Preferential Right to Purchase under Indian Law: Statutory and Judicial Perspectives

Preferential Right to Purchase under Indian Law: Statutory and Judicial Perspectives

Introduction

The “preferential right to purchase” – commonly labelled the right of pre-emption – occupies a liminal space between freedom of alienation and the desire to keep property within a familial, communal or co-sharer fold. Indian jurisprudence engages with this right through plural sources: personal-law statutes (notably §22 of the Hindu Succession Act, 1956), pre-Independence provincial enactments (e.g., Punjab Pre-emption Act, 1913), and a rich body of customary law. This article critically analyses the conceptual foundations, statutory framework and evolving judicial approach to the preferential right to purchase, weaving in leading authorities such as Bishan Singh v. Khazan Singh[1], Darshan Singh v. Ram Pal Singh[2], and recent pronouncements interpreting §22 HSA[3]. Particular attention is paid to the doctrinal tensions between pre-emption and constitutional property guarantees, and to practical implications for conveyancing and litigation strategy.

Historical and Conceptual Underpinnings

From Islamic Jurisprudence to Indian Custom

Pre-emption was unknown to classical Hindu law; it entered the sub-continent through Islamic jurisprudence and was progressively absorbed into local custom.[4] The classic formulation identifies (i) a primary right – a right to be offered the property before it is sold, and (ii) a secondary or remedial right – the right to substitute oneself in place of the purchaser after sale.[5] Indian courts consistently emphasise that the right is “a weak right” – it does not create any proprietary interest in the land until exercised and can be defeated by legitimate methods such as an inter se transfer to a rival pre-emptor of equal or superior rank.[6]

Right of Substitution, not Re-purchase

The jurisprudential core is the doctrine of substitution: the pre-emptor stands in the vendee’s shoes, taking the entire bargain on identical terms.[7] This explains why courts refuse partial enforcement and insist that the pre-emptor accept the whole of the conveyance including onerous covenants. The doctrine also informs statutory drafting, notably the requirement in §22(1) HSA that the heir must be willing to acquire the interest proposed to be transferred rather than negotiate a new contract.

Statutory Framework

Section 22, Hindu Succession Act, 1956

  • Applies where an interest in immovable property of an intestate devolves upon two or more heirs in Class I.
  • Triggers when any one heir proposes to transfer his or her interest; the other heirs “shall have a preferential right to acquire the interest proposed to be transferred”.
  • §22(2) mandates judicial determination of consideration if parties cannot agree; §22(3) introduces a bidding mechanism where multiple heirs bid for the highest price.

The provision aims to curb fragmentation and prevent ingress of strangers into the joint family fold.[8] Notably, Parliament retained §22 despite the 2005 HSA amendments that conferred equal coparcenary rights on daughters, underscoring the section’s continuing relevance.

State Pre-emption Statutes

Parallel provincial legislation (e.g., Punjab, Rajasthan, Himachal Pradesh) governs agricultural and urban property irrespective of succession. Section 4 of the Punjab Act defines the right, while §6 classifies classes of preferential claimants. Constitutionality challenges under Arts. 14 and 19(1)(f) (pre-1978) led some provisions – especially those preferring relatives purely on consanguinity – to be struck down as unreasonable restrictions (e.g., Girdhari v. Jawala[9]).

Judicial Interpretation and Key Precedents

(A) Custom-Based Pre-emption & Its Erosion

In Darshan Singh v. Ram Pal Singh the Supreme Court upheld the retrospective abolition of a customary right to contest alienations under the Punjab Custom (Power to Contest) Amendment Act, 1973, emphasizing legislative supremacy over custom and the doctrine that a mere right to sue is not a vested right.[2] The judgment underscores that where Parliament or a State Legislature expressly abolishes a customary pre-emptive right, courts must give full effect even to pending proceedings.

(B) Foundation Principles – Bishan Singh

The Constitution Bench in Bishan Singh v. Khazan Singh distilled six cardinal principles, inter alia: (i) the right is a right of substitution; (ii) it extends to the entire property; (iii) superiority of right is sine qua non.[1] These principles continue to animate §22 HSA litigation.

(C) Section 22 HSA: Modern Trajectory

(D) Interaction with Partition & Preliminary Decrees

Although not pre-emption cases per se, decisions such as Venkata Reddy v. Pethi Reddy[12], Prema v. Nanje Gowda[13] and S. Sai Reddy v. S. Narayana Reddy[14] illuminate how property rights crystallise (or remain fluid) between preliminary and final decrees. Since §22 activates upon a “proposal to transfer”, its enforceability often hinges on whether the co-heirs’ shares have become final or remain susceptible to change. The Supreme Court’s view that a preliminary decree is not the terminus of partition suggests that a pre-emptive right may still be asserted until the final decree allocates property by metes and bounds.

(E) Constitutional Scrutiny

Post-abolition of Art. 19(1)(f), challenges have pivoted to Art. 14 and Art. 300A. Courts have been wary of pre-emption provisions grounded exclusively on blood-relationship, viewing them as arbitrary (Girdhari). By contrast, §22 HSA survives scrutiny because it is tethered to the legitimate objective of preventing fragmentation among intestate heirs and operates within a narrowly tailored class.

Comparative Analysis with Allied Doctrines

Registration Requirements & Evidentiary Barriers

Shyam Narayan Prasad v. Krishna Prasad underscores that an unregistered exchange deed affecting immovable property is inadmissible in evidence.[15] For pre-emption suits, this means that the triggering sale must itself be validly executed and registered; otherwise, the very foundation of the pre-emptive claim collapses.

Specific Performance of Contracts

The Supreme Court in Kartar Singh v. Harjinder Singh granted specific performance against one co-owner even without the other’s consent, permitting proportional abatement in price.[16] The case demonstrates courts’ willingness to mould equitable relief where co-ownership complicates alienation – a consideration equally pertinent when determining whether a proposed transfer under §22 HSA is bona fide or merely a colourable device to defeat pre-emption.

Practical Implications

  • Conveyancing: Vendors sharing property with Class I heirs should issue formal notices of intention to sell, securing written waivers to forestall litigation.
  • Litigation Strategy: A pre-emptor must plead and prove (i) simultaneous succession, (ii) subsisting superior right on the date of suit and decree, and (iii) readiness to purchase on identical terms.
  • Valuation: Where consideration is contested, prompt recourse to §22(2) for judicial valuation minimises delay.
  • Limitation: Though §22 is silent, courts borrow the three-year period under Art. 97 Limitation Act (suits for possession after extinction of pre-emption) by analogy; prompt action is thus advisable.

Conclusion

The preferential right to purchase in India reflects a delicate balance between the alienating owner’s autonomy and the co-heir or co-sharer’s interest in preserving the integrity of joint holdings. Judicial doctrine has progressively clarified that the right is inherently weak, strictly construed, and subject to constitutional limitations. Yet, §22 of the Hindu Succession Act, fortified by recent case-law, continues to provide a robust mechanism for heirs to avert unwanted fragmentation and maintain familial control over ancestral assets. Future reform may consider procedural codification – e.g., mandatory notice requirements and statutory limitation – to enhance predictability while respecting property freedoms under Art. 300A.

Footnotes

  1. Bishan Singh & Ors. v. Khazan Singh & Anr., AIR 1958 SC 838.
  2. Darshan Singh v. Ram Pal Singh & Anr., 1992 Supp (1) SCC 191.
  3. T. Ravi & Anr. v. B. Chinna Narasimha & Ors., (2017) 7 SCC 342.
  4. Nagammal v. Nanjammal, (1969) 1 MLJ 358 (Mad).
  5. Rangnath v. Babu Rao, AIR 1956 AP 78.
  6. Sriman Narayan Rai v. State of Bihar, 2022 SCC OnLine Pat 1055.
  7. Inayatullah, ILR (1885) 7 All 775 (Mahmood J.).
  8. th Report (1958).
  9. Girdhari v. Jawala, 1956 SCC OnLine Raj 52.
  10. Bhagirathi Chhatoi v. Adikanda Chhatoi, 1988 SCC OnLine Ori 4.
  11. Rustam Ali & Ors. v. Pritam Singh, 2025 SCC OnLine HP 101.
  12. Venkata Reddy & Ors. v. Pethi Reddy, AIR 1963 SC 992.
  13. Prema v. Nanje Gowda & Ors., (2011) 6 SCC 462.
  14. S. Sai Reddy v. S. Narayana Reddy & Ors., (1991) 3 SCC 647.
  15. Shyam Narayan Prasad v. Krishna Prasad & Ors., (2018) 7 SCC 646.
  16. Kartar Singh v. Harjinder Singh & Ors., (1990) 3 SCC 517.