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Rule against Perpetuity

A. Conditions Restraining Alienation and Conditions Repugnant to Interest Created (Sec 10,1,12 read
with section 40)

Introduction-Alienation is favoured by the law than accumulation (alienation rei praefertur

juri accrescendi). There should be free circulation of properties. The owner’s right to alienate
should not be dictated by another through a personal agreement. It is against the spirit of the
right of ownership. Such restrains on alienation should be held void in law. According to
William Blackstone, “there is nothing which so generally strikes the imagination, and
engages the affection of mankind, as the right of property; or that sole and despotic dominion
which one man claims and excercises over the external things of the world, in total exclusion
of the right of any other individual in the universe” (from Commentaries on English Law). In
the words of Jermy Waldron, “in the case of each object, the individual person whose name is
attached to that object is to determine how the object shall be used and by whom. His
decision is to be upheld by society as final” (from ‘What is Private Property’ 1985). Sections
10 to 12 incorporate the first part of the doctrine of ‘Rule Against Perpetuity’. The composite
effect of the sections is that an absolute condition imposed on alienation of property or use of
property or utilisation of income of the property is void and the transfer is valid. Such
conditions tend to create perpetuity which is abhorred in law. The legal effect of agreement is
as if no such conditions exist in the contract. Conditions under section 10, 11, 12 and 17 are
conditions subsequent and have been declared void. Transferee is not bound by them. He may
or may not fulfil them. He is free to transfer it to anybody by any means. The reasons of
conditions may be positive (security of livelihood) as well as negative ones (grudges/hidden
objectives). It makes no difference under section 10.

Condition or limitation here means to do or not to do something the ultimate effect of which
is to take way the power of alienation completely. It must not be confused with ‘words of
purchase’ or ‘conditional limitation’ which is simultaneous conditional transfer case. That is
a valid conditional transfer. Example- if the property is transferred with words ‘to you and
your heirs’. It only denotes that there is a life interest ownership in you but after your death
property is of your heirs. There is no legal intention to make you an absolute owner who can
make further alienations. Heirs clause is essential term of the contract and without its
fulfilment, the object of transfer is defeated as transferor wanted to secure that property
devolves upon heirs only, the ultimate beneficiary. Therefore you cannot transfer this
property to anyone else. This arrangement is not hit by section 10 which recognises that there
is a legal intention to make the transferee a complete owner, clog is only on alienation.

However partial restraints can be imposed. Now what is absolute and what is partial restraint
depends upon the circumstances of each case. Regard should be paid to the deed as a whole.
There are certain exceptions given under section 10 to 12 when restraints can be imposed.

Section 10- Ingredients

1. There is a transfer of property such as sale, exchange, gift, lease or mortgage

(absolute or limited interest transfer).
2. There is a condition or limitation in the contract.
3. The Condition/limitation in effect imposes an absolute restraint on alienation of that
property explicitly or implicitly.
4. Such condition/limitation is void and the transfer is valid
5. Exceptions I- A lesser imposing condition upon lessee for his own benefit or the
benefit of persons claiming under him. E.g. restriction upon sub-tenancy.
6. Exception II- A condition or limitation may be imposed upon a Non-Hindu, Non-
Muslim and Non-Budhist women. It means women upon whom condition can be
imposed must be married women (not unmarried or widow) and must be like
Christian, Parsi or Jew etc. So far as Hindu, Muslim and Budhist women are
concerned, the Married Women’s Property Act, 1874 already contains provisions for
restrictions on transfer of property by these married women. Reason behind such
restrictions is to safeguard the interest of the married women who could be easily
exploited by their unscrupulous husbands.
Instances of Absolute Restraints
1. A person makes a gift of property to another with a condition that he will not sell it to
anyone. Condition is void.
2. A sells his house to B with a condition that B cannot sell it to anyone except C.
Condition is void. C may never purchase the house.
3. Rosher v Rosher 1884 Ch.D– A Father making a will of property of 15000 pounds in
favours of his son imposes a condition that in case son wanted to sell his property, he
must offer the property first to his mother at 1/5 rate . It was held that the condition is
void because it is restraining alienation during lifetime of the widow mother.
4. Renard v. Tourangean 1867 PC- transferee cannot alienate for 20 years. held-its void
condition.
5. Gayasi Ram v. Shabhuddin 1935 All. - Seller imposed condition that buyer cannot
alienate without my consent. Held- it is a void condition. Consent may be
unreasonably withheld.

Instances of Partial Restraints

1. Muhammad Raza v. Abbas bandi Bibi 1932 PC- A lady got property through a
compromise deed with her cousin in which there was a condition that she can only
transfer it to family members. She transferred it to a stranger. She died. Afterwards,
her heirs claimed the property pleading that the she could not sell it to strangers. Court
held it to be a partial restraint and therefore a valid condition. She was bound by it.
The heirs got the property.
2. Zoroastrian Coop. Housing Society Ltd. v District Registrar, Coop. Societies
( Urban) 2005 SC- The restrictions imposed by the co-operative society on its
member to transfer the allotted houses only to Parsies was held to be valid condition.
It is a partial restraint.
3. Transfer to only family, community, caste or a group of people having common bond
have been held to be partial restraints and valid ones. So class transfers are not hit by
section 10.
4. A condition that transferee shall not alienate the property by way of gift is a partial
restraint.
5. The condition as to vendor’s option to buy back or pre-emption conditions in family
properties are partial restraints.

Ingredients of Section 11

1. There is absolute transfer i.e. only Sale, Gift and Exchange.

2. The restriction is imposed the mode of enjoyment of property or use of income of
property.
3. Restriction is void and transfer is valid.
4. Exception- A transferor of an immovable property can impose restrictions for the
beneficial use of his another piece of property e.g. securing right to way, water
channel, walls, drainage, air, light, space etc. In the case of B.D. Ramble v. V.K. Lal-
Transferor sold his adjoining land on a condition that the transferee will leave certain
 area open for passing of fresh air and sunlight to transferor’s house. Condition was
held valid. In the famous case of Tulk v. Moxhay – The transferor was having many
residential houses in London and an adjoining square garden. He sold the square
garden to transferee for himself, his heirs and assigns with a condition that there shall
be no construction in the garden and it shall be kept as such and the occupants of his
residential houses will have the right to enjoy the garden on payment of reasonable
rent. The square garden’s title got passed on to several transferees and the transferee
in dispute wanted to convert the garden into residential complex. The owner of the
adjoining house sought injunction against such transferee. Court allowed the
injunction. The transferee’s contention that he was a subsequent transferee and not
bound by the conditions of original transferor was not accepted by the court. Court
held him bound on the basis of the fact that he took the garden with notice which was
an essential term of the Title of the garden since inception. It ran with the land.

Section 40 of TPA

Any person who otherwise is not a party to the transfer contract can also enforce certain
rights over the property of another if the transferee is for consideration and with notice of the
right of such third person. It can only be enforced for beneficial enjoyment of third person’s
own property. However such third person must not have any interest or easement over such
immovable property.

Covenants Running with the Land

Usually positive covenants (you will have to keep doing it e.g maintenance of property in a
certain way) do not run with the land as their execution needs some expenditure on the part of
transferee. Negative covenants (you cannot do it e.g. construct or fence or stop water supply)
usually run with the land. One can only transfer what he himself has. However the combined
effect of section 11 and 40 is that negative covenants run with the land only when subsequent
transferee has notice of it. It may be written in the deed or otherwise he may know it. It is a
matter of evidence.

Section 12

Any condition that if the transferee became insolvent, the property will revert back to the
transferor is void. It is against the spirit of insolvency law. Transfer is valid and property shall
vest into the official liquidator of the transferee. Section 12 does not apply to lease where
such condition is imposed by the lesser for his own benefit or persons claiming under him.

B. Transfer for the Benefit of Unborn Persons, classes and charitable organisations ( sec
13 to 18)

Ingredients of Section 13

1. There must be a transfer of property in the form of ‘creation of interest for the benefit
of unborn person/s. Unborn here means a child who has not taken birth. Child may or
may not be in mother’s womb.
2. There is no ‘transfer to unborn person’, rather there is ‘transfer for the benefit of
unborn persons’. It means that immediately there is no passing of the complete
ownership to the unborn person.
3. Transfer in favour of unborn person is of an absolute interest i.e. transaction is that of
transfer of ownership e.g. sale, gift and exchange. It is not a limited interest transfer
such as lease or mortgage.
4. A prior interest must be created in favour of a living person or persons. It may be for
limited duration e.g. 5 years or it may be for lifetime too. The prior interest holder
merely holds the possession of the property and enjoys produce/income of the
property. He is in the position of trustee for the protection of interests of the yet to be
born. He cannot alienate property to anyone. However in case of necessity, he may
create limited interests. Prior interest holder may be the father, mother or any other
relative of unborn persons or may be mere stranger to the family. The child gets
vested interest the day he is born but he will get the possession of the property only
when interest of the prior interest holder expires.
5. There is no condition in the transfer deed except the prior interest or as provided u/s
14.
6. The child must come into existence during the life time of any of the prior interest
holders who is continuing with that interest, otherwise the property will revert back to
the transferor. According to section 20, child gets vested interest in the property upon
taking birth provided there is no contrary intention appearing from the deed of
transfer (which may be as per section 14). Therefore, it is clear that child in mother’s
womb does not get vested interest u/s 13. No interest passes upon such child under
TPA if prior interest holder dies before the taking birth of the child. The property
 should revert back to the Transferor as the condition which is ‘taking birth of the child
before death of prior interest holder’ has failed and transfer has also failed and
therefore becomes void. (Whereas, under Hindu Succession Act, 1956 (e. g u/s sec
113), if testator passes before the child’s birth, child being in mother’s womb, the
child takes the property under Will as and when he takes birth. It does not revert back
to the testator. Section 20 of the Succession Act provides that “A child who was in the
womb at the time of the death of an intestate and who is subsequently born alive shall
have the same right to inherit to the intestate as if he or she had been born before the
death of the intestate, and the inheritance shall be deemed to vest in such a case with
effect from the date of the death of the intestate”.)
7. If the provisions of section 13 are not fulfilled, deed is void.

Example- A------------to B for 5 years and C for life-------------to D unborn

Section 14

The vesting of interest in favour of unborn can be restricted up to18 years of age of the child.
The child u/s 13 gets vested ownership when he is born. This vesting can be further delayed
for 18 years. 18 years is maximum period so less than that can also be fixed in the deed e.g.
10 years after birth. This does not amount to a condition which violates section 13.
Meanwhile child enjoys possession and mesne profits if prior interest holder’s interest
expires, but cannot alienate the property for the duration so fixed not exceeding 18 years. The
day he gets major, he can alienate.

Example: A--------------to B for life----------to C (unborn) on becoming major

B dies when C is of 8 years. C will have to wait for 10 more years to get the property. If C
dies before 18, property reverts back to A. If C dies at the age of 17 and had got married and
was having a son D. Property will still revert back to A, as C’s interest was contingent based
on the condition that he must become major. Death could occur before 18, therefore the event
was uncertain to happen. Contingent interests are not heritable, therefore D would get
nothing.

Some Cases

1. Arideshir v Duda Bhoy 1945 Bom (Trust case)

D--------------------1/3 properties to A and R (gifted during his lifetime)

D-----------------2/3 properties trust created---------to A for life 2/6 and to R for life 2/6---------
to A’s son, to R’s son (unborn) with a condition that if A or R die before D, the property will
revert back to D and not to his son.

Held- transfer in favour is conditional, not absolute. The deed is void.

2. Sopher v Administrator General of Bengal 1944 PC (Will case)

A (testator) -------------- to Wife for life and after her death to her living children for life and
then to unborn grandchildren income till they achieve 18 years of age and afterwards absolute
transfer

Held- Deed is valid

3. Girish Dutt v Dutta Din 1934 Luck ( Gift case)

A ------------ to B for life ----------To B’s unborn son and if no son is born then to his unborn
daughter without the power of alienation --------if B is issueless then to C (living). B had only
a daughter.

Held- deed is void. Unborn daughter’s interest is not absolute. When unborn interest fails,
every subsequent interest also fails. Therefore C’s interest also got failed.

4. J.V. Satyanarayama v Pyboyina Manikyan 1983 AP

A-----------to S for life----------then to S’s unborn son

Before S’s son is born, S relinquishes his interest in favour of his father. Court held that it did
not affect the unborn’s right over property.

Section 15

5. Example- A------to B for life------------to B’s unborn children

2 children were born during B’s lifetime and one child took birth after 2 months of father’s
death. The third child’s interest failed u/s 13.

Section 16

Any interest which is subsequent to the unborn child’s interest as alternative arrangement is
bound to fail if the unborn child’s interest fails. See Girish Dutt case.
Section 17

The direction as to accumulation of income on property is void except up to the life span of
the transferor or 18 years whichever is less.

Exceptions:

a. Payment of debt of the transferor or person taking interest under him.

b. Provision for portion (e.g. to temple 10 percent of income)
c. For preservation or maintenance of the property

This section is based on the English Thellusion Act i.e. The Accumulation Act, 1800 which
was enacted to nullify the decision of Thellusion v Woodford case.

Section 18

Law favours charity. Transfer in perpetuity for the benefit of public is valid e.g. religion,
knowledge, commerce, health, education and safety etc.

Mc Naughten Rules (Commissioner of Income Tax v Pemsel)

Charity in legal sense comprises four divisions-

1. Trusts for the benefit of public

2. Trusts for the benefit of education
3. Trusts for the advancement of religion
4. Trusts for other purposes beneficial to the community as a whole, not covered under
earlier heads
The essence is that people in general should be the beneficiaries, such perpetuities can
be created