Doctrine - Feeding The Grant By Estoppel

KEY TAKEAWAYS

•This article is in relation to Section 43 of the Transfer of Property Act, also known as the Doctrine of 'feeding the grant by estoppel.'
•This section deals with erroneous representation made by a person/ authorised party who doesn't actually own the title- with regards to transfer of property. This doctrine is also applicable even if the transferor is not aware of the error in the representation made by him/her.
•Will transferee lose his/her rights to benefit under section 43, if he or she was aware of erroneous representation, or somehow discovers the same by pursuing reasonable care and inquiry?
•Is Section 43 applicable when both transferor and transferee are aware of erroneous representation? Can transferee claim benefits in that situation?

INTRODUCTION

This article deals with Section 43 of Transfer of Property Act which states that transfer by unauthorized person who subsequently acquires interest in property transferred. Where a person fraudulently or erroneously represents that he is authorized to transfer certain immoveable 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. Nothing in this section shall impair the right of transferees in good faith for consideration without notice of the existence of the said option. Here the two main questions which have arose are: 
1.    If the transferee is unaware of the erroneous nature of the representation made to him he can avail Section 43? 
2.    If he is aware of the erroneous/ fraudulent nature of the transfer can he avail Section 43?
 

Doctrine - Feeding The Grant By Estoppel – Sec. 43 Transfer of Property Act

ESSENTIALS:

Essentials of the doctrine of feeding the grant by estoppel are as follows:

1.    Fraudulent or erroneous representation of ownership

For the application of this doctrine it is necessary that the transferor makes a fraudulent or erroneous representation of being the actual owner or having the authority to transfer. It doesn’t matter if it was done with a bona fide intention. All that is necessary is that a misrepresentation was made and the transferee acted upon it.

2.    Transfer of consideration

For the application of this doctrine it is necessary that the transfer of property was with some consideration i.e. it had some value. It is not done when the transfer was done without any consideration.

3.    Option of the transferee

The property transfers to the transferee at their option. For the application of this doctrine, the validity of a contract is decided by the transferee and when the transferee makes the transfer valid, the title of the transferor becomes perfect. 

4.    Subsisting contract of transfer

For the application of this doctrine it is necessary that the contract of transfer still subsists. If the transferee rescinds or extinguishes the contract, the relation between the transferor and transferee ends and no claims can be made on the property.
 

The principle embodied in Section 43 of the Transfer of Property Act has been variously described as the Common Law doctrine of 'feeding the grant by estoppel' or as the doctrine of Equity that 'equity' treats that as done which ought to be done' or as a combination of both, but, a statutory shape having, been given to the principle, it is the section itself which must ultimately determine its scope and the conditions of its application. In order that Section 43 may apply there must obviously have been a fraudulent or erroneous representation by a person that he was authorised to transfer immoveable property and he must have professed to transfer such property, but there is nothing in the section requiring that the transferor should have been aware of the erroneousness of the representation made by him. The transferor might have honestly believed in the truth of the representa-tion that he was authorised to transfer the property which he professed to transfer, but that would not render the Section inapplicable.

It will be noted that even before the introduction of the word 'fraudulently' into the section in 1929, erroneous representation was construed as including alt representations whether tainted or untainted with fraud. The amendment has now made it clear that the section will be applicable even it the transferor is un aware of the erroneous nature of the representation made by him. The matter is concluded by the following observations of the Supreme Court in the case of Tumma Masjid Mercara v. Kodimaniandra Deviah, AIR 1962 S C 847 :--

"It is immaterial whether the transferor acts bona fide or fraudulently in making the representation. It is only material to find out whether in fact the transferee has been misled. It is to be noted that when the decision under consideration was given the relevant words of Section 43 were 'where a person erroneously represents', and now, as amended by Act 20 of 1929 they are 'where a person fraudulently or erroneously represents' and that emphasises that for the purpose of the section it matters not whether the transferor acted fraudulently or innocently is making the representation, and that what is material is that he did make a representation and the transferee has acted on it."

The point next to be considered is whether a transferee is deprived of the benefit of Section 43 if he is aware of the erroneousness of the representation or could have discovered its ertoneousness by exercising reasonable care or pursuing reasonable inquiry. In connection with the first part of the question reference must be made to the Full Bench decision of this Court in the case of Parma Nand v. Champa Lal, (S) AIR 1956 All 225, although the question has now to be decided in accordance with what has been laid down by their Lordships of the Supreme Court in the Jumma Masjid case, AIR 1982 S C 847. The question referred to the Full Bench in Parma Nand's case, (S) AIR 1958 All 225 was:

"Does Section 43, T. P. Act, require that the transferee who can take advantage of it should be one to whom not only a fraudulent or erroneous representation about the transferor's authority to transfer the property is made but should also be one who did not have knowledge of the true factual position and had merely acted on the belief of the erroneous or fraudulent representation made to him by the transferor."

The answer given by Agarwala, J. in which the other Judges constituting the Full Bench con- curred was as follows :

"I am clearly of opinion that the correct view is that Section 43, T. P. Act, does not require that the transferee who can take advantage of it should be one to whom not only a fraudulent or erroneous representation about the transferor's authority to transfer the property is made but should also be one who did not have knowledge of the true factual position and had merely acted on the belief of the erroneous or fraudulent representation made to him by the transferor.

If, however, both the transferor and the transferee knew of the true position, and colluded to enter into a transaction which is invalid in law, the state of knowledge of the transferee becomes material and Section 43 cannot be availed of by him."

In the Jumma Masjid case, AIR 1962 S C 847, however, the Supreme Court laid down the law as follows :

"Where the transferee knew as a fact that the transferor did not possess the title which he repre-sents he has, then he cannot be said to have acted on it when taking a transfer. Section 43 would then have no application ....." 

COMPARISON WITH ENGLISH LAW

The doctrine of feeding the grant by estoppel is based on the maxim ‘nemo dat quod nonhabet which implies that no one can give to another, which he himself does not possess’.The Transfer of Property Act 1872 in section 43 states that - “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”.

In English law, the subsequent estate passes to the transferee without any further act of the transferor. However, it departs from the English doctrine in two respects.

These two aspects are discussed below:-

CONCLUSION

The premise of this article revolves around the provisions of Sec. 43 of the Transfer of Property Act. This article takes into account the doctrine that the section is based on, which is the doctrine of “feeding the grant by estoppel.”
The aforementioned doctrine states that if a person who although has no title to a property, yet grants it to another by conveyance, fraudulently causing loss to the other, will lose his subsequent interest in the property to the other, in case of any subsequent transfer of such property in his favor. An estoppel arises against the transferor for his conduct, and the law obliges him to ‘feed’ that estoppel by reason of his subsequent acquisition. 
The decision taken in the Jumma Masjid case  takes into account the situations where the law is applicable and where it is not. The court held that the provisions of the section will not be applicable when 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. 

Therefore, this article is a comprehensive analysis of the provisions of Sec. 43 of the Transfer of Property Act and applicability of the same. 
 

REVISING THE BASICS

1. Which legislation in India incorporates the doctrine of 'feeding the grant by estoppel'?

Answer- Transfer of Property Act, 1882

2. Which section deals with the doctrine of 'feeding the grant by estoppel' in TPA?

Answer- Section 43

3. Who has the option of validating the transfer?

Answer- The Transferee