Conditional Transfer of Property

By | November 30, 2020
Conditional Transfer

In this article, Ashish Agarwal discusses Conditional Transfer of Property valid under Indian law and the various conditions required to facilitate them.

I. Introduction

Section 5 of the Transfer of Properties Act, 1882 defines the transfer of property as the act of conveying of property by one living person to other(s) or even himself in the present or future. It includes bodies of people, companies in its definition.

It can be noted from the above examples that the transfer of a property may be broadly of two kinds – Absolute transfer, and Conditional transfer.

The absolute transfer would entail that the transferee (one at the receiving end of the transfer) acquires full, immediate and unconditional title in the transferred property. This would be a sale or a gift. Hence, a Conditional transfer is such which is qualified by some conditions, on the fulfilment of which by the transferee only will the property vest in him. That is, when the transfer of property to the transferee rests on the fulfilment or non-fulfilment of certain terms, then such transfer is called conditional transfer of property. Simply, A could agree to transfer his flat to B if B marries his son in 6 months.

II. Which conditions are valid?

There does not exist an uncontrolled, infinite ambit to the transferror to inflict any condition he may like. Section 25 of the Act lays down the conditions which may not be applied during the transfer of property. A condition must not be:

  • Impossible: A condition which is impossible to perform is not valid and a transfer of property must not rest on it.
  • Forbidden by law: A condition must not require the commission of an act forbidden by any law in force.
  • Such that it will defeat the provisions of any law: Even if not expressly prohibited, an act must not be required as a condition if permitting it will defeat the provisions of any law in force.
  • Fraudulent: A condition must not include fraudulent acts in it.
  • Involving injury to anyone: A condition cannot ask a person to injure the person, property or reputation of another.
  • Immoral or opposed to public policy: Some acts are regarded as immoral and opposed to public policy under several judgments and local laws and traditions. For instance, A says that he will sell his property to B if B helps him in lying to his parents and running from his home. These should not be conditions.

Any condition which does not meet the above-laid criteria will render that conditional transfer of property void and no interest will be vested with the transferee.

III. Condition Precedent

Sections 25 to 34 of the Act cover the conditional transfer of properties. As given above, Section 25 lays the criteria of forbidden conditions which would invalidate a transfer. Section 26 lays down what is called a transfer with the condition precedent.

This includes such transfer where the fulfilment of the conditions stated has to be done by the transferee before the property is actually transferred. Unless and until ‘substantial compliance’ of the condition occurs, no interest in the property is vested with the transferee. For instance, in the above example of A asking B to marry his son, if it is stipulated that the marriage must occur before the property is transferred, then it is a condition precedent to transfer of property.

What substantial compliance means is that if the engagement and most marital rites take place but the ceremony gets delayed due to any contingencies, it will still be deemed that the condition has been fulfilled and the transfer would be valid. Hence, there is not strict compliance but substantial compliance which is seen in this category.

Also, if the condition precedent is rendered immoral or impossible to perform the transfer would become void. If the condition is void, so is the transfer. Where the wife was asked to desert her husband for the transfer of property to take place, it was held to be invalid as being opposed to morality and public policy, in Wilkinson v. Wilkinson [1].

In Gonendra Mohan Tagore v. Rajah Jotindra Mohan Tagore[2], X agreed to transfer some property to Y if Y married Z with the permission of A, B and C. C died. X married Y with A and B’s permission. Here, he was deemed to have fulfilled the condition having substantially complied with it. Similar were the facts of Dawson v. Oliver Massey [3] as well.

IV. Condition Subsequent

A transfer of property made with a condition which needs to be fulfilled within some time after the transfer is made is called a transfer on condition subsequent. That is, X transfers property to Y placing the condition that Y will score 90 per cent in the upcoming exams 3 months later. Here, the transfer is made and interest is vested in Y immediately and it stays till the exam. If Y scores enough in the exam, the interest continues to be vested and if he does not, the transfer becomes void. This kind f transfer is contained in the provisions of Section 29 of the Act.

Hence, a condition subsequent transfers the property to the transferee immediately and then the fulfilment of non-fulfilment of the condition in the required time decides whether the transfer remains valid or not. It is to be noted in this condition the compliance is strictly required. That is, an 85 per cent mark may not be deemed sufficient to deem compliance. Another thing to contrast is that if the condition put here becomes impossible to perform then the transfer does not become void. The condition is ignored and the interest in the property continues to vest with the transferee.

In Venkatarama v. Aiyasami [4], X was sentenced to transportation for his life and he agreed to transfer his field to Y. The condition was that if he returned from Port Blair, the transfer will end. He did return from Port Blair and the court held that he may validly reclaim his field from Y.

V. Ulterior Disposition and Doctrine of Acceleration

This is a special kind of conditional transfer of property given in Section 27 where two transferees exist in the relation. The condition is laid as such that if the first transferee fails to fulfil the condition stated, the first transfer fails and the second transferee gets the property instead.

For instance, P agrees to sell his land to Q if Q will secure a job for R. It is stipulated therein that If Q does not secure the job, the land goes to S. Here, the prior disposition will result in Q getting the property on the condition that he gets R a job. If this transfer fails on account of non-fulfilment of condition, then the transfer in whole does not fail, it is rather ‘accelerated’ in S’s favour and he gets the property. It is said that an ulterior disposition was created in favour of S, that is he is the ultimate beneficiary. This is also given the name, ‘Doctrine of Acceleration’.

It must be noted that the prior disposition must fail on non-fulfilment and not become void on the invalidity of condition.

In Underwood v. Wing [5], A agrees to transfer his property to B, his wife and if she dies in his lifetime then the property goes to C. Here, an ulterior disposition was created in C. However, A and B both died in a car accident and as the wife’s death was not in A’s lifetime, it was held that the transfer will not take place in C’s favour.

In Ajudhia v. Rakhman Kaur [6], a gift was to be transferred to the mother. However, as the property was not registered in her name due to local law, the gift accelerated and went to the children instead.

An important aspect is added to this kind of transfer by Section 30 of the Act, which says that the validity of the ulterior disposition does not affect the validity of the prior disposition. That is, two dispositions are created in this kind of transfer.

Even if the subsequent, or ulterior disposition, which is created to become operational on the failure of the first disposition, is actually invalid, that will not affect the prior disposition. For example, A agrees to transfer his land to B, and if B marries then a lifetime interest (interest for the entire life) will be vested in C, B’s unborn male child. Here, the ulterior disposition in favour of C is invalid as lifetime interest cannot be drawn for an unborn child. However, that does not render the first disposition in favour of B invalid.

VI. Other Sections (31 – 34)

Section 31 as well as Section 32 talks about a transfer where the condition is to take place after the transfer and it is an uncertain event which may or may not occur. In such a case, the transfer ceases to have effect when the condition subsequent happens or does not happen. Such a condition is not invalid. However, it must not be immoral or illegal. An example is the case of Ambika Charan v. Sasitara [7], where the person was required to reside at a particular place for the transfer to be valid. So, till he stayed at the residence, the transfer continued to be valid and not thereafter.  

Section 33 talks about a transfer of property where no time is specified for fulfilling the condition set out. It is given that if the performance of the condition becomes impossible permanently or for a long period of time due to the delay, then the condition is breached and the transfer fails.

Section 34 talks about a transfer where a time is stipulated for the fulfilment of a condition. The condition must then be fulfilled in the given time or the transfer ceases to have an effect. However, the reason for the delay is also a factor in such cases. If a person who benefits from the non-performance of the condition causes the delay, then it may be condoned and the condition can be allowed to discharge after the time.


References

[1] (1871) Eq 604

[2] (1874) 11A 387

[3] (1876) 2 Ch D 753

[4] (1922) 43 Mad. L.J. 340

[5] 4 De G.M. and G. 633

[6] (1883) 10 Cal 482

[7] (1915) 22 Cal LJ 61


Property Law; Notes, Case Laws And Study Material

Author: Ashish Agarwal

Advocate | School of Law, Christ University Alumnus

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