Transfer of Property Act MCQs for Judiciary, Page 4

Correct answer: C. Pendente lite nihil innovature

Section 52 of the TPA embodies the doctrine of lis pendens expressed through the maxim "pendente lite nihil innovature" meaning "nothing new should be introduced in pending litigation." This doctrine holds that where a suit is pending in a court concerning immovable property, a transfer of that property by a party to the suit during its pendency is subject to the outcome of the suit. The transferee takes the property bound by whatever decree is passed in the suit. The doctrine is not based on notice (the transferee need not have notice of the pending suit) but on public policy of preventing litigants from giving others rights to disputed property that would defeat the court's decree. It prevents multiplicity of proceedings.

Source note: Section 52, TPA 1882

Correct answer: B. Valid between the parties but voidable at the option of the affected party

A transfer made pendente lite under Section 52 of the TPA is not ipso facto void but only cannot affect the rights of the other party to the suit under any decree or order that may be made therein. The transfer is valid as between the parties to the transfer, but it does not affect the rights of the other party to the litigation. Section 52 creates only a right to be enforced to avoid a transfer made pendente lite; such transfers are not void but voidable at the option of the affected party. If the decree goes against the transferor, the transferee is bound by it and holds subject to the decree. Notably, under Section 52, the doctrine applies regardless of whether the transferee had notice of the pending suit.

Source note: Section 52, TPA 1882; Supreme General Films Exchange v. Maharaja Brijnath, 1975 SC

Correct answer: D. The right to immovable property must be directly and specifically in question in the suit

One of the essential conditions for application of the doctrine of lis pendens under Section 52 is that the right to an immovable property must be directly and specifically in question in the suit or proceeding. The essential conditions are: (i) pendency of a suit or proceeding; (ii) in a court of competent jurisdiction; (iii) the suit must not be collusive; (iv) the right to immovable property must be directly and specifically in question; (v) the property must be transferred or otherwise dealt with by a party to the suit; and (vi) the transfer must affect the rights of the other party. As held in Govinda Pillai Gopala Pillai v. Aiyyappan Krishnan (1957), notice is not an element - the doctrine operates regardless of notice.

Source note: Section 52, TPA 1882; Govinda Pillai Gopala Pillai v. Aiyyappan Krishnan, 1957 SC

Correct answer: A. There was no suit pending in a court of competent jurisdiction when the gift was made

In Govinda Pillai Gopala Pillai v. Aiyyappan Krishnan (1957 SC), the plaint had been filed in a court that lacked the necessary pecuniary jurisdiction and was returned. The gift was executed before the plaint was filed in the competent District Court. The Supreme Court held that the doctrine of lis pendens applies only from the date of presentation of the plaint to a court of competent jurisdiction. A suit filed in a wrong court is not a suit before a competent court. Pendency according to the Explanation to Section 52 begins when the plaint is presented to the proper, competent court. Since there was no pending suit in a competent court when the gift was made, lis pendens did not apply and the gift was valid.

Source note: Govinda Pillai Gopala Pillai v. Aiyyappan Krishnan, 1957 SC; Section 52, TPA 1882

Correct answer: D. Causing the property to be sold through the court

In a simple mortgage under Section 58(b) of the TPA, the mortgagor binds himself personally to repay the mortgage money but does not deliver possession to the mortgagee. The mortgagor merely grants the mortgagee an express or implied power to cause the mortgaged property to be sold through court intervention if the mortgage money is not repaid. The mortgagee's remedy is therefore to obtain a court decree and have the property sold, with the proceeds applied toward the mortgage debt. The mortgagee cannot take possession or foreclose (acquire absolute title). If the sale proceeds are insufficient, the mortgagee can also pursue the mortgagor personally under their personal covenant to repay. This distinguishes simple mortgage from usufructuary and English mortgage.

Source note: Section 58(b), TPA 1882

Correct answer: C. Economic position of the mortgagor, circumstances of mortgage, and whether conditions make redemption practically impossible

In Shivdev Singh v. Sucha Singh (2000 SC), the Supreme Court held that the 99-year mortgage was a clog on equity of redemption, applying a holistic test that considers: (i) the period of redemption; (ii) the circumstances under which the mortgage was created; (iii) the economic and financial position of the mortgagor; (iv) the relationship between mortgagor and mortgagee; (v) the economic and social conditions prevailing at the time; and (vi) any relevant custom. On the facts, the mortgagor was financially hard-pressed, mortgaged for a meager Rs. 7,000 with the mortgagee in an advantageous position. A 99-year term in such circumstances, making redemption within the practical lifetime of the mortgagor impossible, amounted to a clog. Long term alone is not decisive but is a significant factor.

Source note: Shivdev Singh v. Sucha Singh, 2000 SC; Section 60, TPA 1882

Correct answer: B. The mortgagee holds absolute legal title to the property (transferred absolutely by the mortgagor) subject only to the proviso for reconveyance on repayment; the mortgagor retains only the equity of redemption

Section 58(e) TPA: English mortgage - the mortgagor binds himself to repay AND TRANSFERS THE PROPERTY ABSOLUTELY to the mortgagee, subject to a proviso for reconveyance on repayment. Position: (1) MORTGAGEE: holds absolute legal title; can sue for possession; holds as security; (2) MORTGAGOR: has transferred legal title but retains the EQUITY OF REDEMPTION (right to redeem under Section 60 TPA); the equity of redemption is itself an interest in property that can be transferred or mortgaged again; (3) The equity of redemption cannot be clogged - once a mortgage always a mortgage; (4) The mortgagee absolute title is defeasible: on payment, mortgagee MUST retransfer. This duality (absolute title in mortgagee + equity of redemption in mortgagor) is the characteristic feature of English mortgage, widely used by banks for large commercial loans.

Source note: Section 58(e), TPA 1882

Correct answer: A. 30 years from the date the right to redeem accrues; for usufructuary mortgage, the right subsists as long as the mortgage subsists and 30 years runs from when the mortgagee took possession

Article 61 of the Limitation Act 1963: suit for REDEMPTION of mortgage = 30 years. The long 30-year period: (1) Recognizes the long-term nature of mortgage arrangements; (2) Prevents mortgagees from acquiring property through mere lapse of time (which would be a clog on equity of redemption); (3) Consistent with the principle that the right of redemption subsists as long as the mortgage subsists - Shivdev Singh v. Sucha Singh (2000 SC): 'The right of redemption is an incident of a subsisting mortgage and it subsists so long as the mortgage subsists.' The mortgagee possession in a usufructuary mortgage does NOT constitute adverse possession (12 years) against the mortgagor because the mortgagee holds as a secured creditor, not adversely.

Source note: Section 60, TPA 1882; Article 61, Limitation Act 1963

Correct answer: C. A clog on equity of redemption and void, though the 85-year term itself was upheld

In Ganga Dhar v. Shankar Lal (1958 SC), the Supreme Court upheld the 85-year term (holding the long term was not itself a clog since the mortgage had enabled the mortgagor to redeem an earlier mortgage and was not the product of oppression) but struck down the condition that if not redeemed within 6 months after the 85-year period, the mortgage deed would be deemed a sale deed. This second condition - converting the mortgage to a sale on default - was a clog on equity of redemption because it effectively took away the right to redeem after 85 years. Under the doctrine "once a mortgage, always a mortgage," no condition can convert a mortgage into an outright transfer or deprive the mortgagor of the right to redeem. The test is whether the mortgagor was oppressed or placed at a disadvantage.

Source note: Ganga Dhar v. Shankar Lal, 1958 SC; Section 60, TPA 1882

Correct answer: B. Usufructuary mortgage

Section 58(d) of the TPA defines a usufructuary mortgage as one where the mortgagor delivers possession of the mortgaged property to the mortgagee and authorizes him to retain such possession until repayment of the mortgage money, and to receive the rents and profits in lieu of interest or in payment of the mortgage money, or partly in lieu of interest and partly in payment. There is no fixed time for redemption in a usufructuary mortgage - the mortgagee retains possession until repaid. The mortgagor is not personally liable unless there is a distinct agreement. The mortgagee cannot sue for foreclosure or sale but can sue for the mortgage money and possession if dispossessed. This is a common form of mortgage in rural India.

Source note: Section 58(d), TPA 1882

Correct answer: D. The term "ostensible sale" - it is not actually a sale but only appears to be one

Section 58(c) of the TPA defines a mortgage by conditional sale as one where the mortgagor ostensibly sells the mortgaged property with a condition that on default of payment by a certain date the sale shall become absolute, or on payment the sale shall become void, or on payment the buyer shall retransfer. The word "ostensible" (meaning seeming or apparent, not actual) is critical: it imports that this is not really a sale. The parties intend a security transaction (mortgage), not an actual transfer of ownership. The Supreme Court has held that if the mortgage deed and sale deed are separate documents, it cannot be a mortgage by conditional sale - both conditions must be in a single document. The condition of defeasibility is the essence of this type of mortgage.

Source note: Section 58(c), TPA 1882

Correct answer: A. Towns notified by the State Government in the Official Gazette

Section 58(f) of the TPA provides that a mortgage by deposit of title deeds (equitable mortgage) can be created in the towns of Calcutta, Madras, and Bombay, and in any other town which the State Government may, by notification in the Official Gazette, specify in this behalf. The essential feature is the delivery of title deeds to the creditor (or their agent) with the intent to create a security thereon. No written instrument or registration is required for its creation. The property need not be situated in the notified town; the deposit can be made in a notified town for property elsewhere. This form of mortgage is widely used in commercial banking and financing.

Source note: Section 58(f), TPA 1882

Correct answer: B. It cannot be a mortgage by conditional sale under Section 58(c) TPA if the conditions of defeasance are in a separate document from the ostensible sale; it may be an anomalous mortgage or an actual sale

Section 58(c) TPA defines a mortgage by conditional sale as where "the mortgagor ostensibly sells the mortgaged property" with the conditions of defeasance. The Supreme Court has established that for a transaction to qualify as a mortgage by conditional sale under Section 58(c), both the ostensible sale AND the conditions of defeasance (reconveyance on payment / void sale on payment) must be contained in the SAME DOCUMENT. If there are two separate documents - a sale deed and a separate agreement for reconveyance - the transaction does not qualify as a mortgage by conditional sale under Section 58(c) even if the parties intended a security arrangement. It may be: (a) an anomalous mortgage if it serves as security for a debt; or (b) an actual conditional sale. The single-document requirement prevents the statute from being used to recharacterise actual conditional sales as mortgages after the fact.

Source note: Section 58(c), TPA 1882

Correct answer: C. The combination of: (i) 99-year term; (ii) possession delivered to mortgagee.

In Pomal Kanji Govindji v. Vrajlal Karsandas Purohit (1989 SC), the Supreme Court identified the CUMULATIVE effect of multiple conditions: (1) 99-year term - extremely long; (2) possession delivered to mortgagee from the outset; (3) mortgagee given power to DEMOLISH existing structures and REBUILD at the mortgagor's cost - by the time 99 years elapsed, the entire structure would be different and rebuild costs enormous; (4) ALL interest was to be paid ONLY AT TIME OF REDEMPTION, not periodically - meaning at the end of 99 years, the mortgagor would need to pay principal PLUS 99 years of accumulated interest in one impossibly large lump sum. The Court stated: "the whole amount of interest etc. was to be paid only at the time of redemption, which would make redemption practically impossible." It was the TOTALITY of these conditions that constituted the clog - no single condition alone was necessarily decisive.

Source note: Pomal Kanji Govindji v. Vrajlal Karsandas Purohit, 1989 SC; Section 60, TPA 1882

Correct answer: D. A registered instrument signed by the mortgagor and attested by at least two witnesses; and for a mortgage by deposit of title deeds, the deposit itself creates the mortgage without any instrument

Section 59 TPA: "Where the principal money secured is one hundred rupees or upwards, a mortgage other than a mortgage by deposit of title deeds can be effected only by a registered instrument signed by the mortgagor and attested by at least two witnesses. Where the principal money secured is less than one hundred rupees, a mortgage may be effected either by a registered instrument signed and attested as aforesaid, or (except in the case of a simple mortgage) by delivery of the property." Two formal requirements for mortgages of Rs. 100+: (1) REGISTERED INSTRUMENT; (2) ATTESTED BY AT LEAST TWO WITNESSES. Exception: MORTGAGE BY DEPOSIT OF TITLE DEEDS (Section 58(f)) - this can be created without any written instrument; the mere deposit of title deeds with the intent to create security creates the mortgage. Padarath Halwai v. Ram Narain involved Section 59 attestation requirements for a mortgage of pardanashin women.

Source note: Section 59, TPA 1882

Correct answer: D. Transfers the property absolutely to the mortgagee subject to a condition of retransfer on repayment

Section 58(e) of the TPA defines an English mortgage as one where the mortgagor binds himself to repay the mortgage money on a certain date and transfers the mortgaged property absolutely to the mortgagee, but subject to a proviso (condition) that the mortgagee will retransfer the property to the mortgagor upon payment of the mortgage money as agreed. The essentials are: (i) an absolute transfer to the mortgagee; (ii) subject to condition of retransfer on repayment; (iii) payment to be made on a certain date. Despite the "absolute" transfer, the mortgagee does not get indefeasible title as the right to retransfer remains with the mortgagor. This form is common in dealings with companies and banks in urban areas.

Source note: Section 58(e), TPA 1882

Correct answer: B. In an English mortgage: (i) the mortgagor expressly binds himself to repay; (ii) the transfer is expressed as an absolute transfer with a covenant to retransfer on repayment.

Section 58(e) TPA (English Mortgage): (1) mortgagor BINDS HIMSELF PERSONALLY to repay the mortgage money on a certain date; (2) TRANSFERS THE PROPERTY ABSOLUTELY to the mortgagee; (3) subject to a proviso that the mortgagee will RETRANSFER on payment. The transfer is expressed as absolute with an obligation to reverse it. Section 58(c) TPA (Mortgage by Conditional Sale): (1) the mortgagor OSTENSIBLY SELLS the property (not an absolute transfer - it is only an apparent/seeming sale); (2) with conditions: default = sale becomes absolute; payment = sale becomes void; payment = buyer transfers back. The sale is illusory (ostensible) from the start. KEY DIFFERENCE: English mortgage has a real absolute transfer + covenant to retransfer; conditional sale has an illusory (ostensible) sale with defeasance conditions. Both are security transactions but the legal mechanism is different. English mortgage mortgagee holds absolute legal title (subject to the covenant); conditional sale mortgagee holds only a contingent title.

Source note: Sections 58(c), 58(e), TPA 1882

Correct answer: C. Wilful abstention from inquiry or gross negligence

Section 3 of the TPA defines constructive notice as knowledge that a person would have acquired but for wilful abstention from inquiry or search which they ought to have made, or gross negligence. Constructive notice arises in five circumstances: (i) wilful abstention from inquiry; (ii) gross negligence; (iii) registration of the document; (iv) actual possession by a third party; and (v) notice to agent. The doctrine ensures that a person cannot escape legal consequences by deliberately avoiding knowledge that a reasonable person would have obtained. Mere good faith or absence from the area does not excuse a person from constructive notice if due inquiry was deliberately avoided.

Source note: Section 3, TPA 1882

Correct answer: B. B had made inquiries from the Official Receiver and received no information about arrears

In Ahmedabad Municipal Corporation v. Haji Abdul Gafur (AIR 1971 SC 1201), the Supreme Court held that constructive notice of municipal tax arrears could not be imputed to B because the question is not whether the person had the means to find out, but whether in the circumstances there was a duty to find out. B had made general inquiries from the Official Receiver who had charge of the property but was not informed of the arrears. Further, the municipality itself had been negligent in not pursuing the matter after sending notice to the Official Receiver. Since B had taken reasonable precautions and was a bona fide purchaser without actual or constructive notice, he could not be made liable for pre-purchase tax arrears. Each case of constructive notice depends on its own facts.

Source note: Ahmedabad Municipal Corporation v. Haji Abdul Gafur, AIR 1971 SC 1201

Correct answer: D. For the time being in actual possession thereof

Explanation II to Section 3 of the TPA specifically provides that any person acquiring immovable property or any share or interest therein is deemed to have notice of the title, if any, of any person who is for the time being in actual possession thereof. This provision imposes a duty of inquiry on any prospective transferee to ascertain the rights of the person in actual physical possession. If the prospective transferee fails to make such inquiry, they are imputed with constructive notice of whatever rights the possessor has. This principle was applied in Ram Niwas v. Bano (2000 6 SCC 685) where the purchaser was held to have notice of the tenant-buyer's contractual right since the tenant was in actual possession.

Source note: Section 3, Explanation II, TPA 1882; Ram Niwas v. Bano, 2000 6 SCC 685

Correct answer: A. A was in actual possession and C had a duty to inquire from him

In Ram Niwas v. Bano (2000 6 SCC 685), the Supreme Court held that purchasers C were deemed to have constructive notice of tenant A's right to purchase the shop because A was in actual possession of the property under an agreement to purchase. The Court held that if purchasers rely solely on the vendor's assertions and abstain from inquiring from the person in possession about the nature of their possession, they cannot escape the consequences of deemed notice under Explanation II to Section 3. The word "notice" in Section 3 is of wider import than "knowledge," and actual possession by another imposes an inescapable duty of inquiry on the prospective purchaser. C's right was therefore subordinate to A's right.

Source note: Ram Niwas v. Bano, 2000 6 SCC 685

Correct answer: C. Date of registration of the document

Explanation I to Section 3 of the TPA (added by the Amendment Act of 1929) provides that where a transaction relating to immovable property is required by law to be and has been effected by a registered instrument, any person acquiring such property shall be deemed to have notice of such instrument from the date of registration. Three conditions must be satisfied: (i) the instrument must be registered and registration completed as per the Registration Act 1908; (ii) the instrument must be duly entered in books under Section 51 of that Act; and (iii) particulars must be correctly entered in the indexes under Section 55. Before 1929, the law on whether registration amounted to constructive notice was unsettled. Registration ensures public notice by creating a searchable public record of all property transactions.

Source note: Section 3, Explanation I, TPA 1882

Correct answer: B. The notice must be received in the course of agency business relating to a material fact

Explanation III to Section 3 of the TPA provides that notice to an agent is imputed to the principal when: (i) the notice was received during the course of agency; (ii) it was received in the capacity of agent; (iii) it was received in the course of agency business; (iv) it pertains to a matter material to the agency business; and (v) it was not fraudulently concealed from the principal by the agent. The maxim "qui facit per alium facit per se" (he who acts through another acts himself) underpins this rule. If the agent fraudulently conceals the notice from the principal, the principal is not charged with notice against any person who was party to or cognizant of the fraud. There is no requirement for express authorization to receive notices.

Source note: Section 3, Explanation III, TPA 1882

Correct answer: D. D was living near the property and B was in actual possession

In H.N. Narayanaswamy Naidu v. Deveeramma (AIR 1981 Kant 93), the Karnataka High Court held that D was imputed with constructive notice of B's right under the release deed on two grounds. First, D's wilful abstention from inquiry: for wilful abstention, D would have come to know the entire facts. Second, actual possession under Explanation II to Section 3: since B was in actual possession of the property practically as owner, D had a duty to inquire from B about B's rights. The trial court also noted that D was residing within a furlong of the suit premises and in all probability was aware of the dealings. Since D had constructive notice, D could not claim to be a bona fide purchaser without notice.

Source note: H.N. Narayanaswamy Naidu v. Deveeramma, AIR 1981 Kant 93

Correct answer: A. B occupied only a small fraction and C need not inquire from each tenant

In Md. Mustafa v. Haji Md. Isa (AIR 1987 Pat 5), the Patna High Court held that C was not imputed with constructive notice of B's claimed right to purchase merely because B occupied one small portion of a multi-unit building. The Court held that C, as a bona fide purchaser who had made inquiries from the owner, was not duty-bound to inquire from each and every tenant of a small fraction of the property. Constructive notice cannot be presumed where the purchaser was in actual possession of only a small fraction of the property sold. This case establishes an important limitation on the scope of Explanation II to Section 3: actual possession of a small fraction by one of many tenants does not impose a duty to inquire from each such occupant.

Source note: Md. Mustafa v. Haji Md. Isa, AIR 1987 Pat 5