Covenants Running with the Land in Indian Property Law

Covenants Running with the Land in Indian Property Law: Doctrinal Foundations, Judicial Evolution, and Contemporary Challenges

Introduction

The expression “covenant running with the land” is an inheritance from English real property law, signifying those contractual obligations whose benefit or burden is annexed to land itself rather than remaining merely personal to the original parties. Indian courts have long grappled with the transplantation of this doctrine, calibrating it to fit within the statutory architecture of the Transfer of Property Act, 1882 (TPA) and related legislation. This article critically examines the contours of the doctrine in India, synthesising statutory provisions, seminal Supreme Court and High Court authorities, and recent developments exemplified by cases such as Nahalchand Laloochand Pvt. Ltd. v. Panchali CHS Ltd.[1] and Rajasthan State Industrial Development & Investment Corporation v. Subhash Sindhi CHS[2]. Particular attention is paid to the interface between Section 40 TPA, the traditional common law requirements (touch-and-concern, notice, privity), and emerging urban-development contexts.

Historical and Statutory Foundations

Section 40 TPA is the principal statutory recognition of covenants running with land in India, permitting the enforcement of “a right to restrain the enjoyment… of the latter property” or “the benefit of an obligation arising out of contract, and annexed to the ownership of immovable property” against transferees with notice or gratuitous transferees.[3] Complementary provisions include Section 11 (limitations repugnant to the interest created), Section 55(2) (implied covenant for title), Section 108(b)&(j) (lessee’s obligations), and Section 109 (rights of transferee of reversion). Collectively, these provisions integrate equitable principles—derived from Tulk v. Moxhay—into the statutory fabric without adopting the sweeping reforms subsequently introduced in England by the Landlord and Tenant (Covenants) Act 1995.[4]

Conceptual Elements of a Covenant that Runs with the Land

  • Touch and Concern: The covenant must affect the mode of enjoyment, value, or nature of the land; purely personal or collateral promises do not run.[5]
  • Intent to Bind Successors: Parties must intend the covenant to bind assignees, discernible from the language and surrounding circumstances.[6]
  • Dominant Tenement / Benefit: The covenantee must retain land capable of benefiting from the covenant (unless Section 40’s second limb—obligation annexed to ownership—applies).[7]
  • Notice: A purchaser for value without notice is protected; constructive or actual notice suffices under Indian equity.[8]
  • Negative v. Positive: Indian courts, following English equity, are more willing to enforce negative (restrictive) covenants than positive ones against successors, though leases present an exception where even positive covenants (e.g., to pay rent) run by virtue of privity of estate.[9]

Jurisprudential Evolution

Early High Court Decisions

Colonial courts quickly absorbed English learning. In Dinkarrao Ganpatrao Kothare v. Mandlik[10] the Bombay High Court enforced a pre-emption covenant, scrutinising its compatibility with the rule against perpetuities. The Patna decision in Rajpur Colliery Co. v. Pursottam Gohil[11] distilled the classical requirements—negative character, benefit to dominant land, and binding intent—while emphasising notice. Conversely, Jhagru Rai v. Basdeo Rai[12] cautioned against indiscriminate transposition of the English label to Indian pre-emption rights, underscoring doctrinal nuance.

Supreme Court Clarifications

  • Ram Baran Prasad v. Ram Mohit Hazra (1966) recognised that contractual pre-emption clauses, if purely personal, escape the rule against perpetuities; only when they create “rights of property” does the rule bite.[13]
  • R. Kempraj v. Barton Son & Co. (1969) treated a lease-renewal clause as a covenant running with land by virtue of Section 40, reiterating that Indian law eschews equitable estates but nonetheless enforces such covenants in equity.[14]
  • Mohar Singh v. Devi Charan (1988) leveraged Section 109 to allow an assignee of part reversion to sue for eviction, “subject… to other covenants running with the land”, thereby confirming that privity of estate suffices to transmit burdens in leases.[15]

Covenants in Leases

Leases constitute the arena where both benefit and burden traditionally run. High Courts have consistently held rent covenants enforceable against assignees notwithstanding absence of possession (Kunhanujan v. Anjelu[16]) and have applied Article 116 of the Limitation Act on the premise that the suit is one “on a registered contract” because the covenant “has no existence except by the registered deed”.[17] In Raj Narain Jain v. III ADJ[18] and Hukum Chand v. Hazra Begum[19], auction purchasers of the lessor’s interest were bound by renewal or user covenants, the courts reiterating that such covenants “touch and concern” the demised premises.

Restrictive Covenants and Planned Development

Urban development cases have extended Section 40 reasoning to building schemes. Board of Acting Governor of La Martiniere v. National Engineering Industries[20] applied Tulk v. Moxhay to uphold a covenant restricting user despite assignment, distinguishing public-authority leases such as County Council of Sydney. Similarly, Spencer & Co. Ltd. v. Mangal Tirth Estate[21] recognised a scheme-wide restriction to maintain residential character as a running covenant.

Common Areas and Modern Statutes

While Nahalchand Laloochand was not framed as a covenant case, its ratio that stilt parking spaces form part of “common areas and facilities” under the Maharashtra Ownership of Flats Act, 1963 (MOFA) effectively imposes a statutory covenant on promoters and purchasers alike: the burden to treat such spaces as indivisible appurtenances and the correlative benefit vested in each flat owner.[22] The decision illustrates legislative supplementation of classical property doctrines to protect consumer interests in high-density developments.

Public-Law Constraints

In Rajasthan State Industrial Development Corporation[2] the Supreme Court held that post-notification land-sale agreements are void. Though the doctrine of running covenants was tangential, the case underscores that private covenants cannot override statutory acquisition processes, reiterating the primacy of public-law limitations on property autonomy.

Analytical Themes Emerging from Reference Materials

  1. Assimilation without Equitable Estates: Indian courts achieve functional equivalence through Section 40 without adopting the English bifurcation of legal and equitable estates (R. Kempraj). Thus, enforceability hinges on notice, not on the metaphysics of equitable interests.
  2. Leases as an Exception to the Burden Rule: Privity of estate enables burdens—rent, renewal clauses—to run (Dwijendra Nath Mukherji). The doctrine operates automatically, obviating consensual attornment (Mohar Singh).
  3. Restrictive Covenants Favoured over Positive Ones: Courts remain cautious about compelling successors to perform affirmative acts, yet they readily restrain injurious uses (Rajpur Colliery, La Martiniere).
  4. Rule against Perpetuities as a Limiting Principle: Covenants creating future proprietary interests may fail if they postpone vesting beyond the statutory period (Ram Baran Prasad), whereas purely personal or contractual options survive.
  5. Statutory Overlay in Housing Regulation: MOFA and analogous enactments impose obligations that mimic running covenants, reinforcing collective rights in common areas (Nahalchand).

Contemporary Relevance and Challenges

Urbanisation, proliferation of gated communities, and enactment of the Real Estate (Regulation and Development) Act, 2016 (RERA) have magnified the practical significance of covenants governing common amenities, parking, and user restrictions. Issues demanding judicial and legislative attention include:

  • Enforceability of Positive Maintenance Obligations: Whether apartment owners’ associations can bind reluctant purchasers to contribute to sinking funds remains contentious.
  • Digital Notice and Transparency: RERA’s mandates on publication of sanctioned plans may reduce disputes over notice, yet questions persist regarding constructive notice in online repositories.
  • Environmental Covenants: Covenants envisaging green building norms or waste-management obligations raise enforcement complexities, especially when they entail ongoing positive expenditure.
  • Interface with Constitutional Property Doctrine: Post-article 300A jurisprudence curtails arbitrary state interference, but private covenants must still yield to compulsory acquisition statutes as highlighted in Subhash Sindhi CHS.

Conclusion

The Indian law of covenants running with the land is a judicious blend of English equitable heritage and statutory innovation. Section 40 TPA furnishes the doctrinal core, while judicial exposition—from Ram Baran Prasad through R. Kempraj to La Martiniere—has progressively clarified the requisites of touch-and-concern, intent, and notice. Leasehold covenants enjoy a distinct statutory pathway via Sections 108 and 109, ensuring commercial certainty in landlord-tenant relations. Contemporary real-estate regulation, exemplified by MOFA and RERA, extends covenant-like obligations to collective housing contexts, vindicating consumer and community interests. As India’s property landscape evolves, courts must continue balancing freedom of contract, public policy, and equitable protection, ensuring that covenants remain instruments of legitimate land use planning rather than vehicles of perpetuity or exclusion.

Footnotes

  1. Nahalchand Laloochand Private Ltd. v. Panchali Co-operative Housing Society Ltd., (2010) 9 SCC 536.
  2. Rajasthan State Industrial Development & Investment Corporation v. Subhash Sindhi Co-operative Housing Society, (2013) 5 SCC 427.
  3. Transfer of Property Act, 1882, s. 40.
  4. Board of Acting Governor of La Martiniere v. National Engineering Industries Ltd., (2003) 1 CHN 89 (Cal). Cf. Landlord and Tenant (Covenants) Act 1995 (U.K.).
  5. Foa, General Law of Landlord & Tenant, 8th ed., p. 422; quoted in Raj Narain Jain v. III ADJ, 1979 All LJ 485.
  6. Rajpur Colliery Co. v. Pursottam Gohil, AIR 1958 Pat 267.
  7. Rogers v. Hosegood, (1900) 2 Ch 388; followed in Princy v. Jose, 2009 (3) KLT 1.
  8. TPA, s. 40 proviso; see also Dinkarrao Kothare, AIR 1922 Bom 262.
  9. Kunhanujan v. Anjelu, (1893) ILR 17 Mad 24.
  10. Dinkarrao Ganpatrao Kothare v. Narayan Vishwanath Mandlik, (1922) ILR 46 Bom 498.
  11. Rajpur Colliery Co. v. Pursottam Gohil, supra.
  12. Jhagru Rai v. Basdeo Rai, (1924) ILR 3 Pat 701.
  13. Ram Baran Prasad v. Ram Mohit Hazra, AIR 1967 SC 744.
  14. R. Kempraj v. Barton Son & Co., (1970) 1 SCC 506.
  15. Mohar Singh v. Devi Charan, (1988) 3 SCC 63.
  16. Kunhanujan v. Anjelu, supra.
  17. Dwijendra Nath Mukherji v. Pramode Kishore Mandal, 53 CWN 510 (Cal, 1949).
  18. Raj Narain Jain v. III ADJ, AIR 1980 All 78.
  19. Hukum Chand v. Hazra Begum, AIR 1981 All 137.
  20. Board of Acting Governor of La Martiniere, supra.
  21. Spencer & Co. Ltd. v. Mangal Tirth Estate (P) Ltd., 2001 (1) MLJ 420.
  22. Nahalchand Laloochand, supra, paras 50-57.