BRIEF NOTES ON SECTION 10,11&12 OF TRANSFER OF PROPERTY ACT,1882
BRIEF NOTES ON SECTION 10,11&12 OF TRANSFER OF PROPERTY ACT,1882
RESTRAINS ON ALIENATION OF PROPERTY (SECTION 10)
For
Conditional transfers, there are generally two types, namely Conditions
Precedent and Conditions Subsequent. The first one is where the condition has
to be complied with or fulfilled before a transfer could be affected and
subsequent condition is where condition is fulfilled after the transfer is
complete. Section 10 of the Act talks about Condition Subsequent. In a transfer
where fulfillment of condition is after the transfer (i.e. Condition
Subsequent), the transfer would remain completely valid till a time there is no
condition that prevents the transferee from disposing of or parting with his
interest in the property. It is important to note that even if such a transfer
was legitimized with mutual consent of both the parties, the fulfillment is not
binding on the transferee. The
underlying principles behind this rule are that of justice, equity and good
conscience. It creates such a rule so as to prevent transferors from
incorporating an arbitrary condition that are repugnant to the nature of
interest and thus such a restriction is statutorily prohibited. And therefore,
trust cannot be created with a proviso preventing the beneficiary from
alienating his interest.
Restraints
on transfer for a particular time:
Restriction
on alienation with respect to time for example, a condition to not sell for
five years or ten years or any other time whatsoever would be void, unless it
is for a short time period and is coupled with benefit for the transferor
(option of repurchase). A condition for restrain on alienation for five years
was held valid where the condition was if the transferee would re-purchase it
at a higher price within these five years. If he does not, the purchaser is
free to alienate at his prerogative.
Where
the transferor stipulates that the property can be sold only at a fixed price
or puts a condition that property should be transferred for no consideration,
or at market price, or at any other consideration deemed appropriate by the
buyer. Such conditions are restrains on alienation through control over money
and thus void.
Restraints
with respect to persons/transferee:
A
restriction directing the owner that the property should be transferred only
after obtaining prior permission or consent would be totally void, but in some
cases it can be partial restrain also, in such cases, depending on facts and
circumstances, it may be held valid. In Mahamudali Majumdar v. Brikondar Nath,it
was held that transferor himself selling the property to an outsider, cannot
put a condition that binds the latter to sell the property only to members of
transferor’s family
Restraints with respect to sale for particular purposes or use of property:
Where
power of sale of property is not spoken about, but still there is restrain
about the specific purpose for which the property can be transferred, this may
amount to absolute restrain and thus be held void. To whom or for what purpose
to sell should be the prerogative of the current seller and putting a condition
will restrain him from freely disposing of the property. In Bhawani Amma
Kanakadevi v. CSI Dekshina Kerela MahaIdevaka, condition was held as absolute
restrain where in failure to construct a private college at the property would
mean re-conveyance of property back to the transferor for the same
consideration.
The
term restraint means preventing or stopping or disabling a person from doing
something. But on classifying the term into Absolute restrain and Partial
Restrain, it means that when there is no absolute restrain on the transferee,
it means that it is partial restrain and it means it may be permitted.
Section
10 relieves a transferee of immovable property from an absolute restraint
placed on his right to deal with the property in his capacity as an owner
thereof. As per section 10, a condition restraining alienation would be void.
Section applies to a case where property is transferred subject to a condition
or limitation absolutely restraining the transferee from parting with his
interest in the property. For making such a condition invalid the restraint
must be an absolute restraint. Condition imposing absolute restraint on the
right of disposal is a void condition and has no effect. For example, a person
makes a gift of a property to another person (transferee) with a condition that
he will not sell it. This condition imposes an absolute restraint. If the
transferee sells that property, the sale will be valid because conditions
imposing absolute restraint are void. In Kosher v. Kosher, a condition not to
sell during the lifetime of the transferee was held to be void.
Section
10 has only provided for absolute restraints. It is silent about the partial
restraints. Where the restraint does not take away the power of alienation
absolutely but only restricts it to certain extent, it is a partial restraint.
Partial restraint is valid and enforceable. While an absolute restraint is
void, a partial restraint may not be. For instance, a partial restraint that
restricts transfers only to a class of persons is not invalid. However, if the
transfer is restricted to being allowed only to specific individuals, then it
is an absolute restraint and hence, void. This was reiterated in the famous
case of Zoroastrian Co-operative Housing Society Ltd v. District Registrar
Co-operative Societies a society with the object of constructing houses for
residential purposes had a bye law which stated that only Parsis can be members
of the society. There was also a condition that no member could alienate the
house to non-parsis. The Supreme Court held that when a person accepts the
membership of a co-operative society by submitting himself to its by 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 it could not be held to be an
absolute restraint on alienation offending Section 10 of the Transfer of
Property Act.
Exceptions
Section
10 provides two exceptions to the rule against inalienability. First, Section
10 does not prohibit conditions or limitations in the case of a lease, which
are beneficial to the lessoror those claiming under him. Second, property may
be transferred for the benefit of a woman who is not a Hindu, a Muslim, or a
Buddhist, such that she shall not have the power to transfer the property or
change her interest therein during her marriage.
Lease:
A transferee of leased property for a term of years, under the general rule
enacted by Section 10 of the Act should be entitled to transfer his lease-hold
interest, though of course he cannot create an estate which will endure beyond
his own term. However, this general rule admits an exception. The lease may
contain a condition against alienation by a tenant and provide for re-entry, by
the lessor on breach of the condition. Such a restraint on the
tenant's alienatory power is beneficial to the lessor and may be validly
imposed. As per Akram Ali v. Durga the words in the section ‘when the
condition is for the benefit of the lessor or those claiming under him’ have
been construed to mean that the restriction is invalid unless accompanied with
a right of re-entry.
Exception
II:
Married
Women: The second exception provided under Section 10 relates to a non – Hindu,
Mohammedan or Buddhist married women. The section provides that property may be
either transferred to or for the benefit of such women, with a condition that
she would not have power during her marriage to transfer or even charge the
same or her beneficial interest therein. Thus, the two main conditions are that
the woman should be married and she should not be Hindu, Mohammedan or
Buddhist. Under English Common Law, a woman’s property, on marriage, automatically
became the property of her husband. This rule was expressly abolished in India
under Section 4 of the Indian Succession Act, 1865.
RESTRICTION REPUGNANT TO INTEREST CREATED (SECTION 11)
Section 11 of the Transfer of Property Act deals with repugnant conditions. Repugnant conditions are those that are inconsistent with the nature of the interest transferred.
Section 11 prohibits the imposition of any condition directing the transferee to apply or enjoy a particular manner, any interest that is transferred absolutely in a particular manner. Such conditions or directions are void and the transferee is entitled to receive property as if such a condition did not exist in the first place. The transfer itself is, however, not invalidated. These conditions are inconsistent with the nature of the interest transferred. Therefore, they are called repugnant conditions.
If a property is transferred absolutely in favour of the transferee, then any condition or terms of transfer, restricting the full enjoyment of the property (i.e.) repugnant to the interest created, then the transferee is empowered under sec 11 of TP Act to receive and dispose the property as if there was no such condition.
ELEMENTS
This Section comes into operation when the following conditions are fulfilled:
1. Absolute interest is created in favour of the transferee by the transfer.
2. Terms of the transfer provide that the interest in the property shall be enjoyed or applied in the manner prescribed by the transferor.
Interest must be created Absolutely:
In order that Section 11 may apply it is necessary that the interest created in favour of the transferee should be absolute. Where the interest created is not absolute for example lease, this Section does not apply. In the case of a lease, only limited interest is transferred and the lease is bound by the conditions and the mode of enjoyment. An interest which is transferred absolutely is not the same thing as the transfer of absolute estate in property. Any interest for example a life estate may be created absolutely without imposing any conditions or restrictions qualifying its legal incidents. But the transfer of an absolute estate passes to the transferee an interest which is unlimited in estate and unfettered in respect of any condition or trust.
Interest shall be applied or enjoyed in the manner prescribed by the Transferor
The expression “enjoyment of property” includes several rights such as right of alienation, right to effect partition of property, right to use the property for the purpose of residence, a provision for payment etc. The rights of alienation of property is an important form of enjoyment of property. A restriction of such rights, therefore, is a restriction on the enjoyment of property and restrictions should be disregarded A condition in a transfer deed that donee of property and his heir should reside in the property on pain of forfeiture of the gift is a restraint on the enjoyment of property and would be void for repugnancy if the main intention of the donor was to make an absolute gift.
Hindu Law and Mohammedan Law
The invalidity of conditions in restraint of enjoyment of property is recognized both in Hindu law and Mohammedan Law. A direction in restraint of partition in a Hindu gift is void. In Anantha’s case,it was decided under Hindu law that a condition in a gift to Brahmins restrictive of alienation is invalid as being repugnant to the nature of grant. The same decision was given in Rukmani bai’s Case. Even under Mohammedan Law when a gift is made subject to the condition which derogates from its completeness, the gift is valid, but the condition is void.
CASE LAW
Atika Begum, Amina Bi, Hajira and Ors. Vs. Haji A.A.M. Abdulla, Habbeb and 113 Ors. (2002)
Facts:
The suit property consists of land, market, bazaar, stalls, houses and other superstructure, known as Parachery Market, situated on the western side of Govindappa Naicken Street, Madras-1 was purchased by the ancestors of the plaintiffs 1 and 2 as well as the defendants 1 to 113 out of their common fund, and the same is owned by the plaintiffs and defendants jointly by inheritance, sale and gift. Hafiz Mohammed Ghouse, executed a registered will, which contains a list of sharers who were entitled to the suit property and the number of shares held by each one of them. In the said registered deed, HMG declared himself as the Manager of the suit property on behalf of the co-owners and stipulated a condition that a sharer could sell his share to another sharer alone; and the property should not be divided by metes and bounds, and put into individual possession.
Decision:
While Section 10 of the Transfer of Property Act deals with a restriction against the transfer of interest conveyed absolutely, Section 11 of the Transfer of Property Act deals with the restrictions on the enjoyment of such interest conveyed absolutely. In fine, while Section 10 refers to a restriction on the transfer of property, Section 11 refers to a restriction on the enjoyment of the property. The principle behind Section 11 is that a condition repugnant to the interest created absolutely is void. It is well settled in law that a partition is not actually a transfer of property. The partition signifies the surrender of a portion of a joint right in exchange of a similar right from the co-sharer. The partition effects a change in the mode of enjoyment of property, but is not an act of conveying property from one to another. In other words, partition is a process, in and by which, a joint enjoyment is transformed into an enjoyment severally. Hence, partition is not actually a transfer of property, but would only signify the surrender of a portion of a joint right in exchange of a similar right from the other co-sharer or co-sharers. A right of partition, therefore, being an incident of joint ownership of property, any restriction repugnant to such right or interest is invalid as per Section 11 of the Transfer of Property Act.
DIFFERENCE BETWEEN SECTION 10&11 OF TPA
Section 11 talks about restriction repugnant to interest created. The difference between Section 10 and Section 11 is that the former deals with a case of an absolute prohibition against alienation of an interest created by a transfer and the latter deals with the absolute transfer of an interest followed by a restriction on its free enjoyment. That is, under Section 10, whatever interest was conveyed, large or small, limited or unlimited, such interest cannot be made absolutely inalienable by the transferee. Under Section 11, when once an interest has been created absolutely in favour of a person, no fetters can be imposed on its full and free enjoyment. Where, however, the interest created is itself limited, its enjoyment must also be limited; for example, when a widow’s interest under Hindu Law is granted to a woman, a direction that she should enjoy only the usufruct without either encumbering the corpus or committing acts of waste would be valid. But a condition in a deed depriving a co-owner of his or her claim to partition in respect of the common property would be bad, because, the right to partition is an essential ingredient of co-ownership.
SECTION 12 CONDITION MAKING INTEREST DETERMINABLE ON INSOLVENCY OR ATTEMPTED ALIENATION
Section
12 provides that where property is transferred subject to a condition or
limitation leaking any interest therein, reserved or given to or for the
benefit of any person, to cease on his becoming insolvent or endeavouring 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.
Although
this relates to the restrictions on transfer of property, it is actually an
exception to another general rule provided in Section 31 of the Transfer of
Property Act.
Illustration:A
transfers property to B with the condition that should B become insolvent, then
his interest in the property would cease. B later becomes insolvent and A seeks
to enforce the condition. In such a case, the condition would be void andB will
continue to have interest in the property.
Condition
for the benefit of the lessor
The
insolvency exception has been created to prevent a transferee from defrauding
his creditors in such an eventuality by allowing the property to revert back to
the grantor through such a condition. Once again, there is an exception to this
rule in the case of a lease, which allows a lessor to impose such a condition
for his benefit in the lease. This implies that a lessor may stipulate that if
a lessee should become insolvent, the lease may be forfeited and the lessor may
re-enter the leased property.Hence, a covenant determining a lease in the event
of the insolvency of the lessee is valid, but if the lessee assigns the lease
and then becomes insolvent, the condition does not apply.Thus, although there
are general rules that prohibit any restrictions from being imposed on the
enjoyment of the interest in the property after a transfer is made, there are
certain exceptions to it. Most of these revolve around transfer of leases since
the lessor retains significant interests in the property even after the lease
agreement is executed.
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