008 NOC 640 (MP), a suit for specific performance decreed without men
tioning delivery of possession in the decree. The court said that the court executing the
decree could issue direction for delivery of possession, the decree to be amended for this
purpose under S. 152 CPC.
31. Bhagwati v Banarsi Das, 1928 SCC OnLine PC 5: (1927-28) 55 IA 135.
it is a covenant for title the purchaser cannot sue the vendor when he is
evicted by trespassers.
Implied covenants no doubt give place to express covenants, but
whether the implied covenant is thus superseded by an express covenant
would depend upon the circumstances of the case and the language used
in the document.
The proviso shows that the implied covenant is available against a
trustee to the extent that he is deemed to covenant only that he has not
done any act whereby the property is encumbered or whereby he is hin
dered from transferring it. But if the trustee does not disclose his real
character, but sells it as an ordinary owner, he would be subject to the
implied covenant for title.
Therefore, before completion of sale, under Section 55(1), the buyer
could make sure that the title offered by the vendor is free from doubt.
After completion, the buyer can rescind the contract, because the
non-disclosure of the defect would amount to fraud. He can also sue for
damages under clause (2). If the seller has no title at all the purchaser can
get the contract annulled.32
The third paragraph shows that it is a covenant running with the land.
If A buys a property from B but is dispossessed because of a defect in
title, A can sue for damages for breach of the contract. If A is unable to
get possession, because the property is in the possession of C, A can have
the sale set aside only if he can prove B's fraud. Otherwise, his remedy is
only to sue for damages for breach of covenant.
CLAUSE 3: DELIVERY OF DOCUMENTS OF

TITLE ON PAYMENT
The liability of the vendor to deliver title deeds to the purchaser on the
receipt of the purchase-price from him is a liability arising after comple
tion of the sale. Before the sale he was obliged to produce the title deeds
for inspection by the purchaser; and after the sale a duty is cast on him
to deliver the title deeds to the purchaser, if the purchase price is paid. He
must deliver not only those in his possession but also those which he has
power to produce. The proviso consists of two cases when the vendor is
not under the obligation to deliver title deeds.
CLAUSE 4(a): RENTS AND PROFITS BELONG TO

SELLER TILL PASSING OF OWNERSHIP
This clause deals with the seller’s right to rents and profits of the prop
erty, before the completion of sale, because the contract for sale does
32. Motiuahoo v Vinayak Veerchand, ILR (1888) 12 Bom 1 (a contract providing for “such
title as the vendor has”, implies some title); Bhagyathammal v Dhanabagyathammal,
1981 SCC OnLine Mad 45: AIR 1981 Mad 303.
not create any right in the purchaser and the vendor continues to be the
owner.
CLAUSE 4(b): CHARGE FOR UNPAID PRICE

This deals with the vendor’s right, known as vendor’s lien and this right
arises after the completion of the sale. As the last phrase in the section
indicates possession of the property must have also been delivered before
the vendor can have his lien. This is not a possessory lien and the vendor
cannot insist on retaining possession until the price is paid.
In Webb v Mcpherson33, the question involved was whether the appel
lants as representing their testator were entitled to a lien or charge on
certain property belonging to the respondent, for the balance of princi
pal and interest said to be due on account of unpaid purchase money, or
whether there was a contract to the contrary. It was held:
With reference to the conveyance a number of English cases were cited. No
doubt English cases might be useful for the purpose of illustration, but it
must be pointed out that the charge which the vendor obtains under the
Transfer of Property Act is different in its origin and nature from the ven
dor’s lien given by the Courts of Equity to an unpaid vendor. That lien was a
creation of the Court of Equity and could be modified to the circumstances
of the case by the Court of Equity. But in the present case there is a stat
utory charge. The Law of India, speaking broadly, knows nothing of the
distinction between legal and equitable property in the sense in which that
was understood when equity was administered by the Court of Chancery in
England, and the Transfer of Property Act gives a statutory charge upon the
estate to an unpaid vendor unless it is excluded by contract. Such a charge,
therefore, stands in quite a different position from a vendor’s lien. You have
to find something, either express contract, or at least something from which
it is a necessary implication that such a contract exists, in order to exclude
the charge given by the statute. In Their Lordships’ opinion there is no
ground whatever for saying that that charge is excluded by a mere personal
contract to defer payment of a portion of the purchase-money, or to take
the purchase-money by instalments, nor is it, in Their Lordships’ opinion,
excluded by any contract, covenant, or agreement with respect to the pur
chase-money which is not inconsistent with the continuance of the charge.
It is quite clear that the agreement by the purchaser, to pay the balance of
the purchase-money in three annual instalments with interest was in no way
inconsistent with the existence of a charge to the vendor for the amount of
the instalments with interest to become due from time to time.
But there is another point which seems to have found favour with the High
Court in Bengal. It was said that no charge ever arose, because the purchase
was not in consideration of a sum of money, part of which was paid down and
the payment of the balance of which was deferred, but it was a purchase in
consideration of a particular covenant. There is no doubt, both on principle
33. 1903 SCC OnLine PC 25: (1902-03) 30 IA 238.

S. 551 SALE OF IMMOVABLE PROPERTY 185
and authority, that a conveyance or sale in consideration of a covenant to

pay a sum of money in the future is different from a sale in consideration of
money which the purchaser covenants to pay. The distinction may seem fine,
but it is a real distinction, and it is one which, if made out, might have had
the effect which the High Court have given to it. But is that the form of this
conveyance? The conveyance, as already pointed out, is made in considera
tion of a sum of money. The agreement is expressed to be an agreement to sell
for a sum of money, of which part is to be paid and the rest is to be secured
by an instrument of even date, and the operative part of the conveyance is in
consideration of the part paid down, and of a balance which is identified as
being the sum secured by the agreement. Their Lordships, therefore, think
that, that point also fails, and that there is no contract excluding the opera
tion of the charge.
The distinction between a sale in consideration of a covenant to pay
money in future and a sale in consideration of money which the pur
chaser covenants to pay is very subtle but must be carefully noted,
because, in the former case, there is no vendor’s lien. Such a lien arises
only in the latter case. The distinction between the two is this: In the
first case, the consideration is the covenant, whereas in the latter case the
consideration is the money. Whether in a particular case it is one or the
other depends on the intention of the parties to be gathered from all the
circumstances of the case.
The charge referred to in clause 4(6) is enforceable under Section 100
of this Act.
The circumstances in which the vendor’s lien is lost and is not lost
were set out by an eminent judge of the Madras High Court, Sir Vepa c=\
Ramesam, with great clarity in Swamintha Odayar v Subbarama
Ayyar34: CASE P|Lot
(1) A mere direction by the vendor to the vendee to pay the whole or a
part of the purchase money to a third person does not extinguish
the lien.
(2) If such a direction is followed by mere payment to the third person
but not by a fresh contract by the vendee with the third person so
as to effect a complete innovation, the lien is not lost.
(3) Where it was intended that the vendee should execute a mortgage
deed and extinguish the lien but the mortgage deed was not com
pleted by registration and remained a simple bond, the lien is not
extinguished.
(4) Where the vendor obtained a promissory note, not from the vendee
but from a third person at the instance of the vendee and the third
person did not pay, even then, if the third person’s note or bond
34. ILR (1927) 50 Mad 548; Mungamuru Lakshmidevamtna v Land Acquisition Officer,
1984 SCC OnLine AP 174: AIR 1985 AP 200.
was only an additional security to the vendee's liability and not in

substitution of it, the lien is not lost.
(5) Where the vendor himself takes a promissory note or bond and
where the right in it was assigned by him to a third person or where
his right was attached in execution of a decree and purchased by
a third person, the vendor’s right to the lien passes to the third
person under Section 8 of the Transfer of Property Act and is avail
able to the assignee or purchaser.
(6) But if in the last case the vendor took a negotiable instrument and
the instrument is not assigned under the Law Merchant, it is doubt
ful if Section 8 of the Transfer of Property Act will apply and the
endorsee will be entitled to the lien.
(7) Where a complete innovation is effected and a new contract
between the vendee and a third person was effected in substitution
of the vendee’s liability to the vendor, this amounts to a contract
to the contrary within the meaning of Section 55 of the Transfer of
Property Act and the lien is extinguished.... Even in such a case if
the document taken is not a negotiable instrument but only a bond
and if it is taken benami for the benefit of the vendor so that he
may still sue on it, the arrangement being known to the vendee, the
vendor’s lien remains, provided he is not prejudiced. And where the
document taken is a negotiable promissory note so as to disable the
vendor from suing even if he is the person beneficially interested
in the money after its recovery, the lien must be held to be lost, as
ostensibly the payee of the note is the only person entitled to sue.
The note might have been endorsed not to the vendor but to any
other third person. To say that the note in the hands of the payee
has got the lien attached to it involved anomalous positions.
If two persons A and B sell their property to C, D and E and part of
the purchase money is paid by the purchasers, but for the balance two
promissory notes were executed by one of the purchasers, the promissory
notes must be treated as part of the purchase money, and therefore the
vendors do not have an enforceable charge.
If part of the sale consideration is cash and the balance, shares in a
company, and the shares are not transferred, the vendor cannot claim his
charge, because the transaction is not a sale, since the sale consideration
was not price (money).
CLAUSE 5(a): TO DISCLOSE NATURE AND EXTENT OF

SELLER’S INTEREST IN PROPERTY
This clause deals with the buyer’s liability to disclose facts which might
increase the value of seller’s interest in the property, before the completion
of the sale. Though the section is couched in wide terms, it has been
judicially interpreted and confined to facts regarding the seller’s title.
Under the last clause, the non-disclosure is deemed to be fraudulent. For
example, the buyer may have to disclose to a woman selling her property
that she is the absolute owner and not a limited owner. But he need not
disclose to her that there is a mine in the property because the buyer’s
duty only relates to facts concerning title. But if the purchaser sues for
specific performance, the court may refuse to exercise its discretion in his
favour. Compare with clause i(a).
CLAUSE 5(b): PAYMENT OF PURCHASE MONEY

This clause deals with the buyer’s duty to pay the price before the com
pletion of the sale. Under Section 55(i)(<^), the seller has to execute a
proper conveyance when the purchaser pays or tenders the price. Under
this clause, Section 55(5)(&>), the duty is imposed on the purchaser to pay
or tender the price. Where money is retained by the purchaser to pay
off an encumbrance the section provides that he shall pay the amount
so retained to the persons entitled thereto. But there may be circum
stances when there is no such obligation to pay the amount retained
to the vendor. In Mohd Siddiq Khan v Mohd Nasir Ullah Khan35, part
of the purchase price was retained by the vendee in order to pay off an
encumbrance. The encumbrance was not paid off and in fact it was for
an amount larger than the amount retained. In a suit by the vendor to
recover the amount retained with interest, it was held:
The amount was not left with the vendees simply as a deposit of the money of
the vendor. They were to retain it as a security that the property sold should
be freed from the encumbrances upon it and that they should have a good
title. They were entitled to retain it until the vendor provided the rest of the
money necessary for this purpose. Unless this was done, a payment of the
amount retained would leave the property still encumbered, as the mortgagee
would only receive it, if he did so, in part payment of what was due. From the
nature of the transaction it was not a deposit upon which the vendees would
be liable to pay interest unless they refused or omitted to pay the money when
they were informed by the vendor that he was prepared to pay the balance
necessary to satisfy what was due to the mortgagee. Without that balance
they were not bound to pay or tender to him the amount retained.
When the purchaser retains the encumbrance money, the mortgagee can
sue him to recover the amount, as the purchaser is under statutory duty
(shall pay) to pay the amount to the mortgagee. The mortgagee can also
sue the vendor in which case the vendor can sue the purchaser.
35. ILR (1899) 21 All 2.13 (PC).

CLAUSE 5(c): AFTER PASSING OF OWNERSHIP, LOSS IN

VALUE TO BE BORNE BY PURCHASER
This clause deals with the buyer’s liability to bear any loss caused to the
property after completion of sale. [See, S. 49.]
CLAUSE 5(d): AFTER SALE, BUYER TO BEAR DUES

BECOMING PAYABLE
This clause also deals with the buyer’s liability after the completion of
sale. Under Section 55(i)(g), it was the vendor’s liability before comple
tion of sale and under this clause it is the purchaser’s liability after com
pletion of sale.
CLAUSE 6(a): AFTER SALE, BUYER ENTITLED TO

IMPROVEMENTS, PROJECTS, ETC.
This clause deals with the buyer’s right after the completion of sale to
any increase in the value of the property. In Izzat-Un-Nizza Begam v
Kunwar Pratab Singh36, property was sold subject to two mortgages and
the purchaser retained part of the purchase money for paying off the
mortgages. After the sale, however, the mortgages were declared invalid
and the vendor sued for the unpaid purchase money. It was held:
It seems to depend on a very simple rule. On the sale of property subject to
incumbrances the vendor gets the price of his interest, whatever it may be,
whether the price be settled by private bargain or determined by public com
petition, together with an indemnity against the incumbrances affecting the
land. The contract of indemnity may be express or implied. If the purchaser
covenants with the vendor to pay the encumbrances, it is still nothing more
than a contract of indemnity. The purchaser takes the property subject to the
burthen attached to it. If the incumbrances turn out to be invalid, the vendor
has nothing to complain of. He has got what he bargained for. His indemnity
is complete. He cannot pick up the burthen of which the land is relieved and
seize it as his own property. The notion that after completion of the purchase
the purchaser is in some way a trustee for the vendor of the amount by which
the existence, or supposed existence, of incumbrances has led to a diminution
of the price, and liable, therefore, to account to the vendor for anything that
remains of that amount after the incumbrances are satisfied or disposed of,
is without foundation. After the purchase is completed, the vendor has no
claim to participate in any benefit which the purchaser may derive from his
purchase. It would be pedantry to refer at length to authorities. But Their
Lordships, under the circumstances, may perhaps be excused for mentioning
Tweddel v Tweddel3738 , Butler v Butler33 and Waring v Ward39.
36. 1909 SCC OnLine PC 20: (1908-09) 36 IA 203.
37. (1787) 2 Bro CC 151.
38. (1800) 5 Ves 534.
39. (1802) 7 Ves 332.
If, however, the property is sold free from encumbrances, the vendee
retains the vendor’s money to pay off the encumbrances, and hence, the
vendee is an agent of the vendor and accountable to him for any surplus.
The property of a guarantor was auctioned under a settlement between
the lender bank and the borrower. The auction-purchaser was put in pos
session of the property since eight years and registration was also made
in his favour. Sons of the guarantor claimed their share in the surplus
proceeds. The auction-purchaser claimed that he made the purchase by
borrowed money on which he was paying heavy interest. The Supreme
Court held that the auction-sale could not be set aside at that stage. His
possession was not to be interfered with.40
Failure of seller's title.—A trust allotted some land to a person who
transferred it with approval of the trust. The court said that transferee’s
rights were the same, and nothing more, than those of the transferor.
He has to sink or swim with the fortune of the transferor. The allotment
had to be cancelled because the allottee was found to be ineligible. The
transferee could not claim to stick to the allotment. The Supreme Court
considered the facts of the case and willingness shown by the transferee
to pay the additional amount and directed the trust to consider his case.4142
CLAUSE 6(b): BUYER’S LIABILITY IF HE DECLINES TO

ACCEPT DELIVERY OF POSSESSION
This clause deals with the counterpart of the vendor’s lien under
Section 5s(i)(b). The buyer’s charge can also be enforced under
Section zoo. This is a buyer’s right, before completion of the sale, that is,
when he had paid the price but the vendor has not given the document
giving the purchaser ownership.
As regards the nature of the earnest money and the vendor’s right to
forfeit the earnest money, it was held in Mania Bux v Union of India41:
According to Earl Jowitt in Dictionary of English Law at p. 689, ‘Giving
an earnest or earnest money is a mode of signifying assent to a contract of
sale or the like, by giving to the vendor a nominal sum (for example, a shil
ling) as a token that the parties are in earnest or have made up their minds’.
As observed by the Judicial Committee in Kunwar Chiranjit Singh v Har
Swarup43, ‘earnest money is part of the purchase price when the transaction
goes forward; it is forfeited when the transaction falls through, by reason
of the fault or failure of the vendee’.... Forfeiture of earnest money under a
contract of sale of property—movable or immovable—if the amount is rea
sonable, does not fall within Section 74 of the Contract Act. That has been
40. Central Bank of India v C.L. Vimla, (2015) 7 SCC 337.

41. Baljit Singh v Improvement Trust, (2009) 2 SCC 222.
42. (1969) 2 SCC 554.
43. 1925 SCC OnLine PC 63: AIR 1926 PC 1.
decided in several cases: Kunwar Chiranjit Singh v Har Swarup; Roshan Lal
v Delhi Cloth and General Mills Co Ltd44; Mohd Habibullah v Mohd Shafi45,
and Bishan Chand v Radha Kishan Das46.
In Shri Hanuman Cotton Mills v Tata Air Craft Ltd47, it was observed:
CASE PILOT From a review of the decision cited above, the following principles emerge
regarding ‘earnest’:
‘(i) It must be given at the moment at which the contract is concluded.
(z) It represents a guarantee that the contract will be fulfilled or, in other
words, “earnest” is given to bind the contract.
(3) It is part of the purchase price when the transaction is carried out.
(4) It is forfeited when the transaction falls through by reason of the default
or failure of the purchaser.
(5) Unless there is anything to the contrary in the terms of the contract,
on default committed by the buyer, the seller is entitled to forfeit the
earnest.’
...In this view, it is unnecessary for us to consider the decision of this Court
in Maula Bux v Union of India48....
CASE PILOT
The learned Attorney-General has pointed out that the decisions referred
to [in that case] ...do not lay down that the test of reasonableness applies to
an earnest deposit and its forfeiture.... [He] has also referred us to various
decisions, wherein, according to him, though the amounts deposited by way
of earnest money were fairly large in proportion to the total price fixed under
the contract, nevertheless the forfeiture of those amounts were not interfered
with by the Courts. But,... we do not propose to go into those aspects in the
case on hand.
A comparison of the seller’s charge under Section 55(4)(£>) and a buyer’s
charge under this section shows that the former arises on delivery of
possession in relation to the unpaid purchase price, and the latter arises
when the price or part of it is paid in anticipation of delivery. The former
subsists till the price is paid and the latter till conveyance is executed and
possession delivered.
Unlike Section 100 below, the purchaser’s charge for money paid is
available even against persons without notice.49
44. ILR (1911) 33 All 166.

45. ILR (1919) 41 All 324.
46. ILR (1897) 19 All 490.
47. (1969) 3 SCC 522; Saidun Nessa Hoque v Calcutta Vyapar Pratisthan Ltd, 1977 SCC
OnLine Cal 268: AIR 1978 Cal 285; ITO v K.A. Govindasivanry, 1977 SCC OnLine
Mad 84: AIR 1978 Mad 186; Bali Ram Dhote v Bhupendra Nath Banerje, 1978 SCC
OnLine Cal 153: AIR 1978 Cal 559; Basant Lal v Dtuarka Prasad Varshney, 1978 SCC
OnLine All 954: AIR 1978 All 436; DDA v Skipper Construction, (2000) 2 SCC 357;
M.M.R.M. Chettiar Firm v S.R.M.S.L. Chettiar Firm, 1941 SCC OnLine PC 6: AIR
1941 PC 47; Asgar S. Patel v Union of India, (2000) 5 SCC 311; C.B. Gautam v Union of
India, (1993) 1 SCC 78.
48. (1969) 2 SCC 554.
49. Trimbak Narayan Hardas v Babulal Motaji, (1973) 2 SCC 154. Illickal Joseh v
Cholappurath Vrindadevi, 2008 SCC OnLine Ker 67: AIR 2009 Ker 2, the charge is
The passing of title is according to the intention of the parties and

does not depend upon payment of consideration.50 A suit was filed for
cancellation of a registered sale deed on the ground that the price was
not paid. The sale deed did not incorporate any recital that the title was
not to vest in the buyer unless the sale price was paid. It was held that the
title became vested as soon as the sale deed was registered. Cancellation
could not be sought on the ground of unpaid price.51 The appropriate
remedy is suit for price.
The buyer’s charge comes into force the moment he pays the pur
chase money, or any part of it. A subsequent compromise at a time
when the seller’s title is gone, was held as not affecting the charge under
Section 5$(6)(b).52
The next two sections, Sections 56 and 57 also deal with sales.
56. Marshalling by subsequent purchaser.—If the owner of two or more
properties mortgages them to one person and then sells one or more of the prop
erties to another person, the buyer is, in the absence of a contract to the contrary,
entitled to have the mortgage-debt satisfied out of the property or properties not
sold to him, so far as the same will extend, but not so as to prejudice the right of
the mortgagee or persons claiming under him or of any other person who has for
consideration acquired an interest in any of the properties.
MARSHALLING
In marshalling, if several properties are subject to a mortgage and one
of them is sold free from the encumbrance, the mortgagee is required in
the first instance to satisfy his debt from the other property subject to
the mortgage. This may be compared with contribution, in which, if sev
eral properties are subject to a mortgage and the mortgagee is paid out
of one of them, the others are required to make a contribution. Where
there are more than one purchaser neither has any superiority of right
or equity over the other and both contribute rateably to discharge the
encumbrance.
This is so, because robbing Peter to pay Paul is not, as Lord
Macnaughten said, a principle of equity.53
Suppose two properties X and Y are mortgaged to A. X is thereaf
ter sold to B, and Y sold to C. If A proceeds against X, B will suffer.
If he proceeds against Y, C will suffer. Therefore, the liability will be
enforceable against all persons claiming under the chargee. The period of limitation for
enforcing the charge is 12 years from the date on which became due and not three years.
Basant Kaur v General Public, AIR zoo8 NOC 1406 (P&H), a mere agreement for sale
does not create any charge in favour of the buyer.
50. Gurubari Lenka v Dulani Thakurani, 1970 SCC OnLine Ori 28: AIR 1971 Ori 147.
51. Key Pee Buildtech (P) Ltd v Shahjahan Begum, AIR 2015 NOC 1061 (Raj).
52. Molly Ajithkumar v Vimala Sasidharan, 2012 SCC OnLine Ker 82: AIR 2012 Ker 87.
53. See, Ghosh, The Law of Mortgage in India (7th Edn.) 512.
distributed proportionately. This follows from the words “the mortgagee

or other person who has acquired an interest in the property”.
This section applies to the seller of the mortgaged property and not to
the mortgagee. The exception to this rule is where a mortgagor is forced
to foreclose on the mortgage to recover the debt owed to him. In such a
situation the purchaser may proceed against the mortgagor as the repre
sentative of the seller.
Suppose, A mortgages his properties X, Y and Z to B and thereafter
sells X to C and mortgages Y to D. D can claim marshalling against
B but not against C because he is a person who has for consideration
acquired an interest in X.
The view of some of the High Courts has been that the equitable doc
trine of marshalling is meant for the benefit of buyers only. This view
has been impliedly affirmed by the Supreme Court by observing that the
plea of marshalling is a pure question of law. It can be raised for the first
time in appeal without having been specifically pleaded before the trial
court.54
DISCHARGE OF ENCUMBRANCE ON SALE [S. 57]

57. Provision by Court for encumbrances, and sale freed therefrom.—
(a) Where immovable property subject to any encumbrance, whether immedi
ately payable or not, is sold by the court or in execution of a decree, or out of
court, the court may, if it thinks fit, on the application of any party to the sale,
direct or allow payment into court,—
(i) in case of an annual or monthly sum charged on the property, or of a
capital sum charged on a determinable interest in the property—of such
amount as, when invested in securities of the Central Government, the
Court considers will be sufficient, by means of that interest thereof, to
keep down or otherwise provide for the charge, and
(2.) in any other case of a capital sum charged on the property—of the
amount sufficient to meet the encumbrance and any interest due thereon.
But in either case there shall also be paid into court such additional amount
as the court considers will be sufficient to meet the contingency of further costs,
expenses and interest, and any other contingency except depreciation of invest
ments, not exceeding one-tenth part of the original amount to be paid in, unless
the Court for special reasons (which it shall record) thinks fit to require a larger
additional amount.
(b) Thereupon the Court may, if it thinks fit, and after notice to the encum
brancer, unless the Court, for reasons to be recorded in writing, thinks fit to dis
pense with such notice, declare the property to be freed from the encumbrance,
and make any order for conveyance, or vesting order, proper for giving effect
to the sale, and give directions for the retention and investment of the money in
court.
(c) After notice served on the persons interested in or entitled to the money
or fund in Court, the Court may direct payment or transfer thereof to the per
sons entitled to receive or give a discharge for the same, and generally may give
54. J.P. Builders v A. Ramadas Rao, (2011) 1 SCC 429.
directions respecting the application or distribution of the capital or income

thereof.
(d) An appeal shall lie from any declaration, order or direction under this
section as if the same were a decree.
(e) In this section “Court” means (i) a High Court in the exercise of its ordi
nary or extraordinary original civil jurisdiction, (z) the Court of a District Judge
within the local limits of whose jurisdiction the property or any part thereof is
situate, (3) any other court which the State Government may, from time to time,
by notification in the Official Gazette, declare to be competent to exercise the
jurisdiction conferred by this section.
Under this section the court can act only when there is an application of
any party to the sale and the court will not pass directions on its own
motion. Different rules are provided in clauses (a)(i) and (2) for the dis
charge of encumbrance, according as it is an annuity or monthly sum, or
when it is a capital sum. The power of the court is, however, discretion
ary as shown by the words “may, if it thinks fit”.55
The purpose of this section is to empower the courts to pass orders
for clearing encumbrances on property in order to ensure that properties
can be sold free from obligations to third parties and order burdens. This
is intended to simplify the procedure of sale of property by relieving the
need for confirmation from the encumbrancers for proceedings with the
sale of the property.
This provision is applied to any encumbrance whether immediately
recoverable or not on immovable property, which is proposed to be sold
under the authority of the court or in execution of a decree or out of
court.
EXERCISES
1. Distinguish between a contract of sale and a contract for sale.
(pp. 172.-173)
2. What are the duties of a seller before completion of the sale?
(PP- 175-176)
3. What are the duties of a buyer before completion of the sale?
(PP- 175-176)
4. Explain “covenant for title”, (pp. 180-181)
5. What are the duties of a buyer and seller after completion of the
sale? (pp. 174-175)
6. What is the safeguard for a seller who has not been paid the full
price? (pp. 184-186)
7. Explain vendor’s lien. (pp. 181-183)
8. What is the scope of the buyer’s charge for his pre-paid earnest
money and purchase money? (pp. 185-186)
55. Narayanan Namboodiri v Parukutty^ 1981 SCC OnLine Ker 45: AIR 1982 Ker 53
(Salvage lien).
194 LAW OF TRANSFER OF PROPERTY

and statutes referred to in the book EBC
through EBC Explorer™ on SCC Online*; Explorer™
The following cases from this chapter are available (—V

• A.K. Lakshmipathy v Rai Saheb Pannalal H. Lahoti case pilot
Charitable Trust, (2.010) 1 SCC 287.
• Jamshed Khodaram Irani v Burjorji Dhunjibhai, 1915 SCC OnLine
PC 56
• Maula Bux v Union of India, (1969) 2 SCC 554
• Shri Hanuman Cotton Mills v Tata Air Craft Ltd, (1969) 3 SCC 522
• Swamintha Odayar v Subbarama Ayyar, ILR (1927) 50 Mad 548
Chapter 11
Different Kinds of Mortgages
VARIOUS TYPES OF MORTGAGES

A mortgage corresponds to the Hypotheca of Roman law. The creditor,
on the failure of the debtor to pay the debt, could bring the debtor’s
property to sale and recoup himself. It differs from Nexum and Fiducia
of that system of law. Under the former, the debtor was merely forced
to become the servant or slave of the creditor, and, under the latter, the
debtor was kept out of ownership and possession of his own property.
Hindu and Mahommedan Laws also recognised the latter type of mort
gage. Property was pledged to the creditor and the debtor was kept out
of possession till the debt was repaid, the creditor taking the profits in
lieu of the interest.
Section 58(0) defines “mortgage”, “mortgagor”, “mortgagee”, “mort
gage-money” and “mortgage-deed”. It provides:
58. ‘Mortgage", ‘mortgagor", ‘mortgagee", ‘mortgage-money" and
‘mortgage-deed" defined. — A mortgage is the transfer of an interest in specific
immovable 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.
The definition in the Stamp Act is wider.1
In a mortgage deed there are the following ingredients:2
1. See, Ramchand and Sons Sugar Mills v State of U.P., 1977 SCC OnLine All 459: AIR
1978 All 443.
2. Namadeu Keshav Hindalekar v Nazar Sheriyar Mazada, 1982 SCC OnLine Kar 82: AIR
1983 Kar 19; Santosh Kumar v Chameli Deui, 1982 SCC OnLine All 930: AIR 1983 All
195; Janardhana Malian v Gangadharan, 1982 SCC OnLine Ker 214: AIR 1983 Ker 178;
Saryanarayan Shah v Star Company Ltd, 1983 SCC OnLine Cal 57: AIR 1984 Cal 399;
Mahendra Mallik v Brundaban Das, 1983 SCC OnLine Ori 74: AIR 1984 Ori 6z;Janki
v Ganesh Ram, 1984 SCC OnLine All 24: AIR 1984 All 219; Sivarnalata Tat v Chandi
i. the transfer of an interest in specific immovable property;

2. the transfer is for the purpose of securing (a) the payment of
money advanced by way of loan; or (b) the payment of money to be
advanced by way of loan; or (c) the payment of an existing debt; or
(J) the payment of a future debt; or (e) performance of an engage
ment which may give rise to a pecuniary liability.
The scope of the various ingredients is discussed below:
i. The mortgagor, who is the owner of the property, has several inter
ests in his property, such as possession, enjoyment and right to sell
the property. In a mortgage, he transfers any one of these interests
in specified immovable property, to the mortgagee, whereas in a
sale there is a transfer of the ownership which is the entire bundle
of interests in the property sold.
2. Money to be advanced by way of loan arises in the case of a run
ning account between the parties. [See, S. 79]
3. A future debt is a contingent liability which arises on the happen
ing of some contingency, for example, a mortgage of property to
pay the mortgage money if a usufructuary mortgagee is deprived of
the possession of the mortgaged property.
4. Suppose the parties enter into an engagement to do something, and
if one of them does not do what he agreed to do, an obligation to
pay damages may arise. That is there may be a pecuniary liability.
In a mortgage there could be a transfer of interest to secure the per
formance of such an obligation, that is, if the engagement was not
performed, to secure the discharge of the pecuniary liability that
would arise on such non-performance. 3
An undertaking by a person borrowing money not to alienate his prop
erty until the money is repaid is not a mortgage, because there is no
transfer of any interest in property.
It is only after first determining that a transaction is a mortgage
under clause (a) that one should turn to other clauses in order to find out
what kind of mortgage it is. It is necessary to know the kind of mort
gage, because different rights and liabilities arise in the mortgagor and
mortgagee.
Section 59-A provides:
59-A. References to mortgagors and mortgagees to include persons deriving
title from them.—Unless otherwise expressly provided, reference in this Chapter
to mortgagors and mortgagees shall be deemed to include references to persons
deriving title from them respectively.
Charan Dey, 1984 SCC OnLine Cal 24: AIR 1984 Cal 130; Gulab Chand v Babidal,
(1998) 9 SCC 211.
3. Jagan Nath v Har Pal Singh, 1980 SCC OnLine All 52: AIR 1980 All 139.
S. 58(b)] DIFFERENT KINDS OF MORTGAGES 197
Mortgage money: This would include interest only when its payment is
secured by the mortgage deed.
Even in the case of a person who is not the full owner, any of his
rights can be transferred to the mortgagee. Thus a lessee can transfer his
right to possession and create a usufructuary mortgage. The only test is
“The interest conveyed, is it available to the mortgagor in the property?”
For example, a mortgagor may have a limited right, which, however,
does not include the right to possession. Such a mortgagor cannot in the
nature of things, create a usufructuary mortgage. Any right that is trans
ferable without infringing Section 6 can be the subject of a mortgage.4
Non-payment of consideration money by the mortgagee and non-de
livery of possession of the property to be mortgaged, these two facts
have been held to be not sufficient to render the mortgage agreement to
be void or ineffective. If, however, the mortgagee sues for any relief, no
decree can be passed in his favour. The court said because he had given
nothing he could not ask for anything.5
In Indian law there are six different types of mortgages. They are:
i) the simple mortgage, 2) mortgage by conditional sale, 3) usufructuary
mortgage, 4) English mortgage, 5) mortgage by deposit of title deeds, and
6) anomalous mortgage.
SIMPLE MORTGAGE
Simple mortgage is defined in Section 58(b). It provides:
58(b). Simple mortgage.—Where, without delivering possession of the
mortgaged property, the mortgagor binds himself personally to pay the mort
gage-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.
The ingredients of a simple mortgage are: 1) there is a personal under
taking by the mortgagor to repay the loan, 2) possession and enjoyment
remains with the mortgagor, 3) there is a power of sale but to be exer
cised only through court, 4) it must be effected by a registered instru
ment whatever the amount of consideration, 5) there is no delivery of
ownership or possession, and 6) there is no foreclosure.
1. In the case of a simple mortgage the mortgagee has two remedies:
one on the personal undertaking to obtain a money decree against
4. Chief Controlling Revenue Authority v Mayavarani Financial Corpn Ltd, 1979 SCC
OnLine Mad 72: AIR 1979 Mad 282 (Property given as security for payment by bidder at
auction is mortgage); Dorik Mahto v State of Bihar, 1979 SCC OnLine Pat 169: AIR 1980
Pat 163; Ganpat v Nanaji, 1979 SCC OnLine Bom 141: AIR 1981 Bom 335.
5. Basanti Lal v Phaphi, 2007 SCC OnLine Raj 44: AIR 2008 Raj 72.
the debtor (mortgagor) and the other to sue on the mortgage and
obtain a decree for the sale of the property. If the land is not of
sufficient value, the balance may be recovered by personal action.
If there is excess it is to be returned to the mortgagor.
2. If money is to be realised from the income of a specific item of
property, without any right to have the property sold, it is only
a charge. But if the creditor (mortgagee) has the right to have the
property sold from the moment the debt is incurred, then it is a
mortgage.
Mortgage in favour of minor.—Keeping in mind the provisions of
Section n, Contract Act, 1872, it has been held that a mortgage in
favour of a minor is void ab initio. It was a case of a simple mortgage.
The mortgagor had not handed over the property. He had only given the
undertaking that if he failed to pay back the principal amount with inter
est, it could be recovered from the specified property which was subject
to the charge.6
MORTGAGE BY CONDITIONAL SALE [S. 58(c)]

The next type is mortgage by conditional sale and it is defined in
Section 58(c) as follows:
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 a 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.
The ingredients of a mortgage by conditional sale are:
1. There is an ostensible sale by the mortgagor to the mortgagee of the
mortgaged property.
2. There is a condition that the sale shall be void if the loan is repaid
on a particular date. The property is then retransferred to the
mortgagor. If, however, the payment is not made on the stipulated
date, the sale becomes absolute in favour of the mortgagee. (In the
absence of special conditions, the mortgagor cannot pay before the
stipulated date).
6. Mathai Mathai v Joseph Mary, (1015) 5 SCC 622.

S. 58(c)] DIFFERENT KINDS OF MORTGAGES 199
3. The remedy of the mortgagee is by a suit for foreclosure.

4. Registration is compulsory only if the consideration exceeds ^100.
5. There should be only one document [see, proviso]7.
The question whether a transaction is a mortgage by conditional sale or
an out-and-out sale is important, because if it is only a mortgage, time
for repayment is not of the essence of the contract and the mortgagor can
redeem even after the time specified has expired. If, however, the trans
action is an out-and-out sale, if the vendor fails to repay within the date
specified he cannot do so thereafter and the vendee becomes absolute
owner.
A transaction can be deemed to be a mortgage by conditional sale only
when the condition is embodied in the same document which purports to
effect the sale. It is a prerequisite that the condition regarding payment
of mortgage money as a condition for transfer of property to the seller is
in the sale document itself. Every sale accompanied by an agreement for
reconveyance of property does not constitute a mortgage by conditional
sale.8
Whether the transaction in question is a mortgage by conditional sale
depends upon the parties’ intention. If the condition of reconveyance is
stated in the document itself, it is a mortgage. The statement in this case
was that if the mortgage money was not paid back within five years,
the document was to be treated as a sale. The court said that the use of
the words “mortgage money” showed that the transaction was intended
to be a mortgage.9 Where deed embodied a condition of repayment of
7. Which means that the condition should be incorporated in the same document, other
wise it is not a mortgage, Tulsi v Chandrika Prasad, (2006) 8 SCC 322; Gauri Shankar
Prasad v Brahma Nand Singh, (2008) 8 SCC 287. Raj Kishore v Pretn Singh, (2011) 1
SCC 657, sale accompanies by an agreement of reconveyance, not a mortgage by con
ditional sale. Jogendra Chandra Das v Kirtika Devi, 2013 SCC OnLine Gau 209: AIR
2014 Gau 10, document of mortgage brought into existence subsequently. Manjabai
Krishna Patil v Raghunath Revaji Patil, (2007) 12 SCC 427, two documents executed,
only an agreement for reconveyance, not mortgage. Birendra Rudrapaul v Nikunja Behari
Debnath, 2009 SCC OnLine Gau 24: AIR 2009 Gau 114, the condition of reconveyance
was incorporated in a separate document executed on the same day as the document of
mortgage, held, valid as a mortgage by a conditional sale. C. Cheriathan v P. Narayanan
Embranthiri, (2009) 2 SCC 673, the Supreme Court inferred conditional sale, instead of
mortgage, the parties being relatives and the transaction did not show signs of mortgage.
Ramegowda v Boramma, AIR 2012 Kar 52, the document in question carried both types
of transaction, namely, mortgage deed by conditional sale and sale with condition of
repurchase, the court preferred the party whose claim was to redeem the mortgage and
recover possession. Bishwanath Prasad Singh v Rajendra Prasad, (2006) 4 SCC 432, the
sale was subject to the condition of repurchase or reconveyance, not a mortgage. Tulsi v
Chandrika Prasad, (2006) 8 SCC 322, testimony of the scribe, recitals, person who paid
stamp duty, mutation in revenue records, were all considered as relevant facts in finding
out parties’ intention.
8. Raj Kishore v Prem Singh, (2011) 1 SCC 657.
9. Vasantrao v Kishanrao, 2007 SCC OnLine Bom 811: AIR 2008 Bom 42. Rama Devi v
Dilip Singh, (2008) 7 SCC 105, there was a finding of fact that the document in question
consideration money and possession was delivered only for two years
during which the mortgagor had to pay back, it was held that the mere
fact that the amount paid was equal to the price did not make it an out
right sale. The mortgagor was entitled to take back the property.10
A mortgagee cannot transfer the mortgaged property. He takes the
property as a security. He has to return it to the mortgagor on payment.
He is not competent to transfer the property. Any such transfer conveys
no right or title.11
The parties’ description of their deed is not determinative of its real
character.12
The scope of this type of mortgage is illustrated by the following three
cases.
In Chunchun Jha v Ebadat Ali'3, a deed purported to be a sale and
had the outward form of one but at the same time it called itself a “con
ditional sale”. It had, however, no clause for retransfer and instead said
that if the executants paid the money within two years, the property
“shall come in exclusive possession and occupation of us, the execu
tants”. On the question whether it was an out-and-out sale with a cove
nant for repurchase, or a mortgage it was held:
The question whether a given transaction is a mortgage by conditional sale
or a sale outright with a condition of repurchase is a vexed one which invar
iably gives rise to trouble and litigation.... Each must be decided on its own
facts. But certain broad principles remain. The first is that the intention of
the parties is the determining factor: See Balkishen Das v Legge'4. But the
intention must be gathered, in the first place, from the document itself....
The real question in such a case is not what the parties intended or meant but
what is the legal effect of the words which they used .... As Lord Cranworth
said in Alderson v White15, ‘prima facie an absolute conveyance, containing
CASE PILOT
contained a sale, the mortgagee continued to be in possession. The Supreme Court refused
to interfere.
10. Rajwati Devi v Prem Nandani Sinha, 2013 SCC OnLine Pat 98: AIR 2013 Pat 166.
11. Randal v Phagua, (2006) 1 SCC 168 and Jairambhai Ramanbhai Rabari v Bipinchandra
Naranbhai Barot, AIR 2013 Guj 272, nobody appeared to defend the transaction which
was void even otherwise.
12. Chunchun Jha v Ebadat AH, AIR 1954 SC 345, cited by the Supreme Court in Bishwanath
Prasad Singh v Rajendra Prasad, (2006) 4 SCC 432, parties’ description is not
determinative.
13. AIR 1954 SC 345; Karuppanna Gounder v Thirumalai Gounder, 1976 SCC OnLine Mad
31: AIR 1978 Mad 75; Babulal Somalal v Kantial Hargouandas, 1978 SCC OnLine Guj
46: AIR 1979 Guj 50 (lease by mortgagee to mortgagor); Amir Bee v Sub-Divisional
Magistrate, 1979 SCC OnLine Kar 236: AIR 1980 Kar 154; Palani Goundar v Thirumalai
Goundar, 1981 SCC OnLine Mad 61: AIR 1982 Mad 57; Nana Tukaram Jaikar v
Sonabai, 1982 SCC OnLine Bom 46: AIR 1982 Bom 437; Ram Stuarup v Ratiram, 1984
SCC OnLine All 509: AIR 1984 All 369; Sk Abdul Gaffar v Sudha Kanta Roy, 1984 SCC
OnLine Cal 120: AIR 1985 Cal 133; Tamboli Ramanlal Motilal v Ghanchi Chimanlal
Keshavlal, 1993 Supp (1) SCC 295.
14. 1899 SCC OnLine PC 32: (1899-1900) 27 IA 58.
15. (1858) 2 De G&J 97: 44 ER 924, 928.
nothing to show that the relation of debtor and creditor is to exist between
the parties, does not cease to be an absolute conveyance and become a mort
gage merely because the vendor stipulates that he shall have a right to repur
chase.... In every such case the question is, what, upon a fair construction,
is the meaning of the instruments’. Their Lordships of the Privy Council
applied this rule to India in Bhagwan Sahai v Bhagwan Din'6, and in Jhanda
Singh v Wahid-Ud-Din16 17. The converse also holds good and if, on the face of CASE PILOT
it, an instrument clearly purports to be a mortgage it cannot be turned into
a sale by reference to a host of extraneous and irrelevant considerations....
Because of the welter of confusion caused by a multitude of conflicting deci
sions the legislature stepped in and amended Section 58(c) of the Transfer
of Property Act. Unfortunately that brought in its train a further conflict
of authority. But this much is now clear. If the sale and agreement to repur
chase are embodied in separate documents, then the transaction cannot be
a mortgage whether the documents are contemporaneously executed or not.
But the converse does not hold good, that is to say, the mere fact that there is
only one document does not necessarily mean that it must be a mortgage and
cannot be a sale. If the condition of repurchase is embodied in the document
that effects or purports to effect the sale, then it is a matter of construc
tion which was meant. The legislature has made clear cut classification and
excluded transactions embodied in more than one document from the cate
gory of mortgages, therefore, it is reasonable to suppose that persons who,
after the amendment, choose not to use two documents, do not intend the
transaction to be a sale, unless they displace that presumption by clear and
express words; and if the conditions of Section 58(c) are fulfilled, then we are
of the opinion that the deed should be construed as a mortgage.... (In the
present case) on a fair construction the document means that if the money is
paid within the two years then the possession will revert to the executants
with the result that the title which is already in them will continue to reside
there. The necessary consequence of that is that the ostensible sale becomes
void.... In those circumstances seeing that the deed takes the form of a mort
gage by conditional sale under Section 58(c) of the Act, it is legitimate to
infer, in the absence of clear indications to the contrary, that the relationship
of debtor and creditor was intended to continue, and the deed is a mortgage
by conditional sale.
In Bhaskar Waman Joshi v Shrinarayan Rambilas Agarwal18, on the
question whether a deed which ostensibly conveyed property was an CASE PILOT
absolute conveyance or a mortgage by conditional sale, it was held:
The proviso to Section 58(c) was added by Act 20 of 1929. Prior to the
amendment there was a conflict of decisions on the question whether the con
dition contained in a separate deed could be taken into account in ascertain
ing whether a mortgage was intended by rhe principal deed. The Legislature
resolved this conflict by enacting that a transaction shall not be deemed to be
a mortgage unless the condition referred to in the clause is embodied in the
16. 1890 SCC OnLine PC 3: (1889-90) 17 IA 98.

17. 1916 SCC OnLine PC 61: (1915-16) 43 IA 284.
18. AIR i960 SC 301: (i960) 2 SCR 117; Vidhyadhar v Manik Rao, (1999) 3 SCC 573.
document which effects or purports to effect the sale. But it does not follow
that if the condition is incorporated in the deed effecting or purporting to
effect a sale a mortgage transaction must of necessity have been intended.
The question whether by the incorporation of such a condition a transac
tion ostensibly of sale may be regarded as a mortgage is one of intention of
the parties to be gathered from the language of the deed interpreted in the
light of the surrounding circumstances. The circumstance that the condition
is incorporated in the sale deed must undoubtedly be taken into account,
but the value to be attached thereto must vary with the degree of formality
attending upon the transaction. The definition of a mortgage by conditional
sale postulates the creation by the transfer of a relation of mortgagor and
the mortgagee, the price being charged on the property conveyed. In a sale
coupled with an agreement to reconvey there is no relation of debtor and
creditor nor is the price charged upon the property conveyed, but the sale is
subject to an obligation to retransfer the property within the period specified.
What distinguishes the two transactions is the relationship of debtor and
creditor and the transfer being a security for the debt. The form in which the
deed is clothed is not decisive. The definition of a mortgage by conditional
sale itself contemplates an ostensible sale of the property. As pointed out by
the Judicial Committee of the Privy Council in Narasingerji Gyanagerji v
Panuganti ParthasaradhP9, the circumstance that the transaction as phrased
in the document is ostensibly a sale with a right of repurchase in the vendor,
the appearance being laboriously maintained by the words of conveyance
needlessly reiterating the description of an absolute interest or the right of
repurchase bearing the appearance of a right in relation to the exercise of
which time was of the essence is not decisive. The question in each case is one
of determination of the real character of the transaction to be ascertained
from the provisions of the deed viewed in the light of surrounding circum
stances. If the words are plain and unambiguous they must in the light of
the evidence of surrounding circumstances be given their true legal effect.
If there is ambiguity in the language employed, the intention may be ascer
tained from the contents of the deed with such extrinsic evidence as may by
law be permitted to be adduced to show in what manner the language of the
deed was related to existing facts. Oral evidence of intention is not admissible
in interpreting the covenants of the deed but evidence to explain or even to
contradict the recitals as distinguished from the terms of the documents may
of course be given. Evidence of contemporaneous conduct is always admissi
ble as a surrounding circumstance; but evidence as to subsequent conduct of
the parties is inadmissible.
[From the facts that i) interest was agreed to be paid on the price till the
date of reconveyance; and 2.) the price paid was wholly inadequate, the
court held that it was a mortgage and not a sale.]
In P.L. Bapuswami v N. Pattay Gounder20, the owner of a certain
PILOT property executed a sale deed of the property for ^4000, and the docu
ment contained a stipulation that the vendee (defendant) would reconvey
19. 1924 SCC OnLine PC 32: (1923-24) 51 IA 305.
20. AIR 1966 SC 902.
the property to the vendor on repaying the same amount of ^4000. The
vendor died and his sons sold their right in the property to the plain
tiff. The plaintiff claimed that the transaction with the defendant was a
mortgage by conditional sale, and that the plaintiff as the purchaser of
the equity of redemption was entitled to redeem the mortgage by paying
^4000. It was held:
The question whether by the incorporation of the condition (of resale) a
transaction ostensibly of sale may be regarded as a mortgage is one of inten
tion of the parties to be gathered from the language of the deed interpreted
in the light of surrounding circumstances. The definition of a mortgage by
conditional sale postulates the creation by the transfer of a relation of mort
gagor and mortgagee, the price being charged upon the property conveyed.
In a sale coupled with an agreement to reconvey there is no relation of debtor
and creditor nor is the price charged upon the property conveyed, but the
sale is subject to an obligation to retransfer the property within the period
specified. The distinction between the two transactions is the relationship of
debtor and creditor and the transfer being a security for the debt. The form in
which the deed is clothed is not decisive. The question in each case is one of
determination of the real character of the transaction to be ascertained from
the provisions of the document viewed, in the light of surrounding circum
stances. If the language is plain and unambiguous it must in the light of the
evidence of surrounding circumstances be given its true legal effect. If there is
ambiguity in the language employed, the intention may be ascertained from
the contents of the deed with such extrinsic evidence as may by law be per
mitted to be adduced to show in what manner the language of the deed was
related to existing facts.
[The court held that it was a mortgage by conditional sale in view of
the following: 1) the real value of the property was ^8000 whereas the
amount paid was only ^4000; 2) the patta was not transferred to the
name of the vendee; 3) the Kist was continued to be paid by the ven
dor; and 4) the consideration for reconveyance was the same amount of
^4000.]
If A transfers a property to B for 5000 and the document provides
that if, at anytime A requires the property, he may get it back on payment
of ^5000 and any amount equivalent to the improvements made by B
on the property, the transaction is not a mortgage, because the essential
requirement of the relationship of debtor and creditor is not present.
Sir Rash Behari Ghosh quotes21 Butler’s Coke on Littleton:
If the money paid by the grantee was not a fair price for the absolute purchase
of the estate conveyed to him; if he was not let into the immediate possession
of the estate, if instead of receiving the rents for his own benefit, he accounted
for them to the grantor, and only retained the amount of the interest, or, if
21. Ghosh on Mortgages (7th Edn.) 75; Indira Kaur v Sheo Lal Kapoor, (1988) 2 SCC 488;
Mushir Mohd Khan v Sajeda Bano, (2000) 3 SCC 536, U. Milan v Kannayyan, (1999) 8
SCC 51; Santakumari v Lakshmi Amma Janaki Amma, (2000) 7 SCC 60.
the expense of preparing the deed of conveyance was borne by the grantor,
each of these circumstances has been considered by the courts as tending to
prove that the conveyance was intended to be merely pignorititio us [that is
of the nature of a pledge].
Stipulation for return of property in document of sale.—The land
was sold under a document of sale. The purchaser was put in possession.
He was enjoying the property like an absolute owner. Yet, the provision
in the document was that on repayment of the price, the property was to
be returned to the transferor. The Supreme Court said that such a stipu
lation does not constitute a mortgage with conditional sale. The repay
ment was offered a long period after the stipulated time for repayment.
The suit was dismissed.22
USUFRUCTUARY MORTGAGE [S. 58(J)]

The next type is usufructuary mortgage and is defined as follows:
58(d). Usufructuary mortgage.—Where rhe mortgagor delivers possession 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 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 or partly in payment of the mortgage-money, the transaction is called an
usufructuary mortgage and the mortgagee an usufructuary mortgagee.
The ingredients of the usufructuary mortgage are: i) There is delivery
of possession to the mortgagee, z) The mortgagee is to retain posses
sion until the money is repaid and is entitled to appropriate the rents
and profits towards the principal and interest. 3) If the loan is repaid or
discharged by the appropriation of rents and profits then the property is
redeemed. 4) There is no personal liability and there is no remedy avail
able either by sale or foreclosure. 5) Registration is compulsory if the
consideration is over 100.
1. As the definition shows, it is also sufficient if there is an undertak
ing to deliver possession. But it should not be contingent.
2. The mortgagee’s right to retain possession is for an indefinite
period till the loan is repaid. If it is for a term of years and the
debt is deemed to be satisfied at the end of the term, or there is a
personal covenant for payment of the balance, then it may be an
anomalous mortgage or only a grant of the income of the land in
22. Vanchalabai Raghunath Ithape v Shankarrao Babu Rao Bhilare, (2.013) 7 SCC 173.
Following earlier decision in Tamboli Ramanlal Motilal v Ghanchi Chimanlal Keshavlal,
1993 Supp (1) SCC 295. Maya Devi Pandey v Suniit Mathur, AIR 2014 NOC 171 (All),
the document did not suggest any intention not to transfer absolute ownership, no stipu
lation for retransfer, held sale, not mortgage by conditional sale.
S. 58(d)] DIFFERENT KINDS OF MORTGAGES 205
satisfaction of the debt. In the latter case it is not a security for the
debt and hence, is not a mortgage.2324
In Raghu Nath v Competent Officer14, the rights and liabilities of the
mortgagor and the mortgagee in the case of a usufructuary mortgage are
summarised as follows:
Since the mortgage was usufructuary, the mortgagee, and after his having
been declared an evacuee, the Custodian could claim and retain possession
till the mortgage debt was paid and the mortgage was discharged. If the
property is let out in the meantime, the mortgagee and those claiming his
interest therein are entitled to receive the rents and profits accruing from
the property in lieu of interest or towards part payment of the mortgage
debt. Under Section 60 of... [the Transfer of Property] Act, the mortgagor
has a right at any time after the principal amount has become due to require
the mortgagee on payment or tender of the mortgage debt (a) to deliver to
him the mortgage deed and all other documents relating to the mortgaged
property which are in the mortgagee’s possession or power, (6) to deliver
possession where the mortgagee is in possession of the mortgaged property,
and (c) to retransfer the mortgaged property to him or to such third person
as he may direct at his cost. Under Section 76, the mortgagee in possession
has to manage the property as a person of ordinary prudence would manage
it if it were his own. Under Section 83, the mortgagor, provided his right
of redemption is not barred, may deposit in the court where he might have
instituted a suit for redemption to the account of the mortgagee the mortgage
debt then due. The court thereupon has to issue a notice to the mortgagee
and on the mortgagee stating the amount due to him and his willingness to
accept the money so deposited in full discharge of the mortgage debt, pay
the amount to the mortgagee on his depositing the mortgage deed and all
other documents relating to the mortgaged property. Where the mortgagee
is in possession of the property, the court before paying the amount has to
ask him to deliver possession thereof to the mortgagor. When the mortgagor
has tendered or deposited in court the mortgage debt together with interest
thereon and has done all that is to be done by him to enable the mortgagee to
take such amount out of court, and a notice, as aforesaid, has been served on
the mortgagee under Section 83 interest ceases to run. If the mortgagee there
after refuses to accept the amount so deposited or to deliver the mortgage
deed and other documents or possession of the property where it is in his
possession, the remedy of the mortgagor is to file a suit for redemption. The
position, therefore, is that upon the mortgage being paid off, the mortgagor
is entitled to have the property restored to him free from the mortgagee’s
security. The repayment of the debt would be made against delivery of pos
session and of the mortgage deed and other documents, and these have to be
simultaneous transactions. A tender of the mortgage debt or a deposit thereof
23. Puzhakkal Kuttappu v C. Bhargaui, (1977) 1 SCC 17; Ishivar Dass Jain v Sohan Lal,
(2000) 1 SCC 434.
24. (1970) 2 SCC 537; Kunwar Gopi Chand v Nanak Chand, 1978 SCC OnLine All 988: AIR
1979 All 8; Susbil Kumar Singh v Braj Mohan Singh, 1980 SCC OnLine Pat 138: AIR
1981 Pat 172.
in court conditional upon the mortgagee then and there delivering possession
or executing reconveyance, if required, and handing over the deeds would be
a good tender so that if it were to be refused interest would cease running. It
follows that a mortgagee is not permitted to deal with the property in such a
way that upon discharge of the debt the property cannot be restored.
Since possession is with the mortgagee sometimes the question arises
/ r-A whether the transaction is a mortgage or a lease.
In Ramdhan Puri v Bankey Bihari Saran25, the question was whether
case pilot a was a lease or a mortgage. It was held:
The only guiding rule that can be extracted from the cases on the subject is
that the intention of the parties must be looked into and that ‘once you get
a debt with a security of land for its redemption, then the arrangement is a
mortgage by whatever name it is called’.26
[In the present case,] ...whatever ambiguity there might be in the recitals
that was dispelled by the unambiguous declaration made by the parties that
the property was given as security for the loan and the document was exe
cuted as a mortgage. The gist of the document, was not a letting of the prem
ises, with a rent reserved, but a mortgage of the premises with a small portion
of the income of it made payable to the plaintiff. There is, therefore, no scope
for the argument in this case that the document is a lease and not a mortgage.
Section 62 is reproduced below:
62. Right of usufructuary mortgagor to recover possession. — In the case of
a usufructuary mortgage, the mortgagor has a right to recover possession of the
property together with the mortgage-deed and all documents, relating to the
mortgaged property which are in the possession or power of the mortgagee,—
(a) where the mortgagee is authorised to pay himself the mortgage-money
from the rents and profits of the property,—when such money is paid;
(b) where the mortgagee is authorised to pay himself from such rents and
profits or any part thereof a part only of the mortgage-money, when
the term, if any, prescribed for the payment of the mortgage-money has
expired and the mortgagor pays or tenders to the mortgagee the mort
gage-money or the balance thereof or deposits it in Court as hereinafter
provided.
This is a special provision with respect to usufructuary mortgages and
must be read as supplementary to Section 60. The mortgagor has a right
to call for an account from the usufructuary mortgagee even if his right
of redemption is lost by a supervening statutory provision.27
25. AIR 1958 SC 941: 1959 SCR 1085.

26. See, Ghosh on Mortgages (7th Edn) 91.
27. K.P. Muhammed v Maya Devi, 1971 SCC OnLine Ker 64: AIR 1971 Ker 290; K.
Variath v P.C.K. Haji, (1974) 1 SCC 590; Shah Mathuradas Maganlal & Co v Nagappa
Shankarappa Malage, (1976) 3 SCC 660; Nirmal Chandra v Vintal Chand, (2001) 5 SCC
51; Gambangi A. Naidu v Behara V. Patro, (1984) 4 SCC 382; Gopalan Krishnankutty
v Kunjamma Pillai Sarojini Amma, (1996) 3 SCC 424; N.V. Hendra v B.S. Kothawale,
(1995) 6 SCC 608.
S. 62] DIFFERENT KINDS OF MORTGAGES 207
In Shah Mathuradas Maganlal &c Co v Nagappa Shankarappa

Malage28, the appellant was a mortgagee in possession of the mortgaged
property under a deed of mortgage. No interest was to be paid on the CASE PILOT
amount advanced and instead possession of the property was agreed to
remain with the mortgagee. The period for redeeming the mortgage was
fixed for io years from 7 November 1953. The respondent-mortgagor
informed the appellant just a month before the expiry of 10 years that he
was ready and willing to redeem the mortgage. The appellant, however,
put forth a claim that even after the redemption he was entitled to retain
possession because his previous tenancy right subsisted. Dismissing the
appeal to it the Supreme Court held:
The deed of mortgage shows these features indicating that there was sur
render of tenancy and the appellant was only a mortgagee. The High Court
found that there was a surrender of tenancy right. No particular form of
words is essential to make a valid surrender. A surrender may be oral. A
surrender may be express although delivery of possession is necessary for
surrender in the facts and circumstances of a given case. In the present case,
delivery of possession was immediately followed by a redelivery of possession
of the appellant as mortgagee. The mortgage deed establishes beyond doubt
that the effect of the deed was inconsistent with the continuance or subsist
ence of the lease because the parties themselves stipulated that the lease was
to exist only upto November 6, 1953. On the redemption of the mortgage the
respondent had a right to recover possession both on the terms of the mort
gage deed and under Section 62 of the Transfer of Property Act.
These two sections show that a mortgage may be regarded as usufructu
ary mortgage even though the entire debt is not to be paid out of the prof
its of the property. Since mortgage money denotes principal and interest,
there may be a usufructuary mortgage when 1) the principal alone is
recovered from the profits, 2.) when interest alone is recovered from the
profits, and 3) where a part of each is recovered from the profits.
A zuripeshgi lease is a transaction between debtor and creditor and
not between a lessor and a lessee. It is not a mere contract for the cul
tivation of the land let, but it is a real and valid security to the ten
ant for his money advanced. There is very little difference between a
usufructuary mortgage and a zuripeshgi lease, but it is in law treated
as a lease and not as a mortgage. In Wilson’s Glossary, Zuripeshgee is
defined as a compound word formed from “Zwr”—gold money, and
“Peshgee”—advance. It means payment in advance. It is a lease for a
premium and the premium is the loan.
It depends on the facts of each transaction whether it is a mortgage or
a lease. If the lease is as security for money lent, if the right of redemption
28. (1976) 3 SCC 660; Naud Lal v Sukh Deu, 1987 Supp SCC 87; Nemi Chand v Onkar Lal,
{1991) 3 SCC 464; Paricchan Mistry v Achhiabar Mistry, (1996) 5 SCC 526; Gantbangi
A. Naidu v Behara V. Patro, (1984) 4 SCC 382.
is reserved, expressly or by necessary implication, to the lessor, or if the

lessee’s interest continues till the loan is repaid, the transaction would
be considered a mortgage. If, however, there is no relationship of debtor
and creditor, that is, the advance is not repayable, the transaction will be
considered a lease. It depends on whether the sum advanced to the owner
of the land is a loan or a lump sum given as premium.29
Under the terms of the mortgage, the mortgagee had to keep posses
sion with himself. But he handed it over to another who put to the use
of cultivation. It was held that such person in possession had no right to
claim that he had become a tenant. The possession of the mortgagee was
of personal nature.30
The period of limitation is 30 years from the due date of payment or,
where no time is fixed, from the date on which the money is offered to
pay off the mortgage debt. In one of the cases the payment was offered
several times to the mortgagee and, after his demise, to his son, but he
either refused or ignored it. The ultimate action which was brought was
30 years after such event. The court rejected it, being time-barred.31
ENGLISH MORTGAGE [S. 58(e)]

The next type of mortgage is the English mortgage. It is defined in
clause (e) as follows:
58(e). English mortgage.—Where the mortgagor binds himself to repay the
mortgage-money on a certain date, and transfers the mortgaged property abso
lutely to the mortgagee, but subject to a proviso that he will retransfer it to the
mortgagor upon payment of the mortgage-money as agreed, the transaction is
called an English mortgage.
Its characteristics are:
1) a personal covenant to repay the amount on a certain date, 2) there
is an absolute transfer of property with a provision for retransfer in case
of repayment, 3) there is delivery of possession, 4) the remedy is by sale
and not by foreclosure, and 5) there can be a power of sale out of court.
1. Unlike a mortgage by conditional sale, in the case of an English
mortgage there is a personal covenant to repay the amount.
2. In the case of a mortgage by conditional sale there is an ostensible
sale, whereas in an English mortgage there is an absolute transfer the
nature of which is explained in the following case.
29. Mangala Kunhimina Umma v Puthiyaveettil Paru Anima, (1971) 1 SCC 562; Nirmal
Chandra v Vimal Chand, (2001) 5 SCC 51; Gambangi A. Naidu v Behara V. Patro, (1984)
4 SCC 382; G. Krishnankutty v K.P. Sarojini Amnia, (1996) 3 SCC 424; N.V. Hendra v
B.S. Kothawale, (1995) 6 SCC 608.
30. Monappa Naika v Land Tribunal, 2012 SCC OnLine Kar 8562: AIR 2012 Kar 161.
31. Mohan Lal v Mohan Lal, 2013 SCC OnLine Raj 2273: AIR 2013 Raj 187.
S. 58(e)] DIFFERENT KINDS OF MORTGAGES 209
In a case before the Supreme Court, the mortgagor did not bind him
self to repay the mortgage money on a certain date or by a fixed date,
there was nothing in the deed to suggest that the transaction was in the
nature of a mortgage or that there was an undertaking for reconveyance.
There was no signature of the transferor on such agreement. The court
said that the case was not that of an English mortgage. The suit was filed
for declaration of the transferor’s ownership and not for redemption.32
In Ram Kinkar Banerjee v Satya Charan Srimani33, the appellants
were lessees for 999 years of certain mining rights with liberty to sub
lease. A sub-lessee mortgaged his leasehold interest and the mortgage was
in the form of an English mortgage. The rent payable by the sub-lessee
having fallen into arrears and some covenants of the sub-lease remaining
unperformed, the appellants filed a suit against the sub-lessee and his
mortgagees claiming the performance of the terms of the sub-lease. It
was held:
By English law and by Indian law an assignee of a lease is liable by privity
of estate for all the burdens of the lease, burdens which are imposed upon
him by the mere assignment, whether he enters into possession or not: see
Kunhanujan v Anjelu34 and Monica v Subraya Hebbara35....
Up to the time of the passing of the Transfer of Property Act the rights of
mortgagors and mortgagees of land in India were subject to much contro
versy, though in general the law of England, subject to such modification as
justice, equity and good conscience required, was recognised as the law of
India also. But whether the English rules of equity were applicable to such
cases was not certain. Since the passing of that Act, however, the distinction
drawn in England between law and equity in such cases does not exist in
India. As Sir George Rankin says in Bengal National Bank Ltd v Janoki Nath
Roy36, ‘the Transfer of Property Act has left no room for such a distinction’.
The Indian mortgagor however retains some rights though the English
rules of equity do not apply. He retains a right to a re-conveyance of the land
and a right to transfer such right by way of sale or second mortgage (see,
Ss. 81, 82, 91 and 94), and this right in India is a legal right. When there
fore the mortgagor transfers his property by way of mortgage can he be said
to transfer his whole interest? Russell, J. in Vithal Narayan v Rajebahadur
Shriram Savant37 answers the question thus:
‘In India there is no equity of redemption in the lessee (mortgagor) and
there being no distinction between his legal and equitable estate, his
“whole estate” is not transferred by the mortgage.’
The observation is general though in the particular case Russell J was
dealing with a mortgage in a form widely different from that employed in
32. Raj Kishore v Prem Singh, (2.011) 1 SCC 657.
33. 1938 SCC OnLine PC 64: (1938-39) 66 IA 50.
34. ILR (1889) 17 Mad 296.
35. ILR (1907) 30 Mad 410.
36. 1927 SCC OnLine Cal 51: AIR 1927 Cal 725, 822.
37. Vithal Narayan v Shriram Savant, (1905) ILR 29 Bom 391.
England. Apart from the two cases referred to above, the Indian author
ities recognise the principle that the distinction between law and equity
has no place in Indian law. For this proposition reference may be made
to two of the cases quoted by the appellants in argument, viz. Thethalan
CASE PILOT v Elaya Rajah Avargal of Patinhara Kovilagam38 and Fala Krista Pal v
Jagannath Marwari39.
The same view is commonly accepted in the Indian text books40 and was
indeed adopted by the appellants in argument in the present case. Their con
tention was that the Act was a self-contained Code by which alone the rights
of mortgagor and mortgagee were to be ascertained and under which stat
utory and not equitable rights were brought into existence. Their Lordships
agree with this contention and accordingly turn to a consideration of those
Sections of the Act which deal with mortgages. S. 58(^7) of the Act enacts that
a mortgage is a transfer of an interest in specific immovable property. Upon
this definition there follows in the Act as in force at the material date an enu
meration of four classes of mortgage, viz. (1) simple mortgage, (2) mortgage
by conditional sale, (3) usufructuary mortgage, (4) English mortgage. Two
other classes, equitable mortgage and anomalous mortgage, are recognised
and dealt with in Ss. 59 and 98 respectively. Of these six it is contended that
the English mortgage by its terms amounts to and the anomalous mortgage
by its terms may amount to a transfer of the whole interest of the mortgagor,
and therefore where the subject matter is a lease, create privity of estate
between the lessor and the mortgagee of the lease.
No doubt in English law they would do so, but it does not follow that
under a system in which equity has no place the same wording which would
transfer the whole interest of the mortgagor under the former law would
do so under the latter. The outlook is different. By Indian law the inter
est which remains in the mortgagor is a legal interest and its retention may
therefore prevent the whole of the mortgagor’s interest from passing to the
mortgagee—a result which would not follow if an equitable interest only
were retained.... To this argument the appellants reply that whatever may be
the case with other types of mortgage, S. 58(e) in defining the term ‘English
mortgage’ speaks of an absolute transfer of the mortgaged property to the
mortgagee... .
The wording of S. 58(e) undoubtedly gives rise to some difficulty, but
before considering the construction to be put upon it, the soundness of the
appellant’s general contention must be considered ... .
...[U]nder the Indian Act no equitable rights exist and therefore unless
the mortgagor retains some legal interest in the land he has merely a contrac
tual right to have it re-conveyed. If he retains some legal interest it is difficult
to say that he has parted with his whole interest. On the other hand, there
are strong reasons against holding that he retains merely a contractual right
against the mortgagee. If the case arose in England it would be possible to say
38. 1917 SCC OnLine Mad 406: ILR (1917) 40 Mad mi.
39. 1932. SCC OnLine Cal 80: ILR (1931) 59 Cal 1314.
40. See, Ghose’s Law of Mortgage in India (7th Edn.) 95, and Mulla’s Transfer of
Property Act (znd Edn. 1936) 345.
S. 58(e)] DIFFERENT KINDS OF MORTGAGES 211
that the contract for reconveyance gave the mortgagor an equitable interest in
the land, but this argument is untenable in India. In the first place as has been
pointed out, equitable estates do not exist in that country, and in the second,
under the provisions of S. 54, Transfer of Property Act, a contract for the sale
of immovable property does not create any interest in or charge upon land
sold. Having this provision in view, it is difficult to see how a personal con
tract to re-convey can create any interest in the land itself. But to regard the
mortgagor’s right of redemption as being merely contractual and as creating
no interest in the land would make it impossible for him to assign his right
of redemption or to create a second mortgage so as to bind the land. Such a
state of things is, of course, theoretically possible, but it is inconsistent with
the provisions of the Act (which in Ss. 81, 82, 91 and 94 recognises second
mortgages) and with the possibility, well established in India, of transferring
the right of redemption to a purchaser.
Bearing these considerations in mind it remains to consider the effect of
the wording of S. 58^) of the Act. That section speaks of the mortgagor
transferring the ‘mortgaged property absolutely to the mortgagee’. In using
those words does it mean that no interest or no legal interest in the property
remains in the mortgagor? Their Lordships cannot think so. If the sub-section
stopped at the word ‘mortgagee’ it might be necessary to put this construc
tion upon it, but it does not stop there: it adds the proviso that the mortga
gee ‘will re-transfer’ the property ‘upon payment of the mortgage money as
agreed’. Their Lordships think that with this addition the sub-section upon
its true construction does not declare ‘an English mortgage’ to be an absolute
transfer of the property. It declares only that such a mortgage would be an
absolute transfer were it not for the proviso for retransfer....
[Therefore,] ...the mortgage of a lease in any of the six forms referred to
above is not an absolute assignment under Indian law and does not create
privity of estate between the lessor and the mortgagee.
It is called an English mortgage, because under that system a mortgage
is a conveyance as a security for payment of debt, subject to the promise
that upon payment of the debt at a certain time, the property should
be re-conveyed. This is very similar to the definition in Section 58(e),
but the real difference as pointed out above, is, in England it was an
absolute transfer of the mortgagor’s entire legal interest in the property,
with an equitable interest to re-conveyance on repayment. But, reading
Section 58(0) and (e) together shows that the Indian mortgagor retains
some legal rights in the property and the equitable rules of English Law
do not apply.
3. Though in an English mortgage there is a personal covenant to pay
as in the case of a simple mortgage, there is in an English mortgage deliv
ery of possession of the property mortgaged.
4. In a mortgage by conditional sale, the remedy is by foreclosure,
whereas in an English mortgage it is by sale.
5. Such remedy by sale can sometimes be without the intervention of

court. [See, S. 69] A sale outside court is impossible in the case of a sim
ple mortgage as already noticed.
EQUITABLE MORTGAGE, MORTGAGE BY

DEPOSIT OF TITLE DEED [S. 58(f)]
The fifth type of mortgage is mortgage by deposit of title deeds. It is
defined in clause (f) thus:
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 doc
uments of title to immovable property, with intent to create a security thereon,
the transaction is called a mortgage by deposit of title-deeds.
Its characteristics are:
1. It is restricted to persons in certain towns, but the property can be
anywhere. On the other hand, if property is situate in one of the
towns mentioned, but the title deeds are handed over in a town
which is not included, the transaction would not be a mortgage by
deposit of title deeds. For example, if documents of title relating to
property in Madras are handed over, at the request of the creditor
in Madras, to the post office at a place where the Act does not
apply, because the post office is then the agent of the creditor.
2. It is effected by the deposit of title deeds with the intention that
they should be security for the debt. It is recognised in order to
enable the commercial world to raise quick money.
3. Possession of the property is not given.
4. No registration is necessary.
5. The remedy is by a suit for sale and not by foreclosure.
6. The provisions relating to simple mortgage apply to these mort
gages also. Many towns in addition to those mentioned in the sec
tion have been notified.41
Such a mortgage is called an equitable mortgage in English Law. In
Pranjiwandas Mehta v Chan Ma Phee42, there was a mortgage by deposit
41. See, State of Haryana v Naruir Singh, (1014) 1 SCC 105, an order of the High Court to
direct the State Government to enter mutation of property mortgaged by deposit of title
deeds. The court did not take notice of the fact that it was the territory where such mort
gages were not permitted. The court set aside the mortgage and remanded the case for
consideration afresh.
42. 1916 SCC OnLine PC 16: (1915-16) 43 IA ixx; Amulya Gopal Majumdar v United
Industrial Bank Ltd, 1980 SCC OnLine Cal 118: AIR 1981 Cal 404; Kanigalla Prakasa
Rao v Nanduri Ramakrishna Rao, 1981 SCC OnLine AP 154: AIR 198X AP xyx; Ishar
Dass Malhotra v Dhanwant Singh, 1983 SCC OnLine Del X84: AIR 1985 Del 83; Union
of India v Raman Iron Foundry, (1974) x SCC xji.
S. 58(f)] DIFFERENT KINDS OF MORTGAGES 213
of documents of title to the immovable property. Subsequently, a memo

randum was drawn up by the parties which stated that only a part of the
property covered by the documents of title was to be the security for the
debt. On the question whether an equitable mortgage was created upon
the whole property, it was held: The law upon this subject is beyond any
doubt:
i. Where titles of property are handed over with nothing said except that
they are to be security, the law supposes that the scope of the security
is the scope of the title.
z. Where, however, titles are handed over accompanied by a bargain, that
bargain must rule.
3. Lastly, when the bargain is a written bargain, it, and it alone, must
determine what is the scope and the extent of the security.
In the words of Lord Cairns in the leading case of Shaw v Foster43:
Although it is a well-established rule of equity that a deposit of a document
of title, without more, without writing, or without word of mouth create in
equity a charge upon the property referred to, I apprehend that that general
rule will not apply where you have a deposit accompanied by an actual writ
ten charge. In that case you must refer to the terms of the written agreement,
any implication that might be raised supposing there were no document, is
put out of the case and reduced to silence by the document by which alone
you must be governed.
Though registration is not necessary, if there is a memorandum evidenc
ing the deposit of title-deeds and contains the terms of mortgage, it must
be registered.
In Rachpal Mahraj v Bhagwandas Daruka44, accounts relating to the
appellant’s dealings were examined and a large sum was found due to the
respondents who demanded payment. The appellant brought and gave
certain documents, being title deeds relating to immovable property, for
the purpose of being held as security. On the same day, a little later, he
gave a letter. The respondents filed a suit for enforcing the mortgage
by deposit of title deeds and sought to rely on the letter as a memoran
dum proving the mortgage. The appellant contended that the memoran
dum created the mortgage and as it was not registered as required by
Section 17, Registration Act, it was inadmissible in evidence to prove the
mortgage. It was held:
A mortgage by deposit of title deeds is a form of mortgage recognised by
Section 58(f) of the TP Act, which provides that it may be effected in certain
towns... by a person ‘delivering to his creditor or his agent documents of title
to immovable property with intent to create a security thereon’. That is to say,
when the debtor deposits with the creditor the title deeds of his property with
intent to create a security, the law implies a contract between the parties to
43. (1872) LR 5 HL 321.
44. AIR 1950 SC 272.
create a mortgage, and no registered instrument is required under Section 59

as in other forms of mortgage. But if the parties choose to reduce the contract
to writing, the implication is excluded by their express bargain, and the doc
ument will be the sole evidence of its terms. In such a case the deposit and the
document both form integral parts of the transaction and are essential ingre
dients in the creation of the mortgage. As the deposit alone is not intended to
create the charge and the document, which constitutes the bargain regarding
the security, is also necessary and operates to create the charge in conjunc
tion with the deposit, it requires registration under Section 17 of the Indian
Registration Act, 1908, as a non-testamentary instrument creating an inter
est in immovable property, where the value of such property is one hundred
rupees and upwards. The time factor is not decisive. The document may be
handed over to the creditor along with the title-deeds and yet may not be
registrable, as in Obla Sun dara chart ar v Narayana Ayyar45 or, it may be
delivered at a later date and nevertheless be registrable as in Hari Sankar
Paul v Kedar Nath Saha46. The crucial question is: Did the parties intend to
reduce this bargain regarding the deposit of the title-deeds to the form of a
document. In Sundarachariar case, the criterion applied was: ‘No such mem
orandum can be within Section 17 of the Registration Act, unless on its face
it embodied such terms and is signed and delivered at such time and place and
in such circumstances as to lead legitimately to the conclusion that, so far as
the deposit is concerned, it constitutes the agreement between the parties’.
In Hari Sankar Paul case, Lord Macmillan, after reviewing the earlier deci
sions of the Board, held that the document required registration, observing,
‘where, as here, the parties professing to create a mortgage by a deposit of
title-deeds contemporaneously enter into a contractual agreement, in writ
ing, which is made an integral part of the transaction, and is itself an opera
tive instrument and not merely evidential, such a document must, under the
statute, be registered’.
(In the present case) the document purports only to record a transaction
which had been concluded and under which rights and liabilities had been
orally agreed upon. No doubt it was taken by the respondents to show that
the title-deeds of the appellant’s property were deposited with them as secu
rity for the money advanced by them, and to obviate a possible plea that the
deeds were left with them for other purposes... . But that is far from intend
ing to reduce the bargain to writing and make the document the basis of the
rights and liabilities of the parties... . It did not require registration and was
admissible in evidence to prove the creation of the charge.
If the memorandum connects the deposit with the debt and states the
purposes of the deposit it should be registered even if it does not contain
all the terms of the contract.47
45. 1931 SCC OnLine PC 2: (1930-31) 58 IA 68.
46. 1939 SCC OnLine PC 25: (1938-39) 66 IA 184.
47. Kakaraparthy Bhavanarayana v Official Receiver, 1970 SCC OnLine AP 124: AIR
1971 AP 359; KJ. Nathan v S.V. Maruty Reddy, AIR 1965 SC 430: (1964) 6 SCR 727;
Syndicate Bank v APIIC Ltd, (2007) 8 SCC 361, the requirement of deposit of title deeds
reiterated, in this case deposit was that of allotment letter, licence for use of land and
letter of possession, the matter being very important was referred to a larger Bench. The
In Gokul Das v Eastern Mortgage & Agency Co Ltd*48, R executed a

mortgage in favour of D, and D assigned the mortgage to the appellant
by way of equitable sub-mortgage [see, p. 179] by depositing the title CASE PILOT
deeds. R borrowed money from the respondents on a mortgage and paid
off D. On the question of priority between the appellant and respondents
with respect to their respective mortgagee-rights, it was held:
A mortgage is defined in sec. 58 of the Transfer of Property Act. No regis
tration then was required under sec. 59 (of the appellant’s sub-mortgage). As
stated by the Judicial Committee in the case of Whagwan Sahai v Bhagwan
Din49, — ‘the law of India, speaking broadly, knows nothing of the distinction CASE PILOT
between legal and equitable property in the sense in which that was under
stood when equity was administered by the Court of Chancery in England.’
The case of the... [respondents] as presented to us, is that they are ‘legal’
mortgagees and that they are in the same position as a legal mortgagee in
England, who has obtained the legal estate without notice of the prior equi
table encumbrance. But the reasoning is fallacious because, in India, there
is no such distinction between legal and equitable estates as is known to the
English law. If the... [respondent’s] claim can be sustained, it can only be sus
tained under sec. 48 of the Indian Registration Act of 1877, a°d that brings
us to the question whether the transaction in the present case under which
these documents of title were deposited with the...[appellant,] was merely
an oral agreement within the meaning of that section. Now it was decided
more than 20 years ago by Mr Justice Pigott, in case of Coggan v Pogose50,
that ‘a deposit of title-deeds of certain property, under a verbal arrangement
to secure payment of a debt, is not an oral agreement or declaration relating
to such property within the meaning of sec. 48 of the Registration Act.’ That
decided the precise point. So far as we are aware, that decision has never been
dissented from. We think it is unlikely that, during this long series of years,
the point would not have arisen. The case is stronger since the passing of the
Transfer of Property Act, for sec. 59 recognises such a transaction as a valid
mortgage, without the necessity of registration [Therefore the respondent
was not entitled to any priority over the appellant.]
96. Mortgage by deposit of title-deeds.—The provisions hereinbefore con
tained which apply to a simple mortgage shall, so far as may be, apply to a mort
gage by deposit of title-deeds.
See, Section 67(a) and the Lingam Krishna case, page 241.
court cited R. Janakiranian v State, (2006) 1 SCC 697 to the effect that for creating an
equitable mortgage by depositing documents other than title deed was not permissible.
Hubert Peyoli v Santhavilasthu Kesavan Sivadasan, 2009 SCC OnLine Ker 463: AIR
2009 Ker 160, a memorandum for deposit of title deeds would make registration of the
transaction necessary. Also to the same effect, Allahabad Bank v Shivganga Tube Well,
AIR 2014 Bom 100 (Aurangabad Bench).
48. 1905 SCC OnLine Cal 53: (1905) ILR 33 Cal 410.
49. 1890 SCC OnLine PC 3: (1889-90) 17 IA 98.
50. ILR (1884) 11 Cal 158.
A document is a title deed if it shows the claim of the mortgagor to

the property. Merely because Section 59 excludes a mortgage by deposit
of title deeds from registration, it does not mean that memoranda of the
kind discussed above do not need registration.
ANOMALOUS MORTGAGE
The last type of mortgage mentioned in Section 58 is anomalous mort
gage. It is defined in Section 58(g) as follows:
58(g). Anomalous mortgage.—A mortgage which is not a simple mortgage, a
mortgage by conditional sale, a usufructuary mortgage, an English mortgage or
a mortgage by deposit of title-deeds within the meaning of this section is called
an anomalous mortgage.
Examples of anomalous mortgages are a simple usufructuary mortgage
and a usufructuary mortgage by conditional sale. Suppose in the case of
a usufructuary mortgage, the mortgagor also personally covenants to
repay the mortgage amount. It ceases to be a usufructuary mortgage and
becomes both a simple and a usufructuary mortgage. Such a mortgage is
an anomalous mortgage. Suppose possession of the mortgaged property
is given to the mortgagee, the terms of the mortgage being that the rents
and profits of the property should be appropriated towards interest and
that if the principal amount is not paid by a particular date, the property
is deemed to be sold to the mortgagee. It partakes of the characteristics of
both a mortgage by conditional sale as well as a usufructuary mortgage.
Such a mortgage again would be an anomalous mortgage. In Kidar Nath
v Mangat RaiSi, properties were mortgaged with possession, and under
the covenants in the mortgage deed, there was a stipulated rate of interest
payable by the mortgagor on the mortgage money and the amount recov
ered from the income of the property was to be first applied towards the
interest and the balance towards the principal. The mortgagee was also
entitled to recover by suit the interest accruing due. It was held:
The mortgages are clearly anomalous mortgages.
Many of the customary mortgages prevailing in various parts of the
country, and especially in Malabar are really anomalous mortgages. It is
to protect them that clause (g) has been enacted.
In fact, the terms of the contract between the parties could be any
thing provided the right of the mortgagor to redeem is not affected.
Section 98 may be read along with this section. It provides:
98. Rights and liabilities of parties to anomalous mortgages. — In the
case of an anomalous mortgage the rights and liabilities of the parties shall be
51. (1969) 3 SCC 588; Haji Fatnia Bee v Prahlad Singh, 1983 SCC OnLine MP 76: AIR 1985
MP 1.
determined by their contract as evidenced in the mortgage-deed, and, so far as

such contract does not extend, by local usage.
When a mortgagor transfers an interest in immovable property to a
mortgagee a mortgage is created and each of them, the mortgagor and
mortgagee, have an interest in the mortgaged property. Since an interest
in immovable property is itself immovable property both the mortgagor
and the mortgagee can create mortgages over their respective interests.
The kind of mortgage that a mortgagee can create would depend upon
his rights in his mortgage. In the case of the mortgagor the subsequent
mortgage is known as puisne mortgage and when the mortgagee creates
a mortgage over his interest it is said to be sub-mortgage.52
FORMALITIES FOR CREATING MORTGAGE

Section 59 deals with the formalities necessary for entering into a mort
gage transaction. It provides:
59. Mortgage when to be by assurance.—Where the principal money secured
is one hundred rupees or upwards, a mortgage, other than a mortgage by deposit
of title-deeds, can be effected only by a registered instrument signed by the mort
gagor and attested by at least two witnesses.
Where the principal money secured is less than one hundred rupees, a mortgage
may be effected either by a registered instrument signed and attested as aforesaid,
or (except in the case of a simple mortgage) by delivery of the property.53
REGISTRATION
The word “registered” is defined in Section 3 as follows:
“registered” means registered in any part of the territories to which this Act
extends under the law for the time being in force regulating the registration of
documents;
The English common law insisted on the notoriety of transfers of land
which was secured by “livery of seisin” or delivery of ownership and
possession. This was done by the feoffor (the transferor) and the feoffee
(the transferee) going upon the land and the feoffor offering a lump of
earth or a twig of a tree growing on the land to the feoffee; or, first going
through the formality in sight of the land and then the feoffee enter
ing on the land. Modern English Law requires a deed in conveyances
of legal estates (in contrast to equitable estates). Registration however is
optional. But in the absence of registration in the case of estates capable
of being registered, they lose their overreaching character and are una
vailable against subsequent purchasers.
52. Thamattoor Chelamanna v Thamattoor Kurumbikkat Pare Manakkal Parameswaran,
1969 SCC OnLine Ker 101: AIR 1971 Ker 3.
53. Siri Chand v Nathi, 1983 SCC OnLine P&H 55: AIR 1983 P&H 171.
In Indian law, certain transfers must be in writing [see, S. 9] and in

those cases, except in the case of a transfer of an actionable claim, the
document requires to be registered. Section 17, Registration Act also
enumerates the cases in which registration is compulsory, and Section 18
refers to the cases in which it is optional. Section 49 of that Act deals
with the effect of non-registration. It declares that no document required
by Section 17, Transfer of Property Act to be registered, shall, unless it
has been registered: 1) affect the immovable property dealt with; 2) con
fer a power to adopt; and 3) be received as evidence of any transaction
affecting such property or conferring such power. The proviso provides
that notwithstanding the absence of registration the instrument may be
received as evidence of a contract in a suit for specific performance under
the Specific Relief Act, or evidence of part performance of a contract for
the purposes of Section 53-A, Transfer of Property Act. Also the instru
ment, which is required to be registered but has not been registered, is
admissible in evidence for proving matters which are only collateral as
for example, an unregistered partition deed dealing with immovable
properties may be used for proving division in status but not for proving
what items were allotted to whom; and the document can be used as
evidence of the personal covenant in the case where it is a mortgage deed
required to be registered.
Under Section 48, Registration Act, an oral transfer will not avail
against a subsequent transfer of same property if such subsequent trans
fer is registered, unless the anterior oral transfer has been followed up by
delivery of possession.
It has been held about a unilateral mortgage deed registered in accord
ance with requirements of Section 59, that it was immaterial whether the
mortgagee was a party to the deed or not. Such mortgage has to be given
effect to particularly when it has been acted upon.54
Where the transaction is oral and the mortgagee refuses to surrender
possession which was delivered under the transaction, oral transaction
being not provable, the mortgagor would have to depend on his title for
his right of recovery.55
ATTESTATION
“Attested” is defined as follows in Section 3:
“attested”, in relation to an instrument, means and shall be deemed always
to have meant attested by two or more witnesses each of whom has seen the exe
cutant sign or affix his mark to the instrument, or has seen some other person
sign the instrument in the presence and by the direction of the executant, or
has received from the executant a personal acknowledgment of his signature or
54. Tarachand v Sagarbai, (1007) 5 SCC 392.

55. Jeet Ram v Ganga Phal, AIR 2010 NOC 834 (P&H).
mark, or of the signature of such other person, and each of whom has signed the
instrument in the presence of the executant; but it shall not be necessary that
more than one of such witnesses shall have been present at the same time, and no
particular form of attestation shall be necessary;
“Instrument” is defined as follows in Section 3:
“Instrument” means a non-testamentary instrument;
The definition of “attested” has been added by the Transfer of Property
Amendment Act (27 of 1926). The amendment has been given retro
spective operation by using the words, “shall be deemed always to have
meant”. As a result of the definition, it is no longer necessary, as was
held in Shamu Patter v Abdul Kadir Ravuthan5^ that the act of signing
by the executant should be done in the presence of the witnesses. Such a
requirement exists in English Law. Under the present law it is sufficient
if the attestor receives an acknowledgment of execution. In view of the
language of the definition, the signatures of the Registering Officer and
of identifying witnesses affixed to the registration endorsement under the
Registration Act could amount to valid attestation, if the intention was
to sign as attesting witnesses. \
In M.L. Abdul Jabbar Sahib v M.V. Venkata Sastri & Sons57, the
defendant in a suit on a promissory note on the original side of the High case pilot
Court was allowed to defend the suit on his furnishing security for a
sum of ^50,000 to the satisfaction of the Registrar of the High Court.
He executed a security bond charging his immovable properties. The
signature of the executant was attested by the Assistant Registrar of the
High Court and the document was registered by the Registrar under the
Registration Act. The document bore the signatures of the Registrar and
of two identifying witnesses. On the question whether it was attested by
only one witness, namely, the Assistant Registrar of the High Court, or
by more than one witness, it was held:
Prima facie, the registering officer put his signature on the document in dis
charge of his statutory duty under Section 59 of the Registration Act....
Likewise the identifying witnesses... put their signatures on the document to
authenticate the fact that they had identified the executant. It is not shown
that they put their signatures for the purpose of attesting the document. To
attest is to bear witness to a fact. Briefly put, the essential conditions for
valid attestation under Section 3 are: (1) two or more witnesses haue seen
the executant sign the instrument or have received from him a personal
acknowledgment of his signature; (2) with a view to attest or to bear witness
to this fact each of them has signed the instrument in the presence of the
executant. It is essential that the witness should have put his signature animo
attestandi, that is, for the purpose of attesting that he has seen the executant
sign or has received from him a personal acknowledgment of his signature.
56. 1912 SCC OnLine PC 31: (1911-12) 39 IA 218.
57. (1969) 1 SCC 573.
If a person puts his signature on the document for some other purpose, e.g.,
to certify that he is a scribe or an identifier or a registering officer, he is not
an attesting witness.
‘In every case the Court must be satisfied that the names were written
animo attestandi’, see Jarman on Wills, 8th Edn., p. 137. Evidence is admis
sible to show whether the witness had the intention to attest. ‘The attest
ing witnesses must subscribe with the intention that the subscription made
should be complete attestation of the will, and evidence is admissible to show
whether such was the intention or not,’ see Theobald on Wills, 12th Edn.,
p. 129. In Girja Datt Singh v Gangotri Datt Singh53, the Court held that
the two persons who had identified the testator at the time of registration
of the will and had appended their signatures at the foot of the endorsement
by the sub-Registrar, were not attesting witnesses as their signatures were
not put 'animo attestandi'. In Abinash Chandra Bidyanidhi Bhattacharjee v
Dasarath Malo58 59, it was held that a person who had put his name under the
word ‘scribe’ was not an attesting witness as he had put his signature only for
the purpose of authenticating that he was a ‘scribe’. In Shiam Sundar Singh
v Jagannath Singh60, the Privy Council held that the legatees who had put
their signatures on the will in token of their consent to its execution were not
attesting witnesses and were not disqualified from taking as legatees... . It
follows that [in the present case] the document was attested by one witness
only.
The object of attestation is to establish that the purported executant in
fact executed the document. An attestor should be sui juris, that is, capa
ble of entering into a contract. Therefore, illiterate persons and marks
men can be attesting witnesses though it is never considered advisable,
if it can be avoided, to have marksmen as witnesses. [See, Jarman on
Wills, 8th Edn., Vol. I, pp. 134-37.] A person who is a party to a deed
cannot be an attesting witness. A person is however not disqualified to
be an attesting witness merely because he is interested in the transaction.
In Harish Chandra Singh Deo v Bansidhar Mohanty61, a mortgage deed
was executed by the appellant in favour of the second respondent, but,
since the first respondent advanced the money, the first respondent filed
the suit to enforce the mortgage. One of the attesting witnesses was the
first respondent himself. On the question whether there was proper attes
tation, it was held:
It will be seen that... [the definition of ‘attested’] does not preclude in terms
the lender of money from attesting a mortgage deed under which the money
58. AIR 1955 SC 346, 351.

59. 1928 SCC OnLine Cal 136: AIR 1929 Cal 123; Pyare Mohan v Narayani, 1981 SCC
OnLine Raj 8: AIR 1982 Raj 43; Dhruba Sahu v Paramananda Sahu, 1982 SCC OnLine
Ori 83: AIR 1983 Ori 24.
60. 1927 SCC OnLine PC 79: (1927-28) 55 IA 1.
61. AIR 1965 SC 1738: (1966) 1 SCR 153; Banga Chandra Dhur Biswas v Jagat Kishore
Chowdhuri, 1916 SCC OnLine PC 50: (1915-16) 43 IA 249; N. Kamalam v Ayyasamy,
(2001) 7 SCC 503.
was lent.... [TJhe law requires that the testimony of parties to a document
cannot dispense with the necessity of examining at least one attesting wit
ness. ... Inferentially, therefore, it debars a party from attesting a document
which is required by law to be attested. Where, however, a person is not a
party to the deed there is no prohibition in law to the proof of execution of
the document by that person...
A distinction was thus drawn in this case between a person who is a party
to a deed and a person who, though not a party to the deed, is a party to the
transaction and... the latter was not incompetent to attest the deed.
No particular form is necessary, but the executant must have executed
the deed before the attestor can witness the executant’s signature. In Sant
Lal Mahton v Kamla Prasad62, a suit was filed for enforcement of a sim
ple mortgage. The bond was attested by the witness on the same day on
which it was written, but the document was executed (that is, signed by
the mortgagor) later. It was held that the attestation was not valid. The
effect of invalid attestation is that the document cannot be enforced in
a court of law. The provision requires that each attesting witness must
see the executant signing the instrument or affixing his mark, thumb
impression on it. In this case only one attesting witness was examined,
the person who typed the will or scribed it was not known. The will was
produced from the custody of one of the attesting witnesses. How he
came to possess it, was not explained. It was also not known whether the
attesting witnesses signed in the presence of each other. It was held by the
Supreme Court that the will was not properly proved. It was surrounded
by doubtful circumstances.63
In Kundan Lal v Musharraf! Begam64, a mortgage deed was executed
by a pardanashin lady. As there was a thick curtain behind which she sat
she could not have seen through the curtain. On the question whether
the terms of Section 3 relating to attestation, namely, that each of the
attesting witnesses should have signed in the presence of the executant,
were satisfied, it was held:
It is clear enough that the defendant (executant), if she had been minded
to see the witness sign could have done so even if she did not actually see
through the curtain.
The mere attestation of a document is no proof that the attesting witness
is aware of the contents of the document.65 [See, The Law of Evidence
by Vepa P. Sarathi—Estoppel by Attestation.]
62. AIR 1951 SC 477.

63. Lalitaben Jayantilal Popat v Pragnaben Jamnadas Kataria, (2.008) 15 SCC 365.
64. 1936 SCC OnLine PC 31: (1935-36) 63 IA 326; Rai Ganga Pershad Singh Bahadur v Ishri
Pershad Singh, 1918 SCC OnLine PC 4: (1917-18) 45 IA 94; Padarath Halwai v Ram
Nain, 1915 SCC OnLine PC 23: AIR 1915 PC 21.
65. Badri Naryanan v Rajabagyathammal, (1996) 7 SCC 101.
EXERCISES
i. What is meant by attestation? (pp. 216-217)
2. What are the essential elements of a mortgage? (p. 194)
3. What are the essential elements of a simple mortgage? (p. 195)
4. What are the remedies of a simple mortgagee? (pp. 195-196)
5. What are the essential elements of a mortgage by conditional sale?
(pp. 196-197)
6. Distinguish between a mortgage by conditional sale and a condi
tion for re-conveyance, (pp. 196-203)
7. What are the essential elements of a usufructuary mortgage?
(pp. 202-203)
8. What are the essential elements of an English mortgage?
(pp. 206-207)
9. What are the essential elements of an equitable mortgage? (p. 210)
10. What are the essential elements of an anomalous mortgage?
(p. 2.14)

and statutes referred to in the book ^£30
through EBC Explorer™ on SCC Online®; Explorer™
The following cases from this chapter are available J

through EBC Explorer™: vZZz
• Alderson v White, (1858) 2 De G8cJ 97: 44 ER 924 casepilo
• Bhaskar Waman Joshi v Shrinarayan Rambilas Agarwal, AIR i960

SC 301: (i960) 2 SCR 117
• Gokul Das v Eastern Mortgage & Agency Co Ltd, 1905 SCC OnLine
Cal 53
• Jhanda Singh v Wahid-Ud-Din, 1916 SCC OnLine PC 61
• M.L. Abdul Jabbar Sahib v M.V. Venkata Sastri & Sons, (1969) 1
SCC 573
• P.L. Bapuswami v N. Pattay Gounder, AIR 1966 SC 902
• Ramdhan Puri v Bankey Bihari Saran, AIR 1958 SC 941:
1959 SCR 1085
• Shah Mathuradas Maganlal & Co v Nagappa Shankarappa Malage,
(1976) 3 SCC 660
• Thethalan v Elaya Rajah Avargal of Patinhara Kovilagam, 1917 SCC
OnLine Mad 406
• Whagwan Sahai v Bhagwan Din, 1890 SCC OnLine PC 3
Chapter 12
General Considerations in
Relation to Mortgages
IMPLIED COVENANTS
The first rule is that the mortgagor is deemed to have covenanted regard
ing his title and for the quiet enjoyment by the mortgagee. These are
implied covenants breach of which will give rise to the mortgagee an
independent action for damages. These are set out in Section 65 which
is as follows:
65. Implied contracts by mortgagor—In the absence of a contract to the
contrary, the mortgagor shall be deemed to contract with the mortgagee,—
(a) that the interest which the mortgagor professes to transfer to the mortga
gee subsists, and that the mortgagor has power to transfer the same;
(b) that the mortgagor will defend, or if the mortgagee be in possession of the
mortgaged property, enable him to defend, the mortgagor’s title thereto;
(c) that the mortgagor will, so long as the mortgagee is not in possession of
the mortgaged property, pay all public charges accruing due in respect of
the property;
(d) and, where the mortgaged property is a lease, that the rent payable under
the lease, the conditions contained therein, and the contracts binding on
the lessee have been paid, performed and observed down to the com
mencement of the mortgage; and that the mortgagor will, so long as the
security exists and the mortgagee is not in possession of the mortgaged
property, pay the rent reserved by the lease, or, if the lease be renewed,
the renewed lease, perform the conditions contained therein and observe
the contracts binding on the lessee, and indemnify the mortgagee against
all claims sustained by reason of the non-payment of the said rent or the
non-performance or non-observance of the said conditions and contracts;
(e) and, where the mortgage is a second or subsequent encumbrance on
the property, that the mortgagor will pay the interest from time to time
accruing due on each prior encumbrance as and when it becomes due, and
will at the proper time discharge the principal money due on such prior
encumbrance.
The benefit of the contracts mentioned in this section shall be annexed to and
shall go with the interest of the mortgagee 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.
Under clause (d), the mortgagor is also estopped from denying his title
which he represented that he has to the mortgagee. The mortgagee can
also rely on Section 43 if the mortgagor had no title but subsequently,
acquires it. [See, S. 55(2.)]
Under Section 72(c) the mortgagee is entitled to recover any money
spent by him for supporting the mortgagor’s title if the mortgagor does
not do so under clause (b) of this section.
If the mortgagor does not pay the public charges under clause (c) and
the mortgagee does, the latter is entitled to recover the amount under
Section 71(b).
SUBSTITUTED SECURITY
The second rule is the doctrine of substituted security. This is laid down
in Section 73 which is as follows:
73. Right to proceeds of revenue sale or compensation on acquisition.—
(1) Where the mortgaged property or any part thereof or any interest therein
is sold owing to failure to pay arrears of revenue or other charges of a public
nature or rent due in respect of such property, and such failure did not arise from
any default of the mortgagee, the mortgagee shall be entitled to claim payment
of the mortgage-money, in whole or in part, out of any surplus of the sale pro
ceeds remaining after payment of the arrears and of all charges and deductions
directed by law.
(2) Where the mortgaged property or any part thereof or any interest therein
is acquired under the Land Acquisition Act, 1894 (1 of 1894), or any other enact
ment for the time being in force providing for the compulsory acquisition of
immovable property, the mortgagee shall be entitled to claim payment of the
mortgage-money, in whole or in part, out of the amount due to the mortgagor as
compensation.
(3) Such claims shall prevail against all other claims except those of prior
encumbrancers, and may be enforced notwithstanding that the principal money
on the mortgage has not become due.
SCOPE
The sale contemplated by the section is not one subject to encumbrances
for, in that case, the mortgagee can proceed against the property in the
hands of the purchaser. The sale proceeds are treated as substituted secu
rity for the mortgagee.
The principle of this section applies not merely to the sales referred to
in the section but also to execution sales and cases of partition.1
1. Barhamdeo Prasad v Tara Chand, 1913 SCC OnLine PC 32: (1913-14) 41 IA 45.
S. 76] GENERAL CONSIDERATIONS IN MORTGAGES 225
In Mohd Afzal Khan v Abdul Rahman2, the third respondent mort

gaged his two-thirds share in certain properties which were held jointly
with Respondents i and z. Thereafter, there was a partition by arbitra CASE PILOT
tion and the properties mortgaged fell to the share of Respondents i
and z. On the question of the mortgagee’s right to proceed against these
properties, it was held:
... [T]heir Lordships are of opinion that where one of two or more co-sharers
mortgages his undivided share in some of the properties held jointly by them,
the mortgagee takes the security subject to the right of the other co-sharers
to enforce a partition and thereby to convert what was an undivided share of
the whole into a defined portion held in severally. If the mortgage, therefore,
is followed by a partition, and the mortgaged properties are allotted to the
other co-sharers, they take those properties, in the absence of fraud, free from
the mortgage, and the mortgagee can proceed only against the properties
allotted to the mortgagor in substitution of his undivided share. This was the
view taken by the Board in Byjnath Lail v Ramoodeen Chowdry3. ...Their
Lordships think that the principle enunciated in that case applies equally to a
partition by arbitration such as the one in the present case. Their Lordships
are therefore of opinion that the appellant is not entitled to enforce his charge
against the properties allotted to the first and second respondents.
LIABILITIES OF MORTGAGEE IN POSSESSION

The third rule is that ordinarily a mortgagee is not entitled to possession.
Where he is entitled to possession as in the case of a mortgage by condi
tional sale or in an English mortgage, the mortgagee is subject to certain
liabilities. These are set out in Section 76 which is as follows:
76. Liabilities of mortgagee in possession.—When, during the continuance
of the mortgagee the mortgagee takes possession of the mortgaged property,—
(a) he must manage the property as a person of ordinary prudence would
manage it if it were his own;
(b) he must use his best endeavours to collect the rents and profits thereof;
(c) he must, in the absence of a contract to the contrary, out of the income of
the property, pay the Government revenue, all other charges of a public
nature and all rent accruing due in respect thereof during such possession,
and any arrears of rent in default of payment of which the property may
be summarily sold;
(d) he must, in the absence of a contract to the contrary, make such neces
sary repairs of the property as he can pay for out of the rents and profits
thereof after deducting from such rents and profits, the payments men
tioned in clause (c) and the interest on the principal money;
2. 1932 SCC OnLine PC 40: (1931-32) 59 IA 405; Gopala Pillai v State Bank ofTrauancore,
1979 SCC OnLine Ker 194: AIR 1979 Ker 224; L.M.L.L. Lakshmanan Chettiar v
V.A.R. Alagappa Chettiar, 1980 SCC OnLine Mad 150: AIR 1981 Mad 338.
3. 1873 SCC OnLine PC 4: (1873-74)11A 106; Koru Issaktiv Gottumukkala Seetharamaraju,
1947 SCC OnLine Mad no: AIR 1948 Mad 1; Padmanabha Pillai Krishnan Nair v
Punnosse Abraham, 1970 SCC OnLine Ker 19: AIR 1971 Ker 154.
(e) he must not commit any act which is destructive or permanently injurious
to the property;
(f) where he has insured the whole or any part of the property against loss or
damage by fire, he must, in case of such loss or damage, apply any money
which he actually receives under the policy, or so much thereof as may be
necessary, in reinstating the property, or, if the mortgagor so directs, in
reduction or discharge of the mortgage-money;
(g) he must keep clear, full and accurate accounts of all sums received and
spent by him as mortgagee, and at any time during the continuance of the
mortgage, give the mortgagor, at his request and cost, true copies of such
accounts and of the vouchers by which they are supported;
(/?) his receipts from the mortgaged property, or, where such property is per
sonally occupied by him, a fair occupation-rent in respect thereof, shall,
after deducting the expenses properly incurred for the management of the
property and the collection of rents and profits and the other expenses
mentioned in clauses (c) and (d), and interest thereon, be debited against
him in reduction of the amount (if any), from time to time due to him on
account of interest...and, so far as such receipts exceed any interest due,
in reduction or discharge of the mortgage-money; the surplus, if any, shall
be paid to the mortgagor;
(/) When the mortgagor tenders, or deposits in manner hereinafter pro
vided, the amount for the time being due on the mortgage, the mortgagee
must, notwithstanding the provisions in the other clauses of this section,
account for his receipts from the mortgaged property from the date of the
tender or from the earliest time when he could take such amount out of
Court, as the case may be, and shall not be entitled to deduct any amount
therefrom on account of any expenses incurred after such date of or time
in connection with the mortgaged property.
Loss occasioned by his default.—If the mortgagee fails to perform any of the
duties imposed upon him by this section, he may, when accounts are taken in
pursuance of a decree made under this chapter, be debited with the loss, if any,
occasioned by such failure.
SCOPE
While Section 72 deals with the rights of a mortgagee in possession, this
section deals with his liabilities. The mortgagee must be in possession
and as a mortgagee. It is possible that he may be in possession as lessee as
in the case of zuripeshgi leases. In such cases, since he is not in possession
qua mortgagee, this section will not apply.
/ c=\ Examples of clause (a) are as follows.
In Mahabir Gope v Harbans Narain Singh4, the mortgagee in posses-
case pilot si°n certain lands entered into a settlement with tenants contrary to
a term in the ijara deed disentitling the mortgagee from locating tenants
on the mortgaged land. As a result of a statute, occupancy rights were
4. AIR 1952 SC 205: 1952 SCR 775; Mahadeo Maruti Bhagwat v Kantilal Khemchand
Gujar, 1979 SCC OnLine Bom 226: AIR 1980 Bom 79; C.K. Kuttappan v Karthiyayant,
1986 SCC OnLine Ker 286: AIR 1981 Ker 107; Rant Chand v Randhir Singh, (1994) 6
SCC 552.
S. 761 GENERAL CONSIDERATIONS IN MORTGAGES 227
conferred on such tenants. When the mortgagors wanted to take posses

sion of the lands after redeeming the mortgage, they were resisted by the
tenants. It was held:
The general rule is that a person cannot by transfer or otherwise confer a
better title on another than he himself has. A mortgagee cannot, therefore,
create an interest in the mortgaged property which will enure beyond the
termination of his interest as mortgagee. Further, the mortgagee, who takes
possession of the mortgaged property, must manage it as a person of ordi
nary prudence would manage it if it were his own; and he must not commit
any act which is destructive or permanently injurious to the property; see
Section 76 sub clauses (a) & (e) of the Transfer of Property Act....
A permissible settlement by a mortgagee in possession with a tenant in the
course of prudent management and the springing up of rights in the tenant
conferred or created by statute based on the nature of the land and posses
sion for the requisite period is a different matter altogether. It is an exception
to the general rule.... [T]he settlement of the tenant by the mortgagee must
have been a bona fide one. This exception will not apply in a case where the
terms of the mortgage prohibit the mortgagee from making any settlement of
tenants on the land either expressly or by necessary implication.
In Asa Ram v Ram Kali5, a usufructuary mortgagee of agricultural land
inducted the respondents as tenants. When the mortgagors (appellants)
redeemed the mortgage, the respondents resisted delivery of possession
claiming to be hereditary tenants under the UP Tenancy Act. It was held:
Now, Section 76(a) provides that a mortgagee in possession ‘must manage
the property as a person of ordinary prudence would manage it if it were his
own.’ Though on the language of the statute, this is an obligation cast on
the mortgagee, the authorities have held that an agricultural lease created
by him would be binding on the mortgagor even though the mortgage has
been redeemed, provided it is of such a character that a prudent owner of
property would enter into it in the usual course of management. This being
in the nature of an exception, it is the person who claims the benefit thereof,
to strictly establish it....
[In the present case the lands]... were home-farm lands under the direct
cultivation of the proprietors, as distinguished from lands which were under
cultivation by tenants, and having regard to the special rights which the ten
ancy laws all over India have recognised in the owner in respect of such
lands, an act of the mortgagee which puts those rights in peril cannot, as held
in Mahabir Gope v Harbans Nara in Singh, AIR 1952 SC 205: 1952 SCR 775
be regarded as that of a prudent owner, and it requires exceptional grounds
to justify it.
5. AIR 1958 SC 183: 1958 SCR 986; Sachalmal Parasram v Ratnabai, (1973) 3 SCC 198; All
India Film Corpn Ltd v Raja Gyan Nath, (1969) 3 SCC 79; Jagan Nath v Mittar Sain,
1969 SCC OnLine P&H 78: AIR 1970 P&H 104; Purushottam v Madhavji, AIR 1976
Guj 161; Tara Chand v Ganga Ram, 1977 SCC OnLine Del 22: AIR 1978 Del 58.
As the lease could not be protected by Section 76(^7), there was no proper
admission of a tenant and the respondents could not claim the rights
under the U.P. Tenancy Act.
Under clause (b) the mortgagee has not only a right to collect the rents
and profits, he is under a duty to do so, because he has to account and
reduce the mortgagor’s liability especially when the rent is more than the
interest due on the mortgage money, and is to be set off against the inter
est and principal amount of mortgage money. In Mathuralal v Keshar
Bai6, the mortgagor mortgaged his house with possession. The mortgage
deed provided that the tenant shall execute rent notes in favour of the
mortgagee and whatever rent shall be realised will be credited in lieu of
interest and if the amount of rent shall exceed the amount of interest,
the difference shall be deducted from the original sum due, but, if the
amount of interest shall exceed the amount of rent, then the mortgagor
shall pay it. The mortgagor himself became the tenant and he agreed to
pay rent which was slightly less than the interest on the mortgage money.
The period of redemption was two years. After that period the mortga
gee filed a suit on his mortgage and a preliminary decree for sale of the
property was passed, but no steps were taken for the passing of the final
decree within the period of limitation. In a suit for ejectment of the mort
gagor and for rent, it was held:
[The mortgagor’s right to redeem]... under the Limitation Act, 1908, was
to enure for 60 years from the date of the mortgage and the mortgagor had
not lost his right to redeem notwithstanding the passing of the preliminary
decree in the mortgage suit.... After the mortgagee had lost his right to apply
for a final decree for sale, he did not lose his status as a mortgagee: he only
lost his remedy to recover the mortgage money by sale. The mortgagor did
not lose his right to redeem....
In all such cases the leasing back of the property arises because of the
mortgage with possession but we find ourselves unable to hold that the mort
gagee does not secure to himself any rights under the deed of lease but must
proceed on his mortgage in case the amount secured to him under the deed
of lease is not paid. If the security is good and considered to be sufficient by
the mortgagee there is no reason why he should be driven to file a suit on his
mortgage when he can file a suit for realisation of the moneys due under the
rent note.... If during the continuance of the security the mortgagee wants
to sue the mortgagor on the basis of the rent note and take possession himself
or to induct some other tenant thereby securing to himself the amount which
the mortgagor had covenanted to pay, there can be no legal objection to it.
Clause (c) corresponds to Section 65(c) and (d), under which the mort
gagor if in possession is bound to make the payments but only out of
the income. If the income is not sufficient, the mortgagee’s rights and
6. (1970) 1 SCC 454.

obligations are governed by Sections 71(b) and 73? When mortgaged

property is part of a larger holding and the entire holding is brought
to sale for default in payment of rent, and the mortgagee purchases the
property under the rent sale, the mortgagor’s right of redemption is extin
guished.7 8 The liability of the mortgagee is limited to payment of govern
ment dues attributable to the mortgaged land. Agricultural income tax
is not attributable to the mortgaged land. It is liability of the owner. The
mortgagee was not under obligation to pay such dues. The property was
therefore seized and sold for recovery of income tax dues. The right of
redemption of the mortgagor became extinguished.9
Clause (d) shows that the payment under clause (c) has a priority over
repairs.
Clause (e) corresponds to the mortgagor’s obligation under Section 66
and the lessee’s obligation under Section 108.
Clause (f) deals with the application of the insurance money which he
is entitled to receive, when he had insured the property under Section 72.
The scope of clauses (g) and (h) is explained in the following case.
In the Ramdhan Puri case10, (p. 204) it was also contended that the
deed, if at all, represented an anomalous mortgage, that Section 98,
Transfer of Property Act applied to it and that the mortgagee was not
liable to account, because the contract so provided. The mortgagor con
tended that it was a usufructuary mortgage and that the mortgagee was
liable to account under Section 76(g) and (h). It was held:
Whether the transaction is an usufructuary mortgage or an anomalous mort
gage, in the circumstances of the case, there will not be any difference in
the matter of rendition of accounts, for in the ultimate analysis,...the true
construction of the relevant terms of the document would afford an answer
to the question raised....
Section 76(g) of the Transfer of Property Act imposes a liability on a mort
gagee to keep full and accurate accounts supported by vouchers. So too, he
is under a statutory liability under clause (h) to debit the net receipts of the
mortgaged property in deduction of the amount due to him from time to
time on account of interest and where such receipts exceed any interest due,
in reduction and discharge of the mortgage-money and to pay the surplus,
if any, to the mortgagor. Therefore, every mortgagee in possession is bound
to keep clear, full and accurate accounts and to render the accounts to the
mortgagor in the manner prescribed in clause (b). But Section 77 enacts an
exception to the mortgagee’s liability under clauses (g) and (h) of Section 76.
Under... (Section 77), if there is a contract between the mortgagor and the
mortgagee, whereunder it is agreed that the receipts of the mortgaged prop
erty should, so long as the mortgagee is in possession of the property, be
7. Panchanan Sharma v Basudeo Prasad Jaganani, 1995 Supp (2) SCC 574.
8. Sachidanand Prasad v Babu Sheo Prasad Singh, AIR 1966 SC 126.
9. Rukmini Anima v Rajesivary, (2013) 9 SCC 121.
10. AIR 1958 SC 941: 1959 SCR 1085.
taken in lieu of interest and a defined portion of the principal, the mortgagee
is freed from the statutory liability to keep accounts or to render accounts to
the mortgagor in the manner prescribed under clauses (g) and (h) of Section
76 of the Act. This is so because, the receipts are set off against the interest,
and there is nothing to account for. Therefore, to insist upon the mortgagee
to keep accounts or render accounts to the mortgagor would be an empty
formality. The essential condition for the application of this section is that
the receipts of the property should be taken in lieu of interest and a defined
portion of the principal....
The Judicial Committee in Bacchu Lal v Chaudhri Syed Mohammad
Mahn held that notwithstanding the fact that a particular rate of interest was
mentioned in the mortgage deed, there was a contract within the meaning of
Section 77 of the Transfer of Property Act. It was a case of a mortgage with
possession and a particular rate of interest was mentioned in the mortgage
deed. There was a provision for repayment of the principal either in whole or
in part, before the stipulated period, but it was otherwise provided that the
mortgagee should appropriate the surplus profits towards interest, he having
no claim to interest and the mortgagors having no claim to the profits. The
Privy Council held, on a construction of the mortgage deed, that the said
deed contained a contract within the meaning of Section 77 of the Transfer
of Property Act....
[Therefore] [wjhether Section 77 applies or not, under the express terms of
the contract [in the present case], the appellant is not liable to render accounts
for the excess receipts.
Redemption by operation of law, suit for account maintainable.—In
the case of a usufructuary mortgage, the mortgagee continued to be in
possession even after the mortgage became discharged by operation of
law under the debt relief legislation. The mortgagor claimed an account
of income and profits from the property from the date of discharge of the
mortgage. The suit was held to be maintainable.1112
Under clause (i) if the mortgagee wrongfully refuses the mortgage
money tendered or deposited, it also ceases to bear interest; and
77. Receipts in lieu of interest.—Nothing in Section 76, clauses (b), (d), (g)
and (/?), applies to cases where there is a contract between the mortgagee and
the mortgagor that the receipts from the mortgaged property shall, so long as
the mortgagee is in possession of the property, be taken in lieu of interest on the
principal money, or in lieu of such interest and defined portions of the principal.
Clauses (b) and (d) of Section 76 are excepted, because, if the mortgagee
does not collect the full rents and profits, it is he who suffers. The interest
and part of the principal loan are deemed to be discharged and he has
to make the necessary repairs. Clauses (g) and (h) are excepted, because,
11. 1933 SCC OnLine PC 4: (1933) 37 LW 537; Mancheri Puthusseri Ahmed v Kuthiravattam
Estate Receiver, (1996) 6 SCC 185.
12. Prabhakaran v M. Azhagiri Pillai, (2006) 4 SCC 484.
S. 65-A] GENERAL CONSIDERATIONS IN MORTGAGES 231
there is nothing to account, the appropriation of the rent having been

specified by the contract itself.
RIGHTS OF MORTGAGOR IN POSSESSION

Section 76 may be compared with Sections 66 and 65-A which deal with
certain rights of the mortgagor in possession. Section 66 provides:
66. Waste by mortgagor in possession.—A mortgagor in possession of the
mortgaged property is not liable to the mortgagee for allowing the property to
deteriorate; but he must not commit any act which is destructive or permanently
injurious thereto, if the security is insufficient or will be rendered insufficient by
such act.
Explanation.—A security is insufficient within the meaning of this section
unless the value of the mortgaged property exceeds by one-third, or, if consist
ing of buildings, exceed by one-half, the amount for the time being due on the
mortgage.
Section 65-A provides:
65-A. Mortgagor's power to lease. — (1) Subject to the provisions of sub-sec
tion (2), a mortgagor, while lawfully in possession of the mortgaged property,
shall have power to make leases thereof which shall be binding on the mortgagee.
(2) (a) Every such lease shall be such as would be made in the ordinary course
of management of the property concerned, and in accordance with any local law,
custom or usage.
(b) Every such lease shall reserve the best rent that can reasonably be obtained,
and no premium shall be paid or promised and no rent shall be payable in advance.
(c) No such lease shall contain a covenant for renewal.
(d) Every such lease shall take effect from a date not later than six months
from the date on which it is made.
(e) In the case of a lease of buildings, whether leased with or without the land
on which they stand, the duration of the lease shall in no case exceed three years,
and the lease shall contain a covenant for payment of the rent and a condition of
re-entry on the rent not being paid within a time therein specified.
(3) The provisions of sub-section (1) apply only if and as far as a contrary inten
tion is not expressed in the mortgage-deed; and the provisions of sub-section (2)
may be varied or extended by the mortgage-deed and, as so varied and extended,
shall, as far as may be, operate in like manner and with all like incidents, effects
and consequences, as if such variations or extensions were contained in that
sub-section.
Under sub-section (z.)(a), the lease shall be in the ordinary course of man
agement and in accordance with local laws and customs.13
Suppose there is a contract in the mortgage deed that the mortgagor
shall not lease the mortgaged property without the consent of the mortga
gee; and if the mortgagor grants a lease without the mortgagee’s consent,
the lease would be binding on the mortgagor, but not on the mortgagee.
13. Tikkachand Ramvilas Gilda v Jankibai Pyarelal Shrivas, AIR 2015 NOC 546 (Bom),
such lease binds the mortgagee. If the mortgage itself is not in existence at the time of
creation of lease, S. 65-A is not applicable.
Since the lease does not bind the mortgagee, there is no breach of cove
nant as far as he is concerned, because the covenant is only not to create
r-A a lease binding on the mortgagee without his consent.
In Kamakshaya Narayan Singh v Chohan Ram14, a mortgagor in pos-
case pilot session granted a permanent lease of the mortgaged properties in 1925.
The plaintiff who was subrogated to the position of the mortgagee and
purchased the properties in execution of the mortgage decree filed a suit
for possession against the lessees. It was held:
...Section 66...has nothing to do with the mortgagor’s power to lease the
mortgaged property. [The section] ...is a statutory enactment of the powers
of the mortgagor in possession in regard to waste of mortgaged property. The
mortgagor in possession is not liable for what in terms of the English law of
Real Property is known as permissive waste, i.e. for omission to repair or to
prevent natural deterioration. He is however liable for destructive waste, i.e.
acts which are destructive or permanently injurious to the mortgaged prop
erty if the security was insufficient or would be rendered insufficient by such
acts. [Section 66]...has therefore no application to the grant of a lease by a
mortgagor in possession.
The question whether the mortgagor in possession has power to lease the
mortgaged property [in cases coming prior to the enactment of Section 65-A
of the Act by the Amending Act 20 of 1929,] has got to be determined with
reference to the authority of the mortgagor as the bailiff or agent for the
mortgagee to deal with the property in the usual course of management. It
has to be determined on general principles and not on the distinction between
an English mortgage and a simple mortgage or considerations germane to
Section 66 of the... Act.
... [I]t is for the lessee if he wants to resist the claim of the mortgagee to
establish that the lease in his favour was granted on the usual terms in the
ordinary course of management. Such a plea if established — and it must not
be overlooked that the burden of proof in this matter is upon him—would
furnish a complete answer to the claim of the mortgagee.
In the present case there was neither allegation nor proof that the grant
of permanent lease was a dealing with the mortgaged property in the
usual course of management by the mortgagor and therefore, the perma
nent lease could not prevail against the plaintiff.
But now the mortgagor’s power to grant leases is recognised statuto
rily subject to the conditions laid down in this section.
ACCESSIONS
The fourth rule deals with accessions to the mortgaged property and the
law relating to this aspect is dealt with in Sections 63, 63-A, 64, 70, 71
and 72.
14. AIR 1952 SC 401; Gauri Shankar v Kapoor Chand, 1982 SCC OnLine Raj 51: AIR 1983
Raj 77.
An accession to property is something which increases the value of the

property. If the accession is natural the mortgagor is ordinarily entitled
to the increase. If it is due to expense incurred by the mortgagee, the
rights of the mortgagor depend upon whether it is separable or insepara
ble. The rights under the section are subject to a contract to the contrary.
An accession to property is an addition to property, whereas an
improvement is an alteration to the property.
An accession generally becomes part of the principal. Under Section 70:
70. Accession to mortgaged property.—If, after the date of a mortgage, any
accession is made to the mortgaged property, the mortgagee, in the absence of
a contract to the contrary, shall, for the purposes of the security, be entitled to
such accession.
Illustrations
(a) A mortgages to B a certain field bordering on a river. The field is increased
by alluvion. For the purposes of his security, B is entitled to the increase.
(b) A mortgages a certain plot of building-land to B and afterwards erects a
house on the plot. For the purposes of his security, B is entitled to the house as
well as the plot.
This section corresponds to Section 63 which deals with the mortgagor’s
rights. In illustration (b) if the mortgagee erects the building, he is enti
tled to treat it as part of his security, though, on redemption, the mort
gagor is entitled to it without any payment, because the structure would
not be necessary to preserve the land. The accession contemplated by
the section is not merely a physical addition to the property, but would
also cover the case of an enlargement of the mortgagor’s right in the
property. In Kishendatt Ram v Mumtaz Ali Khan15, immediately after
the execution of the mortgage deed a usufructuary mortgagee attempted
to receive collections from the lands comprised in the mortgage, but was
encountered by the opposition of a number of persons holding the land
under subordinate tenures known as birt tenures. The resistance having
been successful, the mortgagee purchased the rights of the birtias. On
the question whether the mortgagor, by paying the purchase money of
the birts, plus the original mortgage money, could redeem the estate, or,
whether the mortgagee was entitled to retain the rights and interests of
the birtias, it was held:
Their Lordships are not prepared to affirm the broad proposition that every
purchase by a mortgagee of a sub-tenure existing at the date of the mortgage
must be taken to have been made for the benefit of the mortgagor, so as to
enhance the value of the mortgaged property, and make the whole, including
the sub-tenure, subject to the right of redemption upon equitable terms....
15. 1879 SCC OnLine PC 11: (1878-79) 6 IA 145; Sorabjeev Divarkadas Ranchhoddas, 1932
SCC OnLine PC 33: (1931-32) 59 IA 366.
It seems to their Lordships that, although some of the earlier cases may
have been qualified by more recent decisions, the general principle is still
recognised by English law to this extent, viz., that most acquisitions by mort
gagor enure for the benefit of the mortgagee, increasing thereby the value of
his security; and that, on the other hand, many acquisitions by the mortga
gee are in like manner treated as accretions to the mortgaged property or
substitutions for it, and, therefore, subject to redemption. The law laid down
in Rakestraw v Brewer16, as to the renewal of a term obtained by the mort
gagee of the expired term, being, ‘as coming from the same root,’ subject to
the same equity, has never been impeached. The English case, which in its
circumstances comes nearest to the present is that of Doe v Pott17, in which
CASE PILOT
the principle was enforced against the mortgagor. It was there held that if the
lord of a manor mortgage it in fee, and afterwards, pending the security, pur
chase and take surrenders to himself in fee of copyholds held of the manor,
they shall enure to the mortgagee’s benefit, and the lord cannot lessen the
security by alienating them. It is difficult to see why, as in the case of a renew
able lease, the same equity should not attach to the mortgagee, particularly
if by reason of his position as mortgagee in possession he has had peculiar
facilities for obtaining the surrenders.
Suppose A mortgages to B, a land containing trees which belong to the
government. B as occupant, purchases the trees from the government. A
on payment of the amount spent by B for the purchase will be entitled to
the trees on redemption. The test seems to be, would the acquisition by
the mortgagee bring it under Section 90, Trusts Act.
71. Renewal of mortgaged lease.—When the mortgaged property is a lease
and the mortgagor obtains a renewal of the lease, the mortgagee, in the absence
of a contract to the contrary, shall, for the purposes of the security, be entitled
to the new lease.
This section corresponds to Section 64 which deals with the mortgagor’s
right when the mortgagee obtains a renewal of the lease.
64. Renewal of mortgaged lease.—Where the mortgaged property is a lease,
and the mortgagee obtains a renewal of the lease, the mortgagor upon redemp
tion, shall, in the absence of a contract by him to the contrary, have the benefit
of the new lease.
Under Section 72(e), the mortgagee is entitled to recover the cost of
such renewal.
63. Accession to mortgaged property: Accession acquired in virtue of trans
ferred ownership.—Where mortgaged property in possession of the mortga
gee has, during the continuance of the mortgage, received any accession, the
16. zPW 511.

17. 2 Dong 710.
mortgagor, upon redemption, shall, in the absence of a contract to the contrary,

be entitled as against the mortgagee to such accession.
Where such accession has been acquired at the expense of the mortgagee and
is capable of separate possession or enjoyment without detriment to the principal
property, the mortgagor desiring to take the accession must pay to the mort
gagee the expense of acquiring it. If such separate possession or enjoyment is
not possible, the accession must be delivered with the property; the mortgagor
being liable, in the case of an acquisition necessary to preserve the property from
destruction, forfeiture or sale, or made with his assent, to pay the proper cost
thereof, as an addition to the principal money, with interest at the same rate as
is payable on the principal, or, where no such rate is fixed, at the rate of nine per
cent per annum.
In the case last mentioned the profits, if any, arising from the accession shall
be credited to the mortgagor.
Where the mortgage is usufructuary and the accession has been acquired at
the expense of the mortgagee, the profits, if any, arising from the accession shall,
in the absence of a contract to the contrary, be set off against interest, if any,
payable on the money so expended.
72. Rights of mortgagee in possession.—A mortgagee may spend such money
as is necessary—
(a) for the preservation of the mortgaged property from destruction, forfei
ture or sale;
(b) for supporting the mortgagor’s title to the property;
(c) for making his own title thereto good against the mortgagor; and
(d) when the mortgaged property is a renewable lease-hold, for the renewal
of the lease;
and may, in the absence of a contract to the contrary, add such money to the
principal money, at the rate of interest payable on the principal, and where no
such rate is fixed, at the rate of nine per cent per annum:
Provided that the expenditure of money by the mortgagee under clause (b)
or clause (c) shall not be deemed to be necessary unless the mortgagor has been
called upon and has failed to take proper and timely steps to preserve the prop
erty or to support the title.
Where the property is by its nature insurable, the mortgagee may also, in the
absence of a contract to the contrary, insure and keep insured against loss or
damage by fire the whole or any part of such property; and the premiums paid
for any such insurance shall be added to the principal money with interest at the
same rate as is payable on the principal money or, where no such rate is fixed, at
the rate of nine per cent per annum. But the amount of such insurance shall not
exceed the amount specified in this behalf in the mortgage-deed or (if, no such
amount is therein specified), two-thirds of the amount that would be required in
case of total destruction to reinstate the property insured.
Nothing in this section shall be deemed to authorize the mortgagee to insure
when an insurance of the property is kept by or on behalf of the mortgagor to the
amount in which the mortgagee is hereby authorized to insure.
Though the marginal note refers to “mortgagee in possession”, the
section in fact applies to all mortgagees. The section is limited to the
costs incurred with respect to mortgaged property, but unlike the rule
in English Law, the mortgagee has a right not only to proceed against
such property, under this section in order to recover such costs, but has
also the personal remedy against the mortgagor or under Section 69,
Contract Act, 1872. But whether the costs incurred are with respect to
STATUTE PILOT the mortgaged property and were necessary to be incurred are questions
depending upon the circumstances of the case. [See, Ss. 64 and 65]
In Parsotbn Thakur v Lal Mohar Thakur™, the plaintiffs as the per
manent lessees of the equity of redemption, filed a suit for redemption.
The mortgagees claimed an additional sum which was spent by them in
resisting the claims of certain tenants. It was held:
The respondents were mortgagees in possession, and would be entitled under
Sect. 72, Transfer of Property Act, 1882, to add to the principal of their
mortgages any money properly expended by them in supporting the title of
their mortgagors. It can hardly be said therefore that any express agreement
was necessary.
IMPROVEMENTS
Section 63-A, which deals with improvements to mortgaged properties,
provides as follows:
63-A. Improvements to mortgaged property. — (1) Where mortgaged prop
erty in possession of the mortgagee has, during the continuance of the mortgage,
been improved, the mortgagor, upon redemption, shall, in the absence of a con
tract to the contrary, be entitled to the improvement; and the mortgagor shall
not, save only in cases provided for in sub-section (2), be liable to pay the cost
thereof.
(2) Where any such improvement was effected at the cost of the mortgagee
and was necessary to preserve the property from destruction or deterioration or
was necessary to prevent the security from becoming insufficient, or was made
in compliance with the lawful order of any public servant or public authority,
the mortgagor shall, in the absence of a contract to the contrary, be liable to pay
the proper cost thereof as an addition to the principal money with interest at the
same rate as is payable on the principal, or, where no such rate is fixed, at the
rate of nine per cent per annum, and the profits, if any, accruing by reason of the
improvement shall be credited to the mortgagor.
EXERCISES
1. When is the mortgagee entitled to compensation for “accessions”
and for “improvements”? (p. 234)
2. Between a mortgagor and a mortgagee—neither can deny the title
of the other. Explain, (pp. 223-234)
3. What is the doctrine of substituted security? (p. 222)
4. What are the general duties of a mortgagee in possession?
(pp. 223-224)
18. 1931 SCC OnLine PC 35: (1930-31) 58 IA 254; Nemi Chand v Onkar Lal, (1991) 3 SCC
464.
GENERAL CONSIDERATIONS IN MORTGAGES 237

and statutes referred to in the book EBC
along with updates, articles, videos,
Explorer™
blogs and a host of different resources.
The following statute from this chapter is available

• Contract Act, 1872.
The following cases from this chapter are available

• Doe v Pott, 2. Dong 710 CASE PILOT
• Kamakshaya Narayan Singh v Chohan Ram, AIR 1952
SC 401
• Mahabir Gope v Harbans Narain Singh, AIR 1952 SC 205:
1952 SCR 775
• Mohd Afzal Khan v Abdul Rahman, 1932 SCC OnLine PC 40
• Rakestraw v Brewer, 2 PW 511

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Chapter 7

Certain Equitable Rules

PRIORITY [S. 48]

Where there are conflicting rights as to immovable property, courts

cannot be drawn in such a case. If, however, the subsequent transfer is

LIMITED POWER OF TRANSFER [S. 38]

2. ICICI Bank Ltd v SIDCO Leathers Ltd, {2006) 10 SCC 452.

be noted that a bare representation by the transferor is not sufficient, but

RIGHT OF PERSONS ENTITLED TO MAINTENANCE [S. 39]

HOLDING OUT [Ss. 41 AND 43]

A wife purchased property in her name acting through her power of

12. Binapani Paul v Pratima Ghosh, (2007) 6 SCC 100.

happened to believe that an allotment letter for a house issued by the

TRANSFEREE’S RIGHT UNDER INSURANCE POLICY [S. 49]

PAYMENTS TO HOLDERS WITH DEFECTIVE TITLE [S. 50]

IMPROVEMENTS [S. 51]

When, under the circumstances aforesaid, the transferee has planted

WHAT IS GOOD FAITH?

The section operates only in favour of a person believing to be

LIS PENDENS [S. 52]

26. (1865-66) 1 HL 119.

PENDENCY OF SUIT OR PROCEEDING

property and if such alienation takes place it is affected by the doctrine.

ANY OTHER PARTY

EFFECT OF TRANSFER PENDENTE LITE

The section must be interpreted strictly. Any transfer outside the

38. (1969) 2 SCC 787.

This point was considered in Samarendra Nath Sinha v Krishna Kumar

Dealing with mortgaged property in dispute.—The mortgagor

his cause by joining the suit as an essential party instead of compelling

FRAUDULENT TRANSFER [S. 53]

purpose of delaying or defeating creditors, then, there being fraud, the

A creditor decree-holder who is in most cases a stranger, can not reasonably

The transfer if defeats or delays the creditors is not an instrument which

67. 1915 SCC OnLine PC 50: (1915-16) 43 IA 104.

being made to this preferred creditor—there being in the case no question

To the same effect is a latter decision of the Privy Council in Zafrul

69. 1929 SCC OnLine PC 69: AIR 1929 PC 279.

applies to creditors existing at the time of transfer as well as subsequent

property was being sold in a clandestine manner, he sent a notice under a

73. (2011) 3 SCC 556.

Visit ebcexplorer.com to access cases

The following statutes from this chapter ar

The following cases from this chapter are a

JOINT OWNERSHIP [S. 44]

1. 1896 SCC OnLine PC 5: (1895-96) 23 IA 37.

p. 138” as if it is the same as a joint tenancy in the English Law of Real

JOINT TRANSFEREES [S. 45]

to show what is the distribution of shares as between them. The distribu­

TRANSFERS BY PERSONS HAVING

TRANSFERS BY CO-OWNERS OF A SHARE [S. 47]

9. Taraknath v Sushil Chandra Dey, (1996) 4 SCC 697.

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The following cases from this chapter are available

Doctrine o£ Part Performance

PART PERFORMANCE [S. 53-A]

WHAT IS THE ENGLISH LAW DOCTRINE

6. the contract must be respecting land; and

I. the contract should be in writing signed by or on behalf of the

to show what is the distribution of shares as between them. The distribu

of registration the ownership is deemed to pass not on the date of regis

Other examples in defects in title are: i) restrictive covenants; z) lia

of documents of title to the immovable property. Subsequently, a memo