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

2. Two brothers, Tulshidas Chatterjee and Kishorilal Chatterjee owned certain properties (Land and building) on Paharpur Road within Mouza Garden Reach, Khiderpore, in the suburbs of Calcutta. In the year 1938 Kishorilal sued for partition of the properties and eventually the matter was referred to arbitration. On December 16, 1940, the arbitrators filed their award on which a final decree was passed on March 15, 1941 in the partition suit. Under the award, two of the four blocks, A, B, C, and D, into which the properties were divided by the arbitrators, namely, blocks A and C, were allotted to Tulshidas and the remaining two blocks, B and D were allotted to Kishorilal. Two common passages marked as X and Y and a common drain Z were kept joint between the parties for their use. In the award there was a clause to the following effect:"We further find and report with the consent of and approval of the parties that any party in case of disposing or transferring any portion of his share, shall offer preference to the other party, that is each party shall have the right of pre-emption between each other."Thereafter, on August 20, 1941 Tulshidas sold his A block to one Nagendra Nath Ghosh. This was done after Kishorilals refusal to pre-empt the same in spite of Tulshidass offer to him in terms of the pre-emption clause. On April 22, 1942, Kishorilal sold, by the Kobala (Ex. I), his two blocks, B and D to Rati Raman Mukherjee and others. On June 21, 1946, the Mukerjees in their turn sold the two blocks B and D to the plaintiffs by the Kobala [Ex. 1(a)]. On September 20, 1952 Nagendra Nath Ghosh sold block A to defendant No. 1 and on December 2, 1952, the present suit was filed by the plaintiffs against the said purchaser- defendant No. 1 for pre-empting his aforesaid purchase. On April 7, 1953 while the suit was pending in the trial Court, defendant No. 1 sold the disputed property (block A) to defendant No. 2. The plaintiffs thereafter made an application for amendment of the plaint praying for a decree for pre-emption against defendants Nos. 1 and 2 and calling upon them to execute a conveyance in favour of the plaintiffs on payment of the actual consideration paid for the property in suit. On the conclusion of the trial the Subordinate Judge held that the covenant of pre-emption was binding upon the defendants who had notice of that clause and plaintiffs were entitled to enforce the right of pre-emption. He further held that the covenant of pre-emption was not hit enforceable against the assignees of the original parties to the contract. Accordingly a decree was granted to the plaintiffs asking them to deposit within one month a sum of Rs. 14,000 for the purpose of pre-empting the suit property and both defendants were directed to execute and register a Kobala in plaintiffs favour within 15 days of the deposit by the plaintiffs. The defendants took the matter in appeal to the Calcutta High Court, which dismissed the appeal and affirmed the judgement and decree of the Subordinate Judge.

Court's reasoning:
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.