Persons competent to transfer and operation of transfer - Property Law

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1. Section 7: persons competent to transfer
2. Minors
3. Persons of unsound mind and disqualified persons
4. Section 8: operation of transfer
5. Problem
How this is examined

Cases checked to exist. Read the judgment before quoting a holding.

Every case cited here has been checked to exist — the citation resolves and names the right parties. The propositions attributed to each case have not been verified line by line against the judgment. Case names link through to the full judgment: read it before quoting a holding in an examination answer, and never carry a proposition from notes into court on trust.

Two short sections, two questions. Section 7 answers who can transfer; section 8 answers what passes when he does. Section 7 is usually tested through a minor or a person of unsound mind, section 8 through a list of things that go with a house or a plot of land.

1. Section 7: persons competent to transfer

Section 7 provides that every person competent to contract and entitled to transferable property, or authorised to dispose of transferable property not his own, is competent to transfer such property, either wholly or in part, and either absolutely or conditionally, in the circumstances, to the extent and in the manner allowed and prescribed by any law for the time being in force.

So the transferor must satisfy two conditions:

Competence to contract. This is borrowed from section 11 of the Indian Contract Act, 1872: the person must have attained majority according to the law to which he is subject, be of sound mind and not be disqualified from contracting by any law.
Title or authority. He must either own the property or have authority to dispose of it. An agent under a power of attorney, a guardian with the leave of the court, a trustee, an executor, the karta of a Hindu joint family for legal necessity and a receiver are all persons “authorised to dispose of transferable property not his own”.

2. Minors

Under the Indian Majority Act, 1875, a person attains majority on completing eighteen years. In Mohori Bibee v. Dharmodas Ghose (1903), the Privy Council held that a minor's contract is void ab initio, not merely voidable. Dharmodas, a minor, had mortgaged his house to a moneylender, whose agent knew of the minority. The mortgage was set aside and the lender could not recover the money advanced, because there was no contract under which the minor could be made to repay, and the minor's estate could not be charged.

The consequences for transfers:

A sale, mortgage, lease or gift by a minor is void. It cannot be ratified by him on attaining majority, because there is nothing to ratify; he must make a fresh transfer.
A minor's property may be transferred by his natural or legal guardian. Under section 8 of the Hindu Minority and Guardianship Act, 1956, a natural guardian needs the previous permission of the court to sell, mortgage or gift the minor's immovable property, and a transfer without it is voidable at the minor's instance.
A minor who falsely represents himself to be of age is not estopped by that representation from pleading minority. The court may, however, order restitution of benefits under section 33 of the Specific Relief Act, 1963 when it sets the transaction aside at the minor's instance.

Can a minor be a transferee?

Yes. Section 7 deals with competence to transfer. Nothing in the Act prevents a minor from receiving property. A gift to a minor is valid and may be accepted by his guardian, and a sale to a minor who has paid the price is valid. The Madras High Court (Full Bench) in Raghava Chariar v. Srinivasa Raghava Chariar (1917) held that a mortgage in favour of a minor who has advanced the whole money is enforceable by him. What a minor cannot do is take on an obligation, so a lease to a minor involving a covenant to pay rent, or a transfer where he still owes the price, is a different matter.

3. Persons of unsound mind and disqualified persons

A person of unsound mind cannot make a valid transfer, though under section 12 of the Contract Act a person usually of unsound mind may transfer during a lucid interval, and a person usually of sound mind may not transfer while he is of unsound mind. Persons disqualified by law (an alien enemy, an undischarged insolvent as to property vested in the official receiver, a convict whose property is under administration) cannot transfer to that extent.

4. Section 8: operation of transfer

Section 8 provides that, unless a different intention is expressed or necessarily implied, a transfer of property passes forthwith to the transferee all the interest which the transferor is then capable of passing in the property and in the legal incidents thereof. Three points follow from the opening words:

Forthwith. The interest passes at once, on the transfer taking effect, not at some later date (unless the parties say otherwise).
All the interest the transferor can pass. The transferee takes the whole of what the transferor had, not more. No one can give a better title than he has, subject to exceptions like section 41.
Different intention. The parties may exclude incidents, for example by reserving a right of way or the trees on the land.

The section then lists the legal incidents that pass with particular kinds of property:

Land: the easements annexed to it, the rents and profits accruing after the transfer, and all things attached to the earth.
Machinery attached to the earth: the movable parts thereof.
A house: the easements annexed to it, the rent accruing after the transfer, and the locks, keys, bars, doors, windows and all other things provided for permanent use in it.
A debt or other actionable claim: the securities for it, but not arrears of interest accrued before the transfer.
Money or other property yielding income: the interest or income accruing after the transfer takes effect.

Trap. Rent and income that accrued before the transfer stay with the transferor; only what accrues after passes. Read section 8 with section 36, which treats rent and other periodical payments as accruing from day to day, so the rent for the month of transfer is split between transferor and transferee.

5. Problem

A, aged seventeen, sells his land to B for Rs. 4 lakh by a registered sale deed, telling B he is nineteen. B pays the price. A, on turning eighteen, sues to recover the land. B says A is estopped and in any case must return the price.

Issue. Whether a sale by a minor is valid, whether the false statement of age estops him, and whether B can recover the price.

Law. Section 7 requires the transferor to be competent to contract; under Mohori Bibee a minor's contract is void. A minor is not estopped from pleading minority by a false representation of age. Section 33 of the Specific Relief Act, 1963 allows the court, when it cancels the instrument at the minor's instance, to require him to restore any benefit he received.

Application. A was not competent under section 7, so the sale deed passes no title. His lie about his age does not validate it. Because A has come to court seeking to set the deed aside, the court may direct him to refund the Rs. 4 lakh, or so much of it as is just, as a condition of relief.

Conclusion. A recovers the land. B cannot keep it, but may be awarded the price by way of restitution.

How this is examined

Usually a short note: “Persons competent to transfer” or “Operation of transfer”. For section 7, give the two conditions, Mohori Bibee and the point that a minor can be a transferee. For section 8, quote the opening rule and the list for land, house and debt. The minor's sale appears as a 6-mark problem.