Feeding the Grant of Estoppel under the Transfer of Property Act, 1882

Feeding the Grant of Estoppel under the Transfer of Property Act, 1882

Introduction

Estoppel is a legal principle both under common law and equity in which a Court prevents or stops a person from making assertions or going back on his or her words of fulfilling the promise he made to someone else. If he doesn’t fulfil his promise, the Court compels him to do so. This principle was evolved in order to save people from the false promises and wrongful deeds of another person. Under the Transfer of Property Act, 1882, this principle has been laid under Section 43 as “feeding the grant by estoppel”. This principle has been evolved under the Act by the English Common Law and through the Principle of Equity which says that a person cannot deny his previous statements and he has to fulfil them.

For understanding this concept, we have to see what the provisions of Sec 43 of the Transfer of Property Act, 1882 says.

Section 43– Transfer by unauthorised person who subsequently acquires interest in property transferred.

Where a person erroneously or fraudulently represents that he is authorised to transfer the certain immovable property and professes to transfer such property for consideration, such transfer shall, at the option of the transferee, operate on any interest which the transferor may acquire in such property at any time during which the contract of transfer subsists.

Nothing in this section shall impair the right of transferees in good faith for consideration without notice of the existence of the said option.
Illustration- A, a Hindu, who has been separated from his father B, sells his three fields X, Y and Z, to C. He represented that all the three fields are under his authority but in real, Z was not under his authority because he has not retained it during the partition from B. B dies and so A gets the property Z under his control as he was B’s heir. Z has not rescinded the contract so he may acquire also property Z from A and A cannot deny giving him the same.

Transfer from an unauthorised person- Feeding the grant of Estoppel

A person who holds no interest and authority over a property cannot transfer it. If he does so, such transfer will be considered made by an unauthorised person. Now when he acquires that property, he cannot deny transferring it the person whom he erroneously or fraudulently told that he would transfer that property to him, as the former will be stopped (prevented) from getting back from his previously made statement and now as he had got that property, he has to transfer it to the person whom he promised to transfer that property. Section 43 is based on two principles-

1. English Common Law of Estoppel.
2. Principle of Equity which states that when a person promises to fulfil a thing more than his capacity, he must do it when he gets the ability.

No person has a right to transfer a property which is beyond his control and when he has no right he should not agree to transfer any interest out of it. When a transfer of interest in land is made, it is known as creating a grant. When that person has no authority of making such transfer, he should not have created any grant in respect of that property. If he acquires the authority of that property, how he can go back from his previously created grant? Neither the equity nor the common law permits him to do so, and this he will be prevented from denying what he granted earlier. Therefore, transfer of property cannot be prevented because of his own previous grant which was created by him due to misrepresentation of his right. His earlier grant will support the estoppel. Feeding the grant by estoppel is an English common law doctrine.

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Estoppel is a rule of evidence which prevents a person from denying a statement made by him when the statement is going against him. But in the Transfer of Property Act, it shows the relationship between the transferor (before and after he acquires right to transfer) and the transferee for value without any notice.

The law given in section 43 is also based on the principle of equity. Equity states that if a person had made a promise in the past which is more than his capability, he has to fulfil it in the future when he becomes capable of fulfilling it. This is the best example for maxim- equity regards that as done which ought to be done. When the transferor promises to transfer a property which is not in his authority, he commits an unjust act against the transferee. The moment he acquires authority, equity demands from him to transfer the promised property to the transferee. But, a further conveyance is necessary for complete transfer.

What are the Necessary Conditions for the Application of Section 43?

1. Transferor should not have an authority– First condition for the application of Section 43 is that a transferor should be an unauthorised person, which means he doesn’t have any capacity to make a transfer but still he promises the transferee that he will perform the transfer of a particular immovable property. If an unauthorised person promises to transfer the property, the contract is for the creation of a future interest. When he obtains that authority or interest, he becomes liable for fulfilling his promise of transferring the said property. The section compels him to transfer the property in a legal manner which he had promised to transfer without having authority.

2. Fraudulent or Erroneous Representation-

The transferor must fraudulently represent to the transferee that he holds an authority to transfer the immovable property. If there is no fraud representation, this section cannot be applied. Misrepresentation can be both in oral or in written but mere silence or inactivity by the transferor can also be amount to misrepresentation. A false statement can be made by both fraudulent and innocent manner or by mistake. If a transferor misrepresents his age or state of mind, Section 43 cannot be applied.

3. Transfer is for a Consideration- This Section is not applicable on gratuitous transfers. So if a transfer by an unauthorised person is made to a transferee as a gift, the transferee will not get the benefit of this section. Where there is value for transfer, there is the applicability of Section 43.

4. The Transferor must acquire the Authority subsequently- The transferor must obtain the authority of a property in the future or subsequently which he had promised to transfer when he had no authority or interest. The authority acquired may be through transfer inter vivo or by the law. Authority can be transferred through exchange or gift deed or through will or inheritance. But the section will not be applicable to the involuntary transfers like auctions or sale by the order of the Court. An auction purchaser cannot take the benefit of this Section.

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5. Discretion of the Transferee- The transfer will not pass au tomatically to the transferee. The transfer depends upon the discretion of the transferee that if all the conditions are fulfilled then he may compel the transferor to transfer the title in his favour. It totally depends upon him whether to enforce his claim or not. This claim cannot be enforced if the unauthorised transferor doesn’t get the title by way of exchange, gift, will or inheritance or by any other means during his life time.

If the transferee repudiates his claim then he cannot make it enforceable at the time when the transferor obtains the authority to transfer the property.

Rights of the Second Transferee

The rights of a second transferee have been given as a proviso in the second paragraph of the section. It is for the interest of the bona fide second transferee for value without notice of the ‘option’ of first transferee. When the second transferee (1) has a good faith, (2) paid consideration, (3) has no notice of the option, (4) takes the transfer before the option can be exercised, then his claim cannot be affected by the claim of the first transferee under section 43. If such circumstances arise, the property will be transferred to the second transferee instead of the first transferee.

Illustration- A is a Hindu who has been separated from his father and retains the property x through partition and B his brother gets property Y. A fraudulently represents to C that he has both the properties and sold to him. After sometime, B dies and A becomes the real owner of the property Y also. But before C could exercise his option to compel A to transfer the properties, A secretly sold the property Y to D who purchased it being in good faith and have no idea about the notice of option of C. D has a right to get the Property against the claim of Y. It is important to note that this right can also be used by the subsequent transferee against the claim of second transferee if the conditions mentioned above are satisfied.

Invalid Transfers

The transfer under Section 43 will be invalid if it is forbidden by law, e.g. if the transfer is against public policy or performed by a minor. This section is only to cure the want of title of the transferor at the time of making transfer. If the transfer is void ab initio, the section cannot be applied even if the transferor acquires the property subsequently. Thus if the transferor is a minor at the time when he fraudulently promises to transfer the property, the transferee cannot claim this section even when the minor acquires the property and has also attained the age of majority. Also if the property is non-transferable under section 6, it cannot be validating by applying section 43.

Section 43 does not require that the transferee should take care and act in good faith to check whether his transferor had the authority to transfer. Even if it were so, there is no evident that the transferee knew about the transferor held no interest in the property.

Clash between Section 43 and Section 6 (a)

Under Section 6 (a) spes- successionis or chance of an heir to apparently get a property in future is a non-transferable interest and such transfer is void ab initio. On the other hand, Section 43 makes a transfer valid made without a title when such transferee acquires the title subsequently. So when the transferor is an heir apparently and transfers the property spes successionis, transferee cannot get the benefit of Section43 to validate the transfer when the apparent heir gets the property subsequently. But there have been cases where the apparent heir transferred the property by misrepresentation about having a title and the transferee got the benefit of section 43 when such heir apparent acquired the title after the death of the propositus. Thus it can be said that an apparent clash between both the sections can arise.

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Case Law- Jumma Masjid v. Kodimaniandra (AIR 1962 SC 847)

The Supreme Court in this case held that there is no conflict between both the sections and they operate simultaneously. The heir-apparent sold his would be share in a joint property to a Masjid for Rs 300. When he acquired the title subsequently, the Masjid claimed under section 43 in order to compel the transferor to transfer the said share in the property to it. The transferor took a defence of section 6(a) and said that due to spes successionis the transfer was void ab initio and section 43 could not validate such transfer. The court held that the Masjid had a right to get the title under section 43 and the transferor was bound to do so. The Court observed that there is no room for a conflict between both the sections The Court further observed that Section 6(a) is a rule of substantive law while section 43 is based on estoppel which is a part of evidence act (procedural law) and so both the provisions could be given effect in their respective spheres.

The Court concluded that if the transferee didn’t knew about the error or fraud representation of the transferor then section 43 can be applied but if the transferee knew about the fraud then section 6(a) will be applied.

Difference between Section 41 and Section 43

Both the sections are based on the rule of estoppel and both are made by the persons who misrepresent themselves as real transferors though they aren’t. But both are different in the following ways-

(1) The transfer of property is already done in Section 41 while in Section 43; the transfer is yet to be completed.
(2) Under Section 41 the transferee is required to have a good faith and has also inquired about the authority of the transferor but in section 43 though the good faith is necessary but taking reasonable care is not a necessity and a transferee may be misled by the transferor.
(3) The Estoppel works against the real owner under Section 41 while the estoppel works against the subsequent transferor under section 43.

Conclusion

Though the doctrine given under section 43 of the Transfer of Property Act, 1882 is based on English common law yet it is quite different in its application. The English common law is based on equitable acquisition of the estate while the Indian doctrine is based on the right obligation and not equitable acquisition of the estate. Under English law, the transfer gets automatically transferred to the transferee when all the conditions are satisfied while under Indian law, the transfer doesn’t takes place automatically and is based upon the discretion of the transferee. Thus we can conclude that though the act was drafted and passed during British Raj and the said Section has been inspired from English law, yet section 43 was made according to the Indian circumstances and has not fully adopted the English common law.

Author: Samiksha Mehta,
Invertis University/ Student ( LL.B 3rd year

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