Section 38 - Transfer by Person Authorised Only Under Certain Circumstances to Transfer
Section 38 of the Transfer of Property Act, 1882 protects a transferee who purchases immovable property for consideration from a person whose power to transfer depends on circumstances that can change, provided the transferee makes reasonable enquiries and acts in good faith. The protection is subject to the statutory requirements and other applicable laws.
Text of Section 38
38. Where any person, authorised only under circumstances in their nature variable to dispose of immovable property, transfers such property for consideration, alleging the existence of such circumstances, they shall, as between the transferee on the one part and the transferor and other persons (if any) affected by the transfer on the other part, be deemed to have existed, if the transferee, after using reasonable care to ascertain the existence of such circumstances, has acted in good faith.
Meaning and scope of Section 38
The expression authorised only under circumstances in their nature variable refers to an authority to dispose of immovable property which exists only when particular facts or needs are present. Those circumstances may arise or cease over time. Section 38 deals with the position of a purchaser when the transferor claims that the required circumstances exist.
Conditions for protection
- Conditional authority: The transferor must have a power to transfer immovable property that depends on variable circumstances.
- Transfer for consideration: The transaction must be for consideration; the section does not give the same protection to a gratuitous transferee.
- Representation of circumstances: The transferor alleges that the circumstances authorising the transfer exist.
- Reasonable care: The transferee takes reasonable steps to verify those circumstances.
- Good faith: The transferee acts honestly and in good faith after making the enquiry.
If these requirements are satisfied, the circumstances are deemed to have existed as between the transferee and the transferor and other persons affected by the transfer. The section does not dispense with separate statutory restrictions or formalities that may govern a particular property or transaction.
Illustration provided in Section 38
A, a Hindu widow, whose husband has left collateral heirs, alleging that the property held by her as such is insufficient for her maintenance, agrees, for purposes neither religious nor charitable, to sell a field, part of such property, to B. B satisfies himself by reasonable enquiry that the income of the property is insufficient for A's maintenance, and that the sale of the field is necessary, and, acting in good faith, buys the field from A. As between B on the one part and A and the collateral heirs on the other part, a necessity for the sale shall be deemed to have existed.
Explanation: The illustration describes a historically recognised situation in which a widow's authority over certain property was linked to necessity. The purchaser investigated the alleged need for maintenance and acted in good faith. The illustration must be read in its historical legal context; modern inheritance and ownership rights, including rights under the Hindu Succession Act, 1956 where applicable, may alter the underlying property rights.
Reasonable care and good faith
The enquiry required depends on the facts of the case. A purchaser may need to examine title documents, the source and limits of the seller's authority, and records or other evidence relating to the claimed necessity. Merely accepting an assertion without appropriate enquiry may not satisfy the requirement of reasonable care. Good faith and reasonable care are separate statutory safeguards.
Related provisions
Section 38 should be read alongside Section 37 (apportionment of benefit of obligation on severance), Section 39 (third-person maintenance rights), and Section 40 (obligations relating to land), where relevant.
Official legal sources
For the legislation and amendments, consult the India Code official repository and the Gazette of India. Check the current statutory text and any applicable state-specific provisions when applying Section 38.
In brief: A purchaser for consideration can invoke Section 38 where the seller's authority depended on variable circumstances, the purchaser reasonably checked the asserted circumstances, and the purchase was made in good faith.