Section-10 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 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 woman (not being a Hindu, Mohammedan or Buddhist), so that she shall not have power during her marriage to transfer or charge the same or her beneficial interest therein.
Conditional Transfers – Every owner of property who is competent to transfer, has freedom of transferring his properties either unconditionally or subject to certain conditions . In a transfer of property where a condition is laid down by the transferor, the transfer is a ‘conditional transfer.
Condition may be (i) condition precedent or (ii) condition subsequent
Condition precedent is that condition which is prior to the transfer of property and whether the transfer would take place or not, is itself dependent on that condition. Condition subsequent is a condition which is required to be fulfilled after the transfer of property has already taken place.
Sections 10, 11, 12 and 17 of the Act deal with condition subsequent.
In these sections, certain conditions subsequent have been declared void. Void condition subsequent has no effect and the transferee is not bound by it; he may or may not fulfill it.
Section 10 incorporates the rule that any restriction on the right of disposal would be against this essential feature of ownership rights.
For example, A makes a gift of his house to B subject to the condition that B shall not sell it. The condition being absolute restraint on B’s right of disposal, is void and B is not bound by it. If he sells the property, the sale is valid.
Absolute Restraint – Section 10 declares a condition to be void when it absolutely restrains alienation. Restraint on alienation is absolute if it totally takes away or curtails the right of disposal.
Parties restrains are not prohibited.
(i) A sells his house to B with a condition that B cannot transfer this house to anyone except C. The condition is void because C may be chosen as a person who may never purchase the property.
(ii) A testator makes a will of certain properties in favour of his son with a condition that if he sold it during the lifetime of his wife she will have an option of purchasing the property at the rate of one-fifth of
the market value. This condition is an absolute restraint on the power of legatee (son) for a particular time. Here, the condition is void because it is restraining alienation during a ‘life time’.
(iii) A husband settles his properties on his wives subject to a condition that they cannot transfer the property without his consent. The condition is void as it takes away the power of alienation of the wives absolutely.
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.
In Muhammad Raza v. Abbas Bandi Bibi, the condition restricted the transferee from transferring the property to strangers, i.e., outside the family of the transferor, the Privy council held that the condition was merely a partial restraint which was valid and enforceable.
Restraint on alienation in compromises – Compromise is not a transfer of property within the meaning of Section 5 of this Act. Therefore, Section 10 is not applicable to compromises made in family settlements and such a compromise is valid even if it involves any restraint on alienation.
There was a dispute over succession to the properties of the deceased between his nephew and his widow. It was compromised between them under which the widow was to hold the possession of the property for her life while admitting the title of the nephew but nephew was restrained from transferring the property during the life of the widow. The Privy Council held that the compromise was valid and enforceable and could not be treated as a condition restraining alienation.
Applicability of Section 10 – The provisions laid down in Section 10 are based on the rule of equity, that property should not be made inalienable permanently. Therefore, the provisions of this section may be applied also to those transfers which are not governed by this Act.
For example, Section 10 has been applied to transfers in Punjab where the Transfer of Property Act is not applicable or it has been made applicable to a transfer to a Hindu idol which is outside the scope of this Act.
However, the law laid down under Section 10 does not apply where the transfer is by operation of law. Restraint on alienation included in a sale by the order of the Court under an execution would not be void under Section 10.
Exceptions – Section 10 makes two exceptions to the general rule that conditions absolutely restraining alienation are void. The first exception is in respect of leases and the second is regarding a property which is transferred to a married woman.
Leases – Lease is a transfer of limited interest where the transferor (leasor) reserves the ownership and transfers only the right of enjoyment to the transferee (lessee). Therefore, a lessor can impose a condition on the lessee that he shall have no right to sub-lease or assign his interest to another person. Such condition, although it is a restraint on the lessee (transferee) against alienation, is valid and he cannot transfer his interest without the consent of the lessor.
Thus, a condition in a perpetual lease that lessee’s right is not transferable, is a valid condition. If the lessor does not expressly say that breach of this condition would terminate the lease then, upon the breach of such restraint (i.e. where lessee transfers his interest) the remedy of the lessor is not a suit for ejectment. The lessor can file a suit against the lessee only for injunction and damages for the breach of condition.
Married Women – Where a property is transferred to a married woman who is not a Hindu, Muslim or Buddhist, the transferor can validly impose a condition restraining alienation. Similar provisions are there in the Married Women’s Right to Property Act, 1874 which is applicable to married women who are not Hindu, Muslim or Buddhist.
A property may be transferred to a married Hindu woman for her life with a condition that she cannot transfer it. Reason behind such a restraint is to safeguard the interest of the married women who could be easily exploited by their unscrupulous husbands.
Idol – A deed dedicating property to deity contained a condition absolutely restraining its transfer. The deed was held to be valid. Section 10 did not apply as a deity is not a living person.
Permission of the District Judge is necessary for alienating by manager the property of the deity.