Transfer of Property Act (TPA)
Restraints on Transfer under Sections 10 to 12: The Scheme of the Act Against Fetters on Alienation
Having declared in section 6 that property of any kind may be transferred, the Act turns to the transferor who tries to give property away and keep control of it at the same time. Sections 10, 11 and 12 deal with three ways of attempting that: forbidding the transferee to alienate, directing how he shall enjoy what he has been given, and providing that his interest shall cease if he becomes insolvent or tries to transfer. In all three the answer is the same — the condition falls and the transfer stands — and in all three the reason is the same: property should remain in commerce.
Figure 1: Three conditions, three verdicts, and the exception each section preserves
1. The Three Sections in Outline
Section | What it strikes at | Effect | What survives |
|---|---|---|---|
10 | A condition or limitation absolutely restraining the transferee from parting with or disposing of his interest | The condition or limitation is void; the transfer stands | A partial restraint; a lease where the condition is for the benefit of the lessor; the proviso for a married woman who is not a Hindu, Muhammadan or Buddhist |
11 | Where an absolute interest is created, a direction that it shall be applied or enjoyed in a particular manner | The direction is void; the transferee may receive and dispose of the interest as if it were not there | A direction imposed on one piece of immoveable property to secure the beneficial enjoyment of another piece belonging to the transferor |
12 | A condition that the interest shall cease on insolvency or on an attempt to transfer it | The condition is void | A lease where the condition is for the benefit of the lessor or those claiming under him |
2. The Common Policy
- Property should circulate. A restraint on alienation keeps land out of the market, prevents it being used as security, and locks capital into the hands of whoever happens to hold it.
- Ownership carries the power of disposal. The right to alienate is not an accessory of ownership that may be shaved off; it is part of what ownership means.
- A transferor cannot give and withhold at once. Having parted with the interest, he has nothing left from which to control it, and a condition that tries to do so is repugnant to his own grant.
- Creditors should not be defeated by drafting. Section 12 in particular prevents a settlor from providing property that is enjoyed in prosperity and disappears the moment creditors arrive.
3. Section 10: Condition Restraining Alienation
Section 10, TPA '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.' |
The operative word is absolutely. A restraint that leaves the transferee with a substantial power of disposal is partial and good; one that takes the power away in everything but name is absolute and void. The distinction, and the cases that draw it, are treated separately.
4. Section 11: Condition Repugnant to the Interest Created
Section 11, TPA '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.' Second paragraph: where such a 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 the section affects any right the transferor may have to enforce the direction, or any remedy for its breach. |
Two features distinguish section 11 from section 10. It applies only where the interest created is absolute — a limited interest may be defined as narrowly as the transferor pleases. And it admits no partial-direction exception: any direction as to the manner of enjoyment of an absolute interest is void, however modest.
5. Section 12: Condition Making Interest Determinable on Insolvency or Attempted Alienation
Section 12, TPA 'Where property is transferred subject to a condition or limitation making any interest therein, reserved or given to or for the benefit of any person, to cease on his becoming insolvent or endeavouring to transfer or dispose of the same, such condition or limitation is void.' 'Nothing in this section applies to a condition in a lease for the benefit of the lessor or those claiming under him.' |
- It attacks a defeasance, not a prohibition. Section 10 forbids the transferee to alienate; section 12 says the interest shall end if he alienates or becomes insolvent. The device is different, the object identical, and the answer the same.
- It protects creditors. An interest that evaporates on insolvency would leave the assignee with nothing to administer, and the settlor's beneficiary enjoying property beyond the reach of those he owes.
- The lease exception is the same as in section 10. A lessor may reserve a right to determine the lease if the lessee becomes insolvent or assigns, because the condition protects his continuing interest in the property.
6. How the Three Differ
Section 10 | Section 11 | Section 12 | |
|---|---|---|---|
What the condition attacks | The power to alienate | The manner of enjoyment | The continuance of the interest |
Interest required | Any interest transferred | An absolute interest | Any interest, reserved or given |
Is a partial version good? | Yes — a partial restraint is valid | No — any direction as to enjoyment is void | No — the condition is void |
Exception | Lease for the lessor's benefit; married-woman proviso | Direction protecting the transferor's other land | Lease for the lessor's benefit |
Result | Condition void, transfer good | Direction void, transfer good | Condition void, transfer good |
7. Where These Sections Sit
Sections 10 to 12 open a block of provisions that regulate what a transferor may attach to his transfer. They are followed by sections 13 and 14, which govern transfers for the benefit of an unborn person and the rule against perpetuity; by sections 19 to 24 on vested and contingent interests; and by sections 25 to 34 on conditional transfers, including conditions precedent and subsequent and the doctrine of election in section 35. The common thread is the tension between a transferor's wish to control the future of his property and the law's preference that property remain free.
Retention aid Ten forbids selling, eleven dictates using, twelve punishes selling. All three fall; the transfer survives in each case. And remember the single asymmetry: a partial restraint escapes section 10, but nothing escapes section 11 except the transferor's own neighbouring land. |
8. Related Topics and Provisions
- Condition Restraining Alienation, Section 10 — absolute and partial restraints, and the exceptions
- Condition Repugnant to the Interest Created, Section 11 — directions as to enjoyment
- Section 10 vs Section 11 — the two compared, with worked examples
- What May Be Transferred, Section 6 — restraints imposed by law rather than by the parties
- Section 40, TPA — obligations annexed to land, and the enforcement of restrictive covenants
- Sections 13, 14 and 20, TPA — transfers for the benefit of an unborn person and the rule against perpetuity