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1927 Supreme(SC) 23
PRIVY COUNCIL [ON APPEAL FROM THEEAST INDIES]
VISCOUNT DUNEDIN, SIR JOHN WALLIS, AND SIR LANCELOT SANDERSON.
SHEOBARAN SINGH - Appellant
Versus
KULSUM-UN-NISSA (DEFENDANTS) - Respondents
On Appeal from the High Court at Allahabad.
Decided On : Mar. 4. 1927.
Solicitors for appellant:Douglas Grant & Bold. Solicitor for respondents: H. S. L. Polak.
A customary right of pre-emption applies to sales conducted by an official assignee in bankruptcy, as the assignee acquires the property with all its existing burdens and advantages, stepping into the legal position of the insolvent.
Headnote:(A) Provincial Insolvency Act, 1907 - Right of pre-emption - Customary right of pre-emption in a share of a village - Entry in the wajib-ul-arz is prima facie evidence of custom without requiring corroborative evidence of instances of exercise, provided it is not in contravention of law - Where a provision in a wajib-ul-arz relates to pre-emption, it should be presumed to be the record of a custom unless the contrary is clearly shown.
(B) Official Assignee - Nature of interest - An official assignee in bankruptcy is invested with the property of the insolvent exactly as it stood, including all its advantages and burdens - The official assignee is placed in the same position as the insolvent and can only sell what he acquired - Consequently, a customary right of pre-emption operates against a purchaser at a sale by an official assignee, as the assignee cannot render the property more valuable or free of burdens than it was in the hands of the insolvent.
(C) Relinquishment of right - Failure to bid at a public auction does not amount to a renunciation of the right of pre-emption if the auction was for a combined lot consisting of the property and arrears of rent, whereas the subsequent private sale was for the property alone.
Facts of the case:
A co-sharer claimed a customary right of pre-emption over a share in a village. The share had belonged to another co-sharer who was declared insolvent, and the property vested in an official assignee. The official assignee attempted a public auction for the property and accrued rents, but eventually sold the property privately to a third party. The claimant, who had not bid at the public auction, sought to exercise the right of pre-emption against the private purchaser.
Findings of Court:
The court found that the custom of pre-emption was sufficiently proved by the entry in the wajib-ul-arz. It further held that the right of pre-emption is not extinguished by the vesting of property in an official assignee, as the assignee steps into the shoes of the insolvent and takes the property subject to all existing customary burdens.
Issues: Whether an entry in the wajib-ul-arz is sufficient to prove a custom of pre-emption and whether such a right applies to an involuntary sale conducted by an official assignee in bankruptcy.
Ratio Decidendi: The court reasoned that an official assignee stands in the same position as the insolvent regarding the property; therefore, any customary obligations attached to the property persist. The official assignee cannot transfer a better title or a more unencumbered interest than that which the insolvent possessed.
Result: Appeal allowed.
Legal Category Hierarchy
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property law
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pre-emption
- customary pre-emption
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pre-emption
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insolvency law
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official assignee
- vesting of property
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official assignee
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evidence law
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documentary evidence
- wajib-ul-arz
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documentary evidence
Judgement
Appeal (No. 149 of 1924) from a decree of the High Court (March 13, 1920) reversing a decree of the Additional Subordinate Judge of Aligarh.
The suit was brought by the appellant, who claimed that by custom he had a right of pre-emption in respect of a 15 biswas share in a mauza. The share in question had belonged to a co-sharer with the appellant in the mauza, but the owner had been declared an insolvent under the Provincial Insolvency Act, 1907, upon a creditors application. His property had vested under the Act in the official assignee, who had sold the share to the first defendant, now represented by the respondents.
The first defendant by his written statement denied the existence of the custom alleged, and pleaded that if there was a custom it was not applicable in the circumstances of the case.
The facts appear from the judgment of the Judicial Committee.
The trial judge decreed the suit, but an appeal to the High Court was allowed, and the suit was dismissed. The learned judges (Tudball and Rafique JJ.) held that, assuming that a custom of pre-emption existed in the village, it did not apply to the sale by the official assignee, as it was an involuntary sale and was not a sale by a co-sharer. Also they were of opinion that the plaintiffs failure to bid at the auction, of which he had notice, amounted to a refusal to purchase. The appeal is reported at I. L. R. 42 A. 402.
1927. Feb. 1, 15. De Gruyther K.C. and Dube for the appellant. The appellant was entitled to pre-empt. There can be no effectual relinquishment until a sale has been completed, and the right operates in the case of a sale by an official assignee Kanhai Lal v. Kalka Prasad . (( 1905) I. L. R. 27
A. 670.) That case was rightly decided, since the principle of pre-emption rests upon a right to be substituted for a purchaser who is not a co-sharer Gobind Dayal v. Inayatullah (( 1885) I. L. R. 7 A. 775.) ; Kanta Prasad v. Mohan Bhagat (( 1909) I. L. R. 32 A. 45.) ; Budhai Sardar v. Sonaullah Mridha (( 1914) I. L. R. 41 C. 943.); Subhagi v. Muhammad I shah (( 1884) I. L. R. 6 A. 463.); Janki
v. Girjadat. (( 1885) I. L. R. 7 A. 482.) The decision in Indraj v. Brother Clement (( 1915) I. L. R. 37
A. 262.) was erroneous. The effect of the vesting in the official assignee is that he is placed in relation to the property in the same position as the insolvent. The statement in the wajib-ul-arz established the custom Digambar Singh v. Ahmad Said Khan (L. R. 42 I. A. 10.); Balgobind v. Badri Prasad . (( 1923) L. R. 50 I. A. 196.)
Dunne K.C. and Wallach for the respondents. The appellants failure to bid at the auction was a renunciation of any right which he had to pre-empt Naunihal Singh v. Ram Ratan (( 1916) I. L. R. 39 A. 127.); Shamsher Singh v. Piari Dat (( 1918) I. L. R. 40 A. 690.); Nathi Lal v. Dhani Ravi . (( 1916) 15 All. L. J. 315.) In any case the custom did not apply, as the sale was not by a co-sharer and was involuntary. Further, no custom of pre-emption was proved. The wajib-ul-arz did not use the word "custom"; it really recorded merely an arrangement between the co-sharers, or the views of the co-sharers, as in Anant Singh v. Durga Singh. (( 1910) L. R. 37 I. A. 196.)
De Gruyther K.C. in reply. In Digambar Singh v. Ahmad Said Khan (L. R. 42 I. A. 10.) the wajib-ul-arz did not specifically state the right as a custom. Having regard to the duty of the revenue officers to record only customs, a statement in a wajib-ul-arz should be presumed to refer to a custom unless the contrary clearly appears Returaji Dubain v. Pahlwan Bhagat. (I. L. R. 33 A. 196,216.) The auction sale was not of the share merely but also of the accrued rents.
March 4. The judgment of their Lordships was delivered by
VISCOUNT DUNEDIN. In this case, pre-emption in a share in a village is claimed by a co-sharer as against the buyer from the assignee in bankruptcy of another co-sharer. The claim was decreed by the Subordinate Judge, but his judgment was reversed and th
