lawyers in India

Whether future property may be mortgaged

Written by: Shubhangi Garg
Constitutional Lawyers in India
Legal Service
  • In order to answer the above question one must look at the provisions of the Transfer of Property Act. The Act defines Transfer of Property as an act by which a living person conveys property, in present or in future, to one or more other living persons, or to himself and one or more other living persons; and "to transfer property" is to perform such act. In the case of Jugal Kishore v. Raw Cotton Co Supreme Court laid down that the words 'in present or in future' qualify the word conveys and not the word 'property'. The conveyance may be in present or in future, but the conveyance should be of property in existence. A transfer of property not in existence operates as a contract to be performed in the future which is specifically enforceable as soon as the property comes into existence.

    he Court went on to say that "Where there is a contract for the transfer of property which is not in existence at the date of the contract, the intending transferee may, when the property comes into existence, enforce the contract by specific performance, provided the contract is of the kind which is specifically enforceable in equity. It is only when the transferor voluntarily executes a deed of transfer as in all conscience he should do or is compelled to do so by a decree for specific performance that the legal title of the transferor in that property passes from him to the transferee. This transfer of title is brought about not by the prior agreement for transfer but by the subsequent deed of transfer." This principle has been upheld and followed in numerous other judgments as well.

    In the case of Ranee Bhobosoondree Dassee v. Issur Chunder Dutt, The Privy Council observed that transaction of sale for future property did not operate as a present transfer of the property, but only as an agreement to transfer so much of it as might be recovered in a suit to be instituted.

    Further the Privy Council in Rajah Sahib Perhlad Sein v. Y. Baboo Budhee Singh, stated
    To support it, the execution of the bill of sale must be treated as a constructive transfer of possession. But how can there be any such transfer, actual or constructive, upon a contract under which the vendor sells that of which he has no possession and to which he may never establish a title. The bill of sale in such a case can only be evidence of a contract to be performed in future and upon the happening of a contingency of which the purchaser may claim a specific performance.

    Though this particular case dealt with an instrument of sale of future property, in effect 'sale' is just another mode of transferring property under the act and so is 'mortgage'. Drawing more on the same analogy, if a sale deed of future property is treated as an agreement to transfer and not as a transfer itself the same principle would apply to mortgage deed as well.

    Section 58 of the Transfer of Property Act 1882 defines mortgage as follows.
    "A mortgage is the transfer of an interest in specific immoveable property for the purpose of securing the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability."
    There are two essential elements for consideration before us. Firstly there must be a transfer or a creation of a right over, or in respect of a property by the instrument.

    A mortgage of future immovable property does not operate to pass any future property and all that it passes is the interest which the transferor can then, i.e., at the date of the transfer, pass.

    The second essential is that it must be a right over or in respect of 'specified' property. The expression 'specified property' has not been defined under the Act nor has the expression 'transfer'

    The dictionary meaning of the word "specify" is: 'to mention, describe, or define in detail'. Property may be considered to be 'specified' if it is clearly defined so that there may be no difficulty in its identification.

    Non-existent property cannot be considered to be clearly defined and capable of identification at the time when the instrument is executed. May be sufficient description is found in the instrument to enable identification in future; but what the definition requires is transfer or creation of rights over or in respect of specified property, that is, at the time the instrument is executed. A property cannot be regarded as certain and defined in praesenti when all that is found is, hope and expectation and sustained effort to produce property as specified and the thing is in the course of production in accordance with specifications. There can be no question that anticipated realisations on exhibition are not specified properties.

    In the above case the Madras High Court had to decide whether the instrument in question was a mortgage with possession coming under Art. 40(a) of Schedule I of the Indian Stamp Act or simply an agreement.

    It was held that the said deed failed to meet the essentials of a Mortgage Deed under section 2(17) of the Stamp Duty Act. It created a charge over a property which was not in existence on the day of making the agreement and hence could not qualify as a mortgage deed and was only an agreement enforceable by the transferee on the acquisition of the said property by the transferor.

    In Moti Ram v. Khyali Ram, MANU/UP/0149/1967, it was held that a transfer could be only of a specific property which is in existence, but agreement to transfer can be of future property and equally, there could be an agreement to assign interest in future.

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