Conditions Restraining Alienation

Section, 10-12

Section 10 in The Transfer of Property Act, 1882

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 a
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 women (not being a Hindu, Muhammadan or
Buddhist), so that she shall not have power during her marriage to transfer or charge the same or her
beneficial interest therein.
Section 10 does not apply to court sales. Partition of a joint family settlements do not amount to
transfer of property, and section 10 would not be applicable to partition or family settlement.
However, any total restraint on right of alienation is void. This rule is based on public policy that
property should be alienable. The principle has universal application and there is nothing in the Hindu
Law which is inconsistent with it. E.g. where four brothers A, B, C and D, effected a partition of the
joint family property and incorporated a condition in the partition deed, that if any one of them
remained childless he would not sell his share to anyone but would leave the property for the surviving
brother. The court held that as this condition amounted to an absolute restraint on A’s power of
alienation it was void and was not binding on him.
Exceptions to the Rule of Restraint on Alienation

In case of a lease where the condition is for the benefit of the lessor or those claiming under him, and
the second is where property is transferred for the benefit of a married woman (not being 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.
Section 11 in The Transfer of Property Act, 1882

11. Restriction repugnant to interest created. —Where, on a transfer of property, an interest therein is
created absolutely in favour of any person, but the terms of the transfer direct that such interest shall
be applied or enjoyed by him in a particular manner, he shall be entitled to receive and dispose of
such interest as if there were no such direction. Where any such direction has been made in respect
of one piece of immoveable property for the purpose of securing the beneficial enjoyment of another
piece of such property, nothing in this section shall be deemed to affect any right which the transferor
may have to enforce such direction or any remedy which he may have in respect of a breach thereof.
 TRANSFER FOR THE BENEFIT OF UNBORN PERSONS

13. Transfer for benefit of unborn person. —Where, on a transfer of property, an interest therein
is created for the benefit of a person not in existence at the date of the transfer, subject to a prior
interest created by the same transfer, the interest created for the benefit of such person shall not take
effect, unless it extends to the whole of the remaining interest of the transferor in the property.

Illustration

‘A’ transfers property of which he is the owner to ‘B’ in trust for A and his intended wife successively
for their lives, and, after the death of the survivor, for the eldest son of the intended marriage for life,
and after his death for A’s second son. The interest so created for the benefit of the eldest son does
not take effect, because it does not extend to the whole of A’s remaining interest in the property.

The general rule is that the transfer can be made only between living persons. There cannot be a direct
transfer to a person who is not in existence or is unborn. Section 13 provides for an arrangement so
the transfers can be made for the benefit of an unborn child, however, section 13 uses the expression
transfer ‘for the benefit of’ and not transfer ‘to’ an unborn person. 3 Whether they will be born or not
is a possibility, a contingency, or an uncertain event, but a transfer of property is permissible to be
made for their benefit.

The procedure is as follows:

3
Even though a child in womb is literally not a person in existence, but has been so treated under both Hindu Law and
English Law. Unborn child here in the TP Act means the child may be in the womb of the mother or who are not even
conceived.
20. When unborn person acquires vested interest on transfer for his benefit.—Where, on a transfer of
property, an interest therein is created for the benefit of a person not then living, he acquires upon his
birth, unless a contrary intention appear from the terms of the transfer, a vested interest, although he
may not be entitled to the enjoyment thereof immediately on his birth.
 RULE AGAINST PERPETUITY

14. Rule against perpetuity. —No transfer of property can operate to create an interest which is to
take effect after the life-time of one or more persons living at the date of such transfer, and the
minority of some person who shall be in existence at the expiration of that period, and to whom, if he
attains full age, the interest created is to belong.

The English meaning of the term perpetuity is eternity or infinity. In relation to TP Act, it means the
creation of an interest in the present, but which is to take effect after long time period. Although TP
Act does not provide any number of years as a long time period, however, it is understood under
section 14 as equivalent to the lifetime of one or more living persons plus the minority (till attainment
of eighteen years) of an unborn person, who would take the absolute interest in the property.

18 years of age may not be extended up to 21 years of age, because at the time of creating the interest,
the person intended to keep it 18 years, hence making it 21 years would be a rule against perpetuity.

The term ‘unless a contrary intention shows’ means that this rule of vesting of property at birth can
be changed by the transferor, and he can stipulate the specific time of the vesting of property in favour
of the beneficiary. However, he cannot stipulate a time which goes beyond the period of perpetuity
i.e., lifetime of a living person or more than one living persons and the attainment of 18 years of the
person not in existence on the date of the transfer, but who would be born at the time when the life
estate comes to an end and would be the ultimate beneficiary.
It is the terms of the deed and not the actual events that will govern the transfer.
Section 15

Transfer to class some of whom come under sections 13 and 14.—If, on a transfer of property, an
interest therein is created for the benefit of a class of persons with regard to some of whom such
interest fails by reason of any of the rules contained in sections 13 and 14, such interest fails in
regard to those persons only and not in regard to the whole class.

The principle under s.15 is that as far as possible the transfer should be given effect. The law makes
the transfer valid and effective for those for whom it is capable of taking effect.

Section 16

16. Transfer to take effect on failure of prior interest. —Where, by reason of any of the rules
contained in sections 13 and 14, an interest created for the benefit of a person or of a class of
persons fails in regard to such person or the whole of such class, any interest created in the same
transaction and intended to take effect after or upon failure of such prior interest also fails.

Section 16 provides that due to violation of the rules specified in ss.13 and 14, a specific transfer
fails and any transfer that is intended to take effect after or upon failure of such transfer also fails.

Section 17

Direction for accumulation. —

(1) Where the terms of a transfer of property direct that the income arising from the property shall
be accumulated either wholly or in part during a period longer than—

(a) the life of the transferor, or

(b) a period of eighteen years from the date of transfer,

such direction shall, save as hereinafter provided, be void to the extent to which the period during
which the accumulation is directed exceeds the longer of the aforesaid periods, and at the end of such
last-mentioned period the property and the income thereof shall be disposed of as if the period during
which the accumulation has been directed to be made had elapsed.

(2) This section shall not affect any direction for accumulation for the purpose of—

i) the payment of the debts of the transferor or any other person taking any interest under the
transferor; or

ii) the provision of portions for children or remoter issue of the transferor or of any other
person taking any interest under the transfer; or
 iii) the preservation or maintenance of the property transferred, and such direction may be
made accordingly.

Inserted by the Amending Act of 1929, applies to transfers where the property and the income arising
from the property are separated by the transferor, and the transferee is directed not to spend the income
but accumulate it for a specific or non-specific period. Law favours free alienation of properly and
spending of the income arising from it except only where the tying up of property is reasonably
desired. The first part of section 17 specifies the period beyond which the direction for accumulation
of income would be void. These limitations are in the alternative, and not in combination of the two,
such as the life of the transferor and 18 years.

E.g., A transferred his property to B in 1960 with a direction, that the income coming out of this
property

Section 18 - Transfer in perpetuity for benefit of public. —The restrictions in sections 14, 16 and
17 shall not apply in the case of a transfer of property for the benefit of the public in the advancement
of religion, knowledge, commerce, health, safety or any other object beneficial to mankind.
 VESTED AND CONTINGENT INTERESTS

19. Vested interest. —Where, on a transfer of property, an interest therein is created in favour of a
person without specifying the time when it is to take effect, or in terms specifying that it is to take
effect forthwith or on the happening of an event which must happen, such interest is vested, unless a
contrary intention appears from the terms of the transfer.

A vested interest is not defeated by the death of the transferee before he obtains possession.

Explanation. —An intention that an interest shall not be vested is not to be inferred merelyfrom a
provision whereby the enjoyment thereof is postponed, or whereby a prior interest in the same
property is given or reserved to some other person, or whereby income arising from the property is
directed to be accumulated until the time of enjoyment arrives, or from a provision that if a particular
event shall happen the interest shall pass to another person.

21. Contingent interest. —Where, on a transfer of property, an interest therein is created in favour
of a person to take effect only on the happening of a specified uncertain event, or if a specified
uncertain event shall not happen, such person thereby acquires a contingent interest in the property.
Such interest becomes a vested interest, in the former case, on the happening of the event, in the latter,
when the happening of the event becomes impossible.

Exception. —Where, under a transfer of property, a person becomes entitled to an interest therein
upon attaining a particular age, and the transferor also gives to him absolutely the income to arise
from such interest before he reaches that age, or directs the income or so much thereof as may be
necessary to be applied for his benefit, such interest is not contingent.

If the transfer is dependent upon the happening of an event that is bound to happen the transferee
takes a vested interest in the property. Vested interest means that the transfer is complete, even though
possession might not have been delivered. The ownership is with the transferee, and if he dies, he is
empowered in contingent interest, he is empowered to transmit the property to his heir. In contingent
interest, the transfer is not complete and is dependent on a condition precedent the happening and
fulfilment of which is not certain. It would be converted into a vested interest only when the condition
happens.

Interest is said to be a vested interest when there is an immediate right of present enjoyment or a
present right for future enjoyment. The question of whether the interest created is a vested or a
continent interest is dependent upon the intention to be gathered from a comprehensive view of all
the terms of the document creating the interest, the court while construing the document has to
approach the task of construction in such cases with a bias in favour of vested interest unless the
intention to the contrary is definite and clear.
A vested interest, which has not been vested yet is liable to be divested subsequently. But this has
been vested or the transfer is complete, it cannot be divested. For example, a gift to B, if he gets
married before attaining the age of 35 years is a contingent transfer, but a gift to B with a condition
that it will be forfeited if he remained unmarried till the age of 35 years creates a vested interest in
his favour and he would be divested of this interest if he remains unmarried beyond the age of 35
years.

Difference between Vested and Contingent Interest

 TRANSFER BY OSTENSIBLE OWNER

An ostensible owner is an individual who appears to be the rightful owner of a property.

Section 41 of TPA acts as a safeguard for unsuspecting third parties, ensuring the validity of property
transfers made by ostensible owners with the consent of interested parties. However, this protection
is contingent upon the third party’s careful consideration and bona fide intentions, and it does not
excuse negligence in property acquisition.

The provision emphasizes the authority granted to ostensible owners by real owners, whether
expressed or implied, with legal constraints to prevent misuse. Property transfers, once executed, are
irreversible at the owner’s discretion, encompassing various forms such as mortgages, leases, sales,
or exchanges. The burden of proof lies with the transferee to demonstrate the ostensible owner’s
status, reinforcing the need for due diligence and cautious investigation.

41. Transfer by ostensible owner. —Where, with the consent, express or implied, of the persons
interested in immovable property, a person is the ostensible owner of such property and transfers the
same for consideration, the transfer shall not be voidable on the ground that the transferor was not
authorised to make it:

Provided that the transferee, after taking reasonable care to ascertain that the transferor had power
to make the transfer, has acted in good faith.

The principle underlying this section is that if two innocent persons are defrauded or cheated by one,
who, after transferring the property of one without his consent, to another, is no longer present, and
the two-person enter into litigation with respect to the property transferred, then out of these two
innocent persons, the one who, by his conduct or consent enabled the fraud to take place, will suffer.

A brother in possession of his sister’s share as well as his own for 25 years with the revenue records
showing the brother’s name as the owner with respect to the whole property, a husband in complete
possession of his wife’s property and wife never objected to it, a widow was in sole possession of the
property would be illustrations of the ostensible owner.
The possession and ostensible ownership must be with the consent of the real owner. The real owner
must also be capable of giving consent to the transfer and should have given it with free will. It would
include consent given on mistake of fact but not one given on misapprehension of legal status.
Consent need not be express or in writing. Where by conduct a person allows others to deal with his
property as his own, it would amount to implied consent. Negligence would amount to consent.
Further, if a person is in duty to speak, then even silence would amount to consent.

Transfer itself need not be with the consent of the true owner.

Consent does not include an intention to deceive.

The section will not apply if the real owner does not give the consent and had in fact challenged the
occupation of the possessor. In Md. Shafiqullah Khan v. Md. Samiullah Khan, after the death of the
owner, the property was in the possession of his illegitimate sons, who in law, were ineligible to
inherit his property. The legitimate heir, Muhammad Shafiqullah Khan, filed a lawsuit to claim his
inheritance rights. However, the illegitimate sons, acting as ostensible owners, sold the property to a
third party, Samiullah. This sale was affected after the rightful heir had already filed the suit claiming
possession of property. The lower court, considering Samiullah’s lack of knowledge about the lawsuit
and his good faith, protected him under Section 41 of TPA, barring Shafiqullah Khan from
establishing his title. The Allahabad High Court held that this did not meet the Section 41
requirement, as ownership was not obtained with the express or implied consent of the lawful owner,
thus denying the ostensible ownership status to the illegitimate sons.

Similarly, where the owner executes a power of attorney authorizing his attorney to sell the property
which he did for consideration through a registered deed, it was held that a suit for injunction was
barred by section 41.

According to Benami Transaction (Prohibition) Act 1988, when a property is transferred benami
(under someone else’s name), the holder of the property becomes the genuine owner, with the
benamidar serving as a trustee. The real owner can challenge such alienation only by proving lack of
consent and the buyer’s awareness. The Act prohibits legal actions or claims against the person in
whose name the property is held or any other claimant asserting real ownership.

According to section 2 (a) benami transaction means any transaction in which property is transferred
to one person for a consideration paid or provided by another person;

Ownership rights of the true owner cannot be enforced against the benami owner due to legal
provisions such as the Benami Transaction (Prohibition) Amendment Act, 2016. This Act renders the
transfer by an ostensible owner illegal, with specific exceptions.

The true owner cannot assert his ownership rights against the benami owner under any
circumstances.4 The Benami Transaction (Prohibition) Amendment Act, 2016 prohibits the transfer
by an ostensible owner and has made it illegal and unlawful with certain exceptions. In the case of
Thakur Krishna vs. Kanhayalal5, it was held by the court that any property that is held or owned in
the name of benami owner is liable to be acquired by the competent authority of the government
without paying any kind of remuneration. Although the Benami Transaction (Prohibition)
Amendment Act, 2016 has provided certain exception to the said rule which are as follows:

▪ The property held by a Karta or any member of an HUF and such property is held for the benefit
or gain of the other members of such HUF and the same is purchased by a known source of the
HUF will not amount to a Benami transaction under the Act.
▪ A person who purchases property in the name of his spouse or any child is not subject to the
benami transaction restriction. However, the individual's known ancestors must pay the
consideration.
▪ The property that is held by a person in the capacity of a trustee for the benefit of another person
will not amount to a benami transaction / property. Fiduciary capacity means, being in a position
of a trustee and being in a position where the person can be affirmed to have duties of good faith,
confidence, trust and transparency and one who must exercise a high standard of care in managing
another person’s property or money.
▪ When the property of a person is jointly held by the brother, sister, lineal descendent or antecedent
and the consideration for the same is paid by a person who is a known individual to the owner.

The above-mentioned exceptions are the areas that are governed by the section 41 of the Transfer of
Property Act, 1882.

State of Punjab v. Surjit Kaur (Dead) Through LRs

4
Rai Sunil Kumar Mitra and Ors. v. Thakur Singh and Ors. (1983 - PATNAHC): MANU/BH/0025/1984.
5
Sri Thakur Krishna Chandramajiu v. Kanhayalal and Ors. (1960 - ALLHC): MANU/UP/0055/1961.
A Benamidar is a real owner except when he is a coparcener, trustee, standing in a fiduciary relation.
Section 3(3) provides punishment three years or fine or both.

Except where the property is brought in the name of wife or unmarried daughter.

Section 4(1) of Benami Transaction Act 1988 provides “no suit, claim or action to enforce any right
in respect of any property held benami against the person in whose name the property is held or
against any other person shall lie by or on behalf of a person claiming to be the real owner of such
property.”

Mithilesh Kumari v. Prem Bhari Khare AIR 1989 SC 1247 SC held that BT Act 1988 is a piece of
legislation that is a declaratory enactment which makes benami transaction punishable and also
prohibits the right to defences against recovery under benami transaction. So the properties held
benami even at the time of coming into the forces of this Act may be effected errestive of their
beginning duration of origin.

Ramcoomar Koondoo v. Macqueen (1872) 11 Beng LR 46

In this case, Alexander purchased the property in the name of Bumboo Bibee and Alexander paid
the consideration.

Sale deed was executed in the name of Bumboo Bibee.

Bumboo Bibee was having two legal heir, X and McQueen.

Bumboo Bibee sold the property to Ramdhanee, whose son Ramcoomar is the respondent/ appelant
in this case.

The plaintiff (McQueen) argued that she had inherited a property by way of a will made by her father
Alexander who was the real owner. According to the plaintiff Bumboo Bibee was a mere benamidar.

The whole transaction was a ‘benami’ transaction but was not known to anyone except the person
who sold the property. The plaintiff sued the third party for recovery of the possession of the land but
the committee held that:

“It is a principle of natural equity that where one man allows another to hold himself out as
the owner of an estate, and a third person purchases it for value from the apparent owner in
the belief that he is the real owner, the man who so allows the other to hold himself our shall
not be permitted to recover upon his secret title, unless he can overthrow that of the purchaser
by showing, either that he had direct notice, or something which amounts to constructive
notice, of the real title, or that there existed circumstances which ought to have put him upon
an inquiry that, if prosecuted would have led to discovery of it.”
Privy Council held that Alexander was the real owner and BB was Benamidar. Alexander has allowed
BB to hold the property as a real owner. As Transfer is with consideration and the transferee has acted
in good faith. Hence, plaintiff cannot take back the property form the third party. Transfer was a
legitimate transfer. These wordings used in this case can be seen in the S. 41 of the Act which deals
with Ostensible owner.
 Transfer of Property Pending Suit Relating thereto

52. Transfer of property pending suit relating thereto - During the pendency in any Court having
authority within the limits of India or established beyond such limits by the Central Government of
any suit or proceedings which is not collusive and in which any right to immoveable property is
directly and specifically in question, the property cannot be transferred or otherwise dealt with by any
party to the suit or proceeding so as to affect the rights of any other party thereto under any decree or
order which may be made therein, except under the authority of the Court and on such terms as it may
impose.

Explanation.—For the purposes of this section, the pendency of a suit or proceeding shall be deemed
to commence from the date of the presentation of the plaint or the institution of the proceeding in a
Court of competent jurisdiction, and to continue until the suit or proceeding has been disposed of by
a final decree or order and complete satisfaction or discharge of such decree or order has been
obtained, or has become unobtainable by reason of the expiration of any period of limitation
prescribed for the execution thereof by any law for the time being in force.

Analysis

The principle contained in this section is based on the English common law maxim utlite pendente
nihil innovator i.e., during litigation no new rights should be introduced.

If we allow the property to be transferred during the pendency of the litigation, the litigation may go
indefinitely and the very purpose of justice should be delivered timely, will be frustrated.

This rule makes an alienation subject to the final disposition of the suit. In other words, whosoever
takes the property by a transfer during the pendency of the suit, would be automatically bound by the
decision of the court and it would be enforceable against him, irrespective of whether he was formally
inculcated as a party or not.
Lis pendens continues during the appeal with a decree passed in the suit. Dismissal of a suit does
not negate the application of lis pendens if an appeal is filed later but not where it is reversed in the
appeal. The suit continues even after the passing of the decree till its execution.

Lis pendens doctrine is applicable even if a civil appeal has been filed before the Supreme Court.

Suit or Proceedings

The term suit indicates a measure taken for a legal action or proceedings initiated by a person who
claims relief invoking the judicial mechanism set up by the state for a peaceful relief of his grievance.
It includes a suit for a temporary or permanent injunction, an easement suit, a partition suit, a suit for
foreclosure of a mortgage, and a suit for redemption of the mortgaged property, a writ petition but
does not include a review petition. Proceedings include revenue proceedings, or before the Registrar
of Co-operative Society but not proceeding before a Settlement Officer.
Broad purpose of lis pendens doctrine is to maintain status quo and to make the sale pendente lite
subordinate to the rights based on decree in the suit and not to declare sale invalid or defeat any just
and equitable claim.

Section 52 provides that a lis pendens transferee bound by decree of court.

Transferee pendente lite may be added as party.

Transfer pendent lite is not void, but only subject to the outcome of the litigation. Doctrine does not
defeat any just and equitable claim but only subject them to the authority of the court.