Rambaran Prosad v Ram Mohit Hazra

Facts

In a partition between two brothers the properties were divided into blocks under an arbitration award, and the parties agreed by covenant that if either wished to transfer his share he would first offer it to the other, i.e. a mutual right of pre-emption with no time limit. When a transfer was later made in breach, the question arose whether the perpetual covenant of pre-emption was void as offending the rule against perpetuity.

Issues

• Whether a contract for sale of immovable property creates any interest in the property.
• Whether a covenant of pre-emption unlimited in time is void under the rule against perpetuity (Section 14).

Arguments

The party resisting enforcement argued the perpetual pre-emption covenant created an interest in land that offended the rule against perpetuity and was void. The other side argued such a covenant is merely personal/contractual and creates no interest in land.

Held

Settling a conflict of decisions, the Supreme Court held that under Section 54 a mere contract for the sale of immovable property does not, of itself, create any interest in or charge on the property. As the covenant of pre-emption created no interest in land but only a personal obligation enforceable in equity, the rule against perpetuity under Section 14 had no application, and the covenant was valid even without any time limit for exercise of the option.

Ratio decidendi

A contract for sale of immovable property creates no interest in or charge on the property (Section 54); consequently a covenant of pre-emption is a personal obligation to which the rule against perpetuity does not apply.

Significance

Authoritatively settled that in India, unlike English equity, a contract of sale confers no equitable estate or interest in land, reinforcing Section 54's last paragraph. Repeatedly followed (e.g. Balwant Vithal Kadam v Sunil Baburao Kadam, (2018) 2 SCC 82).

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