03 September 1964
Supreme Court


Case number: Appeal (civil) 489 of 1962






DATE OF JUDGMENT: 03/09/1964


CITATION:  1965 AIR  951            1965 SCR  (1) 220  CITATOR INFO :  R          1987 SC1010  (11)  RF         1989 SC1534  (11)

ACT: Administration of Evacuee Property Act (31 of 1950), s. 7(1) and  Provincial  Insolvency   Act (5 of 1920),  ss.  27  and 28(7)-Emigration to Pakistan-Emigrant declared insolvent and thereafter as evacuee-Whether his property could be declared evacuee property.

HEADNOTE:    An  Indian emigrated to Pakistan in February,  1950.   In March,  1950 a petition was presented by his  creditors  for adjudicating   him   an  insolvent  and  it   was   ordered. Thereafter  in  1951  the  Assistant  Custodian  of  Evacuee Property issued a notice under s. 7(1) of the Administration of  Evacuee  Property  Act (31 of 1950)  to  the  interested persons to show cause why the emigrant’s property should not be declared evacuee property.  In spite of objections of the respondent (Official Receiver), the declaration was made  in 1954,  and the order was confirmed by the  Deputy  Custodian and  the Custodian General.  The respondent then  moved  the -High  Court under Art. 226 of the Constitution.   The  High Court  held  that  it  must be shown  at  the  time  of  the declaration  that  the  property  in  question  is   evacuee property,  and  as  the  insolvent lost  his  title  to  the property  which  had vested in the  Official  Receiver,  the property could not be declared evacuee property.  ’De Deputy Custodian appealed to the Supreme Court.   HELD : The appeal should be allowed. The construction of s. 7(1) presents a problem which can  be resolved  not merely by the adoption of the mechanical  rule of   construction  based  on  grammar,  but  by  a   liberal construction  which  takes  into  account  the  bearing  and purport of the relevant words used in the section considered in  the light of the relevant provisions of the Act and  the principal  object  of the Act.  So construed, all  that  the section  requires is, that the appropriate authority  should consider  whether the property in respect of which a  decla- ration  is  about to be made was evacuee property  under  s. 2(f)  of the Administration of Evacuee Property Act and  the



fact  that the property had vested in the Official  Receiver before proceedings were commenced under s. 7(1) of the  Act, would  not affect the character of the property.  [225G-  H; 226A-B- 229E-F]. Ebrahim Aboobakar (and another V. Tek Chand Dolwani,  [1953] S.C.R. 691, explained.

JUDGMENT:    CIVIL,  APPELLATE JURISDICTION : Civil Appeal No. 489  of 1962. Appeal from the judgment and order dated April 18, 1960,  of the Punjab High Court (Circuit Bench) at Delhi in Civil Writ No. 200-D of 1955.    R.     Ganpathy  Iyer  and  B. R. G. K.  Achar,  for  the appellants.    G.     S. Pathak and B. C. Misra, for the respondent.  221 The Judgment of the Court was delivered by   Gajendragadkar  C.  J.  What  is  the  relevant  date   by reference  to which the character of the property has to  be determined  in  issuing a notification of  evacuee  property under section 7(1) of the Administration of Evacuee Property Act,  1950  (No. 31 of 1950) (hereinafter called  the  Act)? That is the short question which arises in this appeal.  The decision of this question lies within a very narrow compass, because  it has to be found on a reasonable construction  of the  material words used in s. 7(1) itself; but  the  deter- mination  of  the scope and effect of these  material  words presents a somewhat difficult problem of construction and it has  to be resolved after reading the said provision in  the light of other relevant circumstances.    An Indian citizen named Daulat Ram Surana was carrying on business at Delhi as a jeweller in the name of Sardar  Singh Daulat Ram.  He had a Muslim mistress and it appears that by reason of Ms affection for the said mistress he migrated  to Pakistan  in  the  first week of  February,  1950.   He  was possessed   of  extensive  properties,  both   movable   and immovable,  but  apparently, he was  involved  in  financial difficulties about that time, and so, before he migrated  to Pakistan  he transferred his I share in his ancestral  house in Baidwara Street, Delhi for a consideration of Rs. 26,000. On  the  14th  March, 1950, Nanak Chand  and  certain  other persons  claiming to be his creditors, filed a  petition  of insolvency against the firm of Daulat Ram and against Daulat Ram himself.  On June 17, 1950, both the firm and Daulat Ram were adjudicated insolvents and the respondent, the Official Receiver,  was appointed the Receiver of the estate  of  the insolvents.   In August, 1951, the Official Receiver  wanted to sell some items of the insolvents’ property and the  sale was  fixed  to be held on the 18th August, 1951.   Two  days prior thereto, however,. the Assistant Custodian of  Evacuee Property issued a notice under S. 7(1) of the Act to  Daulat Ram and other interested persons to show cause why be should not  be declared an evacuee under S. 2 (d) (i) of  the  Act. The  respondent  came  to  know  of  the  said  proceedings, appeared   before   the  Assistant  Custodian   and   raised objections  to the property of Daulat Ram being declared  as evacuee  property.  These objections were overruled  by  the Assistant  Custodian  and  the property of  Daulat  Ram  was declared  evacuee property on the 15th February,’1954.   The respondent  challenged  this order by preferring  an  appeal before  the Authorised Dy.  Custodian, and when  the  appeal was  dismissed,  he  moved  the  Custodian  General  in  his



revisional jurisdiction.  The revision application filed  by the respondent was 222 also  dismissed.  The respondent then moved the Punjab  High Court by a writ petition and challenged the validity of  the orders  passed by the respective authorities under the  Act, declaring  the property of Daulat Ram as  evacuee  property. To this petition, the Dy.  Custodian, Evacuee Property,  the Authorised  Dy.  Custodian and the Assistant Custodian  were impleaded  as respondents.  These are the appellants  before us. When this matter was taken up before Bishan Narain J. of the Punjab  High Court, he took the view that the  point  raised for his decision was of considerable importance, and so,  he thought  that it should be decided by a larger Bench.   That is how the writ petition was placed before a Division  Bench of  the said High Court.  The Division Bench has upheld  the plea  raised  by the respondent and has  directed  that  the orders  made  by the Custodian Department  that  the  entire property  of Daulat Ram vests in the Custodian  are  illegal and  should  be  quashed by a writ  of  certiorari.   It  is against  -this order that the appellants have come  to  this Court with a certificate granted by the High Court.    The   dispute   between  the  parties  in   the   present proceedings centres round the competing claims based on  the retrospective  operation  of the two relevant  orders.   The appellants contend that when a notification is issued  under s. 7 (1 ) of the Act, the vesting of the evacuee property in the Custodian takes effect in the present case from the date when  the evacuee migrated to Pakistan.  The date of  Daulat Ram’s  migration to Pakistan is February 7 or 8,  1950,  and the  appellants’  case is that though the  declaration  that Daulat  Ram’s  property  is evacuee  property  was  made  on February 15, 1954, the vesting must be deemed to have  taken place as from February 7 or 8, 1950.  The appellants concede that  the order of adjudication made against Daulat  Ram  on the  June  17,  1950  would, by  virtue  of  the  provisions contained  in  s.  28(7) of the  Provincial  Insolvency  Act relate back to the date of the presentation of the  petition made  by his creditors in that behalf, and that takes us  to March 14, 1950.  Thus, one of the arguments which was  urged before the High Court on behalf of the appellants and  which has   been  placed  before  us  is  that  though  both   the declaration of the evacuee property and the adjudication  as to Daulat Ram’s insolvency have retrospective operation, the said  retrospective  operation places the  declaration  made under s. 7(1) earlier than the date of adjudication, and so, the  declaration  made under s. 7(1) must prevail  over  the adjudication  of  Daulat Ram as insolvent.  If that  be  the true  position,  the fact that the property  vested  in  the Official  223 Receiver  under s. 28 of the Provincial Insolvency Act  will not  matter, because by virtue of the declaration made,  the property of the evacuee must be deemed to have vested in the Custodian on an earlier date and that gives priority to  the title claimed by the Custodian.   The argument thus presented for the appellants prima facie appears to be attractive, but on a close examination of  the relevant  provisions  of  sections 7 and 8 of  the  Act,  it becomes   plain  that  the  said  argument  proceeds  on   a misconception  of  the  effect  of  the  two  sections  read together.  It is true that s. 8 ( 1 ) (a) provides that  any property declared to be evacuee property under s. 7 shall be deemed to have vested in the Custodian for the State in  the



case of the property of an evacuee as defined in  sub-clause (i)  of clause (d) of section 2, from the date on  which  he leaves  or left any place in a State for any  place  outside the  territories  now forming part of India.   It  has  been found by the appropriate authorities that Daulat Ram  became an  evacuee under s. 2(d) (i) of the Act, and so, there  can be  no doubt that after the declaration was made in  respect of his property under s. 7 (1), the vesting in the Custodian will  be  deemed  to have taken place on  the  date  of  his migration.  But this position does not assist the appellants in the matter of construing s. 7(1), and the decision of the point  raised by the appellants must ultimately depend  upon the construction of the said section.  If the view taken  by the  High Court is right, that before a declaration  can  be made under s. 7(1), it must be shown that the property which is  the  subject-matter of the proceedings  under  the  said provision  is,  at  the date  of  the  declaration,  evacuee property, then the result would be that if the said property is  not  property of the evacuee at the  relevant  time,  no declaration can be made under s. 7(1), and there would be no scope for the retrospective operation of the vesting of  the property  in the Custodian under s. 8(l).  Section 8(l)  can come  into  operation only if and after a  notification  has been  validly  and properly made under s.  7(1).   In  other words,  s.  8(1) provides for a statutory consequence  of  a valid declaration made under s. 7(1).  That is why the  said section  cannot be pressed into service for construing s.  7 (1).   There  is  another  argument which should  be  dealt  with before we address ourselves to the question of construing s. 7(1).   It is pointed out that s. 4 (1) of the Act  provides that the provisions of this Act and of the rules and  orders made  thereunder shall have effect notwithstanding  anything inconsistent  therewith contained in any other law  for  the time being in force or in any 224 instrument  having  effect by virtue of any such  law.   The suggestion is that if the material provisions of sections 27 and  28  of  the  Provincial Insolvency  Act  on  which  the respondent’s  case  about the retrospective vesting  of  the insolvents’ property in the Official Receiver is based,  are inconsistent   with  s.  4(1)  of  the  Act,  section   4(1) prescribes  that  the relevant provisions of this  Act  will prevail   over  the  said  provisions  of   the   Provincial Insolvency   Act.   This  argument  is  misconceived.    The relevant  provisions of the two sections of  the  Provincial Insolvency  Act do not disclose anything  inconsistent  with the  relevant  provisions of the Act, and so,  there  is  no occasion  to invoke the provisions of s. 4 (1) in  order  to establish the conclusion that the provisions of the Act will prevail  over  the said provisions of  the  Insolvency  Act. Section  28(7) read with s. 27 of the Insolvency Act  merely provides that when an order of adjudication is made under s. 27,  the insolvents property vests in the Official  Receiver as  from the date of the presentation of the  petition  made against  the debtor.  Neither s. 7(1), nor s. 8 of  the  Act can be said to be inconsistent with these provisions.   That is why we do not think any argument can be validly based  on the  provisions  of s. 4 (1 ) of the Act  in  repelling  the claim made by the respondent in the present proceedings. That takes us to the question about the construction Of s. 7 (1).  Section 7 (1 ) which was in operation at the  relevant time reads thus :               "Where  the Custodian is of opinion  that  any               property   is  evacuee  property  within   the



             meaning  of  this Act, he may,  after  causing               notice  thereof to be given in such manner  as               may  be prescribed to the persons  interested,               and after holding such inquiry into the matter               as the circumstances of the case permit,  pass               an  order  declaring any such Property  to  be               evacuee property."   In  substance,  the  High  Court  has  held  that  when  a declaration is sought to be made in respect of the  property of  in  evacuee,  it  must  be shown  at  the  time  of  the declaration  that  the  property  in  question  is   evacuee property within the meaning of the Act.  "Evacuee  property" is defined by s. 2(f) as any property of an evacuee (whether held by him as owner or as a 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  provisions contained  in  section  40.   The  rest  of  the  definition excludes certain properties from the purview of s. 2(f), but with those excluded properties  225 we  are  not  concerned in  the  present  proceedings.   The respondent’s  contention  is  that  at  the  time  when  the declaration  was made under S. 7(l), the adjudication  order against Daulat Ram had been made and his property had vested in  the  Official Receiver.  The inevitable  consequence  of this  vesting is that the insolvent had, as a result of  the statutory  provisions contained in ss. 27 and 28(7)  of  the Provincial  Insolvency Act, lost his title to  the  property and  the  title had vested in the Official  Receiver.   That being so, it could not be said that the property was evacuee property  at  the time when declaration was  made  under  s. 7(l).    It  is  significant,  says  Mr.  Pathak   for   the respondent,  that  what  s.  7  (I)  requires  is  that  the Custodian  is  of  opinion  that  any  property  is  evacuee property.   In  other words, when the  Custodian  forms  the opinion  about the character of the property,  the  property must  be evacuee property; and if that is so in the  present case, the property was not evacuee property at the  relevant time, and so, the declaration is bad and inoperative in law.   There  is considerable force in this argument.  The  rules of  grammar may suggest that when the section says that  the property is evacuee property, it prima facie indicates  that the property should bear that character at the time when the opinion   is  formed.   But  Mr.  Ganapathy  Iyer  for   the appellants  has strenuously contended that the  construction of  s. 7(1) should not be based solely or primarily  on  the mechanical  application of the rules of grammar.   He  urges that  the  construction for which Mr.  Pathak  contends  and which,  in substance, has been accepted by the  High  Court, would  lead to very anomalous results; and his  argument  is that  it  is  open to the Court to  take  into  account  the obvious  aim  -and object of the  statutory  provision  when attempting the task of construing its words.  If it  appears that the obvious aim and object of the statutory  provisions would  be frustrated by accepting the  literal  construction suggested  by  the respondent, then it may be  open  to  the Court  to enquire whether an alternative construction  which would  serve the purpose of achieving the aim and object  of the Act, is reasonably possible.  Mr. Ganapathy lyer  argues that  what s. 7(1) requires is that the property  should  be evacuee  property,  and on his construction,  all  that  the appropriate authority is required to consider is whether the property  in respect of which a declaration is about  to  be



made was property of the evacuee.  Evacuee property has been defined   by  the  Act  and  its  definition   imports   the consideration  as to whether it is property of  an  evacuee. Daulat Rain is undoubtedly an evacuee and at the time of his migration,  the property in question was his  property.   In that sense, when the Custodian declared that it was  evacuee property, 226 he  was fully justified in making the  declaration,  because the property was that of the evacuee.     If  this construction is not accepted, it would  clearly lead  to  very  anomalous  consequences.   We  have  already noticed that the inclusive part of the definition prescribed by  S.  2(f)  brings  within the  scope  of  the  definition properties which are transferred by an Indian citizen before he migrated to Pakistan.  The scheme of s. 40 is clear.  The provisions of S. 40(1) read with the other relevant  clauses of  the  said  section indicate beyond any  doubt  that  the legislature intended to prohibit transfers made by intending evacuees with the object of converting their properties into cash  and  taking it away from India.  It was  thought  that unless  this  drastic  measure  was  adopted,  the  economic interests  of  the country would be put  in  great  jeopardy because  intending  evacuees could openly  and  conveniently dispose of their properties and leave the country with  cash in  their pocket thereby materially affecting  the  national economy  of  our country.  That is why in  defining  evacuee property,  it  has expressly provided that  this  definition would  take in properties which had been transferred by  the intending evacuees prior to their migration from India after August  14, 1947, and the inclusive part of  the  definition covers  all modes of transfers which become  ineffective  by reason  of the provisions contained in S. 40.  Thus,  it  is clear  that  if  the intending  evacuees  transferred  their properties  before  migration,  their  properties  would  be deemed  to be evacuee properties for the purpose of s.  7(l) and  the transferees would have to submit to the vesting  of the  said properties in the Custodian under S. 8 (1) of  the Act.    Similarly, s. 7(1A) and S. 7(2) deal with other cases  of transfer  and make them ineffective for the purpose of S.  7 (I).  Section 7(1A) provides that if during the pendency  of any proceedings under sub-section (1) any person  interested in  the  property dies, the proceedings  shall,  unless  the Custodian otherwise directs, be continued and disposed of as if such person were alive.  This clause was added by section 5  of Act 42 of 1954 with retrospective effect to  meet  the problem  raised by this Court in Ebrahim Aboobaker and  Anr. v. Tek Chand Dolwani.(1) In that case, this Court held  that where  a Mohammedan against whom proceedings  are  commenced under  the  Act  for  declaring  him  an  evacuee  and   his properties  evacuee properties, dies during the pendency  of the proceedings, he cannot be declared an evacuee after  his death, and his properties which on his death vest in his (1)  [1953] S.C.R. 691.  227    heirs under the Mohammedan law cannot be declared evacuee properties.   This decision was based substantially  on  the ground  that the material provisions of S. 7(1)  require  an enquiry  to  be made into the character  of  the  properties before they are declared to be evacuee properties and it was held  that if pending such an enquiry the person in  respect of  whose property the enquiry is proceeded with  dies,  the enquiry  becomes  impossible, and so, the  proceedings  must come  to  an  end.   The  death  of  the  evacuee  opens  up



succession  to the property and the successors could not  be compelled to appear in an enquiry and raise pleas which  the deceased  evacuee  might  have raised.   "If  the  Custodian cannot  take possession of the property of a  living  person before the declaration," observed Ghulam Hasan J. who  spoke for the Court, "by the same token he cannot take  possession after the death of the alleged evacuee when the property had passed   into   the  hands  of  the  heirs."   The   enquiry contemplated  by  S.  7, it was  thought,  was  a  condition precedent  to the making of the declaration under s.  8  and since  the right of the Custodian to exercise dominion  over the  property  cannot arise until the enquiry is  over,  the death  of  the alleged evacuee brings to an end  the  entire proceedings under s. 7.   It was no doubt urged before this Court in that case  that the  Act  aims at fixing the nature of the property  from  a particular  date and that the proceedings taken are  against the property and not against the person.  This argument was, however,  characterised  as fallacious on  the  ground  that there can be no property, evacuee or otherwise, unless there is  a person who owns that property.  It will thus be  clear that the main reason which weighed with this Court in coming to  the  conclusion that the proceedings under s.  7(1)  are automatically terminated on the death of the alleged evacuee was  "that  the  property  cannot  be  notified  as  evacuee property unless and until the person claiming interest in it has been given notice." (p. 704).    In  order to provide for the continuance  of  proceedings initiated  against an alleged evacuee even after his  death, the legislature stepped in and made an amendment to the  Act by  inserting  S. 7(1A) retrospectively.  It would  thus  be seen that s. 7(1A) would come into operation in cases  where the alleged evacuee dies pending the enquiry under S.  7(1). It   does  not,  however,  authorise  the  commencement   or institution of the enquiry under S. 7(1) after the death  of the alleged evacuee.  Such a case would still be governed by the   principles  laid  down  by  this  Court   in   Ebrahim Aboobaker’s case(1). (1)  [1953] S.C.R. 691. 228     Incidentally, it would be pertinent to observe that  the High  Court thought that this decision afforded  substantial guidance  in determining the question of  construction  with which it was concerned in the present appeal.  After quoting the material observations made by Ghulam Hasan J. in Ebrahim Aboobaker’s  case(1),  the High Court has observed  that  in view of the law laid down by their Lordships of the  Supreme Court  it  must  be  held  that as  soon  as  the  order  of adjudication  was made on the 17th June, 1950, the  property of  the  insolvent vested in the Official Receiver  for  the purposes mentioned in the Provincial Insolvency Act, and so, it  was  not open to the Custodian to  issue  a  declaration under s. 7 (1 ) of the Act.  With respect, we are unable  to see  how the decision of this Court in  Ebrahim  Aboobaker’s case(1) can have any relevance or materiality in  construing S.  7(1) of the Act for the purpose of deciding the  dispute between  the parties before us.  The main test on which  the validity of the proceedings taken against Ebrahim  Aboobaker was  successfully  challenged was that the  alleged  evacuee having  died, a proper and valid enquiry could not be  held. That test cannot be applied in the present case effectively. The alleged evacuee was alive at the date of the enquiry and there  was  no infirmity in the proceedings  taken  in  that behalf.   Having  taken the view that the decision  of  this Court  in  Ebrahim  Aboobaker’s case(1)  was  decisively  in



favour  of the respondent’s contention, the High  Court  did not  feel called upon to address itself to the  question  of construction  of S. 7(1) in the light of the other  relevant considerations to which we have referred.    Reverting  then to s. 7 (2) of the Act, it is  noticeable that  as  a result of this provision, if a notice  has  been issued  under  sub-section (I) in respect of  any  property, such  property  shall,  pending  the  determination  of  the question  whether  it is evacuee property or  otherwise,  be incapable of being transferred or charged in any way, except with  the  leave of the Custodian, and no  person  shall  be capable  of taking any benefit from such transfer or  charge except   with  such  leave.   It  is  remarkable  that   the legislature  has  taken  the  precaution  of  prescribing  a blanket  ban  on transfers of all properties in  respect  of which  proceedings have commenced under S. 7(1).   This  ban operates even in respect of properties which may  ultimately be  found to be not evacuee properties, and that  means  the intention  of  the  legislature clearly  was  to  leave  all properties as they were when Proceedings have been commenced in respect of them under S. 7(1).    Thus,  the position appears to be that transfers made  by intending  evacuees  before they migrated  from  India  come within (1)  [1953] S.C.R. 691.  229 the  definition of evacuee property, and declaration can  be made in respect of properties so transferred under s.  7(1). Transfers  made  pending the proceedings cannot  defeat  the purpose  of the enquiry under s. 7(1) and a declaration  can be made in spite of such transfers pending the enquiry.  The death   of  an  alleged  evacuee  does  not  interrupt   the continuance  of the proceedings and the declaration  can  be made  even after his death that his properties were  evacuee properties.  If that be so, could it have been the intention of  the legislature to permit transfers of their  properties by evacuees between the date of their migration and the date of  the commencement of the proceedings under s. 7(1)  ?  If the  view taken by the High Court is right, then it  follows that  wherever properties have been transferred by  evacuees after their migration and before the proceedings under s.  7 (1)  commenced, they would be beyond the reach of  the  Act. In our opinion, it is very difficult, if not impossible,  to assume  that  such  could have been  the  intention  of  the legislature.   The risk posed by transfers  which  intending evacuees  were  naturally  inclined to make  to  save  their fortunes  was  so  grave  at  the  relevant  time  that  the legislature  has taken the precaution of making  appropriate provisions  to save the economy of the country; and  so,  it seems to us that the consequence which inevitably flows from the  adoption  of  the construction  for  which  Mr.  Pathak contends  is  so patently inconsistent with  the  clear  and unambiguous  object  of  the  Act  that  it  would  not   be reasonable to accept that construction.  In our opinion, the construction  of  s. 7 (1) presents a problem which  can  be resolved  not merely by the adoption of the mechanical  rule of construction based on grammar, but by a liberal construc- tion which takes into account the bearing and purport of the relevant  words used in s. 7(1), considered in the light  of the  other relevant provisions of the Act and the  principal object of the Act. Mr. Pathak -no doubt attempted to suggest that the  omission to deal with the category of transfers to which we have just referred may have been deliberate because be points out that the legislature  may have intended that if the properties of



the  evacuees  were  compulsorily acquired  under  the  Land Acquisition  Act,  or had vested in the  Official  Receivers under s. 28(7) of the Provincial Insolvency Act. they should be  exempted from the proceedings under s. 7(1) of the  Act. We  are not impressed by this argument.  If the  legislature wanted  to save these categories of transaction.% where  the evacuees’  title  was  lost, it could  have  easily  made  a suitable provision in that behalf.  We feel no difficulty in holding  that  the legislature could not  have  intended  to permit private L2Sup.164-2 230 transfers  of  their  properties  by  evacuees  after   they migrated  from, India, where these transfers were  completed before  the commencement of the proceedings under  S.  7(1). We are, therefore, satisfied that the view taken by the High Court does not correctly represent the true scope and effect of the provisions contained in S.7(1) of the Act. In  the result, the appeal is allowed, the order  passed  by the  High Court is set aside and the writ petition filed  by the  respondent is dismissed.  In the circumstances  of  the case, there would be no order as to costs. Appeal allowed. 231