DIRECTION AGAINST

ACCUMULATION AND RESTRAINT

SUBMITTED TO-

DR. ALAMDEEP KAUR

SUBMITTED BY-

BHAVYA

B.A. LL.B (HONS)

SECTION-A

ROLL NO. 17/19

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 ACKNOWLEDGEMENTS
I would like to express my special thanks of gratitude to my professor, Dr.
Alamdeep Kaur, who gave me the golden opportunity to do this project on the
topic DIRECTION AGAINST ACCUMULATION AND RESTRAINT ON
ALIENATION which helped me in doing a lot of research and it added
immensely to my knowledge. I would also like to thank my family and friends
who helped me in finalizing this project within the given time frame.

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INTRODUCTION

Alienation means transferring of property. This transfer of property can be through gifts,
sales and mortgages. Under Hindu Law, no person of the Joint Hindu family, not even the
Karta, has the full power to alienate the joint family property or his own interest in the joint
family property without the consent of all coparceners. Section 10 to 18 of the Transfer of
Property Act, 1882 (hereinafter referred to as “the Act”) state the rules for alienation of
property. This is commonly known as the ‘rule against alienability’. The Transfer of Property
Act is based on the principle that there can be a free transfer of property and if conditions
restraining transfer are imposed, then the free transfer would be restricted.1 Doctrine of
accumulation is a way to restrain the enjoyment of property that has been provided for under
Section 17 of the Act.

BACKGROUND

Section 17 of the Act provides for the accumulation of income derived from the property and
is called the direction for accumulation. Accumulation means profits or income arising out of
the property either wholly or in part. This Section has been derived from English law.
Originally there could have been a direction for accumulation in English law for the full
period of perpetuity. But in the case of Thelluson v. Woodford 2 the testator directed the
accumulation for nine lives in succession and the direction was held to be good. Thereafter
the Accumulation Act, 1800 was passed fixing the maximum period for accumulation. The
Act was repealed by the Law of Property Act, 1925, which however re-enacted the
provisions.3

A direction for the accumulation with gift is not considered to be profoundly wrong, it is said
to be a failure in case it is offending an independent rule of Hindu Law.4 In instances of
religious endowment, direction of accumulation shall not be held illegal when the direction is
not made for the advantage either for the settlor or for the family members or when the object
is reasonable without the opposition by public policy.5

1
Subodh Asthana, Conditions restraining Alienation under the Transfer of Property Act, 1882, available at
https://blog.ipleaders.in/alienation-restraint/ (last visited on 27.10.2021 at 7:12 PM).
2
(1805) 11 Ves 112.
3
Vepa P. Sarathi, Law of Transfer of Property, 86 (6th Edition, EBC, Lucknow, 2017).
4
Watkins v. Admr. GL., AIR 1920 Cal 951 (954).
5
Bhabatarini Debi v. Ashmantara Debi, AIR 1938 Cal 490 (496).

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Under the Mahomedan Law, the provision for accumulation will make sure that it is for the
advantage of the charitable purpose and shall not transgress the rule of perpetuities. The
validation of the object of wakf comes from the presentation of Fateha that includes the
involvement of expenditure.6 The direction of accumulation of income in wakf is considered
to a valid one.

PROVISIONS

The Rule of Accumulation is governed by Sections 17 and 18 of the Act.

Section 17: Direction for Accumulation— (1) Where the terms of a transfer of property
direct that the income arising from the property shall be accumulated either wholly or in part
during a period longer than—

(a) the life of the transferor, or

(b) a period of eighteen years from the date of the transfer,

such direction shall, save as hereinafter provided, be void to the extent to which the period
during which the accumulation is directed exceeds the longer of the aforesaid periods, and at
the end of such last-mentioned period the property and the income thereof shall be disposed
of as if the period during which the accumulation has been directed to be made had elapsed.

(2) This section shall not affect any direction for accumulation for the purpose of—

(i) the payment of the debts of the transferor or any other person taking any interest under
the transfer, or

(ii) the provision of portions for children or remoter issue of the transferor or of any other
person taking any interest under the transfer, or

(iii) the preservation or maintenance of the property transferred;

and such direction may be made accordingly.

Section 18: Transfer in perpetuity for benefit of public.—The restrictions in sections 14, 16
and 17 shall not apply in the case of a transfer of property for the benefit of the public in the

6
Ramanadham v. Vada Levvai, (1911) 34 Mad 12.

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advancement of religion, knowledge, commerce, health, safety or any other object beneficial
to mankind.

ANALYSIS OF THE PROVISIONS

Section 11 of the Act deals with repugnant conditions. Repugnant conditions are those that
are inconsistent with the nature of the interest transferred. Section 11 prohibits the imposition
of any condition directing the transferee to apply or enjoy in a particular manner, any interest
that is transferred absolutely in a particular manner. Such conditions or directions are void
and the transferee is entitled to receive property as if such a condition did not exist in the first
place. The transfer itself is, however, not invalidated.7

Section 17 of The Transfer of Property Act, 1882 is an exception to Section 11. Section 17
provides for the accumulation of income derived from the property and is called the direction
for accumulation. Accumulation means profits or income arising out of the property either
wholly or in part. A direction for the accumulation of income from a property amounts to
limiting beneficial enjoyment of property. This section is akin to Section 117 of Indian
Succession Act, 1925.

A direction of accumulation of income of any property means restraining the free enjoyment
of its incidental benefits such as rents, produces or profits. In other words, it would mean
limiting the beneficial enjoyment of the property. A direction of accumulation of income is a
particular mode of restraining the enjoyment of property.

As per Section 11 of the Act, any condition which is repugnant to the interest created or
which restraints the enjoyment of property which was transferred absolutely is void and
inoperative. The direction of accumulation income is a kind of condition which is contrary to
the interest created or limiting the right to enjoyment in favour of the transferee to whom the
property is transferred absolutely. Section 17 of the Act, is an exception to Section 11 and
permits a direction of accumulation of income to operate in certain cases. But Section 17 and
11 are different as Section 11 is only applicable in cases transfer of absolute interest whereas
Section 17 is applicable to all kind of transfer.

7
Sonakshi, Absolute and Partial Restraints on Transfer, available at
https://www.lawctopus.com/academike/restraints-on-transfer/ (last visited on 27.10.2021 at 8:10 PM).

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Direction of accumulation of incomes and profits of property transferred as per the terms of
the Act are a separate fund means postponing transferee’s right of beneficial enjoyment of the
property transferred.

Like the postponement of vesting of interest is discouraged under Section 14 (rule against
perpetuity) the postponement of transferee’s right of beneficial enjoyment of property is also
discouraged under Section 17 (direction against accumulation) of the Act.

Section 14 fixes the maximum permissible limit for postponing the vesting of interest and
Section 17 prescribes the maximum permissible period up to which income and profits of the
property transferred can be accumulated. Section 17 allows accumulation of income during
either of the two following periods:

1. The life of the transferor

Therefore, any direction or condition which makes accumulation of income is beyond the
prescribe period shall be held void. the result will be that at the end of the last mention period
(permissible postponement) the property together with the incidental benefits shall go to the
transferee.

Exceptions
There are a few cases where the accumulation of income is allowed for more than the period
provided under Section 17.

1. Payment of debts
If the purpose of the accumulation is payment of debt incurred by the transferor or
anyone having interest in property then section 17 shall not be applicable in that case.
2. Raising Portions
Raising portion means providing for a portion of income for maintenance. If the
purpose of the direction of accumulation of income on the property transferred is
providing maintenance to the children or remoter issue of the transferor or any other
person interested in transfer.
3. Preservation of property
In case the income of property was directed to be accumulated for the purpose of
preservation and maintenance of the property so transferred then also section 17 will
not have application.

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SECTION 18: TRANSFER IN PERPETUITY FOR THE BENEFIT OF
PUBLIC:

The rule against perpetuity and accumulation do not apply in the case of transfer of property
for the benefit of public. Making property non-transferable and putting restrictions on its
transferability is against the socio economic policy and also detrimental to the property itself.
But when property is transferred for benefit of public in advancement of religion,
knowledge, commerce, health, safety and other object beneficial for the mankind the rule
under Section 14, 16 & 17 shall have no application. For Section 18 to apply, the charitable
trust must be of public nature.

CASE LAWS

In the case of Dr. Mafaldo Mascarenhas v. Annie Dias,8 the Bombay High Court highlighted
the difference between the doctrine of accumulation mentioned under Indian Law under
Section 117(1) of the Indian Succession Act and in English Jurisprudence under Section
164(1) of the Law of Property Act 1925. It was stated that, “Both in India and in England
the direction for accumulation at the expiry of the permissive period is made void but at the
end of the permissive period, in England only the released income is to go to and be received
by the person or persons who would be entitled thereto as if such accumulation had not been
directed. It is to be noticed that what the English Statute provides for is only in connection
with the income arising at the end of the permissive period, but does not contain any
direction or provision whatever in connection with the corpus which yields that income.
Section 117 of our Indian Act provides that at the end of the permissive period, which under
that section is eighteen years from the date of the death of the testator, the property and the
income thereof shall be disposed of as if the period during which the accumulation has been
directed to be made had elapsed. It is to be noticed that the provision in India is different in
so far as the said section provides that at the end of the permissive period not only the
released income but also “the property” that is, the corpus are to be disposed of
immediately.”

The case Gnanendra Nath Das v. Surendra Nath Das 9 was a case concerned with the true
construction of the will of Sreenath Das. The first clause of the will dedicated certain

8
1957 SCC OnLine Bom 245.
9
1920 SCC OnLine PC 28.

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property to the family idols. It was contested by stating that firstly, this clause does not
constitute a complete dedication of all the property to the idols, but merely created a charge
on the property in favour of the idols. Secondly, that there is no valid trust for religious and
charitable purposes with regard to the surplus income arising from the so-
called debuttar estate. It was held that “When the Will clearly stated that the revenues and
rents of named properties are to be applied in a certain manner, with
a direction for accumulation of surplus income, and then continues with a provision that “out
of the income of such fund” It was also stated that the Shebait shall have power to celebrate
religious ceremonies and the words “such fund” include the added accumulations or are only
applicable to the original debutter fund. Therefore, “Such fund” means the whole property, so
that the accumulations which are added become part of the corpus, and are equally with it
subject to the charitable trust created by the Will.

In the case of Dolagovinda Sethi v. Kanika Museum,10 the test to determine whether the a
temple is of public or private nature to fall under Section 18 was laid down. It was stated that,
“The test to determine the public or private nature of a temple is of equal application to the
question whether any in town meant is public or private. The ratio of the foregoing
discussion can be summarised as follows;

a) The first requirement of a public trust is that it must be for the benefit of the
community or a class of the community as distinct from private individuals.

b) The origin of the trust, and the manner in which its affairs are managed, the nature
and extent of the gifts received by it and the awareness of the management and the
beneficiaries that the trust is for the benefit of the public are important factors to be
considered.

c) Whether the exercise of the right by the public in enjoying the benefits is as of right or
is by way of concessions allowed.

d) Whether the scheme envisages association of the members of the public at large in the
management of trust.”

SYNOPSIS

10
AIR 1989 Ori 60.

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Every person who wishes to make any transfer of property must be in position to enjoy to
income or profit that arise out of such property during his lifetime. Section 17 of the Act
allows the income arising from a property to be accumulated. It lays down how and to what
extent can this be done. Section 17 is clear that accumulation of income is valid but only till a
certain time period. The accumulation is allowed to be wholly or in part during the life of the
transferor and from a period of 18 years from the date of transfer. Any direction for
accumulation of income beyond certain period is void after this period has passed.

However, there are certain exceptions to this rule, like, if the transferor is in debt or his legal
heirs are using the incoming arising out of the property to pay the transferor’s debts, then this
period is not limited to 18 years. The exceptions also include maintenance of remoter issues
and maintenance of the property itself.

For example: ‘A’ transfers property to ‘B’ in 1940 which is with the direction that the income
arising out of property is to be accumulated till 1970. i.e. for 30 years. ‘A’ dies in 1965. The
period during which the transferor is alive is more than 18 years from the date of the transfer
but being the longer of the two periods, the direction is valid till 1965. In another case where
the transferor had died in 1950, then longer period would be 18 years and accordingly the
direction would remain valid till 1958.

Section 18 talks against the rule of perpetuity as well. It states that if the purpose of
transferring the property is the benefit of public or any other object beneficial to mankind for
example charitable purposes, then the property can be allowed to be in perpetuity.

CONCLUSION

In short, the direction for accumulation of the income is a particular mode of restraining the
enjoyment of the property. According to the principal laid down in Section 17 such direction
for accumulation would be void and inoperative but this section provides an exception and
permits a direction for accumulation of income to operate in certain cases. This Section
allows accumulation of income upto the life of transferor, or up to the period of 18 years,
from the date of the transfer, whichever is longer.
The basic underlying of this principle is that as land is to be enjoyed by the profit that arise
out of such a land and just as law prevent the restraint on alienation, so the law also
disfavours any attempt to prevent the income being enjoyed by the owner of the land and for

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the time being. So such accumulation of income is not allowed by law under Section 17. It
means direction of accumulation of income is valid if it is first up to the life of transferor or
second upto period of 18 years from the date of the transfer. Section 18 is an exception to rule
against perpetuity where a property is allowed to be in perpetuity if it is transferred for
charitable purposes.

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 BIBLIOGRAPHY

BOOKS AND JOURNALS

1. Asthana Subodh, Conditions restraining Alienation under the Transfer of Property

DATABASES

1. www.indiankanoon.com
2. www.scconline.com

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