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Ouseph Vs. Govindankutty Menon and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtKerala High Court
Decided On
Case NumberSecond Appeal No. 1149 of 1969
Judge
Reported inAIR1972Ker176
ActsTransfer of Property Act, 1882 - Sections 43
AppellantOuseph
RespondentGovindankutty Menon and ors.
Appellant Advocate M.K. Narayana Menon, Adv.
Respondent Advocate T.S. Venkiteswara Iyer and P.K. Balasubramoniam, Advs.
DispositionAppeal dismissed
Cases ReferredSilla Chandra v. Ramachandra Sahu
Excerpt:
.....13 (1) has no application where there is apparently conveyance of property to which on date of transfer transferor has no title. - - this principlehas now been well settled, whatever might have been the conflict of views on this question earlier. the transferee may also be equally well aware that the transferor has no title to what he purports to transfer and may be willing to take the risk of getting title only in the event of the transferor subsequently acquiring title to the property. the question is whether in such cases any rule which enables the transferee to claim that his transfer should be made good would operate. this is a principle which has been well accepted and has become part of the common law of the land. for, if a contract be in other respects good and fit to be..........that a court of equity would compel him to perform the contract, and that the contract would, in equity, transfer the beneficial interest to the mortgagee or purchaser immediately on the property being acquired. this, of course, assumes that the supposed contract is one of that class of which a court of equity would decree the specificperformance. if it be so, then immediate-ly on the acquisition of the property described the vendor or mortgagor would hold it in trust for the purchaser or mortgagee, according to the terms of the contract. for, if a contract be in other respects good and fit to be performed, and the consideration has been received, incapacity to perform it at the time of its execution will be no answer when the means of doing so are afterwards obtained.'in the latter.....
Judgment:

P. Subramonian Poti, J.

1. The only dispute in the appeal concerns the question whether plaintiff is entitled to a decree charged on plaint item No. 11 also. That item along With certain other items of properties, was charged under a simple mortgage Ext. P-1 dated 24-5-1949 for an amount of Rs. 750 received thereunder. Though the executant purported to mortgage that item also, On that day he had no title to that property. In fact the consideration received under Ext. P-1 was for the purpose of taking a sale deed of that item of property and it was later, by Ext. D-5 sale deed, that the said item was acquired by the executant on 3-2-1950. Therefore on the date of execution of Ext. P-1, in regard to item No. 11, the executant had no title. He acquired title after a few months and thereafter, on his death, his heir the 1st defendant sold the property to one Reppai under Ext. D-4 dated 21-1-1954 who in turn sold the properly to 4th defendant under Ext. D-3 dated 22-3-1961. The claim of the plaintiff in the suit for a decree charged upon item No. 11 was resisted by the 4th defendant on the ground that on the date of the mortgage the mortgagor had no title to that item and there-lore so far as that item was concern ed, the mortgage would be inoperative. This contention was upheld by the trial court. The appellate court reversed it and gave the plaintiff a decree charged on this item also. That is challenged in this appeal by the 4th defendant.

2. Counsel contends that Section 43 of the Transfer of Property Act, 1882 will not be available in a case where the person who takes a document takes it with the knowledge of the absence of title in the transferor. Section 43 is founded on the rule of estoppel and therefore in order to attract the principle of that Section it is necessary to show that there has been an erroneous or fraudulent representation. If both parties are aware of the absence of or defect in the title of the transferor, that will not be a case where there is an erroneous representation. In such a case there is no scope for applying the rule of estoppel embodied in Section 43 of the Transfer of Property Act. This principlehas now been well settled, whatever might have been the conflict of views on this question earlier. The Supreme Court in the decision in Jumma Masjid v. Kodi-maniandra Deviah (AIR 1962 SC 847) has stated the principle governing such cases. Unless it is contended that when taking Ext. P-1 the mortgagee was not aware or the want of title of the mortgagor, there is no scope for invoking Section 43 of the Transfer of Property Act. On the facts of the case before me it cannot be said that the mortgagee who took Ext. P-1 was not aware of the absence of title in the mortgagor. That is because the very document mentions that the consideration thereunder was being received for the purpose of taking the sale of item No. 11.

3. The main controversy concerns the contention raised by Sri M. K. Nara-yana Menon, counsel for the appellant, that where Section 43 has no application, there is no scope for applying any other principle analogous to that provision. If the rule of feeding the grant by estoppel has no application to a case, it is the contention of the learned counsel, no other rule to give relief to a party should be invoked.

4. There may be cases where a party purports to transfer or assign property to which the transferor has no title in praesenti, but to which he may acquire title later. The transferee may also be equally well aware that the transferor has no title to what he purports to transfer and may be willing to take the risk of getting title only in the event of the transferor subsequently acquiring title to the property. The question is whether in such cases any rule which enables the transferee to claim that his transfer should be made good would operate. According to me, this question can be answered in two different ways.

5. When a person purports to transfer property to which he has no title and which he is proposing to acquire on a future date and it is acquired later the purported transfer may operate as an executory contract and when subsequently he acquires it that becomes operative. Another way of looking at it is to treat the case as one where the equity compels the transferor to do what he has undertaken to do. This is on the principle that equity deems as done that which ought to be done. This is a principle which has been well accepted and has become part of the common law of the land. This is not a rule which is founded on the doctrine of estoppel and therefore does not cover the field of Section 43 of the Transfer of Property Act.

6. The two leading cases on the question in controversy before me in the English Courts may be referred to here. Holroyd v. Marshall, (1862) 10 HLC 191at p. 210 and Collyer v. Isaacs, (1881) 19 Ch D 342, are cases where a similar question came up for decision and these cases have been cited time and again by Indian Courts whenever similar situations have arisen. In (1862) 10 HLC 191, Lord Chancellor (Lord Westbury) said in his speech in the House of Lords;

'But if a vendor or mortgagor agrees to sell or mortgage property, real or personal, of which he is not possessed at the time, and he receives the consideration for the contract, and afterwards becomes possessed of property answering the description in the contract, there is no doubt that a Court of Equity would compel him to perform the contract, and that the contract would, in equity, transfer the beneficial interest to the mortgagee or purchaser immediately on the property being acquired. This, of course, assumes that the supposed contract is one of that class of which a Court of Equity would decree the specificperformance. If it be so, then immediate-ly on the acquisition of the property described the vendor or mortgagor would hold it in trust for the purchaser or mortgagee, according to the terms of the contract. For, if a contract be in other respects good and fit to be performed, and the consideration has been received, incapacity to perform it at the time of its execution will be no answer when the means of doing so are afterwards obtained.'

In the latter case Jessel, M. R. said:

'A man cannot in equity, any more than at law, assign what has no existence. A man can contract to assign property which is to come into existence in the future, and when it has come into existence, equity, treating as done that which ought to be done, fastens upon that property, and the contract to assign thus becomes a complete assignment.'

7. In Bansidhar v. Sant Ltd (1888) ILR 10 All 133, the court was dealing with a case where certain future indigo produce was the subject of a contract of assignment and the question that arose was whether such a contract would convey title. The two decisions to which I have adverted were taken as laying down the correct rule applicable to such a case. Gaya Din v. Kashi Gir, (1907) ILR 29 All 163, was a case where certain property to which the transferor anticipated title under a prospective decree for pre-emption was mortgaged. The same rule was applied in that case by the learned Judges. A case more or less similar to the one before me was before their Lordships of the Allahabad High Court in Ram Lal v. Shiama Lal, AIR 1931 All 275. There a mortgage was executed of a property to which the mortgagor had no title and it was to purchase the property mortgaged that the mortgage itself was executed. The court held that the mortgagee wasentitled to enforce the security against theproperty which was subsequently acquired by the mortgagor. In Kabul Chand v. Badri Das, AIR 1938 All 22, also the rule has been applied. The Calcutta High Court has also taken the same view in Khobari Singh v. Ram Prasad Roy, (1908) 7 Cal LJ 387. Justice Mookerjee after referring to the leading English cases on the subject, viz., (1862) 10 HLC 191 and (1891) 19 Ch D 342 observed:

'The foundation of the doctrine, therefore, is that a mortgage of non-existent property, though inoperative as a conveyance, is operative as an executory agreement, which attaches to the property the moment it is acquired, and in equity, transfers the beneficial interest to the mortgagee, without any new act done by the mortgagor to confirm the mortgage.' Shah, J., as he then was, referred to the decisions in (1882) 10 IILC 191 and (1891) 19 Ch D 342 in Fatechand v. Parashram, AIR 1953 Bom 101 and observed that the rule formulated in these decisions applies, to India and therefore a charge on future properties operates upon such property as soon as it comes into existence. Countering an argument addressed before the learned Judge that the English rule ought not to be adopted in India, as the English law does recognise the distinction between a legal estate and an equitable estate the learned Judge said:

'It is true that in India, the law does not recognise any distinction between legal estates and equitable estates, but the rule that a transfer of property which is to come into existence in future, operates upon the property when it comes into existence does not depend upon recognition of any distinction between legal and equitable estates. The rule is an illustration of a well known maxim that 'equity regards that as done which ought to be done'. The Courts in India are Courts which administer equity as well as law, and the maxim would be regarded as applicable in India. In several cases which have come before the Courts in India the rule has been accepted as applicable. As stated by Sir Dinshah Mulla in his Transfer of Property Act, 3rd Edn., p. 51:

'....In English law as soon as the property comes into existence and is capable of being identified, equity taking as done that which ought to be done fastens upon the property, and the contract to assign thus becomes a complete equitable assignment; and so in a recent case, Viscount Cave said-

'When a person executes a document purporting to assign property to be afterwards acquired by him, that property on its acquisition passes in equity to the assignee'. The Calcutta High Court has followed the English decisions ..... andheld that a transfer of non-existent or asit is conveniently called, after acquired property, provided it is not of the nature contemplated in Section 6 (a), is perfectly valid and is to be regarded in a Court as a contract to transfer after the vendor acquires the title and will fasten upon the property as soon as the vendor acquires it.' The same appears to be the view taken by their Lordships of the Privy Council in 'Vatsavaya Venkata Subhadrayyamma v. Poosapati Venkatapi', 52 Ind App 1 = (AIR 1924 PC 162), where a charge created upon fruits of litigation for moneys advanced during the pendency of litigation was held to operate upon property which was obtained as a result of the litigation. Following the view taken by the Calcutta High Court which is referred to by Sir Dinshah Mulla and the decision of the Privy Council I am of the view that the rule of English law as stated in (1861) 10 HLC 191 and (1881) 19 Ch D 342, applies to India.'

8. Before parting with the discussion on this subject I have to notice the provision in Section 13(1) of the Specific Relief Act, 1963 which materially corresponds to the provision in Section 18 of the repealed Specific Relief Act of 1877. Subsection (1) (a) of that section provides that where a person contracts to sell or let certain immovable property having no title or only an imperfect title, the purchaser or lessee has the right, if the vendor or lessor has subsequent to the contract any interest in the property to compel him to make good the contract out of such interest. Based on this provision it is contended that where title is absent at the time of the purported transfer the transferee has only a right to compel the transferor to effect a transfer when he acquires title. This is on the basis that Section 13(1) recognises only such a right. In other words, what is contended is that the contract entered into by the parties should not be considered as executed but as one agreeing to convey property in future. I have already referred to the decisions which bold the view that on the subsequent acquisition of title the earlier absence of or defect in title is, made good. In that case no question of further conveyance would arise. The reference to Section 13(1) is apparently misconceived as that section refers to a contract to sell immovable property. Where there is apparently a conveyance of property to which on the date of transfer the transferor has no title it is not a contract to sell immovable property within the meaning of Section 13(1) and therefore that provision will have no application. The decision in Silla Chandra v. Ramachandra Sahu, AIR 1964 SC 1789 to which my attention has been drawn has no application as in that case there was only an agreement to sell property and the question that arose was as to what would happen if title is acquired later though at the timeagreement was entered into there was no title in the person who offered to sell. That decision has apparently no application.

9. From the above discussion itappears to be clear that though Section 43or the Transfer of Property Act may notbe applicable to the facts of the case before me still the transferee would obtainthe benefit of the subsequent acquisitionof title by the transferor. The contentionof the defendant must thereupon fail.

10. It is further contended by Sri M. K. Narayana Menon that the 4th defendant is not a transferee, but is a transferee from a transferee and therefore the rule should not operate as against him. I see no reason to draw a distinction between a transferee and a transferee from one such.

11. It is contended that at any rate the 4th defendant must be considered as a bona fide transferee for value and therefore the rule which is sought to be invoked here ought not be enforced against him. There again I do not see any reason to agree with learned counsel. With regard to 'notice', Section 3 of the Transfer of Property Act provides:

'A person is said to have notice of a fact when he actually knows that fact, or when, but for wilful abstention from an enquiry or search which he ought to have made, or gross negligence, he would have known it.'

Therefore if normally a person would have known of the existence of a document, he would have notice of the document. Ext. P-1 hypothecation itself mentions the fact that the property was only proposed to be purchased and when the 4th defendant took a document, he is normally and as a prudent man expected to ascertain whether there are any encumbrances in the property and if he had so done, he would have become aware of the execution of the mortgage of the property to which the mortgagor had no title in praesenti. I see no reason to consider the 4th defendant in this circumstance as a bona fide transferee for value without notice. He has taken the assignment subject to the mortgage in case the mortgage is operative in law otherwise.

12. In the result, I see no reason to differ from the conclusion reached by the court below.

13. The Second Appeal is dismissed with costs.


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