REG 085 Section 48 and Section 50

Section 48 and Section 50: Priority of a Registered Document Against an Oral Agreement and Against an Unregistered Document

Sections 48 and 50 are the Act's two priority provisions, and they are directed at two different opponents. Section 48 sets a registered document against an oral agreement or declaration relating to the same property, and gives the registered document priority unless the oral agreement was accompanied or followed by delivery of possession and itself amounts to a valid transfer. Section 50 sets certain registered documents against an unregistered document relating to the same property, and gives the registered document priority subject to what the section itself excepts. Neither decides priority between two registered documents, and neither is the source of the doctrine of notice.

The two priority rules, their opponents, and the exceptions each carries

1. Section 48

• The section is not confined to immovable property. It speaks of property "whether movable or immovable", which sets it apart from Section 50.
• It excludes testamentary documents. A will is dealt with by the law of succession, and registration neither adds to nor detracts from it.
• The exception has two limbs, and both must be satisfied. The oral agreement must have been accompanied or followed by delivery of possession, and it must itself amount to a valid transfer under some law in force.
• That second limb is what confines the exception. Delivery of possession alone is not enough; the law must recognise the oral transaction as a transfer. So the exception fits a sale of tangible immovable property below one hundred rupees under Section 54 of the Transfer of Property Act, 1882, a lease from year to year or reserving a yearly rent made by delivery of possession under the second paragraph of Section 107, and a gift of movables under Section 123.
• The proviso is a separate and important rule. A mortgage by deposit of title deeds under Section 58(f) of the Transfer of Property Act prevails over a mortgage deed subsequently executed and registered over the same property. An equitable mortgage is therefore not defeated merely because the later mortgagee took a registered deed.
• That proviso was inserted in 1929, by Section 10 of Act 21 of 1929, and it is the statutory recognition of the equitable mortgage in the scheme of priority.

2. Section 50

• The section is confined to the classes it enumerates. It applies to documents of the kinds in Section 17(1)(a) to (d) and Section 18(a) and (b), which are the instruments dealing with interests in immovable property and the leases.
• The registered document prevails whether or not the two are of the same nature. A registered lease may prevail over an unregistered sale deed, and the other way about.
• A decree or order is excluded from the class of unregistered documents that can be defeated, because a decree takes its force from the court and not from registration.
• Sub section (2) carries three exceptions. Leases exempted by the proviso to Section 17(1), that is leases not exceeding one year and not reserving a yearly rent; the optionally registrable documents listed in Section 17(2); and documents that had no priority under the law in force when the Act commenced.
• The second exception is the one that matters in practice. A document within Section 17(2) is not required to be registered at all, and it would be incongruous to penalise a party for not registering what the Act does not require him to register.

3. The Two Compared

4. What Neither Section Does

1. Neither decides priority between two registered documents. That is worked out from the dates of execution under Section 47, read with the substantive law of transfer.

2. Neither validates a document that is otherwise bad. Priority presupposes a valid instrument; registration does not cure want of title, want of capacity, or fraud.

3. Neither is the source of the doctrine of notice. That is Explanation I to Section 3 of the Transfer of Property Act, 1882, which fixes a person with constructive notice of a registered instrument in the circumstances it prescribes.

4. Neither displaces Section 48 of the Transfer of Property Act, 1882, the general rule that where a person purports to create rights in the same property at different times, the later right is subject to the earlier.

5. Neither operates on a document outside its own class. Section 48 needs a non testamentary registered document; Section 50 needs one of the enumerated kinds.

6. Neither answers the question of possession. Whether possession passed, and when, is a question of fact.

5. Notice: Where the Real Work Is Done

6. The Mortgage by Deposit of Title Deeds

• Section 58(f) of the Transfer of Property Act, 1882 defines it. Where a person in a town notified by the State Government delivers to a creditor documents of title to immovable property with intent to create a security thereon, the transaction is a mortgage by deposit of title deeds.
• No registration is required, because there is no instrument creating the mortgage; the deposit is the transaction.
• The proviso to Section 48 protects it, and gives it priority over a mortgage deed subsequently executed and registered relating to the same property.
• But if the parties reduce the bargain to writing, and the writing is itself the contract of mortgage rather than a mere memorandum of a completed deposit, the writing requires registration, and the protection is lost if it is not registered.
• That distinction is the whole of the litigation in this field: whether the document produced is the bargain itself or a record of a bargain already made by delivery.

7. The Common Errors

• Supposing that Section 48 is confined to immovable property. It is not; it speaks of property whether movable or immovable.
• Supposing that delivery of possession alone saves an oral agreement under Section 48. It does not. The agreement must also constitute a valid transfer under some law in force.
• Supposing that Section 48 has no proviso. It has, and the proviso protects the equitable mortgage against a later registered mortgage deed.
• Supposing that Section 50 applies to every registered document. It applies only to the classes it enumerates.
• Supposing that Section 50 defeats an unregistered document within Section 17(2). It does not; sub section (2) excepts those documents.
• Supposing that Section 50 gives a registered document priority over an earlier registered one. It does not; that question turns on Section 47 and the dates of execution.
• Supposing that these sections supply the doctrine of notice. They do not; Explanation I to Section 3 of the Transfer of Property Act, 1882 does.

8. The Position Stated Shortly

1. Section 48 gives a duly registered non testamentary document priority over an oral agreement or declaration relating to the same property, movable or immovable.

2. The exception is an oral agreement accompanied or followed by delivery of possession which itself constitutes a valid transfer under some law in force.

3. That exception fits the cases in which the substantive law allows a transfer without writing, such as Section 54, the second paragraph of Section 107, and Section 123 of the Transfer of Property Act, 1882.

4. The proviso to Section 48 gives a mortgage by deposit of title deeds priority over a mortgage deed subsequently executed and registered over the same property.

5. Section 50 gives documents of the kinds in Section 17(1)(a) to (d) and Section 18(a) and (b), if duly registered, priority over every unregistered document relating to the same property, not being a decree or order.

6. It operates whether or not the two documents are of the same nature.

7. Section 50(2) excepts leases exempted by the proviso to Section 17(1), documents within Section 17(2), and documents without priority under the law in force at the commencement of the Act.

8. Neither section decides priority between two registered documents, which turns on the dates of execution under Section 47.

9. Neither section validates an instrument that is otherwise bad.

10. The doctrine of notice comes from Explanation I to Section 3 of the Transfer of Property Act, 1882, and not from Sections 48 and 50.