B.A. LL.B. (Five Years) Sem 6 Property Law 2021 Mar Question Paper with Solutions

Restraint on alienation: section 10

Under section 10, 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", the condition "is void". The transfer is good, and the transferee takes the property free of the condition.

Only an absolute restraint is void. A condition is absolute when it takes away the power of transfer altogether, or in substance. Rosher v. Rosher, (1884) 26 Ch D 801, shows the test of substance. A testator left land to his son on a condition. If the son wished to sell in the widow's lifetime, he must first offer it to her at a price far below its value. He was free to sell in form, but not in fact, so the condition was held an absolute restraint and void.

A partial restraint leaves a real power of transfer and limits it only in part. Zoroastrian Co-operative Housing Society Ltd. v. District Registrar, Co-operative Societies (Urban), (2005) 5 SCC 632, upheld bye-laws of a Parsi housing society that allowed members to transfer only to other Parsis, with the society's sanction. The Supreme Court treated this as a self-imposed partial restraint, which section 10 did not strike down.

2. The direction must be repugnant to the gift. An owner decides for himself how to use his own property. A direction that he must live in the house himself, or must never let it, takes away part of what was given. The law treats that as inconsistent with full ownership.
3. Only the direction fails. The transferee keeps the property and enjoys it as he likes.

The exception for adjoining property

The second paragraph of section 11 saves one kind of direction. Where a direction about one piece of immovable property is made "for the purpose of securing the beneficial enjoyment of another piece of such property", the transferor may still enforce it. Suppose an owner sells half his plot and keeps the half next to it. He may validly bind the buyer not to build above two floors, so as to protect the light and air of the half he kept. That direction serves his own neighbouring land, not a wish to control the buyer.

Determinable on insolvency or attempted alienation: section 12

Section 12 strikes at an indirect restraint. A transferor may say that the transferee's interest will "cease on his becoming insolvent or endeavouring to transfer or dispose of the same". Such a condition "is void". Without this rule, section 10 could be avoided easily. A transferor could not forbid a sale, but he could say that the interest ends the moment a sale is attempted. Like section 10, section 12 does not apply to "a condition in a lease for the benefit of the lessor".

Examples

1. X gifts a house to Y with a condition that Y shall never sell it. The condition is void under section 10, and Y may sell.
2. X gifts a house to Y on a condition that Y shall not sell it to one named business rival of the donor. This partial restraint may be upheld.
3. X gifts a sum of money to Y absolutely, directing that Y spend it only on a car. Y may use it as he likes under section 11.

Conclusion. The Act protects the transferee's freedom both to transfer and to enjoy what he receives. An absolute restraint on alienation is void under section 10, though a partial restraint may stand, as Zoroastrian shows. Under section 11, a direction on how an absolute interest must be enjoyed is ignored, as N.P. Saseendran holds. The exception is a direction protecting adjoining land. A condition ending the interest on insolvency or attempted transfer is void under section 12, except in a lease for the lessor's benefit.