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SC ruled transfer is valid if transferor acquires ownership of the sold property at a later date

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Supreme Court ruled that even if there was erroneous or fraudulent representation during transfer of title of immovable property it will still hold good provided the transferor has acquired the title at a later date. The judgment was given by a two-judge Bench of the Apex Court on February 8, 2019, with respect to Section 43 of Transfer of Property Act.

Facts of the case

The plaintiff had purchased a piece of land on 06.01.1990 from Late Pranab Kumar Bora but later on, he came to know that the government had declared the same land as ceiling surplus land in the year 1988. This created a problem for the transferee at the time and when later on the government declared the land ceiling free only then he could obtain mutation in 1991. The plaintiff then faced another problem as an ex-police officer, a defendant in this case, had illegally and forcibly taken control of the plaintiff’s land.

Plaintiff then filed a case praying for relief through lawful eviction of the defendant as well as a declaration that he alone has right, title and interest over that piece of land. The trial court in their 1998 decision found merit in the plaintiff’s case and awarded the decision in his favour. Aggrieved by the judgment the defendant moved first appellate court who overturned the lower court’s judgment. The first appellate court posed a vital question –

Whether the suit land was declared ceiling surplus land and as such it was acquired by the Government in the year 1988 and as such whether the vendor had any saleable right to sell the suit land to the plaintiff on 6.1.1990.”

The trial court, this time around, held that the disputed land was declared as ceiling surplus land by the government at the time of the sale and as such, the vendor had no right to sell the land and hence, the plaintiff has no right, title or interest in the same land. This judgment found approval both in the first appellate court and also was endorsed by the High Court of Guwahati. At this juncture, frustrated by the whole process, the plaintiff filed an appeal at the Supreme Court.

Court ruling

The case was presented before a two-judge Bench of the top court, Honourable Justices L. Nageshwara Rao and M. R. Shah. After hearing both sides in this case and analysing the judgments of the lower courts the Apex Court agreed with plaintiff’s counsel, Advocate Mohana who pointed out that Section 43 of Transfer of Property Act was not taken into consideration by the lower courts while passing the verdicts.

The Supreme Court interpreted Section 43 of the Transfer of Property Act in this case and reiterated,

if at the time of transfer, the vendor/transferor might have a defective title or have no title and/or no right or interest, however subsequently the transferor acquires the right, title or interest and the contract of transfer subsists, in that case at the option of the transferee, such a transfer is valid. In such a situation, the transferor cannot be permitted to challenge the transfer and/or the transferor has no option to raise the dispute in making the transfer.”

The Court further held that the intention of Section 43 was to protect the rights of the persons involved with the transfer of property so that nobody could avail any undue benefit from the situation. Since in the present case the vendor had sold the land to the plaintiff and money has exchanged hands, “Section 43 would come into play and protect the rights of the plaintiff.”

Impact of the judgment

Section 43 of Transfer of Property Act is based upon the principles of Doctrine of estoppel and the principle of equity. The doctrine of estoppel means stopping the transferor “from saying that though he has sold/transferred the property/land on payment of sale consideration, still the transfer is not binding to him.” The Court held “that is why Section 43 gives an option to the transferee and not the transferor.”

The Transfer of Property Act, Section 43 is typically designed to protect the rights and interests of the bonafide purchaser (plaintiff in this case),

against the person, who fraudulently or erroneously represents to bonafide purchaser, that he is absolutely authorized to transfer the property, and at the same time professes to transfer the property for consideration, and entered into one contract of sale but in reality at this time he himself is not authorized to transfer that immovable property, but subsequently at any time in future becomes authorized to transfer by any reason. But the consequence of such right to the bonafide purchaser is that, even such transfer will not become void or voidable but at the option of transferee becomes operative, on any interest which the transferor acquires subsequent over that immovable property at any time before the quashing of the contract of the sale/transfer, thereby preventing the interest of the bonafide purchaser. Law of estoppels here compels the transferor who made the representation to deliver the immovable property to the bonafide purchaser.”

The interpretation of Section 43 in this manner has finally brought justice to the plaintiff in this instant case and has set the precedent that any property owner who has similarly been subjected to fraud by any greedy vendors can now seek redress from the court of law and his grievances will be heard and addressed as according to law and help him recover his accrued losses that he has suffered all these years let alone the mental anguish that for which there is no adequate compensation.

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