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PROPERY LAW ASSIGNMENT , FOL, JAMIA, 2018-19

Property law assignment

TOPIC-
CONDITION RESTRAINING ALIENATION OF PROPERTY AND ITS EXCEPTION

Submitted by
RAGHIB NAUSHAD
Roll No. 45 of
BA LLB (Hons.), Sem., III (R)

Faculty of Law
Jamia Millia Islamia.
In
November, 2018

Under the guidance of

DR. QAZI MOHD USMAN
Assistant Professor
Official Address:
Faculty of Law,
JAMIA MILLIA ISLAMIA,
NEW DELHI- 110025
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PROPERY LAW ASSIGNMENT , FOL, JAMIA, 2018-19

CERTIFICATE

The project entitled “ ----------------------------------------------------------------------

------------------------------------------------------------------------------------------------
---------------------------------- “ submitted to the Faculty of Law, Jamia Millia
Islamia for Property Law as part of Internal Assessment is based on my
original work carried out under the guidance of---------- ----------from---------- --
----to-------------- . The Research work has not been submitted elsewhere for
award of any degree.

The material borrowed from other sources and incorporated in the research
paper has been duly acknowledged.

I understand that I myself would be held responsible and accountable for

plagiarism, if any, detected later on.
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INDEX

ACKNOWLEDGEMENT……………………………..…4
INTRODUCTION…………………………………....5 to 6
IMPORTANCE………………………………………6 to 7
RESTRAINT ON TRANSFER……………………..8 to 16
EXCEPTIONS……………………………………..16 to 18
BIBLIOGRAPHY……………………………………….19
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ACKNOWLEDGEMENT

I would like to express my special thanks of gratitude to Prof.

QAZI USMAN sir as well as the dean of our faculty Prof. Nuzhat
Parveen Khan who gave me the golden opportunity to do this
wonderful project on the topic “CONDITION RESTRAINING
ALIENATION OF PROPERTY AND ITS EXCEPTION”, which
also helped me in doing a lot of Research and i came to know about
so many new things I am really thankful to them.
Secondly I would also like to thank my parents and friends who
helped me a lot in finalizing this project within the limited time
frame.
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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“.
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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.

IMPORTANCE
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
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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.
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RESTRAINTS ON TRANSFER – SECTION 10

Section 10:-
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 of limitation is void. Except in the case of lease
where this 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 woman (not being a Hindu, Mohammedan or
Buddhist) so that she shall not have p transfer or charge the same
for her beneficial interest therein”.

This is based on the general rule of jurisprudence “alienatio rei

prae fertur juri accrescendi” that is to say that alienation is
favoured by law rather than accumulation. This is general
economic principal that there should be free circulation and
disposition of property. An absolute restart is repugnant to the
nature of the estate and is an exception to the very essence of the
grant.

This section 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. Thus, if a
transfers his property to B with a condition that B shall never sell it,
or shall sell it only to a particular person, the condition is void, and
B any sell or not as he pleases. Here the sections Olovs that only
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the condition (restraining alienation) is void and not the transfer

itself.

In Rosher v. Rosher, (1884) 26 Ch D 801, a person A made a gift

of house to B with a condition that if B sold during the life-time
of A‟s wife, she should have an option to purchase it for Its.
10,000. The value of the house was Rs. 10,00,000. This was held to
be a effect an absolute restraint and void.

When a property is transferred absolutely it must be transferred

with all its legal incidents. Section 8 of the set also provides that
unless different intention is expressed (or implied), a transfer of
property passes forthwith to the transferee all the interest which the
transferor is then capable of passing in the property and in the legal
incidents thereof.
In Achammal v. Raja Manickam1
Once an absolute right had been vested in the second defendant, in
respect of the properties bequeathed to him by way of a Will, no
further condition could have been imposed, as per Sections 10 and
11 of the TP Act, restraining the alienation of the property or by
creating a restriction repugnant to the interest created in such a
property — Section 138 of the Succession Act, makes it clear that
when a Will contains a direction that the property bequeathed,
absolutely, should be applied or enjoyed in a particular manner, the
legatee shall be entitled to receive the said property as if the Will
had contained no such direction.

1
AIR 2010 Mad. 34.
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In Sarju Bala v. Jyotirmoyee2, it was held that,

the limitation as to the right of succession to the property is void,
but the grant to Kripamoyee being one of inheritance she got an
absolute title as a permanent tenure-holder and was entitled to deal
with the property as she liked. The estate did not revert to the donor
or his heirs after Kripa moyee's death and, therefore, assuming that
the plaintiffs are heirs of Raja Kali Narayan they are not entitled to
the property. In the view I have taken, it is not necessary to express
an opinion on the question whether a defeasance clause and a right
of reentry of the lessor providei in a lease may or may not be void
for remoteness, as in this case I think the defeasance clause is void
being contrary to the general law of inheritance. The result is that
this appeal will stand dismissed with costs to be divided equally
among the different sets of respondents appearing in this Court.

In Tagore v. Tagore3 the distinction was made by the Privy

Council which is as follows:-
(1) The Bengali father has the same power of disposition over
ancestral as over self-acquired property, even to the preju-dice of
the son.

(2) Inheritance being a thing laid down by the State for rea-sons of
public policy, a private person cannot lay down a mode of
inheritance unknown to the law. Thus if a testator grants property
to a person and his eldest nephew and the eldest nephew of such
nephew, and so forth, here the mode of inheritance not being legal,

2
(1931) 35 CWN 993
3
1872 9 Beng LR 37
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it fails except as to those persons in whose favour it is valid by way

of gift. Here the succession of life-estate, being repugnant to Hindu
law, it fails as a mode of inheritance. It remains to be seen whether
it can be upheld by the law of gift.

(3) Under the Hindu Law, in the case of a gift, the donee must be a
person in existence and, therefore, the life-estate of Jitendra‟s
unborn son is illegal.

(4) The next question is “whether the life-estate of Jitendra‟s son

being illegal the grant to Surendra who is living, is illegal”. It is not
valid because he was to take only on „failure of determina­tion‟ of
the previous estate. The condition precedent must be fulfilled in the
manner contemplated by the testator; the life estate of Surendra is
invalid.

(5)Trusts of various kinds have been reorganised and acted on in

India and there is no reason why they should not be upheld, if
created by Hindus. But the interposition of trustees in this case
cannot cure the illegality of the will. Trusts for illegal purposes are
invalid.

(6) The maintenance is sufficient. The amount of mainte-nance is

to be determined by various circumstances among which the
magnitude of the property is one; but it is not to have a fixed
proportion to the extent of the property.
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(7) The result is, as to everything after Jitendra‟s life estate, there
was an intestacy, and the plaintiff would succeed, not as legatee,
but as heir in spite of his being expressly disinherited. A general
provision in the will that the heir at law shall be disinher-ited is
ineffectual, without a valid bequest to another person.

The principles of Hindu Law laid down in this case were a

governing factor for half century. Now it has been superseded by
the Hindu Disposition of Property Act (XV of 1916) which
pro-vided that a gift of bequest to an unborn person is valid,
provided he is given an absolute interest and the gift is in
conformity with Section 113 of the Indian Succession Act, 1925.

Absolute and Partial Restriction

The conditions or limitation on alienation may d be either absolute
or partial. Absolute restraints are declared void under Section 10,
however partial restraints may be allowed.

Whether a condition amounts to a total or partial depends upon the

substance, i.e., the real effect of the condition and not the form of
words laying down the condition. An absolute restraint is one that
takes away the power of alienation completely or substantially,
whereas, partial restraint is one that imposes some restriction on the
power of alienation but the tram is substantially free to alienate
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property in various ways. In Renand v. Tourangeaon4, it was held

that a condition that transferee shall not transfer the property for a
period of twenty years is an absolute restriction and thus void. If it
were a condition that transferee shall not transfer the property for a
period of 3 years, it would be a partial restraint and thus valid.

Illustrations:-
(i) A condition that transferee shall not transfer the property by way
of gift, is a partial restraint and thus valid.

(ii) A condition that transferee shall not transfer the property

family/or to a particular person only, is a partial restraint and thus
valid.

On the other hand, if a transferor A transferred a filed to transferred

B, with a condition that if he sold it he must sell to C (A particular
person) and nobody else. The restriction was held to be absolute
and thus void.

(iii) A stipulation in a sale-deed that the vendee could sell-back the

property to the vendor only, and to no one else, is more than a mere
partial restraint, and thus invalid.

(iv) A compromise by way of settlement of family disputes has

been held to be valid, although it involves an agreement in restraint
of alienation.

4
(1867). LR 2 PC 4
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In Mata Prasad v. Nageshera Sahai5, a dispute relating to

succession between a widow and the nephew was compromised on
terms that the widow was to retain possession for life while the title
of the nephew was admitted with a condition restraining him from
alienating during her life-time. The compromise was held to be
valid.
In Gayashi Ram v. Shahabuddin6, 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 Swami7, 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.

5
(1925) 47 All 884
6
AIR 1935 All 493, 157 Ind Cas 897
7
1958 AIR 255, 1958 SCR 895
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In Zoroastrian Co-operative Housing Society Ltd v. District

Registrar Co-operative Societies8, 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 Venkataswamy9, 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 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.

8
AIR 2015 SC 334
9
ILR 2000 KAR 3450
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EXCEPTIONS:-
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 favor 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
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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.
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. 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, 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
property 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 the property and from encumbering it or

alienating it while she is under husband‟s protection and shelter.
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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.
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BIBLIOGRAPHY

BOOKS
1. Dr. G.P. TRIPATHI, THE TRANSFER OF PROPERTY ACT,
9th edn., 2018, (CENTRAL LAW PUBLICATION).

2. DR. R.K. SINHA, THE TRANSFER OF PROPERTY ACT, (

CENTRAL LAW AGENCY).

WEBSITES
1. www.indiankanoon.com
2. www.scconline.com
3. www.manupatra.com
4. http://www.academia.edu/14343318/Sec_10_and_11_of_TP_Ac
t_1882
5. https://www.lawteacher.net/free-law-essays/property-
trusts/property-carries-with-it-certain-basic-rights-law-
essays.php