Movable property

May 2, 2024

1865

This article has been written by Ashutosh Jain. The article deals with the term ‘movable property’, wherein the author has tried to explain the historical origin of the word ‘property’, its significance and thereafter delved into its segregation into various types. However, the main purpose of the author is to understand the meaning of ‘movable property’ in the Indian context. The author has tried to explain the meaning and functioning of ‘movable property’ under different legislations enforced in India.

Introduction

The word ‘property’ is being used quite often in our daily routine. We use this word to refer to our possessions, our belongings, our assets, our liabilities and our creations. However, one of the most curious things is to understand the real significance of the word ‘property’. The word so simple and used so widely in our daily life has been a topic of debate for ages among philosophers, governments and monarchs. The reason for such curiosity and debate behind this word is its impact on creating rights and liabilities over people. In the first part of the article, we will try to understand the historical significance of the term ‘property’ itself so that in the later part of the article it will become easier for us to understand why there has been so much discussion about its meaning and significance.

Historical origin of the word ‘property’

As far as the origin of the word is concerned, it would be interesting to know that the word ‘property’ does not have its origin in the English language, rather it has been derived from the Latin word ‘properietate’ which means something that is owned. Therefore, it can be concluded here that in earlier times, the word was a symbol of ownership. Here, it is important to note that the right of ownership demands deprivation from others. In simple words, one can not be granted a right of ownership without depriving other people of the same. The other person may be an individual, a juristic person or a government itself. However, with changing times, the word ‘property’ has been used with different connotations for different references. For example, telecom spectrum is a natural resource and is the property of the people of the country. Further, the word ‘property’ has been used with various prefixes like tangible, intangible, corporeal, uncorporeal, movable and immovable. In this article, we will confine ourselves to the laws related to movable property only.

According to Black’s Law dictionary, the word ‘property’ means “that which is peculiar or proper to any person; that which belongs exclusively to one, in the strict legal sense, an aggregate of rights which are guaranteed and protected by the government”. From the reading of the definition, the following conclusion can be drawn:

The term extends to every species over which an individual can assert rights and interests.
The term includes ownership which has unrestricted and exclusive rights.
The term may also include the right to dispose of the thing to dispose of in accordance with law.
Further, the definition also provides the guarantee and protection of the rights mentioned above from the government.

The term property in the Indian context is of great significance mainly because there is no clear outlook of the term property in one single legislation. Broadly, property can be classified as ‘incorporeal’, ‘corporeal’, ‘tangible’, ‘intangible’, ‘private’. However, the most talked about distinction is between the ‘movable’ and ‘immovable’ properties.

For the purpose of this article, we will focus on movable property and when the need arises, we will differentiate it from other forms of property.

However, given the context above, it is important to examine the significance of the origin of property rights around the world in order to understand the legal aspects of the word ‘property’.

History of property rights

The development of property rights regarding individuals around the world has been termed as the progressions of private property rights, wherein these rights were described as an individual’s access to and control over things like lands, ways to make production and natural resources like water. With the passage of time, these private rights also started incorporating other areas like ideas, inventions, writings etc. and henceforth, the scope of private property rights was enlarged. The concept of property rights has ever been evolving and has been extensively debated and discussed by the popular historical figures like Aristotle, Aquinas and Hobbes. Let’s understand the ideas propounded by each of the philosophers mentioned above with regard to property rights.

Aristotle

Since the birth of the political ideology of ‘Nation- State’, it was believed that everything that exists within the territorial jurisdiction of the State is the State’s property and the State is the ultimate owner of all the property. However, the concept of private property rights denounces the right of the State or dilutes the right of the State over the subject property. In this regard, Aristotle in his book ‘The Republic’ argued in favour of private ownership of property against the old-age concept of collective ownership. According to him, private ownership will lead to competition and this would compel individuals to progress on their own by minding their own business. Aristotle opposed the idea of collective ownership stating that when every individual would have their own interests to take care of, they would not complain about others and seek ways to improve their own lives.

Another argument by Aristotle in favour of the private right to property was that it would lead to or signify the extent of freedom. The freedom to own the property would lead the individuals to contribute more to the State and hence, collectively the State would grow faster in such scenarios. No matter how much Aristotle supported private rights but his theory was self contradictory with regard to slaves. The dilemma was that in ancient Greece, slaves were the movable property of their individual masters but slaves being individuals themselves had no right to own or possess any property. For Aristotle, the slaves were not entitled to having property rights. For slaves, Aristotle argued and believed that slaves must be ruled like slaves as according to Aristotle the need for slaves was only envy or violence. This was the first of its kind social dilemma regarding property rights, where the lives of living human beings were debated and discussed by others, their movements were restricted and freedom was snatched away under old human laws because as per law, slaves were the property of their masters.

Thomas Aquinas

Thomas Aquinas however, was the first to dissect the above-mentioned view of Aristotle and argued that property rights must be diversified based on needs rather than purchasing power. He further argued that the poor have equal rights to acquire the property as the rich and the ownership of the property must also include the quotient of moral obligations. The issue of ownership of property or private rights over property has evolved further over a period of time because of continuous rigorous debate and discussion over the rights of the state etc. According to Thomas, property, especially the land was to be considered as a natural resource, which cannot be divided as per the human law, rather the same has to be distributed or acquired as per the need.

Thomas Hobbs

However, Thomas Hobbs in his famous work ‘The Elements of Law Natural Politic’, first came up with the theory that property is the creation of the State and therefore, therefore, the first right over the property and its distribution should be of the sovereign. In his book “De Cive”, Thomas confessed that his first purpose in taking an interest in political philosophy was to understand the nature of the relationship between private property rights and the concept of sovereignty of State.

According to Hobbs, individual property rights are the convention which needs the backing of the state as all the property originates from the sovereign and its transfer to individuals is a grant and subsequently this ‘right to grant’ gives birth to the ‘right to tax’ or the ‘right to confiscate the property’. In the De Cive, Hobbs defined ‘property’ as the belonging of an individual which he can keep for himself only if it is permitted by law with the backing of the sovereign. The important feature of the definition is that Hobbs does not talk about property as a right but as a grant by the sovereign within the purview of law operating at that time. The conclusion of Hobbs’ idea of property can be summarised as follows:

Only the State as the sovereign has the absolute right over the property,
Individuals enjoying the property only have the possession and no right is being conferred as ownership.

It is to be noted that ownership and possession of property are based on the ideas of Hobbs only. It is the State which owns the property and then the same is granted to the individual on the lease for a certain period. So far we have read that the debate over the rights regarding property started from the premise that the individual must have the interests over the property, the debate escalates to whether these individual rights should be equal to all or must be divided as per human order. However, the culmination of all the debate reached the conclusion that the sovereign is the true owner of the property and thereafter individuals are granted the right to use it.

However, the whole discussion issue with respect to the ultimate ownership of the sovereign was related to immovable property like land, but with changing times a new concept of property started emerging in which the state or sovereign has neither any role to play nor any benefit to seek. For example, shares of a company bought by the individual is a private affair where the State has no role to play.

Further, the purchase of such shares is a wholly commercial transaction, therefore, the issue would arise with respect to the nature of ownership rights an individual would have in this regard. With changing times, many such issues arose and with the evolution of time, different types of laws have been made in this regard. Now, in the democratic government where people govern themselves, there is no sovereign monarch who would grant the rights to the property of any kind. In modern times, the sovereign has been replaced by the laws of the land. Therefore, let us understand the laws related to property in the Indian context.

Movable property under different legislations in India

In the previous part of the article, we have started with the historical origin of the term ‘property’ and thereafter discussed the opinions, ideology and thoughts of different philosophers regarding the term. In the later part of the article, we shall narrow down our discussion for the purpose of the present article to ‘movable property’ as it exists today under various Indian laws and will discuss all the legislations in India dealing with movable property.

Indian Penal Code, 1860

For the purpose of the Indian Penal Code, 1660 (hereinafter referred to as “IPC”), Section 22 of IPC includes all the corporeal property except land and any other thing attached to the land or to earth or anything which is permanently fixed to something which is attached to the earth.

A breakdown of the definition would show that the movable property means:

corporeal property, or
anything which is not attached to the land.

The applicability of the definition of movable property was discussed by the Hon’ble Supreme Court in the case of Nevada Properties v. State of Maharashtra, (2019). In this case, the short question arose whether the money could be seized during the seizure under Section 102 CrPC. The Court while reading through the provision, came to the conclusion that only movable property can be seized under Section 102 CrPC. Once, the issue regarding the type of property to be seized was settled, another issue arose as to what would amount to the movable property. The reason was that CrPC does not define the term ‘movable property’. The Court looked at the definition clause of CrPC and looked at Section 2(y) of the CrPC, which states that the terms which are not defined under CrPC would mean the same as IPC. Therefore, the Court looked into Section 22 of IPC and concluded that as per the meaning of ‘movable property’ under Section 22, everything which is not attached to earth would become movable property, hence, the money would also be termed as movable property and thus, can be seized.

General Clauses Act, 1897

Section 3(36) of the General Clauses Act, 1897 (hereinafter referred to as “GCA”) defines movable property ‘as property of every description, except immovable property’. This means thereby, all the kinds of property except immovable property can be termed as movable property. The term ‘immovable property’ is defined under Section 3(26) wherein, it is stated that the following would be termed as immovable property:

land; (example: farmland)
any benefits arising out of land; (crops after harvesting)
all the things attached to the earth; (for example: trees)
or permanently fastened to anything attached to the earth. (example: building, structures)

A combined reading of Section 3(36) and 3(26) would reveal the meaning of movable property as the property which:

is not land or something attached to it;
is not arising out of land or permanently fastened to anything attached to it.

The reading of the above two Sections under GCA shows that the scope of movable property is very wide. Therefore, it is important to understand the meaning of the word movable property through various judgments.

Case laws

Commissioner of Income Tax v. Bhurangya Coal Co, (1958) In this case, this issue was to ascertain the time for transferring the immovable property. The peculiar facts of this case are as such; on 16.03.1946, two promoters entered into an agreement to sell the colliery, lands, super-structures, machinery and fixtures to the respondent company which itself was incorporated on 18.03.1946. The total value of all the properties attached to sold was Rs. 6,10,000/-. All the properties to be sold were divided into two schedules. Schedule-I contained all the immovable property like land, and buildings for which the consideration was Rs. 2,00,600/- and schedule-II contained all the immovable property like machinery, trucks, pipes and motor cars for the consideration of Rs. 4,09,400/-. On 30.03.1946 all the properties including immovable ones mentioned in Schedule-I and movable ones mentioned in Schedule-II were put into possession of the respondent.

On 17.05.1946, the respondent executed a sale deed with regard to the immovable property. Consequently, an Income Tax notice under Section 12B under the Income Tax Act, 1961 was issued to the respondent seeking payment of tax under Capital Gain tax for any profit or gain arising from the sale, exchange or transfer of a capital asset. One of the issues arose before the Hon’ble Supreme Court as to how to determine if the properties mentioned in Schedule-II like machinery attached to the ground would be considered as immovable property and hence would be liable to tax.

The Court after reading the General Clauses Act and the Sales of Goods Act concluded that a property even attached to the earth could be held to be movable only if the intention is to severe it and thereafter sold it separately.

Bulchand Chandiram of Bombay v. Bank of India, (1968): In this case, the issue arose with respect to the status of the insurance policy as to whether the insurance policy is a movable or immovable property. The facts of the case were such, the appellant in the case was a Pakistani citizen who had come to India on 06.06.1950 with a temporary permit. During his stay in India, the Government of Pakistan declared the appellant an evacuee. The appellant had opened a cash credit account in the Bank of India (Hyderabad, Sindh Branch). The appellant secured some amount from the Bank of India (Hyderabad, Sindh Branch) by assigning his life insurance policies and mortgaging some immovable properties.

In July 1949, the appellant received another loan of Rs. 1,25,000/- from Hyderabad Back. The total amount of debt on the appellant as of 12.04.1950 was Rs. 1,35,735/-. Seeing the huge amount of debt, the appellant filed an application under Section 5 of the Displaced Person (Debts Adjustment) Act, 1951 for adjustment of his debts. The appellant alleged that the bank had realised two of his insurance policies and argued that such an act of the bank was illegal as it was done when the appellant was in India and the bank should refund the amount.

The Court held that the appellant and his wife had assigned the insurance policy to the bank to receive loans, therefore, the policies were in the possession of the bank and being a movable property, the bank is not obliged to refund the amount of the insurance policy.

Standard Chartered Bank v. Bank of India, (2016): In this case, the issue was whether the bonds issued by the bank amounted to ‘movable property’. The facts were that the National Power Corporation Ltd. (NPCL) issued bonds of two series in December 1991. The one series of bonds was 9% tax-free and the second series of bonds were 17% taxable bonds. On 26.02.1992, NPCL allotted these bonds to Andhra Bank Financial Services Ltd. (ABFSL). ABFSL further sold 17% taxable bonds of face value Rs. 50 crores to Standard Chartered Bank and in return received an amount of Rs. 48,02,50,000/-. ABFSL issued the banker’s Receipt No 23727 acknowledging the Appellant. Thereafter, the appellant sold 17% bonds to one ANZ Grindlays Bank and issued bank receipts no 1939 to ANZ. Thereafter, on 27.02.1992, ABFSL asked the appellant to return the banker’s receipt 23727 which was refused by the appellant stating that it only received a photocopy of the original letter of allotment. Meanwhile, a broker, acting in a large number of securities transactions of banks and financial institutions got the possession of the original letter and gave it to Canara Bank Mutual Fund (CBMF). On 17.03.1992, CBMF sold the same bonds to the appellant and issued receipt no 2767 to the appellant. Thereafter, the appellant filed a suit of recovery against ABFSL for the recovery of the principal amount of Rs. 48,02,50,000/- under Article 91 (a) of the Limitation Act, 1963. The respondent argued that the suit was not maintainable because essential ingredients of Article 91(a) of the Limitation Act, 1963 were not met out i.e. the subject property of the suit must be a specific movable property. The Court, not agreeing with the submissions, held that a reading of Section 3(36) of GCA made it clear that everything which is not immovable becomes movable property. Since suit bonds were not immovable in nature, hence, they would be considered as movable property.

The Registration Act, 1908

Section 2(9) of the Registration Act, 1908 (hereinafter referred to as “RA”) provides the definition of movable property, wherein the following are included :

timber, growing crops and grass,
growing crops,
grass,
fruit upon and juice in trees,
property of every other description, except immovable property.

Further Section 18 (d) of RA makes it optional to register any instrument (except will) which creates, declares, assigns, limits or extinguishes any right, title or interest to or in movable property. In simple terms, it is not mandatory to register any instrument related to movable property.

It is interesting to note that the definition as it stands today has been adopted on the various recommendations of the Law Commission. The Law Commission in its sixth report in the year 1957 had suggested the definition of ‘immovable property’ should be redrafted so that a clear distinction could be made between ‘immovable’ and ‘movable’ property. Further, with respect to the definition of movable property, the Law Commission made the following suggestions:

Standing timber should be considered as ‘movable property’ irrespective of the fact whether it is standing or severed from land.
Machinery though embedded or attached to earth, if being taken out, must be considered as ‘movable property’.
Fruit and juice must be considered as ‘movable property’.

These concerns were taken into reconsideration by the Law Commission in September 1967 and the Law Commission in its thirty- fourth report affirmed the recommendations that were made in the sixth report regarding fruit and juice as the movable property. With respect to standing timber, the Law Commission concluded that the timber would be considered as ‘movable property’ in light of the judgement of Shantabai Vs. State of Bombay (discussed below). Therefore, the definition as it stands today clearly includes all the recommendations of the Law Commission of India.

Case laws

Shantabai v. State of Bombay, AIR (1958): In this case, the petitioner’s husband through an unregistered document had granted her the right to cut and take all kinds of wood including timber in the forest under his zamindari. Meanwhile, the government passed the Madhya Pradesh Abolition of Proprietary Rights (Estate, Mahal, Alienated Lands) Act, 1950 (“MPAPR”). As per Section 3 of MPAPR, the petitioner was prohibited from cutting wood from the forest. The petitioner filed an application and obtained an Order under Section 6(2) of MPAPR seeking permission to work in the forest and to cut the trees. Subsequently, the Divisional Forest Officer initiated action against her and forfeited all the wood from her and stopped her from cutting the trees. The petitioner approached the government against the action but did not get any relief. Thereafter, the petitioner approached the Hon’ble Supreme Court under Article 32 of the Constitution alleging the violation of her fundamental right under Article 19(1)(f) (right to property, now omitted) and 19(1)(g) of the Constitution.

The Hon’ble Supreme Court examined all the documents and Orders and held that first the document granting Petition the right to cut the trees cannot be taken as a valid document as the same was not registered under RA. Second, the Order so passed does not violate any fundamental right. Lastly, the Court held that timber is movable property.

K. L. Selected Coal Concern v. S. K. Khanson and Company, (1971): In this case, the appellant had filed the appeal against the decree being passed against him wherein the Court had ordered the appellant to hypothecate the machinery in order to make the payment to the respondent. The appellant challenged the decree on the ground that the machinery mentioned in the decree was immovable property and therefore, it was mandatory to register the decree and without registration of the same under the RA, the decree cannot be executed.

The Court held that the trial Court did not consider this question properly and left the issue to be decided at time of making the record of the machinery involved as to whether the machinery involved in the decree are immovable or movable property. However, the Hon’ble High Court, while examining the decree and the list of machinery involved, came to the conclusion that all the machines mentioned in the decree were movable properties. Further, no evidence was shown to suggest that the assets or machines as mentioned in the decree were immovable property. Therefore, there is no occasion to believe that the machines involved are immovable and hence, no registration is required.

Ratan Lal Sharma v. Purshottam Harit, (1974): In this case, the appellant and respondent had formed a partnership firm. However, a dispute arose between them in December 1962 and the partners fell out of the partnership firm. At the time of the dispute between the appellant and respondent, the firm had many movable and immovable assets. Both the parties decided to resolve the dispute through arbitration.

The arbitrators passed the award on 10.09.1963 in which the appellant was awarded exclusive right over factory and other liabilities. On the other hand, the respondent was awarded half of the debt of the firm along with the appellant’s renouncement of his right in the shares. The appellant challenged the award before the Hon’ble High Court on the ground that the award created rights in the immovable property and was required to be registered but since the same was unregistered, the award is not valid.

The High Court dismissed the appeal for being time barred. Against which the appellant filed a SLP before the Hon’ble Supreme Court with the same question of law. The Hon’ble Supreme Court after hearing both sides and after going through all the documents held that the award passed by the arbitrators merely segregated and distributed the shares in the total asset of each partner and shares in the assets are nothing but movable property. Hence, it is not required to register the award under RA.

Nariman Aspandiar Irani v. Adi Merwan Irani, (1989): In this case, the dispute arose with respect to the distribution of assets between the partners of a firm. The appellant had instituted the suit against the defendant seeking a declaration that shares gifted by the appellant to the defendant by two writings, executed by the appellant in favour of the defendant, were not valid. The contention of the appellant was that the ‘gift’ was not valid as the same was not registered and attested by two witnesses as required by Section 123 of the Transfer of Property Act. The defendant argued that there was no need to register the gift deed because the gift pertained to shares in the partnership property and the same being movable property need not to be registered.

The Court upheld the contention of the defendant and held that the shares even with regard to the immovable property are considered as movable property and hence, need not be required to be registered.

Dinaji and Ors. v. Daddi and Ors., (1990): In this case, the issue arose with respect to the admissibility of unregistered documents related to deed of adoption, whereby appellant had conferred the right in her movable property upon her adopted son and relinquished her rights to alienate any part of such movable property. Later on, the appellant through a registered sale deed sold the property to some third party and filed for injunction and sought possession of suit property. The Ld. Trial Court held that the unregistered deed can be considered only as the proof of adoption and decreed the suit in favour of the defendant. On appeal, the Appellate Court set aside the decree.

The matter reached the High Court, which upheld the decision of the first Appellate Court stating that after executing the adoption deed, the widow was left with no right in the property and therefore, her sale deed was non-est. The appellant filed SLP before the Hon’ble Supreme Court stating that the adoption deed is hit by Section 17(1)(b) of RA and since it was not registered, it cannot be operated upon.

Therefore, the issue in the Supreme Court was whether the adoption deed would be considered as immovable property and hence need to be registered under RA. The Supreme Court held that as per Hindu Succession Act, 1956, the appellant had become absolute owner of the property and the adopted child could claim inheritance only after her death. In case of an adoption deed even for movable property, the same needs to be registered under Section 17(1) of RA and since in the present case, the same is not registered, it can not be operated upon.

Sales of Goods Act, 1930

The next legislation with regard to movable property is the Sales of Goods Act, 1930 (hereinafter referred as ‘SGA’). Though, SGA does not define moveable property directly but Section 2(7) of SGA defines “goods” as every kind of movable property other than actionable claim and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under contract of sale. Further Section 2(11) defines ‘property’ as general property in goods, and not merely a special property.

Let’s break down the definition mentioned above. As per Section 2(7) of SGA, the word ‘goods’ would include the following:

all kinds of movable property except actionable claim and money;
stock and shares;
growing crops;
grass;
things attached to land which can be severed before selling.

A reading of above-mentioned items would show that all these things are easily transferable or one can say that these can be moved from one place to another. Therefore, it can be concluded that SGA is all about the transferability of movable property. It is interesting to note that in the case of movable property, the title of property gets transferred immediately after making the final payment.

The SGA provides the mechanism for transfer of ownership in the case of movable property through its provisions. It is to be noted that, the ownership and possession are two different concepts, one may have the possession of the movable asset but still would not be called the owner of the property and vice-versa. For example, A sold his phone to B but B asked A to keep the phone for the next 5 days. Here, though A has the possession of the phone but by virtue of selling it to B, the ownership has changed.

Therefore, it is equally important to understand how the ownership of movable property gets transferred under SGA.

Types of goods

In order to understand the transfer of movable property under SGA, we first need to understand the type of goods under SGA. As per Section 6 of SGA, there are 6 types of goods. The same are discussed below:

Existing goods: These are the goods which exist at the time of entering into a contract of sale. These goods can further be categorised under three categories namely; specified goods, ascertained goods and unascertained goods.

Specified goods: These are defined under Section 2(14) of SGA as the goods which are predetermined to sell. For example: A wishes to sell his car Maruti Dzire and places an advertisement in this regard in the newspaper. Here, both the seller and prospective purchaser are aware of what kind of good is under transaction. The seller is aware that he wishes to sell a Maruti Dezire car and the buyer is also known as to what he is going to buy.
Ascertained goods: These are goods which are ascertained by the buyer before purchasing them or entering into the contract. For example, A decided to purchase 300 kgs of oranges from the wholesale market. Here, the purchaser has decided what kind of goods and their quantity, he/she wishes to purchase or in other words, the purchaser has ascertained the kind of goods he wishes to purchase.
Unascertained goods: Unlike ascertained goods, these are the goods where the buyer is not aware of exact details of the goods he or she is going to purchase. For example: A wants to sell 300 kgs of oranges from the pool of 500 kgs. Now, here the buyer does not know which 300 kgs of oranges he would get.

Future goods: These are defined under Section 2(6) of SGA as the goods that are decided to be manufactured or prepared once the contract of sale for them has been entered into between the seller and buyer. For example: A and B entered into the contract to sell 25 litres of snow white colour paint to be used at home. Here, the 25 litres of paint would be produced only once the contract between the buyer and seller is made. These kinds of contracts would always be called ‘agreements to sell’ and would be termed as future goods.
Contingent goods: These are defined under Section 6(2) as the goods whose sales are relied upon the success of a particular event or specific circumstances. For example: A promised to purchase a car from B, if the price of the same newly branded car does not go down by at least 20%. Here, the purchase of a car depends upon the happening of a particular event. The contingency is the condition of not dropping the price by 20%.

So far we have understood the meaning of goods which are mainly the movable property itself. Further, we have understood the types of goods under SGA. Now, let us explore the transfer of these movable properties and understand how ownership gets transferred under SGA.

Transfer of movable property

In this regard, it is to be noted that Section 18-24 of SGA underlines the provisions for transfer of ownership. Let’s understand these provisions one by one:

Section 18 of the SGA clarifies that no goods can be transferred until and unless the goods to be sold are ascertained. For example: in the case of contingent goods or future goods, the movable property cannot be transferred unless the ambiguity over their transfer is removed. In the case of the car sale where the contingency lies that the contract would be executed only when the price of a newly branded car goes down by 20%. In this case, the contract for sale would not be executed unless the precondition was satisfied.
Section 19 of SGA talks about the intention of the parties for the transfer of movable property.

Sub-section (1) of Section 19 states that in the contract of sale, time is of the essence between the parties and the movable property under contract would only get transferred only at the time as prescribed by the parties.
Sub-section (2) of Section 19 talks about the ascertaining the intention of the parties. As per the sub-section, the intention of the parties can be ascertained through:

Terms of contract;
Conduct of parties; and
Circumstances of case.
Sub-section (3) of Section 19 states that until and unless the contract of sale between parties indicates otherwise, the time for transferring the property is to be ascertained as per Sections 20 to 24.

As per Section 20, in case of sale of specified goods, the property would get transferred when the contract is made. The time of payment of price or time of delivery is immaterial in the contract of sale of specified goods. For example: A enters into a contract with B to sell the white paint. The quantity and quality have already been fixed by the parties. Now, as soon as the contract is made between the parties, the white paint is deemed to be transferred to B.
Section 21 is regarding the transfer of specified goods when the seller is bound to do something in order to make the goods in a deliverable state. In such a case, property would not be considered to be passed to the owner until such things are being done by the seller. For example, A entered into a contract for sale with B for sale of furniture but B put the condition that he would purchase the furniture only when the same gets polished. In such a case, the furniture would get transferred only when the A gets the polish done on the said furniture.
Section 22 lays down provisions for transferring the specified goods which are required to be weighed, measured, tested or to be checked by some means in order to determine the price. In such a case, the goods would not be considered transferred until and unless the price is being determined by weight, measure, test or by some other means as required.
Section 23 of SGA lays down the provisions for the transfer of property for uncertain goods. In this regard, Section 23 lays down two ways:

The goods must be transformed into a certain property to avoid any ambiguity. The need for such transformation is required to provide buyers with the precise goods. Here, the initiative for creating a distinction is to be taken by the seller. For example: A sells oranges to B but B wishes to purchase only a particular type of oranges, here in order to transfer the oranges, A must distinguish the special category of oranges.
In the second way, both buyer and seller set aside the goods with prior agreement to this effect. This is a bilateral act, where both buyer and seller take initiative. For example: A sells oranges to B but B puts the condition to buy only a special category of oranges. A and B both separated the special kind of oranges to be purchased by B.
Section 24 of SGA lays down provisions for transferring the movable property in case of ‘sent on approval’ basis or ‘on sale or return’ basis. As per Section 24, in cases, where the consent of the buyer is the essence of the contract for the sale of the goods, the goods get transferred in the following two ways:

When on receiving the goods, the buyer gives consent or signifies his approval to the seller or does any such act, which signifies his approval, then the goods are deemed to be transferred to the buyer. For example: A sends a batch of mobile handsets to B, who on checking every mobile phone, gives approval to A, and the transfer is deemed to be completed.
In case, the buyer does not give approval to the seller but keeps the goods with himself more than the time specified in the contract for sale, then the goods would be deemed to be accepted by the buyer. For example: A sent a batch of mobile handsets to B, though B did not reject the goods but also did not confirm it and kept the goods for more than 25 days which is more than the time period specified in the contract for the return of the goods, here since the time to grant approval or rejection the same is beyond the time period specified under contract between the parties, therefore, the goods would be deemed to be accepted by the buyer.
Section 26 of SGA states that until and unless the contract for sale between the parties specifically specifies, the risk related to the goods gets transferred to the buyer irrespective of the fact that goods have been delivered to the buyer. Section 26 comes with two provisos which state the following:

Proviso 1: when the delivery has been delayed then the party who is at fault would bear the risk.
Proviso 2: it states that the provisions of Section 26 do not mean to affect the rights and liabilities of the parties as bailee of the goods related to another party.

Case laws

Harshvardhan Pandey v. State of M.P. (2015): In this case, Madhya Pradesh Police caught one vehicle namely Mahindra Scorpio, transporting 1200 bottles of Rex Cough Syrup, the vehicle was not registered. The police, while seizing the syrup, also seized the vehicle. The petitioner submitted that he had purchased the vehicle on 22.10.2014 and entrusted the same to his driver to drop his niece on 16.11.2014. It was submitted that the offence was committed without his knowledge by his driver.

He further submitted that while the accused had been arrested, the vehicle was also seized and was lying in an unprotected condition and should be returned to the petitioner. The state argued that at the time of the seizure, the vehicle was unregistered, therefore, no link can be established between the vehicle and the petitioner.

However, after pursuing the documents filed by the petitioner, the Court observed that the petitioner in fact had purchased the vehicle, which means even though the petitioner had yet to register the vehicle it could not change the fact that the vehicle was purchased by the petitioner. The Court held that in the case of movable property, the title of property passes to the transferee as soon as the price is paid. Hence, the petitioner would be considered as the true owner of the property.

Dashrath Prasad v. State of M.P. (2007): In this case, the petitioner had filed a revision petition against the Order passed by the Ld. Additional Session Judge for rejecting his application regarding interim custody of Maruti Van. The brief facts for consideration before the Court were that the vehicle was seized by the city Kotwali police of Chhatarpur in connection with a case registered under Section 302 and Section 396 of IPC. According to the police, the vehicle was used in the commission of the offence.

However, as per the chargesheet, the petitioner of the vehicle was not the accused. The petitioner contended that he had purchased the vehicle from one Mr. Dasrath Prasad Dubey through a sale letter dated 30.09.2004. Thereafter, the petitioner had duly filed all the documents before the Regional Transport Officer for recording the transfer of a vehicle, however, the registration certificate could not be obtained on time and meanwhile, the offence was committed. The Ld. Additional Session Judge rejected the application filed by the applicant on the ground that since the Regional Transport Officer had not registered the transfer of a vehicle, the same could not be considered to be transferred in the name of the applicant and hence the interim custody could not be granted.

When the matter reached to the Hon’ble Madhya Pradesh High Court, the Hon’ble High Court, after hearing the submission made by both the sides held that as per the SGA, the title of the property passess to the transferee as soon as the complete amount of the consideration is being paid by the transferee to the transferor. As far as registration of the vehicle under the provision of Motor Vehicle Act, 1988 is concerned it is for the purpose of fixing ostensible ownership for the liability of taxes etc.

Agricultural Market Committee v. Shalimar Chemicals Works (1997): In this case the appellant and respondent entered into the contract for shipment of copra (dried coconut kernel) from Kerala to Hyderabad. As per the contract for sale, the defendant had to ship the goods to Hyderabad and payment was to be made through Bank of Hyderabad. Dispute arose between the parties with respect to the timing of delivery of goods and the appellant refused to honour its commitment of making payment taking the ground that ownership was not transferred to the appellant.

The Court held that the place of delivery, method of delivery and timing of delivery becomes irrelevant factors once the goods are out for delivery and as soon as the seller had dispatched the goods from Kerala, the ownership got transferred to the appellant. Hence, the appellant was liable to make the payment.

Union of India & Anr. v. K. G. Khosla & Co. (P), (1979): In this case, the Hon’ble Supreme Court was faced with the issue as to what place would be considered as the place of sale in the case of future goods. In this case, the respondent company was the manufacturer of air compressor and garage equipment and had its manufacturing unit in Faridabad and head office at Delhi. The head office used to place orders of manufacturing on the basis of contracts made.

Once the units were manufactured, the head office would collect the same from the manufacturing unit based in Faridabad and bring back to Delhi, from Delhi the units so manufactured would be sent to the customers. In November 1965, the sales tax authorities demanded payment of sales tax under East Punjab General Sales Tax Act, 1948 for the period starting from April 1, 1961 to 1964-65 on the ground that the sales were interstate sales and hence, the payment had to be made under Central Sales Tax Act, 1965. The respondent alleged that since the sale was effected from the head office based in Delhi to different parts of Delhi, therefore, no inter-state sales were affected. The Hon’ble High Court held that the sales would be considered to be effective at Faridabad and the sales tax paid in Delhi should be transferred to Sales Tax Authorities at Faridabad. The Union of India appealed against the decision of the Hon’ble High Court stating that the sales were made effective in Delhi, therefore, the tax is to be paid in Delhi only.

The Hon’ble Supreme Court held that goods were manufactured as per the specifications of the customer, therefore, they would be classified as future goods under Section 2(6) of SGA. Further, as per the provisions of SGA, the sales would be considered as effective as soon as the goods are out for delivery. In the present case the head office was in Delhi but the goods were out for delivery from Faridabad only, therefore, the incident of dispatch of goods would be Faridabad only.

Municipal Commissioner of Hooghly Chinsurah Municipality v. Spence Ltd. (1978): In this case, the appellant was a municipality corporation, which had purchased a tractor from the defendant, the contract between the parties stipulated a condition that in case, the appellant did not like the tractor or the tractor could not suit their requirement, they would return the same. The appellant neither confirmed the purchase nor rejected the same but kept the tractor for a period of more than a month and thereafter, on one day rejected the same. The defendant refused to take back the tractor alleging that the time period taken for rejecting the good was enough to compel the appellant to purchase the same. The appellant filed a suit against the defendant,

The Court held that even if it is presumed that the appellant had not used the tractor as per their case, it cannot be ruled out that the appellant had the possession of the tractor for more than a month and they did not reject the sale. Therefore, the appellant now owned the tractor and could not reject the same.

Badri Prasad v. State of Madhya Pradesh (1971): In this case, the appellant entered into a contract for sale with regard to certain timber in the forest in Jagir in Madhya Pradesh. Two clauses of the contract which were of prime importance were Clause 1 and Clause 5. Clause 1 entitled the appellant to cut the teak trees having height of more than 12 inches. Clause 5 stated that after cutting them 3 inches of height should remain. Before the appellant could have cut the trees, a Notification was issued by the government under Abolition of Proprietary Rights (Estate, Mahals, Alienated Lands) Act, 1950 vesting the said land with the government.

After passing of such notification, the appellant was prohibited from cutting the trees, though the appellant and government tried to negotiate but the appellant filed a suit for specific performance on two grounds. 1) the forest and trees were not vested with the state under the act and 2) even if the same were vested, the standing timber being a movable property and having been sold to the appellant did not get vested with the State. After hearing the arguments, the Court held that as per the Act and the Notification, the forest and land were vested with the State.

Further, as per the contract, the appellant was not made the owner of the trees but could only become the owner of the timber after cutting them off from the trees because under Clause 5 of the contract, the appellant had no right to the trees and under Clause 1. it was to ascertain which trees were to be cut in order to establish appellant’s right. As per Section 19 of SGA, till the cutting of trees was not ascertained, the contract for sale could not be completed. Since the contract for sale in the case could not be ascertained, therefore, the decree for specific performance could not be granted.

Multanmal Chempalal v. C.P. Shah, (1970): In this case, the appellant had purchased a certain quantity of clothes from the defendant for the total sum of Rs. 1,449 out of which Rs. 50/- was paid in advance. Upon receiving the advance, the defendant dispatched the goods from Bombay to Bellary on 07.03.1957 on a public carrier. In between, some dispute arose between the appellant and the defendant regarding the total amount to be paid due to which, the appellant did not pay the amount for the next two months and finally made the payment in May 1957. After receiving the amount, the defendant forwarded the necessary receipt required to be presented to take possession of the goods. However, the appellant could not get the possession as the goods got stolen in between. the appellant filed suit against the defendant however, he lost on the ground that the risk got transferred to the appellant once the goods were dispatched. Appellant in the appeal submitted that Section 26 of SGA is not applicable to him as he made payment only in May 1957, therefore, there was no consent at the first place to send the goods in March 1957. However, the Hon’ble Karnataka High Court held that in order to prove the non-applicability of Section 26, the appellant had to prove that the goods were lost before making the payment, since the same was not proved, the appellant could not take the excuse of late payment and as per Section 26, the risk attached to the goods got transferred to the appellant.

In the aforementioned legislations, we have witnessed evolution of movable property under Indian laws, however, the situation regarding the term ‘movable property’ was not clear in the beginning and there was a lot of confusion as to what would constitute movable property. The laws that created such a confusion was Transfer of Property Act, 1881. The confusion so created was because of a not so clear definition of the property in the Transfer of Property Act, 1881 itself. Lets understand the provisions of the Transfer of Property Act, 1881 in this regard.

Confusion in interpretation of term ‘movable property’

Transfer of Property Act, 1882 (hereinafter referred as ‘TPA’) is a legislation where the definition clause does not specify specifically as to what kind of property it talks about. Though Section 3 of TPA defines ‘immovable property’ but the Act does not specify movable property. The definition of the word ‘immovable property’ under Section 3 is a negative definition because it only states that immovable property does not include standing timber, growing crops or grass. Thus, the definition only provides that immovable property is everything but standing timber, growing crops or grass. The vagueness of the definition not only failed to describe the movable property but also failed to clearly establish the meaning of immovable property. The Courts were also faced with this situation and had to interpret the meaning and scope of TPA. This confusion led to the Courts to interpret the statute and adjudicate the disputes based on the principles of equity and fairness. Some of the important cases in this regard are described below:

Case laws

Nanhe Lal and Anr. v. Ram Bharose, (1938): In this case, the dispute was with regard to the execution of the mortgage deed made with respect to trees planted on the land. The issue arose whether the mortgage deed with respect to trees was valid and whether the trees standing on the land of the suit property would be constituted as immovable property? The moot question before the court was whether to consider the trees over the land as movable property or immovable property.

The Court observed that Section 3 of TPA while defining immovable property does not include standing timber. Therefore, the trees would be considered as immovable property and the mortgage deed can be executed as per Section 58 of TPA and at best there can be hypothecation of trees.

Perumal Naicker v. T. Ramaswami Kone and Anr. (1969): In this case, the issue was of fixtures, which the TPA does not provide much clarity about. Here, the defendant No 1 had defaulted in the repayment of loan taken from defendant No 2 i.e. state government, thereafter the fetter engine and pump, which the defendant had purchased through the loan amount, were attached to the recovery proceedings under Revenue Recovery Act, 1890. The appellant was the purchaser. The sale was held as illegal as the fetter engine and pump were considered as immovable property and as per the lower Courts Order, proper steps were not taken to sell immovable property.

Therefore, the issue before the Hon’ble Madras High Court was as to whether the fetter engine and pump would be considered as immovable property? The Court held that, though the fetter engine and pump were fixed to the earth but their fixing was temporary, meaning thereby they were fixed through nuts and bolts and as per the requirement or once their use is over, the same could be removed and be fixed somewhere else. Therefore, a fetter engine and pump would be considered as movable property.

Vasudev Ramchandra v. Pranal Jayachand Thakar, (1974): In this case, the attention was drawn to the issue which was with respect to the applicability of the TPA on the shares in the registered company. The Supreme Court observed that though Section 5 of TPA provides for transfer of property while the transferor is alive and Section 6 of TPA provides for transfer of all kinds of property, however, the TPA is not exhaustive and does not deal with all kinds of property.

Further, transfer of shares could not be covered under TPA because Section 28 of the Companies Act, 1913 prescribed shares as the movable property. Shares would fall under the definition of “goods” under Sales of Goods Act, 1930.

At present, shares in a company are considered as movable property as per Section 44 of the Companies Act, 2013.

The Inspector General of Registration v. Velayuthaswamy Spinning Mills (p) Ltd. (2013): In the case of, the petitioner company bought along with four windmills installed on the land. When the petitioner company applied for registration of sale deed in this regard, the registering authority insisted on including the value of windmills, though petitioner did not agree but had to pay the additional stamp duty under protest.

However, when the petitioner demanded back the additional amount paid, the same was denied holding that the windmills were part of the land and hence the additional amount paid was due to the windmills which became immovable property, once they got fixed on the land. The Madras High Court held that the windmills were movable property as they could be detached from earth and no stamp duty could be charged for the same.

From the reading of the provisions of the TPA and the judgments discussed above, it can be concluded that though the Act does not specifically clarify the distinction between movable and immovable property, however, the Court over the years have devised various mechanisms to distinguish between immovable and movable property. Specially in the case of trees planted to the earth, the same is to be treated as the movable property. Further, in regard to any fixtures to the property, it has to be seen whether the fixture is temporary or permanent.

In case, the fixture can be removed from earth, then the same would be treated as movable property and only in case the fixture is permanent like building structures, only then the same would be considered as immovable property. As per the settled position, the real test for treating the tree as movable or immovable is to check its usage. If the contract is for cutting it and thereafter selling it, then it would be considered as movable and in case the contract is to grow it and yield fruits and shade then it becomes immovable.

Conclusion

The different legislations discussed above are the cornerstone for the whole jurisprudence of the movable property rights in India. In this regard, the Indian Penal Code, 1860 was the first legislation which provided the definition of the term ‘movable property’, where it included all the corporeal property except land and anything attached to the land. However, IPC being the criminal legislation, the definition provided thereunder could not be used under civil cases.

It is the General Clauses Act, 1897, which for the first time, defined movable property in the general sense, which became very useful to understand the jurisprudence of movable property. It is interesting to note that the General Clauses Act, 1897, defined the term ‘immovable property’ clearly, which included land, any benefits arising out of land, and all the things attached to the earth or something permanently attached to it. Thereafter, for the term ‘movable property’, it simply says everything apart from the immovable property is movable property. In any case, the General Clauses Act, 1897 brought much needed clarity in terms of the definition of the movable property, which was interpreted in many cases by various courts to remove any doubts. The substantive definition of the movable property made it very easy to understand the procedural aspects of it. Like, how one can transfer the movable property, for this, Section 18 (d) of the Registration Act, 1908 makes it optional to register any instrument or anything related to the movable property. Meaning thereby, in case of the sale, purchase or transfer of any movable property, it is not required to register the same and non registration would not make it void.

However, things were not always as smooth as they seem to be in the present day. Back in the 1800’s, a lot of confusion was created because of the definition of ‘immovable property’ under Section 3 of Transfer of Property Act, 1908. It was difficult to assess which property would fall under the movable category and which one would fall under the immovable. The problem majorly arose with the changing times and problems. For example, whether only permanent fixtures to earth would be called immovable property or temporary fixtures would also fall in this definition. The clarity in this regard came from the courts, when the courts made a clear distinction by holding that only those objects which are not permanently fixed to the land and can be removed, would be termed as movable property. For example, for a long time the issue of whether the planted trees could be considered as the movable property was debated in various cases. The whole objective for conducting this kind of exercise was to understand the idea as to why one should declare the trees as movable property. The whole concept behind movable property was that the physical position can be transferred from one place to another. The debate was regarding the issue which was, how one can call a tree an immovable property when it can be taken from one place to another by simply severing it. The issue was settled with an understanding that a tree planted on earth would be considered as immovable but once it is severed and is transferable, then it can be considered as movable. The issue was considered to be settled, but the issue was far from over.

It is interesting to see how the movable nature of property also creates the effect on the applicability of the law. For example, the issue regarding the meaning of ‘planted’. A machine, even though movable from one place to another but once planted on the earth, becomes immovable. Therefore, had it not been planted, the machine would have been treated under the Sales of Goods Act, 1930 but now since it was planted, it will be governed by the provisions of different acts i.e. Transfer of Property Act, 1882. The word ‘planted’ itself created controversy as it could change the whole nature of possession and different procedures of transfer would be applied. Therefore, another distinction was created by defining the scope of the word ‘planted’, the courts held when the word planted is used, one has to look into the nature of such a plantation as to whether the machine is permanently planted or it can be removed from the earth. In case, the machine is permanently planted, then the same has to be considered as immovable property, however, if the property can be detached from earth, the same would be considered as movable property.

Another interesting issue in the jurisprudence related to the possession, transfer and ownership of movable property arose with regard to shares in certain property. The Court has time and again held that irrespective of the nature of the property involved, let it be immovable or movable, the share in any such property would always be movable in nature. The reason behind such reasoning is that though the property may be immovable and could not be physically transferred but the share in such property is granted through an instrument which is movable and could easily be transferred from one place to another.

Law is an evolving field where evolution is the only constant, with the beginning of the concept of the property, the whole consideration was as to who should be granted the right to hold property and as to whether the private rights in the property should be allowed and if yes and then to what extent. From that time till today, law related to the property and especially movable property has evolved and matured many times and will keep evolving in future as well.

Frequently Asked Questions (FAQs)

What is movable property?

As per Section 3(36) of the General Clauses Act, 1897, a movable property is a property of every description except immovable property.

Which Act is applicable for the transfer, possession or ownership of movable property?

Provisions of the Sales of Goods Act are applicable for the transfer, possession or ownership of movable property.

Whether a machine planted on earth would be considered as movable property?

It depends upon the nature of plantation, if the machine so planted can be removed from the earth and then can be placed in another place, the same would be considered as movable property.

Whether an instrument dealing with the transfer of movable property is required to be registered?

No, As per Section 18 (d) of the Registration Act, 1908, registration of movable property is not mandatory but optional.

Whether timber is a movable property?

Yes, timber is a movable property.

Movable property

Introduction

Historical origin of the word ‘property’