Transfer of Property Defined
Chapter Four
Syllabus topic 1.2, "General principles of transfer of property"
Pages 17 to 20 of 378
In one line
A transfer of property is one living person handing property over to another living person, or to himself and another, now or in the future.
In exam wording: section 5 provides that "transfer of property" means an act by which a living person conveys property, in present or in future, to one or more other living persons, or to himself, or to himself and one or more other living persons, and "to transfer property" is to perform such act.
Why the definition is drawn this way
Everything after section 5 uses the phrase "transfer of property", so the phrase has to have an edge. Two words in the definition draw that edge, and both are tested.
"Living person" keeps wills out. A will operates only on death, so a testator is not a living person conveying to a living person, and the Act does not govern wills at all. That is also why section 3 defines "instrument" as a non-testamentary instrument, as explained in [The Interpretation Clause: Attestation, Notice and the Words the Act Runs On]. Wills are governed by the Indian Succession Act 1925.
"Conveys" keeps out arrangements that do not move an interest from one person to another. Nothing is conveyed by a partition, because each sharer already owned an undivided interest in the whole.
The provision itself
Section 5 provides that in the following sections "transfer of property" means an act by which a living person conveys property, in present or in future, to one or more other living persons, or to himself, or to himself and one or more other living persons; and "to transfer property" is to perform such act.
The section adds a paragraph on who counts as a living person:
In this section "living person" includes a company or association or body of individuals, whether incorporated or not, but nothing herein contained shall affect any law for the time being in force relating to transfer of property to or by companies, associations or bodies of individuals.
Broken down
One, the transferor must be a living person. A dead person cannot transfer, so a will is outside the Act. A company, an association or a body of individuals, incorporated or not, is a living person for this purpose.
Two, the transferee must be a living person, or the transferor himself, or the transferor and another. The Act was amended in 1929 to add "or to himself", which put beyond doubt that a person may transfer property to himself, as happens when someone declares himself a trustee of his own property. He can also transfer to himself and another jointly, which is how a sole owner adds a spouse as joint owner.
Transfer of Property Defined
Because the transferee must be a living person, a transfer directly to an unborn child is not possible. What the Act permits instead is the machinery in section 13, taught in [Transfer for the Benefit of an Unborn Person].
Three, there must be a conveyance. An interest must pass out of the transferor and into the transferee.
Four, it may be in present or in future. This is the phrase students misread, and the misreading is worth marking. It qualifies the conveyance, not the property. A person may convey today an interest that will fall into possession later, for example a remainder after a life interest. What he cannot do is convey property that does not yet exist or that he does not yet have any interest in, because there is nothing to convey. A transfer of future property operates, if at all, as a contract to transfer when the property comes into existence.
A worked example
Anand owns a shop at Thane. Consider five arrangements.
One. Anand executes a registered deed conveying the shop to his brother Bharat. A living person conveys property to another living person. A transfer under section 5.
Two. Anand makes a will leaving the shop to Bharat. Not a transfer under section 5, because it takes effect only on Anand's death and there is no conveyance by a living person. The Indian Succession Act 1925 governs it.
Three. Anand executes a deed declaring that he holds the shop from today as trustee for his daughter. He has transferred to himself in a new capacity, which the words "or to himself" expressly permit.
Four. Anand and Bharat, who jointly inherited the shop from their father, execute a deed of partition by which Anand takes the shop and Bharat takes the godown. Not a transfer. Each already had an undivided interest in both properties; the deed works out their shares rather than conveying anything new.
Five. Anand agrees to sell Bharat the crop that his field will produce next season. The crop does not exist yet. This cannot operate as a transfer under section 5 for want of anything to convey; it takes effect as a contract to transfer the crop when it comes into being.
What it does NOT mean
"In present or in future" does not mean future property can be transferred. It means the conveyance may be of an interest that vests in possession later. A transfer of property not yet in existence operates as a contract.
It does not mean a transfer must be for consideration. A gift is a transfer under section 5 and is dealt with in [Gift]. Consideration is what separates the kinds of transfer, not what makes something a transfer.
Transfer of Property Defined
It does not mean the transferee must be a natural person. A company or an unincorporated association counts, by the second paragraph of the section.
A surrender, a relinquishment or a family settlement is usually not a transfer. A surrender of a lease extinguishes an interest rather than conveying one; a relinquishment by a coparcener enlarges the shares of the others by operation of law; and a family settlement recognises pre-existing claims rather than creating new ones. Each of these is a standard answer point and each rests on the absence of a conveyance.
Distinctions
| Transfer under section 5 | Not a transfer | |
|---|---|---|
| Examples | Sale, mortgage, lease, exchange, gift, a declaration of trust over one's own property | Will, succession, partition, surrender, relinquishment, family settlement, court auction sale |
| Why | A living person conveys an interest to a living person | No conveyance, or not between living persons, or by operation of law under s.2(d) |
| Governing law | This Act | Succession Act 1925, personal law, the Code of Civil Procedure 1908 |
Quick revision
- Section 5: an act by which a living person conveys property, in present or in future, to one or more other living persons, or to himself, or to himself and others.
- "Living person" includes a company, association or body of individuals, incorporated or not.
- A will is not a transfer, because it takes effect on death; hence "instrument" in section 3 is non-testamentary.
- "In present or in future" qualifies the conveyance, not the property. Future property cannot be transferred; the arrangement takes effect as a contract.
- A person may transfer to himself, added in 1929, which covers a declaration of trust.
- Not transfers: partition, surrender, relinquishment, family settlement, succession, and transfers by operation of law under section 2(d).
- A transfer directly to an unborn person is impossible; section 13 provides the route.
Test yourself
1. Is a will a transfer of property under section 5? No. Section 5 requires a conveyance by a living person to a living person. A will speaks only from death, so it falls outside the Act and is governed by the Indian Succession Act 1925.
2. What does "in present or in future" qualify? The conveyance, not the property. An interest may be conveyed now to fall into possession later. It does not permit a transfer of property that does not yet exist, which can only be a contract to transfer.
3. Can a man transfer property to himself? Yes. Section 5 expressly allows a transfer to himself, or to himself and one or more other living persons. The clearest instance is a declaration that he holds his own property as trustee for another.
4. Two brothers divide the ancestral house between them by a deed. Transfer or not? Not a transfer. Each brother already held an undivided interest in the whole, so the deed adjusts their existing rights instead of conveying a new interest.
Transfer of Property Defined
5. Is a partnership firm a "living person" for section 5? Yes. The second paragraph of section 5 includes an association or body of individuals, whether incorporated or not, subject to any law in force about transfers to or by such bodies.
6. Can property be transferred to an unborn child directly? No, because the transferee must be a living person. Section 13 provides the only route: an interest is first created in favour of a living person, and the interest for the unborn person follows it, on the conditions that section imposes.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.