Preemption is a Very Weak Right; For, Property Right is a Constitutional & Human Right

Saji Koduvath, Advocate, Kottayam.

What is Preemption?

  • Preemption is the purchase of any property by one person, before it is offered to others; or prior action before another acts (such as preemptive attack). 

What is Preemption, in Law?

  • In law, it is the right of a person to (re)purchase an immovable property (which has been sold to another) without a regular sale deed – but, merely by substituting the name of (re)purchaser in the sale deed.

In Audh Bihari Singh v. Gajadhar, AIR 1954 SC 417, our Apex Court (BK Mukherjea, J.) accepted the actual practice as to pre-emption explained in the decision, Govinda Dayal v. Inayatulla, ILR 7 A1l 775, which reads as under:

  • “It (right of pre-emption) is simply a right of substitution entitling the preemptor by means of a legal incident to which the sale itself was subject, to stand in the shoes of the vendee, in respect of the rights and obligations arising from the sale under which he has derived his title. It is in effect, as if in a sale deed, the vendee’s name was rubbed out and the pre- emptors’s name was substituted in his place.”

The afore-stated passage was quoted in Smt. Vijayalakshmi Vs. B. Himantharaja Chetty, AIR 1996 SC 2146, qualifying Govinda Dayal v. Inayatulla, ILR 7 A1l 775, to be a ‘classic judgment’.

Origin of Law of Preemption

The Constitution Bench of our Apex Court, held in Audh Bihari Singh v. Gajadhar (supra) as under:

  • “The Privy Council has said in more cases than one [Vide Jadulat v, Janki Koer, 39 I.A. 101, 106; Digambar Singh v. Ahmad, 42 I.A. 10, 18.], that the law of pre-emption was introduced in this country by the Muhammadans. There is no indication of any such conception in the Hindu Law and the subject has not been noticed or discussed either in the writings of the Smriti writers or in those of later commentators.”

Sources of Right of Preemption

  • In Audh Bihari Singh v. Gajadhar (supra), the Apex Court pointed out that the right of preemption arises by:
    • (1) rule of common law
    • (2) custom,
    • (3) personal Law
    • (4) statute and
    • (5) contract.

BK Mukherjea, J. explained for the Constitutional Bench as under:

  • “During the period of the Mughal emperors the law of pre- emption was administered as a rule of common law of the land in those parts of the country which came under the domination of the Muhammadan rulers, and it was applied alike to Muhammadans and Zimmees (within which Christians and Hindus were included), no distinction being made in this respect between persons of different races and creeds [Vide Hamilton’s Hedaya, Vol. III, P. 592].
  • In course of time the Hindus came to adopt pre-emption as a custom for reasons of convenience and the custom is largely to be found in provinces like Bihar and Gujerat which had once been integral parts of the Muhammadan empire. Opinions differ as to whether the custom of preemption amongst village communities in Punjab and other parts of India was borrowed from the Muhammadans or arose independently of the Muhammadan Law, having its origin in the doctrine of “limited right” which has always been the characteristic feature of village communities [Vide P.R. 98 of 1894]. …
  • Since the establishment of British rule in India the Muhammadan Law ceased to be the general law of the land and as pre-emption is not one of the matters respecting which Muhammadan Law is expressly declared to be the rule of decision where the parties to a suit are Muhammadans, the Courts in British India administered the Muhammadan Law of pre-emption as between Muhammadans entirely on grounds of ‘justice, equity and good conscience’. Here again there was no uniformity of views expressed by the different High Courts in India and the High Court of Madras definitely held that the law of pre-emption, by reason of its placing restrictions upon the liberty of transfer of property, could not be regarded to be in consonance with the principles of justice, equity and good conscience [Vide Krishna Menon v. Keshavan, 20 Mad. 305]. Hence the right of pre-emption is not recognised in the Madras Presidency at all even amongst Muhammadans except on the footing of a custom.
  • Rights of preemption have in some provinces like Punjab, Agra and Oudh been embodied in statutes passed by the Indian Legislature and where the law has been thus it undoubtedly becomes the territorial law of the place and is applicable to persons other than Muhammadans by reason of their property being situated therein. In other parts of India its operation depends upon custom and when the law is customary the right is enforceable irrespective of the religious persuasion of the parties concerned. Where the law is neither territorial nor customary, it is applicable only between Muhammadans as part of their personal law provided the judiciary of the place where the property is; situated does not consider such law to be opposed to the principles of justice, equity and good conscience.
  • Apart from these a right of pre-emption can be created by contract and as has been observed by the Judicial Committee in the case referred to above, such contracts are usually found amongst sharers in a village.”

Preemption is a Weak Right; Property right is a Constitutional/Human Right

  • In Rajasthan Housing Board, v. New Pink City Nirman Sahkari Samiti Ltd., AIR 2015 SC 2126, it was held that property right is a constitutional right and also a human right; and that preemption is a very weak right.
  • The Supreme Court of India repeatedly held that preemption is a weak right. Following decisions include in it:
    • Bishan Singh v. Khazan Singh, AIR 1958 SC 838,
    • Radhakishan Laxminarayan Vs. Shridhar , AIR 1960 SC 1368
    • Indira Bai v. Nand Kishore, AIR 1991 SC 1055,
    • Krishna Dass Agarwal v. Kanhaiyalal, AIR 1996 SC 3464,
    • Lachhman Dass v. Jagat Ram, AIR 2007 SC 1169
    • Barasat Eye Hospital v. Kaustabh Mondal, (2019) 19 SCC 767,
    • Raghunath v. Radha Mohan, AIR 2020 SC 5026.

The Supreme Court qualified preemption as an archaic right in the following decisions:

  • Atani Prakash v. State of Haryana, AIR 1986 SC 859
  • Indira Bai v. Nand Kishore, AIR 1991 SC 1055
  • Krishna Minor v. State of Haryana, AIR 1994 SC 2536
  • Shyam Sunder v. Ram Kumar, AIR 2001 SC 2472

Preemption is characterised to be a clog on right. (Therefore, it has to be construed strictly.)

  • Indira Bai v. Nand Kishore, AIR 1991 SC 1055
  • Mohd. Noor v. Mohd. Ibrahim, AIR 1995 SC 398
  • Hasthimal Vs. P. Tej Raj Sharma, AIR 2007 SC 3246

Court Looks upon preemption with distaste as held in:

  • Krishna Dass Agarwal v. Kanhaiyalal, AIR 1996 SC 3464.

Pre-emption is a ‘Right to the offer’ and a remedial rightto follow the thing sold’

Our Apex Court summarized the law on pre-emption in Bishan Singh v. Khazan Singh, AIR 1958 SC 838, as under:

  •  “(1) The right of pre-emption is not a right to the thing sold but a right to the offer of a thing about to be sold. This right is called the primary or inherent right.
  • (2) The pre-emptor has a secondary right or a remedial right to follow the thing sold.
  • (3) It is a right of substitution but not of re-purchase i. e., the pre-emptor takes the entire bargain and steps into the shoes of the original vendee.
  • (4) It is a right to acquire the whole of the property sold and not a share of the property sold.
  • (5) Preference being the essence of the right, the plaintiff must have a superior right to that  of the vendee or the person substituted in his place.
  • (6) 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.”

(Quoted in Barasat Eye Hospital v. Kaustabh Mondal, (2019) 19 SCC 767, and Raghunath v. Radha Mohan, AIR 2020 SC 502.)

Pre-Emption is Inconsistent with Constitutional Scheme and Modern Ideas

In Smt. Vijayalakshmi Vs. B. Himantharaja Chetty, AIR 1996 SC 2146, apprised the right of preemption as under:

  • “The concept of substitution from that long and even before has been the foundation of the law of pre-emption and has been noticed, followed and employed, time and again, in a catena of decisions. The fact that this Court in Atam Prakesh vs. State of Haryana [1986(2) SCC 249] has struck down the right of pre-emption based on consanguinity as a relic of the feudal past, inconsistent with the constitutional scheme and modern ideas, has not altered the situation that the right of pre-emption, wherever founded, whether in custom, statute or contract, is still a right of being substituted in place of the vendee, in a bargain of sale of immovable property. We therefore need not burden this judgment with other attributes of the concept as attempted by both Hon’ble Judges of the High Court.”

Right of Pre-emption once waived, cannot be raised on  subsequent sales

In Raghunath v. Radha Mohan, AIR 2020 SC 502, iterating that pre-emption is a weak right, it was held that once a plaintiff-pre-emptor chooses to waive his right of Pre-emption, he loses that right for ever, and could not raise the right in perpetuity every time there is a subsequent transaction or sale. It is only exercisable for the first time when the cause of such a right arises.

Section 10 & 11 of Transfer of Properties Act & Preemption

Section 10 of Transfer of Properties Act reads as under:

  • “10. Condition restraining alienation: Where property is transferred subject to a condition or limitation absolutely restraining the transferee or any person claiming under him from parting with or disposing of his interest in the property, the condition or limitation is void, except in the case of a lease where the condition is for the benefit of the lessor or those claiming under him:provided that property may be transferred to or for the benefit of a women (not being a Hindu, Muhammadan or Buddhist), so that she shall not have power during her marriage to transfer or charge the same or her beneficial interest therein.”

Section 11 of Transfer of Properties Act reads as under:

  • 11. Restriction repugnant to interest created– Where transfer of property, an interest therein is created absolutely in favour of any person, but the terms of the transfer direct that such interest shall be applied or enjoyed by him in a particular manner, he shall be entitled to receive and dispose of such interest as if there were no such direction.
  • Where any such direction has been made in respect of one piece of immoveable property for the purpose of securing the beneficial enjoyment of another piece of such property, nothing in this section shall be deemed to affect any right which the transferor may have to enforce such direction or any remedy which he may have in respect of a breach thereof.

In Gayasi Ram v. Shahabuddin, AIR 1935 All 493, the sale deed contained a clause that the vendee shall not transfer the house by mortgage, gift or sell to any one except the vendor or his heirs and if in contravention of the clause, the property is sold the vendor or his heir would have a right to get back the house by paying Rs. 175/- and if the property was to be sold in court auction sale, the sale would be invalid. The sale consideration for the house was Rs. 150/-. Relying on Dal Singh v. Khub Chand (AIR 1921 All 97), Asghari Begam v. Maula Bakhsh (AIR 1929 All 381) and Gomti Singh v. Anari Kuar (AIR 1929 All 492) it was held that the sale deed was between strangers and the clause was an absolute restraint on alienation to anyone except the vendor or his heirs and therefore void in view of Section 10 of Transfer of Property Act, and that in such cases question of pre-emption did not arise.

In Trichinopoly Varthaga Sangam Ltd. v. T. N. Shanmughasundaram, AIR 1939 Mad. 769, the Clause in the Partition deed – the property should not be sold to any stranger; and lease only to brothers or their heirs for a sum not exceeding Rs. 1000/-. The court found that there was “no obligation” for a member to buy “even at Rs. 1000/-“. Hence it was held – Restriction is ‘absolute’, and hence, void.

Similarly, it was held in Manohar Shivram Swami v. Mahadeo Guruling Swami, AIR 2008 Bom 116, that the condition in the Sale deed prohibiting sale ‘outside family’ was void.

In Bhavani Amma Kanakadevi v. CSI, Dakshina Kerala Maha Idavaka, AIR 2008 Kerala 38, the question came for consideration was whether a provision in a sale deed that in the event of failure to construct a private college in the property sold thereunder, the property shall be re-conveyed by the vendee to the vendor for the same sale consideration is barred under the provisions of Sections 10 or 11 of Transfer of Property Act. Observing that (though) Ext.A2 did not contain a specific clause prohibiting respondent from alienating the property to third parties, the implied clause – that in the event of failure to construct a college, the property shall be reconveyed to the assignor at the same price – shut out any other option. The High Court held that it was an absolute restraint on the right of respondent to deal with the property including alienation, which was void as provided under Section 10. 

The court referred to the following decisions:

  • Jatru Pahan v. Mahatma Ambikajit Prasad ( AIR 1957 Patna 570),
  • Gayasi Ram v. Shahabuddin (AIR 1935 All. 493)
  • Manohar Shivram Swami v. Mahadeo Guruling Swami (AIR 1988 Bombay 116)
  • Fatima v. Saraswathi Amma (AIR 1986 Kearla 56).
  • Thomas v. AA Henry, 2008(2) KLT 63, ILR 2008(2) Ker. 12
  • Trichinopoly Varthaga Sangam Ltd. v. T. N. Shanmughasundaram, AIR 1939 Mad. 769.

Read in this Cluster (Click on the Topic):

Book No. 1.   Handbook of a Civil Lawyer

Book No. 2: A Handbook on Constitutional Issues

Book No. 3: Common Law of CLUBS and SOCIETIES in India

Book No. 4: Common Law of TRUSTS in India

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