Doctrine of Priority Under Transfer of Property Act

This doctrine of priority is based on the Principles of Natural Justice, which indicate that if rights are awarded to two different people at different times, the one who has the advantage in time will also have the advantage in law. This principle, however, applies only where the conflicting equities of the parties involved are otherwise equal. Section 48's priority doctrine is based on the legal maxim, qui prior est tempore potior est jure, which basically means that one who is first in time is better in law.

Meaning of Doctrine of Priority

The concept of priority is regulated by Section 48 of the Transfer of Property Act of 1882 (TPA). In a case where the court has conflicting interests, this doctrine helps the court determine which party's rights must take priority over the other. The need for this notion arises when the property transferor subsequently deals with the same property with two different people. As a result, the courts' problem is largely resolved.

Basis of the Doctrine

It is a natural justice principle that if rights are created in favour of two people at different times, the one with the advantage in time should also have the advantage in law. This rule, however, only applies where the conflicting equities are otherwise equal.

Section 48 of the Transfer of Property Act of 1882 is based on the essential principle that no one can impart a title greater than what he has. If a person has already given property, he cannot renege on his gift and deal with the property free of the rights created by the earlier transaction. Section 48 is an absolute in its terms, with no protection or reservation for a subsequent transferee who is knowledgeable of the prior transfer.

Essential of the Doctrine of Priority

Following are the major essentials of doctrine of priority −

• The property should have one owner or transferor and more than one transferee.

• It is only applicable to real property that is immovable.

• The transfer should be made at various times, and at each of these instances,

• This right cannot be fully exercised at the same time.

Exception to the Doctrine of Priority

Major exception are −

Prior mortgagee postponement

If the prior mortgagee commits fraud, gross negligence, or deception and encourages anyone to submit security money for the same property, the prior mortgagee is postponed to the subsequent mortgagees. As a result, the succeeding mortgagee takes priority over the preceding mortgagee in the property's rights.

Non-compliance with the legal procedure in the preceding transfer

If the preceding transfer was done without following the legal procedure, the subsequent transfer would be granted all of the rights that the previous transfer had.

Estoppel

In this case, if the primary transferee was aware of the subsequent transfer, the subsequent transferee will be given priority. Under this exemption, the primary transferee is not required to know the specific items in the exchange.

By registration

An instrument's activity begins on the day of its execution. When subsequent deeds are done on the same date and the order of execution is unclear, all deeds are done simultaneously. Furthermore, if two deeds have different dates and are carried out on different days, priority will be determined by the dates on the deeds instead of their specific registered dates.

By notice

The presence of notice implies familiarity with the facts. As a result, when a real contract, whether oral or written, is established for the sale of property, and a third party sells the property after receiving notice of the previous exchange, the title of the person claiming under the previous exchange takes priority over the subsequent purchaser. The time exchange, on the other hand, should be bona fide.

By court

When a court orders or decrees that the subsequent transfer or second transfer be made, that transfer takes precedence over the earlier transfer, and the rights of the later transfer are given priority. As a result, the priority rule will not apply in some situations.

Case Law

In Duraiswami Reddi v. Angappa Reddi (1945) 1 MLJ 425, it was held that even if a prior transferor's documents were later registered, he would still be given priority over a subsequent transferee. This is true even if the next transferee has no knowledge of the earlier transaction.

Section 429A of the Companies Act, 1956, did not specifically allow for rights of priority over mortgaged assets in SFL Industries Ltd v. Reliance Capital Ltd, AIR 2015 P&H 116. Section 48 of the TPA becomes relevant in such circumstances. As a result, the first charge holder's claim would prevail over the second charge holder's claim.

Conclusion

Section 48 of the Act establishes the priority when there are a few transferees. It protects the rights of the first transferee in the absence of a special contract or reservation. It expresses the vital concept that no one can more effectively bear one's rights and titles than oneself.

As a result, the transferor's subsequent transactions with the property cannot infringe on the transferee's rights. It cannot disregard the rights established by the previous transfer. Moreover, the priority theory now applies to the Registration Act and the Insolvency and Bankruptcy Code.

Frequently Asked Questions (FAQs)

Q1. What is the doctrine of priority in the transfer of property?

Ans. There are disputes between parties over conflicting rights to the same immovable property. Section 48 of the Transfer of Property Act of 1882 deals with the determination of conflicting parties' rights to the same immovable property.

Q2. What is priority of rights created by transfer?

Ans. It states that if a person purports to create rights in or over the same immovable property by trying to transfer them at different times, and such rights cannot all exist or be exercised to their fullest extent together, each later-created right shall, in the absence of a special contract or reservation binding the earlier-created rights, take priority over the earlier-created rights.