B.A./B.B.A.LL.

B (Hons)

SEMESTER VI

PROPERTY LAW

Prepared By

Ms.Navditya Tanwar Kaundal

HIMACHAL PRADESH NATIONAL LAW UNIVERSITY

GHANDAL, SUB TEHSIL - DHAMI

P.O - SHAKARAH

SHIMLA-171014

DECEMBER, 2019

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 B.A./B.B.A.LL.B (Hons) Semester- VI

Paper: LLB 601 Property Law

Objectives: The property has always received irrefutable importance in human life. The course
on the transfer of property contains an elaborate discussion and detail coverage of the meaning
and principles relating to general and specific transfer of immovable property. The course aims
to equip students with knowledge to understand intricate issues involved in transfers of
immovable property.

The primary objectives of this course are to: -

(i) To accentuate clarity on the fundamental concepts of the property law.
(ii) To present the law i.e., Transfer of Property Act, 1882 in a simple and organized manner.

Prescribed Legislation:

1) Transfer of Property Act,1882

2) The Registration Act,1908
3) The Civil Procedure Code,1908

Prescribed Books:

1) Mulla, (2013) Transfer of Property Act

2) Saxena, Poonam Pradhan, (2016) Property Law
3) James Charles Smith, (2014) Property and Sovereignty (Law, Property and Society)
4) Singh, Avtar, (2012) Transfer of Property Act
5) Medill, Colleen E. (2009) Acing Property: A Checklist Approach to Solving Property
Problems
6) Sprankling, John G.(2012) Understanding Property Law

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 Module-1
Introduction: Concept of Property and Principles Relating to Transfer of
Property

[The module focuses on providing the clarity on fundamental concepts, viz, what is property,
distinction between movable & immovable property; transfer and kind of transfers contemplated
under Transfer of Property Act through the following sections i.e., Ss. 3 to 35 Transfer of
Property Act & Ss. 17 & 18 of Indian Registration Act, 1908]

1.1Meaning & Concept of Property: Distinction between Movable and Immovable

Property; Attestation; Notice.
1.2 Definition of Transfer of Property; Transferable and Non-Transferable Property;
Conditions Restricting Transfer
1.3 Transfers to an Unborn Person and Rule against Perpetuity
1.4 Vested and Contingent interest
1.5 Rule of Election
Cases:
i. Shantabai v.State of Bombay AIR1958 SC532
ii. State of Orissa v. Titaghur Paper Mills Company Limited AIR 1985 SC
iii. Bamdev Panigrahiv. Manorama Raj AIR 1974 AP 226
iv. Duncans Industries Ltd. V. State of U.P. (2000) SCC 633
v. Kumar Harish Cahndra Singh Deo v. Bansidhar Mohanty AIR 1965 SC 1738
vi. M.L. Abdul Jabbar Sahib v. H. Venkata Sastri AIR 1969 SC 1147
vii. Ahmedabad Municipal Corporation v. Haji Abdul Gafar Haji Hussen bhai AIR
1971 SC 1201
viii. Md. Mustafa v. Haji Md. Isa AIR 1987
ix. V.N. Sarin v. Ajit Kumar Poplai AIR 1966 SC
x. Kenneth Solomon v. Dan Singh Bawa AIR 1986
xi. Mohar Singh v. Devi Charan AIR 1988 SC1365

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 xii. N.Ramaih v. Nagraj S. AIR 2001
xiii. Jumma Masjid Mercara v. Kodimaniandra Deviah AIR1962 SC847
xiv. Kartar Singh v. Harbans Kaur (1994)4 SCC
xv. Rosher v. Rosher (1884) 26 Ch D 801
xvi. Muhammad Raza v. Abbas Bandi Bibi (1932) I.A 236
xvii. Zoroastrian Co-operative Housing Society Ltd. v. District Registrar, Co-op
Societies (Urban) (2005) SCC 632
xviii. Tulk v. Moxhay (1848) 2 Ch.
xix. Ram Newaz v. Nankoo AIR 1926 ALL 283
xx. Ram Baran v. ram Mohit AIR 1967 SC 744
xxi. R. Kempraj v. Burton Son & Co AIR 1970 SC 1872
xxii. Rajeh Kanta Roy v. Shanti Debi AIR 1957 SC255

Module-2
Principles Governing Transfer of Immovable Property
(Total Lectures – 15 Lectures)
[This module will elucidate on the principles governing the transfer of immovable property.
Ss.40 to 53 A along with the case laws mentioned below will help the students to gain
perspicacity]

2.1 Transfers by Ostensible Owner

2.2 Doctrine of Feeding Grant by Estoppel
2.3 Doctrine of Lis pendens
2.4 Fraudulent Transfer
2.5 Doctrine of Part Performance
Cases:
i. Jayaram Mudaliar v. Ayyaswami AIR 1973 SC 569
ii. Supreme General Films Exchange Ltd. v. Maharaja Sir Brijnath Singhji Deo AIR
1975 SC 1810
iii. Govinda Pillai Gopala Pillai v. Aiyyappan Krishnan AIR 1957
iv. Dalip Kaur v. Jeewan Ram AIR1996 P&H 158

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 v. U.N.Sharma v. Puttegowda AIR 1996 Karnataka
vi. Sunil Kumar Sarkar v. Aghor Kr. Basu AIR 1989 Gau39
vii. D.S. Parvathamma v. Srinivan (2003) 4 SCC 705
viii. Sardar Govindrao Mahadik v. Devi Sahai AIR 1982 SC 989

Module-3
Specific Transfers: Definitions and Kinds, Rights and Liabilities
(Total Lectures – 18 Lectures)
[This module relates to the specific transfers such as mortgage, sale, gift, lease and exchange.
The emphasis will be on the sections Ss.55 to129]

3.1 Mortgage: of Mortgagor and Mortgagee

3.2 Sale
3.3 Gift
3.4 Lease & License
3.5 Exchange
Cases:
i. Ganga Dhar v. Shankar Lal AIR 1958
ii. Pomal kanji Govindji v. Vrajlal Karsandas Purohit AIR 1989 SC 436
iii. Shivdev Singh v. Sucha Singh AIR 2000 SC 1935
iv. Associated Hotels of India v. R.N Kapoor AIR1959 SC 1262
v. Quality Cut Pieces v. M. Laxmi AIR1986 Bom 359
vi. B.V.D‟Souza v. Antonio Fausto Fernandes AIR 1989 SC
vii. Tila Bewa v. Mana Bewa AIR 1962 Ori 130
viii. Kartari v. Kewal Krishan AIR 1972 HP 117
ix. Kamal Sahu v. Krishna Sahu AIR 1954 Ori 105
x. Mohammadin v. Asibun Nissa AIR 2005 Jhar 1

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 Module-4
Charge & Transfers of Actionable Claims
(Total Lectures – 07 Lectures)
[The module focuses on the Ss. 100-104, 130-137 to elaborate the meaning and concept of
Charges and Actionable Claims]
4.1 Meaning and Concept: Charges
4.2 Creation of Charge; Notice & Enforcement
4.3 Meaning of Actionable Claims
4.4 Transfer of Actionable Claims
4.5 Liability of Transferee of Actionable Claim
Cases:
i. Raja Sri Shiva Prasad v. Beni Madhab AIR 1922 Pat 529
ii. Abduljabbar v. Venkata Sastri AIR 1969 SC 1147
iii. Venkata Guruwdha v. Kesava Ramaih AIR 1926 Mad.417
iv. United India F& G Insuarance Co. Ltd. V. Planiappa Transport Carriers AIR 1986
A.P.32

Important Note:
1. The list of cases enumerated above is not exhaustive. Teachers teaching the course shall
be at liberty to add new cases.
2. Students are required to study the legislation as amended up to date and consult the latest
editions of books.

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 Table of Content

S.No. Case Title Pg. No.

1. Shantabai v.State of Bombay AIR1958 SC532 09 - 19
2. State of Orissa v. Titaghur Paper Mills Company Limited AIR 1985 SC 20 - 89
3. Bamdev Panigrahiv. Manorama Raj AIR 1974 AP 226 90 -101
4. Duncans Industries Ltd. V. State of U.P. (2000) SCC 633 102 -111
5. Kumar Harish Cahndra Singh Deo v. Bansidhar Mohanty AIR 1965 SC 112 -115
6. M.L. Abdul Jabbar Sahib v. H. Venkata Sastri AIR 1969 SC 1147 116 - 124
7. Padarath Halwai v Pandit Ram Nain Upadhia (1915) 17 BOMLR 617 125- 129
8. Ahmedabad Municipal Corporation v. Haji Abdul Gafar Haji Hussen bhai 130 - 140
AIR 1971 SC 1201
9. Md. Mustafa v. Haji Md. Isa AIR 1987 141 -154
10. V.N. Sarin v. Ajit Kumar Poplai AIR 1966 SC 155 - 161
11. Kenneth Solomon v. Dan Singh Bawa AIR 1986 162 - 167
12. Mohar Singh v. Devi Charan AIR 1988 SC1365 168 - 171
13. N.Ramaih v. Nagraj S. AIR 2001 172 - 180
14. Jumma Masjid Mercara v. Kodimaniandra Deviah AIR1962 SC847 182 - 191
15. Kartar Singh v. Harbans Kaur (1994)4 SCC 192 - 195
16. Rosher v. Rosher (1884) 26 Ch D 801 196 - 198
17. Muhammad Raza v. Abbas Bandi Bibi (1932) I.A 236 199 - 205
18. Zoroastrian Co-operative Housing Society Ltd. v. District Registrar, Co- 206 - 236
op Societies (Urban) (2005) SCC 632
19. Tulk v. Moxhay (1848) 2 Ch. 237 - 238
20. Ram Newaz v. Nankoo AIR 1926 ALL 283 239 - 240
21. Ram Baran v. Ram Mohit AIR 1967 SC 744 241 – 249
22. R. Kempraj v. Burton Son & Co AIR 1970 SC 1872 250 - 253
23. Rajeh Kanta Roy v. Shanti Debi AIR 1957 SC255 254 - 268
24. Jayaram Mudaliar v. Ayyaswami AIR 1973 SC 569 269 - 281
25. Supreme General Films Exchange Ltd. v. Maharaja Sir Brijnath Singhji 282 - 285
Deo AIR 1975 SC 1810

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26. Govinda Pillai Gopala Pillai v. Aiyyappan Krishnan AIR 1957 286 - 292
27. Dalip Kaur v. Jeewan Ram AIR1996 P&H 158 293 - 295
28. D.S. Parvathamma v. Srinivan (2003) 4 SCC 705 296 - 301
29. U.N.Sharma v. Puttegowda AIR 1996 Karnataka 302 -308
30. Sunil Kumar Sarkar v. Aghor Kr. Basu AIR 1989 Gau39 309 - 312
31. Sardar Govindrao Mahadik v. Devi Sahai AIR 1982 SC 989 313 - 335
32. Ganga Dhar v. Shankar Lal AIR 1958 336 - 343
33. Pomal kanji Govindji v. Vrajlal Karsandas Purohit AIR 1989 SC 436 344 - 362
34. Shivdev Singh v. Sucha Singh AIR 2000 SC 1935 363 -370
35. Associated Hotels of India v. R.N Kapoor AIR1959 SC 1262 371 - 385
36. Quality Cut Pieces v. M. Laxmi AIR1986 Bom 359 386 - 400
37. B.V.D‟Souza v. Antonio Fausto Fernandes AIR 1989 SC 401 - 404
38. Tila Bewa v. Mana Bewa AIR 1962 Ori 130 405 - 409
39. Kartari v. Kewal Krishan AIR 1972 HP 117 410 - 418
40. Kama Sahu And Anr. vs Krishna Sahu IR 1954 Ori 105 419 - 423
41. Raja Sri Sri Shiva Prasad Singh vs Beni Madhab Chowdhury 70 Ind Cas 424 - 428
42. United India Fire And General Insurance Company Limited vs Pelaniappa 429- 436
Transport Carriers AIR 1986 AP 32
43. Debendra Nath Mullick vs Pulin Behary Mullick And Anr. 437 - 438

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 Shrimati Shantabai vs State of Bombay & Others

AIR 532, 1959 SCR 265

By an unregistered document the husband of the petitioner granted her the right to take and
appropriate all kinds of wood from certain forests in his Zamindary. With the passing of the
Madhya Pradesh Abolition of Proprietary Rights(Estates, Mahals, Alienated Lands) Act,
1950, all proprietary rights in land vested in the State under s. 3 Of that Act and the petitioner
could no longer cut any wood. She applied to the Deputy Commissioner and obtained from him
an order under s.6(2) of the Act, permitting her to work the forest and started cutting the trees.
The Divisional Forest Officer took action against her and passed an order directing that her name
might be cancelled and the cut materials forfeited. She moved the State Government against this
order but to no effect. Thereafter she applied to this Court under Art. 32 of the Constitution and
contended that the order of Forest Officer infringed her fundamental rights under Arts. 19(i)(f)
and 19(1)(g) :
Held (per curiam), that the order in question did not infringe the fundamental rights of the
petitioner under Arts. 19(1)(f) and 19(i)(g) and the petition must be dismissed.

1. DAS C. J - We have had the advantage of perusing the judgment prepared by our learned
Brother Bose J. which he will presently read. While we agree with him that this application must
be dismissed, we would prefer to base our decision on reasons slightly different from those
adopted by our learned Brother. The relevant facts will be found fully set out by him in his
judgment.

The petitioner has come up before us on an application under Art. 32 of the Constitution praying
for setting aside the order made by the respondent No. 3 on March 19, 1956, directing the
petitioner to stop the cutting of forest wood and for a writ, order or direction to the respondents
not to interfere in any manner whatever with the rights of the petitioner to enter the forests,
appoint her agents, obtain renewal passes, manufacture charcoal and to exercise other rights
mentioned in the petition.

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2. Since the application is under Art. 32 of the Constitution, the petitioner must make out that
there has been an infringement of some fundamental right claimed by her. The petitioner's
grievance is that the offending order has infringed her fundamental right under Art. 19(1)(f)
and 19(1)(g). She claims to have derived the fundamental rights, which are alleged to have been
infringed, from a document dated April 26, 1948, whereby her husband Shri Balirambhau Doye,
the proprietor of certain forests in eight several Tehsils, granted to her the right to take and
appropriate all kinds of wood-Building wood, fuel wood and bamboos, etc.-from the said forests
for a period from the date of the document up to December 26, 1960. The terms of the document
have been sufficiently set out in the judgment to be presently delivered by Bose J. and need not
be set out here. The petitioner has paid Rs. 26,000 as consideration for the rights granted to her.
The genuineness of this document and the good faith of the parties thereto have not been
questioned. The document, however, has not been registered under the Indian Registration Act.
The nature of the rights claimed by the petitioner has to be ascertained on a proper interpretation
of the aforesaid document. We do not consider it necessary to examine or analyse the document
minutely or to finally determine what we may regard as the true meaning and effect thereof, for,
as will be presently seen, whatever construction be put on this document, the petitioner cannot
complain of the breach of any of her fundamental rights.

3.If the document is construed as conveying to her any part or share in the proprietary right of
the grantor, then, not being registered under the Indian Registration Act, the document does not
affect the immoveable property or give her any right to any share or interest in the immoveable
property. Assuming that she had acquired a share or interest in the proprietary right in spite of
the document not having been registered, even then that right has vested in the State under s. 3 of
the Madhya Pradesh Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands)
Act, 1950, and she may in that case only claim compensation if any is payable to her under the
Act. If the document is construed as purely a license granted to her to enter upon the land, then
that license must be taken to have become extinguished as soon as the grantor's proprietary rights
in the land vested in the State under s. 3 of the Act. if the document is construed as a license
coupled with a grant, then the right acquired by her would be either in the nature of some profits-
a-prendre which, being an interest in land, is immoveable property or a purely personal right
under a contract. If the document is construed-as having given her a profits-a-prendre which is

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an interest in land, then also the document will not affect the immoveable property and will not
operate to transmit to the petitioner any such profits-a-prendre which is in the nature of'
immoveable property, as the document has not been registered under the Indian Registration
Act, as has been held in Ananda Behera v. The State of Orissa. [AIR 1956 SC17]If it is a purely
personal right, then such right will have no higher efficacy than a right acquired under a contract.
If, therefore, the document is construed as a matter of contract, then assuming but without
deciding that a contract is a property within Arts. 19(1)(f) or 31(1) of the Constitution, she
cannot com- plain, for the State has not acquired or taken possession of her contract in any way.
The State is not a party to the contract and claims no benefit under it. The petitioner is still the
owner and is still in possession of that contract, regarded as her property, and she can hold it or
dispose of it as she likes and if she can find a purchaser. The petitioner is free to sue the grantor
upon that contract and recover damages by way of compensation. The State is not a party to the
contract and is not bound by the contract and accordingly acknowledges no liability under the
contract which being purely personal does not run with the land. If the petitioner maintains that,
by some process not quite apparent, the State is also bound by that contract, even then she, as the
owner of that contract, can only seek to enforce the contract in the ordinary way and sue the
State if she be so advised, as to which we say nothing, and claim whatever damages or
compensation she may be entitled to for the alleged breach of it. This aspect of the matter does
not appear to have been brought to the notice of this Court when it decided the case
of Chhotabai Jethabai Patel and Co. v. The State of Madhya Pradesh [AIR 1953 SC] and had
it been so done, we have no doubt that case would not have been decided in the way it was done.

For the reasons stated above, whatever rights, if any, may have accrued to the petitioner under
that document on any of the several interpretations noted above, the cannot complain of the
infringement by Ananda Behera v. The State of Orissa & Chhotabai Jethabai Patel and Co. v.
The State of Madhya Pradesh, state of any fundamental right for the enforcement of which
alone a petition under Art. 32 is maintainable. We, therefore, agree that this petition should be
dismissed with costs.

4. BOSE J.-This is a writ petition under Art. 32 of the Constitution in which the petitioner
claims that her fundamental right to cut and collect timber in the forests in question has been
infringed.

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The petitioner's husband, Balirambhau Doye, was the Zamindar of Pandharpur. On April 26,
1948, he executed an unregistered document, which called itself a lease, in favour of his wife, the
petitioner. The deed gives her the right to enter upon certain areas in the zamindari in order to cut
and take out bamboos, fuel wood and teak. Certain restrictions are put on the cutting, and the
felling of certain trees is prohibited. But in the main, that is the substance of the right. The term
of the deed is from April 26, 1948 to December 26, 1960, and the consideration is Rs. 26,000.

5.The petitioner says that she worked the forests till 1950. In that year the Madhya Pradesh
Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act, 1950, which came into
force on January 26, 1951, was enacted. Under s. 3 of that Act, all proprietary rights in the land
vest in the State on and from the date fixed in a notification issued under sub-s. (1). The date
fixed for the vesting in this area was March 31, 1951. After that, the petitioner was stopped from
cutting any more trees. She therefore applied to the Deputy Commissioner, Bhandara, under s.
6(2) of the Act for validating the lease. The Deputy Commissioner held, on August 16, 1955, that
the section did not apply because it only applied to transfers made after March 16, 1950, whereas
the petitioner's transfer was made on April 26, 1948. But, despite that, he went on to hold that the
Act did not apply to transfers made before March 16, 1950, and so leases before that could not be
questioned. He also held that the lease was genuine and ordered that the petitioner be allowed to
work the forests subject to the conditions set out in her lease and to the rules framed under s.
218(A) of the C. P. Land Revenue Act.

6. It seems that the petitioner claimed compensation from Government for being ousted from the
forests from 1951 to 1955 but gave up the claim on the understanding that she would be allowed
to work the forests for the remaining period of the term in accordance with the Deputy
Commissioner's order dated August 16, 1955. She thereupon went to the Divisional Forest
Officer at Bhandara and asked for permission to work the forests in accordance with the above
order. She applied twice and, as all the comfort she got was a letter saying that her claim was
being examined, she seems to have taken the law into her own hands, entered the forests and
started cutting the trees; or so the Divisional Forest Officer says. The Divisional Forest Officer
thereupon took action against her for unlawful cutting and directed that her name be cancelled
and that the cut materials be forfeited. This was on March 19, 1956. Because of this, the
petitioner went up to the Government of Madhya Pradesh and made an application dated

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September 27, 1956, asking that the Divisional Forest Officer be directed to give the petitioner
immediate possession and not to interfere with her rights. Then, as nothing tangible happened,
she made a petition to this Court under Art. 32 of the Constitution on August 26, 1957. The
foundation of the petitioner's rights is the deed of April 26, 1948. The exact nature of this
document was much canvassed before us in the arguments by both sides. It was said at various
times by one side or the other to be a contract conferring contractual rights, a transfer, a licence
coupled with a grant, that it related to move able property and that, contra, it related to
immoveable property. It will be necessary, therefore, to ascertain its true nature before I proceed
further.

As I have said, the document calls itself a "lease deed ", but that is not conclusive because the
true nature of a document cannot be disguised by labelling it something else.

Clause (1) of the deed runs-

"We executed this lease deed ... and which by this deed have been leased out to you in
consideration of Rs. 26,000 for taking out timber, fuel and bamboos etc." At the end of clause
(2), there is the following paragraph: “You No. 1 are the principal lessee, while Nos. 2 and 3 are
the sub-lessees."

Clause (3) contains a reservation in favour of the proprietor. A certain portion of the cutting was
reserved for the proprietor and the petitioner was only given rights in the remainder. The relevant
passage runs: " Pasas 16, 17, 18 are already leased out to you in your lease. The cutting of its
wood be made by the estate itself. Thereafter, whatever stock shall remain standing, it shall be
part of your lease. Of this stock, so cut, you shall have no claim whatsoever."

Clause (5) runs-

"Besides the above pass- the whole forest is leased out to you. Only the lease, of the forest
woods is given to you." Clause (7) states-

"The proprietorship of the estate and yourself are (in a way) co-related and you are managing the
same and therefore in the lease itself and concerning it, you should conduct yourself only as a

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lease holder explicitly Only in the absence of the Malik, you should look after the estate as a
Malik and only to that extent you should hold charge as such and conduct yourself as such with
respect' to sub-lessees." The rest of this clause is-

Without the signatures of the Malik, nothing, would be held valid and acceptable, including even
your own pasas transactions, the lease under reference shall not be alterable or alienable by
anybody."

6. The only other clause to which reference need be made is clause (8). It runs-

"You should not be permitted to recut the wood in the area which was once subject to the
operation of cutting. Otherwise the area concerned will revert to the estate. The cutting of the
forests should be right at the land surface and there should not be left any deep furrows or holes."
I will examine the seventh clause first. The question is whether it confers any proprietary rights
or interest on the petitioner. I do not think it does. It is clumsily worded but I think that the real
meaning is this. The petitioner is the `proprietor's wife and it seems that she was accustomed to
do certain acts of management in his absence. The purpose of clause (7) is to ensure that when
she acts in that capacity she is not to have the right to make any alteration in the deed. There are
no words of transfer or conveyance and I do not think any part of the proprietary rights, or any
interest in them, are conveyed by this clause. It does not even confer rights of management. It
only recites the existing state of affairs and either curtails or clarifies powers as manager that is
assumed to exist when the proprietor is away.

Although the document repeatedly calls itself a lease, it confers no rights of enjoyment in the
land. Clause (5) makes that clear, because it says-

Only the lease of the forest woods is given to you' . In my opinion, the document only confers a
right to enter on the lands in order to cut down certain kinds of trees and carry away the wood.
To that extent the matter is covered by the decision in Chhotabhai Jethabhai Patel & Co. v. The
State of Madhya Pradesh [AIR 1953 SC], and by the later decision in Ananda Behera v. The
State of Orissa [AIR 1956 SC17] , where it was held that a transaction of this kind amounts to a
licence to enter on the land coupled with a grant to out certain trees on it and carry away the
wood. In England it is a profit a prendre because it is a grant of the produce of the soil “like

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grass, or turves or trees ". Halsbury‟s Laws of England (Simonds Edition) page 522, It is not a "
transfer of a right to enjoy the immoveable property " itself (s. 105 of the Transfer of Property
Act), but a grant of a right to enter upon the land and take away a part of the produce of the soil
from it. In a lease, one enjoys the property but has no right to take it away. In a profit a prendre
one has a licence to enter on the land, not for the purpose of enjoying it, but for removing
something from it, namely, a part of the produce of the soil. Much of the discussion before us
centred round the Madhya Pradesh Abolition of Proprietary Rights (Estates, Mahals, Alienated
Lands) Act of 1950. But I need not consider that because this, being a writ petition under Art. 32,
the petitioner must establish a fundamental right. For the reasons given in Ananda Behera's case
(1), I would hold that she has none. This runs counter to Chhotebhai Jethabhai Patel's case but, as
that was a decision of three Judges and the other five, I feel that we are bound to follow the later
case, that is to say, Ananda Behera's case (1), especially as I think it lays down the law aright.

8. The learned counsel for the petitioner contended that his client's rights flowed out of a contract
and so, relying on Chhotebhai Jethabhai Patel's case, he contended that he was entitled to a writ.
As a matter of fact, the rights in the earlier case were held to flow from a licence and not from a
contract simpliciter (see page 483) but it is true that the learned Judges held that a writ petition
lay. In so far as the petitioner rests her claim in contract simpliciter, I think she has no case
because of the reasons given in Ananda Behera's case:

“If the petitioners' rights are no more than the right to obtain future goods under the Sale of
Goods Act, then that is a purely personal right arising out of a contract to which the State of
Orissa is not a party and in any event a refusal to perform the contract that gives rise to that right
may amount to a breach of contract but cannot be regarded as a breach of any fundamental
right." To bring the claim under Art. 19(1)(f) or something more must be disclosed, namely, a
right to property of which one is the owner or in which one has an interest apart from a purely
contractual right. Therefore, the claim founded in contract simpliciter disappears. But, in so far
as it is founded either on the licence, or on the grant, the question turns on whether this is a grant
of moveable or immovable property. Following the decision in Ananda Behera's case, I would
hold that a right to enter on land for the purpose of cutting and carrying away timber standing on
it is a benefit that arises out of land. There is no difference there between the English and the
Indian law. The English law will be found in 12 Halsbury's Laws of England (Simonds Edition)

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pages 620 and 621. But that still leaves the question whether this is moveable or immoveable
property.

Under s. 3 (26) of the General Clauses Act, it would be regarded as "immovable property”
because it is a benefit that arises out of the land and also because trees are attached to the earth.
On the other hand, the Transfer of Property Act says in s. 3 that standing timber is not
immoveable property for the purposes of that Act and so does s. 2 (6) of the Registration Act.
The question is which of these two definitions is to prevail.

9. Now it will be observed that “trees " are regarded as immoveable property because they are
attached to or rooted in the earth. Section 2(6) of the Registration Act expressly says so and,
though the Transfer of Pro party Act does not define immoveable property beyond saying that it
does not include " standing timber, growing crops or grass ", trees attached to earth (except
standing timber), are immovable property, even under the Transfer of Property Act, because of s.
3 (26) of the General Clauses Act. In the absence of a special definition, the general definition
must prevail. Therefore, trees (except standing timber) are immoveable property.

Now, what is the difference between standing timber and a tree ? It is clear that there must be a
distinction because the Transfer of Property Act draws one in the definitions of " immoveable
property " and (1) [1955] 2 S.C.R. 919.

"attached to the earth " ; and it seems to me that the distinction must lie in the difference
between a tree and timber. It is to be noted that the exclusion is only of standing timber” and not
of “timber trees". Timber is well enough known to be-

"wood suitable for building houses, bridges, ships etc., whether on the tree or cut and seasoned.
(Webster's Collegiate Dictionary).

Therefore, " standing timber " must be a tree that is in a state fit for these purposes and, further,
a tree that is meant to be converted into timber so shortly that it can already be looked upon as
timber for all practical purposes even though it is still standing. If not, it is still a tree because,
unlike timber, it will continue to draw sustenance from the soil.

16 | P a g e
10.Now, of course, a tree will continue to draw sustenance from the soil so long as it continues to
stand and live; and that physical fact of life cannot be altered by giving it another name and
calling it "standing timber ". But the amount of nourishment it takes, if it is felled at a reasonably
early date, is so negligible that it can be ignored for all practical purposes and though,
theoretically, there is no distinction between one class of tree and another, if the drawing of
nourishment from the soil is the basis of the rule, as I hold it to be, the law is grounded, not so
much on logical abstractions as on sound and practical common- sense. It grew empirically from
instance to instance and decision to decision until a recognisable and workable pattern emerged;
and here, this is the shape it has taken. The distinction, set out above, has been made in a series
of Indian cases that are collected in Mulla'sTransfer of Property Act, 4th edition, at pages 16
and 21. At page 16, the learned author says-

"Standing timbers are trees fit for use for building or repairing houses. This is an exception
to the general rule that growing trees are immoveable property." At page 21 he says-

"Trees and shrubs may be sold apart from the land, to be cut and removed as wood, and in that
case they are moveable property. But if the transfer includes the right to fell the trees for a term
of years, so that the transferee derives a benefit from further growth, the transfer is treated as one
of immoveable' property." The learned author also refers to the English law and says at page 21-

" In English law an unconditional sale of growing trees to be cut by the purchaser, has been held
to be a sale of an interest in land; but not so if it is stipulated that they are to be removed as soon
as possible."

11.In my opinion, the distinction is sound. Before a tree can be regarded as “standing timber” it
must be in such a state that, if cut, it could be used as timber; and when in that state it must be
cut reasonably early. The rule is probably grounded on generations of experience in forestry and
commerce and this part of the law may have grown out of that. It is easy to see that the tree
might otherwise deteriorate and that its continuance in a forest after it has passed its prime might
hamper the growth of younger wood and spoil the forest and eventually the timber market. But
however that may be, the legal basis for the rule is that trees that are not cut continue to draw
nourishment from the soil and that the benefit of this goes to the grantee. Now, how does the

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document in question-regard this In the first place, the duration of the grant is twelve years. It is
evident that trees that will be fit for cutting twelve years hence will not be fit for felling now.
Therefore, it is not a mere sale of the trees as wood. It is more. It is not just a right to cut a tree
but also to derive a profit

-from the soil itself, in the shape of the nourishment in the soil that goes into the tree and maker,
it grow till it is of a size and age fit for felling as timber; and, if already of that size, in order to
enable it to continue to live till the petitioner chooses to fell it. This aspect is emphasised in
clause (5) of the deed where the cutting of teak trees under 1/2 feet is prohibited. But, as soon as
they reach that girth within the twelve years, they can be felled. And clause (4) speaks of a first
cutting and a second cutting and a third cutting. As regards trees that could be cut at once, there
is no obligation to do so. They can be left standing till such time as the petitioner chooses to fell
them. That means that they are not to be converted into timber at a reasonably early date and that
the intention is that they should continue to live and derive nourishment and benefit from the
soil; in other words, they are to be regarded as trees and not as timber that is standing and is
about to be cut and used for the purposes for which timber is meant. It follows that the grant is
not only of standing timber but also of trees that are not in a fit state to be felled at once but
which are to be felled gradually as they attain the required girth in the course of the twelve
years;. and further, of trees that the petitioner is not required to fell and convert into timber at
once even though they are of the required age and growth. Such trees cannot be regarded as
timber that happens to be standing because timber, as such, does not draw nourishment from the
soil. If, therefore, they can be left for an appreciable length of time, they must be regarded as
trees and not as timber. The difference lies there.

12.The result is that, though such trees as can be regarded as standing timber at the date of the
document, both because of their size and girth and also because of the intention to fell at an early
date, would be moveable, property for the purposes of the Transfer of Property and Registration
Acts, the remaining trees that are also covered by the grant will be immoveable property, and as
the total value is Rs. 26,000, the deed requires registration. Being unregistered, it passes no title
or interest and, therefore, as in Ananda Behera's case (1) the petitioner has no fundamental right
which she can enforce.

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My lord the Chief Justice and my learned brothers prefer to leave the question whether the deed
here is a lease or a licence coupled with a grant, open because, on either view the petitioner must
fail. But we are all agreed that the petition be dismissed with costs.

Petition dismissed.

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 State of Orissa & Other v The Titaghur Paper Mills Company

AIR 1985 SCR (3) 26

The Judgment of the Court was delivered by MADON J. These two Appeals by Special Leave
granted by this Court are against the judgment and order of the Orissa High Court allowing 209
writ petitions under Article 226 of the Constitution of India filed before it.

1.Genesis of the Appeals On May 23, 1977, the Government of Orissa in the Finance
Department issued two Notifications under the Orissa Sales Tax Act 1947 (Orissa Act XIV of
1947). We will hereinafter for the sake of brevity refer to this Act as "the Orissa Act". These
Notifications were Notification S.R.O. 372/77 and Notification S.R.O No. 373/ 77. Notification
S.R.O. No. 372/77 was made in exercise of the powers conferred by section 3-B of the Orissa
Act and Notification S.R.O. No. 373/77 was made in exercise of the powers conferred by the
first proviso to sub-section (1) of section 5 of the Orissa Act. We will refer to these Notifications
in detail in the course of this judgment but for the present suffice it to say that notification
S.R.O.No. 372/77 amended notification no. 20209-CTA-14/76-F dated April 23, 1976, and made
bamboos agreed to be severed and standing trees agreed to be severed liable to tax on the
turnover of purchase with effect from June 1, 1977, while notification S.R.O. No 373/77
amended with effect from June 1, 1977, Notification No. 20212-CTA -14/76-F dated April 23,
1979, and directed that the tax payable by a dealer under the Orissa Act on account of the
purchase of bamboos agreed to be severed and standing trees agreed to be severed would be at
the rate of ten per cent. After the promulgation on December 29, 1977, of the Orissa Sales Tax
(Amendment) Ordinance 1977 (Orissa Ordinance No, 10 of 1977), which amended the Orissa
Act, two other notifications were issued on December 29, 1977, by the Government of Orissa in
the- Finance Department, namely Notification No. 67178- C.T.A.135/77 (Pt.) F (S.R.O.
No900/77) and Notification No. 67181-C.T.A. 135/77-F (S.R.O. No. 901/77). The first
Notification was expressed to be made in exercise of the powers conferred by section 3-B of the
Orissa Act and in supersession of all previous notifications issued on that subject. By the said
notification the State Government declared that the goods set out in the Schedule to the said
Notification were liable to be taxed on the turnover of purchase with effect from January 1. 1978.
Entries Nos. 2 and 17 in the Schedule to the said Notification specified bamboos agreed to be

20 | P a g e
severed and standing trees agreed to be severed respectively. The second Notification was
expressed to be made in exercise of the powers conferred by sub- section (1) of section 5 of the
Orissa Act and in supersession of all previous notifications in that regard. By the said notification
the State Government directed that with effect from January 1, 1978, the tax payable by a dealer
under the Orissa Act on account of the purchase of goods specified in column (3) of the Schedule
to the said Notification would be at the rate specified against it in column (3) thereof. In the said
Schedule the rate of purchase tax for bamboos agreed to be severed and standing trees agreed to
be severed was prescribed as ten per cent. The relevant entries in the Schedule in that behalf are
Entries Nos. 2 and 17. The Orissa Tax (Amendment) Ordinance, 1977, was repealed and placed
by the Orissa Sales Tax (Amendment) Act, 1978 (Orissa Act No. 4 of 1978).

2. As many as 209 writ petitions under Article 226 of the Constitution of India were filed in the
High Court of Orissa challenging the validity of the aforesaid two Notifications dated May 23,
1977, and the said Entries Nos. 9 and 17 in each of the said two notifications dated December 29,
1977 (hereinafter collectively referred to as "the impugned provisions"). The petitioners before
the High Court fell into two categories. The first category consisted of those who has entered
into agreements with the State of Orissa for the purpose of felling, cutting obtaining and
removing bamboos from forest areas "for the purpose of converting the bamboo into paper pulp
or for purposes connected with the manufacture of paper or in any connection incidental
therewith". This agreement will be hereinafter referred to as "the Bamboo Contract". The other
group consisted of those who had entered into agreements for the purchase of standing trees. We
will hereinafter refer to this agreement as "The Timber Contract". All the Bamboo Contracts
before the High Court were in the same terms except with respect to the contract area, the period
of the agreement and the amount of royalty payable; and the same was the case with the Timber
contracts. By a common judgment delivered on September 19, 1979, reported as The Titaghur
Paper Mills Company Ltd. and another v. State of Orissa and other (and other cases)1, the High
Court allowed all the (1) (1980) 45 S.T.C. 170.said writ petitions and quashed the impugned
provisions. The High Court made no order as to the costs of these petitions.

3. Each of the present two Appeals has been filed by the State of Orissa, the Commissioner of
Sales Tax Orissa, and the Sales Tax Officer concerned ill the matter, challenging the correctness
of the said judgment of the High Court. The Respondents in Civil Appeal No. 219 of 1982 are

21 | P a g e
the Titaghur Paper Mills Company Limited (hereinafter referred to as 'the Respondent
Company") and one Kanak Ghose, a shareholder and director of the Respondent Company. The
Respondents in Civil Appeal No. 220 of 1982 are Mangalji Mulji Khara, a partner of the firm of
Messrs. M.M. Khara, and the said firm. The Chief Conservator of Forests, Orissa, the Divisional
Forest Officer, Rairkhol Division and the Divisional Forest Officer, Deogarh Division have also
been joined as proforma Respondents to the said Appeal.

4. Facts: The Respondent Company is a public limited company. Its registered office is situated
at Calcutta in the state of West Bengal. The Respondent Company carries on inter alia the
business of manufacturing paper. For this purpose it owned at the relevant time three paper mills-
one at Titaghur in the State of West Bengal, the second at Kankinara also in the State of west
Bengal and the third at P. O. Choudwar, Cuttack District, in the State of Orissa. For the purpose
of obtaining raw materials for its business of manufacturing paper, the Respondent Company
entered into a Bamboo Contract dated January 20, 1974, with the State of Orissa. This agreement
was effective for a period of fourteen years from October 1, 1966, in respect of Bonai Main
Areas of Bonai Division, for a period of thirteen years of with effect from October 1, 1967, in
respect of Kusumdih P. S. of Bonai Division; and for a period of eleven years with effect from
October 1, 1969, in respect of Gurundia Rusinath P. S. of Bonai Division, with an option to the
respondent Company to renew the agreement for a further period of twelve years from October
1, 1980. For the present it is not necessary to refer to the other terms and conditions of this
Bamboo Contract.

5. After the said two Notification dated May 23, 1977, were issued, the Sales Tax Officer,
Dhenkanal Circle, Angul, Ward (the Third Appellant in Civil Appeal No. 219 of 1982) issued
to the manager of the Respondent Company's mill at P. O. Choudwar a notice dated August 18,
1977, under Rules 22 and 28(2) of the Orissa Sales Tax Rules, 1947, stating that though the
Respondent Company's gross turnover during the year immediately preceding June 1, 1977, had
exceeded Rs. 25,000; it had without sufficient cause failed to apply for registration as a dealer
under section 9 of the Orissa Act and calling upon him to submit within one month a return in
Form IV of the forms appended to the said Rules, showing the particulars of "turnover for the
quarter ending 76-77 & 6/77". By the said notice the said manager was required to attend in
person or by agent at the Sales Tax Office at Angul on October 30, 1977, and to produce or

22 | P a g e
cause to be produced the accounts and documents specified in the said notice and to show cause
why in addition to the amount of tax that might be assessed a penalty not exceeding one and half
times that amount should not be imposed under section 12(5) of the Orissa Act that is, for
carrying on business without being registered as a dealer. By its letter dated August 25, 1977 the
Respondent Company asked for time to seek legal advice. Thereafter by its letter dated
September 27, 1977 addressed to the said Sales Tax Officer, the Respondent Company
contended that the said notice was invalid and called upon him to cancel the said notice. A copy
of the said letter was also sent to the Commissioner of Sales Tax, Orissa, who is Second
Appellant in Civil Appeal No. 219 of 1982 as also to the Chief Secretary to the Government of
the State of Orissa. As no reply was received to the said letter, the Respondent Company and the
said Kanak Ghosh filed writ petition in the High Court of Orissa, being O.J.C No. 811 of 1977,
challenging the validity of the said two Notifications dated May 23, 1977, and the said notice.
While the said writ petition was part-heard, the said two Notifications were replaced by the said
two Notifications dated December 29, 1977. Accordingly, the Respondent Company applied for
amendment of the said writ petition. It also filed along with Kanak Ghosh another writ petition,
being O.J.C. No. 740 of 1978, challenging the validity not only of the said two Notifications
dated May 23, 1977, but also of Entries Nos. 2 and 17 of the said two Notifications dated
December 29, 1977, and the said notice dated August 18 1977, on the same grounds as those in
the earlier writ petition.

6.The principal contentions raised in the said writ petitions were that the subject-matter of the
Bamboo Contract was not a sale or purchase of goods but was lease of immovable property or in
any event was the creation of an interest in immovable property by way of grant of profit a
prendre which according to the Respondent Company amounted in Indian law to an easement
under the Indian Easements Act, 1882 (Act V of 1882), and that for the said reason the amounts
of royalty payable under the Bamboo Contract could not be made exigible to either sales tax or
purchase tax in the exercise of the legislative competence of the State, and, therefore, the
impugned provisions were unconstitutional and ultra vires the Orissa Act. It was further
contended that the Bamboo Contract was a works contract and for the said reason also the
transaction covered by it was not exigible to sales tax or purchase tax. It was also contended that
as the said Notifications dated December 29, 1977, were expressed to be made in supersession of

23 | P a g e
all earlier notifications on the subject, the liability, if any, under the said Notifications dated May
23, 1977, was wiped out. The said writ petitions prayed for quashing the impugned provisions
and for writ of mandamus against the respondents to the said petitions, namely, the State of
Orissa, the Commissioner of Sales Tax, Orissa, and the said Sales Tax Officer, restraining them
from giving any effect or taking any further steps or proceedings against the Respondent
Company on the basis Or the impugned provisions or the said notice.

7.In addition to the said two writ petitions filed by the Respondent Company and the said Kanak
Ghosh, three other writ Petitions were also filed by other parties Who had entered into Bamboo
Contracts with the State of Orissa in which similar contention were raised and reliefs claimed.
The record is not clear whether any assessment order was made against the Respondent
Company in pursuance of the said notice or whether further proceedings in pursuance of the said
notice were stayed by the High Court by an interim order. As mentioned earlier, by the said
common judgment delivered by the High Court, the said writ petitions were allowed. As a
natural corollary of the High Court, quashing the impugned provisions it ought to have also
quashed, the said notice dated August 18, 1977, and the assessment order, if any, made in
pursuance thereof. The High Court, however, did not do so, perhaps because as it heard and
decided all the said 209 writ petitions together it did not ascertain the facts of each individual
petition or the exact consequential reliefs to be given to the petitioner therein.

8. Apart from the Respondent Firm, 203 other forest contractors who had entered into similar
agreements with the State Government also filed writ petitions in the High Court challenging the
validity of the impugned provisions. By its judgment under appeal, the High Court allowed the
said petition filed by the Respondent Firm. As in the case of the writ petition filed by the
Respondent Company and very probably for the same reason, the High Court did not pass any
order quashing the said assessment order consequent upon it holding that the impugned
provisions were ultra vires the Act. Judgment of the High Court All the said 209 writ petitions
were heard by a Division Bench of the Orissa High Court consisting of S.K.Ray, C.J., and N.K.
Das, J. The main judgment was delivered by Das. J., while Ray, C.J., delivered a short,
concurring judgment. Das, J. rejected the contention that the effect of the word 'supersession'
used in the Notifications dated December 29, 1977, was to wipe out the liability under the earlier
Notifications dated May 23, 1977. He held that the Notifications dated May 23, 1977, remained

24 | P a g e
in force until the Notifications dated December 29, 1977, came into operation. So far as the other
points raised before the High Court were concerned, Das, J., summarized the conclusions
reached by the court in paragraphs 19 and 2() of his judgment as follows:

"1 For the reasons stated above, we hold as follows: (1) That the bamboos all trees agreed to be
severed are nothing but bamboos and timber after those are felled. When admittedly timber and
bamboos are liable for taxation at the sale point, taxation of those goods at the purchase point
amounts to double taxation and, as such, the notifications arc ultra vires the provisions of the the
Act. (2) The impugned notifications amount to taxation on agreements of sale, but not on sale
and purchase of goods; and (3) In the case of bamboo exploitation contracts, the impugned
notifications amount also to impost of tax on profit-a-prendre and, as such, arc against the
provisions of the Orissa Sales Tax Act. ". In view of the aforesaid findings, we do not consider it
necessary to go into the other questions raised by the petitioners, namely, whether it is a works
contract and whether the notifications amount to excessive delegation or whether there has
been business of purchase by the petitioners or whether there has been restriction on trade
and business"

9.In his concurring judgment Ray, C. J., agreed with Das, J. and further held that in the series of
sales in question the first sale, that is the taxable event, started from the Divisional Forest Officer
and that the Divisional Forest Officer was the taxable person who had sold taxable goods,
namely, timber, and that as what was sold by the Divisional Forest Officer was purchased by the
petitioners before the High Court the identity of goods sold and purchased was the same, and that
where such a sale was taxed, the purchase thereof was excluded from the levy of tax by virtue of
sections 3-B and 8 of the Orissa Act and consequently the levy of purchase tax by the impugned
provisions was bad in law. In view of its above findings, the High Court allowed all the writ
petitions and quashed the impugned provisions. The High Court made no order as to the costs of
the writ petitions.

"92A. Taxes on the sale or purchase of goods other than newspapers, where such sale or
purchase takes place in the course of inter-State trade or commerce." The amended Entry 54 in
List II reads as follows: “Taxes on the sale or purchase of goods other than newspapers, subject
to the provisions of Entry 92A of List I."

25 | P a g e
10. We are not concerned in these Appeals with the amendment made in Entry 55 in the State
List by the Constitution (Forty second Amendments) Act, 1976. We are not concerned with
Entry 92-B inserted in the Union List or with the extended meaning given to the expression "tax
on the sale or purchase of goods" by the new clause (29A) inserted in Article 366 of the
Constitution whereby that expression inter alia includes a tax on the transfer of property in goods
(whether as goods or in some other form) involved in the execution of a works contract, by the
Constitution (Forty-sixth Amendment) Act, 1982. We are equally not concerned in these Appeals
with the restrictions imposed by Article 286 of the Constitution on a State's power to levy a tax
on certain classes of sales and purchases of goods. The Orissa Act in keeping with the legislative
history of fiscal measures in general, the Orissa Act has been amended several times. Thus, by
the middle of July 1981 it had been amended twenty-eight times. It is needless to refer to all the
provisions of the Orissa Act or of the various amendments made therein except such of them as
are relevant for the purpose of these Appeals. The Orissa Act when enacted levied a tax only on
the sales of goods taking place in the province of Orissa. By the Orissa Sales tax (Amendment)
Act, 1958 (Orissa Act No.28 of 1958), a purchase tax was for the, first time introduced in the
State of Orissa with effect from December We are concerned in these Appeals only with
purchases and sales of goods and not with their supply or distribution. The terms "sale" and
"purchase" are defined in clause (g) of section 2. Clause (g), omitting the Explanation which is
not relevant for our purpose, reads as follows:

"(g) 'Sale' means, with all its grammatical variations and cognate expressions, any transfer of
property in goods for cash or deferred payment or other valuable consideration, but does not
include a mortgage, hypothecation, charge or pledge and the words "buy" and "purchase" shall
be construed accordingly;

XXXXX

The expressions "goods" "purchase price" and "sale price" are defined in clause (d), (ee) and (h)
of section 2 as follows:

" (d) 'Goods' means all kinds of movable property other than actionable claims, stocks, shares or
securities and includes all growing crops, grass and things attached to or forming part of the land
which are agreed before sale or under the contract of sale to be severed, " (ee) 'Purchase Price'

26 | P a g e
means the amount payable by a person as valuable consideration for the purchase or supply of
any goods less any sum allowed by the seller as cash discount according to ordinary trade
practice, but it shall include any sum charged towards anything done by the seller in respect of
the goods at the time of or before deli very of such goods other than the cost of freight or
delivery or the cost of installation when such cost is separately charged; "(h) 'Sale Price' means
the amount payable to a dealer as consideration for the sale or supply of any goods, less any sum
allowed as cash discount according to ordinary trade practice, but including any sum charged for
anything done by the dealer in respect of the goods at the time of, or before delivery thereof".

Amongst the amendments made by the Orissa Sales Tax (Amendment) Ordinance, 1977, which
were re-enacted by the Orissa Sales Tax (Amendment) Act, 1978, was the substitution of sub-
section (I) of section 5 and the first proviso thereto by a new sub-section (1). Thus, with effect
from January 1, 1978 sub-section (1) reads as follows: Section 3-B confers upon the State
Government the power to declare what goods or classes of goods would be liable to tax on the
turnover of purchases. Section 3-B reads as follow.

"3-B. Goods liable to purchase tax The State Government may, from time to time, by
notification, declare any goods or class of goods to be liable to tax on turnover of purchases:

Provided that no tax shall be payable on the sales of such goods or class of goods declared under
this section”

This section was inserted in the Orissa Act with effect from December 1, 1958, by the Orissa
Sales Tax (Amendment) Act, 1958.

As the tax under the Orissa Act is intended to be a single point levy, section 8 confers upon the
State Government the power to prescribe points at which goods may be taxed or
exempted, Section 8 provides as follows:

“Power of the State Government to prescribe points at which goods may be taxed or exempted
Notwithstanding anything to the contrary, in this Act, the State Government may prescribe the
points in the series of sales or purchases by successive dealers at which any goods or classes or
descriptions of goods may be taxed or exempted from taxation and in doing so may direct that

27 | P a g e
sales to or purchases by a person other than a registered dealer shall be exempted from taxation:
Provided that the same goods shall not be taxed at more than one point in the same series of sales
or purchases by successive dealers.

Explanation-Where in a series of sales, tax is prescribed to be levied at the first point, such point,
in respect of goods dispatched from outside the State of Orissa shall mean and shall always be
deemed to have meant the first of such sales effected by a dealer liable under the Act after the
goods are actually taken delivery of by him inside the State of Orissa."

Rules 93-A to 93-G of the Orissa Sales Tax Rules, 1947, prescribe the goods on which tax is
payable at the first point in a series of sales. The goods so prescribed have no relevance to these
Appeals.

The ambit of the Orissa State's taxing power-

14. The validity of the impugned provisions is challenged on two grounds: (1) they levy a tax on
what is not a sale or purchase of goods and are, therefore, unconstitutional, and (2) assuming the
subject-matter of the impugned provisions is a sale or purchase of goods, they levy a tax on the
same goods both at the sale point and purchase-point and are therefore, ultra vires the Orissa Act.
In order to test the correctness of these challenges, it is necessary to bear in mind the ambit of the
Orissa State‟s power to levy a tax on the sale or purchase of goods This power is subject to a two
fold restriction-one Constitutional; and the other, statutory. The Constitutional restriction on the
legislative competence of the Orissa State in this behalf is shared by it in common with all other
States, while the statutory restriction is self-imposed and flows from the provisions of the Orissa
Act.

15. In Addition to the above Constitutional limitations on the Orissa State's power to tax sales or
purchases of goods, there are other restrictions imposed by sections 3-B and 8 of the Orissa Act.
A State is free when there is a series of sales in respect of the same goods to tax each one of such
sales or purchases in that series or to levy the tax at one or more points in such series of sales or
purchases. Legislation of all States in this respect is not uniform. Some States have adopted a
single-point levy, others, a two- point levy; and yet others, a multi-point levy. The State of Orissa
has adopted a single point levy. It has done this by enacting the provision to section 3-B and the

28 | P a g e
proviso to section 8. Under the proviso to section 3-B no tax is payable on the sales of goods or
class of goods declared under that section to be liable to taxes on the turnover of purchase-. The
proviso to section 8 states that "the same goods shall not be taxed at more than one point in the
same series of sales or purchases by successive dealers". Where, therefore, In a series of sales by
successive dealers sales tax or purchase tax is levied at a particular point, neither sales tax nor
purchase tax can be levied at another point in the same series; and similarly can be levied in
respect of the same transaction or any other transaction of sale of the same goods.

As any attempt on the part of the State to impose by legislation sales tax or purchase tax in
respect of what would not be a sale or a sale of goods or goods under the Sale of Goods Act,
1930, is unconstitutional, any attempt by it to do so in the exercise of its power of making
subordinate legislation, either by way of a rule or notification would be equally unconstitutional;
and so would such an act on the part of the authorities under a Sales Tax Act purporting to be
done in the exercise of powers conferred by that Act or any rule made or notification issued
thereunder. Similarly where any rule or notification travels beyond the ambit of the parent Act, it
would be ultra vires the Act. Equally, sales tax authorities purporting to act under an act or under
any rule made or notification issued thereunder cannot travel beyond the scope of such Act, rule
or notification. Thus, the sales tax authorities under the Orissa Act cannot assess to sales tax or
purchase tax a transaction which is not a sale or purchase of goods or assess to sales tax any
goods or class of goods which are liable to purchase tax or assess to tax, whether sales tax or
purchase tax, goods at another point in the same series of sales or purchase of those goods by
successive dealers when those goods are liable to be taxed at a different point in that series.
Subject-matter of the impugned provisions, What now falls to be determined is the subject-
matter of the impugned provisions. Relying upon the definition of the term "goods" in the Sale of
Goods Act, 1930, and in the Orissa Act, it was submitted on behalf of the Appellant State that
the subject-matter of the impugned provisions is goods and that what is made exigible to tax
under the impugned provisions is a completed purchase of goods. On behalf of the contesting
Respondents it was submitted that by impugned provisions a new class of goods not known to
law sought to be created and made exigible to purchase tax and that this attempt on the part of
the State Government was unconstitutional as being beyond its legislative competence. The High
Court held that the impugned provisions amounted to a tax on an agreement of sale and not on a

29 | P a g e
sale or purchase of goods. It further held that in the case of Bamboo Contracts, the impugned
provisions also amounted to levying a tax on a profit a prendre.

17. The term "goods" is defined in clause (7) of section 2 of the Sale of Goods Act as follows (7)
'goods' mean every kind of movable property other than actionable claims and money; and
includes stock and shares, growing crops, grass and things attached to or forming part of the land
which are agreed to be served before sale or under the contract of sale ;"

We have already reproduced earlier the definition of "goods" given in clause (d) of section 2 of
the, Orissa Act. However for the purposes of ready reference and comparison, we are
reproducing the same here again. That definition is as 'follows:

"(d) 'Goods' means all kinds of movable property other than actionable claims, stocks, shares or
securities and includes all growing crops, grass and things attached to or forming part of the land
which are agreed before sale or under the contract of sale to be severed "

18.What is pertinent to note, however, is that under both the definitions the term 'goods" mean all
kinds of movable property (except the classes of movable property specifically excluded) and
includes growing crops, grass and things attached to or forming part of the land which are agreed
to be severed before sale or under the contract of sale. The Transfer of Property Act, 1882 (Act
IV of 1882), does not give any definition of the term "movable property", but clauses (36)
of section 3 of the General Clauses Act, 1897 (Act X of 1897), clause (27) of the Orissa General
Clauses Act, 1937 (Orissa Act I of 1937), and clause (9) of section 2 of the Registration Act,
1908 (Act XVI) of (1908) do. Clause (36) of section 3of the General Clauses Act provides as
follows:

"(36) 'movable property, shall mean property of every description, except immovable property."

The definition in the Orissa General Clauses Act is in identical terms. The definition in
the Registration Act is as follows:

"(9) 'moveable property' includes standing timber, growing crops and grass, fruit upon and juice
in trees, and property of every other description, except immovable property."

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The Transfer of Property Act does not give any exhaustive definition of "immovable property."
The only definition given therein is in section 3 which states:

'immovable property' does not include standing timber, growing crops, or grass."

This is strictly speaking not a definition of the term "immovable property" for it does not tell us
what immovable property is but merely tells us what it does not include. We must, therefore, turn
to other Acts where that term is defined. Clause (26) of section 3 of the General Clauses Act
defines "immovable property" as follows:

"(26) 'immovable property' shall include land, benefit to arise out of land, and things attached to
the earth, or permanently fastened to anything attached to the earth."

The definition of "immovable property" in clause (21) of section 2 of the Orissa General Clauses
Act is in the same terms. A more elaborate definition is given in clause (6) of section 2 of the
Registration Act which states:

"(6) 'immovable property' includes land, buildings, hereditary allowances, rights to ways, lights,
ferries, fisheries or any other benefit to arise out of land, and things attached to the earth or
permanently fastened to anything I) which is attached to the earth, but not standing timber,
growing crops nor grass."

What is pertinent to note about these definitions is that things attached to the earth are
immovable property. The expression "attached to the earth" is defined in section 3 of the
Transfer of Property Act as follows:

“„attached to the earth, means-

(a) rooted in the earth, as in the case of trees and shrubs;

(b) imbedded in the earth, as in the case of walls or buildings; or

(c) attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is
attached."

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19.Thus, while trees rooted in the earth are immovable property as being things attached to the
earth by reason of the definition of the term "immovable property" given in the General Clauses
Act, the Orissa General Clauses Act and the Registration Act, read with the definition of the
expression "attached to the earth" given in the Transfer of Property Act, standing timber is
movable property by reason of its being excluded from the definition of "immovable property" in
the Transfer of Property Act and theRegistration Act and by being expressly included within the
meaning of the term "movable property" given in the Registration Act. The distinction between a
tree and standing timber has been pointed out by Vivian Bose, J., in his separate but concurring
judgment in the case of Shrimati Shantabai v. State of Bombay and others 1 as follows:

"Now, what is the difference between standing timber and a tree? It is clear that there must be a
distinction because the Transfer of Property Act draws one in the definitions of 'immovable
property and 'attached to the earth'; and it seems to me that the distinction must lie in the
difference between a tree and timber. It is to be noted that the exclusion is only of 'standing
timber' and not of 'timber trees ' "Timber is well enough known to be-wood suitable for building
houses, bridges, ships, etc., whether on the tree or cut and seasoned.' (Webster's Collegiate
Dictionary). Therefore, 'standing timber' must be a tree that is in a state fit for these purposes
and, further, a tree that is meant to be converted into timber so shortly that it can already be
looked upon as timber for all practical purposes even though it is still standing. If not, it is still a
tree because, unlike timber, it will continue to draw sustenance from the soil.

"Now, of course, a tree will continue to draw sustenance from the soil so long as it continues to
stand and live, and that physical fact of life cannot be altered by giving it another name and
calling it 'standing timber' But the amount of nourishment it takes, if it is felled at a reasonably
early date, is so negligible that it can be ignored for all practical purposes and though,
theoretically, there is no distinction between one class of tree and another, if the drawing of
nourishment from the soil is the basis of the rule, as I hold it to be, the law is grounded, not so
much on logical abstractions as on sound and practical commonsense. It grew empirically from
instance to instance and decision to decision until a recognisable and workable pattern emerged;
and here, this is the shape it has taken."

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20. Thus, trees which are ready to be felled would be standing timber and, therefore, movable
property. What is, however, material for our purpose is that while trees (including bamboos)
rooted in the earth being things attached to the earth are immovable property and if they are
standing timber are movable property trees (including bamboos) rooted in the earth which are
agreed to be severed before sale or under the contract of sale are not only a movable property but
also goods.

21. In this connection it may be mentioned that in English law there exists (or rather existed) a
difference between fructus natwriles and fructus industriales. Fructus naturales are natural
growth of the soil, such as, grass. timber and fruit on trees, which were regarded at common law
as part of the soil. Fructus industriales are- fruits or crops produced "in the year, by the labour of
the year" in sowing and reaping, planting, and gathering e.g. corn and potatoes. Fractus
industriales are traditionally chattels being considered the "representative" of the labour and
expense of the occupier and thing independent of the land in which they are growing and were
not treated as an interest in land. Fructus naturales are regarded until severance as part of the soil
and an agreement conferring any right or interest in them upon a buyer before severance was a
contract or sale of an interest in land and were, therefore, governed by section 4 of the Statute of
Frauds of 1677 (29 Car. II c. 3). If they were severed before sale, section 17 of that Statute
applied P (see Benjamin's Sale of Goods, Second Edition, para 90, p. 62) this distinction was,
therefore, important in England for the purposes of the formalities required under the Statute of
Frauds. Under the definition of goods' given in section 62 (1) of the old English Sale of Goods
Act of 1893, "goods" included inter alia all industrial growing crops and things attached to or
forming part of the land which were agreed to be severed before sale or under the contract of
sale. The formalities required for a contract for the sale of goods of the value of L10 and
upwards by section 17 of the Statute of Frauds were re-enacted in section 4 of the Sale of Goods
Act, 1893. This section was repealed by the Law Reform (Enforcement of Contracts) Act, 1954.
The definition of 'goods' in section 61 (1) of the new Sale of Goods Act, 1979, is the same as
in the earlier Sale of Goods Act. Thus, the position now in English law is that crops and other
produce whether fructus naturales or fructus industriales (except in the case of a sale without
severance on a landlord, incoming tenant or purchaser of the land) will always be "goods" for the
purposes of a contract of sale since the agreement between the parties must be that they shall be

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severed either "before sale" or "under the contract of sale" (see Benjamin's Sale of Goods,
Second Edition, para 91, p.63).

22. As pointed out in Mahadeo v. The State of Bombay [1959] Supp. 2 S.C.R. 339. 349-the
distinction which prevailed in English law between fructus naturales and fructus industriales
does not exist in Indian law, and the only question which would fall to be considered in India is
whether a transaction concerns "goods" or "movable property" or "immovable property"' The
importance of this question is twofold: (I) in the case of immovable property, a document of the
kind specified in section 17 of the Registration Act requires to be compulsorily registered and if
it is not so registered, the consequences mentioned in sections in sections 49 and 50 of that Act
follow, while a document relating to goods or movable property is not required to be registered;
and 2) by reason of the interpretation placed on Entry 54 in List II in the Seventh Schedule to the
Constitution of India by this Court a State cannot levy a tax on the sale or purchase of any
property other than "goods" .

23.The submission of the Respondent that the impugned provisions levied a purchase tax on
immovable property and not on goods and hence travelled beyond the taxing power of the State
Government under the said Entry 54 was based upon the omission in the impugned provisions of
the words "before sale or under the contract of sale." It was urged that unless these words
qualified the phrase "agreed to be severed", standing trees and bamboos would not be "goods"
within the meaning of the definition of that term in the Sale of goods Act and the Orissa Act. The
High Court held that the impugned provisions amounted to levying a tax on an agreement of sale
and not on actual sale or purchase. According to the High Court, on tax can be imposed unless
the taxable event (namely, the transfer of property in the goods from the seller to the buyer) takes
place; and standing trees including bamboos) being unascertained goods, under the forest
contracts entered into by the State Government, they continue to be the property of the State
Government until felled and, therefore, the title to such trees or bamboos is transferred in favour
of the forest contractor only when the trees or bamboos are felled and severed after complying
with the conditions of the forest contract. We find that there is a fallacy under lying the above
submissions of the Respondents and in the reasoning of the High Court, the fallacy being to read
merely the description of the goods given in the impugned provisions by itself and not in
conjunctions with the governing words of the said provision. These impugned provisions declare

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that standing trees agreed to be severed and bamboos agreed to be severed shall be liable to tax
on the turnover of purchases. The tax that is levied under section 3-B is not on goods declared
under that section but on the turnover of purchases of such goods. It one reads the Notifications
issued under section 3-B and 5(1) as a whole. It is clear that the taxable event is not an agreement
to sever standing trees or bamboos but the purchase of bamboos or standing trees agreed to be
severed.

24. Does the absence of the words "before sale or under the contract of sale" make any difference
to this position? The answer in our opinion must be in the negative. The very use of the word
"agreed" in the description of goods shows that there is to be an agreement between the buyer
and the seller and under this agreement standing trees must be agreed to be severed and so also
bamboos. According to the definition of "goods" such severance may be either before sale or
under the contract of sale. At the first blush, therefore, it would appear that the goods which form
the subject matter of the impugned provisions are either bamboos and standing P trees agreed to
be severed before sale or bamboos and standing trees agreed to be severed under the contract of
sale. The question is "Which one is it?". The answer to this question depends upon the distinction
in law between an agreement to sell and sale. Section 4 of the Sale of Goods Act, 1930, deals
with a sale and an agreement to sell and it provides as follows:

Sale and agreement to sell.

(1) A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the
property in goods to the buyer for a price. There may be a contract of sale between one part-
owner and another.

(2) A contract of sale may be absolute or conditional. (3) Where under a contract of sale the
property in the goods is transferred from the seller to the buyer, the contract is called a sale, but
where the transfer of the property in the goods is to take place at a future time or subject to some
condition thereafter to be fulfilled, the contract is called an agreement to sell.

(4) An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled
subject to which the property in the goods is to be transferred."

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Thus, where there is a transfer from the buyer to the seller of property in the goods which are the
subject-matter of the agreement to sell, the contract of sale, is a sale but when the transfer of
property in the goods is to take place at a future time or subject to some condition thereafter to be
fulfilled, it is an agreement to sell which become a tale when the time elapses or such conditions
are fulfilled In the first case the contract is executed, while in the second case it is executory The
distinction between an agreement to sell and sale and the legal consequences flowing from each
have been succinctly stated in Benjamin's Sale of Goods, paras 25-26 at page 23, as follows:

"Agreement to sell. An Agreement to sell is simply a contract, and as such cannot give rise to
any rights in the buyer which are based on ownership or possession, but only to claims for breach
of contract. In the normal case at least, so long as the property in the goods remains in the seller,
they are his to deal with as he chooses (except that he may be in breach of his contract with the
buyer); they are liable to seizure in distress or execution as his property; and they pass to the
trustee in the event of his bankruptcy.

25. Sale. The Sale of Goods Act 1979 defines a sale in the following passages: first 'where under
a contract of sale the property in the goods is transferred from the seller to the buyer the contract
is called a sale'; and secondly, 'an agreement to sell becomes a sale when the time elapses or the
conditions are fulfilled subject to which the property in the goods is to be transferred. It is
therefore possible for a sale within the statutory meaning to come about ill one of two ways:
either by a contract which itself operates to transfer the goods from the ownership of the seller to
that of the buyer, the property passing when the contract is made; or by a contract which is
initially only an agreement to sell, but is later performed or executed by the transfer of the
property. In either case it is clear that the sale involves not only a contract, but also a conveyance
of the property in the goods, and so it may confer on the buyer the right to bring a claim in tort
for wrongful interference with the goods as well as rights in contract."

The test, therefore, is the transfer of the property in the goods from the seller to the buyer. In
order to determine whether for the impugned provisions to apply standing trees or bamboos are
to be severed before sale or under the contract of sale, what is required to be ascertained,
therefore, is the point of time when the property in the goods is transferred from the seller to the
buyer Under section 18 of the Sale of Goods Act, where there is a contract for the sale of

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unascertained goods, no property in the goods transferred to the buyer unless and until the goods
are ascertained. Under section 19, where there is a contract for the sale of specific or ascertained
goods the property in them is transferred to the buyer at such time as the parties to the contract
intend it to be transferred and for the purpose of ascertaining the intention of the parties regard is
to be had to the terms of the contract, the conduct of the parties and circumstances of the case.
Further, unless a different intention appears, the rules contained insections 20 to 24 are rules for
ascertaining the intention of the parties as to the time at which the property in the goods is to
pass to the buyer. Sections 20 to 23 provide as follows:

"20. Specific goods in a deliverable state. Where there is an unconditional contract for the sale of
specific goods in a deliverable state, the property in the goods passes to the buyer when the
contract is made, and it is immaterial whether the time of payment of the price or the time of
delivery of the goods, or both, is postponed."

"21. Specific goods to be put into a deliverable state.

Where there is a contract for the sale of specific goods and the seller is bound to do something to
the goods for the purpose of putting them into a deliverable state, the property goes not pass until
such thing is done and the buyer has notice thereof."

"22. Specific goods m a deliverable state, when the seller has to do anything thereto in order to
ascertain price. Where there is a contract for the sale of specific goods in a deliverable state, but
the seller is bound to weigh, measure, test or do some other act or thing with reference to the
goods for the purpose of ascertaining the price, the property does not pass until such act or thing
is done and the buyer has notice thereof."

"23. Sale of unascertained goods and appropriation.

(1) Where there is a contract for the sale of unascertained or future goods by description and
goods of that description and in a deliverable state are unconditionally appropriated to the
contract, either by the seller with the assent of the buyer or by the buyer with the assent of the
seller, the property in the goods thereupon passes to the buyer. Such assent may be expressed or
imp- lied, and may be given either before or after the appropriation is made.

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(2) Delivery to the Carrier.

Where in pursuance of the contract, the seller deli- vers the goods to the buyer or to a carrier or
other bailee (whether named by the buyer or not) for the purpose of transmission to the buyer,
and does not reserve the right of disposal, he is deemed to have unconditionally appropriated the
goods to the contract."

We are not concerned with section 24 which provides when property in the goods passes to the
buyer where goods are delivered to the buyer on approval or "on sale or return" or other similar
terms. The terms "deliverable state" and "specific goods" are defined in clauses (3) and (14)
of section 2 of the Sale of Goods Act as follows:

"(3) goods are said to be in a 'deliverable state' when they are in such state that the buyer would
under the contract be bound to take delivery of them;" "(14) 'specific goods' means goods
identified and agreed upon at the time a contract of sale is made."

Under the Orissa Act also "sale" is defined as meaning "transfer of property in goods" and the
word "purchase" is to be construed accordingly. The language of the impugned provisions,
especially the governing words thereof, makes it clear that what is made eligible to tax is not an
executory contract of sale but an executed contract of sale or in other words, not an executory
contract of purchase but a completed contract of purchase. Bearing in mind the statutory
provisions referred to above, it is further clear that such purchase would be complete when the
standing trees or bamboos are specific goods, that is, when they arc identified and agreed upon at
the time the contract of sale is made, and the con tract is unconditional and further such standing
trees or bamboos arc in a deliverable state, that is, nothing remains to be done except for the
buyer to enter upon the land of the seller and to fell and remove the trees Of bamboos, as the
case may be, without any let or hindrance. If these factors exist, then unless a different intention
appears either from the terms of the contract or can be infer red from the conduct of the parties
and other circumstances of the case, the property in such standing trees and bamboos would pass
from seller to the buyer when the contract is made and it is immaterial whether the time of
payment of the price or the time of taking delivery of standing trees agreed to be severed or
bamboos agreed to be severed or both is postponed. If, however, there is an unconditional

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contract for the sale of standing trees or bamboos which are unascertained, then unless a different
intention appears, the property in them would be transferred to the buyer when the standing trees
and bamboos are ascertained and it would be equally immaterial whether the time of payment of
the price or the time of taking delivery of standing trees agreed to be severed or bamboos agreed
to be severed or both is postponed. In either event, the sale and purchase would be completed
before severance as under the impugned provisions there has to be a completed purchase of
standing trees or bamboos agreed to be severed for the impugned provisions to apply. The
severance obviously cannot be before sale because in that case the property would only pass and
the sale completed after severance and the impugned provisions would have no application.
Therefore, for the impugned provisions to apply the severance of the standing trees or bamboos
must not be before sale but under the contract of sale, that is, after the sale thereof is completed.
The absence in the impugned provisions of the words "before sale or under the contract of sale"
thus makes 'no difference. The subject-matter of the impugned provisions is goods and the tax
that is levied thereunder is on the completed purchase of goods.

26. The fallacy underlying the reasoning of the High Court is that it has confused the question of
the interpretation of the impugned provisions with the interpretation of Timber Contracts and the
Bamboo Contract. On the interpretation it placed upon the Timber Contracts it came to the
conclusion that the property in the standing trees passed only after severance and after complying
with the conditions of that contract ar d, therefore, the impugned provisions purported to levy a
purchase tax on an agreement to sell. In the case of bamboos agreed to be severed, the High
Court on an interpretation of the Bamboo Contract held that it was a grant of a profit a prendre
and from that it further held that the impugned provisions were bad in law because they
amounted to a levy of purchase tax on a profit a prendre. This approach adopted by the High
Court was erroneous in law. The question of the validity of the impugned provisions had nothing
to do with the legality of any action taken thereunder to make exigible to tax a particular
transaction. If a notification is invalid, all actions taken under it would be invalid also. The
converse, however, is not true. Where a notification is valid, an action purported to be taken
thereunder contrary to the terms of that notification or going beyond the scope of that
notification would be bad in law without affecting in any manner the validity of the notification.
Were the interpretation placed by the High Court on the Bamboo Contract and the Timber

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Contracts correct, the transactions covered by them would not be liable to be taxed under the
impugned provisions and any attempt or action by the State to do so would be illegal but the
validity of the impugned provisions would not be affected thereby. The challenge to the validity
of the impugned provisions on the ground of their unconstitutionality must, therefore, fail.
Double taxation Another ground on which the High Court invalidated the impugned provisions
was that bamboos agreed to be severed and trees agreed to be severed were the same as bamboos
and timber after they are felled and as bamboos and timber were liable to tax at the sale-point,
the taxation of the same goods at the purchase point amounted to double taxation and was
contrary to the provisions of the Orissa Act. The general rule of construction is that a taxing
statute will not be so construed as to result in taxing the same person twice in respect of the same
income or transaction. There is, however, nothing to prohibit the legislature from so enacting it.
If what the High Court held were correct, it would not be double taxation in the strict sense of the
term because the same person is not being taxed twice in respect of the same transaction but the
same transaction is being taxed twice though in different hands, that is, the seller in a transaction
Or sale is being subjected to sales tax and the purchaser in the same transaction is being
subjected to purchase tax. Not only does the Orissa Act expressly forbid this but it also forbids
the levying of tax at more than one point in the same series of sales or purchases by successive
dealers. The provisions in this behalf are to be found in the proviso to section 3-B and the
proviso to section 8. Under the proviso to section 3-B, no tax is to be payable on the sales of
goods or class of goods declared under that section to be liable to tax on the turn over of
purchases. Under the proviso to section 8, the same goods are not to be taxed at more than one
point in the same series of sales or purchases by successive dealers. According to the High Court,
under the Orissa Act all goods are liable to sales tax unless exempted from tax by the State
Government under section 6, and, therefore, if particular goods are liable to sales tax, no
purchase tax is leviable in respect of the same goods unless the State Government issues three
notifications, namely, (I) a notification under section 3-B declaring the goods to be taxable at the
purchase point, (2) a notification under section 5 prescribing the rate of purchase tax, and (3) a
notification deleting the goods from the list of goods taxable at the sale point. The High Court
has illustrated this by setting out what was done when fish was made liable to purchase tax
instead of sales tax We find that the High Court has misunderstood the scheme of taxation under
the Orissa Act. As the Notifications dated December 29, 1917, were issued as a result of the

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amendments made by the Orissa Sales Tax (Amendment) Ordinance, 1977, replaced by the
Orissa Sales Tax (Amendment) Act, 1978, while the Notifications dated May 23, 1977, were
issued prior to these amendments, it is necessary to consider the scheme of taxation under the
Orissa Act both prior to and after January 1, 1978, being the date on which the relevant
provisions of the said Ordinance came into force.

Prior to January 1, 1978, under section 5 (1) the tax payable by a dealer under the Orissa Act on
his taxable turnover was at the rate specified in that sub-section. At the relevant time the rate was
six per cent. The rate specified in section 5 (1) was for both sales tax and purchase tax. As under
the Orissa Act a dealer is liable to pay tax on his turnover of sales as also on his turnover of
purchases and as purchase tax is payable only on the turnover of purchases of those declared
under section 3-B, in respect of the goods not so declared a dealer would be liable to pay sales
tax. Under the proviso to section 3-B, when any goods are declared to be liable to tax on the
turnover of purchases, no tax is payable on the sales Or such goods. Prior to January 1, 1978, a
notification was to be issued by the Slate Government under the first proviso to section 5 (1)
only when it wanted to fix a rate of tax higher or lower than that specified in section 5(1). If no
such notification was issued, then the tax which was payable, whether it was sales tax or
purchase tax, was to be at the rate mentioned in section 5 (1). The illustration given by the High
Court was in respect of goods for which under the first proviso to section 5(1) the State
Government had notified a rate of tax different from that mentioned in section 5(1). Where,
however, any goods were declared under section 3-B to be liable to tax on the turnover of
purchases, the notification prescribing a higher or lower rate of sales tax issued under the first
proviso to section 5(1) would there upon cease to be operative by reason of the operation of the
proviso to section 3-B and it was not necessary to repeal expressly that notification. It was also
not necessary for the State Government to issue a notification fixing the rate of purchase tax
unless it wanted to fix a rate higher or lower than that specified in section 5 (1). Where no such
notification was issued, the rate of purchase tax would be the one which was mentioned in
section 5(1), After January 1, 1978, the scheme of taxation is that no rate of tax is specified in the
Orissa Act but under section 5(1) the State Government is given the power to notify from time to
time the rate of tax, whether sales tax or purchase tax, by issuing notifications. The notifications
issued under section 5 (1) fixing the rate of sales tax, namely, Notification No. 67184-C.T.A.-

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135/77-F dated December 29, 1977, does not contain any entry in respect of bamboos or timber
or in respect of bamboos agreed to be severed or standing trees agreed to be severed. If they were
liable to sales tax, they would fall under the residuary entry No. 101 and be liable to sales tax at
the rate of seven per cent. If, however, any goods falling under the residuary entry or any other
entry in that notification arc declared under section 3-B to be liable to tax on the turnover of
purchases, the residuary entry or that particular entry would automatically cease to operate in
respect of those goods by reason of the proviso to section3- B without there being any necessity
to delete that particular entry or to amend the residuary entry by excluding those goods
therefrom. It would, however, be necessary for the State Government to issue a notification
specifying the rate of purchase tax on those goods because unlike what the position was prior to
January 1, 1978, on and after that date the new sub section 5(1) does not specify any rate of tax
but leaves it to the State Government to notify it from time to time.

27. The High Court was, therefore, in error in holding that the impugned provisions were invalid
and ultra vires the Orissa Act as they amounted to "double taxation". Effect of "Supersession"

Yet another contention raised by the contesting Respondents with respect to the impugned
provisions was that the two Notifications dated December 29, 1977, having been made in
"supersession" of all previous Notifications issued on the subject, the effect was to wipe out all
tax liability which had accrued under the Notifications dated May 23, 1977. The High Court held
that to hold that the liability was so wiped out would amount to giving a retrospective effect to
the Notifications dated December 29, 1977, and as the Legislature had not conferred upon the
State Government the power to issue notifications having retrospective effect, to so hold would
be to render the said Notification void. The High Court referred to a number of decisions on the
question of the power to make subordinate legislation having retrospective effect.

We find it unnecessary for the purpose of deciding this point to refer to any of the authorities
cited by the High Court. Both the Notifications dated December 29, 1977, are in express terms
made with effect from January 1, 1918. They do not at all purport to have any retrospective
effect and, therefore, they could not affect the operation of the earlier Notifications dated May
23, 1977, until they came into force on January 1, 1978. Further, both section 3-B and section
5(1) in express terms confer power upon the State Government to issue notifications "from time

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to time". Section 3-B provides that "the State may, from time to time by notifications, declare...
"goods liable to purchase tax. Prior to January 1, 1978, the proviso to sub-section (l) of section
5 provided that "The State Government may, from time to time by notification...fix a higher rate
not exceeding thirteen per cent or any lower rate of tax.. " Section S (I) as amended with effect
from January, 1978, provides that "The tax shall be levied...at such rate, not exceeding thirteen
per cent...as the State Government may, from time to time by notification, specify." Thus, the
Power of the State Government to issue notification under these two sections is to be exercised
by it "from time to time" and, therefore, the State Government can under section 5(1) issue a
notification and repeal and replace it by another notification enhancing or lowering the rate of
tax and similarly it can issue a notification under section 3-B declaring particular goods or class
of goods to be liable to tax on the turnover of purchases and subsequently by another notification
repeal that notification with the result that the particular goods or class of goods will from the
date of such repeal be again liable to pay tax on the turnover of sales. In the Notifications dated
December 29, 1977, the word "supersession" is used in the same sense as the word "repeal" or
rather the words "repeal and replacement". The Shorter Oxford English Dictionary, Third
Edition, at page 2084, defines the word 'supersession' as meaning "The action of superseding or
condition of being superseded." Some of the meanings given to the word 'supersede' on the same
page in that Dictionary which are relevant for our purpose are "to put a stop to; to render
superfluous or unnecessary; to make of no effect; to annul; to take the place of (something set
aside or abandoned); to succeed to the place occupied by; to supply the place of a thing".
Webster's Third New International Dictionary at page 2296 defines the word "supersession" as
"the state of being superseded; removal and replacement". Thus, by using in the Notifications
dated December 29, 1977, the expression 'in suerssion of all previous notification' that was done
was to repeal and replace the previous notifications by new notifications. By repealing and
replacing the previous notifications by other notifications, the result was not to wipe out any
liability accrued under the previous notifications. If this contention of the Respondents were to
be accepted, the result would be startling. It would mean, for example, that when a notification
has been issued under section 5 (13 prescribing a rate of tax, and that notification is later
superseded by another notification further enhancing the rate of tax, all tax liability under the
earlier notification is wiped out and no tax can be collected by the State Government in respect
of any transactions effected during the period when the earlier notification was in force.

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The two Notifications dated December 29, 1977, impugned by the Respondents were not the
only notifications which were issued on that date. There was another notification issued on that
date, namely, Notification No. 67184-C.T.A.- 135/77-F, directing that with effect from January l,
1978, the rate of tax payable by a dealer under the Orissa Act on account of the sale of goods
specified in column (2) of the Schedule to the said Notifications would be at the rate specified
against each in column (3) thereof. The issuance of these three Notifications became necessary
by reason of the change brought about in the scheme of taxation by the Orissa Sales Tax
(Amendment) Ordinance, 1977. Prior to that Ordinance, the rate of tax was as specified in sub-
section

(l) of section 5 with power conferred upon the State Government by the first proviso to that sub-
section to fix by notification issued from time to time a higher rate of tax not exceeding the limit
mentioned in the said proviso or to fix from time to time a lower rate of tax on account of the
sale or purchase of any goods or class of goods specified in such notification. Thus, if no
notification was issued by the State Government enhancing or lowering the rate of tax, the tax,
whether sales tax or purchase tax, payable by a dealer would be at the rate specified in sub-
section (1) of section 5 which at the relevant time was six percent. In pursuance of the power
conferred by the said proviso, the State Government had from time to time issued notifications
enhancing and in some cases lowering the rate of tax payable on account of either sale or
purchase of goods. The new section 5(1) did not specify any rate of tax but what was done was to
confer upon the State Government the power by notification to specify from time to time the rate
of tax subject to a maximum of thirteen per cent. Therefore, With effect from January 1, 1978,
unless a notification was issued specifying the rate of tax, no dealer would be liable to pay any
tax under the Orissa Act. It was for this reason that the Notification No. 67184-C.T.A-135/17-F
dated December 29, 1977, was issued specifying the rates of sales tax with effect from January 1,
1978. As under section 3-B the State Government had to declare the goods or class of goods
which were liable to tax on the turnover of purchases, the State Government had issued from
time to time notifications declaring such goods or class of goods. The purchases of such goods or
class of goods were liable to purchase tax at the rate specified in the old section 5(1). Where,
however, the State Government wanted that the turnover of purchase of particular goods or class
of goods should be taxed at a higher or lower rate, it issued notifications specifying such rate. As

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no rate of tax was specified in the new section 5(1) but it was left to the Government to specify
the rate of tax by notification both in respect of sales tax and purchase tax, from the date the
amending Ordinance of 1977 came into force, namely from January 1, 1978, it was necessary to
issue a notification consolidating all previous notifications on the subject in respect of goods
liable to purchase tax which the State Government did by the impugned Notification No. 67178-
C.T.A.-135/77-(Pt)-F. dated December 29, 1977, declaring what goods would be liable to tax on
the turnover of purchases with effect from January 1, 1978. Unless, however, the rate of
purchase tax in respect of these goods was specified under the new section 5(1) the goods though
declared to be liable to tax on the turnover of purchase would not be exigible to any tax at all, it,
therefore, became necessary for the State Government to issue Notification No. 67181-C.T.A.-
135/77-F. dated December 29, 1977, specifying the rates of purchase tax with effect from
January 1, 1978.

Exigibility to tax-Preliminary Contention-

28. The question which now remains to be considered is as regards the exigibility to purchase tax
of the amounts payable under the Bamboo Contract and the Timber Contracts. Before we address
ourselves to this question, it is necessary to dispose of a preliminary contention raised by the
Appellant with respect to this part of the case. It was submitted that the question whether a
particular contract is a sale or purchase of goods is a question of fact or a question of
interpretation of documents and one to be decided by the assessing authorities and, therefore, if
this Court holds that the impugned provisions are valid (as we have now done), it should not go
into the question of the exigibility to purchase tax of the transactions in question. This plea was
not raised at any stage before the High Court but has been raised for the first time in the Petitions
for Special Leave to Appeal, and that too only with respect to the Bamboo Contract though
during the course of hearing before us, it was raised with respect to the Timber Contracts also.
Before the High Court the matter proceeded on the basis that the question of validity of the
impugned provisions and of the exigibility to purchase tax of the transactions covered by the
Bamboo Contract and the Timber Contracts were inextricably linked together as if the impugned
provisions were issued only in order to levy a purchase tax on the transactions covered by these
Contracts. The Appellant can, therefore, hardly raise such a plea for the first time before this
Court. It is true that normally it is for assessing authorities to ascertain the facts and to interpret

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the documents in question, if there be any, and to decide whether a particular transaction is
exigible to tax. Here, however, the facts are not in dispute and the determination of this question
involves only an interpretation of the documents. The major part of the hearing before the High
Court was taken up with the nature of the transactions covered by these Contracts. We have also
heard the parties at length on the merits of this question. Even though the judgment of the High
Court with respect to the validity of the impugned provisions has been held by us to be erroneous
in law, it may well be said that the High Court's finding on the true nature of the Bamboo
Contract and the Timber Contracts remains unaffected. If we refuse to decide this question and
leave it to the assessing authorities to do so, they may well feel themselves bound by the High
Court's findings on this point or on the other hand, they may consider that the whole judgment of
the High Court has been reversed, particularly in view of the fact that in their writ petitions the
Respondent company had challenged the notice issued to it to file a return and the Respondent
Firm had challenged the assessment order made against it and, therefore, feel free to determine
the question afresh. In either event the matter would ultimately come back for decision to this
Court and that too after the lapse of several years-a consequence not to be contemplated with
equanimity by this Court. We, therefore, reject this preliminary contention raised by the
Appellant.

30. Timber Contracts: We will first take up the Timber Contracts. The High Court held that
standing trees were unascertained goods and continued to be the property of the State
Government until felled and, therefore, the title to them was transferred to the forest contractor
only when the trees were felled or severed by him after complying with all the conditions of the
forest contract and as the impugned provisions applied only to standing trees, that is, to trees
before their severance, purchase tax was not attracted and any attempt to levy purchase tax on
the amounts payable under the Timber Contracts would amount to taxing an agreement of sale of
goods and not a completed sale or purchase of goods. The High Court further held that the trees
so severed in which the property passed to the forest contractor were liable to sales tax by reason
of the retrospectively amended definition of the term "dealer" in clause (c) of section 2 of the
Orissa Act and they could not, therefore, be again made liable to purchase tax. The High Court
also rejected the contention of the Appellant State that timber and dressed or sized logs were
different commercial commodities and that sales tax could, therefore, be levied on both.

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According to the High Court they were the same commodity and, therefore, they could not be
made liable to sales tax at two points in the same series of sales. The High Court did not decide
the question whether the Timber Contracts were works contracts. This point was, however, urged
before us "on behalf of the Respondent firm. We will deal with this point separately but for the
present suffice it to say that according to us none of the Timber Contracts is a works contract.

On behalf of the Appellant State it was submitted that the Timber Contracts read with the sale
notice advertising the auction in respect of the standing trees showed that the standing trees
which were the subject matter of the Timber Contracts were goods identified and agreed upon at
the time when the contract of sale was made and were thus specific goods and that, therefore,
there was an unconditional contract for the sale of specific goods in a deliverable state and the
property in the said trees passed to the forest contractor, namely, the Respondent Firm, when the
contract was made, and the fact that the time of delivery as also payment of price was postponed
was irrelevant. It was the Appellant's submission that for the reason set out above the amounts
payable under the Timber Contract were exigible to purchase tax. It was further submitted that in
any event the property in the standing trees passed when the forest contractor was permitted to
get into the area as delineated under Rule 12 of the Orissa Forest Contract Rule, 1966
(hereinafter referred to as "The Forest Contract Rules"), to enable the contractor to fell the trees.
The same submissions as found favour with the High Court were advanced before us on behalf
of the Respondent Firm.

While setting out the facts of Civil Appeal No. 220 of 1982, we have outlined the procedure
followed by the State of Orissa in entering into forest contracts. The notice of public auction with
which we are concerned was published in the Orissa Gazette and was headed "Sale Notice of
Timber and Other Forest Products...." This Sale Notice related to different forest produce and
was in three parts. Part I gave "the list of timber and other forest products" for the session 1977-
78 which would be "sold by public auction" and the places and dates where such auction sales
were to be held. Clause 2 of Part I of the Sale Notice stated that the sale lots were subject to the
Special Conditions of Sale as published in Part II of the Sale Notice, the General Conditions of
Sale as published in Part III of the Sale Notice so far as they may be applicable and the
Conditions mentioned in the sanctioned form of agreement. Clause 3 stated that the successful
bidders shall be bound by the Orissa Forest Act. 1972, the Forest Contract Rules, the Orissa

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Timber and other Forest Produce Transit Rules, and all other relevant rules in force or which
might hereinafter come into force and promulgated under the Orissa Forest Act, 1972.

34.As the Orissa Forest Contract Act, 1972 (Orissa Act 14 of 1972), and the Forest Contract
Rules formed part of the agreement between the State of Orissa and the Respondent Firm, it may
be convenient at the stage to look at the relevant provisions thereof. Clause (g) of section 2 of the
Orissa Forest Contract Act defines "forest produce"' as including inter alia timber, whether found
in or brought from a forest or not, and trees when found in or brought from a forest. Clause (n)
defines "timber" as including "trees fallen or felled and all wood cut-up or sawn". Clause

(o) of section 2 of the Act defines "trees" as including bamboos. Section 36 of the Orissa Forest
Act confers powers upon the State Government to make rules inter alia for the cutting, sawing,
conversion and removal of trees and timber, and the collection, manufacture and removal of
forest produce, from protected forests Under section 37, any infringement of a rule made
under section 36 is an offence punishable with imprisonment for a term which may extend to one
year or with fine which may extend to Rs. 2000 or both. Under section 45(1) the control of all
rivers and their banks as regards the floating of timber as well as the control of all timber and
other forest produce in transit by land or water is vested in the State Government and the State
Government is conferred the power to make rules to regulate the transit and possession of all
timber and other forest produce, including rules prescribing the routes by which alone timber or
other forest produce may be imported, exported or moved into, from or within the State, and to
provide for punishment of imprisonment which may extend to one year or fine which may
extend to Rs. 1,000 or both for any breach of such rules.

20. Even after felling the trees the Respondent Firm was not entitled to remove the felled trees by
any route which it liked but only by routes which were prescribed and that too only if covered by
a permit signed by the Respondent Firm or its duly authorized agent from a permit book obtained
from the Range Officer. Further, under Rule 16, after felling the trees the Respondent Firm had
to remove them to the prescribed depots or places for check and examination and it was only
after the trees felled by it were checked and examined to ascertain that they were felled in the
manner prescribed in Rule 20 and were the trees which were the subject matter of the contract
that it could take them out of the contract area. Unless the Respondent Firm felled and removed

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all the trees which were the subject-matter of the contract within the period of the contract, on
the expiry of such period it would lose all rights to the trees not so removed.

It is true that under Rule 40 if the trees were destroyed by reason of fire, tempest, disease, pest,
flood, drought or other natural calamity or by reason of any wrongful act committed by any third
party or by reason of the unsoundness or breakage of any trees which were the subject-matter of
the contract, the Respondent Firm was not entitled to any compensation for any loss sustained by
it. This would show that after a Timber Contract was concluded, the risk passed to the
Respondent Firm. Under section 26of the Sale of Goods Act, the goods remain at the seller's risk
until the property in the goods is transferred to the buyer and when the property is transferred to
the buyer, the goods are at the buyer's risk whether delivery has been made or not. Section 26 is,
however, qualified by the phrase "Unless otherwise agreed." Thus, this section is subject to a
contract to the contrary and what we have stated above is sufficient to show that the Timber
Contracts were subject to a contract to the contrary and under them the risk passed to the
Respondent Firm before the property passed to it. This is made abundantly clear by Rule 44
which states that "All forest produce removed from a contract area in accordance with these rules
shall be at the absolute disposal of the forest contractor."

36. It is, therefore, clear that the Timber Contracts were not transactions of sale or purchase of
standing trees agreed to be severed. They were merely agreements to sell such trees. As pointed
out above, each stage of the felling and removal operations was governed by the Forest Contract
Rules and was under the control and supervision of the Forest Officers. The property passed to
the Respondent Firm only in the trees which were felled, that is, in timber, after all the conditions
Of contract had been complied with and after such timber was examined and checked and
removed from the contract area; The impugned provisions therefore, did not apply to the
transactions covered by the Timber Contracts.

It will be useful in the context of the conclusions which we have reached to refer to the decision
of this Court in Badri Prasad v. State of Madhya Pradesh & Anr. the question in that case was
whether there was a contract of sale of standing timber and whether under the contract the
property had passed to the appellant or whether the property had passed after the trees had been
felled and hence the right of the appellant's transferor had vested in the State Government before

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the trees were felled by reason of the provisions of the Madhya Pradesh Abolition of Proprietary
Rights (Estates, Mahals, Alienated Lands) Act, 1950 (M.P. Act No. I of 1951). The Court held
that under the terms of the contract the trees had to be felled before they become the property of
the appellant. The Court observed (at pages 390-1) "It will be noticed that under cl. 1 of the
contract the plaintiff was entitled to cut teak trees of more than 12 inches girth. It had to be
ascertained which trees fell within that description. Till this was ascertained, they were not
'ascertained goods' within s. 19 of the Sale of Goods Act. Clause 5 of the contract contemplated
that stumps of trees, after cutting, had to be 3 inches high. In other words, the contract was not to
sell tile whole of the trees. In these circumstances property in the cut timber would only pass to
the plaintiff under the contract at the earliest when the trees are felled. But before that happened
the trees had vested in the state." It is pertinent to note that conditions 16 to 18 of the special
Conditions of Sale which form part of the Timber Contracts also (1) [1969] 2 S.C.R. 380.
prescribe the girth of the trees which are to be felled and the height above the ground level at
which they are to be felled. Timber and Logs.

37. On our above finding that the transactions under the Timber Contracts are sales of Timber
and not sales of standing trees agreed to be severed the tax which would be attracted would be
sales tax and not purchase tax under the impugned provisions. This would, however, be so if the
Divisional Forest Officer were a dealer. Under the terms of the Timber Contracts the Respondent
Firm is liable to reimburse the Divisional Forest Officer the amount of sales tax he would which
be liable to pay. The question whether the Divisional Forest Officer is a dealer within the
meaning of that term as defined in clause (c) of section 2 prior to its being substituted with
retrospective effect by the Orissa Sales tax (Amendment and Validation) Act, 1979, which
repealed and replaced the Ordinance with the same title, is pending before the Court in Civil
Appeals Nos. 1237-1238 of 1979 and 1420-1421 of 1979 Whatever be the position under the old
definition, after the substitution of that definition with retrospective effect by the said
Amendment and Validation Act, the Divisional Forest Officer ought be a dealer. The validity of
this amendment is, however, also under challenge in this Court in Writ Petitions Nos. 958 of
1979 and 966 of 1979. We therefore, express no opinion on either OF these questions. It was,
however, submitted on behalf of the Respondent Firm that assuming these challenges fail, it
would be called upon to reimburse the Divisional Forest Officer According to the Respondent

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Firm, the Divisional Forest Officer. would not be entitled to do so because it had made sized and
dressed logs from the timbers which it had purchased under the Timber Contracts and had sold
such logs and paid sales tax on these sales and, therefore, to tax the sales of timber to them
would be to levy the tax at an earlier point in the same series of sales which is not permissible by
reason of the prohibition contained in the proviso to section 8. According to them, timber and
sized or dressed logs are one and the same commercial commodity. This contention was upheld
by the High Court. Though the High Court had so decided in order to consider whether the same
transaction could be taxed both at the sale-point as also at the purchase-point, it none the less
becomes necessary for us to determine this question in or to prevent needless litigation in the
future.

38. We will first see how different High Courts have dealt with this question. In Saw Bros.
and Co. v. The State of West Bengal [1963] 14 S.T.C. 878. all learned Single Judge of the
Calcutta High Court held that planks sawed out of logs are different things from logs and timber
in its nascent state. No reasons are given in that Judgment for reaching this conclusion, In
Bachha Tewari and another v. Divisional Forest Officer, West Midnapore Division, and
others[1963] 14 S.T.C. 1067. the same learned Judge held that the the chopping of timber into
firewood was a manufacturing process and, therefore, the imposition of a tax on timber and on
firewood manufactured from that timber did not amount to double taxation The question in both
those cases was whether sawing of planks and chopping of timber into firewood amounted to
manufacture so as to make the assessee liable to pay sales tax on the manufactured goods. This is
a different question from that to which we have to address ourselves. We may, however, point
out that even where the question is whether a certain process has resulted in a manufacture, the
resultant product must be a different commercial commodity and merely because certain articles
are known by different names it does not mean that they are different commercial commodities if
in fact they are merely different forms of the same commodity. Thus, in Tungabhadra Industries
Ltd. Kurnool v. Commercial Tax Officer, Kurnool [1960] 11 S.T.C. 827; (1961) 2 S.C R 14
Over and Assessment) Rules, 1939, hydrogenated groundnut oil, commonly called 'Vanaspati'
was held by this Court to be groundnut oil within the meaning of Rules S (I) (k) and 18 (2) of the
Madras General Sales Tax (Turn-The Court further held that the processing of groundnut oil to
render it more acceptable to the customer by improving its quality would not render the oil a

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commodity other than groundnut oil. Similarly, in the State of Gujarat v. Sakarwala Bros.(l) this
Court held that 'pates', `harda' and `alchidana' were sugar in different forms and fell within the
definition of sugar in Entry 47 of Schedule to the Bombay Sales Tax Act, 1959.

40. A decision more relevant to our purpose than the two Calcutta decisions is a decision of a
Division Bench of the Madhya Pradesh High Court in Mohanlal Vishram v. Commissioner of`
Sales Tax Madhya Pradesh, Indore [1969] 24 S.T.C. 101. In that case the Madhya Pradesh High
Court held that by felling standing timber trees, cutting them and converting some of them into`
ballis', a dealer did not alter their character as timber or used them for manufacture of other
goods within the meaning of section 8(1) of the Madhya Pradesh Sales Tax Act, 1958. Another
decision equally relevant for our purpose is that of a Division Bench of the Andhra Pradesh High
Court in G. Ramaswamy and others v. The State of Andhra Pradesh and others [1973] 32 S.T.C.
309. in which the question was very much the same as the one which we have to decide. The
assessees in that case purchased nascent timber, that is, logs of wood, and had swan or cut them
into planks, rafters, cut sizes, etc., and sold them for the purpose of construction of buildings and
the like. Under section 5(2)(a) of the Andhra Pradesh General Sales Tax Act, 1957, read with
Item 63 in the First Schedule to that Act, a dealer in timber was liable to pay sales tax at the rate
of three pies in a rupee at the point of first sale. The assessees were, however, sought to be taxed
under section 5(1) of that Act on their sales of, planks, rafters, out sizes, etc. treating them as
general goods. The contention of assessees was that these goods were timber which was taxable
at the first point of sale and the first point of sale was when the Forest Department sold the
standing timber trees to them and, therefore, the planks, rafters, cut sizes, etc., sold by them
could not again be made liable to sales tax Treating those goods as different commercial
commodities. The Division Bench held that in dealing with matters relating to the general public,
statutes are presumed to use words in their popular rather than their narrowly legal or technical
sense, and that as the provision levying a tax on timber was directed to deal with a matter
affecting people generally, as timber is in common use the word "timber" would have the same
meaning attached to it as in the common and ordinary use of language. The Division Bench
further held that although dictionaries are not to be taken as authoritative exponents of the
meanings of words used in a statute, it was a well-known rule of courts of law that words should
be taken to be used in the ordinary sense and courts are, therefore, sent for instruction to the

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dictionaries in the absence of any legislative or judicial guidance. The Division Bench then
referred to the meaning given to the word "timber" in different dictionaries. The Division Bench
also considered the meaning in commercial parlance of the term "timber". In that case the
assesses in their affidavits had asserted that timber in the commercial field also meant planks, cut
sizes, etc. There was no convincing denial by the Government of that assertion. The Division
Bench then turned to the "Rules for gradation of cut sizes of timber" prepared and issued in
October, 1960, by the Indian Standards Institution which showed the word "timber" was freely
used for kinds of standard cut sizes for building purposes. The Division Bench also looked at
Indian Airlines Quotation No. 406 of April 26, 1972, in which the words used were "timber teak-
wood" setting out the particular sizes thereafter. The Division Bench also referred to the other
documentary evidence produced in that case and held that the documents and affidavits before it
clearly made out that even the cut sizes of timber were commonly known as timber in
commercial field and that, therefore, both in the popular sense and in the commercial sense, the
word "timber" had the same meaning. The Division Bench also laid emphasis on the
interpretation given to the term "timber" by the sales tax Administration. For all these reasons the
Division Bench held that merely because planks, rafters, cut sizes, etc., were sawn or cut from
logs of woo(3, they did not alter their character and still continued to be raw materials which by
themselves and in the same form could not be directly put to use for construction purposes and
the logs of wood purchased by the assessees were merely cut or sawn to sizes for the sake of
convenience and to make them acceptable to the customers and that by reason of this process
they did not lose their character as timber.

41. We will now turn to the decisions of the Orissa High Court on this point. In State of Orissa v.
Rajani Timber traders [1974] 34 S.T.C. 374. a Division Bench of that High Court held that
timber logs and sized timber U were different commodities in the commercial sense though sized
timbers were brought out only from timber logs by a particular process. The Division Bench
further observed that the person who had a need of timber logs would not be satisfied had sized
timber been offered to him and similarly a person requiring sized timber would not be satisfied if
timber logs were supplied. In Kripasindhu Sahu & Sons v. State of Orissa [1975] 35 S.T.C. 270.
another Division Bench of the same High Court held that the dictum in the Rajani Timber
Traders' case was too widely stated and it did not indicate the meaning of the word "timber" as

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used in common parlance in commercial circles and it also did not purport to specify the
meaning of the expression "sized timber" as used in that judgment. The Division Bench further
held that timber in common parlance in Orissa took within its ambit only long and big sized logs
of wood ordinarily used in house construction as beams and pillars and that when timber was
converted into planks, rafters and other wood products like tables and chairs or cut into various
small sizes so as to be unfit for use as beams and pillars and similar such uses they could not be
termed as timber in common parlance though they may retain their essential character as wood
because the essential characteristic of timber as a commercial commodity was lost after such
conversion. The judgment in that case does not indicate any basis for holding that the word
"timber" had in common parlance in Orissa the meaning which according to the Division Bench
it bore. It is also curious to note that one learned Judge was common to both the Division
Benches though in each case the judgment was delivered by the other learned judge-

42. Having seen how the different High Courts have dealt with this question, we will now
ascertain the true position for ourselves. In Ganesh Trading Co., Karnal v. State of Haryana and
another [1973] 32 S.T.C. 623, 625 (S.C.) Hedge, J., speaking for this Count, said: ' This Court
has firmly ruled that in finding out the true meaning of the entries in a Sales Tax Act, what is
relevant is not the dictionary meaning, but how those entries are understood in common parlance,
specially in commercial circles". Applying this principle, the Court held that although rice was
produced out of paddy, paddy did not continue to be paddy after dehusking and that when paddy
was dehusked and rice produced, there was a change in the identity of the goods and, therefore,
rice and paddy were two different things in ordinary parlance.A careful reading of the judgment
in that case shows that there was no evidence before the court to show how "paddy" and "rice"
were understood in commercial circles or what these words meant in commercial or trade
parlance and that what the Court did was to refer to various authorities dealing not with rice or
paddy but with other goods and the meaning in ordinary parlance of the words "paddy" and '
rice" in order to ascertain the meaning of these words in the sense stated by it above.

So far as the case before us is concerned, there is material on the record to show what the word
"timber" and "logs" mean in commercial or trade parlance nor do the pleadings of the parties
filed in the Orissa High Court throw any light on the matter. The averment of the Respondent
Firm in this behalf is to be found in paragraph 13 of its writ petition in the High Court and all

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that is stated therein is that under the impugned provisions it would be required to pay purchase
tax on "timber agreed to be severed" and after severing the timber while effecting sales of timber
would be liable to pay sales tax on such sales. In the counter affidavit of the Law Officer in the
office of the Commissioner of Commercial Taxes, Orissa, filed on behalf of the Commissioner of
Commercial Taxes and the Sales Tax Officer, Sambalpur Circle, while replying to the said
paragraph 13 all that is stated is that timber commercially does not remain the same after being
cut, sized and shaped, and, therefore, there was no legal obstruction to tax an altogether different
commercial commodity at sale- point. In view of this state of the record we must seek to
ascertain the meaning of these two terms in common parlance with such aid as is available to the
Court. It is now well settled that the dictionary meaning of a word cannot be looked at where that
word has been statutorily defined or judicially interpreted but where there is no such definition or
interpretation, the court may take the aid of dictionaries to ascertain the meaning of a word in
common 1 parlance. In doing so the court must bear in mind that a word is used in different
senses according to its context and a dictionary gives all the meanings of a word and the court,
therefore have to select the particular meaning which would be relevant to the context in which it
has to interpret that word. The Orissa Act does not define the term ''timber" or "logs". Orissa is,
however, a State which is rich in natural wealth and mostly all, if not all, forests in the State of
Orissa are protected or reserved forests and come within the purview of the Orissa Forest Act,
1972, which was an Act passed to consolidate and amend the laws relating to the protection and
management of forests in the State of Orissa. The real object behind the issue of impugned
provisions was to levy purchase tax on standing trees agreed to be severed and bamboos agreed
to be servered in view of the judgment of the Orissa High Court in Straw Products Ltd, v. State
of Orissa in which it was held that a Divisional Forest Officer was not a dealer and, therefore, not
liable to pay sales tax and hence could not call upon forest contractors to reimburse him in
respect thereof. In view of this background, it would be relevant for our purpose to look at the
statutory definition of the term "timber". given in the Orissa Forest' Act, 1972. That term is
defined in clause (n) of section 2 of that Act, which reads as follows.

"(n) 'timber' includes trees fallen or felled and all wood cut-up or sawn."

On turning to various dictionaries, we find that the dictionary meaning largely coincides with
the statutory meaning of the word "timber". While discussing the question of the subject-matter

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of the impugned provisions we have set out the definition of the word "timber" contained in the
Webster Collegiate Dictionary occurring ring in the passage from the judgment of Vivian Bose,
J, in Shrimati Shantabai v State of Bombay The relevant meanings of the term "timber" given in
the Shorter Oxford Dictionary, Third Edition, are "building material generally; wood used for
the building of houses, ships, etc., or for the use of the carpenter, joiner, or other artisan". This
definition also states that the word is "applied to the wood of growing trees capable of being
used for structural purposes; hence collectively to the trees themselves". Amongst the meanings
given in the Concise Oxford Dictionary, Sixth Edition, are "wood prepared for building,
carpentry, etc;. trees suitable for this; woods, forests, piece of wood, beam". One of the
meanings of the word "timber" given in Webester's Third New International Dictionary, is "wood
used for or suitable for building (as a house or boat) for carpentry or joinery".A "log" according
to the Shorter Oxford English Dictionary means "a bulky mass of wood; now usually an unhewn
portion of a felled tree, or a length cut off for firewood" and according to the Concise Oxford
Dictionary it means "unhewn piece of felled tree, or similar rough mass of wood especially cut
for firewood". Thus, logs will be nothing more than wood cut up or sawn and would be timber.

42. A question which remains is whether beams, rafters and planks would also be logs or timber.
The Shorters Oxford English Dictionary defines "beam" inter alia as a large piece of squared
timber, long in proportional to its breadth and thickness and the Concise Oxford Dictionary
defines it as a ' long piece of squared timber supported at both ends, used in houses, ships, etc."
and according to Webster‟s Third New International Dictionary, it means "a long piece of heavy
often squared timber suitable for use in house construction." A beam is thus timber sawn in a
particular way. "Rafter" as shown by the Shorter Oxford English Dictionary is nothing but "one
of the beams which give shape and form to a roof, and bear the outer covering of slates, tiles,
thatch, etc." The Concise Oxford Dictionary and Webster's New International Dictionary define
"rafter" in very much the same way; the first defines it as "one of the sloping beams forming
framework of a roof" and the seconds as "one of the often sloping beams that sup- port a roof."
Rafter would also, therefore, be timber or log put to a particular use. A "plank" is defined in
Shorter Oxford English Dictionary as "a long flat piece of smoothed timber, thicker than a board,
specially a length of timber sawn to a thickness of from two to six inches, a width of nine inches
or more, and eight feet or H upwards in length." According to the Concise Oxford Dictionary it

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is a "long wide piece of timber, a few inches thick" and according to Webster's Third New
International Dictionary, it is "a heavy thick board that in technical specifications usually has a
thickness of 2 to 4 inches and a width of at least 8 inches." The exact thickness and width of a
plank may be of importance in technical specifications but in ordinary parlance planks would be
flattened and smoothed timber. Such flatness and smoothness can only be achieved by using a
saw and other implements required for that purpose. The same would be the case when timber is
rounded or shaped. The statutory definitions of timber extracted above read along with the
meaning of the word "timber" given in different dictionaries would show that the conclusion
reached by the Madhya Pradesh High Court in Mohanlal Vishram v. Commissioner of Sales Tax,
Madhya Pradesh, Indore, and by the Andhra Pradesh High Court in G. Ramaswamy and others v.
The State of Andhra Pradesh and others is more germane to our purpose than the two Orissa
cases neither of which has referred to the statutory definition of the word "timber" in the relevant
statutes. The observations of the Orissa High Court in the case of Krupasindhu Sahu & Sons v.
State of Orissa that timber in common parlance in Orissa takes within its ambit only long and big
sized logs of wood ordinarily used in house construction as beams and pillars but not when
timber is converted into planks, rafters and other wood products like tables and chairs cannot,
therefore, be said to be correct so far as planks and rafters are concerned. In our opinion, planks
and rafters would also be timber.

The result is that sales of dressed or sized logs by the Respondent Firm having already been
assessed to sales tax, the sales to the First Respondent Firm of timber by the State Government
from which logs were made by the Respondent Firm cannot be made liable to sales tax as it
would amount to levying tax at two points in the same series of sales by successive dealers
assuming without deciding that the retrospectively substituted definition of "dealer" in clause

(c) of section 2 of Orissa Sales Tax Act, 1947, is valid.

Yet another aspect of this question now arises for our consideration. During the period from June
1, 1977, to December 31, 3 1977, by reason of Notification No. S.R.O. 374/77 dated May
23, 1977, the rate of sales tax on timber was fixed at ten per cent by the State Government. Since
it was the contention of the State Government that logs are commercially a different commodity,
the tax could not have been assessed on the sales of logs by the Respondent Firm during this

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period at the rate of ten per cent but would have been assessed at the general rate of six per cent
specified in section 5(1) of the Orissa Act. If such was the case, on the findings given by us
above, the Respondent Firm would be liable to pay sales tax not at the rate of six per cent but at
the rate of ten per cent and it might be argued that the Respondent Firm has been under-assessed
or part of its turnover of sales of logs has escaped assessment. The assessment order made on the
Respondent Firm referred to earlier includes both the amount of purchase tax and sales tax but
this is not a composite assessment order but a severable one because the turn over of sales as also
the turnover of purchases have been shown separately and the amount of sales tax and purchase
tax have equally been shown separately. Thus, though as a result of our holding that the amounts
paid by the Respondent Firm under the Timber Contracts are not eligible to purchase tax, the
assessment order would require to be modified and corrected, such modification and correction
would not affect the rest of the assessment order. The question then is "Whether the sales tax
authorities can reopen the assessment of the Respondent Firm so far as the turnover of sales of
logs is concerned?" Under sub-section (8) of section 12 of the Orissa Act, the Commissioner of
Sales Tax or those sales tax authorities to whom such power is delegated have the power to
reopen an assessment but under section 12(8) the exercise of this power is subject to a period of
limitation, namely, thirty six months from the expiry of the year to which that period for which
the assessment is to be reopened relates. Since three years have long since expired from the year
to which the period in question relates, it would not now be open to the sales tax authorities
assuming it was a case for re- opening the assessment, to reopen the Respondent Firm's
assessment and tax the turnover of sales of dressed or sized logs at the rate of ten per cent instead
of six per cent. This question, of course, would not arise for any period on or after January 1,
1978, on which date the substituted sub- section (1) of section 5 came into force, as under the
notification issued under the substituted sub-section (1), no separate rate of tax is specified either
for timber or logs or any of the other goods which we have been considering above and all of
them would fall for the purpose of payment of sales tax under the residuary Entry No. 101 of the
Notification No. 67184-C.T.A. 135/77/1- ; dated December 29, 1977, and would be liable to
sales tax at the rate of seven percent and there would thus be no under-assessment or escapement
of assessment. Bamboo Contract We will now ascertain the nature of the Bamboo Contract.
Unlike the Timber Contracts, the Bamboo Contract is not in a prescribed statutory form but it
appears from the judgment of the High Court that all the Bamboo Contracts before it contained

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identical terms and conditions except with respect to the contract area, the period of the contract
and the amount of royalty. The parties to the Bamboo Contract were the Governor Or the State of
Orissa referred to in the said Contract as "the Grantor" and the Respondent Company. The
Bamboo Contract is headed "Agreement of Bamboo Areas in Bonai Forest Division to the
Titaghur Paper Mills Company Limited." The second and the third recitals of the Bamboo
Contract are as follows:

"AND WHERAER the Company is desirous of obtaining grant from the Grantor of exclusive
right and licence to fell, cut, obtain and remove bamboos from all felling series of Bamboos
Working Circle in the Bonai Forest Division in the State of Orissa for the purpose of converting
the bamboos into paper pulp or for purposes connected with the manufacture of paper or in any
connection incidental therewith.

AND WHEREAS the Grantor has agreed to grant the said licence to the Company subject to the
restrictions, terms and conditions hereinafter appearing."

43. It was submitted on behalf of the Appellant that the Bamboo Contract was a composite
contract of sale, in that it was an agreement to sell existing goods" namely, bamboos standing in
the contract areas at the date of the Bamboo Contract, coupled with an agreement to sell future
goods, namely, bamboos to come into existence in the future. According to the Appellant the
property in the existing bamboos would pass after they were ripe for cutting and under Rule 12
of the Forest Contract Rules the Divisional Forest Officer had delineated the boundaries and
limits of the annual coupe from which bamboos were to be cut for the Respondent Company to
take delivery of them in as much as the bamboos then became ascertained goods. In the
alternative it was submitted that the property passed when the Respondent Company started the
work of cutting bamboos. According to the Appellant, in either event property passed before the
bamboos were severed. So far as the bamboos which were not in existence at the date of the
Bamboo Contract but were to come into existence thereafter were concerned, it was submitted
that as they were future goods once they came into existence and became ripe for cutting, the
property in them passed to the Respondent Company in the same way as in the case of bamboos
in existence at the date of the Bamboo Contract.

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45. In this view of the matter, the impugned provisions would have no application and the
amounts payable under the Bamboo Contract would not be exigible to purchase tax. By reason,
however, of the substitution of the definition of the term "dealer" in clause (c of section 2 of the
Orissa Act with retrospective effect, it may be argued that if the Bamboo Contract was a contract
of sale of goods, then on the sale taking place to the Respondent Company, sales tax would
become payable and the Respondent Company would be bound to reimburse to the Forest
Department the amount payable by it as sales tax. In order to avoid future legal controversy and
particularly in view of the fact that the High Court has held the Bamboo Contract to be a grant of
a profit a prendre it becomes necessary to determine whether the Bamboo Contract is at all a
contract of sale of goods. According to the Respondent Company the High Court was right in
holding that Bamboo Contract was not a contract of sale of goods but was a grant of a profit a
prendre.

45. The meaning and nature of a profit a prendre have been thus described in Halsbury's Laws of
England, Fourth Edition, Volume 14, paragraphs 240 to 242 at pages 115 to 117:

"240. Meaning of 'profit a prendre' A profit a prendre is a right to take something off another
person's land. It may be more fully defined as a right to enter another's land to take some profit
of the soil, or a portion of the soil itself, for the use of the owner of the right The term 'profit a
prendre' is used in contradistinction to the term 'profit a prendre', which signified a benefit which
had' to be rendered by the possessor of land after it had come into his possession.A profit a
prendre is a servitude.

"241. Profit a prendre as an interest in land. A profit a prendre is an interest in land and for this
reason any disposition of it must be in writing.A profit a prendre which gives a right to
participate in a portion only of some specified produce of the land is just as much an interest in
the land as a right to take the whole of that produce. . .

"242. What may be taken as a profit a prendre. The subject matter of a profit a prendre, namely
the substance which the owner of the right is by virtue of the right entitled to take, may consist of
animals, including fish and fowl, which are on the land, or of vegetable matter growing or
deposited on the land by some agency other than that of man, or of any part of the soil itself,
including mineral accretions to the soil by natural forces. The right may extend to the taking of

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the whole of such animal or vegetable matters or merely a part of them. Rights have been
established as profits a prendre to take acorns and beech mast, brakes, fern, heather and litter,
thorns, turf and peat, boughs and branches of growing trees, rushes, freshwater fish, stone, sand
and shingle from the seashore A and ice from a canal; also the right of pasture and of shooting
pheasants. There is, however, no right to take seacoal from the foreshore. The right to take
animals ferae naturae while they are upon the soil belongs to the owner of the soil, who may
grant to others as a profit a prendre a right to come and take them by a grant of hunting, shooting,
fowling and so forth."

46. A profit a prendre is a servitude for it burdens the land or rather a person's ownership of land
by separating from the rest certain portions or fragments of the right of ownership to be enjoyed
by persons other than the owner of the thing itself (see Jowitt's Dictionary of English Law,
Second Edition, Volume 2, page 1640. under the heading "Servitude"). "Servitude" is a wider
term and includes both easements and profits a prendre (see Halsbury's Laws of England, Fourth
Edition, Volume 14, paragraph 3, page 4). The distinction between a profit a prendre and an
easement has been thus stated in Halsbury's Laws of England, Fourth Edition, paragraph 43 at
pages 21 to 22:

"The chief distinction between an easement and a profit a prendre is that whereas an easement
only confers a right to utilise the servient tenement in a particular manner or prevent the
commission of some act on that tenement, a profit a prendre confers a right to take from the
servient tenement some part of the soil of that tenement or minerals under it or some part of its
natural produce or the animals ferae naturae existing upon it. What is taken must be capable of
ownership, for otherwise the right amounts to a mere easement".

47. In Indian law an easement is defined by section 4 of the Indian Easement Act, 1882 (Act
No. V of 1882) as being ' a right which the owner or occupier of certain land possesses, as such,
for the beneficial enjoyment of that land, to do and continue to do something, or to prevent and
continue to prevent something being done, in or upon, or in respect of, certain other land not his
own".A profit a prendre when granted in favour of the owner of a dominant heritage for the
beneficial enjoyment of such heritage would, therefore, be an easement but it would not be so if
the grant was not for the beneficial enjoyment of the grantee's heritage.

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Clause (26) of section 3 of the General Clauses Act, 1897, defines "immovable property" as
including inter alia "benefit to arise out of land". The definition of "immovable property" in
clause (f) of section 2 of the Registration Act 1908, illustrates a benefit to arise out of land by
stating that immovable property "includes...rights to ways, lights ferries, fisheries or any other
benefit lo arise out of land". As we have seen earlier, the Transfer of Property Act, 1882, does
not give any definition of "immovable property" except negatively by stating that immovable
property does not include standing timber, growing crops, or grass. The Transfer of Property Act
was enacted about fifteen years prior to the General Clauses Act, However, by section 4 of the
General Clauses Act, the definitions of certain words and expressions, including "immovable
property" and "movable property", given in section 3 of that Act are directed to apply also,
unless there is anything repugnant in the subject or context, to allCentral Acts made after January
3 1968, and the definitions of these two terms, therefore, apply when they occur in the Transfer
of Property Act. In Ananda Behra and another v. The State of Orissa and another (1) this Court
has held that a profit a prendre is a benefit arising out land and that in view of clause (26)
of section 3 of the General Clauses Act, it is immovable property within the meaning of
the Transfer of Property Act.

48. The earlier decisions showing what constitutes benefits arising out of land have been
summarized in Mulla on The Transfer of Property Act, 1882", and it would be pertinent to
reproduce the whole of that passage. That passage (at pages 16-17 of the Fifth Edition) is as
follows:

"A 'benefit to arise out of land' is an interest in land and therefore immovable property. The first
Indian Law Commissioners in their report of 1879 said that they had 'abstained from the almost
impracticable task of defining the various kinds of interests in immovable things which are
considered immovable property. The Registration Act, however, expressly includes as
immovable property benefits to arise out of land, here diary allowances, rights of way lights,
ferries and fisheries'. The definition of immovable property in the General Clauses Act applies to
this Act. The following have been held to be immovable (1) 11955] 2 S. C. R. 919 property:-
varashasan or annual allowance charged on land; a right to collect dues at a fair held on a plot of
land; a hat or market; a right to possession and management of a saranjam; a malikana; a right to
collect rent or jana: a life interest in the income of immovable property; a right of way; a ferry;

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and a fishery; a lease of land". B Having seen what the distinctive features of a profit a prendre
are, we will now turn to the Bamboo Contract to ascertain whether it can be described as a grant
of a profit a prendre and thereafter to examine the authorities cited at the Bar in this connection.
Though both the Bamboo Contract in some of its clauses and the Timber Contracts speak of "the
forest produce sold and purchased under this Agreement", there are strong countervailing factors
which go to show that the Bamboo Contract is not a contract of sale of goods. While each of the
Timber Contracts is described in its body as "an agreement for the sale and purchase of forest
produce", the Bamboo Contract is in express terms described as "a grant of exclusive right and
licence to fell, cut, obtain and remove bamboos...for the purpose of converting the bamboos into
paper pulp or for purposes connected with the manufacture of paper...." Further, throughout the
Bamboo Contract, the person who is giving the grant, namely, the Governor of the State of
Orissa, is referred to as the "Grantor." While the Timber Contracts speak of the consideration
payable by the forest contractor, the Bamboo Contract provides for payment of royalty.

"Royalty" is not a term used in legal parlance for the price of goods sold. "Royalty" is defined in
Jowitt's Dictionary of English Law, Fifth Edition, Volume 2, page 1595, as follows.

"Royalty, a payment reserved by the grantor of a patent, lease of a mine or similar right, and
payable proportionately to the use made of right by the grantee. It is usually a payment of
money, but may be a payment in kind, that is, of part of the produce of the exercise of the right.

49. Royalty also means a payment which is made to an author or composer by a publisher in
respect of each copy of his work which is sold, or to an inventor in respect of each article sold
under the patent." We are not concerned with the second meaning of the word H "royalty" given
in Jowitt. Unlike the Timber Contracts, the Bamboo Contract is not an agreement to sell
bamboos standing in the contract areas with an accessory licence to enter upon such areas / for
the purpose of felling and removing the bamboos nor is it, unlike the Timber Contracts, in
respect of a particular felling season only. It is an agreement for a long period extending to
fourteen years, thirteen years and eleven years with respect to different con tract areas with an
option to the Respondent Company to renew the contract for a further term of twelve years and it
embraces not only bamboos which are in existence at the date of the contract but also bamboos
which are to grow and come into existence thereafter. The payment of royalty under the Bamboo

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Contract has no relation to the actual quantity of bamboos cut and removed. Further, the
Respondent Company is bound to pay a minimum royalty and the amount of royalty to be paid
by it is always to be in excess of the royalty due on the bamboos cut in the contract areas.

We may pause here to note what the Judicial Committee of the Privy Council had to say in the
case of Raja Bahadur Kamkashya Narain Singh of Ramgarh v. Commissioner of Income- tax,
Bihar and Orissa about the payment of minimum royalty under a coal mining lease. The question
in that case was whether the annual amounts payable by way of minimum royalty to the lessor
were in his hands capital receipt cr revenue receipt. The Judicial Committee held that it was an
income flowing from the covenant in the lease. While discussing this question, the Judicial
Committee said (at pages 522-3):

"These are periodical payments, to be made by the lessee under his covenants in consideration of
the benefits which he is granted by the lessor. What these benefits may be is shown by the
extract from the lease quoted above, which illustrates how inadequate and fallacious it is to
envisage the royalties as merely the price of the actual tons of coal. The tonnage royalty is indeed
only payable when the coal or coke is gotton and despatched: but that is merely the last stage. As
preliminary and ancillary to that culminating act, liberties are granted to enter on the land and
search, to dig and sink pits, to erect engines an (1) (1943)11 I.T.R. 513 P.C.

machinery, coke ovens, furnaces and form railways and , roads. All these and the like liberties
show how fallacious it is to treat the lease as merely one for the acquisition of a certain number
of tons of coal, or the agreed item of royalty as merely the price of each ton of coal."

Though the case before the Judicial Committee was of a lease of a coal mine and we have before
us the case a grant for the purpose of felling, cutting and removing bamboos with various other
rights and licenses ancillary thereto, the above observations of the Judicial Committee are very
pertinent and apposite to what we have to decide.

50. Under the Bamboo Contract, the Respondent Company has the right to use all lands, roads
and streams within as also outside the contract areas for the purpose of free ingress to and egress
from the contract areas. It is also given the right to make dams across streams, cut canals, make
water courses, irrigation works, roads, bridges, buildings, tramways and other work useful or

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necessary for the purpose of its business of felling, cutting, and removing bamboos for the
purpose of converting the same into paper pulp or for purposes connected with the manufacture
of paper. For this purpose it has also the right to use timber and other forest produce to be paid
for at the current schedule of rates. The Respondent Company has the right to attract fuel from
areas allotted for that purpose in order to meet the fuel requirements of the domestic
consumption in the houses and offices of the persons employed by it and to pay a fixed royalty
for this purpose. Further, the Government was bound, if required by the Respondent Company,
to lease to it a suitable site or sites selected by it for the erection of store houses, sheds, depots,
bungalows, staff offices, agencies and other buildings of a like nature.

51. We have highlighted above only the important terms and conditions which go to show that
the bamboo Contract is not and cannot be a contract of sale of goods. It confers upon the
Respondent Company a benefit to arise out of land, namely, the right to cut and remove bamboos
which would grow from the soil couple with several ancillary rights and is thus a grant of a profit
a prendre. It is equally not possible to view it as a composite contract one, an agreement relating
to standing bamboos agreed to be severed H and the other, an agreement relating to bamboos to
come into existence in the future. The terms of the Bamboo Contract make it clear that it is one,
integral and indivisible contract which is not capable of being severed in the manner canvassed
on behalf of the Appellant. It is not a lease of the contract areas to the Respondent Company for
its terms clearly show that there is no demise by the State Government of any area to the
Respondent Company. The Respondent dent Company has also no right to the exclusive
possession of the contract areas but has only a right to enter upon the land to take a part of the
produce thereof for its own benefit. Further, it is also pertinent that while this right to enter upon
the contract areas is described as a "licence", under clause XXV of the Bamboo Contract the
Respondent (company has the right to take on lease a suitable site or sites of its choice within the
contract areas for the erection of store houses, sheds, depots, bungalows, staff offices, agencies
and other buildings of alike nature required fourth purpose of its business. The terms and
conditions of the Bamboo Contract leave no doubt that it confers upon the Respondent Company
a benefit to arise out of land and it would thus be an interest in immovable property. As the grant
is of the value exceeding Rs. 100, the Bamboo Contract is compulsorily registrable. It is, in fact,
not registered. This is, however, immaterial because it is a grant b the Government of an interest

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in land and under section Registration Act it is exempt from registration. The High Court was,
therefore, right in holding that the Bamboo Contract was a grant of a profit prendre, though the
grant of such right not being for the beneficial enjoyment of any land of the Respondent
Company it would not be an easement. Being a profit a prendre or a benefit to arise out of land
any attempt on the part of the State Government to tax the amounts payable under the Bamboo
Contract would not only be ultra vires the Orissa Act but also unconstitutional as being beyond
the State's taxing power under Entry 54 in List II in the Seventh Schedule to the Constitution of
India.

53. We will now turn to the authorities cited at the Bar. The cases which have come before the
courts on this point have mainly involved the question whether the document before the court
required registration. After the coming into force of the Constitution of India and the
introduction of land reforms with consequent abolition of 'Zamindari' and other proprietary into
rests in land, the question whether a particular document was a grant of a proprietary interest in
land has also fallen for determination by various courts. It is unnecessary to refer to all the
decisions which were cited before us and we propose to confine ourselves to considering only
such of them as are directly relevant to the question which we have to decide. Of the High Court
decisions the one most in point is that of a Full Bench OF the Madras High Court in Seeni
Chettiar v. Santhanathan Chettiar and others I.L.R. (18971 20 Mad. 58 F.B The question in that
case was whether a document which granted to the defendant a right to enjoy the produce of all
the trees on the bank and bed of a tank as also the grass and the reeds and further to cut and
remove the trees for a period exceeding four years required registration. The court held that the
document was not a lease because it did not transfer to the defendant exclusive possession of the
tank but conferred upon him merely a right of access to the place for the reasonable enjoyment of
what he was entitled to under the contract The court, however, came to the conclusion that the
document required registration as it transferred an interest in immovable property, and that it was
not a sale of mere standing timber but it was contemplated by the document, as shown by the fact
that a comparatively long period of a little more than four years was granted to the defendant for
cutting and removing the trees, that "the purchaser should derive a benefit from the further
growth of the thing sold, from further vegetation and from the nutriment to be afforded by the
land". The above words quoted in the judgment in that case were those of Sir Edward Vaughan

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Williams in the following passage cited with approval by Lord Coleridge, C.J., in Marshall v.
Green, [1875] 1 C.P.D. 35, 39:-

"The principle of these decisions appears to be this, that wherever at the time of the contract it is
contemplated that the purchaser should derive a benefit from the further growth of the thing sold,
from further vegetation and from the nutriment to be afforded by the land, the contract is to be
considered as for an interest in land; but where the process of vegetation is over, or the par ties
agree that the thing sold shall be immediately with drawn from the land, the land is to be
considered as a H mere warehouse of the thing sold, and the contract is for goods."

54. So far as the decisions of this Court are concerned, the one which requires consideration first
is Firm Chhotabhai Jethabai Patel & Co. (and other cases) v. The State of Madhya Pradesh
[19531 S.C.R. 476. This was one of the two cases strongly relied upon by the Appellant, the
other being State of Madhya Pradesh & Ors. v, Orient Paper Mills Ltd. [1977] 2 S.C.R. 149.
The facts in Chhotabhai's Case were that the petitioners had entered into contracts with the
proprietors of certain estates and mahals in the State of Madhya Pradesh under which they
acquired the right to pluck, collect and carry away tendu leaves; to cultivate, culture and acquire
lac; and to cut and carry away teak and timber and miscellaneous species of trees called
hardwood and bamboos. On January 26, 1951, the Madhya Pradesh Abolition of Proprietary
Rights (Estates, Mahals, Alienated Lands) Act, 1950 (Madhya Pradesh Act I of 1951), came into
force and on the very next day a notification was issued under the said Act putting an end to all
proprietary rights in estates, mahals and alienated villages and vesting the same in the State for
the purposes of the State free of all encumbrances with effect from March 31, 1952. The
petitioners therupon approached this Court under Article 32 of the Constitution of India praying
for a writ prohibiting the State of Madhya Pradesh from interfering with the rights which they
had acquired under the contracts with the former proprietors. It was averred in the petitions that
not only had the petitioners paid the consideration under the said contracts but had also spent
large sums of money in the exercise of their rights under the said contracts. This Court held that
the contracts appeared to be in essence and effect licenses granted to the petitioners to cut, gather
and carry away the produce in the shape tendu leaves, lac, timber or wood and did not create any
interest either in the land or in the trees or plants. In arriving at this conclusion the Court relied
upon a decision of the Judicial Committee of the Privy Council in Messrs Mohanlal Hargovind

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of Jubbulpore v. Commissioner of income-tax, C.P. & Berar, Nagpur L.R. [1949] 76 I.A. 235;
ILR 1949 Nag. 892; A.l.R. 1949 P.C. 311. In that case the assesses carried on business as
manufacturers and vendors of bidis composed of tobacco contained or rolled in tendu leaves. The
contracts entered into by the assesees were short term contracts under which in consideration of a
sum payable by instalments the assessees' were granted the exclusive right to collect and remove
tendu leaves from specified areas. Some of the contracts also granted to the assessees a small
ancillary right of cultivation. The Judicial Committee held that the amounts paid by the assessees
under the said contracts constituted expenditure in order to secure raw materials for their
business and, therefore, such expenditure was allowable as being on revenue account. In
Chhotabhai's Case this Court took the view that the contracts before it were similar to the
contracts before the Judicial committee and quoted with approval the following passage from the
judgment in Messrs Mohanlal Hargovind's Case (at page 241):

"The contracts grant no interest in land and no interest in the trees or plants themselves. They are
simply and solely contracts giving to the grantees the right to pick and carry away leaves, which,
of course, implies the right to appropriate them as their own property. The small right of
cultivation given in the first of the two contracts is me rely ancillary and is of no more
significance than would be, e.g., a right to spray a fruit tree given to the person who has bought
the crop of apples. The contracts are short term contracts. The, picking of the leaves under them
has to start at once or practically at once and to proceed continuously."

According to this Court, the contracts entered into by the petitioners before it related to goods
which had a potential existence and there was sale of a right to such goods as soon as they came
into existence, the question whether the title passed on the date of the contract itself or later
depending upon the intention of the parties. This Court, therefore, came to the conclusion that the
State had no right to interfere with the petitioners' rights under the said contracts.

55. As we will later point out, the authority of the decision in Chhotabhai's Case has been
considerably shaken, if not wholly eroded, by subsequent pronouncements of this Court. For
the present it will be sufficient for us to point out that the reliance placed in Chhotabhai's Case
on the decision of the Judicial Committee in Messrs Mohanlal Hargovind's Case does not appear
to be justified for the contracts before the Judicial Committee and before this Court were

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different in their contents and this Court appears to have fallen into an error in assuming that
they were similar. For instance, the contracts before the Privy Council were short term contracts
while those before the Court in Chhotabhai's Case were for different periods including terms of
five to even fifteen years. Apart from this, we have pointed out above the features which go to
make the Bamboo Contract a benefit to arise out of land. These features were conspicuously
absent in the contracts before the court in Caotabhai's Case.

56.The decision next in point of time on this aspect of the case is Ananda Behara and Another
v. The State of Orissa and Another. The petitioners in that case had obtained oral licenses for
catching and appropriating fish from specified sections of the Chilka Lake from its proprietor,
the Raja of Parikud, on payment of large sums of money prior to the enactment of the Orissa
Estates Abolition Act, 1951 (Orissa Act I of 1952). Under the said Act, the estates of the Raja of
Parikud vested in the State of Orissa and the State refused to recognize the rights of the
petitioners and was seeking to re-auction the rights of fishery in the said lake. The petitioners,
contending that the State had infringed or was about to infringe their fundamental rights under
Articles 19 (1) (f) and 3 (1) of the Constitution of India, filed petitions in this Court under Article
32 of the Constitiution. In their petition, the petitioners claimed that the ; transactions entered
into by the were sales of future goods, namely, fish in the sections of the lake covered by the
licences and that a s fish was movable property, the sai Act was not attracted because it was
confined to immovable property. The Court observed that if this contention of the petitioners was
correct, then their petition under Article 32 was misconceived because until any fish was actually
caught, the petitioners would not acquire any property in it. The Court held that what was sold to
the petitioners was the right to catch and carry away fish in specific sections of the lake for a
specified future period and that this amounted to a licence to enter on the land coupled with a
grant to catch and carry away the fish which right was a profit and in England it would be
regarded as an interest in land because it was a right to take some profit of the soil for the use of
the owner of the right in and India it would be regarded as a benefit arising out of the land and as
such would be immovable property. The Court then pointed out that fish did not come under the
category of property excluded from the definition of "immovable property". The Court further
held that if a profit a prendre is regarded as tangible immovable property, then the 'property'
being over Rs. 100 in value, the document creating such right would repuire to be registered, and

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if it was intangible immovable property, then a registered instrument would be necessary
whatever the value; but as in the case before the Court the sales were all oral and therefore, there
being neither writing nor registration, the transactions passed no title or interest and accordingly
the petitioners had no fundamental rights which they could enforce, Ananda Behera's Case was
the first decision in which Chhotabhai's Case was distinguished. The relevant passage in the
judgment (at pages 9234) is as follows:

"It is necessary to advert to Firm Chhotabhai Jethabai Patel & Co. v. The State of Madhya
Pradesh and explain it because it was held there that a right to pluck, collect and carry away'
tendu leaves does not give the owner of the right any proprietary interest in the land and so that
sort of right was not an 'encumbrance' within the meaning of the Madhya Pradesh Abolition of
Proprietary Rights Act. But the contract there was to 'pluck, collect and carry away, the leaves.
The only kind of leaves that can be 'plucked' are those that are growing on trees and it is evident
that there must be a fresh drop of leaves at periodic intervals. That would make it a growing crop
and a growing crop is expressly exempted from the definition of 'immovable property' in
the Transfer of Property Act. That case is distinguishable and does not apply here".

57. The next decision which was cited and on which a considerable debate took place at the Bar
wasShrimati Shantabhai v. State of Bombay & Others. The faces in that case were that by an
unregistered document the petitioner's husband had granted to her in consideration of a sum of
Rs. 20,000 the right to take and appropriate all kinds of wood from certain forests in his
Zamindari. On the coming into force of the Madhya Pradesh Abolition of Proprietary Rights
(Estates, Mahals, Alienated Lands) Act, 1950, all proprietary rights in land vested in the State of
Madhya Pradesh and the petitioner could no longer cut any wood. She thereupon applied to the
Deputy Commissioner and obtained from him an order permitting her to work the forest and
started cutting the trees. The Divisional Forest Officer took action against her and passed an
order directing that the cut materials be forfeited. She made representations to the Government
and they proving fruitless, she filed in this Court a petition under Article 32 of the Constitution
of India alleging breach of her fundamental rights under Article 19 (1) (f)and (g) of the
Constitution. Four of the five learned Judges who heard the case pointed out that the foundation
of the petitioner's claim was an unregistered document and that it was not necessary to determine
the true meaning and effect thereof for whatever construction be put on it, the petitioner could

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not complain of breach of any of her fundamental rights. The majority of the learned Judges held
that if the document were considered as conveying to the petitioner any part or share in her
husband's proprietary right, no such part or share was conveyed to her as the document was not
registered and assuming that any such part or share was conveyed, it had become vested in the
State under section 3of the said Act; if the document were considered as a licence coupled with a
grant, then the right acquired by the petitioner would be either in the nature of a profit a prendre
which being an interest in land was immovable property and would require registration and as
the document was not registered, it did not operate to transmit to her any such profit a prendre as
held in Ananda Behera's Case; and if the document were construed as conferring a purely
personal right under a contract, assuming without deciding that a contract was property" within
the meaning of Article 19(1)(f) and 31(1) of the Constitution, she could not complain as the State
had not acquired or taken possession of the contract which remained her property and as the
State was not a party to the contract and claimed no benefit under it, the petitioner was free to
sue the grantor upon that contract and recover damages by way of compensation; and assuming
the State was also bound by the contract, she could only seek to enforce the contract in the
ordinary way and sue the State if so advised and claim whatever damages or compensation she
might be entitled to for the alleged breach of it. After so holding the majority of the learned
Judges observed (at page 269):

"This aspect of the matter does not appear to have been brought to the notice of this when it
decided the case of Chhotobhai Jethabai Patel and Co. v. The State of Madhya Pradesh and had it
been so done, we have, no doubt that case would not have been decided in the way it was done."

Unlike the majority of the Judges, Vivian Bose, J,. in his separate judgment considered in detail
the nature of the document in that case. Vivian Bose, J,. pointed out the distinction between
standing timber and a tree. We have earlier extracted those passages from the learned Judge's
judgment. The learned Judge then pointed out that the duration of the grant was for a period of
twelve years and that it was evident that trees which would be fit for cutting twelve years later
would not be fit for felling immediately and; therefore, the document was not a mere sale of trees
as wood. Vivian Bose, J,. held that the transaction was not just a right to cut a tree but also to
derive a profit from the soil itself; in the shape of the nourishment in the soil that went into the
tree and made it to grow till it was of a size and age fit for felling as timber and if already of that

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size, in order to enable it to continue to live till the petitioner chose to fell it The learned judge,
therefore, held that though such trees as can be regarded as standing timber at the date of the
document, both because of their size and girth and also because of the intention to fall at an early
date would be movable property for the purposes of the Transfer of Property Act and
the Registration Act, the remaining trees that were covered by the grant would be immovable
property, and as the total value was Rs. 26,000, the deed required registration and being
unregistered, it did not pass any title or interest and, therefore, as in Ananda Behera's Case the
petitioner had no fundamental right which she could enforce.

58. According to learned Counsel for the Appellant, the judgment of Vivian Bose, J,. in that case
was not the judgment of the Court since the other learned Judges expressly refrained from
expressing any opinion as to the actual nature of the transaction under the document in question.
Learned Counsel submitted that what the Court really held in that case was that there was no
breach of any fundamental right of the petitioner which would entitle her to approach this Court
under Article 32 of the Constitution, and this decision was, therefore, not an authority for the
proposition that a document of the type before the Court was a grant of a profit a prendre as held
by Vivian Bose. J It is true as contended by learned Counsel that the majority expressly refrained
from deciding the nature of the document because, as it pointed out, in any view of the matter,
the petition would fail and it would, therefore, be difficult to say that what Vivian Bose, J,. held
was that the decision of the Court as such. However, the judgment of Vivian Base, J., is a closely
reasoned one which carries instant conviction and cannot, therefore, be lightly brushed aside as
learned Counsel has attempted to do. It is also pertinent to note that the majority in that case
pointed out the principal errors into which the Court had fallen in Chhotabhai's Case and
disapproved of what was decided in that case.

59. The decision to which we must now advert is Mahadeo v. The State of Bombay (and
connected petitions). The facts in that case were that some proprietors of Zamindaris situate in
territories, then belonging to the State of Madhya Pradesh and on the reorganization of States
transferred to the erstwhile State of Bombay, granted to the petitioners right to take forest
produce, mainly tendu leaves, from forests included in their Zamindaris. The agreements
conveyed to the petitioners in addition to the tendu leaves other forest produce like timber,
bamboos, etc., the soil for making bricks, and the right to build on and occupy land for the

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purpose of their business. In a number of cases, these rights were spread over many years. Some
of the agreements were registered and the others unregistered. After the coming into force of the
Madhya Pradesh Abolition of Proprietary Right's (Estates, Mahals, Alienated Lands) Act, 1950,
the Government disclaimed the agreements and auctioned the rights afresh, acting under section
3 of the said Act. The petitioners thereupon filed petitions under Article 32of the Constitution of
India challenging the legality of the action taken by the Government on the ground that it was an
invasion of their fundamental rights. The main contention of the petitioners was that the
agreements were in essence and effect licenses granted to them to cut, gather and carry away the
produce in the shape of tendu leaves, or lac, or timber or wood, and did not grant to them any
"interest in land" or 'benefit to arise out of land' and the object of the agreements could,
therefore, only be described as sale of goods as defined in the Indian Sale of Goods Act. In
support of that contention, the petitioners relied upon the decision in Chhotabhai's case. The
Court examined the terms of the agreements in question and concluded that under none of them
was there a naked right to take leaves of tendu trees together with a right of ingress and of
regress from the land but there were further benefits including the right to accupy the land, to
erect buildings and to take other forest produce not necessarily standing timber, growing crop or
grass. The Court further held that whether the right to the leaves could be regarded as a right to a
growing crop had to be examined with reference to all the terms of the documents and all the
rights conveyed thereunder and that if the right conveyed comprised more than the leaves of the
trees, it would not be correct to refer to it as being in respect of growing crops simpliciter. On an
examination of the terms of the documents and the rights conveyed thereunder the Court came to
the conclusion that what was granted to the petitioners was an interest in immovable property
which was a proprietary right within the meaning of the said act and, therefore, it vested in the
State. With reference to Chhotabhai Case relied upon by the petitioners. Hidayatullah, J., as he
then was , speaking for the court, said (at page 346):

" It is clear from the foregoing analysis of the decision in Chhotabhai's Case that on a
construction of the documents there under consideration an adopting a principle enunciated by
the privy Council in Mohanlal Hargovind of Jubbalpure v. Commissioner of Income tax Central
Provinces and Berar and relying upon a passage each in Benjamin on Sale and the well-known
treatise of Baden-Powell, the Bench came to the conclusion that the documents there under

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consideration did not create any interest in land and did not constitute any grant of any
proprietary interest in the estate but were merely contracts or licenses given to the petitioners to
cut, gather and carry away the produce in the shape of tendu leaves, or lac, or timber or wood'.
But then, it necessarily followed that the Act did not purport to affect the petitioners' rights under
the contracts or licences. But what was the nature of those rights of the petitioners? It is plain,
that if they were merely contracual rights, then as pointed out in the two later decisions,
in Ananda Behera v. The State of Orissa, Shantabai's case, the State has not acquired or taken
possession of those rights but has only declined to be bound by the agreements to which they
were not a party. If, on the other hand, the petitioners were mere licensees, then also, as pointed
out in the second of the two cases cited, the licences came to T-l an end on the extinction of the
title of the licensors. In either case there was no question of the breach Or any fundamental right
of the petitioners which could support the petitions which were presented under Art. 32 of the
Constituion. It is this aspect of the matter which was not brought to the notice of the Court, and
the resulting omission to advert to it has seriously impaired, if not completely nullified, the effect
and weight of the decision in Chhotabhai's case as a precedent."

60. We may also usefully reproduce the following passages (at page 354) from the concluded
portion of the judgment:

"From this, it is quite clear that forests and trees be longed to the proprietors, and they were
items of proprietary rights. "

"If then the forest and the trees belonged to the proprietors as items in their 'proprietary rights', it
is quite clear that these items of proprietary rights have been transferred to the petitioners...Being
a 'proprietary right', it vests in the State under ss. 3 and 4 of the Act. The decision in
Chhotabhai's case treated these rights as bare licenses, and it was apparently given per incuriam
and cannot; therefore; be followed." (Emphasis supplied) Faced with this decision, learned
Counsel for the Appellant sought to distinguish it on the ground that the terms of the agreements
in that case were different from the terms of the Bamboo Contract. We are unable to accept this
submission. It is unnecessary to set out in detail the terms of the agreements in Mahadeo's Case.
The differences sought to be pointed out by learned Counsel for the Appellant are unsubstantial
and make no difference. The essential and basic features are the same and the same interpretation

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as was placed upon the agreements in Mahadeo's Case must, therefore, apply to the Bamboo
Contract.

In State of Madhya Pradesh v. Yakinuddin the respondents had entered into agreements with
the former proprietors of certain estates in the State of Madhya Pradesh acquiring the right to pro
pagate lac, collect tendu leaves and gather fruits and flowers of Mahua leaves. Some of these
documents were registered and others (1) [1963] 3 S.C.R. 13 unregistered. On the coming into
force of the Madhya Pradesh Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands)
Act, 1950, the State of Madhya Pradesh took possession of all the villages comprised in the
respective estates of the proprietors who had granted the aforesaid rights to the respondents and
refused to recognize the respondents' rights. The respondents thereupon filed petitions under
Article 226 of the Constitution in the High Court of Madhya Pradesh and the High Court relying
upon the decision in Chhotabhai's Case, granted to the respondents the reliefs claimed by them.A
Bench of five Judges of this Court allowed the appeals filed by the State of Madhya Pradesh. In
its judgment, this Court considered its earlier decisions in Shantabai v. State of
Bombay and others and Mahadeo v. the State of Bombay and observed as follows (at page
21): "In view of these considerations, it must be held that these cases are equally governed by the
decisions aforesaid of this Court, which have overruled the earliest decision in the case
of Chhotabhai Jethabai Patel and Co. v. The State of Madhya Pradesh.

61. In Board of Revenue Etc. v. A.M. Ansari Etc.(1976] 3 S.C.R 661. the respondents were the
highest bidders at an auction of forest produce, namely, timber, fuel, bamboos, minor forest
produce, bidi leaves, tanning barks, parks, mohwa, etc., held by the Forest Department of the
Government of Andhra Pradesh. They were called upon to pay in terms of the conditions of sale
stamp duty on the agreements to be executed by then as if these documents were leases of
immovable property. The respondents there upon filed petitions under Article 226 of the
Constitution in the High Court of Andhra Pradesh. In the said petitions, the State contended that
under the agreements, the respondents had acquired an interest in immovable property. The High
Court held in favour of the respondents. The State went in appeal to this court. On consideration
of the terms of the agreements, this Court held that the agreements were licences and not leases.
The Court laid emphasis upon three salient features of those agreements for reaching its
conclusion, namely, (l) that these were agreements of short duration of nine lo ten months, (2)

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that they did not create any estate or interest in the H land, and (3) that they did not grant
exclusive possession and control of the land to the respondents but merely granted to them the
right to pluck, cut, carry away and appropriate the forest produce that might have been existing at
the date of the agreement or which might have come into existence during the short period of the
currency of the agreements, and that the right of the respondents to go on the land was only
ancillary to the real purpose of the contract. The Court observed as follows (at page 667):

"...Thus the acquisition by the respondents not being an interest in the soil but merely a right to
cut the fructus naturales, we are clearly of the view that the agreements in question possessed the
characteristics of licences and did not amount to leases so as to attract the applicability of Article
31(c) of the Stamp Act".

"The conclusion arrived at by us gains strength from the judgment of this Court in Firm
Chhotabhai Jethabai Patel and Co. & Ors. V. The State of Madhya Pradesh where contracts and
agreements entered into by person with the previous proprietors of certain estates and mahals in
the State under which they acquired the rights to pluck, collect and carry away tendu leaves, to
cultivate, culture, and acquire lac, and to cut and carry away teak and timber and miscellaneous
species of trees called hardwood and bamboos were held in essence and effect to be licences."

"There is, of course, a Judgment of this Court in Mahadeo v. State of Bombay where seemingly a
somewhat different view was expressed but the facts of that course were quite distinguishable. In
that case apart from the bare right to take the leaves of tendu trees, there were further benefits
including the right to occupy the land to erect buildings and to take away other forest produce
not necessarily standing timber, growing crop or grass and the rights were spread over many
years."

We fail to see how this authority in any way supports the case of the Appellant before us or
resuscitates the authority of Chhotabhai's Case. In Ansari's Case the Court seems to have
assumed that Chhotabhai's Case dealt with short term contracts while, as we have seen above,
most of the contracts in Chhotabhai's Case were of far greater duration extending even to fifteen
years, nor was the Court's attention drawn to the case of State Or Madhya Pradesh v.
Yakinuddin. While the agreement in Ansari's Case was a mere right to enter upon the land and

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take away tendu leaves, etc., the right under the Bamboo Contract is of a wholly different nature.
Further, the question whether the agreements were a grant of a profit a prendre or a benefit to
arise out of land was not raised and, therefore, not considered in Ansari's Case and the only point
which fell for decision by the Court was whether the agreements were licences or leases. In fact,
another question which arose in that case was whether the respondents were liable to pay the
amounts demanded from them as reimbursement of sales tax. Affirming the decision of the High
Court on this point, the Court held that the Forest Department did not carry on any business s by
holding auctions of forest produce and was, therefore, not a dealer within the meaning of that
term as defined in the Andhra Pradesh General Sales Tax Act, 1957. The question whether the
agreements were contracts of sale of goods was, however, not considered in that case-

62.We now come to the case of State of Madhya Pradesh and others v. Orient Paper Mills Ltd.,
the second of the two cases on which learned Counsel for the Appellant relied so strongly in
support of his submission that the Bamboo Contract was a contract of sale of goods. The facts in
that case as appearing from the judgment of the High Court reported as Orient Paper Mills Ltd.
v. State of Madhya Pradesh and Others were that the President of Indicating on behalf of the
former Part State of Vindhya Pradesh had entered into an agreement with the respondent. The
said agreement was a registered instrument and was styled as a lease and under it the respondent
acpuired the right for a period of twenty years with an option of renewal for a further period of
twenty years to enter upon "the leased area" to fell, cut or extract bamboos and salai wood and to
remove, store and utilize the same for meeting the fuel requirement of its paper mill.A copy of
the said agreement has been produced before us. Some of the terms of the said agreement were
the same as those contained in the Bamboo Contracts as also in the case of Mahadeo v. The State
of Bombay. The said agreement provided for payment of royalty including a minimum royalty. It
also conferred upon the respondent the right to take on lease such suitable site or sites as were at
the disposal of the State Government within "the leased area" for the erection of store houses,
sheds, depots, bungalows, staff offices, agencies and other buildings of a like nature bonafide
required for the purposes of its business connected with the said agreement as also a right to
make dams across reams, cut canals, make water-course, irrigation works, construct roads,
railways and tramways and do any other work useful or necessary for the purposes of its business
connected with the said agreement in or upon "the leased area" in terms very similar to those in

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the Bamboo Contract. After the States Reorganization Act, 1956, came into force, the territories
comprised in the State of Vindhya Pradesh became part of the new State of Madhya Pradesh. At
the date when the said agreement was entered into the P. and Berar Sales Tax Act, 1947, was in
force in the State of Vindhya Pradesh and the definition of "goods" contained in clause (g)
of section 2 of that Act as modified and in force in that State excluded from the purview of the
said Act forest contracts that gave a right to collect timber or wood to forest produce. The C. P.
and Berar Sales Tax Act was repealed by the Madhya Pradesh General Sales Tax Act, 1958, with
effect from April 1, 1959, and the new Act did not contain any exclusion of forest contracts from
the definitions of ' goods". Further, the term "dealer" as defined in the 1958 Act included the
Central Government and the State Government or any of its departments. The Forest Department
of the State Government was, however, exempted from the payment of sales tax for the period
April 1, 1959, to November 2, 1962. After the period of the said exemption expired, the Forest
Department got itself registered as a dealer and the Divisional Forest Officer called upon the
respondent to reimburse to him the amount which, according to him, he was liable to pay as sales
tax in respect of the transaction covered by the said agreement. Challenging his right to do so,
the respondent filed in the High Court of Madhya Pradesh a writ petition under Article 226 of the
Constitution. In the said writ petition the respondent contended that the transaction covered by
the said agreement was not a sale of goods and accordingly, no sales tax was payable in respect
of bamboos and salai wood extracted by the respondent thereunder, that the said agreement did
not provide for the recovery of the amount of sales tax from the respondent, and that neither the
State Government nor the Forest Department of that Government was a "dealer" and that even if
the sales tax was payable, it was not recoverable as arrears of land revenue. The High Court held
that the transaction was one of sale of goods and that if sales tax was payable it would be
recoverable under section 64A of the Sale of Goods Act, 1939, but the State Government or the
Forest Department could not merely by selling the forest produce grown on its own land be
regarded as carrying on any business of buying, selling, supplying or distributing goods and,
therefore, in respect of mere sales of forest produce neither the State Government nor the Forest
Department was a "dealer" within the meaning of that term as defined in the 1958 Act. In coming
to the conclusion that the said agreement was a contract of sale of goods, the High Court
proceeded upon the basis that what it had to consider was "the stage when bamboo and salai
wood have already been felled and appropriated''. By reason of the judgment of the High Court,

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the definition of the term "dealer" was amended with retrospective effect by the Madhya Pradesh
General Sales Tax (Amendment and Validation) Act, 1971, so as to nullify the finding of the
High Court that neither the State Government nor its Forest department was a "dealer". The State
of Madhya Pradesh as also the respondent came in appeal to the Supreme Court. The appeals
were heard in the Court by a Division Bench of two learned Judges. At the hearing of the
appeals, the respondent desired to challenge the vires of the amending Act, but in view of the
Presidential Proclamation suspending the operation of Article 14, it could not do so and the court
held that after the proclamation lapsed, it was open to the respondent to take up the point but so
far E the appeals were concerned that challenge was not available and the appeals must be
decided on the basis that the amendment was valid and constitutional. The main point before this
Court, therefore, was whether the said agreement was a lease as it was styled or a simple sale of
standing timber coupled with a licence to enter and do certain things on another's land. The Court
held that the label given to a document was not conclusive of its real nature and that under the
said agreement, possession of the land was not given to the respondent as it would have been had
the said agreement been a lease and that as the terms of the said agreement showed, it conferred
in substance a right to cut and carry away timber of specified species G and till the trees were
cut, they remained the property of the owner, namely, the State, and that once the trees were
severed, the property in them passed to the respondent. The Court further observed that the term
used in the said agreement, namely, "royalty", was "a feudalistic euphemism for the 'price' of the
timber".

We are unable to agree with the interpretation placed by the Court on the document in the Orient
Paper Mill*' Case. We find that in that case this Court as also the High Court adopted a wrong
approach in construing the said document. It is a well-settled rule of interpretation that a
document must be construed as a whole. This rule is stated in Halsbury's Laws of England,
Fourth Edition, Volume 12, paragraph 1469 at page 602, as follows:

"Instrument construed as whole.

It is a rule of construction applicable to all written instruments that the instrument must be
construed as a whole in order to ascertain the true meaning of its several clauses, and the words
of each clause must be so interpreted as to bring them into harmony with the other provisions of

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the instrument, if that interpretation does no violence to the cleaning of which they are naturally
susceptible. The best construction of deeds is to make one part of the deed expound the other,
and so to make all the parts agree. Effect must as far as possible, be given to every word and
every clause".

63. In Mahadeo v. State of Bombay a five-Judge Bench of this Court categorically held (at page
349) that "Whether the right to the leaves can be regarded as a right to a growing crop has,
however, to be examined with reference to all the terms of the documents and all the right.
conveyed thereunder". In spite of this clear and unequivocal pronouncement by a five-Judge
Bench of this Court, the learned Judges of the High Court who decided the Orient Paper Mills'
Case held (at page 538) that "we have to consider the stage when bamboos and salai wood have
already been felled and appropriated", while a two-Judge Bench of this Court evolved for itself
in the appeal from that judgment a rule of interpretation which was thus stated (at page 152) by
Krishna Iyer, J., who spoke for the Court:

"The meat of the matter is the judicial determination of the true character of the transaction of
'lease' from the angle of the MPGST Act and the Sale of Goods Act whose combined operation is
pressed into service for making the tax exigible from the Forest Department and, in turn, from
the respondent mills. It is the part of judicial prudence to decide an issue arising under the
specific statute by confining the focus to that statuary compass as far as possible. Diffusion into
wider jurisprudential areas is fraught with unwitting conflict or confusion. We, therefore, warn
ourselves against venturing into the general law of real property except for minimal illumination
thrown by rulings cited. In a large sense, there are no absolutes in legal propositions and human
problems and so, in the jural cosmos of relativity, our observations here may not be good
currency beyond the factual-legal boundaries of sales-tax situations under a specific statute."

A little later the learned Judge stated (at page 157) as follows: -

"We may also observe that the question before us is not so much as to what nomenclature would
aptly describe the deed but as to whether the deed results in sale of trees after they are cut. The
answer to that question, as would appear from the above has to be in the affirmative".

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The above rule enunciated by this Court in that case falls into two parts, namely, (I) a document
should be so interpreted as to bring it within the ambit of a particular statute relevant for the
purpose of the dispute before the Court, and (2) in order to do so, the court can look at only such
of the clauses of the document as also to just one or more of the consequences flowing from the
document which would fit in with the interpretation which the court wants to put on the
document to make that statute applicable. The above principle of interpretation cannot be
accepted as correct in law. It is fraught with considerable danger and mischief as it may expose
documents to the personal predilections and philosophies of individual judges depending upon
whether according to them it would be desirable that documents of the type they have to construe
should be made subject to a particular statute or not. The result would be that a document can be
construed as amounting to a grant of a benefit to arise out of land when the question before the
Court is whether proprietary rights and interests in estates have been abolished and the same
document or a document having the same tenor could be construed as a contract of sale of goods
when the question Is whether the amounts payable thereunder are exigible to sales tax or
purchase tax, making the interpretation of the document dependent upon the personal views of
the judges with respect to the legislation in question. In the very case which we are considering,
namely, the Orient Paper Mill's Case as shown by the very first sentence in the judgment, this
Court obliquely expressed its disapproval of the transactions of the type represent by the
document before it. That sentence is as follows (at page 150) .

"The State of Madhya Pradesh, blessed with abundant forest wealth, whose exploitation, for
reasons best known to that government, was left in part to the private sector. viz., the respondent,
Orient Paper Mills-"

64.We may point out here that in making this observation the Court overlooked three important
aspects of the matter, namely, (I) it was a matter of policy for the State to decide whether such
transactions should be entered into or not, (2) the transaction was entered into by the State so that
a paper mill could be started in the State as shown by the various terms of the said agreement and
thus was an encouragement to setting up of industries in the State, and (3) the transaction
ensured employment for the people of the area because the said agreement expressly provided
that the respondent was to engage minim m 50 per cent of the labour for the working of the
contract area from the local source if available.

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Just as a document cannot be interpreted by picking out only a few clauses ignoring the other
relevant ones, in the same way the nature and meaning of a document cannot be determined by
its end result or one of the results or consequences which flow from it. If the second part of the
above rule were correct, the result would be startling. There would be almost no agreement
relating to immovable property which cannot be construed as a contract of sale of goods. Two
instances would suffice to show this. If a man were to sell his building to another and the deed of
sale were to provide that the building should be demolished and reconstructed and the price
should be paid to the vendor partly in money and partly by giving him accommodation in the
new building, according to this rule of interpretation adopted by the Court in the Orient Paper
Mills Case it would for the purpose of sales tax be a sale of goods because the old building when
demolished would result in movable property, namely, debris, doors, windows, water pipes:
drainage pipes, water tanks, etc., which would be sold by the purchaser as movables. Similarly, if
a man were to give a lease of his orchard or field, the lessee would be entitled to the fruits
already in existence as also to the fruits which would come into existence in the future and
equally in the case of a field the same would be the case wlth respect to the crop growing in the
field as also the crops to grow thereafter. The fruits and crop, whether existing or future, when
plucked or harvested, would be movable property and would be sold as such by the lessee; but on
the second part of the rule of interpretation laid down the Orient Paper Mills' Case, the
document, indisputably a lease of immovable property, would for the purposes of sales tax law
be a sale of goods. In looking merely at the end-result of the agreement before it, namely, that
the bamboos would be cut and then would be goods in the hands of the respondent and holding
therefrom that the transaction was exigible to sales tax, the Court overlooked what had been
firmly established by the decision of the five-Judge Bench of this Court in State of Madras v.
Gannon Dunkerly Co. (Madras) Ltd. that both the agreement and the sale must relate to the same
subject-matter and, therefore, there cannot be an agreement relating to one kind of property and a
sale as regards another. This principle has been consistently followed and applied by this Court
(see, for instance. Commissioner of Sales Tax. M. P. v. Purshottam Premji).(1) Incidentally, we
may also point out that in the Orient Paper Mills Case this Court itself had reservations as
regards what it was deciding as is shown 'by its statement that "in the journal cosmos of
relativity, our observations here may not be good currency beyond the factual legal boundaries of

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sales-tax situations under a specific statute." We are constrained to observe that they are not
"good currency" so far as even those situations are concerned.

It is true that the nomenclature and description given to a contract is not determinative of the real
nature of the document or of the transaction thereunder. These, however, have to be determined
from all the terms and clauses of the document and all the rights and results flowing therefrom
and not by picking and choosing certain clauses and the ultimate effect or result as the Court did
in the Orient Paper Mills' Case.

65.Thus, in coming to the conclusion that the term "royalty" used in the document before it was
merely "a feudalistic euphemism for the 'price' of the timber", the Court overlooked the fact that
the amount of royalty payable by the respondent was consideration for all the rights conferred
upon the respondent under the contract though it was to be calculated according to the quantity
(1) [1970] 26 S.T.C. 38, 41 S.C. of the bamboos felled, and the Court also overlooked the fact
that this was made further clear by the provision for payment of a minimum royalty.

It is also true that an interpretation placed by the court on a document is not binding upon it
when another document comes to be interpreted by it but that is so where the two documents are
of different tenors and not where they have the same tenor. On the ground that they dealt with
the general law of real property, the Court in Orient Paper Mils' case did not advert to the earlier
decisions of this Court relating to documents with similar tenor even though those cases referred
to in the judgment of the Madhya Pradesh High Court under appeal before it. In view of this, the
Orissa High Court in the judgment under appeal before us held that the Orient Paper Mill 's Case
was decided by this Court per in curium because it did not take into consideration decisions of
larger Benches of this Court. In Union of India and another v. K. S.Subramanian, this Court held
as follows:

"But, we do not think that the High Court acted correctly in skirting the views expressed by
larger benches of this Court in the manner in which it had done this. The proper course for a
High Court, in such a case, is to try to find out and follow the opinions expressed by larger
benches of this Court in preference to those expressed by smaller benches of the Court. That is

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the practice followed by this Court itself. The practice has now crystallized in to rule of law
declared by this Court."

66. Had the Court looked at these decisions of larger Benches, it would have appreciated that the
only question before it could not be whether the document was a lease or a contract of sale of
goods and that even though the document was not a lease it could be a grant of a profit a prendre
and that where there is a grant of a profit a prendre that is, a benefit to arise out of land, it is
immaterial whether the possession of the land is given to the grantee or whether the grantee is
given only a licence to enter upon the land to receive the benefit. The basic and salient features
of the agreement before the Court in the Orient Paper Mills.' Case were the same as in the case of
Mahadeo state of Bombay and this Court was not justified in not adverting to that case and the
other cases referred to by us earlier on the ground that these cases dealt with the general law of
real property.

A chameleon may change its surroundings but document is not a chameleon to change its
meaning according to the purpose of the statute with reference to which it falls to be interpreted
and if documents having the same tenor are not to be construed by courts in the same way, it
would make for great uncertainty and would introduce confusion, leaving people bewildered as
to how they should manage their affairs so as to make their transactions valid and legal in eye of
the law.

67. The authorities discussed above show that the case of Firm Chhotabhai Jethabai Patel & Co.
v. The State of Madhya Pradesh is not good law and has been overruled by decisions of larger
Benches of this Court. They equally show that the case of State of Madhya Pradesh v. Orient
Paper Mills Ltd., is also not good law and that this decision was given per incurium and laid
down principles of interpretation which are wrong in law and cannot be assented to. The
discussion of the above authorities also confirm us in our opinion that the Bamboo Contract is
not a contract of sale of goods but is a grant of a Profit a prendre, that is, of a benefit to arise out
of land and that it is not possible to bifurcate the Bamboo Contract into two: one for the sale of
bamboos existing at the date of the contract and the other for the sale of future goods, that is, of
bamboos to come into existence in the future. In order to ascertain the true nature and meaning of
the Bamboo Contract, we have to examine the said contract as a whole with reference to all its

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terms and all the rights conferred by it and not with reference to only a few terms or with just one
of the rights flowing therefrom. On a proper interpretation, the Bamboo Contract dose not confer
upon the Respondent Company merely a right to enter upon the land and cut bamboos and take
them away. In addition to the right to enter upon the land for the above purpose, there are other
important rights flowing from the Bamboo Contract it which we have already summarized earlier
and which make in clear that what the Bamboo Contract granted was a benefit to arise out of
land which is an interest in immovable property. The attemp on the part of the State Government
and the officer of its Sales Tax Department to bring to tax the amounts payable under the
Bmboo Contract was, therefore, not only unconstitutional but ultra vires the Orissa Act.

Works Contract: The only point which now remains to be considered is the one canvassed by the
contesting Respondents namely, that the Bamboo Contract as also the Timber Contracts arc
works contracts and the amounts payable thereunder cannot, therefore, be made exigible to any
tax under the Orissa Act.A works contract is a compendious term to describe conveniently a
contract for the performance of work or services in which the supply of materials or some other
goods is incidental. The simplest example of this type of contract would be where an order is
given to a tailor to make a suit from suiting supplied by the customer. This would be a contract
of work or servies in which the suyply of materials, namely, thread, lining, and buttons used in
making the suit, would be mrely incidental. Similarly, if an artist is commissioned to paint a
portrait, it would be a contract of work and services in which the canvass on which the portrait is
painted and the paint used in painting the portrait would be merely incidental. In Commissioner
of Sale Tax, M.P. v. Pershottam Premji, this Court pointed out the distinction between a works
contract and a contract for the sale of goods as follows (at page 41):

"The primary difference between a contract for work or service and a contract for sale of goods
is that in the former there is in the person performing work or rendering service no property in
the thing produced as a whole notwithstanding that a part or even the whole of the materials used
by him may have been his property. In the case of a contract for sale, the thing produced as a
whole has individual existence as the sole property of the party who produced it, at some time
before delivery, and the property therein passes only under the contract relating thereto to the
other party for price"

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As pointed out above the Timber Contracts are agreements relating to movables while the
Bamboo Contract is a grant of an interest in immovable property. The question, therefore,
whether there is a works contract or a contract of sale of goods can arise only with respect to the
Timber Contracts. but the very meaning of a works contract would show that the Timber
Contracts cannot be works contracts. The payee of the price, namely, the Government has not
undertaken to do any work or labour. The work or labour under the Timber Contracts is to be
done by the payer of the price, namely, the forest contractor, that is, the Respondent Firm. It is
the Respondent Firm which has to enter upon the land and to fell the standing trees and to
remove them. Assuming for the sake of argument that the Bamboo Contract were a contract
relating to movables, the same position would apply to it. This contention of the Respondents is,
therefore, without any substance.

Conclusions to summarize our conclusions -

(2) Under the impugned provisions the taxable event is not an agreement to sever standing trees
or bamboos but the purchase of standing trees or bamboos agreed to be severed.

(3) The absence in the impugned provisions of the words "before sale or under the contract of
sale" is immaterial for the impugned provisions read as a whole clearly show that the severance
of standing trees or bamboos has to be under the contract of sale and before the purchase thereof
has been completed and not before sale of such trees or bamboos.

(4) The subject-matter of the impugned provisions is goods and the tax that is levied thereunder
is on a completed purchase of goods.

(5) When under section 3-B of the Orissa Sales Tax Act, 1947, any goods are declared to be
liable to tax on the turnover of purchases, such goods automatically cease to be liable to sales tax
by reason of the proviso to that section.

(6) The word "supersession" in the Notifications dated December 29, 1977, is used in the same
sense as the words "repeal and replacement" and, therefore, does not have the effect of wiping
out the tax liability under the previous notifications. All that was done by using the words "in
supersession of all previous notifications" in the Notifications dated December 29, 1977, was to

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repeal and replace previous notifications and not to wipe out any I) liability incurred under the
previous notifications.

The Timber Contracts are not works contracts but are agreements to sell standing timber.

Under the Timber Contracts the property in the trees which were the subject-matter of the
contracts passed to the Respondent Firm, Messrs M.M. Khara, only in the trees which were
felled, that is, in timber, after all the Conditions of the contract had been complied with and after
such timber was examined and checked and removed from the contract area. The impugned
provisions, therefore, did not apply to the transactions covered by the Timber Contracts. (9) The
dictionary meaning of a word cannot be looked at where that word has been statutorily defined or
judicially interpreted but where there is no such definition or interpretation, the court may take
the aid of dictionaries to ascertain the meaning of a word in common parlance, bearing in mind
that a word is used in different senses according to its context and a dictionary gives all the
meanings of a word, and the court has, therefore, to select particular meaning which is relevant
to the content in which it has to interpret that word (10) Timber and sized or dressed logs are one
and the same commercial commodity. Beams, rafters and planks would also be timber.

(11) As the sales of dressed or sized logs by the Respondent Firm have already been assessed to
sales tax, the sales to the First Respondent Firm of timber by the State Government from which
logs were made by the Respondent Firm cannot be made liable to sales tax as it would amount to
levying tax at two points in the same series of sales by successive dealers, assuming without
deciding that the retrospectively substituted definition of "dealer" in clause (c) of section 2 of the
Orissa Sales Tax Act, 1947, is valid.

(12) During the period June 1, 1977, to December 31, 1977, the sales of logs by the Respondent
Firm would be liable to tax at the rate of ten per cent. Assuming that these sale s have been
assessed to tax at the rate of ten per cent, by reason of the period of limitation prescribed by
section 12(8) of the Orissa Sales Tax Act, 1947, the Respondent Firm's assessment for the
relevant period cannot now be reopened to reassess such sales at ten Per cent.

(13) The Bamboo Contract is not a lease of the contract ' areas to the Respondent Company, The
Titaghur Paper Mills (Company Limited.

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(14) The Bamboo Contract is also not a grant of an easement to the Respondent Company.

(15) The Bamboo contract is a grant of a profit a prendre which in Indian law is a benefit to arise
out of land and thus creates an interest in immovable property.

(16) Being a benefit to arise out of land, any attempt on the Part of the State Government to tax
the amounts payable under the Bamboo Contract would be not only ultra vires the Orissa Act but
also unconstitutional as being beyond the State's taxing power under Entry 54 in List II in the
seventh Schedule to the Constitution of India.

(17) The case of Firm Chhotabhai Jethabai Patel & Co. v. The State of Madhya Pradesh is not
good law and has been overruled by decisions of larger Benches of this Court as pointed out by
this Court in State of Madhya Pradesh v. Yakinuddin.

(18) The case of State of Madhya Pradesh & Ors v. Orient Paper Mills Ltd. is also not good law
as that decision was given per incurium and laid down principles of interpretation which are
wrong in law. (19) The real nature of a document and the transaction thereunder have to be
determined with reference to all the terms and clauses of that document and all the rights and
results flowing therefrom. On the above conclusions reached by us the judgment of the High
Court in so far as it holds the impugned provisions to be unconstitutional and ultra vires the
Orissa Sales Tax Act 1947, requires to be reversed. This, however, does not mean that the writ
petitions filed by the Respondent Company and the Respondent Firm in the High Court should
be dismissed because in its writ petitions the Respondent Company had played for quashing the
notice dated August 18, 1977, issued against it under Rules 22 and 28(2) of the Orissa Sales Tax
Rules, 1947, and the Respondent Firm in its writ petition had prayed for setting aside the
assessment order dated November 28, 1978, for the priod April 1, 1977, to March 31, 1978. On
the findings given by us the said notice must be quashed. So far the said assessment order is
concerned, as we have pointed out earlier, it is severable and does not require to be set aside in
toto but only so far as it imposed purchase tax on the amounts paid by the Respondent Firm
under the Timber Contract. Though the High Court did not give these consequential reliefs in
view of its findings that the impugned provisions were invalid, it becomes necessary for us to do

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so in order to do complete justice between the parties as we are entitled to do under Article
142 of the Constitution of India.

66. In the result, we reverse the judgment of the High Court in so for as it holds (1) Notification
S.R.O. No. 372/77 dated May 23. 1977, issued under section 3-B of the Orissa Sales Tax Act,
1947, (2) Notification S.R.O. No. 373/77 dated May 23, 1977, issued under the first proviso to
sub-section (1) ofsection 5 of the said Act prior to the amendment of the said sub-section by the
Orissa Sale Tax (Amendment) Act, 1978, which repealed and replaced the Orissa Sales Tax
(Amendment) Ordinance, 1977, (3) Entries 2 and 17 in the Schedule to Notification No. 67178 -
C.T.A 135/77 (Pt.) - F (S.R.O). No. 900/77) dated December 29, 1977, issued under the
said section 3-B and (4) Entries No. 2 and 17 in the Schedule to Notification No. 67181 - C.T.A.
135/77-F (S.R.O. No. 901/77) dated December 29, 1977, issued under sub-section (1) of the said
section S after its amendment by the Orissa Sales Tax (Amendment) Act, 1978, to be
unconstitutional as being ultra vires Entry 54 in List II in the Seventh Schedule to the
Constitution of India and as being ultra vires the Orissa Sales Tax Act, 1947, and we declare
these provisions to be constitutional and valid. In Civil Appeal No. 219 of 1982, we further
quash and set aside the notice dated August 18, 1977, under Rules 22 and 28(2) of the Orissa
Sales Tax Rules 1947, issued against the Respondent Company, The Titaghur Paper Mills
Company Limited, and the assessment order, if any, made in pursuance thereof. In Civil Appeal
No. 220 of 1982, we further modify the assessment order dated November 28, 1978, for the
period April 1, 1977, to March 31, 1978, made against Respondent Firm; Messrs M.M. Khara,
by deleting therefrom the item of purchase tax on the amounts paid by the Respondent Firm
under the Timber Contracts entered into by it with the State of Orissa and direct consequential
modifications to be made therein.

As the real object of the State Government in making the impugned provisions was to make
exigible to purchase tax the amounts payable under the Bamboo Contracts and the Timber
Contracts in which object it has failed, in our opinion, a fair order for costs would be that the
parties should bear and pay their own costs of these Appeals and we direct accordingly.

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 Bamadev Panigrahi v Monorama Raj

AIR 1974 AP 226

JUDGMENT Kondaiah, J.

1. This appeal by the defendant is directed against the judgment and decree of the Additional
Subordinate Judge, Srikakulam, in O. S. No. 76 of 1966 decreeing the plaintiff's suit for the
recovery of a sum of the equipment of a cinema concern known as 'Kumar Touring Talkies'.

2. The material facts leading to this appeal may briefly be stated : The plaintiff's husband, late
Profulla Kumar Raj and the defendant were friends. According to the plaint allegations, the
plaintiff's husband had obtained a possessory mortgage. On 1-9-1957 from the Raja of Mandasa
on 1-9-1957 from the Raja of Mandasa in respect of a site measuring about Ac. 3-51 cents
known as 'Pula Thota' which contains a bunglow in it, for a sum of Rs. 4,000/- with a view to run
to cinema in that place. Profulla Kumar Raj, the plaintiff's husband, advanced from the year 1952
till the end of 1959 various sums amounting to Rs. 15,000/- to the defendant to meet his
obligations under forest contracts which he had entered into with the Raja Seheb of Mandasa.
The plaintiff's husband built a temporary cinema structure and erected a temporary pandal in a
portion of the plaint schedule site. For the purpose of the plaint schedule site. For the purpose of
the cinema, the plaintiff's husband purchased under a hire purchase agreement dated 17-2-1958 a
cinema projector and its accessories under an agreement with the Commercial Credit
Corporation, Madras, for a sum of Rs. 16,327/-. On the same day, he purchased a diesel amount
of Rs. 3,506/-. The aforesaid cinema projector and the oil engine and their accessories have been
imbedded and installed in the earth by constructing foundations for the purpose of running the
cinema concern known as 'Kumar Touring Talkies.' Finding no time to manage the cinema
concern the entrusted the management of the trust and confidence in him. The defendant taking
advantage of his position, as being the person in management, colluded with the Raja Saheb of
Mandesa and got an endorsement, of discharge made on the mortgage bond dated 1-9-1957 and
subsequently obtained the mortgage in his name on 6-3-1961. The plaintiff's husband had issued
a notice on 5-5-1961 calling upon the defendant to render a correct account of the management
of the cinema concern and demanding from him the payment of Rs. 15,000/- previously
advanced by him and to deliver possession of the entire cinema concern including the machinery,

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equipment, records etc., and also the site. The defendant, by his reply dated 2-6-1961, denied has
liability either to account for the management of Kumar Touring Talkies or to the return of Rs.
15,000/- alleged to have been advanced by the plaintiff's husband. Though the claim of the
plaintiffs' husband was denied categorically by the defendant as early as 2-6-1961, no suit had
been filed by him during his lifetime for the recovery of possession of the cinema equipment or
for recovery of the amount advanced by him. However, the plaintiffs' husband filed a suit, O. S.
No. 124 of 1961, on the file of the District Munsif Sompeta, for the recovery of the mortgage
amount of Rs. 4,000/- against the Raja of Mandasa and the defendant. That suit was decree ex
parte and the proceedings to set aside the ex parte decree are said to be pending in this High
Court.

3. As the plaintiff's husband was sick in 1963 and continued to be so till 7-8-1965 when he died,
the plaintiff filed the present suit for declaration that she is the owner of the cinema
equipment such a projector and diesal oil engine etc., embodied in the plaint schedule site
relating to the cinema concern known as Kumar Touring Talkies, and for directing the
defendant to remove the said cinema equipment and deliver the same to the plaintiff, or in
the alternative, for recovery of a sum of Rs. 19,833/- being the values of the machinery,
with subsequent interest and for costs. The suit claim was resisted by the defendant
contending inter alia that it was he, but not the plaintiff's husband , who is real owner of
the Kumar Touring Talkies, that he had obtained the mortgage deed from the Raja of
Mandasa though he got the deed executed benami in the name of the plaintif's husband,
that it was he who really obtained the hire purchase agreement from the Commercial
Credit Corporation, Madras in the name of the plaintiffs' husband, that he had paid the
instalments as per the agreement, that he did to borrow any amount from the plaintiff's
husband and that the suit pertains to the recovery of possession of movable property and
is, therefore, barred by limitation. It is further stated that the defendant removed the
equipment, machinery, projector etc. in December, 1961, and January, 1962, that his
attempt to obtain a licence in his name from the concerned authorities in his name from the
concerned authorities was unsuccesful on account of the attitude of the plaintiff's husband
and that there is no merit in the suit.

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4. The trial Court, framed as many as 16 issues as specified in paragraph 10 of its judgment,
Issues 9 and 11 were recast on 19-10-1970. The plaintiff examined P. Ws. 1 to 4 and marked
Exs. A-1 to A-49 in support of her claim. The defendant examined himself as D. W. 1 in addition
to examining D. Ws. 2 and 3 and filed Exs. B-1 to B-75 in support of his defence.

5. The trial Court, on a consideration of the material on record, has found that the cinema
equipment as well as the oil engine which were embedded in the earth are immovable property
and, therefore, the suit was within the period of limitation, that the suit property really belonged
to the plaintiff's husband who had entrusted the management of the cinema concern and the suit
premises to the defendant and that it was the plaintiff's husband that entered into the hire-
purchase agreement with the Commercial Credit Corporation, Madras. In the result, declaring the
plaitiff's husband and after his death, the plaintiff as the owner of the suit property, a decree for
the recovery of Rs. 19,388/- was granted to the plaintiff. Hence, this appeal.

6. The principal contention of Mr. S. Ramamurthy the learned counsel appearing for the
appellant, is that the cinema projector and the oil engine and their accessories are movable
property and they do not become immovable property on their being embedded in or fastened to
any property in the Kumar Touring Talkies as the intention and object of fixing the same was to
have the beneficial enjoyment of the equipment and machinery but not to benefit the land. On
such premise, it is argued that the suit being one related to movable property, should have been
preferred within 3 years from the date of the refusal or denial of the plaintiff's claim by the
defendant on 2-6-1961 and the present suit filed on July 20, 1966 is, therefore, barred by
limitation. He also contended that it is the appellant, but not the plaintiff's husband, that was the
real owner of the suit property and the plaintiff has no claim to the suit property.

7. Mr. Gangadhara Rao, the learned counsel appearing for the respondent, opposed the claim of
the appellant contending inter alia that the suit for declaration of the plaintiff's title to the cinema
concern is maintainable and is within the period of limitation, as the recovered, is immovable but
not movable property and there is no justifiable ground for interference with the findings of fact
arrived at by the trial Court relating to the ownership of the Cinema equipment and oil engine
and the appeal merits dismissal.

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8. Upon the respective contentions of the parties, the following questions arise for our
decisions.

(1) Whether, on the facts and in the circumstances, the suit for the recovery of possession of
the cinema equipment, and the diesal oil engine and their accessories or, in the alternative,
for recovery of their value, is barred by limitation as pleaded by the defendant?

(2) Whether the plaintiff's husband and after his death, the plaintiff is entitled to the
cinema equipment and the diesel oil engine and their accessories?

9. It is well-settled that a suit for declaration of title to, or for recovery of possession of ,
immovable property can be filed within 12 years from the date of the refusal or denial of the
plaintiff's right by the opposing party. However, in the case of movable property , such a suit
must be filed within 3 years from the date of refusal or denial of the plaintiff's right. The answer
to the point relating to limitation depends upon the nature and character of the property whose
possession is sought to be recovered by the plaintiff. If the property in respect of which the
declaration is sought for and of which delivery of possession is prayed for, or in lieu of which
alternative claim for recovery of money is made, is found to be immovable but not movable
property the present suit filed 5 years after the denial by the defendant of the plaintiff's right must
be held to be within the period of limitation. But, on the other hand, if the reliefs sought for are
construed to be in respect of movable property as contended by the appellant the suit must be
held to be barred by limitation as it is filed beyond the period of three years. The pertinent
question that falls for decision is whether the reliefs sought for in the plaint relate to movable or
immovable property.

10. Before adverting to the facts and circumstances of the case , for the purpose of determining
whether the suit relates to movable or immovable property, it is not only profitable but relevant
and necessary to briefly refer to the concept and the content of the expression "movable
property" and 'immovable property' and the case law on that aspect. The expressions 'Movable
Property' and 'Immovable Property' have not been defined under the Limitation Act whose
provisions are applicable to decide the point of limitation. However, they have been defined
under the General Clauses Act, Transfer of Property Act and the Registration Act which we shall

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presently indicate. The expression 'immovable property' has been defined under clause (26)
of Section 3 of the General Clauses Act, 1897 as follows :

"Immovable property shall include land, benefits to arise out of land, and things attached to the
earth or permanently fastened to anything attached to the earth."

Clause 36 of Section 3 of the General Clauses Act, 1897, defines 'movable property' as
'property of every description except immovable property'. The same definitions have been
provided under clauses (14) and (19) of Section 3 of the Andhra Pradesh General Clauses Act,
1897. 'Movable Property' is defined in clause (9) of Section 2 of the Registration Act as
including 'standing timber, growing crops and grass , fruit upon and juice in trees , and property
of every other description, except immovable property."

'Immovable Property' defined in clause (6) of Section 2 of the said Act. 'includes land,
buildings and things attached to the earth or permanently fastened to anything which is attached
to the earth, but not standing timber, growing crops nor grass."

The definitions in the Transfer of Property Act, 1882 may now be noted. Section 3 of the
Transfer of Property Act defines "immovable property" thus :-

"Immovable property does not include standing timber, growing crop or grass."

The expression "attached to the earth" means

(a) rooted in the earth, as in the case of trees and shrubs;

(b) embedded in the earth, as in the case of walls or buildings or

(c) attached to what is so embedded for the permanent beneficial enjoyment of that to which it is
attached."

11. From a reading of the statutory definitions of the terms "movable property" and "immovable
property" referred to above, it is manifest that things attached to the earth or permanently
fastened to anything attached to the earth are not movable but immovable property. The

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machinery in question, i.e., the cinema projector, diesel oil engine and their accessories does not
fall within any of the categories of immovable property. Though it is really movable property , it
may become immovable property if it is attached to the earth or permanently fastened to
anything which is attached to the earth. The enquiry should be not whether the attachment is
direct or indirect but what the nature and character of the attachment and the intendment and
object of such attachment are.

12. The English law of fixtures has no strict application to the law in India relating to machinery
attached to the earth or permanently fastened to anything attached to the earth, in view of the
statutory definitions pointed out earlier. We may, however, notice some English decisions
wherein certain tests or guidelines for determining whether any machinery is movable or
immovable property have been laid down.

13. In Holland v. Hodgson, (1872) 7 CP 328 at p. 334 looms attached earth and floor of a
worsted mill were held to be fixtures. Therein, it was observed by Blackburn, J. as follows :

"................ the general maxim of the law is, that what is annexed to the land becomes part of the
land; but it is very difficult , if not impossible , to say with precision what constitutes an
annexation sufficient for this purpose. It is a question which must depend on the circumstances of
each case, and mainly on two circumstances, as indicating the intention viz., the degree of
annexation and the object of the annexation.

14. In Leigh v. Taylor, (1902 AC 157 at p. 161) the House of Lords held that certain valuable
tapestries affixed by a tenant to the walls of a house for the purpose of ornament and for the
better enjoyment of them as chattels had not become part of the house, but formed part of the
personal estate of the tenant for life. It was observed by the learned Lord Chancellor Halsbury
that there were no real divergences of opinion amongst different judges except that "facts have
been regarded in different aspects according to the fashion of the times, the mode of
ornamentation , and the mode in which houses were built, and the degree of attachment which
from time to time to time become necessary or not according to the nature of the structure which
was being dealt with. The principle appears to me to be the same today as it was in early times,
and the broad principle is that, unless it has become path of the house in any intelligible sense, is

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not a thing which passes to the heir." The same view was reiterated in Spyer v. Phillipson ,
(1931-2 Ch 183).

15. The two guidelines evolved by the English Courts have been accepted by the Courts in India
for being followed while considered the question whether any machinery imbedded in the earth
or fastened to anything attached to the earth is movable or immovable property. In Narayana
Sa. v. Balaguruswami, (AIR 1924 Mad 187), Kumaraswami Sastriar, J. held that copper Stills
which were placed upon two iron rails in a distillery building and which could be removed by
pulling down the brick and the mud wall put up on one side for the purpose of keeping them in
position, were movables. The machinery fixed in a building for the purpose of baling cotton was
held by the Allahabad High Court in Megraj v. Krishna Chandra, (AIR 1924 All 365), to be
movable property. In Subhrahmaniam Firm v. Chidambaram, (AIR 1940 Mad 527 at p. 529),
the machinery installed by a tenant for running a cinema in the premises taken by him on lease
for his own profit, was held to be movable property within the meaning of Section 3 of the
Transfer of Property Act, as it was not a permanent improvement to the premises. We may notice
the following passage in the judgment of the learned Judges, Wadsworth, and J.:

"If a thing is imbedded in the earth or attached to what is so imbedded for the permanent
beneficial enjoyment of that to which it is attached, then it is part of the immovable property. If
the attachment of the chatter itself, then it remains a chatter, even though fixed for the time being
so that it may be enjoyed. The question must in each case be decided according to the
circumstances."

A Division Bench of the Madras High Court, in Mohammed Ibrahim v. Northern Circars Fibre
Trading Co., Coconada, 1944 (2) Mad LJ 60 at p. 64 = (AIR 1944 Mad 492) was of the view that
the machinery installed on a cement platform and held in position by being attached to iron
pillars fixed in the ground, was immovable property, as the annexation was made by the person
who owned the building as well as the machinery. The learned Judge, Krishnaswami Ayyangar,
J., who spoke for the Court, observed thus :

"It is obvious that his object was to become the owner of both for the purpose of carrying on a
business and for his own and individual benefit. If the argument is correct, namely, that the same

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intention which the vendors had must be attributed to the purchaser, the only way of establishing
a different in only way of establishing a different intention would be by the purchaser removing
the machinery from the ground to which it was annexed and again attaching it with the express
intention of making it part of the land. We cannot imagine that the law requires any such
procedure to the adopted for inferring an intention on the part of the purchaser to make the
machinery part of the land ."

In Board of Revenue v. Venkataswami Naidu, , a Full Bench of the Madras High Court held that
a lease of the properties relating to a touring cinema is not chargeable to stamp duty as the
equipment of the touring cinema which is capable of being removed and collapsible does not fall
within the category of immovable property. To the same effect is the decision of another
Division Bench of the Madras High Court in Perumal Naicker v. Ramaswami Kone, , wherein a
Petter engine mounted and fastened to a cement base was found to be immovable property on the
ground that it was fixed to the earth for the beneficial enjoyment of the property during its lease.
Where the machinery owned by one person was attached to the land belonging to another, it was
held by a Division Bench of the Nagpur High Court in J. H. Subbaiah v. Govind Rao, (AIR 1953
Nag 224) that the machinery is movable property. However, a boiler engine and a decorticator
fixed and imbedded in a ginning and decorticating factory building were held by a Divisio n
Bench of this Court in Chetty & Co. v. Collector of Anantpur, to be immovable property , as they
had been fixed for the beneficial use of the building as a factory.

16. From the foregoing discussion, the following principles emerge: The question whether any
machinery such as an oil engine imbedded in earth or permanently fastened to anything attached
to the earth is movable or immovable property, is a mixed question of fact and law depending
upon the facts and circumstances of each case. There is no statutory test or guideline having
universal application, for the determination of the nature or circumstances by itself may not be
conclusive or decisive, but the cumulative effect or the totality of the material facts and
circumstances must be taken as a fair and reasonable guide to determine the nature of the
property in a given case. The English law of fixtures has no strict application to this aspect of the
law in so far as our country is concerned, in view of the statutory definitions of the expressions
'immovable property' and 'movable property' in the General Clauses Act. Transfer of Property
Act and Registration Act.

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17. The tests enunciated by the decided cases to determine the character and nature of the
property are:

(I) What is the intendment, object and purpose of installing the machinery -- Whether it is the
beneficial enjoyment of the building , land or structure , or the enjoyment of the very
machinery?

(ii) The degree and manner of attachment or annexation of the machinery to the earth .

Where the machinery and the building or land on which it is installed, are owned by one and the
same person, normally it should be inferred, unless the contrary is proved, that the object and
purpose of installing the machinery is to have beneficial enjoyment of the entire building or land,
but not the sole enjoyment of the very machinery is to have beneficial enjoyment of the entire
building or land, but not the sole enjoyment of the very machinery itself. However, where the
machinery imbedded or installed and the building or land belong to two different powers , the
intendment and object of the person who is in possession and enjoyment of the property in
installing or annexing the machinery must normally be presumed , until the contrary is proved ,
to be to exploit the benefit of the machinery alone , as he is not interested in the building or the
land . Where the building or land or factory is taken on lease for a term by a lessee and he installs
certain machinery on that property during the lease period, it has to be held the machinery was
the beneficial enjoyment of the very machinery during the period of his lease. A tenant, who is in
possession of land for a certain period, would not intent to make any permanent improvement to
the land itself but try to make use of any machine or oil engine during the period of his lease. In
all probability, he may remove the oil engine or machine from the land the moment his object of
its beneficial enjoyment during his lease period is achieved. In such a case, fixtures on the land
cannot be termed to be a permanent one so as to bring it within the meaning of immovable
property. The nature of the stalled is also a relevant and material factor to be taken into
consideration in determining the character of the machinery. Where the building in which
machinery such as an oil engine or a cinema projector has been installed by the owner, is not a
pucca and permanent one , but it only a temporary shed or tent , his intention and purpose could
only be the beneficial enjoyment of the very machinery but not the building . However, where a
cinema projector and an oil engine have been installed in a permanent cinema theatre, purpose

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and object of installing the same must invariably be the beneficial enjoyment of the very cinema
theatre. The intendment, object and purpose of the person who fastens or installs the machinery
has to be inferred from the proved facts and admitted circumstances.

18. On the application of the aforesaid principles, we shall now proceed to examine the facts and
circumstances of the case on hand for the purpose of determining whether the cinema equipment
such as cinema projector and diesal oil engine in question is movable or immovable property.
The cinema concern is a touring talkies. It is not a pucca cinema hall , but it is only a temporary
shed build partly with zinc sheets and partly with oil cloth. The cabin portion is built with zinc
sheets and the remaining intent is covered with oil cloths. The cinema concern , as its very name
"Kumar Touring Talkies" indicates , is a temporary concern. The management of the concern
obtained permission to exhibit shows temporarily during the period for which a temporary
licence has been granted by the concerned authorities. It admits of no doubt that a touring talkies
would not be generally at one and the same place permanently but it will be moved freely from
place to place depending upon the demand and the convenience of the proprietor. Indisputable,
the land on which the said kumar Touring Talkies has been raised, really belongs to the Raja of
Mandasa. The claimant of the touring talkies, be it the appellant or the respondent's husband,
must be held to be a usufactuary mortgagee of the land belonging to the Raja of Mandasa. The
lease obtained for running the Kumar Touring Talkies was only for a period of one year, after the
expoiry of which there was no guarantee or assurance that the management of the concern would
automatically get extension of period for running the shows. The management may or may not
obtain such extension. In fact, on account of the disputes that cropped up between the appellant
and the plaintiff's husband, no one could successfully obtain the requisite permission from the
concerned authorities for running the cinema shows after expiry of one year period originally
granted . The person, be he the appellant or the plaintiff's husband, who installed the cinema
equipment on the land owned by the Raja of Mandasa, during the lease period for the specific
and limited purpose of exhibiting cinema shows, being the usufactuary mortgagee of the land but
not the owner thereof, must have intended to have only the beneficial enjoyment of the cinema
equipment, but would not have intended to benefit the very land which was not owned by him.
The lessee or the usufactuary mortgagee of the land, which was not owned by him. The lessee or
the usufactuary morgagee of the land, in installing the diesal oil engine, cinema projector etc.,

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must invariably have intended to make use of the said equipment during the limited lease period
and thereafter , separate the same from the land, as he was not interested, in the improvement of
the land belonging to another . On a careful consideration of the entire facts and circumstances,
we are of the firm view that the intendment, object and purpose of installing the cinema
equipment in question, was only to have the beneficial enjoyment of the very equipment during
the period of the lease or mortgage. That apart, the diesal oil engine and the cinema projector are
not rooted in the earth as in the case of trees and shurbs, or imbedded in the earth as in the case
of walls or buildings, or attached to what is so imbedded for the permanent beneficial enjoyment
of that to which they are attached. In the circumstances, the equipment or machinery must be
held to have not been attached to the earth within the meaning of the expression "attached to the
earth" under Section 3 of the Transfer of Property Act. The machinery is not only not attached to
the earth, but also not permanently fastened to anything attached to the earth. Hence, the
machinery in question must be held to be movable property but not immovable property. On that
premise, it must be held that the suit for the recovery of possession, or in the alternative, for
recovery of the value of such movable property, beyond the period of three years after the denial
by the defendant of the plaintiff's right , is barred by limitation.

19. The contention of Mr. Gangadhara Rao that the suit, as framed, is not barred by limitation
and that the subsequent withdrawal by the plaintiff of her claim for declaration of her right to the
cinema equipment, would not disentitle her to continue the suit in respect of the other reliefs
cannot be acceded to. This submission of the counsel is based on the assumption that the prayer
for declaration of the plaintiff's right to the cinema equipment relates to immovable property. We
have earlier held that the cinema projector and the diesal oil engine etc., are movable property.
That apart, the very declaration, as revealed from the plaint , appears to only in respect of the
cinema equipment, but not the touring talkies. We are satisfied that he declaration sought for by
the plaintiff is only in respect of movable property but not immovable property.

20. Hench this submission of the plaintiff has no leges to stand. The suit must have been filed
within three years from the date of the refusal or denial by the defendant of the right of the
plaintiff's husband to the suit property. We may also add that the conduct of the plaintiff in not
filing the suit within three years after the denial of her right to the suit property by the defendant,

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is a material factor to be taken into consideration factor to be taken into consideration. For all
reasons stated, question No. 1 is answered in the affirmative and in favour the appellant.

21. In view of our finding that the suit is barred by limitation, we do not find it necessary to
advert to question No. 2 relating to the ownership of the property.

22. In the result, the appeal is allowed setting aside the judgment and decree of the Court below,
with costs throughout.

23. Appeal allowed.

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 Duncans Industries Ltd v State of U.P. & Ors

(2000) SCC 633

SANTOSH HEGDE, J.

1.A Deed of Conveyance dated 9.6.1994 executed by a company named ICI India Ltd. in favour
of Chand Chhap Fertilizer and Chemicals Ltd. when presented for registration, the concerned
Registrar referred the said document under Section 47-A(II) of the Stamp Act to the Collector
complaining of the non-compliance of Section 27 of the said Act and praying for proper
valuation to be made and to collect the stamp duty and penalty payable on the said document.
The Collector after inquiry levied a stamp duty of Rs.37,01,26,832.50 and a penalty of
Rs.30,53,167.50. The said order came to be challenged by the aggrieved party in a revision
under Section 56 of the Stamp Act before the Chief Controlling Revenue Authority in Stamp
Revision No.36/95-96 and the said Revisional Authority as per his order dated 4.4.95 partly
allowed the challenge and so far as the imposition of penalty was concerned the same was set
aside and slightly modified the stamp duty levied by the Collector. Consequent to the order of
the Revisional Authority, the appellant herein became liable to pay stamp duty on the said Deed
of Conveyance amount to Rs.36,68,08.887.50. This order of the Revisional Authority came to be
challenged before the High Court in Civil Misc. Writ Petition No.9170/95 which came to be
dismissed and as against this order of the High Court of Judicature at Allahabad dated 7.7.1997,
the appellant has preferred the above civil appeal.

2. Briefly stated, the facts leading to the controversy in question are as follows : ICI India Ltd., a
company registered under the Companies Act, 1956 executed an agreement of sale dated
11.11.1993 wherein it agreed to transfer on an as is where is basis and as a going concern its
fertilizer business of manufacturing, marketing, distribution and sale of urea fertilizer in favour
of Chand Chhap Fertilizer and Chemicals Ltd. (hereinafter referred to as the CCFCL) also a
company incorporated under the Companies Act, 1956 which company has since been renamed
as M/s. Duncans Industries Limited, Fertilizer Division, Kanpur Nagar (the appellant herein) for
a total sale consideration of Rs.70 crores which was termed as slump price in the agreement. The
said agreement also stated that the vendor would on the transfer date transfer the fertilizer

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business by actual delivery of possession to the CCFCL in respect of such of the estates and
properties mentioned in the agreement as were capable of being transferred by actual and/or
constructive delivery and in respect of the estates requiring transfer by execution of necessary
documents vesting the title thereof in CCFCL, and it was further agreed and declared that the
ownership in respect of the assets and properties comprised in the fertilizer business to be
transferred as per the agreement, would be deemed to be vested in CCFCL on and from the
transfer date which, according to the agreement means 1.12.1993 or such other date as may be
agreed to by and between ICI India and CCFCL. The term fertilizer business was defined to
mean and include the following other properties :

(i) Demised land being plot nos. 2B and 5 and the sub-divided portion of plot No.2 demarcated
and admeasuring in the aggregate an area of 243.4387 acres equivalent to 9,85,159.50 sq. mtrs.
Being the unshaded portion shown on the plan annexed hereto together with the buildings and
structures thereon forming part of the fertilizer business as on the Transfer Date;

(ii) freehold land and residential building thereon with the name Chandralok, situate at plot
no.4/284, Parbati Bangla Road, Kanpur comprising 94 residential flats;

(iii) freehold land and residential building thereon with the name Chandrakala, situate at
Navsheel Apartments, 56 Cantonment, Kanpur comprising a Guest House on the ground floor
and 3 residential flats on the first floor;

(iv) Plant and machinery relating to the Fertilizer business including the Ammonia
Manufacturing Plants, the Captive power plant and all other movable capital assets including
vehicles, furniture, air-conditioners, stand-by systems, pipelines, railway siding etc., as on the
Transfer Date and wheresoever situate, all of which relate exclusively to the Fertilizer Business
and are owned and in the possession of ICI or are owned by ICI but in the lawful possession of
any third party for and on behalf of ICI:

3.Pursuant to the said agreement, a deed of conveyance dated 9.6.1994 was executed by the said
ICI in favour of CCFCL, on the presentation of the said Conveyance Deed for registration. The
Sub- Registrar made a reference to the Collector under Section 47-A(2) of the Stamp Act, 1899
(hereinafter referred to as the Act) stating that in the document under reference all the details

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required under Section 27 of the Act had not been given by the parties, hence valuation and
examination is essential and requested the Collector to determine the value as required under the
Act and the Rules and to take action to realise the deficit stamp duty and penalty. Consequent
upon this reference made by the Sub- Registrar, the Collector after necessary inquiry as per his
order dated 20.2.1995 referred to above, levied stamp duty and penalty to which reference has
already been made. Being aggrieved by the said order of the Collector, the appellant preferred a
revision petition to the Chief Controlling Revenue Authority who, as already stated, by his order
dated 9.6.1994 set aside the penalty and modified the duty payable to Rs.36,68,08,887.50 which
order came to be challenged before the High Court unsuccessfully. Before the High Court the
appellant had challenged the authority of the Sub-Registrar to make a reference to the Collector
on the ground that there was no material to entertain any reason to believe that the market value
of the property which was the subject-matter of the conveyance deed had not been truly set forth
in the instrument. The High Court negatived the said contention after considering the arguments
of the appellant in detail, and before us no argument has been advanced on this score. Mr. M L
Verma, learned senior counsel appearing for the appellant, urged that the High Court committed
an error in coming to the conclusion that the plant and machinery which were transferred by the
vendor to the appellant, were immovable properties, attracting the provisions of the Stamp
Act and at any rate under the conveyance deed dated 9.6.1994, the vendor had not conveyed any
title to the appellant in regard to these plant and machinery. He also contended that the High
Court erred in relying upon paragraphs 10 and 11 of the conveyance deed to come to the
conclusion that the plant and machinery were the subject- matter of the said deed. He contended
that the said paragraphs merely made a reference to an earlier instrument and mere reference to
some earlier transaction in a document does not amount to incorporation in that document of the
terms and conditions relating thereto.

4. It was also contended that the High Court failed to look into the intention of the parties who by
an agreement dated 11.11.1993 had treated the plant and machinery as movables and have
delivered possession of the said plant and machinery as movables on 11.12.1993. Hence, the said
plant and machinery is neither immovable property nor the property which has been transferred
by virtue of the deed of conveyance dated 9.6.1994. Therefore, the value of the said plant and
machinery could not have been taken into consideration for the purpose of arriving at the correct

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and true value of the property conveyed under the deed of conveyance. He also contended that
the valuation in regard to the plant and machinery made by the authorities and as accepted by the
High Court is incorrect and contrary to law. Mr. Gopal Subramaniam, learned senior counsel
appearing on behalf of the State, in reply, contended that the document dated 11.11.1993
(agreement of sale and transfer of fertilizer business) by ICI in favour of the CCFCL
contemplated an agreement to transfer the business of manufacturing, marketing, distribution and
sale of urea fertilizer that is fertilizer business itself with a stipulation that the first stream,
second stream and the third stream urea manufacturing plants as well as the Ammonia
manufacturing plants would also be transferred as a part of the transfer of fertilizer business of
the ICI as a going concern. He also contended that a reading of the document at Para 1(e)(i)
which defines fertilizer business clearly shows that the intention of the vendor was to transfer all
properties that comprised the fertiliser business. He also drew our attention to the observations of
the High Court which had in specific terms noted that the learned counsel representing the
appellant before it, had not seriously challenged the valuation made by the authorities, hence he
contended that the challenge made to the valuation by the appellant before us should not be
countenanced. We have heard learned counsel for the parties and the question that arises for our
consideration is : whether by the conveyance deed dated 9.6.1994, the plant and machinery were
also transferred; and if so, whether the High Court was right in accepting the valuation as made
by the authorities for the purpose of stamp duty payable ? Considering the question whether the
plant & machinery in the instant case can be construed as immovable property or not, the High
Court came to the conclusion that the machineries which formed the fertilizer plant, were
permanently embedded in the earth with an intention of running the fertilizer factory and while
embedding these machineries the intention of the party was not to remove the same for the
purpose of any sale of the same either as a part of a machinery or scrap and in the very nature of
the user of these machineries, it was necessary that these machineries be permanently fixed to the
ground. Therefore, it came to the conclusion that these machineries were immovable property
which were permanently attached to the land in question.

5.While coming to this conclusion the learned Judge relied upon the observations found in the
case of Reynolds v. Ashby & Son (1904 AC 466) and Official Liquidator v. Sri Krishna Deo
& Ors. (AIR 1959 All. 247). We are inclined to agree with the above finding of the High Court

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that the plant and machinery in the instant case are immovable properties. The question
whether machinery which is embedded in the earth is movable property or an immovable
property, depends upon the facts and circumstances of each case. Primarily, the court will
have to take into consideration the intention of the parties when it decided to embed the
machinery whether such embedment was intended to be temporary or permanent. A careful
perusal of the agreement of sale and the conveyance deed along with the attendant circumstances
and taking into consideration the nature of machineries involved clearly shows that the
machineries which have been embedded in the earth to constitute a fertiliser plant in the instant
case, are definitely embedded permanently with a view to utilise the same as a fertiliser plant.
The description of the machines as seen in the Schedule attached to the deed of conveyance also
shows without any doubt that they were set up permanently in the land in question with a view to
operate a fertilizer plant and the same was not embedded to dismantle and remove the same for
the purpose of sale as machinery at any point of time. The facts as could be found also show that
the purpose for which these machines were embedded was to use the plant as a factory for the
manufacture of fertiliser at various stages of its production. Hence, the contention that these
machines should be treated as movables cannot be accepted. Nor can it be said that the plant and
machinery could have been transferred by delivery of possession on any date prior to the date of
conveyance of the title to the land.

6.Mr. Verma, in support of his contention that the machineries in question are not immovable
properties, relied on a judgment of this Court in Sirpur Paper Mills Ltd. v. Collector of Central
Excise, Hyderabad (1998 1 SCC 400). In the said case, this Court while considering the
leviability of excise duty on paper-making machines, based on the facts of that case, came to the
conclusion that the machineries involved in that case did not constitute immovable property. As
stated above, whether a machinery embedded in the earth can be treated as movable or
immovable property depends upon the facts and circumstances of each case. The Court
considering the said question will have to take into consideration the intention of the parties
which embedded the machinery and also the intention of the parties who intend alienating those
machinery. In the case cited by Mr. Verma, this Court in para 4 of the judgment had observed
thus : In view of this finding of fact, it is not possible to hold that the machinery assembled and
erected by the appellant at its factory site was immovable property as something attached to earth

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like a building or a tree. The Tribunal has pointed out that it was for the operational efficiency of
the machine that it was attached to earth. If the appellant wanted to sell the paper-making
machine it could always remove it from its base and sell it." From the above observations, it is
clear that this Court has decided the issue in that case based on the facts and circumstances
pertaining to that case hence the same will not help the appellant in supporting its contention in
this case where after perusing the documetns and other attending circumstances available in this
case, we have come to the conclusion that the plant and machinery in this case cannot but be
described as an immovable property. Hence, we agree with the High Court on this point. The
next question for consideration is whether the vendor did transfer the title of the plant and
machinery in the instant case by the conveyance deed dated 9.6.1994. Here again, it is imperative
to ascertain the intention of the parties from the material available on record. While ascertaining
the intention of the parties, we cannot preclude the contents of the agreement pursuant to which
the conveyance deed in question has come into existence.

7.We have noticed that as per the agreement it is clear what was agreed to be sold is the entire
business of fertilizer on an as is where is basis including the land, building thereon, plant and
machinery relating to fertilizer business description of which is found in the definition of the
term fertilizer business in the agreement itself which has been extracted by us hereinabove. It is
not the case of the appellant when it contends that the possession of plant and machinery was
handed over separately to the appellant by the vendor that these machineries were dismantled
and given to the appellant, nor is it possible to visualise from the nature of the plant that is
involved in the instant case that such a possession de hors the land could be given by the vendor
to the appellant. It is obviously to reduce the market value of the property the document in
question is attempted to be drafted as a Conveyance Deed regarding the land only. The appellant
had embarked upon a methodology by which it purported to transfer the possession of the plant
and machinery separately and is contending now that this handing over possession of the
machinery is de hors the conveyance deed. We are not convinced with this argument. Apart from
the recitals in the agreement of sale, it is clear from the recitals in the conveyance deed itself that
what is conveyed under the deed dated 9.6.1994 is not only the land but the entire fertilizer
business including plant and machinery. A perusal of Clauses 10, 11 and 13 of the said deed
shows that it is the fertilizer factory which the vendor had agreed to transfer along with its

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business as a going concern and to complete the same the conveyance deed in question was
being executed. There is implicit reference to the sale of fertilizer factory as a going concern in
the conveyance deed itself. That apart, the inclusion of Schedule III to the conveyance deed
wherein a Plan delineating the various machineries comprising of the fertilizer factory is
appended shows that it is the land with standing fertilizer factory which is being conveyed under
the deed, though an attempt to camouflage this part of the property sold is made in the recitals, in
our opinion, the parties concerned have not been able to successfully do so. While considering
this question of transfer of plant and machinery being part of the conveyance deed or not,
reliance can also be placed on the application filed by the appellant before the appropriate
authority of the Income-Tax Department wherein while disclosing the market value of the
immovable property sought to be transferred the appellant himself has mentioned the value of the
property so transferred as Rs.70 crores which is the figure found in the agreement of sale which
agreement includes the sale of plant and machinery along with the land. A certificate issued by
the appropriate authority under Section 269 UL(3) of the Income Tax Act evidences this fact. In
the said application made by the appellant for obtaining the said certificate, the appellant has in
specific terms at serial No. (iv) of the Schedule included plant and machinery, railway sliding
and other immovable properties as part of the fertilizer business undertaking. It is also found on
record that by a supplementary affidavit dated 8.9.1993 filed before the Income Tax department
while filing Form 37-I prescribed under the Income-tax Rules the petitioner has again shown all
these plant and machinery along with the Plan which is now attached to the conveyance deed as
part of the property that is being conveyed. Merely because in some of the relevant paragraphs of
the Conveyance Deed the appellant has tried to highlight the fact that what is being sold under
the conveyance deed is only the land and a reference is made in regard to the handing over of
possession of the machinery on an earlier date does not ipso facto establish that the vendor did
not convey the title of the plant and machinery under the conveyance deed dated 9.6.1994.

8. Learned counsel for the appellant has placed for our consideration a judgment of this Court in
the case of Himalaya House Co. Ltd., Bombay v. The Chief Controlling Revenue
Authority (1972 1 SCC 726) to contend that a mere reference to an earlier agreement does not
amount to incorporation of the terms and conditions of an earlier transaction or the intention of
the parties. We have carefully considered the said judgment and, in our opinion, that judgment

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does not in any manner lay down the law in absolute terms that a court cannot look into prior
agreements while considering the intention of the parties for finding out what actually is the
property that is conveyed under the deed under consideration. It is again based on facts of that
case that this Court came to the conclusion therein that the so called terms and conditions which
were found in an earlier agreement were not intended to be incorporated in the subsequent
document. This is clear from the following observations of this Court appearing in Para 10 of the
said judgment: From the language used in the Assignment Deed, it is not possible to come to the
conclusion that the terms and conditions of the earlier transaction have been made a part of that
Deed. Further barring one particular agreement, other agreements were not before the Court.
Therefore, it is not possible to know what the terms and conditions of those agreements were.
Before the terms and conditions of an agreement can be said to have been incorporated into
another document, the same must clearly show that the parties thereto intended to incorporate
them. No such intention is available in this case.

9.Hence we are of the opinion that this judgment also does not help the appellant in his attempt
to convince us that we should not take into consideration the recitals in the agreement dated
11.11.93 while considering the conveyance deed of 9.6.1994.

For the reasons stated above, we are of the considered opinion that the vendor as per the
conveyance deed dated 9.6.1994 has conveyed the title it had not only in regard to the land
in question but also to the entire fertilizer business in as is where is condition including the
plant and machinery standing on the said land. Therefore, the authorities below were totally
justified in taking into consideration the value of these plant and machineries along with the
value of the land for the purpose of the Act. The next point to be considered is whether the High
Court was justified in accepting the valuation made by the authorities in regard to the plant and
machinery. Here we must note that in the judgment of the High Court, the learned Judge has
noted as follows : In fact the finding on valuation of plant and machinery was not seriously
challenged by Shri Shanti Bhushan during the course of argument and, in my opinion, rightly. It
is based on this approach of the learned counsel appearing for the appellant that the High Court
did not go into the question of valuation. However, since the learned counsel for the appellant
did question the correctness of the valuation made by the authorities below, we have heard the

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arguments addressed in this regard. We have also heard the arguments on behalf of the State on
this score.

10. The question of valuation is basically a question of fact and this Court is normally reluctant
to interfere with the finding on such a question of fact if it is based on relevant material on
record. The main objection of the appellant in regard to the valuation arrived at by the authorities
is that the Collector originally constituted an Enquiry Committee consisting of the Assistant
Inspector General (Registration), General Manager, District Industries Centre, Sub-Registrar and
the Tehsildar. After the report was submitted by the Sub-Committee for the reasons of its own,
the Collector reconstituted the said Enquiry Committee by substituting Additional City
Magistrate in place of Sub-Registrar. This substitution of the Enquiry Committee, according to
the appellant, is without authority of law. We are unable to accept this contention. Constitution
of an Enquiry Committee by the Collector is for the purpose of finding out the true market value
of the property conveyed under the Deed. In this process, the Collector has every authority in law
to take assistance from such source as is available, even if it amounts to constituting or
reconstituting more than one Committee. That apart, the appellant has not been able to establish
any prejudice that is caused to it by reconstitution of the Expert/Enquiry Committee. We have
perused that part of the report of the Collector in which he has discussed in extenso the various
materials that were available before the Committee and also the report of the valuers appointed
for the purpose of finding out the value of the plant and machinery. These valuers are technical
persons who have while valuing the plant and machinery taken into consideration all aspects of
valuation including the life of the plant and machinery. The valuations made both by the Enquiry
Committee as well as the valuers are mostly based on the documents produced by the appellant
itself.

11. Hence, we cannot accept the argument that the valuation accepted by the Collector and
confirmed by the revisional authority is either not based on any material or a finding arrived at
arbitrarily. Once we are convinced that the method adopted by the authorities for the purpose of
valuation is based on relevant materials then this Court will not interfere with such a finding of
fact. That apart, as observed above, even the counsel for the appellant before the High Court did
not seriously challenge the valuation and as emphasised by the High Court, rightly so. Therefore,
we do not find any force in the last contention of the appellant also.

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12. For the reasons stated above, this appeal fails and the same is dismissed with costs.

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 Kumar Harish Chandra Singh Deo v. Bansidhar Mohanty And Ors

AIR 1738, 1966 SCR (1) 153

The Judgment of the Court was delivered by Mudholkar, J. Two questions are raised before us in
this appeal from the judgment of the Orissa High Court. One is whether the mortgage deed upon
which the suit of the respondent no. 1 was based was validly attested. The other is whether the
respondent no. 1 was entitled to institute the suit.

1. The mortgage deed in question was executed by the appellant in favour of Jagannath Debata,
respondent no. 2 on April 30, 1945, for a consideration of Rs. 15,000. The appellant undertook to
repay the amount advanced together with interest within one year from the execution of the deed.
The appellant, however, failed to do so. Respondent no. 1 therefore instituted the suit out of
which this appeal arises.

2. According to respondent no. 1 though the money was advanced by him to the appellant he
obtained the deed in the name of the second respondent Jagannath Debata because he himself
and the appellant were close friends and he felt it embarrassing to ask the appellant to pay
interest on the money advanced by him. As the consideration for the mortgagee deed proceeded
from him he claimed the right to sue upon the deed. He, however, joined Jagannath Debata as the
third defendant to the suit. He also joined Dr. Jyotsna De as second defendant because she is the
transferee of the mortgaged property-which consists of a house, from the appellant whose wife
she is. This lady however remained ex parts. The appellant denied the claim on various grounds
but we are only concerned with two upon which arguments were addressed to us. Those are the
grounds which we have set out at the beginning of the judgment. The third defendant Jagannath
Debata disputed the right of respondent no. 1 to institute the suit and claimed that it was he who
had advanced the consideration. His claim was, however, rejected by the trial court and he has
remained content with the decree passed by the trial court in favour of respondent no. 1. The trial
court decreed the suit of respondent no. 1 with costs. Against that decree the appellant alone
preferred an appeal before the High Court. The contention raised by the appellant before us were
also raised by him before the High Court but were rejected by it. In our opinion there is no

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substance in either of the contentions urged on behalf of the appellant. It is no doubt true that
there 1 5 5 were only two attesting witnesses to the mortgage deed, one of whom was respondent
no. 1, that is, the lender himself. Section 59 of the Transfer of Property Act, which, amongst
other things, provides that a mortgage deed shall be attested by at least two witnesses, does not in
terms debar the lender of money from attesting the deed. The word "attested" has been
defined thus in s. 3 of the Transfer of Property Act:

" 'attested' in relation to an instrument means and shall be deemed always to have meant
attested by two or more witnesses each of whom has seen the executant sign or affix his
mark to the instrument, or has seen some other person sign the instrument in the presence
and by the direction of the executant, or has received from the executant a personal
acknowledgment of his signature or mark or of the signature of such other person, and
each of whom has signed the instrument in the presence of the executant; but it shall not be
necessary that more than one of such witnesses shall have been present at the same time,
and no particular form of attestation shall be necessary."

3. This definition is similar to that contained in the Indian Succession Act. It will see that it also
does not preclude in terms the lender of money from attesting a mortgage deed under which the
money was lent. No other provision of law has been brought to our notice which debars the
lender of money from attesting the deed which evidences the transaction whereunder the money
was lent. Learned counsel, however, referred us to some decisions of the High Courts in India.
These are Peary Mohan Maiti & Ors. v. Sreenath Chandra [14 Cal WN 1046] ; Sarur Jigar
Begun v. Barada Kanta I.L.R. 37 Cal. 526.and Gamati Ammal v. V. S. M. Krishna
Iyer A.I.R. 1954 Mad. 126. In all these cases it has been held that a party to a document which
is required by law to be attested is not competent to attest the document. In taking this view
reliance has been placed upon the observations of Lord Selborne, L.C., in Seal v. Claridge
[(18810 7QBD 516].

"It (i.e., the attestation) implies the presence of some person, who stands by but is not a
party to the transaction."

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The object of attestation is to protect the executant from being required to execute a
document by the other party thereto by force, fraud or undue influence. No doubt, neither
the definition of 'attested' nor s. 59 of the Transfer of Property Act debars a party to a mortgage
deed from attesting it. It must, however, be borne in mind that the law requires that the testimony
of parties to a document cannot dispense with the necessity of examining at least ,One attesting
witness to prove the execution of the deed. Inferentially, therefore, it debars a party from
attesting a document which is required by law to be attested. Where, however, a person is not a
party to the deed there is no prohibition in law to the proof of the execution of the document by
that person. It would follow, therefore, that the ground on which the rule laid down in English
cases and followed in India would not be available against a person who has lent money for
securing the payment of which a mortgage deed was executed by the mortgagor but who is not a
party to that deed. Indeed it has been so held by the Bombay High Court in Balu Ravji Charat
v. Gopal Gangadh Dhabu[12 Ind Cas 531 (Bom)] and by the late Chief Court of Oudh in
Durga Din & Ors. v. Suraj Bakhsh [AIR 1931 Oudh 285]. In the first of these cases an
argument similar to the one advanced before us was addressed before the Bombay High Court.
Repelling it the court observed:

4."In Seal v. Claridge, much relied upon by the appellant's pleader the old case of Svire v. Bell
(1793) 5 T.R. 371, in which the obsolete rule was pushed to its farthest extent, was cited to the
Court but Lord Selbome in delivering judgment said : 'What is the meaning of attestation, apart
from the Bills of Sale Act, 1878 ? The word implies the presence of some person who stands by
but is not a party to the transaction.' He then referred to Freshly v. Reed (1842) 9 M & W 404
and said: 'It follows from that case that the party to an instrument cannot attest it.' Again in
Wickham v. Marquis of Bath (1865) L.R.I Eq. 17 at p. 25, the remarks of the Master of the
rolls imply that if the plaintiffs Dave and Wickham had not executed the deed as parties but had
only signed with the intention of attesting, the provision of the statute requiring two attesting
witnesses would have been satisfied.'

5. A distinction was thus drawn in this case between a person who is a party to a deed and a
person who, though not a party to the deed is a party to the transaction and it was said that the
latter was not incompetent to attest the deed. This decision was followed by the Chief Court of
Oudh. We agree with the view taken by the Bombay High Court. As regards the second question

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a number of High Courts in India had taken the view that a benamidar could not maintain a suit
for the recovery of property standing in his name, beneficial interest in which was in someone
else. Benami transactions are not frowned upon in India but on the other hand they are
recognised. Indeed s. 84 of the Indian Trusts Act, 1882 gives recognition to such transactions.
Dealing with such transactions Sir George Farewell has observed in Bilas Munwar v. Desrai
Ranjit Singh:

"It is quite unobjectionable and has a curious resemblance to the doctrine of our English law, that
the trust of the legal estate results to the man who pays the purchase money, and this again
follows the analogy of our common law, that where a fulfillment is made without consideration
the use results to the offeror."

5. It must follow from this that the beneficial owner of property standing in the name of another
must necessarily be entitled to institute a suit with respect to it or with respect to the enforcement
of a right concerning the property of a co-sharer. It will follow that a person who takes benefit
under the transaction or who provides consideration for a transaction is entitled to maintain a suit
concerned transaction. Thus where a transaction is a mortgage, the actual lender of money is
entitled to sue upon it. Indeed, till the decision of the Privy Council in Gur Narayan & Ors. v.
Sheo Lai Singh & Ors. (2) the right of a benamidar to sue upon a transaction which is only
ostensibly in his favour was not recognised by several courts in India. Relying upon this decision
it was con- tended before us on behalf of the appellant that in view of this decision it must be
held that it is the benamidar alone who could maintain a suit but not the beneficial owner. That,
however, is not what the Privy Council decided. Indeed, that was never a question which arose
for consideration before the Privy Council. Apart from that on principle the real beneficiary
under a transaction cannot be disentitled to enforce a right arising thereunder.

In this view we uphold the decree of the High Court and dismiss the appeal with costs.

Appeal dismisssed.

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 M. L. Abdul Jabhar Sahib v H. V. Venkata Sastri & Sons & Ors Equivalent citations:

AIR 1147, 1969 SCR (3) 513

Appeals by special leave from the judgment and order dated July 28, 1961 of the Madras High
Court in O.S.A. Nos. 65, 70 and 71 of 1956.

1.R.Gapalakrishnan, for respondents Nos. 2 to 4 (in C.A. No. 272 of 1966), respondents Nos. 1
and 2 (in C.A. No. 273 of 1966) and respondent No. 1 (in C.A. No. 274 of 1966). The Judgment
of the Court was delivered by Bachawat, J. On February 23, 1953 the appellant instituted C.S.
No. 56 of 1953 on the Original Side of the Madras High Court under the summary procedure of
Order 7 of the Original Side Rules against Hajee Ahmed Batcha claiming a decree for Rs.
40,556/1/2/- and Rs. 8,327/12/9/- said to be due under two I promissory notes executed by Haji
Ahmed Batcha. On March 9 1953, Hajee Ahmed Batcha obtained leave to defend the suit on
condition of his furnishing the security for a sum of Rs. 50,000 to the satisfaction of the Registrar
of the High Court. On March 26, 1953 Hajee Ahmed Batcha executed a security bond in favour
of the Registrar of the Madras High Court charging several immoveable properties for payment
of Rs. 50,000. The condition of the bond was that if he paid to the appellant the amount of any
decree that might be passed in the aforesaid suit the bond would be void and of no effect and that
otherwise it would remain in full force. The bond was attested by B. Somnath Rao. It was also
signed by K. S. Narayana Iyer, Advocate, who explained the document to Hajee Ahmed Batcha
and identified him. All the properties charged by the bond are outside the local limits of 'the
ordinary original jurisdiction of the Madras High Court. The document was presented for
registration on March 29, 1.953 and was registered by D. W. Kittoo, the Sub- Registrar of
Madras-Chingleput District. Before the Sub- Registrar, Hajee Ahmed Batcha admitted execution
of the document and was identified by Senkaranarayan, and Kaki Abdul Aziz. The identifying
witnesses as also the Sub- Registrar signed the document. Hajee Ahmed Batcha died on February
14, 1954 and his legal representatives were substituted in his place in C.S. No. 56 of 1953. On
March 19, 1954 Ramaswami, J. passed a decree for Rs. 49,891/13/- with interest and costs and
directed payment of the decretal amount on or before April 20, 1954. While passing the decree,
he observed :-"It is stated that the defendant has executed a security bond in respect of their

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immoveable properties when they obtained leave to defend and this will stand enured to the
benefit of the decree-holder as a charge for the decree amount.".

2. Clauses 3 and 4 of the formal decree provided "(3) that the security bond executed in respect
of their immoveable properties by defendants 2 to 4 in pursuance of the order dated 9th March
1953 in application No. 797 of 1953 shall stand enured to the benefit of the plaintiff as a charge
for the a amounts mentioned in clause 1 supra;.that in default of defendants 2 to 4 paying the
amount mentioned in clause 1 supra on or before the date mentioned in, clause 2 supra the
plaintiff shall be at liberty to apply for the appointment of Commissioners for, sale of the
aforesaid properties."

3. The appellant filed an application for (a) making absolute the charge decree dated March 31,
1954 and directing sale of the properties; and (b) appointment of Commissioners for selling
them. On April 23, 1954 the Court allowed- the application, appointed Commissioners for selling
of the properties and directed that the relevant title deeds and security bond be handed over 5 17
to the Commissioners. The Commissioners sold the properties on May 29 and 30, 1954. The
sales were confirmed and the sale proceeds were deposited in Court on July 2, 1954. All the
three respondents are simple money creditors of Hajee Ahmed Batcha. The respondents Venkata
Sastri & Sons filed O.S. No' 13 of 1953 in the Sub-Court, Vellore, and obtained a decree for Rs.
5,500 on March 27, 1953. Respondent H.R. Cowramma instituted O.S. No. 14 of 1953 in the
same Court and obtained a money decree on April 14, 1953. The two decree-holders filed
applications for execution of their respective decrees. One Rama Sastri predecessors of
respondents H.R. Chidambara Sastri and H.R. Gopal Krishna Sastri obtained a money decree
against Hajee Ahmed Batcha in O.S. No. 364 of 1951/52 in the Court of the District Munsiff,
Shimoga, got the decree transferred for execution through the Court of the District Munsiff,
Vellore, and filed an application for execution in that Court. On June 7, 1954 the aforesaid
respondents filed applications in the Madras High Court for (i) transfer of their execution
petitions pending in the Vellore courts to the file of the High Court and (ii) an order for rateable
distribution of the assets realized in execution of the decree passed in favour of the appellant in
C.S. No. 56 of 1953. The appellant opposed the applications and contended that as the properties
were charged for the payment of his decretal amount, the sale proceeds were not available for
rateable distributing amongst simple money creditors. The respondents contended that the

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security bond was invalid as it was not attested by two witnesses and that the decree passed in
C.S. No. 56 of 1953 did not create any charge. Balakrishna Ayyar, J. dismissed all the
applications as also exemption petitions filed by the respondents. He held that the decree in C.S.
No. 56 of 1953 did not create a charge on the properties. But following the decision in Veerappa
Chettiar v. Subramania(1) he held that the security bond was sufficiently attested by the Sub-
Registrar and the identi- fying-witnesses. The respondents filed appeals against the orders. On
March 28, 1958 the Divisional Bench hearing the appeals referred to a Full Bench the following
question "Whether the decision in Veerappa Chettiar v. Subramania lyer (I.L.R. 52 Mad. 123)
requires reconsideration."

4. The Full Bench held "In our opinion, such signatures of the registering officer and the
identifying witnesses endorsed on a mortgage document can be treated as those of attesting
witnesses if' (1) the signatories are those who have seen the execution or received a personal
acknowledgment (1) I.L.R. 52 Mad. 123. from the executant of his having executed the
document, (2) they sign their names in- the presence of the executant and (3) while,so doing they
had the animus to attest. The mere presence of the signatures of the registering officer or the
identifying witnesses on the registration endorsements would not by themselves be sufficient to
satisfy the requirements of a Valid attestation; but it would be competent for the parties to show
by evidence that any or all of these persons did in fact intend to and did sign as attesting witness
as well."

5. The Full Bench held that the decision in Veerappa Chettiar's Case(1) can be held to, be correct
to this limited extent only and not otherwise. At the final hearing of the appeals, the Divisional
Bench held that ( 1 ) a charge by act of parties could be created only by a document registered
and attested by two witnesses; (2) the security bond was not attested by two witnesses and was
therefore invalid; (3) the decree in C.S. No. 56 of 1953 should be construed as containing
nothing more than a recital of the fact of there having been a security bond in favour of the
plaintiff; and the sale in execution of the decree must be regarded as a sale in execution of a
money decree; and (4) tie respondents were entitled to an order for rateable distribution.
Accordingly, the Divisional Banch allowed the appeals, directed attachment of the sale proceeds
and declared that the respondents were entitled to rateable distribution along with the appellant.
The present appeals have been filed after obtaining special leave from this Court.

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6. The following questions arise in these appeals: (1) Is the security bond attested by two
witnesses; (2) if not, is it invalid? (3) does the decree in C.S. No. 56 of 1953 direct sale,of the
properties for the discharge of a charge- thereon, and (4) are the respondents entitled to rateable
distribution of the assets held by court.? As to the first question, it is not the case of the appellant
that K.S. Narayana Iyer is an attesting witness. The contention is that the Sub-Registrar D.W.
Kittoo and the identifying witnesses Senkaranarayana and Kaki Abdul Aziz attested the
document. In our opinion, the High Court rightly rejected this contention.

Section 3 of the Transfer of Property Act gives the definition of the word "attested" and is
in these words :-

"Attested", in relation to an instrument, means and shall be deemed to have meant attested
by two or more witnesses each of whom has seen the executant sign or affix his mark to the
instrument, or has seen some other person sign the instrument in the presence and by the
(1) I.L.R. 52 Mad. 123.

direction of the executant, or has received from the executant a personal acknowledgment of his-
signature or mark, or of the signature of such other person, and each of whom has signed the
instrument in the presence of the executant; but it shall not be necessary that more than one of
such witnesses shall have been present it the same time and no particular form of attestation shall
be necessary."

7. It is to be noticed that the word "attested", the thing to be defined,. occurs as part of the
definition itself. To attest is to bear witness. to a fact. Briefly put, the essential conditions of a
valid attestation under s. 3 are : (1 ) two or more witnesses. have seen the executant sign the
instrument or have received from him a personal acknowledgment of his signature; (2) with a
view to attest or to bear witness to this fact each of them has. signed the instrument in the
presence of the executant. It is essential that the witness should have- put his signature animo
attestandi, that is, for the purpose of attesting that he has seen the executant sign or has received
from him a personal acknowledgment of his signature. If a person puts his signature on the
document for some other purpose, e.g., to certify that he is a scribe or an identifier or a
registering officer, he is not an attesting witness. "In every case the Court must be satisfied that
the names were written animo attestandi", see Jarman on Wills, 8th ed.

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137. Evidence is admissible to show whether the witness had the intention to attest. "The
attesting witnesses must subscribe with the intention that the subscription made should be
complete attestation of the will, and evidence is admissible to show whether such was the
intention or not," see Theobald on Wills, 12th ed. p. 129. ,In Giria Datt v. Gangotri (1)the Court
held that the two persons who had identified the testator at the time of the registration of the will
and had appended their signatures at the foot of the endorsement by the Sub-Registrar, were not
attesting witnesses. as their signatures were not put "animo attestandi". In Abinash Chandra
Bidvanidhi Bhattacharya v. Dasarath Malo(2) it was held that a person who had put his name
under the word "scribe" was not an attesting witness as he had put his signature only for the
purpose of authenticating that he was a "scribe". In Shiam Sundar Singh v. Jagannath Singh (3)
the Privy Council held that the legatees who had put their signatures on the will in token of their
consent to its execution were not attesting witnesses and were not dis-qualifled from taking as
legatees.

The Indian Registration Act, 1908 lays down a detailed pro- cedure for registration of
documents. The registering officer is;

(1) A.I.R. 1955 S.C. 346,351. (3) 54 M.L.J. 43. (2) I.L.R. 56 Cal. 598 under a duty to enquire
whether the document is' executed by the person by whom it purports to have been executed and
to satisfy himself as to the identity of the executant, s. 34(3). He can register the document if he
is satisfied about the identity of the person executing the document and if that person admits
execution, [s. 25(1)]. The signatures of the executant and of ,every person examined with
reference to the document are endorsed on the document, (s.

58) the registering officer is required to affix the date and his signature to the endorsements (s.
59) Prima facie, the registering officer puts his signature on the document in discharge of his
statutory duty under s. 59 and not for the purpose of attesting it or certifying that he has received
from the executant a personal acknowledgment of his signature.

The evidence does not show that the registering officer D.W. Kitto put his signature on the
document with the intention of attesting it. Nor is it proved that he signed the document in the
presence of the executant. In these circumstances he cannot be regarded as an attesting witness

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see SurendraBahadur Singh v. Thakur Behari Singh(1). Like identifying witnesses
Senkaranarayana and Kaki Abdul Aziz signatures on the document to authenticate the fact that
they have identified the executant. It is not shown that they put their signatures for 'the purpose
of attesting the document. They cannot therefore be regarded as attesting witnesses.

It is common case that B. Somnath Rao attested the document. It follows that the document was
attested by one witness only.

8. As to the second question, the argument on behalf of the respondents is that s. 100 of the
Transfer of Property Act attracts s. 59 and that a charge can be created only by a document
signed, registered and attested, by two witnesses in accordance with s. 59 where the principal
money secured is Rs. 100 or upwards. The High Court accepted this contention following its
earlier decisions in Viswanadhan v. Menon I.L.R. [1939].Mad and Shiva Rao v.
Shanmugasundara Swami I.L.R. [1940] mad. 306 and held that the security bond was, invalid,
as it was swami attested by one witness only. We are unable to agree with this opinion.

9. Section 100 is in these terms "Where immoveable property of one person is by act of parties or
operation of law made security for the payment of money to another, and the transaction does not
amount to a mortgage, the latter person is said to have a charge on the property', and all the
provisions hereinbefore contained which apply to a simple mortgage shall, so" far as may be,
apply to such charge. Nothing in this section applies to the charge of a trustee on the trust
property for expenses property incurred. in the execution of his trust, and, save as otherwise
expressly provided by any law for the time being in force no charge shall be enforced against any
property in the hands of a person to whom such property has been transferred for consideration
and without notice of the charge.

10. The first paragraph consists of two parts. The first part concerns the creation, of a charge
over immoveable property. A charge may be made by act of parties or by operation of law. No
restriction is put on the manner in which a charge can be made. Where such a charge has been
created the second part comes into play. It provides that all the provisions hereinbefore contained
which apply to a simple mortgage shall; so far as may be, apply to such charge. The second part
does not address itself to the question of creation of a charge. It does not attract the provisions of

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s. 59 relating to the creation of a mortgage. With regard to the applicability of the provisions
relating to a simple mortgage, the second part of the first paragraph makes no distinction
between a charge created by act of parties and a charge by operation of law. Now a charge by
operation of law is not made by a signed, registered and attested instrument. Obviously, the
second part has not the effect of attracting the provisions of s. 59 to such a charge. Likewise the
legislature could not have intended that the second part would attract the provisions of s. 59 to a
charge created by act of parties. Had this been the intention of the legislature the second part
would have been differently worded.

11. If a charge can be made by a registered instrument only in accordance with s. 59, the
subsequent transferee will always have notice of the charge in view of s. 3 under which
registration of the instrument operates as such a notice. But the basic assumption of the doctrine
of notice enunciated in the second paragraph is that there may be cases where the subsequent
transferee may not have notice of the charge. The plain implication of this paragraph is that a
charge can be made without any writing.

If a non-testamentary instrument creates a charge of the value of Rs. 100 or upwards, the
document must be registered under s. 17 (1) (b) of the Indian Registration Act. But there is no
provision of law which requires that an instrument creating the charge must be attested by
witnesses.

12. Before s. 100 was amended by Act 20 of 1929 it was well settled that the section did not
prescribe any particular mode of creating a charge. The amendment substituted the words "all the
provisions hereinbefore contained which apply to a simple mortgage shall, so far as may be,
apply to such charge," for the words "all the provisions hereinbefore contained as to a mortgagor
shall, so far as may be, apply to the owner of such property, and the provisions of sections
81 and 82 shall, so far as may be, apply to the person having such charge." The object of the
amendment was to make it clear that the rights and liabilities of the parties in ,case of a charge
shall,, so far as may be, the same as the rights, and liabilities of the parties to a simple mortgage.
The amendment was not intended to prescribe any particular mode for the creation of a charge.
We find that the Nagpur High Court came to a similar conclusion in Baburao v. Narayan(1). It
follows that the security bond was not required to be attested by witnesses. It was duly registered

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and was valid and operative. As to the third question, we find that the decree dated March 19,
1954 declared that the security bond in respect of the immovable I properties would enure for the
benefit of the appellant as a charge for the decretal amount. This relief was granted on the ,oral
prayer of the plaintiffs. We are unable to agree with the High Court that in view of the omission
to amend the plaint by adding a prayer for enforcement of the charge, the decree should be
construed as containing merely a recital of the fact that a security bond had been executed. In our
opinion, the decree on its true construction declared that the security bond created a charg e over
the properties in favour of the plaintiffs for payment of the decretal amount and gave them the
liberty to apply for sale of the 'properties for the discharge of the encumbrance. Pursuant to the
decree the properties were sold and the assets are now held by the Court. The omission to ask
for, an amendment of the plaint was an irregularity, but that does not affect the construction of
the decree. It was suggested that the decree was invalid as the High Court had no territorial
jurisdiction under clause 12 of its Letters Patent to pass a decree for sale of properties outside the
local limits of its ordinary original jurisdiction. For the purpose of these appeals, it is sufficient to
say that the respondents cannot raise this question in the present proceedings. If the decree is
invalid and the sale is illegal on this ground, the respondents cannot maintain their applications
for rateable distribution of the assets. They ,,can ask for division of the sale proceeds only on the
assumption that the properties were lawfully sold. It is therefore unnecessary to decide whether
the objection as to the territorial jurisdiction of the High Court has been waived by the judgment-
debtor and cannot now be agitated by him and persons claiming through him, having regard to
the decisions in Seth Hiralal Patni v. Sri Kali I.L.R. [1949] Nag. 802,1819-
822., Nath, Behrein Petroleum Co. Ltd., v. P. J. Pappu [1966] 1 S.C.R. 461,462-3.
, Zamindar of Etiyapuram v. Chidambaram Chetty [1962] 2 S.C.R. 747,751-2. As to the 4th
question we find that the immoveable properties have been sold in execution of a decree ordering
sale for the discharge of the encumbrance thereon in favour of the appellant. Section
73(1) proviso (c) therefore applies and the proceeds of sale after defraying the expenses of the
sale must be applied in the first instance in discharging the amount due to the appellant. Only the
balance left after discharging this amount can be dis- tributed amongst the respondents. It
follows that the High Court was in error in holding that the respondents were entitled to rateable
distribution of the assets along with the appellant.

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13. In the result, the appeals are allowed, the orders passed by the Divisional Bench of the
Madras High Court are set aside and the orders passed by the learned Single Judge are restored.
There will be no order as to costs.

Appeals allowed.

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 Padarath Halwai v Pandit Ram Nain Upadhia

(1915) 17 BOMLR 617

JUDGMENT John Edge, J.

1. These are consolidated appeals from decrees, dated respectively the 29th March 1909, of the
High Court of Judicature at Allahabad. The two decrees appealed from were made in appeals in
the same suit. The suit was brought in the Court of the Subordinate Judge of Jaunpur on the 29th
November 1904 to enforce, by sale of the village Baragaon and other villages, the payment of
Rs. 66,809 odd, due under a mortgage, dated the 25th June 1892. The Subordinate Judge decreed
the claim in part, and in part dismissed it. Each side appealed to the High Court at Allahabad.
The High Court dismissed the defendants' appeal, and in the plaintiffs' appeal gave them a decree
for their claim.

2. When these consolidated appeals first came on for hearing before this Board it was contended
on behalf of the appellants that the mortgage upon which this suit was brought had not been
attested by at least two witnesses, and as the amount secured by it exceeded one hundred rupees
the alleged mortgage was ineffective and could not be given in evidence. That point had not been
raised in either of the Courts below. Under the circumstances this Board remanded the case to
the High Court in order to enable the parties to produce evidence on the question of attestation.
Evidence on that subject has been taken and has been returned to this Board. On behalf of the
appellants it has now been contended that the evidence which was given on the remand in proof
of the attestation was unreliable, and, even if accepted as true, did not prove that the two attesting
witnesses who gave evidence on the remand had seen the mortgagors sign their names to the
mortgage.

3. The mortgagors were two purdahnashin ladies who did not appear before the attesting
witnesses, and consequently their faces were not seen by the witnesses. These two attesting
witnesses were, however, well acquainted with the voices of the ladies, and their Lordships are
satisfied that these two attesting witnesses did identify the mortgagors at the time when the deed
was executed. The mortgagors were, on the occasion of the execution of the mortgage-deed,
brought from the zenana apartments of the house in which they were to an ante-room to execute

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the deed. In the ante-room the ladies seated themselves on the floor, and between them and these
two attesting witnesses there was a chick, which was not lined with cloth, hanging in the
doorway. These two attesting witnesses recognised the ladies by their voices, and they say that
they saw each lady execute the deed with her own hand, although owing to the chick they were
unable to see the face of either of the ladies. On the other side an attempt was made to prove that
a tat, through which nothing could be seen, was hanging in the doorway. Their Lordships accept
the evidence of these two attesting witnesses as true, and hold it proved that the mortgage-deed
of the 25th June 1892 was duly attested by at least two witnesses within the meaning of Section
59 of the Transfer of Property Act, 1882. It is not disputed that the mortgage-deed was in fact the
deed of the two purdahnashin ladies, Musammat Niamat Bibi and Musammat Kamar-un-Nisa
Bibi, the mortgagors.

4. The only other question to be considered in these appeals is the contention on behalf of the
appellants that the plaintiffs in the suit have, by reason of certain events, which will now be
referred to, lost their right to enforce against Baragaon payment of a considerable part of the
amount which they have claimed.

5. On the 8th August 1887, Musammat Niamat Bibi and Musammat Kamar-un-Nisa, who will be
hereafter referred to as the mortgagors, mortgaged the villages Arghupur and Baragaon, to Sarju
Parshad and Ramanand to secure Rs. 12,000 and interest thereon. On the 19th February 18921
the mortgagors mortgaged Arghupur to Lukshmi Prasad and others to secure Rs. 30,000 and
interest thereon. The mortgagees of the 19th February 1892, and their representatives-in-title will
hereafter be referred to as the second mortgagees. On the 25th June 1892, the mortgagors by
their deed of that date mortgaged Arghupur and Baragaon, together with three other villages, to
Sarju Parshad and Ramanand to secure Rs. 32,000 and interest thereon. This sum of Rs. 32,000
included a sum of Rs. 18,000 principal and interest then due under the mortgage of the 8th
August 1887. On the 20th May 1893, the mortgagors further mortgaged Arghupur to the second
mortgagees to secure Rs. 21,324 and interest thereon. Sarju Parshad is dead; he is represented in
this suit by his son, Ram Narain, who is one of the three plaintiffs. The other plaintiffs are
Ramanand and his son S. Narain.

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6. On the 14th December 1896, the second mortgagees brought a suit in the Court of the
Subordinate Judge of Jaunpur upon their mortgages of the 19th February 1892 and the 20th May
1893 to obtain a decree for the principal moneys and interest due under the said mortgages, and
they prayed that in default of payment on a date to be fixed by the Court, Arghupur should be
sold by auction and the proceeds of the sale should be applied towards the satisfaction of their
decree. To that, suit the second mortgagees made Musammat Kamar-un-Nisa Bibi as one of the
mortgagors and as the heiress of Musammat Niamat Bibi, then dead, the other mortgagor, Sarju
Parshad, Ramanand and one Indar Sen Singh, defendants. Indar Sen Singh was a subsequent
mortgagee; he is a defendant to this suit, but is not an appellant. In their plaint the second
mortgagees stated that Sarju Parshad, Ramanand and Indar Sen Singh were mortgagees of
Arghupur, and that they, the then plaintiffs, "were ready to pay the mortgage money due to any
of them who may be prior mortgagees and which they (the plaintiffs) may be legally bound to
pay."

7. In their written statement in the suit of 1896, Sarju Parshad and Ramanand distinctly claimed
their right as prior mortgagees and said: "If the plaintiffs be willing to get the hypothecated
property sold, after paying in full the prior amount due to these defendants, they have no
objection whatever to the plaintiffs' claim."

8. The then Subordinate Judge of Jaunpur, being obviously in confusion of mind as to the rights
of the parties to the Suit of 1896, by his judgment of the 19th January 1897, decided amongst
other things that Arghupur should be sold by auction in the event of the defendants to the suit
failing to pay, on or before the 19th May 1897, to the plaintiffs in that Suit (the second
mortgagees) Rs. 49,275-9-0, the principal and interest due under the mortgage of the 19th
February 1892 and future interest, and that the proceeds of the sale should be applied first in
payment of the amount due to the second mortgagees under their mortgage of the 19th February
1892, and that the balance, if any, should be "applied in payment of the sum which may be due
to Sarju Parshad and Ramanand on that date with interest. Any surplus left to be applied in
payment of the sum due to the plaintiffs under the second document, dated the 20th May 1893."
The Subordinate Judge apparently overlooked the rights of Sarju Parshad and Ramanand under
their prior mortgage of the 8th August 1887. In accordance with the judgment a decree was made
by the Subordinate Judge. Default having been made in payment on the date fixed a decree

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absolute for sale of Arghupur was made by the Subordinate Judge of Jaunpur on the 4th
September 1897. Under the decree of the 4th September 1897, Arghupur was sold. The proceeds
of the sale were applied first in payment to the second mortgagees of the sum then due to them in
respect of their mortgage of the 19th February 1892, and the balance of the proceeds of the sale
was paid to the first mortgagees; that balance did not satisfy the amount then due to the first
mortgagees under their mortgage of the 8th August 1887. If the proceeds of the sale of Arghupur
had been first applied to the payment of the amount then due under the mortgage of the 8th
August 1887, that mortgage would have been satisfied, and the amount due under the mortgage
of the 25th June 1892 would have been to that extent reduced. As the proceeds of the sale of
Arghupur did not satisfy the amount due to the second mortgagees under their mortgage of the
20th May 1893, they obtained a decree under Section 90 of the Transfer of Property Act, 1882,
and in execution of this decree the village of Baragaon was sold on the 20th April 1904, and was
purchased by the appellants.

9. On behalf of the appellants it has been contended before this Board and in the Courts below
that Baragaon was relieved of all liability in respect of the debt due under the mortgage of the 8th
August 1887, by reason of the failure of Sarju Parshad and Ramanand to insist on their priority
under that mortgage, it being alleged in support of the contention that Sarju Parshad and
Ramanand had agreed to waive their priority as mortgagees of Arghupur, or had waived it, of
which, if it were material, there is no proof, and that they were guilty of laches in not insisting on
that priority. Their Lordships have found it difficult to follow the argument in support of the
contention, as the appellants had no interest in Baragaon until they purchased Baragaon on the
20th April 1904, and what they then purchased was the interest of the mortgagors in that village.

10. It is true that had Sarju Parshad and Ramanand appealed against the decree of the
Subordinate Judge, they could have had their interests as first mortgagees under the mortgage of
8th August 1887 protected, and would, on the sale of Arghupur, have obtained payment of the
amount then due under that mortgage. Sarju Parshad and Ramanand did not, by an appeal, insist
on their right as prior mortgagees, but the fact that they did not insist on having the amount due
under the mortgage of the 8th August 1887 satisfied in priority to the claim of the second
mortgagees does not disentitle the plaintiffs to recover the full amount of their claim in this suit,

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and does not entitle the appellants to relief. No other fact which would entitle the appellants to
relief has been shown. The appeals fail.

11. Their Lordships will humbly advise His Majesty that these consolidated appeals should be
dismissed.

12. The appellants must pay the costs.

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Ahmedabad Municipal Corporation v Haji Abdulgafur Haji Hussenbhai Equivalent 1971
AIR 1201, 1971 SCR 63

Appeal from the judgment and order dated April 28, 29, 1966 of the Gujarat High Court in
Letters Patent Appeal No. 19 of S. T. Desai and I. N. Shroff, for the appellant. The respondent
did not appear.

1.The Judgment of the Court was delivered by Dua, J.-In this appeal on certificate granted by the
High Court of Gujarat under Article 133(1)(c) of the Constitution of India the question raised
relate to the liability of auction purchaser of property at court sale for the arrears of municipal
taxes due on the date of sale to the municipal corporation of the City of Ahmedabad which dues
are a statutory charge on the property sold and of which the purchaser had no actual notice. On
the question of constructive notice there is a sharp conflict of judicial decisions in the various
High Courts and in the Allahabad High Court itself there have been conflicting expression of
opinion. In this Court there being no representation on behalf of the respondent the appeal was
heard ex parte.

2. The property which is the subject matter of controversy in this litigation originally belonged to
one Haji Nur-Mahammad Haji Abdulmian. He apparently ran into financial difficulties in
February, 1949, and insolvency proceedings were started against him in March, 1949. By an
interim order receivers took charge of his estate and finally on October 14, 1950 he was
adjudicated insolvent. The property in question accordingly vested in the receivers. This property
had been mortgaged with a firm called Messrs. Hargovind Laxmichand. In execution of a
mortgage decree obtained by the mortgagee this property was auctioned and purchased at court
sale by the plaintiff Haji Abdulgafur Haji Hussenbhai, (respondent in this Court) for Rs. 22,300.
He was declared purchaser on November 28, 1954. At the time of this purchase there were
municipal taxes in respect of this property in arrear for the years 1949-50 to 1953-54, which
means that the receivers had not cared to pay the municipal taxes during all these years. The
property was attached by the municipal corporation by means of an attachment notice dated- July
20, 1955 for the arrears of the municipal taxes amounting to Rs. 543.79 ps. As the municipal
corporation threatened to sell the property pursuant to the attachment proceedings the purchaser

130 | P a g e
instituted the suit (giving rise to this appeal) for a declaration that he was the owner of the
property and that the arrears of municipal taxes due from Haji Nurmohammad Haji Abdulmian
were not recoverable by attachment of the suit property in the plaintiff's hands and that the
warrant of attachment of the property issued by the municipal corporation was illegal and ultra
vires. Permanent injunc- tion restraining the municipal corporation from attaching the property
for arrears of municipal taxes was also sought. The trial court declined the prayer for a
declaration that the property was not liable to be attached for recovery of the arrears of municipal
taxes. But the war-rant of attachment actually issued in this case was held to be illegal and void
with the result that an injunction was issued restraining the municipal corporation from enforcing
the impugned warrant of attachment against the plaintiff in respect of the suit property. Both
parties feeling aggriev- ed appealed to the District Court. The Assistant Judge who heard the
appeals dismissed both of them. The plaintiff thereupon presented a second appeal to the Gujarat
High Court which was summarily dismissed by a learned single Judge. Leave to appeal to a
Division Bench under cl. 15 of the Letters Patent was however granted. The Division Bench
hearing the Letters 5-1 S.C. India/71 Patent appeal in a fairly lengthy order allowed the plaintiffs
appeal and decreed his suit holding that the plaintiff is the owner of the suit property and the
charge of the municipal corporation for arrears of municipal tax is not enforceable against his
property and also restraining the municipal corporation by a permanent injunction from
proceeding to realise from this property the charge in respect of the arrears of municipal taxes.

3. On appeal in this Court three main questions were raised by Shri S. T. Desai, learned counsel
for the appellant. To begin with it was contended that there is no warranty of title in an auction
sale. This general contention seems to us to be well-founded because it is axiomatic that the
purchaser at auction sale takes the property subject to all the defects of title and the doctrine
caveat emptor (let the purchaser beware) applies to such purchaser. The case of the judgment
debtor having no saleable interest at all in the property sold such as is contemplated by 0. 21, R.
91, C. P. C. is, however, different and is not covered by this doctrine. The second point
canvassed was that there is an express provision in Section 141(1) of the Bombay Provincial
Municipal Corporation Act, 1949 (hereinafter called the Bombay Municipal Act) for holding the
present property to be liable for the recovery of municipal taxes and, therefore though the
property was subject only to a charge not amounting to mortgage and, therefore, involving no

131 | P a g e
transfer of interest in the property, the same could nevertheless be sold for realizing the amount
charged, even in the hands of a transferee for consideration without notice. Section 141 of the
Bombay Municipal Act is an express saving provision as contemplated by Section 100 of
Transfer of Property Act, contended Shri Desai. This submission has no merit as would be clear
from a plain reading of Section 100 of the Transfer of Property Act, 1882 and Section 141 of the
Bombay Municipal Act, the only relevant statutory provisions. Section 100 of the Transfer of
Property Act dealing with 'charges' provides.

S. 100 "Where immoveable property of one person is by act of parties or operation of law made
security for the payment of money to another, and the transaction does not amount to a mortgage,
the later person is said to have a charge on the property; and all the provisions hereinbefore
contained which apply to a simple mortgage shall, so far as may be, apply to such charge.

4. Nothing in this section applies to the charge of a, trustee on the trust-property for expenses
properly incurred in the execution of his trust, and;, save as otherwise expressly provided by any
law for the time being in force, no charge shall be enforced against any property in the hands of a
person to whom such property has been transferred for consideration and without notice of the
charge."

5. This section in unambiguous language lays down that no charge is enforceable against any
property in the hands of a transferee for consideration without notice of the charge except where
it is otherwise expressly provided by any law for the time being in force. The saving provision of
law must expressly provide for enforcement of a charge against the property in the hands of a
transferee for value without notice of the charge and not merely create a charge. We now turn to
Section 141 of the Bombay Provincial Municipal Corporation Act, 1949 to see if it answers the
requirements of Section 100 of Transfer of Property Act. This section reads :-

6. Section 141. "Property taxes to be a first charge on premises on which they are assessed: (1)
Property taxes due under this Act in respect of any building or land shall, subject to the prior
payment of the land revenue, if any, due to the State Government thereupon, be a first charge, in
the case of any building or land held immediately from the Government, upon the interest in
such building or land of the person liable for such taxes and upon the movable property, if any,

132 | P a g e
found within or upon such building or land and belonging to such person ; and, in the case of any
other building or land, upon the said building or land and upon the moveable property, if any,
found within or upon such building or land and belonging to the person liable for such taxes.
Explanation.-The term "Property taxes" in this section shall be seemed to include charges
payable under section 134 for water supplied to any premises and the costs of recovery of
property-taxes as specified in the rules. (2) In any decree passed in a suit for the enforcement of
the charge created by sub-section (1), the Court may order the payment to the Corporation of
interest on the sum found to be due at such rate as the Court deems reasonable from the date of
the institution of the suit until realisation, and such interest and the cost of enforcing the said
charge, including the costs of the suit and the cost of bringing the premises or moveable property
in question to sale under the decree, shall, subject as aforesaid, be a fresh charge on such
premises and moveable property along with the amount found to be due, and the Court may
direct payment thereof to be made to the Corporation out of the sale proceeds."

6. Sub-section (1). as is obvious, merely creates a charge in express language. This charge is
subject to prior payment of land revenue due to the State Government on such building or land.
The section, apart from creating a statutory charge, does not further provide that this charge is
enforceable against the property charged in the hands of a transferee for consideration without
notice of the charge. It was contended that the saving provision, as contemplated by Section
100 of the Transfer of Property Act, may, without using express words, in effect provide that the
property is liable to sale in enforcement of the charge and that if this liability is fixed by a
provision expressly dealing with the subject, then the charge would be enforceable against the
property even in the hands of a transferee for consideration without notice of the charge.
According to the submission it is not necessary for the saving provision to expressly provide for
the enforceability, of the charge against the property in the hands of a transferee for
consideration without notice of the charge. This submission is unacceptable because, as already
observed, what is enacted in the second half of Section 100 of Transfer of Property Act is the
general prohibition that no charge shall be enforced against any property in the hands of a
transferee for consideration without notice of the charge and the exception to this general rule
must be expressly provided by law. The real core of the saving provision of law must be not
mere enforceability of the charge against the property charged but enforceability of the charge

133 | P a g e
against the said property in the hands of a transferee for consideration without notice of the
charge. Section 141 of the Bombay Municipal Act is clearly not such a provision. The second
contention accordingly fails and is repelled. The third argument, and indeed this was the
principal argument which was vehemently pressed with considerable force by Shri Desai. is that
the plaintiff must be deemed to have constructive notice of the arrears of municipal taxes and as
an auction purchaser he must be held liable to pay these taxes and the property purchased must
also be held subject to this liability in his hands. In support of this submission he cited some
decisions of our High Courts. The first decision relied upon by Shri Desai is reported as Arumilli
Suravya v. Pinisetti Venkataramanamma(1) in which relying on Creet v. Ganga Ram Gool Rai
(2) it was observed by Horwill J., that Section 100 of the Transfer of Property Act does not apply
to auction sales because the transfer within the meaning of the Transfer of Property Act does not
include an auction sale. It was added that the position of a purchaser at an execution sale is the
same as that of the judgment-debtor and his position is somewhat different from that of a (1)
A.I.R. 1940 Mad. 701. (2) I.L.R. [1937] 1 Cal. 203. purchaser at a private sale. According to this
decision, purchase the property subject to all the charges and encumbrances legal and equitable
which would bind the debtor$. We do not agree with the view taken in this decision. We
however, do not consider it necessary to go into the matter at length because we find that this
decision was expressly overruled by this Court in Laxmi Devi v. Mukand Kunwar(1) and the
High Court, relying on this Court's decision, had also repelled a similar contention pressed on
behalf of the Municipal Corporation there. This Court pointed out in Laxmi Devi's case(2) that
the provi- sions of Section 2(d) of the Transfer of Property Act prevail over Section 5 with the
result that the provisions of Section 57 and those contained in Chapter IV of the Transfer of
Property Act must apply to transfer, by operation of law. Section 100, it may be pointed out, falls
in Chapter IV. Reliance was next placed on a Full Bench decision of the Allahabad High Court
in Nawal Kishore v. The Municipal Board, Agra (1). According to this, decision the question of
constructive notice is a question of fact which falls to be determined on the evidence and
circumstances of each case. But that Court felt that there was a principle on which question of
constructive notice could rest, that principle being that all intending purchasers of the property in
municipal areas where the property is subject to a municipal tax which has been made a charge
on the property by statute have a constructive knowledge of the tax and of the possibility of some
arrears being due with the result that it becomes their duty before acquiring the property to make

134 | P a g e
enquiries as to the amount of tax which is due or which may be due and if they fail to make this
enquiry such failure amounts to a wilful abstention or gross negligence within the meaning
of Section 3 of the Transfer of Property Act and notice must be imputed to them. The reference
to the Full Bench in the reported case was necessitated because of conflict of judicial opinion
between that Court and Oudh Chief Court. The earlier decision of a Division Bench in Municipal
Board, Cawnpore v. Roop Chand Jain (2) was overruled and the Bench decision of Oudh High
Court in Municipal Board, Lucknow v. Ramjilal (4) was approved. The next decision to which
reference was made by Shri Desai is reported as Akhoy Kumar Banerjee v. Corporation of
Calcutta (5). In this case, after distinguishing a mortgage from a charge, it was observed-that the
statutory charge in that case could not be enforced against the property in the hands of bona fide
purchaser for value without notice. While dealing with the question whether the appellants in
that case were purchasers for value without notice, it was observed that they had (1) [1965] 1
S.C.R. 726. not pleaded in their written statement that they were Purchasers for value without
notice. Having not pleaded this defence they were held disentitled to avail of it. Having so
observed the Court dealt with the case on the assumption that the defence though not expressly
taken in the pleadings was available to the defendants. The Court said :

"But even if we assume that the defence, though not expressly taken in their written statement, is
available to the defendants, they are in a position of difficulty from which there is no escape. The
appellants are private purchasers of the property and if they had enquired at the time of their
purchase, they would have discovered that the rates were in arrears; as a matter of fact, they
would be personally liable under Section 223 for the arrears of the year immediately prior to the
date of their purchase, and they admit that they have satisfied such arrears, though they do not
disclose whether by enquiry they had ascertained the existence of the arrears before they made
the purchase.

7. The Court then proceeded to deal with the position of the vendor from whom the appellants
had purchased the property in order to see if he could raise the defence of being a purchaser for
value without notice. The appellant's vendor was a mortgagee who had acquired title by
foreclosure-an involuntary alienation by his mortgagor-and it was held that to him constructive
notice could not be imputed to the same extent as to a purchaser at a private sale. But had he
made enquiries from the municipal authorities he could still have ascertained whether any arrears

135 | P a g e
of consolidated rates were due. When he had taken the mortgage ,be was aware that if the rates
were not paid the arrears would be fiat charge on the property with the result that before
becoming full owner by foreclosure he should have ascertained the true state of affairs. On this
reasoning he was held to have constructive notice and the purchasers from him could not claim
greater protection. These circumstances clearly disclose that the reported case is not similar to
the one before us and is of little assistance.

8. Chandu Ram v. Municipal Commissioner of Kurseong Municipality A.I.R. 1951 Cal. 398
was the next decision cited. The Bench in that case followed the Full Bench decision of the
Allahabad High Court in Nawal Kishores case (supra). A Division Bench of the Oudh Chief
Court in Municipal Board, Lucknow v. Lala Ramji Lal A.I.R. 1941 Oudh 305 disagreeing with
the Bench decision of the Allahabad High Court in Roop Chand Jain's case (supra) observed that
it must be presumed that a person who buys house property situate in a municipality is
acquainted with the law by which a charge is imposed on that property for the payment of taxes.
The charge having been expressly imposed by the Municipal Act upon the property for payment
of municipal taxes the municipality was entitled to follow the property in the hands of a
transferee who had not cared to make any enquiry as to whether the payment of taxes was in
arrears. The Court approved the Calcutta decision in Akhoy Kumar's case (supra). The next
decision cited is reported as Laxman Venkatesh Naik v. The Secretary of State for India (1) but
being a case of takkavi loans it is of no assistance in the present case. We may now turn to the
Bench decision of the Allahabad High Court in Roop Chand Jain's case (supra). The reasoning
for the view adopted there may be reproduced :

"A bona fide purchaser takes property he buys free of all charges of which he has no notice
actual or constructive. He is said to have constructive notice when ordinary prudence and care
would have impelled him to undertake an enquiry which would have disclosed the charge. If for
instance the charge is created by a registered document then the purchaser would be held to have
constructive notice of that charge inasmuch as a prudent purchaser would in ordinary course
search the registers before effecting the purchase. There is no register, as far as we know, of
arrears of taxes or of charges in respect thereof. It has not been shown that the municipality of
Cawnpore intimate to the public in the "Press" or by other publication a list of the properties
which are charged in respect of arrears of taxes. There is nothing upon the record to justify the

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conclusion that the defendants could have demanded any information from-the municipality in
regard to charges on immovable property within the municipal limits."

9.The Court then noticed the fact that the Kanpur Corporation had allowed II years' arrears of
taxes to accumulate and it was observed that no intending purchaser was bound to presume that
taxes upon the property, he contemplates purchasing had not been paid in the ordinary course, in
the absence of special intimation by the municipality. On this reasoning the suggestion of
constructive notice was negatived.

10. According to Section 3 of the Transfer of Property Act which is described as interpretation
clause, a person is said to have notice of a fact when he actually knows that fact or when before
willful abstention from an enquiry or search which he ought to have made or gross negligence he
would have known it. There (1) XLI B.I.R. 257.are three explanations to this definition dealing
with three contingencies when a person acquiring immovable property is to be deemed to have
notice of certain facts. Those explanations are:

"Explanation I.-Where any transaction relating to immoveable property is required by law to be

and has been affected by a registered instrument, any person acquiring such property or any part
of. or share of such instrument as from the date of registration or, where the property is not all
situated in one sub- district, or where the registered instrument has been registered under
subsection (2) of Section 30 of the Indian Registration Act, 1908, from the earliest date on which
any memorandum of such registered instrument has been filed by any Sub-Registrar within
whose sub-district any part of the property which is being acquired, or of the property wherein a
share or interest is being acquired, is situated Provided that-

(1) the instrument has been registered and its registration completed in the manner prescribed by
the Indian Registration Act, 1908, and the rules made thereunder. (2) the instrument or
memorandum has been duly entered or filed, as the case may be, in books kept under section
51 of that Act and (3) the particulars regarding the transaction to which the instrument relates
have been correctly entered in the indexes kept under section 55 of that Act. Explanation II.-Any
person acquiring any immoveable property or any share or interest in any such property shall be
deemed to have notice of the title, if any, of any person who is for the time being in actual
possession thereof.

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Explanation III.-A person shall be deemed to have had notice of any fact if his agent acquires
notice thereof whilst acting on his behalf in the course of business to which that fact is material.

Provided that, if the agent fraudulently conceals the fact, the principal shall not be charged with
notice thereof as against any person who was a party to or otherwise cognizant of the fraud."

Now the circumstances which by a deeming fiction impute notice to a party are based, on his
willful abstention to enquire or search, which a person ought to make or, on his gross negligence.
This presumption of notice is commonly known as constructive notice.

11. Though originating in equity, this presumption of notice is now ;a part of our statute and we
have to interpret it as such. Willful abstention suggests conscious or deliberate abstention and
gross negligence is indicative of a higher degree of neglect. Negligence is ordinarily understood
as an omission to take such reasonable care as under the circumstances is the duty of a person of
ordinary prudence to take. In other words it is an omission to do something which a reasonable
man guided by consideration which normally regulate the conduct of human affairs would do or
doing something which a normally prudent and reasonable man would not do. The question of
wilful abstention or gross negligence and, therefore, of constructive notice considered from this
point of view is generally a question of fact or at best mixed question of fact and law depending
primarily on the facts and circumstances of each case and except for cases directly falling within
the three explanations, no inflexible rule can be laid down to serve as a straight- jacket covering
all possible contingencies. The question one has to answer in circumstances like the present is
not whether the purchaser had the means of obtaining and might with prudent caution have
obtained knowledge of the charge but whether in not doing so he acted with wilful abstention or
gross negligence. Being a question depending on the behaviour of a reasonably prudent man, the
Courts have to consider it in the background of Indian conditions. Courts in India should,
therefore, be careful and cautious in seeking assistance from English precedents which should
not be blindly or too readily followed.

12. Adverting now to the case before us, as already noticed. the property in question had vested
in the receivers in insolvency proceedings since March, 1949 by an interim order, and in
,October, 1950 the original owner was adjudicated as an insolvent and the property finally vested
in the receivers in insolvency. The plaintiff purchased the property in November, 1954 and in our

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opinion it could not have reasonably been expected by him that the receivers would not have
paid to the municipal corporation since 1949 the taxes and other dues which were charged on this
property by statute. According to Section 61 of the Provincial Insolvency Act, 1920 the debts
due to a local authority are given priority, being bracketed along with the debts due to the State.
Merely because these taxes are charged on the property could not constitute a valid ground for
the official receiver not to discharge this liability. In fact we find from the record that on January
15, 1951 the receivers had submitted a report to the insolvency court about their having received
bills for Rs. 6283-0 in respect of municipal taxes of the insolvent's property and leave of the
court was sought for transferring the said property to the names of the receivers in the municipal
and Government records. The court recorded an order on February 8, 1951 that the municipal
taxes had to be paid. On the receivers stating that they did not possess sufficient funds the court
gave notice to the, counsel for the opposite party and on February 24, 1951 made the following
order: "Mr. Pandya absent. The taxes have to be paid. The Receivers state that they can pay only
by sale of some properties of the insolvent from which they want sanctioned. The property in
which the insolvent stays should first be disposed of. The terms arc accordingly so authorised."

13. It is not known what happened thereafter. It is, however, difficult to appreciate why after
having secured the necessary order from the court municipal taxes were not paid off by the
receivers and why the municipal corporation did not pursue the matter and secure payment of the
taxes due. May be that the municipal corporation thought that since these dues were a charge on
the property they need not pursue the matter with the receivers and also need not approach the
insolvency court. If so, then this, in our opinion, was not a proper attitude to adopt. In any event
the plaintiff could not reasonably have thought that the municipal corporation had not cared to
secure payment of the taxes due since 1949. On the facts and circumstances of this case,
therefore, we cannot hold that the plaintiff as a prudent and reasonable man was bound to
enquire from the municipal corporation about the existence of any arrears of taxes due from the
receivers. It appears from the record, however, that he did in fact make enquiries from the
receivers but they did not give any intimation. The plaintiff made a statement on oath that when
he purchased the building in question it was occupied by the tenants and the rent used to be
recovered by the receivers. There is no rebuttal to this evidence. Now, if the receivers were
receiving rent from the tenants, the reasonable assumption would be that the municipal taxes

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which were a charge on the property and which were also given priority under Section 61 of the
Provincial Insolvency Act, 1920, had been duly paid by the receivers out of the rental income.
The plaintiff could have no reasonable ground for assuming that they were in arrears. From the
plaintiff's testimony it is clear that he did nevertheless make enquiries from the receivers if there
were any dues against the property though the enquiry was not made specifically about
municipal dues. Apparently he was not informed about the arrears of municipal taxes. This
seems to us explainable on the ground that the receivers had, after securing appropriate orders,
for some reasons not clear on the record, omitted to pay the arrears of municipal taxes and they
were, therefore, reluctant to disclose this lapse on their part. On these facts and cir- cumstances
we do not think that the plaintiff could reasonably be fixed with any constructive notice of the
arrears of municipal taxes since 1949. So far as the legal position is concerned we are inclined to
agree with the reasoning adopted by the Allahabad High Court in Roop Chand Jain's case (supra)
in preference to the reasoning of the Full Bench of that Court in Nawal Kishore's case (supra) or
of the Division Bench of Oudh Chief Court in Ramji Lal's case (supra). We do not think there is
any principle or firm rule of law as suggested in Nawal Kishore's case (supra) imputing to all
intending purchasers of property in municipal area where municipal taxes are a charge on the
property, constructive knowledge of the existence of such municipal taxes and of the reasonable
possibility of those taxes being in affears. The question of constructive knowledge or notice has
to be determined on the facts and circumstances of each case. According to the Full Bench
decision in Nawal Kishore's case (supra) also the question of constructive notice is a question of
fact and we do not find that the material on the present record justifies that the plaintiff should be
fixed, with any constructive notice of the arrears of municipal taxes.

14. We may add before concluding that as the question of constructive notice has to be
approached from equitable considerations we feel that the municipal corporation in the present
case was far more negligent and blameworthy than the plaintiff. We have, therefore, no
hesitation in holding that the High Court took the correct view of the legal position with the
result that this appeal must fail and is dismissed. As there is no representation on behalf of the
respondent there will be no order as to costs.

Appeal dismissed.
*****************************************************************************

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 Md. Mustafa v Haji Md. Isa And Ors.

AIR 1987 Pat 5

JUDGMENT Ramnandan Prasad, J.

1. This appeal by the plaintiff is directed against the judgment and the decree dismissing his suit
for specific performance of contract with regard to the sale of a house said to have been entered
into by the original defendant 1 Haji Md. Isa and the plaintiff.

2. The case of the plaintiff is that he was a tenant in one of the Katras of a Pucca house, which
stood over four decimals of land appertaining to plot Nos. 2230 and 2231 under Khata No. 721
in village Alamgirpur Phulwarisharif, a suburb of town of Patna, which belonged to original
defendant 1 Md. Isa, who was his uncle. In the month of April, 1972 Haji Md. Isa expressed his
desire to plaintiff Md. Mustafa to sell the house, as he was in need of some money, and
eventually, after some negotiation, Md. Isa agreed to sell the house to the plaintiff for a sum of
Rs. 20,000/-. As the plaintiff had not got so much fund with him at that time for getting the sale
deed executed, he wanted some time and Md. Haji Md. Isa agreed to grant him some time. It is
said that on 14th June, 1972 Md. Isa told the plaintiff that he urgently required Rs. 7,000/- and so
he should advance the amount to him and get a deed of agreement to sell executed by him. The
plaintiff agreed. On the following day i.e. on 15-6-1972 the plaintiff advanced Rs. 7,000/-
towards the aforesaid consideration money of Rs. 20,000/- to Haji Md. Isa, who, in turn,
executed an agreement to sell on a stamped paper and delivered the same to the plaintiff.
According to this agreement Md. Isa agreed to execute a registered sale deed in respect of the
said house in favour of the plaintiff on payment of the balance of the consideration money by the
last week of January, 1973, but he put the plaintiff in possession of the entire building at that
very time in part performance of the contract. The case of the plaintiff is that he managed the
balance of the consideration money and he asked Md. Isa to execute the sale deed, but he did not
do, and hence the plaintiff sent a registered notice through his pleader on 7-10-1972 which was
refused. In the meantime, the plaintiff learnt that the father of the minor defendants 6 and 7,
namely, Arif Hussain, brought a collusive sale deed dt. 20-7-1972 into existence in the name of
these defendants said to have been executed by Md. Isa. It is said that this sale deed is a
fraudulent document and was brought into existence in spite of the aforesaid agreement executed

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by Md. Isa in favour of the plaintiff. It has also been alleged that this sale deed can have no legal
effect, as it was executed without consideration and with full knowledge of the said agreement in
favour of the plaintiff.

3. Original defendant 1 Haji Md. Isa had filed written statement denying the allegations of the
plaintiff but he died during the pendency of the suit on 20-6-1974 and his heirs, namely,
respondents l(a) and l(b), who were substituted in his place adopted the written statement filed by
him. Defendants 2 and 3 have filed a joint written statement. The case, however, put forward in
the two sets of written statement is substantially the same. The case of the defendants is that Md.
Isa was in need of money and so he wanted to sell the house. It has also been admitted by Md.
Isa that the plaintiff also wanted to purchase the house, but the price offered by him was too low
and hence he had rejected his offer. He has denied to have agreed to sell the house to the plaintiff
for a sum of Rs. 20,000/- or to have executed an agreement in his favour in this connection.
According to these defendants the agreement said to have been-executed by Md. Isa and filed by
the plaintiff is a forged, fabricated and antedated document. Their further case is that Md. Isa had
agreed to sell the house to defendants 2 and 3 for a sum of Rs. 24,000/- and he actually executed
a registered sale deed in their favour on 20-7-1972 after receiving the full consideration money
of Rs. 24,000/- from them. According to them, this sale deed is a genuine document and was
executed for consideration and Md. Isa had also put defendants 2 and 3 in possession of the
house after sale and they are coming in possession thereof. Further case of the defendants 2 and 3
is that they are bona fide purchasers for value without any notice of the alleged agreement.

4. The learned Subordinate Judge, who tried the suit dismissed the suit on the following findings
: --

(1) The agreement in question (Ext. 1)was not executed by Haji Md. Isa and was not a genuine
document.

(2) The sale deed (Ext. A/1) was duly executed by Md. Isa on receiving full consideration and
was a valid and genuine document.

(3) Defendants 2 and 3 were bona fide purchasers for value without notice of the said agreement.

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5. The learned counsel appearing for the appellant has challenged the aforesaid findings arrived
at by the learned Subordinate Judge and so the following points arise for determination in this
appeal : --

(I) Whether the agreement (Ext. 1) is a valid and genuine document?

(II) Whether defendants 2 and 3 are bona fide purchasers for value without notice of the
Baibiyana aforesaid?

Point No. (I):

6. The witnesses who deposed on this point on behalf of the plaintiff are Md. Idris (P.W. 4),
Abdul Razak (P.W. 5), besides plaintiff Md. Mustafa himself (P.W. 2). Naturally P.W. 2 is the
most important witness amongst these three, the other two being only attesting witnesses to the
deed.

7. As many as five persons figure as attesting witnesses on the Beyananama (Ext. 1) including
P.Ws. 4 and 5. The other three, namely, Md. Kamruddin, Md. Abdul Gani and Md. Yaqub are
dead according to the plaintiff, and as such they could not be examined. The scribe of the deed,
namely, Bakruddin, has not been examined by the plaintiff, although his evidence would have
been of considerable importance in the case. An explanation was offered for his non-examination
in a petition filed on 2-7-1977 that he had been gained over by the defendants, but the latter had
controverted this allegation by filing a rejoinder. Whatever be the real position the fact remains
that the scribe has not come forward to support the case of the plaintiff regarding the genuineness
of the Beyananama.

7A. P.W. 4 and 5 have of course, stated that the Beyananama was executed by Md. Isa in their
presence, but, on a close scrutiny, their evidence does not inspire confidence.

8. According to the plaintiff and P.Ws. 4 and 5 this Beyananama was scribed in the hotel of the
plaintiff located in the house in suit which itself lies on Fulwari Chouraha at about 10 a.m. on 15-
6-1972. It is really surprising as to why this Beyananama was scribed, executed and attested at a
hotel, which is a public place. As admitted by P.W. 5, this hotel is on the Chouraha where large

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numbers of people move about. Then, according to this very witness as many as 15 to 20 persons
were sitting in the hotel when the Beyananama was scribed and consideration money of Rs.
7,000/- was paid to Md. Isa. It is really surprising how Md. Isa selected this hotel for getting the
Beyananama scribed and executed. Indeed, it does not appear quite natural that he would have
selected this hotel for receiving amount of Rs. 7,000/- in cash in presence of so many outsiders,
some of whom must be strangers. According to the evidence he had taken the said amount after
counting the same in presence of everybody. This circumstance assumes importance, as the
residential house of Md. Isa was just by the side of this building where he had his own Baithak
for males where he usually sits. It is also strange that Md. Isa did not call either of his sons or
any of his relations and all alone went to the hotel on his own without being called by the
plaintiff there. It is also not easily believable that Md. Isa had called Bakruzama, an advocate's
clerk, for scribing the Beyananama, when he himself had not taken any such work from him in
the past. According to the admitted position, Bakruzama is a resident of Rajendra Nagar and
Beyananama was being executed at Phulwarisharif, which is far away from there. Indeed,
according to the evidence of the plaintiff himself, it is he who had taken this scribe to his own
hotel for scribing the deed and even then he has not dared to examine him on his behalf.

9. Indeed, the presence of P.W. 4 at the relevant time in the hotel of the plaintiff appears to be a
peculiar coincidence. Admittedly, he is a resident of Ramnabag, which is at a considerable
distance from Phulwarisharif, and has got absolutely no concern with that place. He had also got
no concern either with the plaintiff or Md. Isa. Of course, he claims to have gone to the
bookbinding shop of Md. Isa at Ramnabag on a few occasions, but on his own showing that shop
is not there after 1962 and he had no occasion to meet Md. Isa thereafter until that fateful day. At
one place he had stated that he had gone there as he had been called by Md. Isa, but he had not
stated as to the person who had gone to call him and why he would come to the hotel of the
plaintiff on being called by Md. Isa, when he had no occasion to meet Md. Isa after 1962. It is
hardly believable that he would have been called by Md. Isa from Ramnabag to the hotel of the
plaintiff for simply attesting Beyananama, when a lot of persons were available for that purpose
at Phulwarisharif itself. In fact his evidence is far from satisfactory and it was suggested to him
that he is a servant of Majo Babu who had set up the plaintiff to lay a claim on the house in
question.

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10. P.W. 5, Abdul Razzak, also does not appear to be a dependable witness. It was suggested to
him that he was working as a tailor in the house of the plaintiff which fact he denied and asserted
that he worked as a tailor in the shop of Md. Halim at Khagaul. But, he has been contradicted by
the plaintiff himself, according to whom, this witness worked as a tailor in the shop of one Rauf
at Phulwarisharif itself. In any event, this witness (P.W. 5) had admitted that he used to go to
work at Khagaul daily in the morning and return home only at 11 p.m. and this he had been
doing during the last 15 years. If it was so, it is strange as to how he was present in the hotel at
10a.m. on 15-6-1972. He has said that he had gone to the shop of the plaintiff for taking tea, but
in ordinary course he would have gone to take tea before 9 a.m. which was his time for going to
his own tailoring shop at Khagaul. It is really strange that Md. Isa would have asked him to sit in
that hotel without any reason at the cost of his work. It would also be significant to point out that
he claims to have signed in Deonagri script on the Beyananama, but he has put his left thumb
impression on his deposition which is indicative of the fact that he is an illiterate.

11. The plaintiff (P.W. 2) has not fared better. He has stated that Md. Isa had told him in April
1972 that he wanted to sell the disputed house and that the terms of the sale were settled between
the two only within two days from the start of the negotiation. Nobody else was present during
these talks. He has, however, not explained as to why no Beyananama or sale deed was executed
at that time. He has also not stated as to when the sate deed was to be executed. In fact, he could
not say in which pan of April this talk had taken place. Then, he has staled that all on a sudden
Md. Isa told him for the first time on 1-4-6-1972 that he wanted money and accordingly
Beyananama was scribed and executed on the following day i.e. on 15-4-1972. None else was
present at this talk also. Indeed it is not clear from the evidence of the plaintiff as to what was the
necessity which compelled Md. Isa to executed the Beyananama in question all on a sudden on
15-6-1972. The Beyananama recites about some necessities but there is no evidence to show that
in fact those necessities existed. It is also strange that according to the plaintiff himself the first
talk regarding advance of money and execution of Beyananama took place on 14-6-1972, but
Md. Isa is said to have purchased the stamp papers for Beyananama on 10-6-1972 i.e. four days
before the negotiation and the talk in this regard had started although both the parties are close
relations and also close neighbours.

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12. Then, there is no evidence worth the name to show that the plaintiff came in actual or even
constructive possession of the entire building after the execution of the said Beyananama, as
stated therein and as claimed by the plaintiff. Admittedly, the plaintiff was occupying only one
of the Katras of the building as tenant since the time of his father in which he was holding his
hotel. There is nothing on the record to show that he really came in possession of the entire
building after the execution of the Beyananama. It is the admitted position that there were six
other tenants like the plaintiff in that building, besides the plaintiff. There is nothing to show that
the plaintiff ever realised rent from any of them. Of course, he has stated that he had realised rent
from one of the tenants and that also only once, but this statement is apparently false, as he could
not name the tenant from whom he had realised the rent. In fact, he did not give out the names of
the other tenants who were in possession of the different portions of that building. This cannot be
the natural conduct of a person, who claims to have come in actual possession of the entire
building. On the other hand two of the tenants namely, Dr. Suleman Gosh Khan (D.W. 3) and
Md. Nazir Alam (D.W. 4) have come to the witness-box to support the case of the defendants 2
and 3. Their evidence is that previously they used to pay rent to Md. Isa, but after the latter
executed the sale deed in favour of defendants 2 and 3, he asked them to pay rent to these
defendants and both of them, accordingly, paid rent thereafter to the father of these defendants,
namely, Arif Hussain (D. W. 9). There appears absolutely no reason to reject the evidence of
these witnesses and, in fact, the evidence of D.W. 3, who is a medical practitioner deserves due
consideration. Then, the evidence of D.W. 9 shows that one of the Katras of the disputed
building was vacant at the time of the sale and Md. Isa put him in direct possession of that Katra
after the sale. He has also been supported by Jafar Imam alias Samiullah (D.W. 2), who is one of
the sons of late Md. Isa, who died on 20-6-1974. Then the names of defendants 2 and 3 were also
mutated in the Circle Office and rent receipts were granted in their names. I find on the other
hand, there is nothing to show that the plaintiff had ever taken steps for getting his name mutated
anywhere. In such circumstances, it is not possible to accept the case of the plaintiff that Md. Isa
had put him in possession of the entire building and that he had come in possession thereof on
the basis of his Beyananama.

13. The conduct of the plaintiff otherwise also does not appear to be that of a normal and prudent
holder of a Baibeyana deed. He has admitted in para 25 of his deposition that he came to know

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about the sale deed executed in favour of defendants 2 and 3 only a week after its execution, but,
curiously enough, he did not enquire from Md. Isa as to why he had done so. He even did not go
to defendants 2 and 3 or their father and in fact he never informed them about his own
Beyananama. Normaliy, he was expected to rebuke Md. Isa for executing the sale deed after
executing a Beyananama in his favour but, evidently, he kept mum over the matter. According to
his own evidence he went to Md. Isa only in October, 1972, although the sale deed was executed
on 20-7-1972, and simply asked him to execute the sale deed. Even at that time he did not
question him as to why he had executed the sale deed in favour of defendants 2 and 3. It is really
difficult to believe that he simply told Md. Isa to execute the sale deed in his favour in October,
1972 long after he came to know about the sale deed in favour of defendants 2 and 3. Not only
that, there is absolutely no mention about the sale deed (Ext. B/1) in the notice (Ext. 4) said to
have been sent by his advocate to Md. Isa on 7-10-1972. In fact, this notice was quite premature,
as even according to the Beyananama of the plaintiff, Md. Isa was to execute the sale deed till
the end of January, 1973 and so there was no occasion for giving this notice to him on 7-10-72.
Normally such a notice is given only when the executant of the Beyananama fails to execute the
sale deed within the time specified in the Beyananama, but here the position is different. Then,
the reason given by the plaintiff for not getting the Beyananama registered is also not
convincing, when he had paid Rs. 7,000/- in cash. The explanation that he did not get the deed
registered, as this was a transaction between uncle and nephew is hardly convincing when the
relationship between the two was not at all quite cordial, as according to his own evidence he
was not on visiting terms with Md. Isa.

14. Thus, on a consideration of all aspects of the matter, I find it difficult to place any reliance on
the evidence of the plaintiff or his two witnesses (P.Ws. 4 and 5) regarding execution of the
Beyananama.

15. In fact the genuineness of the Beyananama is rendered doubtful by the endorsement on the
back of its first page and the evidence of the Stamp Vendor, namely, Ram Udar Prasad (D.W.
12). This endorsement shows its serial No. as 7673 and the date of sale as 10-6-72. According to
the Stamp Vendor and his Register, the stamp bearing serial No. 7673 was sold on 29-11-72 and
not on 10-6-72, and the stamp which is said to have been sold to Md. Isa on 10-6-72 (Ext. 9)
bears serial No. 2365. This stamp, according to the Register, is for Rs. 2/-. According to the

147 | P a g e
plaintiff, the serial number on the back of the first page of Beyananama was 2365 which was
interpolated to make it 7673, whereas, according to the defendants, the serial number is correct,
but the date has been interpolated as showing 10-6-1972. This endorsement was not sent for
examination to any expert and it is very difficult to agree with the plaintiff that 7673 has been
interpolated, as no sign of interpolation appears to the naked eye. If the serial number was really
7673, this could not be sold to Md. Isa on 10-6-1972. Of course, there is some cutting regarding
the amount of the stamp sold under serial No. 2365 dt. 10-6-1972, but it is difficult to reject the
explanation given by this Stamp Vendor in this regard. It is true that Md. Isa has not explained as
to why he had purchased the stamp worth Rs. 2/- on 10-6-1972, but, the simple reply of the
learned counsel for the defendants in this regard is that he had no occasion to do so, as there was
no statement in this regard in the plaint and Md. Isa himself died before the evidence was
recorded. No doubt P.W. 6, who is an advocate's clerk, has tried to support the case of the
plaintiff by stating that the serial number of the stamp as mentioned on the back of the first page
of the Beyananama was 2365 which has been interpolated to make it 7673. He has stated that he
had prepared a note of this Beyananama at the time of filing it in Court, which note he had
produced in Court when he was recalled for further examination and has been marked as Ext. 10.
This note is evidently not a true copy of the Beyananama and it is difficult to hold that this note
is a genuine document. It has not been explained as to why this witness had made a note of the
serial number on the back of the first page of the stamp, as it was not the main part of the
Beyananama. It is obvious that he has brought this note in existence at a much later stage only to
support the case of the plaintiff and his evidence has been rightly rejected by the learned
Subordinate Judge.

16. As stated above, it is very difficult to connect the stamp said to have been purchased by Md.
Isa on 10-6-1972 with the Beyananama in question as the very talk of the execution of the
Beyananama with the plaintiff had taken place for the first on 14-6-1972, and it is not easily
acceptable that Md. Isa would have purchased the stamp for this Beyananama on 10-6-72, when
there was no talk about the execution of any Beyananama.

17. Apart from the above discrepancy regarding the serial number of the stamp, the genuineness
of the Beyananama is rendered doubtful by the manner in which scribe has put his signature
thereon. Although the scribe is said to have signed the document soon after scribing it, but the

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ink by which he put signature is quite different from the body portion of the document. Indeed,
the body portion is also not consistenly written in one ink. The first page of the deed is in deep
ink whereas the other three pages are in much fainter ink. The signature of the scribe is probably
in the ink in which the top portion of the first page of the deed was written. Then, the signatures
of the attesting witnesses are in different inks. As stated above, Abdul Razzak has signed in
Deonagri script in his own pen, but from his deposition it appears that he has put his left thumb
impression thereon which would indicate that he is an illiterate. Then, the ink in which he has put
his signature is quite different from the ink used by other attesting witnesses.

18. Indeed, then the evidence of the expert examined by the plaintiff, namely, S.M. Anis Ahmad
(P. W. 8), who has come to prove that the signatures appearing on the Beyanama tally with the
admitted signatures of Md. Isa on different documents, is not quite convincing. Apart from the
fact that he is only a matriculate and does not appear to have received any training in the art of
handwriting at any recognised institution, the reasons given by him for his opinion are also not
convincing. At any rate, the learned Subordinate Judge was quite justified in not acting on the
basis of his evidence in face of the evidence of the expert (D.W. 10) examined on behalf of the
defendants. This D. W. 10 appears to be a well-trained man in the science of handwriting, as he
had taken training at the Forensic Science and Technology at Calcutta for two years and
thereafter he had taken a practical training of the science in the United Kingdom. He is also a
Fellow Member of Royal Microscopical Society, London. He has also given good reasons for
coming to the conclusion that the signatures appearing on the Beyananama did not tally with the
admitted signatures of Md. Isa on various documents. The reasons given by him are much more
convincing and I have also compared the disputed signatures of Md. Isa on the Beyananama with
those on the admitted documents with my naked eyes, of course, with the help of magnifying
glass, and found myself in agreement with the opinion of D.W. 10.

19. Thus, I find that the plaintiff has failed to prove that the disputed signatures of Md. Isa
appearing on the Beyananama were actually his signatures. Then the facts and circumstances
discussed above also render the genuineness of this Beyananama very doubtful and it is not
possible to act on it.

Point No. II

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20. The sale deed (Ext. A/1) said to have been executed by Md. Isa in favour of defendants 2 and
3 has been marked without any objection on behalf of the plaintiff. Indeed, its due execution has
been proved by the son of Md. Isa (D.W. 2) and D.W. 9. This Md. Isa, who died before the
evidence was taken up has also admitted about its execution and passing of consideration in his
written statement filed in the suit. There is nothing in the evidence adduced on behalf of the
plaintiff to show that the sale deed was without any consideration and even the plaintiff (P.W. 2)
has not stated that this sale deed was executed without any consideration. When the executant
admits about the execution and passing of the consideration, it is really very difficult to accept
the case of a stranger to the document, to wit the plaintiff, that this document was not executed
for consideration. In such circumstances, there appears no difficulty in holding that this sale deed
was duly executed by Md. Isa after receiving consideration money, as mentioned thereunder.

21. Now comes the question as to whether defendants 2 and 3 are bona fide purchasers without
notice of the said Beyananama.

22. It has been submitted that if the building was not in actual possession of the vendor and a
portion of it was admittedly in possession of the plaintiff, it was the duty of the purchasers to
make enquiries from the persons in possession including the plaintiff and that the purchasers are
bound by all the equities which the party in possession may have been in the property if they
failed to make any enquiry from them. It was further submitted that the possession of the
plaintiff over a portion of the building in question would be sufficient notice to the purchasers of
all the equitable interests including the interest arising out of a collateral agreement. It was
pointed out that in the present case it is the admitted position that the father of the minor
purchasers did not make any enquiry and so he shall be deemed to have purchased the building
subject to the equities which the plaintiff possessed in the property on the basis of his
Beyananama and in any event he cannot be called a bona fide purchaser without notice. In
support of this submission reliance was placed on the decisions in the case of Balchand Mahton
v. Bulaki Singh, AIR 1929 Pat 284, Ramkrishna Singh v. Mahadei Haluai, ILR 1965 Pat 596 :
(AIR 1965 Pat 467), and Basruddin Khan v. Gurudarshan Das, AIR 1970 Pat 304 in which the
principle of constructive notice has been applied for giving relief to the plaintiff. The principle of
constructive notice is incorporated in Illus. II of Section 3 of the T.P. Act which reads as follows:

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"Any person acquiring any immovable property or any share or interest in any such property
shall be deemed to have notice of the title, if any, of any person who is for the time being in
actual possession thereof."

23. These three decisions, which are of Division Bench, no doubt, support the broad contention
of the appellant, but the facts and circumstances of those cases are quite different from the facts
and circumstances of the present case. In all those cases the plaintiff was in exclusive occupation
of the land or building involved. In the present case the position is that there were and are six
more tenants in the house besides the plaintiff and presumably they are in occupation of identical
areas, as there is no evidence to indicate that the plaintiff was in occupation of a larger area than
the other tenants. Indeed both the plaintiff and D. W. 3 were paying the same rent of Rs. 10/- per
month. In such circumstances, it may well be said that the plaintiff was in occupation of l/7th
portion of the building which can be conveniently described as an insignificant portion of the
building.

24. All these decisions are based primarily on the doctrine laid down in the case of Daniels v.
Davison, (1809) 16 Ves 249. The limits up to which this doctrine can be extended has been
explained in a Full Bench decision of this Court in Hari Charan Kuar v. Kaula Rai, (1917) 2 Pat
U 513 : (AIR 1917 Pat 478) in which the following observation has been made :

"..........There appears to be no case in the books in which the Courts have been asked to apply
the doctrine of Daniels v. Davison, (1809-16 Ves 249) to a case like the one before us in which
the person who had the contract to purchase in his pocket was in possession not of the entire
property sold to another but only of a small portion of that property."

The Full Bench did not apply the doctrine laid down in the case of Daniels v. Davison English
decisions on the basis of which the aforesaid three decisions have been given, as the plaintiff was
in occupation of only a small portion of the property. In the case before the Full Bench the land
sold to purchasers was 9 bighas 10 kathas, whereas the plaintiff was in possession of only 3
bighas 15 kathas out of that land. This would mean that the Full Bench did not apply the
principle of those cases even when the plaintiff was in possession of a little over 1/3rd area of the
land sold. If that principle could not be applied in a case where the plaintiff was in possession of

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more than l/3rd of the property sold, it obviously cannot be applied in the present case where the
plaintiff was in possession of only l/7th of the property sold.

25. This view has been followed by a Division Bench of this Court in the case of Kesharmull
Agarwala v. Rajendra Prasad, 1968 BLJR 28. In this case it was observed as follows:

"......Here, on the admission of the plaintiff himself, there were three persons in occupation of the
disputed house. The plaintiff was occupying the shop portion at a monthly rental of Rs. 15/-. The
inner portion of the house and the rooms were in occupation of the owner, namely, defendant 1,
his mother and grandmother. Another portion of the house was also at that time in the occupation
of a doctor named Anand Karu Sarkar. Under such circumstances the purchaser was not bound to
make enquiry from every tenant in occupation of a portion of the house, especially when the
owner himself was occupying a portion and enquiry had been made from him."

The legal position regarding burden of proof was also explained by the Division Bench and it
was stated as follows: --

"......It is doubtless well settled that to defeat a suit for specific performance of contract the
burden initially lies on the subsequent purchaser to prove want of notice. But, as pointed out
in Ramchander Singh v. Bibi Asghari Begam and another this burden is somewhat light, and
even a mere denial may suffice. Moreover, when both parties have given evidence, the question
is ultimately one of appreciating the evidence, and any discussion about burden of proof
becomes somewhat academic."

This very principle has been followed by a learned single Judge of this Court in Rameshwar
Singh v. Hari Narayan Singh, AIR 1984 Pat 277 where Ashwani Kumar Sinha, J. has
summarised the law in this regard by stating as follows : --

"It is thus apparent that the contesting defendant pleaded want of knowledge of the plaintiff's
prior contract. Thus though the settled law is that the onus was upon the contesting defendant to
prove that he was a bona fide purchaser for value without notice of the prior contract yet in view
of the denial regarding want of knowledge of the plaintiffs prior contract by the defendants, the
onus shifted on the plaintiff. In this view of law the two Courts below, in my opinion, very

152 | P a g e
correctly threw the onus upon the plaintiff to prove the knowledge of prior contract on the
contesting defendant."

26. Thus, the principle, which emerges from these decisions is that the principle of constructive
notice, as incorporated in Illus. II of Section 3 of the T.P. Act and the doctrine as laid down in
Daniels v. Davison, (1809-16 Ves249) (supra) cannot be extended to a case in which the person
basing his claim on the basis of a prior agreement is in possession of only a small fraction of the
property which has been purchased by the purchasers and in such a case the purchasers cannot be
said to be bound to make enquiry about the previous contract from the plaintiff or any other
tenant in occupation of a portion of the house. In such an event the deeming clause of Illus. II
of Section 3 cannot be attracted at all and the Court cannot presume that the purchaser will have
the notice of the title, if any, of any person who is for the time being in actual possession of only
a small fraction of the property sold.

27. So, far the burden of proof regarding the plea of the purchasers being bona fide purchasers
without notice of the prior contract is concerned, it is well settled that to defeat a suit for specific
performance of contract, the burden Initially lies on the subsequent purchasers to prove want of
notice, but this burden is somewhat light and even a mere denial may suffice for shifting the
burden upon the plaintiff to prove that the purchasers had the knowledge about his prior contract
before he purchased the property. In any event, when both the parties have given evidence, the
question of burden loses its importance and the question is ultimately one of appreciating
evidence.

28. In view of the principles of law stated above, it cannot be said in the present case that
defendants 2 and 3 shall be deemed to have notice about the alleged agreement between the
plaintiff and Md. Isa as the plaintiff was in possession of only 1/7th of the building purchased by
the defendants. In any event, the initial burden of proof regarding want of knowledge of the
alleged prior agreement of the plaintiff has been discharged by D.W. 9 who is the father and
guardian of the purchasers by stating on oath that he had absolutely no knowledge about the said
agreement before he purchased the building in question from Md. Isa. Ordinarily one cannot
expect any corroboration of such a denial and, in face of this denial, it was for the plaintiff to
prove that in fact defendants 2 and 3 or their father had knowledge about his alleged agreement.

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The plaintiff (P.W. 2) himself is the solitary witness who has deposed on this point and he too
has made only a vague and general statement in his examination-in-chief that these defendants
and their father were aware of his agreement, but he has not explained as to how they could
know about it. In the absence of any statement regarding any circumstance from which he could
gather about their knowledge, it is difficult to accept his bald evidence in face of the denial of
D.W. 9. The mere fact that D.W. 9 was also a resident of the same locality is not such a
circumstance which alone can lead to the irresistible conclusion that he must be aware of the said
agreement, especially when the locality is a big one comprising of a large number of houses. In
such circumstances, the learned Subordinate Judge was quite justified in holding that defendants
2 and 3 and their father had no prior knowledge about the alleged agreement. When they had no
prior knowledge about the said agreement, they cannot be bound by it and the plaintiff cannot
enforce his agreement as against them, even if his agreement would have been a valid and
genuine document, because a bona fide purchaser for value without notice cannot be bound by
any prior agreement between his vendor and the plaintiff.

29. Thus, in any view of the matter, the plaintiff is not entitled to a decree for specific
performance of contract. He also cannot claim a refund of the consideration money of the
agreement, in view of the finding that his agreement is not genuine and valid.

30. For the reasons stated above, this appeal is dismissed with costs.

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 V. N. Sarin vs Major Ajit Kumar Poplai on 9 August, 1965

Equivalent citations: 1966 AIR 432, 1966 SCR (1) 349

JUDGMENT:

1. The Judgment of the Court was delivered by Gajendragadkar, C.J. The short question of law
which arises in this appeal is whether the partition of the coparcenary property among the
coparceners can be said to be "an acquisition by transfer" within the meaning of s. 14(6) of
the Delhi Rent Control Act, 1958 (Act No. 59 of 1958) (hereinafter called 'the Act'). This
question arises in this way. The premises in question are a part of a bungalow situate at Racquet
Court Road, Civil Lines, Delhi. The bungalow originally belonged to the joint Hindu family
consisting of respondent No. 2, Mr. B. S. Poplai and his two sons, respondent No. 1, Major Ajit
Kumar Poplai and Vinod Kumar Poplai. The three members of this undivided Hindu family
partitioned their coparcenary property on May 17, 1962, and as a result of the said partition, the
present premises fell to the share of respondent No. 1. The appellant V. N. Sarin had been
inducted into the premises as a tenant by respondent No. 2 before partition at a monthly rental of
Rs. 80. After respondent No. 1 got this property by partition, he applied to the Rent Controller
for the eviction of the appellant on the ground that he required the premises bona fide for his own
residence and that of his wife and children who are dependent on him. To this application, he
impleaded the appellant and respondent No.

2. The appellant contested the claim of respondent No. 1 of three grounds. He urged that
respondent No. 1 was not his landlord inasmuch as he was not aware of the partition and did not
know what it contained. He also urged that even if respondent No. 1 was his landlord, he did not
require the premises bona fide; and so, the requirements of s. 14(1)(e) of the Act were not
satisfied. The last contention raised by him was that if respondent No. 1 got the property in suit
by partition, in law it meant that he had acquired the premises by transfer within the meaning
of s. 14 (6) of the Act and the provisions of the said section make the present suit incompetent.

155 | P a g e
3. The Rent Controller held that respondent No. 1 was the exclusive owner of the premises in
suit by virtue of partition. As such, it was found that he was the landlord of the appellant. In
regard to the plea made by respondent No. 1 that he needed the premises bona fide as prescribed
by s. 14 (1) (e), the Rent Controller rejected the case of respondent No. 1. The point raised by the
appellant under s. 14(6) of the Act was not upheld on the ground that acquisition of the suit
premises by partition cannot be said to be acquisition by transfer within the meaning of the said
section. As a result of the finding recorded against respondent No. 1 under s. 14(1) (e) however,
his application for the appellant's eviction failed.

4. Against this decision, respondent No. 1 preferred an appeal to the Rent Control Tribunal,
Delhi. The said Tribunal agreed with the Rent Controller in holding that respondent No. 1 was
the landlord of the premises in suit and had not acquired the said premises by transfer. In regard
to the finding recorded by the, Rent Controller under s. 14(1) (e), the Rent Control Tribunal
came to a different conclusion. It held that respondent No.1 had established his case that he
needed the premises bona fide for his personal use as prescribed by the said provision. In the
result, the appeal preferred by respondent No. 1 was allowed and the eviction of the appellant
was ordered.

5. This decision was challenged by the appellant by preferring a second appeal before the Punjab
High Court. The High Court upheld the findings recorded by the Rent Control Tribunal on the
question of the status of respondent No. 1 as the landlord of the premises and on the plea made
by him that his claim for eviction of the appellant was justified under s. 14(1)(e). In fact, these
two findings could not be and were not challenged before the High Court which was dealing with
the matter in second appeal. The main contention which was raised before the High Court was in
regard to the construction of s. 14(6); and on this point, the High Court has agreed with the view
taken by the Rent Control Tribunal and has held that respondent No. 1 cannot be said to have
acquired the premises in suit by transfer within the meaning of the said section. It is against this
decree that the appellant has come to this Court by special leave. Mr. Purshottam for the
appellant argues that the view taken by the High Court about the construction of s. 14(6) is
erroneous in law. That is how the only point which arises for our decision is whether the partition
of the coparcenary property among the coparceners could be said to be an acquisition by transfer
under s. 14(6) of the Act.

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6. The Act was passed in 1958 to provide, inter alia, for the control of rents and evictions in
certain areas in the Union Territory of Delhi. This Act conforms to the usual pattern adopted by
rent control legislation in this country. Section 2(e) defines a "landlord" as meaning a person
who, for the time being, is receiving, or is entitled to receive, the rent of any premises, whether
on his own account or on account of or on' behalf of, or for the benefit of, any other person or as
a trustee, guardian or receiver for any other person or who would so receive the rent or be
entitled to receive the rent, if the premises were let to a tenant. It has been found by all the courts
below that respondent No. 1 is a landlord of the premises and this position has not been and
cannot be disputed in the appeal before us. Section 14 (1) of the Act provides for the protection
of tenants against eviction. It lays down that notwithstanding anything to the contrary contained
in any other law or contract, no order or decree for the recovery of possession of any premises
shall be made by any court or Controller in favour of the landlord against a tenant. Having thus
provided for general protection of tenants in respect of eviction, clauses (a) to (1) of the proviso
to the said section lay down that the Controller may, on an application made to him in the
prescribed manner, make an order for the recovery of possession of the premises on one or more
of the grounds covered by the said clauses; clause (e) of s. 14(1) is one of such clauses and it
refers to cases where the premises let for, residential purposes are required bona fide by the
landlord for occupation as therein described. The Rent Control Tribunal and the High Court have
recorded a finding against the appellant and in favour of respondent No. 1 on this point and this
finding also has not been and cannot be challenged before us.

7. That takes us to s. 14(6). It provides that where a landlord has acquired any premises by
transfer, no application for the recovery of possession of such premises shall lie under sub-
section (1) on the ground specified in clause (e) of the proviso thereto, unless a period of five
years has elapsed from the date of the acquisition. It is obvious that if this clause applies to the
claim made by respondent No. 1 for evicting the appellant, his application would be barred,
because a period of five years had not elapsed from the date of the acquisition when the present
application was made. The High Court has, however, held that where property originally
belonging to an undivided Hindu family is allotted to the share of one of the coparceners as a
result of partition, it cannot be said that the said property has been acquired by such person by

157 | P a g e
transfer; and so, s. 14(6) cannot be invoked by the appellant. The question which we have to
decide in the present appeal is whether this view of the High Court is right.

8. Before construing s. 14(6), it may be permissible to enquire what may be the policy
underlying the section and the object intended to be achieved by it. It seems plain that the object
which this provision is intended to achieve is to prevent transfers by landlords as a device to
enable the purchasers to evict the tenants from the premises let out to them. If a landlord was
unable to make out a case for evicting his tenant under s. 14 (1) (e), it was not unlikely that he
may think of transferring the premises to a purchaser who would be able to make out such a case
on his own behalf; and the legislature thought that if such a course was allowed to he adopted, it
would defeat the purpose of s. 14(1). In other words, where the right to evict a tenant could not
be claimed by a landlord under s. 14 (1) (e), the legislature thought that the landlord should not
be permitted to create such a right by adopting the device of transferring the premises to a
purchaser who may be able to Prove his own individual case under s. 14(1)

(e). It is possible that this provision may, in some cases, work hardship, because if a transfer is
made by a landlord who could have proved his case under s. 14 ( 1 ) (e), the transferee would be
precluded from making a claim for the eviction of the tenant within five years even. though he,
in his turn, would also have proved his case under s. 14 (1)

(e). Apparently, the legislature thought that the possible mischief which may be caused to the
tenants by transfers made by landlords to circumvent the provisions of s. 14 (1)

(e) required that an unqualified and absolute provision should be made as prescribed by s. 14(6).
That, in our opinion, appears to be the object intended to be achieved by this provision and the
policy underlying it. Mr. Purshottam, however, contends that when an item of property
belonging to the undivided Hindu family is allotted to the share of one of the coparceners on
partition, such allotment in substance amounts to the transfer of the said property to the said
person and it is, therefore, an acquisition of the Said property by transfer. Prima facie, it is not
easy to accept this contention. Community of interest and unity of possession are the essential
attributes of coparcenary property; and so, the true effect of partition is that each coparcener gets
a specific property in lieu of his undivided right in respect of the totality of the property of the

158 | P a g e
family. In other words, what happens at a partition is that in lieu of the property allotted to
individual coparceners they, in substance, renounce their right in respect of the other properties;
they get exclusive title to the properties allotted to them and as a consequence, they renounce
their undefined right in respect of the rest of the property. The process of partition, therefore,
involves the transfer of joint enjoyment of the properties by all the coparceners into an
enjoyment in severalty by them of the respective properties allotted to their shares. Having
regard to this basic character of joint Hindu family property, it cannot be denied that each
coparcener has an antecedent title to the said property, though its extent is not determined until
partition takes place. That being so, partition really means that whereas initially all the
coparceners have subsisting title to the totality of the property of the family jointly, that joint title
is by partition transformed into separate titles of the individual coparceners in respect of several
items of properties allotted to them respectively. If that be the true nature of partition, it would
not be easy to uphold the broad contention raised by Mr. Purshottam that Partition of an
undivided Hindu family property must necessarily mean transfer of the property to the individual
coparceners. As was observed by the Privy Council in Girja Bal v. Sadashiv Dhunadiraj and
Others.(1) "Partition does not give him (a coparcener) a title or create a title in him; it only
enables him to obtain what is his own in a definite and specific form for purposes of disposition
independent of the wishes of his former co- sharers".

8. Mr. Purshottam, however, strongly relies on the fact that there is preponderance of judicial
authority in favour of the view that a partition is a transfer for the purpose of s. 53 of the Transfer
of Property Act. It will be recalled that the decision of the question as to whether a partition
under Hindu Law is a transfer within the meaning of s. 53, naturally depends upon the definition
of the word "transfer" prescribed by s. 5 of the said Act. Section 5 provides that in the following
sections, "transfer of property" means an act by which a living person conveys property, in
present or in future. to one or more other living persons, or to himself, or to (1) 43 I.A. 151 at p.
161.himself and one or more other living persons. It must be conceded that in a number of cases,
the High Courts in India have held that partition amounts to a transfer within the meaning of s.
53, vide, for instance, Soniram Raghushet & Others v. Dwarkabai Shridharshet & Another
A.I.R. 1951 Bom. 94. , and the cases cited therein. On the other hand, there are some decisions
which have taken a contrary view, vide Naramsetti Venkatappala Narasimhalu and Anr. v.

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Naramsetti Someswara Rao and Anr., A.I.R 1943 Mad. 505. and Gutta Radhakrishnayya v.
Gutta Sarasamma A.I.R. 1951 Mad. 213 .

9. In this connection, Mr. Purshottam has also relied on the fact that under s. 17 ( 1 ) (b) of the
Indian Registration Act, a deed of partition is held to be a non-testamentary instrument which
purports to create a right, title or interest in respect of the property covered by it, and his
argument is that if for the purpose of s. 17 (1) (b) of the Registration Act as well as for the
purpose of s. 53 of the Transfer of Property Act, partition is held to be a transfer of property,
there is no reason why partition should not be held to be an acquisition of property by transfer
within the meaning of s. 14(6) of the Act.

10. In dealing with the present appeal, we propose to confine our decision to the narrow question
which arises before us and that relates to the construction of s. 14(6). What s. 14(6) provides is
that the purchaser should acquire the premises by transfer and that necessarily assumes that the
title to the property which the purchaser acquires by transfer did not vest in him prior to such
transfer. Having regard to the object intended to be achieved by this provision, we are not
inclined to hold that a person who acquired property by partition can fall within the scope of its
provision even though the property which he acquired by partition did in a sense belong to him
before such transfer. Where a property belongs to an undivided Hindu family and on partition it
falls to the share of one of the coparceners of the family, there is no doubt a change of the
landlord of the said premises, but the said change is not of the same character as the change
which is effected by transfer of premises to which s. 14(6) refers. In regard to cases falling under
s. 14(6), a person who had no title to the premises and in that sense, was a stranger, becomes a
land- lord by virtue of the transfer. In regard to a partition, the position is entirely different.
When the appellant was inducted into the premises, the premises belonged to the undivided
Hindu family consisting of respondent No. 1, his father and his brother. After partition, instead
of the alone bad become landlord of the premises. We are satisfied that it would be unreasonable
to hold that allotment of one parcel of property belonging to an undivided Hindu family to an
individual coparcener as a result of partition is an acquisition of the said property by transfer by
the said coparcener within the meaning of s. 14(6). In our opinion, the High Court was right in
coming to the conclusion that s. 14 (6) did not create a bar against the institution of the
application by respondent No. 1 for evicting the appellant. In this connection, we may refer to a

160 | P a g e
recent decision of this Court in the Commissioner of Income-tax, Gujarat v. Keshavlal
Lallubhai Patel. 1965 2 S.C.R. 100. In that case, the respondent Keshavlal had thrown all
himself-acquired property into the common hotchpotch of the Hindu undivided family which
consisted of himself, his wife, a major son and a minor son. Thereafter, an oral partition took
place between the members of the said family and properties were transferred in accordance with
it in the names of the several members. The question which arose for the decision of this Court
was whether there was an indirect transfer of the properties allotted to the wife and minor son in
the partition within the meaning of s. 16 (3) (a) (iii) and (iv) of the Indian Income-tax Act. 1922.
This Court held that the oral partition in question was not a transfer in the strict sense and should
not, therefore, be said to attract the provisions of s. 1 6 (3 )(a) (iii) and (iv) of the said Act. This
decision shows that having regard to the context of the provision of the Income-tax Act with
which the Court was dealing it was thought that a partition is not a transfer. Considerations
which weighed with the Court in determining the, true effect of partition in the light of the
provisions of the said section, apply with equal force to the interpretation of s. 14(6) of the Act.

11.In the result, the appeal fails and is dismissed with costs. Before we part with this appeal, we
would like to add that on the appellant undertaking to vacate the suit premises within three
months from the date of this decision, Mr. Sastri for respondent No. 1 has fairly agreed not to
execute the decree during the said period.

Appeal dismissed.

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 Kenneth Solomon vs Dan Singh Bawa

AIR 1986 Delhi 1, 28 (1985) DLT 229, 1985 (9) DRJ 292, 1985 RLR 438

JUDGMENT G.C. Jain, J.

(1) Dr. (Mrs.) C.L. Sury was lessee of house No. 72, Baber Road, New Delhi under the
respondent Dan Singh Bawa. The agreed rent was Rs. 37.82 per month. She died in October,
1967.

(2) On April 22, 1968 the landlord brought an application against the present appellant Kenneth
Solomon for recovery of possession of the tenancy premises. The eviction was claimed under
proviso (b) to Sub Section (1) of Section 14 of the Delhi Rent Control Act, 1958 (for short 'the
Act) on the allegations that the tenant had left no heir and had in her life time parted with the
possession of the premises in dispute in favor of the appellant without the written consent of the
landlord.

(3) The appellant defended the claim. The plea raised was that that contractual tenancy in favor
of Dr. Sury had not been determined. The tenancy rights devolved on him and another person
under a will dated March 31, 1957. In case it was held by the court that he could not inherit the
tenancy rights under the will the same devolved on him as an heir being Dr. Sury's nearest
kinsman.

(4) The Additional Rent Controller by his order dated December 18, 1973 came to the conclusion
that the tenancy rights had not been bequeathed by Dr. Sury under the will in question. The
appellant who was a nephew of Dr. Sury inherited those rights as an heir and therefore there was
no parting with possession by the tenant. With these findings he dismissed the eviction petition.
This finding was, however, reversed in appeal by the learned Rent Control Tribunal. It was held
that the tenant had bequeathed the tenancy rights in favor of the appellant under the will which
act amounted to parting with possession of the premises. Consequently an order for recovery of
possession was granted in favor of the respondent against the appellant on October 28, 1976.
Feeling aggrieved the appellant has filed the present appeal.

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(5) Mr. Vohra, learned counsel appearing For the appellant has raised two main questions: (1)
that the tenancy rights Were not disposed under the will and (2) that the act of bequeathing the
tenancy rights by making a will would not amount to parting with possession of the premises
within the meaning of the provisions contained in proviso (b).

(6) A will has to be construed like any other document. The duty of the court is to ascertain the
testator's intention from the words used in the will. The will EX.RW 1/1, no doubt, makes no
specific mention of the tenancy rights. It however has a residuary clause which reads ;--
"5.Ihereby bequeath, give and devise all my moveable and immoveable properties, whatsoever,
howsoever, and where-so-ever situate at the time of my death including all the monies which
may be left over after paying my Funeral and Monument Expenses and for my Dogs expenses to
be equally divided by my Trustees among my two nephews :-- 1. Kenneth Solomon-son of John
Solomon--at present residing at. Chabiganj, Kashmere Gate) Delhi. 2. Pannel Richard Solomon-
son of John Solomon-at present residing at Chabiganj, Kashmere Gate, Delhi."

(7) A lease, as defined by Section 105 of the Transfer of Property Act, is a transfer of a right to
enjoy immoveable property turn a term or in perpetuity in consideration of a price paid or
promised or services or other things of Value to be rendered periodically or on specified
occasions to the transferor- by the transferee. The right of enjoyment contemplated by this
Section is an interest in the immoveable property. The agreement of lease confers on the lessee
the right to possess the immoveable property subject matter of the lease. It being an interest in
the immoveable property would be covered under the expression "all my moveable and
immoveable properties" used in the above quoted residuary clause of the will. The word
'Property' includes all legal rights of a person except his personal rights which constitutes his
status or personal condition. The tenancy rights would definitely be included in the words "all
my moveable and immoveable properties". have examined the will carefully and I agree with the
learned Tribunal that the will does not indicate any intention of the testator to exclude the
tenancy rights. On the other hand the residuary clause referred to above shows that the intention
was to give all her moveable and immoveable properties except the properties for which a
specific provision was made. The tenancy rights, therefore devolved on she appellant under the
will.

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(8) Now I turn to examine the next question. The question for determination is whether the act of
disposing the tenancy rights by making a will amounts to 'parting with possession' and entitles
the landlord to claim eviction under proviso (b) to Sub-Section (1) of Section 14 of the Act.
These provisions read:- "14.Protection of tenant against eviction- (1) Notwithstanding anything
to the contrary contained in any other law or contract, no order or decree for the recovery of
possession of any premises shall be made by any court or Controller in favor of the landlord
against a tenant : Provided that the Controller may, on an application made to him in the
prescribed manner, make an order for the recovery of possession of the premises on one or more
of the following grounds only. namely- (b) that the tenant has, on or after the 9th day of June,
1952 Sub-let, assigned or otherwise parted with the possession of the whole or any part of the
premises without obtaining the consent in writing of the landlord. "

(9) The case set up by the landlord is that the tenant had parted with the possession of the
tenancy premises. The expression "otherwise parted with the possession" has not been defined in
the Act. "Parted with" according to Chambers 20th Century Dictionary, New Edition, inter alia,
means 'to relinquish'. Stroud's Judicial Dictionary 4th ed. explains the term 'part with' in these
words : "(2)A lessee's covenant not to "part with the possession of the demised premises or any
part thereof" is broken only if the lessee entirely excludes himself from the legal possession or
part of the premises (Sterling v. Abrahams (1931) 1 Ch. 470)."

(10) The expression "parted with possession", therefore, means giving the legal possession
acquired under the lease to a person who was not a party to the lease agreement. Undoubtedly,
there must be vesting of possession of the tenancy premises by the tenant in another person by
divesting himself not only of physical, possession but also of a right to possession.

(11) "WILT" as defined under Section 2(h) of the Indian Succession Act, means the legal
declaration of the intention of the testator with respect to his property which he desires to be
carried into effect after his death. One characteristic of a will as distinguished from other kinds
of instruments disposing of property is its revocable nature. It is ambulatory until the death of the
testator. It is dependent upon the testator's death for its vigour and effect. Till that event it is only
an expression of intention to deal with the property in a particular manner. But the moment the
testator dies, it has the effect of vesting the property subject matter of the will in the devisee. At

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that point of time it would have the same effect as a transfer of possession by sale or mortgage.
The process of parting with possession thus starts on the execution of the will but matures only
on the death of the testator. The tenancy rights disposed under a will would vest in the devisee
immediately on the death of the testator. This vesting, in my judgment, would amount to parting
with possession within the meaning of the provisions contained in proviso (b).

(12) In Nathud & others, v. Devi Singh &Another, , a Division Bench after examining the
provisions contained in proviso (c) to Sub-section (1) of Section 13 of the Delhi and Ajmer Rent
Control Act (38 of 1952), which provisions were similar to the provisions contained in proviso
(b) to Sub-Section (1) of Section 14 of the Act, held :- "WHAT is hit by proviso (c) is a
volitional transfer by a tenant without the consent of the landlord. If on the death of a person
holding contractual tenancy the suit premises come into the hands of the heirs of the tenant that
is not an intentional or volitional transfer and such parting with the possession would not be
affected. The case of parting with possession by will is, however, clearly envisaged in proviso (c)
to Sub-section (1) of Section 13."

The Division Bench had relied on an earlier D.B. decision in Ram Dass Vs. Roopchand
F.A.'No.119-D of 1960 decided on September 12, 1964.

(13) Section 15(1) of the Bombay Rents, Hotel and Lodging House Rates Control Act (57 of
1947) prohibits the tenant to sublet the whole or any part of the premises let to him or transfer in
any other manner his interest therein. The contravention of these terms invites the penalty of
eviction. Examining these terms a Division Bench of the Bombay High Court in Dr. Anant
Trimbak Sabnis v. Vasant Pratdp Pandit, held :- "IT is true that the bequest becomes effective
only after the death of the testator and is liable to be revoked at any time. This by itself however,
cannot make it anything but transfer. Even the restricted concept of "transfer" inter vivos
in Section 5 of the T.P. Act contemplated its becoming effective at some future date in a given
case. Bequest does result in the passing of the property from the testator to the legatee. It is no
doubt different in its nature from the sale, mortgage, lease or gift. It is nonce the-less, a transfer
in its generic sense."

These decisions fully support my view.

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(14) Relying on the definition of expression ''transfer of property" given in Section 5 of the
Transfer of Property Act and the decision in Raja Surendra Vikram Singh Vs. Rani Munia
Kunwar and Another, Air 1944 Oudh 65 and Lala Devi Doss v. Panna Lal Air 1959 J.&.K 62.
Mr. Vohra contended that making of a will would not amount to transfer.

(15) "TRANSFER of property", according to the definition given in Section 5 of the Transfer of
Property Act, means an act by which a living person conveys property in present or in future to
one or more other living persons or to himself, and one or more other living persons. True, these
words exclude transfer by will, for a will operates after the death of the testator. The act of
making a will in itself would not attract the provisions contained in proviso (b). No landlord can
claim eviction, during the life time of the tenant, on the ground that the tenant had made a will
disposing the tenancy rights. It is for the simple reason that it can be revoked at any time. By
itself it does not vest the legal possession in the devisee. However, there is no escape from the
conclusion that by his voluntary act the tenant parts with the possession of the tenancy premises
though from the date of his death in case the will remains unrevoked. Dr. Sury by her act of
bequeathing the tenancy rights by means of the will in favor of the petitioner and his brother had
parted with possession within the meaning of proviso (b). The landlord was, therefore, entitled to
claim eviction.

(16) In Raja Surendra Vikram Singh v. Rani Munia Kunwar (supra) the court examined the
meaning of the word 'transfer' under the Transfer of Property Act. The question whether
disposing of the tenancy rights by a will would amount to transfer or parting with possession
under the rent Acts was not involved in that case. Similarly this question was not considered by
the Full Bench of Jammu & Kashmir High Court in Kala Devi Dass v. Panna Lal (supra).

(17) Mr. Vohra also relied on a single bench decision of this court in The Vaish Cooperative
Adarsh Bank Ltd. Delhi v. M/s. Suraj Balram Sawhney and sons and Anr , 1973 Rcr 217. In that
case a cooperative society registered under the Bombay Cooperative Societies Act was the
tenant. It stood dissolved. On the same day a new society came into existence and the new
society was in possession of the tenancy premises when the eviction was claimed. It was held
that it was not a case of subletting or parting with possession. The reason given in support of this
decision is that it was the tenant's overt act of subletting assignment or parting with possession

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without the consent in writing of the landlord which gives a cause of action to the landlord to
move an application for an order of possession against the tenant or his assignee or both The
committing of this overt act pre-supposes the existence of the person whose act gives the cause
of action. If the effect of law was that the tenant ceased to exist simultaneously with the coming
into existence of the new society, it follows that the tenant was not in a position nor had a legal
capacity to do something which may be called the overt act which in turn gives rise to the cause
of action to the landlord to file an application to recover possession. This is, however, not the
case here. Here the tenant's overt act consisted in her making the will which was a voluntary act.

(18) It was also contended by the learned counsel for the appellant that the respondent in the
eviction petition had pleaded that the tenant had parted with the possession of the premises in her
life time and cannot now be allowed to say that the parting with possession was on the date of
her death. The respondent, argued the learned counsel, cannot be allowed to set up a new case.
This submission has no merit.

(19) In para 16 of the petition it was averred that the present appellant was a person to whom the
possession of the tenancy premises had been parted with by the deceased tenant without the
written consent of the landlord. In para 18 (1) it was alleged that the tenant in her life time parted
with possession of the tenancy premises in dispute in favor of the present appellant. No doubt,
the averment was that the possession of the tenancy premises was parted with in her life time.
That, however, would not make much difference, because the process of parting with possession
started in her life time when she executed the will declaring her intention to dispose the tenancy
rights in favor of the appellant. The act, of course, matured on her death. But the fact remains
that the process started in her life time. It cannot be said that the respondent was setting a new
case.

(20) In conclusion, I find no merit in the appeal and dismiss the same. The appellant, however, is
allowed three months‟ time to vacate the premises. Parties are left to bear their own costs.

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167 | P a g e
 Mohar Singh (Dead By Lrs.) vs Devi Charan & Others

AIR 1988 SCR Supl. (1) 255

2. The first-respondent was a tenant of two adjacent shops, under a single lease, obtained from
two co-owners Shri Jado Ram and Asha Ram who had, respectively 3/8th and 5/8th shares in the
property. Appellant, Mohar Singh became the transferee of the 3/8th share of Jadoram. Similarly,
Asha Ram's 5/8th interest came to be transferred, through an intermediary alienation, to a certain
Gyan Chand. Pursuant to a decree in a civil suit for partition between Gyan Chand and the
appellant, the co-ownership came to an end and towards his share appellant was allotted, and
became the exclusive owner of, one of the shops. That is the subject- matter of the present
proceedings.

3. Appellant instituted proceedings for eviction against the First respondent under Section 21 of
U.P. Act XIII of 1972 before the prescribed authority on the ground of his own bonafide need.
The prescribed-authority ordered release of the premises and made an order granting possession.
The appeal preferred by the First-respondent before the District Judge, Muzaffarnagar was
dismissed. First-respondent then moved the High Court in Writ No. 2280 of 1979.

The findings as to the bona fides and reasonableness of the requirement of the appellant, stand
concluded by the concurrent findings of the statutory authorities. Indeed that was not also the
ground on which the order of eviction was assailed before the High Court in the writ petition

4. Before the High Court what was urged by the First- respondent, and accepted by the High
Court, was the contention that the severance of the reversion and assignment of that part of the
reversion in respect of the suit shop in favour of the appellant did not clothe the appellant with
the right to seek eviction without the other lessor joining in the action; and that in claiming
possession of a part of the subject matter of the original- lease the appellant was seeking to split
the integrity and unity of the tenancy, which according to the First- respondent, was
impermissible in law.

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The High Court does not appear to have considered the effect of the partition decree between
erstwhile co-owners and of the appellant, consequently, having become the exclusive owner of
one of the shops. The reasoning that appears to have commended itself to the High Court in
setting-aside the order made by the Courts-below granting possession, is somewhat on these
lines:

".... But unless such a situation has been created with the consent of all of them, the effect of
transfer of a portion of the accommodation would be that in place of one lessor would be
substituted two lessors, even though of defined portions of the accommodation let out to the
lessee. It cannot be denied that one of the two joint lessors cannot institute a suit for ejectment or
apply for permission to file such a suit in respect of a portion of the accommodation."

"........ In other words even now as a result of transfer a part of the building under tenancy the
splitting up of the tenancy cannot be permitted unless the tenant has agreed to it. On this view of
the matter, the impugned orders are liable to be quashed."

5. It is trite proposition that a land-lord cannot split the unity and integrity of the tenancy and
recover possession of a part of the demised premises from the tenant. But Section 109 of the
Transfer of Property Act provides a statutory exception to this rule and enables an assignee of a
part of the reversion to exercise all the rights of the landlord in respect of the portion respecting
which the reversion is so assigned subject, of course, to the other covenant running with the land.
This is the true effect of the words 'shall possess all the rights ...... of the lessor as to the property
or part transferred ......' occurring in Section 109 of the T.P. Act. There is no need for a
consensual attornment. The attornment is brought about by operation of law. The limitation on
the right of the landlord against splitting-up of the integrity of the tenancy, inhering in the
inhibitions of his own contract, does not visit the assignee of the part of the reversion. There is
no need for the consent of the tenant for the severance of the reversion and the assignment of the
part so severed. This proposition is too well-settled to require any further elucidation or
reiteration. Suffice it to refer to the succinct statement of the law by Wallis, CJ in Kannyan v.
Alikutty, AIR 1920 Madras 838 (FB) (at 840).

"..... A lessor cannot give a tenant notice to quit a part of the holding only and then sue to eject
him from such part only, as pointed out quite recently by the Privy Council in Harihar Banerji v.

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Ramasashi Roy, AIR 1918 PC 102. Consequently, if the suit is brought by the original lessor the
answer to the question referred to us must be in the negative because such a suit does not lie at
all. Other considerations, however, arise, where, as in the present case, the original lessor has
parted in whole or in part with the reversion in part of the demised premises. Under the general
law such an assignment effects a severance, and entitles the assignee on the expiry of the term to
eject the tenant from the land covered by the assignment."

6. Shri Uma Dutta, learned counsel for the respondent-

tenant, however, relied on the pronouncement of this Court in Badri Narain Jha and Ors. v.
Rameshwar Dayal Singh and Ors., [1951] SCR 153 (159) to support his contention that
severance and assignment of a part of the reversion would not affect the integrity of the lease.
We are afraid, reliance on this case is somewhat misplaced. This was a converse case where this
Court considered the effect of splitting-up of the interest of the lessees, inter-se. In that context,
Mahajan, J said:

".... An inter-se partition of the mokarrari interest amongst the mokarraridars as alleged by the
plaintiffs could not affect their liability qua the lessor for the payment of the whole rent, as
several tenants of a tenancy in law constitute but a single tenant, and qua the landlord they
constitute one person, each constituent part of which possesses certain common rights in the
whole and is liable to discharge common obligations in its entirety .........."

"There is a privity of the estate between the tenant and the landlord in the whole of the leasehold
and he is liable for all the covenants running with the land. In law, therefore, an inter-se partition
of the makarrari interest could not affect the integrity of the lease ......"

This is an altogether different proposition.

7. The next contention of Shri Uma Datta is that, at all events, what flows from a 'transfer'
undr section 5 read with Section 109 of T.P. Act cannot be predicated of a partition as partition is
no 'transfer'. It is true that a partition is not actually a transfer of property but would only signify
the surrender of a portion of a joint right in exchange for a similar right from the other co-sharer
or co- sharers. However, some decisions of the High Courts tend to the view that even a case of

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partition is covered by Section 109 and that, in any event, even if the section does not in terms
apply the principle of the section is applicable as embodying a rule of justice, equity and good
conscience. We need not go into this question in this case. Suffice it to say that the same High
Court itself, from whose decision this present appeal arises, in Ram Chandra Singh v. Ram Saran
& Ors., AIR 1978 Allahabad 173 has taken the view that section 109 of T.P. Act is attracted to
the case of partition also. That was a decision which the learned judge in the present case should
have considered himself bound by, unless there was a pronouncement of a larger bench to the
contrary or unless the learned judge himself differed from the earlier view in which event the
matter had to go before a Division Bench.

The correctness of the decision in Ram Chandra Singh's case was not assailed before us and,
therefore, we do not feel called upon to pronounce on it. We should, we think apply the same
rule to this case. Several other High Courts have also taken this view, though, however, some
decisions have been content to rest the conclusion on the general principle underlying Section
109, T.P. Act, as a rule of justice, equity and good conscience.

8. In the result, this appeal is allowed, the order of the High Court set-aside and that of the III
Additional District Judge, Mazaffarnagar in Rent Control Appeal No. 48 of 1978 restored. In the
circumstances of this case, there will be no order as to costs.

Appeal allowed.
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 N. Ramaiah vs Nagaraj S. And Another

AIR 2001 Kant 395

JUDGMENT R.V. Raveendran, J.

1. Feeling aggrieved by the rejection of his application for impleading (I.A. No. VIII) in Probate
C.P. No. 8 of 1998 pending on the file of this Court, the appellant has filed this appeal.

2. The appellant (N. Ramaiah) is the brother of one Anjanamma. The said Anjanamma was the
widow, and the respondent herein (S. Nagaraj) is the nephew (brother's son), of one Muni
Narayanappa. The respondent herein (S. Nagaraj) filed Probate C.P. No. 8 of 1998 for grant of
letters of administration in regard to a Will dated 11-1-1998 said to have been executed by the
Muni Narayanappa. The said Will was contested by Anjanamma, widow of Muni Narayanappa,
inter alia on the grounds that the said Will was a got up document, and that she had succeeded to
the properties of Muni Narayanappa as his sole legal heir.

3. In the said proceedings, the said S. Nagaraj filed I.A. No. I on 16-3-1998 seeking a temporary
injunction to restrain Anjanamma from alienating/encumbering the properties, or withdrawing
the amounts from the Banks, mentioned in the Schedule therein on the ground that the said
properties were bequeathed to him under the Will dated 11-1-1998 by Muni Narayanappa. Item
'A' of the Schedule to the said application (I.A. No. I) is land and building in Khata No. 280/6-
4B, Hennur, Bangalore with the running business of Cauvery Service Station. Item 'B' in the
Schedule was the house in the occupation of Anjanamma and the building in the occupation of
Sitaram Agencies. Item 'C' related to Bank balances/deposits. The learned Single Judge made an
order on the said application on 18-6-1998 directing the respondent therein (Anjanamma) to
maintain status quo in regard to the properties until further orders.

4. Subsequently, the said Anjanamma died on 11-12-1998 and the appellant herein filed an
application (I.A. No. VIII) for impleading himself as the respondent in Probate C.P. No. 8 of
1998 in place of the deceased Anjanamma, by claiming to be the legatee under the registered
Will dated 15-9-1998 of the said Anjanamma. He claimed that Anjanamma had bequeathed her
properties described in the Schedule to her Will dated 15-9-1998 to him and his children and

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therefore he is one of the co-owners of the properties which were the subject-matter of Probate
C.P. No. 8 of 1998. Schedule 'A' to the said Will dated 15-9-1998 relates to property bearing Sy.
No. 6/4B measuring 1 acre in Hennur Road, Bangalore with a residential house and a petrol bunk
by name Cauvery Service Station with all machineries, etc. Schedules 'B' and 'C' relate to
amounts in Bank accounts and deposits.

5. It is stated that the property described in Schedule 'A' in the alleged Will of Anjanamma is the
same as the properties described as Items A and B in the Schedule to I.A. No. I in Probate C.P.
No. 8 of 1998, which was the subject-matter of the order of status quo.

6. The said application for impleading was resisted by S. Nagaraj. The learned Single Judge,
accepting the objections, has dismissed the application for impleading, holding that the Will
dated 15-9-1998 was executed by Anjanamma, in breach and defiance of the order of status quo
and therefore non est and of no legal consequence and will have to be ignored; and that the
appellant who based his right on such Will of Anjanamma, had no locus standi to apply for
impleading and was not entitled to come on record and contest the proceedings for letters of
administration filed by the respondent, in regard to the Will of Muni Narayanappa. The relevant
portion of the order of the learned Single Judge is extracted below for ready reference.-

"4. Dealing with the objection regarding the execution of the alleged Will on 15-9-1998 during
the pendency of the prohibitory order passed by this Court, applicant's learned Counsel
contended that the status quo order only restricted alienations and it is his contention therefore
that the order in question does not come in the way of the parties executing documents which is
different from alienation. To my mind, this is virtually legal hairsplitting; when a Court passes an
order directing the parties to maintain status quo, the order is a blanket prohibitory order
whereunder the parties would be precluded not only from effecting alienations or changes but
more importantly by necessary implication from doing any acts whereby the situation vis-a-vis
that property gets altered. It would be downright ridiculous to contend that the order only limits
physical alienation because it would mean that a party can completely alter the situation by
executing documents which would create rights in third parties and can still contend that merely
because there is no physical alienation or change that it is within the framework of the order.
When a Court orders the maintenance of status quo, it necessarily implies a prohibition on the

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creation of new right, title or interest through the execution of any documents. If the need arises,
it is open to the party to apply to the Court either for vacating or modifying the order or
obtaining the sanction of the Court for doing any of the acts which the party desires to undertake.
But in my considered view, the execution of a document by a party to a proceeding in rank
defiance of an interim order cannot under any circumstances be construed as being outside the
ambit and scope of that order. It only goes without saying that such a document even if executed
would be wholly non est because no right, title or interest of any type can flow from a document
executed in defiance of a prohibitory order of a Court because that document is virtually
rendered invalid. This to my mind is the essence of the issue that falls for determination before
this Court".

(emphasis supplied)

7. Feeling aggrieved, the applicant in I.A. No. VIII in Probate C.P. No. 8 of 1998, has filed this
appeal contending that an order of status quo in regard to a property did not bar the execution of
a Will bequeathing such property, nor affected the validity of the bequest made under such a
Will; and that on the death of Anjanamma, he ought to have been permitted to come on record to
contest the alleged Will of Muni Narayanappa.

8. On the other hand, learned Counsel for the respondent supported the order of the learned
Single Judge, by putting forth the following contentions:

(i) The learned Single Judge had directed Anjanamma to maintain status quo in regard to the
properties; that the said order was passed on an application filed by the petitioner in Probate C.P.
No. 8 of 1998, seeking a direction to Anjanamma that she should not alienate or encumber the
properties mentioned in the Schedule to the said application. The order of status quo would
therefore mean that the Court had barred her from transferring or alienating the property in any
manner. Section 5 of the Transfer of Property Act, 1882 defines 'transfer of property' as an act by
which a living person conveys property, in present or in future, to one or more other living
persons. Having regard to the said definition, a bequest under a Will is nothing but a 'transfer of
property in future'. By executing a Will dated 15-9-1998 bequeathing the property in favour of
the appellant and his children, Anjanamma effected a future transfer of the property, thereby

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violating the order of status quo. Therefore her Will, as also the bequest of the property
thereunder, are invalid.

(ii) Section 59 of the Indian Succession Act, 1925 enumerates the persons capable of making
Wills. Explanation 1 thereto makes it clear that a married woman (who is of sound mind, not
being a minor), may dispose of by Will, any property which she could alienate by her own act
during her life. Section 30 of the Hindu Succession Act, 1956 provides that any Hindu may
dispose of by Will or other testamentary disposition, any property, which is capable of being so
disposed of by him in accordance with the provisions of the Indian Succession Act, 1925 or any
other law for the time being in force and applicable to Hindus. A combined reading of Section
59 of the Indian Succession Act and Section 30of the Hindu Succession Act shows that
Anjanamma could dispose of by Will, only such property, which she could have alienated by her
own act during her lifetime. On 15-9-1998 when the Will was executed, the order of status quo
was in force which prohibited her from transferring the property and therefore she could not have
transferred the property on 15-9-1998; and what could not be transferred by her on 15-9-1998 by
her own act could not be disposed of under a Will on that date. Therefore the Will and bequest
are invalid.

9. One Suguna has filed I.A. No. IV for impleading, in this appeal contending that she is the
adopted daughter of Muni Narayanappa and the Will dated 15-9-1998 put forth by the appellant
was not executed by Anjanamma and is a got up document; and that she has filed a suit for
partition against Anjanamma in O.S. No. 2817 of 1998. It is not necessary to consider the claims
of Suguna in this appeal. If she has any grievance she can get herself impleaded in Probate C.P.
No. 8 of 1998 or independently challenge the Will dated 15-9-1998. Hence, I.A. No. IV for
impleading has no merit and is rejected.

10. The rival contentions give rise to the following points for consideration:

(i) whether a bequest of a property under a Will is a transfer of the property;

(ii) whether a direction to a party to maintain status quo in regard to a property, prohibits him
from making a testamentary disposition; and whether a Will made during the operation of an

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order of status quo regarding a property, is void and non est insofar as the bequest relating to
such property.

Re: Point (i):

11. Transfer of Property Act, 1882 ('TP Act' for short) deals with transfers inter vivos, that is, the
act of a living person, conveying a property in present or in future, to one or more living persons.
The provisions of TP Act are inapplicable to testamentary successions which are governed
by Indian Succession Act, 1925. Section 2(h) of the Indian Succession Act defines 'Will' as the
legal declaration of the intention of a testator with respect to his property which he desires to be
carried into effect after his death.

12. The differences between a transfer and a Will are well-recognised. A transfer is a conveyance
of an existing property by one living person to another (that is transfer inter vivos). On the other
hand, a Will does not involve any transfer, nor effect any transfer inter vivos, but is a legal
expression of the wishes and intention of a person in regard to his properties which he desires to
be carried into effect after his death. In other words, a Will regulates succession and provides for
succession as declared by it (testamentary succession) instead of succession as per personal law
(non-testamentary succession). The concept of transfer by a living person is wholly alien to a
Will. When a person makes a Will, he provides for testamentary succession and does not transfer
any property. While a transfer is irrevocable and comes into effect either immediately or on the
happening of a specified contingency, a Will is revocable and comes into operation only after the
death of the testator. Thus to treat a devise under a Will as a transfer of an existing property in
future, is contrary to all known principles relating to transfer of property and testamentary
succession.

13. The learned Single Judge proceeded on a wrong premise when he observed that execution of
a Will by a testator devising his property, amounts to execution of a document creating new
right, title or interest in a property and therefore execution of a Will violates the order of status
quo. By execution of a Will, no right or title or interest is created in favour of anyone during the
lifetime of the deceased. The first point is therefore answered in the negative.

Re: Point (ii):

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14. In this case, Nagaraj, the petitioner in Probate C.P. No. 8 of 1998, filed I.A. No. I seeking a
temporary injunction restraining Anjanamma from alienating or encumbering the property or
withdrawing the amount from the Bank, described in the Schedule to the application. There was
no dispute that Anjanamma was in possession of the properties left by Muninarayanappa. The
learned Single Judge merely directed Anjanamma to maintain status quo with regard to the
properties. It was not clarified as to whether she was required to maintain status quo in regard to
the possession of the property or title to the property.

15. No Court has the power to make an order, that too an interim order, restraining an individual
from exercising his right to execute a Will and thereby regulate succession on his death. A
direction to a party to maintain status quo in regard to a property does not therefore bar him from
making a testamentary disposition in regard to such property. By making a Will, the testator
neither changes title nor possession in regard to a property nor alters the nature or situation of the
property nor removes or adds anything to the property. In short the testator, by making a Will
does not alter the existing state of things in regard to the property. It follows therefore that
making of a Will in regard to a property does not violate an order of status quo in regard to such
property, and consequently, the testamentary disposition is neither void nor voidable.

16. The prayer in I.A. No. I in Probate C.P. No. 8 of 1998 and the context in which the status quo
order dated 18-6-1998 was granted, while considering the interlocutory application, makes it
evident that the order merely directed Anjanamma not to alienate or convey the property and did
not prohibit her from executing a Will making a testamentary disposition in regard to the
property.

17. We will now deal with the contention of the respondent based on Section 30 of the Hindu
Succession Act, 1956 read with Section 59 of the Indian Succession Act, 1925. Section 30 of the
Hindu Succession Act, 1956 provides that any Hindu may dispose of by Will or other
testamentary disposition, any property, which is capable of being so disposed of by him, in
accordance with the provisions of an Indian Succession Act, 1925 or any other law for the time
being in force and applicable to Hindus. Section 59 of the Indian Succession Act provides that a
married woman may dispose by Will of any property which she could alienate by her own act
during her life.

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18. These provisions deal with the legal capacity to make a Will and who can and who cannot
make a Will. Section 59 makes it clear that any person can make a Will if he is of a sound mind
and is not a minor. Explanation 1 to Section 59 clarifies what can be disposed by Will by a
married woman and states that any property which she could alienate by her own act during her
life can be disposed by Will. It follows that a married woman who cannot alienate a property by
her own act during her life, cannot dispose of the property by a Will.

18.1 For example, prior to the coming into force of Hindu Succession Act, 1956, a Hindu widow
could not dispose of by Will, any property inherited by her from her husband. Similarly, the
holder of a mere life interest in a property could not make any Will in regard to the property as
his or her interest is limited to his life and cannot enure to the benefit of anyone beyond her
lifetime.

18.2 The bar contemplated in Explanation 1 to Section 59 is a bar or permanent inability under
the personal law or a statute. It does not refer to a temporary prohibition arising from an
injunction issued by a Court. Neither Section 59 of the Indian Succession Act nor Section 30 of
the Hindu Succession Act has, therefore, any relevance.

19. Both parts of point (ii) are therefore answered in the negative.

A digression re: 'status quo'

20. We may at this juncture advert to the confusion caused by orders directing status quo. The
parties are (or a party is) normally directed to maintain status quo in regard to a property, so that
the position does not get altered or become irreversible pending decision in the suit or legal
proceeding. The term 'status quo' means the 'situation that currently exists' or the 'existing state
of things at any given point of time'. The Supreme Court in Bharat Coking Coal Limited v State
of Bihar and Others', has recognised the fact that "the expression "status quo" is undoubtedly a
term of ambiguity and at times give arise to doubt and difficulty".

21. The Court while making an order to maintain status quo, should endeavour to clarify the
conditions, in the context of which or subject to which, such direction is issued, as the words

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status quo take contextual meaning and may give room for several different interpretations. Let
us illustrate.

Illustration (i):

If a person puts up a construction in his site violating the set back requirements and if the owner
of a property approaches the Court seeking an injunction restraining the adjoining owner from
proceeding with the construction in violation of building bye-laws and the Court orders status
quo, the order may mean that no further construction shall be made and the construction shall be
maintained in the same position as on the date of the order.

Illustration (ii):

If a member of a joint family files an application seeking an injunction in a suit for partition,
restraining the kartha from alienating the joint family property and the Court grants an order of
status quo, it may mean that the defendant should not alienate the property.

Illustration (iii):

If a plaintiff seeks an injunction restraining the defendant from harvesting a crop in the suit land
and the Court orders status quo, it may mean that defendant should not harvest the standing crop.

Illustration (iv):

In service litigation, if the employee seeks a direction to employer not to terminate his services
and the Court directs defendant to maintain status quo, it may mean that defendant should not
terminate the service of the employee.

22. An order of status quo is a specie of interim orders, when granted indiscriminately and
without qualifications or conditions, leads to ambiguity, difficulties, and injustice. If Courts want
to give interim relief, they should endeavour to give specific injunctive relief. If grant of order of
'status quo' is found to be the only appropriate relief, then Courts should indicate the nature of
status quo, that is whether the status quo is in regard to possession, title, nature of property or
some other aspect. Merely saying 'status quo' or 'status quo to be maintained' should be avoided.

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If in a suit for injunction, where plaintiff claims that he is in possession of the suit property and
the defendant is attempting to interfere with his possession, and the defendant contends that he is
in possession and petitioner was never in possession, if the Court merely directs status quo to be
maintained by parties, without saying anything more, it Will cause confusion and in many cases
even lead to breach of peace. On the basis of such order, the plaintiff would contend that he is in
possession and he is entitled to continue in possession; and the defendant would contend that he
is in possession and he is entitled to continue in possession. In such a case, if the Court wants to
direct status quo, it should specify the context in which, or conditions subject to which, such
status quo direction is issued.

23. The petitioner in Probate C.P. No. 8 of 1998 [respondent herein] seeks letters of
administration in regard to alleged Will of Muni Narayanappa. That was challenged and resisted
by Anjanamma, wife of Muni-narayanappa, by contending that she succeeded to the properties
of Muni Narayanappa. She died and appellant claims to be the legatee in possession of the
property which is claimed by the petitioner in Probate C.P. No. 8 of 1998, under the Will of
Muni Narayanappa. If the appellant is not permitted to come on record, there Will be no one to
continue the contest put up by Anjanamma. We therefore find that the appellant is a necessary
party to the proceedings in Probate C.P. No. 8 of 1998.

24. The appeal is, therefore, allowed and the order dated 6-1-1999 on I.A. No. VIII is Probate
C.P. No. 8 of 1998 is set aside. I.A. No. VIII in Probate C.P. No. 8 of 1998 shall stand allowed.
The respondent to pay a sum of Rs. 2,500.00 as costs to the appellant.

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 The Jumma Masjid, Mercara vs Kodimaniandra Deviah

AIR 847, 1962 SCR Supl. (2) 554

1.This is an appeal against the Judgment of the High Court of Madras, dismissing the suit filed
by the appellant, as Muthavalli of the Jumma Masjid, Mercara for possession of a half-share in
the properties specified in the plaint. The facts are not in dispute. There was a joint family
consisting of three brothers, Santhappa, Nanjundappa and Basappa. Of these, Santhappa died
unmarried, Basappa died in 1901, leaving behind a widow Gangamma, and Najundappa died in
1907 leaving him surviving his widow Ammakka, who succeeded to all the family properties as
his heir. On the death of Ammakka, which took place in 1910, the estate devolved on Basappa,
Mallappa and Santhappa, the sister's grandsons of Nanjundappa as his next reversioners. The
relationship of the parties is shown in the following genealogical table.

Basappa

Santhappa Nanjundapa Basappa Mallammal

(brother 1 d. unmarried) d.1907

-Ammakka -Gangamma

d.1910 d.1933

Ramegosda Mallegowda

Basappa Mallappa Santhappa

On August 5, 1900, Nanjundappa and Basappa executed a usufructuary mortgage over the
properties which form the subject-matter of this litigation, and one Appanna Shetty, having
obtained an assignment thereof, filed a suit to enforce it, O.S. 9 of 1903, in the court of the
Subordinate Judge, Coorg. That ended in a compromise decree, which provided that Appanna

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Shetty was to enjoy the usufruct from the hypotheca till August, 1920, in full satisfaction of all
his claims under the mortgage, and that the properties were thereafter to revert to the family of
the mortgagors. By a sale deed dated November 18, 1920, Ex. III, the three reversioners,
Basappa, Nallappa and Santhappa, sold the suit properties to one Ganapathi, under whom the
respondents claim, for a consideration of Rs. 2,000. Therein the vendors recite that the properties
in question belonged to the joint family of Nanjundappa and his brother Basappa, that on the
death of Nanjundappa, Ammakka inherited them as his widow, and on her death, they had
devolved on them as the next reversioners of the last male owner. On March 12, 1921, the
vendors executed another deed, Ex. IV, by which Ex. III was rectified by inclusion of certain
items of properties, which were stated to have been left out by oversight. It is on these
documents that the title of the respondents rests.

2.On the strength of these two deeds, Ganapathi sued to recover possession of the properties
comprised therein. The suit was contested by Gangamma, who claimed that the properties in
question were the self-acquisitions of her husband Basappa, and that she, as his heir, was entitled
to them. The Subordinate Judge of Coorg who tried the suit accepted this contention, and his
finding was affirmed by the District Judge on appeal, and by the, Judicial Commissioner in
second appeal. But before the second appeal was finally disposed of, Gangamma died on
February 17, 1933. Thereupon Ganapathi applied to the revenue authorities to transfer the patta
for the lands standing in the name of Gangamma to his own name, in accordance with the sale
deed Ex. III. The appellant intervened in these proceedings and claimed that the Jumma Masjid,
Mercara, had become entitled to the properties held by Gangamma, firstly, under a Sadakah or
gift alleged to have been made by her on September 5, 1932, and, secondly, under a deed of
release executed on March 3, 1933, by Santhappa, one of the reversioners, relinquishing his half-
share in the properties to the mosque for a consideration of Rs. 300. By an order dated
September 9, 1933, Ex. II, the revenue authorities declined to accept the title of the appellant and
directed that the name of Ganapathi should be entered as the owner of the properties. Pursuant to
this order, Ganapathi got into possession of the properties.

3.The suit out of which the present appeal arises was instituted by the appellant on January 2,
1945, for recovery of a half-share in the properties that had been held by Gangamma and for
mesne profits. In the plaint, the title of the appellant to the properties is based both on the gift

182 | P a g e
which Gangamma is alleged to have made on September 5, 1932, and on the release deed
executed by Santhappa, the reversioner, on March 3, 1933. With reference to the title put
forward by the respondents on the basis of Ex. III and Ex. IV, the claim made in the plaint is that
as the vendors had only a spes succession is in the properties during the lifetime of Gangamma,
the transfer was void and conferred no title. The defence of the respondents to the suit was that
as Santhappa had sold the properties to Ganapathi on a representation that he had become
entitled to them as reversioner of Nanjundappa, on the death of Ammakka in 1910, he was
estopped from asserting that they were in fact the self-acquisitions of Basappa, and that he had,
in consequence, no title at the dates of Ex. III and Ex. IV. The appellant, it was contended, could,
therefore, get no title as against them under the release deed Ex. A, dated March 3, 1933.

4.The District Judge of Coorg who heard the action held that the alleged gift by Gangamma on
September 5, 1932, had not been established, and as this ground of title was abandoned by the
appellant in the High Court, no further notice will be taken of it. Dealing next with the title
claimed by the appellant under the release deed, Ex. A executed by Santhappa, the District Judge
held that as Ganapathi had purchased the properties under Ex. III on the faith of the
representation contained therein that the vendors had become entitled to them on the death of
Ammakka in 1910, he acquired a good title under s. 43 of the Transfer of Property Act, and that
Ex. A could not prevail as against it. He accordingly dismissed the suit. The plaintiff took the
matter in appeal to the High Court, Madras, and in view of the conflict of authorities on the
question in that Court, the case was refer red for the decision of a Full Bench. The learned Judges
who heard the reference agreed with the court below that the purchaser under Ex. III had, in
taking the sale, acted on the representation as to title contained therein, and held that as the sale
by the vendors was of properties in which they claimed a present interest and not of a mere right
to succeed in future, s. 43 of the Transfer of Property Act applied, and the sale became operative
when the vendors acquired title to the properties on the death of Gangamma on February 17,
1933. In the result, the appeal was dismissed. The appellant then applied for leave to appeal to
this Court under Art. 133(1)(c), and the same was granted by the High Court of Mysore to which
the matter had become transferred under s. 4 of Act 72 of 1952. That is how the appeal comes
before us.

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5.The sole point for determination in this appeal is, whether a transfer of property for
consideration made by a person who represents that he has a present and transferable interest
therein, while he possesses, in fact, only a spes successionis, is within the protection of s. 43 of
the Transfer of Property Act. If it is, then on the facts found by the courts below, the title of the
respondents under Ex. III and Ex. IV must prevail over that of the appellant under Ex. A. If it is
not, then the appellant succeeds on the basis of Ex A.

Section 43 of the Transfer of Property Act runs as follows:-

"Where a person fraudulently or erroneously represents that he is authorised to transfer certain

immovable property and professes to transfer such property for consideration such transfer shall,
at the option of the transferee, operate on any interest which the transferor may acquire in such
property at any time during which the contact of transfer subsists.

Nothing in this section shall impair the right of transferees in good faith for consideration
without notice of the existence of the said option."

6.Considering the scope of the section on its terms, it clearly applies whenever a person transfers
property to which he has no title on a representation that he has a present and transferable interes
therein, and acting on that representation, the transferee takes a transfer for consideration. When
these conditions are satisfied, the section enacts that if the transferor subsequently acquires the
property, the transferee becomes entitled to it, if the transfer has not meantime been thrown up or
cancelled and is subsisting. There is an exception in favour of transferees for consideration in
good faith and without notice of the rights under the prior transfer. But apart from that, the
section is absolute and unqualified in its operation. It applies to all transfers which fulfil the
conditions prescribed therein, and it makes 1. O difference in its application, whether the defect
of title in the transferor arises by reason of his having no interest whatsoever in the property, or
of his interest therein being that of an expectant heir.

7.The contention on behalf of the appellant is that s. 43 must be read subject to s. 6 (a) of
the Transfer of Property Act which enacts that, "The chance of an heir apparent succeeding to an
estate, the chance of a relation obtaining a legacy on the death of a kinsman or any other mere
possibility of a like nature, cannot be transferred." The argument is that if s. 43 is to be

184 | P a g e
interpreted as having application to Cases of what are in fact transfers of spes successionis, that
will have the effect of nullifying s. 6 (a), and that therefore it would be proper to construe s. 43
as limited to cases of transfers other than those falling within . G(a). In effect, this argument
involves importing into the section a new exception to the following effect; "Nothing in this
section shall operate to confer on the transferee any title, if the transferor had at the date of the
transfer an interest of the kind mentioned in s. 6 (a)." If we accede. to this contention we will not
be construing s.43. but rewriting it. "We are not entitled", observed Lord Loreburn L. C., in
Vickers v. Evans (1), "to read words into an Act of Parliament unless clear reason for it is to be
found within the four corners of the Act itself."

8. Now the compelling reason urged by the appellant for reading a further exception in s. 43 is
that if it is construed as applicable to transfers by persons who have only spes successionis at the
date of transfer, it would have the effect of nullifying s. 6(a). But section 6(a) and s. 4 relate to
two different, subjects, and there is no necessary conflict between them; Section 6 (a) deals with
certain kinds of interests in property mentioned therein, and prohibits a transfer simpliciter of
those interests. Section 43 deals with representations as to title made by a transferor who
had no title at the time of transfer, and provides that the transfer shall fasten itself on the
title which the transferor subsequently acquires. Section 6 (a) enacts a rule of substantive
law, while s. 43 enacts a rule of estoppel which is one of evidence. The two provisions
operate on different fields, and under different conditions, and we see no ground for
reading a conflict between them or for outing down the ambit of the one by reference to the
other. In our opinion, both of them can he given full effect on their own terms, in their
respective spheres. To hold that transfers by persons who have only a spes successionis at
the date of transfer are not within the protection afforded by s. 43 would destroy its utility
to a large extent.

9.It is also contended that as under the law there can be no estoppel against a statute
transfers which are prohibited by s. (6a) could not be held to be protected by s. 43. There would
have been considerable force in this argument if the question The fell to be decided solely on the
terms of s. 6 (a). Rules of estoppel are not to be resorted to for defeating or circumventing
prohibitions enacted by Statutes on grounds of public policy. But here the matter does not rest
only on s. 6 (a). We have in addition, s. 43, which enacts a special provision for the protection of

185 | P a g e
transferees for consideration from persons who represent that they have present title, which, in
fact, they have not. And the point for decision is simply whether on then facts the respondents
are entitled to the benefit of this section. If they are, as found by the courts below, then the plea
of estoppel raised by them on the terms of the section is one pleaded under, and not against the
statute, The appellant also sought to rely on the decisions wherein it has been held that a plea of
estoppel could not be raised against a millor who had transferred property on a representation
that he was of age, and that s. 43 was inapplicable to such transfers, vide Sadiq Ali Khan v. Jai
Kishori Gadigeppa v. Balanagauda (2) Ajudhia Prasad v. Chandan Lal(3)But the short answer
to this contention is that s. 43 deals with transfers which fail forwant of title in the transferor and
not want of capacity in him at the time of transfer. It may further be observed in this connection
that the doctrine of estoppel has been held to have no application to persons who have no
contractual capacity where the claim is based on contract, vide Mahomed Syedol Ariffin, v.
Yeoh Oai Gark (4); Levine v. Brougham (5), Leslie Ltd. s. Sheil); Khan Gul v. Lakha Singh
(7). Decisions on transfers by minors therefore are of no assistance in ascertaining the true scope
of s. 43.

10.So far we have discussed the question on the language of the section and on the principles
applicable thereto. There is an illustration appended.to s. 43, and we have deferred consideration
thereof to the last as there has been a controversy as to how far it is admissible in construing the
section. It is as follows:-

"A, a Hindu, who has separated from his father B, sells to C three fields, X, Y and Z,
representing that A is authorized to transfer the same. Of these fields Z does not belong to A, it
having been retained by B on the partition; but on B's dying A as heir obtains Z. C, not having
rescinded the contract of sale, may require A to deliver Z to him.

In this illustration, when A sold the field Z to C, he had only a spes successionis. But he having
subsequently inherited it, became entitled to it. This would appear to conclude the question
against the appellant. But it is argued that the illustration is repugnant to the section and must be
rejected. If the language of the section clearly excluded from its purview transfers in which the
transferor had only such interest as is specified in s. 6(a), then it would undoubtedly not be
legitimate to use the illustration to enlarge it. But far from being restricted in its scope as

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contended for by the appellant, the section is, in our view, general in its terms and of sufficient
amplitude to take in the class of transfers now in question. Its is not to be readily assumed that all
illustration to a section is repugnant to it and rejected. Reference may, in this connection, be
made to the following observations of the judicial Committee in Mahomed Shedol Ariffin v.
Yeoh Ooi Gark (1) as to the value to given to illustrations appended to a section, in ascertaining
its true scope:

"It is the duty of a court of law to accept, if that can be done, the illustrations given as being both
of relevance and value in the construction of the text. The illustrations should in no case be
rejected because they do not square with ideas possibly derived from another system of
jurisprudence as to the law with which they are the sections deal And it would require a very
special case to warrant their rejection on the ground of their assumed repugnancy to the sections
themselves. It would be the very last resort of construction to make any such assumption. The
great usefulness of the illustrations, which have, although no part of the sections, been expressly
furnished by the Legislature as helpful in the working and application of the statute, should not
be thus impaired."

11. We shall now proceed to consider the more important cases wherein the present question has
been considered. One of the earliest of them is the decision of the Madras High court
in Alamanaya Kunigari Nabi Sab v. Murukuti Papiah (1). That arose out of a suit to enforce a
mortgage executed by the son over properties belonging to the father while he was alive. The
father died pending the suit, and the properties devolved on the son as his heir. The point for
decision was whether the mortgagee could claim the protection of s. 43 of the Transfer of
Property Act. The argument against is was that "s. 43 could not be so construed as to nullify s.
6(a) of the Transfer of Property Act, by validating a transfer initially void under s 6(a)". In
rejecting this contention, the Court observed:-

"This argument, however, neglects the distinction between purporting to transfer `the chance of
an heir-apparent,' and `erroneously representing that he (the transferor) isauthorised to transfer
certain immoveable property." It is the latter course that was followed in the present case. It was
represented to the transferee that the transferor was in praesenti entitled to and thus authorise to
transfer the property." (p.736) On this reasoning if a transfer is statedly of an interest of the

187 | P a g e
character mentioned in s. 6(a), it would be void, whereas, if it purports to be of an interest in
praesenti, it is within the protection afforded by s. 43 Then we come to the decision in The
official Assignee, Madras v. Sampath Naidu (1), where a different view was taken. The facts
were that one v. Chetti had executed two mortgages over properties in respect of which he had
only spes successionis. Then he succeeded to those properties as heir and then sold them to one
Ananda Mohan. A mortgagee claiming under Ananda Mohan filed a suit for a declaration that
the two mortgages created by Chetty before he had become entitled to them as heir, were void as
offending s. 6(a) of the Transfer of Property Act. The mortgagee contended that in the events that
had happened the mortgages had become enforceable under s. 43 of the Act. The Court
negatived this contention and held that as the mortgages, when executed, contravened s. 6(a),
they could not become valid under s. 43. Referring to the decision in Alamanaya Kunigari Nabi
Sab v. Murkuti Papiah (2), the Court observed that no distinction could be drawn between a
transfer of what is on the face of it spes successionis, and what purports to be an interest in
praesenti. "If such a distinction were allowed", observed Bardswell, J., delivering the Judgment
of the Court, "the effect would be that by a clever description of the property dealt with in a deed
of transfer one would be allowed to conceal the real nature of the transaction and evade a clear
statutory prohibition."

This reasoning is open to the criticism that it ignores the principle underlying s. 43. That section
embodies, as already stated, a rule of estoppel and enacts that a person who makes a
representation shall not be heard to allege the contrary as against a person who acts on that
representation. It is immaterial whether the transferor acts bona fide or fraudulently in making
the representation. It is only material to find out whether in fact the transferee has been misled. It
is to be noted that when the decision under consideration was given, the relevant word of s.
43 were, "where a person erroneously represents", and now, a amended by Act 20 of 1929, they
are "where a person fraudulently or erroneously represents", and that emphasises that for the
purpose of the section it matters not whether the transferor act fraudulently or innocently in
making the representation, and that what is material is that he did made representation and the
transferee has acted on it. Where the transferee knew as a fact that the transferor did not possess
the title which he represents he has, then he cannot be said to have acted on it when taking a
transfer. Section 43 would then have no application, and the transfer will fail under s. 6(a). But

188 | P a g e
where the transferee does act on the representation, there is no reason why he should not have the
benefit of the equitable doctrine embodied in s. 43, however fraudulent the act of the transferor
might have been.

The learned Judges were further of the opinion that in view of the decision of the Privy Council
inAnanda Mohan Roy v. Gour Mohan Mullick (1) and the decision in Sri Jagannada Raju v. Sri
Rajah Prasada Rao (2), which was approved therein, the illustration to s. 43 must be rejected as
repugnant to it. In Sri Jagannada Raju's case (2), the question was whether a contract entered into
by certainpresumptive reversioners to sell the estate which was then held by a widow as heir
could be specifically enforced, after the succession had opened. It was held that as s. 6(a) forbade
transfers of spes successionis, contracts to make such transfers would be void under s. 23 of the
contract Act, and could not be enforced. This decision was approved by the Privy Council
in Ananda Mohan Roy v. Gour Mohan Mullick(1), where also the question was whether a
contract by the nearest reversioner to sell property which was in the possession of a widow as
heir was valid and enforceable, and it was held that the prohibition under s. 6(a) would became
futile, if agreements to transfer could be enforced. These decisions have no bearing on the
question now under consideration, as to the right of a person who for consideration takes a
transfer of what is represented to be an interest in praesenti. The decision in The Official
Assinee, Madras v. Sampatha Naidu (2) is, in our view, erroneous, and was rightly over ruled in
the decision now under appeal.

Proceeding on to the decisions of the other High Courts, the point under discussion arose directly
for decision in Shyam Narain v. Mangal Prasad (3). The facts were similar to those in The
official Assignee, Madras s. Sampath Naidu(2) One Ram Narayan, who was the daughter's son
of the last male owner sold the properties in 1910 to the respondents, while they were vested in
the daughter Akashi. On her death in 1926, he succeeded to the properties as heir and sold them
in 1927 to the appellants. The appellants claimed the estate on the ground that the sale in 1910
conferred no title on the respondents as Ram Narayan had then only a spes successionis. The
respondents contended that they became entitled to the properties when Ram Narayan acquired
them as heir in 1926. The learned Judge, Sir S. M. Sulaiman, C. J., and Rachhpal, J., held,
agreeing with the decision in Alamanaya Kunigari, Nabi Sab v. Murukuti Papiah (1),and
deffering from The official Assignee, Madras v. Sampath Naidu (2),and Bindeshwari Singh v.

189 | P a g e
Har Narain Singh (3), that s.43 applied and that the respondents, had acquired a good title. In
coming to this, conclusion, they relied on the illustration to s. 43 as, indicating its, true scope,
and observed:-

"Section 6 (a) would, therefore, apply to cases, where professedly there is, a transfer of a mere
spes successionis, the parties knowing that the transferor has, no more right than that of a mere
expectant heir. The result, of course, would be the same where the parties, knowing the full facts,
fraudulently clothe the transaction in the garb of a an out and out sale of the property, and there
is, no erroneous representation made by the transferor to the transferor as, to his, ownership. "But
where an erroneous, representation is, made by the transferor to the transferee that he is, the full
owner of the property transferred and is authorized to transfer it and the property transferred is
not a mere chance of succession but immovable property itself, and the transferee acts, upon
such erroneous representation, then if the transferor happens, later, before the contract of transfer
comes, to an end, to acquire an interest in that property, no matter whether by private purchase,
gift, legacy or by inheritance or otherwise, the previous transfer can at the option of the
transferee operate on the interest which has, been subsequently acquired, although it did not exit
at the time of the transfer." (pp. 478,479).

This decision was followed by the Bombay High Court in Vithabai v. Malhar Shankar (4) and by
thePatna High Court in Ram Japan v. Jagesara Kuer(1). A similar view had been taken by the
Nagpur High Court in Syed, Bismilla v. Manulal Chabildas(2).

The preponderance of judicial opinion is in favour of the view taken by the Madras High Court
in Alamanaya Kunigari Nabi Sab v. Murukuti Papiah (3), and approved by the Full Bench in the
decision now under appeal. In our judgment, the interpretation placed on s. 43 in those decisions
correct and the contrary opinion is erroneous. We accordingly hold that when a person transfers
property representing that he has a present interest therein, whereas he has, in fact, only a spes
successionis, the transferee is entitled to the benefit of s. 43, if he has taken the transfer on the
faith of that representation and for consideration. In the present case, Santhappa, the vendor in
Ex. III, represented that he was entitled to the property in praesenti, and it has been found that
the purchaser entered into the transaction acting on that representation. He therefore acquired
title to the properties under s. 44 of the Transfer of Property Act, when Santhappa became in

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titulo on the death of Gangamma on February 17, 1933, and the subsequent dealing with them by
Santhappa by way of release under Ex. A did not operate to vest any title in the appellant.

The Courts below were right in upholding the title of the respondents, and this appeal must be
dismissed with costs of the third respondent, who alone appears.

Appeal dismissed.

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 Kartar Singh vs Harbans Kaur

1994 SCC (4) 730

JUDGMENT:

1. Leave granted.

2. The appellant is the defendant. Smt Harbans Kaur - respondent executed the sale deed on 19-
4-1961, in favour of the appellant of alienating the lands on her behalf and on behalf of her
minor son, Kulwant Singh. Kulwant Singh, on attaining majority, filed Case No. 21 of 1975 on
14-3-1975 on the file of the Sub-Judge, IInd Class, Gurdaspur for a declaration that the sale of
his share in the lands mentioned in the schedule attached thereto by his mother was void and
does not bind him. The decree ultimately was granted declaring that the sale was void as against
the minor. But before taking delivery of the possession, Kulwant Singh died. Harbans Kaur, the
mother being Class-1 heir under Section 6 of the Hindu Succession Act, 1956 read with the
schedule succeeded to the estate of the deceased. The appellant, therefore, laid his claim to the
benefit of Section 43 of the Transfer of Property Act, 1882 (for short 'the Act'). The High Court
ill Second Appeal No. 1557 of 1979, while setting aside the decree of the trial court and declared
that the sale is void, refused to grant the remedy under Section 43of the Act. Thus these appeals
by special leave.

3.The contention for the appellant is that in view of the finding that Harbans Kaur had succeeded
by operation of law, the appellant is entitled to the interest acquired by Harbans Kaur by
operation of Section 43 of the Act and the High Court has misapplied the ratio of decisions of
this Court in Jumma Masjid, Mercara v. Kodimaniandra Deviah and the decision of the AIR
1962 SC 847: 1962 Supp 2 SCR 554: (1962) 2 MLJ 90 (SC) Patna High Court in Jhulan Prasad
v. Ram Raj Prasad2. Section 43 of the Transfer of Property Act provides thus :

"Where a person fraudulently or erroneously represents that he is authorised to transfer certain

immovable property and professes to transfer such property for consideration, such transfer shall,

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at the option of the transferee, operate on any interest which the transferor may acquire in such
property at any time during which the contract of transfer subsists."

4.A reading clearly shows that for application of Section 43 of the Act, two conditions must be
satisfied. Firstly, that there is a fraudulent or erroneous representation made by the transferor to
the transferee that he is authorised to transfer certain immovable property and in the purported
exercise of authority, professed to transfer such property for consideration. Subsequently, when
it is discovered that the transferor acquired an interest in the transferred property, at the option of
the transferee, he is entitled to get the restitution of interest in property got by the transferor,
provided the transferor acquires such interest in the property during which contract of transfer
must subsist.

5.In this case, admittedly, Kulwant Singh was a minor on the date when the respondent
transferred the property on 19- 4-1961. The marginal note of the sale deed specifically mentions
to the effect :

"... that the land had been acquired by her and by her minor son by exercising the right of pre-
emption and that she was executing the sale deed in respect of her own share and acting as
guardian of her minor son so far as his share was concerned."

6.It is settled law that the transferee must make all reasonable and diligent enquiries regarding
the capacity of the transferor and the necessity to alienate the estate of the minor. On satisfying
those requirements, he is to enter into and have the sale deed from the guardian or manager of
the estate of the minor. Under the Guardian and Wards Act, the estate of the minor cannot be
alienated unless a specific permission in that behalf is obtained from the district court.
Admittedly, no such permission was obtained. Therefore, the sale of the half share of the interest
of Kulwant Singh made by his mother is void.

7.Section 43 feeds its estoppel. The rule of estoppel by deed by the transferor would apply only
when the transferee has been misled. The transferee must know or put on notice that the
transferor does not possesses the title which he represents that he has. When note in the sale deed
had put the appellant on notice of limited right of the mother as guardian, as a reasonable prudent
man the appellant is expected to enquire whether on her own the mother as guardian of minor

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son is competent to alienate the estate of the minor. When such acts were not done the first limb
of Section 43 is not satisfied. It is obvious that it may be an erroneous representation and may
not be fraudulent one made by the mother that she is entitled to alienate 2 AIR 1979 Pat 54: 1978
BBCJ 736 the estate of the minor. For the purpose of Section 43 it is not strong material for
consideration. But on declaration that the sale is void, in the eye of law the contract is non est to
the extent of the share of the minor from its inception. The second limb of Section 43 is that the
contract must be a subsisting one at the time of the claim. A void contract is no contract in the
eye of law and was never in existence so the sencond limb of Section 43 is not satisfied. The
ratio of this Court in Jumma Masjid case' is thus :

"Section 43 embodies a rule of estoppel and enacts that a person who makes a representation
shall not be heard to allege the contrary as against a person who acts on that representation. It
is immaterial whether the transferor acts bona fide or fraudulently in making the
representation.It is only material to find out whether in fact the transferee has been misled. For
the purpose of the section, it matters not whether the transferor acted fraudulently or innocently
in making the representation, and that what is material is that he did make a representation and
the transferee knows as a fact that the transferor does not possess the title which he represents
he has, then he cannot be said to have acted on it when taking a transfer. Section 43 would then
have no application and the transfer will fail under Section 6(a)."

This Court in the later part has made it clear that where the transferee knows as a fact that the
transferor does not possess the title which he represents he has, then he cannot be said to have
acted on it when taking a transfer. Section 43 would then have no application and the transfer
will fail under Section 6(1) of the Transfer of Property Act. In view of the finding that diligent
and reasonable enquiries were made regarding the entitlement of the mother to alienate the half
share of the minor's estate, it cannot be said that the appellant had acted reasonably in getting the
transfer in his favour.

8. In the face of the existence of the aforementioned note and in the light of the law, it could be
concluded that Section 43 does not apply to the fact of this case, The ratio of the Patna High
Court also does not apply to the facts in this case as rightly distinguished by the High Court. It is
made clear that the declaration given by the High Court is only qua the right of the minor and it

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is fairly conceded by the respondent that the decree does not have any effect on the half share
conveyed by the mother. If the appellant has any independent cause of action subsisting under
the contract against the respondent, this judgment may not stand in his way to pursue the remedy
under the law.

9. The appeals are accordingly dismissed. No costs.

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195 | P a g e
 ROSHER V. ROSHER (1884) 26 CH. D. 801

J.B. Rosher, by his will, dated the 26th of November, 1872, devised as follows:

―I devise all my manor, commonly called Trewyn Manor, and all other my real estate, unto my
said son Jeremiah Lilburn Rosher, his heirs, executors, administrators and assigns, according to
the tenure there of respectively, provided always, and I hereby declare that if my said son, or his
heirs„ or devisees, or any person claiming through or under him or them shall desire to sell my
manor and estate of Trewyn, and other my estates in the countries of Monmouth and Hereford or
any part or parts thereof, in the life time of my wife, she shall have the option to purchase the
same at the price of £ 3600 for the whole, and at a proportionate price for any part or parts
thereof, and the same shall accordingly be first offered to her at such price or proportionate price
or prices. And I also declare that if my said son, his heirs or devisees,or any person claiming
through or under him or them shall during the life of my said wife desire to let Trewyn House,
garden buildings, land and premises, or any part or parts thereof, now in my occupation, for a
longer period than three years at any one time, she shall have the option of renting the whole of
the lastly described premises for any period exceeding three years as she shall desire, at the
yearly rent of £ 25, and the same shall be first offered to her accordingly ; and that if my said
son, his heirs or devisees, or any person claiming through or under him or them shall during the
life of my said wife desire to let Lower Trewyn or part or any parts thereof for a longer period
exceeding seven years she shall have the option of renting it for any period exceeding seven
years as she shall desire, at the yearly rent of £ 35, and the same shall be first offered to her
accordingly.

The testator died on the 26th of November, 1874. This action was brought by the widow
against the son. The special case was stated by consent for the opinion of the Court, pursuant to
Order XXXIV of the Rules of Court of 1875.

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 The case stated that the real selling value of the manor and estate of Trewym, and other estates
of the testator in the country of Manmouth and Hereford, was at the date of the will and at the
time of the testator death, £ 15,000 and upwards; that the real letting value of Trewyn House
garden buildings, land, and premises, was, at the date of the will and at the time of the testator„s
death, £ 100 and upwards per annum; and that the real letting value of Lower Trewyn was at the
date of the will and at the time of the testator„s death £ 100 and upwards per annum.

The questions for the opinion of the court were:

(1) Whether or not, according to the true construction of the will, the son was entitled to sell or to
mortgage or charge respectively the estates devised to him by the will, or any part thereof,
without first offering to the widow the option to purchase the premises so intended to be sold or
to be mortgaged or charged at the price named in the will or at a proportionate price, according
to the quantity dealt with, as the case might be, or whether the provisions and directions
contained in the will in reference to the option of purchase were null and void?.

(2) Whether or not, according to the true construction of the will, the son was entitled to let the
premises called Trewyn House, or any part thereof, for a longer term than three years, or the
premises called Lower Trewyn, or any part thereof, for a longer period than seven years, without
first offering to the widow the option of renting the same respectively as directed by the will at
the respective rents named therein, or whether the provisions and directions in the will contained
in reference to the letting of the said premises or either of them were void and of no effect?

May 28. Pearson, J., after stating the facts, continued:-

3. The question I have to decide is whether, there being an absolute devise in fee simple to the
son, the conditions annexed to it are valid. I will deal first with the condition which relates to
selling, and it will, I hope, shorten the observations which I have to make if I first state the
manner in which I interpret this condition.

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4. The restriction upon selling is this, that if the son, or any person claiming through or under
him, is minded to sell during the lifetime of the testator„s widow, the estate intended to be sold,
whether it is the whole or only part of the devised estates, must be offered to the widow at the
price of £ 3000 for the whole, or at a proportionate price for a part. It is agreed that the value of
the whole estate at the death of the testator was £ 15,000. It is, therefore, in effect a condition
that, if the son desires to sell, he shall offer the estates to the widow, and that she is to be at
liberty to buy them at one-fifth of their value. I consider that (and I mean to decide the case upon
that conclusion) as an absolute restraint against sale during the life of the widow. I mean to treat
it as if it had been done ―during the life of the widow you shall not sell,‖ because to compel
him, if he does sell, to sell at one-fifth of the value, and to throw away four-fifths of the value of
the estate is, to my mind, equivalent to a restraint upon selling at all.

6. If a covenant be held good which in the event of a grantee in fee simple aliening the land,
merely imposes a fine upon him (or an additional rent on the lands, as in the case before us) the
general rule might be evaded and the principles of it violated by fixing such an amount of fine or
additional rent as would effectually prohibit the alienation, which would clearly be a
`circumvention of the law.‖ To my mind, to compel the son in the present case, if he chose to
sell, to sell at one-fifth of the value of the estate, is really a prohibition of alienation during the
widow„s lifetime.

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198 | P a g e
 Syed Mohammad Raza vs Abbas Bandi Bibi

(1932) 34 BOMLR 1048

JUDGMENT George Lowndes, J.

1. The facts necessary for the decision of this appeal are within a small compass.

2. In 1868 one Sughra Bibi brought a suit against her cousin Afzal Husain, claiming a half-share
in certain immoveable pro perties in Oudh which had been entered in his name at the post mutiny
settlement. The litigation ended in a compromise upon which a decree was passed in the suit on
September 19, 1870. The compromise was in the following terms:-

We are Musammab Sughra Bibi, plaintiff, claimant of a share in Mahal Shadipur, Nusha, &c,
pargana Tanda, and Surhurpur, and 8yed Afzal Hasan, son of Syed Tegh Ali Qanungo,
Lambardar of the aforesaid Mahal, defendant.

Whereas between the parties to the above-mentioned case in which a share is claimed an
amicable settlement has been arrived at to the effect that the plaintiff's marriage by way of nikah
with the defendant may be performed in the next month, accordingly in view of a marriage
settlement, there no longer exists any dispute regarding a share, and insomuch as the defendant's
first wife, the daughter of Raja Syed Abbas Ali, deceased, is alive, it has been settled that both
wives should, in accordance with this agreement, in their capacity as wives, from this very time
be declared permanent owners [malik mustaqil] of a moiety each of the entire Mahal Shadipur,
and that the names of Musammab Fatima Begam, the first wife, and Musammat Sughra Bibi,
plaintiff, be entered in the public records as owners of half and half [bil munasfa milkiatan]. The
said females shall not have powor to transfer this property to a stranger ; but the ownership
thereof as family property shall devolve on the legal heirs of both the abovenamed wives, from
generation to generation [naslan bad naslan] and the management and collections of the entire
estate of Shadipur shall be in the hands of their husband, Syed Afzal Hasan, in his capacity of a
husband ; if on the part of the husband there is any act of neglect) or estrangement towards either
of the wives, then, in that case, the wife's only remedy will be to have the management of her
share performed by the Government through the Court of Wards ; but during the lifetime of

199 | P a g e
Afzal Hasan neither of the wives shall have the power on her own authority to have the
management of the share which is owned by her performed by any member of her father's
family, and if in contravention of this agreement the defendant refuses to marry the plaintiff by
way of nikah, then the plaintiff shall in accordance with this document remain owner of a
moiety, and if the plaintiff acts contrary to the stipulation of nikah, she shall cease to have any
rights whatever. If, God forbid, contrary to custom the divorce of either of the wives takes place,
then, even in that case, ownership shall remain vested in the wives, as before, subject to the
conditions mentioned above ; provided that the divorced wife should regard herself as an
undivorced wife, and like a woman without a husband continue to live in the house, and be it
understood that the aforesaid conditions shall appiy to whatever share exists in the villages
comprised in Mahal Shadipur, as detailed below :-(1) Shadipur, (2) Ninawan, Behari, Daudpur,
Nandapur, Qutubpur, Belahri, Daryapur; moreover, whatever property, such as Chitoi and
Nausanda and Musha, &c, pargana Tanda and Halimpur and Lodhna and Nathupnr, pargana
Surhurpur, &c., exists at present, or may be acquired in future, shall, during the lifetime of Mir
Teg Ali and myself (the defendant), continue to remain in possession of the defendant, and after
me (the defendant] this property also shall devolve on the two wives or their descendants [aulad]
in equal shares.

Hence this agreement is made in writing in order that it may serve as evidence thereof and the
pending case may be decided in accordance with its terms.

3. Afzal Hussain thereafter duly married Sughra Bibi and died in 1872 childless, his first wife
Fattina Begum having predeceased him in 1871. Sughra Bibi took possession of her share in the
propertiea, but had sold or mortgaged it all before her death, which occurred on July 26,1914.
Her transferees remained in undisturbed possession for nearly twelve years after her death.

4. On March 26, 1926, the suit out of which this appeal has arisen was instituted by the
respondent in the Court of the Subordinate Judge of Fyzabad for the recovery of two-thirds of
Sughra Bibi's share from the appellants, in whose possession the properties had come under the
alienations above referred to.

200 | P a g e
5. The respondent's case was that under the compromise Sugbra Bibi took only a life estate
without power of alienation, and that on her death the half-share passed to her heirs, of whom the
respondent in right of her mother Zainab Bibi, the sister of Afoul Husain, was one, her share
being two thirds. The other heirs, taking the remaining third were said to be certain maternal
relatives of Sughra Bibi, who apparently made no claim, and were not joined as parties to the
suit, but it is not suggested that it is defective on this account. The present appeal, therefore, is
concerned only with two-thirds of the property, and the rights of the parties depend in the first
instance on the validity of the alienations by Sughra Bibi, the title of the respondent, if these
alienations were invalid, not being disputed.

6. A preliminary issue which covered this question was raised and tried by the Subordinate
Judge. It was in the following terms:-

Was the restriction placed by the compromise deed dated September 19, 1870, upon Sughra
Bibi's power of alienation valid and legally enforceable?

The learned Judge, after a detailed but not very informing examination of the case law on the
subject, held that the restriction imposed by the deed on the lady's power of alienation was
invalid and inoperative, and he accordingly answered the issue in the negative.

7. The hearing of some twenty-eight other issues in the case came subsequently before another
Subordinate Judge, with the result that the suit was dismissed with regard to certain of the
properties claimed, but decreed with regard to others.

8. Both sidss appealed to the Chief Court: The case was heard by Raza and Pullan JJ, who
delivered their judgment on January 4, 1929, allowing the appeal of the present respondent, and
dismissing that of the appellants, with the result that the suit was decreed in full. The questions
other than that as to Sughra Bibi's power of alienation are not now material. They were in part
disposed of by concurrent findings of fact of the two courts, and for the rest involve matters
subsidiary to the main issue as to the validity of the alienations.

9. The learned Judges of the Chief Court discussed the meaning of the word malik which has
been used throughout the compromise agreement, but came to the conclusion that having regard
to the express provision that the ladies were not to have power to transfer the property to a

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stranger, they had only a " limited ownership," with a gift over to their heirs. They then
considered whether under the Shia law, by which the parties were governed, such an
arrangement would be valid, and came to the conclusion that it would.

10. Before the Board the case law has been discussed at great length, but without throwing much
light upon the construction of the particular document with which this appeal is concerned, It
was urged for the appellants that the true effect of the document was to constitute the ladies full
owners of the two moieties of the property, and that the attempt to restrict their power of
alienation should be regarded as repugnant, special reliance being placed upon the judgment of
the Board delivered by the late Sir Binod Mitter in Eaghunath Prasad Singh v. Deputy
Commissioner, Partabgarh (1929) I.L.R. 58 I.A, 372, s.c. 32 Bom. L.R. 129. For the respondent
it was contended that, having regard to the decisions of this Board, the use of the word " malik "
did not necessarily imply full ownership, and that reading the document as a whole the ladies
took only life estates with vested remainders in their heirs.

11. In support of the appellants' contention if; was pointed out that the ladies were to be "malik
mustaqil," i.e., permanent proprietors, and were to be entered as such in the public records; that
their proprietorship was to take effect from the execution of the document, and that if Afzal
Husain refused to marry Sughra Bibi, she was to " remain owner of a moiety " free from
restriction of any kind ; that other property, to which Sughra Bibi had made no claim, was also
dealt with; that it was to remain in the possession of Afzal Husain during his life and the lifetime
of his father Tegh Ali, and then was to " devolve on the two wives or their descendants in equal
shares "-again, as the respondent's counsel concedes, without restriction, From this it is said to be
clear that the draftsman of the document was quite competent to put a life estate into direct
words if that had been the intention of the parties under the first part of the agreement. It is also
suggested that the words upon which the respondent relies as constituting a gift over to the
ladies' heirs, are only explanatory of the restriction against transfer to a stranger, which
immediately preceedes them, and it is pointed out with some force that if only life estates were
intended the restriction would not have been confined to the case of strangers.

202 | P a g e
12. Their Lordships feel the weight of these contentions, and they might have some difficulty in
holding that Sughra Bibi took nothing more than a life estate. But assuming in the appellants'
favour that she took an estate of inheritance, it was nevertheless one saddled, under the express
words of the document, with a restriction against alienation to “a stranger." Their Lordships have
no doubt that "stranger" means anyone who is not a member of the family, and appellants are
admittedly strangers in this sense. Unless, therefore, this restriction can for some reason be
disregarded, they have no title to the properties which can prevail against the respondent.

13. On the assumption that Sughra Bibi took under the terms of the document in question an
absolute estate subject only to this restriction, their Lordships think that the restriction was not
absolute, but partial; it forbids only alienation to strangers, leaving her free to make any transfer
she pleases within the ambit of the family. The question, therefore, is whether such a partial
restriction on alienation is so inconsistent with an otherwise absolute estate that it must be
regarded as repugnant and merely void. On this question their Lordships think that Raghunath
Praaad Singh's case (supra) is of no assistance to the appellants, for there the restriction against
alienation was absolute and was attached to a gift by will. It is, in their Lordships' opinion,
important in the present case to bear in mind that the document under which the appellants claim
was not a deed of gift, or a conveyance, by one of the parties to the other, but was in the' nature
of a contract between them as to the terms upon which the ladies were to take. The title to that
which Sughra Bibi took was in dispute between her and Afzal Husain. In compromise of their
conflicting claims what was evidently a family arrangement was come to, by which it was agreed
that she should take what aha claimed upon certain conditions. One of these conditions was that
she would not alienate the property outside the family. Their Lordships are asked by the
appellants to say that this condition was not binding upon her, and that what she took she was
free to transfer to them.

14. The law by which this question must be judged is, their Lordships think, prescribed by
Section 3 of the Oudh Laws Act, 1876, and failing the earlier clauses of the section which seem
to have no application, " the Courts shall act according to justice, equity and good conscience,"
which has been adopted as the ultimate test for all the provincial Courts in India.

203 | P a g e
15. Is it then contrary to justice, equity and good conscience to hold an agreement of this nature
to be binding? Judging the matter upon abstract grounds, their Lordships would have thought
that where a person had been allowed to take property upon the express agreement that it shall
not be alienated outside the family, those who seek to make title through a direct breach of this
agreement could hardly support their claim by an appeal to these high sounding principles, and it
must be remembered in this connection that family arrangements are specially favoured in courts
of equity.

16. But apart from this, it seems clear that after the passing of the Transfer of Property Act in
1882, a partial restriction upon the power of disposition would not, in the case of a transfer inter
vivo8, be regarded as repugnant; see Section 10 of the Act. In view of the terms of this section,
and in the absence of any authority suggesting that before the Act a different principle was
applied by the Courts in India, their Lordships think that it would be impossible for them to
assert that such an agreement as they are now considering was contrary to justice, equity and
good conscience.

17. It was said by Lord Hobhouse in Waghela Rajsanji v. shekh Masludin (1887) L.R. 14 I.A. 89,
96 that the expression "equity and good conscience" was generally interpreted as meaning
English law, if found applicable to Indian society and circumstances. If this is to be the test there
is authority that in England a partial restriction would not be regarded as repugnant even in the
case of a testamentary gift. So in In re Macleay (1875) L.R. 20 Eq. 186 Sir George Jessel M. R.
upheld a condition attached to a devise in fee that the devisee should "never sell out of the
family," pointing out that this had been the law from the time of Coke ; and in Doe d. Gill v.
Peasson (1805) 6 East 173 Lord Ellenborough in the King's Bench affirmed the validity of a
similar restriction.

18. Their Lordships see no reason, therefore, to hold that the provision in the compromise
agreement that Sughra Bibi should not have power to transfer the properties in suit to a stranger
was otherwise than binding upon her.

19. Their Lordships have heard much discussion of the question whether the Shia law permits of
the creation of a vested remainder in such an indeterminate body as the heirs of a living person,
but, in the view they take of the appellants' case, it is unnecessary for them to come to any

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conclusion upon this somewhat abstruse problem, or to consider the authorities that have been
cited.

20. In their Lordships' opinion Sughra Bibi had no power to transfer any part of the properties to
the appellants, and upon her death the respondent became entitled to the two-thirds share in the
properties which she claims.

They think that this appeal fails, and that the decree of the Chief Court, dated January 4, 1929,
should be affirmed with costs, and they will humbly advise the Majesty accordingly.

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 Zoroastrian Co-Operative Housing Society Ltd. vs District Registrar, Co-Operative
Socities (Urban) (2005) 5 SCC 632

JUDGMENT:
J U D G M E N T P.K. BALASUBRAMANYAN, J.

1. The Zoroastrian Co-operative Housing Society is a society registered on 19.5.1926, under

the Bombay Co-operative Societies Act, 1925. The Society applied to the Government of
Bombay for acquisition of certain lands in Ahmedabad District, then in the State of Bombay,
under the Land Acquisition Act, 1894 for the purpose of erecting houses for residential use of its
members and to further the aims and objects of the Society. On the Government of Bombay
agreeing to the proposal, the Society entered into an agreement on 17.2.1928 with the
Government under Section 41 of the Land Acquisition Act. Certain lands were acquired. From
the lands thus acquired at its cost and given to it, the Society allotted plots of land to the various
members of the Society in furtherance of the objects of the Society. On the re- organization of
States, the Society became functional in the State of Gujarat and came within the purview of the
Gujarat Co-operative Societies Act, 1961. Section 169 of that Act, repealed the Bombay Co-
operative Societies Act, 1925 and in sub-section (2) provided that all societies registered or
deemed to be registered under the Bombay Act, the registration of which was in force
immediately before the commencement of the Gujarat Act, were to be deemed to be registered
under the Gujarat Act. The Gujarat Act came into force on 1.5.1962. Thus, the Society came to
be regulated by the Gujarat Co-operative Societies Act, 1961 (hereinafter referred to as 'the Act').

2.On the scheme of the Bombay Co-operative Societies Act (hereinafter referred to as 'the
Bombay Act'), the Society had applied for registration in terms of Section 9 of that Act. The
application was accompanied by the proposed bye-laws of the Society. The Registrar of Co-
operative Societies, on being satisfied that the Society had complied with the provisions of the
Act and the Rules and that the proposed bye- laws were not contrary to the Act and the Rules,
granted registration to the Society and its bye-laws and issued a certificate of registration in
terms of Section 11 of that Act. As per the bye-laws, the objects of the Society were to carry on
the trade of building, and of buying, selling, hiring, letting and developing land in accordance

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with Co-operative principles and to establish and carry on social, re-creative and educational
work in connection with its tenets and the Society was to have full power to do all things it
deemed necessary or expedient, for the accomplishment of all objects specified in its bye-laws,
including the power to purchase, hold, sell, exchange, mortgage, rent, lease, sub-lease, surrender,
accept surrenders of and deal with lands of any tenure and to sell by installments and subject to
any terms or conditions and to make and guarantee advances to members for building or
purchasing property and to erect, pull down, repair, alter or otherwise deal with any building
thereon. All persons who had signed the application for registration are original members by
virtue of bye-law No.7. The said bye-law further provided that other members shall be elected by
the Committee of the Society, provided that all members shall belong to the Parsi Community
subject to satisfying other conditions in that bye-law. Bye-law No. 21 provided for sale of a share
held by a member but with previous sanction of the Committee which had full discretion in
granting or withholding such sanction. It was also provided that until the transfer of a share is
registered, no right was acquired against the Society by the transferee, and no claim against the
transferor by the Society was also to be affected. In short, the qualification for becoming a
member in the Society was that the person should be a Parsi and that the transfer of a share to
him had to have the previous sanction of the Committee of the Society.

3. Some of the relevant provisions of the Bombay Act may now be noticed. Under Section
3, the Registrar had the right to classify all societies under one or other of the heads referred to in
that Section. Under Section 5 of that Act, a society which had as its object, the promotion of
economic interests of its members in accordance with economic principles, may be registered
under the Act with or without limited liability. Section 6 placed restrictions on the interests of the
members of the society with limited liability. Section 6A enacted that no person shall be
admitted as a member of a society unless he was a person competent to contract under Section 11
of the Indian Contract Act. Section 7 stipulated the conditions for registration and provided that
no society could be registered under the Act which did not consist of at least 10 persons who
were qualified to be members of the society under Section 6A and where the object of the society
was the creation of funds to be lent to its members, unless all persons forming the society resided
in the same town or village or in the group of villages or they belonged to the same tribe, class or
occupation, unless the Registrar ordered otherwise and no person could be admitted to

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membership of any such society after its registration unless the persons fulfilled the two
requirements as mentioned above. If the Registrar was satisfied that a society has complied with
the provisions of the Act and the Rules and that its proposed bye-laws are not contrary to the Act
or to the Rules, under Section 10 he was to register the society and its bye-laws. According to the
Society, it had submitted its duly filled in application under Section 9 of the Act accompanied by
its bye-laws and the said bye-laws have been approved and registered by the Registrar on being
satisfied that the proposed bye-laws were not contrary to the Act or to the Rules.

4. After the Society was formed and registered as indicated earlier, the Society got lands
acquired by the State by invoking the Land Acquisition Act, 1894. The Society entered into an
agreement in that behalf with the Government under Section 41 of the Act on 17.2.1928. The
said agreement recited that the Government of Bombay was satisfied that the land should be
acquired under the Land Acquisition Act "for the purpose of erecting houses thereon". It was
also stated that the Government was satisfied that the acquisition of the land was needed for the
furtherance of the objects of the Society and was likely to prove useful to the public and it
consented to put in operation the provisions of the Land Acquisition Act. An extent of 6 acres 12
guntas was thus acquired and handed over to the Society, on the Society bearing the cost of that
acquisition. The Society in its turn allotted portions of the land to its members for the purpose of
putting up residential houses in the concerned plots.

5. One of the members of the Society sold the plot in which he had constructed a residential
building, to the father of Respondent No.2 with the previous consent of the Committee of the
Society. The father of Respondent No.2 was also admitted to membership of the Society, he
being qualified for such admission in terms of the bye-laws of the Society. After the rights
devolved on Respondent No.2, consequent on the death of his father, he became a member of the
Society of his volition. Thereafter, he applied to the Society for permission to demolish the
bungalow that had been put up and to construct a commercial building in its place. The Society
refused him permission stating that the bye-laws of the Society did not permit commercial use of
the land. Thereafter, Respondent No.2 applied to the Society for permission to demolish the
bungalow and to construct residential flats to be sold to Parsis. The Society acceded to the
request of Respondent No.2, making it clear that the flats constructed could only be sold to

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Parsis. It appears that, earlier, the Society had written to the Registrar that it was apprehending
that certain members of the Society were proposing to sell their bungalows to persons outside the
Parsi community only with commercial motive and in violation of clause 7 of the bye-laws. The
Registrar replied that any transaction of sale should be in accordance with the bye-laws of the
Society and any sale in violation of the bye-laws would not be permitted, thus, stressing the
sanctity of the bye-laws. On 20.7.1982, the Government of Gujarat had also issued a notification
declaring that persons or firms dealing with the sale and purchase of lands and buildings,
contractors, architects and engineers were disqualified from being members of Co-operative
Housing Societies. Though, permission was given to Respondent No.2 as early as on 17.5.1988
for construction of residential flats in the land, to be sold only to members of the Parsi
community, he did not act on the permission for a period of seven years. Apprehending that
Respondent No.2 intended to violate the bye-laws of the Society, the Society passed a resolution
reminding its members that in accordance with bye-law No.7, no person other than a Parsi could
become a new member of the Society and informing the existing members of the Society that
they could not sell their plots or bungalows to any person not belonging to the Parsi community.
Respondent No.2 appears to have started negotiations with Respondent No.3, a Builder's
association, in violation of the restriction on sale of shares or property to a non-Parsi. The
Society, in that context, filed a case before the Board of Nominees under the Act for an
injunction restraining Respondent No.2 from putting up any construction in plot no.7 and from
transferring the same to outsiders in violation of bye-law No.7 without valid prior permission
from the Society. Though, initially an interim order of injunction was granted, the Board
informed the Society that the Society could not restrict its membership only to the Parsi
community and that membership should remain open for every person. A clarification was also
sought for from the Society as to why it had refused permission to Respondent No.2 to transfer
plot no.7 belonging to him. Subsequently, the Board of Nominees vacated the interim order of
injunction granted, inter alia, on the ground that the construction of a block of residential flats
would not create disturbance and nuisance to the original members of the Society. Thereafter,
Respondent No.2 applied to the Society for permission to transfer his share to Respondent No.3.
The said application was rejected by the Society, since according to it, the application was
contrary to the Act, Rules and the bye-laws of the Society. While the Society challenged the
order of the Board of Nominees before the Gujarat State Co-operative Societies Tribunal,

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Respondents 2 and 3 challenged the rejection of the request of Respondent No.2 to sell his plot to
Respondent No.3, by way of an appeal before the Registrar of Co-operative Societies under
Section 24 of the Act. The Tribunal, in the revision filed by the Society, took the view in an
interim order that the bye-law restricting membership to Parsis was a restriction on the right to
property and the right to alienate property and, therefore, was invalid in terms of Article 300A of
the Constitution of India. This order was challenged by the Society and its Chairman before the
High Court of Gujarat in Special Civil Application No. 6226 of 1996. By judgment dated
16.1.1997, a learned Single Judge of the Gujarat High Court dismissed the writ petition
essentially holding that the restriction in a bye-law to the effect that membership would be
limited only to persons belonging to the Parsi community, would be an unfair restriction which
can be validly dealt with by the appropriate authorities under Section 24 of the Act and Rule
12(2) of the Rules. It was also held that such a bye-law would amount to a restraint on alienation
and hence would be hit by Section 10 of the Transfer of Property Act. The Society and its
Chairman, challenged the said decision before a Division Bench, in Letters Patent Appeal No.
129 of 1997. By judgment dated 23.7.1999, the said appeal was dismissed, more or less,
concurring with the reasoning and conclusion of the learned Single Judge. The decision of the
Division Bench of the Gujarat High Court thus rendered, is challenged in this appeal by Special
Leave.

6. Mr. Soli J. Sorabjee, learned Senior Counsel appearing for the appellants contended that
under Article 19(1)(c) of the Constitution of India, Parsis had a fundament right of forming an
association and that fundamental right cannot be infringed by thrusting upon the association,
members whom it does not want to admit or against the terms of its bye- laws. He submitted that
the content of the right of association guaranteed by Article 19(1)(c) of the Constitution of India
has been misunderstood by the High Court and the Authorities under the Act. He also contended
that there was nothing in the Act or the Rules which precluded a society from restricting its
membership to persons of a particular persuasion, belief or tenet and the High Court was in error
in holding that membership could not be restricted to members of the parsi community for whose
benefit the very society was got registered. Though, grounds based on Article 26 of the
Constitution of India raised, were not pursued, it was pointed out that under Article 29, the parsis
had the right to conserve their culture. It was submitted that bye-law No.7 was perfectly valid

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and so long as it did not violate anything contained in the Act or the Rules, it could not be held to
be invalid or unenforceable and the society cannot be compelled to act against the terms of its
bye- laws. He also submitted that there was no absolute restraint on alienation to attract Section
10 of the Transfer of Property Act and the restraint, if any, was only a partial restraint, valid in
law. There was nothing illegal in certain persons coming together to form a society in agreeing to
restrict membership in it or to exclude the general public at its discretion with a view to carry on
its objects smoothly. Mr. Bobde, learned Senior Counsel appearing for the contesting
respondents, Respondents 2 and 3, contended that Section 4 of the Act clearly indicated that no
bye-law could be recognized which was opposed to public policy or which was in contravention
of public policy in the context of the relevant provisions in the Constitution of India and the
rights of an individual under the laws of the Country. A bye-law restricting membership in a co-
operative society, to a particular denomination, community, caste or creed was opposed to public
policy and consequently, the Authorities under the Act and the High Court were fully justified in
rejecting the claim of the Society. Learned Senior Counsel also contended that the High Court
was right in holding that the concerned bye-law operated as a restraint on alienation and such a
restraint was clearly invalid in terms of Section 10 of the Transfer of Property Act. He submitted
that a co-operative society stood on a different footing from a purely voluntary association or a
society registered under the Societies Registration Act and in the context of Sections 4 and 24 of
the Act, the validity of the bye-laws of a society had to be tested, notwithstanding the fact that
the bye-laws had been earlier approved by the Registrar of Co-operative Societies. Learned
Senior Counsel also contended that under Section 14 of the Act, the Registrar had the power to
call upon the Society to amend its bye-laws and in that context, the Registrar could direct the
Society to delete the restriction placed on admission to membership by bye-law No.7 of the bye-
laws of the Society. In reply, Mr. Sorabjee pointed out that the rights under Part III of the
Constitution of India pertained to State action and an individual could always join a voluntary
association or a cooperative society which placed certain restrictions on the right, he might have
otherwise enjoyed. There was also no substance in the contention that public policy was being
violated.

7. Before proceeding further, some of the relevant provisions of the Gujarat Act may be
noticed in a little detail. The Society though originally registered under the Bombay Co-operative

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Societies Act, 1925 has to be deemed to be registered under the Gujarat Act by virtue of Section
169 of the Gujarat Cooperative Societies Act, 1961. Section 2(2) of the Act defines bye-laws as
meaning, bye-laws registered under the Act. Section 2(13) defines a member as meaning a
person joining in an application for the registration of a co-operative society which is
subsequently registered, or a person, duly admitted to membership of the society after its
registration. Section 4 of the Act, based on which considerable arguments were raised before us,
reads as follows:- "4. Societies which may be registered.- A society, which has as its object the
promotion of the economic interests or general welfare of its members or of the public, in
accordance with co-operative principles, or a society established with the object of facilitating
the operations of any such society, may be registered under this Act:

Provided that it shall not be registered if, in the opinion of the Registrar, it is economically
unsound, or its registration may have an adverse effect upon any other society, or it is opposed
to, or its working is likely to be in contravention of pubic policy."

Section 6 insists that a society shall not be registered under the Act unless it consists of at least
ten persons not belonging to the same family, who are qualified to be members under the Act and
who reside within the area of operation of the society. This shows that the members of a family
could not by themselves form into a society. There was no such embargo on persons belonging
to a community or sex forming themselves into a cooperative society. Section 8 speaks of
application for registration and Section 9 speaks of registration. As noticed, the Society was
originally registered under the Bombay Act. Under Section 11 of the Act, the Registrar is given
the power to decide certain questions. The said Section reads:

"11. Power of Registrar to decide certain questions.- When, any question arises whether for the
purpose of the formation, or registration or continuance of a society or the admission of a person
as a member of a society under this Act a person is an agriculturist or a non-agriculturist, or
whether any person is a resident in a town or village or group of villages, or whether two or more
villages shall be considered to form a group, or whether any person belongs to any particular
tribe, class or occupation, the question shall be decided by the Registrar."

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It may be noted that the power does not include the power to decide whether the refusal to admit
a particular member on the basis that he is not qualified under the bye-laws is correct or not and
the power is conferred only to decide the eligibility of a person to be a member, apparently in
terms of the Act, the Rules and the bye-laws. Section 12 enables the Registrar to classify the
societies. Section 13 provides that an amendment of the bye-laws of a society had to be approved
by the Registrar before it could come into force. Section 14 of the Act confers a power on the
Registrar to direct an amendment of the bye-laws of a society. The said Section reads as under:-

"14. Power to direct amendment of bye-

laws .- (1) If it appears to the Registrar that an amendment of the bye-laws except in respect of
the name or objects of a society is necessary or desirable in the interest of such society, he may
call upon the society, in the prescribed manner, to make the amendment within such time as he
may specify.

(2) If the society fails to make the amendment within the time so specified, the Registrar after
giving the society an opportunity of being heard and with the prior approval of the State Co-
operative Council, may register the amendment, and shall thereupon issue to the society a copy
thereof certified by him. With effect from the date of the registration of the amendment in the
manner aforesaid, the bye-laws shall be deemed to have been duly amended accordingly ; and
the bye-laws as amended shall be binding on the society and its members."

Section 22 provides that subject to the provisions of Section 25, no person shall be admitted as a
member of a society unless he is an individual, who is competent to contract, a firm, company, or
any other body corporate or a society registered under the Societies Registration Act, 1860, a
society registered, or deemed to be registered, under the Act, the State Government, a local
authority, or a public trust registered under Bombay Public Trusts Act, 1950.

Section 23 deals with removal of a member in certain circumstances. Section 24 speaks of open
membership. Sub-Section (1) thereof, which is of immediate relevance, reads as follows:- "24.
Open membership. (1) No society shall, without sufficient cause, refuse admission to

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membership to any person duly qualified therefor under the provisions of this Act, the rules and
bye-laws of such society."

Be it noted that admission to membership could not be refused only to a person who was duly
qualified therefor under the Act, the Rules and the bye-laws of such Society. In other words, the
bye-laws are not given the go-by in spite of the introduction of the concept of open membership
as indicated by the heading of the Section. Section 29 of the Act restricted the right of a member
other than the State Government or a society to hold more than one fifth of the total share capital
of the society. Section 30 places restriction on transfer of share or interest. It reads "30.
Restrictions on transfer of share or interest.- (1) Subject to the provisions of section 29 and sub-
section (2) a transfer of, or charge on, the share or interest of a member in the capital of a society
shall be subject to such conditions as may be prescribed.

(2) A member shall not transfer any share held by him, or his interest in the capital or
property of any society, or any part thereof, unless.-

(a) he has held such share or interest for not less than one year;

(b) the transfer or charge is made to the Society, or to a member of the Society, or to a person
whose application for membership has been accepted by the Society; and

(c) the committee has approved such transfer."

It can be seen that a restriction is placed on the right of a member to transfer his share by sub-
section (2) of Section 30 and the transfer could be only in favour of the society or to a member of
the society or to a person whose application for membership has been accepted by the society
and the committee has approved such transfer. Section 31 provides for transfer of interest on
death of a member. Even an heir or a legal representative, had to seek and obtain a membership
in the society, before the rights could be transferred to him. The section also leaves a right to the
heir or legal representative to require the society to pay him the value of the share or interest of
the deceased member, ascertained as prescribed. Section 32 of the Act provides that the share or

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interest of a member in the capital of a Cooperative Society is not liable to attachment. Under
Section 36 of the Act, the society even has the power to expel a member and unless otherwise
ordered in special circumstances by the Registrar, such expelled member does not have a right of
re-admission to membership. Sections 44 to 46 place restrictions on transactions with non-
members and the said transactions were to be subject to such restrictions as may be prescribed.
Under Chapter V of the Act, any society duly registered under the Act would be entitled to State
aid. Under Section 73 of the Act, the final authority of the society is to vest in the general body
of the society, subject to it being delegated in terms of the bye-laws of the society. The powers
and functions of the Committee in which the management of every society vested, are dealt with
in Section 74 of the Act.

8. The Gujarat Co-operative Societies Rules, 1965 was framed in terms of the Act. Rule
12(2) provides that no Co-operative Housing Society shall, without sufficient cause, refuse
admission to its membership, to any person duly qualified therefor under the provisions of the
Act and its bye-laws, to whom an existing member of such society wants to sell or transfer his
land or house and no such society shall, without sufficient cause, refuse to give permission to any
existing member to sell or transfer his plot of land or house to another person who is duly
qualified to become a member of that society.

9. A peep into the history of the legislation brought in to govern the co-operative movement
in the country seems justified. The real first legislation touching the co-operative movement was
the Co-operative Credit Societies Act, 1904. When that act came into being, there was no other
act in force under which an association or a society could be formed for the purpose of
promoting the economic interests of its members in accordance with the well recognized co-
operative principles, though a co-operative society could be organized under the Indian
Companies Act, 1882. Lacuna was found in the working of that Act especially in the
development of rural credit. To remove the same, the Cooperative Societies Act, 1912 was
enacted. Under Section 4 of that Act, a society which had as its object, the promotion of
economic interests of its members in accordance with economic principles, could be registered
under the Act. Under Section 6, no society could be registered which did not consist of at least
10 persons above the age of 18 years and where the object of the society was the creation of

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funds to be lent to its members unless such persons either resided in the same town or village or
in the same group of villages or they were members of the same tribe, class, caste or occupation
unless otherwise directed by the Registrar of Co-operative societies. Section 14 placed
restrictions on the transfer of share or interest by a member and the transfer could be made only
to the society or to a member of the society. What is relevant for our purpose is to notice that
normally, the membership in a society created with the object of creation of funds to be lent to its
members, was to be confined to members of the same tribe, class, caste or occupation. The Co-
operative Societies Act, 1912 continued in force until the concerned States enacted laws for
themselves. It was, thus, that the Bombay Co-operative Societies Act, 1925 was enacted. We
have earlier noticed some of the relevant provisions of the Act and it is not necessary to repeat
them here. Under Section 72 of the Act, a society registered either under the Co-operative Credit
Societies Act, 1904 or the Co-operative Societies Act, 1912 was to be deemed to be registered
under the Act. What is required to be noticed is that in this Act also, when the object of the
society was the creation of funds to be lent to its members, the membership had to be confined to
persons belonging to the same town or village or same group of villages or they had to be
members of the same tribe, class (originally it was caste) or occupation unless the Registrar
ordered otherwise. It was this Act, under which the present appellant Society got itself registered,
though it later came to be governed by the Gujarat Co-operative Societies Act which was
subsequently enacted. We have already adverted to the general provisions thereof but it may be
relevant to notice here that under Section 6, no society other than a federal society, could be
registered unless it consisted of at least 10 persons belonging to different families and who
resided in the area of operation of the society and no society with unlimited liability could be
registered unless all persons forming the society, resided in the same town or village or in the
group of villages. Section 24 of the Act put restrictions in respect of membership. Section 30
restricted the right of transfer and Section 31 the right of inheritance. Thus, running right through
the relevant enactments, is the concept of restricted membership in a co-operative society. The
concept of open membership referred to in Section 24 of the Act has therefore to be understood
in this background, especially when we bear in mind that it only placed an embargo on refusal of
admission to membership to any person duly qualified therefor under the provisions of the Act,
the Rules and the bye-laws of the society.

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10. It could be seen from the leaflet which is a part of Annexure P-1 containing the bye-laws
of the Society filed with the rejoinder that suggestions were made regarding the formation of co-
operative housing societies. The appellant is a housing society. It was stated that the essential
feature of every housing society was at least that its houses formed one settlement in one
compact area and the regulation of the settlement rested in the hands of the managing committee
of the society. The problem involved in devising of model bye-laws which had to combine rather
opposite requirements is also seen explained. In the suggestions for the promotion of a housing
society the first essential is said to be that there should be a bond of common habits and common
usage among the members which should strengthen their neighbourly feelings, their loyal
adherence to the will of the society expressed by the committee's orders and their unselfish and
harmonious working together. In India, this bond was most frequently found in a community or
caste or groups like cultivators of a village. It is seen that the appellant Society, more or less,
adopted the model bye-laws prepared in that behalf and by bye-law 7, the housing society
confined its membership to those of the Parsi community.

11. The cooperative movement, by its very nature, is a form of voluntary association where
individuals unite for mutual benefit in the production and distribution of wealth upon principles
of equity, reason and common good. No doubt, when it gets registered under the Cooperative
Societies Act, it is governed by the provisions of the Cooperative Societies Act and the Rules
framed thereunder. In Damyanti Naranga v. Union of India & Others (AIR 1971 SC 966), this
Court, discussing the scope of the right to form an association guaranteed by Article 19(1)(c) of
the Constitution of India, stated that the right to form an association necessarily implies that the
persons forming the association have also the right to continue to be associated with only those
whom they voluntarily admit in the association. Any law, by which members are introduced in
the voluntary Association without any option being given to the members to keep them out, or
any law which takes away the membership of those who have voluntarily joined it, will be a law
violating the right to form an association. Based on this decision, it is contended on behalf of the
Society that its members have the right to be associated only with those whom they consider
eligible to be admitted and the right to deny admission to those with whom they do not want to
associate, cannot be interfered with by the Registrar by imposing on them a member who
according to them was not eligible to be admitted. The argument on this basis is sought to be met

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on behalf of the respondents by reference to another decision of this Court in Daman Singh and
others, etc. v. State of Punjab and others, etc. (AIR 1985 SC 973). Therein, their Lordships, after
referring to Damyanti (supra), held that that decision had no application to the situation before
them. The position was explained in the following words:-

"That case has no application whatever to the situation before us. It was a case where an
unregistered society was by statute converted into a registered society which bore no
resemblance whatever to the original society. New members could be admitted in large numbers
so as to reduce the original members to an insignificant minority. The composition of the society
itself was transformed by the Act and the voluntary nature of the association of the members who
formed the original society was totally destroyed. The Act was, therefore, struck down by the
Court as contravening the fundamental right guaranteed by Art. 19(1)(f). In the cases before us
we are concerned with co-operative societies which from the inception are governed by statute.
They are created by statute, they are controlled by statute and so, there can be no objection to
statutory interference with their composition on the ground of contravention of the individual
right of freedom of association."

It is emphasized that the principle recognized in the Damyanti's case (supra) was not applicable
to a co-operative society since it is a creature of a statute, the Cooperative Societies Act and that
the rights of its members could be abridged by a provision in the Act. Regarding the rights of an
individual member, their Lordships have stated: "Once a person becomes a member of a
cooperative society, he loses his individuality qua the Society and he has no independent rights
except those given to him by the statute and the bye-laws."

12. 'Daman Singh's case (supra), in our view, is not an answer to the claim of the Society that
it had the right to decide with whom it wants to associate or to deny membership to a person who
was not qualified to be one in terms of the bye-laws of the Society. The effect of the observations
in Daman Singh's case (supra), is only that cooperative societies, from their very inception are
governed by the statute, the Cooperative Societies Act, that they are created by statute, they are
controlled by the statute and so, there can be no objection to statutory interference with their
composition or functioning and no merit in a challenge to statutory interference based on

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contravention of the individual right of freedom of association. As we understand the statement
of the law by this Court in Daman Singh's case, it only means that the action of the Society in
refusing membership to a person has to be tested in the anvil of the provisions of the Act, the
Rules and its bye- laws. Be it noted that the bye-laws had already been approved on the basis that
it is consistent with the Act and the Rules. Even then, it may be possible in a given case to point
out that a particular bye-law was against the terms of the Act or the Rules. Daman Singh does
not indicate that the Act, the Rules and the bye-laws for that matter, have to be given the go-by,
merely because the particular bye-law or action of the Society may not accord with our concept
of fairness or propriety in terms of the rights available to an ordinary citizen. Therefore, in the
light of the observations in Daman Singh, what one has to search for, is a provision in the Act or
the Rules which prevails over bye-law No.7 of the Society, confining membership in it, to only a
person who is a Parsi. Section 24 of the Act, no doubt, speaks of open membership, but Section
24(1) makes it clear that, that open membership is the membership of a person duly qualified
therefor under the provisions of the Act, the Rules and the bye-laws of the Society. In other
words, Section 24(1) does not contemplate an open membership de hors the bye-laws of the
Society. Nor do we find anything in the Act which precludes a society from prescribing a
qualification for membership based on a belief, a persuasion or a religion for that matter. Section
30(2) of the Act even places restrictions on the right of a member to transfer his right. In fact, the
individual right of the member, respondent No.2, has got submerged in the collective right of the
Society. In State of U.P. and another v. C.O.D. Chheoki Employees' Cooperative Society Ltd.
and others, (1997) 3 SCC 681, this Court after referring to Daman Singh's case (supra) held in
paragraph 16 that :

"Thus, it is settled law that no citizen has a fundamental right under Article 19(1)(c) to become a
member of a Cooperative Society. His right is governed by the provisions of the statute. So, the
right to become or to continue being a member of the society is a statutory right. On fulfillment
of the qualifications prescribed to become a member and for being a member of the society and
on admission, he becomes a member. His being a member of the society is subject to the
operation of the Act, rules and bye-laws applicable from time to time. A member of the society
has no independent right qua the society and it is the society that is entitled to represent as the
corporate aggregate. No individual member is entitled to assail the constitutionality of the

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provisions of the Act, rules and the bye-laws as he has his right under the Act, rules and the bye-
laws and is subject to its operation. The stream cannot rise higher than the source."

13. Section 4, on which reliance is placed, with particular reference to its proviso, only
speaks of denial of registration if, in the opinion of the Registrar, the Society to be formed was
economically unsound, or its registration may have an adverse effect upon any other Society, or
it is opposed to, or its working is likely to be in contravention of public policy. Prima facie, it
may have to be said that public policy, in the context of Section 4 of the Act, is the policy that is
adopted by the concerned Act and the Rules framed thereunder. The concept of public policy in
the context of the Cooperative Societies Act has to be looked for under the four corners of that
Act and in the absence of any prohibition contained therein against the forming of a society for
persons of Parsi origin, it could not be held that the confining of membership as was done by
bye-law No.7, was opposed to public policy. When a statute is enacted, creating entities
introduced thereunder on fulfillment of the conditions laid down therein, the public policy in
relation to that statute has to be searched for within the four corners of that statute and when so
searched for, one does not find anything in the Act which prevents the Society from refusing
membership to a person who does not qualify in terms of bye-law No.7 of the Society.

14. Reliance was placed on Rule 12 of the Gujarat Cooperative Societies Rules, 1965. Rule
12 deals with open membership and provides in Rule 12(2) as follows:

"12. Open membership.-(1) ..

(2) No co-operative housing society shall without sufficient cause, refuse admission to its
membership to any person, duly qualified therefor, under the provisions of the Act, and its bye-
laws to whom an existing member of such society wants to sell or transfer his plot of land or
house and no such society shall without sufficient cause, refuse to give permission to any
existing member thereof to sell or transfer his plot of land or house to another person who is duly
qualified as aforesaid to become its member."

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Rule 12(2), as can be seen, provides only that, no person shall be refused admission provided he
is duly qualified under the Act and the bye-laws of the society to be a member or permission for
transfer refused, if the proposed transferee is qualified to be a member. Here again, the primacy
given to the bye-laws of the society is in no manner sought to be whittled down by reference to
any public policy going by the larger concept of that term and outside the Act. The decisions of
the Bombay High Court, the Gujarat High Court and the Madhya Pradesh High Court relied on
by learned counsel proceeded on the basis that if any provision is made against the constitutional
scheme of things like confining membership in a Society to a caste, religion or creed, the same
would be opposed to public policy and hence unenforceable. The question is whether such an
approach is warranted when a statute enacted in that behalf outlines the contours of the policy
sought to be enforced by the creation of bodies thereunder, being essentially associations which
are voluntary in nature.

15. Membership in a co-operative society only brings about a contractual relationship among
the members forming it subject of course to the Act and the Rules. One becomes a member in a
co-operative society either at the time of its formation or acquires membership in it on
possessing the requisite qualification under the bye-laws of the society and on being accepted as
a member. It is not as if one has a fundamental right to become a member of a co-operative
society. But certainly, if the application of one for membership, who is otherwise qualified to be
a member under the Act, Rules and the bye-laws of the society, is rejected unreasonably or for
frivolous reasons, the person may be entitled to enforce his claim to become a member in an
appropriate forum or court of law. This is the effect of the decision in Jain Merchants Co-
operative Housing Society vs. HUF of Manubhai (1995 (1) Gujarat Law Reporter 19) relied on
by the High Court. The said decision does not lay down a proposition, nor can it lay down a
proposition, that even a person who does not qualify to be a member in terms of the bye-laws of
a society can enforce a right to become a member of that society. It is one thing to say that it is
not desirable to restrict membership in a society based solely on religion or sex but it is quite
different thing to say that any such voluntary approved bye-law containing such a restriction
could be ignored or declared unconstitutional by an authority or a tribunal created under the Act
itself. Normally, the bye-laws of a society do not have the status of a statute and as held by this
Court in Co-operative Central Credit Bank Ltd. vs. Industrial Tribunal, Hyderabad (AIR 1970

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SC 245) bye-laws are only the rules which governs the internal management or administration of
a society and they are of the nature of articles of association of a company incorporated under the
Companies Act. They may be binding between the persons affected by them but they do not have
the force of a statute.

16. The validity of a bye-law, that too an approved bye-law, has to be tested in the light of
the provisions of the Act and the rules governing co-operative societies. In so testing, the search
should be to see whether a particular bye-law violates the mandate of any of the provisions of the
Act or runs counter to any of its provisions or to any of the rules. Section 24(1) of the Act only
provides for open membership subject to a person, aspiring to be a member, possessing the
qualification prescribed by the bye-laws. It is not an open membership dehors the qualification
prescribed by the bye-laws. When in Daman Singh this Court held that when a co-operative
society is governed by the appropriate legislation it will be subject to the intervention made by
the concerned legislation, it only meant that a legislative provision in the Act can be introduced
for the purpose of eliminating a qualification for membership based on sex, religion or a
persuasion or mode of life. But so long as there is no legislative intervention of that nature, it is
not open to the court to coin a theory that a particular bye-law is not desirable and would be
opposed to public policy as indicated by the Constitution. The Constitution no doubt provides
that in any State action there shall be no discrimination based either on religion or on sex. But
Part III of the Constitution has not interfered with the right of a citizen to enter into a contract for
his own benefit and at the same time incurring a certain liability arising out of the contract. As
observed by the High Court of Bombay in Karvanagar Sahakari Griha Rachana Sanstha
Maryadit and others vs. State (AIR 1989 Bombay 392) the members have joined the society in
accordance with the bye-laws and the members join a housing society by ascertaining what
would be the environment in which they will reside. It is not permissible for the State
Government to compel the society to amend its bye-laws as it would defeat the object of
formation of the society. In that case, the society was constituted with the object of providing
peaceful accommodation to its members. Though there may be circumstances justifying the State
taking steps to meet shortage of accommodation, it was not open to the State Government to
issue a direction to the Registrar of Co-operative Societies to direct a co- operative society to
make requisite amendments to their bye-laws and grant permission to its members to raise

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multistoried constructions. In appeal from that decision reported as State of Maharashtra and
others vs. Karvanagar Sahakari Griya Rachana Sanstha Maryadit and others (2000 (9) SCC 295)
this Court while dismissing the appeal stated that it was clear that though a power was conferred
on the Registrar to direct amendment of the bye-laws of a society, yet the paramount
consideration is the interest of the society. So also, the power of the State Government to issue
directions in public interest could not be exercised so as to be prejudicial to the interest of the
society. In the view of this Court, what was in the interest of the society was primarily for the
society alone to decide and it was not for an outside agency to say. Where, however, the
government or the Registrar exercised statutory powers to issue directions to amend the bye-
laws, such directions should satisfy the requirement of the interest of the society. This makes it
clear that the interest of the society is paramount and that interest would prevail so long as there
is nothing in the Act or the Rules prohibiting the promotion of such interest. Going by Chheoki
Employees' Cooperative Society Ltd.,'s case, neither the member, respondent No.2, nor the
aspirant to membership, respondent No.3 had the competence to challenge the validity of the
bye-laws of the Society or to claim a right to membership in the Society.

17. It appears to us that unless appropriate amendments are brought to the various
Cooperative Societies Acts incorporating a policy that no society shall be formed or if formed,
membership in no society shall be confined to persons of a particular persuasion, religion, belief
or region, it could not be said that a society would be disentitled to refuse membership to a
person who is not duly qualified to be one in terms of its bye-laws.

18. It can be seen from the bye-laws of the present Society that the Society, more or less,
adopted the model bye-laws made applicable to the Bombay Presidency. The object of the
Society as set out in bye-law No.2 reads:

"2. The objects of the Society shall be to carry on the trade of building, and of buying,
selling, hiring, letting and developing land in accordance with Co-operative principles and to
establish and carry on social, re-creative and educational work in connection with its tenets and
the Society was to have full power to do all things it deems necessary or expedient for the
accomplishment of all objects specified in its bye- laws, including the power to purchase, hold,

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sell, exchange, mortgage, rent, lease, sub-lease, surrender, accept surrenders of and deal with
lands of any tenure and to sell by installments and subject to any terms or conditions and to make
and guarantee advances to Members for building or purchasing property and to erect, pull down,
repair, alter or otherwise deal with any building thereon."

Under bye-law No.7, it was provided that members shall be elected by the Committee provided
that all members shall belong to the Parsi community and on the conditions referred to in bye-
law No.7. Provision has been made providing for the contingency arising out of the death of a
member. Under bye-law No.21, it is provided that any share held by a member could be sold in
terms of the other relevant bye-laws only with previous sanction of the Committee. The
Committee is given full discretion in granting or withholding such sanction. Of course, in terms
of the Act and the Rules, the refusal may be appealable before the Authority under the Act and
the Society may not be in a position to argue that its decision is final. But that does not mean that
the Authority under the Act is competent to ignore the bye-law relating to qualification to
membership and direct the Society by exercising appellate or other power, to admit a person to
membership who is not qualified to be a member, on the basis of its notion of public policy or
fairness in dealing. These approved bye-laws, clearly, confer power on the Committee to reject
the application for membership of a person who is not qualified in terms of the bye-law
concerned and this cannot be interfered with on the basis of anything contained in the Act or the
Rules. We are, therefore, satisfied that by introducing a theory of what the court considers to be
public policy, a society registered under the Cooperative Societies Act, cannot be directed to
admit a member who is not qualified to be a member in terms of its duly registered bye-laws.

19. It is true that it is very tempting to accept an argument that Articles 14 and 15 read in the
light of the preamble to the Constitution of India reflect the thinking of our Constitution makers
and prevents any discrimination based on religion or origin in the matter of equal treatment or
employment and to apply the same even in respect of a co- operative society. But, while being
thus tempted, the Court must also consider what lies behind the formation of co-operative
societies and what their character is and how they are to be run as envisaged by the various
Cooperative Societies Acts prevalent in the various States of this Country. Running through the
Cooperative Societies Act, is the theory of area of operation. That means that membership could

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be denied to a citizen of this Country who is located outside the area of operation of a society.
Does he not have a fundamental right to settle down in any part of the country or carry on a trade
or business in any part of the country? Does not that right carry with it, the right to apply for
membership in any cooperative society irrespective of the fact that he is a person hailing from an
area outside the area of operation of the society? In the name of enforcing public policy, can a
Registrar permit such a member to be enrolled? Will it not then go against the very concept of
limiting the areas of operation of cooperative societies? It is, in this context that we are inclined
to the view that public policy in terms of a particular entity must be as reflected by the statute
that creates the entity or governs it and on the Rules for the creation of such an entity. Tested
from that angle, so long as there is no amendment brought to the Cooperative Societies Acts in
the various States, it would not be permissible to direct the societies to go against their bye-laws
restricting membership based on its own criteria.

20. What is relied on to invoke the plea that the restriction of membership is opposed to
public policy is the proviso to Section 4 of the Act. We have already quoted Section 4. For
convenience, we extract the proviso once again:-

"Provided that it shall not be registered if, in the opinion of the Registrar, it is economically
unsound, or its registration may have an adverse effect upon any other society, or it is opposed
to, or its working is likely to be in contravention of pubic policy."

What is the public policy contemplated by the proviso, when the formation and running of an
association like a cooperative society is governed by a law enacted for that purpose, the
Cooperative Societies Act, which recognizes the sanctity of the rights of the citizens coming
together, to impose restrictions on their own rights by making appropriate provisions in the bye-
laws of the society? Normally, that policy has to be searched for within the confines of that
statute. What one has to bear in mind is that the statute reflects the policy of the Legislature in
respect of the subject matter dealt with thereunder. When the Gujarat Cooperative Societies Act,
1961 was enacted, it could not be taken that the Legislature was unaware of the fundamental
rights of citizens enshrined in Articles 19(1)(d) and (g) of the Constitution of India. But the
Legislation, in aid of the cooperative movement and in the context of the rights available to

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citizens under Article 19(1)(c) of the Constitution of India, imposes only certain restrictions as
reflected by the Act, the Rules and the Bye-laws of the particular society. The Acts specifically
gave sanctity to the bye-laws of a Society duly approved by the authorities under the Act. The
expression 'public policy' in the context of Section 4 of the Act can be understood only as being
opposed to the policy reflected by the Cooperative Societies Act. As indicated in Renusagar
Power Co. Ltd. vs. General Electric Co. , 1994 Supp. (1) SCC 644, the public policy underlying
a statute has to be considered in the context of the provisions of that statute. Therein, in the
context of the Foreign Exchange Regulation Act, 1973, it was held that any violation of the
provisions of that Act enacted in national economic interest would be contrary to public policy
and that would be the sense in which it should be understood when used in Section 7(1)(b)(ii) of
that Act.

21. Under the Indian Contract Act, a person sui juris has the freedom to enter into a contract.
The bye-laws of a cooperative society setting out the terms of membership to it, is a contract
entered into by a person when he seeks to become a member of that society. Even the formation
of the society is based on a contract. This freedom to contract available to a citizen cannot be
curtailed or curbed relying on the fundamental rights enshrined in Part III of the Constitution of
India against State action. A right to enforce a fundamental right against State action, cannot be
extended to challenge a right to enter into a contract giving up an absolute right in oneself in the
interests of an association to be formed or in the interests of the members in general of that
association. This is also in lieu of advantages derived by that person by accepting a membership
in the Society. The restriction imposed, is generally for retaining the identity of the society and to
carry forward the object for which the society was originally formed. It is, therefore, a fallacy to
consider, in the context of cooperative societies, that the surrendering of an absolute right by a
citizen who becomes a member of that society, could be challenged by the said member by
taking up the position that the restriction he had placed on himself by entering into the compact,
is in violation of his fundamental right of freedom of movement, trade or right to settle in any
part of the country. He exercises his right of association when he becomes a member of a society
by entering into a contract with others regulating his conduct vis-`-vis the society, the members
constituting it, and submerging his rights in the common right to be enjoyed by all and he is
really exercising his right of association guaranteed by Article 19(1)(c) of the Constitution of

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India in that process. His rights merge in the rights of the society and are controlled by the Act
and the bye-laws of the society.

22. Entering into an association with others for forming a co-operative society and
subscribing to its bye-laws are matters of contract voluntarily undertaken by a citizen. While
considering an argument that a provision in the bye-laws thus subscribed to by a member is
opposed to public policy, the court cannot forget another important public policy as stated by
Jessel, M.R. in Printing and Numerical Registering Company v.s Sampson ( 1874-75 (Vol. 19)
L.R. Equity Cases 462):

"it must not be forgotten that you are not to extend arbitrarily those rules which say that a given
contract is void as being against public policy, because if there is one thing which more than
another public policy requires, it is that men of full age and competent understanding shall have
the utmost liberty of contracting, and that their contracts when entered into freely and voluntarily
shall be held sacred and shall be enforced by Courts of justice. Therefore, you have this
paramount public policy to consider that you are not lightly to interfere with this freedom of
contract. Now, there is no doubt public policy may say that a contract to commit a crime, or a
contract to give a reward to another to commit a crime, is necessarily void. The decisions have
gone further, and contracts to commit an immoral offence, or to give money or reward to another
to commit an immoral offence, or to induce another to do something aginst the general rules of
morality, though far more indefinite than the previous class, have always been held to be void. I
should be sorry to extend the doctrine much further."

23. In the context of the freedom of contract available to a person and in the context of the
right to form an association guaranteed by Article 19(1)(c) of the Constitution of India, and the
law governing such an association, courts have to be cautious in trying to ride the unruly horse of
public policy in acceding to a challenge to a qualification for membership in the bye-laws, not
taboo under the Act and the Rules themselves.

24. It also appears to us, that a person after becoming a member of a Cooperative Society
cannot seek to get out of the obligation undertaken by him while becoming a member of such a

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Society by resort to the principle of public policy based on constitutional protections given to an
individual as against State action. As noticed in Rodriguez vs. Speyer Bros. (1919) A.C. 59 and
Fender vs. Mildmay (1938) A.C. 1, the considerations of public policy are disabling and not
enabling. Observed Lord Sumner in Rodriguez (Supra)":

"Considerations of public policy are applied to private contracts or dispositions in order to

disable, not to enable. I never heard of a legal disability from which a party or a transaction could
be relieved because it would be good policy to do so."

By invoking considerations of public policy, there appears to be no justification in relieving a

member of a Cooperative Society of the obligations undertaken by him while joining it. The
argument, therefore, that Respondent No.2, herein, a member, should be relieved of the
obligation undertaken by him while joining the Society or becoming its member or while seeking
permission to put up a multi-storeyed construction, should be relieved of the restriction, he has
agreed to, on the ground that the same might affect his fundamental rights guaranteed by Article
19(1)(d) or (g) of the Constitution of India or that it offends Article 300A of the Constitution.

25. Dealing with the validity of a restriction which prohibits assignments of contractual rights
which have the effect of bringing the assignee into direct contractual relations with the other
party to the contract, the House of Lords held in Linden Gardens Trust Ltd. v. Lenesta Sludge
Disposal Ltd. and others, [1993] 3 All E.R. 417, that the prohibition on the assignment including
that of accrued rights of action was not void as being contrary to public policy; since, a party to a
building contract could have a genuine commercial interest in seeking to ensure that he was in
contractual relations only with a person whom he had selected as the other party to the contract
and there was no public need for the law to support a market in choses in action. The principle in
our view supports the position that a contractual restriction on whom to admit as a member or
with whom to associate, cannot be said to be opposed to public policy.

26. It is true that in secular India it may be somewhat retrograde to conceive of co-operative
societies confined to group of members or followers of a particular religion, a particular mode of
life, a particular persuasion. But that is different from saying that you cannot have a co-operative

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society confined to persons of a particular persuasion, belief, trade, way of life or a religion. A
co-operative society is not a state unless the tests indicated in Ajay Hasia are satisfied. There is
no case here that the appellant society satisfies the tests laid down by Ajay Hasia so as to be
considered to be a state within the meaning of Article 12 of the Constitution. The fundamental
rights in Part III of the Constitution are normally enforced against State action or action by other
authorities who may come within the purview of Article 12 of the Constitution. It is not possible
to argue that a person has a fundamental right to become a member of a voluntary association or
of a co-operative society governed by its own bye-laws. So long as this position holds, we are of
the view that it is not possible, especially for a Registrar who is an authority under The Co-
operative societies Act, to direct a co- operative society to admit as a member, a person who does
not qualify to be a member as per the bye-laws registered under the Act. Nor can a Registrar
direct in terms of Section 14 of the Act to amend the bye-laws since it could not be said that such
an amendment, as directed in this case is necessary or desirable in the interests of the appellant
society. What is relevant under Section 14 of the Act is the interests of the society and the
necessity in the context of that interest. It is not the interest of an individual member or an
aspirant to a membership.

27. It is true that in the activities of a society, as envisaged by the bye- laws, the society may
acquire rights or incur obligations which may be enforced. But the incurring of such an
obligation or the acquiring of such a right, cannot stand in the way of the right to form an
association guaranteed by Article 19(1)(c) of the Constitution available to the members of the
society who formed themselves into the appellant Society. The position under The Bombay Co-
operative Societies Act under which the Society was originally formed was also no different as
can be seen from the relevant provisions of the Act. It, therefore, appears to us to be not open to
the Registrar or any other authority under The Co-operative Societies Act to direct the Society to
go against its own bye-laws and to admit a person to membership as has been sought to be done
in this case.

28. The argument that public policy is as reflected by the constitutional guarantees, which
govern rights and obligations has to be approached with caution. It will be easy for State
Legislatures to provide in their respective Co-operative Societies Acts that no society could be

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formed or registered under the Act as confined to a group, a sex, a religion or members of a
particular persuasion or way of life. But that is different from saying that in the name of open
membership, subject to its bye-laws contemplated by the relevant provisions of the Act, a
direction could be issued to ignore the bye-laws and to admit a person who is not qualified to
become a member. Moreover, what is public policy in the context of a co-operative society got
registered by certain persons coming together and laying down a qualification for membership in
that society, is a question that has to be considered essentially in the context of the availability of
such a right in India to form such associations and the absence of a prohibition in that behalf
contained in the Co-operative Societies Act and the Rules. In fact, the Act and the Rules
contemplate classification of a society and even there, no prohibition has been indicated in
respect of the confining of the membership to a class of people. The decisions of the Bombay
High Court relied on by counsel for the respondent, in our view, have proceeded on the basis of
the concept of open membership without giving adequate importance to the provision in the very
section that the open membership is subject to bye-laws of the society or the qualification
prescribed for membership in the society. In that context, it is not possible to import one's
inherent abhorrence to religious groups or other groups coming together to form, what learned
counsel for the respondent called "ghettos". That is certainly an important aspect but that is an
aspect that has to be tackled by the legislature and not by the authorities under the Act directing
the co-operative society to go against its own bye-laws or by the courts upholding such orders of
the authorities, based on presumed public policy when the Act itself does not warrant it or
sanction it.

29. Section 23 of the Contract Act provides that where consideration and object are not
lawful the contract would be void. But for Section 23 to apply it must be forbidden by law or it
must of such a nature that it would defeat the provision of any law or it is fraudulent or it
involves or implies injury to the person or property of another or the court regards it as immoral
or opposed to public policy. If we proceed on the basic premise that public policy in relation to a
co-operative society is to be looked for within the four corners of the Act, the very enactment
under which the very society is formed, a bye-law that does not militate against any of the
provisions of the Act cannot be held to be opposed to public policy unless it is immoral or
offends public order. It cannot be said that a person bargaining for membership in a Society or

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for coming together with those of his ilk to form a society with the objects as set out in the bye-
laws subscribed to by him, can be considered to be doing anything immoral or against public
order. An aspirant to membership in a co-operative society, is at arms length with the other
members of the society with whom he enters into the compact or in which he joins, having
expressed his willingness to subscribe to the aims and objects of that society. In the context of
Section 23 of the Contract Act, something more than possible or plausible argument based on the
constitutional scheme is necessary to nullify an agreement voluntarily entered into by a person.
We have already quoted the relevant observations of Lord Sumner in Rodriguez vs. Speyer Bros.
(1919) A.C. 59). Here, respondent No.2 became a member of the Society of his own volition
acquiring the rights and incurring the obligations imposed by the approved bye-laws of the
Society. It is not open to respondent No.2 to approach the authorities for relieving him of his
obligations attaching to the acquisition of membership in the Society. It is also not open to the
authorities under the Act to relieve him of his obligations in the guise of entering a finding that
discrimination on the basis of the religion or sex is taboo under the Constitution in the context of
Part III thereof. As has been held by this Court, he is precluded from challenging the validity of
the bye-laws relating to membership.

30. The above conclusion would lead us to the question whether there is anything in The
Gujarat Co-operative Societies Act and the Gujarat Co-operative Societies Rules restricting the
rights of the citizens to form a voluntary association and get it registered under The Co-operative
Societies Act confining its membership to a particular set of people recognized by their
profession, their sex, their work or the position they hold or with reference to their beliefs, either
religious or otherwise. It is not contended that there is any provision in the Gujarat Co-operative
Societies Act prohibiting the registration of such a co-operative society. We have already
referred to the history of the legislation and the concept of confinement of membership based on
residence, belief or community. The concept of open membership, as envisaged by Section 24 of
the Act is not absolute on the very wording of that Section. The availability of membership is
subject to the qualification prescribed under the provisions of the Act, the Rules and the bye-laws
of such society. In other words, if the relevant bye-law of a society places any restriction on a
person getting admitted to a co-operative society, that bye-law would be operative against him

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and no person, or aspiring member, can be heard to say that he will not be bound by that law
which prescribes a qualification for his membership.

31. In our view, the High Court made a wrong approach to the question of whether a bye-law
like bye-law No.7 could be ignored by a member and whether the Authorities under the Act and
the court could ignore the same on the basis that it is opposed to public policy being against the
constitutional scheme of equality or non-discrimination relating to employment, vocation and
such. So long as the approved bye-law stands and the Act does not provide for invalidity of such
a bye- law or for interdicting the formation of co-operative societies confined to persons of a
particular vocation, a particular community, a particular persuasion or a particular sex, it could
not be held that the formation of such a society under the Act would be opposed to public policy
and consequently liable to be declared void or the society directed to amend its basic bye-law
relating to qualification for membership.

32. It is true that our Constitution has set goals for ourselves and one such goal is the doing
away with discrimination based on religion or sex. But that goal has to be achieved by legislative
intervention and not by the court coining a theory that whatever is not consistent with the scheme
or a provision of the Constitution, be it under Part III or Part IV thereof, could be declared to be
opposed to public policy by the court. Normally, as stated by this Court in Gheru Lal Parakh vs.
Mahadeodas Maiya and others (1959 Suppl. (2) SCR 406, the doctrine of public policy is
governed by precedents, its principles have been crystalised under the different heads and though
it was permissible to expound and apply them to different situations it could be applied only to
clear and undeniable cases of harm to the public. Although, theoretically it was permissible to
evolve a new head of public policy in exceptional circumstances, such a course would be
inadvisable in the interest of stability of society.

33. The appellant Society was formed with the object of providing housing to the members of
the Parsi community, a community admittedly a minority which apparently did not claim that
status when the Constituent Assembly was debating the Constitution. But even then, it is open to
that community to try to preserve its culture and way of life and in that process, to work for the
advancement of members of that community by enabling them to acquire membership in a

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society and allotment of lands or buildings in one's capacity as a member of that society, to
preserve its object of advancement of the community. It is also open to the members of that
community, who came together to form the co-operative society, to prescribe that members of
that community for whose benefit the society was formed, alone could aspire to be members of
that society. There is nothing in the Bombay Act or the Gujarat Act which precludes the
formation of such a society. In fact, the history of legislation referred to earlier, would indicate
that such coming together of groups was recognized by the Acts enacted in that behalf
concerning the co-operative movement. Even today, we have Women's co-operative societies,
we have co-operative societies of handicapped persons, we have co-operative societies of
labourers and agricultural workers. We have co-operative societies of religious groups who
believe in vegetarianism and abhore non-vegetarian food. It will be impermissible, so long as the
law stands as it is, to thrust upon the society of those believing in say, vegetarianism, persons
who are regular consumers of non-vegetarian food. May be, in view of the developments that
have taken place in our society and in the context of the constitutional scheme, it is time to
legislate or bring about changes in Co-operative Societies Acts regarding the formation of
societies based on such a thinking or concept. But that cannot make the formation of a society
like the appellant Society or the qualification fixed for membership therein, opposed to public
policy or enable the authorities under the Act to intervene and dictate to the society to change its
fundamental character.

34. Another ground relied on by the Authorities under the Act and the High Court to direct
the acceptance of respondent No.3 as a member in the Society is that the bye-law confining
membership to a person belonging to the Parsi community and the insistence on respondent No.2
selling the building or the flats therein only to members of the Parsi community who alone are
qualified to be members of the Society, would amount to an absolute restraint on alienation
within the meaning of Section 10 of Transfer of Property Act. Section 10 of the Transfer of
Property Act cannot have any application to transfer of membership. Transfer of membership is
regulated by the bye-laws. The bye-laws in that regard are not in challenge and cannot
effectively be challenged in view of what we have held above. Section 30 of the Act itself places
restriction in that regard. There is no plea of invalidity attached to that provision. Hence, the

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restriction in that regard cannot be invalidated or ignored by reference to Section 10 of the
Transfer of Property Act.

35. Section 10 of the Transfer of Property Act relieves a transferee of immoveable property
from an absolute restraint placed on his right to deal with the property in his capacity as an
owner thereof. As per Section 10, a condition restraining alienation would be void. The Section
applies to a case where property is transferred subject to a condition or limitation absolutely
restraining the transferee from parting with his interest in the property. For making such a
condition invalid, the restraint must be an absolute restraint. It must be a restraint imposed while
the property is being transferred to the transferee. Here, respondent No.2 became a member of
the Society on the death of his father. He subscribed to the bye-laws. He accepted Section 30 of
the Act and the other restrictions placed on a member. Respondent No.2 was qualified to be a
member in terms of the bye-laws. His father was also a member of the Society. The allotment of
the property was made to appellant in his capacity as a member. There was really no transfer of
property to respondent No.2. He inherited it with the limitations thereon placed by Section 31 of
the Act and the bye-laws. His right to become a member depended on his possessing the
qualification to become one as per the bye-laws of the Society. He possessed that qualification.
The bye-laws provide that he should have the prior consent of the Society for transferring the
property or his membership to a person qualified to be a member of the Society. These are
restrictions in the interests of the Society and its members and consistent with the object with
which the Society was formed. He cannot question that restriction. It is also not possible to say
that such a restriction amounts to an absolute restraint on alienation within the meaning of
Section 10 of the Transfer of Property Act.

36. The restriction, if any, is a self-imposed restriction. It is a restriction in a compact to

which the father of respondent No.2 was a party and to which respondent No.2 voluntarily
became a party. It is difficult to postulate that such a qualified freedom to transfer a property
accepted by a person voluntarily, would attract Section 10 of the Act. Moreover, it is not as if it
is an absolute restraint on alienation. Respondent No.2 has the right to transfer the property to a
person who is qualified to be a member of the Society as per its bye-laws. At best, it is a partial
restraint on alienation. Such partial restraints are valid if imposed in a family settlement, partition

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or compromise of disputed claims. This is clear from the decision of the Privy Council in
Mohammad Raza v. Mt. Abbas Bandi Bibi, ALR 59 I.A. 236 and also from the decision of the
Supreme Court in Gummanna Shetty and others v. Nagaveniamma, AIR 1967 SC 1595. So,
when a person accepts membership in a cooperative society by submitting himself to its bye-laws
and secures an allotment of a plot of land or a building in terms of the bye-laws and places on
himself a qualified restriction in his right to transfer the property by stipulating that the same
would be transferred back to the society or with the prior consent of the society to a person
qualified to be a member of the society, it cannot be held to be an absolute restraint on alienation
offending Section 10 of the Transfer of Property Act. He has placed that restriction on himself in
the interests of the collective body, the society. He has voluntarily submerged his rights in that of
the society.

37. The fact that the rights of a member or an allottee over a building or plot is attachable and
saleable in enforcement of a decree or an obligation against him cannot make a provision like the
one found in the bye-laws, an absolute restraint on alienation to attract Section 10 of the Transfer
of Property Act. Of course, it is property in the hands of the member on the strength of the
allotment. It may also be attachable and saleable in spite of the volition of the allottee. But that
does not enable the Court to hold that the condition that an allotment to the member is subject to
his possessing the qualification to be a member of the cooperative society or that a voluntary
transfer by him could be made only to the society itself or to another person qualified to be a
member of the society and with the consent of the society could straight away be declared to be
an absolute restraint on alienation and consequently an interference with his right to property
protected by Article 300A of the Constitution of India. We are, therefore, satisfied that the
finding that the restriction placed on rights of a member of the Society to deal with the property
allotted to him must be deemed to be invalid as an absolute restraint on alienation is erroneous.
The said finding is reversed.

38. In view of what we have stated above, we allow this appeal, set aside the judgments of
the High Court and the orders of the Authorities under the Act and uphold the right of the
Society to insist that the property has to be dealt by respondent No.2 only in terms of the bye-
laws of the Society and assigned either wholly or in parts only to persons qualified to be

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members of the Society in terms of its bye-laws. The direction given by the authority to the
appellant to admit respondent No.3 as a member is set aside. Respondent No.3 is restrained from
entering the property or putting up any construction therein on the basis of any transfer by
respondent No.2 in disregard of the bye-laws of the Society and without the prior consent of the
Society.

39. The Writ Petition filed by the appellant in the High Court is allowed in the above manner.
The appellant will be entitled to its costs here and in the court below.

******************************************************************************

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 Tulk v. Moxhay

Established that there are occasions in which equitable covenants can bind future purchasers of
property and „run with the land‟.

Facts

The claimant, Tulk, owned several properties in Leicester Square, London, and sold one such
property to another, making the purchaser promise to not build on the property so as to help keep
Leicester Square „uncovered with buildings‟ and creating an equitable covenant. The purchaser
subsequently sold the land and it underwent multiple transactions, and was eventually purchased
by the defendant, Moxhay. Whilst Moxhay was aware of the covenant attached to the land at the
time of the transaction, he claimed it was unenforceable as he had not been a party to the original
transaction in which the covenant had been made.

Issue

Whether an equitable covenant limiting the use of a property could „run with the land‟ and bind a
future owner of the property.

Held

The High Court, consisting of Lord Cottenham, found for Tulk, and passed an injunction to
prevent Moxhay from building on the land. The covenant had been intended to run with the land
at the time it was made, and all subsequent purchasers had been informed of its existence.
Moreover, as a covenant amounts to a contract between a vendor and vendee, it is enforceable
against a purchaser for value with either constructive or actual notice. As Moxhay had actual
notice of the covenant, he was obligated to abide by it. Notably, the relevance of this decision
decreased with the introduction of the 1925 Land Registration Act which made such covenants a
registrable interest. A, being seised of the centre garden and some houses in Leicester Square,
conveyed the garden to B in fee, and B covenanted for himself and his assigns to keep the garden
unbuilt upon.

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Held: A purchaser from B, with notice of the covenant, was bound by it in equity, whether he
was bound at law or not, and an injunction was granted to restrain him infringing the covenant.
The equitable doctrine is that restrictive covenants follow the land to the new owner on notice.
The subsequent owner must be found to have notice before he will be bound by the covenants.

The burden of a positive covenant will not run with the land. In order to bind a successor in title:
1) the covenant must be negative in substance 2) It must benefit the land of the covenantee, 3)
The burden must be intended to run with the land, and 4) the successor must have notice of the
covenant.

Lord Cottenham LC said: „It is said that the covenant being one which does not run with the
land, this court cannot enforce it; but the question is, not whether the covenant runs with the
land, but whether a party shall be permitted to use the land in a manner inconsistent with the
contract entered into by his vendor, and with notice of which he purchased.‟ and „if an equity is
attached to the property by the owner, no one purchasing with notice of that equity can stand in a
different situation from the party from whom he purchased.‟

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 Ram Newaz And Anr. vs Nankoo And Ors.

AIR 1926 All 283

JUDGMENT

1. This is the appeal of the plaintiffs who had instituted a suit as reversioners of one Ram Charan
for the possession of 2 bighas of land. In 1884 Ram Charan appears to have been in difficulties
and he had a 9-pie odd share in a certain village. He executed a sale-deed which has had to be
construed in all the Courts and on the proper construction of that sale-deed the rights of the
parties depend. The plaintiffs are the reversioners, but the defendants are the purchasers of
whatever rights the vendee had. The real point is whether the sale was an out-and-out sale of the
9-pie odd share or whether it was a sale by the vendor of the 9-pie odd share minus the 2 bighas
cow in dispute. The document lies before us and it starts by Ram Charan stating that he had a 9-
pie 3-kauri 2-dant zamindari share in the property and then, after usual formal parts, says that he
has absolutely sold, with the exception of 2 bighas of nankar land numbered as below (1460), the
entire property. Pausing there and putting the sale in the plainest; possible terms it was a sale of
the 9-pie odd share minus the 2 bighas specifically numbered. At a later portion of the deed he
says:

Let this be known that the 2 bighas of nankar land which I have excluded from the sale shall
remain in my possession for life and after my death in the possession of my aulad khas without
payment of rent or Government revenue. I or my lineal descendants have no right to transfer the
property excluded either permanently or temporarily. If none of my lineal descendants is alive in
my family then the said land shall be declared to be the own property of the vendee and his heirs
and the persons of my family shall have no claim to the same.

2. It remains only to notice one further reference to this land. In the detail we find the share sold,
viz., 9-pie 3 kauri 2 dant nankar land excluded from the 2 bighas No. 1460. The construction that

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we put upon the passages that we have read is that the vendee got on the 12th of February 1884,
the date of the sale, the 9-pie odd share with No. 1460, the 2 bighas definitely excluded, but that
they had a possibility of becoming its owners at a future date provided that provision was one
which the law would recognize. We can see in the document no indication whatever of the
vendees having acquired the whole of the property in the whole of the land including the two
bighas. What we do find is an acquisition of the whole of the 9-pie odd share except that
particular area of 2 bighas numbered 1460. Now if that be so, what is the position when a contest
arises between the nearest reversioners and the successors of the venders? The position was that
Ram Charan having died, he was succeeded by his son Mauzzam Ram, who in turn died
childless in 1918, and, therefore, those 2 bighas of land would, as it happened, if there was no
law to the contrary, become the property of the vendees within a life or lives in being and
twenty-one years after. But the fact that it happened to fall in within the legal limitation is not the
test which is to be applied to these cases. What you have to see is whether the event can be
postponed to beyond the period of a life or lives in being and 21 years after and not what in fact
happened. Now applying that test it is perfectly evident that these 2 bighas of nankar land might
have remained with the lineal descendants of Ram Charan for 100 or 200 years, and that being
so, we are of opinion that this was a condition repugnant to the law, and being so repugnant to
the law the defendants could not set up this document on which they rely as entitling them to
possession of the property. "We are, therefore, of opinion that the plaintiffs were right in
bringing this action and that the decision of the learned Judge of this Court must be set aside and
the decree of the first appellate Court which confirmed the judgment of the Munsif must be
restored with costs and fees in this Court on the higher scale.

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 Rambaran Prasad vs Ram Mohit Hazra & Ors

1967 AIR 744

Author: V Ramaswami

JUDGMENT:

Appeal by special leave from the judgment and decree dated November 11, 1959 of the Calcutta
High Court in Appeal from Original Decree No. 109 of 1954. The Judgment of the Court was
delivered by Ramaswami, J. This appeal is brought, by special leave, from the judgment of the
Calcutta High Court -dated November 18, 1959 in First Appeal No. 104 of 1954 affirming the
judgment and decree dated February 27, 1954 of the Subordinate Judge, Fifth Court, at Alipore
District 24 Parganas in Title Suit No. 100 of 1952 decreeing the suit for pre-emption in favour of
the plaintiffs respondents Nos. 1 and 2.

Facts: Two brothers, Tulshidas Chatterjee and Kishorilal Chatterjee owned certain properties
(land and building) on Paharpur Road within Mouza Garden Reach, Khidderpore, in the
suburbs of Calcutta. In the year 1938 Kishorilal sued for partition of the properties and
eventually the matter was referred to arbitration. On December 16, 1940, the arbitrators filed
their award on which a final decree was passed on March 15, 1941 in the partition suit. Under
the award, two ofthe four blocks, A, B, C & D, into which the properties were divided by the
arbitrators, namely, blocks A and C, were allotted to Tulshidas and the remaining two blocks, B
and D were allotted to Kishorilal. Two common passages marked as X and Y and a common
drain Z were kept joint between the parties for their use. In the award there was a clause to the
following effect:

"We further find and report with the consent of and approval of the parties that any party in case
of disposing or transferring any portion of his share shall offer preference to the other party,
that is each party shall have the right of pre-emption between each other." Thereafter, on August
20, 1941 Tulshidas sold his A block to one Nagendra Nath Ghosh. This was done after
Kishorilal's refusal to pre-empt the same in spite of Tulshidas's offer to him in terms of he pre-
emption clause. On April 22, 1942, Kishorilal sold, by the Kobala (Ex. 1), histwo blocks, B and

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D to Rati Raman Mukherjee and others. On June 21, 1946, the Mukherjees in their turn sold the
two blocks B & D to the plaintiffs by the Kobala [Ex. 1(a)]. On September 20, 1952 Nagendra
Nath Ghosh sold block A to defendant No. 1 and on December 2, 1952, the present suit was filed
by the plaintiffs against the said purchaser- defendant No. for pre-empting his aforesaid
purchase. On April 7, 1953 while the suit was pending in the trial court, defendant No. I sold the
disputed property (block A) to defendant No. 2. The plaintiffs thereafter made an application for
amendment of the plaint praying for a decree for pre-emption against defendants Nos. 1 & 2 and
calling upon them to execute a conveyance in favour of the plaintiffs on payment of the actual
consideration paid for the property in suit. On the conclusion of the trial the Subordinate Judge
held that the covenant of pre-emption was binding upon the defendants who had notice of that
clause and plaintiffs were entitled to enforce the night of pre- emption., He further held that the
covenant of preemption was not hit by the rule against perpetuities and was enfor- ceable against
the assignees of the original parties to the contract. Accordingly a decree was granted to the
plaintiffs asking them to deposit within one month a sum of Rs. 14,000 for the purpose of
preempting the suit property and both the defendants were directed to execute and register a
Kobala in plaintiffs' favour within 15 days of the deposit by the plaintiffs. The defendants took
the matter in appeal to the Calcutta High Court which dismissed the appeal and affirmed the
judgment and decree of the Subordinate Judge.

2. On behalf of the appellant learned Counsel put forward the argument that the covenant for pre-
emption was merely a personal covenant between the contracting parties and was not binding
against successors-in-interest or the assignees of the original parties to he contract. We are
unable to accept this submission as correct. It is true that the pre- emption clause does not
expressly state that it is binding upon the assignees or successors-in-interest, but, having regard
to the context and the circumstances in which the award was made, it is manifest that the pre-
emption clause must be construed as binding upon the assignees or successors-in-interest of
the original contracting parties. Prima Facie rights of the parties to a contract are assignable.
section 23(b) of the Specific Relief Act states :

"23. Except as otherwise provided by this Chapter, the specific performance of a contract
may be obtained by-

(a)......................................

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(b) the representative in interest, or the principal, of any party thereto: provided that, where the
learning, skill, solvency or any personal quality of such party is a material ingredient in the
contract, or where the contract provides that his interest shall not be assigned, his representative
in interest or his principal shall not be entitled to specific performance of the contract, unless
where his part thereof has already been performed Section 27(b) of the Act is to the following
effect "27. Except as otherwise provided by this Chapter, specific performance of a contract
may be enforced against-

(a)......................................

(b) any other person claiming under him by a title arising subsequently to the contract, except a
transferee for value who has paid his money in good faith and without notice of the original
contract ;"

4. Reference should also be made to ss. 37 and 40 of the Indian Contract Act which are to the
following effect "37. The parties to a contract must either perform, or offer to perform, their
respective promises, unless such performance is dispensed with or excused under the provisions
of this Act, or of any other law. Promises bind the representatives of the promisers in case of the
death of such promisers before performance, unless a contrary intention appears from the
contract." If it appears from the nature of the case that it was the intention of the parties to any
contract that any promise contained in it should be performed by the promisor himself, such
promise must be performed by the promisor. In other cases, the promisor or his representatives
may employ a competent person to perform it."

5. In substance these statutory provisions lay down that, subject to certain exceptions which are
not material in this case, a contract in the absence of a contrary intention express or implied will
be enforceable by and against the parties and their legal heirs and legal representatives including
assignees and transferees. In the present case, there is nothing in the language of the pre-emption
clause or the other clauses of the award to suggest that the parties had any contrary intention.
On the other hand a reference to the other clauses of the award shows that the parties intended
that the obligations and benefit of the contract should go to the assignees or successors-in-
interest. The following clauses of the award are important:

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"We find and report that 6' six feet wide common passage marked 'X' measuring 12 ch. 36 sq. ft.
in the plan -and colored with Burnt sienna shall ever remain as such to all the blocks the owners
whereof shall have every right to take underground water pipes electric connections etc. and the
parties shall have never any right either to obstruct or to close any part of the same. The parties
shall be at liberty to fill up the tank portion allotted in their respective shares at their own costs.
The common walls and structures according to the above allotments shall have to be maintained
and kept in proper condition by both parties. We further find and report that the partition line in
the inner courtyard shall be drawn east to west as shown in the plan just over the middle of the
pit situated at the North West corner of the inner courtyard for the drainage of water. There
must be an opening in the partition wall that may be raised thereon over the mouth of the pit in
order to have a free access for the drainage of water of both parties through the said pit which
shall have to be maintained as such for ever. With the consent of the parties we find and award
that the parties shall complete construction of new structures or demolition of any existing
structures, in terms of this award within one year from this date, that is 16th dayof December,
1940. During this period of one year parties shall remain entitled to use and enjoy the entire
property as allotted, but immediately after the expiry of the said period of one year plaintiff shall
have every right to close or otherwise obstruct the defendant from enjoyment ofthat portion of
the structure privy or land exclusively allotted to him and the defendant shall have the same right
as against the plaintiff in respect of his share of structures and land exclusively allotted to his
share in terms of the award."

6. It is obvious that in these clauses the expression "parties" cannot be restricted to the original
parties to the contract but must include the legal representatives and assignees of the original
parties. There is hence no reason why the same expression should be given a restricted meaning
in the pre- emption clause which is the subjectmatter of interpretation in the present appeal. On
behalf of the respondents Mr. N. C. Chatterjee rightly argued that the pre-emption clause was
based upon the ground of vicinage and this circumstance would also suggest that the intention of
the parties was that the pre-emption clause should be binding upon the heirs and successors-in-
interest and the assignees of the original parties to the contract. We accordingly hold that Mr.
Bishen Narain on behalf of the appellant is unable to make good his submission on this aspect of
the case.

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7. We pass on to consider the next question which arises in this appeal, namely, whether the
covenant of pre-emption offends the rule against perpetuities and is therefore void and not
enforceable even against the original contracting parties.

"A perpetuity", as defined by Lewis in his well-known book on "Perpetuities" (p. 164), is 'a
future limitation, whether executory or by way of remainder, and of either real or personal
property which is not to vest until after the expiration of, or will not necessarily vest within, the
period fixed and prescribed by law for the, creation of future estates and interests'. The rule as
formulated falls within the branch of the law of property and its true object is to restrain the
creation of future conditional interest in property. The rule against perpetuities is, not
concerned with contracts as such or with contractual rights and obligations as such. Thus a
contract to pay money to a person, his heirs or, legal representatives upon a future
contingency, which may happen beyond the period prescribed would be perfectly valid (Walsh v.
Secretary of State for India (1863) 10 H.L.C. 367). It is therefore well-established that the rule
of perpetuity concerns rights of property only and does not affect the making of contracts which
do not create rights of property. The rule does not therefore apply to personal contracts which do
not create interest in property (See the decision of the Court of Appeal in South Eastern Railway
Company v. Associated Portland Cement Manufacturers Ltd. [1910] 1 Ch.), even though the
contract may have reference to land. In Witham v. Vane, (1883) Challies Law of Real Property,
3rd. Ed., App. V., p. 440. William Harry, Earl of Darlington sold in 1824 the manor of Hutton
Henry and other heriditaments to George Silvertop. In the conveyance there was a covenant that
the said Earl, his heirs, executors, administrators or assigns would pay six pence for each
chaldron of coal which would be wrought or gotten out of the lands so sold and which would be
shipped for sale, to George Silvertop, his heirs, executors, administrators or assigns. The
covenant was enforced in 1883 at the instance of an assignee from the legal representatives of
George Silvertop against the executors of the Earl. The Lord Chancellor (Earl of Silborne)
overruled the plea that the covenant offended the rule against perpetuities on the ground that,
though the covenant had relation to land; it did not amount to a reservation of any interest in
land. In English law a contract for purchase of real property is regarded as creating an equitable
interest, and if, in the absence of a time limit, it is possible that the option for repurchase might
be exercised beyond the prescribed period fixed by the perpetuity rule, the covenant is regarded
as altogether void. It has therefore been held that a covenant for pre-emption unlimited in point

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of time is bad as being obnoxious to the rule against perpetuities. The point was settled by the
Court of appeal in London and South Western Railway Company v. Gomm [1882] 20 Ch. D.
562 which is the leading English authority on the point. In that case, the plaintiff company
conveyed certain lands to Powell in 1865, and Powell covenanted with the company that he,
his heirs, and assigns, would at any time, on receipt of Pound 100, reconvey the lands to the
company. In 1879, the defendant Gomm purchased the land from Powell's heirs with notice of
the above covenant, and in 1880 the company gave the defendant a notice to reconvey the land,
and on his refusal brought the suit for specific performance. Kay J. gave the plaintiff a decree,
being of the opinion that, as the covenant did not create any estate or interest in the land, it was
not obnoxious to the rule against perpetuities. This decision was reversed by the Court of appeal,
and it was held that the option to purchase created an equitable interest in the land which
attracted the operation of the perpetuity rule. Sir George Jessel M. R. observed, in his judgment,
that the right to call for a conveyance of land was an equitable interest or equitable estate. There
was no doubt about it in an ordinary case of contract for purchase, and an option for repurchase
did not stand on a different footing. In the course of his judgment the learned Master of Rolls
observed as follows:

"Whether the rule applies or not depends upon this as it appears to me, does or does not the
covenant give an interest in the land? If it is a bare or more personal contract it is of course not
obnoxious to the rule, but in that case it is impossible to see how the present appellant can be
bound. He did not enter into the contract, but is only a purchaser from Powell who did. If it is
a mere personal contract it cannot be enforced against the assignee. Therefore the company must
admit that it somehow binds the land. The right to call for a conveyance of the land is an
equitable interest or equitable estate. In the ordinary case of a contract for purchase there is no
doubt about this, and an option of purchase is not different, in its nature. A person exercising the
option has to do, two things; he has to give notice of his intention to, M1 5Sup C1/66-6 purchase,
and to pay the purchase money; but as far as the man who is liable to convey is concerned, his
estate or interest is taken away from him without his consent, and the right to take it away being
vested in another, the covenant giving the option must give the other an interest in land."

8. In the case of an agreement for sale entered into prior to the passing of the Transfer of
Property Act, it was the accepted doctrine in India that the agreement created an interest in the

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land itself in favour of the purchaser. For instance, in Fati Chand Sahu v. Lilambar Sing Das
(1871) 9 B.L.R. 433 (PC) a suit for specific performance of a contract for sale was dismissed on
the ground that the agreement, which was held to create an interest in the land, was not registered
under s. 17, cl. (2) of the Indian Registration Act of 1866. Following this principle, Markby J. in
Tripoota Soonduree v. Juggur Nath Dutt (1874) 24 Suth W.R. 321] expressed the opinion that a
covenant for pre-emption contained in a deed of partition, which was unlimited in point of time,
was not enforceable in law. The same view was taken by Baker J. in Allibhai Mahomed Akuji
v. Dada Allis Isaac A.I.R. 1931 Bom. 578 where the option of purchase was contained in a
contract entered into before the passing of the Tranfer of Property Act. The decision of the
Judicial Committee in Maharaj Bahadur Singh v. Bal Chanad [A.I.R 1922 PC 165] was also a
decision relating to a contract of the year 1872. In that case, the proprietor of a hill entered into
an agreement with a society of Jains that, if the latter would require a site thereon for the erection
of a temple, he and his heirs would grant the site free of cost. The proprietor afterwards alienated
the hill. The society, through their representatives, sued the alienees for possession of a site
defined by boundaries, alleging notice to the proprietor requiring that site and that they had taken
possession, but been dispossessed. It was held by the Judicial Committee that the suit must fail.
The Judicial Committee was of the opinion that the agreement conferred on the society no
present estate or interest in the site, and was unenforceable as a covenant, since it did not run
with the land, and infringed the rule against perpetuity. Lord Buckmaster who pronounced the
opinion of the Judicial Corn- mittee observed as follows "Further, if the case be regarded in
another lightnamely, an agreement to grant 'in the future whatever land might be selected as a
site for a temple-as the only interest created would be one to take effect by entry at a later date,
and as this date is uncertain, the provision is obviously bad as offending the rule against
perpetuities, for the interest wouldnot then vest in presenti, but would vest at the expiration of an
indefinite time which might extend beyond the expiration of the proper period." But there has
been a change in the legal position in India since the passing of the Transfer of Property Act.
Section 54 of the Act states, that a contract for sale of immovable property “doesnot, of itself,
create any interest in or charge on such property". Section 40 of the Act is also important and
reads as follows:

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"40. Where, for the more beneficial enjoyment of his own immovable property, a third person
has, independently of any interest in the immovable property of another or of any easement
thereon, a right to restrain the enjoyment in a particular manner of the latter property, or where a
third person is entitled to the benefit of an obligation arising out of contract, and annexed to the
ownership of immovable property, but not amounting to an interest therein or easement thereon,
such right or obligation may be enforced against a transferee with notice thereof or a gratuitous
transferee of the property affected thereby, but not against a transferee for consideration and
without notice of the right or obligation nor against such property in his hands." The second
paragraph of s. 40 taken with the illustration establishes two propositions: (1) that a contract for
sale does not create any interest in the land, but is annexed to the ownership of the land and (2)
that the obligation can be enforced against a subsequent gratuitous transferee from the vendor or
a transferee for value but with notice. Section 14 of the Act states as follows:

"14. No transfer of property can operate to create an interest which is to take effect after the
lifetime of one or more persons living at the date of such transfer, and the minority of some
person who shall be in existence at the expiration of that period, and to whom, if he attains full
age, the interest created is to belong."

9. Reading s. 14 along with s. 54 of the Transfer of Property Act its manifest that a mere contract
for sale of immovable property does not create any interest in the immovable property and it
therefore follows that the rule of perpetuity cannot be applied to a covenant of pre-emption even
though there is no time limit within which the option has to be exercised. It is true that the
second paragraph of s. 40 of the Transfer of Property Act make a substantial departure from the
English law, for an obligation under a contract which creates no interest in land but which
concerns land is made enforceable against an assignee of the land who takes from the promiser
either gratuitously or takes for value but with notice. A contract of this nature does not stand on
the same footing as a mere personal contract, for it can be enforced against an assignee with
notice. There is a superficial kind of resemblance between the personal obligation created by the
contract of sale described under s. 40 of the Act which arises out of the contract, and annexed to
the ownership of immovable property, but not amounting to an interest therein or easement
thereon and the equitable interest of the person purchasing under the English Law, in that both
these rights are liable to be defeated by a purchaser for value without notice. But the analogy

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cannot be carried further and the rule against perpetuity which applies to equitable estates in
English law cannot be applied to a covenant of pre-emption because s. 40 of the statute does not
make the covenant enforceable against the assignee on the footing that it creates an interest in the
land. We are accordingly of the opinion that the covenant for pre- emption in this case does not
offend the rule against perpetuities and cannot be considered to be void in law. The view that we
have expressed is borne out by the decisions of the Calcutta High Court in Ali Hossain Miya v.
Raj Kumar Haldar I.L.R. (1943) 2 Cal, 605., of the Allahabad High Court in Aulad Ali v. Ali
Athar I.L.R. 49 All. 527 and of the Madras High Court in Chinna Munuswami Nayudu v.
Sagalaguna Nayudu ( 1. L.R. 49 Mad. 387 1925) Mr. Bishen Narain relied on the decision of
the Calcutta High Court in Nobin Chandra Soot v. Nabab Ali Sarkar 5 C.W.N. 343 and the
judgment of the Allahabad High Court in Gopi Ram v. Jeot Ram I.L.R. 45 All. 478. For the
reasons we have already stated we hold that the later deci- sions in Ali Hossain Miya v. Raj
Kumar Haldar in Chinna Munuswami Nayudu v. Sagalaguna Nayudu, and in Aulad Ali v. Ali
Athar, correctly state the law on the point.

10. For the reasons expressed we hold that the decision of the High Court is correct and this
appeal must be dismissed with costs.

Appeal dismissed.

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 R. Kempraj vs M/S. Barton Son & Co

1970 AIR 1872, 1970 SCR (2) 140

JUDGMENT:

The Judgment of the Court was delivered by Grover, J. This is an appeal by special leave from a
judgment of the Mysore High Court in which the question involved is whether an option given to
a lessee to get the lease, which is initially for a period of 10 years, renewed after every 10 years
is hit by the rule of perpetuity and is void. The respondent entered into a deed of lease on
October 26, 1951 with the appellant in respect of premises Nos. 8 & 9, Mahatma Gandhi Road,
(South Parade), Civil Station, Bangalore. It was stipulated that the lease would be for a period of
10 years in the first instance with effect from November 1, 1961 "with, an option to the
lessee to renew the same as long as desired as provided". Clauses 9 and 10 which are material
may be reproduced:--

"9. The lessee shall have the right to renew the lease of the scheduled premises at the end of the
present period of ten years herein secured on the same rental of Rs. 450/- per month, for a
similar period and for further similar periods thereafter on the same terms and conditions as are
set forth herein; and the Lessee shall be permitted and shall have the right to remain in
occupation of the premises on the same terms and conditions for any further periods of ten years
as long as they desire to do so.

10. The Lessor shall not raise any objection whatsoever to the Lessee exercising his option to
renew the lease for any further periods of ten years on the same terms and conditions as long as
they desire to be in occupation, provided that the Lessee shah not have the right to transfer the
lease or alienate any right thereunder. ' It appears that before the expiry of the period often years
from the date of the commencement of the lease the lessee wrote to the lessor informing him of
the intention to exercise the option given to the lessee under the deed of lease to get the same
renewed on the same terms and conditions as before for a period of ten years from November 1,
1961. The lessor did not comply with the request. After serving a notice the lessee filed a suit for
specific performance of the covenant in the lease for renewal. It was prayed that the lessorbe

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directed to execute a registered deed to lease in favour of the lessee and if he failed to do so the
court should execute a deed in his favour. The lessor pleaded, inter alia, that the condition
relating to renewal was hit the rule against perpetuity. Certain other pleas were taken with which
we are not concerned. The trial court decreed the suit. The first appellate court and the High
Court affirmed the decree. The rule against perpetuity is embodied in s. 14 of the Transfer of
Property Act, hereinafter called the Act. According to it no transfer of property can operate to
create an interest which is to take effect after the lifetime of one or more persons living at the
date of such transfer and the minority of some person who shall be in existence at the expiration
of that period and to whom, if he attains full age, the interest created is to belong. It is well
known that the rule against perpetuity is rounded on the principle that the liberty of alienation
"shall not be exercised to its own destruction and that all contrivances shall be void which
tend to create a perpetuity or place property for ever out of the reach of the exercise of the
power of alienation". The words "transfer of property" have been defined by s. 5 of the Act to
mean an act by which a living person conveys property in present or in future to one or more
other living persons etc. The words "living persons" include a Company or association or body
of individuals. Section 105 of the Act defines "lease". A lease of immovable property is a
transfer of a right to enjoy such property made for a certain time express or implied or in
perpetuity in consideration of a price paid or promised or of money, a share of crops, service or
any other thing of value. A lease is not a mere contract but it is a transfer of an interest in land
and creates a right in rem. Owing to the provisions of s. 105 a lease in perpetuity can be created
but even then an interest still remains in the lessor which is called a reversion.

2. It is not disputed on behalf of the appellant that a lease in perpetuity could have been created
but the lease in the present case was not of that kind and was for a period of ten years only in
the first instance. It is said that the mischief is created by the clauses relating to renewal which
are covenants that run with the land. It is pointed out that on a correct construction of the
renewal clauses the rule of perpetuity contained in s. 14 would be immediately attracted. We
are unable to agree. Section 14 is applicable only where there is transfer of property. Even if
creation of a lease-hold interest is a transfer of a right in property and would fall within the
expression "transfer of property" the transfer was for a period of ten years only by means of the
indenture Exh. P-I. The stipulation relating to the renewal could not be regarded as transferring
property or any rights therein. In Ganesh Sonar v. Purnendu Narayan Singha & Ors. (1962)

251 | P a g e
Patna 201 in the case of lease of land an option had been given to the lessor determine the lease
and take possession of the lease- hold land under specified conditions. The question was whether
such a covenant would fall within the rule laid down in the English case Woodall v. Clifton
(1905) 2. Ch. 257 in which it was held that a proviso in a lease giving an option to the lessor to
purchase the fee simple of the land at a certain rate was invalid as infringing the rule against
perpetuity. The Patna High Court distinguished the English decision quite rightly on the ground
that after the counting into force of the Act a contract for the sale of immovable property did not
itself create an interest in such property as was the case under the English law. According to the
Patna decision the option given by the lessee to the lessor to resume the lease hold land was
merely a personal covenant and was not a covenant which created an interest in land and so the
rule against perpetuity contained in s. 14 of the Act was not applicable. The same principle
would govern the present case. The clauses containing the option to get the lease renewed on the
expiry of each term of ten years can by no means be regarded as creating an interest in property
of the nature that would fall within the ambit of s. 14. Even under the English law the court
would give effect to a covenant for perpetual renewal so long as the invention is clear and it will
not be open to objection on the ground of perpetuity; see Halsbury's Laws of England, 3rd Edn.
Vol. 23, p 627. In Muller v. Traf Jword (1901) 1 Ch. 54.it was held that the covenant in a
lease for renewal was not strictly a covenant for renewal. But Farwell, J., proceeded to
observe that a covenant to renew had been held for at least two centuries to be a covenant
running with the land. If so, then no question of perpetuity would arise. It appears that in
England whatever might have been the reason, the objection of perpetuity had never been taken
to cases of covenants for renewal. The following observations of Farwell, J., which were quoted
with approval by Lord Evershed, M.R. in Weg Motors Ltd. v. Hales & Others [1961] 3,
A.E.L.R. 181,188 are note-worthy:

"But now I will assume that this is a covenant for renewal running with the land; it is then in my
opinion free from any taint of perpetuity because it is annexed to the land. See Rogers v.
Hosegood, (1900) 2 Ch. 388."

3. The equitable rule that the burden of a covenant runs with the land is to be found in s. 40 of
the Act. This section reads: "Where for the more beneficial enjoyment of his own immoveable
property, a third person, has, independently of any interest in the immoveable property of

252 | P a g e
another or of any easement thereon, a right to restrain the enjoyment in a particular manner of the
latter property, or where a third person is entitled to the benefit of an obligation arising out of
contract, and annexed to the ownership of immoveable property, but not amounting to an interest
therein or easement thereon, such right or obligation may be enforced against a transferee with
notice thereof or a gratuitous transferee of the property affected thereby, but not against a
transferee for consideration and without notice of the right or obligation nor against such
property in his hands."

4. As pointed out in Mulla's Transfer of Property Act, 5th Edn. at page 194, s. 40 expressly says
that the right of the covenantee not an interest in the land bound by the covenant nor an
easement. It is not an interest because the Act does not recognise equitable estates and it cannot
be said as Sir George Jessal said in London & South Western Rly. v. Gomm [1882] 20 Ch. D.
562 that if a covenant "binds the land it creates an equitable interest in the land." The expression
"covenant runs with the land" has been taken from the English law of real property. It is an
exception to the general rule that all covenants are personal. Even on the footing that the
clauses relating to renewal in the lease, in the present case, contain covenants running with the
land the rule against perpetuity contained in s. 14 of the Act would not be applicable as no
interest in property has been created of the nature contemplated by that provision.

5. For the above reasons the appeal fails and it is dismissed with costs.

Appeal dismissed.

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 Rajes Kanta Roy v. Shanti Debi

AIR 1957 SC 255

JUDGMENT:

1.The Judgment of the Court was delivered by JAGANNADHADAS J.-This is an appeal by

special leave against the judgment and decree of the High Court of Calcutta and arises out of an
application filed by the appellant under s. 47 of the Code of Civil Procedure in the course of
execution proceedings in the Second Court of the Subordinate Judge at Alipore, District 24-
Parganas. The facts leading thereto are as follows:

2. One Ramani Kanta Roy was possessed of considerable properties. He had three sons, Rajes
Kanta Roy, Rabindra Kanta Roy and Ramendra Kanta Roy. Rabindra died childless in the year
1938 leaving a widow, Santi Debi. ln 1934 Ramani created an endowment in respect of some of
his properties in favour of his family deity and appointed his three sons as shebaits. After the
death of Rabindra his widow Santi Debi, instituted a suit against the other members of the family
in 1941 for a declaration that she, as the heir of her deceased husband, was entitled to function as
a shebait in the place of her husband. The suit terminated in a compromise recognizing the right
of Shanti Debi as a co-shebait. Shortly thereafter, however, i.e., in the year 1944, Ramani and his
two sons, Rajes and Ramendra, filed a suit against Santi Debi for a declaration that the above
mentioned compromise decree was null and void. One of the grounds on which the suit was
based was that the marriage of Santi Debi with Rabindra was a nullity inasmuch as the said
marriage was one between persons within prohibited degrees. During the pendency of that suit
Ramani, the father, executed a registered trust deed in respect of his entire properties on, July 26,
1945. The terms of that trust-deed will be referred to presently. The eldest of the sons, Rajes, was
appointed thereunder as the sole trustee to hold the properties under trust subject to certain
powers and obligations. After the execution of this trust deed the father died, the exact date of his
death does not appear on the record. Some time thereafter the suit was compromised on
December 3, 1946. The material terms of this compromise will be set out presently. By the said
compromise Shanti Debi gave up her rights under the previous compromise decree of 1941 and
agreed to receive for her natural life a monthly allowance of Rs. 475 payable from the month of
November, 1946. It was one of the terms of the compromise that on default of payment Santi

254 | P a g e
Debi will be entitled to realise the same by means of execution of the decree. It appears that the
monthly allowance as aforesaid was regularly paid up to the end of February, 1948, and that
thereafter payment was defaulted. Consequently Shanti Debi filed an application for execution
on July 8, 1949, to realize the arrears of her monthly allowance from March, 1948, to July, 1949,
amounting to Rs. 8,075 against both the brothers, Rajes and Ramendra. Execution was asked for
by way of attachment and sale of immovable properties,viz., premises No. 44/2, Lansdowne
Road, Ballygunge P.S., 24- Parganas. Rajes filed an objection to the execution under s. 47 of the
Code of Civil Procedure on various grounds. Ramendra has not filed, or joined in, any such
application and has apparently not contested the execution. The present contest in both the courts
below and here is only between Rajes and Santi Debi. An order was passed by the Subordinate
Judge over-ruling the objections raised by Rajes. An appeal was taken therefrom to the High
Court at Calcutta which was dismissed by its judgment under appeal. Hence the present appeal in
which Rajes is the appellant, while Santi Debi is the first respondent and Ramendra is the second
respondent. The two main objections to the execution proceedings which have been urged before
us are that- (1) Under the compromise decree which is now sought to be put in execution, charge
was created over certain properties for the due payment of the monthly allowance and hence as a
matter of construction of the decree, the personal remedy can be pursued only after the
remedy by way of charge is exhausted, (2)Under the terms of the deed of trust Rajes has no
attachable interest in the properties sought to be proceeded against.

3.The first of the above contentions is raised with reference to the terms of the compromise
decree dated December 3, 1946, and is set out in para. 14 of the petition under s. 47 of the Code
of Civil. Procedure as follows: " That under the compromise decree in question the decree-
holder has relinquished all her right, title and interest in respect of all the properties left by
Ramani Kanta Roy deceased and she having agreed to realise her dues, if any, out of a
particular property is not entitled to proceed against the properties sought to be attached
simultaneously, keeping the said security alive." The material portion of the compromise decree
dated December 3, 1946, is as follows:

“ (a) That the compromise decree in Suit No. 92 of 1941 of the Hon'ble High Court of Calcutta,
Original Side, is declared to be inoperative and set aside and the defendant No. 1 would be
debarred from claiming right or relief in the said decree.

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(b)That the plaintiffs abovenamed agree to pay to defendant No. 1 for her natural life a monthly
allowance of Rs. 475 and the said allowance is to be paid on and from the month of November,
1946.

(c)That the said monthly allowance of Rs. 475 is to be paid on or before the 10th day of each
succeeding month and in case of failure to pay the said monthly allowance of four consecutive
months, the defendant No. 1 will be entitled to realise, the amount in default by means of
execution of the decree to be passed in terms of this petition of compromise.

(d)Thatthe properties mentioned in the schedule below are hereby charged for the due payment
of the said monthly allowance and the defendant No. 1 will be at liberty to realise the amount
in default against the properties charged by execution of this decree.

(e)That the defendant No. 1 will, at her option, be further entitled to realise the amount in default
by appointment of Receiver for execution of this decree over the charged properties.

(j)That each of the terms stated above is a consideration for the other terms.

The charge above-mentioned is over property called Bharatkhali property consisting of a number
of items in Rangpur Collectorate now in East Pakistan. Before considering the objection raised
under point No. 1, it is right to mention that a minor objection has been taken that, as a fact, there
is no executable decree whichcan form the subject-matter of execution. It is pointed out that cl.
(c) of the compromise petition is to the effect that "defendant No. 1 (the present respondent No.
1) will be entitled to realise the amount in default by means of execution of the decree to be
passed in terms of this petition of compromise" but that there is no formal decree carrying this
out and directing that the plaintiffs therein, Rajes and Ramendra, do pay to the first defendant
therein, Santi Debi, the sum of Rs. 475 per month. What appears to have happened is as follows.
The petition for compromise was filed on December 3, 1946, with the prayer that the " terms of
this petition of compromise be recorded and that the title suit mentioned above as between the
plaintiffs and defendant No. 1 be disposed of in terms of this petition of compromise and the
compromise be made a part of the decree in the same." Thereupon on the same date the
following formal order was passed.

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“This suit coming on this day for final disposal it is ordered and decreed that the suit be and the
same is hereby decreed on compromise as against defendant No. 1. That the sole nama do form
part of this decree."

4. It is true that a formal direction in terms of the various clauses of the compromise petition
directing the plaintiffs to pay the monthly allowance of Rs. 475 to the first defendant has not, in
terms, been drawn up. But there can be no doubt that this was what was meant to be conveyed by
the above mentioned formal order in so far as it is relevant for the present purposes. We
understand that the actual decree in this case merely showing that "the solenama do form part of
the decree " is according to the usual practice of courts in Bengal in all such cases and that it is
generally understood to amount to such a direction though it is not so expressly set out. We do
not consider it necessary to express opinion as to whether that is a correct practice. But we do
not think that in this case the execution is to be defeated on this ground. There is no indication in
the judgment either of the Subordinate Judge or of the High Court that any such point has been
raised before them. We accordingly overrule this objection. As regards the first of the main
points raised with reference to the terms of the compromise decree, it is not disputed that cl. (c)
does impose a personal obligation on the plaintiffs therein to pay to the first defendant therein a
monthly allowance of Rs. 475 and that; therefore, the decree-holder is entitled to a personal
remedy. What is urged, however, is that taking cls. (c) and (d) together, the clear intention is that
when any default occurs, the decree-holder has to look for payment first to the properties
charged and that, it is only in the event of not being able to obtain satisfaction out of it, that the
personal obligation can be enforced. A number of cases of the Bombay High Court have been
cited before us in support of this argument and it is urged that where a particular fund is
indicated for-the payment of a debt and is charged, the courts should not construe an extra clause
for payment simpliciter as giving a concurrent remedy but that in such cases the charged fund
is primarily to be looked to. It is also urged that in such cases it is inequitable to a low the
personal remedy to be pursued in the first instance, or, at any rate, unless the decree-holder gives
up the charge. Our attention is also drawn to the fact that the execution petition itself under the
column "Mode in which the assistance of the Court is required" specifically states as follows:

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" Be it noted that at present the execution is not proceeded against certain immovable properties
in Eastern Pakistan which are under charge for the present amount on account of arrear
maintenance and also future maintenance due under the decree without prejudice to her rights
under the said decree. Decreeholder reserves to herself all rights and reliefs as are not
enforceable in Dominion of India in respect of the decree."

5. It is pointed out that the decree-holder in terms desires to pursue the personal remedy while
reserving the remedy under the charge. In the present case we do not consider it necessary to deal
with these Bombay decisions cited before us or with the above contention based thereon. For, it
is not disputed that where a compromise decree provides both for a personal remedy and a
charge, the whole question depends on the intention to be gathered from the various terms in
the compromise decree. In our opinion, the construction of the two relevant clauses and the
intention to be gathered therefrom in this case are quite clear. It is true that in one sense, cls. (c),
(d) and (e) of the com- promise indicate certain specified properties as being available to the
decree-holder for realisation of any dues either by pursuing the charge or by getting a
Receiver appointed in respect of the charged properties. But the wording of the three clauses
shows clearly that she is not obliged to resort to these two remedies in the first instance. Clause
(e) says that " the defendant No. I will be entitled to realise the amount in default by means of
execution of decree." Clause (d) says that " the defendant No. I will be at liberty to realise the
amountin default against the properties charged." Clause (e) says that " the defendant No. I will,
at her option, be further entitled to realise the amount in default by appointment of Receiver for
execution of this decree over the charged properties." It is quite clear that cl. (c) gives her an
unqualified right to obtain payment of the monthly allowance from the plaintiffs. Clauses (d) and
(e) give her a liberty or option to pursue the remedies specified therein. There is nothing in these
two clauses to limit, in any way, the unqualified right that she was given under cl. (c). Our
attention is drawn to the statement in cl. (j) which says that “each of the terms stated is a
consideration for the other terms." What exactly is meant thereby is somewhat obscure. But we
are unable to see how that clause affects the intention which, in our view, has to be gathered by
reading cls. (c), (d) and (e) together. We are, therefore, of the opinion that the contention raised

258 | P a g e
to the effect that the personal remedy is not available in this case before exhausting the charged
properties, is not sustainable.

6. Now, coming to the second point, the contentions raised are that, on a true construction of the
terms of. the trust deed the interest of the judgment-debtor, Rajes, (1) in the properties covered
by the trust deed, and (2) in particular, in property No. 44/2, Lansdowne Road sought to be
attached, is only a contingent one and hence not attachable. That a mere contingent interest
though transferable inter vivos is not attachable is well settled since the Privy Council decision in
Pestonjee Bhicajee v. P. H. Anderson (1). The question as to whether the interest of the
judgment-debtor, Rajes, in this case is vested or contingent, is one not altogether free from
difficulty. But it is well to notice at the outset that this point has not been raised in the petition
filed by the judgment-debtor, Rajes, under s. 47 of the Code of Civil Procedure. What is stated
therein is merely the following "Under the said deed of trust, the judgment debtor has no interest
in the property except that of a trustee and as such the decree holder cannot proceed for
realisation of her alleged dues against the said property." The objection in this form is obviously
untenable and has not been urged in any of the courts below. Indeed, if under the trust deed the
judgment-debtor has a beneficial interest, it is not disputed that such beneficial interest would be
attachable provided it is a (1) I.L.R. [1939] Bom. 36. vested interest and not a contingent interest.
The judgment of the executing court, however, shows that what was dealt with there is the
contention that the interest under the trust deed was a mere expectancy as opposed to a
vested interest. The Court held that the interest which the judgment-debtors had in the
property by virtue of the deed of trust was not a mere expectancy. On appeal to the High
Court, none of the grounds set out in the appeal memorandum thereto relates to this question.
The High Court, however, dealt with the matter on the footing that the question is whether the
interest of the judgment-debtor under the deed of trust is a vested as opposed to a contingent
interest. It does not appear to us that question in this form should have been allowed to be raised.
Its determination may well depend upon the question whether as a fact the contingency
suggested has disappeared by virtue of subsequent, vents. However, since the point has been
allowed to be raised and the decision of the High Court is given on the footing of the matter
being solely one of construction of the document, we proceed to consider it.

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7. The main provision under which the two brothers, Rajes and Ramendra, get any interest under
the trust deed is that contained in sub-cls. (a) and (b) of cl. 12, which are as follows:

" 12. On the liquidation of all the debts of the settlor (including the debt, if any, that may be
incurred by the trustee for payment of the settlor's debts) and after his death this trust shall
come to- an end and the properties described in Schedule 'A' shall devolve as follows:-

(a) The properties being Lot I, Lot II, Lot III, and Lot IV described in the said Schedule 'A'
hereunder written including the surplus income thereof shall devolve on the said Rajes Kanta
Roy absolutely or if he be then dead,. then the said properties shall devolve on his heirs then
living absolutely but subject to the provisions contained in clause

(c) here of regarding premises No. 44/2, Lansdowne Road

(b) The properties being Lot V described, in the said Schedule 'A' hereunder written including
the surplus income thereof shall be enjoyed by the said Ramendra Kanta Roy during his
lifetime or if he be then dead then the said properties shall devolve on his son or sons if any
absolutely but if there be no son living at that time and if there be a grand-son (son's son) or
grand-sons then on such grand-son or grand-sons absolutely. They show that Lots I to IV in
Schedule A ultimately go to Rajes and Lot V alone goes to Ramendra. But the interest which
either of these is to get in the properties allotted to each is expressed to be one which each will
get after the trust comes to an end. Now, it is only after the happening of the two events, viz.,
(1) the discharge of all the debts specified in the schedules (including the debts, if any, that may
be incurred by the trustee for payment of the settlor's debts), and (2) the death of the settlor
himself, that the trust comes to an end and it is on the trust coming to an end that the sons get the
properties allotted to them. It was recognised in arguments before us that the death of the settlor
is not by any means an uncertain event and that, therefore, this involves no element of
contingency. But what was urged is that the discharge of the debts is an uncertain event in the
sense that neither the factum nor the time of such discharge is one that can be predicated with
any certainty and that since the interest which the two brothers take is to be only after such
discharge their respective interests therein are contingent. It is pointed out that the settlor was
very particular about the property not going into the hands of the two sons for their enjoyment as
owners until after the debts are liquidated and that this is emphasised in various clauses of the

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trust deed. It is urged that this clearly shows the intention of the settlor to be that the discharge of
the debts should be a condition precedent for the vesting in them of any interest in the properties.
Thus el. 3 of the trust deed imposes a specific obligation on the trustee that " he shall pay the
present existing just debts of the settlor." Clause 5 says that " during the lifetime of the settlor
and so long as all the debts of the settlor be not paid off the trustee shall pay monthly and every
month Rs. 1,000- to the settlor, Rs. 300/- to Rajes and Rs. 200/- to Ramendra." In cl. 6 it is stated
that "on the death of the settlor before the liquidation of his debts the trustee shall pay to Rajes
Rs. 800/- and Rs. 700/- to Ramendra per month." By virtue of these two clauses a sum of only
Rs. 1,500/- out of the income is set aside for the benefit of the members of the family and hence
by implication the rest of the income is to be applied towards discharge of the debts. Clauses 8
and 9 provide for payments out of the income in the event of death either of Rajes or of
Ramendra before the liquidation of debts. Clause 10 provides for residence of the family as long
as debts are not fully paid off. Clause 11 authorizes the trustee to sell, mortgage, or give a long
lease of any of the properties for payment of the debts. Clauses 12(a) and (b) proceed on the
assumption that the surplus income (after payments therefrom as provided) is to be accumulated
so long as the trust continues, i.e., debts are not discharged. Quite clearly, therefore, during the
subsistence of the trust both the sons get only a portion of the income as specified above and do
not get for themselves the full benefit out of the-properties respectively allotted to the until the
debts are completely discharged. There is no doubt that these terms show that the settlor attached
great importance to the discharge of the debts becoming an accomplished fact before the two
sons take the full benefit by way of revolution of the property and that in order to facilitate the
same he restricted his own enjoyment and that of his two sons to an aggregate limited sum of Rs.
1,500/- per month out of the income (apart from a few other minor monthly payments). But can
it be said that their interest in the property was made to depend on the event of the total discharge
of the debts and that the discharge of the debts was contemplated as an uncertain event.

8. The determination of the question as, to whether an interest created by such is deed is vested
or contingent has to be guided generally by the principles recognised under,ss. 19 and 21 of the
Transfer of Property Act, 1882, and ss. 119 and 120 of the Indian Succession Act, 1925. The
learned Judges of the High Court relied on illustration (v) to s. 119 of the Indian Succession Act
and the decision in Ranganatha Mudaliar v. A. Mohana Krishna Mudaliar (1926) A.I.R. 1926
Madras 645. The learned Solicitor General appearing for the appellant before us has urged that

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there is no such inflexible rule of law as is assumed by the High Court, viz., that "in spite of a
clause requiring payment of debts before the property reaches the hands of the donee, the
gift is a vested one." He drew our attention to the fact that both s. 19 of the Transfer of Property
Act and s. 119 of the Indian Succession Act clearly indicate that if "a contrary intention appears"
from the document that will prevail. He has also drawn our attention to the case in Bernard v.
Mountague [1816] 1 Mer. 422 ; 35 E.R. 729 in which it was held, on a construction of the terms
of the trust, that the payment of the debts was a condition precedent to the vesting of the interest
devised therein. How, such a matter, as the one before us, is treated in English law when it arises,
appears from the following passages in the recognised textbooks. Williams on Executors and
Administrators(13th Ed.), Vol. 2, at p. 658, states one of the two rules of construction to be that
where the bequest -is in terms immediate, and the payment alone postponed, the legacy is vested.
He states a number of exceptions to that rule and says the rule itself is always subservient to the
intentions of the testator, and that the exception may be found in operation in cases where the
testator has shown a clear intention that the legacies shall not vest till his debts are satisfied. The
learned Solicitor-General relies also on a similar passage from Jarman on Wills (8th Ed.), Vol. II,
at p. 1390, which states as follows:

"So, where a testator clearly expressed his intention that the benefits given by his will should not
vest tillhis debts were paid, the intention was carried into execution, and the vesting as well as
payment was held to be postponed." But it is to be noticed that at p. 1373 in Jarman on Wills
(8th Ed.), Vol. 11, it is also stated as follows: "It was at one period doubted whether a devise to
a person after payment of debts was not contingent until the debts were paid; but it is now well-
established that such a devise confers an immediately vested interest, the words of apparent
postponement being considered only as creating a charge."

9. Apart from any seemingly technical rules which may be gathered from English decisions and
text-books on this subject, there can be no doubt that the question is really one of intention to be
gathered from a comprehensive view of all the terms of a document. The learned Solicitor-
General frankly admitted this, and also that a Court has to approach the task of construction in
such cases with a bias in favour of a vested interest unless the intention to the contrary is definite
and clear. It is, therefore, necessary to consider the entire scheme of the deed of trust in the
present case, having regard to the terms therein, and to gather the intention there from. By

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the date the settlor executed the deed of trust he had his two sons, Rajes and Ramendra and
the widowed daughter-in-law, Santi Debi, the validity of whose marriage he was disputing. One
of the main purposes of the trust deed, as appears from its preamble is to give the property to his
two surviving sons, Rajes and Ramendra, after excluding his widowed daughter-in-law, Santi
Debi, against whom he had developed prejudice on account of hers being a sagotra marriage. An
equally important purpose of the trust was the discharge of his debts. For that purpose he made
the following arrangements. (1) The entire property was constituted a trust for the discharge of
the debts and thereby he divested himself entirely of any interest therein or management thereof;
(2) The properties were to be in the management of his eldest son, Rajes, as the trustee thereof
with powers of alienation for, payment of debts; and (3) The use of the income for the sustenance
of himself and his sons was limited to specified amounts thereof, viz., Rs. 1,500/-per mensem in
order that the debts may be methodically and speedily discharged. There is no evidence before us
as to what the total income of the property at the time was and whether there would have
been any substantial surplus available from the income for the discharge of debts. But Sch. A of
the trust deed shows that the properties were fairly considerable and schedule B shows that the
debts at the time were to the tune of Rs. 2,62,169-8-0. Clause 17 of the trust deed values the
properties at rupees five lacs for the purposes of stamp duty and it may reasonably be assumed
that the value would have been substantially higher. There can be no reasonable doubt that the
settlor did contemplate that, on a proper management of the property and with a scheme for the
discharge of debts, there would emerge surplus income by the date of termination of trust. This
appears from el. 12(a) of the trust deed which specifically provides for the disposal of the surplus
income of each lot which might accumulate during the continuance of the trust. It is, permissible,
therefore, to think that the surpluses contemplated would not be unsubstantial. Under cl. 14 of
the trust deed the settlor provides for the devolution of the trusteeship in case his son, Rajes, died
before the liquidation of the debts and says that on the death of Rajes, Rajes's wife and
Ramendra, are to become joint trustees and that on the death of either of them the surviving
trustee shall be the sole trustee. There is no provision for any further devolution of trusteeship in
the contingency of such sole trustee also dying before the liquidation of the debts. The absence
of any such provision may well be taken to indicate that, in the contemplation of the settlor, the
debts would be discharged and the trust would come to an end, in any case, before the expiry of
the three lives mentioned therein, i.e., Rajes, his wife and Ramendra,. While, therefore, the

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settlor does appear to have attached considerable importance to the liquidation of debts, there is
nothing to show that he was apprehensive that the debts would remain undischarged out of his
properties and its income and that he contemplated the ultimate discharge of his debts to be such
an uncertain event as to drive him to make the accrual of the interest to his sons under the deed to
depend upon the event of the actual discharge of his debts. In this context there are also other
provisions in the trust deed which are of great significance.

1. The two sons, Rajes and Ramendra, are not completely excluded from any benefit out of the
settlor's estate until the debts are discharged and the trust comes to an end. It is provided that
each of them has to be paid a specific amount per month out of the properties, i.e., Rs. 300/-
and Rs. 200/- during the settlor's lifetime and Rs. 800/- and Rs. 700/- after the settlor's death.

2. It is further provided that on the death of either of these two sons before the debts are
discharged and the trust comes to an end, the above amounts are to go to their respective legal
heirs (subject to some minor variations so far as it relates to Ramendra's'heirs). The provision in
this behalf, so far as Rajes (with whose interest alone we are now concerned) shows that on his
death during the continuance of the trust the amount payable to him monthly was to be paid to
his widow and on her death to his legal heirs.

3. The most significant provision in this context is that under cl. 12(a) which, while allotting
lots I to IV to Rajes and lot V to Ramendra, specifically provides also that surplus income
thereof, i.e., such income as is referable to those lots, should devolve on the two sons in the same
way. A reference to Sch. A shows that, these lots are unequal and hence in the normal course,
if there had been no such specific provision, the surplus income would have been equally
divisible. The fact that the surplus incomes of the specified lots is also to devolve along wit h
those specified lots themselves, is a clear indication that the corpus of these lots was earmarked
for the two sons with the present income thereof but with a restriction on the enjoyment of the
present income to specified sums, so as to facilitate orderly discharge of the debts.

10. Now, there can be no doubt about the rule that where the enjoyment of the property is
postponed but the present income thereof is to be applied for the benefit of the donee the gift is
vested and not contingent. (See Explanation to s. 19 of the Transfer of Property Act, Explanation
to s. 119 of the Indian Succession Act. See also Williams on Executors andAdministrators, 13th

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Ed., Vol. 2, p. 663, para. 1010, and Jarman on Wills, 8th Ed., Vol. 11, p. 1397). This rule
operates normally where the entire income is applied for the benefit of the donee. The
distinguishing feature in this case is that it is not the entire income that is available to the donees
for their actual use but only a portion thereof. But it is to be observed that according to the
scheme of the trust deed, the reason for limiting the enjoyment of the income to a specified sum
there of, is obviously in order to facilitate and bring about the discharge of the debts.

11. As already explained the underlying scheme of the trust deed is that the enjoyment is to be
restricted until the debts are discharged. Whatever may be said of such a provision where a
donee is not him self a person who is under any legal obligation aliunde to discharge such
debts, the position in this case is different. The two sons are themselves persons who, if the
settlor died intestate, would be under an obligation to discharge his debts out of the properties
which devolve upon them. It is only the surplus which would be legally available for
division between them. In such a case, the balance of the income which is meant to be applied
for the discharge of the debts is also an application of the income for the benefit of the donees. It
follows that the entire income is to be applied for the benefit of the doneees and only the surplus,
if any, is available to the donees. Hence the provision in the trust deed that lots I to IV are to
devolve on Rajes and lot V on Ramendra and that the surplus income of each of these lots after
the discharge of the debts is also to devolve in the same way, clearly operates as nothing more
than the present allotment of these properties themselves to the donees, subject to the discharge
of debts nationally in the same proportion.

12. Thus, taking the substance of the entire scheme of this division between the two sons the
position that emerges is as follows. (1) Specified lots are ear- marked for each of the two sons.
(2) The present income out of those lots is to be applied for the discharge of the debts after
payment of specified sums therefrom by way of monthly payments to the two sons and
presumably such application is to be notionally pro rata. (3) Any surpluses which remain from
out of the income of each of the lots are to go to the very person to whom the corpus of the lot
itself is to belong on the termination of the trust. (4) In the event of any of the two sons dying
before the termination of the trust, his interest in the monthly payments out of the income is to
devolve on his heirs. These arrangements taken together clearly indicate that what is postponed
is not the very vesting of the property in the lots themselves but that the enjoyment of the income

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thereof is burdened with certain monthly payments and with theobligation to discharge debts
therefrom notionally pro rata, all of which taken together constitute application of the income for
his benefit. It may be noticed at this stage that one of the features of a contingent interest is that
if a person dies before the contingency disappears and before the vesting occurs, the heirs of
such a person do not get the benefit of the gift. But the trust deed in question specifically
provides in the case of Rajes-with whose interest alone we are concerned- that even in the event
of his death it is his heirs (then surviving) that would take the interest.

13. It has been urged that the provision in el. 12(a) in favour of the heirs then surviving is in the
nature of a direct gift in favour of the heir or heirs who may be alive at the date when the
contingency disappears. But even so, this would make no practical difference. It is to be
remembered that in this case the parties belong to the Dayabhaga school of Hindu Law and
this is admitted before us. It is also to be remembered that up to the third degree in the male line
the principle of representation under the Hindu Law operates. The net result of the provision,
therefore, is that whenever the alleged contingency of discharge of debts may disappear the
person on whom the interest would devolve would, in the normal course, be the very heir (the
lineal descendant then surviving or the widow) of Rajes. The actual devolution of the interest,
therefore, would not be affected by the alleged contingency.That being so, it is more reasonable
to hold that the interest of Rajes under the deed is vested and not contingent. This view is
confirmed by the fact that under the compromise decree which is now sought to be executed both
the judgment- debtors, Rajes and Ramendra, created a charge for the monthly payment to Santi
Debi and agreed to such charge being presently executable. This shows clearly that they
themselves understood the interest available to them under the trust as a vested interest.

14. In the course of the discussions before us a number of other possibilities which may arise
with reference to the actual terms of the deed were closely examined with a view to test how far
they fit in with one view or the other of the nature of interest in question. But evensuch an
elaborate consideration of the possibilities did not throw any further light on the question at
issue. We are, therefore, of the opinion that in so far as the interest of Rajes is concerned in
lots I to IV under the trust deed, it is vested and not contingent. The further question that arises is
whether in view of the terms to be noticed, his interest in No. 44/2, Lansdowne Road, against
which execution is sought, is in any way different. The scope for any possible difference arises

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in view of the fact that the devolution of lots I to IV on Rajes or his heirs (then living) is
specifically expressed to be "subject to the provisions contained in el. (c) hereof regarding
premises No. 44/2, Lansdowne Road." The relevant provisions relating to this property are as
follows. Clause 10 provides that the settlor as well as Rajes and Ramendra with their respective
families should be entitled to reside in the premises during the settlor's lifetime and so long as
settlor's debts are not fully paid off. Clause 12(c) provides that after the death of the settlor and
after all debts have been fully paid off and on the said Rajes or his legal heirs purchasing in the
town of Calcutta or its suburbs a suitable house at a value not less than Rs. 40,000/- and making
over the same to Ramendra absolutely, Rajes or his legal heirs shall be the absolute owner of the
premises No. 44/2, Lansdowne Road, but that so long as such house be not purchased and made
over to Ramendra, Rajes and Ramendra should both be entitled to reside in the said premises
with their respective families. It is urged that, since it is thus specifically provided that until the
discharge, by Rajes or his heirs, of the obligation to purchase another suitable house and to
make over the same to Ramendra or his heirs, Rajes is not to be the absolute owner, this is a
factor which imports a further element of contain. agency, in the interest given to Rajes under
this deed of trust in so far as it relates to premises No. 44/2, Lansdowne Road. It is contended
that in order to emphasise the additional contingency as regards this item, subjection to cl. (c) as
regards these premises, has been specifically incorporated in cl. 12(a). Now, it is to be noticed
that the preliminary portion of cl. 12 shows that on the liquidation of the debts and after the
death of the settlor, the trust shall come to an end and the properties in Lots I to IV are to devolve
on Rajes. Clause 12(c), therefore, would prima facie show that the contingency, if any, which
arises by virtue of the obligation to provide alternative accommodation to Ramendra or his
heirs is to arise only after the death of the settlor and the discharge of the debts, which taken
together means the termination of the trust. So understood and assuming for the sake of
argument that the obligation to provide alternative accommodation is by itself a contingency, this
would bring about a contingent interest in premises No. 41/2, Lansdowne Road, in favour of
Rajes, after the termination of the trust. It follows that this item of property would not be
owned by anybody until that contingency disappears. This would result in this item of property
remaining without any legal ownership for the intervening period which is opposed to law.

15.The learned Solicitor-General, presumably recognising this difficulty, was obliged to

urge that the contingency arising from the provision imposing obligation on Rajes and his dra

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should be read into the preliminary portion of el. 12 in so far as premises No. 44/2, Lansdowne
Road, is concerned. That is to say, according to him, the trust is to be construed as not coming to
an end as regards this item of property alone until the obligation to provide alternative
accommodation is discharged. This construction would be doing great violence to the language
of cl. 12 which specifically shows in peremptory terms that the trust “shall come to an end on the
liquidation of all the debts of the settlor and after his death." The construction contended for is
not justified by the phrase " subject to the provisions contained in cl. (c) here of regarding
premises No. 44/2, Lansdowne Road" which occurs in cl. (a) thereof. The limitation by way of
subjection has reference only to "devolution" of the properties in Lots I to IV "absolutely."
Neitherthe use of word "devolution" nor of the word "absolutely" in cls. 12(a) and (c) can be
understood, in the context, as having any bearing on the vesting of the interest as opposed to the
interest being contingent, but only as indicating a full and unrestricted devolution of the property
subject to no limitations as regards the enjoyment thereof, as opposed to a vesting and devolution
subject to restricted enjoyment.

16. It appears to us reasonably clear that the intention of the settlor, taking cls. 12(a) and (c)
together, is that as regards Lots I to IV, the beneficial interest of Rajes as regards all the
properties comprised therein, including premises No. 44/2, Lansdowne Road, is vested in title
but restricted in enjoyment so long as the settlor is alive and the debts are not discharged, and
that as regards premises No. 44/2, Lansdowne Road, his enjoyment is further restricted inasmuch
as it is subject to the right of residence of Ramendra and his heirs in the said premises until the
obligation to provide alternative accommodation is discharged by Rajes or his heirs. We are
clearly of the opinion that the objection raised to the execution (1) on the ground that the
properties charged are to be proceeded against, in the first instance, and (2) on the ground that
the interest which Rajes gets under the trust deed either as regards the general properties
covered by the deed or as regards premises No. 44/2, Lansdowne Road, is contingent, are
untenable. If, as a fact, either the debts remain undis- charged or the alternative accommodation
has not so far been provided, how the rights of persons affected thereby are to be safeguarded is
not a matter that arises for consideration before us and we express no opinion thereupon. This
appeal is accordingly dismissed with costs.

Appeal dismissed.

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 Jayaram Mudaliar v. Ayyaswami

AIR 1973 SC 569

The Judgment of A. N. RAY and M. H. BEG was delivered by BEG J. SIKRI C.J. gave a
separate Opinion.

1.Beg, J. Jayaram Mudaliar, the Appellant before us by Special Leave, purchased some lease
hold land for Rs. 10,500/- from Munisami Mudaliar and others under a sale deed of 7-7-1958
(Exhibit B-7) and some other lands shown in a sales certificate dated 15-7-1960, (Exhibit B-
51) sold to him for Rs. 6,550/- at a public auction of immovable property held to realise the
dues in respect of loans taken by Munisami Mudaliar under the Land Improvement Loans' Act 19
of 1883. Both Jayaram and Munisami, mentioned above, were impleaded as co-defendants in a
Partition suit, in Vellore, Madras, now before us in appeal, commenced by a pauper application
dated 23-6-1958 filed by the plaintiff-respondent Ayyaswami Mudaliar so that the suit must be
deemed to have been, filed onthat date. The plaintiff respondent before us had challenged, by an
amendment of his plaint on 18-9-1961, the validity of the sales of land mentioned above,
consisting of items given in schedule 'B' to the plaint, on the ground, inter-alia, that these sales,
of joint property in suit, were struck by the doctrine of lis pendens embodied in section 52 of the
Indian Transfer of Property Act. As this is the sole question, on merits, raised by the appellant
before us for consideration, we will only mention those facts which are relevant for its decision.

2. Before, however, dealing with the above-mentioned question, a preliminary objection to the
hearing of this appeal may be disposed of. The Trial Court and the Court of first appeal having
held that the rule of lis pendens applied to the sales mentioned above, the appellant purchaser
had filed a second appeal in the High Court of Madras, which was substantially dismissed by a
learned Judge of that Court, on 19-7-1968, after a modification of the decree. Leave to file a
Letters Patent appeal was not asked for in the manner required by Rule 28, Order IV of the Rules
of Madras High Court, which runs as follows "28. When an appeal against an appellate decree or
order has been heard and disposed of by a single Judge, any application for a certificate that the
case is a fit one for further appeal under clause 15 of the Letters Patent shall be made orally and
immediately after the judgment has been delivered."

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3.But, the appellant, after obtaining certified copies of the judgment and decree of the High
Court, sent a letter to the Registry that the case be listed again for obtaining, a certificate of
fitness to file a Letters' Patent appeal. The case was, therefore, listed before the learned Judge
and an oral application which was then made for grant of a certificate, was rejected on 6-9-1968
on the ground that it had not been made at the proper time. It was contended, on behalf of the
respondent, that, in the circumstances stated above, the appellant must be deemed to have been
satisfied with the Judgment of the High Court as his Counsel did not ask for leave to file a
Letters' Patent appeal as required by Order IV Rule 28 of the Rules of the Madras High
Court (that is to say, immediately after the judgment has been delivered). The following
observations of this Court in Penu Balakrishna Iyer & Ors. v. Sri Ariva M. Ramaswami lyer &
Ors. AIR 1932 Madras 566. were cited to contend that, the appeal before us should be rejected in
limine : (1) [1964] 7 S.C.R. 49 @ 52-53 .lm15 "Normally, an application for special leave
against a second appellate decision would not be granted unless the remedy of a Letters Patent
Appeal has been availd of. In fact, no appeal against second appellate decisions appears to be
contemplated by the Constitution .as is evident from the, fact that Art. 133(3) expressly provides
that normally an appeal will not lie to this Court from the judgment, decree, or final order of one
Judge of the High Court. It is only where an application for special leave against a second
appellate judgment raises issues of law of general importance that the Court would grant the
application and proceed to deal with the merits of the contentions raised by the appellant. But
even in such cases, it is necessary that the remedy by way of a Letters' Patent Appeal must
resorted to before a party comes to this Court".

4. In reply to the preliminary objection, Mr. Chagla, appearing for appellant, has assailed the
validity of the above mentioned Rule 28 of Order IV itself. It is submitted that the rule conflicts
with the provisions of clause 15 of the Letters' Patent of the Madras High Court requiring only
that the Judge who passed the Judgment should declare that the case is fit one for appeal as a
condition for appealing. It was urged that the period of limitation for filing an appeal should not,
in effect, be cut down by a rule such as the one found in Rule 28, Order IV of the Rules of
Madras High Court. It was urged that, before article 117 of the Limitation Actof 1963 introduced
a period of thirty days from a decree or order for filing a Letters Patent appeal, the period of
limitation for such appeals fell under the residuary article 181 of the old Limitation Act. As
applications for certification fen outside the provisions of the Civil Procedure Code and there

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was no specific provision for them in the Limitation Act the High Court could frame its own rule
prescribing the mode and time for making such applications. Rule 28 of Order IV of the
Madras High Court does not purport to affect the power to give the declaration
contemplated by clause 15 of the Letters' Patent,. In some High Courts, there is no rule of the
Court laying down that the application should be oral and made immediately after the judgment
has been delivered. It is, however, evident that a rule such as Rule 28 of Order IV the Madras
High Court is most useful and necessary particularly when a period of thirty days only for filing
an appeal has been prescribed in 1963. The Judge pronouncing the judgment can decide then
and there, in the presence of parties or their counsel, whether the case calls for a certificate. In a
suitable case, where a party is able to prove that it was prevented due to some cause beyond its
control from asking for leave at the proper time, the Judge concerned may condone non-
compliance by a party with Rule 28, Order IV, of the Madras High Court, or extend time by
applying Section 5 of the Limitation Act. This salutary rule could not, therefore, be held to be
ultra vires or invalid.

4. There is, however, another answer to the preliminary objec- tion. It was contended that the case
before us is covered by what was laid down by this Court in Penu Balakrishna Iyer's case
(Supra) when it said (at page 53) "..we do not think it would be possible to lay down an
unqualified rule that leave should not be granted if the party has not moved for leave under the
Letters Patent and it cannot be so granted, nor is it possible to lay down an inflexible rule that if
in such a case leave has been granted it must always and necessarily be revoked. Having regard
to the wide scope of the powers conferred onthis Court under Art. 136, it is not possible and,
indeed, it would not be expedient, to lay down any general rule which would govern all cases.
The question as to whether the jurisdiction of this Court under Art. 136 should be exercised or
not, and if yes, on what terms and conditions, is a matter which this Court has to decide on the
facts of each case".In that particular case, this Court had actually heard and allowed the appeal
by Special leave because it held that there was no general inflexible rule that special leave
should be refused where the appellant has not exhausted- his rights by asking for a certificate of
fitness of a case and because that case called for interference. It is urged before us that the
appellant had done whatever he possibly could, in the circumstances of the case, to apply for and
obtain a certificate of fitness after going through the judgment of the High Court, so that the rule
that alternative modes of redress should be exhausted before coming to this Court had been

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really complied with. Each case must, we think, be decided upon its own facts. In the case before
us, although the appellant was not shown to have attempted any explanation of failure to apply
for the certificate at the proper time, yet, +,he special leave petition having been granted, and the
case having passed, without objection, beyond the stage of interim orders and printing of the
records, we have heard arguments on merits, also. The merits may now be considered. The
challenge on the ground of lis pendens, which had been accepted by the Courts in Madras, right
up to the High Court, was directed against two kinds of sales : firstly,% there was the ostensibly
voluntary sale of 7-7-1958 under a sale deed by the defendant Munisami Mudaliar and his major
son Subramanian Mudaliar and three minor sons Jagannathan, Duraisami alias Thanikachalam,
and Vijayarangam in favour of the defendant appellant; and, secondly, there was the sale
evidenced by the,. sale certificate (Exhibit B. 51) of 15-7-1960 showing that the auction sale was
held in order to realise certain, "arrears under hire purchase system due to Shri O. D. Munisami
Mudaliar. The words "due to" must in the context, be read as "due from"' because "falsa
demostration non nocet". The deed of the voluntary sale for Rs. 10,5001/- showed that Rs.
7375.11 Ans. were to be set off against the money due on a. decree obtained by the purchaser
against the sellers in original. suit 2/56 of the Vellore Sub-Court , Rs. 538.5 Ans. were left to
liquidate the amount due for principal and interest due to the purchaser on a bond dated 14-10-
1957, by Munisami Mudaliar, Rs. 662.9 Ans. was to be set off to liquidate another amount due to
the purchaser from Munisami on account of the principal and, interest on another bond executed
by Munisami, Rs. 1250.0.0 was left to pay off and liquidate the balance of a debt due to one
Thiruvenkata Pillai from Munisami, Rs. 100.0.0 were meant to settle a liability to the
Government in respect of a purchase of cattle and for digging of some well, Rs. 51.13 Ans.
were to go, towards settling a similar liability, and only Rs. 521.11 Ans. were paid in cash to
the seller after deducting other amounts for meeting liabilities most of which were shown as
debts to the purchaser himself. It may be mentioned here that, on 17-1-1944, Munisami had
executed a mortgage of some of the property in Schedule 'B' of the plaint for Rs. 7,500/ in
favour of Kannayiram, and he had executed a second mortgage in respect of one item of property
of Schedule 'B' in favour of Patta Mal, who had assigned his rights to T. Pillai. A third mortgage
of the first item of Schedule 'B' properties was executed on 27-5- 1952 by Munisami, in favour
of the appellant Jayaram, was said to be necessitated by the need to pay arrears of Rs. 3,000/-
income tax and for discharging a debt and a promote in favour of a man called Mudali. In 1955,

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an original suit No. 124/1955 had been filed by T. Pillai who had obtained orders for the sale of
the first item of Schedule 'B' properties shown in the plaint. The original suit No. 2 of 1956 had
been filed for principal and interest due on 27-5- 1952 to the appellant who had obtained an
attachment on 5-1- 1956 of some schedule 'B' properties. The appellant had obtained a
preliminary decree on 25-1-1956 in his suit and a final decree on 14-9-1957. All these events had
taken Place before the institution of the partition suit on 23-6-1968. But, the voluntary sale to
satisfy decretal amounts was executed after this date. The second sale was an involuntary sale
for realisation of dues under the provisions of section 7 of the Land Improvement Loans Act 19
of 1883 which could be realised as arrears of land revenue. There was nothing in the sale
certificate to show that the due for which properties were sold were of anyone other than
Munisami individually.

5. On the facts stated above, the appellant Jayaram claims that both kinds of sales were outside
the purview of the doctrine of lis pendens inasmuch as both the sales were for the discharge
of preexisting liabilities of the Hindu joint family of which Munisami was the karta. The
liabilities incurred by Munisami, it was submitted, as karta of the family, had to be met, in any
case, out of the properties which were the subject matter of the partition suit. It was urged that
where properties are liable to be sold for, pay- ment of such debts as have to be discharged by the
whole family, only those properties would be available for partition in the pending suit which are
left after taking away the properties sold for meeting the pre-existing liabilities of the joint
family. In the case of the sale for discharging dues under the Land Improvement Loans Act it
was also contended that they obtained priority .,over other claims, and, for this additional reason,
fell outside, the scope of the principle of lis pendens.

6. The defendant-respondent Munisami and the defendant appellant Jayaram had both pleaded
that the properties in suit were acquired by Munisami with his own funds obtained by separate
business in partnership with a stranger and that Ayyaswami, plaintiff, had no share in these
properties. The plaintiff respondent's case was that although the properties were joint, the
liabilities sought to be created and alienations made by Munisami were fraudulent and not for any
legal necessity, and, therefore, not binding on the family. The Trial Court had found that the
properties given in Schedule 'B' were joint family properties of which the defendant respondent
Munisami was the karta in possession. This finding was affirmed by the first Appellate Courtand

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was not touched in the High Court. It did not follow from this finding that all dealings of
Munisami with joint family properties, on the wrong assumption that he was entitled to alienate
them as owner and not as karta, would automatically become binding on the joint family. A karta
is only authorised to make alienations on behalf of the whole family where these are supported
by legal necessity. It was no party's case that the alienations were made on behalf of, and,
therefore, were legally binding on the joint family of which plaintiff-respondent Ayyaswami was
a member., The Trial Court recorded a finding on which the learned Counsel for the appellant
relies strongly : "There is over- whelming documentary and oral evidence to show that the sale
deed Exhibit B.7 and the revenue sale are all true and supported by consideration and that the
12th Defendant would be entitled to them, if these sales were not affected by the rule of lis
pendens 'Within the meaning of Section 52 of the Transfer of Property Act."

7. It may be mentioned here that the 12th Defendant is no other than, the appellant Jayaram
Mudaliar, the son-in-law of defendant respondent Munisami Mudaliar, who had purchased the
properties covered by both the impugned sales. The plea of the plaintiff-respondent Ayyaswami
that the sales in favour of Jayaram, the 12th defendant-appellant, were fraudulent and fictitious
and the trial Court's decree for the partition included the, properties covered by the two
impugned sales evidenced by Ex. B.7 and B.5 1, yet, the Commissioner who was to divide the
properties by metes and bounds, was directed to allot to Munisami's share, so far as possible,
properties which were covered by Exhibit B.7, and B.51. This implied that the liabilities created
by the decrees for whose satisfaction the sale deed dated 7-7-58 (Exhibit B-7) was executed and
the revenue sale of 16-3-1960 for loans under an agreement were treated as the separate
liabilities of the defendant Munisami and not those of the joint family. The Trial Court as well as
the First Appellate Court had also rejected the plea that the revenue sale of 16-3-1960 to satisfy
pre-existing liabilities of Munisami had any priority over the rights of the plaintiff-respondent
may get in the partition suit. The result was that the partition suit was decreed subject to a
direction for the allotment of the Properties covered by Exhibit B. 7 and B. 51 so that the
purchaser may retain these properties if they were allotted to Munisami.

8. The High Court of Madras had described the sale of 7-7-1958 as a "voluntary alienation", and,
thereby, placed it on a footing different from an involuntary sale in execution of a decree in a
mortgage suit. The obligations incurred before the sale of 7-7-1958, by reason of the decrees in

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the mortgaged suits, were not on this view, liabilities which could be equated with either
transfers prior to the institution of the partition suit or with sales in execution of mortgage
decrees which are involuntary. So far as the revenue sale was concerned, the High Court, after
setting out the terms of Section 7 of the Land Improvement Loans Act 19 of 1883, held that only
that land sold was to be excluded from the purview of the principle of lis pendens for the
improvement of which some loan was taken. This meant that only that part of the loan was
treated as a liability of the joint family as could be said to be taken for the joint land. It,
therefore, modified the decrees of the Courts below by giving a direction that further evidence
should be taken before passing a final decree to show what land could be thus excluded from
partition. The plaintiff-appellant has relied upon certain authorities laying down that the doctrine
of lis pendens is not to be extended to cover involuntary sales in execution of a decree in a
mortgage suit where the mortgage was, prior to the institution of the suit in which the plea of lis
pendens is taken, because the rights of the purchaser in execution of a mortgage decree date back
to the mortgage itself. They are: Chinnaswami Paddayachi v. Darmalinga Paddyachi (1) Gulam
Rasool Sahib v. Hamida Bibi AIR 1950 Madras 189, Baldeo Das Bajoria & Ors. v. Sarojini Dasi
& Ors., AIR 1929 Calcutta 697. Har Prashad Lal v. Dalmardan Singh ILR 32 Calcutta 891.
Reliance was also placed on the principle laid down in Sityam Lal & Anr. v. Sohan Lal & Ors.,
AIR 1928 All. to contend that, since Section 52 of the Transfer of Property Act does not protect
transferors, a transfer on behalf of the whole joint Hindu family would be outside the purview of
the principle in a partition suit. The contention advanced on the strength of the last mentioned
case erroneously assumes that the impugned sales were on behalf of the joint family.

9.Learned Counsel for the plaintiff-respondent has, in reply, drawn our attention to thefollowing
observations of Sulaiman, Ag. C.J., expressing the majority opinion in Ram Sanehi Lal &
Anr. v. Janki Prasad & Ors. AIR 1931 All. P. 466 @ 480. (FB) :

". . . . the language of S. 52 has been held to be applicable not only to private transfers but also
to Court sales held in execution of decrees. S. 2 (d) does not make S. 52 inapplicable to Ch.4,
which deals with mortgages. This is now well-settled : vide Radhama'dhub Holdar v.
Manohar Mukerji (1881) 15 Cal. 756=15 I.A. 97 and Moti Lal v. Kharrabuldin 1898, 25 Cal.
179=24 I.A. 170 followed in numerous cases out of which mention may be made of Sukhadeo
Prasad V. Jamna(1901) 23 All. 60=(1900) A.W.N. 199 ".

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But, as we have no actual sale in execution of a mortgage decree, this question need not be
decided here. Another decision to which our attention was drawn was: Maulabax v. Sardarmal
& Anr. AIR 1952 Nag. 34. The suggestion made on behalf of the appellant, that attach- ment of
some schedule 'B' property before judgment in the purchaser's mortgage suit could remove it
from the ambit of lis pendens, is quit,-, unacceptable. A contention of this kind was, repelled, in
K. M. Lal v. Ganeshi Ram, [1970] 2 S.C.R. 204 at 21 by this Court as clearly of no avail against
the embargo imposed by Section 52 of the Transfer of Property Act.

10. The High Court had rightly distinguished cases cited on behalf of the appellant before it by
holding that exemption from the scope of As pendens cannot be extended to voluntary sales in
any case. Obviously, its view was that, even where a voluntary sale takes place in order to satisfy
the decretal amount in a mortgage suit, the result of such a sale was not the same as that of an
involuntary sale in the course of execution proceedings where land is sold to satisfy the decree
on the strength of a mortgage which creates an interest in the property mortgaged. The High
Court had observed that, as regards the satisfaction of the mortgage decree in his favour, which
was part of the consideration for the sale of 7-7-1958, the appellant purchaser decree holder
could get the benefit of Section 14 Limitation Act and still execute his decree if it remained
unsatisfied due to failure of consideration.

11. An examination of the sale deed of 7-7-1958 discloses that it is not confined to the
satisfaction of the decretal amounts. Other items are also found in it. The sale deed does not
purport to be on behalf of the Hindu joint family of which Ayyaswami the plaintiff and
Munisami Defendant No. 1 could be said to be members. It no doubt mentions the sons of
Munisami Mudaliar but not Ayyaswami, plaintiff, among the sellers. At most, it could be a sale
binding on the shares of the sellers. As already indicated, Munisami, Defendant-Respondent, as
well as Jayaram Defendant- Appellant, having denied that the, properties in dispute were joint,
could not take up the position that the sales were binding on the whole family. Therefore, we are
unable to hold that the assumption of the Madras High Court that the voluntary sale could not
bind the whole family, of which Munisami was the karta, was incorrect.

12. Learned Counsel for the appellant had also relied on Bishan Singh v. Khazan Singh [1959]
S.C.R. 878. That was a case in which, before the deposit of money by the pre-emptors in a suit to
enforce their rights to pre-emption, the vendee had sold his rights to the appellant who had an

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equal right of pre-emption. It was held there that the claim for pre-emption could be defeated by
such a device which fell outside the purview of the principle of lis pendens. We think that this
decision turns upon its own facts and on the nature of the right of pre-emption which, as was
observed there, is a weak right. This Court had held that this weak right could be defeated by a
sale which a vendee is compelled to make for the purpose of defeating the 'night, provided the
purchaser's superior or equal right to Pre-emption had not been barred by limitation. On the
question considered there the view of the East Punjab High Court in Wazir Ali Khan v. Zahir
Ahmad Khan was preferred, to the view of the Allahabad High Court in Kundan Lal v. Amar
Singh, The observations made by this Court with regard to the doctrine of lis pendens when a
plaintiff is enforcing a right of preemption must, we think, be confined to cases of sales which
could defeat preemptors claims. It has to be remembered that a technical rule of the law of
preemption is that the preemptor, to succeed in his suit, must continue to possess the right to
preempt until the decree for possession is passed in his favour. As regards the revenue sale of 16-
3-1960 (Exhibit 0.51) we find that the, sale certificate is even less informative than the voluntary
sale deed considered above. Nevertheless, the view taken by: the Madras High Court was that
any land for to improvement of which loan is shown to have been taken by Munisami Mudaliar
would be excluded from the purview of the doctrine of lis pendens. It is, however, urged that
the High Court had given effect to clause, (c) of Section 7 of the Land improvement Loans Act
of 1883, but had overlooked clause (a). Here, the relevant part of Section 7, sub-s. (1) of this Apt
may be, set out. It reads as follows, Recovery of loans.-(1) Subject to such rules as may be made
under Section 10, all loans granted under this Act, all interest (if any) chargeable thereon, and
'Costs (if any) incurred in making the same shall, when they become be' recoverable by the,
Collector in all or any of the following modes, name-

(a) from the borrower-as if they were arrears of land revenue due by him;

(b) from his surety (if any) as if they were arrears of land revenue due by him;,

(c) out of the land for the benefit of which the loan has been granted as if they were arrears of
land revenue due in respect of that land;

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(d) out of the property comprised in the collateral security (if any)-according to the procedure
for the realization of land revenue by the sale of immovable property other than the land on
which that revenue is due :

Provided that no proceeding in respect of any land under clause (c) shall affect any interest in
that land which existed before the date of the order granting the loan, other than the interest of
the borrower, and of mortgages of, or persons having charges on, that interest (1) A.I.R. 1927
All. 664. and where the loan is' granted under Section 4 with the consent of another person, the
interest of that person, and of mortgagees of, or persons having charges on, that
interest."Reliance was also placed on Sec. 42 of the Madras Revenue- Recovery Act of 1864
which reads as follows:

"All lands brought: to sale on account of arrears of revenue shall be sold free of all
incumbrances, and if any balance shall remain after liquidating the arrears with interest and the
expences of attachment and sale and other costs due in respect to such arrears, it shall be paid
over to the defaulter unless such payment be' prohibited by the injunction of a Court of
competent jurisdiction."

13. It will be seen that the assumption that the dues could be realised as arrears of land revenue
would only apply to the interest of the borrower so far as clause (7) (1) (a) ls concerned. The
proviso enacts that even recoveries falling under See. 7 ( 1 ) (c) do not affect prior interests of,
persons other than the borrower or of the party which consents to certain loans. In the case
before us, the borrower had himself taken up the case that the loan was taken by him
individually for the purpose of purchasing a pumping set installed on the land. It did not,
therefore, follow that this liability was incurred on behalf ofthe joint family unless it amounted to
an unprovement of the joint land. Every transaction of Munisami or in respect of joint property
in his possession could not affect rights of other members. It was for this reason that Section 7

(a) was not specifically applied by the High Court,. But, at the same time, the direction that the
properties sold should, so far as possible, be allotted to Munisami meant that the purchaser
could enforce his rights to them if they came to the share of Munisami. The question of
paramount claims or rights of the Government for the realisation of its taxes or of dues which
are equated with taxes was also raised on behalf of the appellant on the strength of Builders

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Supply Corporation v. The Union of India(1) In that case, the origin of the paramount right of
the State to realise taxes due, which could obtain priority over other claims, was traced to the
prerogatives of the British crown in India. Apart of the fact that there is no claim by, the State
before us, we may observe that, where a statutory provision is relied upon for recovery of dues,
the effect of it must be confined to what the statute en-acts. Even under the English law, the
terms of the statute displace any claim based on prerogatives of the Crown (1) [1965] 2 S.C.R.
289. vide Attorney Generalv. De Keyser's Royal hotel Ltd. [1920] AC 508. And, in no case, can
the, claim whatever its basis, justify. a sale of that property which doesnot belong to the person
against whom the claim exists. As already observed a claim under Section 7(1) (a) of the Land
Improvement Loans Act of 1883 could only be made from the borrower. This meat that, unless
it was proved that Munisami, in taking a loan under the Act, was acting as the, karta of the, joint
Hindu family of which Ayyaswamy was a member, recovery of arrears could only be made from
Munisami's share in the, 1and. That this could be done was, in our opinion implied in the
direction that the properties sold should, so far as possible, be allotted to the share of Munisami.
As some argument has been advanced on the supposed inapplicability of the general doctrine of
lis pendem to the impugned sales, the nature, the basis, and the, scope of this doctrine may be,
considered here. It has been pointed out, in Bennet "On lis pendens", that, even before Sir
Francis Bacon framed his ordinances in 1816 "'for the better and more regular administration of
justice in the chancery, to be daily observed" stating the doctrine of lis pendens in the 12th
ordinance, the doctrine was already recognized and enforced by Common law Courts.
Bacon's ordinance on the Subject said :

"No decree bindeth any that commeth in bona fide, by conveyance from the, defendant before
the bill exhibited, and is made no party, neither by bill, nor the order; but, where he comes in
pendente life, and, while the suit is in full prosecution and without any colour of allowance or
privity of the court, there regularly the decree bindeth; but, if there were any intermissions of
suit, or the court made acquainted with the conveyance, the court is to give order upon the
special matter according to justice."

13.The doctrine, however, as would be evident from Bennet's work mentioned above, is derived
from the rules of jus gentium which became embodied in the Roman Law where we find the
maxim: "Rem dequa controversia prohibemur in acrum dedicate" (a thing concerning which

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there is a controversy is prohibited, during the suit from being alienated). Bell, in his
commentaries on the lows of Scotland Bell's Com. on laws of Scotland, p. 144. said that it was
grounded on the, maxim: "Pendente lite nibil innovandum". He observed "It is a general rule
which seems to have been recognized in all regular systems of jurisprudence, that during the
pendence of an action of which the object is to vest the property or obtain the possession of real
estate, a purchaser shall be held to take that estate as it stands in the person of the seller, and to
be bound by the claims which shall ultimately be pronounced."

14.In the Corpus Juris Secundum (Vol. LIV-P. 570), we find the following definition:

"Lis pendens literally means a pending suit; and the doctrine of lis pendens has been defined
as the jurisdiction, power, or control which a court acquires over property involved in suit,
pending the continuance of the action, and until final judgment therein." Expositions of the
doctrine indicate that the need for it arises from the very nature of the jurisdiction of Courts and
their control over the subject-matter of litigation so that parties litigating before it may not
remove any part of the subject-matter outside the power of the court to deal with it and thus
make the proceedings infructuous. It is useful to remember this background of Section 52 of our
Transfer of Property Act which lays down:

"During the pendency in any Court...... of any suit or proceeding which is not collusive and in
which any right to immovable property is directly and specifically in question, the property
cannot be transferred or otherwise dealt with by any party to the suit or proceeding so as to affect
the rights of any other party thereto under any decree or order which may be made there,in,
except under the authority of the Court and on such terms as it may impose."

15. It is evident that the doctrine, as stated in Section 52, applies not merely to actual transfers of
rights which are subject-matter of litigation but to other dealings with it "by any party to the suit
or proceeding, so as to affect the right of any other party thereto". Hence, it could be urged that
where it is not a party to the litigation but an outside agency, such as the tax Collecting
authorities of the Government, which proceeds against the subject--matter of litigation, without
anything done by a litigating party, the resulting transaction will not be hit by Section 52. Again,
where all the parties which could be affected by a pending litigation are, themselves parties to a
transfer or dealings with property in such a way that they cannot resile from or disown the

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transaction impugned before the Court dealing with the litigation, the Court may bind them to
their own acts. All these are matters which the Court could have properly considered. The
purpose of Section 52 of the Transfer of Property Act is not to defeat any just and equitable
claim but only to subject them to the authority of the Court which is dealing with the property to,
which claims are put forward. In the case before us, the Courts had given directions to safeguard
such just and equitable claims as the purchaser appellant may have obtained without trespassing
on the rights of the plaintiff-respondent in the joint Property involved in the partition suit before
the Court. Hence, the doctrine of lis pendens was correctly applied.

For the reasons given above, there is no force in this appeal which is dismissed with costs.

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 Supreme General Films Exchange ... vs His Highness Maharaja Sir

1975 AIR 1810, 1976 SCR (1) 237

JUDGMENT:

1. The judgment of the Court was delivered by BEG, J. The plaintiff-respondent had filed a suit
in the District Judge's Court at Jabalpur claiming a declaration that a lease executed in
favour of the Defendant-Appellant, M/s. Supreme General Films Exchange Ltd., (hereinafter
referred to as 'the Company'), in respect of Strider Vilas Theater (now known as Plaza Talkies)
by its former owners. Jiwan Das Bhatia and his sons (hereinafter referred to as 'the Bhatias'), is
void and ineffective against the plaintiff's rights under decrees obtained in Civil Suit No. 15A of
1954 dated 7-S-60 and in Civil Suit No. 3B of 1952 dated 20-4-1954 in execution of which the
Theater had been attached. The plaintiff wanted the declaration also to make it clear that an
auction purchaser, purchasing the theater in execution of either of the two decrees, gets rights
free from any obligation towards the Defendant-Appellant under the void lease. The former
owners of the theater, the Bhatias, had borrowed Rs. 2,50,000/- from the Plaintiff-Respondent, a
Maharaja, against the security of bales of cotton. On 29-12- 1951, they executed a registered
mortgage deed in respect of the Plaza Theater in favour of the plaintiff as the price of pledged
goods was insufficientto satisfy the dues. The plaintiff, unable to recover the amount due, had
brought Civil Suit No. 15A of 1954 in which a compromise decree was passed on 7-5-1960, in
terms of an agreement between the parties that amounts clue will be realized by the sale of Plaza
theater.

2. The Central Bank of India, another creditor of Bhatias, had brought Civil Suit No. 3B of 1952
and obtained a decree for Rs. 1,24,000- on 29-4-]952. Rights under this decree were assigned in
favour of the plaintiff-respondent. The Plaza theater, together with other properties of Bhatias,
was attached on 4-5-1955 in the course of execution of that decree. The appellant company
claimed to be a lessee in occupation of the theater where it had carried on the business of
running a Cinema under an unregistered lease obtained on 27-2-1940. The lease of 1940 had
expired on 10- 4-1946. The Company continued as a tenant holding over until the impugned
lease deed of 30-3-1956 was executed. If this was a valid lease, it would have conferred upon the
company the right to be a tenant of the property under the lease for eight years, from 10-2-1956

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to 10-2-1964, with an option for a renewal until 10-2-1970. This lease was executed after the
company had filed a suit No. 16A of 1954) on 20-11-1954 for the specific performance of an
agreement to lease contained in a letter dated 19-7-1948. A compromise decree was passed on
24-3-1956 in this suit also. the lease deed of 30-3 1956 purported to carry out the terms of that
compromise decree passed in a suit in which the plaintiff was not impleaded at all. The plaintiff's
case was that the lease of 30-3-1956 was void as it was struck by three statutory provisions,
namely, section 52 of the Transfer of Property Act, Section 65A of the Transfer of Propertied
Act, and Section 64 of the Civil Procedure Code. The defendant-appellant company, in
addition to denying the alleged rights of the plaintiff to the benefits of these provisions, pleaded
that a Suit of the nature filed by the plaintiff did not lie at all as it fell outside the purview of
Section 42 of the Specific Relief Act, 1877, altogether.

3. The Trial Court and the High Court, after having over- ruled the pleas of the defendant-
appellant, had decreed the plaintiff's suit. The defendant company obtained special leave to
appeal to this Court under Article of the Constitution Learned Counsel for the appellant
company tried to persuade us to A hold that the plaintiff had neither a legal character nor any
such present right in any property for which a declaration could be granted under Section 42
of the Specific Relief Act 1877 (re-enacted as Section 34 of the Specific Relief Act of 1963).
Furthermore, he contended that the defendant-company had never denied any of the rights of the
plaintiff. Finally, he submitted that, ill any case, no declaration at all was needed by the plaintiff
if the lease of 1956, executed by the former owners of the theater in favour of the defendant-
appellant, was void

4.The contention that the case fell outside the purview of Section 52 of the Transfer of Property
Act as the lease was executed in purported satisfaction of an antecedent claim rests upon the
terms of an agreement of 1948, embodied in a letter, on the strength of which the defendant-
appellant had filed his suit for specific performance. We find that the terms of the compromise
decree in that suit and lease-deed of 1956 purported to confer upon the defendant-appellant new
rights. Indeed, there are good grounds for suspecting that the compromise in the suit for specific
performance was adopted as a device to get round legal difficulties in the execution of the lease
of 1956 in favour of the defendant-company. We are unable to accept the argument, sought to be
supported by the citation of Bishan Singh & Ors. v. Khazan Singh & Anr [AIR 1958 SC838]

283 | P a g e
that the lease was merely an enforcement of an antecedent or pre-existing right. We think
that it purported to create entirely new rights pendent lite. It was, therefore, struck by the
doctrine of lis pendens, as explained by this Court in Jayaram Mudaliar v. Ayyaswami &
Ors.[AIR 1973 SC569], embodied in Section 52 of the Transfer of Property Act.

5.An alternative argument of the appellant was that a case falling within Section 65A(2)(e) of
the Transfer of Property Act, confining the duration of a lease by a mortgagor to three years,
being a special provision, displaces the provisions of Section 52 of the Transfer of Property Act.
This argument overlooks the special objects of the doctrine of lis pendens which applies to a case
in which litigation, relating to property in which rights are sought to be created pendente lite by
acts of parties, is pending. Moreover, for the purposes of this argument, the defendant- appellant
assumes that the provisions of Section 65A(2)(e) Transfer of Property Act are applicable. If that
was so, it would make no substantial difference to the rights of the defendant-appellant which
would vanish before the suit was filed if Section 65A applies We, however, think that, as the
special doctrine of lis pendens is applicable here, the purported lease of 1956 was invalid from
the outset. In this view of the matter, it is not necessary to consider the applicability of Section
65A(2) (e), which the defendant- appellant denies, to the facts of this case.

6. As regards the applicability of Section 64, Civil Procedure Code, we find that parties disagree
on the question whether the attachment made by the Central Bank on 20-4-1955, in execution of
the decree of which the plaintiff-respondent was the assignee, existed on the date the impugned
lease of 30-3-1956. Learned Counsel for the appellate relied upon the terms of an order recorded
on the order sheet, in the Court of Additional District Judge, Jabalpur, in Civil Suit No. 3B of
1952, on 25-1-1956, showing that, in view of the stay order received from the High Court,
execution could not proceed. The order sheet, however, also contains the enigmatic statement
that execution was dismissed as infructuous but the attachment was to continue for six months.
The High Court had treated the last part of the statement in the order sheet as void and
ineffective presumably on the ground that the Additional District Judge had no jurisdiction
either to lift the attachment or to dismiss the execution proceedings after the High Court had
given its order staying all further action in execution proceedings. The terms of the High Court's
order are not evident from anything placed before us. On the other hand, learned Counsel for the
plaintiff-respondent relies upon a subsequent order of the same Court, passed on 30-4- 1960, in

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the same suit. This order shows that a compromise had been arrived at between the decree holder
and the judgment debtor under which the decree holder had agreed to lift attachment of property
except with regard to Plaza Talkies which was to continue. We are, therefore, unable to hold that
the concurrent findings of the Trial Court and the High Court, that the Plaza Talkie was attached
in execution of decree in suit No. 3B of 1952 on 4-5-1955 and that this attachment was in
existence when the impugned lease was executed on 30-3-1956, are erroneous. On these
findings, the lease of 1956 was certainly struck by the provisions of Section 64 Civil procedure
Code also. Section 64, Civil Procedure Code, in fact, constitues an application of the doctrine of
lis pendence inthe circumstance specified there.

For the reasons given above, we dismiss this appeal with costs.

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 Govinda Pillai Gopala Pillai vs Ayyapan Pillai And Ors.

AIR 1957 Ker 10

M. S. MENON J. – In execution of the decree in the suit the appellant applied for delivery of one
acre of property in survey plot No. 201/1 of the Kanjirappally North Pakuthy together with the
building thereon. The contentions of the respondent (102nd defendant) as summarised by the
court below are:

That the 35th defendant, his father, had no rights over the property even on the date of the suit
that the 35th defendant has gifted this property under Ext. I to himself and his mother on 3-6-
1095, long before the suit, that the mother in turn gifted her rights over the property to him under
Ext. II in 1101, that ever since that date, he is in possession of the property in his own
independent title, that neither he nor his mother was a party to this decree, that the decree is not
binding on him and his property and that therefore the plaintiff is not entitled to get possession of
the property‖.

2. The only question, as can be seen from the summary of contentions extracted above, that
arises for consideration is whether the gift deed dated 3-6-1095 is affected by the rule of lis
pendens.

3. The plaint, however, was returned for want of pecuniary jurisdiction for presentation to the
proper court and was filed in the District Court of Kottayam only on 29-11-1095. If 29-11-1095
is the material date then it is equally clear that Ext. I is not affected by the rule and that the
conclusion of the lower court to that effect has to be sustained.

4. Section 52 of the Transfer of Property Act, 1882, reads as follows:

During the active prosecution in any Court having authority in British India or established
beyond the limits of British India by the Governor-General in Council, of a contentious suit or
proceeding in which any right to immovable property is directly and specifically in question, the
property cannot be transferred or otherwise dealt with by any party to the suit or proceeding so as
to affect the rights of any other party thereto under any decree or order which may be made

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therein, except under the authority of the Court and on such terms as it may impose. The section
was amended by Act 20 of 1929 by substituting the word ―pendency‖ for the words ― active
prosecution‖ and the words ― any suit or proceeding which is not collusive‖ for the words ―a
contentious suit or proceeding‖ and by the addition of an Explanation which fixes the time during
which a suit is deemed to be pending for the purposes of the section. The section as amended
reads as follows:

During the pendency in any Court having authority within the limits of India excluding the State
of Jammu and Kashmir or established beyond such limits by the Central Government … of any
suit or proceeding which is not collusive and in which any right to immovable property is
directly and specifically in question, the property cannot be transferred or otherwise dealt with
by any party to the suit or proceeding so as to affect the rights of any other party thereto under
any decree or order which may be made therein, except under the authority of the Court and on
such terms as it may impose.

Explanation – For the purposes of this section the pendency of a suit or proceeding shall be
deemed to commence from the date of the presentation of the plaint or the institution of the
proceeding in a Court of competent jurisdiction and to continue until the suit or proceeding has
been disposed of by a final decree or order and complete satisfaction or discharge of such decree
or order has been obtained, or has become unobtainable by reason of the expiration of any period
of limitation prescribed for the execution thereof by any law for the time being in force.‖

5. There was no Transfer of Property Act in force in the Travancore State at the relevant time
and so what we are concerned with in this case is not so much the application of a specific
statutory provision as of the general principle governing such matters. ―Lis‖ means an action or
a suit, ―Pendens‖ is the present participle of ―Pendo‖ meaning continuing or pending, and the
doctrine of Lis pendens may be defined as ―the jurisdiction, power, or control that courts have,
during the pendency of an action over the property involved therein . (34 American
Jurisprudence 360).

6. The basis of the doctrine in given as follows in the said volume:

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Two different theories have been advanced as the basis of the doctrine of lis pendens. According
to some authorities, a pending suit must be regarded as notice to all the world, and pursuant to
this view it is argued that any person who deals with property involved therein, having
presumably known what he was doing, must have acted in bad faith and is therefore, properly
bound by the judgment rendered. Other authorities, however, take the position that the doctrine is
not founded on any theory of notice at all, but is based upon the necessity, as a matter of public
policy, of preventing litigants from disposing of the property in controversy in such manner as to
interefere with execution of the court„s decree. Without such a principle, it has been judicially
declared, all suits for specific property might be rendered abortive by successive alienations of
the property in suit, so that at the end of the suit another would have to be commenced, and after
that, another, making it almost impracticable for a man ever to make his rights available by a
resort to the courts of justice‖. (34 American Jurisprudence 363).

And its origin and history;

The doctrine of lis pendens is of ancient lineage. Originating, it is said, in the civil law, it seems
to have been operative at an early date as the basis of the common law rule by virtue of which
the judgment in a real action was regarded as over-reaching any alienation made by the
defendant during its pendency. In the course of time the doctrine was adopted by equity, being
embodied in one of Lord Bacon„s ordinances ―for the better and more regular administration of
justice in the court of Chancery. This ordinance, commonly known as Bacon„s Twelth Rule,
provides ‗that no decree bindeth any that cometh in bonafide by conveyance from the defendant,
before bill is exhibited, and is made no party neither by bill nor order; but where he comes in
pendente lite, and while the suit is in full prosecution and without any color of allowance or
privity of the court, there regularly the decree bindeth; but if there were any intermission of the
suit, or the court made acquainted with, the court is to give order upon the special matter
according to justice„. The principle thus adopted at an early period in the history of chancery
jurisprudence has been followed and acted on by various successive chancellors, and is admitted
by writters on the subject to be the established doctrine‖. (34 American Jurisprudence 365)

7. Bennet, in his Treatise on the Law of Lis Pendens was not inclined to accept notice as the
basis of the rule. He quoted Lord Chancelor Cranworth Bellamy v. Sabine [ (1857) I De. G & J
566].

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―It is scarcely correct to speak of lis pendens as affecting the purchaser through the doctrine of
notice, though undoubtedly the language of the courts often so describes its operation. It affects
him not because it amounts to notice, but because the law does not allow litigant parties to give
to others pending the litigation rights to the property in dispute so as to prejudice the opposite
party… The necessities of mankind require that the decision of the court in the suit shall be
binding not only on the litigant parties, but also on those who derive title under them by
alienation made pending the suit, whether such alienees had or had not notice of the pending
proceedings. If this were not so there could be no certainty that the litigation would ever come to
an end, and said:

The foundation for the doctrine of lis pendens does not rest upon notice, actual or constructive; it
rests solely upon necessity – the necessity, that neither party to the litigation should alienate the
property in dispute so as to affect his opponent‖.

8. In Mulla‟s commentary to S. 52 of the Transfer of Property Act, 1882, (4th Edition, page 228)
it is stated:

If the plaintiffs valuation is disputed and the plaint returned after inquiry for presentation to a
Court of higher grade, an alienation effected in the interval is affected by the doctrine of lis
pendens. If this proposition embodies the correct principle then Ex. I is affected by the said
doctrine and the appeal has to be allowed.

9. The statement is based on Ma Than v. Maung Bagyan [ AIR 1927 Rang 145]. In that case a
suit was instituted in the Township Court at Bogale which could only deal with suits up to Rs.
500 in value. The defendant filed a written statement in which he pleaded inter alia that on a
correct valuation the suit will be found to be beyond the pecuniary jurisdiction of the court. The
court framed a preliminary issue as to the proper valuation of the suit, took evidence as to the
acreage of the holding and the value per acre, and on the 14th of May 1920 recorded a finding
that the proper valuation of the suit would be Rs. 750. On the basis of that finding it directed that
the plaint be returned for presentation to the proper court. The proper court was the Sub-
Divisional Court at Pyapon, and the plaint was presented in that court on the 21st May 1920.

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 10. On the 20th May 1920 the defendant executed a conveyance of the land and the question
before the court was whether the said conveyance was vitiated by the rule of lis pendens. Heald,
J., stated the question for decision as follows:-

The question which thus comes before us in this appeal is whether in a case where the subject
matter of the suit is land and the valuation which the plaintiff puts on the land is disputed and
where the proper valuation is after enquiry found to be beyond the pecuniary limits of the Court
in which the plaint was presented, so that the plaint is returned for presentation in another Court,
and where further the plaint is so presented without undue delay, a transfer made in the interval
between the return of the plaint and its presentation to the proper court is a transfer which is
prohibited by S. 52 of the Transfer of Property Act and answered the question in the affirmative.

11. In the course of his judgment, he also referred to Tangor Majhri v. Jaladhar Deari, [AIR 1919
Mad 755] and said:

It is, clear that neither of these decisions is an authority on the question before us, which is in
effect whether a plaintiff who has presented his plaint in a wrong court can be regarded as
actively prosecuting a suit or proceeding in the interval between the return of the plaint for
presentation in another Court and its actual presentation in that Court. Cunliffe, J, on the other
hand, thought that Tangor Majhri case was a direct authority on the point:

There is a direct authority on this very point in the case . There it was held that the rule of lis
pendens will operate in favour of a plaintiff, who, at the time of the transfer was erroneously
prosecuting his suit in a Court which from defect of jurisdiction was unable to entertain it and in
consequence returned it for presentation to the appropriate Court, which Court ultimatelly
decreed the suit on the basis of a lawful compromise. The decision in question appears to me to
be based on a sound principle of equity. And said:

From the commencement the plaintiff in the words of S. 52 was engaged in actively prosecuting„
her suit. I am of the opinion that even if a person actively prosecutes a suit in a Court which from
defect of jurisdiction is an inappropriate tribunal yet such active prosecution is contemplated by
the section under regard.

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12. Whatever may be the correctness of the decision on the basis of Section 52 before the
amendments effected by Act 20 of 1921 it cannot be considered as a correct interpretation of the
section as it stands today. In Gouri Dutt v. Shanker [AIR 1933 Sind 117], Rupchand, AJC, said:

The legislature has thought fit to amend the provisions of S. 52, T.P. Act, by Act 20 of 1929, two
years after the case in AIR 1927 Rang, 145 was decided to make it abundantly clear that the
pendency of the suit or proceedings for the purpose of the doctrine of lis pendens shall be
deemed to commence from the date of presentation of the plaint or the institution of the
proceedings in the Court of competent jurisdiction. The Rangoon case in therefore no longer
good law‖. And added :

If a suit remains a suit though a Court cannot entertain it for want of jurisdiction and has to
return the plaint to the Court in which the suit should have been presented, as held in the
Rangoon case, the provisions of S. 14 (The Indian Limitation Act, 1908), so far as they provide
for extending the period of limitation in such cases would be redundant. But this is not so. In a
number of rulings it has been held that where the suit had been instituted in a wrong court and
the plaint has been ordered to be returned, the period of limitation does not commence from the
date when the plaint was first presented but from the date when it was subsequently presented in
the proper Court, although it is open to the plaintiff to rely upon the provisions of S. 14 to claim
exemption for the time during which he was prosecuting with due diligence and in good faith his
first suit.

13. In Nathusingh v. Anandrao [AIR 1940 Nag 185]: a minor member of a joint Hindu family
instituted a suit for partition against his father in a wrong court and the father executed a
mortgage subsequent thereto and before the plaint was presented to the proper court. It was
contended that the doctrine of lis pendens as enunciated in section 52 applied to the case.
Pollock, J., said:

The mortgage was executed after S. 52 was amended by the Transfer of Property (Amendment)
Act, 20 of 1929. The only order that was made in the proceedings pending at the time when the
mortgage was executed was an order that the plaint should be returned for presentation in a
proper Court. The suit in which the decree for partition was passed was not instituted until after
the mortgage was executed, and therefore the doctrine in lis pendens cannot apply.

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14. We take the view that Section 52 of the Transfer of Property Act, 1882, as it stands today
embodies a correct version of the rule of lis pendens and that it is that rule that should be applied
in this case. If the said rule is applied there can be no doubt that there was no suit pending in a
court of competent jurisdiction prior to 29-11-1095 and that Ext. I dated 3-6-1095 should hence
be held as not vitiated by the rule of lis pendens.

15. It follows that the lower court„s decision is correct and has to be affirmed. The appeal falls
and is hereby dismissed with costs.

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 Dalip Kaur and Others vs Jeewan Ram And Others

AIR 1996 P H 158, (1996) 113 PLR 138

Bench: J L Gupta

JUDGMENT

1. Are the proceedings in a civil appeal before the Supreme Court in pursuance to the grant of
special leave under Article 136 of the Constitution of India not a continuation of the proceedings
in the original suit and is the principle of lis pendens not applicable to such proceedings? This is
the short question that arises in this second appeal.

2. A few facts may be noticed.

3. Lachhman respondent No. 24 filed a suit for possession by way of pre-emption of the land
measuring 9 kanals 9 Marias which had been sold to respondents I to 5 (original vendees). A part
of this land had been sold by respondents 1 to 5 to respondents 6 to 21. The suit for possession
by pre-emption was decreed by the trial Court on August 22, 1983. In pursuance to this decree,
Lachhrnan took possession of the suit land on October 6,1983. The appeal filed by respondents 1
to 5 was dismissed by the learned District Judge on March 18, 1985. The second appeal to this
Court was dismissed on September 26, 1985. Thereafter, respondents 1 to 5 filed a special leave
petition under Article 136 of the Constitution of India. Leave was granted. The appeal of
respondents 1 to 5 was accepted vide order, dated October 5, 1989. Accordingly, the suit filed by
Lachhman was dismissed. Thereafter, the original vendees and respondents 6 to 21 filed an
application under Section 144, Code of Civil Procedure, for restitution of possession.

4. The appellants along with respondents 22 and 23 filed objections alleging that they had
purchased the suit land from Lachhman. Being bona fide purchasers for consideration, the
petition under Section 144 of the Code was not competent. Respondents I to 21 filed reply to the
objections and pleaded that the matter was governed by the principle of lis pendens. The learned
trial Court framed the following issues:

1) Whether the objections are maintainable as alleged in the objection petition? OPP

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2) Relief.

5. Vide Judgment dated February 23, 1994, the learned trial Court rejected the objections. On
appeal the order of the trial Court having been affirmed, the objectors have filed the present
second appeal.

6. The sole contention raised by Mr. J. R. Mittal, learned counsel for the appellants is that the
principle of lis pendens does not apply to the proceedings in the appeal before their Lordships of
the Supreme Court. He has placed firm reliance on the decision of this Court in Mewa Singh v.
Jagir Singh, AIR 1971 P&H 244. The claim made on behalf of the appellants has been
controverted by the learned counsel for respondents 1 to 21.

7. Firstly, it deserves notice that the Supreme Court is at the head of the 'pyramid' of the judicial
system in this country. It exercises original and appellate jurisdiction. It has the poweer to "pass
such decree or make such order as is necessary for doing complete justice in any cause or matter
-- and any decree so passed or order so made shall be enforceable throughout the territory of
India". The law declared by the Supreme Court is binding on all Courts within the territory of
India. Under Article 136 of the Constitution of India, the Supreme Court has the discretion to
"grant special leave to appeal from any judgment, decree, determination, sentence or order in any
cause or matter passed or made by any Court or Tribunal" in the terrirotory of India. Their
Lordships can even interfere with an interlocutory order. The powers conferred on the Court
under the Constitution are very wide. This power has been invoked and exercised not only in
case where substantial questions of law are involved but even in those where the High Court has
come to a wrong conclusion from the evidence. The court has interfered with the orders passed
by the High Court in Second Appeals or Revision Petitions. In the present case, the decree which
had been passed by the trial court and affirmed by the lower appellate Court as well as this Court
in Second Appeal, was reversed by their Lordships. The decree having been reversed, the parties
were clearly entitled to restitution of possession. The mere fact that the present appellants were
not a party before the Supreme Court, is of no consequence as their interests were duly
represented by their vendor who was admittedly a party. Still further, there appears to be no
warrant for the view that the proceedings are not a continuation of the original suit. The mere
fact that the leave to appeal has to be obtained under the Constitution does not mean that the

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doctrine of lis pendens would not apply or that the decree holder shall not be entitled to the
restoration of possession.

8. As for decision in Mewa Singh's case (AIR 1971 Punj & Har 244) (supra), it deserves mention
that in this case the dispute was not decided on merits but in terms of the compromise arrived at
between the parties. It was further found that the appellants had recognised the fact "that they
were not entitled to get back the possession of that land from Purshotam Das Rattan as he was
not a party to the appeal and in his absence it could not be held that the gift in his favour was
fictitious ......... For these reasons, the appellants cannot now seek the assistance of the Court to
get possession of 30 Bighas of land from Purshotam Das Rattan". It is no doubt true that his
Lordship was pleased to observe that Article 136 of the Constitution is an extraordinary remedy
and is not in the ordinary line of appeal. However, it was also observed that "there is no doubt
that the transferee during the pendency of a suit or other proceedings is bound by the result
thereof but that principle cannot be made applicable to the facts of this case in view of the
insertion of Clause (iv) in paragraph 10 of , the petition of compromise and then its deletion,
which were conscious acts and amounted to not disturbing the rights of Purshottam Das Rattan."
It was, thus, clearly a case on its own facts. However, the principle that the transferee during the
pendency of the proceedings is bound by the result was recognised. This is precisely what has
happened in the present case.

9. In view of the above, the question posed at the outset is answered in the negative. It is held
that proceedings before the Supreme Court are a continuation of those in the original suit and
that the principle of lis pendens as well as restitution shall apply to the proceedings. Accordingly,
it is held that there is no merit in this appeal. It is dismissed. However, in the circumstances of
the case, I make no order as to costs.

10. Appeal dismissed.

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 D.S. Parvathamma vs A. Srinivasan

(2003) 4 SCC 705

JUDGMENT:

R.C. Lahoti, J.: The suit premises forming part of the building No.25, 5th Cross, Annamma
Temple Extension, Ramakrishnapuram, Bangalore, measuring 8x20 sq. ft. are the subject matter
of these proceedings initiated under the provisions of the Karnataka Rent Control Act, 1961,
(hereinafter 'the Act', for short) by the respondent claiming himself to be owner-landlord and
seeking eviction of the appellant alleging him to be tenant in the suit premises. Eviction has
been ordered under Clauses (a) and (h) of sub-Section (1) of Section 21 of the Act by the Rent
Controller and upheld by the High Court in exercise of revisional jurisdiction under Section
50(1) of the Act. The singular issue surviving for decision at this stage and around which the
learned counsel for the parties have centered their submissions is: whether the appellant is
entitled to protect his possession under Section 53A of the Transfer of Property Act, 1882 and
hence not liable to suffer eviction based on landlord-tenant relationship which has ceased to exist
on account of subsequent events.

1.The plea arises for determination in the background of the facts briefly stated hereinafter. The
suit premises were initially owned by one N. Shamanna. The appellant was inducted in the suit
premises as a tenant w.e.f. 1.11.1967. According to the appellant, he entered into an agreement to
purchase the suit property from the original owner in the year 1970, whereafter he has been
holding the suit premises as a prospective vendor and in part performance of agreement to
purchase the property, which relationship has superseded the erstwhile tenancy relationship and
altered the nature and character of appellant's possession over the suit premises from that of
tenant to that of a purchaser in possession in part performance of agreement to sell the property
within the meaning of Section 53A of T.P. Act. The factum of there being any agreement to sell
the property entered into by the original landlord with the appellant has been denied and has been
a subject matter of controversy in these proceedings. What is not disputed is that under a deed of
sale dated 18.4.1983 the original owner N. Shamanna and his wife Smt. Nanjamma have
transferred their right, title and interest in the property, including the suit premises, to the

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respondent herein. These proceedings were initiated by the respondent herein after serving a
notice on the appellant.

2.The controversy centering around the principal issue arising for decision in this appeal stands
mellowed down to the extent of the findings arrived at in the judgment dated 1.9.1999 passed by
VII Addl. City Civil Judge, Bangalore. It was a suit instituted by the appellant herein against N.
Shamanna the original owner, Nanjamma wife of the original owner and A. Sreenivasan, the
present owner and the respondent herein (respectively impleaded as defendant nos. 1, 2 and 3 in
the suit) seeking specific performance of the alleged agreement to sell of the year 1970 in his
favour. The respondent herein was impleaded as subsequent transferee. The Trial Court held that
though there was an agreement to sell in favour of the appellant, however, the suit filed by him
was barred by limitation and also suffered from gross delay and laches. The respondent was
held to be a transferee without notice of agreement in favour of the appellant, having purchased
the property bona fide and for consideration. It was held that the appellant was not entitled to a
decree of specific performance of the agreement to sell in his favour nor, looking to his conduct,
was he entitled to the alternative relief of refund of consideration with or without damages. One
of the findings arrived at is that in spite of the alleged agreement to sell of the year 1970, the
appellant had not disowned his character as tenant in the suit premises. There is no finding
arrived at in the judgment that the appellant was in possession of the suit premises in part
performance of the agreement of the year 1970. The suit was held liable to be dismissed and was
dismissed. The judgment and decree have achieved a finality as the appellant herein did not
pursue the matter further.

3. Section 53A of the Transfer of Property Act reads as under:- "53A. Part Performance.
Where any person contracts to transfer for consideration any immovable property by writing
signed by him or on his behalf from which the terms necessary to constitute the transfer can be
ascertained with reasonable certainty, and the transferee has, in part performance of the contract,
taken possession of the property or any part thereof, or the transferee, being already in
possession, continues in possession in part performance of the contract and has done some act in
furtherance of the contract, and the transferee has performed or is willing to perform his part of
the contract, then, notwithstanding that where there is an instrument of transfer, that the transfer
has not been completed in the manner prescribed therefore by the law for the time being in force,

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the transferor or any person claiming under him shall be debarred from enforcing against the
transferee and persons claiming under him any right in respect of the property of which the
transferee has taken or continued in possession, other than a right expressly provided by the
terms of the contract:

Provided that nothing in this section shall affect the rights of a transferee for consideration who
has no notice of the contract or of the part performance thereof."

4. The essential features of the equitable doctrine of part performance as statutorily modified
and incorporated in Section 53A abovesaid, to the extent relevant for the purposes of this case,
are: (i) that the transferee has, in part performance of the contract, taken possession of the
property or any part thereof, or the transferee, being already in possession, continues in
possession in part performance of the contract and has done some act in furtherance of the
contract,

(ii) that the transferee has performed or is willing to perform his part of the contract, and

(iii) that the plea of part performance is not available to be raised against a transferee for
consideration who has no notice of the contract or of the part performance thereof.

5. In G.H.C. Ariff Vs. Jadunath Majumdar Bahadur, AIR 1931 PC 79, their Lordships held that a
prospective vendee already in possession of the property as lessee since before having allowed
his right to enforce his contract to become barred can resist the claim to possession by seeking to
establish a title, the acquisition of which is forbidden by the statute he being a lessee. Though
Ariff's case deals with English equitable doctrine and not with Section 53A of the Transfer of
Property Act, 1882 yet the basic principle remains the same. The transferee must have performed
or be willing to perform his part of the contract. If a suit for specific performance of the contract
filed by the transferee has been dismissed on merits and his disentitlement to seek enforcement
of the contract has been adjudicated upon by a judicial verdict it cannot be said that the
transferee has performed or is willing to perform his part of the contract. It would be a
contradiction in terms. On the suit for specific performance of contract having been dismissed,
such a plea is not available to raise.

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6. There are reasons more than one why the appellant cannot be permitted to raise the plea of
part performance and seek shelter thereunder. The civil suit which was filed by the appellant was
initially filed in the year 1989 as a suit for injunction seeking to protect his possession. After
about four years from the date of institution of the suit the relief of specific performance was also
added by way of amendments in the year 1993. On 1.9.1999, the suit was dismissed in its
entirety. Not only was the plaintiff's claim for specific performance and monetary relief in the
alternative denied, but even the relief of injunction was not allowed to him. Secondly, the
appellant has failed to allege and prove that he was delivered possession in part performance of
the contract or he, being already in possession as lessee, continued in possession in part
performance of the agreement to purchase, i.e. by mutual agreement between the parties his
possession as lessee ceased and commenced as that of a transferee under the contract. On the
contrary, there is a finding recorded in the earlier suit that in spite of his having entered into a
contract to purchase the property he had not disowned his character as lessee and he was treated
as such by the parties. The judgment dated 1.9.1999 in the Civil Suit notes the conduct of the
plaintiff inconsistent with his conduct as vendee in possession. When a person already in
possession of the property in some other capacity enters into a contract to purchase the property,
to confer the benefit of protecting possession under the plea of part performance his act effective
from that day must be consistent with the contract alleged and also such as cannot be referred to
the preceding title. The High Court of Madhya Pradesh had an occasion to deal with the facts
very near to the facts before us in Bhagwandas Parsadilal Vs. Surajmal & Anr., AIR 1961 M.P.
237. A tenant in possession entered into an agreement to purchase the house forming subject
matter of tenancy. However, he failed to show his nature of possession having altered from that
of a tenant into that of a transferee. In a suit of ejectment based on landlord-tenant relationship,
the tenant sought to protect his possession by raising the plea of part performance as against
subsequent purchaser of the property. Referring to Section 91 of Indian Trust Act, the High
Court held that a subsequent purchaser of the property with notice of an existing contract
affecting that property must hold the property for the benefit of the person in whose favour the
prior agreement to sell has been executed to the extent it is necessary to give effect to that
contract. But that does not mean that till a final decision has been reached the contract creates a
right in the person in possession, i.e. the tenant, to refuse to surrender possession of the premises
even if such possession was obtained by him not in part performance of the contract but in his

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capacity as a tenant. Having entered into possession as a tenant and having continued to remain
in possession in that capacity he cannot be heard to say that by reason of the agreement to sell his
possession was no longer that of a tenant. (Also see Dakshinamurthi Mudaliar (Dead) & Ors.
Vs. Dhanakoti Ammal, AIR 1925 Madras 965 and A.M.A. Sultan (deceased by LRs) & Ors.
Vs. Seydu Zohra Beevi, AIR 1990 Kerala 186. In our opinion the law has been correctly stated
by the High Court of Madhya Pradesh in the abovesaid decision. Thirdly, as already stated
hereinabove, in view of his suit for specific performance having been dismissed, it cannot be said
that he had performed or was willing to perform his part of contract.

7.Lastly, as held in the civil suit, the respondent is a transferee for consideration who has no
notice of the contract or of the part performance thereof in favour of the appellant. In Sardar
Govindrao Mahadik & Anr. Vs. Devi Sahai & Ors., AIR 1982 SC 989, this Court has held
that there is a understandably and noteworthy difference in the probative value of entering into
possession for first time and continuing in possession with a claim of change in character. Where
a person claiming benefit of part performance of a contract was already in possession prior to the
contract, the Court would expect something independent of the mere retention of possession to
evidence part performance and some act done in furtherance of the contract and some act done in
furtherance of the contract.

8. Strong reliance was placed by the learned senior counsel for the appellant on a recent decision
of this Court in Shrimant Shamrao Suryavanshi & Anr. Vs. Pralhad Bhairoba Suryavanshi
(Dead) by Lrs. & Ors., (2002) 3 SCC 676, wherein this Court has held that a person obtaining
possession of the property in part performance of an agreement of sale, can defend his possession
in a suit for recovery of possession filed by the transferor or by subsequent transferee of the
property claiming under him, even if a suit for specific performance of the agreement of sale has
become barred by limitation. (emphasis supplied) Clearly it was a case where the person in
possession was so inducted in part performance of the agreement of sale. Excepting that his suit
had gone barred by limitation there was nothing else to deny the benefit of the plea to the person
in possession. The court proceeded on the reasoning that the law of limitation barred the remedy
but did not bar the defence. The distinguishing features of that case are that: (i) it was admitted
that the transferee had taken possession over the property in part performance of the contract, (ii)
that the transferee had not brought any suit for specific performance of the agreement to sell, and

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(iii) the transferee was always and still ready and willing to perform his part of the contract.
These three significant factual features are missing in the case before us and therefore the
appellant's effort to find support from the authority of Shrimant Shamrao Suryavanshi's case
(supra) must fail. Bar of limitation alone does not bar the plea of part performance being raised if
all other requisites of Section 53A of T.P. Act are available.

8. Though, the learned counsel for the appellant contended that there is no registered sale deed in
favour of the respondent and therefore he cannot be held to be a transferee having acquired
ownership rights in the property, such a plea cannot be permitted to be raised at this stage. The
fact that the respondent is a transferee under registered deed of sale having acquired ownership
in the property was not disputed upto the High Court. At no point of time the appellant ever
requested for the original sale deed being brought on record before the Court. A new plea which
is essentially a plea of fact cannot be allowed to be urged for the first time at the hearing of
appeal under Article 136 of the Constitution before this Court, more so when it is contrary to the
stand taken by the appellant himself in the High Court and the Court below.

For the foregoing reasons the appeal is held liable to be dismissed and is dismissed accordingly.
The decision of the Rent Controller, as upheld by the High Court, is maintained.

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 U.N. Sharma vs Puttegowda And Anr.

AIR 1986 Kant 99

JUDGMENT

1. This is a plaintiffs appeal against the order dated 26-3-1985, passed by the Civil Judge,
Ramanagaram, in O.S. No. 63/82 dismissing I. A. V. filed by the plaintiff under Order 39 Rules
1 and 2 of C. P.

2. According to the plaintiff ' the defendant 1 and 2, who are the owners of the suit lands, agreed
to sell the suit lands to him for Rs. 21,000/- and received Rs. 15,0007- on 1-7-1982 and executed
the agreement of sale. According to the plaintiff, defendants-1 and 2 put the plaintiff, on
possession of the lands on 1-7-1982 itself. He claims that he has been in possession of the lands
ever since he has been put in possession of the property on 1-7-1982. According to him,
defendants 1 and 2 started interferring with his possession. Hence, he filed O.S. No. 63/82, for a
permanent injunction. Along with the suit, he filed I. A. I. under Order 39 Rules-1 and 2 of C. P.
C. praying to restrain defendants-1 and 2 from interfering with his peaceful possession of the
property pending disposal of the suit. He filed I. A. II requesting the Court to restrain the
defendants from alienating the property. The Court below issued a temporary injunction
restraining defendants I and 2 from alienating the property. So far as 1. A. 1. is concerned, it
issued notice to defendants 1 and 2.

3. Defendants 1 and 2 appeared and filed their objections and written statements also denying the
execution of the agreement of sale and denying the receipt of the consideration. They set up that
the said agreement of sale had been fabricated by their uncle Marigowda in conveniance with the
plaintiff.

4. The ruling in Krishnamoorthy Koundar v. Paramasiva Koundar was placed before the trial
Court by the defendants Counsel. it appears that in view of the said Madras decision, the
plaintiff"s counsel did not press I.A.I. and it was dismissed. Thereafter, the plaintiff filled I.A.I.
again under Order 39 Rules 1 and 2 on 20-11-1984 requesting the Court to issue temporary

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injunction restraining defendants of the property pending the suit. Defendants 1 and 2 raised
serious objections to the same. The trail court dismissed I.A.V. hence, the present appeal.

5. The plaintiff relies on the agreement of sale dated 1-7-1982. He has no other documents
except the agreement of sale to show that he was put in possession of the property. He has not
even filed the Affidavits of any neighbouring land owners or of anyone else in support of his
application 1. A. V. It may be that he has produced now the Affidavits of two neighbouring land
owners and two affidavits of the persons, who were said to have attested the agreement of sale.
Filing of Affidavits of such persons will not be of any help to the appellant-plaintiff. The
plaintiff has not even produced pahani copies to show that he has been in cultivation of the lands
in question ever since the date of agreement. Even defendants did not produce any documents in
support of their contention. Thus, the plaintiff has not placed before the Court any satisfactory
evidence, oral or documentary, to show that he has been, prima facie, in possession of the suit
property. Therefore, on facts also, the trial Court was justified in dismissing I. A. V.

6. It can be seen with advantage that 1. A. 1. filed by the plaintiff along with the suit itself was
not pressed by him and it was dismissed two or two and a half years back and thereafter, he filed
1. A. V. again with the same request, When he did not press I. A. 1. at the initial stage itself, it
may not be proper and legal for him to file 1. A. V. The previous order dismissing 1. A. 1. will
come in the way of considering 1. A. V. which again contains the same request.

7. Learned Counsel Sri P. R. Srinivasan for the appellant-plaintiff contended that the agreement
of sale contained the recital that the possession of the property had been delivered to the plaintiff
and, therefore, it should be taken that the plaintiff is in possession of the properties. A naked
recital in the agreement of sale by itself is not sufficient to show that the plaintiff has been in
possession by the property because defendant 1and 2 have denied the execution of the agreement
of sale and denied the receipt of consideration and have gone to the extent of contending that the
agreement of sale has been concocted by their uncle Marigowda in connivance with the plaintiff.
The question of execution of agreement of sale will have to be gone into in the course of the
fullfledged trial and it is still to be proved. The plaintiffs contention that defendants delivered
possession of the suit properties, has also been denied by the defendants.

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8. Learned Counsel Srinivasan submitted that the Court is not barred from granting temporary
injunction under Order 39 Rules I and 2 C. P. C. even in a suit filed for specific performance on
the strength of the agreement of sale. He relied on Yenkamma v. Yellanna, R. S. A., 230/1973
disposed of on 11-7-1974, reported in (1975) 1 Kant LJ, (SN) 35. It is observed:

"If plaintiffs acquire substantial rights under an agreement of sale, they are entitled to be
protected against the transferor who is trying to deprive the plaintiffs of their possession contrary
to the terms of S. 53A T. P. Act. Plaintiffs must be held to be defending their rights under S. 53A
and the suit for injunction cannot be construed as one to enforce rights conferred by S. 53A. AIR
1939 All 611 Rel on. Ref. to.

If the plaintiffs prove that the commencement of their possession is lawful under the agreement
they are entitled to an injunction. The commencement of possession being under the agreement
of sale, continuance of possession by the plaintiffs cannot be deemed to be adverse, unless there
has been denial of defendant's title and assertion of hostile title. ILR (1965) 1 Mad 254 Rel. on."

The said decision came to be rendered after the matter was disposed of after fullfledged trial and
after the evidence was adduced by both the parties. It does not consider the case failing under
Order 39 Rules 1 and 2. Therefore, the considerations that will have to be taken into
consideration by the Court while disposing of the suit for permanent injunction are entirely
different from the consideration that will have to be considered while disposing of the
application under Order 39 Rules 1 and 2. Further Section 53A is meant to protect the possession
of a transferee. Therefore, the said decision will not help the learned Counsel. He then relied on
Eramma .V. Parwatamma (1971) 2 Mys LJ 179: (AIR 1972 Mys 1.21). The facts of the said case
were:

'The suit was filed for possession of lands,~ S. Nos. 150, 151 and 156 of Modalapur, Manvi
Taluk, and for consequential reliefs. The plaintiffs case was that she was dispossessed by
defendant and her husband in the year 1954 and. the revenue records we're manipulated in their
favour. The defendant pleaded that there was an agreement of sale dated 27-6-51 between the
plaintiff and the defendant, that the plaintiff had thereunder agreed to sell the suit properties and
two other properties for a sum of Rs. 6,000/- that a sum of Rs. 5,000 was paid to the plaintiff that
the defendant got possession of the properties in pursuance to the said agreement and continues

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in possession as owner. The defendant relies on S. 53A of the Transfer of Property Act to defeat
the claim of the plaintiff in the suit."

Therefore, the said ruling, in my opinion, will not come to the rescue of the learned Counsel Sri.
Srinivasan. The facts in the said case also show that the suit for permanent injunction was
disposed of on taking into consideration the evidence produced by the parties. As already stated
by me the considerations which will have to be taken into consideration by the Court for grant of
a permanent injunction at, the final disposal, are different from the ones which the court will
have to take into consideration while disposing of the application filed under Order 39 Rules- I
and 2. Therefore. the said ruling will not be of any helpful to him. He then relied on AIR 1972
SC 22()K) (M. Kallappa Setty v. Lakshminarayana Rao). It was a case where the plaintiff
claims.to have purchased the property from B and whereas the defendant claims to have
purchased the property from C. Therefore, it was a case between two rival purchasers and
between two different persons. The question of agreement to sell did not arise at all in the
Supreme Court's case. Therefore, the trial Court rightly held that the principle laid down in the
Supreme Court's case will not be of any help to dispose of the controversy in dispute between the
parties The principle underlying Section 53A is that, notwithstanding that the contract, though
required to be registered, has not been registered, or where there is an instrument of transfer, that
the transfer has not been completed in the manner prescribed therefore by the law for the time
being in force, the transferor or any person claiming under him shall be debarred from enforcing
against the transferee and persons claiming under him any right in respect .of the property of
which the transferee has taken or continued in possession, other than a right expressly provided
by the terms of the contract. Therefore, Section 53A applies as a bar against the transferor. It
debars the transferor from enforcing against the transferee any right in respect of the property of
which the transferee has:continued in possession. In the present case, the transferor has not been
claiming any right in respect of the property; on the other hand, the transferee is claiming right
against the transferor. Therefore, the plaintiff cannot rely on Section 53A of the Act in the
present case.

9. The learned author Sri. Mulla, Sixth Edition, at page 288, has observed:

"The section has been described by the Privy Council (Main Pir Bux v. Sardar Mahomed
Tahar (1934) 61 Ind App 388 : (AM 1934 PC 235) and the Supreme Court (Manektal

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Mansukhabai v. Hormusji Jamshedji , as a partial importation of the English equitable
doctrine of part performance. By virtue of this section, part performance does not give rise to an
equity, as in England, but to a statutory right Amrao v. Baburao ILR (1950) Nag 25 : (AIR.
1951 Nag 403). This right is more restricted than the .English equity in two respects, (1) there
must be a written contract, and (2) it is only available as a defence."

Therefore, the plaintiff, who has filed the suit mostly basing his claim on Section 53A of the T.
P. Act will not be entitled either in law or in equity to claim a relief especially when his claim
itself appears to be based on Section 53A of t1he Act.

10. Learned Counsel Sri. P. R. Srinivasan placed before me the decision in Krishnamoorthy
Koundar v. Paramasiva Koundar. It was a suit for specific performance of an agreement of
sale by prospective vendee. In the said case also, the transferee claiming that he was put in
possession of the property under an agreement of sale has sought for injunction under Order 39
Rules 1 and 2 C. P. C. It was a case where the defendants denied the execution of the agreement,
denied the receipt of consideration and denied the handing over of the possession. The Madras
High Court held:

"The plaintiffs assertion that the possession of the suit properties was given on the date of the
agreement was also denied by the first defendant. According to him, the plaintiff had trespassed
into the possession of the properties and with a view to sustain the possession of the trespassed
properties he has come forward with a false claim for specific performance. The trial Court
having held that the truth and genuineness of the alleged agreement of sale has to be established
in the suit at the stage of the trial chose to grant an injunction in favour of the plaintiff pending
disposal of the suit. The said order has been questioned by the f irst defendant in this appeal. The
Court below having posed the question as to whether the plaintiff took possession of the suit
properties on the date of the agreement, viz., 16-8-1977 held that the plaintiff took possession in
pursuance of the agreement mainly relying on the recital in the agreement. We are of the view
that. in the circumstances of this case unless the plaintiff establishes the actual delivery of
possession of the properties on the date of agreement of sale, he cannot merely rely on the terms

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of the agreement which is denied by the first defendant and the truth of which the plaintiff has to
establish at the stage of the trial."

11. In this view of the matter, the trial Court is not justified in granting injunction as prayed for
by the plaintiff The Madras High Court further in para-3 held:

"Even assuming that the plaintiff was given possession of the suit properties on the date of the
agreement of sale by the first defendant the question still is, whether the plaintiff could claim the
relief of injunction based on Sec. 53A of tbe Transfer of Property Act. Admittedly, in this case
the plaintiff has not yet got title to the properties. He can get title to the properties only if he
succeeds in the suit and obtains sale deed in respect of the properties. It is well established that
an agreement of sale does not create any interest in the property which is subject matter of the
agreement. Therefore, the plaintiff if at all can claim only an equitable right based on S. 53A of
the Transfer of Property Act. Therefore, the relief of temporary injunction claimed by the
plaintiff pending the suit can be taken to have been claimed by the plaintiff only on the basis of
S. 53A of the Transfer of property Act as mere possession of the plaintiff of the suit properties
on the date of the suit cannot be taken to enable him to obtain injunction from the Counsel. If
that will be the case even a trespasser in possession can approach the Court and ask for an
injunction pending the suit as an application for claiming equitable relief under S. 53A of the
Transfer of Property Act. If the application for injunction is so treated then the plaintiff cannot be
granted the relief for the reason that S. 53A can be used to resist the defendant when he seeks to
dispossess the plaintiff It is well established that Section 53A of the Transfer of Property Act
provides for a passive equity and not for an active equity. Therefore~ the plaintiff cannot seek his
relief of injunction in a Court of law based on S. 53A of the Transfer of Property Act though he
can use S. 53A to debar the transferor who has agreed to sell the property from claiming any
right in respect of that property. It is well established that the right conferred by S. 53A is a right
available to the defen0ant only to protect his possession and on the basis of that section the
defendant cannot claim any title and it merely operates as a bar to the plaintiff to ascertain his
title" Therefore, the facts in the said Madras case appear to be on all fours with the present case.
Further, I am of the opinion that the plaintiff, who appears to have filed the suit basing his relief
under Sec. 53A of the Act, is not entitled to the relief of a temporary injunction under Order 39

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Rules 1 and 2 C.P.C. Therefore, under these circumstances, the Court below in my opinion, both
on facts and it, law was justified in dismissing. I. A. V. Accordingly, the appeal is dismissd. No
costs. 1. A. I. filed by the plaintiff- appellant in this appeal is dismissed. It is not necessary to
pass any orders on 1. A. III filed by the defendants-respondents in this appeal.

12. Appeal dismissed.

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 Sunil Kr. Sarkar (Deceased By ... vs Aghor Kr. Basu

AIR 1989 Gau 39

JUDGMENT Manisana, J.

1. This appeal arises from the judgment and decree passed by the learned Assistant District Judge
Goalpara in Title Appeal No. 99 of 1978 affirming the judgment and decree passed by the
learned Munsiff (I), Dhubri in Title Suit No. 120 of 1975 decreeing the suit for ejectment or
eviction of the defendant from the suit premises.

2. The plaintiff brought the suit stating that the defendant, on 8-12-1964, took lease of the suit
premises at a monthly rent of Rs. 200/-. But the defendant defaulted in payment of rents for the
suit premises from the month of February 1967. The defendant has also sublet a portion of the
suit premises. The plaintiff demanded rents and possession of the suit premises, but the
defendant failed to pay rent and to vacate the suit premises. The defendant contested the suit. The
case of the defendant was that he took a loan of Rs. 4,100/- from the plaintiff by mortgaging the
suit premises. The defendant was allowed to possess the suit premises as before on his own right.
But a deed of sale, dated 5-12-64, registered on 8-12-64 was obtained by the plaintiff from the
defendant for Rs. 8,200/-. A deed of re-conveyance dated 7-12-64 (Ext.-4) registered on 8-12-64
was executed by the plaintiff for the re-sale of the suit premises at Rs. 8,200/- stating that if the
defendant pays the sum of Rs. 8,200/- on or before 7-12-75, the suit premises would be re-
conveyed. There was also another agreement dated 7-12-65(64) (Ext.-5) for re-payment of loan
of Rs. 4,.100/-at a monthly instalment of Rs. 200/-. The further case of the defendant was that the
sale deed (Ext.-3) was fraudulent and collusive; and the plaintiff had acquired no right, title and
interest in the suit premises. The defendant has already paid the money and therefore is not
entitled to be evicted.

3. The Courts below have held that the sale deed (Ext.-3) was out and out sale; and that the
defendant was the tenant of the plaintiff on the basis of the lease deed (Ext-5); and that the
defendant did not pay the sum mentioned in the deed of re-conveyance (Ext.-4).

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4. Mr. B. K. Goswami, the learned Counsel for the appellant, has submitted that the three
documents, namely, the sale deed (Ext.-3), the re-conveyance deed (Ext.-4) and the lease deed
(Ext.-5) if read together, the transaction was a mortgage and not a sale. Mr. Goswami has
referred me to the decisions of the Supreme Court as reported in Bhaskar v. Srinarayan, AIR
1960 SC 301 and P. L. Bapuswami v. N. Pattay, AIR 1966 SC 902 to support his contention.

5. Mr. Banerjee, the learned counsel for the respondents, has submitted that under Section 58 of
the T.P. Act, the defendant is debarred from taking the plea that the transaction was a mortgage.

6. The question which arises for consideration is whether the transaction was a mortgage by
conditional sale. Sale deed, Ext. 3, was executed on 5-12-64. But it was registered on 8-12-64.
On 7-12-64 a deed of re-conveyance (Ext.-4) was executed by the plaintiff in favour of the
defendant. The deed of re-conveyance was also registered on 8-12-64. Under the deed of re-
conveyance, the right of re-purchase was to be exercised within one year from the date of the
agreement. On 7-12-64 another lease deed was also executed by the defendant in favour of the
plaintiff agreeing to pay rent @ Rs. 200/- p.m. for occupation of the suit premises.

7. By Section 58(c) of the T.P. Act, a mortgage by a conditional sale is defined as follows:

" Mortgage by conditional sale : Where the mortgagor ostensibly sells the mortgaged property-

On condition that on default of payment of the mortgage-money on a certain date the sale shall
become absolute, or On condition that on such payment being made the buyer shall transfer the
property to the seller, the transaction is called a mortgage by conditional sale;Provided that no
such transaction shall be deemed to be a mortgage, unless the condition is embodied in the
document which effects or purports to effect the sale." Proviso to Section 58(c) envisages that
the condition effecting or purporting to effect the sale a mortgage transaction must be
incorporated in one and the same deed. In the present case, there were three separate deeds as
already stated. The condition effecting or purporting to effect the sale as a mortgage has not been
embodied in the sale deed (Ext-3). Therefore, under Section 58(c) the defendant is debarred from
saying that the transaction was in the nature of mortgage or a mortgage by conditional sale. In a
similar case, the Supreme Court, in K. Simrathmull v. Nanjalingiah, AIR 1963 SC 1182, has
held:

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"It is unfortunate, having regard to the provision of Section 58(c) of the Transfer of Property Act,
that the plaintiff is debarred from proving that the transaction was in the nature of a mortgage."

In the case before the Supreme Court, there were three deeds executed on the same day as parts
of same transaction. They were : (i) a sale deed conveying to the defendant the suit land and
house, (ii) a deed of re-conveyance in favour of the plaintiff providing that if the plaintiff could
pay Rs. 1,500/- within 2 years, the defendant would execute a sale deed of transferring the land
and house, and (iii) a rent-note by the plaintiff in favour of the defendant agreeing to pay rent at
the rate of Rs. 26.25 per month for the occupation of the house and the land. Therefore, the
decision of the Supreme Court is squarely applicable to the present case. In view of the above
discussion, the transaction was not a mortgage. The decisions of the Supreme Court in
Bhaskar(AIR 1960 SC 301) (supra) and P. L Bapuswami (AIR 1966 SC 902) (supra) referred to
me by Mr. Goswami are not applicable to the present case for the reason that in those cases
before the Supreme Court, condition effecting or purporting to effect the sale as a mortgage was
stipulated in the sale deed itself, but in the present case there were three separate deeds. In this
view of the matter, the contention of Mr. Goswami must fail.

8; Mr. Goswami, the learned counsel for the appellant, has submitted that the defendant is
protected by or under Section 53A of the T. P. Act. Mr. Banerjee, the learned counsel for the
respondents, has submitted that this plea was not taken before the Courts below, therefore, the
plea of protection under Section 53A cannot be raised in the Second Appeal. In any event, the
defendant is not protected by or under Section 53A. Be that as it may, the Courts below have
concurrently given findings that the defendant was a tenant of the plaintiff.

9. The question then is, -- Whether a tenant continuing in possession after a contract to
transfer written and signed by the landlord is protected by or under Section 53A? The pre-
requisites for invoking the equitable doctrine of part performance are : (a) that there must be a
contract to transfer for consideration immovable property in writing signed by the person sought
to be bound by it and from which the terms necessary to constitute the transfer can be ascertained
with reasonable certainty; (b) that it must be shown that the transferee has, in part-performance
of the contract, either taken possession of the property or any part thereof, or the transferee

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being, already in possession, continues in possession and has done some act in furtherance of the
contract; and (c) that the transferee has performed or is willing to perform his part of the
contract.

10. If the tenant was already in possession of the property at the time of contract, what has to be
decided is whether he continues in possession in part-performance of the contract. Therefore,
mere continuance in possession does not satisfy the requirements under Section 53A. Where the
tenant is already in possession of the property as a tenant and continues in possession in his
capacity as a tenant after the contract it does not necessarily follow that be continues
dispossession in part-performance of the contract. It is for the reason that a tenant is estopped
from questioning the title of the landlord under Section 116 of the Evidence Act. Therefore, the
tenant must show either from the contract or some other material or evidence that he continued to
possess the properly not in the capacity as a tenant, for example, he does not pay the rents under
one of the terms of contract to sale in order to show that his possession is not in the capacity as a
tenant, but in part-performance of the contract. In addition to it, the tenant has to show that he
has done some act in furtherance of the contract, such as payment of necessary taxes to show that
lie was liable to pay the taxes a his possession was no longer as that of a tenant. Therefore, if a
tenant has been in possession in his capacity as a tenant and not in part-performance of the
contract, he cannot take the plea of protection under Section 53A.

11. In the present case, although there is a registered written contract (Ext.-4), there is no
material to show that the defendant-tenant was possessing the suit premises in part-performance
of the contract. The Courts below have also held that he had been possessing the suit premises in
the capacity as tenant under the deed of lease (Ext-5) and not in part-performance of the contract.
Therefore, the defendant is not qualified for the protection under Section 53A.

12. For the foregoing reasons, the appeal is dismissed No costs.

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 Sardar Govindrao Mahadik & Anr vs Devi Sahai & Ors

1982 AIR 989, 1982 SCR (2) 186

JUDGMENT:

1. The Judgment of the Court was delivered by DESAI, J. What constitutes part performance
within the meaning of the expression in Section 53-A of the Transfer of Property Act ('Act' for
short) so as to clothe a mortgagee in possession with the title of ownership which would defeat
the suit of the erstwhile mortgagor for redemption, is the question canvassed in these two appeals
by common certificate.

2. Facts: first Sardar Govindrao Mahadik original plaintiff 1 (now deceased prosecuting these
appeals through his legal representatives) and Gyarsilal original plaintiff 2 (appellant 2) filed
Civil Suit No. 14151 in the Court of the District Judge, Indore, for redemption of a mortgage in
respect of house No. 41 more particularly described in plaint paragraph 1, dated February 22,
1951. A loan of Rs. 10,000 was secured by the mortgage. The mortgage was mortgage with
possession. Plaintiff I was the mortgagor and the sole defendant Devi Sahai was the mortgagee.
Plaintiff 2 is a purchaser of the mortgaged property from plaintiff I under a registered sale deed
Ex. P-I, dated October 14, 1950. Plaintiff I will be referred to as mortgagor Defendant Devi
Sahai as a mortgagee and plaintiff 2 Gyarsilal as subsequent purchaser in this judgment. Even
though the mortgage was mortgage with possession, it was not a usufructuory mortgage but an
anomalous mortgage in that the mortgagor had agreed to pay interest at the rate of 12% and the
mortgagee was liable to account for the income of the property earned as rent and if the
mortgagee himself occupied the same he was bound to account for the rent at the rate of Rs. 515
per annum. Mortgagor served notice dated October 5, 1945, calling upon the mortgagee to render
true and full account of the mortgage transaction. The mortgagee failed to comply with the
notice. Subsequently it appears that there were some negotiations between the mortgagor and the
mortgagee which according to the mortgagee, culminated in a sale of the mortgaged property in
favour of mortgagee for Rs. 50,000. Account of the mortgage transaction was made and the
consideration of Rs. 50,000 for the sale of the house which would mean sale of equity of
redemption was worked out as under: Rs. 25,000 Principal mortgage money plus the amount
found due as interest on taking accounts of mortgage Rs. 17,735. Given credit for the amounts

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taken from time to time by the mortgagor from the mortgagee s for domestic expenses. This is
disputed as incorrect and it was suggested that the entry be read as amount retained to pay off
other creditors of the mortgagor Rs. 1,000 taken in advance for purchasing stamps and incurring
registration expenses. Rs. 6,26 to be paid in cash at the time of registration before the Sub-
Registrar. Rs. 50,000 Requisite stamps were purchased and the draft sale deed was drawn up on
October 10, 1950, but it was never registered. On October 14, 1950, 1st plaintiff mortgagor sold
the suit house by a registered sale deed to plaintiff 2 Gyarsilal for Rs. 50,000 with an agreement
for resale. Thereafter the mortgagor and the subsequent purchaser as plaintiffs 1 and 2
respectively filed a suit on February 22, 1951 against mortgagee defendant Devi Sahai for taking
accounts of the mortgage transaction and for a decree for redemption. The mortgagee Devi Sahai
defended the suit on diverse grounds but the principal and the only defence canvassed was one
under section 53A of the Act, namely, that even though the sale deed purporting to sell equity of
redemption having not been registered would not clothe the mortgagee with title of owner to the
mortgaged property, yet he could defend his possession as transferee owner under the doctrine of
part performance in as much as not only is the mortgagee in possession in part performance of
the contract of sale but has continued in possession in part performance of the contract and has
done several acts unequivocally referable or attributable to the contract and that the mortgage as
transferee has not only performed but is willing to perform his part of the contract and, therefore,
the mortgagor is debarred from enforcing against the mortgagee any right in respect of the
mortgaged property. As a necessary corollary, it was also contended that plaintiff 2 has acquired
no right, title or interest in the mortgaged property under the alleged sale deed dated October 14,
1950, in view of the fact that the transferor, viz., original mortgagor had no subsisting title to the
property on the date of the sale which he could have transferred to the 2nd plaintiff.

3. Arising from the pleadings of the parties, trial court framed five issues. The trial court held
that plaintiff I executed a sale deed of the mortgaged property in favour of the defendant
mortgagee but as the sale deed was not registered the transaction of sale is riot complete on the
issue of protection of section 53A claimed by the defendant mortgagee the trial court held
against him. It was held that the mortgage being mortgage with possession, continued possession
of the mortgagee after the date of the contract dated October 10, 1950, would not be in part
performance of the contract. The trial court further held that no payment was made could
remotely be said to be in part performance of the contract. With regard to the payment of Rs.

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1,000 for purchase of stamps and expenses of registration, it was held that the same was paid
before the execution of the contract, and therefore, could not be said to be in furtherance of the
contract. On these findings the trial court held that section 53A of the Act was not attracted and
the mortgage was accordingly held to be subsisting and a preliminary decree for taking accounts
was passed. A Commissioner was appointed for taking accounts.

4. Defendant mortgagee Devi Sahai preferred Civil First Appeal No. 14/66 to the Indore Bench
of the Madhya Pradesh High Court. When this appeal was pending, appellant Motilal in cognate
Civil No 1145/69 applied under order 22, rule 10, Code of Civil Procedure, for being joined as a
party to the appeal claiming that under s the sale certificate dated March 25, 1953, issued by
theAdditional City Civil Judge First Class, Indore, he had purchased the equity of redemption in
respect of the mortgaged property and that he has a subsisting interest in the property involved in
the dispute and, therefore, he would contest the rights of the plaintiffs as well as of the
mortgagee defendant to claim any right, title or interest in the property. In his application Motilal
alleged that he had filed Civil Suit No.243/47 dated November 3,1947for recovering a certain
amount against the 1st plaintiff mortgagor and had secured attachment before judgment of the
mortgaged property on November 6, 1947. His suit was decreed to the extent of Rs. 2500 by the
trial court. He filed execution application No. 216/51 and in this proceeding the mortgaged
property was sold subject to mortgage and he purchased the same for Rs. 300. The auction sale
was confirmed on September 25, 1953. It may also be mentioned that the mortgagor 1st plaintiff
had preferred appeal against the decree of the trial court and the appellate court by its
judgment dated March 27, 1953, allowed the appeal and dismissed the suit of Motilal in entirety.
Against the appellate decree Motilal filed Second Appeal No. 78/53 in the High Court and by its
judgment dated September 4, 1958, Motilal's claim to the tune of Rs. 500 against the Ist plaintiff
mortgagor along with proportionate interest and costs was decreed. The application of Motilal
for being impleaded as a party was contested by the Ist and the 2nd plaintiffs as well as by the
defendant mortgagee. The High Court allowed the application of Motilal for being joined as
party to the appeal and examined the contentions advanced on his behalf on merits. The only
contention canvassed by the mortgagee in his appeal in the High Court was that he is entitled to
the protection conferred by Section 53A of the Act. In order to attract section 53A it was urged
that Rs. 1,000 advanced to mortgagor for purchase of stamps etc. was in furtherance of the
contract. The only such act pleaded was payment of Rs. 1,000 and no other act or circumstance

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was relied upon. The High Court was of the opinion that original mortgagee Devi Sahai was
entitled to the benefit of the doctrine of part performance as against the Ist plaintiff mortgagor
Govindrao Mahadik and his subsequent transferee Gyarsilal because he was in possession and
continued to be in possession and paid Rs. 1,000 in furtherance of the contract. While so holding
the High Court imposed a condition that the mortgagee must pay or deposit in the court an
amount of Rs. 24,000 with interest at the rate of 4% per annum from the date of delivery of
possession to him as vendee till the date of payment or deposit on the footing that was the
balance consideration promised but not paid by the mortgagee. The deposit was directed to be
made in the trial court within three months from the date of the judgment of the High Court for
payment to the 2nd respondent which would enable the mortgagee to retain possession of the
mortgaged property. The High Court gave a further direction that if the payment or deposit as
directed in the judgment was not made, the appeal of the mortgagee would stand dismissed and if
the amount directed in the judgment of the High Court was paid or deposited in the trial court
within the stipulated time the appeal of the mortgagee would stand allowed and in that event the
suit of the mortgagor would stand dismissed. In respect of Motilal's claim the High Court
directed that in either event he shall be entitled to recover the balance of his decretal amount and
interest at the rate of 4% per annum from the date of the auction sale till the date of realisation
and to the extent of that amount there shall be a charge on the mortgaged property enforceable at
the instance of Motilal. In the circumstances of the case the High Court did not award costs to
either side.

5. Both the original plaintiffs and Motilal made separate applications for certificate under Article
133 (l) (a) and (b) of the Constitution which were granted. Hence, these two appeals.

The Appeal (CA 1144/69) preferred by the original plaintiffs-plaintiff 1 being the mortgagor,
may be dealt with first. In this appeal Ist defendant (mortgagee) seeks to non-suit the plaintiff on
the only ground that he is entitled to the benefit of equitable doctrine of part performance as
enacted in section 53A of the Act. According to the defendant-mortgagee the mortgagor agreed
to sell the mortgaged property to the mortgagee for consideration of Rs. 50,000 made up in the
manner set out in the sale deed Ex. 1 dated October 10, 1950 and pursuant to the agreement he
has given Rs. 1,000 being part of the consideration for purchasing stamps and for expenses of
registration and after stamps were purchased, sale deed Ex. 1 was drawn up and executed and

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since then he being in possession retained the same as a vendee and accordingly he is entitled to
the protection of section 53A of the Act.

6. This necessitates focussing of the attention on the requirements what constitutes part
performance as enacted in section 53A. Even though at the hearing of the appeals what was the
state of law prior to the introduction of section 53A in the Act by the Transfer of Property
(Amendment) Act, 1929, was canvassed at length, we would like to steer clear of this confusing
mass of legal squabble and, proceed to analyse the contents of section 53A, subsequently
referring to legislative cum legal history so far as it is relevant for interpretation of the section.
Section 53A reads as under:

"53A. Where any person contracts to transfer for consideration any immovable property by
writing signed by him or on his behalf from which the terms necessary to constitute the transfer
can be ascertained with reasonable certainty, and the transferee has, in part performance of the
contract, taken possession of the property or any part there of, or the transferee being already in
possession continues in possession in part performance of the contract and has done some act in
furtherance of the contract and the transferee has performed or is willing to perform his part of
the contract then, not withstanding that the contract, though required to be registered, has not
been registered, or, where there is an instrument of transfer, that the transfer has not been
completed in the manner prescribed therefor by the law for the time being in force the
transferor or any per son claiming under him shall be debarred from enforcing against the
transferred and persons claiming under him any right in respect of the property of which the
transferee has taken or continues in possession, other than a right expressly provided by the
terms of the contract; Provided that nothing in this section shall affect the rights of a transferee
for consideration who has no notice of the contract or of the part performance thereof."

7. In order to qualify for the protection conferred by the equitable doctrine of part performance
as enacted in section 53A, the following facts will have to be established:

(1) That the transferor has contracted to transfer for consideration any immovable property by
writing signed by him or on his behalf from which the terms necessary to constitute the transfer
can be ascertained with reasonable certainty; (2) That the transferee has in part-performance of
the contract taken possession of the property or any part thereof. Or the transferee being

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already in possession, continues in possession in part performance of the contract:(3) That the
transferee has done some act in furtherance of the contract: and (4) That the transferee has
already or is willing to perform his part of the contract." (see Nathulal v. Phool Chand).There
was no dispute that the aforementioned conditions have to be satisfied to make good the
defence of part performance. The controversy is on their application to the facts of the case. The
High Court which accepted the defence of part performance as canvassed on behalf of the
mortgagee who claimed to have purchased the property under a sale deed Ext. D 1datedOctober
10, 1950, found that payment of Rs. 1,000 for purchase of stamps was an unequivocal act in
furtherance of the contract. The defendant mortgagee did not invite the High Court to consider
any other act as having been done by him under the contract or furtherance of the contract, or
unequivocally referable to the contract. However, when the matter was heard in this Court, Mr.
V S. Desai, learned counsel appearing for the respondent mortgagee urged the following acts as
having been done by the mortgagee in furtherance of the contract which would constitute part
performance;

(a) payment of Rs. 1,000 as agreed to under the contract for purchase of stamps for drawing up
and registering the sale deed;

(b) discharge of a debt of Rs. 541 which was included in the amount of Rs. 17,735 retained by
the mortgagee from the total consideration payable for discharging other debts;

(c) mortgagee agreed to discharge the mortgage subsisting on the property in his favour on
settlement of accounts;

(d) all dues owed by the mortgagor to the mortgagee may have to be taken as cleared on
completion of the

(e) nature and character of possession changed as recited in the contract; A few more
circumstances were relied upon to show that the mortgagee was willing to perform his part of the
contract and the omissions pointed out are not fatal to his case. They are:

(f) failure to offer the amount agreed to be paid before the Registrar and/or not discharging debts
agreed to be discharged as having been given credit in the consideration for the sale would not

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detract from part performance because they have to be evaluated in the facts and circumstances
of the case;

(g) conduct of the 1st plaintiff mortgagor in executing and registering a sale deed in respect of
the mortgaged property in favour of the 2nd plaintiff Gyarsilal and thereby frustrating the
contract of sale in favour of the defendant mortgagee evidence that the 1st plaintiff
mortgagor wasaware of the contract in favour of the defendant mortgagee and he was retaining
possession in furtherance of the contract:

(h) defendant mortgagee made all attempts to get the deed registered by approaching the Sub-
Registrar;

(i) the defendant mortgagee initiated criminal proceedings against the 1st plaintiff mortgagor
for misusing the stamp papers.

8. Section 4 of the Statute of Frauds, 1677 of United Kingdom provided that no person shall be
charged upon any contract for sale of lands or any interest in land etc. unless the agreement or
some memorandum or some note thereof shall be in writing and signed by the party to be
charged thereunder or some other person there unto by him lawfully authorised. This provision
has been substantially re-enacted in section 40 (i) of the Law of Property Act, 1925 with this
departure that sub-section 2 specifically provides that the substantive provision in sub-section I
does not effect the law relating to part-performance or sales by the court. As no action could be
brought on oral agreement the doctrine of part performance was devised by the Chancery Court
with a view to mitigating the hardship arising out of an advantage taken by a person under an
oral contract and failure to enforce it would permit such person to retain the undeserved
advantage by the Equity Court enforcing the contract. The situation must be such that not to
enforce the contract in face of the defence of Statute of Frauds after taking advantage of oral
contract would perpetuate the fraud which the statute sought to prevent The party who altered its
position under the contract must have done some act under the contract and it would amount to
fraud in the opposite party to take advantage of the contract not being in writing. Such a situation
arose where one of the parties to the oral agreement altered its position and when specific
performance was sought after taking advantage under oral contract, set up the defence available
under the Statute of Frauds. The Chancery Court while granting relief of specific performance

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wanted to be wholly satisfied that the pleaded oral contract exists and is established to its utmost
satisfaction and in order to ascertain the existence of the oral contract before granting a relief of
specific performance the court wanted to be satisfied that some such act has been done which
would be unequivocally referable to the oral contract as would prove the existence beyond
suspicion, meaning part performance of the contract. The departure under our law is that when
giving its statutory form in section 53A of the Act the existence of a written contract has been
made sine qua non and simultaneously the statute also insists upon proof of some act having
been done in furtherance of the contract. The act relied upon as evidencing part performance
must be of such nature and character that its existence would establish the contract and its
implantation. Each and every act subsequent to contract by itself may not be sufficient to
establish part performance. The act must be of such a character as being one unequivocally
referable to the contract and having been per. formed in performance of the contract. In Lady
Thynne v. Earl of Glengall it was observed that: "part performance to take the case out of the
Statute of Frauds, always supposes a completed agreement. There can be no part performance
where there is no completed agreement in existence. It must be obligatory, and what is done must
be under the terms of the agreement and by force of the agreement." This approach would
necessitate that the act relied upon as being in the part-performance of the contract was such as
by its own force would show the very same contract as is alleged by the person seeking the
protection of part-performance.

9. In the fact situation as it unfolds itself in this case, continued possession of the mortgagee
hardly offers any clue to the question of part performance. Defendant mortgagee was in
possession of the mortgaged property. Therefore, physical possession having not changed hands,
it would be for the mortgagee to show that he continued to retain possession in part performance
of the contract and has done some act in furtherance of the contract. Where physical and actual
possession was already with the person claiming the benefit of the doctrine of part performance
its continued retention by itself without anything more would hardly be indicative of an act
unequivocally referable to part performance of the contract. He must further establish that he has
done some act in furtherance of the contract. This was not disputed and, therefore, the
mortgagee defendant urged before the High Court and reiterated before us that, payment of Rs.
1,000 inter alia to the Ist plaintiff mortgagor for purchase of stamps and for expenses incidental
to registration was an act unequivocally done in furtherance of the contract.

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10. Before evaluating the submission a few relevant facts may be noticed. By letter Ext. P-3
dated October 9, 1950, Ist plaintiff wrote to defendant mortgagee portion of which may be
extracted as it has some bearing on the question under consideration:

".. It is requested that we have entered into a contract with you for the sale-condition of our
house No. 12 situated in Kalai Mohalla. Therefore to buy stamps etc. for the sale you should pay
Rs. 1,000 (Rupees one thousand only) to our Mukhtiar Shri Madhavraoji Vishnu Joshi, 82, Ada
Bazar, Indorewale, I agree for the same and shall deduct the amount at the time of registration."
Pursuant to this letter defendant mortgagee paid Rs. 700 to the Muktiar and an endorsement to
that effect is found as Ext. P-4. On the next day that is October 10, 1950, a further amount of Rs.
300 was given and stamps were purchased and on the same day sale deed Ext. 1 was drawn up.
While reciting the consideration for the sale deed a credit was given for Rs. 1,000 paid by the
mortgagee for purchase of stamp. So far there is no dispute. The grievance is that according to
the Ist plaintiff mortgagor he had agreed to sell the house to the mortgagee but the sale was to be
a conditional sale with a right to repurchase and that was agreed to between the parties.
Subsequently when the sale deed Ext. D-1 was drawn up he found that it was an absolute sale in
breach of the agreement and therefore he did not complete the transaction and sold the house
subsequently on October 14, 1950 to the 2nd plaintiff, under Ext. P-1 which is a conditional sale
with a right to repurchase. It would thus transpire that payment of Rs. 1,000 consisting of two
separate payments-one of Rs. 700 on October 9, 1950, and an amount of Rs. 300 on October 10,
1950, by the defendant mortgagee to Ist plaintiff mortgagor for purchasing stamps for execution
of a sale deed is not in dispute. What is in dispute is whether the payment was made towards
some contract anterior to the letter Ext. P-3 dated October 9,195, or it was in pursuance to the
contract dated October 10, 1950, as reflected in the unregistered sale deed. In this connection
the stand taken by the mortgagee defendant is both equivocal and fluctuating. In the written
statement filed on his behalf on April 10, 1951, there is no specific, clear and unambiguous plea
of part performance. Under the heading 'additional plea' in para 9 it is contended that the sale
deed having been executed in favour of the mortgagee in settlement of mortgage transaction
mutually between the parties and that the mortgaged property has been given to the mortgagee as
an owner, the mortgage transaction does not subsist in law. This has been understood to mean a
plea for the protection of the doctrine of part performance. Be that as it may, it is not suggested
that there was any oral contract anterior to the one as found in the unregistered sale deed Ext.

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D-l. Nor is there any suggestion of any draft agreement prior to the drawing up of the sale deed
Ext. D-l. What transpires from the diverse recital is that there was some oral discussion between
the parties prior to the letter Ext. P-3 dated October 9, 1950, at which the understanding was that
there was to be a conditional sale with a right of repurchase by the mortgagor and that becomes
evident from the recital in Ext. P-3, "sale condition" which is contemporaneous evidence having
its intrinsic worth and a stamp of truthfulness because at that time no dispute had arisen and the
mortgagor was seeking tc work out and implement the agreement by seeking a loan of Rs. 1,000
for purchase of stamps and for expenses incidental to registration so as to complete the
transaction. But there was no written contract. It must be stated that there was dispute about
the nature of transaction is also borne out by the parol evidence. Mortgagee Devi Sahai DW 1
has deposed in para 6 that mortgagor in Chit Ex. P. 3 proposed a conditional sale to which he
did not agree whereupon mortgagor agreed to give absolute sale. This establishes that there
was a dispute as to the nature of the transaction. Section 53A postulates a written contract from
which the terms necessary to constitute the transfer can be ascertained with reasonable
certainty. There was no concluded contract prior to Ext. D- l. The only written contract which is
relied on is the unregistered sale deed Ex. D-l of October 10, 1950. On the admission of the
mortgagee himself it is crystal clear that out of Rs. 1,000 an amount of Rs. 700 was paid on
October 9, 1950, and that was prior to the agreement. As for the payment of Rs. 300 it is not
specifically claimed that was payment in furtherance of the contract. In any event, stamps were
purchased prior to the drawing up of Ext. D-l which is the contract relied upon for the purposes
of section 53A. And it must be shown that the act has been done in furtherance of the contract,
i.e. subsequent to the contract or at best simultaneously with the contract but unequivocally
attributable or referable to the contract. It must follow that acts anterior to and done previous to
the agreement cannot be presumed to be done in pursuance of it and cannot, therefore, be
considered as acts of part performance (See Whiteread v. Brockhunt quoted by White and
Tudor, leading cases on Equity at p. 416).

10. The High Court overlooking the very important fact situation that the only contract relied
upon by the mortgagee defendant was one contained in the unregistered sale deed Ext. D-1 dated
October 10, 1950, committed an error in holding that the payment of Rs. 1,000 prior to October
10, 1950 would undoubtedly be an act in pursuance of the contract which is evidenced by the
writing Ext. D-1 duly signed by the Ist respondent. This approach overlooks a vital dispute

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between the parties and the High Court could not have utilised this circumstance without
resolving the dispute in as much as unquestionably there were some negotiations between
the parties either on October 9, 1950, or some time prior thereto but there was no concluded
contract because the very letter Ext. P-3 which the Ist plaintiff mortgagor sought a loan of Rs.
1,000 for purchasing the stamps etc. was pursuant to a conditional sale and that is totally denied
and repudiated by the mortgagee as shown hereinabove. Accordingly when the amount of Rs.
1,000 was paid it was the stage of negotiations and not a concluded contract. And when the
contract was drawn up as evidenced by Ext. D-1 being the unregistered sale deed dated October
10, 1950, the parties were not ad idem because the mortgagor declined toagree to registration of
the sale deed as it was contrary to the understanding arrived at between the parties though no
doubt he had executed the sale deed. The contention therefore that the amount of Rs. 1,000 was
paid in furtherance of the contract does not bear scrutiny. However, assuming that the finding of
fact recorded by the High Court that the amount of Rs. 1,000 was paid in furtherance of the
contract, is a finding of fact recorded on appreciation and evaluation of evidence and ordinarily
not interfered with by this Court unless shown to be perverse, the alternative contention that
payment of part or even whole of the consideration could not be said to be in furtherance of the
contract and, therefore, not sufficient to constitute part performance, may now be examined.
How far payment of part or even whole of the consideration would constitute part performance
so as to take the case out of section 4 of the Statute of Frauds may now be examined with
reference first to the English decisions because section 53A enacts with some modification the
English equitable doctrine of part performance.In order to mitigate the hardship arising out of the
rigorous provisions of the Statute of Frauds equitable doctrine of part performance was divised
by the Court of Chancery. Commenting upon section 4 of the Statute of Frauds 1677, Lord
Redesdale observed in Foxcroft v. Lester,(l) (quoted in White & Tudor's Leading cases on
Equity, 8th Edn., p. 413) as under:

"The Statute of Frauds says that no action or suit shall be maintained on an agreement relating to
lands, which is not in writing, signed by the party to be charged with it; and yet the Court is in
the daily habit of relieving, where the party seeking relief has been put into a situation which
makes it against conscience in the other party to insist on the want of writing so signed, as a
bar to his relief. The first case (apparently) of this kind was Foxcroft v. Lyster (1), which was
decided on a principle acted upon in Courts of law, but not applicable to the particular case. It

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was against conscience to suffer the party who had entered and expended his money on the faith
of a parol agreement to be treated as a trespasser, and the other party to enjoy the advantage of
the money he had laid out."

11. The question often arises whether payment of part or even whole of the consideration can be
unequivocally attributed to the contract. At 416 the authors observe:

"Payment of part or even of all the purchase-money will not be considered an act of part
performance to take a parol contract out of the Statute of Frauds. Nor will payment of the auction
duty."

The payment of a part or even a whole of the consideration was not treated unequivocal act of
part performance because it was believed that money can be repaid or can be reclaimed and,
therefore, it is not an unequivocal act evidencing an act in furtherance of the contract (See
Hanbury & Maudsley, Modern Quity, 10th Edn., p. 37). Similarly, Story's Equity Jurisprudence
14th Edn., para 1045, p. 424, neatly sets out the history of the approach to payment of money
as evidence of part performance. It may be extracted:

".. It seems formerly to have been thought that a deposit, or security, or payment of the purchase
money, or of a part of it, or at least of a considerable part of it, was such a part performance as
took the case out of the statute. But that doctrine was open to much controversy, and is now
finally overthrown Indeed the distinction taken in some of the cases between the payment of a
small part and the payment of a considerable part of the purchase-money seems quite too refined
and subtle, for independently of the difficulty of saying what shall be deemed a small and what a
considerable part of the purchase money, each must, upon principle, stand upon the same reason,
namely, that it is a part performance in both cases, or not in either. One ground why part
payment is not now deemed a part performance, sufficient to take a case out of the statute, is that
the money can be recovered back again at law, and therefore the case admits of full and direct
compensation." Equity by G.M. Keeton and L.A. Sheridan, 2nd Edn., p. 366 sets out
chronologically the approach of the Court to payment of money as evidencing part performance.
Attitude to the payment of money as an act of part performance had varied from time to time.
In Elizabeth Meddison v. John Alderson,(1) Lord Selborne, L.C. pointed out:

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".. The payment of money is an equivocal act not (in itself) unless connection is established by
parol testimony indicative of a contract consisting of land."

12. In Snell's principles of Equity, 20th Edn., p. 587, under the heading 'Insufficient Acts to bring
the case out of the doctrine of part performance', it is noted that payment of a part of the
purchase-money, or even apparently the whole, is not sufficient for part performance of a
contract for the sale of land for the payment of money is an equivocal act (not in itself), until
the connection is established by parol testimony, indicative of a contract concerning land.
Maddison v. Alderson is relied upon in support of this statement. A few cases to which our
attention was drawn may now be referred to. In Clinan and Anr. v. Cooke and Ors., Cooke
inserted an advertisement in the public papers inviting offers to let a piece and parcel of land for
the period set out in the advertisement. In response to this advertisement the plaintiffs applied
to Edmund Meagher to whomthe application was to be addressed and entered into a treaty with
him for lease of land. A memorandum of agreement was entered into between the parties and the
intending tenant deposited 50 guineas which the advertiser received in consideration of the lease
on the recommendation of Meagher who also appeared to have received a sum of 20 guineas
from the plaintiffs for which no receipt was given Subsequently Mr. Cooke refused to perform
the agreement and he granted a new term of lease to the defendants who entered into the same
with the knowledge of the agreement with the plaintiffs. An action was brought by the plain tiffs
for specific performance. Declining to grant that relief Lord Redesdale held as under:

"But I think this is not a case in which part performance appears. The only circumstance that can
be considered as amounting to part performance is the payment ofthe sum of fifty guineas to
Mr. Cooke. It has always been considered that the payment of money is not to be deemed part
performance to take a case out of the statute."

12. In Maddison's case Earl of Selborne, L.C. in unequivocal terms observed that it may be taken
as new settled that part payment of purchase money is not enough, and judges of high authority
have said the same even of payment in full. Clinan v. Cooke, (supra) Hughes v. Morris and
Britain v. Rossiter, (1879) 11 QBD 123 were relied upon in support of this. Again at p. 484 Lord
O'Hagan taking note of the conflict of decisions pertinently observed as under:

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"I confess I have found it hard to follow the reasoning of the judges in some of the cases to
which the Lord Chancellor has referred to reconcile the rulings, in others of them-and to regard
as entirely satisfactory the state of the law in which the taking of possession or receipts of rent
is dealt with as an act of part performance, and the giving and acceptance of any amount of
purchase money, confessedly in pursuance and affirmance of a contract of sale, is not. As to
some of the judgments prompted no doubt by a desire to defeat fraud and accomplish justice, I
am inclined to concur with the present Master of the Rolls in Britain v. Rossiter, (1879) 11 QBD
123 when he called them" bold decisions."

13. It may be noted that in that case an intestate induced a woman to serve him as his house-
keeper without wages for many years and to give up other prospects of establishment in life by a
verbal promise to make a will leaving her a life estate in land and afterwards signed a will, not
duly attested, by which he left her the life estate. Lt was contended on behalf of the woman who
worked as house-keeper that she had wholly performed her part by serving the intestate as house-
keeper till the intestate's death without wages yet the Court in its equity jurisdiction declined to
hold such an act as referable to any contract and was not such a part performance as to take
the case out of the operation of section 4 of the Statute of Frauds. This case is being referred to
show how firstly established and entrenched the view was that payment is not enough. Offer to
work without wages was treated as evidencing some payment not enough to sustain the plea of
part performance. The equity should take such a view of human service and sacrifice is difficult
to appreciate. Modern notions of equity, fairplay and just approach would stand rudely shaken
by the view taken in that case & and quoting the case is not to be interpreted to mean sharing the
view. In Chaproniere v. Lambert, [1917] 2 Ch. 35 the Court of Appeal reinforced the view
which held the field till then that the mere payment of rent is not such part performance to take
the case out of the statute and even payment of whole of the purchase money has been held
not to be sufficient to take the case out of the statute. In so doing it reiterated the view taken in
Muddison v. Anderson, (1883) 8 App Cas 467. In Enland the law took a sharp U-turn in
Steadman v. Steadman, [1976] AC 536 Lord Simon of Claisdale under the heading 'Payment of
money' observed as under:

"It has sometimes been said that payment of money can never be a sufficient act of part
performance to raise the required equity in favour of the plaintiff or, more narrowly, that

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payment of part or even the whole of the purchase price for an interest in land is not a sufficient
act of part performance. But neither of the reasons put forward for the rule justifies it as framed
so absolutely. The first was that a plaintiff seeking to enforce an oral agreement to which the
statute relates needs the aid of equity; and equity would not lend its aid if there was an adequate
remedy at law. It was argued that a payment could be recovered at law, so there was no call for
the intervention of equity. But the payee might not be able to re pay the money (he might have
gone bankrupt), or the land might have a particular significance for the plaintiff (of the equitable
order for specific delivery of a chattel of particular value to the owner: (Duke of Somerset v.
Cookson) or it might have greatly risen in value since the payment, or money may have lost
some of its value. So, it was sought to justify the rule, alternatively, on the ground that payment
of money is always an equivocal act, it need not imply a pre-existing contract, but is equally
consistent with many other hypotheses. This may be so in many cases, but it is not so in all cases.
Oral testimony may not be given to connect the payment with a contract; but circumstances
established by admissible evidence (other acts of part performance, for case, for example, what
was said (i.e. done) in the magistrates' court in part performance of the agreement makes it plain
that the payment of the 108 was also in part performance of the agreement and not a spontaneous
act of generosity or discharge of a legal obligation or attributable to any other hypothesis."To
some extent, therefore the statement of law in Maddison's case that it may be taken as well
settled that payment of part of purchase money or even the whole of the consideration is not
sufficient act of part performance can be taken to have been shaken considerably from its
foundation. While text book writers and English decisions may shed some light to illuminate the
blurred areas as to whether part payment of purchase money or even the whole of the
consideration would not be sufficient act of part performance, it is necessary that this aspect
may be examined in the background of statutory requirement as enacted in section 53A. To
qualify for the protection of the doctrine of part performance it must be shown that there is a
contract to transfer for consideration immovable property and the contract is evidenced by a
writing signed by the person sought to be bound by r it and from which the terms necessary to
constitute the transfer can be ascertained with reasonable certainty. These are pre-requisites to
invoke the equitable doctrine of part performance. After establishing the aforementioned
circumstances it must be further shown that a transferee had in part performance of the contract
either taken possession of the property or any part thereof or the transferee being already in

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possession continues in possession in part performance of the contract and has done some act in
furtherance of the contract. The acts claimed to be in part performance must be unequivocally
referable to the pre-existing contract and the acts of part performance must unequivocally point
in the direction of the existence of contract and evidencing implementation or performance of
contract. There must be a real nexus between the contract and the acts done in pursuance of the
contract or in furtherance of tho contract and must be unequivocally referable to the contract.
When series of acts are done in part performance, one such may be payment of consideration.
Any one act by itself may or may not be of such a conclusive nature as to conclude the point one
way or the other but when taken with many others payment of part of the consideration or the
whole of the consideration may as well be shown to be in furtherance of contract. The correct
approach would be what Lord Reid said in Steadman's case that one must not first took at the
oral contract and then see whether the alleged acts of part performance are consistent with it.
One must first look at the alleged acts of part performance and see whether they prove that there
must have been a contract and it is only if they do so prove that one can bring in the oral
contract. This view may not be wholly applicable to the situation in India because an oral
contract is not envisaged by section 53A. Even for invoking the equitable doctrine of part
performance there has to be a contract in writing from which the terms necessary to constitute
the transfer can be ascertained with reasonable certainty. Therefore, the correct view in India
would be, look at that writing that is offered as a contract for transfer for consideration of any
immovable property and then examine the acts said to have been done in furtherance of the
contract and find out whether there is a real nexus between the contract and the acts pleaded as
in part performance so that to refuse relief would be perpetuating the fraud of the party who after
having taken advantage or benefit of the contract backs out and pleads non registration as
defence, a defence analogous to section 4 of the Statute of Frauds. We may recall here that the
acts preliminary to the contract would be hardly of any assistance in ascertaining whether they
were in furtherance of the contract. Anything done in furtherance of the contract postulates the
pre- existing contract and the acts done in furtherance thereof. Therefore, the acts interior to the
contract or merely incidental to the contract would hardly provide any evidence of part
performance. In the facts of this case this payment would not be an act of part performance. In
our opinion, therefore, the High Court recorded an utterly unsustainable finding without
minutely examining the relevant evidence coupled with the requirements of law and erred in

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holding that the payment of Rs. 1,000 was in furtherance of the contract. We would also add that
in the facts and circumstances of the case payment of Rs. 1,000 was not such an act of part
performance which would help defendant mortgagee in any manner. Mr. Desai next contended
that the mortgagee discharged a debt of Rs. 541 which was included in the amount of Rs. 17,735
retained by the mortgagee from the total consideration payable for discharging other debts
and that this payment was in furtherance of the contract. This contention is being put forward
for the first time in this Court and should be negatived on that account alone. Even apart from
this there is no sufficient evidence to uphold this contention. In fact, the defendant mortgagee
himself has to some extent prevaricated on the question of retention of Rs. 17,735 out of the total
consideration for the sale transaction agreed at Rs. 50,000. Consideration of Rs. 50,000 was
made up, inter alia, by retaining Rs. 17,735 in discharge of debts owed by mortgagor to
mortgagee by borrowing loans on different occasions for domestic expenses. It is so stated in
Ext. D-l which had been extracted earlier. Mortgagee in his evidence gave a go bye to this recital
and deposed that the amount of Rs, 17,735 from the total consideration payable by him was
retained by the mortgagee for payment of other creditors of the mortgagor. Even apart from this
he has not stated a word that out of the amount of Rs. 17,735 he paid Rs. 541 to any particular
creditor. In his written statement he has stated that the amount of Rs. 17,735 was kept in deposit
for payment to other creditor of the mortgagor. One such creditor was to be paid a sum of Rs.
541. This creditor is none other than the mortgagee himself. This would mean that he himself
was creditor to whom he paid Rs. 541. Assuming that he could have reimbursed himself, there is
nothing to show that he gave a discharge or that he gave credit in his books of accounts. Further,
there is no statement in his evidence to that effect. That aspect was never canvassed before the
trial court as well as the High Court and we find no material evidence to substantiate this
contention. The contention has, therefore, to be negatived.

14. The third act of part performance pleaded on behalf of the mortgagee is that the mortgagee
agreed to discharge the mortgage subsisting on the property in his favour on settlement of
accounts. The mortgage deed admittedly was not returned to the mortgagor even after the
mortgagor executed Ext. D-1 the sale deed which was not ultimately registered. But that is not
enough. The mortgage admitted in his evidence that even after Ext. D-1 was executed he
maintained the accounts of mortgage and in that account he debited Rs. 1,000 paid to the
mortgagor for purchase of stamps. Could it be said that he had discharged or agreed to discharge

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the mortgage subsisting on the property? There is however a piece of evidence which
completely belies the claim and demonstrably establishes that mortgagee never claimed to regard
himself as owner from October 10, 1950 the date of contract but till a later date continued to
regard himself as a mortgagee with subsisting mortgage. Mortgagee made an application on June
23, 1952 nearly two years after the contract of sale in the execution proceedings filed by Motilal
seeking to bring mortgage property to court auction for realising his decretal amount, which
decree he had obtained against the mortgagor. In this application dated June 23, 1952 mortgagee
has stated that till that date Rs. 27792/2/3 were due under the mortgage from the mortgagor and
that fact must be noted in the sale proclamation and thereafter property should be sold. Now if
on October 10, 1950 accountswere made, mortgage was satisfied and mortgage debt was
discharged, how is it that on June 23, 1952 he retained the mortgage account, worked out the
amount due and sought its mention in the sale proclamation. This conduct of mortgagee is
sufficient to negative this contention. In any event mere oral agreement to discharge a
mortgage could hardly be said to be an act of part performance unless in fact such an act was
done and that could have been only done by a discharged mortgage deed being returned to the
mortgagor.

15. The next act of part performance pleaded by the mortgagee is that all dues owed by the
mortgagor to the mortgagee have be taken as cleared on completion of the contract Now, even
here his stand is equivocal. In the written statement it was stated that at the time of filing the
written statement a sum of Rs. 29,000 was found to be due from the mortgagor. If on October 10,
1950, all accounts were made up, how could he continue a mortgage account which mortgage
according to him came to be satisfied when he took the sale deed and continued in possession in
part performance of the contract? Therefore, the submission is without merits.

16. The next act of part performance pleaded by the mortgagee is that the nature and character of
possession changed as recited in the contract. Mortgagee was in possession as mortgagee. Now
according to him since the date of execution of the sale deed the nature of possession changed.
For this he relies upon a statement in the sale deed Ext. D-1 wherein it is stated that he is being
put in possession as owner. This mere recital is hardly indicative of the change in the nature of
possession. There is no evidence to show that he moved the authorities that he would be liable to
pay taxes as owner. There is no overt act on his part to so assert possession as owner. A mere

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recital in the disputed sale deed is of dubious evidentary value and when it would be pointed out
that he was never willing to perform his part of the contract which is a pre-requisite for claiming
protection of the doctrine of part performance it will be shown that he believed himself to be a
mortgagee and acted as such even at a date much later than October 10, 1950, from which date
he claims to be the owner. Induction into possession of an immovable property for the first time
subsequent to the contract touching the property, may be decisive of the plea of part
performance. Mere possession ceases to be of assistance when as in this case the person claiming
benefit of part performance is already in possession, prior to the contract and continues to retain
possession. However a reference to a statement of law in Halsbury's Laws of England, 3rd
Edition, Vol. 36, para 418 would be instructive. It reads as under:

"Where possession is given to a "tenant" before a tenancy agreement has been concluded and the
possession is retained after the conclusion of the agreement, the possession, if unequivocally
referable to the agreement, is a sufficient part performance but subject to this, acts done prior to,
or preparatory to, the contract will not suffice."

16. If a person claiming benefit of part performance is inducted into possession for the first time
pursuant to the contract it would be strong evidence of the contract and possession changing
hands pursuant to the contract in Hedson v. Heuland, it was held that although the entry into
possession was antecedent to the contract, yet the subsequent continuance in possession being,
under the circumstances, unequivocally referable to the contract, constituted a part performance
sufficient to take the case out of the Statute of Frauds.

17. In Nathulal's case, the fact that Nathulal parted with possession after receiving part payment
of the sale consideration was held sufficient to constitute part performance. This Court observed
that part performance of contract Phoolchand has taken possession of the property and he had in
pursuance thereof paid a part of the consideration and thereby the first three conditions for
making good the defence of part performance had been satisfactorily shown to exist. But
greater emphasis was laid on the decision of Somnath Iyer, Acting C.J. in Babu Murlidhar v.
Soudagar Mohammad Abdul Bashir and Anr. AIR 1970 Kant 20. In that case an unregistered
agreement of sale executed by the mortgagor in favour of the mortgagee in possession recited
that after the date of the agreement the mortgagee who had been in possession as such would
become the owner of the property and that he could get his name mutated into mutation register

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of the municipality and in implementation of this agreement of sale, the mortgagor himself made
an application for mutation to the municipal authorities and the name of the mortgagee was
mutated as owner of the property, it was held sufficient to clothe the mortgagee with the
protection of section 53A in a suit for redemption of the mortgage and the mortgagor's suit
was dismissed. The Court attached considerable importance to the provision in the unregistered
agreement for mutation in favour of the mortgagee as owner and the subsequent conduct of the
mortgagor in making an application for mutation was held to be the clearest indication which is
essential for invoking the doctrine of part performance. The decision can be said to depend more
or less on the facts of the case. However in this connection a reference was also made to Thota
China Subba Rao and Ors. v. Matapelli Raju and Ors, AIR 1950 Federal Court 1 that decision
is hardly of any importance because an extreme contention was advanced on behalf of the
mortgagee resisting a suit for redemption that he continued to be in possession in part
performance of the agreement which argument was repelled by the Court on the observation that
the mortgagee had never been in possession and the contention that he was always in
constructive possession could hardly assist him.

19. In Jahangir Begum v. Gulam Ali Ahmed, AIR 1955 Hyd 101 the Court after holding that
the defendant was in possession and had put up a structure on it, came to the conclusion that he
was not entitled to the benefit of doctrine of part performance because he was already in
possession before the contract to transfer the property, relied upon by him, was entered into, and,
therefore, it was obligatory upon him to show that he had done some act in furtherance of the
contract in order to constitute a part performance of the contract. In Kukali v. Basantilal (2) the
facts found were that A mortgaged with possession his house with B. Subsequently A sold the
house to in consideration of the mortgage debt and the amount spent by A on improvements and
repairs of the house. The deed was not registered. Subsequently A sold the same property to
under a registered sale deed sued for redemption relied on the equitable doctrine of part
performance in defence. Negativing the defence of part performance the Court held that as was
already in possession as a mortgagee, unless he shows that he did some act in furtherance of the
contract, over and above being in possession, mere continuance in possession would not
constitute part performance. The case is very near to the facts disclosed in the case under
discussion. There is an understandable and noteworthy difference in the probative value of
entering into possession for the first time and continuing in possession with a claim of change in

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character. Where person claiming benefit of part performance of a contract was already in
possession prior to the contract, the court would expect something independent of the mere
retention of possession to evidence part performance. Therefore mere retention of possession is
not discharged, could hardly be said to be an act in part performance unequivocally referable to
the contract of sale.

20. Section 53A requires that the person claiming the benefit of part performance must always be
shown to be ready and willing to perform his part of the contract. And if it is shown that he
was not ready and willing to perform his part of the contract he will not qualify for the
protection of the doctrine of part performance. Reverting to the consideration recited in Ext. D-l
the sale deed, even according to the mortgagee it was agreed that he had retained an amount of
Rs. 17,735 out of the total consideration of Rs. 50,000 for payment to the other creditors of the
mortgagor. Barring a claim made in the written statement that he paid himself Rs. 541 which was
included in the amount of Rs. 17,735 which allegation itself is unconvincing; there has not been
the slightest attempt on his part to pay up any of the creditors of the mortgagor. There is nothing
to show that he had the list of all the creditors of the mortgagor or that he made any attempt to
procure the list or that he issued a public notice inviting the creditors of the mortgagor to claim
payment from him to the extent of the consideration retained by him. Not a single creditor has
been paid is an admitted position. But the more inequitous conduct of the mortgagee is that he
had not made the slightest attempt to contact any of the creditors of the mortgagor or to pay even
the smallest sum. There is no such statement in the written statement but even in his evidence at
the trial he has not been able to show that he has paid any creditor or made any attempt to pay
any of the creditors including those whose names were admittedly known to him such as
Ramkaran Ghasilal, Kajodimal, Motilal Bhagirath and Kanhaiyalal Chagganlal. Further shifting
stand of mortgagee to suit his convenience is discernible here. In Ext. D-1, the entry of Rs.
17,735 is described as 'have been taken from you from time to time for domestic expenses'. In his
evidence mortgagee states that this recital is incorrect and the correct position according to him
is that the amount of Rs. 17,735 from total consideration payable by him was retained to pay to
other creditors of mortgagor. According to him the only amount due to him from mortgagor
outside the mortgage transaction was a debt of Rs. 541 only. Mortgagee neither paid himself
nor other creditors and thereby did not perform his part of the contract. He even did not pay a
small decretal amount of Rs. 500 plus interest and costs to Motilal in 1952 but allowed the

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property to be sold. Coupled with this is the fact according to the recital in Ext. D-1 he had
agreed to pay the balance of the consideration of Rs 6265 to the mortgagor at the time of
registration of the sale deed. Now, undoubtedly the mortgagor did not agree to get the sale deed
registered because there was a dispute between the parties as to the nature of the transaction.
But the defendant mortgagee made unilateral attempt to get the sale deed registered by offering it
for registration. Thus while attempting to complete his title both legally and even in equity he
was under an obligation to pay Rs 6265 to the mortgagor. This liability is not disputed yet in this
behalf he has not stated anything in his examination-in-chief that he made any attempt to pay that
amount to the mortgagor. Add to this his failure to return the discharged mortgage deed and his
further averment that he used to maintain the mortgage account even after October 10, 1950.
All this would conclusively show A that the mortgagor himself was not willing to perform his
part of the contract. In this view of the matter Mr. Desai's contention that failure to pay the
amount agreed to be paid before the Registrar and/or not discharging debts agreed to be
discharged as having been given credit in the consideration for the sale would not detract from
part performance because they have to be evaluated in the facts and circumstances of the case
cannot be upheld.

17. It was next contended on behalf of the mortgagee that the conduct of the 1st plaintiff
mortgagor in executing and registering a sale deed in respect of the mortgaged property in favour
of 2nd plaintiff Gyarsilal and thereby frustrating the contract of sale in favour of the defendant
mortgagee evidence that the Ist plaintiff was aware of the contract in favour of the defendant
mortgagee and he was retaining possession in furtherance of the contract. The submission does
not constitute any independent act on the part of mortgagee but it is merely another facet of the
fact of permission being retained by the defendant mortgagee. Retention of possession is of no
consequence in this case because the mortgage was not discharged and was subsisting and the
mortgage being a mortgage with possession the mortgagee was entitled to retain possession. The
fact that immediately a sale deed was executed in favour of 2nd plaintiff by Ist plaintiff would
show that he was unwilling to accept the contract as offered by the mortgagee. The subsequent
purchaser Gyarsilal has taken a conditional sale and this reinforce the stand of the mortgagor.
The existence of the dispute about the nature of the transaction, namely, according to the
mortgagor he wanted an absolute sale and this dispute between the parties as on October 10,
1950, is not in dispute. Therefore the conduct of the mortgagor is consistent with this case. It was

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next contended that defendant mortgagee made all attempts to get the deed registered by
approaching the Sub- Registrar, and that the defendant mortgagee initiated criminal proceedings
against the Ist plaintiff mortgagor for misusing the stamp papers need not detain us, as they have
no probative value.

18. Having, therefore, examined all the contentions canvassed on behalf of the mortgagee we
unhesitatingly reach the conclusion that the mortgagee has failed to prove that he did any act in
furtherance of the contract, continued retention of possession being circumstance of neutral
character in the facts and circumstances of the case and it being further established to our
satisfaction that the mortgagee was not willing to perform his part of the contract, it is clear that
the mortgagee is not entitled to the benefit of the equitable doctrine of Part Performance. On the
conclusions hereby indicated the appeal preferred by the plaintiffs (CA 1144/69) must be
allowed and the judgment of the High Court has to be set aside and the one rendered by the trial
court is restored with costs throughout.

19. Accordingly, Civil Appeal No. 1144/69 filed by Govindrao Mahadik is allowed and the
judgment and decree of the High Court are set aside and those of the trial court are restored with
costs throughout. Civil Appeal No. 1145/69 preferred by Motilal is disposed of in accordance
with direction herein-above indicated with no order as to costs. CMP 9004/80 and CMP
10593/80 for substitution are allowed.

Appeals allowed.

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 Seth Ganga Dhar vs Shankar Lal & Others

AIR 1958

1. The Judgment of the Court was delivered by SARKAR J.-This appeal arises out of a suit for
the redemption of a mortgage dated August 1, 1899. The property mortgaged was a four-roomed
shop with certain appurtenances, standing on a piece of land measuring 5 yards by 15 yards in
Naya Bazar, Ajmere. The mortgage was created by Purshottamdas who is now dead and was
in favour of Dhanrupmal, a respondent in this appeal. The mortgage instrument stated that the
property had been usufructuarily mortgaged in lieu of Rs. 6,300 of which Rs. 5,750 had been
left with the mortgagee to redeem a prior mortgage on the same and another property. It also
provided that on redemption of the prior mortgage, the possession of the shop would be taken
over and retained by the mortgagee, Dhanrupmal, who would appropriate its rent in lieu of
interest on the money advanced by him and the possession of the other property covered by the
prior mortgage, being a share in a Kachery would be made over to the mortgagor,
Purshottamdas. The provisions in the mortgage instrument on which the present dispute turns
were in these terms:

“I or my heirs will not be entitled to redeem the property for a period of 85 years. After the
expiry of 85 years we shall redeem it within a period of six months. In case we do not redeem
within a period of six months, then after the expiry of the stipulated period, 1, my heirs, and
legal representatives shall have no claim over the mortgaged property, and the mortgagee
shall have no claim to get the mortgage money and the lagat (i. e., repairs) expenses that may be
due at the time of default. In such e, case this very deed will be deemed to be a sale deed.
There will be no need of executing a fresh sale deed. The expenses spent in repairs and new
constructions will be paid along with the mortgage money at the time of redemption according
to account produced by the mortgagee."

2. The mortgagee, Dhanrupmal, duly redeemed the earlier mortgage and, went into possession of
the shop while possession of the Kacheri was delivered to the mortgagor. On April 12, 1939,
Dhanrupmal assigned his rights under the mortgage to Motilal who died later, and whose estate
is now represented by his sons, who are the other respondents in this appeal. The estate of
Purshottamdas, the original mortgagor, is now represented by his son, the appellant. On January

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2, 1947, the appellant filed the suit in the Court of the Sub-Judge, Ajmere, against the
respondents. The suit was contested by the sons of Motilal, the assignee of the mortgage, who
are the only respondents appearing in this appeal and whom we shall hence, hereafter refer to as
the respondents. They said that the suit was premature as under the mortgage contract there was
no right of redemption for eighty five years after the date of the mortgage, that is to say, till
August 1, 1984. The learned Sub-Judge, purporting to follow a decision of the Judicial
Commis- sioner, Ajmere, to whom he was subordinate, held that the provision postponing
redemption for eightyfive years was invalid as it amounted to a clog on the equityof redemption.
He, therefore, passed a preliminary decree for redemption. On appeal, the learned Judicial
Conmmissioner, Ajmere, held, that the decision which the Sub-Judge had purported to follow
was, distinguishable. He examined a large number of cases on the subject and came to the
conclusion that the provision in question did not amount to a clog on the equity of redemption.
He, therefore, allowed the appeal and dismissed the appellant's suit. From this decision the
appeal to this Court arises.

3. It is admitted that the case is governed by the Transfer of Property Act. Under s. 60 of that
Act, at any time after the principal money has become due, the mortgagor has a right on payment
or tender of the mortgage money to require the mortgagee to reconvey the mortgage property to
him. The right conferred by this section has been called the right to redeem and the appellant
sought to enforce this right by his suit. Under this section, however, that right can be exercised
only after the mortgage money has become due. In Bakhtawai- Begum v. HusainiKhanam
(1913) L.R. 41 I.A. 84, 89, also the same view was expressed in these words:

“Ordinarily, and in the absence of a special condition entitling the mortgagor to redeem during
the term for which the mortgage is created, the right of redemption can only arise on the
expiration of the specified period.” Now, in the present case the term of the mortgage is eighty-
five years and there is no' stipulation entitling the mortgagor to redeem during that term.
That term has not yet expired. The respondents, therefore, contend that the suit is premature and
liable to be dismissed.

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The appellant's answer to this contention is that the covenant creating the long term of eightyfive
years for the mortgage, taken along with the provision that the mortgagor must redeem within a
period of six months thereafter or not at all and the other terms of the mortgage and also the
circumstances of the case, is really a clog on the equity of redemption and is therefore invalid.
He contends that, in the result the mortgage money had been due all along and the suit was not
premature.

4. The rule against clogs on the equity of redemption is that, a mortgage shall always be
redeemable and a mortgagor's right to redeem shall neither be taken away nor be limited by
any contract between the parties. The principle behind the rule was expressed by Lindley M. R.
in Santley v. Wilde [1899] 2 Ch, 474.in these words:

“The principle is this: a mortgage is a conveyance of land or an assignment of chattles as a

security for the payment of a debt or the discharge of some other obligation for which it is given.
This is the idea of a mortgage: and the security is redeemable on the payment or discharge of
such debt or obligation, any provision to the contrary notwithstanding. That, in my opinion, is
the law. Any provision inserted to prevent redemption on payment or performance of the debt
or obligation for which the security was given is what is meant by a clog or fetter on the equity
of redemption and is therefore void. It follows from this, that "once a mortgage always a
mortgage ". The right of redemption, therefore, cannot be taken away. The Courts will ignore
any contract the effect of which is to deprive the mortgagor of his right to redeem the mortoage.
One thing, therefore, is clear, namely, that the term in the mortgage contract, that on the failure
of the mortgagor to redeem the mortgage within the specified period of six months the mortgagor
will have no claim over the mortgaged property, and the mortgage deed will be deemed to be a
deed of sale in favour of the mortgagee, cannot be sustained. It plainly takes away altogether, the
mortgagor's right to redeem the mortgage after the specified period. This is not permissible, for
" once a mortgage always a mortgage " and therefore always redeemable. The same result also
follows from s. 60 of the Transfer of Property Act. So it was said in Mohammad Sher Khan v.
Seth Swami Dayal (1921) L.R. 49 1, A. 60, 65. :

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"An anomalous mortgage enabling a mortgagee after a lapse of time and in the absence of
redemption to enter and take the rents in satisfaction of the interest would be perfectly valid if it
did not also hinder an existing right to redeem. But it is this that the present mortgage
undoubtedly purports to effect. It is expressly stated to be for five years, and after that,period the
principal money became payable. This, under s. 60 of the Transfer of Property Act, is the event
on which the mortgagor had a right on payment of the mortgage money to redeem. The section is
unqualified in its terms, and contains no saving provision as other sections do in favour of
contracts to the contrary. Their lordships therefore see no sufficient reason for withholding from
the words of the section their full force and effect. "

5. Under the section, once 'the right to redeem has arisen it cannot be taken away. The
mortgagor's right to redeem must be deemed to continue even after the period of six months has
expired and the attempt to confine that right to that period must fail. The term in the mortgage
instrument providing that the mortgage can be redeemed only within the six months and not
thereafter must be held period of to be invalid and ignored. The learned Judicial Commissioner
took the same view and this has not been challenged in this appeal on behalf of the
respondents.With this term however this case is not really con cerned. Learned advocate for the
appellant directed his attack on the term in the instrument of mortgage that it will not be
redeemable for eighty five years. He contended that this term amounts to a clog on the equity of
redemption. We wish to observe here that the learned advocate did not contend that the
invalidity, as we have earlier held, of the term taking away the right to redeem the mortgage after
the period of six months makes the term fixing the period of the mortgage at eighty five years
invalid. This latter term stands quite apart. It only fixes the time when the principal sum is to
become due, that is, when the right to redeem will accrue and has, therefore, nothing to do with a
term which provides when that right will be lost. The invalidity of one does not make the other
also invalid. The term providing that the right to redeem will arise after eighty five years does
not, of course, take away the mortgagor's right to redeem and is not, therefore, in that sense, a
clog on the equity of redemption. It does, however prevent accrual of the right to redeem for the
period mentioned. Is it then, in so far as it prevents the right to redeem from accruing for a time,
a clog? As we have already said, the right to redeem does not arise till the principal money
becomes due. When the principal sum is to become due must of course depend on the contract
between the parties. In the present case the parties have agreed that the right to redeem will

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arise eightyfive years after the date of the mortgage, that is to say, the principal money will then
become due. The appellant says that he should be relieved from this bargain that he has made.
This is the contention that has to be examined. The rule against clogs on the equity of redemption
no doubt involves that the Courts have the power to relieve a party from his bar 'gain. If he has
agreed to forfeit wholly his right to redeem in certain circumstances, that agreement will be
avoided. But the Courts have gone beyond this. They have also relieved mortgagors from
bargains whereby the right to redeem has not been taken away but restricted. The question is the
term now under consideration such that a Court will exercise its power to grant relief against it?
That depends on the extent of this power. It is a power evolved in the early English Courts of
Equity for a special reason. All through the ages the reason has remained constant and the
Court's power is therefore limited by that reason. The extent of this power has, therefore, to be
ascertained by having regard to its origin. It will be enough for this purpose to refer to two
authorities on this question.

6. In a very early case, namely, Vermon v. Bethell Earl of Northington L. C. said, “This court,
as a court of conscience, is very jealous of persons taking securities for a loan, and converting
such securities into purchases. And therefore I take it to be an established rule, that a mortgagee
can never provide at the time of making the loan for any event or condition on which the equity
of redemption shall be discharged, and the conveyance absolute. And there is great reason and
justice in this rule, for necessitous men are not, truly speaking, free men, but, to answer a
present exigency, will submit to any terms that the crafty may impose upon them. " In
comparatively recent times Viscount Haldane L. C.repeated the same view when he said in G.
and C. Kreglinger v. New Patagonia Meat and Cold Storage Company Ltd. (1762) 2 Eden 110,
113; 28 E.R. 838,839: This jurisdiction was merely a special application of a more general power
to relieve against penalties and to could them into mere securities. The case of the common law
mortgage of land was indeed a gross one. The land was conveyed to the creditor upon the
condition that if the money he had advanced to the feoffor was repaid on a date and at a place
named, the fee simple would revest in the latter, but that if the condition was not strictly and
literally fulfilled he should lose the land forever. What made the hardship on the debtor a glaring
one was that the debt still remained unpaid and could be recovered from the feoffor
notwithstanding that he had actually forfeited the land to the mortgagee. Equity, therefore, at an
early date began to relieve against what was virtually a penalty by compelling the creditor to use

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his legal title as a mere security. My Lords, this was the origin of the jurisdiction which we are
now considering, and it is important to bear that origin in mind. For the end to accomplish which
the jurisdiction has been evolved ought to govern and limit its exercise by equity judges. That
end has always been to ascertain, by patrol evidence if need be, the real nature and substance of
the transaction, and if it turned out to be in truth one of mortgage simply, to place it on that
footing. It was, in ordinary cases, only where there was conduct which the Court of Chancery
regarded as unconscientious that it interfered with freedom of contract. The lending of money, on
mortgage or otherwise, was looked on with suspicion, and the court was on the alert to discover
want of conscience in the terms imposed by lenders." The reason then justifying the Court's
power to relieve a mortgagor from the effects of his bargain is its want of conscience. Putting
it in more familiar language the Court's jurisdiction to relieve a mortgagor from his bargain
depends on whether it was obtained by taking advantage of any difficulty or embarrassment that
he might have been in when he borrowed the moneys on the mortgage. Was the mortgagor
oppressed? Was he imposed upon? If he was, then he may be entitled to relief.

7. We then have to see if there was anything unconscionable in the agreement that the mortgage
would not be redeemed for eightyfive years. Is it oppressive? Was he forced to agree to it
because of his difficulties? Now this question is essentially one of fact and has to be decided on
the circumstances of each case. It would be wholly unprofitable in enquiring into this question to
examine the large number of reported cases on the subject, for each turns on its own facts.
First then, does the length of the term-and in this case it is long enough being eightyfive years-
itself lead to the conclusion that it was an oppressive term? In our view, it does not do so. It is
not necessary for us to go so far as to say that the length of the term of the mortgage can never by
itself show that the bargain was oppressive. We do not desire to say anything on that question in
this case. We think it enough to say that we have nothing here to show that the length of the
term was in any way dis-advantagous to the mortgagor. It is quite conceivable that it was to his
advantage. The suit for redemption was brought over forty-seven years after the date of the
mortgage. It seems to us impossible that if the term was oppressive, that was not realised much
earlier and the suit brought within a short time of the mortgage.

8. The learned Judicial Commissioner felt that the respondents' contention that the suit had been
brought as the price of landed property had gone up after the war, was justified. We are not

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prepared to say that he was wrong in this view. We cannot also ignore, as appears from a large
number of reported decisions, that it is not uncommon in various parts of India to have long
term mortgages. Then we find that the property was subject to a prior mortgage. We are not
aware what the term-of that mortgage was but we find that mortgage included another property
which became freed from it as a result of the mortgage in suit.

9. This would show that the mortgagee under this mortgage was not putting any pressure on the
mortgagor. That conclusion also receives support from the fact that the mortgage money under
the present mortgage was more than that under the earlier mortgage but the mortgagee in the
present case was satisfied with a smaller security. Again, no complaint is made that the interest
charged, which was to be measured by the rent of the property, was in any manner high. All
these, to our mind, indicate that the mortgagee had not taken any unfair advantage of his position
as the lender, nor that the mortgagor was under any financial embarrassment. It is said that the
mortgage instrument itself indicates that the bargain is hard, for, while the mortgagor cannot
redeem for eighty-five years, the mortgagee is free to demand payment of his dues at any time
he likes.This contention is plainly fallacious. There is nothing in the mortgage instrument
permitting the mortgagee to demand any money, and it is well settled that the mortgagee's right
to enforce the mortgage and the mortgagor's right to redeem are co-extensive.Then it is said that
under the deed the mortgagee can spend any amount on repairs to the mortgage property and in
putting up new constructions there- and the mortgagor could only redeem after paying the
expenses for these. We are unable to agree that such is the effect of the mortgage instrument. We
cannot lose sight of the fact that the mortgaged shop and the area of the land on which it stood
were very small. It was not possible to spend a large sum on repairs or construction there.
Furthermore, having agreed to 85 years as the term of the mortgage, the parties must have
imagined that during this long period repairs and constructions would become necessary. It is
only such necessary repairs as are contemplated by the instrument and we do not consider that it
is hard on the mortgagor to have to pay for such repairs and construction when he redeems the
property and gets the benefit of the repairs and construction. Neither do we think that there is
anything in the contention that under the document the mortgagor was bound to accept
whatever was shown in the mortgagee's account as having been spent on the repairs and
construction.

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10. That is not, in our view, the effect of the relevant clause which reads, “The expenses spent in
repairs and new constructions will be paid according to the account produced by the mortgagee.”
All that it means is that in claiming moneys on account of repairs and construction the mortgagee
will have to show from his account that he spent these moneys. It is really a safeguard for the
mortgagor. It was also said that all the terms in the deed were for the benefit of the mortgagee
and that showed that the bargain was a hard one. We do not think that all the terms were for the
benefit of the mortgagee, or that what there was in the instrument was for his benefit and
indicated that the mortgagee had forced a hard bargain on the mortgagor. We have earlier said
how the bargain appears to us to have been fair and one as between parties dealing with each
other on equal footing. We have no evidence in this case of the circumstances existing at the date
of the mortgage as to the pecuniary condition of the mortgagor or as to anything else from which
we may come to the conclusion that the mortgagee had taken advantage of the difficulties of the
mortgagor and imposed a hard bargain on him. It was said that the fact that the property was
subject to a prior mortgage at the date of the mortgage in suit indicates the impecunious position
of the mortgagor. We are unable to agree with this contention. Every debtor is not necessarily
impecunious. The mortgagor certainly derived this advantage from that mortgage that he was
able to free from the earlier mortgage the kacheri and he has been in enjoyment of it ever
since.

11.That, to our mind, indicates that the bargain had been freely made. There was nothing else to
which our attention was directed as showing that the bargain was hard. We, therefore, think
that the bargain was a reasonable one and the eighty-five years term of the mortgage should be
enforced. We then come to the conclusion that the suit was premature and must fail.

In the result we dismiss this appeal with costs.

****************.*************************************************************

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 Pomal Kanji Govindji & Ors vs Vrajlal Karsandas Purohit & Ors

AIR 436, 1988 SCR Supl. (3) 826

JUDGMENT: This is an appeal from the judgment and order of the Gujarat High Court, dated
26th April, 1~82 dismissing the second appeal. The High Court observed that the learned Judge
had followed the judgment of the said High Court in Khalubai Nathu Sumra v. Rajgo Mulji
Nanji and others,AIR 1979 Gujarat 171 where the learned Single Judge in the background of a
mortgage, where the mortgagor was financially hard-pressed and the mortgage was for 99 years
and the term gave the mortgagee the right to demolish existing structure and construct new one
and the expenses of such to be reimbursed by mortgagor at the time of redemption, it was held
that the terms were unreasonable, unconscionable and not binding.

1. MUKHARJI. J. These appeals and the special leave petition are directed against the decision
of the High Court of Gujarat, upholding the right of the mortgagors to redeem the properties
before the period stipulated in the deeds as well as the right of the mortgagors to recover
possession of the properties from the tenants and/or the mortgagees without resort to the relevant
Rent Restriction Act. All these matters were separately canvassed before us as these involved
varying facts, yet the fundamental common question is, whether long term mortgages in the
present infaltionary market in fast moving conditions are clogs on equity of redemption and as
such the mortgages are redeemable at the mortgagors' instance before the stipulated period and
whether the tenants who have been inducted by the mortgagees can be evicted on the termination
of the mortgage or do these tenants enjoy protection under the relevant Rent Restriction Acts.
One basic fact that was emphasised in all these cases was that all these involve urban immovable
properties. In those cirumstances, whether the mortgages operate as clogs on equity of
redemption is a mixed question of law and facts. It is necessary to have a conspectus of the
facts involved in each of the cases herein. We may start with the facts relating to Special Leave
Petition (Civil ) No. 8219 of 1982 because that is a typical case.

2. In order, however, to appreciate the contentions urged therein, it will be necessary to refer to
the decision of the first Appellate Court, in the instant case before us. By the judgment, the
Assistant Judge, Kutch at Bhuj in Gujarat disposed of two appeals. These appeals arose from the

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judgment and decree passed by the Civil Judge, Bhuj, in Regular Civil Suit No. 35/72 by which
the decree for redemption of mortgage was passed and the tenants inducted by the mortgagees
were also directed to deliver up possession to the mortgagors. The plaintiffs had filed a suit
alleging that the deceased Karsandas Haridas Purohit was their father and he died in the year
1956, he had mortgaged the suit property to Kanasara Soni Shivji Jotha and Lalji Jetha for
30,000 Koris by a registered mortgage deed dated 20th April, 1943. The mortgage deed was
executed in favour of Soni Govindji Nalayanji who was the power of attorney holder and
manager of the defendants Nos. 1 and 2. The defendant No. 3 is the heir of said Govindji
Narayanji and he was also managing the properties of the defendants Nos I and 2. The mortgage
property consisted of two delis in which there were residential houses, shops etc. The
mortgagees had inducted tenants in the suit property and they were defendants Nos. 4 to 9 in the
original suit when the mortgage transaction took place, the economic condition of the father of
the plaintiffs was weak. He was heavily indebted to other persons. It was alleged and it was so
held bythe learned Judge and upheld by the Appellate Judge that the mortgagees took advantage
of' that situation and took mortgage deed from him on harsh and oppressive conditions. They got
incorporated long term of 99 years for redemption of mortgage. It is further stated that though
possession was to be handed over to the mortgagees, they took condition for interest on the part
of principal amount in the mortgage PG NO 835 deed. Moreover, the mortgagees were given
liberty to spend any amount they liked for the improvement of the suit property. They were also
permitted to rebuild the entire property. Thus these terms and conditions, according to the
Appellate Judge, were incorporated in the mortgage deed to ensure that the mortgagors were
prevented for ever from redeeming the mortgage. The terms and conditions, according to the
Assistant Judge, Bhuj, being the first Appellate Court were unreasonable, oppressive and harsh
and amounted to clog on equity of redemption and, as such, bad and the plaintiffs were entitled
to redeem the mortgage even before the expiry of the term of mortgage. A registered notice to
the defendants Nos. I and 2 was given to redeem the mortgage but they failed to do so, hence, the
present suit was filed to redeem the mortgage and to recover actual possession from the
defendants Nos. 4 to 9 who were the tenants inducted by the mortgagees.

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3. The defendant No. 1 resisted the suit. It was his case that the term of mortgage was for 99
years, so the suit filed before the expiry of that period was premature. The defendant No. 3
resisted the suit by written statement. The defendants Nos. 4 to 9 resisted the suit on the grounds
that the plaintiffs were not entitled to redeem the mortgage and even if they were so entitled,
they could not get actual physical possession from the tenants who were protected by the
provisions of the relevant Bombay Rent Act. It was their case that the plaintiffs were not entitled
to get actual possession of the premises in which they were inducted by the mortgagees. The
defendants Nos. 2/1 to 2/7 who were the heirs of mortgagee Shivji Jetha were residing in London
and New Delhi, so the personal service of summons could not be effected upon them. The
summons was published in the local newspapers but none of them appeared before the Court so
the Court proceeded ex-parte against them. The trial was conducted and a preliminary decree for
redemption of mortgage was passed on 2nd April, 1974 by the Trial Court. Thereafter, the
decree-holder applied for final decree so the notices were issued to all the defendants. The heirs
of Shivji Jetha appeared in response to that notice and filed applications before the Trial Court to
set aside the ex- parte decree on the ground that summons of the suit had not been duly served
upon them. That prayer was rejected by the Trial Court. Thereafter, they filed Civil Misc.
Appeals in the District Court. The appeals were allowed by the District Court and the ex-parte
decree for redemption of mortgage was set aside. The Trial Court was directed to proceed with
the suit after permitting the concerned defendants to take part in the proceedings right after
receiving their written statements. Accordingly defendant No. 2/1 appeared in the PG NO 836
suit and filed his written statement while other defendants remained absent.

4. It was the case of the defendant No. 2/1 that the sisters of the plaintiffs had not been joined as
parties in the suit, so the suit was bad for want of necessary parties. Moreover, as per the terms
and conditions of the mortgage deed dated 20th April, 1943, there was usufructuary mortgage for
20,000 koris and the remaining l0,000 koris were advanced to the mortgagor at monthly interest
at the rate of 1/2 per cent. There was a condition in the mortgage deed that the mortgagor should
pay principal amount as well as the interest at the time of redemption. When the suit was filed in
the year 1972, the mortgagees were entitled to recover interest on l0,000 koris for a period of 291
ears . That interest would be 17,400 koris so the total mortgage amount will be Rs.47400 which
would be equivalent to Rs. 15,800) and and the Civil Judge had no jurisdiction to try such suit
so the plaint should have been returned for presentation in the proper court.

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5. It was further alleged that the court fees paid by the plaintiffs was also not sufficient.
Moreover, it was not true that the father of the plaintiffs was of weak economic condition. The
grand father of the plaintiffs was an Advocate and the father of the plaintiffs was the clerk of
an Advocate. The plaintiff No. l was also working as an Advocate at the time of the mortgage. so
they knew the legal position. It was further alleged that at the relevant time the prevalent custom
in Kutch State was to take mortgages of long term for 99 years and when it was permissible to
take mortgage deeds with such a long term It was also necessary to give permission for
rebuilding the whole property, for better enjoyment of it. So long term mortgage and the
conditions for reconstruction of the property could not amount to clogs on equity of redemption
of mortgage it was the case of the mortgagees and/or tenants. The mortgagees did not take any,
it was pleaded undue advantage and they were not present physically when the transaction took
place through their power of attorney holders. If the conditions in the mortgage deed did not
amount to clogs on equity of redemption, the suit would be clearly premature. It may be
mentioned that the plaintiff No. 1 had subsequently become a Civil Judge and was ultimately the
Chairman of the Tribunal so if the said terms and conditions of the mortgage were onerous and
oppressive, he would not have sat idle for 29 years. But he remained silent because he was aware
of the custom, it was pleaded. It was alleged that the prices of immovable properties had
increased tremendously; therefore, that suit had been filed with mala fide intention.

6. It was averred that in case the Court came to the conclusion that there was clog on equity of
redemption and the plaintiffs were entitled to the PG NO 837 redemption, then the interest on
10,000 koris should be awarded to the mortgagees. In the premises, it was averred that the suit
should be dismissed as there was no clog on equity of redemption and the court had no
jurisdiction to try the suit. The Trial Court then recorded additional evidence in the suit and
ultimately decreed the suit on 28th September, 1978. The Trial Court came to the conclusion that
there was mortgage transaction between the father of the plaintiffs and Soni Shivji Jetha and
Lalji Mulji on 20th April, 1943. The Trial Court further came to the conclusion that the terms
and conditions in the mortgage deed were harsh and oppressive, which amounted to clog on
equity of redemption, so the plaintiffs were entitled to file the suit even before the expiry of the
term of the mortgage. The Trial Court also came to the conclusion that the sisters of the plaintiffs
were not necessary parties to the suit and even if they were necessary parties, a co-mortgagor
was entitled to file the suit for redemption, so the suit was not bad for want of non-joinder of

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necessary parties. The Trial Court further came to the conclusion that it had jurisdiction to try the
suit and held that the mortgagees were not entitled to claim interest on 10,000 koris. It was
further directed that the plaintiffs were entitled to recover possession from the defendants Nos. 4
to 9 who were the tenants inducted by the mortgagees. Accordingly, a preliminary decree was
passed in the suit. Aggrieved thereby the mortgagees filed Regular Civil Appeal No. 149/78 and
the tenants filed Regular Civil Appeal No. 150/78. These were disposed of by the judgment of
the first Appellate Court. The learned Judge of the first Appellate Court framed the following
issues:

(1) Whether the terms and conditions in the mortgage deed dated 20.4.1943 amount to clog on
equity of redemption?

(2) Whether the decree passed is bad for want of jurisdiction with trial court?

(3) Whether the mortgagees are entitled to get interest on 10,000 koris?

(4) Whether the tenants are protected from the effect of redemption decree by virtue of the
provisions of Bombay Rent Act?

(5)Whether the decree passed by the trial court is legal and proper?

(6) What order?"

7. It is not necessary any longer in view of the findings made and the subsequent course of
events to detain ourselves on all the issues. For the purpose of the present appeal is well as the
connected appeals we are concerned with two issues, namely, Issue Nos. 1 and 4 stated above, in
other words, whether the terms and conditions of the mortgage deed dated 20th April, 1943
amounted to clog on equity of redemption and secondly, whether the tenants are protected from
the effect of redemption decree by virtue of the provisions of the Bombay Rent Act. The learned
Assistant Judge in the first appeal had noted that it was not in dispute that the document. Ext.
103 dated 20th April, 1943, the certified copy of which was also produced at Ext. 51 was
executed by the father of the plaintiffs in favour of Kansara Soni Shivji Jetha. According to this
document, an usufructuary mortgage was created on the suit property for 20,000 koris and the
possession was to be delivered to the mortgagees. Over and above that a further amount of
10,000 koris was also paid to the mortgagor for whom he had to pay interest at the rate of 1/2 per

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cent per month. The mortgage period was fixed for 99 years and after the expiry of that period,
the mortgagor had to pay 30,000 koris as principal amount along with interest due on 10,000
koris. This was a registered document and it was acted upon by the parties. The learned Trial
Judge held that the long term of 99 years for redemption coupled with other circumstances,
indicated that there was clog on equity of redemption It was argued that the long term for
redemption was not necessarily a clog on equity of redemption.

8. Certain decisions were referred to. The Trial Court noted that there was no quarrel with the
proposition of law that long term itself could not amount to clog on equity of redemption, when
the bargain otherwise was reasonable one and the mortgagee had not taken any undue or unfair
advantage. But, if in a mortgage with long term of redemption, there were other circumstances to
suggest that the bargain was unreasonable one and the mortgagee had taken unfair advantage,
then certainly long term also will be clog on equity of redemption. It is a question to be judged
in the light of the surrounding circumstances. It may be noted here that there was a
condition in the mortgage deed permitting construction of structure after demolishing the
existing structure, costs of which were to be paid by the mortgagor. After examining the PG NO
839 facts and the relevant decisions, the first Appellate Court came to the conclusion that the
terms were oppressive and harsh and there was clog on equity of redemption and the mortgagor
should be freed from that bondage. Shri Rajinder Sachar, Shri B.K. Mehta as well as Shri
Dholakia urged on behalf of their respective clients that in former Kutch district, there was a
custom to take mortgages for long term of 99 years and when the period was long. naturally the
mortgagee would be required to give full authority to repair and reconstruct the mortgaged
property with a view to keep pace with new demands of changing pattern, so the condition
permitting the mortgagee to reconstruct the whole premises was natural consequence of long
term and that should not be treated as clog on equity of redemption. The learned Assistant Judge
had rejected the similar contention made before him on behalf of the mortgagees and tenants in
view of the decisions of the Gujarat High Court which were also arising out of the decisions in
the suits filed in Kutch district and in those cases it was held that there was clog on equity of
redemption. We will deal with some Gujarat decisions separately, presently. The learned
Assistant Judge referred to another circumstance i.e., to the condition of mortgage which
indicated the oppressive nature of the term. By mortgage deed being Ext. 103 usufructuary
mortgage was created for 20,000 koris only and additional mortgage of 10,000 koris was also

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created for which the mortgagor had to pay interest at the rate of 1/2 per month. Furthermore,
the mortgagor was not allowed to discharge interest liability periodically, but he had to pay to
whole amount of interest at the end of 99 years at the time of redemption of the mortgage.
Naturally, there would be hugh accumulation of interest which for all practical probabilities in
most of the cases will be an impossibility to discharge. It was held that the purpose was to ensure
that the right of redemption could never be exercised. On the other hand, it was contended before
the learned Assistant Judge that the transaction was bona fide because reasonable consideration
was paid as mortgage money. They was no direct contact between the mortgagor and the
mortgagee. There could not be any collusion. The mortgagees were abroad. The learned
Assistant Judge examined the evidences of one Madhavji Shivji Soni in order to show
comparable instances for reasonableness of the consideration. The learned Assistant Judge after
discussing the evidence proceeded on the assumption that the consideration paid as mortgage
money was reasonable and proper and, according to him, it did not make any difference if the
other conditions in the mortgage deed were found to be oppressive and amounting to clog on
equity of redemption.

9. Attention of the learned Assistant Judge was drawn to the fact that this was a bona fide
transaction at the time when made, but subsequently, the prices of immovable properties
increased so the plaintiffs had come forward to file suits after a lapse of long time. It was
highlighted that the plaintiff No. I was serving as a Civil Judge and if he came to know that the
transaction was oppressive, he would not have sat idle for such for a long period. Reference
was made to the decision of this Court in Seth Ganga Dhar v. Shankar Lal & Ors., [1959]
S.C.R. 509. We will examine that decision in detail. The learned Assistant Judge came to the
conclusion on point No. 1 that there was clog on equity of redemption and accordingly answered
the Issue No. 1 in the affirmative. With the other issues we are not concerned in this appeal
except Issue No. 4. Regarding Issue No. 4, as mentioned hereinbefore, which is on the question
whether the tenants are protected from the effect of redemption decree by virtue of the provisions
of the Bombay Rent Act, it may be mentioned that the tenants had filed regular civil appeal and
it was urged before the learned Assistant Judge that even if the mortgage was redeemed, the
tenants inducted by the mortgagees would be entitled to continue in possession of the properties
in question as they were protected by the provisions of the said Rent Act. There was no dispute
in this case and in the facts of the other three appeals that the tenants were inducted by the

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mortgagees after the mortgage was created. It is also true that in all these mortgage deeds, there
was provision that the mortgagees were competent to lease out the suit property and if in
exercise of that power, they inducted the tenants in the suit properties, their tenancies would not
come to an end on the redemption of mortgage, it was argued. The Full Bench of the Gujarat
High Court in Lalji Purshottam v. Thacker Madavji Meghaji, 17 Gujarat Law Reporter 497
held that the mortgagee in possession might lease the property, but authorisation to the
mortgagee to let out the property to any other tenant would not amount to an intention to create
tenancy beyond the term of mortgage. Following the said decision, however, it was held that
the tenant had no right to be in possession and was not entitled to the protection of the Bombay
Rent Act after the redemption of the mortgage. The appeal was accordingly disposed of. As
mentioned hereinbefore, there was a second appeal to the High Court and thc High Court
expressed the view in brief order and dismissed the second appeal on 26th April, 1982 It appears,
however, that in second appeal two questions were agitated, (1) the question of jurisdiction
and Damdupat and (2) the tenants' right to be in possession. So far as the question of jurisdiction
and Damdupat, the High Court observed that the Assistant Judge was right. This PG NO 841
point is not before us in this appeal under Article 136 of the Constitution. So far as the question
of tenants' right to be in possession after the redemption of mortgage, the High Court followed
the decision in Khatubai Nathu Sumra v. Rajgo Mulji Nanji and others, (supra).

10. It was a suit for redemption of the mortgaged property located in the town of Bhuj. There
upon, the respondent No. I preferred an appeal to the District Judge where the suit was decreed.
The defendants filed a second appeal which was dismissed and the decree-holder made an
application for final decree and the Court gave the final decree on 30th November, 1974. While
giving the final decree for redemption of the mortgage a direction was given in the decree to the
judgment debtors to hand over the possession of the mortgaged property within three months on
the decree-holder making payment of dues in respect of the mortgage in the Court. In pursuance
of the final decree the decree-holder took out the execution proceedings and deposited the dues
in the Court. At the same time the decree-holder claimed possession of the mortgaged property
from one Shambhulal Vallabhji Thacker, the appellant herein, stating that he was a tenant in
the possession of the property. The notice was issued to Shambhulal Vallabhji, who appeared
before the Court and submitted his objections stating that he was a tenant protected by law and

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he could not be evicted in the execution of the decree obtained by the decree-holder. He also
stated that he was entitled to get the protection under the Bombay Rent Control Act.

11. The learned District Judge held that there was no conduct on the part of the decree-holder
which would estop him from claiming physical possession from the tenant of the mortgagee in
possession. It was contended that when the mortgagee leased out the mortgaged property under
the ordinary prudent management of the mortgaged property the mortgagor on redemption of the
mortgage was not entitled to recover physical possession of the property from the tenant. The
learned Judge negatived this contention. The High Court rejected the appeal summarily. Hence,
this appeal.

12. The appellant is the tenant of the mortgagee. The plaintiffs Nos. 1 to 6 are the heirs and legal
representatives of deceased Mehta Kanji Bhagvanji. It may be mentioned that the tenant was
inducted by the mortgagee in 1955. The property was mortgaged in 1948 for a period of five
years. It appears, therefore, that the tenant was inducted after the period of redemption had
expired. The mortgagor had a right to redeem after the expiration of the mortgage. It was
contended that though the mortgagee had inducted tenants in the suit property with a mala fide
intention on the part of the mortgagee, it was still an act of prudent management. The first
Appellate Court on the question before us, namely, whether the tenant was protected by the
Bombay Rent Act, came to the conclusion after discussing all the relevant evidence and relying
on the decision of the Lalji Purshottam v. Thacker Madhavji Meghaji (supra) that the tenants
were not so protected under the provisions of the Bombay Rent Act in the facts of the case The
appellant preferred this appeal and this is in issue in this case.

13. The right of redemption, therefore, cannot be taken away. The Courts will ignore any
contract the effect of which is to deprive the mortgagor of his right to redeem the mortgage. It
was further reiterated at page 515 of the report in Seth Ganga Dhar's case (supra) that the rule
against clogs on the equity of redemption no doubt involves that the Courts have the power to
relieve a party from his bargain. If he has agreed to forfeit wholly his right to redeem in
certain circumstances, that agreement will be avoided. But the Courts have gone beyond this.
They have also relieved mortgagors from bargains whereby the right to redeem has not been
taken away but restricted. It is a power evolved by the early English Courts of Equity for a
special reason. All through the ages the reason has remained constant and the Court's power is,

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therefore, limited by that reason. The extent of this power has, therefore, to be ascertained by
having regard to its origin. It is better to refer to the observations of Northington L.C. in Vermon
v. Bethell, 28 E.R. 838 and 839. Lord Chancellor observed therein as follows:

"This court, as a court of conscience, is very jealous of persons taking securities for a loan, and
converting such securities into purchases. And therefore I take it to be an established rule, that a
mortgagee can never provide at the PG NO 845 time of making the laon for any event or
condition on which the equity of redemption shall be discharged, and the conveyance absolute.
And there is great reason and justice in this rule, for necessitous men are not, truly speaking, free
men, but, to answer a present exigency, will submit to any terms that the craft may impose upon
them."

14. The same view was reiterated by Viscount Haldane L.C. in G. and C. Kreglinger v. New
Patagonia Meat and Cold Storage Company Ltd., [1914] Appeal Cases 25, where it was
observed at pages 35 and 36 of the report as follows:

"This jurisdiction was merely a special application of a more general power to relieve against
penalties and to mould them into mere securities. The case of the common law mortgage of land
was indeed a gross one. The land was conveyed to the creditor upon the condition that if the
money he had advanced to the feoffor was repaid on a date and at a place named, the fee simple
would revest in the latter, but that if the condition was not strictly and literally fulfilled he
should lose the land for ever. What made the hardship on the debtor a glaring one was that the
debt still remained unpaid and could be recovered from the fee offor notwithstanding that he had
actually forfeited the land to the mortgagee. Equity, therefore, at an early date began to relieve
against what was virtually a penalty by compelling the creditor to use his legal title as a mere
security.

15. My Lords, this was the origin of the jurisdiction which we are now considering, and it is
important to bear that origin in mind. For the end to accomplish which the jurisdiction has been
evolved ought to govern and limit its exercise by equity judges. That end has always been to
ascertain, by parol evidence if need be, the real nature and substance of the transaction, and if it
turned out to be in truth one of mortgage simply, to place it on that footing. It was, in ordinary
cases, only where there was conduct which the Court of Chancery regarded as unconscientious

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that it interfered with freedom of contract. The lending of money, on mortgage or otherwise,
was looked on with suspicion, and the court was on the alert to discover want of con-science
in the terms imposed by lenders."

16. The reason justifying the Court's power to relieve a mortgagor from the effects of his bargain
is its want of conscience. Putting it in more familiar language the Court's jurisdiction to relieve a
mortgagor from his bargain depends on whether it was obtained by taking advantage of any
difficulty or embarrassment that he might have been in when he borrowed the moneys on the
mortgage. Length of the term, according to Sarkar, J. in the aforesaid decision, was not by itself
oppressive and could not operate as a clog on the equity of redemption. There was a term in the
mortgage deed that the mortgagees could spend any amount on repairs and those expenses would
be paid, according to the account produced by the mortgagees. All that it meant was that in
claiming moneys on account of repairs and construction the mortgagees had to show from their
accounts that they had spent these moneys. This Court on that basis held that the clause which
provided that the mortgage had to be redeemed within the specified period of six months was bad.
The principle, however, is that it was not an unconscionable bargain and it did not in effect
deprive the mortgagor of his right to redeem the mortgage or so to curtail his right to redeem that
it has become illusory and non-existent, then there was no clog on equity of redemption. It
has to be borne in mind that the English authorities relied upon by Sarkar, J. and the principles
propounded by this Court in the case of Seth Ganga Dhar's, case (supra) were in the
background of a sedate and fixed state of affairs. The spiral and escalation of prices of the
immovable properties was not then there. Today, perhaps, a different conspectus would be
required to consider the right to redeem the property after considerable length of time pegging
the price to a small amount of money, the value of which is fast changing.

17. The rights and liabilities of the mortgagor are controlled by the provisions of section 60 of
the Transfer of Property Act, 1882. The clog on redemption has been noted in Mulla's Transfer
of Property Act. 7th Edition, page 401 that a mortgage being a security for the debt, the right of
redemption continues although the mortgagor fails to pay the debt at due date. Any provision
inserted to prevent, evade or hamper redemption is void. That is implied in the maxim "once a
mortgage always a mortgage". Collins, M.R. in Jarrah Timber & Wood Paving Corporation v.
Samuel, [1903] 2 Ch. 1 at page 7 observed that it is the right of a mortgagor on redemption, by

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reason of the very nature of a mortgage to get back the subject of the mortgage and to hold and
enjoy as he was entitled to hold and enjoy it before the mortgage.

18. PG NO 847 The doctrine clog on the equity of redemption" is a rule of justice, equity and
good conscience. It must be adopted in each case to the reality of the situation and the
individuality of the transaction. We must take note of the time, the condition, the price spiral, the
term bargain and the other obligations in the background of the financial conditions of the
parties. Therefore, in our opinion, in view of the evidence it is not possible to hold that there was
no clog on the equity of redemption in these cases.

19. A very large number of decisions have been cited at the Bar. Shri T.U. Mehta, Shri Rajinder
Sachar, Shri B.K. Mehta and Shri Dholakia very ably and painstakingly argued this case in
respect of their cotentions. Our attention was drawn to the observations of the Allahabad High
Court in Chhedi Lal v. Babu Nandan, A.I.R. 1944 Allahabad 204 where it was held that the
provision inserted to prevent redemption on payment or performance of the debt or obligation for
which security was given, was a clog on equity of redemption. Condition in mortgage was in that
case that if mortgagee constructed new building by demolition of mortgaged property which
was kachcha structure, mortgagor would pay cost of construction at the time of redemption.
Stipulation in circumstances of the case, it was held, did not amount to clog on equity of
redemption. It was argued before us by th. Mortgagees that the provision for the payment
towards cost and expenses of repairs and construction did not amount to a clog on the equity of
redemption because the repairs and construction were to be effectuated to keep the property in
good condition. In the aforesaid decision Verma, J. at page 207 of the report observed that in the
case before the Court it was not pleaded that any pressure and undue influence had been
exercised upon the mortgagors. Verma. J referred to the observations of the Viscount Haldane
L.C. in G & C. Kreglinger v. New Patagonla Meat and Cold .Storage Co., (supra) and
Lindley M.R. in Santley v. Wilde, (supra). Sir Tej Bahadur Sapru argued before Verma, J. that
it is not his contention that the mortgagee in this case tried to gain a collateral advantage. His
argument was that a onerous term has been incorporated in the deed which placed such a burden
on the mortgagor as to make it impossible for him to redeem. There is a freedom of contract
between the mortgagor and the mortgagee as observed by Verma, J. at page 207 of the report We
must, however, observe that we live in a changed time. Freedom of contract is permissible

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provided it does not lead to taking advantage of the oppressed or depressed people. The law must
transform itself to the social awareness.

PG NO 848 Poverty should not be unduly permitted to curtail one's right to borrow money on
the ground of justice, equity and good conscience on just terms. If it does, it is bad.
Whether it does or does not, must, however, depend upon the facts and the circumstances of
each case.

20. Reference was also be made to the case of Bhika and Anr. v. Sheikh Amir and Ors., A.I.R.
1923 Nagpur 60 where there was no provision under which power was given to the executant
of the Deed to pay off the amount which was the consideration for the Deed, and no accounts
were to be rendered or required. It was held that relief against an agreement forming a clog on
the equity of redemption can only be obtained if it was challenged within a reasonable time. It
was an equitable relief which cannot be granted as a matter of course. In that decision Sri Vivian
Bose, as the learned counsel appearing for the appellant unsuccessfully sought to obtain relief
against an agreement containing a clog on the equity of redemption.

21. Whether in the facts and the circumstances of these cases, the mortgage transaction amounted
to clog on the equity of redemption, is a mixed question of law and fact. Courts do not look with
favour at any clause or stipulation which clogs equity of redemption. A clog on the equity of
redemption is unjust and unequitable. The principles of English law, as we have noticed from
the decisions referred to hereinbefore which have been accepted by this Court in this country,
looks with disfavour at clogs on the equity of redemption. Section 60 of the Transfer of Property
Act, in India, also recognises the same position.

22. It is a right of the mortgagor on redemption, by reason of the very nature of the mortgage, to
get back the subject of the mortgage and to hold and enjoy as he was entitled to hold and enjoy it
before the mortgage. If he is prevented from doing so or is prevented from redeeming the
mortgage, such prevention is bad in law. If he is so prevented, the equity of redemption is
affected by that whether aptly or not, and it has always been termed as a clog. Such a clog is
inequitable. The law does not countenance it. Bearing the aforesaid back-ground in mind, each
case has to be judged and decided in its own perspective. As has been observed by this Court that
long-term for redemption by itself, is not a clog on equity of redemption. Whether or not in a

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particular transaction there is clog on the equity of redemption, depends primarily upon the
period of redemption, the circumstances under which the mortgage was created, the economic
and financial position of the mortgagor, and his PG NO 849 relationship vis-a-vis him and the
mortgagee, the economic and social conditions in a particular country at a particular point of
time, custom, if any, prevalent in the community or the society in which the transaction takes
place, and the totality of the circumstances under which a mortgage is created, namely,
circumstances of the parties, the time, the situation, the clauses for redemption either for
payment of interest or any other sum, the obligations of the mortgagee to construct or repair
or maintain the mortgaged property in cases of usufructuary mortgage to manage as a matter of
prudent management, these factors must be co-related to each other and viewed in a
comprehensive conspectus in the background of the facts and the circumstances of each case, to
determine whether these are clogs on equity of redemption.

23. These principles have been recognised by this Court in Ganga Dhar v. Shankar Lal (supra). It
has also to be borne in mind that long-term for redemption in respect of immovable properties
was prevalent at a time when things and the Society were, more or less, in a static condition. We
live in changing circumstances. Mortgage is a security of loan. It is an axiomatic principle of life
and law that necessitous men are not free men. A mortgage is essentially and basically a
conveyance in law or an assignment of chattels as a security for the payment of debt or for
discharge of some other obligation for which it is given. The security must, therefore, be
redeemable on the payment or discharge of such debt of obligation. Any provision to the
contrary, notwithstanding, is a clog or fetter on the equity of redemption and, hence, bad and
void. "Once a mortgage must always remain a mortgage", and must not be transformed into a
conveyance or deprivation of the right over the property.

24. This is the English law based on principles of equity. This is the Indian law based on justice,
equity and good conscience. We reiterate that position. Though, long-term by itself as the period
for redemption, is not necessarily a clog on equity but in the changing circumstances of inflation
and phenomenal increase in the prices of real estates, in this age of population-explosion and
consciousness and need for habitat, long-term, very long- term, taken with other relevant factors,
would create a presumption that it is a clog on equity of redemption. If that is the position then
keeping in view the financial and economic conditions of the mortgagor, the clause obliging the

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payment of interest even in case of usufructuary mortgage not periodically but at the time of
ultimate redemption imposing a burden on the mortgagor to redeem, the clauses permitting
construction and reconstruction of the PG NO 850 building in this inflationary age and
debiting the mortgagor with an obligation to pay for the same as an obligation for redemption,
would amount to clog on equity.

25. Section 60 of the Transfer of Property Act, 1882, conferred on the mortgagor the right of
redemption. This is a statutory right. The right of redemption is an incident of a subsisting
mortgage and it subsists so long as the mortgage subsists. See the observations in R. Ghose
"Law of Mortgage" 6th Edn. page 227.

Whether in a particular case there is any clog on the equity of redemption, has to be decided in
view of its background of the particular case. The doctrine of clog on equity of redemption has to
be moulded in the modern conditions. See Mulla: 'Transfer of Property Act', 17th Edn. 402.
Law does not favour any clog on equity of redemption. It is a settled law in England and in
India that a mortgage cannot be made altogether irredeemable or redemption made illusory. The
law must respond and be responsive to the felt and discernible compulsions of
circumstances that would be equitable, fair and just, and unless there is anything to the contrary
in the Statute, Court must take cognisance of that fact and act accordingly. In the context of fast
changing circumstances and economic stability, long-term for redemption makes a mortgage an
illusory mortgage, though not decisive. It should prima facie be an indication as to how clogs on
equity of redemption should be judged.

26. In the facts and the circumstances and in view of the long period for redemption, the
provision for interest (1/2% per annum payable on the principal amount at the end of the long
period, the clause regarding the repairs etc., and the mortgagor's financial condition, all these
suggest that there was clog on equity. The submissions made by Mr. Sachar and Mr. Mehta are,
therefore, unacceptable. In that view of the matter, we are of the opinion that the decision of the
High Court as well as the Courts below that there existed clog on the equity of redemption in
case of these mortgages, is correct and proper, and we hold so accordingly.

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Before we dispose of the contentions on the second aspect, we must deal with some of the
decisions of the Gujarat High Court to which reference had been made and some of which also
referred before us. We have noticed the decision of the PG NO 851 Gujarat High Court in
Khatubai Nathu Sumra v. Rajgo Mulji Nanji and others, (supra). In Maganlal Chhotalal
Chhatrapati and Ors. v. Bhalchandra Chhaganlal Shah, 15 GujaratLaw Reporter 193. P.D.
Desai, J. as the learned Chief Justice then was, held that the doctrine of clog on the equity of
redemption means that no contract between a mortgagor and mortgagee made at the time of the
mortgage and as a part of the mortgage transaction or, in other words, as a part of the loan, would
be valid if it in substance and effect prevents the mortgagor from getting back his property on
payment of what is due on his security. Any such bargain which has that effect is invalid. The
learned Judge reiterated that whether in a particular case long term amounted to a clog on the
equity of redemption had to be decided on the evidence on record which brings out the attending
circumstances or might arise by necessary implication on a combined reading of all the terms of
the mortgage. The learned Judge found that this long term of lease along with the cost of
repairing or reconstruction to be paid at the time of redemption by the mortgagor indicated that
there was clog on equity of redemption. The learned Judge referred to certain observations of Mr.
Justice Macklin of the Bombay High Court where Justice Macklin had observed that anything
which does have the appearance of clogging redemption must be examined critically, and that if
the conditions in the mortgage taken as a whole and added together do create unnecessary
difficulties in the way of redemption it seems that is a greater or less clog upon the equity of
redemption within the ordinary meaning of the term. In our opinion, such observations will
apply with greater force in the present inflationary market. The other decision to which
reference may be made is the decision of the Gujarat High Court in Soni Motiben v. M/s. Hiralal
Lakharnshi, 22 Gujarat Law Reporter 473. This also reiterates the same principle. In Vadilal
Chhaganlal Soni and Others v. Gokaldas Mansukh and Others, A.I.R. 1953 Bombay 408 also,
the same principle was reiterated. In that case, it was held by Gajendragadkar J., as the learned
Chief Justice then was, that the agreement between the mortgagor and mortgagee was that the
mortgagor was to redeem the mortgage 99 years after its execution and the mortgagee was given
full authority to build any structure on the plot mortgaged after spending any amount he liked
It was held that the two terms of the mortgage were so unreasonable and oppressive that these
amounted to clog on the equity of redemption. Similar was the position in the case of Sarjug

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Mahto and other. v. Smt. Devrup Devi and Others A.I.R. l963 Patna 114, where also the
mortgage was for 99 years. In Chhedi Lal v. Babu Nandan's case (supra), the court reiterated
that freedom of contract unless it is vitiated by undue influence or pressure of poverty should be
giver. a PG NO 852 free play. In the inflationary world, long term for redemption would prima
facie raise a presumption of clog on the equity of redemption. See also the observations in
Rashbehary Ghose' 'Law of Mortgage' 6th Edn. pages 227 and 228. Bearing the aforesaid
principles in mind we must analyse the facts involved in these appeals. It has been noticed
in S.L.P. (Civil) No. 8219 of 1982 that the High Court of Gujarat by its order impugned had
dismissed the second appeal. The High Court had merely observed in dismissing the
second appeal that the First Appellate Court had followed the decision of the Gujarat High Court
in Khatubai Nathu Sumra v. Rajgo Mulji Nanji and Others, (supra). We have noted the
salient features of the said decision. The High Court, therefore, found no ground to interfere
with the decision of the First Appellate Court and accordingly dismissed the second appeal. The
First Appellate Court by its judgment disposed of Civil Regular Appeal No. 149 of 1978 and
another civil appeal which was the appeal by the tenant was also disposed of by the said
judgment. The learned Judge of the Appellate Court had referred to the ratio of the
decision in Gangadhar v. Shankerlal (supra). The learned Judge bearing in mind the
principle of the aforesaid decision and the relevant clause of Ext. 103 came to the conclusion that
the clauses amounted to clog on the equity of redemption in the facts of this case. Shri Sachhar
tried to urge before us that on the evidence and the facts in this case having regard to the position
of the parties, the transaction did not amount to clog on the equity of redemption. It was
emphasised by the First Appellate Court that the fact that the son of the mortgagor subsequently
became Civil Judge would not affect the position because what was relevant was the financial
condition at the time of the transaction. We have further to bear in mind that it has come out in
the evidence that the father of the plaintiff was residing in the suit property at the relevant time
and there was no other residential house except the suit property. The First Appellate
Court, therefore, emphasised in our opinion rightly that if there was no pressure from the
creditor, no body would like to mortgage the only house which is sole abode on the earth.

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In that view of the matter and in view of the position in law, we are of the opinion that the First
Appellate Court was right in the view it took.

643. There the term fixed for redemption was of 96 years and there was a stipulation for payment
of interest along-with principal not periodically but only at the time of redemption. In the
instant case before us the mortgagor was required to pay the whole amount of interest at the end
of 99 years which will practically make the redemption impossible. Applying the well-settled
principles which will be applicable to the facts of this case in determining whether there was in
fact a clog on the equity of redemption, we are of the opinion what the First Appellate Court was
right in holding that there was a clog on equity of redemption.

27. In this connection, it will be appropriate here to refer to the position as mentioned in the
Mulla's`Transfer of Property Act', 7th Edn. pages 513 and 514, which is as follows:

"Whether a mortgagee in possession can by reason of clause (a) grant a lease of the mortgaged
property has been considered in several decisions of the Supreme Court. In Mahabir Gope v.
Harbans Narain, (1952 S.C.R. 775, the Supreme court observed that the right conferred under
clause(a) was an exception to the general rule that a person cannot confer a better title on
another than he possesses himself. The Court pointed out that it followed that though a
mortgagee may, if it is prudent, grant leases, these would determine on redemption. The Court
recognised, however, that in some cases the granting of a lease in the course of prudent
management might result in the tenant acquiring rights under other laws so that he could not be
evicted by the mortgagor, but this was an exception, and could not apply where the mortgage
deed prohibits such a lease either expressly, or by necessary implication. These observations
do not appear to have been followed in Harihar Prasad Singh v. Deonarayan Prasad, [1956]
S.C.R. 1 where the Suprerne PG NO 861 Court held that even a lease created by a mortgagee in
possession in the course of prudent management though binding on the mortgagors after
redemption, could not create the rights of a raiyat on the tenants. The question was next
considered in Asa Ram v. Ram Kali, [1958] S.C.R. 986, where the Supreme Court held that the
creation of a lease which would create occupancy rights in favour of the tenants could not be
regarded as a prudent transaction. In Prabhu v. Ramdev, [1966] 3 S.C.R. 676. however, the
Supreme Court without referring to Asa Ram s case held that a tenant of a mortgagee can invoke
the benefit of subsequent Tenancy legislation which provided that such a tenant could not be

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evicted except in the circumstances set out in that legislation. The Court explained Mahabir
Gope's case as being a decision given with reference to the normal relationship of landlord and
tenant. and stressed that the Supreme Court in that case had contemplated an extraordinary
situation arising from a tenant acquiring rights under other laws. The Court explained Harihar
Prasad Singh's case as having been decided on the peculiar facts of the case, viz,. that in that case
the tenants were not entitled under the Local law to invoke the protection of that law. In Film
Corporation Ltd. v. Gyan Nath, [1970] 2 S.C.R. 581 the Supreme Court again considered the
question. The Court did not refer to either Harihar Prasad Singh,s case (supra) or Prabhu v.
Ramdev (supra). The Court observed that the principle laid down in Mahabir Gope's case
(supra) that a bona fide and prudent lease would bind the mortgagor "ordinary'' applies only
to agricultural lands and has "seldom" been extended to urban property. This observation is
strictly speaking, obiter, as the Court found that the lease in question was neither bona fide
nor prudent in view of the long term and the low rent. It is respectfully submitted that there is
no warrant for limiting sec. 76(a) to agricultural land. Whether a particular lease is bona fide or
prudent is a question of fact; obviously a lease of urban land which would confer on the lesson
the protection of special statutes such as the Rent Acts would prima facie be imprudent. In
Sachalmal Parasram v. Ratanbai, [1987] 3 S.C.C. 198, however, the Supreme Court has
repeated the obiter observation in the Film Corporation case (supra) that except in the case of
agricultural land acts of a mortgagee would not bind the mortgagor.

28. Having considered the facts and the circumstances and the ratio of the decision in Jadavji
Purshottam's case (supra), we are clearly of the opinion that the tenancy rights did not come to be
enlarged by the Tenancy Legislation after the tenant was put into possession by the mortgagee
and the tenancy created ia favour of the tenants by the mortgagor did not have the concurrence of
the mortgagor so as to claim tenancy rights even after redemption of the mortgage.

In the premises, the appeals must fail and are dismissed. Civil Miscellaneous Petition in C.A. No.
397/80 must also fail and is dismissed. The parties will pay and bear their own costs.

Appeals dismissed

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 Shri Shivdev Singh & Anr vs Sh.Sucha Singh & Anr

AIR 2000 SC 1935

JUDGMENT: SETHI,J.

1. Claiming to be the owner of the disputed property being land measuring 23 canals 2 marlas
situate in Village Sansra, Tehsil Ajnala, Punjab, the respondent-plaintiff filed a suit for
possession by way of redemption against the appellants in the Court of Additional Senior Sub-
Judge, Ajnala. The suit was decreed by the Trial Court with a direction for delivery of possession
by way of redemption on paying/ depositing the mortgage money of Rs.7,000/- minus the cost of
the decree. The appeal filed by the appellants was dismissed by the First Appellate Court on 25th
July, 1998 and second appeal was dismissed vide the judgment impugned in this appeal.

2. It is contended on behalf of the appellants that the clause prescribing the period of mortgage
did not constitutes a clog on the equity of redemption and that the suit filed before the expiry of
the stipulated time was premature in terms of Section 60 of the Transfer of Property Act. In
support of their contentions the appellants have relied upon the judgment of this Court in
Ganga Dhar vs. Shankar Lal [AIR 1958 SC 770 = 1959 SCR 509] and distinguished the
judgment relied upon by the High Court in the case of Pomal Kanji Govindji & ors.vs. Vrajlal
Karsandas Purohit & Ors. [AIR 1989 SC 436].

3. In order to appreciate the rival contentions, it is necessary to take note of the facts of the case
which have given rise to the filing of the present appeal. The disputed property was owned by
one Prakash Singh who had mortgaged the same in favour of Smt.Basant Kaur for a sum of
Rs.7,000/- vide mortgage deed dated 19.3.1968. The said Smt.Basant kaur died whereafter the
appellants herein stepped into her shoes qua the suit property and, according to the plaintiffs
became mortgagees in possession of the said land. The said Shri Prakash Singh, the original
owner, sold the land measuring 19 kanals 2 marlas out of the mortgaged property in favour of
the respondents Sucha Singh vide registered sale deed dated 25th March, 1987 for a valid
consideration by which the mortgage money of Rs.7,000/- was kept with the respondent-plaintiff

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as security (Amanat) to be paid to the appellants. It was further pleaded by the plaintiff that at the
time of the original mortgage deed dated 19.3.1968 the said Shri Prakash Singh was financially
tight and allegedly taking undue advantage of his poor financial condition and helplessness the
appellants got incorporated a term in the mortgage deed, to the effect that the mortgage was for a
period of 99 years which constituted a clog on the equity of redemption and that the appellants
had been enjoying the usufructs of the mortgage for more than 20 years before the date of the
filing of the suit. Despite the fact that the respondent-plaintiff had purchased only 19 kanals 2
marlas out of the mortgaged land, he offered the whole of the mortgage money to the appellants-
defendant realising that partial redemption was not permissible. The appellants were stated to
have refused to deliver possession which necessitated the filing of the suit. Prakash Singh who
was impleaded as defendant No.3 was proceeded ex-parte. The appellants, though admitted that
the disputed land under mortgage was in their possession on the basis of a mortgage for a sum of
Rs.7,000/- since the year 1968, yet contended that the plaintiffs had no right to get the suit land
redeemed before the expirty of mortgage period of 99 years. The suit was stated to be premature
and liable to be dismissed. On the basis of the pleadings of the parties, the Trial Court
framed the following issues: "1. Whether the disputed land is liable to be redeemed in favour of
the plaintiff as claimed through this Suit? OPP.

2. Whether the period of 99 years of mortgage is a clog on the equity of redemption? OPP.

3. Whether the plaintiff has no locus standi to file this suit? OPD

4. Relief?"

The Trial Court while deciding Issue Nos.1 and 2 held:

4."The clause in the mortgage deed providing for the mortgage of the land for a period of 99
years constitutes a clog on the equity of redemption and as such is illegal and void and the same
cannot be allowed to stand in the way of the plaintiff to get the suit land redeemed or acquire its
possession. The statutory right of redemption cannot be fettered by any condition which impedes
or prevents the redemption clause. This view stands fully fortified from the relevant law laid
down through an authority, 1992(1) All India Land Laws Reporter (P&H) 524, Ajit Singh vs.
Kakhbir Singh and others. As such the argument advanced on behalf of the defendants on this
account must fail. The case of the plaintiff could not be resisted on any other cogent ground."

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5. The plaintiff-respondent was held to have proved that he was entitled to get whole of the
disputed land redeemed by payment of the mortgage money of Rs.7,000/- to the appellants-
defendants. In view of positive findings on Issue Nos.1 and 2 in favour of the plaintiffs, issue
No.3 was decided against the defendants and suit decreed as noticed earlier. The appellate
court also decided on facts that the plaintiff after the purchase of the land, the subject matter of
the suit, had become mortgagor and was entitled to redeem the same prior to the period of 99
years fixed in the mortgage deed. The clog or fetter of redemption imposed in the mortgage deed
was held to be void which did not prevent the plaintiffs to seek redemption of the mortgaged
property prior to the aforesaid period. Section 60 of the Transfer of Property Act provides that at
any time after the money has become due, the mortgagor has a right, on payment or tender, at a
proper time and place of the mortgagor-money to require the mortgagee to deliver the mortgage-
deed and all documents relating to the mortgaged property and where the mortgagee is in
possession of the mortgaged property, to deliver possession thereof to the mortgagor. Such a
right of the mortgagor is called, in English Law, the equity of redemption. The mortgagor being
an owner who has parted with some rights of ownership has a right to get back the mortgage
deed or mortgaged property, in exercise of his right of ownership. The right of redemption
recognised under the Transfer of Property Act is thus a statutory and legal right which cannot be
extinguished by any agreement made at the time of mortgage as part of the mortgage transaction.
This Court in Jayasingh Dnyanu Mhoprekar & Anr. vs. Krishna Babaji Patil & Anr.[AIR
1985 SC 1646] held:

"It is well settled that the right of redemption under a mortgage deed can come to an end only in
a manner known to law. Such extinguishment of the right can take place by a contract between
the parties, by a merger or by a statutory provision which debars the mortgagor from redeeming
the mortgage. A mortgagee who has entered into possession of the mortgaged property under a
mortgage will have to give up possession of the property when a suit for redemption is filed
unless he is able to show that the right of redemption has come to an end or that the suit is
liable to be dismissed on some other valid ground. This flows from the legal principle which is
applicable to all mortgages, namely "Once a mortgage, always a mortgage."

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6. Any provision incorporated in the mortgage deed to prevent or hamper the redemption would
thus be void. A mortgage cannot be made irredeemable and the right of redemption notan
illusory. This Court in Ganga Dhar v. Shankar Lal [AIR 1958 SC 770] held:

"The rule against clogs on the equity of redemption is that, a mortgage shall always be
redeemable and a mortgagor's right to redeem shall neither be taken away nor be limited by any
contract between the parties. The principle behind the rule was expressed by Lindley M.R. in
Santley v. Wilde, (1899) 2 Ch. 474(B) in these words:

"The principle is this: a mortgage is a conveyance of land or an assignment of chattles as a

security for the payment of a debt or the discharge of some other obligation for which it is given.
This is the idea of a mortgage; and the security is redeemable on the payment or discharge of
such debt or obligation, any provision to the contrary notwithstanding. That, in my opinion is the
law. Any provision inserted to prevent redemption on payment or performance of the debt or
obligation for which the security was given is what is meant by a clog or fetter on the equity of
remption and is therefore void. It follows from this, that "once a mortgage always a mortgage."

7. The right of redemption, therefore, cannot be taken away. The court will ignore any contract
the effect of which is to deprive the mortgagor of his right to redeem the mortgage. One thing,
therefore, is clear, namely, that the term in the mortgage contract, that on the failure of the
mortgagor to redeem the mortgage within the specified period of six months the mortgagor will
have no claim over the mortgaged property, and the mortgage deed will be deemed to be a deed
of sale in favour of the mortgagee, cannot be sustained. It plainly takes away altogether, the
mortgagor's right to redeem the mortgage after the specified period. This is not permissible, for
"once a mortgage always a mortgage" and therefore always redeemable. The same result also
follows from S.60 of the Transfer of Property Act. So it was said in Mohammad Sher Kahn v.
Seth Swami Dayal, 49 Ind App. 60 at p.65: (AIR 1922 PC 17 at p.19) (C).

8. An anomalous mortgage enable a morgagee after a lapse of time and in the absence of
redemption to enter and take the rents in satisfaction of the interest would be perfectly valid if it
did not also hinder an existing right to redeem. But it is this that the present mortgage
undoubtedly purports to effect. It is expressly stated to be for five years, and after that period
the principal money became payable. This, under S.60 of the Transfer of Property Act, is the

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event on which the mortgagor had a right on payment of the mortgage money to redeem. The
section is unqualified in its terms, and contains no saving provision as other sections do in favour
of contracts to the contrary. Their Lordships therefore see on sufficient reason for withholding
from the words of the section their full force and effect."

9. It was observed that the rule against clog on equity of redemption empowered the courts to
relieve a party from his bargain. If a person has agreed to forfeit wholly his right to redeem in
certain circumstances, that agreement will be avoided. After referring to judgments in Vernon v.
Bethell, (1762) 2 Eden 110 at 113; 28 ER 838 at p. 839 (D), G & C. Kreglinger v. New
Patagonia Meat and Cold Storage Company Ltd. (1914) AC 25 at pp. 35 & 36) this Court held:

"The reason then justifying the court's power to relieve a mortgagor from the effects of his
bargain is its want of conscience. Putting it in mere familiar language the Court's jurisdiction to
relieve a mortgagor from his bargain depends on whether it was obtained by taking advantage of
any difficulty or embarrassment that he might have been in when he borrowed the moneys on the
mortgage. Was the mortgagor oppressed? Was he imposed upon? If he was, then he may be
entitled to relief.

10. We then have to see if there was anything unconscionable in the agreement that the mortgage
would not be redeemed for eightyfive years. Is it oppressive? Was he forced to agree to it
because of his difficulties? Now this question is essentially one of fact and has to be decided on
the circumstances of each case. It would be wholly unprofitable in enquiring into this question to
examine the large number of reported cases on the subject, for each turns on its own facts."

11. The Court further held that the length of term by itself would not lead to the conclusion that it
was an oppressive term. Restricting their findings on the facts of the case, the Court observed "it
is not necessary for us to go so far as to say that the length of the term of the mortgage can never
by itself show that the bargain was oppressive. We do not desire to say anything on that question
in this case. We think it enough to say that we have nothing here to show that the length of the
term was in any way disadvantageous to the mortgagor".

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12. In Pomal Kanji Govindji & Ors. v. Vrajlal Karsandas Purohit & Ors. [AIR 1989 SC 436]
this Court held that "freedom of contract is permissible provided it does not lead to taking
advantage of the oppressed or depressed people. The law must transform itself to the social
awareness. Poverty should not be unduly permitted to curtail one's right to borrow money on the
ground of justice, equity and good conscience on just terms. If it does, it is bad. Whether it does
or does not, must, however, depend upon the facts and the circumstances of each case". The
doctrine "clog on equity of redemption" was held to be a rule of justice, equity and good
conscience. It must be adopted to the reality of situation and the individuality of transaction. The
court should take note of the time, the condition, the price spiral, the term bargain and the other
obligations in the background of the financial conditions of the parties. After referring to various
judgments of the High Courts in the country this Court held:

"Whether in the facts and the circumstances of these cases, the mortgage transaction amounted
to clog on the equity of redemption, is a mixed question of law and fact. Courts do not look
with favour at any clause or stipulation which clogs equity of redemption. A clog on the equity
of redemption is unjust and unequitable. The principles of English law, as we have noticed from
the decision referred to hereinbefore which have been accepted by this Court in this country,
look with disfavour at clogs on the equity of redemption. Section 60 of the Transfer of Property
Act, in India, also recognises the same position.

13.It is a right of the mortgagor on redemption, by reason of the very nature of the mortgage, to
get back the subject of the mortgage and to hold and enjoy as he was entitled to hold and enjoy it
before the mortgage. If he is prevented from doing so or is prevented from redeeming the
mortgage, such prevention is bad in law. If he is so prevented, the equity of redemption is
affected by that whether aptly or not, and it has always been termed as a clog. Such a clog is
inequitable. The law does not countenance it. Bearing the aforesaid background in mind, each
case has to be judged and decided in its own perspective. As has been observed by this Court that
long term for redemption by itself, is not a clog on equity of redemption. Whether or not in a
particular transaction there is a clog on the equity of redemption, depends primarily upon the
period of redemption, the circumstances under which the mortgage was created, the economic
and financial position of the mortgagor, and his relationship vis-à-vis him and the mortgagee, the
economic and social conditions in a particular country at a particular point of time, custom, if

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any, prevalent in the community or the society in which the transaction takes place, and the
totality of the circumstances under which a mortgage is created, namely, circumstances of the
parties, the time, the situation, the clauses for redemption either for payment of interest or any
other sum, the obligations of the mortgagee to construct or repair or maintain the mortgaged
property in cases of usufructuary mortgage, to manage as a matter of prudent management, these
factors must be correlated to each other and viewed in a comprehensive conspectus in the
background of the facts and the circumstances of each case, to determine whether these are
clogs on equity of redemption."

14. It was further held that Section 60 of the Transfer of Property Act confers on the mortgagor
right of redemption which is a statutory right. The right of redemption is an incident of a
subsisting mortgage and it subsists so long as the mortgage subsists. Whether in a particular case
there is any clog on the equity of redemption, has to be decided in view of the background of a
particular case. The doctrine of clog on equity of redemption has to be moulded in modern
conditions. In this regard the Court held:

"It is a settled law in England and in India that a mortgage cannot be made altogether
irredeemable or redemption made illusory. The law must respond and be responsive to the felt
and discernible compulsions of circumstances that would be equitable, fair and just, and unless
there is anything to the contrary in the statute, law must take congnisance of that fact and act
accordingly. In the context of fast changing circumstances and economic stability, long term for
redemption makes a mortgage an illusory mortgage, though not decisive. It should prima facie be
an indication as to how clogs on equity of redemption should be judged."

15. In the present case all the courts below on facts held that the mortgage deed being for a
period of 99 years was a clog on the equity of redemption. Such findings were returned keeping
in view the facts and circumstances of the case and the financial position under which the
mortgagor Shri Prakash Singh was placed at the time of execution of the mortgage deed on
19.3.1968. The appellants were found to be in an advantageous position qua the mortgagor. They
were also found to be deriving the usufructs of the mortgaged land for a period of over 26 years
at the time of filing of the suit on payment of meager sum of Rs.7,000/- only to the mortgagor.
The findings of the facts returned by the courts below do not require any interference
particularly when the learned counsel appearing for the appellants has not contended that such

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findings were perverse or uncalled for or against the evidence. There is no merit in this appeal
which is accordingly dismissed but without any order as to costs.

******************************************************************************

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 Associated Hotels Of India Ltd vs R. N. Kapoor

1959 AIR 1262, 1960 SCR (1) 368

JUDGMENT:

Appeal by special leave from the judgment and order dated the April 29, 1953, of the Punjab
High Court at Simla in Civil Revision No. 761 of 1951, arising out of the Appellate Order dated
October 6, 1951, of the Court of District Judge, Delhi in Misc. Civil Appeal No. 248 of 1950,
against the order of the Rent Controller, Delhi dated the December 14, 1950. The respondent did
not appear. 1959. May 19.

1. S. K. DAS J.-I have had the advantage and privilege of reading the judgments prepared by my
learned brethren, Sarkar, J., and Subba Rao, J. I agree with my learned brother Subba Rao, J.,
that the deed of May 1, 1949, is a lease and not a licence. I have nothing useful to add to what he
has said on this part of the case of the appellant. On the question of the true scope and effect of s.
2(b) of the Delhi and Ajmer-Merwara Rent Control Act, (19 of 1947) hereinafter called the Rent
Control Act, I have reached the same conclusion as has been reached by my learned brother
Sarkar, J., namely, that the rooms or spaces let out by the' appellant to the respondent in the
Imperial Hotel, New Delhi, were rooms in a hotel within the meaning of s. 2(b) of the Rent
Control Act; therefore that Act did not apply and the respondent was not entitled to ask for the
determination of fair rent under its provisions. The reasons for which I have reached that
conclusion are somewhat different from those of my learned brother, Sarkar J., and it is,
therefore, necessary that I should state the reasons in my own words.

I read first s. 2(b) of the Rent Control Act so far as it is relevant for our purpose:

"S. 2. In this Act, unless there is anything repugnant in the subject or context,-

(a)...............................................

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(b) 'premises' means any building or building which is, or is intended to be, let for use as a
residence or for commercial any other purpose......... but does not include a room in a
dharamshala, hotel or lodging house." The question before us is-what is the meaning of the
expression 'a room in a, hotel? Does it merely mean a room which in a physical sense is within a
building or part of a building used as a hotel; or does it mean something more, that is the room
itself is not' only within a hotel in a physical sense but is let out to serve what are known as 'hotel
purposes'? If a strictly literal construction is adopted, then a room in a hotel or dharamshala or
lodging house means merely that the room is within, and part of, the building which is used as a
hotel, dharamshala or lodging house. There may be a case where the entire building is not used
as a hotel, dharamshala or lodging house, but only a part of it so used. In that event, the hotel,
lodging house or dharamshala will be that part of the building only which is used as such, and
any room therein will be a room in a hotel, dharamshala or lodging house. Rooms outside that
part but in the same building will not be rooms in a hotel, dharamshala or lodging house. Take,
however, a case where the room in question is within that part of the building which is used as a
hotel, dharamshala or lodging house, but the room is let out for a purpose totally unconnected
with that of the hotel, lodging house or dharamshala as the case may be. Will the room still be a
room in a hotel, lodging house or dharamshala? That I take it, is the question which we have to
answer.

2. The word 'hotel' is not defined in the Rent Control Act. It is defined in a cognate Act called the
Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 (Bom. 57 of 47). The
definition there says that a hotel or lodging house means a building or a part of a building where
lodging with or without board or other service is provided for a monetary consideration. I do not
pause here to decide whether that definition should be adopted for the purpose of interpreting s.
2(b) of the rent Control Act. It is sufficient to state that in its ordinary connotation the word
'hotel' means a house for entertaining strangers or travellers: a place where lodging is furnished
to transient guests as well as one where both lodging and food or other amenities are furnished. It
is worthy of note that in a. 2(b) of the Rent Control Act three different words are used 'hotel',
dharamshals' or 'lodging house'. Obviously, the three words do not mean the same establishment.
In the cognate Act, the Bombay Rents Hotel and Lodging House Rates Control Act, 1947,
however, the definition clause gives the same meaning to the words 'hotel' and lodging house'. In
my view s. 2(b) of the Rent Control Act by using two different words distinguishes a hotel from

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a lodging house in some respects and indicates that the former is an establishment where not
merely lodging but some other amenities are provided. It was, however, never questioned that
the Imperial Hotel, New Delhi, is a hotel within the meaning of that word as it is commonly
understood, or even as it is defined in the cognate Act. Passing now from definitions which are
apt not to be uniform, the question is whether the partitioned spaces in the two cloak rooms let
out to the respondent were rooms in that hotel. In a physical sense they were undoubtedly rooms
in that hotel. I am prepared, however to say that a strictly literal construction may not be justified
and the word 'room' in the composite expression 'room in a hotel' must take colour from the
context or the collocation of words in which it has been used; in other words, its meaning should
be determined noscitur a sociis. The reason why I think so may be explained by an illustration.
Suppose there is a big room inside a hotel; in a physical sense it is a room in a hotel, but let us
suppose that it is let out, to take an extreme example, as a timber godown. Will it still be a room
in a hotel, though in a physical sense it is a room of the building which is used as a hotel? I think
it would be doing violence to the context if the expression 'room in a hotel' is interpreted in a
strictly literal sense. On the view which I take a room in a hotel must fulfil two conditions: (1) it
must he part a hotel in the physical sense and (2) its user must be connected with the general
purpose of the hotel of which it is a part. In the case under our consideration the spaces were let
out for carrying on the business of a hair dresser. Such a business I consider to be one of the
amenities which a modern hotel provides. The circumstance that people not resident in the hotel
might also be served by the hair dresser does not alter the position; it is still an amenity for the
residents in the hotel to have a hair dressing saloon within the hotel itself. A modern hotel
provides many' facilities to its residents; some hotels have billiard rooms let out to a private
person where residents of the hotel as also non- residents can play billiards on payment of a
small fee; other hotels provide post office and banking facilities by letting out rooms in the hotel
for that purpose. All these amenties are connected with the hotel business and a barber's shop
within the hotel premises is no exception. These are my reasons for holding that the rooms in
question were rooms in a hotel within the meaning of s. 2

(b) of the Rent Control Act, 1947, and the respondent was not entitled to ask for fixation of fair
or standard rent for the same. 1, therefore, agree with my learned brother Sarkar, J., that the
appeal should be allowed, but in the circumstances of the case there should be no order for costs.

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3. SARKAR J.-The appellant is the proprietor of an hotel called the Imperial Hotel which is
housed in a building on Queensway, New Delhi. R. N. Kapoor, the respondent named above who
is now dead, was the proprietor of 'a business carried on under the name of Madam Janes. Under
an agreement with the appellant, he came to occupy certain spaces in the Ladies' and Gents'
cloak rooms of the Imperial Hotel paying therefore initially at the rate of Rs. 800 and
subsequently Rs. 700, per month.

4. On September 26, 1950, R. N. Kapoor made an application under s. 7(1) of the Delhi and
Ajmere-Merwara Rent Control Act, 1947 (19 of 1947), to the Rent Controller, New Delhi,
alleging that he was a tenant of the spaces in the cloak rooms under the appellant and asking that
standard rent might be fixed in respect of them. The appellant opposed the application,
contending for reasons to be mentioned later, that the Act did not apply and no standard rent
could be fixed. The Rent Controller however rejected the appellant's contention and allowed the
application fixing the standard rent at Rs. 94 per month. On appeal by the appellant,. the,District
Judge of Delhi If set aside the order of the Rent Controller and dismissed the application. R. N.
Kapoor then moved the High Court in revision. The High Court set aside the order of the District
Judge and restored that of the Rent Controller. Hence, this appeal. We are informed that R. N.
Kapoor died pending the present appeal and his legal representatives have been duly brought on
the record. No one has however appeared to oppose the appeal and we have not had the
advantage of the other side of the case placed before us. As earlier stated, the appellant contends
that the Act does not apply to the present case and the Rent Controller bad no jurisdiction to fix a
standard rent. This contention was founded on two grounds which I shall presently state, but
before doing that I wish to refer to a few of the provisions of the Act as that would help to
appreciate the appellant's contention.

5. For the purpose of the present case it may be stated that the object of the Act is to control rents
and evictions. Section 3 says that no tenant shall be liable to pay for occupation of any premises
any sum in excess of the standard rent of these premises. Section 2(d) defines a tenant as a
person who takes on rent any promises. Section 2(b) defines what is a premises within the
meaning of the Act and this definition will have to be set out later because this case largely turns
on that definition. Section 2(c)provides how standard rent in relation to any promises is to be
determined. Section 7 (1) states that if any dispute arises regarding the standard rent payable for

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any premises then it shall be determined by the Court. It is under this section that the application
out of which this appeal arises was made, the Court presumably being the Rent Controller. It is
clear from these provisions of the Act that standard rent can be fixed only in relation to premises
as defined in the Act and only a tenant, that is, the person to whom the premises have been let
out, can ask for the fixing of the standard rent. I now set out the definition of " premises " given
in the Act so far as is material for our purposes:

"premises" means any building or part of a building which is or is intended to be let

separately.............. but does not' include a room in a dharamsala, hotel or lodging house."

6. It is clear from this definition that the Act did not intend to control the rents payable by and
evictions of, persons who take on rent rooms in a dharamsala, hotel or lodging house. The
appellant contends that the spaces are not premises within the Act as they are rooms in a hotel
and so no standard rent could be fixed in respect of them. Thus the first question that arises in
this appeal is the spaces rooms in a hotel within the definition? If they are rooms in a hotel,
clearly no standard rent could be fixed by the Rent Controller in respect of them.

7. The Act does not define a hotel. That word has therefore to be understood in its ordinary
sense. It is clear to me that the Imperial Hotel is a hotel however the word may be understood. It
was never contended in these proceedings that the Imperial Hotel was not a " hotel " within the
Act. Indeed, the Imperial Hotel is one of the best known hotels of New Delhi. It also seems to me
plain that the spaces are "rooms ", for, this again has not been disputed in the Courts below and I
have not found any reason to think that they are not rooms.

8. The language used in the Act is “room in a...... hotel". The word “hotel “here must refer to a
building for a room in a hotel must be a room in a building. That building no doubt must be an
hotel, that is to say, a building in which the business of an hotel is carried on. The language used
in the Act would include an room in the hotel building. That is its plain meaning. Unless there is
good reason to do otherwise, that meaning cannot be departed from. This is the view that the
learned District Judge took. Is there then any reason why the words of the statute should be given
a meaning other than their ordinary meaning? The Rent Controller and the High Court found
several such reasons and these I will now consider.

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9. The learned Rent Controller took the view that a room in an hotel would be a room normally
used for purposes of lodging and not any room in an hotel. He took this view because he thought
that if, for example, there was a three storeyed building, the ground floor of which was used for
shops and the two upper floors for an hotel, it could not have been intended to exclude the entire
building from the operation of the Act, and so the rooms on the ground floor would not have
been rooms in an hotel. I am unable to appreciate how this illustration leads to the conclusion
that a room in an hotel contemplated is a room normally used for lodging. The learned Rent
Controller's reasoning is clearly fallacious. Because in a part of a building there is a hotel, the
entire building does not become a hotel. Under the definition, a part of a building may be a
premises and there is nothing to prevent a part only of a building being a hotel and the rest of it
not being one. In the illustration imagined the ground floor is not a part of the hotel. The
shoprooms in the ground floor cannot for this reason be rooms in a hotel at all. No question of
these rooms being rooms in a hotel normally used for lodging, arises. We see no reason why a
room in a hotel within the Act must be a room normally used for lodging. The Act does not say
so. It would be difficult to say which is a room normally used for lodging for the hotel owner
may use a room in a hotel for any purpose of the hotel, he likes. Again, it would be an unusual
hotel which lets out its lodging rooms; the usual thing is to give licences to boarders to live in
these rooms.

10. I now pass on to the judgment of the High Court. Khosla, J., who delivered the judgment,
thought that a room in a hotel would be within the definition if it was let out to a person to whom
board or other service was also given. It would seem that according to the learned Judge a room
in an hotel within the Act is a room let out to a guest in an hotel, for only a guest bargains for
lodging and food and services in an hotel. But the section does not contain words indicating that
this is the meaning contemplated. In defining a room in a hotel it does not circumscribe the terms
of the letting. 'If this was the intention,' the tenant would be entirely unprotected. Ex hypothesi he
would be outside the protection of the Act. Though he would be for all practical purposes a
boarder in an hotel, the would also be outside the protection of the cognate Act, The Bombay
Rents, Hotels and Lodging House, Rates Control Act, 1947 (Bom. 57 of 1947), which has been
made applicable toDelhi, for that Act deals with lodging rates in an hotel which are entirely
different from rents payable when hotel rooms are let out. A lodger in an hotel is a mere licensee
and not a tenant for " there is involved in the term "lodger" that the man must lodge in the house

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of another "; see Foa on Landlord and Tenant (8th Ed.) p. 9. It could hardly have been intended
to leave a person who is practically a boarder in a hotel in that situation. As I have earlier said, it
would be a most unusual hotel which lets out its rooms to a guest, and the Act could not have
been contemplating such a thing.

Khosla, J., also said that the room in a hotel need not necessarily be a bed room but it must be so
intimately connected with the hotel as to be a part and parcel of it, that it must be a room which
is an essential amenity provided by an hotel e.g., the dining room in an hotel. I am unable to
agree. I do not appreciate why any room in an hotel is not intimately connected with it, by which
apparently is meant, the business of the hotel. The business of the hotel is carried on in the whole
building and therefore in every part of it. It would be difficult to say that one part of the building
is more intimately connected with the hotel business than another. Nor do I see any reason why
the Act should exempt from its protection a part which is intimately connected as it is said, and
which confess I do not understand, and not a part not so intimately connected. I also do not
understand what is meant by saying that a part of an hotel supplies essential amenities. The idea
of essentiality of an amenity is so vague as to be unworkable. This test would introduce great
uncertainty in the working of the Act which could not have been intended. Nor do I see any
reason why the Act should have left out of its protection a room which is an essential amenity of
the hotel and not other rooms in it.

11. Though it is not clear, it may be that Khosla J., was thinking that in order that a room in an
hotel may be within the definition it must be let out for the purposes of the hotel. By this it is
apparently meant that the room must be let out to supply board or give other services to the
guests, to do which are the purposes of an hotel. Again, I find no justification for the view. There
is nothing in the definition about the purposes of the letting out. Nor am I aware that hotel
proprietors are in the habit of letting out portions of the hotel premises to others for supplying
board and services to the guests in the hotels. It may be that an hotel proprietor grants licences to
contractors to use parts of his premises to provide board and services to the guests in the hotel.
This however is a different matter and with such licences we are not concerned. Again, a
proprietor of a different kind of business who lets out a portion of his business premises for the
purposes of his business does not get an exemption from the operation of the Act. I am unable to
see why the proprietor of a hotel business should have special consideration. The Act no doubt

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exempts a room in a hotel but it says nothing about the purposes for which the room must be let
out to get the exemption. Further, not only a room in an hotel is exempted by the definition but at
the same time also a room in a dharamsala. If a room in an hotel within the Act is a room let out
for the purposes of the hotel so must therefore be a room in a dharamsala, It would however be
difficult to see how a room in a dharamsala can be let out for the purposes of the dharamsala for
a dharamsala does not as a rule supply food or give any services, properly so called.

12. Having given the matter my best consideration I have not been able to find any reason why
the words used in the definition should not have their plain meaning given to them. I therefore
come to theconclusion that a room in an hotel within the definition is any room in a building in
the whole of which the business of an hotel is run. So understood, the definition would include
the spaces in the cloak rooms of the Imperiol Hotel with which we are concerned. These spaces
are, in my view, rooms in an hotel and excluded from the operation of the Act. The Rent
Controller had no power to fix any standard rent in respect of them.

13.The appellant also contended that Kapoor was not a tenant of the spaces but only a licensee
and so again the Act did not apply. The question so raised depends on the construction of the
written agreement under which Kapoor came to occupy the spaces and the circumstances of the
case. I do not consider it necessary to express any opinion on this question for this appeal must in
my view be allowed as the spaces are outside the Act being rooms in an hotel. In the result I
would allow the appeal and dismiss the application for fixing standard rent. I do not propose to
make any order for costs.

14. SUBBA RAO J.- I have had the advantage of perusing the judgment of my learned brother,
Sarkar, J., and I regret my inability to agree with him.

15. The facts material to the question raised are in a narrow compass. The appellants, the
Associated Hotels of India Ltd., are the proprietors of Hotel Imperial, New Delhi. The
respondent, R. N. Kapur, since deceased, was in occupation of two rooms described as ladies'
and gentlemen's cloak rooms, and carried on his business as a hair-dresser. He secured
possession of the said rooms under a deed dated May 1, 1949, executed by him and the
appellants. He got into possession of the said rooms, agreeing to pay a sum of Rs. 9,600 a year,
i.e., Rs. 800 per month, but later on, by mutual consent, the annual payment was reduced to Rs.

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8,400, i.e., Rs. 700 per month. On September 26, 1950, the respondent made an application to
the Rent Controller, Delhi, alleging that the rent demanded was excessive and therefore a fair
rent might be fixed under the Delhi and Ajmer-Merwara Rent Control Act, 1947 (19 of 1947),
hereinafter called if the Act. The appellants appeared before the Rent Controller and contended
that the Act had no application to the premises in question at they were premises in a hotel
exempted under s. 2 of the Act from its operation, and also on the ground that under the aforesaid
document the respondent was not a tenant but only a licensee. By order dated October 24, 1950,
the Rent Controller held that the exemption under s. 2 of the Act related only to residential rooms
in a hotel and therefore the Act applied to the premises in question. On appeal the District Judge,
Delhi, came to a contrary conclusion; he was of the view that the rooms in question were rooms
in a hotel within the meaning of s. 2 of the Act and therefore the Act had no application to the
present case. Further on a construction of the said document, he held that the appellants only
permitted the respondent to use the said two rooms in the hotel, and; therefore, the transaction
between the parties was not a lease but a licence. On the basis of the aforesaid two findings, he
came to the conclusion that the Rent Controller had no jurisdiction to fix a fair rent for the
premises. The respondent preferred a revision against the said order of the District Judge to the
High Court of Punjab at Simla, and Khosla, J., held that the said premises were not rooms in a
hotel within the meaning of s. 2 of the Act and that the document executed between the parties
created a lease and not a licence. On those findings, he set aside the decree of the learned District
Judge and restored the order of the Rent Controller. The present appeal was filed in this Court by
special leave granted to the appellants on January 18, 1954.

16.The learned Solicitor-General and Mr. Chatterjee, who followed him, contended that the Rent
Controller had no jurisdiction to fix a fair rent under the Act in regard to the said premises for the
following reasons: (1) The document dated May 1, 1949, created a relationship of licensor and
licensee between the parties and not that of lessor and lessee as held by the High Court; and (2)
the said rooms were rooms in a hotel within the meaning of s. 2 of the Act, and, therefore, they
were exempted from the operation. of the Act. Unfortunately, the legal representative of the
respondent was ex parte and we did not have the advantage of the opposite view being presented
to us. But we have before us the considered judgment of the High Court, which has brought out
all the salient points in favour of the respondent, The first question turns upon the true
construction of the document dated May, 1, 1949, whereunder the respondent was put in

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possession of the said rooms. As the argument turns upon the terms of the said document it will
be convenient to read the relevant portions thereof. The document is described as a deed of
licence and the parties are described as licensor and licensee. The preamble to the document runs
thus :

" Whereas the Licensee approached the Licensor through their constituted, Attorney to permit
the Licensee to allow the use and occupation of space allotted in the Ladies and Gents Cloak
Rooms, at the Hotel Imperial, New Delhi, for the consideration and on terms and conditions as
follows:-"

The following are its terms and conditions:

1. In pursuance of the said agreement, the Licensor hereby grants to the Licensee, Leave and
License to use and occupy the said premises to carry on their business of Hair Dressers from 1st
May, 1949 to 30th April, 1950.

2. That the charges of such use and occupation shall be Rs. 9,600 a year payable in four quarterly
installments i.e., 1st immediately on signing the contract, 2nd on the 1st of August, 1949, 3rd on
the 1st November, 1949 and the 4th on the 1st February, 1950, whether the Licensee occupy the
premises and carry on the business or not.

3. That in the first instance the Licensor shall allow to the Licensee leave and license to use and
occupy the said premises for a period of one year only.

4. That the licensee shall have the opportunity of further extension of the period of license after
the expiry of one year at the option of the licensor on the same terms and conditions but in any
case the licensee shall intimate their desire for an extension at least three months prior to the
expiry of one year from the date of the execution of this DEED.

5. The licensee shall use the premises as at present fitted and keep the same in good condition.
The licensor shall not supply any fitting or fixture more then what exists in the premises for the
present. The licensee will have their power and light meters and will pay for electric charges.

6. That the licensee shall not make any alterations in the premises without the prior consent in
writing from the licensor.

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7. That should the licensee fail to pay the agreed fee to the licensor from the date an d in the
manner as agreed, the licensor shall be at liberty to terminate this DEED without any notice and
without payment of any compensation and shall be entitled to charge interest at 12% per annum
on the amount remaining unpaid.

17.. That in case the licensee for reasons beyond their control are forced to close their business in
Delhi, the licensor agrees that during the remaining period the license shall be transferred to any
person with the consent and approval of the licensor subject to charges so obtained not exceeding
the monthly charge of Rs. 800."

18. The document no doubt uses phraseology appropriate to a licence. But it is the substance of
the agreement that matters and not the form, for otherwise clever drafting can camouflage the
real intention of the parties. What is the substance of this document? Two rooms at the Hotel
Imperial were put in possession of the respondent for the purpose, of carrying on his business as
hair-dresser from May 1, 1949. The term of the document was, in the first instance, for one year,
but it might be renewed. The amount payable for the use and occupation was fixed in a sum of
Rs. 9,600 per annum, payable in four instalments. The respondent was to keep the premises in
good condition; He should pay for power and electricity. He should not make alterations in the
premises without the consent of the appellants. If he did not pay the prescribed amount in the
manner agreed to, he could be evicted therefrom without notice, and he would also be liable to
pay compensation with interest. He could transfer his interest in the document with the consent
of the appellants. The respondent agreed to pay the amount prescribed whether he carried on the
business in the premises or not. Shortly stated, under the document the respondent was given
possession of the two rooms for carrying on his private business on condition that he should pay
the fixed amount to the appellants irrespective of the fact whether he carried on his business in
the premises or not.

19. There is a marked distinction between a lease and a licence. Section 105 of the Transfer of
Property Act defines a lease of immoveable property as a transfer of a right to enjoy such
property made for a certain time in consideration for a price paid or promised. Under s. 108 of
the said Act, the lessee is entitled to be put in possession of the property. A lease is therefore a
transfer of an interest in land. The interest, transferred is called the leasehold interest. The lessor
parts with his right to enjoy the property during the term of the lease, and it follows from it that

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the lessee gets that right to the exclusion of the lessor. Whereas s. 52 of the Indian Easements
Act defines a licence thus:

"Where one person grants to another, or to a definite number of other persons, a right to do or
continue to do in or upon the immoveable property of the grantor, something which would, in the
absence of such right, be unlawful, and such right does not amount to an easement or an interest
in the property, the right is called a licence."

20. Under the aforesaid section, if a document gives only a right to use the property in a
particular way or under certain terms while it remains in possession and control of the owner
thereof, it will be a licence. The legal possession, therefore, continues to be with the owner of the
property, but the licensee is permitted to make use of the premises for a particular purpose'. But
for the permission, his occupation would be unlawful. It does not create in his favour any estate
or interest n the property. There is, therefore, cleat distinction between the two concepts. The
dividing line is clear though sometimes it becomes very thin or even blurred. At one time it was
thought that the test of exclusive possession was infalliable and if a person was given exclusive
possession of a premises, it would conclusively establish that he was a lessee. But there was a
change and the recent trend of judicial opinion is reflected in Errington v. Errington, [1952] 1
All E.R. 149. wherein Lord Denning reviewing the case law on the subject summarizes the result
of his discussion thus at p. 155:

"The result of all these cases is that, although a person who is let into exclusive possession is
prima facie, to be considered to be tenant, nevertheless he will not be held to be so if the
circumstances negative any intention to create a tenancy."

21. The Court of Appeal again in Cobb v. Lane [1952] 1 All E.R. 1199 considered the legal
position and laid down that the intention of the parties was the real test for ascertaining the
character of a document. At p. 1201, Somervell. L. J, stated:

"................ the solution that would seem to have been found is, as one would expect, that it must
depend on the intention of the parties."

Denning, L. J., said much to the same effect at p. 1202:

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"The question in all these cases is one of intention: Did the circumstances and the conduct of the
parties show that all that was intended was that the occupier should have a personal privilege
with no interest in the land?”

The following propositions may, therefore, be taken as well-established: (1) To ascertain whether
a document creates a licence or lease, the substance of the document must be preferred to the
form ; (2) the real test is the intention of the parties-whether they intended to create a lease or a
licence; (3) if the document creates an interest in the property, it is a lease; but, if it only permits
another to make use of the property, of which the legal possession continues with the owner, it is
a licence; and (4) if under the document a party gets exclusive possession of the property, prima
facie, he is considered to be a tenant; but circumstances may be established which negative the
intention to create a lease. Judged by the said tests, it is not possible to hold that the document is
one of licence. Certainly it does not confer only a bare personal privilege on the respondent to
make use of the rooms. It puts him in exclusive possession of them, untrammelled by the control
and free from the directions of the appellants. The covenants are those that are usually found or
expected to be included in a lease deed. The right of the respondent to transfer his interest under
the document, although with the consent of the appellants, is destructive of any theory of licence.
The solitary circumstance that the rooms let out in the present case are situated in a building
wherein a hotel is run cannot make any difference in the character of the holding. The intention
of the parties is clearly manifest, and the clever phraseology used or the ingenuity of the
document- writer hardly conceals the real intent. I, therefore, hold that under the document there
was transfer of a right to enjoy the two rooms, and, therefore, it created a tenancy in favour of the
respondent.

22. The next ground turns upon the construction of the provisions of s. 2 of the Act. Section 2(b)
defines the term " premises and the material portion of it is as follows:

" Premises means any building or part of a building which is, or is intended to be, let separately.

but does not include a room in a, dharmashala, hotel or lodging house."

23. What is the construction of the words “a room in a hotel “? The object of the Act as disclosed
in the preamble is “to provide for the control of rents and evictions and for the lease to
Government of premises upon their becoming vacant, in certain areas in the 49 Provinces of

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Delhi and Ajmer-Merwara". The Act was, therefore, passed to control exorbitant rents of
buildings prevailing in the said States. But s. 2 exempts a room in a hotel from the operation of
the Act. The reason for the exemption may be to encourage running of hotels in the cities, or it
may be for other reasons. Whatever may be the object of the Act, the scope of the exemption
cannot be enlarged so as to limit the operation of the Act. The exemption from the Act is only in
respect of a room in a hotel. The collocation of the words brings out the characteristics of the
exempted room. The room is part of a hotel. It partakes its character and does not cease to be one
after it is let out. It is, therefore, necessary to ascertain the meaning of the word "hotel". The
word “hotel " is not defined in the Act. A hotel in common parlance means a place where a
proprietor makes it his business to furnish food or lodging, or both to travellers or other persons.
A building cannot be run as a hotel unless services necessary for the comfortable stay of lodgers
and boarders are maintained. Services so maintained. vary with the standard of the hotel and the
class of persons to which it caters; but the amenities must have relation to the hotel business.
Provisions for heating or lighting, supply of hot water, sanitary arrangements, sleeping facilities,
and such others are some of the amenities a hotel offers to its constituents. But every amenity
however remote and unconnected with the business of a hotel cannot be described as service in a
hotel. The idea of a hotel can be better clarified by illustration than by definition and by giving
examples of what is a room in a hotel and also what is not a room in a hotel. (1) A owns a
building in a part whereof he runs a hotel but leases out a room to B in the part of the building
not used as hotel; (2) A runs a hotel in the entire building but lets out a room to B for a purpose
unconnected with the hotel business; (3) A runs a hotel in the entire building and lets out a room
to B for carrying on his business different from that of a hotel, though incidentally the inmates of
the hotel take advantage of it because of its proximity; (4) A lets out a room in such a building to
another with an express condition that he should cater only to the needs of the inmates of the
hotel; and (5) A lets out a room in a hotel to a lodger, who can command all the services and
amenities of a hotel. In the first illustration, the room has never been a part of a hotel though it is
part of a building where a hotel is run. In the second, though a room was once part of a hotel, it
ceased to be one, for it has been let out for a non-hotel purpose. In the fifth, it is let out as part of
a hotel, and, therefore, it is definitely a room in a hotel. In the fourth, the room may still continue
as part of the hotel as it is let out to provide an amenity or service connected with the hotel. But
to extend the scope of the words to the third illustration is to obliterate the distinction between a

384 | P a g e
room in a hotel and a room in any other building. If a room in a building, which is not a hotel but
situated near a hotel, is let out to a tenant to carry on his business of a hair-dresser, it is not
exempted from the operation of the Act. But if the argument of the appellants be accepted, if a
similar room in a building, wherein a hotel is situated is let out for a similar purpose, it would be
exempted. In either case, the tenant is put in exclusive possession of the room and he is entitled
to carry on his business without any reference to the activities of the hotel. Can it be said that
there is any reasonable nexus between the business of the tenant and that of the hotel. The only
thing that can be said is that a lodger in a hotel building can step into the saloon to have a shave
or haircut. So too, he can do so in the case of a saloon in the neighbouring house. The tenant is
not bound by the contract to give any preferential treatment to the lodger. He may take his turn
along with others, and when he is served, he is served not in his capacity as a lodger but as one
of the general customers. What is more, under the document the tenant is not even bound to carry
on the business of a hair-dresser. His only liability is to pay the stipulated amount to the landlord.
The room, therefore, for the purpose of the Act, ceases to be a part of the hotel and becomes a
place of business of the respondent. As the rooms in question were not let out as part of a hotel
or for hotel purposes, I must hold that they are' not rooms in a hotel within the meaning of s. 2 of
the Act.

24. In this view, the appellants are not exempted from the operation of the Act. The judgment of
the High Court is correct. The appeal fails and is dismissed.

ORDER In accordance with the opinion of the majority, the appeal is allowed. No order as to
costs.

******************************************************************************

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 Quality Cut Pieces And Etc. vs M. Laxmi And Co.

AIR 1986 Bom 359, 1984 (2) BomCR 788

JUDGMENT V.V. Vaze, J.

1. Summer of 42. The city of Bombay was slowly recovering from the erosion of war economy.
Serpentine queues for essential commodities were seen everywhere. The mighty arch of yellow
basalt hautily thrusting its frame above the promontory lapped by the waters of Bay of Bombay
had witnessed the entry of many an Englishman--Administrators, Governors-General, dashing
blades or humble quill-drivers coming to India to keep Pax Britannica. That very arch was soon
to serve as their exit.

2. A group of seven businessmen drawn from various fields like pharmaceuticals, textiles, tea,
banking and insurance got together and surveyed the Indian economic scene. They had a vision
of a possible cooperation of Indian and foreign entrepreneurs in the field of supply of essential
commodities for civilian consumption something which was very much relegated to the
background by the more pressing need to keep the sinews of war flowing. They envisaged a free-
flow of goods and merchandise once the sea routes became open; took note of the fact that
manufacturers in western countries had at their disposal large departmental chain stores to handle
goods direct from the factory to the consumer and managed country-wide distribution system.
This group regretted the absence of a similar large scale departmental store in India and decided
to remedy the defect and build up a co-ordinated contact between the producer and consumer.
With this object in view, the group incorporated a company "Departmental Service Stores
Limited" ("DSS").

3. The company could not function in view of the prohibition regarding the issue of shares under
Rule 94A of the Defence of India Rules, without the sanction of the Examiner of Capital Issues.
This sanction was granted on 15th Nov. 1943 authorising the company to raise capital of the
value of Rs. 1,62,000/- under certain conditions. The hurdle of the Defence of India Rule was
crossed and capital was raised. Having realised the capital by allotting shares to those who had
applied before 17th May 1943, the company had money but no premises wherein to start the

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contemplated departmental stores. The company was all dressed up but had nowhere to go. On
8th Sept. 1944 the company acquired the house of Messrs. Dinshaw and Company, Colaba,
Causeway, Bombay, from one Behram Rustom Irani, after paying Rs. 47,000/-out of which Rs.
4,000/- were towards the goodwill and the remainder towards the price of goods, electrical
installations, type-writers etc. A store was started in the premises of Dinshaw and Co., for the 10
months ending 30th June 1945, DSS made a modest profit of Rs. 6,485-2-11 Ps.

4. The Examiner of Capital Issues permitted the company to issue further shares of capital of the
value of Rs. 8,30,000/-. The signatories to the Memorandum and Articles of Association, the
Directors, Managing Agents and their friends agreed to take a bulk of the new issue and
remainder was offered for public subscription. Messrs. Begman Traders Ltd. of 41, Bruce Street,
Fort, Bombay, were the Managing Agents of the company and Bagayatkar and Manjrekar of
Bombay were ex-officio Directors nominated by the Managing Agents. The Prospectus issued by
the company inviting subscription from the public, after taking a note of the possible increase in
international trade on account of the opening of free sea routes, announced that the DSS will
inaugurate a new era of "Shop as you please" under one roof and thereby obviate the necessity of
standing in long queues and hunting for different goods and shops situated in far flung localities.
The ambitious prospectus projected a picture of a store where a person can buy all his needs
"from a pin to a piano" and that too with home delivery facilities. Twelve Departments were
enumerated as being the ones which would be immediately opened in the stores and it was
indicated that the DSS would further diversify their activities into thirty more Departments
ranging from motor-cars, engineering goods, type writers, jewellery to flowers. By way of a foot
note DSS promised that departments of refreshments, decoration and art gallery will follow after
a while.

5. Regarding the mechanics of running the stores, the prospectus proclaimed that the DSS shall
bring together manufacturers under one roof and the concept being of cooperation, a selected
group of merchants dealing in various types of merchandise were to be provided with facilities
and accommodation in the store "for the display and sale of their goods, under the supervision
and general management of the company". The promotors felt that this would save the merchants
good deal of overhead charges and exorbitant shop rents.

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6. The projection of the Directors was that the income to the company from the Departments will
be "the commission ranging from 2.1/2% to 15% or more" according to the nature of the
commodities sold, and that many leading merchants in various lines had already expressed their
willingness to avail themselves of this facility. The promoters announced that the DSS enjoyed
the confidence of leading merchants "who had agreed to leave in their control their goods worth
thousands of rupees for display and sale on retail and wholesale basis".

7. The permission granted by the Controller for issue of the balance of the originally issued share
capital of Rs. 10,00,000/-"created a problem of securing suitable premises at a suitable place,
when for love or money even small premises were not available in Bombay". As the report for
the Year ending 30th June, 1946 suggests, the Directors were "fortunate in securing an ideal
structure and land in an ideal locality at Dadar a most central place in Greater Bombay." (After
stating facts in paras 8 to 45, His Lordship proceeded --Ed) 8 to 45. x x x x x x x x x x x Lease or
Licence?

46. The tests to be applied in order to find out whether a particular document operates as a lease
or a licence have been crystallised by the Supreme Court in Sohanlal Naraindas v. Laxmidas
Raghunath, 1971 Mah LJ 604, at p. 607 :

"Intention of the parties to an instrument must be gathered from the terms of the agreement
examined in the light of the surrounding circumstances. The description given by the parties may
be evidence of the intention but is not decisive. Mere use of the words appropriate to the creation
of a lease will not preclude the agreement operating as a licence. A recital that the agreement
does not create a tenancy is also not decisive. The crucial test in each case is whether the
instrument is intended to create or not to create an interest in the property the subject-matter of
the agreement. If it is in fact intended to create an interest in the property it is a lease, if it does
not, it is a licence. In determining whether the agreement creates a lease or a licence the test of
exclusive possession, though not decisive, is of significance. Mrs. M.N. Clubwala v. Fida
Hussain Saheb,

47. During the war and in the post-war period, the freedom of parties to enter into a lease and the
licencee's rights to sublet the premises were seriously curtailed by the various Rent Control Acts.
Section 15 of Bombay Rents, Hotel and Lodging House Rates Control Act, 1947 ("Rent Act")

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puts an embargo on the tenant to sublet, assign or transfer his interest in the premises let out to
him, Hence, the first question that arises for determination is whether the parties could "contract
out" of the provisions of the regulatory legislation pertaining to urban tenancies?

48. In Sheel-Mex and B.P. Ltd. v. Manchester Garages Ltd., (1971) 1 All ER 841 the
plaintiffs were the owners of a petrol filling station. They allowed the defendants to go into
occupations of the premises by an agreement contained in a document called a licence. By the
terms of the agreement, it was expressed to be solely for the purpose of selling the plaintiffs'
brands of motor fuel and the defendants had agreed to promote the sale of the plaintiffs' products.
As differences arose between the parties, the plaintiffs asked the defendants to leave when the
agreement expired upon which the latter claimed that the agreement gave them a tenancy and
they are entitled to protection of the (U.K.) Landlord and Tenant Act, 1954. The defendants
relied heavily on the fact that they were in exclusive possession of the petrol filling station. Lord
Denning dismissed this ground:

"..... counsel for the defendants says that the defendants have exclusive possession, and that that
carries with it a tenancy. That is old law which is now gone. As I have said many times,
exclusive possession is no longer decisive. We have to look at the nature of the transaction to see
whether it is a personal privilege, or not....."

Next the Counsel argued that it would not be permissible for the parties to "get out" of the
Landlord and Tenant Act, 1954. Repelling this argument, Lord Denning said (at p. 844):

"It seems to me that when the parties are making arrangements for a filling station, they can
agree either on a licence or a tenancy. If they agree on a licence, it is easy enough for their
agreement to be put into writing, in which case the licensee has no protection under the Landlord
and Tenant Act, 1954. But, if they agree on a tenancy, and so express it, he is protected. I realise
that this means that the parties can agreeing on a licence, get out of the Act; but so be it; it may
be no bad thing....."

49. The stall-holders in the present batch-appeals have branded the agreements with DSS etc. as
'Sham and bogus'. Such an argument was advanced in Somma v. Hazelhurst, (1978) 2 All ER
1011 where it was urged that in a "Rent Act situation" any permission to occupy the premises
exclusively must be a tenancy and not a licence, unless it comes into the category of hotels,

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hostels, family arrangements or service occupancy of a similar undefined special category.
Dismissing the contention, the Court observed (at p. 1020):

".....We can see no reason why an ordinary landlord not in any of these special categories should
not be able to grant a licence to occupy an ordinary house. If that is what both he and the licensee
intend and if they can frame any written agreement in such a way as to demonstrate that it is not
really an agreement for a lease masquerading as a licence, we can see no reason in law or justice
why they should be prevented from achieving that object. Nor can we see why their common
intentions should be categorised as bogus or unreal or as sham merely on the grounds that the
Court disapproves of the bargain."

The Court approved the observations of Backely LJ in Shell-Mex and B.P. Ltd. v. Manchester
Garages Ltd. case (supra)--

"and it may be that this is a device which has been adopted by the plaintiffs to avoid possible
consequences of the Landlord and Tenant Act, 1954, which would have affected the transaction
being one of landlord and tenant, but in my judgment one cannot take that into account in the
process of construing such a document to find out what the true nature of the transaction is. One
has first to find out what is the true nature of the transaction and then see how the Act operates
on the state of affairs, if it bites at all. One should not approach the problem with a tendency to
attempt to find a tenancy because unless there is a tenancy the case will escape the effects of the
statute."

50. The observations in a New Zealand decision Donald v. Baldwyn, (1953) NZLR 313 at p.
321) were also approved:

"The law will not be hoodwinked by shams: but real and lawful intentions cannot be dismissed
as shams merely because they are disliked. It is a sham to say one thing while really intending
another; but the Court cannot say that a licence is a sham for the reason that the Court thinks the
parties ought to have intended a tenancy.”

51. "Why so large cost, having so short a lease, Dost thou upon thy fading mansion spend?" So
asked Shakespeare in his early Sonnet 146.

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52. DSS had taken the suit property from Ashar for a short lease of 10 years from 1-6-1946 to
31-5-1956. It had only one option of renewal for a further period of 10 years. All the same, in
spite of dwindling finances, DSS constructed a building worth Rs. 1,51,585/-, furnished the same
with furniture and fittings costing Rs. 1,32,768/- and installed electrical fittings worth Rs.
22,641/-. The property purchased by Ashar was an old godown of a mill; will a lessee of Ashar
incur a 'large cost' of Rs. 2,00,000/- upon a 'fading godown' if he was only to sublet the same?

53. Exh. Z-196 dt. 20-6-1952 is a typical agreement which DSS used to enter into with the
merchants. The preamble states that the merchant "Soni Watch Co." in this case, had applied to
DSS "to stock, display and sell his goods through DSS" and that the merchant shall sell the
goods at ruling market rates. DSS shall try to obtain licences and permits, if necessary, in its own
name, but DSS will be free to do business in the same or similar articles in the stores. The
merchant had agreed to deposit by way of guarantee a sum of Rs. 1,000/- for a stall admeasuring
about 120 Sq. ft. which was to bear interest at 3.50 per cent per annum. The merchant was to be
provided by DSS with a stall complete with fittings and furnitures, provide his own cash memo,
maintain a stock book and submit to the DSS monthly statement of accounts on or before the 5th
of the following month. The ownership of the goods was to remain with the merchant. DSS were
entitled to receive a minimum "share, remuneration or commission" at the rate of Rs. 135/- per
stall or Rs. 250/- for two stalls or to "the share, remuneration or commission" at the rate of two
per cent on the gross sale proceeds, exclusive of sales tax, whichever is more. The agreement
was to remain in force for one year from 13-5-1953, but power was given to the Company to
terminate the agreement for breach of the terms. Then follows Clause 34: "The merchant shall
have no right to assign the benefit of this agreement. The merchant is not a tenant of the
Company and on termination of this agreement, he shall have no right to continue in or use of the
premises of the Company".

54. In short, the agreement not only clearly tells the merchant that he is not a tenant of the stall,
but obligates him to send a statement of accounts so that DSS could work out whether they are
entitled to a commission over and above the minimum agreed upon.

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55. On 29-8-1952, some stall-holders wrote to the Collector of Bombay (Exh. Z-157) in
connection with the notices dt. 26-8-1952 issued by the Collector asking the merchants to pay the
dues. The merchants informed the Collector that with the exception of Dr. D.S. Patkar (who is
not one of the defendants), "all are charged commission on the gross sale with a certain
minimum according to the number of stalls or spaces required by the individual merchants for
trading in the department stores." They referred to the fact that prior to 1-5-1952, DSS were
providing all facilities, such as service of the boys, delivery of the goods, collection of daily
sales, maintenance of stock book and accounts, supervision, electricity and all other incidental
expenses for which the merchants were paying higher rate of compensation. As one of the share-
holders, the letter proceeds, has filed a winding up petition as DSS have changed their
management practices, reduced the amount of deposit and the rate of commission. The
merchants expressed fervent hope that the winding up petition will be dismissed, but requested
the Collector to see that essential services like watchmen, electricity, etc. are maintained.

56. The earlier letter (Exh. 31) dt. 8-1-1951, by which the merchants had asked the Collector of
Bombay to hold DSS responsible for the sales tax, has already been discussed. Vide Exhibit 'O'
dt. 21st Oct. 1952, DSS told the Collector that except the case of Dr. Patkar, in whose favour
they had created tenancy and whose premises are distinctly separate, all other persons who are
trading with the DSS are not tenants. DSS charges the merchants certain percentage with a
certain fixed minimum on the gross daily sales by way of Company's commission. The letter
goes on to say that the merchants, who attend the sales, "do so more as the Salesmen of the
Company and not in their capacities as the owners of the goods". None of the merchants have
been allowed to put up sign-boards in his own name. DSS then referred to the case of Mrs. Sarla
Shetty, who was allowed to conduct a tailoring class on leave and licence basis, but has picked
up a quarrel and put up claim for tenancy rights. An attempt was made by DSS to ask Chinubhai
whether the stalls can be let out, so that more money could be realised and the debt paid off more
quickly (Exhibit "R" dt. 30th Oct. 1953). According to Chinubhai he tried to sell this idea to the
mortgagees but the mortgagees did not agree and hence the idea was dropped.

57. The intention of the parties can be gathered from the surrounding circumstances, and so far
as the present case is concerned, it is not one of a stray occupation by a stranger in a room in a
residential house which may give rise to questions as to whether he was only a lodger or a

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boarder or a paying guest or a tenant. This is a case of no less than 47 people taking stalls and
carrying on business for a period of over 22 years. Resultantly the behavioral pattern appearing
on a broad canvas stretching over more than two decades has to be observed. It would make for a
better appreciation of this pattern if the evidence is grouped under various heads.

58. Admittedly, Laxmi lost possession as a result of Court Decree on 19th Nov. 1968 and it has
been urged by the stall-holders that the space that was allotted to them was in their exclusive
possession, inasmuch as, they had put flap doors and for that purpose certain photographs were
produced. The photographs did show an arrangement of a plywood shutter capable of being
locked. It was also canvassed that there were rolling shutters to some stalls which would enure
for a better locking system. But P. W. 6 Mahendra, who was commissioned to fix the rolling
shutters, had admitted that the shutters were fixed after 1968 and thus the fixation of rolling
shutters loses its relevance for the purposes of this appeal which deals with a period prior to 19-
11-1958. It is now more or less an established fact that none of the stalls had a locking
arrangement, for, the space allotted to each merchant was earmarked on two sides by show-cases
placed back-to-back forming the walls and waist high-counters placed in the front across which
the merchants would attend to the customers formed the third side.

59. As the plan of the building shows, the stores (with the exception of Stall No. 6 of Nathani
who is the Appellant in First Appeal No. 648 of 1972, and Stall No. 7 of Ramjivandas who is the
Appellant in First Appeal No. 664 of 1972, to whom I would advert later), was like a fort having
a single collapsible steel gate which controlled the ingress and egress. A second wooden gate
was also provided inside the steel collapsible steel gate for greater security, the space between
the two acting as a passage to the stores flanked by show windows on either sides. While
handing over possession to the mortgagees Shah Brothers, DSS, vide Exhibit 'D' dt. 25th Oct.
1953, talked of giving the keys of the gates. That is to say, once the gate was locked, it was not
possible for anyone to enter the stores.

60. Such was the control of the management, that the merchants had to request Ramniklal on 8th
July, 1954 (Exh. 'Z-61') that "the stores should be kept open continuously from 9.00 am. to 8.00
p.m. without the present break of 12.00 a.m. to 3.00p.m. in order to improve the sales and
remove the inconvenience of finding some shelter between 12.00 a.m. (Sic noon) to 3.00 p.m."

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The management would close the stores at 12.00 noon, ask all the merchants to clear out, lock
the gates and allow them entry only at 3.00 p.m.

61. The timings of the stores became the subject-matter of discussion amongst the merchants and
the management, as would be apparent from the perusal of the bunch of letters (Exh. 'Z-61'
(Colly.)). When the management conceded to the request of keeping the stores open non-stop
without lunch break, some merchants, on 23-7-1954, wrote to Ramniklal that they should revert
to the old timings as they did not get enough business to justify putting in extra work of three
hours. Some complained that as the stores caters to office-goers hardly any one comes between
12.00 noon to 3.00 p.m. while others felt that a good number of customers coming from far off
places such as Virar, Kalyan, would be disappointed to find the stores closed between 12.00
noon and 3.00 p.m. The management had the final say in the matter and they decided on 11th
Dec. 1954 that the old timings should be restored. So complete was the control of Ramniklal
over the timings of the stores that on 1st Dec., 1954 he decided that in view of inauguration of
the Stainless Steel Department at the hands of Ashar the paramount landlord, the stores would be
opened at 8.00 a.m. Similarly, Ramniklal closed the stores at 10.00 p.m. on 26-10-1954 and
asked all the merchants to bring in 'their account books for a joint Pooja at 10.30 p.m.
Deployment of Staff.

62. If DSS, Ramniklal or Laxmi were only interested in acting as landlords, nothing would have
been easier than to open an account in the nearest bank and ask the merchants to credit the
monthly rent in that account. There would have been no need to appoint any staff whatsoever,
not even a bill collector.

But right from the beginning DSS maintained an office in the stores and had a number of
employees such as watchmen, accountants etc. As an exercise in business management, DSS, in
the year ending 30th June, 1948, had engaged extra highly qualified and experienced staff of
accountants and statisticians so that the contingency of accumulating large portion of dead stock
did not occur.

63. It appears that Chinubhai used to incur expenditure of about Rs. 5,000/- to Rs. 6,000/-per
annum in inserting advertisements of the stores as a whole. (Exh. 'Z-60') ('Z-80'). Whenever the
stall holders desired that their names should be specificaly mentioned in the advertisements,

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Ramniklal used to comply, provided the particular stall-holder bore half the expenses. For
instance, Soni Watch Company (vide letter -- Exh. 'Z-73') wrote on 11th Nov. 1955 informing
Ramniklal that an expense of Rs. 243-4-0 had been incurred by them in exhibiting cinema slides
at 'Chitra', 'Rivoli' and 'Broadway' of Dadar, and claimed reimbursment of half the cost totalling
to Rs. 121-10-0. Another stall-holder Gujar and Company also desired to boost up the sale of
Samson Dresses. They intended to have an advertisement campaign which would cost him Rs.
60/- and requested Ramniklal to contribute his share of Rs. 30/-. Ramniklal was issuing calendars
showing the name of the stores, but one Karamshi Monshi, holder of stall No. 26, desired that
500 calendars should bear his name as well and by a letter (Exh. 'Z-70') dated 3rd Sept. 1956,
agreed to bear expenses for the same.

The Merchants' Association by their Resolution dt. 12-1-1957 decided that the Executive
Committee of their Association should discuss with the management a successful campaign of
advertisement and that the facade of the stores should be given a face lift. The management, vide
their letter dt. 25th March, 1956 (Exh, "Z-60") agreed to share 50/o of the expenses and invited
suggestions and proposals for the construction of the front gate.

64. It appears that the management gifted a telephone locking device to the customers as a part of
their advertising campaign.

65. The acknowledged leader of the stallholders Soni, had admitted that the management-used to
decorate the stores on festive occasions.

66. In order to promote sales, the management had announced a 61/4% rebate on 15th Aug. 1957
to customers and the same was shared by the management. Next year, the merchants again
requested the management on 18-7-1958 (Exh. 'Z-60') (Colly.) that a rebate of 6% should be
allowed to the customers and half the burden of 3% should be borne by the management.

67. It appears that in spite of advertisement campaign, and all other steps taken by the
management, the sales of the stalls did not pick up appreciably. A circular was issued by
Ramniklal (Exh. 'Z-63') on 3-12-1954 convening a meeting of the stall-holders with a view to
giving rebate in the minimum commission. Ramniklal made it clear that the rebate in the
commission will be granted only to those merchants who have no outstanding and who would
give an undertaking "to remain in the stores for the next six months". Ultimately, a rebate of 10%

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was granted but the circulars issued from time to time (Exh. "Z-63") (Colly.) show that the
merchants were in arrears not only in the payment of their minimum commission, but also
electric charges. The management also offered a heavy reduction in the minimum commission
when the stores was closed for about 10 days during the agitation consequent upon the report of
the States Re-organisation Commission.

68. The merchants used to submit sales statements from time to time ('Exh. "Z-86 to "Z-107")
and the recalcitrants amongst them were reminded to submit statements.

69. By a letter (Exh. "Z-64") dt. 2nd Aug. 1956, Soni requested permission from Ramniklal to
change the merchandise in which they were dealing till that date, but the management advised
him to stock latest popular records of H.M.V. but did not permit him to deal in watches.

70. One of the tests proposed by Lord Denning M. R. in Marchant v. Charters, (1977) 3 All ER
918 at p. 922 is "Was it intended that the occupier should have a stake in the room or did he have
only permission for himself personally to occupy the room, whether under a contract or not?"
Right from the beginning it was the management of the stores which had a stake not only in the
various stalls which they had furnished but also in the sales of stallholders who were given
permission to occupy the same. Some of the stall-holders like Paradkar (Exh. "Z-74 dt. 4th Oct.
1956) who could not boost their sales, surrendered their stalls because even the minimum
commission was rather too heavy for them to pay. The advertisement compaign was geared to
increase the sales of the stall-holders so that the management could augment their share of the
commission on the gross sales figures. It was not the stall-holders who had the stake in the stalls
but the management who had a stake not only in the stalls and the entire buildings, but also in the
total sales so that they could claim higher commission. The interest of the stall-holders was not
assignable and every time a new stall-holder was inducted, he was given a fresh permission by
the management.

71. The sapling of a departmental stores nursed under the long shadows of Macy's and Harrod's
did not take roots let alone burgeoing in Dadar soil. The Dadar housewife was accustomed to
visit a row of shop-fronts displaying sarees when she wanted to buy a saree and was not mentally
attuned to visit a conglomeration of shops selling anything from a pin to a piano. (A white

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collared Dadarite anyway preferred to do his Sunday morning riyaz squatting on the floor with
his good old harmonium!).

72. Most of the stall-holders did not do well with the result that the management had to content
itself with the minimum commission. But Century Mills, who had a stall, showed better
performance and paid the percentage of commission calculated on the basis of sales which was
higher than the minimum agreed upon. After their initial period was over, fresh negotiations
were started with Century and a fresh permission granted to them under different terms.

73. All the licenced agreements with the stall-holders came to an end on 31-12-1965 and the
surprising feature of this case is that right from 1946 till this date, not a single assertion was
made by the stall-holders that they are tenants. On 1-1-1966, notices of revocation (Exh. "Z-
168") (Colly.) were issued by Laxmi whereafter for the first time' on 10-1-1966, the stall-holders
claimed to be tenants and thus filed the first salvo in this battle. Within a month, they filed suits
on 9-2-1966 (Exh. "Z-201") in the Small Causes Court for obtaining a declaration that they are
the tenants. This long acquiescence of the stallholders lends credence to the case of the plaintiffs
that the stall-holders were merely licensees.

74. The surrounding circumstances marshalled above like want of facility to independently lock
the stalls, the inability of the stall-holders to enter into the building or the stores at will, the
requirement of having to seek permission of the management to change the hours of business or
effect a change of merchandise, non-assignability of interest in the stalls, repeated recognition of
the agreements to pay a fixed percentage of commission subject to a minimum with DSS,
Ramniklal and Laxmi, the sale promotion campaigns lodged by DSS, Ramniklal and Laxmi, the
correspondence of the stall-holders with the fiscal authorities reiterating the commission
agreements, the deployment of staff like watchmen; accountants, statisticians by the management
to monitor the sales, want of a single protest by the stall-holders till 10-1-1966 asserting rights of
tenancy, submission of sales statements by the stall-holders to the management and payment of
commission on the turnover higher than the minimum by Century Mills' stall, unequivocally
point out that all of them, with the exception of stall No. 6 of Nathani and Stall No. 7 of
Ramjeevandas were merely licensees for reward.

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75. The cases of Nathani and Ramjeevandas stand on different footing. It is not the case of
Laxmi or their predecessors in interest that they have never given any premises in the stores on
rent. Admittedly, Dr. Patkar who runs a maternity home and others were tenants. Though
exclusive possession alone and by itself is not the acid test of determination whether the
relationship between the parties is that of tenancy or licence, it assumes importance in the cases
of Nathani and Ramjeevandas. Both these stalls are facing the road and the stall-holders have not
to enter the collapsible gate at all to reach and open their stalls. Surely, these stalls facing the
road could not be kept open as was the practice with the stalls inside the main gate. The
exclusive possession in their case coupled with the fact that there are other persons who are
recognised to be the tenants in the building of the stores, is a pointer to the fact Laxmi have
failed to prove that Nathani and Ramjeevandas are mere licensees.

76. A feeble attempt has been made by the defendants-stall-holders to challenge the title of
Laxmi to the suit premises and this has been countered by Laxmi pleading that the stall-holders
are estopped from doing so. As, neither Ashar, nor DSS, nor Shah Brothers, nor Ramniklal are
parties to the present proceedings, and as the suits are simple money suits it is obvious that no
final adjudication can be made regarding the question of title of Laxmi to the suit premises in
these proceedings. That belongs to this Court on its Original Side where a title suit is pending.
Under the first lease Exh. "1", dt. 5th July, 1948, DSS, the Lessees, had acquired an interest in
the premises for a term of 10 years computed from 1st June 1946 to 31st May 1956 with an
option of one renewal. This option was exercised both by DSS and by Ramniklal. This position
was accepted by Ashar in Exhibits "Z-173' and "Z-58". In Exhibit "Z-186" dt. 6th Sept. 1955
Mulla have referred to the letters dt. 1st and 2nd Aug. 1955 by which Ramniklal had purported to
exercise option for the renewal of the lease. It is another matter that Mulla pointed out that rent
has not been paid regularly at the rate of Rs. 100/-per month. On 6th Sept. 1960 that is much
after the first period of 10 years was over, the Solicitors of Ashar accused DSS of having
committed breaches of certain covenents of the lease and purported to terminate the same.

77. On 31st May 1956 the 20 year period under the original Lease Deed expired. Admittedly, a
registered Conveyance for the second 10 year period was not executed, but the exchange of
letters, as respects the renewal, would be admissible under the Proviso to Section 49 of the
Registration Act for a collateral purpose of showing the nature and character of possession of

398 | P a g e
Laxmi. Satish Chand Nakhan v. Govardhan Das Byas, . As Laxmi held over and continued in
possession by paying rent, the holding over must be held as a tenancy from month to month. The
rent was being received from Ramniklal but the receipts were being given in the name of DSS.

78. The possession of Ramniklal and Laxmi was a juridical one and Ramniklal and Laxmi being
persons in juridical possession of the premises, had entered into a contract of licence permitting
the stall-owners to use the premises for display and sale of their goods in return for a commission
computed on the basis of an agreed percentage of the gross sales.

79. Even before coming into force of the Indian Evidence Act, 1872, this High Court has been
following the principle of tenant estoppel. In Vasudev Daji v. Babaji Ranu, (1871) 8 Bom HCR
175, the Court held that a tenant cannot ordinarily dispute the title of his landlord in a suit
brought against him for recovery of possession if the existence of a tenancy is established by the
fact of the tenant's payment of rent to his landlord or otherwise. After the coming into force of
the Indian Evidence Act which, in Section 116, incorporated the principle of estoppel of tenant,
the Privy Council, in Kumar Raj Krishna Prosad Lal v. Baraboni Coal Concern Ltd. , held that
Section 116 does not deal with all kinds of estoppel or occasions of estoppel which might arise
between the landlord and the tenant.

80. Though Laxmi had exercised its right of renewal and the paramount landlord Ashar had
agreed to grant the request, the conveyance was not registered as was contemplated by the
original lease deed. Counsel for the Appellants argued that in the absence of a registered deed,
the purported renewal for a fresh period of 10 years is ineffective and neither Ramniklal nor
Laxmi could act as landlords and induct the appellants into the premises either as tenants or as
licensees. As observed earlier, the principle of tenant estoppel is wider than that governed by the
ambit of Section 116 of the Evidence Act and the absence of a registered lease deed for the
renewed period would make no difference as regards the bar of estoppel against the appellants.
In Industrial Properties (Barton Hill) Ltd. v. Associated Electrical Industries Ltd., (1977) 1 QB
580 (CA) though the purchase price was paid pursuant to an agreement to sell the freehold of an
industrial estate, no conveyance of the property was made in order to save stamp duty and the
premises were leased out to A.E.I. The landlord filed a suit claiming damages against A.E.I. for
breach of covenant to repair the premises and the lessees who by then had discovered the defect
in the title of the landlord, challenged the maintainability of the suit for damages. Holding that

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the landlords have become equitable owners of the premises, the Court found that the tenants are
estopped from challenging the landlords' equitable title, and that this rule of estoppel continued
to operate after the expiry of the lease unless, after the termination of the lessee's possession a
claim was made against him by a title paramount in respect of some part of the period of the
lease. When a valid contract of tenancy had been created between the parties, the tenant would
be estopped under the contract even though it might be that some other person, for example, the
reminderman or a mortgagee might be able to assert some title paramount against the tenant who
had been given, as between himself and his landlord, a perfectly valid tenancy. Stratford v.
Syrett, (1958) 1 QB 107. Consequently it is obvious that the stallholders having been inducted
into the premises by Laxmi the equitable owners -- are estopped from challenging its title.

81. Two minor points remained to be discussed. The first was regarding the maintainability of
the suit for which an argument was advanced that as minors who earlier were admitted to the
benefits of partnership of the plaintiff firm have since become partners, a new partnership has
been formed while the certificate (Exh. "B") showing the entry in the register of firms deals with
the old partnership. The learned trial Judge, after relying on the case of Bhogilal Laherchand v.
Commr. of Income-tax, , has rightly held that the old partnership continued when a minor son
attaining majority elects to continue as a partner.

Secondly, it was argued that in view of Section 15 of the Bombay Rent Act, the plaintiffs could
not acquire any right, title and interest in the premises. The learned trial Judge, after taking note
of the fact that Section 15 operates "subject to any contract to the contrary" has correctly
dismissed this objection holding that the initial lease being Exh. 1 itself permitted transfer
absolutely or by way of mortgage or sub-lease and also subsequent to such transfer.

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400 | P a g e
 Capt. B.V.D Souza vs Antonio Fausto Fernandes

AIR 1989 SCR (3) 626

JUDGMENT:

1. The Judgment of the Court was delivered by SHARMA, J. The only point involved in this
appeal is whether the document (Ext. 20) executed by the parties at the time the appellant was
inducted in the disputed premises is an agreement of leave and licence or a deed of lease. The
building belongs to the respondent, and the appellant claims to be in its occupation as a month to
month tenant. The respondent instituted the suit in the civil court, out of which this appeal by
special leave arises, for a decree for eviction of the appellant alleging that he has been in
occupation of the building as a licensee and has illegally refused to vacate in spite of service of
notice. The appellant's defence is that he is a tenant protected by the provisions of the Goa,
Daman and Diu Buildings (Lease, Rent and Eviction) Control Act, 1968, and in view of s. 56
there- of the suit in the civil court is not maintainable. Agreeing with the plaintiff-respondent, the
trial court passed a decree which was confirmed on appeal by the District Judge. The High Court
dismissed the second appeal filed by the appellant observing that it was concluded by concurrent
findings of fact.

2. We do not agree with the High Court that the findings of the courts below were those of fact
so as to be binding on the High Court under s. 100 of the Code of Civil Proce- dure. The case has
to be decided on the nature of possession of appellant which is dependent on a correct
interpretation of the document Ext. 20.

3. The document Ext. 20 has been described as an agreement of leave and licence and the parties
as the Licensor and the Licensee. But it is significant to note that in the very first sentence of the
document the respondent is described as "Landlord hereinafter called the Licensor". However,
this cannot answer the disputed issue as it is firmly established that for ascertaining whether a
document creates a licence or lease, the substance of the document must be preferred to the form.
As was observed by this Court in Associated Hotels of India Ltd. v .R.N. Kapoor, [1960] 1
SCR 368, the real test is the intention of the parties--whether they intended to create a lease or

401 | P a g e
licence. If an interest in the property is created by the deed it is a lease but if the document only
permits another person to make use of the property "of which the legal possession continues with
the owner", it is a licence. If the party in whose favour the document is executed gets exclusive
possession of the property, prima facie he must be considered to be a tenant; although this factor
by it self will not be decisive. Judged in this light, there does not appear to be any scope for
interpret- ing Ext. 20 as an agreement of leave and licence.

4. The document has been placed before us by the learned counsel for the appellant. Although as
stated earlier, it has been described as an agreement of leave and licence and the parties as the
"Licensor" and the "Licensee", its provi- sions unmistakably indicate that the,appellant was
being let in as a tenant on the monthly rental of Rs.350 (besides water and electricity charges) to
be paid regularly on or before the 5th day of each consecutive month. By clause 5, it was agreed
that the appellant "shall not sub-let, under- let or part possession of the premises to any stranger
nor shall he keep the premises vacant for more than 3 months without the consent of the
Licensor", that is, the respondent. The question of executing a sub-lease or subletting can arise
only by a tenant. If a licensee inducts any person in the property as his tenant, it cannot be
described as sub- letting. In clause 15 it is stated that on the expiry of the period, the deed "shall
be renewable thereafter at the will of the licensee"; and in the event of the licensee not desiring to
renew, "shall give one month's notice in writ- ing". These terms are not consistent with the
respondent's case of licence, and indicate that an interest in the property was created in favour of
the appellant in pursuance of which he was put in possession with a right of renewal. When
compared with the terms of the documents set out in the judgments in Associated Hotels of
India Ltd. v. R.N. Kapoor, [1960] 1 SCR 368 and Sohan Lal Naraindas v. Laxmidas
Raghunath Gadit, [1971] 3 SCR 319, relied upon by the learned counsel for the appellant,
which were construed by this Court as creating lease inspite of their description as licence deeds,
the appellant's case stands out as stronger. If the approach adopted by the courts below in
interpreting the document is accepted, it shall defeat the object of the Rent Acts, by permitting
the parties to camouflage the real nature of the transaction by resorting to skilful drafting.

5. Mr. Dholakia, learned counsel for the respondent, streneously, contended that the test of
exclusive possession is an out dated one which should not now be taken into account for the
purpose of deciding the nature of posses- sion. Reliance was placed on the observations of Lord

402 | P a g e
Denning MR in Shell-Mex and BP Ltd. v. Manchester Garages Ltd., [1971] 1 All E.R. 841. We
do not agree that exclusive pos- session of a party is irrelevant as is suggested; but at the same
time as has been observed in the earlier cases of this Court, referredto above, it is not conclusive.
The other tests, namely, intention of the parties and whether the document creates any interest in
the property or not, are important considerations. The observations in the English case, relied
upon by the learned counsel for the respondent cannot be understood to suggest that the test of
exclusive possession has been now rendered irrelevant and redundant as they are immediately
followed by the statement;

"As I have said manytimes, exclusive posses- sion is no longer decisive."

The position stands further clarified by the following statement in the concurring judgment of
Buckley, L J,; "The only clause which points one way or the other, I think, is cl. 19 in Sch. 1
which Lord Denning MR has already read, which clearly recognises that notwithstanding the
bargain between the parties, the plaintiffs retained rights of possession and control over the
property in question. That seems to me to be consistent only with the fact that this trans- action
was in truth a licence transaction and not a tenancy under which the defendants would obtain
an exclusive right to possession of the property during the term of the tenancy, subject, of course,
to any rights reserved by the plaintiffs."

We are also not in a position to agree with Mr. Dholakia when he says that if the parties
themselves have chosen to describe the transaction as a licence, we cannot make out a different
case for them. It is well settled that the main purpose of enacting the Rent statutes is to protect
the tenant from the exploitation of the landlord, who being in the dominating position is capable
of dictating his terms at the inception of the tenancy; and, the Rent Acts must receive that
interpretation which may advance the object and suppress the mischief. By adopting a different
approach the Rent laws are likely to be defeated altogether.

6. The surrounding circumstances are also consistent with the deed being one of lease. The
notice to vacate the premises was served on the appellant after several years of expiry of the term
of the agreement. It is not suggested on behalf of the respondent that there is any relationship
between the parties or that they were friends which induced him to allow the appellant to occupy
the building. Realisa- tion of rent which has been described in the document (Ext. 20) as

403 | P a g e
"compensation reserved for use and occupation" was the sole consideration of the transaction. In
this back- ground the description of the parties as lessor and lessee or the rent as compensation
does not carry much weight.

7. For the reasons mentioned above, we hold that Ext. 20 was in reality a document of lease
and the appellant has been enjoying the exclusive possession thereof in the capac- ity of month to
month tenant. As a result the suit was, in view of the provisions of the Goa, Daman and Diu
Buildings (Lease, Rent and Eviction) Control Act, not maintainable. The appeal is accordingly
allowed but without costs, the decree passed by the courts below is set aside and theb suit is
dismissed.

Appeal allowed.

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 Tila Bewa vs Mana Bewa

AIR 1962 Ori 130

JUDGMENT S. Barman, J.

1. The plaintiff is the appellant, in this second appeal, from a decision of the learned Subordinate
Judge of Cuttack, whereby he allowed in part, an appeal from the decision or the learned Munsif,
Cuttack and decreed the plaintiff's suit with certain conditions.

2. The plaintiff is the daughter-in-law of the defendant, as appears from a short genealogical
table set out below-

Mana Bawa | First Wife=Natbar (dead)=Tila Bewa (Plaintiff)

3. On May 10, 1951, the defendant mother-in-law gifted away the suit lands in favour of the
plaintiff daughter-in-law, by a registered deed of gift (Ext. 1). Until 1953, the plaintiff remained
in possession of the suit lands and lived with her husband Natabar who died in 1953, After
Natabar's death, the plaintiff lived with the defendant mother-in-law till 1954. In 1954, the
plaintiff having been neglected by the mother-in-law she (plaintiff) left for her father's house.
Thereafter the plaintiff a applied for mutation in respect of the suit lands. On May 31, 1954 the
defendant mother-in-law executed a deed of cancellation of the gift deed (Ext. A). Thereafter on
September 19, 1954, this suit was filed by the plaintiff for declaration of title and possession in
respect of the suit lands. The defendant mother-in-law's defence,--as taken in the suit, shortly
stated--is this; her son Natabar's first wife, after marriage, did not come to live with him.
Thereafter the defendant got her son married to plaintiff; during the marriage negotiations, the
defendant executed the deed of gift, in order to induce the plaintiff to come and live with her son;
that the deed off gift was not acted upon; that it was a conditional gift to the plaintiff on
condition that the plaintiff will maintain the defendant; the plaintiff having failed to maintain the
defendant, she (defendant),--according to her,--is entitled to revoke the deed of gift and
accordingly she cancelled the deed of gift by Ext. A : further that the plaintiff having re-married,
she is not entitled to the property under the deed of gift.

4. The trial Court found that the gift was genuine and valid; that the gift was accepted by the
plaintiff through her husband who then was alive; that she was entitled to the suit lands, even

405 | P a g e
after the plaintiff's remarriage; and accordingly the suit was decreed in favour of the plaintiff. In
appeal the learned lower appellate Court found that there was no clause for revocation of the gift
under any contingency; that the (plaintiff carried on the Seva of the defendant till her husband's
death; that the plaintiff had remarreid; that there was no fraud, coercion, undue influence, misake
or mis-representation in executing the deed of gift in favour of the plaintiff; the defendant
accepted the terms of the gift; that the defendant knew fully well the terms when executing the
deed; that the transaction, was not a nominal nor make-believe; in fact it was acted upon; that the
deed of gift cannot thus be revoked; that the plaintiffs title to the suit property as property gifted
to her by the defendant, was declared with the condition that the defendant mother-in-law will
remain in possession till her death; and accordingly the suit was decreed in favour of the plaintiff
declaring the title in her favour but she will get (sic) possession during the life-time of the
defendant. From this decision of the learned lower appellate Court this Second appeal has been
filed by the plaintiff as the appellant. A cross-appeal was also filed by the defendant mother-in-
law on the ground that the deed of gift was not valid because of undue influence, fraud and
coercion.

5. The points, urged on behalf of the plaintiff appellant, were that the document having been
registered and attested as required under Section 123 of the Transfer of Property Act, the gift
became complete; that it cannot be revoked unless there is an agreement between the donor and
the donee that on the happening of a specified event which does not depend on the will of the
donor of the gift, it shall be suspended or revoked as provided in Section 126 of the Transfer of
Property Act. On a plain reading of the document itself, it does not provide that the defendant
mother-in-law was to remain in possession of the gifted lands during her life-time.

6. The well settled legal position, based on authorities, is that a gift, subject to the condition that
the donee should maintain the donor, cannot be revoked under Section 126 of the Transfer of
Property Act for failure of the donee to maintain the donor, firstly for the reason that there is no
agreement between the parties that the gift could be either suspended or revoked; and secondly,
this should not depend on the will of the donor; again, the failure of the donee to maintain the
donor as undertaken by her in the document is not a contingency which should defeat the gift; all
that could be said is that the default of the donee in that behalf amounts to want of
consideration; Section 126 thus provides against the revocation of a document of gift for failure

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of consideration; if the donee does not maintain the donor as agreed to by the donee, the latter
(donor) could take proper steps to recover maintenance; it is not open to a settler to revoke a
settlement at his will and pleasure and he has got to get it set aside in a court of law by putting
forward such pleas as bear on the invalidity of a deed of gift. Under Section 122 the Transfer of
Property Act, a gift is complete when it is accepted by or on behalf of the donee; where there is
evidence that the gift of property by a person to his wife and children was accepted by the
donees, the fact,--that the donor, who had no other property,--stayed on the property, even after
the gift,--does not show that the gift had not taken effect; where no right in the property is
reserved in the donor, the fact that there is a clause in the deed (as in the present case) that the
donee should maintain the donor, does not show that the donor continued to be the beneficial
owner; a direction in a gift deed that the donee should maintain the donor till his death will not
make the gift a conditional one; if the terms of the gift deed were ,that there had been an absolute
transfer of the property in favour of the donee, such a direction for maintenance shall be regarded
only as an expression of pious wish on the part of the donor.

On the aspect of such pious wishes, the legal position is that where a gift deed, after the operative
portion of the deed, provided that the donee was to render services to the donor and to meet the
donor's funeral expenses, such directions are only pious wishes and do not give any right to the
donor to revoke the gift if the conditions are not observed; when, therefore, there is an out and
out transfer, followed by a direction to the donee to maintain the donor, the latter direction is
only a pious wish; on the other hand if the gift deed starts with a statement that it is made with
the object of providing for maintenance of the donor, and this statement is followed by the
operative clause,--there can be no doubt that the gift is subject ,to the liability to maintain the
donor.

7. This leads me to the construction of the deed of gift, in the present case, in the light of the
legal position as stated above. On a plain reading of the document, it is clear that the defendant
donor makes a complete gift of the suit lands in the operative portion of the document, making
the plaintiff full owner in possession from the date thereof "Aja dina tharu sampuma malik
dakhalkar karai'' (in vernacular); it is after making the plaintiff full owner, in respect of the suit
lands, that the defendant expresses her pious wish later on in the document to the effect that the
plaintiff would render to the defendant "Sebadharma and Bharan Poshan," that is to say, to

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render to the defendant services and maintain her during her lifetime and she further expressed a
wish that after her death the plaintiff would perform her funeral rites; then the document ends, by
providing that the defendant or her heirs will not have. In any way any right to the suit lands and
if they claim any right then on the strength of this document such claim will be invalid in law
courts; the only condition attached to the gift as stated in the last sentence is that the plaintiff will
not be able to sell or mortgage without the consent of her husband (plaintiff's husband), and that
the plaintiff will not alienate the suit lands by sale or mortgage etc. during the lifetime of the
defendant, and that if she does so, it will be invalid; thus, reading the document as a whole, it is
clear that it was an out and out gift, and that the directions as to her maintenance and
Sebadharma are only pious wishes expressed by the defendant in the document.

8. Mr. S. Mohanty, learned counsel for the defendant respondent,--while pressing his cross-
appeal,--submitted that the gift was an unconscionable bargain, as it was by coercion, undue
influence and fraud on defendant, that the defendant executed the document without knowing the
full implications of the document; that the gift was not acted upon inasmuch as no mutation took
place. In my opinion, in view of there having been no specific issue as to the alleged coercion,
undue influence, fraud, mistake or misrepresentation as alleged, the defendant's cross-appeal,
challenging the deed of gift as altogether a void document, on the grounds as alleged, has no
substance.

9. In support of his proposition, that the deed of gift is revocable, the learned counsel for the
defendant respondent relied on a decision of the Allahabad High Court in Balbhadar Singh v.
Lakshmi Bai, AIR 1930 All 669, holding that under Hindu Law if a person makes a gift to
another in expectation that the donee will do more work in consideration of the gift, it follows
that if the donee failed to do that which it has conditioned he should do, the gift is revocable. The
learned counsel's point is that in order that the defendant may get Sebadharma (services) from
the plaintiff she (plaintiff) has to remain in the house; but the plaintiff having remarried, she
cannot perform the Sebadharma of the defendant because the plaintiff has left the house of the
defendant and remarried. In my opinion, this argument cannot stand, in view of the legal position
as stated above. With regard to the decision, relied on by the learned counsel, it appears that the
Allahabad High Court observed that it was arguable that in the. absence of an express power of
revocation for failure of the condition the gift cannot be impugned or revoked. Therefore, the

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Allahabad decision,--which was decided on the particular facts of the case,--does not support the
defendant's contention. In the present case, as is clear from the document itself, there is no
agreement that on failure on the part of the plaintiff to perform any of the conditions, namely,
Sebadharma etc. the gift will be invalid. In other words, there must be a defeasance or default
clause in order to make the gift revocable; if there was a condition that on failure to perform any
of the conditions the gift will be void, then certainly the gift could have been revoked; the
document "does not make any provision to that effect. Here, the defendant cancelled the gift,--as
appears from the deed of cancellation,--in apprehension that the plaintiff might waste the
property by transfer; it is not the defendant's case that, by reason of the plaintiff's having failed to
perform her Sebadharma etc. that she revoked the deed of gift.

It is, however, expected that the plaintiff will respect the pious wishes of the defendant that the
plaintiff will perform her Sebadharma in the manner, that is possible under the circumstances
and also carry out her other obligations as contained in the deed of gift,--all out of the income of
the suit lands, in terms of the deed of gift.

10. In this view of the case, the decision of the learned lower appellate Court is modified to the
extent that Clauses (3) and (4) of Ordering portion in paragraph 18 of the judgment are set aside;
the rest of the decision of the learned lower appellate Court is confirmed; it is further declared
that the plaintiff is entitled to immediate possession of the suit lands, and that she be given such
possession accordingly. The result, therefore, is that the appeal is partly allowed with the
modifications as aforesaid. The cross-appeal is dismissed. In the circumstances of the case, each
party to bear own costs throughout, except that the court-fees for the plaint will be paid by the
parties in equal shares to the State Government as per Clause 2 of the ordering portion of the
judgment of the learned lower appellate Court.

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 Smt. Kartari vs Kewal Krishan And Ors

AIR 1972 HP 117

JUDGMENT D.B. Lal, J.

1. This second appeal has been directed against the judgment dated 24th June, 1968 of the
District Judge, Kangra, whereby reversing the decision of the Sub-Judge First Class Una, he has
dismissed the suit of the plaintiff which was for recovery of possession over landed property
which was gifted by the plaintiff's ancestor to the defendants. Shrimati Kartari appeared in Court
with the allegations, that her mother Shrimati Basanti was the exclusive owner of 20 Kanals and
16 Marias of land situate in 'Mauza' Badhara (P. S. Una) of which the Khasra numbers were
given in the plaint. It was alleged that Shrimati Basanti was an old, feeble, helpless and illiterate
woman. She was 'paroanashin' and was not in a sound state of mind as she used to remain sick.
In fact, the plaintiff used to look after her and usually resided with her as she was her only
daughter and had become widow within four years of her marriage. The plaintiff has no issues of
her own. According to plaintiff, her mother was attached to her and she was looking after her
properties. Sometimes in March or April, 1961, the plaintiff went to reside at her husband's
house and the defendants Kewal Krishan and Mula Ram who were collaterals in the fourth
degree, of the husband of Shrimati Basanti, taking advantage of her absence and of the helpless
condition of Shrimati Basanti, brought to bear undue influence upon her and brought her to Una
under the pretext of getting her treated by some doctor. There on 4th April, 1961 they managed
to obtain a gift-deed from her which they got registered on that very day. In this manner Shrimati
Basanti was divested of her entire landed property and the defendants claimed ownership on the
basis of the gift-deed. When the plaintiff came back to her village, she came to know from
people that some transaction of gift was obtained by the defendants from her mother.
Accordingly she made enquiries from her mother who did not remember anything but simply
asserted that she was made to sign some transfer deed in favour of the defendants. Thereafter, at
the instance of Shrimati Basanti, the two ladies went to Una on 24th April, 1961 and got scribed
a complaint to the Superintendent of Police, Hosiarpur, to the effect that under undue influence
and "fraud, some transfer deed was obtained from Shrimati Basanti by the defendants and that
the same would not be binding upon them. Three or four days thereafter, Shrimati Basanti died.
The defendants had come in possesion over the disputed land and did not vacate possession.

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Therefore, the plaintiff was compelled to file the suit for recovery of possession after
cancellation of the gift-deed.

2. The defendants contested the suit on the allegations, that Shrimati Basanti was neither old nor
feeble nor incapable of understanding. Rather she fully understood the document which she
executed in favour of the defendants. According to defendants, she did not want her properties to
descend upon the heirs of the plaintiff who was daughter and rather wanted the properties to go
to the heir of her deceased husband. That was a reason, according to defendants, why a gift-deed
was executed by her in favour of the defendants. It was denied that any undue influence was
exercised upon the lady and that any fraud was practised upon her.

3. The learned Sub-Judge found in favour of the plaintiff and after cancelling the gift-deed,
decreed the suit for possession. The defendants came in appeal before the learned District Judge
and he disagreed with the decision of the learned sub-Judge and dismissed the suit. The plaintiff
has now come up in this second appeal.

4. There is a specific allegation in the plaint that undue influence was exercised and in the
absence of the plaintiff, the defendants, had taken the lady who was ailing, to Una under the
pretext that she was to be given a treatment by some doctor. She was, thus, brought under the
influence of the defendants and the gift-deed was obtained. The Court trying a case of undue
influence must consider two things to start with, namely:--

(i) Are the relations between the donor and the donee such that the donee is in a position to
dominate the will of the donor? and

(ii) Has the donee used that position to obtain an unfair advantage over the donor?

Upon the determination of these issues, a third point emerges, which is that of the onus probandi.
If the transaction appears to be unconscionable, then the burden of proving that the contract was
not induced by undue influence is to lie upon the person who was in a position to dominate the
will of the other. See AIR 1967 SC 878, Subhash Chandra v. Ganga Prosad. It was thus to be
ascertained if the defendants were in a position to dominate the will of Shrimati Basanti and have
they used their position to obtain an unfair advantage over her. Certain circumstances were
established by evidence and these circumstances need be reiterated. As to the age of the lady,

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according to plaint case, she was 90 years old. In the gift-deed itself the age is mentioned as 60
years. Madho Ram (PW. 3), however, stated that her age was 75 years Shero (D.W. 3), assessed
her age to be 70 years, while Kewal Krishan defendant (DW-4) stated that her age was 60 or 65
years. It is, therefore, abundantly clear that the age of the lady was near about 70 years which
was sufficiently an advanced age, specially when she was ailing. According to Shero (D. W. 3)
the defendants had brought her for treatment by some doctor. The plaintiff herself, of course,
stated that she was not in a sound state of mind and that she was in a position to tell facts about
the transaction only when she could collect her wits. It was, therefore, established that Shrimati
Basanti was an aged lady who was ailing at the time of the execution of the gift-deed. Apparently
she must have been attached to the plaintiff who was her only daughter. The gift-deed was
obtained while the daughter was absent and had gone to her husband's place. In fact, the
defendants avoided the presence of the plaintiff at all relevant time of the execution and
registration of the deed. The defendants were, no doubt, collaterals and being male-members of
the family of her husband, came to her and brought her to Una for treatment. In this manner they
were in a position to dominate the will of the lady, at any rate during that short period of time
when the plaintiff remained absent. In the plaint, however, it was stated that the defendants were
not even on visiting terms with the lady. This assertion was obviously made as a counterblast to
the defendants' assertion in the gift-deed itself that they were serving the lady since long and the
gift was obtained in lieu of that service. There is no evidence worth the name to prove that any
service was rendered by the defendants to the lady. It is obvious that she must have been attached
to her only daughter and, as stated by her, it was she who was to serve her up till her death. The
beneficiary Kewal Krishan defendant played a prominent part in execution and registration of the
deed. He had taken witnesses from the village and according to Shero (D. W. 3), he was also one
of the witnesses taken from the village, but only Jakha (D. W. 2) stood as witness and one more
witness was taken from Una. For some reason, Shero (D. W. 3) was given up. However, he was
produced in the Court and it is he who admitted that the lady was taken by the defendants for
treatment to Una. However, he was not in a position to tell as to whether any treatment was given
to her at all. It appears therefore, that the lady was taken to Una under the pretext of giving her a
treatment. That is the reason why the witness is not in a position to give out any detail regarding
such treatment. It is, therefore, evident that Kewal Krishan defendant engaged his scribe for
writing the deed. He presented the lady for registration of the document. In this connection,

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reference can be made to Vellaswamy Servai v. L. Sivaraman Servai, AIR 1930 PC 24 which
was a case of will. But the ratio of the case is equally applicable to the circumstances of this
case. Their Lordships made the following observation:--

"Where the propounder of a will is the principal beneficiary under it and has taken a leading part
in giving instructions for the execution of the will and procuring its registration and execution,
the circumstances are such as would excite the suspicion of any probate Court and require it to
examine the evidence in support of the will with great vigilance and scrutiny. The propounder is
not entitled to probate unless the evidence removes such suspicion and clearly proves that the
testator approved of the will."

The defendant being the principal beneficiary thus took a leading part in execution and
registration and this by itself is sufficient to prove that he dominated the will of the lady and
exercised his influence in obtaining an unfair advantage inasmuch as he deprived the natural heir
namely the plaintiff of the entire properties. The natural affection of the mother should have been
for the daughter who was a widow and not under affluent circumstances. Admittedly she has no
issues and according to her statement, she does pot possess any landed property at her husband's
place. Amar Nath, Sarpanch, (P. W. 2) stated that the plaintiff has no male-member to look after
her at her father-in-law's place. She has no landed property, except half portion of a house of
which compensation has been paid to her. Kewal Krishan (D.W. 4) the defendant himself
admitted that the plaintiff does not have any relation of hers at her father-in-law's place. The
defendants asserted that the donor did not want to change the line of descent from her husband
and that is why, she gifted the disputed property to them. If that was the reason for making the
gift, why it was not mentioned in the deed itself? There it was stated that the defendants were
doing service for her and the gift was being executed in lieu of that service. Above all, the lady
herself came to Una subsequently and questioned the deed of gift. She got a complaint written by
Sant Ram scribe (P.W. 1) on 25th of April, 1961. This witness produced his register which
contained the thumb impression of the lady. The substance of the complaint was written in the
register which was, obviously, kept in the regular course of business. A copy of the register (Ex.
P.W. 1/1) has been filed. The original complaint was not summoned from the office of the
Superintendent of Police. There was some controversy as to the admissibility of this register
entry. There can be no denying that the register entry is by itself a primary evidence of a

413 | P a g e
document. In fact, two documents were brought into existence, one was the complaint sent to the
Superintendent of Police and the other was the register entry made by the scribe. The plaintiff
produced the register entry and could not produce the complaint itself. The register entry was
thus primary evidence of the document and could be taken into evidence. At any rate, this
document proved that Shrimati Basanti had her own objection for the document which she was
made to execute on 4th April, 1961 at the instance of the defendants. She did not know the
details of that document, which is manifest from the register entry (Ex. P.W. 1/1) which specifies
that all the four brothers including the two defendants had taken the transfer in their favour. In
fact, the gift was executed in favour of only two brothers, namely, the defendants. This
circumstance also proves that the lady was not aware of the details of the transaction of which
she was made a party. According to Kewal Krishan (D.W. 4), she was an illiterate lady.

5. The learned District Judge pointed out that the defendants' witnesses were not put questions by
the plaintiff as to which document other than the gift was intended to be executed. In fact, no
such questions could be put to the witnesses because the plaintiff never relied upon any other
document. Rather her case was that a gift under undue influence was executed. The learned
District Judge further pointed out that the scribe was not cross-examined by the plaintiff upon the
question as to whether the document was read out and explained to the lady. He has further
stated that Jakha Ram (D.W. 2) Stated that the lady had come by foot upto Una, and from this, it
could be inferred that she was hale and hearty. These suggestions made by the learned District
fudge do not carry us any further. Jakha Ram was the own person of the defendant and was
brought from the village to stand as witness for the deed. As such, he was out to support the
defendant. As against him, Shero (D.W. 3) very much stated that she was ailing at that time and
was brought by Kewal Krishan for treatment. The scribe (D.W. 1) rather stated that whatever the
lady said was got written in the deed, which is obviously incorrect because the language utilised
for scribing the deed could not have been stated by her. The witness could have very well stated
that he had heard the lady and understood her. Thereafter, he wrote down the substance of her
talk and scribed the deed, but this he has not stated. The learned District Judge, then relied upon
the endorsement of the Sub-Registrar. It is obviously correct that such endorsements are made
out, in a routine fashion and whatever presumption is attached to such endorsements, it can be
rebutted by proper evidence. The learned District Judge then stated that the particulars of fraud
were not given out in the plaint. It may be correct to say that a case of fraud was not established,

414 | P a g e
but nonetheless the case of undue influence was proved and that is sufficient to set aside the
document.

6. As a result to all that I have stated above, inferences can be drawn to the effect that the
defendants were in a position to dominate the will of the lady and that they exercised their
influence and obtained an unfair advantage for themselves. The transaction of gift was itself
unconscionable inasmuch as the mother deprived her dependent daughter of her entire share in
the properties. Besides this, the donor herself never kept any land for her maintenance. Had she
remained alive for some substantial period, she would have been entirely dependent for
livelihood upon the defendants. She would not have agreed to such a transaction. The burden of
proof thus lay upon the defendants to establish that undtie influence was not exercised and this
they failed to establish. The learned District Judge placed a wrong burden of proof upon the
plaintiff which is clear from the reasoning that he has adopted in the judgment. It is, therefore,
abundantly clear that the disputed gift-deed was obtained by undue influence and need be set
aside.

7. Rules regarding transactions by 'pardanashin' women are equally applicable to illiterate and
ignorant women though not 'pardanashin'. This is so held in Chinta Dasya v. Bhalku Das, AIR
1930 Cal 591. There is no reason, say their Lordships, why a rule which is applicable to
pardanashin ladies on the ground of their ignorance and illiteracy should be restricted to that
class only and should not apply to the case of a poor woman who is equally ignorant and
illiterate and is not pardanashin, simply because she does not belong to that class. If that view of
the matter were adopted the effect clearly would be to confer an unfair advantage upon rich
women as compared with poor women. The object of the rule of law is to protect the weak and
helpless and it would not be restricted to a particular class of the community. In Mt. Farid-un-
nisa v. Mukhtar Ahmad, AIR 1925 PC 204 the following observation has been made which pan
be profitably understood in the case:--

"The law of India contains well-known principles for the protection of persons, who transfer
their property to their own disadvantage, when they have not the usual means of fully
understanding the nature and effect of what they are doing. In this it has only given the special
development, which Indian social usages make necessary, to the general rules of English law,
which protect persons, whose disabilities make them dependant upon or subject them to the

415 | P a g e
influence of others, even though nothing in the nature of deception or coercion may have
occurred. This is part of the law relating to personal capacity to make binding transfers or
settlements of property of any kind.

The real point is that the disposition made must be substantially understood and must really be
the mental act, as its execution is the physical act, of the person who makes it. The parties to
prove the state of the settlor's mind are the parties who set up and rely on the deed. They must
satisfy the Court that the deed has been explained to and understood by the party thus under
disability, either before execution, or after it under circumstances which establish adoption of it
with full knowledge and comprehension. Further, the whole doctrine involves the view that mere
execution by such a person, although unaccompanied by duress, protest or obvious signs of
misunderstanding or want of comprehension, is in itself no real proof of a true understanding
mind in the executant. Evidence to establish Such comprehension is most obviously found in
proof that the deed was read over to the settlor and, where necessary, explained. If it is in a
language which she does not understand, it must, of course, be translated, and it is to be
remembered that the clearness of the meaning of the deed will suffer in the process. The extent
and character of the explanation required must depend on the circumstances of each case."

In the instant case, it was the duty of the defendants to prove that the lady substantially
understood the document and her physical act of signing such document coincided with the
mental act of approval of its contents. This the defendants have failed to establish and hence the
plaintiff must succeed. In Ram Kalap Pande v. Bansidhar, (AIR 1947 Oudh 89), the following
observation was made which may be of some interest:--

"When the parties to a transaction do not stand upon an equal footing, the law raises in a suitable
case a presumption of fraud. In order to bind persons who, by their acts or contracts, have
divested themselves of the bulk of their property, there must be a free and full consent, and in
transactions in which one of the parties is not a free and voluntary agent and is unable to
appreciate the import of what he does, the main elements which render the act his own are
wanting. Accordingly, when a person, who from his state of mind, age, weakness or other
peculiar circumstances is incapable of exercising a free discretion, is induced by another to do
that which may tend to injure him, that other is not allowed to derive any benefit from, his
improper conduct."

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The ratio of these cases equally applies to the circumstances made out in the instant case.

8. The respondents made rather a desperate attempt of raising the plea of limitation. It was urged
on their behalf, that 3 years period of limitation is prescribed under Article 59 of the Limitation
Act and because the gift-deed was executed on 4th April, 1961, the suit should have been filed
upto 4th April, 1964. Rather it was filed on 2nd May, 1964 and as such, according to
respondents, the suit was time barred. It has to be understood by reference of Article 59, that this
period of 8 years begins to run from the date when the facts entitling the plaintiff to have the
instrument cancelled or set aside first be come known to him. It is, therefore, a question of fact as
to when the facts of the deed became known to the plaintiff and as pointed out by the learned
counsel for the appellant, such facts could only be known from the deed itself, which was entered
in the registration books only on 1st September, 1961. At any rate, that is the date which has
been mentioned in the endorsement that has been made on the back of the deed itself. Therefore,
a certified copy of the deed could only be obtained after 1st September, 1961 and if this date is
accounted for, the suit was filed well within time. It is obviously correct that the plaintiff or
Shrimati Basanti were not aware of the full contents of the gift-deed because in Ex. P.W. 1/1,
which is a copy of the register entry maintained by the scribe, they specified that four of the
brothers were the donees under the transfer deed. This was an incorrect statement. The indication
is that the ladies were not aware of the true contents of the documents and therefore for the
purpose of limitation, the facts entitling them to have the instrument cancelled, could be come
known to them only after 1st September, 1961. Apart from this, as held in Banarsi Das v. Kanshi
Ram, AIR 1963 SC 1165 a new plea of limitation which was not purely one of law but a mixed
question of law and facts cannot be allowed to be raised for the first time at the stage of
arguments in second appeal before the High Court.

9. In this view of the matter, it was amply proved that the gift-deed was executed under undue
influence and hence the agreement did not convey a free and full consent of Shrimati Basanti. A
valid contract never came into existence. Shrimati Basanti herself objected to the deed and
lodged a complaint to Police in respect of it. The defendants could not derive any title under the
gift-deed. The plaintiff being the natural heir of the deceased, is entitled to get possession from
the defendants and the gift-deed is liable to be set aside.

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10. The appeal is, therefore, allowed and the judgment and the decree of the learned District
Judge are set aside and the plaintiff's suit for possession is decreed, with costs all throughout.

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 Kama Sahu And Anr. vs Krishna Sahu

IR 1954 Ori 105

JUDGMENT Mohanty, J.

1. Defendants are the appellants. It appears that D-1, (the husband of D-2) Satyabadi Sahu,
Krishna Sahu and Laxman Sahu are four brothers. The family had some lands at, different places
including lands in village Chandipadaro. Appellant 2 (D-2) had purchased, some homestead
lands with a house thereon at Chatrapur. Satyabadi and his other brothers wanted, to take an
interest in that homestead land of D-2, treating it to be a portion of the joint family property, but
failed.

It also appears that it was so arranged between the present plaintiff, Krishna Sahu and Satyabadi
on the one hand, and the defendants-appellants on the other, that Krishna and Satyabadi would
separately take the homestead land and the house of D-2 at Chatrapur in exchange for their lands
that would fall to their share in the village Chandipadaro. Accordingly on 27-7-43, D-2 executed
sale-deeds one in favour of the present plaintiff and another in favour of Satyabadi with respect
to her homestead land and the house thereon situate at Chatrapur. But they, in return, could not
execute any such deed in favour of D-2 in respect of their lands at Chandipadaro; but promised
to do so after partition of their lands had been finalised. Admittedly the partition deed was
effected between the brothers with respect to their joint family property on 18-2-44.
Notwithstanding it, they did not execute any sale-deed in favour of D-2 as previously agreed
Upon. It is why D-2 cancelled the two sale-deeds executed by her on 27-7-43.

It should be noted here that the dispute between the parties went so far as to culminate in the
initiation of 145 proceedings with respect to the disputed land. The Magistrate could not come to
any finding as to which party is in possession of the disputed land, and he therefore kept the
property under attachment and directed the parties to establish their right in the Civil Court. It is
why the respondent filed a suit out of which this appeal has arisen for a declaration of his title to
the property on the strength of the sale-deed executed in his favour by D-2 on 27-7-43. A similar
suit was also filed by the present appellant against Satyabadi Sahu for a declaration of her title to
the other portion of the homestead and for recovery of possession thereof.

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2. The case of the plaintiff is that he has purchased the property for a cash consideration of Rs.
500/- and has acquired a good title to it on the execution of the sale-deed by D-2 and has been in
possession thereof since his purchase. The claim was contested by both the defendants
(appellants) mainly on the ground that in pursuance of an oral agreement for exchange of lands,
D-2 executed a deed with respect to her Chatrapur land on the promise of the plaintiff
(respondent) to execute similar deed in her favour with respect to her Chandipadaro land after
the partition of that land had been finalised. Though the said partition was finalised in February
1944, the plaintiff did not execute any sale-deed in her favour, although asked for many a time. It
is why she has cancelled the sale-deed executed in favour of the plaintiff; and the plaintiff has
acquired no title to the property on account of his failure to execute a similar deed in her favour
with respect to his own land.

3. Both the Courts below have concurrently held that in pursuance of an oral agreement for
exchange of land as between the parties, D-2 has executed a sale-deed. Exhibit I in favour of the
plaintiff on the promise of the plaintiff to execute a similar deed in favour of D-2 with respect to
his Chandipadaro land after the partition among the brothers had been finalised, that the partition
was effected in February, 1944, taut the plaintiff did not execute any Kabala in favour of D-2;
and that notwithstanding it, the plaintiff has acquired a good title to the property on the execution
of the sale-deed, Ext. I by D-2. They have further held that it is open to the defendants to legally
enforce the specific performance of the contract for the execution of the sale-deed with respect to
the Chandipadaro land. They have, therefore, decreed the plaintiff's suit. Against that decree and
judgment of the appellate Court the defendants have preferred this second appeal.

4. As has been stated above, there is a concurrent finding of both the Courts below that in
pursuance of an agreement for exchange of land between the parties, D-2 has executed a sale-
deed now in question in favour of the plaintiff. This finding was not challenged before me by the
respondent. The only question that was canvassed, at the bar is as to whether the plaintiff has
acquired any title to the property by virtue of the deed, Ext. I. Exhibit C is a deed of cancellation
which D-2 executed on 21-6-44 cancelling thereby the deed, Ext, I. She appears to have done it
when she found herself helpless in persuading the plaintiff to execute a similar document in
pursuance of the agreement of exchange.

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It is contended on behalf of the respondent that the mere execution of the sale-deed with out any
specific agreement for the postponement of the passing of the title till after the execution of
another document by the plaintiff is itself sufficient to pass valid title in the disputed property to
the plaintiff under Ext. I. But on the other hand, it is contended on the side of the appellant that
as the transaction is an exchange, but not a sale, the title would not pass to the plaintiff under
Ext. I until and unless a similar document is executed by the plaintiff in favour of D-2 with
respect to his land at Chandipadaro. In my view, the contention advanced on the side of the
appellant is tenable.

The word 'sale' has been defined in the T. P. Act in S. 54 as "A transfer of ownership in
exchange of price paid or promised, or part paid, or part promised."

It appears from this definition that a 'sale' should always be for a price, but in the case of
'exchange' the transfer of the ownership of one thing is not for any price paid or promised, but for
transfer of another thing in return. The word "exchange" has been defined in Section 118 of the
T. P. Act, as:

"When two persons mutually transfer the ownership of one thing for the ownership of another,
neither thing or both things being money only, the transaction is called an 'exchange'."

If in case a transfer of ownership of an immovable property is exchanged for money, then the
'transaction cannot be an exchange, but a sale. It being so, unless the properties of both parties
are simultaneously transferred in favour of each other, the title to the property cannot pass in
favour of the one when the other party does not execute any such document in favour of the
other. Exchange can be effected either by one document or by different documents. The
consideration for the one document executed in pursuance of an agreement for exchange is the
execution of a document by the other party. Unless it is so done, the party who has taken the
deed from the other party without himself executing any document in favour of that other party,
cannot claim to have got a valid title to the property until and unless he executes a similar
document transferring his interest in favour of that other party. It being so, the title cannot pass,
nor could have passed to the present plaintiff on the mere execution of the sale-deed Ext. I. In the
case of an exchange, the intention of parties cannot but be that there should be a reciprocal
transfer of two things at the same time and that until such a thing is done, the passing of title

421 | P a g e
under the one document executed in pursuance of the contract, should always be postponed till
after the execution of the another document by the other party. In this view of the position of
law, I hold that the plaintiff in this case has acquired no title to the property, because, he has
failed to act according to the promise even though the partition was finally effected in February,
1944.

5. Learned advocate appearing for the respondent relies upon a decision of the Allahabad High
Court reported in -- 'Gopi Ram v. Durjan', AIR 1929 All 63 (A), in support of his contention
that under Ext. I the plaintiff has got good title to the property, but the only remedy available to
the present appellant is to sue the plaintiff for specific performance of the contract with respect to
the Chandipadaro land. But the facts of that case are not similar to the facts of the present 'case,
in that case land was exchanged between the parties under one deed of exchange. But in spite of
that deed of exchange, the defendant was withholding possession of his land. It is why, the
plaintiff in that case brought a suit for recovery of possession' of the land in dispute on the basis
of that exchange.

Their Lordship's of the Allahabad High Court while discussing this point has made a distinction
between an executed contract and an executory contract and held that specific performance of a
contract is available only in the case of an executory agreement, but not in the case of an
executed contract. He has further observed in that case to the effect that when the exchange-deed
was finally executed, the contract is not available to the parties in that suit. It being so, that
authority is not of any avail to the respondent. It is further urged on the side of the respondent
that when there was a mutual exchange of possession the defendants cannot avail the plea that
passing of the title in favour of the plaintiff to the disputed property has been postponed till after
the execution of a similar Kabala by the plaintiff. But the transaction of exchange cannot be
completed till after the execution in the present case of deeds j'by both parties in favour of each
other. When I one of the parties has failed to execute the deed in pursuance of the agreement, the
mere fact of exchange of possession cannot be sufficient to complete the passing of title in
favour of each other, especially when properties to be exchanged are each worth more than Rs.
100/-. It being so, this contention is not sustainable.

6. But the case filed by the present defendants against Satyabadi Sahu ultimately came up before
this Court in -- 'Second Appeal No. 309 of 1948 (Orissa) (B)'. In that case a similar question

422 | P a g e
arose as to whether Satyabadi has acquired any title by the deed executed by the present
appellant in his favour without Satyabadi executing a similar document in favour of D-2 with
respect to the Chandipadaro land. A Division Bench of this Court in the unreported case have
held that when it was an exchange, the title to the two items of the property on each side would
pass to the other simultaneously on execution of the necessary document or documents, and that
"it is impossible to say that the title passes until the entire transaction is fully completed." Both
these cases are of same nature. The view taken by the Division Bench of this Court is in
consonance with the view which I have taken in this case on a consideration of the distinction
between 'exchange' and sale.

7. In the result, I would differ from the courts below in this that the plaintiff-respondent has not
acquired any title to the property merely on the execution of the sale-deed Ext. I in his favour by
D-2. As the plaintiff has not carried out his part of the contract and as there has been no
reciprocal transfer of the property as contemplated within the definition of 'exchange', I would
hold that the plaintiff-respondent has acquired no title to the property under Ext. I.

8. I would, therefore, set aside the judgment and decree of the Courts below and dismiss the
plaintiff's suit with costs. The appeal is allowed with costs.

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 Raja Sri Sri Shiva Prasad Singh vs Beni Madhab Chowdhury

70 Ind Cas 24

JUDGMENT Das, J.

1. Two questions have been raised in this appeal, first, whether the appellant who applied for a
decree as against the respondent under Order XXXIV, Rule 6, of the Code could maintain the
application without a Succession Certificate, and, secondly, whether the document upon which
the appellant relies operated merely as a charge, and, if so, whether the appellant was entitled to
a decree under Order XXXIV, Rule 6, the Code.

2. The facts are these: Raja Durga Prosad Singh of Jheria brought a suit for royalty in respect of
certain coal lands. He obtained a decree and the properties were sold on the 17th September
1915. The sale did not satisfy the claim of Raja Durga Prosad as against the respondent and there
still remained a sum of Rs. 4,175 due to Raja Durga Pro ad. Raja Durga Prosad, it appears, died
after the sale of the properties and the present appellant has succeeded to the Raja by
survivorship. On the 15th July 1918 the appellant presented an application under Order XXXIV,
Rule 6, for recovery of the sum of Rs. 4,175 from the respondent. The learned Subordinate Judge
being of opinion that the appellant could not maintain the application without at Succession
Certificate, has dismissed the claim of the appellant.

3. I am of opinion that the decision of the learned Subordinate Judge on this point cannot be
supported. Admittedly the appellant has succeeded to the Jheria Raj by right of survivorship, but
it was urged on behalf of the appellant that the estate being impartible the appellant could only
have taken the estate by inheritance, although he was selected as such successor by the
application of the rule of survivorship. In support of his argument Mr. S, M. Mullick relied upon
the decision of this Court in the case of Shyam Lal Singh v. Raja Bijay Narayan Kundu
Bahadur 39 Ind. Cas. 36 : 2 P.L.J. 136 : 1 P.L.W. 140 : (1917) Pat. 121. I will consider this case
in a moment, but it is necessary to point out that the law on the subject has been discussed very
fully and elaborately by the Judicial Committee in the recent case of Baijnath Prasad Singh v.
Tej Bali Singh 60 Ind. Cas. 534 : 43 A. 228 : 48 I.A. 195 : 19 A.L.J. 317 : 33 C.L.J. 388 : 40
M.L.J. 387 : (1921) M.W.N. 300 : 25 C.W.N. 564 : 2 P.L.T. 257 : 23 Bom. L.R. 654: 3 U.L.P.R.
(P.C.) 35 : 29 M.L.T. 358 (P.C.). On an exhaustive review of all the decisions, starting with what

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is known as the Katama Natchier v. Raja of Shivagunga M.I.A. 539 at p. 543 : 2 W.R.P.C. 31
: 1 Suth. P.C.J. 520: 2 Sar. P.C.J. 25: 19 E.R. 843 their Lordships came to the conclusion that the
question, of how to select the head of the family in a joint family is" part of the general law. In
the course of their judgment, their Lordships said as follows. "That the custom of impartibility
does not touch it," that is to say, touch the question of how to select the head of the family in a
joint family "is shown by the long list. of authorities above cited, and there is, in their Lordships'
view no necessary logical deduction from the decisions in Sartaj Kuan v. Deoraj Kuari 10 A.
272 : 15 I.A. 51: 5 Sar. P.C.J. 139: 12 Ind. Jur. 213: 6 Ind. Dec. (N.S.) 182 (P.C.) and the second
Pittapur cases which forces them to an opposite conclusion." Their Lordships quoted with
approval the decision in the case of Naraganti Achammagaru v. Venkatachalapati Nayanivaru 4
M. 250: 1 Ind. Dec. (N.S.) 1010 where the proposition was laid down in the following words:
"Where property is held in co-parcenary by a joint Hindu family there are ordinarily three rights
vested in coparceners--the right of joint enjoyment, the right to call for partition, and the right to
survivorship. Where impartible property is the subject of such ownership, the right of joint
enjoyment, and the right of partition as the right of an undivided co-parcener are, from the nature
of the property, incapable of existence. But there being nothing in the nature of the property
inconsistent with the right of survivorship, it may be presumed that right remains." Reviewing all
the decisions of the Judicial Committee up to Sartaj Kuari's case 10 A. 272: 15 I.A. 51: 5 Sar.
P.C.J. 139: 12 Ind. Jur. 213: 6 Ind. Dec. (N.S.) 182 (P.C.) their Lordships laid down three broad
proposition-

1. The fact that a raj is impartibl does not make it separate or self-acquired property.

2. A raj, though impartible, may in fact be self-acquired or it may be family property of a joint
undivided family.

3. If it is the latter, succession Will be regulated according to the rule which obtains n an
undivided joint family so far as the selection of the person entitled to succeed is concerned, i.e.,
the person will be designated by survivorship, although then, according to the custom of
impartibility, he will hold the raj without the other sharing it.

5. Their Lordships then discussed the case of Sartaj Kuari v. Deoraj Kuari 10 A. 272: 15 I.A.
51: 5 Sar. P.C.J. 139: 12 Ind. Jur. 213: 6 Ind. Dec. (N.S.) 182 (P.C.) and said that what was

425 | P a g e
actually decided in Sartaj Kuari's case 10 A. 272 : 15 I.A. 51 : 5 Sar. P.C.J. 139: 12 Ind. Jur. 213:
6 Ind. Dec. (N.S.) 182 (P.C.) was that in an impartible raj there was no restriction on the power
of alienation by the member of the family who was on the gaddi and was in possession, in
respect that there was no such right of co-ownership in the other members as to give them a title
to prevent such alienation. Their Lorpships reviewed the cases subsequent to Sartaj Kuari's case
10 A. 272: 15 I.A. 51 : 5 Sar. P.C.J. 139: 12 Ind. Jur. 213 : 6 Ind. Dec. (N.S.) 182 (P.C.) and
came to the conclusion that the rules laid down in the earlier cases on the question of succession
have not been touched by Sartaj Kuari's case 10 A. 272 : 15 I.A. 51 : 5 Sar. P.C.J. 139: 12 Ind.
Jur. 213: 6 Ind. Dec. (N.S.) 182 (P.C.). They thought that the key-note of the position was what
was laid down in the Neelkisto Deb Burmono v. Beerchunder Thakur 12 M.I.A. 523 : 12
W.R.P.C. 21 : 3 B.L.R.C. 13 : 2 Sar. P.C.J. 523: 2 Suth. P.C.J. 243: 20 E.R. 436. viz. "when a
custom is found to exist, it supersedes the general law, which, however, still regulates all beyond
the custom. Basing their decision on the passage which has just been cited, they came to the
conclusion that the selection of the person entitled to succeed is governed by the general law of
the land, but that when the selection is made he holds the raj by virtue of the custom which
prevents the others sharing it.

6. In my opinion the latest decision of the Judicial Committee completely negatives the
arguments which have been advanced before us. But it was urged that we are conclusively bound
by the decision of the Full Bench of this Court in the case of Shyam Lal Singh v. Raja Bijay
Narayan Kundu Bahadur39 Ind. Cas. 36 : 2 P.L.J. 136 : 1 P.L.W. 140 : (1917) Pat. 121. In that
case the late Chief Justice of this Court with the concurrence of Chapman and Roe, JJ., came to
the conclusion that there was no right to succeed by survivorship in an impartible estate,
Chamier, C.J., in delivering the leading judgment, said as follows: "all that their Lordships of the
Privy Council have all along intended to lay down is that for the purposes of ascertaining the
person entitled to succeed to an impartible estate yon must have resort to the rule which would
have governed the succession if the estate had remained partible." In my opinion it is impossible
to uphold this view having regard to the decision of the Judicial Committee in the case
of Baijnath Prasad Singh v. Tej Bali Singh 60 Ind. Cas. 534 : 43 A. 228 : 48 I.A. 195 : 19
A.L.J. 317 : 33 C.L.J. 388 : 40 M.L.J. 387 : (1921) M.W.N. 300 : 25 C.W.N. 564 : 2 P.L.T. 257 :
23 Bom. L.R. 654 : 3 U.L.P.R. (P.C.) 35 : 29 M.L.T. 358 (P.C.). It is unnecessary to decide
whether that case was rightly or wrongly decided, inasmuch as the question of succession was

426 | P a g e
not raised in that case and all that was involved was the question whether any portion of the
property in the hands of a holder of an impartible raj could be regarded as assets which the
creditor could seize in execution of a decree obtained against his predecessor-in-title. We are in
this case not concerned with that question. If we were we would be bound to follow the decision
of the Judicial Committee which lays down in express terms that the question of selection of the
successor is governed by the general law of the land and not by custom; but that when the
selection is made he holds the property by custom which prevents others sharing in it. In may
opinion the appellant took the impartible estate by survivorship and it was not necessary for him
to obtain a Succession Certificate as a condition for the maintainability of the application.

7. So far as the other question is concerned, the view of the learned Subordinate Judge was in
favour of the appellant. But Mr. Susil Madhab Mullick on behalf of the respondent has urged
before us that the appellant was not entitled to maintain an application under Order XXXIV,
Rule 6, inasmuch as the document upon which the appellant relies created a charge and not a
mortgage within the meaning of the term as defined in Section 58 of the Transfer of Property
Act. The clause in the document upon which reliance is placed runs as follows:

This settled coal land, mines, coal raised by me, machineries, tools, bungalow, edifices coolie-
shed erected by me as well as all other moveables and immoveables shall ever be regarded as a
security for the payment of the rent and cesses due, together with interest thereon due to you. I
shall not be competent to transfer the said property by sale, gift, or remove the same, so long as
the rent, etc., due to you will remain unpaid. If it is done so, it shall not be accepted.

8. Now, the broad distinction between a mortgage and a charge is this, that whereas a charge
only gives right to payment out of a particular fund or particular property without transferring
that fund or property, a mortgage is in essence a transfer of an interest in specific immoveable
property. The line of division in England between a charge and a mortgage is a very clear one;
but in this country the division is not so well-marked. It has been pointed out that there is very
little difference, if any, between a charge and a simple mortgage as defined in Section 58 of the
Transfer of Property Act; and that, in a simple mortgage, the interest transferred is the right to
have the property sold. If that be so, it becomes a question of some nicety to distinguish between
a simple mortgage and a charge. In the case of Dalip Singh v. Bahadur Ram 15 Ind. Cas. 435 :
34 A. 446 : 9 A.L.J. 550 the late Chief Justice of this Court, then Mr. Justice Chamier, laid down

427 | P a g e
the three essentials constituting a simple mortgage as follows: "In order that there may be a
simple mortgage, there must be (a) a transfer of an interest in specific immovable property, (b) a
personal undertaking by the mortgagor to pay the mortgage money, and (c) an agreement,
express or implied, that in the event of the mortgagor failing to pay according to his contract, the
mortgagee shall have a right to cause the mortgaged property to be sold this case was followed
by this Court in the case of Anand Ram Marwari v. Dhanpat Singh 38 Ind. Cas. 37 : P.L.J.
563 : 563 : P.L.W. 341. Now, in the present case the conditions (b) and (c) have been fulfilled;
but there is no express transfer of an interest in the property. In the case already cited Chamier, J.
said as follows: "In a simple mortgage the interest transferred is the right to have the property
sold, and this need not necessarily be provided for in the deed in so may words; it may be
inferred from the language used and where such an agreement can be inferred, then the
requirements of condition (a) axe satisfied." In my opinion the decision in Dalip Singh v.
Bahadur Ram 15 Ind. Cas. 435 : 34 A. 446 : 9 A.L.J. 550 followed as it has been by this Court
in Anand Ram Marwari v. Dhanpat Singh 38 Ind. Cas. 37 : 1 P.L.J. 563 : 2 P.L.W. 341 governs
the present case. It may be pointed out that the word used in the Bengalee document is 'bandhak'
which undoubtedly implies a mortgage. I am of opinion that the contention of Mr. S.M. Mullick
on this point must be overruled.

9. I would allow the appeal, set aside the order of the learned Judge in the Court below and
remand the case to that Court for decision as to the sum of money for which the plaintiff is
entitled to a decree. The appellant is entitled to the costs of this appeal. The costs incurred in the
Court below will abide the result and will be disposed of by the learned Subordinate Judge.
Adami, J.

10. I agree.

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 United India Fire And General Insurance Company Limited vs Pelaniappa Transport
Carriers

AIR 1986 AP 32

JUDGMENT

1. The appellant-United India Fire and General Insurance Company Limited obtained two letters,
one, dated Feb. 5, 1973 letter of subrogation and the other, letter of assignment of even date Ex.
A-3 from M/s. V. K. Brothers, a partnership firm, second respondent herein with a right to
recover the suit claim against Sri Palaniappa Transport Carriers, first respondent herein. The
facts leading thereto are that M/s. V. K. Brothers (second respondent) consigned six bales of
cloth to be delivered at Madras and entrusted to the first respondent Transport Carriers, for
delivery thereof to the consignee. Before consigning the second respondent also insured the six
bales of cloth with the appellant under a policy. When the goods were delivered at Madras, they
were found to be damaged and the authorised values made valuation thereof at Rs. 7,199-25 ps.
It was found that the first respondent was responsible for causing damage and that the damage
was causes due to their negligence. But pursuant to the policy of Insurance covered with the
appellant, the appellant made payment thereof to the second respondent and the appellant
obtained the letters of subrogation and the assignment of right to indemnification from the
second respondent impleading M/s. V. K. Brothers, as the second plaintiff in the suit. The
appellant laid the suit in the lower Court against the defendant - Transport Carriers. In the written
statement the defendant took the plea that M/s. V. K. Brothers is not a registered partnership
Firm and that, therefore, the suit is not maintainable. No issue, in that regard, was framed by the
trial Court. The trial Court found, as to fact, that the defendant carriers, was negligent and the
damage had been caused as a result thereof, that the Insurance Company obtained not only the
letter of subrogation but also the assignment of the right of indemnification from the defendant
and that, therefore, the defendant is liable for the payment of the suit claim. Therefore, the trial
Court decreed the suit. The Transport Carriers filed an appeal. The appellate Court felt that the
plea that M/s. V. K. Brothers being an unregistered partnership firm, the suit at their instance is
not maintainable is a material issue and that it is to be tried after affording an opportunity to all
the parties to adduce evidence in that regard. In that view, the appellate Court set aside the

429 | P a g e
decree and remanded the matter to the Trial Court for framing the above issue and for retrial on
that issue. Assailing the remnant order, the present appeal has been filed.

2. Sri C. V. Mohan Reddy, the learned counsel for the appellant raised an important question of
law contending that even assuming that M/s. V. K. Brothers, is not a registered partnership firm,
the suit is not merely based on the right of subrogation but also in assignment of indemnification.
The appellant having obtained those rights, it is needless to implead M/s. V. K. Brothers, eo
nomine as the second plaintiff and the suit at the instance of the appellant itself is maintainable
and in such an event the issue framed by the appellate Court is unnecessary and the remand also
is not needed. He also further contended that the decision of the Supreme Court in Union of
India v. Sri Sarada Mills, was not correctly appreciated by the lower appellate Court and the
ratio therein helps the appellant. It is further contended by the learned counsel for the appellant
that the right to recover is a common law right or a statutory III of 1865). Therefore, the
prohibition engrafted under S. 69 (2) of the Indian Partnership Act does not apply to the facts of
this case. In support thereof, he relied on the decisions of the Kerala and Calcutta High Courts in
Kerala Arecanut Stores v. Ramkishore and Sons, and Sukul Brothers v. H. K. Kavarana
(AIR 1958 Cal 730).

3. Though the first respondent has been served, no one is appearing either in person or through
their counsel. Since the question involved is of much importance, I requested Sri S. Ananda
Reddy, the learned Member of the Bar, to assist this Court as Amicus Curiae. Sri Ananda Reddy,
the learned counsel contends that, as of fact, it is now found that M/s. V. K. Brothers is a non-
registered partnership Firm and that the suit at their instance is not maintainable in view of S. 69
of the Indian Partnership act. The letter of subrogation and the letter of assignment of right to
indemnification are not helpful to the appellant for the reason that the suit itself is not
maintainable at the instance of an unregistered partnership firm and that the assignments were
made with a view to avoid the rigour of the provisions of S. 69 of the Indian Partnership Act. He
also contended that the statutory right under S. 8 of the Carriers Act is available only to owner of
the goods but not to the third parties. Therefore, if it is concluded that the suit is not maintainable
under those circumstances, the order of remand is perfectly legal and it does not warrant
interference.

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4. Upon the restrictive contentions of both the learned counsel, two questions arise for
consideration: (1) What are the rights acquired by the appellant under Exs. A-3 and A-5 and (2)
even assuming that M/s. V. K. Brothers, the consignor, is not a registered partnership firm,
whether the suit can be filed by the appellant alone on the basis of Exs-A-3 and A-5 and whether
the decree granted by the trial Court is legal on that premise.

5. The facts, which are not in dispute for the disposal of this appeal, can be stated in a nut shell:
the appellant is the United India Fire and General Insurance Company Limited. M/s. V. K.
Brothers, second respondent herein, is the consignoer. It consigned the goods of six bales of
clothe for delivery at Madras and entrusted the same to Sri Palaniappa Transport Carriers, first
respondent herein. The goods were found to have been damaged and the suit claim is the amount
that is assessed towards the damages. The appellant obtained letters of surrogation and also
indemnification to recover from the first respondent-carriers-damages paid pursuant to the policy
booked with the appellant.

6. In Halsbury's Laws of England, Third Edition, Volume 22, in para 512 it is stated:

"The doctrine of subroagtaion applies to all contracts of non-marine insurance which are
contracts of indemnity, such as, for example, contracts of fire insurance, motor vehicle insurance
and contingency insurance covering non-payment of money. It applies whether the loss is total or
partial, and is a corollary of the principle of indemnity. By requiring any means of diminishing or
extinguishing a loss to be taken into account, it prevents the assured from recovering more than a
full indemnity."

7. In para 513 it is stated that subrogation, in the strict sense of the term, expresses the right of
the insurers to be placed in the position of the assured so as to be entitled to the advantage of all
the rights and remedies which the assured posseses against third parties in respect of the subject
matter. The precise nature of the third party's liability to the assured is immaterial; subrogation
applies even to a statutory liability. In Vasudeva v. Caledonian Insurance Company,
Veeraswamy, J, speaking for the Court observed:

431 | P a g e
"A contract of motor insurance, like marine or accident insurance is, in essence, one of
indemnity. The right of insurer to subrogation or to get into the shoes of the assured as it were, is
inherent in and springs from the principles of indemnity and the basis of the right is justice,
equity and good conscience, namely, the indemnifier should be in a position to reduce the extent
of his liability within limits. But subrogation does not ipso jure enable him to sue third parties in
his own name. It will only entitle the insurer to sue in the name of the assured, it being an
obligation of the assured to lend his name and assistance to such an action. However, an
assignment or a transfer implies something more than subrogation and vests in the insurer the
assured's interest, rights and remedies in respect of the subject-matter and substance of the
insurance. In such a case, therefore, the insurer, by virtue of the transfer or assignment in his
favour will be in a position to maintain a suit in his own name against third parties." In Union of
India v. Sri Sarada Mills (supra), their Lordships of the Supreme Court were called upon to
consider the assignment and subrogation of the rights to recover pursuant to marine insurance
covered under the Marine Insurance Act. In that case, the respondent Sri Sarada Mills Limited,
consigned the goods with the Railways for transshipment, but they were fond to be lost. They
also insured the goods with the Insurance Company. They subrogaged their rights to the
Insurance Company. Thereafter, they filed the suit for recovery of the value of the goods in the
transit. Defence was taken that the suit at their instance was not maintainable. The trial Court
dismissed the suit. On appeal, the High Court allowed the appeal and decreed the suit. When it
was assailed, the majority of their Lordships speaking through A. N. Ray, J., (as he then was)
held that the suit is maintainable. Mathew, J. held that the suit is not maintainable. While
considering the effect of the assignment vis a vis the provisions of S. 6 (e) of the Transfer of
Property Act, it was held that a bare right of action might be claims to damages for breach of
contract or claims to damages for tort. An assignment of a mere right of litigation is bad. As
assignment of property is valid even although that property may be incapable of being recovered
without litigation. The reason behind the rule is that a bare right of action for damages is not
assignable because the law will not recognise any transaction which may savour of maintenance
of champerty. It is only when there is some interest in the subject matter that a transaction can be
saved from the imputation of maintenance. That interest must exist apart from the assignment
and to that extent must be independent of it. A chose in action for breach of contract was not
assignable at law but was assignable at equity. A chose in action in tore was assignable neither in

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law nor in equity. A bare right of action is not assignable. When however the right of action is
one of the incidents attached to the property or contract assigned it will not be treated as a bare
right of action. On the facts in that case it was held that the insurance company and the mill
proceeded on the basis that the insurance company was only subrogated to the rights of the
assured. The letter of subrogation contains intrinsic evidence that the respondent would given the
insurance company facilities for enforcing rights. The insurance company has chosen to allow
the mill to sue. The cause of action of the mill against the Railway administration did not perish
on giving the letter of subrogation. On that finding, it was held that the suit is maintainable.

7. Section 6 (e) of the Transfer of Property Act prohibits assignment or transfer of a mere right to
sue. But S. 130 of the Transfer of Property Act postulates that the transfer of an actionable claim
whether with or without consideration shall be effected only by the execution of an instrument in
writing signed by the transferor or his duly authorised agent, shall be complete and effectual
upon the execution of such instrument, and thereupon all the rights and remedies of the
transferor, whether by way of damages or otherwise, shall vest in the transferee, whether such
notice of the transfer as hereinafter provided be given or not.

8. The recitals in Ex. A- 3 read thus:

In consideration of your paying to us a loss of Rs. 2,083.65 ps. In respect of the undermentioned
goods insured with you under Policy No. HY/O/482/72 Certificate No. 1, we hereby assign and
transfer to you all our rights, title and interest and respect of the said goods, and all rights and
claims against any person or persons in respect thereof."

It is also given under Ex. A-5 an authorisation to sue in the name of M/s. V. K. Brothers, as well.
In view of these specific recitals and in view of the legal position set out above, the necessary
conclusion is that the appellant has got under Exs. A3 and A 5 not merely a subrogation but also
assignment of the right to recover the loss to get indemnification thereof which they suffered
pursuant to the policy under which they made payment to the consignor, M/s. V. K. Brothers so
as to reducing or diminishing or extinguishing the said loss. It applies to ordinary policy relating
to commercial goods. This right is based on justice, equity and good conscience. Therefore, the
embargo created under S. 6 (e) of the Transfer of Property Act is not attracted to the facts in this
case. It is an actionable claim under S. 130 of the Transfer of Property Act and, therefore, it is

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validly transferred; the appellant acquired valid right, title and interest from the consignor and
the suit for the recovery thereof is maintainable.

9. The next question is whether the suit is maintainable at the instance of the appellant alone. We
assume, for the purpose of this case, that M/s. V. K. Brothers is an un-registered partnership
firm. The effect of non-registration of a partnership firm has been stated in S. 69 (1) and (2) of
the Indian Partnership Act, 1932 (Act IX of 1932). Sub-sec (2) is relevant for the purpose of the
case which reads thus :

"69 (2) NO suit to enforce a right arising from a contract shall be institued in any Court by or on
behalf of a firm against any third party unless the firm is registered and the persons suing are or
have been shown in the Registrar of Firms as partners in the firm."

10. The contention of Sri Mohan Reddy, the learned counsel for the appellant, is that it is not
merely a right arising from a contract, but it is also a statutory right arising under S. 8 of the
Carriers Act 1865 (Act III of 1865). No doubt S. 8 thereof provides a right to recover the loss or
damage of any property delivered to a carrier notwithstanding anything contained herein before
where such loss or damage has arised from the negligence of the carrier or any of his agents or
servants. But the question is whether the suit is maintainable at the instance of the Insurance
Company. The Carriers Act provides a right to claim damages for the loss of goods entrusted for
delivery to the carrier to the owner of the goods. The language used therein that "every common
carrier shall be liable to the owner for loss of or damage to any property delivered to such carrier
to be carried where such loss or damage shall have arisen from ..........."Therefore, it is a personal
right granted to the owner and unless this statutory right is permitted to be assigned under the
statute, the assignee acquiries no right under the statute. This court in Naras Reddy v. Venkata
Subbayya, , Satyanarayana Raju, J., (as he then was) took the same view. I respectfully agree
with the same. In that case, the question was whether the agent can maintain the suit on behalf of
the owner. It was held by Satnayanarayana Raju, J., that he suit at the instance of the agent was
not maintainable. The ratio in the above case is equally applicable to the facts of this case is
equally applicable to the facts of this case and it must be held that the suit is not maintainable for
the loss or damage against the career at the instance of the assignee. But it does not conclude the
matter. It is already held that it is an assignment of indemnification which is an actionable claim
transferred and acquired under the provisions of S. 130 of the Transfer of Property Act. But the

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question still remains to be considered is whether an unregistered firm can assign its rights to
third parties and whether the third parties can sue on the basis thereof. In Loonkaran Sethia v.
Ivan E. John the Supreme Court has held that an unregistered firm cannot lay a suit, that the suit
is not maintainable at their instance and that the suit is liable to be dismissed. Same is the view of
this Court in Narasa Reddy v. Venkata Subbayya (supra). But the question is whether the suit can
be laid by third parties. In I. T. Commr. Andhra Pradesh v. J. R. & O. Mills, ., the Supreme Court
held :"the registration of the firm takes place only when the necessary entry is made in the
register of firms under S. 59 of the Partnership Act by the Registrar."

11. In Shanmugha v. Rathina, AIR 1948 Mad 187, it was held:

"Partnership Act places no prohibition upon an unregistered partnership making contracts either
between the partners inter se or with some third party, nor upon an unregistered partnership
acquiring property or assets. All that it does to make a suit instituted by an unregistered
partnership, to recovery property unforceable. But relief from the disability can be obtained at
any time as long as the partnership is in existence, and if the partnership is registered before the
suit is instituted the partnership can recover its property and sue on contracts made with third
parties even when those contracts were entered into at a time when the partnership was not
registered."

The same view was taken by the Bombay High Court in Appaya Nijlingappa v. Subba Babaji,
AIR 1938 Bom 108. In Mohan Singh v. Janki Dass, AIR 1937 Lah 241, the facts were that
there was an unregistered partnership firm that it filed a suit to recover the amount due and that
the suit to recover the amount due and that the suit was dismissed. Thereafter, it transferred the
debt to a registered firm. The registered firm filed a suit. The contention raised was that the
earlier decree operates as res judicata.

In that context it was held:

"Even the firm Behari Lal Parashotam Das was competent to maintain another suit for the
recovery of the amount after registration. No provision from the Partnership Act has been cited
to show that an unregistered firm is not entitled to do business or to legally assign its assets to
another person who himself is competent to maintain a suit. Therefore, the dismissal of the
previous suit cannot operate as res judicata against the assignee of the firm Behari Lal Parshotam

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Das. It is obvious that under S. 69 Partnership Act, two conditions must exist before a suit can be
dismissed. The contract must be with an unregistered firm and the person to suing to recover the
amount must be that firm or another unregistered firm. It is only then, that there can be an
objection to the maintainability of the suit. The mere fact that the contract was with an
unregistered firm is not sufficient to dismiss a suit if the plaintiff is otherwise competent to
maintain it."

11. From the ratio of the above decisions, the necessary conclusion is that sub-sec (2) of S. 69
prohibits filing of a suit on the basis of a contract by an unregistered partnership firm or a partner
thereof on its behalf. But there is no prohibition for acquiring property by an unregistered firm or
its transferring property in the third parties and the right acquired by the third parties pursuant to
the assignment made by the unregistered partnership firm is not defeated. The embargo would
not apply to cases of suits filed by a person or a registered firm to whom the unregistered firm
may have assigned the rights under an assignable contract entered into by it with third parties.
Under those circumstances, the necessary conclusion is that the assignment is not illegal and the
suit can be maintained individually by the assignee alone. In this view, it is not necessary for me
to consider the decisions cited by Sri Mohan Reddy, the learned counsel for the appellant, since
they do not directly cover the point.

12. Before concluding, I express my thanks to Mr. Ananda Reddy, the learned member of the
Bar, for giving me assistance in this case.

13. For the foregoing reasons, the appeal is allowed and the decree of the appellate Court is set
aside and that of the trial Court is restored and affirmed, but in the circumstances without costs.

14. Appeal allowed.

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 Debendra Nath Mullick vs Pulin Behary Mullick And Anr.

(1897) ILR 24 Cal 763

JUDGMENT Ameer Ali, J.

1. The facts of this case are sufficiently set out in my preliminary judgment I.L.R. 23 Cal. 714. It
is enough to say that the Registrar has found upon the inquiry directed that the expenses of and
incidental to the plaintiff's assignment amounted to Rs. 758-4-0. His report is dated the 19th of
December 1896. On the 8th of May last an application was made to fix a day for further hearing
and final judgment. The case was fixed for the 22nd of May, but was adjourned by consent to the
29th of May. On the 27th the defendant deposited a further sum of Rs. 65, odd annas. Mr. Sinha
on behalf of the plaintiff contends that the sum deposited by the defendant on the 10th of April
1896 was insufficient, inasmuch as he had deposited only Rs. 750 over and above the
consideration paid by the plaintiff for his assignment, whereas the expenses are now found to
have been Rs. 758-4-0, and that therefore he (the defendant) is not entitled to the benefit of
Section 135 of the Transfer of Property Act. He also contends that the balance ought to have
been paid into Court as soon as it was discovered that the amount originally deposited was not
sufficient, and that the deposit of Rs. 65 made after the case was placed on the cause list on the
22nd of May last does not remove his objection. He also asks for interest up to final judgment.

2. As regards the first point it was obviously impossible for the defendant to know what the
expenses amounted to. The plaintiff did not furnish any information on the subject, and
consequently an inquiry was directed to ascertain the amount. Under the circumstances the
defendant could only be expected to deposit an approximate amount, and he accordingly paid
into Court Rs. 750 over and above the price paid by the plaintiff, thus showing his intention to
abide by the offer he had repeatedly made to the plaintiff. On the 19th of December 1896 it was
found that the expenses amounted to Rs. 758, odd annas. The case of Muchiram Barik v. Ishan
Chunder Chuckerbutti I.L.R. 21 Cal. 568 shows that a debtor claiming the benefit of Section 135
of the Transfer of Property Act is discharged of his liability, if he pays or offers to pay at any
time before final judgment the consideration plus the expenses and interest. The defendant in this
case has, from the outset, claimed the benefit of the section; he tendered the amount to the
plaintiff shortly after the assignment, and appears to have been always willing to pay whatever

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else the plaintiff might be found entitled to for incidental expenses and interest. In order to show
that he was acting bond fide he deposited in Court Rs. 3,500 on the 10th of April 1896. It seems
to me that he is entitled to the benefit of Section 135 of the Transfer of Property Act.

3. I am also of opinion that under Section 84 of the Transfer of Property Act the plaintiff ought to
have interest on the sum of Rs. 2,750 only up to the 6th of March 1891. I understand that the
amount paid into Court fully covers what the plaintiff is entitled to under Section 135. I
accordingly order that the sums of money paid into Court by the defendant be paid to the
plaintiff, and that the plaintiff do reconvey or retransfer to the defendant the property comprised
in the mortgage and further charge, free from all incumbrances done by him or any person or
persons claiming by, from or under him, and do deliver up all documents in his custody or power
relating thereto, such reconveyance to be settled by the Registrar of the Court, if the parties differ
about the same.

4. Having regard to the conduct of the plaintiff I must direct him to pay to the defendant his costs
of the suit to be taxed on Scale 2.

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Happy Reading 

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