Drafting and Conveyancing Relating to Various Deeds and Documents-III – Drafting, Pleadings and Appearances Important Questions
Question 1.
In the light of judicial pronouncements, discuss the following; Transfer of immovable property by way of sale can be effected only by a deed of conveyance.
Answer:
According to Section 54 of Transfer of Property Act, 1882, sale is a transfer of ownership in exchange for a price paid or promised or part- paid and part promised. A contract for the sale of immovable property is a contract that a sale of such property shall take place on terms settled between the parties.
Transfer of Immovable property:
- Transfer, in the case of tangible immovable property of the value of one hundred rupees and upwards, or in the case of intangible thing, can be made only by a registered instrument.
- In the case of tangible immovable property of a value less than one hundred rupees, such transfer may be made either by a registered instrument or by delivery of the property.
Delivery:
- Delivery of tangible immovable property takes place when the seller places the buyer, or such person as he directs, in possession of the property.
Documentation:
- Agreement to sell and the Conveyance Deed i.e. sale deed.
- Only a Sale Deed.
The Supreme Court of India observed in the case of Suraj Lamp & Industries Pvt Ltd. v. State of Haryana
“It has become common practice to effect transfers of immovable property by way of either general power of attorney (GPA), sale agreement or will transfers in order to evade the payment of duties, taxes and other fees payable on transfer and registration (e.g., stamp duty or registration fees). The Apex Court held that such transactions are illegal and cannot be recognized as valid under law”
Question 2.
Drafting of a sale deed of immovable property requires comprehensive coverage of technicalities like offer, transfer, etc. Mention eight important covenants of sale deed of ABC Company’s factory premises.
OR
Mention important aspects which should be kept in mind while drafting a sale deed of an immovable property by a limited company.
Answer:
Following are the important aspects which should be kept in mind while drafting a sale deed:
(a) Lawful Consideration and Object: The property must be purchased as a part of legal transaction having paid the consideration as required under the provisions of the Indian Contract Act, 1872 for a valid contract.
The objectives for which the property is being purchased by the buyer should be lawful i.e., not forbidden by law, not to impart injury to the person or property.
(b) Competence of Person to Transfer: Parties: As per Indian Contract Act parties should be of the age of majority, should be of sound mind and not be disqualified from contracting by any law.
For a company: Board of Directors should authorise a person by passing appropriate resolution in conformity with the Articles of Association and Memorandum of Association.
(c) Transfer of all interest in the property: All interests which a transferor is capable of passing in the property should be explained in the document, for example, if it is transfer of land, the easements annexed thereto, the rents of profits thereof, things attached thereto etc.
(d) Absolute transfer: The transfer should be free of any conditions or limitations which may restrict the other party to make full use of the property in exercise of legal rights.
(e) Absolute interest in the property: The interest being transferred in the property should not be conditional which may restrict full enjoyment of the property by the transferee.
(f) Justification for transfer: Cogent reasons for the transfer be given so { as to establish bona fide base for the transaction and to avoid eventualities of fraud and multiple litigation therefrom.
(g) Protection of creditors’ interest: Law protects creditors’ interest in the transferred property.
(h) Property to be free from conditions: The property being transferred should be free from any rights or obligations which a third person can enforce legally against transferee for enjoying any benefits.
(i) Transfer in good faith and with full authority: Where the property is transferred by a person not to be the real owner, it is necessary to make such transfer valid for the transferor should have the authority to transfer and he must exercise this authority in good faith.
(j) Protection for defective title: Law protects the transferee who acquires j the immovable property under good faith and for bona fide consideration under Section 51 of the Transfer of Property Act.
(k) Precautions: The draftsman should know beforehand that the property under transfer is free from encumbrances and no litigation questioning I such property or rights or interest is pending in any court.
Question 3.
Hurry Burry Ltd. went into liquidation and its assets were put to sale by p the Court. The terms and conditions of the sale stated that the sale would f be of the assets on ‘basis where is and whatever” there is’ basis and the f bidders had to satisfy themselves as to any encumbrance on the property.
On 15th September 2006, the company judge confirmed the sale of an immovable property in an auction in favour of Ravi. Later on, Ravi f received a notice from the municipal corporation authorities claiming the payment of arrears of property tax for the period prior to 15th September 2006 with interest. The municipal corporation had not filed its claim before the official liquidator. It was argued by the municipal corporation authorities that the sale was made on ‘basis where is and whatever is’ ; basis and the buyer was deemed to have full knowledge as to the defects in the description, quality and quantity of the assets sold.
Decide whether Ravi is liable to pay the arrears of property tax with j interest. Support your answer with decided case law.
Answer:
In the case of Ai Champday Industries Ltd v Official Liquidator &, SLP (C) No. 15285 of 2008 Supreme Court held that the purchaser was not liable to pay the taxes prior to the date 15th September, 2006. The Supreme Court held:
a. Under Section 55(1)(g)oftheTransferofPropertyAct, 1882, the seller is bound to pay all Public Charges due in respect of the property up to the date of sale, when the property is sold in an auction.
b. The fact that the company went into liquidation was given due publicity, the advertisement did not specify that all public charges have to be paid. The municipal authorities did not file their claims before the official liquidator.
c. Neither the company nor any other law imposed any additional obligation upon the purchaser to make any enquiry with regard to the liabilities of the company other than those which would impede its value.
d. An encumbrance must be capable of being found out either on inspection of property or at the Registrar’s office or a statutory authority.
In the light of the above decision, Mr. Ravi is not liable to pay the taxes prior to 15th September; 2006 as the sale was on as is where is basis and the municipal corporation failed to file its claim for arrears in time.
Question 4.
Drafting of a sale deed of immovable property requires comprehensive coverage of technicalities like offer, transfer, etc. Mention eight important covenants of sale deed of ABC Company’s factory premises.
Answer:
THIS DEED OF SALE is made at Delhi on this 3rd day of July 2020, by and between ABC Ltd. having its registered office at _________ acting through its Director Mr. X, authorised vide board resolution dated ________ (hereinafter called “the seller”) of the ONE PART.
AND
CD, S/o…….. R/o …………., (hereinafter called “the buyer”) of the OTHER PART.
(The expressions “seller” and “buyer” wherever they occur in these presents, shall unless the context otherwise admits, also mean and include their respective heirs, executors, administrators, legal representatives and assigns).
WHEREAS the seller wishes to dispose off its property more fully defined in the schedule below.
AND WHEREAS the buyer wishes to purchase the said property for residential purpose.
AND WHEREAS the parties hereunto have agreed for a consideration to the tune of ₹…….
NOW THIS DEED WITNESSETH AS UNDER:
1. In consideration of the sum of ₹…….. seller on the ……………………………. day of ………………… the seller hereby acknowledges) the seller as owner hereby transfers to the buyer by way of sale ALL that pucca house standing on the land measuring 27 metres by 10 metres fully described in the schedule hereto annexed and thereon shown with its boundaries coloured red (hereinafter referred to as “Premises”) TO HOLD the same to the buyer as absolute owner.
2. The seller hereby covenants with the buyer as follows:
a. The said premises shall be quietly entered, held and enjoyed and the rents and profits received therefrom by the buyer without any interruption or disturbance by the seller or any person.
b. The interest hereby transferred subsists and the seller has power to sell the same.
c. The property hereby sold is free from all encumbrances, charges, mortgages, liens, prior agreement to sell, court proceedings, gifts, of any nature whatsoever.
d. That the construction existing on the said premises is in accordance with the sanctioned plan.
3. If any of the aforesaid representations and warranties are found to be false in any manner and if the buyer is deprived of the said premises at any time after execution of this Sale Deed in full or in part thereof, the Seller hereby undertakes that he will entirely remain liable and responsible to indemnify the buyer for any loss whatsoever.
4. That the Seller has delivered the peaceful physical vacant possession of the said Premises under sale along with all its rights of ownership and original documents of the premises to the buyer at the time of execution and registration of this Sale Deed.
5. That the buyer can get the said Premises under sale mutated in its own name.
6. That from the date of execution of this Sale Deed the buyer becomes the sole and absolute owner of the said premises under sale and shall be at full liberty to use, enjoy and utilize the said premises as he may like.
7. That after the execution of this Sale Deed neither the buyer nor his legal heirs, may raise any objection or create any charge or demand any share in the said Premises under sale here-after.
SCHEDULE
Property bearing No registered at page no….. of the government records
kept at…. Having
North:…………
South………….
East……………
West…………..
IN WITNESS WHEREOF the parties aforementioned have signed this Deed of Sale on the date, month and the year aforementioned.
Witness: 1.
ABC Ltd.
Through its Director
Witness: 2. CD
Question 5.
Draft a specimen of deed of sale by liquidator of a company in voluntary liquidation.
Answer:
THIS SALE DEED is made on this 3rd day of July 2020 by voluntary liquidator of Co. Ltd., in voluntary liquidation (hereinafter called as “the vendor”) of the ONE PART.
AND
Shri……., son of Shri…….., Occupation………., resident of…………. (hereinafter called as “the purchaser”) of the OTHER PART.
WHEREAS by a special resolution passed by the shareholders of…………… Co. Ltd., at an Extraordinary General Meeting held on the …………………. day of……………, of which notice as prescribed by law had been duly given, and it was resolved that the company be wound up voluntarily.
WHEREAS the said vendor was appointed its voluntary liquidator on …………. the notice whereof was duly submitted to the Registrar of Companies ………………. as prescribed by law, on ………………
AND WHEREAS in a meeting of the shareholders of the said company held in accordance with the provisions of the Companies Act, 2013, it was resolved that the properties mentioned in the Schedule annexed hereto be sold by the vendor after publishing a notice for sale in daily newspapers twice within a period of a fortnight, and pursuant to such resolution, the vendor had duly advertised the sale of the said properties in the issues of ………………………. dated …………………… respectively and issues of ……………………… dated …………… respectively and pursuant thereto have received offers, the highest whereof was that of the said purchaser.
AND WHEREAS the said vendor agreed to sell and the said purchaser agreed to purchase the said properties on the terms and conditions mentioned herein and incorporated in an agreement to sell dated ……………………. between the said vendor and the said purchaser.
NOW THIS DEED OF SALE WITNESSES AS FOLLOWS:
That pursuant to the agreement dated ………………………………… aforementioned and in consideration of the sum of ₹ …………. (Rupees ………………….. ) paid by the purchaser before the Sub-Registrar, …………………………. on presentation of this Deed of sale for registration thereof (the receipt whereof the vendor hereby acknowledges) the vendor hereby transfers by way of sale and conveys on behalf of the said company all those items of the property mentioned more particularly in the Schedule attached hereto, unto the said purchaser, his heirs and assigns to have and to hold the same absolutely and forever.
SCHEDULE
List of properties:
1.
2.
3.
IN WITNESS WHEREOF the parties aforementioned have signed this Deed of Sale on the date, month and the year aforementioned.
Witness: 1. Vendor
Witness: 2. Purchaser
Question 6.
Draft a deed of sale of joint family property for legal necessity by Manager (Karta) of a Hindu Mitakshara Undivided family.
Answer:
THIS DEED OF SALE made this ………………………….. day of …………………. between AB for self and as Karta of and representing all other coparceners, viz., his sons named …………………… all constituting a Hindu Mitkshara undivided family of, etc., (hereinafter called “the vendor”) which expression shall, where the subject or context allows, be deemed to include at all times hereafter all persons being from time to time the coparceners of the said family of the ONE PART.
AND
CD, S/o…. R/o……. (hereinafter called “the purchaser”) of the OTHER PART.
WHEREAS the said joint family for several years past owned and still owns and possess inter alia the lands, hereditaments and premises described in Schedule A hereto as part of its estate.
AND WHEREAS the said joint family also carried on and still carries on business as dealers and suppliers of ………………… at No …………………… under the name and style of ………………………………… which suffered a heavy loss of its capital and reserves estimated at ₹ ………………….. in the year ……………………… owing to out-break of fire ……………………….. at its godown at No ………………………….. on the day of ………………………..
AND WHEREAS the joint family could not also pay its income-tax and other capital and revenue liabilities of the said business aggregating to ₹ ……………………….. for the years ………………….. and also its business debts estimated at ₹ ………………………
AND WHEREAS the said joint family has at present no funds nor any other means or resources to pay the liability of the family as regards the said income-tax except by sale of one of its properties.
AND WHEREAS in the circumstances aforesaid the said AB for self and as Karta of the said joint family has by an agreement in writing dated ………………….. agreed with the said CD for sale of the property fully mentioned and described in the Schedule hereto at and for the sum of ₹ ………………………..
AND WHEREAS such sale is to the interest and for the benefit of the said joint family and its estate.
AND WHEREAS the said CD after bonafide and independent enquiry is %, satisfied about the present financial condition of the family and in particular § the debts and liabilities as aforesaid and the reasons for, circumstances behind, and the necessity for the sale.
NOW THIS, INDENTURE WITNESSETH that in pursuance of the said agreement and in consideration of the sum of ₹ ……………………………… paid by the said CD to the said AB simultaneously with the execution of these presents he, the said AB doth hereby and hereunder for self and as Karta for and representing all other coparceners of the said joint family do hereby grant, sell, convey, transfer, assign and assure the said property together with all houses, buildings, fixtures etc. (as usual in a conveyance) unto and to the use of the said CD absolutely and forever. Usual covenants on the part of a vendor as in a conveyance.
Schedule above referred to
IN WITNESS WHEREOF the parties aforementioned have signed this Deed of Sale on the date, month and the year aforementioned.
Witness: 1. Vendor
Witness: 2. Purchaser
Question 7.
The employees registered union of ABC Ltd., proposes to construct a temple on half-acre vacant plot adjoining factory dispensary in the factory campus. The local authorities and labour welfare officer also recommended the proposal and grant NOC for the same. The managing director of the company, ‘XYZ’, asked the Company Secretary to examine it, report and if worth approving put up a draft deed for consideration of the Board. The Company Secretary recommends it on the following main terms:
(1) Draft deed will be prepared by the Company and executed by the Temple Management Committee (TMC).
(2) Temple will be constructed within six months.
(3) Annual rental of ₹ 100/- shall be payable by TMC to ABC Ltd. by the first week of January every year.
(4) Employees will not be charged with any fees, donations etc, however may be accepted in case of volunteer.
(5) Proper cleanliness at all times, will be the responsibility of TMC.
(6) Company’s authorized officers shall be allowed to inspect temple premises on a one-week time notice, and TMC will be bound to follow their instructions.
(7) Jurisdiction clause will be the local jurisdiction of the ABC Ltd., in ] case of any dispute. Though Arbitration Clause will also be mentioned. On the basis of the terms by the Company Secretary of ABC Ltd., you are required to draft a Deed of Grant of Land for temple in the factory premises. Assume other facts, if required.
Answer:
THIS GRANT is made on the 1st September 2019 between ABC Ltd. having its registered office at ________ acting through its Director Mr. X, authorised vide board resolution dated …………(hereinafter called the “grantor”) of the ONE PART.
AND
Temple Management Committee, (TMC) acting through its member M, X (hereinafter called the “grantee”) of the OTHER PART.
WHEREAS the grantee on 1st July 2019 applied to the Grantor for the grant of Grantee’s land admeasuring half an acre, which is lying vacant adjoining the Company’s Dispensary in factory complex, for the purpose of building a temple thereon.
AND WHEREAS the grantor has agreed with the grantee to grant him for the said purpose the land hereby transferred belonging to the grantor on the terms and conditions hereinafter contained.
AND WHEREAS the grantee has accepted the said grant for the said purpose and on the terms and conditions hereinafter contained.
NOW THIS DEED WITNESSES’ AS FOLLOWS:
1. In pursuance of the aforesaid agreement and in consideration of the Grantee’s covenants hereinafter contained, and for the purpose of promoting, religious worship, the grantor hereby grants and transfers to the Grantee ALL THAT PLOT of land etc., TO HOLD THE SAME to the grantee and his Successors according to custom of Succession in the management of religious endorsements recognized by the religion professed by the Grantee for the purpose of a Temple and for no other purpose (excluding ancillary purposes) in accordance with the covenants and the provision hereinafter contained.
2. The Grantee hereby covenants with the grantor as follows:
a. He will within six months from the date hereof erect a temple of the value of ₹ ……………………. on the said premises and will not use the said premises for any other purpose whatsoever.
b. If the grantee fails to erect a temple within the said period of six months, the said premises shall revert to the grantor.
c. Such temple, when erected shall be open to all human beings without any distinction of caste or creed to enter the said temple for worship and prayer and for no other purpose.
d. The grantee has undertaken to pay a sum of ? 100/- as annual rental to the grantor to be paid before first week of January every year in advance.
e. The grantee shall not charge any fee, donations etc. from the employees of the grantor except by way of voluntary contributions for the benefit of the temple.
f. The grantee shall be bound to maintain proper cleanliness in the temple premises at all the times.
g. The grantee and his successors shall at all time hereafter keep such temple in good and substantial repair and will at his or their own cost perform all ceremonies of worship therein according to the religion professed by the grantee.
h. The grantee and his agents shall, on a prior notice of one week, permit at all reasonable times, the authorized officers of the company to examine the condition of the temple premises.
i. If the said premises shall cease to be used for the purpose of a temple then the said premises and all buildings thereon shall revert to the grantor.
3. In case of any dispute arising out or concerning the terms of this deed, the same shall be referred to …………….. for arbitration whose decision thereon shall be final and binding on the parties.
4. In case of any other disputes arising out of or in any way connected with this deed the same shall be deemed to have arisen in ……………….. and only courts in ……………….. shall have jurisdiction to determine the same.
IN WITNESS WHEREOF the parties aforementioned have signed this Deed of Sale on the date, month and the year aforementioned.
Witness: 1. Grantor
Witness: 2. Grantee
Question 8.
Comment on the following; A mortgage is a transfer of interest in any property.
Answer:
According to section 58 of the Transfer of Property Act, 1882, a“mortgage” is the transfer of an interest in specific immovable 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.
Mortgage of property gives the lender a right to acquire and sell the property in case of default by the borrower in repayment of either the loan amount or other dues in accordance with the agreed terms and conditions. It creates a legally binding contract between the parties.
Immovable property includes lands, benefits arising out of the land and things attached to it and does not include standing timber, growing crops or grass.
Parties to mortgage:
- The transferor in the case of a mortgage is called a ‘mortgagor’.
- The transferee in the case of a mortgage is called a ‘mortgagee’.
Mortgage money:
- The principal money and interest of which payment is secured for the time being are called the ‘mortgage money.
Mortgage deed:
- The instrument, if any, by which a transfer is effected is called a “mortgage deed”.
Question 9.
Explain the following; Special advantages of mortgage by deposit of title deeds.
OR
Write note on the following; Types of Mortgage.
Answer:
The following are different kinds of mortgages in effect in India:
(a) Simple Mortgage:
In a simple mortgage, the mortgagor without delivering possession of the mortgaged property binds himself personally to pay the mortgage money and agrees expressly or impliedly that if he fails to pay the debt and interest in terms of the mortgage deed, the property will be sold and the proceeds applied in payment of the mortgaged money.
(b) Mortgage by Conditional Sale:
In a mortgage by conditional sale, the property is sold subject to the condition that on default in payment of the mortgaged money on a certain date the sale shall become absolute or that on such payment the sale shall become void or on such payment the buyer shall transfer the property to the seller. Possession of the property shall be with the mortgagee.
(c) Usufructuary Mortgage:
In this mortgage, the mortgagor delivers possession of the mortgaged property to the mortgagee who retains the possession until the satisfaction of the debt. The mortgagee will take the usufruct in lieu of the interest or part payment of the principal or partly in payment of interest or partly in part payment of the principal. The mortgagor is not personally liable to pay the debt and the mortgagee is not entitled during the term of the mortgage to demand his mortgage money.
(d) English Mortgage:
In an English mortgage, a mortgagor binds himself to repay the mortgaged money on certain date and transfers the mortgaged property absolutely to the mortgagee subject to the proviso that he will re-transfer it to the mortgagor upon payment of the mortgaged money as agreed.
(e) Mortgage by Deposit of Title Deeds:
Mortgage by deposit of title deeds is called in English law as equitable mortgage. It is an oral transaction and no documents like Deed of Mortgage is required to be executed. No written acknowledgement is required for creating this mortgage. It is, however, prudent to have a record of transactions to avoid difficulties to establish the creation of the mortgage. In this case, a Memorandum of Mortgage by deposit of title deeds is prepared by the mortgagee to secure the specific mortgage money.
Equitable mortgage is preferred by the lenders/banks/creditors as well as the commercial enterprises because of the following advantages:
- To save time and avoid inconvenience of documentation, and registration.
- To minimize cost of creating mortgages and cost of borrowed funds by saving stamp duty.
- To maintain secrecy of the debit transaction.
(f) Anomalous Mortgage:
Anomalous Mortgage is a combination of any of the above forms of mortgage or any mortgage other than those set out above.
Question 10.
Usufructuary mortgage is similar to English Mortgage. Whether this statement is correct? Justify your answer.
OR
Distinguish between the following; English mortgage and Usufructuary mortgage.
Answer:
In an English mortgage, a mortgagor binds himself to repay the mortgaged money on certain date and transfers the mortgaged property absolutely to the mortgagee subject to the proviso that he will re-transfer it to the mortgagor upon payment of the mortgaged money as agreed.
In a Usufructuary mortgage, the mortgagor delivers possession of the mortgaged property to the mortgagee who retains the possession until the satisfaction of the debt. The mortgagee will take the usufruct in lieu of the interest or part payment of the principal or partly in payment of interest or partly in part payment of the principal.
In an English mortgage the mortgagor is personally liable to pay the mortgagor however in usufructuary mortgage, the mortgagor is not personally liable to pay the debt and the mortgagee is not entitled during the term of the mortgage to demand his mortgage money.
Hence, usufructuary mortgage and English mortgage are not similar.
Question 11.
Distinguish between the following; Release and re-conveyance of mortgaged assets.
Answer:
Release of any of the mortgaged assets or reconveyance of the mortgaged property could be done by a registered document in case the mortgage has been created in the form other than equitable mortgage by deposit of title deeds by a registered deed of mortgage.
In those cases where release or reconveyance of mortgaged property covered under equitable mortgage is sought by the mortgagor, the same could be done by releasing the relevant title documents and re-depositing the remaining title deeds by rewriting the memorandum for creation of equitable mortgage. On redemption of equitable mortgage all the title deeds could be released by the mortgagee to the mortgagor by personal hand delivery and against accountable receipts from the mortgagor.
Question 12.
Explain the following; Appointment, power and functions of receiver under mortgage.
Answer:
Under Section 69A of the Transfer of Property Act, a mortgagee having the right to exercise the power to sell is entitled to appoint by writing signed by him or on his behalf a receiver of the income of the mortgaged property or any part thereof.
Appointment of Receiver:
- Any person who has been named in the mortgage deed and is willing and able to act as a receiver may be appointed by a mortgagee.
- If any person so named is not capable and unwilling to act or is dead, the mortgagee may appoint any person to whose appointment the mortgagor agrees.
- Failing such an agreement the mortgagee shall be entitled to apply to the Court for appointment of a Receiver and any person appointed by the Court shall be deemed to have been duly appointed by the mortgagee.
Powers and functions of the receiver:
The receiver is required to apply all money received by him as follows:
- In discharge of all rents, taxes, land revenue, rates and outgoings whatever affecting the mortgaged property.
- In keeping down all annual sums or other payments, and the interest on all principals sums, having priority to the mortgage in right whereof he is Receiver.
- In payment of his commission, and of the premiums on fire, life or other insurances, if any, properly payable under the mortgage deed or under this Act, and the cost of executing necessary or proper repairs directed in writing by the mortgagee.
- In payment of the interest falling due under the mortgage.
- In discharge of the principal money, if so directed in writing by the mortgagee.
Question 13.
Draft a specimen of memorandum of mortgage by deposit of title deeds.
Answer:
THIS DEED OF MORTGAGE is made on the 3rd day of July 2020, between ‘AB’, S/o…….. R/o……… (hereinafter called “the Mortgagor”), of the ONE PART.
AND
‘CD’, S/o……. R/o…….. (hereinafter called the “Mortgagee”), of the OTHER PART WHEREAS the Mortgagor is absolutely seized and possessed of or otherwise is well and sufficiently entitled the property intended to be hereby mortgaged which is free from all encumbrances and attachments.
AND WHEREAS the Mortgagee has agreed to lend and advance a sum of ₹ ……………… to the Mortgagor at his request upon having the repayment thereof, with interest at the rate hereunder stated and secured in the manner hereinafter expressed.
NOW THIS DEED WITNESSETH AS UNDER
1. Mortgagor has deposited with Mortgagee the original title deeds comprised in the Schedule A hereto, relating to the premises belonging to the said mortgagor and situate at …………………….. described in Schedule B with intent to create a charge thereon for securing repayment to the said mortgagee of the sum lent along with interest for the same from this date at the rate of ₹ …………………. per cent per annum.
2. The said mortgagor do hereby undertake as and when required by the said mortgagee to execute and register at the costs of the said mortgagor a legal mortgage in such form and containing such covenants and provisions as he may reasonably require.
Dated this ……………………….. day of ……………………… 2019.
SCHEDULE A
Description of the Title Deeds deposited
SCHEDULE B
Description of the Property
IN WITNESS WHEREOF the parties herein under have set their hands on the day and year hereinabove mentioned.
Witnesses:
1. ………….. MORTGAGOR
2. ………….. MORTGAGEE
Question 14.
Draft a specimen deed of usufructuary mortgage.
Answer:
THIS MORTGAGE, made on 3rd day of July 2013, between ‘AB’ S/o……….. R/o……….. (hereinafter called “the Mortgagor”) of the ONE PART.
AND
‘CD’ S/o…. R/o…. (hereinafter called “the Mortgagee”) of the OTHER PART WHEREAS the Mortgagor is absolutely seized and possessed or is otherwise well and sufficiently entitled to an absolute estate of inheritance or an estate equivalent thereto free from encumbrances to the lands, hereditaments ………………………….. fully mentioned and described in the Schedule hereto.
AND WHEREAS that on consideration of the sum of ₹ ………………………….. now paid to the Mortgagor by the Mortgagee the said ‘AB’ hereby conveys to the said mortgagee the property described in schedule 1, from this day.
NOW THIS DEED WITNESSETH AS UNDER
1. That the Mortgagee shall be in possession of the mortgaged property under the terms of the deed for securing payment on the ……………………….. day of …………………. 2013, of the principal sum secured, with the interest thereon at ₹ ……………… per cent per annum, which mortgage money will be set off against the usufruct of the mortgaged property, and the Mortgagee does hereby promise to keep clear accounts thereof.
2. The mortgagor hereby agrees that the Mortgagee shall retain possession of the mortgaged property until the principal sum together with the interest due be paid off out of the proceeds of the property and on payment of the aforesaid sum.
3. Upon pay off, the Mortgagee shall execute and register a release of the mortgaged property in favour of the Mortgagor.
4. That the Mortgagee also shall not to, execute, perform nor suffer to the contrary any act deed or thing whereby or by reason or means whereof the value of the said property in his possession may be diminished or the same may otherwise be prejudiced in title or estate.
5. The mortgagor does also agree to pay the Government revenue and the municipal tax of the said property regularly and in case he fails to make such payment, the Mortgagee shall be at liberty to pay such revenue and taxes, and such sum paid shall be considered an additional principal sum advanced to the Mortgagor, and shall carry interest at the rate stipulated above.
6. That the receipt whereof the Mortgagor does hereby acknowledge the acceptance of the mortgage money is annexed.
7. That the Mortgagor also agrees that if he, the Mortgagor, does not pay the principal sum with the interest then due on the stipulated date, this conveyance will become absolute and the Mortgagee will be entitled to foreclose the mortgaged property, and thereafter the Mortgagor, his heirs, executors, administrators or assigns shall be absolutely debarred of all the rights to redeem the same.
SCHEDULE
IN WITNESS WHEREOF the parties herein under have set their hands on the date and year hereinabove mentioned in the presence of:
Witnesses:
1 ‘AB’
2 ‘CD’
Question 15.
Draft the following Documents; Deed of Redemption or Re-Conveyance of Mortgaged property by the Mortgagor in favour of the Mortgage.
Answer:
THIS DEED OF REDEMPTION is made on 3rd day of 2019 between Mr. A, S/o……….. R/o……….. (hereinafter called as the “mortgagee”) of the ONE PART.
AND
Mr. B, S/o……. R/o……. (hereinafter called as the “mortgagor”) of the OTHER PART.
WHEREBY by a mortgage deed dated ………………. the property mentioned in that deed was mortgaged by the said mortgagor in favour of the said mortgagee to secure payment of the amount of ₹ ………………….. with interest @…………………. per cent per annum.
NOW THIS DEED OF RECONVEYANCE WITNESSETH:
1. That in consideration of all principal moneys and interest secured by the said mortgage deed dated …………………. having been paid, the receipt whereof the said mortgagee hereby acknowledges.
2. The said mortgagee hereby redeems or reconveys unto the said mortgagor all the property comprised in the said mortgage deed to hold use of the said property upon mortgagor.
3. The mortgagor becoming the absolute owner discharged from all principal money and interest secured by and from all claims and demands under the aforesaid mortgage deed.
IN WITNESS WHEREOF the parties herein under have set their hands on the day and year hereinabove mentioned.
Witnesses:
1. ………MORTGAGOR
2. ………MORTGAGEE
Question 16.
Pravin Arora mortgaged his property in favour of Juhi Chawla in consideration of loan taken by Pravin’Arora. Now the loan together with interest has been paid. Prepare a deed of redemption or re-conveyance of mortgaged property in favour of the mortgagor.
THIS DEED OF REDEMPTION is made at New Delhi on this the 3rd day of July 2017 between Mr. Pravin Arora, Sb Mr. Sakct Arora, aged about 50 years, R/o…., (hereinafter referred as “mortgagor” which expression shall, unless it is repugnant to the context mean and include his legal representatives and executors.)
AND
Ms. Juhi Chawla, W/o Mr. Jay Mehta, aged about 43 years, R/o…. (referred to as “mortgagee” which expression shall, unless it is repugnant to the context mean and include his legal representatives and executors).
WHEREAS the property, more fully described in the schedule I hereto; was mortgaged by the mortgagor to the mortgagee as security for the repayment of a debt amounting to ₹ …………….. under a deed of mortgage dated ……………., registered as document number: in the office of the Sub-Registrar ……………..
AND WHEREAS the mortgagee has received full and final repayment of the loan amount of ₹ ……………. borrowed by the mortgagor……………. under the aforementioned Deed of Mortgage dated vide cheque number……………. dated ……………. drawn on the ……………. in favour of the mortgagee.
NOW THIS DEED WITNESSETH AS UNDER:
1. That in consideration of the payment of ₹………………………. to the Mortgagee by the Mortgagor paid in full of the principal sum and interest due and owing to the mortgagee on the security of the said Indenture of the Mortgage (the receipt whereof the Mortgagee doth hereby admit and acknowledge.
2. That the mortgagee do hereby acquit, release and forever discharge the Mortgagor.
3. That the mortgagee hereby retransfers and reconvey to the mortgagor all that the said mortgage property, more particularly described in the Schedule I hereto, to have and hold the same unto the mortgagor absolutely and free from encumbrances of any kind whatsoever.
4. That the mortgagor is discharged from all claims, demands and rights of the mortgagee under the said mortgage.
5. The mortgagee hereby covenants with the mortgagor that he has not done or knowing or willingly suffered or been party or privy to any act, deed or thing whereby or by reason of means whereof the said mortgaged property hereby reconveyed or retransferred or intended so to be or any of them or any part thereof mayor shall be impeached, affected or encumbered in title, estate or otherwise howsoever.
6. And the mortgagee hereby declares and confirms that title deeds he has delivered the title deeds in respect of the mortgaged property and the Deed of Mortgage to the Mortgagor.
SCHEDULE I
Property Details
IN WITNESS WHEREOF the MORTGAGOR and the MORTGAGEE has hereto set their hands to this deed of redemption on the day, month and year hereinabove written.
WITNESSES:
1. Signature of the Mortgagee
2. Signature of the Mortgagor
Question 17.
Comment on the following; A lease of immovable property is a transfer of right.
Answer:
Lease is a contract between lessor and lessee for the fixed term for the use on hire of a specific asset selected by lessee. Lessor retains ownership of the assets and lessee gets the possession for use of the asset on payment of specified rental over a period.
In every State there is a legislation providing for the rights of lessors and lessees, of residential and commercial buildings. Thus the local rent control acts govern the leasing agreements. They override the provisions of the Transfer of Property Act.
As per Section 105 of the Transfer of Property Act Lease is defined as “A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perperuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms. Lessor, lessee, premium and rent defined. The transferor is called the lessor.
The transferee is called the lessee. The price is called the premium, and the money, share, service or other thing to be so rendered is called the rent.”
Essentials
The essential legal elements of lease are:
a. Parties i.e. lessor or lessee;
b. Subject matter of lease i.e. the property to be leased
c. Demise or partial transfer of such property d Term and period of lease
e. Consideration or rent
Question 18.
Distinguish between habendum and reddendum.
Answer:
The following are the differences between habendum and reddendum
| Habendum | Reddendum |
| Habendum is a part of deed which states the interest, the purchaser is to take in the property. Habendum clause starts with the words “THE HAVE AND TO HOLD” |
Reddendum is a clause by which rent is reserved in a lease deed. |
| Origin: Formerly in England if there was a gratuitous transfer, the transferee was not deemed to be the owner of the beneficial estate in the property. It was therefore, necessary to indicate in the deed that it was being transferred for the use of the transferee. | It mentions the mode and time fixed for payment. |
| Now it is not necessary to express it as the expression “TO HAVE AND” are omitted. The habendum limits the estate mentioned in the parcels. | It begins with the word “yielding and paying” with reference to the reserved rent is payable during the terms of the lease. |
| The transferee is mentioned again in the habendum for whose use the estate is conveyed. | It includes the place where payable and instalment where mentioned. If there is apportionment of rent, should also be mentioned. |
Question 19.
Write a note on the following; Necessary clauses in a sub-lease deed.
Answer:
- Subject matter of lease i.e. the property to be leased.
- Term and period of lease: Law requires that the lease of real estate should be expressed and duration of the lease should be pre-settled under the written contract.
- Consideration or rent.
- Operative Part: It should be clearly stated that the lessor is divesting himself of possession and the lessee coming into possession, e.g. by the use of such words as “The lessor hereby lets, or demises or grants a lease of, etc., etc. with effect from the day of ”
- Reddendum: This clause is found only in a deed of lease. It begins with the word rendering or paying with reference to the reserved rent. It mentions:
a. The mode of payment
b. Time fixed for payment
c. Place where rent is payable
d. Installments if any
e. Apportionment of rent - Covenants: Terms and conditions are mentioned in several paragraphs. The usual covenants are to be found in Section 108 of the Transfer of Property Act; other important covenants generally refer to payment of taxes, repairs, insurance, subletting purpose of the lease, e.g. residential purpose, renewal, forfeiture.
- Termination: The circumstances in which the lease shall be determined be also specifically reduced to writing to avoid complications of misconceptions.
Question 20.
Comment on the following; A sub-lease is a device by a lessee for a lesser term than he himself has.
OR
Examine the following statement; A sub-lease Is an absolute assignment.
OR
A sub-lease is an absolute assignment under the Indian law or the English law.
Answer:
A “sub-lease” is a demise by a lessee for lessor term than he himself has. Generally, Sub-lease of property is made by a person who is himself a lessee or tenant of that property. A sub-lease can be made unless the lessee is refrained by the contract of the tenancy from subletting.
Assignment:
An absolute assignment is the act of complete transfer of the ownership (all rights, benefits and liabilities) of the policy completely to other party without any terms and condition.
If the demise is for the whole term or for a period beyond the term, it amounts to assignment.
A covenant against subletting will restrain the assignment, but a mere covenant against subletting does not prohibit underletting a part of the premises.
Following are the case laws on this subject:
1. Hunsraj v Bejoylal Seal (1930) 57 cal 1176)
“In India, a sub-lease is not an absolute assignment.”
2. Akshay Kumar v Akman Molla (1915) 19 CWN1197
“It was held that there is no privity of estate as between the lessor and the sub-lease, who does not step into the shoes of lessee.”
Question 21.
Write a note on the following; Surrender of lease.
OR
In the light of judicial pronouncements, discuss the following; Surrender of lease is not a transfer but a mere yielding up by the lessee of his interest under the lease to the lessor by mutual agreement.(June 2018, 4 marks)
OR
In the light of judicial pronouncements, discuss the following; Surrender of lease is not a transfer.
Answer:
Surrender of lease is a yielding up by the lessee of his interest under the lease to the lessor by mutual agreement. It is not a transfer or an assignment of any right or estate within the meaning of Section 5 of the Transfer of Property Act.
Following are the case laws on this subject:
1. Makhanlal y. Nagendranath, (1933) 60 Cal 379
“The person who surrenders is called the surrenderer and the person to whom surrender is made is called the surrenderee.”
2. Torabaf y. Padan Chand, 62 CWN 176
“A Requisition Order by the Government does not amount to any surrender. Surrender may be expressed or implied. Except in a case of some special kinds of lease as required by special Act, no writing or registration is necessary. Surrender may be oral, if accompanied by delivery of possession.”
Question 22.
Sub-lease is not a surrender of lease.
Answer:
Sub-lease:
A sub-lease is a demise by a lessee for lessor term than he himself has. Every lessee, however short his term may be, make a sub-lease unless he is refrained by the contract of the tenancy from subletting.
If the demise is for the whole term or for a period beyond the term, it amounts to assignment.
It is true that a covenant against subletting will restrain the assignment, but a mere covenant against subletting does not prohibit underletting a part of the premises. As long as the lessee remains in possession he may permit another person to use the demised premises without committing a breach of covenant, namely not to assign, underlet or part with the possession of the demised premises.
Hunsraj v Bejoylal Seal (1930) 57 Cal 1176)
In India, a sub-lease is not an absolute assignment.
Surrender of lease:
Surrender of lease is a yielding up by the lessee of his interest under the lease to the lessor by mutual agreement. It is not a transfer or an assignment of any right or estate within the meaning of Section 5 of the Transfer of Property Act.
Following are the case laws on this subject:
1. Makhanlal v. Nagendranath (1933) 60 Cal 379
“The person who surrenders is called the surrenderer and the person to whom surrender is made is called the surrenderee.”
2. Torabai v. Padan Chand 62 CWN176
“A Requisition Order by the Government does not amount to any surrender Surrender may be expressed or implied. Except in a case of some special kinds of lease as required by special Act, no writing or registration is necessary. Surrender may be oral, if accompanied by delivery of possession.”
Question 23.
Distinguish between the following; Lease and license.
Answer:
The following are the differences between License and Lease
| License | Lease |
| 1. License is a grant by one person to another or to a definite number of persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right, be unlawful, and such right does not amount to an easement or an interest in the property, the right is called a license. | A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms. |
| 2. License is defined under Section 52 of the Indian Easement Act, 1882. | A lease of immovable is defined Section 105 of the Transfer of Property Act. |
| 3. The parties are called as licensor and licensee. | The transferor is called the lessor, the transferee is called the lessee. |
| 4. No interest is created in the licensee. | Interest created in the lessee. |
| 5. Non assignable. | Usually assignable. |
| 6. Always permissive and revocable. | Permissive but not normally revocable. |
| 7. Not exclusive user. | Exclusive user. |
| 8. Remedy for breach is damages. | Specifically enforceable. |
| 9. Instrument granting right does not require registration. | Instrument creating right requires registration. |
| 10. User not liable for public nuisance. | Liable. |
| 11. Denial of grantor’s title does not necessarily result in forfeiture. | Denial of lessor’s title results in forfeiture. |
| 12. No notice necessary to terminate relationship. | Notice necessary to terminate relationship. |
| 13. Does not entitle licensee to sue strangers in his own name. | Can sue in his own name. |
Question 24.
In the light of case law on the subject distinguish in what respects should a lease deed be different from lease and license agreement.
Answer:
Lease:
A “lease” of immovable property is a transfer of a right to enjoy such j property, made for a certain time, express or implied, or in perpetuity, in I consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms.
License:
A “License” is a grant by one person to another or to a definite number of persons, a right to do, or continue to do, in or upon the immovable property of the grantor, something which would, in the absence of such right, be unlawful, and such right does not amount to an easement or an interest in the property, the right is called a license.
Judicial precedents on distinction between lease and license:
Khalil Ahmed Bashir Ahmed v. Tufelhussein Samasbhai Sarangpurwala 1988 SCC155
“The Supreme Court has held: “In order to determine whether a document created a license or a lease the real test is to ascertain the intention of the parties ie. whether they intended to create a license or a lease. If the document creates an interest in the property entitling the transferee to enjoyment, then it is a lease; but if it only permits another to make use of the property without exclusive possession, then it is a license. ”
Rajbir Kaur & Anr. v. M/s. S. Chokesiri & Co. 1988 (2) SCJ 316
‘“In order to determine whether a document created a license or a lease the real test is to ascertain the intention of the parties i.e. whether they intended to create a license or a lease. If the document creates an interest in the property entitling the transferee to enjoyment, then it is a lease; but if it only permits another to make use of the property without exclusive possession, then it is a license.”
From the judgments of various Courts, it appears that the main factors to decide whether the agreement is a lease or a license are:
a. The intention of the parties
b. Whether the agreement creates an interest in the property.
Question 25.
What is the difference between mortgage and lease from the point of view of drafting of an agreement?
Answer:
Mortgage:
According to section 58 of the Transfer of Property Act, 1882, a “mortgage” is the transfer of an interest in specific immovable 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.
Mortgage of property gives the lender a right to acquire and sell the property in case of default by the borrower in repayment of either the loan amount or other dues in accordance with the agreed terms and conditions. It creates a legally-binding contract between the parties.
Immovable property includes lands, benefits arising out of the land and things attached to it and does not include standing timber, growing crops or grass.
Parties to mortgage:
- The transferor in the case of a mortgage is called a ‘mortgagor’
- The transferee in the case of a mortgage is called a ‘mortgagee’
Mortgage money:
The principal money and interest of which payment is secured for the time being are called the ‘mortgage money’
Mortgage deed:
The instrument, if any, by which a transfer is effected is called a “mortgage deed”.
Lease:
Lease is a contract between lessor and lessee for the fixed term for the use on hire of a specific asset selected by lessee. Lessor retains ownership of the assets and lessee gets the possession for use of the asset on payment of specified rental over a period.
In every State there is a legislation providing for the rights of lessors and lessees of residential and commercial buildings, thus the local rent control acts govern the leasing agreements. They override the provisions of the Transfer of Property Act.
As per Section 105 of the Transfer of Property Act: Lease is defined as
“A lease of immovable property is a transfer of a right to enjoy such property, made for a certain time, express or implied, or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops, service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms. Lessor, lessee, premium and rent defined. The transferor is called the lessor. The transferee is called the lessee. The price is called the premium, and the money, share, service or other thing to be so rendered is called the rent.”
Essentials
The essential legal elements of lease are:-
a. Parties i.e. lessor or lessee
b. Subject matter of lease i.e. the property to be leased
c. Demise or partial transfer of such property
d. Term and period of lease
e. Consideration or rent
Question 26.
Draft the following as per the instructions; A Deed altering conditions in a lease.
Answer:
THIS DEED made on 3rd July, 2019 at…… between AB, S/o…. R/o…… (hereinafter called “the landlord”) of the ONE PART.
AND
CD, Sb….. R/o…… (herein after called “the tenant”), of the OTHER PART.
WHEREAS by a lease (hereinafter called “the principal deed”), dated the ………………… day of ………………………. and made between the parties hereto and registered at ………………………….. Registration office in Book No …………………….. Volume No ……………………… pages …………………… to ……………………. Being No ……………….. for the year ……………………, the said landlord granted and demised to tenant the house (or, etc.) situate at…. described in schedule.
AND WHEREAS the parties hereto have agreed to alter and modify the terms and conditions of the principal deed in the following manner:-
NOW THIS DEED WITNESSETH AS UNDER
1. That Sub-clause (e) of clause 2 of the principal deed, the following subclause shall be omitted and shall cease to have any effect.
2. For sub-clause (b) of clause 2 of the principal deed, the following sub clause shall be substituted, namely:
“………………………………………………………………”
3. That as altered and modified as aforesaid the principal deed shall remain in full force and effect.
IN WITNESS WHEREOF the parties hereunto have set their signatures on the date above mentioned in the presence of:
Witnesses:
1. Landlord
2. Tenant
Question 27.
Draft a deed of sub-lease with the permission of Vi jay, the original lessor between Amar (sub-lessor) and Binod (the sub-lessee) in respect of Survey No. 786, Part I, being used as agricultural land admeasuring 50 acres situated on the eastern bank of Varuna river in Varanasi District (UP) demised to the original lessor, Vijay, for a period of 30 years w.e.f. 1st January, 2012 and covenanted for renewal for three consecutive periods of 30 years each; though the sub-lease has to be initially valid for 30 years only.
Answer:
THIS DEED OF LEASE is made this 3rd day of July 2013 between AB, S/o…………. R/o………………….. (hereinafter called as “the sublessor”), of the ONE PART,
AND
CD, S/o………… R/o………….. (hereinafter called “the sub-lessee”), of the OTHER PART.
WHEREAS by a lease (hereinafter referred to as “the original lease”) dated …………….. the day of ……………………. and made between XY as owner and AB as lessee and registered in Book I, Vol. …………………. pages ……………………. to being No …………………… for the year ……………….. in the Office of Sub-Registrar of …………………….. etc., the premises (or, etc.) described in the original lease were demised to the said original lessee for a period of ………………… years with effect from the day of ………………….. on a yearly rent and subject to the covenants and conditions to be performed and observed as therein contained.
AND WHEREAS the original lessee has agreed to grant and the sub-lessee has agreed to accept a sub-lease of the premises (or, etc.) hereinafter described upon the conditions hereinafter contained:
NOW THIS DEED WITNESSETH AS UNDER:
That in consideration of the rent hereinafter reserved and the covenants by the sub-lessee hereinafter contained, the original lessee do hereby grant to the sub-lessee a lease of ALL THAT premises (or, etc.) known by the name of, etc., and situate at, etc., together with the appurtenances; TO HOLD the same unto and to use of the sub-lessee for the period of ……………….. years, commencing with effect from the ……………….. day of …………………. at the monthly rent of Rupees ………………………… subject to the following conditions:
1. The sub-lessee hereby agrees with and covenants with its lessor as follows:
a. To pay the said rent, clear of all deductions, on the ………………………. day of ……………………………. every current month in advance during the term of the lease.
b. To pay all taxes and outgoings now payable or hereafter to be come payable in respect of the leased premises.
c. To keep the said premises in good and tenantable repair, and not to make any alteration therein without the written consent of the landlord.
d To perform all the covenants, conditions and stipulations contained in the original lease.
e. To not to do, execute or perform any act, deed or thing or suffer anything to the contrary whereby or by reason or means whereof the original lease may be avoided or forfeited.
f. To allow the original lessee to enter upon the leased premises for the purpose of inspection of the premises.
g. To keep the original lessee indemnified against all actions, claims, demands and expenses on account of performance or non-performance by the sub-lessee.
2. The original lessee does agree and covenant with the sub-lessee as follows:
a. That upon the sub-lessee paying the rent hereby reserved and performing the conditions and covenants herein contained, shall quietly and peacefully possess and enjoy the property.
b. Provided that in case of any breach of any of the by the sub-lessee, the lease shall, at the option of the original lessee, stand determined.
c. The original lessee shall duly and punctually pay the rent reserved, and perform all the covenants and conditions contained in the original lease,
d. The original lessee acknowledges the right of the sub-lessee as to production of the original lease and to delivery of copies thereof and undertakes for the safe custody thereof.
3. It is further agreed that the terms “the original lessee” and “sub-lessee” used herein shall, unless inconsistent with the context, include as well their respective successors and assigns.
IN WITNESS WHERE OF the parties hereunto have set their signatures on the date above mentioned in the presence of:
Witnesses:
1. Lessor
2. Lessee