Radhakisan Laxminarayan Toshniwal Vs.
Shridhar Ramchandra Alshi & Ors  INSC 88 (23 April 1960)
SINHA, BHUVNESHWAR P.(CJ) GAJENDRAGADKAR,
CITATION: 1960 AIR 1368 1961 SCR (1) 248
CITATOR INFO :
RF 1961 SC1747 (15) R 1969 SC 244 (11,12) RF
1991 SC1055 (1,5)
Pre-emption--Equity if in favour of
pre-emptor--Whether Mohamedon Law or personal law can override provision of
statute law--To defeat a claim of Pre-emption, whether it is a fraud, Berar
Land Revenue Code, 1928.
The vendors executed an agreement for sale in
respect of a certain survey number which according to the agreement was to be
diverted to non-agricultural purposes and thereafter a sale deed was to be executed.
In pursuance to the said agreement the vendors applied for diversion which was
sanctioned subject to the payment of premium and other conditions. Before the
sale deed was executed respondent No. 1 Sridhar brought a suit for pre-emption
against the appellant on the ground that he had a co-occupancy in the survey
number in dispute being the owner of the adjoining survey number. The suit was
decreed and on appeal the High Court inter alia held that the transaction was a
sale which was subject to pre-emption and that the failure to execute and
register a sale deed was a subterfuge to defeat the right of pre-emption.
The question for decision was (1) whether a
right of preemption had accrued to respondent Sridhar under the provisions of
the Berar Land Revenue Code, 1928, and (2) whether the appellant was guilty of
fraud in that in order to defeat the right of pre-emption the deed of sale was
not executed, but for all intents and purposes the appellant had become the
owner of the property.
Held, that the right of pre-emption in Berar
did not arise from Mohamedon Law and did not exist till it was brought from
Land laws of the Punjab or North West Provinces. Theright of pre-emption under
the Berar Land Revenue Code extended to transactions of sale, usufructuary
mortgages and leases for 15 years or more and right under Mohamedon Law applies
only to sales. The word sale has no wider connotation under s. 176 of the Berar
Land Revenue Code than it has in the Transfer of Property Act. After the
application of Transfer of Property Act to Berar a transaction of sale could
not be effective except through a registered instrument.
The contract of sale in the instant case
created no interest in favour of the appellant and the proprietary title did
not validly pass from the vendors to the appellant and until that was completed
no right to enforce pre-emption arose.
The transfer of 249 properties, where the
Transfer of Property Act applied, had to be under the provisions of the
Transfer of Property Act only and neither the Mohamedon Law nor any other
personal law of transfer of property could override the statute law. There are
no equities in favour of a pre-emptor, whose sole object is to disturb a valid
transaction by virtue of the right created by statute.
Held, further that it is neither illegal nor
fraudulent for the parties to a transfer, to avoid and defeat a claim for
preemption by all legitimate means and a person is entitled to steer clear of
the laws of pre-emption by all lawful means.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 167 of 1955.
Appeal by special leave from the judgment and
decree dated November 22, 1951, of the former Nagpur High Court in Second
Appeal No. 720 of 1945.
S. N. Kherdekar, N. K. Kherdekar and A. G.
Ratna. parkhi, for the appellant.
N. C. Chatterjee, S. A. Sohni and Ganpat Rai,
for respondent No. 1.
1960. August 23. The Judgment of the Court
was delivered by KAPUR J.-This is an appeal by special leave against the
judgment and decree of the High Court at Nagpur passed in second appeal No.
1720 of 1945 confirming the decree of the District Judge. In the suit out of
which this appeal has arisen the appellant was defendant No. 1 and the
respondents were the plaintiff and defendant Nos. 2 and 3 and the dispute
relates to pre-emption on the ground of co-occupancy which falls under Ch. XIV
of the Berar Land Revenue Code, 1928, hereinafter called the Code.
On April 10, 1943, D. B. Ghaisas and his
mother Ramabai entered into two contracts of sale with the appellant, one in
regard to Survey Nos. 5, 14 and 16 for a sum of Rs. 10,000 out of which Rs.
2,000 was paid as earnest money and the other in regard to Survey No. 15/1 for
Rs. 8,500 out of which Rs. 500 was paid as earnest money. On April 16, 1943,
the vendors executed a registered sale deed in regard to Survey No,%. 5, 14 and
16 and the balance of the price 32 250 was paid before the Registrar. On April
22, 1943, the vendors executed a lease of Survey No. 15/1 for 14 years in
favour of Kisanlal and Sitaram who were defendant Nos. 2 and 3 in the suit and
are respondents Nos. 2 and 3 in this appeal. On April 24, 1943, the vendors
executed a fresh agreement of sale in respect of the same field which according
to the agreement was to be diverted to nonagricultural purposes and thereafter a
sale deed was to be executed when it was so diverted. The appellant was to pay
the costs of the diversion as well as the premium. In pursuance of this
agreement the vendors applied to the Deputy Commissioner, Akola, on August 12,
1943, for diversion under s. 58 of the Code and sanction was accorded on
January 22, 1944, subject to payment of premium of Rs. 9,222 and other
conditions. The appellant's case is that as agreed the vendors were paid this
money for deposit and it was deposited in the Treasury under Challan No. 68 but
there is no finding in favour of the appellant although the trial court and the
District Judge seem to have proceeded on the premises that this amount was
deposited but in the circumstances of this case it is not necessary to go into
this matter. On February 1, 1944, the sale deed was executed by the vendors in
favour of the appellant and the consideration in the sale deed was Rs. 17,722.
On September 11, 1943, i.e., before the sale
deed was executed the respondent, Sridhar, brought a suit for preemption
against the appellant on the allegation that he had a co-occupancy in the
Survey number in dispute-being the owner of Survey No. 15/2. In the plaint it
was alleged that the transaction of contract under the documents of April 10,
1943, and April 24, 1943, constituted a sale and therefore it was subject to
respondent Sridhar's prior right of preemption. It was also alleged that the
price was not fixed in good faith. These allegations were denied. Both the
trial court and the District Judge held that respondent Sridhar was entitled to
preempt and determined the fair consideration to be Rs. 3,306. The suit was
therefore decreed by the trial court and on appeal by the District Judge. The
appellant took an appeal to the 251 High Court which also confirmed the decree
of the subordinate courts.
The High Court has held that the transaction
was a sale which was subject to pre-emption and that the failure to execute and
register a sale deed was a subterfuge to defeat the right of pre-emption. It
also hold that the proceedings taken for conversion of agricultural land into
nonagricultural land were pendente lite and as the right of preemption had
already accrued by subsequent acts of the vendors and the vendee it could not
be defeated. The High Court further held that as the order of the
Sub-Divisional Officer allowing conversion was a conditional one the land could
not be said to have been irrevocably diverted to nonagricultural purposes. The
decree of the subordinate courts was Confirmed and against that judgment the
appellant has come to this court in appeal by special leave.
The first question for decision is whether a
right of preemption had accrued to respondent Sridbar under the provisions of
the Code. Previous to the cession of Berar by the Nizam of Hyderabad to the
British Government in 1853, the Mohammedan rule of preemption was, according to
one view, in force in the province of Berar and it continued to be so till the
Berar Land Revenue Code of 1896 came into operation as from January 1, 1897. On
the other hand, according to the view of two writers on the Berar Land Revenue
Code of 1896, the Mohammedan law origin of the right of pre-emption does not
seem to be well-founded. In the annotation of the Berar Land Revenue Code of 1896
Mr. E. S. Reynolds wrote in 1896 that although the right of preemption in
regard to agricultural land on occupancy tenures bad been recognised in Berar
the right was not based on Mohammedan law nor did it appear to be ancient and
immemorial custom. It seems to have been evolved from a ruling of the Resident
acting as the High Court based on r.
10 of the Sub-tenancy Rules. According to
Hirurkar (Land Revenue Code, pp. 126-127) also the right of pre-emption was not
based on the Mohammedan law and did not originally exist in Berar. It 252 seems
to have been brought from the land laws of the Punjab or the North West
Provinces. In the Berar Settlement Rules and Berar Sub-tenancy Rules of 1866
the right of pre-emption attached to relinquishment of shares in the case of
ryots of joint holdings and applied to co-sharers and this is different from
the rule of Mohammedan law.
By s. 205 of the Berar Land Revenue Code of
1896 the right of pre-emption arose when a co-occupant in any Survey number was
transferred by sale, foreclosure of mortgage or relinquishment in favour of a
specified person for valuable consideration and it vested in every other
co-occupant of the Survey number. It will thus be seen that the right of
pre-emption, which under Mohammedan law attaches to sales only, was also
applicable to foreclosure of mortgages and relinquishment for valuable
consideration. In the year 1907 the Transfer of Property Act (IV of 1882) was
extended to the province of Berar. In 1928, the Code was re-enacted and it further
extended the provisions in regard to pre-emption in Ch. XIV. Under s. 174
pre-emptive rights arise in respect of transfers of unalienated land held for
agricultural purposes and before an occupant could transfer the whole or any
portion of his interest he had to give notice of his intention to all other
occupants. Under ss. 176 to 178, the right of pre-emption arises in the case of
transfers by way of sale, usufructuary mortgages, by lease for a period
exceeding fifteen years or in the case of final decrees for foreclosure in a
case of mortgage by conditional sale. Under a. 183 every occupant in Survey
number shall have the right to pre-empt the interest transferred by civil suit.
Under s. 184 the right also arises in the case of an exchange. Thus it will be
seen that the right of preemption has been by statute extended far beyond what
was contemplated under Mohammedan law and also beyond what was recognised in
the Berar Settlement Rules, Berar Subtenancy Rules and in the Code of 1896.
The High Court held that the word sale in s.
176 of the Code had a wider connotation than what it had under s. 54 of the
Transfer of Property. Act. That 253 was based on the judgment of Vivian Bose,
J. (as he then was), in Jainarayan Ramgopal Marwadi v. Balwant Maroti Shingore
(1) which had been approved in later judgments of that court. It was also of
the opinion that the transaction in dispute gave rise to the exercise of the
right of preemption under the rule laid down in Begum v. Mohammad Yakub (2) and
as in the instant case there was in reality a sale although a registered sale
deed had not been executed the right of pre-emption could not be defeated by
the device that the vendors and the appellant adopted.
According to s. 2 of the Transfer of Property
Act which at the relevant time was in operation in Berar s. 54 is not one of
the sections within ch. 2 of that Act and therefore it overrides Mohammedan law
and the provisions of that section, being exhaustive as to modes of transfer,
govern all sales in that province and no title passes on a sale except as
provided in that section. Sale is there defined as transfer of ownership for a
price paid or promised or part paid or part promised and in the case of sale of
tangible immoveable property of Rs. 100/or more sale can only be made by a
registered instrument. That is clear from the language of the section itself
where it is stated :Section 54 Sale how made:-" Such transfer, in the case
of tangible immoveable property of the value of one hundred rupees and upwards,
or in the case of a reversion or other intangible thing, can be made only by a
registered instrument ".
It was held by the Privy Council in
Immudipattam Thirugnana S. O. Kondema Naik v. Peria Dorasami (3) which was a
case of a zamindari estate that it could not be transferred except by a
registered instrument. But it was submitted that sale when used in connection
with the general law of pre-emption is not to be construed in the narrow sense
in which it is used in the Transfer of Property Act and that that had been
accepted by the Judicial Committee in Sitaram Bhaurao Deshmukh v. Jiaul Hasan
Sirajul Khan(4) where (1) A.I.R. 1939 Nag. 35.
(3) (1900) 28 I.A. 46.
(2) (1894) I.L.R. 16 All. 344.
(4) (1921) 48 I.A. 475.
254 the observations of Sir John Edge, C. J.,
in Begum v. Mohammad Yakub (1) had been approved.
In Sitaram Deshmukh's case (2) one of the two
Mohammedan cosharers in Bombay by an agreement dated October 14, 1908, agreed
to sell his share to a Hindu. The agreement was expressly subject to a right
'in the co-sharer to pre-empt.
The vendor informed his co-sharer that he had
sold his share and the latter thereupon, after the customary formalities on
October 15, 1908, claimed to recover the share from the purchaser. The sale
deed was executed on November 9, 1908, and then a suit was filed by the
pre-emptor. It was held that the co-sharer had the right to pre-empt in
accordance with the intention expressed by the parties to the sale and that
intention was to be looked at to determine what system of law was to apply and
what was to be taken to be the date of the sale with reference to which the
formalities were performed. The question there really was as to what was to be
taken as a sale sufficient to justify the pre-emptor in proceeding at once to
the ceremonies and it was in that connection that the following observation of
Sir John Edge in Begum v. Mohammad Yakub (1) were quoted :" The Chief
Justice, Sir John Edge, there observes, in connection with the question whether
the Transfer of Property Act, which required registration, bad altered the
principle of the Mohammedan Law, which determined what was a sale for the
purposes of the date in reference to which the ceremonies should be performed;
" I cannot think that it was the intention of the Legislature in passing
Act No. IV of 1882 " (the Transfer of Property Act) " to alter
directly or indirectly the Mohammedan law of pre-emption as it existed and was
understood for centuries prior to the passing of Act IV of 1882 ".
That at all events is in harmony with the
conclusion come to by the High Court at Bombay. The conclusion is, that you are
to look at the intention of the parties in determining what system of law was
to be taken as applying and what was to be taken to be (1) (1894) I.L.R. 16 All.
344. (2) (1921) 48 I.A. 475.
255 the date of the sale with reference to
which the ceremonies were performed ".
But it was argued for the respondents that
the Privy Council had not only approved the observation of Sir John Edge, C.
J., in Begum v. Mohammad Yakub(1) but has
also approved the view of the Calcutta High Court in Jadu Lal Sahu v. Janki
Koer (2). That was a case from Bihar where the right of pre-emption under
Mohammedan Law was judicially recognised in regard to Hindus also. The question
whether the sale which was to be preempted was the one under s. 54 of the
Transfer of Property Act or the one under the principles of Mohmmedan Law does
not seem to have been the point raised in that case. It may be pointed out that
both in the case which went to the Privy Council (Sitaram Bhaurao Deshmukh v. Jaiul
Hasan Sirajul Khan (3) and the Calcutta case Jadulal Sahu v. Janki Koer (2))
sale deeds were executed and registered before the suits to enforce pre-emption
were filed. In the latter case the kabala was on July 28, 1904 and the
ceremonies were performed after that date.
In the Allahabad case, Begum v. Mohammad
Yakub (1), there was a verbal sale of a house which was followed by possession
but there was no registered document. No doubt there the learned Chief Justice
in the majority judgment did say that to import into the Mohammedan Law of
pre-emption the definition of the word " sale " with restrictions
contained in s. 54 of the Transfer of Property Act would materially alter
Mohammedan Law of preemption and afford fraudulent persons to avoid the law of
pre-emption; with this view Bannerji, J., did Dot agree. But in our opinion the
transfer of property where the Transfer of Property Act applies has, as was
held by the Privy Council also, to be under the provisions of the Transfer of
Property Act only and Mohammedan Law of Transfer of Property cannot override
the statute law. Mahmood, J., in Janki v. Girjadat (4) though in a minority
(four judges took a different view) was of the opinion that a valid and (1)
(1894) I.L.R. 16 All. 344.
(2) (1908) I.L.R. 35 Cal. 575.
(3) (1921) 48 I.A. 475.
(4) (1885) I.L.R. 7 All. 482.
256 perfected sale was a condition precedent
to the exercise of the right of pre-emption and until such sale had been
effected the right of pre-emption could not arise.
Section 17 read with s. 49 of the
Registration Act shows that a transfer of immoveable property where it is worth
100 or more requires registration and unless
so registered the document does not affect the property and cannot be received
in evidence. The following observations of Mahmood, J., from Janki v.Girjadat
(1) are very apposite:" If a valid and perfected sale were not a condition
precedent to the exercise of the pre-emptive right, consequences would follow
which the law of pre-emption does not contemplate or provide for. In this very
case, supposing the so-called vendor, notwithstanding the application of the
15th August, 1882 (which cannot amount to an estoppel under the circumstances)
continues or recenters into possession of the property it is clear that the socalled
vendee would have no, title under the so-called sale, to enable him to recover
possession-the transaction being, by reason of s. 54 of the Transfer of
Property Act, ineffectual as transfer of ownership. The right of preemption
being only a right of substitution, the successful pre-emptor's title is
necessarily the same as that of the vendee and if the vendee took nothing under
the sale the preemptor can take nothing either; and it follows that if the
vendee could not oust the vendor, the preemptor could not do so either, because
in both cases the question would necessarily arise whether the sale was valid
in the sense of transferring ownership. Again, if notwithstanding a preemptive
suit such as this, the so-called vendor, who has executed an invalid sale which
does not in law divest him of the proprietary right, subsequently executes a
valid and registered sale-deed in favour of a co-sharer other than the
preemptor or in favour of a purchaser for value without notice of the so-called
contract for sale it is difficult to conceive how the preemptor, who has
succeeded in a suit like the present, could resist the claim of such purchaser
for possession of the property ".
(1) (1885) I.L.R. 7 All. 482.
257 Under s. 54 of the Transfer of Property
Act a contract for sale does not of itself create any interest in or charge on
immoveable property and consequently the contract in the instant case created
no interest in favour of the vendee and the proprietary title did not validly
pass from the vendors to the vendee and until that was completed no right to
enforce pre-emption arose. As we have said earlier wherever the Transfer of
Property Act is in force Mohammedan Law or any other personal law is inapplicable
to transfers and no title passes except in accordance with that Act. Therefore
when the suit was brought there was no transfer by way of sale which could be
subject to preemption.
It was next contended that the appellant was
guilty of fraud in that in order to defeat the right of the preemptors a deed
of sale was not executed although as a matter of fact price had been paid,
possession had passed and for all intents and purposes the appellant had become
the owner of the property and that conduct such as this would defeat the very
law of preemption. The right to pre-empt the sale is not exercisable till a
pre-emptible transfer has been effected and the right of pre-emption is not one
which is looked upon with great favour by the courts presumably for the reason
that it is in derogation of the right of the owner to alienate his property. It
is neither illegal nor fraudulent for parties to a transfer to avoid and defeat
a claim for pre-emption by all legitimate means. In the Punjab where the right of
pre-emption is also statutory the courts have not looked with disfavour at the
attempts of the vendor and the vendee to avoid the accrual of right of preemption
by any lawful means and this view has been accepted by this court in Bishan
Singh v. Khazan Singh (7) where Subba Rao, J., observed:" The right being
a very weak right, it can be defeated by all legitimate methods, such as the
vendee allowing the claimant of a superior or equal right being substituted in
his place ".
In the present case the transaction of sale
had not (7)  S.C.R. 878,884.
33 258 been completed until February 1, 1944,
when the sale deed was executed. Anything done previous to it could not
ordinarily be said to be a fraud to deprive a pre-emptor, from the exercise of
his right of pre-emption. There are no equities in favour of a pre-emptor,
whose sole object is to disturb a valid transaction by virtue of the rights
created in him by statute. To defeat the law of pre-emption by any legitimate
means is not fraud on the part of either the vendor or the vendee and a person
is entitled to steer clear of the law of pre-emption by all lawful means.
It was then submitted that the sale deed had
as a matter of fact, been executed on February 1, 1944; but respondent Sridhar
brought the suit not on the cause of action arising on the sale dated February
1, 1944, but on the transaction of April 10, 1943, coupled with that of April
24, 1943, which being mere contracts of sale created no interest in the vendee
and there was no right of pre-emption in respondent No. I which could be
enforced under the Code.
Mr. Chatterji urged that it did not matter if
the sale took place later and the suit was brought earlier but the suit as laid
down was one to pre-empt a sale of April 1943 when, as a matter of fact, no
sale had taken place. If respondent Sridhar had based his right of pre-emption
on the basis of the sale of February 1, 1944, the appellant would have taken
such defence as the law allowed him. The defence in regard to the conversion of
the land from agricultural into nonagricultural site which negatives the right
of pre-emption would then have become a very important issue in the case and
the appellant would have adduced proper proof in regard to it. The right of
pre-emption is a weak right and is not looked upon with favour by courts and
therefore the courts could not go out of their way to help the pre-emptor.
In our opinion the judgment of the High Court
was erroneous and we would therefore allow this appeal, set aside the judgment
and decree of the High Court and dismiss the suit with costs throughout.