Case Summary
| Citation | Zoroastrian Coop. Housing Society Ltd.v.District Registrar, Coop. Societies (Urban)(2005) 5 SCC 632 |
| Keywords | sec 10 tpa , absolute or partial restraint, conditions, parsi and non parsi, housing society, cooperative society |
| Facts | A society was registered under the Bombay Co-operative Societies Act, with the object of constructing houses for residential purposes, and according to the byelaws, the membership was restricted only to Parsis. The byelaws also contained a condition that no member could alienate the house to non-Parsis. The High Court of Bombay stated that a restriction based on religion, race or caste contained in a byelaw on the member’s right in a cooperative housing society to transfer his membership coupled with his right to alienate his interest in the immovable property would be bad in the eyes of law. Restriction on the member’s right to transfer membership and/or his interest in the property, to a non-Parsi was held violative of s. 10, and is therefore void. The matter went to the Supreme Court in appeal. |
| Issues | Whether the Restriction on the member’s right to transfer membership and/or his interest in the property, to a non-Parsi violative of s. 10 of the Transfer of Property act? |
| Contentions | Appellant contended that There was nothing in the Act or the Rules which precluded a society from restricting its membership to persons of a particular persuasion, belief or tenet and the High Court was in error in holding membership could not be restricted to these members. As bye-law №7 was perfectly valid There was nothing illegal in certain persons coming together to form a society or to restrict membership in it or to exclude the general public at its discretion with a view to carry on its objects smoothly. There was no absolute restraint on alienation to attract Section 10 of the Transfer of Property Act and there was only a partial restraint, if any, that was valid in law. Respondent contention no bye-law could be recognized which was opposed to public policy or which was in contravention of public policy in the context of the Constitution of India and the rights of an individual under the laws of the country. Counsel also contended that the High Court was right in holding that the concerned bye-law operated as a restraint on alienation and such a restraint was clearly invalid in terms of Section 10 of the Transfer of Property Act. |
| Law Points | The Apex Court allowed the appeal and held that when a person accepts the membership of a co-operative society by submitting himself to its byelaws and places on himself a qualified restriction on his right to transfer property by stipulating that same would be transferred with prior consent of society to a person qualified to be a member of the society, it could not be held to be an absolute restraint on alienation offending s. 10 of the TP Act. Hence, it set aside the finding of the High Court that the restriction placed on rights of members of a society not to sell the property allotted, to non-Parsis was an absolute restraint on alienation as unsustainable. |
| Judgement | The Supreme Court held that this clause in the byelaws that a person could sell it only to Parsis and not to a non-Parsi was a partial restraint and not an absolute one. |
| Ratio Decidendi & Case Authority |
Full Case Details
P.K. BALASUBRAMANYAN, J. – The Zoroastrian Cooperative Housing Society is a society
registered on 19-5-1926, under the Bombay Cooperative Societies Act, 1925. The Society applied to
the Government of Bombay for acquisition of certain lands in Ahmedabad district, then in the State of
Bombay, under the Land Acquisition Act, 1894 for the purpose of erecting houses for residential use
of its members and to further the aims and objects of the Society. On the Government of Bombay
agreeing to the proposal, the Society entered into an agreement on 17-2-1928 with the Government
under Section 41 of the Land Acquisition Act. Certain lands were acquired. From the lands thus
acquired at its cost and given to it, the Society allotted plots of land to the various members of the
Society in furtherance of the objects of the Society. On the reorganisation of States, the Society
became functional in the State of Gujarat and came within the purview of the Gujarat Cooperative
Societies Act, 1961. Section 169 of that Act, repealed the Bombay Cooperative Societies Act, 1925
and in sub-section (2) provided that all societies registered or deemed to be registered under the
Bombay Act, the registration of which was in force immediate ly before the commencement of the
Gujarat Act, were to be deemed to be registered under the Gujarat Act. The Gujarat Act came into
force on 1-5-1962. Thus, the Society came to be regulated by the Gujarat Cooperative Societies Act,
1961 (“the Act”).
2. On the scheme of the Bombay Cooperative Societies Act (“the Bombay Act”), the Society had
applied for registration in terms of Section 9 of that Act. The application was accompanied by the
proposed bye-laws of the Society. The Registrar of Cooperative Societies, on being satisfied that the
Society had complied with the provisions of the Act and the Rules and that the proposed bye-laws
were not contrary to the Act and the Rules, granted registration to the Society and its bye- laws and
issued a certificate of registration in terms of Section 11 of that Act. As per the bye-laws, the objects
of the Society were to carry on the trade of building, and of buying, selling, hiring, letting and
developing land in accordance with cooperative principles and to establish and carry on social,
recreative and educational work in connection with its tenets and the Society was to have full power
to do all things it deemed necessary or expedient, for the accomplishment of all objects specified in its
bye-laws, including the power to purchase, hold, sell, exchange, mortgage, rent, lease, sub-lease,
surrender, accept surrenders of and deal with lands of any tenure and to sell by instalments and
subject to any terms or conditions and to make and guarantee advances to members for building or
purchasing property and to erect, pull down, repair, alter or otherwise deal with any building thereon.
All persons who had signed the application for registration were original members by virtue of Byelaw 7. The said bye-law further provided that other members shall be elected by the Committee of the
Society, provided that all members shall belong to the Parsi community subject to satisfying other
conditions in that bye-law. Bye-law 21 provided for sale of a share held by a member but with
previous sanction of the Committee which had full discretion in granting or withholding such
sanction. It was also provided that until the transfer of a share was registered, no right was acquired
against the Society by the transferee, and no claim against the transferor by the Society was also to be
affected. In short, the qualification for becoming a member in the Society was that the person should
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be a Parsi and that the transfer of a share to him had to have the previous sanction of the Committee
of the Society.
3. Some of the relevant provisions of the Bombay Act may now be noticed. Under Section 3, the
Registrar had the right to classify all societies under one or other of the heads referred to in that
section. Under Section 5 of that Act, a society which had as its object, the promotion of economic
interests of its members in accordance with economic principles, may be registered under the Act with
or without limited liability. Section 6 placed restrictions on the interests of the members of the society
with limited liability. Section 6-A enacted that no person shall be admitted as a member of a society
unless he was a person competent to contract under Section 11 of Contract Act, 1872. Section 7
stipulated the conditions for registration and provided that no society could be registered under the
Act which did not consist of at least 10 persons who were qualified to be members of the society
under Section 6-A and where the object of the society was the creation of funds to be lent to its
members, unless all persons forming the society resided in the same town or village or in a group of
villages or they belonged to the same tribe, class or occupation, unless the Registrar ordered otherwise
and no person could be admitted to membership of any such society after its registration unless the
persons fulfilled the two requirements as mentioned above. If the Registrar was satisfied that a society
has complied with the provisions of the Act and the Rules and that its proposed bye-laws are not
contrary to the Act or to the Rules, under Section 10 he was to register the society and its bye-laws.
According to the Society, it had submitted its duly filled in application under Section 9 of the Act
accompanied by its bye-laws and the said bye-laws have been approved and registered by the
Registrar on being satisfied that the proposed bye-laws were not contrary to the Act or to the Rules.
4. After the Society was formed and registered as indicated earlier, the Society got lands acquired
by the State by invoking the Land Acquisition Act, 1894. The Society entered into an agreement in
that behalf with the Government under Section 41 of the Act on 17-2-1928. The said agreement
recited that the Government of Bombay was satisfied that the land should be acquired under the Land
Acquisition Act “for the purpose of erecting houses thereon”. It was also stated that the Government
was satisfied that the acquisition of the land was needed for the furtherance of the objects of the
Society and was likely to prove useful to the public and it consented to put in operation the provisions
of the Land Acquisition Act. An extent of 6 acres 12 guntas was thus acquired and handed over to the
Society, on the Society bearing the cost of that acquisition. The Society in its turn allotted portions of
the land to its members for the purpose of putting up residential houses in the plots concerned.
5. One of the members of the Society sold the plot in which he had constructed a residential
building, to the father of Respondent 2 with the previous consent of the Committee of the Society.
The father of Respondent 2 was also admitted to membership of the Society, he being qualified for
such admission in terms of the bye-laws of the Society. After the rights devolved on Respondent 2,
consequent on the death of his father, he became a member of the Society of his volition. Thereafter,
he applied to the Society for permission to demolish the bungalow that had been put up and to
construct a commercial building in its place. The Society refused him permission stating that the byelaws of the Society did not permit commercial use of the land. Thereafter, Respondent 2 applied to the
Society for permission to demolish the bungalow and to construct residential flats to be sold to Parsis.
The Society acceded to the request of Respondent 2, making it clear that the flats constructed could
only be sold to Parsis. It appears that, earlier, the Society had written to the Registrar that it was
apprehending that certain members of the Society were proposing to sell their bungalows to persons
outside the Parsi community only with commercial motive and in violation of clause 7 of the bye-
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laws. The Registrar replied that any transaction of sale should be in accordance with the bye-laws of
the Society and any sale in violation of the bye-laws would not be permitted, thus, stressing the
sanctity of the bye-laws. On 20-7-1982, the Government of Gujarat had also issued a notification
declaring that persons or firms dealing with the sale and purchase of lands and buildings, contractors,
architects and engineers were disqualified from being members of cooperative housing societies.
Though, permission was given to Respondent 2 as early as on 17-5-1988 for construction of
residential flats in the land, to be sold only to members of the Parsi community, he did not act on the
permission for a period of seven years. Apprehending that Respondent 2 intended to violate the byelaws of the Society, the Society passed a resolution reminding its members that in accordance with
Bye- law 7, no person other than a Parsi could become a new member of the Society and informing
the existing members of the Society that they could not sell their plots or bungalows to any person not
belonging to the Parsi community. Respondent 2 appears to have started negotiations with
Respondent 3, a builders’ association, in violation of the restriction on sale of shares or property to a
non-Parsi. The Society, in that context, filed a case before the Board of Nominees under the Act for an
injunction res training Respondent 2 from putting up any construction in Plot No. 7 and from
transferring the same to outsiders in violation of Bye-law 7 without valid prior permission from the
Society. Though, initially an interim order of injunction was granted, the Board informed the Society
that the Society could not restrict its membership only to the Parsi community and that membership
should remain open for every person. A clarification was also sought for from the Society as to why it
had refused permission to Respondent 2 to transfer Plot No. 7 belonging to him. Subsequently, the
Board of Nominees vacated the interim order of injunction granted, inter alia, on the ground that the
construction of a block of residential flats would not create disturbance and nuisance to the original
members of the Society. Thereafter, Respondent 2 applied to the Society for permission to transfer his
share to Respondent 3. The said application was rejected by the Society, since according to it, the
application was contrary to the Act, Rules and the bye-laws of the Society. While the Society
challenged the order of the Board of Nominees before the Gujarat State Cooperative Societies
Tribunal, Respondents 2 and 3 challenged the rejection of the request of Respondent 2 to sell his plot
to Respondent 3, by way of an appeal before the Registrar of Cooperative Societies under Section 24
of the Act. The Tribunal, in the revision filed by the Society, took the view in an interim order that the
bye-law restricting membership to Parsis was a restriction on the right to property and the right to
alienate property and, therefore, was invalid in terms of Article 300-A of the Constitution. This order
was challenged by the Society and its Chairman before the High Court of Gujarat in Special Civil
Application No. 6226 of 1996. By judgment dated 16-1-1997, a learned Single Judge of the Gujarat
High Court dismissed the writ petition essentially holding that the restriction in a bye-law to the effect
that membership would be limited only to persons belonging to the Parsi community, would be an
unfair restriction which can be validly dealt with by the appropriate authorities under Section 24 of
the Act and Rule 12(2) of the Rules. It was also held that such a bye-law would amount to a restraint
on alienation and hence would be hit by Section 10 of the Transfer of Property Act. The Society and
its Chairman challenged the said decision before a Division Bench, in Letters Patent Appeal No. 129
of 1997. By judgment dated 23-7-1999, the said appeal was dismissed, more or less, concurring with
the reasoning and conclusion of the learned Single Judge. The decision of the Division Bench of the
Gujarat High Court thus rendered is challenged in this appeal by special leave.
6. Mr Soli J. Sorabjee, learned Senior Counsel appearing for the appellants contended that under
Article 19(1)( c ) of the Constitution, Parsis had a fundamental right of forming an association and
that fundamental right cannot be infringed by thrusting upon the association, members whom it does
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not want to admit or against the terms of its bye-laws. He submitted that the content of the right of
association guaranteed by Article 19(1)( c ) of the Constitution has been misunderstood by the High
Court and the authorities under the Act. He also contended that there was nothing in the Act or the
Rules which precluded a society from restricting its membership to persons of a particular persuasion,
belief or tenet and the High Court was in error in holding that membership could not be restricted to
members of the Parsi community for whose benefit the very Society was got registered. Though,
grounds based on Article 26 of the Constitution raised, were not pursued, it was pointed out that under
Article 29, the Parsis had the right to conserve their culture. It was submitted that Bye-law 7 was
perfectly valid and so long as it did not violate anything contained in the Act or the Rules, it could not
be held to be invalid or unenforceable and the Society cannot be compelled to act against the terms of
its bye-laws. He also submitted that there was no absolute restraint on alienation to attract Section 10
of the Transfer of Property Act and the restraint, if any, was only a partial restraint, valid in law.
There was nothing illegal in certain persons coming together to form a society in agreeing to restrict
membership in it or to exclude the general public at its discretion with a view to carry on its objects
smoothly. Mr Bobde, learned Senior Counsel appearing for the contesting respondents, Respondents 2
and 3, contended that Section 4 of the Act clearly indicated that no bye-law could be recognised
which was opposed to public policy or which was in contravention of public policy in the context of
the relevant provisions in the Constitution and the rights of an individual under the laws of the
Country. A bye-law restricting membership in a cooperative society, to a particular denomination,
community, caste or creed was opposed to public policy and consequently, the authorities under the
Act and the High Court were fully justified in rejecting the claim of the Society. Learned Senior
Counsel also contended that the High Court was right in holding that the bye-law concerned operated
as a restraint on alienation and such a restraint was clearly invalid in terms of Section 10 of the
Transfer of Property Act. He submitted that a cooperative society stood on a different footing from a
purely voluntary association or a society registered under the Societies Registration Act and in the
context of Sections 4 and 24 of the Act, the validity of the bye-laws of a society had to be tested,
notwithstanding the fact that the bye-laws had been earlier approved by the Registrar of Cooperative
Societies. Learned Senior Counsel also contended that under Section 14 of the Act, the Registrar had
the power to call upon the Society to amend its bye-laws and in that context, the Registrar could direct
the Society to delete the restriction placed on admission to membership by Bye-law 7 of the bye-laws
of the Society. In reply, Mr Sorabjee pointed out that the rights under Part III of the Constitution
pertained to State action and an individual could always join a voluntary association or a cooperative
society which placed certain restrictions on the right he might have otherwise enjoyed. There was also
no substance in the contention that public policy was being violated.
7. Before proceeding further, some of the relevant provisions of the Gujarat Act may be noticed in
a little detail. The Society though originally registered under the Bombay Cooperative Societies Act,
1925 has to be deemed to be registered under the Gujarat Act by virtue of Section 169 of the Gujarat
Cooperative Societies Act, 1961. Section 2(2) of the Act defines bye-laws as meaning, bye-laws
registered under the Act. Section 2(13) defines a member as meaning a person joining in an
application for the registration of a cooperative society which is subsequently registered, or a person,
duly admitted to membership of the society after its registration. Section 4 of the Act, based on which
considerable arguments were raised before us, reads as follows:
“4. Societies which may be registered. – A society, which has as its object the promotion
of the economic interests or general welfare of its members or of the public, in accordance
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with cooperative principles, or a society established with the object of facilitating the
operations of any such society, may be registered under this Act:
Provided that it shall not be registered if, in the opinion of the Registrar, it is economically
unsound, or its registration may have an adverse effect upon any other society, or it is
opposed to, or its working is likely to be in contravention of public policy.”
11. Section 23 deals with removal of a member in certain circumstances. Section 24 speaks of
open membership. Sub-section (1) thereof, which is of immediate relevance, reads as follows:
“24. Open membership .- (1) No society shall, without sufficient cause, refuse admission
to membership to any person duly qualified therefor under the provisions of this Act, the
rules and bye-laws of such society.”
Be it noted that admission to membership could not be refused only to a person who was duly
qualified therefor under the Act, the Rules and the bye-laws of such society. In other words, the byelaws are not given the go-by in spite of the introduction of the concept of open membership as
indicated by the heading of the section. Section 29 of the Act restricts the right of a member other
than the State Government or a society to hold more than one-fifth of the total share capital of the
society. Section 30 places restriction on transfer of share or interest. It reads:
“30. Restrictions on transfer of share or interest .-(1) Subject to the provisions of
Section 29 and sub-section (2) a transfer of, or charge on, the share or interest of a member
in the capital of a society shall be subject to such conditions as may be prescribed.
(2) A member shall not transfer any share held by him, or his interest in the capital or
property of any society, or any part thereof, unless,-
(a) he has held such share or interest for not less than one year;
(b) the transfer or charge is made to the society, or to a member of the society, or to a
person whose application for membership has been accepted by the society; and
(c) the committee has approved such transfer.”
It can be seen that a restriction is placed on the right of a member to transfer his share by subsection (2) of Section 30 and the transfer could be only in favour of the society or to a member of the
society or to a person whose application for membership has been accepted by the society and the
committee has approved such transfer. Section 31 provides for transfer of interest on death of a
member. Even an heir or a legal representative, has to seek and obtain a membership in the society,
before the rights could be transferred to him. The section also leaves a right to the heir or legal
representative to require the society to pay him the value of the share or interest of the deceased
member, ascertained as prescribed. Section 32 of the Act provides that the share or interest of a
member in the capital of a cooperative society is not liable to attachment. Under Section 36 of the
Act, the society even has the power to expel a member and unless otherwise ordered in special
circumstances by the Registrar, such expelled member does not have a right of readmission to
membership. Sections 44 to 46 place restrictions on transactions with non-members and the said
transactions are to be subject to such restrictions as may be prescribed. Under Chapter V of the Act,
any society duly registered under the Act would be entitled to State aid. Under Section 73 of the Act,
the final authority of the society is to vest in the general body of the society, subject to it being
delegated in terms of the bye-laws of the society. The powers and functions of the committee in which
the management of every society vested, are dealt with in Section 74 of the Act.
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12. The Gujarat Cooperative Societies Rules, 1965 were framed in terms of the Act. Rule 12(2)
provides that no cooperative housing society shall, without sufficient cause, refuse admission to its
membership, to any person duly qualified therefore under the provisions of the Act and its bye-laws,
to whom an existing member of such society wants to sell or transfer his land or house and no such
society shall, without sufficient cause, refuse to give permission to any existing member to sell or
transfer his plot of land or house to another person who is duly qualified to become a member of that
society.
14. It could be seen from the leaflet which is a part of Annexure P-1 containing the bye-laws of
the Society filed with the rejoinder that suggestions were made regarding the formation of cooperative
housing societies. The appellant is a housing society. It was stated that the essential feature of every
housing society was at least that its houses formed one settlement in one compact area and the
regulation of the settlement rested in the hands of the managing committee of the society. The
problem involve in devising of model bye-laws which had to combine rather opposite requirements is
also seen explained. In the suggestions for the promotion of a housing society the first essential is said
to be that there should be a bond of common habits and common usage among the members which
should strengthen their neighbourly feelings, their loyal adherence to the will of the society expressed
by the committee’s orders and their unselfish and harmonious working together. In India, this bond
was most frequently found in a community or caste or groups like cultivators of a village. It is seen
that the appellant Society, more or less, adopted the model bye-laws prepared in that behalf and by
Bye-law 7, the Housing Society confined its membership to those of the Parsi community.
36. The above conclusion would lead us to the question whether there is anything in the Gujarat
Cooperative Societies Act and the Gujarat Cooperative Societies Rules restricting the rights of
citizens to form a voluntary association and get it registered under the Cooperative Societies Act
confining its membership to a particular set of people recognized by their profession, their sex, their
work or the position they hold or with reference to their beliefs, either religious or otherwise. It is not
contended that there is any provision in the Gujarat Cooperative Societies Act prohibiting the
registration of such a cooperative society. We have already referred to the history of the legislation
and the concept of confinement of membership based on residence, belief or community. The concept
of open membership, as envisaged by Section 24 of the Act is not absolute on the very wording of that
section. The availability of membership is subject to the qualification prescribed under the provisions
of the Act, the Rules and the bye-laws of such society. In other words, if the relevant bye-law of a
society places any restriction on a person getting admitted to a cooperative society, that bye-law
would be operative against him and no person, or aspiring member, can be heard to say that he will
not be bound by that law which prescribes a qualification for his membership.
37. In our view, the High Court made a wrong approach to the question of whether a bye-law like
Bye-law 7 could be ignored by a member and whether the authorities under the Act and the Court
could ignore the same on the basis that it is opposed to public policy being against the constitutional
scheme of equality or non-discrimination relating to employment, vocation and such. So long as the
approved bye-law stands and the Act does not provide for invalidity of such a bye-law or for
interdicting the formation of cooperative societies confined to persons of a particular vocation, a
particular community, a particular persuasion or a particular sex, it could not be held that the
formation of such a society under the Act would be opposed to public policy and consequently liable
to be declared void or the society directed to amend its basic bye-law relating to qualification for
membership.
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38. It is true that our Constitution has set goals for ourselves and one such goal is the doing
away with discrimination based on religion or sex. But that goal has to be achieved by legislative
intervention and not by the court coining a theory that whatever is not consistent with the scheme or a
provision of the Constitution, be it under Part III or Part IV thereof, could be declared to be opposed
to public policy by the court. Normally, as stated by this Court in Gherulal Parakh v. Mahadeodas
Maiya [AIR 1959 SC 781] the doctrine of public policy is governed by precedents, its principles have
been crystallised under the different heads and though it was permissible to expound and apply them
to different situations it could be applied only to clear and undeniable cases of harm to the public.
Although, theoretically it was permissible to evolve a new head of public policy in exceptional
circumstances, such a course would be inadvisable in the interest of stability of society.
39. The appellant Society was formed with the object of providing housing to the members of the
Parsi community, a community admittedly a minority which apparently did not claim that status when
the Constituent Assembly was debating the Constitution. But even then, it is open to that community
to try to preserve its culture and way of life and in that process, to work for the advancement of
members of that community by enabling them to acquire membership in a society and allotment of
lands or buildings in one’s capacity as a member of that society, to preserve its object of advancement
of the community. It is also open to the members of that community, who came together to form the
cooperative society, to prescribe that members of that community for whose benefit the society was
formed, alone could aspire to be members of that society. There is nothing in the Bombay Act or the
Gujarat Act which precludes the formation of such a society. In fact, the history of legislation referred
to earlier, would indicate that such coming together of groups was recognised by the Acts enacted in
that behalf concerning the cooperative movement. Even today, we have women’s cooperative
societies, we have cooperative societies of handicapped persons, we have cooperative societies of
labourers and agricultural workers. We have cooperative societies of religious groups who believe in
vegetarianism and abhor non-vegetarian food. It will be impermissible, so long as the law stands as it
is, to thrust upon the society of those believing in say, vegetarianism, persons who are regular
consumers of non-vegetarian food. Maybe, in view of the developments that have taken place in our
society and in the context of the constitutional scheme, it is time to legislate or bring about changes in
Cooperative Societies Acts regarding the formation of societies based on such a thinking or concept.
But that cannot make the formation of a society like the appellant Society or the qualification fixed for
membership therein, opposed to public policy or enable the authorities under the Act to intervene and
dictate to the society to change its fundamental character.
40. Another ground relied on by the authorities under the Act and the High Court to direct the
acceptance of Respondent 3 as a member in the Society is that the bye-law confining membership to a
person belonging to the Parsi community and the insistence on Respondent 2 selling the building or
the flats therein only to members of the Parsi community who alone are qualified to be members of
the Society, would amount to an absolute restraint on alienation within the meaning of Section 10 of
the Transfer of Property Act. Section 10 of the Transfer of Property Act cannot have any application
to transfer of membership. Transfer of membership is regulated by the bye-laws. The bye-laws in
that regard are not in challenge and cannot effectively be challenged in view of what we have held
above. Section 30 of the Act itself places restriction in that regard. There is no plea of invalidity
attached to that provision. Hence, the restriction in that regard cannot be invalidated or ignored by
reference to Section 10 of the Transfer of Property Act.
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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 being transferred to the
transferee. Here, Respondent 2 became a member of the Society on the death of his father. He
subscribed to the bye-laws. He accepted Section 30 of the Act and the other restrictions placed 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 the 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 the Society. He possessed that
qualification. The bye-laws provide that he should have 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 a 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 on alienation. 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 [AIR 1932 PC
158] and also from the decision of the Supreme Court in Gummanna Shetty v. Nagaveniamma [AIR
1967 SC 1595]. So, when a person accepts membership in a cooperative society by submitting himself
to its bye-laws and secures an allotment of a plot of land or a building in terms of the bye-laws and
places on himself a qualified restriction in his right to transfer the property by stipulating that the
same would be 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.
43. The fact that the rights of a member or an allottee over a building or plot is attachable and
saleable in enforcement of a decree or an obligation against him cannot make a provision like the one
found in the bye-laws, an absolute restraint on alienation to attract Section 10 of the Transfer of
Property Act. Of course, it is property in the hands of the member on the strength of the allotment. It
may also be attachable and saleable in spite of the volition of the allottee. But that does not enable the
court to hold that the condition that an allotment to the member is subject to his possessing the
qualification to be a member of the cooperative society or that a voluntary transfer by him could be
made only to the society itself or to another person qualified to be a member of the society and with
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the consent of the society could straightaway be declared to be an absolute restraint on alienation
and consequently an interference with his right to property protected by Article 300-A of the
Constitution. We are, therefore, satisfied that the finding that the restriction placed on rights of a
member of the society to deal with the property allotted to him must be deemed to be invalid as an
absolute restraint on alienation is erroneous. The said finding is reversed.
44. In view of what we have stated above, we allow this appeal, set aside the judgments of the
High Court and the orders of the authorities under the Act and uphold the right of the Society to insist
that the property has to be dealt by Respondent 2 only in terms of the bye-laws of the Society and
assigned either wholly or in parts only to persons qualified to be members of the Society in terms of
its bye-laws. The direction given by the authority to the appellant to admit Respondent 3 as a member
is set aside. Respondent 3 is restrained from entering the property or putting up any construction
therein on the basis of any transfer by Respondent 2 in disregard of the bye-laws of the Society and
without the prior consent of the Society.
45. The writ petition filed by the appellant in the High Court is allowed in the above manner
