5.6 Property Law

National Law University and Judicial Academy, Assam
Programme:
B.A.LL.B. (Hons)
Details of Course offered
Odd/Even Semester – Academic Year 2018-19
Sl. Course Code Course

No Title L T P CR CH
1 5.6 PL Property 3 1 2 5
Law
a. Code and Title of the Course: 5.6 PL Property Law
b. Course Credit: 5 (total marks 100)
c. Medium of instruction: English
d. Course Compiled by: Kasturi Gakul and Saheb Chowdhury
e. Course Edited by: Ankur Madhia

f. Course Instructor: Ankur Madhia
1. Course Objectives -
The course is designed to acquaint the students with the comprehensive knowledge
of property law in India. The students are motivated to learn about property law in
its historical perspective so that they develop an understanding of the reasons
behind the emergence of property law in India.
The course on Property law primarily focuses on the Transfer of Property Act, 1882
and the Indian Easements Act, 1882.
The objectives of the course are-
1. To familiarize students with the conceptual knowledge of property and its

different kinds particularly movable and immovable property.
2. To trace the historical background behind the Transfer of Property Act
3. To explain the object and subject-matter of Transfer of Property Act.
4. To impart to students detailed knowledge on intricacies of the general principles
and doctrines regulating transfer of property such as rule against inalienability,
rule against perpetuity, doctrine of election, rule of part performance, etc.
5. To develop in students a critical understanding about the nature of specific
forms of transfer which include sales, leases, mortgages, gifts and exchanges.
6. To acquaint students with the special rules governing each specific forms of
transfer and the distinctions between the different forms.
7. To emphasize on the legal provisions pertaining to easements and licence.
2
2. Teaching methodology –
For teaching property law in the National Law University, Assam lecture method
along with alternative and supplementary strategies for effective teaching will be
utilized, such as permissive style of teaching, brain storming, group discussion,
seminar presentation (project topic). There will be participatory teaching with
discussion on basic principles, concepts, doctrines and judicial decisions relating to
property law. To develop an understanding on varied topics of property law group
discussion and brain-storming sessions will be held in the classroom. To encourage
self-study, individualized instruction and to inculcate study attitudes individual
project topics are allotted to students in advance. The students prepare their topics
from the list of sources suggested to them under the supervision of the teacher-in-
charge of the subject. In the classroom every student is required to present her/his
project topic through seminar presentation and to have her/his doubt cleared through
discussion. Through project work students are encouraged to do independent
research on their project topics and thereby trained to prepare good research
papers/articles. The teacher will guide the students in their pursuit of legal learning
through application of the planned teaching process which includes introduction of
the basic concept, presentation and discussion of the subject-matter in details,
recapitulation on the topic discussed through questioning, clarification of doubts
and queries, if any, and suggestions for further readings. The topics will be taught
through projected teaching aids like power point presentation and white board.
3. Case Law Reporter/Journals –

The law reports on Property law are abbreviated as AIR (All India Reporter) and
SCC (Supreme Court Cases). These reporters are available in the National Law
University, Assam (NLUA) Library.
3
List of Cases:
Name of Case Citation
Shanta Bai v. State of Bombay 1958 SC 532

Cooper v. Cooper 1874, LR 7 HL 53
K. Naina Mohamed(Dead) Through L. Rs. vs. A.M. 2010, SC, Civil Appeal No.
VasudevanChettiar(Dead) Through L. Rs. And others 8365 of 2002
Jaya Ram Mudaliar vs. Ayya Swami and Ors. 1972 (2) SCC 200
Rajinder Singh and Ors. Vs. Santa Singh and Ors AIR 1973 SC 2573
Anand Rao Vinayak v. Administrator- General of Bombay (1896)ILR 20 Bom 450
J.V. Satyanarayana v. Pyboyina Manikyan AIR 1983 AP 139
(1915) 43 Cal 521, 32 IC
Musahar Sahu v. Hakim Lal
343 PC
Girjesh Dutt v. Data Din AIR 1939 Oudh 35
Sunrise Associates v. Govt. of NCT of Delhi AIR 2006 SC 1908
Shrimant Shamrao Suryavanshi and Another Vs. Prahlad Appeal (civil) 2706 of
Bhairoba Suryavanshi (Dead) By Lrs. And Ors 1991
Madam Pillai V. Badar Kali 45 Mad 612 (FB)
AIR 2008(NOC)
Ratan Bai v. Basanti Bai
1172(MP)
Misahul Enterprises v. Vijaya Srivastava AIR 2003 Del. 15
Dattatraya Mote v Anand Datar (1974) 2 SCC 799
Gajraj Jain v. State of Bihar (2004) 7 SCC 151
Gajadhar v. Rombhaee 1938 Nag. 439
AIR 1965 SC 950
Byramjee Jeejeebhoy (P) Ltd v. State of Maharashtra
Janki Nath v. Dinanath AIR 1931 PC 207
Mohammadin v. Asibun Nissa AIR 2005 Jhar 1
Shrihari Jena v. Khatramohun Jana AIR 2002 Ori 195
AIR 1967 SC 878
Subha Chandra v. Ganga Prosad
Farid-un-nissa v. Mukhtra Ahmed AIR 1925 PC 204
Sankarawadi v. Secretary of State ILR 28 Madras 72
K.Mohideen v. M.M. Abdullah AIR 1978 Mad.97
Bhua Ram v. Baij Nath AIR 1962 SC 1476
Laxman v. Cuttack Municipal Council AIR 1985 Ori. 90
Mumtaz Ali & Others v. Mohd Sharif Khan AIR 1973 All. 98
R.S. Gupta v. B.N. Inter College AIR 1987 SC 1242
Shambhoo Nath v. Kapoor Singh AIR 1967 J.& K 52(63)
4
4. Prescribed Readings –
• V.P. Sarathi, G.C.V.SUBBA RAO LAW OF TRANSFER OF PROPERTY
th
(EASEMENTS, TRUST AND WILLS), 7 ed. 2012, Ch. XIV, (Subject-matter of
Transfer), pp. 784-820; Ch. XXVII, (Operation of Transfer),pp. 901-954
th
• R.K. Sinha, THE TRANSFER OF PROPERTY ACT, 15 ed. 2014, Ch. I
(Preliminary), pp.8-47; Ch. II (Transfer by Act of Parties), pp. 49-84; Ch.II,
(Conditions restricting Transfer), pp. 85-94; Ch.II, ( Rule against Accumulation),
pp. 108-110.
nd
• Poonam Pradhan Saxena, PROPERTY LAW, 2 ed. 2011, Ch.1 (Movable and
Immovable properties),pp. 9-54; Ch.2 (Conditions restricting transfer), pp 88-110;
Ch.2 (Transfer for benefit of unborn persons and Rule against perpetuity), pp 111-
123, (Election),pp 155-160.
th
• V.P. Sarathi, LAW OF TRANSFER OF PROPERTY, 5 ed. 2012, Ch.
1(Immovable property), pp.7-17; Ch.2 (Transferability of Property), pp. 18-41;
Ch.3 (General rules regarding Transfer of property), pp. 42-72 ;Ch. 4 (Vested and
Contingent Interest); pp. 74-79; Ch. 6(Doctrine of Election), pp. 88-93; Ch.9
(Doctrine of Part-performance), pp. 124-132.
th
• S.N. Shukla, THE TRANSFER OF PROPERTY ACT, 26 ed. 2006, Ch. II
(Transfer by Act of Parties), pp.31- 55; Ch. II (Conditions restraining transfer), pp.
56-61; Ch. II (Transfer for benefit of Unborn Persons and Rule Against Perpetuity),
pp.62-71; Ch. II (Vested and Contingent Interest), pp. 75-81; Ch. II, (Doctrine of
Election), pp. 91-96.; Ch. II, (Fraudulent Transfer), pp. 158-167; Ch. II, (Part
performance), pp. 167-188.
th
• R.K. Sinha, THE TRANSFER OF PROPERTY ACT, 15 ed. 2014, Ch. II,
(Transfer for benefit of Unborn Persons and Rule Against Perpetuity),pp. 95-105;
Ch. II(Vested and Contingent Interest), pp. 111-121; Ch. II, (Doctrine of Election),
pp. 136-142; Ch. II, (Fraudulent transfer and Part-performance), pp. 201-228.
• Dr. G.P. Tripathi, The Transfer of Property Act, Allahabad, Central Law
th
Publications, 17 ed. 2011,Ch I(what are immovable properties) pp. 16-2; Ch II
(Persons competent to Transfer, Operation of Transfer, Oral Transfer, Conditions
5
restricting alienation) pp. 73- 101, Ch II (Transfer for the benefit of Unborn person
and Rule Against perpetuity) pp. 109-119
th
(EASEMENTS, TRUST AND WILLS), 7 ed. 2012, Ch. Part IX, (Sale of
Immovable property), pp. 1455-1548; Ch. XXX,(Mortgages),pp. 1025-1098; Ch.
XXXI, (Formalities of Mortgage), pp. 1099-1107; Ch. XXXIII,(Rights of
mortgagor), pp. 1115- 1171; Ch. XXXVIII, (Charges),pp.1407-1418..
nd
• Poonam Pradhan Saxena, PROPERTY LAW, 2 ed. 2011, Ch.3 (Sales of
Immovable properties),pp. 271-310 ; Ch.4 (Mortgages of immovable property), pp.
311-450; Ch. 5 (Charges), pp. 451-463
th
• R.K. Sinha, THE TRANSFER OF PROPERTY ACT, 15 ed. 2014, Ch. V (Leases),
pp.408-456; Ch. VI, (Exchanges), pp. 457-461; Ch.II, (Gifts), pp.462-478.
th
(EASEMENTS, TRUST AND WILLS), 7 ed. 2012, Ch. XLVII, (Leases), pp.
1641- 1716; Ch. XLIV,(Exchanges),pp. 1560-1562; Ch. XLV, (Gift), pp. 1563-
1577.
nd
• Poonam Pradhan Saxena, PROPERTY LAW, 2 ed. 2011, Ch.6, (Leases of
Immovable property),pp. 465-535; Ch.7 (Exchange), pp 537-542; Ch.8 (Gifts), pp
543-564
th
• V.P. Sarathi, LAW OF TRANSFER OF PROPERTY, 5 ed. 2012, Ch. 19(Leases),
pp.248-289; Ch. 20 (Exchanges), pp. 290-291; Ch.21 (Gifts), pp. 291-294.
• V.P.Sarathi, G.C.V.SUBBA RAO LAW OF TRANSFER OF PROPERTY
th
(EASEMENTS, TRUST AND WILLS), 7 ed. 2012, Ch. IX, (Easements and their
classifications),pp. 313-330; Ch.X (Rights resembling easements),pp. 331-377; Ch.
XI (Acquisition of Easements),pp. 378-438; Ch.XII (Incidents of Easements),
pp.439-463; Ch.XIII (Extinction, Suspension and Revival of Easements), pp. 464-
477.
nd
• Poonam Pradhan Saxena, PROPERTY LAW, 2 ed. 2011, Ch.1(Movable and
Immovable properties),pp. 9-54; Ch.2 (Conditions restricting transfer), pp 88-110;
Ch.2 (Transfer for benefit of unborn persons and Rule against perpetuity), pp 111-
123, (Election),pp 155-160.
6
th
• V.P. Sarathi, LAW OF TRANSFER OF PROPERTY, 5 ed. 2012, Ch. 23 (The
Law relating to Easements), pp.298-316; Ch.23, (Licence), pp. 316-318.
th
• S.K.Agarwal, INDIAN EASEMENTS ACT, 13 ed. 2006, Ch. I (Easements
Generally), pp. 6-28; Ch.II (Imposition, Acquisition and Transfer of Easements),
pp. 29-65; Ch. III (Incidents of easements), pp. 66-81; Ch. IV (Disturbance of
easements), pp 82-92; Ch. V (Extinction, suspension and revival of easements), pp.
93-109; Ch. VI (Licences), pp. 111- 136.
Statutory Reference:
• The Transfer of Property Act, 1882 (Act of IV of 1882)

• The Indian Easement Act, 1882 (Act of V of 1882)
5. Course Evaluation Method – The Course is assessed in 100 marks in

total by an examination system comprising of written exam and seminar
presentation (project work). There shall be a Mid-Term Examination of 20 marks
and End-Semester Examination of 50 marks. Project work comprises of 20 marks
and seminar presentation of the project consist of 5 marks. The remaining 5 marks
are allotted for class attendance.
6. Expected Outcomes of the Course – On completion of the Course

the students are expected to understand the nuances of each module and develop a
comprehensive knowledge of the theoretical and practical aspects of the law relating
to property in India. Further, the students are expected to acquire the skill of
analytical in-depth research along with a publishable research work. The study of
property law will improve the knowledge-base of the law students and encourage
them to undertake litigation relating to property law in future.
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7. Detailed Structure of the Course –
Module 1
Introduction: Concept of Property, Classification of Property- Movable and

Immovable property.
Transfer of Property Act: Historical background; Object of the Act; Definition

and concept of Immovable property, Attached to the earth, Actionable claims and
Notice.
Transfer of Property by Act of Parties: Definition of Transfer of Property;

Subject-matter of Transfer; Persons competent to transfer; Oral Transfer; Operation
of transfer.
Conditions Restricting Transfer: Restraints on Alienation; Rule against

Repugnant conditions; Insolvency of Transferee; Rule against Accumulation.
General principles governing Transfer of property: Transfer to Unborn Persons;

Rule Against Perpetuity; Vested and Contingent Interest; Doctrine of Election;
Fraudulent Transfer; Rule of Part Performance; Transfer by Ostensible Owner; Rule
of Feeding Grant by Estoppel; Rule of Lis pendens.
Module 2
Sales of Immovable Property: Definition of Sale; Essentials of valid Sale; Rights

and liabilities of Buyer and Seller; Marshalling by purchaser; Distinction between
Sale and Contract of Sale
Mortgages: Definition of Mortgage, Mortgagor, Mortgagee; Essential elements of

Mortgage; Kinds of Mortgage; Rights and Liabilities of Mortgagor and Mortgagee;
Redemption and Foreclosure; Marshalling securities; Subrogation
Charges: Definition of Charge; Requisites of Charge; Creation of Charge – Charge

by Act of Parties and Charge by operation of Law; Notice of charge; Enforcement
of Charge; Extinction of Charges; Distinction between Mortgage and Charge
8
Module 3
Lease: Definition of Lease; Essentials of Lease; Duration of Leases; Mode of

execution of Lease; Rights and liabilities of Lessor and Leasee; Determination of
Lease
Exchange: Definition and characteristics of Exchange; Rights and Liabilities of

parties; Exchange of money
Gifts: Definition of Gift; Essential elements of Gift; Modes of making Gift;

Suspension or Revocation of Gift; Onerous gifts; Universal Donee
Module 4
Law Relating to Easement: Definition of Easement; Servient and Dominant

owner; Servient and Dominant Heritage; Elements of Easements; Classification of
Easements. Easement restrictive of certain rights; Imposition, Acquisition and
Transfer of Easements; Incidents of Easements.
Extinction of Easement: Extinction of Accessory rights; dissolution of right of

servient owner; expiration of limited period; termination of necessity; useless
easements; permanent alteration by superior force; Destruction of heritages; Unity
of ownership; Revocation; Release; Permanent change in dominant heritage; Non-
enjoyment; Suspension and Revival of Easements.
Licence: Definition of Licence; Characteristics of Licence; Grant of Licence;

Transferability of Licence; Revocation of Licence; Licensee’s rights on revocation
and on eviction; Distinction between Lease and Licence; Distinction between
Easement and Licence.
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8. List of relevant print and online resources
S. No. Title Author
1. Property in a Changing Society A. R. Biswas
A.K. Srivastava and Bal

Nature of Right Under Section 53A of the Transfer of Property
2. Krishna
Act 1882
Sec 52: The Transfer of property Act, 1882 and its Law Commission of
3.
Amendments, 157th report, India
Consultation Paper-cum-Questionnaire on Adverse Possession Law Commission of

4.
of Land/Immovable Property India
S. No Name of the Case Citation
1 Saheb Ram Surajmal v. Purushottam Lal AIR 1950 Nag 89
1958 SC 532
2 Shanta Bai v. State of Bombay
3 Beepathumma v. S.V. Kadambolithaya AIR 1965 SC 241
4 Sohanlal Naraindas v. Laxmidas Raghunath (1971) 1 SCC 276
1996 SC 2260: (1996) 5

5 Usha Subbarao v. B.N. Vishveswariah AIR
SCC 201
(2000) SCC 633
6 Duncan Industries v. State of Uttar Pradesh
7 Rambabu Namdeo Gajre v. Narayan Bapuji (2004) 8 SCC 614
8 Chennammal v. Munimalaiyan AIR 2005 SCC 4397

Zoroastrian Co-operative Housing Society Ltd v. District
9 (2005) 5 SCC 632
Registrar Co-operative Societies
10 Haryana Financial Corporation v. Rajesh Gupta AIR 2010 SC 338
10
Civil Appeal No. 9030 of
2013
State of Haryana and Others v. Navir Singh and Another AND
11
State of Punjab and Others v. Pagro Foods Ltd. and Others
Civil Appeal No 9049 of
2013
11
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Consultation Paper-cum-Questionnaire on
Adverse Possession of Land/Immovable Property
The claim to rights and interests in relation to property on the basis of possession has
been recognized in all legal systems. Uninterrupted and uncontested possession for a specified
period, hostile to the rights and interests of true owner, is considered to be one of the legally
recognized modes of acquisition of ownership. The prescription of periods of limitations for
recovering possession or for negation of the rights and interests of true owner is the core and
essence of the law of adverse possession. Right to access to Courts is barred by law on effluxion
of prescribed time. The conditions necessary for the acceptance of a claim based on adverse
possession have been laid down basically by way of Judge-made law. Several exceptions to the
concept of adverse possession based on legal relationship between the title holder and the person
in actual possession as well as the character of land are also recognized by law. Permissive
possession or possession without a clear intention to exercise exclusive rights over the property
is not considered as adverse possession.
2. The legal position and principles governing adverse possession.
2.1 As observed by the Supreme Court of India in the case of Karnataka Board of Wakf Vs.
GOI1, in the eye of law, an owner would be deemed to be in possession of a property so long as
there is no intrusion. Non-use of the property by the owner even for a long time won’t affect his
title. But the position will be altered when another person takes possession of the property and
asserts rights over it and the person having title omits or neglects to take legal action against
such person for years together( emphasis supplied). “The process of acquisition of title by
adverse possession springs into action essentially by default or inaction of the owner”. 2 The
1( 2004) 10 SCC 779
2 Amrendra Pratap Singh vs. Tej Bahadur Prajapati, (2004) 10 SCC 65

essential requisites to establish adverse possession are that the possession of the adverse
possessor must be neither by force nor by stealth nor under the license of the owner. It must be
adequate in continuity, in publicity and in extent to show that the possession is adverse to the
paper owner.
2.2 The law on adverse possession is contained in the Indian Limitation Act. Article 65,
Schedule I of The Limitation Act prescribes a limitation of 12 years for a suit for possession of
immovable property or any interest therein based on title. It is important to note that the starting
point of limitation of 12 years is counted from the point of time “when the possession of the
defendants becomes adverse to the plaintiff”. Article 65 is an independent Article applicable to
all suits for possession of immovable property based on title i.e., proprietary title as distinct from
possessory title. Article 64 governs suits for possession based on possessory right. 12 years
from the date of dispossession is the starting point of limitation under Article 64. Article 65 as
well as Article 64 shall be read with Section 27 which bears the heading – “Extinguishment of
right to property”. It lays down:
“At the determination of the period hereby limited to any person for instituting
the suit for possession of any property, his right to such property shall be
extinguished.”
That means, where a cause of action exists to file a suit for possession and if the suit is not filed
within the period of limitation prescribed, then, not only the period of limitation comes to an end,
but the right based on title or possession, as the case may be, will be extinguished. The section
assists the person in possession to acquire prescriptive title by adverse possession 3. When the
title to property of the previous owner is extinguished, it passes on to the possessor and the
3 U.N. Mitra’s Law of Limitation & Prescription, 13th edition, 2011. Vol. I, revised by Justice S A Kader, P.732
possessory right gets transformed into ownership. [Section 27] is an exception to the well
accepted rule that limitation bars only the remedy and does not extinguish the title. It lays down
a rule of substantive law by declaring that after the lapse of the period, the title ceases to exist
and not merely the remedy4. It means that since the person who had a right to possession has
allowed his right to be extinguished by his inaction, he cannot recover the property from the
person in adverse possession and as a necessary corollary thereto, the person in adverse
possession is enabled to hold on to his possession as against the owner not in possession.
2.3 As far as the Government (Central or State) property is concerned, the period of limitation
for any suit (except a suit before the Supreme Court) is 30 years and the starting point of
limitation is the same as in the case of a suit by a private person (vide Article 112, Schedule I of
Limitation Act). Acquisition of easements by prescription is provided for by Section 25 of The
Limitation Act.
2.4 The legal position as regards the acquisition of title to land by adverse possession has
been succinctly stated by the Judicial Committee of the Privy Council in Perry vs. Clissold5:
“It cannot be disputed that a person in possession of land in the assumed
character of owner and exercising peaceably the ordinary rights of ownership has a
perfectly good title against all the world but the rightful owner. And if the rightful
owner does not come forward and assert his title by the process of law within the
period prescribed by the provisions of the statute of Limitation applicable to the
case, his right is for ever extinguished and the possessory owner acquires an
absolute title.”
4 Valliamma Champaka vs Sivathanu Pillai (1964) 1 MLJ, 161 (FB)
5 (1907) AC 73, at 79
2.5 This statement of law has been accepted by the Supreme Court of India in the case of
Nair Service Society Ltd. vs. K.C. Alexander6. The Bench consisting of three Judges observed
thus:
“The cases of the Judicial Committee are not binding on us. But we
approve of the dictum in 1907 AC 73. No subsequent case has been
brought to our notice departing from that view. No doubt, a great
controversy exists over the two cases of (1849) 13 QB 945 and (1865)
1 QB 1. But it must be taken to be finally resolved by 1907 AC 73. A
similar view has been consistently taken in India and the amendment
of the Indian Limitation Act has given approval to the proposition
accepted in 1907 AC 73 and may be taken to be declaratory of the
law in India.”
2.6 It was clarified by a three-Judge Bench of the Supreme Court in Kshitish Chandra Bose
v. Commissioner of Ranchi,7 “All that the law requires is that the possession must be open and
without any attempt at concealment. It is not necessary that the possession must be so effective
so as to bring it to the specific knowledge of the owner. Such a requirement may be insisted on
where an ouster of title is pleaded, but that is not the case here.” It was also clarified in a series
of decisions that while possession shall be open and exclusive and in assertion of one’s own
right, the fact that the possessor did not know who the real owner was, will not make his
possession any the less adverse. There are certain passing observations in some judgments of the
Supreme Court rendered by two learned Judges that the plea of adverse possession is not
6 AIR 1968 SC 1165
7AIR 1981 SC 707

available if the adverse possessor does not know who the true owner is; but, the law declared by
the larger Bench decisions of the Supreme Court obviously prevails.
2.7 The intention to exclude others from the control of property is an essential element of
factual possession. The intention to possess the property exclusively implies the intention to
exclude all others including the true owner whether known or unknown to the adverse possessor.
In an article written by Justice (retd.) S.A. Kader – “Law of Adverse Possession in India –
Recent Trends Unsettling the Law”8 the learned author pointed out that the attempted distinction
made in P.T. Munichikkanna Reddy vs. Revamma9 between the ‘intention to possess’ and
‘intention to dispossess’ is not in conformity with the settled law and that both these concepts
are correlative to each other. The following statement of law by Slade, J on “intention to
possess” has been approved by House of Lords in JA Pye (Oxford) Ltd. Vs. Graham10:
“What is really meant, in my judgment, is that the animus possidendi involves
the intention, in one’s own name and on one’s own behalf, to exclude the world at
large, including the owner with the paper title if he be not himself the possessor, so far
as is reasonably practicable and so far as the processes of the law will allow.”
2.8 In The Secretary of State vs. Vira Rayan11, a Division Bench of Madras High Court
rightly pointed out that the ignorance of the owner will not prevent the accrual of a title by
prescription. The possession must be open and hostile enough to be capable of being known by
the parties interested in the property (vide T. Anjanappa vs. Somalingappa).12 In other words,
8 Annexure II to Volume II of U.N. Mitra’s Law of Limitation, 13th Edn.
9 (2007) 6 SCC 59
10 2003 1AC 419
11 ILR 9 Mad. 175
12 2006 7 SCC 570

the possession to become adverse to the owner must be so overt and open that the person against
whom time runs, can, with exercise of reasonable diligence, be aware of what is happening.
3. Justification for adverse possession.
3.1 The rationale for adverse possession rests broadly on the considerations that title to land
should not long be in doubt, the society will benefit from some one making use of land the owner
leaves idle and that that persons who come to regard the occupant as owner may be protected. 13
The maxim that law and equity does not help those who sleep over their rights is invoked in
support of prescription of title by adverse possession. In other words, the original title holder
who neglected to enforce his rights over the land cannot be permitted to re-enter the land after a
long passage of time. A situation lasting for a long period creates certain expectations and it
would be unjust to disappoint those who trust on them.
3.2 The ‘great’ purpose of adverse possession as described by a jurist Henry W. Ballantine in
his article “Title by Adverse Possession,”14 “is automatically to quiet all titles which are openly
and consistently asserted, to provide proof of meritorious titles and correct errors in
conveyancing”. Another justification for the law of adverse possession is captured in the quote
that possession is “nine points of the law”. The moral justification of the law of adverse
possession was graphically stated by Justice O.W. Holmes who said “man like a tree in the cleft
of a rock, gradually shapes his roots to the surroundings, and when the roots have grown to a
certain size, can’t be displaced without cutting at his life,”.
4. Criticism of adverse possession and the plea to have a fresh look.
4.1 Some legal scholars in foreign countries have pleaded for abolition of adverse possession
describing it as legalized land theft and a means of unjust enrichment. It has also been pointed
13 William B Stoebuck, “The Law of Adverse Possession in Washington”, (1960) 35 Wash. L. Rev. 53.
14 32 HLR 135
out that there is no certainty in the law of adverse possession and the courts in several cases have
wrestled with the meaning of the expressions – actual, continuous, open, hostile and exclusive
possession.
4.2 The Supreme Court of India, has in two recent decisions, namely, Hemaji Waghaji vs.
Bhikhabhai Khengarbhai 15 and State of Haryana Vs. Mukesh Kumar16, has pointed out the need
to have a fresh look at the law of adverse possession. Borrowing the language from the
judgment of the High Court (Chancery Division) of England in J.A. Pye (Oxford) Ltd. vs.
Graham17, the Supreme Court in the former case, described the law of adverse possession as
irrational, illogical and wholly disproportionate and extremely harsh for the true owner “and a
windfall for dishonest person who had illegally taken possession of the property”. The Supreme
Court, after extensively quoting from P. T. Munichikkanna Reddy vs. Revamma (supra, 9)
reiterated the observation therein that “with the expanding jurisprudence of the European Court
of Human Rights, the Court has taken an unkind view to the concept of adverse possession in the
recent judgment of J.A. Pye (Oxford) Vs. United Kingdom”. The Court was not aware that the
said judgment of ECHR has not been approved by the Grand Chamber consisting of a larger
Bench, on a reference made to it in the same case.
4.3 In Hemaji Waghaji’s case, the Supreme Court held on the facts that the appellant had
miserably failed to prove adverse possession. However, the Court went further and made the
following observations at paragraphs 34 to 36 (of AIR).
“34. Before parting with this case, we deem it appropriate to observe
that the law of adverse possession which ousts an owner on the basis of
15 AIR 2009 SC 103,
16 2011(10) SCC 404
17 (2000) 3 WLR 242

inaction within limitation is irrational, illogical and wholly disproportionate.
The law as it exists is extremely harsh for the true owner and a windfall for a
dishonest person who had illegally taken passion of the property of the true
owner. The law ought not to benefit a person who in clandestine manner takes
possession of the property of the owner in contravention of law. This in
substance would mean that the law gives seal of approval to the illegal action
or activities of a rank trespasser or who had wrongfully taken possession of the
property of the true owner.
35. We fail to comprehend why the law should place premium on
dishonesty by legitimizing possession of a rank trespasser and compelling the
owner to lose its possession only because of his inaction in taking back the
possession within limitation.
36. In our considered view, there is an urgent need of fresh look regarding the
law on adverse possession. We recommend the Union of India to seriously
consider and make suitable changes in the law of adverse possession. A copy of
this judgment be sent to the Secretary, Ministry of Law and Justice, Department
of Legal Affairs, Government of India for taking appropriate steps in
accordance with law.”
5. The two decisions of Supreme Court – critical analysis and closer look.
5.1 In Hemaji Waghaji case, the court extensively referred to the earlier decision in P.T.
Munichikkanna Reddy vs. Revamma (supra, 9) and placed heavy reliance on ECHR decision in
J.A. Pye Oxford Vs. United Kingdom. Practically, the words employed by the learned trial
Judge Neuberger, J in J.A. Pye (Oxford) vs. Grahams 18 and the European Court of Human
18(2000) 3 WLR 242

Rights (ECHR) in J.A. Pye (Oxford) Ltd. vs. United Kingdom19 have been repeated in the
concluding paragraph. The fact that by the time Hemaji Waghaji’s case was decided, the Grand
Chamber of ECHR delivered its judgment on 30 th August, 2007 disapproving the ratio of the
2005 decision of ECHR in the case between the same parties was not brought to the notice of the
learned Judges of Supreme Court. The Grand Chamber of the ECHR examined the legislation
relating to adverse possession from the point of view of the objective of the law, the principles
of proportionality and fair balance and held that the existence of the limitation period for actions
for recovery of land as such pursues a legitimate aim and that the fair balance required by Article
1, Protocol No. 1 to the Convention was not upset by the law dealing with adverse possession.
5.2 Another aspect which needs to be mentioned in this context is that it is not clear from the
decision of the Supreme Court in Revamma and Hemaji as to what difference would it make if
the right to property is considered to be human right apart from being a constitutional or statutory
right. In Revamma, it was merely clarified that property dispute issues including adverse
possession is being examined by the European Human Rights Courts on the premise that it is a
human right. The ultimate decision in both the cases decided by the Supreme Court turned on
the facts of the case i.e., whether there was enough evidence to substantiate the plea of adverse
possession and that was answered in the negative.
5.3 It is interesting to note that the Northern Ireland Law Commission in its Report on Land
Law [NILC8 (2010] had expressed the view that in the light of the decision of the Grand
Chamber of the European Court of Human Rights in the case of J.A. Pye (Oxford) Ltd. Vs. U.K.,
the human rights issues relating to the doctrine of adverse possession have been put to rest for
the time being and should not be pursued further. The consultees were unanimously in
19 (2005) 49 ERG 90
agreement with the Law Commission that the doctrine of adverse possession should be reained to
enable a squatter to acquire the title of a dispossessed owner after the expiration of the specified
period of limitation.
5.4 On a close and fair reading of the judgment in Hemaji’s case and even the latter case in
State of Haryana Vs. Mukesh Kumar (supra, 16), it is fairly clear that the Court deprecated the
law in so far as it benefits a rank trespasser who had wrongfully taken possession of the property
belonging to another. The observations in para 35 reinforces this view point quite clearly. A
rank trespasser is thus frowned upon. So, it needs to be seriously examined whether the
protection should be extended to a naked and dishonest trespasser and to those who may have
purchased the property from such trespasser. While claims based on adverse possession may
deserve to be recognized, it can still be ensured that the possession originating from dishonesty
and foul means does not receive the same recognition in law.
5.5 In the latest case of State of Haryana Vs. Mukesh Kumar (supra, 16), there is a trenchant
criticism of the doctrine of adverse possession. The same learned Judge who authored the
judgment in Hemaji’s case reiterated what was said earlier after referring to the English cases and
made certain important observations which need to be taken note of. That was a case in which
the State of Haryana (Police Department) set up the plea of adverse possession which was not
accepted by the trial court and appellate court on a review of evidence. The learned Judge
Dalveer Bhandari, J speaking for the Bench, described the law of adverse possession as archaic
and “needs a serious relook” in the larger interest of the people. It was observed: “Adverse
possession allows a trespasser – a person guilty of a tort, or even a crime, in the eye of the law –
to gain legal title to land which he has illegally possessed for 12 years. How 12 years of
illegality can suddenly be converted to legal title is, logically and morally speaking, baffling.
This outmoded law essentially asks the judiciary to place its stamp of approval upon conduct
that the ordinary Indian citizen would find reprehensible. The doctrine of adverse possession
has troubled a great many legal minds. We are clearly of the opinion that time has come for
change.” The learned Judge posed a question: “How 12 years of illegality can suddenly be
converted to legal title is, logically and morally speaking, baffling” and then observed “We are
clearly of the opinion that time has come for change”. The observations made earlier at
paragraph 39 are also relevant. “The Government instrumentalities – including Police – in the
instant case have attempted to possess land adversely. This, in our opinion, is a testament to the
absurdity of the law and a black mark upon the justice system’s legitimacy”. Then, it was said
“if this law is to be retained according to the wisdom of Parliament, then at least the law must
require those who adversely possess land to compensate the title owners according to the
prevalent market rate of the land or property.” Then at paragraph 40, it was observed that
Parliament must seriously consider at least to abolish “bad faith” adverse possession i.e., adverse
possession achieved through intentional trespassing. At paragraph 41, it was also observed that
if the Parliament decides to retain the law of adverse possession, the duration of possession (i.e.,
limitation period) under the law of Limitation should be extended to 30 to 50 years, “rather than
a mere 12”. It was pointed out that “a longer statutory period would decrease the frequency of
adverse possession suits and ensure that only those claimants most intimately connected with
the land acquire it, while only the most passive and unprotective owners lose title.” In the
penultimate paragraph, the Court said “we recommend the Union of India to immediately
consider a seriously deliberate either abolition of law of adverse possession and in the alternate,
to make suitable amendments in the law of adverse possession”.
6. Position in other countries

6.1 The acquisition of land under the doctrine of adverse possession is recognized in all the
civil and common law jurisdictions. The concept and elements of adverse possession are almost
the same. However, there is no clear pattern as regards the length of limitation periods. The
period after which the real owner may no longer bring an action to repossess her land varies from
10 years to 30 years. In the case of claims by the Crown (State) in most of the countries, it is 60
years. Proof of good faith on the part of the possessor of the land will significantly reduce the
limitation period in some jurisdictions such as France, Spain, The Netherlands and Poland. For
instance, French law permits the acquisition of title to land by prescription over a 30-year period
if the possession is continuous, uninterrupted, peaceful, public and unequivocal. A reduced
prescription period of ten years is provided if the possessor had acted in good faith and in
genuine belief of the existence of a just title. However, if the true owner does not live within the
district of the Court of Appeal, then the period is extended by twice the number of years i.e., 20
years. In some countries, e.g., Hungary, Germany, Massachusetts/US, the evidence of good faith
is not a relevant consideration. The application of the doctrine of adverse possession as well as
the duration of possession also depends on whether the land is registered or not. Significant
differences in the application of adverse possession arise where the States have adopted the
system of land registration. Where the title to land is registered, some States have abolished the
capacity to acquire land by prescription (e.g., Canada) while retaining the right in respect of
unregistered land. This difference reflects the policy that the uncertainty of ascertaining
ownership is eliminated by a system of registration so that the rationale for the doctrine of
adverse possession is thereby weakened.20 Most countries do maintain the doctrine of adverse
possession in respect of registered land. (e.g., UK, Australia, US and Newzealand) and Courts
20See Report of the British Institute of International and Comparative Law for Her Majesty’s Court Services
(September 2006).
continue to recognize the public policy value of extinguishing title to registered property after a
certain period. (supra, 20)
6.2 In UK, the acquisition of land by adverse possession is governed by the Limitation Act of
1980 and the Land Registration Act of 2002 which repealed the earlier Act of 1925. The
Limitation Act of 1980 provides that no action shall be brought by any person to recover any
land after the expiration of twelve (12) years from the date on which the right of action accrued
to him. The right of action shall be treated as having accrued on the date of dispossession or
discontinuance. It made no distinction between registered and unregistered land. S.17 of the said
Act provided that on the expiry of limitation regulating the recovery of land, the title of the paper
owner was extinguished. Section 75(1) of Land Registration Act, 1925 however, provided that on
the expiry of the limitation period, the title was not extinguished, but the registered proprietor
was deemed to hold the land thereafter in trust for the squatter. The Land Registration Act of
2002 (which repealed the 1925 Act) made a number of changes to the law as it related to
registered land. It provided that adverse possession for however long would not of itself bar the
owner’s title to a registered land. However, a squatter is entitled to apply to be registered as
proprietor after ten (10) years and a procedure is prescribed for dealing with such application.
6.3 In US, all States within the Federation recognize title acquired by adverse possession
after limitation periods ranging from 5 to 40 years. In addition to varying time limitations, there
are differences among the States as to the role of good faith as a necessary condition for adverse
possession and as to certain categories of land type and use. Most of the jurisdictions in US do
not require an element of good faith in cases of actual and uninterrupted possession. (supra, 20)
7. Abolition of adverse possession – pros and cons

7.1 One view point which has considerable merit is that the wholesale abolition of adverse
possession would trigger practical problems affecting common people and bona fide possessors
of property who may have no title documents. Multitude of people especially those in rural areas
belonging to agriculturist families remain in possession since long whether by virtue of
inheritance, purchase or otherwise without having valid and legally recognized title deeds. The
lack of a legal regime under which the titles are registered and the shoddy manner in which the
land records are maintained by the concerned Departments of Government has made it difficult
to those entering into land deals to know even through reasonable diligence the true owner of
land and the history of ownership. People in rural areas live in their ancestral houses or enjoy
possessory rights over parcels of land from times immemorial, bona fide believing that they or
their ancestors are the true owners of land. There is no means of knowing whether the land in
question is Government land or the land over which the Government has a right of resumption or
some one else has superior title over land. At least the ordinary people do not know. Even
legitimate owners who may have only the element of possession as the foundation for assuming
or defending their rights may suffer if the concept of adverse possession is abolished or allowed
to remain under stringent conditions. That the possession is “nine points of law” applies with
great force to such category of persons.
7.2 On the other hand, the question may be legitimately asked as to why those who grab the
land overnight by force or otherwise without semblance of bona fides and without color of title
should be allowed to get title by adverse possession? Why should land theft or grabbing be
made the basis for deriving title by reason of open, hostile enjoyment for a long period? Should
not the conduct of occupier of land be taken into account? Further, what about those owners of
property who may not be physically available to evince an intention towards disrupting hostile
possession. These questions do arise. In the ultimate analysis, there is perhaps a need to strike a
fair balance between competing considerations in the process of considering the changes in law
if any.
8. A representation has been made to the Central Government by Pravasi Properties
Protection Council (PROP), Sion, Mumbai stating inter-alia that adverse possession has become
a handy tool to the relatives and neighbours to occupy the NRI’s properties with the aid of
village officers who are instrumental in effecting changes in land records. They suggest the
abolition of law of adverse possession and to check the menace of trespassers. It is not
specifically indicated as to how such problems of NRIs could be adequately taken care of by
abolishing adverse possession. However, the need to devise some special measures for
protection/restoration of properties owned by NRIs deserve due consideration.
9. On the basis of informations received from the High Courts in U.P., Mahrashtra, Delhi,
Gujarat, Assam and other NE States, Kerala, Madhya Pradesh, Odisha, Bihar and Rajasthan,
there are about 52430 cases in which the plea of adverse possession has been raised in the suits
before the trial courts pending at the end of the year 2010. Information has not been received
from other High Courts. However, it can be estimated that only in about 80,000 cases, the plea
of adverse possession has been raised in the pending matters. In the course of interaction with
the judicial officers and lawyers in some places, it has come to light that the plea of adverse
possession though raised is quite often not pursued and hardly any evidence is adduced thereon.
10. Having regard to the above legal and factual background and the views expressed by the
Supreme Court, it is considered necessary to get responses from the public, especially, the
Judges, lawyers, legal academia and bureaucracy on various issues concerning adverse
possession. A Questionnaire has been prepared and annexed herewith for this purpose.
Questionnaire on Adverse Possession
1. Do you think that the law of adverse possession under which the legal owner and title
holder of immovable property is precluded from bringing an action to recover the possession
from a person in occupation of the property for a continuous period of twelve years openly,
peacefully and in a manner hostile to the interest of legal owner should be retained in the statute
book or the time has come to repeal it? Are there good social reasons or considerations of public
policy for retaining the legal acquisition of title through adverse possession?
2. Do you think that having regard to the conditions in our country such as lack of reliable
record of rights, title registration, the problem of identity of property and the difficulties of even
genuine occupants to back up their possession with formal title deeds, the law of adverse
possession should remain or should it be scrapped?
3. (a) Do you think that certain exceptions and qualifications should be carved out by law so
as to ensure that the plea of adverse possession should not be made available to those who
dishonestly enter the land with full consciousness that they were trespassing into another’s land?
(b) In other words, whether it is just and proper to make the plea of adverse possession available
to a naked trespasser entering the land without good faith?
(c) In any case, whether the bona fide purchasers from a trespasser should be allowed to plead
adverse possession. ?
4. If the benefit of acquisition of title by adverse possession is to be denied to a rank
trespasser, should he be paid compensation for the improvements made or other expenditure
incurred for preservation of land?

5. Do you think that the real owner who did not evince any interest in the land should at any
distance of time be permitted to claim back the land irrespective of a string of changes in land
occupation and improvements made thereto ?
6. If adverse possession is allowed to remain, do you think that the real owner should be
compensated in terms of market value as per the rate prevailing on the date when the person
claiming adverse possession started possessing the land? Or, could there be any other principle of
working out compensation or indemnification without hassles?
7. If adverse possession is retained, is there a case for enlarging the present period of
limitation of 12 years and 30 years (in the case of Govt. land) ? If so, to what extent?
8. As far as the property of the State is concerned, the Limitation Act prescribes thirty year
period for filing a suit against a person in adverse possession. Is there a case for abolition of
adverse possession in relation to Government property? Should it be left to the Government to
claim possession of its land at any time irrespective of the long chain of events that might have
occurred and inaction on the part of Govt.?
9. Whether the law which extinguishes the right to property vested with the true owner by
reason of the lapse of prescribed period of adverse possession of another can be tested by the
standards laid down in Article of the 1st Protocol21 to the (European) Convention for the
Protection of Human Rights and Fundamental Freedoms and be faulted on the ground of being
‘irrational’ and ‘disproportionate’?
10. (a) In what way the NRIs would be more handicapped than resident Indians by reason of
application of the law of adverse possession?
21 “Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived
of his possessions except in the public interest and subject to the conditions provided for by law and by the general
principles or international law”.
(b) What safeguards and remedies if any should be provided to the N.R.Is to check illegal
encroachment of their immovable properties? Should there be longer period of limitation in
respect of the property owned by N.R.Is. ?
11. Do you think that the principles governing adverse possession and its proof should be
provided explicitly in a Statute?
The replies may be sent to Joint Secretary & Law Officer, Law Commission of India, 2 nd
Floor, ILI Building, Bhagwan Das Road, New Delhi-110 001 within a month. The e-
mail/Website particulars are given below:
Website: http://lawcommissionofindia.nic.in
e-mail: lci-dla@nic.in
Page 1
Equivalent Citation: AIR1950Nag89, Pat. L.J. 1 : A.I.R. 1918 Pat. 398; Webster v.
[1950]ILR Nag355 Webster (1862) 81 Beav. 393 : 135 R.R. 484
IN THE HIGH COURT OF NAGPUR Disposition:

Appeal Dismissed
Second Appeal No. 435 of 1944
Case Note:
Decided On: 05.08.1949
Miscellaneous - Dissolution of Firm -
Appellants: Firm of Sahebram Surajmal Present appeal filed against order by
and Ors. which it was declared that Respondent's
Vs. firm was dissolved by transferring its
Respondent: Purushottamlal Gopikishan share to rest of partners with effect from
and Ors. relevant year by sale and Appellant had no
interest remained in said firm - Held,
Hon'ble Judges/Coram: relying on evidence of concerned witness,
Mangalmurti, J. entries in account-books of both parties
and facts that Respondent took no interest
Counsels: in partnership from relevant year and did
For Appellant/Petitioner/Plaintiff: E.G. not even object to change of names of it's
Chendke, Adv. firm, come to conclusion that Respondent
firm had sold all its interest in partnership
For Respondents/Defendant: M. Adhikari in relevant year to Appellants - No doubt
and A.P. Sen, Advs. that interest in a partnership of a person
who was a partner was to be regarded as
movable property notwithstanding that at
Subject: Property
time when it was charged or sold,
partnership assets include immovable
Acts/Rules/Orders: property - Doctrine of marshalling can be
Transfer of Property Act, 1882 - Section 3, applied only when there was a mortgage of
Transfer of Property Act, 1882 - Section 54, immovable properties - If Legislature had
Transfer of Property Act, 1882 - Section 55, intended to provide for sales of movable
Transfer of Property Act, 1882 - Section 56, properties also by Chapter III one would
Transfer of Property Act, 1882 - Section 57; have expected some provision in that
Central General Clauses Act, 1897 chapter as regards rights and liabilities of
;Partnership Act - Section 19, Partnership buyer and seller of such properties, but
Act - Section 19(2), Partnership Act - that chapter was conspicuous by an
Section 20, Partnership Act - Section 29; absence of any such provision - It (interest
Sale of Goods Act, 1930 - Section 2, Sale of of a partner in a partnership) was a claim
Goods Act, 1930 - Section 2(7), Sale of to beneficial interest in moveable property
Goods Act, 1930 - Section 5(2); Code of but that moveable property was not one
Civil Procedure (CPC) - Order 21 Rule 49 which was not in possession either actual
or constructive of claimant as it was in
Cases Referred: 'possession of partners who manage and
Ajudhia Pershad v. Sham Sunder A.I.R 1947 look after partnership business and that
Lah. 18 : I.L.R. (1947) Lah. 417; Mt. Savitri possession was on behalf of all partners i.e.
Devi v. Dwarka Prasad it was in constructive possession of partner
MANU/UP/0112/1938 : I.L.R. (1939) ALL. who wants to sell his interest - It was thus
275 : A.I.R.1939 ALL. 305; Janki Sing v. not an 'actionable claim - Interest of a
Jagannath DasMANU/BH/0091/1917 : 3 partner in partnership being movable
© Manupatra Information Solutions Pvt. Ltd.

Page 2
property and not being an actionable 4. The learned Counsel for the Appellant
claim comes within definition of "goods" - brought to my notice the letter Ex. P-2 dated
In this case sale of interest of partner in 8th/9th April 1936 wherein the Defendants
partnership was by word of mouth - asked the Plaintiff to send a letter to them
Appeal, therefore, fails and dismissed saying that the Plaintiff had left no interest of
any kind in the mamhari shop. The learned
JUDGMENT Counsel contended that the letter which the
Defendants had asked the Plaintiff to send to
Mangalmurti, J. them was the writing by which the contract
was to be completed, and as the Plaintiff did
1. The stock-in-trade of the farm of "Khetmal not send that letter, the contract of sale was
Bhariodan" was purchased by the firm of the not completed. It is, however, clear from the
following four persons: (1) The Plaintiff firm, letter (Ex. P-2) that the Defendants wanted
(2) Gopikisan (father of Defendant 1), (3). the letter from the Plaintiff not to complete
Balkisan (Defendant 2) and (d) Ramkisan the contract but to save the trouble of leading
(father of Defendants 3 to 6). The partnership evidence regarding the sale in the suits that
of the abovementioned four persons was they had to file if the Defendants in those
formed in 1931 and given the name "Sukhlal suits raised any objection. Having considered
Sampatlal." all the evidence carefully, I see no reason to
differ from the concurrent finding of the two
2. The Plaintiff brought this suit for a lower Courts that there was a sale by the
declaration that the firm "Sukhlal Sampatlal", Plaintiff of his share as a partner in the
which had changed its name first to partnership to the Defendants.
''Ramanlal Purushottamdas" and then to
"Ramanlal Hanumandas" was dissolved on 5. The next question that was raised was
31st October 1939 by its- notice Ex. D-1. The about the manner in which this sale could be
defence was that the Plaintiff firm had made. The first contention of the learned
transferred its share to the rest of the partners Counsel for the Appellant in this matter was
with effect from 1935 by sale. The trial Court that the share of a partner in a partnership was
and the Court of first appeal have found that an intangible thing" and came within Clause
there was such a sale. 2 of Section 54, T.P. Act and so its sale could
be made only by registered instrument, It
3. The learned Counsel for the Appellant undoubtedly is an intangible thing" but is not
contends that there was in fact no sale and all "immovable property" within the meaning
the evidence that has been led by the given to it by the Central General Clauses Act
Defendants shows that the parties were only which defines it as follows:
negotiating a. sale but it had not been
completed and was to be completed by a Immovable property shall include land,
writing. Both the lower Courts relying on the benefits to arise out of land, and things
evidence of Govindlal Nathani (D.W. 1), the attached to the earth or permanently fastened
entries in the account-books of both the to anything attached to the earth.
parties and the facts that the Plaintiff took no
interest in the partnership from the year 1936 It is movable property which is defined in that
and did not even object to the change of the Act as property of every description except
names of the firm, have come to the immovable property. The same question had
conclusion that the Plaintiff firm had sold all arisen in the Full Bench case of Ajudhia
its interest in the partnership in Diwali of Pershad v. Sham Sunder A.I.R 1947 Lah. 18
Sambat 1992 to the Defendants. : I.L.R. (1947) Lah. 417 F.B. and after
discussing the law Cornelius J. with" whom

Page 3
the other two learned Judges agreed made the interest is to be regarded as movable
following observations at p. 21: property, notwithstanding that at the time
when it is charged or sold, the partnership
It may, of course, happen that by agreement assets include immovable property.
with the other partners, the separating partner
may be given separate possession of his There is therefore no doubt that the interest in
share, and that this may include Immovable a partnership of a person who is a partner is
property, but the legal conception of a share to be regarded as movable property
is not determined by reference to such a notwithstanding that at the time when it is
possibility, but solely in relation to the rights charged or sold, the partnership assets
of the separating partner as enforceable at include immovable property. This reasoning
law. There would thus appear to be no doubt applies to the present case with still greater
that the share of a partner in an existing force' as the partnership assets in this case did
partnership is essentially movable property not include any immovable property.
notwithstanding that a part of the partnership
property may be immovable. The transfer of 6. Section 54, T.P. Act, has no application to
such an interest by a partner to an outsider is the sale of movable property. This would be
provided for in Section 29, Partnership Act clear from an examination of the headings
and the terms of this section make it quite and sub-headings of the various Chapters of
clear that the rights of the transferee are on a the Transfer of Property Act. This is
distinctly lower plane than those of his discussed at great length in lit. Savitri Devi v.
transferor. Such a transferee is not entitled to Dwarka Prasad I.L.R. (1939) ALL. 276 :
interfere in the conduct of the business or to A.I.R. (26) 1939 ALL. 305 wherein we get
require accounts or to inspect the books of the the following observations at pp. 279 and
firm, and he must be content to receive a 280:
share of profits calculated on the basis of
accounts agreed to by the existing partners, The headings of Chapters III, IV and V put it
which he is bound to accept. It is only if the beyond doubt that provision has bean made
firm is dissolved that he is entitled as against in those chapters only with respect to sales,
the remaining partners to receive the share of mortgages and leases of immovable
the partnership property to which his properties. The headings of these chapter's
transferor was entitled as well as to ask for an stand in special contrast to the heading of
account, that only from the date of Chapter VII which deals with gifts. By that
dissolution. It is true that Section 29 deals chapter the Legislature has made provision
only with voluntary transfers and does not in not only with respect to gifts of Immovable
terms apply to a transfer under Order 21 , but also with respect of gifts of movable
Rule 49, Code of Civil Procedure. properties.
The learned Judge proceeds to discuss the The preamble of a statute has always been
law applicable to the transfer under Order 21, regarded as a good means of finding out its
Rule 49, Code of Civil Procedure and meaning, and the headings prefixed to
concludes by saying: sections or sets of sections in statutes are
regarded as preambles to those sections, and,
It would seem obvious in view of the above therefore, a safe guide in interpreting those
reasons that the answer to the question sections; vide Maxwell on the Interpretation
formulated at the (SIC) ment of this of Statutes, 7th Edn. pp. 37 and 44, and Janki
discussion is in the negative; in other words, Sing v. Jagannath Das
when the interest in a partnership of a person MANU/BH/0091/1917 : 3 Pat. L.J. 1 :
who is a partner is dealt with under Order 21, A.I.R.1918 Pat. 398 F.B. But the headings or
Rule 49, Code of Civil Procedure, that sub-headings cannot either restrict or extend

Page 4
the scope of the sections when the language beneficial interest in movable property lot in
used is free from ambiguity. In Section 54 the the possession, either actual or constructive,
words "or other intangible thing" are of the claimant, which the civil Courts
preceded by the word 'reversion' and this recognize as affording grounds for relief,
shows that the words 'intangible thing' have whether such debt or beneficial interest be
been used ejusdem generis with the word existent, accruing, conditional, or (SIC).
'reversion.' The word 'reversion is ordinarily
used to denote some right in immovable The interest of a partner in the partnership is
property. It, therefore, follows that the words (SIC)ly not a claim to a debt as a "debt" is an
'intangible thing' in Section 54 have reference (SIC) to pay a liquidated (or specified) sum
only to immovable property. This conclusion of money, Webster v. Webster (1862) 81
becomes irresistible when one proceeds to Beav. 393 : 135 R.R. 484 vide Mulla's Code
consider - the terms of Sections 55, 56 and of Civil Procedure Edn. 11 (1941) p. 241.
57, T.P. Act. Sections 55 and 57 deal
specifically with Bales of immovable 9. It (the interest of a partner in a partnership)
property and Section 56 provides about is a claim to beneficial interest in moveable
marshalling by subsequent purchaser. The property but that moveable property is not
doctrine of marshalling can be applied only one which is not in the possession either
when there is a mortgage of immovable actual or constructive of the claimant as it is
properties. If the Legislature had intended to in the 'possession of the partners who manage
provide for sales of movable properties also and look after the partnership business and
by Chapter III one would have expected some that possession is on behalf of all the partners
provision in that chapter as regards the rights i.e. it is in the constructive possession of the
and liabilities of the buyer and seller of such partner who wants to sell his interest. It is
properties, but that chapter is conspicuous by thus not an 'actionable claim.
an absence of any such provision.
10. The interest of a partner in partnership being movable
7. Sale of movable property is governed by property and not being an actionable claim comes within the
definition of "goods" given in Section 2(7), Sale of Goods Act,
the Indian Sale of Goods Act, 1930, which 1930. According to Sub-section (2) of Section 5 ibid a contract
defines "goods" in Clause (7) of Section 2 as of saIe of goods may be made in writing or by word of mouth,
or partly in writing and partly by word of mouth or may be
follows: implied from the conduct of the parties. In this case the sale of
the interest of the partner in the partnership was by word of
Goods' means every kind of movable mouth.
property other than actionable claims and

11. The learned Counsel for the Appellant then contended that
money, and includes stock and shares, the person who is alleged to have sold the interest of the
growing crops, grass and things attached to or Plaintiff firm in the partnership of Sukhlal Sampatlal was not
forming part of the land which are agreed to authorized to sell the property on behalf of the Plaintiff firm.
The sale transaction was entered into by Dhanraj who
be severed before the sale or under the according to Para. 5 of the plaint was "the managing proprietor
contract of sale. of the Plaintiff firm" Dhanraj (p.w. 1) admits that he looked
after the manihari shop (Sukhlal Sampatlal) along with
Balkishan up to 1932 when he left Raipur. He is the person
8. The learned Counsel for the Appellant then through whom the Plaintiff firm has filed this suit. It can,
contended that the interest of a partner in a therefore, be safely inferred that the implied authority de. fined
in Section 19, Partnership Act, which does not empower him
partnership is an "actionable claim" which is to enter into partnership on behalf of the firm was extended as
defined in Section 3, T.P. Act in the provided in Section 20, Partnership Act. Further, as provided
in Sub-section (2) of Section 19 ibid the authority of a partner
following words: can extend to entering into partnership on behalf of the firm by
usage or custom of trade. There have been no pleadings on
Actionable claim means a claim to any debt, these points because that question was not raised in the lower
Courts. In these circumstances the material on record is
(SIC) than debt secured by mortgage of sufficient to show that Dhanraj had that authority. The appeal,
immovable property or by hypothecation or therefore, fails and is dismissed with costs. Costs in the lower
Courts as ordered by them.
pledge of movable property, or to any

Page 5
© Manupatra Information Solutions Pvt.

Ltd.

Shrimati Shantabai vs State Of Bombay & Others on 24 March, 1958
Supreme Court of India

Equivalent citations: 1958 AIR 532, 1959 SCR 265
Author: S R Das
Bench: Das, Sudhi Ranjan (Cj), Aiyyar, T.L. Venkatarama, Das, S.K., Sarkar, A.K., Bose, Vivian
PETITIONER:
SHRIMATI SHANTABAI
Vs.
RESPONDENT:
STATE OF BOMBAY & OTHERS
DATE OF JUDGMENT:
24/03/1958
BENCH:
DAS, SUDHI RANJAN (CJ)
BENCH:
DAS, SUDHI RANJAN (CJ)
AIYYAR, T.L. VENKATARAMA
DAS, S.K.
SARKAR, A.K.
BOSE, VIVIAN
CITATION:
1958 AIR 532 1959 SCR 265
ACT:
Fundamental Rights, Enforcement of Unregistered document
conferring right to cut and appropriate wood from forest
land-Proprietary interest vested in State by subsequent
enactment-Claim founded on rights accruing from such
document, if maintainable -Constitution of India, Arts.
19(1)(f), 19(1)(g)-Madhya Pradesh Abolition of Proprietary
Rights (Estates, Mahals, Alienated Lands) Act, 1950 (No. 1
of 1951).
HEADNOTE:
By an unregistered document the husband of the petitioner
granted her the right to take and appropriate all kinds of
wood from certain forests in his Zamindary. With the
passing of the Madhya Pradesh Abolition of Proprietary
Rights (Estates, Mahals, Alienated Lands) Act, 1950, all
proprietary rights in land vested in the State under s. 3 Of
that Act and the petitioner could no longer cut any wood.
She applied to the Deputy Commissioner and obtained from him
an order under s. 6(2) of the Act permitting her to work
the forest and started cutting the trees. The Divisional
Indian Kanoon - http://indiankanoon.org/doc/963790/ 1

Forest Officer took action against her and passed an order

directing that her name might be cancelled and the cut
materials forfeited. She moved the State Government against
this order but to no effect. Thereafter she applied to this
Court under Art. 32 of the Constitution and contended that
the order of Forest Officer infringed her fundamental rights
under Arts. 19(i)(f) and 19(1)(g) :
Held (per curiam), that the order in question did not
infringe the fundamental rights of the petitioner under
Arts. 19(1)(f) and 19(i)(g) and the petition must be
dismissed.
34
266
Ananda Behera v. The State of Orissa , [1955] 2 S.C.R. gig,
followed.
Chhotabai jethabai Patel and Co. v. The State of Madhya
Pradesh, [1953] S.C.R. 476, not followed.
Held (per Das C. J., Venkatarama Aiyar, S. K. Das and A. K.
Sarkar, jj.), that it was not necessary to examine the docu-
ment minutely and finally determine its real character for
the purpose of deciding the matter in controversy, for
whatever construction might be put on it, the petition must
fail. If the document purported to transfer any proprietary
interest in land, it would be ineffective both for non-
registration under the Registration Act and under s. 3 of
the Madhya Pradesh Abolition of Proprietary Rights Act which
vested such interest in the State. If it was a profits-a-
prendre that was sought to be transferred by it, then again
the document would be compulsorily registrable as a profits-
a-prendre was by its nature immoveable property. If it was
a contract that gave rise to a purely personal right, assum-
ing that a contract was property within the meaning of
Art.
19(i)(f) and 31(1) Of the Constitution, the petitioner could
not complain as the State had not acquired or taken
possession of the contract which remained her property and
she was free to dispose of it in any way she liked. The
State not being a party to that contract would not be bound
by it, and even if for some reason or other it could be, the
remedy of the petitioner lay by way of a suit for
enforcement of the contract and compensation for any
possible breach of it and no question of infringement of any
fundamental right could arise.
Per Bose, J. The document conferred a right on the peti-
tioner to enter on the lands in order to cut down and carry
away, not merely the standing timber, but also other trees
that were not in a fit state to be felled at once. The
grant was, therefore, not merely in respect of moveable
property but immoveable property as well. Being valued at
Rs. 26,ooo, the document was compulsorily registrable under
the Registration Act otherwise no title or interest could
pass ; and in absence of such registration the petitioner
had no fundamental rights that could be enforced, as held by
this court in Ananda Behera's case.

Although standing timber is not immoveable property under

the Transfer of Property Actor the Registration Act, trees
attacked to the earth which are immoveable property under s.
3(26) of the General Clauses Act, as also S. 2(6) of the
Registration Act, must be so under the Transfer of Property
Act as well.
JUDGMENT:
ORIGINAL JURISDICTION: Petition No. 104 of 1957. Petition under Article 32 of the Constitution
for the enforcement of fundamental rights.
R. V. S. Mani, for the petitioner.
H. N. Sanyal, Additional Solicitor-General of India, R. Ganapathy Iyer and R. H. Dhebar for

respondents, Nos. 1-3. N.N. Keshwani, for I. N. Shroff, for respondent No. 4. 1958. March 24. The
Judgment of Das C. J. Venkatarama Aiyar, S. K. Das and Sarkar JJ. was delivered by Das C. J. Bose
J. delivered a separate Judgment.
DAS C. J.- We have had the advantage of perusing the judgment prepared by our learned Brother
Bose J. which he will presently read. While we agree with him that this application must be
dismissed, we would prefer to base our decision on reasons slightly different from those adopted by
our learned Brother. The relevant facts will be found fully set out by him in his judgment.
The petitioner has come up before us on an application under Art. 32 of the Constitution praying for
setting aside the order made by the respondent No. 3 on March 19, 1956, directing the petitioner to
stop the cutting of forest wood and for a writ, order or direction to the respondents not to interfere
in any manner whatever with the rights of the petitioner to enter the forests, appoint her agents,
obtain renewal passes, manufacture charcoal and to exercise other rights mentioned in the petition.
Since the application is under Art. 32 of the Constitution, the petitioner must make out that there
has been an infringement of some fundamental right claimed by her. The petitioner's grievance is
that the offending order has infringed her fundamental right under Art. 19(1)(f) and 19(1)(g). She
claims to have derived the fundamental rights, which are alleged to have been infringed, from a
document dated April 26, 1948, whereby her husband Shri Balirambhau Doye, the proprietor of
certain forests in eight several Tehsils, granted to her the right to take and appropriate all kinds of
wood-Building wood, fuel wood and bamboos, etc.-from the said forests for a period from the date
of the document up to December 26, 1960. The terms of the document have been sufficiently set out
in the judgment to be presently delivered by Bose J. and need not be set out here. The petitioner has
paid Rs. 26,000 as consideration for the rights granted to her. The genuineness of this document
and the good faith of the parties thereto have not been questioned. The document, however, has not
been registered under the Indian Registration Act. The nature of the rights claimed by the petitioner
has to be ascertained on a proper interpretation of the aforesaid document. We do not consider it
necessary to examine or analyse the document minutely or to finally determine what we may regard

as the true meaning and effect thereof, for, as will be presently seen, whatever construction be put
on this document, the petitioner cannot complain of the breach of any of her fundamental rights.
If the document is construed as conveying to her any part or share in the proprietary right of the
grantor, then, not being registered under the Indian Registration Act, the document does not affect
the immoveable property or give her any right to any share or interest in the immoveable property.
Assuming that she had acquired a share or interest in the proprietary right in spite of the document
not having been registered, even then that right has vested in the State under s. 3 of the Madhya
Pradesh Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act, 1950, and she may
in that case only claim compensation if any is payable to her under the Act. If the document is
construed as purely a license granted to her to enter upon the land, then that license must be taken
to have become extinguished as soon as the grantor's proprietary rights in the land vested in the
State under s. 3 of the Act. if the document is construed as a license coupled with a grant, then the
right acquired by her would be either in the nature of some profits-a-prendre which, being an
interest in land, is immoveable property or a purely personal right under a contract. If the document
is construed-as having given her a profits-a-prendre which is an interest in land, then also the
document will not affect the immoveable property and will not operate to transmit to the petitioner
any such profits-a-prendre which is in the nature of' immoveable property, as the document has not
been registered under the Indian Registration Act, as has been held in Ananda Behera v. The State
of Orissa (1). If it is a purely personal right, then such right will have no higher efficacy than a right
acquired under a contract. If, therefore, the document is construed as a matter of contract, then
assuming but without deciding that a contract is a property within Arts. 19(1)(f) or 31(1) of the
Constitution, she cannot complain, for the State has not acquired or taken possession of her
contract in any way. The State is not a party to the contract and claims no benefit under it. The
petitioner is still the owner and is still in possession of that contract, regarded as her property, and
she can hold it or dispose of it as she likes and if she can find a purchaser. The petitioner is free to
sue the grantor upon that contract and recover damages by way of compensation. The State is not a
party to the contract and is not bound by the contract and accordingly acknowledges no liability
under the contract which being purely personal does not run with the land. If the petitioner
maintains that, by some process not quite apparent, the State is also bound by that contract, even
then she, as the owner of that contract, can only seek to enforce the contract in the ordinary way and
sue the State if she be so advised, as to which we say nothing, and claim whatever damages or
compensation she may be entitled to for the alleged breach of it. This aspect of the matter does not
appear to have been brought to the notice of this Court when it decided the case of Chhotabai
Jethabai Patel and Co. v. The State of Madhya Pradesh (2) and had it been so done, we have no
doubt that case would not have been decided in the way it was done.
For the reasons stated above, whatever rights, if any, may have accrued to the petitioner under that
document on any of the several interpretations noted above, the cannot complain of the
infringement by the (1) [1955] 2 S.C.R. 919, (2) [1953] S.C.R. 476.
State of any fundamental right for the enforcement of which alone a petition under Art. 32 is
maintainable. We, therefore, agree that this petition should be dismissed with costs.

BOSE J.-This is a writ petition under Art. 32 of the Constitution in which the petitioner claims that
her fundamental right to cut and collect timber in the forests in question has been infringed.
The petitioner's husband, Balirambhau Doye, was the Zamindar of Pandharpur. On April 26, 1948,
he executed an unregistered document, that called itself a lease, in favour of his wife, the petitioner.
The deed gives her the right to enter upon certain areas in the zamindari in order to cut and take out
bamboos, fuel wood and teak. Certain restrictions are put on the cutting, and the felling of certain
trees is prohibited. But in the main, that is the substance of the right. The term of the deed is from
April 26, 1948 to December 26, 1960, and the consideration is Rs. 26,000.
The petitioner says that she worked the forests till 1950. In that year the Madhya Pradesh Abolition
of Proprietary Rights (Estates, Mahals, Alienated Lands) Act, 1950, which came into force on
January 26, 1951, was enacted. Under s. 3 of that Act, all proprietary rights in the land vest in the
State on and from the date fixed in a notification issued under sub-s. (1). The date fixed for the
vesting in this area was March 31, 1951. After that, the petitioner was stopped from cutting any more
trees. She therefore applied to the Deputy Commissioner, Bhandara, under s. 6(2) of the Act for
validating the lease. The Deputy Commissioner held, on August 16, 1955, that the section did not
apply because it only applied to transfers made after March 16, 1950, whereas the petitioner's
transfer was made on April 26, 1948. But, despite that, he went on to hold that the Act did not apply
to transfers made before March 16, 1950, and so leases before that could not be questioned. He also
held that the lease was genuine and ordered that the petitioner be allowed to work the forests
subject to the conditions set out in her lease and to the rules framed under s. 218(A) of the C. P.
Land Revenue Act.
It seems that the petitioner claimed compensation from Government for being ousted from the
forests from 1951 to 1955 but gave up the claim on the understanding that she would be allowed to
work the forests for the remaining period of the term in accordance with the Deputy Commissioner's
order dated August 16, 1955. She thereupon went to the Divisional Forest Officer at Bhandara and
asked for permission to work the forests in accordance with the above order. She applied twice and,
as all the comfort she got was a letter saying that her claim was being examined, she seems to have
taken the law into her own hands, entered the forests and started cutting the trees; or so the
Divisional Forest Officer says. The Divisional Forest Officer thereupon took action against her for
unlawful cutting and directed that her name be cancelled and that the cut materials be forfeited.
This was on March 19, 1956. Because of this, the petitioner went up to the Government of Madhya
Pradesh and made an application dated September 27, 1956, asking that the Divisional Forest
Officer be directed to give the petitioner immediate possession and not to interfere with her rights.
Then, as nothing tangible happened, she made a petition to this Court under Art. 32 of the
Constitution on August 26, 1957. The foundation of the petitioner's rights is the deed of April 26,
1948. The exact nature of this document was much canvassed before us in the arguments by both
sides. It was said at various times by one side or the other to be a contract conferring contractual
rights, a transfer, a licence coupled with a grant, that it related to move able property and that,
contra, it related to immoveable property. It will be necessary, therefore, to ascertain its true nature
before I proceed further.

As I have said, the document calls itself a " lease deed ", but that is not conclusive because the true
nature of a document cannot be disguised by labelling it something else.
Clause (1) of the deed runs-
" We executed this lease deed ... and which by this deed have been leased out to you in consideration
of Rs. 26,000 for taking out timber, fuel and bamboos etc." At the end of clause (2), there is the
following paragraph: " You No. 1 are the principal lessee, while Nos. 2 and 3 are the sub-lessees."
Clause (3) contains a reservation in favour of the proprietor. A certain portion of the cutting was
reserved for the proprietor and the petitioner was only given rights in the remainder. The relevant
passage runs: " Pasas 16, 17, 18 are already leased out to you in your lease. The cutting of its wood be
made by the estate itself. Thereafter, whatever stock shall remain standing, it shall be part of your
lease. Of this stock, so cut, you shall have no claim whatsoever."
Clause (5) runs-
" Besides the above pasas- the whole forest is leased out to you. Only the lease, of the forest woods is
given to you." Clause (7) states-
" The proprietorship of the estate and yourself are (in a way) co-related and you are managing the
same and therefore in the lease itself and concerning it, you should conduct yourself only as a lease
holder explicitly Only in the absence of the Malik, you should look after the estate as a Malik and
only to that extent you should hold charge as such and conduct yourself as such with respect' to
sub-lessees." The rest of this clause is-
Without the signatures of the Malik, nothing, would be held valid and acceptable, including even
your own pasas transactions,........... The lease under reference shall not be alterable or alienable by
any body."
The only other clause to which reference need be made is clause (8). It runs-
"You should not be permitted to recut the wood in the area which was once subject to the operation
of cutting. otherwise the area concerned will revert to the estate. The cutting of the forests should be
right at the land surface and there should not be left any deep furrows or holes." I will examine the
seventh clause first. The question is whether it confers any proprietary rights or interest on the
petitioner. I do not think it does. It is clumsily worded but I think that the real meaning is this. The
petitioner is the `proprietor's wife and it seems that she was accustomed to do certain acts of
management in his absence. The purpose of clause (7) is to ensure that when she acts in that
capacity she is not to have the right to make any alteration in the deed. There are no words of
transfer or conveyance and I do not think any part of the proprietary rights, or any interest in them,
are conveyed by this clause. It does not even confer rights of management. It only recites the
existing state of affairs and either curtails or clarifies powers as manager that are assumed to exist
when the proprietor is away.

Although the document repeatedly calls itself a lease, it confers no rights of enjoyment in the land.
Clause (5) makes that clear, because it says-
Only the lease of the forest woods is given to you' . In my opinion, the document only confers a right
to enter on the lands in order to cut down certain kinds of trees and carry away the wood. To that
extent the matter is covered by the decision in Chhotabhai Jethabhai Patel & Co. v. The State of
Madhya Pradesh (1), and by the later decision in Ananda Behera v. The State of Orissa (2), where it
was held that a transaction of this kind amounts to a licence to enter on the land coupled with a
grant to out certain trees on it and carry away the wood. In England it is a profit a prendre because it
is a grant of the produce of the soil " like grass, or turves or trees ". See 12 Halsbury's Laws of
England (Simonds Edition) page 522, Note (m). (2) [1953]S.C.R.476,483.
(2) [1955] 2 S.C.R. 919, 922, 923.
It is not a " transfer of a right to enjoy the immoveable property " itself (s. 105 of the Transfer of
Property Act), but a grant of a right to enter upon the land and take away a part of the produce of the
soil from it. In a lease, one enjoys the property but has no right to take it away. In a profit a prendre
one has a licence to enter on the land, not for the purpose of enjoying it, but for removing something
from it, namely, a part of the produce of the soil. Much of the discussion before us centred round the
Madhya Pradesh Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act of 1950. But
I need not consider that because this, being a writ petition under Art. 32, the petitioner must
establish a fundamental right. For the reasons given in Ananda Behera's case (1), I would hold that
she has none. This runs counter to Chhotebhai Jethabhai Patel's case but, as that was a decision of
three Judges and the other five, I feel that we are bound to follow the later case, that is to say,
Ananda Behera's case (1), especially as I think it lays down the law aright.
The learned counsel for the petitioner contended that his client's rights flowed out of a contract and
so, relying on Chhotebhai Jethabhai Patel's case(2), he contended that he was entitled to a writ. As a
matter of fact, the rights in the earlier case were held to flow from a licence and not from a contract
simpliciter (see page 483) but it is true that the learned Judges held that a writ petition lay. In so far
as the petitioner rests her claim in contract simpliciter, I think she has no case because of the
reasons given in Ananda Behera's case (1):
" If the petitioners' rights are no more than the right to obtain future goods under the Sale of Goods
Act, then that is a purely personal right arising out of a contract to which the State of Orissa is not a
party and in any event a refusal to perform the contract that gives rise to that right may amount to a
breach of contract but cannot be regarded as a breach of any fundamental right." To bring the claim
under Art. 19(1)(f) or Art. 31(1) (1) [1955]2 S.C.R. 919.
(2) [1953] S.C.R. 476.
something more must be disclosed, namely, a right to property of which one is the owner or in
which one has an interest apart from a purely contractual right. Therefore, the claim founded in
contract simpliciter disappears. But, in so far as it is founded either on the licence, or on the grant,

the question turns on whether this is a grant of moveable or immovable property. Following the
decision in Ananda Behera's case (1), I would hold that a right to enter on land for the purpose of
cutting and carrying away timber standing on it is a benefit that arises out of land. There is no
difference there between the English and the Indian law. The English law will be found in 12
Halsbury's Laws of England (Simonds Edition) pages 620 and 621. But that still leaves the question
whether this is moveable or immoveable property.
Under s. 3 (26) of the General Clauses Act, it would be regarded as " immovable property " because
it is a benefit that arises out of the land and also because trees are attached to the earth. On the
other hand, the Transfer of Property Act says in s. 3 that standing timber is not immoveable
property for the purposes of that Act and so does s. 2 (6) of the Registration Act. The question is
which of these two definitions is to prevail.
Now it will be observed that " trees " are regarded as immoveable property because they are attached
to or rooted in the earth. Section 2(6) of the Registration Act expressly says so and, though the
Transfer of Pro party Act does not define immoveable property beyond saying that it does not
include " standing timber, growing crops or grass ", trees attached to earth (except standing timber),
are immovable property, even under the Transfer of Property Act, because of s. 3 (26) of the
General Clauses Act. In the absence of a special definition, the general definition must prevail.
Therefore, trees (except standing timber) are immoveable property.
Now, what is the difference between standing timber and a tree ? It is clear that there must be a
distinction because the Transfer of Property Act draws one in the definitions of " immoveable
property " and (1) [1955] 2 S.C.R. 919.
" attached to the earth " ; and it seems to me that the distinction must lie in the difference between a
tree and timber. It is to be noted that the exclusion is only of standing timber " and not of " timber
trees". Timber is well enough known to be-
" wood suitable for building houses, bridges, ships etc., whether on the tree or cut and seasoned.
(Webster's Collegiate Dictionary).
Therefore, " standing timber " must be a tree that is in a state fit for these purposes and, further, a
tree that is meant to be converted into timber so shortly that it can already be looked upon as timber
for all practical purposes even though it is still standing. I? not, it is still a tree because, unlike
timber, it will continue to draw sustenance from the soil.
Now, of course, a tree will continue to draw sustenance from the soil so long as it continues to stand
and live; and that physical fact of life cannot be altered by giving it another name and calling it "
standing timber ". But the amount of nourishment it takes, if it is felled at a reasonably early date, is
so negligible that it can be ignored for all practical purposes and though, theoretically, there is no
distinction between one class of tree and another, if the drawing of nourishment from the soil is the
basis of the rule, as I hold it to be, the law is grounded, not so much on logical abstractions as on
sound and practical common- sense. It grew empirically from instance to instance and decision to

decision until a recognisable and workable pattern emerged; and here, this is the shape it has taken.
The distinction, set out above, has been made in a series of Indian cases that are collected in Mulla's
Transfer of Property Act, 4th edition, at pages 16 and 21. At page 16, the learned author says-
"Standing timber are trees fit for use for building or repairing houses. This is an exception to the
general rule that growing trees are immoveable property." At page 21 he says-
"Trees and shrubs may be sold apart from the land, to be cut and removed as wood, and in that case
they are moveable property. But if the transfer includes the right to fell the trees for a term of years,
so that the transferee derives a benefit from further growth, the transfer is treated as one of
immoveable' property." The learned author also refers to the English law and says at page 21-
" In English law an unconditional sale of growing trees to be cut by the purchaser, has been held to
be a sale of an interest in land; but not so if it is stipulated that they are to be removed as soon as
possible."
In my opinion, the distinction is sound. Before a tree can be regarded as " standing timber " it must
be in such a state that, if cut, it could be used as timber; and when in that state it must be cut
reasonably early. The rule is probably grounded on generations of experience in forestry and
commerce and this part of the law may have grown out of that. It is easy to see that the tree might
otherwise deteriorate and that its continuance in a forest after it has passed its prime might hamper
the growth of younger wood and spoil the forest and eventually the timber market. But however that
may be, the legal basis for the rule is that trees that are not cut continue to draw nourishment from
the soil and that the benefit of this goes to the grantee. Now, how does the document in
question-regard this In the first place, the duration of the grant is twelve years. It is evident that
trees that will be fit for cutting twelve years hence will not be fit for felling now. Therefore, it is not a
mere sale of the trees as wood. It is more. It is not just a right to cut a tree but also to derive a profit
-from the soil itself, in the shape of the nourishment in the soil that goes into the tree and maker, it
grow till it is of a size and age fit for felling as timber; and, if already of that size, in order to enable it
to continue to live till the petitioner chooses to fell it. This aspect is emphasised in clause (5) of the
deed where the cutting of teak trees under 1/2 feet is prohibited. But, as soon as they reach that girth
within the twelve years, they can be felled. And clause (4) speaks of a first cutting and a second
cutting and a third cutting. As regards trees that could be cut at once, there is no obligation to do so.
They can be left standing till such time as the petitioner chooses to fell them. That means that they
are not to be converted into timber at a reasonably early date and that the intention is that they
should continue to live and derive nourishment and benefit from the soil; in other words, they are to
be regarded as trees and not as timber that is standing and is about to be cut and used for the
purposes for which timber is meant. It follows that the grant is not only of standing timber but also
of trees that are not in a fit state to be felled at once but which are to be felled gradually as they
attain the required girth in the course of the twelve years;. and further, of trees that the petitioner is
not required to fell and convert into timber at once even though they are of the required age and
growth. Such trees cannot be regarded as timber that happens to be standing because timber, as
such, does not draw nourishment from the soil. If, therefore, they can be left for an appreciable

length of time, they must be regarded as trees and not as timber. The difference lies there.
The result is that, though such trees as can be regarded as standing timber at the date of the
document, both because of their size and girth and also because of the intention to fell at an early
date, would be moveable, property for the purposes of the Transfer of Property and Registration
Acts, the remaining trees that are also covered by the grant will be immoveable property, and as the
total value is Rs. 26,000, the deed requires registration. Being unregistered, it passes no title or
interest and, therefore, as in Ananda Behera's case (1) the petitioner has no fundamental right which
she can enforce.
My lord the Chief Justice and my learned brothers prefer to leave the question whether the deed
here is a lease or a licence coupled with a grant, open because, on either view the petitioner must
fail. But we are all agreed that the petition be dismissed with costs.
Petition dismissed.
(I) [1955] 2 S.C.R. 919.

Page 1
JUDGMENT
Equivalent Citation: AIR1965SC241, Hidayatullah, J.

[1964]5SCR836
1. This is an appeal by certificate granted by
IN THE SUPREME COURT OF INDIA the High Court of Madras against its common
judgment and decree dated November 3,
Decided On: 06.12.1963 1955 in A.S. Nos. 88 and 138 of 1947. The
appellants are 7 of the original 139
Appellants:C. Beepathumma and Ors. defendants and the respondents are the two
Vs. plaintiffs and the original defendant No. 1.
Respondent:V.S. Kadambolithaya and The appeal arises from a suit of for
Ors. redemption of a usufructuary mortgage dated
April 26, 1862 and for delivery of possession
Hon'ble Judges/Coram: of properties described in schedules A and B
J.C. Shah, K. Subba Rao and M. of the plaint together with mesne profits from
Hidayatullah, JJ. the date of redemption till delivery of
possession. The mortgaged property had
Subject: Property passed into the hands of several persons and
this is why so many defendants were joined.
Acts/Rules/Orders: We shall now give the facts which go back
Indian Limitation Act, 1877 - Section 3, for an incredibly long period.
Indian Limitation Act, 1877 - Schedule -
Article 134, Indian Limitation Act, 1877 - 2. The plaint incorporates three schedules
Section 3, Indian Limitation Act, 1877 - distinguished as A, B and C Schedules and
Schedule - Article 148 they describe properties which belonged to
the Alyasantana family of the second
Case Note: respondent. On April 14, 1842, one Madana,
who was then the Ejaman of the family,
Property - right of redemption - Section 3 usufructuarily mortgaged the A, B and C
and Articles 134 and 148 of Schedule to schedule properties in favour of one
Indian Limitation Act, 1877 - suit filed for Kunhammu Hajar for 1250 varahas or
redemption of usufructuary mortgage and pagodas (equal to Rs. 5,000) under Ex. P-1.
for delivery of possession of properties This deed did not contain any provision for
with mesne profits from date of repayment of the amount or for the
redemption till delivery of possession - usufructuary mortgage to be worked off. It
deed that was executed did not contain any contained a clause to the following effect :
provision for repayment of amount -
petition filed to hand over possession to "At the end of the cultivation season,
legal representative of family - Supreme whenever you state that the said land is not
Court observed that mortgagors required, the said one thousand, two hundred
undertook that they would redeem and fifty varahas due to you and also the
properties by paying principal of value of improvements shall be paid to you in
mortgage amount - held, mortgagees could one lump-sum and the said land, house,
not claim to hold lands and use amount cattle-shed, out house, etc. shall be obtained
paid as price of redemption - mortgagees back from you, and this document as well as
to pay interest on amount paid by the previous documents shall be got
mortgagors till date of delivery of redeemed."
possession.

Page 2
3. Though the mortgage deed was taken their part agreed that the remaining properties
ostensibly in his own name by Kunhammu (which are now shown in schedules A and B
Hajar, he did so on behalf of his brothers, to the plaint) would be enjoyed by the
sisters, nephews and nieces etc. The mortgagees for a period of 40 years from the
mortgaged property was described as land date of the document together with
bearing a beriz of 44 1/2 pagodas (equal to improvement made thereon. The mortgagors
Rs. 227-10-8) situated in Warg No. 34 of covenanted that if after the expiry of the
Kumbadaje village, Netanige Magne. Bekal stipulated period this land was required by
taluk (the whole Warg bore a beriz of 56 1/2 them and if at the time of the cultivation
pagodas), comprising 37 fields which were season of that year the mortgage amount of
described by their names without boundaries. the usufructuary mortgage (Ex. P-1) together
The mortgagees who were given possession with the amounts of two other deeds creating
of lands were also placed in possession of a charge and Rs. 100 taken at the execution
some heads of cattle and other movables and of Ex. P-2 together with the amounts relating
for the redemption of the movables there was to improvements were paid one lump-sum,
a separate term in the deed. the land and the bond would stand redeemed.
Ex. P-2 was executed by the mortgagors and
4. In 1857, the family of the mortgagees a counterpart (Ex. P-2(a)) was executed,
effected a partition by registered documents among others, by Aliamma, the widow of
which are marked collectively as Ex. P-6 Kunhammu Hajar, who signed for herself but
series. This partition was not by metes and not on behalf of Kunhi Pakki her minor son
bounds or by the allotment of whole fields but by Kunhammu Hajar. Kunhi Pakki's share in
a division of lands with reference to the the mortgage was thus not represented in Exs.
fraction of the beriz payable. We are P-2 and P-2(a). Kunhi Pakki died in 1934 and
concerned in this appeal only with the share the first defendant, also Kunhi Pakki who is
which went to Kunhammu Hajar whose share the third respondent in this appeal, is his
was 1/4th. In Ex. P-6 which is the partition grand-son. It may be mentioned that the two
deed concerning him, his share was described deeds which created a charge and which were
as follows : to be discharged along with Ex. P-1 and P-2
have been held by the High Court and the
"Further, out of Belinjada land bearing a Court below to be for the principal amount of
beriz of Rs. 227-10-10 and entered in No. 34 Rs. 2,000. We may now omit for the time
maindana Kuntamma Varg of Kunvadaji being a reference to the further devolution of
village Nettanige Magne, the one-fourth the share of Kunhi Pakki son of Kunhammu
portion bearing a beriz of Rs. 56-14-8 and Hajar in respect of whose share in Ex. P-1 the
consisting of land and Bavaities including main dispute in the case has arisen. We shall
border trees, soil and field attached thereto. mention those details later.
5. Other members of the family received 6. The present suit was filed for redemption
shares according to their own right, of Ex. P-2 by the first and the second
mentioned in separate documents. The respondents. The first respondent purchased
earliest such document was of April 3, 1857 schedule A properties in July 1943 by Ex. P-
and the last of April 30, 1857. Kunhammu 83 and undertook to redeem the mortgaged
Hajar died after this partition and on April 26, properties described in schedules A and B
1862, the mortgagors and mortgagees entered and to hand over possession of schedule B
into an agreement evidenced by Exs. P-2 and properties to the legal representative in the
P-2(a) by which Ex. P-1 was re-affirmed; the family of Madana. Respondent No. 2 the then
mortgagees, however, released from Ex. P-1 Elamanthi is that representative. This suit
certain properties which are now shown in was filed on April 20, 1944 and it would
schedule C to the plant. The mortgagors on clearly be barred under Art. 148 of the Indian
Limitation Act unless Exs. P-2 and P-2(a)

Page 3
and the term of 40 years for which the trial Judge with regard to limitation and the
mortgagees were to remain in possession application of the equitable doctrine of
from 1862 were taken into consideration and election of Kunhi Pakki in respect of
saved limitation. The plaintiffs in their suit documents Ex. P-2 and P-2(a).
stated that the claim was within time, because
under Ex. P-2 the mortgagees were entitled to 8. In this appeal, it is contended that the
remain in possession for 40 years from April conclusions of the High Court with regard to
26, 1862 and the right of redemption thus limitation and the doctrine of election were
accrued for the first time on April 27, 1902 erroneous further that the High Court was in
and the claim made in 1944 was within 60 error in awarding mesne profits from the date
years of that date as required by Art. 148. The fixed in the preliminary decree for
defence was that in so far as the share of redemption, in view of the fact that the High
Kunhammu Hajar was concerned, Kunhi Court found an increased amount in respect
Pakki, who inherited it was not bound by Ex. of improvements and the amount of
P-2(a) because he was neither a signatory to improvements had to be paid for in full before
it being a minor, nor had any legal guardian redemption could be claimed. Before we deal
executed Ex. P-2(a) on his behalf. It was with these points, we must narrate more facts.
pleaded that there was no doctrine of
representation in Mohammedan Law, and the 9. The present appeal has been filed by
mother, even if she had signed Ex. P-2(a), Beepathumma the legal representative of
would have been a fazuli, that is to say, an deft. 8-C. Mahamood son of Abdul Rahimam
unauthorised person. It was further pleaded Haji, who died during the pendency of the
that the respect of Kunhi Pakki's share Exs. appeal in the High Court and by the daughter
P-2 and P-2(a) could not save limitation and (deft. 9) and the sons (defts. 52, 67 and 68) of
1/4th share of Kunhammu Hajar was not C. Mahamood; the other appellants are
liable to be redeemed. It was also claimed Abdulla (deft. 49) son and Bipathumma (deft.
that the plaintiffs must pay for improvements. 50) daughter of Mammachumma (deft. 48).
This Mammachumma was the sister of Kunhi
7. The trial Judge held that suit to be within Pakki son of Kunhama Hajar. These names
time applying to the 1/4th share of have to be borne in mind because they are
Kunhammu Hajar than owned by C. connected with the 1/4th share which on
Mahamood deft. 8, the equitable doctrine of partition went to Kunhammu Hajar by Ex. P-
election on the ground that Kunhi Pakki had 6, and will figure in the narrative which
approved and adopted Exs. P-2 and P-2(a) follows. It must also be remembered that
and taken benefit under them and his Warg No. 34 was also called "Belinja
successors could not therefore avoid them. Mainda-Kinhana".
With regard to improvements, the trial Judge
found that an amount of Rs. 4,089-2-0 was 10. After the partition, Kunhammu Hajar
due. The trial Judge accordingly passed a executed a usufructuary mortgage (Ex. P-16)
decree inter alia for the redemption of the in favour of his elder sister Cheriamma in
share of C. Mahamood on payment of the respect of his 1/4th share on September 23,
price of redemption and improvements 1857. Cheriamma had received 1/8th share
together with interest thereon. From this (beriz of Rs. 28-7-4) at the partition vide Ex.
judgment, A.S. 138 of 1947 was filed by P-6(c). In the mortgage deed (Ex. P-16) it was
defendants 3, 5, 8, 9, 49, 59, 52, 67, 68 and stated that Kunhamu Hajar would redeem the
121 and A.S. 88 of 1947 was filed by property whenever he wanted it. Ex. P-2 and
defendant 58. The plaintiffs also cross- P-2(a) then came into existence. Cheriamma
objected. The judgment of the High Court was not a signatory to Ex. P-2(a), because she
modified the decree in the matter of the had died earlier. After Cheriamma's death,
amounts due for improvements but on the her share of 1/8th and the mortgagee rights
main question, it endorsed the views of the

Page 4
were divided between Mammachumma and (1/4th plus 3/16th). No boundaries were
Aisumma by Exs. P-17 and P-17(a) on given but it was stated that the boundaries
October 6, 1861. Each of these two sisters were the same as in the mortgage deed of
was allotted property of the beriz of Rs. 28- January 18, 1887 in favour of Laxmana
7-4 from the 1/4th share mortgaged by Bhakta. This document recited that no other
Kunhammu Hajarand of Rs. 14-3-8 from the documents were handed over, but the
share proper of Cheriamma. Mammachumma mortgagor undertook to send them latter. On
and Aisumma thereafter held properties of September 29, 1902, Kunhi Pakki, his wife
total beriz of Rs. 42-11-0 each and each share Beepathumma and his son Kunhammu
was 3/16th of the entire mortgaged property. executed a usufructuary mortgage (Exs. P-
62) for Rs. 32,000 in favour of one Vaikunta
11. After Kunhammu Hajar's death, his son Bhakta. Several lots of properties were
Kunhi Pakki ignored the usufructuary included and item 18 referred to property of
mortgagee in favour of Cheriamma (Ex. P- the beriz of Rs. 98-11-0 in Belinjada
16). On July 10, 1884, he took a sale deed Maindana Kinyana (Warg No. 34). This
(Ex. P-59) from Hammadekunhi son of showed that he was mortgaging his 1/4th
Mammachumma. The property was share and 3/16th share of Cheriamma. A
described as of beriz of Rs. 28-7-4 in Warg recital showed that all "Voladocuments"
No. 34 and of the beriz of Rs. 14-3-8. In other were handed over and evidence has
words, though the property was shown in two established that Ex. P-2 was one of them.
lots, he obtained the 3/16th share of Vaikunta Bhakta transferred the mortgagee
Cheriamma. No boundaries were mentioned rights under Ex. P-62 to Abdul Rahiman and
in the deed because it was stated that Kunhi Korgappa by Ex. P-64 dated April 10, 1913;
Pakki was in possession of a portion of the item 18 in Ex. P-64 is land of Warg No. 34 of
properties in the same Warg. In this way, the beriz of Rs. 98-11-0 and the boundaries
Kunhi Pakki obtained properties of a total are said to be as shown in the Ilidarwar (Ex.
beriz of Rs. 42-11-0, which had belonged to P-1 and P-2). Kunhi Pakki also executed on
Mammachumma. August 26, 1924, a document (Ex. P-65)
creating a charge on the same properties in
12. Kunhi Pakki then executed a simple favour of the assignees. These properties
mortgage (Ex. P-60) in favour of one were again said to be those that had been
Laxmana Bhakta on January 18, 1887 for Rs. usufructuarily mortgaged under the Ilidarwar
5,500. The property was said to be of Belinja of September 29, 1902 in favour of Vaikunta
Mainda Kinhana (Warg No. 34) and to be in Bhakta by Ex. P-62.
two lots, one lot bearing a beriz of Rs. 28-7-
4 and the other a beriz of Rs. 14-3-8. This 13. On January 23, 1930, the heirs of Abdul
showed that Kunhi Pakki was mortgaging the Rahiman and the heirs of Korgappa executed
above 3/16th share acquired by him by Ex. P- a partition dated (Ex. D-54) and at that
59. This conclusion is reinforced by the fact partition, the Kumbadaje properties which
that the boundaries in Ex. P-60 are said to be were the subject-matter of the mortgages and
as mentioned in Ex. P-59. The right of Kunhi charge fell to the share of Abdul Rahiman's
Pakki in this property was said to be "Avadhi- heirs. It is stated in Ex-D-54 that all the
Ilidarwar" (usufructuary mortgage for a fixed documents were handed over to the heirs of
term in lieu of interest) (Ex. P-1 read with Ex. Abdul Rahiman. C. Mahamood was the son
P-2). Later, Kunhi Pakki executed a simple of Abdul Rahiman and on September 23,
mortgage Ex. P-61 for Rs. 2,000 on February 1930, he obtained a release of the share of his
11, 1892 in favour of one Anantha Kini. The mother, brother and sister by Ex. P-66. In Ex.
property, this time, was said to be of the beriz P-66, there is a mention that the properties of
of Rs. 56 odd and also property of the beriz Kumbadaje village had been obtained by an
of Rs. 28-7-4 and Rs. 14-3-8. In other words, assignment from Vaikunta Bhakta and were
he was mortgaging the entire 7/16th share being enjoyed as a usufructuary mortgage

Page 5
with a term. It also mentioned the charge enjoyed by us without payment of tirve under
created by Kunhi Pakki for Rs. 9,500 on the registered Karar (Agreement) deed
August 26, 1924. It was also mentioned that executed on the 14th of Chitra Bahula of
all the documents relating to properties in Dundubhi (1862) year (27th April 1862) by
Kumbadaje village had been handed over to your mother Alima Hajjumma and others in
C. Mahamood son of Abdul Rahiman. The favour of ourselves and others are as follows
total beriz of the Kumbadaje properties was :
shown to be Rs. 198-8-0 because it included
certain sub-divisions other than those xxx
included in Exs. P-64 and P-65. In this
manner, the 8th defendant acquired the "All this entire property is mortgaged to you
7/16th share of Kunhi Pakki. with a time-limit of thirty-two years from this
Prajothpathi year onwards; and the one said
14. We have now to see three other Karar document obtained by us and
documents which were executed either by mentioned above is given to you;
Kunhi Pakki or were in his favour. The most
important of these is Ex. P-3 dated September xxx
4, 1871. This was a mortgage by the original
mortgagors in favour of Kunhi Pakki. It will "If the principal amount and interest fall into
be recalled that schedule C properties were arrears, that arrears of interest also shall be
released at the time when Ex. P-1, which was paid, after the due date, at that time only
without any time limit, was converted into a when the mortgage amount relating to your
mortgage with a time limit by Ex. P-2 in Avadhi Ilida Arwar (usufructuary mortgage
1862. Kunhi Pakki now obtained a mortgage with time-limit) is paid and when the
of the released properties with a term of 32 property and the documents are redeemed;
years' enjoyment, thus putting all the three and, the property, this document, and the
properties described in schedules A, B and C documents mentioned herein and also to be
in the plaint and mentioned in Ex. P-1 on the got redeemed by you from the said Hammada
same footing. The significance of 32 years' Kunhi Beary shall be got redeemed by us."
term is quite clear. This mortgage was to run
for the same period for which the other xxx
mortgage deed was to run. It was stated in this
document that Kunhi Pakki was already
15. The consideration of this mortgage was to
enjoying the other property out of property
go to pay off the dues of Hammada Kunhi
bearing a beriz of Rs. 227-10-10 of Warg No.
and others amounting in all to Rs. 565-8-0.
34 under a usufructuary mortgage with a time
The mortgagors also acknowledged receipt of
limit by virtue of a registered document of
an amount of Rs. 234-8-0. By this document,
1862 executed by Kunhi Pakki's mother
Kunhi Pakki placed all the properties on the
Aliamma. Certain recitals of that document
same footing and neutralised so to speak the
may be reproduced here :
effect of the release of properties by Ex. P-
2(a). Kunhi Pakki appears not to have paid
"Out of the property enjoyed by you these amount himself, because on September
previously under usufructuary mortgage with 21, 1872, he executed a simple mortgage in
time-limit i.e., out of the property bearing a favour of Hammada Kunhi for an amount of
beriz of Rs. 227-10-10 and entered in Muli Rs. 800 (Ex. P-3(a)). He stated in that deed
No. 34 our ancestor, Maindana Kinhanna that the property was mortgaged without
varg in Kumbadaje village, the said Nettanige possession and was still in the enjoyment of
magne attached to the sub-district of the original proprietors.
Kasaragod, South Kanara district, in respect
of which property the entire tirve is paid by
yourself, the particulars of the property

Page 6
16. The last document to be mentioned is Ex. redemption became due under Exs. P-2 and
P-4, which was a usufructuary mortgage by P-2(a), that is to say 1902. There is no doubt
the original mortgagors in favour of that the Law of Limitation is a procedural law
Hammada Kunhi dated May 29, 1877. This and the provisions existing on the date of the
document makes a reference to the earlier suit apply to it. This suit was filed in 1944 and
documents of Kunhi Pakki in respect of the the Act of 1877 governs it. The only dispute
released properties. It refers specially to Ex. is when did the mortgage become due for
P-2 and states that property was now being redemption. According to the mortgagees,
held on a usufructuary mortgage with a time- time ran from the date of the mortgage under
limit. the Act of 1859 and did not stop in respect of
the share of Kunhi Pakki, because he was not
17. It was contended in this case on behalf of bound by Exs. P-2 and P-2(a). The
the mortgagees that the 1/4th share of Kunhi mortgagors, on the other hand, contend that
Pakki, on which time-limit was not imposed, Kunhi Pakki had accepted Exs. P-2 and P-
because Kunhi Pakki was a minor when Ex. 2(a) as his own documents and had obtained
P-2 and P-2(a) were executed, could not be benefit under them in various ways and the
redeemed by the plaintiff as the suit in respect appellants are either estopped from
of them was time-barred. To understand this contending the contrary or having approved
contention, it is necessary to give a short and adopted those documents and taken
history of the Law of Limitation between the benefit, cannot repudiate them. In other
years 1842 and 1902. In 1842 when Ex. P-1 words, they seek to apply the equitable
was executed, there was no law prescribing a doctrine of election to Kunhi Pakki and thus
period of limitation for the redemption of a to deft. 8 who derived title from Kunhi Pakki.
usufructuary mortgage. Such limit came in This plea of the mortgagors was accepted by
1859 for the first time and a period of 60 the High Court and the Court below. It is
years from the date of the mortgage was contended that these courts erroneously
prescribed. It is this statute which seems to applied the doctrine to the present case.
have been the cause for the execution of Exs.
P-2 and P-2(a); the mortgagees were perhaps 18. Mr. S. T. Desai learned counsel for the
afraid that the mortgage could be redeemed at appellants admits that the mortgagors had not
any time within 60 years from the date of the lost their right to the properties comprised in
mortgage of 1842. The last date for Ex. P-2 and that Ex. P-2 incorporated Ex. P-
redemption thus was 1902. By getting the 1. Exs. P-63 and P-63(a) were filed to
term certain for 40 years, the date for establish the connection which, in view of the
redemption was shifted by them to 1902 and admission, it is not necessary to set forth here.
redemption could not take place till that year. He also admits that he cannot make out case
The mortgagors also benefited, because they under Art. 134 of the Indian Limitation Act.
obtained a release of sosme properties and He contends that the doctrine of election is
received Rs. 100 in cash. The period of 60 but a species of estoppel and there can be no
years was repeated in the Act of 1871; but it estoppel against law especially against the
contained a rider that if during the period of Limitation Act, because of s. 3 of that Act. He
60 years, there was an acknowledgment then relies upon a decision of the Madras High
the period would run from the date of that Court reported in Sitarama Chetty and Anr. v.
acknowledgment. Art. 148 of the Limitation Krishnaswami Chetty I.L.R.(1915) Mad. 38
Act as it stands today was introduced by the where White C.J. quoting a passage from Mr.
Act of 1877. It makes the 60 years' period run Mitra's book on the Law of Limitation,
from the time when redemption is due. The observes that an agreement by a person
mortgagors contend that they have the benefit against whom a cause of action has arisen,
of the present Act read with Exs. P-2 and P- that he would not take advantage of the
2(a) and the time for redemption will expire statute, cannot affect its operation on the
at the end of 60 years from the date on which original cause of action, unless such

Page 7
agreement amounts to an acknowledgment of 20. The doctrine of election which has been
liability which the statute recognises as an applied in this case is well-settled and may be
exception to the rule. Mr. Desai also relies stated in the classic words of Maitland -
upon Govardhan Das v. Dau Dayal
MANU/UP/0271/1931 : I.L.R. (1932) All. "That he who accepts a benefit under a deed
573. for the proposition that no one can or will or other instrument must adopt the
contract himself out of the statute of whole contents of that instrument, must
limitation, nor can estoppel be pleaded conform to all its provisions and renounce all
against a statutory bar of limitation. Some rights that are inconsistent with it."
other cases cited by him are not in point and
need not be mentioned. On the basis of these (see Maitland's Lectures on Equity, Lecture
cases, Mr. Desai contends that unless Exs. P- 18) The same principle is stated in White and
2 and P-2(a) can be pleaded as an Tudor's Leading Cases in Equity Vol. 18th
acknowledgment limitation cannot be saved Edn. at p. 444 as follows :
in respect of Kunhi Pakki's share and the suit
itself must be dismissed under s. 3 of the "Election is the obligation imposed upon a
Limitation Act. He contends that the party by Courts of equity to choose between
equitable doctrine of election does not apply two inconsistent or alternative rights or
to the present case, because the documents on claims in cases where there is clear intention
which reliance is placed refer not to the 1/4th of the person from whom he derives one that
share of Kunhi Pakki but to the 3/16th share he should not enjoy both......... That he who
of Cheriamma which Kunhi Pakki accepts a benefit under a deed or will must
subsequently obtained. He states that the adopt the whole contents of the instrument."
latter conclusion is inescapable if Exs. P-59,
P-60 and P-61 are read together. He submits 21. The Indian Courts have applied this
that in these documents Kunhi Pakki no doctrine in several cases and a reference to all
doubt connected the 3/16th share with Exs. P- of them is hardly necessary. We may,
2 and P-2(a) but treated his own 1/4th share however, refer to a decision of the Madras
separately. High Court in Ramakottayya v.
Viraraghavayya where after referring to the
19. There is no doubt that Kunhi Pakki was passage quoted by us from White and Tudor,
not directly bound by Exs. P-2 and P-2(a). Coutts Trotter, C.J. observed that the
Mr. Desai is right in contending that as Kunhi principle is often put in another form that a
Pakki was a minor and no guardian signed on person cannot approbate and reprobate the
his behalf, Ex. P-2(a) cannot be used to show same transaction and he referred to the
either an acknowledgment by him or an decision of the Judicial Committee in
extension of the term of the original Rangaswami Gounden v. Nachiappa
usufructuary mortgage. The only question Gounden I.L.R. (1918) Mad. 523.. Recently,
thus is whether by reason of the later this Court has also considered the doctrine in
documents and the conduct of Kunhi Pakki it Bhau Ram v. Baij Nath Singh and others
can be said that Kunhi Pakki had obtained the MANU/SC/0031/1961 : [1962]1SCR358 .
benefit of Ex. P-2(a) which bound him to
accept Exs. P-2 and P-2(a) in their entirety. In 22. The short question is whether, in the
binding Kunhi Pakki in this way, no question words of the Scottish lawyers Kunhi Pakki
of extending the period of limitation or of can be said to have approbated Ex. P-2 and P-
acknowledgment arises, and section 3 of the 2(a) and therefore his successors in title
Limitation Act is not in the way because time cannot now reprobate them. In this
would run only from 1902. This result connection, Ex. P-3 and P-4 quite clearly
follows because the mortgagors could not show that Kunhi Pakki considered that he
redeem the property including the share of was bound by Ex. P-2(a) and the mortgagors
Kunhi Pakki for 40 years from 1862.

Page 8
were bound by Ex. P-2. His taking of the was to be allowed to them. Under Ex. P-1,
mortgage of the released properties clearly from which we have quoted the relevant
indicated that he accepted that the passage earlier it was agreed that the sum of
mortgagors were released from the 1250 varahas and the value of improvements
obligations of Ex. P-1. In Ex. P-3, he took the would be paid in one lump sum. In the
mortgage of the released properties for a subsequent documents also the same term
period of 32 years which made the two was included. The respondents contend that
mortgages run for an identical term, and that interest on the extra amount of compensation
document referred to the earlier transaction for improvements has been awarded by the
as one under an Avadhi Illida Arwar High Court and this makes it equitable that
(usufructuary mortgage with a time limit) the appellants should pay mesne profits for
which indicated that the time limit imposed the period of their possession after the deposit
by Exs. P-2 and P-2(a) was in his of the amount found by the trial Judge in
contemplation. In all subsequent documents, court. No question of equity really arises,
reference is to be found to the Illida Arwar because the mortgage had to be redeemed
and the reference is not only to the 3/16th according to its own terms. The mortgagors
share of Cheriamma but to the entire 7/16th undertook that they would redeem the
share of Kunhi Pakki, that is to say, his properties by paying the principal of the
original share of 1/4th obtained by him mortgage amount and the compensation for
through his father by Ex. P-6 and 3/16th share improvements in a lump sum and cannot
which he obtained later. In view of the fact complain if the mortgagees are not compelled
that in this way, Kunhi Pakki obtained the to hand over the property or to pay mesne
enjoyment of the mortgage in respect of his profits till the mortgagors have paid the full
1/4th share for a period of 40 years certain, amount. Both sides referred to certain cases
he must be taken to have elected to apply to which are really not in point because the facts
his own 1/4th share the terms of Ex. P-2. were entirely different. It is not necessary to
Having in this way accepted benefit and thus refer to them, because no principle can be
approbated that document, neither he nor his gathered from them. In the present case, April
successors could be heard to say that the 15, 1946 was fixed for redemption and the
mortgage in Ex. P-1 was independent of Ex. mortgagors put into court a sum of about Rs.
P-2 and that the limitation ran out on the lapse 17,000. The appellate decree was passed on
of 60 years from 1842. In our opinion, the November 3, 1955 and possession was
doctrine of election was properly applied in delivered in 1957. We were informed that a
respect of Kunhi Pakki's 1/4th share now in sum of Rs. 11,800 per year was deposited in
the possession of the present appellants court by way of mesne profits.
through defendant 8.
24. Now the mortgagees cannot claim to hold
23. The next point that was urged was that the the lands and use the amount paid as price of
High Court and the Court below should not redemption. Even if they were not required to
have awarded mesne profits against the hand over possession till the amount together
appellants till they were paid the full price of with the compensation for improvements was
redemption including the compensation for paid in full to them, they could not have the
improvements. The trial court had found that use of the money as well. In our opinion, the
an amount of Rs. 4,089-2-0 was due to mortgagees must pay interest on the amount
defendant No. 8. This amount was increased paid by the mortgagors from the date of
by the High Court to Rs. 6,625-7-0. This was withdrawal of the amount till possession was
a substantial increase and even though the delivered to the mortgagors at 6% per annum
plaintiffs had earlier deposited the entire simple. The extra amount due to the
amount for redemption including the sum of mortgagees by way of compensation will be
Rs. 4,089-2-0, they cannot be said to have deductible and accounts shall be adjusted
fulfilled the condition on which redemption between the parties accordingly.

Page 9
25. The appeal is thus partly allowed as

indicated above. In view of the failure on the
main point, the appellants must pay the costs
of the appeal to the respondents.
26. Appeal partly allowed.

Page 1
Equivalent Citation: of licence - Defendant alleged of occupying

1971(1)ALT279(SC), (1972) 42 AWR premises under an agreement of licence - Trial
Court dismissed suit - High Court confirmed
31, 1972(74)BOMLR144, the decree - Appeal filed against order - Held,
1971MhLJ604, (1971)1SCC276, Trial Court regarded exclusive possession of
[1971]3SCR319, 1971(III)UJ164 premises given to the Defendant as conclusive
of the question whether the loft was in
IN THE SUPREME COURT OF occupation of the Defendant as a tenant - Court
observed that on a consideration of clauses of
INDIA the agreement it was unable to reach a
conclusion whether the agreement was
Civil Appeal No. 2443 of 1966 intended to operate as a lease or as a licence but
since exclusive possession was given it must be
Decided On: 08.01.1971 regarded a lease - High Court considered all
the covenants and the attendant circumstances
and reached the conclusion that having regard
Appellants:Sohan Lal Naraindas to the exclusive possession given to the
Vs. Defendant it was intended to confer an interest
Respondent:Laxmidas Raghunath in loft and on that account agreement operated
Gadit as a lease and not as a licence - Hence, appeal
dismissed.
Hon'ble Judges/Coram:
JUDGMENT
J.C. Shah, C.J., A.N. Grover and K.S.
Hegde, JJ.
J.C. Shah, C.J.
Counsels: 1. Sohan Lal Naraindas-hereinafter
For Appellant/Petitioner/Plaintiff: J.B.
referred to as 'the plaintiff '-commenced
Dadachanji, F.S. Nariman and P.C.
an action in the City Civil Court,
Bhartai, Advs
Bombay, for a decree in ejectment against
Laxmidas Raghunath hereinafter called
For Respondents/Defendant: D.V. Patel,
'the defendant'-alleging that the defendant
Ramesh Malik and Ganpat Rai, Advs.
was occupying a loft 19' x 15' on the
upper floor of a building at Pragraj Galli,
Subject: Property Mulji Jetha Market, Bombay under an
agreement of licence dated November 3,
Acts/Rules/Orders: 1958 and that the licence had been duly
Transfer of Property Act - Section 105 terminated and withdrawn but the
Easements Act - Section 52; defendant had failed and neglected to
Constitution of India - Article 133(1) vacate the loft notwithstanding the
demand. The defendant contended that he
Prior History: was a tenant of the loft, that the tenancy
Appeal from the Judgment and Order had not been duly terminated as required
dated 21st/25th January of the Bombay by law, that he was entitled to the
High Court in First Appeal No. 769 of protection of the Bombay Rents Hotel &
1963- Lodging House Rates Contract Act 1947
and that the Court had no jurisdiction to
Case Note: try the suit.
Property - Ejectment - Plaintiff filed a
suit for ejectment under an agreement

Page 2
2. The Trial Court dismissed the suit 1. The owner (the plaintiff) has agreed to
holding that the defendant was a tenant of grant the leave the licence for use and
the plaintiff and not his licensee. The occupation of the said loft (Medo) of the
decree was confirmed in appeal, by the said shop for a period one year
High Court of Bombay. The High Court commencing from Aso Vad 13 S.Y. 2014
held that on the terms of the agreement to Aso Vad 12 S.Y. 2015.
and in the light of the surrounding
circumstances the relationship between 2. The Licensee (the defendant) shall pay
the parties was that of landlord and to the Owner monthly compensation or
tenant. With certificate granted by the Licensee fee at the rate of Rs. 250/-per
High Court the plaintiff has appealed to month, and the Licensee has paid Rs.
this Court. 3000/-(Rupee three thousand) only to the
Owner as compensation or licence fee for
3. The certificate granted by the High the said period in advance on or before
Court is defective. The plaintiff applied the execution of this agreement.
for certificate under Article 133(1)(a) of
the Constitution and in the alternative 3. The Licensee shall have no right as a
under Article 133(1)(c) of the tenant or Sub-tenant in respect of the said
Constitution. The High Court passed an loft (Medo) of the said shop. The
order certifying the case under Article Licensee shall not Sub-let, allow to use,
133(1)(c). A certificate granted by the transfer or assign in any way the said loft
High Court must be supported by (Medo) of the shop to any one else.
adequate reasons. It is obligatory upon
the High Court to set out the question of 4. The Owner shall bear and pay the rent
public or private importance which in of the said shop.
their opinion fall to be determined in the
proposed appeal. Since we are of the view 5. The Licensee shall use and occupy the
that there is no merit in this appeal, we said loft (Medo) of the said shop as a
have not thought it fit to vacate the cloth merchants only and shall not be
certificate. entitled to carry on any other business.
4. The agreement dated November 3, 6. The parties hereto shall give one
1958 was recorded formally in writing month's clear notice of their intention to
and was duly executed. The plaintiff was terminate this agreements in writing.
the lessee of a shop No. 11 in Pragraj
Galli, Mulji Jetha Market, and the loft of 7. . .
that shop was the subject matter of that
agreement. The period of the agreement 8. If the Licensee commits breach of any
was one year. It was stated in the of the terms of this agreement in that case
agreement that the loft "was given on the Owner shall be entitled to terminate
leave and licence basis for use and and revoke the leave and licence hereby
occupation" of the defendant on the terms granted without giving notice to the
and conditions mentioned therein. The Licensee.
relevant conditions were-
5. The defendant was put in exclusive
possession of the loft. The plaintiff did

Page 3
not reserve possession of any part of the interest in the property, the right is called
loft or a right of entry therein. The loft a licence
had a separate entrance. The customers of
the defendant used the separate entrance Section 105 of the Transfer of Property
to the loft during the business hours and Act defines "lease" :
his stock of cloth remained in the loft
after business hours. The plaintiff and A lease of immovable property is a
defendant were both cloth merchants, and transfer of a right to enjoy such property,
the only consideration for granting the made for a certain time, express or
licence was the payment of Rs. 250/-per implied, or in perpetuity, in consideration
month. There is no evidence that the loft of a price paid or promised, or of money,
was given to the defendant out of a share of crops, service or any other
sympathy or because of friendship, or thing of value, to be rendered periodically
relationship, or any similar motive. It was or on specified occasions to the transfer
stipulated that the plaintiff may terminate or by the transferee, who accepts the
the agreement by giving one month's transfer on such terms.
clear notice, the agreement could not be
terminated by notice of a shorter duration. ...
6. An attempt was deliberately made to A licence confers a right to do or continue

camouflage the true nature of the to do something in or upon immovable
agreement, by reciting in several clauses property of grantor which but for the
that the agreement was for leave and grant of the right may be unlawful, but it
licence, and to emphasise the presence it creates no estate or interest in the
was also recited that the defendant was immovable property of the grantor. A
not to have any right as tenant or Sub- lease on the other hand creates an interest
tenant in respect of the loft. in the property demised.
7. At the trial the elder brother of the 8. Intention of the parties to an instrument
defendant was examined as a witness. He must be gathered from the terms of the
stated that the agreement dated agreement examined in the light of the
November 3, 1958 was intended to be an surrounding circumstances. The
agreement of lease, but the plaintiff description given by the parties may be
insisted that the agreement be drafted evidence of the intention but is not
with the conditions set out therein. decisive. Mere use of the words
appropriate to the creation of a lease will
Section 52 of the Easements Act defines not preclude the agreement operating as a
a "Licence" : licence. A recital that the agreement does
not create a tenancy is also not decisive.
Where one person grants to another, or to The crucial test in each case is whether
a definite number of other persons, a right the instrument is intended to create or not
to do, or continue to do, in or upon the to create an interest in the property the
immovable property of the grantor, subject matter of the agreement. If it is in
something which would, in the absence of fact intended to create an interest in the
such right be unlawful, and such right property it is a lease, if it does not, it is a
does not amount to an easement or an licence. In determining whether the

Page 4
agreement creates a lease or a licence the

test of exclusive possession, though not
decisive, is of significance. Mrs. M.N.
Clubwala v. Fida Hussain Saheb and Ors
MANU/SC/0016/1964 : [1964]6SCR642
.
9. The Trial Court regarded exclusive

possession of the premises given to the
defendant as conclusive of the question
whether the loft was in the occupation of
the defendant as a tenant. The Court
observed that on a consideration of the
clauses of the agreement it was unable to
reach a conclusion whether the agreement
was intended to operate as a lease or as a
licence but since exclusive possession
was given it must be regarded a lease. The
High Court considered all the covenants
and the attendant circumstances and
reached the conclusion that having regard
to the exclusive possession given to the
defendant it was intended to confer an
interest in the loft and on that account the
agreement operated as a lease and not as
a licence.
10. We have carefully considered the

covenants in the light of the relevant
surrounding circumstances. We are
unable to disagree with the view taken by
the High Court that by the terms of the
agreement an interest was created in the
loft in favour of the defendant.
11. The appeal fails and is dismissed with

costs.

Page 1
Equivalent Citation: AIR1996SC2260, of the Karnataka High Court in R.F.A. No.

1996(4)ALT1(SC), 1996CivilCC124, 593 of 1985.
JT1996(6)SC607, 1996(7)KarLJ734,
1996(5)SCALE308, (1996)5SCC201, Authorities Referred:
[1996]Supp3SCR106, 1996(2)UJ660 Halsbury's Laws of England, Vol. 50, 4th
Edn., paras 591, 592 and 604, at pp. 396,
IN THE SUPREME COURT OF 397, 405.
INDIA
Background :
Civil Appeal No. 9062 of 1996.
Family - Property - Suit for partition of
Decided On: 08.07.1996 property - Appellant claimed for 1/5 share
of her deceased husband in the properties
- High Court dismissed the petition on the
Appellants:Usha Subbarao ground that the appellant could not claim
Vs. any right in respect of properties specified
Respondent: B.E. Vishveswariah and in Schedules "A", "B" and D", but she
others was held entitled to her husband's interest
in Schedule "C" properties - Hence this
Hon'ble Judges/Coram: appeal
S.C. Agrawal and G.T. Nanavati, JJ.
Issues :
Counsels:
For Appellant/Petitioner/Plaintiff: V. Whether Appellant is entitled to get share
Gopalaih and E.C. Vidya Sagar, Advs from her husband's property?
Subject: Family Holding :
Relevant Section: Will must be construed as containing a

Succession Act, 1925 - Section 119; bequeath of a vested interest in favour of
Succession Act, 1925 - Section 120; the sons surviving the testator which
Transfer of Property Act, 1882 - Section 19; means that the legacy vested in the
Transfer of Property Act, 1882 - Section 21 legatees, including the husband of the
appellant, at the time of testator's death
and after the death of her husband, the
Acts/Rules/Orders:
appellant is entitled to claim the one-fifth
Succession Act, 1925 - Section 119,
share of her husband in properties
Succession Act, 1925 - Section 120;
mentioned in Schedule "A", "B" and "D"
Transfer of Property Act, 1882 - Section
- Appeal allowed.
19Gnanambal Ammal v. T. Raju Ayyar
MANU/SC/0045/1950
Background :
Cases Referred:
Family - Property - Suit for partition of
Rajes Kanta Roy v. Santi Devi
property - Appellant claimed for 1/5
MANU/SC/0088/1956; Navneet Lal Alias
share of her deceased husband in the
Rangi v. Gokul MANU/SC/0328/1975;
properties - High Court dismissed the
Bhagabati v. Kalicharan, (1911) 38 Ind App
petition on the ground that the appellant
54
could not claim any right in respect of
properties specified in Schedules "A",
Prior History: "B" and D", but she was held entitled to
From the Judgment and Order dated 15.4.94

Page 2
her husband's interest in Schedule "C" B.N. Rama Rao and B.N. Ganesh. The
properties - Hence this appeal appellant is the wife of B.N. Subba Rao who
died on February 21, 1954 without leaving
Issues : any issue. Smt. Nadiga Nanjamma died on
March 28, 1959. After the death of Smt.
Whether Appellant is entitled to get share Nadiga Nanjamma, the appellant filed the
from her husband's property? suit giving rise to this appeal.
Holding : 4. As indicated earlier, in the Will dated

March 13, 1935 the immovable and
Will must be construed as containing a moveable properties of the testator were
bequeath of a vested interest in favour of specified in four groups specified in
the sons surviving the testator which Schedules "A", "B", "C" and "D" attached
means that the legacy vested in the with the Will. Schedule "A" consists of four
legatees, including the husband of the items of Immovable properties, Item No. 1 is
appellant, at the time of testator's death house No. 318, 3rd Road, Margosa Avenue,
and after the death of her husband, the Malleswaram, Bangalore City and items Nos.
appellant is entitled to claim the one-fifth 2, 3 and 4 are agricultural lands. Schedule
share of her husband in properties "B" consists of shares and securities standing
mentioned in Schedule "A", "B" and "D" in the name of Smt. Nadiga Nanjamma.
- Appeal allowed. Schedule "C" consists of thrift deposit
accounts in the Bank of Mysore Limited
ORDER standing in the names of five sons of the
testator. Schedule "D" consists of shares and
S.C. Agrawal, J securities and fixed deposits in banks. The
relevant parts of the Will dated March 13,
1. Special leave granted. 1935 are set out as under :
2. This appeal by the plaintiff arises out of a During my life time I will be in charge and
suit wherein the appellant claimed 1/5 share management of my properties. After my life
of her deceased husband in the properties left time, if my wife Nadiga Nanjamma should
by her father-in-law, Dr. N.S. Nanjundiah, on survive me, she the said Nadiga Nanjamma
the basis of a Will executed by Dr. shall be in charge and management of all my
Nanjundiah on March 13, 1935. The said suit properties given in Schedule A, B, C and D
was decreed in full by the trial court. But on together with their accretions and together
appeal, the Karnataka High Court, by the with my properties acquired by me in future.
judgment dated April 15, 1994, has set aside My wife, the abovementioned Nadiga
the said judgment of the trial court in respect Nanjamma will have no power to dispose of
of properties mentioned in Schedules "A", any of these properties mentioned in
"B" and "D" to the said Will and has confined Schedules A, B, C and D by sale, gift, will,
the decree to properties mentioned in mortgage or hypothecation. She the said
Schedule "C" to the Will. The questions that Nadiga Nanjamma is. entitled to take the
fall for consideration in this appeal relate to produce of the lands mentioned in A
construction of the Will. Schedule and use the same for the
maintenance of herself and her children. She
3. Dr. N.S. Nanjundiah (hereinafter referred the said Nadiga Nanjamma also entitled to
to as 'the testator') died on July 28, 1938 use the interest dividends and incomes of the
leaving behind his wife Smt. Nadiga properties mentioned in B and D Schedules
Nanjamma and five sons, B.N. Subba Rao, for the same purpose.
B.N. Shankar Rao, B.N. Visweswaraiah,

Page 3
With regard to the house (Item No. 1 of the A above named Nadiga Nanjamma is entitled to
Schedule) my wife, the above named Nadiga withdraw from the respective deposits not
Nanjamma and her children are entitled to more than rupees three hundred only (Rs.
live in that house during the life time of my 300) for each Upanayanam and not more than
wife, and the said house should not be Rupees five hundred only (Rs. 500) (for each
partitioned during my wife, Nadiga marriage), during the minority of my
Nanjamma's life time. children.
Mr. C. Nagappa, B.A., L.L.B., Advocate With regard to the properties mentioned in B
Lakshmi Vilas Agrahar, Mysore, one of the and D Schedules, the investments, that is,
Executors and Trustees of this Will, shall be stock and shares, may have to be altered in
in possession of the lands viz., items Nos. 2, some cases either by conversion or by
3 and 4 of the A Schedule, during the encashment and for the payment of further
minority of my children. The above calls on some of the shares; my wife the
mentioned Mr. C. Nagappa shall make above named Nadiga Nanjamma is entitled
arrangements for the cultivation of the said only to transact the operations of conversion
lands, for the collection of produce encashment or payment of further calls on
therefrom, for the payment of Kandayam shares, as the case may be, and she the above
over same and for the delivery of all produce named Nadiga Nanjamma has also powers to
from the lands to my wife, the reinvest the same in suitable securities, when
abovementioned Nadiga Nanjamma and her necessary, through the Bank of Mysore
children. Limited, Bangalore City but the corpus in
each case shall remain in tact. Only the
The properties mentioned in the B Schedule interest, dividend of other incomes of the
stand in the name of my wife, the abovesaid above shares etc. might be used by my wife
Nadiga Nanjamma. The income from these for the maintenance of herself and her
properties, as stated above, shall be used for children as stated above.
the maintenance, education, Upanayanam
and marriage of my children, during their After any of my sons attain the age of
minority. After may sons attain the age of majority if he, the major son, demands
majority, the income from the properties partition during the life time of my wife, the
mentioned in the B Schedule only shall be said Nadiga Nanjamma, he is entitled to get
used by my wife, the above named Nadiga for his share the thrift deposit in the Bank of
Nanjamma, for her own maintenance if she Mysore Limited, Bangalore City, standing in
lives separate from any of major sons. The his name as mentioned in C Schedule, and
properties of the said B Schedule shall be also to get his portion in items 2, 3 and 4 of
liable to partition after the demise of my wife, the A Schedule and his portion in D Schedule
the above named Nadiga Nanjamma, among of properties, with the exception of item 1 of
her surviving children. A Schedule, the partition being determined
according to the prevailing Hindu Law in
With regard to the properties given in the C force at that time. After the life time of both
Schedule, that is, thrift deposits at the Bank myself and my wife, the said Nadiga
of Mysore, Bangalore City, they shall be the Nanjamma, all the properties mentioned in A,
property of each of my children on whose B and D Schedules shall be divided equally
respective names those deposits have been among my surviving children.
made, after they attain their age of majority.
Where Upanayanams and marriages are to be 5. At the time when the said Will was
performed for my children, if the income executed all the five sons of the testator were
from other sources of my property are found minors and the eldest son, B.N. Subba Rao,
insufficient to meet the expenses, my wife the the husband of the appellant, was aged 12

Page 4
years. It appears that there was considerable sons of the testator became entitled to equal
difference between the age of the testator and shares in the properties and the recital in the
his wife. At the time of execution of the Will, Will that the partition should take place
the testator was aged about 53 years while his amongst the surviving children after the
wife, Smt. Nadiga Nanjamma was aged 28 death of Smt. Nadiga Nanjamma is really
years. In the Will the testator made the intended to refer to the children surviving the
following provision regarding guardianship testator. The said view of the trial court has
of the minor sons : been reversed by the High Court in appeal by
the impugned judgment. The High Court has
If some of my sons happen to be still minors held that right was given to the children
at the time of the demise of myself and my surviving the testator to demand partition
wife, the said Nadiga Nanjamma, my major after the death of the testator subject to the
sons shall be the guardians and Managers of conditions imposed in the Will and in the
the Minor sons' persons and properties. If all absence of such a demand, the division was
my sons, however, happened to be minors at to take place after the death of Smt. Nadiga
the demise of myself and my wife, the above Nanjamma among the children surviving
named Nadiga Nanjamma, I appoint the Smt. Nadiga Nanjamma. The High Court
following gentlemen as Guardians during my further held that since after attaining majority
children's minority : B.N. Subba Rao did not demand partition
during his life and Smt. Nadiga Nanjamma
(1) Mr. C. Nagappa, B.A., L.L.B., Advocate, continued to manage the properties during
Lakshmivilas Agrahar, Mysore. her life time and since B.N. Subba Rao had
already expired when Smt. Nadiga
(2) Mr. B Srikanta Rao, No. 9, 3rd Road, Nanjamma died, it could not be held that B.N.
Chamarajpet Bangalore City. Subba Rao had a right title or interest in the
properties except to demand partition by
(3) Mr. B. Ramaswariah, Retired School metes and bounds which specified event did
Master, No. 2, Sunkalpet, Bangalore City. not happen during life time of Smt. Nadiga
Nanjamma. On that view the High Court held
that the appellant could not claim any right in
(4) Mr. M.B. Varadarajengar, Advocate,
respect of properties specified in Schedules
Sultanpet, Bangalore City, and
"A", "B" and D", but she was held entitled to
her husband's interest in Schedule "C"
(5) Mr. B.R. Subba Rao, Tutor, University properties.
College, residing at No. 1493, Kothwal
Ramanna Street, Mysore.
7. In view of the said decision of the High
Court it is necessary to determine the date
6. The case of the appellant is that the when the bequest made in favour of the sons
respective shares in the various properties of of the testator under the Will vested in the
the testator vested in the five sons of the legatees. If it is found that the legacy vested
testator as per the Will, on the death of the in the legatees on the death of the testator, the
testator and that after the death of her appellant, as the legal representative of one of
husband, B.N. Subba Rao, the appellant is the legatees who died after the death of the
entitled to the share in the properties that had testator, would be entitled to claim the
vested in him prior to his death in accordance interest of her deceased husband as per the
with the Will. The trial court, namely, the said bequest. But if it is found that the bequest
XVII Additional City Civil Judge, Bangalore was to vest in the legatees only after the death
City, by his judgment dated February 4, of Smt. Nadiga Nanjamma, the appellant
1985, accepted the said plea of the appellant would not be entitled to claim any interest
and held that the succession opened on the because her husband had pre-deceased Smt.
death of the testator by virtue of which all the Nadiga Nanjamma.

Page 5
8. For the purpose of determining the date of person to take effect only on the happening of
vesting of the interest in the bequest it is a specified uncertain event, on if a specified
necessary to bear in mind the distinction uncertain event shall not happen, such person
between a vested interest and a contingent thereby acquires a contingent interest in the
interest. An interest is said to be a vested property. Such interest becomes a vested
interest when there is immediate right of interest, in the former case, on the happening
present enjoyment or a present right for of the event, in the latter, when the happening
future enjoyment. An interest is said to be of the event becomes impossible.
contingent if the right of enjoyment is made
dependent upon some event or condition Exception. - Where, under a transfer of
which may or may not happen. On the property, a person becomes entitled to an
happening of the event or condition a interest therein upon attaining a particular
contingent interest becomes a vested interest. age, and the transferor also gives to him
The Transfer of Property Act, 1882 as well as absolutely the income to arise from such
the Indian Succession Act, 1925 recognise interest before he reaches that age, or directs
this distinction between a vested interest and the income or so much thereof as may be
a contingent interest. Vested interest has been necessary to be applied for his benefit, such
thus defined in Section 19 of The Transfer of interest is not contingent.
Property Act, 1882 :
10. In the Indian Succession Act provision
Section 19. Where, on a transfer of property, with regard to date of vesting of a legacy
an interest therein is created in favour of a when payment or possession is postponed is
person without specifying the time when it is contained in Section 119 which provides as
to take effect, or in terms specifying that it is follows :
to take effect forthwith or on the happening
of an event which must happen, such interest Section 119. Date of Vesting of legacy when
is vested, unless a contrary intention appears payment or possession postponed. where by
from the terms of the transfer. the terms of a bequest the legatee is not
entitled to immediate possession of the thing
A vested interest is not defeated by the death bequeathed, a right to receive it at the proper
of the transferee before he obtains time shall, unless a contrary intention appears
possession. by the will, become vested in the legatee on
the testator's death and shall pass to the
Explanation. - An intention that an interest legatees representatives if he dies before that
shall not be vested is not to be inferred from time and without having received the legacy,
a provision whereby the enjoyment thereof is and in such cases the legacy is from the
postponed, or whereby a prior interest in the testator's death said to be vested in interest.
same property is given or reserved to some
other person, or whereby income arising from Explanation : An intention that a legacy to
the property is directed to be accumulated any person shall not become vested in interest
until the time of enjoyment arrives, or from a in him is not to be inferred merely from a
provision that if a particular event shall provision whereby the payment or possession
happen the interest shall pass to another of the thing bequeathed is postponed, or
person. whereby a prior interest therein is bequeathed
to some other person, or whereby the income
9. Contingent interest is defined in Section 21 arising from the fund bequeathed is directed
of the said Act in the following terms : to be accumulated until the time of payment
arrives, or from a provision that, if a
Section 21. Where, on a transfer of property, particular event shall happen, the legacy shall
an interest therein is created in favour of a go over to another person.

Page 6
11. Section 120 of the Indian Succession Act intention to be gathered from a
makes the following provision for date of comprehensive view of all the terms of the
vesting when legacy is contingent upon document creating the interest, the court
specified uncertain event : while construing the document has to
approach the task of construction in such
Section 120. Date of vesting when legacy cases with a bias in favour of vested interest
contingent upon specified uncertain event. - unless the intention to the contrary is definite
(1) A legacy bequeathed in case a specified and clear. (See : Rajes Kanta Roy v. Santi
uncertain event shall happen does not vest Devi MANU/SC/0088/1956 : [1957]1SCR77
until that event happens. . As regards Wills the rule is that "where there
is doubt as to the time of vesting, the
(2) A legacy bequeathed in case a specified presumption is in favour of the early vesting
uncertain event shall not happen does not vest of the gift and, accordingly, it vests at the
until the happening of that event becomes testator's death or at the earliest moment after
impossible. that date which is possible in the context."
(See : Halsbury's Law of England, 4th Edn.,
(3) In either case, until the condition has been Vol. 50, para 589 at p. 395).
fulfilled, the interest of the legatee is called
contingent. 13. In order to determine whether the
appellant can claim any right in the properties
Exception. Where a fund is bequeathed to any of the testator, it is, therefore, necessary to
person upon his attaining a particular age, examine the nature of the bequest that was
and the will also gives to him absolutely the made by the testator in favour of his five sons
income to arise from the fund before he including the deceased husband of the
reaches that age, or directs the income, or so appellant. If it is found that the bequest is in
much of it as may be necessary, to be applied the nature of vested interest, it would vest in
for his benefit, the bequest of the fund is not the husband of the appellant on the death of
contingent. the testator and after the death of her husband
the appellant, as his legal representative,
12. By virtue of Section 119, in a case where would be entitled to claim her husband's
bequest is of a vested interest and by the interest in the properties. But in case the
terms of the bequest the legatee is not entitled bequest is found to be in the nature of a
to immediate possession of the thing contingent interest which was to vest in the
bequeathed, the right to receive it at the legatees only after the death of Smt. Nadiga
proper time becomes vested in the legatee on Nanjamma, the appellant would not be
testator's death and in the event of the death entitled to claim any interest in the properties
of the legatee without having received the since her husband had predeceased Smt.
legacy the said right to receive it passes to the Nadiga Nanjamma.
legal representatives of the legatee. This is,
however, subject to a contrary intention being 14. We must, therefore, construe the will to
expressed in the Will. But in the case of a find out the interest of the testator in this
contingent bequest, Section 120 prescribes regard. With regard to construction of Wills
that the legacy vests in the legatee only after the law is well settled that intention has be
the happening or not happening of the ascertained from the words used keeping in
contingency which means that in the event of view the surrounding circumstances, the
the legatee dying prior to happening of that position of the testator, his family
contingency no interest passes to his legal relationship and that the Will must be read as
representatives. Although the question a whole. (See : Gnanambal Animal v. T. Raju
whether the interest created is a vested or a Ayyar and Ors. MANU/SC/0045/1950 :
contingent interest is dependent upon the [1950]1SCR949 ; Navneet Lal Alias Rangi v.
Gokul and Ors. MANU/SC/0328/1975 :

Page 7
[1976]2SCR924 . If the Will is thus read, it is same and for the delivery of all produce from
found that under the Will Smt. Nadiga the lands to Smt. Nadiga Nanjamma and her
Nanjamma was vested with the management children. As regards partition of the
of all the properties specified in Schedules properties, it was provided that if any of the
"A", "B" and "D" but she had no power to sons after attaining the age of majority
dispose of any of those properties by sale, demands partition during the life time of Smt.
gift, Will, mortgage or hypothecation. She Nadiga Nanjamma, he would be entitled to
was entitled to take the produce of the lands get his share of the thrift deposit account in
mentioned at items Nos. 2, 3 and 4 in the Bank of Mysore Limited, Bangalore City,
Schedule "A" and use the same for the standing in his name as mentioned in
maintenance of herself and her children. She Schedule "C" and he would also to get his
was also entitled to use the interest, dividends portion in properties mentioned at items Nos.
and income of the properties mentioned in 2, 3 and 4 in Schedule "A" and his portion in
Schedules "B" and "D" for the same purpose. properties specified in Schedule "D" with the
With regard to properties mentioned in exception of the property mentioned at item
Schedule "C", the testator has directed that No. 1 of Schedule "A" and that the partition
where Upanayanams and marriages were to would be determined according to the
be performed for the children during their prevailing Hindu law in force at that time. It
minority and income from other sources of was further provided that after the life time of
his property was insufficient to meet the the testator and his wife, Smt. Nadiga
expenses, Smt. Nadiga Nanjamma could Nanjamma, all the properties mentioned in
withdraw from the thrift deposit account of Schedules "A", "B" and" "D" shall be divided
the said child not more than Rs. 300 for equally among "my surviving children".
Upanayanam and not more than Rs. 500 for With regard to properties mentioned in
marriage of the child. As regards properties Schedule "B", it is stated in the Will that the
mentioned in Schedules "B" and "D", it was said properties stood in the name of Smt.
provided that Smt. Nadiga Nanjamma was Nadiga Nanjamma and that income from
entitled only to transact the operations of those properties shall be used for the
conversion, encashment or payment of maintenance, education, Upanayanam and
further calls on shares, as the case may be, marriage of children, during their minority
and she had also power to reinvest the same and after sons of the testator attain the age of
in suitable securities but the corpus in each majority, the income from the properties
case had to be kept intact and only the mentioned in schedule "B" only shall be used
interest, dividend or other incomes of said by Smt.'Nadiga Nanjamma, for her own
shares could be used by her for the maintenance if she lives separate from any of
maintenance of herself and children as stated major sons and that the said properties shall
above. With regard to the house mentioned at be liable to partition after the demise of Smt.
item No. 1 of Schedule "A", it was directed Nadiga Nanjamma among "her surviving
that Smt. Nadiga Nanjamma and the children children".
were entitled to live in it during the life time
of Smt. Nadiga Nanjamma and that it would 15. Thus according to the Will the right to
not be partitioned during her life time. As separate of the share in respect of properties
regards the lands mentioned at items Nos. 2, mentioned at items Nos. 2, 3, and 4 of
3 and 4 in Schedule "A" , it was provided that Schedule "A" as well as properties mentioned
during the minority of the children Shri C. in Schedules "C" and "D". was available to
Nagappa, Advocate and one of the Executors each of the sons of the testator on his
and Trustees of the Will, shall be in attaining the age of majority and that the right
possession of the lands and shall make to separate enjoyment of the bequest relating
arrangements for the cultivation of the said to share in the property mentioned at item No.
lands, for the collection of produce 1 of Schedule "A" and properties mentioned
therefrom, for the payment of kandayam over in Schedule "B" was available only after the

Page 8
death of Smt. Nadiga Nanjamma. But ever items Nos. 2, 3 and 4 in Schedule "A" and the
during the period the right to separate properties specified in Schedules "C" and
enjoyment was not available to the legatees "D" is not available till the legatee obtains
the income from the properties was available majority and the right to separate enjoyment
for the maintenance of the legatees, their of his share in the property mentioned at item
education, their Upanayanams and marriages No. 1 in Schedule "A" and the properties
as well for maintenance of Smt. Nadiga specified in Schedule "B" is not available
Nanjamma. during the life time of Smt. Nadiga
Nanjamma ? In our opinion, this question
16. The Explanations in Section 19 of the must be answered in the negative. Under the
Transfer of Property Act and Section 119 of English law where a condition can be family
the Indian Succession Act incorporate the read as postponing merely the right of
rule that where enjoyment of the property is possession or of obtaining payment, transfer
postponed but the present income thereof is or conveyance, so that there is an express or
to be applied for the donee the gift is vested implied distinction between the time of
and not contingent. In Rajes Kanta Roy v. vesting and time of enjoyment, the gift is held
Sand Devi, (supra) this Court has pointed out to be vested at the earlier date if the rest of the
that this rule operates normally where the context allows. But where the postponement
entire income is applied for the benefit of the of the gift is on account of some qualification
donee. In that case, however, under the terms attached to the donee, the gift is prima facie
of the settlement the entire income was not contingent on his qualification being
available to the donees for their actual use but acquired. A gift to a person "at", "if, "as soon
only a portion thereof was available and the as", "when" or "provided" he attains a certain
balance was to be used for discharge of debts. age, without further context to govern the
It was held that since the donees were sons of meaning of the words, is contingent and vests
the settlor who were under an obligation to only on the attainment of the required age,
discharge his debts out of the properties this being a quality or description which the
which devolve upon them, the balance of the donee must in general possess in order to
income which was meant to be applied for the claim under the gift. But if the words of a gift
discharge of the debts was also an application express a distinction between the gift itself
of the income for the benefit of the donees and the event denoting the time of payment,
and, therefore, the entire income is to be division or transfer, and this time is the
applied for the benefit of the donees. attainment by the donee of the age of twenty-
Similarly, in the instant case, we find that the one years or other age or is any other event
income from the properties was to be used which, assuming the requisite duration of
partly for the maintenance, education, life, must necessarily happen at a
Upanayanams and marriages of the legatees determinable time, then prima facie the gift is
and partly for the maintenance of their not contingent in respect of that event. (See :
mother, Smt. Nadiga Nanjamma. Since the Halsbury's Laws of England, 4th Edn., Vol.
legatees, as sons, were under an obligation to 50, paras 591, 592 and 604, at pp. 396, 397,
maintain their mother, it must be held that the 405. The same is the position in India and it
entire income from the properties was to be has been succinctly brought out in illustration
applied for the benefit of the legatees and in (ii) to Section 119 and illustration (ii) to
accordance with the rule referred to above, Section 120 of the Indian Succession Act.
the bequest in favour of the legatees must be The said illustrations are as under :
held to be of a vested interest.
Illustration (ii) to Section 119
17. Does the said bequest cease to be a
bequest for a vested interest for the reason (ii) A bequeaths to B 100 rupees, to be paid
that the right to separate enjoyment in respect to him upon his attaining the age of 18. On
of his share in the properties mentioned at

Page 9
A's death the legacy becomes vested in Privy council in Rewun persad v. Jiadha
interest in B. Beeby (1846) 4 M.I. A. 137, where the
testator gave his wife a life estate and after
Illustration (ii) to Section 120 her death one moiety of the estate to his
brother and the other moiety to his two sons.
(ii) A sum of money is bequeathed to A "in The brother and one of the sons died during
case he shall attain the age of 18," or "when the life time of the widow. It was held that as
he shall attain the age of 18." A's interest in the share of the sense were vested the widow
the legacy is contingent until the condition is of the pre-deceased son was entitled to
fulfilled by his attaining that age. succeed to her husband's share. Similarly, in
Bhagabati v. Kalicharan (1911) 38 I.A. 54,
18. In the present case, the testator in the Will the bequest was to the mother for life, then to
has not used words similar to those contained the wife for her life and then to the nephews.
in illustration (ii) to Section 120. The testator The Privy Council rejected the contention
after making the bequest in favour of the that there was no vesting in the nephews until
legatees has given the direction that a son on the death of the survivor of the mother and
attaining majority could demand partition the widow and held that the nephews were
according to the prevailing Hindu law in intended to take a vested and transmissible
force at that time to get his portion in items interest on the death of the testator though
Nos. 2, 3 and 4 in Schedule "A" and the thrift their possession and enjoyment were
deposit standing in his name as mentioned in postponed. The same position is reiterated in
Schedule "C" as well as his portion in the illustration (iii) to Section 119 which reads as
properties specified in Schedule "D". This is under:
a case where the testator has made a
distinction between the gift itself and the Illustration (iii) to Section 119
event denoting the time of payment, division
or transfer, viz., attaining the age of majority. (iii) A fund is bequeathed to A for life, and
It falls in the same category as illustration (ii) after his death to B. On the testator's death the
to Section 119 of The Indian Succession Act legacy to B becomes vested in interest in B.
and must be held to be a bequest of vested
interest in respect of these properties. 20. The High Court has referred to following
direction by the testator in the Will :
19. Similarly, the direction in the Will
excluding the property at item No. 1 of After the life time of both myself and my
Schedule "A" and the properties mentioned in wife, the said Nadiga Nanjamma, all the
Schedule "B" for partition during the life time properties mentioned in A, B and D
of Smt. Nadiga Nanjamma and that Smt. Schedules shall be divided equally among my
Nadiga Nanjamma would be entitled to surviving children.
reside in the house at item No. 1 of Schedule
"A" and to use the income from the properties 21. The High Court has construed the
mentioned in Schedule "B" for her own expression "my surviving children" to mean
maintenance if she lives separate from any of the children of the testator who survive Smt.
the major sons, only creates a limited life Nadiga Nanjamma and has held that after the
interest in the said properties in favour of death of Smt. Nanjamma only the children
Smt. Nadiga Nanjamma and it does not have surviving Smt. Nanjamma could claim
the effect of rendering the bequest in respect partition in respect of the premises mentioned
of those properties as a contingent bequest in Schedules 'A', 'B' and 'D'.
and it continues to be a bequest of a vested
interest in those properties. Reference in this 22. The learned Counsel for the appellant has
Context may be made to the decision of the urged that in the Will the testator has

Page 10
deliberately used two different expressions, whole and keeping in view the direction
viz., "her surviving children" while dealing enabling a son on attaining majority to seek
with the division of properties mentioned in partition of his share in properties at items
Schedule 'B' after the demise of Smt. Nadiga Nos. 2, 3 and 4 in Schedule 'A' as well as the
Nanjamma and the expression "my surviving properties specified in Schedule 'D' it cannot
children" while dealing with division of be said that the expression "surviving
properties mentioned in Schedules 'A' , 'B' children" in the context of division of
and 'D' after the death of Smt. Nanjamma. properties mentioned in Schedules 'A', 'B' and
The submission is that the expression "my 'D' was not used in the normal sense to mean
surviving children" must mean the children the children surviving the testator.
surviving the testator, while the expression
"her surviving children" must mean children 23. We are unable to read the Will as
surviving Smt. Nanjamma and that all the indicating a contrary intention to make a
children surviving the testator are entitled to departure from the rule regarding vesting of
their share in the properties mentioned in the legacy as contained in Section 119 of the
Schedules 'A', 'B' and 'D' after the death of Act. In our opinion, the Will cannot be
Smt. Nanjamma. In our opinion, nothing construed as creating a contingent interest in
much can be made out of the difference in the some of the testator so as to postpone the
phraseology because if the expression "my date of vesting of the legacy till after the
surviving children" is construed to mean the death of Smt. Nadiga Nanjamma. On a proper
children surviving the testator and the construction the Will must be construed as
expression "her surviving children" is containing a bequeath of a vested interest in
construed to mean the children surviving favour of the sons surviving the testator
Smt. Nanjamma, there will arise a which means that the legacy vested in the
contradiction in the Will in so far as partition legatees, including the husband of the
of Schedule "B" properties is concerned appellant, at the time of testator's death and
because at one place it is mentioned that after the death of her husband, the appellant
"properties of Schedule 'B' shall be liable to is entitled to claim the one-fifth share of her
partition after the demise of my wife, the husband in properties mentioned in Schedule
abovementioned Nadiga Nanjamma, among "A", "B" and "D" in addition to properties
her surviving children", meaning thereby that mentioned in Schedule "C" viz, the thrift
the said properties were divisible among the deposits standing in the name of the
children surviving Smt. Nanjamma, while at appellant's husband in the Bank of Mysore
another place in the Will, it is stated the "after Ltd.
the life time of both myself and my wife, the
said Smt. Nadiga Nanjamma, all the 24. The appeal is, therefore, allowed, the
properties mentioned in A, B and D impugned judgment of the High Court is set
Schedules shall be divided equally among my aside to the extent it denies the appellant one-
surviving children, meaning thereby that the fifth share in the properties mentioned in
properties in Schedules "A", "B" and "D" Schedules "A", "B" and "D" and it is held that
were divisible among the children surviving apart from the share in properties mentioned
the testator. The expressions "my surviving in Schedule "C", the appellant is also entitled
children" and "her surviving children" must, to one- fifth share in the properties mentioned
therefore, be construed in the same sense. in Schedules "A", "B" and "D". as held by the
The words "surviving children" normally trial court. There is no order as to costs.
mean children surviving the testator. The said
expression in a particular context could also
mean the children surviving Smt. Nadiga
© Manupatra Information Solutions Pvt.
Nanjamma. The expression has to be given a
meaning which is in consonance with the Ltd.
other parts of the Will. Reading the Will as a

Page 1
Held: Fertiliser Plant - Plant & Machinery

embedded in earth--Whether movable or
Equivalent Citation: AIR2000SC355, immovable property--The question
2000(1)CTC374, 2000(88)ECR19(SC), whether machinery embedded in the earth
JT1999(9)SC421, (2000)1MLJ118(SC), is movable property or immovable
2000 91 RD55, 1999(7)SCALE344, property depends upon the facts and
(2000)1SCC633, 2000(1)UJ659 circumstances of each case, and the Court
has to take into consideration whether the
IN THE SUPREME COURT OF intention of the party, when it decided to
INDIA embed the machinery, was to make such
embedding temporary or permanent. In
the instant case, the machineries which
Decided On: 03.12.1999 have been embedded in the earth to
constitute a fertilizer plant are definitely
Appellants:Duncans Industries Ltd. embedded permanently with a view to
Vs. utilise the same as a fertiliser plant. The
Respondent: State of U.P. and Ors. plant and machinery of the fertiliser plant
are immovable property and cannot be
Hon'ble Judges/Coram: treated as movables. "We are inclined to
B.N. Kirpal and N. Santosh Hegde, JJ. agree with the above finding of the High
Court that the plant and machinery in the
Subject: Commercial instant case are immovable properties.
The question whether a machinery which
Acts/Rules/Orders: is embedded-in the earth is movable
Stamp Act, 1899 - Section 27, Stamp Act, property or an immovable property,
1899 - Section 47A(II), Stamp Act, 1899 - depends upon the facts and circumstances
Section 56; Companies Act, 1956 ;Income of each case. Primarily, the court will have
Tax Act - Section 269 UL(3); Income Tax to take into consideration the intention of
Rules the parties when it decided to embed the
machinery whether such embedment was
Cases Referred: intended to be temporary or permanent. A
Sirpur Paper Mills Ltd. v. Collector of careful perusal of the agreement of sale
Central Excise, Hyderabad and the conveyance deed along with the
MANU/SC/0846/1998; Reynolds v. Ashby attendant circumstances and taking into
and Son 1904 AC 466; Official Liquidator v. consideration the nature of machineries
Sri Krishna Deo and Ors. involved clearly shows that the
MANU/UP/0067/1959; Himalaya House machineries which have been embedded in
Co. Ltd., Bombay v. The Chief Controlling the earth to constitute a fertiliser plant in
Revenue Authority MANU/SC/0504/1972; the instant case, are definitely embedded
Reynolds v. Ashby & Son [1904 AC permanently with a view to utilise the same
466];Official Liquidator v. Sri Krishna Deo as a fertiliser plant. TU& description of
& Ors. [AIR 1959 All. 247];Sirpur Paper the machines as seen in the Schedule
Mills Ltd. v. CCE [1998 (74) ECR 1 attached to the deed of conveyance also
(SC)];Himalaya House Co. Ltd. v. Chief shows without any doubt that they were set
Controlling Revenue Authority [1972 1 SCC up permanently in the land in question
726] with a view to operate a fertilizer plant and
the same was not embedded to dismantle
and remove the same for the purpose of
Case Note:
sale as machinery at any point of time. The
facts as could be found also show that the
purpose for which these machines were

Page 2
embedded was to use the plant as a factory agreement pursuant to which the
for the manufacture of fertiliser at various conveyance deed in question has come into
stages of its production. Hence, the existence. We have noticed that as per the
contention that these machines should be agreement it is clear what was agreed to be
treated as movables cannot be accepted. sold is the entire business of fertilizer on an
Nor can it be said that the plant and "as is where is" basis including the land,
machinery could have been transferred by building thereon, plant and machinery
delivery of possession on any date prior to relating to fertilizer business--description
the date of conveyance of the title to the of which is found in the definition of the
land...........after perusing the documents term "fertilizer business" in the
and other attending circumstances agreement itself..........It is not the case of
available in this case, we have come to the the appellant when it contends that the
conclusion that the plant and machinery in possession of plant and machinery was
this case cannot but be described as an handed over separately to the appellant by
immovable property. Hence, we agree with the vendor that these machineries were
the High Court on this point." dismantled and given to the appellant, nor
is it possible to visualise from the nature of
2. Stamp Duty--Conveyance Deed--Sale of the plant that is involved in the instant case
Fertiliser Plant--Whether the vendor that such a possession de hors the land
transferred the title of the plant and could be given by the vendor to the
machinery by the Conveyance Deed or appellant. It is obviously to reduce the
only transferred the land--The intention of market value of the property the
the parties has to be taken into document in question is attempted to be
consideration. From the agreement it is drafted as a conveyance Deed regarding
clear that what was agreed to be sold was the land only. The appellant had
the entire fertiliser business on an "as is embarked upon a methodology by which it
where is" basis including the land, purported to transfer the possession of the
building thereon, and plant and plant and machinery separately and is
machinery relating to the fertiliser contending now that this handing over
business. It is clear from the recitals in the possession of the machinery is de hors the
conveyance deed itself that what is conveyance deed. We arc not convinced
conveyed under the deed is not only the with this argument. Apart from the
land but the entire fertiliser business recitals in the agreement of sale, it is clear
including plant and machinery. It is from the recitals in the conveyance deed
obviously to reduce the market value of the itself that what is conveyed under the deed
property that the document in question is dated 9.6.1994 is not only the land but the
attempted to be drafted as a Conveyance entire fertilizer business including plant
Deed regarding the land only. The and machinery. ..........the vendor as per
authorities below were totally justified in the conveyance deed dated 9.6.1994 has
taking into consideration the value of the conveyed the title it had not only in regard
plant and machineries along with the value to the land in question put also to the entire
of the land for the purpose of the Stamp fertilizer business in "as is where is"
Act. "The next question for consideration condition including the plant and
is whether the vendor did transfer the title machinery standing on the said land.
of the plant and machinery in the instant Therefore, the authorities below were
case by the conveyance deed dated totally justified in taking into
9.6.1994. Here again, it is imperative to consideration the value of these plant and
ascertain the intention of the parties from machineries along with the value of the
the material available on record. While land for the purpose of the Act."
ascertaining the intention of the parties,
we cannot (sic) the contents of the 3. Property--Fertiliser Plant--Market

Page 3
Value--Enquiry Committee--Jurisdiction that is caused to it by reconstitution of the

of Collector to reconstitute an Enquiry Expert/Enquiry Committee. We have
Committee--Whether High Court was perused that part of the report of the
right in accepting the valuation of the Collector in which he has discussed in
property by the authorities--Constitution extenso the various materials that were
of an Enquiry Committee by the Collector available before the Committee and also
is for determining the true market value of the report of the valuers appointed for the
the property conveyed under the Deed. In purpose of finding out the value of the
this process, the Collector has every plant and machinery. These valuers are
authority in law to take assistance from technical persons who have while valuing
such source as is available, even if it the plant and machinery taken into
amounts to constituting or reconstituting consideration all aspects of valuation
more than one Committee. The valuations including the life of the plant and
made both by the Enquiry Committee as machinery. The valuations made both by
well as the valuers are mostly based on the the Enquiry Committee as well as the
documents produced by the appellant valuers are mostly based on the documents
itself. Hence, the argument that the produced by the appellant itself. Hence, we
valuation accepted by the Collector and cannot accept the argument that the
confirmed by the revisional authority is valuation accepted by the Collector and
either not based on any material or a confirmed by the revisional authority is
finding arrived at arbitrarily cannot be either not based on any material or a
accepted. Further, the appellant did not finding arrived at arbitrarily. Once we are
seriously challenge the valuation before convinced that the method adopted by the
the High Court, hence the judgment of the authorities for the purpose of valuation is
High Court is upheld. "The main objection based on relevant materials then this
of the appellant in regard to the valuation Court will not interfere with such a finding
arrived at by the authorities is that the of fact. That apart, as observed above,
Collector originally constituted an even the counsel for the appellant before
Enquiry Committee consisting of the the High Court did not seriously challenge
Assistant Inspector General the valuation and as emphasised by the
(Registration), General Manager, District High Court, rightly so. Therefore, we do
Industries Centre, Sub-Registrar and the not find any force in the last contention of
Tehsildar. After the report was submitted the appellant also."
by the Sub-Committee for the reasons of
its own, the Collector reconstituted the Disposition:
said Enquiry Committee by substituting Appeal Dismissed
Additional City Magistrate in place of
Sub-Registrar. This substitution of the Industry: Fertilizers
Enquiry Committee, according to the
appellant, is without authority of law. We ORDER
are unable to accept this contention.
Constitution of an Enquiry Committee by
Santosh Hegde, J
the Collector is for the purpose of finding
out the true market value of the property
conveyed under the Deed. In this process, 1. A Deed of Conveyance dated 9.6.1994
the Collector has every authority in law to executed by a company named ICI India Ltd.
take assistance from such source as is in favour of Chand Chhap Fertilizer and
available, even if it amounts to constituting Chemicals Ltd. when presented for
or reconstituting more than one registration, the concerned Registrar referred
Committee. That apart, the appellant has the said document under Section 47-A(II)
not been able to establish any prejudice Stamp Act to the Collector complaining of

Page 4
the non compliance of Section 27 of the said delivery of possession to the CCFCL in
Act and praying for proper valuation to be respect of such of the estates and properties
made and to collect the stamp duty and mentioned in the agreement as were capable
penalty payable on the said document. The of being transferred by actual and/or
Collector after inquiry levied a stamp duty of constructive delivery and in respect of the
Rs. 37,01,26,832.50 and a penalty of Rs. estates requiring transfer by execution of
30,53,167.50. The said order came to be necessary documents vesting the title thereof
challenged by the aggrieved party in a in CCFCL, and it was further agreed and
revision under Section 56 of the Stamp Act declared that the ownership in respect of the
before the Chief Controlling Revenue assets and properties comprised in the
Authority in Stamp Revision No. 36/95-96 "fertilizer business" to be transferred as per
and the said Revisional Authority as per his the agreement, would be deemed to be vested
order dated 4.4.95 partly allowed the in CCFCL on and from the "transfer date"
challenge and so far as the imposition of which, according to the agreement means
penalty was concerned the same was set aside 1.12.1993 or such other date as may be
and slightly modified the stamp duty levied agreed to by and between ICI India and
by the Collector. Consequent to the order of CCFCL. The term "fertilizer business" was
the Revisional Authority, the appellant herein defined to mean and include the following
become liable to pay stamp duty on the said other properties:
Deed of Conveyance amount to Rs.
36,68,08.887.50. This order of the Revisional (i) Demised land being plot Nos. 2B and 5
Authority came to be challenged before the and the sub-divided portion of plot No. 2
High Court in Civil Misc. Writ Petition No. demarcated and admeasuring in the aggregate
9170/95 which came to be dismissed and as an area of 243.4387 acres equivalent to
against this order of the High Court of 9,85,159.50 sq. mtrs. Being the unshaped
Judicature at Allahabad dated 7.7.1997, the portion shown on the plan annexed hereto
appellant has preferred the above civil together with the buildings and structures
appeal. thereon forming part of the fertilizer business
as on the Transfer Date;
2. Briefly stated, the facts leading to the
controversy in question are as follows: (ii) freehold land and residential building
thereon with the name 'Chandralok", situate
ICI India Ltd., a company registered under at plot no. 4/284, Parbati Bangla Road,
the Companies Act, 1956 executed an Kanpur comprising 94 residential flats;
agreement of sale dated 11.11.1993 wherein
it agreed to transfer on an "as is where is" (iii) freehold land and residential building
basis and "as a going concern" its fertilizer thereon with the name 'Chandrakala', situate
business of manufacturing, marketing, at Navsheel Apartments, 56 Cantonment,
distribution and sale of urea fertilizer in Kanpur comprising a Guest House on the
favour of Chand Chhap Fertilizer and ground floor and 3 residential flats on the first
Chemicals Ltd. (hereinafter referred to as 'the floor; (iv) Plant and machinery relating to the
CCFCL') also a company incorporated under Fertilizer business including the Ammonia
the Companies Act, 1956 which company has Manufacturing Plants, the Captive power
since been renamed as M/s. Duncans plant and all other movable capital assets
Industries Limited, Fertilizer Division, including vehicles, furniture, air-
Kanpur Nagar (the appellant herein) for a conditioners, stand-by systems, pipelines,
total sale consideration of Rs. 70 crores railway siding etc., as on the Transfer Date
which was termed as "slump price" in the and wheresoever situate, all of which relate
agreement. The said agreement also stated exclusively to the Fertilizer Business and are
that the vendor would on the "transfer date" owned and in the possession of ICI or are
transfer the fertilizer business by actual

Page 5
owned by ICI but in the lawful possession of which were transferred by the vendor to the
any third party for and on behalf of ICI ; appellant, were immovable properties,
attracting the provisions of the Stamp Act and
3. Pursuant to the said agreement, a deed of at any rate under the conveyance deed dated
conveyance dated 9.6.1994 was executed by 9.6.1994, the vendor had not conveyed any
the said ICI in favour of CCFCL, on the title to the appellant in regard to these plant
presentation of the said Conveyance Deed for and machinery. He also contended that the
registration. The Sub-Registrar made a High Court erred in relying upon paragraphs
reference to the Collector under Section 47- 10 and 11 of the conveyance deed to come to
A(2) of the Stamp Act, 1899 (hereinafter the conclusion that the plant and machinery
referred to as 'the Act') stating that in the were the subject-matter of the said deed. He
document under reference all the details contended that the said paragraphs merely
required under Section 27 of the Act had not made a reference to an earlier instrument and
been given by the parties, hence valuation mere reference to some earlier transaction in
and examination is essential and requested a document does not amount to incorporation
the Collector to determine the value as in that document of the terms and conditions
required under the Act and the Rules and to relating thereto. It was also contended that
take action to realise the deficit stamp duty the High Court failed to look into the
and penalty. Consequent upon this reference intention of the parties who by an agreement
made by the Sub-Registrar, the Collector dated 11.11.1993 had treated the-plant and
after necessary inquiry as per his order dated machinery as movables and have delivered
20.2.1995 referred to above, levied stamp possession of the said plant and machinery as
duty and penalty to which reference has movables on 11.12.1993. Hence, the said
already been made. Being aggrieved by the plant and machinery is neither immovable
said order of the Collector, the appellant property nor the property which has been
preferred a revision petition to the Chief transferred by virtue of the deed of
Controlling Revenue Authority who, as conveyance dated 9.6.1994. Therefore, the
already stated, by his order dated 9.6.1994 set value of the said plant and machinery could
aside the penalty and modified the duty not have been taken into consideration for the
payable to Rs. 36,68,08,887.50 which order purpose of arriving at the correct and true
came to be challenged before the High Court value of the property conveyed under the
unsuccessfully. deed of conveyance. He also contended that
the valuation in regard to the plant and
4. Before the High Court the appellant had machinery made by the authorities and as
challenged the authority of the Sub-Registrar accepted by the High Court is incorrect and
to make a reference to the Collector on the contrary to law.
ground that there was no material to entertain
any "reason to, believe" that the market value 6. Mr. Gopal Subramaniam, learned senior
of the property which was the subject-matter counsel appearing on behalf of the State, in
of the conveyance deed had not been truly set reply, contended that the document dated
forth in the instrument. The High Court 11.11.1993 (agreement of sale and transfer of
negatived the said contention after fertilizer business) by ICI in favour of the
considering the arguments of the appellant in CCFCL contemplated an agreement to
detail, and before us no argument has been transfer the business of manufacturing,
advanced on this score. marketing, distribution and sale of urea
fertilizer that is fertilizer business itself with
5. Mr. M.L. Verma, learned senior counsel a stipulation that the first stream, second
appearing for the appellant, urged that the stream and the third stream urea
High Court committed an error in coming to manufacturing plants as well as the Ammonia
the conclusion that the plant and machinery manufacturing plants would also be
transferred as a part of the transfer of

Page 6
fertilizer business of the ICI as a going machinery in the instant case are immovable
concern. He also contended that a reading of properties. The question whether a
the document at Para 1(c)(i) which defines machinery which is embedded in the earth is
"fertilizer business" clearly shows that the movable property or an immovable property,
intention of the vendor was to transfer all depends upon the facts and circumstances of
properties that comprised the fertiliser each case. Primarily, the court will have to
business. He also drew our attention to the take into consideration the intention of the
observations of the High Court which had in parties when it decided to embed the
specific terms noted that the learned Counsel machinery whether such c was intended to be
representing the appellant before it, had not temporary or permanent. A careful perusal of
seriously challenged the valuation made by the agreement of sale and the conveyance
the authorities, hence he contended that, the deed along with the attendant circumstances
challenge made to the valuation by the and taking into consideration the nature of
appellant before us should not be machineries involved clearly shows that the
countenanced. machineries which have been embedded in
the earth to constitute a fertiliser plant in the
7. We have heard learned Counsel for the instant case, are definitely embedded
parties and the question that arises for our permanently with a view to utilise the same
consideration is whether by the conveyance as a fertiliser plant. The description of the
deed dated 9.6.1994. the plant and machinery machines as seen in the Schedule attached to
were also transferred; and if so, whether the the deed of conveyance also shows without
High Court was right in accepting the any doubt that they were set up permanently
valuation as made by the authorities for in the land in question with a view to operate
purpose of stamp duty payable? a fertilizer plant and the same was not
embedded to dismantle and remove the same
8. Considering the question whether the plant for the purpose of sale as machinery at any
& machinery in the instant case can be point of time. The facts as could be found also
construed as immovable property or not, the show that the purpose for which these
High Court came to the conclusion that the machines were embedded was to use the
machineries which formed the fertilizer plant as a factory for the manufacture of
plant, were permanently embedded in the fertiliser at various stages of its production.
earth with an intention of running the Hence, the contention that these machines
fertilizer factory and while embedding these should be treated as movables cannot be
machineries the intention of the party was not accepted. Nor can it be said that the plant and
to remove the same for the purpose of any machinery could have been transferred by
sale of the same either as a part of a delivery of possession on any date prior the
machinery or scrap and in the very nature of date of conveyance of the title to the land. Mr.
the user of these machineries, it was Verma, in support of his contention that the
necessary that these machineries be machineries in question are not immovable
permanently fixed to the ground. Therefore, properties, relied on a judgment of this Court
it came to the conclusion that these in Sirpur Paper Mills Ltd. v. Collector of
machineries were immovable property which Central Excise, Hyderabad
were permanently attached to the land in MANU/SC/0846/1998 : 1998(97)ELT3(SC)
question. While coming to this conclusion the . In the said case, this Court while considering
learned Judge relied upon the observations the leviability of excise duty on paper-
found in the case of Reynolds v. Ashby & making machines, based on the facts of that
Son 1904 AC 466 and Official Liquidator v. case, came to the conclusion that the
Sri Krishna Deo and Ors. machineries involved in that case did not
MANU/UP/0067/1959 : AIR1959All247 . constitute immovable property. As stated
We are inclined to agree with the above above, whether a machinery embedded in the
finding of the High Court that the plant and earth can be treated as movable or immovable

Page 7
property depends upon the facts and which has been extracted by us hereinabove.
circumstances of each case. The Court It is not the case of the appellant when it
considering the said question will have to contends that the possession of plant and
take into consideration the intention of the machinery was handed over separately to the
parties which embedded the machinery and appellant by the vendor that these
also the intention of the parties who intend machineries were dismantled and given to the
alienating those machinery. In the case cited appellant, nor is it possible to visualise from
by Mr. Verma, this Court in para 4 of the the nature of the plant that is involved in the
judgment had observed thus : "In view of this instant case that such a possession de hors the
finding of fact, it is not possible to hold that land could be given by the vendor to the
the machinery assembled and erected by the appellant. It is obviously to reduce the market
appellant at its factory site was immovable value of the property the document in
property as something attached to earth like a question is attempted to be drafted as a
building or a tree. The Tribunal has pointed Conveyance Deed regarding the land only.
out that it was for the operational efficiency The appellant had embarked upon a
of the machine that it was attached to earth. If methodology by which it purported to
the appellant wanted to sell the paper-making transfer the possession of the plant and
machine it could always remove it from its machinery separately and is contending now
base and sell it." that this handing over possession of the
machinery is de hors the conveyance deed.
9. From the above observations, it is clear that We are not convinced with this argument.
this Court has decided the issue, in that case Apart from the recitals in the agreement of
based on the facts and circumstances sale, it is clear from the recitals in the
pertaining to that case hence the same will not conveyance deed itself that what is conveyed
help the appellant in supporting its contention under the deed dated 9.6.1994 is not only the
in this case where after perusing the land but the entire fertilizer business
documents and other attending circumstances including plant and machinery. A perusal of
available in this case, we have come to the Clauses 10, 11 and 13 of the said deed shows
conclusion that the plant and machinery in that it is the fertilizer factory which the
this case cannot but be described as an vendor had agreed to transfer along with its
immovable property. Hence, we agree with business as a going concern and to complete
the High Court on this point. the same the conveyance deed in question
was being executed. There is implicit
10. The next question for consideration is reference to the sale of fertilizer factory as a
whether the vendor did transfer the title of the going concern in the conveyance deed itself.
plant and machinery in the instant case by the That apart, the inclusion of Schedule III to the
conveyance deed dated 9.6.1994. Here again, conveyance deed wherein a Plan delineating
it is imperative to ascertain the intention of the various machineries comprising of the
the parties from the material available on fertilizer factory is appended shows that it is
record. While ascertaining the intention of the land with standing fertilizer factory which
the parties, we cannot preclude the contents is being conveyed under the deed, though an
of the agreement pursuant to which the attempt to camouflage this part of the
conveyance deed in question has come into property sold is made in the recitals, in our
existence. We have noticed that as per the opinion, the parties concerned have not been
agreement it is clear what was agreed to be able to successfully do so. While considering
sold is the-entire business of fertilizer on an this question of transfer of plant and
"as is where Is" basis including the land, machinery being part of the conveyance deed
building thereon, plant and machinery or not, reliance can also be placed on the
relating to fertilizer business- description of application filed by the appellant before the
which is found in the definition of the term appropriate authority of the Income-Tax
"fertilizer business" in the agreement itself Department wherein while disclosing the

Page 8
market value of the immovable property that is conveyed under the deed under
sought to be transferred the appellant himself consideration. It is again based on facts of
has mentioned the value of the property so that case that this Court came to the
transferred as Rs. 70 crores which is the conclusion therein that the so called terms
figure found in the agreement of sale which and conditions which were found in an earlier
agreement includes the sale of plant and agreement were not intended to be
machinery along with the land. A certificate incorporated in the subsequent document.
issued by the appropriate authority under This is clear from the following observations
Section 269UL(3) of the Income Tax Act of this Court appearing in Para 10 of the said
evidences this fact. In the said application judgment:
made by the appellant for obtaining the said
certificate, the appellant has in specific terms ... From the language used in the Assignment
at serial No. (iv) of the Schedule included Deed, it is not possible to come to the
plant and machinery, railway sliding and conclusion that the terms and conditions of
other immovable properties as part of the the earlier transaction have been made a part
fertilizer business undertaking. It is also of that Deed. Further barring one particular
found on record that by a supplementary agreement, other agreements were not before
affidavit dated 8.9.1993 filed before the the Court. Therefore, it is not possible to
Income Tax department while filing form know what the terms and conditions of those
373-1 prescribed under the Income-tax Rules agreements were. Before the terms and
the petitioner has again shown all these plant conditions of an agreement can be said to
and machinery along with the Plan which is have been incorporated into another
now attached to the conveyance deed as part document, the same must clearly show that
of the property that is being conveyed. the parties thereto intended to incorporate
Merely because in some of the relevant them. No such intention is available in this
paragraphs of the Conveyance Deed the case.
appellant has tried to highlight the fact that
what is being sold under the conveyance deed 12. Hence we are of the opinion that this
is only the land and a reference is made in judgment also does not help the appellant in
regard to the handing over of possession of his attempt to convince us that we should not
the machinery on an earlier date does not ipso take into consideration the recitals in the
facto establish that the vendor did not convey agreement dated 11.11.93 while considering
the title of the plant and machinery under the the conveyance deed of 9.6.1994.
conveyance deed dated 9.6.1994.
13. For the reasons stated above, we are of the
11. Learned counsel for the appellant has considered opinion that the vendor as per the
placed for our consideration a judgment of conveyance deed dated 9.6.1994 has
this Court in the case of Himalaya House Co. conveyed the title it had not only in regard to
Ltd., Bombay v. The Chief Controlling the land in question but also to the entire
Revenue Authority MANU/SC/0504/1972 : fertilizer business in "as is where is"
[1972]3SCR332 to contend that a mere condition including the plant and machinery
reference to an earlier agreement does not standing on the said land. Therefore, the
amount to incorporation of the terms and authorities below were totally justified in
conditions of an earlier transaction or the taking into consideration the value of these
intention of the parties. We have carefully plant and machineries along with the value of
considered the said judgment and, in our the land for the purpose of the Act.
opinion, that judgment does not in any
manner lay down the law in absolute terms 14. The next point to be considered is
that a court cannot look into prior agreements whether the High Court was justified in
while considering the intention of the parties accepting the valuation made by the
for finding out what actually is the property

Page 9
authorities in regard to the plant and that were available before the Committee and
machinery. Here we must note that in the also the report of the valuers appointed for the
judgment of the High Court, the learned purpose of finding out the value of the plant
Judge has noted as follows: "... In fact the and machinery. These valuers are technical
finding on valuation of plant and machinery persons who have while valuing the plant and
was not seriously challenged by Shri Shanti machinery taken into consideration all
Bhushan during the course of argument and, aspects of valuation including the life of the
in my opinion, rightly". It is based on this plant and machinery. The valuations made
approach of the learned Counsel appearing both by the Enquiry Committee as well as the
for the appellant that the High Court did not valuers are mostly based on the documents
go into the question of valuation. However, produced by the appellant itself. Hence, we
since the learned Counsel for the appellant cannot accept the argument that the valuation
did question the correctness of the valuation accepted by the Collector and confirmed by
made by the authorities below, we have heard the revisional authority is either not based on
the arguments addressed in this regard. We any material or a finding arrived at arbitrarily.
have also heard the arguments on behalf of Once we are convinced that the method
the State on this score. adopted by the authorities for the purpose of
valuation is based on relevant materials then
15. The question of valuation is basically a this Court will not interfere with such a
question of fact and this Court is normally finding of fact. That apart, as observed above,
reluctant to interfere with the finding on such even the counsel for the appellant before the
a question of fact if it is based on relevant High Court did not seriously challenge the
material on record. The main objection of the valuation and as emphasised by the High
appellant regard to the valuation arrived at by Court, rightly so. Therefore, we do not find
the authorities is that the Collector originally any force in the last contention of the
constituted an Enquiry Committee consisting appellant also.
of the Assistant Inspector General
(Registration), General Manager, District 16. For the reasons stated above, this appeal
Industries center, Sub-Registrar and the fails and the same is dismissed with costs.
Tehsildar. After the report was submitted by
the Sub-Committee for the reasons of its
own, the Collector reconstituted the said
Enquiry Committee by substituting
Additional City Magistrate in place of Sub-
Registrar. This substitution of the Enquiry
Committee, according to the appellant, is
without authority of law. We are unable to
accept this contention. Constitution of an
Enquiry Committee by the Collector is for the
purpose of finding out the true market value
of the property conveyed under the Deed. In
this process, the Collector has every authority
in law to take assistance from such source as
is available, even if it amounts to constituting
or reconstituting more than one Committee.
That apart, the appellant has not been able to
establish any prejudice that is caused to it by
reconstitution of the Expert/Enquiry
Committee. We have perused that part of; the
report of the Collector in which he has
discussed in extenso the various materials

Page 1
Equivalent Citation: AIR2004SC4342, 2004(5)ALLMR(SC)1189, 2004 (57) ALR 260, 2004 4

AWC(Supp)3044SC, 2005(2)BomCR315, 2004(106(4))BOMLR433, 2005(1)CGLJ274,
JT2004(8)SC415, 2004(3)KLT728(SC), 2005-1-LW155, 2005(1)PLJR70, 2004(7)SCALE318,
(2004)8SCC614, [2004]Supp(3)SCR817, 2004(2)UJ1364
IN THE SUPREME COURT OF INDIA
Civil Appeal No. 4610 of 2000
Appellants: Rambhau Namdeo Gajre

Vs.
Respondent: Narayan Bapuji Dhotra (dead) through Lrs.
Ashok Bhan and S.H. Kapadia, JJ.
Counsels:
For Appellant/Petitioner/Plaintiff: B.N. Deshmukh, Sr. Adv. and Venkateswara Rao Anumolu, Adv.
for S.M. Jadhava, Adv
For Respondents/Defendant: N.M. Ghatate, Sr. Adv., S.V. Deshpande and Anuradha Rustogi, Advs.
Subject: Property
Acts/Rules/Orders:
Transfer of Property Act - Section 53A, Transfer of Property Act - Section 54; Transfer of Property
(Amendment) Act, 1929
Cases Referred:
Shrimant Shamrao Suryavanshi and Anr. v. Pralhad Bhairoba Suryavanshi, MANU/SC/0093/2002;
State of U.P. v. District Judge and Ors., MANU/SC/0020/1997
Prior History / High Court Status:

From the Judgment and Order dated 07.10.1999 of the Bombay High Court in Second Appeal No. 205
of 1984 (MANU/MH/0167/2000)
Disposition:
Appeal Dismissed
Case Note:
Transfer of Property Act, 1882 - Sections 53A and 54--Doctrine of part performance of contract
in Section 53A -- Scope and applicability--Conditions--Right of proposed transferee to protect
his possession against proposed vendor--Cannot be pressed in service against third party--
Plaintiff entering into agreement of sale of immovable property worth more than Rs. 100 with
one P who took possession of suit property in part performance thereof--Sale deed not executed
and registered in his favour in terms of Section 54--Within 2-1/2 months thereafter, P executed
similar agreement of sale in favour of appellant and put him in possession of suit property--
Whether appellant entitled to protect his possession by virtue of Section 53A?--Held, “no”--P
did not have any right to enter into agreement with appellant as he was not owner--No
agreement between plaintiff owner and appellant-- Agreement of sale does not create interest of

Page 2
proposed vendee in suit property--Appellant not transferee within meaning of Section 53A--
Appellant did not get possessory or equitable title to suit property through P.
Section 53A was enacted in 1929 by the Transfer of Property (Amendment) Act, 1929, and
imports into India in a modified form the equity of part performance as it developed in England
over the years. Doctrine of part performance, as stated in Section 53A of the Act is an equitable
doctrine which creates a bar of estoppel in favour of the transferee against the transferor.
The doctrine of part performance aims at protecting the possession of such transferee provided
certain conditions contemplated by Section 53A are fulfilled. The essential conditions, which are
required to be fulfilled if a transferee wants to defend or protect his possession under Section
53A of the Act have been culled out of the Supreme Court in Shrimant Shamrao Suryavanshi
and another v. Prahlad Bhalroba Suryavanshi, 2002 (2) AWC 918 (SC) : (2002) 3 SCC 676, as
follows :
“(1) There must be a contract to transfer for consideration of any immovable property;
(2) the contract must be in writing, signed by the transferor, or by someone on his behalf;
(3) the writing must be in such words from which the terms necessary to construe the transfer
can be ascertained;
(4) the transferee must in part performance of the contract take possession of the property, or of
any part thereof;
(5) the transferee must have done some act in furtherance of the contract; and
(6) the transferee must have performed or be willing to perform his part of the contract.”
If these conditions are fulfilled, then in a given case, there is an equity in favour of the proposed
transferee who can protect his possession against the proposed transferor even though a
registered deed conveying the title is not executed by the proposed transferor.
Protection provided under Section 53A of the Transfer of Property Act, 1882, to the proposed
transferee is a shield only against the transferor. It disentitles the transferor from disturbing the
possession of the proposed transferee who is put in possession in pursuance of such an
agreement. It has nothing to do with the ownership of the proposed transferor who remains full
owner of the property till it is legally conveyed by executing a registered sale deed in favour of
the transferee. Such a right to protect possession against the proposed vendor cannot be pressed
in service against a third party.
The doctrine of part performance as contemplated in Section 53A of the Transfer of Property
Act, 1882, can be availed of by the proposed transferee against his transferor or any person
claiming under him and not against a third person with whom he does not have a privity of
contract.
JUDGMENT
Ashok Bhan, J.

Page 3
Transfer of Property Act (hereinafter referred

1. Defendant/appellant (hereinafter referred to as "the Act").
to as "the appellant") has filed this appeal
against the judgment of the High Court in 4. Trial Court upon consideration of the
Second Appeal No. 205 of 1984 whereby the evidence on record came to the conclusion
High Court reversing the judgment and that a mere contract of sale is incapable of
decree passed by the first Appellate Court has creating any right or title in favour of the
restored the order passed by the Civil Court, transferee. That no right or interest was
Jalna in Suit No. 184 of 1974. The Trial Court created in the suit land in favour of Pishorrilal
had decreed the suit filed by the Narayan by virtue of the agreement of sale dated
Bapuji Dhotra, (deceased) now represented 16.6.1961. That the original agreement of
through his Legal representatives (hereinafter sale between Narayan Bapuji Dhotra and
referred to as "the respondent"). Pishorrilal was not placed on the record and
the certified copy produced as Exhibit 16/1D
2. The property in dispute is agricultural land had not been proved. That the appellant had
bearing Survey No. 94 admeasuring 18 acres failed to exercise due care in ascertaining the
and 23 gunthas situated at Village Jambwadi, title of Pishorrilal before entering into an
Taluka Jalna in the State of Maharashtra. agreement of sale with him. It was highly
Respondent who was the owner of the suit improbable that the appellant had no
land filed the Suit for possession of the land knowledge about the pendency of the suit
with the averment that the appellant had between the plaintiff and his brother and
wrongfully dispossessed him of the suit land Pishorrilal. It was also held that the appellant
in April, 1965. According to him, he was the could not defend his possession under
owner of the suit land which was his self- Section 53A of the Act as against the
acquired property. It was averred that in the plaintiff/respondent. In view of the findings
Special Civil Suit No. 20 of 1962 filed by his recorded the trial Court proceeded to pass the
brother for partition and possession of the decree for possession in favour of the
ancestral property, the suit land along with respondent.
other lands was left to his share.
5. Aggrieved against the judgment and decree
3. Appellant resisted the suit contending, passed by the Trial Court, the appellant filed
inter alia, that under an agreement of sale an appeal. The first appellate Court taking a
dated 16.6.1961 Narayan Bapuji Dhotra, different view set aside the judgment of the
original plaintiff, and his brother Manohar trial Court and dismissed the suit filed by the
agreed to sell the suit land to Pishorrilal plaintiff/respondent The first Appellate Court
Punjabi who paid the entire amount of came to the conclusion that the appellant had
consideration and was put in possession of acquired an equitable/possessors title to the
the land in part performance of the agreement suit land on the basis of the agreement of sale
of sale. That Pishorrilal executed an executed in his favour by Pishorrilal and was
agreement of sale of the suit land in favour of therefore, entitled to protect his possession
the appellant on 1.9.1961. That he paid the under Section 53A of the Act.
entire amount of the consideration to
Pishorrilal and was put in possession of the 6. Original plaintiff/respondent died. His
suit land by Pishorrilal in part performance of Legal representatives (now the respondent)
the agreement dated 1.9.1961. It was filed a second appeal in the High Court.
contended that since he was in possession of Although, a number of questions of law were
the suit land in part performance of the framed at the time of admission of the second
agreement, he was entitled to protect his appeal but at the time of final disposal the
possession in terms of Section 53A of the only substantial question of law worth
consideration was found to be:

Page 4
"Whether the defendant, who is in possession transferor to take advantage of his own fault
of the suit land on the basis of an agreement and evict the transferee from the property.
of sale dated 1.9.1961 executed by Pishorrilal The doctrine of part performance aims at
Punjabi, who himself, in turn, had come in protecting the possession of such transferee
possession of the suit land on the basis of a provided certain conditions contemplated by
similar agreement dated 16.6.1961 executed Section 53A are fulfilled. The essential
by the plaintiff, can claim benefit of the conditions which are required to be fulfilled
equitable doctrine of part performance as if a transferee wants to defend or protect his
stated in Section 53A of the Transfer of possession under Section 53A of the Act have
Property Act to protect his possession." been culled out of this Court in Shrimant
Shamrao Suryavanshi and Anr. v. Pralhad
The above noted question was answered by Bhairoba Suryavanshi,
the High Court in the negative. It was held MANU/SC/0093/2002 : [2002]1SCR393 ,
that the appellant was not entitled to protect are:
his possession claiming benefit of equitable
doctrine of part performance enshrined in "(1) There must be a contract to transfer for
Section 53A of the Act. Title in the suit consideration of any immovable property;
property had not been conveyed in favour of
Pishorrilal by executing a registered sale (2) the contract must be in writing, signed by
deed. In the absence of title in the property the transferor, or by someone on his behalf;
Pishorrilal could neither enter into an
agreement of sale nor transfer possession of (3) the writing must be in such words from
the property to the appellant in part which the terms necessary to construe the
performance of the agreement under Section transfer can be ascertained;
53A of the Act. That the appellant failed to
take due care and pre-caution to ascertain the (4) the transferee must in part performance of
title of Pishorrilal to the suit land before the contract take possession of the property,
entering into transaction with him. or of any part thereof;
7. Section 53A was enacted in 1929 by the (5) the transferee must have done some act in
Transfer of Property (Amendment) Act, furtherance of the contract; and
1929, and imports into India in a modified
form the equity of part performance as it (6) the transferee must have performed or be
developed in England over the years. willing to perform his part of the contract."
Doctrine of part performance as stated in
Section 53A of the Act is an equitable
9. If these conditions are fulfilled then in a
doctrine which creates a bar of estoppel in
given case there is an equity in favour of the
favour of the transferee against the transferor.
proposed transferee who can protect his
possession against the proposed transferor
8. It is seen that many a times a transferee even though a registered deed conveying the
takes possession of the property in part title is not executed by the proposed
performance of the contract and he is willing transferor. In such a situation equitable
to perform his part of the contract. However, doctrine of part performance provided under
the transferor some how or the other does not Section 53A comes into play and provides
complete the transaction by executing a that "the transferor or any person claiming
registered deed in favour of the transferee, under him shall be debarred from enforcing
which is required under the law. At times, he against the transferee and persons claiming
tries to get back the possession of the under him any right in respect of the property
property. In equity the Courts in England of which the transferee has taken or
held that it would be unfair to allow the continued in possession, other than a right

Page 5
expressly provided by the terms of the could not be availed of by the appellant
contract." against the plaintiff/respondent with whom
he has no privity of contract. The doctrine of
10. Protection provided under Section 53A of part performance as contemplated by Section
the Act to the proposed transferee is a shield 53A can be availed of by the transferee or any
only against the transferor. It disentitles the person claiming under him. The appellant not
transferor from disturbing the possession of being the transferee within the meaning of
the proposed transferee who is put in Section 53A of the Act could not invoke the
possession in pursuance to such an equitable doctrine of part performance to
agreement. It has nothing to do with the protect his possession as against the
ownership of the proposed transferor who plaintiff/respondent.
remains full owner of the property till it is
legally conveyed by executing a registered 13. The agreement to sell does not create an
sale deed in favour of the transferee. Such a interest of the proposed vendee in the suit
right to protect possession against the property. As per Section 54 of the Act, the
proposed vendor cannot be pressed in service title in immovable property valued at more
against a third party. than Rs. 100/- can be conveyed only by
executing & registered sale deed. Section 54
11. The question which falls for our specifically provides that a contract for sale
consideration is: "Whether the doctrine of of immovable property is a contract
part performance could be availed of by the evidencing the fact that the sale of such
defendant with whom the respondent had property shall take place on the terms settled
never entered into an agreement of sale?" It between the parties, but does not, of itself,
is an admitted case of the parties that the create any interest in or charge on such
plaintiff/respondent had entered into an property. It is not disputed before us that the
agreement of sale with Pishorrilal on suit land sought to be conveyed is of the value
16.6.1961 and who had taken possession of of more than Rs. 100. Therefore, unless there
the suit land in part performance thereof. Sale was a registered document of sale in favour
deed had not been executed and registered in of the Pishorrilal (proposed transferee) the
his favour. Pishorrilal did not take any steps title of the suit land continued to vest in
for getting the agreement of sale specifically Narayan Bapuji Dhotra (original plaintiff)
enforced and obtain a registered sale deed in and remain in his ownership. This point was
respect of the suit land. Within a period of 2- examined in detail by this Court in State of
1/2 months Pishorrilal executed a similar U.P. v. District Judge and Ors.,
agreement of sale dated 1.9.1961 in favour of MANU/SC/0020/1997 : AIR1997SC53 , and
the appellant and put him in possession of the it was held thus:
suit land. Pishorrilal did not have any right to
enter into an agreement of sale with the "Having given our anxious consideration to
appellant as he was not the owner of the suit the rival contentions we find that the High
land. The appellant did not care to ascertain Court with respect had patently erred in
the title of Pishorrilal to the suit land before taking the view that because of Section 53A
entering into the transaction with him. of the Transfer of Property Act the proposed
transferees of the land had acquired an
12. There was no agreement between the interest in the lands which would result in
respondent and the appellant in connection exclusion of these lands from the
with the suit land. The doctrine of part computation of the holding of the tenure-
performance enshrined in Section 53A of the holder transferor on the appointed day. It is
Act could have been availed of by Pishorrilal obvious that an agreement to sell creates no
against the plaintiff/respondent subject to the interest in land. As per Section 54 of the
fulfillment of certain conditions but the same Transfer of Property Act, the property in the
land gets conveyed only by registered sale

Page 6
deed. It is not in dispute that the lands sought by Pishorrilal, therefore, the privity of
to be covered were having value of more than contract is between Pishorrilal and the
Rs. 100. Therefore, unless there was a appellant and not between the appellant and
registered document of sale in favour of the the respondent. The doctrine of part
proposed transferee agreement-holders, the performance as contemplated in Section 53A
title of the land would not get divested from can be availed of by the proposed transferee
the vendor and would remain in his against his transferor or any person claiming
ownership. There is no dispute on this aspect. under him and not against a third person with
However, strong reliance was placed by whom he does not have a privity of contract.
learned counsel for Respondent 3 on Section
53A of the Transfer of Property Act. We fail 14. Doctrine of part performance is rooted in
to appreciate how that section can at all be equity and provides 3 shield of protection to
relevant against the third party like the the proposed transferee to remain in
appellant-State. That section provides for a possession against the original owner who
shield of protection to the proposed has agreed to sell to the transferee if the
transferee to remain in possession against the proposed transferee satisfies other conditions
original owner who has agreed to sell these of Section 53A. It operates as an equitable
lands to the transferee if the proposed estoppel against the original owner to seek
transferee satisfies other conditions of possession of the property which was given
Section 53A. That protection is available as a to the proposed vendee in part performance
shield only against the transferor, the of the contract. Appellant being a third party
proposed vendor, and would disentitle him and not a privy to the transaction on which
from disturbing the possession of the the estoppel rests can take no advantage of it.
proposed transferees who are put in
possession pursuant to such an agreement. 15. Pishorrilal did not have a transferable
But that has nothing to do with the ownership interest which he could convey to the
of the proposed transferor who remains full appellant by entering into an agreement of
owner of the said lands till they are legally sale with the appellant. The appellant under
conveyed by sale deed to the proposed the circumstances does not have the equitable
transferees. Such a right to protect possession right to protect his possession as against the
against the proposed vendor cannot be owner of the land, i.e., the respondent.
pressed in service against a third party like Appellant is not the transferee within the
the appellant-State when it seeks to enforce meaning of Section 53A. The appellant did
the provisions of the Act against the tenure- not get the possessory or equitable title to the
holder, proposed transferor of these lands." suit land through Pishorrilal as Pishorrilal
himself did not have any right in the property.
[Emphasis supplied] The only right possessed by the Pishorrilal
under Section 53A was to protect his
There was no agreement between the possession as against his proposed vendee.
appellant and the respondent in connection He did not have conveyable interest in the
with the suit land. The doctrine of part property which he could transfer to a third
performance could have been availed of by party including the possession of the
Pishorrilal against his proposed vendor property.
subject, of course, to the fulfillment of the
conditions mentioned above. It could not be 16. For the reasons stated above, we do not
availed of by the appellant against the find any merit in this appeal and dismiss the
respondent with whom he has no privity of same with costs.
contract. Appellant has been put in
possession of the suit land on the basis of an
agreement of sale not by the respondent but

Equivalent Citation: AIR2005SC4397, 2005(6)ALD83(SC), 2005 (61) ALR 605, 2006(1)ALT43(SC),
2005(5)CTC370, [2006(1)JCR75(SC)], JT2005(9)SC1, 2005-4-LW726, (2006)2MLJ7(SC), 2005 99 RD789,
2005 2 RD789, RLW2006(1)SC130, 2005(8)SCALE473, (2005)13SCC71citation image
IN THE SUPREME COURT OF INDIA
Appellants: Chennammal
Vs.
Respondent: Munimalaiyan and Ors.
Dr. Arijit Pasayat and AR. Lakshmanan, JJ.
Counsels:
For Appellant/Petitioner/Plaintiff: V. Prabhakar, Asok K.Sadhu Khan, R.S. Krishna Kumar and Revathy
Raghavan, Advs
For Respondents/Defendant: K.K. Mani, Adv.
Subject: Civil
Subject: Property
Catch Words
Mentioned IN
Acts/Rules/Orders:
Code of Civil Procedure (CPC) - Order 34 Rule 7; Transfer of Property Act, 1882 - Section 58
Cases Referred:
Tamboli Ramanlal Motilal (dead) by L.Rs. v. Ghanchi Chimanlal Keshavlal (dead) by L.Rs. and Anr.,
MANU/SC/0229/1992MANU/SC/0229/1992; Chunchun Jha v. Ebadat Ali and Anr.,
MANU/SC/0111/1954MANU/SC/0111/1954; Bhaskar Waman Joshi (deceased) and Ors. v.
Shrinarayan Rambilas Agarwal (deceased) and Ors., MANU/SC/0161/1959MANU/SC/0161/1959;
Umabai and Anr. v. Nilkanth Dhondiba Chavan (dead) by LRs and Another,
MANU/SC/0285/2005MANU/SC/0285/2005; Pandit Chunchun Jha v. Sk. Ebadat Ali,
MANU/SC/0111/1954MANU/SC/0111/1954; Bhaskar Waman Joshi v. Narayan Ramblidas Agarwal,
MANU/SC/0161/1959MANU/SC/0161/1959; K. Simrathmull v. S. Nanjalingiah Gowder,
MANU/SC/0338/1962MANU/SC/0338/1962; Mushir Mohammed Khan v. Sajeda Bano,
MANU/SC/0150/2000MANU/SC/0150/2000; Tamboli Ramanlal Motilal v. Ghanchi Chimanlal
Keshavlal,MANU/SC/0229/1992MANU/SC/0229/1992; P.L. Bapuswami v. N. Pattay Gounder,
MANU/SC/0284/1965MANU/SC/0284/1965
Citing Reference:
Mentioned
4
Relied On
6
Prior History:
From the Judgment and Order dated 6.3.98 of the Madras High Court in S.A. No. 1966 of 1984
Disposition:
Appeal Dismissed
Case Note:
Property - Mortgage by Conditional Sale - Respondent-plaintiff executed a simple mortgage in favour

of the appellant-defendant - Deed was executed by the respondent-plaintiff in favour of the appellant-
defendant - As respondent-plaintiff was unable to discharge his liabilities, properties given by him as
security were sold to the appellant-defendant - Right to repurchase the properties within a period of
3 years were however kept reserved by the respondent-plaintiff - Respondent-plaintiff sought
redemption of the property - Appellant-defendant contended that the deed in question was a deed
of sale and not a mortgage by conditional sale - Respondent-plaintiff instituted a suit against the
appellant-defendant and prayed for a decree for redemption - District Munsiff held that the deed in
question was only a mortgage by conditional sale and not a sale deed - Trial court thus passed a
preliminary decree for redemption - Aggrieved by the preliminary decree, the appellant-defendant
preferred an appeal before the Additional Subordinate Judge - Additional Subordinate Judge held that
the document was an outright sale and not a mortgage by conditional sale and allowed the appeal -
Respondent-plaintiffs preferred second appeal before the High Court - Second appeal was allowed
and the judgment and decree of the trial court was restored - High Court held that the document in
question was only a mortgage by conditional sale - Hence, the present appeal - Whether the document
in question is a mortgage by conditional sale or a sale with a condition of re-purchase - Held, recitals
clearly shows that the deed in question was not a deed of sale but a mortgage by conditional sale -
Appeal dismissed
Subject Category :
SIMPLE MONEY AND MORTGAGE MATTERS ETC. - MORTGAGE PRIVATE
JUDGMENT
AR. Lakshmanan, J.
1. This appeal is directed against the final judgment and order dated 06.03.1998 passed by the High
Court of Madras in Second Appeal No. 1966 of 1984 allowing the same and reversing the judgment
and order dated 15.11.1983 passed in A.S. No. 51 and 1982 by the Additional Subordinate Judge,
Dharmapuri at Krishnagiri and restoring the order and judgment dated 20.11.1981 passed by the
District Munsiff, House in O.S. No. 542 of 1978.
2. The short facts of the case are as follows:-
The defendant is the appellant in this civil appeal. One Munimalaiyan (plaintiff) executed a simple
mortgage in favour of the appellant for a sum of Rs. 3,000/-. For securing the due repayment, 3 items
of properties belonging to Munimalaiyan was given as security. Munimalaiyan was unable to discharge
the simple mortgage and on the intervention of Panchayatdars, a deed was executed by Munimalaiyan
in favour of the appellant herein (Chennammal). In and by the said deed, one of the properties which
was given as security for the simple mortgage was sold to the appellant herein with a right reserved
to the said Munimalaiyan to repurchase the same within a period of 3 years on payment of Rs. 3,000/-
. A legal notice was issued by the said Munimalaiyan to the appellant herein seeking redemption of
the property which was the subject-matter of the deed dated 22.10.1970. The appellant issued a reply
notice contending that the deed dated 20.10.1970 was a deed of sale and not a mortgage by
conditional sale as sought to be contended by the said Munimalaiyan.
The said Munimalaiyan instituted a suit in O.S. No. 542 of 1978 on the file of the District Munsiff,
House against the appellant herein praying for a decree for redemption. It was contended that the
deed dated 20.10.1970 was a mortgage by conditional sale and that pursuant to the sale, the appellant
was put in possession of the suit property and that the deed is not a sale deed and that a right to
redeem the property within a period of 3 years was reserved and failing which the appellant herein
was entitled to have the patta transferred in her own name. As on 20.10.1970, the property was
valued at Rs. 12,500/-. It was further contended that Munimalaiyan was paying the kist for the suit
properties and that the appellant had raised various crops and derived sufficient income every year
and that the mortgaged debt has to be scaled down as per Section 8 of Act 5 of 1978 and that since
the appellant has been in possession for 8 years Rs. 2,400/- ought to be deducted and that the
appellant herein is entitled only to Rs. 600/- as per law and that the said sum of Rs. 600/- has been
deposited into Court and that, therefore, the property has to be re-transferred and possession handed
over. On these allegations the said Munimalaiyan prayed for the aforesaid relief.
Pending the suit, the said Munimalaiyan died and his LRs were brought on record as his legal
representatives and they continued to prosecute the suit.
3. The appellant herein resisted the suit contending that the deed dated 20.10.1970 was an outright
sale and that since Munimalaiyan was unable to discharge the simple mortgage the deed in question
came to be executed and that the sale consideration under the document was adjusted towards the
amounts due under the simple mortgage deed of the year 1961 and that the said document was
executed on the advise of the Panchayatdars and that half the property is rocky and unfit for
cultivation and that the income therefrom was very meagre and that a right to repurchase had been
reserved under the document within a period of three years failing which the document stipulated
that the appellant would have absolute rights and that the option to repurchase was not exercised
within the stipulated period of three years and that from the date of the document the appellant has
been in possession as absolute owner and has been paying kist and that patta has also been
transferred in her name and that the appellant had made certain portions of the property cultivable
and the value thereof has increased and in order to get the benefit of the increase in value the present
suit has been laid wrongly alleging that the document is a mortgage by conditional sale and that the
suit is barred by time and that the provisions of Act 40 of 1978 are not applicable to the facts of the
case and that the question of scaling down of the debt does not arise and that court fee paid is
incorrect. On these allegations the appellant herein prayed for the dismissal of the suit.
The District Munsiff, House who tried the suit held that the document in question which was marked
as Exhibit A1/B1 was only a mortgage by conditional sale and that it is not a sale deed as contended
by the appellant herein and that from the intention of the parties and the document in question, it
was clear that only a mortgage by conditional sale had been executed and that Munimalaiyan was
entitled to the benefits under Act 40 of 1978 and that, therefore, only Rs. 600/- was due and that the
question of mesne profits was relegated to the final decree proceedings. The trial Court thus passed
a preliminary decree for redemption.
4. Aggrieved by the preliminary decree, the appellant preferred an appeal on the file of the Additional
Subordinate Judge, Dharmapuri. The Additional Subordinate Judge on an interpretation of the
document in question held that the document was only an outright sale and not a mortgage by
conditional sale. In this view of the matter, the Additional Subordinate Judge allowed the appeal and
thereby set aside the judgment and decree passed by the District Munsiff.
5. The respondents herein being aggrieved by the appeal being allowed and their suit being dismissed,
preferred S.A. No. 1966 of 1984 on the file of the High Court at Madras.
S. Jagadeesan, J. who heard the second appeal allowed the same and restored the judgment and
decree of the trial Court by setting aside the judgment and decree of the Appellate Court. The High
Court held that the document in question is only a mortgage by conditional sale since vesting absolute
rights in the property had been postponed under the document and that since interest had been paid
regularly there was no necessity for a sale deed to be executed by discharging the earlier mortgage
and that there was no necessity for the appellant to agree to re-convey the property after the period
of 3 years and that the value of the property though Rs. 12,500/- had been shown as only Rs. 3,000/-
and that all these factors could only lead one to conclude that the document in question is only a
mortgage by conditional sale. On these findings, the second appeal was allowed.
6. We have carefully perused the judgment under appeal in the second appeal and also the judgment
and decree passed by the Appellate Court and also of the trial Court and perused the document
conditional deed of sale for Rs. 3,000/- dated 22.10.1970. We have also perused the certified copy of
the Tamil version of the document and the translated English version.
We heard Mr. V. Prabhakar, learned counsel for the appellant/defendant and Mr. K.K. Mani, learned
counsel for the respondents/plaintiffs.
7. Mr. V. Prabhakar, learned counsel for the appellant, made the following submissions:-
1) the recitals in the disputed document Ex.A1/B1 are unambiguous and clearly refer to an absolute
sale and not a mortgage by conditional sale;
2) the document in question had been executed due to the inability to discharge the principal under
the simple mortgage and, therefore, the High Court should have held that the document in question
is an outright sale;
3) the High Court has overlooked the very fact that the document in question recites that the property
would be reconveyed if the money is paid within 3 years would clearly show that a right of re-purchase
alone had been reserved while the sale effected was absolute;
4) the High Court has failed to note that the absence of stipulation as to payment of interest but
containing recitals as to payment of taxes, handing over of possession and a right to re-purchase the
property coupled with a pointed recital that the sale is being effected would clearly establish that the
document in question is an outright sale;
5) that the term "mortgage by conditional sale" referred to in Section 58(c) of the Transfer of Property
Act, 1882 could only mean that an ostensible sale effected with the right to redeem being reserved
vide in instant case an outright sale has been effected with a right to repurchase alone being reserved
which is sufficient in itself to indicate that the document in question is an outright sale deed;
6) that the High Court erred in interpreting the document in question as one of mortgage by
conditional sale despite clear recitals therein that the sale is an absolute sale;
7) that the respondents having lost the right to re-purchase the property by not exercising the option
as recited in the document within the period stipulated therein cannot turn around and contend that
the document in question is a mortgage by conditional sale.
8. Mr. Prabhakar, learned counsel for the appellant, has taken us through the pleadings, judgments
and also the Ex.A1/B1. In support of his contention, he relied on the following judgments:-
1) Tamboli Ramanlal Motilal (dead) by L.Rs. v. Ghanchi Chimanlal Keshavlal (dead) by L.Rs. and Anr.,
MANU/SC/0229/1992MANU/SC/0229/1992 : AIR1992SC1236
2) Chunchun Jha v. Ebadat Ali and Anr., MANU/SC/0111/1954MANU/SC/0111/1954 : [1955]1SCR174

3) Bhaskar Waman Joshi (deceased) and Ors. v. Shrinarayan Rambilas Agarwal (deceased) and Ors.,
MANU/SC/0161/1959MANU/SC/0161/1959 : [1960]2SCR117
4) Umabai and Anr. v. Nilkanth Dhondiba Chavan (dead) by LRs and Another,
MANU/SC/0285/2005MANU/SC/0285/2005 : (2005)6SCC243
9. According to Mr. K.K. Mani, learned counsel for the respondents, the document in question was
a) a mortgage by conditional sale;
b) pursuant to the sale, the appellant was put in possession of the suit property;
c) right to redeem the property within a period of 3 years was reserved failing which the appellant was
entitled to have the patta transferred in her own name;
d) though the value of the property as on 22.10.1970 was Rs. 12,500/- but the deed was executed for
Rs. 3,000/-;
e) since Munimalaiyan was unable to discharge the simple mortgage, he executed the document in
favour of the appellant herein;
f) one of the property which was given as security for the simple mortgage was sold to the appellant
with a right reserved to Munimalaiyan to re-purchase the same within a period of 3 years on payment
of Rs. 3,000/-.
He also invited our attention to the very same Ex.A1/B1 and placed strong reliance on the judgment
of this Court in P.L. Bapuswami v. N. Pattay Gounder, MANU/SC/0284/1965MANU/SC/0284/1965 :
[1966]2SCR918
10. In the above factual background, the only question for determination is whether the document in
question is a mortgage by conditional sale as contended by plaintiff/respondent herein or a sale out
and out with a condition of re-purchase as alleged by the defendants. If the former, the
plaintiff/respondent succeeds. If the latter appellant/defendant are out of Court. Therefore, the entire
case is based on the construction of the document.
Before proceeding to consider the rival submissions, we feel it is beneficial to reproduce the
conditional deed of sale for Rs. 3,000/- i.e. Ex.A1/B1 document.
"Conditional Deed of Sale executed on 22.10.1970 (Twenty Second Day of October, Nineteen Seventy)
by Munimayan, S/O Ariyan, Harijan, Cultivation residing at No. 252, Oadayanda Halli, Kuruppu,
Oadayanda Halli Village, Denkarikottai Taluk, in favour of Chennammal, W/O Govindachami, residing
at the said village, in respect of the properties mentioned hereunder in the presence of the
Panchayatadar mentioned hereunder is as follows:
The Punja Land described hereunder is belonging to me as self acquired property and in my possession
and enjoyment and registered as Document No. 4625/1961 dated 20.12.1961. (1 Book 867 Volume
Pages 63 to 70). As per the advice of the Panchayatdar I have executed this Deed of Sale in respect of
the said Punja Lands (inclusive of the same properties) in favour of you for consideration of Rs. 3,000/-
(Rupees three thousand only). Since I could not pay the principle amount of Rs. 3,000/- found in the
document, I have handed over the possession of the undermentioned property to you today in the
presence of the witnesses signed hereunder. Since I have received the sale consideration by way of
returning the document dated 20.12.1961. I shall purchase the said property from you within the
period of three years, at my cost. Till then, you shall pay the kist to the Government from Fasli 1380.
In case of failure on my part to purchase the property from you within the period of three years, you
and your heirs shall hold and enjoy the property with absolute rights, from the next day onwards. I
undertake that neither my heirs nor myself and would give any trouble by indulging in civil and criminal
proceedings, in respect of the said property. If it is so, it has no proof. My heirs and myself shall stand
surety for the said sale consideration of Rs. 3,000/-. You shall apply for transfer of patta for the
property on the next day of the expiry of the three years period. I shall not raise any objection, then.
This property is situated within the limits of Kelamangalam Panchayat Union, Rayalkottai, Panchayat.
SCHEDULE OF PROPERTY
Dharmapuri Dist. - Rayakottai Sub-Registration District - Denkarikottai Taluk - 256 No. Oadayanda Halli
Group - Thimmu Halli Village, West of the land belonging to Manthedu Gounder, East of the land
belonging to Kalan and Pathiran; South of the Onipuram Pathway; comprised within these limits, Punja
AC.8.05 in Re-survey No. 80/1 Kist is 9.02. The said extent of the land is the subject matter of this
conditional sale. Present value Rs. 12,500/-.
L.T.I. of Munimayan
WITNESSES
1) Venkatappan s/o Thayappan @ Venkatan, Oadayanda Halli
2) M.M. Ramaiah, s/o M. Munivenkatan, Royakottai
3) L.T.I. of Narayana Gounder, s/o Thimmu Gounder, Oadayanda Halli
Scribed by : R.V. Venkataraman."
A careful perusal of the document would clearly show that the document has been couched in a simple
Tamil language. The recitals are clear and unambiguous. It is seen from the document that
Munimalaiyan was unable to discharge the simple mortgage. Panchayatdars intervene and amicably
settled the matter. A deed was executed thereupon by Munimalaiyan in favour of the appellant herein
and in and by the said deed one of the properties which was given as security for the simple mortgage
was sold to the appellant with a right reserved to the said Munimalaiyan to re-purchase the same
within a period of 3 years on payment of Rs. 3,000/-. The right to redeem the property within a period
of 3 years was specifically reserved. The recitals, in our opinion, would only show that the deed in
question is not a deed of sale but a mortgage by conditional sale.
11. Section 58(c) of the Transfer of Property Act, 1882 deals with mortgage by conditional sale. The
said section reads thus:
"58(c) Mortgage by conditional sale - Where, the mortgagor ostensibly sells the mortgaged property-
on condition that on default of payment of the mortgage-money on a certain date the sale shall
become absolute, or
on condition that on such payment being made the sale shall become void, or
on condition that on such payment being made the buyer shall transfer the property to the seller,
the transaction is called mortgage by conditional sale and the mortgagee a mortgagee by conditional
sale:
Provided that no such transaction shall be deemed to be a mortgage, unless the condition is embodied
in the document which effects or purports to effect the sale."
A mortgage by conditional sale takes the form of an ostensible sale of the property with the condition
superadded that it shall become an absolute sale on default of payment on a certain date or subject
to the proviso that the sale shall be treated as void and the property re-transferred on payment being
made.
12. We shall now consider the judgments cited; 1) Tamboli Ramanlal Motilal (dead) by L.Rs. v. Ghanchi
Chimanlal Keshavlal (dead) by L.Rs. and Anr., MANU/SC/0229/1992MANU/SC/0229/1992 :
AIR1992SC1236
This Court, in this case, held as under:
"13. The attendant circumstances could be looked into only to gather the intention. Such an intention,
if explicitly expressed in the document itself, there is no scope for looking at the attendant
circumstances. If, therefore, there is no relationship of the debtor and the creditor, the question of it
being a mortgage by conditional sale does not arise.
16. In order to appreciate the respective contentions, it is necessary for us to analyse Ex.26 dated
11.12.1950. Before that, it is necessary to utter a word of caution. Having regard to the nice
distinctions between a mortgage by conditional sale and a sale with an option to repurchase, one
should be guided by the terms of the document alone without much help from the case law. Of course,
cases could be referred for the purposes of interpreting a particular clause to gather the intention.
Then again, it is also settled law that nomenclature of the document is hardly conclusive and much
importance cannot be attached to the nomenclature alone since it is the real intention which requires
to be gathered. It is from this angle we propose to analyse the document. No doubt the document is
styled as a deed of conditional sale, but as we have just now observed, that is not conclusive of the
matter."
2) Chunchun Jha v. Ebadat Ali and Anr., MANU/SC/0111/1954MANU/SC/0111/1954 : [1955]1SCR174
We have perused the above judgment. The judgment explains as to how a document has to be
construed. The judgment says that the intention must be gathered from the document itself and if the
words are express and clear, effect must be given to them and any extraneous enquiry into what was
thought or intended is ruled out. The real question in such a case is not what the parties intended or
meant but what is the legal effect of the words which they used and if there is ambiguity in the
language employed, then it is permissible to look to the surrounding circumstances to determine what
was intended.
3) Bhaskar Waman Joshi (deceased) and Ors. v. Shrinarayan Rambilas Agarwal (deceased) and Ors.,
MANU/SC/0161/1959MANU/SC/0161/1959 : [1960]2SCR117
This Court, in this case, has explained the circumstance that the condition incorporated in the sale
deed must undoubtedly be taken into account, but the value to be attached thereto must vary with
the degree of formality attending upon the transaction. The definition of a mortgage by conditional
sale postulates the creation by the transfer of a relation of mortgagor and the mortgagee, the price
being charged on the property conveyed. This Court further held that in a sale coupled with an
agreement to re-convey there is no relation of debtor and creditor nor is the price charged upon the
property conveyed, but the sale is subject to an obligation to retransfer the property within the
specified period. This Court also held that the question in each case is one of determination of the real
character of the transaction to be ascertained from the provisions of the deed viewed in the light of
surrounding circumstances. If the words are plain and unambiguous they must in the light of the
evidence of surrounding circumstances be given their true legal effect. If there is ambiguity in the
language employed, the intention may be ascertained from the contents of the deed with such
extrinsic evidence as may by law be permitted to be adduced to show in what manner the language
of the deed was relating to existing facts.
4) Umabai and Anr. v. Nilkanth Dhondiba Chavan (dead) by LRs and Another,
MANU/SC/0285/2005MANU/SC/0285/2005 : (2005)6SCC243
Paras 19 & 21 of the above judgment was relied on by counsel for the appellant which reads thus:
"19. It may be true that level of a document is not decisive. The true nature of transaction must be
determined having regard to the intention of the parties as well as the circumstances attributing
thereto as also the wordings used in the document in question.
21. There exists a distinction between mortgage by conditional sale and a sale with a condition of
repurchase. In a mortgage, the debt subsists and a right to redeem remains with the debtor; but a sale
with a condition of repurchase is not a lending and borrowing arrangement. There does not exist any
debt and no right to redeem is reserved thereby. An agreement to sell confers merely a personal right
which can be enforced strictly according to the terms of the deed and at the time agreed upon. Proviso
appended to Section 58(c), however, states that if the condition for retransfer is not embodied in the
document which effects or purports to effect a sale, the transaction will not be regarded as a
mortgage. (See Pandit Chunchun Jha v. Sk. Ebadat Ali, MANU/SC/0111/1954MANU/SC/0111/1954 :
[1955]1SCR174 , Bhaskar Waman Joshi v. Narayan Ramblidas Agarwal,
MANU/SC/0161/1959MANU/SC/0161/1959 : [1960]2SCR117 , K. Simrathmull v. S. Nanjalingiah
Gowder, MANU/SC/0338/1962MANU/SC/0338/1962 : AIR1963SC1182 , Mushir Mohammed Khan v.
Sajeda Bano, MANU/SC/0150/2000MANU/SC/0150/2000 : [2000]2SCR65 and Tamboli Ramanlal
Motilal v. Ghanchi Chimanlal Keshavlal,Ghanchi Chimanlal Keshavlal."
5) P.L. Bapuswami v. N. Pattay Gounder, MANU/SC/0284/1965MANU/SC/0284/1965 : [1966]2SCR918

(Four Judges) was cited by Mr. K.K. Mani, learned counsel appearing for the respondent.
In this case, one Palani Moopan executed a document in favour of the defendant for a consideration
of Rs. 4,000/- on May 28, 1946. The document was in the form of a sale-deed but it contained a
stipulation that the first defendant should re-convey the property to Palani Moopan on his repaying
the amount of Rs. 4,000/- after 5 years and before the end of the 7th year. This Court held as under:
"that there were several circumstances to indicate that the document was a transaction of mortgage
by conditional sale and not a sale with a condition for retransfer. In the first place, the condition for
repurchase was embodied in the same document. In the second place, the consideration for the
transaction was Rs. 4,000/- while the real value of the property was Rs. 8,000/-. In the third place, the
patta was not transferred to the 1st defendant after the execution of the document by Palani Moopan.
The kist for the land was also continued to be paid by Palani Moopan and after his death, by his sons.
Lastly, the consideration for reconveyance was Rs. 4,000/-, the same amount as the consideration for
the original transaction. The plaintiff was entitled to preliminary decree for redemption under Order
34, Rule 7, Civil Procedure Code, for taking accounts and for declaration of the amounts due to the 1st
defendant under the document."
13. The above judgment, in our opinion, squarely applies to the facts and circumstances of the case
on hand. They are:
1) the transaction in question is a mortgage by conditional sale;
2) the condition for re-purchase of 3 years was embodied in the same document;
3) the consideration for the transaction was Rs. 3,000/- while the real value of the property was Rs.
12,500/-;
4) patta was not transferred to the defendant after the execution of the document;
5) as per the evidence available on record, the kist for the land was continued to be paid by the plaintiff
- Munimalaiyan;
6) the consideration for re-conveyance was only for Rs. 3,000/-;
7) the appellant was given liberty to have the patta transferred and also to enjoy the property
absolutely after the period of 3 years expired;
8) the trial Court granted a preliminary decree which was reversed by the lower Appellate court and
again interfered with by the High Court.
14. We have considered all the attendant circumstances to cover the intention of the parties. The
intention is explicitly expressed in the document itself. There is, therefore, no scope for looking at the
attendant circumstances. There is no relationship of the debtor and the creditor. This Court also in
Tamboli Ramanlal Motilal (dead) by L.Rs. v. Ghanchi Chimanlal Keshavlal (dead) by L.Rs. and Anr.,
MANU/SC/0229/1992MANU/SC/0229/1992 : AIR1992SC1236 has pointed out that the Court should
be guided by the terms of the document alone without much help from the case law. Viewed from
any angle, we are of the opinion that the document in question is a mortgage by conditional sale.
15. In the result, the appeal stands dismissed and the judgment and decree of the High Court is
affirmed. However, we order no costs.
Page 1
Equivalent Citation: AIR2005SC2306, Rules, Gujarat Co - operative 1965; Transfer

2005(5)ALLMR(SC)731, of Property Act - Section 10; Constitution of
2005(3)BomCR514, India - Article 12, Constitution of India -
2005(107(3))BOMLR120, Article 14, Constitution of India - Article 15,
[2005]125CompCas235(SC), Constitution of India - Article 19(1),
2005GLH(3)571, (2005)2GLR1530, Constitution of India - Article 26,
JT2005(4)SC337, (2005)5SCC632, Constitution of India - Article 29,
[2005]1SCR592 Constitution of India - Article 300A;
Societies Registration Act, 1860 ;Bombay
IN THE SUPREME COURT OF Public Trusts Act, 1950 ;Companies Act,
INDIA 1882 ;Cooperative Societies Act, 1912 ;Co-
operative Credit Societies Act, 1904 ;Foreign
Exchange Regulation Act, 1973
Cases Referred:
Appellants: Zoroastrian Co-operative Damyanti Naranga v. Union of India and Ors.

Housing Society Limited and Anr. MANU/SC/0726/1971; Daman Singh and
Vs. Ors. etc. v. State of Punjab and Ors. etc.
Respondent: District Registrar Co- MANU/SC/0392/1985; State of U.P. and
operative Societies (Urban) and Ors. Anr. v. C.O.D. Chheoki Employees'
Cooperative Society Ltd. and Ors.
Hon'ble Judges/Coram: MANU/SC/0332/1997; Jain Merchants Co-
B.N. Agrawal and P.K. Balasubramanyan, JJ. operative Housing Society v. HUF of
Manubhai, MANU/GJ/0206/1994; Co-
Counsels: operative Central Credit Bank Ltd. v.
For Appellant/Petitioner/Plaintiff: Soli J. Industrial Tribunal, Hyderabad
Sorabjee, Sr. Adv., Sanjeev Sen, Nandini MANU/SC/0611/1969; Karvanagar Sahakari
Gore, Seema Sundd, Jasmine Damakewal, Griha Rachana Sanstha Maryadit and Ors. v.
Kanika Agnihotri and Ashim Sood, Adv. for State MANU/MH/0304/1989; State of
Manik Karanjawala, Advs Maharashtra and Ors. v. Karvanagar Sahakari
Griya Rachana Sanstha Maryadit and Ors.,
For Respondents/Defendant: V.A. Bobde, Sr. MANU/SC/2613/2000 : 2000 (9) SCC 295;
Adv., A.P. Mayee, N.S. Tambwekar, Sanjeev Renusagar Power Co. Ltd. v. General Electric
K. Choudhary, Vishwajit Singh, Arjun Co., MANU/SC/0195/1994; Printing and
Bobde and Hemantika Wahi, Advs. Numerical Registering Company v.
Sampson, 1874 (19) L.R. E C 462; Rodriguez
v. Speyer Bros., (1919) A.C. 59; Fender v.
Subject: Trusts and Societies
Mildmay, (1938) A.C. 1; Linden Gardens
Trust Ltd. v. Lenesta Sludge Disposal Ltd.
Subject: Property and Ors., [1993] 3 All E.R. 417; Gheru Lal
Parakh v. Mahadeodas Maiya and Ors., 1959
Acts/Rules/Orders: Suppl. (2) SCR 406; Mohammad Raza v. Mt.
Bombay Co - operative operative Societies Abbas Bandi Bibi, ALR 59 IndAp 236;
Act, Bombay Co - operative 1925; Land Gummanna Shetty and Ors. v.
Acquisition Act, 1894 - Section 41; Gujarat Nagaveniamma MANU/SC/0201/1967
Co - operative operative Societies Act,
Gujarat Co - operative 1961; Contract Act -
Cases Overruled / Reversed:
Section 11, Contract Act - Section 23;
Gujarat Co - operative operative Societies

Page 2
Community - Rejection of application of

Zoroastrian Co-operative Housing Society Respondent 2 - Tribunal held that bye law
Ltd. and Anr. Vs. District Registrar, Co-op. restricting membership to Parsis was a
Societies (Urban) and Ors. restriction on right to property and was
(MANU/GJ/0138/1999) violative of Article 300 A - Writ petition -
Dismissed by High Court - Appeal to
Prior History: Supreme Court - Allowing appeal held
that when a person accepts membership in
a cooperative society by submitting
From the Judgment and Order dated 23.7.99 himself to its bye laws and places on
of the Gujarat High Court in L.P.A. No. himself a qualified restriction on his right
129/97 in S.C.A. No. 6226 of 1996 to transfer property by stipulating that
same would be transferred with prior
Disposition: consent of society to a person qualified to
Appeal Allowed be a member of society, it could not be held
to be an absolute restraint on alienation
Citing Reference: offending Section 10 of Transfer of
Property Act - Hence finding of High
Court that restriction placed on rights of
Case Note:
members of a society to deal with property
allotted to him was invalid as an absolute
restraint on alienation, held unsustainable
Property - Bombay Co-operative Societies and set aside
Act, 1925 - Gujarat Co-operative Societies
Act, 1961 - Gujarat Co-operative Societies
Rules, 1965 - Rule 12 and 12(2) - Transfer
of Property Act - Section 10 - Zoroastrian
Cooperative Housing Society, a society JUDGMENT
registered under Bombay Cooperative
Societies Act, 1925 formed with object of P.K. Balasubramanyan, J.
providing housing to members of Parsi
Community - Respondent 2 becoming . The Zoroastrian Co-operative Housing
member of society on death of his father - Society is a society registered on 19.5.1926,
Respondent applied to society for under the Bombay Co-operative Societies
permission to demolish bungalow and to Act, 1925. The Society applied to the
construct a commercial building in its Government of Bombay for acquisition of
place - Rejection of application by Society certain lands in Ahmedabad District, then in
stating that bye laws of society did not the State of Bombay, under the Land
permit commercial use of land - Acquisition Act, 1894 for the purpose of
Respondent 2 subsequently applied to erecting houses for residential use of its
society for permission to demolish members and to further the aims and objects
bungalow and for construction of of the Society. On the Government of
residential flats to be sold to Parsis - Bombay agreeing to the proposal, the Society
Application allowed by society - entered into an agreement on 17.2.1928 with
Negotiations entered into by Respondent 2 the Government under Section 41 of the Land
with Respondent 3 a builder’s association Acquisition Act. Certain lands were acquired.
in violation of restriction on sale of shares From the lands thus acquired at its cost and
or property to a Non Parsi - Challenged by given to it, the Society allotted plots of land
Society by filing a case before Board of to the various members of the Society in
Nominees - Board held that society could furtherance of the objects of the Society. On
not restrict its membership only to Parsi the re- organization of States, the Society

Page 3
became functional in the State of Gujarat and The said bye-law further provided that other
came within the purview of the Gujarat Co- members shall be elected by the Committee
operative Societies Act, 1961. Section 169 of of the Society, provided that all members
that Act, repealed the Bombay Co- operative shall belong to the Parsi Community subject
Societies Act, 1925 and in sub-section (2) to satisfying other conditions in that bye-law.
provided that all societies registered or Bye-law No. 21 provided for sale of a share
deemed to be registered under the Bombay held by a member but with previous sanction
Act, the registration of which was in force of the Committee which had full discretion in
immediately before the commencement of granting or withholding such sanction. It was
the Gujarat Act, were to be deemed to be also provided that until the transfer of a share
registered under the Gujarat Act. The Gujarat is registered, no right was acquired against
Act came into force on 1.5.1962. Thus, the the Society by the transferee, and no claim
Society came to be regulated by the Gujarat against the transferor by the Society was also
Co-operative Societies Act, 1961 (hereinafter to be affected. In short, the qualification for
referred to as 'the Act'). becoming a member in the Society was that
the person should be a Parsi and that the
2. On the scheme of the Bombay Co- transfer of a share to him had to have the
operative Societies Act (hereinafter referred previous sanction of the Committee of the
to as 'the Bombay Act'), the Society had Society.
applied for registration in terms of Section 9
of that Act. The application was accompanied 3. Some of the relevant provisions of the
by the proposed bye-laws of the Society. The Bombay Act may now be noticed. Under
Registrar of Co-operative Societies, on being Section 3, the Registrar had the right to
satisfied that the Society had complied with classify all societies under one or other of the
the provisions of the Act and the Rules and heads referred to in that Section. Under
that the proposed bye- laws were not contrary Section 5 of that Act, a society which had as
to the Act and the Rules, granted registration its object, the promotion of economic
to the Society and its bye-laws and issued a interests of its members in accordance with
certificate of registration in terms of Section economic principles, may be registered under
11 of that Act. As per the bye-laws, the the Act with or without limited liability.
objects of the Society were to carry on the Section 6 placed restrictions on the interests
trade of building, and of buying, selling, of the members of the society with limited
hiring, letting and developing land in liability. Section 6A enacted that no person
accordance with Co-operative principles and shall be admitted as a member of a society
to establish and carry on social, re-creative unless he was a person competent to contract
and educational work in connection with its under Section 11 of the Indian Contract Act.
tenets and the Society was to have full power Section 7 stipulated the conditions for
to do all things it deemed necessary or registration and provided that no society
expedient, for the accomplishment of all could be registered under the Act which did
objects specified in its bye-laws, including not consist of at least 10 persons who were
the power to purchase, hold, sell, exchange, qualified to be members of the society under
mortgage, rent, lease, sub-lease, surrender, Section 6A and where the object of the
accept surrenders of and deal with lands of society was the creation of funds to be lent to
any tenure and to sell by installments and its members, unless all persons forming the
subject to any terms or conditions and to society resided in the same town or village or
make and guarantee advances to members for in the group of villages or they belonged to
building or purchasing property and to erect, the same tribe, class or occupation, unless the
pull down, repair, alter or otherwise deal with Registrar ordered otherwise and no person
any building thereon. All persons who had could be admitted to membership of any such
signed the application for registration, are society after its registration unless the
original members by virtue of bye-law No. 7. persons fulfilled the two requirements as

Page 4
mentioned above. If the Registrar was bungalow that had been put up and to
satisfied that a society has complied with the construct a commercial building in its place.
provisions of the Act and the Rules and that The Society refused him permission stating
its proposed bye-laws are not contrary to the that the bye-laws of the Society did not
Act or to the Rules, under Section 10 he was permit commercial use of the land.
to register the society and its bye-laws. Thereafter, Respondent No. 2 applied to the
According to the Society, it had submitted its Society for permission to demolish the
duly filled in application under Section 9 of bungalow and to construct residential flats to
the Act accompanied by its bye-laws and the be sold to Parsis. The Society acceded to the
said bye-laws have been approved and request of Respondent No. 2, making it clear
registered by the Registrar on being satisfied that the flats constructed could only be sold
that the proposed bye-laws were not contrary to Parsis. It appears that, earlier, the Society
to the Act or to the Rules. had written to the Registrar that it was
apprehending that certain members of the
4. After the Society was formed and Society were proposing to sell their
registered as indicated earlier, the Society got bungalows to persons outside the Parsi
lands acquired by the State by invoking the community only with commercial motive and
Land Acquisition Act, 1894. The Society in violation of clause 7 of the bye-laws. The
entered into an agreement in that behalf with Registrar replied that any transaction of sale
the Government under Section 41 of the Act should be in accordance with the bye-laws of
on 17.2.1928. The said agreement recited that the Society and any sale in violation of the
the Government of Bombay was satisfied that bye-laws would not be permitted, thus,
the land should be acquired under the Land stressing the sanctity of the bye-laws. On
Acquisition Act "for the purpose of erecting 20.7.1982, the Government of Gujarat had
houses thereon". It was also stated that the also issued a notification declaring that
Government was satisfied that the acquisition persons or firms dealing with the sale and
of the land was needed for the furtherance of purchase of lands and buildings, contractors,
the objects of the Society and was likely to architects and engineers were disqualified
prove useful to the public and it consented to from being members of Co-operative
put in operation the provisions of the Land Housing Societies. Though, permission was
Acquisition Act. An extent of 6 acres 12 given to Respondent No. 2 as early as on
guntas was thus acquired and handed over to 17.5.1988 for construction of residential flats
the Society, on the Society bearing the cost of in the land, to be sold only to members of the
that acquisition. The Society in its turn Parsi community, he did not act on the
allotted portions of the land to its members permission for a period of seven years.
for the purpose of putting up residential Apprehending that Respondent No. 2
houses in the concerned plots. intended to violate the bye-laws of the
Society, the Society passed a resolution
5. One of the members of the Society sold the reminding its members that in accordance
plot in which he had constructed a residential with bye-law No. 7, no person other than a
building, to the father of Respondent No. 2 Parsi could become a new member of the
with the previous consent of the Committee Society and informing the existing members
of the Society. The father of Respondent No. of the Society that they could not sell their
2 was also admitted to membership of the plots or bungalows to any person not
Society, he being qualified for such belonging to the Parsi community.
admission in terms of the bye-laws of the Respondent No. 2 appears to have started
Society. After the rights devolved on negotiations with Respondent No. 3, a
Respondent No. 2, consequent on the death Builder's association, in violation of the
of his father, he became a member of the restriction on sale of shares or property to a
Society of his volition. Thereafter, he applied non-Parsi. The Society, in that context, filed
to the Society for permission to demolish the a case before the Board of Nominees under

Page 5
the Act for an injunction restraining dealt with by the appropriate authorities
Respondent No. 2 from putting up any under Section 24 of the Act and Rule 12(2) of
construction in plot No. 7 and from the Rules. It was also held that such a bye-
transferring the same to outsiders in violation law would amount to a restraint on alienation
of bye-law No. 7 without valid prior and hence would be hit by Section 10 of the
permission from the Society. Though, Transfer of Property Act. The Society and its
initially an interim order of injunction was Chairman, challenged the said decision
granted, the Board informed the Society that before a Division Bench, in Letters Patent
the Society could not restrict its membership Appeal No. 129 of 1997. By judgment dated
only to the Parsi community and that 23.7.1999, the said appeal was dismissed,
membership should remain open for every more or less, concurring with the reasoning
person. A clarification was also sought for and conclusion of the learned Single Judge.
from the Society as to why it had refused The decision of the Division Bench of the
permission to Respondent No. 2 to transfer Gujarat High Court thus rendered, is
plot No. 7 belonging to him. Subsequently, challenged in this appeal by Special Leave.
the Board of Nominees vacated the interim
order of injunction granted, inter alia, on the 6. Mr. Soli J. Sorabjee, learned Senior
ground that the construction of a block of Counsel appearing for the appellants
residential flats would not create disturbance contended that under Article 19(1)(c) of the
and nuisance to the original members of the Constitution of India, Parsis had a fundament
Society. Thereafter, Respondent No. 2 right of forming an association and that
applied to the Society for permission to fundamental right cannot be infringed by
transfer his share to Respondent No. 3. The thrusting upon the association, members
said application was rejected by the Society, whom it does not want to admit or against the
since according to it, the application was terms of its bye- laws. He submitted that the
contrary to the Act, Rules and the bye-laws content of the right of association guaranteed
of the Society. While the Society challenged by Article 19(1)(c) of the Constitution of
the order of the Board of Nominees before the India has been misunderstood by the High
Gujarat State Co-operative Societies Court and the Authorities under the Act. He
Tribunal, Respondents 2 and 3 challenged the also contended that there was nothing in the
rejection of the request of Respondent No. 2 Act or the Rules which precluded a society
to sell his plot to Respondent No. 3, by way from restricting its membership to persons of
of an appeal before the Registrar of Co- a particular persuasion, belief or tenet and the
operative Societies under Section 24 of the High Court was in error in holding that
Act. The Tribunal, in the revision filed by the membership could not be restricted to
Society, took the view in an interim order that members of the parsi community for whose
the bye-law restricting membership to Parsis benefit the very society was got registered.
was a restriction on the right to property and Though, grounds based on Article 26 of the
the right to alienate property and, therefore, Constitution of India raised, were not
was invalid in terms of Article 300A of the pursued, it was pointed out that under Article
Constitution of India. This order was 29, the parsis had the right to conserve their
challenged by the Society and its Chairman culture. It was submitted that bye-law No. 7
before the High Court of Gujarat in Special was perfectly valid and so long as it did not
Civil Application No. 6226 of 1996. By violate anything contained in the Act or the
judgment dated 16.1.1997, a learned Single Rules, it could not be held to be invalid or
Judge of the Gujarat High Court dismissed unenforceable and the society cannot be
the writ petition essentially holding that the compelled to act against the terms of its bye-
restriction in a bye-law to the effect that laws. He also submitted that there was no
membership would be limited only to persons absolute restraint on alienation to attract
belonging to the Parsi community, would be Section 10 of the Transfer of Property Act
an unfair restriction which can be validly and the restraint, if any, was only a partial

Page 6
restraint, valid in law. There was nothing 7. Before proceeding further, some of the
illegal in certain persons coming together to relevant provisions of the Gujarat Act may be
form a society in agreeing to restrict noticed in a little detail. The Society though
membership in it or to exclude the general originally registered under the Bombay Co-
public at its discretion with a view to carry on operative Societies Act, 1925 has to be
its objects smoothly. Mr. Bobde, learned deemed to be registered under the Gujarat
Senior Counsel appearing for the contesting Act by virtue of Section 169 of the Gujarat
respondents, Respondents 2 and 3, contended Cooperative Societies Act, 1961. Section
that Section 4 of the Act clearly indicated that 2(2) of the Act defines bye-laws as meaning,
no bye-law could be recognized which was bye-laws registered under the Act. Section
opposed to public policy or which was in 2(13) defines a member as meaning a person
contravention of public policy in the context joining in an application for the registration
of the relevant provisions in the Constitution of a co-operative society which is
of India and the rights of an individual under subsequently registered, or a person, duly
the laws of the Country. A bye-law restricting admitted to membership of the society after
membership in a co-operative society, to a its registration. Section 4 of the Act, based on
particular denomination, community, caste or which considerable arguments were raised
creed was opposed to public policy and before us, reads as follows:-
consequently, the Authorities under the Act
and the High Court were fully justified in "4. Societies which may be registered. - A
rejecting the claim of the Society. Learned society, which has as its object the promotion
Senior Counsel also contended that the High of the economic interests or general welfare
Court was right in holding that the concerned of its members or of the public, in accordance
bye-law operated as a restraint on alienation with cooperative principles, or a society
and such a restraint was clearly invalid in established with the object of facilitating the
terms of Section 10 of the Transfer of operations of any such society, may be
Property Act. He submitted that a co- registered under this Act:
operative society stood on a different footing
from a purely voluntary association or a Provided that it shall not be registered if, in
society registered under the Societies the opinion of the Registrar, it is
Registration Act and in the context of economically unsound, or its registration
Sections 4 and 24 of the Act, the validity of may have an adverse effect upon any other
the bye-laws of a society had to be tested, society, or it is opposed to, or its working is
notwithstanding the fact that the bye-laws likely to be in contravention of pubic policy."
had been earlier approved by the Registrar of
Co-operative Societies. Learned Senior Section 6 insists that a society shall not be
Counsel also contended that under Section 14 registered under the Act unless it consists of
of the Act, the Registrar had the power to call at least ten persons not belonging to the same
upon the Society to amend its bye-laws and family, who are qualified to be members
in that context, the Registrar could direct the under the Act and who reside within the area
Society to delete the restriction placed on of operation of the society. This shows that
admission to membership by bye-law No. 7 the members of a family could not by
of the bye-laws of the Society. In reply, Mr. themselves form into a society. There was no
Sorabjee pointed out that the rights under Part such embargo on persons belonging to a
III of the Constitution of India pertained to community or sex forming themselves into a
State action and an individual could always cooperative society. Section 8 speaks of
join a voluntary association or a cooperative application for registration and Section 9
society which placed certain restrictions on speaks of registration. As noticed, the Society
the right, he might have otherwise enjoyed. was originally registered under the Bombay
There was also no substance in the contention Act. Under Section 11 of the Act, the
that public policy was being violated.

Page 7
Registrar is given the power to decide certain effect from the date of the registration of the
questions. The said Section reads: amendment in the manner aforesaid, the bye-
laws shall be deemed to have been duly
"11. Power of Registrar to decide certain amended accordingly ; and the bye-laws as
questions. - When, any question arises amended shall be binding on the society and
whether for the purpose of the formation, or its members."
registration or continuance of a society or the
admission of a person as a member of a Section 22 provides that subject to the
society under this Act a person is an provisions of Section 25, no person shall be
agriculturist or a non-agriculturist, or admitted as a member of a society unless he
whether any person is a resident in a town or is an individual, who is competent to
village or group of villages, or whether two contract, a firm, company, or any other body
or more villages shall be considered to form corporate or a society registered under the
a group, or whether any person belongs to Societies Registration Act, 1860, a society
any particular tribe, class or occupation, the registered, or deemed to be registered, under
question shall be decided by the Registrar." the Act, the State Government, a local
authority, or a public trust registered under
It may be noted that the power does not Bombay Public Trusts Act, 1950.
include the power to decide whether the
refusal to admit a particular member on the Section 23 deals with removal of a member
basis that he is not qualified under the bye- in certain circumstances. Section 24 speaks
laws is correct or not and the power is of open membership. Sub-Section (1)
conferred only to decide the eligibility of a thereof, which is of immediate relevance,
person to be a member, apparently in terms reads as follows:-
of the Act, the Rules and the bye-laws.
Section 12 enables the Registrar to classify "24. Open membership. (1) No society
the societies. Section 13 provides that an shall, without sufficient cause, refuse
amendment of the bye-laws of a society had admission to membership to any person duly
to be approved by the Registrar before it qualified therefore under the provisions of
could come into force. Section 14 of the Act this Act, the rules and bye- laws of such
confers a power on the Registrar to direct an society."
amendment of the bye-laws of a society. The
said Section reads as under:- Be it noted that admission to membership
could not be refused only to a person who
"14. Power to direct amendment of bye- was duly qualified therefore under the Act,
laws.- (1) If it appears to the Registrar that an the Rules and the bye-laws of such Society.
amendment of the bye-laws except in respect In other words, the bye-laws are not given the
of the name or objects of a society is go-by in spite of the introduction of the
necessary or desirable in the interest of such concept of open membership as indicated by
society, he may call upon the society, in the the heading of the Section. Section 29 of the
prescribed manner, to make the amendment Act restricted the right of a member other
within such time as he may specify. than the State Government or a society to
hold more than one fifth of the total share
(2) If the society fails to make the amendment capital of the society. Section 30 places
within the time so specified, the Registrar restriction on transfer of share or interest. It
after giving the society an opportunity of reads
being heard and with the prior approval of the
State Co-operative Council, may register the "30. Restrictions on transfer of share or
amendment, and shall thereupon issue to the interest.- (1) Subject to the provisions of
society a copy thereof certified by him. With section 29 and sub- section (2) a transfer of,

Page 8
or charge on, the share or interest of a prescribed. Under Chapter V of the Act, any
member in the capital of a society shall be society duly registered under the Act would
subject to such conditions as may be be entitled to State aid. Under Section 73 of
prescribed. the Act, the final authority of the society is to
vest in the general body of the society,
(2) A member shall not transfer any share subject to it being delegated in terms of the
held by him, or his interest in the capital or bye-laws of the society. The powers and
property of any society, or any part thereof, functions of the Committee in which the
unless.- management of every society vested, are
dealt with in Section 74 of the Act.
(a) he has held such share or interest for not
less than one year; 8. The Gujarat Co-operative Societies Rules,
1965 was framed in terms of the Act. Rule
(b) the transfer or charge is made to the 12(2) provides that no Co-operative Housing
Society, or to a member of the Society, or to Society shall, without sufficient cause, refuse
a person whose application for membership admission to its membership, to any person
has been accepted by the Society; and duly qualified therefore under the provisions
of the Act and its bye-laws, to whom an
(c) the committee has approved such existing member of such society wants to sell
transfer." or transfer his land or house and no such
society shall, without sufficient cause, refuse
It can be seen that a restriction is placed on to give permission to any existing member to
the right of a member to transfer his share by sell or transfer his plot of land or house to
sub-section (2) of Section 30 and the transfer another person who is duly qualified to
could be only in favour of the society or to a become a member of that society.
member of the society or to a person whose
application for membership has been 9. A peep into the history of the legislation
accepted by the society and the committee brought in to govern the co-operative
has approved such transfer. Section 31 movement in the country seems justified. The
provides for transfer of interest on death of a real first legislation touching the co-operative
member. Even an heir or a legal movement was the Co-operative Credit
representative, had to seek and obtain a Societies Act, 1904. When that act came into
membership in the society, before the rights being, there was no other act in force under
could be transferred to him. The section also which an association or a society could be
leaves a right to the heir or legal formed for the purpose of promoting the
representative to require the society to pay economic interests of its members in
him the value of the share or interest of the accordance with the well recognized co-
deceased member, ascertained as prescribed. operative principles, though a co-operative
Section 32 of the Act provides that the share society could be organized under the Indian
or interest of a member in the capital of a Companies Act, 1882. Lacuna was found in
Cooperative Society is not liable to the working of that Act especially in the
attachment. Under Section 36 of the Act, the development of rural credit. To remove the
society even has the power to expel a member same, the Cooperative Societies Act, 1912
and unless otherwise ordered in special was enacted. Under Section 4 of that Act, a
circumstances by the Registrar, such expelled society which had as its object, the promotion
member does not have a right of re-admission of economic interests of its members in
to membership. Sections 44 to 46 place accordance with economic principles, could
restrictions on transactions with non- be registered under the Act. Under Section 6,
members and the said transactions were to be no society could be registered which did not
subject to such restrictions as may be consist of at least 10 persons above the age of
18 years and where the object of the society

Page 9
was the creation of funds to be lent to its 24 of the Act put restrictions in respect of
members unless such persons either resided membership. Section 30 restricted the right of
in the same town or village or in the same transfer and Section 31 the right of
group of villages or they were members of the inheritance. Thus, running right through the
same tribe, class, caste or occupation unless relevant enactments, is the concept of
otherwise directed by the Registrar of Co- restricted membership in a co-operative
operative societies. Section 14 placed society. The concept of open membership
restrictions on the transfer of share or interest referred to in Section 24 of the Act has
by a member and the transfer could be made therefore to be understood in this
only to the society or to a member of the background, especially when we bear in mind
society. What is relevant for our purpose is to that it only placed an embargo on refusal of
notice that normally, the membership in a admission to membership to any person duly
society created with the object of creation of qualified therefore under the provisions of
funds to be lent to its members, was to be the Act, the Rules and the bye-laws of the
confined to members of the same tribe, class, society.
caste or occupation. The Co-operative
Societies Act, 1912 continued in force until 10. It could be seen from the leaflet which is
the concerned States enacted laws for a part of Annexure P-1 containing the bye-
themselves. It was, thus, that the Bombay Co- laws of the Society filed with the rejoinder,
operative Societies Act, 1925 was enacted. that suggestions were made regarding the
We have earlier noticed some of the relevant formation of co-operative housing societies.
provisions of the Act and it is not necessary The appellant is a housing society. It was
to repeat them here. Under Section 72 of the stated that the essential feature of every
Act, a society registered either under the Co- housing society was at least that its houses
operative Credit Societies Act, 1904 or the formed one settlement in one compact area
Co-operative Societies Act, 1912 was to be and the regulation of the settlement rested in
deemed to be registered under the Act. What the hands of the managing committee of the
is required to be noticed is that in this Act society. The problem involved in devising of
also, when the object of the society was the model bye-laws which had to combine rather
creation of funds to be lent to its members, opposite requirements is also seen explained.
the membership had to be confined to persons In the suggestions for the promotion of a
belonging to the same town or village or same housing society the first essential is said to be
group of villages or they had to be members that there should be a bond of common habits
of the same tribe, class (originally it was and common usage among the members
caste) or occupation unless the Registrar which should strengthen their neighbourly
ordered otherwise. It was this Act, under feelings, their loyal adherence to the will of
which the present appellant Society got itself the society expressed by the committee's
registered, though it later came to be orders and their unselfish and harmonious
governed by the Gujarat Co-operative working together. In India, this bond was
Societies Act which was subsequently most frequently found in a community or
enacted. We have already adverted to the caste or groups like cultivators of a village. It
general provisions thereof but it may be is seen that the appellant Society, more or
relevant to notice here that under Section 6, less, adopted the model bye-laws prepared in
no society other than a federal society, could that behalf and by bye-law 7, the housing
be registered unless it consisted of at least 10 society confined its membership to those of
persons belonging to different families and the Parsi community.
who resided in the area of operation of the
society and no society with unlimited liability 11. The cooperative movement, by its very
could be registered unless all persons nature, is a form of voluntary association
forming the society, resided in the same town where individuals unite for mutual benefit in
or village or in the group of villages. Section the production and distribution of wealth

Page 10
upon principles of equity, reason and of the society itself was transformed by the
common good. No doubt, when it gets Act and the voluntary nature of the
registered under the Cooperative Societies association of the members who formed the
Act, it is governed by the provisions of the original society was totally destroyed. The
Cooperative Societies Act and the Rules Act was, therefore, struck down by the Court
framed thereunder. In Damyanti Naranga v. as contravening the fundamental right
Union of India and Ors. guaranteed by Art. 19(1)(f). In the cases
MANU/SC/0726/1971 : [1971]3SCR840, before us we are concerned with co-operative
this Court, discussing the scope of the right to societies which from the inception are
form an association guaranteed by Article governed by statute. They are created by
19(1)(c) of the Constitution of India, stated statute, they are controlled by statute and so,
that the right to form an association there can be no objection to statutory
necessarily implies that the persons forming interference with their composition on the
the association have also the right to continue ground of contravention of the individual
to be associated with only those whom they right of freedom of association."
voluntarily admit in the association. Any law,
by which members are introduced in the It is emphasized that the principle recognized
voluntary Association without any option in the Damyanti's case (supra) was not
being given to the members to keep them out, applicable to a co-operative society since it is
or any law which takes away the membership a creature of a statute, the Cooperative
of those who have voluntarily joined it, will Societies Act and that the rights of its
be a law violating the right to form an members could be abridged by a provision in
association. Based on this decision, it is the Act. Regarding the rights of an individual
contended on behalf of the Society that its member, their Lordships have stated:
members have the right to be associated only
with those whom they consider eligible to be "Once a person becomes a member of a
admitted and the right to deny admission to cooperative society, he loses his individuality
those with whom they do not want to qua the Society and he has no independent
associate, cannot be interfered with by the rights except those given to him by the statute
Registrar by imposing on them a member and the bye-laws."
who according to them was not eligible to be
admitted. The argument on this basis is 12. 'Daman Singh's case (supra), in our
sought to be met on behalf of the respondents view, is not an answer to the claim of the
by reference to another decision of this Court Society that it had the right to decide with
in Daman Singh and Ors., etc. v. State of whom it wants to associate or to deny
Punjab and Ors., etc. membership to a person who was not
MANU/SC/0392/1985 : [1985]3SCR580. qualified to be one in terms of the bye-laws
Therein, their Lordships, after referring to of the Society. The effect of the observations
Damyanti (supra), held that that decision had in Daman Singh's case (supra), is only that
no application to the situation before them. cooperative societies, from their very
The position was explained in the following inception are governed by the statute, the
words:- Cooperative Societies Act, that they are
created by statute, they are controlled by the
"That case has no application whatever to the statute and so, there can be no objection to
situation before us. It was a case where an statutory interference with their composition
unregistered society was by statute converted or functioning and no merit in a challenge to
into a registered society which bore no statutory interference based on contravention
resemblance whatever to the original society. of the individual right of freedom of
New members could be admitted in large association. As we understand the statement
numbers so as to reduce the original members of the law by this Court in Daman Singh's
to an insignificant minority. The composition

Page 11
case, it only means that the action of the right. On fulfillment of the qualifications
Society in refusing membership to a person prescribed to become a member and for being
has to be tested in the anvil of the provisions a member of the society and on admission, he
of the Act, the Rules and its bye- laws. Be it becomes a member. His being a member of
noted that the bye-laws had already been the society is subject to the operation of the
approved on the basis that it is consistent with Act, rules and bye-laws applicable from time
the Act and the Rules. Even then, it may be to time. A member of the society has no
possible in a given case to point out that a independent right qua the society and it is the
particular bye-law was against the terms of society that is entitled to represent as the
the Act or the Rules. Daman Singh does not corporate aggregate. No individual member
indicate that the Act, the Rules and the bye- is entitled to assail the constitutionality of the
laws for that matter, have to be given the go- provisions of the Act, rules and the bye-laws
by, merely because the particular bye-law or as he has his right under the Act, rules and the
action of the Society may not accord with our bye-laws and is subject to its operation. The
concept of fairness or propriety in terms of stream cannot rise higher than the source."
the rights available to an ordinary citizen.
Therefore, in the light of the observations in 13. Section 4, on which reliance is placed,
Daman Singh, what one has to search for, is with particular reference to its proviso, only
a provision in the Act or the Rules which speaks of denial of registration if, in the
prevails over bye-law No. 7 of the Society, opinion of the Registrar, the Society to be
confining membership in it, to only a person formed was economically unsound, or its
who is a Parsi. Section 24 of the Act, no registration may have an adverse effect upon
doubt, speaks of open membership, but any other Society, or it is opposed to, or its
Section 24(1) makes it clear that, that open working is likely to be in contravention of
membership is the membership of a person public policy. Prima facie, it may have to be
duly qualified therefore under the provisions said that public policy, in the context of
of the Act, the Rules and the bye-laws of the Section 4 of the Act, is the policy that is
Society. In other words, Section 24(1) does adopted by the concerned Act and the Rules
not contemplate an open membership de hors framed thereunder. The concept of public
the bye-laws of the Society. Nor do we find policy in the context of the Cooperative
anything in the Act which precludes a society Societies Act has to be looked for under the
from prescribing a qualification for four corners of that Act and in the absence of
membership based on a belief, a persuasion any prohibition contained therein against the
or a religion for that matter. Section 30(2) of forming of a society for persons of Parsi
the Act even places restrictions on the right origin, it could not be held that the confining
of a member to transfer his right. In fact, the of membership as was done by bye-law No.
individual right of the member, respondent 7, was opposed to public policy. When a
No. 2, has got submerged in the collective statute is enacted, creating entities introduced
right of the Society. In State of U.P. and thereunder on fulfillment of the conditions
Anr. v. C.O.D. Chheoki Employees' laid down therein, the public policy in
Cooperative Society Ltd. and Ors. relation to that statute has to be searched for
MANU/SC/0332/1997 : [1997]1SCR380, within the four corners of that statute and
this Court after referring to Daman Singh's when so searched for, one does not find
case (supra) held in paragraph 16 that : anything in the Act which prevents the
Society from refusing membership to a
"Thus, it is settled law that no citizen has a person who does not qualify in terms of bye-
fundamental right under Article 19(1)(c) to law No. 7 of the Society.
become a member of a Cooperative Society.
His right is governed by the provisions of the 14. Reliance was placed on Rule 12 of the
statute. So, the right to become or to continue Gujarat Cooperative Societies Rules, 1965.
being a member of the society is a statutory

Page 12
Rule 12 deals with open membership and the time of its formation or acquires
provides in Rule 12(2) as follows: membership in it on possessing the requisite
qualification under the bye-laws of the
"12. Open membership.-(1) ......... society and on being accepted as a member.
It is not as if one has a fundamental right to
(2) No co-operative housing society shall become a member of a co-operative society.
without sufficient cause, refuse admission to But certainly, if the application of one for
its membership to any person, duly qualified membership, who is otherwise qualified to be
therefor, under the provisions of the Act, and a member under the Act, Rules and the bye-
its bye-laws to whom an existing member of laws of the society, is rejected unreasonably
such society wants to sell or transfer his plot or for frivolous reasons, the person may be
of land or house and no such society shall entitled to enforce his claim to become a
without sufficient cause, refuse to give member in an appropriate forum or court of
permission to any existing member thereof to law. This is the effect of the decision in Jain
sell or transfer his plot of land or house to Merchants Co-operative Housing Society
another person who is duly qualified as v. HUF of Manubhai MANU/GJ/0206/1994
aforesaid to become its member." relied on by the High Court. The said
decision does not lay down a proposition, nor
Rule 12(2), as can be seen, provides only that, can it lay down a proposition, that even a
no person shall be refused admission person who does not qualify to be a member
provided he is duly qualified under the Act in terms of the bye-laws of a society can
and the bye-laws of the society to be a enforce a right to become a member of that
member or permission for transfer refused, if society. It is one thing to say that it is not
the proposed transferee is qualified to be a desirable to restrict membership in a society
member. Here again, the primacy given to the based solely on religion or sex but it is quite
bye-laws of the society is in no manner different thing to say that any such voluntary
sought to be whittled down by reference to approved bye-law containing such a
any public policy going by the larger concept restriction could be ignored or declared
of that term and outside the Act. The unconstitutional by an authority or a tribunal
decisions of the Bombay High Court, the created under the Act itself. Normally, the
Gujarat High Court and the Madhya Pradesh bye-laws of a society do not have the status
High Court relied on by learned counsel of a statute and as held by this Court in Co-
proceeded on the basis that if any provision is operative Central Credit Bank Ltd. v.
made against the constitutional scheme of Industrial Tribunal, Hyderabad
things like confining membership in a MANU/SC/0611/1969 : (1969)IILLJ698SC
Society to a caste, religion or creed, the same bye-laws are only the rules which governs the
would be opposed to public policy and hence internal management or administration of a
unenforceable. The question is whether such society and they are of the nature of articles
an approach is warranted when a statute of association of a company incorporated
enacted in that behalf outlines the contours of under the Companies Act. They may be
the policy sought to be enforced by the binding between the persons affected by
creation of bodies thereunder, being them but they do not have the force of a
essentially associations which are voluntary statute.
in nature.
16. The validity of a bye-law, that too an
15. Membership in a co-operative society approved bye-law, has to be tested in the light
only brings about a contractual relationship of the provisions of the Act and the rules
among the members forming it subject of governing co-operative societies. In so
course to the Act and the Rules. One becomes testing, the search should be to see whether a
a member in a co-operative society either at particular bye-law violates the mandate of
any of the provisions of the Act or runs

Page 13
counter to any of its provisions or to any of multistoried constructions. In appeal from

the rules. Section 24(1) of the Act only that decision reported as State of
provides for open membership subject to a Maharashtra and Ors. v. Karvanagar
person, aspiring to be a member, possessing Sahakari Griya Rachana Sanstha
the qualification prescribed by the bye-laws. Maryadit and Ors. MANU/SC/2613/2000 :
It is not an open membership dehors the 2000 (9) SCC 295 this Court while
qualification prescribed by the bye-laws. dismissing the appeal stated that it was clear
When in Daman Singh this Court held that that though a power was conferred on the
when a co-operative society is governed by Registrar to direct amendment of the bye-
the appropriate legislation it will be subject to laws of a society, yet the paramount
the intervention made by the concerned consideration is the interest of the society. So
legislation, it only meant that a legislative also, the power of the State Government to
provision in the Act can be introduced for the issue directions in public interest, could not
purpose of eliminating a qualification for be exercised so as to be prejudicial to the
membership based on sex, religion or a interest of the society. In the view of this
persuasion or mode of life. But so long as Court, what was in the interest of the society
there is no legislative intervention of that was primarily for the society alone to decide
nature, it is not open to the court to coin a and it was not for an outside agency to say.
theory that a particular bye-law is not Where, however, the government or the
desirable and would be opposed to public Registrar exercised statutory powers to issue
policy as indicated by the Constitution. The directions to amend the bye-laws, such
Constitution no doubt provides that in any directions should satisfy the requirement of
State action there shall be no discrimination the interest of the society. This makes it clear
based either on religion or on sex. But Part III that the interest of the society is paramount
of the Constitution has not interfered with the and that interest would prevail so long as
right of a citizen to enter into a contract for there is nothing in the Act or the Rules
his own benefit and at the same time prohibiting the promotion of such interest.
incurring a certain liability arising out of the Going by Chheoki Employees' Cooperative
contract. As observed by the High Court of Society Ltd.,'s case, neither the member,
Bombay in Karvanagar Sahakari Griha respondent No. 2, nor the aspirant to
Rachana Sanstha Maryadit and Ors. v. membership, respondent No. 3 had the
State MANU/MH/0304/1989 : competence to challenge the validity of the
AIR1989Bom392 the members have joined bye-laws of the Society or to claim a right to
the society in accordance with the bye-laws membership in the Society.
and the members join a housing society by
ascertaining what would be the environment 17. It appears to us that unless appropriate
in which they will reside. It is not permissible amendments are brought to the various
for the State Government to compel the Cooperative Societies Acts incorporating a
society to amend its bye-laws as it would policy that no society shall be formed or if
defeat the object of formation of the society. formed, membership in no society shall be
In that case, the society was constituted with confined to persons of a particular
the object of providing peaceful persuasion, religion, belief or region, it could
accommodation to its members. Though not be said that a society would be disentitled
there may be circumstances justifying the to refuse membership to a person who is not
State taking steps to meet shortage of duly qualified to be one in terms of its bye-
accommodation, it was not open to the State laws.
Government to issue a direction to the
Registrar of Co-operative Societies to direct 18. It can be seen from the bye-laws of the
a cooperative society to make requisite present Society that the Society, more or less,
amendments to their bye-laws and grant adopted the model bye-laws made applicable
permission to its members to raise

Page 14
to the Bombay Presidency. The object of the in terms of the bye-law concerned and this
Society as set out in bye-law No. 2 reads: cannot be interfered with on the basis of
anything contained in the Act or the Rules.
"2. The objects of the Society shall be to carry We are, therefore, satisfied that by
on the trade of building, and of buying, introducing a theory of what the court
selling, hiring, letting and developing land in considers to be public policy, a society
accordance with Co-operative principles and registered under the Cooperative Societies
to establish and carry on social, re-creative Act, cannot be directed to admit a member
and educational work in connection with its who is not qualified to be a member in terms
tenets and the Society was to have full power of its duly registered bye-laws.
to do all things it deems necessary or
expedient for the accomplishment of all 19. It is true that it is very tempting to accept
objects specified in its bye- laws, including an argument that Articles 14 and 15 read in
the power to purchase, hold, sell, exchange, the light of the preamble to the Constitution
mortgage, rent, lease, sub-lease, surrender, of India reflect the thinking of our
accept surrenders of and deal with lands of Constitution makers and prevents any
any tenure and to sell by installments and discrimination based on religion or origin in
subject to any terms or conditions and to the matter of equal treatment or employment
make and guarantee advances to Members and to apply the same even in respect of a co-
for building or purchasing property and to operative society. But, while being thus
erect, pull down, repair, alter or otherwise tempted, the Court must also consider what
deal with any building thereon." lies behind the formation of co-operative
societies and what their character is and how
Under bye-law No. 7, it was provided that they are to be run as envisaged by the various
members shall be elected by the Committee Cooperative Societies Acts prevalent in the
provided that all members shall belong to the various States of this Country. Running
Parsi community and on the conditions through the Cooperative Societies Act, is the
referred to in bye-law No. 7. Provision has theory of area of operation. That means that
been made providing for the contingency membership could be denied to a citizen of
arising out of the death of a member. Under this Country who is located outside the area
bye-law No. 21, it is provided that any share of operation of a society. Does he not have a
held by a member could be sold in terms of fundamental right to settle down in any part
the other relevant bye-laws only with of the country or carry on a trade or business
previous sanction of the Committee. The in any part of the country? Does not that right
Committee is given full discretion in granting carry with it, the right to apply for
or withholding such sanction. Of course, in membership in any cooperative society
terms of the Act and the Rules, the refusal irrespective of the fact that he is a person
may be appealable before the Authority hailing from an area outside the area of
under the Act and the Society may not be in operation of the society? In the name of
a position to argue that its decision is final. enforcing public policy, can a Registrar
But that does not mean that the Authority permit such a member to be enrolled? Will it
under the Act is competent to ignore the bye- not then go against the very concept of
law relating to qualification to membership limiting the areas of operation of cooperative
and direct the Society by exercising appellate societies? It is, in this context that we are
or other power, to admit a person to inclined to the view that public policy in
membership who is not qualified to be a terms of a particular entity must be as
member, on the basis of its notion of public reflected by the statute that creates the entity
policy or fairness in dealing. These approved or governs it and on the Rules for the creation
bye-laws, clearly, confer power on the of such an entity. Tested from that angle, so
Committee to reject the application for long as there is no amendment brought to the
membership of a person who is not qualified Cooperative Societies Acts in the various

Page 15
States, it would not be permissible to direct policy reflected by the Cooperative Societies
the societies to go against their bye-laws Act. As indicated in Renusagar Power Co.
restricting membership based on its own Ltd. v. General Electric Co.,
criteria. MANU/SC/0195/1994 : AIR1994SC860, the
public policy underlying a statute has to be
20. What is relied on to invoke the plea that considered in the context of the provisions of
the restriction of membership is opposed to that statute. Therein, in the context of the
public policy is the proviso to Section 4 of the Foreign Exchange Regulation Act, 1973, it
Act. We have already quoted Section 4. For was held that any violation of the provisions
convenience, we extract the proviso once of that Act enacted in national economic
again:- interest would be contrary to public policy
and that would be the sense in which it should
"Provided that it shall not be registered if, in be understood when used in Section
the opinion of the Registrar, it is 7(1)(b)(ii) of that Act.
economically unsound, or its registration
may have an adverse effect upon any other 21. Under the Indian Contract Act, a person
society, or it is opposed to, or its working is sui juris has the freedom to enter into a
likely to be in contravention of pubic policy." contract. The bye-laws of a cooperative
society setting out the terms of membership
What is the public policy contemplated by the to it, is a contract entered into by a person
proviso, when the formation and running of when he seeks to become a member of that
an association like a cooperative society is society. Even the formation of the society is
governed by a law enacted for that purpose, based on a contract. This freedom to contract
the Cooperative Societies Act, which available to a citizen cannot be curtailed or
recognizes the sanctity of the rights of the curbed relying on the fundamental rights
citizens coming together, to impose enshrined in Part III of the Constitution of
restrictions on their own rights by making India against State action. A right to enforce
appropriate provisions in the bye-laws of the a fundamental right against State action,
society? Normally, that policy has to be cannot be extended to challenge a right to
searched for within the confines of that enter into a contract giving up an absolute
statute. What one has to bear in mind is that right in oneself in the interests of an
the statute reflects the policy of the association to be formed or in the interests of
Legislature in respect of the subject matter the members in general of that association.
dealt with thereunder. When the Gujarat This is also in lieu of advantages derived by
Cooperative Societies Act, 1961 was enacted, that person by accepting a membership in the
it could not be taken that the Legislature was Society. The restriction imposed, is generally
unaware of the fundamental rights of citizens for retaining the identity of the society and to
enshrined in Articles 19(1)(d) and (g) of the carry forward the object for which the society
Constitution of India. But the Legislation, in was originally formed. It is, therefore, a
aid of the cooperative movement and in the fallacy to consider, in the context of
context of the rights available to citizens cooperative societies, that the surrendering of
under Article 19(1)(c) of the Constitution of an absolute right by a citizen who becomes a
India, imposes only certain restrictions as member of that society, could be challenged
reflected by the Act, the Rules and the Bye- by the said member by taking up the position
laws of the particular society. The Acts that the restriction he had placed on himself
specifically gave sanctity to the bye-laws of a by entering into the compact, is in violation
Society duly approved by the authorities of his fundamental right of freedom of
under the Act. The expression 'public policy' movement, trade or right to settle in any part
in the context of Section 4 of the Act can be of the country. He exercises his right of
understood only as being opposed to the association when he becomes a member of a
society by entering into a contract with others

Page 16
regulating his conduct vis-`-vis the society, 23. In the context of the freedom of contract
the members constituting it, and submerging available to a person and in the context of the
his rights in the common right to be enjoyed right to form an association guaranteed by
by all and he is really exercising his right of Article 19(1)(c) of the Constitution of India,
association guaranteed by Article 19(1)(c) of and the law governing such an association,
the Constitution of India in that process. His courts have to be cautious in trying to ride the
rights merge in the rights of the society and unruly horse of public policy in acceding to a
are controlled by the Act and the bye-laws of challenge to a qualification for membership
the society. in the bye-laws, not taboo under the Act and
the Rules themselves.
22. Entering into an association with others
for forming a co-operative society and 24. It also appears to us, that a person after
subscribing to its bye-laws are matters of becoming a member of a Cooperative Society
contract voluntarily undertaken by a citizen. cannot seek to get out of the obligation
While considering an argument that a undertaken by him while becoming a
provision in the bye-laws thus subscribed to member of such a Society by resort to the
by a member is opposed to public policy, the principle of public policy based on
court cannot forget another important public constitutional protections given to an
policy as stated by Jessel, M.R. in Printing individual as against State action. As noticed
and Numerical Registering Company v. in Rodriguez v. Speyer Bros. (1919) A.C.
Sampson 1874 (Vol. 19) L.R. Equity Cases 59 and Fender v. Mildmay (1938) A.C. 1,
462): the considerations of public policy are
disabling and not enabling. Observed Lord
"it must not be forgotten that you are not to Sumner in Rodriguez (Supra)":
extend arbitrarily those rules which say that a
given contract is void as being against public "Considerations of public policy are applied
policy, because if there is one thing which to private contracts or dispositions in order to
more than another public policy requires, it is disable, not to enable. I never heard of a legal
that men of full age and competent disability from which a party or a transaction
understanding shall have the utmost liberty of could be relieved because it would be good
contracting, and that their contracts when policy to do so."
entered into freely and voluntarily shall be
held sacred and shall be enforced by Courts By invoking considerations of public policy,
of justice. Therefore, you have this there appears to be no justification in
paramount public policy to consider -- that relieving a member of a Cooperative Society
you are not lightly to interfere with this of the obligations undertaken by him while
freedom of contract. Now, there is no doubt joining it. The argument, therefore, that
public policy may say that a contract to Respondent No. 2, herein, a member, should
commit a crime, or a contract to give a reward be relieved of the obligation undertaken by
to another to commit a crime, is necessarily him while joining the Society or becoming its
void. The decisions have gone further, and member or while seeking permission to put
contracts to commit an immoral offence, or up a multi-storeyed construction, should be
to give money or reward to another to commit relieved of the restriction, he has agreed to,
an immoral offence, or to induce another to on the ground that the same might affect his
do something against the general rules of fundamental rights guaranteed by Article
morality, though far more indefinite than the 19(1)(d) or (g) of the Constitution of India or
previous class, have always been held to be that it offends Article 300A of the
void. I should be sorry to extend the doctrine Constitution.
much further."

Page 17
25. Dealing with the validity of a restriction operative society to admit as a member, a
which prohibits assignments of contractual person who does not qualify to be a member
rights which have the effect of bringing the as per the bye-laws registered under the Act.
assignee into direct contractual relations with Nor can a Registrar direct in terms of Section
the other party to the contract, the House of 14 of the Act to amend the bye-laws since it
Lords held in Linden Gardens Trust Ltd. v. could not be said that such an amendment, as
Lenesta Sludge Disposal Ltd. and Ors., directed in this case is necessary or desirable
[1993] 3 All E.R. 417, that the prohibition on in the interests of the appellant society. What
the assignment including that of accrued is relevant under Section 14 of the Act is the
rights of action was not void as being interests of the society and the necessity in
contrary to public policy; since, a party to a the context of that interest. It is not the
building contract could have a genuine interest of an individual member or an
commercial interest in seeking to ensure that aspirant to a membership.
he was in contractual relations only with a
person whom he had selected as the other 27. It is true that in the activities of a society,
party to the contract and there was no public as envisaged by the bye- laws, the society
need for the law to support a market in choses may acquire rights or incur obligations which
in action. The principle in our view supports may be enforced. But the incurring of such an
the position that a contractual restriction on obligation or the acquiring of such a right,
whom to admit as a member or with whom to cannot stand in the way of the right to form
associate, cannot be said to be opposed to an association guaranteed by Article 19(1)(c)
public policy. of the Constitution available to the members
of the society who formed themselves into
26. It is true that in secular India it may be the appellant Society. The position under The
somewhat retrograde to conceive of co- Bombay Co-operative Societies Act under
operative societies confined to group of which the Society was originally formed was
members or followers of a particular religion, also no different as can be seen from the
a particular mode of life, a particular relevant provisions of the Act. It, therefore,
persuasion. But that is different from saying appears to us to be not open to the Registrar
that you cannot have a co-operative society or any other authority under The Co-
confined to persons of a particular operative Societies Act to direct the Society
persuasion, belief, trade, way of life or a to go against its own bye-laws and to admit a
religion. A co-operative society is not a state person to membership as has been sought to
unless the tests indicated in Ajay Hasia are be done in this case.
satisfied. There is no case here that the
appellant society satisfies the tests laid down 28. The argument that public policy is as
by Ajay Hasia so as to be considered to be a reflected by the constitutional guarantees,
state within the meaning of Article 12 of the which govern rights and obligations has to be
Constitution. The fundamental rights in Part approached with caution. It will be easy for
III of the Constitution are normally enforced State Legislatures to provide in their
against State action or action by other respective Co-operative Societies Acts that
authorities who may come within the no society could be formed or registered
purview of Article 12 of the Constitution. It under the Act as confined to a group, a sex, a
is not possible to argue that a person has a religion or members of a particular
fundamental right to become a member of a persuasion or way of life. But that is different
voluntary association or of a co-operative from saying that in the name of open
society governed by its own bye-laws. So membership, subject to its bye-laws
long as this position holds, we are of the view contemplated by the relevant provisions of
that it is not possible, especially for a the Act, a direction could be issued to ignore
Registrar who is an authority under The Co- the bye-laws and to admit a person who is not
operative societies Act, to direct a co- qualified to become a member. Moreover,

Page 18
what is public policy in the context of a co- provisions of the Act cannot be held to be
operative society got registered by certain opposed to public policy unless it is immoral
persons coming together and laying down a or offends public order. It cannot be said that
qualification for membership in that society, a person bargaining for membership in a
is a question that has to be considered Society or for coming together with those of
essentially in the context of the availability of his ilk to form a society with the objects as
such a right in India to form such associations set out in the bye-laws subscribed to by him,
and the absence of a prohibition in that behalf can be considered to be doing anything
contained in the Co-operative Societies Act immoral or against public order. An aspirant
and the Rules. In fact, the Act and the Rules to membership in a co-operative society, is at
contemplate classification of a society and arms length with the other members of the
even there, no prohibition has been indicated society with whom he enters into the compact
in respect of the confining of the membership or in which he joins, having expressed his
to a class of people. The decisions of the willingness to subscribe to the aims and
Bombay High Court relied on by counsel for objects of that society. In the context of
the respondent, in our view, have proceeded Section 23 of the Contract Act, something
on the basis of the concept of open more than possible or plausible argument
membership without giving adequate based on the constitutional scheme is
importance to the provision in the very necessary to nullify an agreement voluntarily
section that the open membership is subject entered into by a person. We have already
to bye-laws of the society or the qualification quoted the relevant observations of Lord
prescribed for membership in the society. In Sumner in Rodriguez v. Speyer Bros.
that context, it is not possible to import one's (1919) A.C. 59. Here, respondent No. 2
inherent abhorrence to religious groups or became a member of the Society of his own
other groups coming together to form, what volition acquiring the rights and incurring the
learned counsel for the respondent called obligations imposed by the approved bye-
"ghettos". That is certainly an important laws of the Society. It is not open to
aspect but that is an aspect that has to be respondent No. 2 to approach the authorities
tackled by the legislature and not by the for relieving him of his obligations attaching
authorities under the Act directing the co- to the acquisition of membership in the
operative society to go against its own bye- Society. It is also not open to the authorities
laws or by the courts upholding such orders under the Act to relieve him of his obligations
of the authorities, based on presumed public in the guise of entering a finding that
policy when the Act itself does not warrant it discrimination on the basis of the religion or
or sanction it. sex is taboo under the Constitution in the
context of Part III thereof. As has been held
29. Section 23 of the Contract Act provides by this Court, he is precluded from
that where consideration and object are not challenging the validity of the bye-laws
lawful the contract would be void. But for relating to membership.
Section 23 to apply it must be forbidden by
law or it must of such a nature that it would 30. The above conclusion would lead us to
defeat the provision of any law or it is the question whether there is anything in The
fraudulent or it involves or implies injury to Gujarat Co-operative Societies Act and the
the person or property of another or the court Gujarat Co-operative Societies Rules
regards it as immoral or opposed to public restricting the rights of the citizens to form a
policy. If we proceed on the basic premise voluntary association and get it registered
that public policy in relation to a co-operative under The Co-operative Societies Act
society is to be looked for within the four confining its membership to a particular set
corners of the Act, the very enactment under of people recognized by their profession,
which the very society is formed, a bye-law their sex, their work or the position they hold
that does not militate against any of the or with reference to their beliefs, either

Page 19
religious or otherwise. It is not contended that not consistent with the scheme or a provision
there is any provision in the Gujarat Co- of the Constitution, be it under Part III or Part
operative Societies Act prohibiting the IV thereof, could be declared to be opposed
registration of such a co-operative society. to public policy by the court. Normally, as
We have already referred to the history of the stated by this Court in Gheru Lal Parakh v.
legislation and the concept of confinement of Mahadeodas Maiya and Ors. 1959 Suppl.
membership based on residence, belief or (2) SCR 406, the doctrine of public policy is
community. The concept of open governed by precedents, its principles have
membership, as envisaged by Section 24 of been crystalised under the different heads and
the Act is not absolute on the very wording of though it was permissible to expound and
that Section. The availability of membership apply them to different situations it could be
is subject to the qualification prescribed applied only to clear and undeniable cases of
under the provisions of the Act, the Rules and harm to the public. Although, theoretically it
the bye-laws of such society. In other words, was permissible to evolve a new head of
if the relevant bye-law of a society places any public policy in exceptional circumstances,
restriction on a person getting admitted to a such a course would be inadvisable in the
co-operative society, that bye-law would be interest of stability of society.
operative against him and no person, or
aspiring member, can be heard to say that he 33. The appellant Society was formed with
will not be bound by that law which the object of providing housing to the
prescribes a qualification for his members of the Parsi community, a
membership. community admittedly a minority which
apparently did not claim that status when the
31. In our view, the High Court made a wrong Constituent Assembly was debating the
approach to the question of whether a bye- Constitution. But even then, it is open to that
law like bye-law No. 7 could be ignored by a community to try to preserve its culture and
member and whether the Authorities under way of life and in that process, to work for the
the Act and the court could ignore the same advancement of members of that community
on the basis that it is opposed to public policy by enabling them to acquire membership in a
being against the constitutional scheme of society and allotment of lands or buildings in
equality or non-discrimination relating to one's capacity as a member of that society, to
employment, vocation and such. So long as preserve its object of advancement of the
the approved bye-law stands and the Act does community. It is also open to the members of
not provide for invalidity of such a bye- law that community, who came together to form
or for interdicting the formation of co- the co-operative society, to prescribe that
operative societies confined to persons of a members of that community for whose
particular vocation, a particular community, benefit the society was formed, alone could
a particular persuasion or a particular sex, it aspire to be members of that society. There is
could not be held that the formation of such a nothing in the Bombay Act or the Gujarat Act
society under the Act would be opposed to which precludes the formation of such a
public policy and consequently liable to be society. In fact, the history of legislation
declared void or the society directed to referred to earlier, would indicate that such
amend its basic bye-law relating to coming together of groups was recognized by
qualification for membership. the Acts enacted in that behalf concerning the
co-operative movement. Even today, we have
32. It is true that our Constitution has set Women's co-operative societies, we have co-
goals for ourselves and one such goal is the operative societies of handicapped persons,
doing away with discrimination based on we have co-operative societies of labourers
religion or sex. But that goal has to be and agricultural workers. We have co-
achieved by legislative intervention and not operative societies of religious groups who
by the court coining a theory that whatever is believe in vegetarianism and abhor non-

Page 20
vegetarian food. It will be impermissible, so Section applies to a case where property is

long as the law stands as it is, to thrust upon transferred subject to a condition or
the society of those believing in say, limitation absolutely restraining the
vegetarianism, persons who are regular transferee from parting with his interest in the
consumers of non-vegetarian food. May be, property. For making such a condition
in view of the developments that have taken invalid, the restraint must be an absolute
place in our society and in the context of the restraint. It must be a restraint imposed while
constitutional scheme, it is time to legislate or the property is being transferred to the
bring about changes in Co-operative transferee. Here, respondent No. 2 became a
Societies Acts regarding the formation of member of the Society on the death of his
societies based on such a thinking or concept. father. He subscribed to the bye-laws. He
But that cannot make the formation of a accepted Section 30 of the Act and the other
society like the appellant Society or the restrictions placed on a member. Respondent
qualification fixed for membership therein, No. 2 was qualified to be a member in terms
opposed to public policy or enable the of the bye-laws. His father was also a
authorities under the Act to intervene and member of the Society. The allotment of the
dictate to the society to change its property was made to appellant in his
fundamental character. capacity as a member. There was really no
transfer of property to respondent No. 2. He
34. Another ground relied on by the inherited it with the limitations thereon
Authorities under the Act and the High Court placed by Section 31 of the Act and the bye-
to direct the acceptance of respondent No. 3 laws. His right to become a member
as a member in the Society is that the bye-law depended on his possessing the qualification
confining membership to a person belonging to become one as per the bye-laws of the
to the Parsi community and the insistence on Society. He possessed that qualification. The
respondent No. 2 selling the building or the bye-laws provide that he should have the
flats therein only to members of the Parsi prior consent of the Society for transferring
community who alone are qualified to be the property or his membership to a person
members of the Society, would amount to an qualified to be a member of the Society.
absolute restraint on alienation within the These are restrictions in the interests of the
meaning of Section 10 of Transfer of Society and its members and consistent with
Property Act. Section 10 of the Transfer of the object with which the Society was
Property Act cannot have any application to formed. He cannot question that restriction. It
transfer of membership. Transfer of is also not possible to say that such a
membership is regulated by the bye-laws. restriction amounts to an absolute restraint on
The bye-laws in that regard are not in alienation within the meaning of Section 10
challenge and cannot effectively be of the Transfer of Property Act.
challenged in view of what we have held
above. Section 30 of the Act itself places 36. The restriction, if any, is a self-imposed
restriction in that regard. There is no plea of restriction. It is a restriction in a compact to
invalidity attached to that provision. Hence, which the father of respondent No. 2 was a
the restriction in that regard cannot be party and to which respondent No. 2
invalidated or ignored by reference to Section voluntarily became a party. It is difficult to
10 of the Transfer of Property Act. postulate that such a qualified freedom to
transfer a property accepted by a person
35. Section 10 of the Transfer of Property Act voluntarily, would attract Section 10 of the
relieves a transferee of Immovable property Act. Moreover, it is not as if it is an absolute
from an absolute restraint placed on his right restraint on alienation. Respondent No. 2 has
to deal with the property in his capacity as an the right to transfer the property to a person
owner thereof. As per Section 10, a condition who is qualified to be a member of the
restraining alienation would be void. The Society as per its bye-laws. At best, it is a

Page 21
partial restraint on alienation. Such partial finding that the restriction placed on rights of
restraints are valid if imposed in a family a member of the Society to deal with the
settlement, partition or compromise of property allotted to him must be deemed to
disputed claims. This is clear from the be invalid as an absolute restraint on
decision of the Privy Council in Mohammad alienation is erroneous. The said finding is
Raza v. Mt. Abbas Bandi Bibi, ALR 59 reversed.
IndAp 236 and also from the decision of the
Supreme Court in Gummanna Shetty and 38. In view of what we have stated above, we
Ors. v. Nagaveniamma allow this appeal, set aside the judgments of
MANU/SC/0201/1967 : [1967]3SCR932. the High Court and the orders of the
So, when a person accepts membership in a Authorities under the Act and uphold the
cooperative society by submitting himself to right of the Society to insist that the property
its bye-laws and secures an allotment of a plot has to be dealt by respondent No. 2 only in
of land or a building in terms of the bye-laws terms of the bye- laws of the Society and
and places on himself a qualified restriction assigned either wholly or in parts only to
in his right to transfer the property by persons qualified to be members of the
stipulating that the same would be transferred Society in terms of its bye-laws. The
back to the society or with the prior consent direction given by the authority to the
of the society to a person qualified to be a appellant to admit respondent No. 3 as a
member of the society, it cannot be held to be member is set aside. Respondent No. 3 is
an absolute restraint on alienation offending restrained from entering the property or
Section 10 of the Transfer of Property Act. putting up any construction therein on the
He has placed that restriction on himself in basis of any transfer by respondent No. 2 in
the interests of the collective body, the disregard of the bye-laws of the Society and
society. He has voluntarily submerged his without the prior consent of the Society.
rights in that of the society.
39. The Writ Petition filed by the appellant in
37. The fact that the rights of a member or an the High Court is allowed in the above
allottee over a building or plot is attachable manner. The appellant will be entitled to its
and saleable in enforcement of a decree or an costs here and in the court below.
obligation against him cannot make a
provision like the one found in the bye-laws,
an absolute restraint on alienation to attract
Section 10 of the Transfer of Property Act. Of
course, it is property in the hands of the
member on the strength of the allotment. It
may also be attachable and saleable in spite
of the volition of the allottee. But that does
not enable the Court to hold that the condition
that an allotment to the member is subject to
his possessing the qualification to be a
member of the cooperative society or that a
voluntary transfer by him could be made only
to the society itself or to another person
qualified to be a member of the society and
with the consent of the society could straight
away be declared to be an absolute restraint
on alienation and consequently an
interference with his right to property
protected by Article 300A of the Constitution
of India. We are, therefore, satisfied that the

Page 1
Equivalent Citation: AIR2010SC338, Haryana in Civil Writ Petition No. 5725 of

2010(1)ALD67(SC), 2010 (78) ALR 445, 2001
2010 1 AWC(Supp)821SC,
JT2009(15)SC260, (2010)157PLR390, Case Note:
2009(14)SCALE569, (2010)1SCC655, Transfer of Property Act, 1882--Section
[2009]16SCR456, 2010(1)UC604 55--Financial Corporation Act, 1951--
Section 29--Forfeiture of earnest money--
IN THE SUPREME COURT OF Legality--Held-- Where a party not
INDIA disclosed the entire details of other party
then he cannot entitle to revoke Section
Civil Appeal No. 829 of 2003 29 of Financial Corporation Act. [Para--
18 and 24]
Subject Category :
MATTERS RELATING TO LEASES,
Appellants: Haryana Financial GOVT. CONTRACTS AND CONTRACTS
Corporation and Anr. BY LOCAL BODIES
Vs.
Respondent: Rajesh Gupta
J.M. Panchal and S.S. Nijjar, JJ.
JUDGMENT
Counsels:
For Appellant/Petitioner/Plaintiff: Amit Surinder Singh Nijjar, J.
Dayal, Adv
1. This appeal is directed against the
For Respondents/Defendant: Vimal Chandra Judgment and Order dated 26.11.2001 in
S. Dave, Adv. C.W.P. 5725/2001 of the High Court of
Punjab and Haryana at Chandigarh.
Subject: Banking
2. The respondent had approached the High
Subject: Property Court with a prayer that the order dated
September 30, 1998 by which the Haryana
Acts/Rules/Orders: Financial Corporation (hereinafter referred to
Transfer of Property Act, 1882 - Section 55, as the appellants/Corporation), had forfeited,
Transfer of Property Act, 1882 - Section amount of Rs. 2.5 lakhs, deposited by the
55(1); State Financial Corporation Act, 1951 respondent by way of earnest money, be
- Section 29 quashed. The respondent had also prayed that
the appellants /Corporation be directed to
Cases Referred: refund the amount illegally forfeited along
Union Bank of India v. Official Liquidator with interest.
and Ors. MANU/SC/0592/1994 : (1994) 1
SCC 575; U.T. Chandigarh Administration 3. Shorn of unnecessary details, we may
and Anr. v. Amarjeet Singh and Ors. notice here only the relevant facts.
MANU/SC/0389/2009 : (2009) 4 SCC 660
4. On 8.1.1998, the appellants/Corporation
Prior History: issued an advertisement for sale of various
From the Judgment and Order dated units, including the land of M/s. Unique
26.11.2001 of the High Court of Punjab and Oxygen Private Limited(hereinafter referred

Page 2
to as the defaulting unit), Old Hansi Road, Thanking you,

Jind. On 28.1.1998 respondent initially made
an offer of Rs. 25,00,000/-, which was Yours faithfully
subsequently during negotiations enhanced Sd/-
to Rs. 50,00,000/-. On that very day the Rajesh Gupta
respondent deposited an amount of Rs. 2.5
lakhs by way of earnest money. On 29.1.1998
No response was given by the
the respondent wrote a letter to the Managing
appellants/Corporation to the respondent.
Director of the appellants/Corporation as
However by letter dated 19.2.1998 the
follows
appellants/Corporation called the respondent
for negotiations. These negotiations resulted
in enhancement of the bid from Rs. 25 lakhs
to Rs. 50 lakhs. Again in the letter dated 7
.3.1998, the respondent stated as follows:

The Managing Director
Haryana Financial Corporation
17, 18, 19 Sector 17-A
Chandigarh 160017
The Managing Director
Haryana Financial Corporation
Kind Attention: Sh.Raj Kumar Ji, M.D. Chandigarh.
Sub: Offer to purchase assets of Unique Sub: Offer to purchase unit of Unique
Oxygen Private Limited Jind. Oxygen Private
Limited Jind
Dear Sir,
Dear Sir,
With reference to your advertisement in
`ECONOMIC TIMES' dated 08.01.98, we With reference to the negotiation held on
are inclined to submit our bid for purchase of 6.3.98 at your Head Office for the sale of
assets of the above mentioned company. assets of said concern. We are the highest
With this purpose we visited the factory bidder and understand that our bid will be
premises on 21.01.1998. On our visit, it was accepted. However, the matter regarding
noticed that the premises do not have an approved/authorised passage for smooth
independent appropriate passage from the functioning of the factory was discussed in
road. On further inquiry from the concerned the meeting and the unit holder, who was also
Branch office, the copy of site plan/ building present in the meeting confirmed that such
plans were not available and we were told passage exist, at the factory.
that the same are available at Head office
only. Therefore you are requested to kindly
In this regard, it is submitted that we have
apprise us in this matter so that we do not face
come to know that there is no
any problems, if we acquire the unit as per
approved/authorised passage to factory
your offer.
sufficient to pass a truck through it. The
gate/passage presently being used is
We hope to hear soon in this regard. unauthorized.

Page 3
In the light of above you are requested to It is further stated that the area mentioned in
kindly apprise us in this matter and supply us the map approved by the M.C. is 1130 sq. yd.
the copy of approved building plan, site plan whereas the total area in the sale deed and is
for the building mortgaged by H.F.C. so that mortgaged to the Corporation is 1210 sq. yd.
we may not face any problem in future in It is also not out of place to mention that the
running the unit. land on which the office building is
constructed is also not mortgaged to the
Kindly treat it as most urgent. Corporation and if that area is excluded the
main gate of the factory will go behind from
Thanking you, the existing place and then the unit will be
stripped of independent Rasta.
Yours faithfully
Sd/- 7. In spite of the aforesaid factual position,
the appellants/ Corporation issued the letter
Rajesh Gupta
dated 18.5.1998 to the respondent advising
him to deposit balance amount of 25 per cent
5. It would appear that by letter dated of the bid amount within 15 days from the
3.4.1998, the Branch manager brought the date of issue of the letter failing which the
objection of the respondent to the notice of amount of the earnest money deposited
the head office of the appellants/Corporation. would be forfeited without further notice.
In response to this communication the The respondent, however, again raised the
Branch Manager was informed by the head issue regarding the passage at the open house
office of the appellants/Corporation, by letter held by the appellants/Corporation at Hissar
dated 7.4.1998 that clear cut passage/rasta on 12.6.1998. According to the appellants/
has been provided to the unit as per Corporation, as per the revenue record and
documents submitted by the defaulting unit at the demarcation report of the revenue
the time of availing loan. Reference in this officials dated 27.6.1998, therein 16.5 ft.
letter was also made to the Sale Deed, dated rasta is provided in the west of the Unit.
8.9.1994, Mutation No. 5172, Mutation No. However, not satisfied, the respondent did
9896, Search Report and sale deed, Rasta, not pay the balance amount. Therefore the
wherein it is mentioned that there is an appellants/Corporation invited fresh tenders
approach road to the factory site. The Branch for sale of land. On 30.9.1998 the
Manager was directed to satisfy the appellants/Corporation forfeited the sum of
respondent with the aforesaid documents. On Rs. 2.5 lakhs which had been deposited by the
30.04.1998, the Branch Manager addressed a respondent as earnest money.
letter to the head office of the
appellants/Corporation clearly informing as
8. It was this action of the
follows:
appellants/Corporation that was challenged
by the respondent by way of a Writ Petition
However, the actual Rasta which is of 3 in the Punjab and Haryana High Court.
Karams and appeared in the papers
particularly shown in the sale deed is not
9. The aforesaid writ petition has been
connected directly with the unit and to
allowed by the Division Bench. The order
connect the Rasta with the Rasta of the
dated 30.9.1998 by which the earnest money
revenue record party purchased some land
had been forfeited has been quashed and set
where the movement of the vehicles is not
aside. A further direction has been issued to
possible at all.
the appellants/Corporation to refund the
amount along with interest at the rate of 12
6. In fact the letter further pointed out as per cent per annum w.e.f. 1.2.1998 to the date
follows: of payment. The High Court also imposed

Page 4
costs on the appellants/Corporation assessed on any of the grounds pleaded by the

as Rs. 5,000/-. Further directions were issued appellants. He submitted that the appellants
to release the amount to the respondent cannot be permitted to take advantage of their
within two months from the receipt of a copy own wrong. They have misled the respondent
of the order of the High Court. It is this order into making a huge deposit for a plot of land
which is challenged in the present appeal. which was not suitable. Without an
independent passage the land could not have
10. We have heard the learned Counsel for been used as a manufacturing unit. The
the parties at length. appellants /Corporation ignored all the
objections raised by the respondent with
11. Mr. Amit Dayal, learned Counsel for the regard to the non-existence of the
appellants /Corporation submits that the independent approach road.
respondent accepted the plots on "as is where
is basis". Therefore, the appellants/ 13. We have considered the submissions
Corporation cannot now permit the made by the learned Counsel. We have also
respondent to wriggle out of a confirmed bid, perused the judgment of the Division Bench
on the ground that there is no independent of the High Court.
approach road to the Unit. Learned Counsel
further submitted that it was for the 14. Factually the appellants have accepted
respondent to make necessary enquiry with that on 28.1.1998 the respondent had in no
regard to the existence of the 3 Karams rasta, uncertain terms informed the
with the Revenue and other authorities. appellants/Corporation about the non-
According to the learned Counsel the entire existence of the independent passage. No
documentation which had been provided at denial could possibly be made in the face of
the time when the loan was sanctioned clearly the letter dated 29.1.1998 which makes a
indicated that there is a 3 Karams rasta reference to the visit of the respondent to the
leading from the road to the Unit. Learned factory premises on 21.1.1998. There is a
Counsel further pointed out that the categorical assertion that premises do not
respondent had visited the site on 21.1.1998. have an independent appropriate passage
Therefore he would have known the exact from the road. When enquiries were made
situation of the "rasta". The respondent was from the branch office, the respondent, was
aware of the exact nature of the land being simply informed that copy of the site plan and
purchased by him. In support of his building plan were not available, and would
submission learned Counsel relies on Section be available at the Head Office only.
55 of The Transfer of Property Act, 1882. Thereafter, there is a studious silence from
Learned Counsel further submitted that the the appellants/Corporation with regard to the
appellants /Corporation are entitled to forfeit aforesaid grievance made by the respondent.
the security amount in view of Clause 5 of the Again, on 7.3.1998 the respondent informed
terms and conditions for the sale of property the appellants/Corporation as follows:
as contained in the advertisement dated
8.1.1998. Learned Counsel also sought to In this regard, it is submitted that we have
justify the action of the come to know that there is no
appellants/Corporation by placing reliance approved/authorised passage to factory
on Section 29 of The State Financial sufficient to pass a truck through it. The
Corporation Act, 1951. gate/passage presently being used is
unauthorized.
12. On the other hand, Mr. Vimal Chandra S.
Dave, learned Counsel for the respondent, In the light of above you are requested to
submits that the judgment of the High Court kindly apprise us in this matter and supply us
is self-speaking and is not open to challenge the copy of approved building plan, site plan

Page 5
for the building mortgaged by H.F.C. so that independent approach road. The letter
we may not face any problem in future in however does not indicate, that any
running the unit. independent inquiries were made by the
appellants/ Corporation to verify the
15. It appears that the aforesaid request of the authenticity of the statements made by the
respondent was also never specifically management of the defaulting unit which had
answered by the appellants/ Corporation. In availed of the loan, by mortgaging the assets
view of the protests of the respondent, the of the unit. The entire issue seems to be
issue was raised by the Branch Manager of concluded against the appellants/
the appellants /Corporation through letter Corporation by letter dated 30.4.1998, the
dated 3.4.1998 addressed to the Head Office. relevant parts of which have already been
The Branch Manager was informed by the reproduced in the earlier part of this
Head Office, through letter dated 7.4.1998 judgment. A perusal of the extracts,
that as per the documents submitted by the reproduced earlier, would clearly show that
defaulting unit at the time of availing loan, the Branch Manager has informed the head
clear cut passage/rasta has been provided to office in unequivocal language that the
the concerned Unit. The letter dated 7.4.1998 independent passage shown in the sale deed
reads as follows: is not connected directly with the defaulting
unit. It also indicates that the defaulting unit
Please refer to your letter No. had merely purchased some land to connect
HFC\BO\JD\98\7 dated 3.4.98 on the subject the rasta with the revenue record on which
cited above. movement of the vehicle is not possible at all.
This land was not even mortgaged with the
In this connection, you are advised that clear appellants/Corporation. The letter also
cut Passage / Rasta has been provided to the clearly states that by exclusion of the
concern as per documents submitted by the aforesaid land the size of the plot would be
concern at the time of availing loan. reduced from 1210 sq. yards to 1130 sq.
yards. That would mean that the main gate of
Enclosed herewith please find photocopy of the factory would be out side the land offered
the Sale Deed No. 1494 dated 8.9.94 and for sale. Taking into consideration the
photocopy of the Mutation No. 5172, another aforesaid facts the Division Bench concluded
Mutation No. 9896 and Search Report and as follows:
Sale Deed, Rasta, wherein it is clear cut
mentioned that there is an approach road the Taking the totality of circumstances into
factory site. So, you may please satisfy the consideration, we are satisfied that the
Auction Purchaser with these documents and petitioner was not at fault. He was entitled to
inform us the latest position of the case. It is withhold the money as the respondents had
also added here that you may make clear to failed to provide a proper passage. Still
the auction purchaser that the unit has been further, the factual position having been
sold by the Corporation as and where basis. admitted in the letter dated April 30, 1998, a
copy of which is at Annexure P6, and nothing
16. A perusal of the aforesaid letter makes it to the contrary having been produced on the
apparent that the appellants/Corporation file, we find that the action of the
were merely relying on the documents respondent/Corporation in forfeiting the
submitted by M/s. Unique Oxygen Private amount deposited by the petitioner was
Limited, Old Hansi Road, Jind i.e., the wholly arbitrary and unfair.
defaulting unit. The appellants/Corporation
had been informed by the management of the 17. We see no reason to take any different
defaulting unit at the time of availing of the view. We are also of the opinion that the
loan facility that the Unit had the necessary Division Bench was justified in further
concluding that in law the

Page 6
appellants/Corporation undoubtedly has the Transfer of Property Act, 1882. The aforesaid
power to forfeit the earnest money provided Section provides as under:
there was a failure on the part of the
respondent to make the deposit. The Division (1) The seller is bound-
Bench, however, observed that the
respondent was dealing with an (a) to disclose to the buyer any material
instrumentality of state. He was entitled to defect in the property [or in the seller's title
legitimately proceed on the assumption that thereto] of which the seller is, and the buyer
the appellants, a Statutory Corporation, an is not, aware, and which the buyer could not
instrumentality of the State, shall act fairly. with ordinary care discover;
The respondent could not have suspected that
he would be called upon to pay the amount of (b) to produce to the buyer on his request for
Rs. 50 lakhs without being given even a examination all documents of title relating to
proper passage to the Unit that he was the property which are in the seller's
buying. We are of considered opinion that the possession or power;
respondent had deposited the sum of Rs. 2.5
lakhs on the clear understanding that there 20. A mere perusal of the aforesaid provision
would be an independent approach road to will show that it was incumbent upon the
the Unit. This is understandable. Without any appellants/Corporation to disclose to the
independent passage the plot of land would respondent about the non-existence of the
be not more than an agricultural plot, not independent passage to the Unit. It was also
suitable for development as a manufacturing the duty of the appellants/Corporation to
unit. We therefore don't find any substance in inform the respondent that the passage
the submission made by the learned Counsel mentioned in the revenue record was not fit
for the appellants/Corporation. for movement of vehicles. The appellant also
failed to produce to the buyer the entire
18. In our opinion, the appellants cannot be documentation as required by Section
given the benefit of Clause 5 of the 55(1)(b) of the aforesaid Section. We are
advertisement. The appellants /Corporation therefore satisfied that the
cannot be permitted to take advantage of their appellants/Corporation cannot seek to rely on
own wrong. Clause 5 undoubtedly permits the aforesaid provision of The Transfer of
the forfeiture of the earnest money deposited. Property Act, 1882.
But this can only be, if the auction purchaser
fails to comply with the conditions of sale. In 21. In our opinion, the reliance on Section 29
our opinion the respondent has not failed to of the State Financial Corporations Act, 1951
comply with the conditions of sale. Rather, it is wholly misplaced. The aforesaid Section
is the appellants/Corporation which has acted pertains to action which the Corporation can
unfairly, and is trying to take advantage of its take against the Unit which had defaulted in
own wrong. payment of loan. In such circumstances the
Corporation has the power to sell the property
19. In view of the aforesaid, we are of the that has been hypothecated or mortgaged
considered opinion that the with the Corporation. Respondent herein is
appellants/Corporation cannot be permitted an auction purchaser and therefore cannot be
to rely upon Section 55 of The Transfer of confused with the defaulting unit. We are
Property Act, 1882. The also of the considered opinion that the
appellants/Corporation failed to disclose to reliance placed on the judgment of this Court
the respondent the material defect about the by the counsel for the appellants in the case
non-existence of the independent 3 `Karam' of Union Bank of India v. Official
passage to the property. Therefore, the Liquidator and Ors. MANU/SC/0592/1994
appellants/ Corporation clearly acted in : (1994) 1 SCC 575 is wholly misconceived.
breach of Section 55(1)(a) and (b) of The

Page 7
The aforesaid judgment relates to sale of the in a developed layout. In our opinion the
property and assets of a company in aforesaid judgment is not applicable to the
liquidation by the official liquidator under the facts of this case. We see no merit in any of
orders of the Court. Therefore it is observed the submissions, or the grounds of appeal.
that the official liquidator cannot and does The appeal is accordingly dismissed.
not hold any guarantee or warranty in respect
of the property sold. That is because the 24. It appears that the judgment of the High
official liquidator proceeds on the basis of Court had been stayed by this Court on
what the records of the company in 2.9.2002. In view of the dismissal of the
liquidation show. Therefore it is for the appeal, we direct that the forfeited amount be
intending purchaser to satisfy himself in all refunded to the respondent with 12 per cent
respects as to the title and encumbrances and interest w.e.f. 1.2.1998 till payment. The
so forth of the immovable property that he amount be paid to the respondent within a
proposes to purchase. In those circumstances period of two months of producing the
it is held that the purchaser cannot after certified copy of this order. We also direct
having purchased the property on such terms that in the event the aforesaid amount is not
then claim diminution in the price on the paid within the stipulated period the
ground of defect in the title or description of respondent shall be entitled to interest at the
the property. The judgment clearly goes on to rate of 18 per cent per annum till payment.
further hold as follows: We also direct the respondent shall be
entitled to costs which are assessed as Rs.
The case of the Official Liquidator selling the 50,000/-.
property of a company in liquidation under
the orders of the Court is altogether different
from the case of an individual selling
immovable property belonging to himself.
22. The aforesaid observation would be

clearly applicable to the Corporation as it is
exercising the rights of an owner in selling
the property. The appellants/Corporation is
not selling the property as an official
liquidator.
23. In any event, the facts of this case as

narrated above would clearly indicate that the
respondent had made all necessary inquiries.
It was the appellants/Corporation that failed
to perform its obligations in giving a fair
description of the property offered for sale.
Learned Counsel had also relied on another
judgment in the case of U.T. Chandigarh
Administration and Anr. v. Amarjeet
Singh and Ors. MANU/SC/0389/2009 :
(2009) 4 SCC 660. In our opinion, the
aforesaid judgment is wholly inapplicable to
the facts and circumstances of this case as it
relates to the duties of a developer who
carries on activities of development of land
and invites application for allotment of sites

Page 1
Equivalent Citation: 2014II AD (S.C.) Subject: Civil

441, AIR2014SC339, 2014(1)AJR157,
2014(1) AKR 82, 2014(1)ALD13, Acts/Rules/Orders:
2013(6)ALLMR945, 2013 (101) ALR 205, Companies Act; Transfer of Property Act,
2013 6 AWC5607SC, 2014(1)CDR95(SC), 1882 - Section 58, Transfer of Property Act,
2014(1) CHN (SC) 7, 2013(6)CTC234, 1882 - Section 59; Indian Registration Act,
2013(4)J.L.J.R.297, 2013(4)KLT207, 2014- 1908 - Section 17, Indian Registration Act,
1-LW97, 2013(4)RCR(Civil)754, 2013 121 1908 - Section 17(1); Indian Stamp Act,
RD471, 2014 123 RD762, 1899
2013(12)SCALE514, (2014)1SCC105,
(2014)4WBLR(SC)561 Cases Referred:
Rachpal v. Bhagwandas
IN THE SUPREME COURT OF MANU/SC/0046/1950 : AIR 1950 SC 272;
INDIA United Bank of India v. Lekharam Sonaram
and Co. MANU/SC/0370/1965 : AIR 1965
Civil Appeal No. 9030 of 2013 (Arising SC 1591
out of Special Leave Petition (Civil) No.
18323 of 2008) and Civil Appeal No. Prior History / High Court Status:
9049 of 2013 (Arising out of Special From the Judgment and Order dated
30.08.2007 of the High Court of Punjab and
Leave Petition (Civil) No. 924 of 2009)
Haryana at Chandigarh in CWP No. 3533 of
2007 (MANU/PH/1082/2007)
Disposition:
Appellants: State of Haryana and Ors. Appeal Allowed
Vs.
Respondent: Navir Singh and Anr. Case Note:
(1) Transfer of Property Act, 1882 -
AND Section 58(f)--Registration Act, 1908--
Section 17(1)(c)--Mortgage by deposit of
Appellants: State of Punjab and Ors. title-deed--Mutation on basis of mortgage
Vs. effected by deposit of title-deeds--Entry of
Respondent: Pagro Foods Ltd. and charge in revenue records on basis of
mortgage created by deposit of title-deeds-
Ors. -Respondents resisted mutation on ground
that no entry can be made as instrument of
Hon'ble Judges/Coram: deposit of title-deeds is compulsorily
C.K. Prasad and Kurian Joseph, JJ. registrable under Section 17(1)(c) of
Registration Act--Question for
Counsels: consideration--Whether 'charge' of
For Appellant/Petitioner/Plaintiff: B.S. Mor, mortgage can be entered in revenue record
Addl. AAG, Nikhil Nayyar, AAG, Neeraj in respect of mortgage effected by deposit
Mor, Naresh Bakshi, Ashok Kumar Singh of title-deeds without its registration and
and Kuldip Singh, Advs. payment of registration fee and stamp
duty--Held--Charge of mortgage by
For Respondents/Defendant: Rajesh Kumar, deposit of title-deeds and for that,
Anupama Dhruve, Sarv Mitter, Advs., For instrument of mortgage is not necessary--
M/s. Mitter and Mitter, Kamal Mohan Mortgage by deposit of title-deeds does not
Gupta, Ashok Kumar Singh and Jitendra require registration--Question of payment
Kumar, Advs. of registration fee and stamp duty does not

Page 2
arise-No error in impugned judgment of necessary. Mortgage by deposit of title-

High Court directing entry of charge in deeds further does not require
revenue records on basis of mortgage registration. Hence, the question of
created by deposit of title-deeds. payment of registration fee and stamp
duty does not arise. When the borrower
Mortgage by deposit of title-deeds in terms and the creditor choose to reduce the
of Section 58(f) of the Transfer of Property contract in writing and if such a document
Act surely acknowledges the receipt and is the sole evidence of terms between them,
transfer of interest and therefore, one may the document shall form integral part of
contend that its registration is compulsory. the transaction and same shall require
However. Section 59 of the Transfer of registration under Section 17 of the
Property Act mandates that every Registration Act.
mortgage other than a mortgage by
deposit of title-deeds can be effected only (2) Registration Act, 1908 - Section 17--
by a registered instrument. When the Compulsory registration--Document
debtor deposits with the creditor title- merely recording transaction which is
deeds of the property for the purpose of already concluded and which does not
security, it becomes mortgage in terms of create any rights and liabilities does not
Section 58(f) of the Transfer of Property require registration.
Act and no registered instrument is
required under Section 59 thereof as in
other classes of mortgage. The essence of
mortgage by deposit of title-deeds is
handing over by a borrower to the creditor
title-deeds of immovable property with the
intention that those documents shall
constitute security, enabling the creditor
to recover the money lent. After the
deposit of the title-deeds the creditor and
borrower may record the transaction in a
memorandum but such a memorandum
would not be an instrument of mortgage. JUDGMENT
A memorandum reducing other terms and
conditions with regard to the deposit in the Chandramauli Kumar Prasad, J.
form of a document, however, shall
require registration under Section 17(1)(c) C.A. No. 9030 of 2013 (@ SLP (CIVIL) No.
of the Registration Act, but in a case in 18323 of 2008)
which such a document does not
incorporate any term and condition, it is 1. The Petitioners, aggrieved by the order of
merely evidential and does not require the High Court directing entry of charge in
registration. the revenue records on the basis of mortgage
created by deposit of title-deeds, have
Nothing has been brought on record to preferred this special leave petition.
show existence of any instrument which
has created or extinguished any right or 2. Delay condoned.
liability. In the case in hand, the original
deeds have just been deposited with the 3. Leave granted.
bank. The charge of mortgage can be
entered into revenue record in respect of 4. Shorn of unnecessary details, facts giving
mortgage by deposit of title-deeds and for rise to the present appeal are that one M/s.
that, instrument of mortgage is not

Page 3
Ultra Tech Private, a company incorporated payment of registration fee and stamp duty,
under the Companies Act, was sanctioned a the prayer for mutation cannot be allowed.
term loan of Rs. 425 lakhs and working
capital facility of Rs. 99 lakhs by the Punjab 7. The High Court considered the objection
National Bank (hereinafter referred to as the and negatived the same in the following
Bank). As agreed by the Bank, original title- words:
deeds in respect of 19 Marlas of land
belonging to Narvir Singh and 31 Marlas of We are of the view that an equitable mortgage
land owned by Rajinder Kaur were deposited is created by deposit of title-deeds and not
with the Bank by the borrower. In this way through any written instrument. Simple
mortgage by deposit of title-deeds took place. pledge of the title-deeds to the bank as
It is not in dispute that this transaction had Security creates an equitable mortgage,
taken place in a town notified Under Section therefore, there is never an instrument of
58(f) of the Transfer of Property Act. The deposit of title-deed/equitable mortgage. The
Bank wrote to the Tahsildar, Panchkula for Petitioner simply went to the bank and
mutation on the basis of mortgage effected by handed over the title-deeds of their respective
deposit of the title-deeds. When nothing was properties. This act was enough to create a
done, the land owner filed writ petition mortgage as envisaged Under Section 58(f)
before the High Court inter alia praying for of the Transfer of Property Act. Quite often a
mutation on the basis of mortgage aforesaid. memorandum is drawn up regarding the
handing over of the title-deeds but this
5. The Respondents resisted mutation inter memorandum is simply a written record of
alia on the ground that no entry can be made the pledge. The memorandum itself is not an
as the instrument of deposit of title-deeds is instrument of mortgage....
compulsorily registrable Under Section
17(1)(c) of the Registration Act and for that, 8. Mr. B.S. Mor, Additional Advocate
they relied on a letter dated 29th March, 2007 General appearing for the State submits that
of the Finance Commissioner and Principal mortgage by deposit of title-deeds requires
Secretary to Government, the relevant registration Under Section 17(1)(c) of the
portion whereof reads as under: Registration Act, 1908. Further it mandates
payment of fee as prescribed Under Article
XXX XXX XXX 1(1)(b) of the Registration Fees notification
dated 6th November, 2006. In addition,
2. It is clarified that the instrument of deposit payment of stamp duty as per Article 6 of the
of title-deed/Equitable Mortgage is Indian Stamp Act is also required. According
compulsorily registrable Under Section to Mr. Mor in the absence of all these the
17(1)(c) of the Indian Registration Act, 1908. mortgage by deposit of title-deeds cannot
Registration fee is payable under Article form the basis of mutation.
1(1)(b) in the table of Registration Fees
Notification dated 06th November, 2006. 9. Mr. Harikesh Singh, learned Counsel
Article 6 of the schedule I-A of the Indian appearing for the Respondents, however,
Stamp Act, 1899 provides for rate of Stamp submits that mortgage by deposit of title-
Duty (SD) chargeable on deposit of title- deeds does not need any registered
deeds/equitable mortgage. instrument. Hence, there is no question of
deposit of any fee thereon. According to him,
XXX XXX XXX it also does not require payment of duty under
the Stamp Act.
6. According to the Respondents, in the
absence of registration as aforesaid and 10. An application for impleadment has been
filed by the Bank for being impleaded as a

Page 4
party to the proceedings, which was allowed advanced by way of loan. Section 17(1)(c) of
by this Court vide order dated 12th July, 2010. the Registration Act provides that a non-
The Bank is represented by Mr. Rajesh testamentary instrument which
Kumar, Advocate for M/s. Mitter and Mitter, acknowledges the receipt or payment of any
Advocates. consideration on account of the creation,
declaration, assignment, limitation or
11. Another application for impleadment extension of any such right, title or interest,
(I.A. No. 3 of 2011) has been filed by requires compulsory registration. Mortgage
Shankar Twine Products Pvt. Ltd. through its by deposit of title-deeds in terms of Section
Director. We reject this petition giving liberty 58(f) of the Transfer of Property Act surely
to it to take recourse to such other remedy as acknowledges the receipt and transfer of
is available to it before the court of competent interest and, therefore, one may contend that
jurisdiction. its registration is compulsory. However,
Section 59 of the Transfer of Property Act
12. In view of rival submissions, the question mandates that every mortgage other than a
which falls for consideration is whether mortgage by deposit of title-deeds can be
'charge' of mortgage can be entered in the effected only by a registered instrument. In
revenue record in respect of a mortgage the face of it, in our opinion, when the debtor
effected by deposit of title-deeds without its deposits with the creditor title-deeds of the
registration and payment of registration fee property for the purpose of security, it
and stamp duty. becomes mortgage in terms of Section 58(f)
of the Transfer of Property Act and no
13. Mortgage by deposit of title-deeds is registered instrument is required Under
sanctioned by law Under Section 58(f) of the Section 59 thereof as in other classes of
Transfer of Property Act in specified towns, mortgage. The essence of mortgage by
same reads as follows: deposit of title-deeds is handing over by a
borrower to the creditor title-deeds of
immovable property with the intention that
58. "Mortgage", "mortgagor",
those documents shall constitute security,
"mortgagee", "mortgage-money" and
enabling the creditor to recover the money
"mortgage-deed" defined.--
lent. After the deposit of the title-deeds the
creditor and borrower may record the
(a) xxx xxx xxx
transaction in a memorandum but such a
memorandum would not be an instrument of
(e) xxx xxx xxx mortgage. A memorandum reducing other
terms and conditions with regard to the
(f) Mortgage by deposit of title-deeds.-- deposit in the form of a document, however,
Where a person in any of the following shall require registration Under Section
towns, namely, the towns of Calcutta, 17(1)(c) of the Registration Act, but in a case
Madras, and Bombay, and in any other town in which such a document does not
which the State Government concerned may, incorporate any term and condition, it is
by notification in the Official Gazette, merely evidential and does not require
specify in this behalf, delivers to a creditor or registration.
his agent documents of title to immoveable
property, with intent to create a security 15. This Court had the occasion to consider
thereon, the transaction is called a mortgage this question in the case of Rachpal v.
by deposit of title-deeds. Bhagwandas MANU/SC/0046/1950 : AIR
1950 SC 272, and the statement of law made
14. Mortgage inter alia means transfer of therein supports the view we have taken,
interest in the specific immovable property which would be evident from the following
for the purpose of securing the money passage of the judgment:

Page 5
4. A mortgage by deposit of title-deeds is a by their express bargain, and the document

form of mortgage recognized by Section will be the sole evidence of its terms. In such
58(f), T.P. Act, which provides that it may be a case the deposit and the document both
effected in certain towns (including Calcutta) form integral parts of the transaction and are
by a person "delivering to his creditor or his essential ingredients in the creation of the
agent documents of title to immovable mortgage. It follows that in such a case the
property with intent to create a security document which constitutes the bargain
thereon." That is to say, when the debtor regarding security requires registration
deposits with the creditor the title-deeds of Under Section 17 of the Indian Registration
his property with intent to create a security, Act, 1908, as a non-testamentary instrument
the law implies a contract between the parties creating an interest in immovable property,
to create a mortgage, and no registered where the value of such property is one
instrument is required Under Section 59 as in hundred rupees and upwards. If a document
other forms of mortgage. But if the parties of this character is not registered it cannot be
choose to reduce the contract to writing, the used in the evidence at all and the transaction
implication is excluded by their express itself cannot be proved by oral evidence
bargain, and the document will be the sole either....
evidence of its terms. In such a case the
deposit and the document both form integral 17. Bearing in mind the principles aforesaid,
parts of the transaction and are essential we proceed to consider the facts of the
ingredients in the creation of the mortgage. present case. It is relevant here to state that
As the deposit alone is not intended to create letter dated 29th March, 2007 of the Finance
the charge and the document, which Commissioner inter alia makes "instrument
constitutes the bargain regarding the security, of deposit of title-deeds compulsorily
is also necessary and operates to create the registrable Under Section 17(1)(c) of the
charge in conjunction with the deposit, it Registration Act." In such contingency,
requires registration Under Section 17, registration fee and stamp duty would be
Registration Act, 1908, as a non-testamentary leviable. But the question is whether
instrument creating an interest in immovable mortgage by deposit of title-deeds is required
property, where the value of such property is to be done by an instrument at all. In our
one hundred rupees and upwards. The time opinion, it may be effected in specified town
factor is not decisive. The document may be by the debtor delivering to his creditor
handed over to the creditor along with the documents of title to immoveable property
title-deeds and yet may not be registrable.... with the intent to create a security thereon.
No instrument is required to be drawn for this
16. This Court while relying on the aforesaid purpose. However, the parties may choose to
judgment in the case of United Bank of have a memorandum prepared only showing
India v. Lekharam Sonaram and Co. deposit of the title-deeds. In such a case also
MANU/SC/0370/1965 : AIR 1965 SC 1591 registration is not required. But in a case in
reiterated as follows: which the memorandum recorded in writing
creates right, liability or extinguishes those,
7....It is essential to bear in mind that the same requires registration. In our opinion, the
essence of a mortgage by deposit of title- letter of the Finance Commissioner would
deeds is the actual handing over by a apply in cases where the instrument of
borrower to the lender of documents of title deposit of title-deeds incorporates terms and
to immovable property with the intention that conditions in addition to what flow from the
those documents shall constitute a security mortgage by deposit of title-deeds. But in that
which will enable the creditor ultimately to case there has to be an instrument which is an
recover the money which he has lent. But if integral part of the transaction regarding the
the parties choose to reduce the contract to mortgage by deposit of title-deeds. A
writing, this implication of law is excluded document merely recording a transaction

Page 6
which is already concluded and which does 22. It is the stand of the Appellants that
not create any rights and liabilities does not deposit of the title-deeds are not in relation to
require registration. Nothing has been the properties situated in the towns specified
brought on record to show existence of any Under Section 58(f) or in the towns notified
instrument which has created or extinguished by the State Government in terms of Section
any right or liability. In the case in hand, the 58 of the Transfer of Property Act. In this
original deeds have just been deposited with connection, our attention has been drawn to
the bank. In the face of it, we are of opinion the notification dated May 26, 2003 of the
that the charge of mortgage can be entered Government of Punjab in the Department of
into revenue record in respect of mortgage by Revenue and Rehabilitation, same reads as
deposit of title-deeds and for that, instrument follows:
of mortgage is not necessary. Mortgage by
deposit of title-deeds further does not require In exercise of the power conferred by Clause
registration. Hence, the question of payment (f) of Section 58 of the Transfer of Property
of registration fee and stamp duty does not Act, 1882 (Central Act No. 4 of 1882) and all
arise. By way of abundant caution and at the other powers enabling him in this behalf, the
cost of repetition we may, however, observe Governor of Punjab is pleased to specify
that when the borrower and the creditor Gobindgarh in the district Fatehgarh Sahib
choose to reduce the contract in writing and and Mohali in District Roop Nagar in the
if such a document is the sole evidence of State of Punjab as Towns for the purpose of
terms between them, the document shall form the aforesaid section of the said Act.
integral part of the transaction and same shall
require registration Under Section 17 of the 23. This aspect of the matter has not been
Registration Act. From conspectus of what considered by the High Court in the
we have observed above, we do not find any impugned judgment. As the same goes to the
error in the judgment of the High Court. root of the matter, we have no option than to
set aside the impugned order and remit the
18. In the result, we do not find any merit in matter back for its fresh consideration in
the appeal and it is dismissed accordingly but accordance with law in the light of the
without any order as to costs. observation made above.
CIVIL APPEAL No. 9049 of 2013 (@ SLP 24. In the result, we allow this appeal, set
(C) No. 924/2009) aside the impugned judgment of the High
Court and remit the matter back to the High
19. Delay condoned. Court for fresh consideration in accordance
with law.
20. Leave granted.
21. By the impugned order, the High Court

had directed the Appellants herein to enter
mutation in favour of Punjab National Bank
in respect of the properties mortgaged by
deposit of title-deeds. According to the
Appellants, the properties mortgaged by
deposit of title-deeds are situated in the
village Matab Garh in the District of
Ludhiana and at village Dallomajra, Tahsil
and District Fatehgarh Sahib and village
Sadhugarh in the District Sirhind.

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National Law University and Judicial Academy, Assam

Odd/Even Semester – Academic Year 2018-19

Sl. Course Code Course

a. Code and Title of the Course: 5.6 PL Property Law

b. Course Credit: 5 (total marks 100)

c. Medium of instruction: English

d. Course Compiled by: Kasturi Gakul and Saheb Chowdhury

e. Course Edited by: Ankur Madhia

The objectives of the course are-

1. To familiarize students with the conceptual knowledge of property and its

3. Case Law Reporter/Journals –

Name of Case Citation

Shanta Bai v. State of Bombay 1958 SC 532

• The Transfer of Property Act, 1882 (Act of IV of 1882)

5. Course Evaluation Method – The Course is assessed in 100 marks in

6. Expected Outcomes of the Course – On completion of the Course

Introduction: Concept of Property, Classification of Property- Movable and

Transfer of Property Act: Historical background; Object of the Act; Definition

Transfer of Property by Act of Parties: Definition of Transfer of Property;

Conditions Restricting Transfer: Restraints on Alienation; Rule against

General principles governing Transfer of property: Transfer to Unborn Persons;

Sales of Immovable Property: Definition of Sale; Essentials of valid Sale; Rights

Mortgages: Definition of Mortgage, Mortgagor, Mortgagee; Essential elements of

Charges: Definition of Charge; Requisites of Charge; Creation of Charge – Charge

Lease: Definition of Lease; Essentials of Lease; Duration of Leases; Mode of

Exchange: Definition and characteristics of Exchange; Rights and Liabilities of

Gifts: Definition of Gift; Essential elements of Gift; Modes of making Gift;

Law Relating to Easement: Definition of Easement; Servient and Dominant

Extinction of Easement: Extinction of Accessory rights; dissolution of right of

Licence: Definition of Licence; Characteristics of Licence; Grant of Licence;

S. No. Title Author

1. Property in a Changing Society A. R. Biswas

A.K. Srivastava and Bal

Consultation Paper-cum-Questionnaire on Adverse Possession Law Commission of

S. No Name of the Case Citation

1 Saheb Ram Surajmal v. Purushottam Lal AIR 1950 Nag 89

3 Beepathumma v. S.V. Kadambolithaya AIR 1965 SC 241

4 Sohanlal Naraindas v. Laxmidas Raghunath (1971) 1 SCC 276

1996 SC 2260: (1996) 5

7 Rambabu Namdeo Gajre v. Narayan Bapuji (2004) 8 SCC 614

8 Chennammal v. Munimalaiyan AIR 2005 SCC 4397

10 Haryana Financial Corporation v. Rajesh Gupta AIR 2010 SC 338

recognized modes of acquisition of ownership. The prescription of periods of limitations for

is not considered as adverse possession.

2. The legal position and principles governing adverse possession.

1( 2004) 10 SCC 779

2 Amrendra Pratap Singh vs. Tej Bahadur Prajapati, (2004) 10 SCC 65

defendants becomes adverse to the plaintiff”. Article 65 is an independent Article applicable to

right to property”. It lays down:

Limitation Act). Acquisition of easements by prescription is provided for by Section 25 of The

“It cannot be disputed that a person in possession of land in the assumed

period prescribed by the provisions of the statute of Limitation applicable to the

4 Valliamma Champaka vs Sivathanu Pillai (1964) 1 MLJ, 161 (FB)

approve of the dictum in 1907 AC 73. No subsequent case has been

brought to our notice departing from that view. No doubt, a great

1 QB 1. But it must be taken to be finally resolved by 1907 AC 73. A

of the Indian Limitation Act has given approval to the proposition

accepted in 1907 AC 73 and may be taken to be declaratory of the

6 AIR 1968 SC 1165

7AIR 1981 SC 707

the larger Bench decisions of the Supreme Court obviously prevails.

“What is really meant, in my judgment, is that the animus possidendi involves

8 Annexure II to Volume II of U.N. Mitra’s Law of Limitation, 13th Edn.

10 2003 1AC 419