This article on ‘Detailed Study on Conditional Transfers under Transfer of Property Act, 1882’ has been written by Nishant Vimal, 3rd year student of Symbiosis Law School, Hyderabad.  

Introduction

Section 25 of the Transfer of Property Act, 1882 provides for Conditional Transfer. It means that any transfer that happens on the fulfilment of a condition that is imposed on the other party for the transfer of property. For example, A agrees to transfer his property to B if he gets selected for a job. The requirement of A for B to get a job is called a condition.

For any kind of a conditional transfer to be valid, the condition that is imposed should not be:

  1. Prohibited by law,
  2. Should not be an act that involves fraudulent acts,
  3. Should not be any act that is impossible,
  4. Should not be an act that is termed as violative of public policy,
  5. Should not be immoral,
  6. Any act that incurs any harm to any person or his property.

For example, X transfers a property ‘B’ to Y stating that he shall murder Z as a condition for the transfer. Such transfer is void as the condition is prohibited by law.

Types of Conditions on Transfer

There are three specific types of conditions that are imposed in a transfer of property and there are some more types provided. All these conditions should also satisfy all the requirements of a condition as mentioned in Section 25 of the Transfer of Property Act, 1882.

Condition Precedent

It is given in Section 26 of the Transfer of Property Act, 1882. Any condition that is required to be fulfilled before the transfer of any property is called a condition precedent. This condition is not to be strictly followed and the transfer can take place even when there has been substantial compliance of the condition. For example, A is ready to transfer his property to B on the condition that he needs to take the consent of X, Y and Z before marrying. Z dies and afterward, B takes the consent of X and Y so the transfer can take place as there has been substantial compliance. These facts were from a case of Dawson v. Oliver-Massey (1).

In the landmark case of Wilkinson v. Wilkinson (2), the condition where one party was required to desert her husband for the transfer to go through, this was held by the court as invalid as it was against public policy.

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Condition Subsequent

It is given in Section 29 of the Transfer of Property Act, 1882. Any condition that is required to be fulfilled after the transfer of any property is called condition subsequent. This condition is to be strictly complied with and the transfer will happen only after the completion of such condition. For example, A transfers any property ‘X’ to B on the condition that he has to score above 75 percent in his university exams. If B fails to achieve 75 percent marks then the transfer will break down and the property will revert back to A.

Although it is an essential requirement that the condition needs to lawful and if it is not then the condition will be held as void and the transfer will not break down and will be finalized. For example, A transfers the property to B on the condition that he shall murder C. This condition is void and hence transfer will go through and the property will be kept by B.

Condition Collateral

Any condition that is required to be fulfilled simultaneously after the transfer of any property is called condition collateral. It needs to be strictly followed otherwise the transfer will break down. For example, A transfers property ‘X’ to B on the condition that he shall maintain A’s wife C for a period of 10 years. If B complies with it and maintains C, the transfer will be valid and the property will be in the possession of B.  

Also it has been recently clarified by the Hon’ble Supreme Court in a case in 2018, in case of a conditional gift where there was no recital of acceptance and no proof or any sign of acceptance. If the possession of that gift is with the donor for his lifetime and it is not completed during his lifetime. The deed of gift might be cancelled at the option of the donor as it has not violated any principles required in a valid transfer of property and the donor is within his rights to cancel any gift deed of such kind.

Other Types of Conditions

Section 27 of the Transfer of Property Act, 1882 provides for any transfer to any other person if the first transfer fails. For example, A transfers a car to B on condition that he shall transfer his bike to C, if he does not the car shall go to D. So if B does not transfer his bike to C, the car shall go to D on failure of ‘prior disposition’ as said in the section.  

It should be noticed that the condition on the first transfer was valid otherwise, the subsequent interest or transfer also fails. Only when the valid condition is not fulfilled or ‘shall fail’ then only the subsequent transfer takes effect.

The Doctrine of Acceleration comes into the picture here, it is based on the principle that one property should be passed on to some other person if the first condition fails as if the property was never vested in him. In the case of Ajudhia v. Rakhman Kaur (3), where the property when not registered in the name of the mother because of a local act and she could not have received the gift, the property was accelerated to the children as a gift.

There is an exception to this section which is when it is a situation of a transfer in form of a gift, doctrine of acceleration does not apply unless the first transfer fails in a particular specified manner only.

Section 28 of the Transfer of Property Act, 1882 provides for any subsequent transfer that takes place on not happening of a specified event.

Conditional Limitation is something that is applied here and it affects any ulterior disposition and if a vested property involves any condition that does not happen, it takes place and property is transferred to the ulterior disposition which is the ultimate beneficiary.

This section is subject to rules which are present in the sections 10,12,21,22,23,24,25 and 27 of the Transfer of Property Act,1882.

For example in Contingent interest which is mentioned in Section 21 of the Transfer of Property Act, 1882 when the condition is put that A’s land which is transferred to B will be transferred to C if B dies. Hence the interests created in C is ulterior transfer. The requirement here also is that the conditions need to be lawful and satisfy all other requirements in Section 25.

This event is a condition of defeasance i.e. the act of making something null and void. The only exception is where a person is vested with an absolute interest and thereafter to a person. The interest for the third person is on termination of the person vested with absolute interest and not on defeasance.

Section 30 of the Transfer of Property Act, 1882 provides that any transfer will not be affected by the invalidity of the ulterior disposition, which means that is the subsequent transaction as it is rendered void because of some default, then the first transaction will not be held invalid because of it.

For example if X transfers land to Y and then, after his marriage, life interest to his male offspring. As the transfer to the male offspring is not valid as per Section 13 of the Transfer of Property Act, 1882 which prohibits any life interest created in favour of unborn. The substance of Section 30 provides that the transfer to B will not be affected even when the ulterior disposition (transfer to unborn son) is not valid.

Section 31 of the Transfer of Property Act, 1882 states that any transfer where the condition of happening of an event or not happening of an event takes place is applied, the transfer shall cease to have an effect. The condition mentioned in this section is a condition subsequent and not a conditional limitation which is in favour of any third party. This condition is given in a negative sense, as the transferor prescribes when the transfer shall cease to have effect.

For example, A can put a condition on B to plant a tree and then the transfer will have an effect. If B plants, then he will get the property.  

In the case of Ambika Charan v. Sasitara (4), it was held that even condition collateral is a valid condition under the application of Section 31 and in this case, one party was required to live at a particular residence and as long as this condition is fulfilled, the transfer shall continue to have an effect.

Even where the condition where there is a prescribed penalty, it can be extracted by way of compensation, for example for forfeiting an estate, compensation can be demanded.

Section 32 of the Transfer of Property Act, 1882 states that the condition mentioned in Section 31 should not be invalid or prohibited by law. Although Section 30 is also kept in mind that any condition in ulterior disposition which is invalid will not invalidate any transfer that happened prior to it. As for condition precedent or subsequent, for the transfer to be valid the conditions need not be invalid and all the requirements mentioned in Section 25 should be met.

Section 33 of the Transfer of Property Act, 1882 states about any transfer where on a condition, time is not specified for the happening or non-happening of an act. This transfer ceases to have effect only when the act is made to be impossible permanently or for a great period of time.

Section 34 of the Transfer of Property Act, 1882 states about any transfer where on a condition, time is specified for the happening or non-happening of an act and on the failure of such condition, the interest of the property is to go to another person. If the condition is fulfilled within the prescribed time, then the transfer will continue to have effect, and if not then the transfer shall cease to have an effect. For example, M agrees to transfer land ‘X’ to N on the condition that he shall go to England in a span of 2 months. If N goes to England within the prescribed time period then the transfer shall go through and N shall get the property, but if he fails to do so inside the 2 months specified by M, the transfer shall cease to have effect.

But, it has to been seen that, what caused the delay of the condition to be fulfilled. If the performance of the specified condition that may be either subsequent or precedent is prevented by a person who is interested in its non-fulfilment, the delay is condoned and the condition is discharged.

X transfers property to Y with a condition that if he does not go to U.S. within 2 years, the property will pass on to Z. Later on if Z, by playing a fraud, prevents Y from performing the condition, the delay in such performance is excused.

Conclusion

Conditional Transfers form a very crucial aspect in day to day transactions of transfer of property. It is important to know about provisions relating to this concept. All types of conditional transfers are given from Section 25 – 34 of the Transfer of Property Act, 1882. It is important to note that the condition on any transfer should not be prohibited by law and can be ideally performed. This article conveys the basic principles and mechanisms behind these provisions, and how they fare out with practical examples that will help the reader relate it with the real time events.

Reference

  1. (1876) 2 Ch D 753.
  2. (1871) Eq 604.
  3. (1883) 10 Cal 482.
  4. (1915) 22 Cal LJ 61.

 

  

 

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