MUHAMMAD MUSHTAQ vs MALIK MUMTAZ — 2026 SCMR 54 SUPREME-COURT

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MUHAMMAD MUSHTAQ VS MALIK MUMTAZ. Ss. 2(d) & 5---Pre-emption---Distinction between sale and exchange---Relevance---Transaction recorded in mutation as an exchange or a sale---Classification and determination. According to Section 5 of the Act, a right of pre-emption arises in the case of a sale, which, as defined in Section 2(d) of the Act, refers to a permanent transfer of ownership of immovable property in exchange for valuable consideration. However, this definition explicitly excludes situations where agricultural lands are exchanged for purposes of better management. The legal issue before the Supreme Court was whether a transaction recorded in mutation as an exchange could be treated as a sale for the purpose of creating a right of pre-emption. Held: The distinction between sale and exchange is of fundamental importance because the right of pre-emption is available only against a sale transaction and does not extend to transactions such as exchange or gift. While the law of pre-emption can be evaded through lawful means, there is nothing inherently illegal about executing an exchange when a vendee or buyer fears that a straightforward sale in his favour might be pre-empted. A transaction which is genuinely an exchange cannot be converted into a sale merely because the effect of such transaction may defeat a claim of pre-emption. The Supreme Court held that the nature of the transaction has to be determined on the basis of the actual substance of the transaction and not merely on assumptions or suspicion. Where the parties have lawfully executed an exchange of agricultural land for better management purposes, such transaction does not attract the right of pre-emption under Section 5 of the relevant Pre-emption Act.

MUHAMMAD MUSHTAQ vs MALIK MUMTAZ — 2026 SCMR 54 SUPREME-COURT

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