Report No. 70
Chapter 43
Priority of Rights Created by Transfer
Section 48
43.1. Introductory.-
Where the same transferor creates or purports to create by transfer rights in or over the same immovable property, it obviously becomes necessary to determine whose right shall prevail. Such a situation may arise by mistake, accident or design. Whatever be the circumstances leading thereto, a conflict arises and requires to be resolved.
43.2. The priority of rights created by transfer.-
The general rule for resolving the conflict on the subject is contained in section 48, which reads-
"48. Where a person purports to create by transfer at different times rights in or over the same immovable property, and such rights cannot all exist or be exercised to their full extent together, each later created right shall, in the absence of a special contract or reservation binding the earlier transferees, be subject to the rights previously created."
We propose to examine first the principle of the section then its scope and operation and then certain supposed and real limitations and exceptions.
43.3. Principle.-
The section is a statement of the English equitable maxim "qui prior est iempore, potior est jure"1 a relic of the primitive law to which the right of ownership in property may be ultimately traced. The section is, however, subject to the exceptions comprised in cases falling under sections 78 and 79. The rule, again, does not affect the specific provisions; of section 50 of the Indian Registration Act2, under which registered documents relating to land, of which registration is optional, were for the first time declared to take effect against unregistered documents relating to the same property, not being a decree or order, whether such unregistered document be of the same nature as the registered document or not.
As regards property generally, whether movable or immovable, a registered instrument relating to property is, by another section (section 48-Registration Act), declared to take effect against any oral agreement or declaration relating to such property, except where the agreement or declaration has been accompanied or followed by delivery of possession. Section 48 of the Transfer of Property Act states the rule applicable in general to resolve conflicts arising by successive transfers of the same interest.
1. "He who is first in time, is better in law", Co. Litt 14a. Broom's Legal Maxims, 6th Edn., 335.
2. Indian Registration Act, 1908.
43.4. Natural justice.-
It is a principle of natural justice that if rights are created in favour of two persons at different times, the one who has the advantage in time should also have the advantage in law. This rule, however, applies only to cases where the conflicting equities are otherwise equal. In a contest between persons having only equitable interests, priority of time is the ground of preference last resorted to, i.e., a court of equity will not prefer one to the other on the mere ground of priority of time, until it finds, on an examination of their relative merits, that there is no other sufficient ground for preference between them. But the rule, in general, is as stated above.
This approach of the law could be justified on certain deeper considerations. The law favours security of title, and is hesitant to interfere with the status already established except for, special reasons. If a person has acquired an interest in property, he who comes later on the scene must show an overriding consideration for superseding the state of things already existing-or, to put it in legal language-to disturb a right already created. It should not be forgotten that if the law creates a right, there is, in general, an ethical justification for the creation of that very right.
A right is, in the language of jurisprudence, a claim recognised or enforceable in law. But it has roots in the implicit ethical notion that the law recognises or enforces the claim because it is just to do so. The German word "Recht" indicates this link more expressly. Such a right having been created over a property, the legal system would be failing in consistency if another "right" in the same property is recognised or enforced. There would be chaos and it would be impossible to maintain any certainty or order in the application of the law.
Priority in point of time thus becomes, in general, an imperative necessity of the legal system of a civilised society, once that system has decided to recognise or enforce a claim and a claim of that nature has already been created by the parties, relying on the legal system. Exceptional circumstances may necessitate a different approach, but those exceptional circumstances themselves are illustrations of situations where ethical considerations of a wider import are present-e.g., claims in salvage or the demands of greater certainty constitute the basis of a different rule-e.g., registration.
43.5. Doctrine of priority in Hindu law.-
The doctrine of priority was not unknown to Hindu Law. It is given by Yajnavalkya as follows:-
"In the case of a pledge, a gift and a sale, however, evidence in support of the prior claim pre-ponderates."1
Jimultavahana, commenting upon this verse, provides the exception that if possession is given to the second transferee, who retains it for 20 years, he will get preference over the first transferee. So he says:2
"If a person after a gift, or mortgage to him allows the property to remain with the seller, donor or mortgagor, who subsequently transfers it to another with possession and the latter holds it for 20 years then the first dealing, though prior is, of no avail".
Scope-To revert to the section, let us say a few words about its scope.
1. Yaj, II 23(2).
2. Jimutavahana-Vyavaharamatrika, pp. 348-349; Lingat Classical Law of India, p. 162.
43.6. Need for the section-Modes of transfer.-
If there had been only one legal mode of transfer, namely, by delivery or possession, there would be no great need for a provision regulating priority. But the law does not provide transfer of possession as the only mode of transferring an interest in property. And, further, certain kinds of transfer e.g. certain species of mortgages-do not contemplate a transfer of possession at all. There is scope for conflict between two transfers, because the law leaves scope for a variety of modes of transfer.
The modes of transfer allowed by law vary-in some cases, there can be an oral transfer; in some cases there may be transfer by an instrument in writing without registration; and, in some cases, there may be a requirement of writing coupled with registration. Where the transferor employs such a mode of transfer (that is, a transfer otherwise than by delivery of possession), difficulty could arise if the oral transfer is made or the transfer in writing is executed at different times in favour of different persons.
For example, a writing may be in favour of transferee A, in regard to an interest in immovable property and after a few days (or, may be, at a later time on the same day)1 the same transferor executes a transfer in favour of B in regard to the same interest. So long as physical delivery of possession is not the only legal mode of transfer, theoretically the possibility of such a conflict always remains.
1. Cf. para. 43.12, infra.
43.7. Conditions for application of the section.-
The section postulates that the rights so created cannot co-exist or be concurrently exercised. The words "cannot exist together", indicate that the two interests cannot be beneficially enjoyed without prejudicing each other. Equitably, the prior transferee has the preference, unless there is a contract or reservation by which he is bound or where through his fraud, misrepresentation or gross neglect, another person has been induced to advance money. In the latter case, the prior transferee, being estopped, is postponed to the subsequent transferee1.
1. Section 78.
43.8. Separate rights.-
There can be no need for priority where separate rights created in favour of different persons can all be exercised to their full extent without encroaching on each other. In that case they may be treated as relating to different entities. This section does not apply to two substituted security rights. The case of priority arises only where the same property is successively mortgaged.1 A case for priority arises not because the persons are different, but because the interest cannot all be fully exercised. Such interests may coalesce by merger, or one interest may be waived or abandoned and priority may be conferred by contract and forfeited by negligence.
1. Krishnaveni Ammal v. Subramaniam Chetty, AIR 1938 Mad 547.
43.9. Scope for priority.-
The principle of the section cannot, therefore, apply where the two interests do not conflict. Thus, in a case where the property is mortgaged to one and subsequently sold to another, this section will not apply, for the purchaser has obtained only the equity of redemption, an interest which can exist side by side with the mortgage.1 So there is no conflict between a completed sale and a contract for sale, as the latter confers no right on the property2. An unregistered sale-deed, where registration is compulsory, would confer also no rights upon the vendee, and he cannot, therefore, claim as against the registered transferee.3-4
If A mortgages or sells property to B, and afterwards C purchases at a court-sale the then existing right, title, and interest of A, C buys in the first case (mortgage), the equity of redemption, and in the second case (sale), nothing at all. In such a case registration cannot help C for, on the very fact of his certificate of sale, the property comprised therein is not the property previously conveyed to B, but only the residue of A's estate after such conveyance.5
1. Ramachandra v. Krishna, ILR 9 Mad 495.
2. Section 54, last para.
3. Waman v. Dhondiba, ILR 4 Born 127; Chundernath v. Bhovrub, ILR 10 Cal 250; Ram Autar v. Dhanauri, ILR 8 All 540.
4. Illustrative cases taken mostly from Gour.
5. Sobhagchand v. Bhaichand, ILR 6 Born 193 (FB) followed in Bamaraja v. Arunachala, ILR 7 Mad 248.
Back
