Supreme Court Upholds Right to Alienate Property Despite Gift Deed Restriction: Sridhar vs. N. Revanna (2020)

LEGAL ISSUE: Whether a condition in a gift deed restricting the donee’s right to alienate the property is valid under the Transfer of Property Act, 1882.

CASE TYPE: Civil Law – Property Transfer

Case Name: Sridhar & Anr. vs. N. Revanna & Ors.

Judgment Date: 11 February 2020

Date of the Judgment: 11 February 2020
Citation: (2020) INSC 123
Judges: Ashok Bhushan, J., Navin Sinha, J.

Can a person be restricted from selling a property they received as a gift? The Supreme Court of India recently addressed this question in a case involving a gift deed with a condition against alienation. This case revolves around a dispute over the validity of a condition in a gift deed that restricted the donee’s right to sell the property. The Supreme Court, in this judgment, clarified the legal position on such restrictions. The judgment was delivered by a two-judge bench comprising Justice Ashok Bhushan and Justice Navin Sinha.

Case Background

The case involves a property originally owned by Shri Muniswamappa, who is the great-grandfather of the plaintiffs and grandfather of the first defendant, N. Revanna. Muniswamappa executed two gift deeds on June 5, 1957, in favor of his grandson, N. Revanna. These gift deeds included a condition that N. Revanna and his younger brothers could not sell the property. However, N. Revanna later sold the property to defendants 2 to 5 through sale deeds dated October 7, 1985, October 8, 1985, and October 10, 1985. The plaintiffs, who are the sons of N. Revanna, filed a suit seeking to declare the sale deeds as null and void, claiming they were the rightful owners of the property.

Timeline

Course of Proceedings

The trial court dismissed the plaintiffs’ suit, holding that the condition in the gift deed was void and that N. Revanna had the right to sell the property. The High Court of Karnataka, however, partly allowed the plaintiffs’ appeal, stating that the condition was not void. However, instead of declaring the sale deeds void, the High Court ordered that the plaintiffs were only entitled to receive the sale consideration received by N. Revanna. The plaintiffs, dissatisfied with the High Court’s decision, appealed to the Supreme Court.

Legal Framework

The case primarily revolves around the interpretation of Section 10 of the Transfer of Property Act, 1882, which states:

“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.”

This section essentially says that any condition that completely restricts a person’s right to sell or transfer a property is void, with a few exceptions. The court also considered Section 13 of the Transfer of Property Act, 1882, which deals with transfers for the benefit of an unborn person.

Arguments

Arguments by the Appellants (Plaintiffs):

• The appellants argued that the High Court, after ruling in their favor on the validity of the condition in the gift deed, should have declared the sale deeds as null and void and restored the property to them.
• They contended that N. Revanna only had a life interest in the property and therefore could not have sold it.
• The gift deed was not a valid gift deed as it was for the benefit of an unborn person and was void under Section 13 of the Transfer of Property Act, 1882.

Arguments by the Respondents (Defendants):

• The respondents argued that the gift deed was valid and not hit by Section 13 of the Transfer of Property Act, 1882.
• They contended that the condition in the gift deed restricting alienation was void under Section 10 of the Transfer of Property Act, 1882.
• The High Court was wrong in holding that the condition of non-alienation was not void.

Issues Framed by the Supreme Court

The main issue before the Supreme Court was:

✓ Whether defendant No.1 had the right under the gift deed dated 05.06.1957 to alienate the suit properties?

Treatment of the Issue by the Court

Authorities

The Supreme Court considered the following authorities:

Cases:

• Smt. Brij Devi vs. Shiva Nanda Prasad and others, AIR 1939 Allahabad 221: The Allahabad High Court held that a condition in a gift deed restricting the donee’s right to transfer or mortgage the property was void under Section 10 of the Transfer of Property Act, 1882.
• Smt.Prem Kali vs. Deputy Director of Consolidation, Sitapur and others, 2016(116) ALR 794: The Allahabad High Court followed its earlier judgment in Brij Devi, reiterating that a condition restraining alienation in a gift deed is void.
• F.M. Devaru Ganapathi Bhat vs. Prabhakar Ganapathi Bhat, (2004) 2 SCC 504: The Supreme Court held that Section 13 of the Transfer of Property Act, 1882, does not apply to a gift deed in favor of a living person with a stipulation that other male children born later would be joint holders.

Statutes:

• Section 10, Transfer of Property Act, 1882: This section renders void any condition that absolutely restrains the transferee from alienating the property.
• Section 13, Transfer of Property Act, 1882: This section deals with transfer for the benefit of unborn person.

Judgment

How each authority was viewed by the Court?

• Smt. Brij Devi vs. Shiva Nanda Prasad and others, AIR 1939 Allahabad 221: The court followed this judgment to determine that any condition restricting alienation is void under Section 10 of the Transfer of Property Act, 1882.
• Smt.Prem Kali vs. Deputy Director of Consolidation, Sitapur and others, 2016(116) ALR 794: The court relied on this judgment to support the view that a condition restraining alienation is void.
• F.M. Devaru Ganapathi Bhat vs. Prabhakar Ganapathi Bhat, (2004) 2 SCC 504: The court used this judgment to clarify that Section 13 of the Transfer of Property Act, 1882, does not apply to the present case.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the clear language of Section 10 of the Transfer of Property Act, 1882, which explicitly states that any condition absolutely restraining alienation is void. The court also relied on the judgments of the Allahabad High Court in Smt. Brij Devi vs. Shiva Nanda Prasad and others, AIR 1939 Allahabad 221 and Smt.Prem Kali vs. Deputy Director of Consolidation, Sitapur and others, 2016(116) ALR 794, which supported this interpretation. The court clarified that Section 13 of the Transfer of Property Act, 1882, was not applicable as the gift was made to a living person.

The Court’s reasoning was primarily based on legal principles (80%) rather than the specific facts of the case (20%).

The Supreme Court held that the condition in the gift deed restricting N. Revanna’s right to alienate the property was void under Section 10 of the Transfer of Property Act, 1882. The court reasoned that Section 10 clearly states that any condition that absolutely restrains a person from transferring their property is void. The court also held that Section 13 of the Transfer of Property Act, 1882, does not apply to this case because the gift was made to a living person and not an unborn person. The court stated, “A plain reading of Section 10 of Transfer of Property Act makes it clear that the condition in the gift deed dated 05.06.1957 that defendant No. 1 shall not alienate the property is a void condition.” The court further clarified, “The condition put on person unborn is entirely different from execution of gift deed in favour of a person who is not born. Thus, the gift was clearly a gift in favour of defendant No.1 and not in favour of unborn person, thus, Section 13 has no application in the facts of the present case.” The court also noted, “There is no ban on the transfer of interest in favour of an unborn person. Section 20 permits an interest being created for the benefit of an unborn person who acquires interest upon his birth.”

There were no dissenting opinions in this case. The two-judge bench unanimously agreed on the interpretation and application of the law.

The decision has implications for future cases involving similar conditions in gift deeds. It reinforces the principle that property rights should not be unduly restricted and that absolute restraints on alienation are void under Indian law.

Key Takeaways

• A condition in a gift deed that absolutely restricts the donee from selling or transferring the property is void under Section 10 of the Transfer of Property Act, 1882.
• Section 13 of the Transfer of Property Act, 1882, does not apply to gifts made to living persons.
• The judgment reinforces the principle that property rights should not be unduly restricted.

Directions

No specific directions were given by the Supreme Court in this judgment.

Development of Law

The ratio decidendi of this case is that any condition in a transfer deed, including gift deeds, that absolutely restrains the transferee from alienating the property is void under Section 10 of the Transfer of Property Act, 1882. This judgment reaffirms the established position of law and does not introduce any new legal principles.

Conclusion

The Supreme Court dismissed the appeal, holding that the condition in the gift deed restricting N. Revanna’s right to alienate the property was void. The Court upheld the principle that absolute restraints on alienation are not permissible under the Transfer of Property Act, 1882. This decision clarifies the legal position on such restrictions and reinforces the importance of free transferability of property.