[1961] '960 RADHAKISAN LAXMINARAYAN TOSHNIWAL August 23. SHRIDHAR RAMCHANDRA ALSHI AND OTHEI~S. (B. P. SINHA, c. J., J. L. KAPUR, P. B. GAJENDRAGADKAR, K. SunBA HAo and K. N. WANCHOO, JJ.)
Pre-emption-Equity if in favour of pre-emptor-Whether M ohamedon Law or personal law can override provision of statute law -To defeat a claim of pre-emption, whether it is a frattd, Berar Land Revenue Code, I928.
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 ~pplied for diversion which was sanctioned subject to the payment of premium and other conditions. Before the sale deed was executed respondent No. r 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 (r) whether a right of pre- emption had accrued to respondent Sridhar under the provisions of the Berar Land Revenue Code, r928, 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. The right of pre-emption under the Berar Land Revenue Code extended to
transactions of sale, usufructuary mortgages and leases for r5 years or more and right under Mohamedon Law applies only to sales. The word sale has no wider connotation under s. r76 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 com- pleted no right to enforce pre-emption arose. The transfer of property, where the Transfer of Property Act applied, had to i960
be under the provisions of the Transfer of Property Act only and neither the Mohamedon Law nor any other personal'law of Radhakisan transfer of property could override the statute law. There are Laxminara:yan
no equities in favour of a pre-emptor, whose sole object is to Toshni~al disturb a valid transaction by virtue of the right created by v. statute. Shridhar Held, further that it is neither illegal nor frauaulent for Ramchandra Alshi the parties to a transfer, to avoid and defeat a claim for pre- & Othm.
emption by ali legitimate means and a person is entitled to steer clear of the laws of pre-emption by all lawful means. CIVIL ArPELLATE JURISDICTION: Civil Appeal No. 167 of 1955.
Appeal by special leave from the judgment and decree dated November 22, 1951, of the former Nag- pur 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. I. 1960. August 23. The Judgment of the Court was delivered by KAPUR J.-This is an appeal by special leave
Kapur J. against the jmlgment and decree of the High Court at Nagpur passed in second appeal No. 1720 of 1945 con- firming 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 plain- tiff anq 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/l for Hs. 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 Nos. 5, 14 and 16 and the balance of the price (1961) r96o was paid before the RegiRtrar. On April 22, 1943, the vendors executed a. lease of Survey Ko. 15/l for 14
Radhnkfsa,1 r.,,,,,., 0 ,.,,0 ., y<>ars in fa.,·our of Kisa.nlal and Sita.ram who were Toshuiwal defendant Nos. 2 and 3 in the suit and are respond- v. ents Nos. 2 and 3 in this appeal. On April 24, 1943,
Shndlw the vendors executed a. fresh agreement of sale in res- Ram<ha .. dra Alshr pect of the same field which according to the agree- .;. Othm b d · d · I ment was to e 1verte to non-agncu tura purposes
Kapur ;. and thereafter a 8ale deed was to be executed wht>n it was sa°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
CommiBBioner, Akola, on August 12, 1943, for diver- sion under s. 58 af the Code and sanction was accorrled 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 <lflposited in the Trea- sury under Chall1rn Ko. 68 but there is no finding in favour of the appellant although the trial court and
the District Judge 8eem to have proc~eded on the pre- mises that this amount was deposited but in the cir- cumstances of this case it i~ not necessary to go into this matter. On February I, I 944, the sale deed was
executed by the vendors in favour of the appellant 1md the consideration in the sale deed was l~s. 17,722. On Sepoombor I 1, 1943, i.e., before the sale dned was• executed the respondent, Sridhar, brought a suit
for pre-emption against the appellant on the allegation that he had a co-occupancy in the Survey number in dispute-being the owner of Survey Xo. 15/2. In the plaint it was alleged tJtat the transaction of contract
under the documents of April IO, 1943, and April 24, 1943, constituted a sale and the efore it was subject to respondent. SridhM'A prior right of pre-emption. It was also alleged that tho price waA not fixed in good
faith. These allegations were denied. Both the trial court and the District Judge held that respondent Sridhar was entitled to pre-empt and determined the fair consideration to be Rs. 3,306. The suit was there-
fore decreed by the trial court and on appeal by the District Judge. The appellant took an appeal to the High Court which also confirmed the decree of the '960 subordinate courts.
Radhakisan The High Court has held tha.t the transaction was Laxminarayan a sa.le which was subject to pre-emption and that the Toslmiwal failure to execute and register a sale deed was, a sub-
v. terfuge to defeat the right of pre-emption. It also Shridhar h Id h d. k f . Ramchandra Als/1i e _that t e procee mgs ~a en 1or conversion o agr1- .,, Othm cultural land into non-agrwultural land were pendente
lite and as the right of pre-emption had already ace- Kap1tr J. rued 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 non-agricultural purposes. The decree of the subordi- nate courts was confirmed and against that judgment
the appellant has come to this court in appeal by special lea. ve. The first question for decision is whether a right of pre-emption had accrued to respondent Sridhar 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 pre- empt ion wa·s, according to one .view, in force in the province of Berar and it continued to be so till the
Bera.r Land Revenue Code of 1896 came into opera- tion 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 pre-emption 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 Moham-
medan law and did not originally exist in Berar. It SUPRE~IE COURT REPORTS (1961] ''6° seems to have beon brought from the land laws of the Puui'ab or tho North 'Vest Provinces. In the Berar
Hadl11ikt.<an Settlement Rules and Rerar Sub-tenancv Rules of l.axtni t1ttray1111 rrsh>1u•·.11 1866 the right of pre-emption attaohed to relinquish- v. ment of shares in the case of ryot~ of joint holdings
Shndha• and applied to co-sharers and this is different from Ramc>.and•• Aisin the rule of Mohammedan law. & Othm By s. 205 of the Berar Land Revonue Code of 1896 Kap•<> 1. the right of pre-emption arose when a co-occupant in
any Survey number was transferred by sale, forec)o. sure of mortgage or relinquishment in favour of a. specified person for valuable consideration and it vest- ed in every other co occupant of the Survey number.
It will thus be seen that tho right of pre-emption, which under Mohammedan law attaches to sales only, was also applicable to foreclosure of mortgages and relinquishment for value.hie consideration. In the
year 1907 the Transfer of Property Act (IV of 1882) was extended to tho province of Berar. In 1928, the Code was re-enacted and it further extended the pro· visions in regard t-0 pre-emption in Ch. XIV. Under
s. 174 pre-empti've rights arise in respect of transfers of una.lienated 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 yea.rs or in the case of final decrees for foreclosure in a. case of mortgage by conditional sale. Under s. · 183 every occupant in
Survey number shall have the right to pre-empt the interest transferred by civil suit. Unc!er s. 184 the right also a.rises in the case of an oxcha.nge. Thus it will be seon that tbc right of pre-emption has been by
statute extended far beyond what was contemplated under Moha.mmecla.n law and also beyond what was recogniserl in the Berar Settlement Rules, Berar Sub- tenancy I{ ules 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 was based on the judgment of Vivian Bose, J. (as he
I960 then was), in Jainarayan Ramgopal Marwadi v. Bal. want Maroti Shingore (1) which had been appro .. vedJn · Radhakisan La.oninarayan later judgments of that court. It was also,._ of the
Toshniwal opinion that the transaction in dispute gave vis~. to the v. exercise of the right of pre-emption_ .under, the rule Shridhar laid down in Begum v. Mohammad fakub.('J and as in Ramchand~a Alshi the instant case there was in reality a sa,le although a
& Others registered sale deed had not been exe,cu_ted'.the right Ifapur ]. of pre.emption could not be defeated by.! tb'e .. dev~e that the vendors and the appellant adopted;. According to s. 2 of the Transfer of Prop11rty 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 secti9n. Sale is there defined as transfer of ownership for a price paid or promised or part paid or part pro-
mised 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. 0. Kondema Naik v. Peria Dorasami (') which wa.s 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 connec- tion 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 Bhau- rao Deshmukh v. Jiaul Hasan Sirajul Khan(') where (I) A.LR. 1939 Nag. 35· (3) (1900) zB LA. 46.
· (z) (1894) LL.R. 16 AIL 344. (4) (1921) 48 I.A. 475. SUPREME COCRT REPORTS (1961] the observations of Sir .John Edge, C. J., in RP.gum v. Mohammad Yakub (')had been approved. Radh"ki.'""
In 8itaram D1!.'!hmukh's case(') one of the two J.axm111ataya •1 r,,1rn,,,,,1 Moha.mmeda.n co-sharers in Bombay by a.n agreement v. dated October 14, 1908, a.greed to sell his share to a.
Shtidha• Hindu. The agreement wa.s expressly subject to a. right Ram,hand>a Ai'.ln in the co-sharer to pre.empt. The vendor informed & 011"'·' his co-sharer that he ha.d sold his share and the httcr
/(apur J. thereupon, after Urn customary formalities on October 15, 1908, claimed to recover the sha.rc from the pur- cha8n. The sale deed was executed on X ovember 9, l!lOS, and then a. snit wa.s filed by the pre-emptor. It
was hrld tha.t the co.sharer ha.d tho right to pre-empt in accordance with the intention expressed by the pa.r- tiC'S to the sale 1Lnd that intn1tion wa.s to be looked at to determiuo what system of la.w wa.s to apply a.nd
wha.t wa.s to be ta.ken to bo the date of the sale with reference to which tho formalities wore performed. The question there really wa.s as to what wa.s to be ta.ken as a sale sufficient to justify the pre-emptor in
proceeding at once to the ceremonies a.nd it wa.s 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 obser-
ves, in connection wit.h the question whether the Transfer of Property Act, which roguired registrat.ion, ha.d altered the prineiple of the Mohammedan La.w, which determiner! what wa.s a. sa.le for the purpoHoH of
the date in reference to which the ceremonies should be performed; " I cannot think tha.t it was the intention of tho Legislature in passing Act Ko. IV of 1882" (the Transfer of Property Act) "to alter directly or
indirectly the Mohammedan law of pre-emption as it existed and wa.s understood for centuries prior to the passing of Act IY of 1882". That a.t all events is in ha.rmonv with the con-
clusion come to by the High Court at 'Bomb11.y. The conclusion is, that you a.re to look at the intention of the parties in determinin~ what system of la.w was to be ta.ken a.s applying a.nd wha.t wa.s to be ta.ken to be
(1) (1894) l.L.R. 16 All. 344. (2) (1921) 48 !.A. 475· the date of the sale with reference to which the cere- z96o monies were performed". Radhakisan But it was argued for the respondents that the Privy
La:oninarayan Council had not only approved the observation of Toshniwal Sir John Edge, C. J., in Begum v. Mohammad v. Y akub (1) but has also approved the . view of the Shridhar Calcutta High Court in Jadu Lal Sahu v. Janki Ramclrnndra Alshi Koer ('). That was a case from Bihar where the right
& Others of pre-emption under Mohammedan Law was judicial- Kapur J. ly recognised in regard to Hindus also. The question whether the sale which was to be pre-empted 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 caM which went to the Privy Council (Sitaram Bhaurao Deshmukh v.
Jaiul Hasan Sirajul Khan(') aud the Calcutta case Jadulal Sahu v. Janki Koer ('))sale deeds were execut- ed and registered before the suits to enforce pre-emp- tion 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 ('), there was a verbal sale of a house which was followed by possession but there was no regis-
tered 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 pre- emption and afford fraudulent persons to avoid the law of pre-emption ; with this view Bannerji, J., did
not agree. But in our opinion the transfer of pro- perty where the Transfer of Property Act applies has, as was held by the Privy Council also, to be under the provisions of the '.l.'ransfer of Property Act only
and Mohammedan Law of Transfer of Property cannot override the statute law. Mahmood, J., in Janki v. Girjadat (') though in a minority (four judges took a different view) was of the opinion that a valid and
(1) (1894) l.L.R. 16 All .. 344· (2) (1908) I.L.R. 35 Cal. 575. (3) (1921) 48 I.A. 475. (4) (1885) IL.R. 7 All. 482, SUPRE!\!E COURT REPORTS (1961] perfected sale wa.s a condition precedent to the exer-
cise of the right of pre-emption a.nd until such sale ha.d Ji'adh~his(l11 b Cl" d h ' h f Jd een euecte t e rig t o pre-emptmn cou not arise. /.~, n11ir.a~ayr.Jt: T°''"""'"' Section 17 read with s. 49 of the Registration Act
v. shows that a transfer of immovea.lile property where .<h"d''"' it is worth Rs. 100 or more requires registration and Ra""'""'d•a °'''"'unless so registered the document does not affect the .s. Othas
property and cannot be received in e\·idence. The following observations of Mahmood, J., from Janki v. Girjadat (')a.re very apposite:- " If a valid and perfected sale were not a condi-
tion precedent to the exercise of tho pre-emptive right, consequences would follow which the law of pre-emp- tion does not contemplate or provide for. In this very case, supposing the so-called vendor, notwithstanding
the application of tho.15th August, 1882 (which cannot a.mount to an estoppel under the circumstances) conti- nues or re-enters into possession of the property, it is clear that the so.called vendoo would have no title
under the so-called sale, to enable him to reC'over possession-the transaction being, by reason of s. 54 of tho Transfer of Property Act., ineffectual as transfer of ownership. The right of pre-emption being only a right
of substitution, the successful pre-emptor's title is neces- sarily the same a.s that of the vendee and if the vendee took nothing under tho sale the pre-emptor ca.n ta.ko nothing either ; and it follows that if the
vendee could not oust the vendor, the pre-emptor could not do so either, because in both cases the ques- tion would necessarily arise whether the sale wa.s valid in the sonse of tr&nsfering ownership.
Again, if notwithst,anding a pre-emptive suit such as this, the so-ca.lied vendor, who ha.s executed &n invalid sale which does not in la.w divest him of the proprie- tory right, suh8oquently executes a valid and registor-
ll<l sale-deed in favour of a co-Bha.rer other than the pre-emptor or in favour of a purchaser for value without notico of the so-co.lied contra.ct for sale it is difficult to conceive how the pre-emptor, who ha.s
succeeded in a suit like the present, could resist the claim of such purchaser for possession of the pro- perty ". (1) (1885) l.L.R. 1 All. 482. Under s. 54 of the Transfer of Property Act a con-
r960 tract for sale does not of itself create any interest in h Radhakis5n or c arge on immoveable property and consequently Lazminarayan the contract in the instant case created no interest in
Toshniwaz favour of the vendee and the proprietary title did not v. validly pass from the vendors to the vendee and until ShddhDY that was completed no right to enforce pre-emption Ranzchand'° Alshi arose. As we have said earlier wherever the Transfer
'°' Othm of Property Act is in force Mohammedan Law or any Kapur J. 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 pre- emption. It was next contended that the appellant was guilty of fraud in that in order to defeat the right of the pre- em ptors 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 con- duct such as this would defeat the very law of pre-
emption,Jrhe right. to pre-empt the sale is not exercis- able 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 pre-emption by any lawful
means and this view has been accepted by this court in Bishan Singh v. Khazan Singh(') 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) [1959) S.C.R. 878, 884. [1961] i96o been completed until February l, 1944, when the sale
deed was executed. Anythiug done previous to it RadhaAisan Lax•••••ray•• coulci not ordinarily i>e said to be & fraud to deprive & Toshiwal pre-emptor, from the exercise of his right of pre-emp-
v. tion. There &re no equities in favour of a pre-emptor, Sloridioar . whose sole object is to disturb a valid transaction by Ramchandra Alsh• virtue of the rights created in him by statute. To .s- 0'""'
defeat the law of prn-emption by a.ny legitimate means Kapur J. 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 la.wful means.
It wa.s then submitted that the sale· deed had as a matter of fa.ct, been executed on February l, 1944; but respondent Sridhar brought the suit not on the ca.use of action arising on the sale dated February l,
1944, but on the transaction of April 10, 1943, coupled with that of April 24, 1943, which .being mere con- tracts of sale created no interest in the vt'lndee and there wa.s no right of pre-emption in respondent No. l
which could be enforced under the (',ode. l\lr. Chatterji urged that it did not matter if the sale took place later a.nd the suit wa.s brought earlier but the suit as laid down wa.s one to pre-empt a sale of April 1943 when,
as a matter of fa.ct, no sale had taken place. If respon- dent Sridhar had ba.sed his right of pre-emption on t.he basis of the sale of February 1, 1944, tho appellant would have ta.ken such defence as the law a.II owed
him. The defence in regs.rd to the con version of tho land from a.gricultura.l into non-agriculture.I site which negatives the right of pre-emption would then have become a very important iBBue in the case a.nd the
appellant would have adduced proper proof in regard to it. The right of pre.emption is a. wea.k right a.nd 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 wa.s erroneous a.nd we would therefore allow this appeal, set a.side the judgment and decree of the High Oourt and dismiBB the suit with costs throughout.
Appeal allowed.