Relief for property buyers misled by vendors

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Property

Applying the principle of feeding the grant by estoppel under section 43 of the Transfer of Property Act, 1881, the Supreme Court in a recent judgment granted relief to a party who was misled into purchasing a property by an erroneous representation of title by the vendor.

In the case of Tanu Ram Bora v Promod Ch. Das through LRs & ors, the appellant before the Supreme Court had instituted a title suit in 1995 seeking the declaration of title over a plot. The plot was purchased by him in 1990 without noticing that it was declared as ceiling surplus land by the government two years ago. However, later the same year, the land was declared free of the ceiling limit. He then registered the title’s transfer in local government records in 1991.

Four years later, the vendor trespassed into the property and took over its possession. This led to the institution of the title suit. Although a trial court in Assam upheld the suit, the first appellate court reversed it and held that the vendor had no marketable title on the day of conveyance. The first appellate court also came to the conclusion that the defendants’ rights over the land also could not be established under section 53A of the act. The judgment of the first appellate court was confirmed by Gauhati High Court in a second appeal.

In the appeal, the Supreme Court observed that section 43 of the act provides 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 that the transferor may acquire in such property at any time during which the contract of transfer subsists.

The court observed that the intention behind section 43 of the act was based on the “principle of estoppel as well as the equity”. Further, the intention and objects seem to be that after procuring the sale consideration and transferring the land, the transferor is estopped from saying that though he has sold or transferred the property or land on payment of sale consideration, still the transfer is not binding on him. That is why section 43 of the act gives an option to the transferee and not the transferor.

Referring to the earlier judgments, the Supreme Court held that to apply section 43 of the act it was immaterial whether the transferor acted in a bona fide manner or fraudulently in making the representation. It is only material to find out whether the transferee has been misled. Section 43 uses the words “where a person fraudulently or erroneously represents”.

Applying the principle in the case, the Supreme Court found that the vendor had acquired the title over the property when it was declared ceiling free, after the sale, and thus allowed the appeal and set aside the judgment passed by the high court, and also the judgment and decree passed by the trial court.

The dispute digest is compiled by Bhasin & Co, Advocates, a corporate law firm based in New Delhi. The authors can be contacted at lbhasin@bhasinco.in or lbhasin@gmail.com. Readers should not act on the basis of this information without seeking professional legal advice.