Feeding the Grant By Estoppel Section 43 under TPA

Estoppel means when a person claims something, he cannot go back on what he so claim.

The doctrine of feeding the grant by estoppel id derived from the legal Maxim “Nemo dat quad non habet” which means that no one can give something which he does not himself possess to another person.

Doctrine of feeding the grant by estoppel is mentioned in under section 43 , part 5 of TPA, 1882 . Section 115 of the Indian Evidence Act 1872 deals with the concept of estoppel which means a person said or represented something then he has to follow it, basically he stopped from denying it.

This general rule lays down that no property can be transferred by an person who is not authorised to do so. Thus, if a person does not have a title to property, he cannot validly transfer the same to another. But this rule has been relaxed in practice due to “adjustment of equities” between such person and the transferee. One of such exception to this message rule is provided in section 43 of TP Act.

The doctrine of feeding the grant by estoppel compels a man to perform when the performance becomes possible. It does give the transferor the option of going ahead with the transfer, it then completely depends upon the transferee if he is still willing to go ahead with the transfer after the transfer becomes viable option.

Case : 

In Ram Bhawan Singh vs Jagdish 1990 the court observed that “when a person having a limited interest in the property transfers a larger interest to the transferee on a representation and subsequently acquires the larger interest , the larger interest passes to the transferee at the latter’s option. This doctrine not only applies to sales but also applies to a mortgage, lease, charge, and exchange. Where no grant or interest in immovable property is involved, the doctrine would not apply. The doctrine also does not apply in cases where transferor has acquired interest not in the property which is subject matter of the transfer, but in some other property.

Section 43 enacts that:

• If a person processes to transfer an immovable property by fraudulently or erroneously that he had authority to do so,
• The transfer is for consideration and,
• Such transferor acquires the authority subsequently, 
• Then the transferee may compel the transferor to pass on the property to him.

Illustration

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, it having retained by B on the partition; but on B‘s denying A as heir obtains Z. C, not having rescinded the contract of sale, may require A to deliver Z to him.

Essential Requisites of the Doctrine of Feeding the Grant by Estoppel

• A fraudulent or erroneous representation of ownership

The estoppel rests on the representation (express or implied) made by the transferor that he is authorised to transfer, which representation subsequently turns out to be erroneous. It makes no difference that the transferor had no interest whatsoever in the property or the interest therein that of an expectant heir. Further, it is immaterial whether the transferor acts bonafide or fraudulently in making the representation. What is material is that he did make a representation and the transferee acted on it and thus has been misled. In other words the doctrine applies only when the transferee has been misled into believing a false representation and not otherwise. The doctrine also applies in cases where the transferor has a duty to speak and he fails to do so. Where a person sold the property as an agent of the widow, and later became her heir, the doctrine did not apply, as there was no erroneous representation Peyare Lal v Misri.

• Property should be Available with the Transferee

The second condition for validation of such a transfer that is based on a misrepresentation is that not only the contract should be subsisting, and the transferee willing to exercise the option, but the property must be available with the transferor. If the property is transferred by the transferor to another person, even before the transferee can exercise the option to validate the earlier transfer, the remedy of validation of transfer will be lost to the transferee, provided that the second transferee takes the property for consideration and has no notice, actual or constructive about the existence of the first contract.

For instance, A represents to B that he is competent to transfer a land X, which in fact belongs to his father. B acts on that representation and furnishes a consideration of Rs. 10 lakhs towards it. B later comes to know about A’s lack of title, but prefers to wait. A became the owner of the property on his father’s death. While B was contemplating the appropriate action to be taken, A sold the land to C, who as a bonafide purchaser, bought it without any notice of B’s claim over it. The only remedy that B has now is to claim compensation, damages or his money back. But he would lose all claims over the property as before he could exercise his option to validate the transfer, the property had already been transferred to a bonafide purchaser for value and without notice. The reason is that till the option is exercised by the first transferee, the validation of the transfer will not take place. Till the ownership of the transferor is not affected at all, he remains competent to transfer the same in favour of anyone.

• A transfer for consideration

The doctrine of ‘feeding the grant by estoppel’ is applicable only to the transfers of properties for value. This section is not applicable where the transfer is gratuitous, i.e. without consideration. Thus, the provisions of this section are not applicable to transfer of property by way of a gift where the donor has no present fixed right at the date of transfer, making it a void transaction.

• At the option of the transferee

The transfer becomes valid when the transferee exercises the option and the title of the transferor becomes perfect. Where the official receiver transfers property before it vests in him, the implied covenant will be treated as erroneous representation, and the purchaser’s title would be complete as soon as the property vests in him Muthiya Chettiar v Doraswami (AIR 1927 ). Similarly where a partner sells the property of a firm in his right and subsequently on the dissolution of the firm is allotted the same property, the transferee gets the benefit of such allotment (Syed Nurul Hossein v Sheosahai (1893).Further, the interest acquired by the transferor does not automatically pass on to the transferee but only when he claims his interest in such property

• A subsisting contract of transfer

The option of the transfer can only be exercised in respect of an interest acquired by the transferee whilst the contract of transfer “still subsists”. If the transferee (purchaser) had repudiated or cancelled that transaction, or had recovered his purchase money, or if the transaction were one of mortgage and the mortgage money had been repaid, then the relation of the transferor and the transferee has ceased to exist, and no claim in respect of the property can be made by the latter

Exceptions to the Doctrine of Feeding the Grant by Estoppel:

• When the transferee is aware of the true transaction

The benefit of this section cannot be claimed by the transferee if he did not believe in or act upon the representation. There doctrine of estoppel does not operate when both the parties are aware of the true transaction. Accordingly, if he is aware of the defect in title of the transferor, he cannot get the benefit of Sec. 43. Thus, when an undivided Hindu father had two sons A and B. A who was entitled only to 1/3 of property, mortgaged ½ of property to C, who knew that A was entitled to 1/3.Later, A’s father died and A having become entitled to a half share, C sued on the mortgage seeking to make A’s half share liable, it was held that C could avail only 1/3 share.

Knowledge on part of the transferee with respect to the defect in title of the transferor need not be actual knowledge. If the circumstances are such that as a reasonable, prudent person, the transferee, to safeguard his own interests had made sufficient inquiries that he ought to have made, or had been vigilant and upon doing so, he could have detected the lack of title, he would be deemed to have constructive notice of the lack of title, and s. 43 would not apply.  

In Kartar Singh v. Harbans Kaur, a Hindu woman executed a sale deed of the lands belonging to her minor son in 1961. The son on attaining majority in 1975, filed a suit to the effect that this sale was not binding on him, and was void. The Court passed a decree that this sale, executed by the mother of the properties belonging/owned by her minor son was void, and directed that the possession of these properties be restored to the son. Before the son could take possession of the property, he died, and the mother as a Class I heir succeeded to the property. The transferee, X, claimed the benefit of s. 43 and when the remedy was refused by the High Court went to the Supreme Court in appeal. The Court held that for the application of s. 43, two conditions must be satisfied. First, a fraudulent or erroneous representation made by the transferor to the transferee that he is authorised to transfer certain immovable property and in the purported exercise of authority professed to transfer such property for consideration.

Secondly, when it is discovered that the transferor acquired an interest in the transferred property, at the option of the transferee he is entitled to get the restitution of interest in property got by the transferor, provided the transferor acquires such interest in the property during which contract of transfer must subsist. As the primary distinguishing factor between the application of s. 43 and s. 6(a) is knowledge of the lack of title or incompetency on part of the transferee, the Court here tried to examine whether the transferee in the present case had knowledge of the fact whether, the mother was competent to transfer the property of her son.

The Court said:

The material time at which the knowledge has to be proved is the time of the conclusion of the contract. When we analyse the issue as to whether the transferee who is now seeking the beneficial protection of Section 43, had knowledge or notice of the incompetency of transferor or not, we must take note of the fact that even constructive notice on his part would bring the case under Section 6 (a). If by making some inquiries or verifying certain facts, as a normal reasonable prudent person, the transferee could have detected the incompetency of the transferor to transfer the property, but he failed to do that, law would impute constructive notice of the same on him, and as the consequences of actual and constructive notice are identical, in case of imputation of constructive notice also, the plea of misrepresentation, erroneous or fraudulent would not be accepted by the Court. In such a case, Section 6 (a) would be applicable under which this transfer would be considered void, and Section 43 will not apply.

Here, it is pertinent to note that when the mother transferred the property belonging to her son, the marginal note on the sale deed mentioned that the land had been acquired by her and by her minor son by exercising the right of pre-emption, and that she was executing the sale deed in respect of her own share and acting as the guardian of her minor son in so far as his share is considered. Thus, the fact that she was acting as the guardian and the owner was in fact a minor, was apparent from a bare reading of the sale deed. In law, a guardian is not competent to transfer the properties of a minor, unless there is an authorisation from the Court. 

The fact that she was a guardian and also acting as one, was the starting point of inquiry, and the transferee should have probed further. As a reasonable prudent man, he was expected to enquire whether on her own, the mother, as the guardian, was competent to alienate his share. The second requirement is that the contract should be subsisting at the time of the claim but here, the Court held that as right at the inception, the contract was void, because the transferee ought to have known about the incompetency of the transferor this void contract cannot be deemed to be subsisting at the time, when the mother due to inheritance acquired competency.

Thus, according to the Court, the transferee here knew the fact that the mother was not competent to effect a valid transfer and s. 43 would have no application. The litigation, which took 33 years, culminated later, with the Supreme Court pronouncing the verdict, that the transferee cannot acquire a valid title to the property because he was deemed to have knowledge of the defect in title in the first place.

• Transfer must not be otherwise prohibited

For the validation of the transfer made by an unauthorised person under a representation, this contract in the first place should not have been against any law in any form whatsoever, i.e., not only the parties should be competent to contract, but the purpose of the contract should be Lawful, and not opposed to public policy or to defeat the rights of creditors or a provision of Law,  etc. 

Thus if the transferor’s incompetency was owing to his minority or insanity, S. 43 would not confer an option in favour of the transferee to validate the transfer on the minor’s attaining majority or curing of insanity, as this is a statutory incompetency, that was appended to the minor or an insane person, that prohibited him from transferring the property. Similarly, if a particular piece of land has been declared by a statute to be specifically inalienable, such as Bhumidhari land, S. 43 cannot apply to such a situation. However, where the property was requisitioned by the military, and a lessee assigned his interest in this property conditional upon the property being de-requisitioned by the military, the Court held that after the property was de-requisitioned and the transferee acquired competency, he was required to perform his part of the contract under the assignment.

• When the second transferee acquires rights

The second paragraph of section 43 protects the rights of the second transferee in good faith and for consideration who has no notice of the option in favour of the first transferee. Thus, the only person who can defeat the right of an original transferee is a subsequent transferee. Usually, the deed of transfer is registered, which operates as a notice of the existence of such contract to the entire world. If however, the deed is not registered, the original transferee is in a vulnerable position.

Comparison with English Law 

English law, the subsequent estate passes to the transferee without any further act of the transferor. But it departs from the English doctrine in two respects.

• First, the estate does not pass instantly but at the option of the transferee. Under English law, the transfer is automatically validated, without the need for any other action on part of either the transferee or the transferor. Under Indian law, for it’s validation, the option must be exercised by the transferee, for which three conditions must be fulfilled; the contract should be subsisting; the property should be available and, the transferee should be willing to go ahead with the transfer.
• Second, the transferee maybe defeated by a purchase for value without notice. Under English law, as the original transfer is perfected the moment transferor acquires competency to transfer the property, and the transfer is validated instantaneously, the scope of property not being available due to the chances of the entry of a bona fide transferee for consideration does not arise.

• Illustrations
  • X, a Hindu wife executed a mortgage of her husband’s property as if it belonged to her five years after he had disappeared. The mortgage was invalid, as the presumption of death does not arise until seven years.
  • A and B, two sisters inherit property on the death of their father. A, even though entitled to only ½ share, sells the entire property to C representing himself to be the sole owner. B dies and inherits A’s share, C is now entitled to claim interest in that share.
  • X a person sold the property as an agent of Y(a widow), and later became the heir of X’s property. The doctrine does not apply in this situation as there is no erroneous representation.
  • A and B entered into a contract with A falsely representing the facts. B after knowing this terminated the contract. A later on claims interest in the subject of the contract. The doctrine does not apply as the contract no longer subsists.

The Rule of Feeding the Grant by Estoppel under S. 43 and Spes Successionis under S. 6(A)

Spes Successionis

It means expectation of succession i.e. a possibility of getting property in future through succession i.e. through inheritance or will. Transfer of spes successionis is void ab initio. Except as otherwise provided by the Transfer of Property Act property of any kind may be transferred, so transferability of property is general rule and this rule obtains its enforcement from section 6. Exception to this general rule is provided by the provisions of Section 6 itself. Section 6(a) of the Transfer of Property Act restricts the transfer of a mere expectancy or chance of an heir-apparent succeeding to an estate, the possibility of a relation obtaining a legacy on the death of a kinsman, or any other mere possibility of alike nature.

So during the lifetime of a person his heir-apparent cannot transfer its mere expectancy of succeeding because it is not his right it’s only an expectation of getting a share, after the death of the principle, in future. A person having interest over a property which is spes successionis i.e. mere possibility to succeed to the property in future is not a right and is not capable of being transferred. Such a person cannot file a suit on the basis of such expectation of succession.

Section 6(a) of property made spes successionis an exception of rule of transferability as per the provision of section 6 spes successionis includes:

• Chance of an heir-apparent succeeding to an estate.
• Chance of a relation obtaining legacy on the death of a kinsman.
• Any other mere possibility of a like nature.

Chance of Heir Apparent

Heir Apparent-because there is no heir of a living person. It is a mere chance because if a person hopes to succeed to property of an intestate what and how much of it would be available can only be ascertained at the death of the intestate. This is so because no property may be left by the time he dies, or he may have made a will with regard to it or that the heir apparent may die before person whose property he hopes to succeed to.

Thus, there is only a hope, expectancy or chance to succeed.

Example : A family consists of a father (F) and son (S). S hopes to succeed to the property of F his father. He professes to transfer property X, with a conviction that he is the future owner of it and assures him that on the death of F he would deliver the possession of property to X. The next day X dies and S actually becomes the owner of those properties but refuses to deliver possession to X. X cannot press for delivery as the transfer was void ab initio.

Chance of a Relation Obtaining Legacy upon the Death of a Kinsman

Chance of a legacy is a mere possibility of getting certain estate in future under a will. It is the chance or expectation of any friend or relation to get property, under a will, after the death of the testator. Chance of an heir-apparent and chance of a legacy is very much alike because both possess no right in property and they are mere expectations. The chance of a relation or a friend receiving a legacy is a possibility even more remote than the chance of the succession of an heir, and non-transferable. A will only operates after the death of the testator and not on the date when it is written and if there is more than one will the last one prevail. So, for obtaining the entitlement over the property of the testator the person has to qualify two conditions:

• He has to survive the testator; and,
• He must be the person who was mentioned in the last will. If two or more wills have been executed in favour of different persons, only the legatee under the last will is entitled to get the property. Before a will operates i.e. before the death of the testator, the legatee has only a mere hope of getting certain property under will, and is non-transferable.

Any Other Possibility of a Nature

Any other possibility of nature would mean any other possible interest or property which is as uncertain as the chance of an heir-apparent or of a legatee. The central aim of section 6(a) is to prohibit the transfer of properties which are merely a future uncertain possible interest. Therefore, clause (a) of section 6 exclude not only the chance of an heir-apparent or of a legatee but also any other chance of getting future property which is not at present a fixed right of a transferor. The words of a ‘like nature’ indicate that the possibility referred to herein must belong to the same category as the chance of an heir-apparent or the chance of a relation obtaining legacy. In this case, the usual illustration of a possibility is the case of a fisherman’s net. There is no certainty that any fish will be caught, and the fisherman has no interest in the fish until they are caught.

The rule of feeding the grant by estoppel has to be compared and contrasted with the rule of Spes Successionis provided under section 6 (a) of the Act. They appear to relate to similar kinds of situations but with different consequences. In fact, not only do they relate to different situations, they are also inherently different.

Distinction between Spes Successionis and the rule of estoppel under S. 43

The primary difference between S. 6(a) and S. 43 are as follows:

• Section 6(a) enacts a rule of substantive law, while S. 43 incorporated a rule of estoppel.
• Section 43 applies only applies in those cases, where the transfer is for consideration, it does not apply on gratuitous transfer. It applies in cases where despite a misrepresentation, the transferor, either takes or seeks to take a monetary benefit from the transferee. It therefore would not apply to cases where a person transfers the property by way of gift. On the other hand, the prohibition under S. 6(a) applies to all kinds of transfers, irrespective of whether they are for consideration or gratuitous transfer. A gift of property that a person hopes to inherit is also void. 
• Under S. 6(a) the fact that it is a transfer of spec successions is within the knowledge of both the transferee and transferor. There is no misrepresentation from the side of the transferor in regards to his competency to pass a good title in present to the transferee. Under S. 43, due to express representation, fraudulent or erroneous, the transferee, at the behest of the transferor, is assured a good title. Section 43, is very clear of the fact that its application will only cover those cases, where due to the making of a representation by the transferor, that he is competent to transfer a piece of property, the transferee has been expressly misled. The transferee had no knowledge about the defect or lack of title on part of the transferor, he is made to believe in the competency of the transferor to transfer the property.
• The status of  a transfer under S.6(a) is void in its inception, however under S.43, the transfer is voidable at the option of the transferee provided two conditions are satisfied.
  • The contract should be subsisting at the time the transferor attains competency to transfer the property, i.e it should not have been rescinded; and, 
  • The property should be available with the transferor. It should not be in the hand of a bona fide transferee for value. 

Conclusion

The Doctrine of Estoppel is an important principle which protects people against fraud or misrepresentation. There are several instances where an innocent person becomes a prey to false representations made to them by some party. Sometimes the case may be such that the plaintiff suffered huge losses. This doctrine avoids such situations and charges the person for his wrongful conduct. This legal principle gives an incentive to every one of those people who tries to make false representations to others and induces them to act upon it by planting their faith in them, and incur losses as a result of such false representations, by not performing such acts, else they would be held liable.