An Analysis of Persons Competent to Transfer Property under Indian Law

An Analysis of Persons Competent to Transfer Property under Indian Law

Introduction

The concept of "persons competent to transfer" is fundamental to the law of property in India, governing the validity and enforceability of property transactions. The primary legislation addressing this is the Transfer of Property Act, 1882 (hereinafter "TPA"). Section 7 of the TPA lays down the foundational criteria for determining who can legally transfer property. This article seeks to provide a comprehensive analysis of these criteria, drawing upon statutory provisions, landmark judicial pronouncements, and relevant legal principles prevalent in India. Understanding the nuances of competency is crucial not only for individuals engaging in property transactions but also for legal practitioners and the judiciary in adjudicating disputes arising therefrom.

Core Principles of Competency to Transfer: Section 7 of the Transfer of Property Act, 1882

Section 7 of the Transfer of Property Act, 1882, is the cornerstone for determining competency to transfer. It states:

"Every person competent to contract and entitled to transferable property, or authorised to dispose of transferable property not his own, is competent to transfer such property either wholly or in part, and either absolutely or conditionally, in the circumstances, to the extent and in the manner, allowed and prescribed by any law for the time being in force."[1]

This provision delineates three essential conditions for a person to be competent to transfer property: (i) competency to contract; (ii) entitlement to transferable property, or (iii) authorisation to dispose of transferable property not his own. These elements are often intertwined with other statutory provisions, particularly the Indian Contract Act, 1872.

1. Competency to Contract

The first limb of Section 7 TPA mandates that a transferor must be "competent to contract." Section 11 of the Indian Contract Act, 1872, defines who is competent to contract: "Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind and is not disqualified from contracting by any law to which he is subject."[2]

The Madras High Court in The Court Of Wards And Sri Sri Veera v. Sri Sri Gowra Chandra And C (1890) explicitly linked Section 7 TPA with Sections 11 and 12 of the Indian Contract Act, examining whether the Zemindar was of sound mind and not otherwise disqualified.[3] Similarly, the Bombay High Court in Chairman/Secretary, Deep Apartment Chs Ltd. v. State Of Maharashtra And Others (2012) noted that persons competent to transfer under Section 7 TPA are those competent to contract under Section 11 of the Indian Contract Act, i.e., not minors, insolvents, or persons of unsound mind.[4]

a) Minority

A minor, being incompetent to contract, cannot make a valid transfer of property. The Privy Council in Mohori Bibee v. Dharmodas Ghose (1903) I.L.R. 30 Cal. 539, held that a mortgage by a minor was void. This principle was reiterated in A.T Raghava Chariar Petitioner v. O.A Srinivasa Raghava Chariar (1916), where the Madras High Court, while holding a mortgage in favour of a minor as enforceable, acknowledged the Privy Council's ruling that a transfer *by* a minor is void because a minor is not competent to contract under the Indian Contract Act, and therefore not competent to transfer under Section 7 TPA.[5] The Madhya Pradesh High Court in Mt. Salu Bai v. Bajat Khan (1917) emphasized that persons incompetent under Section 11 of the Contract Act, including minors, are absolutely incompetent, and transactions by them are void, not merely voidable.[6]

b) Soundness of Mind

A person of unsound mind is also incompetent to contract and consequently, to transfer property. Section 12 of the Indian Contract Act clarifies that a person is of sound mind for contracting if, at the time of making the contract, they are capable of understanding it and forming a rational judgment as to its effect upon their interests. The case of The Court Of Wards And Sri Sri Veera v. Sri Sri Gowra Chandra And C (1890) involved an inquiry into the soundness of mind of the transferor at the date of the transaction.[3]

c) Disqualification by Law

If a person is disqualified from contracting by any law to which they are subject, they are incompetent to transfer property. This could include, for instance, persons under legal disability imposed by specific statutes. As observed in Mt. Salu Bai v. Bajat Khan (1917), persons disqualified by law are treated ejusdem generis with minors and lunatics under Section 11 of the Contract Act.[6]

2. Entitlement to Transferable Property

The second condition is that the person must be "entitled to transferable property." This implies that the transferor must have a vested interest in the property being transferred and that the property itself must be of a nature that is legally transferable. Section 6 of the TPA specifies what property may be transferred, and also lists exceptions (e.g., a mere right to sue, public office, stipends).[7]

The Supreme Court in Ram Gopal v. Nand Lal And Others (1950) affirmed that a Hindu female granted property with the term "Malik" holds an absolute, heritable interest, making her entitled to such property and thus competent to transfer it.[8] This judgment clarified that females can hold absolute proprietary rights under Hindu Law, thereby satisfying the "entitlement" criterion of Section 7 TPA. The Andhra Pradesh High Court in Yanala Malleshwari v. Ananthula Sayamma (2006) noted that Section 7 TPA allows every person entitled to transferable property to transfer it, provided they are competent.[9] The court also referred to Section 6(h) TPA, which prohibits transfers for an unlawful object or to a legally disqualified transferee.[9, 10]

3. Authorisation to Dispose of Transferable Property Not One's Own

The third alternative condition under Section 7 TPA is that the person is "authorised to dispose of transferable property not his own." This covers situations where individuals, though not owners, are legally empowered to transfer property. Several High Court judgments elaborate on this aspect.

The Madras High Court in N. Ramayee v. Sub-Registrar, Registration Department And Another (2020) and The Federal Bank Ltd., v. The Sub Registrar, (Madras High Court, 2023) explicitly stated that Section 7 TPA makes it clear that even a person not entitled to transferable property (as owner) is competent to transfer if authorised to dispose of such property.[11, 12] These cases refer to Section 41 TPA (ostensible owner) and Section 42 TPA (transfer by person having authority to revoke former transfer) as examples of such authorisation.[11, 12]

Other instances include:

  • Guardians/Managers: The Privy Council in Hunoomanpersaud Panday v. Mussumat Babooee Munraj Koonweree (1856) dealt with the authority of a manager or guardian of an infant heir to charge an ancestral estate under Hindu law. Such authority, though limited and qualified (requiring necessity or benefit to the estate), exemplifies an authorisation to dispose of property not one's own.[13]
  • Karta of a Hindu Undivided Family (HUF): As discussed in M.S.P Rajah v. Commissioner Of Gift-Tax, Madras (1980), the Karta of an HUF is authorised by Hindu law to dispose of HUF property under certain circumstances (e.g., legal necessity, benefit of the estate, or for pious purposes), even though he is not the sole owner.[14]
  • Agents with Power of Attorney: A duly authorised agent, acting under a power of attorney, can execute transfers on behalf of the principal. The Kerala High Court in Noble John v. State Of Kerala (2010) referred to Section 32(c) of the Registration Act, 1908, which allows presentation of documents for registration by an agent of a person, representative, or assign, duly authorised by a power of attorney.[1]

Judicial Interpretation and Application of Competency

1. The Role of the Transferor's Title

While Section 7 TPA deals with competency, the actual validity of a transfer also depends on the transferor having a valid title to convey. The principle of nemo dat quod non habet (no one can give what they do not have) is pertinent. The Andhra Pradesh High Court in Siriki Appalaswamy v. Sub-Registrar, Pendurthi, Visakhapatnam District (2008) emphasized that mere registration of a document does not confer title if the vendor lacks it. The transfer of property is subject to the vendor having title.[15]

An interesting question arose in Rajwati And Another v. Sukhi And Others (2018) before the Punjab & Haryana High Court: whether a person who subsequently acquires absolute title can be permitted to challenge a lease deed executed by him earlier on the ground that, at the time of execution, he was not competent.[16] This touches upon doctrines like estoppel or "feeding the grant by estoppel" (Section 43 TPA), where a person who erroneously represents authority to transfer, and subsequently acquires interest, may be compelled to make good the transfer.

2. Co-ownership and Competency to Transfer

Co-owners are generally competent to transfer their respective shares in the property. In Vidya Devi Alias Vidya Vati (Dead) By Lrs. v. Prem Prakash And Others (1995), the Supreme Court dealt with the rights of co-bhumidars under the Delhi Land Reforms Act, 1954. The Court upheld the right of a co-bhumidhar to seek partition, implying their entitlement to their share and thus, competency to deal with it, subject to the specific provisions of the Act.[17]

3. Competency in Specific Transactions and Contexts

The nature of the transaction can also bring competency into focus. In Indira Kaur (Smt) And Others v. Sheo Lal Kapoor (1988), the Supreme Court examined a transaction alleged to be a sale, ultimately finding it to be more in the nature of a mortgage, considering the circumstances and the financial vulnerability of the plaintiff.[18] While not directly about Section 7, it underscores how courts scrutinize the true nature of transactions and the relative positions of parties, which can be influenced by their capacity.

The Rajasthan High Court in Commercial Taxes Officer v. Mani Lal & Co. (1992) held that a transfer of goods between a head office and its branch (or vice versa) does not constitute a "sale" because, for a sale, there must be two distinct persons competent to transfer property for consideration.[19] This highlights that the concept of "persons" in transfer requires distinct legal entities capable of reciprocal rights and obligations.

The Karnataka High Court in Chamundi Hotels Pvt. Ltd. & Others v. The Appropriate Authority & Others (1996), while discussing Chapter XX-C of the Income Tax Act, 1961, observed that if an agreement filed under Section 269UC is void (e.g., due to lack of competency of one party under Section 7 TPA), the appropriate authority cannot act upon it.[20]

4. Procedural Aspects: Registration and Enquiry by Registering Authority

The Registration Act, 1908, plays a procedural role. While registering officers are not adjudicators of title, they have a limited power of enquiry. The Kerala High Court in Noble John v. State Of Kerala (2010) discussed provisions of the Registration Act (Sections 32, 34, 35), noting that the Registering Officer can inquire if the person executing the document is who they claim to be and can refuse registration if the executant appears to be a minor, idiot, or lunatic, or if execution is denied.[1]

However, the Bombay High Court in Chairman/Secretary, Deep Apartment Chs Ltd. v. State Of Maharashtra And Others (2012) clarified that the Registering Authority cannot refuse registration on the ground of absence of title of the executant or defect in title, as this would be opposed to public policy. The focus is on compliance with registration procedures, not substantive title investigation.[4] This was also the view in Siriki Appalaswamy v. Sub-Registrar, which stated that registration itself does not create title.[15]

Limitations on Transfer

Even if a person is competent to transfer under Section 7 TPA, Section 6 of the TPA imposes certain limitations on what can be transferred. For instance, Section 6(h) TPA, as noted in Sasikala v. Revenue Divisional Officer And Another (2022) and Yanala Malleshwari v. Ananthula Sayamma (2006), states that no transfer can be made for an unlawful object or consideration, or to a person legally disqualified to be a transferee.[10, 9] The Gujarat High Court in Abdul Satar Jaji Ibrahim v. Shah Manilal Talakchand (1968) also referenced Section 6(h) in its discussion on what constitutes a valid transfer.[21]

Conclusion

The determination of "persons competent to transfer" under Indian law hinges primarily on Section 7 of the Transfer of Property Act, 1882, which itself is intrinsically linked to the capacity to contract as defined by the Indian Contract Act, 1872. A person must be of majority, of sound mind, and not otherwise disqualified by law to contract. Beyond this, they must either be entitled to the transferable property or be specifically authorised by law or by the owner to dispose of property that is not their own. Judicial pronouncements have consistently reinforced these principles, clarifying their application in diverse factual scenarios, including transfers by guardians, Kartas of HUFs, ostensible owners, and agents.

While the procedural act of registration does not confer title if the transferor lacks competency or title, the enquiry by the registering authority provides a preliminary check on apparent disqualifications like minority or lunacy. Ultimately, a valid transfer requires a competent transferor, transferable property, and compliance with any other laws in force, ensuring that property rights are clearly defined and transactions are legally sound.

References

  1. Noble John v. State Of Kerala (Kerala High Court, 2010), also citing Noble John v. State Of Kerala (2010 SCC ONLINE KER 2561). Section 7 TPA is also quoted or referenced in Sasikala v. Revenue Divisional Officer And Another (Madras High Court, 2022); N. Ramayee v. Sub-Registrar, Registration Department And Another (Madras High Court, 2020); The Federal Bank Ltd., v. The Sub Registrar, (Madras High Court, 2023); Chamundi Hotels Pvt. Ltd. & Others v. The Appropriate Authority & Others (Karnataka High Court, 1996); The Court Of Wards And Sri Sri Veera v. Sri Sri Gowra Chandra And C (Madras High Court, 1890); Chairman/Secretary, Deep Apartment Chs Ltd. v. State Of Maharashtra And Others (2012 SCC ONLINE BOM 1521, Bombay High Court, 2012); Siriki Appalaswamy v. Sub-Registrar, Pendurthi, Visakhapatnam District (Andhra Pradesh High Court, 2008); Abdul Satar Jaji Ibrahim v. Shah Manilal Talakchand (Gujarat High Court, 1968); M.S.P Rajah v. Commissioner Of Gift-Tax, Madras (Madras High Court, 1980); Shri Shaikh Chiraguiddin… v. Shri Krishna Bablo Gaonkar & Others… (Bombay High Court, 1998); Yanala Malleshwari v. Ananthula Sayamma (2006 SCC ONLINE AP 909, Andhra Pradesh High Court, 2006).
  2. Indian Contract Act, 1872, Section 11.
  3. The Court Of Wards And Sri Sri Veera v. Sri Sri Gowra Chandra And C (Madras High Court, 1890).
  4. Chairman/Secretary, Deep Apartment Chs Ltd. v. State Of Maharashtra And Others (2012 SCC ONLINE BOM 1521, Bombay High Court, 2012).
  5. A.T Raghava Chariar Petitioner v. O.A Srinivasa Raghava Chariar (1916 SCC ONLINE MAD 83, Madras High Court, 1916).
  6. Mt. Salu Bai v. Bajat Khan (Madhya Pradesh High Court, 1917).
  7. Transfer of Property Act, 1882, Section 6.
  8. Ram Gopal v. Nand Lal And Others (1951 AIR SC 13, Supreme Court Of India, 1950).
  9. Yanala Malleshwari v. Ananthula Sayamma (2006 SCC ONLINE AP 909, Andhra Pradesh High Court, 2006).
  10. Sasikala v. Revenue Divisional Officer And Another (Madras High Court, 2022).
  11. N. Ramayee v. Sub-Registrar, Registration Department And Another (Madras High Court, 2020).
  12. The Federal Bank Ltd., v. The Sub Registrar, (Madras High Court, 2023).
  13. Hunoomanpersaud Panday v. Mussumat Babooee Munraj Koonweree (India) (1856 UKPC 28, Privy Council, 1856).
  14. M.S.P Rajah v. Commissioner Of Gift-Tax, Madras (Madras High Court, 1980).
  15. Siriki Appalaswamy v. Sub-Registrar, Pendurthi, Visakhapatnam District (Andhra Pradesh High Court, 2008).
  16. Rajwati And Another v. Sukhi And Others (Punjab & Haryana High Court, 2018).
  17. Vidya Devi Alias Vidya Vati (Dead) By Lrs. v. Prem Prakash And Others (1995 SCC 4 496, Supreme Court Of India, 1995).
  18. Indira Kaur (Smt) And Others v. Sheo Lal Kapoor (1988 SCC 2 488, Supreme Court Of India, 1988).
  19. Commercial Taxes Officer v. Mani Lal & Co. (1992 SCC ONLINE RAJ 405, Rajasthan High Court, 1992).
  20. Chamundi Hotels Pvt. Ltd. & Others v. The Appropriate Authority & Others (Karnataka High Court, 1996).
  21. Abdul Satar Jaji Ibrahim v. Shah Manilal Talakchand (Gujarat High Court, 1968).