JUDGMENT [ENTITY], J.
1. In the main application, [CASE NUMBER], the applicant asserts a right in the nature of pre-emption. In the more recent application, [CASE NUMBER], the vendor in whose agreement the right is found has sought to be impleaded as an applicant in [CASE NUMBER]. The original applicant and the later applicant are under the same management and there appears to be no conflict of interest between the two.
2. By an indenture of October 30, 1963, Titagarh Paper Mills Company Limited sold a piece of land to [ENTITY] India Limited. The recital to the agreement identified Titagarh Paper Mills Company Limited as the vendor company and specified that such expression was to include its successors. [ENTITY] India Limited was referred to in the agreement as the purchaser company which expression was to include its successors and assigns. It is not in dispute that the purchaser company later came to be known as Weighbird India Limited, a company subsequently taken over by the Central Government, the shares wherein were held by the Central Government through Bharat Bhari Udyog Nigam Limited. It is also not in dispute that the vendor company came subsequently to be known as Titagarh Steels Limited and ultimately as Titagarh Industries Limited, the applicant in the later application.
3. It appears from the document of October, 1963 that both the vendor and the purchaser companies were under a common management. [SECTION] of such agreement provide as follows:
V. It is Hereby Agreed & Declared by & Between the Vendor Company and the Purchaser Company as follows:
(i) If at any time hereafter the purchaser company shall desire to sell the said premises or cease to use the said premises for the purpose of manufacture of its products or if the purchaser company be put into liquidation or if at any time Geo. Salter & Co. Ltd. a shareholder of the purchaser company disposes of all or the majority of its shareholding in the purchaser company without the express concurrence in writing of the vendor company then and in such case the vendor company shall have the option of purchasing the said premises.
(ii) If at any time hereafter the purchaser company shall create any charge or mortgage on the said premises and if the said premises shall be offered or put up for sale in enforcement of such charge or mortgage then and in such case the vendor company shall have the option of purchasing the said premises before the said premises are offered or put up for sale and it is an express condition or stipulation of this conveyance that any such charge or mortgage of the said premises created by the purchaser company shall be and shall always be deemed to be subject to this condition or stipulation.
(iii) In every such case the purchaser company or the party enforcing the charge or mortgage as the case may be shall forthwith make an offer in writing to the vendor company to sell the said premises and in the event of a Court enforcing the charge or mortgage the said property shall apply to such Court for a direction that the said premises be offered to the vendor company for purchase.
(iv) If the vendor company shall accept in writing before the expiration of the period of sixth day from the date of receipt by the vendor company of such an offer then the said premises shall be sold to the vendor company free from all encumbrances upon the terms hereinafter contained in this clause.
(v) If such offer is expressly declined or is not accepted by the vendor company within the period specified in Sub-clause (iv) hereof or if within sixty days from the date on which directions are given by the Court under Sub-clause (iii) hereof the vendor company does not notify in writing the Court enforcing the charge or mortgage that the vendor company is willing to purchase the said premises then the purchaser company or the party or the Court enforcing the charge or mortgage shall be at liberty to sell or otherwise dispose of the said premises upon such terms as the purchaser company or the party or the Court enforcing the charge or mortgage shall think fit.
(vi) The sale under the option exercised on a notice given by the purchaser company under Sub-clauses (iii) and (iv) hereof shall be upon the following terms and conditions:
(a) The sale price shall be the market price fixed by mutual agreement between the purchaser company and the vendor company or failing agreement by an independent valuer appointed by the President for the time being of the Bengal Chamber of Commerce & Industry at the request of either the purchaser company or the vendor company.
(b)The sale shall be completed within six months from the date of acceptance of the offer by the vendor company in terms of Sub-clause (iv) hereof.
(vii) The sale under the option exercised on a notice given by the party enforcing the charge or mortgage under Sub-clauses (iii) and (iv) hereof shall be upon the following terms and conditions:
(a) The sale price shall be the market price fixed by mutual agreement between the vendor company and the party enforcing the charge or mortgage or failing agreement by an independent valuer appointed by the President for the time being of the Bengal Chamber of Commerce & Industry at the request of either the vendor company or the party enforcing the charge or mortgage or the price fixed by the Court enforcing the charge or mortgage.
(b) The sale shall be completed within such period which as may be agreed between the vendor company and the party enforcing the charge or mortgage or the period which may be fixed by the Court enforcing the charge or mortgage on the application of either the vendor company or the party enforcing the charge or mortgage.
VI. Nothing contained in these presents shall be construed as creating a mortgage by conditional sale within the meaning of [SECTION] of the [ACT] between the vendor company and the purchaser company in respect of the said premises.
4. In the original application, the applicant therein, one Titagarh Papers Limited claimed to be entitled to the rights of the vendor under the 1963 agreement, tracing its rights as a transferee under a scheme of arrangement sanctioned by this Court on February 1, 2006. According to the original applicant, it received the Paper Mill No. 1 divisiorj of Titagarh Industries Limited under the scheme of compromise and arrangement sanctioned by this Court in the year 2006 and by virtue of [SECTION] and [SECTION] of such scheme, it became entitled to the entire business undertaking of Titagarh Industries Limited established at Titagarh for the manufacture and sale of paper and all assets and liabilities of Titagarh Industries Limited pertaining or relatable thereto. The rights under the agreement of October, 1963 are not specifically found in the scheme, but the original applicant asserted that since such right of Titagarh Industries Limited related to the paper mill that it transferred under the scheme to the original applicant, the original applicant was the rightful repository of the rights of the vendor under the 1963 agreement and entitled to enforce the same. However, upon a question of locus having arisen, the original applicant offered to bring Titagarh Industries Limited on as a co-applicant and the later application was thereafter made with leave to treat either applicant as the owner of the right or both applicants as joint owners thereof.
5. According to the applicants, the 1963 agreement recognises that the vendor or its successor-in-interest would have a right in the nature of preemption in respect of the subject land in the event any of the following four situations arose without express concurrence in writing of the vendor company:
(i) The purchaser or its successor or assign desired to sell the land; or
(ii) the purchaser company or its successor or assignee ceased to use the said premises for the purpose of manufacture of its products; or
(iii) if the purchaser company or its successor or assign was put into liquidation; or
(iv) if at any time, [ENTITY] & Company Limited, a shareholder of the purchaser company or its successor or assign, disposed of all or the majority of its shareholding in the purchaser company or its successor or assign.
6. The applicants insist that upon any of the above situations covered by Clause V of the agreement arising, the applicants are entitled to call upon the purchaser company or its successor or assign to fix a price by mutual agreement and purchase the premises at such price. However, it appears from the relevant sub-clauses that there is no price mechanism that has been provided for in such a situation and the price mechanism detailed in the agreement is for a situation that has not arisen in this case. The applicants have accepted such position and have conceded that the agreement does not provide a price mechanism but submit that it is always open to a Court to ascertain the market value of an immoveable property to enable the vendor or his successor to exercise the option that is reserved unto it under the agreement.
7. By a letter of October 21, 2002, the later applicant called upon the company, prior to its liquidation, to sell the land to the later applicant. In such letter the later applicant asserted as follows:
the company has ceased to use the said land for the purpose the same was sold out and workers have all opted for the Voluntary Retirement Scheme. Presently, no manufacturing activity is going on in the said land and the company is closed for all practical purposes.
In the premises aforesaid, we hereby exercise our right of pre-emption as contained in the said indenture and request you to take necessary steps for re-selling the land to us in accordance with the provision as contained in the said indenture, in particular the clause as set out hereinabove.
8. The applicants claim that upon such demand going unheeded, the applicant was within its rights to enforce its right found in the agreement. Before such right could be enforced, the company went into liquidation on April 8, 2003, giving rise to another ground on which it could assert the same right. But the immediate reason, according to the applicants, for instituting these proceedings, was a notice issued on January 27,2006 by the official liquidator for sale of the moveable property of the company in liquidation. The original application was presented on June 16, 2006 and the later applicant jumped into the fray on August 17, 2007.
9. According to the applicants, these proceedings cover two pieces of land, the first is described in Schedule C to the original application and is said to measure approximately 26,1[SECTION] sq.ft. which was the subject-matter of the 1963 document and the second, a land measuring approximately 49,514 sq.ft. with a building on 44,641 sq.ft. and an open area of 4,873 sq.ft. The applicants claim that the second piece of land, and the building thereon, were made available to the company as a licensee and seek a direction on the official liquidator to disclaim such property detailed in Schedule I to the affidavit in support of the original Judges summons. The arguments have, however, been confined to the first property and it is such first property that is the subject of the discussion herein. The applicants will have leave, if they are otherwise entitled, to pursue prayers (e), (i) and (g) of the Judges summons relating to the second property in subsequent proceedings that may be brought in that regard. The prayers being considered in connection with the first property are as follows:
(a) An order directing sale of the first property as described in Schedule "C" to the applicant at a price to be determined by this Hon'ble Court in the manner as provided in the deed of conveyance dated 30th October, 1963;
(b) Respondent be directed to take steps to execute a conveyance for sale of the first property in favour of the applicant;
(c) An order appointing a valuer for the purpose of determining the price of the first property in the manner as provided for in the deed of conveyance dated 30th October, 1963;
(d) Alternatively leave be given to the applicant to file a suit or any other appropriate proceedings against the company (in liquidation) in respect of its claim and right of pre-emption to purchase the first property under the conveyance dated 30th October, 1963;
10. The applicants suggest that such a right as the applicants seek to assert is recognised in [SECTION] of the [ACT]:
[SECTION]. Burden of obligation imposing restriction on use of land. Where, for the more beneficial enjoyment of his own immovable property, a third person has, independently of any interest in the immovable property of another or of any easement thereon, a right to restrain the enjoyment in a particular manner of the latter property, or Or of obligation annexed to ownership but not amounting to interest or easement. Where a third person is entitled to the benefit of an obligation arising out of contract, and annexed to the ownership of immovable property, but not amounting to an interest therein or easement thereon, Such right or obligation may be enforced against a transferee with notice thereof or a gratuitous transferee of the property affected thereby, but not against a transferee for consideration and without notice of the right or obligation, nor against such property in his hands.
11. It is the second paragraph of [SECTION] that the applicants cite to assert the right found in the third paragraph. But Counsel for the official liquidator submits that if it is a right under [SECTION] that the applicants assert, the applications have to be dismissed as [SECTION] recognises a pre-emptor's right against only a transferee and not the transferor. It is rightly pointed out on behalf of the official liquidator that in the absence of any sale having taken place, the applicants cannot apply under [SECTION]. It is also submitted on behalf of the official liquidator that, if the applicants seek to assert any right of pre-emption, these proceedings have to be understood as one under [SECTION] for leave to be granted to the applicants to institute a suit. According to the official liquidator, such a right of pre-emption as one under [SECTION] of the [ACT], has first to be established by way of a suit as recognised in [SECTION] of the [ACT], and the decree can only be passed upon the sale of the subject immovable property being completed.
12. For the same purpose, Counsel for the official liquidator relies on [SECTION] of the Schedule to the [ACT] and submits that in any view of the matter, the right of pre-emption whether under any statute or by custom or on special contract can only be exercised upon the sale being completed and the document of sale being registered. The period of one year provided under [SECTION] begins when the purchaser takes under the sale sought to be impeached, physical possession of the whole or part of the property sold, or, where the subject-matter of the sale does not admit of physical possession of the whole or part of the property, when the instrument of sale is registered.
13. The applicants have begun with the decision reported at [PRECEDENT]. In that case the appellant before the Privy Council, the plaintiff, alleged that there was a customary right of pre-emption prevalent in the village among co-sharers and that he was entitled to have the right made good. The objection by the defendants was that the plaintiff ought to have exercised his right of pre-emption by bidding at the sale. The bidding was in course of bankruptcy proceedings against the transferor and the right of pre-emption in respect of a property sold in bankruptcy proceedings was discussed by the Privy Council in the following words:
With deference to the learned Judges it seems to Their Lordships that this overlooks one of the fundamental principles of all arrangements for the realization and distribution of a bankrupt's property. In every system of law the term may vary, but in all there is an official, be he called an assignee or trustee or any other name, and that official, is by force of the statute invested in the bankrupt's property. But the property he takes is the property of the bankrupt exactly as it stood in his person, with all its advantages and all its burdens. The working out of the view taken by the learned Judges would lead to curious results. After all, in a custom of pre-emption there is, so to speak, a debtor and creditor side: the debtor side is the obligation of the holder of the share to offer it to a co-sharer; the creditor side is the right of the co-sharer to buy. The property, if fettered, would be presumably somewhat less valuable than if it were free. But if the view of the learned Judges were right, the bankruptcy of A would have the double effect of forfeiting something belonging to B and of rendering the property of A more valuable in the hands of his official assignee than it was in his own.
14. The applicants have relied on the decision reported at [PRECEDENT] an Anr. and the following passage found therein, quoting from a judgment rendered at the turn of the last century:
Much more assistance, in my judgment, is to be derived from two authorities in the sphere of bankruptcy to which I was referred by Counsel on behalf of the plaintiff, and, indeed, by Counsel on behalf of the defendants. The first of those is [PRECEDENT], where the headnote reads:
Specific performance may be enforced against the trustee in bankruptcy of a vendor of property, and, if the property is leasehold, he cannot disclaim the contract without disclaiming the lease.
In the course of his judgment, [ENTITY] J said (at 125):
'It has been contended on his that is the trustee in bankruptcy's behalf that the fact of the bankruptcy makes all the difference as regards the liability to specifically perform a contract. In support of that, [PRECEDENT], has been referred to. The effect of that decision is correctly stated in [ENTITY]'s Vendors and Purchasers [6th Edn, 1888) p 1126]-that is to say, that specific performance cannot be decreed against the trustee in bankruptcy of the purchaser. That decision has no application to a case in which the vendor's trustee in bankruptcy is the defendant. If any authority is needed in support of this finding, it is to be found in Ex parte Rabbidge 1878(8) Ch D 367 at 370) where [ENTITY] L.J. said:
The result was that, upon the adjudication being made, the legal estate in the property vested in the trustee in the bankruptcy, subject to the equity of the purchaser under the contract. That equity gave him a right to have the property conveyed to him, upon payment of the purchase-money to the person to whom the property belonged.
And [ENTITY] L. J. said (at 371): 'The trustee in the bankruptcy had vested in him the estate of the bankrupt in the property. He was not in the fullest sense of the word a trustee of the property for the purchaser, because the whole of the purchase-money had not been paid. But he took the legal estate in the property, subject to the equity of the purchaser under the contract, which gave the purchaser the right to say convey me the estate on my paying the purchase money." Anything more explicit on this part of the case could not well be imagined. All that the plaintiff asks the trustee to do is to execute the engrossment already approved and assign the property to him, and, the plaintiff disclaiming any right of proof against the bankrupt's estate, an order for such execution, and that the defendant is to pay the costs of the action, must be made.' I appreciate of course, that the Court in that case was concerned with the position of a vendor's trustee in bankruptcy and not the receiver of a vendor company, and I, of course, appreciate that one important difference between those two situations is that the property of the bankrupt in the Pearce case, including the property subject to the contract of sale, vested in the trustee in bankruptcy, whereas the defendant company's property in the present case is not vested in the receiver. But none the less, in my judgment, the approach which is adopted there by [ENTITY] J to determining the non-effect of bankruptcy on the equitable interest which a purchaser of land from a bankrupt had before the onset of bankruptcy is certainly of assistance in considering the effect or non-effect of the appointment of a receiver of the vendor companies in the present case.
The other bankruptcy authority which arose, in fact, out of the same bankruptcy is in the Court of Appeal and is [CASE NUMBER], and the headnote there reads:
The trustee in a bankruptcy cannot, under [SECTION] of the [ACT], disclaim a contract entered into by the bankrupt for the sale of a lease under he also disclaims the lease itself. [SECTION] was intended to enable the trustee to get rid of an onerous property or contract, and it does not enable him to disclaim a contract merely because it would be more beneficial to the estate that the contract should not be carried out. The trustee cannot by a disclaimer take away from a purchaser of land from the bankrupt the equitable interest which vested in him under his contract.
15. For the history of the law relating to pre-emption as recognised in this country, the applicants have relied on the judgment reported at [PRECEDENT]. and paragraphs 10 and 11 thereof:
(10) 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 [ENTITY], the Courts in British India administered the Muhammadan Law of pre-emption as between [ENTITY], 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: [PRECEDENT]. Hence the right of pre-emption is not recognised in the Madras Presidency at all even amongst [ENTITY] except on the footing of a custom.
Rights of pre-emption 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 codified, it undoubtedly becomes the territorial law of the place and is applicable to persons other than [ENTITY] by reason of their property being situated therein: See '[ENTITY]'s Muhammadan Law, Vol. II, page 596'. 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 [ENTITY] 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. It is against this background that we propose to examine the contentions that have been raised in the present case.
(11) The first question that has been mooted before us is, whether the burden and benefit of a right of pre-emption are incidents annexed to the lands belonging respectively to the vendor and the pre-emptor or is the right merely one of re-purchase, which a neighbour or co-sharer enjoys under Muhammadan Law, and which he can enforce personally against the vendee in whom the title to the property has already vested by sale.
The Learned Counsel for the appellant has pressed for acceptance of the first view while the Solicitor-General appearing for the respondents has contended, that by no accepted principles of jurisprudence, can the pre-emptor be said to have an interest in the property of the vendor. It is pointed out that the right of pre-emption arises for the first time when there is a completed sale and the title of the purchaser is perfected and if the right was one attached to the property, it must have existed prior to the sale and should have been available not merely in case of sale but in all other kinds of transfer like gift and lease.
16. [PRECEDENT]. is pressed into service by the applicants to demonstrate the right is such that it need not be fastened to the land though it is an incident of property and attaches to the land itself. In this case the Supreme Court considered a statutory right of pre-emption that provided that the land owner or the tenant at will would have the same right in the land allotted to him as he had in his original holding or tenancy. It was held that such a provision preserved the obligation that may be on the land in the nature of a disability and the consequence was that the ordinary law of pre-emption under which the pre-emptor had the right to follow the land stood extended and the land allotted to the land owner or tenant at will in lieu of the land which may have been subject to pre-emption, also became subject to pre-emption in the same way as the original holding or tenancy.
17. The applicants have next referred to [PRECEDENT]. again a case of a statutory right of pre-emption which recognises the right of pre-emption as an incident of ownership of one land and a burden on the ownership of another land. The Court held that on general principles, the incident and burden will follow such land in the nature of a covenant running with the land.
18. The applicants have also placed the judgment reported at [PRECEDENT] (dead) by his legal representatives and Ors. for the proposition that the right of pre-emption does not abate on the death of the holder of such right, and the judgment at [PRECEDENT]. for the proposition that purchasers of property subject to right of pre-emption will be bound by the burden, subject to [SECTION] of the [ACT]. The concept of duality of ownership, legal and equitable, and the English principles of equitable ownership in property have been discussed in the next case cited by the applicants reported at [PRECEDENT]. Paragraph 6 of the report has been placed to highlight the burden of obligation annexed to the ownership of immovable property in such a case:
6. We do not wish to go in any detail into the question whether the English equitable doctrine of conversion of realty into personality is applicable in India. However, we do wish to say that the English doctrine of conversion of realty into personality cannot be bodily lifted from its native English soil and transplanted in statute-bound Indian law. But, we have to notice that many of the principles of English equity have taken statutory form in India and have been incorporated in occasional provisions of various Indian statutes such as the [ACT], the [ACT], [ACT] etc. and where a question of interpretation of such equity based statutory provisions arises we will be well justified in seeking aid from the equity source. The concept and creation of duality of ownership, legal and equitable, on the execution of an agreement to convey immovable property, as understood in English is alien to Indian Law which recognises one owner i.e. the legal owner; vide [PRECEDENT] . The ultimate paragraph of [SECTION] of the [ACT], expressly enunciates that a contract for the sale of immovable property does not, of itself, create any interest in or charge on such property. But the ultimate and penultimate paragraphs of [SECTION] of the [ACT] make it clear that such a contract creates an obligation annexed to the ownership of immoveable property, not amounting to an interest in the property, but which obligation may be enforced against a transferee with notice of the contract or a gratuitous transferee of the property. Thus, the equitable ownership in property recognised by equity in England is translated into Indian Law as an obligation annexed to the ownership of property, not amounting to an interest in the property, but an obligation which may be enforced against a transferee with notice or a gratuitous transferee.
19. According to the applicants, under [SECTION] of the [ACT] the official liquidator is merely a custodian of the properties of a company in liquidation as has been recognised by Sub-section (1) thereof:
456. Custody of company's property. (1) Where a winding up order has been made or where a provisional liquidator has been appointed, the liquidator or the provisional liquidator, as the case may be, shall take into his custody or under his control, all the property, effects or actionable claims to which the company is or appears to be entitled.
20. For such purpose the applicants have relied on a Division Bench judgment of the Bombay High Court reported at [PRECEDENT] and [PRECEDENT] and Liquidator of Atrois Chemicals Pvt. Ltd. to assert that the position of the assignee in bankruptcy proceedings is different from the position of the official liquidator in company winding up proceedings. Paragraph 23 of the report has been placed:
23. Our attention is drawn to two decisions of the Karnataka High Court. In the case of [PRECEDENT], the Court considered a case where a State Financial Corporation, as a secured creditor, sought leave of the Court under [SECTION] of the [ACT] for permission to sell the mortgaged property of the respondent company in liquidation for the recovery of its dues in exercise of its powers under [SECTION] of the [ACT]. The Court held that this right is available to a financial corporation only when the company is not in winding up. Once the company is in winding up and 'its property vests in the Court', the State Financial Corporation cannot exercise its power under [SECTION] and in such a situation only the official liquidator can sell the properties of the company in winding up. With respect to the learned Judge, he is not right in proceeding on the footing that the property of a company in winding up vests in the official liquidator. He has only the custody of the property of the company. Under [SECTION] of the [ACT], the Official Liquidator is required to take into his custody and control all the properties of the company in winding up. The property of the company does not vest in him as in the case of insolvency. The company remains the property of the company [ENTITY]'s Guide to the [ACT], 12th Edition, page 1811). Therefore, the official liquidator cannot demand possession of the property from a mortgagee lawfully in possession of it. Also, the rights conferred on a financial corporation as a mortgagee under [SECTION] of the [ACT] are not obliterated when the company is in winding up. It may have to exercise its right to take possession with the permission of the Court. Also, the statutory right which is given to a financial corporation under [SECTION] to sell the property has to be exercised consistently with the rights of a pari passu chargeholder in whose favour a statutory charge is created by the proviso to [SECTION] of the [ACT] when the company is in liquidation. Therefore, such a power can be exercised only with the concurrence of the official liquidator and the official liquidator is required to take the permission of the Court before giving such concurrence since he is an officer of the Court and is required to act under the directions of the Court while exercising his powers on behalf of the workers. However, we entirely agree with the learned Judge when he says in the above judgment that for the implementation of the priorities under [SECTION] of the [ACT] the official liquidator must take necessary steps to file the claim of the workman before the Court as set out in the judgment and that this is not dependent on the statement of affairs being filed by the Directors of the company. This, however, is not a question which requires determination in the present case and, hence we do not propose to go into this question. We respectfully differ from this judgment in so far as it lays down that if there are workmen's dues, only the official liquidator can sell the properties which are secured to a State Financial Corporation if the company is wound up.
21. The applicants accept that the applicants do not press the classical right of pre-emption as recognised under [SECTION] of the [ACT]. The applicants have conceded that they need not assign any name to the right that they seek to assert in these proceedings. They simply seek to rely on the 1963 agreement and claim back the land that the later applicant had transferred to the company (now in liquidation) in terms thereof. The applicants show that a contractual right as the one that they seek to enforce is on equal footing as a right of pre-emption recognised when such right is traced to custom or statute. The applicants refer to the judgment of a Division Bench of this Court reported at 58 CWN 1000 [PRECEDENT]. where it was a contractual right that was sought to be enforced.
22. The facts in that case were that on March 15, 1945, in pursuance of an arrangement between the parties for sale and resale of a land, the plaintiffs sold the property to the first defendant and simultaneously obtained from him an agreement for reconveyance. The second and third defendants claimed to be co-sharers and applied for pre-emption under the [ACT] against the first defendant-transferee and there was an order in favour of the second and third defendants. The plaintiffs thereupon brought a suit against the second and third defendants and the original transferee-first defendant for specific performance of the contract, claiming that there was a simultaneous agreement for reconveyance and that the second and third defendants had notice of such agreement for re-conveyance and were bound by the same.
23. On such facts and upon the Court's satisfaction that the pre-emptors under the [ACT] who instituted the pre-emption proceedings had notice of the agreement for reconveyance, it was held that such pre-emptors could not resist the enforcement of the agreement for reconveyance merely by virtue of the provisions of the [ACT]. The pre-emptors' appeal from the appellate decree was dismissed by the Division Bench of this Court by recognising the original transferor's contractual right. Such contractual right prevailed notwithstanding the provisions of the [ACT] that the pre-emptors had invoked to effectively annul the transfer in favour of the first defendant in that suit.
24. In the judgment reported at [PRECEDENT]. that the applicants next cite, the principal issue was whether a covenant in the nature of pre-emption was merely personal. Though such issue is not relevant in the present case upon the later applicant, the original transferor, joining in the fray, such Supreme Court decision needs to be mentioned in its recognition of the principles found in English Law and in the statement that Indian Law on the aspect is somewhat different. In a suit for partition between two brothers, the matter was referred to arbitration and a final decree was passed in the suit on the basis of the arbitrator's award. The award recorded the consent and approval of the parties to a condition that in case either party disposed of or transferred any portion of his share, he would "offer preference to the other party, that is each party shall have the right of pre-emption". One of the brothers sold a portion of his share to an outsider upon the other brother's refusal to pre-empt the same in spite of an offer in terms of the pre-emption clause. The other brother sold two of the blocks of properties partitioned to another set of outsiders who, in turn, sold such two blocks to the plaintiffs in the suit. The transferee of the property which had been refused to be taken up in terms of the pre-emption clause, sold such property to the first defendant in the suit and the transferees of the other block of properties instituted a suit for pre-empting the first defendant's purchase. During pendency of the suit the first property was transferred by the first defendant to the second defendant and the plaintiffs applied for amending the plaint to seek a decree for pre-emption against both the defendants and calling upon both defendants to execute a conveyance in favour of the plaintiffs on payment of the actual consideration paid for such property.
25. The Trial Court recognised the plaintiffs' right of pre-emption and decreed the suit. In appeal, this Court affirmed the judgment and decree. The Supreme Court recognised that the rights of parties to a contract were assignable on the strength of [SECTION] and [SECTION] of the [ACT] and [SECTION] and [SECTION] of the [ACT]. The Supreme Court thereafter considered the question whether the covenant of pre-emption offended the rule against perpetuity and, upon noticing the English Law, found that prior to the [ACT] in India the English doctrine applied, but upon [SECTION] of the [ACT] there was a change in the legal position in India. In such context, it was held as follows:
The second paragraph of [SECTION] taken with the illustration establishes two propositions: (1) that a contract for sale does not create any interest in the land, but is annexed to the ownership of the land, and (2) that the obligation can (be) enforced against a subsequent gratuitous transferee from the vendor or a transferee for value but with notice. [SECTION] of the Act states as follows:
14. No transfer of property can operate to create an interest which is to take effect after the lifetime of one or more persons living at the date of such transfer, and the minority of some person who shall be in existence at the expiration of that period, and to whom, if he attains full age, the interest created is to belong.
Reading [SECTION] along with [SECTION] of the [ACT] it is manifest that a mere contract for sale of immoveable property does not create any interest in the immoveable property and it, therefore, follows that the rule of perpetuity cannot be applied to a covenant of pre-emption even though there is no time limit within which the option has to be exercised. It is true that the second paragraph of [SECTION] of the [ACT] makes a substantial departure from the English Law, for an obligation under a contract which creates no interest in land but which concerns land is made enforceable against an assignee of the land who takes from the promisor either gratuitously or takes for value but with notice. A contract of this nature does not stand on the same footing as a mere personal contract, for it can be enforced against an assignee with notice. There is a superficial kind of resemblance between the personal obligation created by the contract of sale described under [SECTION] of the Act which arises out of the contract, and annexed to the ownership of immoveable property, but not amounting to an interest therein or easement thereon and the equitable interest of the person purchasing under the English Law, in that both these rights are liable to be defeated by a purchaser for value without notice. But the analogy cannot be carried further and the rule against perpetuity which applies to equitable estates in English Law cannot be applied to a covenant of preemption because [SECTION] of the statute does not make the covenant enforceable against the assignee on the footing that it creates an interest in the land.
26. On behalf of the official liquidator, the thrust of the argument has been as to the locus of the original applicant. But upon the later applicant joining in, much of the sting in such attack has been taken away. The major endeavour on the part of the official liquidator has been to demonstrate that the right as the one urged by the applicants is a feeble right and, in the circumstances, is purely illusory. The official liquidator's reliance on [PRECEDENT]. has been rendered irrelevant upon the later applicant joining in and it is not necessary to consider whether the right as the one claimed by the applicant is personal and it cannot be transferred, as the original transferor is now before Court.
27. The judgments reported at [PRECEDENT]. and [PRECEDENT] have been cited on behalf of the official liquidator to show that a party enforcing a right in the nature of pre-emption has to participate in a bid if there is an auction and it is only upon such party matching the highest bid that he succeeds. It is emphasised that the only advantage that a person claiming such a right can seek is that he has only to match the highest bid in an auction, he does not have to better it; it is for the other bidders to outbid him and he succeeds if he is one of two or more bidders at the highest price. The judgment reported at AIR 1958 SC 383 [ENTITY] and Ors. v. Khazan Singh and Anr. has been placed both in furtherance of the proposition that such right is illusory and to trace the history of the law of pre-emption in this country.
28. The Supreme Court judgment in [ENTITY] case is also relied upon by the applicants to urge that such a right that they seek to assert has two constituents: the primary right is a right to be offered the property and the secondary right is against the vendee. Even if the remedial right can be said to be limited, according to the applicants, the primary right to be offered has always been recognised and preserved by Courts. The applicants assert that their right under [SECTION] of the agreement can be exercised at a time prior to the sale as the clauses provide for the same.
29. The official liquidator cites limitation as a next ground to resist the orders prayed for. It is submitted that since [SECTION] of the Schedule to the [ACT] may not apply as there is not yet any purchaser, the residuary article in respect of suits, [SECTION], would apply. The official liquidator refers to the later applicant's letter of October 21, 2002 and submits that even if upon the later applicant joining in the original application, the date of making the original application is reckoned, a period of more than three years had elapsed from the letter of October 21, 2002 and the date of accrual of the applicants' cause of action, on the applicants own showing as found in the assertions contained in such letter.
30. The issue boils down to whether the applicants have any right as they seek to assert and whether such right can be taken forward in view of the point of limitation that has been urged. The agreement of 1963 is clear and categorical in preserving certain rights of the later applicant upon the happening of any of the events set out in Clause V thereof. Upon the happening of each of the events as envisaged in Clause V, the later applicant would have a right to obtain the property and the fact that the later applicant had missed, in terms of time, to enforce a right upon any of the other situations having already arisen, would not preclude the later applicant from asserting the right found upon another situation arising.
31. The applicants', or more precisely the later applicant's, right is not one that needs to be asserted on the strength of [SECTION] of the [ACT]. Such right can be exercised in terms of the agreement and there is no legal embargo in the exercise thereof [SECTION] of the [ACT] recognises the exercise of a different species of the same genus of such right. But the second and third paragraphs of [SECTION] come into play only upon a transfer being completed and, by virtue of [SECTION] of the [ACT], would make it obligatory for the party asserting the right of pre-emption to institute a suit against the transferee within the period recognised by [SECTION] of the Schedule to the [ACT].
32. Such is not the situation in the present case where the applicants seek to have the property at a price to be determined by Court (the applicants have so offered), but without going through the process of auction. The applicants have also cited their immediate cause for coming to Court. The original applicant was prompted by the official liquidator issuing notice in January, 2006 for sale of the moveable properties of the company. Manifest in such notice is the intention of the custodian of the properties of the company in liquidation to sell its properties and the applicants have stepped forward to avert the sale of the subject premises and to be offered the same at reasonable market value to be fixed by Court. Unlike the classical right of pre-emption which, in effect, is not a right of repurchase but only a right of substitution, the applicants are here to enforce the right to repurchase the property in terms of Clause V of the 1963 agreement.
33. Of the four situations that Clause V(i) of the agreement recognises, the second had arisen on or prior to October 21, 2002. The third situation envisaged by the clause arose upon the order of winding up being made on April 8, 2003 and now, upon the official liquidator having issued the notice to sell the moveable properties of the company in liquidation in January, 2006, the applicants say the notice evinces a desire to ultimately sell all the assets of the company in liquidation, including the subject land. Since the applicants have applied to enforce their right to purchase the subject land within months of the official liquidator's notice, it is not necessary to go into the other issues raised by the official liquidator and deal with the question as to whether the applicants had lost their right to seek repurchase upon the second and third situations covered by the relevant clause in 1963 agreement, having arisen. Even if the recent date of the later applicant's plea to join in the original application is reckoned, the assertion of such right is within the period of three years from the accrual of the applicants cause of action. The applicants, of course, have referred to [SECTION] of the [ACT] and claim that in view of [SECTION] of the [ACT] which provides that the official liquidator shall merely take into his custody or control all property of the company in liquidation, the assets of the company in liquidation have "become vested in trust" in the official liquidator and the assertion of the applicants' right cannot be denied on the ground of delay or limitation. It is not necessary to go into such issue as the applicants' assertion of the right upon the first situation in the clause having arisen, is within the period of limitation under [SECTION] of the Schedule to the [ACT] upon the desire being manifest in the official liquidator's issuance of the notice of January, 2006.
34. Once it is recognised that the applicants have the right as they assert, it next falls for consideration as to how such right can be permitted to be exercised. Since the matter has been heard at considerable length and in view of the powers of the Company Court under [SECTION] of the Act, the matter can be finally decided, particularly when the sale of the subject land has to be made by the Company Court.
35. At the end of the day it appears that there has been much ado about nothing. The right that the applicants canvass is a right to obtain the subject land at the market value thereof. The applicants suggest that a valuer should be appointed to assess the worth of the subject land and the applicants should be offered the option of purchasing it at such price. No doubt, a valuation needs to be carried out as is done in respect of every asset of such description sold by the Company Court. But the paper valuation of an asset does not necessarily indicate its actual worth. Valuation of a property can be a handy guide to indicate the reserve price, the actual worth is assessed only upon the property coming to the block at the auction.
36. The applicants will be afforded, at the auction of the subject land, an opportunity to match the highest bid, subject to such highest bid being above the valuer's assessment of the property. In the event the bid by the applicants is the joint highest, the applicants will enjoy the benefit of being entitled to purchase the land at such price without requiring to outbid the other joint highest bidder. But the applicants' rights, though recognised, cannot confer on them the benefit of obtaining the land on the valuation thereof by any valuer without the land coming under the hammer in the Court sale. The applicants will also enjoy the special privilege of being invited by the official liquidator to participate in the sale by auction whenever it is conducted by Court.
37. [CASE NUMBER] is allowed by treating the later applicant as a joint applicant in [CASE NUMBER]. [CASE NUMBER] is disposed of on the above basis. There will be no order as to costs.
Urgent photostat certified copies of this judgment, if applied for, be issued to the parties upon compliance with requisite formalities.