Report No. 70
Transfer by Unauthorised Person-subsequently Acquired Interest
An important situation involving a consideration of more than one provision of the Act and requiring a discussion of certain important doctrines is dealt with in section 43. What happens when a person professes to transfer property which he is not, at the time of transfer, entitled to transfer, but which be becomes competent to transfer by reason of subsequent events? Should the law take a strict view and take into account only the facts as they stood at the time of transfer? Or should it also have regard to later developments?
39.2. Section 43.-
Equity's choice was for the latter alternative. In the Act, the rule on the subject is to be found in section 43:
"Where a person fraudulently or erroneously represents that he is authorised to transfer certain immovable property and professes to transfer such property for consideration, such transfer shall, at the option of the transferee, operate on any interest which the transferor may acquire in such property at any time during which the contract of transfer subsists. Nothing in this section shall impair the right of transferees in good faith for consideration without notice of the existence of the said option.
A, a Hindu, who has separated from his father B, sells to C three fields, X, Y and Z representing that A is authorised to transfer the same. Of these fields, Z, does not belong to A, in having been retained by B on the partition; but on B's dying, A as heir obtains (the field) Z, C, not having rescinded the contract of sale, may require A to deliver Z to him."
The words "fraudulently or" added by the Amending Act, 1929, were intended to improve the sense of the section; since a fraudulent representation cannot fail to be erroneous, and it was so held even before the amendment. The use of these two expressions points to the fact that it is the position of the innocent transferee that the section has in mind. This brings us to the relevant doctrine of equity.
39.4. Halroyd v. Marshall.-
In equity, the famous rule in Halroyd v. Marshall, (1862) 10 House of Lords Cases 191., lays down that the mortgage of non-existent property, though inoperative as a present transfer, operates as an executory agreement which attaches to the property the moment it is acquired, and which, in equity, transfers the beneficial interests to the mortgages when any new act is done by the mortgagor to confirm the mortgage. This subject was closely connected with the evolution of rules of equity relating to assignment.
At common law, an assignment of property to be acquired in the future was void, but, in equity, such an assignment was treated as an enforceable contract, if made for valuable consideration.1 In fact, in equity, even the mere expectancy of the heir-at-law of succeeding to the estate of his ancestors or the next of the kin succeeding to the personality of a living person was treated as assignable and this included an interest which a person might take under the will of a living testator.2 There is an interesting English case3 in which copyright in songs yet to be written was held to be assignable. The principle was long ago stated by Story4 in these words:
"Courts of equity give effect to assignments of interest held in trust; and whether the interests are contingent or executory including so remote an interest as a spes successions, whether they are in real or in personal estate, as well as to assignments of choses in action."
Thus, while at law, to make an assignment valid, the thing which is subject of it must have actual or potential existence at the time of grant or assignment, courts of equality recognised assignment of things which have no present or potential existence. In equity, such an assignment was considered as amounting to a declaration of trust and to permit the assignee to make use of the assignors name in order to recover the debt or to reduce the property into possession. This seems to be the explanation of the fact that section 43 makes an exception in regard to intermediate transfers of value without notice.
1. Warmatrey v. Tanfiend, (1628) 1 Reports of Chancery 191.
2. Snell Equity, (1966), pp. 91, 92.
3. Performing Right Society v. London Theatre of Waristics, 1924 AC 1.
4. Story Equity Jurisprudence, (1919), p. 432, para. 1040.
39.4A. English law.-
Under section 43, the right is declared to exist only as against the transferor and persons claiming under him, e.g., the heir1. Thus, where he is deprived of the property in an execution sale, it has been held that the transferee cannot follow up the property in the hands of his auction purchasers2.
1. Radhey Lal v. Mahesh Prasad, ILR 7 All 864.
2. Alukmonee v. Anee Madhub, ILR 4 Cal 677.
39.5. Meaning of transfer.-
It is to be noticed with reference to section 43 that the expression used is "transfer" and this is wide enough to cover not only a sale but also a mortgage, lease or exchange. Since the section is a kind of 'Estoppel', there is no need why the operations should be confined to sale, and the section does not contain any such restrictive language.