FIRM MUKAND LAL \'EER KUMAR & ANR.

SRI PlJRUSHOTl'A\'I SINGH & ORS.

January 31, 1968

[J. C. SHAH AND V. RAMASWAMI, JJ.)

Ptorincial /11sohency Act (5 of 1920), s. 9(l)(c)-Trv.11sfer of pro. perry by Dl'ed-All<'1-:ed act "-' insolvcucy-Threr 1non1hs pt'Tiod start.t

w11etlzer frnnz• execution or rl'gistrlltion-Whethcr finn can be adjudicated irnolvent-P<1rtners when can he adjudicated i1no/l•ent.

M a p;.1nncr of. a firn1 cxccurcJ a dccJ of gif1 in Octob.; r, 1957 of a property. \\hich v•as not partnl'r.., hip property. rhe deed of gifts v.as rcgi>tcrcd in March 1958.

In April, lay, 1958 and January 1959, pelirions \\'ere tiled alleging thar the firn1 and its l\l/O p<irlncrs had comn1i1te<l acts of in1, olvcncy <11HI therefore, thl!y shoulU he declared inolvnts. The lo\\cr court<; .a<ljudic;11ed lhe firm and rh-~ partner-; insolven!. 'fhl! High C."ourr, in revision. confinncd th1.? adjudica1ion of insolvency \\'ith rcgan.J

to lhc firn1 and \I. hut set a.;, idc \\'ilh regard 10 the other partner. In 11ppeal to thi_.; Couri it \\'3\ conrendeJ lhJt (i) the siarling point of the three n1onth"' period prscrihcd under s. 9(i) (c) of the Provincial Jn- .!, Q)vcnc)' Ac1 .... hould he lhc d; ite of execu i0n of the Jeed of gifr and not the date of rcgisrration; (ii) no order of ; tdjudication could be made agains1

;1 firm hut it could only be n1aUc agJin~I the parlners individually; and

(iii) the Jirn1 should no~ have hecn d2clarcU inolvcnt n1ercly because of 1hc deed of g1fl cx, culed hy \1.

llELD: (il Scciion 49 of the Indian Rcgi!:>lra1ion Act implies thal a do..:umcnt by rc<i<.On of ih c:xecutionalone cannot h; ivc lhc effect of lr'1n.;;- fcrring the properly.

The deed of gift cxccut-:!d by f\f, could not be considered 10 he an acr of in:-.olvcncy unless a v<1lid tr<1nsf.!r of properly \\'as

n1adc hv I hat Uocun1cn1 and such ;1 valid t r;.insfer could he said to hu\-e been m; de only when the docun1cnt \Vas registered. J866 D-FJ

.J.akh111i Cliond v. Kt\110 R.t1111. 1.L.R. 16 L<1h, 735. Saratl1adu /)h'lJr"yya' v. K uruba Suhh11n11a, I. L. R. 5 8 \.fad. J 66 and /)istrilI Bua rd Bij11or

v. A1 uht1111n1t1d A hdul S:do111, I. l. R, J 94 7 AIL 624, approve<l.

U ()11 M~11u1g v. ,\fa1111,1,• Shwc //paung, A.l.R. 1937 Rangoon 446, <lisapprove<l.

(ii) An ord1r of adjuJicarion could be made againr the firm in rhc prccnt case if the proper condition . .;; \\'ere sa1isfied. Seclion 79(2) (c) of the Act provides for rules to he ma<lc bv the High Court as to the procedure to he follo\1.-'Cd \\'h-.!11 :he debtor is a firn1. 'rhis section, therefore. ;1ssumc) rhat ; ut adjudication order can he n1ade under !he Act againsr 1hc firm in the firms name. [~67 G-l~]

J:'x ptirlt' /llc1i11 (1879)12 Ch. D. 5~2. rcrcrred to.

(iii) Jn order to support an adjudication again5t a firm ihcrl' n1ust be proof thal c;1ch of the partners h;1~ committed some act Of insol\'cncy. If, ho"ever, a joint acr ol insohency iS relied upon it must be shoy.n to be the aL"t of <111 rhe parlnrs. 1\n or<lcr for adjudication can also be made <1J!ains1 a firn1 if 1hcrc v.--; is an ac 1 of insolvency by an agent of 1he firm "hich W<tS !luch :is n1us1 ncccs\arily he in1ru1ed to lhC firm. rh~ cxpla.- n:i!il1n ro s. 6 of the Acr docs nor by do\\n !hat an act of insolvency of

• A

II ..

the agent shall. be attributed to the principal but that it ma~ .. e treated asthc Act of the principal. [868 E, F] ·

rfhe on.Jer of the lower court, so far it adjudicated the registered firm as insolvent. rnut be set aside.

The property of which M made gift was not a partnership property an<l ther~ was no collective act of insol vcncy allcgc<l on behalf of all the partners <; Jf the firm.

Re : lvlvhanuul Hasan1 & Co. 24 Born. l.R. 861 and Gopal Naidu v.

Mohan/al Kan'yafol, LL.R. Mad. 189. referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 1167 to 1169 of 1965.

Appeals by special leave from the fµdgment and order dated November 1, 1961 of the Allahabad High Cnurt in Civil Revision Nos. 310 to 312 of 1960.

A. K. Sen and J. P. Goyal, for the appelhmts (in all the appeals).

B. C. Misra, M. V. Goswami and R. H. Dhebar, for rej:lon dcnts Nos. 1 and 2 (in C.As. Nos. 1167 and 116~ of 1965).

S. S. Shukla, for respondent No. 3 (in C.As. Nos. 1167 and 1168of1965) and respondent No. 2 (in C.A. No. 1169of1965).

B. C. Misra and R. Mahalingier, for respondent No. 1 (ii) to

(v) (in C.A. No. 1169 of 1965).

The Judgment of the Court was q.e}iyered by

' Ramaswami, J. These appeals are brought, by special leave, from the judgment of the Allahabad B:igh Court dated November 1, 1961 in three Civil Revision Applications nos. 310 , o 312 of 1960.

AppeJlant no. 1 is a registered firm of which appellant no. 2.

Mukund Lal and respondent no. C/, Ram Surat Misra. are the only two partners. The firm carried on 'Arhat' (Commission Agency) business.

Three petitions µnder the Provincial Insolvency Act (Act V of 1920), hereinafter called the 'Act', were made against the firm and its two partners under s. 7 of the Act. Purushottah1 Singh, respondent no. 1 and Sat Narain Singh, respondent no. 2 filed the first petition (Petition no. 9 of 1958) on April 28, 1958.

The second petition was filed by Smt. Tara Devi, respondent no. 3 and Shyam Das, respondent no. 4 on May 30, 1958 which was registered as Petition no. 19 of 1958.

The third petition was filed by Jivenda Mal on January 20. 1959 which was registered as Petition no. 2 of 1959.

In petition no. 9 of 1958, a sum of Rs. 15,760/- was claimed; in petition no. 19 of 1958, a sum of Rs. 14,545/-was claimed and in petition no. 2 of 1959 a sum oi Rs. 3,884/- was claimed but other creditors also filed their claims to the extent of Rs. 96,000/-.

In all these petitions it was alleged

864 SUPREME COt:RT REPORTS

[ 1968] 2 S.C.R.

that the firm and its two partners Jiad committed acts of insolvency and therefore they should be declared insolvents. The firm and its partners contested the pctitiiins and asserted that they had already paid a sum of Rs. 3,50.000/- to other crcllitors and they .were in a position to pay all the creditors and had not conunittcJ any acts of insolvency. All the three insolvency petitions wer~ consolidated together and were heard by the Insolvency Judge, Varanasi whQ by his judgment dated August 8, 1959 adjudieatrd the firm .and its two partners as insolvents.

Thereafter the firm and its two partners filed three appeals i; nder s. 75 or the Act but all these appeals were dismissed by the Additional District Judge, Varanasi by his judgment dated February 28, 1960. Thereafter the firm and its two partner> took the matter in revision to th,• Allahabad High Court which partly allowed the revision applications and set aside the order of the lower courts adjudging Ram Surat Misra. respohdent no. 7. one of the partners of the firm a; insolvent.

The rest of the order declaring the firm and its other partner, Mukand Lal as insolvent was cofinned.

The main question iO be considered in these appeals is whether the deed of gift executed by Mukand Lal in favour of his soi;, Veer Kumar on October 3 I, I 951 and registered on March 11.

I 958 could be treated as an Act of insolvency committed withi,, three months of the presentation of the petition.

Secion 6 ( b) or the Act state' : "6. A debtor commits an act of inso:vency in each of the following cases, namely :-

( b) if, in India or ebewhere, he makes any transfer of his property or of any part thereof with intent to defeat or delay his creditors;"

Section 9( I) (c) states:

"9. (I) A creditor shall not be entitled to present an insolvecy petition against a debtor unless-

( c) the act of insolvency on which the petition is G grounded has occurre.d within three months before the presentation of the petition :

Provided that where the said period of three months referred to in clause ( c) expires on a day when the Court is closed. the insolvency petition may be presented on the day on which the Court re-opens." Section 122 of the Transfer of Property Act (Act 4 of 1882) " to the following effect :

FJRM MUKAND LAL "· PURUSHOTAM (Ranwswami, !.) 865

A "Gift is the transfer of certain existing moveable or

immoveable property made voluntarily and without consideration, by one person, .called the donor, to another, called the donee, arid accepted by or on behalf of the donee.

Such acceptance must be made during the life-time of the donor and while he is still capable of giving.

If the donee dies before acceptance, the gift is void."

Section 123 of the Transfer of Property Act states :

"For the purpose of making a gift of immoveable C property, the transfer must be effected by a registered instrument signed by or on behalf of the donor, and attested by at least two witnesses.

For the purpose of making a gift of moveable property, the transfer may be effected either by a registered instrument signed as aforesaid or by delivery.

Such delivery may be made in the same way as goods sold may be delivered." Section 47 of the. Indian Registration Act, 1908 (Act 16 of

1908) is to the following effect :

"A registered document shall operate from the time from which it would have commenced to operte if no registration thereof bad been required or made, and not from the time of its registration." Section 49 of the Indian Registration Act states as follows :

"No document required by section 17 or by any provision of the Transfer o.f Property Act, 1882, to be registered shall- ( a) affect any immoveable prope1iy comprised therein, or

(b) confer any power to adopt, or ( c) be received as evidence of any transaction affecting such property or conferring such. power. unless it has been registered : Provided .that an unregistered document affecting immoveable property and required by this Act or the Transfer of Property Act, 1882, to be registered may be received as evidence of a contrct in a suit for specific performance under Chapter II of the Specific Relief Act, 1877, or as evidence of part performance of a contract for the purposes of section 53A of the Transfer of Property Act. 1 882. or as evidence of any collateral

866 ' j•

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[1968] 2 S C.R

transaction not required to be effected by registered instrument."

It was contended on behalf of the appellants that under s. 4 7 of the Indian Registration Act a registered document operates from the date of its executirn even though it may require registration and consequently the registration of the document should be taken to. date back to the date of execution by a fiction of law.

It was therefore submitted that the starting point of the three months' period prescribed under s. 9(1 )(c) of the Act should be the dat~ of execution of the deed of gift and not the date of registration.

We are unable to accept this argument as correct.

Section 123 of the Transfer of Property Act states that for the purpose of making a gift of immoveable property the transfer must be effected by a registered instrument in the prescribed manner. Under th!s section therefore a gift of immoveable property is not valid unle>' it is effected by a registered instrument. It is true that under s. 47 of the Indian Registration Act once a document is registered the effect begins to commence from the date of execution, but if the document is not registered it can never have any legal effes; t as " deed of gift.

Under s. 49 of the Indian Registration Act it is provided that no document required by s. 17 or by any provision of the Transfer of Property Act, 1882, to he registered shall affect any immoveable property comprised therein unless it has ben registered. The section necessarily implies that such a document by reason of its execution alone cannot have the effect of transferring the property.

In the present case, therefore. the deed of gift executed by Mukand Lal in favour of Veer Kumar dated October 31, 1957 cannot be considered to be an act of in<c.; vency unless a valid transfer of properly was made by that document and such a valid transfer could be said to have been made onlv when the document was registered on March 11, 1958. The question in the present case is nof what was the effect of the registration of the deed of gift, but when did the event take place which effectively transferred the property.

We are not concerned wit!• the point of time from which the document became operative but with the point of time at which the deed of gift became legnlly effective.

The contrary viewpoint for which the appellant con tends would ignore the cirrnmstance that if the reistration of the deed of gift was not effected within the period of three months the creditor would be deprived of his remedy of relying upon the act of transfer as constitutin~ an act of insolvency. Such an interpretation should be avotded as it would nullify the intention of the statute.

On this question there has been divergence of opinion amon~ the various High Courts.

Tn Lakhmi Chand v. Kesha Ram ( 1 i

(I) I.LR. 16 Lah, 7)5.

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it was held by the Full Bench of Lahore High .Court th11t .when a petition was presented alleging that a debtor had committed an act of insolvency by a regi, stered deed, the period of limitation prescribed by s. 9 (1 )( c) of the Act ran from the date of the registration of the deed and not .from the .date of the execution thereof.

The same view was expressed by the Madras High Court in Sarvathada Iswarayya v. Kuruba Subbanna('). In that case, the execution of the sale deed waR relied upon as an act of insolvency by a petitioning creditor and it was held by Madhavan Nair and Bardswell, JJ. that the three months' period prescribed by s. 9 (1) ( c) of the Act must be calculated from the date of the registration of the deed and not from the date of its execution.

The same view was also enunciated by the Allahabad High Court in Dis'lrict Board, Bijnor v. Mohammad Abdul Salam(').

A contrary view has been taken by the Full Bench of the Rangoon High Court in U On Maung v. Maung Shwe Hpaung( 8 ). It was held that the period of three months referred to in s. 54, Provincial Insolvency Act, began to run from the date of execution of the transfer provided it had been properly registered within the spei fied time..

But for the rasons already expressed we hold that the decisions in Lakhmi Chand v. Kesho Ram('), in Sarvathada Iswaryya v. Kuruba Subbanna.('). and in' District Board, Bijnor v. Mohammad Abdul Salam('), correctly state the law on the point .

It was next argued that no order of adjudication could be made against a firm but it can only be made against the partners individually. We are unable to accept this argument as correct.

It is true that according to the English law the act o[bankruptcy must be a personal act and no act of bankruptcy could . , be committed by a firm as such, and no adjudication could be made against a firm . in the firm's name.-(See Ex parte Blain)('). But under s. 99 of the PresidenC)'-towns Insolvency

Act (Act III of 1909) an adjudication order may be made. against a firm in the firm's name and such an order operates as if it were an order made against each of the persons who at the date of the order was a partner in the firm.

There is, however, no provision in the Act corresponding to s. 99 of the Presidencytowns Insolvency Act., But s.79(2)'(c) of the Act .provides for rules to be made by 'the High. Court as to the procedure to be followed when the . debtor is' a firm.

This section therefore assumes that an adjudication order can be made under ihe Act against the firm in the firm's name. Rules have been made under this section by th<:l Allahabad. High Court'. Reference was made H on behalf of the respondents to Rle 26 which states :. ·

{!) I.L.R. SB Mad.166. . (>) A.J.R. 1937 Rangoon 446.

(5) (1879) 12 Ch. D. 522-.

__ ._..

(2) I.)'.,.il, )947 Alt. 624.

(4) LL.Rd6 Lah.'735 .

SUPREME COURT REPORTS

[ 1968] 2 S.C.R.

"26. An adjudication order made against a firm shall operate as if it were an adjudication order made against each of the persons who at the date of the order is a partner in that firm."

It is manifest that an order of a"djudication could be made against the firm 1n the present case if the proper conditions were satisfied.

We therefore reject the argument of the appellants on this aspect of the case.

J, was further contended on behalf of the appellants that there is no finding of any of the couns to the effect that the firm commilted any act of insolvency.

The allegation of the respondents was that appellant no. 2 transferred to his son.

Veer Kumar his personal house property by way of a gift deed dated October 31. 1957 and this was done by him with the intent to defeat or delay his creditors.

It was pointed out that Ram Surat Misra was adjudged nor to be insolvent by the High Court on the ground that there WJs no allegation against him of any act of insolvency.

It was therefore contended that the firm should not have been declared insolvent merely because of the deed of gift executed by appellant no. 2, Mukand Lal.

In our opinion, this argument is well-founded and must be accepted as correct.

We think that in order to support an adjudication against a firm there must be proof that each of the partn.rs has committed some act of insolvency.

If, however, a joint act of insolvency is relied upon it must be shown to be the act of all the partners.

An order for adjudication can also be made against a firm if there was an act of insolvency by an agent of the firm which was such as must necessarily be imputed to the firm.

The Explanation to s. 6 of the Act says "for the purpose of this section the act of the agent may be the act of the principal".

The Explanation does not lay down that an act of insolvency of the agent shall be attributed to the principal but that it may be treated as the act of the principal.

Section 2 (a) of the Indian Partnership Act (Act IX of 1932) defines 'an act of a firm' to mean "any act or omission by all the partners, or by any partner or agent of the firm which gives rise to a right enforceable by or against the firm".

The effect of this section read with the Explanation to s. 6 of the Act appears to be that the question whether an act of insolvency of one or more partners can be regarded as an act of all the partners is a question of fact to be determined on the facts and circumstances of each particular case.

For instance, In Re Mohomed Hasham & Co.(') one of the partners in a firm consisting of two parnters departed from the usual place of business with intent to delay and defeat the creditors of the firm.

It was held by the Bombay

(ll 24 Hom. LR. 86).

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High Court that an adjudication order could not be made against the firm in such a case unless the other partner had also departed with like intent.

Similarly, in Gopal Naidu v.

Mohan/al Kanya/al ( 1 ) it was held by the Madras High Court that it is a question of fact whether the aq of one partner in closing the business of the firm and thus committing an act of insolvency so far as he is conce1 ned was imputable to another partner so as to entitle the creditors of the firm to get the other also adjudicated an insolvent.

In the circumstances of that particular case it was held that the mere fact of closing the firm by one partner without more evidence to show that the other either expressly or impliedly authorized the same was insufficient to lead to such imputation.

In the present case, the property of which Mukand Lal made a gift to Veer Kumar was not partnership property and the.re was no collective act of insolvency alleged on behalf of. all the partn.ers of the firm.

In the circumstances of the present case it cannot also be held that the act of insolvency committed by Mukand Lal should be attributed to Ram Surat Misra.

The High Court has, in fact, allowed the appeal of Ram Surat Misra and set aside the order of the lower courts declaring him as insolvent.

We are consequently of opinion that the order of the lower courts, so far as it adjudicates the registered firm as insolvent, should be set aside, but the rest of the order of the lower courts declaring Mukand Lal as insolvent will stand.

Subject to this modification these appeals are dismissed. There will be no order as to costs of this Court.

Y.P .

(I) J. L. R. 49 Mad. 189.

Appeals dismissed.

' \

FIRM MUKAND LAL \'EER KUMAR & ANR

C. SHAH

V. RAMASWAMI, JJ.

s. 9(l)(c)

s. 9(i)

s. 6

A. K. Sen

J. P. Goyal

B. C. Misra

M. V. Goswami

R. H. Dhebar

S. S. Shukla

R. Mahalingier

Ramaswami

Allahabad B:igh Court

Mukund Lal

Ram Surat Misra

s. 7

Purushottah1 Singh

Sat Narain Singh

April 28, 1958

Tara Devi

Shyam Das

May 30, 1958

Jivenda Mal

January 20. 1959

August 8, 1959

s. 75

Additional District Judge, Varanasi

February 28, 1960

Allahabad High Court

Ram Surat Misra

Mukand Lal

Veer Kumar

October 3 I, I 951

March 11.

India

Section 9( I)

Section 122

Transfer of Property Act

FJRM MUKAND LAL

Ranwswami

Section 123

Transfer of Property Act

Section 47

Indian Registration Act, 1908

Section 49

Registration Act

section 17

Property Act, 1882

section 53A

Transfer of Property Act

SUPREMB COURT REPORTS

[1968] 2 S C.R

s. 4

Registration Act

s. 9(1 )(c)

Section 123

Transfer of Property Act

s. 47

Registration Act

s. 49

Registration Act

s. 17

Transfer of Property Act, 1882

October 31, 1957

March 11, 1958

Lahore High .Court

s. 9

Madras High Court

Madhavan Nair

Bardswell

s. 9

Rangoon High Court

s. 54

Provincial Insolvency Act

s. 99

s. 99

October 31. 1957

Ram Surat Misra

Mukand Lal

s. 6

Section 2

Indian Partnership Act

s. 6


BIRENDR, A PRATAP SINGH AND ANOTHER

GULWANT SINGH AND OTHERS

Jan11ary 31, 1968

[J. C. SHAH, V. RAMASWAMI AND V. BHARGAVA, JJ.] B

U.P. Znmi11dari Abolition & Reforms Act, 1950, s. 19(vii)-person in possession of lane/ heco11Jing a Sirdt1r by vir1ue of being subtenc'1t undt: s. 47( 4) of U.P. Tenancy Ac1, 1939-req11iremen1s for-Suh./ense signed prinr In coming inin force of s. 295A of I 939 Act but to take efJect .o; ubsequently-if .s. 295A applicahlt'--Duration of lease mentioning no fixed period-pri11rioles for de1erfni11ing.

P held the ex-proprietary tenancy of certain lands and, on the 5th

Jur.~. 1947, executed a sub-lease in favour of the appellants which laid down that !he tenancy \.•/as to con1mencc from lst Ju:y, 1947 an~ which was regislered on the 22nd June.

On 15th January, 1951. P surrendered his tenancy rights to th.! landlord who in turn. executed a Jeruje in respect of !he land in favour of the rrspondcn's.

The appellants ho\\evcr con1inucd in possession. l"hc lJ.P. Zan1indari Aboliiion and Land Reforms Act. I 950 came into force on I st July, 1952 and both the appellants as well

s the rc!<ipond.::nts claimed to have become Sirdars of the land under the Act.

The appellant.s instiluled 'a suit for a doclaration that they had be come Sirdars of the land under s. 19(vii) by virtue of being suh-tenants within the meaning nf s. 47(4) of the U.P. Tenancy Act.

1939. The rrial Court decreed the st.:it in the appcllan~· 'favour but a Division Bench of the High Court et asid~ the decree.

In appeal to this Court it \\'as contended, inter alia, on behalf of the appellants that although P had suuendered his rights as ex-proprietary tenant on I 5th January. 1951, their own sub-tenancy continued by virtue of the provisions of s. 295A of the Tenancy Ac! which was introduced into that Act by the amendment Act X of 1947 that came into force on the 14th June. I 947; it was cla'med that s. 295A became applicable to the appellants becaus! a suh-Jease in their favour was executed on 5th June. 1947. prior to the enforcement of Act X of !947 so that on the da'e of commencen1ent of this Act the appell1nts continued to be the subtenants under s. 295A; ii was further contended that though the sub-lease in favour of the appellants \\-as not for any fixed tcrn1 mentioned in the .sublease itself. it should be held from the surrouhding facts and circumslanccs that the sub-lease was for a period of five y-ars as. under the Tenancy Act. an ex-proprietary tenant could sublet hie:; holding for a period not

cxc-:!edin~ 5 vears ..

HELD: The appellants' possession subsequent to 30th June. 1951 could not be held lo be in pursuance of a right confrred. on a sub-tenant

hy ' 47(4) of the U.P. Tenancy Act, 1939 and consequently. the land was not held by the appellants in the capacity mentioned in s. I9(vii) of the

U.P. Zan1indari 'Abolition and Land Ref0rn1'i Acl. 1950.

(i) "rhe appellants \Vere not suh-tenants on 14t!i June. 1947 which was

the date of commencement of the U.P. AC'! X of !947 and. therefore, H s. 295A of the Tenancy Act never becnme applicable to their case.

The sub-leac; e clearly laid down that the suh-lenancy was to commence from 1st July. 1947 which was a date subseQuent to 14th June, 1947.

The

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BIRENDRA v. GULWANT 871

mere fact that the sub-lease was executed on 5th June, 1947 by P could not mean that the appellants' sub-lease was with effect from that date.

~{ere delivery of the leas-e and its counter-part by one party to the other as envisaged under s. 55(1) of the Tenancy Act does not make the lessee under th:: lease a lessee fron1 the date of delivery of the written documents nor is any such principle laid down in s 55(1 ). Fu'rthermore it was in any case not shown. on the facts, such delivery had taken place prior to 14th June, 1947. [874 G-HJ

(ii) Nothing in the conduct of the parties had been brought on record to show that the sub-lease was intended to remain effective for a period of 5 years and on the facts of •he case the sub-lease must be. held to be from year to year and the appellants' rights determined accordingly.

Mohd. Sher Khan & Anr. v. Sp<cia/ Manager, Court of Wards, Mahewa Estate and Or.t. 1950 A.W.R. 447; distinguished.

Surendra Ktonar Sen Chaudhury & Ors. v. Chandratara Na:h & Ors., A.LR. 1931, Cal. 135 and Janaki Nath Roy and Ors. v. Dina Nat/1 K11nd11 & Ors., A.LR. 1931 P.C. 207; referred to.

The appellants had obtained the. sub-lease with effect from !st July, 1947, and were entitled to hold the land for one year which would expire on the 30th June, 1948: but, if they were. allowed to continue by their landholder on 1st July, 1948, they became entitled to hold the land for another year expiring on 30th June, 1949, and so on from year to year.

Since the appellants were allowed by P to continue in possession after !st July 1950, they were sub-tenants of P under the sub-lease. and were entitled to continue in possession upto 30th June, 1951.

But on 15th January. 1951, P lost his right as chief-tenant and the effect of s. 47(1) of the Tenancy Act was that, with effect from that date, the rights of the appellants as sub-tenants of P became extinguished. Their pbssession after that date could no longer be he.Id to be in the capacity of sub-tenants of P bu' was under a legal right which accrued to them under s. 47(4).

This is a limited right to continue in possession for \the remainder of the term of the sub-lease or for five years whichever period may be shorter.

In the present case, the right granted by s. 47(4) to the appellants could be exercised by them only upto 30th June, 1951. [879 C-FJ

Utility Articles Man11fact11ring Co. v. Raja Balwdur Motilal Bomha..v Mills Ltd., A.I.R. 1943 Born. 306 and Queen'.< Club Gorden.< Estate Ltd.

v. Bignell, [1924] 1 K.B.D. 117; referred to.

There was no force in the cont<ntion that when the appellants continued in possession of the disputed land after 30th June, 1951, they did so in exercise of the same right whica they possessed on 30th June, 1951, as that right was not extinguished by eviction from the land. The right under s. 47(4) is granted by the statute itself for a limited period, and, once that period expires, it cannot 1>e held. that the, right continues tbereafter. There is no require.ment in law that. after the expiry of that period. there must be eviction from the land in order to extinguish the right granted by s. 47(4), [880 D-E] Ram Dular Singh and Another v. Babu Sukhu Ram & Ors; 1963 Alld.

L.J. 667; dist; nguished. ' CIVIL APPELLATE JURISDICTION : Civil Appeal No. 619 of 1965.

 H Appeal by special leave from the judgment and decree dated December 17, 1963 of the Allahabad High Court, Lucknow Bench in Special Appeal, No. 76 of 1961.

SUPREME COURT REPORTS

[1968] 2 S.C.R.

Gopalji Mehro1ra, S. S. Misra and C. P. Lal, for the appellants.

Jagdish Swamp and J. P. Goyal: for respondents Nos. I to 4.

Th~ Judgment of the Court was delivered by

Bhargava, J. The disputed land was the ex-proprietary tenancy of one Parmeshwar Singh who, on the 5th June, 1947, executed a sub-lease in favour of the appellants on an annual rent of Rs. 74.

The sub-lease was registered. on 22nd June, 1947.

It laid down that the tenancy was to commence from the beginning of the year 1355 Fasli, i.e., with effect .from I st July, 194 7.

In pursuance of this sub-lease, the appellants entered into possession.

On 15th January, 1951, Parmeshwar Singh, the ex-proprietary tenant, surrendered his tenancy rJ'ghts to the landlord and on the same date the landlord executed a Jesse in respect of this land in favou:· of the 1espondents.

The appellants, however, continued to remain in possession.

Thcreafte~. on !st July, 1952, the U.P.

Zamindari Abolition and Land Refonns Act, 1950 (No. I o!

1951) (hereinafter referred to as "ihe Act") came into force.

Disputes arose between the appellants and the respondents who both claimed to hawe become Sirdars of this land and, consequently, on I st August, 1952, the appellants instituted a suit for a declaration that thy were the Sirdars of the disputed land.

They also prayed for an injunction restraining the respo11.dents

from interfering with the possession of the appellants.

In the alternative, a prayer was also made for a decree for possession, in case it was found that the appellants had been disposses.sed.

The Munsif. who tried the suit, held that the appellant< had become Sirdars under section I 9(vii) of the Act and, consequently, decreecl the suit.

The decree was aflinned by the first appellate Court as well as by a single Judge of the Allahabad High Court in second appeal.

A special appeal to a Division Bench was taken up by the respondents with the leave of the single Judge.

In this special appeal, the High Court held that the appellants did not become Sirdars of this land when the Act came into force and, consequently, allowed the appeal and dismissed the suit of the appellants.

The appellants have now come up to this Court against thLs decree of the High Court under special leave gran!ed. by this Court.

The appellants claimed to have become Sirdars of this land under s. 191vii) of the Act which is as follows :-·

"19. All land held or deemed to have been held on the date immediately preceding tl\e date of vesting by any person as-

BIRENDRA v. GVLWANT (Bhargava, !.) 873

(vii) a sub-tenant referred to in .sub>-section ( 4) of

section 47 of the United Provinces Tenancy Act, 1939,

.· shall, save in cases provided for in clause ( d) of sub section ( 1) of sec: ion 18, be deemed to be settled by the State Government with such person, who shall subject to the provisions of this Act be entitled, except as provided in sub-section (2) of section 18, to take or retain possession as a sirdar thereof."

In order to substantiate this claim, the appellants thus had to prove that this land was held or must be deemed to have been held by them on ihe 30th June, 1952 as sub-tenants referred to in sub-section (4) of s. 47 of the United Provinces Tenancy Act, 1939 (hereinafter referred to as "the Tenancy Act"). The question arose, because the appellants were holding as sub, tenanui from Parmeshwar Singh who surrendered his rights as chief tenant on the 15th January, 1951, before the relevant date mentioned ins. 19(vii) of the Act.

Section 47(1) of the Tenancy Act lays down that, except as otherwise provided in sub-section ( 3) and sub-section ( 4), the extinction of the interest of a tenant, other than a permanent tenure-liolder or a iixed 'ate tenant, shall operate to extinguish the interest of ''"Y knant holding under him.

This sub-section when applied to the cas~ of the appellants, ignoring the exceptions laid down in it, necessarily leads to the conclusion that. wh.n Parmeshwar Singh 0n 15th January, 1951 surrendered his rights as ex-proprietary tenant, the interest of the appellants, who were holding as sub -tenants under him, came to be extinguished.

On behalf of the appellants, however, it was urged that there are two grounds for holding that their interest was not extinguished and we proceed to examine these contentions.

The first ground, on which the continuance of subtenancy. even after the surrender by Panneshwar Singh, is claimed by the appellants, is based on the provisions of section 295A of the Tenancy Act which was introduced in that Act by section 26 of the United Provinces Tenancy (Amendment) Act X of 1947 and which reads as follows :-

"295-A. Notwithstanding any contract to the contrary or anything contained in this Act or any other law for the time being in force every person who on the date of the commencement of the United Provinces Tenancy (Amendment) Act, 1947, is a sub-tenant shall, subject to th~ provisions of the proviso to sub-section (3) of

(1968] 2 S.C.R.

section 27 of the United Provinces Tenancy (Amendment) Act, I 94 7. be e:1?itled lo retain possession of his holding for a period of live years from that date, and for this period nothing in sub-section (2) of section 44 or section 171 shall render the landholder of such subtenant liable to ejectment under the provisions of section 171 :

Provided ........................ "

The United Provinces Tenancy (Amendment) Act X of 1947 came into force on the 14th June. 1947, and it is urged that s. 295A of the Tenancy Act becomes applicable to the ap!Jellants.

because the sub-lease in their favour was executed on 5th June. 194 7, prior to the enforcement of that Amendment Act.

It is urged that, on the date of the commencement of the Amendment Act, the appellants were sub-tenants of this laud. This plea fails, because we are unable to accept the submission that the appellants were sub-tenants of this land on 14th June, 1947. The sub-leas~

in plain terms lays down that the sub-tenancy is to commerce from the beginning of 1355 Fasli, i.e., with effect from !st July.

I 947. which is a date subsequent to 14th June, I 947. The mere fact that the sub-lease wa' e:-ecuted on 5th June, 1947 by Parmeshwar Singh cannot make the appellants sub-lessees with elfet from

that date when the sub-lease itself laid down that it was to commence from the beginning of 1355 Fasli.

Learned counsel appearing on heh:ilf '1f the appellants. however, relied on sub-section ( 1) of s. 55 of the Tenancy Act which is as follows :-

"On admissio~ to a holding the tenant is enti!l•'.! to recciw from his landholder a written lease consistent with the provisions of this Act and the landholder upon delivering or tendering to a tenant such a lease is entitled to receive from him a counterpart thereof." Jn this case, there is no doubt that a written lease consistent with the provisicns of the Tenancy Act was executed together with a counterpart thereof on the 5th June, 1947; and learned counsel's argument was that this lease and the counterpart having been delivered in accordance with this provision on 5th June, 1947, it should be deemed that the appellants became tenants with effect from that very date.

The argument fails for two reasons.

One is that the mere delivery of the lease and the counterpart by one party to the other does not make the lessee under the lease a lessee from the date of delivery of the written documents, nor is any such principle laid down is sec. 55 (I). The rights under the lease can only arise in accordance with the terms of the lease.

Jn the present case. the terms of th~ sub-lease themselves laid down tha the appellants were to he sub-lessees irom !st July, 1947, and. consequenlly, the mere delivery of the documents could not brin_g

BIRENDRA v. GULWANT (Bhargava, J.) 875

into existence the relationship of lessor and lessee from an earlier date.

The second reason is that, even on facts, there is nothing to show that the written lease and its counterpart were actually delivered by one party to the other on the 5th June, 194 7.

On the other hand there is material on the record which makes it clear that there could not possibly have been such delivery of the written documents prior to 14th June, 1947.

The sub-lease itself shows. that it was registered on 22nd June, 1947.

The sub-lease was not valid and effective until it was registered.

This registration was required under s. 56 of the Tenancy Act which lays down that a lease for a period exceeding one year or from year to year shall be made by a registered instrument only.

The appellants themselves came forward with the case that this was not a lease for a period not exceeding one year, so that the lease to be valid had to be registered in accordance with s. 56 of the Tenancl! Act.

The registration took place on 22nd June, 1947 and it is, therefore, clear that the written lease properly executed and ell'ective could not have been delivered by Panueshwar Singh to the appellants before 22nd June, 1947.

Consequently, even if for the sake of argument it may be accepted, though we consider that it is entirely wrong, that on delivey of the written lease under s. 55 the rights as a lessee commence, such rights as sub-lessees in favour of the appellants could not arise before 22nd June, 1947, as there could not possibly be delivery of the written lease to the appellants by Panneshwar Singh prior to that date.

In these circumstances, the conclusion is irresistible that the appellants were not subtenants on 14th June, 1947, which was the date of commencement of the United Provinces Tenancy (Amendment) Act, 194 7 and, therefore, section 295-A of the Tenancy Act never became applicable to the case of the appellants.

The applicability of s. 19(vii) of the Act was claimed, in the alternative, on .the ground that the appellants were holding this land as sub-tenants referred to in s. 4 7 ( 4) of the Tenancv Act.

The case put forward on behalf of the appellants was that the sub-ledse in. their favour by Parmeshwar Singh was not for any fixed term mentioned in the sub-lease itself, but from the surrounding facts and Circumstances it should be held that it was a-sublease for a period of five years. The appellate Bench of the High Court, in deciding the case against the appellants, has held that the sub-lease was a lease from year to year and not for a period of live years as contended on behalf of the appellants. The term of five years as the period of sub-lease was claimed on the basis that, under the Tenancy Act, an ex-proprietary tenant could sublet his holding for a period not exceeding five years and any sub-lease for a period exceeding five years would be invalid. The argument was that when Parmeshwar Singh sublet his ex-proprietary holding to the appellants without mentioning any period, it must be inferred that he intended it to be a sub-lease for the full period of

876 SlJPREME COURT REPORTS

[19681 2 S.C.R.

five years for which he was entitled to sublet his holding.

We do not think that this argument can he accepted.

If Parmeshwar Singh had intended to sublet the land for a priod of five years only, or for a period less than five years, there was no difficulty in his making a mention of that period in the suh-lease itself.

Parmeshwar Sinh chose not to mention any period at all and. consequently, this sub-lease cannot be held to be a lease for any fixed period.

The sub-lease reserves an annual rent, and the period of the lease has to be determined on the basis of this rr.sr vation of rent.

We are unable to find any reasons in support of the plea put forward on behalf of the dppellants that the term of the sub-lease should Le held to be five years simply because no period at all was mentioued in the sub-lease itself.

No principle of law could be cited on behalf of the appellants in support of this plea.

Reliance was placed on a decision of a learned single Judge of the A!lahabad High Court in Mohd. Ser Khan and Another v.

Special Manager Courr of Wards, Mahewa Estate and Others( 1 ).

In !hat case, d:aling with an agricultur'11 lease in which no period was specified and there was only a mention of the date fwm which the lease was :o begin, it was held that the lease required registration as it could not 1'e treated as a lease for a period of one year only.

This proposition may be correct; but it docs not assist tilt appellants in urgin~ that the period must be held .to be five years.

It is true that, where the terms of a !case are not free from ambiguity, it is permissible to take into consideration the conduct of the parties for the purpose of determining its true nature, as held by the Calcutta High Court in Surendra Kumar Sen Choudhury and , Others v. Chandratara Nath and Others('). But, in the present case, nothing in the conduct of the parties has been brought on record to show that the sub-lease was intended to remain effective for a period of five years only.

The sub-lease. as we have mentioned earlier, did not specify any term, but reserved an annual rent.

Such a lease can only be held to be either a permanent lease or a lease from year to year.

This proposition was clearly laid down by the Privy Council in Janaki Nath Roy and Others v. Dina Nath K1111du and Others('). fn that case, their Lordships were concerned with a lease which was described as "beymeyadi".

Upon a careful consideration of the document of lease, their Lordships held :-

"Either the lease is a permanent lease, determinable only in the special cases therein provided, or it is a lease from year to year, which the landlord could at his will determine by a six months' notice.

No intermediate position is open."

(l) tQ50 ,\W.R. 447. (')A.LR. t9)1 Cal. l.'5.

(3) At.R. !Y.11 P.C 2G7.

.· A

BIRllND!lA v. GULWANT (Bhargava, J.) 871

The principle laid down, thus, categorically excludes an interpretation being put on such a lease by which the lease may be held to be for a fixed period.

The only interpretation possible is that either it is a permanent lease, or a lease from year to year.

The contention on behalf of the appellants that this Court should hold the present sub-lease in favour of the appellants to be for a fixed term of five years must, therefore, be rejected.

Since the appellants themselves do not contend that this sub-lease should be held to be a permanent one because, in that case, it would become invalid, the conclusion necessarily follows that the sub-lease must be held to be from year to year, and it is on this basis that the rights of the appellants shou\d be determined.

Counsel appearing on behalf of the appellants argued that, even if it be held \hat the sub-lease is Aot for a fixed term of five years but is one from year to year, the appellants can still justifiably claim that they were holding the land on 30th June, 19S2 as sub-tenants referred to in s. 4 7 ( 4) of the Tenancy Act. In order to test this argument, we have first to consider the status of the appel!ants on 15th January, 1951, the date when their chief tenant Parmeshwar Singh surrendered his rights, and the effect of that surrender on the rights of the appellants. It is true, as urged by learned counsel, that there is a distinction between a lease from year to year and a lease for a fixed period of one year .only. The sub-lease in favour of the appellants was not for a fixed period of one year.

Being a sub-lease from year to year, the right of the appellants acquired under it was to hold the land as 5ub-lessees year after year as those years commenced. The true nature of such a lease was explained by the Bombay High Court in Utility Articles Manufacturing Co. v. Raja Bahadur Motilal Bombay Mills

Ltd.('), though with reference to a monthly lease. In order to explain the incidence of such a lease, that Court relied on the judgment of Salter, J. in Queen's Club Gardens Estate, Ltd. v.

Bignell('), whq was dealing with a case where the parties, by agreement between them, had expressed the intention that the tenancy shall be a periodic tenancy, viz., a tenancy from week to week and beyond this, no further or other intention could be gathered either from the words or the conduct of the parties.

Salter, J. held that "in the case of all periodic tenancies, whether from year to year, or from quarter to quarter, or from month lo month, or for any otherperiod, the law, as I find it stated in the authorities, appears to be that the tenancy is from perio~ period, from one fixed date to another.

It is a tenancy for so many years, or quarters, or months, or weeks, as the parties may think fit. If a new period be allowed to begin, the tenancy must, in the absence of course of any other arrangement between the parties, continue until the period ends, and neither party can, against the will of

(I) A.I.R. 1943 Born. 306.

(2) [1924] I K.B.D. 117.

LJSup.Cl/68-12

878 SUPIU!MB OOU1T IU!POllTS

[!968] 2 $.C.R.

the other, put an end to the tenancy during the currency of the period." In that case, the principle was further explained by approving the following dictum :-

"It seems clear that the true nature of such a tenancy is that it is a lease for two years certain, and that every year after it is a springing interest arising upon the first contract and parcel of it, so that if the lessee occupies for a number of years, these years by computation from the time past, make an entire lease for so many years, and that after the commencement of each new year it becomes an entire lease certain for the years past and also for the year so entered on, and that it is not a reletting at the commencement of the third and subsequent years."

In our opinion, this is the correct principle to be applied in giving effect to a lease from year to year. In the present C:ISe, the appellants had obtained this sub-lease with effect from lst July, 1947 and, as we have held earlier, it was a sub-lease from year .o year.

On 1st July, 1947, therefore, the appellants were entitled to hold the land for one year which would expire on the

30th June, 1948; but, if they were allowed to continue by their landholder on 1st July, 1948, they became entitled to hold the land for another year expirinJ? on 30th June, 1949. During that year, therefore, the sub-lease would be held to be a sub-lease for two years.

Similarly, since the appellants were allowed to continue by Parmeshwar Singh in possession until 15th Jan11ary, 1951. it must be held. that under that same sub-lease, the appellants were sub-lessees for the subsequent years 1949-50 and 1950-51 also.

On 15th January, 1951, consequently, the appellants were subtenants of Parrneshwar Singh under this sub-lease and their term was to continue up to 30th June, 1951. On 15th January, 1951, Parrneshwar Singh lost his right as chief-tenant and the effect of s. 4 7 ( 1) of the Tenancy Act was that, with effect from that date, the rights of the appellants as sub-tenants of Parrneshwar Singh became extinguished.

The sub-lease in favour of the appellants terminated on that date.

The appellants continued to remain in possession even after 15th January, 1951, but that possession could no longer be held to be in the capacity of sub-tenants of Parmeshwar Singh. The subsequent possession was, however, under a legal right and that right accrued to the appellants under su~. ( 4) of section 47 which is as follows :-

"Where, at the time of the extinction by surrender or abandonment, or by death without any heir entitled to inherit such interest, of the interest in a holding of a tenant other than a permanent tenure-holder or fixedrate tenant, there is in existence a valid sub-lease of the

H •

BIRBNDRA v. GULWANT (Bhargava, 1.) 879

whole or of a portion of the holding, executed on or after the first day of January, 1902, all covenants, binding and enforceable as between the tenant and the subtenant shall, subject to 'the provisions of sub-s. ( 5), be binding and enforceable as between the tenant's landholder and the sub-tenant for the remainder of the term of the llUb-lease or for five years, whichever period may be shorter."

This sub-section does not lay down that the original sub-lease executed by the chief tenant, who surrenders his riglits, is to continue in force. What this provision does is to create a new right in the sub-tenant and that is the limited right to continue in possession for the remainder of the term of the sub-lease or for five years whichever period may be shorter.

During this period when the sub-tenant of the chief tenant, who has surrendered his rights, is entitled to remain in possession, he .is allowed the benefit of all covenants between him and the chief tenant and to treat them as . binding and enforceable between him and his chief tenant's landholder, subject to the slight modification in special cases governed by sub-section ( 5) of s. 4 7 when he is required , to pay to the land-holder the rent which was payable by the chief tenant in case it happens to be more than the rent which was payable by him a5 sub-tenant to his chief tenant. This special right granted by s. 47 ( 4) is exercisable for the limited term mentioped therein.

Where the remaining term of a sub-lease is more than five years, this right would be exercisable for five years; but, where the remaining period of a sub-lease is less than five years, the right would be exercisable only for the remainder of the term of the sub-lease.

In the present case, we have already held above that, on 15th ianuary, 19 51, the appellants were holding the land under a sub; lease under which they were entitled to continue as sub-tenants up to 30th June, 1951. Consequently, the right gra!lted bys. 47(4) to the appellants could be exercised by them ,. tly up to 30th June,

1951. No such right could remain vested in them subsequent to that date.

We are unable to accept the submission made on behalf of the appellants that it should be held that this right granted by s. 47 ( 4) would again accrue to the appellants on 1st July, 1951 in accordance with the terms of the sub-lease, because the sub-lease in their favour was from year to year. We have already mentioned earlier that the effect of s. 4 7 ( 1) of the Tenancy Act was that that sub-lease was extinguished and no accrual of a fresh right with reference to that sub-lease could be claimed thereafter.

The right that accrued under s. 47 ( 4) was no longer in the same terms as the right under the sub-lease and was only limited to the period during which that sub-lease was to remain effective on the date when s. 4 7 ( 1) and s. 4 7 ( 4) became applicable. On that L3Sup.CI/68-l3

880 SUPREME COURT IU!POllTS [1968] 2 s.c.R.

date, the remaining term of the sub-lease was up to 30th June, 1951, so that the right that accrued unJer s. 47 ( 4) was limited up to 30th June, 1951 only and it could not arise afresh on !st July, 1951 as it was not a recurring right like that of a sub-tenant holding under a sub-lease from year to year.

Learned counsel for the appellants, relying on a decision of the Full Bench of the Allahabad High Court in Ram Dular Singh and A1101her v. Babu Sukhu Ram & Others( 1 ) urged that in any case, we should hold that, when the appellants continued in posse; sion of the disputed land after 30th June, 1951, they did so in exercise of the same right which they possessed on 30th June, 1951, as that right was not extinguished by their eviction from the land.

The principle laid down by the Allahabad High Court in that case does not apply, because the decision in tat case depended on the circumstance that, under the Tenancy Act, the rights of a tenant continuing in possession after the expiry of the period of lease did not extinguished under sections 45 or 47 of the T nancy Act which "'ere the only sections which deal with the extinction of the rights of tenants. So far as the right granted by s. 47 ( 4) is concerned, it is granted by the statu1e itself for a limited period and, once that period expires, it cannot be held that the right continues thereafter.

There is no requirement in law that, after the expiry of that period, there must be eviction from the land in o:der to extinguish the right granted bys. 47(4).

The possession subsequent to 30th June, 1951 cannot, therefore, be held to be in pursuance of a right conferred on a sub-tenant referred to ins. 47(4) of the Tenancy Act and, consequently, th~ land was not held by the appellants thereafter in the capacity mentioned in s. l 9(vii) of the Act.

The High Court, in these circumstances, was right in rejecting the claim of the appellants.

The appeal fails.

As agreed by counsel for parties, parties F will bear their own costs of .this appeal.

R.K.P.S.

Appeal dismissed.

(I) 1961 Alld. L.J. 667.

BIRENDR, A PRATAP SINGH AND ANOTHER

GULWANT SINGH AND OTHERS

Jan11ary 31, 1968

C. SHAH

V. RAMASWAMI

V. BHARGAVA, JJ.

Reforms Act, 1950

s. 19(vii)

s. 47( 4)

s. 295A

s. 295A

Aboliiion and Land Reforms Act

s. 19(vii)

s. 47(4)

s. 295A

s. 295A

5th June. 1947

s. 295A

Tenancy Act, 1939

s. 295A

s. 55(1)

s 55(1 )

14th June, 1947

30th June, 1951

15th January. 1951

s. 47(1)

s. 47(4)

s. 47(4)

s. 47(4)

s. 47(4)

Gopalji Mehro1ra

S. S. Misra

C. P. Lal

Jagdish Swamp

J. P. Goyal

Bhargava

Parmeshwar Singh

22nd June, 1947

15th January, 1951

Parmeshwar Singh

Allahabad High Court

s. 191

section 47

United Provinces Tenancy Act, 1939

section 18

30th June, 1952

s. 47

United Provinces Tenancy Act, 1939

Section 47(1)

Panneshwar Singh

section 295A

section 26

section 27

section 44

section 171

section 171

14th June. 1947

s. 295A

5th June. 194 7

s. 55

5th June, 1947

sec. 55

5th June, 194 7

s. 56

s. 56

Panueshwar Singh

s. 55

section 295

s. 19(vii)

s. 4

Parmeshwar Sinh

A!lahabad High Court

Calcutta High Court

30th June, 19S2

s. 4

Bombay High Court

Salter

1st July, 1947

30th June, 1948

1st July, 1948

30th June, 1949

15th Jan11ary, 1951

Parrneshwar Singh

s. 4

section 47

s. 4

s. 47

15th ianuary, 19 51

s. 47

July, 1951

s. 4

s. 47

s. 4

s. 4

s. 47

sections 45

s. 47


CHHATU RAM HORIL RAM LTD. v.

STATE OF BIHAR AND ANR.

January 31, 1968

[J. C. SHAH AND V. RAMASWAMI, JJ.)

Bihar Land Reforms Act (30 of 1950), ss. 3, 4 and 10-Lease of mica bearing /ands-Covenant for renewc/ of /ease-Vesting of estate in State Government under the Act-Whether lessee entitled to renewal.

The appellant-company obtained a lease of certain mica bearing land from the owners for a period of fifteen years.

The lease deed provided for a renewal of the lease on the expiry of the period at the option of the lessee. The land .was within an estate and by virtue of a notification under the Bihar Land Reforms Ac', 1950, the estate vested in the State Government under s. 4, free 1from all encumbrances and free from all rights of the lessees. But the appellant continued in occupation for the remaining period of the contractual lease, under a s'atutory lease deemed to have been granted by the State under s. Hl of the Act.

On the question whether the &ppellant was entitled to specific performance of the covenant of renewal,

HELD : The agreement of renewal of the lease in future was not binding upon the State Government after the vesting of the estate.

(I) The original contractual lease came to an end by the operation of s. 4 and under s. 10 a fresh statutory lease for the remainder of the term of •hat lease, in favour of the lessee, came into being with terms and conditions mutatis mutandis the same as the conditions of the original

leas~. But the covenant granting an option of renewal of 1he lease on the expiry of the period of the lease is merely a covenant running with the land, and does not create any interest in land. It being in the nature of an encumbrance and by virtue Of s. 4 it was extinguished and the land vested in the State free from the obligation crea'ed by the renewal clause.

[885 C-E] The St1:1te of Bihar v. Indian Copper Corporation Ltd. I.L.R .. 38 Pat. 1160, approved.

(2) Rule 40 of the Mineral Concession Rules, 1949, under which a lessee of a mining lease is enti•led to at least one renewal for a period not exceeding the duration of the original lease, applies to grants made by Government and not to statutory leases. Therefore, the , rule has no applica'ion.

Even assuming the rule was applicable, the duration of the original lease in the case of such a statutory lease must be deemed to be no longer than the period between the date of vesting and the da'e of expiry of the original lease and that period. for which renewal may have been claimed, expired many years ago. [885 G; 886 A-Bl

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 47 of 1965.

Appeal from the judgment and decree dated December 12, 1962 of the Patna High Court in Appeal from Original Decree No. 433 of 1959. .

H. R. Gokhalt!, S. N. Prasad and iJ. P. Singh, for the appellant. ·

882 SUPlll!MB COUllT llBPOllTS

[1968] 2 S.C.R.

D. P. Singh, K. M. K. Nair and Shivapufan, for the respondent.

The Judgment of the Court was delivered by Shah, J. On September 30, 1940 the appellant-a private limited Company-obtained a lease froin the owners of 3,300

acres of mica bearing land in viIJage Sapi:hi in the District of Gaya, for a period cf fifteen years. Clause 29 of the indenture of lease read as folJows :- ·· "If on the expiry of the term of the thika we executant Nos. 1 and 2, first party, the lessors, desire to let out in thika the thika property or any portion thereof and if any other person wants to take it in thika, then in such circumstances it will be incumbent upon us, executant Nos. I and 2 first party, the lessors. to inform about it to executant No. 3, second party, the lessee, first. If on the same terms and stipulations and ; ama executant No. 3, second party, the lessee, wants to take it in thika then in that case, we executant Nos. I and 2, first party, the lessors, shall let it out in thika to him ( executant No. 3), and we shall execute a fresh thika deed in respect thereof in favour of executant No. 3, second party, the lessee. and executant No. 3, second parfy. the lessee, shall be competent to get the deed executed."

By virtue of a notification issued under s. 3 of the Bihar Land Reforms Act, 1950, the right of •he owners in the lands. vested on June 27, 1953 in the State of Bihar.

The appellant Company remained thereafter in occupation under a statutory lease deemed to be granted by the State for the remaining period of the contractual lease. On February 22, 1955, the Company served a notic~ upon the State exercisinit the option of renewal granted by cl. 29 of the indenture. On January 6, 1956, the State granted a lease to the appellant of 410 acres out of the lands for 20 yeat\ and the remaininit area was granted in lease to one Sant Saran Bhadani a director of the appellant Company.

In a writ petition moved by one Sudha Devi the lease granted to the appellant Comnany and Rhadani were set aside by order dated July 5, 1956. of the High Court of Patna. on the ground that in eranting fresh leaes to the appellant Company and Bhadani the State of Bihar had violated rr. 67 and 68 of the Mineral Concession Rules, 1949.

The appellant Com,, anv then instituted in the Court of the Subordinate Judee. Second Grade. Gava. an action for !t>Ccific H performance of the covenant of renewal in the indenture Of lease • dated September 30, 1940.

The Subordinate Ju_dJ?e dimiissed the action holding that by the Stipulation in cl. 29 a right of pre-

ClillATU RAM I.TD. V, BIHAR (Shah, J.) 883

A emption and not of renewal was granted to the appellant Company. The High Court of Patna confirmed the decree passed by the Trial Court but on different grounds. .The High Court held that the right granted by cl. 29 gave rise to an "encumbrance" which was extinguished when the interest of the owners in the land vested in the State.

With certificate granted by the High B Court, this appeal has been preferred by !he Company.

A notification under s. 3 ( 1) of the Bihar Land Reforms Act, 1950, on June 27, 1953 was issued in respect of the land of the owners.

Section 4 of the Act prescribes the consequences of the publication of the notification under s. 3 ( 1) : it provides, insofar as it is reievant :

"Notwithstanding anything contained in any other law for the time being in force or in . any contract, on the publication of the notification under sub-section ( 1) of section 3, or sub-section

(1) or (2) of section 3A the following consequences shall ensue, namely :

(a) Such estate or tenure including the interests of the proprietor or tenure-holder in any building or part of a building comprised in such estat~ or tenure and used primarily as office or cutch ery for the collection of rent of such estate or tenure, and his interests in trees, forests, fisheries, ja/kars, hats, bazar, me/a and ferries and all other sairati interests as also his interest in all sub-soil including any rights in mines and minerals, whether discovered or undiscovered, or whether being worked or not, inclusive of such rights of a Jessee of mines and minerals comprised in such estate or tenure (other than the iaterests of raiyats and under-raiyats) shaJI, with effect from the date of vesting, vest absolutely in the State free from all encumbrances and such proprietor or tenure-holder shall cease to have any interests in such estate or tenure, other than the interests expressly saved b; y or under the provisions of this Act." The opening words of this clause "Subject to the subsequent provisions of this Chapter" were omitted by Bihar Act 16 of 1959, but that omission has no practical significance in this case. Section 10 of the Act provides :

"( 1) Notwithstanding anything contained in this Act, where immediately before the date of vesting of the estate or tenure there is a subsisting lease of mines or minerals comprised in the estate or tenure or :my part

thereof, the whole> or that part of the estate or tenure

884 SUPREME COURT ll!POllTS

comprised in such lease shall, with effect from the date of vesting, be deemed to have been leased hy the State Government to the holder of the said subsisting lease for the remainder of the tem1 of that lease, and such holder shall be entitled to retain possession of the leasehold property.

(2) The terms and conditions of the said lease by the State Government shall mutatis mutandis be the same as the terms and conditions of the subsisting lease referred to in sub-section ( I ) , but with the additional condition that, if in the opinion of the State Government the holder of the lease had not, before the date of the commencement of this Act, done any prospecting or developing work, the State Government shall be entitled at any time before the expiry of one year from the said date to determine the lease by giving three month's notice in writing :

Provided

(3) ..

Counsel for the appellant Company contended that cl. 29 created an interest in the demised land in favour of the Company and the State of Bihar as successor-in-title of the original owners took the land subject to that interest.

In the altemativ~. counsel contended, the Company acquired immediately on execution of the indentures of lease an indefeasible right to obtain renewal and that right was enforceable against the owners and thir uccessors in-interest alike.

We are unable to agree with those contr.nti<'ns.

The covenant granting an option of renewal of the lease on the expiry of the period of the lease outstanding is a covenant running with the land : it creates no interest in land.

In The State of Rihar

v. Indian Copper Corporation Ltd.(') the High Court of Patna held that a clause for renewal of a lease on the expiry of its period has not the effect of a present demiSe nor does it opera'e to crete an interest in land on the date on which the original lease was executed : a covenant fpr renewal is not tantamount to an actual demise and therefore "no leasehold interest is created for the renewed term when the original lease is granted." Under the terms of the lease dated September 30, 1940, the appetlant Company became entitled to a lease for a period of fifteen years.

On the expiry of that period the Company could have enforcd their right to get a renewal of the lease for a period of fifteen years against the owners if their interest had not been extinguished. If the owners declined to carry out their obligation, the Company could sue for specific performance and claim a light to remain

(I) t.L.R. 38 Pat. 1!60,

cHltATU RAM LTD. v. BilIAR (Shah, ].) 885

in possession for a period of fifteen years stipulated in cl. 29.

But the provisions of the Bihar Land Reforms Act intervened. By rhe express terms of s. 4(a) of the Act all the interests of the owners in all sub-soil including any rights in mines and minerals, whether discovered or undiscovered, or whether being worktd or not inclusive of such rights of the lessee of mines and minerals ·

coprised in such estate or tenure became vested in the State with effect from the date of vesting absolutely and free from all encumbranches. Even the interest of the lessees of the mines and m; nera\s comprised in the estate therefore ceased, and all encumbrances on the interest of the owners' estate were extinguished and the State took the estate free from all the rights of the lessees. The original contractual lease came to an end by the operation C'f s. 4 (1 )(a) of the Act, and a fresh statutory lease for the remainder of the

teem of that lease in favour of the lessee came into being under s. 10(1) of the Act.

The appellant Company therefore acquired the rights of a s:atutory lessee for the period between June 27, 1953 and September 30, 1955, with terms and conditions mutatis mutandis the same as the conditions of the original lease granted by the owne, rs on September 30, 1940. But by virtue of s. 4 that covenant by which the owners had agreed to renew the lease at the option of the lessee being merely of the nature of an e11crnnbrance and not an interest in the land was extinguished, the land vested in the State free from the obligation created by the renewal clause.

We agree with the High Court that "a clause for renewal of the lease at a future date was a limitation imposed upon the lessor.

His freedom as an absolute owner was sought to be curtailed by such agreement. It was thus an encumbrance and all encumbrances were wiped out by section 4. . .................. .

Taking all these provisions into consideration, an agreement for renewal of a lease in future cannot be binding upon the State Government after the vesting of the estate".

Counsel for the appellant relied upon r. 40 of the Mineral Concession Rules, 1949, and contended that under 'the scheme of the Rules a lessee of a mining lease is entitled to at least one rrnewal.

Rule 40, insofar as it is material, provides : " ( 1) The period for which a mining lease may be granted shall be 30 years in the case of coal, iron-ore and bauxite for manufacture of aluminium, and 20 years in the case of any other minerals, unless the applicant himself asks for a shorter period. The lease shall be renewable at the option of the lessee, for one or two periods, each not exceeding the duration of the original lease, in the case of iron-ore and bauxite for manufacture of aluminium, and one period not exceeding the

886 SUPREME COURT llEPORTS

[1968) 2 S.C.R.

duration of the original lease in the case of other minerals." But r: 40 has no application.

Manifestly, the rule applies to grants made by the Government : it has no application to statutory leases arising by virtue of s. I 0 of the Bihar Land Reforms Act.

Even assuming that r. 40 applies to such a statutory lease, , the duration of the "original lease" may be deemed to be no longer B than the period between the date of vesting and September 30,

1955. That period for which renewal may have been .claimed has expired many years ago, and recognition of the rights of the appellant Company will be of no practical significance in this appeal.

The appeal fails and is dismissed with cdsts.

Appeal dismissed.

CHHATU RAM HORIL RAM LTD

STATE OF BIHAR AND ANR

C. SHAH

V. RAMASWAMI, JJ.

Bihar Land Reforms Act

ss. 3, 4 and 10

s. 4

s. 4

s. 10

s. 4

Mineral Concession Rules, 1949

Patna High Court

H. R. Gokhalt

S. N. Prasad

iJ. P. Singh

D. P. Singh

K. M. K. Nair

Shivapufan

Shah

Clause 29

s. 3

Bihar Land Reforms Act, 1950

Bihar

February 22, 1955

cl. 29

January 6, 1956

Sant Saran Bhadani

Sudha Devi

Comnany

Rhadani

July 5, 1956

High Court of Patna

Bhadani

State of Bihar

Mineral Concession Rules, 1949

cl. 29

cl. 29

s. 3

Bihar Land Reforms Act, 1950

June 27, 1953

Section 4

s. 3

section 3

section 3A

Section 10

cl. 29

September 30, 1940

cl. 29

s. 4(a)

s. 4

s. 10(1)

September 30, 1955

s. 4

section 4

Mineral Concession Rules, 1949


UNION OF INDIA

NANAK SINGH

January 31, 1968

(1. C. SHAH AND V. RAMAswAMI, JJ.]

Res Judicata-Petltion under A.rt. 226 allowed by single Judge o/ High CouN on twn groumh-Division Bench dismissing petition by advene/y deciding first ground Olld not considering second ground-Second growul

whether can be basis of civil suit-Whether barred by re&<judicata,

The respondCJ1t was a temporary Field Inspector of the Office of the Custodian of Evacuee Property, Delhi.

By an order passed in Januaey 1958 the Additional Settlement Commissioner, Mr. Kane, who wu also holding the office of Additional Custodian terminated the employment of the respondent after giving him one month's salaey in lieu of notice. The

order was confirmed by the departmental authorities in appeal. The respondent filed a writ petition in the High Court on two grounds, namely :

(i) that the order terminating the employment amounted to punishment and could not be made without affording opportunity to be heard; (ii) that Mr. Kane was not competent under s. 5 of the Central Services (Temporary Service) Rules, 1949 to pass the order. The single Judge who heard the petition upheld both the grounds and granted the petitilJn.

In appeal, the Division Bench reversed the order and dismissed the peti• lion observing that the order in question did not amount to punishment.

The Division Bench observed that the second point was not before them,

because arguments were advanced mainly on the first rint and on a decimon of tho first point the appeal. could he disposed o . The respondents petition under Act. 136 of the Constitution for special leave to appeal to this Court was dismissed. The respondent thereafter instituted a suit in the Civil Court. The trial Court dismissed the suit but the first appellate court held that the order terminating the respondent's serviee was void.

A second appeal by the Union of India was dismissed by the High Court on the view that the order of termination of services was passed by an incompetent authority and this issue was not barred by res judicata. The Union of India appealed. d'' HELD : The single Judge who decided the respondent's W[lf"petition decided both the grounds in his favour. When in appeal the.High Court reversed the judgment and dismissed the petition it must be deemed to have rejected both the grounds on which the petition was founded.

In rejecting the fil'!t plea the High Court gave detailed reasons. The second plea must also be deemed to have been negatived by the High Court. for the High Court could not, without reversing the judgment of the single Judge, on that plea have dismissed the petition. The suit was therefore barred by res judlcata.

It could not be said that the High Court reserved to the respondent the right to agitate the question about the authority of Mr. Kane to pass the order. in a separate suit. There was no snch express reservation and it could not be implied, for such an implication was plainly inconsistent with the final order passed by the High Court.

Gukibchand Chhota/al Parikh v. State of Gujarat, A.I.R. 1965. S.C II 53, referred to.

Abdul/ah Ashgar Ali Khan v. Gnnesh Dass, A.I.R. 1917 P.C. 201. held not applicable. 1.3 Sup Cl/63-14

SSS vl'REML COURT REPORTS

[ 1968) 2 S.C.R.

CIVIL APPELLATE JURISDICTION : Civil Appeal No; 280 of A 1967.

Appeal by special leave from the judgment and order dated September 29, 1966 of the Punjab High Court Circuit Bench at Delhi in Regular Second Appeal No. 74-D of 1966.

B. Sen, R. N. Sachthey and S. P. Nayar, for the appellant.

Pritam Singh Safeer, for the respondent.

The Judgment of tile Court was delivered by Shah, J.

Nanak Singh-respondent in this appeal-held in August 1957 the post of Field Inspector in the Office of the Custodian, Evacuee Property, Delhi, as a temporary employee.

By order dated January 10, 1958, K. S. Kane, Additional Settlement Commissioner who was also holding the office of Additional Custodian terminated the employment of the respondent. after giving him one month's salary in lieu of notice.

The order of Mr. Kane was confirmed in appeal.

Nanak Singh then moved the High Court of Punjab by a petition under Art. 226 of the Constitution for an order dcclarin)! that the determination of his employment was "void, illegal and unconstitutional" on two grounds-( I) that the order terminating the employment amounted to imposing punishment and could not be made without affording opponunity to the employee to show cause against the action proposed to be taken in regard to him: and (2) that Mr. Kane was not competent under r. 5 of the Central Civil Services (Temporary Services) Ru!es. 1949 to terminate his employment.

Gurdev Singh, J., upheld both the grounds and granted the petition.

The Hih Court of Punjab in appeal reversed that order and directed that the petition be dism1 .. , d. The High Couri observed that by the order determining the employment of Nanak Singh no punishment was imposed. Jn dea!ing with the authority of Mr. Kane to terminate the employment of 1'.anak Singh the High Court observed :

"Jn the second place it was urged that the Officer who had passed the order of dismissal was not competent to do so.

The second point is not before us because arguments have been advanced mainly on the first point and on a decision of this point the appeal can be disposed of." A petition preferred to this Court against the order of the High (; ourt for leave to appeal under Art. 136 of the Constitution was rejected.

Nanak Singh thereafter instituted suit No. 218 of 1963 in the Court of the Senior Sub-Judge, Delhi, for a declaration that the order terminating his employment was made by an authority lower

• !'

than the authority competent to pass that order, and that the order was "wanting in bona fides" and was on that account "illegal, null and void", and for an order declaring him entitled to be treated as continuing in employment and on duty and entitled to all the benefits of service as if he had not been removed from employment.

This suit was dismissed by the Court of First Instance.

In appeal; the Additional District Judge, Delhi, reversed the decree passed by the Court of First Instance, and declared that the order of Mr. Kane dated January 10, 1958, terminating the employment of Nanak Singh was void and inoperative, and that Nanak Singh was entitled to be treated as in service and on duty since the date of the order.

A second appeal against that judgment by the Union of India was dismissed by Bedi, J.

The learned

Judg~ was of the view that the judgment of the Division Bench of the High Court in the writ petition did not operate to prevent Nanak Singh from reagitating the question about the authority of Mr. Kane to terminate his employment, and that on the materials placed before the Court there was no evidence that authority had been delegated to Mr. Kane to exercise that power. Against that order, with special leave, the Union of India has appealed to this Court.

The first question which falls to be determined in tl1is appeal is whether the judgment of the High Court in the writ petition operated as res judicata in the Civil Suit filed by Nanak Singh.

Nanak Singh, it may be recalled, claimed relief on two alternative grounds-( 1) infringement of the protection under Art. 311 of the Constitution; and (2) absence of authority' in the Officer who terminated his employment under r. 5 of the Central Civil Services (Temporary Service) Rules, 1949. Each ground, if successful. was sufficient to support an order in his favour. Gurdev Singh, J .. decided both the grounds in favour of Nanak Singh. The High Court reversed the judgment of Gurdev Singh, J., and dismissed the petition filed by Nanak Singh : thereby the High Court must be deemed to have rejected both the grounds on which the petition was founded.

On the plea that the order of termination of his employment amounted to dismissal, the High Court gave detailed reasons and observed that by the termination of his employment Nanak Singh was not visited with any punishment. The second plea about the authority of Mr. Kane also must be deemed t0 have been negatived by the High Court, for the High Court could not, .without reversing the judgment of Gurdev Singh, J., have dis-- missed the petition.

It is true that in the judgment of the Court of Appeal some obscure statement has been made, and it is difficult to appreciate the true purport thereof.

But what operates as res judicata is the decision and not the reasons given by the Court in support of the decision.

We are unable to agree with counsel for Nanak Singh, that the High Court reserved to Nanak

SUPREME COURT REPORTS

[1968) 2 S.C.R.

Singh the right to agitate the question about the authority of Mr.

Kane in a separate suit.

There is n~ such express reservation. and it cannot be implied, for such an implication is plainly incoasistent with the final order passed by the High Court. Even assuming that the High Court was in error in holding that the appeal could be decided oitly on the first point, the order dismissing the petition must still operate as res judicata in respect of both the points on which the petition was founded.

This Court in Gulabchand Chhota/a/ Parikh v.

State of Gujarat(') observed that the provisions of s. 11 of the Code of Civil Procedure are not exhaustive with respect to an earlier decision operating as res judicata between the same panics on the same matter in controversy in a subsequent regular suit, and on the general principle of res judicata, any previous decision on a matter in controversy, decided after full contest or after a.ftording fair opportunity to the parties to prove their case by a Court oompetent to decide it, will operate as res judicata in a subsequent regular suit.

It is not necessary that the Court deciding the matter formerly be competent to decide the subsequent suit or that the former proceeding and the subsequent suit have the same subject-matter. There. is no good reason to preclude such decisions on matters in controversy in writ proceedings under Art. 226 or Art. 32 of the Constitution from operating as res judicata in subsequent regular suits on the same matters in controversy between the same parties and thus to give limited effect to the principle of the finality of decision after full contest. The Court in Gu/abchand's case(') left open the question whether the principle of c0nstructive res judicata may be invoked by a party to the subsequent suit on the ground that a matter which might or ought to have been raised in the earlier proceeding but was not so raised therein, must still be deemed to have been decided.

If the order of the High Court in appeal from the order in the writ petition operated constructively as res judicata, it might have been necessary to consider the question which was left open by Court in Gulabchand's case('). But in our view the judgment in the previou~ case operates by express decision as res

; udicara.

It is true that in order that the previous adjudication between the parties may operate as res judicata, the question must have been heard and decided or that the parties m11St have an opportuntiy of raising their contentions therein.

Jn the present case, Gurdev Singh, J .. dealt with the question in some detail and held that Mr Kane had no authority to terminate the employment of Nanak Singh.

The High Court in appeal thought that the

ppeal could be disposed of only on the first ground, and they recorded no express finding on the second ground. But once the

ti) A. I. R. 1%~ S. C. 1153.

' •

appeal was allowed and the petition was dismissed, the dismissal of the petition operated as a rejection of both the grounds on which it was .founded.

The judgment of the Privy Council on which reliance was placed by counsel for Nanak Singh-. Abdullah Ashgar Ali Khan v. Ganesh Dass('), has, in our judgment, r.o application.

In that case a suit was dismissed by the Court of the Judicial Commissioner on the view that its constitution was defective, and no opinion on the merits of the dispute between the parties was expressed.

The judgment of the Judicial Commissioner was held not to operate as res judicata in a subsequent suit between the parties to the previous suit, because the dispute was not decided on its merits in the previous suit expressly or even by implication.

It is unnecessary on that view to adjudicate upon the question whether Mr. Kane had authority to determine the employment of N auak Singh.

The appeal is allowed and the decree passed by the High Court is set aside.

The decree passed by the Court of First Instance is restored.

When special leave to appeal was granted to the Union, this Court passed an order that the Union of India will pay the costs of the appeal in any event. The Union of India must, therefore, pay the costs of the tespondent iri this appeal. There will be no order as to costs in the Court of the First Instance, the District Court and the High Court.

G.C.

Appeal allowed .

(I) A.I.R. 1917 P.C. 201.

UNION OF INDIA

NANAK SINGH

January 31, 1968

1. C. SHAH

V. RAMAswAMI, JJ.

Kane

s. 5

Union of India

B. Sen

R. N. Sachthey

S. P. Nayar

Pritam Singh Safeer

Shah

Nanak Singh

K. S. Kane

Nanak Singh

High Court of Punjab

Art. 226

Gurdev Singh

Hih Court of Punjab

Nanak Singh

1'.anak Singh

Art. 136

Senior Sub-Judge, Delhi

Additional District Judge, Delhi

January 10, 1958

Bedi

Art. 311

Nanak

SUPREME COURT REPORTS

s. 11

the Code of Civil Procedure

Art. 226

Art. 32

Gu

abchand

Gulabchand

Nanak Singh-

N auak Singh


SPECIAL

LAND

ACQUISITION &

REHARIUTATION A

OFFICER, SAGAR

M. S. SESHAGIRI RAO & ANR.

January 31, 1968

(1. C. SHAH AND V. RAMASWAM!, JJ.]

L.Jnd Acquisition Act (I of 1894).-<irant of lend on surrer.der >n:ithoul compensation-Proceedings under Latid Ac1--Con1pensation, how payable.

condition to

AcqUisition

The Government of ~1ys0rc. granted a plot of land to the respondent~

"'ith the added condition that "in the event of the Government requirini C the land for anv reason \vhatsoevcr. the grantee shall suncoder the land to the Government withbut claiming any compensation".

The Government acquired the land by adopting tho procedure prescribed by the Laed Acquisition Act but no compensation wa~ awarded to the grantees for the land.

The Hih Court, in appeal, held that sinee the Government had failed to exercise the right which it had under the terms of tbe grant and had acted under the Land Acquisition Act, lhe grantees v.erc entitled to compensation :is provided under the Act.

In appeal, this Court.

D HELD : After ob!aining poession of the land in pursuance of statu tory authority under s. 17 of the Land Acqu; sition Act, the Govemme!lt could not seek ro exercise the option conferred by the terms of the grant.

The grantees wrc entitled to iom!JC'0.S3tion for the land of \\ohich the OMlcrship v.as vcs:red in them.

Bu. in :i''C'i'iing compensation payable to the antces, existence of the condition which severely restricte.d their right

could not be ignored. [894 ll-C] E The Act is silc11: s to the acquisiti,)n of partial interestc; in Jana but it cannot be inferred therefrom that interest in Jand restricted becau!ie of the existence of rights of the State in the land cannot be acquired. When land is notified for acquisition for a public purpose and the State has no interest therein. market value of the land mus! be detennined and aPPortioned among the persons entitkd to the land.

Where the interest of the owner is clogged by the right of the Stale, the compensation payable is F only th-o market value of that intere, t. subject to the clog. [895 B, CJ

The Coliector of Bon1bay v. .1\/u\ser,., anji Rattt; nji Mirtri &: Ors. { 1955} S.C.R. 131 I, followed.

Attomry-Grnera/ v. De Kayser"s Ro.val Hot<! Ltd., (1920) A.C. 508, referred to.

Government of Bombay v. Es11fa/i Salebliai.

I.LR. 34 Bom. 618, G approved.

Stat,· of Mtulras v. A.Y.S. /'arisuthn NnJnr. [1961] M.L.J. 285. disapproved.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 335 of 1966.

Appeal by special leave from the judgment and order dated November 6. 1963 of the Mysore High Court in Misc. Appeal No. 293 of 1961.

H •

A Niren De, Solicitor-General, R. Gopa/akrishnan and S. P.

Nayar, for the appellant.

Nau;; it Lal and T. S. Ramachandran, for the respondents.

The Judgment of the Court was delivered by Shah, J. On April 15, 1952, the Government of Mysore granted an area of 11 acres and 3 8 gunthas of land situate in village Hebbyle to the respondents to this appeal. The grant was made in Form Appendix 'E' to the Mysore Land Revenue Rules with the added condition that "in the event of the Government requiring the land for any reason whatsoever, the grantee shall surrender the land to the Government without claiming any compensation". On January 11, 1958, the Government of Mysore published a notification under s. 4 of the Land Acquisition Act that the land granted was likely to be needed for a public purpose.

By a subsequent notification made under s. 17 ( 4) of the Land Acquisition Act, Government dispensed with the enquiry under s. 5-A of the Act and obtained possession of the land. In assessing compensation, the Land Acquisition Officer did not award any compensation for the land, and awarded Rs. 1,495 /- for improvement claimed to have been made to the land by the grantees.

In a reference under s. 18 of the Land Acquisition Act, the District Court agreed with the Land Acquisition Officer.

In appeal, the High Court of Mysore set aside the award anJ remanded the case to the District Court with a direction to dete!1lline the compensation payable to the grantees 11nd to dispose of the case acording to law.

T!e High Court observed that since the Government had failed to exercise the right which it had under the terms of the grant and had adopted the procedure prescribed by the Land Acquisition Act, compensation for acquisition under the Land Acquisition Act and the process by which ihe grantees were to be deprived of the land must be followed.

Against the order passed by the High Court, this appeal is preferred with special leave.

Under s. 3 (a) "land" is defined as including benefits to arise out of land, and things attached to the earth or permanently fastened to anything attached to the earth. By s. 4 the appropriate Government is authorised to issue a notification that land in any locality is needed or is likely to be needed for any public purpose, and thereafter to exercise certain powers in respect of the land for determining its suitability for the purpose notified.

The Government may under s. 17 in cases of urgency take possession of any waste or arable 1and needed for the public purpose and the land thereupon vests absolutely in the Government free from all

encumbrance~.

The Government of Mysore did not purport to exercise the power reserved by the terms of the grant, and adopted the proce-

894 SUPREME COURT JlEPORTS JI968J 2 s.c.R.

dure prescribed by the Land Acquisition Act. The High Court observed, relying upon the decision of the House of Lords in A11orney-General v. De Kayser's RoyaJ°Hote/ Ltd.(') that the Government could not, after adopting the procedure prescribed by the Land Acquisition Act, seek to resort to the conditions of the grant and claim that no compensation for acquisition of the land was payable.

It is true that after obtaining possessio!l of the land in pursuance of statutory authority under s. 17, the Government of Mysore could not seek to exercise the option conferred by the terms of the grant.

But on that account in assessing compeDation payable to the grantees, existence of the condition which severely restricted their right could not be ignored. The grantees were entitled to compensation for the land of which the ownership was vested in them.

The measure of that compensation is the market value of the land at the date of the notification, and the measure of that market value is what a willing purchaser may at the date of the notification under s. 4 pay for the right to the land subject to the option Yested in the Government.

The High Coun also placed reli'!nce upon the judgment of the Madras High Court in The State of Madras v. A. Y. S. Pdrisutha Nadar('). In that case the main question decided was whether it was open to a claimant to compensation for land under acquisition to assert title to the land notified for acquisition as against the State Government when the land had become vested in the Government by the operation of the Madras Estates (Abolition and Conversion into Ryotwari) Act 26 of 1948. On behalf of the State it was contended that once an estate is taken over by the State in exercise of its powers under the Estates Abolition Act, the entire land in the estate so taken over vested in the State in absolute ownership, and that no other claim of ownership in respect of any parcel of the land in the estate could be put forward by any other person as against the State Government without obtaining a ryotwari pa/ta under the machinery of the Act. The High Court rejected that contention observing that the Government availing itself of the machinery under the Land Acquisition Act for compulsory acquisition and treating the subject-matter of ' the acquisition as not belonging to itself but to others, is under an obligation to pay compensation as provided in the Act, and that the Government was incompetent in the proceeding under the Land Acquisition. Act to put forward its own title to the property sought to be acquired so as to defeat the rights of persons entitled to the compensation. The propositions so broadly stated are, in our judgment, not accurate. The Act contemplates acquisition of land for a public purpose.

By acquisition of land is intended the purchase of such interest outstanding in others as clog the right of the Government to use the land for the public purpose. Where

(I) [ 1920) A.C. 508.

(2) [1961) 2 M.L.J. 285.

the land is owned by a single p.!rson, the entire market value payable for deprivation of the ownership is payable to that person : if the interest is divided, for instance, where it be.longs to several persons, or where there is a mortgage or a lease outstanding on the land, or the land belongs to one and a house thereon to another, or limited interests in the land are vested in different persons, apportionment of the compensation is contemplated. The Act is, it is true, silent as to the acquisition of partial interests in the land, but it cannot be inferred therefrom that interest in land restricted because of the existence . of rights of t)J.e State in the land cannot be acquired.

When land is notified for acquisition for a public purpose and the State has no interest therein, market value of the !arid must be determined and apportioned among the persons entitled to the land.

Where the interest of th(: owner b clogged by the right of the State, the compensation payable is only the market value of that interest, subject to the clog.

We re unable to agree with the High Court of Madras that when land 'is notified for acquisition, and in the land the State ha~ " an J.riierest, or the ownership of the land is subject to a restrictive .covenant in favour of the State, the State is estopped from setting up its interest or right in the proceedings for acquisition.

The State in a proceeding for acquisition does not acquire, its own interest in the land, and the Collector offers and the Civil Court assesses compensation for acquisition of the interest of the private E persons which gets extinguished by compulsory acquisition and

 pays compensation equivalent to the market value of that interest.

There is nothing In the Act which prevents the State from claiming in the proceeding for acquisitron of la, nd notified for acquisition that the interest proposed to be acquired is a restrictive interest.

We agree with the observations made by Batchelor, 1., Government of Bombay v. Esufali Salebhai(') at p. 636:

"The procedure laid down in the Act is so laid down as being appropriate to the special case which is considered in the Act, i.e., the case where the complete interests are owned privately. But that special case is, as I understand it, singled out by the legislature as the norm or type with the intent that in other cases which only partially conform to the type the procedure should be followed in so far as it is appropriate, nor that such cases should be excluded from the Act because they do noi wholly conform to the type. In other words, Government . . are not debarred from acquiring and paying for the only outstanding interests merely because the Act, which primarily contemplates 1111 interests as

SUPREME COURT REPORTS

[1968) 2 S.C.R.

held outside Government, directs that the entire cor.; pensation based upon the market value of the whole land must be distributed among the. claimants.

In such circumstances, as it appears to me, there is no insuperable objection to adapting the procedure to the ease on the foot.ing that the outstanding interests, which are the only things to be acquired, are the only things to be paid for."

The principle of Esufa/i Salebhai'J case(') was it may be observed, approved by this Coun in The Collector of Bombay v.

Nusserwanji Ratranji Mistri & Others( 2 ).

But the view expressed by the District Coun that the grantees c are not entitled to any compensation for the land cannot be sustained.

The District Court was bound to determine the market value. at the date of the notification under s. 4 of the Land Acquisition Act, of the interest of the grantees in the land.

The order passed by he High Court is maintained subject to the modification that the market value of the interest of the gran D tees 11 the land (of the nature hereinbefore mentioned) at the date of th~ notification under s. 4 of the Land Acquisition Act shall be determined and paid to the grantees in addition to the compensat'T1 paid for the improvement in the land.

There will be no order as to costs in this appeal.

Y.P.

(1) (19~5) s. c. , i_ ::11.

Order of the High Court modified.

• '

SPECIAL LAND ACQUISITION & REHABILITATION OFFICER, SAGAR

M. S. SESHAGIRI RAO & ANR

1. C. SHAH

Jnd Acquisition Act

s. 17

CIVIL APPELLATE JURISDICTION

Mysore High Court

A Niren De

R. Gopa

S. P.

Nayar

T. S. Ramachandran

Shah

April 15, 1952

Government of Mysore

Hebbyle

January 11, 1958

s. 4

s. 17

s. 5

s. 18

High Court of Mysore

s. 3

s. 4

s. 17

s. 17

s. 4

Madras High Court

High Court of Madras

is nothing In the Act

Batchelor

s. 4

s. 4