Saji Koduvath, Advocate, Kottayam

Abstract

Introduction

In Rusoday Securities Ltd. v. National Stock Exchange of India Ltd., 2021-3 SCC 401, it is pointed out that if literally translated, Nemo dat quod non habet means

• “No one gives what they do not have.”

It is a fundamental principle of the law of Transfer of Property

In Umadevi Nambiar v. Thamarasseri Roman Catholic Diocese, AIR 2022 SC 1640; 2022-7 SCC 90, it is held as under:

• “19. It is a fundamental principle of the law of transfer of property that “no one can confer a better title than what he himself has” (Nemo dat quod non habet). The appellant’s sister did not have the power to sell the property to the vendors of the respondent. Therefore, the vendors of the respondent could not have derived any valid title to the property. If the vendors of the respondent themselves did not have any title, they had nothing to convey to the respondent, except perhaps the litigation.”

This principle is followed in the following cases also

• Union of India v. Vijay Krishna Uniyal, 2018-11 SCC 382,
• Standard Chartered Bank v. Andhra Bank Financial Services LTD. 2006 AIR SC 3626; 2006-6 SCC 94

P. Kishore Kumar v. Vittal K Patkar (2023 SCC Online SC 1483; 2024-1 CTC 547; 2023-4 CurCC(SC) 278) is a latest decision (Dipankar Datta, Bela M. Trivedi, JJ.) in this matter which held as under:

• “18. It is settled law that a vendor cannot transfer a title to the vendee better than he himself possesses, the principle arising from the maxim nemo dat quod non habet, i.e., “no one can confer a better title than what he himself has”.

S.27 of the Sale of Goods Act Incorporates this Rule

S.27 Sale of Goods Act reads as under:

• “Sale by person not the owner.- Subject to the provisions of this Act and of any other law for the time being in force, where goods are sold by a person who is not the owner thereof and who does not sell them under the authority or with the consent of the owner the buyer, acquires no better title to the goods than the seller had, unless the owner of the goods is by his conduct precluded from denying the seller’s authority to sell;
• Provided that where a mercantile agent is, with the consent of the owner, in possession of the goods or of a document of title to the goods, any sale made by him, when acting in the ordinary course of business of a mercantile agent, shall be as valid as if he were expressly authorised by the owner of the goods to make the same.
• Provided that the buyer acts in the good faith and has not at the time of the contract of sale notice that the seller has no authority to sell.”

The Kerala High Court observed in Vishnu & Co.  v. Abdulkhadar Haji, 1990-1 KLJ 358; 1990-1 KLT 519, as under:

• S. 27 of the Sale of Goods Act incorporates partially the general rule of English law that no one can transfer a better title to goods than he himself possesses. This rule is often expressed in terms of the Latin maxim “Nemo dat quod non babet”.
• The principle underlying the Section is that prima facie the right of the legal owner should be protected unless he has done something to induce innocent purchasers or pledgees to believe that the immediate possessor of the goods is the true owner.
• Two exceptions to the strict general rule are provided in the above Section itself. Some others are contained in S.28 to 30 and 54 of the Act itself. S.27 itself makes the rule subject to other exceptions provided by other laws. By providing exceptions to the general rule which protects the true owner absolutely, the law had tried to make provision to protect cases where goods are sold by persons who are not really entitled to sell them. This is an attempt to strike a balance between competing claims put forward by the true owners on the one hand and the bona fide purchaser on the other hand. This is required in the interest of trade and commerce. Thus, under the Indian Law, a purchaser from a seller who has no title or authority to sell the goods can get a valid title to goods only in case he establishes that he comes under one or the other exceptions provided by law as indicated above. The exception relevant for the purpose of this case is the first exception provided in S.27 itself. To bring the case within the first exception to S.27 a person has to establish that he is a bona fide purchaser for value without notice of any defect in title and for that he has to prove that he had purchased the goods after proper enquiry into the right of the person in possession to make the sale. So, an honest purchase made carelessly without making proper enquiries cannot be said to have been made in good faith to convey good title capable of defeating the title of the true owner. Again a bona fide purchaser for value without notice should further show that the true owner is in the circumstances of the case “precluded from denying the seller’s authority to sell”.
• This exception is based on the principle of estoppel. Such an estoppel may arise either (I) by reason of a representation made by the true owner that the seller is the owner of the goods or (II) by negligence on the part of the true owner which enables the seller to create an appearance of ownership. Where negligence is relied upon as raising estoppel, it is necessary to show that the true owner owed the buyer a duty to be careful, that in breach of that duty the true owner was negligent and that this negligence was the proximate or real cause of the buyer being induced to part with the purchase price of the goods to the seller. Mere carelessness on the part of the owner to guard his goods does not however create an estoppel. Mere delivery by the true owner to another person of the possession of the goods or documents of title to goods does not estop him from asserting his title as against one who has purchased the goods from that person. A reference to a few passages from Benjamin’s Sale of Goods, Second Edn. at pages 465 and 470 would show that these principles are well settled principles governing acquisition of title by estoppel:
  • “Where the true owner of goods, by words or conduct, represents or permits it to be represented that another person is the owner of the goods, any sale of the goods by that person is as valid against the true owner as if the seller were actually the owner thereof, with respect to any one buying the goods in reliance on the representation. Although the representation may be by words or conduct, it must be clear and unequivocal. It is therefore well established that the mere parting with possession of goods is not conduct which estops the true owner from setting up his title. Parting with possession alone is not a representation of ownership, even if the person receiving the goods has the authority of the true owner to deliver them to third parties. If the rule were otherwise, any bailor would be estopped from denying his bailee’s right to sell the goods, and there would be no necessity at all for the Factors Acts. There must be something more. The true owner must have so acted as to mislead the buyer into the belief that the seller was entitled to sell the goods”
  • “The circumstances in which negligence on the part of the true owner can raise such an estoppel are narrowly circumscribed. It is necessary for the buyer to show, first that the true owner owed him a duty to be careful; secondly, that in breach of that duty the true owner was negligent; and, thirdly that this negligence was the proximate or real cause of the buyer being induced to part with the purchase price of the goods to the seller.”
• That these are the principles applicable in cases where title is claimed by a bona fide purchaser for value without notice relying upon the principle of title by estoppel, can be seen from important decisions rendered by both English and Indian Courts. Thus in the decision reported in Central Newbury etc. Ltd. v. Unity Finance, (1956) 3 A11.E.R. 905 while dealing with a claim based on title by estoppel two of the three learned Judges Lord Justice Hodson and Morris Q. observed thus:
  • “Hodson, L.J: by delivering the car registration book, as well as the car itself, to C the plaintiffs had not given him the means of appearing to be the owner or of having apparent authority to sell the car, since the registration book was not a document of title to the car, and since delivery of the car without more would not have amounted to giving C. apparent authority to sell it; and therefore the plaintiffs, who were the true owners of the car, were not estopped from denying the title of the third parties to sell the car to the first defendants, and were entitled to recover damages for its conversion.
  • Per Morris, L.J.: it cannot be assumed that the person in possession of a car and its registration book is the owner of the car. The absence of a registration book when a car is being sold will naturally give rise to much inquiry. The existence of one in the hands of a seller does not remove all occasion for inquiry and does not prove legal ownership.”
• Denning L.J. who dissented from the majority view upheld the claim of the bona fide purchase in a very forceful judgment in the following manner:
  • “It is said, however, that the original owner owed no duty to the innocent purchaser. I do not agree. When the original owner handed over the car and log-book to a complete stranger, intending to part with the property in them, he ought to have foreseen the possibility that the stranger might try to dispose of them for his own benefit to someone or other. That is what does happen when you hand over goods to a stranger reserving no right to yourself. The original owner owed a duty to any person to whom the stranger might try to dispose of them. The case comes within the words of Lord Wright in Mercantile Bank of India Ltd. v. Central Bank of India Ltd. (4) (1938) 1 All E.R. at p.62): ‘The duty may be, in the words of Blackburn, J., ‘to the general public of whom the person is one’ His identity may be ascertainable only by the event, in the sense that he had turned out to be the member of the general public actually reached and affected by the conduct, negligence, representation or ostensible authority”.
• In the decision reported in Moorgate Mercantile Co. Ltd. v. Twitchings (1977) A.C.890 it was again held by the House of Lords that in the case of motor vehicles, delivery to another of possession of the vehicle with the vehicle registration book (or registration certificates) does not constitute a representation that the bailee has authority to sell the vehicle. It is interesting to note that the said decision was also a majority decision and two of the law Lords dissented from the majority and upheld the claim of the bona fide purchaser.”

Transfer of a Motor Vehicle

The Kerala High Court continued in Vishnu & Co.  v. Abdulkhadar Haji, 1990-1 KLJ 358; 1990-1 KLT 519, as under:

•        “26. Further it is necessary to refer to some of the relevant provisions of the Motor Vehicles Act, 1939 (Act IV of 1939) and to understand the exact scope and effect of the registration of the vehicles under the said Act and the nature and implications of the certificate of registration issued under the Act. S.24(2) provides that the registering authority shall issue the owner of a motor vehicle registered by it in accordance with S.21 and 22 of the Motor Vehicles Act; a certificate of registration in the prescribed form. It has been further provided in S.31 of the said Act that whenever a transfer of ownership takes place the transferor as well as the transferee are bound to inform the registering authority of such transfer of ownership and on complying with the requirements of that Section the registering authority shall register the transfer reported to it. Provision is also made as to what should be done when the transfer is omitted to be reported by the transferor and transferee. Relevant portions of S.31 are in the following terms:
•        “Transfer of ownership. (1) Where the ownership of any motor vehicle registered under this Chapter is transferred,
•        (a) the transfer-or shall
•        (i) within fourteen days of the transfer, report the fact of transfer to the registering authority within whose jurisdiction the transfer is to be effected and shall simultaneously send a copy of the said report to the transferee;
•        (ii) within forty-five days of the transfer, forward to the registering authority referred to in sub-clause (i) –
•        (A) a no objection certificate obtained under S.29-A;
•        (B) in a case where no such certificate has been obtained,-
•        (I) a receipt obtained under sub-section (2) of S.29-A; or
•        (II) a postal acknowledgment received by the transferor if he has sent an application in this behalf by registered post acknowledgment due to the registering authority referred to in S.29-A, together with a declaration that he has not received any communication from such authority refusing to grant such certificate or requiring him to comply with any direction subject to which such certificate may be granted;
•        (b) the transferee shall, within thirty days of the transfer, report the transfer to the registering authority within whose jurisdiction he resides, and shall forward the certificate of registration to that registering authority together with the prescribed fee and a copy of the report received by him from the transferor in order that particulars of the transfer of ownership may be entered in the certificate of registration.
•        (1-A)
•        (1-B)
•        (1-C)
•        (2) A registering authority other than the original registering authority making any such entry shall communicate the transfer of ownership to the original registering authority.”
•        27. From the above provisions it is evident that registering of the transfer of ownership is an act to be done by the statutory registering authority on the basis of the actual transfer of ownership already effected. It is only a record of the fact of change of ownership or title to a motor vehicle and cannot be equated to an act necessary for transfer of ownership or title. Under S.31 the statutory authority is bound to record what has been intimated to it and the authority has no option to refuse registration if the requirements of the Section are complied with. That this is the legal position can be seen from the decision reported in Santakumari v. R.T.O., Kozhikode, 1975 K.L.T. 580 wherein it has been observed as follows:
  •        “From this it is clear that once the transferee reports the fact of transfer within 30 days to the registering authority and certificate of registration is also submitted in order that particulars of the transfer of ownership may be entered in the certificate of registration together with the prescribed fee and a copy of the report received by him from the transferor, and the transferor also makes a report of the transfer to the registering authority, the registering authority has no option but to make the necessary entries in the registration certificate.”
•        The following observation in the decision reported in P.K. Panda v. Premalata Choudhury, AIR 1980 Orissa 102 is also worth noting in this connection:
  •        “There is no provision of law that the registration of a motor vehicle with the registering authority is a sine qua non for transfer of ownership or that transfer without registration would be void or ineffective. The provisions of S.22, 24 and 31 contemplate a completed transfer of ownership of a motor vehicle. The provisions of the Act regarding registration of vehicles have nothing to do with ownership. They only provide for regulation of the use of the motor vehicles in public places. The certificate of registration issued under S.24(2) of the Act is not a document of title, but it is a piece of evidence to show the owner of the vehicle

Exception to this Rule – Negotiable Instruments

In State Bank of India v. Rajendra Kumar Singh, AIR 1969 SC 401, it is observed as under:

• “The property in coins and currency notes passes by mere delivery and it is the clearest exception to the rule Nemo dat quod non habat. This exception was engrafted in the interest of commercial necessity. But the exception only applies if the transferee of the coin. or currency notes takes in good faith for value and without notice of a defect in the title of the transferor. The rule is stated by Wills J. in Whistler v. Forster as follows :
  • `The general rule of law is undoubted, that no one can transfer a better title than he himself possesses: Nemo dat quod non habat. To this there ,are some exceptions; one of which arises out of the rule of the law merchant as to negotiable instruments. These, being part of the currency, are subject to. the same rule as money: and if such an instrument be transferred in good faith, for value, before it is overdue, it becomes available in the hands of the holder, notwithstanding fraud which would render it unavailable in the hands of a previous holder.`

Exception to this Rule – Transfer in Good Faith for Value

It is applied if the following conditions are also satisfied –

• No misrepresentation or fraud, which would render the transactions as void,
• the property is purchased after taking reasonable care to ascertain that the transferee has the requisite power to transfer the said land, and
• the parties have acted in good faith.

In V.  Chandrasekaran VS Administrative Officer, 2012 12 SCC 133, it is laid down as under:

• “23. The general rule of law is undoubted, that no one can transfer a better title than he himself possesses; Nemo dat quod non habet.
• However, this Rule has certain exceptions and one of them is, that the transfer must be in good faith for value, and there must be no misrepresentation or fraud, which would render the transactions as void and also that the property is purchased after taking reasonable care to ascertain that the transferee has the requisite power to transfer the said land, and finally that, the parties have acted in good faith, as is required under Section 41 of the Transfer of Property Act, 1882. (Vide: Asa Ram & Anr. v. Mst. Ram Kali & Anr., AIR 1958 SC 183; State Bank of India v. Rajendra Kumar Singh & Ors., AIR 1969 SC 401, Controller of Estate Duty, Lucknow v. Aloke Mitra, AIR 1981 SC 102; Hanumant Kumar Talesara v. Mohal Lal, AIR 1988 SC 299; and State of Punjab v. Surjit Kaur (Dead) through LRs., JT (2001) 10 SC 42).”

If Excess Given, Confine to the Right Held

In Narinder Singh Rao v. Air Vice-Marshal Mahinder Singh Rao, (2013) 9 SCC 425, it is held that the bequest has to be treated only to the extent of the share held by the testatrix, where the testatrix had bequeathed property in excess to her share. This principle is followed in Kavita Kanwar v. Pamela Mehta, AIR 2020 SC 2614; 2021-11 SCC 209.

Bill of Lading and a Negotiable Instrument

In Morvi Bank v. Union of India, 1965 (3) SCR 254, it was observed as under:

• “The law on the subject, as we conceive it may be stated thus: An owner of goods can make valid pledge of them by transferring the railway receipt representing the said goods. The general rule is expressed by the maxim nemo dat quod non habet, i.e., no one can convey a better title than what he had. To this maxim, to facilitate mercantile transactions, the Indian law has grafted some exceptions, in favour of bona fide pledgees by transfer of documents of title from persons, whether owners of goods or their mercantile agents who do not possess the full bundle of rights of ownership at the time the pledges are made. To confer a right to effect a valid pledge by transfer of documents of title relating to goods on owners of the goods with defects in title and mercantile agents and to deny it to the full owners thereof is to introduce an incongruity into the act by construction. On the other hand, the real intention of the legislature will be carried out if the said right is conceded to the full owner of goods and extended by construction to owners with defects in title or their mercantile agents.” (Quoted in: Union of India VS Federal Bank, ILR 1982-1 Ker 561)

In Law and Practice of Banking by Milnes Holden observed at page 269 as under:

• “The Act did not make bills of lading negotiable instruments. The essential characteristics of a negotiable instrument are (i) the property therein is capable of being transferred by delivery (either with or without endorsement according as to whether the instrument is in favour of order or bearer), (ii) a bona fide transferee for value obtains a title free from equities, and (iii) the holder can sue on the instrument in his own name. The second characteristic implies that a transferee who gives value in good faith may be able to obtain a better title then his transferor had for example, a bona fide transferee for value of a bill of exchange can obtain a good title from a thief. It is this quality that is lacking in the case of a bill of lading. A transferee takes it subject to any defects in the title of prior parties.” (Quoted in: Union of India VS Federal Bank, ILR 1982-1 Ker 561)

What is said of bills of lading applies to a railway receipt also. Anson in the Law of Contract, 24th Edition at page 448 expresses as under:

• “But a bill of lading differs from the negotiable instrument with which we have just been dealing: In the first place, its endorsement transfers a remedy in rem, the right to claim specific goods, whereas a negotiable instrument confers only a remedy in personam, the right to be paid a certain sum money.. ….
• A bill of lading, then, is a contract assignable without notice; it so far resembles a conveyance that it gives a title to property, but it cannot give a better title, whether proprietary or contractual, than is possessed by the consignee.” (Quoted in: Union of India VS Federal Bank, ILR 1982-1 Ker 561)

In Union of India v. Federal Bank, ILR 1982-1 Ker 561, it was observed as under:

• “An endorsee of a document of title (which a railway receipt is – see S.137 of the Transfer of Property Act) does not confer on a transferee better rights than a transferor and even if he might have taken the transfer bona fide for value he cannot claim rights which his transferor did not have. Therefore, if in this case we find that the goods had not been booked and the railway receipts therefore are really not documents of title transferring property or operating as pledges of the property, merely because the Bank took the receipts on payment of value and without knowing the real facts the Bank may not be entitled to a decree. So, the crucial question in this case is whether the railway receipts have been issued without receiving the goods for consignment.
• 12. In the circumstances of the case the consideration of the question of burden of proof becomes relevant. In this case on whom does the burden lie to show that goods had not been received by the railway administration notwithstanding the admitted issue of railway receipts? The learned counsel Sri Shenoi does not seriously contend that despite the issue of the railway receipts the burden is on the plaintiff. But he submits that such burden on the Railway authorities has been discharged by the evidence in the case. The railway receipt, as we have already indicated, is evidence, so far as third parties are concerned, of entrustment of goods at the stations mentioned therein for the purpose of consigning them. It contains an admission of the receipt of the goods by the railway. An admission is not conclusive evidence. It is open to the party to prove that notwithstanding the admission the facts are otherwise. But in the face of such admission the burden would necessarily be on the railway administration to show that the goods were not received. The court below seems to have made the same approach.”

Sale by some Sharers in Partition Suits & nemo dat quod non habet

Our Apex Court held in Dhanalakshmi v. P. Mohan, 2007-10 SCC 719, that purchasers of undivided shares of the coparceners were entitled to come on record in preliminary decree proceedings so that they may claim an equitable set off in the final decree proceedings as regards their purchase transaction. Hence, the plaintiffs’ omission to array purchasers of undivided share prior to institution of the suit necessitates reconsideration of the matter after affording an opportunity to the purchasers.

The Supreme Court in T. Ravi v. B. Chinna Narasimha, 2017- 7 SCC 342, dealt with a similar situation as under:

• “Purchaser pendente lite is bound by the preliminary decree with respect to the shares so determined and it cannot be reopened and whatever equity could have been claimed in the final decree proceedings to the extent of the vendor’s share has already been extended to the purchasers.”

In Sardar Surjeet Singh v. Juguna Bai, 2018-1 ICC 591; 2017-4 RCR(Civ) 695 (SC), it is observed as under:

• “Thus the determination of shares as per preliminary decree has attained finality, shares of the parties had been crystalised in each and every property. Purchaser pendente lite is bound by the preliminary decree with respect to the shares so determined and it cannot be re-opened and whatever equity could have been claimed in the final decree proceedings to the extent of vendor’s share has already been extended to the purchasers.”

In Marirudraiah v. B. Sarojamma, 2009-12 SCC 710 also ou Apex Court accepted the direction (of the High Court) to the trial court to work out the equity in favour of the purchasers and compensate the plaintiffs and other sharers who are not parties to the sale deed.

In S.  Sugunamma v B.  Padmamma, 2017-5 ALD 403; 2017-4 ALT 757, the Andhra High Court followed the general principle adopted by our courts. It reads as under:

• “35. Therefore, in fine, the appellant is entitled to a preliminary decree for partition and separate possession of her one-fifth share in the suit schedule properties. It may be open to the alienees to seek the allotment of the properties purchased by them to the share of the 1st defendant in the final decree proceedings.”

Karnataka High Court in Nagarathnamma v.  B.  Rudriah, 2012 4 AIR Kar R 424; ILR 2012  (Kar) 4129, in a suit for partition directed the plaintiffs to implead the alinees (of some sharers) in the final decr

This equity principle is consistently followed by the courts in India. See:

• Narayana Naicker v. Kannusamy Naicker, 2019 3 LW 19,
• Domegunta Venkatasesha Reddy v. Gowramma, 2019-2 AIR Kar R 401; ILR 2019  (Kar).

By Proving a Deed, Title of the Executing Person is Not Automatically Confirmed

The Supreme Court held in Kizhakke Vattakandiyil Madhavan v. Thiyyurkunnath Meethal Janaki (Aniruddha Bose & Sudhanshu DhuliaJJ.) 9.4.2024, also held as under:

• “18. … It would be trite to repeat that even if subsistence of a deed is proved in evidence, the title of the executing person (in this case Chiruthey) does not automatically stand confirmed. ….. Chiruthey could not convey any property over which she did not have any right or title. Her right, if any, would stem from the second deed of lease (Exhibit A-1, Verumpattam Kuzhikkanam dt.14th July 1910). We are conscious of the fact that no claim was made before any forum for invalidating the deed dated 14th July 1910 .… But in absence of proper title over the subject property, that lease deed even if she was its sole lessor would not have had been legally valid or enforceable. If right, title or interest in certain property is sought conveyed by a person by an instrument who herself does not possess any such form of entitlement on the subject being conveyed, even with a subsisting deed of conveyance on such property, the grantee on her successors-in-interest will not have legal right to enforce the right the latter may have derived from such an instrument.”