Rule of estoppel

RULE OF ESTOPPEL

Author: Santoshi karasi

INTRODUCTION

In India previously there was no law relating to the transfer of property and at that point of time courts apply the rules of English law that equity, justice and good conscience for fair transfer of property, but now at present time, the law relating to the transfer of property is governed by the Transfer of Property Act 1882. Under this law, there is the general rule which we all should abide while transferring property, that only the person who has title can transfer the property. However, the question may arise can anyone transfer the property who is not authorized to do so?

Well, this general rule clearly provides that any person who does not have the title of the property cannot transfer it since he/she is not authorized to do any transfer, however there is an exception provided under Section 43 of Transfer of Property Act that is known as “Rule of Estoppel or Doctrine of Feeding Grant of Estoppel”.

Meaning of Estoppel

Lets first understand the term “Estoppel”, this word has been derived from the French term ‘estoup’ which means shut the mouth and its purpose is to prevent the party from denying the truth. Under English Law Estoppel is of three kinds; the first one is Estoppel by judgment, second is Estoppel in pais and the third is named Estoppel by deed.

In the Indian Legislature, the Estoppel by the judgement was incorporated in the law as the doctrine of res judicata and the doctrine of Estoppels in pais incorporated in Evidence Act, whereas, ‘Doctrine of Estoppel by deed’ has been incorporated in Section 43 of Transfer of Property Act 1882. Estoppel by deed means that the party is not allowed to deny from the facts which are stated in the deed previously made between the parties. This principle of Section 43 signifies, if a person promises more than he can perform then he must fulfil the promise when he gets the ability to do so, which clearly means that when a transferor made a promise to perform the transfer of the property to another person, which he is incompetent to perform at a time, then later when he acquires the competency he cannot deny by giving any excuse of incompetence.

Section 43 of Transfer of property Act

According to Section 43 of the Act[1] where a person fraudulently or erroneously represents that he is authorized to transfer certain immovable property and professes to transfer such property for consideration such transfer shall, at the option of the transferee, operate on any interest which the transferor may acquire in such property at any time during which the contract of transfer subsists.

However, nothing in this section shall impair the right of the transferee in good faith for consideration without notice of the existence of the said option.

Essentials Requirements

In order to take the benefit from section 43 the Transferee must prove the following essential requirements:

1. There was a fraudulent or erroneous representation by the transferor while transferring the property;
2. It was to the effect that the transferor is entitled to transfer the immovable property;
3. The transfer of property must be for consideration, if it is made without consideration then the same will not be considered as valid;
4. The transferor must subsequently acquire some interest in the property which he professed to transfer;
5. The Transferee has not rescinded the contract if he does so then no claim can be made by him;
6. The Transferee has acted in good faith for consideration and without notice of the rights under the prior transfer.

For Instance:

• a person named as X fraudulently represents to Y  that he is authorized to transfer the property ‘AB’ whereas in fact he is not authorized to transfer the same as because the real owner of the property was his father Z, however, Y in good faith has paid the consideration for such property. Now X has failed to transfer the property as he had no authority. But later on, he acquires the interest in property ‘AB’ under the will of his father Z.

Here, Y does not have rescinded the contract may require X to deliver the property ‘AB’ to him. Thus, where a transferor has transferred interest in property which he did not at that time possess, but subsequently acquire, the benefit of his subsequent acquisition goes automatically to the earlier transferee.

• P and Q entered into a contract of transfer of property but P falsely represented the facts to Q, after knowing this Q terminated the contract. P, later acquires an interest in the property of the contract. Now here the doctrine does not apply as the contract no longer subsists between P &Q.

Relevant Case Laws

• Rajapakse v. Fernando,”[2] In this case the basis of the rule of Estoppel stated by the Privy Council that where a grantor had purported to grant an interest in land which he did not at time possess but subsequently obtained, the benefit of his subsequent acquisition goes automatically to the benefit of earlier grantee. This means once the transferor acquires the interest in the property then the same will automatically transfer to the transferee.

• Muthuswami pillai v. Sandana velan,[3]

In Muthuswami’s case, the father in a joint family consisting of himself and his two sons sold family property representing that it was his self-acquired property and one of the sons died pending the vendee’s suit for possession, the vendee was held entitled to the benefit of his accession to the father’s estate and was awarded half of his property.

• Jumma Masjid, Mercara vs. Kodimaniandra Deviah[4]

In this case, the issue raised before the court that whether the transfer of property for consideration made by a person who represents that he has a present and transferable interest therein, while he possesses, in fact, only a spes successionis, falls within the ambit of Section 43 of the Transfer of Property Act. The Court held that the transferee is entitled to the benefit of Section 43 if he has taken the transfer in the good faith and for consideration.

This means it is clear with the above that if the transferee knew as a fact that the transferor did not possess the title which he represents he has, then he cannot be said to have acted on it when taking a transfer. Section 43 would not be applied.

Conclusion

 The Rule of Estoppel provides what exactly happens when a transfer is done by an unauthorized person who later acquires the authority to transfer the same, this doctrine does not apply in such circumstances, where the transferee has rescinded the contract or he is well-known with the facts that the transfer is fraudulent. This rule not only protects the right of the first transferee but also the right of the second transferee on satisfying the condition to act in a good faith as the transferee has the right to invoke section 43 of Transfer of property act in case if the transferee is misrepresented by the transferor.

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[1] Transfer of property act 1882, section 43

[2] Rajapakse v. Fernando,  14 May, 1920

[3] Muthuswami pillai v. Sandana velan, 101 Ind Cas 619, (1927) 53 MLJ 218

[4] JummaMasjid, Mercara vs. Kodimaniandra Deviah 1962 AIR 847, 1962 SCR Supl. (2) 554