CONDITIONS RESTRAINING TRANSFER

This article is written by Narayanareddy Sripriya of BMS College of Law, Bangalore, an intern under Legal Vidhiya

ABSTRACT:

This article is about the transfer of property and there are certain elements to make a valid transfer. The transfer must include two parties and property, which can be movable or immovable property. The title of the property must be with the transferor and conditions included in the transfer are void if such a transfer is impossible. If the transfer is against alienation of the property of the transferee, then the condition is void. The condition can be a condition precedent, condition subsequent, or condition collateral

Keywords: Transfer of property, Alienation, absolute restraint, partial restraint

INTRODUCTION :

The Transfer of Property Act came into existence in 1882 where before its existence the immovable properties were governed under the English law and the principle of equity. this act applies only to transfer by the act of the parties but not by operation of law. This act applies to both movable and immovable property and it deals with trans of property intervivos (between two living persons). According to section 5 of the Transfer of Property Act, the transfer of property is an act by which property is conveyed from a living person to another person or himself either in the present or future. here the living person includes a company whether incorporated or not or an association or body of individuals.[1]

Essential elements for transfer of property:

• There must be an act performed which is not automatic but legally transferred to another person. This will not include will or inheritance as they are effective only after the death of the testator.
• Both the parties must be living and they can be human beings or a juristic person but they must be competent to transfer under the Indian Contract Act.
• The transferor must have the title with him to make a valid transfer. The title must be transferred from transferor to transferee.
• The transfer can be made in the present or the future by making an agreement and also it can include conditional transfer.
• The property about to be transferred must be in existence and it can be movable, immovable or intangible, etc.
• The property can be transferred to any other person or himself.in the case of Naranbhai v. Suleman,1975, Guj HC held that the person made a trust, appointed himself as trustee, and transferred to himself and it is a valid transfer.

CONDITIONS RESTRAINING ALIENATION :

Section 10 of the Transfer of property deals with the conditions restraining the transfer. If the condition included is such that restricts the transferee from the further transfer of the property which can be absolutely restrained or partially restrained, then the condition is subjected to be void and the transfer is valid.

Alienation refers to that after the transfer the ownership of the property is given to one person and no person has the rights over that, also no conditions can be imposed on the transferee for further transfer .section 10 of the transfer of property incorporates that if any condition is against the disposal of the property, then the condition would not be binding on the transferee and transferee gets the absolute title over the property. If the condition included is condition precedent, then the condition is valid whereas if it is conditional subsequent then the condition is void and transfer is valid[2]. There are two types of conditions

                   Condition precedent               condition subsequent

• In condition precedent, it says that there must be a condition that must be satisfied to make a transfer and take over the title of the property and the must be substantially complied.

Example: A transfers Rs .50000 to B on a condition that only if he marries and it must be with the consent of C, D, and E . E dies and B marries with c and d consent. B is considered to fulfill his condition.[3]

In the case of Wilkinson v. Wilkinson, the party asked the other party to divorce the husband to make the transfer valid. since it is an immoral act court held that the condition is void and against public policy.

• Subsequent condition is a condition which must be followed The transfer can be completed only after the subsequent is fulfilled. the essential is that the condition must be lawful and no fraudulent actions involved, if it restricts the absolute transfer or involves fraudulent actions then it is void.[4]
• OTHER TYPES OF CONDITIONS :
• Collateral condition is such that where transfer and the condition are fulfilled simultaneously
• Section 27 of Transfer of Property says that if the first transfer fails then transfer can be made to any other party. It happens only when the condition is not satisfied or the prior transfer fails. For example,  A transferred a car to B on condition to transfer his bike to C and if he does not do so the car will be transferred to D.
• Section 28 provides that if any transfer is made on the happening of a specified event. It can be called a conditional limitation.  For example: A transfers his land to B and after his death the land will be transferred to C .hence the interest created on C has ulterior motives. Here, the property will be transferred to the ulterior beneficiary at the end if the condition does not happen.
• Section 31 states that if the condition is dependent on the happening and non-happening of an event, then transfer has an effect after the happening of an event.

TYPES OF RESTRAINTS :

1. ABSOLUTE RESTRAINT :

If a condition is imposed of such a kind that makes the transferee not to sell the property and the absolute ownership of the property is taken away and they can only enjoy the property by themselves and cannot be transferred to any person then it is called as absolute restraint. If there is such a condition imposed then the condition is void and the transfer is valid.

• RESTRAINT IMPOSED WITH RESPECT TO TIME :

If there is any condition imposed upon the transferee that restricts him from disposing off the property for a particular period of time then such restriction is void. The time limit is 3 years if it is more than that then it is an absolute restraint.

• RESTRAINT IMPOSED WITH RESPECT TO CONSIDERATION :

If a condition is imposed by the transferor upon the transferee which includes that the sale must be for a fixed price or at a market rate then the condition is an absolute restraint so the condition is void.

• RESTRAIN IMPOSED WITH RESPECT TO PURPOSE:

If a condition is included stating that to make a transfer, he needs to get permission from any specific person, then such restriction is a clog on the property so, the restriction is void. As the transferee has the liberty to decide for which purpose, he wants to sell the property such act is void. A condition that includes that property must be sold for religious or educational purpose then such condition is void

• RESTRICTION IMPOSED WITH RESPECT TO PURPOSE :

If there is a condition included which directs the transferee that if he wants to sell then it must be for a specific purpose then such restrain acts as an absolute restrain on the transferee and it is a void condition.

•  A gift of the house with the condition not to sell .in this transfer is valid but the condition not sell is void as the title is transferred, he can transfer to any person

• The husband gifts the house to the wife and she cannot sell the house without his consent, here the condition is void.[5]

2. PARTIAL RESTRAINT :

In this only the partial rights of the transferee is taken away to dispose of the property where it sets the limits to the transferee and his rights over the property and section 10 has not spoken about it but partial restraint is valid.

• For example, the property can be transferred but only to the family members, it is valid because certain families have their traditions.
• if a condition is made that the property cannot be transferred as a gift, then it is a partial restriction so the condition is valid.
• if a condition is imposed that property must be sold only to a particular person, then it is an absolute restriction, so the condition is void.

EXCEPTIONS TO SECTION 10:

If a restraint is imposed on the transferee which restricts him from transferring, then it is void  but there are exceptions to the rule of restraint on alienation. The exceptions are in favor of the lessor and the married woman.

• Lease: if a condition is imposed in the lease deed that the lessor cannot sublease the leased property or to handover the property when the lessor wants to sell, these conditions are considered to be valid so any condition restraining the lessee from alienating the property is not void.
• Married woman: if a transfer is made to the married woman who can be a Hindu, Mohammedan, or Buddhist, in such cases transferor restricting the alienation of property is not void.

CASE LAWS :

1. In the case of Rosher v. Rosher[6], A who has the title of the property has made a gift of property to B and included a condition that if B decides to sell the house during A’s wife lifetime, then she can buy the house at Rs.10000 which is worth of Rs.100000.This condition is an absolute restraint and was declared void.
2. In the case of Muhammad Raza v. Abhas Bandi Bibi, there was a condition that the property could not be sold outside of family members. The court held that the conditional included is a partial restraint and it is a valid transfer.[7]
3. In Gayashi v. Shahabuddin, the sale deed included a clause that the transferee has no right to transfer the property by way of gift, exchange, or mortgage except to the transferor or his heirs. the court held that the condition is void as it is an absolute restraint.[8]
4. In K Muniswamy v. K Venkataswamy, there was a family partition effection with the condition that parents have life interest over the property after that property must be distributed between two sons equally. but parents during their lifetime sold the property to one son so the other son challenged this in court and the court held it as an absolute restraint and the transfer is invalid.[9]
5. In Zorstrain Co-operative Housing Society Ltd v. District Registrar Co-operative Societies, there were houses constructed for residential purposes included in bye-laws which could be provided for Parsis only. and another condition included is that non-Parsi cannot alienate that property. the apex court held that since membership is given with qualified restriction according to byelaws and the prior consent is taken then the condition is not an absolute restraint.[10]
6. In Renand v. Tourangeaon , a condition was included which sought the alienation of property for 20 years was an absolute restraint and if it is for 3 years then it could be considered valid.[11]

CONCLUSION:

In a transfer, the parties involved must be living at the time of transfer and the transfer can be at present or in the future. There are conditions included in the transfer of property if the condition is of absolute restraint that is the absolute interest of the owner is taken away then the condition is void. The condition is void as it is against the principle of public policy which allows the free disposition of property. Every citizen of the country has the right to own the property likewise they can dispose of the property to anyone and it must not be restricted by the transferor but partial restrain is permissible depending on the condition so if transfer involves partial restraint, then it can make a valid transfer.

REFERENCES:          

1. Transfer of Property Act, section 5, no.4, acts of the Parliament,1882(India )
2. Shreya Srivastava, Analysis on restraints on the Alienation of Property, Manupatra,(Nov 9, 2023, 9:30 pm ) https://articles.manupatra.com/article-details/Section-10-Analysis-Of-Restraints-On-The-Alienation-Of-Property
3. Transfer of Property Act, section 26, no.4, acts of the parliament,1882(India )
4. Transfer of Property Act, section 29,no.4 ,acts of the Parliament,1882(India )
5. Legal Service India, https://www.legalserviceindia.com/legal/article-4151-restrain-on-transfer-of-property.html#:~:text=Section%2010%20of%20the%20Act%20has%20only%20provided%20for%20absolute,person%20is%20valid%20and%20enforceable, 9th Nov 2023
6. Rosher Vs ROSHER (1884) 26 Ch D 801
7. 2002(2) ALD Cri 116 ,(1932) 34 BOMLR 1048
8. Gayashi v. Shahabuddin , AIR 1935 ,All 493
9. K Muniswamy v. K Venkataswamy , AIR 2001 Kant 246
10. Zorstrain Co-operative Housing Society Ltd v. District Registrar Co-operative Societies (2005) 5 SCC 632
11. Renand v. Tourangeaon (1867) LR 2 PC 4

---

[1] Transfer of property act ,section 5 ,no.4 ,acts of the parliament,1882(India )

[2] Shreya Srivastava ,Analysis on restraints on the Alienation of Property,Manupatra,(Nov 9 , 2023, 9:30 pm ) https://articles.manupatra.com/article-details/Section-10-Analysis-Of-Restraints-On-The-Alienation-Of-Property

[3] Transfer of property act ,section 26 ,no.4 ,acts of the parliament,1882(India )

[4] Transfer of property act ,section 29 ,no.4 ,acts of the parliament,1882(India )

[5] Legal Service India, https://www.legalserviceindia.com/legal/article-4151-restrain-on-transfer-of-property.html#:~:text=Section%2010%20of%20the%20Act%20has%20only%20provided%20for%20absolute,person%20is%20valid%20and%20enforceable, 9th nov 2023

[6] Rosher Vs ROSHER (1884) 26 Ch D 801

[7] 2002(2) ALD Cri 116 ,(1932) 34 BOMLR 1048

[8] Gayashi v. Shahabuddin , AIR 1935 ,All 493

[9] K Muniswamy v. K Venkataswamy , AIR 2001 Kant 246

[10]Zorstrain Co-operative Housing Society Ltd v. District Registrar Co-operative Societies (2005) 5 SCC 632

[11]  Renand v. Tourangeaon (1867) LR 2 PC 4

Disclaimer: The materials provided herein are intended solely for informational purposes. Accessing or using the site or the materials does not establish an attorney-client relationship. The information presented on this site is not to be construed as legal or professional advice, and it should not be relied upon for such purposes or used as a substitute for advice from a licensed attorney in your state. Additionally, the viewpoint presented by the author is of a personal nature.