Shri Mithoo Shahani And Ors vs Union Of India And Ors

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

Court: supreme-court

Case Number: Civil Appeal No. 552 of 1963

Decision Date: 10 March, 1964

Coram: N. Rajagopala Ayyangar, P.B. Gajendragadkar, K.N. Wanchoo, J.C. Shah, S.M. Sikri

In the matter titled Shri Mithoo Shahani and Others versus Union of India and Others, the judgment was delivered on 10 March 1964 by the Supreme Court of India. The opinion was authored by Justice N. Rajagopala Ayyangar, and the bench was composed of Justices N. Rajagopala Ayyangar, P. B. Gajendragadkar, K. N. Wanchoo, J. C. Shah and S. M. Sikri. The citation for the decision is recorded as 1964 AIR 1536 and 1964 SCR (7) 103, with subsequent citations including D 1965 SC 134 (3) RF, 1969 SC 1297 (8). The case concerned the Evacuee Property – Land Act and the Displaced Persons (Compensation and Rehabilitation) Act, 1954 (Act XLIV of 1954), specifically the application of section 33 of that Act.

The factual background shows that the appellants and five respondents were identified as displaced persons. The Deputy Custodian of Nizamabad District initially allotted approximately sixty acres of land to the five respondents by way of lease, without imposing any condition that the lessees cultivate the land personally. While this lease remained in force, the Government of India issued a press note on 13 November 1953 announcing its decision to allocate evacuee agricultural land in Hyderabad State to displaced persons whose claims had been verified under the Displaced Persons (Claims) Act, 1950. Acting on that notification, the appellants submitted an application and, on 4 May 1954, the disputed land—still subject to the existing lease in favor of the respondents—was allotted to them.

Subsequently, the Displaced Persons (Compensation and Rehabilitation) Act became effective on 9 October 1954. Pursuant to section 20 of that Act, the Regional Settlement Commissioner issued Sanads in favor of the appellants for the same parcels of land. Both the appellants and the respondents laid claim to these plots, leading the dispute to ascend to the Deputy Chief Settlement Commissioner. The Deputy Chief Settlement Commissioner referred the matter to the Government of India for consideration under section 33 of the Act. The Deputy Secretary in the Rehabilitation Ministry examined the case under that provision and upheld the respondents’ contentions, resulting in the cancellation of the allotment previously made to the appellants.

The appellants challenged the legality of the government’s order. The Court held that the order issued by the Central Government fell within the ambit of section 33 of the 1954 Act, as it dealt with correcting an error concerning a “thing done or action taken” related to a rehabilitation grant to a displaced person. The Court further observed that the issue was not limited to questioning the Regional Settlement Commissioner’s order, but rather involved determining whether the original leaseholders—the respondents—were entitled to restoration relief, a question that had been referred to the Central Government for resolution after both parties were heard on all points.

In this appeal the Court observed that the reference to the Central Government arose because the Deputy Chief Settlement Commissioner had issued an order, and that both parties had been fully heard by the Central Government on every issue before any orders were issued; consequently it would be incorrect to view the question before the Central Government as limited solely to the correctness of the Regional Settlement Commissioner’s order, an order that, when read in isolation, might not fall within the scope of section 39 of the Act. The Court further held that a Sanad may be issued lawfully only when it is based on a valid allotment order. Therefore, if the allotment order that serves as the foundation for a grant is set aside, the grant itself cannot continue to exist, because a valid grant must be made by a competent authority under a valid order. Once the validity of that foundational order is terminated, the grant cannot be sustained unless the Act or the rules contain an express provision that the grant would survive such invalidation. Applying this principle to the facts of the present case, the Court concluded that when an allotment order is vacated, the title that was derived from the continued operation of that order also collapses. The Court distinguished the decision in Partumal v. Managing Officer, Jaipur, I.L.R. 11 Raj. 1121, and approved the ruling in Balwant Kaur v. Chief Settlement Commissioner (Lands), I.L.R. [1964] Punjab 36. The judgment was recorded under the civil appellate jurisdiction as Civil Appeal No. 552 of 1963, filed by special leave against the order dated 28 April 1960 issued by the Deputy Secretary to the Government of India, Ministry of Rehabilitation, which purported to exercise revisionary powers conferred by section 33 of the Displaced Persons (Compensation and Rehabilitation) Act, 1954 (Central Act XLIV of 1954). The appeal was accompanied by Writ Petition No. 108 of 1960, seeking enforcement of fundamental rights under Article 32 of the Constitution of India. Counsel for the appellants and petitioners, as well as counsel for the respondents, were instructed. The judgment was delivered on 10 March 1964 by Justice Ayyangar. The Court noted that the appeal sought to challenge the correctness of the Deputy Secretary’s order made under section 33 of the Act. The factual background essential to the dispute involved approximately 60 acres of agricultural land located at Nizamabad, formerly in the State of Hyderabad and presently in the State of Andhra Pradesh. The case proceeded from here to address the substantive legal issues.

On 7 July 1950 the Deputy Custodian of Nizamabad District formally allotted forty‑four acres of the disputed land to five individuals who appear before the Court as respondents. All five were recognised as displaced persons and, under the provisions applicable at that time, each was entitled to receive such an allotment. Subsequently, by an order dated 21 July 1951, the remaining sixteen acres and a fraction of an acre were also allotted to the same five persons, thereby completing the allocation of the entire sixty‑acre parcel. The allocation was executed by way of a lease, and one of the conditions incorporated in that lease was that its terms could be revised only after the lapse of five years from the date of lease execution. It is material to note that the lease contained no requirement obligating the lessees to cultivate the leased lands personally; the lease simply granted them possession without imposing any agricultural duties on the lessees.

While this lease remained in force, the Government of India issued a press note on 13 November 1953 announcing its intention to allot evacuee agricultural land in Hyderabad State to displaced persons whose claims for agricultural lands had been verified under the Displaced Persons (Claims) Act, 1950. The press note explained that the purpose of those allotments was to settle the verified claims of displaced persons concerning their agricultural holdings, and that the terms of the new allotments would be the same as those prescribed under the quasi‑permanent allotment scheme operating in Punjab. The notice invited applications from persons residing, among others, in Hyderabad State whose verified claims included a demand for agricultural land, and it fixed 31 December as the final date for receipt of such applications. In response to this notification, the appellants submitted an application, and on 4 May 1954 the land that is now the subject of this dispute, although still covered by the existing lease in favour of the respondents, was allotted to the appellants on a quasi‑permanent basis. There is no dispute that the appellants satisfied all the qualifications required by the press note and were therefore eligible to receive an allotment of evacuee property. The order of allotment, a copy of which was sent to the Collector of Nizamabad district, contained a request that the allottees be placed in possession of the land and that this fact be communicated to the office of the Regional Settlement Commissioner. Acting on that request, the revenue authorities dispossessed the respondents from the leased lands and placed the appellants in physical possession of the same.

Following their dispossession, the respondents addressed a representation to the Regional Settlement Commissioner in Bombay, emphasizing that they were displaced persons who had previously been rehabilitated through the lease allotment and were now being uprooted without justification. They further asserted that they had incurred substantial expenses in improving the agricultural land and in bringing it under proper cultivation. The Regional Settlement Commissioner examined these representations and, by an order dated 10 July 1954, rejected the respondents’ application for relief. While the full reasons for that order are not reproduced here, it is sufficient to note that one of the principal grounds for rejection was the respondents’ failure to personally cultivate the leased lands, a condition that, although not expressly required by the lease, was considered relevant by the Commissioner. Unsatisfied with this outcome, the respondents then moved the Regional Settlement Commissioner again, seeking a review of his earlier order and also requesting further relief from the Government of India in their favour.

In the proceedings the respondents petitioned the Government of India for relief, requesting that the Government intervene on their behalf. After this petition was filed, the relevant legislation was passed and became effective on 9 October 1954. Section 12 of that Act gave the Central Government authority to acquire property belonging to evacuees for the purpose of rehabilitating displaced persons. Pursuant to that power, the lands that later became the subject of dispute were taken over by the Government through a notification dated 18 January 1955. While the respondents continued to pursue a reversal of the Regional Settlement Commissioner’s order dated 10 July 1954, the Commissioner, without referring to the respondents, issued sanads in favour of appellants 1 to 4 on 12 January 1956, acting under section 20 of the Act.

The Deputy Chief Settlement Commissioner, who was handling the representations filed by the respondents, issued an order on 22 August 1958 after receiving a report from the Regional Settlement Commissioner. In that order he observed that the files did not contain any evidence that the land had originally been leased to the respondents on the condition that they personally cultivate it. Consequently, he set aside the Regional Settlement Commissioner’s order of 10 July 1954 and remanded the matter for a fresh, thorough enquiry, directing that new orders be made after such enquiry. A subsequent enquiry was conducted by the Collector, whose report dated 13 June 1959 concluded that the respondents had indeed personally cultivated the lands. The Collector also noted that, of the total 60 acres, 26 guntas had been allotted on a quasi‑permanent basis to other displaced persons in 1954, and that portion was therefore excluded from the controversy. It should be noted that the Deputy Chief Settlement Commissioner’s order of 22 August 1958 had inadvertently been issued without giving notice to the appellants. When this omission was brought to his attention after the remand, he issued notice to the appellants, heard them, and then referred the case to the Government of India for action under section 33 of the Act.

The referral was examined by the Deputy Secretary in the Rehabilitation Ministry, who heard all parties and recorded two principal findings: first, that the order of 10 July 1954 which refused to transfer the lands to the respondents was erroneous; and second, that there was no valid reason for terminating the lease and depriving the respondents of possession of the disputed property. On the basis of those findings, the Deputy Secretary directed that the sanads granted to the appellants be revoked and that the respondents be restored to possession of the property. The legality of that order became the subject of the present appeal. Counsel for the appellant, Mr Achhru Ram, raised three specific points: (1) that the Central Government lacked authority under section 33 of the Act to revise the Regional Settlement Commissioner’s order of 10 July 1954; (2) that, even assuming the order could be revised, the land in dispute had been transferred to the appellants irrevocably through quasi‑permanent allotments and sanads issued in the name of the President of India, and therefore the title could not be disturbed except in accordance with the terms of those sanads; and (3) that the Deputy Secretary had no material before him which justified concluding that the order of 10 July 1954 was erroneous and needed revision.

In this matter, the Court examined three specific submissions made by counsel for the appellant. The first submission asserted that, even assuming the order dated 10 July 1954 could be subject to revision, the disputed land had already been transferred to the appellants on an irrevocable basis through a quasi‑permanent allotment and the issuance of sanads. Those sanads were executed in the name of the President of India, and the title created by them could be disturbed only in accordance with the specific terms contained in the sanads themselves. The second submission contended that the Deputy Secretary of the Government of India, who considered the revision request, possessed no material or evidence before him that would enable him to find the 10 July 1954 order erroneous or in need of revision. The third submission argued that the order of the Regional Settlement Commissioner, which the Central Government later revised under section 33, was not a “proceeding under this Act” because it had been issued before the Act came into force, and therefore lay outside the jurisdiction conferred by section 33.

The Court then turned to the language of section 33, which provides that the Central Government may at any time call for the record of any proceeding under the Act and may pass such order as it considers appropriate, provided that the order is not inconsistent with any provision of the Act or with the rules made thereunder. The Court observed that if the order of 10 July 1954 issued by the Regional Settlement Commissioner qualifies as a “proceeding under this Act,” there is no statutory limitation on the Central Government’s power to pass an order that the circumstances of the case require, subject only to the condition that the new order must not conflict with any provision of the Act or the applicable rules. It was further noted that the Central Government cannot issue an order that is inconsistent with the Act or the rules. The contention that, after the transfer of the property and the grant of a sanad under section 20 read with rule 91(8) in the form specified in Appendix XXIV of the Rules, the impugned order was inconsistent with the Act was not supported by any material; no allegation was made that the present order conflicted with any statutory provision or rule.

The Court explained that whether the opinion of the Central Government was correct or incorrect on the evidence does not fall within the scope of an appeal under article 136. However, the question of whether the order was illegal or void, as distinct from being merely incorrect, required consideration and would be dealt with in conjunction with the final argument submitted by counsel. Regarding the contention that the original order pre‑dated the Act and therefore could not be revised under section 33, the Court pointed to section 39 of the Act. Section 39 expressly provides that any act or order made prior to the commencement of the Act, insofar as it is not inconsistent with the Act, shall be deemed to have been taken in exercise of the powers conferred by the Act as if the Act were in force on the date of the act or order. This provision therefore brings the earlier order within the scope of section 33.

Section 39 of the Act provides that any act or decision, including any order issued, by the Chief Settlement Commissioner, Settlement Commissioner, Additional Settlement Commissioners or Settlement Officers made for the purpose of paying compensation, rehabilitation grants or other benefits to displaced persons shall, to the extent that it does not conflict with the provisions of the Act, be treated as having been exercised under the powers conferred by the Act as if the Act had been in force on the date on which that act or decision was taken. The section is worded as follows: “Anything done or any action taken (including any order made) by the Chief Settlement Commissioner, Settlement Commissioner, Additional Settlement Commissioners or Settlement Officers for the purposes of payment of compensation or rehabilitation grants or other grants to displaced persons shall, in so far as it is not inconsistent with the provisions of this Act, be deemed to have been done or taken in the exercise of the powers conferred by or under this Act as if this Act were in force on the date on which such thing was done or action was taken.” After stating the provision, it was argued that the order dated 10 July 1954 merely rejected an application filed by the respondents seeking restoration of possession of lands from which they claimed to have been unjustly dispossessed. The argument contended that because the order did not involve any payment of compensation or a rehabilitation grant, it could not be characterised as a “thing done” or “action taken” within the meaning of Section 39 and therefore could not be treated as an action taken under the Act. A similar line of reasoning was presented in a slightly different form, asserting that even if the Central Government possessed the authority to set aside the Regional Settlement Commissioner’s order of 10 July 1954, the Government could not direct the cancellation of the sales and the grants of sanads to the appellants. It was further claimed that because the cancellation of the sanads and the consequent dispossession of the appellants were not matters pending before the Central Government, any directive to that effect would be beyond the Government’s jurisdiction. The Court found no merit in either version of these arguments.

In addressing the first argument, the Court observed that accepting the submission that the Central Government should have limited its intervention to merely setting aside the order of 10 July 1954 would not alter the ultimate outcome. The order that the Regional Settlement Commissioner had issued on that date rejected a prayer contained in an application by the respondents seeking restoration of possession of the lands from which they alleged dispossession. If that prayer were to be granted on the reversal of the 10 July 1954 order, the logical consequence would be that the appellants would be deprived of possession of the disputed property—precisely the result that the impugned order now directs. Consequently, the dispossession of the appellants is directly linked to the setting aside of the earlier order, and the appellants obtain no advantage by arguing that the Central Government should have confined itself to that limited act. Moreover, the Court noted that the submission failed to appreciate the matters that were before the Central Government at the time it passed the impugned order. The factual background, as recorded, showed that there had been an allotment by way of lease as a rehabilitation grant to persons who were acknowledged as displaced persons in 1950‑51. This lease, which constituted “the thing done,” was the subject of the 1954 order that was later set aside under Section 33 of the Act. Therefore, the impugned order was correctly understood to be rectifying an error concerning a “thing done” or “action taken” with respect to a rehabilitation grant to a displaced person, rather than merely addressing the procedural aspect of the 10 July 1954 order.

In this case the Court observed that the rehabilitation grant made to persons who were undeniably displaced in 1950‑51 constituted the “thing done” that had been upset by the order of 1954 and later restored by the order of July 1954, an order that itself was set aside under section 33 of the Act. Accordingly, the impugned order was concerned with correcting an error relating to that earlier rehabilitation grant. The reference to the Central Government was not confined merely to the order dated 10 July 1954; the entire issue of whether the respondents, as original allottees by way of lease, were entitled to restoration had been referred to the Central Government by the Regional Settlement Commissioner’s order of 3 November 1959. Both parties were heard on every point before the Central Government before it issued its orders, and therefore it would be inaccurate to state that the matter before the Central Government was technically only the correctness of the Regional Settlement Commissioner’s order of 10 July 1954, a question that, read in isolation, might not fall within section 39. The next argument raised concerned the sanads granted to the appellant on 12 January 1956, which, according to the appellant, could not be cancelled except in accordance with the terms of those sanads. The specific clause of the sanad relied upon as the sole ground for setting it aside provides that the President may resume the whole or any part of the property if the Central Government is, at any time, satisfied and records a written decision to that effect that the transferee or any predecessor obtained any compensation under the Act by fraud or misrepresentation, and that such decision of the Central Government is final. It was not contested that this condition had not been satisfied. The question, however, was whether a sanad and the title derived thereunder could continue to exist when the underlying order of allotment on which the sanad was based had itself been reversed or set aside. On this point the Court referred to two decisions. The first was a Full Bench decision of the Rajasthan High Court in Partumal v. Managing Officer, Jaipur, which examined the construction of section 24 of the Act, the provision empowering the Chief Settlement Commissioner to revise orders issued by Settlement Officers, Assistant Settlement Officers, Assistant Settlement Commissioners, Additional Settlement Commissioners and others. The relevant part of the head‑note of that decision states: “Section 24 of the Displaced Persons (Compensation and Rehabilitation)”.

The Court observed that the Displaced Persons (Compensation and Rehabilitation) Act, 1954 unquestionably grants the Chief Settlement Commissioner extensive powers of revision, yet those powers do not extend to the cancellation of sales once they have been completed. It was further noted that although section 24 of the Act enables the removal of an allotment, once such an allotment has matured into a sale, the sale itself cannot be set aside. Consequently, the Chief Settlement Commissioner, while exercising his revision authority, lacks any jurisdiction to annul a sale of property, and any order attempting to cancel a sale is therefore beyond his authority and invalid. The Court held that to read section 24 as permitting the cancellation of sales merely because it authorises the cancellation of allotments would be an over‑reach. Moreover, the execution of a sale deed cannot be treated as a mere formal expression of an allotment order that depends on the continued existence of that order.

Subsequent to the Rajasthan decision, a matter came before the Punjab High Court in Balwant Kaur v. Chief Settlement Commissioner (Lands) (I.L.R. [1964] Punjab 36). In that case a full bench, by a majority, disagreed with the Rajasthan view and held that if an order effecting an allotment is set aside, the title obtained on the basis of the continued existence of that order also ceases to exist. The Court of this jurisdiction is of the firm opinion that the Punjab High Court’s judgment is correct. The relevant statutory provisions and rules were fully outlined in the Punjab decision, and it is unnecessary to repeat them in detail here. What is essential is that none of those provisions contain any clause that would oppose the logical and principled position endorsed by the Punjab court.

The Court clarified that a sanad may lawfully be issued only when it is grounded on a valid allotment order. If the foundational allotment order is set aside, the ensuing grant cannot survive, because a valid grant must be made by a competent officer acting under a valid order. Once the validity of the allotment order is terminated, the grant cannot be upheld unless the Act or the rules expressly state that the grant remains effective despite the cancellation of the allotment. No such provision was identified in either the Act or the rules, and therefore the argument advanced by counsel on this point lacks any substantive basis.

The final point raised by counsel concerned the Deputy Secretary who issued the impugned order dated 10 July 1954, alleging that he possessed no material on which to find the order erroneous or justified in being set aside. The Court rejected this submission, observing that if the respondents were entitled

The Court observed that if the respondents were entitled to remain in possession of the property that had originally been leased to them by way of allotment, and if their leasehold interest had not been validly terminated, then the Deputy Secretary possessed sufficient material on record to find that the order he issued restoring possession was not devoid of factual basis. Consequently, the Court held that the submission contending otherwise lacked merit. Accordingly, the appeal was dismissed, and the parties were ordered to bear costs. The judgment further addressed Writ Petition 108 of 1960, which had been filed under Article 32 of the Constitution by the appellants in Civil Appeal 552 of 1963, seeking a writ of certiorari to set aside the same order of the Deputy Secretary whose legality was also challenged in the appeal. Both the writ petition and the accompanying application for special leave were placed before the Court for a preliminary hearing on 30 November 1960. During that hearing, the Court granted the leave sought and issued a rule nisi in the petition, directing that the two matters be heard together. In light of the Court’s decision on the appeal, it was held that the writ petition could not succeed and was therefore dismissed. No order as to costs was made in the writ petition. In sum, both the appeal and the writ petition were dismissed.