Law of Pre-emption

9 Dec 2022  Read 43259 Views

When it comes to property, especially joint property with multiple co-owners, pre-emption is a controversial issue. When combined with the prefix "pre," the Latin verb "emptum," meaning "buy or purchase," inevitably leads to the English phrase "first option to buy." In this article, we are going to learn about Pre-emption. It includes Pre-emption under Muslim and Hindu Law, its constitutional validity, and its associated rights.

What is pre-emotion?

An immovable property owner has the legal right to purchase another immovable property that has been sold to another party. The owner of an immovable property has the right to repurchase a neighbouring property sold to another party. This is called pre-emption. 

Pre-emption will be simple to comprehend with the following example: Owners of the neighbouring homes owned by 'A' and 'B' live adjacent to one another. A possible stranger to 'B', 'C' purchases 'B's' residence. 'A', a pre-emptor, may legally repurchase that home from 'C' at the same price 'B' sold it to 'C' under the terms of this pre-emption right. In this way, 'A' could prevent 'C' from becoming his long-term neighbour due to the right of pre-emption. In reality, the basic foundation of this right has been a perceived annoyance that a stranger might bring on.

Pre-emption under Muslim law 

The transfer of property is essential to a nation's economy. There are two categories of property transfers. It might either be gratuitous or not. Muslims are not always bound by their personal laws when it comes to the non-gratuitous transfer of property. The Indian legislature has passed laws on several issues that affect Indians as a whole, including Muslims. However, there are still some matters in which Muslims are subject to their own personal laws. One of them is the law of pre-emption. Muslims still have the luxury of being ruled by their preemptive laws in most nations.

Shuffa refers to a right of substitution granted to a person by law, tradition, or agreement. The seller's position is given priority, and the right is based on the seller's and the seller's set terms of sale. In the case of Vijayalakshmi v. B. Himantharaja Chetty (1996) 9 SCC 376, Mulla defines the word "pre-emption." The owner of one piece of real estate can gain the "Shuffa," or "right of first refusal," by buying another piece sold to someone else.

Pre-emption is a legal principle that has its roots in Islamic law but was unknown in India before the advent of Mughal power. Both Muslims and Hindus are subject to this general land law. Later, the British used it for morality, justice, and fairness toward Muslims. Pre-emption rights in India can be found in four places: Muslim personal laws, traditions, legislation, and contracts. While the right of pre-emption is mainly viewed as a customary right by Hindus, it is a part of their laws for Muslims.

In the case of Gobind Dayal v. Inayatullah (1885), Justice Syed Mahmood stated that Pre-emption is referred to as a right granted to the owners of a moveable property for low amusement of that movable property to obtain, in return for the buyer, possession of some movable property on the same terms that such latter movable property is sold to any other person.

Constitutional Validity of Pre-emption 

Before the 44th Constitutional Amendment Act of 1978, the pre-emption statute infringed upon the fundamental right to possess and dispose of property, protected by Article 19(1)(f) and Article 31 of the Constitution. However, following the amendment mentioned above, both articles were removed from Part III of the Indian Constitution and are now covered by Article 300A as constitutional rights. Prior to this amendment, the Supreme Court had ruled in several decisions that the statutory pre-emption provision based on vicinage was unconstitutional.

According to Bhau Ram v. BajiNath, AIR 1962 SC 1476, the Supreme Court was allowed to decide whether or not pre-emption is constitutional. In its decision, the Supreme Court declared pre-emption based on vicinage illegal. Later, the Supreme Court held that the common act of vicinage pre-emption is unlawful in another case, Sant Ram v. Labh Singh, AIR 1965 SC 314.

Due to the enactment of the 44th Amendment and the effective monitoring of the application of previous laws, the entire debate over constitutionality changed after 1978. It made property ownership a constitutional right and not a fundamental right. Nevertheless, the legal analysis of pre-emption continues to be extensive. Since the Constitution protected the right to property, it was subject to restrictions under Articles 14 and 15.

In Lrs Raghunath. 's (D) v. Radha Mohan AIR 2020 SC 5026, the right of pre-emption can only be used for the first time when the need arises. If such a person decides it is not worthwhile, it is not an unrestricted right available to them at all times.

Pre-emption rights belong to a controlling shared tenant. The use of pre-emption is fairly restricted, yet it was familiar with the Indian subcontinent. The importance of pre-emption in modern culture has significantly decreased. Even now, some people take advantage of the possibility of applying for the pre-emption right, particularly when agricultural property is required; they must deal with certain legal challenges, and the parties bought and upgraded the land.

Formalities of Pre-emption

  1. The first demand refers to the 'demand for jumping', which states that it must be made immediately.
  2. The second demand refers to a 'demand involving witnesses.'
  3. The third demand, aka 'demand for possession', arises when the preemptor fails in the first two demands. In the third demand, he may take any legal action. 

Rights under Pre-emption 

A person can exercise his right of pre-emption under two circumstances:

  1. When the property is subjected to a valid sale.
  2. When the sale is complete 

A person loses his right of pre-emption under the following circumstances.

  1. By acquiescence or estoppel or waiver or forfeiture 
  2. By the death of the Preemptor (The right of pre-emption is also forfeited if the preemptor dies after making the first two demands but prior to the lawsuit being filed or the third demand, in which case his legal representatives are not permitted to bring the lawsuit.)
  3. By misjoinder of plaintiffs (if the preemptor shares his right of pre-emption as a co-plaintiff, his right can also be forfeited)
  4. By release
  5. Loss of right before the final decree
  6. By statutory disability

Hindu Law

Section 22 of the Hindu Succession Act governs the preferential right to acquire property in some instances. 

The "preferential right" remedy under Section 22 of the Hindu Succession Act may be used before the selling transaction. According to the section, when one co-sharer intends to transfer his share, the other co-sharer may apply to buy that portion. This situation may occur when a co-shareholder gets into an oral or written agreement to sell with a third party.

The solution is to apply for the right of pre-emption once the sale is finalised. A few state laws, customs, or prior cases acknowledge this right. The right may be a civil right if no statutory provision exists.

Conclusion

Pre-emption rights only apply when immovable property is transferred by sale; they do not apply if it is transferred through a gift, bequest, lease (even if it is perpetual), mortgage, or conditional sale with possession. The pre-emption right may be defeated, or the pre-desire emptor's to use it may be lessened by the parties to a sale transaction using legal means that are neither dishonest nor illegal.

About the Author: Gurpreet Kaur Dutta | 82 Post(s)

A legal content writer who pursued BBA-LL.B.(H) from Amity University Chhattisgarh. She has a keen interest in corporate and IPR sectors. 

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