MODULE 4

15 MARKS

Q. Doctrine of feeding the grant by estoppel incorporated under Section 43 of The Act with the help
of appropriate illustration - PDFs

Q. What is doctrine of part performance? Discuss the essential conditions for application of this
doctrine.

Q. Explain the doctrine of ‘Lis-Pendens’ and exceptions to it if any- From BOOK Notes.

OR

Q. Write a detailed note on ‘doctrine of lis pendens’.

Doctrine of Lis Pendens

The doctrine of lis pendens is incorporated in the Transfer of Property Act, 1882, under Section
52. ‘Lis’ means litigation and ‘pendens’ means pending, literally signifying pending litigation.
Any action or proceeding which is pending in any court of law is said to be lis pendens. The
maxim representing this doctrine accurately is pendente lite nihil innovature, which means that
‘during the pendency of litigation, nothing new should be introduced’. The principle behind this
doctrine is that nothing new should be introduced into a litigation that is pending, i.e. to
maintain the status quo, to abstain from doing anything which may affect any party to the
litigation.

In terms of property law, it implies that no new interest in respect of a property should be
introduced, if that property is the subject-matter of a litigation. If a new interest or title is
created in that property, that would amount to a transfer of that property. The doctrine of lis
pendens prohibits the transfer of any property under litigation.

The doctrine of lis pendens has its origin in the case of Bellamy v. Sabine [1], wherein Turner,
L.J., observed that the doctrine of lis pendens was a doctrine common to the courts of law as
well as equity, since it would become almost impossible for the suit that is instituted in a court,
to be adjudicated if alienations pendente lite were allowed to prevail. The plaintiff, in such a
situation, would be liable to be defeated by the defendants causing the alienation before the
judgement is passed, every time, and would be driven to institute a new course of proceedings,
every time.

Section 52 states that if any suit or proceeding is pending in any court having authority within
India, or in any court established by the Central Government outside India, any immovable
property that is part of that suit or proceeding cannot be transferred or otherwise dealt with, by
any party to the suit, in such a way that such transfer or dealing would affect the rights of any
other party to the suit or proceeding. Such a transfer or dealing can only be affected if the Court
allows it and it may impose certain conditions as it may deem necessary.
Moreover, the suit or proceeding that is instituted should not be collusive in nature and must
involve a right to the immovable property that is in question.

This section does not apply to the State of Jammu and Kashmir.

The explanation to this section provides the pendency of proceeding would begin on the date
the plaint is presented as well as instituted in court of competent jurisdiction, and it would end
on the date the final decree or order is passed by the court, or if it has become unobtainable
because of expiry of the limitation period. As per Section 52, the purpose of doctrine of lis
pendens is not to invalidate the transfer, but to make it subject to litigation.

In Rajendar Singh v. Santa Singh[3], the Supreme Court observed that the doctrine of lis
pendens intends to strike at any attempts made by the parties to the suit to curtail the
jurisdiction of the Court through private dealings, which affect the subject matter of the suit and
prevent the Court from deciding a dispute in relation to that property and hence, frustrate the
decree.

Essentials

The basis of the doctrine is necessity, so it is immaterial as to whether the transferee had any
notice of suit pending in the court or not. The transferee is bound by the order of the court even
if he had no actual or constructive notice of the pending suit.[4] The pendency of the suit starts
from the date on which the plaint is filed in the court and ends on the date on which the final
decree is passed by the court, as mentioned in the explanation to section 52.

Following are the essentials of Doctrine of Lis Pendens as described in section 52:

1. There must be a pendency of a suit or proceeding.

2. The suit/proceeding must be pending in a court which has the jurisdiction to try it.

3. A right to immovable property is either directly or indirectly involved in the

suit/proceeding.

4. The immovable property in dispute is transferred/dealt with by any party to the suit.

5. Such transfer/dealing affects the rights of the other party(s) involved in the
suit/proceeding.

Once all the conditions are fulfilled, the transferee is bound by the court’s decision. If the
decision of the court is in favour of the person transferring the property in dispute (transferor),
the person to whom the property is transferred (transferee) gets all the rights attached to that
transfer. If the decision is against the transferor, the transferee does not get any right because
the transferor has no right to transfer the property anymore. Although, it must be noted that
section 52 does not invalidate any transfer, but makes it subject to the rights of the parties
involved in the suit.

Exceptions

1. Where there is a private sale by a creditor holding the right to dispose off the mortgaged
property even if there is a suit for redemption filed for the same.
2. If the property is not described clearly in the pending suit, or if it cannot be identified, the
doctrine of lis pendens will not be applicable. Mere mention of the property is not enough, it
should be identifiable.

3. Where there is a suit for maintenance only for the maintenance payments to be ascertained
transparently, the doctrine of lis pendens will not apply because the property is not directly in
question.

4. Where a court orders restoration of an immovable property under Order 21, Rule 63 of the
Civil Procedure Code, 1908, the doctrine of lis pendens is not applicable.

5. Where a transfer is affected by a person who is not a party to the suit.

6. Where the transferor is only partly affected because of the transfer.

7. A transfer made with court’s consent is not subject to S.52 of TPA as it states explicitly states,
“except under the authority of the Court and on such terms as it may impose.” in the case
of Vinod Seth v. Devinder Bajaj, the court, after a thorough examination of the case’s facts and
circumstances, determined that it was appropriate to exempt the case from the Lis Pendens
doctrine and allowed the defendants to sell the property even while the case was still pending.

Effect of Doctrine of Lis Pendens

A transfer or action taken by a party to a lawsuit during the pendency of the suit or proceeding
is not automatically void. Instead, it is only considered voidable if it has the potential to impact
the rights of any other party to the suit under any decree or order that may be issued as part of
the lawsuit. Section 52 of Transfer of Property Act creates a right that can be enforced to set
aside a transfer made during the pendency of the suit, as these transfers are not inherently void
but rather voidable. Importantly, this voidability depends on the choice of the party affected by
the ongoing proceeding, during which the transfer occurred.

In essence, the rule of lis pendens does not aim to invalidate or automatically void the transfer
but rather places it under the purview of the litigation’s outcome. According to this rule, anyone
who acquires a property during the pendency of a lawsuit is bound by the judgment that may be
rendered against the person from whom they acquired the title, even if such a purchaser was
not a party to the lawsuit or had no prior notice of the ongoing litigation.
 Doctrine of Part Performance
The doctrine of part performance is based on the principle of equity, which means that equity
looks at the intention rather than form. It is incorporated to prevent fraud and from taking
advantage of non-registration of the document.

As per the law of contracts, no right can pass to another person till the sale is complete. But
when a person enters into a contract and performs his part or does any act in furtherance of the
contract, he is entitled to compensation or the performance by the other party – in case the
other party has not acted upon his part of the contract.

Section 53A of the Transfer of Property Act of 1882 incorporates the doctrine of part
performance. According to this doctrine, if a person makes an agreement with another and lets
the other person act in furtherance of the contract, he has created equity that cannot be
resisted. Since the person in the contract played his part, the absence of a formality like
registration does not affect the performance of the contract. As a result, neither the transferor
nor anyone under him may sue the transferee.

As a result of the doctrine, the transferor or any person claiming under him cannot enforce any
right in respect of property upon the transferor or the person claiming under him except to
assert the right expressly granted by the contract about the property of which they have taken
or continued possession.

However, it is to be noted that the contract should not be unsigned or unstamped. Since the
contract is signed by both parties and the transferee has acted his part, the transferor is bound
to perform his part; otherwise, he needs to pay compensation for the breach.

Essentials

1) Contract To Transfer An Immovable Property For Consideration

The primary criterion of this Section is that a contract must be written in order to transfer
immovable property. It must be signed by the person to whom it is intended to bind, or by his
agent on his behalf. This clause does not apply to the transferee under an oral agreement. For
the purposes of Section 53A, however, any conditions of a previous oral agreement converted to
writing can be used as held in the case of Parvathamma v A Srinivasan. Section 53A provides
protection only in circumstances when the property is transferred under a contract. Because
partition is not a transfer of property, Section 53A protection will not apply. Property must be
transferred for consideration. This doctrine will not apply if the transfer is made without
consideration.

2) Contract In Writing and Ascertainable With Reasonable Certainty

The second criterion was also stated and reiterated in the case of Govind Prasad Dubey v
Chandra Mohan Agnihotri is that the contract must be in writing and that the contract’s terms
can be determined with reasonable certainty. The contract must also be signed by or on behalf
of the individual requesting to reclaim possession. The contract must be signed by the
transferee himself or by someone who has been officially authorised to sign on his behalf.
It is not required for every last detail to be revealed in the writing. Even if it is not registered or
attested, an unfinished deed of transfer is considered a contract in writing, but it must be signed
by the transferor or his agent. Unregistered documents affecting the real property that is
required to be registered under the Transfer of Property Act or the Registration Act may be
used as evidence of a contract in a suit for specific performance, as evidence of part-
performance of a contract for the purposes of Section 53A, or as evidence of any collateral
transaction not required by a registered instrument.

3) Transfer Of Possession Or Continuance In Possession

Another criterion is that the transferee either took possession of the property after the contract
was signed or if he was already in possession, he must have continued to do so. Possession must
have been taken or continued in accordance with the terms of the contract. This clause will not
apply if the transferee has not yet taken control/possession of the property

4) Readiness Or Willingness of Transferee

“He who seeks equity must do equity,” says the equity principle. If the transferee wants to take
advantage of this clause, he or she must also fulfil his or her obligations under the contract. He
must be willing and able to fulfil his contractual obligations. Protection under Section 53A is a
separate right, and a person performing a part of an agreement is only entitled to it if it can be
demonstrated that he was always ready and prepared to carry out his share of the agreement.
Absolute and unconditional readiness and willingness are required. In the case of Chinnaraj v
Sheik Davood Nachiar, the benefit under the clause cannot be granted to a person who refuses
to fulfil his contractual obligations.

The contract or the agreement to sell must be registered.

The language of the document must be such that the terms are certainly able and not vague
must be reasonable and clear if not then the doctrine does not apply[2].

Essentials Elements

1. The contract must be of immovable property

a. The contract must be for consideration

b. The contract must be in writing and signed by him/her or on behalf of him.

c. He/she must have some conditions under the contract for a transfer of immovable
property.

d. The contract or the agreement to sell must be registered.

e. The language of the document must be such that the terms are certainly able and not
vague must be reasonable and clear if not then the doctrine does not apply[2].

2. The person to whom it is transferred

 a. If the property is in custody or some part of it already, or if the property is in possession,
the same will occur.

b. In the exercise section of the deal, the act of taking possession shall be taken.

c. And, to facilitate or invoking the section for the contract, the transferee who was still in
charge of the contract has to act something in its advancement.

3. The person to whom the property is transferred is willing to perform the contract or part of
it.

4. The person who is transferring the property or any person on behalf of him cannot claim any
right on the property on which the person to whom the property is transferred is residing or
has possession unless the rights were explicitly mentioned in the terms of the contract.

5. The Doctrine of part performance cannot be invoked if the manner of the contract has not
been completed as prescribed by the statute.

Scope of Doctrine of Part Performance

1. In plain reading, a transferor shall take ownership part in the execution of the contract for the
property in question, aside from meeting the other provisions, using the shield provided for in
this clause, and having done so to promote the contract.

2. Where the relevant contract does not comply with the provisions of a legal contract, the court
cannot accept the plea referred to herein. For a transferor to use insurance in this clause, there
must then be a legal contract.

3. The purpose of this provision is restricted only to the placing by the transferor, in connection
with a property already owned by the transferor, of a bar on the protection of the rights.

4. The section grants no right on unregistered transfer to the transferor to assume custody of
the transferor or any other right, it is only applicable to him as a protection.

5. For this clause to apply, the contract must be linked effectively to actions performed in
support of the contract or to actions that may be unequivocally alluded to in that contract.

6. Where there is no transfer arrangement or land, the applicability issue of this provision does
not arise.

7. The transferor must be the owner to attract the disposition of this section, a sales agreement
should be concluded and the transferor’s possession should be by that agreement and the
transferor has to do something else to support the agreement, and he has to be willing and
willing to fulfill his part of the agreement.

Fraudulent Transfer
The doctrine says that every transfer of immovable property which is done with an intention to
delay or defeat the creditors shall be voidable.

Such option to consider the transaction void or not has been left in the hands of the aggrieved
party who, here, will be the delayed or defeated creditors. This means that even though such
transfer is, in the eyes of law, valid but it is left upon the creditor as to whether he wishes to
avoid or not. The motive of the legislature behind such arrangement is to give the option to the
party who has suffered or whose interest has been affected.

The basic objective is to lend a blanket to such people who suffer in the nature of delay or
defeat of their interest. Such people whose mere fault was to lend money to the ill-intentioned
transferor must be provided some kind of security- one which only the legislature through legal
policy can provide.

Essentials

I. Transfer of Property

The very first essential is the application of The Transfer of Property Act, 1882 itself. If the
transaction does not fall within the ambit of such legislation, there is absolutely no question of
application of Section 53 According to the Act[4], transfer of property means when any person
transfers property to one or more people, or to himself and one or more people.
It must fulfil all the conditions of a valid transfer.

II. The property must be Immovable in Nature

Section 53 of The Transfer of Property Act, 1882 attracts application to only those property
which is considered to be immovable in nature.

III. Fraudulent/Malafide Intention

The third essential of Section 53 is that the intention behind the transfer must be to delay or
defraud creditors. This is to say that it is important to cull out the intention behind the transfer
which is in question. If such transfer has been with the scheme or design to result in delay or
defeat of the creditors such transfer is voidable.

It must be proved by making use of evidence which may be direct or circumstantial in nature.

a. If the transfer was made under such circumstances that it was not widely known
i.e. in secrecy

b. If the transfer was done in haste.

c. If the transfer was carried out soon after a decree was passed against the
judgment-debtor. Such decree must be such to order the repayment of debt.

d. If the transfer was such that the debtor, mysteriously, transferred the whole of
his property without any thought to himself i.e. without keeping any part of the
property for himself. (no benefit for himself)

e. The consideration made for the transfer was such which was significantly small
or of no value, when it is compared to the real, original or actual value of the
property transferred.
 f. In accordance to the evidence discovered, it was proved that there is actually no
consideration payment, contrary to what was given in the sale deed.

IV. Such delay or defeat must be suffered by creditor(s)

The fourth essential is that the delay or defeat must have been suffered by creditor(s). This is to
say the ill-intentioned transfer, in question must be such wherein the affected people is or are
creditor(s). Herein, it is pertinent to understand the term "creditor". It is said to be understood
in a wide sense for this section.

In the case of Ram Das v Debut[8], the term was interpreted to include such people to whom
the transferor owes some kind of liability which is financial in nature [ i.e. creditors ] which
would include not only those to whom he owes at the time of transfer in question as well as
those to whom he owes at a time which is after the transfer in question.

In order to effectuate application of The Transfer of Property Act, 1882, more specifically, the
Section 53 of the Act, it is necessary for the affected party to be a person to whom liability is
owed to by the transferor, a liability which is financial in nature. However, it is not necessary for
the creditor to be secured. On the contrary, such affected creditor could be an unsecured one as
well.

Moreover, even a subsequent creditor i.e. a person to whom the liability which is financial in
nature is owed to at a later date than the transferor, can move to the court under this particular
section. This connotes to the fact that debt to exist at the time of effectuating the transfer is not
mandatory.

If transfer of property is effectuated before the transaction of debt, possessed with the intention
or scheme that the transferor would undertake a liability [which would be financial in nature]
upon his head in future and for such purpose wanted to restrict his property from the reach or
hold of future creditors, it is deemed to be equally wrong or fraudulent in the eyes of law. Such
transaction is also liable to be set aside. Such setting aside, however, would be at the insistence
of creditors only since such transaction is deemed voidable.

In the case of Kanchanbai v. Moti Chand[9], the term creditors used in Section 53 was
discussed. In such case, the transferor undertook a liability which was financial in nature
amounting to a value of Rs. 2600 i.e. two thousand and six hundred rupees. The creditor
requested repayment of the money which was owed to him.
However, even after doing so, he was not paid back. At such instance, such person to whom
money was owed warned that he would move to the court to seek payment of his money. On
receipt of notice of such filing of suit, the transferor, by executing a gift deed [ in favour of his
daughter ], gifted his property. At this point, fed up of the transferors antics, the creditor moved
to the court seeking respite under Section 53 of the Act.
The learned court, on the other hand, opined that the usage of word creditors cannot be
construed to mean that Section 53 would be applicable only in the occasion of presence of
multiple creditors. This section would attract application even if one single creditor is delayed
or defeated or when there was an intention to delay or defeat even a single creditor. Therefore,
in the present case, Section 53 was held to be applicable.

Effect

Every transfer of property, which is immovable in accordance to the relevant section of The
Transfer of Property Act, 1882, which is done possessed with an intention aimed to delay or
defeat the creditors of the transferor shall be voidable. Such option to consider the transaction
void or not has been left in the hands of the aggrieved party who, here, will be the delayed or
defeated creditors.

This means that even though such transfer is, in the eyes of law, valid but it is left upon the
creditor as to whether he wishes to avoid or not. The motive of the legislature behind such
arrangement is to give the option to the party who has suffered or whose interest has been
affected.

However, we must make note of the fact that only the particular part of transaction which was
effectuated with an ill intention, would be regarded as one which is fraudulent in nature. The
rest of the transfer which was not tainted with this scheme, would be effectuated normally i.e.
something akin to severability would be effectuated. The catch here is that in transfers wherein
a major part of the transaction in question is held to be one made possessed with an ill intent to
delay or defeat the creditor(s) and fraudulent parts of the transaction cannot be severed from
the rest of the transaction, then whole of such transaction in question would be held to be
voidable.

Exceptions

1. Good Faith
The transferee i.e. the person to whom the transfer is made is protected by law if they took
the property, in question, in absolute good faith and gave due consideration for the same.
When the transferee i.e. the person to whom the transfer is made purchased any property,
being immovable in nature, possessing such intent which is considered good faith and paid
consideration which is considered adequate, the creditors cannot take the help or derive
benefit from S.53.
But if the transferee was keenly aware that the transferor was possessed of such foul intent
and keeping such in mind aims to keep mum about it, the transferee is not in good faith and
would not be covered by the exception.

2. Insolvency Laws
The rights of the person to whom the transfer is made, those which stem from any law which
relates to insolvency which is being enforced at such time, are not effectuated by the
application of Doctrine of Fraudulent transfer Application of any law which relates to
insolvency which is being enforced at such time.
Burden of Proof

Burden of proof with respect to showcasing whether the transfer was made possessed with
the intention aimed to delay or defeat the creditors lies on the creditors. This is so since they
are the ones who can actually prove whatever delay, defraud or defeat they suffered at the
hands of the ill-intentioned transferor.

Doctrine of Priority
The doctrine of priority under section 48 of the Transfer of Property Act, 1882 deals with the
determination of rights of the conflicting parties over the same immovable property. It assists the
court in determining the parties to whom rights are given priority over the other in case of
conflicting interests between the parties. The doctrine of priority is based on the Principle of Natural
Justice.

The doctrine of priority under Section 48 is inspired from the legal maxim, qui prior est tempore
potior est jure which ultimately means one who is first in time is better in law.

The doctrine of priority states that when rights over immovable properties are made in favour of
different individuals at different times it resulted in a conflict of interest between the parties. In
order to resolve the deadlock between the parties, the doctrine was inspired by a legal maxim of qui
prior est tempore potiorest jure which means one who is first in time in greater in law. In other
words, an individual who has an advantage in time will get the advantage in law. The rights are given
to an individual according to the procedure established by law. Subsequently, the rights of the same
property executed in favour of another individual. In such cases, the entitlement of immovable
property is awarded to the individual who received the rights first from the transferor according to
the procedure established by law.

Essentials For Doctrine Of Priority

1) Immovable property: The doctrine of priority under the Transfer of Property Act, 1882 applies to
only immovable properties.

2) The property is transferred to two or more transferees: The concerning immovable property
belongs to one transferor and is transferred to more than one transferee.
3) The property must have been transferred at different times: The transfer of rights of immovable
property is made in favour of different individuals at different times and the rights of the transferee
must have been created over the property.

4) The rights cannot be exercised at the same time: The rights of the transferee shall not be
exercised to their fullest capacity at the same time.

Illustration

1) Amit is the owner of a 2-acre land and intended to transfer his piece of land to Xena without
mandatory registration in January 2019. Subsequently, Amit transfer the same property in favour of
Zubair by completing all legal formalities including mandatory registration in January 2020.
According to the doctrine of priority, rights of the immovable property awarded to Zubair and the
transfer of rights made to Xena in a void contract.

2) Zain is the owner of Z&Z restaurant in New Delhi, India. Zain is going through some financial
hardships and decides to mortgage the Z&Z restaurant. In order to cope with the financial troubles.
Zain Mortgaged Z&Z restaurant to Jalal on 28 March 2020, but the situation got worse with the
passing days. Zain decided to sell Z&Z restaurant to recover losses incurred in due course of time. On
1 January 2021, Zain completed the legal paperwork and sold Z&Z restaurant to Kabir. The conflict of
interest arises between Jalal and Kabir over Z&Z restaurant. According to the doctrine, the rights of
Z&Z restaurant were awarded to Jalal because there was a mortgage before the sale of Z&Z
restaurant.

Limitations And Exceptions to The Doctrine of Priority

The doctrine is subjected to limitations and exceptions which resulted in the different outcomes of
the cases. The analysis of the cases is based on the following exception such as-

1) Cancellation and postponement of mortgage: The cancellation and postponement of prior

mortgages are covered under section 78 of the Transfer of Property Act, 1882. It deals with the
mortgages which conduct fraud, gross negligence, misrepresentation, coercion, or use of any unfair
means to obtain consent and security money from the mortgager. Such mortgagee was postponed
and the subsequent mortgagees will have priority in the rights of the property over the prior
mortgagee.

2) Estoppel: According to the exception of estoppel, if first, the transferee is aware of the
subsequent transfer of property, then the subsequent transferee will get the opportunity to be in
priority. It is not necessary to know the exact detail of the transfer.

3) Registration: The doctrine of priority depends upon the dates of execution of deeds and not on
the dates of deeds registration. So if the first transfer is not registered, the subsequent transferee
will get the priority.

4) Notice: It is a general exception where the holder of a registered deed holds priority over the
unregistered deed holder at the time of execution of the deed. In such cases, the holder of the
registered deed had notice of the prior unregistered deed at the time of execution. Section 50 of the
Registration Act, 1908 provides various classifications of registered document for sale, purchase, or
transfer of rights of immovable properties from one person to another which give priority against
unregistered documents.

5) Court Orders: The court has the authority to pass an order or a decree to prioritize the
subsequent transfer over the prior transfer of immovable property. In such cases, the doctrine of
priority shall not apply to the concerned transfer of property.

6) Failed to comply with the procedure of law: The transfer of immovable properties must follow
the procedure established by law for executing the decree. Any sort of failure to comply with or
breach of law leads to the invalidation of the decree.

7) Contract to Contrary: If there exists a contract between the parties contrary to these provisions, it
will take precedence over the law of priority.

8) Fraud, Misrepresentation or Negligence: If there exists fraud, misrepresentation or negligence on

part of first mortgagee in the second mortgage, i.e first mortgagee is involved, then the rights of first
mortgagee won’t prevail.

Case Law

In Duraiswami Reddi V. Angappa Reddi, Madras High Court held that the prior transferee got
priority even if the records of transfer are enrolled later and an earlier transferee would be qualified
for implementation of rights over the property. Regardless of the fact, whether the consequent
transferee went into the exchange.

In SFL Industries V. Reliance Capital Ltd. a crucial question of law arose before the court is whether
the provision of the Companies Act shall have the effect of the doctrine of priority which belongs to
the Property Act. After analysis, the Hon’ble court pronounced that the doctrine of priority shall
apply to the Companies Act under Section 48 of the Transfer of Property Act, 1882. The court
pronounced that the right of 1st charge holder must have prevailed over the claim of the
subsequent charge holder.

In ICICI Bank Ltd. V. SIDCO Leather Ltd. the court held that 1st charge holder prevails over the
2nd charge holder.

Conclusion

The doctrine of priority in property law is based on time to resolve the deadlock between the parties
involved in the transfer of immovable properties. It offers priority to an individual who is advanced
in time and will get the advantage in law over the execution of the transfer deed. The conflict
between the parties arises due to the transfer of one single immovable property to more than one
person at different times. Therefore, the transferor must transfer the rights of the immovable
property to more than one individual to enforce the doctrine of priority under 48 of the Transfer of
Property Act, 1882.

Effect of the document registered under doctrine of priority

Under the rule of priority, registration of the document does not affect the rights of the prior
transferee. That means if the document of the prior transferee is unregistered whereas the
document of the subsequent transfer is registered, still the rule of priority would be applicable to
the prior transferee and not the subsequent transferee unless and until the subsequent transaction
is made with bonafide intention and without the knowledge of the prior transaction. Registration
does not create any right in the property. It is merely proof of intention to transfer the title of the
property.

Exceptions

Postponement of prior mortgagee (Section 78)

Section 78 of the Transfer of Property Act is an exception to the doctrine of priority. According to
this Section, if the prior mortgagee creates some fraud, gross negligence, or misrepresentation and
induces any person to give security money for the same property, then the prior mortgagee is
postponed to the subsequent mortgagees. Hence, the subsequent mortgagee will have priority in
the rights of the property over the prior mortgagee.

For example, A mortgages a property to B, subsequently, A also mortgages the same property to C. C
unaware of the previous transaction inquiries about any debts (if any) in the property with B. B
fraudulently conceals his mortgage due to which B advances money for the same to A. Here, though
B is the prior mortgagee since B has committed fraud, his prior rights are postponed.

Non-compliance with the procedure of law in prior transfer

If the prior transfer is created non-complaining to the procedure laid down by the law, then such
subsequent transfer would be given all the rights prior to the previous transfer. For example, A
executed a lease deed of immovable property in favor of B for 5 years but did not get it registered
which was mandatory. Later, A sold the same property to C. Here the rights of C would be given
preference over B.

Estoppel

In this case, if the first transferee knew about the subsequent transfer, then the subsequent
transferee will get the priority. This is an exception to the rule of priority. In this exception, it is not
necessary that the first transferee should know the exact contents of the transfer.

By registration

Every instrument starts its operation from the date of its execution. In cases where subsequent
deeds are carried out on the same date and the order of execution is unknown, then all the deeds
will be carried out at the same time. And in cases where two deeds consist of different dates and are
registered on different days, then the priority, in this case, will depend upon the dates on the deeds
and not on their respective registered dates.

By notice

The presence of notice means being familiar with the facts. Therefore, when a bona fide contract,
whether oral or written, is created for the sale of property, and further the third party buys the
property concerning the notice of the earlier transfer, the title of the party claiming under the
previous transfer would get the priority over the subsequent purchaser. But the transfer that has
been created in time must be bona fide.

Section 50 of the Registration Act also provides various classifications of the registered document
which is related to the immovable property to draw effect against the unregistered document.
Hence, in cases where the holder of the registered deed had notice of the earlier unregistered deed,
at the time of execution, it gives the registered deed of the subsequent holder a priority because of
his deed over the previous holder of an unregistered deed for not being ought to be registered.

By court

When the court orders or passes a decree to take the subsequent transfer or the second transfer,
then such transfer would prevail over the prior transfer and the rights of the subsequent transfer
would be given preference. Thus, the rule of priority will not be applicable in such cases.

Doctrine of Holding Out (Ostensible Owner)

The principle of an ostensible owner performing the transfer of property was established to defend
the rights of innocent third parties against actual property owners, it is codified under Section 41 of
the Act. Innocent third parties’ rights are protected by this principle. It also discusses the different
components and requirements that must be met in order for the plaintiff to profit from this concept,
as well as its implementation in several case laws both before and after India’s independence.

What is Section 41 of Transfer of Property Act

The transfer of property to an ostensible owner is dealt with under Section 41 of the Transfer of
Property Act, 1882. According to it, when a person acts on the express or implied consent of a
person who is vested in a certain immovable property, that person is deemed the ‘ostensible owner’
of that property.

An exception to the ‘Nemo Dat Quod Non Habet’ rule

The rule enunciated in Section 41 acts as an exception to the general principle that a person cannot
transfer a superior title to property than what he holds i.e. ‘Nemo Dat Quod Non Habet‘. Section 41
is a well-accepted exception to this general principle. If the real owner, for example, entrusts a
particular person with the title papers in any reasonable manner and makes him an ostensible
owner, then a third party who (after appropriate investigation) trades with such an ostensible owner
in a bona fide manner might obtain a valid title to the property as against the real owner.

Rights and Limitations of the Ostensible Owner

An ostensible owner, although not the real owner, may act as if they are the true owner during
transactions. This right is acquired due to the real owner’s intentional neglect or acquiescence,
allowing the ostensible owner to exist. The concept of assigning an ostensible owner is based on a
universally applicable rule of natural equity.

Protection for Third-Party Purchasers

According to this rule, if one person allows another to hold themselves out as the owner of a
property and a third party purchases the property in good faith from the ostensible owner, believing
them to be the real owner, the person who allowed the ostensible owner to act as such cannot later
claim their secret title.

However, this rule can be overturned if the person who allowed the ostensible ownership can prove
that the third party had direct notice or constructive notice of the genuine title, or if there were
circumstances that should have prompted the third party to investigate and discover the true
ownership.

Examples of Non-Ostensible Owners

There are certain individuals who are not considered ostensible owners. They include:

 Self-proclaimed managers or agents who claim to have authority over the property.

 Mortgagors who have a minor interest in the property and act as servants.

 Co-sharers who occupy jointly shared family property.

 Trustees or managers of idols, as idols themselves cannot provide consent.

Essentials
1. The transferor must be an ostensible owner

When it has already been proven that the transfer was performed with the real owner’s permission,
the real owner will be estopped from making a claim on the property. It will be applicable even if the
transferee had performed no investigations to see if the transferor had the authority to make the
transfer, which is otherwise essential for this section to apply. Hence, the transfer itself does not
need to be done with the approval of the real owner for this provision to apply. It is sufficient if the
transferor is the ostensible owner with the approval of the real owner at the moment of transfer.

2. The real owner’s consent is essential for ostensible ownership

For the real owner to be barred from claiming ownership under this provision, the ostensible
ownership of the transferor must have been formed, allowed, or acquiesced in by the real owner.
This can be established through:

Express Consent: When the owner clearly states, either verbally or in writing, that they have no
interest in the property or that another person has an interest in the property. It can also be shown
through acts such as attesting a deed stating the lack of interest or getting the property registered in
another person’s name while disclaiming ownership. Mere inaction or silence is generally not
considered consent unless there is a duty to speak or the silence is equivalent to speaking.

Implied Consent: Consent can be inferred from the actions or behaviour of the real owner. If the
real owner is aware that someone else is dealing with their property and does not object, their
silence or inaction may imply consent. However, it must be established that the owner was aware of
their right, interest, or title to the property and provided consent despite this knowledge. If the
owner was unaware of their right at the time, they are not precluded from pursuing their claim
against the transferee.

3. The transfer must be for consideration

A transferee can only profit from Section 41 of the Act if he can show that he received the property
in exchange for something. There should be a quid pro quo in the transaction.

4. The transferee must take reasonable precautions

The clause states that a transfer made by an ostensible owner is not voidable because the transferor
was not allowed to perform it, as long as the transferee was taking reasonable precautions to ensure
that the transferor has the necessary authority to effectuate the transfer, and

If a transferee does not have constructive knowledge of the real owner’s title and no means to
investigate the real title-holder of the property, he may be protected under this clause.

The proviso states that the transferee must demonstrate that they conducted a reasonable
investigation to ascertain the transferor’s authority. Conducting a standard title search is an essential
requirement for the provision to apply. Failing to do so would disqualify the transferee from
receiving the benefit of this clause.

If the title is obvious, no further inquiry may be necessary. When a person appears to be in
possession of the property, is documented as the owner, holds the property’s title deeds, and
openly discusses it with third parties, there is no reason to suspect that the third party acted with
malicious intentions in dealing with them.

5. The transferee must act in Good Faith

It is essential for the transferee to act with a bona fide intent. It is possible that there may be
investigation without good faith as well as good faith without investigation. The real owner will not
be affected by the transactions being entered into by the ostensible owner in either of these
scenarios. This provision requires honesty as “good faith.” A person may commit a mistake, but he
must do so in good faith. A transferee cannot claim protection under this clause simply because he
was unaware of the actual owner’s title. He must not close his eyes and make a hasty purchase from
an ostensible owner without first determining whether the transferor has the authority to make the
transfer. The mere fact that the buyer’s name was registered in the revenue papers at the required
period is insufficient to establish that he was a genuine buyer. He must conduct a reasonable
investigation into both the transferor’s title and his authority to sell.

EXCEPTIONS

If the true owner permits another to hold himself out as a real owner, a third person who –

(a) deals with that other after taking reasonable care to ascertain that the transferor had the power
to make transfer &
(b) act in good faith, such third person acquires good title to the property as against the true owner.

Reasonable care:

With respect to degree of reasonable care to be taken by the transferee, the requisite for
ascertaining whether the transferor has power to make transfer, it may be said that-

1. The question, whether a transferee took reasonable care to ascertain that the transferee had
power to make the transfer, has to be determined with the reference to the circumstances of each
particular case, the test being, whether he acted

 like a reasonable man of business &

 with ordinary prudence.

2. The ordinary standard of diligence, for ascertaining whether the transferor had the power to
make the transfer, is calling for the title under which transferor claims and inspecting them by
transferee. While an inspection of title deed before the transfer, if there is any indication anything
which put the transferee on notice or enquiry regarding any infirmity in the title of the transferor,
then it might be further investigated.

Good faith:

The expression good faith means that the transferee has acted honestly and in the real belief that
the ostensible owner is the true owner. The proviso to section requires that the transferee must not
only take reasonable care to ascertain that the transferor has power to transfer the property, but
also transferee must act in good faith. It is possible that there may be enquiry without good faith
and good faith without an enquiry. In none of the above cases, the real owner is affected by one’s
transaction with ostensible owner.

Burden Of Proof:

Section 41 of The Transfer Of Property Act, 1882 is similar to Section 115 of Indian Evidence
Act,1872. The burden of Proof signifies an obligation to prove a fact. Normally burden of proof lies
on the person who claims fact to be true. But when a person intentionally induced another person to
act, the case falls under section 115 of Indian Evidence Act, 1872 and the burden to proof is on the
person inducing, to show that transferee knew the truth and therefore, is not entitled to rely upon
the plea of estoppel.

In Mahinder Singh v. Pardaman Singh, the Delhi High Court said that when a transaction is Benami
and transferor is ostensible owner, the burden to prove lies on a person who claims that he is the
real owner.

BENAMI TRANSACTION:

Agnew described that the word ‘Benam’ is of Persian origin made up of two words ‘be’ and ‘nam’
meaning ‘no name’ i.e. nameless or fictitious. The simple meaning of Benami is that a purchaser
desires to buy property but does not desire to buy in his own name and therefore buys it in the
name of someone else. The objective behind benami transaction is to hide the real property,
sometimes to avoid creditors and sometimes merely from habit or superstition.

Section 3 of Benami Transaction Act, 1988 lays down prohibition of benami transaction while section
41 of The Transfer of Property Act, 1882 allows such transfer. Thus, transfer by ostensible ownership
under section 41 is subject to provision of Benami Transaction under section 3 of Benami
Transactions (Prohibition of the Right to Recover Property) Act, 1988.

Ram Coomar v. McQueen (1872)

In the case of Ram Coomar v McQueen (1872), the concept of transferring property by an ostensible
owner was established to protect innocent third parties. The Judicial Committee used this notion in
the case, which later became reflected in Section 41 of the Transfer of Property Act.

The case involved a land transaction where the property was initially sold to Bunnoo Bebee, who
then sold it to John and Maria McQueen. The plaintiff, Ramcoomar Koondoo’s father, inherited the
property and sued the McQueens for possession. The transaction was a benami transaction, known
only to the person who sold the land. The Calcutta High Court ruled in favor of the McQueens,
leading to an appeal to the Privy Council.

The Privy Council held that the appellants, the McQueens, were entitled to keep the property
despite the initial benami title. They emphasized that the burden of proof was on the appellants to
show that the purchase was made on behalf of the real owner, which the respondent failed to do.
The Privy Council concluded that the transaction appeared legitimate, and even if Bunnoo Bebee
was an ostensible owner, the implied consent of the real owner allowed the transfer to be legally
sustainable. As a result, the plaintiff could not reclaim the property from the third party.

Md. Shafiqullah Khan v. Md. Samiullah Khan (1929)

In the case of Md. Shafiqullah Khan v. Md. Samiullah Khan (1929), the issue revolved around the
possession and transfer of land by illegitimate sons who pretended to be the legitimate owners. The
genuine heir, Shafiqullah Khan, filed a lawsuit to assert his inheritance rights, while the possessors
sold the land to a third party, Samiullah Khan. The main question was whether the illegitimate sons
could be considered ostensible owners under Section 41 of the Transfer of Property Act.

The lower court ruled in favour of Samiullah Khan, the third-party purchaser, stating that he had
acted in good faith and was protected under Section 41. The court found that Samiullah had no
knowledge of Shafiqullah’s suit and believed the illegitimate sons had the title to the land, as
Shafiqullah had allowed their names to remain in the revenue papers. Consequently, the court held
that Shafiqullah was barred from establishing his own title.

However, the Allahabad High Court disagreed with the lower court’s interpretation. They stated that
the situation did not fulfill the requirements of Section 41 because ownership was not obtained with
the consent, either express or implied, of the lawful owner. Therefore, the illegitimate sons were not
considered ostensible owners under the provision.
 Feeding Grant by Estoppel – S.43
The doctrine of equity states that when one person either by his act or omission, or by declaration,
has made another person believe something to be true or persuaded that person to act upon it, then
in no case can he or his representative deny the truth of that thing later in the suit or in the
proceedings. In simple words, estoppel means one cannot contradict, deny or declare to be false the
previous statement which was made by him in the Court.

The law incorporated in S. 43 is based upon common law doctrine of Estoppel by deed and the
equitable by deed and the equitable principle that if a person promises more than he can perform,
then he must fulfil the promise, when he gets the ability to do so. Feeding the grant by Estoppel acts
as an exception to the general rule contained under S. 7 of the Transfer of Property Act, 1882
according to which unauthorised transfers are void. However, in this case such transfer is considered
valid.

Ingredients

Fraudulent/ Erroneous Representation By The Transferor

The transferor transfers with a mala fide intention to deceive the transferee or under a mistake of
his own right.

As the equitable doctrine of estoppel requires a man to make his representation good, the word
fraudulently/erroneously is the foundation of this section. The words imply that the intention can be
intentionally false or can even be made under a mistaken belief of having the authority to transfer. It
need not be any particular form; it can even be by word of mouth or by a document.

Transferee Acted Upon The Representation

On the erroneous and fraudulent representation made by the transferor, the transferee believes him
and acts upon such representation to complete the transaction. It is a well settled position that no
estoppel can arise where the true possession is known to the transferee. Section 43 does not apply
to gracious transfer or gifts.

Subsequent Acquisition Of Authority By The Transferor

The transferor may acquire the authority by any legal method, for example, by gift, purchase,
inheritance or even by a will. Further, for the application of Section 43, the transfer should be
otherwise be valid, i.e., the transferor must be competent and the object to the transferor should
not be contrary to the public policy.

The transfer becomes valid when the transferee exercises the option and the title of the transferor
becomes perfect. Where the official receiver transfers property before it vests in him, the implied
covenant will be treated as erroneous representation, and the purchaser’s title would be complete
as soon as the property vests in him (Muthiya Chettiar v Doraswami[1]). Similarly, where a partner
sells the property of a firm in his right and subsequently on the dissolution of the firm is allotted the
same property, the transferee gets the benefit of such allotment (Syed Nurul Hossein v
Sheosahai[2]).

Further, the interest acquired by the transferor does not automatically pass on to the transferee but
only when he claims his interest in such property

There Should Be a Subsisting Contract Of Transfer

The option of the transfer can only be exercised in respect of an interest acquired by the transferee
whilst the contract of transfer “still subsists”. If the transferee (purchaser) had repudiated or
cancelled that transaction, or had recovered his purchase money, or if the transaction were one of
mortgage and the mortgage money had been repaid, then the relation of the transferor and the
transferee has ceased to exist, and no claim in respect of the property can be made by the latter.

Invalid Transfers

The transfer under Section 43 will be invalid if it is prohibited by law, such as if it is against public
policy or is performed by a minor. This section is only intended to cure the transferor's lack of title at
the moment of transfer. If the transfer is void from the start, the section cannot be applied even if
the transferor later obtains the property. As a result, if the transferor is a minor at the time he falsely
promises to transfer the property, the transferee cannot use this provision even after the minor gets
the property and reaches the age of majority. Therefore, if the property is non-transferable under
Section 6, it cannot be validated using Section 43.

Section 43 does not require the transferee to use care and act in good faith in determining whether
his transferor has the authorization to transfer. Even if such were the case, there is no evidence that
the transferee knew of the transferor's lack of interest in the property.

Exceptions

Section 43 does not apply in the following circumstances −

 Cases in which no consideration is given

 If both parties were aware of the exact state of affairs about the transfer

 Execution sales

 If the transferee is not misled by the false or erroneous representation of the transferor,

 Gifts

 Transfers are not transferrable under the law.

Whether There Is a Conflict Between Section 6(a) AND Section 43 of Transfer of Property Act?

The Honorable Supreme Court in the case of Juma Masjid Mercara v. Kodia Maniandra Deviah,
observed that there is no conflict between Section 6 (a) and Section 43. The provisions of S. 6 (a)
refer to the rule of substantive law. Whereas S. 43 prescribes a rule of equity in case a transfer is
made by a person not having the authority to transfer.
 1. 43 provides for the application of rule of estoppel against the transferor after he acquires
the authority to transfer. Further, Section 43 lays down that one of the conditions for the
applicability of estoppel against the transferor is that the transferee must have been misled
by the representation of the transferor. However, if the transferee had the knowledge of
facts and the title of the transferor, then Section 43 shall not apply, however, Section 6 (a) of
the Act shall apply.

Section 43 applies only in those cases, where the transfer is for consideration, it does not apply on
gratuitous transfer. It applies in cases where despite a misrepresentation, the transferor, either
takes or seeks to take a monetary benefit from the transferee. It therefore would not apply to cases
where a person transfers the property by way of gift. On the other hand, the prohibition under S.
6(a) applies to all kinds of transfers, irrespective of whether they are for consideration or gratuitous
transfer. A gift of property that a person hopes to inherit is also void.

The status of a transfer under S. 6(a) is void in its inception, however under S. 43, the transfer is
voidable at the option of the transferee provided two conditions are satisfied. Firstly, that the
contract should be subsisting at the time the transferor attains competency to transfer the property,
i.e it should not have been rescinded and secondly, that the property should be available with the
transferor. It should not be in the hand of a bona fide transferee for value.

Conclusion

The doctrine contained under section 43 is based on the equitable principle that if a person promises
more than he can perform, then he must fulfil the promise, when he gets the ability to do so. The
rule in India is the rule extended by equity and it is contained under Section 115 of the Indian
Evidence Act. As the equitable doctrine of estoppel requires a man to make his representation good,
therefore, if the transferor professes to transfer, equity does not permit him to deny his earlier
grant.