Bochliit14r Sfogh

Tru Stak of Punjab

.M udholkat J.

March 7.

724 SUPREME COURT REPORTs [l96ZJ SUPP.

would then be the action of the Government. Horo one of the Under Secretaries to the Government of Punjab informed the appellant by his letter dated !\fay, 1, 1957 that his representation '•had been considered 1tnd rejected", evidently by the State Government.

Thh; would show that appropriate action had been taken under the relevant rule.

Tho appeal is thus without substance and is dismissed. In view of the fact that the appellant is a displaced person with heavy responsibilities and with limited or possibly hardly any means we diroct that the costs shall be borntl by the parties concerned.

BHAURAY

B. BAIJNATH SINGH

(P. B.

GAJB!'!DltAGADKAR, A. K. SARKAR, K. N.

WANCHOO, K. C. DAS GUP'l'A and N. RAJA

GOl'ALA AYYANGAR, JJ.)

Pre-eniption-Stalt1tes entitling neighbours, co-sharera et.c. to pre-empt-C<msti!utionality of-If offend right to properly- Whethtr discriminatory-Rewa Stale Pre-emption Act, JY4G, s, 10-l'unjab Pre-emption Act, 1913(Punj. 1 of 1913), •· !G- Berar Land Revenue Code, 192S, Ch. X/V-Conatitution of /ndia, Art...14, 19(1)(!), 19(5).

Section IO of the Rewa State !'re-emption Act, 1946, conferred the right of pre-emption on the ground, inter alia of vicinage. The proviso to s. 10 provided that among preemptors of the same class the nearer in relationship t<:> . the vendor will exclude the more remote.

There were prov1s1ons in the Act for giving notice of an intended sale . to .persons having a right of pre.emption, for the loss of die ~1ght of pie-emption in case no action \vas taken on the notice and for fixation of a fair price by the Courl. It was contended

thats. IO offended Art. 19(1)(f) of the Constitution and was 1161 void.

Section 16 of the Punjab Pre•emption Act, 1913, as applied to Delhi, provided for pre-emption on six grounds, the first, third, fourth and sixth grounds being in favour of co. sharers, owners of common staircases, owners of common entrance from a street and owners of contiguous property.

By s. 7 the operation of the Act was limited to localities where the custom of pre-emption was prevalent.

There were provisions in the Act for giving of notice etc. as in lhe Rewa Act.

Section 5 exempted agricultural property, shops, serai, katra,

dharmsala, moaque and other similar building from the purview of the Act. It was contended that s. 16 offended Art. 19(1)(f) and that the Act contravened Art. 14.

Chapter 14 of the Berar Land Revenue Code, 1928, created a right of pre-emption in the holder of an interest in a survey-number when any person having an interest in any land in that survey-number sold it to a stranger provided that the interest sold was in unalienated land held for agricultural purposes. It was contended that this law of pre-emption was inconsistent with Art. 19(I)(f).

..-, z Held, (per Gajendragadkar, Wanchoo and Ayyangar, JJ., Sarkar and Das Gupta, JJ., Contra) that s. IO of the Rewa Act which provided for pre-emption on the ground of vicinage imposed unreasonable restrictions on the right to acquire, hold or dispose of property guaranteed by Art.19(1) (f) of the Constitution and was void.

It placed restrictions on the right of the vendor to sell his property to a purchaer of his choice at a price settled between them ; it exposed the purchaser to litigation even after the requisite notices had been given by the vendor. There was no advantage to the general public from such a law. The real reason behind a Jaw of pre emption on the basis of vicinage was to prevent strangers i.e. people belonging to different religion, race or caste, from , acquiring property in any area populated by a particular fraternity or class of people. This could not be considered reasonable in view of the prohibition under Art. 15 of the C0nstitution of discrimination only on grounds of religion, race, caste, etc.

Shri Audh Behari Singh v. Gajadltar Jaipuria, (1955) I. S.C.R. 70; Ibrahim Saib v. Muni Mir Udim Saib, (1870) 6 Mad. H.C.R. 26and1ffohomed Beg Amin v. Narayan Meghaji Patil, ( 1916) I.L.R. 40 Born. 358, referred to.

Per Sarkar and Das Gupta, JJ. Section 10 of the Rew'

i . . . . . • . .

BhauRam

•• B. Baijnoth Singh

19GZ

BhauRam

B. BlliJn•lh SU., A

726 SUPREME OOURT REPORTS [1962] SUPP.

Act did not offend Art. 19(l)(f) and was valid.

The right of pre-en1ption was not frequently exerci!>ed and the restric .. tions imposed by it did not affect many persons.

Jn a lage part of the country there \Vas customary !aw of pre-emption which had been found to be reasonable before the Constitution came into force ; nothing had happened since to make it unreasonable. The provisions regarding notice etc. relaxed the severity of the restriction.

The law imposed two restrictions on the vendor-first that he may be prevented from selling property at any price he liked and secondly, that he could not sell it to anyone of his choice. fhe first restriction was clearly reasonable a• it prevented the vendor from selling at exorbitant prices and the rich from amassing property The second was not a great deprivation. The law placed the restriction on the purchaser that he could not acquire a particular property if the adjoining owner wanted it.

In view of the Indian \\"ay of life to live in compact communities this was a reasonable restriction.

It would also avoid disputes that may arise if a stranger were allO\\'ed to come in.

The reasons for upholding pre-emption on the ground of being co-sharers were equally applicable to pre-emption on the ground of vicinage. The proviso to s. IO which laid down that a person nearer in relationship to the vendor shall have a preferential right was not bad ; it did not create a right of pre-emption but it merely solved a problem arising out of a valid right of pre-emption arising in favour bf more then one person.

Sardha Ram v. Haji Abdul, A.IR. (1960) Punj. lll5 and' Ramc/1andrn Kri,, hnaji Dhaga/e v. Janardan Krishna7>pa Jfancrir, A.I.R. (1955) Nag. 225, approved.

Punch Gujar Gaur Brahmins v. Amarsingh, A.J.R. (1954) Raj. 100, Babula/ v. Gowardhandas, A.J.R. (1956) M.B.J. i'!Pu:al<tl Ghansham v. Param Lalanju, A.LR. (1956) V.P. 9 and Moti Bai v. Kand Kari Channaya, A.LR. (1954) Hyd. 161, disapproved.

Shri Aud/I Rehari Singh v. Gajad.har ./ aipuria, ( 1955') I S.C.R. 70 and Tyson'" Smith, (1938) 9 Ad. & E.P. 406, referred to.

lleld, further, that the first, third and fourth grounds of pre-emption ins. 16 of the Punjah Act as applied to Delhi did not offend Arts. 19(I)(f) and 14 and were valid.

The lav:, under the firc; t ground ins. 16, providing for pre-emption by co-sharers imposed reasonahle restrictions in the interest of the general public on the right under Art. 19(1 )(f).

If an outsider v.•as in trocluccd as a co-sharer in a property it would make common management extremely difficult and destroy !l•c benefits of ownership in common.

The advantae of

excluding a stranger in the case of a residential house was all the greater as it would avoid all kinds of disputes.

The third ground ins. 16, which applied in a case where the property sold had a staircase common with other properties stood practically on the same footing as that of co-sharers.

The fourth ground ins. 16 which applied where the property sold had a common entrance from the street with other properties was similar to the first and the third ground. Further, there was no discrimination in s. 16 because of the exclusion of certain properties from its operation by s. 5.

So far as agri cultural property was concerned it formed a distinct class by itself and there was no question of discrimination on that account. With respect to the other premises exempted by s. 5 they formed one class, namely, those to which the public resorted v.,1hich were distinct from residential property meant for private resident.

There was no question of excluding strangers frOrri such premises.

Uttam Singh v. Kartar Singh AJ.R. 1954 Pun. 55 and Sardha Ram v. Haji Abdul Majid Mohd. Amir Khan, A.I.R. 1960, Pun. 196, approved.

Per Gajendri'gadkar, Wanchoo and Ayyangar, JJ. The Sixth ground in s. 16 which provided for pre-emption on the ground of vicinage was invalid for the same reasons as s. 1 O of the Rewa Act was invalid.

Per Sarkar and Das Gupta, JJ, The sixth ground of pre-emption in s. 16 was also valid for the same reason as s. IO of the Rewa Act was valid.

Ilelrl, further, that the law or" pre-emption contained in 14 of the Berar Code was valid. It applied to those who were

co-shrers or were_ akin to. co-sharers; Such a right of pree1npt1on wo.uld result i:n c?nsoliation of holdings in a survey number which wou!J be in the mterest of the general public.

Rarnchandra v.Janardan, A.LR. 1955 Nag. 225, approved.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 270 of 1955. ·

Appeal by special leave from the judgment and

decree.dted arch 21, 19~2, of the former Judicial Comm1ss10ner s Court, Vmdhya Pradesh in ]' A No. 16 of 1952. ·

WITH Civil Appeal No. 430 of 1958.

196t

BhauRam

•• B. Ba&nath Singh

Bh"" Ram v.

B. B.; jnoth Bintla

Wanchoo J.

728 SUPREME OOUR'f REPORTS [1962] SUPP.

Appeal from the judgment and decree dated April l 2, 1956, of the former Nagpur High Court in

L.P.A. No. I Ill of 5f>.

AND Civil Appeal No. 59:i of 1960.

Appeal from the judgment and order dated October 29, 1957, of the Punjab High Court in Civil Revision Application No. 518 D of 1956.

L, K. Jha. R. Patnaik and A.D. Mathur, for the appellant (in C.A. No. 270 of 1955).

D. N. Mukherjee, for respondent No. I.

S. K: Kapur and P. D. Menmi, for the Inter vener.

A. V. Viswanatha Sastri and A. G, Ratnaparkhi, for th!l appellants in (C.A. No. 430 of 1958).

S. A. Sohoni and Ganpat Rai. 'for the respon dent{!, ·

R. S. N1trnla, for the appellant (in C. A. No. 595/fiO).

S. K. Kap11r and Ganpat Rai, for the respon dent.

1962. March 7.

The Judgment of Gajendra gadkar, Wanchoo aud Ayyanga.r JJ., was delivered by W:mchoo .J.

The , Judgment of Sarkar and Das Gupta, , J, J., was delivered by Sarkar, J.

WA:>CHOO, J.-These three appeals which have been heard together raise the constitutionality of cort'1in provisions of the pre-emption laws pre vailing in tho States of Madhya Pradesh (Rewa-3tate area), l'elhi and Maharashtra (Berar-aroa). Three suits for pre.emption wore brought by pre-emptors which were decreed, and the present appeals are by purcha{!ers. Though the appeals were heard together J'S some of the points involved wore common, i~ . . .

3 S.C.R.

SUPREME <; JOURT REPORTS 729

would be convenient to deal with each appeal separately because the Jaw involved in each case is different.

We shall begin with C.A. 207 of 1955. This is eoncerned with the Rewa State Pre-emption Act, l\J46 (hereinafter called the Rewa Act), and particularly with s.10 thereof, which is in these terms:-

"Classes of pre-emptors :-Persons of the following classes shall have a right of preemption:--

( 1) Any person who is a co-sharer or partner in the property sold and foreclosed.•:

~ .

(2) Any person who. owns arty immovable property adjoining the property sold or foreclosed or in case of transfer of tenancy rights, the land which is the subject of such rights.

Provided that among the above mentioned classes the first in order will exclude the second and among persons of the same class, the nearer in relationship to the person whose property is sold or foreclosed will exclude the more remote."

We are in the present case concerned with the second clause by which a person owning immovable property adjoining the property sold or foreclosed is entitled to pre-empt subject to the order provided in the proviso. In this case, both the purchaser and the pre-emptors hold property adjoining the. property sold, but as the pre-emptors were related to the vendor, while the purchaser was not, the suit was decreed irt favour of the pre-emptors in view of the proviso.

The question therefore that arises is whether a right of pre-emption by vicinage offends 4rt. I9(l)(f). There has beeµ divergence of opinion

Bhau Ram v.

B. Baijnath Singh

Wanchoo J.

B. Baijnath Singh

W11nchoo J.

730 SUPREME COUR'I'. REPORTS [l!lu2] SUPP.

between various High Courts on this qm'stion. The High Courts of lfajasthan, Madhya Bharat and Hyderabad and the Judicial Commissioner, Vindhya

Pradesh have taken the view that such a right of pre-emption offends Art. 19( l)(f) whilo the High Court of Punjab has held otherwise. Before, h"owever, we deal with the main points urged in this case

we may notice the argument based on the decision of this Court in Shri Audh Behari Singh \". Ga_jad!tar Jaipuria, where it was held that the law of preemption creates a right which attaches to the property and on that footing only it can be enforced against the purchaser~ The argument is that since the righ.t of pro-emption attaches to the property sold it ls an incident of property, and thernfore cannot be held to be a restriction on the right to acquin', hold and dispose of property. On the other hand it is urged that if the law of pro-empt.ion creates a right which is an incident of lJroperty, even so it would bPa restriction ereatcd by law on the fundamental right guarnnteed undor Art. I !J( I)( f) of the Constitution. We are of opinion that even if the law of pre-emption creates a right which att11ches to property it would be creating a restriction so far as the acquiring, holding or disposing of property is concerned which was not them before the law of pre-empt.ion was enacted. Therefore, even if the liability attaches to the property, it will still amount to a restriction on the right guaranteed

by Art. 19(1 )(f), when it attaches to the property by the law of pre-emption.

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 thio right in t.bo

interests of thr gcmmil public. There can hen~ r]oubt that a law of pre-empt.ion docs impose restriction

n the fundamental right guara!lteed -qnder :Art.

~ !J

(i) (f) and the question is whether the restriction imposed in the ttewa case is reasonable and in the interests of the general public. Section 1(1 of the Rewa Act applies to all kinds of property, whether urban or rural, and whether agricultural land or houee 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 preexisting 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 evsn 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.

Nc.r do we think that the fact that the right of preemption 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 preemption by vicinage. We are not concermid 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 Jaw of pre.emption a vendor would be entitled to sell his property to anybody for any price that may

pe 11ettled between him and the purchaser, '.!'hi~

' f•

Bhau Rom v.

B. Baijnath Singh

Wanehoo J.

Rhau Ram

B. Ra1j1Jath Singh

JY111uhoo J,

732 SUPREME COURT REPORTS (1962) SUPP.

right is clearly restricted by the law of pre-emption

which may in many ca.sos result in a depression of the price which the vendor may otherwise be ablo to ge~ for his property. Further the Act provides that if the vendor and the vendee desire that there may be no suit for pre-empt.ion tho vendor can give notice to possible pre-omptors of the price at which the vendor is rilling 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 with.in one month frodl the date of service of such notice, he or his agent pays or tenders the price to the vendor: see ss. 12 and I 3.

Further. s. 15 shows that even where such a notice has been given and the pr:ice has not been paid or tendered, a suit for pre-emption can be filed after tho 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 tho price stated in the notice id the proper price, and if it comes to tho conclnion

that it is not it has the power to fix such price as 11ppears to it to be the fair market price of the property sold. Clearly, therefore, th ore is a restriction on tho 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 preemptor is not prepared to pay the agreed price and can have it reduced. The notice therefore providfd in s. 12 and the failure of the pre-emptor to comply with it under s, 13 are really of not such value, for thl• pre-emptor can always get over the provisions of s.13 by alleging that t-he price entered in thn notice

was not fixed in gooJ faith. In effect, therefore, "very sale will be open to pre-emption and the law Qf pro-emption thus provides a crop of litigation for the vendor and the vendce. This is the first result of tho law of pm-emption.

Furt}\er we "All !19

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 b;; an unconscionable price. Nor do we think that the la.w 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 dis,

advantage 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 cerbin 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. Ther.eafter 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 preemptor 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 he property after action being taken under ss.12 and 13 is forced into litigation on the

Bhau Ram v.

B. Baijnath Singh

Wanchoo J.

Bll•ciRam

•• B, Baijnath Singh

WacAooJ.

734 SUPREME COURT REPORTS [1962] SUPP.

ground that th(l price agreed is presumably too high. Thus there is clearly a rostl'iction on his right to hold propert.v, and even though the vende(l may eventually succeed on the footmg that the price :tgroed is not above the market value he is compelled to go through litigtition in order to hold the property. Such a restriction would thus appear to be unreasonablo for it allows the pre-emptor to go to court evcm after ss.12 and 13 have beon complied with.

Let us further look to the broader aspects of the provisions rel:iting to pre-emption by vi<:inage.

It .may be stated that the right. of pre-emption was not recognised under the Hindu law and is not enforced in large parts of this <'ountry to tho south of the Vindhyas. It Cl'me to be enforced after the advent of i\Iohomedan rule as based on custom which was accepted by courts, particularly in

orthern India. While in )/orthern India the courts enforced the right of pre-emption based on custom, even where there was no statutory law of preemption holding that it wa, s in accordance with justice, equity and good conscience, in Southern India the view taken was that it was opposed to principles of justice, equity and good consecnce: (see Ibrahim Saib v. 11funi Mir Udin Saib and (1)

Mohmned Beg Amin Bert v. Narayan Me, ghaji Patil)(').

The reasonableness of a custom is, however, not a. co.nstant factor and what is reasonable at one stage of tho progress of society may not be so at l\nothcr stage. It is in this context that we have to judge the law of pre-emption as it was later put into various statutes. Before the Constitution came into force, the statutes if they were passed by competent authority, eould not be challenged; but we have now to judge the reason ablene88 of these statutes in the light of the fundamental rights guaranteed to the citizens of this country by the Constitution. In

(I) (1870' 6. Mad. H.C.R. 26.

(2) (1916) I.L.R. 40 Bom. 358.

. .. , .. s.c.R. StrPR:FlME COURT REPORTS

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 :f'rom acquiring property in an area which had been populated by a particular fraternity of class of people and in those tirµes a right of preemption which would oust a stranger from the neighbourhood may have been tolerable or reasonable, But the Constitution now prohibits dis.criminatiou <1gainst any citizen on grounds only of religion, r .ce, 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 preemption 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. peo]Jle belonging to different religion, race or caste, from acquiring property. Such division of society now into groups and exclusion of strangers fro,'

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 guranteed under Art. 19(l)(f), for it is impossible to see such restrictions as reasonable and in the interests of the general public in the st!lte of society m 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

Bhau Ram . v.

B. Baijnath Siugh

Wanchoo J,

Bhau Ram v.

B. Baijnalh Singh

rv a"'hoo J.

~.16 SUPREME COURT REPoRTS (1962] SUPP.

argument of consolidation can be availed of now when we find that in most :Statos laws are being

pased which are putting ceilings on agricultural holdings is a matter which it is unnece!lB&ry to consider in the prrsnt emm, for the Rewa Act applies not only to agricultural holdings but also to burn property including house property. There is no quostii>n of any advantage arising out of consolidation whore one is dealing with urban property or house property.

The matter of consolidation might have had some hearing if the RewaAct was appli<; able to agricultural lando only.

But as it applies to urban lands as woll as house property where no quostion of consolidation of holdinf; ls arises, the impugned provision cannot be held to be a. reasonable re8trietion in the interests of the general public on the ground that it leads to eo!lsolidation 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 somet.hing could be said in it.a favour with respect to agricult1Jre holding on the ground of consolidation. We are therefore of opinion that the second clause of s. IO imposes an W1reaeonable 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

purp<>Bo uf tho firHt clause only, which is not in dispute Lefore us.

In this view of the matter C. A. 270 of 1955 must suc.ceed.

We next come to C.A. 595 of 1960.

This relates the Punjab Pre-emption Act, l9l 3(Punj. I of 1913), (hereinafter referred to as the Punjab Act), as applied to tho city of old Delhi. W are

concerned with s. 16 of the Punjab Act, which deals with urban immovable property and is in these terms :-

"The right of pre-emption in respect of urban immovable property shall vest, • ·

firstly, in the co-shares in such property, if any; secondly, where the sale is of the site of the building or other structure, in the owners of such building or structure ;

thirdly, where the sale is of a property having a staircase common to other properties, in the owners of such properties ;

"fourthly, where the sale is of a property having a common entrance from the street with other properties, in the owners of such properties ; fifthly, where the sale ia of a servient, property in the owners of the dominant property, and vice versa ;

sixthly, in the persons who own immovable property contiguous to the property sold."

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 (ll (f); it further held that the sixth ground offended

Bhau Ram

••• B. Baijhc.th 8ingA

Wanchoo J.

J96Z

Bh<tU Rom

R. Bai)noth Sinth

Ww~Ji.. J.

73s SUPREME cobklr REPOIis (1962] sui>:P.

Art. 19 (l) (f). Thia IRl!t view was apparently in conflict with the earlir Full Bouch decision of that Court in UUam Singh v. Kartar Singh (I). Lator tho High Court held in Sardlia Ram v. Haji Abdul Maji, d Mohd. Amir Kltan {') by a five-Judgo Bench that the provisions contained in clause "sixthly" of s. 16 were not ultm vire.s 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 Cons-· titutional.

Further, in view of the five-Judge decision in 1960 which has shaken the view taken in the judgment under appeal on the sixth grounds, the appellant has urged that that decision is correct.

It may be noted that under e. 7 of the Punjab Act, s. 16 only applies to a. town sub-division of a. town when a custom of pre-emption is proved to have been in existence in such town or sub-division at the time of the commencement of the Aot and not otherwise. [tis not disputed thats. 16 applies to that area of old Delhi in '\\' hich the property is situate. The fa.ct however that such a custom was prevalent in this area. before 1!113 when the Punjab Act ca.me into force is not a decisive factor in holding that the provisions of s. 16 of the Punjab Act a.re necessarily reasonable. We have already dealt with this aspect of the matter when dealing with the Rowa Act, and need not add anything more.

We have also doalt with the question a.s to the right of pre-emption based on vicinago when doaling with the ltewa Act, and for the reasons given ea..rlier we hold that pre:eption based. on vicinage 1s an unreasonable restnct10n on the right

to hold, acquire or dispose of property conferred by Art. l\J (l) (f). Wo may however briefly notice the grounds on which the two Punjab cases of l!l54 and

(I) A, l.R. 1954 Pun. 55.

(2) A.l.R. I 96 0 P"n. I Sf•

3 .· ··.·

S.C.R.

' 1960 have held otherwise. In the 1954 case both ss. 15 and 16 of the Punjab Act were dealt with together. We are not here concerned with s. 15 and express no opinion with respect to it. As to s.16, the reasons which impelled the learp.ed Judges to hold that the provisions of s. 16 were constitutional were "to reduce the changes of litigation and friction and to promote public order and domestic comfort, and to promote private and public decency and convenience". We are not able to understand how providing pre-emption on the ground of vicinage would carry out these objects, assuming their promotion is in the interests of the ge11eral public.

Perhaps the reasons why these grounds were given in the 1954 case may be that the learned Judges were considering not merely pre-emption. by vicinage but also with other grounds provided in s. 16.

Whatever may be said about these' reasons so far as other grounds, of pre-emption contained in s. 16 are concerned, these reasons have in our opinion no validity so far as pre-emption by vicinage is concerned. Turning now to the case of Sardha Ram, (') we may note that the learned Judges observed that "pre-emption imposes restrictions on the right of the vendee to acquire and hold property and the right of the vendor to dispose of property.

It limits the power of the vendor to sell his property to whomsoever he may please or prevents him from showing preference to anyone to whom he may wish to sell ........ .it is a clog on the freedom on sale and tends to diminish the market .value of the property." They were also conscious of the trials and tribulations of a vendor whose property is governed by the law of pre-emption. But they seem to have upheld the constitutionality of the sixth ground main\y for two reasons, namely (i) that it had already been upheld in Uttam Singh's case (') and (ii) that "what is reasonable in any particular (1/ A.J.R. 1960 Pun. 196.

(2) A.I.R. 1954 Pun. 55.

Bhau Rom

B. Baijnath Singh

W1,1r.choo J.

19GZ

Bh .. Rom

B. Baijnath Singh

W anekoo .'.

740 SUPREME COURT REPoRTS [1!)62] SUPP.

case is difficult of ascertainment;" that the choioo of measures is for the legislature, that the legislatures

a.re presumed to have investigatod the subject and to havo acted with reason, that an Act of the legislature should be sustained unless it violates constitutional limitations beyond roasonable question".

The last Punjab case therefore does not add any further roaaon is support of the reasonableness of the restriction placed by the law of pre-emption relating to viclnage, and if anything, the observations mentioned earlier show how unreasonable the restriction can be, and in the circumstances we must hold that the sixth ground in 11. 16 is unconstitutional for reasons already indicated when dealing with the Rewa Act.

This brings us to the consideration of the first ground which gives a right of pre-emption to a cosharcr in the property sold. The question as to tho conRt, itutionality of a law of pre-emption in favour of a co-sharer has been considered by a number of High Courts and the constitutionality hllll been uniformly upheld. We have no doubt that a law giving such a right imposes a reasonable restriction which is in the interest o( the general public. If an outsider is introduced is a co-sharer in a property it will make common management oxtremoly difficult and destroy the .benefits of ownership in common. The result of the law of pre-emption in favour of a cosharer is that if sales take place the proporty may eventually come into the hands of one co-sharer as full owner and that would naturally be a great advantage the advantage is a.II the greater in the case

of a residential house and s. 16 is concerned with urban property; for tho 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 clea1 .,, nd 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 oo-sharership is a reasonable restriction on the right to acquire, hold and dispose of property and is in the interests of the general public.

The same reasoning in our opil)iiln 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 priv11te passage from the public street. In such a case the ownew of the buildings would stand more or less in the position of co. sharers, though actually there may be no cosharership in the house sold. But .as we have said this case would approximate to cases of a common staircase and co-sharer; thereforo, for reasons given in the case of co-sharers we uphold the right of pre-emption covered by the fourth 15round in s. 16.

The ease falling under the fourth

Bhau Ram

•• B. Ba.ijnath. Singh

W.anchoo J.

8"4u R..,,

•• R. B<ijulh SU., h

w-11ooJ.

SUPREME COURT REPORTS [1962) SUPP.

ground must be distinguished from lcatras which are exempt from the provisions of the Act in s. 5: (see Karim Ahmad v. Rahmat Elahi) (1) •

A contcetion was also revised that s. I 6 offends Art. 14 of the Constitution. This was based on s. ,3 of the Punjab Act which gives exemptions to certain properties from the application of the Act and also on the ground that it did not apply to agricultural property. So far as agricultural properties are concerned, they form a distinct class by themselves and therefore there can be no question of discrimination on that account.

With regard to exemptions contained in s. 5. with respect to shop, serai, katra, dharmsala, mosque or other similar building, these arc obviously distinguishable, for they are generally places to which public re9ort.

In particular strees 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 tho secondary meaning is market; see Karim Ahmad v. Rahmat Elahi.

Generally, therefore, a katra. would be a business locality though there might bu purely residential katrM.

However, even purely residential katras would coneist 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 pri vato 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 foils 1md is hereby dismiBSed.

The case will now go back for disposal according to law and we trust its decision will he expedited.

(1) AJ.R. J946 Lab,432.

3 S.C.R.

SUPRE!\IE COURT REPORTS 743

This brings us to C, A. 430 of 1958. In this case a preemption suit was brought by r, he respondents under Chap. XIV of the Berar Land Revenue Code, 1928 (hereinafter called the Code)

with respect to snrvey No. 285, sub-division I.

The pre-emptors hold sub-division 2 of survey No. 285 and based their claim on s. 174 of the Cod'<· Section 17 4 -lays down tat the right of pre-emption thereunder shall arise only for unalienated lands held for agricultural purposes in favour of occupants in a survey number in respect of transfers of interests is that survey number. An "occupant in a survey number" has been d, efined in s. 173 to mean a person having the right of an .occupant; whether in his sole right or jointly with others, in that survey number, or in any portion of it. But the right of pre-emption does not arise even on a transfer of a part of a survey number when the transfer is in favour of another occupant in that survey number or when the transfer is made with consent of all the occupants in the survey number. The only point which has been raisecd before us is whether the right of preemption given by s. 174 of the Code is an unreasonable restriction on the right to acquire, hold or dispose of property guaranteed under Art. 19 (1) (f). It may be mentioned that the suit was . decreed and on appeal to the High Court tb e decree of the tri<i, l court was confirmed. The appellant had contended befoie the High Court that the law of pre-emption had been rendered void as it was inconsistent with Art. 19 ( 1) (f} of the Constitution. But this contention was negatived on the basis of .. nearlier judgment of the Nagpur High Court in Ramchandra v. Janardan (1) by which the right of pre-emption contained in Chap. XIV of . the Code was held constitutional.

The present appeal challenges the correctness of the view takeii in that case.

{Jl A.J.R. 1955 Na~. n~:

Bhau Rom

B. Bai}nath Sin:h

Wanchoo J.

J96Z

Blan lam

•• Jl, Bsijndh Sin1A

w ""'1loo J.

744 SUPREME COURT REPORTS [1962) SUPP.

Now it will be seen that the right of prmp tion granted by _Chap.

XIV is of a very limited nature. In the first place it is confined to [occupants in a survey -number. A "survoy number" means a portion of land formed into, or recognised as, a survey number at the last preceding revenuesurvey 'or subsoquently r<1cognised as such by the Deputy Commissioner, in respect of which the area and the land revenue pa ya.bl A are separately entered under an indicative number in the land records. "Sub.division of a survey number" is defined to mean a portion of a survey numhPr in rospect of which the area and the land revenue payable are separately entered in the land records under an indicative number subordinate to that of the survey number of which it is a portion. It appears that generally survey numbers are the units of assessment at the time of r.evenue settlement and are formed under B. 86 of thci Code and no new numbers can be formed under the Rules after the settlement except in special cases, e. g., whore land is takon up for public purposes for public buildings, threshing floors etc., or waste land is given out for cultivation, or survey numbers exeee ding 30 acres are divided into two or more survey numbers to reduce the area; in all other cases only sub-divisions of a survey number take place. sub divisions are formed under s. 88 read with the rules framod thereunder, and it is open to amalgamate two or more adjoining sub-divisions in a survey number when th"Y are held hy tho same occupants under the same tenuro. On sulKlivision, the assessment of a survey number is distributed over its sub-divisions as agreed between the occupants. It is clear therefore that the assessment of a survey number is one and under s. 132 where there are more than one occupant of a survey number, all Ruch occupants are jointly and severally liable to the payment of the land-revenue assessed oµ it. To be¥in with terefore the holders of~

survey number are really co-sharers. For one reason or the other, if during the currency of the settlement co-sharers decide to sub-divide the number, the assessment is distributed amongst the subdivisions and each sub-divisions then becomes a holding on being thus separateiy assessed to landrevenue.

The right of pre-emption under Chap.

XIV is confined only to the survey number which as we have pointed out earlier is one unit of assessment, the occupants of which are co-sharers and are jointly and severally responsible for the payment of land revenue. In effect, therefore where a survey number is sub-divided during the currency of a settlement and sub-divisions are formed with separate assessment of ]and-revenue on such subdivisions, the holders of various sub-divisions, though they are not strictly co-sharers, are very much akin to co-sharers. The pre-emption therefore as prov:idcd in r. 174 of Chap. XIV is really pre-emption in favour of co-sharers strictly so-called before there is any sub-division of a survey number and after such sub-division between persons who though not strictly co-sharers are still akin to co-sharers. It also appears from the Rules that a separate survey number is generally expected to be about 30 acres, though in particular cases it may he larger. Therefore, the law of pre-emption in s. 174 of the Code applies to those who are cosharers 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. Jn effect therefore the Code creates a ri.!!ht of pre-emption in the holder of an interest in a survey number only when an occupant having an interest in that survey number se.lls it or there is foreclosure or a'usufructury mortgage, or a lease exceeding fifteen years js

. .

19~2

Bhau Ram

v.,

8. Bajj,.aih Sin:h

Wanc%oo J.

B/Jau Rom

"' B Baijnalh Sinth

W-.;..J.

746 SUPREME COURT REPORTS [1962) SUPP.

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 th is right is ia 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 t.he Code with this addition that this being agricultural land there will be further advantag.i inasmuch as the right of pre-emption would result in consolidation of holdings within a survey number wh!ch as we have said is generally of an extent of thirty acres. \V'e are therefore of opinion th t the view taken in Ramcliandra v . .J anardan (1) to the effect that tho law of pro-emption provided in Chap. XIV of the Code does not infriuge Art. Hl

(l) (f), is correct. This being t.he only point urged

before us in the appoal, we are of opinion th1it the appeal must fail.

We therefore allow C. A. 2i0 of l!l5:3 with costs and dismiss the suit for pre-emption. No order as to costs in this appeal C. A. 59'1 of I 9fi0 and C. A. 430 of 1958 are hereby dismissed with costs.

SARKAH, J.-These three appeals arise out of suits for pre-emption of properties.

Broadly put, the question in each appeal is whether the law creating the right of pre-emption with which it is concerned, is void as offending Art. 19(1 )(f) of the Constitution. One of the appeals involves also tho question whether the 111.w is invalid a~ offending .

Art. 14 of the Constitution.

The right of pre-emption challenged is in each case based on a statute. So there aro three different tatutes to deal with. Though some of the features of these statu~ are subst&ntially-

(ll AJ.R. 1954 N.,. ~· .

oommon, there are some others which are not so.

Each appeal has therefore to be considered independently in r<Jference to its own statute. It may however be observed here that these statutes are all pre-Constitution laws but the sale on which the right of pre-emption was claimed had taken place in each case after the Constitution had come into force.

We shall first take Civil Appeal No. 270 of

1955. That is concerned with the Rewa State Preemption Act, 1946. We shall b11 concerned with s. 10 of the Act which is in these terms:

S. lO Persons of the following classes shall have a right of pre-emption:-

(1) Any person who is a co; sharer or partner in the property sold or foreclosed:

 (2) Any person who owns any immove- 1tble property adjoining the property sold or foreclosed or in case of transfer of tenancy rights, the land which is the subject of such rights.

Provided that among the above mentioned classes the first in order will exclude the second and among persons of the same class, the nearer in relationship to the person whose property is sold or foreclosed will exclude the more remote.

In this case, pre-emptiop. was decreed on the ground of ownership of adjoining property but as both the purchaser and the pre-emptor held lands adjoining the property sold, the pre-emption decree was passed in favour of the pre-emptor under the proviso to s.10 as he was related to the vendor

qile the purchaser was not so related1 ·

1.02

Bhau Ram

•• B. BtJijnath Singh

Sarkar J.

Bhau Ram v.

B. B.ij..ih Singh

Sa.U.J.

748 SUPREME COURT REPORTS (1962] SUPP.

The question that ariseR in this case is whether a right of pre-emption based on vicinage offends Art.. I\!( I l(f).

On this question there has been a divergence of opinion in the High Courts.

It would not b!l profitable to discuss these decisions in detail because in what follows we shall deal with the various points considered in them. It may however be stated that th" High Courts of Hajasthan Madhya Bharat .. Vindhya Pradesh and Hyderabad have ta.ken the view that such a right of pre-emption offends Art. I !l: see Panclt G"ujar Gaur Brnhmins v. Amar8ingh('), Ba/mlal v. GouMdltan

das ('), Sewalal Gh~118hyam v. Param La/({'njn ('),(this dealt with the Act with which we are dPaling), a11d llloti Bai v. Kand Kari Channay" ('). On the other hand the High Court of Punjab has held that the right of pre-emption based on vicinage does not offencd Art. I 9( l)(f): see Sardlta Ham v. l!aji Abifol(').

It may perhaps b" said that the High Court of Nagpur has also ta.ken the same view as the High Court of Punjab: seo Ramcltandm K rislmaji DluJg11k v . . Janardan Kn'.slmn.ppa Marwar(').

One arg•Jment advanced on behalf of the pre emptor, which applies to all the appr'als, may bo noticed here.

Our attention was drawn to Shri Audh Belv1ri Singh v. Ua.jadhar .laipuria(') whPre it is stated that "In our opinion the law of preemption create8 a right which attaches to tlw property and on that footing only it can bo enforced against the purchaser''. It was said that since the right of preemption is attach"d to property it is an incident on which property is held and therefore it is not a restriction on theright to hold property.

On behalf of the purchaser it was said tllat eve11 so it would bo a restriction because a right to hold property existed independently of the law of pre emption and this law ff .. cted adversely the right to

{I) A.t.R. (1954) Raj, 100

(2, A.I.R. (19; G) M II I

(3J A.I.R. (19'•6) V.J'. 9.

(4) A.IR. (!9S4) Hyd. 11,1, t5l A.f, R. (1960) Punj 196

(6) A.I.R. (195S) Nag. 225,

(7) (19$5) I S.C.R. 70, 80.

 3 s.c.:R.

SUPREME COURT REPOR'rs

property. As at present advised, we are unable to say that the contention of the purchaser is entirely without foundation. In the view however that we have taken of these cases, we think it unnece3sary to pronounce finally on the point so raised. We shall proceed on the basis that even if the law of pre-emption creates a right which attached to property, it may amount to a restriction on thC' right guaranteed by Art. 19(l){f).

Article 19 (I) (f) of the Constitution states that every citizen shall ha.ve the right "to acquire, hold and dispose of property". Clause (5) of this Article says that reasonable restrictions on this right may be imposed by law in the interests of the general public. There is no doubt that a law of pre-emption does impose a restriction on the rights mentioned in Art. l9 (1) (f). The extent of the restriction will be considered by us in more detail later. The question is whether the restriction is reasonable and in the interests of the general public. In deciding the question of reasonableness, we think, we have to balance the disadvantage to the person injuriously affected by the law and the advantage conferred . by it on the community in general. If we find that the advantage outweighs the disadvantage, then we would be justified in holding the restriction imposed by the law to be reasonable. In considering the question of reasonableness, we do not conceive it any part of our duty as a Court to go into questions of policy, or to ask whether if it was for us to make the law how we would have made it. Once we find that the restriction imposed by the law is reasonable, we think, we are bound .to uphold it.

The first thing that we wish to observe is that the result of'a law of pre-emption is not that every sale is likely to be pre-empted. One does not exercise the rigbt of pre-emption for the fun of it nor does so out of perversity. One has to have

BhauR'am .. ., B. BaijtuJth-S{ngh

Sarkar J.

Bha11 &m

B. Baijnath SingJ1

750 SUPREME COURT REPORTS (1962] SUPP.

money to ho able to exercise that right. It can be presumed that given the money the right will be exercised vnly when it would be decidedly advantageous to d.o so. We think that it may therefore be fairly said that the right of pre-emption will not be exercised in a very largo number of cases. The restriction imposed by it will not therefore affect many.

This we think is a. legitimat(, consideration in judging the reasonableness of a restriction imposed by the law of pre-emption.

There is one other general consideration t-0 which we propose now to refer. In large parts of this country there has been for a long time a customary right of pre-emption including a right to preempt on the ground of vicinage.

Before the Constitution that custom bad been upheld by courts of law.

In Audh BehariSitl{lh's case (•i, this court itself upheld a custom giving a right of precmption

on the ground of vicinage. The Courts could not have upheld the customary right of pre emption unless they held the custom to be reasonable. It is well known that "A custom must be reaaonablc. If it is against reason it has no force in law.": see Halsbury's Laws of England, 3rd ed. vol. 11 p. 162.

In Tyson v. Smith, (')Tindal, C.J., observed "Nor is a. custom unreasonable because it is prejudicial to the interests of a private man, if it be for the benefit of the commonwealth". These words, it will ho noticed, are very near to the words used in cl. (5) of Art. 19.

We then come to this: before the Constitution various courts in India held the customary right of pre-emption on the ground of vicinage to be a reasonable custom, that is, in the opinion of the courts the restriction impoed by it was a rear sonable restriction. \Ve are unable to discover why

after the Constitution, the law imposing a similar restriction, customary or otherwise, should be held to be unreasonable. There has not been any such

c11[J955J1 s.c.R., 10, so.

(2) [1958) 9 Ad. & l!d-, 40IS, 42 t.

3 s.d.R. ' sU:PREME cou&T REPORTS 7ifr

vast change in the socia, l or economic structure of the country which would justify the view that a restriction which was reasonable before January 26,

1950, has since then become unreasonable. It is true that courts in Madras refused to apply the Mahomedan Law of pre-emption as a matter of justice, equity and good conscience. But we are not concerned with Mahomedan Law or with justice, equity and good-conscience. Even in Madras a local custom giving a right of pre-emption ha!i been upheld: see Tulla's Mahomedan Law, 15th ed. p. 202.

The restriction imposed by the law of preemption has different aspects when considered from the point of view of a vender and a vendee. We will first take up the case of a vendor. We think it will not be worng to say that the reports show that a vendor has rarely come to court complaining that the law of pre-emption has cast an unreasonable burden on his right to dispose of property.

Now the Rewa Act provides bys. 12 that when a person proposes to sell immovable property he

niay give notice of his intention to do so to the person or persons having theright of pre-emption under the Act in reRpect of the sale and of the price at which he is willing to sell.

Section 13 provides that any person having the right of pre-emption shall lose such right unless within one month of the notice he pays or tenders the price mentioned in it to the vendor. The result of these provisions is that the vendor can unless perhaps where he was selling for an unreasonably high price, ascertain before hand whether any person entitled to pre-empt is likely to exercise his right. If .he finds that such persons do n<Jt insist on their right, then he can sell it to anyone he likes and at any price. It may reasonably be expected that there will be many cases in which this will happen. To a person having a right

Bh1u Ram v.

B. Bajjnath Singh

Sarkar J,

195Z

Bli•u R•n•

B. BeiinatA Singh

Sarkar J.

752 SUPREME COUBT REPORTS [i962] SUPP.

of pre-emption, he will be compelled to sell at a reasonable price.

Thus the Rewa law of pre-emption imposes on a vendor two restrictions .. The first is that he may he prevented .from selling property at any price he likes, and th(• second is that he cannot sell it to anyone of his choice.

Now tho first restriction is clearly a reasonable restriction. One cannot complain if he is made to accept a fair market price for the property he is willing to sell and is deprived of the chance of

oxtractin~ an unconscionable price. Such a measure won Id control prices and check speculation in land. It would help to stabilize the economy of the country. It would prevent a wealthy man with his resources in money from outbidding a poorer man in respect of a property which is of grca, t advantage to the poorer man to have by reason of its vicinage with propnty he holds and which may not have that value for the richer man. It was contended that the law of pre-emption had the effect of amassing wealth in one ownership.

For the reasons just mentioned, we think it really prevents the richer man from acquiring properties when it is to the advantage of a poorer man to have the same.

In so far as the law prevents a vendor from selling his property at an exorbitant price it cannot, in our view, be said to impose an unreasonable restriction on him.

Then, as we have said, the law of pre-emption prevents a vendor from selling his property to anyone he likes. We cannot imagine this to ho a great deprivation. Really, the freedom to sell to anyone has perhaps no more value than a sentimental one.

As ag!linst this the advantag(i accruing to the neighbouring owner is that he is able to enlarize the property previously held by him.

We think that balancing the two sides the scalo dips much in favour of the pre-emptor. Thero are"also other reasons for this view whioh we shall present!) state.

I •

,, I

3 S.C.R.

SUPREME COURT REPOR'i'S

It is said that one of the disadvantages of the law of pre-emption i.s that it gives rise to a lot of litigation. We do not think that this is a legitimate argument. The law does not necessarily gives rise to litigntion.

Litigation arises because through cupidity people want to evade the law.

In that way, a number of other laws may be thought of which cause litigation. But the defect is not in law but in human nature. We are therefore unable to agree that the fact that litigation may be caused either because the law of pre-emption is sought to be enforced or to be evaded, can be a reason to say that the restriction imposed by it is unreasonable.

We also think that in deciding whether a law imposes unreasonable restrictions, the fact that it easily gives rise to litigation is a wholly irrelevant consideration.

Assuming that the law imposes a restriction if it did not, no question of the reasonableness of the restriction would of course arise-that restriction would not become unreasonable if it was not otherwise so because the law caused a great deal of litigation.

Now we come to the case of a purchaser. It is well understood that the right of pre-emption is a right to be substituted in place of the purchaser.

That is the view that was accepted in Audh Bihari Singh's case(I). So far as the Rewa Act is concerned, s. 4(i) expressly provides that the right of preemption is a right to be substituted in the place of the purchaser. It would, therefore, follow that the only restriction put on the purchaser is on his right to acquire a particular property. The law of preemption does not restrict his right to hold property.

If he has acquired property in compliance with the law of pre-emption, then there is nothing to prevent him from holding it for as long as he likes.

The question then is whether the restriction

11J (1~55J s.c.R. 10, so.

BhauRom v.

B. Baijnath Singh

Sarka1 J.

JJhau Ram v.

B. Bai.j1kJth SJ"nch

Sarkar 1°

;54 SUPRE~IE COURT REPORTS (1962] suPi>.

on tho right to acquire property ii! unreasonable. Is it unreasonablo to say that one ahall not acquire a particular propert1 if the adjoining owner wants it?

It is not as if the purchaser is prevented from acquiring any property. There must be many other properties more or less equally good which he is free to acquire. As we have earlier pointed out, there woul<l not be many cases in which the right of preemption would be exercised with the consequent restriction on a stranger's right to purchase.

Now if the property is agricultrual land there is no doubt that the right of pre-emption on grounds of vicinage will help consolidation of holdings.

We think that balancing the advantages of the consolidation of holdings with the disadvantages resulting to a stranger by the restriction imposed on his right of acquiring that property, there is no doubt that the disadvantages are of small consequence. The advantages arising from the consolidation of agricultural holdings will be discuased in the last case that we will consider and which comes from Berar.

Tho Rewa Act however is not confinod to agricultural !:ind. It creates a right of pre-emption in other property also. Let us consider the case of house property in a town or village.

In a town or village the Indian way of life has been to live in compact communities.

There is no doubt that such living has great advantages.

It is true that due to C; Conomic reasons it is not always possible nowadays for many to have the comfort of living in compact communities. But the fact that economic conditions a.re breaking up compact comnunities does not show that living in such communities has not its advantages. It seems to us that such li>ing would help to maintain the homogeneity, eomfort and peace of the people. It is common human experience that property leads to disputes concerning boundaries, easement and concerning divers other rights connected with it. .Also

disrutrs ari1c llcause Gf diffe1ent ways of Jiving.

Now most of these disputes would be with the adjoining owners. The right of pre-emption based on te ground of vicinage would help to itvoid these disputes coming into existence. Again, it wo?-1'.1 be a great discomfort for a number of people hvmg together for years to have to accept among themselves an outsider who may not be able to fit himself into that community or may even be an undesirable person. Furthermore, if a person is given preference in acquiring neighbouring property it would help him better to manage his properties. Privacy of the home would be better maintained. Against all these advantages the only disadvantage that the purchaser suffers is that he cannot acquire a parti

cular property. It will often be possible for him to get another equally good property. It cannot be said that if between to such competing persons the law favour one who owns neighbouring property, the law is putting unreasonable restriction on the other person.

In none. of the reported cases has it yet been held that the right of pre-emption given to a cosharer imposes an unreable restriction on the purchaser. It seems to us that it would be impossible to take that view. A co-sharer increases his holding if he is given the preference to buy the land.

He of course also prevants an outsider being thrust into joint ownership with him and this is the only difference between his case and the case of an adjoining owner. The difference is not such as would in principle lead to different conclusions as to the reasonableness of the restriction in the two cases. A co-sharer ii he does not like his new co-sharer can always separate his share. It has not however been held that for this reason a law giving a co-sharer a right of pre-emption puts an unreasonable restriction on an other persons right to acquire property.

We think, therefore, on the same principle it has to be held that a law giving a right of pre-emption on .

J962

BhouRam

B. Baijnath ingh

Sarkar _J.

Bhau Ram

•• B. Baij11a1h Singh

Barkaf' J.

756 SUPREME COURT REPORTS [1962) SUi>P.

the ground of vicinage also imposes a restriction whir.h is reasonable.

One of the advantages of the law of pre emption based on vioinage earlier noticed is the preservation of the privacy of homeR.

In regard to this, it was said that purdah system has disappeared and therefore there is no need to protect it. It may be that purdah has disappeared but it cannot be said that the privacy of the home is a thing which

is of no value nowadays. It is this that the 1!1w of pre.emption will protect and therefore be of advantage to.the community. We think it wrong to imagine that privacy of a home is of value only to the people observing purdah.

Then it is said that living in compact communities has also disappeared and people now live in flats. But wo do not think that it can be suggested that living in communities has not its advantages or living in flats is an ideal system. There are therefore no arguments against the view that living in compact and homogeneous communities is still desirable and has still its advantages which perhaps will always remain.

It is also said that the restriction imposed by the law of pre-emption is unreasonable because it encourages discrimination on the ground of religion, race and caste and this is what Art. 15 of the Constitution forbids. We do not think that it is a reasonable reading of. the Constitution to say that it forbids people of one race, religion or caste from living together.

Furthermore, compact communities are not always of the same race, religion or caste. The advantage is not due to identity of caste etc. but to the identity of thought and way of living and tics generated by long familiarity with each other and the families of each other. For all these reasons a restriction imposed by the law of pre-emption based on vicinagc is, in our view, a

reasonable restriction on the right to acquire and dispose of property.

Then it was argued that when a property is purchased in exercise of the right of pre-emption, it will often happen that that property will be let out to a stranger and so the objective of living in compact communities will not be attained in many cases.

This may be so in some cases but the landlord when the occasion arises, can choose that stranger. He further has some control over the tenant. He will have no property dispute with the tena~1t except such as might arise out oftenancy laws. If the tenant is found to be undesirable, he can be removed. All that this contention comes to is that the law of pre-emption may not completely guarantee the advantages which it is designed to create, but there is no doubt that it does guarantee a very large part of it and it would be incorrect . to say that it guarantees none.

A further question remains in this case. It is said that s. 10 of the Rewa Act is bad in that it gives a preferential right to pre-empt on the basis of relationship. This however does not seem to us to be a correct way of reading the statue. What it aims at is to give a right of pre-emption on the ground of vicinage and the other ground. mentioned in the section.

But then it is unavoidable that there may be various persons entitled as co-owners or owners of adjoining properties to the right of pre-emption under the section. It has to be remembered that we are now proceeding on the basis that the right imposes a reasonable restriction. In order therefore that a statute legally made giving the right of pre-emption may not be rendered infructuous in certain circumstances, an order of prefrrence among the would be pre-emptors has to be devised. l'his is done by the proviso to s-. IO of the Eewll

/ . . ' .

196t

BhauRam v.

B.Baijnalh 'Sin:·

Sarkaf'J.

. .

Bh .. R""' ..

B. Baij11a11' Sfnth

SUPREME COURT REPORTS [1962] SUPP.

Act by laying down that a person nearer in relationship to the vendor will have a preferential right of pre-emption over others.

The proviso does not purport to create a right of pre-emption only on the ground of relationship. It solves a problem arising out of a right of pre-emption legitimately granted on the ground of co-ownership or vicinago. It is a corollary to the main right. If the main right is good, a provision enacted to prevent its being defeated would equally be good. ' The result is thats. IO of the Rewa Act whioh gives the right" of pre-emption on the ground of vicinage must be declared to be a perfectly valid statutory provision which docs not offend Art.

I 9( I )(f) of tho Constitution and so is the proviso to that section which is really a pa.rt of it.

That disposes of Civil Appeal No. 270 of 1955. We W<:uld theroforc dismiss the appeal.

We next come to Civil Appeal No. 595 of 1960 which concerns tho Punjab Pre-emption Act of 1913.

The property involved in this case is a house situated in the city of Old Delhi.

Section i6 of the Punjab Act which govorns the property in dispute, is in these terms :

S 16.

The right of pre-emption in respect o'f urban immovable property shall vest,-

firstly, in the co-sharers in such property, if any; secondly; where tho sale is of the site of tho building or other structure, in the owners of such building or structure ;

thirdly, where the sale is of a property having a staircase common to other properties, in the owners of such properties ;

fourthly, where the sale is of property

avin~ a common entrance from t)lo $reet

with other properties, in the owners of such properties ;

fifthly, where the sa]e is of a servient property, in the owners of the dominant property, and vice versa ;

sixthly, in the persons who own immovable property contiguous to the property sold.

The Punjab Act, like the Rewa Act, contains provisions for giving notice of an intended sale to the person having a right of pre-emption, for loss of right of pre-emption when action is not taken to purchase in terms of the notice and for fixation of a fair price by the court : see ss. 19, 20, 22, 25 and 27 of the Punjab Pre-emption Act.

As we have said in the Rewa case, provisions of this kind help to relax the severity of the restriction imposed on the seller.

The pre-emptor in this case based his claim on the first, third, fourth and sixth grounds mentioned in the section. The High Court held that the section did not offend Art. l9(l)(f) with regard to the first, third and fourth grounds but did so with reg-ard to the sixth ground. The judgment of the High Court

is reported in A.LR. (1958) Punj. 44.

The view there taken in so far as it concerns the sixth ground in the section is against the Full Bench decision of the same High Court in Uttam Singh v. Kartar Singh (l) and Sardharam v. Haji Abdul (2) the latter of which expressly overruled that view ..

It is interesting to note that under s. 7 of the Punjab Act a right of pre-emption in respect of urban immovable property in any town, that is, the right contemplated bys. 16, shall exist if a custom of pre-emption had existed in such town at the commencement of the Act and not otherwise.

(1) A I.It. (1~54) Punj. 55. . . .

B.Baijnath Singh

Sarkar J.

Bhau Rom

R. B aljnalh Singh

Sarkar J.

760 SUPREME COURT REPORTS (1962] SUPP.

It ia plain that in the city of Delhi the custom of pre-emption had so prevailed; if it had not, then of course the point would h:we boen ta.ken and the case thereupon decided against the pre-emptor.

Custom is a question of fa.ct and on the state of the records in this case we must proceed on the ha.sis that a custom of pre-emption had existed in Delhi.

Now that custom, if it had prevailed must have done so because it was considered to be a reasonable rule inspite of the restriction that it imposed on the vendor or the purchaser. We have earlier s:i.id that tho existence of a customary right of pre-emption indicates that the restriction imposed by it is reasonable. That view itpplies moro strongly to the pres:mt case becausi; here in the very areit with which we are concerned that custom did exist.

The right of preemption based on vicinage mentioned in the sixth ground in e. 16 has itlrea.dy been doalt with by us in the Rewa case. l<'or tho reasons stated, there, we hold this provision in s. 16 to be a valid piece of le>gislation.

We hitvo now to dea.l with the other grounds in s. lfi referred to earlier. Tho first confers a. right of pre.emption on a co-sharer in it property. Wo feel no doubt that a law giving such a right imposes a reasonable restriction on the right conferred by Art. 19( I )(f). If an outsider is introduced a.R a cosharer in a property, that is likely to ma.ke com mon management inconvenient and thereby destroy the bcnPfits of ownership of the property to a large extent. Property cannot be managed profitably unJegs one policy is followed. If there arc more than one owner of a propnrty, it is nssential for the profitable enjoyment of it that they should be alc to work in •mison. ThArefore if by tho op1ira.t10n of the law of prc-omption based on co-ownership the property eventually comes to mi vested in a single hand that would be a grea.t advantage to the ownor. Such a law being for the benofit of ~11

owners would surely !:; e in the interest.s of the general public. Till the property comes to be vested in one owner it would have remained in the

hands of two or more people who have been owning it for years and have been getting on with each other smoothly, for otherwise they would have partitioned it. In such a case if one of the joint owners goes out and in his place the remaining joint owner or owners have to accept astranger, a good deal of irritation and mismarnigement may be reasonably apprehended. If the property owned is a residential house-and s.16 will be largely concerned with such properties-the introduction of a stranger into it would lead to an undesirable situation and often and in disaster. These are the advantages arising from a law of pre-emption based on coownership. The disadvantages are that the selling co-owner cannot sell it to anyone he likes or for an extortionate price, and the purchaser is deprived of owning an undivided share in property. Neither of these seems to us to be a great deprivation. In neither case is the disadvantage suffered great as compared to the advantage accruing to the remaining joint owner.

Therefore, it seems to us that the restriction imposed on the right to dispose of or acquire properties imposed by the first ground under s. 16 of thc> Punjab Act is a reasonable restriction.

The right based on the third and fourth grounds mentioned. in the section also seems to ns unobjectionable. The third ground gives to the owner of property a right of pre-emption when another property having a common staircase with his is sold. If a number of properties have a common staircase and one is sold, it would be most inconvenient and greatly disadTantageous to the owners of the unsold properties if they cannot prevent a 8tranger from acquiring the portion sold and thereby obtaining a right to the common user of tqe tairoase with them. 'fhat would in a lare

. . ~

I9•t

Bhau Ram v.

B. Ba, jn-, th Singh

Sarkar J.

IY6t

Bhau Ram

B. Batjnalh Singh

Sorkar J.

762 SUPREME COURT REPORTS (1962] SUPP.

number of cases be more or less admitting a Rtran. ger into their houses.

The disadvantage arising from such & state of affairs is clearly much more than the advantage that would arise to the purchaser by the acquisition of the property. The fourth ground gives a right of pre-emption when one of several properties having a common entrance from the street is sold. 'Jhe street is of course the public street which is common to all. In order that this ground may apply, there has to be a common entrance from such a street to a numbN of properties.

This ground apparently contemplates a rase of a

passage leading from a public street which is common to all the owners of properticH sitnate on th1it passage. This ground therefore deals with owners of properties who have to share a common passage.

People living in these hl'USPS would naturally from a very compact community. Indeed very often they would be living like relatives or members of a family.

A law which ives them a right to buy one of these properties when it is sold to a etranger cannot be said to impose an unreasonable restriction on anyone.

AH in the last case, the atfrantago accruing from such a law to the porson desiring to pre-empt would far outweigh the disad1antage occasioned either to tlw vendor or the purchaser.

The learned counsel for the appellant referred to various Acts which have gradually abolished the right of pre-emption. He pointer:! out that by Act X of 1960 of the Punjab Legislature s. !(l has in faet been repealed as a whole anrl has bP-en substituted by a provision creating a right only in a tenant to pre-empt the property held by him when the landlord desires to sell it.

Punjab Act X of 1960 however has not been extended to Delhi rind here the Punjab Prcemption Act of 1913, the Act with which we arc ooncerned, still applies. All that these subsequent pieces of legislation show is that the Legislature has thought it fit to abolish ccrtai11

rihts of rro-emption ill various cases. But ~

oannot be used as an argument to contend that the Legislature considers that the . la~ of pre-em1_>tion imposes an. unreasonable restrioton on the r1ghs mentioned in Art. 19(l)(f). lf it were so, then 1t has to be said that in so far as the Legislature has not thought it fit to repeal the law of pre-emption as it exists in Delhi, it does not consider that law to impose an unreasonable restriction. Arguments of this kind do not lead us anywhere. Furthermore, we have to decide the question of the reasonableness of the restriction for ourselves and whatever opinion a legislature expresses on the matter is not of much relevance for this purpose.

Lastly, we have to deal with the point that s. 16 of the Act offends Art. 14 of the Constitution.

It was said that it offended that article because there was no right of pre-emption in regard to agriculture land and the law was not available outside urban areas of Delhi and that it exempted from its operation shops and katras. Now with regard €o agricultural land, it clearly forms a distinct class by itself and so do properties outside urban areas.

Properties in urban areas have their own pPculiar problems. Futhermore, there is not likely to be much agricultural land within the Union territories of Delhi. With regard to shops and katras, no doubts. 5 of the Act exempts them from its operation. But these also form a class by themselves different from other properties.

A shop of course is essentially a. bussines premises.

What a katra is, in not defined in the Act, But it would appear that the primary meaning of katra is an enclosure and the secondary meaning is market: see Karim Ahmed v. Rehmat Alahi (').

It would therefore be safe to proceed on the basis that a katra is principally a business premises within an enclosure though no dou bt, it also contains residential accommodation. It can be assumed that tpe

(IJ A. I. R. (1946) Lall. 433. .

Bhau Ram v.

B. Boijnath Sinth

Sarkar J.

Bhau 84111

v. 8, Daijnolla Singh

Sark1.TJ.

s., u, J.

764 SUPREME COURT REPORTS [1962] SUPP.

residential accommodation provided is for persons working in the shops in thn katra.

Now clearly in business one hs to work and mix with strangers.

One has to welcom1• :md associate with, romple. tely unknown persons who d0 not live with the

persons doing the business. In order that business premises may cater to tho needs of the community for which they <•xist, t.hey havo to he open to all.

To such premises no quetion of any advantage flowing from community living arises.

They are genPrally properties of great value. It. seems to us that they ran therefore he put in 11 epnratc class. They do not rn'ed the protection of the law of pre-emption in the same way as other properties w0uld do.

For these rcwons we clo not think that s. 16 can be said to viohtte Art. 14 of tho Consti. tution.

In the result we hold that the first, third, fourth an<l sixth grounclH, on which a right of pre-emp tion is basAd by s. f6 of th" Punjab Act, am valid pieces of legislation. We would therefore dismiss this appeal with costs.

We come now to the last appeal, that iH, Civil Appeal Xo. 430 of 1958. It eonccrns th" Ilerar L1rnd Revenue Code of I !lt8.

ChaptPr 14 of this Code creates cortain rights of pre-emption to one of which we sh:1ll presently refer. 'fhat chapt.er ccm8ists of ss. 173 to 187.

This chaptrr in the Code, like the two Acts WA have alreacly dealt with, contains provisions :i.l.Jout notice of an intended salfl, Jµss of right to pre.om pt in case tho notice is not acted upon and fix<ltion of a fair

price. These :i.re contained in ss. 176, 180 and 182.

As we have earlier stated, these provi, ions very largely romove the rigour of the restriction imposed by tho right of pre-emption 011 vendors of properties.

The right is confined to unalienated lands held for agricultural purposes:[~. 174(2)). Jt a.ris<•s in the caeo of a s:i.le when one ocoupar1t,

3 s.c.k.

SUPREME COURT REi>OR'i'S 765

in a Survey Number proposes to sell the whole or any portion of his interest to a stranger and the right is given to other occupants in the same Survey.Number: s. 176 ands. 18::. Now a Survey-

Number is defined as a portion of land recognised as such at the revenue survey in respect of which the area and land revenue payable are separately entered under an indicative number in the land records : s. 2 ( 13).

Sub-division of a surveynumber means portion of a survey-number in respect of which the area and the land revenue payably are separately entered in the land records under an indicative number subordinate to that of the survey-number of which it is the portion : s.2(12). Section 184 provides that when an occupant in a survey-number exchanges his interest in it for land elsewhere, then this exchnge would not create any right of pre-emption in favour of the other persons interested in the survey-number, part of or interest in, which is exchanged. The substance of the matter therefore is that the Berar Code creates a right of pre-emption in the holder of interest in a survey-number only when anybody having an interests in any land in that survey-number sells it for a money consideration to a stranger provided that the interest sold is in unalienated land held for agriculture purpose.

In the present case, the vendor owned subdivision No. 1 in survey-number 285 and the respondents jointly owned sub-division No. 2 in the same survey-number and in that right claimed to pre-empt the sale by the vendor. There is further no controvery that the lands were unalienated land held for agriculture purpose.

Mr. Sovani appearing for the respondents said that under the Berar Code of 1928 and under the previous land laws which it replaced, an occupant is one who obtains land from the Government on the terms mentioned in the Code and that it is

lb62

Bhau Ram

8. Baijnath Sir1th,

Sarkar J,

Bhau Ram

B. Raijnotlt Singh

S.rkarJ.

'6~

SUPREME COURT REPORTS (1962) SUPP.

only against such an occupant that a right of preemption is created by that Code.

He therefore contended that the right to property being created on the term that it would be liable to pre-emption, it was not a case of restriction but one of the nature of the property itself and therefore no question of infringement of Art.. 19( I )(f) arises by the exercise of that right.

As in our opinion the respondents should succeed in this appeal for the reasons to be presently discussed, we think it unnecessary to pronounce on this contention of Mr. Sovani. We have besides no materials to show as to when the right of ownership in tho proP, Crty im•olvcd in this case was first creat€d.

It may have been created under a law. other than the Code or its predeccssorn.

In that case ;\Jr.

Sovani's argument would lose its principle force.

Further we have not all the earlier land laws of Berar before us.

Jt would not be right on the materials now before. us to investigate and pronounce on the question raised by Mr. Sovani.

It is clear from what we have earlier stated that the lands included in one survey-number arc contiguous. It is only when an interest in such lands is sold that under the Berar Code a right of pre-emption arises. It would follow inevitably that the result of the exercise of this right would he to effect a consolidation of holdings. Such

11, consolidation would undoubtedly be of a great benefit to the agriculturist and to the oommunit.y as a whole.

The evils of fregmentation of agricultural holdings in our country are too well known to need detailed discussion.

Shortly put it would help an agriculturist greatly if he could extend his holdings thereby making agricultural operation economical and more productive with the resultant benefit to the country.

A law which therefore tends towards consolidation has groat advantages.

3 8.C.R.

SUPREME cotJ:R'i' REPORTS 761

. Ramvhandra Krishnaji Dhagale v. Janardhan K rishrw.ppa llfarwar(l) was a case concerning preemption under the Berar Code and was heard by a Full Bench of the Nagpur High Court.

The Bench presided over by the present Chief Justice of this Court found no difficulty in upholding thB validity of the provisions in that Code creating the right of pre-emption. With regard to the question of consolidation, Kaushalendra Rao J. observed at p. 232.

"It is not without significance that while in a part of the State the Central Provincesspecial legislation had to be undertaken for checking the evil of fragmentation by enacting a measure like the Central Provinces Consolidation of the Holdings Act (Act VIII. 1928) no such necessity has so far been felt in Berar presumably because of the operation of the law of pre-empt.ion.'' This observation undoubtedly is of gre'lt authority coming from a Judge of eminence familiar with the conditions in Berar. It has not even been suggested that the observation was not justified. But it was said that the present tendency of legislaon is fix ll. ceiling as to land that can be held by a person and that this shows that consolidation of holdings is no longer considered desirable. We are entirely unable to agree with this view.

The idea behind fixing a ceiling for holding of land is to make an equit.-ible distribution of the available land possible.

But this is subject to the idea that each holding should be economical. In other words, the law as to ceiling does not discourage consolidation of holdings but is intended only to prevent undue grabbing of lands by persons with the necessary means to do the same. Section 184 by providing that no right of pre emption wonld arise on the exchange of lands clearly indicates that the object of the Berar Cod

(1) A.I.R. (1955) Nag 225.

BhouRam

•• B, Baijnoth Singh

Sa'r/eor J.

19H

Bliau Ram

B .. Baijnalh Sin git

Sa'1<0r J,

768 SUPREME COURT REPoRTS [1962] SUPP.

in providing for the right of prc-omption is to achieve consolidation of holdings.

W c foci no dou ht that the benefits to :irise out of consolid:ition far outweigh the disadvantages caused by the restriction put by it on the right to property guaranteed by Art. 19( l )(f).

We, therefore, come to tho conclusion that the provisions in Chapter 14 of the Herar Land Revenue Code creating a right of pre-emption on the sale of land :ire valid and fully within the Constitution.

This appeal therefore must also foil and we would dismiRs it with coHts.

BY Comrr : In accord:incc with the opinion of the majority Civil Appeal No. 270 of 1955 is allowed ; no order as to costs.

C. A. No. 27 of 1955 ullou:P.d. C. A. No. 430 of 1958 and C. A. No. 595 of 1960 dismissed .