RAM BARAN PRASAD V RAM MOHIT HAZRA, AIR 1967 SC 744 :
FACTS
- The property was partitioned between two brothers, A and B, with a pre-emption clause in each other’s favour, i.e., if any one of them wanted to sell his share, he had to first offer it to the other brother.
- Only upon his refusal to buy it could it be sold to others. A offered to sell his portion to B, which he refused and therefore, he sold it to C.
- Similarly, B sold his portion to D. Further, C sold his property to X and D sold it to Y.
ISSUE
- Whether the covenant for pre-emption was merely a personal covenant between contracting parties and was thus, not binding against the successors?
- whether a pre-emption clause executed by the parties would be hit by the rule against perpetuities?
HELD
- The court held that the covenant of pre-emption was binding on Y and D as they had notice of it, and X was entitled to enforce the right of pre-emption, i.e. binding on successors.
- Also there is nothing in the language of the pre-emption clause or other clauses of the award to suggest that the parties had any contrary intention.
- Lewis in his book ‘perpetuities’ defined perpetuity as “future limitation”. The object of the rule is to restraint the creation of future interest in the property.
- The court held that pre-emption clause is just an agreement for sale. It does provide vested interest in property. It is just giving chance to other person before selling the property. It does not create vested interest for anyone. Therefore, the pre-emption clause does not convey the property. There is difference in both the situations.
- Therefore, the rule against perpetuity is applicable on transfer of property, not on pre-emption. Hence, the pre-emption clause is valid and not violative of rule against perpetuity.