property law i

8/4/2019 Property Law I

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NATIONAL LAW INSTITUTE UNIVERSITY, BHOPAL

ANALYSIS OF PARTIAL RESTRAINT ON TRANSFER OF PROPERTY.

Submitted To: Dr. Sanjay Yadav Submitted by: Payoja A. Gandhi

Subject: Property Law- I Roll No: 2009B.A, L.L.B 04

Enrolment No: A-0866

Sixth Trimester

2010-11.


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TABLE OF CASES

Bosangowda v. Irgowdatti. Pg 7

Bhola Ram Chaudhary v. State of Bihar... Pg 9

Deo D Gill v. Pearson.Pg 5

Diwali v. Apaji... Pg 7

Gurdit Singh And Ors. v. Babu And Ors... Pg 9

K. Muniswamy v. K. Venkataswamy.. Pg 11

Laxmamma v. State of Karnataka and Ors ..Pg 12

Loknath Khound v. Gunaram Kalita .Pg 5

Mahamud Ali Majumdar v. Brikodar Nath ...Pg 6

Manohar Shivram Swami v. Mahadeo Guruling Swami ...Pg 8

Mata Prasad v. Nageshar Sahai ...Pg 10

Mohammad Raza Khan v. Abbas Bandi Bibi Pg 6

Muthuraman Chettiar v. Ponnusami Pg 11

Ratanlal v. Ramanuj Das ...Pg 6

re Macky 44 L.J. Ch. 44. Pg 5

Rosher v. Rosher Pg 7

Shiba Prasad v. Lekhraj and Co .Pg 9

Shri Ramachandra Bhakta v. Shri Krushna Chandra Bhakta and Anr Pg 10

Zoroastrian Co-operative Housing Society Ltd v. District Registrar Co-operative Societies ...Pg 9


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TABLE OF CONTENTS

PAGE NO:

Introduction ......4

Statement of Problem.............5

Origin of concept of Partial restraint.............5

Test of Partial restraint ..5

Types of Partial Restraint..5

Restraints for a particular time...............5 Restraints with respect to persons (family arrangements)....6-10 Partition and subsequent restraint on alienation..............11 Grants by the Government to persons belonging to the Scheduled Caste and Scheduled Tribe

and partial restriction on alienation.............12

Conclusion..13

Bibliography.......14


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2. STATEMENT OF PROBLEM: The proposed study shall analyze the various cases were

restrictions are made with regard to alienation of property.

3. ORIGIN OF CONCEPT OF PARTIAL RESTRAINT: The leading authority in English

law on the question of validity of a condition as a partial restraint is re Macky1

. In this case the

transferee of an estate was given the property on the condition that he should never sell the

property outside the family. Sir George Jessel, M.R. observed that it is only a partial restraint and

hence valid on three grounds. Firstly, it is limited as to the mode of alienation because the only

prohibition is against selling. He may lease or mortgage the property. Secondly, it is a limited

restraint as regards to a class he may sell it to any member of the family. Thirdly, it is not limited

as to time. These English law principles were followed by the courts in India.

4. TEST OF PARTIAL RESTRAINT: Whether the condition takes away the whole power of

alienation substantially is the actual test of partial restraint. Whether a restriction would or would

not amount to partial restraint would depend on the substance and the effect of the condition and

not merely on the terminology used in the contract. In Deo D Gill v. Pearson2, a property was

given to two sisters as tenants in common subject to the condition that if they had no issue, they

should have no power of alienation except to their sisters or their children. Lord Ellenborough

held this condition good. Section 10 of the Transfer of Property Act, 18823

is silent about the

situation where the restraint is partial. However the judiciary has evolved this concept through

various decisions. The concept can be explained by describing the four types of partial restraints.

5. TYPES OF PARTIAL RESTRAINT:

i) Restraints for a particular time: Restrictions with respect to time, i.e condition that the

transferee would not sell it for five years or ten tears or for any period whatsoever would be void,

unless it is for a short time period and is coupled with a benefit to the transferor, such an option

of repurchase, at a consideration stipulated in the contract. This option of repurchase is personal

to the transferor and cannot extend to anybody else. In Loknath Khound v.Gunaram Kalita4,

A sold his house to B for five lakh rupees, with a condition that B should not sell it for five

144 L.J. Ch. 44

2 [1805] 6 East 173.3 Herein after referred to as the Act.4 AIR 1986 Gau 52


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years. Within this period of five years, A would arrange the money and would have an option to

repurchase it for six lakh rupees. If he is unable to exercise this option of repurchase within five

years, B would be at liberty to sell it to anyone. The condition is with respect to both the time as

well as a person, but would be valid as it is in the nature of partial restraint and is for the personal

benefit of the transferor.

ii) Restrictions with respect to Persons (Family Arrangements): Restrictions directing the

owner that the property or an interest should be transferred to specific persons can be either

partial or absolute, depending upon the facts and circumstances of the case. If the condition is

that he should not sell it outside the family or even community then it is a partial restraint,

provided both transferor and transferee are members of the same family or community. This

condition is laid to conserve the property within a specific family or community, of which both

the parties are members. InMahamud Ali Majumdar v. Brikodar Nath5, it was held that when

the transferor himself transfers the property outside the family then he cannot put a condition that

binds the transferee( outsider) to sell the property only to the members of his family(

transferors).

With respect to family settlement, section 10 of the Act does not apply. Since family

arrangements are not transfer of property, new interest is not created. In Ratanlal v. Ramanuj

Das

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, where the property was given by father to the son under a family arrangement with acondition that with respect a portion of it the son was prohibited from alienating that piece during

the lifetime of the father. The Court held that it was not an absolute restraint and hence binding

and valid on the son.

InMohammad Raza Khan v. Abbas Bandi Bibi7, where a compromise was made and a widow

was given the property with a condition that she would not alienate the property outside the

family it was held that the restraint was only partial and was not repugnant to justice, equity and

good conscience.

5 AIR 1960 Assam 1786 AIR 1944 Nag 1877 AIR 1932 PC 158


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In Bosangowda v. Irgowdatti,8 there was a dispute regarding husband's property and a Hindu

widow arrived at a compromise with the reversioners. She agreed to keep the property for life

and undertook not to sell or mortgage the same and it was held that the compromise was a family

arrangement and did not amount to transfer of property within the meaning of Section 10, T. P.

Act.

In the case ofDiwali v. Apaji9, a compromise was reached between the widow and her adopted

son whereby she was allotted certain properties for her maintenance but without power of

alienation, it was held to be a valid condition.

InRosher v. Rosher10

, aperson A died and left his entire property to his son S by a will. The Will

laid a condition that if S or any of his heirs wanted to sell the property then they must first offer

it to W( the widow of the deceased) if she wanted to purchase it at a fixed price, i.e -one- fifth of

the value of the manor ( 3000 pounds). The price of the manor at the time of operation of the will

was 15000 pounds. A so if the son or any of his heirs wanted to rent the manor then they could

do so only for a period of three years. If the tenancy exceeded for more than three years, W

would have the option to occupy the premises at a fixed rent of 25 pounds per year. Also if the

tenancy exceeded for a period of seven years, again W was entitled to occupy the same for an

annual rent of 35 pounds. S sold the property without offering it to W. The court held that the

character of the restraint was

i) Respect to persons, i.e, the testators wife whose name was specifically mentioned inthe will.

ii) Respect to money or price: W could purchase the property at a specific price of 3000pounds, irrespective of whatever maybe the market value.

iii) Respect to alienation: The beneficiaries were not supposed to lease the manor beyondiv) the period of three years and if they leased it then she would take the property at a

very small rent.

8 AIR 1923 Bom 276 (E).9 1886 ILR 10 Bom 342.10 (1889) 26 ChD 801.


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Hence the court held that these restrictions amounted to an absolute restraint on S and his heirs

power of alienation and therefore void. The Son was entitled to ignore these conditions and

could sell; the manor to anyone for any time period, without any cause of action arising in

favour of W. To compel the son (if he wished to sell), at one- fifth of the value of the estate, is a

prohibition of alienation during the widows lifetime.

Manohar Shivram Swami v. Mahadeo Guruling Swami11, A and B were first cousins, (sons of

two brothers). A made a will of his property in favour of B. On As death, B acquired the title

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 only to the sellers Jangam family and not to

anybody else. C sold the property to D, ignoring the condition incorporated in the sale deed. B

took back the possession of the property on the ground that as C had committed a breach of thecondition, the transfer became void. He also filed a suit against C, D and others seeking

perpetual injunction restraining them from interfering with his possession of the property. C

took the defence that this condition violated Section 10 of the Act and therefore was not binding

on him. The trial court rejected this defence and held that the sale deed was executed by B was

void and not binding on C and hence property should be restored to C. In the district court, the

validity of the sale was upheld. The restriction imposed on C in the sale deed was not

repugnant to Section 10 of the Act. The matter went in appeal to the Bombay High Court. The

High Court had to decide whether the condition restricting sale to any person other than a

person belonging to the Jangam family was hit by section 10. The High Court held that the

condition absolutely restrained C from parting with his interest in the property and therefore it

was void. This decision comes as a surprise as the condition here in fact aimed to not sell the

property outside the family/ community, which in a number of cases discussed above, has been

held to be a partial restraint, and binding on the parties. The Court ignored to consider the

precedents.

11 AIR 1988 Bom 116


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In Zoroastrian Co-operative Housing Society Ltd v.District Registrar Co-operative Societies12,

a society was registered under the Bombay Co-operative Societies Act with the object of

constructing houses for residential purposes, and according to the bye- laws, the membership

was restricted only to Parsis. The Bombay High Court stated that a restriction based on religion,

race or caste contained in a bye- law on the members right in a co-operative housing society to

transfer his membership coupled with his interest in the immovable property would be bad in the

eyes of law. Restriction on the members right to transfer membership and or his interest in the

property to a non- Parsi was held violative of Section 10 and therefore void. The matter went to

the Supreme Court in appeal. The Apex court allowed the appeal and held that when a person

accepts the membership of a co-operative society by submitting himself to its bye- laws 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 only could not be an absolute restraint on alienation offending Section 10 of the Act. This

clause in the bye-laws that a person could sell it only to Parsis and not to a non- Parsi was a

partial restraint and not an absolute one.

InShiba Prasad v.Lekhraj and Co13, it was held that a condition in the kharposh grant made by

a zamindar in favour of a junior member that the subject matter of the grant was not liable to be

attached and sold in execution, is only a partial restraint, and hence valid.

In Bhola Ram Chaudhary v.State of Bihar14

, it was held that a clause in the lease deed which

provides that the interest of the leaseholder cannot be transferred without the written permission

of the deputy commissioner is not an absolute restraint on transfer and hence valid.

In Gurdit Singh And Ors. v. Babu And Ors15

, the plaintiffs were the collaterals of one Amrika

who in 1879 made a gift of the property in dispute in favour of his 'pichhlag son Fauja. This gift

was objected to by the collaterals of Amrika but in the revenue department a compromise was

arrived at between Amrika, Fauja and the then existing collaterals that the donee or his

descendants will have no right to effect a sale or mortgage of the land and that they will be

12 AIR 2005 SC 230513 AIR 1945 PC 16214 AIR 1990 Pat 2015 AIR 1953 P & H 282


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entitled only use and derive profit or benefit from property. In 1944 the descendants of Fauja

mortgaged a portion of the land and the collaterals challenged this alienation and sued for

possession of the whole of the land gifted on the ground that there was a breach of the terms of

the compromise. Both the trial and the district courts dismissed this suit holding that such a

condition which was imposed in the gift was contrary to Section 10, T. P. Act and was void. The

matter went in appeal to the Punjab and Haryana High Court. The court held that the agreement

was not contrary to any principle of equity, nor is it contrary to any provision of law. It was a

reasonable compromise made in common prudence by reversioners and Amrika and Fauja.

Section 10 of the Act does not apply in this case. The Court held that the plaintiffs were entitled

to the portion of the land which had been alienated by the descendants of Fauja.

Shri Ramachandra Bhakta v. Shri Krushna Chandra Bhakta and Anr

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, a clause in theagreement between the plaintiff (seller) and the defendant to sell the Gharabari land stipulated

that if at any future point of time, the defendant wished to sell it then the land has to be first

offered to the plaintiff and if he agrees to purchase the land at the market value, then nobody else

can purchase the same. But if the plaintiff is not able to pay the market rate and is not interested

to purchase, the land can be sold to a third party. The lower appellate Court however, held that in

view of Section 10 of the Transfer of Property Act, the stipulations restricting alienation by the

transferee is void and, therefore, has to be ignored. The Orissa High Court held restriction is a

partial restriction with regard to alienation of property and cannot be construed as a total

prohibition for alienation and, therefore, the said clause does not attract the prohibition contained

Under Section 10 of the Transfer of Property Act and as such, is not void.

InMata Prasadv.Nageshar Sahai17

, there was a dispute between the nephew and the widow of

the deceased. It was compromised between them that the widow shall hold the possession of the

property for her life while admitting the title of the nephew but the nephew was restrained from

transferring the property during the life of the widow. The Privy Council held that that the

compromise was valid and cannot be regarded as a condition restraining alienation.

16 1999 II OLR 10517 AIR 1925 PC 272


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iii) Partition and Subsequent Restraint on Alienation: Partition of a joint family property or

family settlement do not amount to transfer of property18, Section 10 of the Act would not be

applicable. However any total restraint on the right of alienation is void. This rule is based on the

sound public policy of free circulation of property. In Muthuraman Chettiar v.Ponnusami19,

there was a partition in the joint hindu family and it was stipulated in the agreement that if any of

the parties to the agreement remain childless, he should not sell or transfer his share by a gift but

the share would be inherited by rest of shareholders. The Madras High Court held that this

stipulation was added to frustrate indefinitely the right of alienation which was the legal incident

of an absolute estate. Thus it created life estate in favour of a shareholder who died without any

issue. Hence this stipulation was struck down as void.

InK. Muniswamy v. K. Venkataswamy20

, a family consisted of father F, mother M and two sons

S1 and S2. The partition took place and properties were divided with one half was taken by M and

F and one- fourth by the two sons. The partition deed incorporated a condition that each of these

persons were to enjoy the property according to their wishes in any manner they liked and could

effect mutation of name, so that taxes could be paid by the respective parties. The properties

were ancestral as well as self- acquired. However there was one condition in the partition deed

which 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 between S1 and S2. This

creation of life- interest meant the parents had no power to alienate the property during their life-

time. The parents sold the property to S1. S2 challenged the validity of sale on ground that since

parents had no power of alienation, the sale affected by them was invalid. The court explored the

nature of estate that vested in the parents. The court held that the character of the estate whether

limited or absolute, did not depend upon purely on the terms or expressions used to describe it,

but has to be taken in totality, looking at the substance and the intention of the parties. The use of

the expressions like each of them should get their khatka of the property in their names and the

fact that they could use the properties in any manner they like meant that an absolute estate wasgranted to the parties after partition. A restriction, prohibiting themabsolutely from transferring

the property, amounted to an absolute restraint on alienation and was therefore bad in eyes of

18 V,N,Sarin v. Ajit Kumar Poplai, AIR 196519 AIR 1915 Mad 119120 AIR 2001 Kant 246.


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law. This shows that had it been a creation of limited estate in the first place, only then this

condition would have been operative.

iv) Grants by the Government to persons belonging to the Scheduled Caste and Scheduled

Tribe and partial restriction on alienation: A full bench of the Karnataka High Court in

Laxmamma v. State of Karnataka and Ors21

considered whether condition in nature of partial

or permanent restraint on alienation of land granted to S.C/S.T people is void under Section 10 or

14 of the Act? In this case following restrictions were put on the S.C/S.TS when they were

granted land for a nominal consideration by the government under Karnataka Scheduled Castes

and Scheduled Tribes (Prohibition of Transfer of Certain Lands) Act, 1978.

1. That a grantee( S.C/S.T) shall not alienate the land forever or a permanent restraint onalienation;

2. That the alienation, if any, shall only be to the members of SC/ST;3. That an application shall not be made without obtaining prior permission of Government

or the authorised officer; and

4. That a grantee shall not alienate for a limited period except in favour of Government or aCo-operative Society. Even though the land has been alienated the land would be restored

to the original grantees.

The court discussed the objective behind the above mentioned legislation. The Act was enacted

to help the Scheduled Castes and Scheduled Tribes grantees whose ignorance and poverty have

been exploited by persons belonging to the affluent and powerful sections to obtain sales or

mortgages either for a nominal consideration or for no consideration at all and they have become

the victims of circumstances. Hence the above mentioned restrictions have been imposed on

them. Also, the court held that the Government grant can in no case be equated to a disposal by a

private person in favour of another private person. It cannot be treated as a transfer within the

meaning of Section 5 of the Transfer of Property Act, 1882. The said Act does not apply to anytransfer that takes place by operation of law. Hence the above restrictions were not violative of

the provisions of the Act.

21 AIR 1983 Karn. 237.


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CONCLUSION

The doctrine of Partial restraint is a judicial creation. Section 10 of the Transfer of Property Act

does not mention this concept. Only those conditions that restraint alienation absolutely are void

under Section 10. Restraint short of an absolute curtailment of the power of the interest holder to

transfer his interest, will be binding on him. Whether a condition totally or partially prohibits

alienation depends on the substance or the effect of the condition and not the form. Different

instances of partial restraint have been discussed before. To summarize, conditions restricted

alienation outside the family would be perfectly valid. Such restrictions are prevalent in India.

The objective behind such restrictions is to ensure that the property remains in the family. With

regards to offering the property to the transferor or at any other person whom the transferor

prescribes at a fixed price is an absolute restriction hence void as per the Act. However acondition to offer the transferor the option to repurchase at the prevailing market price at the time

of the sale is only a partial restraint.

The courts have expressed different opinions on the question whether a restriction on the right of

alienation created by a family settlement, a compromise or consent decree is valid. Usually the

transfer of Property Act does not apply in cases of family settlement or compromise but a clause

in the compromise agreement imposing absolute restriction on alienation is invalid as per Section

10 of the Act.

22

Hence Gurdit Singh v. Babu & Ors

23

case is against this principle as thetransferee as well as his heirs were prohibited from selling, mortgaging the land and were

allowed only to possess and enjoy the benefits arising out of the land.

It can be concluded that absolute restriction on alienation of property after transfer takes place

except in case of lease and in case of land transferred to a married woman who is not a Hindu,

Muslim or a Buddhist is void and the concerned property can be transferred freely.

22Fatima v. K.S.Amma, AIR 1986 Ker. 56

23Referred on Pg 9 and 10.


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BIBLIOGRAPHY

DF Mulla (2006) The Transfer of Property Act, New Delhi: LexisNexis Butterworths.

Singh Avtar(2009) Textbook on The Transfer of Property Act, New Delhi: Universal LawPublishing Co. Pvt. Ltd.

Tripathi G.P (2005) The Transfer of Property Act, Allahabad: Central Law Publications.

Saxena Poonam (2006)Property Law Student Series,Nagpur: LexisNexis Butterworths. Sinha R.K. (2007) The Transfer of Property Act, Allahabad: Central Law Agency. Shukla S.N. (2006) The Transfer of Property Act,Faridabad: Allahabad Law Agency.

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