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Restrain on Transfer of Property

Introduction to Transfer of Property

The Transfer of Property Act, 1882 governs the law relating to property in India. Before this act came into force, there was practically no law in India related to real property. Few points which were covered certain Regulations and Act, Courts in India applied the rules of English law as to justice, equality, and good concise. Property has always been one of the basic elements of an individual's socio-economic life.

Transfer of property is a Concurrent Subject both Central and State government can take legislative action in respect of the transfer of property except that relating to agriculture land which is a state subject. The objective of the Transfer of Property Act, 1882 is to provide uniform rules for the transfer of property.

Section 5 of the Transfer of Property Act, states that Transfer of property means an act by which living person conveys property in present, or in future to one or more other living persons. The term 'Living persons' also includes company, association or body of individuals whether incorporated or not[1].

The parties involved in Transfer of property are Transferor and Transferee. The law relating Transfer of property is the important branch of civil law. The Transfer of Property Act,1882 majorly deals with the immovable property and is applicable to those transfer which takes between living parties, the Act would not be applicable if the property is transferred or disposed of through will same would be applicable under Indian Succession Act, 1925.

Although chapter II of the Act deals with both kinds of property. If the Transfer takes place by operation of law then the provisions of the act would not be applicable in that case. Operation of law means the transfer in the form of inheritance, insolvency, forfeiture, or sale in execution of a decree. Property being transferred must be as per rules prescribed under this Act. Both transferor and transferee must be competent to Transfer and should satisfy all the conditions laid down in Section 7 of the Act which deals with the essential elements of the valid transfer[2].

Restrain on Alienation

Section 10 of Transfer of Property Act, 1882

Where property is transferred subject to the condition or a 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 the limitation is void, except in the case of 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[3].

Conditions Restraining Alienation

Whenever any person who is the owner of any property and is competent to transfer the property, may transfer such property either with or without condition. Such conditions act as limitations or restrictions on the rights of the transferee. Conditions concerning transfer may either be condition precedent or condition subsequent.

Condition precedent means the terms of transfer of property imposes a certain condition which must be fulfilled before a person can take interest in the property. Condition subsequent requires the transferee to fulfill the conditions imposed upon him immediately after the property is vested.

In the case of Omwati v. State of Haryana[4], it was held by the High Court of Punjab-Haryana that any restriction imposed by the government on the alienation of property cannot operate from the retrospective effect without enabling the provision in the statute.

Absolute restrain

Restrain on alienation is said to be absolute when it totally takes away the right of disposal. Section 10 of the Act says that when any condition or limitation imposed which absolutely restrains the transferee from disposing of his interest then such restriction will be treated as void and will not have any effect.

However, the transfer will be treated as valid. Section 10 relieves the transferee of an immovable property from any such absolute restrain placed on his right to deal with the property in his as owner. Section 10 applies to a case when any property is transferred with any such condition or limitation which restricts transferee from disposing of his interest for making such a condition invalid the restrain must be absolute restrain.

In Achammal v. Rajamanickam Krthikeyan[5], Will contained a direction that the property bequeathed should be applied or enjoyed in a particular manner. The court said that once a property is bequeathed absolutely, a condition imposing restraining would be void. Therefore, the Court came to the conclusion that the legatee was entitled to receive the property and deal with the property as if no such condition was there in the will.

When any such property is transferred with condition which absolutely restrains the transferee from alienating such property or disposing of his interest then such condition will be treated as void.

The owner of the property has liberty to sell the property to whomsoever he may desire at any time and for any consideration. There are certain integral components while transferring the property and it is totally at discretion of the transferor to decide the time and consideration of transfer. Restrain on alienation of property can be with respect to time, person, consideration and purpose.
  • Restriction imposed with respect to time:

    when any condition is imposed upon transferee which directs him or absolutely restricts him to sell the property for particular period of time then such condition or restriction would be treated as void. For e.g.- If Virat sells his house to Rahul with a condition that he should not sell it for ten years then such condition would be treated as void. But is any such condition if imposed by transferor in terms of transfer upon transferee and it is for the benefit of transferor and for short period of time then such condition or restriction would be treated as valid.

    For e.g.- If Virat sells his house to Rahul for Rs. 2,00,000 with a condition that he should not sell for three years.

    Within this period of three years Virat would re-arrange the money and repurchase it for Rs. 3,00,000. If Virat is not able to purchase within the time stipulated in the contract then Rahul can sell it that property to anyone whomsoever he may desire.
     
  • Restrain imposed with respect to consideration:

    When transferor has imposed a condition upon transferee that he should sell it only for a fixed price specified by him or directs him that the property should be sold only at market price and out of the sale proceeds something should be paid to specific person or for specific purpose then such conditions would act as a restrain on transfer of property and would be void. Such conditions cannot be imposed by transferor upon transferee which absolutely restrains him from disposing or parting of his interest in the property.

    For e.g.- If Mahi sells his house to Rohit for Rs.20,000 and imposes a condition that if in future if Rohit wants to sell this house then can sell it only for Rs. 15,000. Condition will be treated as void as Rohit is at liberty to sell the house for any consideration.
     
  • Restrain imposed with respect to person:

    When there is any restriction which is imposed by the transferor which directs the transferee that he can only sell it after obtaining the prior approval from any specific person then such restriction will be treated as clog on property and such restriction is void but if a condition that he can only transfer it to specific person can be either partial or restrain. For e.g.- If A sells his property to B with a condition that if in future if B wants sell it, he would only sell it to daughter A. Such condition would be treated as void.
     
  • Restrain imposed with respect to purpose:

    If any property which is transferred by the transferor which directs the transferee that if in future, he wants to sell it, then he may sell it only for specific purpose. Such restrain would act as absolute restrain on the power of transferee to transfer his interest as per his convenience and will.

    Transferee is at liberty to sell his property to any and for any specific purpose desire. Therefore, any such condition imposed upon him in the terms of transfer would act as void and the transferee may ignore such conditions and may sell it any one and for any purpose he may desire.

    Conditions that the property should be sold for religious purpose, or for any other purpose such as construction of educational institution would operate as void as being repugnant to the right of alienation[6].


Partial Restrain

Section 10 of the Act has only provided for absolute restrain and it silent on partial restrain[7]. When any such transfer which does not take away the rights of alienation it is considered to be partial restrain. Partial restrain as regard to time, place or person is valid and enforceable.

For e.g. A transfer property to B with a condition that he should further not alienate in the favor of D who is trade competitor A. It contains partial restrain and is considered to be valid. A total restrain on the right of alienation is void but partial would be considered as valid and binding. This rule is based on sound policy of free circulation[8]. A condition which is imposed in the bye-laws that the property cannot be sold to non-Parsi will operate as valid condition[9].

Exceptions to Section 10

Whenever any property is transferred which absolutely restrains transferee from disposing of his interest then such restrain would be considered as void. However, there certain exceptions to rule of restrain on alienation. Exceptions are in the favor of lessor and other in the favor of married woman.
  • Lease:
    A condition in the lease deed, lessor can impose a condition that lessee shall not sub lease it. A condition imposed in the lease deed that lessee will have to surrender the property in the event that lessor needs to sell the property will be considered to be valid condition. Thus, any condition restraining lessee from alienating leasehold property is not invalid.
     
  • Married Women
    Section 10 provides second exception in relation to married woman who is non-Hindu, Mohammedan or Buddhist. It provides that property may be transferred to or for the benefit of a woman (not being Hindu, Mohammedan or Buddhist), in such cases transferor can impose a condition which restricts the right to alienate the property further and such condition would not be considered as void.


Restrain on enjoyment

Section 11of Transfer of Property Act, 1882

Where, on a transfer of property, an interest therein is created absolutely in favor 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 and dispose of such interest as if there were no such direction.

When any property which is transferred absolutely by the transferor, then such property may be enjoyed in any manner by the transferee as he likes and any such restriction which is placed on the enjoyment of property which is transferred to transferee such restriction will be treated as void.

When there is any transfer of absolute interest it means the transfer of ownership. When any such property is transferred then rights attached to such property are also transferred, it gives all the right of managing, enjoying, and disposing of that property. Once the ownership of property is transferred it is not possible to restrain someone of his rights and enjoyment[10]. Once an absolute interest is created in favor of any person, no restriction can be placed as to manner in which interest is created[11].

Section 10 of the Transfer of Property Act, 1882 applies to all transfers[12], whereas section 11 will not apply unless the transfer is absolute, and the condition or restrictions imposed by the terms of transfer[13]. Therefore, under section 10, an absolute restrain is void, whereas, under section 11, only a restriction repugnant to the interest created by transfer is void. There will be the transfer of an absolute interest or ownership if the transfer relates to the gift, exchange, and sale.

A person cannot sell his property with condition that he can grow only those crops as directed by the transferor. Such a condition is void. Similarly, a person who makes an absolute gift of the house to another with a condition that he shall reside in it. Here, the gift is absolute and the direction is void.

Whenever any property has transferred the interest attached to it is also transferred absolutely it indicates that the transferor has vested all the rights through specific conveyance in the favor of the transferee. When the interest transferred is absolute it means that the transferor has not retained any rights in his favor. In the case of lease deed, the transferor only transfers the right to possess and right to enjoy the property, however, the title is retained by the transferor along with the right to sell.

Exceptions to Section 11

Section 11 contains one exception which is for the benefit of the transferor and it states that the restriction repugnant to interest may be created. Wherever any property is transferred absolute, the transferor can still impose a condition or a direction that restrains the mode of enjoyment of the only piece of property of transferor, for the beneficial enjoyment of some other property, such direction will be considered as valid direction. The transferor must give a direction and such direction must be made in respect of one piece of immovable property for the purpose of securing beneficial enjoyment of another piece of such property that is transferred to the transferee.

A condition imposed by the transferor may be positive or negative. When any property which is transferred and the condition imposed by the transferor is positive then the transferee is bound to fulfill such conditions even if it restrains his enjoyment of the property. Where any such condition imposed is negative, the transferee is not bound to fulfill such a condition.

In the case of Indu Kakkar v. Haryana Industrial Development Corporation[14], an agreement between industrial corporations and industrial units with a condition that industrial units shall be established within the specified time failing which their interest shall cease. The Supreme Court held that condition to be valid causing no restrain on the mode of enjoyment of property, and therefore, the agreement was held to be valid.

Condition as to insolvency

Section 12 of Transfer of Property Act, 1882

Where property is transferred subject to a condition or limitation making 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[15].

If the property is transferred to any person with a condition that property will be revert to the transferor if the transferee becomes insolvent, it is an invalid condition. This section is not applicable in a condition of a lease where the lessor deserves to get back the leased property on a declaration of the lessee as insolvent.

Conclusion
In order to govern the free transfer of property in India, the Transfer of Property Act, 1882 was came into existence. This transfer may take place in present and future but it should be amongst living people. This assignment further addresses that restrictions which are absolutely or partially placed on transferring property and also the conditions. Provisions of section 10, 11 and 12 contains certain condition under which the transferer's alienation of property is void. There are also exceptions when certain conditions may be relevant.

It is generally possible to categorize the restrictions imposed under section 10 under two heads:
  1. absolute and
  2. partial.
It depends upon the terms of transfer whether the condition is absolute or partial. Whenever the property is transferred to transferee the rights attached to it also gets transfers which includes right to absolute ownership, alienation and right to enjoy the property. Article 300A of the Constitution of India states that the any person should not be deprive except in accordance with the statute[16]. Furthermore, the Article 19(1)(e) lays down the fundamental right to settle in any part of the country subject certain conditions[17].

Bibliography:

  1. Statutes:
    1. Transfer of Property Act, 1882.
  2. Books Referred:
    1. The Transfer of Property Act- Dr. Avtar Singh and Prof (Dr) Harpreet Kaur.
    2. Property Law- Dr. Poonam Pradhan Saxena.
  3. Case Laws:
    1. Omwati v. State of Haryana, AIR 2019 (NOC) 40 P&H.
    2. Achammal v. Rajamanickam Krthikeyan, AIR 2010 Mad 34: (2010) 2 Mad Lj 1210: 2010 (1) Mad LW 151.
    3. Saraju Bala v Jyotirmoyee, AIR 1931 PC 179; Lalit Mohun v Chukkun Lal, (1897) ILR 24 Cal 834.
    4. K Muniswamy v. K Venkatswamy, AIR 2001 Kant 246: ILR 2000 Ker 3450: (2000) 6 Kant 487.
    5. Zoroastrian Co-op Housing Society Ltd v Dist Registrar, Co-op Societies, (2005) 5 SCC 632: AIR 2005 SC 2306.
    6. Jayawant Baliramji Panchbahi (Since dead) through LRs v. Anusuyabhai Vasantrao Deshmukh, AIR 217 Bom178.
    7. Indu Kakkar v. Haryana Industrial Development Corporation, AIR 1999 SC 296: 1998 AIR SCW 3817: (1999)


End-Notes:

  1. Section 5, Transfer of Property Act, 1882, No. 4 of 1882, Acts of Parliament, 1882 (India)
  2. Section 7, Transfer of Property Act, 1882, No. 4 of 1882, Acts of Parliament, 1882 (India)
  3. Section 10, Transfer of Property Act, 1882, No. 4 of 1882, Acts of Parliament, 1882 (India)
  4. AIR 2019 (NOC) 40 P&H
  5. AIR 2010 Mad 34: (2010) 2 Mad Lj 1210: 2010 (1) Mad LW 151.
  6. Saraju Bala v Jyotirmoyee, AIR 1931 PC 179; Lalit Mohun v Chukkun Lal, (1897) ILR 24 Cal 834
  7. Supra note 3
  8. K Muniswamy v. K Venkatswamy, AIR 2001 Kant 246: ILR 2000 Ker 3450: (2000) 6 Kant 487.
  9. Zoroastrian Co-op Housing Society Ltd v Dist Registrar, Co-op Societies, (2005) 5 SCC 632 : AIR 2005 SC 2306.
  10. Section 11, Transfer of Property Act, 1882, No. 4 of 1882, Acts of Parliament, 1882 (India)
  11. Jayawant Baliramji Panchbahi (Since dead) through LRs v. Anusuyabhai Vasantrao Deshmukh, AIR 217 Bom178.
  12. supra note. 3
  13. supra note. 10
  14. AIR 1999 SC 296: 1998 AIR SCW 3817: (1999)
  15. Section 12, Transfer of Property Act, 1882, No. 4 of 1882, Acts of Parliament, 1882 (India)
  16. INDIA CONST. art. 300A
  17. INDIA CONST. art. 19. cl. 1(e)

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