Can a Co-Owner Sell or Mortgage an Undivided Share Without Consent?

Can a Co-Owner Sell or Mortgage an Undivided Share Without Consent?

A Study of Co-Ownership and Coparcenary Property Under Indian Law

 

Abstract

Whether a co-owner of jointly owned or ancestral property can sell or mortgage his or her undivided share without the consent of other co-owners remains a recurring source of litigation in Indian property law. This paper looks at the legal framework for co-ownership in common law and civil law jurisdictions, especially in the context of Indian law, such as the Hindu Succession Act, Transfer of Property Act, and judicial interpretations of the Hindu Undivided Family (HUF) doctrine. The analysis covers rights and restrictions related to the tenancy structures of joint tenants, tenants in common and coparcenary. The extent of alienation rights of a co-owner; the protection of interests of third-party purchasers; remedies for aggrieved co-owners; and recent legislative changes are addressed. In this paper, it is argued that there is a difference between ordinary co-ownership and coparcenary ownership in the Indian legal system. Generally, a co-owner may transfer his or her undivided share in the property without the consent of other co-owners in pursuance of Section 44 of the Transfer of Property Act, 1882[1], but there are certain restraints regarding the transfer of dwelling house, coparcenary property and transfers made by a Karta involving matters beyond the benefit of the estate and the necessity of the Karta. The paper examines the rights of co-owners, transferees, mortgagees and aggrieved family members through a review of the statutory provisions and case law decisions.

 

 

1. Introduction

Disputes frequently arise when one co-owner attempts to sell or mortgage an undivided interest in jointly owned property without obtaining the consent of the remaining co-owners. The potential for conflict of this type leads to a number of interesting questions about the nature and scope of a co-owner’s proprietary rights, the level of protection other co-owners enjoy, and rights of third-party purchasers/mortgagees. Indian law hinges on the nature of the ownership, whether the property is held in ordinary co-ownership, whether property is held in joint family property, or, coparcenary property which is governed by Hindu law. The legal principles applicable to co-ownership in India are mainly from the Transfer of Property Act 1882, the Hindu Succession Act 1956 and judicially formulated principles of Hindu Law. Where such property is transferred without the consent of all concerned it becomes important to understand the interaction of these sources, particularly where an interest is held jointly.

In general, each co-owner can transfer his or her undivided interest regardless of whether or not the other co-owners consent. But only the transferor’s interest can be transferred to the transferee and statutory restrictions, rights of partition and the special rules applicable to coparcenary and family dwelling houses, are still applicable.

 

2. Co-Ownership – Forms of Co-Ownership: A Definitional Framework

2.1 Tenancy in Common

In a tenancy in common, each co-owner possesses a distinct proprietary interest, which need not be equal to the interests of the other co-owners. No right of survivorship – any share of the co-owner’s goes by will or intestate succession on death. Importantly, in most jurisdictions, a tenant in common can sell, mortgage or gift his or her share without the consent of the other co-tenants. The buyer then assumes the role of the selling co-owner, owns only his/her share of the interest, and is a new co-owner with the original co-owners. It is an essential rule of both English law and American law.

2.2 Hindu Undivided Family and Coparcenary Property

A Hindu Undivided Family (HUF) and a coparcenary are related but distinct concepts under Hindu law. An HUF consists of persons lineally descended from a common ancestor together with their spouses and unmarried daughters. A coparcenary is a narrower body within a Hindu Undivided Family consisting of those members who acquire an interest in coparcenary property by birth.

Before the Hindu Succession (Amendment) Act, 2005 coparcenary was mostly for male descendants. Through this amendment, a major reform was added, which was the introduction of coparcenary system for daughters, they were taken as coparceners by birth, treated at par with sons and were liable for all rights and liabilities of sons. In Vineeta Sharma v. Rakesh Sharma (2020), the Supreme Court explained that the daughters acquire the coparcener status by birth and don’t depend upon the father being alive on the day of commencement of the amendment.[2]

A coparcener, unlike normal co-owners, does not have a particular fraction of land. Each coparcener’s interest continues to fluctuate until partition and may increase or decrease with births and deaths within the family. This attribute has a significant impact on the transferability of coparcener’s interest in joint family property.

There has also been significant clarification provided by the courts in the difference between ancestral property and also that property which has become the property of a Hindu due to his father. In Commissioner of Wealth Tax v. Chander Sen, the Supreme Court rejected the traditional assumption that every property inherited by a son automatically becomes joint family property.[3] The Court ruled that the property acquired under Section 8 of the Hindu Succession Act passes individually to the heir and there is no indication of a joint family in the circumstances. The judgment significantly narrowed the automatic expansion of coparcenary property and remains crucial for determining whether a particular property can be treated as ancestral or HUF property.

 

3. General Principles of Alienation by a Co-Owner

3.1 The right to sell one’s own share

In India the main Act governing the transfer of immovable property, as regards transfer of non-agricultural land, is the Transfer of Property Act, 1882 (TPA).

One of the most significant sections of the TPA is section 44[4]. Section 44 provides that a co-owner may transfer his or her undivided interest in jointly owned property. Transferee takes all the rights that the transferor had on the date of the transfer, including the rights to joint possession and the right of partition.

But a very important exception arises in conjunction with a dwelling house in which no division of the family had taken place. When a co-owner has his/her portion transferred to another person the transferee, a stranger, acquires no automatic rights to be considered a co-owner of the dwelling house.

The provision has two conflicting aims: to protect the proprietary rights and to stop the stranger from intruding on the security and privacy of the family dwelling.

3.1A The Jurisprudential Basis of Section 44 TPA

In Section 44, the principle of the right of alienation of property is reflected, which is the ordinary right of ownership. A co-owner does not have exclusive possession of any particular part of the property, but he or she has a proprietary interest which can be transferred. Thus, the provision safeguards the marketability of property interests and it ensures that one co-owner does not have the ability to effectively block another co-owner from being able to deal with his own interest in the property.

The section does at the same time acknowledge competing interests. The dwelling-house exception is based on a concern of the legislature that members of the family should not be forced to share intimate dwelling places with strangers simply because one member has sold an undivided interest. Thus, Section 44 is an attempt to balance two conflicting values, namely alienability of property and family privacy.

3.2 Judicial Interpretation of Section 44

In Mohd. Baqar v. Naim-un-Nisa Bibi (1956)[5], the Supreme Court recognised that each co-owner possesses an interest in every inch of the jointly owned property until partition. A co-owner can, therefore, transfer his proprietary interest, although the transferee can never have a right for more than the transferor had.

Likewise, in Dorab Cawasji Warden v. Coomi Sorab Warden (1990)[6], the Supreme Court reiterated the safeguard of family dwelling house and cited cases where it might be appropriate to abstain from disturbing possession of family members by stranger-purchaser by mere exercise of a stay. But the importance of Dorab Cawasji Warden is not only in his protection of possessory rights but in his recognition of the social nature of a family dwelling house. In the judgment, the rights under Section 44 are not absolute and can be modified where it will interfere with the family’s security and peaceful use of the residential property. Thus, the decision shows Indian courts’ willingness to give consideration to social factors while balancing economic rights.

In Sultan Begum v. Debi Prasad[7], the Allahabad High Court emphasised that a stranger purchaser of an undivided share in a family dwelling house cannot insist upon joint possession against the wishes of the remaining family members. The decision upholds the protective principle behind the dwelling house exception provided for in Section 44.

3.3 Distinction between the sale of the share and the sale of the whole

A core concern in co-ownership is whether the co-owner can sell his or her share undivided and whether the sale of the share is valid or whether it is a purported sale of the property or another co-owner’s share which is void ab initio. If a co-owner claims to sell more than his share, he is acting outside his rights and no title of more than his share can be transferred. A transferor cannot convey a better title than he himself possesses, reflecting the nemo dat quod non habet principle.

But problems occur where a share is not clearly defined or agreed or where the property is not easily divisible or where one co-owner has been handling the property on behalf of all, and has entered into transactions without the express consent of the co-owners. These complexities have been faced by courts using equitable considerations and particular provisions of law.

3.4 The Position in Other Jurisdictions

While in many common law jurisdictions, co-owners may transfer an undivided interest even without the consent of other co-owners, Indian law is unique in the manner in which the Indian law pertaining to coparcenary interests of Hindu co-owners interacts with the provisions of the Transfer of Property Act, 1882, Section 44. Therefore the transfer may be valid but not have a practical effect, depending on the nature of the property and the transferee.

4. Special Restrictions on Ancestral and Joint Family Property

4.1 Powers and Limitations of the Karta

In the context of HUF, the Karta of a Hindu Undivided Family possesses managerial and representative powers over joint family property. The Karta can alienate coparcenary property under the following circumstances:

(a) legal necessity (avashyakata)

(b) benefit of the estate (kutumbarthe)

(c) indispensable duties (dharmakarya).[8]

Generally, courts have interpreted these three heads to include debts incurred for the benefit of the family and debts to defend litigation that threatens the estate as well as debts for essential maintenance.

Similarly the consent of all adult coparceners may make the alienation more valid, but an alienation by Karta can be made without taking consent of all the coparceners if such alienation is supported with legal necessity, benefit of the estate, or indispensable religious obligations.[9] Impediment to the alienation of a property for an impermissible purpose does not make the alienation null and void but it is only voidable — that is, it can be set aside on the basis of refusal by the non-consenting coparceners. The difference between void and voidable has some implications: a third-party purchaser for value who didn’t know the alienation was for an improper purpose may obtain good title if the alienation, on its face, appeared to be done for a proper purpose, but a purchaser who knows the alienation was for an improper purpose will not be protected.

The doctrine of legal necessity traces its modern formulation to the Privy Council’s decision in Hunooman Persaud Panday v. Mussumat Babooee Munraj Koonweree (1856)[10], which recognised the authority of a family manager to alienate joint family property where necessity or benefit to the estate could be established.

4.2 Alienation by a Non-Karta Coparcener

The powers of a non-Karta coparcener are significantly more limited than those of the Karta. No coparcener has any ownership interest in a specific share of coparcenary property before partition and therefore it is not possible for any coparcener to deal with a specific portion of coparcenary property as if it were exclusively his own.

Courts have recognised that a coparcener may transfer his undivided interest, subject to the rights of other coparceners and the ultimate determination of shares upon partition.

The Supreme Court also noticed in Thamma Venkata Subbamma v. Thamma Rattamma (1987)[11] that the transferee, from a coparcener acquires an equitable right to demand partition and that transferee can pursue his right by the legal process. That transfer does not necessarily mean that a property has only one recipient.

The decision is an attempt to strike a balance between commercial certainty and traditional Hindu law principles. Transfer of the coparcener’s interest is an unnecessary restriction on the economic value of his interest. Meanwhile, the unrestricted transfer could put the coparcenary nature of the ownership at stake. So, the Court took a middle ground, by accepting transferability, but restricting the rights of the transferee in practical terms up to and under the partition.

4.2A Coparcenary Transfers – Special Types of Co-ownership

Ordinary co-ownership and coparcenary ownership need to be distinguished; the distinction between ordinary co-ownership and coparcenary ownership is often forgotten. Even though a property isn’t divided, the ordinary co-owner has a defined proprietary share. In contrast, a coparcener has a fluctuating share which increases and decreases in the family depending on birth and death until the time of partition.

This distinction is the reason for some conceptual problems arising in alienation of a coparcenary interest. The transferor will not have a fixed share at the time of the transfer, the transferee will receive only the interest of the transferor that might ultimately come to the transferor on partition. Hence, any transaction in coparcenary land is fraught with greater uncertainty as compared to any ordinary co-owned land.

4.2B Should a Coparcener Be Allowed to Transfer an Undivided Interest at All?

Modern recognition of transfers by individual coparceners has led to doctrinal controversy. Allowing such transfers is seen by critics as going against the very idea of coparcenary ownership and bringing strangers into the equation of family property. On the other hand, if the coparcener’s proprietary interest is completely barred of sale, it would have a significant effect on the market value of the interest. This latter option has been the preferred one in Indian courts, in which transferability was accepted but the rights of the transferee were limited to a possessory right.

4.3 Impact of the Hindu Succession (Amendment) Act, 2005.

The 2005 amendment generated significant judicial disagreement, particularly in Prakash v. Phulavati and Danamma v. Amar.[12] The Supreme Court, in the Vineeta Sharma case, has settled the aforesaid disputes by ruling that the daughter has been coparcener by birth and that the father’s survival on the day the amendment came into effect is not important.

 

5. Mortgaging Co-Owned Property: Rights and Restrictions

5.1 General Right to Mortgage One’s Share

A mortgage under Transfer of Property is a transfer of an interest in particular immovable property in order to secure payment of money.[13] Just as a co-owner may sell an undivided share, a co-owner may also mortgage that share. The mortgagee has only the interest of the mortgagor, and if the mortgagor defaults, the mortgagee will only have the right to the mortgagor’s interest. The mortgagee may need to commence the partition proceedings before the mortgagee can exercise its security, that is, take possession of a particular part of the property.

5.2 Mortgage of Ancestral Property

In the case of ancestral and coparcenary property, the rules governing the sale of property are also in operation for mortgages and are even more complicated. Non-performing asset claims have faced this principle time and time again, where the bank and financial institution learn that the borrower had no right to the property or that the borrower’s rights were inferior to those of other members of the family.

The Karta has the right to mortgage the ancestral property for the purposes of legal necessity. The necessity must be actual, such mortgages are binding on all the coparceners, even minors and those not called upon. One of the most litigated situations is when a Karta borrows against family property for a business venture which goes bad. Courts will review if the business was designed to benefit the family estate, if due diligence was performed and if the loan amount matched the family’s true needs.

In State Bank of India v. Ghamandi Ram[14], the Supreme Court highlighted the unique legal nature of Hindu joint family property and noted that the nature of the property would need to be ascertained before enforcing the proprietary rights. The ruling underscores the need to determine if the property is being held as a sole property, joint property, or a property held in an HUF, especially in the context of creditors and financial institutions attempting to enforce their security interests on the assets of an HUF.

5.3 The role of a third-party lender and the due diligence process

Lenders that lend against collectively owned real estate have a heavy due diligence responsibility. They are required to trace the entire chain of title, determine the type of co-ownership and whether the individual signing the mortgage has such authority. If due diligence is not performed, a lender may be left with a mortgage that is voidable by aggrieved co-owners and that will greatly impact the security. The doctrine of ‘constructive notice’ under the TPA holds that a purchaser or mortgagee is to be presumed to have knowledge of any facts which would have been discovered by a reasonable search.[15]

 

6. Key Judicial Developments

6.1 Hardeo Rai v. Sakuntala Devi (2008)[16]

This case highlighted the difference between power of alienation of the Karta and the other coparceners. Alienation of ancestral property by Karta except in case of legal necessity and benefit of estate is voidable and not void, stated the Supreme Court. The Court also noted that the right to challenge such a transaction would continue to remain available to the minor coparcener for two years following his attaining majority as that was the concern of the legislature.

It is important that the Court says that unauthorised alienations are voidable, not void. The effect of holding such transactions to be void would be to make commercial transactions with family property extremely uncertain, since purchasers would never be able to rely on a certainty of title. The Court gives them a voidable effect to ensure market stability as well as safeguard the interests of the non-consenting coparceners.

6.2 Vineeta Sharma v. Rakesh Sharma (2020)[17]

Vineeta Sharma v. Rakesh Sharma is one of the most significant recent decisions concerning coparcenary rights. The Court explained that daughters acquire coparcenary rights by birth, irrespective of whether the father is alive on the date of commencement of the 2005 amendment.

The judgment was necessary to settle the various conflicting interpretations which arose after Prakash v. Phulavati (2016) and Danamma v. Amar (2018). The Court gave the following guidelines: 1. The coparcenary of the daughter is by her birth and does not require the father to be alive as of the date of coming into force of the amendment in 2005. The ruling has significant impact on conveyancing and title verification proceedings with respect to coparcenary properties as daughters would now have to be considered coparceners being their proprietary interest same as sons.

7. Practical Illustration: Sale to a Real-Estate Developer

Consider a situation, where there are 3 siblings that inherit an undivided ancestral property. One sibling is selling his alleged “one-third interest” in the property to a real-estate developer, without the other siblings’ knowledge. The developer is not entitled to take immediate occupation of any particular part of the land. Rather, the developer only comes in as an owner of an undivided interest in the transferor and must make an application for partition. The developer might not be able to enter into joint possession as per Section 44, if the property is an undivided family dwelling house. The controversy thus ramps up from ownership to partition and share allocation, thus exemplifying the realities of unilateral alienation.

8. If the co-owner(s) are disappointed, what are their options?

8.1 Suit for Partition

A suit for partition is the most basic remedy which any co-owner of a property can get when he objects to any action by the other co-owners in respect of its management and proposed alienation. The Partition Act, 1893[18] provides the remedy of a party to the ownership asking for a partition of the land so each party may be given his or her portion. After partition each former co-owner will have his share in severalty and therefore may deal with it independently without considering others. Generally, courts prefer a partition by metes and bounds (actual partition) when the land is divisible, and a partition by sale (sale and distribution of proceeds) when it is not.

8.2 Injunction Against Proposed Sale

If a co-owner suspects that another co-owner is about to undertake an unauthorised alienation, then the co-owner can apply for an interim or final injunction from the civil court. The three-part test is used by the court: prima facie case, balance of convenience, and irreparable injury. Often the courts will grant interim relief until the proprietary claims are adjudicated, as the unauthorised transfer could raise the possibility of competing proprietary claims.

8.3 Declaration of Void or Voidable Transaction

An aggrieved co-owner may file a suit for a declaration that an alienation by another co-owner was void or voidable. The limitation period does not apply if the transaction is for the sale of another person’s share (void transactions). The Limitation Act contains timelines for challenging voidable transactions like alienation for an improper purpose, otherwise such a transaction can be considered ratified.

The relevant limitation period will depend on the type of challenge and whether the challenge is that the transaction is void or at least voidable as to the challenger under substantive law.

The claim against third party purchasers, which was previously included in the list, has been removed.

Protection can only be sought by a purchaser where the facts of each case, the type of title investigation made and the notice attributed under the Transfer of Property Act would permit this.

9. Suggested Reform

A common problem which makes for litigation is the problem for purchasers and financial institutions to identify all the coparceners. Daughters get coparcenary rights automatically by birth after Vineeta Sharma irrespective of whether the father was alive on the time of the amendment or not. It therefore makes title verification significantly more difficult.

A mandatory requirement of disclosing all coparceners at the time of registration of any transfer in case of joint family properties would certainly diminish litigation. Such disclosure would help to enhance the certainty of transactions, without compromising the substance of family members’ rights.

While in practice there are benefits to allowing transfers of undivided interests, there is uncertainty in the current system for both buyers and family members. The purchaser can obtain a good and valid interest in the property without being able to take possession for years while the partition lawsuit is pending. On the other hand, family members can find themselves embroiled in conflicts that last for years that stem from transactions they were never part of. All of this, therefore, continues to present a challenge for the law to reconcile marketability of land and property with the preservation of family ownership structures.

10. Contemporary Relevance

Real-estate developers often buy undivided estates from individual family members in the expectation that the estate will be divided later. Such transactions frequently lead to litigation either in the form of contesting the existence of coparcenary rights or the validity of the transfer. Increasingly, such disagreements have arisen when the banks accept ancestral property as collateral, but do not make proper enquiry about the existence of all coparceners.

Many litigations which have arisen in the recent years in the context of redevelopment projects in metros like Mumbai, Bangalore and Delhi are litigations where one coparcener enters into a redevelopment agreement or transfers an undivided interest without the consent of all the interested parties. Conflicts like these reflect the ongoing struggle between commercialization of property and maintenance of family property forms.

11. Conclusion

It is not whether a co-owner can transfer property without consent, but what is transferred when it is done. Section 44 of the Transfer of Property Act gives the ordinary co-owner the right to alienate his undivided interest. But the usefulness of such a transfer is marred by partition issues, the dwelling house exception and the peculiarities of coparcenary.

The cases in the courts show a persistent effort to reconcile private rights of property with the interests of the family. The modern courts have been more and more ready to give effect to the transferability of undivided interests, while at the same time introducing safeguards to prevent loss of family possession and prejudice to non-consenting co-owners. The latest development in the field of coparcenary rights, following the Vineeta Sharma case, underscores the need for meticulous title checks and adherence to legal requirements in the modern real estate landscape.

12. References

I. Statutes

• Transfer of Property Act, No. 4 of 1882, §§ 44, 54, 58 (India).
• Hindu Succession Act, No. 30 of 1956 (India), amended by Hindu Succession (Amendment) Act, No. 39 of 2005 (India).
• Partition Act, No. 4 of 1893 (India).
• Code of Civil Procedure, No. 5 of 1908, Order XXXIV (India).

II. Cases

• Comm’r of Wealth Tax v. Chander Sen, (1986) 3 S.C.C. 567 (India).
• Danamma @ Suman Surpur v. Amar, (2018) 3 S.C.C. 343 (India).
• Dorab Cawasji Warden v. Coomi Sorab Warden, (1990) 2 S.C.C. 117 (India).
• Hardeo Rai v. Sakuntala Devi, (2008) 7 S.C.C. 46 (India).
• Hunooman Persaud Panday v. Mussumat Babooee Munraj Koonweree, (1856) 6 M.I.A. 393 (P.C.) (appeal taken from India).
• Baqar v. Naim-un-Nisa Bibi, A.I.R. 1956 S.C. 548 (India).
• Noorul Hoda v. Bibi Raifunnisa, (1996) 7 S.C.C. 767 (India).
• Prakash v. Phulavati, (2016) 2 S.C.C. 36 (India).
• State Bank of India v. Ghamandi Ram, A.I.R. 1969 S.C. 1330 (India).
• Sultan Begum v. Debi Prasad, A.I.R. 1990 All. 42 (India).
• Thamma Venkata Subbamma v. Thamma Rattamma, (1987) 3 S.C.C. 294 (India).
• Vineeta Sharma v. Rakesh Sharma, (2020) 9 S.C.C. 1 (India).

III. Books

• F. Mulla, The Transfer of Property Act (12th ed. 2017).
• A. Desai, Mulla Hindu Law (22d ed. 2019).
• Kevin Gray & Susan Francis Gray, Elements of Land Law (5th ed. 2009).

IV. Reports and Legislative Materials

• Law Comm’n of India, 174th Report, Property Rights of Women: Proposed Reforms Under the Hindu Law (2000).
• Law Comm’n of India, 202d Report, Proposal to Amend the Hindu Succession Act, 1956 (2007).

[1] Transfer of Property Act, No. 4 of 1882, § 44 (India).

[2] Vineeta Sharma v. Rakesh Sharma, (2020) 9 S.C.C. 1.

[3] Comm’r of Wealth Tax v. Chander Sen, (1986) 3 S.C.C. 567.

[4] Transfer of Property Act, No. 4 of 1882, § 44 (India)

[5] Mohd. Baqar v. Naim-un-Nisa Bibi, A.I.R. 1956 S.C. 548 (India).

[6] Dorab Cawasji Warden v. Coomi Sorab Warden, (1990) 2 S.C.C. 117.

[7] Sultan Begum v. Debi Prasad, A.I.R. 1990 All. 42.

[8] Hardeo Rai v. Sakuntala Devi, (2008) 7 S.C.C. 46 (India)

[9] Hardeo Rai v. Sakuntala Devi, (2008) 7 S.C.C. 46 (India)

[10] Hunooman Persaud Panday v. Mussumat Babooee Munraj Koonweree, (1856) 6 M.I.A. 393 (P.C.).

[11] Thamma Venkata Subbamma v. Thamma Rattamma, (1987) 3 S.C.C. 294.

[12] Prakash v. Phulavati, (2016) 2 S.C.C. 36; Danamma @ Suman Surpur v. Amar, (2018) 3 S.C.C. 343.

[13] Transfer of Property Act, No. 4 of 1882, § 58 (India).

[14] State Bank of India v. Ghamandi Ram, A.I.R. 1969 S.C. 1330.

[15] Transfer of Property Act, No. 4 of 1882, Explanation II to § 3 (India)

[16] Hardeo Rai v. Sakuntala Devi, (2008) 7 S.C.C. 46.

[17] Vineeta Sharma v. Rakesh Sharma, (2020) 9 S.C.C. 1, ¶¶ 78–86 (India)

[18] Partition Act, No. 4 of 1893 (India).