12 October 1970
Supreme Court


Case number: Appeal (civil) 1946 of 1966






DATE OF JUDGMENT: 12/10/1970


CITATION:  1971 AIR 1228            1971 SCR  (2) 550  CITATOR INFO :  RF         1986 SC 872  (119)

ACT: Punjab   Pre-emption  Act  1  of   1913-Notification   dated September 13, 1962, under s. 8(2) of the Act whether  issued mala fide-Party alleging mala fide whether must name officer or  officers  misusing  authority of  State  for  collateral purpose--Such burden would be intolerable.

HEADNOTE: Surinder  Kumar and Virender Kumar (defendants in the  suit) purchased on May 9, 1958 a plot of land in District Gurgaon. On January 9, 1959 the plaintiffs filed a suit in the  Civil Court  to  pre-empt  the sale.  On  November  16,  1961  the Government  of  Punjab  issued  in  exercise  of  the  power conferred by s. 8(2) of the Punjab Pre-emption Act, 1913,  a notification  declaring "that no right of pre-emption  shall exist with respect to urban of village immovable property or agricultural  land when purchased by any person for  setting up  or  expansion  of any industry in  the  State  with  the permission of the Director of Industries, Punjab." By  order dated February 16. 1962 the Civil Court passed a decree  for preemption conditionally on payment of the amount for  which the  property  was  sold.  The Civil Court  found  that  the defendants  had  failed to establish that they  intended  to establish a factory on the land in question.  The defendants appealed  to  the  Court of  the  Senior  Subordinate  Judge against  the  decree  of the Trial  Court.   Thereafter  the Government   of  Punjab  issued  another   notification   on September 3,1962, that the Governor of Punjab was pleased to order that "no right of pre-emption shall exist with respect to  the  sale  of land, described in the  Schedule  to  this Notification made on the 9th May, 1958, in favour of Messrs. Surinder Kumar and Virender Kumar, opposite Railway Station, Faridabad for the establishment of a factory for manufacture of  cork  products".   In the  Schedule  was  described  the property   aforesaid  purchased  by  the  defendants.    The plaintiffs  then  moved a petition in the High  Court  chal- lenging the validity of the Notification dated September  3, 1962  among others On the ground that in issuing  the  order the  Government acted mala fide.  The High Court  held  that



the  notification extinguishing the right of pre-emption  in the  property,issued during the pendency of the  appeal  did not  disentitle  the plaintiffs to maintain  their  claim-of preemption  already  exercised  and in respect  of  which  a decree   was  granted  to  them.   The  notification   dated September 3, 1962 was held to have been issued mala fide and on  that account invalid though s. 8(2) of the Punjab Act  1 of  1913  was held not offend Art. 14 of  the  Constitution. With  special  leave the State of Punjab  appealed  to  this Court, HELD  :  The High Court rightly held on the facts  that  the impugned notification was issued mala fide.  The  plaintiffs who claimed that they bad a right to pre-empt the sale filed a suit against the defendants and obtained a decree.  On the finding  of  the  High  Court  it  was  clear  that   except disclosing  that  the  defendants intended  to  construct  a factory, nothing more was said.  The State Government  still proceeded to exclude from the operation of the Act the  land so  as  to defeat the right of preemption exercised  by  the plaintiffs in respect of which a decree was passed 551 by  the Civil Court.  The State Government had not in  their affidavit  satisfactorily  explained  the  circumstances  in which  the  order was passed.  The conclusion  of  the  High Court  was borne out by the evidence and no ground was  made out  calling  for  interference in this  appeal  by  special leave. [554 E; 556 B-C] The  contention  on  behalf  of the  State  that  the  party alleging that the action of the State was not bona fide must name the officer or officers guilty  of  conduct which justifies an  inference  that  the official act was done for a collateral purpose, could not be accepted.   It  would be placing an  intolerable  burden  of proof of a just claim to require a party alleging mala fides of  State  action to aver in his petition and  to  prove  by positive evidence that a particular officer was  responsible for misusing the authority of the State by taking action for a collateral purpose. [5.55 F-H] [The  impugned  notification having been  held  invalid  the question  whether s. 8(2) of the Punjab Pre-emption Act  was ultra vires Art. 14 of the Constitution did not survive  for consideration.] [553 B]

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1946 of 1966. Appeal  by special leave from the judgment and  order  dated December 6, 1965 of the Punjab High Court in Civil Writ  No. 1523 of 1962. V. C. Mahajan, for the appellant. Abad Behari, for respondents Nos.  1 and 2. The Judgment of the Court was delivered by Shah, J. On May 9, 1958 Khillu and two others sold a plot of land  in  village Majesar,  Tehsil.   Ballabhgarh,  District Gurgaon  to  Surinder  Kumar and Virender  Kumar  (who  will hereinafter be referred to as "the defendants").  On January 9,   1959  Ramjilal  and  Khazan  hereinafter   called   the "plaintiffs" filed a suit in the Civil Court to pre-empt the sale.  On November 16, 1961 the Government of Punjab  issued in  exercise  of the power conferred by sub-section  (2)  of Section 8 of the Punjab Pre-emption Act, 1913 a notification declaring  "that no rights of pre-emption shall  exist  with respect  to  urban or village immovable  property  or  agri- cultural land when purchased by any person for setting up or



extension  of any industry in the State with the  permission of the Director of Industries, Punjab." The plaintiffs contended that the notification issued by the Government did (not prejudicially affect their claim to pre- empt  the sale.  By order dated February 16, 1962 the  Civil Court  passed  a  decree for  pre-emption  conditionally  on payment of the amount for which the property was sold.   The Civil  Court  found  that  the  defendants  had  failed   to establish  that they intended to establish a factory on  the land in question. 5 52 The   defendants  appealed  to  the  Court  of  the   Senior Subordinate  Judge  against the decree of the  Trial  Court. Thereafter   the   Government  of  Punjab   issued   another notification  on  September 3, 1962, that  the  Governor  of Punjab  was Pleased to order that "no right  of  pre-emption shall  exist with respect to the sale of land, described  in the Schedule to this Notification made on the 9th May, 1958, in  favour  of Messrs.  Surinder Kumar and  Virender  Kumar, opposite  Railway Station, Faridabad, for the  establishment of  a  factory for manufacture of cork  products".   In  the Schedule  was described the property sold to the  defendants by Khillu and two others. The  plaintiffs then moved a petition in the High  Court  of Punjab  challenging the validity of the  notification  dated September  3,  1962,  among others on  the  ground  that  in issuing  the  order  the  Government  acted  mala  fide.   A Division  Bench  of  the High Court referred  the  case  for hearing before a full bench of the Court. The  full  bench  held that in a suit  for  pre-emption  the claimant  must  prove that his right to  pre-empt  subsisted till the date of the decree of the first Court and that loss of the right after the date of the decree "by his own act or by  an act beyond his control" did not affect his claim  in the  suit.  Accordingly the notification under s: 8  (2)  of the Punjab Pre-emption Act, 1913 extinguishing the right  of pre-emption  in the property issued during the  pendency  of the  appeal  against the decree of the Trial Court  did  not disentitle  the plaintiffs to maintain their claim  of  pre- emotion already exercised, and in respect of which a  decree was granted to them.  The High Court also held that s.  8(2) of  Punjab  Act  1 of 1913 did not offend  Art.  14  of  the Constitution, but the notification dated September 3,  1962, was  issued mala fide, and was on that account liable to  be struck  down as invalid." With special leave, the  State  of Punjab has appealed to this Court. It  was  urged,  that s. 8 (2) infringes  the  guarantee  of equality  under Art. 14 of the Constitution.  In  terms,  s. 8(2) provides               "The   State   Government   may   declare   by               notification  that in any local area  or  with               respect  to any land or property or  class  of               land  or property or with respect to any  sale               or class of sales, no right of pre-emption  or               only   such   limited  right  as   the   State               Government may specify shall exist.,, The High Court was of the view that s. 8 must be read in the light  of  the scheme of the Act and especially S.  9  which excludes  fro the operation of the Act sales made by  Or  to Government,  or  to any local authority, or to  any  company under the provision of Part VII of the Land Acquisition Act, 1894,  or  in  respect any sale  sanctioned  by  the  Deputy Commissioner under s. 3 (2) of 553 the  Punjab  Alienation  of  Land  Act,  1900.   The   power



conferred  by  s. 8(2) to declare by  notification  that  to certain  sales the Act will not apply is independent of  the exemption which is statutorily prescribed by s. 9.  Exercise of the power under s. 8 (2) is apparently not restricted  to transactions  of the nature specified in s. 9, but  for  the purpose  of the present case we do not feel called  upon  to decide  whether  sub-s.  (2)  of  s.  8  invests  the  State Government with "arbitrary, unguided and uncanalised power " so  as  to  infringe  the  guarantee  of  Art.  14  of   the Constitution,  for, in our view the plea that the order  was issued mala fide raised by the plaintiffs and upheld by  the High Court must be decided in their favour. The High Court on a review of the evidence found it  proved, that,  although at some stages reference to the  pre-emption suit filed by the plaintiffs appeared in the history of  the case, the defendants did not disclose the fact that a decree had been passed in favour of the plaintiffs in the suit, nor did  any  authority (except the Tehsildar) try to  find  out whether  a decree had been passed in that suit; that it  was never  brought  to  the  notice  of  any  authority  by  the defendants  that the finding of the Trial Court was  against them and it was because they had failed to prove that  they intended  to  set up a factory, no authority ever  tried  to learn  anything  about that finding; that only  a  few  days after the filing of the appeal by the defendants against the decree  of the Trial Court an affidavit was filed by one  of the defendants that they intended to put up a factory on the land in question; that the District Inspector of  Industries at  Gurgaon made a report in favour of the defendants,  only on  the  basis that they had started building  the  boundary wall;  that  the  Tehsildar made a  report  adverse  to  the defendants, and pointed out that they had only constructed a small  room  in  the middle of the land and  not  a  factory building;  that the move of the defendants was  to  stultify and  defeat that decree; that the Deputy Commissioner  first ordered  that  a  copy of the report  of  the  Tahsildar  be forwarded  to the Government,but two days later  the  Deputy Commissioner changed his mind when the defendants approached him  and on the mere statement of the defendants  that  they intended  to  set  up a factory in  the  land  in  question, heproceeded to recommend that "exemption notification  under s.  8(2) of the Act" be issued in favour of  the  defendants and  that  this was followed up by the  higher  authorities; that the report of the Tahsildar which had material  bearing on  the decision to be taken in the matter of issue  of  the impugned   notification   was  suppressed   and   for   this suppression  there  was no explanation "on the side  of  the State";  that although in the note dated March 14,  1962  of the  Joint Director of Industries, it was directed that  the defendants  were to sign an agreement that the exemption  to be  granted to them would not be "misutilised" and the  land would  "not be sold for money-making", and although  in  the Revenue Department’s note of August 14, 1962, it was 5 5 4 stated  that the Director of Industries be asked  to  obtain such an undertaking before the issue of the notification, no such   agreement  or  undertaking  was  obtained  from   the defendants  and  all that was done was that on  November  8, 1962  (a  day before the date of the notification  and  some days before its publication) another affidavit was  obtained from  the  defendants that the land had been  purchased  for establishing  a factory and "they solemnly undertook not  to misuse  or abuse the land", and declared and undertook  that the  land  shall be used only for industrial  purposes,  but there was "no manner of contract by them whereby they  would



have  to surrender back the land in the event of  their  not using it for the purpose of establishing a factory". The  High Court also observed that there was  no  allegation that any superior officer "in the Revenue Department such as the  Secretary or the Deputy Secretary had acted in  a  mala fide manner in the issue of the impugned notification".  But it  was pressed before the Court that the  notification  was not  really the act of one single person  finally  approving that  the  notification be issued : it was the result  of  a process  of  formal or informal inquiries  and  reports  and consideration  of  various  authorities  at  various  stages leading   up  to  the  recommendations  based  on   material collected  which  went  to form the basis  of  the  judgment whether  or  not  such a notification should  issue  in  any particular  case.  Approving of the process, the High  Court observed  that on a consideration of all  the  circumstances the  impugned notification must be held to have been  issued mala fide.  The High Court concluded               "The reason in the circumstances of this  case               is simple.  In the first place, the report  of               the Tahsildar was a crucial and vital document               in  this case, which would  substantially  and               materially. affect the approach of the  higher               authorities in the conclusion to issue or  not               to  issue the Notification.  In  this  respect               what  happened before the Deputy  Commissioner               (Collector)  had  also the same  bearing.   It               should  have  been disclosed what  orders  the               Deputy  Commissioner (Collector) passed  first               and  what  was the order which he  passed  two               days  later.   An endeavour should  have  been               made  by  somebody to find out  what  was  the               finding  given  by  the  Trial  Court  in  the               decision of that suit.  This was not done even               after  the  matter  was  pointed  out  by  the               Tahsildar.     In    other    words,    either               deliberately  or by sheer avoidance no  effort               was  made to find out what finding  the  Trial               ,Court  had  given in the matter . .  .  .  In               spite  of  it  having been  pointed  out  that               before  the  issue  of  the  notification   an               agreement be obtained from respondents               5 5 5               2  and 3 (the defendants) against  misuse  and               misutilisation  of  the land for  the  purpose               other  than  that  for  which  it  was   being               exempted from the right of pre-emption of the,               petitioners and for not making it an otherwise               profiteering  transaction, no such  agreement,               binding  in  law,  was  obtained  from   these               respondents ’(the defendants), but instead the               matter was slurred over by obtaining a  second               affidavit   from  the  two  respondents   (the               defendants).  It is thus apparent that at  the               final   stages,   when   the   question    for               consideration was whether or not the  impugned               notification should be issued, whether all the               circumstances were present which justified the               issue  of such a notification and whether  all               the obligations that were required to be taken               by  respondents 2 and 3 (the  defendants)  had               been  taken  before its  issue,  were  matters               which either could not ’be considered  because               substantial material collected was withheld or               clear      directions     were      completely



             ignored.........  In the circumstances of  the               case,  to my mind, the  impugned  notification               cannot  be  held to have been issued  in  good               faith  and has to be held to have been  issued               mala fide." This is a finding based on appreciation of evidence, and  no case  is  made on which may justify us in  interfering  with that  finding.  It appears that the subordinate  authorities withheld very important facts which had bearing on the issue of  the notification by the State Government  excluding  the land, sold under the sale deed dated May 9, 1958 executed by Khillu from the operation of the Punjab Pre-emption Act 1 of 1913  even  after  a decree was passed by  the  Civil  Court granting pre-emption. Counsel  for  the State of Punjab contended that  the,  plea that the action of the State was not bona fide  established, cannot  be  said to be unless the party alleging  that  case names  the  officer  or officers  guilty  of  conduct  which justifies an inference that the official act was done for  a collateral  purpose, and since no such attempt was made  and the  High  Court  did not find that  any  named  officer  or officers was or were responsible for that official act,  the plea that it was bona fide must fail.  We do not think  that the law casts any such burden upon the party challenging the validity  of the action taken by the State Government.   The State   Government  has  undoubtedly  to  act  through   its officers.   What matters were considered, what matters  were placed before the final authority, and who acted on  behalf of the State Government in issuing the order in the name  of the  Governor,  are all within the knowledge  of  the  State Government, and it would be placing an intolerable burden in proof  of  a just claims to require a  party  alleging  mala fides of, State action to aver in his petition and to prove by positive 556 evidence  that  a  particular officer  was  responsible  for misusing  the authority of the State by taking action for  a collateral purpose. The facts in the present case are eloquent.  A sale deed was executed  in favour of the defendants.  The  plaintiffs  who claimed  that they had a right to pre-empt the sale filed  a suit  against the defendants and obtained a decree.  On  the finding  of  the,  High  Court  it  is  clear  that   except disclosing  that  the  defendants intended  to  construct  a factory, nothing more was said.  The State Government  still proceeded to issue, in exercise of the power under S. 8  (2) of  the  Punjab Pre-emption Act, a notification  to  exclude from  the operation of the Act the land so as to defeat  the right  of preemption exercised by the plaintiffs in  respect of which a decree was passed by the Civil Court.  The  State Government   has   filed   no   affidavit   explaining   the circumstances  in which the order came to be passed  :  they have merely offered "comments" on the petition filed by  the plaintiffs.   In our _judgment, the conclusion of  the  High Court  was  home out by evidence and no ground is  made  out calling  for our interference with that conclusion  in  this appeal with special leave. The appeal therefore fails and is dismissed with costs. G.C.     Appeal dismissed. 5 57