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Report No. 70

Note of Dissent

I have read the dissenting note of my colleague, Mr. S.P. Sen-Varma and agree with it. I would like to add a few words of my own. I regret I cannot agree to the proposal that the law relating to the revocability of gifts should be so amended as to make a written promise of a gift irrevocable if the donee accepts possession of the property in pursuance of the promise.

The proposal in effect is that if A makes a promise in writing to B that he will make a gift of his property to B and puts B in possession of that property, A cannot revoke the gift and recover possession of the property, even though the ownership still remains with him. It may be noted that in the illustration given by me, B does not do any act on the faith of the promise of gift which will render it inequitable for A to revoke the gift. The only thing that A has done is that he has been put in possession and accepted possession of the property.

But being put in possession or accepting possession is a benefit and not a detriment and under the present law B cannot take advantage of the benefit derived by him so as to deprive A of his right to revoke the gift. The position would be different if, acting on the faith of the promise of gift by A, B has constructed a house on the property at his own cost or done something or refrained from doing something which has altered his position for the worth.

All he can claim is that A promised in writing to make a gift of the property to him and also put him in possession. This does not create any equities in favour of B so as to deprive A of his right to revoke the gift, if he discovers that B did not deserve the gift. It may be noted that in actual practice gifts of property are usually made by one party to another out of love and affection, or gratitude for the faithful attitude of the donee.

For example, a father may promise to make a gift of his property to one of his sons out of love and affection. But the ownership in the property is effected by a registered instrument signed by or on behalf of the father-in other words, until the property becomes in law the property of the son. Before this transfer of ownership takes place, the father will have the right to revoke the gift.

In my opinion, the father should have this right. For example, if the father finds that the son for whom he had such love and affection becomes unfaithful to him so as to forfeit his love and affection, the father has the right under the law to revoke the gift, assert his ownership and claim the return of the property to him and recover possession.

But under the proposed section 123A, the father will have no remedy against such an unfaithful son and he will be in the position of King Lear who gifted his kingdom to there treacherous daughters and was subsequently thrown out from his own kingdom. I cannot agree to a proposal which will become a charter of protection for unfaithful or treacherous sons or relations or other unfaithful donees.

It may be noted that under the proposed law the accepting of possession by the donee will have the same effect as consideration. Under section 53A of the Transfer of Property Act, if B gives consideration for A's promise to transfer property to him and is put in possession, he acquires a title to the property against A and A cannot file a suit for the recovery of the property on the ground that the transfer was not registered.

But under the proposed section 123A, the equities arising out of the doctrine of consideration will be attached to gifts (without consideration) if the donor makes a written promise to gift the property and the donee accepts possession. I think the proposed change will deprive the donor of a very valuable right which today he can exercise till the last moment against undutiful, treacherous or unfaithful donees. Under the present social system, such a change will work havoc. I am strongly opposed to it. Of course, after the gift deed is registered, the donor ceases to be the owner and he is helpless against an unfaithful donee, be he a son or a friend or a servant.

But until this last moment arrives, he remains the owner and should have the right to revoke a gift and recover the property from any undeserving donee. The fact that the donor made a promise in writing is irrelevant when considering the equities between the parties. As far as equity is concerned, there is no difference between an oral or a written promise. The proposed section 123A, will treat acceptance of possession by the donee as having the same force as giving consideration for the gift. I must emphasise that mere acceptance of a gift is a benefit and the donee should not be allowed to take advantage of this benefit as if he has suffered any detriment or loss or given any consideration.

24th August, 1977.

(S.S. Dhavan)

Notes of Dissent

I am sorry that I am recording my dissent on the points mentioned below.

I do not agree to the proposal that the right of foreclosure available to a mortgagee in a mortgage by conditional sale or to a mortgage in an anomalous mortgage which specifically provides for foreclosure should be altogether taken away and that such mortgagee should be allowed to bring only a suit for sale. In other words, it is proposed to omit the right of foreclosure altogether from the law of mortgage in our country.

The reason given is that if foreclosure is retained, then, mortgagor on the passing of a decree for foreclosure absolutely loses his property without receiving anything from the mortgaged property which he might have received out of the proceeds of the sale of the property. It is argued that if foreclosure is abolished and the mortgaged property is sold, then after satisfying the mortgage money due to the mortgagee, a portion of the sale proceeds may be available to the mortgagor.

The idea of foreclosure is inherent in a mortgage by conditional sale which in many parts of India is known as Kot Kabala, vide the definition in section 58(c). Substitution of sale for foreclosure in a mortgage by conditional sale is inherently and essentially opposed to the concept of mortgage by conditional sale. Then, it is not true that the mortgagor does not get adequate money from the mortgagee when he enters into the transaction of mortgage by conditional sale.

The amount which a mortgagor in a mortgage by conditional sale receives from the mortgagee is much larger than the amount which is obtainable, say, in the case of a simple mortgage. The principal amount in a mortgage by conditional sale is very near the price which might be fetched by an out and out sale of the mortgaged property.

A mortgage by conditional sale without the right of foreclosure is in my opinion a contradiction in terms. Merely retaining a particular form (namely mortgage by conditional sale) is of no use unless its special characteristic, namely, the right of the mortgagee to a decree of foreclosure debarring a mortgagor from redeeming the mortgage altogether, is retained. The Privy Council case of Ram Kinkar v. Satyacharan, AIR 1939 PC reminds me only of what Lord Halsbury had said in Quinn v. Leathern, 1901 AC 495 (506):

"every judgement must be read as applicable to the particular facts proved, or assumed to be proved, since the generality of the expressions which may be found there are not intended to be expositions of the whole law but governed and qualified by the particular facts of the case in which such expressions are to be found. The other is that that a case is only an authority for what it actually decides. I entirely deny that it can be quoted for a proposition that may seem to follow logically from it. Such a mode of reasoning assumes that the law is necessarily a logical code, whereas every lawyer must acknowledge that the law is not always logical at all."

Therefore, we cannot entirely brush aside the different forms of mortgage mentioned in section 58 of the Transfer of Property Act. The entire sensuous phenomenal world is a world of forms and appearances and names. Through our sensuous experiences we cannot know the ultimate reality underlying all forms and names. The phenomenal world without forms is meaningless. Mortgage by conditional sale is no doubt a form of mortgage. But it is a form which cannot be ignored at all in our dealings with immovable property.

Therefore, my view is, either retain foreclosure or abolish altogether mortgage by conditional sale. What is there in retaining a mere shell without the substance within the shell? It may also be pointed out that though it is proposed to give only a right of sale to the mortgage in a mortgage by conditional sale, the personal remedy is not proposed to be made available to such a mortgagee. Such a personal remedy, is available to a simple mortgagee who has a right to get a decree for sale from the court.

In this view of the matter, I cannot agree with the proposal made in this respect.

II

I do not agree to the proposal made in section 106 of the Transfer of Property Act for leases for purposes of building. In the Transfer of Property Act there is at present no specific provision relating to leases for purposes of building.

Section 106 categories for the purpose thereof leases of immovable property as follows:

1. Lease of immovable property for agricultural purposes;

2. Lease of immovable property for manufacturing purposes; and

3. Lease of immovable property for any other purposes.

But there is no specific mention for leases of immovable property for purposes of building. A lease of immovable property as defined in section 105 may be made for a certain term expressed or implied or in perpervity. It is unnecessary to refer here to the other conditions mentioned in the section. To introduce the concept of lease of immovable property for building purposes may bring in complications. The first question may arise-what does such a lease exactly connote?

In English law the position is different. There leases for building purposes have been recognised for a long time and have a well-defined and settled meaning. Jowitt in the Dictionary of English Law defines "building lease", as a lease, often for a term of ninety-nine years at a rent known as a ground rent, under which the lessee covenants to erect certain specified buildings on the land demised by the lease, and to ensure and keep in repair such buildings during the term.

At the expiration of the term the buildings become the property of the lessor. The ground rent is fixed at such a figure that the lessee, after paying it and after providing for the return of his capital at the end of the term, will make a reasonable rate of profit on the capital. By the Settled Land Act, 1882, section 2(10)(iii), a building lease is defined as a lease for the erecting and improving of, and the adding to and the repairing of, buildings and by the Law of Property Act, 1925, section 205 as a lease for building purposes or purpose connected therewith.

Such leases of settled land are regulated by the Settled Land Act, 1925, section 44 and (as to leases by mortgagees) by section 99 and section 58 (3) (9) (10) of the Law of Property Act, 1925. See the Landlord and Tenant Act, 1927, section 2(1), as to a tenant's claim for compensation for improvements; see also the Landlord and Tenant Act, 1954, sections 47-50. Uptil now no specific difficulty appears to have been felt in this country on account of the absence of specific provisions in the Transfer of Property Act, with respect to leases for building purposes. In my view, introduction of such provisions is not called for in view of the wide language of section 105 of the Transfer of Property Act, 1882.

III

I do not think that any change should be made in section 123 relating to the mode for making a gift of movable property. Section 123 provides inter alia that for the purposes of making a gift of movable property, the transfer may be effected either by a registered instrument, signed by or on behalf of the donor or by delivery. There is a difference between sale of moveable property and gift of moveable property.

There is also a difference between a gift of moveable property inter vivos by act of parties and a gift of movable property by will. A will is a mere piece of paper unless it has been probated. The scheme throughout the Transfer of Property Act appears to be that, except in the case of transfer of actionable claims, whenever any writing is required, whether in sale, mortgage, lease, exchange or gift, the writing is required to be registered.

In section 59 "registered" was inserted in 1929. Gift is a voluntary transfer i.e. a transfer without consideration. Therefore, here the formalities should be more stringent. There are two modes of making a gift of moveable property. It can be made by simple delivery or in the alternative, a gift of moveable property may ,be affected by a written instrument which must be registered. If simplicity is the aim to be achieved, then there should be only one mode for making a gift of movable property, namely, delivery but if both the modes are to be retained then the The Transfer of written instrument must be registered. Analogy to the English deed is inaccurate. A deed under the English case is full of formalities.

In England there is no registration merely of assurances, but there is registration of title. In India the Registration Act deals only with registration of assurance and not with the registration of title. In the case of transfer of actionable claims there are practical difficulties if registration is insisted upon. Then actionable claim, as the name indicates can be realised and effectuated only through court action when required. To point out anomaly in the present provision relating to gift of moveable property, it has been pointed out that writing of gift of small piece of jewellery must be registered, but a writing of gift of jewellery in another's possession need not be.

Similarly, it is pointed out that a writing of a motor car must be registered but not a sale of a motor car or that a writing of a gift of wrist watch must be registered but not a writing of gift of moneys in bank. It has already been pointed out that gift being a voluntary transaction the provisions with respect thereto must be more stringent. Therefore, if we want to simplify the law in this respect we may simply provide that a gift of moveable property whatever may be its price, may be made only by delivery. In that case no writing and registration will be required.

But if it is desired that there should be a second mode of making a gift of moveable property, namely, writing also, then the writing must be registered and that is what the present law provides. In this connection the language of clause (1) of section 25 of the Contract Act may be seen. In this clause an agreement made on account of natural love and affection between parties standing in a near relation to each other, must be in writing and registered, in order to be a valid agreement. I do not therefore think that any change is called for in section 123 in relation to the making of gift of moveable property.

(S.P. Sen-Varma)
24-8-1977

We would like to place on record our warm appreciation of the valuable assistance we have received from Shri Bakshi, Member-Secretary of the Commission in the preparation of this Report.

P.B. Gajendragadkar, Chairman.

P.K. Tripathi, Member.

S.S. Dhavan, Member.

S.P. Sen-Varma, Member.

B.C. Mitra, Member.

P.M. Bakshi, Member-Secretary.

New Delhi,
Dated: 25th August, 1977.



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