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Report No. 70

Chapter 46

Improvements Made in Good Faith

Section 51

46.1. Introduction.-

The golden thread of good faith which is woven into section 50, and which runs through some of the earlier sections, appears again in the next section, where good faith has even a positive role to play. If, section 50 merely gives protection from liability for a payment made in good faith, section 51 goes further and confers positive rights in regard to improvements made by a person on immovable property who, owing to defective title, is ultimately evicted.

If he can show good faith, he is entitled to compensation. The legal defect in his title is not allowed to override his claim based on equitable considerations. This is yet another example of the genesis of some of the important provisions of the Act in equity1 and gives the lie to the charge sometimes made that the law is based on technicalities. Justice in the wider sense, justice with an all-embracing eye, is the dominant spirit underlying section 51.

1. For a detailed discussion of the English law see "Quickied Plantation" solo credit solo (1963) 215 LT 143.

46.2. Not based on estoppel.-

Although an equitable claim for compensation for improvements can arise on the basis of estoppel also, that is not the factual situation contemplated by section 51. The section reads:

"51. When the transferee of immovable property makes any improvement on the property, believing in good faith that he is absolutely entitled thereto, and he is subsequently evicted therefrom by any person having a better title, the transferee has a right to require the person causing the eviction either to have the value of improvement estimated and paid or secured or the transferee, or to sell his interest in the property to the transferee as the then market value thereof irrespective of the value of such improvement. The amount to be paid or secured in respect of such improvement shall be the estimated value thereof at the time of the eviction.

When under the circumstances aforesaid, the transferee has planted or sown on the property crops which are growing when he is evicted thereof, he is entitled to such crops and to free ingress and egress to gather and carry them."

The situation which the section is concerned with is one mainly of eviction. Eviction being a remedy of a specific nature, equity would compel the persons seeking that remedy to have regard to the position of the person evicted, where improvements have been made by that person bona fide and in the belief that he was absolutely entitled to the property. There are certain conditions to be satisfied in this regard, but at this stage it is sufficient to point out that the crux of protection given by the section is "good faith". The rest are matters of detail, while good faith constitutes the heart of matter.

This section is, to some extent, founded upon the principle that he who will have equity must do equity. As observed by Snell: "A constructive trust may also arise where a person, who is only part-owner, acting bona fide, permanently benefits as estate by repairs or improvements; for a lien or trust may arise in his favour in respect of the sum he has expended in such repairs or improvements.1

1. Lake v. Gibson, 1 Eq Ca Ab 290.

46.3. Hindu law and Muslim law.-

Somewhat similar principles are recognised in Hindu law and Muslim law. Narada says-1

"If a man has built a house on the ground of a stranger and lives in it, paying rent for it, he may take with him, when he leaves the house, the thatch, the timber, the bricks and the other building material; but if he has been residing on the ground of a stranger, without paying rent and against that man's wish, he shall, by no means, take with him, on leaving it, the thatch and the timber."

Under the Muslim law, according to the 'Hedaya':

"A person usurping land and planting trees in it, or erecting building upon it, must be directed to remove the trees and clear the land and restore the same to the proprietor. If the removal is injurious to the land, the proprietor of the land has the option of paying to the proprietor of the trees or of the buildings, a compensation equal to the value and thus possessing himself of them2."

1. Sacred Books of the East, 1889 Edn., Vol. 33, pp. 114, 145, Ganganath Jha Hindu Law in its Sources, (1930 Edn.), Vol. 1, p. 302, Narada, Vol. VI. pp. 20, 21, cited in Mofiz v. Rasik Lal, 1910 ILR 37 Cal 815 (820).

2. (a) Hedaya Hamilton's Translations, Vol. 3; cited in Pannalal v. Gobardhan Das, AIR 1949 All 757 (759, 760);

(b) (1902) 26 Born 1 (15, 16): 28 Ind App 121 (PC) (Case from Zanzibar where Muhammadan law applied-the above passage was held to contain the rule applicable).

46.4. Civil law.-

The section deals with only one aspect of a wider principle which allows similar relief. It declares only what has been the pre-existing law on the subject1. Embodying as it does a rule of equity, it is applicable alike to both Hindus and Mohammedan2. The Civil law carried its doctrine in cases of this sort much further, and allowed3 the purchaser or other person making improvements innocently and under the belief that he was the true owner, compensation for the benefit actually conferred upon the property4, (described as "meliorations")5 Domat lays down as a general doctrine that those who have spent money on improvements of an estate, have, by the civil law, a privilege upon those improvements, as upon a purchase with their own money.

1. Gour.

2. Section 2(d); Durgosi v. Fakeer Sahib, ILR 30 Mad 197.

3. See Pannalal v. Govardhan Das, AIR 1949 All 757 (759).

4. Dig. Book 50, tit 17, I, 206 "June nature cequm est, reminem cum alleries detrimento et injuria fieri cupletiorem.

5. A creditor was allowed lien for meliorations (Dig. Bk. 121, tit 1, I, 25; 1 Domat Bk 3, tit 1, 5 Arts. 1-7).

46.5. English law.-

The rule here enacted is much wider than that deducible from the English cases, according to which it is necessary that the real owner must have had knowledge not only of the expenditure incurred1, but also of his own rights in the property2. But this is by no means necessary under the section, which requires only that the person making improvements must have acted in the bona fide belief that he was absolutely entitled to the property. Where he fails to prove this, he cannot claim protection3. Provision for compensation for improvements under varying and various conditions is also made in the several Provincial Acts which provide for compensation to tenants and persons occupying land.4-5

1. Ramsden v. Dyson, LR 1 1-11.. 129 (141).

2. Wilmott v. Barber, 13 Ch D 36, o.a., 17 Ch D 772.

3. Moti Chand v. Hr. India Corp. Co. Ltd., ILR (1932) All 210.

4. Section 69(1), Punjab Tenancy Act (XVI of 1887); The Central Provinces Tenancy Act (XI of 1898); Bengal Tenancy Act (VII of 1885); Malabar Compensation for Tenants Improvements Act (Madras Act 1 of 1900).

5. Gour.

46.6. Other situations.-

A claim for compensation for improvements may be made successfully or unsuccessfully in several situations. Some of the important ones are the following1:

(a) When improvements are made by a person who believes himself in good faith to be absolutely entitled to the property. This is the situation in section 51. Relief under that section has nothing to do with the conduct of the real owner.

(b) Where the owner has encouraged another person to make improvements by his declaration, act or omission. Relief in this case is based on estoppel2 which bars ejectment without compensation.

(c) Where improvements are made by a co-owner without the concurrence of the other co-owners. In such a situation the other co-owner may obtain relief without proof of material injury3. The case would be decided purely on proprietary rights.

(d) Where improvements are made by holders of a limited interest. In such a case, compensation is admissible only when the improvements can be traced to some encouragement by the full owner. Such a claim may be made by the tenant against the landlord4-5 or by a mortgagee against the mortgagor.

(e) Where improvements are made by a pure trespasser without the consent of, or encouragement by, the owner. In such a case, compensation is not allowed.6-7

As to situation (b) above, it may be stated that where the owner encourages improvements to be made, equitable estoppel may arise by reason of the conduct of the real owner.

After discussing these theoretical aspects, we proceed to a consideration of some concrete questions.

1. Gour.

2. Ramsden v. Dyson, LR 1 HL 129 (168).

3. (a) Paras Ram v. Sheriff, ILR 9 All 661 (664);

(b) Nocury Lal v. Bindabun, ILR 8 Cal 708;

(c) Joy Chunder v. Bipproo, ILR 14 Cal 236; (d)Madan Mohun v. Rajab Ali, ILR 28 Cal 223;

(e) Sashi Bhushan v. Ganesh Chunder, ILR 29 Cal 500;

(f) Fazilatunnessa v. Liaz Hassan, ILR 30 Cal 901.

4. Section 108(m)(p)(q).

5. (a) Beni Ram v. Kundan Lal, ILR 21 All 496 (PC), (b) Raja of Venkatagiri v. Mukku, 7 IC 202 (208).

6. Section 63.

7. Maddanappa v. Chandramma, AIR 1965 SC 1812 (1816), para. 14.

46.7. Good faith and inquiry.-

We have already stated1 that good faith is the crux of the section. Its content is therefore a matter of some importance.

1. Para. 46.3, supra.

46.8. Inquiry. On the question whether good faith in section 51 also requires proof of proper inquiry, there is some obscurity. In a Madras case,1 the grantee of land under an order of the Tehsildar spent money on improvements without knowledge of an appeal which had been filed against the order and which had resulted in cancellation of the grant.

The section was regarded as applicable. Probably in this case proper inquiry would have disclosed the proceedings by way of appeal. In an earlier case of the same High Court,2 however, the claim of a purchaser from Hindu widow for compensation for improvements was repelled on the ground of want of good faith. The purchaser in that case did not make any inquiries as to necessity for the sale and the sale was set aside at the instance of the reversioner. It was held that since the purchaser could not, in the circumstances, have believed that he was absolutely entitled, there could be no valid claim under section 51.

There are some decision's of the other High Courts taking the same view.3

With respect, we are not convinced that this is a correct view of the section as it now stands. The question is whether or not that honest belief is preceded by proper inquiry. To say in such circumstances that the purchaser could not have believed that he was absolutely entitled, is to equate good faith with the element of careful inquiry, which is not the ordinary understanding of the expression "good faith". Theoretically, one cannot overlook the distinction between what is the belief of the person and what is the reasonable belief of that person.

While actual knowledge of a defect in one's title may bar the application of section 51 for want of good faith, it does not appear to be a correct view to take that negligence as such would preclude good faith. We would agree rather with those decisions.4 which take the view that honesty of purpose suffices. So far as the section under consideration is concerned, it should be provided that what is done honestly is done in good faith, whether or not is done negligently.5

1. Narayanmurthi v. Secretary of State, 48 MI.J 682: AIR 1925 Mad 63.

2. Nangappa v. P. Goundan, ILR 32 Mad 530.

3. Bimol Chandra v. Mammatha Nath, AIR 1954 Cal 345 (347).

4. Mohammad Ali Khan v. Kanulal, AIR 1935 Cal 625.

5. Cf discussion as to section 50, supra.

46.9. Invalid instruments.-

There is a difference of opinion as to whether a person in whose favour an instrument is executed which is invalid for want of registration is a "transferee" within the meaning of section 51. According to the High Court of Madras1 he is a transferee. According to the High Courts of Allahabad2 and Rangoon,3 he is not.

1. Ramanathan v. Ranganathan, AIR 1919 Mad 1083 (1090) (FB).

2. Ram Prasad v. Chajju, AIR 1964 All 300 (302).

3. Madan Gopal v. Sundaran, AIR 1940 Rang 172 (174).

46.10. Qualified owner.-

Then, there is a controversy as to whether the section applies to a case where the transfer is from a qualified owner. It is the view of the Allahabad High Court1 that section 51 is applicable only to defective transfers and not to defensible transfers. The Madras and Nagpur view is to be contrary2-3. One is reminded in this context of the phrase used in section 43-power of a person to transfer property "in circumstances which are in their nature variable." We are of the opinion that the wider view-the Madras view-should be adopted, having regard to the beneficial object of the section.

The answer to such questions depends partly on the meaning which one attaches to the expression "transferee" and partly on the emphasis to be placed on the words "believing himself to be absolutely entitled in good faith." We see every reason why the wider view should be adopted. The emphasis should be on the honest belief of the person making the improvements that he is a transferee and not on the validity of his title. Once good faith is established, the equities in his favour should not be disregarded.

1. Lachmi Prasad v. Lachmi Narain, AIR 1928 All 41 (42) (Ashworth, J.).

2. Nangappa v. P. Coundan, ILR 32 Mad 530.

3. Vithal v. Narayan, AIR 1931 Nag 69 (Jackson, A.J.C.).

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