Assignment

SUBJECT: Transfer of property Act

TOPIC: Case Analysis (Rambaran Prasad vs Ram Mohit Hazra & Ors )

SCHOOL OF LAW

UNIVERSITY OF PETROLEUM AND ENERGY STUDIES

DEHRADUN

ASSIGNMENT

LLB (3yr) SEMESTER 4(2023-26)

Submitted To: Dr. Shikha Dimri

Submitted By: Agrrim Jain

SAP ID: 500123372

Course: LL. b 3 Year

Semester: 4th Semester

The Ram Baran Prasad v. Ram Mohit Hazra and Others 1 case decided by the Supreme Court of
India on September 6, 1966, is a landmark decision in the realm of property law, specifically
dealing with the enforceability of pre-emption conditions and their compatibility with the rule
against perpetuities. This case is about the dispute between plaintiffs, Ram Baran Prasad and
others, and defendants, Ram Mohit Hazra and another, relating to the lawful exercise of a pre-
emption right created by a partition deed. The fundamental question was whether the pre-
emption clause, which gave the plaintiffs the priority to purchase any portion of the property
being sold by the defendants, was binding on successors and assignees and whether it violated
the rule against perpetuities, thereby rendering it invalid.

The Supreme Court, affirming the judgment of the Calcutta High Court, upheld the decree in
favor of the plaintiffs. The Subordinate Judge had held the pre-emption covenant to be binding
on the defendants and successors so that the plaintiffs could enforce their pre-emptive rights in
spite of the defendants' attempts to alienate the property without offering the plaintiffs the first
option to buy. The High Court and then the Supreme Court rejected the appellants' contention
that the pre-emption clause was a personal covenant and hence non-binding on assignees. In
addition, the courts of higher jurisdiction held that the covenant was not in violation of the rule
against perpetuities, particularly in light of the provisions in the Indian Contract Act and the
Transfer of Property Act, which provided legal backing for enforceability of such provisions
against assignees and successors.

Legal Reasoning
1
1967 AIR 744, 1967 SCR (1) 293
The legal argument of the Supreme Court rested on statutory interpretation and the intent of the
parties to the initial arbitration award. The court examined Section 23(b) and Section 27(b) of the
Specific Relief Act, which authorize the assignment of contract rights unless specifically
prohibited. Moreover, Sections 37 and 40 of the Indian Contract Act played an important role in
determining that contractual obligations typically bind successors unless clearly stated otherwise.

The court underscored that the pre-emption clause was more than a personal contract, as it was
incorporated into the partition award, a legally binding instrument. The court concluded that the
word "parties" in the award extended to include successors and assignees, thus expanding the
pre-emption rights to the original contracting parties. Moreover, the court examined the Transfer
of Property Act, Sections 40 and 54 in particular, in order to ascertain that such covenants don't
necessarily amount to property interests but can certainly be enforced upon transferees who have
notice or those receiving the property for value.

In discussing the rule against perpetuities, the court distinguished between personal agreements
and those that create property interests. Because the pre-emption covenant did not create a
proprietary interest but an obligation related to ownership, it was deemed to be not objectionable
under the rule of perpetuities. The court also considered the progressive developments in Indian
property law after the Transfer of Property Act, reaffirming that the pre-emption clause does not
violate statutory prohibitions.

Impact

This landmark judgment has far-reaching implications for Indian property law. It establishes that
pre-emption rights created by formal legal instruments like partition decrees are binding on
successors and assignees, guaranteeing continuity and compliance with initial contractual terms.
By upholding that such covenants do not offend the rule against perpetuities, the judgment
provides certainty and clarity in property transactions, encouraging parties to incorporate pre-
emption clauses without fear of future judicial invalidation.

Additionally, this judgment aligns individual contractual obligations with law of property,
bringing Indian legal practice into harmony with modern interpretations of statutes. It serves as a
precedent to future cases concerning analogous conflicts, instructing courts to thoroughly
examine the intention and statutory provisions in determining the enforceability of contractual
covenants tied to rights of property.

The above has fully explained the clause in question. It is, in general terms, as stated earlier, a
"preemption clause" in favor of either party to the said award, and the only issue is whether its
benefits and obligations are to be restricted to the said parties alone, that is, to them individually,
or would be extended to their heirs and/or legal representatives, including assignees. On first
reading, the clause which, by the way, in fact constitutes a contract between the parties to the
partition award, given the wording of the clause itself, reinforced by the power of the arbitrators
and of the Court, can and ought to be interpreted from the point of view of a contract and it has
no wording indicating either a restricted or an enlarged interpretation. But two among the
existing Acts, i.e., the Contract Act and the Specific Relief Act, appear to provide some support
in understanding its construction and give us a workable clue in its interpretation.

Sections 23(b) and 27(b) of the Specific Relief Act and sections 37 and 40 of the Indian Contract
Act go on to state that, except in certain exceptions which are not applicable here, a contract,
subject to an expressed or implied contrary intention, will be enforceable by and against parties
and/or their heirs and legal representatives, including assignees or transferees. Our job, therefore,
becomes much simpler, and we have only to identify from the contract shown to us that the
present pre-emption clause contained in the partition award is, as above noted, essentially a
contract, in view of the express reference to the agreement of the parties to the same, and the
circumstances surrounding it, whether such an intention could be found either from the clause
itself or from the award, to which it forms a part, or from the surrounding conditions, or from the
nature of the particular right, viz., the contractual right in the nature of a right of pre-emption.
The provision, as pointed out above, does not explain this fact nor does the award.

The provision in question would validate any conclusion of such intention (see in this regard
Vaman Trimbak Joshi v. C. Damodar Simpi 2 and Vishweshar Narsabhatta Gaddada v. D. I
Bhatkar3. In contracts, unless they are founded on personal facets of the contractual parties or

2
L. L. R 49 Bom 862
3
A. LR 1940 Bom. 339
analogous considerations, assignability is the rule and the reverse is the exception. Therefore, the
opposite intention has to be clearly established, either directly or by necessary implication. Using
this test, we conclude that the alleged right of preemption in the given scenario is enforceable
against and by the original parties and/or their legal agents, such as assignees, i.e., the same
holds true among the current parties as well. The character of the right, once more, considering
the particularities of this case and taking into account the nature and conditions of the properties
involved, would more in line with the above view. In addition, it must be pointed out that if the
argument of the appellants prevails and the advantages and liabilities of the contract under
consideration are limited to the parties of the award. To such parties in person, that would make
an unfair construction because at least the successors in interest of the original parties should
have been intended to be privileged by its benefits and to be bound by its obligations.

Therefore, the contract has to be construed more widely, at least in relation to the aforementioned
heirs of the initial parties, and there is no reason why, in such a situation, its obligation and
benefits should not extend to assignees as well, especially when the contract is not one such that
assigning its obligations to assignees would be detrimental to the respective beneficiary. If it had
been the intention of the parties that the advantage and liabilities of the said clause shall extend
only to the parties themselves or merely to their successors, specific words to that effect would
and ought to have been employed as can be seen from the case cited by Dr. Gupta, i.e., Vithoba
Madhab Shanbhagi v Madhav Damodar Sharibhag4. However, bona fide assignees for value
without notice would not be bound by any obligations, and this is well settled and does not
require reiterating.

The second Bombay case of Harkisandas Bhagwandas v. Bai Dhanoo 5 decided by a learned
single Judge (Shingne, J.), followed practically the earlier case, reported 6 in, which was greatly
comparable and does not rest on a different footing.

Conclusion

4
L. L. R 42 Bom
5
A. LR 1934 Bom. 171,
6
L. L. R 42 Bom. 344
We have dealt with the main and, indeed, the only argument, in practical terms, that was
advanced by Dr. Gupta in support of this appeal and, in our view, on the basis of the
considerations expressed above, that argument must not be accepted. Also, we must observe,
incidentally, that the said pre-emption clause is free from any flaw on account of any vagueness
in its wording or for being against or offending any law, e.g., the rule against perpetuities. It is
enough for the above-stated purpose to refer to the three Allahabad High Court cases, reported in
Basdeo Rai v. Jhagru Rai, (9) Muhammad Jan v. Fazal-Ud-Din, 7; Aulad Ali v. Ali Athar and
Nasir Ud Din,8. The provision is also absolutely valid and legally binding under, inter alia, sec.
27(b) of the Specific Relief Act and sec. 40 of the Transfer of Property Act and no one can raise
any objection thereto on the ground that it is against the law of the land and hence not valid.

It should further be remembered that the relevant clause we are examining, which, as previously
stated, reads like a pre-emption clause, is essentially contractual in character. A contractual pre-
emption right is not necessarily personal. There is nothing inherently inherent in it which would
require such an inference. The problem is one of the interpretations of the particular contract and,
while in a specific case, the contract may well be personal due to its circumstances, that is not the
general or universal rule (see, for instance, the various cases referred to above).

7
1. L. R 46 All. 333 and 514
8
LL. R 49 All.