PROJECT OF TRANSFER OF PROPERTY ACT

TOPIC – SECTION 10 OF TRANSFER OF

PROPERTY ACT

SUBMITTED TO -Mrs. PARUL SINHA

NAME - ASMIT WADHWA, 22

SAP ID - 500055130
NAME – KARTIKEY YADAV, 41
SAP ID - 500054879

B.COM LLB HONS. BATCH 1

 INTRODUCTION

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.1

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

1
Kanchi , Absolute and Partial Restraint on Transfer ,(13th Nov ,2017, 8 pm )
https://www.lawctopus.com/academike/restraints-on-transfer/
researcher will analyse the law in light of decided Supreme Court and major High Court
cases.

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.2

Whereas the Section 11 deals with Restriction repugnant to interest created3

: Where, on a transfer of property, an interest therein is created absolutely in favour 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 immoveable 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

Explanation :- If a property is transferred absolutely in favour of the transferee, then any

condition or termsof transfer, restricting the full enjoyment of the property (i.e.)
repugnant to the interestcreated, then the transferee is empowered under sec 11 of TP Act
to receive and dispose the property as if there was no such condition . 4

2
https://www.legalbites.in/restraints-transfer-section-10/
3
Gokul Sundar K Ravi , condition restraining alienation (15th Nov, 2017,5pm)
http://www.academia.edu/14343318/Sec_10_and_11_of_TP_Act_1882
4
Id 3
 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 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.[xii] 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.5

5
Kanchi , Absolute and Partial Restraint on Transfer ,(15th Nov ,2017, 2 pm )
https://www.lawctopus.com/academike/restraints-on-transfer/
 Absolute Restraint

Absolute restraint refers to a condition that attempts to take away either totally or
substantially the power of alienation.6 Section 10 says that where property is transferred
subject to a condition or limitation which absolutely restraints the transferee from parting
with or disposing 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 Fry, “from the earliest times, the courts have always learnt against any
devise to render an estate inalienable.” 7

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 8

6
Canbank Financial Services Ltd. V Custodian, (2004) 8 SCC 355
7
Zoroastrian Co-operative Housing Society v District Registrar Co-opertaive Societies (Urban), AIR 2005 SC 2306
8
Sardakripa v Bepin Chandra, AIR 1923 Cal 679
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.9 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.10

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 the heirs were entitled to ignore the restraint on
alienation and deal with the property as absolute owners.11

The condition restraining lessee from alienating leasehold property is not illegal or
void.12

9
Rama Rao v Thimappa, AIR 1925 Mad 732
10
DhavaniAmmaKankadevi v C.S.I. Dekshina Kerala MahaIdavaka, AIR 2002 Ker 3
11
Kannamal v Rajeshwari, AIR 2004 NOC 8 (Mad
12
RaghuramRao v Eric P. Mathias, AIR 2002 SC 797
 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.13

A restriction for a particular time or to a particular or specified person14 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 Sahai15, 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

13
K. Muniaswamy v K. Venkataswamy, AIR 2001 Kant 246
14
Mohd. Raza v Abbas BandiBibi, (1932) 59 IA 236
15
(1927) 47 All 484
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 substantially absolute
restriction is limited by a time period that is, it applies for a specific time period only, it
remains void.

Exceptions to the general rule

Section 10 provides two exceptions to the rule againstinalienability. First, Section 10
does not prohibit conditions orlimitations in the case of a lease, which are beneficial to
the lessoror those claiming under him. Second, property may be transferredfor the benefit
of a woman who is not a Hindu, a Muslim, or aBuddhist, such that she shall not have the
power to transfer theproperty or change her interest therein during her marriage.
Thisexception is based on the doctrine of coverture that operated inEngland in the
nineteenth century. There, women could be givenproperty for their enjoyment without the
right to alienate theproperty during her marriage. The rule protected women frombeing
forced to alienate their property in favour of their husbands.However, despite the
abolition of the doctrine of coverture inEngland, this exception continues to remain on
the statute booksin 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.16

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.17 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 property18 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.

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.

16
RaghuramRao v Eric P. Mathias, AIR (2002) SC 797
17
Raja JagatRanvir v Bagriden, AIR 1973 All 1
18
Rama Rao v Thimappa, AIR 1925 Mad 732
Relevant cases

InRosher v. Rosher19, 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. Shahabuddin20, 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 Swami21 , 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.

20
AIR 1935 All 493
21
AIR 1988 Bom 116
In Zoroastrian Co-operative Housing Society Ltd v. District Registrar Co-operative
Societies22, 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 Venkataswamy23, 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.

22
Zoroastrian Co-operative Housing Society v District Registrar Co-opertaive Societies (Urban), AIR 2005 SC
2306
23
Kannamal v Rajeshwari, AIR 2004 NOC 8 (Mad)