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Transfer of Property by Co-Owners

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 12-Sep-2024

Source: Supreme Court 

Why in News? 

A bench of Justice Sudhanshu Dhulia and Justice Pankaj Mithal held that a co-owner is not competent to transfer the entire property without getting his share determined and demarcated so as to bind the other co-owners.                       

  • The Supreme Court held this in the case of SK Golam Lalchand v. Nnadu Lal Shaw @ Nandu Lal Keshari @ Nandu Lal Bayes & Ors. 

What is the Background of SK Golam Lalchand v. Nandu Lal Shaw @ Nandu Lal Keshari @ Nandu Lal Bayes & Ors. Case? 

  • The suit property was purchased by two brothers namely, late Sita Ram and late Salik Ram in 1959 from one Sahdori Dasi. 
  • Both of them had equal rights in the property. 
  • It is alleged that one of the two brothers late Salik Ram gifted his share in the suit property to his brother late Sita Ram who allegedly became the absolute owner of the entire property. 
  • Late Sita Ram died intestate leaving behind his son Brij Mohan. Consequently, a sale deed was executed by Brij Mohan in favour of his tenants,  
  • It is the case of the plaintiff that gift deed alleged above has not been executed. 
  • Therefore, it is the case of the plaintiff that Brij Mohan had no right to transfer the whole of property in favour of one of the tenants.  
  • Thus, a suit was filed by the Plaintiff for declaration and permanent injunction. 
  •  This suit was dismissed by the Court of first instance but in appeal the decree was reversed holding that there was no partition of property. 
  • This judgment was affirmed by the High Court in Second Appeal. 
  • Thus, an appeal was preferred in the Supreme Court.  

What were the Court’s Observations? 

  • The Court held that there is no controversy on the fact that the property was equally owned by Late Salik Ram and Late Sita Ram and the property had always remained joint and undivided between the co-owners. 
  • The Court further observed that it could not be proved in the Court clearly that the gift deed was executed in favour of Late Sita Ram. 
  • Thus, it was held that Brij Mohan was not competent alone to execute the sale of entire property that too without it’s partition by metes and bounds. 
  • It was further observed that the sale deed may be a valid document in accordance with Section 44 of the Transfer of Property Act, 1882 1(TPA) to the extent of the share of Brij Mohan in the property. 
  • Accordingly, the Court answered the issue as follows: 
    • Brij Mohan alone was not competent to transfer the entire property without getting his share determined and demarcated so as to bind other co-owners. 
    • Accordingly, the defendant was restrained by the decree of injunction in acting in derogation of the propriety rights of co-owners until and unless the partition takes place.

What is the Law on Transfer by and to the Co-Owners? 

Section Provision Contents
Section 44 Transfer by one co-owner
    • Section 44 of TPA states that if one of the co-owners transfers his share in the property, the transferee steps into the shoes of the transferor and becomes a co-owner with the remaining co-owners. 
    • The transferee will get all the rights and liabilities of the transferor, including the right to partition the property. 
    • Rights of transferee in this case are as follows: 
      • The transferee shall have the right to joint possession and to use and enjoy the property in the same manner as the transferor.  
      • The transferee shall have the right to enforce partition. 
    • Special Provision for Dwelling Houses: 
      • It states if the transferee is not a member of the undivided family and the property in question is a dwelling-house belonging to an undivided family, the transferee does not have the right to joint possession or common enjoyment of the house. 
Section 45 Joint Transfer for Consideration
    • This Section comes into picture when the transfer is done to two or more persons. 
    • The consideration for this transfer is paid out of a fund belonging to them in common. 
    • The eventual co-owners of the property will have interest in the property in proportion with the interest to which they are entitled in the fund. 
    • In case consideration is paid out of separate funds belonging to them respectively. 
    • They are entitled to shares in the property in proportion to shares of consideration. 
    • In case there is no evidence of interests in the fund such person shall be presumed to be equally interested in the property. 
Section 46  Transfer for Consideration by Persons Having Distinct Interests 
    • Section 46 provides for a situation where the property transferred for consideration by persons having distinct interests therein. 
    • The transferors shall be entitled to share in consideration in the following manner: 
    • Where their interest in property of equal value: Equal share in consideration. 
    • Where their interest in property of unequal value: Right in Consideration proportionate to the value of their interests. 
Section 47 Transfer by Co-Owners of Share in Common Property 
    • Section 47 provides for a situation where several co-owners transfer a share. 
    • However, they fail to specify on what share the transfer is to take effect. 
    • In such a case if: 
    • The shares of the co-owners are equal : transfer shall take place on such shares equally. 
    • The shares of the co-owners are unequal: transfer shall take place proportionately to the extent of such shares.  

Why are the Judgments on Transfer of Property by Co-Owners? 

  • Durgapada Pai v. Debidas Mukherjee (1973) 
    • The Court held that a dwelling house connotes to some extent a permanent abode of the undivided family where such family resides or intends to reside generally and not a house for stray short or temporary residence for specified purpose. 
  • Dorab Cawasji Warden v. Coomi Sarob Warden (1990) 
    • The Supreme Court restrained a suit for partition filed by the buyer of an undivided share because the circumstances showed that irreparable damage would have been caused to the family if an outsider found entry into the house. 
  • Sri Ram v. Ram Kishan (2010) 
    • The Court held that, when any member of a joint family sells his portion of the family property which has not been marked out by partition or otherwise, the purchaser can file a suit for partition and delivery of possession of the portion to which the selling member is entitled.