Feeding the Grant by Estoppel

The doctrine of equity states that when one person either by his act or omission, or by declaration, has made another person believe something to be true or persuaded that person to act upon it, then in no case can he or his representative deny the truth of that thing later in the suit or in the proceedings. In simple words, estoppel means one cannot contradict, deny or declare to be false the previous statement which was made by him in the Court.

The law incorporated in S. 43 is based upon common law doctrine of Estoppel by deed and the equitable by deed and the equitable principle that if a person promises more than he can perform, then he must fulfil the promise, when he gets the ability to do so. Feeding the grant by Estoppel acts as an exception to the general rule contained under S. 7 of the Transfer of Property Act, 1882 according to which unauthorised transfers are void. However, in this case such transfer is considered valid.

 Introduction

Where a person has no right to transfer the property, he should not agree or profess to transfer any interest therein. However, if he has professed to transfer, equity does not permit him to deny his earlier statement. The Estoppel is backed by or is supported by, his own earlier grant.

The English common law ‘Doctrine of estoppel by deed’ was extended by equity to estoppel by representation. This extension dates back from the English case of Pickard v. Sears.

Ingredients

Fraudulent/ Erroneous Representation By The Transferor

The transferor transfers with a mala fide intention to deceive the transferee or under a mistake of his own right.

As the equitable doctrine of estoppel requires a man to make his representation good, the word fraudulently/erroneously is the foundation of this section. The words imply that the intention can be intentionally false or can even be made under a mistaken belief of having the authority to transfer. It need not be any particular form; it can even be by word of mouth or by a document.

Transferree Acted Upon The Representation

On the erroneous and fraudulent representation made by the transferor, the transferee believes him and acts upon such representation to complete the transaction. It is a well settled position that no estoppel can arise where the true possession is known to the transferee. Section 43 does not apply to gracious transfer or gifts.

Subsequent Acquisition Of Authority By The Transferor

The transferor may acquire the authority by any legal method, for example, by gift, purchase, inheritance or even by a will. Further, for the application of Section 43, the transfer should be otherwise be valid, i.e., the transferor must be competent and the object to the transferor should not be contrary to the public policy.

The transfer becomes valid when the transferee exercises the option and the title of the transferor becomes perfect. Where the official receiver transfers property before it vests in him, the implied covenant will be treated as erroneous representation, and the purchaser’s title would be complete as soon as the property vests in him (Muthiya Chettiar v Doraswami[1]). Similarly, where a partner sells the property of a firm in his right and subsequently on the dissolution of the firm is allotted the same property, the transferee gets the benefit of such allotment (Syed Nurul Hossein v Sheosahai[2]).

Further, the interest acquired by the transferor does not automatically pass on to the transferee but only when he claims his interest in such property

There Should Be A Subsisting Contract Of Transfer

The option of the transfer can only be exercised in respect of an interest acquired by the transferee whilst the contract of transfer “still subsists”. If the transferee (purchaser) had repudiated or cancelled that transaction, or had recovered his purchase money, or if the transaction were one of mortgage and the mortgage money had been repaid, then the relation of the transferor and the transferee has ceased to exist, and no claim in respect of the property can be made by the latter.

Invalid Transfer

43 of the Transfer of Property Act acts as an exception to S. 7 of the Act. S. 7 declares all unauthorised transfers void, however, S. 43 acts as an exception of the same which declares the unauthorised transfer under S. 43 valid. However, the transferee cannot take the help of S. 43 in the following cases:

• If the transaction is against public policy
• If the transferor is minor

Section 43 is applicable in all other situations except in the two conditions mentioned herein above.

In the case of Rajapakse v. Fernando[3], the Privy Council observed that where the transferor has purported to grant an interest in the property in which he did not have any interest at the time of transfer but he subsequently acquires interest, the rule of estoppel applies against the transferor, if he subsequently acquires that interest.

In Ram Bhawan Singh v Jagdish[4] the court observed that “when a person having a limited interest in the property transfers a larger interest to the transferee on a representation, and subsequently acquires the larger interest, the larger interest passes to the transferee at the latter’s option. This doctrine not only applies to sale but also applies to a mortgage, lease, charge, and exchange. Where no grant or interest in immovable property is involved, the doctrine would not apply. The doctrine also does not apply in cases where the transferor has acquired interest not in the property which is the subject matter of the transfer, but in some other property.

Difference between English Law and Indian Law

There exists a difference between the English law and the Indian law on one point. In English law, as soon as the transferor acquires the interest, an equitable estate passes to the transferee automatically. However, under the Indian law, as soon as the property is acquired, no estate passes to the transferee, however, an obligation is annexed to the property and the transferor becomes trustee of it for the transferee.

The equitable rule is enacted under Section 13 (1) (a) of the Specific Relief Act. Since, under the Indian Law, the transferee is required to take some further action by bringing the suit of specific performance and in case he does not exercise his option, then the right of transferee may get defeated by a purchase for value without notice.

Spes Successions

Spes Successionis is a latin maxim. It means the chance of succeeding in a person’s property after his death. It states about the mere possibility of a person to succeed in a property after his death. If The heir apparent or any relation expects to succeed in a property by way of will or succession, then according to the transfer of Property Act, he does not vest any interest in the property and cannot transfer that property.

The general rule of Section 6 of the Transfer of Property Act is that the person who possesses an interest in the property can transfer the property. Transfer by an heir – apparent cannot be taken as a transfer because the property is not in the hands of the transferor but there is only an expectation that the heir – apparent may get the property in future. The Transfer of Property Act, 1882 governs the transfer of property and prohibits some way of transfer to protect the principle of equity.

Therefore, it is an undisputable law that no one can have any estate or interest at law or in equity, contingent or other, in the property of a living person to which he hopes to succeed as heir at law or next of kin of such living person. During the lifetime of such person no one can have more than a spes successions, an expectation or hope of succeeding to his property.

The concept of Spes Successionis is contained under S. 6 (a) of the Transfer of Property Act. In the case of Ghulam Abbas v. Hazi Koyyum[5], the Court held that the transfer of mere expected interest is prohibited as being spes – successionis as waiting for the death of someone is against public policy. Therefore, it is not allowed.

Whether There Is A Conflict Between Section 6(a) AND Section 43 of Transfer of Property Act?

The honourable Supreme Court in the case of Juma Masjid v. Kodimaniandra[6], observed that there is no conflict between Section 6 (a) and Section 43. The provisions of S. 6 (a) refer to the rule of substantive law. Whereas S. 43 prescribes a rule of equity in case a transfer is made by a person not having the authority to transfer.

1. 43 provides for the application of rule of estoppel against the transferor after he acquires the authority to transfer. Further, Section 43 lays down that one of the conditions for the applicability of estoppel against the transferor is that the transferee must have been misled by the representation of the transferor. However, if the transferee had the knowledge of facts and the title of the transferor, then Section 43 shall not apply, however, Section 6 (a) of the Act shall apply.

Section 43 applies only in those cases, where the transfer is for consideration, it does not apply on gratuitous transfer. It applies in cases where despite a misrepresentation, the transferor, either takes or seeks to take a monetary benefit from the transferee. It therefore would not apply to cases where a person transfers the property by way of gift. On the other hand, the prohibition under S. 6(a) applies to all kinds of transfers, irrespective of whether they are for consideration or gratuitous transfer. A gift of property that a person hopes to inherit is also void.

The status of a transfer under S. 6(a) is void in its inception, however under S. 43, the transfer is voidable at the option of the transferee provided two conditions are satisfied. Firstly, that the contract should be subsisting at the time the transferor attains competency to transfer the property, i.e it should not have been rescinded and secondly, that the property should be available with the transferor. It should not be in the hand of a bona fide transferee for value.

Conclusion

The doctrine contained under section 43 is based on the equitable principle that if a person promises more than he can perform, then he must fulfil the promise, when he gets the ability to do so. The rule in India is the rule extended by equity and it is contained under Section 115 of the Indian Evidence Act. As the equitable doctrine of estoppel requires a man to make his representation good, therefore, if the transferor professes to transfer, equity does not permit him to deny his earlier grant.

The article has been contributed by Keshav Tejpal, student at University School of Law and Legal Studies.

End Notes

[1] AIR 1927 Mad 1091

[2] (1893) ILR 20Cal 1

[3] AIR 1920 PC 216

[4] (1990) 4 SCC 309

[5] 1973 SCC 554

[6] AIR 1962 SC 847