Experts CornerShardul Amarchand Mangaldas


Introduction


The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) was enacted with the objective to enable banks and financial institutions to realise long-term assets, to improve recovery of debts and reduce non-performing assets by taking possession and selling such assets, in the manner and as per the procedure as provided therein and read with the Security Interest (Enforcement) Rules, 2002 (Rules).

 

The SARFAESI read with the Rules, meticulously sets out the step-by-step procedure which is to be adhered to by the banks/financial institutions i.e. the secured creditors, for taking possession and ultimately effecting the transfer of a non-performing asset. Non-adherence to any single procedural step or even non-compliance of a time period stipulated therein by the secured creditor, has lead to a plethora of litigation.

 

A third-party purchaser, being interested in acquiring the secured asset must primarily ensure that the secured creditor has taken all the necessary steps and checked all the boxes as spelt out under the SARFAESI read with the Rules, prior to acquisition of the secured asset.

 


Sale on “As is where is basis”


The sale of secured assets under SARFAESI in most cases takes place on “as is where is basis” which means that the purchaser would be acquiring the asset with all its existing rights, obligations and liabilities. Auction notices which are issued by the secured creditors usually state that “the property is free from all encumbrances known to the secured creditor” and thereby shifting the onus onto the purchaser to make its own independent enquiry. However, the Bombay High Court, Nagpur Bench, in its recent judgment dated 18-2-2021 in Medineutrina (P) Ltd. v. District Industries Centre[1] held that, when a property is sold on “as is where is basis”, though it would be upon the purchaser to make reasonable enquiries about the encumbrances affecting the property, the mere mention of “as is where is basis” or any such phrase should not absolve the secured creditor of its obligation to make proper enquiries about other dues/encumbrances affecting the property, to obtain information about which the secured creditor has the means and which information should be disclosed in the auction notice so that the purchaser can make a conscious decision and not raise a plea of not having been informed. Insofar as encumbrances on account of statutory/government/municipal/ revenue dues are concerned, the responsibility of obtaining the details thereof is of the secured creditor. In spite of the aforesaid directions laid down in the judgment, the Court further held that an encumbrance affecting the secured asset, prior to the issuance of the auction notice, would be the liability of the purchaser in order to obtain a clear and marketable title to the property having purchased the same on “as is where is basis”.

 

Even though the aforesaid judgment directs secured creditors to make a disclosure of statutory encumbrances in the auction notice, it is still to be seen if the directions laid down therein will become a reality and will protect a third-party purchaser who is acquiring the secured asset on “as is where is basis”. It is prudent for the purchaser to make its own independent enquiry with respect to outstanding dues and encumbrances affecting the property, so as to factor in such cost as such additional cost will not form part of the consideration payable to the secured creditor for acquisition of the asset. As per Section 31-B of SARFAESI [as amended by the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016], any debt due to a secured creditor by sale of assets over which security interest is created, shall take priority over any debt due to the Central Government, State Government or local authority. Accordingly, any other dues/encumbrances affecting the property, will have to be cleared in addition to the consideration payable to the secured creditor so as to enable the purchaser to obtain a clear and marketable title to the secured asset.

 


Borrowers right to foreclose and redeem the mortgage


As per Section 60 of the Transfer of Property Act, 1882, the mortgagor/borrower has a right to redeem the mortgage on payment of the entire mortgage money to the secured creditor. It has been the contention of borrowers that the right of redemption only stands extinguished on the date of registration of the sale certificate in favour of the purchaser. This point on redemption has been analysed by the Supreme Court of India in its judgment dated 20-8-2019 in Shakeena v. Bank of India[2] wherein it was held that the borrower has a right of redemption only before the time the mortgage is foreclosed or the estate is sold. It was further held that issuance of a sale certificate as per Rule 9(7) of the Rules is a complete and absolute sale for the purpose of SARFAESI and the sale certificate need not be registered, as Section 17(2)(xii) of the Registration Act, 1908 provides that a sale certificate issued by a Civil or Revenue Officer in respect of property sold in a public auction does not require registration. Accordingly, the right to redemption stands obliterated from the date of issuance of the sale certificate as registration of the sale certificate is not mandatory.

 


Borrowers right to prevent transfer of secured assets


In addition to what is stated hereinabove and as per the amended Section 13(8) of the SARFAESI which has come into force with effect from 1-9-2016,  which amended section states that, where the amount of dues of the secured creditor together with all costs, charges and expenses incurred by the secured creditor are tendered by the borrower to the secured creditor prior to the date of publication of notice for public auction or inviting quotations or tender from public or private treaty for transfer of the secured asset, the secured asset shall not be transferred by the secured creditor. The Supreme Court of India in its judgment dated 10-2-2014 in Mathew Varghese v. M. Amritha Kumar[3] held that by virtue of the provisions of Section 13(8) of the SARFAESI, any sale or transfer of a secured asset cannot take place without duly informing the borrower of the time and date of such sale or transfer in order to enable the borrower to tender the dues of the secured creditor and any such sale or transfer effected without complying with the said statutory requirement would be a constitutional violation and nullify the ultimate sale.

 


Conclusion


In light of what is stated hereinabove, acquisition of a secured asset under SARFAESI requires the purchaser to do thorough due diligence to ensure there are no outstanding dues and encumbrances affecting the property and to ensure strict compliance of the procedure along with the time periods as stipulated in SARFAESI read with the Rules. The thorough due diligence will enable the purchaser to obtain a clear and marketable title to the secured asset which is free from all encumbrances and by carrying out such due diligence, the purchaser will ultimately be saved from knocking on the doors of the court to enforce its right to the secured asset.

 


† Partner, Shardul Amarchand Mangaldas

†† Associate, Shardul Amarchand Mangaldas.

[1] 2021 SCC OnLine Bom 222.

[2] 2019 SCC OnLine SC 1059.

[3] (2014) 5 SCC 610.

Case BriefsHigh Courts

Kerala High Court: N. Anil Kumar, J., decided a matter wherein the son-in-law claimed his right on father-in-law’s property while pleading that he was adopted by his wife’s family after marriage and hence had a right on the property.

Plaintiff aged 69 years was the respondent in the appeal claiming for permanent injunction interdicting the defendant from trespassing into the plaint schedule property or interfering with the plaintiff’s peaceful possession and enjoyment of the plaint schedule property and the house therein or committing any waste therein.

The said suit property belonged to the plaintiff by virtue of a gift deed.

Plaintiff also submitted that he had constructed a concrete house spending his own funds and was also residing with his family on the said property.

The defendant was the son-in-law of the plaintiff and he had no manner of right over the property.

Reason for filing the suit was that the defendant was disturbing the plaintiff’s peaceful possession and enjoyment of the suit property.

What was the son-in law’s contention?

Son-in-law contended that he had married the only daughter of the plaintiff and has been practically adopted as a member of the family subsequent to the marriage. Hence, he maintained that he has a right to reside in the house, as of right. He also added that he had constructed a building in the property expending his own money and has no other place of abode.

Trial Court’s decision

Trial Court held that the plaintiff is the owner in possession of the plaint schedule property and the defendant, who is the son-in-law of the plaintiff, has no manner of right in interfering with the possession of the plaint schedule building.

First Appellate Court upheld the trial court’s decision.

Question for Consideration:

Does a son-in-law have any legal right to his father-in-law’s property and building?

High Court expressed that it would be difficult to hold that the defendant was a member of the family.

It was noted by the Court that the defendant’s behaviour became intolerable, due to which the plaintiff filed a suit seeking a permanent prohibitory injunction restraining the defendant from entering into the plaint schedule property and building.

High Court stated that it is a settled principle of law that even a trespasser, who is in established possession of the property, could obtain an injunction.

In the present matter, the matter would have been different if the plaintiff was the true owner of the property.

Defendant was the son-law in the present case, it is shameful for him to plead that he had been adopted as a member of the family, subsequent to the marriage with the plaintiff’s daughter.

Nair Service Society Ltd. v. K.C. Alexander, AIR 1968 SC 1165, in this decision the 3-Judge Bench of the Supreme Court reiterated the principle that possession is good against all but the true owner.

Therefore,

“A person in possession of the land in the assumed character of owner and exercising peaceably the ordinary rights of ownership has a perfectly good title against all the world but the rightful owner.”

The rightful owner filed a suit for injunction restraining him from entering into the property. The residence of the defendant, if any, in the plaint schedule building is only permissive in nature. The defendant cannot contend that he is in legal possession of the suit property or the building.

Further, the Court opined that it was not necessary to decide the validity of the Gift Deed executed by the Church in favour of the plaintiff.

Contention that the plaintiff was a man of bad character and not on good terms with family members was rejected in view of Section 52 of the Indian Evidence Act which provides that in civil cases, a fact pertaining to the character of an individual is not relevant.

The said section lays down the principle that the character of a party as a piece of evidence cannot be used to manifest that conduct attributed to him is not probable or improbable.

 To be a question of law involved in the case, there must be first, a foundation for it laid in the pleadings, and the question should emerge from the sustainable findings of fact, arrived at by Courts of facts, and it must be necessary to decide that question of law for a just and proper decision of the case.

Bench dismissed the appeal on finding no error in the decision of lower courts. [Davis Raphel v. Hendry Thomas, 2021 SCC OnLine Ker 3491, decided on 6-09-2021]


Advocates before the Court:

For Appellant:

Blaze K. Jose, Advocate

Deepa Narayanan, Advocate

For Respondent:

V.A. Satheesh, Advocate

V.T. Madhavanunni

Case BriefsHigh Courts

Punjab and Haryana High Court: Expressing that when the children, who the parents have reared with untold sorrows and miseries, throw them at the mercy of their destiny and use their muscle power to torture and harass them, the parents’ world get totally shattered which marks as the beginning for the unfortunate tale of their moving from one Forum to another for redressal, Harnaresh Singh Gill, J., while quoting from the holy script of  Sri Guru Granth Sahib, Sri Guru Ram Dass has written ‘KAAHAY POOT JHAGRAT HA-O SANG BAAP/ JIN KAY JANAY BADEERAY TUM HA-O TIN SIO JHAGRAT PAPP//” (O son, why do you argue with your father? It is a sin to argue with the one who fathered you and raised you) stated that “we have to treat our parents as God.


Life is full with extraordinary challenges and unrivalled opportunities, but such chances must not be used against those who parented you.

Classic Example

Instant matter was a classic example, wherein the petitioners sought equities entirely forgetting that it is because of their conduct that their old and aged parents had to seek their eviction so as to buy back their peace and freedom.

Grievance

Issuance of writ of mandamus was sought for directing respondents 1 to 3 to protect the life and liberty of the petitioners at the hands of respondents 4 and 5 and mandate them not to interfere in the property of the petitioners.

Application filed by respondent 4 under the Maintenance and Welfare of Parents and Senior Citizens Act, 2007 wherein the petitioners have been ordered to be ejected from the house is also sought to be dismissed.

Factual Background

Respondent 4 had filed an application under the provisions of the 2007 Act against the petitioners i.e. his son and daughter-in-law. Petitioners were not treating respondent 4 and 5 properly and depriving them even of the basic necessities and just wanted to grab respondents’ property and owing to their behaviour, respondents 4 and 5 had disowned petitioner 1 from their movable and immovable property.

Respondents had even requested the petitioners to vacate the house in question, but they did not. Sub Divisional Magistrate in his report recommended the ejectment of the petitioners and sent the same to the District Magistrate who ordered the ejectment of the petitioners from the house.

Petitioners’ Contention

Counsel for the petitioner contended that the house in question was a joint Hindu Family Property and petitioner 1 had also contributed to the construction of ground floor of the house, he also started a business in which respondent 4 was shown the proprietor.

Another submission was that the respondents had ill-treated petitioner 2 and accordingly FIR under Sections 498-A, 406, 323, 506 and 34 of Penal Code, 1860 were registered against the respondents.

Adding to its submissions, the petitioners counsel also contended that the District Magistrate had no power under Section 23 of the 2007 Act to direct a son to vacate the house of his parents because none of the circumstances contemplated in the statutory provisions, is attracted in a father-son-relationship.

Analysis, Law and Decision

Respondent 4’s case was that the house in question was his self-acquired property, and rather it was not a Joint Hindu Family Property.

SDM in its report had stated that as per the sale deed, respondent 4 was the owner of the house in question.

High Court stated that even if for the sake of arguments, Court assumes that respondent 4 had gifted the house to the petitioners, even then the transfer of property was to be held void in certain circumstances.

Section 23 of the 2007 Act dealt with the validity of the transfer of property in certain circumstances.

“…if a senior citizen who, after the commencement of the 2007 Act, has transferred by way of gift or otherwise, his property, with the condition that the transferee would provide basic amenities and basic physical needs to the transferor, who thereafter refuses or fails to provide such amenities and physical needs, then the transfer of the property made by the senior citizen shall be deemed to have been made by fraud or coercion or under undue influence and shall at the option of the transferor, be declared void by the Tribunal.”

Rule 24 of the Rules provides in the action plan as to how the property of senior citizen, which includes a residential building, can be vacated from his son, daughter or legal heir(s) while in an unauthorized occupation and how the said order is to be enforced.

Court added that though the present matter is not the one wherein any transfer or gift has been executed by respondent 4 and 5. Hence, the petitioners cannot maintain the claim on the alleged ground that petitioner 1 had contributed towards the renovation of the house.

Adding more to the analysis, Bench expressed that even in the cases, where a gift deed was executed by the parents in favour of the children, it was held that irrespective of any condition regarding providing to the transferor the basic amenities, the transferee would be bound to maintain the transferor.

High Court referred to this Court’s decision in Raksha Devi v. Deputy Commr., decided on 3-5-2018.

In view of the above, Court dismissed the petition on not finding any merit. [Anil Kumar Dhiman v. State of Haryana, CRWP 1357 of 2019, decided on 21-9-2021]


Advocates before the Court:

Mr Akhil Bhasin, Advocate, for the petitioners.

Mr Pardeep Prakash Chahar, DAG, Haryana.

Mr Anuj Balian, Advocate, for respondents 4 and 5.


Additional Reading:


“Daughters are daughters forever and sons are sons till they are married”: Bom HC orders son to vacate flat of 90 yrs old parents

Under Parents and Senior Citizens Act, is it necessary to find out whether property belongs to parent exclusively or is a shared household in which daughter-in-law has rights? Bom HC deciphers

Children living in parents’ house are at best licensees: Cal HC says senior citizens’ exclusive residentiary rights to be viewed from prism of Art. 21

P&H HC | Maintaining elderly parents is not only a value based principle but a bounden duty under Maintenance and Welfare of Parents Act

Madras HC | Sons turning turtle after giving undertaking to vacate their father’s premises is Contempt of Court: Read synopsis of Court’s opinion

Del HC | Which is the proper forum for filing appeals from the eviction order passed by DM under Delhi Maintenance and Welfare of Parents and Senior Citizens Act? Court answers

All HC | Is the District Magistrate under obligation to provide protection to senior citizens being harassed by their children? HC explains

Bom HC | “If children cannot take care of their parents and allow them to live in peace, they atleast ought not to make their life a living hell”; Court sternly warns daughter to not harass mother physically & mentally

Chh HC | Step-son held duty bound to maintain his step-mother under Maintenance and Welfare of Parents and Senior Citizens Act

Maintenance – Children and Parents

Parents can evict children under the provisions of MWPSC Act, 2007 upon being harassed: Bombay HC

Op EdsOP. ED.

Introduction

Transfer of property can be defined with reference to Section 5[1] of the Transfer of Property Act, 1882, as the act by which a living person (living person includes a person, a group or persons, a company or association) conveys (transfers title of property) property in the present or in the future, to one or more living person or to himself. Transfer can also occur via inter vivos which means a property is entrusted to another person as a gift under a fiduciary relationship.

Section 7[2] of the Act puts forth persons competent to transfer which is the person should be a major and should not be of unsound mind. The above sections indicate that transfer between two living persons is possible and is valid. The complexity arises when the transfer of property to a child in the mother’s womb comes into the picture. Many questions arise as to whether an unborn person can be treated as a living for the purpose of transfer? Or what happens in situations if the child is not born? Or what would be the circumstance if a property is transferred for an unborn person but is misused by the person the property is entrusted in?

Whether transfer of property can be made to an unborn person

According to the theories of personality under jurisprudence, the purpose theory[3] by Ernst Immanuel Bekker and Alois von Brinz states that a non-living entity such as a corporate is to be attributed with a personality for the purpose of being capable of having rights and duties. Similarly, the fiction theory[4] by Von Savigny, Salmond, Coke, Blackstone, and Holland put forth that a corporation is different from its members and that any change in members does not affect the existence of a corporation. They were of the opinion that only human beings are capable of thinking, hence it is by way of fiction that “will” is attributed to non-human beings through human beings who are capable of thinking and assigning them with a legal personality. The purpose theory and the fiction theory form the basis for the drafters of the Transfer of Property Act to consider the transfer of property to an unborn person. On application of the purpose theory, the transfer to an unborn person who is either conceived or not conceived can be carried out as the transfer is made for a particular purpose of being entrusted with certain rights and duties. The fiction theory can also be applied similarly as an unborn is by means of fiction considered to be living for a specific purpose. Hence, for the purpose of the Transfer of Property Act, 1882, the theories of personality under jurisprudence play an essential role in transactions to an unborn or a corporate.

Analysis of transfer to an unborn person

After a thorough analysis of the Transfer of Property Act, 1882, there are two very critical sections that relate to the transfer of property to an unborn person which are Section 13[5] and Section 14[6]. Section 13 of the Act is as follows:

  1. Transfer for benefit of unborn person. — Where, on a transfer of property, an interest therein is created for the benefit of a person not in existence at the date of the transfer, subject to a prior interest created by the same transfer, the interest created for the benefit of such person shall not take effect, unless it extends to the whole of the remaining interest of the transferor in the property.[7]

On analysis, it is clear that the section provides for the transfer of property to an unborn person and that such transfer is made for the benefit of a person who is not in existence at the date of the transfer shall take place provided it extends to the whole of the remaining interest of the transferor in the property. It can be understood from the section that transfer to an unborn is to occur by first transferring the life interest of the property to a person living on the date of such transfer, followed by which absolute interest is to be conferred to the unborn. The person in whose favour life interest is created will hold possession of property till his death. During his lifetime if the person (who on the date of creation of life interest is unborn) is born, the title of the property will immediately be vested in him but he will gain possession of the property only on the death of the person who contains life interest.[8] The same is illustrated below.

A, transfers the life interest of his property in the favour of B. On unborn (UB) being born, title, as well as absolute interest, is transferred to UB.

The difference between life interest and absolute interest is such that life interest includes the right to enjoy the property but does not provide the right to alienate the property whereas, absolute interest is the transfer of all the rights of the property except the right to possession till the death of the life interest holder. In the present situation on UB being born, absolute interest is transferred to UB but he will only gain possession on the death of B. Short explanations for the same are as follows:

Life interest: Transferred to a person living on the date of transfer. Confers right to enjoy the property till person’s death. Also, permits the legal heirs of the person to enjoy the property till the person’s death.

Absolute interest: Confers all rights on the ultimate beneficiary including the right of alienation.

In Rukhamanbai v. Shivram[9] it was held that a person who is entrusted with life interest of an agricultural land can lease out the land unless any contrary intention arises.

The conditions for transfer to unborn under Section 13 are as follows:

Taking into consideration the illustration A transfers the life interest of his property in the favour of B. On unborn (UB) being born, title, as well as absolute interest, is transferred to UB the conditions are—

  1. If UB is never born. The property will go back to B. If B dies the property will go back to A and if A is dead, the property will go to the legal heirs of A. It must be kept in mind that once a property is reverted back it cannot be transferred again in the same transaction. A new transaction is to take place.
  2. When UB is born after the death of B. On the death of the B the property will revert back to A. Hence, a new transaction is to take place.
  3. If UB dies before the death of B. The property will go to the legal heirs of UB on the death of B. If UB transfers the property to someone, the person will gain possession only on the death of B.

In F.M. Devaru Ganapathi Bhat v. Prabhakar Ganapathi Bhat [10] the transferor had gifted the property to the appellant with the condition that if any male children are born to her brother that they shall be joint holders of the property along with the appellant. It was held that there is no ban on the transfer of interest in favour of an unborn person the present situation will remain unaffected by Section 13. Section 20[11] of the Act permits an interest being created for the benefit of an unborn person who will acquire absolute interest upon his birth. The Court also held that there is no provision which states that absolute interest cannot be created in favour of an unborn person. Creation of such a right is permissible was held to be permissible.

“A perpetuity”, as defined by Lewis in his well-known book on “perpetuities” (p. 164), is “a future limitation, whether executory or by way of remainder, and of either real or personal property which is not to vest until after the expiration of, or will not necessarily vest within, the period fixed and prescribed by law for the creation of future estates and interests”. The rule as formulated falls within the branch of the law of property and its true object is to restrain the creation of future conditional interest in the property.[12]

Section 13 also provides for the transfer to an unborn person by the creation of a trust. The condition is such that the unborn must come into existence before the death of the life interest holder. Here, existence means that the child should be conceived and should be in the mother’s womb and does not mandate birth. In Trustees of Sahebzadi Oalia Kulsum Trust v. CED[13] it was held that the creation of a trust does not amount to the creation of life interest for the benefit of transfer to an unborn person.

Section 14 of the Act is as follows:

  1. Rule against perpetuity. — No transfer of property can operate to create an interest which is to take effect after the lifetime of one or more persons living at the date of such transfer, and the minority of some person who shall be in existence at the expiration of that period, and to whom, if he attains full age, the interest created is to belong.[14]

The above section is similar to Section 13, it contains the transfer of property to an unborn. The only difference in Section 14 is that the absolute interest (except the right of possession) which is normally conferred to the unborn on being born can be delayed up to the age of 18 years. Vested interest is an interest that can be created on the happening of an event such as the infant will gain absolute interest on turning 18 years of age. The same can be explained with the help of an illustration.

A, transfers the life interest of his property in the favour of B. The condition put out by A is that UB will gain vested interest only on attaining the age of 18 years. On unborn (UB) turning 18 years vested interest is transferred to UB. On the death of B, UB gains absolute interest.

Section 14 also contains that a property cannot be inalienable for an indefinite period such as transfer to different unborn generations hence the restriction of 18 years for the transfer of vested interest. The rule against perpetuity has been laid down to prevent the depreciation of a property. An illustration for the same is as follows.

A, transfers the life interest of his property in the favour of B with the condition that UB 1 should gain absolute interest on being born, followed by transfer to his children UB 2 and UB 3 on their respective births, followed by transfer to UB 4 child of UB 2 on his birth.

In the above illustration, it can be noted that transfer to unborn persons for three generations has been made which makes the property inalienable for an indefinite period, hence the rule against perpetuity strictly restricts such transfers as it also depreciates the value of the property.

It is critical to emphasise that life interest cannot be transferred to an unborn person. Also, that no direct transfer is to be made to an unborn. In R. Kempraj v. Barton Son and Co.[15] the question before the Court was whether the option given to the lessee to get initial ten years lease renewed after every ten years is hit by the rule of perpetuity. The Court held that the renewal clauses were part of a personal covenant creating no right in the land. Hence, the clause would not be hit by rule against perpetuity.

The ratio decidendi in K. Naina Mohamed v. A.M. Vasudevan Chettiar[16] held that “rule against perpetuity concerns rights of the property only and did not affect the making of contracts”.

Section 20 contains that an unborn is entitled to vested interest on his birth and under Section 21[17] the exception contains that a person being entitled to an interest upon attaining the age of 18 years is not a contingent interest.[18]

The transfer to an unborn person includes both the transfer to a child not in the mother’s womb who has not been conceived and who is non-existent and also includes the transfer to a child in a mother’s womb who has been conceived. Both the transfers come under transfer to an unborn person as the unborn person has not been born. Section 13 refers to a transfer of property and creation of an interest therein and brings out the distinction between the phrase “transfer of property” and “creation of interest in the property”[19]. The above analysis has clearly put forth the procedure of transfer to an unborn person.

Conclusion

The difference between life interest, vested interest, and absolute interest is as follows; life interest is transferred to a person who is living on the date of such transfer. He will enjoy possession of the property and will be entitled to the benefits from the property. The same can be enjoyed by his legal heirs till his death. Vested interest is transferred to an unborn on being born. It includes title to the property and the right to alienate property but does not include the right to possession. Under normal circumstances, the unborn will be immediately entitled to vested interest on birth. But Section 14 makes provision for delay of granting vested interest to unborn, up to the age of 18 years. This means the transferor can specifically emphasise that the unborn will get the property only after attaining a certain age such as 16 years. The rule mandates that vested interest can be delayed only up to 18 years of age to avoid the property being inalienable for unspecified periods of time as the life interest holder does not have the right to alienate the property. Absolute interest is transferred to an unborn, now an infant, on the death of the life interest holder. Absolute interest includes the right of alienation. But under Section 13 once the unborn is born and the absolute interest is transferred, the unborn will not be entitled to possession of the property. The same applies to Section 14 once the unborn is born and after the vested interest is transferred the unborn cannot have possession of property till the life interest holder dies and will also gain absolute interest only on the death of the life interest holder.  Hence, transfer to an unborn person is permissible by creating life interest in the favour of another living person. The life interest includes the right to enjoy the property and does not confer the right to alienate the property. On the unborn being born, absolute interest is conferred to the infant but does not confer possession of property. Possession of property is conferred to the infant only on the death of the person who had a life interest in the property. The conferring of absolute interest can be delayed up to 18 years of age of the unborn. Transfer of property to unborn persons of different generations violates the rule against perpetuity under Section 14 as it depreciates the value of the property leaving it inalienable for indefinite periods of time. The same does not prevent the transfer to unborn persons of the same generation such as to unborn siblings.


5th Year, BA LLB student at Symbiosis Law School, Hyderabad, authored on 10-7-2021.

[1] Transfer of Property Act, 1882.

[2] Transfer of Property Act, 1882.

[3] Mayank Shekhar, “Theories of Juristic Personality”, retrieved 10-7-2021, from legal bites, available at <https://www.legalbites.in/theories-juristic-personality/>.

[4] Mayank Shekhar, “Theories of Juristic Personality”, retrieved 10-7-2021, from legal bites, available at <https://www.legalbites.in/theories-juristic-personality/>.

[5] <http://www.scconline.com/DocumentLink/86Lq3D1K>.

[6] <ttp://www.scconline.com/DocumentLink/q57fNh04>.

[7] Transfer of Property Act, 1882.

[8] Dr Poonam Pradhan Saxena, Property Law.

[9] (1981) 4 SCC 262.

[10] (2004) 2 SCC 504.

[11] <http://www.scconline.com/DocumentLink/M1CKsvas>.

[12] Ram Baran Prosad v. Ram Mohit Hazra, 1959 SCC OnLine Cal 122.

[13] (1998) 6 SCC 267.

[14] Transfer of Property Act, 1882.

[15] (1969) 2 SCC 594.

[16] (2010) 7 SCC 603.

[17] <http://www.scconline.com/DocumentLink/W4x445Hs>.

[18] Transfer of Property Act, 1882.

[19] Dattatreya Shanker Mote v. Anand Chintaman Datar, (1974) 2 SCC 799.

Case BriefsSupreme Court

Supreme Court: The bench of Hemant Gupta and AS Bopanna, JJ has held that in order to determine whether a document is that of a mortgage or a conditional sale, the intention of the parties has to be seen when the document is executed

The proviso to Section 58(c) of the Transfer of Property Act, states that,

“provided that no such transaction shall be deemed to be a mortgage, unless the condition is embodied in the document which effects or purports to effect the sale”

As held in Pandit Chunchun Jha v. Sheikh Ebadat Ali, AIR 1954 SC 345, a transaction which takes the outward form of a sale but in essence the documents are of a mortgage, though it is couched in the form of a sale.

“… it is impossible to compare one case with another. Each case must be decided on its own facts and circumstances. The document has to read as a whole and if any word is ambiguous, then to find out the intention of the parties when such document was executed.”

The Court was hearing the case where a sum of Rs.3,000/- was taken as a loan from the defendant for household expenses. The same was to be returned and the defendant was bound to retransfer the land. If the amount was not paid within the stipulated period, the conditional sale deed was to be taken as a permanent one.

A reading of the document showed that the document was executed for the reason that the plaintiff has borrowed a sum of Rs.3,000/- for his household expenses and the defendant is bound to retransfer the land if the amount is paid within one year. The advance of loan and return thereof are part of the same document which creates a relationship of debtor and creditor. Thus, it was held that the deed would be covered by proviso in Section 58(c) of the Act.

Further, on the question of in the absence of any positive evidence of any improvement and the cost incurred, the defendants were entitled to recover anything more than the mortgage amount, the Court explained that Section 63 of the Act contemplates that any accession by the mortgagee, during the continuance of the mortgage, the mortgagor shall on redemption be entitled to such accession in the absence of a contract to the contrary.

Under Section 63(a) of the Act, the liability of mortgagor to pay for improvement will arise if the mortgagee had to incur the costs to preserve the property from destruction or deterioration or was necessary to prevent the security from becoming insufficient or being made in compliance with the lawful order of any public servant or public authority.

However, none of the eventualities arose in the present case compelling the mortgagor to pay for the improvements if any carried out by the mortgagee.

The Court, further, stated that

“A mortgagee spends such money as is necessary for the preservation of the mortgaged property for destruction, forfeiture or sale; for supporting the mortgagor’s title to the property; for making his own title thereto good against the mortgagor; and when the mortgaged property is a renewable lease-hold, for the renewal of the lease, such expenditure incurred by the mortgagee can be added to the cost of improvements in the principal amount due.”

However, in the absence of any positive evidence of any improvement and the cost incurred, the defendants are not entitled to recover anything more than the mortgage amount.

In the case at hand, since the possession was given to the mortgagee, he has enjoyed usufruct from the mortgage property which compensates not only of the user of the land but also improvements made by him. The improvements were to enjoy the usufruct of the property mortgaged.

[Bhimrao Ramchandra Khalate v. Nana Dinkar Yadav, 2021 SCC OnLine SC 582, decided on 13.08.2021]


*Judgment by: Justice Hemant Gupta

Know Thy Judge| Justice Hemant Gupta

OP. ED.Practical Lawyer Archives

The following question of seminal importance was referred to a three-Judge Bench of the Supreme Court in Syndicate Bank v. APIIC, (2021) 3 SCC 736 : (SCC p. 738, para 1)

 

Whether a property can be equitably mortgaged by depositing documents which may not be title deeds or registered document of title.”

 

The Supreme Court did not feel inclined to decide this question since it could decide the case on a narrower issue, and the mortgage of the allotment letter in the facts of that case was enforced on the principle of estoppel.

 

Had the Supreme Court gone into the above said question it would have found support in Hill Properties Ltd. v. Union Bank of India1, wherein the right of ownership of a flat was purchased by R-5 therein by becoming a shareholder of the housing company which was providing the flat, to the extent of the value of the flat. The share certificate by virtue of which R-5 was allotted the flat was pledged with the Bank to create a mortgage, in the absence of any registered conveyance of the flat in question : facts which are almost identical to the facts of Syndicate Bank case. In Hill Properties case it was held that what the said share certificate, which is the equivalent of an allotment letter, creates a “species of property” or “species of interest” which can validly be mortgaged by deposit of such document with the Bank. The Supreme Court in Hill Properties case followed Himmatlal Shah2, in holding that this “species of property” or “species of interest” in the flat, is freely transferable/alienable i.e. can be sold, gifted, bequeathed, inherited, mortgaged, etc. It was held that this “species of property” includes both an independent right over the flat itself, and an undivided interest over the common areas and facilities (see paras 12, 13, 15 and 16 of Hill Properties).

 

The abovesaid question formulated by the Supreme Court involves several legal aspects which require consideration, which, it is respectfully submitted, involve a number of propositions which are required to be demonstrated and established. These are as follows:

 

(1) Section 58 of the Transfer of Property Act, 1882 (TPA) inter alia provides that “a mortgage is the transfer of an interest in specific immovable property” for the purpose of securing a loan.

 

(2) Nemo dat quod non habet i.e. no one can give what he does not have : no one can transfer a property right or interest in property that he does not have, is one of the bedrock principles of Property Law. The principle of nemo dat quod non habet finds statutory recognition, for instance in Sections 7, 8 and 48 TPA.

 

(3) If one can only transfer property which one has, then it follows that a person who has merely an allotment letter (or similar document) in respect of some immovable property but which is not a registered document of title, must hold some kind of proprietary interest, some “species of interest” in the immovable property concerned, so as to be in a position to create a mortgage in respect thereof. This is true as any kind of mortgage must necessarily involve a “transfer of an interest in immovable property”.

 

(4) Thus, it is only if the holder of the allotment letter or similar document (not being a registered instrument of title) has some interest in the immovable property that he would be in a position to transfer some interest in the immovable property so as to create a mortgage.

 

(5) Normally an allotment letter is equivalent to or is accompanied by a contract for sale of immovable property i.e. a contract that a sale of such property shall take place on terms settled between the parties.

 

(6) Hence, the first question that arises is : What is the nature of interest in immovable property that the holder of an allotment letter or contract for sale in respect thereof holds? It will be demonstrated that an allotment letter or contract for sale creates a constructive trust in respect of the immovable property which is the subject-matter of the contract for sale, with the seller as constructive trustee holding the legal title for the benefit of the buyer : with the buyer as the beneficiary or cestui que trust of such constructive trust which arises by operation of law. That is to say, the buyer under a contract for sale holds an equitable estate in the immovable property in question which mirrors the legal estate held by the seller. This equitable estate subsists so long as the contract for sale in question remains specifically enforceable. Once a proper sale deed is registered in accordance with law, and only then, the legal and equitable estates merge and stand transferred to the buyer absolutely, and the buyer becomes the holder of the full legal estate of the seller in the immovable property concerned.

 

(7) The legal proposition that a buyer under a contract for sale (not being a registered instrument of title) holds an equitable estate in the immovable property which is the subject-matter of the contract for sale, is not free from controversy, as there are conflicting judgments of the Supreme Court on this issue.

 

(8) To establish this proposition, it is necessary to bring out clearly the true nature and hallmarks of property from relevant statutory provisions and case law i.e. What is unique to proprietary relationships which distinguishes them from all other kinds of legal relationships? Once these unique hallmarks of proprietary character have been demonstrated, the next question that arises is : Do the rights in respect of immovable property created by a contract for sale in respect thereof, exhibit these unique hallmarks of proprietary relationships, so as to qualify as being proprietary rights?

 

(9) It will be demonstrated that there are two kinds of property : legal estates and interests, and, equitable estates and interests. Legal estates are unique in that they exhibit a complete or total in rem character without exception i.e. they bind the whole world or third parties or subsequent transferees without exception regardless of notice, knowledge or consent. There are no exceptions whatsoever to the binding effect and the in rem nature of legal property rights. Equitable estates mirror legal estates, but exhibit a near complete in rem character i.e. with an exception : equitable estates bind the whole world or third parties or subsequent transferees except bona fide transferees for consideration without notice of the prior equitable proprietary interests.

 

(10) Normally and in most circumstances equitable estates exist only in tandem with the legal estate which they mirror, and this is almost always coterminous with the existence of a trust which is the archetypical splitting of a proprietary interest into a legal estate held by the trustee, and, the beneficial interest thereunder i.e. the equitable estate held by the cestui que trust or beneficiary of the trust. The trust could be an express trust created vide a trust deed, or the trust could arise by operation of law in situations in which the law (vide statutory provisions or case law) recognises the creation and subsistence of such trusts, called resulting and constructive trusts.

 

(11) It will be demonstrated through an extensive survey of case law and statutory provisions that the “species of interest” held by a buyer under a contract for sale (not amounting to a registered instrument of title) exhibits this near total in rem character which is the hallmark of equitable interests in property. That, thus the buyer under a contract for sale holds not merely contractual rights with respect to the immovable property which is the subject-matter of the contract for sale, but also holds an equitable estate therein which exhibits the required near total in rem proprietary character of equitable estates and interests in property.

 

(12) The equitable estate under a contract for sale is a manifestation of the equitable principle that equity deems as done that which ought to have been done. Such equitable estate by providing a mortgageable interest for raising funds through mortgage loans, provides a critical via media to pull oneself up by one’s own bootstraps as it were, to finance the capital starved vast majority of the populace of this Nation : those who do not already own enough property to be able to raise the funds they require to build homes for young families and finance new businesses.

 

(13) It will also be demonstrated that the result that the buyer under a contract for sale holds an equitable estate in the immovable property concerned, is equally bootstrapped with significant statutory safeguards to ensure that the regime of registration and stamp duty is not undermined in any way. This becomes evident when the entire regime of Property Law in India is examined as a whole i.e. when related provisions of TPA are read with the relevant provisions of the remaining Property Law statutes such as the Trusts Act, 1882, the Specific Relief Act, 1963, the Registration Act, 1908 and the Central and State Stamp Acts. These safeguards are based on the core principles of equity : he who seeks equity must do equity, and he who seeks equity must come to the court with clean hands. It will be demonstrated that the courts have sufficient power and discretion to refuse to extend the benefit of the equitable estate under a contract for sale to unscrupulous persons who seek to evade the regime of registration and stamp duty.

 

(14) The next question that arises is : Whether the equitable estate so held by a buyer under a contract for sale is transferable so that an interest can be transferred therefrom to the mortgagee to create a mortgage. It will be demonstrated that the interest under a contract for sale being freely transferable subject only to the terms of the contract itself, an interest can certainly be transferred from the equitable estate held by the buyer under the contract for sale, to the mortgagee to create a mortgage of the equitable estate.

 

(15) The next issue that arises is : What is the exact nature of the mortgage that is created when the buyer under a contract for sale deposits the contract for sale itself or allotment letter with the mortgagee?

 

(16) Before this question can be answered it is respectfully submitted that this issue is bedevilled by much confusion in the terminology that is used. It will be demonstrated that the ordinary usage of the term “equitable mortgage” in legal and financial parlance in modern day India is erroneous as these words are used to describe even the case when registered documents of title i.e. documents evidencing legal estates in property, are deposited with the mortgagee. This error seems to be an error of history which continues from the legal regime which subsisted in British India prior to the enactment of TPA in 1882.

 

(17) Prior to the enactment of TPA, like in England at that time, in pre-TPA British India the normal and prevalent manner in which mortgages were entered into was that at law the mortgagor transferred absolutely the legal title of the immovable property which was to serve as the security interest to the mortgagee, with a right of reconveyance to the mortgagor upon repayment of the borrowed amount with interest by a certain date. Thus, at law the mortgagor retained only a limited right to recover his legal title upon repayment. However, in equity the mortgagor was still considered the owner of immovable property, though subject to the mortgage. This continued ownership of immovable property by the mortgagor in equity was recognised as an equitable interest in the immovable property concerned and was known as the “equity of redemption”, despite the legal title having been transferred to the mortgagee. Thus, the equity of redemption was an equitable estate in the mortgaged property. Thus, for instance if a subsequent transferee purchased the legal title of the mortgaged property from the mortgagee (the mortgagee holding such title absolutely at law) without notice of the mortgagor’s equity of redemption and for good consideration, the equitable estate of the mortgagor would stand extinguished.

 

(18) It is for this reason that the interest in the immovable property that was retained by the mortgagor in England at that time and pre-TPA British India was called the “equity of redemption”, because that is exactly what it was : a proprietary interest but only in equity which exhibited a near total in rem character, in that it bound the whole world or third parties, but with the significant exception of subsequent transferees of the mortgaged property for good consideration without notice of the mortgagor’s equity of redemption. Thus, the equity of redemption, like all equitable estates was defeasible by such transferees.

 

(19) In pre-TPA British India and in England at that time, mortgages could be created in equity as well.3 This would be particularly so if the mortgagor did not want to transfer the legal estate absolutely to the mortgagee, but yet wanted to take out a mortgage loan. Mortgages so created in equity were correctly called “equitable mortgages” and were often accompanied by the deposit of the registered documents of title with the mortgagee. This was done as a precaution, in order to prevent a transfer of the legal estate by the mortgagor to the detriment of the mortgagee. Thus, mortgages in equity accompanied by deposit of documents of title with the mortgagee became quite prevalent in British India and came to be known by the moniker of “equitable mortgages”. Since such mortgages truly were only mortgages in equity, even though documents of legal title may have been deposited with the mortgagee, it was correct to call them “equitable mortgages”.

 

(20) Upon the enactment of the TPA in 1882 (alongwith the Contract Act, 1872, the Specific Relief Act, 1877, the Trusts Act, 1882 and the Easements Act, 1882, and Registration Acts and Stamp Acts of various years already being in existence) the new regime of Property Law in British India became complete.

 

(21) One of the major innovations ushered in by TPA was that so long as the technical requirements specified in Section 59 TPA for the creation of mortgages were satisfied, in all mortgages so created, the mortgagor retains a legal estate now correctly called the “right of redemption” and the mortgagee obtains a legal estate : an “interest in specific immovable property” called the “mortgagee’s interest”. After the enactment of TPA it is no longer necessary for the mortgagor to transfer the legal title absolutely to the mortgagee to create a valid mortgage at law.4

 

(22) Section 60 TPA explains the nature and the contours of the right of redemption of the mortgagor in all kinds of mortgages defined in Section 58 TPA, and provides that the right of redemption can only be extinguished in two cases : either by the act of the mortgagor and mortgagee, or, by a decree of court. Thus, the right of redemption of the mortgagor can no longer be unilaterally extinguished in the same way as the equity of redemption could be extinguished by a subsequent transfer of the mortgaged property from the mortgagee for consideration, where the subsequent transferee could show that he had no notice of the prior mortgage or equity of redemption (see para 18, above).

 

(23) The right of redemption of the mortgagor, conferred for the first time by the TPA is a full-fledged legal estate which exhibits the total in rem nature of legal estates and binds the whole world or third parties without exception : no number of subsequent transfers of the mortgaged property can extinguish the right of redemption, regardless of the notice, knowledge or consent of the subsequent transferees. So long as the right of redemption is not extinguished by an act of the mortgagor and mortgagee, or, by a decree of court, every subsequent transferee would be bound by the mortgagor’s right of redemption without exception.

 

(24) Most crucially, the TPA vide Section 58(f) created the legal estate of “mortgage by deposit of title deeds” when the mortgage was created by the deposit of registered instruments of title with the mortgagee in a notified town. Section 96 TPA clarifies that a “mortgage by deposit of title deeds” operates exactly as a simple mortgage defined in Section 58(b) TPA, thus making it amply clear that a “mortgage by deposit of title deeds” operates exactly like all other mortgages at law specified in Section 58 TPA, and that such mortgages no longer take effect only in equity, which was the case in the pre-TPA era.

 

(25) It will thus be demonstrated that after the coming into effect of TPA it is erroneous to refer to a mortgage created by deposit of registered instruments of title i.e. documents evidencing legal estates in property, with the mortgagee in a notified town, as an “equitable mortgage”, as it is no longer a mortgage only in equity, but creates full-fledged legal estates both in the mortgagor and mortgagee which display total or complete in rem character to bind the whole world or third parties without exception. Further, that it is equally erroneous to refer to the “right of redemption” (a legal estate) which is retained by the mortgagor under a mortgage by deposit of title deeds or any other mortgage properly created in terms of TPA, as the “equity of redemption”.

 

(26) Thus, the deposit of registered instruments of title i.e. documents evidencing legal estates in property, creates a legal mortgage called “mortgage by deposit of title deeds”. However, what the buyer under an allotment letter or contract for sale holds is an equitable estate and not a legal estate (see paras 6 to 11, above). Applying the principle of nemo dat quod non habet i.e. that no one can transfer a property right or interest in property that he does not have, the holder of an equitable estate i.e. the buyer under the contract for sale or allotment letter, can at best transfer an equitable estate.

 

(27) Thus, it will be demonstrated that when the buyer under a contract for sale (not being a registered instrument of title) deposits the allotment letter or contract for sale with the mortgagee in a notified town, he does indeed create an “equitable mortgage”, since only a mortgage in equity can be created as the transferor holds only an equitable estate : nemo dat quod non habet.

 

(28) Thus, it is respectfully submitted, the answer to the question formulated by the Court in Syndicate Bank case5 could be as follows : that immovable property can be equitably mortgaged by depositing documents which may not be title deeds or registered documents of title, since the buyer under a contract for sale or allotment letter holds only an equitable estate which can be equitably mortgaged by deposit of the allotment letter or contract for sale with the mortgagee in a notified town.

— These propositions are proposed to be substantiated with statutory and case law analysis in several forthcoming papers in the SCC Journal Section.

 


*The article has been published with kind permission of SCC Online cited as (2021) 3 SCC J-25

M.A. (Cantab). Associate Editor, Supreme Court Cases. Formerly Visiting Professor of Law at Dr RML National Law University, Lucknow from 2011-2016. The author taught Property Law I and Property Law II full time at RML National Law School for five academic years. The author is grateful to all his students of all the batches at RML National Law School for having provoked the inquiries that have led to this paper and to the forthcoming papers on the issues delineated in this paper. The author is deeply grateful to Prof. Balraj Chauhan, the Creator of many law schools, for his vision and foresight in having given the author full freedom to teach Property Law, to enable students to acquire a working practical understanding of this complex and extremely important area of law.

 

1(2014) 1 SCC 635 : (2014) 1 SCC (Civ) 513

2(1975) 2 SCC 105

3 This legal position obtains currently in India and England as well : mortgages can be created in equity.

4 Even though the forms in which a conditional sale mortgage as defined in Section 58(c) TPA and an English mortgage as defined in Section 58(e) TPA are supposed to be created appear to suggest the pre-TPA formula of absolute conveyance of the legal title with right of reconveyance to create these mortgages, the so called absolute conveyance in both sub-sections is only ostensible in nature, and if the stipulated conditions are strictly satisfied, the mortgagor never parts with the absolute title in mortgages created under Section 58(c) or Section 58(e) TPA.

5(2021) 3 SCC 736

Op EdsOP. ED.

The term “ownership” literally means to have or hold a thing. The Black’s Law Dictionary defines ownership as “the bundle of rights allowing one to use, manage, and enjoy property, including the right to convey it to the other”. In the legal sense, the term “ownership” means right over a thing to the exclusion of all other persons, implying non-interference by others in the exercise of his rights and the same must be distinguished from a mere holding of a thing in one’s possession.

Austin defined ownership as “a right indefinite in point of user, unrestricted in point of disposition and unlimited in point of duration”. His definition thus implies three attributes viz.:

(i) Indefinite user – the owner of a thing is free to use or misuse the thing in a way he likes.

(ii) Unrestricted disposition – the power of disposition of the owner is unhampered by law meaning that he is absolutely free to dispose it to anyone.

(iii) Unlimited duration – ownership of a person cannot be cut short and the owner can continue to be the owner as long as he likes. 

The High Court of Calcutta, in its judgment in Jiban Roy Choudhury v. Taramoyee Debi1, has explained ownership and its incidents as follows:

11. In Salmond’s Jurisprudence (12th edn.) ownership is described as follows (Chapter 8):

“Ownership denotes the relation between a person and object forming the subject-matter of his ownership. It consists in a complex of rights, all of which are rights in rem being good against all the world and not merely against specified persons. Though in certain situation some of these rights may be absent, the normal cases of ownership can be expected to exhibit the following incidents.”

12. The incidents are (i) right to possess the thing though he may be wrongfully deprived of it or may have voluntarily divested himself of it; (ii) right to use and enjoy the thing owned, right to manage and use, to the income from it such right to possess being in fact liberties; (iii) right to consume or destroy as also to alienate or transfer the thing by will after death or by conveyance during lifetime; (iv) right of ownership being indeterminate in duration such interest being perpetual, determined neither by any set point (as the interest of a lessee or bailee) nor by owner’s death, as the property owned can descend to his heirs or while the new owner’s interest is to continue, if the property is sold to him prior to death, unaffected by such death; and (v) ownership is residuary in character and when the lesser rights are given away, their extinction revives all rights in the owner.

 Ingredients of ownership

Normally ownership comprises the following:

(i) Right to possess: The owner of a thing has a right to possess it, to the exclusion of all others i.e., the owner has exclusive control of a thing.

(ii) Right to use: The owner has right to use the subject-matter of ownership as per his own discretion.

(iii) Right to manage: The owner has the tight to manage i.e., he has the right to decide how and by whom the thing shall be used.

(iv) Right to the capital/alienation: The owner has exclusive right of alienating with the thing. A non-owner may possess a thing but he can not transfer its ownership.

(v) Right to income: The owner of a thing has the right to the income arising out of the thing within the limits, if any, laid down by any law.

 Types of ownership

The different types of ownership may be mentioned:

(i) Vested ownership: An ownership is vested when all the events essential to vest property in the owner have happened and the owner’s title is already perfect. For example, two people sharing ownership of a property. If one dies, the other gets the gain of vested ownership of the property.

(ii) Contingent ownership: The ownership is conditional. In this case, the transfer of ownership is subject to certain conditions. For example, a testator may leave property to his wife for her life and on her death to A, if he is then alive, but if A is dead to B. Here A and B are both owners of the property in question, but their ownership is merely contingent.

(iii) Sole and co-ownership: When the right of ownership is exclusively vested in one person, it is called sole ownership. When the property is jointly held by several persons at the same time, it is called co-ownership.

As per the English law, co-ownership is further sub-divided into joint tenancy and tenancy in common.

(iv) Corporeal ownership: The said ownership relates to corporeal property, moveable or immoveable. For example, ownership of land, goods, etc.

(v) Incorporeal ownership: The said ownership relates to intangible objects. For example, ownership of a right, patent, etc.

(vi) Legal and equitable ownership: Legal ownership originally meant the one having its origin in the rules of common law. For example, a lender who has lent money for a property is the legal owner of that property.

On the other hand, equitable ownership resulted from rules of equity different from common law.

(vii) Trust and beneficiary ownership: Trust is defined as an obligation annexed to the ownership of the property and arising out of a confidence reposed or declared. The person who reposes the trust is called “author”, the person accepting the confidence is called “beneficiary” and the subject-matter of the trust is called “trust property”. The person in whom the property vests is called the “trustee”, and he has the “trust or legal ownership” of the property. The person for whose benefit the property is held is called the “beneficiary”, and his ownership is termed as “beneficial ownership”.

(viii) Absolute and limited ownership: When all the rights of ownership i.e., possession, enjoyment and disposal, are vested in a person without any restriction except those imposed by law, his ownership is said to be absolute. On the other hand, where the ownership is subject to limitations on use or duration or disposal, the ownership is said to be limited.

The Patna High Court in the judgment of Hira Singh v. Sk. Mosaheb2,  regarding the ownership of property in lieu of dower held as under:

9. The learned Judge having quoted that passage came to the conclusion that, in all cases where a Muhammadan widow is found in possession of property in lieu of dower after her husband’s death, her position is that of a usufructuary mortgagee and that she is entitled to remain in possession merely as a mortgagee, in order that her claim for dower might be satisfied out of the rents and profits and that she is, in no case entitled to any larger interest. He came to the conclusion that, if her position was that of a mortgagee in possession she was clearly not entitled to execute a conveyance in respect of the property in favour of Defendant 1, and that, having regard to what her actual position was, namely, that of a mortgagee in possession, she could not acquire a title by adverse possession by having her name recorded as a kashikar in the record of rights, and that no act on her part could bar the right of the heirs of Teg Ali to sue for possession of the property as against the widow or her transferees on the ground that her claim for dower had been satisfied and that, therefore, they were entitled to the equity of redemption in the property … I can see no reason in law why the husband should not during his lifetime satisfy his liability to pay his wife’s dower just as much out of real property as out of personal property, such as money. The dower can be paid off at any time during the joint lifetime of the husband and wife. It can certainly be paid in money, although it may not be usual to do so, and I can see no reason why a conveyance of landed property should not be made to the wife as an out and out transfer of ownership for the purpose of satisfying the dower. In fact, in another passage in the work of the learned author to which reference has already been made, at p. 318 of the first edition, it is clearly stated that a gift by a husband to a wife during his lifetime by way of payment of her dower is a gift for which there is a good consideration and may be treated as a hibi-bil-iwaz. In these circumstances, it seems to me, although I agree with the learned Judge of this Court that the decision of the Subordinate Judge cannot stand because he assumed a presumption to exist, which, in my opinion, has no legal foundation, nevertheless, the matter is not concluded and ought to go back again to the Subordinate Judge for further consideration for him to determine upon the evidence already given and upon the surrounding circumstances of the case whether, in fact the transaction which took place shortly before the death of Teg Ali was an out and out gift to his wife, or was merely a transaction whereby she was put in possession of the property to satisfy herself for her arrears of dower out of the rents and profits of that property. 

  1. …With these directions, I think that the case should be remanded to the Subordinate Judge to arrive at a conclusion of fact upon the main question in the case without giving any weight to the consideration which influenced him in the first instance where he found that in such a case as this it is usually an absolute right which is given. There is no such presumption that it is usually an absolute right and therefore, that matter must be left out of consideration by the Subordinate Judge and must not be allowed to influence his judgment in any way.…

Modern modes of acquiring ownership

Under modern law, modes of acquiring ownership may be classified under two heads:

(i) original mode; and

(ii) derivative mode.

Original mode: The said mode is the result of some independent personal act of the acquirer himself. It is of following kinds:

(i) Absolute mode: In this mode, ownership is acquired over previously ownerless object.

(ii) Extinctive mode: In this mode, there is extinction of previous ownership by an independent adverse act on part of the acquirer.

 (iii) Accessory mode: In this mode, requisition of ownership is the result of accession.

Derivative mode: When ownership is derived from a previous owner, it is called derivative acquisition of ownership. It is derived by any of the following modes: 

(i) Title of prior owner: In agreement, a title is acquired with the consent of the previous owner. It is only limited to contracts but includes all bilateral acts which create an interest. Such agreement may be either by assignment or by grant.

(ii) Purchase: A contract for sale does not confer title in immoveable property. As per Section 54 of the Transfer of Property Act3, a contract for sale of immoveable property is a contract that such sale shall take place on terms settled between the parties. However, if a person has entered into possession under a contract for sale and is in peaceful and settled possession of the same with the consent of the person having the title thereto, he is entitled to protect his possession against the whole world.

(iii) Will: In this regard, as decided by Delhi High Court in Lakshmi Devi v. State of Delhi4; Rajinder Singh Chowdhary v. S. Manjit Singh Chowdhary5, husband of a testatrix cannot claim absolute ownership over the property after the death of his wife, and would have no authority to bequeath the same by way of will. The Court held as:

  1. The Full Bench of this Court in Rajinder Singh Chowdhary v. S. Manjit Singh Chowdhary6 was confronted almost with identical proposition of law and took the view that it is the intention of the testator that has to be found out on a reading of the will and there cannot be any hard and fast rule of uniform application to find out as to whether the grant was absolute or it was subject to any condition or stipulation.

20. The function of the Court is to minimise or eliminate fallacious or anomalous situation emanating from the document particularly the will and not to embroil the parties in imbroglio of legal jargon. If there are two clauses in a will which appear to be irreconcilable and cannot stand together, it is the last covenant or the clause that shall prevail as the last clause or the covenant of the will is the last intention of a person executing the will. If the preceding clause confers any right which may be either absolute or limited that may be out of close relationship as that of husband and wife or out of love and affection or to protect the interest during one’s life time. That is not the last intention of the testator. What is relevant, and material is the last intention which is given effect to as this is the sole intention which is to prevail. In this case, if the property was bequeathed by Lakshmi Devi in respect of Clause 5, then Clause 6 which is the main clause shall have no meaning in spite of the fact that it was the last clause and last intention of the testator.

(iv) Gift: As per Section 122 of the Transfer of Property Act, 18827, gift is defined as the transfer of certain existing moveable or immoveable property made voluntarily and without consideration, by one person, called the donor, to another, called the done and accepted by or on behalf of the donee. As per Section 1238 of the said Act, the transfer by way of gift must be affected by a registered instrument signed by or on behalf of donor and attested by at least two witnesses, or by way of delivery.

The Madras High Court in Madras State Bhoodan Yagna Board, Madurai v. Subramania Athithan9, held that there is no provision as per the Hindu Succession Act for making gift of his interest in joint family property by a manager of a joint family, and as such Section 3010 of the said Act does not apply. The Court held as under:

  1. Mr Alagiriswami, appearing for the appellant, contended that the gifts made by the first defendant would be valid at least to the extent of his share in the joint family properties. His submission is that under the Hindu Succession Act, the first defendant is entitled to make a will of his property and if, on the death of the first defendant, such a will can take effect, there is no reason for not applying the same principles to a case of gift by the first defendant. It is true that Section 30 of the Hindu Succession Act confers power upon a member of a joint family to make a will in respect of his interest in the joint family property. But that principle cannot be extended to a case of a gift, which is a transaction inter vivos, unless the statute itself specifically recognises it. Section 4 of that Act which sets out the overriding effect of that Act merely provides that any text, rule or interpretation of Hindu Law or any custom or usage as part of that law in force immediately before the commencement of that Act shall cease to have effect with respect to any matter for which provision is made in that Act. That Act has not made any provision for making a gift by a manager of a joint family of his interest in the joint family property and as such Section 30 does not avail to the appellant and we are clearly of the opinion that the gifts by the first defendant are invalid even as regards his interests in the joint family properties.

(v) Transfer of ownership: The rights of transferee from a co-owner are regulated by Section 4411 of the Transfer of Property Act, which provides that where one or more co-owners of the immoveable property transfers his share of such property or any interest therein, the transferee acquires the transferor’s right to joint possession or other common or part enjoyment of the property, and to enforce partition of the same, so far as necessary to give effect to the transfer, subject to conditions and liabilities affecting at the date of transfer.

(vi) Succession: In this regard, it has been held in several judgments that genuineness of will has to be established.

Further, inheritance is another method of acquisition of property. In respect of death of the owners, all rights belonging to the deceased are divisible into inheritable rights i.e., rights that survive their owner and devolve on his legal representative; and uninheritable rights i.e., rights which extinguish with the death of the person. Generally, devolution can take place wither by intestate succession, or by testamentary succession.

(vii) Exchange: Section 11812 of the Transfer of Property Act, 1882 defines exchange as a transaction where two persons mutually transfer the ownership of one thing for the ownership of another, neither thing or both things being define money only. Further, a transfer of property in completion of an exchange can be made only in manner provided for the transfer of such property by sale.

The Andhra Pradesh High Court in Emana Veeraraghavamma v. Gudiseva Subbarao13, held that when the property inherited by a female is no longer available at the time of her death, there is no necessity of any further enquiry, as the property might have been exchanged with another property or the consideration of the same might have been used for acquiring another property. The Court held as follows:

  1. Now, while interpreting the said clause (a), it must be borne in mind that the female inheriting a property from her father or mother becomes the absolute owner of such property and that she can deal with it in such manner as he likes. If she alienates the property inherited by her. It cannot then be said, on her death, that the property inherited by her, is still available for devolution. We are of the opinion that the expression “property inherited by a female Hindu from her father or mother” occurring in this sub-clause must be given a restricted meaning consistent with the absolute right of disposition of the female owner. The special rule of succession applies only in case the very “property” inherited by a female from her father or mother is still available at the time of her death, otherwise, the rule does not apply….

Acquisition by Government:

Acquisition means taking not be voluntary agreement, but by authority of an Act of Parliament and by virtue of the compulsory powers thereby conferred. On acquisition of land by the Government, the land vests in the State free from all encumbrances. A person having any interest in such land can only claim compensation either from the State Government or from any person who might have collected the compensation in relation to such interest in the land. Apart from that, he cannot have any other right, much less occupation right, in such land once the same has been acquired by the Government.

Ownership by adverse possession:

Adverse possession is that form of possession or occupancy of land which is inconsistent with the title of any person to whom the land rightfully belongs and tends to extinguish that person’s title.

Section 2714 of the Limitation Act, 1963 and Articles 64, 65 and 112 of the Schedule15 to the said Act prescribe the period for law of adverse possession. Though the general rule of the law of limitation is that it is not meant to destroy the rights of the parties but it only fixes time period for the applicable legal remedy, however, Section 27 is an exception to the said rule, as reiterated in Ravinder Kaur Grewal v.  Manjit Kaur16, by the Supreme Court as under:

  1. Law of adverse possession does not qualify only a defendant for the acquisition of title by way of adverse possession, it may be perfected by a person who is filing a suit. It only restricts a right of the owner to recover possession before the period of limitation fixed for the extinction of his rights expires. Once right is extinguished another person acquires prescriptive right which cannot be defeated by re-entry by the owner or subsequent acknowledgment of his rights. In such a case suit can be filed by a person whose right is sought to be defeated.
  1. We are not inclined to accept the submission that there is no conferral of right by adverse possession. Section 27 of the Limitation Act, 1963 provides for extinguishment of right on the lapse of limitation fixed to institute a suit for possession of any property, the right to such property shall stand extinguished. The concept of adverse possession as evolved goes beyond it on completion of period and extinguishment of right confers the same right on the possessor, which has been extinguished and not more than that. For a person to sue for possession would indicate that right has accrued to him in praesenti to obtain it, not in futuro. Any property in Section 27 would include corporeal or incorporeal property. Article 65 deals with immovable property. 
  1. The adverse possession requires all the three classic requirements to coexist at the same time, namely, nec vi i.e. adequate in continuity, nec clam i.e. adequate in publicity and nec precario i.e. adverse to a competitor, in denial of title and his knowledge. Visible, notorious and peaceful so that if the owner does not take care to know notorious facts, knowledge is attributed to him on the basis that but for due diligence he would have known it. Adverse possession cannot be decreed on a title which is not pleaded. Animus possidendi under hostile colour of title is required. Trespasser’s long possession is not synonymous with adverse possession. Trespasser’s possession is construed to be on behalf of the owner, the casual user does not constitute adverse possession. The owner can take possession from a trespasser at any point in time. Possessor looks after the property, protects it and in case of agricultural property by and the large concept is that actual tiller should own the land who works by dint of his hard labour and makes the land cultivable. The legislature in various States confers rights based on possession.

Advocate and a qualified Chartered Accountant, presently practising at Supreme Court and Delhi High Court.

1 1979 SCC OnLine Cal 83

2 1920 SCC OnLine Pat 328.

3 <http://www.scconline.com/DocumentLink/UR00Q4f7>.

4 2001 SCC OnLine Del 1217.

5 2000 SCC OnLine Del 724.

6 2000 SCC OnLine Del 724.

7 <http://www.scconline.com/DocumentLink/8C6FCxUV>.

8 <http://www.scconline.com/DocumentLink/1g2Ix5QR>.

9 1972 SCC OnLine Mad 152.

10 <http://www.scconline.com/DocumentLink/6akYcyAr>.

11 <http://www.scconline.com/DocumentLink/a8wzkp3R>.

12 <http://www.scconline.com/DocumentLink/DGt9M4i5>.

13 1975 SCC OnLine AP 179.

14 <http://www.scconline.com/DocumentLink/s1bzqM79>.

15 <http://www.scconline.com/DocumentLink/t2W6ff2x>.

16 (2019) 8 SCC 729.

Case BriefsHigh Courts

Uttaranchal High Court: A Division Judge Bench of K.M. Joseph and Sharad Kumar Sharma, JJ., had allowed a revision which was filed aggrieved by the order of the Trade Tax Tribunal.

The assessment was done under the U.P. Trade Tax Act, 1948 and the respondent was assessed to tax in respect of sale of imported cement, imported sheet tiles & steel and self-manufactured tiles. The Assessing Officer had also assessed respondent in regard to the sale of steel scrap, sale of discarded items and tender forms. In Appeal, the Appellate Authority had dismissed the Appeal. Thereafter, the respondent preferred Second Appeal No. 117 of 1999 before the Trade Tax Tribunal, which partly allowed the appeal filed by the respondent and had sustained the tax assessed in respect of steel scrap, old discarded items and tender forms. The assessment order in so far it relates to the tax levied in respect of the imported cement, sale of imported sheet tiles & steel and self-manufactured tiles was interfered with. Thus the instant revision was filed.

The issue to be dealt was whether the Commercial Tax Tribunal has erred in law in holding that supply of cement, steel and bricks etc. to the contractors by the Government Department, for which cost is deducted from the bills of the contractors, does not amount to sale? And was it not liable to tax?

The Court relied on the Supreme Court judgment in N.M. Goel & Co. v. Sales Tax Officer, (1989) 1 SCC 335, wherein the Court noted that the appellant was a building contractor and registered dealer under the Madhya Pradesh General Sales Tax Act. The C.P.W.D. invited tenders for construction of foodgrain godown. In the tender submitted by the appellant the prices of the material to be used for construction cost of iron, steel and cement were included. The P.W.D. agreed to supply from its stores iron, steel and cement for the construction work and to deduct the price of material so supplied and consumed from the construction from the final bill of the appellant. It was found that all materials supplied to the contractors under the clause remain absolute property of the Government and could not be removed on any account from the site of the work and was at all times open to inspection by the Engineer-in-charge. The clause in fact inter alia provided that the contractor was bound to procure and to supply the material from stores as from time to time required for use of work for the purpose of contract only, and value of the full quantity of the materials and stores so supplied was specified at a rate and got set off or deducted from any sum due or that became due thereafter to the contractor.

The Court keeping in view these observations held that Tribunal was in error in taking the view that no tax to be paid on the sale of imported cement, sheet piles & steel and sale of self-manufactured tiles. The Court also noticed that definition of sale under the U.P. Trade Tax Act under Section 2-h includes transfer of property in goods involved in the execution of a works contract. The Court allowed the revision restoring the order of the Assessing Officer.[Commr., Commercial Tax v. Executive Engineer,  2018 SCC OnLine Utt 193, decided on 21-02-2018]


Suchita Shukla, Editorial Assistant has put this story together

Case BriefsHigh Courts

Kerala High Court: A. Muhamed Mustaque, J. dismissed a petition challenging the order of Appellate Authority under Maintenance and Welfare of Parents and Senior Citizens Act, 2007. 

The case of the petitioner is that her father executed a gift deed in her favour in 2014, thereafter filed an application in the Maintenance Tribunal under Section 23 of the MWPSC Act to revoke the said gift deed on the ground that his daughter is not providing him with necessary facilities to protect his well being. The Tribunal declined the father’s prayer but ordered the daughter (petitioner herein) to provide necessary facilities to her father to protect his well being. The father approached the appellate authority against the said order. The Appellate Authority allowed his appeal and granted revocation of the gift deed. Aggrieved thereby, the instant petition was filed in this Court.

Sri G. Harikumar, appearing on behalf of the petitioner argued that Section 23 can be attracted only in case of admission of a valid transfer. However, the respondent in the application stated that the deed was fraudulently obtained by undue influence and coercion. Thus, it is a case of civil dispute and shall be resolved by a civil court and not by Maintenance Tribunal.

Sri B.N.Shivsankar, appearing on behalf of the respondents relied on the object of the MWPSC Act. In addition to this, it was argued that the transfer of property of a senior citizen by way of gift is subject to providing basic amenities and if these are not provided the deed can be revoked under Section 23 of the MWPSC Act. 

The Court looked into the scope and object of the Act and accepted the respondent’s contention. The parliament enacted MWPSC Act to uphold the dignity and respect of a senior citizen at the time of old age. It relied on deontological moral theory of legislation and said that there are a certain type of actions which have universal acceptance. The Court also said that the tribunal has a duty to elicit the truth by adopting an inquisitorial approach as the act is not intended at dispute resolution but to promote measures to secure the welfare and interest of the senior citizens and parents. 

Relying on Radhamani v. State of Kerala, 2015 SCC OnLine Ker 33530, the Court held that there is no requirement of a written stipulation to effect that the transferee maintains the transferor. The tribunal should look at the circumstances under which the deed was executed.

Based on the following grounds the Court set aside the order of the Appellate Authority and remitted back the matter for reconsideration by the Tribunal. It also ordered that since the respondent is residing abroad, the Tribunal can hold sessions over electronic media.[G.S. Manju v. K.N. Gopi, 2019 SCC OnLine Ker 5363, decided on 10-10-2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Appellate Tribunal for PMLA: The Tribunal chaired by Manmohan Singh, J. set aside an order restraining a woman from sale or transfer of a property, in which she was not claiming any right, title or interest.

The present appeal was filed under Section 26 of Prevention of Money Laundering Act, 2002 against the order passed by the Adjudicating Authority in an Original Application (OA) whereby appellant and her associates had been restrained from sale/ transfer of certain properties. The appellant’s case was that prima facie there was no link or nexus with the accused. Her name had only been mentioned in relation to a property which she had agreed to be purchased from one Nirmala Jain. However, due to certain personal reasons on the seller’s part, the sale could not be consummated. The said OA made no mention of any paper/documents/article or the like which had been seized and which had any connection with the appellant.

Appellant’s sole submission was that no cogent evidence had been provided by the ED to show that it had any link/ nexus with any alleged accused parties. However, despite the same, she had been arrayed as a defendant in the O.A.

The Tribunal noted that in the impugned order, no plea of the appellant had been referred. The appellant was not even claiming any right in the subject property. No prosecution complaint had been filed under Section 8(3)(a) of PMLA and the period of ninety days had already expired. Thus, her name ought to be deleted as the defendant from the O.A. At this juncture, counsel for respondent Atul Tripathi submitted that since the appellant was claiming no right and title in the property, her name may be deleted.

In view of the above, the appeal was allowed.[Alka Pahwa v. Assistant Director Directorate of Enforcement, Chandigarh, 2019 SCC OnLine ATPMLA 10, decided on 28-03-2019]

Case BriefsForeign Courts

Supreme Court of Democratic Republic of Sri Lanka: A Bench comprising of S. Eva Wanasundera PCJ, H.N.J. Perera and Murdu Fernando, JJ., set aside the judgment of the lower courts, and granted the relief sought by the plaintiffs in the present case.

The pertinent facts of the case are that the defendant had come into the ownership of two small allotments of land by means of a title deed, which was duly attested by the notary public. She had transferred the same to a third party named Premlatha for a purchase price of Rs. 500,000, as stated by the notary public. Premlatha, by means of another deed, transferred the said property to the plaintiff. On the very same day on which this transfer took place, the plaintiff entered into a lease agreement in favour of the defendant, which was for a period of two years and the lease amount was Rs. 12000 per year, which the defendant agreed to pay in installments of Rs. 500 every month. After the expiry of the lease period, the defendant had refused to move out, as a result of which the plaintiffs filed an action for ejection against the defendant. In the trial, the defendant had presented evidence, but had not been present for cross examination. In spite of the same, the district court had reserved the case for judgment, and further dismissed the plaint but did not grant the relief prayed for by the defendant. The High Court had upheld the decision of the District Judge. The contention of the defendant was that the transfer of the property to Premlatha was in the nature of a transaction of security, for which the defendant was paying interest, and as she had failed to ‘pay the loan’, she was unable to get the property retransferred to herself. The transaction between the defendant and Premlatha was in the nature of a trust, as the defendant never intended to pass the title of the property. The defendant was a witness to the deed which was signed between Premlatha and the plaintiff, and thus it is evident that there was no intention on the part of the defendant to retain her status as owner of the property, as the deed was for the sale of the property, for a consideration of Rs. 6 lakhs. The contention that the plaintiff was holding the property in trust for the defendant was also rejected by the court, which stated that ‘holding in trust’ is a concept which cannot pass or be transferred from one person to another.

The court placed reliance on the case of Dr. Rasiah Jeyarajah v. Yogambihai Thambirajahnee-Renganathan Pillei, 2015 SCC OnLine SL SC 8, to state that the plaintiff was entitled to evict the defendants from the property upon the conclusion of the lease agreement, and that there was no need to prove title over the premises. The plaintiff was not obligated under law to provide notice of termination of lease and license, contrary to what was held by the High Court.

Accordingly the appeal was allowed with costs and the judgment of the District Court and the Civil Appellate High Court set aside. [Hallewa Mangalika Jayasinghe v. Udeni Bandara Jayasinghe, SC Appeal 183/2016, order dated 28.09.2018]

Case BriefsSupreme Court

Supreme Court: While hearing the matter relating to mortgagor’s right of redemption by appellant, the bench comprising of Navin Sinha and Ranjan Gogoi JJ. held that where the mortgaged property has already been put to auction sale and sale certificate has been issued, there remains no property mortgaged to be redeemed and hence, the mortgagor cannot claim the right to redemption of the mortgaged property by the virtue of section 60 of the Transfer of property Act 1882.

The mortgagor had contended that the mortgagor has a right of redemption even after sale has taken place. On the other hand, it was contended by the defendant that the sale in its favour stood concluded, sale certified issued along with possession delivered, long before the suit for redemption was filed, hence, the right of redemption stood extinguished. Rejecting the mortgagor’s contention, the Court held that the mortgagor has a right of redemption even after sale has taken place pursuant to the final decree, but before the confirmation of sale. [Allokam Peddabbayya v. Allahabad Bank, 2017 SCC OnLine SC 671, decided on 19.06.2017]

Legislation UpdatesStatutes/Bills/Ordinances

The Enemy Property (Amendment and Validation) Third Ordinance, 2016 has been promulgated by the President of India with the aim of making amendments to the existing Enemy Property Act, 1968 and Public Premises (Eviction of Unauthorised Occupants) Act, 1971. It shall be deemed to have come into force by 7th January, 2016.

The amendments executed through this Ordinance include, amendment in Section 5 by which clause (3) has been inserted in the provision which states that “The enemy property vested in the custodian shall, notwithstanding that the enemy or the enemy subject or the enemy firm has ceased to an enemy due to death extinction winding up of business or change of nationality or that the legal heir and successor is a citizen of India or the citizen of a country which is not an enemy, continue to remain, save as otherwise provided in this Act, vested in the Custodian.”

While a newly inserted section 5A provides for issue of certificate by custodian to declare that the enemy property vests in him. While the newly inserted section 5 B provides that the law of succession does not apply to enemy property.

Further, the Ordinance, by the virtue of section 6, also restricts the transfer of any property which is vested in the custodian by an enemy or enemy subject or enemy firm.

The Ordinance further inserts a new Section 8 A which deals with Sale of property by Custodian which also imposes a liability on the custodian to preserve the enemy property till the time is duly disposed off in accordance with the provisions of the Act.Section 10 confers the power to issue a certificate of sale by the custodian.

Section 18 provides provisions for transfer of property which is vested as an enemy property in certain cases and the sub-clause A of the same confers the right to not return the income made from an enemy property but from its sales. The section further lays the jurisdiction of the competent court, in which an aggrieved matter can be raised.

The Ordinance further repealed The Enemy Property (Amendment and Validation) Second Ordinance, 2016. Further, action taken under the Enemy Property Act, 1968 as amended by the said Ordinance, shall be deemed to have been done or taken under the corresponding provisions of the said Act, as amended by this Ordinance.

Ministry of Law and Justice