Ram Baran Prasad v Ram Mohit Hazra

Facts

The dispute concerned a covenant of pre-emption / agreement relating to immovable property, and whether the obligation, being perpetual in operation, was void as offending the rule against perpetuity. There had been a long-standing conflict of High Court decisions on whether the rule against perpetuity applied to such covenants.

Issues

• Whether the rule against perpetuity under section 14 applies to a contract for the sale of immovable property or a covenant of pre-emption.
• Whether such a covenant creates an interest in land attracting the rule.

Arguments

It was argued for one side that a perpetual covenant of pre-emption created an equitable interest in land and was void for remoteness under section 14. The other side argued that, under section 54, a mere agreement for sale creates no interest in land, so the rule cannot apply.

Held

The Supreme Court held that section 14 begins with the words 'No transfer of property...' and applies only where there is a transfer creating an interest in property. Since, under section 54, a contract for the sale of immovable property does not of itself create any interest in the property, the rule against perpetuity has no application to such contracts, including a covenant of pre-emption. The Court overruled the contrary view in Maharaj Bahadur Singh v Balchand that such covenants created an equitable interest in land.

Ratio decidendi

The rule against perpetuity under section 14 applies only to transfers creating an interest in property; it does not apply to personal contracts or covenants of pre-emption which create no interest in land.

Significance

Leading Supreme Court authority resolving the conflict over the scope of section 14; it firmly confines the rule against perpetuity to dispositions creating proprietary interests and excludes mere contractual obligations.

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