Restraint on Alienation of Property: A study with different modes of transfer of

Immovable Property
INTRODUCTION
Restraint on alienation
A restraint on alienation, in the law of real property, is a clause used in the conveyance of
real property that seeks to prohibit the recipient from selling or otherwise transferring his
interest in the property.
Section 10, 11 and 12 of the Transfer of Property Act,1882
The principle underlying Section 10 is that a right to transfer is incidental to, and inseparable
form, the beneficial ownership of the property. The object of Sections 10 and 11, is that the
transferor should not be allowed to put a clog or restriction on the right of the vendee so as to
be repugnant to the nature of estate sold 1. The principle is self-evident. One cannot transfer a
property to its total destruction. The right of owner does not include the liberty to ruin the
ownership. The owner can destroy the property if he so likes but he cannot ruin the
ownership. Whosoever is the owner of an estate , he has freedom to deal with the property
in the same way as was done by the ex-owners. The owner has full liberty to transfer a
property but has no right to make it non-transferable forever. It is not reasonable exercise of
the liberty to make the property non-alienable by putting condition or limitation therewith.
It is however, necessary that alienation restrained must be of the property transferred.
Whatever, may be transfer limited or absolute but the restriction contemplated has to be
absolute. The restriction is invalid, the transfer is valid, however partial restraint is not
void.

What are the types of restraint

Section 10 defines two types of restrainta) Absolute restraint
b) Partial Restraint

1 (1979) J and K L.R. 355 (D.B.)

Absolute restraint is void, a partial restraint is not.2

Absolute Restraint
The section says that a condition which absolutely restrains the power of alienation is void. In
Re Macluey3, MR Jessel said that whether the condition took away the whole power of
alienation substantially, was a question of substance and not of form.
In Rosher v Rosher4 , the testator devised an absolute estate to his son with a proviso that if
he sold during the lifetime of his wife, she should have an option of purchasing the estate at a
price which was one-fifth of the market value. This was held to an absolute restraint and
hence the condition was void.
A provision in a partition deed prohibiting alienation of the property allotted absolutely to
each coparcener without the consent of the other sharers is invalid as an absolute restraint.5
In Kelly v Elliot6 where a tea plantation was devised absolutely , but a condition was annexed
that if the devisee should sell the plantation I will direct her to pay my brother the sum E
1,000 out of the proceeds of such sale, also the further sum of E500 out of the proceeds of
such sale (to her sister)- the direction was held to be repugnant and void as a restraint on
alienation.
Partial Restraint
Section 10 is silent about the situation where the restraint is partial. Where the restraint does
not take away the power of alienation of the transferee substantially but only limits it to some
extent, the restraint is partial. A partial restraint is valid and enforceable.
In Muhammad Raza v Abbas Bandi Bibi7 the condition restricted the transferee from
transferring the property to strangers, i.e., outside the family of the transferor, the Privy
2 Canbank Financial Services Ltd v Custodian (2004) 8 SCC 355
3
4
5 Mudara v Muthu Hengsu 154 IC 587, AIR 1935 Mad 33
6 [1896] 2 Ch 353

Council held that the condition was merely a partial restraint which was valid and
enforceable.
In re Macky8 there was a devise of an estate on condition that the devisee should never sell it
out of the family. The Court held that the restrain was only partial in nature and the condition
was valid. Making a deep observation, Sir George Jessel , M.R. observed that :
First, it is limited as to the mode of alienation because the only prohibition is against
selling. There are various modes of alienation. Besides sale, a person can lease or he may
mortgage or he may settle, therefore it is a mere limited restriction on alienation in that way.
Then again it is a limited restraint as regards class; he is never to sell it outside the family
but he may sell it to any member of the family. It is not, therefore, in the sense of there being
only one person to buy; the Will shows there were great many members of family when she
made her Will. This is trictly a restraint on alienation
Zoroastrian case
Different modes of Transfer of Property
Sales of Im Pr-Ss. 54 to 57
Mortgages of Im Pr-Ss. 58 to 104,
ChargeS. 100
Leases of Im Pr Ss. 105 to 117
Exchanges Ss. 118 to 121
Gifts Ss. 122 to 129
The word transfer is defined with reference to the word convey. The word transfer of
property describes a process or an act by which the title of the property, ownership ,
possession and its enjoyment of the property is given to another. The definition in Section
205(1)(ii) of the Law of the Property Act is Conveyance includes a mortgage, charge, is
,assent, vesting declaration, vesting instrument, disclaimer , release and every other assurance
of property or of any interest therein by any instrument except a Will. The word conveys
has been used in a much wider sense under Section 5.
Transfer of Property under Sec 5

7 AIR 1932 PC 158

8 44 L.J. Ch. 441

1. Means an act by which a living person conveys property

2. The property is conveyed to another living person or persons
3. The conveyance can be in present or in future
A transfer of Property clearly contemplates that the transferor has an interest in the property,
which is sought to be conveyed. He cannot sever his rights in the property and yet convey it
to the transferee.9Only 5 conveyances are transfer of property for the Act:1. Three modes convey absolute title e.g., sale, gift, exchange.
2. Two convey limited interest e.g., mortgage and lease
Will is not included under the word transfer as a Will operates only after the death of the
testator.10
Sale- Sale has been defined under Section 54 of the Transfer of Property Act,1882. It defines
saleas a transfer of ownership in exchange for a price paid or promised or part-paid and part
promised. According to its ordinary meaning, sale is a transfer of property for a price. 11The
meaning of the word price ahs not been defined under Transfer of Property Act,1882 and
hence its meaning under Sale of Goods Act,1930 is applicable here. 12 But the payment of
price is not necessarily a sine qua non for sale because the words in Sec.54 are price paid or
promised. In determining whether a transaction is sale or any other transfer, the court should
look into the real nature and essence of the transaction 13.The adjustment of the rights of the
partners in a dissolved firm is not a transfer, nor it is for a price.14
When a sale deed of immovable property was executed and registered, there is prima facie
transfer of title to vendee.In the case of Dulana Devi v Balaram Sahu15 it was held that mere
9 Samrathi v Parasuram AIR 1975 Pat 140 (143)
10 Koragappa Gowda v Jinnappa Gowda 1998 AIHC 1147(1149)(Kant) ; Asharfi
Devi v. Prem Chand AIR 1973 Alll 457
11 Pg 630,2nd ed , Commentaries on TPA,Soli j Sorabjee,2004
12 Commissioner of IT v Motor & General Stores AIR 1967 SC 200
13 Central Finance and Housing Co. v British Transport Co. AIR 1954 All 196.
14 I.T.Commr., M.P. v Dewas Cine Corpn., AIR 1968 SC 676 (678).

fact that consideration was not paid will not arrest the passing of title, as a sale of property
may be effected in exchange for the price paid or promised to be paid.
A sale should be distinguished fro a mortgage or a lease since in the latter there is no transfer
of ownership when in the case of sale there is such transfer of ownership, being an essential
element in sale. If the consideration is not money it can be anything but sale.
Mortgage A mortage has been defined under Section 58 of the Act and defines it as the
transfer of an interest in specific immovable property for the purpose of securing the payment
of money defined advanced or to be advanced by way of loan, an existing or future debt, or
the performance of an engagement which may give rise to a pecuniary liability. The transferor
is called mortgagor and the transferee mortgagee; the principal money and the interest of
which payment is secured for the time being s called the mortgage-money and the instrument
by which the mortgage is effected is called mortgage deed.The purpose of the mortgage must
be to secure payment of loan or debt or performance of engagement. A transfer made for
discharging a debt is not a mortgage.16
There are six types of mortgage: Simple mortgages, Mortgage by conditional sale,
usufructuary mortgage, English mortgage, mortgage by deposit of title deeds and Anomalous
mortgage. In a simple mortgage what is transferred is power of sale which is one of the
component rights that make up the aggregate of ownership. In a usufructuary mortgage, what
is transferred is aright of possession and enjoyment fo the usufruct. In a conditional mortgage
and in an English mortage the right transferred is, in form, a transfer of a right of ownership
subject to a condition.
In each case, whatever be the form of the mortgage, there is a transfer of some interest only,
and not a transfer of the whole interest of the mortgagor.17

15 AIR 1993 Ori 59

16 Nidha Shah v Murli dhar 30 Ind App 54
17 Ram Kinkar v Satya Charan (1939) ILR 1 Cal 283

If the mortgage money is not advance as promised, the remedy of the mortgagor is by way of
redemption or damages. He cannot file a suit for specific performance of the agreement to
lend the whole amount.18
Gift- A gift is a voluntary transfer of movable or immovable property made by the donor to
the donee during the lifetime of the donee and effected by a registered document being
attested by two attesters. If all the elements of Sec 122 read alongwith Sec123 are fulfilled,
there will be a valid gift, if not it will have no legal consequence. 19 While considering
whether there was a valid gift, the intention of the donor, execution of the deed and
acceptance are pivotal features.20
Lease- Section 105 of Transfer of Property Act,1882 defines lease of property. A lease is a
transfer of a right to enjoy such property , made for a certain time, express or implied, or in
perpetuity or in consideration of a price paid or promised, or of money, a share of crops,
service or any other thing of value, to be rendered periodically or on specified occasions to
the transferor by the transferee, who accepts the transfer on such terms.
The relationship of a lessor and lessee is one of contract. 21 This section defines a lease as a
partial transfer i.e. a transfer of a right of enjoyment for a certain time. The essential elements
of a lease are:

The parties,
The subject-matter: immovable property
The demise, or partial transfer,
The term or period,
The consideration or rent

The interest of a lessor is a reversion, that is to say a future estate capable of being reduced to
possession on the termination of the existing lease and can be validly transferred under Sec
5.22 Lease is a mode of transfer whereby an interest in property is curved out by the lessor in
18 Phul Chand v Chand Mal ILR 30 All 252
19 Kunjikuttriamma v. Knikuttiamma, 2201 (1) KLT 797 (798) (Ker)
20Sanjukta Ray v Bimelendu Mohanty, AIR 1997 Ori 131 (134,135).
21 Mulla pg 959

favour of the lessee. Thus where there is no transfer of interest there is no lease. 23 In a lease
the lessee enjoys the property but cannot tale it away.
In the case of Monoharlal v State of M.P.24 wherein a document of lease which purports to
grant fro some years a right to rear and pluck fruits from the trees and to take them away is
not a lease but a sale of growing crops.
Exchange- Exchange defined under section 118, is a recognised mode of transfer like sale,
gift, part performance etc under the Transfer of Property Act,1882. 25 Exchange takes place
when two persons mutually transfer the ownership of one thing for ownership of another.
However, the Supreme Court in the case of Harendra H. Mehta v S.Mukesh H.Mehta

26

said

that both the properties should be situated in India. Transfer of property by way of exchange
is complete between two persons only if it is registered by operation of Section 17 of the
Registration Act,1908. Where exchange affects transfer of immovable property worth
Rs.100/- or more, registration is required, oral exchange is not permissible. 27A party to
exchange cannot take the plea of adverse possession.28
Difference between Sale and Exchange
The difference between sale and exchange is this that in sale the price is paid is paid in
money while in exchange it is paid in another property by way of barter.29 But where the
owner of the property transfers it partly in exchange for another property and partly for cash,
22 Venkayya v Subbaro AIR 1957 AP 619
23Tolaram v State of Bombay AIR 1954 SC 496
24 AIR 1959 MP 120
25 Bal Kishore v Braham Das 2002 AIHC 3819 (3820) (HP-DB)
26 (1996) 5 SCC 108
27 Satyawan v Rahbir (2002-2) Punj LR 467 (474) (P&H)
28 Bal Kishore v Braham Das 2002 AIHC 3819 (3820) (HP-DB)
29 Kama v Krishna AIR 1954 Ori 105

the transaction is an exchange.30However, where the transaction is in substance an exchange a

mere fact that value of the property transferred has been fixed and mentioned does not
convert the transaction into one of sale.31
Applicability
Restraint Against Alienation in Gift- Under Sec 126 of TPA, a gift may be made on and
agreed condition that it may be revoked on the happening of an event which does not depend
upon will of the donor. However, such condition should not be repugnant to ss 10 & 12 which
deal with all transfers of property by act of parties. Thus, where a deed of gift provided that
the donee or his successor had no right to transfer the property and that if they did transfer,
the same would be invalid and the donor or his successor would have a right to revoke the
gift, the condition was held to be invalid. 32 In case the gift is a valid gift, the title of donor in
the gifted property vests in the done after the acceptance of the gift by the done. If an
absolute gift is made subject to a condition absolutely restraining alienation, the condition is
void33. The last paragraph of the section enacts that the condition of revocation does not affect
the rights of transferees for consideration without notice. This makes it clear that the
condition of revocation operates only as a personal covenant. It does not restrict the interest
of the done, and is not repugnant to the gift under s 10. It has, therefore been held that if A
makes a gift of his property to B, with a condition that A should be at liberty to revoke the
gift to B transferred the property without As consent, the condition does not contravene the
provisions of s 10, and is valid.34
Exception in case of Lease
A lease is an exception to the rule against an absolute restraint on alienation. This exception
arises from the very nature of a lease which is a transfer of property for a time, or in
perpetuity, but in which the lessor necessarily retains an interest. A condition in a permanent
30 P.R.Srinivasan v Corporation of City of Bangalore ILR (1957) Mys 167
31 Ram Badan v KAnwar Singh AIR 1938 All 229.
32 Brij Devi v Shiv Nanda Prasad (1939) ILR All 298
33 Jagdeo Sharma v NAndan MAhto AIR 1982 Pat 32.
34 Ma Yin Hu v Ma Chit May (1929) ILR 7 Rang 306

lease, that should the necessity for alienation by the lessor arise the lessee will surrender the
lease to the lessor is valid 35. The words in this section hen the condition is for the benefit of
the lessor or those claiming under him seem to be merely explanatory of the reason for the
exception. They have been construed to mean that the restriction is invalid, unless
accompanied with a right of re-entry.36This has been dissented from by the Madras High
Court in the case of Parameshri v Vittappa37, on the ground that every such restriction is for
the benefit of the lessor; but that case also held that a restriction without a right of re-entry
gives the lessor a right to damages, but was invalid as a condition and does not have the effect
of rendering the the assignment invalid. The amendment made in s 111(g) by Act 20 of 1929,
makes it clear that a breach of condition against alienation will not work a forfeiture, unless
the condition reserves a right of re-entry. A condition that in case of alienation bythe lessee,
the lease shall be void is not now sufficient to determine the lease, and the case of
Vyankataraya v Shivrambhat38 is now obsolete. Unless a right of re-entry is reserved, the
breach of such a condition merely gives the lessor a right to an injunction and damages.
The restriction on assignment prevents the lessee from assigning without consent of the
lessor.
Married Woman
The proviso recognizes as another exception the restraint on the power of anticipation in the
case of a married who is not a Hindu, Mohammedan or Buddhist. This restraint was a clasue
introduced in marriage settlements whereby property was settled on a married woman for
their separate use without the power to sell or charge the corpus of the estate. The English
Common law rule that a womans property became her husbands on marriage was abrogated
in respect of marriage after 1 January,1866 by s 4 of the Indian Succession Act,1865.
However, in settlements designed to protect married woman from themselves this clause was
retained and received statutory recognition in this section and in ss 56 and 58 of the Indian
Trusts Act 1882. The Married Womens Property Act 1874, was passed to establish the
35 Rama Rao v Thimappa (1925) 48 Mad LJ 463
36 Nil Madhab v Narattam (1890) ILR 17 Cal 826
37 (1903) ILR 26 Mad 157
38 (1883) ILR 7 Bom 256

separate property of married women whi were married before 1 Jan,1866 with reference to
their own wages and earnings. Section 7 of that Act saya that a married woman may sue or be
sued in her own nam in respect of her separate property. Section 8 provides that person
entering into a contract with a married woman with reference to her separate property may
sue and recover against her to the extent of that property. The High Court of Calcutta held
that these provisons enabled a creditor to enforce his claim also against property which a
married woman is restrained from alienating.39 This decision was followed by J Farran in a
case of Cursetji v Rustomji 40decided by Bom High Court. The Mad HC however held that
full meaning can be given to s 8 of the Married womenss Prop act without imputing the
LEgislatuer an intention to ignore conditions in restraint of alienation distinctly recognized in
a later Act. Statutory effect has been given to the Mad view by the amended proviso to s8 of
MWomensPA, substituted by s 2 of the Transfer of Property (Amendment) Supplement Act
1929. This expressly provides that decrees passed against a married woam under s 8 cannot
be executed by the attachment or sale of property she is restrained from alienationg during
marriage.
(Exception)Restraint on alienation in Leases- It is permissible for a lessor to fetter the liberty
of alienation even when the lease is permanent41. A landlord is entitled to insert a stipulation
in a permanent lease providing for the fulfilment of certain conditions without which a
transfer by the lessee would not be binding on the landlord. 42 A covenant in a lease forbidding
transfer by the lessee is valid and enforceable even when the lessee has not transferred the
whole of the property leased but reserved a fraction for himself.43
But the restriction on alienation in a lease must be for the benefit of the lessor. In other words,
if there is a clause in a lease merely stipulating that the lessee should not transfer his interest
to any third person, but the lease does not reserve a right of re-entry, the clause is inoperative
39 Hippolite v Stuart (1885) ILR 12 Cal 522
40 (1887) ILR 11 Bom 348
41 Vyankatraya v Shivram 7 Bom 256 (260)
42 Abdul Rashid v Sachidananda AIR 1939 Cal 523
43 Umesh v Kala Chand 34 IC 516 (Cal)

inasmuch as it cannot be said to be condition for the benefit of the lessor, and an assignment
by the lessee of his interest in the lease would not work a forfeiture of the lease. 44 For
example in the case of Swarna v Prahlad45 in a permanent lease there was a condition that if
lessee or any of his representatives intended to transfer the whole or any portion of the lease,
the transfer would be made in favour of a third party without the lessors permission or
wishes, that in the case of a transfer to a co-sharer of the lessee, such consent would not be
necessary and that in case of any act against the aforesaid conditions,. It was held that the
said act would be invalid because the covenant was void and was not binding on the lessee.
The question was whether in case of perpetual lease , alienation of the property would be
illegal or void. The Bombay High Court in the case of Vyakunta Bapuji v Bombay46 observed
that sec 10 which forbids a clause against alienation in general, makes an exception in the
case of leases where it is introduced for the benefit of the lessor. Subsequently in the case of
Raghuram Rao v Eric P.Mathias47 approved this view and reiterated the same decision.
Exception to the general rule contained in Sec 10 arises from the very nature of the
transaction inasmuch as a lease is a transfer of property for a time or in perpetuity but in
either case the lessor retains an interest in the leasehold property.
Restraint on alienation in Mortgage - A covenant not to alienate does not amount to a
mortgage.48 If the debtor promises to repay the debt then the covenants until payment that he
will not alienate any property, the transaction does not amount to a mortgage, for there is no
transfer of an interest in the property.49 In Mohan Lal v Indumati50 a full bench of Allahabad
High Court held that :
44 Nilmadhab v Narottam 17 Cal 826
45 26 CWN 874
46 7 Bom 256
47 AIR 2002 SC 797
48 Mulla pg 555
49 Gunoo Singh v Latafut (1878) ILR 3 Cal 336
50 (1917) ILR 39 All 244

A covenant against alienation may be said to be a covenant divesting the executants of a

document of a portion of his interest in the property in question, but it does not vest that
interest in anyone else,
And accordingly, a bond in which the obligor covenanted not to transfer certain property and
added the words if I shall do so, then such transfer shall be invalid was held not to be a
mortage.
Restraint on Partition- As partition is not transfer of property sec 10 necessarily does not
apply. However, on the ground of sound public policy any total restraint on the right of
alienation of immovable property which prevents circulation is void; but any partial restraints
or limitations would be valid and binding.51 But where the other features of the document
indicate that the parties did not intend to effect an outright partition but they really wanted a
division for convenience and enjoyment, restrictions on alienation are not hit by section 1052.
Restraint on alienation in compromise Where one of the terms of the compromise embodied
in a decree contained a condition that the party to whom the house was conveyed had no
liberty to transfer it without the consent and permission of other party it is held that such a
condition was void as being a restraint on alienation. 53 But where a compromise decree
contained a term against alienation of certain properties and gave the other party right to its
possession on such alienation, the decree was not a nullity in spite of the fact the term was
opposed to section 10 of the Act.54

Agreement in restraint of alienation Section 10 has no application before an actual transfer.

Accordingly it has no application to an agreement affecting the transferee personally. But if
there is a special personal contract between the parties, that can be enforced.55
51 K.Muniswamy v K. Venataswamy AIR 2001 Kant 246.
52 Gummanna v Nagaveniamma AIR 1967 SC 1595
53 Khaialiram v Raghunath 3 All LJ 621
54 BAi Mungu v Bai Vijli AIR 1967 Guj 81
55 Devidayal v Ghasita AIR 1929 All 607.