Supreme Court Clarifies Pre-emption Rights in Property Transfers: Suresh Chand vs. Suresh Chander (2020)

Introduction

Date of the Judgment: 19 February 2020

Citation: 2020 INSC 143

Judges: Dr. Dhananjaya Y Chandrachud, J and Ajay Rastogi, J

Can a person claim a right of pre-emption over a property when the buyer also possesses a similar right? The Supreme Court of India recently addressed this complex issue concerning property rights in Rajasthan. The case revolves around a dispute over a courtyard and the applicability of the Rajasthan Pre-emption Act, 1966. The core question was whether a brother’s right to pre-empt a sale is superior to that of a person who shares a common amenity with the property.

The judgment was delivered by a two-judge bench comprising Dr. Dhananjaya Y Chandrachud, J and Ajay Rastogi, J.

Case Background

The dispute began when Beni Prasad filed a suit for pre-emption in the Civil Court, Badi, Dholpur, Rajasthan. Beni Prasad sought to exercise his right of pre-emption against the sale of a house and courtyard by his brother, Kirorilal, to Devicharan. Beni Prasad claimed that he and Kirorilal were joint owners of the courtyard, each having a half share.

The defendants, Devicharan and Kirorilal, contested the suit. They argued that the property originally belonged to Pyare Lal and Baboo Lal, who had sold it to Prabhu Lal, the father of Beni Prasad and Kirorilal. They further contended that a partition in 1956 had allotted the disputed house and courtyard to Kirorilal, while Beni Prasad received another property. Devicharan also claimed a right of pre-emption based on his use of the courtyard as a common amenity.

Beni Prasad died during the proceedings and was represented by respondents 1 to 13. The appellants in the present appeal are the sons of Devicharan.

Timeline

Course of Proceedings

The Trial Court framed several issues, including whether Beni Prasad had a right of pre-emption, whether there was a common entrance to the properties, and whether Devicharan also had a right of pre-emption. The Trial Court rejected Devicharan’s claim that he had an equal right of pre-emption, holding that Beni Prasad’s right as a brother was superior. The Trial Court decreed the suit in favor of Beni Prasad.

The First Appellate Court affirmed the Trial Court’s decision, acknowledging that while Devicharan had a right of passage through the courtyard, Beni Prasad’s right as a brother was superior. The First Appeal was dismissed.

The High Court dismissed the Second Appeal in limine, stating that no substantial question of law arose.

Legal Framework

The case is governed by the Rajasthan Pre-emption Act, 1966. The key provisions are:

• Section 4: “Cases in which right of pre-emption accrues. Subject to the provisions contained in section 5, the right of pre-emption shall, upon the transfer of any immovable property, accrue to the persons mentioned in section 6.” This section states that the right of pre-emption arises upon the transfer of immovable property to persons specified in Section 6, subject to Section 5.
• Section 5(1)(c): “Case in which right of pre-emption does not accrue – (1) The right of pre-emption shall not accrue – (c) on a transfer to any of the persons mentioned in section 6, to any person who has an equal or inferior right of pre-emption”. This section specifies that the right of pre-emption does not accrue to a person with an equal or inferior right when the transfer is to a person mentioned in Section 6.
• Section 6(1)(ii): “Persons to whom right of pre-emption accrues – (1) Subject to the other provisions of this Act, the right of pre-emption in respect of any immovable property transferred shall accrue to, and vest in, the following classes of persons, namely:…(ii) owners of other immovable property with a stair-case or an entrance or other right or amenity common to such other property and the property transferred,” This section outlines that the right of pre-emption is granted to owners of properties sharing a common amenity with the transferred property.
• Section 6(3): “Among persons of the same class claiming the right of pre-emption, the person nearer in relationship to the person whose property is transferred will exclude the more remote.” This section establishes that among persons of the same class, the person more closely related to the seller has a superior right.

Arguments

Appellants’ (Suresh Chand and Anr) Arguments:

• The appellants argued that Section 5(1)(c) of the Rajasthan Pre-emption Act, 1966, states that a right of pre-emption is not available when the property is sold to someone who also possesses a right of pre-emption, regardless of whether that right is equal or inferior.
• They contended that the right of pre-emption is a weak right, and the legislature has clearly stated that it is not available when the property is sold to a person who has such a right.
• They submitted that the comma in Section 5(1)(c) should be read as “or,” interpreting the section disjunctively. This would mean that if the buyer has any right under Section 6, the pre-emption right of another person would not accrue.
• The appellants argued that the plaintiff (Beni Prasad) would not be covered by the first part of Section 5(1)(c) as the first defendant (Devicharan) would be covered by Section 6(1)(ii). The second part would not apply to the plaintiff as he only has an inferior right of pre-emption against the defendant.

Respondents’ (Suresh Chander (D) Thr LRs and Ors) Arguments:

• The respondents argued that Beni Prasad and Kirorilal were brothers, and Beni Prasad’s right of pre-emption should be upheld.
• They contended that if the appellants’ claim is accepted, the respondents could be deprived of using the common amenity of the courtyard.
• They argued that both the Trial Court and the Appellate Court correctly concluded that Beni Prasad’s right as a brother was superior to Devicharan’s right as a user of the common amenity.

Innovativeness of the argument: The appellants’ argument regarding the disjunctive interpretation of Section 5(1)(c) by reading the comma as “or” was a novel attempt to circumvent the established understanding of pre-emption rights.

Issues Framed by the Supreme Court

The Supreme Court considered the following issue:

1. Whether a right of pre-emption was available to Beni Prasad who is alleged to be a joint owner in possession of the disputed courtyard.

Treatment of the Issue by the Court

Authorities

Cases Relied Upon:

• Bishan Singh v Khazan Singh [AIR 1958 SC 838] – The Supreme Court of India, while dealing with the Punjab Pre-emption Act 1913, summarized the law on pre-emption, stating that a pre-emptor must show a superior right to that of the vendee. It also stated that the right of pre-emption is a weak right.
• Radhakisan Laxminarayan Toshniwal v Shridhar Ramchandra Alshi [AIR 1960 SC 1368] – The Supreme Court of India held that the right to pre-empt a sale is not exercisable until a pre-emptible transfer has been effected. It also stated that it is not illegal for parties to avoid a claim for pre-emption by all legitimate means.

Legal Provisions Considered:

• Section 4 of the Rajasthan Pre-emption Act, 1966: This section states that the right of pre-emption arises upon the transfer of immovable property to persons specified in Section 6, subject to Section 5.
• Section 5(1)(c) of the Rajasthan Pre-emption Act, 1966: This section specifies that the right of pre-emption does not accrue to a person with an equal or inferior right when the transfer is to a person mentioned in Section 6.
• Section 6(1)(ii) of the Rajasthan Pre-emption Act, 1966: This section outlines that the right of pre-emption is granted to owners of properties sharing a common amenity with the transferred property.
• Section 6(3) of the Rajasthan Pre-emption Act, 1966: This section establishes that among persons of the same class, the person more closely related to the seller has a superior right.

Judgment

How each authority was viewed by the Court?

✓ The Supreme Court relied on Bishan Singh v Khazan Singh [AIR 1958 SC 838]* to reiterate that a pre-emptor must demonstrate a superior right and that the right of pre-emption is a weak right.

✓ The Supreme Court cited Radhakisan Laxminarayan Toshniwal v Shridhar Ramchandra Alshi [AIR 1960 SC 1368]* to emphasize that the right of pre-emption is not favored by the courts and can be avoided by legitimate means.

✓ The Court used Section 4 of the Rajasthan Pre-emption Act, 1966* to establish the basic framework for when the right of pre-emption arises, linking it to the provisions of Section 5 and 6.

✓ The Court interpreted Section 5(1)(c) of the Rajasthan Pre-emption Act, 1966* to mean that the right of pre-emption does not accrue to a person with an equal or inferior right when the transfer is to a person mentioned in Section 6, but that this should be read conjunctively and not disjunctively.

✓ The Court referred to Section 6(1)(ii) of the Rajasthan Pre-emption Act, 1966* to acknowledge that Devicharan had a right of pre-emption as an owner of property sharing a common amenity, but this right was not superior.

✓ The Court relied on Section 6(3) of the Rajasthan Pre-emption Act, 1966* to establish that Beni Prasad’s right as a brother was superior to Devicharan’s right, even though both had a right of pre-emption under Section 6.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the interpretation of the Rajasthan Pre-emption Act, 1966, particularly Section 5(1)(c) and Section 6(3). The Court emphasized the importance of maintaining the existing hierarchy of pre-emption rights as laid down in the statute. The Court also focused on the factual relationship between the parties. The Court rejected the appellants’ argument for a disjunctive reading of Section 5(1)(c), holding that such an interpretation would amount to legislative re-drafting, which is impermissible.

The Court’s reasoning was heavily based on the legal interpretation of the relevant sections of the Rajasthan Pre-emption Act, 1966. While the factual relationship between the parties was considered, the legal framework played a dominant role in the decision. The court emphasized that the right of pre-emption is a weak right and that it should be interpreted strictly within the confines of the statute.

Logical Reasoning

Key Takeaways

• Hierarchy of Pre-emption Rights: The judgment clarifies that within the same class of pre-emptors, those more closely related to the seller have a superior right.
• Interpretation of Section 5(1)(c): The Supreme Court has firmly established that Section 5(1)(c) of the Rajasthan Pre-emption Act, 1966, must be interpreted conjunctively, not disjunctively.
• Weak Nature of Pre-emption Rights: The Court reiterated that pre-emption rights are considered weak and can be defeated by legitimate means, but they must be interpreted strictly within the statute.
• Impact on Property Transfers: This judgment provides clarity on the application of pre-emption rights in cases where multiple parties have such rights.

Directions

No specific directions were given by the Supreme Court in this case.

Specific Amendments Analysis

There were no specific amendments discussed in this judgment.

Development of Law

The ratio decidendi of this case is that when multiple parties have pre-emption rights under the Rajasthan Pre-emption Act, 1966, the right of a person more closely related to the seller is superior to that of a person who shares a common amenity with the property. This judgment reinforces the hierarchical structure of pre-emption rights as defined in Section 6(3) of the Act. The Court clarified that Section 5(1)(c) should be interpreted conjunctively and not disjunctively, rejecting the appellants’ novel interpretation. This ruling reinforces the existing legal position on pre-emption rights in Rajasthan.

Conclusion

The Supreme Court dismissed the appeal, upholding the concurrent findings of the lower courts. The Court held that Beni Prasad, as the brother of the seller, had a superior right of pre-emption compared to Devicharan, who shared a common amenity with the property. The judgment clarifies the interpretation of Section 5(1)(c) of the Rajasthan Pre-emption Act, 1966, and reinforces the hierarchy of pre-emption rights. The Court also reiterated that the right of pre-emption is a weak right and that it should be interpreted strictly within the confines of the statute.

Category

• Rajasthan Pre-emption Act, 1966
  • Section 4, Rajasthan Pre-emption Act, 1966
  • Section 5, Rajasthan Pre-emption Act, 1966
  • Section 6, Rajasthan Pre-emption Act, 1966
• Property Law
  • Pre-emption Rights
  • Property Transfer
• Civil Law
  • Property Disputes

FAQ

Q: What is a right of pre-emption in property law?

A: A right of pre-emption is a preferential right to purchase a property when it is being sold. It allows certain individuals, often those with a close relationship to the property or its owner, to buy the property before it is offered to others.

Q: What does the Supreme Court say about pre-emption rights in this case?

A: The Supreme Court clarified that when multiple people have pre-emption rights, the person more closely related to the seller has a superior right. In this case, a brother’s right was superior to that of someone sharing a common amenity.

Q: What is the significance of Section 5(1)(c) of the Rajasthan Pre-emption Act, 1966?

A: Section 5(1)(c) specifies that the right of pre-emption does not accrue to a person with an equal or inferior right when the transfer is to a person mentioned in Section 6. The Supreme Court clarified that this section must be read conjunctively, not disjunctively.

Q: How does this judgment affect property owners in Rajasthan?

A: This judgment provides clarity on the hierarchy of pre-emption rights, particularly when multiple parties have such rights. It helps property owners understand who has a superior claim when a property is sold.

Q: Can a right of pre-emption be avoided?

A: Yes, the Supreme Court reiterated that pre-emption rights are considered weak and can be defeated by legitimate means. However, the right must be interpreted strictly within the confines of the relevant statute.