"M" a member of a housing society purchases a plot and later on sells it to "D", a non-member. Under the bye-laws of the society, such transfer is not permitted......Decide.

Question: "M" a member of a housing society purchases a plot and later on sells it to "D", a non-member. Under the bye-laws of the society, such transfer is not permitted. "M" claims that the bye-law of the society infringes Section 10 of the Transfer of Property Act. Decide. [UPJS 2012]

Find the answer to the mains question of Property Law only on Legal Bites. ["M" a member of a housing society purchases a plot and later on sells it to "D", a non-member. Under the bye-laws of the society, such transfer is not permitted. "M" claims that the bye-law of the society infringes Section 10 of the Transfer of Property Act. Decide.]

Section 10 in the Transfer of Property Act, 1882 lays down the provision regarding conditions restraining alienation. The provision runs down as below:

“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 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.”

Section 10 stipulates that any condition imposed on the transferee which would amount to an absolute restraint on the right of the transferee to dispose of his interest in the property shall be void. The property must be transferred to the transferee subject to the condition.

In Rosher v. Rosher, (1884) 26 Ch D 801, A made a gift of a house to B and gave a condition that if B decides to sell the house during the lifetime of A’s wife, she should have the option of purchasing it for Rs 10000, while the market value of the house was set at Rs 10,00,000. This condition was held to be an absolute restraint and was declared void.

In the landmark case of, Zoroastrian Cooperative Housing Society Ltd v. District Registrar, Cooperative Societies (Urban) and Others, AIR 2005 SC 2306, the Apex Court observed that Section 10 provides that where the 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 is void. Therefore, such a condition imposed by a bye-law on its member that he cannot alienate the property to a non-Parsi person would be prima facie illegal.

Moreover, every citizen has a right under Article 300A of the Constitution of India, to property, and such a right to property is not to be deprived except in accordance with the 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 can be a restriction on such a right, the same could be only by appropriate legislation. If there is a law made by the appropriate legislature, the same could be examined from the standpoint of whether it is a reasonable restriction or otherwise. However, A bye-law being not law cannot restrict the rights of citizens.

The Apex Court further held that the bye-law is a contract and the freedom of contract cannot be curtailed and, by relying upon the fundamental rights, the bye-law restricting membership to the members of one community cannot be said to be illegal or contrary to public policy or violative of Articles 14, 15 or 19 of the Constitution of India. The Apex Court further held that the bye-law prohibiting the transfer of property by a member to a non-member is not violative of Section 10 of the Transfer of Property Act and such bye-law even does not offend Article 300A of the Constitution of India.

Therefore, a bye-law of a housing society as given in the present case cannot be said to infringe upon section 10 of the Transfer of Property Act.