Rabia Bai vs The Custodian-General 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. 22 of 1956
Decision Date: 12 January 1961
Coram: P.B. Gajendragadkar, A.K. Sarkar, K.N. Wanchoo, J.R. Mudholkar
In the matter titled Rabia Bai versus the Custodian‑General of Evacuee Property, the Supreme Court of India delivered its judgment on 12 January 1961. The opinion was authored by Justice P.B. Gajendragadkar, who sat on a bench together with Justices A.K. Sarkar, K.N. Wanchoo, and J.R. Mudholkar. The case was recorded as Civil Appeal No. 22 of 1956 and was taken on special leave from an order dated 4 July 1954 issued by the Custodian‑General of Evacuee Property in a revenue proceeding designated as No. 427/R/Judl./53. The official citation of the decision appears as 1961 AIR 1002 and 1961 SCR (3) 448, with further references recorded as R 1961 SC1257 (7) RF 1976 SC2557 (9, 25). The principal statutory provision under consideration was Section 40(4)(a) of the Administration of Evacuee Property Act, 1950 (XXXI of 1950), which deals with the confirmation of sales made before the enactment of evacuee‑property legislation.
The factual backdrop involved a person identified only as “M” who had migrated to Pakistan in 1947. While residing in Pakistan, M sold a parcel of immovable property situated in the State of Madras to the appellant on 2 August 1949. At the time of that transaction, no specific legislation governing evacuee property existed in Madras. However, on 23 August 1949, the Administration of Evacuee Property (Chief Commissioners Provinces) Ordinance, 1949 (XII of 1949) was extended to apply to Madras. Following this extension, the appellant applied for confirmation of the sale under the provisions of the Act. Subsequently, the authorities declared M an evacuee and classified the property as evacuee property. The administration then examined the circumstances of the sale and concluded that M had entered into the transaction with the purpose of evading the forthcoming evacuee law that it was anticipated would be applied to Madras. As a result, the confirmation of the sale was refused under Section 40(4)(a) because the transaction was deemed not to have been entered into in good faith.
The appellant contended that M could not be said to have acted dishonestly because, at the time of the sale, no evacuee‑property law was operative in Madras. The appellant argued further that an intention to avoid a future law did not amount to dishonest conduct. The Court examined these submissions and held that the vendor had indeed failed to act in good faith. The Court emphasized that, given the purpose and emergency nature of the legislation, a deliberate intention to defeat a law that was expected to be extended constituted a lack of good faith. The Court explained that if the vendor sold his property solely for the purpose of converting it into cash and transporting it to Pakistan, without any legitimate necessity, his action demonstrated an intention to circumvent the imminent provisions of the evacuee law, thereby satisfying the statutory requirement of dishonesty under Section 40(4)(a). Consequently, the Court affirmed that the refusal to confirm the sale was proper and that the vendor’s conduct fell within the ambit of the statutory bar.
The parties were represented by counsel for the appellant and counsel for the respondent. The appellant’s counsel included A. V. Viswanatha Sastri and R. Ganapathy Iyer, while the respondent was represented by the Additional Solicitor‑General of India, H.N. Sanyal, together with N.S. Bindra and D. Gupta. The Court’s decision ultimately rejected the appellant’s claim for confirmation of the sale and upheld the application of Section 40(4)(a) of the Administration of Evacuee Property Act, confirming that the transaction had not been conducted in good faith.
The appeal, which was entertained by way of special leave, challenged the order issued by the Custodian‑General of Evacuee Property, New Delhi, in a revision petition that affirmed the decisions of the lower authorities. Those authorities had declined the appellant’s request for confirmation of a particular sale transaction under section 40(4)(a) of the Administration of Evacuee Property Act, 1950. The appellant, identified as Rabia Bai, is a citizen of India residing at Grange, Yercaud, in Salem District. In 1949 she became aware that the premises numbered 20 on Godown Street, G.T., Madras, were being offered for sale. Desiring to acquire an immovable asset, she arranged for the purchase of the said premises through her husband. The property had been owned by Mohamad Gani Jan Mohamad, who had departed for Pakistan in 1947 and subsequently settled there. Before leaving, Mohamad Gani had executed a power of attorney in favour of his nephew, Ahmed Abdul Gani. The nephew arrived in Madras in April 1949 and undertook the sale. After negotiations, the appellant’s husband entered into a written agreement with Ahmed Abdul Gani on 29 April 1949 for the purchase of the property at a price of Rs 2,40,000. An initial payment of Rs 1,50,000 was made promptly in cash and by bank drafts. The sale deed was then prepared, dispatched to Karachi for execution by the vendor, and, upon its return duly signed, was presented to the Collector’s Office in Madras where it was stamped on 27 June 1949. Prior to registration, an income‑tax clearance certificate was required; once obtained, the deed was presented for registration and was officially registered on 11 August 1949. The remaining balance of Rs 30,000 was paid before the registering officer to Mr M. H. Ganni, who also possessed a power of attorney from the vendor. Through these steps the appellant secured title to the property. Subsequently, she applied for confirmation of the sale deed, but her application was rejected. Before analyzing the specific facts of those proceedings, it is necessary to outline briefly the background concerning the application of the evacuee legislation in the State of Madras.
Within two weeks after the registration of the sale deed in favour of the appellant, Ordinance No. XII of 1949, which had been promulgated on 13 June 1949, was extended to Madras on 23 August 1949. Section 25(1) of that Ordinance imposed restrictions on transfers made by evacuees. In substance, this subsection stipulated that any transfer of a right or interest in property made by, or on behalf of, an evacuee after a date to be specified by the Central Government would not be effective unless it received confirmation from the Custodian. Section 25(2) provided that an application for such confirmation could be filed by the transferor, or by any person claiming under, or lawfully authorised by, the transferor, to the Custodian within two months from the date of registration of the deed of transfer or within two months from the commencement of the Ordinance, whichever was later. The proviso to this subsection empowered the Custodian to admit an application filed after the prescribed period if he was satisfied that sufficient reasons existed, and required him to record the reasons for allowing the late filing. Section 25(3) mandated that the Custodian conduct a summary enquiry into the application in the manner prescribed, and authorized him to reject the application if, in his opinion, the transaction had not been entered into in good faith or for valuable …
In the earlier ordinance, a transfer of any right or interest in property situated in a province would not become effective unless the Custodian confirmed it, once the Central Government had specified the applicable date for that province by notification in the official gazette. Section twenty‑five, clause two of that ordinance stated that an application for such confirmation could be filed by the transferor, or by any person claiming under the transferor or lawfully authorised by either, with the Custodian. The application had to be presented within two months of the registration of the deed of transfer, or within two months of the commencement of the ordinance, whichever occurred later. The proviso attached to this clause gave the Custodian discretionary power to accept an application that was filed after the prescribed limitation period, provided the Custodian was convinced that sufficient reasons existed for allowing the late filing, and it required the Custodian to record the reasons for exercising this discretion. Section twenty‑five, clause three mandated that the Custodian conduct a summary enquiry into each application in the manner prescribed by the ordinance and authorised the Custodian to reject the application for confirmation on any of three grounds: first, if the transaction was not entered into in good faith or for valuable consideration; second, if the transaction was prohibited by any law then in force; or third, if the Custodian considered that the transaction ought not to be confirmed for any other reason. If the application was not rejected under clause three, clause four allowed the Custodian either to confirm the transfer without conditions or to confirm it subject to such terms and conditions as the Custodian deemed appropriate. Ordinance number twelve of 1949 was subsequently repealed by Ordinance number twenty‑seven of 1949, which became operative on 18 October 1949. Section thirty‑eight of the later ordinance mirrored the provisions of section twenty‑five of the earlier ordinance except for one significant difference. Section thirty‑eight, clause one stipulated that any transfer of a right or interest in property made in any manner after 14 August 1947 by, or on behalf of, an evacuee would not be effective unless the Custodian confirmed it. Thus, whereas the earlier provision left the determination of the relevant date to a notification by the Central Government, the later provision fixed a uniform date—14 August 1947—for all provinces to which the ordinance applied. Apart from this variation, the remaining provisions of section thirty‑eight were identical to those of section twenty‑five. On 17 April 1950, Ordinance number twenty‑seven of 1949 was itself repealed by Act thirty‑one of 1950, effected by section fifty‑eight of that Act. Section forty, clauses one and four, replicated the relevant provisions of sections twenty‑five and thirty‑eight of the earlier ordinances. One notable amendment introduced by section forty, clause one concerned the time‑frame of transfers to which its provisions applied. Under this clause, the transfers covered were those executed after 14 August 1947 but before 7 May 1954, and the clause further provided, inter alia, that such transfers would not confer any
In this case the Court explained that the transfer of property did not create any enforceable rights for the parties if, after the transfer, the transferor became an evacuee as defined in section 2 or if the transferor’s property was thereafter declared or notified to be evacuee property under this Act, unless the Custodian confirmed the transfer in accordance with the statutory provisions. Section 40(4) dealt with an application made under subsection (1) for confirmation of such a transfer. The three clauses of that subsection—paragraphs (a), (b) and (c)—mirrored the corresponding provisions of sections 25(3) (a)‑(c) and 38(4) (a)‑(c) of the earlier Ordinances. Consequently, the Court noted that the power granted to the Custodian to hold an enquiry on an application for confirmation and to refuse confirmation in prescribed circumstances remained unchanged. The Court then traced the legislative history, stating that Ordinance No. XII of 1949, which had been extended to Madras on 23 August 1949, was operative only until 18 October 1949. After that date Ordinance No. XXVII of 1949 replaced it, and the latter Ordinance was in turn repealed by Act XXXI of 1950 on 17 April 1950. The appellant’s application for confirmation of her purchase was therefore examined under the provisions of the 1950 Act. The appellant had filed her application for confirmation of the sale on 19 December 1949. The application was opposed by the tenants, who raised several grounds arguing that the transfer should not be confirmed. On 11 January 1951 the Assistant Custodian of Evacuee Property, Madras City, declared the vendor’s property to be evacuee property, holding that the vendor fell squarely within the definition of “an evacuee” contained in section 2(d)(ii) of the Act. That declaration was made under section 7(1) of the Act. In considering the appellant’s request for confirmation, the Assistant Custodian took into account his earlier declaration that the vendor was an evacuee and that the vendor’s property was evacuee property. After reviewing the relevant aspects of the transaction, he concluded that confirming the transfer would not be justified. The Assistant Custodian reached this conclusion by relying on section 40(4)(c) of the Act, observing that the rapid and hurried manner in which the vendor acted brought the transaction within the scope of that provision. Accordingly, he issued an order on 31 July 1951 refusing to confirm the transaction. The appellant challenged this conclusion by filing an appeal before the Custodian. The Custodian, after hearing the appeal, held that the sale was supported by valuable consideration, but nevertheless proceeded to examine whether the sale could be said to have been entered into in good faith.
In examining whether the sale had been made in good faith, the appellate authority first noted that the vendor had departed for Pakistan in June 1947, apparently because of civil unrest or fear of such unrest, and that it was evident he had permanently settled there. The authority further observed that the vendor evidently wished to dispose of his Indian properties, convert them into cash, and transport the proceeds to Pakistan. To support this inference, the authority relied upon a letter addressed by the vendor to Mohideen dated 4 July 1949. In that letter the vendor wrote, “if the matter is delayed there would be many sort of new difficulties as you know that the Government are passing new rules every day,” and the authority interpreted the letter as a clear indication that the vendor intended to sell his assets as swiftly as possible in order to avoid the anticipated extension of evacuee legislation to Madras. Consequently, the appellate authority concluded that the transaction was not entered into in good faith and therefore could not be confirmed under section 40(4)(a) of the Act. The appellate judgment also recorded that the request for confirmation could likewise be refused under section 40(4)(c) of the Act, and the order effecting this refusal was dated 4 February 1953. Subsequently, the appellant filed a revisional application before the Custodian‑General, who re‑examined the matter and concurred with the appellate authority’s finding that, although valuable consideration had been paid, the transaction could not be characterized as being made in good faith. In reaching this view, the Custodian‑General relied on the vendor’s conduct, the rapid pace with which the sale was attempted, and the anxiety expressed in the vendor’s letter to Mohideen. The Custodian‑General therefore held that the vendor sought to circumvent the soon‑to‑be‑applied evacuee restrictions, demonstrating a lack of good faith. On that basis, the revisional application was dismissed on 4 July 1954, with the Custodian‑General stating that the appellant’s case fell within section 40(4)(a) of the Act and declining to consider the applicability of section 40(4)(c). The Court observed that where either the vendor or the vendee lacks good faith, confirmation of the transaction may be rightfully denied under section 40(4)(a); thus good faith is required of both parties. Accordingly, the provisions of section 40(4)(a) are stricter than those of section 53(1) of the Transfer of Property Act, which protects the rights of a transferee who is in good faith.
The law that protects a purchaser who has given consideration does not apply under section 40(4)(a) of the Act. Consequently, even though the appellant paid valuable consideration and appears to have acted in good faith, her claim for confirmation fails if the vendor lacked good faith. The appellant’s payment of consideration and her good‑faith conduct may be relevant to assess her own behavior, but they do not affect the assessment of the vendor’s conduct. This principle is not seriously contested before the Court. Counsel for the appellant argues that, at the time of negotiations, evacuee law had not yet been extended to Madras, allowing the vendor full freedom to dispose of his property. He further submits that, even if the law applied, the Government’s policy was to confirm transfers by Muslim evacuees to Indian nationals unless a tax certificate was missing or other dues remained unpaid in the Custodian’s register. The argument relies on a press note dated May 13, 1949, which the Government of India purportedly issued through the Ministry of Rehabilitation. Conversely, counsel for the respondent points to a circular dated March 9, 1950, which states that any Government instructions are subject to the requirements of section 38(4) of Central Ordinance No. XXVII of 1949. In other words, regardless of the nature of circulars, the authorities administering the evacuee law must resolve matters according to the statutory provisions governing that law. The Court does not consider the submission that, where the law applied, confirmation of sales would become automatic upon satisfaction of the two conditions mentioned in the press note to be persuasive. Accordingly, the Court assumes that the issue of confirming the sale was to be, and indeed was, dealt with by the appropriate authorities under the relevant statutory provisions in force at the material time. The vendor in this dispute was a Muslim evacuee who owned the property before the proposed transfer to the appellant. According to the press note, a transfer could be confirmed only if the evacuee produced a tax clearance certificate and had no outstanding liabilities in the Custodian’s register. The circular of 9 March 1950 clarified that any ministerial direction must still comply with the procedural requirements of section 38(4) of the Central Ordinance. Thus, even a policy of automatic confirmation could not supersede the statutory conditions laid down in the evacuee law. The Court observed that the vendor’s intention to evade the imminent extension of evacuee law to Madras demonstrated a lack of good faith required by section 40(4)(a). Because good faith must exist on both sides of a transaction, the vendor’s deficiency cannot be cured by the appellant’s good‑faith purchase. Accordingly, the Court declined to give effect to the argument that the statutory scheme automatically validates sales once the two conditions are satisfied.
The Court observed that the question of confirming sale transactions was required to be, and indeed was, dealt with by the appropriate authorities under the statutory provisions that were in force at the material time. It noted, however, that at the time the impugned transaction was completed no evacuee law had been extended to Madras, and that this fact raised a further question. The question was whether a transaction entered into deliberately and consciously with the purpose of evading the application of an evacuee law that was expected to be extended to Madras would attract the provisions of section forty of the Act, subsection four, sub‑paragraph a. The Court recalled that the respondent had answered this question in the affirmative, and that counsel for the petitioner, Mr Sastri, contended that this conclusion was erroneous in law. Mr Sastri argued that the expression “good faith” in section forty, subsection four, sub‑paragraph a should be interpreted in the sense given to that expression by section three, sub‑section twenty‑two of the General Clauses Act of 1897. That provision, he said, states that a thing is deemed to be done in good faith where it is in fact done honestly, whether or not it is done negligently. Accordingly, counsel argued that the vendor could not be said to have acted dishonestly when no evacuee law applied to Madras, and that an intention to avoid a law that might later be applied to Madras could not introduce an element of dishonesty into his conduct. The Court rejected this argument. It pointed out that section three of the General Clauses Act itself provides that the definitions prescribed by that section are applicable “unless there is anything repugnant in the subject or context”. Consequently, it would not be unreasonable to hold that the content of the expression “good faith” must depend substantially on the context of the statute that employs it. In determining the meaning of the expression in section forty, subsection four, sub‑paragraph a, the Court said it was essential to consider the scope and effect of the principal provisions of section forty, subsection one. That subsection provides, inter alia, that no transfer made after the fourteenth day of August, nineteen forty‑seven shall be effective to confer any rights on the parties thereto if, at any time after the transfer, the transferor becomes an evacuee within the meaning of section two, or the property of the transferor is declared or notified to be evacuee property within the meaning of the Act, unless the transfer is confirmed by the Custodian in accordance with the provisions of the Act. The Court therefore concluded that all transfers made after the fourteenth day of August, nineteen forty‑seven but before the seventh day of May, nineteen fifty‑four fall within the operation of that provision, and that a large number of transfers effected during that period are consequently subject to the mischief that section forty was intended to address.
The Court noted that the transactions under consideration were executed at a time when no evacuee law existed to govern those transfers. Reading sections 40(1) and 40(4) together, the Court found that transfers caught by the former provision would be valid only if they received confirmation under the latter provision. The Court allowed that a transfer made during the prohibited period might have been entered into in good faith or for valuable consideration and therefore might not attract any of the sub‑clauses (a), (b) or (c) of section 40(4). In such a circumstance, the mere fact that the transfer occurred within the prohibited period would not automatically render it void, and the Custodian would be required to confirm it. However, if the same transfer fell within the ambit of clause (a) of section 40(4), which deals with transactions not entered into in good faith or for valuable consideration, the Custodian could not affirm it and the transfer would remain inoperative. This analysis demonstrated that the primary purpose of the Act was to preserve the property of persons who had migrated to Pakistan until the Government of India could reach an understanding with the Government of Pakistan regarding adjustment of claims of Indian evacuees over property left in Pakistan. The underlying idea, as the Court explained, was that the two governments would agree on the valuation of evacuee properties situated in each country, and that any difference in valuation would be amicably settled between them. Following such adjustment, the Act intended that evacuees would receive compensation for the loss incurred due to the property they had left in the opposite country. The Court observed, however, that this intended scheme of valuation, adjustment, and compensation had not been successfully implemented. There was no doubt, the Court held, about the policy and object of the Act, and that any interpretation of the phrase “good faith” in section 40(1) must be informed by that policy. Section 40(4) enumerates three categories in which a transfer may not be confirmed: clause (a) concerns transactions not entered into in good faith or for valuable consideration; clause (b) concerns transactions prohibited by any law then in force; and clause (c) covers transactions that may be refused confirmation for any other reason. The Court therefore concluded that the scope of these three clauses is very wide, encompassing not only transactions prohibited by law but also those lacking good faith or valuable consideration. It further noted that if the test prescribed by section 3(22) of the General Clauses Act, as interpreted by the referenced authority, were applied, a large number of transactions might have to be confirmed even though they were deliberately arranged to evade section 40(1). In its opinion, the Court stated that the fact that the evacuee law had not yet been extended to the relevant region was not a decisive factor.
In this case, the Court observed that the fact that the evacuee law had not yet been extended to Madras at the relevant time could not be considered decisive. It was well known that the law was being extended from province to province as circumstances required, and the vendor’s own letter to Mohideen demonstrated that the vendor was aware of this forthcoming extension. The Court noted that the history of evacuee legislation enacted by several states as well as by the Central Government and the Legislature of Pakistan showed that the legislatures were attempting to address an unprecedented problem. The statutes passed in India and Pakistan during the material period made it clear to evacuees of both countries that the two governments were adopting legislative measures intended to protect evacuee properties and to prevent their transfer. Consequently, when a vendor sold his property not out of any necessity or legitimate purpose but solely with the aim of converting it into cash and moving it to Pakistan, such a sale was clearly intended to defeat the provisions of the Act that the vendor knew would soon apply to Madras. The Court therefore found it difficult to accept that the vendor was acting honestly within the meaning of section 40(4)(a) of the Act. An intention to defeat the provisions of the Act could not be described as honest in this context. The Court warned that if, despite such an intention, a transaction were upheld as being entered into in good faith, many similar transactions might escape the operation of section 40(1), thereby defeating the purpose of the legislation. The Court emphasized that although the provisions of section 40(1) are drastic, they were deliberately made retrospective, a fact that underscores the aim and object of the Act. It would be unreasonable to ignore this purpose when construing the expression “good faith” in section 40(4)(a). Accordingly, the Court held that, having regard to the purpose of the emergency legislation involved, the expression “good faith” had been properly interpreted by the respondent when he concluded that a deliberate intention to evade the anticipated application of the evacuee law brought the transfer within the mischief of section 40(4)(a). The result was that the appeal failed and was dismissed with costs, and the dismissal of the appeal was affirmed.