Bombay High Court
Dr.Aspi S. Golwala & Ors vs Bai Ratanbai & Behramji Kuka ... on 20 March, 2014
Author: S.C. Gupte
Bench: S.C. Gupte
sat 1/17 nm 126-2013.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
NOTICE OF MOTION NO. 126 OF 2013
IN
SUIT NO. 60 OF 2013
Dr.Aspi S. Golwala & Ors. ...Applicants / Plaintiffs
vs.
Bai Ratanbai & Behramji Kuka Co-operative
Housing Society Ltd. & Ors. ...Defendants
Mr.Sanjay Kothari with Mr.Chirag Balsara and Ms.B.K. Bali i/b. M/s.Bali
Associates for the Plaintiffs.
Mr.D.D. Madon with Mr.Cyrus Ardeshir with Mr.M.N. Mulla i/b. M/s.M.Mulla
Associates for Defendant Nos.1 to 5 and 7 and 8.
CORAM : S.C. GUPTE, J.
ORDER RESERVED ON : 30th JANUARY, 2014 ORDER PRONOUNCED ON : 20th MARCH, 2014 P.C. :
The Notice of Motion is taken out by the Plaintiffs, who are trustees of two public charitable trusts, for a temporary injunction to restrain Defendant No.1 society from transferring 60 flats referred to in the plaint without the consent of the Trust.
2. Plaintiff Nos.1 to 4 are trustees of Seth Behramji Ferdunji Kuka and Bai Ratanbai Behramji Kuka Charity Trust ("Kuka Trust"), whilst Plaintiff No.5 is the sole trustee of Bai Hirabai Manchersha Gilder Charity Trust ("Gilder Trust"). Trustees of Gilder Trust were owners of a plot of land admeasuring about 3430 sq.yards at Andheri in Mumbai, and by an agreement for sale dated 20 February 1989 agreed to sell to the trustees of Kuka Trust the said land for a price of Rs.2 lakh. The purchasers, in turn, agreed to construct a building / buildings in the land for low income group Parsis. There were restrictions as to the area and price of flats to be constructed in the building/s. The area of the flats was not to exceed ::: Downloaded on - 29/03/2014 18:58:19 ::: sat 2/17 nm 126-2013.doc 350 sq.ft and the price not to exceed the cost price. It was agreed that it would be an express term of the by-laws of the proposed society or regulations of the association of flat purchasers that each and every flat in the building/s shall be used and occupied by Parsi/s professing the Zoroastrian religion only. (The relevant clauses of the agreement in this behalf shall be quoted later.) By a change report accepted by the Charity commissioner of State of Maharashtra, the land was declared as the property of Kuka Trust. Kuka Trust constructed six buildings of ground plus flour floors comprising of a total of sixty flats. The construction was accomplished with the help of Navroji P. Godrej Trust. Kuka Trust allotted flats to lower income Parsis at a concessional price of Rs.1,50,000/- per flat. The Trust entered into standard printed allotment agreements with the allottees. These agreements expressly incorporated the restrictive covenants contained in the agreement for sale and referred to above. (The relevant clauses shall be referred to later.) The society of allottees of flats (Defendant No.1) was registered under the Maharashtra Co-operative Societies Act, 1960. It is the case of the Plaintiffs that the restrictive covenants of the allotment agreements were not incorporated by Defendant No.1 in its bye-laws, but these covenants were nonetheless binding on every member of Defendant No.1. There is as yet no conveyance of the land with buildings from the Kuka Trust to Defendant No.1. It is claimed that non-incorporation of appropriate clauses in relation with the restrictive covenants is the reason why the conveyance has still not been executed. It is the case of the Plaintiffs that in the meanwhile the allottees / Defendant No.1 have transferred some flats in the building in breach of the restrictive covenants. The Plaintiffs apprehend that further transfers may take place and have approached the court seeking a declaration concerning the restrictive covenants being an integral part of the bye-laws of Defendant No.1 or in the alternative an order directing the latter to incorporate these covenants into its bye-laws. The Plaintiffs also seek to prohibit transfers of flats in breach of such covenants and pray for appropriate reliefs in that behalf.
3. The main defences to the suit of Defendant Nos.1 to 5, 7 and 8, who are the contesting Defendants, as disclosed in their reply, are these. The Defendants submit that the suit, in so far as it seeks a declaration / order in ::: Downloaded on - 29/03/2014 18:58:19 ::: sat 3/17 nm 126-2013.doc respect of bye-laws, is barred by limitation, since the bye-laws came to be framed in 1991. The Defendants submit that the suit is bad for non-joinder of necessary parties, namely, all the sixty members / flat owners of Defendant No.1 society. It is submitted that the suit is bad for want of the consent of the Charity Commissioner under Section 51 of the Bombay Public Trusts Act, 1950. It is claimed that the present suit is nothing but a counter-blast to the consumer complaint filed by Defendant No.1 claiming transfer / conveyance in respect of the suit property. The Defendants further submit that the restrictive clauses, which are sought to be enforced by the Plaintiffs, are void and unenforceable and opposed to public policy.
4. The learned Counsel appearing for the Plaintiffs submits that the allottees got their flats at concessional rates (at cost price) since the project was meant for poor Parsis in furtherance of the charitable nature of the project and are bound by the restrictive covenants which run with the land; that the restrictive clauses have actually been acted upon and some of which have also been adopted in the bye-laws (these shall be discussed later); that these clauses do not contain an absolute restraint on transfers; and that such clauses have been held to be valid by courts. The learned Counsel in this behalf relies on the judgment of the Supreme Court in the case of Zoroastrian Cooperative Housing Society Ltd. vs. District Registrar, Cooperative Societies (Urban) 1, in support of his contention.
5. The learned Counsel for the contesting Defendants, on the other hand, submits that the flats were sold to the members of Defendant No.1 society at market values after taking into account the escalation in costs as well as expenditure for additional amenities; that some of the flats have been sold by the Plaintiffs even to non-Parsis; that the covenants referred to by the Plaintiffs offend against the provisions of Sections 10, 11 and 12 of the Transfer of Property Act and are void to that extent; that assuming without admitting that some of these covenants are made part of the bye-laws of Defendant No.1, bye-laws which are not consistent with the law cannot be given effect to. The learned Counsel relies 1 (2005) 5 SCC 632 ::: Downloaded on - 29/03/2014 18:58:19 ::: sat 4/17 nm 126-2013.doc upon the judgments of several High Courts in this behalf and explains the decision of Zoroastrian Society's case (supra). He also submits that Defendant No.1 is willing to make a statement that the restriction concerning transfer of flats only in favour of Parsis shall be incorporated in the bye-laws of Defendant No.1 in keeping with the law laid down in Zoroastrian Society's case.
6. Since the Defendants have raised objections to the jurisdiction of this Court, as noted above, preliminary issues under Section 9 A of the Code of Civil Procedure will have to be framed and answered before the Notice of Motion is finally disposed of. Accordingly, the following issues are framed as preliminary issues:
(i) Whether the Suit is barred by the law of limitation ?
(ii) Whether the Suit is barred by reason of want of consent of the Charity Commissioner under Section 51 of the Bombay Public Trusts Act, 1950 ?
Having framed these preliminary issues, the following order is passed on the Plaintiffs' application for interim relief pending determination of the preliminary issues. The merits of the parties' respective cases on the preliminary issues are also considered prima facie for the purpose of deciding such application.
7. The Defendants submit that the prayers in the suit seeking a declaration in respect of, or amendment of, bye-laws are time barred, since the bye-laws were framed in 1991. In this behalf, it is pertinent to note that the interim injunction sought in the Notice of Motion is not simply on the basis of the main relief of declaration / amendment as aforesaid, but on the basis and in aid of a declaration that any transaction entered into by Defendant No.1 or its members in violation of the restrictive clauses referred to in prayer clause (c) of the plaint is null and void and of no legal effect and not binding upon the Plaintiffs. The cause of action for claiming such a declaration is a continuous cause of action. The bar of limitation alleged by the Defendants thus has prima facie no merits from the point of view of giving any interim relief to the Plaintiffs on the basis of the respective clauses.
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8. The second objection is based on Section 51 of the Bombay Public Trusts Act, which requires a consent of the Charity Commissioner before persons having interest in a public trust can institute a suit of the nature specified in Section 50 of that Act. It has been held in a number of cases by our Court that Sections 50 and 51 do not impose any embargo or restriction on the powers of the trustees to file suits for vindicating their rights as owners against trespassers or other third parties or for recovery of possession of the trust property. In the present case, the Plaintiffs seek to enforce their proprietory rights (as trustees) in respect of the suit property and prima facia such a suit cannot be held to be bad for want of the Charity Commissioner's consent.
9. The ground of non-joinder of members of Defendant No.1 as necessary parties also has no prima facie merit. The members are collectively represented by their common body, namely, Defendant No.1 society, and the suit cannot be held to be bad for non-joinder of the members individually.
10. That brings us to the main ground urged by the learned Counsel for the contesting Defendants, namely, the nullity of the restrictive covenants on account of the conditions restraining alienation or the restrictions being repugnant to the interest created. We shall first note the relevant provisions of the Transfer of Property Act, namely, Sections 10, 11 and 12 of the Act, which are set out below :
"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 woman (not being a Hindu, Muhammadan or Buddhist), so that she shall not have power ::: Downloaded on - 29/03/2014 18:58:19 ::: sat 6/17 nm 126-2013.doc during her marriage to transfer or charge the same or her beneficial interest therein.
11. Restriction repugnant to interest created .- 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 immovable 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.
12. Condition making interest determinable or insolvency or attempted alienation .- 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 endeavoring 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."
11. Let us now note the restrictive covenants sought to be enforced by the Plaintiffs. These form part of the Agreement for Sale executed by the Gilder Trust in favour of the Kuka Trust and are contained in the allotment agreements (read with the third schedule thereof) executed by the Kuka Trust individually in favour of the allottee members of Defendant No.1 or their predecessors in ::: Downloaded on - 29/03/2014 18:58:19 ::: sat 7/17 nm 126-2013.doc pursuance of the said Agreement for Sale. The relevant of these clauses as set out below :
17. The Bye-laws of the proposed Society, and/or articles of association of Limited Company or other incorporated body shall always contain in addition to the standard clauses, the clauses set out in the Third Schedule hereto which will expressly apply to all the flats in the proposed Building.
18. The Allottee/s has been informed and is aware that the object of the Gilder Trustees in agreeing to sell the land to the Kuka Trustees at a concessional rate much lower than the market rate as also the object of the Kuka Trustees in creating building on the said land as hereinabove recited is to provide housing accommodation for needy Zoroastrian Parsis who do not have sufficient financial resources to buy flats at market rates, and that the price of the flat hereby agreed to be allotted to the Allottee/s is based only on the proportionate cost of the construction of the flat and the price or market value of the land has not been added to the price of the said flat and for these reasons and the absence of any profit motive on the part of the Kuka Trustees and the Gilder Trustees that the price at which the flat is agreed to be allotted to the Allottee/s is such lower than the market price of flats of a similar area in the same locality. In consideration of the Kuka Trustees/Gilder Trustees agreeing to allot the flat to the Allottee/s (at a reduced price as hereinabove recited) the allottee/s agrees:-
(i) that the said flat will be used and occupied exclusively by the Allottee/s only for personal residence of himself and members of his family and for no other purpose.
In the event the death of the Allottee/s only members of his family residing with him two years prior to his death will be entitled to the said flat.
(ii) The flat allotted to the Allottee/s will be used and occupied exclusively by the Allottees only being Parsis and professing the Zoroastrian Religion and in the event of :-
(a) the Allottee/s or
(b) any member of his family occupying the said flat
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along with the Allottee/s converting himself/
herself from the Zoroastrian Religion to any
other religion; or
(c) the Allottee/s or
(d) any member of his family occupying the said flat
along with the Allotee/s marrying a person not
professing the Zoroastrian faith and continuing to reside in the said flat.
the Allottee/s will forfeit his or her right to occupy the said flat under this Agreement and his membership of the proposed Co-operative ig Housing Society, Limited Company or other body and shall thereupon cases to be such a member and be liable to be evicted forthwith from the said flat. Any person claiming through the Allottee/s shall also be liable to be evicted from the said flat. The Allottee/s hereby agrees and undertakes that on the happening of any one of the events set out above, he/she/they will hand over vacant possession of the said flat to the Kuka Trustees/Gilder Trustees as the case may be and the Allottee/s will be compensated in manner herein provided.
(iii) In the event of the Allottee / s desiring to transfer the flat he shall first offer in writing the same to the Kuka Trustee/s Gilder Trustees who nominated the said Allottees for allotment of the flat. The consideration of such transfer shall be the actual price at which the flat was allotted to the Allottee/s together with simple interest thereon at 10 % (Ten) per annum. If the Kuka Trustees/Gilder Trustees do not exercise their pre- emptive right and accept the Allottee/s offer within a period of three months from the date of the same the Allottee/s will be entitled to transfer his share in the Society and interest in the flat to any needy Parsi Zoroastrian only who may be approved by the Kuka ::: Downloaded on - 29/03/2014 18:58:19 ::: sat 9/17 nm 126-2013.doc Trustees/Gilder Trustees. The right hereby conferred on the Kuka Trustees/Gilder Trustees will be a right of pre- emption within the meaning of the Transfer of Property Act and be binding on the Allottee/s and all persons claiming through or under him. Any transfer purported to be effected by the Allottee/s in breach of the right of pre-emption hereby given will be null and void until such time as the Society limited Company or an incorporated body is formed and he Trustees who allotted the flat to the Applicant and thereafter the Society limited company or incorporated body will be entitled to refuse ig to register such transfer (the provisions of the Co-
operative Societies Act and other applicable laws, notwithstanding).
iv) In the event of the Allottee/s desiring to give the flat on lease and/or leave and licence or care taker basis or keep any paying guests or on any other basis he shall intimate in writing his desire to do so to the Kuka Trustees/Gilder Trustees. The Kuka Trustees/Gilder Trustees shall have the first right to give the said flat on lease and/or leave and license paying guests or care- taker basis or any basis to such person as they may nominate for such period and on such terms and conditions as they may think fit, or alternatively give their consent to the Allottee/s giving the flat on lease and/or leave and licence care-taker basis or keep any paying guests or on any other basis to a party proposed by the Allottee/s on terms and conditions approved by the Kuka Trustees/Gilder Trustees in writing.
(v) at any time keep the said flat unoccupied for a period exceeding three months without the prior permission in writing of the Kuka Trustees/Gilder Trustees. In the event of the flat remaining unoccupied in breach of the above conditions the Kuka Trustees/Gilder Trustees shall be entitled to break open any lock on the said flat remove the furniture and other belongings of the ::: Downloaded on - 29/03/2014 18:58:19 ::: sat 10/17 nm 126-2013.doc Allottee/s at the risk and cost of the Allottee/s and take possession of the flat. On the happening of such on event the Allottee/will be entitled only to payment of compensation provided in sub-clause (iii) hereof and shall ceases to be a member of the Society etc and his shares therein shall stand forfeited.
The Allottee/s hereby agrees and connects to the above provisions being incorporated in the Bye-laws and other regulation of the proposed Society, limited company or other incorporated body to be formed of the Allottee/s of the said flats and the Allottee/s will not ig contest the validity of the said provisions.
31. If the Allottee/s neglects/omit/s or fails for any reason whatsoever to pay to the Kuka Trustees the amounts due and payable by the Allottee/s under the terms and conditions of this Agreement whether demanded or not by the Kuka Trustees as per the provisions herein within the time herein specified or if the Allottee/s shall in other way fail to perform or observe any of the terms and stipulations of his/her/their part herein contained or referred to, the Kuka Trustees shall be entitled to re-enter upon and resume possession of the said Flat and this Agreement shall cease and stand terminated and the money and all other amounts already paid by the Allottee/s shall stand absolutely forfeited to the Kuka Trustees and the Allottee/s shall have no claim for refund or repayment of the said money and/or the said other amounts already paid by the Allottee/s or any part thereof and the Allottee/s hereby agrees to forfeiture of all his/her their right, title and interest in the said flat and all amounts already paid and in such event the Allottee/s shall also be liable to immediate ejectment as a trespasser but the right given by this clauses to the Kuka Trustees shall be without prejudice to any other rights, remedies and claims whatsoever at law or under this Agreement of the Trustees against the Allottee/s.
12. There is some controversy between the parties as to whether, and which of, these clauses are actually incorporated in the bye-laws of Defendant ::: Downloaded on - 29/03/2014 18:58:19 ::: sat 11/17 nm 126-2013.doc No.1 society. There is an averment in the paint that Defendant No.1 has not incorporated in its bye-laws any of the clauses of the third schedule. In its reply, however, Defendant No. 1 has submitted a copy of its bye-laws, which it claims to have come to know recently about and which "appear to have incorporated the said clauses". These bye-laws contain the restrictive clauses specified in item nos. (i), (ii) and (iii) of the Third Schedule to the allotment agreements referred to above. Defendant No. 1 claims that the present Managing Committee, which is a new committee, has addressed a letter to the Registrar of co-operative Societies seeking a clarification as to whether the "parsee only" clause had been approved by the Registrar's Office. Be that as it may, what this means is that there is some material on record which suggests that the restrictive covenants, referred to above, form part of the bye-laws. It is not good enough for Defendant No. 1 to claim ignorance of such bye-laws or aver that "as on date to the best of my knowledge, the Defendant No. 1 Society has always been functioning as per the provisions contained in the Model Bye-Laws". After all, it is for the Society to prove what its bye-laws are.
13. The learned Counsel for the Defendants, however, submits that assuming without admitting that the restrictive covenants are part of the Bye- laws, the same are still bad and cannot be given effect to as per the provisions of Sections 10, 11 and 12 of the Act referred to above. The restrictive covenants, noted above, contain a wide variety of restrictions. It may, however, be sufficient to consider the restrictive covenant of pre-emption contained in the agreement (which is also part of the bye-laws, as stated above), since a valid pre-emption clause by itself will sustain the interim relief prayed for in the Notice of Motion.
The pre-emption clause requires as follows:
(i) In the event the allottee/member of Defendant No. 1 desiring to transfer his flat, he shall first offer it to the trustees of Kuka or Gilder Trust, as the case may be who, in the first place, nominated such allotte / member for allotment;
(ii) The consideration for such transfer shall be the actual price at which the flat was allotted to the allottee/member plus simple ::: Downloaded on - 29/03/2014 18:58:19 ::: sat 12/17 nm 126-2013.doc interest thereon at 10 % p.a.;
(iii) If the trustees do not exercise their pre-emptive right and accept the allottee/member's offer within three months from the date of the offer, the allottee / member shall be entitled to transfer his interest to any needy Parsi Zoroastrian who may be approved by the Kuka/Gilder trustees, as the case may be.
Now the question is whether this right of pre-emption comes within the prohibited conditions/limitations/restrictions under Sections 10, 11 or 12. The principle behind Section 10 is that the right of transfer is incidental to, and inseparable from, the beneficial ownership of property. It cannot be divorced from such beneficial ownership. An absolute restraint on the right of transfer is repugnant to the nature of the estate of a beneficial owner and opposed to the very essence thereof.
14. The Supreme Court in Zoroastrian Society's Case (supra), considered whether the restriction to transfer property in a co-operative society only to a person possessing a certain qualification or to the society or with the prior consent of the society, to a person qualified to be a member of the society ( a member of the Parsi zoroastrian faith in that case) amounts to a restraint offending Section 10 of the Act. The Court held that it did not amount to such a restraint; and that it was at best a partial restraint on alienation and not an absolute restraint. This is what the Court had to say:
41. Section 10 of the Transfer of Property Act relieves a transferee of immovable property from an absolute restraint placed on his right to deal with the property in his capacity as an owner thereof. As per Section 10, a condition restraining alienation would be void. The section applies to a case where property is transferred subject to a condition or limitation absolutely restraining the transferee from parting with his interest in the property. For making such a condition invalid, the restraint must be an absolute restraint. It must be a restraint imposed while the property is ::: Downloaded on - 29/03/2014 18:58:19 ::: sat 13/17 nm 126-2013.doc being transferred to the transferee. Here Respondent 2 became a member of sthe society on the death of his father. He subscribed to the bye-laws. He accepted Section 30 of eh Act and the other restrictions place on a member. Respondent 2 was qualified to be a member in terms of the bye-laws. His father was also a member of the Society. The allotment of the property was made to Respondent 2 in his capacity as a member. There was really no transfer of property to Respondent 2. He inherited it with the limitations thereon placed by Section 31 of he Act and the bye-laws. His right to become a member depended on his possessing the qualification to become one as per the bye-laws of he Society. He possessed that qualification. The bye-laws provide that he should the prior consent of the Society for transferring the property or his membership to a person qualified to be a member of the Society. These are restrictions in the interests of the Society and its members and consistent with the object with which the Society was formed. He cannot question that restriction. It is also not possible to say that such a restriction amounts to an absolute restraint on alienation within the meaning of Section 10 of the Transfer of Property Act.
42. The restriction, if any, is a self-imposed restriction. It is restriction in a compact to which the father of Respondent 2 was a party and to which Respondent 2 voluntarily became a party. It is difficult to postulate that such a qualified freedom to transfer a property accepted by a person voluntarily, would attract Section 10 of the Act. Moreover, it is not as if it is an absolute restraint on alienation. Respondent 2 has the right to transfer the property to a person who is qualified to be a member of the Society as per its bye-laws. At best, it is a partial restraint. Such partial restraints are valid if imposed in a family settlement, partition or compromise of disputed claims. This is clear from the decision of the Privy Council in Mohd. Raza V Abbas bandi Bibi 2 and also from the decision of the Supreme Court in Gummanna Shetty v. Nagaveniamma3. So, when a person accepts membership in a cooperative society by submitting himself to its bye-laws and places on himself a qualified restriction in his right to transfer the property by stipulating that the same would be 2 15 (1932) 59 IA 236 : AIR 1932 PC page 158 3 (1967) 3 SCR 932 : AIR 1967 SC page 1595 ::: Downloaded on - 29/03/2014 18:58:19 ::: sat 14/17 nm 126-2013.doc transferred back to the society or with the prior consent of the society to a person qualified to be a member of the society, it cannot be held to be an absolute restraint on alienation offending Section 10 of the Transfer of Property Act. He has placed that restriction on himself in the interests of the collective body, the society. He has voluntarily submerged his rights in that of the society.
15. That apart, a covenant of pre-emption per se does not offend the rule against restraint on alienation or the rule against perpetuity contained in the Act. A covenant for pre-emption is an obligation arising out of contract, and annexed to the ownership of property, under Section 40 of the Transfer of Property Act and can be enforced against a transferee with notice thereof. Such a covenant does not offend against the rule against restraint on alienation or other restrictions under Sections 10 to 12 or 14 of the Transfer of Property Act.
The Supreme Court in the case of Ram Baran Prasad Vs. Ram Mohit Hazra 4 recognized this position and upheld a covenant for pre-emption on that footing.
16. The learned Counsel for the Defendants, however, submitted that a covenant of pre-emption which fixes the price at which alone the purchase must be made under the covenant, is nonetheless a restrictive covenant offending Section 10. He relies on the judgment of the Allahabad High court in the case of Gayasi Ram Vs. Shahabuddin 5 in this behalf. In the Allahabad Case, the Court noted the earlier rulings of that Court on the point. The first of such rulings was in the case of Dal Singh Vs. Khub Chand6, where there was a sale with a condition that the purchaser or his heirs should sell to the vendor or his heirs for the same price and to no one else. The Court noted that this would amount to an absolute restraint. The other case was of Asghari Begam Vs. Maula Bakhsh 7, where the condition was against the transfer of an allowance by way of maintenance which was a charge on immovable property and the condition forbade making the transfer during minority or after minority. It was held that, this was an absolute restraint on alienation and was void as contrary to the principle of Section 10 of 4 AIR 1967 Supreme Court page 744 5 AIR 1935 Allahabad page 493 6 AIR 1921 Allahabad page 97 7 1929 All 381=116 I C page 90 ::: Downloaded on - 29/03/2014 18:58:19 ::: sat 15/17 nm 126-2013.doc the Transfer of Property Act. The third case noted was the case of Gomati Singh V. Anari Kua8. That was a case of settlement between a husband and his two wives by way of execution of a sale deed as tamliknama in which it was provided that the property should be held by the husband of the two wives and that neither he nor his wives could transfer the property separately and the transfer could be made only when all combined. It was held that this was an absolute restraint on alienation so far as the 1/3 share of the husband was concerned and that this condition was not valid as it violated section 10 of the Act, as far as the 1/3 share was concerned. Following these decisions, a clause in the sale deed in Gayasi Ram Vs. Shahabuddin case (supra) that the vendee could not transfer property by mortgage, gift or ig sale to any one excepting the vendor or his heirs at a fixed price, was held to be contrary to Section 10 of the Transfer of Property Act.
17. In the present case, the covenant of pre-emption requires the property to be transferred to the covenantee or his nominee at actual price at which the flat was allotted to the covenantor plus simple interest calculated at the rate of 10 % p.a. This covenant must be understood in the context of the original allotment to the covenantor itself being at a concessional rate (at cost price), the project having been undertaken by Kuka trust for poor Parsis. It was in furtherance of the charitable intent with which the project was undertaken that the covenant of pre-emption provided for this special price for purchase of the property in enforcement of the right of pre-emption. It is clear from a mere reading of the allotment agreement that the allotment was on a special footing and at a concessional price representing the cost of the construction and not taking into account the price of the land as well as profit of the builder/developer. Prima facie the price at which the right of pre-emption would be enforced was linked to the special concessional price at which the flat was allotted in the first place plus a reasonable surplus represented by a fair rate of interest on the allotment price paid by the allottee. Such fixed price for purchase under the pre- emption clause would be a reasonable price entailing only a partial restraint on alienation and not an absolute restraint within the meaning of Section 10 of the 8 1929 All 492=118 I C page 152 ::: Downloaded on - 29/03/2014 18:58:19 ::: sat 16/17 nm 126-2013.doc Act.
18. Besides, as held by the Supreme Court in the case of Zoroastrian Co-operative Society (supra), the pre-emption clause being part of the bye-laws (as explained above, prima facie there is material to show that the clause is part of the bye-laws of Defendant No. 1), it forms part of obligations undertaken by the allottees while becoming members of the society. These obligations are in the interest of the society and its members and consistent with the objects with which the housing project was undertaken and the society was formed. It is difficult to postulate that such a qualified freedom to transfer a property undertaken by a person voluntarily would attract Section 10 of the Act.
19. The other judgments relied upon by the learned Counsel for the Defendants also do not carry their case any further. In the case of Manohar Shivram Sami Vs. Mahadeo Guruling Swami 9, this Court dealt with a restrictive covenant by which the vendee bound himself to transfer the property only to the family of the vendor. The case is clearly distinguishable on facts. So also, the decisions of Punjab and Haryana High Court in Puranchand Vs. Jagat 10 Ram and Others and of Kerala High Court in the case of Bhavani Amma Kanakadevi & Ors. Vs. C.S.I. Dekshina Kerala Maha Idavaka 11, where the provision in the sale deed for reconveyance of the land to the vendor if any construction in the land was not accomplished within a stipulated period, was held to be void under section 11 of the Transfer of Property Act, are distinguishable. The provision of reconveyance in these cases was repugnant to the nature of estate created by the sale deed. As explained above the covenant of pre-emption in the present case is only a partial restraint on alienation, which is permissible under the Act.
20. The decisions of the Supreme Court in the case of Veena Kumari Tandon Vs. Neelam Bhalla & Ors.12 and our Court in the case of Kushal 9 AIR 1988 Bombay page 116 10 Punjab Law Reporter VOL XC - (1986-2) page 485 11 AIR 2008 Kerala page 38 12 2008 (1) ALL MR page 404 ::: Downloaded on - 29/03/2014 18:58:19 ::: sat 17/17 nm 126-2013.doc Bapurao Pawar Vs. State of Maharashtra 13 which held that the legislative act prevails over a subordinate legislation and that bye-laws of a society cannot be permitted to operate in derogation to the legislative act, have no application to the facts of the present case. As held above, the pre-emption clause does not offend Section 10 to 12 or 14 of the Act and there is no question of such clause operating in derogation to the legislative act.
21. For all these reasons, the Plaintiffs have made out a prima facie case for seeking the declaration and enforcement of the pre-emption clause. The balance of convenience is also in favour of the Plaintiffs. The Plaintiffs will suffer irreparable harm, if the interim relief is not granted.
22. Pending determination of the preliminary issues framed as above, interim relief is, accordingly, granted in terms of prayer clauses (a) and (b).
23. The parties to file their respective affidavits of documents and complete the procedure of discovery and inspection and thereafter file their respective affidavits in lieu of evidence on the preliminary issues. Let the suit be kept for directions after 12 weeks, i.e. on 19 th June, 2014.
( S.C. GUPTE, J. ) 13 2008 (6) Bom. C.R. page 28 ::: Downloaded on - 29/03/2014 18:58:19 :::