Transfer of Property Act

Table of Contents
Table of cases and statutes ........................................................................................ 2
Cases ............................................................................................................................................................ 2 Statutes ....................................................................................................................................................... 2

Bibliography ...................................................................................................................... 2
Books refered........................................................................................................................................... 2 Books cited................................................................................................................................................ 2

Abbreviations .................................................................................................................. 3 Research Methodology ................................................................................................ 4

Aims and Objectives .............................................................................................................................. 4 Scope and Limitations .......................................................................................................................... 4 Method of Writing and Mode of Citation ...................................................................................... 4 Sources of Data........................................................................................................................................ 4 Acknowledgement ................................................................................................................................. 4

Actionable Claim ............................................................................................................. 5

Definition of Actionable Claim .......................................................................................................... 5 History of Actionable Claim ............................................................................................................... 6 Claims recognized as actionable claims .................................................................................. 6

Notice .................................................................................................................................... 7
Meaning of notice ................................................................................................................................... 7 Importance of notice............................................................................................................................. 7

Actual notice...................................................................................................................... 8 Constructive notice ....................................................................................................... 9

Willfull abstention ................................................................................................................................. 9 Gross negligence ..................................................................................................................................... 9 Registration as notice ........................................................................................................................ 10 Possession as notice ........................................................................................................................... 11 Notice to the agent .............................................................................................................................. 12

Transfer of Property Act

Table of Cases and Statutes

Cases referred

1. Daya Debi v. Chapla Devi, AIR 1960 Cal. 378. 2. Varjivan Das v. Magan Lal, AIR 1937 Bom. 382. 3. Lalchand v. Hussainio (1927) 97 LC 257. 4. Chinnappareddi v. Venkataramanappa, AIR 1942 Mad. 209. 5. Bharat Prasad v. Paras Singh, AIR 1967 All. 15. 6. Amir Hasan Khan v. Muhammad N. Hussain, AIR 1932 All. 345.

7. Zaffar M. Ali v. Budge-Budge Jute Mills, (1907) 34 Cal. 289. 8. Alkash Ali v. Nath Bank, AIR 1951 Assam 56. 9. Lloyd v. Banks, (1868) L.R.3 Ch. 488 10. Kausalai Ammal v. S.V.K.R Amirthavala Vandammal, AIR 1973 Mad. 255 11. Munindrachandra v. Trylukonath, 2 CWN 750 12. Lloyds Bank ltd. v. PE Guzder & Co., AIR 1930 Cal. 22. 13. Rajaram v. Krishna Sami, (1893) 16 Mad. 301. 14. 24 Panigana's Lawyers's Assn. v. State of West Sengal, AIR 1986 Cal. 205.

Statutes referred
1. The Transfer of Property Act 1882

Bibliography
Books referred
1) Sinha, R.K, THE TRANSFER OF PROPERTY ACT, (12th ed., Cectral Law Agency) 2) Mulla, TRANSFER OF PROPERTY ACT, (Ed. IX, Lexis Nexis Butterworth Wadhwa.)

Transfer of Property Act

Abbreviations
& Cr.P.C AIR Anr. Art. Cr.L.J Dist. ed. J. No. Para SC SCC Supp. v. Vol. And Criminal Procedure Code 1973 All India Reporter Another Article Criminal Law Journal District Edition Justice Number Paragraph Supreme Court Supreme Court Cases Supplement Versus Volume

Transfer of Property Act

Research Methodology

Aims and Objectives

This paper aims to analyze the current and past position of the Law regarding actionable claim and doctrine of notice. The objective is to discuss the development, and interpretation of this law.

Scope and Limitations

I have limited my research to the important case law in this regard. This is not an exhaustive study of the case law although it has dealt with the important cases pertaining to actionable claim and notice.

Method of Writing and Mode of Citation

I have adopted descriptive style of writing as the research topic demands. Every effort has been made to make the research as concise and succinct as possible. Wherever necessary, description of the elementary concepts has been provided. The mode of citation in this research paper is uniform and consistent.

Sources of Data
The research is based on reliance on authoritative books and commentaries on the Property law and case law. Original judgments have been referred to, wherever possible. All sources have been duly acknowledged.

Acknowledgement
I would like to thank my Property Law professor Harpreet Kaur maam for providing me insight and being instrumental in my research. I would also like to thank my family and my friends for giving me support throughout my research.

Transfer of Property Act

Actionable Claim
Definition of Actionable Claim According to Section 3, actionable claim means: (1) Unsecured money debt, and (2) A claim to beneficial interest in movable property not in possession of the claimant.

1. Unsecured money debt: A debt may be secured or unsecured. Where the creditor (the person who gives loan) takes security from the debtor (the person who takes the loan ) for repayment of his money, the debt is secured debt. When a person takes some loan and simply writes a pronote, the debt is an unsecured debt. According to Section 3 only unsecured debt is an actionable claim. Debt secured by way of mortgage, pledge or hypothecation is not an actionable claim. It may be noted that 'debt' here does not mean only 'loan'. Any obligation to pay a certain or definite sum of money may be called a 'debt'. For example, claim of 'arrears of rent ! is an actionable claim. 'Debt' may be existent, accruing or conditional. a) Existent Debt: Where a debt or sum of money has' become due and is payable (enforceable) at present, the debt is existent. b) Accruing debt: Where a debt or sum of money is at present due but it is payable not now but on a future date, the debt is accruing. Accruing debt is due at present but becomes payable only on a future date. c) Conditional or Contingent debt: Where the claim fora sum of money exists but the payment depends upon the fulfilment of any condition, the debt is conditional.

2. Claim to beneficial interest not in possession of the claimant: Right of a person to take the possession of a movable property from the possession of another, is the actionable claim of that person provided claimant has beneficial interest (i.e. right of possession) in that property. Following requirements are necessary for constituting an actionable claim 5

Transfer of Property Act a) The claim is to some movable property. b) The movable property is in possession of another person. c) The beneficial interest or the right of possession of the claimant is recognized by the Court. A person can claim possession of a movable property of which he has right to possess but it is not in his possession. If a property is already in his actual or constructive possession there is no question of claiming its possession. Therefore, if a movable property is proved to be in actual or constructive possession of the claimant, there is no actionable claim. Moreover, the claimant must also have right of possession i.e. the law recognizes that he has beneficial interest in that movable property. If he has no legal right of possession, the claim is not actionable claim.

History of actionable claim: The definition of actionable claim was included in Section 3 of the Transfer of Property Act in 1900. Before this, the Anglo-Indian Courts following English law1 used to give a wide meaning to this term and it included every kind of claim in a movable property, which could be enforced through the courts. But such a wide meaning created confusion. For example, under this meaning all debts whether secured or unsecured were actionable claims whereas a debt secured by mortgage of immovable property is, strictly speaking, an 'interest in land'. Similarly, under this meaning any claim of money whether the amount was fixed amount or uncertain, was an actionable claim. Because of such confusions, there used to be conflicting decisions and the law was neither clear nor uniform. Accordingly, a dear and definite meaning of the term actionable claim was included in Section 3 of the Transfer of Property Act by the Amending Act II of 1900. The definition of actionable claim given in Section 3 now limits the scope of this term. Some of the claims recognized as actionable claims are: a) Claim for arrears of rent.2
1

Under English law movable properties are classified as (1) 'chose in possession or those properties

which are capable of being pose ad i.e. tangible and (2)'chose in action' or, those properties which are in the nature of beneficial interest in movables (i.e. intangibles); these properties may be claimed only by an action in a court of law.
2

Daya Debi v. Chapla Devi, AIR 1960 Cal. 378.

Transfer of Property Act b) Claim for money due under insurance policy.3 c) Claim for return of earnest money.4 d) Right to get back the purchase money when the sale is set aside.5 e) Right of a partner to sue for an account of the dissolved partnership firm.6 f) Muslim woman's claim for her unpaid dower 7 g) Right to claim benefit under a contract for the purchase of goods.8 h) Right to get the proceeds of a business.9

Notice
Meaning of notice Notice means knowledge or information of a fact. Where a person has knowledge of any fact or it could be proved that under the circumstances he must have knowledge of that fact, he is said to have notice of that fact. If it is established before the Court of law that a person has notice of some fact or transaction, the knowledge of that fact is binding on him. He cannot deny the knowledge of that fact if it goes against him.10

Importance of notice: The doctrine of notice is an equitable doctrine. It protects the interests of a transferee for value (with consideration) without notice. There might be transfers in which there is, some legal defect and the transfer is void. Under a void transfer of property the transferee cannot get any interest. But, if it could be proved that transferee was a transferee for value (i.e., he has paid money) and he had no notice of the legal defect, the equity shall protect his interest under the doctrine of notice. For example, if out of a property a person has right to be maintained and that property is transferred, the transferee would get the property with this liability. But, if it could

3 4 5 6 7 8 9

Varjivan Das v. Magan Lal, AIR 1937 Bom. 382. Lalchand v. Hussainio (1927) 97 LC 257. Chinnappareddi v. Venkataramanappa, AIR 1942 Mad. 209. Bharat Prasad v. Paras Singh, AIR 1967 All. 15. Amir Hasan Khan v. Muhammad N. Hussain, AIR 1932 All. 345. Zaffar M. Ali v. Budge-Budge Jute Mills, (1907) 34 Cal. 289. Alkash Ali v. Nath Bank, AIR 1951 Assam 56. Sinha, R.K, THE TRANSFER OF PROPERTY ACT, (12th ed., Cectral Law Agency)

10

Transfer of Property Act be proved that transfer was for value and the transferee had no notice (knowledge) of this liability then, under Section 39 of the Act, the transferee would not be bound by the liability to maintain that person out of the property purchased by him. Other instances where under the Transfer of Property Act, interests of transferees for value without notice have been protected under the doctrine of notice are given in Sections 40, 41, 53, 53-A.11 Notice may either be (i) actual i.e. e. express or (ii) constructive.

Actual or Express Notice Actual notice means direct or express knowledge or information about something. Actual notice is a matter of fact. That is to say, whether a person has actual notice of a fact or not can itself be proved or disproved on the basis of certain other facts. Express notice is binding on a person only under certain conditions. Following requisites are necessary for an express notice. (i) The knowledge or information must be definite. It must not be heresay or rumors. If a person comes to know about certain facts by way of rumors or through casual conversation between some persons, this knowledge is not legal because no person is bound to take notice of rumors. The knowledge of the fact must be of such a nature which a normal man would be expected to take seriously' so that he may do or may not do (abstain) something in future. Unless the mind of the person has in some way been brought to an intelligent appreciation of the nature of the thing, there is no notice.12 Every notice means-knowledge of a fact but every knowledge is not treated as notice. (ii) Only the knowledge of the parties interested in the transaction is actual notice regarding that transaction. Knowledge or information of any other person who is stranger to the transaction is no notice. (iii) The Knowledge or information must be about or related to the transaction in question. Knowledge of something which is not relevant for a transaction cannot be taken to be actual notice for that transaction.

11 12

Sinha, R.K, THE TRANSFER OF PROPERTY ACT, (12th ed., Cectral Law Agency) Lloyd v. Banks, (1868) L.R.3 Ch. 488

Transfer of Property Act Constructive Notice Doctrine of constructive notice is based on equity. Where a person actually does not know anything about a fact but the court treats that under the circumstances he must be deemed to have knowledge of that fact, the notice is constructive. There are certain circumstances in which the court presumes that under those circumstances a person should be taken to have knowledge of that fact. The legal presumption of constructive notice is made by the Court under the following circumstances:

(i)

Willful abstention from an inquiry or search:

Willful abstention from an inquiry or search means deliberately avoiding taking notice of a fact, which a reasonable man would have taken in the normal course of life. If a person refuses to accept a registered envelope addressed to him, it is his willful abstention from taking notice of the contents of that envelop.13 Wilful abstention in this section has been construed to mean want of bona fides as distinguished from mere omission to make enquiries.14 Therefore, a person who refuses to take a registered letter shall be imputed with constructive notice of its contents and he cannot take the plea that he does not know its contents. Actual notice of a deed (written document) is constructive notice of the contents and all other deeds to which it refers as affecting the same property.15 If a person is purchasing certain immovable property and the seller has shown him the title deeds which mention that the property was partitioned property with certain conditions, the purchaser shall be imputed with notice of the fact of partition and its conditions. He cannot be allowed to plead that he was ignorant of the conditions. Constructive notice is inferred only where a person has means of knowing a fact but has omitted to know it. Where a person has no means or opportunities to get information about a thing, notice cannot be imputed on him about that thing.

(ii)

Gross Negligence:

13 14 15

Sinha, R.K, THE TRANSFER OF PROPERTY ACT, (12th ed., Cectral Law Agency) Kausalai Ammal v. S.V.K.R Amirthavala Vandammal, AIR 1973 Mad. 255 Mulla, Transfer of Property Act. Ed. VI, p. 30

Transfer of Property Act The phrase `gross negligence' was invented by the courts of equity in order to extend their jurisdiction. Equity cannot interfere with the legal title except in cases of trusts, fraud or accident. Negligence is not fraud, for negligence implies indolence and indifference, while fraud is active dishonesty But in extreme cases, courts of equity got over the difficulty by assuming that the negligent person had willfully shut his eyes to circumstances which called for equity, On this assumption, gross negligence was evidence of a fraudulent design which gave the Court of Equity jurisdiction to interfere. 16 Gross negligence is blameworthy under the law and is never excused. It means carelessness of so aggravated nature as to indicate an attitude of mental indifference to obvious risks. Formerly, gross negligence was regarded as evidence of fraud.17 But, since fraud necessarily implies that there is no carelessness but a designed purpose or bad intention, therefore, now a gross-negligence is not regarded as evidence of fraud. 18 It is carelessness of grave nature but without any mala fide or bad motive. Whether constructive notice may be imputed to a person on the ground of his grossnegligence or not, depends upon the facts of each case. Conduct of a person in a given circumstance maybe his gross-negligence while the same conduct in another circumstance may not be gross-negligence. In other words, duty to take notice of a fact may vary from case to case.

(iii) Registration as Notice: Explanation I to Section 3 provides that registration of a document is notice of all the facts stated in that document. Where a document has been registered, it is presumed that all the persons concerned have constructive notice of the material facts affecting the property which are apparent in the deed or which can be reasonably inferred from its contents. 19 Any person interested in the transaction, which is registered under the provisions of the Indian Registration Act, 1908, cannot plead that he has no notice of the transfer made under that deed. It may be noted that Explanation I was added to Section 3 by the Amending Act of 1929. Before, 1929
16 17 18 19

Mulla, Transfer of Property Act. Ed. IX, Munindrachandra v. Trylukonath, 2 CWN 750 Lloyds Bank ltd. v. PE Guzder & Co., AIR 1930 Cal. 22. Rajaram v. Krishna Sami, (1893) 16 Mad. 301.

10

Transfer of Property Act the law whether registration amounted to constructive notice or not was not settled. According to some High Courts registration was constructive notice but according to others, it did not amount to notice. Because of this reason, Explanation I was added to make it clear that registration of those documents in which registration is compulsory under the Registration Act, amounts to notice as a general rule and in all the cases. Where registration of a document is compulsory, there is a duty to search and inquire into the facts of the document. In order that registration may be treated as constructive notice of its contents, following conditions are necessary (1) Registration is notice only of those documents which are compulsorily registerable. Registration of documents in which registration is optional is not constructive notice. Thus, testamentary documents (wills) do not come within the purview of notice as contemplated by Section 3, Expl. 1 because they are not required to be compulsorily registered.20 (2) Registration amounts to notice only when all the formalities prescribed under the Registration Act are duly completed. Registration is notice only for a subsequent transferee. It does not amount to constructive notice for transferees (or persons interested in the transaction) prior to the registration of that transaction.

(iv)

Actual Possession as Notice of Title:

Actual possession of an immovable property is regarded as constructive notice of such title which the person in possession may have. Explanation II to Section 3 provides that any person acquiring any immovable property shall be deemed to have notice of the title, if any, of any person who is for the time being in actual possession thereof. Explanation II was added to Section 3 by the Amending Act, 1929. Before 1929, the law in India was not settled. According to the Allahabad, Bombay and Madras High Courts, possession of an immovable property amounted to constructive notice of such title as the person in actual possession may have. But, the Calcutta High Court took the view that possession of a property was not conclusive (final) proof but only cogent

20.

24 Panigana's Lawyers's Assn. v. State of West Sengal, AIR 1986 Cal. 205.

11

Transfer of Property Act (convincing) evidence of notice.21 However, the controversy has now been resolved by Explanation II, which incorporates the view taken by majority of the High Courts. Thus, the present law is that actual possession is constructive notice of the title or that much interest of the possessor, which affects the transferee. Therefore, any person who wants to deal with any immovable property must ascertain whether the possessor has the title or interest in the property or not. If a person does not make such enquiries then he cannot be allowed to say that he had no knowledge that the title was not with the person who is in possession of the property. It may be noted that possession operates as notice of the possessor's title or interest in the property would mean that if a person is in possession of a property, nobody could say that he has no knowledge of the 'fact of possession' by the possessor. Title here does not mean ownership. It simply means 'right to possess. Actual or physical possession of a property is a fact, which cannot be denied by a person who acquires that property. Instances of possession as notice occur mostly in cases of tenants who are in possession of the property under certain 'right to possess'. Normally, the principle of constructive notice on the ground of possession is not applicable in respect of the rights of third parties. But in certain cases where the state of the property is such that the rights of third party are necessarily affected, the rule of constructive notice is made applicable.

(v)

Notice to Agent is Notice to Principal:

Notice or knowledge of a fact to any agent amounts to constructive notice to his principal. The principal cannot deny that the notice of the fact was to agent and not to him. The rule that a principal was bound constructively with notice of certain facts to his agent was added in Section 3 by Explanation III under the Amending Act, 1929. Notice to an agent is also called an imputed notice. It is called imputed notice because if a person authorizes some one to act as his agent for doing certain things, he is supposed to have control over the activities of that agent with respect to that thing. Following conditions are necessary for the applicability of the rule that notice to agent is imputed notice to principal: 1. Notice must have been acquired by a person as an agent; not in any other capacity. Unless it could be shown that there exists relationship of agency
21

Sinha, R.K, THE TRANSFER OF PROPERTY ACT, (12 th ed., Cectral Law Agency)

12

Transfer of Property Act between two persons notice of one cannot be treated as imputed notice to another (principal). 2. Notice to an, agent is imputed notice to principal only with regard to the particular business or transaction for which the agent has been appointed. 3. Notice must be acquired or obtained by an agent during, the course of agency. Knowledge acquired by a person before his appointment as agent or after the termination of agency is no knowledge and is not imputed notice for the principal. 4. Notice acquired by an agent must be relevant or material to the transaction. Any knowledge obtained or acquired by an agent during the course of agency which is not material to the particular business for which agency exists, shall not be regarded as notice to the principal. 5. Notice must not have been fraudulently concealed by the agent. Fraudulently concealment would mean that the agent has knowledge of certain facts related to the business but he has not communicated it to his principal with dishonest intention. 6. Partners of a firm are agents of one another. Accordingly, notice of a fact to a partner with regard to the business of the firm is imputed notice to the firm.

13