Is right to pre-emption a recurring right or exercisable only the first time? SC answers

Supreme Court: On the question as to whether the right of pre-emption can be enforced for an indefinite number of transactions or it is exercisable only the first time, the 3-judge bench of SK Kaul, Aniruddha Bose and Krishna Murari, JJ has held that

“… it is only exercisable for the first time when the cause of such a right arises, in a situation where the plaintiff-pre-emptor chooses to waive such right after the 1966 Act becoming operational. Section 9 of the said Act operates as a bar on his exercising such right on a subsequent transaction relating to the same immovable property.”

Origin and history of right of pre-emption

The historical perspective of the right of pre-emption shows that it owes its origination to the advent of the Mohammedan rule, based on customs, which came to be accepted in various courts largely located in the north of India. The pre-emptor has two rights. The inherent or primary right, which is the right to the offer of a thing about to be sold and the secondary or remedial right to follow the thing sold. It is a secondary right, which is simply a right of substitution in place of the original vendee. The pre-emptor is bound to show that he not only has a right as good as that of the vendee, but it is superior to that of the vendee; and that too at the time when the pre-emptor exercises his right.

“… the right is a “very weak right” and is, thus, capable of being defeated by all legitimate methods including the claim of superior or equal right.”

Recurring right or a one-time right

  • Section 21 of the Rajasthan Pre-Emption Act, 1966 stipulates that the right of pre-emption has to be exercised, in case of a sale, within one year from the date of sale and if the sale is not by a registered deed, on the purchaser taking the physical possession of any part of the property sold.
  • This period has to be as per Article 97 of the Limitation Act which states that it is one year from the date when the sale is registered.
  • The loss of right of pre-emption on transfer has been defined under Section 9 of the said Act which provides that the loss is only occasioned, when, within two months from the date of service of the notice, the price is not tendered. However, that is the loss of the right, vis-à-vis the transaction in question.

On the question whether such a right of pre-emption is a recurring right, i.e. every time the property is sold, the right would rearise, in a case the pre-empting plaintiff himself has chosen not to exercise such right over the subject immovable property when sold to another purchaser earlier, the Court held,

“… it would not be appropriate or permissible to adopt legal reasoning making such a weak right, some kind of a right in perpetuity arising to a plaintiff every time there is a subsequent transaction or sale once the plaintiff has waived his right or pre-emption over the subject immovable property.”

Holding that the loss of right mandated under Section 9 of the Act is absolute, the Court further stated that the plain reading of the said provision does not reveal that such right can re-arise to the person who waives his right of pre-emption in an earlier transaction. To do so would mean that a person, whether not having the means or for any other reason, does not exercise the right of pre-emption and yet he, even after decades, can exercise such a right.

“This would create some sort of a cloud on a title and uncertainty as a subsequent purchaser would not know, when he wants to sell the property, whether he can complete the transaction or not or whether a cosharer will jump into the scene. This is not contemplated in the 1966 Act. This is bound to have an effect on the price offered by a purchaser at that time because he would have an impression of uncertainty about the proposed transaction.”

The Court, hence, held that such a right is available once – whether to take it or leave it to a person having a right of pre-emption. If such person finds it is not worth once, it is not an open right available for all times to come to that person.

[Raghunath v. Radha Mohan,  2020 SCC OnLine SC 828, decided on 13.10.2020]

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