Report No. 70
43.10. Time of taking effect.-
For the determination of the question as to the priority of rights created by transfer, it is, in the first place, essential to inquire as to the exact time from which a transfer begins to operate-a question which, in its turn, depends upon the mode and nature of the transfer. A sale1 or a mortgage2, except a mortgage by deposit of title deeds, or an exchange3 of immovable property of a value of less than Rs. 100 may be made either by a registered instrument or by delivery of the property. A lease of immovable property for more than one year can only be made by a registered instrument4, and a gift of whatever value must needs be registered5.
1. Section 54.
2. Section 59.
3. Section 118.
4. Section 107.
5. Section 123.
43.11. In cases where a transfer may be validly mad by delivery of possession, it will take effect only when possession is transferred, but in other cases where registration is resorted to, the transfer is deemed to take effect not from the date of the registration, but from the date of the execution of the conveyance1.
Now, since a document may be presented for registration at any time within four months2, and in special cases within eight months3, it is conceivable that by merely antedating a deed one transferee may obtain priority over another, and thereby defeat its purpose. Other things being equal, a deed takes effect from the moment of its execution, even though its registration is delayed.
1. Section 47, Indian Registration Act, 1908.
2. Section 23, Indian Registration Act, 1908.
3. Section 24, Indian Registration Act, 1908.
43.12. Time of execution. On a question arising1 as to the effect of two deeds relating to the same subject-matter, both executed on the same day, it must be proved which was, in fact, executed first; but if there is anything in the deeds themselves to show an intention that they shall take effect pari passu, then the Court will presume that the deeds were executed in such order as to give effect to that intention.
1. Gartside v. Silkstone and Co., 21 Ch D 761.
43.13. Transfers by operation of law.-
As regards transfers by operation of law, it is provided by the Code of Civil Procedure that "when a sale has become absolute, the property shall be deemed to have vested in the purchaser from the time when the property is sold and not from the time when the sale becomes absolute.1 This was an alteration of the law as laid down in section 316 of the old Code of 1882, by which the title of the purchaser dated only from the date of confirmation of the sale.2
1. Section 65, C.P.C.
2. Mohima Chander v. Nobin Chunder, 1805 ILR 23 Cal 48 (51) (Petheram, C.J. & Baverlay, J.).
43.14 Competing auction-purchasers.-
As between the competing auction-purchasers, the principles which govern preference are the same as those which regulate the claims of priority among mortgagees. Independently of any preference secured by reason of registration or possession, the purchaser must redeem all charges created before the sale. He must be held to have made his bid with full knowledge that the property was burdened with debts, and he can only claim possession by paying off those debts.
His certificate of sale confers on him no right to require the later mortgagees (or those purchasing under them as auction-purchasers) to returned back the money he paid either personally or out of the property1. The plea or purchase without notice, though it may be a good defence against an equitable claim, is no defence against a legal claim2.
A person purchasing property with notice of prior contract in favour of another is bound to hold the property for his benefit to the extent necessary to give effect to that contract3. Where the subsequent transferee has taken a conveyance, the person in whose favour the prior contract subsists suing for possession will get a decree declaring that the subsequent transferee holds the property for the benefit of the plaintiff to the extent necessary to give effect to his contract, and that he do execute to the plaintiff a proper conveyance, and a decree for possession.
Where the prior transferee suing his vendor for specific performance of his contract knows of the subsequent interest he should also implead him in the same suit. But where, he is ignorant of the subsequently created right a separate suit would then be necessary.4
1. Baijnath v. Bhimappa, 3 Born LR 92.
2. Gaffer v. Bhikaji, ILR 26 Born 159; section 91, Indian Trusts Act (2 of 1882).
3. Gaffer v. Bhikaji, ILR 26 Bom 159.
4. Gaffer v. Bhikaji, ILR 26 Born 159 (162).
It is to be pointed out that section 48 does not operate on the basis of notice. A subsequent transferee cannot, therefore, get higher rights on the ground that he had no notice of the prior transfer, except in cases which are specifically dealt with by a distinct provision of the law which recognises the relevance of notice.1
1. H.G. section 40.
We may state that registration has no relevance, so that even if a document is registered later, yet if it is executed earlier, the registration has retrospective effect. Conversely, it is not in every case that prior registration of a subsequently executed document necessarily confers priority. The answer depends on the terms of the provisions in the Registration Act and the circumstances of the case. Under section 50 of the Registration Act, a deed registered subsequently gets priority over a prior unregistered deed of which registration is optional. But this execution is subject to the doctrine of notice.1
An instrument operates from the date of its execution and even if it is registered, it will operate from the date of execution.2 Therefore, while registration may be necessary to confer validity on an instrument where the Registration Act or any other law so provides, it does not except the operation of section 48 as such.
1. Amir Chandra v. Sohi Shushan, 1904 ILR 31 Cal 305.
2. Section 47, Indian Registration Act, 1908. For earlier law, see Santaya Mangarsava v. Narayan, ILR 8 Born 182.
43.17. Registration and interests whose co-existence is compatible.-
Where there is a competition between two registered documents in respect of the same property, the document executed first has priority, even though the document executed subsequent was registered first1.
It has already been pointed out that section 48 has no relevance where the two interests created by successive transfers can co-exist. For example, the purchaser of immovable property cannot evict from possession a tenant for cultivation admitted into the property by the mortgagee in possession2.
1. Arunachalam v. Sivan, AIR 1970 Mad 226.
2. Thakur Singh v. Karam Singh, AIR 1925 Lah 165.
The limitations of the section ought also to be noted. 'Transfer' in this section means a complete transfer, and does not include a mere contract for sale, or an incomplete sale by an unregistered sale-deed where registration is compulsory. Where one of the documents is only an agreement to transfer and the later document is a transfer in the completed sense, then again section 48 has no relevance1.
This is for the reason that an agreement to transfer immovable property not only does not create an interest in land in general, but also is not a 'transfer' within the terms of section 48. Of course, there could be other provisions which may bind the subsequent transferee with the obligation created earlier by the transferor in the form of a contract to transfer. Such is section 40, but in such cases notice and certain other ingredients will have to be fulfilled.
1. AIR 1938 Born 357.
Difficult questions arise in regard to charges and equitable mortgages. In determining such questions, we must have strict regard to the scheme of the Act and to the concept of 'equitable mortgage' and the concept of 'charge' as spelt out in section 100. A charge does not create an interest in property; it creates rather a right to property, but this does not mean that it is entirely disregarded. How far a charge binds person's subsequently dealing with the property charged, depends upon how far the case falls within section 100, of which the most important ingredient is the requirement of notice.
As regards equitable mortgages, it is to be remembered that an equitable mortgage-in those cases where it is permitted-is as much a mortgage as any other type of mortgage. Section 58 does not create any distinction as between the various kinds of mortgages enumerated in that section inter se. In fact, the expression 'equitable mortgage' is one used in practice for the sake of convenience, but the legal name in section 51(f) is 'mortgage by deposit of title deeds'.
A mortgage by deposit of title deeds does not require writing.1 If a writing is executed and it incorporates the mortgage, it requires registration, but, if the mortgage is complete without the writing, a mere memorandum of the mortgage does not require to be registered. Subject to these observations, there is no superiority conferred by the law on any other kind of mortgage in contrast with equitable mortgages.
1. Jeevan Das v. Framji, (1870) 7 Born HCR 45 (Original Civil Jurisdiction.).
43.20. Priority for Government debts.-
While the Government possesses to a certain extent, a priority in regard to debts, this does not appear to extend to conferring a priority in regard to secured debts. The result is that such priority as the Government possesses, does not affect the provisions of section 48. Therefore, the area of operation of the Government priority in respect of debts does not embrace the priority of transfers. This is for the reason that generally the priority is understood as extending only to unsecured debts, in the absence of specific statutory provisions to the contrary.
43.21. Exception-section 78.-
Some of the exceptions to section 48 may now be considered. One exception to the rule enacted in section 48 is enacted by section 78, under which a prior mortgagee is postponed to a subsequent mortgagee, where, through the fraud, misrepresentation or gross neglect of the prior mortgagee, another person has been induced to advance money on the security of the mortgaged property. The postponement of the prior mortgagee in such cases is really a species of estoppel, which enables the creation of the subsequent mortgage. While the prior mortgagee need not go out of his way to give notice of his security when he fears that the mortgagor is dealing with the property, the situation is different where there is fraud1.
1. Mulla, (1973), p. 54.
43.22. An exception to the rule "qui prior est tempore" is also to be found in the salvage charges created on account of advances made to save the encumbered property from loss or destruction1. Such advances are payable in priority to all other charges of earlier date, and, amongst themselves, have precedence in the inverse order of their respective dates.
On the same principle, where the Court authorizes the Receiver to borrow money on a mortgage, directing that it should constitute a first charge on the property, it will take priority over any other mortgage though of an earlier date2. But, in order to confer such priority, the loan must have been raised for the purpose of preserving the property. If, in such a case, the court even improperly confers priority, of which the mortgagees affected thereby have notice, the order may hold good against them unless it is set aside.
1. Fisher Mortgage, p. 958, cited in Gour.
2. Giridharilal v. Dhirendra, ILR 34 Cal 427 (441, 442).
The rule in section 48 also yields to the equitable principle of estoppel. So also where the registered purchaser was present when possession was made over to the unregistered purchaser, the former was, on that account, postponed to the latter,1 when he raised no objection.
1. Somnathdas v. Sindhu, 5 CPLR 97, cited by Gour.
An instrument operates from the date of its execution,1 and it immaterial that it is compulsorily registrable, for in that case too, it will operate from the same date.
1. Section 47, Indian Registration Act, 1908.
43.24. No change.-
The above discussion, which was intended to draw attention to a few salient features of the section, does not disclose any need, for amendment of the section.