Case: Rambaran Prosad Vs. Ram Mohit Hazra &amp; Ors

for possession of a site defined by boundaries, alleging notice to the proprietor requiring that site and that they had taken possession, but been dispossessed. It was held by the Judicial Committee that the suit must fail. The Judicial Committee was of the opinion that the agreement conferred on the society no present estate or interest in the site, and was unenforceable as a covenant, since it did not run with the land, and infringed the rule against perpetuity. Lord Buckmaster who pronounced the opinion of the Judicial Committee observed as follows:"Further, if the case be regarded in another light - namely, an agreement to grant in the future whatever land might be selected as a site for a temple - as the only interest created would be one to take effect by entry at a later date, and as this date is uncertain, the provision is obviously bad as offending the rule against perpetuities, for the interest would not then vest in praesenti, but would vest at the expiration of an indefinite time which might extend beyond the expiration of the proper period." 11. But there has been a change in the legal position in India since the passing of the Transfer of Property Act. Section 54 of the Act states that a contract for sale of immovable property "does not of itself, create any interest in or charge on such property". Section 40 of the Act is also important and reads as follows :"40. Where, for the more beneficial enjoyment of his own immovable property,; 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 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. The second paragraph S. 40 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 14 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 S. 14 along with S. 54 of the Transfer of Property 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 thought there is no time limit within which the option has to be exercised. It is true that the second paragraph of S. 40 of the Transfer of Property 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 promissory 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 S. 40 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 premption because S. 40 of the statute does not make the covenant enforceable against the assignee on the footing that it creates an interest in the land. 12. We are accordingly of the opinion that the covenant for pre-emption in this case does not offend the rule against perpetuities and cannot be considered to be void in law. The view that we have expressed is borne out by the decisions of the Calcutta High Court in Ali Hossain Miya v, Raj Kumar Haldar, ILR (1943) 2 Cal 605: (AIR 1943 Cal 417 ) (FB), of the ,Allahabad High Court in Auad Ali v. Ali Athar, ILR 49 All 527: (AIR 1927 All 170 ) (FB), and of the Madras High Court in Chinna Munuswami Nayudu v. Sagalaguna Nayudu, ILR 49 Mad 387 : (AIR 1926 Mad 699 ). Mr. Bishen Narain relied on the decision of the Calcutta High Court in Nobin Chandra Soot v. Nabab Ali Sarkar, (1001) 5 Cal WN 343, and the Judgment of the Allahabad High Court in Gopi Ram v. Jeot Ram, ILR 45 All 478: (AIR 1923 All 514). For the reasons we have already stated we hold that the later decisions in ILR (1943), 2 Cal 605 : (AIR 1943 Cal 417 ) (FB) supra. in 11, R49 Mad 387 : (AIR 1926 Mad 699 ), supra and in ILR 49 AII 527 (AIR 1927 All 170 ) (FB), supra, correctly state the law on the point.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]We are unable to accept this submission as correct. It is true that then clause does not expressly state that it is binding upon the assignees or, but , having regard to the context and the circumstances in which the award was made, it is manifest that then clause must be construed as binding upon the assignees ort of the original contracting partiesIn substance these statutory provisions lay down that, subject to certain exceptions which are not material in this case a contract in the absence of a contrary intention express or implied will be enforceable by and against the parties and their legal heirs and legal representatives including assignees and transferees.In the present case, there is nothing in the language of theIt is obvious that in these clauses the expression "parties" cannot be restricted to the original parties to the contract but must include the legal representatives and assignees of the original parties. There is hence no reason why the same expression should be given a restricted meaning in then clause, which is the subject matter of interpretation in the present appeal. On behalf of the respondents Mr. N. C. Chatterji rightly argued that the preparation clause was based upon the ground of vicinage and this circumstance would also suggest that the intention of the parties was that then clause should be binding upon the heirs andt and the assignees of the original parties to the Contract We accordingly hold that Mr. Bishen Narain on behalf of the appellant is unable to make good his submissions on this aspect of the case7. "A perpetuity", as defined by Lewis in hisn book on "Perpetuities" (p. 164), is a future limitation, whether executory or by way of remainder, and of either real or personal property which is not to vest until after the expiration of, or will not necessarily vest within, the period fixed and prescribed by law for the creation of future estates and interests. The rule as formulated falls within the branch of the law of property and its true object is to restrain the creation of future conditional interest in property. The rule against perpetuities is not concerned with contract as such or with contractual rights and obligations as such. Thus a contract to pay money to a person, his heirs or legal representatives upon a future contingency, which may happen beyond the period prescribed would be perfectly valid (Walsh v. Secretary of State for India), (1863) 10 HLC 367: 11 ER 1068. It is , therefore , well established that the rule of perpetuity concerns rights of property only and does not affect the making of contracts which do not create rights of property8. The rule does not therefore apply to personal contracts which do not create interest in property (See the decision of the Court of Appeal in SouthEastern Railway Co. v. Associated Portland Cement Manufacturers Ltd.),1 Ch12,even though the contract may have reference to land11. But there has been a change in the legal position in India since the passing of the Transfer of Property Act. Section 54 of the Act states that a contract for sale of immovable property "does not of itself, create any interest in or charge on such property"Reading S. 14 along with S. 54 of the Transfer of Property 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 ofn even thought there is no time limit within which the option has to be exercised. It is true that the second paragraph of S. 40 of the Transfer of Property 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 promissory 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 S. 40 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 premption because S. 40 of the statute does not make the covenant enforceable against the assignee on the footing that it creates an interest in the land12. We are accordingly of the opinion that the covenant forn in this case does not offend the rule against perpetuities and cannot be considered to be void in law. The view that we have expressed is borne out by the decisions of the Calcutta High Court in Ali Hossain Miya v, Raj Kumar Haldar, ILR (1943) 2 Cal 605: (AIR 1943 Cal 417  ) (FB), of the ,Allahabad High Court in Auad Ali v. Ali Athar, ILR 49 All 527: (AIR 1927 All 170  ) (FB), and of the Madras High Court in Chinna Munuswami Nayudu v. Sagalaguna Nayudu, ILR 49 Mad 387  : (AIR 1926 Mad 699  ). Mr. Bishen Narain relied on the decision of the Calcutta High Court in Nobin Chandra Soot v. Nabab Ali Sarkar, (1001) 5 Cal WN 343, and the Judgment of the Allahabad High Court in Gopi Ram v. Jeot Ram, ILR 45 All 478: (AIR 1923 All 514). For the reasons we have already stated we hold that the later decisions in ILR (1943), 2 Cal 605  : (AIR 1943 Cal 417  ) (FB) supra. in 11, R49 Mad 387  : (AIR 1926 Mad 699  ), supra and in ILR 49 AII 527 (AIR 1927 All 170  ) (FB), supra, correctly state the law on the point.