Right to Alienate under the Transfer of Property Act, 1882

Introduction

Owning property typically comes with the freedom to sell it whenever and to whomever you choose—a right known as alienation. But what happens when this right is restricted? Imagine being unable to sell your property for ten years, or sell it only to specific people, or having to sell it back at a predetermined price. These restrictions, known as restraints on alienation, can significantly affect one’s control over his property.

Understanding these restraints is essential, as they come in various forms, each with legal implications. By examining these aspects, we can better understand how property rights can be protected and limited and when such limitations might be legally valid and practically necessary. Section 10 of the Transfer of Property Act, 1882 essentially deals with the restrictions imposed upon the right to alienate the property.

Right to alienate the property

• An owner has the exclusive right to alienate their property, meaning they can sell it whenever they want, for any price, to anyone, and for any reason.
• The concept of alienation includes the freedom of the seller or buyer to choose the terms of the sale, such as the timing, price, and purpose.
• A restraint on alienation is a condition that limits the owner’s freedom to sell their property. It can dictate when, how much, how, to whom, or why the property must be sold. These restraints can appear in the following ways:

Restraints on transfer for a particular time

• A clause preventing the sale of property for a set period is generally not valid unless it is for a short duration and benefits the seller (like a right to buy back).
• In the Loknath Khound v. Gunaram Kalita[1] case, it was found that a five-year sale restriction was valid when the buyer had to sell back at a higher price within that period. If he does not, the purchaser can alienate at his prerogative.

Restraints directing control over consideration/money

When a seller imposes conditions on the sale of property, such as setting a minimum price or requiring the transfer to be at market value or a buyer-determined price, these restrictions are void because they control the monetary aspect of the sale.

Restraints concerning persons/transferee

• A clause that prevents property owners from selling their land without permission is completely invalid. However, in certain situations, a partial restriction might be allowed.
• Whether this is valid depends on each case’s specific circumstances. In Mahamudali Majumdar v. Brikondar Nath[2], it was held that the transferor himself, selling the property to an outsider, cannot put a condition that binds the latter to sell the property only to members of the transferor’s family.

Restraints regarding sale for a particular purpose

• When a property transfer agreement does not explicitly grant the right to sell but imposes limitations on how the property can be used, this might be considered an excessive restriction.
• The ability to decide who to sell to and for what purpose is generally the seller’s prerogative. Imposing conditions on these decisions can limit the seller’s freedom to dispose of the property.
• In the case of Bhawani Amma Kanakadevi v. CSI Dekshina Kerela MahaIdevaka[3], a condition that required the construction of a private college on the property was deemed an excessive restriction. If the condition wasn’t met, the property had to be returned to the original owner for the same price.

Types of restraints

1. Absolute restraint

• An absolute restraint is a restriction that eliminates a transferee’s right to sell or transfer their property. This means the transferee cannot pass ownership to someone else and has no control over the property’s use.
• Section 10 states that any condition preventing a transferee from disposing of their property is not valid. Therefore, the property must be transferred without such a restriction.
• In Rosher v. Rosher[4], a gift with a condition allowing the donor’s wife to buy the property at a significantly undervalued price was considered an absolute restraint and was declared void.
• Furthermore, in Kannamal v. Rajeshwari[5], a similar outcome occurred when a life estate was granted with an absolute restriction preventing the transferee from selling or giving away the property. In Mohd Raza v. Abbas BandiBibi[6], a condition limiting the transfer to a specific person or for a particular time was also deemed not valid.

2. Partial restraint

• Partial restraint is a condition that partially limits a transferee’s right to sell or give away property. This type of restraint does not significantly affect the transferee’s ownership rights. While Section 10 does not directly address partial restraints, such a condition is generally considered valid.
• In the case of Mata Prasad v. Nageshwar Sahai[7], a dispute arose over succession between a nephew and a widow. A compromise was reached where the widow was given possession of the property. At the same time, the title was granted to the nephew with the condition that he could not transfer the property during the widow’s lifetime. The court upheld the validity of this compromise and condition.
• However, if a transfer is restricted to only specific individuals, it constitutes an absolute restraint and is therefore void. This principle was reaffirmed in the notable case of Zoroastrian Co-operative Housing Society Ltd v. District Registrar Co-operative Societies[8], where a housing society established for residential purposes had a bylaw restricting membership to Parsis and prohibiting members from selling their property to non-Parsis.
• The Supreme Court ruled that when a person voluntarily accepts membership in a cooperative society and agrees to its bylaws, which include a qualified restriction on property transfer requiring society approval, it does not amount to an absolute restraint on alienation in violation of Section 10 of the Transfer of Property Act.

Exceptions to the general rule

• Section 10 outlines two exceptions to the rule against inalienability. The first exception is that conditions or limitations attached to a lease, which benefit the lessor or those claiming under the lessor, are not prohibited.
• The second exception allows for property to be transferred to a woman who is not Hindu, Muslim, or Buddhist, with a restriction that she cannot transfer or alter her interest in the property during her marriage.

Conclusion

In conclusion, while the right to alienate property is a fundamental aspect of ownership, the law recognizes certain restraints that can limit this freedom. These restraints can take various forms, including restrictions on a sale’s timing, consideration, transferee, or purpose. Absolute restraints, which eliminate the ability to transfer property, are generally void under Section 10 of the Transfer of Property Act. However, partial restraints, which impose limited conditions on alienation, may be upheld depending on the circumstances.

The courts have consistently balanced the need to protect the autonomy of property owners with the necessity of allowing reasonable restrictions, particularly in cases where such restrictions serve a legitimate purpose. Exceptions to the general rule against inalienability, such as those benefiting lessors or protecting women under certain conditions, further illustrate the nuanced approach of the law. Understanding these legal principles is crucial for anyone involved in property transactions, as they define the boundaries of ownership rights and the validity of restrictions that may be imposed.

[1] AIR 1986 GAUHATI 52.

[2] AIR 1960 Assam 178.

[3] AIR 2008 Ker. 38.

[4] (1884) 26 Ch D 801.

[5] AIR 2004 NOC 8 (Mad).

[6] 1932 (59) IA 236.

[7] (1927) 47 All 48415.

[8] AIR 2005 SC 2306.