Report No. 70
17.20. Effect of void condition.-
Where a restraint on alienation is void by reason of the principles discussed above, it is obvious that an alienation made in violation thereof is as operative as if no such restraint existed. The transfer containing the restraint is valid, and is to be read as if no such condition existed. This much is clear so far as the rights of subsequent transferees are concerned. But since the restraints are imposed usually in reciprocal transfers having a contractual element, the question naturally arises whether as between the parties, the restraint possesses any validity, so as to confer a cause of action on a party to the transfer against the defaulting party.
17.21. On this point the authorities are not unanimous. It has been held in Calcutta1 that as between the immediate parties to it, the convenant is binding. But a different note was struck by Phear, J. in a case2 since affirmed,3 in which he observed:
"It is not competent for the owners of property in this country by any arrangement made in their own discretion to alter the ordinary incidents of the property which they possess, for instance, in this particular case, to say that the joint-property shall remain the joint-property of the joint-family in perpetuity but shall not possess the incidents which the law of the country attaches to property in such condition, namely, that every independent coparcener is entitled, at any time, to his share dividend of the rest.
No doubt, any one member of the family and, therefore, all, might, for sufficient consideration, bind themselves to forego their rights for a specified time and definite purpose, by a contract which could be enforced against them personally.4
The Bombay High Court has, similarly, held that an agreement between co-parceners never to divide certain property is invalid as tending to create a perpetuity,5 and the same view has been taken in Allahabad6 and Madras7 where the introduction of a condition against alienation in a great absolute in its terms has been declared to be equivalent to introducing an exception of the very thing which is the essence of the grant.
So, where parties to a division agree that the property of any one of the parties to the agreement or their heirs dying issueless, should not be sold or transferred as a gift, but should, on his death, be divided by the other shareholders, and where, subsequently, the property was sold in contravention of this agreement and a party to the original agreement sued to recover, it was held that the condition was void.8 A decision of the Privy Council9 tends to the same conclusion.
1. Ramdhun v. Arund, 2 Hyde 93; Rajendra v. Sham Chund, ILR 6 Cal 106; followed in Muthuraman v. Ponnuswamy, 29 MLJ 214.
2. Radhanath v. Tarrucknath, (1874) 3 Cal 126 (128).
3. Krishnendra v. Debendra, (1883) 12 Cal 793.
4. Radhanath v. Tarrucknath, (1874) 3 Cal 126 (128).
5. Ramalinga v. Virupakshi, ILR 7 Born 538, citing :-Rajendra v. Sham Chund, ILR 6 Cal 106; Ananth v. Nagamuthu, ILR 4 Mad 200; Asutosh v. Doorga, ILR 5 Cal 438 PC; Chimonroo v. Rumbha, 4 Bom LR 508; Chandar Shekhar v. Kundan Lal, ILR 31 All 3.
6. Chander Shekhar v. Kundan Lad, ILR 31 All 3.
7. (a) Anantha v. Nagamuthu, ILR 4 Mad 200 (202);
(b) Venkataramanna v. Brammanna, 4 MHCR 345;
(c) Promotho v. Radhika, 14 BLR 175;
(d) Parameshri v. Vittappa, 12 MLJ 189 (193);
(e) McEacharn v. Cotton, 1902 AC 104.
8. Venkataramanna v. Brammanna, 4 MHCR 345.
9. Padmanund v. Hayes, ILR 28 Cal 720 (733) (PC).
17.22. It seems that such stipulations, since they would, within the meaning of section 23, Contract Act, be agreements whose object or consideration is unlawful, could be regarded as void for that reason. In any case, the matter is one of construction and application of section 23 of the Contract Act, the question being whether the stipulation defeats section 10 of the Transfer of Property Act.
17.23. Partition and family arrangements.-
So far as the main paragraph of the section is concerned, we have dealt with the existing position above at some length, in view of the importance of the section. We have a few points on which an amendment is required in the main paragraph-besides, of course, the amendment regarding the meaning of the word "absolutely" which we have already discussed.1
The question to be considered is the applicability of the section to partitions and family arrangements. Since the section opens with the words "where property is transferred.", it may not apply to partitions, if regard be had to the strict meaning of the word "transfer".2 Position in this regard is not, however, free from doubt, as is apparent from the case law to be discussed presently.
1. See recommendation as to "absolutely", supra-Para. 17.19.
2. Compare section 5 and para. 17.24.
17.24. Partition deed.-
It appears from reported decisions that partition deeds have contained conditions which provide that the share of a particular person shall not be sold or that if it is sold, the other co-sharer would have the right of pre-emption, and that too at a fixed price. Judicial decisions also show that such conditions have raised controversy as to whether they are valid, or whether they should be construed as substantially imposing an absolute restraint on alienation. The last mention query, in its turn, involves an examination of the question whether section 10 applies to deeds of partition at all. This query arises because under section 5 a transfer of property is defined as an act by which a property is conveyed-and a partition is not, in terms, a transfer.
Recognising the hardships caused by such harsh provisions in partition deeds, courts have, in general, tried to do substantial justice, by refusing to recognise them, but the reasons for the conclusions so arrived at have varied. Some High Courts have taken section 10 as applicable. Some High Courts, while not going to that length, have decided the matter on the ground of justice, equity and good conscience. Since the situation is of frequent recurrence, an examination of the case law is useful and this examination, it is hoped, will show the need for clarification in the matter.
17.25. Madras view.- One shade of view is that the section applies to a partition.1 A Madras decision of 1939 illustrates this approach.2
In a partition deed between the father and his sons in a Hindu family, it was provided that certain houses (which had been used as the family residence) should be held by the members of the family as tenants in common, that no member should have the right to dispose of his share to a stranger, that if any of the sons chose to live in the houses mentioned, he shall not be at liberty in any manner to let or lease, etc. his undivided share to a stranger to the family but shall do so only to any of his brothers or his heirs for a sum not exceeding Rs. 1,000 and it is found that the price of Rs. 1,000 fixed is far below the real price of the share and that there is no corresponding obligation on the part of the other members to buy the share of the members wishing to sell, the restriction against the alienation is void.
The estate created is a tenancy in common, and the restriction against alienation amounts to an absolute restraint on alienation within the meaning of section 10, and, therefore, must be disregarded as void; the sons take the property as tenants-in-common without fetter. It is not clear whether section 10 was regarded as applicable in terms. Perhaps the principle was applied.
1. AIR 1955 Mad 350 (reviews case law).
2. T.V. Sangam v. Shanmukha Sundaram, AIR 1939 Mad 769, distinguished in AIR 1957 Pat 571.
17.26. Bombay case.-
A term restraining alienation during the lifetime of the widow in a partition deed was held by the Bombay High Court1 to be void, and it even held a partition to be a "transfer" for the purposes of section 10, Transfer of Property Act.2
1. fagannathpuri, AIR 1968 Born 25, para. 8 (Deshmukh, J.) (contra Sanatan, AIR 1946 Cal 129-distinguished in AIR 1951 Born 94).
2. Compare also-
(a) Waman v. Ganpat, AIR 1946 Bona 10 (12);
(b)Rasagoundan, AIR 1923 Mad 577: 44 MLJ 513.
17.27. Family Settlement.-
It may be noted that even in a family settlement, an absolute restraint on alienation is void.1 In contrast, a partial restraint on alienation in family settlement would be valid if otherwise reasonable.2
The principle underlying section 10 would be applied to a family settlement if there is an absolute restraint on alienation.3
1. Nageshar Sahai v. Mata Prasad, AIR 1925 PC 272 (280), affirming AIR 1922 Oudh 236 (244) . (case of compromise).
2. Mationied Ruza v. Abbas Bandi, AIR 1932 PC 158, affirming AIR 1929 Oudh 193.
3. Venkatachallum v. Kabalamurthi, AIR 1955 Mad 350 (358).
17.28. Calcutta case.- A Calcutta case,1 however, leaves the matter somewhat uncertain.
1. Sanatan, AIR 1946 Cal 129.
On the question whether a provision compelling transfer to a particular person on an artificially narrow price is an absolute restraint or only a partial one, the position seems to be fairly clear. In this context, it is pertinent to refer to an Allahabad case.1 In that case, the transfer was from X to Y, on the condition that Y shall have no right to transfer the property except to the seller X and his heirs for a fixed sum of money. This was held to be an absolute restraint, for all practical purposes,2-3 and was held to be void.
1. Gayasi Ram v. Shahabuddin, AIR 1935 All 493 (494, 495) (Sulaiman, C.J. and Bennet, J.).
2. To the same effect, Hari v. fehomal, AIR 1935 Sind 182 (184).
3. See also Dal Singh v. Khub Chand, AIR 1921 All 97 (Tudball & Lindsay, B.).
17.30. English case.-
In the English case of in re Rosher,1 a testator devised an estate to his son in fee, subject to the proviso that if the son, his heirs or devisee, or any person claiming through or under him or them, should desire to sell the estate, or any part or parts thereof during the lifetime of the testator's wife, she (the testator's wife) should be given the option to purchase the estate at the price of £ 3,000 for the whole, and at a proportionate price for any part or parts thereof.
The selling value of the estate at the date of the will and at the time of the testator's death was 15,000. It was held that the proviso compelling the son to sell at such an undervalue amounted to an absolute restraint on alienation during the lifetime of the widow, and was consequently void.
The same principle was applied by Eve, J. in In re Cockerill, (1929) 2 Ch D 131: 98 U a 281. In that case, a testator by his will devised land subject to the proviso that if within 20 years of his death the devisee should desire to sell the land, he was to give the governors of a certain school the option of purchasing it at the price of £ 300 an acre. The total area was about 22 acres, and the land was worth £ 670 an acre at the date of death. It was held that the condition amounted to a restraint on alienation and was void for repugnancy. It may be noted that these English cases were relied on in the Sind case2 for holding that a condition for pre-emption at an artificially small price is void in a will.
1. Rusher (in re:), (1884) 26 Ch D 801: 53 Ch 722.
2. Hari v. Jathomal, AIR 1935 Sind 182 (184) (case of Will).