It has been common practice in India for family members to acquire properties in joint names, particularly residential properties, despite only one of the transferees making the payment towards consideration or cost for acquisition of such flat. In such cases, especially residential flats, at the time of distribution / succession of respective estates of such individuals, a question arises as to whether the ownership of such flats will devolve upon the heirs of the transferee who actually paid the consideration or cost of acquisition out of his/her own separate funds or the ownership of such flat will devolve upon the heirs of both the transferees whose names are recorded as joint purchasers in the sale deed.
The provisions of The Transfer of Property Act, 1882 (“TOPA”) relate to conveyance of property, which has been enacted to amend the law relating to the transfer of property by act of parties. Section 45 of TOPA specifically comes into play in the above scenario, as it deals with the quantum of interest and its determination in situations where there are several joint owners of immovable property, and the interest of such joint owners has not been specified by them in the sale deed at the time of acquisition of the immovable property. Section 45 of TOPA is reproduced as under:
- Section 45 – Joint transfer for consideration
Where immoveable property is transferred for consideration to two or more persons and such consideration is paid out of a fund belonging to them in common, they are, in the absence of a contract to the contrary, respectively entitled to interests in such property identical, as nearly as may be, with the interests to which they were respectively entitled in the fund; and, where such consideration is paid out of separate funds belonging to them respectively, they are, in the absence of a contract to the contrary, respectively entitled to interests in such property in proportion to the shares of the consideration which they respectively advanced. In the absence of evidence as to the interests in the fund to which they were respectively entitled, or as to the shares which they respectively advanced, such persons shall be presumed to be equally interested in the property.
Interpretation of Judiciary:
- Quantum of interest in property when consideration is advanced out of separate funds
The first two conditions of Section 45 of the Transfer of Property Act clearly specified that in the absence of contract to the contrary, the persons will be entitled to the share in the property according to their shares in the consideration which they have invested or advanced out of common fund or separate fund. If the consideration is paid out of separate funds of the individuals, the entitlement in property is proportionate to such funds advanced.
In 2016, the High Court of Judicature at Bombay (Goa Bench) in the matter of Peter Francis Conceicao and Ors. vs. Candolina Conceicao and Ors.1¸ has interpretated the section by observing that this section deals with the question as to what quantum of interest each one of several transferees would get in the property transferred based on the consideration paid. The principle of equity underlying this section is not applicable if the parties themselves have specified what interest or share each of the transferees will have in the property transferred. Section 45 accordingly declares that the rules enunciated are to apply only where there is no contract to the contrary. The High Court went on to rule that admittedly, in the present case, there is no contract as to the manner in which the transferee would have a share in the property in question based on the subject sale deed. In such circumstances, the share in the property transferred would be in terms of the said provisions to the extent of the consideration contributed by the respective parties.
- Quantum of interest in property when consideration is advanced out of common fund
Even when the transferees have advanced consideration out of common fund, the entitlement in the property will be determined on basis of respective interest which each of the transferees held in the common fund.
The Income Tax Appellate Tribunal (Allahabad) in the matter of The Acit vs Shri C.K. Malik (I.G.)2 observed that the language of Section 45 of the TOPA is very clear and provides that where immovable property is transferred for a consideration to two or more persons and such consideration is paid out of funds belonging to them in common, they are entitled to interest in such property identical as nearly as may be with the interest to which they were respectively entitled in the fund. If such consideration is paid out of separate funds belonging to them respectively then such persons will be entitled to interest in such property in proportion to the shares of the consideration which they respectively advanced.
The High Court of Judicature at Madras in the matter of C.V. Ramaswami Naidu and Ors. vs. C.S. Shyamala Devi and Ors.3 has enunciated on the nature of such ownership, as follows, “…..Co-ownership is a relationship which springs and slopes from consensus and contract.. The legal relationship is always knitted in a framework of jointness and no one therein can predicate with certainty as to what portion of the property held in common is his; and an element of inseparability is inhered in the doctrine of co-ownership. What can be predicated by reason of Section 45 of the Transfer of Property Act and by invoking the principle of quasi trust in the Indian Trusts Act is the quantum of rights of such co-owners in the entirety of the property. Such quantification of rights of each of the co-owners in a given property depends on the facts and circumstances of each case. It is for the purpose of providing a just rule for weighing and appreciating the value or interest of a co-owner in joint property that the rule of equity is evolved in Section 45 of the Transfer of Property Act. Therefore, if the source of the purchase price or the consideration for the investment in a joint enterprise emanates from a common fund, then the shares of each of the co-owners or co-entrepreneurs would be the same as their interest in that common fund.
Presumption of equal interest in property in the absence of evidence as to nature of interest held by co-owners in funds
The Appellate Tribunal in the case of The Acit vs. Shri C.K. Malik (I.G.)4 has further explained that the last requirement of the section is that in the absence of evidence as to the interest in the funds to which they were respectively entitled or as to the shares which they respectively advanced, such persons shall be presumed to be equally interested in the property. The third requirement is the exception to Rule. If no evidence is available, then all such persons will be presumed to be equally interested in the property. The High Court of Judicature at Madras in R. Ramanathan vs. M. Arunkumar5, was constrained to observe that “….in the event of the parties concerned are not in a position to adduce clinching and clear evidence in that regard then the Court has to hold that all the joint purchasers are equally entitled to the said property.”
Admission by Respondent (Husband) that Respondent (Wife) was to be treated as co-owner will operate as estoppel
The Hon’ble Bombay High Court in the matter of Sunita Shankar Salvi vs. Shankar Laxman Salvi6 held that if the names of the parties are inserted jointly as the owners in the documents such as title deed for a property out of love and affection, it has to be presumed that the parties are co-owners. In the matter, the Respondent (husband) had surrendered the tenancy rights in respect of the subject property in favour of the builder, in lieu whereof the builder agreed to provide alternate accommodation and that in the agreement executed by the builder, the name of the Appellant (wife) was incorporated at the instance of the Respondent (husband) out of love and affection. It is therefore contended that since the Respondent (husband) was the tenant in respect of the surrendered premises, which was surrendered in favour of the builder, it is the Respondent (husband) alone who can have full interest in the said flat.
The Court observed that it will not be out of place to mention that though there was no tenancy in Appellant’s name (wife) in respect of the premises vacated by the Respondent (husband), the same was for the benefit of the family, and that the Appellant (wife) was also occupying the premises along with the Respondent (husband) as a member of the family. He specifically admits that the appellant (wife) was to be treated as co-owner with the respondent i.e. husband. The admission given by the respondent (husband) will also operate as estoppel against him. He by his conduct is precluded from contending contrary to his admission which is in the form of admitted documents of title. The said flat is in the joint names of the appellant (wife) and the respondent (husband). From the very fact that the name of the appellant was joined as one of the owners in the title deed, it will have to be presumed that the appellant (wife) is entitled to share the said flat equally in the ratio of 50:50 along with the respondent (husband).
From the above discussion, it is amply clear that for the purpose of distribution / succession of individual interest in property acquired by two or more individuals either through separate funds or common fund, it is important to consider the nuanced scenarios envisaged by Section 45 of TOPA to determine the correct devolution of title in such cases and that the blanket presumption of equal interest of co-owners in joint property would not be the correct approach. The exception to the rule enumerated in Section 45 and the above judgments makes it clear that if the property is purchased out of separate funds of one of the individual co-owners and the other co-owners did not make any contribution towards purchase price of the property and there is evidence to that effect, the individual purchaser who solely contributed for purchase of the property will acquire absolute share/interest in property to the exclusion of the other co-owners. However, if admissions to the contrary are made by the said individual purchaser, then it will operate as an estoppel against him.
2 2004 89 ITD 249 All
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