Rule of Estoppel

The Rule of Estoppel signifies that when a person makes a promise to another person, which is more than what he can perform or which he is incapable of performing, he cannot later claim incompetency as a legitimate excuse when he acquires the competency to fulfil his promise.

In simple words, he, later on, cannot claim incompetency to avoid his liabilities. Such a person would be compelled to fulfil the promise when he acquires the competency to perform it. This competency feeds the estoppel. Estoppel signifies a stop, now, you have to stick to what you said.

Example: A represents to B that he is authorised to transfer property X, whereas, in reality, he is not and professes to transfer the same. Acting on that representation B provides consideration for the same. The transfer is inoperative as A had no authority to transfer the property. But later on, A acquires the property under the will of his Uncle, who owns the property.

Now A can be compelled to complete the transfer. He cannot plead the transfer to be inoperative on the grounds that he had no authority at the time of transfer.

The Rule of Estoppel has been adopted in Indian Legislations from the Common Law. The Rule of Estoppel has been embodied in Section 43 of Transfer of Property Act, 1882. It explains what happens when a transfer is done by an unauthorised person but he, later on, acquires interest in the property transferred.

Essentials of Section 43

1. The transferor makes a false representation that he’s authorised to transfer a certain immovable property
2. This representation may be erroneous or fraudulent
3. The transferor professes to transfer the property;
4. For consideration;
5. The transferee enters into a contract, acting on that representation;
6. The transferor, later on, acquires some interest in the property while the contract is subsisting.
7. The transfer would operate on any such interest acquired at the option of the transferee.
8. Provided that, there is no subsequent bona fide transferee who has entered into the transfer without having any notice of the earlier contract between the transferor and the prior transferee.

Representation: May be Fraudulent or Erroneous

In order for the Rule of Estoppel to apply, there must be some representation. It is not needed for a representation to be fraudulent or intentional. There might be 2 cases:

1. A fraudulently makes B believe that he has the right to transfer the property, and B acts on that representation. And later on, A acquires the same right.
2. A believes that he has the authority to transfer the property and makes B to believe the same. B acts on that belief. In reality, A doesn’t have the authority but he, later on, acquires it.

In both the cases mentioned above, the Rule of Estoppel would apply. The section was amended in 1929 which added the word fraudulently, earlier it was just erroneously.

Hence, the purpose of this section is, it doesn’t matter whether the transferor has acted fraudulently or innocently. What is material is he made the representation and the transferee acted on it.[1]

The representation can be expressed or implied. It is presumed that when a person says that ‘he will transfer the property’, he is conveying that he has the authority to transfer that particular property. It would amount to a representation and the Rule of Estoppel will be attracted when he gains the competency to transfer.

• Viraya v. Hanumanta[2]

A, B and C were coparceners and held the family property jointly. A sold the property to alienee without the consent of other coparceners. A failed to deliver the property to the alienee as the joint family property cannot be transferred without the consent of all the coparceners. Alienee filed a suit against A for the enforcement of the contract.

During the pendency of the suit, C died. A’s share in the joint property increased to one-half. It was held that the alienee was entitled to the share (including the increased share) of A in the property.

The transferee enters into a contract, acting on the representation made by the transferor:

Acting on the representation made by the transferor depicts the lack of knowledge on the part of the transferee. Hence, for there to be a representation, it is material that the transferee should be unaware or should not have notice of the lack of competency on the part of the transferor to enter into the transaction.

In a case where the transferee knows about the defect in the title of the transferor at the time of the transfer, Section 43 or the Rule of Estoppel would not apply.

The absence of knowledge on the part of the transferee about the defect in the title of the transferor also means that the transferee took reasonable care to protect his interest and then believed the title of the transferor should be good. Hence, it is a duty on the part of the transferee to inquire before entering into the transaction as to the title of the transferor and protect his own interest.

The test of reasonable care is the amount of care that an ordinarily prudent man would take.

This shows that the knowledge on the part of the transferee could be actual or constructive. Actual knowledge means when the transferee knew the title of the transferor to be bad and constructive knowledge means when the transferee could’ve detected the lack of title but did not because of his own negligence. Even if the constructive knowledge on the part of the transferee is present at the time of the transfer, then the Rule of Estoppel won’t apply.

• Kartar Singh v. Harbans Kaur[3]

Lands which are the subject matter of the case belonged to the minor son, and his mother executed the sale deed of those lands. The son on attaining majority filed a suit contending that the sale was not binding on him and hence is void. The court declared the deed to be void and directed the restoration of the possession of the properties to the son. Before the restoration of possession could take place, the son died. Mother succeeded to those lands as an heir. The transferee claimed the benefit under Section 43.

The court in the present case examined whether the transferee had knowledge about the incompetency of the mother to execute the sale deed. It was observed that the sale deed mentioned that the land had been acquired by her and her minor son, and she was acting as her guardian.

The transferee could’ve inquired that whether the mother was competent to alienate the property of her minor son as a guardian as, In law, unless a guardian has been authorized by the court, he cannot alienate the property of the minor.

Held:

The transferee knew the fact that the mother was incompetent to effect a valid transfer, and Section 43 of TPA would have no application.

Transfer:

1. The property in question must be immovable property.
2. The transfer must be for consideration. It doesn’t mean that the transferee has paid some monetary consideration to the transferor but that the consideration should be the essence of the transfer. Hence, Section 43 would not be attracted by gratuitous transfers like a gift, etc.
3. The section applies to Sale, mortgage, lease, charge and exchange.

The doctrine doesn’t apply to:

1. Sale made through the court
2. Where the transfer was forbidden by law, or
3. The transfer is contrary to public policy.

Transfer by a minor or lunatic is not qualified to attract the application of this section.

The transferor, later on, acquires some interest in the property while the contract is subsisting.

The Rule of Estoppel or Section 43 would be applicable only when the transferor subsequently acquires any interest in the property.

The section would apply only when the transferor acquires the interest in the property and not his successors or heirs. The application of the section is personal in character and won’t apply against the person who acquires the property in his own right.

Example: A made B believe that he had the authority to transfer the property, which actually belonged to his brother. A died during the lifetime of his brother. When the brother died, the property went to the heirs of A, who were also the heirs of the brother. B cannot go against A’s heirs under Section 43.

The interest must be acquired by the transferor while the contract is still subsisting. It means that the contract shouldn’t have come to an end before acquiring the interest.

Example: A makes B believe that he has the authority to transfer the property, which actually belongs to his brother. They enter into a contract of sale for the same. B, later on, gets to know that A has no authority to make the transfer. B asks for the consideration that had been paid back. A pays the money back. A few days later, A’s brother dies, and A inherits the same property. But now, B cannot exercise his option to validate the sale as the contract had already come to an end.

The transfer would operate on any such interest acquired at the option of the transferee.

This means the transfer made is voidable at the option of the transferee. The transferee has the option to make the transfer valid.

The condition is different under Common Law. Under common law, if the contract subsists at the time when the transferee acquires the interest in the property, the transfer is validated automatically. There is no need for any action on the part of either transferor or transferee.

Proviso:

This explains a situation where even when all the essentials of Section 43 have been fulfilled, the Rule of Estoppel won’t apply.

If the property has been transferred by the transferor to another person before the transferee could exercise the option to validate the transfer, the transferor loses the remedy of validation. But this will apply only in the case where

1. The subsequent transferee is a bona fide transferee, i.e. she must not have knowledge about the first transfer/contract. Knowledge can be actual or constructive.
2. The second transfer must be for consideration.

Example: A represents to B that he is authorised to transfer property X, whereas in reality he is not and professes to transfer the same. Acting on that representation B provides consideration for the same. A, later on, acquires the property under the will of his Uncle, who was the owner of the property. Now the transfer becomes operative at the option of B i.e. B can either ask for the transferor to complete the transferor can ask for his money back. Before B could exercise his option, A sells the property to C. C had no knowledge about the contract between A and B.

Sale to C is valid and B has lost the option to validate his own transfer.

Comparison between the Rule of Feeding the Grant by Estoppel and Spec Successions:

Section 6 (a) of TPA provides that the chance of an heir apparent to succeed to the property of an intestate cannot be transferred. If the same is transferred, the transfer is void.

On the other hand, Section 43 makes the transfer valid at the option of the transferee if a person acquires the right in the property as an heir and the rest of the essentials are also fulfilled.

• Jumma Majid Mercara V. Kodimaniandra Deviah[4]

In this case, the Supreme Court drew a distinction between Section 43 and Section 6 (a) of TPA. It held that there is no reason for conflict between them, and they both relate to different spheres. Section 6 (a) enacts a rule of substantive law, whereas Section 43 enacts a rule of Estoppel, which is one of evidence. The two sections operate on different fields and under different conditions.

The main difference between the two lies in the fact that the transfer that falls under section 6 (a) is within the knowledge of the transferee as well and there is no misrepresentation. Whereas, under Section 43, the absence of knowledge on the part of the transferee is one of the main conditions.

In case of a chance of an heir apparent being transferred, even the constructive notice on the part of the transferee would bring the case under Section 6 (a).[5]

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[1] Jumma Majid Mercara v. Kodimaniandra Deviah, AIR 1962 SC 847: (1962) Supp 1 SCR 554

[2] Viraya v. Hanumanta (1890) 14 Mad 459

[3] Kartar Singh v. Harbans Kaur, (1994) 4 SCC 730

[4] Jumma Majid Mercara v. Kodimaniandra Deviah, AIR 1962 SC 847: (1962) Supp 1 SCR 554

[5] Kartar Singh v. Harbans Kaur, (1994) 4 SCC 730

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2. Ostensible Owner