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PETITIONER: RABIA BAI

       Vs.

RESPONDENT: THE CUSTODIAN-GENERAL OF EVACUEEPROPERTY.

DATE OF JUDGMENT: 12/01/1961

BENCH: GAJENDRAGADKAR, P.B. BENCH: GAJENDRAGADKAR, P.B. 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

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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).

JUDGMENT: 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

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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

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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

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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

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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

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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 an other 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

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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. 460