Supreme Court Upholds Tenant’s Right of Pre-emption in Urban Immovable Property Sale: Jagmohan vs. Badri Nath (2024)

Date of the Judgment: 6th February 2024

Citation: 2024 INSC 86

Judges: C.T. Ravikumar, J. and Rajesh Bindal, J.

Can a tenant claim a right of pre-emption over the sale of a property that includes a rolling mill, and does a government notification exempting land sales in municipal areas apply to such a sale? The Supreme Court of India recently addressed this question in a case concerning the sale of a rolling mill in Jagadhri, Haryana. The core issue revolved around whether the property in question should be considered “land” or “urban immovable property” under the Punjab Pre-emption Act, 1913, and whether a notification exempting land sales in municipal areas would apply. The bench comprised Justices C.T. Ravikumar and Rajesh Bindal, with the judgment authored by Justice Rajesh Bindal.

Case Background

The respondents (Badri Nath and others) filed a suit on January 25, 1984, seeking possession of a property measuring 719 square yards in Jagadhri, Haryana, through their right of pre-emption. The respondents claimed to be tenants of the property since 1949. The property, which included a rolling mill, was sold by its owners to the appellants (Jagmohan and another) via a registered sale deed dated January 25, 1983, for ₹43,000. The respondents, invoking the Punjab Pre-emption Act, 1913, asserted their preferential right to purchase the property as tenants and offered to pay the same sale consideration. The Trial Court decreed the suit in favor of the respondents, ordering them to pay ₹50,238 to the appellants, which included the sale price and expenses, after deducting 1/5th of the pre-emption amount deposited during the suit’s filing. This decree was upheld by the High Court.

Timeline:

Course of Proceedings

The Trial Court initially decreed the suit in favor of the respondents, recognizing their right of pre-emption. This decision was upheld by the lower Appellate Court and subsequently by the High Court. The appellants then appealed to the Supreme Court, challenging the concurrent findings of fact recorded by all the courts below. The appellants argued that the suit should have been dismissed due to a government notification that exempted land sales in municipal areas from pre-emption rights, and that the suit was time-barred.

Legal Framework

The case primarily revolves around the interpretation of the Punjab Pre-emption Act, 1913 (the 1913 Act), the Punjab Alienation of Land Act, 1900 (the 1900 Act), and the General Clauses Act, 1897 (the 1897 Act). Key provisions include:

• Section 3 of the 1913 Act: Defines “agricultural land,” “village immovable property,” and “urban immovable property.”
  • (1) ‘agricultural land’ shall mean land as defined in Punjab Alienation of Land Act, 1900 (XIII of 1900) (as amended by act, 1 of 1907), but shall not include the rights of a mortgage, whether usufructuary or not in such land:
  • (2) ‘village immovable property’ shall mean immovable property within the limits of a village, other than agricultural land:
  • (3) ‘urban immovable property’ shall mean immovable property within the limits of town, other than agricultural land. For the purposes of this Act a specified place shall be deemed to be a town (a) If so declared by the State Government by notification in the Official Gazette or (b) if so found by the Courts:
• Section 8(2) of the 1913 Act: Empowers the State Government to exclude certain areas or properties from the right of pre-emption.
  • The State Government may declare by notification that in any local area or with respect to any land or property or class of land or property or with respect to any sale or class of sales, no right of pre-emption or only such limited right as that the State Government may specify, shall exist.
• Section 15 of the 1913 Act: Specifies the persons in whom the right of pre-emption vests for agricultural land and village immovable property.
• Section 16 of the 1913 Act: Specifies the person in whom the right of pre-emption vests for urban immovable property.
  • The right of pre-emption in respect of urban immovable property shall vest in the tenant who holds under tenancy of the vendor the property sold or apart thereof.
• Section 2(3) of the 1900 Act: Defines “land” as land not occupied by a building site in a town or village, used for agricultural purposes.
  • the expression “ land” means land which is not occupied as the site of any building in a town or village and is occupied or let for agricultural purposes or for purposes subservient to agriculture or for pasture, and includes—(a)the sites of buildings and other structures on such land; (b)a share in the profits of an estate or holding; (c) any dues or any fixed percentage of the land-revenue payable by an inferior land-owner to a superior land-owner; (d) a right to receive rent; and (e) any right to water enjoyed by the owner or occupier of land as such:
• Section 3(26) of the 1897 Act: Defines “immovable property” to include land, benefits arising out of land, and things attached to the earth.

The interplay between these definitions and the government notification under Section 8(2) of the 1913 Act is central to the case. The court also considered the Limitation Act, 1963, regarding the time limit for filing a suit for pre-emption.

Arguments

Appellants’ Arguments:

• The appellants contended that the suit should be dismissed due to a notification dated October 8, 1985, issued under Section 8(2) of the 1913 Act, which eliminated the right of pre-emption for land sales within municipal areas of Haryana.
• They argued that the sale in question was of land within the municipal limits of Jagadhri, thus falling under the ambit of the notification.
• The appellants relied on the Supreme Court’s judgment in Shyam Sunder and others v. Ram Kumar and another [(2001) 8 SCC 24], stating that the right of pre-emption must exist on the date of the sale deed registration, the date of filing the suit, and the date of the decree by the first court. Since the notification was issued before the Trial Court’s decree, the pre-emption right should not have been upheld.
• They also argued that the suit was time-barred, as it was filed on January 25, 1984, while the sale deed was registered on January 25, 1983, exceeding the one-year limitation period.
• Further, the appellants challenged the lower courts’ findings on the custom of pre-emption, arguing that while some evidence was presented for the urban area of Jagadhri’s municipal limits, no evidence was provided for the extended area where the property was located. They cited the High Court’s judgment in Sandeep Bansal v. M. L. Hans and others [R.S.A. No. 2109 of 1998], which stated that the same custom cannot be relied upon for transactions in the extended area.

Respondents’ Arguments:

• The respondents argued that the notification dated October 8, 1985, was not applicable because it exempted only the sale of “land” within municipal areas, whereas the property in question was a rolling mill, which is an “immovable property” and not just “land”.
• They contended that their right of pre-emption stemmed from Section 16 of the 1913 Act, which grants such rights to tenants of urban immovable property.
• They argued that the definition of ‘land’ under the 1900 Act excludes any site of any building in a town or village, implying that immovable property is more than just land.
• The respondents submitted that the suit was filed within the limitation period, as Section 12 of the Limitation Act, 1963, excludes the date of registration of the sale deed, making the suit filed on January 25, 1984, within the one-year limit.
• The respondents also highlighted that the issue of limitation was not seriously contested in the lower courts.
• They fairly acknowledged the legal proposition in Shyam Sunder and others’ case (supra) but argued that it was not applicable in the present case due to the nature of the property and the scope of the notification.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court considered the following issue:

1. Whether the exemption of pre-emption as granted vide notification dated 08.10.1985 would be available to the property in dispute.

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:

• Shyam Sunder and others v. Ram Kumar and another [(2001) 8 SCC 24] – Supreme Court of India
  • The court referred to this Constitution Bench judgment to emphasize that the right of pre-emption must exist on the date of registration of the sale deed, the date of filing of suit, and the date of the decree by the first Court.
• Sandeep Bansal v. M. L. Hans and others [R.S.A. No. 2109 of 1998] – High Court of Punjab and Haryana at Chandigarh
  • The court referred to this case to highlight that the custom of pre-emption in the urban area of municipal limits of Jagadhri cannot be relied upon for any transaction of sale in the extended area.

Legal Provisions:

• Sections 3(1), 3(2), and 3(3) of the Punjab Pre-emption Act, 1913:
  • These sections define “agricultural land”, “village immovable property”, and “urban immovable property” respectively. The court used these definitions to distinguish between land and immovable property.
• Section 8(2) of the Punjab Pre-emption Act, 1913:
  • This section empowers the State Government to exclude certain areas or properties from the right of pre-emption. The court examined the scope of the notification issued under this provision.
• Section 15 of the Punjab Pre-emption Act, 1913:
  • This section defines the persons in whom right of pre-emption vests in respect of sales of agricultural land and village immovable property. The court used this section to show the difference between agricultural land and village immovable property.
• Section 16 of the Punjab Pre-emption Act, 1913:
  • This section defines the persons in whom right of pre-emption vests in respect of sales of urban immovable property. The court used this section to show that the tenant has a right of pre-emption in respect of urban immovable property.
• Section 2(3) of the Punjab Alienation of Land Act, 1900:
  • This section defines “land.” The court used this definition to emphasize that the definition of land excludes any site of any building in a town or village.
• Section 3(26) of the General Clauses Act, 1897:
  • This section defines “immovable property.” The court used this definition to show that immovable property includes land and more.

Authority Analysis

Judgment

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

How each authority was viewed by the Court?

• The Supreme Court acknowledged the principle laid down in Shyam Sunder and others v. Ram Kumar and another [(2001) 8 SCC 24]* but distinguished its application in the present case, stating that the notification was not applicable to the property in question.
• The High Court’s judgment in Sandeep Bansal v. M. L. Hans and others [R.S.A. No. 2109 of 1998]* was referred to by the appellants, but the court did not find it necessary to decide on the issue of custom of pre-emption as the right of pre-emption was given in the statute itself.
• The court relied on Sections 3(1), 3(2) and 3(3) of the Punjab Pre-emption Act, 1913* to distinguish between “agricultural land,” “village immovable property,” and “urban immovable property.”
• The court interpreted Section 8(2) of the Punjab Pre-emption Act, 1913* to determine that the notification issued under it applied only to “land” and not “immovable property.”
• The court relied on Section 15 of the Punjab Pre-emption Act, 1913* to show the difference between agricultural land and village immovable property.
• The court relied on Section 16 of the Punjab Pre-emption Act, 1913* to show that the tenant has a right of pre-emption in respect of urban immovable property.
• The court used the definition of “land” in Section 2(3) of the Punjab Alienation of Land Act, 1900* to emphasize that it excludes building sites in towns or villages.
• The court used the definition of “immovable property” in Section 3(26) of the General Clauses Act, 1897* to show that it includes land and more.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the distinction between “land” and “immovable property” as defined in the relevant statutes. The court emphasized that the notification issued under Section 8(2) of the 1913 Act specifically referred to “land” and not to “immovable property,” which includes structures like the rolling mill. The court’s reasoning focused on the plain language of the statutes and the notification, giving preference to the literal interpretation of the terms used. The court also considered the fact that the respondents were tenants on the property since 1949 and their right of pre-emption under Section 16 of the 1913 Act.

Fact:Law Ratio:

The court’s reasoning was predominantly based on legal considerations (80%), focusing on the interpretation of statutes and notifications, with a lesser emphasis on the factual aspects of the case (20%), such as the nature of the property and the tenancy.

Logical Reasoning

Judgment

The Supreme Court dismissed the appeal, upholding the decisions of the lower courts. The court reasoned that the notification dated October 8, 1985, issued under Section 8(2) of the 1913 Act, which exempted land sales in municipal areas from pre-emption rights, did not apply to the sale of the property in question. The court emphasized that the notification used the term “land,” while the property was an “immovable property” consisting of a rolling mill, which is more than just land. The court also noted that the respondents’ right of pre-emption as tenants was protected under Section 16 of the 1913 Act.

Key quotes from the judgment:

• “The term ‘land’ as defined in Section 2(3) of the 1900 Act excludes any site of any building in a town or village. Meaning thereby that the immovable property would be more than the land only or the land on which the construction has already been made.”
• “As the notification dated 08.10.1985 limits its application for taking away the right of pre-emption only with reference to sale of land falling in the areas of any municipality, the same will not come to the rescue of the appellants.”
• “In the case in hand, admittedly it is sale of immovable property, which is more than the land as a rolling mill had already been set up on the land, which was in occupation of the respondents as tenants.”

The court also rejected the appellants’ argument that the suit was time-barred, stating that the date of registration of the sale deed is excluded when calculating the limitation period as per Section 12 of the Limitation Act, 1963. The bench was unanimous, with both judges concurring on the decision.

Key Takeaways

• Tenants of urban immovable properties, such as those with structures like rolling mills, have a right of pre-emption under the Punjab Pre-emption Act, 1913.
• Government notifications exempting land sales from pre-emption rights may not apply to sales of immovable properties that include structures.
• The distinction between “land” and “immovable property” is crucial in determining the applicability of pre-emption rights.
• The date of registration of the sale deed is excluded when calculating the limitation period for filing a suit for pre-emption.

Potential Future Impact: This judgment clarifies the scope of pre-emption rights for tenants in urban areas, particularly concerning properties with structures. It emphasizes the importance of distinguishing between “land” and “immovable property” when interpreting exemption notifications. This ruling may also impact similar cases involving pre-emption rights and the interpretation of government notifications. It will be a precedent for the cases where the right of pre-emption is claimed in the sale of immovable property which is more than just land.

Directions

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