Rana Sheo Ambar Singh vs Allahabad Bank Ltd.

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

Court: supreme-court

Case Number: Civil Appeal No. 301 of 1960

Decision Date: 27 April 1961

Coram: K.N. Wanchoo, P.B. Gajendragadkar, K.C. Das Gupta

In the matter titled Rana Sheo Ambar Singh versus Allahabad Bank Ltd., the proceedings were held at Allahabad on the twenty‑seventh day of April in the year nineteen‑sixty‑one. The case came before the Supreme Court of India and the judgment was authored by Justice K. N. Wanchoo. The bench that considered the appeal consisted of Justice K. N. Wanchoo, Justice P. B. Gajendragadkar, and Justice K. C. Das Gupta. The appellant in the case was identified as Rana Sheo Ambar Singh, while the respondent was Allahabad Bank Ltd., a banking corporation with its registered office in Allahabad. The decision of the Court was rendered on the same day of the hearing, namely the twenty‑seventh of April, nineteen‑sixty‑one, and the bench on which the decision was pronounced comprised the learned Justices Wanchoo, Gajendragadkar, Gupta, Das, and also included contributions from T. L. Venkatarama.

The citation for this judgment appears in the 1961 volume of the All India Reporter at page 1790, and it is also recorded in the Supreme Court Reports in the second part of the 1962 volume at page 441. Subsequent references to this decision can be found in a number of later reported cases, for example, the 1962 Supreme Court reference number 1464, the 1969 Supreme Court case reported at page 971, the 1970 Supreme Court decision at page 1880, the 1971 Supreme Court judgments at pages 77 and 1678, the 1973 Supreme Court case at page 1269, the 1975 Supreme Court decision at page 2295, and the 1977 Supreme Court report at page 1552. The legal issue under consideration primarily involved the interpretation of the Mortgage Decree in the context of proprietorial rights that had been affected by the Uttar Pradesh Zamindari Abolition and Land Reforms Act of 1950, specifically the provisions contained in sections six (a) (i), six (h), and eighteen of that enactment. The Court was called upon to determine whether a mortgagor, who possessed a right of Bhumidari created under section eighteen of the Act, could lawfully convey that newly created right in execution of a decree, given that the original proprietary rights had been vested in the State by operation of the land‑reform legislation.

The factual background set out that the father of the appellant, who was the talukdar of the estate known as Khajur‑gaon, executed a simple mortgage in favour of Allahabad Bank Ltd. over his proprietary interest in the estate, which comprised sixty‑seven villages. While the execution proceedings were pending, the Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950, came into force in July of nineteen‑fifty‑two, thereby abolishing the zamindari rights of the judgment‑debtor and rendering those rights incapable of being sold. The respondent bank consequently filed an application before the executing court, contending that although the zamindari rights could no longer be transferred, the rights that remained in the judgment‑debtor after the enactment—namely the Bhumidari rights—could be sold together with certain ancillary rights. Objections were taken and the matter ultimately reached the High Court on appeal. The High Court, inter alia, upheld the view of the executing court that execution could proceed against the Bhumidari rights created in favour of the appellant pursuant to section eighteen of the land‑reform Act. The pivotal question before this Court was whether those Bhumidari rights, which were a new class of right conferred upon the intermediary under the Act, could be dealt with as a mortgaged security in an execution of the decree, especially in view of the fact that the original proprietary rights in the Sir, Khudkast, and grove lands were now vested in the State. The Court held that the intention of the Uttar Pradesh Zamindari Abolition and Land Reforms Act was to vest the proprietary rights in Sir, Khudkast, and grove lands in the State, and to resettle those lands on the intermediary not as compensation but on the basis of his cultivatory possession, thereby creating a new tenure and a special right of Bhumidari under section eighteen. Consequently the proprietary rights that had been mortgaged were extinguished, and the Bhumidari right, being a wholly new right, could not be considered part of the mortgage. The Court further stated that the mortgagee could enforce his rights against the mortgagor only in the manner prescribed by section six (h) of the Act read together with section seventy‑three of the Transfer of Property Act, and could only claim any compensation money due. Regarding the Sir, Khudkast, and grove lands, the mortgagee could not enforce his rights by the sale of the Bhumidari rights created in favour of the mortgagor as a substituted security. In the present case, therefore, the Bhumidari rights created in favour of the appellant could not be sold in execution of the decree that the respondent sought to enforce under the mortgage of 1914.

In accordance with section six of chapter h of the Act, read together with section seventy‑three of the Transfer of Property Act, the mortgagee was permitted to enforce his rights only by following the compensation procedure prescribed in those provisions. The Court observed that, as regards the Sir, Khudkast land and the grove land, the mortgagee could not enforce his security by treating the Bhumidari rights created in favour of the mortgagor as a substituted security and then selling those rights. Consequently, the Court held that the Bhumidari rights which had been created in favour of the appellant could not be sold in execution of the decree that had been entered against him under the mortgage dated 13 July 1914.

The appeal, numbered Civil Appeal No 301 of 1960, was filed against the judgment and decree dated 24 September 1958 of the Allahabad High Court, Lucknow Bench, in the first execution of decree matter numbered 8 of 1953. Counsel for the appellant and counsel for the respondent were respectively designated. The judgment was delivered on 27 April 1961 by Justice Wanchoo. The Court noted that the appellant’s father, Rana Umanath Bakshsingh, held the position of Talukdar of Khajurgaon and, on 13 July 1914, executed a simple mortgage in favour of Allahabad Bank Limited for a principal sum of six hundred thousand rupees, securing the mortgage against proprietary rights in sixty‑seven villages. In May 1924 the bank instituted a suit seeking recovery of the unpaid mortgage amount by forcing sale of the mortgaged property. A preliminary decree for recovery of approximately four hundred thousand rupees was passed in January 1925, and this decree was made final in July 1926, directing that the proprietary rights in the sixty‑seven villages be sold. Subsequent execution applications were filed, but those were not the subject of the present reference. In 1934 the Uttar Pradesh Agriculturists’ Relief Act was enacted, prompting the judgment‑debtor to apply for amendment of the decree under that Act. The decree was amended on 19 October 1936 pursuant to the provisions of the Relief Act, and the pending execution proceedings were stayed because the court fixed instalment payments. The bank later applied for execution on 25 May 1940; the judgment‑debtor objected on the ground of limitation, but the objection was rejected and execution proceeded thereafter. On 1 July 1952 the Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950 (1 of 1951) came into force, which abolished the zamindari rights of the judgment‑debtor and rendered it impossible to sell those rights in the sixty‑seven villages. Accordingly, on 29 September 1952 the bank made an application asserting that, since the zamindari rights could no longer be sold, only the remaining rights of the judgment‑debtor, such as those in trees, wells, and buildings, could be sold, and it sought to treat compensation payable by the State as substituted security.

After the Act became operative, the respondent submitted an application stating that only those rights of the judgment debtor which continued to exist after the enactment could be sold. The application specifically identified the rights in trees and wells located in the abadi as well as the buildings situated in various villages as property that could be sold under execution. In addition, the application prayed that the judgment debtor’s proprietary interests in grove land and in sir and khudkashat land, which the Act preserved under section 18, should be treated as substituted security in place of the original proprietary rights that had been mortgaged to the respondent, and consequently those rights should also be sold. Finally, the application requested that any compensation payable to the judgment debtor by the State on acquisition of his proprietary rights be regarded as substituted security. The appellant opposed these requests on several grounds. The execution court, however, held that the buildings, trees and wells situated in the abadi were liable to be sold in execution of the decree. It further held that the respondent was entitled to the compensation amount granted by the State to the appellant in lieu of the zamindari rights, treating that amount as substituted security. Lastly, the court concluded that the bhumidari rights acquired by the appellant under section 18 of the Act could also be sold in execution of the decree.

The appellant appealed the execution court’s order to the High Court, raising two principal points. First, it contended that the bhumidari rights created by section 18 of the Act could not be sold in execution of the decree. Second, it argued that the application dated 20 September 1952 was a fresh application for execution, filed more than twelve years after the amended decree, and therefore barred by limitation. The High Court rejected both contentions. It held that execution could proceed against the bhumidari rights created in favour of the appellant under section 18 of the Act. Moreover, the High Court observed that the 20 September 1952 application was not a new filing; rather, the decree holder was merely seeking to enforce the decree with respect to property for which he had already applied within the period prescribed by law. Consequently, the High Court dismissed the appeal. The appellant subsequently obtained a certificate of appeal and brought the matter before the Supreme Court. The principal argument advanced on behalf of the appellant before this Court is that the High Court’s determination that bhumidari rights created under section 18 of the Act are saleable in execution of the decree is erroneous. The mortgage deed, as explained, identified the mortgaged property as the estate forming part of the Talukdari of Khajurgaon, which comprised sixty‑seven villages, and the mortgage therefore covered only the mortgagor’s proprietary interests in those villages. Because the mortgage was of a simple nature, no possession of any portion of the property was transferred to the mortgagee. Counsel for the appellant therefore contended that...

The appellant contended that, since the proprietary right in the sixty‑seven villages had vested in the State under the Act, the respondent, whose only entitlement under the mortgage was to the proprietary rights sold, could now rely only on the compensation payable to the appellant under the Act, placing particular reliance on section 6(h) of the Act. In contrast, the respondent argued that bhumidari rights arising under section 18 of the Act were liable to be sold because they represented the proprietary rights that had been mortgaged, and that, in any event, those rights could be sold as a substituted security in place of the mortgaged property. Consequently, the Court needed to examine the scheme of the Act in order to resolve these opposing submissions. It was not in dispute that the Taluka of Khajurgaon qualified as an estate within the meaning of the Act. It may also be noted that the judgment‑debtor possessed certain sir and khudkashat lands as well as a zamindar’s grove within the sixty‑seven villages that formed the Talukdari estate. Section 4 of the Act provides for the vesting of an estate in the State upon the issuance of a notification made under that provision, and the Taluka of Khajurgaon has indeed vested in the State by virtue of such a notification under section 4. Section 6 prescribes the consequences of the vesting that arises under section 4, and clause (a)(i) of section 6 makes clear the interests that cease and become vested in the State, stating: “(a)‑all rights, title and interest of all the intermediaries‑ (i) in every estate in such area including land (cultivable or barren), grove‑land, forests whether within or outside village boundaries, trees (other than trees in village abadi, holding or grove), fisheries, tanks, ponds, water‑channels, ferries, pathways, abadi sites hats, bazars or melas (other than hats, bazars, melas held upon land to which clauses (a) to (c) of sub‑section (1) of section 18 apply), and … shall cease and be vested in the State of Uttar Pradesh free from all encumbrances.” Clause (h) of section 6 is also material and reads: “(h) no claim or liability enforceable or incurred before the date of vesting by or against such intermediary for any money, which is charged on or is secured by a mortgage of such estate or part thereof shall, except as provided in section 73 of the Transfer of Property Act, 1882, be enforceable against his interest in the estate.” Accordingly, all lands, whether cultivable, barren or grove lands, vested in the State upon the notification made under section 4, unless the Act provides otherwise. Therefore, proprietary rights in sir and khudkashat land and grove land would vest in the State on the coming into force of the notification under section 4, unless there is a specific provision in the Act stating otherwise. The respondent’s contention that sir and khudkashat land and grove land continued to remain the property of the appellant and thus remained liable to be sold in execution proceedings must therefore fail in view of the vesting effected by the notification, unless a contrary provision, such as sections 9 or 18, can be shown to apply.

The assertion that the property remained the appellant’s and that it would therefore stay subject to sale in execution proceedings could not be sustained because the notification issued under section 4 transferred ownership to the State, except where the Act itself provided a different rule. The respondent placed reliance on sections 9 and 18 of the Act as the only statutory provisions that might alter this general rule. Section 9 was examined first and was clearly identified as a “provision otherwise.” It states that all wells and trees situated in an abadi, together with any buildings located within the limits of an estate and belonging to or held by an intermediary, tenant or any other person—whether that person resides in the village or not—shall continue to belong to that intermediary. The provision further explains that the site of the wells and the area adjoining the buildings shall be deemed to be settled with the intermediary by the State Government on terms and conditions that may be prescribed. This language creates a specific exception to the blanket vesting of property in the State that occurs upon the issuance of a section 4 notification. The exception applies only to the wells, trees and buildings themselves; the land on which they stand nevertheless vests in the State, although it is treated as settled with the intermediary under conditions that the Government may later prescribe.

The practical effect of section 9, therefore, is that the appellant—as an intermediary within the meaning of the Act—retains ownership of the wells, the trees in an abadi and the buildings, and these assets remain liable to be sold if they are covered by a mortgage. The High Court had already accepted that there was no dispute concerning the status of the wells, the trees in the abadi and the buildings, and it had conceded that these items could be subject to sale. The only remaining point of contention concerned the bhumidari rights created under section 18. The Court then turned its attention to section 18 to determine whether it, like section 9, constituted a “provision otherwise.” The relevant excerpt of section 18 provided that, subject to sections 10, 15, 16 and 17, all lands that were in possession of, held by, or deemed to be held by an intermediary as sir, khudkashat or an intermediary’s grove immediately before the date of vesting shall be deemed to … (the passage continues). The Court noted that, unlike the clear exception in section 9, section 18 contained no language indicating that sir, khudkashat or grove lands would continue to belong to the intermediary, and thus these lands would vest in the State under section 6(a)(i) because no contrary provision existed in section 18.

Section 18 provides that the land shall be settled by the State Government with the relevant intermediary, lessee, tenant, grantee or grove‑holder, as appropriate, and that, subject to the provisions of the Act, such person shall be entitled to take or retain possession as a bhumidar thereof. The Court observed that the language of this provision differs markedly from that of section 9. Section 9 expressly states that trees and wells in abadi and buildings shall continue to belong to the intermediary, demonstrating that the legislature intended to carve out an exception for those three items so that they would not vest in the State by operation of the notification under section 4 and the consequences under section 6. By contrast, section 18 contains no provision indicating that sir land, khudkashat land or an intermediary’s grove are to remain with the intermediary. Consequently, the Court concluded that sir land, khudkashat land and grove land would vest in the State by virtue of section 6(a)(i) because section 18 does not provide any contrary direction. For comparative purpose, the Court referred to section 23 of the Rajasthan Land Reforms and Resumption of Jagirs Act, No VI of 1952 (the “Rajasthan Act”), which states: “notwithstanding anything contained in the last preceding section (i.e. s. 22, which refers to consequences of resumption), all khudkashat lands of a Jagirdar etc. shall continue to belong to or be held by such jagirdar or other person.” The Court reasoned that if the intent of the present Act had been to keep sir land, khudkashat land and grove land out of State ownership, a similar explicit exception would have been inserted, just as section 9 does for trees, wells and buildings. Moreover, the wording of section 18—specifying that khudkashat and sir land and an intermediary’s grove shall be deemed to be settled with the intermediary and that he would have bhumidari rights therein—indicates that these three categories of property first vested in the State under section 6(a)(1) and were thereafter resettled on a new tenure, rather than preserving the pre‑vesting proprietary right. Thus, the legislature was creating a fresh right under section 18, while the original proprietary rights in sir land, khudkashat land and any intermediary’s grove had already vested in the State pursuant to section 6. Accordingly, the Court held that section 18 does not constitute an exception to the effects of section 6, and that sir land, khudkashat land and grove land remain the property of the judgment debtor in the same manner as they were his property at the time of the mortgage and would

In this case the Court observed that the proprietary interests in sir and khudkashat land as well as in grove land had already vested in the State, and that the interest conferred upon the intermediary by section 18 of the Act constituted an entirely new right which the intermediary had never previously held. Because this newly created right did not exist at the time the mortgage was executed in 1914, it could not have been part of the property that was mortgaged. The Court then turned its attention to the compensation provisions contained in the Act, noting that it had been contended that the interest granted to the intermediary under section 18 was in reality his old right, since no compensation was payable to him for the portion of land that remained with him under that provision. The first provision examined in this regard was section 39, which deals with the computation of the gross assets of a mahal. Under section 39, the value of the gross assets includes amounts calculated at the rates applicable to former proprietary tenants of comparable land for land that is in personal cultivation or held as an intermediary’s grove, khudkashat or sir by all intermediaries in the estate, subject to certain exceptions that are not material to the present analysis. The very inclusion of the rents of those lands, in which bhumidari rights were created by section 18, in the computation of gross assets demonstrates that those lands also vested in the State; if they had not vested in the State there would have been no reason to include them in the gross‑asset calculation for compensation purposes. The Court further compared this scheme with a similar provision found in the Rajasthan Act for illustrative purposes. In that Act, the second schedule sets out the method for calculating gross income, and the income from khudkashat land is excluded because it is exempted from the consequences of resumption under section 23 of that Act. It is also true that, under section 44 of the present Act, when net assets are calculated the income from sir, khudkashat, and grove land is excluded on the ground that bhumidari rights have been conferred thereunder by section 18. However, that exclusion serves only the purpose of determining the amount of compensation payable to the intermediary; in that context it was necessary to recognize that the legislature was creating a new right for the intermediary with respect to certain lands, and therefore monetary compensation was not required. The Court held that this distinction does not alter the legal effect of the notification issued under section 4. According to that notification, sir, khudkashat, and grove land vest in the State and are not exempt from the consequences of vesting laid down in section 6. Consequently, the proprietary rights in those lands that had been mortgaged are extinguished, and the bhumidari right created by section 18 remains a wholly new right distinct from the earlier proprietary interest.

In this case the Court observed that the rights created under section 18 of the Act could not be treated as part of the mortgage. The discussion then turned to section 6(h) of the Act, which provides that “no claim or liability enforceable or incurred before the date of vesting by or against such intermediary for any money, which is charged on or is secured by a mortgage of such estate or part thereof shall, except as provided in s. 73 of the Transfer of Property Act, 1882, be enforceable against his interest in the estate.” The Court held that this provision operates in two ways. First, it bars the mortgagee from pursuing the proprietary right once the interest has vested in the State. Second, it confines the mortgagee’s remedy to the procedure laid down in section 73 of the Transfer of Property Act. Section 73(2) states that “where the mortgaged property or any part thereof or any interest therein is acquired under the Land Acquisition Act, 1894 (1 of 1894), or any other enactment for the time being in force providing for the compulsory acquisition of immovable property, the mortgagee shall be entitled to claim payment of the mortgage money, in whole or in part, out of the amount due to the mortgagor as compensation.” The Court noted that the property in dispute had indeed been compulsorily acquired by the State under the Act, and therefore, read together, sections 6(h) and 73 require the mortgagee to seek recovery only from the compensation awarded to the mortgor. Consequently, the mortgagee cannot enforce his security by claiming the bhumidari rights created under section 18, because those rights are not compensation but special rights arising from cultivatory possession. The Court clarified that this ruling does not affect lands that remain outside State acquisition, such as those exempted under section 9 of the Act. However, where a notification under section 4 and the consequent operation of section 6 cause the land to vest in the State, the mortgagee’s sole recourse is to follow the compensation provision of section 6(h) and cannot rely on the sale or enforcement of the bhumidari rights.

In relation to khudkashat land and grove land, the Court held that the mortgagee could obtain only the compensation amount prescribed in section 6(h) of the Act. The submission that the bhumidari rights might be treated as a substituted security was therefore rejected as untenable. The Court’s attention was then directed to section 8(2) of the Uttar Pradesh Zamindars Debt Reduction Act, No. XV of 1953. That legislation provides for the reduction of debts owed by zamindars whose estates have been acquired under the principal Act, and it stipulates that the reduced debt may be recovered solely from the compensation and rehabilitation grant payable to the mortgagor or judgment‑debtor with respect to the acquired estates. In particular, section 8(2) declares that, notwithstanding any other law, the reduced amount payable to a mortgavor or judgment‑debtor under sections 3 or 4 concerning mortgaged estates cannot be recovered except out of the compensation and rehabilitation grant due to that person.

The Court observed that it could not discern any manner in which the provisions of the Uttar Pradesh Zamindars Debt Reduction Act would modify the construction of section 6(h) of the primary Act when read together with its other provisions. Consequently, the Court found it unnecessary to interpret section 8(2) of the Debt Reduction Act, because it was already clear from section 6(h) and the surrounding provisions that the bhumidari rights created in favour of the appellant could not be sold to satisfy the decree issued against him under the 1914 mortgage. The matter then turned to the question of limitation. Counsel for the respondent acknowledged that, if the appellant succeeded on the first point, it would not be required to address the limitation issue. Since the appellant had indeed succeeded on that principal point, the Court concluded that it was unnecessary to examine whether the application for execution by sale of the bhumidari rights under section 18 was barred by limitation.

Accordingly, the Court allowed the appeal and directed that the execution of the decree sought by the respondent could not be levied against the bhumidari rights created in favour of the appellant under section 18 of the Act. The appellant was awarded costs of these proceedings and of the proceedings in the High Court, while the costs of any execution court were left to the discretion of that court. The appeal was therefore allowed.