Muhammad Raza v Abbas Bandi Bibi

Facts

Property was transferred subject to a condition restraining the transferee from alienating it to a stranger, that is, to persons outside the family. The validity of this condition restricting alienation to within the family was challenged as a restraint on alienation.

Issues

• Whether a condition prohibiting alienation to a stranger (outside the family) is an absolute restraint void under section 10.
• Whether such partial restrictions were regarded as repugnant in India even before the Transfer of Property Act.

Arguments

The party challenging the condition contended it restricted the transferee's power of alienation and was therefore void. The party upholding it argued the restraint was only partial, confined to keeping property within the family, and was always recognised as valid.

Held

The Privy Council, approving Doe d Gill v Pearson and Re Macleay, held that a condition merely restraining alienation to a stranger – i.e. outside the family – is not an absolute restriction and is valid. Their Lordships observed that after the passing of the Transfer of Property Act, a partial restriction on the power of disposition would not, in the case of an inter vivos transfer, be regarded as repugnant, and there was no authority that Indian courts applied a different principle before the Act. Earlier decisions treating any condition against alienation to a stranger as an absolute restraint were held no longer good law.

Ratio decidendi

A partial restraint on alienation, such as a condition restraining transfer to persons outside the family, is valid and not repugnant under section 10; only an absolute restraint is void.

Significance

The foundational authority distinguishing partial from absolute restraints under section 10, relied on in later cases including Zoroastrian Co-operative Housing Society; it settled that family/community-confined restraints are enforceable.

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