Feeding the Grant by Estoppel

The proviso: the innocent later purchaser

The second paragraph provides that nothing in the section shall impair the right of transferees in good faith for consideration without notice of the existence of the said option.

So if, after acquiring the interest, the transferor sells the property to a fresh purchaser who pays value, acts honestly and knows nothing of the earlier transaction, that purchaser is safe and the first transferee's option is defeated. The section protects a buyer against a misrepresenting seller, not against another innocent buyer.

The relationship with section 6(a)

This is the hardest thing in Module I, and it is examined directly.

The apparent conflict is easy to state. Section 6(a) says the chance of an heir-apparent succeeding to an estate cannot be transferred, and a transfer of a spes successionis is void. Section 43 appears to let exactly such a transfer take effect once the transferor inherits. If a void transfer can be fed, section 6(a) seems to have been repealed by the section that follows it.

The Jumma Masjid, Mercara v. Kodimaniandra Deviah, AIR 1962 SC 847, decided on 11 January 1962 by Venkatarama Aiyyar, Kapur, Hidayatullah and Shah JJ, resolves it.

Facts. Three brothers, Santhappa, Nanjundappa and Basappa, were members of a joint family. Nanjundappa died in 1907 leaving his widow Ammakka, who took the estate as heir; on her death in 1910 the property passed to the reversioners. On 18 November 1920 three men who were grandsons of Nanjundappa's sister sold the disputed properties to Ganapathi for Rs. 2,000, the deed representing that they had become entitled as reversioners on Ammakka's death. In truth, at the date of the sale, what they had was a spes successionis. Ganapathi's successor sued for possession, and the Jumma Masjid claimed the same property through a gift said to have been made in 1932 and a release deed of March 1933.

Held. The transferee was entitled to the benefit of section 43. Where a person transfers property representing that he has a present interest in it when in fact he has only a spes successionis, a transferee who took on the faith of that representation and for consideration may claim under section 43 once the transferor acquires the interest. On the apparent conflict, the Court held that section 6(a) enacts a rule of substantive law while section 43 enacts a rule of estoppel, which is a rule of evidence, and that the two operate in different fields and on different conditions, so there is no ground for reading a conflict between them.

Why it matters here. It gives the student the dividing line, and the line is knowledge.

• Where both parties know they are dealing in a mere chance of succession, they are trading in a spes successionis. Section 6(a) applies, the transfer is void, and section 43 cannot help, because there was no representation and so no estoppel.
• Where the transferee was misled into believing the transferor already had the interest, section 43 applies. The transferee is not buying an expectancy; he thinks he is buying property.

So the two sections never meet. Section 6(a) asks what was transferred; section 43 asks what the transferor said.

A worked example

Jitendra tells Kalpana that a shop at Solapur belongs to him, and sells it to her for Rs. 25 lakh by a registered deed. In fact the shop belongs to his father, and Jitendra has no interest in it at all. Two years later his father dies and Jitendra inherits the shop.

Kalpana's position. All the conditions are met: a representation of authority, immovable property, consideration, and the subsequent acquisition of the interest while the contract subsists. At her option, the transfer operates on the interest Jitendra has acquired, and she may require him to deliver the shop.

She has a choice. The section gives her an option. She may instead rescind and sue for the return of her money with damages, which she might prefer if the shop has fallen in value.

If Kalpana had rescinded the contract a year after the sale, on discovering the truth, the contract would no longer subsist when Jitendra inherited, and the option would not be available.

If Jitendra, on inheriting, had sold the shop to Lalit, who paid full value, acted honestly and knew nothing of the sale to Kalpana, the second paragraph protects Lalit. Kalpana's option is defeated and her remedy lies against Jitendra personally.

Change the facts so that Kalpana knew. Suppose the deed had recited that Jitendra was merely his father's heir-apparent and that Kalpana was buying his chance of inheriting, at a discount. There is no representation and no estoppel. This is a transfer of a spes successionis, void under section 6(a), and Jumma Masjid's reasoning leaves section 43 with nothing to operate on.

What it does NOT mean

It does not validate a transfer of a spes successionis knowingly made. That remains void under section 6(a). What section 43 rescues is a transferee who was misled.

It does not require fraud. The section says "fraudulently or erroneously", so an honest mistake produces the same result.

It is not automatic. The transfer operates at the option of the transferee, who may elect to take the property or to pursue other remedies.

It does not survive rescission. The contract of transfer must subsist when the interest is acquired.

It does not defeat an innocent later purchaser. The second paragraph protects a transferee in good faith for consideration without notice of the option.

It does not apply to a gratuitous transfer. Consideration is required.

It does not apply to movable property. The section is confined to immovable property.

Distinctions

Quick revision

• Section 43: a fraudulent or erroneous representation of authority, a professed transfer for consideration of immovable property, and the transferor's subsequent acquisition of an interest, let the transfer operate on that interest at the transferee's option, while the contract subsists.
• The doctrine's name is a picture: the after-acquired interest feeds the empty grant.
• The second paragraph protects a later transferee in good faith for consideration without notice of the option.
• Section 6(a) and section 43 do not conflict: the first is substantive law, the second a rule of estoppel, and they operate in different fields, per The Jumma Masjid, Mercara v. Kodimaniandra Deviah, AIR 1962 SC 847.
• The dividing line is knowledge: both parties knowingly dealing in a chance means section 6(a) and a void transfer; a misled transferee means section 43.

Test yourself

1. State the conditions of section 43. A fraudulent or erroneous representation by the transferor that he is authorised to transfer certain immovable property; a professed transfer of it for consideration; the transferor's subsequent acquisition of an interest in that property; the contract of transfer still subsisting; and the transferee exercising his option.

2. Must the representation be dishonest? No. The section covers a representation made "fraudulently or erroneously", so an honest mistake is enough.

3. How did the Supreme Court reconcile sections 6(a) and 43? In The Jumma Masjid, Mercara v. Kodimaniandra Deviah, AIR 1962 SC 847, the Court held that section 6(a) enacts a rule of substantive law and section 43 a rule of estoppel, which is a rule of evidence, so the two operate in different fields and on different conditions and there is no conflict.

4. When can a transferee NOT invoke section 43 against a person who sells him a mere chance of inheriting? Where the transferee knew that he was buying only a spes successionis. There is then no representation and no estoppel, and section 6(a) makes the transfer void.

5. A sells B property he does not own, then acquires it, then sells it to C who pays value and knows nothing. Who takes? C. The second paragraph of section 43 preserves the rights of transferees in good faith for consideration without notice of the option, so B's option is defeated and B is left with a personal remedy against A.

6. Is the operation of section 43 automatic on the transferor acquiring the interest? No. The transfer operates at the option of the transferee, who may instead rescind and pursue other remedies.