Appeal No 167 of 1955
section N Kherdekar N K Kherdekar and A G Ratna
parkhi for the appellant
N C Chatterjee section 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 ChXIV 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 10000 out of which Rs 2000 was paid as earnest money and the other in regard to Survey No 151 for Rs 8500 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 No5 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 151 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 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 section 58 of the Code and sanction was accorded on January 22 1944 subject to payment of premium of Rs 9222 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 September 11 1943 ie 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 152
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 3306
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 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 section 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
According to Hirurkar Land Revenue Code pp126 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 section 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
Under section 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 sections 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 section 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 section 176 of the Code had a wider connotation than what it had under section 54 of the Transfer of Property
That 253 was based on the judgment of Vivian Bose J as he then was in Jainarayan Ramgopal Marwadi vs 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 vs 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 section 2 of the Transfer of Property Act which at the relevant time was in operation in Berar section 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 section O Kondema Naik vs 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 vs Jiaul Hasan Sirajul Khan4 where 1 AIR 1939 Nag
3 1900 28 IA 46
2 All 344
4 1921 48 IA 475
254 the observations of Sir John Edge C J in Begum vs 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 vs 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 All 3442 1921 48 IA 475255 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 vs Mohammad Yakub1 but has also approved the view of the Calcutta High Court in Jadu Lal Sahu vs 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 section 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
In the latter case the kabala was on July 28 1904 and the ceremonies were performed after that date
In the Allahabad case Begum vs 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 section 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
Mahmood J in Janki vs Girjadat 4 though in a minority four judges took a different view was of the opinion that a valid and 1 All 344
2 Cal
3 1921 48 IA 475
4 All
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 section 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 vs 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 section 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 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 All
257 Under section 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 vs 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  884
33 258 been completed until February 1 1944 when the sale deed was executed
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 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


Summary:
The appellant executed two usufructuary mortgages in favour of the respondents in 1946 with respect to two properties situated in Ferozepur city and herself took the properties on lease on the same date
The respondents filed an application under section 13 of the Displaced Persons Debts Adjustment Act LXX of 1951 for recovery of the principal sum due and also the arrears of rent
The appellant contested the application on the ground inter alia that the liability was not a debt under the Act as it was not a pecuniary liability and that mortgages in relation to properties situated now in India were not covered by it
The Tribunal allowed the application and passed a preliminary decree for sale
The appellant s appeal to the High Court and another under the Letters Patent were both dismissed
On appeal by special leave Held that a mortgage debt would create a pecuniary liabi lity upon the mortgagor and would be covered by the definition of the word  debt  in section 2 6 of the Act
There is nothing in any provision of the Act which would cut down the plain meaning of the words pecuniary liability as used in section 26 read with sub cl
c thereof or restrict those wide words to liability other than that secured by a mortgage
Under sub cl
c of section 26 a displaced person to whom a mortgage debt is due from any other person whether a displaced person or not ordinarily residing in the territories to which the Act extends can take the benefit of this Act
571 The interest of the prior mortgagee or the subsequent mort gagee if any would not be affected by a decree passed on an application under section 13 of the Act