Motipur Zamindari Co. Ltd vs The State of Bihar and Another

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeals Nos. 62 and 63 of 1953

Decision Date: 17 April 1953

Coram: M. Patanjali Sastri, B.K. Mukherjea, Ghulam Hasan, Natwarlal H. Bhagwati, S. R. Das

In this matter the Supreme Court of India heard an appeal titled Motipur Zamindari Co. Ltd. versus The State of Bihar and Another. The appeal was decided on 17 April 1953. The bench that considered the appeal consisted of Chief Justice M. Patanjali Sastri together with Justices B. K. Mukherjea, Ghulam Hasan, Natwarlal H. Bhagwati and Justice S. R. Dab. The citation for the decision is reported in 1953 AIR 320 and 1953 SCR 720. The dispute concerned the applicability of the Bihar Land Reforms Act, 1950, specifically sections 2(o), 2(r) and 3, to corporate entities. The issue centred on the interpretation of the terms “person”, “proprietor” and “tenure-holder” as defined in the Act. The Court held that the word “person” within the definitions of “proprietor” and “tenure-holder” includes companies that were incorporated under the Indian Companies Act, 1913. The Court observed that there is nothing in the subject-matter or context of the legislation that prevents a company from being treated as a proprietor or tenure-holder, and that such inclusion is necessary to give full effect to the object of the Act. The Court distinguished the earlier decision of Pharmaceutical Society v. The London and Provincial Supply Association, Limited (1880) 5 App. Cas. 857, finding it not applicable to the present question.

The civil appeals, numbered 62 and 63 of 1953, were filed under Article 132(1) of the Constitution of India against the order dated 22 December 1952 passed by the Patna High Court, then presided over by Justices Ramaswami and Sarjoo Prosad. In appeal 62 the appellant was Motipur Zamindari Co. Ltd., a company incorporated in 1932 under the Indian Companies Act and having its registered office in Bengal. This company supplied sugar-cane to a sister concern called Motipur Sugar Factory Ltd. Appeal 63 was brought by Raja Jankinath Roy and Narendra Nath Roy and Co. Ltd., a company incorporated in 1933 under the same Companies Act, also with its registered office in Bengal. The latter company owned Zamindari estates in Purnea, Bihar, and in Malda, West Bengal, and carried on a variety of businesses including banking and financing. On 30 December 1949 the Bihar Legislature passed the Bihar Land-Reforms Bill, which after being reserved for the President’s consideration received his assent on 11 September 1950. The Act was subsequently published in the Bihar Gazette on 25 September 1950 and was brought into force that same day by a notification issued by the State Government pursuant to section 1(3) of the Act. The appellants challenged the validity of the Act, alleging that it exceeded the legislative competence of the Bihar Legislature and was therefore void. The Patna High Court, on a special bench, declared the Act unconstitutional for contravening article 14 of the Constitution on 12 March 1951. The State of Bihar appealed that decision to this Court, and while the appeal was pending, the provisional Parliament enacted the Constitution (First Amendment) Act, 1951, a matter also contested before this Court.

The Bihar Land-Reforms Bill was passed by the Bihar Legislature on 30 December 1949 and received the President’s assent on 11 September 1950. The Act was published in the Bihar Gazette on 25 September 1950 and, on the same day, the State Government brought it into force by a notification issued under the authority conferred by section 1(3) of the Act. After the Act became effective, a number of proprietors and tenure-holders of Zamindari estates instituted proceedings against the State of Bihar seeking orders that would restrain the State Government from taking over the estates pursuant to the provisions of the Act. Those proprietors and tenure-holders contended that the Act exceeded the legislative competence of the Bihar Legislature and was therefore void.

On 12 March 1951 a Special Bench of the Patna High Court examined the validity of the Bihar Land-Reforms Act and held that the Act was unconstitutional because it violated article 14 of the Constitution. The State of Bihar appealed this judgment to the Supreme Court. While the appeal was pending, the provisional Parliament enacted the Constitution (First Amendment) Act, 1951. The respondents in the principal appeal challenged the validity of that amending Act, but on 5 October 1951 the Supreme Court upheld the constitutional amendment.

Subsequent to the amendment, the State Government issued notifications on 6 November 1951 under section 3 of the Bihar Land-Reforms Act, declaring that certain titles belonging to the two appellants had passed to and become vested in the State. In response, each appellant filed a separate application before the Patna High Court invoking article 226 of the Constitution, praying for a writ of mandamus or any suitable direction restraining the State from taking possession of their respective estates or tenures on the basis of the said notifications, together with ancillary relief.

The State’s appeals against the Special Bench’s declaration that the Act was void were heard by the Supreme Court, which upheld the validity of the Act except for a few provisions identified in the majority judgment as severable. After that determination, the two applications filed under article 226 were heard by a Bench of the Patna High Court and were dismissed on 22 December 1952. The present appeals have been filed, with the permission of the Patna High Court, against those dismissals.

The question framed before the High Court concerned whether, when properly construed, the Bihar Land-Reforms Act was intended to apply to Zamindari estates owned by companies incorporated under the Indian Companies Act. The appellants argued that it was not intended to apply to such companies. They urged that the Bihar Legislature possessed no authority to legislate with respect to trading corporations or non-trading corporations whose objects were not confined to a single State. To support this contention, they referred to entries 43, 44 and 45 of List I of the Constitution, which assign exclusive legislative competence in those matters to Parliament. Consequently, the appellants maintained that by enacting the Act, the Bihar Legislature intruded into the Union legislative field, rendering the Act invalid.

In support of the appeals, counsel attempted to strengthen the argument by citing specific provisions of the statute in question as well as the winding-up provisions contained in the Companies Act. The Patna High Court rejected this line of reasoning, and the counsel representing the appellants has not raised any objection to that portion of the High Court’s judgment. The principal submission advanced by the counsel is that, even assuming that the Bihar Legislature possessed the authority to enact a law for the acquisition of Zamindari estates held by incorporated companies, the statute itself did not actually effect such acquisition.

Section 3 of the statute empowers the State Government, by way of a formal notification, to declare that the estates or tenures belonging to a proprietor or a tenure-holder have transferred to the State and have become vested therein. It is relevant to recall that, pursuant to this very provision, the State Government issued notifications on 6 November 1951 concerning the estates of the appellants that were situated within the territorial limits of the State. The counsel’s chief contention is that the companies which are the appellants do not fall within the meanings of the terms “proprietor” or “tenure-holder” as defined by the statute, and consequently that no portion of their estates was intended to vest in the State nor did any portion actually vest.

For the purpose of clarification, the statute defines “proprietor” in section 2(o) as a person who holds, either in trust or for his own benefit, an estate or any part of an estate, and the definition expressly includes the heirs and successors-in-interest of a proprietor. The definition further provides that, where a proprietor is a minor, or is of unsound mind, or is an idiot, the term also embraces the guardian, committee or other legal curator of such proprietor. Likewise, the term “tenure-holder” is defined in section 2(r) as a person who has obtained, from a proprietor or from any tenure-holder, a right to hold land or similar property.

The counsel argues that the word “person” appearing in both of these definitions, when read in the context of the statute, does not extend to corporate entities. While it is conceded that, under section 4(40) of the Bihar General Clauses Act, the term “person” would ordinarily be interpreted to include a company, the counsel submits that the definitions in the statute should be applied only where there is no inconsistency or repugnancy with the subject matter or the surrounding context. According to this line of reasoning, the definitions of “proprietor” and “tenure-holder” were intended to refer exclusively to natural persons and therefore exclude a company that holds Zamindari estates.

The Court is unable to accept this submission. It is undisputed that a corporate body can own an estate or a portion thereof, and the appellants are, in fact, litigating these appeals in order to protect the estates currently owned by them. Consequently, the companies satisfy the first part of the definition of “proprietor,” which describes a person holding an estate for his own benefit. After articulating the core meaning of the term, the definition proceeds to enumerate additional categories that are to be included under specific circumstances, such as heirs and successors-in-interest. Although the word “heir” is plainly inapplicable to a company, there is nothing in the definition that prevents a company from having a successor-in-interest, and that aspect of the definition is therefore applicable.

Moreover, the definition does not contain any provision that expressly excludes a company from being regarded as a proprietor. The absence of reference to directors, managing agents, or, in the event of winding-up, a liquidator, does not constitute a persuasive reason to conclude that the term “proprietor” was intended to omit corporate owners. It is noteworthy that the definition also omits reference to an agent, official assignee or receiver of an individual proprietor, even though such persons may be involved in matters of estate administration. The reference to a proprietor who is a minor, of unsound mind, or an idiot, together with the mention of a guardian or committee, was included to address situations where the proprietor possesses legal disabilities. Consequently, the counsel’s reliance on these ancillary provisions to assert that the statute was limited to natural persons does not withstand scrutiny.

The Court observed that the definition of “proprietor” does not specifically mention directors, managing agents, or, where the company is being wound up, the liquidator of the company. The Court said that this omission does not provide a strong reason to conclude that the word “proprietor” as defined cannot apply to a company. The Court further noted that the definition also excludes the agent, or in the event of insolvency the official assignee or receiver, of an individual proprietor. The Court explained that a reference in the definition to a proprietor who is a minor, of unsound mind, an idiot, or who has a guardian was necessary because such proprietors are subject to legal disabilities. The Court recorded that Mr P R Das cited various sections and rules made under section 43 of the Act to argue that only natural persons were meant to be covered by the Act, contending that a company could not perform the acts mentioned in the statute. The Court accepted that Mr P R Das did not dispute the fact that an incorporated company can achieve those acts through its directors, managing agents or other officers authorised by its articles of association. However, the Court rejected the contention that the provisions of the Indian Companies Act should be imported into the interpretation of the present Act.

The Court further stated that Mr P R Das relied primarily on the case of Pharmaceutical Society v. The London and Provincial Supply Association, Limited, where it was held that a corporation did not fall within the word “person” used in the Pharmacy Act, 1868. The Court referred to Lord Selborne’s observations at page 863 of that judgment. The Court reproduced the preamble to the Pharmacy Act, which declared that it was “expedient for the safety of the public that persons keeping open shop for the retailing, dispensing or compounding of poisons, and persons known as chemists and druggists should possess a competent practical knowledge of their business.” The Court explained that the preamble clearly contemplated individuals skilled in pharmaceutical matters and not impersonal corporate entities that would lack such knowledge. The Court also quoted Lord Blackburn’s remarks at page 870, where he observed that the language of the preamble was not intended to cover corporations. Lord Blackburn noted that, although a corporation might, through competent directors and managers, possess the necessary knowledge for public protection, the corporation itself could not have knowledge, being a legal “person” without practical ability. The Court added that Lord Blackburn examined sections 1 and 15 of the Pharmacy Act and concluded that the word “person” in that Act meant a natural person. The Court then indicated that the effect of that case was to consider whether the word “Person” could be interpreted to include a corporation.

In this case the Court explained that whether the word “person” in a statute can be taken to include a corporation must be decided by looking at the purpose of that statute and at the other enactments that were passed to achieve that purpose. Because the pre-amble of the Act clearly set out its object, the Court held that there was no doubt that the term “person” in that Act could not be meant to include a corporation. The Court referred to Lord Selborne’s observation on page 863, where he, by reference to the 18th (1) (1880) L.R. 5 App. Cas. 857 section, said that the legislature used the word “person” only for individual persons, since it would be contrary to the subject-matter of the Act to include a corporation within that meaning.

Mr P. R. Das argued that Lord Selborne’s judgment was based on the fact that a corporation could not make a written application signed by it, and therefore the judgment implied that the provisions of the Companies Act could not be taken into account when construing another Act. The Court rejected that implication. It observed that a company can be understood only by reference to the Companies Act, because a company is created by that Act and its existence, powers and rights are regulated by it. The Court noted that the speeches of the noble Lords in the cited case simply indicated that, for the particular Act under consideration, the object of the Act made the inclusion of “corporation” within the term “person” inappropriate, and that the decision did not extend beyond that limited observation.

Mr Das also contended that a company that owned an estate was never intended to be affected by the Act. He pointed to the winding-up provisions of the Indian Companies Act and argued that those provisions could not be fitted into the scheme of the Bihar Act. He feared a conflict of jurisdiction between the court handling the winding-up, possibly in another State, and the Bihar Government and its officers if the Zamindari assets were taken over and compensation was paid by non-transferable bonds. The Court found no merit in that contention. It held that once a notification under section 3 was issued, the Zamindari estate would vest in the State and the company would cease to have any interest in it, retaining only the right to receive compensation. If a winding-up later occurred, the liquidator would pursue the remedy provided by this Act, and the company would be in no worse position than an official assignee or receiver of an individual proprietor who might become insolvent in another State.

Finally, Mr Das relied heavily on section 41 of the Act, asserting that this section was wholly inapplicable to a company and that this showed the Bihar Legislature did not intend a company owning an estate to be governed by the Act. The Court observed that a corporation cannot be made liable for treason, felony, or any misdemeanor involving personal violence, or for any offence whose only penalty is imprisonment or corporal punishment, as noted in Halsbury’s second edition, volume IX, article 5, page 14. However, the Court pointed out that section 41 does not prescribe punishment by imprisonment only; the imposition of imprisonment or a fine depends on the seriousness of the offence, not on the character of the offender. Consequently, the Court rejected the argument that section 41 was inapplicable to a company.

The Court observed that in a winding-up proceeding the liquidator would be required to pursue the remedy that this Act prescribed. It further held that the liquidator or the company would not find itself in a position inferior to that of an official assignee or official receiver dealing with an individual proprietor who might become insolvent in another State. The Court noted that counsel for the petitioner placed strong reliance on section 41 of the Act and argued that the provision was wholly inapplicable to a company. According to that argument, the very existence of this inapplicability would demonstrate that the Bihar Legislature had not intended a company owning an estate to be governed by the Act.

The Court acknowledged the well-known principle that a corporation cannot be held liable for treason, felony, or any misdemeanor involving personal violence, nor for any offence whose sole penalty is imprisonment or corporal punishment, as stated in Halsbury’s second edition, volume IX, article 5, page 14. It then pointed out that section 41 does not prescribe punishment by imprisonment alone. Counsel for the petitioner further suggested that the imposition of imprisonment or a fine would depend upon the gravity of the offence rather than upon the character of the offender. The Court, however, found this contention to be contrary to the opinion of Lord Blackburn recorded on pages 869-870 of the report of the case relied upon by the petitioner.

Recent authority, namely Director of Public Prosecutions v Kent and Sussex Contractors Limited (1) and Rex v I.C.B. Haulage Limited and Another (2), was cited to show that a corporation may be convicted even of an offence requiring a specific act of will or a particular state of mind. The Court clarified that, apart from the unresolved question of whether a company may be found guilty of wilful failure or neglect—a point on which the Court chose not to give a definitive opinion—there was no difficulty in applying the provisions of section 41 to the officers or agents of the company.

The Court explained that once a notification under section 3(1) was published, the estate vested in the State. Section 4 then set out the consequences of such vesting, as noted in the cited reports (1) [1944] I.K.B. 14 6 and (2) [1944] I.K.B. 551. Clause (g) of section 4 empowered the Collector, by a written order served in the prescribed manner, to require any person in possession of the estate or any part thereof to surrender possession by a specified date and to take any steps or use any force necessary to secure compliance with that order. The Court held that if any officer or agent of the company, while in possession of the estate, wilfully failed to obey such a lawful order, that officer could rightly be proceeded against under section 41. Similarly, under section 40, the officers mentioned therein were authorized, at any time before or after the date of vesting, by a written order served in the prescribed manner, to require a proprietor, tenure-holder, or any other person in possession of the estate—or any agents or employees of such persons—to produce at a prescribed time any documents, papers, registers, or information relating to the estate as may be required for the purposes of the Act.

The officer may, by written order, require the person in possession of an estate or tenure to produce at the time and place specified such documents, papers, registers, or any information relating to the estate or tenure that the officer may from time to time deem necessary for any purpose authorized by the Act. A willful failure or neglect to obey such an order would inevitably subject the recalcitrant officer or agent of the company to the penalty prescribed in section 41. Consequently, section 41 does not, by its terms, bar the application of the Act to incorporated companies, because a company is unquestionably capable of owning and holding property. The entire object of the impugned Act was explained by Mahajan J. in State of Bihar v. Kameshwar Singh (1): “Now it is obvious that concentration of big blocks of land in the hands of a few individuals is contrary to the principle on which the Constitution of India is based. The purpose of the acquisition contemplated by the impugned Act therefore is to do away with the concentration of big blocks of land and means of production in the hands of a few individuals and to so distribute the ownership and control of the material resources which come in the hands of the State as to subserve the common good as best as possible. In other words, shortly put, the purpose behind the Act is to bring about a reform in the land distribution system of Bihar for the general benefit of the community as advised.” In light of that purpose, there is no justification for distinguishing between an individual proprietor and a company that owns estates or tenures. Nothing in the subject-matter or context of the Act is repugnant to the inclusion of a company owning an estate within the definition of “proprietor”; on the contrary, such inclusion is essential to give full effect to the very objective of the legislation. In Appeal No. 63 of 1953, counsel for the appellant raised an additional contention. The appellant company owned estates situated in Purnea in the district of Bihar and in Malda in the district of West Bengal, yet it was required to pay a single government revenue at Purnea. It was further alleged that the company had let out portions of those estates under Patni leases, each Patni comprising land both within and outside Bihar. The acquisition of the portion of the estate that lay in Bihar had rendered it difficult, if not impossible, for the appellant company to pay its revenue or to recover its rent. Moreover, that Bihar portion could not be severed from the remainder of the estate, and therefore a notification that covered only the Bihar portion was argued to be invalid. The Court found no merit in that argument, agreeing with the High Court that the matter was a straightforward question of apportionment of revenue.

The Court noted that, in addition to the previously discussed question of apportioning government revenue, there was also the matter of apportioning the rent payable by the parties. It held that the very necessity of carrying out such an apportionment of rent could not, in any conceivable way, affect the legal validity of the notification that had been issued. In other words, the requirement to divide the rent between the relevant portions of the estate did not render the notification void or unlawful. Having regard to the reasons that had been set out earlier in this judgment, the Court concluded that the appeals brought before it could not succeed. Accordingly, the Court ordered that the appeals fail and be dismissed, and that the costs of the proceedings be awarded against the appellants. The order therefore dismissed the appeals and imposed costs upon the parties who had pursued them. The Court also recorded the names of the agents who had appeared on behalf of the parties, identifying the agent for the appellants as B. B. Biswas and the agent for the respondents as G. H. Rajadhyaksha.