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 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.

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 property in various ways. In Renand v. Tourangeaon, (1867). LR 2 PC 4, 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.

In Mata Prasad v. Nageshera Sahal, (1925) 47 All 884, 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.

Exceptions:

1. Lease: When the condition is for the benefit of the lessor or those claiming under him, it will be valid. Thus a condition in lease that the lessee should not sublet or assign is valid. The logic behind this exception is that landlord should be free to choose the person who shall be in possession of his land.
2. Marriage woman: A condition restraining alienation may be imposed when the property is transferred to a married woman is not a Hindu Mohammedan or a Buddhist.

Restriction on Free Enjoyment of Property

Section 11. Restriction repugnant to interest created “where, on a transfer of property, an interest therein is created absolute in favour of any person, but the terms of 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.”

Thus a transferee of property who takes an absolute interest cannot be restrained in his enjoyment or disposition of it by any condition inserted in the transfer.

Section 11 provides that any condition restraining the enjoyment of the property which is transferred absolutely is void. When a property is transferred absolutely, it must be transferred with all its legal incidents. If any condition or limitation is imposed in the deed of conveyance, that would be repugnant to Section 11 of the T.P. Act; Smt. Manjusha Devi v. Suinit Chandra Mukherejee, AIR 1972 Cal 310.

The following restrictions are void according to Section 11 of T.P. Act—

(i) A makes an absolute gift of a house to B with a condition that the gift will be forfeited if B does not reside in it.

(ii) The transferee should always let the land at a definite rents or cultivate it in a particular manner.

Section 11 is practically a corollary to Section 10. The distinction between Section10 and 11 is that under Section 10, the restriction is directed against the transfer of the interest while under Section 11, the restriction is directed against free enjoyment. Section 10 is applicable to all transfer whether limited or absolute, whereas Section 11 will not apply unless the transfer absolute, and the restriction is imposed by the terms of the transfer.

Exception

The second paragraph of Section 11 provides the exception to the general rule contained in first paragraph. According to it, the transferor may impose conditions restraining the enjoyment of land if such conditions are for the benefit of his (transferor’s) adjoining land.” Tulk v. Moxhay, 2 Phill 774.

Illustrations:

(1) A owns two properties X and Y, and sells X to B. A imposes restriction on B that he shall for the more beneficial enjoyment of Y, keep open a portion of X enjoyment of Y, keep open a portion of X adjoining Y and not build on it. The restriction is valid and enforceable against B.

(2) A owns two properties X and Y and sells X to B and imposes a condition on B that B shall lay out money in building and repairing a drain passing over X adjoining Y. The restriction is valid and enforceable.

(3) A makes an absolute gift of a house to B, and directs that B shall not raise it higher, so as to obstruct the passage of light and air to A’s adjoining house, the direction will be valid.

Section 12. Condition making interest determinable on insolvency or attempted alienation

When property is transferred subject to a conditions or limitation making any interest therein, reserved or give 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 is lease for the benefit of the lessor or those claiming under him.” This section provides that a condition that the grantee shall cease to have any right on becoming insolvent or that the shall cease to have any interest on attempting to alienate property, is void.

The principle behind this provision is that it would be unjust that the grantee should enjoy and possess all the incidents of ownership of property and yet be deprived who have made advances on the strengths of the property should be prevented of the right of alienation incident to such ownership; and it is equally unjust aiming, that the creditor who may have made advances on the strength of the property should be prevented from having recourse to the property transferred for satisfaction of their debts on account of clause in the transfer, which none but the grantor and the grantee may know nothing about.

The exception to this section provides that nothing in this section applies to a condition in a lease for the benefit of the lessor or those claiming under him.