http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 4  

PETITIONER: NAMDEO

       Vs.

RESPONDENT: COLLECTOR, EAST NEEMAR, KHANDWA & ORS.

DATE OF JUDGMENT22/08/1995

BENCH: RAMASWAMY, K. BENCH: RAMASWAMY, K. HANSARIA B.L. (J)

CITATION:  1996 AIR  973            1995 SCC  (5) 598  JT 1995 (6)   137        1995 SCALE  (4)831

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T      K. RAMASWAMY, J:      Leave granted.      The appellant  is  a  subsequent  purchaser  from  Devi Prakash son  of Laxman Prasad. The case of Rama Krishna, the original owner,  is’ that  he had  obtained loan from Laxman Prasad, admittedly a money-lender, by an oral mortgage of 12 acres and  20 gunthas of land. Laxman Prasad had delivered 4 acres and  odd and got the sale deed executed for 8 acres 30 gunthas of  the land  in the  name of  his  minor  son  Devi Prakash. Therefore,  he comes  within the provisions of M.P. Samaj Ke Kamjor Wargon Ke Krishi Bhumidharakon Ka Udhar Dene Walon Ke  Bhumi Hadapane  Sambandhi  Kuchakron  Se  Paritran Tatha Mukti  Adhiniyam [for  short,  ‘the  Act’].  The  Sub- divisional Officer  by  his  order  dated  August  27,  1982 recorded a finding that:     "Applicant’s witness  No.2  Ram  Krishna      Matharam and  applicant’s  witness  No.3      Kadulal have  supported this  statement.      Alongwith  this,   non-applicant  Eknath      (one of  the subsequent  purchasers) has      admitted  that  upon  execution  of  the      instrument of the transaction possession      continued and remained with Ram Krishna.      It is  thus clear  from the testimony of      these witnesses  that for  several years      after the  transaction effected in 1964,      Ram Krishna  was in  possession  of  the      disputed land.  It is noticeable that in      Khasra   1969-70   also,   his   partial      possession has  been  shown.  Thus  from      these facts  it appears prima facie that      the  transaction   in  question   was  a      prohibited transaction  of loan because,      if it  was a  transaction of  real sale,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 4  

    then Laxman Prasad and Devi Prakash must      have taken  the land in their possession      soon  after   the   execution   of   the      instrument of transaction."      Thus, it was declared that the initial sale dated March 17, 1964  and the  subsequent sale  deed  executed  by  Devi Prakash in  favour of the appellant and another sale deed in favour of  Eknath on  May 23, 1974 are void and directed the appellant and  Eknath to  deliver possession of the lands to Rama Krishna. On appeal it was confirmed. When the appellant and another  challenged under  Article 226 in Misc. Petition No.1276/83 and  another, the  Division Bench  of  M.P.  High Court by  order dated March 4, 1991 upheld the orders of the tribunals. Thus this appeal by special leave.      Shri P.P.Rao,  the learned Senior counsel has contended that the Act has no application for the reason that the land covered by  1964 sale  deed relates  to 12  acres 20 gunthas while the Act would become applicable when sale transactions are covered  within a  specified extent  of land declared in the Act. We find no force in the contention.      Section 2(c) of the Act states that:      (c) "holder of agricultural land" in the      weaker sections  of the  people means  a      holder of  land  used  for  purposes  of      agriculture not exceeding eight hectares      of unirrigated  land or four hectares of      irrigated land  within the State whether      as a  Bhumiswami or  an occupancy tenant      or a Government lessee either in any one      or all of the capacities together within      the meaning of the Code." A reading thereof indicates that a holder of an agricultural land not  exceeding 8  hectares of  unirrigated  land  or  4 hectares of irrigated land within the State as a Bhoomiswami or occupancy tenant or a Government lessee either in any one or  all   of  the   capacities  together   is  a  holder  of agricultural  land.  It  is  seen  that  the  Sub-Divisional Officer  had  recorded  a  finding  that  what  remained  in possession of  Lakshman Prasad and his son Devi Prasad was 8 acres  20   gunthas  and,   therefore,  it   is  within  the specification of  4 hectares  of  irrigated  land.  The  Act thereby clearly  becomes applicable  to the  lands  in  this case.      It is  next contended that the Act applies only to sale transactions  effected  from  the  appointed  date,  namely, January 1,  1971 as  specified in  Section 2(a).  Since  the original transaction had taken place in 1964, the Act cannot be  applied  retrospectively.  It  is  seen  that  the  Sub- Divisional Officer  recorded that though sales were effected only in 1974 but the document which purported to have been a sale  deed   of  1964  was  not  really  intended  to  be  a conveyance. The  finding recorded by the Tribunals below was that Ram Krishna never intended to sell the land; and Laxman Prasad, being a money lender, made the document as if a sale deed, which  was intended  to be  a mortgage  deed.This fact gets corroboration from the finding and revenue entries that the owner  remained in  possession of  the lands. Therefore, even if  the sales  were effected  in 1974,  the Act becomes applicable to such transactions.      The further  contention is  that there was an agreement of sale  by Devi  Prasad with the appellant in the year 1969 and that  sale deed  was executed  in 1974, it dates back to the  date   of  agreement   and,  therefore,   the  Act   is inapplicable.  We  find  no  force  in  the  contention.  An agreement of  sale does  not  convey  any  right,  title  or

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 4  

interest. It  would create  only an  enforceable right  in a court of law and parties could act thereon. The right, title and interest  in the  land of Devi Prasad stood extinguished only on  execution and  registration of  the sale  deed  and admittedly it  was done  in 1974.  Therefore, the sale deeds are within the prohibited period.      It is also urged that the Sub-Divisional Officer has to consider and  record a finding, as enjoined under s.6 of the Act relating the conditions enumerated in sub-s.(4) thereof. The authorities have not considered, more particularly, with reference to  the urgency of the loan, availability of other sources; also  the market  value of  the land at the time of the transaction and the adequacy of the consideration passed under  the   documents.  It  is  true  that  the  enumerated circumstances are required to be considered in juxtaposition with the power under s.4 of the Act, which reads:      "4. All  prohibited transactions of loan      to be  subject to  protection and relief      under this Act.           It  is  hereby  declared  that  all      claims  in   relation  to  a  prohibited      transaction of  loan subsisting  on  the      appointed day or entered into thereafter      but on or before the date of publication      of  this   Act  in  the  Gazette  shall,      notwithstanding  anything  contained  in      the Code  or any other enactment for the      time being  in force  or any  decree  or      order,  if   any,  of   any   court   or      authority, be  subject to protection and      relief in accordance with the provisions      of this Act."      On recording  a  finding  by  the  authority  that  the transaction in  question was  a  prohibited  transaction  of loan, it  would be  entitled to declare, under s.7, that the sale is  a void  sale or unenforceable. The authorities have recorded the  findings that  Rama Krishana never intended to sell the  land, he  had obtained  loan of a sum of Rs.2000/- and odd,  and he  repaid the  amount  with  interest.  These considerations obviously  weighed with  the authorities  and the High  Court had agreed with the finding by the statutory authorities   that    the   Sub-Divisional    Officer    had substantially complied  with the provisions in sub- s.(4) of s.6 of  the Act.  So, the  non-consideration of  the  above- mentioned  circumstances   did  not  cause  any  failure  of justice. Of  course, it  would have  been better  to  record findings qua these also.      It is brought to our notice that under sub-s.(2) of s.7 an attempt  has to be made by the authority to find out what was the  actual consideration  that had  passed and what was the prevailing  price of  the lands at the date of sale. The authorities are  then entitled  to direct the moneylender to pay the  difference to  the holder of the agricultural land. The object  of the  Act is  to  see  that  the  debtor  gets adequate consideration  for his  land. No  such attempt  was made by  the  authorities,  and  so,  the  order  passed  is illegal. We find no force in the contention. It is seen that sub-s.(1) of  s.7  mandates  that  when  the  Sub-Divisional Officer is  satisfied that  the transaction of loan is not a prohibited  transaction   of  loan,  he  shall  dismiss  the application or  close the  proceedings. But  if he records a finding that  the transaction  is of loan "in substance" and is a  prohibited transaction of loan, he should declare such transaction to  be void, should pass an order, setting aside the transfer  of the  land to the creditor or money-lender’s

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 4  

nominee  or   subsequent  seller   and  he   should  restore possession of  the land  to the  debtor, i.e., holder of the agricultural land.  Sub-s.(2) comes into operation only when no positive  finding under s.7(1) is recorded. Clause (b) of Section 7 (1) (ii) states that:      "(b) where  in his  opinion  it  is  not      feasible to  restore the  possession  of      land, pass order directing the lender of      money to  pay the  difference  of  price      under sub-s.(2)." In the aforesaid situation only the authorities are required to go  into the  questions envisaged  in sub-s.(2) and other follow-up action mentioned in that behalf in sub-section (4) of s.6  of the Act. Since the finding of the authorities was that there  was no  adequate consideration  and the sale was within the  prohibited period,  the  findings  recorded  are under s.7(1)  (a) of the Act; consequently, the need to make enquiry as  is necessary  under clause  (b) of  s.7 (1) (ii) read with sub-s. (4) of S.6, does not arise.      The final  submission is  that since 1974 the appellant has been  in possession of the lands and he has improved the land, he  is prepared  to pay the prevailing market value as on date and a direction in this behalf may be given. Learned counsel for  the contesting  respondents has stated that his client is interested to get back possession of the land, and not money.  In view  of the  finding that the transaction is vitiated, because of which it was set aside exercising power under s.7(1) (a) of the Act, we do not think that we will be justified to  interfere with that order and give a direction to pay the market value.      The appeal is accordingly dismissed. No costs.