Section 10 of The Transfer of Property Act, 1882 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, 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 women (not being a Hindu, Muslim or Buddhist), so that she shall not have power during her marriage to transfer or charge the same or her beneficial interest therein.
Explanation: If any property is transferred, there can be no condition restraining alienation, except in the case of lease or for the protection and benefit of a Christian Women until the period of her marriage. If a transfer made, has a condition or limitation which restricts alienation for the purpose other than lease or for the benefit of a Christian women, t he condition or limitation is deemed to be void.
Case Laws: Shri Ramachandra Bhakta vs Shri Krushna Chandra Bhakta and Ors. (1999) Facts: The suit property-Bari land, by a deed of family arrangement, was executed by the plaintiff and his father on one side and Nidhi Bhokta (defendant No. 1) on the other incorporating a pre-emptory clause that if any of the aforesaid parties wants to sell the land allotted to his share, then the other party, if prepared to purchase the said property, the demised land cannot be sold to any third party. However, if the party is unable or not interested in purchasing purchasing the land on the market value, then it can be sold to any third party.
It was alleged that NK violating the aforesaid stipulation in the deed, alienated the suit property to SKCB by registered sale deed, for a consideration of Rs. 500/-. The plaintiff, therefore, brought a suit for declaration that the sale deed is illegal and void and for a direction to the NB to execute the sale deed in respect of the suit property in favour of the plaintiff, failing which the Court may execute the suit sale deed and for permanent injunction. The NB however, took the plea that he has offered to sell the suit property to the SRB, but since the plaintiff declined to purchase, he had sold the same to SKCB and as such, there has been no breach of contract. Decision: The prohibition contained in Section 10 of the Transfer of Property Act is operative against absolute restraint on alienation only and not against a partial restraint.
Canbank Financial Services Ltd vs The Custodian & Others (2004) Facts: Andhra Bank (Respondent No. 3) is a nationalized bank. Andhra Bank Financial Services Limited (Respondent No. 4) is a company wholly owned by Andhra Bank. Canbank
Mutual Fund (CBMF) is a subsidiary company of Canara Bank, another nationalized bank. The Appellant herein is also a subsidiary of Canara Bank. In or about 1989, Canbank Mutual Fund floated an open ended investment scheme known as CANCIGO on an assured return of 12.5% p.a. payable half yearly; the lock in period where for was one year. A stipulation was also made to the effect that transfers are not permitted. Hiten P. Dalal (Respondent No. 2) was a registered stock broker. Respondent No. 3 (Andhra Bank) at his request applied for CANCIGO units of face value of Rs. 11 crores. Similarly, Respondent No. 4 (Andhra Bank Financial Services Limited) also at the request of HPD applied for CANCIGO units of face value of Rs. 22 crores. Indisputably, the payment of application money for purchase of said CANCIGO units was to be made, out of the money lying in the bank account of HPD. The AB and ABFS Ltd. complied with said request of HPD. The CANCIGO certificates received by the AB and ABFS Ltd. were handed over to the HPD. The interest accruing from the CANCIGO received by the AB and ABFS Ltd. was also credited to the account of HPD. The said Respondents did not claim any right, title or interest therein. Decision: A beneficial trust has been created. The same would, thus, be transferable as otherwise it would be hit by Section 10 of the Transfer of Property Act. Section 10 would not be attracted only when the restriction as to alienation is only partial. A stipulation taking away the whole power of alienation substantially is a question of substance and not of form. Section 10 limits the application of such stipulation.
Shyamal Ranjan Mukerjee vs Nirmal Ranjan Mukerjee (2007) Question of Law:
1. Whether the Temple which is abode of the Deity is alienable even if there is no such prohibition in the Deed of Dedication? 2. Whether the properties other than Temple vested in the Deity are alienable? Decision: Section 10 of the Transfer of Property Act makes it clear that if property is subject to a condition absolutely restraining the transferee or any person claiming under him from parting or disposing of his interest in property, such condition is void, except in case of lease. But, since it is connected with a person’s belief and faith, it cannot be alienated.
A writ of mandamus is further issued commanding State of Uttar Pradesh not to permit any alienation of any property attached with any Temple and other Religious Institutions (Mutts, Temples, specified Endowments which also includes Samadhis and other Religious Institutions) etc. without prior permission of the District Judge concerned.
Section 11 of The Transfer of Property Act, 1882 Restriction repugnant to interest created : 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 any such direction has been made in respect of one piece of immoveable property for the purpose of securing the beneficial enjoyment of another piece of such property, nothing in this section shall be deemed to affect any right which the transferor may have to enforce such direction or any remedy which he may have in respect of a breach thereof.
Explanation: 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.
Case Laws: Atika Begum, Amina Bi, Hajira and 2 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.
Inderjeet Singh Sial And Anr vs M/S. Karam Chand Thapar And Ors (2012) Facts: The appellants are the heirs of one Sardar Pishora Singh Sial. SPS obtained a mining lease from the erstwhile Government of Central Provinces for extraction of coal in 420.27 acres of land. He also obtained in the same village for prospecting of coal, an area measuring 242.29 acres. In anticipation of obtaining the lease and the licencee he entered into a contract with Karam Chand Thaper and Brothers Ltd. to assign his rights in the lease and prospecting licence when maturing. On obtaining, he sought and received permission from the Government for transferring those two rights to KCT and Bros. Ltd. The Government however secured there under for itself payment of due royalty from SPS until a particular date and thereafter from the said company. On such permission being granted, a sale deed was executed by SPS in favour of KCT and Bros. Ltd. This first assignee later assigned its rights, interests and obligations in favour of the second assignee M/s. Rawanawara Collieries and in the same pattern, the second assignee sold its rights, interests and obligations to the third assignee M/s. Oriental Coal Company Ltd. The lease and licence was for a period of thirty years starting from particular dates as embodied in the initial deeds.
There are distinct two royalties which are playing their part. First is the royalty which Pishora Singh, legally bound, had undertaken to pay to the State Government on obtaining mining and prospecting rights. The second "royalty" figuring is embodied in the assignment deed Ex.D-5 wherein royalty has been undertaken to be paid by Karam Chand Thapar and Bros. Ltd. to Pishora Singh to the extent and manner stipulated therein as part of the consideration for assignment, over and above the royalty payable to the State. The liability to pay such stipulated royalty to Pishora Singh ultimately rested on the three afore-mentioned assignees, jointly as well as severally. And in the discharge of that liability undisputedly periodic payments had been made to Pishora Singh (including his heirs) for about 20 years. Then suddenly, as is the case, the assignees cooled off and stopped making payments. Ultimately, the heirs of Pishora Singh Sial filed a suit against the three assignees for recovery of the sums of royalty then fallen due, together with interest; total claim then being for Rs.2,32,627.18 up to a certain period and on quantities of coal despatched. Decision: The defendants' first appeal before the High Court of Madhya Pradesh was placed before a Division Bench of two Hon'ble Judges.
Judge 1: The stipulated payment was meant to be royalty as such and thus not claimable by the plaintiffs as individuals. Judge 2: Held that the term in the deed directing payment of royalty or rent would be offensive to the enjoyment of absolute rights and thus hit by the provisions of Section 11 of the Transfer of Property Act. Appeal to the SC via SLP: It may be true that the document, written in English language, may have been prepared by a lawyer and was entered into between persons conversant with the vocabulary employed in mining leases. Yet these factors per se cannot conclude the matter
that the word "royalty" used in the document was meant to be royalty as such. If intelligence and responsibility is to be attributed to the draftsman and the contracting parties for using the word "royalty" in that technical sense, then it cannot be imagined that they would have overlooked the status of the contracting parties inter se. We cannot thus assume that they were well versed in one aspect and not in the other. Strictly speaking, had the draftsman and the signatories to the deed meant "royalty" as such, then they could not have omitted to identify who had the sovereign prerogative or the State part to play. The word "royalty" thus, in the deed was used in a loose sense so as to convey liability to make periodic payments to the assignor for the period during which the lease would subsist; payments dependent on the coal gotten and extracted in quantities or on despatch. The commodity goes by its value; not by the wrapper in which it is packed. A man is known for his worth; not for the clothes he wears. Royal robes worn by a beggar would not make him a King. The document is weighed by its content, not the title. One needs to go to the value, not the glitter. All the same, we do not wish to minimise the importance of the right words to be used in documents. Therefore, we are of the view that the word "royalty" was used in the deed mis-descriptively and was really meant to cover an important item of the consideration due for future payments. Section 54 of the Transfer of Property Act clearly postulates that sale is a transfer of ownership in exchange for a price paid or promised to be paid or part paid and part promised. In either situation title to the property would get transferred.
Bhavani Amma Kanakadevi vs C.S.I. (2007) Facts: Plaint schedule property having an extent of 1.12 acres belonged to Parameswaran Pilla, the original plaintiff, the Appellants are his legal heirs. It was sold to respondent C.S.I. Dakshina Kerala Maha Idavaka for the purpose of construction of a private college for a consideration of Rs.11,200/-. There is a clause in the sale deed that if by any reason a college could not be constructed, respondent vendee shall reconvey the property for the same consideration to the plaintiff. Contending that no college was constructed and as provided under sale deed, plaintiff is entitled to get the property reconveyed by respondent and respondent is attempting to dispose the property to third parties. Respondent resisted the suit contending that clause in Ext.A2 to reconvey the property to the plaintiff is void under Section 10 of Transfer of Property Act. Decision: Though Ext.A2 does not contain a specific clause prohibiting respondent from alienating the property to third parties, there is an implied clause that in the event of failure to construct a college, the property shall be reconveyed to the assignor at the same price thereby shutting out any other option. It is an absolute restraint on the right of respondent to deal with the property including alienation, which is void as provided under Section 10.
