1. This appeal under Order 43, Rule 1 (u) of the Code of Civil Procedure comes before us on a reference under Rule 9 (2) (a) of the High Court Rules for consideration of a substantial question of law involving interpretation of the Constitution by a larger Bench.
2. The question is whether Section 11 sixthly of the Bhopal Pre-emption Act, 1934 (III of 1934) providing for a right of pre-emption 'in the persons who own immovable property contiguous to the property sold' is void as offending against the provisions of Article 19(1)(f) of the Constitution. It arises in this manner. By a sale deed dated 14 June 1955, the appellant 1 sold his shop situate in Bhopal town to the appellant 2 for a sum of Rs. 5,000/- without the consent or knowledge of the respondent, who owned immovable property contiguous to that shop.
Since the respondent's request for being allowed to pre-empt the sale was not accepted, he filed the suit out of which this appeal arises. The Court of first instance dismissed the suit on the preliminary point that the relevant enactment giving a right of pre-emption on the ground of vicinage was void as contravening Article 19(1)(f) of the Constitution. The lower appeal Court took a contrary view and remanded the suit for trial on merits. The correctness of that view is in controversy before us.
3. There can be no question that the law of pre-emption imposes a limitation or disability upon the ownership of property to this extent that it restricts the owner's unfettered right of sale and compels him to sell the property to his co-sharer or neighbour as the case may be, Audh Behari Singh v. Gajadhar Jaipuria, 1955-1 SCR 70 : (AIR1954 SC 417). Being a clog on the freedom of sale, it tends to diminish the market value of the property. It is a weak right and is not looked upon with favour by the Courts : Radhakishan v. Shridhar, AIR 1960 SC 1368. It has been allowed to be defeated by all legitimate means : Bishan Singh v. Khazan Singh 1959 SCR 878 ; (AIR 1958 SC 838).
4. In what way the person whose property is subject to a right of pre-emption suffers would appear clearly from the observations made in two cases :
'A large proportion of the litigation in Berar districts relates to pre-emption suits. The intending purchaser knowing as he does that he may have to face a litigation of this kind naturally is not prepared to pay the full price of the property and has the temptation of over-stating the price paid, so much so that even though the burden of proof lies on the pre-emptor to show that the consideration of the transaction sought to be preempted had not been fixed in good faith or was in excess of the market value (see Namdeo v. Kesheo, ILR (1937) Nag 469 at p. 471 : (AIR 1938 Nag 59 at pp. 60-61)) in actual practice, the Courts start with a lurking suspicion that the price may have been overstated. In some cases where the entire consideration of the major portion of it has been paid before the registering officer, the plea has often been raised by the pre-emptor and accepted by the Courts that some portion of the amount so paid to the vendor has found its way back, into the pocket of the vendee. The plaintiff naturally starts with the case that the real consideration was one-third or one-fourth of the amount stated in the document evidencing the transfer and his opponent naturally is interested in insisting upon the price stated in the document. Witnesses are examined on both sides supporting the opposing versions and the Court is left in the very unenviable position of doing its best to find out where the truth lay. In other words, it becomes a game of hide-and-seek, and very often the result actually arrived at by the Court may not represent the real truth. Sometimes the price thus determined by the Court may turn out to be too little or too much with reference to the price actually paid by the vendee. It thus becomes a gamble in litigation leading to speculation.' (Ramchandra v. Janardan ILR (1955) Nag 378 at pp. 386-387 : ((S) AIR 1955 Nag 225 at p. 227) (FB)).
'Except under the pressure of necessity, landowners rarely part with their landed property. It 3s therefore of the utmost moment to them to obtain its fair value and without unreasonable delay. Now in a village held by a number of co-sharers it is almost impossible to obtain within a reasonable time from every co-sharer an explicit refusal of an offer of sale, or such evidence of the refusal as will thereafter be incontrovertible. Not un-frequently when a co-sharer desires to sell his share, and in fulfilment of the stipulation offers it to his co-sharers, some one or more of them will neither explicitly accept nor decline to offer, but haggle to obtain it at a price far below its value. When the patience of the seller is exhausted, or the urgency of his need no longer permits delay,he is driven to effect a sale with a stranger, which is followed after the longest delay allowed by law by the institution of one or more suits to enforce the right of pre-emption. The stranger, aware of the risk to which his purchase is exposed, either at once takes account of it by offering less than the property ought to fetch if it could be sold free from the risk, or retains a portion of the purchase-money until it be seen whether the sale is contested, or, if contested, the result be known. Fictitious considerations are entered in sale-deeds, fictitious payments made before the registering officers, fictitious receipts executed, and wholesale perjury committed on the one side or the other when the Courts come to inquire into the prices actually paid.'' Raja Ram v. Bansi, ILR 1 All 207 at page 209.
The question is whethers in the circumstances, the restriction imposed by the statutory right of preemption on the ground of vicinage is a reasonable restriction. Since the impugned enactment relates only to immovable property within the limits of a municipality or a notified area, we would restrict our attention to such property. It is urged before us that the towns in the Bhopal region are in a backward State, that purdah continues to be observed and that it is necessary in the interests of domestic comfort and public order that intrusion of strangers should be excluded.
In our opinion, the conditions in which the right was recognised in regard to urban immovable property have altogether changed. We are further of opinion that, having regard to the object in view and the nature of limitation imposed on the owner of immovable property, the right of pre-emption grounded merely on vicinage is an excessive invasion of the right guaranteed by Article 19(1)(f) of the Constitution and cannot for that reason also be regarded as a reasonable restriction under Clause (5) of Article 19 of the Constitution. That being so, the Sixth clause of Section 11 of the Bhopal Pre-emption Act must be regarded as void from the commencement of the Constitution. As we would show in the sequel, we have the guidance, support and authority of several decisions in favour of this view.
5. Our attention was drawn to ILR (1955) Nag 378 : ((S) AIR 1955 Nag 225) (FB)). In that case, the law of pre-emption contained in Chapter 14 of the Berar Land Revenue Code, 1928, was upheld as valid mainly on the ground that it was calculated to prevent fragmentation of agricultural land and to promote consolidation. That was also the case in Abdul Hakim v. Jan Mohammad, ILR (1952) 1 All 149 : (AIR 1951 All 247). In our opinion, the right of pre-emption conferred in the context of agricultural land, which promotes consolidation of holdings, stands on a very different footing. As pointed out by the Supreme Court in Attar Singh v. State of U. P., AIR 1959 SC 564, consolidation is a boon to the tenure-holders of a village.
6. The right of pre-emption in relation to urban property on the ground of vicinage was considered by this Court in two cases. In Mohammad Umar v. Amir Mohammad, 1958 MPLJ 419 : (AIR 1958 Madh Pra 423), it was held that the Mahomedan customary law of pre-emption was not abrogated by the provisions of the Constitution. Tare, J. observed ;
'I am unable to see anything unreasonable, as customary law of pre-emption is prevalent in Punjab as also in other States there is a statutory law of pre-emption in respect of agricultural holdings.'
In Yakub Mohammad v. Karim, 1959 MPLJ 1218 : (AIR 1960 Madh Pra 191), the very provision of the Bhopal Pre-emption Act, which is impugned before us, was held by one of us (Dixit, C. J.) to be void, being repugnant to Article 19(1)(f) of the Constitution.
7. Before the formation of the new State of Madhya Pradesh, this question was considered in Bhopal, Madhya Bharat and Vindhya Pradesh. In Bagmal v. Ratanlal, S. A. No. 41 of 1955, D/-13-7-1956 (MB), Mathur, J. C., differing from the contrary view taken earlier by Sathaye, J. C., held that Clause (6) of Section 11 of die Bhopal Pre-emption Act was void. In Babulal v. Gowardhandas, (S) AIR 1956 Madh-B 1 (FB), to which one of us (Dixit, J. as he then was) was a party, Sub-section (8) of Section 12 of the Gwalior Pre-emption Act, which provided for pre-emption on the ground of vicinage, was held to be void. In Sewalal v. Param Lalanju, (S) AIR 1956 Vindh Pra 9, Sub-section (2) of Section 10 of the Rewa State Pre-emption Act, 1946, which conferred a right of pre-emption on the ground of vicinage, was regarded as void.
8. In Moti Bai v. Kand Kari Channaya, ILR 1954 Hyd 85 : (AIR 1954 Hyd 161) (FB) and Ranganath v. Babu Rao, ILR (1956) Hyd 565 : ((S) AIR 1956 Hyd 120), the customary right of pre-emption on the ground of vicinage was declared to be void as offending against Article 19(1)(f) of the Constitution. The same view was taken in Panch Gujar Gaur Brahmins v. Amarsingh, ILR (1954) 4 Raj 84 : (AIR 1954 Raj 100) (FB). In Shanker Lal v. Poonamchand, ILR (1954) 4 Raj 310 : (AIR 1954 Raj 231), Clause (3) of Section 3 of the Law of Pre-emption in Marwar giving the right of pre-emption on the ground of vicinage was held to be void. A similar view was again taken in regard to the relevant provision of the Alwar State Pre-emption Act, 1946, Nathuram v. Patram, AIR 1960 Raj 125 (SB).
So far as the Punjab High Court is concerned, Section 16 of the Punjab Pre-emption Act was upheld as valid in its entirety by a Full Bench : Uttam Singh v. Kartar Singh, ILR (1954) Punj 232 : (AIR 1954 Punj 55). However, a different view was taken in regard to the sixth clause of Section 16 ibid (providing for pre-emption on the ground of vicinage) by a Division Bench of that Court in Kesar Devi v. Nanak Singh, AIR 1958 Punj 44. That decision was however overruled by a larger Bench of five Judges in Sardha Ram v. Abdul Majid, AIR 1960 Punj 196 (FB). It would thus appear that, with the exception of the two Full Bench decisions of the Punjab High Court, the consensus of judicial opinion supports the view we have taken.
9. In the latest Punjab case, the view taken by other High Courts was not accepted for the several reasons given in paragraph 20. In our opinion, the learned Judges appear to have been influenced by the American doctrine of separation of powers and the wisdom of the Legislature, by the history of the right of pre-emption and by overriding consideration of not overruling a Full Bench decision recorded in 1954. The oppressive nature of the restriction does not appear to have been considered in the back-ground of the conditions now obtaining in urban areas. That being so, we are, with the utmost respect, unable to share the opinion expressed by them.
10. The result is that the appeal succeeds and is allowed. The order of remand is set aside and the decree of the Court of first instance is restored. The respondent shall bear his own costs and pay to the appellants their costs throughout. Counsel's fee here Rs. 100/-
11. I agree that the sixth clause of Section 11 of the Bhopal Pre-emption Act, 1934, giving the right of pre-emption by vicinage is void from 26 January, 1950 by reason of Article 19(1)(f) and that this appeal should be allowed. I had occasion to deal with a similar provision contained in the Gwalior Pre-emption Act, Samvat 1992, as a Judge of the Madhya Bharat High Court in the case of (S) AIR 1956 Madh-B 1 (FB). The reasons given by me in Babulal's case for holding that the provision in the Gwalior Pre-emption Act giving a right of pre-emption on the basis of vicinage was void from 26 January, 1950 are equally applicable to the invalidity of the sixth clause of Section 11 of the Bhopal Pre-emption Act.
I do not wish to repeat all that has been said in Babulal's case, (S) AIR 1956 Madh-B 1 (FB). The decision in Babulal's case, (S) AIR 1956 Madh-B 1 (FB), was considered by Bhandari, C. J., in AIR 1960 Punj 196 (FB). The learned Chief Justice reproduced some passages from my judgment without making any comment on it. He, however, made a general comment on the view taken by some Judges that the right of pre-emption on the ground of vicinage was arbitrary and capricious. The learned Chief Justice said that they had overlooked certain fundamental principles and had completely ignored the historical aspect and had failed to take notice of the fact that the right of pre-emption was recognized not only by Mahomedan Law but also by customary law in village communities.
One has only to read the judgment in Babulal's case, (S) AIR 1956 Madh-B 1 (FB) (supra), and the decisions of other High Courts taking a similar view to see whether the criticism made by Bhandari, C. J. is or is not justified. In (S) AIR 1956 Madh-B 1 (FB) (supra), the distinction between urban property and agricultural land in regard to the validity of the pre-emption law was pointed out, and it was observed that the decisions in AIR 1951 All 247, Punjab State v. Inder Singh, AIR 1953 Punj 20 and AIR 1954 Punj 55, were not in point as they related to agricultural lands and the considerations of consolidation of holdings and of integrity of the village and village community had no bearing on the question whether the Jaw of pre-emption based on vicinage in respect of immovable property other than agricultural landsituate in towns and urban areas was reasonable.
I think it is of fundamental importance to bear in mind the distinction between agricultural land and urban property in approaching the question of the validity of a statutory provision giving a right of pre-emption on the basis of vicinage. With all due deference to the learned Judges of the Punjab High Court deciding Sardharam v. Haji Abdul (supra), I must say that they have altogether missed this distinction.