Section-5 “Transfer of property” defined.—In the following sections “transfer of property” means an act by which a living person conveys property, in present or in future, to one or more other living persons, or to himself, 1[or to himself] and one or more other living persons; and “to transfer property” is to perform such act. 1[In this section “living person” includes a company or association or body of individuals, whether incorporated or not, but nothing herein contained shall affect any law for the time being in force relating to transfer of property to or by companies, associations or bodies of individuals.]
The analysis of this definition, makes it clear that transfer of property is –
i. An act by which
ii. A living person,
iv. In present or future,
vi. To another living person or to himself.
Part (A) of Chapter II makes it clear that provisions contained in this part of Chapter II are applicable to transfer of properties whether movable or immovable. Certain provisions of this Act are applicable to the transfers of also movable properties. Sections 5 to 37 of this chapter are applicable to transfers of movable and immovable, both kinds of properties. For example, what is meant by transfer of property (Sec. 5) or when the interest of that property accrues to the transferee, (Secs. 19, 21) are basic questions irrespective of the nature of property. Similarly, what properties cannot be transferred (Sec. 6) or under what conditions a transfer can be made for the benefit of unborn persons (Secs. 3, 14) etc. are also such issues where the nature of property is irrelevant.
Part (B) of this chapter contains provisions for the transfer of only immovable properties because the provisions laid down in Sections 38- 53A necessarily suggest that they can be applicable where the property is immovable.
Transfer of property have been given specific names on the ground of special procedure or other differences in those matters. For example, transfer of ownership in property in return of money has been given specific name ‘sale’ whereas if there is no consideration in the transfer of ownership, it is gift.
Section 5 defines ‘transfer of property in the following words:
“Transfer of Property” means an act by which a living person conveys property in present or in future, to one or more other living persons (or to himself) and ‘to transfer property’ is to perform such act).
(i) Transfers of Property is an act—Under this something is done by the person who wants to transfer his property; it is not transferred automatically without transferors act as is the case in wills or inheritance. Transferring property would mean doing of this ‘act’ or performing such act. The legal effect of this act is passing of property from one person to another.
(ii) Living Person – The person who makes the transfer is called the transferor. The transferor may be human person or a juristic person. The living person i.e the transferor must be in existence at the time of making of the transfer. The transferor must also be competent i.e of the age of majority, of sound mind and not otherwise disqualified to transfer a property. Court has not been regarded as ‘ living person’ therefore, transfer made by the order to the Court (e.g. Court-Sale) is not a transfer of property within the meaning of Section 5 of the Transfer of Property Act.
(iii) Conveys –— Conveyance means any act of the transferor by which certain new titles or interests are created in favour of the transferee. In a transfer of property there is actually transfer of title to or interests in that property. Before transfer of property, the transferee does not have that particular interest. After the transfer of property the transferee gets that particular interest which is given by the transferor. Anything done or any form of assurance by virtue of which transferee gets new title or interest which he did not have before the transfer, is called conveyance.
The test as to whether a transaction is a transfer of property or not is whether that transaction passes on certain new rights or interests to the transferee or not.
Similarly, delivery of possession accompanied by an agreement of sale does not amount to transfer of an interest in the property. A transfer can be effected only by a registered sale deed, and not merely by an agreement to sell, general power of attorney or Will (Suraj Lamp & Industries (P. ) Ltd. V. State of Haryana, AIR 2012 SC 206)..
Division of Partnership assets partners of a partnership firm is not a conveyance because all of them were already owners of such assets.
(iv) In present or in Future — A transfer of property may be made so as to take place with immediate effect or to take place on a future date. The transferor can make arrangement that the property is vested or accrues to the transferee immediately after the completion of the transfer. He may also make such arrangements in which the vesting of the interest of the property is postponed to a future date. He is free to transfer a property also upon the fulfilment of certain conditions.
a. A transfers his property to B for life and then to C. the transfer in favour of B is present (although he gets only life interest) but the transfer in favour of C is further transfer.
b. A makes gift of his watch to B provided B gets first division in the next examination. Here, although the gift has been declared today but it shall take effect only if B gets first division. Such transfers are called conditional transfers.
The conveyance may, therefore, be present, future or conditional.
(v) Property – The word ‘Property’ has been used in a comprehensive sense. It has a very wide meaning and includes properties of all descriptions. It means movable properties. It means immovable properties. It also means intangible properties such as right to catch fish or an actionable claims or other beneficial interests in a property.
Property is essentially a bundle of rights or interest. When a property is transferred, there may be transfer of all the rights in that property or only of some of it. All the rights in a property signifies ownership or absolute interest. Only some of the rights or interests in a property would mean partial or limited interest. Thus, if A makes a gift of his house to B, there is transfer of absolute interest of the house. It is a transfer of ‘Property’. On the other hand, if A transfers the right of enjoyment of his house to B for a certain period it is called ‘lease’. It is transfer of only partial interest in the house but it is also a transfer of ‘property’.
The Property must be a present property. That is to say, it exists on the date of the transfer. Transfer of any non-existent property is void. Transfer of any non-existent or future property operates only as a contract which may be performed in future and can be enforced as soon as the property comes into existence.
(vi) To another living person – There must also be another person to whom the property may be transferred. Such other person is called transferee. Under Section 5 is an act between two living persons, the transferee must also be a living person.
The transferee need not be a competent person. Transferee may be minor, insane or even a child en ventre sa mere (child in mother’s womb). But, the transferee must be in existence when the transfer is being made.
‘Another living person’ includes also juridical person such as firms, societies, companies, corporations etc. and property may be transferred to them. An idol is a juristic person capable of holding property but it is not a ‘living person within the meaning of Section 5 of the Act. It has been held that an idol is a symbol of deity and it is against the Hindu Religion that a deity should accept any property or worldly goods. Dedication of property to a temple is not a transfer of property (Biopatrai Nath v. Ramchandra, AIR 1926 Nag. 469).
To Himself – A transfer of property under Section 5 of the Act requires two ‘living persons’, the transferor and transferee. One cannot transfer a property to himself. But, one can transfer a property to himself in some other capacity. The transferor and the transferee are physically the same person but as transferor he has the legal status of settlor whereas as transferee his legal status is that of a trustee.
Family Settlement –In a family settlement there is a mutual agreement between the members of a family to hold their respective shares separately. It simply acknowledges and defines the title of each member (Tek Bahadur v. Devi Singh, AIR 1966 SC 292). In Sadhu Madho Das V. Pandit Mukund Ram (AIR 1955 SC 481), the Supreme Court observed that family arrangement is based on the assumption that there is an antecedent (pre-existing) title of some sort in the parties and the agreement acknowledges and defines what that title is (Vikram Singh V. Ajit Inder Singh, AIR 2014 Del. 173).
In a family settlement since there is no creation of any new title or interest in favour of any member, there is not conveyance; therefore, it is not a transfer of property.
Compromise – Compromise is also not a transfer of property. Compromise means agreement for the settlement of doubtful claims between the parties in respect of some property. Like family settlement, here too the titles or interest of the parties are antecedent or already existing; the compromise deed simply defines them (Abbas Bandi Bibi v. Muhammad Raza, AIR 1929 Oudh 193, Khunni Lal v. Govind Krishna (1911) 33 AII 356).
Partition – Partition is not a transfer of property. Partition means separating the parts of co-owned property. If in a property there are several co-owners having, under the law, their respective interests but the whole property is neither used nor enjoyed by them separately then, after the partition each member gets merely the separate right of enjoyment. Accordingly, it has been held that partition is really a process by which a joint enjoyment is transformed into an enjoyment severally, and no conveyance is involved in the process as the conferment of a new title is not necessary (Chanderwati v. Lakshmi Chand, AIR 1988 Del 13).
Surrender – Surrender is therefore falling of a lesser estate into a greater. For example, A is landlord and B is his tenant. A as landlord has ownership of the house. Ownership or absolute interest is a larger interest. B as a tenant has also an interest in A’s house but A’s interest is lesser interest because it is limited only to right of enjoyment. Now, if B vacates the house before expiry of the term of tenancy, it would amount surrendering of his right of residence. Here, the lesser for smaller interest, of the landlord during tenancy, comes back to ownership (larger interest). There is no creation of any new title or interest in favour of the landlord.
Release — Release is a transfer of property. If a larger interest falls into a smaller interest in such a way that smaller interest is enlarged then, for the holder of smaller interest there is creation of a new title or interest. Since some new titles or interest are added to his already existing interest, There is conveyance hence it amounts to transfer of property (Official Assigner, Madras v. Tehmma, Dinshaw Tehrani, AIR 1972 Mad. 187). After taking some money A executed a deed transferring his right, title and interest in his half share of the property absolutely in favour of B. The document, thus gave B absolute rights in the share which belonged to A and to which B was not entitled. The Madras High Court held that this document clearly came under the definition of deed of “transfer” within the meaning of Section 5.
Release may be with consideration or without any consideration.
Relinquishment – Relinquishment means giving up one’s rights or interests. Its effect is extinction of one’s rights in a property; there is no intention that the person relinquishing his interest is conveying that interest in favour of another person. Relinquishment is therefore, not a transfer of property. Moreover, since relinquishment connotes the extinction of a right therefore, there is nothing left to transfer so that it may amount to a transfer of property as defined in Section 5 of the Act (Provident Investment Co. v. Commr. Income Tax, AIR 1954 Bom. 95, See also Kuppuswamy Chettar v. Arumugam, AIR 1967 SC 1395).
Charge – Charge is not a transfer of property. Charge is created on a property for securing a payment out of that property. When the property of a person is charged for securing certain payments e.g. maintenance, it is simply securing ‘personal obligation’ out of his property. A charge is, therefore, not a transfer because the only right created under it is a right to payment out of the property subjected to the charge (Gobind v. Dwarka Nath, (1908) 35 Cal. 837).
Property situated outside India – It may be noted that because of its very nature, transfer of immovable property is governed by the law of the land where the property is situated. But, this does not mean that a person cannot claim rights under the transfer of that property under this Act. His claim is subject to contrary claims or rights of the affected party to prove that the transfer is defective or invalid under the law of the land where the property is situate (Central Bank of India v. Nusserwanji, AIR 2017 NOC 1103 Ker.).