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1936 Supreme(SC) 34
PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
LORD ROCHE, SIR SHADI LAL, AND SIR GEORGE RANKIN
M. E. MOOLLA SONS, LIMITED (IN LIQUIDATION) - Appellant
Versus
OFFICIAL ASSIGNEE OF THE HIGH COURT OF JUDICATURE AT RANGOON AND - Respondents
On appeal from the High Court at Rangoon.
Decided On : May 26, 1936.
Solicitors for the appellant: Barrow, Rogers & Nevill. Solicitors for the Official Assignee: Gard, Lyell & Co.
Interests in future rents, profits, and contingent interests in the corpus of settled landed property are 'benefits arising out of land' and thus constitute immovable property, requiring a registered instrument for valid transfer under the Transfer of Property and Registration Acts.
Headnote:(A) Transfer of Property Act, 1882 - Section 54 - Indian Registration Act, 1908 - Section 17 and 49 - General Clauses Act, 1897 - Section 3(25) - Definition of immovable property - Interest in future rents and profits from land and contingent interest in the corpus of settled landed property are considered "benefits to arise out of land" and thus constitute immovable property - A transfer of such interest requires a registered instrument to be valid; an unregistered agreement does not create any interest or charge on such property. (Paras 110-112)
(B) Indian Trusts Act, 1882 - Section 5 - Validity of trust in relation to immovable property - No trust in relation to immovable property is valid unless declared by a non-testamentary instrument in writing, signed by the author or trustee, and registered - A contract for sale of immovable property does not, by itself, create a trust or transfer title in the absence of registration. (Paras 113-114)
(C) Nature of Beneficiary's Interest - The intervention of trustees does not change the character of the beneficiary's interest in land - A person beneficially entitled to income or corpus from land held by trustees retains an interest in the immovable property, as the legal estate in the trustee is held for the benefit of the cestui que trust. (Paras 112-113)
Facts of the case:
A company sought a declaration that a certain asset held by an insolvent was held in trust for the company and did not vest in the official assignee. The asset consisted of a vested interest in the income and a contingent interest in the corpus of settled landed property. The insolvent had acquired this interest via a registered deed and subsequently agreed to sell it to the company through an unregistered agreement. The company contended that the interest was not immovable property and thus did not require registration for transfer.
Findings of Court:
The court found that the interest in future rents and profits, as well as the contingent interest in the corpus of the landed property, fell within the definition of immovable property as "benefits to arise out of land." Consequently, the transfer of such interest from the insolvent to the company required a registered conveyance under the law. Since the agreement was unregistered, no title passed to the company.
Issues: Whether a vested interest in the income and a contingent interest in the corpus of settled landed property constitute immovable property, thereby necessitating a registered instrument for a valid transfer under the Transfer of Property Act and the Registration Act.
Ratio Decidendi: The court reasoned that statutory definitions of immovable property include benefits arising out of land. Future rents and profits are such benefits. The fact that the right is exercised through trustees does not strip the interest of its character as immovable property. Because the transaction involved the sale of an intangible interest in immovable property, it was governed by the mandatory registration requirements of Section 54 of the Transfer of Property Act and Section 17 of the Registration Act. An unregistered contract for sale does not create any interest in the property.
Result: Appeal dismissed with costs.
Legal Category Hierarchy
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property law
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immovable property
- registration of transfers
- benefits arising out of land
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immovable property
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trust law
- beneficiary interests
- validity of trusts
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insolvency law
- estate of insolvent
Judgement
Appeal (No. 76 of 1935) from a decree of the High Court in its appellate jurisdiction (August 14, 1934) reversing a decree of the High Court in its original civil jurisdiction (March 1, 1934).
This appeal arose out of a suit brought by the appellant company, M. E. Moolla Sons, Ld., through its liquidator, for a declaration that a certain asset held by one M. £. Moolla, an insolvent, was the property of, and was held by him in trust for, the appellant company, and that it did not vest in the Official Assignee as the property of the insolvent.
The asset in question was the interest of one Maung Chit Maung under a deed of settlement made by his father on May 5, 1908. That interest, which was a vested interest in the income and a contingent interest in the corpus of the settled landed property, was conveyed by Maung Chit Maung to M. E. Moolla by a registered deed, dated December 17, 1919, for a consideration of Rs.2,50,000. On December 22, 1920, M. E. Moolla entered into an agreement, which was never registered, to sell to the appellant company his business and certain properties and interests, the latter including the right of Maung Chit Maung in the estate of his father.
The question was whether the interest of Maung Chit Maung was immovable property so that the sale of that interest by M. E. Moolla to the appellant company, to be valid, would require to be by registered conveyance as provided by s. 54 of the Transfer of Property Act, 1882.
The facts, the relevant provisions of the settlement, and the material statutory provisions appear from the judgment of the Judicial Committee.
The trial judge (Shaw J.) allowed the claim of the company and made a declaratory decree as prayed for.
An appeal to the Appellate Court (Page C. J. and Mya Bu J.) was allowed. The learned judges held (inter alia) that the subject-matter of the suit—namely, the interest of Maung Chit Maung in the trust of 1908—was an interest in immovable property, and that therefore a registered conveyance was necessary for the transfer of that interest, and that in the absence of such a conveyance the company acquired no title to the interest. The appeal is reported at ( 1934) I. L. R. 12 R. 589.
1936. May 1, 4 and 5. Dunne K.C. and Hyam for the appellant. The Appellate Court has held that the
Law. Rep. 63 Ind. App. 340 ( 1935- 1936)
M. E. Moolla Sons v. Official Assignee 106
interest under the deed of settlement of 1908 is an interest in immovable property and can be transferred only by registered deed. That interest was not immovable property all that Maung Chit Maung had and transferred was a right to a share that is not immovable property or an interest in immovable property. If there is a transfer at all it is not of immovable property but of an actionable claim. [Reference was made to the Indian Registration Act (XVI. of 1908), s.17, sub-s.1 (b).] The deed of settlement was registered because it dealt with immovable property. It would be unreasonable to read s. 54 of the Transfer of Property Act, 1882, so as to include a contingent interest. No registered document was required in this case the Appellate Court has wrongly used Ariff v. Jadunath Majumdar (( 1931) L. R. 58 I. A. 91.) against the appellant company. [Reference was made to the Indian Trusts Act (II. of 1882), s. 3, Maung Shwe Goh v. Maung Inn (( 1916) L. R. 44 I. A. 15.); Chhatra Kumari Devi v. Mohan Bikram Shah (( 1931) L. R. 58 I. A. 279, 294-5.); and Ma Yait v. Official Assignee . (( 1929) L. R. 57 I. A. 10.)] Under the Trusts Act the only right of the beneficiary is to compel the carrying out of the trust. The transfer of movable property does not require writing and consequently does not require registration. M. E. Moolla was, under the circumstances, in the position of trustee for the company in respect of the interest, and he ceased to be the beneficial owner thereof. The agreement between the company and M. E. Moolla was an agreement for valuable consideration, and was acted upon b
