N. S. Gujral Vs. Custodian of Evacuee
Property & ANR  INSC 206 (12 September 1967)
12/09/1967 WANCHOO, K.N. (CJ) WANCHOO, K.N.
(CJ) BACHAWAT, R.S.
CITATION: 1968 AIR 457 1968 SCR (1) 497
CITATOR INFO :
D 1980 SC1206 (9,40)
Displaced Persons (Compensation and
Rehabilitation) Act (44 of 1954), s. 12 and Administration of Evacuee Property
Act (31 of 1950), ss. 10(1) and 10(2) (m) and (n)-If violative of Arts. 14 and
19(1)(f) of the Constitution of India-Law impairing obligation under
contract-If ultra vires Constitution.
The appellant obtained a decree against two
persons who, along with their wives, migrated to Pakistan. Before the decree
was passed, the two judgment debtors had executed two deeds releasing their
property, which was a building in favour of the wives. The property was
declared evacuee property under the Administration of Evacuee Property Act, 1950
and on the appellant's application, his claim based on the decree was
registered by the Custodian. Later, the Custodian held that the evacuee
property belonged to the wives of the judgment-debtors. The appellant filed a
suit for setting aside the release deeds on the ground that they were of no
effect as being in fraud of the creditors. But, before the suit was filed, the
Central Government, in pursuance of a notification issued under s. 12 of the Displaced
Persons (Compensation and Rehabilitation) Act, 1954, acquired the property. As
a result of the notification, the property which was in law the property of the
evacuees-though it was under the administration of and vested in, the Custodian
under the 1950 Act-became the property of the Central Government free from all
So, in addition to the main plea in the suit
the appellant also contended that s. 12 of the 1954 Act and the notification
issued there under violated Arts. 19(1)(f) and 14 of the Constitution. He
further contended that the amendment by Act 91 of 1956 of s. 10(2)(m) of the
1950 Act, as a result of which the Custodian's power to pay the evacuee's debts
was deleted from the clause, was ultra vires.
On an application under Art. 228, the High
Court tried the two constitutional issues and decided them against the
appellant and remanded the suit to the trial court.
In appeal to this Court,
HELD: (1)(a) Section 12 of 1954 Act did not
interfere with the appellant's right to acquire, hold and dispose of his
property, namely, the decree against the evacuees. At no time did the appellant
have any right whatsoever in the property which vested in the Central
Government on the issue of the notification. Its only effect was that the
appellant could not proceed against the property in execution of his decree.
Therefore the appellant could not claim the protection under Art. 19(1)(f).
[501A: 502A-D] (b) It could not be said that there was violation of Art. 14 on
the ground that decree-holders against non-evacuee property could execute their
decrees while decree-holders against evacuee property could not. There is a
reasonable classification between evacuee property and non-evacuee property,
and there is a clear nexus between the object to be achieved by the 1954 Act,
namely, rehabilitation of evacuees from Pakistan, and the provision in s. 12,
by which 498 the property of evacuees in India is to be utilized for such
rehabilitation. [502E-G] (c) The appellant cannot also be heard to say that s.
12 impairs the obligation of the judgment-debtors under contract between them
and himself because, there is no prohibition against such a law in the Indian
[501F] (2) The amendment of S. 10(2)(m) made
no difference to the legal position, for the power of the Custodian to pay the
debts of the evacuee still remained unimpaired under S.
10(2)(n) read with 10(1). Therefore, it was
unnecessary to consider the invalidity of -the amendment of s. 10(2)(m).
[500F-H] Raja Bhanupratap, Singh v. Assistant
Custodian of Evacuee Property, U.P.  1 S.C.R. 304, followed.
(3) Though the appellant could not claim to
proceed against the property in suit or its income, after the date on -which it
became vested in the Central Government by virtue of the notification under s.
12, he could ask the Custodian to pay him out of the moneys lying with him on
the date of such vesting if he can satisfy him in the manner provided in s.
10(2)(n) read with s. 10(1) of the 1950 Act.
'The trial court would therefore have to decide the issue whether the
release-deeds were-fictitious and fraudulent, and, if it found in favour of the
appellant it would then be open to him to approach the Custodian for such
orders as the Custodian thinks fit to pass with respect to the moneys, if any,
lying with him on the date of vesting. [503F-H]
CIVIL APPELLATE JURISDICTION: Civil Appeal No.
642 of 1966.
Appeal by special leave from the judgment and
order dated October 21, 1962 of the Punjab High Court (Circuit Bench) at Delhi
in Civil Original No. 11-D of 1960 read with judgment and order dated October
26, 1964 of the said High Court in R.S.A. No. 245-D of 1964.
N. S. Bindra and D. D. Sharma, for the
G. R. Rajagopaul, S. P. Nayyar for R. H.
Dhebar, for the respondents.
The Judgment of the Court was delivered by
Wanchoo, C. J. The appellant obtained a decree for over Rs.
41,000 against Modern Electric Iron and Brass
Works, Delhi, which was the property of two partners, namely, Mohd. Sabar and
Noor Mohd. Butt. in January 1950. He also obtained another decree for over Rs.
95.000 against the same two persons and ,one more to which proceeding the
Custodian of Evacuee Property (hereinafter referred to as the Custodian) had
also been made a party. Before. however, the first decree was obtained by the
appellant. Mohd. Sabar and Noor Mohd. Butt had in April 1947 executed two deeds
of release with respect to their property in favour of their wives.
Later Mohd. Sabar and Noor Mohd. Butt and
their wives migrated to Pakistan and their properties were -declared evacuee
properties under the Administration of Evacuee Property Act, No. 31 of 1950,
(hereinafter referred to as the 499 1950-Act). Under s. 10 of the 1950-Act the
Custodian had the power to pay any debt due from the evacuee to any person
subject to rules framed thereunder. Further under the Rules a person to whom an
evacuee owed money could apply for registration of his claim and the Custodian
could register such claim; but mere registration of a claim did not entitle the
claimant to payment, and the Custodian could refuse payment for reasons to be
The claim of the appellant, based on the
first decree passed in his favour, was registered by the Custodian. But in June
1950 the Custodian held that the evacuee property in question in the present
case belonged to the wives of the judgment-debtors (namely, Mohd. Sabar and
Butt). He further directed the appellant to
go to the civil court to Yet the release-deeds set aside. On November 28.
1955. the appellant filed the suit out of
which the present appeal has arisen in the court of the subordinate Judge First
Class, Delhi, claiming that the release-deeds in question were of no effect a
being in fraud of the creditors. He claimed a declaration that the building in
suit belonged to Mohd. Sabar and Noor Mohd. Butt and not to their wives and
that the release-deeds of April 1947 were fictitious and fraudulent and
intended to defeat and delay the creditors and were not binding on the
appellant. He also claimed that the Custodian was bound to open the account of
the income of the said building in the names of Mohd. Sabar and Noor Mohd. Butt
and the proceeds of the said building were bound to be adjusted against the
claims of the appellant.
The suit was resisted by the Custodian and
the Union of India. Their case firstly was that the civil court had no
jurisdiction to entertain the suit. Secondly, it was pleaded that the property
in dispute which was a building in the city of Delhi had been acquired by the
Central Government in pursuance of a notification issued on June 3, 1955, under
s. 12 of the Displaced Persons (Compensation and Rehabilitation) Act. No. 44 of
1954. (hereinafter referred to as the 1954-Act) and therefore the appellant
could not get a declaration to the effect that the proceeds of the suit
building should be adjusted against his claim. The appellant had also pleaded
in his plaint that the acquisition of the building by the notification of June
1955 was subject to his rights and that in
any case the notification and s. 12 of the 1954-Act were ultra vires.
Originally, the trial Court dismissed the
suit holding that as the property in suit had been acquired by the Central
Government by the notification dated June 3, 1955, the appellant could not
claim to proceed against the property or its income. The appellant went in
appeal and the appellate court remanded the suit on the ground that the
appellants plea that the notification 500 and s. 12 of the 1954-Act were ultra
vires had, not been decided. When the suit went back for re-trial on this
issue, the appellant applied for transfer under Art. of the Constitution to the
High Court praying that the constitutional issue be first determined by the
This application was allowed and finally the
constitutional question relating to the validity of s. 12 of the 1954 Act was
considered by a Division Bench of the High Court. It may be mentioned here that
it had been decided by the Subordinate Judge that the civil, court had
jurisdiction and that matter is not in dispute before us. When the matter came
to the High Court, the appellant further challenged the amendment made to the
1950-Act by which cl. (m) of s. 10(2) was amended as ultra vires. Reliance in
this connection was placed on Art. 19 of the Constitution and also on Art. 14.
The High Court held against the appellant on
both points and sent the case back to the trial court for further consideration
in the light of its judgment on the constitutional issues that were raised. The
appellant then applied to the High Court for grant of a certificate to appeal
to this Court, which was refused. Thereupon the appellant applied for and
obtained special leave from this Court-, and that is how the matter has come up
The same two points which were urged before
the High Court have been raised before us on behalf of the appellant. So far as
the first point relating to the invalidity of the amendment to s. 10(2)(m) is
concerned, the matter is now of academic interest in view of the decision of
this Court in Raja Bhanupratap Singh v. Assistant Custodian Evacuee Property
U.P.(1). It was held by the Court that "the power to pay the evacuee's
debts was derived both under cls. (m) and (n) of s. 10(2). Therefore the
deletion from cl. (m) of the Custodian's power to pay the debts, by the
Amending Act of 1956, and the consequential deletion of r. 22 of the Rules
framed under the Act. by which 'a machinery was provided for exercising that
power did not affect the power which is conferred by S. 10(2) (n) and by S.
10(1). The power to administer, under S. 10(1) is not merely a power to manage on
behalf of the evacuee so as to authorise the Custodian only to recover and
collect the assets of the evacuee; it includes power to discharge his
obligations as well, to pay such debts which, in the opinion of the Custodian,
are binding upon the evacuee". This Court further held that the decree of
the civil court was not decisive of the question whether a person making a
claim was entitled to the money claimed by him; it was for the Custodian to
determine whether he was so entitled. In view of this decision it is
unnecessary to express any opinion as to the invalidity of the amendment of
cl.(m) of S. 10(2) for the amendment made no difference to the legal (1) 
1 S.C.R. 304.
501 position as the power of the Custodian to
pay the debts of the evacuee still remained, unimpaired. If be was of opinion
that the debts were genuine, he could pay them.
This brings us to the main question that has
been argued in the present appeal, namely, that s. 12 of the 1954-Act is
invalid because it is an infringement of the right to hold property which the
appellant has under Art. 19(1)(f) of the Constitution and is not saved as a
reasonable restriction thereon. The argument is put thus. The appellant had
advanced money to the two evacuees, namely. Mohd. Sabar and Noor Mohd. Butt. On
the basis of the loan, be had obtained a decree in January 1950. He had the
power to execute that decree against the property of his judgment debtors. By
taking away the property of the judgment debtors, ,After they bad become
evacuees and by vesting that property free from all encumbrances in the Central
Government under s. 12 of the 1954-Act the appellant's right to proceed against
that property had disappeared. Therefore s. 12 of the 1954-Act was violative of
Art. 19(1)(f). as the appellant's holding of the decree had been rendered
illusory. Reliance in this connection is placed on four decisions of the
Supreme Court of the United States of America. namely, (i) Von Hoffman v. The
City of Quincy(1), (ii) Ranger v. City of New Orleans,(2) (iii) Peirce Coombes
v. Milton E. Getz(3) and (iv) W. B. Worthen Co. v. Mrs. W.
D. Thomas(4) Before we consider the argument
raised before us we may say at once that the four cases on which reliance has
been placed on behalf of the appellant are entirely beside the point and of no
assistance. These cases were based on a provision in Art. 1, s. 10 of the
American Constitution which inter alia lays down that "no State
shall...... pass any law impairing the obligation of contracts.........There is
no such provision in our Constitution and.therefore the appellant cannot be
beard to say that as s. 12 of the 1954Act impairs the obligation of the
contract between him and the two evacuees, the section is bad.
Now let us turn to the argument based on Art.
19 (1)(f). It is clear to us that the argument as put forward on behalf of the
appellant is fallacious and untenable. Section 12 of the 1954-Act does not in
any manner affect the decree held by the appellant against Mohd. Sabar and Noor
All that it provides is that the property,
which upto the time the Act of 1954 was passed, was in law the property of the
evacuees, though it was under the administration of the Custodian and vested in
him for that purpose under the 1950Act, would on a notification issued under s.
12 of the 1954Act become the property of the Central (1) 18 L.Ed. Wallace 403.
(2) 26 U.S., S.C.R. 132.
(3) 76 L.Ed. 866.
(4) 78 L.Ed. 1344.
502 Government and the right, title, interest
of the evacuee in such property would thereupon be extinguished and the
property shall vest absolutely in the Central Government free from all
encumbrances. At no time did the appellant have any right whatsoever in the
property which vested in the Central Government on the issue of the
notification under s. 12. It may be that if the owners had not become evacuees
and if the property had not been declared evacuee property, the appellant might
have proceeded against that property in execution of his decree. It may also be
that he cannot do so now after the said notification under s. 12.
But s. 12 does not in our opinion interfere
with the appellant's right to acquire, hold and dispose of his property, namely
the decrees against Mohd. Sabar and Noor Mohd. Butt. As the appellant had no
interest in the property in suit, the fact that it was acquired by the Central
Government by a notification under s. 12 of the 1954-Act did not in any way
affect the appellant's right to acquire, hold and dispose of his property. In
the circumstances, the appellant cannot claim protection under Art. 19(1)(f) at
all with respect to the property in suit and it is not necessary to consider
whether S. 12 could be saved under Art. 19(5). We therefore agree with the High
Court that the appellant cannot claim that s. 12 is ultra vires Art. 19(1)(f)
and therefore the notification made thereunder affects his fundamental right to
acquire, hold and dispose of property.
Further the argument that s. 12 is bad under
Art. 14 has also no force. The contention under this head is that the creditors
who have decrees against non-evacuees can execute their decrees against the
properties of non-evacuees, but the creditors having decrees against evacuees
cannot execute them against their properties after they had vested in the
Central Government by a notification under s. 12 of the 1954-Act; and this
amounts to discrimination under Art. 14.
But it is well-settled that the Constitution
does not contemplate equality of all laws or application of all laws equally to
every person. There is a clear classification between evacuee property and
non-evacuee property. There is a clear nexus between the object to be achieved
by the enactment of the 1954-Act, namely, rehabilitation of evacuees from
Pakistan and the provision in s. 12 by which the property of evacuees in India
is to be utilised for such rehabilitation. There is therefore. no infringement
14 in the circumstances.
Lastly it is urged on behalf of the appellant
on the basis of the decision of this Court in Raja Bhanupratap Singh(1) that
the appellant was entitled to ask the Custodian to consider his case under s.
10(2) (n) read with s. 10(1) of the 1950-Act, and for that purpose it is
necessary to decide the main question raised in the suit, namely, that the
release-deeds of 1947 in favour of the wives (1)  1 S.C.R. 304 503 were
of no effect and therefore the property, though evacuee property, was the
property of the judgment-debtors of the appellant, namely, Mohd. Sabar and Noor
Mohd. Butt. It is also pointed out that the notification of June 3, 1955 was
only with respect to immovable property and there was nothing to show that the
Central Government had issued a notification under s. 14(1)(b) of the 1954-Act
relating to cash balance, if any, lying with the Custodian on the date the
property was acquired. It is urged that all that the notification of June 3,
1955 means is that as from that date no action could be taken against the
property in suit or its income. But if there was any money with the Custodian
on the date of vesting and if no order had been passed in respect thereof under
s. 14(1)(b), the appellant would be entitled to ask the Custodian to consider
whether he should be paid anything out of the moneys lying with the Custodian
provided he could establish that the property was the property of his
judgment-debtors, namely, Mohd. Sabar and Noor Mohd. Butt and not of their
wives. The declaration that the appellant sought was wide in terms in as much
as he claimed that he was entitled to have his claim adjusted against the
proceeds of the said building and these proceeds will include any income of a
period before the date of vesting under the notification under s. 12. It is
urged that as such it is necessary to decide the issue whether the release
deeds of April 1947 were fictitious and fraudulent intended to defeat and delay
the creditors and therefore the property belonged to Mohd. Sabar and Noor Mohd.
Butt. If that is held in his favour by the civil courts he would be entitled to
go to the Custodian and ask him to pass an order in his favour under s.
10(2)(n) read with s. 10(1) and pay him out of the moneys lying with him on the
date the property vested in the Central Government under the notification under
We are. of opinion that there is force in
Though the appellant cannot claim to proceed
against the property in suit or its income after the date on which it vested in
the Central Government by virtue of the notification under s. 12, he can askthe
Custodian to pay him out of the moneys lying with him on the date of such
vesting if he can satisfy him in the manner provided in s. 10(2)(n) read with
s. 10(1) of the 1950-Act. We therefore direct that when the case goes back to
the trial court as ordered by the High Court, the trial court will decide the
issue whether the deeds of release of April, 1947 are fictitious and fraudulent
intended to defeat and delay the creditors and not binding on the appellant. If
the trial court decides in favour of the appellant it will then be open to him
to approach the Custodian under s. 10(2)(n) read with s. 10(1) for such orders
as the Custodian thinks fit to pass with respect to moneys, if any, lying with
him on the date of vesting. It may be mentioned that learned counsel for the
appellant submitted that this property in fact 504 vested in the Central
Government by some notification in 1958 and not by the notification dated June
3, 1955, as mentioned in the plaint. On the other side it has been submitted
that some orders have been passed by the Central Government under S. 14 (1)(b).
These are matters which may require to be gone into by the trial court and for
that purpose it may be necessary to amend the plaint and the written statement,
and this we permit.
We therefore dismiss the appeal subject to
the observations made above. In the circumstances we order parties to bear
their ,own costs of this Court as also of the High Court.
Costs of other -courts will abide the final
V.P.S. Appeal dismissed.