Supreme Court clarifies the deposit requirement for pre-emption under the West Bengal Land Reforms Act: Barasat Eye Hospital vs. Kaustabh Mondal (2019)

LEGAL ISSUE: Whether a person seeking to exercise the right of pre-emption under the West Bengal Land Reforms Act, 1955 must deposit the full sale consideration amount as stated in the sale deed, or if a partial deposit is sufficient for the application to be considered.

CASE TYPE: Civil Law – Land Reforms, Pre-emption Rights

Case Name: Barasat Eye Hospital & Ors. vs. Kaustabh Mondal

[Judgment Date]: October 17, 2019

Date of the Judgment: October 17, 2019

Citation: (2019) INSC 1089

Judges: Sanjay Kishan Kaul, J. and K.M. Joseph, J.

Can a person seeking to enforce their right of pre-emption under the West Bengal Land Reforms Act, 1955, deposit less than the full sale consideration amount stated in the sale deed? The Supreme Court of India recently addressed this crucial question, clarifying the mandatory deposit requirement for pre-emption rights. This judgment clarifies the scope and limitations of pre-emption rights under the Act, emphasizing the need for strict compliance with the deposit requirements. The judgment was delivered by a two-judge bench of Justices Sanjay Kishan Kaul and K.M. Joseph.

Case Background

The appellants, Barasat Eye Hospital & Ors., purchased a plot of land (R.S. Plot No. 488) in Mouza Kalikapur, Barasat, West Bengal, through a registered Sale Deed dated 27.05.2005, for a stated consideration of Rs. 5,21,000. The respondent, Kaustabh Mondal, a raiyat (land holder) of an adjoining land, sought to exercise his right of pre-emption under Section 8 of the West Bengal Land Reforms Act, 1955, claiming that the actual consideration paid was only Rs. 2,50,000, and that the sale deed was inflated due to collusion between the seller and the appellants. The respondent deposited Rs. 2,75,000, which included Rs. 2,50,000 as the alleged principal consideration and Rs. 25,000 as 10% of that amount, and sought leave to deposit any further sum as determined by the court during trial.

Timeline:

Course of Proceedings

The trial court initially ruled in favor of the respondent, stating that the transferee (appellants) had to prove the actual consideration paid and that the balance amount could be deposited later. The appellate court reversed this decision, holding that the full amount as stated in the sale deed had to be deposited. The High Court of Calcutta, in its civil revisional jurisdiction, overturned the appellate court’s decision, stating that a pre-emptor could raise an issue about the stated sale consideration and that the Munsif could direct the deposit of the balance amount after an inquiry. The High Court relied on a previous decision of the Calcutta High Court in Sahid Ali v. S.K. Abdul Kasem.

Legal Framework

The Supreme Court examined the following provisions of the West Bengal Land Reforms Act, 1955:

✓ Section 2(2) defines “bargadar” as a person who cultivates the land of another person on condition of delivering a share of the produce.

✓ Section 2(10) defines “raiyat” as a person or an institution holding land for any purpose whatsoever.

✓ Section 8(1) of the West Bengal Land Reforms Act, 1955 states:

“If a portion or share of a [plot of land of a raiyat] is transferred to any person other than a [co-sharer of a raiyat in the plot of land],[the bargadar in the plot of land] may, within three months of the date of such transfer, or] any [co-sharer of a raiyat in the plot of land] may, within three months of the service of the notice given under sub-section (5) of section 5, or any raiyat possessing land [adjoining such plot of land] may, within four months of the date of such transfer, apply to the [Munsif having territorial jurisdiction,] for transfer of the said portion or [share of the plot of land] to him, subject to the limit mentioned in [section 14M,]on deposit of the consideration money together with a further sum of ten per cent of that amount: xxxx xxxxxxxxxxxxxxxx”

This section grants the right of pre-emption to a bargadar, a co-sharer, or a raiyat holding land adjoining the transferred land, subject to depositing the consideration money plus 10%.

✓ Section 9(1) of the West Bengal Land Reforms Act, 1955 states:

“On the deposit mentioned in sub-section (1) of section 8 being made, the Munsif shall give notice of the application to the transferee, and shall also cause a notice to be affixed on the land for the information of persons interested. On such notice being served, the transferee or any person interested may appear within the time specified in the notice and prove the consideration money paid for the transfer and other sums, if any, properly paid by him in respect of the lands including any sum paid for annulling encumbrances created prior to the day of transfer, and rent or revenue, cesses or taxes for any period. The Munsif may after such enquiry as he considers necessary direct the applicant to deposit such further sum, if any, within the time specified by him and on such sum being deposited, he shall make an order that the amount of the consideration money together with such other sums as are proved to have been paid by the transferee or the person interested plus ten per cent of the consideration money be paid to the transferee or the person interested out of the money in deposit, the remainder, if any, being refunded to the applicant. The Munsif shall then make a further order that the portion or [share of the plot of land] be transferred to the applicant and on such order being made, the portion or [share of the plot of land] shall vest in the applicant.”

This section outlines the procedure for the Munsif to notify the transferee, conduct an inquiry, and order the transfer of land to the pre-emptor after deposit of the consideration money and other sums.

Arguments

Appellants’ Arguments:

• The appellants argued that the right of pre-emption is a “weak right” and must be strictly construed.
• They contended that Section 8(1) of the West Bengal Land Reforms Act, 1955 requires the pre-emptor to deposit the full stated consideration plus 10% before the right can be exercised.
• They argued that Section 9 of the West Bengal Land Reforms Act, 1955 does not contemplate an inquiry into the stated consideration in the sale deed, but only into any further amounts claimed by the vendee.
• The appellants submitted that the plain meaning of the Sections should be followed, requiring full deposit before any inquiry.

Respondent’s Arguments:

• The respondent argued that if unrealistic or arbitrary considerations are shown in the sale deed, they cannot bind the pre-emptor as that would amount to perpetuating a fraud.
• The respondent contended that on deposit of what the pre-emptor believes to be the appropriate consideration, an application could be filed under Section 8(1) of the West Bengal Land Reforms Act, 1955, and thereafter an inquiry in that behalf would proceed under Section 9 of the West Bengal Land Reforms Act, 1955.
• The respondent argued that the power conferred on the Munsif to make an inquiry would be rendered meaningless if a partial deposit was not allowed.

Innovativeness of the argument: The respondent’s argument was innovative in seeking to protect pre-emptors from potentially inflated sale considerations, highlighting the need for an inquiry into the actual consideration paid.

Issues Framed by the Supreme Court

The Supreme Court framed the following issue:

1. Whether the right of pre-emption under Section 8(1) of the West Bengal Land Reforms Act, 1955, can be exercised by depositing the amount as per the sale deed or can a partial deposit be made by the pre-emptor?

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court considered the following authorities:

Cases:

• Bishan Singh & Ors. v. Khazan Singh & Anr. [AIR 1958 SC 838] – The Supreme Court discussed the nature of pre-emption rights, stating it is a weak right and a right of substitution, not re-purchase. It is a right to acquire the whole of the property sold and not a share of the property sold. The pre-emptor must have a superior right to that of the vendee.
• Gopal Sardar v. Karuna Sardar [(2004) 4 SCC 252] – The Supreme Court held that Section 5 of the Limitation Act, 1963, does not apply to applications under Section 8 of the West Bengal Land Reforms Act, 1955, emphasizing the strict adherence to the time limit for exercising the right of pre-emption.
• Kedar Mishra v. State of Bihar [(2016) 7 SCC 478] – The Supreme Court considered the Bihar Land Reforms Act, 1961, noting that the right of pre-emption is subject to the deposit of the full purchase money and 10% of the purchase amount.
• Bhau Ram v. Baij Nath Singh & Ors. [AIR 1962 SC 1476] – A Constitution Bench of the Supreme Court discussed the historical perspective of the right of pre-emption.
• Dhani Nath v. Budhu [136 P .R. 1894] – A case cited in Bishan Singh, discussing the nature of pre-emption rights.
• Gobind Dayal v. Inayatullah [(1885) ILR 7 All 775, 809] – A case cited in Bishan Singh, discussing the nature of pre-emption rights.
• Mool Chand v. Ganga Jal [(1930) ILR 11 Lahore (F .B.) 258, 273] – A case cited in Bishan Singh, discussing the nature of pre-emption rights.
• Sahid Ali v. S.K. Abdul Kasem [(1994) 1 CHN 202] – A Division Bench of the Calcutta High Court, which was relied upon by the High Court in the present case.
• Jyotish Chandra Sardar v. Hira Lal Sardar [ILR 1971 (1) Calcutta 213] – A case of the Calcutta High Court, which was relied upon by the Calcutta High Court in Sahid Ali.
• Amitava Shit v. Bablu Kundu [2014(1) CHN (Cal) 744] – A case of the Calcutta High Court, which relied on Sahid Ali.
• Smt. Aparna Maity v. Smt. Purabi Das [C.O. No.3859/2015 AGM 2016 decided on 19th December, 2016] – A case of the Calcutta High Court, which relied on Sahid Ali.
• British India General Insurance Co. Ltd. v. Captain Itbar Singh [AIR 1959 SC 1331] – The Supreme Court discussed the rules of interpretation of legislative provisions.

Statutes:

• West Bengal Land Reforms Act, 1955 – The primary statute under consideration.
• Limitation Act, 1963 – Referred to in the context of time limits for exercising the right of pre-emption.
• Bihar Land Reforms (Fixation of Ceiling Area and Acquisition of Surplus Land) Act, 1961 – Referred to for comparative analysis of pre-emption provisions.
• Bengal Tenancy Act, 1885 – Referred to for comparison of penal consequences.
• West Bengal Non-Agricultural Tenancy Act, 1949 – Referred to for comparison of penal consequences.

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

The Supreme Court relied on Bishan Singh & Ors. v. Khazan Singh & Anr. [AIR 1958 SC 838]* to emphasize that the right of pre-emption is a “weak right” and a right of substitution, not re-purchase. The Court also relied on Gopal Sardar v. Karuna Sardar [(2004) 4 SCC 252]* to highlight the strict adherence to the time limit for exercising the right of pre-emption, and that Section 5 of the Limitation Act does not apply to applications under Section 8 of the Act. The Court referred to Kedar Mishra v. State of Bihar [(2016) 7 SCC 478]* to reinforce the pre-condition of depositing the full purchase money for exercising the right of pre-emption. The Court overruled the view taken by the Calcutta High Court in Sahid Ali v. S.K. Abdul Kasem [(1994) 1 CHN 202]*, and the cases which followed it, that an inquiry into the stated consideration was envisaged under Section 9 of the Act.

What weighed in the mind of the Court?

The Supreme Court emphasized several points in its reasoning:

• The right of pre-emption is a “weak right” and must be strictly construed.
• The deposit of the full amount of consideration as stated in the sale deed is a prerequisite to even trigger the right of pre-emption under Section 8(1) of the West Bengal Land Reforms Act, 1955.
• Section 9(1) of the West Bengal Land Reforms Act, 1955, comes into play only after the deposit mentioned in Section 8(1) has been made.
• The inquiry under Section 9 is primarily to determine additional sums, if any, properly paid by the transferee, and not to determine the stated sale consideration, unless the full amount is deposited.
• Allowing partial deposits would lead to speculative litigation and would undermine the sanctity of the sale deed.
• The time period for exercising the right of pre-emption is sacrosanct, and the deposit of the full amount within the stipulated time is equally important.

Sentiment Analysis of Reasons Given by the Supreme Court:

Fact:Law Ratio Analysis:

Logical Reasoning:

The Supreme Court rejected the interpretation that a partial deposit was sufficient to trigger the right of pre-emption. The court emphasized that the full amount of consideration, as stated in the sale deed, along with 10% of that amount, must be deposited to activate the right of pre-emption. The court held that the inquiry under Section 9 of the West Bengal Land Reforms Act, 1955, is primarily to determine additional sums, if any, properly paid by the transferee, and not to determine the stated sale consideration.

The Court stated that the phrase “the remainder, if any, being refunded to the applicant” would have to be understood in the context of the full deposit made, and would refer to any excess amount refunded after the inquiry. The Court also noted that the time period for exercising the right of pre-emption is sacrosanct, and the deposit of the full amount within the stipulated time is equally important.

The Court quoted the following from the judgment:

“The right of pre-emption is not a right to the thing sold but a right to the offer of a thing about to be sold.”

“The pre-emptor has a secondary right or a remedial right to follow the thing sold. It is a right of substitution but not of re-purchase.”

“The right being a very weak right, it can be defeated by all legitimate methods.”

The Court did not have a minority opinion.

Key Takeaways

• The right of pre-emption under the West Bengal Land Reforms Act, 1955, is a “weak right” and must be strictly construed.
• A person seeking to exercise the right of pre-emption must deposit the full sale consideration amount as stated in the sale deed, along with 10% of that amount, to trigger the right of pre-emption.
• Partial deposits are not sufficient to activate the right of pre-emption.
• The inquiry under Section 9 of the West Bengal Land Reforms Act, 1955, is primarily to determine additional sums, if any, properly paid by the transferee, and not to determine the stated sale consideration.
• The time period for exercising the right of pre-emption is sacrosanct, and the deposit of the full amount within the stipulated time is equally important.

Directions

The Supreme Court directed that the respondent is entitled to the refund of the amount deposited by him, together with interest, if any, earned on the same, in case it has been kept in an interest-bearing deposit.

Development of Law

The ratio decidendi of this case is that the right of pre-emption under Section 8(1) of the West Bengal Land Reforms Act, 1955, can only be exercised by depositing the full amount of consideration money as stated in the sale deed, along with 10% of that amount. This decision clarifies the law and overrules the previous interpretation of the Calcutta High Court in Sahid Ali v. S.K. Abdul Kasem, which had allowed for an inquiry into the stated consideration even with a partial deposit.

Conclusion

The Supreme Court’s judgment in Barasat Eye Hospital vs. Kaustabh Mondal clarifies that for a person to exercise the right of pre-emption under the West Bengal Land Reforms Act, 1955, they must deposit the full sale consideration as stated in the sale deed, along with 10% of that amount. This decision reinforces the strict nature of pre-emption rights and prevents speculative litigation. The respondent is entitled to the refund of the amount deposited by him, together with interest, if any, earned on the same.