Restrictions on Transfer of Property

Advocates, business lawyers, senior advocates, property lawyers in Bangalore

The ownership of immovable property is classified into freehold and leasehold. Freehold rights would provide the owner an absolute ownership of such property. This means that the owner has full freedom to deal with the property as he likes without any restrictions. Under leasehold right, the lessee does not get any right of ownership, but only a right of possession and enjoyment subject to the restrictions imposed by the lessor. The three important rights enjoyed by the owner of property are:

1) Right to use

2) Right to destroy and

3) Right to transfer

No Fundamental Right :

The important right is the right to transfer. It may be noted that this right to transfer is not an absolute right, but it is subject to the restrictions imposed by the law. In this regard the first and foremost important restriction flows from the Constitution of India. Before the 44th amendment to the Indian Constitution, Right to property was  a fundamental right u/a 31 dealing with Right to own property and u/a 19 (1) (f) dealing with Right to dispose and enjoy property. These two rights were protected by Art 13 (1) (2) in the Indian Constitution, which provided that any law including rules, regulations, notifications, ordinance etc. to the extent they violate fundamental rights are void.

This protection has come to an end by the 44th Amendment, deleting Right to property in the chapter of Fundamental rights and placing it in the ordinary rights chapter i.e. Art 300 A. Thus, the right to property, more so of immovable property, is no more a fundamental right.

Various States have enacted laws, imposing restrictions on the rights of the owner of the property. The Government of Karnataka has prescribed certain ceiling on holding of the agricultural property by persons, companies, societies etc. under the Karnataka Land Reforms Act, 1961. The limit prescribed depends upon the type of land. If the holdings are in excess of prescribed limits, the excess of the holdings will vest with the Government of Karnataka. The Karnataka Land Reforms Act generally prohibits transfer of agricultural property to non-agriculturists and persons having source of income more than Rs.2 lakhs (average for last 5 year income) from non-agricultural sources. Though agricultural property cannot be transferred to non-agriculturists, Karnataka Land Revenue Act provides for conversion of agricultural land to non agricultural land and such converted land can be transferred to non-agriculturists.

Land Acquisition :

There is another important legislation i.e., Land Acquisition Act, 1898, which provides for acquisition of property for public purpose. Once the Government issues preliminary notification for the acquisition of such land, whether agricultural or non-agricultural, such property cannot be transferred to any other person. Here again, authorities competent to acquire property are the Central or State Government and other Government agencies like BDA, KIADB, KHB etc.

Zonal Regulation :

The Comprehensive Development Plan has categorized the areas into various zones like residential, commercial, industrial, green belt area etc., and has also prescribed the various activities which can be carried on in such zones. Permission from planning authorities is required for any change in the land use. In green belt area, only agricultural and allied activities are permitted.

PTCL  Act :

The important social welfare Act with regard to Transfer of property is “The Karnataka SC & ST (PTCL) Act, 1978. The preamble of the Act provides that “An Act to provide for the prohibition of transfer of certain lands granted by the government to persons belonging to the scheduled castes and scheduled tribes in the state, which means any land granted to the landless agricultural labourers belonging to scheduled castes and scheduled tribes cannot be purchased without the permission of the Government. Any one who purchases such a property will not get clear and marketable title; such property will be eventually acquired by Government and returned to the original owner without any compensation to the purchaser.”

These restrictions on the transfer of property are social in nature i.e., to give effect to the importance of Directive Principles of State policy provided u/a 39(b) & 48A of the Indian Constitution Art 39(b) of the Indian Constitution provides that:

1)       The ownership and control of the material resources of the community are so distributed as best to sub-serve the common good. 

2)       Article 48 A in the Indian Constitution provides that the state shall endeavor to protect 

and improve the environment and to safeguard the forests and wildlife of the country.

Transfer of Property Act :

In the Transfer of Property Act, there are certain restrictions on the transfer of property. The purpose of imposing restrictions on transfer of property in the Transfer of Property Act, 1882 is to protect the interests of creditors and persons having better title to the property and to prevent property being removed from trade and commerce.

There are two kinds of restrictions on the transfer of property. They are:

(1) Restrictions to protect the society as a whole,

(2) Restrictions to protect the interest of transferor creditors and people having better title.

According to sec.5, transfer of property could be effected only between living persons and hence no property can be transferred to an unborn person. However, Sec 13 provides for transfer of property to any living person to be held for the benefit of such unborn person.

Sec. 10 in the T.P. Act provides that any condition imposed by the Transferor to the Transferee absolutely from parting with or disposing of his interest in the property is void. This provision facilitates transfer of property by transfer without any restrictions. However, the Act allows temporary restrictions. Various development authorities and societies restrict alienation for some period. This freedom of transferee can be curtailed in case of lease for the benefit of lessor, property transferred to woman, for the benefit of woman not being a Hindu, Mohammedan or Buddhist, so that she shall not have power during her marriage to transfer or charge the  same  or her beneficial interest thereon.\

Sec. 52 – Doctrine of Lispendens, which provides that if any suit relating to immovable property is pending in a competent court of law and during such pendency, if property is transferred, such transfer is subject to decision given by the court.

Sec. 53 deals with fraudulent transfer. It prohibits transfer of property if the purpose and intention behind such transfer is to defraud or delay payment to the creditors of the transferor.

The other restrictions are: Occupant of land under Karnataka Land Reforms Act, 1961 [Sec. 48], Grantee of land under Karnataka Land Reforms Act, 1961 [Sec. 77], Occupancy not transferable without sanction of prescribed authority, Karnataka Land Revenue Act 1964 [Sec. 100].

Purchase of property NRI / POI :

Foreign nationals of non-Indian origin residing outside India cannot purchase any immovable property in India. Persons of Indian origin means persons who held an Indian Passport any time earlier or whose father or grandfather was a citizen of India.

Non-resident Indians can purchase residential and commercial properties without any restriction on ceiling on the number of properties.  The only restriction on the non-resident Indians is that they cannot purchase agricultural, farm / plantation property. In this regard non-resident Indians need not have to send any document or statement to Reserve Bank of India, Government of India or to any bank—before, during or after such purchase. This freedom is available to all non-residents who are either citizens of India (i.e., holding Indian Passport) or who are persons of Indian origin. This freedom is available for buying residential or commercial property.