The State Of Madras And Another vs V. Srinivasa Ayyangar

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

Court: Supreme Court of India

Case Number: Civil Appeal No. 219 of 1954

Decision Date: 21 October, 1955

Coram: Natwarlal H. Bhagwati, Bhuvneshwar P. Sinha, T.L. Venkatram Ayyar

In the matter titled The State of Madras and Another versus V. Srinivasa Ayyangar, decided on 21 October 1955, the Supreme Court of India heard the petition filed by the State of Madras and another party against the respondent, V. Srinivasa Ayyangar. The judgment was delivered by a bench comprising Justice T. L. Venkatarama, Justice Natwarlal H. Bhagwati and Justice Bhuvneshwar P. Sinha. The case is reported in 1956 AIR 94 and 1955 SCR (2) 907. The dispute concerned the operation of the Madras Estates (Abolition and Conversion into Ryotwari) Act, known as Madras Act XXVI of 1948, particularly sections 1(3), 1(4) and 3(b), and the definition of an estate under section 3(2) of the Madras Estates Land Act I of 1908, together with the applicability of section 20 of the 1948 Act.

At the time the 1948 Act was enacted, the village of Karuppur, which lay within the Ramanathapuram Zamindari, was divided into two portions. A fifteen-sixteenth share of the village was held by the inamdars under a pre-settlement grant that had been confirmed by the British Government, the Zamindari having been permanently settled in 1802. The remaining one-sixteenth share was held by the holders of darmila or post-settlement inams that had been granted by the proprietor of the estate. Exercising the powers given to it by section 1(4) of the 1948 Act, the State of Madras issued a notification on 22 August 1949 bringing the provisions of the Act into force as to the Ramanathapuram estate with effect from 7 September 1949; the notification specifically included the one-sixteenth part of Karuppur village.

The respondent, who was the holder of that one-sixteenth darmila inam, contended that under section 1(3) of the 1948 Act the State possessed authority only to notify lands that qualified as estates according to the definition in section 3(2) of the 1908 Madras Estates Land Act. He argued that the one-sixteenth portion of Karuppur did not meet that definition and therefore the notification was beyond the State’s powers, i.e., ultra vires.

The Court rejected the respondent’s contention. It held that when a darmila inam is limited to a fraction of a village rather than the whole village, it retains its character as part of the estate held by the inamdar. Consequently, when the estate is notified under section 1(4) of the 1948 Act, the inam becomes vested in the State pursuant to section 3(b) of the same Act. Accordingly, the one-sixteenth portion of Karuppur forming a darmila inam vested in the State. The Court further observed that, under the provisions of the 1948 Act, the minor darmila inamdar was entitled to claim compensation for the transfer of his portion of the estate to the Government, and that such minor inam was not protected by section 20 of the Act.

The Court noted that the transfer of the minor holder’s portion of the estate to the Government was not safeguarded by section 20 of the Madras Estates (Abolition and Conversion into Ryotwari) Act, 1948. The Court referred to the earlier decisions in Brahmayya v. Achiraju, reported in the Indian Law Reports (Madras) 1922, page 716, and in Nara-yanaraju v. Suryanarayudu, reported in the Indian Appeals 1939, page 278, for guidance on the interpretation of the relevant provisions. The matter proceeded before the Civil Appellate Jurisdiction of the Supreme Court as Civil Appeal No. 219 of 1954, arising from the judgment and order dated 4 April 1952 of the Madras High Court in Civil Miscellaneous Petition No. 8302 of 1950. Counsel for the appellant consisted of the Advocate-General of Madras assisted by two junior counsel, while counsel for the respondent was led by an experienced advocate with a junior. The judgment was pronounced on 21 October 1955 by Justice Venkatārama Ayyar.

In delivering the judgment, the Court explained that the appeal presented a question of considerable importance concerning the rights of holders of darmila or post-settlement inams that comprised portions of a village under the Madras Estates (Abolition and Conversion into Ryotwari) Act, 1948, hereinafter referred to as the Act. The specific subject of the dispute was a one-sixteenth share in the village of Karuppur, which fell within the boundaries of the Zamindari of Ramanathapuram. Historically, the Zamindari had been ruled in the eighteenth century by the Sethupathis, who were recognised as the Lords of Rameswaram and the surrounding islands and seas. In the year 1757, Muthu Vijaya Ragunatha, who then reigned as Rajah of Ramanathapuram, granted the entire village of Karuppur to several individuals for a variety of charitable purposes. The estate later underwent permanent settlement in 1802, at which time an istimrari sanad was issued in favour of the Rajah. Prior to that settlement, the grantees who held the one-sixteenth share under the 1757 grant had abandoned the village; consequently, the inam was resumed at that time. When the permanent settlement was effected, the one-sixteenth portion was incorporated into the assets of the Zamindari and was taken into account in fixing the peishkush payable on the estate. Subsequent to the settlement, on an unspecified date, Rani Mangaleswari, who then possessed the Zamindari, made a fresh grant of the resumed one-sixteenth portion to the inamdars who already held the remaining fifteen-sixteenth portion under the original 1757 grant. On 31 December 1863, the Inam Commissioner confirmed the 1757 grant and issued an inam certificate covering the fifteen-sixteenth portion of the village. Thus, at the time the Act was enacted, the fifteen-sixteenth share was held by the inamdars under a pre-settlement grant that had been confirmed by the British Government, while the remaining one-sixteenth share was held under a post-settlement grant made by the proprietor of the estate. The Act became operative on 19 April 1949. Under section 1(4) of the Act, certain provisions were to take effect immediately, whereas other provisions would come into force on a date that the Government might specify by notification for any zamindari, under-tenure, or inam estate. In exercising that authority, the Government proceeded to issue the relevant notifications.

The appellant exercised the authority granted by the relevant section and issued a notification on 22-8-1949, thereby bringing the Act into operation with respect to the Ramanathapuram estate as of 7-9-1949. In the list of villages that formed part of the Zamindari, the entry “Karuppur (part)” was identified and described as an under-tenure. All parties agreed that the portion referred to in the notification corresponded to the one-sixteenth share of the village, which constitutes the precise subject of the present appeal. The respondent, representing the owners of that inam, instituted proceedings under article 226 of the Constitution, seeking a writ of certiorari to annul the notification of 22-8-1949 on the basis that it exceeded the powers of the State.

The principal ground of challenge was that, according to section 1(3) of the Act, the State could issue a notification only for land classified as “estates” within the meaning of section 3(2) of the Madras Estates Land Act 1908 (Madras Act I of 1908). The respondent argued that the fragment of Karuppur incorporated in the notification did not satisfy the statutory definition of an estate. Section 3(2) of the 1908 Act, insofar as it is relevant, provides that “Estate” means: (a) any permanently settled estate or temporarily settled zamindari; (b) any portion of such permanently settled estate or temporarily settled zamindari that is separately registered in the Collector’s office; (c) any unsettled palaiyam or jagir; (d) any inam village whose grant has been made, confirmed, or recognised by the British Government, even if the village has subsequently been divided among grantees or their successors; and (e) any portion consisting of one or more villages of any estate described in clauses (a), (b) or (c) that is held on a permanent under-tenure.

The respondent contended that because the grant in question concerned only a fraction of a village, it could not be notified as an under-tenure. Under clause (e) of section 3(2), an under-tenure qualifies as an estate only when it relates to an entire village or villages, not to a part thereof. The appellant acknowledged that the inam did not meet the definition of an under-tenure under clause (e), since it comprised merely a portion of the village. Nevertheless, the appellant argued that, although the inam was not an estate in its own right, it formed part of the Ramanathapuram Zamindari as a post-settlement grant of a village fraction, and that once the larger Zamindari was notified, the entire possession—including the inam—should vest in the Government pursuant to section (b) of the Act. The respondent rejected this contention.

Furthermore, the respondent advanced an additional argument that even if post-settlement minor inams fell within the scope of the Act, they would enjoy protection under section 20 of the Act. Section 20(1) states: “In cases not governed by sections IS and 19, where, before the notified date, a landholder has created any right in any land (whether by way of lease”.

In his reasoning the Court set out the provision of section 20 of the Madras Act XXVI of 1948, which stated that any transaction creating a right in land – whether by lease or otherwise – including rights in forests, mines, minerals, quarries, fisheries or ferries, would be regarded as valid, and that all rights and obligations arising from such a transaction on or after the notified date would be enforceable by or against the Government, provided that the transaction was not void or illegal under any law then in force. The provision further required that any right created on or after 1 July 1945 would not be enforceable against the Government unless it was created for a period not exceeding one year. It also prescribed that when a right was created for a period exceeding one year, and it did not relate to the private land of the landholder within the meaning of section 3, clause (10), of the Estates Land Act, the Government might, if it considered it to be in the public interest, give notice to the person concerned and terminate the right with effect from a date specified in the notice, the notice not being earlier than three months after its issuance. The respondent argued that a post-settlement minor inam constituted a right in land created by a landholder and therefore fell within section 20, and that the notification of the estate under section 1(3) would not automatically deprive the inamdar of his title to the lands, leaving him entitled to hold them subject only to any action the State might properly take under section 20. The learned Judges of the Madras High Court agreed with the appellant that post-settlement minor inams were within the operation of the Act, but they accepted the respondent’s contention that such inams were governed by section 20. Because it was commonly accepted that the State had not acted under that section, the High Court held that the notification was beyond the authority of the State and consequently set aside the notification insofar as it related to the inam forming part of Karuppur village. The appellant then applied to the High Court for leave to appeal to this Court against that decision. Although the monetary value of the subject matter was far below the usual threshold for appeal, the learned Judges granted a certificate under article 133(1)(c) on the ground that the question involved was of great public importance. Thus the appeal came before this Court. Two questions were framed for determination: first, whether post-settlement minor inams fell within the operation of Madras Act XXVI of 1948; and second, if they did, whether they were governed by section 20 of the Act. Regarding the first question, the appellant did not maintain that the inam in question was itself an estate as defined in section 3(2) of the Madras Estates Land Act, and therefore not liable to be notified as such under the Act. Rather, his contention was that when the Zamindari of Ramanathapuram was notified – a fact that was not in dispute and which was a valid notification because it was a permanently settled estate falling within the relevant provisions – the inam, being a part of that Zamindari, should vest in the State under the statutory scheme.

In this matter the Court considered the effect of section 3(2)(a) of the Madras Estates Land Act, which provides that minor post-settlement inams of land situated within a zamindari become part of the zamindari and therefore vest in the State. The Court noted that the vesting operates pursuant to section 3(b) of the same Act, and reproduced the operative portion of that provision, which declares that, from the date of notification and unless expressly provided otherwise, the whole estate shall be transferred to the Government and shall vest there free of all encumbrances. The pivotal question for determination was whether the post-settlement minor inams should be regarded as portions of the estate from which they were granted. If such inams are deemed portions of the estate, then, under section 3(b), they automatically vest in the Government. Conversely, if they are not parts of the estate, the notification of the parent estate does not affect their status. The Court observed that the legal position of the holders of these inams had attracted divergent opinions in the Madras High Court. To clarify the issue, the Court referred to the definition of “landholder” contained in section 3(5) of the Madras Estates Land Act, which characterises a landholder as a person who owns an estate or part thereof and also includes every person entitled to collect the rents of the whole or any portion of the estate by virtue of any transfer from the owner or his predecessor-in-title, or by any order of a competent court, or by any statutory provision. By omitting the inclusive clause that was not relevant to the immediate question, the Court emphasized that ownership of any part of an estate brings a person within the definition of landholder. Accordingly, the Court framed the next issue: whether the minor darmila inamdars qualified as landholders under section 3(5). The Court explained that if the inamdars were landholders, the tenants would obtain occupancy rights under section 6, and any actions against the tenants could be instituted only in revenue courts, not in civil courts; moreover, the rights and duties of both the inamdar and the tenants would be governed by the provisions of the Madras Estates Land Act. One line of authority argued that because inamdars were required to pay a quit-rent or jodi to the grantor, they could not be considered owners and therefore could not be said to own parts of an estate. The opposite view contended that the inamdars, in substance, possessed ownership of the lands granted to them, and that the obligation to make a fixed annual payment did not diminish their character as owners, making them landholders owning portions of an estate. Faced with this doctrinal conflict, the Court turned to the earlier Full Bench decision in Brahmayya v. Achiraju, wherein a majority held that minor darmila inamdars were indeed landholders as defined in section 3(5). That decision rested on two grounds: first, that the inamdars stood in the position of owners of parts of an estate; and second, that they were persons entitled to collect rent, satisfying the inclusive part of the definition. The Court therefore affirmed the reasoning of the Full Bench in recognizing the inamdars as landholders for the purposes of the Act.

In the case Narayanaraju v. Suryanarayudu (2), the issue was whether a person who received a grant of a portion of a village after the settlement qualified as a landholder under section 3(5). The matter was decided before the Privy Council. After examining the earlier authorities and the divergent opinions, the Board adopted the view expressed by the majority of the learned judges in Brahmayya v. Achiraju (1). The Board held that a grantee of a post-settlement minor inam is a landholder on both grounds set out in the Brahmayya judgment, namely (1) [1922] I.L.R. 45 Mad. 716 and (2) [1939] 66 I.A. 278. The Board rejected the doctrine that as long as a zamindar retained any interest, however small, the permanent grantee could not be considered an owner. Instead, it observed that the expression “part of the estate” in the definition should be given its plain, ordinary meaning. Although the Board found it more difficult to accept the proposition that the inamdar was a landholder entitled to collect rent within the inclusive part of the definition, it was satisfied that either ground supported the conclusion that the Full Bench decision of 1922 provided a careful and reasonable resolution of a persistent ambiguity in the Act and should not be overturned in view of the lapse of time and the nature of the interests involved. The Board therefore affirmed that the earlier majority view correctly characterized the legal status of post-settlement grantees and that this interpretation gave effect to the rights created by the inam grants.

Consequently, by the time Act XXVI of 1948 was enacted, it was settled law in Madras that minor darmila inamdars were owners of portions of an estate. Interpreting section 3(b) in light of that settled law, when a notified estate is vested entirely in the State under that provision, a minor darmila inam that constitutes part of the estate must also vest in the State. Counsel for the respondent, Sri R. Kesava Iyengar, contended that decisions interpreting section 3(5) of the Madras Estates Land Act, particularly the meaning of the term “landholder,” could not be productively used to interpret the scope of section 3(b) of Act XXVI of 1948 because the definition in the Madras Estates Land Act was intended only for settling landlord-tenant rights and therefore was irrelevant to the rights of an inamdar against the State. The Board responded that the reasoning in Brahmayya v. Achiraju (1) and Narayanaraju v. Suryanarayudu (2) established that the grantee of an inam occupies the position of an owner of the portion of the estate granted to him, and that this principle is pertinent whether the dispute concerns landlord and tenant relations or the relationship between the inamdar and the State. It would be illogical to treat the inamdar as an owner with respect to his tenants and simultaneously deny him ownership in relation to the State, as reflected in the authorities (1) [1922] I.L.R. 45 Mad. 716 and (2) [1939] 66 I.A. 278. The Board concluded that the question was finally resolved by section 2(8) of Act XXVI of 1948, which defines a landholder as

In the judgment the Court observed that the inclusion of a darmila inamdar within the definition of a landholder constituted a statutory acknowledgement of the principle articulated in Brahmayya v. Achiraju (1) and Narayanaraju v. Suryanarayudu (2), namely that a darmila inamdar is the owner of a portion of an estate. Accordingly, the Court held that when a darmila inam concerns only a part of a village rather than the whole village, the inam must be regarded as maintaining its character as a segment of the estate held by the inamdar. Consequently, when the entire estate is notified under section 1(4) of the Act, the inam vested in the inamdar automatically vests in the State under section 3(b) of the same Act.

The respondent contended that the Act contained no provision for awarding compensation to minor darmila inamdars and argued that, because a statute should not be interpreted as depriving any person of property unless there is an explicit compensation clause, such inams should lie outside the operation of the Act. In support of this argument the respondent referred to section 45 of the Act, which provides for the apportionment of compensation payable in respect of an impartible estate after the settlement of debts among family members, and claimed that under that provision the respondent would have no right to any share.

The Court rejected this contention as manifestly erroneous. It explained that the provisions governing the award of compensation are contained in sections 25, 27, 37 and 44 of the Act. Section 25 directs that compensation be measured on the basis of the estate as a whole, not on each individual interest within it. Section 27 prescribes how the basic income of a zamindari is to be fixed. Under subsection 27(i) the income must include one-third of the gross annual ryotwari demand for all lands in the estate, and under subsection 27(iv) it must also include one-third of the average net annual miscellaneous revenue derived from all other sources specified in section 3(b). Therefore, the income generated by the lands that form part of the minor inam, being a component of the estate, is automatically incorporated into the total income of the zamindari.

Section 37 provides that the compensation payable for an estate is calculated on the basis of the basic income as determined by the scale prescribed therein. Section 44 further mandates that the Tribunal shall apportion the compensation among the principal landholder and any other persons whose rights or interests in the estate have been transferred to the Government under section 3(b). On the basis of these provisions, the Court found no doubt that a minor darmila inamdar is a person entitled to claim compensation for the transfer of his portion of the estate to the Government.

Finally, the Court addressed the respondent’s reliance on section 45. It held that section 45 relates solely to the distribution of the compensation determined under section 44 that is payable to the principal landholder when he holds an impartible estate. The provision does not affect or diminish the rights of minor darmila inamdars to claim compensation under section 44. Accordingly, the respondent’s argument that the Act provides no compensation to minor darmila inamdars and that they should be excluded from its operation was definitively rejected.

The Court observed that the holder of an impartible estate retains the right of minor darmila inamdars to claim compensation under section 44. Consequently, the respondent’s contention that the Act excludes any compensation for those inamdars and therefore places them outside the Act was rejected. The Court then turned to the second issue, namely whether a post-settlement minor inam constitutes a right in land created by a landholder within the meaning of section 20 of the Act. At the outset, the Court noted an apparent inconsistency in simultaneously characterising a darmila minor inam as part of an estate and as falling under section 20. If the minor inam is part of an estate, it must automatically vest in the Government pursuant to section 3(b). Conversely, if it is governed by section 20, the title would remain with the inamdar, subject to a right of the Government to intervene under the third proviso, and only upon fulfilment of the conditions there. The respondent argued that section 3 operates only on its own terms “save as otherwise expressly provided herein,” and that section 20 was such an expressly provided exception. The Court found this argument difficult to reconcile, because if section 20 applied to darmila minor inams, they could never be caught by section 3(b). Moreover, that result would conflict with the conclusion that such inams are portions of the estate and that the inamdar is a landholder for the purposes of the Act. The respondent further contended that the words “rights in land created by landlord” should be given their widest possible meaning and therefore include darmila minor inams. The point for decision, therefore, was whether this broader construction was correct. The Court began by affirming that a darmila minor inamdar is a landholder as defined in section 2(8) of the Act, by virtue of his ownership of a part of the estate. The question then arose whether such a person could be said to have obtained a right in the land from the landholder within the ambit of section 20. The Act draws a clear distinction between estates held by landholders and the rights or interests held by other persons in or over those estates. Section 3(b) provides that when a notification is issued under section 1(4), the entire estate shall be transferred to the Government and vested therein. The Court held that the portion of the estate belonging to a darmila inamdar would thus vest in the Government. Section 3(c) further provides that, upon notification, all rights in or over the estate shall cease and terminate. Sections 3(b) and 3(c) therefore address two separate matters: ownership of the estate and non-ownership rights in or over the estate, which are mutually exclusive categories. Turning to section 20, the Court noted that it protects rights in land by way of lease or other creations by the landholder before the notified date.

In this case the Court observed that section 20 of the Act applies only to rights that exist in a land-holder’s possession before the date of notification and not to ownership rights created by section 3(b). The Court stressed that, because section 3(b) deals with the transfer of the whole estate to the Government and section 3(c) deals with the extinction of ancillary rights over that estate, the “rights” referred to in section 20 can logically be confined to those described in section 3(c). Consequently, any transaction that results in the transferee acquiring ownership of the estate or any part of it falls outside the protective scope of section 20. In other words, section 20 does not protect a person who becomes a land-holder simply by acquiring a portion of the estate, and such a person—specifically a darmila minor inam holder—does not enjoy the protection of section 20. The Court pointed to the wording of section 20(2), which provides compensation to persons whose rights are terminated, taking into account the value of the right and the unexpired portion of the period for which the right was created. This language is more suitable for rights that are exercisable for a limited term, such as leases or contracts for mining or forest exploitation, rather than for the absolute ownership of land. The Court further noted that the purpose of the Act was to create a direct relationship between the State and the actual tillers of soil, thereby abolishing all intermediate tenures. Under the Madras Estates Land Act, intermediate tenures included not only estate holders defined in section 3(2) but also holders of post-settlement minor inams, as determined by the highest authority. To fulfil the Act’s purpose fully, it would be necessary to eliminate both the estates defined in section 3(2) and the darmila minor inams. Accepting the respondent’s contention would mean that only the estates enumerated in section 3(2) would vest in the Government upon notification, leaving the minor inams in the hands of the inamdars under section 20 until they are terminated according to its proviso, thereby persisting as isolated holds after the parent estates have vanished. The Court concluded that, to this extent, the legislation would fail to achieve its intended objective. Moreover, if the respondent’s view were accepted, the minor inamdars would not only remain unaffected by the Act but would actually be advantaged, because section 3(a) of the Act repeals the Madras Estates Land Act from the notified date, allowing inamdars to evict tenants and set their own settlement terms.

The Court observed that the Act repealed the earlier statute from the date of notification, and because the Act itself conferred occupancy rights on the tenants, the inamdars, upon receiving notification, would be entitled to evict the tenants and to negotiate new terms with them. The Court stated that it could not adopt an argument that would not only defeat the purpose of the Act but also produce results opposite to those intended by the legislature. Conversely, the Court considered the argument presented by the appellant that minor inams were excluded from the provisions of section 20 and therefore would vest immediately in the State under section 3(b). The Court explained that accepting that view would extinguish the rights of the inamdars and would allow the State to issue ryotwari pattas to the tenants who were then in occupation. The Court indicated its preference for this line of reasoning because it fully realized the legislative intention. Accordingly, the Court held that the one-sixteenth portion of the village of Karuppur that constituted a darmila inam would vest in the Government pursuant to section 3(b) of the Act, and that the only remaining right of the inamdars was to share in the compensation provided for by the Act. The Court ordered that the respondent’s petition as it related to this inam be dismissed. The appeal was therefore allowed, and, subject to the conditions of the certificate of leave, the appellant was directed to pay the costs incurred by the respondent in this Court, while each party was to bear its own costs in the lower court.