Holding

The consent decree granting pre‑emption to the claimant is void as the appellant, a necessary party with notice, was not impleaded and the claimant had no valid pre‑emption right under the Punjab Pre‑emption Act.

Summary

Lachhman Dass, a tenant who had purchased a suit property from Jagat Ram and his wife, challenged a consent decree that granted a pre‑emption right to the daughter of the original owner, who had filed a suit for pre‑emption without impleading Dass. The Supreme Court held that the decree was void because Dass, who had notice of the sale and was in possession, was a necessary party and was denied a hearing. The Court also found that the claimant had no valid pre‑emption right under the Punjab Pre‑emption Act, as the right based on consanguinity was unconstitutional. The decree was procured through collusion and suppression of material facts, constituting fraud on the Court. Consequently, the consent decree was set aside and the appeal allowed.

Issues considered

The consent decree granting pre‑emption to the claimant is binding on a party who was not impleaded.
Whether the claimant, a daughter of the original owner, has a valid right of pre‑emption under the Punjab Pre‑emption Act.
Whether the lack of a necessary party and collusion renders the consent decree void ab initio.
Whether the appellant's right to property under Article 300‑A and the Transfer of Property Act requires compliance with procedural safeguards.

Legislation cited

Constitution of Indias. Article 300-A
Punjab Pre-emption Act, 1913s. 10, s. 19, s. 21, s. 4, s. 5, s. 6
Transfer of Property Act, 1882s. 3

Subjects

right of pre-emptionconsent decreenecessary partyfraud on courtconstitutional right to propertyArticle 300-ATransfer of Property ActPunjab Pre-emption Actcollusionmutationdeed of gift

Judgment

! I
y

A LACHHMAN DASS
v. v..
JAGA T RAM AND ORS.

FEBRUARY 20, 2007
....
B [S.B. SINHA AND MARKANDEY KA TJU, JJ.]

Pwijab Pre-emption Act, 1913:
1· -
Right of pre-emption-Owner of suit property transferring it to
c respondent nos.2 and 3-They transferred the same in favour oftenant on the
said property-Daughter of original owner claiming right of pre-emption
impleading only respondent nos. 1 and 2-Passing of consent decree by
Court-Respondent nos. I and 2 executing a deed of gift in favour of their
children-Grant of mutation in their favour by authorities concerned-
D Challenged by appellant/present owner-Held: Fact regarding purchase of
suit premises by appellant known to daughter of the original owner-Despite
notice, he was not impleaded as a party-His right to own and possess the
~
suit land could not have been taken away without giving him an opportunity
of hearing in a matter of this nature-Claimant also could not have claimed
a right of pre-emption on the bwis of consanguinity as appellant/present
E owner was not a co-sharer of her father-Respondent nos. 1 and 2 by
suppressing material facts in collusion with original owner and claimant
committed a fraud on Court in obtaining the consent decree-Had an
opportunity of hearing been given to appellant/present owner, he could have
shown that the claimant did not have any such right-Hence, impugned
F judgment cannot be sustained-Thus set aside-Transfer of Property Act, -~
1882-s.3 Constitution of lndia, 1950-Article 300-A.

Respondent no.9 was owner of the suit property. Appellant (plaintiff) was
a tenant in respect thereof. The original owner transferred the suit land in
favour of respondent no.I and his wife, respondent no.2. They, in turn, by way
G of a registered sale deed transferred their right and interest therein in favour
of the appellant-tenant on the suit land. Respondent no.8, daughter of the
original owner filed a suit for pre-emption impleading only respondent nos. I
and 2 therein as parties. A compromise was entered into by and between the.
parties in the said proceedings. A consent decree was passed on the basis
" --
H 980
~·

.. LACHHMAN DASS v. JAGAT RAM 981
thereof by the civil Court. Allegedly, she was put in possession of the said A
·~ land in purported execution of the decree of pre-emption. In the meantime, a
deed of gift was executed by Respondent no.I in favour of Respondent nos.3 to
7, his sons and daughters. They had applied for mutation of their names, which
'.
was granted in their favour by the authorities concerned. Assailing the said
order of mutation as also the consent decree, a suit was filed by the appellant.
The suit was dismissed by the Civil Court. The first appeal as also the second B
appeal preferred thereagainst have also been dismissed by the first appellate
Court and the High Court. Hence the present appeal.
~. -f
Appellant contended that as he was not impleaded as a party in the suit
for pre-emption, the decree passed therein was not binding on him; that
collusion on the part of Respondent nos.I, 2, 9 and his daughter, respondent
c
no.8, is evident from the fact that immediately after passing of the decree in
the said suit, a deed of gift was executed by Respondent nos. 1 and 2 in favour
of their children. Therefore, the consent decree should have been set aside.

Allowing the appeal, the Court D

\.
HELD:l.l. Respondent no. 9 could not have claimed a right of pre-
emption as a daughter of Respondent no. 8, the original owner. The fact, that
the appellant-tenant had purchased the suit premises from respondent nos. 1
and 2, was known to her. Appellant was in possession of the land. The execution
of a registered deed of sale shall also be treated as a notice in terms of Section E
3 of the Transfer of Property Act, 1882. Despite the notice, the appellant was
not impleaded as a party. His right, therefore, to own and possess the suit
land could not have been taken away without giving him an opportunity of
hearing in a matter of this nature. (Paras 13, 14 and 15) (986-D-E; 987-E]

~ 1.2. To hold property is a constitutional right in terms of Article 300- F
A of the Constitution oflndia. It is also a human right Right to hold property,
therefore, cannot be taken away except in accordance with the provisions of a
statute. If a superior right to hold a property is claimed, the procedures
therefor must be complied with. The conditions precedent therefor must be
satisfied. Even otherwise, the right of pre-emption is a very weak right, G
~
although it is a statutory right. The Court, while granting a relief in favour
of a preemptor, must bear it in mind about the character of the right, vis-a-
~
vis, the constitutional and human right of the owner thereof. [Para 15)
[987-~F]

Alam Prakash v. State ofHaryana & Ors., [1986] 2 SCC 249, followed. H
r-·
982 SUPREME COURT REPORTS [2007) 2 S.C.R.

A 1.3. The manner in which the purported consent decree was entered >,

into by and between Respondent no.9 on the other hand and respondent nos. I ~-

and 2 is tell tale. Respondent nos.I and 2 having transferred their right and
interest, could not have conveyed any right in the property of respondent no.9.
/~
No such right existed in them. (Para 16] [987-G]

B ' In the consent decree no finding was arrived at as to on what basis
1.4.
the right of Respondent no.9 was considered to be a superior right of pre-
emption. He, out of the total consideration amount of Rs.30,000/-, deposited
only I/5th thereof, i.e., Rs.6,000/- in the Court. Respondent nos.I and 2 neither
said to have claimed the said amount nor the rest of the amount of Rs.24,000/ t -

c - could have been paid in their favour by him. [Para 17] (987-H; 988-A]

1.5. If the Respondent nos. I and 2 only could not have accepted the said
amount as a valid consideration of passing of a decree of pre-emption in favour
of the Respondent no.9; the purported consent decree was void ab initio.
Moreover, in the facts and circumstances of this case, the appellant was a
D necessary party therein. No decree, therefore, could have been passed in his
absence. The parties to the said suit and, in particular, Respondent nos. 1 and
2, therefore, by suppression of material facts committed a fraud on the Court
in obtaining the said decree. It may be true that collusion between Respondent
no.9 and Respondent nos.I and 2 was required to be specifically pleaded, but
in this case collusion between them is apparent on the face of the records.
E The circumstances obtaining in the case lead to only one conclusion that the
parties were in collusion with each other for the purpose of obtaining the
consent decree. (Para 18] (988-B-D]

1.6. Appellant was not a co-sharer of claimant's father. She could not
have claimed a right of pre-emption on the basis of consanguinity. Had,
F therefore, an opportunity of hearing been given, the plaintiff-appellant could >
'
have shown that she did not have any such right. [Para 22] [989-B]

Shyam Sunder & Ors. v. Ram Kumar & Anr., (2001] 8 SCC 24, referred
to.
G
CIVIL APPEALLATE JURISDICTION: Civil Appeal No. 5947 of2002.

From the final Judgment and Order dated 30.5.2001 of the High Court
ofHimahal Pradesh at Shimla in R.S.A. No. 38/1998.

Manoj Swarup, Ajay Gupta and Atulesh Kumar Anant for the Appellant.
H
----4·

LACHHMAN DASS v. JAGAT RAM [S.B. SINHA, J.] 983
Rekha Palli, Anant Vijay Palli and Shubhra Singh for the Respondents. A
~
The Judment of the Court was delivered by
~

S.B. SINHA, J. I. Interpretation of the provisions of the Punjab Pre-
emption Act, 1913 ('the Act', for short) is in question in this appeal which
arises out of a judgment and order dated 30th May, 200 I passed by the High B
Court ofHimachal Pradesh at Shimla in Regular Second Appeal No.38of1998
dismissing the appeal arising from a judgment and decree dated 15.1I.I997
J· ....
passed by the Additional District Judge (I), Una in Civil Appeal No.26/92/
91affirming a judgment and decree dated 7.10.1991 passed by the Sub-Judge,
1st Class, Amb in Civil Suit No.211/85 RBT No.635/89 dismissing the Civil Suit
filed by the appellant herein.
c

- 2.The fact of the matter is under :

Respondent No.9-Desh Raj was owner of the suit property. Appellant
(plaintiff) was a tenant in respect thereof. By reason of a deed of sale dated
D
27.4.1982, Desh Raj transferred the suit land in favour of Jagat Ram (Respondent
No.I-Defendant No.2) and Gurbaksh Kaur, wife of Jagat Ram (Respondent
No.2-Defendant No.2). Jagat Ram and Gurbaksh Kaur, in turn, by a registered
deed of sale dated 11.10.1982 transf..:rred their right and interest therein in
favour of the appellant. Respondent No.8-Chander Bala is the daughter of
Respondent No.9-Desh Raj. Claiming a right of pre-emption in terms of the E
Act, she filed a suit for pre-emption impleading only the respondent Nos. I
and 2 therein. A compromise was entered into by and between the parties in
the said proceedings. A consent decree was passed on the basis thereof by
the learned Subordinate Judge, stating :

"The case was taken up on 13.6.1983 on which date both the parties, F
"' conceded the rights of each other. The Defendant conceded that the
plaintiff has a superior right of preemption. The Plaintiff admitted that
the suit land was actually sold for Rs.30,000/- by the vendor the
Defendant. The counsel for the Plaintiff paid Rs.24,000/- to ·the

.. .;-
Defendant in the court and the remaining Rs.6,000/- has already been
deposited in the court as 1/5th of the preemption amount."
G

3. Allegedly, she was put in possession of the said land in purported
execution of the said decree of pre-emption. A deed of gift was executed by
Defendant-Respondent No. I on 24.1.1984 in favour of Respondent Nos.3 to
7 herein, who are sons and daughters of Respondent Nos. I and 2. They
H
y
984 SUPREME COURT REPORTS (2007] 2 S.C.R.

A applied for mutation of their names, which was granted in their favour by an
order dated 28.1.1985. Assailing the said order of mutation as also the said
consent decree, a suit was filed by the appellant herein. The said suit was
dismissed. As indicated hereinbefore, the first appeal as also the second
appeal preferred thereagainst have also been dismissed.

B 4. )'he original Defendant Nos. 3 to 7 only are before us.

5. Mr. Manoj Swarup, learned counsel appearing on behalf of the
appellant would submit that as the appellant was not impleaded as a party
in the said suit, the decree passed therein was not binding on him. In any
event, the learned counsel would contend that collusion on the part of
C Defendant Nos. I and 2 and Defendant Nos.8 and 9 is evident from the fact
that immediately after passing of the decree in the said suit, a deed of gift
was executed, the consent decree should have been set aside.
'
I
.
6. The Punjab PrP,-emption Act confers a special right of pre-emption on
--
D the persons specified therein. Right of pre-emption has been defined in
Section 4 of the Act to mean the right of a person to acquire agricultural land
or village immovable property or urban immovable property in preference to
other persons, and it arises in respect of such land only in the case of sales
and in respect of such property only in the case of sales or of fore-closures
of the. right to redeem such property.
E
7. Section 5 of the Act provides that there would be no right of pre-
emption in certain cases.

8. Section 6 of the Act states that a right of pre-emption exists in respect
of village immovable property and in respect of agricultural land, but every
F such right shall be subject to all the provisions and limitations contained
therein.

9. Section I 0 of the Act prohibits a party to alienate any property
claiming pre-emption.

G I0. Section 19 of the Act occurring in Chapter IV thereof provides for
the procedure to claim pre-emption in the following terms :

"19. Notice to pre-emptors.-When 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
H
'-1
LACHHMAN DASS v. JAGAT RAM [S.B. SINHA, J.] 985
property or urban immovable property, in respect of which any persons A
,; have a right of pre-emption, he may give notice to all such persons
of the price at which he is willing to sell such land or property or of
the amount due in respect of the mortgage, as the case may be.

Such notice shall be given through any Court within the local
limits of whose jurisdiction such land or property or any part thereof B
is situate, and shall be deemed sufficiently given if it be stuck up on
the chaupal or other public place of the village, town or place in which
the land or property is situate."
, ....
Section 21 provides for suits for pre-emption.
c
11. The constitutionality of the provisions of the said Act came up for
.
-";,
consideration before a Constitution Bench of this Court in Atam Prakash v.
State ofHaryana & Ors. [1986] 2 SCC 249, wherein Chinnappa Reddy, J. held:

"In the first case, (Bhau Ram case), the right of pre-emption given
to co-sharers was held to be a reasonable restriction on the right to D
hold, acquire or dispose of property conferred by Article 19(l)(f) of
t the Constitution. What has been said there to uphold he right of pre-
emption granted to a co-sharer as a reasonable restriction on the right
to property applies with the same force to justify the classification of
co-sharers as a class by.themselves for the purpose of vesting in them
E
the right of pre-emption. We do not think that it is necessary to
restate what has been said in that case. We endorse the views
expressed therein. The right of pre-emption vested in a tenant can
also be easily sustained. There can be no denying that the movement
of all land reform legislations has been towards enabling the tiller of
\ the soil to obtain proprietory right in the soil so that he may not be F
disturbed from possession of the land and deprived of his livelihood
by a superior proprietor. The right of pre-emption in favour of a tenant
granted by the Act is only another instance of a legislation aimed at
protecting the tenant. There can be no doubt that tenants form a
distinct class by themselves and the right of pre-emption granted in
their favour is reasonable and in the public interest. We are, therefore,
G
J
of the view that clause 'fourthly' of Section 15(1)(a), clauses 'fourthly
and fifthly' of Section 15(1)(b) and clause 'fourthly' of Section 15(I)(c)
"' are valid and do not infringe either Article 14 or 15 of the Constitution."

- 12. While upholding the validity of the provisions of the special Act,
H
986 SUPREME COURT REPORTS [2007] 2 S. C.R.

A this Court struck down the right of pre-emption based on consanguinity,
stating : \
"We are thus unable to find any justification for the classification
contained in Section 15 of the Punjab Pre-emption Act of the kinsfolk
entitled to pre-emption. The right of pre-emption based on
B consanguinity is a relic of the feudal past. It is totally inconsistent
with the constitutional scheme. It is inconsistent with modem ideas.
The reasons which justified its recognition quarter of a century ago,
namely, the preservation of the integrity of rural society, the unity of _,,,.
family life and the agnatic theory of succession are today irrelevant. '
-
The list of kinsfolk mentioned as entitled to pre-emption is intrinsically
c defective and self-contradictory. There is, therefore, no reasonable
classification and clauses 'First', 'Secondly' and 'Thirdly' of Section
15(l)(a), 'First', 'Secondly' and 'Thirdly' of Section 15(l)(b), clauses ,;

'First', 'Secondly' and 'Thirdly' of Section 15(l)(c) and the whole of
Section 15(2) are, therefore, declared ultra vires the Constitution."
D
13. Respondent No.9, thereafter, could not have claimed a right of pre-
emption as a daughter of respondent No.8.
+
14. The fact that Appellant has purchased the suit premises was known
to her. Appellant was in possession of the land. The execution of a registered
E deed of .sale shall also be treated as a notice in terms of Section 3 of the
Transfer of Property Act, 1882, which is in the following terms :

" ......... "a person is said to have notice" of a fact when he actually
knows that fact, or when, but for wilful abstention from an enquiry or
search which he ought to have made, or gross negligence, he would
F have known it.

Explanaion 1.-Where any transaction relating to immovable
.property is required by law to be and has been effected by a registered
)

-
instrument, any person acquiring such property or any part of, or
share or interest in, such property shall be deemed to have notice of
G such instrument as from the date of registration or, where the property
is not all situated in one sub-district, or where the registered instrument ...
has been registered under sub-section (2) of section 30 of the Indian 'i
Registration Act, 1908 (16 of 1908), from the earliest date on which

H
any memorandum of such registered instrument has been filed by any
Sub-Registrar within whose sub-district any part of the property which
-
LACH~MAN DASS v. JAGAT RAM [S.B. SINHA, J.] 987
is being acquired, or of the property wherein a share or interest is A
being acquired, is situated:

Provided that

(I) the instrument has been registered and its registration
completed in the manner prescribed by the Indian Registration Act, B
1908 (16 of 1908), and the rules made thereunder,

(2) the instrument or memorandum has been duly entered or filed,
as the case may be, in books kept under Section 51 of that Act, and

(3) the particulars regarding the.transaction to which the instrument
relates have been correctly entered in the indexes kept under section c
55 of that Act.

Explanation II. Any person acquiring any immovable property or
any share or ipterest in any such property shall be deemed to have
notice of the title, if any, of any person who is for the time being in
actual possession thereof." D

-
15. Despite such notice, the appellant was not impleaded as a party. His
right, therefore, to own and possess the suit land could not have been taken
away without giving hir:i an opportunity of hearing in a matter of this nature.
To hold property is a constitutional right in terms of Article 300-A of the
Constitution oflndia. It is also a human right. Right to hold property, therefore,
E
cannot be taken away except in accordance with the provisions of a statute.
If a superior right to hold a property is claimed, the procedures therefor must
be complied with. The conditions precedent therefor must be satisfied. Even
otherwise, the right of pre-emption is a very weak right, although it is a
.I.. statutory right. The Court, while granting a relief in favour of a preemptor, F
must bear it in mind about the character of the right, vis-a-vis, the constitutional
and human right of the owner thereof.

16. The manner in which the purported consent decree was entered into
by and between Defendant No.9 on the other hand and Defendant Nos. I and
2 is tell tale. Defendant Nos. I and 2 having transferred their right and interest, G
could not have conveyed any right in the property of Defendant No.9. No
~ such right existed in them.
~

17. In the consent decree no finding was arrived at as to on what basis
the right of Defendant-Respondent No.9 was considered to be a superior right
H
v
I

988 SUPREME COURT REPORTS (2007] 2 S.C.R.

A of pre•emption. Defendant No.9 out of the total consideration amount of
Rs.30,000/-, deposited only I/5th thereof, i.e., Rs.6,000/- in the Court.
Respondent Nos. I and 2 neither said to have claimed the said amount nor the
rest of the amount of Rs.24,000/- could have been paid in their favour by
Defendant No.9.

B 18. If the Defendant Nos. I and 2 only could not have accepted the said
amount as a valid consideration of passing of a decree of pre-emption in
favour of the Respondent No.9; the purported consent decree, in our opinion,
was void ab initio. Moreover, in the aforementioned facts and circumstances
of this case, the appellant was a necessary party therein. No decree, therefore,
C could have been passed in his absence. The parties to the said suit and, in
particular, Defendant-Respondent Nos. I and 2, therefore, by suppression of
material facts committed a fraud on the Court in obtaining the said decree. It
may be true that collusion between Respondent No.9 and Defendant Nos.I
and 2 'was required to be specifically pleaded, but in this case collusion
between them is apparent on the face of the records. The circumstances
D obtaining in the case lead to only one conclusion that the parties were in
collusion with each other for the purpose of obtaining the said decree.

19. Mrs. Rekha Palli, learned counsel for the respondent, therefore, may
not be correct in contending that the appellant was not a necessary party. The
contention of Mrs. Palli that even if the defendants were imp leaded as party,
E he did pot have any other defence, does not find favour with us.

20. We cannot speculate in regard to the nature of defence which could
be raised in the suit. In any event in a case of this nature, where the appellant
was a necessary party, in his absence the suit could not proceed and, therefore,
F the said question does not arise for consideration in this case. ;

21. In Shyam Sunder & Ors. v. Ram Kumar & Anr. [200 I] 8 SCC 24,• this
Court opined :

· " .... The main object behind the right of pre-emption, either based on
1 custom or statutory law, is to prevent intrusion of a stranger into the
G family-holding or property. A co-sharer under the law of pre-emption
· has right to substitute himself in place of a stranger in respect of a
portion of the property purchased by him, meaning thereby that where
a co-sharer transfers his share in holding, the other co-sharer has
right to veto such transfer and thereby prevent the stranger from
H acquiring the holding in an area where the law of pre-emption prevails.
LACHHMAN DASS v. JAGAT RAM [S.B. SINHA, J.] 989

--) Such a right at present may be characterized as archaic, feudal and A
outmoded but ti.is was law for nearly two centuries, either based on
custom 6lr statutory law. It is in this background the right of pre-
emption under statutory law has been held to be mandatory and not
mere discretionary...."

22. We have noticed hereinbefore that plaintiff was not a co-sharer of B
her father. She could not have claimed a right of pre-emption on the basis of
consanguinity. Had, therefore, an opportunity of hearing been given, the
, -+- plaintiff-appellant could have shown that she did not have any such right.

23. The impugned judgment cannot be sustained. It is set aside
accordingly. The appeal is allowed. Respondents shall bear the cost of the C
appellant. Advocate's fee is assessed at Rs.5,000/-.

S.K.S.. Appeal allowed .

./

•