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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 re- purchase, 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
6
, 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
16
, 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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