The Supreme Court recently held that rents receivable by a borrower can be assigned to a lender as an "actionable claim" as per the Transfer of Property Act, 1882(TPA).
About Transfer of Property Act, 1882
- The TPA is an important piece of legislation that governs the transfer of property between living beings (inter vivos) in India.
- The TPA primarily applies to a transfer of immovable property; however, some sections and clauses of this Act deal with a transfer of movable property as well.
- This Act was first introduced in 1882 and has undergone several amendments since then.
- It outlines the various modes of required transfer and the legal requirements to ensure the transfer is valid.
- The Act applies to all citizens of India who are involved in the transfer.
- What is the Transfer of Property?
- According to the law, the transfer of property is defined as the act of a living person transferring property to one or more living persons, either presently or in the future.
- This definition also encompasses companies, associations, or groups of individuals.
- What Does ‘Transfer’ Mean Under the TPA?
- The TPA considers the term "transfer" to include various modes such as sale, mortgage, lease, actionable claim, gift, or exchange.
- However, it does not apply to transfers that occur through the operation of law, such as inheritance, forfeiture, insolvency, or sale through a decree's execution.
- Additionally, the Act does not govern property disposal through wills or cases related to the succession of the property.
- Other Important Provisions:
- Capacity to Transfer: The Act specifies that only those who can lawfully transfer property can do so. Those who have attained legal adulthood, possess full mental capacity, and are not legally prohibited from transferring property are considered "competent, competent, and eligible individuals" under the law.
- Delivery of Possession: The Act requires that property transfers include possession delivery. It means the transferor must give the transferee physical possession of the property. This requirement is essential for the validity of the transfer and must be met for the transfer to be legally recognised.
- Registration of Document: The Act requires that the transfer of property be documented and registered with the appropriate authorities. It ensures that the transfer is legally binding and that the rights of both parties are protected.
- Performance of Contract: Under the Act, the transferor is legally obligated to meet all sales agreement terms. It includes passing over custody of the items, paying any payments due, and providing any required paperwork. A breach of contract will result in possible legal action if this is not done.
- The rule against perpetuity: Property must be transferred during the lifetime of an individual, as the perpetuity rule cannot be followed. A property cannot be transferred to an unborn child, and it is necessary to consider that while transferring the interest of the property, the person should be above the age of 18 years
- For property transfer, the property should be ‘transferrable’. Some properties, like the right to sue, the right to future maintenance, stipends to the air force/navy/political prisoners/civil pensioners, and the chance of an heir-apparent to succeed to an estate, are not transferrable.
Q1) What are Immovable properties?
Immovable property is anything attached to the land, such as plants or trees. Real estate comes under immovable assets, including houses, warehouses, factories, and manufacturing units.