Restraints on Transfer - Section 10

Section 10 of the Transfer of Property Act provides the condition restraining alienation. The section reads as

“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, alienation is favoured by law rather than accumulation. This is a general economic principle 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 states that where the 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 the condition that B shall never sell it or shall sell it only to a particular person, the condition is void, and B may sell or not as he pleases. Here the sections provide 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 the house to B with the condition that if B sold during the lifetime of A’s wife, she should have the option to purchase it for an amount of 10,000. The value of the house was 10,00,000. This was held to be 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 a 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 limitations on alienation may 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 restriction 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. In contrast, partial restraint is one that imposes some restriction on the power of alienation, but the party 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 the 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 the transferee shall not transfer the property for 3 years, it would be a partial restraint and thus valid.

Illustrations

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

(ii) A condition that the transferee shall not transfer the property to a family/or to a particular person only is a partial restraint and thus valid.

On the other hand, if a transferor A transferred a field to B, with the condition that if he sells 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 lifetime. 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 the lease that the lessee should not sublet or assign is valid. The logic behind this exception is that the 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 is absolutely 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 Debi v. Sunil Chandra Mukherejee, AIR 1972 Cal 310.

The following restrictions are void according to Section 11 of Transfer of Property Act

(i) A makes an absolute gift of a house to B with the 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 rent or cultivate it in a particular manner.

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

Exception

The second paragraph of Section 11 provides the exception to the general rule contained in the first paragraph. According to it, the transferor may impose conditions restraining the enjoyment of land if such conditions benefit his (transferor’s) adjoining land.” Tulk v. Moxhay, [1848] 41 ER 1143

Illustrations

(1) A owns two properties, X and Y, and sells X to B. A imposes a 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, imposing a condition 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 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 a property is transferred subject to conditions or limitations making any interest therein, reserved or given 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 a 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 to becoming insolvent or that they shall cease to have any interest in 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. 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 the satisfaction of their debts on account of a 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.