Case: Bhau Ram Vs. B. Baijnath Singh &amp; Others

The suit was brought by Nanak Singh respondent who claimed pre-emption with respect to a sale in favour of the appellant of a house and was rested on the first, third, fourth and sixth grounds in the section. The question whether s. 16 of the Punjab Act was ultra vires the Constitution was tried as a preliminary issue. The subordinate judge held in favour of the respondent. Thereupon the appellant went in revision to the High Court. The High Court held that the first, third and fourth grounds in s. 16 did not offend Art. 19(1)(f); it further held that the sixth ground offended Art. 19(1)(f). This last view was apparently in conflict with the earlier Full Bench decision of that Court in Uttam Singh v. Kartar Singh (A.I.R. 1954 Pun. 55.). Later the High Court held in Sardha Ram v. Haji Abdul Majid Mohd. Amir Khan (A.I.R. 1960 Pun. 196.) by a five-Judge Bench that the provisions contained in clause "sixthly" of s. 16 were not ultra vires the provisions of the Constitution inasmuch as the restrictions imposed were not unreasonable. The appellant thereupon came to this Court on a certificate granted by the High Court challenging the view of the High Court that the first, third and fourth grounds were Constitutional.

Reasoning:
Article 19(i)(f) gives a fundamental right to a citizen to acquire, hold and dispose of property and cl. (5) of that Article permits reasonable restrictions to be imposed by law on this right in the interests of the general public. There can be no doubt that a law of pre-emption does impose restriction on the fundamental right guaranteed under Art. 19(i)(f) and the question is whether the restriction imposed in the Rewa case is reasonable and in the interests of the general public. Section 10 of the Rewa Act applies to all kinds of property, whether urban or rural, and whether agricultural land or house property, and it is in that context that its reasonableness will have to be judged. There is nothing to show in this case that there was any pre-existing custom of a similar nature prevalent in any part of the area to which the Rewa Act applies, and even if any custom was prevalent in any area, there is nothing to show what precisely that custom was. In any case even if any custom was prevalent in this area before the Rewa Act came into force and it was held reasonable by courts, that would not in our opinion be a decisive factor in considering whether the restrictions imposed by the Rewa Act are reasonable or not. We have to judge the reasonableness of the law in the context of the fundamental rights which were for the first time conferred by the Constitution on the people of this country and which were not there when the courts might have considered the reasonableness of the custom, if any in the context of things then prevalent. Nor do we think that the fact that the right of pre-emption may not be actually exercised in the case of even a large number of sales can have any bearing on the question whether the law imposing the restriction is reasonable or not.Let us therefore see what the Rewa Act provides. Section 10, as we have pointed out, gives a right of pre-emption first to co-sharers and secondly to owners of adjoining property to which we shall refer hereafter as pre-emption by vicinage. We are not concerned in the present appeal with the case of co-sharers, with which we shall deal in a later part of the judgment. Ordinarily, if there was no law of pre-emption a vendor would be entitled to sell his property to anybody for any price that may be settled between him the purchaser. This right is clearly restricted by the law of pre-emption which may in many cases result in a depression of the price which the vendor may otherwise be able to get for his property. Further the Act provides that if the vendor and the vendee desire that there may be no suit for pre-emption the vendor can give notice to possible pre-emptors of the price at which the vendor is willing to sell such property. This notice is given through the court within the local limits of whose jurisdiction the property is situate. On such notices being given to possible pre-emptors, the pre-emptor will lose the right of pre-emption unless within one month from the date of service of the such notice, he or his agent pays or tenders the price to the vendor : see ss. 12 and 13. Further, s. 15 shows that even where such a notice has been given and the price has not been paid or tendered, a suit for pre-emption can be filed after the sale in spite of s. 13 on the ground that the price stated in the notice was not fixed in good faith. The court then decides whether the price stated in the notice is the proper price, and if it comes to the conclusion that it is not it has the power to fix such price as appears to it to be the fair market price of the property sold. Clearly, therefore, there is a restriction on the right of the vendor to sell the property at any price to which the purchaser has agreed and a suit for pre-emption can be filed even where a pre-emptor is not prepared to pay the agreed price and can have it reduced. The notice therefore provided in s. 12 and the failure of the pre-emptor to comply with it under s. 13 are really of not such value, for the pre-emptor can always get over the provisions of s. 13 by alleging that the price entered in the notice was not fixed in good faith. In effect, therefore, every sale will be open to pre-emption and the law of pre-emption thus provides a crop of litigation for the vendor and the vendee. This is the first result of the law of pre-emption. Further we see no reason to think that the law of pre-emption prevents the sale of property at an unconscionable price for if a vendor is demanding an unconscionable price he will not be able to find a vendee. In any case the price is always settled by agreement between the vendor and the vendee and there is no reason to hold that such an agreed price would be an unconscionable price. Nor do we think that the law of pre-emption in intended to provide for fixation of reasonable price by courts; therefore that can hardly be a reason to hold that it is a reasonable restriction in the interests of the general public on the right of the vendor under Art. 19(1)(f). We do not think that the restrictions placed by the law of pre-emption in a case based on vicinage have any effect on prices being reasonably fixed, and the main effect we can see is that the law may give rise to a crop of litigation. We cannot therefore see any advantage to the general public by such a law of pre-emption and in any case the disadvantage certainly overweighs the advantage that may result to a small section of the public.Now let us look at the matter from the point of view of the vendee. He comes to an agreement with the vendor to purchase the property at a certain agreed price. Let us also assume that the vendor has given notice under s. 12 and no action has been taken by the pre-emptor under s. 13. Thereafter the vendee purchases the property and would be entitled to hope that as the price was not paid or tendered under s. 13, he would be able to hold and enjoy the property without any further trouble. But as we have pointed out already even though ss. 12 and 13 are there it is always open to a pre-emptor to file a suit for pre-emption after having failed to take action under s. 13 by merely alleging that the price stated in the notice given to him was not fixed in good faith. So the vendee who may have purchased the property after action being taken under ss. 12 and 13 is forced into litigation on the ground that the price agreed is presumably too high. Thus there is clearly a restriction on his right to hold property, and even though the vendee may eventually succeed on the footing that the price agreed is not above the market value he is compelled to go through litigation in order to hold the property. Such a restriction would thus appear to be unreasonable for it allows the pre-emptor to go to court even after ss. 12 and 13 have been complied withThe reasonableness of a custom is, however, not a constant factor and what is reasonable at one stage of the progress of society may not be so at another stage. It is in this context that we have to judge the law of pre-emption as it was later put into the various statutes. Before the Constitution came into force, the statutes if they were passed by competent authority, could not be challenged; but we have now to judge the reason ableness of these statutes in the light of the fundamental rights guaranteed to the citizens of this country by the Constitution. In a society where certain classes were privileged and preferred to live in groups and there were discriminations, on grounds of religion, race and caste, there may have been some utility in allowing persons to prevent a stranger from acquiring property in an area which had been populated by a particular fraternity of class of people and in those times a right of pre-emption which would oust a stranger from the neighbourhood may have been tolerable or reasonable. But the Constitution now prohibits discrimination against any citizen on grounds only of religion, race, caste, sex, place of birth or any of them under Art. 15 and guarantees a right to every citizen to acquire, hold and dispose of property, subject only to restrictions which may be reasonable and in the interests of the general public. Though therefore the ostensible reason for pre-emption may be vicinage, the real reason behind the law was to prevent a stranger from acquiring property in any area which had been populated by a particular fraternity or class of people. In effect, therefore, the law of pre-emption based on vicinage was really meant to prevent strangers i.e. people belonging to different religion, race or caste, from acquiring property. Such division of society now into groups and exclusion of strangers from any locality cannot be considered reasonable, and the main reason therefore which sustained the law of pre-emption based on vicinage in previous times can have no force now and the law must be held to impose an unreasonable restriction on the right to acquire, hold and dispose of property as now guaranteed under Art. 19(1)(f), for it is impossible to see such restrictions as reasonable and in the interests of the general public in the state of society in the present day.It is urged, however, that at any rate, in the case of agricultural properties, pre-emption by vicinage results in consolidation of agricultural lands, and that at any rate is an advantage. How far the argument of consolidation can be availed of now when we find that in most States laws are being passed which are putting ceilings on agricultural holdings is a matter which it is unnecessary to consider in the present case, for the Rewa Act applies not only to agricultural holdings but also to burn property including house property. There is no question of any advantage arising out of consolidation where one is dealing with urban property or house property. The matter of consolidation might have had some bearing if the Rewa Act was applicable to agricultural lands only. But as it applies to urban lands as well as house property where no question of consolidation of holdings arises, the impugned provision cannot be held to be a reasonable restriction in the interests of the general public on the ground that it leads to consolidation of agricultural holdings. There is no way of severing the application of the law so far as it relates to agricultural holdings from its application to urban or house property and therefore the entire provision as to vicinage must fall, even if something could be said in its favour with respect to agriculture holding on the ground of consolidation. We are therefore of opinion that the second clause of s. 10 imposes an unreasonable restriction on the right to acquire, hold or dispose of property guaranteed under Art. 19(1)(f) of the Constitution and must be struck down. So far as the proviso is concerned it applies both to the first and the second clause and it will survive for the purpose of the first clause only, which is not in dispute before us.In this view of the matter C.A. 270 of 1955 must succeedThis brings us to the consideration of the first ground which gives a right of pre-emption to a co-sharer in the property sold. The question as to the constitutionality of a law of pre-emption in favour of a co-sharer has been considered by a number of High Courts and the constitutionality has been uniformly upheld. We have no doubt that a law giving such a right imposes a reasonable restriction which is in the interest of the general public. If an outsider is introduced is a co-sharer in a property it will make common management extremely difficult and destroy the benefits of ownership in common. The result of the law of pre-emption in favour of a co-sharer is that if sales take place the property may eventually come into the hands of one co-sharer as full owner and that would naturally be a great advantage the advantage is all the greater in the case of a residential house and s. 16 is concerned with urban property; for the introduction of an outsider in a residential house would lead to all kinds of complications. The advantages arising from such a law of pre-emption are clear and in our opinion outweigh the disadvantages which the vendor may suffer on account of his inability to sell the property to whomsoever he pleases. The vendee also cannot be said to suffer much by such a law because he is merely deprived of the right of owning an undivided share of the property. On the whole it seems to us that a right of pre-emption based on co-sharership is a reasonable restriction on the right to acquire, hold and dispose of property and is in the interests of the general publicThe same reasoning in our opinion will apply to the third ground, "where the sale is of a property having a staircase common to other properties, in the owners of such properties". This ground stands on the same footing practically as the first ground relating to co-sharers, and for the same reason we hold that it is a reasonable restriction, and is in the interest of general public.Turning now to the fourth ground, "where the sale is of a property having a common entrance from the street with other properties, in the owners of such properties", this ground is in our opinion similar to the third ground, the only difference being that in one case there is a common staircase while in the other case there is a common private passage from the street. The idea behind this ground seems to be that the buildings are in a common compound and perhaps were originally put up by members of one family or one group with a common private passage from the public street. In such a case the owners of the buildings would stand more or less in the position of co-sharers, though actually there may be no co-sharership in the house sold. But as we have said this case would approximate to cases of a common staircase and co-sharer; therefore, for reasons given in the case of co-sharers we uphold the right of pre-emption covered by the fourth ground in s. 16. The case falling under the fourth ground must be distinguished from katras which are exempt from the provisions of the Act in s. 5With regard to exemptions contained in s. 5 with respect to shop, serai, katra, dharmsala, mosque or other similar building, these are obviously distinguishable, for they are generally places to which public resort. In particular stress was laid on the exemption of katra. A katra is not defined in the Act; but it appears that the primary meaning of the word "katra" is enclosure and the secondary meaning is market; see Karim Ahmad v. Rahmat Elahi. Generally, therefore, a katra would be a business locality though there might be purely residential katras. However, even purely residential katras would consist of a large number of houses to which a large number of people will resort. In the circumstances, the premises exempted under s. 5 are practically of one class, namely, those to which the public has to resort and it is this class which is distinct from the rest of residential property meant for private residence of individuals which has been exempted. In the circumstances we do not think that s. 16 can be said to violate Art. 14 of the Constitution in the light of s. 5 of the Punjab Act. In the result, the appeal fails and is hereby dismissed. The case will now go back for disposal according to law and we trust its decision will be expeditedTherefore, the law of pre-emption in s. 174 of the Code applies to those who are co-sharers or akin to co-sharers and results in consolidation of holdings generally upto about thirty acres, this being the general extent of a survey number. The right of pre-emption is further restricted under s. 184 which provides that no right of pre-emption would arise on an exchange of land with the occupant of another survey number. In effect therefore the Code creates a right of pre-emption in the holder of an interest in a survey number only when an occupant having an interest in that survey number sells it or there is forclosure or a usufructury mortgage, or a lease exceeding fifteen years is created in favour of a stranger subject to the land being unalienated land held for agricultural purposes. Considering therefore the nature of the right created under the Code, we have no hesitation in coming to the conclusion that this right is in reality in favour of a co-sharer strictly so-called or some one who is akin to a co-sharer, and the reasons which we have already indicated when dealing with the Punjab Act relating to co-sharers will apply with full force to the right created under the Code with this addition that this being agricultural land there will be further advantage inasmuch as the right of pre-emption would result in consolidation of holdings within a survey number which as we have said is generally of an extent of thirty acres. We are therefore of opinion that the view taken in Ramchandra v. Janardan (A.I.R. 1954 Nag. 225.) to the effect that the law of pre-emption provided in Chap. XIV of the Code does not infringe Art. 19(1)(f), is correct. This being the only point urged before us in the appeal, we are of opinion that the appeal must fail.We therefore allow C.A. 270 of 1955 with costs and dismiss the suit for pre-emption. No order as to costs in this appeal C.A. 595 of 1960 and C.A. 430 of 1958 are hereby dismissed with costs.