Judgement Briefs

Property Law

Zoroastrian Co-operative Housing Society Ltd. v. District Registrar, Co-operative Societies

(2005) 5 SCC 632

Citation
(2005) 5 SCC 632
Court
Supreme Court of India
Date
2005
Bench
Supreme Court Bench

Facts

  • The Zoroastrian Co-operative Housing Society was formed for members of the Parsi community.
  • Its registered bye-laws provided that:
  • membership was confined to Parsis;
  • transfer of a member’s share required prior approval of the Society;
  • property allotted through the Society could ordinarily be transferred only to a person qualified to become a member.
  • The Society acquired land and allotted plots to members for construction of residential houses.
  • A plot was transferred, with the Society’s permission, to the father of one of the respondents, who was qualified for membership.
  • After the father’s death, the property and membership devolved upon his son.
  • The son later sought to transfer or develop the property in association with a non-Parsi builder.
  • The Society refused consent because the proposed transferee was not qualified for membership under its bye-laws.
  • Co-operative authorities directed the Society to admit the proposed transferee.
  • The validity of the restriction was questioned as an alleged absolute restraint on alienation under Section 10 TPA.

Issue

  • Whether the restriction requiring transfer only to a person qualified for membership amounted to an absolute restraint under Section 10 TPA.
  • Whether the heir could inherit the property free from the Society’s registered bye-laws.
  • Whether a member could insist upon transferring the property to a non-qualified person without the Society’s consent.

Rule

  • Section 10 applies when:
  • property is transferred subject to a condition;
  • the condition absolutely prevents the transferee from parting with their interest.
  • The restraint must be absolute before it is void.
  • A restriction which permits transfer:
  • to the Society; or
  • to another person qualified for membership with the Society’s consent, is ordinarily a partial or qualified restriction.
  • A person who voluntarily becomes a member of a co-operative society accepts the statutory framework and registered bye-laws governing the allotted property.
  • Inheritance of the property does not necessarily remove lawful incidents already attached to membership and allotment.

Application

  • The respondent’s father had voluntarily joined a society formed for a defined community.
  • The respondent himself accepted membership after inheriting the property.
  • The restriction did not prohibit every transfer.
  • The property could still be transferred:
  • to another qualified Parsi member;
  • with the previous consent of the Society; or
  • in accordance with other permissible methods under the bye-laws.
  • Therefore, the property was not made completely inalienable.
  • The restriction was connected with the collective character and object of the Society.
  • Members had pooled their rights under a common arrangement to establish a particular residential community.
  • The respondent could not accept the benefit of membership and allotment but reject the corresponding obligations when he later wished to transfer.
  • Section 10 could not be used to invalidate the regulation of membership itself.
  • The respondent inherited the property subject to the existing statutory and contractual framework; he did not acquire a greater right than his predecessor possessed.
  • The Court treated the restriction as self-imposed and partial.
  • It distinguished between:
  • an owner being prohibited from ever transferring property; and
  • an owner being required to transfer only through a limited, agreed and lawful class of transferees.
  • The latter did not destroy the power of alienation.
  • The fact that the property might be attachable or saleable through compulsory legal process did not convert the voluntary-transfer condition into an absolute restraint.

Conclusion

  • The membership and transfer restrictions were upheld.
  • They did not constitute an absolute restraint under Section 10 TPA.
  • The Society was entitled to insist that the property be transferred only in accordance with its registered bye-laws.
  • The direction requiring admission of the non-qualified transferee was set aside.
  • The proposed transferee was restrained from entering upon or developing the property on the basis of a transfer made without the Society’s consent.