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Report No. 70

18.11. Importance of covenants.-

The emergence of multi-storeyed buildings with what are popularly known as ownership flats usually necessitates covenants binding the co-owners inter se. These covenants are absolutely necessary for the proper enjoyment of the property by each owner of the flat according to the true purport of the scheme. Some times the legislature intervenes by passing legislation relating to "condominium" titles.1-2

It has been recognised ever since the time of Coke that a man may have an inheritance in an upper chamber, though the lower buildings and soil be in another3 But the situation is now of more frequent occurrence, thus increasing the importance of the subject.

1. Act of respecting the co-ownership of immovables-Statutes of Quebec (1969).

2. Condominium Ordinance, North-West Territories (1969).

3. Code on Littleon, 48b. See further Sursill Enterprises Proprietary Ltd. v. Berger Bros. Trading Co. Proprietary Ltd., (1971) 45 ALJR 203.

18.12. Common instances.-

The most common instance of the rule embodied in the second paragraph is to be found in these cases where a person who owns a house and adjoining land and sells the land, enters into a covenant with the purchaser that the latter shall keep a portion of the land transferred vacant and free buildings, so as not to obstruct the air and light of the vendor's house. Such a covenant, being one intended for the beneficial enjoyment of the vender's house, is enforceable, as against the purchase.1

1. See Tulk v. Moxhay, (1848) 2 Phi11 774; McLean v. McKay, LA 5 PC 427.

18.13. Arbitrary condition.-

A covenant which is not made for the beneficial enjoyment of the transferor's property, but is merely an arbitrary condition imposed for its own sake, is not enforceable against the transferee, and the latter may ignore it; e.g., a covenant to use the transferred land as a garden, a covenant to build a second story, a covenant to improve the transferred land. There are affirmative covenants which can be rarely enforced against the transferee.

18.14. English law.-

In England, it was considered to be an important contribution of equity that subject to certain conditions the burden of covenants could be assigned. This is, of course, confined to restrictive covenants. With the growth of population, the law relating to restrictive covenants affecting the user of land has been developed. The cases range themselves conveniently under one or other of two heads, but under which the particular instance is to be classed is a matter of great difficulty, depending as it does upon a consideration of all the facts.

Land may be sold upon terms which make the restrictive stipulations a bargain between the immediate contracting parties, who are at liberty to vary the terms of the contract between them1 and this they may do either in express terms or by waiver or acquiescence will generally be limited in effect to the particular breach.2 And benefit of covenants of this description may be made to run with the land at law and in equity,3 although the burden can only be made to run with the land sold in equity.4

On the other hand, there may be what is known as a building scheme which confers a right upon purchasers of lots to sue purchasers of other lots for failure of observe restrictive stipulations relative to the use of land.5 And in this case the common vendor cannot dispense with the conditions or refuse to observe them.6

1. Rupala v. Cowlishaw, 11 Ch D 866; Osborne v. Bradley, (1903) 2 Ch 446.

2. Sayers v. Collyer, 28 Ch D 103; Knight v. Simmonas, (1896) 2 Ch 294.

3. Rogers v. Hosegood, (1900) 2 Ch 388.

4. Haywood v. Burnswick Permanent Benefit Building Soc., 8 QBD 493.

5. Rowell v. Satchell, (1903) 2 Ch 212.

6. Spicer v. Martin, 14 App Cas 12; Birmingham and District Land Co. (in re:) v. AIlday, (1893) 1 Ch 342.

18.15. History of the section.-

It may be noted that while affirmative covenants, that is to say, covenants to compel the enjoyment in a particular manner are not, in general, enforceable against subsequent transferees, they are still enforceable between the transferee and the transferor. Before 1929, the second paragraph of section 11 read as follows:-

"Nothing in this section shall be deemed to affect the right to restrain, for the beneficial enjoyment of one piece of immovable property, the enjoyment of another piece of such property, or to compel the enjoyment thereof in a particular manner."1

The amendment of 1929, although it made a verbal change in this paragraph, did not restrict its scope and was not, in fact, intended to restrict its scope. A change of substance was intended only in section 40, that is to say2 as regards enforceability against subsequent transferees.

The first paragraph of section 40, before its amendment in 1929, also contained the words "compel its enjoyment"-words which were wide enough to apply to affirmative covenants. After the amendment which omitted these words, an affirmative covenant cannot be enforced against a purchaser from a transferee and only a negative covenant can be enforced, provided that the other conditions in section 40 are satisfied.

1. Mulla, (1973), p. 102.

2. Mulla, (1973), p. 102.

18.16. Allahabad case.-

An Allahabad case1, though decided under the pre-amendment section, supplies factual material which can be used in illustration of the amendment. In that case, the purchaser entered into a covenant to pull down, when required by the vendor, rooms for a passage between the house of the vendor and the house purchased by the purchaser.

This covenant was held to be enforceable against the purchaser under section 11, second paragraph, and against the transferee from the purchaser under section. 40, as it stood then. After the amendment of 1929, as Mulla has pointed out2, the covenant can still be enforced against the immediate purchaser-no change is made by the amendment in section 11-but, being an affirmative covenant, it cannot be enforced against a purchaser from the vendee.

1. Nandgopal v. Batuck Prasad, AIR 1932 All 778.

2. Mulla, (1973), p. 105.

18.17. Exceptions to the rule against restrictive enjoyment.-

There are several exceptions to the general rule that conditions restrictive of the enjoyment of the absolute interest are void. Covenants or other obligations annexed to the ownership of property may control the enjoyment of property. They seem to fall under the following principal categories, namely:-

(i) Easements;

(ii) Covenants running with the land;

(iii) Restrictive covenants;

(iv) Personal covenants;

(v) Contractual obligations annexed to the ownership of property.

18.18. Brief discussion.- A brief discussion of each category follows:

(i) Where property is subject to an easement, the easement is enforceable against the purchaser. Creation of easements and the general subject of easements are outside the province of the Transfer of Property Act.

(ii) Certain covenants run with the land.

The definition of this concept in England1, is as follows:-

"A covenant runs with the land when the benefit or burden of it, whether at law or in equity, passes to the successors in title of the covenantee or the covenantor, as the case may be."

Although, in India, there is no distinction between law and equity, this provision is helpful as explaining the concept of covenants running with the land. Many covenants of the lessee run with the land. Then there are covenants for title created by statute in the case of sale of land and running with the land in India.2

(iii) A restrictive covenant restrains the covenantor from putting his property to certain specified use. An affirmative covenant compels him to enjoy the property in a specified manner. A covenant to keep the land uncovered with buildings is an example of the former; a covenant to dig a well on the land for the supply of water to the dwelling house of the covenantee is an example of the latter.

Ordinarily speaking, the burden of an affirmative covenant does not run with the land. In contrast, the burden of a restrictive covenant is transferred to the subsequent transferees, subject to certain requirements. Developments in England in this field are represented by three leading cases, naively:

(a) Tullk v. Moxhay, (1848) 41 ER 1143;

(b) Austerberry v. Oldman Corporation, (1885) 28-29 Chancery Division 750;

(c) 'Haywood' case3.

The position in equity under the rule in Tulk v. Moxhay, as modified and interpreted by later decisions, was thus stated by Maitland:4

"Any one coming to the land with notice actual or constructive of a covenant entered into by some previous owner of the land restraining the use to be made of the land, will be prohibited from doing anything in breach of that covenant."

It is now well settled that affirmative covenants are not enforceable against the transferees of the land, even where they have notice. But they are binding on the covenators.5

(iv) Personal covenants cannot be enforced against transferees. This is so even if they have notice.6 However, this does not affect their validity as between the immediate parties.

(v) Contractual obligations annexed to ownership are illustrated by an obligation undertaken under a contract of sale.

1. Section 80, Law of Property Act, 1925.

2. Section 55(2) of the Act.

3. Haywood v. Burnswick Permanent Building Society, (1881) 8 QBD 403.

4. Maitland Equity, 2nd Edn., p. 163.

5. Wolverhampton Corp. v. Emmons, (1901) KB 151.

6. London Country Council v. Allen, (1974) 3 KB 642.

18.19. Covenants for supply of goods.-

Covenants in leases for the sole supply of goods sold on the lease premises have often come up before English courts. In an English case decided in 1969,1 Lord Denning M.R. discussed the aspect of restraint of trade. If a person out of possession is let into possession by an Oil company on the terms that he has to tie himself to that company-in the sense that he has to take all his supplies from that company-such a tie was described as good by Lord Denning. On the other hand, if an owner in possession ties himself for more than 5 years to take oil supplies from the company, that is an unreasonable restraint of trade and is invalid.

The relationship between the restraint of trade doctrine and the covenant also came up before a court in New-South Wales, Australia.2 An action between covenantee and covenantor involved a covenant executed by a purchaser of land not to use the property for the sale of wine products sold or produced under the name "Dalwood". The covenant was not capable of benefiting the land of the covenantor, though the land was retained by him. It was held that only covenants in leases and covenants which benefited retained land were excluded from the operation of the doctrine of restraint or trade.

1. Cleveland Petroleum v. Dartatones, (1969) 1 All ER 211.

2. McGuigan Investment Proprietary Limited v. Dalwood, Wineyard Proprietary Ltd., (1970) 1 New Southwales Reports 686.

18.20. Incompleteness.-

There appears to be a certain amount of incompleteness in the second paragraph of section 11. Before the amendment of 1929, it was clear1 that both the right to restrain the enjoyment and the right to compel the enjoyment in a particular manner were saved. This does not appear very clearly in the section after its amendment. We have gone through the Statement of Objects and Reason2 and the Report of the Select Committee, relating to the amendment of 1929, but, with respect, it does not give any adequate reasons why the benefit of this clarification was sought to be sacrificed.

Whatever difficulties might have been felt in section 10, there was hardly any necessity to dispense with those words in the second paragraph of section 11, which at least made it clear that both affirmative and negative covenants were intended to be covered. Having regard to the fact that conveyancing in India is not in a very advanced stage of perfection and also having regard to the fact that there is a likelihood that a controversy-if it has not arisen so far-might arise by reason of the terseness of the language, it appears to be desirable to make it clear that an affirmative covenant is not invalid as between a transferor and transferee under section 11, second paragraph.

In fact, this was the object of the Select Committee, namely, to make it clear that "although an affirmative covenant is not, by itself, invalid as between a transferor or a transferee, negative or restrictive covenants only can be specifically enforced against other parties". In so far as section 40 is concerned, the amendment of 1929, no doubt, follows the trend of later English cases.3 But in so far as the amendment, as a matter of language, makes it less clear than before that section 11, second paragraph, was intended to cover both the types of covenants, it was not, in our opinion, properly executed.

It is not without some effort that one is able to spell out from the paragraph, as amended, that both the types of covenants are covered. Readers might not immediately perceive the difference between the phraseology of section 11 and section 40. Even if they perceive the difference, they might not be readily able to spell out the effort of that difference. In any case, there appears to be hardly any harm if the position is made specific on the point discussed above.

1. See "History of the section", supra.

2. Para. 18.21, infra.

3. Haywood v. Burnswick Building Society, 8 QBD 403.

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