Report No. 70

5.10. Gist of section 3, Act of 1895.-

By the Government Grants Act, 1895, section 3, grants and gifts by or on behalf of the Government are subject to special rules. The Bill was originally framed as an amendment of the Transfer of Property Act. But since its object was to also over-ride limitations supposed to be imposed otherwise than by that Act, it was considered desirable to introduce it as a separate self-contained Bill.

Section 3, in particular, provides that all provisions, restrictions, conditions and limitations whatever contained in any such grant or transfer (grants and gifts made by or on behalf of the Government), shall be valid and take effect according to their tenor, any rule of law, statute or enactment of the legislature to the contrary notwithstanding. The Act was expressly made retrospective. The effect of the Act-to give a few important illustrations-is to empower the Government to create estates unknown to the Hindu law1 or the Muslim law2.

1. Sheo Singh v. Raghubansh Kunwar, ILR 23 All 634 (653).

2. Hapi Mohd. v. Egambara, (1907) 2 Mad LT 55.

5.10A. Construction of 1895 Act.-

General rules of construction will, of course, apply. Thus, the question whether a grant is permanent or personal must, in a great measure, depend upon its terms. But it would appear that in the construction of terms of a Government grant, recourse can be had to the surrounding circumstances and the object for which the grant was made1.

1. Krishna Rao v. Rangarao, 4 Born HC Reports App Cas 1 (24).

5.11. A restriction or limitation, if clearly intended to be for a special purpose, would nevertheless be enforceable by the Government, though it could not be availed of by a third party.

5.12. So, where the grant was resumable if required for government purposes, and the Government had reserved ownership therein, the Court held1 that the propriety of resumption could not be questioned, as it fell within the terms of the grant. By a sand of 1862, the Government granted to one A in consideration of his personal military services, a village revenu-free "to remain in the family of the grantee-on his demise subject to assessment," and the question turned upon what was intended to be conveyed by term "family", and the Court held that it must be taken to be employed in its restricted sense, as meaning "the wife and children" of the grantee, and not in the more extended sense of a household comprising all the blood relations of the man2.

1. Sapurlo v. Secretary of State, ILR 36 Born 438.

2. Jaimal Singh v. Gurmukh Singh, (1910) PR No. 20.

5.13. It would appear that in England Crown1 grants must be in writing. There is no such restriction in India, since no form is prescribed by the Government Grants Act, 1895. The Transfer of Property Act does not apply to Government grant- which is the reason why in a Calcutta case2 it was held that a grant can be made even by a letter from the Agent to the Governor General to the grantee.

1. Coke, 3 Inst. 71, cited by Gour.

2. Hassan Ali v. Chutterput, 1892 ILR 23 Cal 742.

5.14. So, again, in the absence of any procedure prescribed by law for the resumption of government grants, it is manifestly proper and convenient that a notice should be given, even though it be not strictly necessary1.

1. Thomas v. Sherwood, LR 9 PC 142 (148).

5.15. Equitable principles and Government Grants.-

This does not mean that equitable principles generally governing the transfer of property-even those codified in the Transfer of Property Act-would not apply to such grants. When there is nothing in the Government Grants Act or in the grant made thereunder to the contrary, such principles can appropriately be applied. Thus, where a man spends money on the improvement of land granted by the Government under an expectation of an interest therein created or encouraged by the grantors, he would be no worse off than if his grantors had not been the Government. Moreover, as regards situations governed by statute, sometimes particular Act itself may provide that it applies to the Government1.

1. Municipal Corporation v. Secretary of State, ILR 29 Born 588; Secretary of State v. Dattatraya, ILR 26 Born 271.

5.16. Rent Acts.-

Another important modification of the rights which would otherwise flow under the Act should be noticed at this stage. With the emergency of the problem of scarcity of accommodation, it became necessary after the first world war to pass legislation for the control of rents and eviction of tenants. While such legislation does not, in terms, repeal the Transfer of Property Act, the effect of the material provisions is to impose restrictions on the right of the landlord in respect of a tenancy governed by the Act, both as regards the quantum of the rent and as regards eviction of the tenant. Consequently, the legislature also considered it necessary to make detailed provisions as to the enforcement of the statutory rights so created in favour of the tenant and other matters.

5.17. The direct impact of such legislation is to modify the provisions of the Transfer of Property Act relating to leases. But, since what has come to be known as a "statutory tenancy" comes into being under the Act for the control of rents and eviction, the question how far such statutory tenancy is itself property would naturally arise1. In this sense, the juristic importance of such legislation transcends the narrow sphere of leases and could embrace the whole of the law of property.

While the Transfer of Property Act is the general law, the Rent Control Act is a special and local enactment overriding the provisions of the general law so far as it is in conflict therewith. A lease may be terminated under section 106 read with section 111 of the Transfer of Property Act, but the lessee is still not liable to ejectment unless the conditions laid down in the Rent Control Act are satisfied.

1. See Chapter 1, supra.

5.17A. Damdupat.-

There remains to be discussed yet another matter pertaining to the scope of the Act. It relates to a matter arising out of Hindu law. It is not very clear whether the rule of Hindu law prohibiting a creditor from recovering, at one and the same time, as interest, an amount more than the principal-the rule popularly known as Damdupat-is still operative in respect of mortgages.

The matter is not governed by the Civil Procedure Code in a direct manner, since that Code does not deal with the substantive law of interest for the period prior to the institution of the suit. The Interest Act, 1839 also gives no specific guidance on the subject. It is, therefore, a matter of investigation whether any such rule exists.

5.18. Section 4 of the Transfer of Property Act provides that the chapters and sections of that Act which relate to contracts shall be taken as part of the Indian Contract Act. From this section, it would appear that the rule would not apply to mortgages. In its essence, a mortgage debt, or for that matter, any debt, is a pecuniary obligation arising under a contract, express or implie-leaving aside debts arising by operation of law. Under the Hindu law of contract, the rule did apply to debts under mortgages and pledges and other loans.

5.19. Damdupa-Rationale.-

In a Bombay case1, West J. had occasion to consider the rationale of the rule. The precise question related to its applicability to proceedings in execution. West J. held that there is no authority for limiting the amount recoverable in execution of a decree by any such rule. The following observations explain the rationale of the rule:-

"As regards purely private transactions, the law for the protection of the weaker party controls his freedom of contract in the way to which we have referred, or, at least, refuses to enforce the debtor's engagement by means of a duty imposed on the Courts of exercising their powers of coercion to give effect to what it presumes to be an extortionate or unduly rigorous bargain. But the same reason, it is obvious, does not apply to the execution of a decree of a Civil Court. In making such a decree the Judge is not liable, as the debtor is supposed to be, to undue pressure on the part of the creditor."

1. Balkrishna v. Gopal, 1875 ILR 1 Bom 72 (73).

5.20. On the question with which we are immediately concerned, the High Court of Bombay has taken the view that the rule applies as much to secured debts as to non-secured debts. Thus, in a Bombay case1, while holding that the rule applies in all cases as between the Hindu debtors and creditors in respect of simple debts as also in respect of mortgage debts, it was also held that it does not apply where the mortgagee has been placed in possession and is accountable for profits received by him as against the interest due. But, where those profits are, by the terms of the mortgage, received for only a portion of the mortgage debt, the general rule of damdupat will govern the mortgage accounts.

1. Sundarabai v. Jayavant Bhikaji Nadgowda, 1899 ILR 24 Bom 114 (119) (Parsons & Ranade, J).).

5.21. In a Calcutta case1, it was held that the rule applies until the matter travels from the region of contract to that of decree. On this point, an earlier judgment of Woodroffe J.2 was followed. In Madras3, it has been held that the rule does not apply to mortgages governed by the Transfer of Property Act. The judgment does not discuss the position taken in Bombay. There seems to be some disparity between the Bombay view and the Madras view.

1. Nanda Lal Roy v. Dhirendra Nath, 1913 ILR 40 Cal 710: ILR 24 Born 114 (119) (Parsons & Ranade, JJ.).

2. Hari Lal Mullick (in re:), 1906 ILR 33 Cal 1269 (1276).

3. Madhwa Sidhanta Onahini Nidhi v. Venkataramanjaht Naidu, 1903 ILR 26 Mad 662.

5.22. Recommendation to abrogate the rule of Damdupat in relation to mortgages governed by the Act.- Having regard to the fact that the true position is not evident from the Transfer of Property Act, it is, in our view, desirable to make a specific provision. It could be to the effect that the Act shall not affect the operation of the rule of Hindu law known as Damdupat in regard to areas and persons to which or to whom that rule applies.

Or, in the alternative, the reverse provision should be made, namely, the rule of Hindu law known as the rule of Damdupat shall not apply to mortgages to which the Act applies. We prefer the latter alternative, for the sake of uniformity, and also having regard to the fact that cases where, as a matter of policy, interest should be restricted are, in modern times, amply taken care of by legislation for the relief of indebtedness or the Usurious Loans Act or the Money Lenders Act. We recommend that a suitable amendment implementing this approach should be incorporated as section 2A, somewhat on the following lines:-

"2A. The rule of Hindu law known as the rule of Damdupat shall not apply to mortgages of immovable property to which this Act applies."

As to money-lenders, we give below an illustrative list:-

		Act or Regulation No.	Year
1.	Money Lenders Act (Assam)	4	1934
2.	Money Lenders Act (Bihar)	3.	1938
3.	Money Lenders Act (Bombay)	31	1947
4.	Money Lenders Act (Kerala)	35	1958
5.	Money Lenders Act (Madhya Pradesh)	13	1934
6.	Money Lenders Act (Madras)	26	1957
7.	Money Lenders Act (Mysore)	12	1939
8.	Money Lenders Act (Orissa)	3	1939