1. These appeals have arisen out of a suit instituted by the plaintiff to enforce a right of pre-emption. The plaintiff and defendant 2 were cosharers in respect of a homestead, the plaintiff having a 12 annas share and defendant 2 the remaining 4 annas share. Then there was an agreement between the parties, the relevant terms whereof are set out below, and the substance thereof was that neither party would be competent to sell his share in the homestead but to the other. Thereafter defendant 2 mortgaged his 4 annas share in the homestead to the plaintiff and afterwards sold it to defendant 1. The plaintiff then instituted this suit for a declaration that the sale held as aforesaid in contravention of the agreement was ineffectual as against him, and for a sale-deed being executed in his favour on receipt of the value of the share minus the money due on the mortgage, and for other reliefs. The main defence of the defendants was that the agreement was void as being due to undue influence, and misrepresentation and that defendant 1 was a bona fide purchaser for value. The Courts below have decreed the suit in a modified form. The defendants as well as the plaintiff have then appealed to this Court, the appeal of the defendants being S.A. No. 556 of 1926 and that of the plaintiff, S.A. No. 624 of 1926. It will be convenient to deal with the appeals separately.
S.A. No. 556 o/1926.
2. Appeal No. 556 of 1926 was preferred by both the defendants; but defendant 1 died and his heirs have not come forward to be substituted in his place. The position therefore is that the part of the decree of the Court below which declared that the sale by defendant 2 to defendant 1 was invalid and inoperative as against the plaintiff stands unchallenged. The appeal in so far as it is at the instance of defendant 2 is directed against, and its scope is limited to, the part of the decree which runs in these words:
Defendant 2 is further directed to execute a deed of sale to the plaintiff in respect of his 4 anna share in the homestead in suit within a month of the deposit into Court by the plaintiff of Rs. 600 as the price of the sale to the credit of defendant 2. One month's time is allowed to the plaintiff for the deposit. On failure to make the deposit, so much of the decree as directs the sale-deed in favour of the plaintiff will be treated as cancelled.
3. The principal ground on which the decree is challenged on behalf of the appellant, namely, defendant 2, is:
that the agreement is void as it offends against the rule against perpetuity and is bad on the ground of remoteness.
4. The plaintiff respondent contends that this contention of the appellant as also his other contentions to which reference will be made hereafter, should not be entertained as his only defence in the trial Court was that the agreement was void as vitiated by undue influence and misrepresentation; but we think we must overrule this objection as, in our opinion defendant 1 being dead, defendant 2 is competent to rely on all such grounds upon which defendant 1 could have resisted and did resist the plaintiff's claim.
5. To deal with the aforesaid contention of the appellant it is necessary in the first instance to set out the relevant portion of the agreement. It runs thus:
This agreement shall be binding against us, our heirs and our representatives-in-interest. Any act done contrary to this agreement will be considered ineffectual and will not be acceptable to a Court of Justice....We settle the price of the entire property given in the schedule below to be Rs. 2,400. Any of our cosharers or any cosharers of our heirs willing to sell his or any portion of his share shall be bound to sell it, for a price proportionate to the price fixed above to the other cosharers and the other cosharer shall be bound to purchase the same. The intending seller shall on no account be competent to sell his share to a third party except as provided below. Any sale contrary to this proviso will be invalid and the other cosharer will be competent to nullify the same by suing for a kabala within three years of the sale on depositing in Court the price with interest at 4 per cent per annum.
6. There were provisions made as to the circumstances under which a sale could be effected in favour of a third party, but they need not be set out here as admittedly those conditions have not been complied with.
7. Now, it appears that prior to the Transfer of Property Act (4 of 1882) the Indian Legislature recognized that a contract for the sale of immovable property created an equitable interest in the property and made the purchaser the owner of it in equity: See illustration (g) to Section 3, illustration (a) to Section 13, and Section 27, Clause (b), Specific Belief Act I of 1877; Section 17 Clause (2), Registration Act 20 of 1866; and Section 17 Clause (b), Registration Act 3 of 1877; and the judgment of Kanga, J. in Dinakarrao Ganpatrao v. Narayan Vishwanath A.I.R. 1922 Bom. 84 (at pp. 213 to 215 of 47 Bom). In the case of Maharaj Bahadur Singh v. Balchand Choudhury A.I.R. 1922 P.C. 165, in which case the facts were that the proprietor of a hill had in 1872 agreed with a Society of Jains, that if the society would require a site thereon for the erection of a temple, he and his heirs would grant a site free of cost, and had thereafter alienated the hill in favour of a third party, and the society then sued the alienees for possession alleging that they had given notice to the proprietor requiring the site and further alleging that they had taken possession but had been dispossessed, their Lordships of the Judicial Committee observed as follows:
For the appellants '(the Society) to succeed it is essential to show that this agreement created in them some present estate or interest which would prevent the Raja from having made the grant. That could only be effected by reading the compromise as creating in the Jains Society a grant in perpetuity of the Parasnath Hill. This cannot, however, be supported, because subject to the provisions of the agreement, the Raja is left in control of the hill, and the Raja has power from time to time to dispose of such portions as he thinks fit, and it would be impossible to challenge the right of any person who took under him unless it could be shown that the covenant upon which the appellants rely was a covenant which was in the Cireumstances enforceable, not merely against the Raja but against his assignees. Such a covenant as this does not, and cannot run with the land, and could not be so enforced. Further, if the case be regarded in another light namely an agreemeut to grant in future whatever land might be selected as a site for a temple as the only interest created would be one to take effect by entry at a later date, and as this date is uncertain the provision is obviously bad as offending the rule against perpetuities, for the interest would not then vest in presenti, but would vest at the expiration of an indefinite time which might extend beyond the expiration of the proper period.
8. This pronouncement is sufficient authority for the proposition that a covenant for pre-emption, prior to the Transfer of Property Act, at any rate, was within the mischief of the rule against perpetuities. It was said by Bhasyham Ay-yangar, J., in the case of Ramasami Pattar v. Ghinnan Asari  24 Mad. 449, though the question did not directly arise or at any rate was not argued in that case, that though under Section 54, T.P. Act, a contract for the sale of immovable property does not of itself create any interest or charge on such property, and in Section 17 Clause (b), Eegistration Act, the same yiew is adopted and Section 14, T.P. Act formulating the English doctrine of perpetuities with some modifications is not applicable to a covenant for pre-emption, yet Clause (d), Section 2, T. P. Act, expressly provides that nothing in Ch. 2 of the Act, in which Section 14 occurs, shall be deemed to affect any rule of Hindu law. The learned Judge pointed out that in the matter of making a gift inter vivos or by will, the power of a Hindu is, under the Hindu law, more restricted than under the English doctrine of perpetuities and the corresponding provision enacted in Section 14, T.P. Act. He pointed out that in the decision of the Judicial Committee in the case of Chundi Churn Barua v. Sidheswari Debi  16 Cal. 71 the doctrine that no Hindu can either by act inter vivos or by will make a gift in favour of a person not in existence at the time when the gift is made or at the death of the testator as the case may be. Jotindra Mohun Tagore v. Ganendro Mohun Tagore  9 B.L.R. 377 was held applicable-to transferees for consideration. He was doubtful whether the English doctrine of perpetuities and Section 14, T.P., Act, which applied only to transfer of interest in land would apply to contracts for sale of land in India and ultimately observed:
But it must be admitted that there ia really 310 substantial difference between English and Indian law in respect of contract of sale of immovable property and it does seem reasonable and in accordance with the principles of general jurisprudence that there should be some limit of time boyond which the performance of contracts for the transfer of property by way of sale, pre-emption or otherwise must not be allowed to be held in suspense or postponed. Although Section 14 deals only with transfers, the provisions of that section could in some cases be practically defeated if covenants are not held to be void for remoteness on the ground that by themselves they create no interest in property. But the result of extending the rule against perpetuities to covenants may possibly be that, in the case of Hindu, a covenant which would not necessarily vest the future interest, contemplated to result from the covenant, in a person who is in existence at the time of the covenant, would be void. I am glad to be able to refrain from expressing any opinion on this difficult and important question of the application and the limits of the application of the doctrine of perpetuities to covenants, as it has not been really argued in the case and as in fact it is unnecessary to consider and decide it in this case.
9. In India, on the one hand the substantive law of property namely the Transfer of Property Act 4 of 1882 does not recognize equitable interest in land, and the rule of English law that a con-tract for sale of real property makes the purchaser the owner in equity of the estate has no application to those parts of India where the Transfer of Property Act is in force: see Maung Shwe Goh v. Maung Inn A.I.R. 1916 P.C. 139 while on the other hand Section 27(b), Specific Relief Act, recognizes that contracts with regard to land can be specifically enforced against third parties in certain cases, and Section 91, Trust Act, also lays down that a transferee taking with notice of a prior contract in favour of another must hold the right obtained under the transfer as a trustee for the previous promisee. The result is that one who has obtained a promise for the conveyance of land as a substantial interest in it, and contracts of this description stand in a class by themselves. A series of judicial decisions have now settled the view that contracts of this description, if they purport to do indirectly what the law forbids to be done directly, are void, and the principles applicable to them are the same in India as in England.
10. In England what may now be considered to be the leading case on the point is that of L. & S.W. Ry. v. Gomm  20 Ch. D. 562. In that case the facts were these: The plaintiff company in 1865 conveyed a land to Powell in fee, and Powell covenanted with the company that he, his heirs and assignees, would at any time on receipt of 100 reconvey the land to the company. In 1879 Gomm purchased the land from Powell with notice of the covenant; in 1880 the company demanded a conveyance and, upon Gomm's refusal, sued for specific performance. Kay, J., took the view that the rule against perpetuities was a branch not of the law of contract but of property and held that
a contract not creating any estate or interest properly so called in property, at law or equity, is not obnoxious to the rule;
and as the contract in that case did not run with the land at law and a purchaser without notice would not be bound by it, he held that it was not within the rule against perpetuities at all and made a decree for specific performance. Gomm thereupon appealed. The Court of appeal (Sir George Jessel, M.E. and Sir James Hannen and Sir 'Nathaniel Lindley, L. JJ., all of them dealing with the point) reversed the decree holding that the option to purchase gave an equitable interest which was within the rule against perpetuities. The authority of this decision is supreme at the present moment and it is unnecessary to deal with the subsequent decisions which have explained or followed this principle. Of these may be mentioned, Trevelyan v. Trevelyan  53 L.T. 853, Woodall v. Clifton  2 Ch. 257 (26l), Worthington Corporation v. Heather  2 Ch. 532, Edwards v. Edwards  A. C. 275. Another principle that should be borne in mind is that in construing a covenant from the point of view of the doctrine of perpetuities or to test it on the ground of remoteness it is the invariable practice of the English Courts to pay regard to all possible contingencies and not to actual events only: Gungannon v. Smith  12 Clause & F. 546 and Jee v. Audley  1 Cox. 324 and this practice has been followed in Indian Courts, e.g., Srimati Bramamayi Dasi v. Jages Chandra Dutt  8 B.L.R. 400 at 407; Soudaminey v. Jogesh Chunder Dutt  2 Cal. 262 at p. 268 and Nabin Chandra v. Rajani Chandra A.I.R. 1921 Cal. 162. As Bacon, V.C, put it in the case of Trevelyan v. Trevelyan  53 L.T. 853, in respect of a covenant which provided that certain land should be restored on terms mentioned, at any time during the continuance of the settlement:
Why is not the settlement to continue? Who can prescribe for mo, or help me to guess the time at which the settlement will come to an end? It is said that if there wore a tenant in tail he might have barred the continuance of the settlement. No such thing could happen. It was not necessary that it should happen.... This is not a lawful covenant: It is a covenant tending to a perpetuity which the law does not allow, and, which, therefore, cannot be enforced.
11. Indeed in the case of reciprocal promises one forming the consideration for the other, it is impossible to separate the different parts of a promise and treat one part of a promise on the one hand as forming the consideration for the whole or a part of the promise on the other.
12. Now, contracts of the present nature may be of various kinds according as the promise is made by one person in favour of another, or by one person for himself and his heirs etc., in favour of another or in favour of another and his heirs, etc., and there may be also further varieties caused by the promise on the side being made by one person or by one person for himself and his heirs, and so on. There is nothing inherently wrong or objectionable in a contract between persons tying up property for a limited time for a definite purpose or for the sake of mutual convenience. Phear, J., observed in the case of Radhanath v. Tarruck Nath  3 C.W.N. 126:
I need hardly say, however, that it is not competent for the owners of property in this country by any arrangement made in their own discretion to alter the ordinary incidents of the property which they possess, for instance in this particular case, to say that the joint property shall remain the joint property of the joint family in perpetuity, but shall not possess the incident which the law of the country attaches to property in such condition, namely, that every independent parcener is entitled at any time to have his share divided off front the rest. No doubt any one member of the family, and therefore all might for sufficient consideration, bind themselvesto forego their rights for a specified time end definite purpose by a contract which could be enforced against them personally.
13. A plain and simple case in which A and B agree between themselves that if either of them is desirous of selling and the other is willing to buy at a proper price or fixed price, sale to a third party shall be invalid, hardly presents any difficulty. To a personal covenant of this nature, the doctrine of perpetuities or of remoteness has no application. Such, was the case of Kalimuddin Bhuya v. Beazuddin Ahmed  10 C.L.J. 626. The agreement-there was in these terms:
Any of the parties desirous of selling the lands allotted to his share shall sell the same, to the other party willing to buy the same at the proper sale price. Sale to any body else, shall be invalid. But if the parties do not purchase at the proper sale price, the other party shall be entitled to sell to others. Let it be known that the value of the property is. or will be Rs. 600.
14. In breach of this covenant one of the-parties had sold to a third party and the other party then sued to enforce his right of pre-emption. It was held that it could not be argued that the covenant was invalid against the covenantor himself. So also an agreement by a mortgagor to give the mortgagee a preference of pre-emption in case of sale was upheld and given effect to against the covenantor, it being held, there was nothing in the covenant which was contrary to public policy and the argument that the covenant offended against the rule against perpetuities was ignored: Haris Paik v. Jahruddi Gazi  2 C.W.N. 575. The same view was taken of a covenant giving a mortgagee right of preemption in the ease of Bimal Jati v. Biranja Kuar  22 All. 238, it being held on anthority of Biggs v. Hoddinot  2 Ch. 307, Santley v. Wilde  2 Ch. 474 and Or by v. Trigg  9 Mod. 2 that it is prima facie a good covenant and enforceable by the mortgagee, there being nothing in the nature of vagueness, uncertainty or unreasonableness attaching to it.
15. On the other hand, a covenant binding one party and his successor to sell to another and his successors is a covenant for pre-emption unlimited in point of time and has been held not to be enforceable, in numerous cases in the different Courts in this country. One of the earliest cases was that of Sreemati Tripoord Soonduree v. Juggernath Dutt  24 W.R. 321. In that case four brothers on making a partition of their joint property, covenanted with each other that if any one of them, or their heirs, had to sell his share, he should offer to sell the same to one of the cosharers. One of the brothers having died, his widow sold the share which she had inherited without such an offer to the surviving brothers who thereupon sued her and the vendee upon payment of what they alleged to be the value of the property. Markby, J., (Morris, J., concurring) said:
We are also desirous not to be understood as in any way assenting to the proposition that this covenant was binding upon the widow to whom a share in the property had descended from the original covenantor. She was not a party to the covenant, and if we hold that she was bound by it, we must then hold that every person to whom this land may pass by inheritance will also be bound by it. But this would be to create a perpetual covenant as to the disposition of land for which we have not been shown any precedent. A similar covenant was before the Master of the Bolls in Slacker v. Dean  16 Beav. 161 and he doubted whether it could be enforced after the death of the owner who entered into it. We also consider it extremely doubtful how far such a covenant can be enforced.
16. It will be observed that the passage aforesaid is no authority on the question whether as between the original covenantors the agreement would be enforceable. In Stocker v. Dean  16 Beav. 161 the facts were as follows : Deborah Setchfield was the owner of a shop and premises and of an adjoining cottage and premises called the Globe, both of which were vested in Fisher as trustee for her. By one agreement Fisher with the consent of Deborah Setchfield agreed to sell the shop and premises to plaintiff Stocker for 1,000 and it was further agreed that in case Deborah Setchfield should wish to sell the adjoining messuage (the Globe) she would request Fisher (who thereby promised to accede to such request) to sur-render or convey the adjoining messuage-(the Globe) to the plaintiff Stocker and his heirs or appointees for 200. By a contemporaneous agreement of the same date and made between Fisher and Deborah Setchfield on the one part and the plaintiff on the other part it was agreed that if the Globe be not surrendered to the plaintiff before a certain date, the same should be surrendered and conveyed to Deborah Setchfield and that she should enter into a covenant, at the expense of the plaintiff and Deborah Setchfield for herself, her heirs and assigns at all times thereafter to give to the plaintiff, his heirs and assigns, the-right of pre-emption of the Globe with the appurtenances, at the price of 200. The purchase of the shop, etc.. was completed, and thereafter the Globe was conveyed to Deborah Setchfield. She died leaving her trustee to sell the Globe. The Globe was put up to auction and the plaintiff in ignorance of his rights bid for the property up to 360, but it was ultimately bought in for 450. The plaintiff then sued for specific performance insisting that as at the time of her death Deborah Setchfield was desirous of selling the Globe his right of pre-emption bad arisen. The Master of the Rolls construed the first agreement as meaning that it was a right of preemption to be exercised during the life of Deborah Setchfield only, because it was manifest that the parties anticipated that something was to be done by Deborah Setchfield personally when the contract was to be carried into effect, and this limited the right to the case of her wishing to sell in her lifetime. Refer-ring to the second agreement he said:
The other agreement is this. It is at all time thereafter to give the plaintiff, his trustees and assigns the right of pre-emption. It has I think been properly argued, that this is in addition to the first contract or a distinct agreement independent of and superseding it. I think I cannot treat it as superseding the former contract. If I could treat it as a distinct and separate contract, I should require much more argument to convince me that a contract which gives a right of preemption ' at all times ' hereafter is one which could be enforced after the death of the owner of the property....On the whole I am of opinion that the contract was to be enforced in the life of Deborah Setchfield, in case she should, during that period, wish to sell the property.
17. Referring to this case Sundara Ayyar, J., said with great nicety in the case of Kolathu Ayyar v. Ranga Vadhyar  38 Mad. 114:
An unconditional contract to sell would no doubt ordinarily be enforceable against the heirs of the covenantor as if he had said : 'I and my heirs shall convey ;' but the question is can an agreement in the words, ' I promise to convoy to you if I sell the land ' be held to bind the heirs as if the promisor said, 'I promise that I or my heirs shall convey to you if I or they sell'? In other words, is an agreement to convey enforceable when the option to sell is exercised by the heirs, when the document says : ' If I sell ?' It seems to us that there is much reason in the view that such a contract is not enforceable against the heirs.
18. Whatever that may be, Stocker v. Dean  16 Beav. 161 can hardly be read as an authority for the view that an agreement which as a whole infringes the rule against perpetuities is enforceable as good as against the covenantor himself, and in my opinion there is no justification for regarding it as an authority which may be taken as indirectly supporting such a view.
19. That a covenant of the description such as we are concerned with in the case before us by which A and B respectively for themselves and their heirs for all times agree to a right of pre-emption for each other and their heirs is bad as offending against the rule against perpetuities and on the ground of remoteness requires no argument. It is a covenant which amounts to an agreement to convey immovable property upon the happening of an event which might occur at a more remote period than the live? in being and eighteen years afterwards.
20. Instances in which the Courts have refused to enforce such or similar covenants when they were sought to be enforced by or against the successors in interest of the covenantors themselves are common, but those decisions do not really help us in deciding the present case in which the offending covenant is sought to be enforced as between the contracting parties themselves. Amongst such instances may be cited : Nobin Chandra v. Nawab Ali Sarkar  5 C.W.N.343 in which case in a conveyance executed by the plaintiffs in favour of the defendants' father it was provided that if the latter sold the property subsequently, he would be bound to give preference 'to the plaintiff and the covenant was sought to be enforced against the defendants who were the sons of one of the contracting parties : Rash Behari Ganguli v. Shatharanjan Samaddar  64 I.C. 1001 in which the covenant was between the plaintiff and the father of the defendants who were members of a family and it was to the effect that if any member of the family had to sell any portiou of the family property, he must offer it for sale in the first instance to the 'other members of the family and it was stipulated that the agreement would be binding between the parties and their heirs : Nabin Chandra Sarma v. Rajani Chandra Chakravarti A.I.R. 1921 Cal. 162 in which a Hiudu transferred certain immovable property to his son-in-law, reserving a condition that if the transferee or his successor found it necessary to sell the property, he must sell it to the vendor or his nephew or his heirs at a specified price, and the son of the son-in-law having sold the property to strangers, the nephew sued for enforcement of his right of pre-emption ; Kolathu Ayyar v. Ranga Vadhyar  38 Mad. 114 in which a covenant in respect of a right of pre-emption as between two persons was sought to be enforced against the heirs of one of them ; Dinkarrao Ganpatrao v. Narayan Vishwanath A.I.R. 1922 Bom. 84 in which case the covenant in the sale-deed executed by a vendor was in these words:
In ease you or your heirs have to sell the the said plot, the same is to be sold back to me for the above mentioned value. It is not to be sold to any other person. In case you are informed in writing that I or my heirs or vahivatdars or donees from them are not going to purchase it, then only you can sell to any other person if you like. But I do not give right to the purchaser from me. And similarly I do not give this right to purchaser from any of my heirs or vahivatdars or from any donee from them. When you want to sell the building that you are going to build on the same plot, you or your heirs or your vahivatdars are to accept from me or my heirs or vahivatdars or donees the price of that building that may be settled amicably between ourselves or through Panch. The said land is sold to you on the condition that I am to pay as the price of the land only as such amount as is taken from you now. This sale-deed is agreed to by our heirs, representatives, etc.
21. The suit in this case was between 'the heirs of the vendor and the heirs of the vendee.
22. The question with which we are really concerned in the present appeal is whether an agreement of this nature is enforceable as between the contracting parties. Giving the matter all the considerations that I possibly can, I think I must answer the question in the negative, because the covenant itself being obnoxious to the rule against perpetuities, it is one that the law considers as unlawful and it is impossible to hold that it is capable of being enforced even as between the contracting parties. As pointed out by Bhashyam Ayyangar, J., in Ramasami Pattar v. Ghinnan Asari  24 Mad. 449:
the decision in London and South Western Railway Co. v. Gomm.  20 Ch. D. 562 does not proceed on the ground that the covenant cannot be enforced against the legal representative or assignee of the covenantor, but on the ground that it was void for remoteness and, therefore not binding on the covenantor himself.
23. South Eastern Railway v. Associated Portland Cement .  1 Ch. 12 merely decided that if a man promises that he and his heirs will convey, the promise may be enforced against himself, that is to say that the promise may be treated as divisible so as to make it enforceable against the heirs. The case is no authority for the proposition that the rule against perpetuities may be got over by ignoring a part of each of the reciprocal promises and making a new contract for the parties which would not be obnoxious to the rule against perpetuities. That a covenant which is affected by the vice of remoteness is void and ineffectual even as between the immediate parties thereto has been held in this Court in the case of Anath Nath Meitra v. Keshab Chandra  14 C.W.N. 601.
24. For the foregoing reasons I am of opinion that the appellant's main contentention must succeed.
25. In this view it is not necessary to deal in detail with the other arguments that have been advanced on behalf of the appellant which are to the effect first that the plaintiff was not entitled to a decree as he did not deposit the price of the property before instituting the suit as she should have done in accordance with the terms of the agreement; 2nd that the sale by defendant 2 in favour of defendant 1 having been found to be collusive should be regarded as no sale at all and so the plaintiff was not entitled to a decree, there having been really no cause of action for his suit: vide Parsashth Nath Tewari v. Dhanav Ojha  32 Cal. 988 and 3rd that the defendant was entitled to the amount of interest at the rate of 4 per cent per annum on the price between the date of the sale and the institution of the suit. In my opinion there is no substance in the first and second contentions as the omission to make the deposit could not deprive the right which the plaintiff may have under the contract, and the finding as regards collusion does not amount to a finding that the sale was not operative as between the parties. As regards the contention, I am of opinion that it is well founded.
26. In the view that I have expressed as regards the main contention in the appeal, the appeal succeeds. The result is that the decrees of the Courts below being set aside in so far as they are against defendant 2, the suit as against him is dismissed with costs in all the Courts.
S. A. No. 624 0/1926.
27. In view of the result of the other appeal this appeal which has been preferred by the plaintiff for a decree for recovery of possession must fail. It is accordingly dismissed but without costs.