Sri Rajah Velugoti Venkata Sesha Varda... vs The State Of Andhra Pradesh

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

Court: Supreme Court of India

Case Number: Civil Appeals Nos 188 to 190 of 1958

Decision Date: 14 August, 1959

Coram: S.K. Das, A.K. Sarkar, K.N. Wanchoo, M. Hidayatullah

In the matter of Sri Rajah Velugoti Venkata Sesha Varda Raja Gopala Krishna versus the State of Andhra Pradesh, the Supreme Court of India rendered its judgment on 14 August 1959. The Bench comprised Justice S K Das, Justice A K Sarkar, Justice K N Wanchoo and Justice M Hidayatullah, with Justice S K Das presiding as Chief Justice. The petition was filed by the appellant, identified as Sri Rajah Velugoti Venkata Sesha Varda Raja Gopala Krishna, and the respondent was the State of Andhra Pradesh. The case was cited as 1960 AIR 32 and 1960 SCR (1) 552, and it concerned provisions of the Madras Estate (Abolition and Conversion into Ryotwari) Act, 1948, specifically section 20.

The principal issue before the Court arose from a writ petition decided by the Andhra Pradesh High Court, which had examined the validity of an order issued by the Board of Revenue (Andhra) terminating the appellant’s lease over certain state quarries situated in the Venkatagiri Estate. Those quarries had been notified under section 3 of the Madras Estate (Abolition and Conversion into Ryotwari) Act, 1948, and the termination was based on the second proviso to subsection 1 of section 20, on the ground that the lease had been granted after 1 July 1945 and extended for a period exceeding one year, without the three‑month notice required by the third proviso or the compensation provision of sub‑section 2 of the same section. In addition, the appellant sought renewal of the lease under rule 47 of the Mineral Concession Rules, 1949, a request that was rejected both by the Board and by the High Court.

The appellant’s argument centered on the interpretation of the phrase “such right” in the third proviso of section 20(1). The appellant contended that the phrase referred to the right created by the second proviso—that is, the right established on or after 1 July 1945—and therefore the termination of that right should be governed by the notice and compensation requirements of the third proviso and sub‑section 2. The Court examined this contention and held that it lacked merit and must be rejected. The Court explained that the legislative scheme intended to render all rights created after 1 July 1945 and extending beyond one year ineffective, and that a proper construction of section 20 made it clear that the second proviso operated as a self‑contained provision rendering such rights void against the Government. Consequently, even if the rights were merely voidable and not void, the third proviso was unnecessary and did not apply. The Court further clarified that the third proviso applied only to the termination of rights created before 1 July 1945. In support of this view, the Court referred to the decision in A M S S V M & Co. v. State of Madras, I L R (1953) Mad 1175, and noted that the rule framed by the Madras Governor under sections 67(6) and (2) of the Act could not alter the true meaning of section 20.

Finally, the Court concluded that rule 47 of the Mineral Concession Rules, 1949, at most could insert a few terms into the lease, but could not apply to a situation where the lease itself was determined under the second proviso of section 20 and its terms were consequently nullified. Accordingly, the Court dismissed the appellant’s claims for renewal and compensation, affirming the termination of the lease in accordance with the provisions of the Madras Estate (Abolition and Conversion into Ryotwari) Act, 1948.

The Court held that sections 67(6) and 67(2) of the Act could not bring the third proviso into operation, nor could they alter the true meaning of section 20 of the Act. The Court further held that rule 47 of the Mineral Concession Rules, 1949, which at most could insert a few terms into a lease, could not be applied to the present case. In this case the lease itself was created under the second proviso of section 20 of the Act, and the terms of the lease fell within that provision. Consequently, the rule could not affect the lease.

The judgment was delivered in the civil appellate jurisdiction concerning Civil Appeals Nos 188 to 190 of 1958. These appeals were filed against the judgment and order dated 20 November 1957 of the Andhra Pradesh High Court in Writ Petitions Nos 1 of 1956, 19 of 1957 and 470 of 1957. Counsel for the appellant comprised A V Viswanatha Sastri, V Vedantachari and K Sundararajan. Counsel for respondent No 1 comprised H N Sanyal, Additional Solicitor‑General of India, D Venkatappiah Sastri and T M Sen. Counsel for respondent No 2 was K R Choudhuri. The judgment was pronounced on 14 August 1959 by the Chief Justice.

The three appeals challenged the decision of the Andhra Pradesh High Court which had dismissed the three writ petitions, filed jointly by the appellant, with costs. The appeals were filed with certificates of leave granted by the High Court. The Court then narrated the factual background that gave rise to the writ petitions. According to the appellant, an agreement was executed on 10 January 1942 between the Rajah of Venkatagiri and Sri Balumuri Nageswara Rao. Under that agreement the Rajah agreed to grant annual leases for certain slate quarries in his estate for five consecutive years beginning February 1942, provided the Rajah was satisfied with the lessee’s work in the preceding year. The agreement further stipulated that if the leases were continuously granted for five years, the lessee would become entitled, at the end of the fifth year, to obtain a lease from the Rajah for a period of twenty years commencing after the termination of the fifth year.

After the expiry of the fifth year, the Rajah granted a short‑term lease to Balumuri Nageswara Rao covering the period from 1 February 1947 to 30 November 1947. On 10 December 1947 Balumuri Nageswara Rao assigned his right, title and interest under the 1942 agreement to the appellant, who was a son of the Rajah. On the same day the Rajah executed a lease of twenty years in favour of the appellant. Subsequently, on 7 September 1949 the Venkatagiri estate was notified under section 3 of the Madras Estate (Abolition and Conversion into Ryotwari) Act 1948 (Madras Act XXVI of 1948), referred to as the abolition Act.

On the same day, the appellant applied to the Collector for confirmation of the lease that the Rajah had granted to him. No action was taken until 12 February 1952, when the Board of Revenue (Andhra) issued a notice requiring the appellant to show cause within two months why his lease should not be terminated without any compensation, in accordance with the second proviso to section 20(1) of the Abolition Act. The appellant responded to the notice, but the authorities were not satisfied with his explanation. Consequently, instructions were given to the manager of the Venkatagiri estate to take over possession of the slate quarries that the appellant was operating, and the manager was to do so immediately after the two‑month notice period expired.

In response, the appellant promptly instituted writ petition No. 287 of 1952 before the Madras High Court, seeking a writ of mandamus that would compel the Madras State to refrain from terminating his leasehold right in the slate quarries, to prevent any interference with his possession and working of the quarries, and to grant other ancillary reliefs. The petition was heard before Justice Umamaheswaram on 18 July 1955. The learned judge ordered the Government to conduct an enquiry under section 20 of the Abolition Act to determine whether the lease had been granted before or after 1 July 1945, and directed that the enquiry and any subsequent orders be completed within three months of the order.

The Board of Revenue arranged for the Director of Settlements to conduct the enquiry. After taking oral and documentary evidence, the Director prepared a report for the Board. The Board submitted its report to the Government on 20 October 1955. After reviewing the report, the Government instructed the Board to dispose of the matter on its merits. Accordingly, on 27 December 1955 the Board of Revenue issued an order declaring that the appellant’s lease had been granted after 1 July 1945 and, because the lease term exceeded one year, it could not be enforced against the Government under the second proviso to section 20(1) of the Abolition Act. On that basis, the Board declined to ratify the lease and terminated it using powers conferred by the Rules made under the Abolition Act. The Board also directed the Collector to take possession of the slate quarries from the appellant.

Following the termination, the appellant immediately filed writ petition No. 1 of 1956, asking for a writ of mandamus that would require the State of Andhra Pradesh to refrain from terminating his leasehold right in the slate quarries. He later filed another petition, writ petition No. 19 of 1957, seeking a writ of certiorari to challenge the Board’s order.

In this case the appellant also sought to set aside the order issued by the Board of Revenue on 27 December 1955. While that petition was pending, on 21 September 1955 the appellant had submitted an application to the Board of Revenue, Andhra, requesting renewal of his lease under rule 47 of the Mineral Concession Rules, 1949. The Board dismissed that application on 23 May 1957. Following the dismissal, the appellant instituted writ petition number 476 of 1957, asking the court to quash the order that had been passed by the Board of Revenue, or alternatively to issue a writ of mandamus directing the State of Andhra Pradesh to grant a fresh lease in accordance with rule 47 of the Mineral Concession Rules, 1949. All of these writ petitions were heard together, and a single judgment was rendered disposing of them. The present appeals arise from that common judgment. The principal issue that the Court needed to consider was whether the termination of the appellant’s lease by the order dated 27 December 1955 was defective because the Board had failed to give the appellant three months’ notice and had not provided any compensation, as required by section 20 of the Abolition Act. To answer that issue, the Court examined the proper construction of section 20, which reads as follows: “20. (1) Saving of rights of certain lessees and others. In cases not covered by sections 18 and 19, where before the notified date a landholder has created any right in any land, whether by lease or otherwise, including rights in any forest, mines or minerals, quarries, fisheries or ferries, such transaction shall be deemed valid; and all rights and obligations arising thereunder on or after the notified date shall be enforceable by or against the Government, provided that the transaction was not void or illegal under any law then in force. Further, any such right created on or after 1 July 1945 shall not be enforceable against the Government unless it was created for a period not exceeding one year. Moreover, where such right was created for a period exceeding one year, unless it relates to the private land of the landholder within the meaning of section 3, clause (10) of the Estates Land Act, the Government may, if it is of public interest, terminate the right by giving notice to the person concerned, specifying a termination date that shall not be earlier than three months from the date of the notice. (2) The person whose right has been terminated by the Government under the foregoing proviso shall be entitled to compensation from the Government, which shall be determined by the Board of Revenue in accordance with prescribed procedures, taking into account the value of the right and the unexpired portion of its term. The decision of the Board of Revenue shall be final and shall not be open to questioning in any court of law. The long title and

In this case, the Court noted that the preamble to the Abolition Act was argued to declare that the object of the legislation was to provide for the acquisition of the rights of land‑holders, and that the policy of the Act was not intended to interfere with the rights of any other persons standing in the estate. The Court observed, however, that this view was not supported by the substantive provisions of the Act. Section 3 of the Act set out the consequences that followed the notification of an estate, and it was clear that once an estate was notified the whole estate was to stand transferred to the Government. Accordingly, every right or interest that had been created in or over the estate before the date of notification, whether by the principal land‑holder or by any other land‑holder, had to cease and be determined against the Government. The Court further reminded that the Abolition Act had been enacted at a time when section 299 of the Government of India Act, 1935, was in force. Under that provision, no property could be acquired except for a public purpose and only by authority of a law that provided for compensation. The Abolition Act had been passed by the Madras Legislature in the exercise of the legislative power conferred on it by the Government of India Act, 1935. Learned counsel for the appellant submitted that the Court must presume that the Madras Legislature had acted properly and within the limits of the powers conferred upon it. Accordingly, the Court held that it must interpret the provisions of the Abolition Act on the assumption that the Act was a valid piece of legislation and that its provisions did not offend section 299 of the Government of India Act, 1935. Because the Abolition Act was a law for the compulsory acquisition of property, the Court reasoned that its interpretation should be placed on the relevant sections so that compensation would be payable to the person deprived of his property. While the Court conceded that this approach was ordinarily correct, it also observed that the argument lost much of its force when the constitutional provisions were considered.

The Court then turned to the provisions of Article 31(6) and Article 31B of the Constitution of India, read with the Ninth Schedule. Those provisions were based on the assumption that certain laws passed under the Government of India Act, 1935, had offended section 299 of that Act and were therefore expressly saved by Article 31B. The Abolition Act was one of the statutes included in the Ninth Schedule and consequently enjoyed protection under Article 31B. In this circumstance, the Court held that it must interpret the Abolition Act by giving the ordinary and natural meaning to the words employed by the Madras Legislature, without being influenced by any preconceived notion regarding the validity of the Act. The provision for payment of compensation for the determination of rights created before the notified date was found in subsection (2) of section 20 of the Abolition Act. Under that subsection, a person could claim compensation only when his right was terminated by the Government under “the foregoing proviso.” The Court noted that the words “foregoing proviso”, it is conceded, refer

In order to interpret the third proviso to sub‑section (1), counsel for the appellant urged the Court to conclude that the termination of the appellant’s leasehold rights, which were created on or after 1 July 1945, could be effected only under that third proviso; otherwise the compensation provision in sub‑section (2) would not be triggered. The Court noted that the Government could rely on the third proviso to sub‑section (1) only if it could demonstrate that the conditions stipulated in that proviso had been satisfied. Those conditions required, first, that the Government had formed the opinion that terminating the lease served the public interest, and second, that a notice of three months’ duration had been given before the termination was carried out.

The appellant’s counsel further argued that the second proviso was merely declaratory, while the third proviso supplied the procedural mechanism necessary to give effect to the second proviso. According to that line of reasoning, the third proviso was not an independent provision but functioned as a sort of annex to the second proviso. In other words, the third proviso, as described by counsel for the appellant, merely empowered the Government to exercise the right conferred on it by the second proviso, and consequently, any time the Government intended to rely on the right created by the second proviso it must also satisfy the conditions laid down in the third proviso. It was submitted that the expression “such right” appearing in the third proviso referred to the rights mentioned in the second proviso, namely, rights created on or after 1 July 1945.

The scheme of section 20 of the Abolition Act, as presented by the appellant, was said to be twofold. First, it was intended to deem all rights created by lease or otherwise by the landholder before the notified date to be valid, and to make every right and obligation arising therefrom on or after the notified date enforceable either by or against the Government. The Court began its analysis with this broad proposition and then turned to the individual provisos. The first proviso was deemed irrelevant to the facts of the present case and therefore omitted from further consideration. The appellant’s counsel highlighted two implications of the second proviso. The first implication (a) was that all rights created before the notified date but after 1 July 1945, for a period not exceeding one year, would be valid and enforceable both by and against the Government by operation of sub‑section (1) itself. The second implication (b) was that rights created before the notified date but after 1 July 1945, for a period exceeding one year, would also be valid and enforceable by the Government against the person in whose favour such right had been created pursuant to section 20(1). Finally, the express provision of the second proviso was set out: rights created before the notified date but after 1 July 1945, for a period exceeding one year, would not be enforceable against the Government. In other words, the true meaning of this provision was that such rights, although created, could not be pressed upon the Government after the period of one year had elapsed.

The Court observed that the meaning of the second proviso is that any rights created after 1 July 1945 may be declared void only at the initiative of the Government, and consequently the Government must perform an overt act in order to terminate the transaction. It was submitted that the mechanism for effecting such a termination is to be found in the third proviso, and that the termination can occur only when the conditions stipulated in that third proviso are satisfied. The argument was taken a step further by asserting that a person whose rights are ended under the third proviso – the “foregoing proviso” referred to in sub‑section (2) – must therefore be entitled to compensation under sub‑section (2). The Court stated that it could not accept this line of reasoning. The provision of section 20 of the Abolition Act had previously been examined and interpreted by a bench of the Madras High Court. The Court quoted a portion of the judgment of Justice Venkatarama Ayyar in A.M.S.S. V.M. & Co. v. The State of Madras, wherein the petitioners argued that the words “such rights” in the third proviso referred to the rights created after 1 July 1945 mentioned in the preceding proviso, and that on that construction the lease in favour of the petitioners could be terminated only by giving three months’ notice in accordance with that proviso. The Court held that reading the third proviso as a proviso to the second proviso, rather than to the section, had no support in law. It explained that the phrase “such rights” in the second proviso refers solely to the right dealt with in the main body of the section, and that the same expression occurring in the third proviso should be given the same meaning. The Court further noted that the third proviso does not govern the second proviso, a conclusion that becomes clear when the scope of the two provisos is examined. Under the second proviso, leases of a period exceeding one year that were created after 1 July 1945 are not enforceable against the Government; the Government may choose to disaffirm them, rendering them void upon such disaffirmance. If the third proviso were also applicable to those leases, as the petitioners contended, the lease could be terminated only if the Government were satisfied that termination served the public interest, and in such cases the lessee would be entitled to compensation under section 20(2). Thus, while the second proviso allows the Government to terminate the lease at its discretion and without condition, the third proviso permits termination only when it is in the public interest and only upon payment of compensation, a conflict that can be resolved only by interpreting the two provisos as referring to different subjects. The Court also pointed out that the third proviso contains an exception concerning rights created over private lands, an exception that has no counterpart in the second proviso, further demonstrating that the two provisos have distinct scopes.

In the judgment the Court observed that the third proviso contains an exception that pertains to rights created over private lands, and that no comparable provision exists in the second proviso, thereby indicating that the two provisos have different scopes. The Court then articulated the true effect of the statutory section in three separate propositions. First, it held that rights validly created before 1 July 1945 remain valid. Second, it stated that such pre‑1945 rights may nonetheless be determined under the third proviso if the Government is satisfied that termination serves the public interest, and that in those circumstances compensation must be paid in accordance with section 20(2). Third, it concluded that rights created after 1 July 1945, when they extend for more than one year, are liable to be avoided under the second proviso. Applying this analysis, the Court found that the notice dated 13 March 1951 falls within the ambit of the second proviso and is therefore valid. The Court further noted that the Madras High Court had not been made aware of a rule promulgated by the Governor of Madras under the powers conferred by sections 67(1) and (2) of the Abolition Act. That rule provides that, for any right in any land created by a landholder on or after 1 July 1945 for a period exceeding one year and falling within the second proviso of section 20(1), the authority to decide whether the right should be terminated or allowed to continue is the Board of Revenue, and any order of the Board is subject to revision by the Government. The Court held that this rule does not affect the correctness of the Madras decision because the rule merely identifies the authority that decides the fate of a right falling under the second proviso; it does not prescribe the manner of termination and therefore does not invoke the operation of the third proviso. Even assuming the rule had the effect suggested, the Court said it could not alter the meaning of section 20 as correctly construed. The Court explained that the scheme of the Act intends to render ineffective all rights created after 1 July 1945 for a period exceeding one year. In one interpretation, the creation of such rights is void against the Government by operation of the second proviso alone, without any further act by the Government, making the second proviso self‑contained and rendering the third proviso unnecessary for those rights. However, the Court qualified that view by noting that if the second proviso merely makes those rights voidable rather than void, the Government must take some act to avoid them, though such avoidance need not be governed by the third proviso. Consequently, the Court concluded that the third proviso deals with termination of rights created before 1 July 1945, while the second proviso makes rights created after that date unenforceable against the Government, reflecting the Legislature’s intention to provide an unconditional right to the Government to nullify post‑1945 rights in anticipation of the abolition of zamindari and intermediary interests in land.

In this case the Court observed that the rights created after July 1, 1945 were only voidable and not void, and therefore the Government was required to take some affirmative step to avoid those rights. The Court found no basis for insisting that such avoidance had to be carried out according to the terms of the third proviso. The Court held that if the third proviso were to apply to rights created after July 1, 1945, the second proviso would become redundant and would not have needed to be enacted. Accordingly, the Court expressed the view that the third proviso concerned the termination of rights that existed before July 1, 1945, whereas the second proviso rendered rights created after that date unenforceable against the Government. The Court explained that the unconditional authority granted to the Government was well‑known because on the pivotal date the newly elected party had announced its intention to abolish all zamindari holdings and intermediary interests in land. The purpose of the second proviso, the Court said, was to nullify the creation of such rights in anticipation of the forthcoming legislation, and therefore it was drafted without any conditions. The Court added that if any conditions were intended to be placed on the Government’s power to terminate post‑July 1, 1945 rights, those conditions would have been spelled out in the second proviso itself. In out opinion, the Court found no merit in the principal point advanced by counsel for the appellant. The appellant’s counsel had loosely argued that the Government ought to have permitted the applicant’s request to renew his lease under rule 47 of the Mineral Concession Rules of 1949. The Court rejected this argument as untenable. The Court explained that rule 47 prescribed that a mining lease granted by a private person be subject to certain specified conditions, the first of which allowed the lessee to renew the lease for a period not exceeding the original term. The Court clarified that the rule merely added statutory terms to the lease and did not create any additional substantive rights. Consequently, when a lease is terminated under the second proviso, the conditions introduced by rule 47 also terminate. No other issue was raised before the Court, and for the reasons already stated, the Court ordered that the appeals be dismissed with costs, directing that the appeals be dismissed.