Supreme Court settles limitation for pre-emption rights under Rajasthan Pre-Emption Act: Raghunath vs. Radha Mohan (2020)

Introduction

Date of the Judgment: 13 October 2020

Citation: (2020) INSC 771

Judges: Sanjay Kishan Kaul, J., Aniruddha Bose, J., Krishna Murari, J.

Can a person claim the right of pre-emption every time a property is sold, or is this right limited to the first sale after the law comes into effect? The Supreme Court of India recently addressed this question in a case concerning the Rajasthan Pre-Emption Act, 1966. The core issue was whether the limitation period for enforcing the right of pre-emption starts from the first sale after the Act’s enactment or from any subsequent sale. This judgment clarifies the scope and limitations of pre-emption rights, especially concerning multiple sales of the same property. The judgment was delivered by a three-judge bench comprising Justices Sanjay Kishan Kaul, Aniruddha Bose, and Krishna Murari, with the opinion authored by Justice Sanjay Kishan Kaul.

Case Background

The dispute involves a property in Ajmer, Rajasthan. The original plaintiff, the predecessor-in-interest of respondent No. 1, filed a suit on 10 January 1974, seeking pre-emption rights under the Rajasthan Pre-Emption Act, 1966. The property in question, identified as AMC No. XV/290, had been subject to multiple sales. The plaintiff claimed a right of pre-emption based on a common portion in the property.

The property was initially sold by respondents 5 and 6 to respondent No. 4 on 10 January 1974, for Rs. 4000. Subsequently, on 21 January 1974, respondent No. 4 sold the same property to the predecessor-in-interest of the appellant for the same amount. The plaintiff alleged that these two portions were part of the same house with common entrances and facilities and that no notice, as required under Section 8 of the Act, was given to the pre-emptors. The defendants contested the suit, arguing that the premises were separate and that the suit was barred by limitation.

Timeline:

Course of Proceedings

The Trial Court initially decreed the suit on 30 June 1977, finding that the suit was filed within the one-year limitation period. However, during the pendency of the appeal, the defendants applied to amend their written statement, raising the issue of earlier sale deeds from 1945, 1946, and 1966. The appellate court remitted the matter back to the Trial Court on 22 May 1987 to consider these additional issues.

The Trial Court then considered these additional issues and noted that the sale deed of 5 November 1966, occurred after the Rajasthan Pre-Emption Act, 1966, came into force. The Trial Court, on 1 February 1988, held that the suit was not maintainable and was barred by limitation because the earlier sale deed of 5 November 1966, was not challenged, relying on the judgment of the Assam High Court in Kutina Bibi and another vs. Baikuntha Chandra Dutta and others [AIR 1961 Assam 1]. The first appellate court agreed with this finding on 30 March 1989.

The matter was then taken to the Rajasthan High Court, which, on 29 June 2009, held that the one-year limitation period runs from the date of registration of the sale deed or when physical possession is given for each sale. The High Court concluded that each sale gives a fresh cause of action and remitted the matter back to the first appellate court.

Legal Framework

The case primarily revolves around the interpretation of the Rajasthan Pre-Emption Act, 1966, and its interplay with the Limitation Act, 1963.

✓ Section 3 of the Rajasthan Pre-Emption Act, 1966 defines the “right of pre-emption” as the right to acquire property and be substituted as the transferee in preference to the original transferee.

“Section 3: “Right of pre-emption” defined
The “right of pre-emption” is the right accruing under
section 4 of this Act, upon a transfer of any immovable
property, to acquire such property and to be substituted
as the transferee thereof in place of and in preference to
the original transferee and “pre-emptor” means a person
having a right of pre-emption.”

✓ Section 6(1) of the Rajasthan Pre-Emption Act, 1966 specifies the persons to whom the right of pre-emption accrues, including co-sharers, owners of properties with common entrances, and owners of servient or dominant properties.

“Section 6: 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:–
(i) co-sharers of or partners in the property transferred,
(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, and
(iii) owners of property servient or dominant to the
property transferred.”

✓ Section 8 of the Rajasthan Pre-Emption Act, 1966 mandates that a seller must give notice to all pre-emptors regarding the proposed sale price.

“Section 8: Notice to pre-emptors
(1) When any person proposes to sell, or to foreclose the
right to redeem, any immovable property, in respect of
which any persons have a right of pre-emption, he shall
give notice to all such persona as to the price at which he
is proposing so to sell or as to the amount due in respect
of the mortgage proposed to be foreclosed, as the case
may be.
(2) Such notice shall be given through the civil court,
within the local limits of whose jurisdiction the property
concerned is situated shall clearly describe such
property, shall state the name and other particulars of the
purchaser or the mortgagee and shall be served in the
manner prescribed for service of summons in civil suits.”

✓ Section 21 of the Rajasthan Pre-Emption Act, 1966 stipulates a special limitation period of one year for enforcing the right of pre-emption, referencing Article 97 of the Limitation Act, 1963.

“Section 21: Special provision for limitation
(1) Subject to the provisions contained in the proviso to
sub-section (1) of section 5, the period of limitation, in
any case not provided for by article 97 of the First
Schedule to the Limitation Act, 1963 (Central Act 36 of
1963), for a suit to enforce the right of pre-emption
under this Act shall, notwithstanding anything contained
in article 113 of the said schedule of the said Act, be one
year from the date on which,–
(a) in the case of a sale made without a registered sale-
deed, the purchaser takes under the sale physical
possession of any part of the property sold, and
(b) in the case of a foreclosure, the final decree for
foreclosure is passed.
(2) The period of limitation for a suit to enforce a right
of pre-emption which has accrued before the
commencement of this Act shall, notwithstanding
anything contained in the said Limitation Act, in no case
exceed one year from the commencement of this Act.”

✓ Article 97 of the Limitation Act, 1963 specifies a one-year limitation period for enforcing a right of pre-emption, starting from when the purchaser takes physical possession or when the sale deed is registered.

“97. To enforce a right of pre-emption whether the right is founded on law or general usage or on special contract. One year. When the purchaser takes under the sale sought to be impeached, physical possession of the whole or part of the property sold, or, where the subject-matter of the sale does not admit of physical possession of the whole or part of the property, when the instrument of sale is registered.”

✓ Section 9 of the Rajasthan Pre-Emption Act, 1966 outlines the loss of the right of pre-emption if the price is not tendered within two months of notice.

“Section 9: Loss of right of pre-emption on transfer
Any person having a right of pre-emption in respect of
any immovable property proposed to be sold shall lose
such, right unless within two months from the date of
the service of such notice, he or his agent pays or
tenders the price specified in the notice given under
section 8 to the person so proposing to sell:
Provided that the right of pre-emption shall not be so
lost if the immovable property in question is actually
sold for an amount smaller than that mentioned in the
notice or to a person not mentioned in the notice as
purchaser.”

Arguments

Appellant’s Arguments:

• The appellant argued that the policy behind pre-emption is to prevent strangers from intruding on co-sharers. They contended that the predecessor-in-interest of the appellant was a distant relative of the respondent’s predecessor, which was admitted by the plaintiff and the son of the executor of the 1946 sale deed.
• The appellant argued that if a plaintiff waives their right of pre-emption by conduct, they cannot claim it on a subsequent sale of the same property.
• The appellant relied on several judgments:
  • Prahlad Kumar vs. Kishan Chand & Ors. [2009 (3) RLW 2441] where the Rajasthan High Court held that a plaintiff is estopped from claiming pre-emption if they waived the right in an earlier sale.
  • Mangti Ram vs. Onkar Sahai [(1994) 1 RLW 55] where the right of pre-emption was lost due to an earlier compromise deed.
  • Kutina Bibi & Anr. vs. Baikuntha Chandra Dutta & Ors. [AIR 1961 Assam 1] where the court held that if an earlier sale deed is not challenged, the right of pre-emption cannot be claimed against a subsequent sale.
  • Ghulam Jilani vs. Hassan Khan & Ors. [12 PLR 1905 (Vol.VI) 338] where the court held that the suit was barred by time as it was instituted more than a year after the earlier sale.
  • Ghanshyam vs. Chand Bihari & Ors. [(2008) 2 RLW (Rev) 1011] where the court held that the right of pre-emption was waived by conduct.
  • Rukmani Devi (Smt.) vs. Prabhu Narayan & Ors. [(2007) 4 RLW 2882] where the court held that if a pre-emptor waives their right, the court should not allow substitution in a subsequent sale.

Respondent’s Arguments:

• The respondent argued that the limitation to enforce pre-emption rights is governed by Article 97 of the Limitation Act, 1963, read with Section 21 of the Rajasthan Pre-Emption Act, 1966, and that each sale deed provides a separate cause of action.
• The respondent contended that Section 8 of the Rajasthan Pre-Emption Act, 1966, requires the seller to inform all persons about the proposed sale price, and this applies to every sale.
• The respondent argued that there is no provision in the Act that prohibits the right of pre-emption if it is not exercised in an earlier sale.
• The respondent stated that pre-emption is based on substitution in place of the vendee upon payment of the price, and it does not challenge the sale itself. Therefore, not challenging earlier sales does not amount to a waiver.
• The respondent relied on the following judgments:
  • Bishan Singh & Ors. vs. Khazan Singh & Anr. [AIR 1958 SC 838] to support the principle of the right of substitution.
  • Barasat Eye Hospital & Ors. vs. Kaustabh Mondal [(2019) SCC Online SC 1351] to support the principle of the right of substitution.

The innovativeness of the arguments lies in the appellant’s emphasis on the conduct of the pre-emptor and the policy behind pre-emption, arguing that the right should not be a recurring one. The respondent, on the other hand, focused on the literal interpretation of the statute and the concept of a fresh cause of action for each sale.

Issues Framed by the Supreme Court

The Supreme Court framed the following issue for consideration:

1. Whether the limitation shall commence from the first sale deed after coming into force of the Rajasthan Pre-Emption Act, 1966 or from any other subsequent sale on the basis of Article 97 of the Limitation Act, 1963.

Treatment of the Issue by the Court:

Authorities

The Supreme Court considered the following authorities:

Judgment

The Supreme Court held that the right of pre-emption is a weak right and is available only once. If not exercised at the first instance, it cannot be claimed for subsequent sales. The Court emphasized that the limitation period for exercising the right of pre-emption under the Rajasthan Pre-Emption Act, 1966, commences from the first sale after the Act came into force. The Court also noted that the policy behind pre-emption is to prevent strangers from intruding on co-sharers, and since the appellant’s predecessor was a distant relative, the right of pre-emption was not as strong.

The Court observed that the Rajasthan Pre-Emption Act does not bar a pre-emptor from giving up their right and if not exercised within two months, it stands extinguished. The Court further noted that if a pre-emptor waives their right, the court should not allow substitution in a subsequent sale.

The Court referred to the judgment in Kutina Bibi & Anr. vs. Baikuntha Chandra Dutta & Ors. [AIR 1961 Assam 1], which held that if an earlier sale deed is not challenged, the right of pre-emption cannot be claimed against a subsequent sale. The Court also referred to Ghulam Jilani vs. Hassan Khan & Ors. [12 PLR 1905 (Vol.VI) 338], which held that the suit was barred by time as it was instituted more than a year after the earlier sale.

The Supreme Court, therefore, allowed the appeal, set aside the judgment of the High Court, and restored the judgment of the first appellate court.

Ratio Decidendi & Obiter Dicta

Ratio Decidendi:

The core principle established by the Supreme Court in this case is that the limitation period for exercising the right of pre-emption under the Rajasthan Pre-Emption Act, 1966, commences from the first sale after the Act came into force. This means that a person cannot claim the right of pre-emption every time a property is sold; the right is limited to the first sale.

Obiter Dicta:

• The Court reiterated that the right of pre-emption is a weak right and can be defeated by legitimate methods.
• The Court observed that if a pre-emptor waives their right, the court should not allow substitution in a subsequent sale.
• The Court noted that the policy behind pre-emption is to prevent strangers from intruding on co-sharers.

Conclusion

The Supreme Court’s judgment in Raghunath vs. Radha Mohan (2020) provides much-needed clarity on the limitation period for exercising pre-emption rights under the Rajasthan Pre-Emption Act, 1966. The Court’s decision settles the debate on whether the limitation period for pre-emption starts from the first sale or subsequent sales. By holding that the limitation period commences from the first sale after the Act came into force, the Court has ensured that the right of pre-emption is not a recurring one and that it is exercised within a reasonable time.

The judgment also reaffirms that the right of pre-emption is a weak right and can be defeated by legitimate methods. It emphasizes that if a pre-emptor waives their right, they cannot claim it on a subsequent sale. This judgment has significant implications for property transactions in Rajasthan, providing clarity and certainty to both sellers and potential pre-emptors.

Flowchart of the Case: