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RESTRICTIVE COVENANT IN INDIA: A JUDICIAL ANALYSIS

Property Law

Submitted By-
Anursg Sharma
SM0115006
2017-2018; V Semester

National Law University, Assam

1
TABLE OF CONTENT
Introduction. ..... 1
Review of Literature...........2
Research Questions ...3
Objectives (s).. ...3
Research Methodology... 3
Concept of Restrictive Covenant4
Positive and Negative Covenant.6
Restrictive covenant under sec. 11..8
Restrictive covenant under sec. 40..11
Notice of Covenant.14
Conclusion......15
Bibliography...16

2
List of cases

1. Nand Gopal v. Batuk Prasad


2. Tulk v. Moxhay
3. jones v. price
4. Indu Kakkar v. Haryana State, ID C. Ltd.
5. Dyson v. Foster
6. D Mottos v. Gibson
7. Re Ballard's Conveyance
8. Leela v. Ambujakshy
9. Prabhu v. Ramzan
10.Union of Landon and smith bank miles v. Easter
11.Chaturbhuj v. Mansukhram

List of Status

Transfer of Property Act, 1882

List of Abbreviations

Sec. Section
v. Versus
i.e. That is
e.g. Exempli gratia
AIR All India Rule
SCC Supreme Court Case
Ph Phil manual
AC Appeals case

3
Introduction

A covenant is a promise in an agreement. Restrictive covenants are binding legal obligations


written into the deed of a property by the seller. A restrictive covenant is an obligation on one
landowner to refrain from doing something on their land (the Burdened Land, also sometimes
referred to as the Servient Land) for the benefit of someone elses land (the Benefited Land,
also sometimes referred to as the Dominant Land). Restrictive covenants come in all shapes
and sizes. These covenants can be either simple or complex and can levy penalties against
buyers who fail to obey them.

The restrictions are intended to preserve the general character and amenities of other land
reserved by the covenantee. The rule as to restrictive covenants was propounded in the leading
case of Tulk v. Moxhay.1 They are Conditions or directions that the transferor may impose
upon the transferee to secure better enjoyment of his own property. They restrain the transferee
from doing a particular thing.

Under transfer of property Act, 1882, the principal of restrictive covenant is dealt under sec.
11 and 40. Sec. 11 provides that any restriction taking away the right of enjoyment of the owner
shall be void, however this sec. is accompanied with its exception, which is the relevant part
of the research. Also sec. 40 of the Act provides for the beneficial enjoyment of his own
immovable property, a third person has, independently of any interest in the immovable
property of another or of any easement thereon, a right to restrain the enjoyment in a particular
manner of the latter property. The paper aims to analyse these two provisions briefly.

1
(1848) 2 Ph 774

4
Literature Review-

D.F. Mulla, TRANSFER OF PROPERTY, 11th ed. 2013, LexisNexis.

This book helps the author in understanding provisions for Restrictive covenant under Transfer
of Property Act, 1882 through various case laws. This book basically analysis the various case
laws that define the different principles regarding transferees right to impose restriction. It has
described the each provision with their principles in the light of judicial decisions. In addition
to that it also provides very important concept regarding nature and limitation to the right
enjoyed by transferees and transferor regarding restrictive covenant.

Dr. Poonam Pradhan Saxena, PROPERTY LAW, 2nd ed. 2011, Lexis Nexis.
It is a comprehensive book on Property law, which covers the topics related to properties and
their transfers, inheritance and responsibilities of the parties involved. The book comprises of
basic concepts and many important features of the law that are associated with different
religions and in different scenarios. Every section of Transfer of Property Act is very well
discussed and briefly in easy language in this book. The author of this book has dealt Restrictive
covenant in a brief manner with various judicial precedents which was very much helpful.

R.K. Sinha, THE TRANSFER OF PROPERTY ACT, 17th ed. 2016, Central Law
Agency.
It is really interesting to go through the book which is mainly a section wise commentary yet
it comprises the merits of both; section-wise and lecture-wise commentaries, as the correlated
matters have been dealt within the particular section. The book has been divided, into eight
chapters in addition to a short but impressive introduction in the beginning. Every section of
Transfer of Property Act is very well discussed and in easy language in this book. The author
of this book has dealt Section 11 and 40 in a good ways with various case laws which was very
much helpful.

S.N. Shukla, TRANSFER OF PROPERTY ACT, 28th ed. 2011, Allahabad Law Agency.

This book contains the entire concept in very comprehensive and digestive manner. Care has
been taken that the bulk of the book may not increase unreasonably. Important case laws have
been well illustrated in this book which plays an important role in finishing the research project.

5
Research Questions

1. What is the concept of restrictive covenant?


2. How does the covenants differ on basis of nature of restriction imposed by them?
3. What are the provision related to it under Transfer of Property Act, and how it imposes
the restrictions?
4. How the judiciary has interpreted this doctrine under various cases and implemented
it?

Scope and objectives

1. To understand the concept of restrictive covenant from common law and provision
related to it under Transfer of property Act.
2. To differentiate negative covenants from positive ones
3. To discuss the relevance of the doctrine under different sections of Transfer of Property
Act.
4. To further describe the doctrine through its implication in various cases.

Research Methodology-

The research methodology used in this project is doctrinal in nature as all the data and material
has been collected primarily from internet and library.

6
Concept of Restrictive Covenant-

The basic meaning of restrictive covenant is a covenant imposing a restriction on the use of
land so that the value and enjoyment of adjoining land will be preserved. A covenant is a
promise in an agreement. The person who gives the promisewho has the burden of the
promise- is called the covenantor. The person to whom the promise is givenwho has the
benefit of the promise is the covenantee. In other words Restrictive covenants are binding legal
obligations written into the deed of a property by the seller. These covenants can be either
simple or complex and can levy penalties against buyers who fail to obey them. Upon the sale
of land it often becomes desirable to impose conditions restrictive of the enjoyment of the land
by the purchaser. 2

These restrictions are intended to preserve the general character and amenities of other land
reserved by the covenantee. Thus, for instance, the purchaser may be required to enter into a
covenant to keep his land vacant uncovered with buildings or not to use any house that may be
erected on it as a shop. Such a covenant is called a negative or restrictive covenant. It restrains
the covenantor in putting his land to certain specified uses. It does not compel him to enjoy the
land in any particular manner. A covenant, however, may also be positive or affirmative. A
covenant to dig a well on the land for the supply of water for the covenantee's dwelling house
in the neighbourhood or to lay out money in maintaining a road is a positive covenant. Positive
covenants invariably involve the expenditure of money on the land and their enforcement
necessitates compelling the covenanter to put his hand into his pocket.

The rule as to restrictive covenants was propounded in the leading case of Tulk v. Moxhay.
The facts of the case were as follows: the plaintiff was "the owner of a vacant site in Leicester
Square as well as of several houses forming the square. He sold the site by a deed, which
contained a covenant that the vendee, his heirs and assignees would keep the site in its then
form as a square garden and pleasure ground in an open state, uncovered with buildings. The
land after several intermediate purchases passed to the defendant who desired to build on it
although he had notice of the original covenant. The plaintiff sued for an injunction to restrain

2
Dr. Poonam Pradhan Saxena, PROPERTY LAW, Lexis Nexis Publications, 2nd edi (2011), Page no.
173

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him. It was held that the covenant was in substance negative and could be enforced against the
defendant. Lord Cottenham granted the injunction sought.3

The rule in Tulk v. Moxhay, as interpreted and developed by later decisions may be stated thus:
"Anyone coming to the land with notice actual or constructive of a covenant entered into by
some previous owner of the land, restricting the use to be made of the land, will be prohibited
from doing anything in breach of that covenant". The Transfer of Property Act has embodied
in section 40 the rule as to restrictive covenants. It provides that as between the immediate
parties both positive and negative covenants are enforceable when the covenant is made for the
benefit of other adjoining land of the covenantee. When land burdened with a negative
covenant is transferred, the covenant may be enforced against the transferee unless he is a
transferee for consideration and without notice. The distinction between them and easements
consists in that a restrictive covenant binds only purchasers with notice whereas an easement
is binding even on transferees without notice.

3
Dr. R.K. Sinha, TRANSFER OF PROPERTY ACT, Central Law Agency, (VII edi), page no. 152

8
Positive and restrictive covenant

Conditions or directions that the transferor may impose upon the transferee to secure better
enjoyment of his own property can be of two types: positive or affirmative conditions, i.e., they
direct the transferor to do something and negative conditions, i.e., they restrain the transferee
from doing a particular thing. These conditions are called covenants.

For example, A transfers a land to B, and puts a condition, that he would leave open a four feet
wide space adjoining As own land, and would not build upon it. On this land there is also a
one-foot open drain, and the second condition in the transfer deed directs the transferee to
maintain this drain by carrying necessary repairs from time to time. The first covenant, that
requires the transferee not to build upon four feet wide land, is a negative covenant as it is in
nature of not to do a particular thing, while the second condition or covenant is a positive
one, as it requires the transferee to do a particular thing, i.e. to maintain the drain in proper
shape and to carry necessary repairs.

Negative

In equity, a negative covenant or agreement restricting the user of land, attaches itself to the
land and runs with it.4 It is binding on the purchaser who has notice of the covenant. Such
covenant should not be applied negative and does not apply in case of positive or affirmative
covenant. A covenant by a purchaser not to use the burdened property for any other purpose
other than a single dwelling house, or a covenant restricting the nature of building to erected,
an injunction for not obstructing the right of way of a person through the backyard of another,
are illustrations of negative covenants.5 The covenantee or his assignee cannot sue unless the
covenant relates to or concerns some ascertainable property belonging to him or in which he is
interested. If the transferor parts with all his land, there is no land with which the benefit of the
covenant can run, and the same will not be enforceable. The owner must possess land or
property for whose enjoyment the covenant is necessary. If on the date when the covenant is
taken the covenantee has no land to which the benefit of the covenant could be attached, the
burden of the restrictive covenant cannot enure against a derivative owner even when he takes

4
Tulk v. Moxhay (1848) 2 Ph 774
5
Dr. Poonam Pradhan Saxena, PROPERTY LAW, Lexis Nexis Publications, 2nd edi (2011), Page no.
174

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with notice, though the property for the benefit of which restrictive covenant is entered into
need not be independent of or outside the demised premises.

A covenantor is also entitled to the benefit of a restrictive covenant when it is for mutual
benefit, notwithstanding the absence of mutual covenants.

Affirmative Covenants

Affirmative covenants are conditions that require the transferee to do a specific act or may
involve expenditure of money. They are collateral, do not attach themselves to the land
therefore not run with the land either in law or in equity. Since they the nature of a personal
contract between the transferor and the transferee, they cannot be enforced against the
purchaser from the transferee.6
In case of jones v. price7, where A house was divided, the house being retained along with the
roof over the cottage, and giving a covenant to repair the roof on behalf of the owner of the
house. The cottage owner sought to enforce the covenant against a later owner of the house.
The court held that a covenant to perform positive acts. .is not one the burden of which runs
with the land so as to bind the successors in title of the covenantor
A covenant to pay money, lay out money in building or repairs, or contribution to the cost of
roads and sewers, to pull down rooms on a passage8, or covenant to a sub-lessee to pay rent to
the original lessor, are illustrations of positive covenants.

6
D.F. Mulla, TRANSFER OF PROPERTY ACT, (11th edi), Lexis Nexis pub., Page no. 211
7
(1965) 2 QB 618
8
Nand Gopal v. Batuk Prasad (1932) ILR 54 All 17

10
Restrictive covenant under sec. 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 immoveable 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.

Explanation: If a property is transferred absolutely in favour of the transferee, then any


condition or terms of transfer, restricting the full enjoyment of the property (i.e.) repugnant to
the interest created, then the transferee is empowered under sec 11 of Transfer of Property Act
to receive and dispose the property as if there was no such condition. However if the transferee
has imposed a condition in order the enjoy the benefits of his adjoining property then such a
restriction would serve as a covenant, and will be an exception to this sec.

Under Section 11 the conditions the mode of enjoyment are valid only in the following cases-
(i) Where the condition has been imposed by the transferor himself a condition imposed by any
other person is not valid.
(ii) Where the condition restraining mode of enjoyment has been imposed for the beneficial
enjoyment of transferor's own property; transferor cannot impose and enforce such restrictive
conditions for the benefit of another's property. Since such restrictive covenants exist for the
beneficial enjoyment only of transferor's property, they can be enforced only by the transferor
or a subsequent assignee from the transferor of the property for the benefit of which the
covenant was made.9
In case of Leela v. Ambujakshy10, Plaintiff and first defendant are sisters. They are owners of
adjacent lands, which originally formed a compact plot owned by their father Krishnan. He
installed a motor and pump set in the tank-well in the land which now belongs to first defendant.
The entire land was irrigated through pipes from the tank-well. Supply of water to the tank-
well was through underground pipes from a tank in the plaintiff's property. A petition was filed

9
Dr. R.K. Sinha, TRANSFER OF PROPERTY ACT, Central Law Agency, (VII edi), Page no. 94
10
AIR 1989 Ker 308

11
because plaintiff obstructed flow of water to the tank-well. The court held that- This is not a
case in which the respondents agreed for consideration to restrict the enjoyment of the property
transferred to them absolutely. The condition even if not a pious wish is repugnant to the
absolute estate transferred and is void. It cannot be said to be a covenant running with the land
or a covenant at all.
The conditions or directions restraining the mode of enjoyment may be affirmative well as
negative. Where the condition imposed on the transferee's mode of enjoyment is affirmative,
the transferee is bound 'to do certain things even though it may amount to restraint on his mode
of enjoyment of the property. In Indu Kakkar v. Haryana State, ID C. Ltd.11, there was an
agreement between an Industrial Corporation and the Industrial Units with a condition that the
Industrial Units should be established 'within specified time', failing which their interest was
to cease. The Supreme Court held that the condition was valid and not any restraint on mode
of enjoyment. Accordingly, the agreement between the parties was valid and binding on them.
Where the condition is negative, the transferee is restrained from doing certain things i, e, he
is required "not to do certain things.12

11
AIR 1999 SC 296
12
Dr. R.K. Sinha, TRANSFER OF PROPERTY ACT, Central Law Agency, (VII edi), page no. 95

12
Restrictive covenant under sec. 40

The first part of s. 40 seeks to protect the rights of the original owner of the property in
accordance with the terms on which he had sold the portion of his property to the transferee
(present owner). For instance, A is the owner of a large plot of land adjoining a road. He
constructs a house on half of the plot, and the other half adjoining the road is left open. On this
plot he makes a four feet wide to reach the road. This path is used by him and his family to
access the road as well as their house. A later sells this vacant plot of land to B with the
condition that B would not build on this path and also not obstruct the access through this path.
This condition is incorporated in the sale deed. B would be legally bound to follow this
condition. This might have been a contract to begin with between two people. Presently, B is
the owner of the property having an absolute right of enjoyment over his property, but as this
restriction helps A to enjoy his property in a better manner, the condition would be binding on
B. It must be noted here that as A had sold the property he has no right in it of the owner. He
would be described in relation to this property as a third party. He neither has any interest in it
not manner. but has a legal right to compel to his property in a specific manner.

Thus, if for the beneficial enjoyment of his own immovable property a third person has right
independently of any interest in the immovable property of another to direct the enjoyment in
a particular manner of the latter's property, such right or obligation may be enforced against a
transferee with notice thereof or a gratuitous transferee of property affected thereby, but not
against a transferee for consideration and without notice of the right or obligation nor against
such property in his hands.13 It is based on the principle that when a man, by gift or purchase,
acquires property from another with knowledge of a previous contract lawfully and for valuable
consideration made by him with a third person to use and employ property for a particular
purpose in a specified manner, the acquirer shall not, to the material damage of the third party
in opposition to the contract and inconsistently with it, use and employ the property in a manner
not allowable to the giver or seller. Since these restrictions are not of the same importance as
easements, or covenants running with the land they can be enforced only as against transfeeree
with notice or gratuitous transferees.14

13
Union of Landon and smith bank miles v. Easter (1933) Ch 611
14
Prabhu v. Ramzan 17 ALJ 469

13
Section 40 provides that in a transfer of property if the transferor imposes a negative covenant
then such covenant is binding and enforceable also against the assignee (transferee) of the
transferee provided
(i) The covenant is for more beneficial enjoyment of transferor's own land and
(ii) The subsequent transfer is for value and the assignee has notice of the covenant or,
(iii) The subsequent transfer is without consideration.15
Restrictive covenants are more than personal agreements. They are in the nature of covenants
annexed to land as if they are part of the land and together with land they pass on to every
subsequent transferees. For instance, A sells a portion of his house to B. The drain of the house
passes through the portion sold to B. A covenants that B shall not close the drain. Since this
covenant is for more beneficial enjoyment of A's own portion of the house which he retain with
him, the covenant is binding on B. Now, if B transfers this portion to c, the covenant is binding
also on C. A or his heirs or assignees can enforce this and so on. The restrictive covenant, as
contemplated in this section, bind not only the subsequent transferee but also the other
subsequent transferees in series. Accordingly, it may be said that covenants are annexed to land
and they run with the land. Such are burden on the land and are enforceable against any person
who has interest in that land. It assumes the character of an equitable encumbrance on the land
so that its burden runs with the land ie. It will bind the land into whatsoever hand it may come
save only a transferee without notice.
In Chaturbhuj v. Mansukhram16, the owner of the four houses and a chowk sold three houses
and the chowk to the plaintiff, and covenanted to close the window of the fourth house
overlooking the chowk. The owner then sold the fourth house to defendant. The plaintiff sued
the defendant to enforce the covenant, but the suit was dismissed on the ground that even if the
covenants are restrictive covenants, the defendant has purchased the house without notice of
covenant.
There is an expression borrowed from English Law of real property, where it describes a
covenant annexed to land and which is an exception to the general rule that all the covenants
are personal. A covenant may run with land (i) at law or (ii) in equity
(i) A covenant runs with land at law when the benefit of it passes to the assignee of the
covenantee when the burden of it passes to the assignee of the covenantor, and, in

15
Dr. R.K. Sinha, TRANSFER OF PROPERTY ACT, Central Law Agency, (VII edi), Page no. 152
16
AIR 1925 Bom 183

14
either case independently of notice. In case of Dyson v. Foster17, A grants subsoil
rights below his surface land to a colliery company who covenants to pay damages
if they cause a subsidence of the surface land. A sells his surface land to B. it was
held that B can enforce the covenant because it is a covenant the benefit of which
runs with the land at law.
(ii) A covenant runs with land in equity when the burden of it can be enforced against
assignee of the covenantor under the rule in Tulk v. Moxhay. Where a seelss a park
in front of his house to B who covenants not to build upon it. B sells the park to C
who has notice of the covenant. A can enforce the covenant against C, for it is a
covenant running with the land in equity.18
If a covenant is intended to protect only a part of the land described, and is only expressed as
benefiting all the land described, but is actually capable of benefiting only part of that land, it
does not run with all the land notwithstanding that it may be capable of benefiting a part of it.
For example, in the case In Re Ballard's Conveyance19 where the covenant was with the owner
of the Childwickbury Estate, which consisted of 1700 acres, there were no words such as "all
or any of the lands" to indicate that the benefit of the covenant was to pass by a conveyance of
a part of the land. Accordingly, Clauson, J. held that while the covenant might touch or concern
a small portion of the Childwickbury Estate, it did not touch or concern the remainder of it and
that the covenant could not be severed and treated as annexed to that part of the land as was
actually touched by or concerned by the covenant.

Benefit of an Obligation

Similar to the first part of s. 40, pt-II also provides that benefits of obligations of the arising in
favour of a third party, can be enforced against a gratuitous transferee, and a transferee who
takes the property with notice of the obligation. For this, there must be a right or obligation
arising out of a contract and annexed to the ownership of the land for the purpose of its
enforcement against a gratuitous transferee or a transferee with notice of the right or obligation.
For instance, a contract to give rise to a right of pre-emption, to pay maintenance out of land

17
(1909) AC 98
18
D.F. Mulla, TRANSFER OF PROPERTY ACT, (11th edi), Lexis Nexis pub., Page no. 211
19
[1937] Ch. 473

15
to pay an annuity out of a specific property, the right of a mortgagee to recover the mortgage
amount, or a contract of sale create no interest in the land. At the same time, they create an
obligation that is annexed to the ownership and can be enforce by a suit for specific
performance against not only the transferor, but also against a purchaser for consideration with
notice.

Notice of Restrictive covenant


Restrictive covenants are only enforceable where the transfer or the subsequent transfers are
for value and transferee has notice of the restrictive covenant on the property. They are not
binding on a transferee for value without notice. Notice of the burden on property may either
be actual or constructive. For instance, a contract for sale to a purchaser who is a mortgagee in
possession, is a constructive notice. If the transfer of property is without consideration, the
restrictive covenant is binding even without any notice.20
Covenants running with the land can be enforced only as against transfeeree with notice or
gratuitous transferees.
In case of D Mottos v. Gibson21, In 1857 the plaintiff had chartered a ship (The Allerton) to
carry coal from the Tyne to Suez. In the Channel it suffered damage and put in for repairs.
Gibson, who held a mortgage over the ship granted in January 1858, paid for repairs and
effectively took possession of the ship in October 1858 with a view to securing its return to
Newcastle so that he could exercise his power of sale. The plaintiff applied for an injunction to
restrain Gibsons threatened action on the ground that it would be inconsistent with the
performance of the charter-party of which Gibson had known when he had taken his mortgage.
The court held that when a man, by gift or purchase, acquires property from another with
knowledge of a previous contract lawfully and for valuable consideration made by him with a
third person to use and employ property for a particular purpose in a specified manner, the
acquirer shall not, to the material damage of the third party in opposition to the contract and
inconsistently with it, use and employ the property in a manner not allowable to the giver or
seller.

20
Dr. R.K. Sinha, TRANSFER OF PROPERTY ACT, Central Law Agency, (VII edi), Page no. 153
21
(1859) 4 De G&J 276

16
Conclusion-
The principal of restrictive covenant secure better enjoyment of ones own property. The
principal of rights provided by Salmond also suggested that ones right is always subjected to
some restrictions. So that it may not infringe the rights of other and a harmony is maintained
in the society. The principal of restrictive covenants do the same in area of property law.
For ex. In order to protect the right of fresh air of another one can impose a restriction of not
building a factory on the adjacent land.
Restrictive covenants are useful devices for restricting the use of land for the benefit of
neighbouring land and are enforceable against future owners of the burdened land. Positive
covenants, however, are not enforceable against future owners, unless they expressly assume
the obligation to perform the covenants.
However this concept requires some development is order to make full use of the land available,
such as liability on breach of covenant establish long ago and does not make much sense in the
present time. The doctrine holds a significant role under property law. And the doctrine in India
is borrowed from the common law however the different geographical and political scenarios
some of the principals under it must be re-examine.

17
Bibliography

Books
1. D.F. Mulla, TRANSFER OF PROPERTY, 11th ed. 2013, LexisNexis.
2. Dr. Poonam Pradhan Saxena, PROPERTY LAW, Lexis Nexis Publications, 2 nd edi
(2011)
3. Dr. R.K. Sinha, TRANSFER OF PROPERTY ACT, Central Law Agency, (VII edi)
4. S.N. Shukla, TRANSFER OF PROPERTY ACT, 28th ed. 2011, Allahabad Law
Agency

Online Sources
1. www.scconline.com
2. www.manupatra.com

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