AMBALAL SHANKARLAL Vs. BALDEODAS CHHAGANLAL

JUDGEMENT

(1.) This second appeal raises a question of the rules against restraints on alienation and against perpetuities in their applicability to contracts of pre-emption entered upon before the Transfer of Property Act was applied to the Presidency of Bombay. In 1889 one Keshavlal sold the upper floor of his house to his son Madhavlal, the husband of defendant 3 in this case; and in 1891 he sold the ground-floor to his other son Shankarlal, who is the father of the plaintiff. The second of the deeds of sale contained a direction that in the event of Shankarlal desiring to sell the ground-floor, he should sell it to defendant 2's father Madhavlal and should not sell it to an outsider unless Madhavlal were unwilling to buy it at a price fixed in the deed; and Madhavlal was similarly restrained from selling the upper part of the house acquired under the purchase of 1889 to any one other than the plaintiff's father Shankarlal. Madhavlal signed the deed along with the vendor Keshavlal. The plaintiff now seeks to enforce the right of pre- emption created in this deed.

(2.) It is to be noted that this transaction took place before the Transfer of Property Act was applied to the Presidency of Bombay, and it was therefore raised in defence of it that the prohibition against restraint on alienation and the prohibition against perpetuities contained in Secs.10 and 14 of the Transfer of Property Act are inapplicable to the present case. Assuming that in the present case the contract does offend against these rules, it must be accepted that any legal objection to the validity of the contract cannot arise from the Transfer of Property Act. But the second line of defence is that the English doctrine of an equitable interest being created in property which is the subject of an agreement of sale-and the contract for pre-emption is an agreement of that class-applied in India before the introduction of the Transfer of Property Act and would therefore create an interest running with the land and as such subject it to the English common law rule against restraints on alienation and perpetuities. The plaintiff's learned advocate has argued before us that what applies before the introduction of the Transfer of Property Act was not the English rules of equity but the ordinary Hindu law. He argues that the Hindu law contains no prohibition against restraints or perpetuities and he further argues that, assuming it to contain any prohibition of this kind, the law of pre-emption is an exception to the ordinary rule. And lastly he says that the contract in the present case represented a family arrangement in settlement of a family dispute and as such was outside the ordinary rules.

(3.) Dealing with the last contention first, it is enough to say that the learned Judge of the lower appellate Court has held as a fact that there was no family dispute calling for settlement; and that is a finding of fact with which we do not feel called upon to interfere in second appeal. As to the applicability of the English doctrine of an equitable interest being created in the land by a contract of this kind, there is the authority of this High Court in 47 Bom. 191 [Dinkarrao Ganpatrao V/s. Narayan Vishwanath]1 to show that an agreement of this kind contained in a contract of sale offend against the rule of perpetuities and the rule against restraints on alienation, not so much on the ground that an equitable interest in the actual land is created by the contract as because contracts with regard to land can be specifically enforced against third parties in certain cases, with the result that the law in England recognising equitable interests and the law in India refusing to recognise equitable interests are substantially the same with regard to the enforcement of the contracts. The learned Chief Justice said that if such a contract purports to do by indirect means what the law forbids to be done directly, it is void, and in effect the principle is the same in India as in England. It must be confessed with respect that the reasoning in this case is not altogether easy to follow and it has been dissented from by the Full Bench of the Allahabad High Court in 49 ALL. 527, Aulad Ali V/s. Ali Athar2. The decision of the Fall Bench was that a contract of this kind was a personal contract which could be enforced not only against the contracting parties but against their successors also. But, with respect, it is not easy to see how such a contract could be held not to offend against the rule of perpetuities and the rule against restraints on alienation; and in so far as it dissents from the principle underlying the Bombay case, it is not open to us to follow it. This however is the only decision which appears to recognise the validity of contracts of this kind; at any rate, it is the only decision to which we have been referred directly dealing with this particular point. We were referred also to an early decision of this Court in Govind v. Bhagirathibai (1896) Bom. p. J. 7173 where a contract for pre-emption of the unsold half of a vendor's property in favour of his vendee incorporated in the agreement of sale relating to the other half was held to be a valid contract. I may however point out that there is an obvious distinction between a contract of pre-emption relating to unsold land still under the control of the owner and a contract of sale which prevents the vendee from doing what he would otherwise be able to do with property which he buys absolutely. I may also mention that Ranade J. makes it clear that, though a condition reserving a right of pre-emption as between co-sharers has always been regarded as a valid arrangement, it would not be regarded as a valid arrangement if it sinned against the rule about perpetuities or were absolutely prohibitive of alienation.