Report No. 70
49.21. Salmond's analysis.-
Salmond1 says that every right involves a title or source from which it is derived, title being the de facto antecedent of which the right is the de jure consequent. He adds that the titles are of two kinds: original and derivative. Original title is something which creates a right de-novo-the catching of fish is an original title of the right of fishing. A derivative title transfers an already existing right to a new owner-the purchase of fish is an illustration of a derivative title.
1. Salmond Jurisprudence, (1966), p. 431.
49.22. Position in England.-
In England, a contract for the sale of immovable property makes the promise the owner in equity of the estate.1-2But, in India, this is not the position. Section 54 makes it very clear that the contract does not create any interest in the property. Even in the case of a decree for specific performance, it has been held3 that the title passes with the execution and registration of a sale deed, and does not immediately flow from the decree.
1. AIR 1916 PC 193.
2. AIR 1967 SC 744 (748).
3. Christine v. Ugappa, AIR 1966 Mys 299 (303).
Again, it is for this reason that the rule against perpetuities does not affect a contract for the sale of property. Even for the purposes of section 24 of the Bombay Agriculturist Debtor's Relief Act, an agreement to sell does not create any "interest", in the land.1
1. Gurappa v. Basawanappa, AIR 1957 Born 31 (32) (Shah, J.).
49.24. Interest and title.-
Under section 55(2), there is an implied convenant that the interest which the seller professes to transfer subsists, and that he has power to transfer the same. This shows the connection between the concept of title and the concept of interest.
49.25. Title deeds.-
Again, section 58(f), which empowers the creation of a mortgage by deposit of "title deeds", obviously does not mean that a person can create a mortgage of this nature by merely depositing a contract for sale in his favour.
In general, in the Law of Real Property,1 a document of title is a document which describes a land sufficiently to identify it, which shows a disposition of the whole legal interest and which contains nothing to throw any doubt on the title.
In India, a contract for sale of land, would hardly satisfy the last two conditions. According to Cheshire2 the usual way in which the vendor proves his title is to produce the deed or other document by which the land has been disposed of, in order to show that the interest which he has agreed to sell devolved upon him. In England, if the contract for sale is capable of specific performance, an immediate equitable interest in the land passes to the purchaser and the legal estate remains in the vendor until the conveyance has been executed. Specific performance of a contract for the sale of land is ordinarily available to a purchaser.3
But, until specific performance is granted and a conveyance executed (thereunder, title does not pass. Even in England, the position regarding completion of the contract is4 that after the purchaser has investigated the abstract of title, it is his duty either to accept or to reject the title offered to him. Again, completion means that the purchaser should prepare deed for conveyance which is to vest the interest in the purchaser, and which contains the usual convenants by the vendor.
1. Megarry and Wade Real Property, (1966), p. 586.
2. Cheshire Real Property, (1972), p. 73.
3. Cheshire Real Property, (1972), p. 75.
4. Cheshire Real Property, (1972), p. 740.
49.26. As to the judicial decisions on section 3, definition of 'notice', Explanation II, the whole question depends on the meaning of the word 'title'. Reference has been already made to the Patna case. In an Orissa case1 it was held that assuming that mere occupation of property as a tenant would be notice of an agreement not connected with its occupation the doctrine cannot be extended to cases where the tenant has also a contract to purchase in his favour.
It is to be noted that a contract for the sale of immovable property does not (in the scheme of the Act) confer any interest in the property. This is expressly enacted in section 54 of the Act. In the circumstances, it is difficult to see how the word "title" could apply to the equities recognised by section 53A.
1. AIR 1962 Ori 86 (89).
49.27. Position summed up as to passing of title under contract.-
The above discussion as to the passing of title under contract may be thus summed up
(i) No interest in the property passes under a contract. Section 54 is a specific on this point.
(ii) Since no interest passes, no 'derivative' title is created to borrow the phraseology used by Salmond. And the present is undoubtedly not a case of original title.
(iii) That no interest passes, is a position further substantiated by the fact that the rule against perpetuity does not apply to a contract for sale.
(iv) English cases on equitable interest are inapplicable.
(v) A contract of sale cannot be appropriately described as a title deed.
(vi) Estoppel creates a bar and confers no title.
(vii) Where the law prescribes a mode of transfer, derivative title can be created only if that mode is followed.
(viii) This position remains unaffected by section 53A. It confers no title, though it creates certain bars between the parties and their successors in interest.
(ix) Such rights as are created, rest on estoppel. Estoppel passes no title-see proposition (vi) above.
(x) That section 53A is available also against transferees with notice of part performance does not mean that the right amounts to title within section 3, definition of notice, Explanation 2. That Explanation invests possession with notice of "title".
If, on general principles as discussed above, no title is created, availability against transferees cannot modify the position.
49.28. In view of the above position we do not recommend any change in the law.
We shall now consider the question whether gifts fall within the doctrine of part-performance. At a time when the law on the subject was not codified, it was held that the doctrine was applicable even to gifts. This was the Nagpur view.
In a Rangoon case1 it was assumed that where a donee of property is in bona fide possession of it, the donor cannot evict the donee even though the gift had not been made by a registered instrument, but it was also held that the protection is not available to a subsequent donee from the donee whose deed of gift is not registered. In some cases before the amendment, however, it was held that the doctrine did not apply to gifts.2
So far as the present section is concerned, the case is clearly outside the section, because the section contemplates the existence of a 'contract' for the transfer of property. That part of the section which speaks of "an instrument of transfer" refers to an instrument executed in pursuance of the contract. In fact, the opening words "contract" to transfer for consideration" put the matter beyond doubt.
1. AIR 1927 Rang 128; U. Sayainda v. Mangala.
2. (a) Maung Hla Mating v. Maung Po Htai, AIR 1929 Rang 316 (317); (b) AIR 1928 All 699 (703).
49.30. Need for amendment of the law.-
The question now to be considered is whether this position requires to be altered as a matter of justice. Although it can be argued that there are no equities in favour of the donee, one must not overlook the fact that where the donee has taken possession, the position is different. On this basis, there is sufficient justification for extending the law to gifts with suitable amendments in the section.1 We shall recommend the insertion of a suitable provision on the subject in the chapter on gifts.2
1. This recommendation is subject to reservation by Shri Dhavan and Shri Sen-Varma.
2. Chapter on gifts, infra.