1) Introduction -

Property has its duties as well as its rights – Thomas Drumond

Before the Transfer of property Act came into existence in 1882, the transfer of immovable
property in India were governed by the principles of English Law and Equity. In the absence
of any statutory provisions the courts had to fall back upon English law on real properties,
sometimes forcing the courts to decide the disputes according to their own notions of justice
and fair play, resulting in confused and conflicting case laws. To remedy these confusions and
conflicts a Law Commission was appointed in England to prepare a code of substantive Law
of Transfer of Property in India. This Commissions prepared and constituted a draft bill which
was sent to the Secretary of State of India. This Bill was introduced in the Legislative Council
in 1877. The Bill was then referred to a Select Committee and it was also sent to the Local
Governments for their comments. This bill was discussed and re-drafted on many points and
then referred to a Third Law Commission. The Third Law Commission consisted of Sir Charles
Turner, Chief Justice of Madras. Sir Raymond Wast and Mr. Whitley Stokes, Law Member of
the Council of Governor-General.

The Bill pertaining to Transfer of Property was prepared no less than 7 times before the final
bill was passed and it came to existence.

1.1) Objective and Scope of the Act –

The Act defines and amends the law relating to Transfer of Property by act of parties. The Act
does not cover transfer of property by operation of law. Further, transfer of property by act of
parties may be inter vivos or testamentary. Inter Vivos transfer means transfer between two
living persons whereas testamentary transfer relates to transfer by will, etc. The Transfer of
Property Act, covers only inter-vivos transfers. Testamentary transfers are governed by the
Indian Succession Act. The Scope of the Act, is as prescribed below –

a) This Act applies only to transfers by living persons, it does not regulate transfers by
operation of law.
b) The Act mainly deals with the transfer of immovable property, although, Section 5-37
of the Act contain provisions applicable to both movable and immovable properties.
 c) Section 11 of the Act provides for a non – obstinate clause which has an overriding
effect, therefore has been given thereby over all other law for the time in force1
d) Chapter II of the Act contains general principles of transfer, which does not effect
transfer by Muslim even if it is against any of the provisions of Chapter II.
e) The Act has not only defined the existing rules of transfer but also amended and
modified some of them so as to make hem suitable to the socio-economic conditions of
India.
f) The Act has provided a parallel law to already existing law of testamentary and intestate
transfers.
g) The Transfer of Property Act was not made applicable to entire India in the first
instance. As originally enacted, the Act did not extend to then States of Bombay, Punjab
and Delhi.

1.2) Relevant Amendments to the Act –

a) Act 3 of 1885 brought in conformity with the Indian Registration Act.
b) Act 2 of 1900 amended Sections 3, 6(e) and 6(h).
c) Act 6 of 1904 amended Sections 1, 59, 69, 107 and 117.
d) Code of Civil Procedure, 5 of 1908 amended rules about mortgages.
e) Act 11 of 1915 amended Section 69.
f) Act 38 of 1920 amended Section 1.
g) Act 38 of 1925 amended various sections including Section 130.
h) Act 27 of 1926 amended Section 3.
i) Act 10 of 1927 amended Section 3 even further.
j) Act 20 of 1929 amended Sections 60, 63 and 65.
k) Act 3 of 2002 amended Section 106.

1
Bharath Petroleum Corpn. Ltd. V. P. Kesavam (2004) 9 SCC 772 : AIR 2004 SC 2206 : 2004 AIR SCW 1989. The
Court dissented from the judgement in Aswini Kumar Ghose V. Arabinda Bose, AIR 1952 SC 369 : 1952 SCA 633
: 1952 SCJ 568
 2) Sections 9 – 12 demystified.

2.1) Section 9 – Oral Transfers.

‘A Transfer of Property may be made without writing in every case in which a writing is not
expressly required by law.’

Section 9 says that a transfer of property may be made without writing in every case in which
writing is not expressly required by law. Under the ambit of Transfer of Property Act, there are
2 modes of transfer –

a) Delivery of Posession – Those properties may be transferred by delivery of possession

only where writing is not necessary for transfer. Generally the movable properties
maybe transferres by delivery of possession. Month to month tenancy, mortgage by
deposit of title deeds, exchange of immovable property valuing less than rupees 100,
can be transferred orally.
b) Registration – Where registration is necessary, the transfer must be made in writing .
According to the Transfer of Property Act, the following must be made only through a
written document which must be duly registered : 2

.1) Sale of an immovable property exceeding rupees 1003

.2) Sale of reversion or other intangible property4
.3) Simple mortgage irrespective of amount5.
.4) All other mortgages (except the mortgage by deposit of title deeds) securing sums
exceeding rupees 100.6
.5) Lease from year to year, or for a term exceeding 1 year or reserving a yearly rent. 7
.6) Exchange of Immovable Property exceeding rupees 100 in value.8
.7) Gift of an immovable property.9

2
Hansa Industries Private Limited V. Kidarsons Industries Private Ltd., AIR 2007 SC 18: (2006) 8 SCC 531: (2006)
10 SCALE 170,the valuation of assets of a company in a family settlement , no deduction is to be made of an
anticipated liability of capital gains on a hypothetical ale under the settlement.
3
Section 54 of the Transfer of Property Act.
4
Ibid
5
Section 59
6
Ibid
7
Section 107
8
Section 118
9
Section 123
 .8) Transfer of actionable claims. 10
Procedure for the registration of documents is and compulsorily registrable transfers is
given in the Indian Registration Act, 1908. Where writing and registrations are essential
requirements to constitute a transfer, the property cannot be transferred in any other
way. Transfer of Property in any manner will be invalid transfer.11

2.2) Section 10 – Conditions Restraining Alienation –

‘Where property is transferred subject to a condition or limitation absolutely restraining the

transferee or any person claiming under him from parting with or disposing of his interest in
the property, the condition or limitation is void, except in case of a lease where the condition
is for the benefit of the lessor or those claiming under him :

Provided that property may be transferred to or for his benefit of a woman ( not being a Hindu,
Muhammadan or Buddhist ), so that she shall not have power during her marriage to transfer
or charge the same or her beneficial interest therein.

a) Conditions Restraining Alienation : Every owner of a property, who is competent to

transfer, may transfer his property either unconditionally or with certain conditions.
Conditions are limitations or restrictions on the rights of the transferee. Transfers which
are subject to conditions are known as ‘conditional transfers’. These conditions may be
either conditions precedent or subsequent. Conditions precedent are put prior to the
transfer and the actual transfer depends upon compliance of those conditions.
Subsequent conditions are those conditions which are to be fulfilled after the transfer.
These conditions affect the rights of the transferees after the transfer.
b) Absolute Restraint – Section 10 states that where the property is transferred subject to
a condition or limitation which absolutely restraints the transferee from parting with or
disposing off his interest in the property is a void condition. Restraint on alienation is
said to be absolute when it totally takes away the right of disposal. In the words of Lord
Justice Fry12 – ‘ From the earliest times, the courts have always leant against any
device to render an estate inalienable’13.

10
Section 130, only with regards to a situation where writing is sufficient and no real need of registration.
11
Avvamma M. Talawar V. State of Karnataka AIR 2006 (NOC) 1598 (Kant).
12
In re , Parry and Dags, (1886) 31 Ch D 130
13
Zoarastrian Co-op Housing Society V District Registrar Co-op Society AIR 2005 SC 2306
 Section 10 relieves a transferee of immovable property from an absolute restraint placed
thereof . Section 10, prescribes a condition where restraining alienation would be void.
Section applies to a case where property is transferred subject to a condition or
limitation absolutely restraining the transferee from parting his interest in the property.
It was held from the very beginning a beneficial interest was created in favour of the
person with whose monies the securities were purchased and, therefore his beneficial
interest was transferable because otherwise the whole transaction would have been hit
by Section 1014. An Absolute right was vested in the adopted son in respect of properties
bequeathed to him under a will. The will contained a direction that the property
bequeathed should be applied or enjoyed in a particular manner. The Court said that the
legatee was entitled to receive and deal with the property as if no such condition was
there in the will.15 Condition imposing absolute restraint on the right of disposal is a
void condition and has no effect, for example a person makes a gift of property to
another person with a condition that he will not sell it. This condition is the absolute
restraint. If the transferee sells the property the transaction will be void as absolute
restraint is a void condition.16 Also it is to be noted that the condition restraining the
lessee from alienating leasehold property is not illegal or void17; A provision in a local
Act under which alienation of leasehold interest without prior permission of the
collector was to be treated as void was held by a Division Bench of Orissa High Court
to be void. The Collector proceeded to resume leasehold interest without first declaring
that the transfer was void. This was held to be not permissible.18
c) Partial Restraint – Section 10 has only provided for absolute restraints. It is silent about
partial restraints. Where the restraint does not take away the power of alienation
absolutely but only restricts to some extent, it is a partial restraint. Partial Restraint is
valid and enforceable. In the words of Sir George Jesel – ‘ The test is whether the
condition takes away the whole power of alienation substantially; it is a question of
substance and not mere form…. You may restrict alienation in many ways, you may

14
Canbank Financial Services Ltd. V. Custodian, (2004) 8 SCC 355
15
Achammal V. Rajamanickam Karthikeyan, AIR 2010 MAD 34
16
Rosher V. Kosher (1884) 26 CH D 801:
17
Raghuram Rao V. Eric P. Mathias, AIR 2008 (NOC) 8 (Mad)
18
Dinesh Chhapolia V. State of Orissa, AIR 2008 (NOC) 844 (Ori) DB
 restrict it by prohibiting it to a particular class of individuals or you may restrict
alienation by restricting it to a particular time’

Total restraint on right of alienation is void, but a partial restraint would be valid and
binding. This rule is based on sound public policy of free circulation. 19 A restriction for a
particular time or to a particular or specified person has been held to be absolute
restriction.20 A compromise by way of settlement of family disputes has been held valid in
Mata Prasad V. Nageshar Sahai21, although an involved agreement was in restraint of
alienation. The Privy Council held that the compromise was valid and prudent in the
circumstances of the case.

2.2.1) Exceptions to Section 10 –

1) Lease – Conditional Transfer is valid in the case of lease where the condition is for the
benefit of the lessor or those claiming under him. Lease is a transfer of an interest where
the lessor reserves the ownership and transfers only the right of enjoyment to the lessee. A
lessor can impose a condition that the lessee will not assign his interest or sub-lease the
property to any other person. This is a valid condition. This exception is applicable to
permanent leases too. The Supreme Court has held that his Section does not carve out any
exception with regard to perpetual or permanent lease. Thus in the words of the Hon’ble
Supreme Court –

‘This Section does not carry out any exception with regard to perpetual or permanent lease.
It applies to permanent and temporary lease. In view of specific exemption carred out in
this case of lease, in our view there is no substance in the contention……. That the condition
which restrains the lessee from alienating leasehold property is in any way illegal or
void.’22

2 ) Married Woman – This section constitutes another exception which is in favour of married
woman. It says that property may be transferred to or for the benefit of a woman so that she
shall not have possession during marriage to transfer or charge the same to her beneficial
interest therein. This means that where property is transferred to a married woman, the
transferor can impose a restraint on alienation which is not void.

19
K. Muniswamy V. K. Venkataswamy, AIR 2001 Kant 246
20
Mohammad Raza V. Mt. Abbas Bandi Bibi (1932) 59 IA 236
21
Mata Prasad V. Nageshar Sahai, (1927) 27 ALL 484 : Supra Note 14
22
Supra Note 17.
2.2.2) Dedication of Property to Deity –

A deed of dedication of property to a deity contained a condition absolutely restraining transfer.

The deed was held to be not void. The Court said that Section 10 does not apply to a case
where the transferee is a deity, being not a living person. The place in a temple where the idol
of the deity is installed can in no case be alienated.23

2.2.3) Hindu and Muslim Laws –

Under Hindu Laws a condition is absolute restraint on alienation either in a gift inter vivos or
in a will is void. In Muslim Law also, such a condition in restraint of alienation attached to a
gift is void.

2.3) Section 11 – Restrictions Repugnant to Interest Created -

Where, on a transfer of property, an interest therein is created absolutely in favor of any

person, but the terms of the transfer direct that such interest shall be applied or enjoyed by him
in a particular manner, he shall be entitled to receive and dispose of such interest as if there
were no such direction.

Where any such direction has been made in respect of one piece of immovable property for the
purpose of securing the beneficial enjoyment of another piece of such property, nothing in this
section shall be deemed to affect any right which the transferor may have to enforce such
direction or any remedy which he may have in respect of a breach thereof.

Section 11 deals with restrictions repugnant to interest created, i.e. the restrictions on the
enjoyment of absolute interest. When a person transfers absolute interest in a property to any
other person, he gives all the rights of managing, enjoying and disposing of that property. But
where along with the transfer of absolute interest he includes restriction restraining the
enjoyment of property, such a restriction will not be considered valid and it will have no effect.
Once an absolute right has been conferred on a person as to a property, then no rider can be put
on enjoyment of that property.24

Transfer of absolute interest means transfer of ownership. Ownership being all the incidents of
ownership to the transferee. If any of this incident is restricted it will not be full ownership but
less than full ownership. This section comes into play when two conditions are satisfied :

1) An absolute interest is created by the transfer in favour of the transferee, and

2) The terms of the transfer provide that the interest in the property is applied or enjoyed
in the manner prescribed by the transferee.

23
Shyamlal Ranajn Mukherjee V. Nirmal Ranjan Mukherjee, AIR 2006 (NOC) 588 (ALII)
24
R & M Trust V. Koramangala Residency Vigilance Group, AIR 2005 SC 894
2.4) Section 12 – Condition making interest determinable on insolvency or
attempted alienation

The general rule regarding transfer of property is that on transfer of property a condition may
be superadded whereby on happening or non happening of a specified uncertain event, the
interest of the transferee will cease25 . Section 12 provides an exception to this general rule.
Two types of conditions are invalidated by this section 26–

1) Conditions which provide that the interest of the transferee will cease to exist when the
transferee becomes insolvent.
2) Conditions which limit or restrict any attempted transfer by the transferee

Alienation Theory Discussed

3.1) Introduction -

Ownership of the property carries with it certain basic rights, such as a right to have the title to
the property, a right to possess and enjoy it to the exclusion of everyone else, and a right to
alienate it without being dictated to, save in accordance with a provision of law. An absolute
right to dispose of the property indicates that the owner can sell it for consideration or can
donate it for religious or charitable purposes he may gift it to anyone, mortgage it or put it up
for lease. Save with the help of law, no other person can interfere with this power or right of
the owner or dictate to him, what should be the manner of alienation, should he alienate or not,
or even what kind of use it should be put to. In short, this right of alienation, that is one of the
basic rights of the owner, cannot be unreasonably encroached upon by anyone through a private
agreement. This general rule is applicable despite there being an express contract to the
contrary, and prevents the transferor from controlling the power of alienation of the transferee
once the interest in the property is transferred.

The extent to which a person transferring real or personal property may limit its subsequent
disposition by the transferee has for centuries been a problem troubling the courts. Restrictions
upon the grantee’s right to transfer the property, at any time, to whomsoever he may choose,
and in whatever manner he may select, are called “restraints on alienation“.

Recent developments in the field of real property security law have rekindled an interest -in
one of the most ancient and important battlegrounds of the law-the extent to which the law
should protect free alienability of real property and strike down attempts to restrict or penalize
an owner’s ability to transfer his property. The context in which the present-day struggle arises
is a far cry from the feudalistic society existing in England when the restraints on alienation
doctrine was developed, yet the materials which follow evidence quite clearly that the judicial
role in articulating and enforcing the doctrine is beginning anew.

3.2) Importance of the subject -

25
Section 31
26
Subal Chandra Matty V. Usha Banerjee, AIR 2009 Cal 210 (DB)
Understanding what the role the right to exclude plays in defining property is important for
several reasons. First, having a better grasp of the critical features of property may promote a
clearer understanding of the often-arcane legal doctrine that surrounds this institution. Second,
understanding the domain of property is an important preliminary step in developing a
justification or critique of property from the perspective of distributive justice. Third,
formulating a more precise conception of property may be necessary in order to offer a
complete account of constitutional provisions that protect “property.” In any event, for those
who are learning the concept of the law of property, the question is one of intrinsic interest,
whether or not it has any payoff in resolving more immediate concerns.

Ownership of property carries with it certain rights, such as the right to have the title to the
property, a right to possess and enjoy it to the exclusion of everyone else, and a right to alienate
it to the exclusion of others without being dictated to. Sections 10 to 18 of the Transfer of
Property Act, 1882 contain the first set of rules that have to be observed while alienating a
property. Since it is a principle of economics that wealth should be in free circulation to get the
greatest benefit from it, these Sections provide that ordinarily there should be no restraints on
alienation.

This project seeks to analyse the rules regarding transfer of property which talk about
conditions restraining alienation of property once it is transferred. The researcher will first look
into the general provision that all such conditions should be void and then will talk about partial
restraints and other conditions which are valid. Finally, conditions restraining enjoyment of
property which can be enforced will be discussed. The researcher will analyse the law in light
of decided Supreme Court and major High Court cases.

3.3) Right to exclude -

Right to exclude others is “one of the most essential sticks in the bundle of rights that are
commonly characterised as property.”

Three schools of thought regarding right to exclude

Generally speaking, it is possible to identify three different intellectual traditions regarding the
role of the right to exclude. These may be called “single-variable essentialism,” “multiple-
variable essentialism,” and “nominalism.”

Single-variable essentialism

Probably the oldest continuing tradition in attempts to define property is essentialism-the

search for the critical element or elements that make up the irreducible core of property in all
its manifestations. The patron saint of property essentialism is William Blackstone, the first
full-time law professor at an English-speaking university. In fact, Blackstone endorsed not one
but two essentialist definitions of property, corresponding to what is called the single-variable
and the multiple- variable versions.27

The first or single-variable version of essentialism posits that the right to exclude others is the
irreducible core attribute of property.

27
Merill, Thomas W., Property and the Right to Exclude, 77 Neb. L. Rev. 737 1998
Thus, Blackstone:There is nothing which so generally strikes the imagination, and engages the
affections of mankind, as the right of property; or that sole and despotic dominion which one
man claims and exercises over the external things of the world, in total exclusion of the right
of any other individual in the universe.28

Single-variable essentialism also finds extensive if somewhat qualified support in the decisions
of the contemporary U.S. Supreme Court. The Court has said of the right to exclude that it is
“universally held to be a fundamental element of the property right;”29 that it is “one of the
most essential rights” of property;and that it is “one of the most treasured” rights of
property.30 Although all these statements imply that the right to exclude is not the only right
associated with property, no other right has been singled out for such extravagant endorsement.
Moreover, governmental interference with the right to exclude is more likely to be considered
a taking of property without compensation than are interferences with other traditional
elements of property.31

Multiple variable essentialism

The second version of essentialism, also found in Blackstone, posits that the essence of
property lies not just in the right to exclude others, but in a larger set of attributes or incidents,
of which the right to exclude is just one. Thus, Blackstone II: “The third absolute right, inherent
in every Englishman, is that of property: which consists in the free use, enjoyment, and disposal
of all his acquisitions, without any control or diminution, save only by the laws of the land.”

This version of essentialism holds that property is defined by multiple attributes or incidents.
Blackstone describes these multiple attributes as the rights of “free use, enjoyment, and
disposal”. Curiously, the right to exclude others fails to make an appearance on this list.
Moreover, it would seem that the rights of “free use” and “enjoyment” are arguably redundant,
or at least largely overlapping. But these anomalies have been overlooked in subsequent
accounts, which have translated the Blackstonian trilogy as the rights of “possession, use, and
disposition,”18 or alternatively, the rights to exclude, to use or enjoy, and to transfer.32

Under the multiple-variable version of essentialism, the right to exclude is a necessary but not
a sufficient condition of property. Without the right to exclude, there is no property. But more
than the right to exclude is needed in order to create a package of rights sufficiently impressive
to be called property.33

Nominalism

This school of thought views property as a purely conventional concept with no fixed meaning-
an empty vessel that can be filled by each legal system in accordance with its peculiar values

28
William Blackstone, Commentaries on the Laws of England

29
Kaiser Aetna v. United States, 444 U.S. 164, 179-80 (1979)

30
Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 435 (1982)

31
Dolan v. City of Tigard, 512 U.S. 374, 384 (1994)
32
RichardA. Epstein, Takings:Private Property and thePower ofEminent Domain58-59 (1985).
33
The Development of Restraints on Alienation Since Gray, 48 Harv. L. Rev. 373 1934-1935
and beliefs. On this view, the right to exclude is neither a sufficient nor a necessary condition
of property. It may be a feature commonly associated with property, but its presence is not
essential; it is entirely optional. A legal system can label as property anything it wants to. 34

These three schools of thought-single-variable Essentialism, Multiple-Variable Essentialism,

and Nominalism-do not exhaust the possibilitieswith respect to understanding of the nature of
property. One of the most sophisticated modern expositions of property by a philosopher is that
of Jeremy Waldron35. Borrowing a distinction developed by Ronald Dworkin, Waldron argues
that private property is best understood as a general “concept,” of which the various incidents
or elements embody different “conceptions.” He defines the general concept of private property
as the understanding that, “in the case of each object, the individual person whose name is
attached to that object is to determine how the object shall be used and by whom. His decision
is to be upheld by the society as final.36 This general concept, Waldron argues, takes on
different conceptions in different contexts, depending on the type of resource involved, the
traditions of the legal system, whether ownership is unified or divided, and so forth.

General Principles of Transfer of Property: Subject to a limitation or condition

Sections 10, 11, and 12 of the Transfer of Property Act deal with the imposition of restrictions
or limitations in transfer of property. They contemplate situations where limitations may be
imposed on the transferee by the transferor in the instrument on the interest so transferred.37 In
such a case, the question that arises is: are such restrictions valid? If so, under what
circumstances are they valid? Sections 10, 11, and 12 of the Transfer of Property Act hold the
answers to these questions.

Rule against alienability

Section 10 of the Transfer of Property Act: Condition Restraining Alienation- Where

property is transferred subject to a condition or limitation absolutely restraining the transferee
or any person claiming under him from parting with or disposing of his interest in the property,
the condition or limitation is void, except in the case of a lease where the condition is for the
benefit of the lessor or those claiming under him:

PROVIDED that property may be transferred to or for the benefit of a women (not being a
Hindu, Muhammadan or Buddhist), so that she shall not have power during her marriage to
transfer or charge the same or her beneficial interest therein.

Conditional transfers

Every owner of a property, who is competent to transfer, may transfer his property either
unconditionally or with certain conditions. Conditions are limitations or restrictions on the

34
Supra Note 27

35
Jeremy Waldron, What is Private Property?, 5 OxFoPnJ. Legal Stud. 313(1985)

36
Infra Note

37
S.M. Lahiri, The Transfer of Property Act (Act IV of 1882), 11th ed., (India Law House, New Delhi, 2001)
rights of the transferees. Transfers which are subject to restrictions are known as ‘conditional
transfers’. These conditions may be either conditions precedent or conditions subsequent.
Conditions precedent are put prior to the transfer and the actual transfer depends upon
compliance of those conditions. Subsequent conditions are those conditions which are to be
fulfilled after the transfer.38 These conditions are those conditions which are to be fulfilled after
transfer. These conditions affect the rights of the transferees after transfer.

This provides that if a property is transferred subject to a condition or limitation restraining the
transferee’s right of parting with or disposing his interest in the property absolutely, then such
a condition is void. This general rule is referred to as the rule against inalienability. The rule
against inalienability gives effect to the overarching principle behind the Transfer of Property
Act that, generally, all property should be transferable. Therefore, any condition that restrains
alienation is considered void. The transferee can ignore such a condition and continue his
enjoyment of the transferred property as if such a condition did not exist in the first place.

However, while an absolute restraint is void, a partial restraint may not be. For instance, a
partial restraint that restricts transfers only to a class of persons is not invalid. However, if the
transfer is restricted to being allowed only to specific individuals, then it is an absolute restraint
and hence, void.

3.4) Categorisation of restraints -

Since alienation of property is the sole prerogative of the owner of the property, he is
empowered to sell it at any point of time, for any consideration, to nay person, and for any
purpose. There are certain integral components of the very term “alienation” and include
selection purely at the discretion of the transferor or the transferee and the time or consideration
for the transfer. A restraint on alienation, thus would include a condition that dictates to him
when to sell it, to sell it at how much consideration, or how to utilise the consideration; to
whom to sell or for what purpose he should sell. These restraints can appear in the following
ways39:

 Restraints on transfer for a particular time

 Restraints directing control over consideration/money;
 Restraints with respect to persons/transferee; and
 Restraints with respect to sale for particular purposes or use of property

3.5) Absolute restraint -

Absolute restraint refers to a condition that attempts to take away either totally or substantially
the power of alienation.40 Section 10 says that where property is transferred subject to a
condition or limitation which absolutely restraints the transferee from parting with or disposing

38
G.P. Tripathi, The Transfer of Property Act, 1882, 15th ed., (Central Law Publications, Allahabad: 2005)

39
Dr. PoonamPradhanSaxena, Property Law, 2nd Ed. (Lexis Nexis:Nagpur, 2011)

40
Bhavani Amma Kanakadevi v CSI Dekshina Kerela Maha Idavaka, AIR 2008 Ker 38
of his interest in the property is a void condition. Restraint on alienation is said to be absolute
when it totally takes away the right of disposal. In the words of Lord Justice Fry41, “from the
earliest times, the courts have always learnt against any devise to render an estate
inalienable.”42

Section 10 relieves a transferee of immovable property from an absolute restraint placed on his
right to deal with the property in his capacity as an owner thereof. As per section 10, a condition
restraining alienation would be void. Section applies to a case where property is transferred
subject to a condition or limitation absolutely restraining the transferee from parting with his
interest in the property. For making such a condition invalid the restraint must be an absolute
restraint.

Two persons purchased securities in their own names with the money belonging to a third
person. And on his instructions they deposited the securities in the name of that person and also
the interest accruing on them in that person’s account. The securities carried the stipulation that
they were not to be transferred. In order to wipe out his liability to another person, that third
person tendered the securities to his creditor by way of satisfaction to hold them as a
beneficiary. It was held that from the very beginning a beneficial interest was created in favour
of the person with whose monies the securities were purchased and, therefore, his beneficial
interest was transferable because otherwise the whole transaction would have been hit by
section 10.43

Condition imposing absolute restraint on the right of disposal is a void condition and has no
effect. For example, a person makes a gift of a property to another person (transferee) with a
condition that he will not sell it. This condition imposes an absolute restraint. If the transferee
sells that property, the sale will be valid because conditions imposing absolute restraint are
void. Amade a gift of a house to Bwith a condition that if B sold the house during the lifetime
of A’s wife, she should have an option to purchase it, for Rs. 10,000. The value of the house
was Rs. 10,000. This was held to be having the effect of absolute restraint and was void.44 The
provision of law against absolute restriction on alienation is founded on the principle of public
policy, namely that there should be free transferability of property. A transfer of property for
construction of a college contained a condition that if the college was not constructed; the
property would not be alienated. Rather it would be re-conveyed to the person transferring it.
The condition was held to be void and, therefore, not capable of being enforced.45

Where the settler intending to create a life estate in favour of his son-in-law ‘M’, handed over
the title-deeds of the said property to M indicating that he had divested himself of all rights in
the property but imposed absolute perpetual restraint on alienation, it was held that the restraint
was void since the transfer was an absolute transfer in favour of M. Under the provisions of
section 10, the sale deed made by the heirs of M in favour of appellants was a valid sale because

41
In re, Parry and Dags (1886) 31 Ch D 130
42
Zoroastrian Co-operative Housing Society v District Registrar Co-opertaive Societies (Urban), AIR 2005 SC
2306

43
Canbank Financial Services Ltd. V Custodian, (2004) 8 SCC 355

44
Rosher v Rosher, (1884) 26 Ch D 801
45
DhavaniAmmaKankadevi v C.S.I. Dekshina Kerala MahaIdavaka, AIR 2002 Ker 38
the heirs were entitled to ignore the restraint on alienation and deal with the property as absolute
owners.46

The condition restraining lessee from alienating leasehold property is not illegal or void. 47

3.6) Partial restraint -

Section 10 has only provided for absolute restraints. It is silent about the partial restraints.
Where the restraint does not take away the power of alienation absolutely but only restricts it
to certain extent, it is a partial restraint. Partial restraint is valid and enforceable. In words of
Sir George Jesel, “the test is whether the condition takes away the whole power of alienation
substantially; it is question of substance and not of mere form…. You may restrict alienation
in many ways, you may restrict it by prohibiting it to a particular class of individuals or you
may restrict alienation by restricting it to a particular time.”

A total restraint on right of alienation is void but a partial restraint would be valid and binding.
This rule is based on sound public policy of free circulation.48

A restriction for a particular time or to a particular or specified person49 has been held to be
absolute restriction. A compromise by way of settlement of family disputes has been held to
be valid in Mata Prasad v Nageshwar Sahai50, although it involved an agreement an
agreement in restraint of alienation. In this case, dispute was as to succession between a widow
and a nephew. Compromise was done on terms that the widow was to retain possession for life
while the title of the nephew was admitted with a condition that he will not alienate the property
during the widow’s life time. The Privy Council held that the compromise was valid and
prudent in the circumstances of the case.

While an absolute restraint is void, a partial restraint may not be. For instance, a partial restraint
that restricts transfers only to a class of persons is not invalid. However, if the transfer is
restricted to being allowed only to specific individuals, then it is an absolute restraint and hence,
void. How is it determined if a restriction is absolute or partial? In order to determine whether
a restriction is absolute or partial, one must look at the substance of the restraint and not its
mere form. Ordinarily, if alienation is restricted to only family members, the restriction is valid.
However, where in addition to that restriction, a price is also fixed which is far below market
value and no condition is imposed on the family members to purchase, then the restraint is an
absolute one and hence, void, although in form, it is a partial restraint. Even if such a

46
Kannamal v Rajeshwari, AIR 2004 NOC 8 (Mad)

47
RaghuramRao v Eric P. Mathias, AIR 2002 SC 797

48
K. Muniaswamy v K. Venkataswamy, AIR 2001 Kant 246

49
Mohd. Raza v Abbas BandiBibi, (1932) 59 IA 236

50
(1927) 47 All 484
substantially absolute restriction is limited by a time period that is, it applies for a specific time
period only, it remains void.

3.7) Exceptions to the general rule -

Section 10 provides two exceptions to the rule against inalienability. First, Section 10 does not
prohibit conditions or limitations in the case of a lease, which are beneficial to the lessor or
those claiming under him. Second, property may be transferred for the benefit of a woman who
is not a Hindu, a Muslim, or a Buddhist, such that she shall not have the power to transfer the
property or change her interest therein during her marriage. This exception is based on
the doctrine of coverture that operated in England in the nineteenth century. There, women
could be given property for their enjoyment without the right to alienate the property during
her marriage. The rule protected women from being forced to alienate their property in favour
of their husbands. However, despite the abolition of the doctrine of coverture in England, this
exception continues to remain on the statute books in India.

Lease

Conditional transfer is valid in the case of lease where the condition is for the benefit of the
lessor or those claiming under him. Lease is a transfer of a limited interest where the lessor
(transferor) reserves the ownership and transfers only the right of enjoyment to the lessee
(transferee). A lessor can impose a condition that the lessee will not assign his interest or sub-
lease the property to any other person. Such a condition will be valid. This exception is
applicable to permanent leases too. The Supreme Court has held that this section does not carve
out any exception with regard to perpetual or permanent lease. Thus, any condition restraining
the lessee from alienating leasehold property is not invalid.51

A condition in the ease that the lessee shall not sublet or assign his interest to anyone during
the tenure of the lease is valid.52 Similarly, a stipulation in the contract of lease that the lessee
would not sublet the premises and if he does, he would have to pay a fourth of the consideration
as nazaar to the lessor,53 is valid and enforceable. A condition in the lease deed that the lessee
would compulsorily have to surrender the lease in the event the lessor needs to sell the
property54 again is valid.

Married women

Restraints on the power of alienation in dispositions in favour of married woman, who are not
Hindu, Mohammedans or Buddhists, will be valid. This proviso was introduced to serve a
similar purpose as English law in this regard. The English Courts recognized the rule that it
was open to the settler or transferor to insert a clause in the deed of settlement or transfer, by
way of a restraint on anticipation, that is, to restrain her from anticipating the future income of

51
RaghuramRao v Eric P. Mathias, AIR (2002) SC 797
52
Raja JagatRanvir v Bagriden, AIR 1973 All 1

53
Sardakripa v Bepin Chandra, AIR 1923 Cal 679

54
Supra Note
the property and from encumbering it or alienating it while she is under husband’s protection
and shelter.

The section is enacted to check that the transferor shall not impose an absolute restraint on the
power to alienate that interest or right which was transferred to the transferee. Therefore, a
limited interest in property can be created in favour of a transferee, but a restraint on the power
to alienate that limited interest will be invalid.

3.8) Relevant cases -

InRosher v. Rosher55, a person A died leaving behind his wife W and a son S. He left his entire
property to S, under his Will. The will provided that S had to first offer the property for sale
and also had to sell her at L 3000 while the market price was L 15000. The court held that these
restrictions amounted to an absolute restraint on S’s and his heir’s power of alienation and were
therefore void.

In Gayashi Ram v. Shahabuddin56, the sale deed contained a clause that the transferee would
not transfer the property to any person either by way of sale, gift or even mortgage except the
transferor or his heirs. The court held that this condition is void and therefore invalid.

In Manohar Shivram Swami v. Mahadeo Guruling Swami57, A and B were first cousins. A
made a will of his property in favour of B. On A’s death, B acquired the title of the property
and sold it to C, who was also the brother of A. The sale deed contained a condition that if C
wanted to sell the property, he would sell it to the seller’s Jangam (caste) family and not to
anybody else. The court held that the condition incorporated in the sale deed absolutely
restrained C from parting with his interest in the property and therefore was void. The court
upheld the validity of sale affected by C. This decision of Bombay High Court comes as a
surprise as the condition here in fact was not to sell out of the family, which in a number of
cases has been held to be a partial restraint, and binding on the parties.

In Zoroastrian Co-operative Housing Society Ltd v. District Registrar Co-operative

Societies58, a society with the object of constructing houses for residential purposes had a bye
law which stated that only Parsis can be members of the society. There was also a condition
that no member could alienate the house to non-parsis. The Supreme Court held that when a
person accepts the membership of a co-operative society by submitting himself to its byelaws
and places on himself a qualified restriction on his right to transfer property by stipulating that
same would be transferred with prior consent of society to a person qualified to be a member
of the society it could not be held to be an absolute restraint on alienation offending Section 10
of the Transfer of Property Act

In K Muniswamy v. K Venkataswamy59, a family partition was effected although one condition

in the partition deed provided that the mother and the father were to enjoy the properties only
during their lifetime and after their deaths, this property was to be partitioned equally amongst
the two sons. This creation of life interest meant that the parents had no power to alienate the
property during their lifetime. The parents sold their property to one son. Other son challenged
55
Ibid
56
AIR 1935 All 493
57
Supra at 16
58
Supra at 22
59
Ibid
the validity of sale. The court held that a restriction prohibiting them absolutely from
transferring the property amounted to an absolute restraint on alienation and was therefore bad
in eyes of law.

3.9) Repugnant conditions -

Section 11 of the Transfer of Property Act deals with repugnant conditions. Repugnant
conditions are those that are inconsistent with the nature of the interest transferred. Section 11
prohibits the imposition of any condition directing the transferee to apply or enjoy in a
particular manner, any interest that is transferred absolutely in a particular manner. Such
conditions or directions are void and the transferee is entitled to receive property as if such a
condition did not exist in the first place. The transfer itself is, however, not invalidated. These
conditions are inconsistent with the nature of the interest transferred. Therefore, they are called
repugnant conditions.

Illustration: A and B enter into a sale deed for a piece of land. The terms of the sale deed
provides that the piece of land should be used for the purposes of starting a factory for the
manufacture of jute textiles only. This condition is invalid. B can enjoy the land in any manner
that he chooses and the sale deed itself continues to be valid.

Thus, no life interest can be created in favour of a vendee in a contract of sale.60 A gift
restraining enjoyment is void.61 Payment of certain amount to the vendor out of the profits of
property by way of rent after sale is illegal.62 A direction in restraining of partition in a gift or
will is void even thought the restriction is limited in time to the sons attaining majority.63

The exception to this rule according to the second paragraph of Section 11 is that if the
transferor owns another piece of immovable property, he may, for the benefit of that property,
impose a restriction on the enjoyment of that by him. In such a case, the restriction on the
enjoyment of the interest would be valid and saved by Section 11 of the Transfer of Property
Act.

Positive and negative conditions or covenants

Conditions or directions that the transferor may impose upon the transferee to secure better
enjoyment of his own property can be of two types: positive or affirmative conditions, i.e., they
direct the transferor to do something and negative conditions, i.e., they restrain the transferee
from doing a particular thing. These conditions are called covenants. 64

60
Manjusha Devi v Sunil Chandra, AIR 1972 Cal 310

61
N. Manekal v BaiSavita, CA No 959 of 1963 decided on Oct 1(SC)

62
State of Rajasthan v Jeo Raj, AIR 1990 Raj 90

63
Ibid
64
Ibid
For example, A transfers a land to B, and puts a condition, that he would leave open a four feet
wide space adjoining A’s own land, and would not build upon it. On this land there is also a
one-foot open drain, and the second condition in the transfer deed directs the transferee to
maintain this drain by carrying necessary repairs from time to time. The first covenant, that
requires the transferee not to build upon four feet wide land, is a negative covenant as it is in
nature of ‘not to do a particular thing’, while the second condition or covenant is a positive
one, as it requires the transferee to ‘do a particular thing’, i.e. to maintain the drain in proper
shape and to carry necessary repairs.

section 10 and section 11: differences

Section 11 talks about restriction repugnant to interest created. The difference between Section
10 and Section 11 is that the former deals with a case of an absolute prohibition against
alienation of an interest created by a transfer and the latter deals with the absolute transfer of
an interest followed by a restriction on its free enjoyment. That is, under Section 10, whatever
interest was conveyed, large or small, limited or unlimited, such interest cannot be made
absolutely inalienable by the transferee. Under Section 11, when once an interest has been
created absolutely in favour of a person, no fetters can be imposed on its full and free
enjoyment. Where, however, the interest created is itself limited, its enjoyment must also be
limited; for example, when a widow’s interest under Hindu Law is granted to a woman, a
direction that she should enjoy only the usufruct without either encumbering the corpus or
committing acts of waste would be valid. But a condition in a deed depriving a co-owner of his
or her claim to partition in respect of the common property would be bad, because, the right to
partition is an essential ingredient of co-ownership.

The insolvency exception

Section 12 provides that where property is transferred subject to a condition or limitation

leaking any interest therein, reserved or given to or for the benefit of any person, to cease on
his becoming insolvent or endeavouring to transfer or dispose of the same, such condition or
limitation is void.

Nothing in this section applies to a condition in a lease for the benefit of the lessor or those
claiming under him.

Although this relates to the restrictions on transfer of property, it is actually an exception to

another general rule provided in Section 31 of the Transfer of Property Act.

Illustration:A transfers property to B with the condition that should B become insolvent, then
his interest in the property would cease. B later becomes insolvent and A seeks to enforce the
condition. In such a case, the condition would be void and B will continue to have interest in
the property.

Condition for the benefit of the lessor

The insolvency exception has been created to prevent a transferee from defrauding his creditors
in such an eventuality by allowing the property to revert back to the grantor through such a
condition. Once again, there is an exception to this rule in the case of a lease, which allows a
lessor to impose such a condition for his benefit in the lease. This implies that a lessor may
stipulate that if a lessee should become insolvent, the lease may be forfeited and the lessor may
re-enter the leased property. Hence, a covenant determining a lease in the event of the
insolvency of the lessee is valid,65 but if the lessee assigns the lease and then becomes
insolvent, the condition does not apply.66 Thus, although there are general rules that prohibit
any restrictions from being imposed on the enjoyment of the interest in the property after a
transfer is made, there are certain exceptions to it. Most of these revolve around transfer of
leases since the lessor retains significant interests in the property even after the lease agreement
is executed.

3.9) Conclusion -

Section 10 lays down that where property is transferred subject to a condition absolutely
restraining the transferee from parting with his interest in the property, the condition is void.
The principle underlying this section is that a right of transfer is incidental to, and inseparable
from, the ownership of the property. The rule that a condition of absolute restraint is void, is
founded also on the principle of public policy allowing free circulation and disposition of
property. It is only a condition which absolutely restrains the transferee from disposing of the
interest that is rendered void. A condition imposing partial restraint may be valid. The test is
whether the condition takes away the whole power of alienation substantially; it is a question
of substance and not of mere form. The section provides two exceptions; one in case of married
women and other in favour of lessor. Moreover, every citizen has a right, under Article 300A
of the Constitution of India, to property and such a right is not to be deprived except in
accordance with law. Even under Article 19 of the Constitution of India the citizen has a
fundamental right to reside and settle down in any part of the Indian Territory. If there is a law
made by the appropriate legislature, the same should be examined from the stand point of
whether it is reasonable restriction or otherwise.

65
Umrao Singh v Baldeo Singh, AIR 1933 Lah 201
66
Smith v Gronow, (1891) 2 QB 394