Right to Pre-emption

The following document traces the origin of the right to pre-emption in India, analyzing why the courts have been reluctant to uphold this right.

Introduction

Pre-emption is a much talked about subject when it comes to property, especially joint property where there is more than one co-owner. Tracing its origin from the Latin verb ‘emptum’ translating to ‘buy or purchase’ with the prefix ‘pre’, the word literally means first option to buy.

The Supreme Court in the case of Bishan Singh v. Khazan Singh[1] defining the right of pre-emption stated,

“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. This right is called the primary or inherent right.”

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 repurchase, i.e. the pre-emptor takes the entire bargain and steps into the shoes of the original vendee.

Pre-emption has a variety of applications ranging from Company laws to Property laws having similar implementation of enabling the pre-emptor the right of first refusal. The following article traces this right in the particular field of property law.

The right of pre-emption applies only to the transfer of immovable property by sale; it does not apply if the property is transferred under a gift, bequest, lease (even if a perpetual) or mortgage even if by way of conditional sale and with possession. The parties to a sale-transaction may lawfully resort to devices, which are not fraudulent or forbidden by law, to defeat the right of pre-emption or diminish the desire of the pre-emptor to avail himself of it. 

To exercise the right of preemption, the following conditions need to be satisfied:[2]

  • Ownership over an immovable property.
  • Sale of the property which is not of the person exercising the right of preemption.
  • There should be some relation with respect to the property between the pre-emptor and the seller of the land.
  • Possession of the other property is given to the pre-emptor on the same terms as on which the other person is given the right.

Origin

The advent of Mughal rule brought forth Islamic law where the right of pre-emption finds its genesis. It is generally accepted that the law and custom of pre-emption in British India had their origin in the Muslim law and that it was unknown here before the time of the Moghul rulers.[3]

The Muslim law of pre-emption has a rather curious application by the Indian Courts in the British era. The Muslim law of pre-emption has been applied by the Indian courts on the ground of justice, equity, and good conscience.[4] However, on these very grounds, the Madras High Court refused to apply the law of pre-emption to Muslims, holding that it imposed unwarranted restrictions upon the liberty to transfer property.[5] The Bombay High Court having similar views believed that the right of pre-emption placed a clog upon the freedom of sale under Transfer of Property Act and the Indian Contract Act.[6]

The Hanafi law, which is predominant amongst the Muslims of India, recognizes three categories of persons having the right of preemption. They are, in order of priority:

  • a co-sharer in the property which is the subject of sale[7]
  • a participator in the amenities and appendages of the property[8]
  • a neighbour owning an adjoining immovable property.[9]

Under the Shia law, the right of pre-emption is of every narrow application and is restricted to co-owners in the undivided property and that also when their number is two; the right does not arise if there are more co-sharers than two. It does not recognize the right on the ground of vicinage or on the ground of participation in appendages. Under the Shafi law, the right of pre-emption is applicable only to the co-sharers; the other two classes of pre-emptors are not recognized.

The right of pre-emption under Muslim law is based on certain aims. It is said that since the rules of inheritance in Muslim law tend to disintegrate the family property, pre-emption is a necessary safeguard. It reduces the chances of Litigation, consolidates property, and tends to increase production of wealth. Another object of the rule is to prevent inconvenience which may result to families and communities from the introduction of a disagreeable stranger as a coparcener or neighbour.

Though the textual Hindu law did not provide any rule of pre-emption, under section 22(1) of the Hindu Succession Act 1956 when two or more heirs specified in class I under the Schedule inherit an immovable property together, and anyone of such heirs proposes to transfer his or her interest in the property, the other heirs shall have preferential right to acquire that interest. It seems the use of the expression ‘transfer of his or her interest’ may include transfers other than sales also. If more than one co-heir is willing to buy the interest transferred, it is provided that that heir who offers the highest consideration for the transfer shall be preferred.

Case Laws

To better understand the Right of Pre-emption we look at it through the lens of case laws from the Apex Court to our different High Courts.

1.     Smt. Swati Bhatia v. Lalit Upadhyay Shastri And Ors.[10]

In the present case, the Hon’ble High Court of Rajasthan, made the following remarks in concern with the Rajasthan Pre-emption Act, 1966 (“Act”):

The right of pre-emption is duly recognized by custom among Hindus since Pre-Independence Era and subsequently in the year 1966 a comprehensive law on the subject in the form of Act came into effect. Pre-emption right can be classified in three categories:

  • superior rights of preemption,
  • equal rights of pre-emption, and
  • inferior rights of preemption.

Section 4 of the Act envisages cases in which right of pre-emption accrues and Section 6 defines the persons to whom right of pre-emption accrues.

2.     Mohd. Amin v. Krishan Lal[11]

The controversy in the present case arose from a suit for pre-emption filed by the respondent who was the plaintiff before the Trial Court. The suit was dismissed by the Trial Court, however, in the first appeal, the plaintiff/appellant succeeded. The miscellaneous appeal thus came to be filed by defendants/petitioners in terms of Order 43, Rule 1(U) of the Code of Civil Procedure, which was also dismissed.

The Hon’ble Court held that if any person proposes to sell any agricultural land or village immovable property or urban immovable property, or to foreclose the right to redeem any village immovable property, or urban immovable property, in respect of which any person have a right of prior purchase, he may give notice to all such persons of the price at which he proposes to sell such land or property, or of the amount due in respect of mortgage, as the case may be. If not complied with, the suit for pre-emption follows.

3.     Prem Chand v. Smt Rajeshwari Meghnani[12]

In the present case, no notice of sale was given to the other co-owners. Following the principle laid down in the aforementioned case, the Court substituted the purchaser with the other co-owners upon their instance.

4.     Bishan Singh v. Khazan Singh[13]

The Hon’ble Court made the following observations:

  • 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.
  • This right is called the primary or inherent right.
  • 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 i.e., the pre-emptor takes the entire bargain and steps into the shoes of the original vendee.

5.     Lalitha James and others v. Ajit Kumar and others[14]

The Hon’ble Court made the following crucial observations:

  • A purchaser from a co-owner of a portion of undivided property is not entitled to possession of any particular part of the joint property.
  • His right would be for joint ownership and not for exclusive ownership of any particular part of the joint property.
  • A transferee is not in a better position than the co-owner himself. Section 44 gives sanction to this principle.
  • The Respondents will be only entitled to enforce partition of the joint estate. The sale of the exclusive property cannot be accepted. But such a right is a very weak right and can be defeated by all legitimate methods, such as a vendee allowing the claimant of a superior or equal right to be substituted in its place.

Conclusion

The judicial opinion in India is opposed to the rule of pre-emption, particularly in respect of urban immovable property, as is clear from the following observations:

  • Pre-emption is an exceedingly feeble right and is not favoured by law.[15]
  • The right of pre-emption is a very weak right. It interferes with the freedom of contract and is opposed to progressive state of society.[16]
  • The right of pre-emption is a very special right. It displaces ordinary rights and places restrictions upon normal rights of property.[17]
  • It is a right of an extremely feeble nature solely and exclusively based upon the considerations of apprehended inconvenience to the pre-emptor.[18]
  • The state of society which necessitated the introduction of a right of pre-emption as a part of law was thus archaic. The society no longer exists in our cities, towns, or urban areas. The isolated and the politically, economically, and socially independent village community has disappeared from our villages.[19]

Q & A

  1. What is Pre-Emption?

Pre-Emption is a right of first offer or first refusal. It entitles one to be offered the thing being sold (shares/property/others) before or in preference to others.

  1. What modes of transfer of property is it applicable to?

It is only applicable to transfer of property by way of sale and exchange.

  1. When is the right lost?

The following are the ways in which the right of pre-emption may be lost:

  • by misjoinder,
  • by the death of the pre-emptor,
  • by release,
  • by acquiescence or waiver.
  1. Why is it called a “weak right”?

Pre-emption is an exceedingly feeble right and is not favoured by law. The judicial opinion in India is opposed to the rule of pre-emption, particularly in respect of urban immovable property.

  1. What precautions I must take while selling my share in a joint property?

If you propose to sell any agricultural land or village immovable property or urban immovable property, or foreclose the right to redeem any village immovable property, or urban immovable property, in respect of which any person have a right of prior purchase, you may give notice to all such persons of the price at which you propose to sell such land or property, or of the amount due in respect of mortgage, as the case may be. If not complied with, the suit for pre-emption follows.

References

Dinshaw F. Mulla, Principle of Mahomedan Law, (20th Edition, 2013), LexisNexis, New Delhi.                                                                      


[1] Bishan Singh v. Khazan Singh, 1958 AIR 838. 

[2] Dinshaw F. Mulla, Principle of Mahomedan Law, (20th Edition, 2013), LexisNexis, New Delhi.

[3] Digamber Singh v. Ahmed Syed Khan, 37 All. 129.

[4] Gobind Dayal v. Inayat Ullah, 7 All. 775 (F.B.).

[5] Ibrahim Saib v. Munt Mir-ud-din, 6 M.fl.C.R. 26.

[6] Mahmood Beg v. Naray D, (1915) 40 Bom, 358.

[7] Syed Ibrahim v. Syed Khan, 95 l.C 83.

[8] Karim v. Priyo Lal, 28 All. 127.

[9] Aziz Ahmed v. Nazir Ahmed, 50 All. 257.

[10] Smt. Swati Bhatia v. Lalit Upadhyay Shastri And Ors, Civil Misc. Appeal No. 955/2018.

[11] Mohd. Amin v. Krishan Lal, 2018 SCC OnLine J&K 1043.

[12] Prem Chand v Smt Rajeshwari Meghnani, S.B. Civil Misc. Appeal No.1650/2012.

[13] Bishan Singh v. Khazan Singh, 1958 AIR 838.

[14] Lalitha James and others v. Ajit Kumar and others, AIR 1991 MP 15.

[15] Abdul Rashid v. Mohd. Adris, A.I R. 1946 Cal. 135.

[16] Badri Dutt v. Shri Krishan, A.l.R. 1945 All. 94.

[17] Keshav v. Krishna, A.I.R. 1939 Nag. 107.

[18] Nushrut Raza v. Umbulkhyer, 8 W.R. 309.

[19] Babu Lal v. Goverdhan Das, A.I.R. 1956 M.B. 16.

5 Replies to “Right to Pre-emption”

    1. You may send a notice to your co-owner informing him/her of the sale if you do not intend on selling it to them. Else, you may make the first offer to them.

  1. A,B,C,D are co sharers in a land. E,F,G & H are co sharers in another land and they share a common way to have access to their land with A,B,C&D. A sells his share in the land to Z, a stranger and B immediately makes demand regarding his right to preemption in respect to the part of the land which A has sold to Z. B, makes the confirmatiory demand atanding in the concerned land where beside A no one is present and later on files the suit for preemption. E & J who have performed all the prior formalities also file suit regarding their right of preemption as per the Muslim Law. Who among these will succeed and get the benefits of right to preemption in current scenario?

    1. Quite an interesting proposition. Before we reach a consensus as to which suit succeeds, we must list the procedures (and later assumptions made) to help better understand the conclusion.

      Procedures:
      1. What is crucial for a Pre-Emptor to succeed in such a suit is to follow the procedure Mahommedan law lays down, the most crucial being talab-i-ishhad or second demand which must be made in the presence of two witnesses and the vendor or vendee.
      2. The Right to Pre-Emption, as has been reiterated in the article, is a very weak right. Therefore, if the procedure as laid down by the custom prevalent or the statute is not followed, the right is defeated.
      In the present illustration, B did not follow the procedure (no witnesses) and therefore, his right is defeated.

      3. Pre-Emptor can only be the following category of individuals and the first takes precedence over the second:
      co-sharer in the property
      participator in immunities and appendages
      In the present illustration, B’s right should have excluded else’s right due to B being the co-sharer. But his right got defeated as discussed.

      4. For E & J(?) to claim such a right, they must prove to be participators and mere common way of passage is not sufficient, it must be some extension of property.
      In the present case, E only shares a common right of passage with A and nothing on A’s land and vice-versa. Therefore, E is not a pre-emptor. Despite them following procedure, their suit also gets defeated.
      Hence, the sale to Z would be upheld with no substitution being made.

      Conclusion: Therefore, in my opinion, B’s right gets defeated by acquiescence and E had no right in the first place. The sale to Z remains intact. (Refer, for further reading and reference, to the case of Chandramani Devi and Ors. v. Rajmani Devi and Ors.; 30.08.2012 – PATNAHC)

      (Assumptions: The answer would vary depending upon the customs prevalent in the area or, in case of a statute, the requirements of the statute. In addition, it also depends upon the sect, school, and religion of the vendor.)

      Hope this resolves your query! Kindly drop a comment otherwise.

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