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The Invisible Handcuffs: Understanding Restraints On Property Alienation

Is your right to sell your property truly absolute? Unravel the intriguing world of section 10 and discover the hidden limitations.

Section:10 Condition Restraining Alienation

In cases where property is transferred with a condition or limitation that completely restricts the transferee or anyone claiming their rights from selling or transferring their interest in the property, such conditions or limitations are considered invalid. However, there is an exception in the situation of a lease, where the condition benefits the lessor or those connected to them.

Additionally, there is an exception of allowing property to be transferred to or for the benefit of a woman (excluding Hindus, Muslims, or Buddhists). In such cases, she may not have the authority during her marriage to transfer or encumber the property or her beneficial interest in it.

Possessing an ownership of the property comes with inherent rights, including the entitlement to hold its title, the privilege to exclusively possess and relish it without interference, and the freedom to transfer it as desired, except as regulated by legal provisions. An absolute right to dispose of the property indicates that the owner has the authority to trade it for value, offer it for religious or charitable objectives through donation, provide it as a gift, utilize it as collateral for a loan, or make it available for lease.

As aforesaid, except through legal means, no external party can infringe upon this authority or entitlement of the owner, nor can they instruct the owner on the method of transfer, whether to transfer at all, or the specific purpose for which the property should be utilized.

Right to alienation represents a fundamental entitlement of property owners, safeguarding them from unjust intrusion by others. This fundamental principle holds true even in cases where there is a specific contract suggesting otherwise. Additionally, it ensures that the original owner cannot impede the transferee's ability to transfer ownership interest in the property once it has been conveyed.

Unveiling The Legal Tapestry: Zoroastrian Coop. Housing Society Ltd. V. Registrar, Coop. Societies

Any law which provides for these special privileges to this class would not violate fundamental rights like Articles 14 (right to equality), 19 (1)(f) and 31 (then right to property), 19(1)(e) (right to settle anywhere in the country) and even Article 21 (right to life and personal liberty) and 22 (protection against preventive detention). It was unthinkable in a constitutional democracy�. CJI quoted on Article 35A demolished case.

In the pivotal judgment of Zoroastrian Coop. Housing Society Ltd. v. Registrar, Coop. Societies (Urban), 2005, a society was formally registered under the Bombay Co-operative Societies Act. Its primary objective was to construct residential houses. The society's regulations explicitly restricted membership solely to Parsis. Additionally, the bye-laws contained a clause prohibiting members from transferring houses to non-Parsis.

The Bombay High Court ruled that any byelaw within a cooperative housing society that discriminates based on religion, race, or caste, hindering an individual's ability to transfer membership and property rights, is legally unacceptable. Constraints on transferring membership and property rights to individuals outside the Parsi community were deemed unlawful.

Moreover, by applying Section 10 of the Transfer of Property Act in this case, it is evident that a condition or limitation on property transfer preventing the transferee or their successors from selling or transferring their interest is invalid. The byelaw imposing restrictions on a member, preventing the alienation of property to a non-Parsi, is prima facie illegal.

The case was appealed to the Supreme Court, where the Court concluded that an individual who joins a cooperative society and agrees to adhere to its rules, including the stipulation that property can only be transferred with the society's prior approval to an eligible society member, does not impose a complete restraint on property transfer.

Therefore, this does not violate Section 10 of the TP Act. As a result, the High Court's decision, asserting that the restriction barring society members from selling their allotted property to non-Parsis constituted an absolute prohibition on property transfer and was unsustainable, was overturned by the Supreme Court. The Supreme Court clarified that the provision in the bylaws, restricting sales to Parsis rather than non-Parsis, constituted a partial limitation rather than an absolute one.

The Constitutional Validity Of Article 300a: A Study Of The Right To Property In The Indian Constitution

Exploring the complexities of the ruling by the Supreme Court has been met with significant concern and debate. On the surface, it appears to conflict with fundamental rights enshrined in the Indian Constitution, specifically Article 19(1)(f) and Article 31 (now repealed with Article 300A).

These cornerstone rights are deeply woven into the very fabric of the Constitution, and their erosion could potentially leave irreparable damage. These fundamental rights, guaranteeing freedom of trade, profession, and property, are intricately woven into the very fabric of the Indian Constitution. They cannot be summarily dismissed without causing irreparable damage to the Constitution's delicate balance and its overarching commitment to individual liberties.

In 1978, the forty-fourth Amendment to the Constitution instigated a pivotal transformation in the status of the right to property, reshaping its definition and impact. This amendment marked a significant shift by abolishing Article 31, thereby relocating the right to property from the domain of fundamental rights.

Instead, it was redefined as an ordinary constitutional right through the introduction of Article 300A, which succinctly declares:
"No person shall be deprived of his property save by authority of law." Post the 44th Amendment, the right to property became a dual entity-an entrenched fundamental human right as well as a constitutional right. The prerogative to transfer land stands as a natural extension of the right to possess land and cannot be annulled without due legal sanction. The construct of land ownership embodies a spectrum of entitlements, with the right to transfer being a fundamental component.

Furthermore, ensconced within the segment entitled "Right to Freedom," this article bestows upon citizens the entitlement to acquire, possess, and dispose of property. The interlinkage between property and freedom is unequivocally evident, requiring little exposition to underscore this intrinsic connection."

"Constitutional Intent and Cooperative Societies: Rights, Restrictions, and Public Policy"- The legislation under Article 46 of the Indian Constitution places a mandatory responsibility on states to safeguard the interests of scheduled castes and tribes against social injustice and exploitation. Several states, including Bihar, Madhya Pradesh, Rajasthan, Orissa, and West Bengal, have enacted laws to protect property rights of individuals from minority backgrounds.

While the argument aligning Articles 14 and 15 with the Constitution's preamble appears compelling, which prohibits discrimination based on religion or origin, particularly in cooperative societies, it is essential for the Court to consider the foundational principles governing these societies across states as per Cooperative Societies Acts. This means that an individual might face refusal of membership in a cooperative society if they reside outside its operational area.

Shouldn't every citizen possess the fundamental right to reside or conduct business anywhere within the nation, including applying for membership in any cooperative society irrespective of their residential location? Can a Registrar justify the rejection of such a member citing public policy?

This dilemma challenges the notion of limiting a society's operational boundaries. Consequently, we opine that adherence to the statutory definition of public policy should take precedence. Compelling societies to contravene their bye-laws, which restrict membership based on their criteria, would not be justifiable.

In conclusion, it's crucial to recognize that while enforcing a decree or obligation through the attachment and sale of a member's rights in a building or plot cannot align with provisions allowing absolute restrictions on alienation in the bye-laws, certain conditions-like member qualifications or stipulations for voluntary transfers to the cooperative society or qualified members with consent-do not necessarily constitute absolute restraints on alienation.

Hence, our confidence in the determination that the restrictions imposed within the Society on a member's rights amount to absolute restraints on alienation and, consequently, infringe upon their property rights protected by Article 300A of the Constitution of India remains steadfast.

Written By: Mr. Avi Jain, 4th Year B.COM., LL.B.(Hons.) Student at Gujarat National Law University, Gandhinagar.

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