Rabia Bai Vs. The Custodian-General of
Evacuee Property [1961] INSC 8 (12 January 1961)
SARKAR, A.K.
SUBBARAO, K.
WANCHOO, K.N.
MUDHOLKAR, J.R.
CITATION: 1961 AIR 1002 1961 SCR (3) 448
CITATOR INFO :
R 1961 SC1257 (7) RF 1976 SC2557 (9,25)
ACT:
Evacuee Property-Sale before enactment of
evacuee laws- Confirmation of sale-Vendor intending to defeat apprehended
evacuee laws-Good faith, if lacking-Administration of Evacuee Property Act,
1950 (XXXI of 1950), s. 40(4)(a).
HEADNOTE:
M who had gone to Pakistan in 1947, sold his
property in the State of Madras to the appellant on August II, 1949. At that
time there was no legislation with respect to evacuee property in Madras. On August 23, 1949, the Administration of Evacuee Property (Chief Commissioners
Provinces) Ordinance, 1949 (XII of 1949), was extended to Madras. The appellant
made an application for the confirmation of the sale. Subsequently, M was
declared an evacuee and the property as evacuee property. It was found that M
had entered into the transaction with the object of evading the evacuee law
which it was apprehended, would be extended to Madras. Consequently,
confirmation of the sale was refused under S. 40(4)(a) of the Administration of
Evacuaee 449 Property Act, 950, on the ground that the transaction had not been
entered into in good faith. The appellant contended that there was no lack of
good faith on the part of M as he could not be said to have acted dishonestly
when at the time of the sale no evacuee law had been applied to Madras and that an intention to avoid a future law could not be said to be dishonest.
Held, that the vendor had not entered into
the transaction in " good faith " and the confirmation of the sale
was rightly refused under s. 40(4)(a) of the Act. Having regard to the aim and
object of the emergency legislation a deliberate intention to defeat the
apprehended evacuee law motivating a sale amounted to want of " good faith
". If the vendor sold his property not for any necessity or any other
legitimate purpose but solely with the object of converting it into cash and
removing it to Pakistan, he intended to defeat the provisions of the evacuee
law which he knew was to be extended to Madras soon and he acted dishonestly within
the meaning of S. 40(4)(a).
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 22 of 1956.
Appeal by special leave from the judgment and
order dated July 4, 1954, of the Custodian-General, Evacuee Property, in
Revenue Case No. 427/R/ Judl. /53.
A. V. Viswanatha Sastri and R. Ganapathy
Iyer, for the appellant.
H.N. Sanyal,Additional Solicitor-General of
India, N. S.Bindra and D. Gupta, for the respondent.
1961. January 12. The Judgment of the Court
was delivered by GAJENDRAGADKAR, J.-This appeal by special leave is directed
against the order passed by the respondent, the Custodian- General of Evacuee
Property, New Delhi, in a revision petition confirming the orders of the
subordinate authorities whereby the application made by the appellant for confirmation
of the sale transaction in question has been rejected under s. 40 (4) (a) of
the Administration of Evacuee Property Act, XXXI of 1950. The appellant, Rabia
Bai, who is a citizen of India having her residence at Grange, Yercaud, in the
Salem District, came to know in 1949 that premises No. 20, Godown Street, G.T.,
Madras, was for sale. Since the appellant desired to acquire some immoveable
property she arranged for 57 450 the purchase of the said premises through her
husband. The said premises belonged to one Mohamad Gani Jan Mohamad who had
left for Pakistan in 1947 and had settled there. The said Mohamad Gani Jan
Mohamad had executed a power of attorney in favour of his nephew, Ahmed Abdul
Gani. The said Gani came to Madras in April, 1949, and arranged for the sale,
and as a result of negotiations between him and the appellant's husband the
latter entered into a written agreement with the former on April 29, 1949, to
purchase the said property for Rs. 2,40,000/-. A substantial part of the
consideration to the extent of Rs. 1,50,000 /- was paid immediately in the form
of cash and bank drafts. Thereafter the sale deed was duly engrossed and sent
to Karachi for execution by the vendor. After it was received back duly
executed it was presented at the Collector's Office, Madras, and was duly
stamped on June 27, 1949. Income-tax clearance certificate had, however, to be
obtained before the said document could be registered, and soon after the said
certificate was obtained the document was presented for registration and was
duly registered on August 11, 1949.
The balance of the consideration of Rs.
30,000/- was paid before the registering officer to Mr. M. H. Ganni who also
held a power of attorney from the vendor. That is how the appellant obtained
title to the property in suit. As we will point out the appellant applied for
confirmation of this sale deed and her application has been rejected.
Before we refer to the relevant facts in
connection with the said proceedings it is material to set out very briefly the
history of the application of the evacuee laws to the State of Madras.
Within a fortnight after the registration of
the sale deed in favour of the appellant Ordinance No. XII of 1949 which had
been promulgated on June 13,1949, was extended to Madras on August 23, 1949.
Section 25(1) of the Ordinance imposed restrictions on transfers by evacuees.
In substance this sub-section provided that transfers made by or on behalf of
evacuees of any right or interest in their property after such date as may be specified
in that behalf with reference to any 451 Province by the Central Government by
notification in the official gazette shall not be effective unless they are
confirmed by the Custodian. Section 25(2) provided that an application for
confirmation of such transfer may be made by the transferor or the transferor
or any person claiming under, or lawfully authorised by, either of them to the
Custodian within two months from the date of registration of the deed of
transfer or within two months from the commence- ment of the Ordinance
whichever is later. The proviso to the said sub-section empowered the Custodian
to admit an application even if it was made after the period of limitation
prescribed therefor if he was satisfied that there were sufficient reasons for
doing so, and it imposed on the Custodian an obligation to record such reasons.
Sub- section (3) required the Custodian to hold a summary enquiry into the
application in the prescribed manner, and authorised him to reject the
application for confirmation if he was of opinion that (a) the transaction had
not been entered into in good faith or for valuable consideration, or (b) the
transaction was prohibited under any law for the time being in force, or (c)
the transaction ought not to be confirmed for any other reason. Sub-s. (4)
provides that if the application is not rejected under sub-s. (3) the Custodian
may confirm the transfer either unconditionally or subject to such terms and
conditions as he thinks fit to impose.
Ordinance No. XII of 1949 was, however,
repealed by Ordinance No. XXVII of 1949 which came into force on October 18,
1949. Section 38 of this latter Ordinance corresponds to s. 25 of the earlier
Ordinance except in one material particular. It provides that no transfer of
any right or interest in the property made in any manner whatsoever after the
14th day of August, 1947, by or on behalf of an evacuee as therein specified
shall be effective unless it is con- firmed by the Custodian., In other words,
whereas s. 25 of the earlier Ordinance left it to the Central Government to
specify the relevant date in reference to any Province by notification in the
official gazette, s. 38(1) has prescribed the date for all the Provinces 452
where the Ordinance applied. The rest of the relevant provisions of s. 38 are
the same as those of s. 25 of the earlier Ordinance.
On April 17, 1950, this Ordinance was in turn
,repealed by Act XXXI of 1950 by s. 58. Section 40(1) and (4) are similar to
the relevant provisions of ss. 25 and 38 of the earlier Ordinances. One of the
changes made is in regard to the relevant dates prescribed by s. 40(1). Under
s. 40(1) the transfers which are affected by its provisions are those which are
made after the 14th day of August, 1947, but before the 7th day of May, 1954;
and in respect of them the said section provides, inter alia, that they shall
not confer any rights on the parties thereto, if at any time after the transfer
the transferor becomes an evacuee within the meaning of s. 2 or the property of
the transferor is declared or notified to be evacuee property within the
meaning of this Act unless the transfer is confirmed by the Custodian in
accordance with the provisions of this Act.
Section 40(4) deals with an application made
under sub-s. (1) for the confirmation of the transfer. This sub-section and its
three clauses (a), (b) and (c) correspond to ss.
25(3) (a), (b) and (c) and 38(4)(a), (b) and
(c) of the two earlier Ordinances. Thus it is clear that the relevant
provisions, which conferred power on the Custodian to hold an enquiry on the
application made for the confirmation of the transfer and to reject
confirmation in certain cases, continued to be the same. The position,
therefore, is that Ordinance No. XII of 1949 which was extended to Madras on
August 23, 1949, was in operation only until October 18, 1949. Thereafter
Ordinance No. XXVII of 1949 took its place, and in turn this Ordinance was
repealed by Act XXXI of 1950 on April 17, 1950. The application made by the
appellant for confirmation of her purchase has been dealt with under the
relevant provisions of the Act, and we would therefore refer to the said
provisions hereafter.
On December 19, 1949, the appellant applied
for confirmation of the sale transaction in her favour. This application was
resisted by the tenants who urged several grounds in support of their plea that
the 453 transfer should not be confirmed. It appears that on January 11, 1951,
the Assistant Custodian of Evacuee Property, Madras City, had declared the
property of the vendor to be evacuee property since he was of the opinion that
the vendor's case fell within the four corners of the definition of " an
evacuee " under s. 2(d)(ii) of the Act.
The declaration that the vendor's property
was evacuee property was made under s. 7(1) of the Act. The Assistant Custodian
considered the appellant's application for confirmation of the transfer in the
light of the declaration already made by him that the vendor was an evacuee and
that his property was evacuee property. He referred to the relevant features of
the transaction and came to the conclusion that he would not be justified in
confirming it.
It appears that in reaching this conclusion
he relied on the provisions of s. 40(4)(c) of the Act. In his opinion the
feverish hurry disclosed by the conduct of the vendor attracted the provisions
of s. 40(4)(c). The order refusing to confirm the transaction was passed on
July 31, 1951.
The appellant challenged the correctness of
this conclusion by preferring an appeal before the Custodian. The Custodian found
in favour of the appellant that the sale transaction in question was supported
by valuable consideration; even so he proceeded to examine the question as to
whether it could be said to have been entered into in good faith. In dealing
with this question the appellate authority considered the fact that the vendor
had left for Pakistan in June, 1947, evidently on account of civil disturbances
or in fear of such disturbances and that it was obvious that he was permanently
settled in Pakistan. According to the appellate authority the vendor was
desirous of disposing of his properties in India in order to convert them into
cash and take them away to Pakistan. In this connection reliance was placed on
a letter written by the vendor to Mohideen on July 4, 1949. In this letter the
vendor had stated that " if the matter is delayed there would be many sort
of new difficulties as you know that the Government are passing new rules every
day ". He took the view that this letter 454 clearly disclosed that the
vendor's intention was to dispose of his properties as quickly as possible so
as to evade the restrictions of the evacuee laws which he apprehended would be
extended to Madras any day. this finding the appellate authority came to the
conclusion that the transaction had been entered into otherwise than in good
faith, and so it could not be confirmed under s. 40(4)(a). The appellate
judgment shows that according to the appellate authority the request for
confirmation could be rejected also under s.
40(4)(c) of the Act. This order was
pronounced on February 4,1953.
The appellant then moved the respondent, the
Custodian- General in his revisional jurisdiction. The respondent considered
the matter afresh, and agreed with the finding of 'the appellate authority that
though the transaction was supported by valuable consideration it could not be
said to have been entered into in good faith. In support of this conclusion he
relied on the conduct of the vendor, the haste with which the transaction was
attempted to be completed and the anxiety disclosed by him in his letter to
Mohideen. In substance the respondent came to the conclusion that the vendor
wanted to evade the restrictions of the evacuee law which he knew would soon be
extended to Madras, and that showed that he was not acting in good faith. It is
on this view that the revisional application preferred before him by the
appellant was dismissed by him on July 4, 1954. In his opinion the appellant's
case fell under s. 40(4)(a) of the Act. He did not, therefore, consider the
question about the applicability of s. 40(4)(c).
It is clear that if a transaction is affected
by absence of good faith either in the vendor or the vendee its confirmation
may properly be rejected under s. 40(4)(a); in other words, good faith is required
both in the vendor and the vendee. In that sense the provisions of s. 40(4)(a)
are more rigorous and stringent than those of s. 53(1) of the Transfer of
Property Act. Under the latter section which deals with fraudulent transfers
the rights of a transferee in good faith and for consideration are expressly
protected;
that, 455 however, is not the position under
s. 40(4)(a). Therefore the fact that the appellant paid valuable consideration
for the transaction and is not shown to have acted otherwise than in good faith
in entering into the transaction would not justify her claim for confirmation
of the said transaction if it is shown that the vendor had not acted in good
faith in entering into the said transaction. The fact that consideration was
paid by the appellant and that she was acting in good faith may perhaps be
relevant in determining the character of her conduct in regard to the
transaction; but it would not be relevant or material in determining the
character of the conduct of the vendor in relation to the transfer. This
position is not seriously disputed before us.
Mr. Sastri, however, contends that in
considering the good faith of the vendor it would be necessary to bear in mind
that at the relevant time when negotiations were going on between the parties
in respect of the transaction in question evacuee law had not been applied to
Madras, and so evacuees like the appellant's vendor were absolutely free to
deal with their properties as they liked. He also attempted to argue that even
where the evacuee law applied, the policy adopted by the Government of India
was to confirm transfers made by Mohammedan evacuees in favour of Indian
nationals unless a certificate signed by the prescribed income-tax authority
certifying that the transferor had paid all taxes due from him to the
income-tax department in respect of his property, business or undertaking, or
has made satisfactory arrangements for the payment thereof, had not been
produced, and unless he had failed to pay any other dues outstanding against
him in the Custodian's register in respect of his own property and third party
claims recognised exparte by the Custodian. This argument is based upon a copy
of the press note alleged to have been issued by the Government of India in the
Ministry of Rehabilitation on May 13, 1949. On the other hand, the learned
Additional Solicitor-General has relied on a copy of a circular issued by the
Government of India on March 9, 1950, where it has been stated that the
instructions 456 issued by the Government of India are subject to other
requirements of s. 38(4) of the Central Ordinance No. XXVII of 1949 ; in other
words, whatever may be the nature of the circulars and directions issued by the
Government of India, the appropriate authorities administering the provisions
of the evacuee law had to deal with the matters brought before them under the
relevant provisions of the said law. We do not think we can attach much
importance to the argument that even where the evacuee law applied confirmation
of sale transactions was intended to be automatic subject to the satisfaction
of the two conditions specified in the press note. We are bound to assume that
the question about confirming sale transactions was required to be, and was in
fact, dealt with by the appropriate authorities under the relevant statutory
provisions which were in force at the material time. It is, however, true that
no evacuee law had been extended to Madras at the time when the impugned
transaction was completed, and that naturally raises the question as to whether
if a transaction had been entered into deliberately and consciously with the
object of evading the application of evacuee law which it was apprehended would
soon be extended to Madras, does that fact attract the provisions of s.
40(4)(a) of the Act? As we have already indicated the respondent has answered
this question in the affirmative, and Mr. Sastri contends that this conclusion
is erroneous in law.
Mr. Sastri's argument is that the expression
" good faith " in s. 40(4)(a) should be construed in the sense
attributed to the said expression by s. 3, sub-s. (22) of the General Clauses
Act, X of 1897. The said provision lays down that a thing shall be deemed to be
done in good faith where it is in fact done honestly whether it is done negligently
or not.
The argument is that the vendor could not be
said to have acted dishonestly when no evacuee law applied to Madras, and an
intention to avoid a law which may be applied to Madras in future cannot be
said to introduce an element of dishonesty in his conduct. In our opinion this
argument cannot be accepted. In this connection it is necessary to bear in mind
that s. 3 of the General 457 Clauses Act itself provides that the definitions
prescribed by the said section are applicable " unless there is anything
repugnant in the subject or context ", and so it would not be unreasonable
to hold that the content of the expression " good: faith " would
depend,, substantially on the context of the statute which uses it. In
determining the denotation of the said expression in s. 40(4)(a) it would be
essential to take into account the scope and effect of the main provisions of
s. 40(1). As we have already noticed, this section provides, inter alia, that
no transfer made after the 14th day of August, 1947, shall be effective so as
to confer any rights in respect of the said transfer on the parties thereto if,
at any time after the transfer, the transferor becomes an evacuee within the
meaning of s. 2, or the property of the transferor is declared or notified to be
An evacuee property within the meaning of the Act, unless the transfer is
confirmed by the Custodian in accordance with the provisions of this Act. It
would thus be clear that all transfers made after the 14th day of August, 1947,
but before the 7th day of May, 1954, are hit by this section, and that
obviously would bring within the mischief of the section a large number of
transfers effected at a time when no evacuee law was in force in respect of
them.
Reading s. 40(1) and (4) together it appears
that the transfers hit by the former provision would be valid only if they are
confirmed under the latter provision. It is possible that a transfer made
during the prohibited period may have been entered into in good faith or was
for valuable consideration and did not attract any of the provisions contained
in cls. (a), (b) and (c) of a. 40(4). In such a case merely because it was
affected within the prohibited period it would not become void and the
Custodian may have to confirm it; but where such a transfer attracts the
provisions of s. 40(4)(a) for instance, it would not be affirmed and it would
remain inoperative. This shows that the main object of the Act was to preserve
the property of persons who had migrated to Pakistan till the Government of
India could come to some understanding with the Pakistan Government in regard
to adjustment of claims of Indian 58 458 evacuees in respect of the properties
left by them in Pakistan. The idea then presumably was that the two Governments
should agree on the valuation of the evacuee properties left by evacuees in the
two respective countries and the difference in the said valuation should be
amicably adjusted between them. After such adjustment was made it was intended
to compensate the evacuees in regard to the loss incurred by them in respect of
the properties left by them in the two respective countries. That this
intention did not succeed is another matter. There can, however, be no doubt
about the policy and object of the Act, and in determining the content of the
expression " good faith " in the context of the main provision of s.
40(1) this object and policy of the Act must be borne in mind.
Section 40(4) refers to three kinds of cases
where the transfer may not be confirmed; cl. (a) deals with transactions which
are not entered into in good faith or for valuable consideration; cl. (b) deals
with transactions which are prohibited under any law for the time being in
force; and cl. (c) deals with cases of transactions which are not confirmed for
any other reason. It would thus be seen that the scope of the three clauses is
very wide. It is not only transactions prohibited under any law that fall
within the mischief of s. 40(4); but transactions which are not entered into in
good faith or for valuable consideration also fall within its mischief Now, if
the test prescribed by s. 3(22) of the General Clauses Act as interpreted by
Mr. Sastri is held to be relevant a large number of transactions may have to be
confirmed even though they are shown to have been deliberately entered into
with the object of evading the provisions of s. 40(1). In our opinion, the fact
that the evacuee law had not been extended at the relevant time to Madras would not be decisive in the matter. It was well known that the said law was being
extended from Province to Province as it was deemed necessary, and indeed the
letter written by the vendor to Mohideen clearly shows that the vendor knew as
much. The history of the evacuee laws passed in several States and by the 459
Central Government and Legislature from time to time shows that the
Legislatures were attempting to meet with an unprecedented problem, and the
laws passed by them in India and Pakistan at the material time made it
perfectly clear to the evacuees from both the countries that the two countries
were adopting appropriate legislative measures to protect the evacuee
properties and prevent their transfers.
Therefore, if a vendor sold his property not
for any necessity or for any other legitimate purpose but solely with the
object of converting it into cash and removing it to Pakistan, that clearly was
intended to defeat the provisions of the Act which he knew would soon be
extended to Madras, and so it would be difficult to hold that he was acting
honestly within the meaning of s. 40(4)(a) of the Act. An intention to defeat
the provisions of the Act cannot be said to be honest in the context. If
despite his intention to defeat the application of the Act a transaction is
upheld as entered into in good faith many transactions may escape the application
of s. 40(1), and that clearly would defeat the purpose of the Act. It is
significant that though the provisions of s. 40(1) are drastic they have been
deliberately made retrospective, and that emphatically brings out the aim and
object of the Act; and it would be unreasonable-to ignore this aim and object
of the Act in construing the expression " good faith " in s.
40(4)(a). We would, therefore, hold that having regard to the aim and object of
the emergency legislation with which we are concerned in the present case the
expression " good faith " used in s. 40(4)(a) has been property
construed by the respondent when he held that a deliberate intention to defeat
the apprehended application of the evacuee law which was responsible for the transfer
in question brings the transfer within the' mischief of s. 40(4)(a).
The result is the appeal fails and is
dismissed with costs.
Appeal dismissed.
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