Report No. 70
Definition of Transfer of Property
11.1. "Transfer of Property" defined- Introductory.-
Section 5 defines the expression "transfer of property" as meaning an act by which a living person conveys property, in present or in future, to one or more other living persons, or to himself, or to himself and one or more other living persons. It also defines the expression "to transfer property" as meaning to perform such act.
The section further clarifies that '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. This clarification was inserted in 1929.
11.2. Analysi-Living person.-
Let us analyse the section. The first important ingredient is that there must be a living person. This is explained in the second part of the section which expands its scope. But apart from that, it may be noted that the section-and therefore the Act in general-does not apply to the conveyance of property to an entity which is recognised by law as having a personality in law but which does not have life. It is for this reason that a gift to God Almighty does not fall within the frame-work of the Act.1
For the same reason, a transfer of property to an idol is not a transfer2 within the meaning of section 5. Those judicial decisions, therefore, which take the view that a living person includes a juristic person, do not, with respect, appear to be correct. The very fact that in 1929 a paragraph had to be added to define a living person as including a company or association or body of individuals whether incorporated or not, would seem to show that artificial legal persons do not otherwise fall within section 5.
Of course, the position in regard to idols or other juristic persons may be different if the mode of conveyance is so adopted that the transferor executes the instrument in favour of living persons designated as trustees.3 Such a transfer must satisfy the requirements of the Act.
1. AIR 1946 Audh 256.
2. AIR 1926 Nag 469.
3. (1975) 16 Guj LR 289.
The next important ingredient of section 5 is that indicated by the word "conveys". This expression is not defined in the Act, but it postulates on act by which a change of proprietary right is sought to be effected. Where there is no transmutation of a proprietary interest, but only a redistribution thereof, there is no act "conveying" property within the meaning of this section.
It is for this reason that a family arrangement is not a transfer1. Again, it is for the same reason that an arrangement by way of dissolution of partnership is not, speaking ordinarily, a transfer,2 though the case could be different where, after the dissolution, a specific conveyance of property is the device adopted. For the same reason, the contribution of immovable property by a partner as his share of partnership does not require a written document or registra tion.3
1. AIR 1966 SC 432.
2. Cf. AIR 1970 Mad 111.
3. AIR 1963 Pat 221: AIR 1965 Pat 144.
11.4. It has been held1 that an arrangement by which, on the dissolution of a partnership, certain partners are paid off and, in return, give up or assign their interests in the assets of the partnership by way of debts, which were due to the firm is a "transfer of property" as defined by section 5. This, with respect, must be taken as confined to actionable claims (section 130).
1. AIR 1939 Sind 288.
The third important ingredient of section 5 is indicated by the words which relate to the transferee. The transferee must be (i) one or more other living person, or (ii) the transferor himself, or (iii) the transferor himself and one or more other living persons. In the case (ii) mentioned above, the transferor, when he becomes the transferee, does so as a trustee.