Whether limitation should be counted on the basis of substantive law applicable to case?

It may be mentioned that there has been no law of pre-emption in India which would be applied in Goa. But the Law of Preemption in Goa prevailed and hence, the plaintiffs sued under that law being Article 1566 of the PCC. Since there has been no other law made by the Parliament in respect of the right of pre-emption in India which was made applicable to Goa, that law continues to be in force including its proviso, showing the period of limitation for such a cause of action. Rightly, therefore, the plaintiffs sued under that law. The plaintiffs have not sued under the uncodified Hindu Law applicable to India and such a law relating to pre-emption had not been made applicable in Goa. The period of limitation would, therefore, be an adjunct to the substantive law which continues to be in force. That period of limitation would govern the plaintiffs' suit.

IN THE HIGH COURT OF BOMBAY (PANAJI BENCH)

Second Appeal No. 50 of 2002

Decided On: 21.02.2014

Appellants: Shubangi Apa Dhuri
Vs.
Respondent: Sharayu Manohar Kolgaokar

Hon'ble Judges/Coram:R.S. Dalvi, J.

 Citation: 2014(4)BomCR202,2014(5) MHLJ199

1. The appellants sued for exercising their right of preemption against the respondents. The suit came to be dismissed, inter alia, on the ground that it was barred by the law of limitation. An appeal therefrom has been dismissed. In this second appeal, two substantial questions of law with regard to the period of limitation and implied repeal of the limitation, specifying period of limitation are framed, which are as under:

a) Whether in a suit for pre-emption, the limitation period is governed by Article 1566 of Portuguese Civil Code or Article 97 of Indian Limitation Act, 1963?

b) Whether in view of Indian Limitation Act, 1963 which applies to the State of Goa and prescribes a period of limitation for a suit to enforce the right of pre-emption that part of Article 1566 prescribing a shorter period of limitation stands repealed?

The aforesaid questions may be considered together. The other issues, on facts, have resulted in concurrent findings of fact, which need not be gone into in this appeal.

The plaintiffs exercised their right of pre-emption under Article 1566 of the Portuguese Civil Code (PCC), the relevant part of which runs thus:

The co-owners of indivisible or undivided things cannot sell to third parties their respective share if the co-owner desires such part.

1. The co-owner to whom notice of the sale was not given can have for himself the share sold to the third parties, provided that he applies within the period of six months from the date on which he got the knowledge of the sale, deposition before effecting the handling over the price which, according to the points of the agreement has been paid or received.

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2. The PCC which was enacted by the Portuguese has not been repealed after the liberation of Goa. The plaintiffs, therefore, could exercise their right under the aforesaid Article, as they are co-owners of the suit property with the defendants. Article 1566 prohibits sale by a co-owner if other co-owner desired that part which was sold. If notice of sale was not given by the co-owner selling his undivided share to a stranger, he could exercise his right of pre-emption, put only if he applied within six months from the date of knowledge of the sale. The law of pre-emption contained in Article 1566 is, therefore, a complete Code. It sets out substantive, as also procedural aspect of exercise of such right. It would be applicable either wholly or not at all. (This shall be seen from the enunciation of the Supreme Court in the case of (Syndicate Bank Vs. Prabha D. Naik and another etc.), MANU/SC/0197/2001 : 2001 (3) Bom.C.R. 338 (S.C.) : A.I.R. 2001 S.C. 1968, as shall be seen presently).

3. It is seen that the period of limitation under the PCC is six months from the date of knowledge of the sale.

4. The Limitation Act, 1963, repealing the earlier Limitation Act, 1904, was enacted a year or so after the liberation of Goa. It applies to the whole of India, except the State of Jammu and Kashmir. It, therefore, applies even in Goa. In Article 97 of Schedule I of the Limitation Act, contained in Part IX, which is in respect of suits relating to miscellaneous matters, the period of limitation to enforce the right of preemption, whether under law or special contract, is specified. The period of limitation is one year from the registration of the sale deed by the purchaser of the persons against whom the right is created. It is not from the date of knowledge of the sale.

5. It is contended on behalf of the plaintiffs/appellants that though they applied for a right of pre-emption under Article 1566, the period of limitation specified in that Article by way of proviso to their right is not applicable to them because the Limitation Act would apply to the State of Goa.

6. The applicability of the Limitation Act is circumscribed by the savings contained in section 29(2) of the Limitation Act under which special or local law prescribing a different period of limitation would require such period to be applicable and not the period mentioned in the Schedule to the Limitation Act for determining the period of limitation to sue. It would, therefore, have to be seen which limitation would apply to the plaintiffs' case of pre-emption upon admitted facts and a short chronology.

7. The parties are co-owners. The appellants are in exclusive possession of the suit property. The respondents, as co-owners, sought to sell their undivided share therein. A sale deed was executed by the respondents in favour of a third party purchaser on 7th September, 1971. The purchaser did not come into possession. The suit for partition was filed by the purchaser against the plaintiffs on 30th August, 1978. The plaintiffs claim that they had no knowledge of the sale/purchase until they received the summons in that suit on 10th January, 1971. The plaintiffs sued on 27th July, 1979 to exercise their right of pre-emption. This was more than six months after the date of knowledge of the sale. Hence, their suit would be barred under Article 1566 of the PCC. The suit would also be barred under Article 97 of Schedule I to the Limitation Act, 1963 as being more than one year after registration of the sale deed.

8. Not only do the plaintiffs contend that though the substantive law of pre-emption under the PCC applies to them, though the limitation period mentioned therein as proviso does not apply to them, but the plaintiffs also contend that the time from which the period would begin to run under Limitation Act, 1963 would have to be read down to hold that the period of limitation of one year to enforce the right of pre-emption in a suit would be the period from the date of the knowledge of the sale, because unless the plaintiffs knew of the sale, they could not exercise their right of pre-emption. It may at once, be stated that after the sale, the plaintiffs would be enjoined to set aside the sale. It is only before the sale that right of preemption accrues and must be exercised. The knowledge of sale would be the knowledge of a fact for which the cause of action would no longer survive. The cause of action, in a suit for pre-emption would be the intention of a co-owner to sell, upon which the other co-owner would have a right of an option to purchase the property.

9. The right of pre-emption is, therefore, only a right to get first option to purchase before a stranger is sold an immovable property by the co-owners. It is not an enhanced right to acquire the property except upon payment of consideration. The consideration would necessarily be the market value of the property as the other co-owner is entitled to sell his undivided interest in the co-owned property otherwise to an outsider or a stranger which would be at the market price. Consequently, the right of pre-emption either under any substantive law such as the aforesaid Article of the PCC or even the uncodified Hindu Law or under any contract between the co-owners is held to be a very weak right only extending to the above even if it is a statutory right. See (Lachhman Doss Vs. Jagat Ram and others), MANU/SC/7133/2007 : (2007)10 S.C.C. 448. Consequently, no equity in favour of a pre-emptor is held to arise and hence, the pre-emptee is entitled to defeat the law of pre-emption by any legitimate means. See (Kumar Gonsusab and others Vs. Mohammed Miyan URF Baban and others), MANU/SC/3598/2008 : (2008)10 S.C.C. 153.

10. As to which law of limitation would govern the parties, the Counsel on behalf of the plaintiffs himself has relied upon two specific judgments.

In the case of (Justiniano Augusto De Piedade Barreto Vs. Antonio Vicente Da Fonseca and others), MANU/SC/0382/1979 : A.I.R. 1979 S.C. 984, the Division Bench of the Supreme Court considered the Goa, Daman and Diu (Administration) Act, 1962 (GDD Act), in section 5 of which it was declared that all laws in force before the appointed day - 20th December, 1961 - would continue to be in force until amended or repealed by a competent legislation or other competent authority. The PCC and the Portuguese Civil Procedure Code which dealt, inter alia, with the matters of limitation have not been repealed at any time even after the Limitation Act, 1963 was enacted. No notification under section 6 of the GDD Act has been issued with regard to the applicability of the Limitation Act. The Limitation Act does not mention that it will not apply to the State of Goa as it specifies for the State of Jammu and Kashmir.

In this case, the Supreme Court considered the concept of special or local law under section 29(2) of the Limitation Act to hold whether the PCC would stand repealed by the Limitation Act by necessary implication in view thereof.

In para 10 of the judgment, the Court considered that the Code of Civil Procedure, 1908 (CPC) and the Arbitration Act, 1940 were extended to Goa. Section 4 of the GDD Act repeals only such of the law in Goa as corresponds to the CPC and the Arbitration Act. This Act also does not expressly or by implication repeal any provision of the PCC relating to limitation.

In para 11 of the judgment, the Court considered the applicability of the law to any State if it was repugnant to the law made by the Parliament which would prevail and in which case, the limitation of the State to the extent of repugnancy would be void. The Court considered that the PCC may be taken to be the law made by the State (though it was enacted by the Portuguese prior to liberation). The Court held that unless the provisions of the PC were saved by section 29(2) of the Limitation Act, they would be repugnant thereto. If they were saved, there would be no question of repugnancy.

In para 12 of the judgment, the Court specified that there was no escape from the conclusion that the PCC was a local law. The word "local" referred to an area or a territory. The Court had to see whether it was a special law. The word "special" had reference to the subject and the word "local" had reference to an area or territory. The Court explained that the special law was a law relating to a particular subject and the local law was the law confined to a particular area or territory or part thereof. It also explained that the law dealing with the subject may be a general law laying down general rules, but may also contain special provisions relating to the bar of time. Even such a law would be a special law for the purpose of section 29(2). The Court gave three illustrations of such special law-

(a) Section 417(4) of the Cr.P.C. 1898;

(b) Rules framed under the Defence of India Act; and

(c) Rule of limitation in the Bombay Land Requisition Act.

The Court further defined what the special law was, as a law enacted for special cases in special circumstances, in contradistinction to the general rules of the law laid down as applicable generally to all cases.

In para 13 of the judgment, the Court held that there was only one general law of limitation for the entire country being the Limitation Act, 1963 and all other laws prescribing the period of limitation were either special or local laws. They were special laws if they prescribed periods of limitation for specified cases. They were local laws if their applicability was confined to specified areas. The Limitation Act, 1963 only repealed the Limitation Act, 1908. All other laws dealing with limitation, were saved and not repealed.

The Court, therefore, concluded in para 14 that the PCC dealing with limitation was local law within the meaning of section 29(2) of the Limitation Act, 1963. This provision would have to be read into the Limitation Act, 1963 as if the Schedule to the Limitation Act was amended mutatis mutandis and no question of repugnancy arose.

11. This judgment has been followed in the case of Syndicate Bank Vs. Prabha D. Naik and another etc., MANU/SC/0197/2001 : 2001(3) Bom.C.R. 338 (S.C.) : A.I.R. 2001 S.C. 1968. However, it is relied upon by Counsel on behalf of the plaintiffs to show that in that judgment the PCC is held not to be a local law or a special law. The Counsel on behalf of the respondents has neatly drawn attention of the Court to the distinction contained in that judgment which requires the Court to minutely consider the entire of it.

That was a case of a Bank having granted a loan to its customer. The respondents in that case agreed to repay the loan on execution of demand promissory note and the deed of hypothecation. The loan was not repaid. The Bank sued for recovery. The question of limitation arose. Initially the loan was granted in State of Goa, Daman and Diu. What the Court had to consider was whether the PCC applied as local or special law in terms of section29(2) of the Limitation Act to such a case, or whether the remedy under the PCC could be deemed to be impliedly repealed. Article 535 of the PCC was involved. It specified the period of limitation of 20/30 years by the Bank to sue for recovery.

In para 3 of the judgment, the Court considered that where a cause of action had arisen outside Portuguese law it having arisen under the Negotiable Instruments Act, 1881 and the Contract act, 1872, the period of limitation under the PCC would not apply and the rights of the parties would be governed by the Indian Limitation Act. The Supreme Court considered the judgment in the case of (Cadar Construction Vs. Tara Tiles), MANU/MH/0297/1984 : 1984 (2) Bom.C.R. 530(P.B.) : A.I.R. 1984 Bombay 258 in which this Court, inter alia, held relying upon the case of Justiniano Augusto De Piedade Barreto Vs. Antonio Vicente Da Fonseca and others (supra) that the PCC was a local law relating to the period of limitation, but was also a special law dealing with the rights and liabilities under the Code and hence, if a cause of action arose under the PCC, the period of limitation based upon that cause of action would be the period mentioned in the PCC itself. If, however, the cause of action arose outside the Portuguese law, then that part of the law dealing with the limitation would not apply. The cause of action in a suit based on the law outside Portuguese law would be governed by the Limitation Act, 1963.

In para 4 of the judgment, the Supreme Court enumerated various Limitation Acts, enacted initially by the British and later by the Indian Parliament, being the Act of 1859 which came to be repealed by the Act of 1908 and which was in turn repealed by the Act of 1963.

In para 7 of the judgment, the Court accepted the fact that the PCC contained details of multiple laws, including the law of limitation.

In para 11 of the judgment, the Court held that the PCC was a complete Code in itself dealing with various rights and liabilities of citizens and the limitation for the enforcement of such rights. The limitation period for those rights, therefore, could not but be said to arise from the PCC and not de hors the same.

In para 12 of the judgment, the Court observed that the Negotiable Instruments Act, 1881, Indian Contract Act, Sale of Goods Act and Transfer of property Act were brought into effect in Goa from 1st December, 1965. Hence, these legislations came to be made applicable to the State of Goa by the appropriate legislative authority. The promissory note signed by the respondents in that case was under the Negotiable Instruments Act. The deed of hypothecation signed by the respondents was a contract under the Indian Contract Act, both of which stood applied to the State of Goa.

In para 13 of the judgment, the Court observed that Article 535 of the PCC regulated contracts. That was replaced by the Indian Contract Act. Hence, the Court held that the period of limitation prescribed under Article 535 could not survive as an independent provision. It was replaced upon adaptation of the Contract Act. The Supreme Court observed:

It thus cannot but be said to be an implied repeal.

The necessity of expression "repeal" was not even considered.

In para 13 of the judgment, the Supreme Court held that either the Chapter survives in its entirety or it parishes in its all spheres - it is one chapter dealing with contract and prescribed the period of enforcement of the same, no dissection is possible.

Again in para 17, the Supreme Court has observed,

...either the Code applies in its entirety or it does not - there is no half may about it.

This stands to reason. If the substantive law does not apply, the period of limitation of that substantive law also cannot apply. If the law came to be impliedly repealed, the period of limitation also thus did not survive. It would hold good only so long as the substantive law itself continues in operation. The substantive law would continue in operation - together with its limitation period - until another law is applied to the State of Goa.

Consequently, the Supreme Court opined that by reason of existence of the right under the Indian Laws being the Contract Act and the Negotiable Instruments Act, the Portuguese law to that extent stood impliedly repealed. The Supreme Court reasoned that if that was not so, it would result in an absurd situation. The branches of Banks in Goa would sue for recovery of money after 20/30 years and the branches of the Bank in other parts of India would have to sue within three years.

It is in this context that in para 19 of the judgment the Supreme Court observed that the PCC was not a local or special law relating to a cause of action which arose under the Indian Contract Act and the Negotiable Instruments Act. The provisions of the Limitation Act could not be applied de hors the provisions of the PCC which were no longer applicable. Hence, the Supreme Court held that the PCC could not provide for a period of limitation for a cause of action which arose outside the provisions of the PCC and that there would be repugnancy to that extent.

12. It, therefore, follows that if the provisions of the PCC applied, the limitation period mentioned therein would apply. Only if the PCC stood impliedly or expressly repealed by adapting any other legislation to the State of Goa that the period of limitation mentioned in that part of the PCC which was accordingly repealed would not apply.

13. It may be mentioned that there has been no law of pre-emption in India which would be applied in Goa. But the Law of Preemption in Goa prevailed and hence, the plaintiffs sued under that law being Article 1566 of the PCC. Since there has been no other law made by the Parliament in respect of the right of pre-emption in India which was made applicable to Goa, that law continues to be in force including its proviso, showing the period of limitation for such a cause of action. Rightly, therefore, the plaintiffs sued under that law. The plaintiffs have not sued under the uncodified Hindu Law applicable to India and such a law relating to pre-emption had not been made applicable in Goa. The period of limitation would, therefore, be an adjunct to the substantive law which continues to be in force. That period of limitation would govern the plaintiffs' suit.

14. The plaintiffs' case, therefore, falls within the full extent of Article 1566 of the PCC, including the period of limitation. The plaintiffs have not sued within six months of the knowledge of the sale deed. Though the plaintiffs claim to have sued under Article 97, the plaintiffs have also not sued within one year of the registration of the sale deed

15. It is argued that the Article must be read down to include the concept of knowledge even though the sale does not admit possession. The argument is wholly misconceived. The Limitation Act has to be construed strictly. The period of limitation has to be considered from the time it would begin to run and not from any exterior date. The Counsel on behalf of the respondents has rightly drawn the Court's attention to the various Articles being Articles, 56, 57,59, 61-B, 68, 71, 84, 92 to 95, 110 etc., where the knowledge has been contemplated for the time to begin to run. If the legislature deemed it fit, it would have shown that concept in Article 97 also. That is not shown. The Court cannot read the concept of knowledge into the Article, as that would be an act to legislate.

16. In view of the above discussion, it is held that when the suit for pre-emption is filed under Article 1566 of the PCC, that Articles in its entirety, including the period of limitation, would apply and not Article 97 of the Limitation Act, 1963. Point of determination (a) is answered accordingly.

Further Article 1566 of the PCC with regard only to the aspect of limitation cannot be stated to be repealed. It applies in its. entirety. Point of determination (b) is, therefore, answered in the negative.

Consequently, the appeal fails and is hereby dismissed with costs.