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PETITIONER: RADHAKISAN LAXMINARAYAN TOSHNIWAL

       Vs.

RESPONDENT: SHRIDHAR RAMCHANDRA ALSHI AND OTHERS.

DATE OF JUDGMENT: 23/04/1960

BENCH: KAPUR, J.L. BENCH: KAPUR, J.L. SINHA, BHUVNESHWAR P.(CJ) GAJENDRAGADKAR, P.B. SUBBARAO, K. WANCHOO, K.N.

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)

ACT: 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.

HEADNOTE: 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  pre- emption   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.   The- right  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

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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 property, 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.

JUDGMENT: 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  non- agricultural  purposes and thereafter a sale deed was to  be

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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  diver- sion  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  cir- cumstances 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  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 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  pre- emption.   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   non- agricultural  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  non- agricultural 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  pre- emption   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  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

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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  pre- emption  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  pre- emption 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

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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 co- sharers  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 pur- chaser.  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.

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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 Rs. 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  condi- tion  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  so- called 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  pre- emption  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

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transferring  ownership.  Again, if notwithstanding  a  pre- emptive  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  pre- emption 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)  [1959] 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

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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  non- agricultural  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.                           Appeal allowed. 259