TRANSFER BY UNAUTHORIZED PERSON- FEEDING THE GRANT OF ESTOPPEL (Section 43), THE TRANSFER OF PROPERTY ACT, 1882

INTRODUCTION

The principle embodied in section 43, of the Transfer of Property Act, has been described as:

• the Common Law doctrine of ’feeding the grant by estoppel’.

But a statutory shape it is presently having, has been given to the principle, by the section itself, which determines its scope and the conditions of its application.

SECTION 43:TRANSFER BY UNAUTHORIZED PERSON WHO SUBSEQUENTLY ACQUIRED INTEREST IN PROPERTY TRANSFERRED

For the applicability of section 43:

• there must have been a fraudulent or erroneous representation by a person that he was authorized to transfer immovable property and
• he must have professed to transfer such property.

But there is nothing in the section requiring that the transferor should have been aware of the erroneousness of the representation made by him. The transferor might have honestly believed in the truth of the representation that he was authorized to transfer the property which he professed to transfer, but that would not render the section inapplicable.

ESSENTIALS OF SECTION 43

I. FRAUDULENT OR ERRONEOUS REPRESENTATION:

• This is section applicable where the representation by the transferor is fraudulent or erroneous with respect to his authority to transfer the property.
• Essentials-
  • The transferee was misled by the representation of the transferor and
  • The transferee has believed it and in good faith acted upon it.
  • This section is inapplicable, if the fact of the defective title of the transferor is known to both the parties.
• The representation, though required by this section to be fraudulent or erroneous, need not be intentionally false, “not need to be in any particular form”, it may be:
  • in word of mouth or
  • by a document.

II. SUBSEQUENT ACQUISITION:

• To invoke this section, the requirement is that the transferor must acquire some interest in the property that is being transferred.
• Now the question is, if there is subsequent acquisition, even then why it is not satisfying the transfer in toto:
  • the reason behind that is, every acquisition of interest in the property transferred ensure for the benefit of the transferee.

III. TRANSFEREE’S OPINION:

• Section only enables a transferee to claim an interest which the transferor acquires subsequently.
• If he fails to claim it, his right becomes subject to the right of any other transfer in god faith to whom it may be transferred by the transferred by the transferor for valuable consideration.
• In order to exercise the option, he must see that the transfer subsists and that the unperformed part of it is not rescinded by him seeking a remedy in damages against the transferor or his representative.
• The section does not contemplate any exercise of option (such as notice) by the transferee. All that is contemplated is indication of its existence by any overt act such as institution of suit by the transferee.

IV. BONA FIDE PURCHASER FOR VALUE WITHOUT NOTICE:

• If demand is late and meanwhile the transferor gives that property to third person who is bona fide purchaser for value without notice,
  • the right of first transferee ends and that of bona fide purchaser for value without notice prevails.

AMENDMENT OF SECTION 43

The words “fraudulently or” were inserted by the amending act 20 of 1929. The effect of the amendment is to make it clear that the erroneous representation may either innocent or tainted with fraud. However, the effect would remain the same.

CONTROVERSIAL ISSUES IN REGARD TO SECTION 43

ISSUE 1:  

Applicability of the section, when transferor is unaware of the erroneous nature of the representation, made by him.

CONCLUDED BY:

Case 1: Jumma Masjid, Mercara V Kodimaniandra Deviah

Supreme Court observed-

• “It is immaterial whether the transferor acts bona fide or fraudulently in making the representation.
• It is not material to find out whether in fact the transferee has been misled.
• It is to be noted that when the decision under consideration  was given the relevant words of section 43 were ‘where a person erroneously represents’, and now, as amended by Act 20 of 1929 they are ‘where a person fraudulently or erroneously represents’ and that emphasizes that for the purpose of the section it matters not whether the transferor acted fraudulently or innocently is making the representation, and that what is material is that he did make a representation and the transferee has acted on it.”

ISSUE 2:

Whether a transferee is deprived of the benefit of the section 43 if he is aware of the erroneousness of the representation or could have discovered its erroneous by exercising reasonable care or pursuing reasonable inquiry.

CONCLUDED BY:

Case 1: Parma Nand V Champa Lal

The question has now to be decided in accordance with what has been laid down by their Lordships of the Supreme Court in the Jumma Masjid case. According to the Full Bench in Parma Nand’s case:

“Does section 43, T.P.Act, require that the transferee who can take advantage of it should be one to whom not only a fraudulent or erroneous representation about the transferor’s authority to transfer the property is made but should also be one who did not have knowledge of the true factual position and had merely acted on the belief of the erroneous or fraudulent representation made to him by the transferor.”

In the Jumma Masjid case, however, the Supreme Court laid down the law as follows:

“Where the transferee knew as a fact that the transferor did not possess the title which he represents he has, then he cannot be said to have acted on it when taking a transfer. Section 43 would then have no application…”

TRANSFER BY AN UNAUTHORIZED PERSON

SITUATION:

Where a person fraudulently or erroneously represents that he is authorized to transfer certain immovable property and professes to transfer such property for consideration.

CONSEQUENCES:

• Such transfer shall, at the option of the transferee, operate on any interest which the transferor may acquire in such property at any time during which the contract of transfer subsists.
• Nothing in this section shall impair the right of transferee in good faith for consideration without notice of the existence of the said option.
• Transfer by an unauthorized person who subsequently acquires interest in that property is bound to feed the transfer grant by estoppel. He has to pass on whatever he gets. Provided the grantee demands it.
• Provided some other bona fide purchaser for value without notice does not take that interest acquired subsequently.
• Key points: Transfer is-
  • Based on fraudulent or erroneous representative,
  • Presence of representation,
  • As to the authority and professes to transfer,
  • For consideration,
  • Transfer operates on transferee’s opinion (any interest the transferor acquires subsequent thereto at any time), provided contract of transfer subsists,
  • Exception- Bona fide purchaser for value without notice of option gets in.

FEEDING THE GRANT BY ESTOPPEL

• In the principle embodied in section 43:
  • the transfer to deliver the subsequently required property to the transferee,
  • transferee, who must have acted upon his false representation and do harm to himself by paying money for, what he could not get, and
  • thereby “feeding the grant of estoppel” created against him.
• Concept:
  • If a person, who alienated property to which he has not present title, may subsequently become entitled to, he must honor his commitment.
  • Since he cannot derogate from his own grant, his subsequently acquired interest, feeds the estoppel, raised by the prior grant and perfects the tile of the alienee.
• The common law rule of estoppels is:
  • “Where a grantor has purported to grant an interest in land which he did not, at the time, possesses but subsequently acquires, the benefit of his subsequent acquisition goes automatically to the grantee, or as it is usually expressed, feeds the estoppels.”

HOW SECTION 43 IS DIFFERENT FROM DOCTRINE ?

• Doctrine’s partial recognition in India:
  • The whole of the doctrine, however is not recognized in section 43 of the Act. The section follows this doctrine only to the extent that the-
    • ‘subsequent estate passes to the transferee without any further act on the part of the transferor.’

(The estate feeds the estoppel and therefore becomes an interest. From the moment, the transfer begins to operate on the interest acquired by the transferor in the property, it is no longer in the region of estoppels, but becomes an interest. The commencement of the interest is from the date when the transferor had acquired interest in the property.)

• The section differs from the doctrine in two aspects, that as under the doctrine:
  • neither does the estate pass instantly
  • nor does the transferee get a title which cannot be defeated by another transferee for value without notice.

(The transferee under the section must call upon the transferor to deliver the property to him, and before he does so, if it is transferred to another person for value and without notice of the first transfer, he would not be able the title of the subsequent transferee.)

SECTION 6 (spes-successionis) AND 43, THE TRANSFER OF PROPERTY ACT, 1882

• Section 6, spes-successionis is ab-intio null and void and it is totally forbidden by law being against public policy. Grant of estoppel will not be provided in this case, thus section 43, stands different from it.
• Where property is not transferable within meaning of section 6(a), 43 cannot validate the transfer because initial transaction is itself contrary to law.
• Section 6, is bases on expectancy which may or may not be acquired so chance is based on hope. Whereas, section 43, apply where transfer misrepresent the title and doesn’t represent the right in spes-successionis. Therefore, if transfer represents spes-successionis then the transferee cannot acquire benefit of 43.

RELEVANT CASE (SECTION 6 AND 43)

Case: Jumma Masjid, Mercara V Kodimaniadra

Fact:

There appears to be some conflict between section 43 and 6, dealing with the non-transferability of spes-successionis and some controversy was raised to this effect.

Supreme Court:

Setting the controversy at rest held that both the provisions can be given full effect in their respective spheres.

CONCLUSION

Section 43 is an unauthorized person’s, fraudulent and erroneous representation by transfer regarding his right to transfer, for consideration and where this transferor subsequently acquires authority for the transfer. This section is embodied by doctrine of estoppel and even shares some variations, like this section with spes-successionis section. Thus, it is a transfer by an unauthorized person, feeding the grant of estoppel.

BIBLIOGRAPHY

PROJECT-PROFILE “DOCTRINE OF FEEDING THE GRANT BY THE ESTOPPEL” by Azeem Mian

Concept and Distinction of SECTION 6(a) and 43 OF TPA 1972 SECTION 114 OF QSO SECTION 18 SPECIFIC RELIEF ACT by Amir Ali Channar