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Conditions Restricting
Transfer
Conditional Transfers
Transfers
Condition
Precedent
Condition
Subsequent
Section 10, 11 & 12 deals with condition subsequent.
Section 10-
Conditions
Restraining
Transfers
• Principle underlying this section-
1. A right to transfer is incidental and in
separable from the ownership of the property.
2. This is also based on the principle of Public
Policy allowing free circulation and disposal of
property.
Conditions
Restricting
Transfer/
Rule against
alienability
Section 10 is based on general rule of
jurisprudence “alienatio rei prae fertur juri accrescendi”-
Law favors alienation to accumulation.
Section 10- Condition restraining alienation
• “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,……”
Restraint - Absolute (Void)
- Partial (Valid)
Absolute Restraint on Alienation
• Absolute restrictions are void under Section 10 of the Act
• Partial limitations can be permitted.
• Example- A transfers his property to B with a condition that B shall never sell it. The condition is void and B may
sell or not as he pleases.
Rosher v. Rosher (1884)
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.
Re Elliot Kelly V. Elliot (1896)
Illustrations
• A condition that transferee shall not transfer the property
by way of gift, is a partial restraint and thus valid.
• A condition that transferee shall not transfer the property
family/or to a particular person only, is a partial restraint
• 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.
Categorization of restraints
• Restraint on transfer for a particular time;
• Restraints directing control over money/consideration
• Restraint with respect to persons/transferee
• Restraints with respect to sale for particular purposes or use of property.
Case laws-
Loknath Khound V. Gunaram Kalita (1986)
Manohar Shivram Swami V. Mahadeo Guruling Swami (1988)
K. Muniswamy V. K. Venkataswamy (2001)
Zoroastrian Co-operative Housing Society Ltd v District Registrar Co-operative Societies
• Restrictions with respect to time, i.e., the condition that the
transferee would not sell it
• for five years or ten years or for any time period whatsoever would be
void, unless it is
• for a short time period and is coupled with a benefit to the transferor,
such as an option
• of re-purchase, at a consideration stipulated in the contract. This
option of repurchase
• is personal to the transferor and cannot extend to anybody else.
Exceptions to the restraints
• Section 10 “…. 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.”
• Exceptions- Lease
- Property transferred to a married Woman who is not a
Hindu, Mohammedan or Buddhist, then the condition
restricting alienation can be valid.
Assessment
• A sold his house to B subject to the condition that B would not sell it
for an initial period of two years as A wanted to arrange the money
and buy it himself. The condition further provided that if B wanted to
sell the property after two years, he was free to sell it to any one but
must charge only market price from the buyer. A violation of these
conditions would result in the forfeiture of the present sale. Discuss
the validity of these conditions.
• A sells a house to B for 20 lakh with a condition , that if in future B
wants to sell it, he would sell it only to A’s sons or his brothers. A has
four sons and two brothers. Decide the validity of the condition. This
condition would be void and B can sell it to anyone.
• A executes a lease of his house to B, with a condition that he would
live in it, and would not use it for commercial purposes. B takes the
house, and opens a shop in the premises. Can A sue B for violation of
the lease deed and stop him from using the same for commercial
purposes.
Restriction repugnant to interest
created- Section 11
• “Where, on a transfer of property, an interest therein is created absolutely in
favour of any person, but the terms of the 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 absolute interest in the property is transferred, there can be no
restraint upon its enjoyment.
• Any condition restraining the enjoyment of the property which is transferred
absolutely is void.
Illustration
• A sells B a piece of land with a condition that B
will not build upon it. B takes the land, and
attempts to build a house on it. A cannot
prevent him from doing so, as B, as the owner
has the right to enjoy it in any manner that he
likes, subject to the rights of others and also the
provisions of law. Here, B can rightfully ignore
this condition, without affecting the validity of
the transfer.
• A transfers his house to B with the condition
that B would not demolish it. After purchasing
the property, B may retain or demolish it, and A
cannot stop him from doing so.
• Achammal v Rajamanickam Karthikeyan, AIR 2010-
• A is the owner of a house, which is occupied by two tenants, T1 and T2. He
sells it to B, under the condition that B would not collect rent from the
tenants, or evict them, or partition the property or that out of the rent, he
would pay a specific sum to A.
• Which of these conditions will be binding upon A.None of these conditions
will be binding on B, as they would be repugnant to the interest that is created
in his favour by this absolute transfer and a condition repugnant to the
interest created is void when the property is transferred absolutely Where B
has been conferred an absolute interest in the property, he alone is
competent to decide what to do with his property.
Difference between Sec. 10 & 11
• Section 10- Restraint upon power of alienation
• Section 11- Restraint upon enjoyment
• Section 10 is applicable to all transfer whether limited or absolute.
• Section 11 will not apply unless the transfer absolute
Exception
• The second paragraph of Section 11 provides the exception to the general rule contained in first
paragraph. According to it, the transferor may impose conditions restraining the enjoyment of land if
such conditions are for the benefit of his (transferor’s) adjoining land.
• Illustrations:
• A owns two properties X and Y, and sells X to B. A imposes 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.
• A owns two properties X and Y and sells X to B and imposes a condition on B that B shall lay out
money in building and repairing a drain passing over X adjoining Y. The restriction is valid.
• It means, that in order the exception can apply, to begin with:
• (i) The transferor should be the owner of both, i.e., the property that
he professes to sell to the transferee as well as the one for whose
beneficial enjoyment he is seeking to impose the direction for specific
enjoyment.
• (ii) Secondly, the conditions can be imposed on the transferee only
when it enables him and his family members to seek the enjoyment
of his own property, and not of somebody else. He cannot impose
conditions on the transferee, directing him to enjoy his property in a
specific manner so as to benefit third parties.
• Sec 10 and 11 of TP Act, 1882,
https://www.academia.edu/14343318/Sec_10_and_11_of_TP_Act_1882
• Restraint on power of alienation, http://lawtimesjournal.in/restrains-on-
alienation-of-property-under-section-10/

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Conditions Restricting Transfer Under TPA,1882

  • 3. Section 10- Conditions Restraining Transfers • Principle underlying this section- 1. A right to transfer is incidental and in separable from the ownership of the property. 2. This is also based on the principle of Public Policy allowing free circulation and disposal of property.
  • 4. Conditions Restricting Transfer/ Rule against alienability Section 10 is based on general rule of jurisprudence “alienatio rei prae fertur juri accrescendi”- Law favors alienation to accumulation. Section 10- Condition restraining alienation • “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,……” Restraint - Absolute (Void) - Partial (Valid)
  • 5. Absolute Restraint on Alienation • Absolute restrictions are void under Section 10 of the Act • Partial limitations can be permitted. • Example- A transfers his property to B with a condition that B shall never sell it. The condition is void and B may sell or not as he pleases. Rosher v. Rosher (1884) 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. Re Elliot Kelly V. Elliot (1896)
  • 6. Illustrations • A condition that transferee shall not transfer the property by way of gift, is a partial restraint and thus valid. • A condition that transferee shall not transfer the property family/or to a particular person only, is a partial restraint • 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.
  • 7. Categorization of restraints • Restraint on transfer for a particular time; • Restraints directing control over money/consideration • Restraint with respect to persons/transferee • Restraints with respect to sale for particular purposes or use of property. Case laws- Loknath Khound V. Gunaram Kalita (1986) Manohar Shivram Swami V. Mahadeo Guruling Swami (1988) K. Muniswamy V. K. Venkataswamy (2001) Zoroastrian Co-operative Housing Society Ltd v District Registrar Co-operative Societies
  • 8. • Restrictions with respect to time, i.e., the condition that the transferee would not sell it • for five years or ten years or for any time period whatsoever would be void, unless it is • for a short time period and is coupled with a benefit to the transferor, such as an option • of re-purchase, at a consideration stipulated in the contract. This option of repurchase • is personal to the transferor and cannot extend to anybody else.
  • 9. Exceptions to the restraints • Section 10 “…. 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.” • Exceptions- Lease - Property transferred to a married Woman who is not a Hindu, Mohammedan or Buddhist, then the condition restricting alienation can be valid.
  • 10. Assessment • A sold his house to B subject to the condition that B would not sell it for an initial period of two years as A wanted to arrange the money and buy it himself. The condition further provided that if B wanted to sell the property after two years, he was free to sell it to any one but must charge only market price from the buyer. A violation of these conditions would result in the forfeiture of the present sale. Discuss the validity of these conditions. • A sells a house to B for 20 lakh with a condition , that if in future B wants to sell it, he would sell it only to A’s sons or his brothers. A has four sons and two brothers. Decide the validity of the condition. This condition would be void and B can sell it to anyone.
  • 11. • A executes a lease of his house to B, with a condition that he would live in it, and would not use it for commercial purposes. B takes the house, and opens a shop in the premises. Can A sue B for violation of the lease deed and stop him from using the same for commercial purposes.
  • 12. Restriction repugnant to interest created- Section 11 • “Where, on a transfer of property, an interest therein is created absolutely in favour of any person, but the terms of the 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 absolute interest in the property is transferred, there can be no restraint upon its enjoyment. • Any condition restraining the enjoyment of the property which is transferred absolutely is void.
  • 13. Illustration • A sells B a piece of land with a condition that B will not build upon it. B takes the land, and attempts to build a house on it. A cannot prevent him from doing so, as B, as the owner has the right to enjoy it in any manner that he likes, subject to the rights of others and also the provisions of law. Here, B can rightfully ignore this condition, without affecting the validity of the transfer. • A transfers his house to B with the condition that B would not demolish it. After purchasing the property, B may retain or demolish it, and A cannot stop him from doing so.
  • 14. • Achammal v Rajamanickam Karthikeyan, AIR 2010- • A is the owner of a house, which is occupied by two tenants, T1 and T2. He sells it to B, under the condition that B would not collect rent from the tenants, or evict them, or partition the property or that out of the rent, he would pay a specific sum to A. • Which of these conditions will be binding upon A.None of these conditions will be binding on B, as they would be repugnant to the interest that is created in his favour by this absolute transfer and a condition repugnant to the interest created is void when the property is transferred absolutely Where B has been conferred an absolute interest in the property, he alone is competent to decide what to do with his property.
  • 15. Difference between Sec. 10 & 11 • Section 10- Restraint upon power of alienation • Section 11- Restraint upon enjoyment • Section 10 is applicable to all transfer whether limited or absolute. • Section 11 will not apply unless the transfer absolute
  • 16. Exception • The second paragraph of Section 11 provides the exception to the general rule contained in first paragraph. According to it, the transferor may impose conditions restraining the enjoyment of land if such conditions are for the benefit of his (transferor’s) adjoining land. • Illustrations: • A owns two properties X and Y, and sells X to B. A imposes 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. • A owns two properties X and Y and sells X to B and imposes a condition on B that B shall lay out money in building and repairing a drain passing over X adjoining Y. The restriction is valid.
  • 17. • It means, that in order the exception can apply, to begin with: • (i) The transferor should be the owner of both, i.e., the property that he professes to sell to the transferee as well as the one for whose beneficial enjoyment he is seeking to impose the direction for specific enjoyment. • (ii) Secondly, the conditions can be imposed on the transferee only when it enables him and his family members to seek the enjoyment of his own property, and not of somebody else. He cannot impose conditions on the transferee, directing him to enjoy his property in a specific manner so as to benefit third parties.
  • 18. • Sec 10 and 11 of TP Act, 1882, https://www.academia.edu/14343318/Sec_10_and_11_of_TP_Act_1882 • Restraint on power of alienation, http://lawtimesjournal.in/restrains-on- alienation-of-property-under-section-10/