Satar Mohd.& others vs Saraf-ud-Din & others

This second appeal arises out of a suit for preemption instituted by the first respondent against the appellants in March 1957 in the court of the

Subjudge at Rajouri. Respondents 2 onwards sold the property in suit to the appellants under a deed dated 5157 for Rs. 2,000. The vendees

were the tenants of the property at the time of the sale. The plaintiff, first respondent, who is an owner in Mahal laid the present action for

preempting the sale in exercise of the statutory right which S. 14 of the Right of Prior Purchase Act conferred on him. While the preemption suit

was pending in the trial court, S. 14 of the Right of Prior Purchase Act was amended by Act XIII of 1959 conferring a preferential right of

preemption on tenants. On the coming into force of this amendment, the vendees contended before the trial court that they had a preferential claim

over the plaintiff, that the amendment of the law had improved their status, and that therefore the plaintiff's suit was liable to be dismissed. The trial

court agreed with this contemption and dismissed the preemption suit. On appeal, the Additional District Judge at Poonch held that the amending

Act XIII of 1959 had no restropective operation and that, therefore, the rights of the parties were governed by the law as it stood at the time of the

institution of the suit and that consequently the vendees could not validly resist the suit. The aggrieved vendees have therefore come up to this court

in second appeal.

The plaintiff first respondent's learned counsel did not seek to support the decision of the Court of Appeal below on the ground that the amending

Act XIII of 1959 had no retrospective operation. On the other hand, he frankly conceded that this groundon which the lower appellate court

reliedwas not tenable in view of the legal position that a vendee in a preemption action is entitled to improve his status till the passing of the decree

by the first court. It is settled. law that preemptor must have a subsisting right of preemption on (1) the date of the sale, (2) the date of the

institution of the suit, and (3) the date of the decree. If the plaintiff preemptor ceases to have the right of preemption at any of these points of time,

his suit is bound to fail. He can also be non suited by the vendee acquiring at any time before his suit is decreed a right of preemptin equal or

superior to his own. Authorities on this point are legion. See for instance, Madho Singh v. James R R. Skineer, A.I R. 1941 Lahore 433 F. B. :

Shanker Lal v. Poona Chand, A. I. R. 1954 Rajasthan 231. and Nabir Ganai v. Mohd. Ismail Ganai, A. I. R. 1960 J & K 112. It cannot

reasonably be gainsaid that a vendee can improve his status not merely by his own acts after the sale or pending the preemption suit, but also by

virtue of the operation of law in his favour. A subsequent legislation, therefore, can as much enable a vendee to improve his status as any voluntary

act on his part All this has been conceded by the learned counsel for the plaintiffpreemptor. This means that the only ground on which the lower

appellate court gave judgement for plaintiff is plainly unsupportable.

But the learned counsel for the preemptor strenuously urged that the appellantsvendees ceased to be tenants the moment they purchased the

property leased to them from the landlord. If the vendees ceased to be tenants from the date of the sale they could not obviously invoke the benefit

of the amending Act XIII of 1959 which conferred a superior right of preemption on a tenant visavis an owner in Mahal like the plaintiffrespondent.

The point to be examined therefore is whether the tenancy of the appellants was extinguished on their purchasing the vendorlandlord's right under

the sale deed of 5th January 1957. The first respondentpreemptor's claim that the tenancy rights of the vendees became extinguished is based

entirely on the doctrine of merger. The learned counsel for the vendeesappellants has sought to meet this contention by pointing out that in a case

like the present there could be no merger of the interests of the landlord and the tenant and a consequent extinguishment of the tenancy.

This takes us to a consideration of the scope and applicability of the doctrine of merger. A merger ordinarily takes place when a greater estate and

a less estate vest in the same person at the tame time and in the fame right. ""A less estate is not merged in a greater if there is an express or

presumed intention that it shall be kept alive. Where no intention is expressed, the intention may be presumed from the circumstances, as where the

estates are held by the same person in different rights, for example, one beneficially and the other as trustee, or where it is for the advantage of the

holder of the two estates that the less estate should be kept alive."" (Halsbury's Laws of England, 3rd edn. Vol. 14, page 616, paragraph 1136).

Dealing with the merger of the interests of landlord and tenant, it is stated as follows in paragraph 1420 at page 690, Vol. 23, 3rd edn. of

Halsbury's Law of England :

Even when they are held by the same person in the same right, the question of merger is governed in equity by the intention of the parties, and

there is no merger if it is intended that the term should be kept alive. In the absence of any direct evidence of intention, it will be presumed that

merger is not intended if it is to the interest of the party or only consistent with his duty, that merger should not take place.........

Thus, the question of merger, so far as English Law is concerned, is essentially one of intention of the parties. The difference which once existed in

English between the Common Law and the rule of equity on this matter has been removed by the enactment of S. 185 of English Law of Property

Act, 1925. We have now to see whether the English rule can be applied to the instant case.

S. Ill (d) of the Transfer of Property Act has enacted that a lease of immovable property determines in case the interests of the lessee and the

lessor in the whole of the property become vested at the same time in one person in the right. The Section does not in terms leave any scope for

the intention of the parties to come into play. It has therefore been argued that the law in India is different from the English law on subject. I do not

consider it necessary to go into this question in the present case, because the lease in question before me is admittedly a lease for agricultural

purposes within the meaning of S. 117 of the T. P. Act and as such none of the other provisions of Chapter V of that Act which includes S. Ill

applies to it. I am not aware of any notification by the State Government nor has any been brought to my notice by which S. Ill has been made

applicable to agricultural leases. It follows that the question of merger in the present case has to be dealt with independently of S. Ill (d) of the T.P.

Act, that is to say outside the purview of the T. P. Act.

In Dulhin Lachanbati v. Bodh Nath, A.I.R. 1922 P. C. 94. Lord Shaw said as follows on a question of merger.

Merger is not a thing which occurs epso jure upon the acquisition of what may be called the superior with the interior right. There may be many

reasons conveyance reasons, persons arising out of the object of the acquisition of the one right being merely for a temporary purpose, family

reasons and others in the course of which the expediency of avoiding the coalescence of the interest and preserving the separation of title may be

apparent. The question to be settled in the application of the doctrine, is, was such a coalescence of right meant to be accomplished as to

extinguish that separation of title which the records contain.

In Suraj Chandra v. Beharilal, A. I. R. 1939 Cal. 692, the facts were that an owner of land after having leased it to the defendant hypothecated it

to the plaintiff. While the hypothecation was subsisting, the tenant purchased the equity of redemption from the land. Subsequently, the mortgagee

sued to enforce his mortgage and obtained a decree. In execution he sold the property and purchased it himself. After having obtained symbolical

possession of the property through court, he attempted to take actual possession and was resisted by the defendanttenant and therefore a suit for

possession was laid by him. One of the main grounds on which the plaintiff's case was rested was that by the purchase of the landlord's interest by

the tenant the tenancy was extinguished, the less estate having merged in the greater estate. The lease in that case fell outside the ambit of the T. P.

Act and was governed by the Bengal Tenancy Act. The appeal from the suit was heard by a Division Bench of the Calcutta High Court consisting

of B. K. Mukherjea and Rosburgh JJ. In his leading judgement Mr. Justice B. K. Mukherjea (as he then was) observed at page 696 :

A man is presumed to intent that which is for his benefit, and judged by that test it would obviously be to the advantage of the defendant to keep

the two interests separate. His interest as a lessor is affected by the mortgage and if he allows his lessee's interest to be merged in the superior one

he would be hit by the mortgage decree and the sale, and his rights would be extinguished. The existence of a mortgage on the superior right when

the defendant purchase it, even if it cannot be held to be an intermediate estate which would prevent merger, would, in my opinion, certainly

constitute a criterion to determine the intention of the lessee; and the defendant could not have intended a coalescence of the two rights which was

manifestly to his prejudice.''

It is perhaps unnecessary to say more to show that in considering a question of merger de hors provisions of the T. P. Act, intention of the parties

concerned is of crucial importance.

We have now to turn to the facts and circumstances of the instant case to ascertain whether there has been a merger of the tenant's interest in that

of the landlord. When the landlord executed the sale deed, the vendees were holding the land as protected tenants with a large measure of fixity of

tenure under the Jammu & Kashmir Tenancy Act. At the time of the purchase and for a long number of years prior to it there has been in force in

the State of Right of Prior Purchase Act. The right of preemption has been exercised in the State for many years now and it has been very widely

known throughout the State. The very circumstance that about two months after the sale in question the plaintiff laid a suit 10 enforce his right of

preemption is itself an indication that the inhabitants of the locality where the parties to this litigation have been residing and where the suit property

is situated were quite familiar with the right of preemption and the liability of a person who purchases property in disregard of this right to part with

it in favour of the preemptor. It cannot, therefore, be said that the vendees when they purchased the property were ignorant of their liability to a

claim of right of preemption. Indeed, it cannot be assumed that a person was ignorant of the law. So, we have to proceed on the basis that the

vendees knew about the right of preemption residing in the plaintiff or persons like him, when they purchased the property from the landlord.

Furthermore, at the time of purchase the vendees did not have any right of preemption equal to that of the plaintiff or persons occupying similar

status. There is absolutely nothing to indicate that the vendees could have reasonably thought or did in fact imagine that the plaintiff could not or

would not exercise his right of preemption in respect of the land in suit. The vendees, as any other reasonable persons, would have know that if

their tenancy determined on account of their purchase of the landlord's interest, the prospective preemptor would claim to take the entire property

rid of the encumbrance of a protected tenancy. All these factors militate against the vendees having intended to merge their tenancy in the landlord's

estate to the extinction of the former. Therefore, if the question is to be decided on an ascertainment of the intention of the vendee, it appears to be

clear beyond doubt that they could not possibly have intended to extinguish their valuable tenancy rights; they cannot be presumed to have

intended something so much to their detriment. On the other hand, they must be presumed to have intended what was to their benefit, namely,

keeping the two estates separate. If the plaintiff's contention prevails in this case, the result will be that the defendantsappellants shall have to part

with not only what they purchased from the landlord, but also what they originally held in their own right. And for losing the latter right they will get

no compensation whatsoever. This aspect only serves to emphasize that the vendees would not have intended determination of their tenancy by

purchasing the landlord's interest.

By purchasing a property to which a right of preemption attaches, the vendee gets only a defensible title. The property vests in him only subject to

the liability of his being divested of it, In other words, the sale is subject to the right of preemption. The benefit as well as the burden of the right of

preemption runs with the land. A vendee of such property cannot be said to acquire absolute title to that property. An infirmity attaches to the title

of the vendor himself in the matter of selling the property to the vendee who is not entitled to a right of preemption. A sale in these circumstances

stands on different footing from other sales. I venture to think that such a sale will nor vest title in the vendee in the same sense as other sales would

in the ordinary course. The burden of making ever the property to the preemptor which is annexed to the property itself and which is undoubtedly

an incident of the sale projects into the bargain a supervening right of an outsider, namely, the prospective preemptor, and stands between the

vendee and the property which he has purported to acquire. So for as the vendee is concerned, the sale is subject to the condition of his title being

lost to the preemptor. In such a case the vesting of title in the vendee is only of a precarious kind and of a fleeting nature. It would remain so until

the liability of the sale to preemption ceases to exist and the vendee obtains a perfect, stable and permanent title. Such a precarious and shortlived

vesting of title in the vendee does not to my mind appear to be sufficient to bring about a permanent merger of the preexisting interest he held in the

new interest he acquires. And looking at it from the point of view of the preemptor his right is only one of substitution and not of repurchase. As

held by Mr. Justice Mahmood in Gobinda Dayal v. Inayatulla.7 All. 775 (F. B.):

It is simply a right of substitution, entitling the preemptor, 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

vendee's name was rubbed out and the preemptor's name was substituted in its place. ""See also Audh Behari v. Gajadhar, A.I.R. 1954 S. C. 417.

If this be the preemptor's right, how can he get anything more than what was sought to be conveyed to the vendee under the sale which he seeks to

preempt. If the sale was originally in favour of the preemptor himself, he would not have got the tenant's rights. Merely because he steps into the

shoes of the vendee as a result of a preemption suit, why should he obtain a larger interest than what the vendor sold. This aspect of the matter also

seems to point to the propriety of holding that the tenant's rights were kept separate and were not merged in the landlord's rights which the plaintiff

has now sought to preempt.

On a consideration of the various aspects, I have come to the conclusion that the interest of the landlord and the interest of the tenants did not

coalesce in the present case and that each estate was kept separate from the other, and that therefore the tenants remained tenants and could

legitimately invoke the benefit of the amending Act XIII of 1959 and thereby improve their status and nonsuit the plaintiff who has put forward only

an inferior right of preemption.

In the result I allow this appeal with costs, and restore the decision of the trial court dismissing the suit.