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PETITIONER: MOHANLAL ISHVARDAS PANCHAL

       Vs.

RESPONDENT: UNION OF INDIA & ORS.

DATE OF JUDGMENT28/08/1974

BENCH: MATHEW, KUTTYIL KURIEN BENCH: MATHEW, KUTTYIL KURIEN RAY, A.N. (CJ)

CITATION:  1974 AIR 2133            1975 SCR  (1) 950  1974 SCC  (2) 570

ACT: Administration of Evacuee Property Act, 1950 S. 2(1)(1A)--S. 10(2)

HEADNOTE: One of the shareholders of K company, of which the appellant was  the Chairman, was B company holding 12,100 shares in  K Company.   The  capital of B company was made up  of  10,000 shares, of which 9998 shares were held by three shareholders and  the  other two by two shareholders of one  share  each. The Custodian of Evacuee Property claimed that since all the shareholders  of  B company had become evacuees  the  shares held  by  that  company  in K  company  had  become  evacuee property.   He further claimed that the shares already  held by  him  in K company together with the 12,100 shares  of  B company constituted more than 51% of the share capital of  K company  and that therefore, he was entitled to take  charge of  the management of the whole of the affairs of K  company under  a.  10(2)  (11)  of  the  Administration  of  Evacuee Property Act 1950.  The appellant challenged this claim. The High Court held that assuming that all the  shareholders of B company had become evacuees that fact could not make  B company, which had a different corporate personality of  its own, an evacuee, and that the shares held by B company in  K company could not be evacuee property. On  appeal the Supreme Court remitted the case to  the  High Court  to  consider  the question if all  or  a  substantial number of shareholders of B company became evacuees. Without  going into this question the High  Court  dismissed the writ petition. In  April,  1951 the definition of  "evacuee  property"  was amended  by  s. 2(f) (IA) of the Administration  of  Evacuee Property  (Amendment)  Act, 1951 with  retrospective  effect from  April, 1950.  By this definition evacuee property  was made to include property belonging to a company of which not less  than 51 per cent of the shares were held by  evacuees. By  Act  11  of  1953 that definition  was  deleted  and  s. 10(2)(11) was inserted. On  appeal  to this Court it was contended  that  the  three shareholders owning 9998 shares were declared evacuees  only in  1955 and that since these shareholders  became  evacuees subsequent to the date of the Amendment Act of 1953 when the

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definition clause inserted by the Amendment Act of 1951  was deleted, the shares held by B company in K company would not become evacuee property, Remitting the case, to the High Court HELD  : The point of time at which the  shareholders  should have  been evacuees is when the Amendment Act of  1951  came into force or any time while that Act was in operation.   In the  absence of a finding on the question when  they  became evacuees it would be difficult to hold that the shares  held by B company in K company would be evacuee property.  It is, therefore, necessary that 951 the  High  Court  should enter a  finding  on  the  question whether  these three shareholders were evacuee at any  point of  time  before or during the period  when  the  definition clause 2(f)(1A) was in operation [954 H-955D]

JUDGMENT: CIVIL  APPELLATE  JURISDICTION : Civil Appeal  No.  1991  of 1972. Appeal from the Judgment & Order dated the 12th/13th  April, 1972 of the Gujarat High Court in Special Civil Appln.   No. 1055/ 1965. I.   N. Shroff, for the appellant. L.   N. Sinha, Solicitor General for India, P. P. Rao and S. P. Nayar for the respondent Nos 1-3. K.   T..  Hathi,  A.  R.  Chaphekar and  P.  C.  Kapur,  for respondent No.5. The Judgment of the Court was delivered by MATHEW,  J. The appellant was the chairman of the Board   of Directors of Kathiawar Industries Limited. The Custodian  of Evacuee Property sought to proceed against the company under s.  10(2)(11)of the Administration of Evacuee Property  Act, 1950 (hereinafter   referred to as the Act’). The  appellant challenged the validity of proceedings before the High Court of   Gujarat  by  a  petition  under  Article  226  of   the Constitution.  The  High  Court  allowed  the  petition  and quashed  the  proceedings. An appeal against the  order  was preferred  to this Court. The Court set aside the order  and remitted  the case to the High Court for a  fresh  decision. The  Court thereafter dismissed the writ petition and,  this appeal, by certificate, is against that order.  The issued share capital of Kathiawar Industries is Rs.  50 lakhs.  The total number of shares subscribed,  preferential as well as ordinary, of the company is 1,21,961. One of  the shareholders  of that company is a company by  name  Bhawani Investment Company Ltd. That  company held 12,100 shares  in Kathiawar  Industries. The case of the respondents was  that all  the  shareholders  of Bhawani  Investment  Company  had become  evacuees and, therefore, the shares held by  Bhawani Investment  Company  in  Kathiawar  Industries  had   become evacuee  property  and  as  51 per cent  of  the  shares  in Kathiawar  Industries had become vested in the Custodian  of Evacuee Property, the Custodian was entitled to take  charge of the management of the whole affairs of the company  under s. 10(2) (11) of the Act. The appellant denied the fact that all  the  shareholders  of Bhawani  Investment  Company  had become evacuees.  The High Court did not go into that 952 question.  It assumed, for the purpose of the case, that all the  shareholders of Bhawani Investment Company  had  become evacuees,  and  then it said that fact cannot  make  Bhawani Investment   Company  an  evacuee.   It  observed  that   an

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incorporated company has a personality of its own, different from  the personalities of the shareholders and that  shares held   by  the  Bhawani  Investment  Company  in   Kathiawar Industries cannot be evacuee property as Bhawani  Investment Company cannot be an evacuee, and allowed the writ petition. It  was  against  this decision  that  the  respondents  had appealed  to this Court.  The Court held that(1)if all or  a substantial  number  of shareholders in  Bhawani  Investment Company became evacuees, the shares held by that Company  in Kathiawar  Industries would be evacuee property.  It was  in these  circumstances that this Court set aside the order  of the High Court and directed that Court to consider the ques- tion afresh and dispose of the case. Section  2(f)  of the Act, as  originally  enacted,  defined evacuee property’ as follows:               "Evacuee  property means any property  of  any               evacuee  (whether held by him as owner  or  as               trustee or as a beneficiary or as a tenant  or               in  any  other  capacity,  and  includes   any               property which has been obtained by any person               from an evacuee after the 14th day of  August,               1947,  by  any mode of transfer which  is  not               effective by reason of the provision contained               in section 40   but does not include.               (i)   any  ornament and any  wearing  apparel,               cooking vessels, or other household effects in               the immediate possession of an evacuee;               (ii)any  property belonging to  joint  stock               company  the  registered office of  which  was               situated  before the 15th day of August,  1947               in any place now forming part of Pakistan  and               continues  to  be so situated after  the  said               date." The definition of the term evacuee property’ was amended  by the Administration of Evacuee Property (Amendment) Act, 1951 on  April 28, 1951 with retrospective effect from April  17, 1950 and that definition was as follows;               "Evacuee property means any property in  which               an evacuee has any right or interest  (whether               personally or as a trustee or as a beneficiary               or  in  any other capacity) and  includes  any               property-               (1) See Union of India and Others v.  Mohanlal               Ishvardas Panchal & Another               A.I.R. 1971 S. C. 139.                953               (1)   which  has been obtained by  any  person               from an evacuee after the 14th day of  August,               1947,  by  any mode of transfer,  unless  such               transfer  has been confirmed by the  Custodian               who,               (1A)  belonging  to a joint stock  company  of               which not less than fifty-one per cent of  the               shares  are held by evacuees,  notwithstanding               that the registered office of such company  is               situated  in  any part of the  territories  to               which this Act extends, or               (2)   belonging  to any person who, after  the               18th day of October 1949, has done or does any               of the acts specified in clause (e) of section               2,  or in which any such person has any  right               or  interest, to the extent of such  right  or               interest, but does not include-               (i)   any  ornament and any  wearing  apparel,               cooking vessels or other household effects  in

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             the immediate possession of. an evacuee;               (ii)any property belonging to a joint  stock               company,  the registered office of  which  was               situated before the 15th day of August,  1947,               in any place now forming part of Pakistan. and               continues  to  be so situated after  the  said               date." By Act 11 of 1953, the Act was further amended by  repealing s.2(f) (1A) and inserting s. 10(2) (11).  The provisions  of the  Amending  Act  of 1953  were  not  given  retrospective effect. It  was  by  the  amendment in 1951  to  the  Act  that  the definition of evacuee property was made to include  property belonging to a company of which not less than 51 per cent of the shares were held by evacuees [see s. 2(f)(I-A] By Act 11 of  1953 that definition clause was deleted.   According  to Mr.  Shroff, counsel for the appellant, the shares  held  by Bhawani Investment Company in Kathiawar industries were  not evacuee  property  during  the period  when  the  definition clause, namely, s.2(f)(1A) was in operation, as three of the shareholders  in Bhawani Investment Company, who held  9,998 shares  were declared evacuees only in 1955.   He  submitted that  it  is  by virtue of s. 2(f) (1A)  that  the  property belonging to a company of which not less than 51 per cent of the  shares  were  held by  evacuees  would  become  evacuee property   and,  therefore,  it  is  only  if  these   three shareholders  in  Bhawani investment Company  were  evacuees during the period when s.2(f)(1A) remained in operation that the  shares held by Bhawani Investment Company in  Kathiawar industries would be evacuee property and as s.2(f) (1A)  was deleted  by the Amendment Act 11 of 1953 before they  became evacuees,  the shares held by Bhawani Investment Company  in Kathiawar Industries never became evacuee property.  Counsel relied  on the orders of the Assistant Custodian  passed  in 1955  declaring  their  property  as  evacuee  property   to establish that they became evacuees only in 1955. 954 In  order  that  the  Custodian  may  take  charge  of   the management of a company under s.10(2) (11) of the Act, it is necessary  that  the evacuee property which vested  in.  the Custodian  must consist of 51 percent or more of the  shares in the company.  Section 10(2) (11) roads               "Without  prejudice to the generality  of  the               provisions  contained in sub-section (1),  the               Custodian   may,  for  any  of  the   purposes               aforesaid:                (11)  in any case where the evacuee  property               which has vested in the Custodian consists  of               fifty-one per cent or more of the shares in  a               company, the Custodian. may take charge of the               management of the whole affairs of the company               and exercise in addition to any of the  powers               vested  in him under this Act, all or  any  of               the  powers of the directors of  the  company,               notwithstanding that the registered office  of               such  company  is situate in any part  of  the               territories  to  which this Act  extends,  and               notwithstanding   anything  to  the   contrary               contained in this Act or the Indian  Companies               Act,  1913 or in the Articles of  Association.               of the- Company:               Provided  that  the Custodian shall  not  take               charge  of  such  management  of  the  company               except  with  the  preVious  approval  of  the               Central Government."

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There is no dispute that if all the shareholders in  Bhawani Investment  Company were evacuees when the Amendment Act  of 1951  came into force with retrospective effect, the  shares held  by Bhawani Investment Company in Kathiawar  Industries would  be  evacuee property.  There can also be  no  dispute that  if they became evacuees at any time during the  period when that Act was in operation those shares will be  evacuee property.   Therefore,  the question  for  consideration  is whether  the  three shareholders who held 9998  shares  were evacuees   when  the  definition  clause  inserted  by   the Amendment Act of 1951 came into force or became evacuees  at any time when that Act was in operation.  As already stated, the  contention  of Mr. Shroff was that they  were  declared evacuees only in 1955 and, therefore, they were not evacuees before  or  during  the period when  the  definition  clause inserted by the Amendment Act of 1951 was in force.               The material portion of the definition of  the               term evacuee’ in s.2(d) provides:               ’evacuee’ means any person,-               (i)who,  on account of the setting up  of  the               Dominion  of India and Pakistan or on  account               of  civil  disturbances or the  fear  of  such               disturbances,  leaves or has, on or after  the               1st  day of March, 1947, left any place  in  a               State  for any place outside  the  territories               now forming part of India." There  is  no  finding  by the High  Court  that  the  three shareholders  left  any  place in the State  for  any  place outside  India  before the Amendment Act of 1951  came  into force  or,  at  any point of time while  that  Act,  was  in operation.   It  is only if there is a  finding  that  these shareholders were evacuees at any time before or during  the period when 855 the Amendment Act of 1951 was in operation that it could  be said  that the shares held by Bhawani Investment Company  in Kathiawar Industries would be evacuee property by virtue  of s.2(f)(1A). In other words, the point of time at which these shareholders  should  have been evacuees in order  that  the shares  held  by  Bhawani Investment  Company  in  Kathiawar Industries be evacuee property is when the Amendment Act  of 1951  came  into  force or any time while that  Act  was  in operation.  In the absence of a finding on the question when they  became  evacuees,  it is difficult to  hold  that  the shares  held  by  Bhawani Investment  Company  in  Kathiawar Industries  would be evacuee property.  If, as a  matter  of fact,  these shareholders became evacuees subsequent to  the date of the Amendment Act of 1953 when the definition clause [2(f)  (1A)]  inserted  by the Amendment  Act  of  1951  was deleted,  the shares held by Bhawani Investment  Company  in Kathiawar Industries. would not become evacuee property.  It is, therefore, necessary that the High Court should enter  a finding  on  the question whether these  three  shareholders were  evacuees  at any point of time before or  during.  the period  when the definition clause 2(f) (1A)  introduced  by the Amendment Act of 1951 was in operation. Mr.   Shroff contended that even if these shareholders  were evacuees,  during  the relevant period, unless  there  is  a declaration during the period that these shares are  evacuee property under the relevant section of the Act, they  cannot vest  in the Custodian for the purpose of  s.10(2)(11).  The High  Court  will  deal  with the question  in  case  it  is necessary to do so in the light of its finding on the  first point. We, therefore, set aside the judgment of the High Court  and

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remand the case to the High Court.  The cost of this  appeal shall  abide the result of the proceedings before  the  High Court and shall be provided for in the order to be passed by the  High Court.  The interim order made by this Court  will continue until the matter is disposed of by the High  Court. It  is  desirable that the High Court will  dispose  of  the matter as soon as possible. P. B. R.                              Case remanded 956