Report No. 70
17.11. English case.-
In illustration of what is said above, let us refer to the English case of Rosher v. Rosher, 26 Ch D 801 (811). It was a case of testamentary disposition, but the principles would be the same as regards disposition inter vivos. A testator devised an estate to his son in fee, providing that if the son, his heirs or devises should desire to sell the estate during the life-time of the testator's wife, she should have the option to purchase it at a fixed price named, which was one-fifth of the real purchasing value of the estate at the date of the will and at the time of the testator's death. It was held that the prohibition to sell at a fixed price much below its real value, during a given period, was equivalent to an absolute prohibition, and as such void.1
1. See also Doe Singh v. Khub Chand, 19 ALJ 848.
17.12. Position summed up.-
The question really is not how the transfer was designed, but what was really its effect, the true test being whether the condition takes away substantially the whole power of alienation; it is a question of substance and not of mere form.1 If the condition substantially deprives the transferee of the power of alienation, it is void, but if it only so restrains it that in effect he still has the power in substance, it is valid2. So a prohibition on transfer in the father's lifetime held to be valid in a Lahore case3.
The salient points could be thus summed up-
(a) A restraint which though apparently not absolute, has substantially that effect, would be regarded as repugnant.
(b) A condition in restraint of alienation is nonetheless absolute because its operation is limited to a particular period or to a particular person.
(c) Such a condition may be regarded as an absolute restraint by reason of the price at which the alienation is required to be made.
1. Mackay (in re:), LR 20 Eq 186 (189), a part of whose judgment was, however, animadverted upon by Pearson, J., in Rosher v. Rosher, 26 Ch D 801 (817, 818).
2. KcLean v. McKay, LR 5 PC 327;
London and S.W. Ry. Co. v. Comm., 20 Ch D 562.
3. Took Chand v. Radha Kishan, AIR 1935 Lah 503.
17.13. Valid restrictions.-
In contrast, let us see a few cases where the restraints were not regarded as absolute. An agreement to retain a courtyard undivided for the convenience of the adjacent dewellings is valid.1 Similarly, where a Hindu widow executed an agreement in respect of her hUsband's property in favour of her husband's cousins, by which she agreed not to lease the property without obtaining their signatures, adding, that if the document be not signed and consented to by both the parties, it shall be null and void, it was held that the agreement was valid.2
So again, where a house was conveyed to the transferee, subject to a covenant on his part not to use it for any purpose other than a private residence, and the transferee conveyed it to another who converted it into a boarding house, the covenant not to use the house for any other purpose was held not repugnant to the nature of an estate, and might be enforced by an injunction.3
1. (a) Ramalinga v. Virupak, ILR 7 Born 538 (541);
(b) Western v. Macdermott, LR 6 Ch A 72;
(c) Maclean v. Mackay, LR 5 PC 327.
2. Kuldip v. Khetrani, ILR 25 Cal 869.
3. Hobson v. Tulloch, (1898) 1 Ch 424.
17.14. Personal interest.-
Restraints may also be upheld where th6/ merely emphasise the nature of the interest conveyed. The settlement of an annuity with the direction that it should, from time to time, be paid to himself only, and that a receipt under his own signature and no other shall be a sufficient discharge, was construed to point to an intention on the part of the testator that the annuity should cease if it is alienated, and it was held to have ceased on the bankruptcy of annuitant.1 A similar intention may be gathered from the direction to pay a sum of money to an individual named, but not to his assigns, for his natural life with a limitation over if the devisee should alienate.2
1. Dommett v. Bedford, 3 Ves 149.
2. Cooper v. Wyatt, ILR 5 Mad 482.
17.15. A grant of any interest in land, whether limited or unlimited, would be subject to this rule. But it must be the grant of land and not merely of its profits. The adopted son of a Hindu widow granted to her for her maintenance, the usufruct of certain land, she being expressly forbidden by the terms of the grant "to mortgage, make a gift of, sell or assign the land in any way to any person". Her judgment creditor sought to attach the land, but his application was rejected on the ground that what was granted to the widow was the usufruct and no interest in the corpus which, therefore, could not be attached.1 A Will containing clear words of inheritance, but containing a clause forbidding alienation, will take effect as if the clause did not exist.2
1. Diwali v. Apaji, ILR 10 Born 342 (345); distinguished in Golak Nath v. Mathura Nath, ILR 20 Cal 273.
2. Kannu Pillay v. Challathamal, 10 MLJ 203.
17.16. Then, it has been held in Allahabad1 that a gift subject to the power of revocation is not repugnant to this section. In that case, A had sold his village to B, whereupon B granted A some land for his maintenance, stipulating that it would be liable to resumption if A transferred it. A's transferee sued for a declaration that he was a tenant of the land, but Banerji, J., held the plaintiff's assignor's gift to be subject to the power of revocation, and, therefore, not necessarily repugnant to the provisions of section 10. Reference was also made to section 126, but reference to section 6(d) would also have been apposite. Such grants are, necessarily, excluded from the rule.
1. Makund Prasad v. Rajrup Singh, 4 ALJ 708. See contra Brij Devi v. Shiva Nanda, ILR 1939 All .298 (Power of revocation reserved for himself and his heirs in case of alienation).
It is customary in Indian conveyancing for the mortgagor to insert a clause in his mortgage-deed to the effect that the mortgagor will not, pending the mortgage, execute another mortgage or otherwise alienate, or charge the property with another incumbrance. Such a convenant, standing by itself, does not amount to a mortgage.1 But what is its effect upon the rights of the parties and of the subsequent alienee? Allahabad cases on the subject are of interest. It has been held that a transfer of mortgaged property made in contravention of a condition not to alienate is not absolutely void, but voidable only in so far as it is in defeasance of the mortgagee's rights.
Where in contravention of a condition not to alienate, the mortgagor had transferred his proprietary right in the mortgaged property to a third person for a term of years, the Allahabad High Court declared that such transfer should not be binding on a purchaser at the sale in execution of the decree obtained by the mortgagee for the sale of the property in satisfaction of the mortgage-debt unless he desired its continuance2.
But it was again held3 by the same High Court that a transfer of mortgaged property in breach of a condition against alienation is valid, except in so far as it encroaches upon the right of the mortgagee, and with this reservation, such a condition does not bind the property so as to prevent the acquisition of a valid title by the transferee, specially if the transfer was made for the bona fide purpose of paying off the mortgage,4 in which case a condition not to alienate cannot operate to annul it;5
but the debt must be at once discharged by the transfer.6 Now, it has been held7 that a similar convenant on the part of the alienee is absolutely void; then, why should it be otherwise in the case of the transferor? The rule thus laid down by the Allahabad High Court has, in fact, been considerably relaxed by that very High Court.
1. Gunoo v. Latafut, ILR 3 Cal 336.
2. (a) Chuni v. Thakur Das, ILR 1 All 126;
(b) Mulchand v. Galgobind, ILR 1 All 610;
(c) Lachmi v. Koteshar, ILR 2 All 826.
3. Ali Hasn't v. Dhirja, ILR 4 All 518.
4. Ram Saran v. Amrita, 1LR 3 All 369.
5. Dookhchore v. Haiji Hidayatoolah, (1866-67) NWPHCR 7 (FB).
6. Mahomad v. Banea, 1869 NWPHCR 135, cited in Chunni v. Thakur Das, ILR 1 All 126 (128), footnote.
7. Mohram v. Ajudhia, ILR 8 All 452.
Lease deeds often contain conditions against alienation. If they are not absolute or if they fall within the Exception to section 10, they are valid. Assuming now, that the stipulation against alienation is valid, the real question in such a case is, whether by reason of an alienation in breach of such stipulation, the permanent lease is determined, where there is no express condition providing that, on breach of the stipulation against alienation, the lessor may re-inter, or that the lease shall become void.
On this point, the authorities are clear that in the absence of some such express condition, there can be no forfeiture of the lease.1 The lessor may enforce the convenant by using for damages for its breach and by obtaining an injunction to restrain the lessee from making an assignment, in breach of the same.2 The case would, however, be different where non-transferability is shown to be one of the incidents of the lease,3 in which case ejectment would follow on transfer a clause for re-entry being unnecessary.
1. (a) Tanwya v. Timapa, ILR 7 Born 262;
(b) Nihrtadhull v. Narottam, ILR 17 Cal 826;
(c) Narayan v. All Saiba, ILR 18 Born 603;
(d) Madar Sahib v. Nahawa Guiranshah, ILR 21 Born 195;
(e) Parameshri v. Vittappa, ILR 26 Mad 157;
(f) Basarat v. Vittappa, ILR 36 Cal 745.
2. (a) Mohan v. Shekh Sadoodi, 7 BHCR (AC) 69;
(b) Tamaya v. Timapa, ILR 7 Born 262 (265);
(c) McEachurn v. Cotton, 1902 AC 104;
(d) Parameshri v. Vittappa, ILR 26 Mad 157.
3. Section 6(i): Achuta v. Sankaran, 13 IC 1007.
17.19. Recommendation as to the word "absolute".-
It would be apparent from the case law discussed above,1 that the word "absolute" has been construed by the Courts as including cases where the restraint is not absolute in the literal sense, but is substantially so. It appears that the sense of the section, the intention of the legislature and judicial construction there of would be better expressed if the word "absolutely" is suitably explained as including cases where the restraint is substantially of an absolute character.
We recommend accordingly, so that the section may better reflect its true scope. In such an important provision as section 10, the principle should be more precisely expressed where practicable. Such an amendment will not, we know, avoid the tasks which the Courts have to perform of determining whether, having regard to all the circumstances of the case, the restraint is to be regarded as absolute in substance. But the amendment will have the merit of drawing the attention of the citizens to the wide scope of an important ingredient of the section.
1. Paras. 17.10 to 17.18, supra.