Restraint on Alienation in India — Sections 10 and 11 of the Transfer of Property Act, 1882 Explained

This article is for educational and legal awareness purposes only. It does not constitute legal advice or solicitation. Please consult a qualified advocate for advice on specific legal matters.

Overview

Sale deeds and gift deeds in India sometimes carry a clause telling the buyer or donee what they may never do with the property — “the property shall never be sold to an outsider,” “the donee shall not transfer this property during his lifetime,” or “the buyer must always resell to the original owner.” A person relying on such a clause often assumes it binds the transferee forever. It usually does not.

The Transfer of Property Act, 1882 (TPA) deals with this problem through two separate provisions. Section 10 strikes down a condition that absolutely restrains the transferee from parting with the property. Section 11 deals with a related but distinct situation — where the transferor tries to dictate how an interest that has already been given absolutely must be enjoyed. This article explains both provisions, the exceptions written into them, and how courts have drawn the line between a void absolute restraint and a valid partial one.

Section 10 — Condition Restraining Alienation

Section 10 of the Transfer of Property Act, 1882 reads:

“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 woman (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.”

Three things follow from this text:

The general rule. If a transfer of property is made subject to a condition that absolutely stops the transferee (or anyone claiming through the transferee) from selling, gifting, mortgaging, or otherwise disposing of the property, that condition is void. The transfer itself still stands; it is only the restrictive condition that fails.
The lease exception. A condition restraining a lessee from transferring the leasehold is valid if it is for the benefit of the lessor or those claiming under the lessor. Landlords may therefore validly restrict a tenant’s right to sub-let or assign a lease.
The married-woman proviso. The section carries a specific historical carve-out permitting a restraint on a woman’s power to transfer or charge property during her marriage, where she is not a Hindu, Muhammadan, or Buddhist. This proviso remains part of the statute’s text and reflects the personal-law landscape the TPA was drafted against in 1882; it has not been repealed.

Absolute Restraint, Not Partial Restraint

The word that does the real work in Section 10 is “absolutely.” The section does not say that every condition limiting a transferee’s power to deal with the property is void — only a condition that restrains alienation absolutely. Courts have consistently held that a partial restraint — one limited by time, or confined to a particular class of persons, or operating only in a defined set of circumstances — falls outside Section 10 and can be valid.

This distinction was explained by the Privy Council in Mohammad Raza v. Abbas Bandi Bibi (AIR 1932 PC 158), which held that after the Transfer of Property Act came into force, a partial restriction on the power of disposition — such as a condition preventing a transfer to persons outside the family, while leaving the transferee free to deal with the property within the family — would not be treated as repugnant to the interest created and could be enforced.

The Supreme Court applied the same absolute-versus-partial distinction in Zoroastrian Co-operative Housing Society Ltd. v. District Registrar, Co-operative Societies (Urban), AIR 2005 SC 2306 : (2005) 5 SCC 632. A cooperative housing society’s bye-laws confined membership, and therefore the resale of plots in the society, to members of a particular community. The Court held that this was not an absolute restraint under Section 10 — the member remained free to transfer the property to any person qualified for membership under the bye-laws. It was, at best, a partial restraint, voluntarily accepted by a member on joining the society and subscribing to its bye-laws, and such partial restraints — comparable to those seen in a family settlement, partition, or compromise — are not hit by Section 10.

The practical test, drawn from these decisions, is whether the transferee retains any meaningful power of disposition. If some route to transfer remains open — even a restricted one — the restraint is partial and Section 10 does not apply. If no route remains open at all, the restraint is absolute and void.

Section 11 — Restriction Repugnant to the Interest Created

Section 11 of the Transfer of Property Act, 1882 addresses a different problem: what happens when a transferor, having given an absolute interest in property, also tries to control how the transferee must use or enjoy it. The section reads:

“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.”

Section 11 therefore has two limbs:

The general rule. Once an absolute interest in property is created in the transferee’s favour, a direction in the transfer document about the particular manner in which that interest must be applied or enjoyed is ineffective. The transferee may deal with the property as if no such direction existed. The underlying principle is that a condition cannot be allowed to contradict the very absoluteness of the interest that the same document has conferred.
The beneficial-enjoyment exception. This rule does not apply where the direction concerns one piece of immovable property and its purpose is to secure the beneficial enjoyment of another piece of immovable property. In that situation, the transferor retains the right to enforce the direction, or to claim a remedy if it is breached. This exception is what allows conditions of a restrictive-covenant character — for instance, a condition attached to a transfer of one plot that it not be built upon beyond a certain height, imposed to protect the light, air, or view of an adjoining plot retained by the transferor — to survive even though the transferee otherwise holds an absolute interest.

How Section 11 Differs From Section 10

Section 10 is concerned with a condition that stops the transferee from transferring the property at all. Section 11 is concerned with a direction that tells an owner of an absolute interest how to use or enjoy it. A clause forbidding resale is tested under Section 10; a clause dictating that the property may only be used as, say, a garden and not built upon is tested under Section 11 — unless that direction falls within the beneficial-enjoyment exception, in which case it can bind the transferee notwithstanding the absolute interest conferred.

Practical Points

The transfer survives even when the condition does not. Under Section 10, it is the offending condition that is void, not the transfer. A buyer or donee who receives property subject to a void absolute restraint still takes a valid, unencumbered title so far as that condition is concerned.
Drafting a restraint to survive scrutiny. A condition confined to a defined period, or restricting transfer only to a defined class (such as family members, or persons meeting a stated qualification), has a better chance of being treated as a partial restraint than a condition that forecloses every mode of disposition.
Restrictive covenants need the Section 11 exception. A condition controlling how a transferee uses the property will not survive merely because it seems reasonable — it must fit within the narrow exception for a direction that secures the beneficial enjoyment of another, specifically identified piece of immovable property that the transferor retains an interest in.
These are default rules of transfer, not of testamentary succession. Sections 10 and 11 apply to transfers inter vivos (sale, gift, exchange) governed by the Transfer of Property Act. A condition in a will restraining alienation is examined under the analogous provisions of the Indian Succession Act, 1925, not under the TPA.

Takeaway

An absolute restraint on a transferee’s power to alienate property, written into a sale or gift deed, is void under Section 10 of the Transfer of Property Act, 1882 — though the transfer itself remains valid. A partial restraint, limited by time or confined to a defined class of persons, is generally outside Section 10 and can be enforced, as the Privy Council held in Mohammad Raza v. Abbas Bandi Bibi and the Supreme Court reaffirmed in Zoroastrian Co-operative Housing Society. A separate rule under Section 11 strikes down any direction on how an absolutely-transferred interest must be used or enjoyed, except where that direction secures the beneficial enjoyment of another piece of property the transferor retains. Anyone drafting or relying on a resale restriction or a use-restriction in a property document should have the clause examined against these two provisions before treating it as binding.

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