Kharati Ram vs Ram Lal and Others

Weston, C.J.—The question referred to the F.B. is in these words:

Whether a suit to enforce a right of pre-emption in the case of a sale of an equity of redemption of urban immovable property when the pre-emptor pre-empts the immovable property treating the sale of equity of redemption to the mtgee. in possession as being a sale of the property itself comes within Sub-section (3), Section 30 of the Punjab Pre-emption Act, 1913?

The question indicates that in the suit from which the reference has arisen the pre-emptor has claimed not only to pre-empt the rights sold to the mtgee. in possession, but to pre-empt the entire property so as to extinguish all rights of the mtgee. u/s 4 of the Punjab Pre-emption Act, right to pre-empt is created in respect of sales. It is well established that there is no right of pre-emption of a mtge. By pre-emption the pre-emptor is substituted in the place of the seller at the date of sale. It seems arguable that a suit to enforce a right of pre-emption, which is a special right created in the Punjab by statute, must be a suit simpliciter for that purpose. I do not wish, however, to express an opinion one way or the other whether a composite suit for pre-emption and redemption is competent for by the reference we are concerned only with the question of limitation.

The material provisions of the law of limitation relating to pre-emption suits are Article 10, Sch. II to the Limitation Act, Section 30 of the Punjab Pre-emption Act, 1913 and the general residuary Article 120, Sch. II, Limitation Act. The question refd. recites that the property is urban immovable property and the referring order shows that the sale by the mtgor. which is the cause of action for the pre-emption suit, was for consideration of Rs. 50 and was effected by unregistered instrument.

Article 10, Sch. II, Limitation Act, is as follows:

Description of suit. Period of Time from which limitation. period begins to run. 10. To enforce a right One year When the purchaser of pre-emption, whether takes under the right is the sale sought to founded on law or be impeached, general usage or on physical possession special custom. of the whole of the property sold, or, where the subject-matter of the sale does not admit of physical possession, when the instrument of sale is registered.

It has been held in a number of cases, that for the application of the first part of the last column, it must have been possible for physical possession to have been given at the time of the sale. This rule seems to rest upon the use of the words "personal and immediate" by the P.C. in Batul Begum v. Mansur Ali 24 All. 17 : 28 I.A. 248 P.C.. I assume that it represents correct law. I do not think, however, that this rule removes altogether from the operation of Article 10 cases of sales of property (not by registered instrument) which property is subject to mtge.. Under the T.P. Act, and where the principles of that Act apply in India, execution of a mtge. of immovable property does not transfer to the mtgee. all interest in the property, leaving the mtgor. only with an incorporeal equity of redemption. The mtgor. remains owner of the property subject to the mtge. and his right to redeem is not an equity but a statutory right under the Act. When there has been a simple mtge. of property followed later by a sale by the mtgor. it may well be that no impediment exists to the purchaser from the mtgor. taking under the sale immediate physical possession of the whole of the property, which naturally will include the "whole of the property sold." If this is so, and if in fact possession is so taken, Article 10 has obvious application. In most cases where the property is subject to usufructuary mtge., physical transfer of possession under the later sale will not be possible. But there may be instances, for example, where possession under the usufructuary mtge. has not been taken by the mtgee., when immediate physical possession under the later sale deed is possible, and to such instances Article 10 may apply.

Coming now to Section 30 of the Punjab Preemption Act, 1913, omitting Sub-clauses (1) and (2) which do not relate to urban immovable property, the section reads thus:

In any case not provided for by Article 10, Sch. II, Limitation Act, 1908, the period of limitation in a suit to enforce a right of pre-emption under the provisions of this Act shall, notwithstanding anything in Article 120 of the said schedule, be one year.

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(3) In the case of a sale of urban immovable property, from the date on which the vendee takes under the sale physical possession of any part of the property.

The wording suggests the desire of the Legislature to make Section 30 a residuary clause, excluding so far as possible Article 120, Sch. II with its six year period. But clearly if the taking of physical possession of any part of the property in consequence of the sale is not possible or is not effected, Section 30(3) can have no application. The principle underlying both Article 10 and Section 30 is that of the notice afforded to the pre-emptor by the transfer of physical possession or by the registration of the sale-deed. If the transaction of sale is effected in such manner that such notice has not occurred, resort to the residuary Article 120 is unavoidable.

Each case must depend upon its particular facts. If possession under the sale has been taken, Article 10 or Section 30 will apply. If no possession has been taken under the sale, and I understand the reference to relate to such a case, Article 120 will apply.

Khosla, J.

I agree.

Harnam Singh, J.

I agree that a suit of the type falling within the question refd. to us for decision comes within Article 120, Limitation Act, 1908, and I wish to give my reasons.

The answer to the question of law involved in this reference turns upon the interpretation of Section 30. Punjab Pre-emption Act, 1913, though in the reference made the question is put as follows:

Whether a suit to enforce a right of pre-emption in the case of a sale of an equity of redemption of urban immovable property when the pre-emptor pre-emts the immovable property treating the sale of equity of redemption to the mortgee. in possession as being a sale of the property itself comes within Sub-section (3), Section 30, Punjab Preemption Act 1913?

The facts which are material to the question now before us may be stated briefly. On 18-01-1934, Nasir Din and Mohammad Haji mortgaged with possession the house in suit for Rs. 1,400 to Ganga Singh and Ram Lal on the foot of the deed of mtge. Ex. D-3. On the same day, the mtgors. executed rent deed, Ex. D-4, in favour of the mtgees. under which they took the house on lease from the mtgees. on an annual rent of Rs. 36, with the result that the actual possession of the house remained with the mtgors. Ganga Singh mortgee. gifted his mtgee. rights to his daughter Mst. Sardhi, Nasir Din mtgor. died and on 11-08-1939, Mohammad Haji and Mst. Fazal Bibi widow of Nasir Din on the foot of unregistered sale deed, Ex. D-5, sold the equity of redemption in the house for Rs. 50 in favour of Mst. Sardhi and Ram Lal, the two co-mtgees. By the purchase of the right of redemption, Ram Lal and Mt. Sardhi became full owners of the house in suit. On 29-04-1940, Mt. Sardhi sold her share in the house to Ram Lal for Rs. 700 on the foot of sale deed, Ex. D. 2, Ram Lal thus became the absolute owner of the house on 29-04-1940. On 16-08-1944, Kharaiti Ram pltf, instituted civil suit No. 781 of 1944 out of which these proceedings have arisen, for possession of the house described above by per-emption on payment of Rs. 1450. Ram Lal deft. vendee resisted the suit on a number of pleas. In Letters Patent Appeal No. 120 of 1947 we are concerned with issue No. 2 reading: "was the suit within time?"

Section 60, T.P. Act, 1882, is a statement of the "right to redeem". The mtgor''s right of redemption after the date fixed for payment, is called in English law the equity of redemption. The expression "equity of redemption" indicates that the right was a creation of the Cts. of Equity which, while giving relief against forfeiture, allowed the right to continue even after default on due date. In India the right of redemption is a statutory right. In cases reported in books the expression "equity of redemption" has been used by Cts. in India for the expression "right of redemption" created by Section 60, T.P. Act, 1882. In this judgment I have used the expression ''right of redemption'' in preference to the expression equity of redemption.

As stated above the answer to the question of law involved in the reference turns upon the interpretation of Section 30, Punjab Pre-emption Act, 1913, hereinafter refd. to as the Act. Section 30 of the Act reads as under:

In any case not provided for by Article 10, Sch. II, Limitation Act, 1908. the period of limitation in a suit to enforce a right of pre-emption under the provisions of this Act shall, notwithstanding anything in Article 120 of the said Schedule, be one year:

(1) in the case of a sale of agricultural land or village immovable property, from the date of the attestation (if any) of the sale by a Revenue Officer having jurisdiction in the register of mutations maintained under the Punjab Land Revenue Act 1887, or from the date on which the vendee takes under the sale physical possession of any part of such land or property, whichever date shall be the earlier,

(2) in the case of a foreclosure of the right to redeem village immovable property or urban immovable property, from the date on which the title of the mtgee. to the property becomes absolute,

(3) in the case of a sale of urban immovable property from the date on which the vendee takes under the sale physical possession of any part of the property.

The property sold on the foot of sale deed, Ex. D-5. is the right of redemption of urban immovable property. The sale is to the mtgees, in possession. Clearly, sub-ss. (1) and (2), Section 30, do not govern the suit.

Section 30(3) of the Act prescribes period of limitation for a suit to enforce a right of pre-emption under the provisions of the Act in the case of a sale of urban immovable property. As stated above, the sale sought to be pre-empted in the suit out of which these proceedings have arisen is the sale of the right of redemption of urban immovable property. The question that then arises for decision is whether the property sold is capable of "physical possession" within the meaning of Section 30(3) of the Act. A similar point arose in Saiam Sundar v. Amanat Begam 9 ALL. 234 : 1887 A.W.N. 24. In deciding that case Straight and Tyrelli JJ. said:

Now, an equity of redemption is the right now defined by statute, which entitles the mtgor., at the proper time and place, upon satisfaction of the mtge. debt, either by payment of the amount to the mtgee. in possession, or after his realization of it from the usufruct of the mortgaged estate, to deliver up possession to the mtgor., and to execute an instrument re-transferring it, or to have registered an acknowledgment in writing that the mtge. has been extinguished. It follows, therefore, that when, as in the case before us, the mtgee. is in possession, the sale by the mtgor. to the mtgee. of such right to redeem has the effect of extinguishing such right or in other words there is a merger of the two estates in the mtgee. who therefore became proprietor of the property mortgaged. We do not think, in a transaction of this description it can properly be said that any property is sold which is capable of physical possession within the meaning and intention of Article 10 of the Limitation law. It seems to us that in statute, such as the law of limitation, which contemplates notice, express or implied, to the party to be affected by some act done by Anr. in respect of which a right accrues to him to impeach it, and as to which time begins to run against him, quoad his remedy, from a particular point, the word ''physical'' implies some corporeal or perceptible act done, which of itself conveyes or ought to convey to the mind of a person notice that his right has been prejudiced. We are of opinion that an equity of redemption is not susceptible of possession of this description under a sale by which it is transferred, and that for the purposes of pre-emptor impeaching such a sale has one year from the date of registration of the instrument embodying it within which to bring his suit.

Mr. Amar Nath Grover basing himself on Jai Ram v. Sita Ram 52 I.C. 940 : AIR 1919 Nag. 6 F.B., urges that a sale by the mtgor. to the mtgee. in possession of the right to redeem is the sale of the mortgaged property which does admit of physical possession, whether at the time of sale such property be in possession of the mtgor. or in possession of the mtgee. In that case Stayon, A.J.C., said at p. 944:

In England, if you sell land which you have mortgaged or leased for a term, you transfer an equity of redemption or an estate of reversion. In India in such a case you sell your land.

In deciding the point I prefer to follow the reasoning in Shiam Sunder v. Amanat Begam 9 ALL. 234 : 1887 A.W.N. 44 to what was said in 52 I.C. 940 : AIR 1919 Nag. 6 F.B. and hold that in India when a mtgor. sells the right of redemption to the mtgee. in possession the mtgor. does not sell any property which is capable of physical possession within the meaning and intention of Section 30 of the Act. In such a case, the property sold is the right of redemption though the sale by the mtgor. to the mtgee. of such right to redeem has the effect of extinguishing such right and by a merger of the two estates in the mtgee. the mtgee. becomes the proprietor of the property mortgaged. In other words, the mtgor. sells the right of redemption and the mtgee. becomes the proprietor of the property mortgaged by operation of law. That being the situation of law, it is plain that Section 30(3) of the Act does not apply to a suit to enforce a right of pre-emption under the provisions of the Act in the case of a sale of a right of redemption of urban immovable property. In such a case it is not possible for the vendee to take possession of any part of the property sold.

And I may here say that the conclusion set out in the preceding para. follows from an analysis of the right of pre-emption created by Section 4 of the Act. In Govind Dayal v. Innayat Ullah 7 ALL. 775 : 1885 A.W.N. 182 F.B., Mahmood J., said:

The right of pre emption is not a right of ''repurchase'' either from the vendor or from the vendee, involving any new contract of sale; but it is simply a right of substitution, entitling the pre-emptor, by reason of a legal incident to which the sale itself was subject, to stand in the shoes of the vendee in respect of all the rights and obligations arising from the sale under which he has derived his title. It is in effect as if in a sale-deed the vendor''s name was rubbed out and pre-emptor''s name inserted in its place.

In construing Section 4 of the Act the rule laid down in Govind Dayal v. Innayat Ullah 7 ALL. 775 : 1885 A.W.N. 182 F.B., has been consistently folld. by the Punjab Chief Ct. and the H.C. at Lahore. Indeed, it was not disputed in these proceedings that there is no right of pre-emption in respect of a mtge. and by pre-emption the pre-emptor is substituted in place of the seller.

That being so, the right of Kharaiti Ram pltf. pre-emptor was limited to pre-empt the sale of the right of redemption by Mohamad Haji and Mt. Fazal Bibi on 11-08-1939, to Mt. Sardhi and Ram Lal on the foot of the unregistered sale-deed, Ex. D.-5, and we have to decide whether such a suit falls within Sub-section (3), Section 30 of the Act. For the reasons given above, the decision must be that for purposes of limitation such a suit does not come within Section 30(3) of the Act.

But it is said that as Kharaiti Ram instituted civil suit No. 781 of 1944 treating the sale of the right of redemption to the mtgees. in possession as being the sale of the property itself the suit falls within Section 30(3) of the Act.

In the first place, it is doubtful whether a composite suit of the description which was instituted by Kharaiti Ram is competent in law. Rule 4, Order II, Civil P.C., enacts that no cause of action shall, unless with the leave of the Ct., be joined with a suit for the recovery of immovable property, except the claims specified in the three clauses of that rule. Rule 4 then enacts that nothing contained in that rule shall be deemed to prevent any party in a suit for redemption from asking to be put into possession of the property mortgaged. The point is not before us and I hold myself free to express a considered opinion on the point when it becomes necessary. In the present proceedings assuming without deciding that a composite suit for pre-emption and redemption is competent I do not think that the period of limitation prescribed in Section 30(3) of the Act governs such a suit. Such a suit proceeds upon two causes of action and for purposes of limitation each part of the suit is governed by different provisions of law. The question is whether for purposes of limitation a suit simpliciter to enforce a right of pre-emption under the provisions of the Act in the case of sale of right of redemption of urban immovable property comes within Section 30(3) of the Act. In deciding the application of Section 30(3) of the Act the sole test is the nature of the property sold and the fact that a pltf. sues to enforce right of preemption treating the sale of the right of redemption of urban immovable property to the mtgee. in possession as being a sale of the property itself does not bring the suit within Section 30(3) of the Act. Indeed, such a suit is not a suit to enforce a right of pre-emption under the provisions of the Act.

As was said by me in the referring order Sub-section (3), Section 30 of the Act provides that period of limitation in a suit to enforce a right of preemption under the provisions of the Act shall be one year in the case of sale of urban immovable property from the date on which the vendee takes under the sale "physical possession of any property". In case the urban immovable property sold is the right of redemption, the property sold does not admit of "physical possession", and that being so, it is not possible for the vendee to take under the sale "physical possession" of any part of the property. The expression "physical possession of any part of the property" in Sub-section (3), Section 30 on the Act means "physical possession of the property sold" and where the property sold is a right of redemption of a house situate in a town, Sub-section (3), Section 30 of the Act can have no application for "the urban immovable property" sold does not admit of "physical possession". The opinion I have expressed above receives full support from what was said in Gaffar Khan v. Sattar Khan 160 P.R. 1889, and it is significant to note that the Legislature in enacting Section 30 of the Act in 1913 should be deemed to have accepted the law laid down in Gaffar Khan v. Sattar Khan 160 P.R. 1889 to be correct.

For the foregoing reasons, my answer to the question referred to us for decision is in the negative.