Rai Bahadur Kanwar Raj Nathand Others vs Pramod C. Bhatt, Custodian of Evacuee Property

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

Court: Supreme Court of India

Case Number: Civil Appeal No. 205 of 1954

Decision Date: 10 November 1955

Coram: Syed Jaffer Imam, Venkatarama Ayyar

In this case the Supreme Court of India delivered a judgment on 10 November 1955. The matter was styled Rai Bahadur Kanwar Raj Nathand Others versus Pramod C. Bhatt, who was the Custodian of Evacuee Property. The opinion was authored by Justice Syed Jaffer Imam and the bench also included Justices Ayyar, T. L. Venkatarama and Justice Mukherjee, B. I. Kr. The citation for the decision is reported in 1956 AIR 105 and 1955 SCR (2) 977. The case concerned the administration of evacuee property under the Administration of Evacuee Property Act, 1950 (XXXI of 1950), specifically section 12(1) which deals with the power of the Custodian to cancel or amend leases.

The headnote of the judgment explained that section 12(1) of the Act, as amended by Act XLII of 1954, declares that notwithstanding any other law then in force, the Custodian may cancel any allotment, terminate any lease, or amend the terms of any lease or agreement concerning evacuee property, irrespective of whether such lease was granted before or after the commencement of the Act. In the facts before the Court, the respondent, acting as Custodian, had granted a lease to the appellants. Subsequently the Custodian issued a notice requiring the appellants to show cause why the lease should not be cancelled on the ground that they had breached the conditions of the lease.

The appellants argued that the Custodian lacked authority to cancel the lease because, according to their interpretation of section 12(1), the Custodian’s power could only override a statutory bar imposed by another law and could not be used to defeat the contractual rights created by the lease itself. They relied on the wording of the non-obstante clause contained in the section to support their position. The Court examined the operative portion of section 12(1) and held that the power conferred on the Custodian to cancel a lease is expressed in an unqualified and absolute manner. The Court further observed that this authority could not be limited by reference to the non-obstante clause, which had been inserted ex abundanti cautela—a precautionary measure—to prevent a possible argument that the section did not implicitly repeal statutes granting rights to lessees. In reaching this conclusion the Court relied on observations made in the earlier decisions Aswini Kumar Ghose v Arabinda Bose ([1963] SCR 1, 21, 24) and Dominion of India v Shrinbai A. Irani ([1955] 1 SCR 206, 213) regarding the scope and effect of a non-obstante clause.

The judgment was delivered in a civil appellate jurisdiction as Civil Appeal No. 205 of 1954. The appeal arose from a judgment and order dated 13 April 1954 of the Bombay High Court in Appeal No. 49 of 1954, which in turn stemmed from an order dated 31 March 1954 of that High Court exercising its ordinary original jurisdiction in Miscellaneous Petition No. 55 of 1954. Counsel appearing for the appellants were K. T. Desai, P. N. Bhagwati, Rameshwar Nath and Rajinder Narain. Representing the respondent were C. K. Daphtary, the Solicitor-General of India, assisted by Porus A. Mehta and B. H. Dhebar. The Court’s final direction affirmed the Custodian’s unqualified power to cancel the lease under section 12(1) of the Administration of Evacuee Property Act, 1950.

The Court’s judgment was handed down on 10 November 1955 by Justice Venkatramana Ayyar, and it examined whether the Custodian of Evacuee Property possessed the authority under section twelve of the Administration of Evacuee Property Act, 1950, to cancel a lease that the Custodian himself had granted. The appellants, identified as Messrs Abdul Karim and Brothers, owned three textile mills together with attendant bungalows and chawls situated at Ambernath in Thana District, as well as a bobbin factory located at Tardeo in Bombay; other properties owned by them were not the subject of the present appeal. After the owners migrated to Pakistan, a notification dated 12 September 1951, issued pursuant to section seven of the Act, declared those mills and the factory to be evacuee property, and consequently, under section eight-one the ownership vested in the respondent, who acted as the State’s Custodian. The appellants, being displaced persons, entered into a composite agreement with the Custodian on 30 August 1952, identified as Exhibit A, a document that the appellants’ counsel accurately described as comprising three distinct components. Firstly, the agreement provided a lease of the aforesaid mills and the factory to the appellants for a term of five years, with the lease conditions set out in the instrument. Secondly, it contemplated the sale of all stock of raw materials, unsold finished goods, spare parts, automobiles, trucks and other movable assets situated in the mills and factory, and it contained detailed provisions for ascertaining and paying the price of such goods at a later date. Thirdly, the agreement included a conditional provision for the eventual sale of the mills and the factory to the appellants upon the occurrence of specified events and subject to stipulated conditions. In addition, the contract contained a clause that required any disputes between the parties to be referred to arbitration. Pursuant to the agreement, the appellants were handed possession of the mills and the factory on 31 August 1952. On 12 February 1954 the Custodian served a notice on the appellants, marked as Exhibit C, alleging that the appellants had systematically breached several of the terms governing the lease, and demanding that they show cause why the lease should not be cancelled and why they should not be evicted. The notice further declared that the Custodian considered it necessary to give directions for the preservation of the demised premises and of the goods and stock in trade located therein, and therefore the appellants were instructed not to remove any stock, not to raise money on the security of such stock, and to submit daily reports to the Custodian concerning all transactions relating thereto; these directions were presumably issued under section ten of the Act. The appellants appeared before the Custodian on 13 February 1954 and contended that the Custodian lacked authority to issue the notice under section twelve, rendering the notice illegal. Apprehending that the lease might be cancelled, and that they might be evicted,

In this matter, the appellants submitted an application on 16 February 1954, which subsequently gave rise to the present appeal, seeking a writ of certiorari to set aside the notice identified as Exhibit C and also requesting a writ of prohibition to prevent the respondent from taking any further steps under that notice. In support of the petition, the appellants argued that the respondent’s reliance on section 12 of the Administration of Evacuee Property Act, 1950, was misplaced because that provision authorised the cancellation of only those leases that had been granted by the evacuee and not leases granted by the Custodian himself. They further contended that section 10 could not be invoked to issue directions because it applied solely to property belonging to the evacuee, and that the movable articles in question had, by reason of a sale, become the property of the appellants and therefore fell outside the scope of section 10. The petition was heard by Justice Tendolkar, who framed two questions for determination: first, whether the Custodian possessed power under section 12 of the Administration of Evacuee Property Act, 1950, to terminate a lease that had been granted by the Custodian himself; and second, whether the directions issued by the Custodian exceeded the jurisdiction conferred upon him by section 10 of the same Act. On the first question, Justice Tendolkar held that section 12 was limited to leases granted by the evacuee and not to those granted by the Custodian, and consequently concluded that the notice, Exhibit C, was ultra vires the Custodian’s authority under that provision. On the second question, he found that section 10 applied only to evacuee property, and that the movables for which directions had been issued had ceased to be evacuee property as a result of their sale to the appellants; therefore, any directions concerning those movables were unauthorised. Accordingly, the application was allowed. The respondent appealed this decision, and the appeal was heard by Chief Justice Chagla and Justice Dixit. In their judgment dated 13 April 1954, they held that the plain language of section 12 applied to any lease wherever the lease concerned property belonging to the evacuee, and that there was no justification for adding a further limitation that the lease must also have been granted by the evacuee. On that basis, they concluded that the Custodian had authority to issue Exhibit C to cancel the lease. However, regarding the movables, they agreed with Justice Tendolkar that, for the reasons he had set out, the Custodian lacked authority under section 10 to issue any directions concerning those items. Consequently, the appeal was allowed insofar as it concerned the lease but was dismissed with respect to the movables. The appellants then filed the present appeal, obtained a certificate from the High Court under article 133(1)(b), and raised the single remaining issue of whether the Custodian has power under section 12 to cancel a lease granted by himself rather than by the evacuee. That question, however, was no longer open for argument because subsequent legislation had been enacted affecting the interpretation of the provision.

The matter reached its conclusion with reference to Section 5 of the Administration of Evacuee Property (Amendment) Act, 1954 (XLII of 1954). That provision inserts an Explanation to Section 12 of Act XXXI of 1950, stating that, for the purposes of the sub-section, the word “lease” shall be understood to include a lease that is granted by the Custodian, and that the word “agreement” shall be understood to include an agreement entered into by the Custodian. The amendment further provides that this Explanation shall be inserted into Section 12 and shall be deemed to have been inserted there from the beginning. Counsel for the appellants, identified as Mr Desai, acknowledged that the amendment operates retrospectively and therefore governs the rights of the parties in the present appeal. He accepted that, in its current form, Section 12 confers upon the Custodian the authority – an authority that, according to his submission, has always existed – to cancel leases that are created not only by the evacuees but also by the Custodian himself.

Mr Desai, however, argued that the power to cancel a lease may be exercised only to the extent that it overrides a prohibition contained in any other law, and that the power does not extend to overriding the contract under which the lease is held. He based this contention on his reading of the non-obstante clause in the section, which he said is limited to “anything contained in any other law for the time being in force” and does not include “or any contract between the parties”. He further noted that this argument was open to the appellants even before the amendment was enacted, but that it had never been raised at any earlier stage of the proceedings. He suggested that the failure to raise the issue earlier would, by itself, be a sufficient reason to refuse to entertain it now, especially since the claim is now being advanced through a supplemental proceeding under Order 16, rule 4 of the Supreme Court Rules. On the merits, Mr Desai’s contention, he maintained, lacks any substance.

The Court observed that the language of Section 12 expressly authorises the Custodian to vary the terms of a lease. That clear statutory authorisation cannot be reconciled with the appellants’ view that the Custodian lacks any authority to renege on his own contracts. The operative part of the section that confers on the Custodian the power to cancel a lease or to vary its terms is unqualified and absolute. Consequently, that power cannot be narrowed by reference to the provision that it may be exercised “notwithstanding anything contained in any other law for the time being in force”. The Court explained that this non-obstante clause was inserted specifically to counter any argument that Section 12, by implication, fails to repeal statutes that grant rights to lessees. The clause was added ex abundanti cautela, i.e., out of excessive caution, and therefore cannot be interpreted as diminishing the plain meaning of the operative portion of the section. The Court referred to the observations in Aswini Kumar Ghosh v. Arabinda Bose and the Dominion of India v. Shrinbai A. Irani for guidance on the scope of a non-obstante clause.

Accordingly, the Court was of the view that the respondent acted within his statutory authority when he issued Exhibit C in respect of the lease that had been granted in favour of the appellants. The Court noted that Mr Desai had also contended, next, that even if the Custodian possessed the power under Section 12 to cancel the lease, he did not have the power to cancel the agreement to sell the mills and the factory to the appellants, which formed part of Exhibit A. The Court, however, found that the notice in Exhibit C first refers to the lease that it proposes to cancel and secondly to the movables for which certain directions were given. The appellant’s challenge under article 226 concerned the validity of Exhibit C with respect to those two matters, and the Court reiterated that these were the precise points that required determination.

The Court observed that the Custodian possessed authority under section 12 to cancel the lease that had been granted to the appellants, but that the same provision did not confer any power to cancel the agreement for the sale of the mills and the factory to the appellants, an agreement that formed part of Exhibit A. Consequently, the Court held that the notice identified as Exhibit C was, to that extent, beyond the Custodian’s jurisdiction, and that the respondent should therefore be barred from using Exhibit C to cancel that portion of Exhibit A. However, the Court noted that the wording of the notice itself first referred to the lease that was proposed to be cancelled and secondly to the movable items for which certain directions had been issued. The appellants, in their petition under article 226, challenged the validity of Exhibit C with respect to these two matters. Justice Tendolkar, in his judgment, correctly pointed out that these were the two issues that required determination. The Court further observed that the question concerning the appellants’ rights in relation to their purchase of the mills and factory had never been raised in the petition, and that no submissions on that point had been made at any stage of the proceedings. For the first time in the arguments before the Court, those purchase-related rights were being asserted. In view of the circumstances, the Court declined to consider those assertions. The Court merely stated that any rights of the appellants, apart from those arising out of the lease, remain for the appropriate authorities to determine, and that nothing in its decision should be interpreted as a ruling on those separate rights. Accordingly, the appeal was dismissed and costs were awarded against the appellants. (1) [1953] S.C.R. 1, 21, 24. (2) [1955] 1 S.C.R. 206, 213.