Report No. 70
17.31. Need for amendment.-
It appears to us that the matter should be dealt with specifically in section 10 by extending that section to partitions and family arrangements. In particular, while in a partition deed, it is permissible to create a right of pre-emption, it should not be permissible to impose stringent conditions narrowing down the range of the price, and without any corresponding obligation on the other party to sell his or her share within the family.
Such restrictions particularly partake of the nature of an absolute restraint on future transfer, and are therefore against justice, equity and good conscience. They are harsh and unconscionable in so far as they place an undue limit on the price. The freedom of transfer is restricted in a manner which practically amounts to an absolute prohibition.
Even if a partition may not technically be called a transfer, the principle underlying section 10 is so vital to the interests of society that by express amendment it will be just and fair to extend it. This is not to say that a partition is to be construed as a transfer under all sections of the Act. The amendment will be framed so as to extend the provisions of section 10 to partitions and family arrangements. So far as other sections of the Act are concerned the need for similar amendment should, wherever necessary, be examined on the merits with reference to the subject-matter of each particular section.
17.32. Position in the Punjab.-
In this connection, it should be noted that the principle of section 10 has been applied in the Punjab to transfers, even though the Act has no application in the whole area of the State.1 This at least shows that the principle is one deserving of adoption even where technically the section does not apply, since the rule enacted in the section is one based on allowing the free circulation and disposition of property. There is, therefore, sufficient justification-at least prima facie-for applying the section to partitions.
1. AIR 1924 Lak 674.
17.33. Family settlements.-
As to family settlements1 at present the section does not apply, and the reasons for extending the section to such transactions are the same as those in the case of partitions. It may be noted that in Hindu law even in the case of grants for maintenance, a restraint on alienation was not encouraged.2 A family arrangement and a compromise of dispute claims are not "transfers" and the section does not in terms, apply to them.3 But the principle would be applicable were the condition involves an absolute restraint on aliena tion.4
1. AIR 1955 Travancore 231.
2. ILR 38 Mad 867.
3. (a) Rani Mewa Kuwar v. Rani Hulas Kuwar, 1 Ind App 157 (166) (PC);
(b) Khunnilal v. Gobinda, 33 All 356 (PC);
(c) Kapura v. Madsodan Das, AIR 1943 Lah 168.
4. Pritami Chand v. Sundar Das, AIR 1946 Pesh 12.
Where, however, the terms of a compromise were embodied in a decree, the legality of a convenant inserted therein was judged by the test of the rule in section 10. Where, therefore, in a partition-suit the parties entered into a compromise whereby the defendant transferred a house to the plaintiff on the condition that though he should be thenceforward its owner, he could not transfer it to another without the defendant's consent, and the plaintiff afterwards sold the house without his consent, it was held that the clause restraining alienation was repugnant to the grant and was, therefore, void, though its terms had been embodied in a decree.1
1. (a) Khiali Ram v. Raghunath, 3 ALJ 621;
(b) Gayadin v. Syed Mumtaz, (1907) 10 OC 136.
17.35. Recommendation as to partitions and family arrangements.-
Having regard to the various aspects discussed above, we are of the view that section 10 should, by an express amendment, say, by adding a new sub-section-be extended to partitions and family arrangements.
17.36. Exception for lease.-
Extention recommended to movable property.-This disposes of the main paragraph of the section, and the amendments relevant to that paragraph. There is, in the section, an exception for leases, as to which we have no comments, except that we think that the principle of the exception should be the same as regards hire of movable property. We recommend that the exception should be so extended.
17.37. Position as to married women-Recommendation.-
Next, we come to the proviso. We have, in an earlier Report,1 referred to the proviso to section 10 under which property can be transferred to a married woman who is not a Hindu or a Muslim, with a condition restraining her absolutely from alienating during marriage.2 We said in that Report that "this proviso is in derogation of the general rule enacted by section 10 in its main paragraph, prohibiting the imposition of an absolute restraint on alienation.
In our view, the proviso is not justified, in view of the growing social consciousness in the country. Christians and Parsis-to whom the proviso primarily applies-are not less educated than others. There is no such restriction for other communities. The proviso is linked up with section 8, Married Women's Property Act. In our new scheme, its deletion is unavoidable."
Our recommendation in that Report may be quoted-
"Having taken into account the social conditions of the present day and the considerations mentioned above, we are of the view that in section 10 of the Transfer of Property Act, the proviso relating to restraint on alienation should now be removed, and we recommend accordingly."
In conformity with that recommendation, we recommend again, that the proviso in section 10 relating to Married Women should be deleted. Another exception in favour of charities appears to have been overlooked in this section, but it is recognised3 by section 18.
1. 66th Report (Married Women's Property Act), para. 15.2.
2. Also see 66th Report, para. 5.7.
3. As amended by Act 20 of 1929, formerly section 17 of the Act.
There appears to be need for expressly mentioning in this section an exception for charities. It is well-recognised that where there is a gift in favour of a charity, a restraint can be imposed upon the alienation of the property gifted. Not only can a charity claim exemption from the rule against perpetuities to the extent allowed by Law1 but also it is permissible to restrain alienation where the object of the restraint is to preserve the property for the charity and thus to advance its charitable objects.
Though not stated in so many words in section 18, it is a well-recognised principle of law.2 In fact, when section 18 exempts charities from the rule against accumulation of income, it gives an indication of the policy of the law in this regard. For these reasons, we recommend that a specific exception should be inserted in section 10, saving the validity of absolute restraints where the beneficiary is a charity.3
1. Section 18.
2. (a) Goudoin v. Venkatesan, ILR 30 Mad 378 (379);
(b) Babulal v. Ghansham, ILR 44 All 633;
(c) Nizamuddin, ILR 19 Born 264.
3. This is not a draft.
17.37. That perpetuities and the restraint on alienation are connected with each other in their spirit may be well substantiated by the following extract from Jarman on Wills:1
"The necessity of imposing some restraint on the power of postponing the acquisition of the absolute interest in or dominion over property will be obvious if we consider, for a moment, what would be the state of a community, in which a considerable proportion of the land and capital was locked up. The free and active circulation of property which is one of the springs as well as the consequences of commerce, would be obstructed: the improvement of land checked, its acquisition rendered difficult; the capital of a country withdrawn from trade, and the incentives to exertion in every branch of industry diminished."
1. Jarman on Wills, 4th Edn., pp. 250-251, cited by Gour.
17.38. Points for amendment summed up.-
It is now time to sum up the amendments that we have recommended in section 10
(i) Addition of an Explanation regarding the meaning of "absolutely".
(ii) Extension of the section to partition and family arrangements.
(iii) Extension of the proviso (leases) to hire of goods.
(iv) Addition of an exception for transfers in favour of charities.
(v) Deletion of the proviso relating to married women of certain communities.
17.39. Revised draft.-
In the light of the above discussion, we recommend that section 10 should be revised as follows:-
"10(1). 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 a lease of immovable property or letting out of goods on hire where the condition is for the benefit of the lessor or the person letting out the goods on hire, or those claiming under him.
A condition or limitation which in the circumstances of the case operates as a substantially absolute restraint shall, for the purposes of this section, be construed as an absolute restraint.
(2) Nothing in this section applies to any condition or limitation in any such transfer of property as is mentioned1 in section 18.
(3) The provisions of this section apply as far as may be, to a partition or family arrangement, as they apply to a transfer and the expressions "transferred" and "transferee" shall be construed accordingly."
1. Section 18 applies to a transfer of property for the benefit of public in the advancement of religion, knowledge, commerce, health, safety or any other object beneficial to mankind.