FACTS OF THE CASE

 Dutta and Manohar (plaintiff) were first cousins.

 By way of will dated 13th June, 1962 Dutta bequeathed the property to Manohar.
 On Dutta’s death in 1966, Manohar acquired the title of the property and sold it to Dhondubai
(defendant), who was also the brother of Dutta.
 The sale deed contained a condition :
“If it is necessary to transfer the aforesaid property by any instrument, then property shall be
transferred into the jangam family and not to others. The property sold on such condition.”
 Which mean that if Dhondubai want to sell the property, he would sell the property to the person
belongs to jangam (caste) family and not to anybody else.
 Dhondubai sold the property to member of Non jangam family.

ISSUE RAISED

WHETHER THE SALE DEED IS IN CONTRAVENTION OF SECTION 10 OF

TRANSFER OF PROPERTY ACT, 1882?

 The issue in this case was whether the condition put in by the plaintiff came under Section 10 of the
Transfer of Property act and thus void or not? This is because Section 10 says that “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”. So the question is to find out whether the restrain was absolute or not.
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. Section 10 to 18 of the Transfer of Property Act, 1882
contain the first set of rules that have to be observed while alienating 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 paper 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 would 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.

Analysis of present case with the help of relevant section and case laws.

Section 101

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 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.

1
The Transfer of Property Act, 1882
The rule in all systems of jurisprudence is alienation rei praefertur juri accrescendi, that is,
alienation is favoured by the law rather than accumulation It was this attitude that made sub-
infeudation make place for substitution.

Restraints on alienation can appear in the following ways:

 Restraints on transfer for a particular time

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

The section is based on the principle that the power of alienation is one of the most important
incidents of property. If total restraints were not prohibited, this important principle would be
abrogated by private agreement. On the same principle, a provision in an agreement among the
members of a joint Hindu family that they would not enjoy the income of the joint family
properties and that they would no claim partition, would be void, though partition is not
alienation.

The section has to be read with Section 12 as they both deal with restraints on powers of
alienation. While a total restraint on the power of alienation is void, partial restraints may be
good. For example, a condition that the transferee shall not transfer his interest for a period of 3
years, or a condition that the transferee shall not transfer the property to any member of a
particular person’s family. But, the determination where a condition amounts to a total or partial
restraint depends upon the substance and not the form. For example, an agreement preventing the
transferee from transferring his property to anyone except to the transferor or his heirs, and that
too if they are willing to buy it at a fixed price, is in substance an absolute restraint.
Exceptions to the General Rule

The section makes two exceptions; one in favour of lessors and the other in case of married
women.

In the case of lessors, the condition will be good only “if it is for the benefit of the lessors”, as
for example a specific statement in the conveyance that the lessor may re-enter. The effect of
contravening a mere condition against assignment in a lease will not make an assignment in
contravention of such a condition automatically void. Without an express provision for re-entry,
the lessor will only be entitled to damages for breach of covenant.

A valid condition against alienation of the leasehold interest can be imposed in respect of
voluntary and involuntary alienations, such as, sale in execution. But in the case of voluntary
alienations, there should also be a condition for re-entry to make the condition against alienation
valid. 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 is valid.

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.

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.
Section 122

Condition making interest determinable on insolvency or attempted alienation.-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 endeavoring 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.

In Rosher v. Rosher3, 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 Gayasi Ram v. Shahabuddin4, 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 Zoroastrian Co-operative Housing Society Ltd v. District Registrar Co-operative

Societies , 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

2
The Transfer of Property Act, 1882

3
Rosher v Rosher, (1884) 26 Ch D 801
4
AIR 1935 All 493, 157 Ind Cas 897
In K Muniswamy v. K Venkataswamy5 , 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.

In Dugdale v. Dugdale , it was observed:

The liability of the estate to be attached by creditors on a bankruptcy or judgment is an incident

of the estate, and no attempt to deprive it of that incident by direct prohibition would be valid…
An incident of the estate given, which cannot be directly taken away or prevented by the donor,
cannot be taken away indirectly by a condition which would cause the estate to revert to the
donor, or by a conditional limitation or executor device which would cause it to shift to another
person.

These observations show that creditors may have made advances on the strength of property the
transferee has. They should not be deprived of their security because of a clause in the transfer of
which they know nothing. Hence, this rule has been enacted as an exception to the general rule
embodied in Section 31 and 32, that an interest may be created with the condition superadded
that the interest shall cease on the happening of an uncertain event.

5
K. Muniaswamy v K. Venkataswamy, AIR 2001 Kant 246
Restraint on enjoyment of Property

Section 116 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 principle is that a condition will be void, if it detracts from the completeness of the very
interest created; it will be good if it is consistent with such interest. Thus, where; an absolute
estate is granted, but a condition is imposed on the alienee requiring him to reside in a particular
place, the condition is not valid and cannot be enforced.

The second paragraph of Section 11 relates to the rights of a transferor as against the transferee.
These are

 To enforce the performance of a positive covenant

 To restrain the breach of a negative covenant.

6
The Transfer of Property Act, 1882
After the 1929 amendment, although affirmative and negative covenants are valid as between a
transferor and a transferee, only negative covenants can be enforced against a transferee from the
first transferee by reason of Section 407.

The first and third paragraphs of section 40 may be compared with second paragraph of section
11. While the latter deals with the transferor’s rights against the transferee, this section deals
with the right against the transferee from the first transferee. The 1929 amendment confined the
section to negative or restrictive covenants.

The law in England was that in the case of a covenant between the vendor and the vendee of a
land, its benefit ran with the land of the covenantee but its burden did not run with the land of
covenantor; but if the covenant was negative on the user of the land by the covenantor, it will be
enforced against the covenantor’s transferee if he had notice of the covenant or the transfer was
gratuitous. And in determining whether a covenant was positive or negative it is the substance of
the covenant and not its form that matters. This is the law in India also after 1929 amendment.
The reason for the rule is this: If a person sells land with a covenant he would not get full value.
Why should a purchaser from him be then allowed to ignore the covenant and sell it free of the
covenant and get a better value? Incidentally, a purchaser with notice from a transferee without
notice is not bound by the covenant.

7
The Transfer of Property Act, 1882
JUDGEMENT
Bombay High court in this case held that the condition incorporated in the sale deed absolutely
restrained the defendant from parting with his interest in the property and therefore was void under
section 10 of Transfer of Property act. The court upheld the validity of sale affected by defendant.
The judge in this case stated that “Even assuming that the learned Counsel is right in her submission
that the defendant has committed breach of the covenant, that does not advance the plaintiff's case to
any extent, because the condition would be void under Section 10 of the Transfer of Property Act.
The Allahabad High Court has ruled in Gayashi Ram "in order to see whether there is absolute
restraint or not, one has to examine the effect of all the conditions and find whether for all practical
purposes alienation is prohibited. The mere fact that there may be some remote contingency in which
there may be a possibility of an alienation taking place would not necessarily take the case out of the
prohibition contained in Section 10." With respect, I agree with these observations of the learned
Judges. The ratio of this decision applies to the case before me on all fours. The finding of the
District Court will have to be upheld that the conditions incorporated in the sale deed executed by the
plaintiff in favour of defendant is void under Section 10 ibid. Broach of the condition, even if
assumed to be proved, is neither here nor there. This second appeal has no merit, and is accordingly
dismissed with costs.”
ANALYSIS

Bombay High Court failed to interpret the sale deed properly in accordance to the Section 10 of
Transfer Of Property Act, 182, The judgment given by the Bombay High court was not justified
according to me, the restraint of the condition provided by the plaintiff was not absolute but was
rather partial. 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. 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 under section 10 of Transfer of Property
Act which states that “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”. According to this rule the defendant was not absolutely restricted to sell the property but is
just partially restricted which is valid by law as he can sell the property to a certain class of
individuals. 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 and thus should have been applied in this case as well, but was rather
ignored in this situation.