This article is written by Shivya Malhotra of 5th Semester of University of Petroleum and Energy Studies, an intern under Legal Vidhiya
Abstract
This article delves into the intricate web of legal restrictions governing the transfer of property, focusing on the Transfer of Property Act and its implications on real estate transactions. Through a comprehensive analysis, the article explores the various dimensions of property transfer, ranging from the validity criteria and conditions to the prohibition of fraudulent transfers. It highlights the significance of understanding these restrictions for both buyers and sellers, emphasizing the legal and ethical considerations that underpin property transactions. By shedding light on the complexities of these regulations, the article aims to equip readers with the knowledge needed to navigate the multifaceted world of property transfers within the boundaries of the law.
Objective
The objective of the Transfer of Property Act, 1882 is to provide uniform rules for the transfer of property.
Keywords
Transfer of property, Alienation or Restrain, Types of restraints, exceptions to restraints.
Introduction
Property ownership and transfer in India are governed by various laws, with the Transfer of Property Act (TOPA) being a cornerstone of these regulations. Enacted in 1882 during British rule, TOPA provides the legal framework for the transfer of property, outlining the rights and responsibilities of both buyers and sellers. In this article, we will explore the key aspects of TOPA and the restrictions it imposes on the transfer of property.
The law relating to transfer of property is governed by the Transfer of Property Act, 1882. Property is always considered as the basic elements of an individual’s socio-economic life. Central and state both the governments can take legislative action in respect of the transfer of property. Section 5 of the TPA, states that transfer of property is an act of conveying property by one person to another person. The parties so involved in transfer are transferor and transferee.
This Act would not applicable if the property is disposed of by the operation of law rather that would be governed under Indian Succession Act, 1925. Operation of Law means the transfer in the form of inheritance, insolvency, forfeiture or sale in execution of a decree. [1]
The transfer must fulfil the conditions laid down under Section 7 of the Act which deals with the essential elements of the valid contract. [2]
Transfer of property
Section 5 of the Transfer of Property Act, 1882 defines the meaning of transfer of property which says an act by which one person conveys the property may be in present or in future, to one or more persons, or to himself, or to himself and one or more person. Here, living person may be a company or an association or body of individuals, whether incorporated or not.
This act deals with only the sale, lease, gifts, mortgage and exchange of property. No doubt, that there can be any other kind of transfer as well, but that would not be governed by the Transfer of the Properties Act.
Who can transfer property?
Section 7 of the Transfer of Property Act states the person those are competent to transfer property, such persons are categorised as: –
- Every person competent under Indian Contract Act, 1872.
- A person who is authorized to dispose of transferable property that he does not have the ownership to.
What is Alienation?
It means transfer of property. The mode of transfer could be through gift deed, sale or mortgage. In Joint Hindu family, no person not even the Karta has the power to alienate the joint family property without obtaining the free consent of the coparceners. Only such property can be alienated without anyone’s consent which is the separate property of the Karta or any individual of a Joint Hindu family.
Restrain or Alienation
Section 10
It states that a condition that arose at the time the property was transferred to the transferee and prohibits the transferee from giving up all right to transfer his interest in the property to another person will be nullified. The transfer from the recipient would continue to be enforceable.
Except in the case of leases where the condition is for the benefit of the lessor or those claiming under him, conditions that are placed on property transfers that are intended to prevent the transferee or anyone claiming under him from giving up or selling their interest in the property are null and void.
As long as the woman is not a Muslim, Hindu, or Buddhist, property may be transferred to or for her benefit, but she cannot use her marital status to transfer or charge the property or her beneficial interest in it.
This could be viewed as the anti-alienability rule. Transfer of property must be free of restriction; this is the fundamental tenet upon which it rests.
Types of Restraints
- Absolute Restraints
- It is a kind of restraint which completely waives of the rights of the transferee to alienate or dispose of the property. Under this the transferee can no longer exercise his right to transfer his interest in the property to another person and has no freedom to do what he wants with his property in his capacity as the owner of the property.
- Let’s understand this with an example, A gifted a house to B, and put up a condition stating that if B wants to sell the house during the lifetime of A’s wife, she should have the option of purchasing it foe Rs. 10,000, while the market value of the house was set as 10,00, 000.This condition will be considered as an absolute restraint and was declared void.
- Partial restraint
- It is a kind of a condition which partially takes away the rights of the transferee to dispose of his interest in the property. Here, the right is not taken away substantially. Section 10 does not specifically talk about partial restraints.
- Mata Prasad v. Nageshwar Sahai (1927) 47 AII 484, a dispute regarding succession between nephew and widow arose. They came to a compromise that the widow holds the possession of the property while the ownership will be given to the nephew and a condition was put up, that he was restricted from alienating the property during the widow’s lifetime. It was held that the condition as well as the compromise were valid in nature and prudent in the present case.
Absolute and Partial Restrain being in Dilemma
There has been a dilemma since very long that whether a particular restrain is absolute restrain or partial restrain because of this the Indian Courts have been disturbed with this issue. Indian legal system permits the application of partial restrain which are worthy of being categorized as both fair and reasonable.
A line of demarcation has been tried to be drawn on the basis of the facts of certain cases:
- The transferee was only allowed to sell the property to a particular person who agrees to buy it in the first instance. This can be considered as the partial restrain.
- An English rule was applied to it by the Privy Council where it was held that a restriction forbidding alienation of property to strangers, allowing it only to the family members was a partial restrain.[3] In the case of Zoroastrian Co-operative a similar verdict was given by the court.
- Preventing free circulation of property, in light of sound public policy, was held void and lying under the ambit of Section 10.[4]
There are certain exceptions to the restraints.
- Lease
It is a transfer wherein the right to enjoy the usage of the property is with lessee though he does not have the ownership of the property whereas the ownership of the property is still with the lessor.
- Married woman
When the property is to be transferred to a married woman, except for a Hindu, Muslim or Buddhist woman, then the condition restricting alienation can be valid.
Repugnant Condition
- Section 11 talks about the conditions which are repugnant in nature and which are inconsistent with the right to transfer the interest. These conditions come with the transfer when the transfer confers to the transferee, absolute interests in the property. Any condition with a transfer of absolute interests in the property will be void.
- The parties entered into a sale deed for a piece of land. Therein, it was mentioned that the buyer could only use the land for setting up a factory for jute textile manufacturing. It was held that this condition was invalid as the absolute interest in the land had been transferred to the buyer and he could use it as he pleased. [5]
The Indian Judiciary has upheld restraints on the following grounds that cannot be consolidated into definite categories, the four main grounds are as follows: –
- The doctrine of first refusal.
It provides the transferor the first claim over the property. Basically, it is determined under this doctrine that if the transferee wants to sell the property, then he should first make an offer to the transferor. Then depending upon the transferor, he shall dispose if his property. In case the transferor denies to purchase it then the transferee can make an offer to public at large or to whosoever he wants. In Debi Dayal v. Ghasita. The court assessed that this kind of transfer must have partial restrain. The court upheld the validity of the transfer that the transferee would first make an offer to sell the property to the transferor and would offer it for sale in case the transferor denies to purchase.
- Time based restraints
The restrictions on time frame have been proposed in order to declare them void. There is an exception to this doctrine which was held in the case named, Loknath Khound v. Gunaram Kalita. In this case the transferor restricted alienation for five years. However, he added a clause that he would have an option to repurchase it within this time frame and if he did not, the transferee was free to sell it’s beyond the fifth year. The court upheld this condition due to the limited period within which the restrictions were imposed.
- Infringement on autonomy
Restrictions are interpreted by looking at how the autonomy of the contracting parties is curbed. In Gayasi Ram v. Shahabuddin it was held that a two-pronged test to determine party’s restraints. Firstly, If alienation cannot be undertaken for all the practical purposes the transfer will be absolute. Secondly, the existence of remote contingencies where the transfer can occur does not negate the fact that the transfer is absolute.
- Community based restrictions
In the case of Mohd. Raza the restrictions that would be imposed on the alienation of the property within the family or community were declared valid. Sentimental attachment or the preservation of the family esteem can determine the validity of such restrictions. Some of the recent cases allows the preservation of property within the society and the main motive behind this is the preservation of minority rights. [6]
Alienation of a Temple which is the abode of a deity
Alienation of a temple that serves as a deity’s home. The deed of dedication of property contains a clause that completely prohibits the transfer of property. It was decided that the deed was valid. “Whether the Temple is abode of deity is alienable even if there is no such prohibition that had to be mentioned in the deed of dedication?” was the legal question that arose in this case. and “Whether the properties other than Temple vested in the Deity are alienable?” emerged as another legal query. It was decided that it is evident. According to section 10 of the Transfer of Property Act, a condition on property that completely prevents the transferee or anyone claiming under him from giving up or selling his interest in the property is null and void, with the exception of leases. However, in situations where a person’s belief, faith, or trust are involved in a property lease or alienation. One cannot alienate it.[7]
Conclusion
In the intricate tapestry of property transactions, conditions restricting the transfer of property stand as pivotal threads, weaving legal intricacies into the fabric of real estate dealings. The Transfer of Property Act provides a comprehensive framework, outlining the contours within which these conditions operate, ensuring both legal validity and ethical considerations.
As we conclude our exploration, it becomes evident that an in-depth understanding of these conditions is indispensable for anyone engaged in property transactions. From the prohibition of fraudulent transfers to the nuanced distinctions between leases and licenses, each condition serves a distinct purpose in safeguarding the rights of parties involved.
References
https://blog.ipleaders.in/alienation-restraint/
[1] Legal service, https://www.legalserviceindia.com/legal/article-4151-restrain-on-transfer-of-property.html#:~:text=Section%2010%20of%20the%20Act,will%20be%20treated%20as%20valid
[2] Section 7
[3] Syed Mohammad Raza v. Abbas Bandi, MANU/MH/0323/1988.
[4] Muniswamy v. Venkataswamy, MANU/KA/0479/2000.
[5] iPleaders, https://blog.ipleaders.in/alienation-restraint/
[6] SCCOnline, https://www.scconline.com/blog/post/2022/12/23/re-examining-the-interpretation-of-section-10-of-the-transfer-of-property-act-1882/
[7] Manupatra, https://articles.manupatra.com/article-details/Section-10-Analysis-Of-Restraints-On-The-Alienation-Of-Property
