Contractors with former proprietors sought protection of their rights to tendu leaves, lac and timber after the estates vested in Madhya Pradesh. The Supreme Court held the contracts were mere licences, not encumbrances on proprietary rights, and issued a writ restraining the State from interfering.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
476 SUPREME COURT REPORTS [1953]
1952
CHHOTABHAI JETHABAI PATEL AND CO.
Dec. 2i.
v.
• THE STATE OF MADHYA PRADESH
(and other cases)
(MEHR CHAND .MAHAJAN, 0HANDRASEKHARA AIYAR and BHAGWATI JJ.]
]fadhya Pradesh Abolition of Proprietary Bights (Estates, Mahals and Alienated Lands) Act, 1950, ss. 3, 4-Bights t<nder contracts with proprietors for plucking tendu leaves, collecting lac, cutting ti1nber etc. - Whether vest in State-Nature of such contracts :-Indian Sale of Goods Act (III of 1930) s. 4 (3)-"Ft<ti.re goods", meaning of.
The Madhya Pradesh Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act of 1950 put an end to all proprietary rights ln estates, mahals and alienated villages situated in the State and vested them in the State for the purposes of the State, free from all encumbrances. The petitioners, who had entered into various contracts and agreements \Vith the proprietors of the estates before the date on v-rhicb tl1e estates vested in the State under the Act (and some of them even before the 16th ?lfarch, 1950) under which they were entitled to pluck, collect and carry away tendu leaves, to cultivate, culture and acquire lac, and to cut and carry awa.y teak and titnber and other species of trees, applied for writs under art. 32 of the Constitution prohibit· ing the State from interfering with the rights they had acquired under the contracts with the proprietors:
Held, (i) On a construction of the contracts in question, that the contracts '°vere in essence and effect licenses granted to the petitioners to cut, gather and carry away produce in the shape of tendu leaves, lac, timber, or wood and the petitioners 'vere neither proprietors nor persons having any interest in the proprieta~y rights through the proprietors, within the meaning of the Act;
(ii) The rights of the petitioners were not encumbrances within the meaning of the expression "free from encumbrances'' in s. 3 (1) of the Act and the petitioners were entitled to a writ against .\he State prohibiting the State from interfering with· the rights of the petitioners under· the contracts which they had entered into with the proprietors.
Mohanlal Hargovind v. Commissioner of Incmne-tax, 0. P. tf Berar (I.L .R. [1949] Nag. 892) referred td.
Held also, thats. 4 (3l of the Indian Sale of Goods Act which lays clown that ·in the case of sale of future goods the contract
S.C.R. SUPREME COURT REPORTS 477
;
l952 Firm Chhotabhao Chhotabhao lethabai Patel Patel and Co. v. The State of M:adhy!l Prade&h.
amounts only to an. agreement. to sell did not apply to the con- l952 tracts in the present case as "future goods" are defined in the Act as meaning goods to be manufactured or produced or acquired by Firm Chhotabhao Chhotabhao the seller after making the contract of sale. • lethabai Patel Patel
ORIGINAL JuRISDICTION: Petitions Nos. 232, 233, 286, 309, 320, 351, 319, 350, 354 and 490 of 1951. Applications under article 32 of the Constitution for writs to enforce the fundamental rights of the petitioners .
. C. K. Daphtary (R. M. Bajarnavis, with him) for the petitioner in Petition No. ~3;3.
M. C. Setalvad (G. N. Joshi and R. M. Hajarnavis, with him) for the petitioner in Petition No. 233.
R. M. Hajarnavis for the petitioners in Petitions Nos. 286, 309 and 320.
V. N. Swami for the petitioners in Petitions Nos. 350 and 351.
N. S. Bindra (R. S. Narula, with him) for the petitioners in Petitions Nos. 319, 354 and 490.
T. L. Shivde, Advocate-General of Madhya Pradesh, for the respondent in all the petitions, the State of . Madhya Pradesh.
_.., .
OHANDRASEKHARA AIYAR J.-These are petitions under article 32 of the Constitution of India for directions or orders or writs to enforce the fundamental rights of the petitioners to property by prohibiting the respondent, the State of Madhya Pradesh, from enforcing their alleged rights under the Madhya Pradesh Abolition of Proprietary Rights Act, 1950.
The several petitioners entered into contracts and agreements with the previous proprietors of certain estates and mahals in the State under which it is said they acquired the rights to pluck, collect and carry away tendu leaves, to cultivate, culture :.nd acquire lac, and to cut and carry away teak and timber and miscellaneous species of trees called hardwood and
478 SUPREME OOUR'i' REPoli'i'S (1953j
1952 bamboos. The contracts . and agreements are in . ~ . writing; some of them are registered. There is no FirmOhhotobh"'disnnte about their genuineness and it has not been Jethabai and 00 Patel . alleged .., that they are collusive or . ' fraudulent transv. actions. Their dates and the several sums of money Th• State of paid as consideration are set out in the petitions. Madhya The petitioners allege that they have spent large Pradesh. sums of money in the exercise of their rights, and Ohandrasekhara this fact too is not cont_roverted:
l
Aiyar J. Petitions Nos. 232, 233, 286, 309 and 320 of 1951 relate to tendu leaves which grow in shrub jungles and which are used in the manufacture of beedis or country made cigarettes, a very extensive and competitive business carried on by some of the petitioners involving an outlay of one to two lakhs of rupees in some cases. For instance, 406 contracts are involved in Petition No. 232 of 1951 ;'the consideration paid comes to Rs. 1,65,385 and the expenses are alleged to be in the region of Rs. 1,90,000. In Petition No. 233 of 1951 there are 785 contracts; the purchase money is Rs. 1,10,605 and the ontlay by way of ex·penses is said to be Rs. 50,000.
Petition No. 319 of 1951 relates to the culture and cultivation of lac, and there are several lease deeds of different dates enuring for different periods; two of them go np to the years 1966 and 1967.
Teak, timber and hardwood form the subject-matter of the rights involved in Petition No. 350 of 1951, and the registered lease deed is dated 8th October, 1949, and it is for a teni:t of ten years.
Petition No. 351 of 1952 involves tendu leaves and miscellaneous forest produce and timber.
Petition No. 354 of 1951 relates to bamboo forests, and Petition No. 490 of 1951 to hardwood and bamboo.
The contentions of the petitioners are mainly three in number.. They say that the rights acquired by them under these contracts and agreements were got before the passing of the Madhya Pradesh Abolition
s.c.n. SUPREME COtJR11 11EPORTS 479
. ., '
of Proprietary Rights Act, 1950, and that the legisla- 1952 ti that on therefore does they are not prop not net . affect ors them. w1 'th' Ill th It e mean is urged mg . next o f B". irm Jethabai 0-,, 'iota Patelbl ia•. the Act and consequently the Act does not apply to and co. them. Lastly, the question is raised that the A.ct v. itself is ultra vires, as many·of its material provisions The State of offend their fundamental rights guaranteed under Madhya Pradesh. the Constitution.
The full title of the Act is the "Madhya Pradesh Ohandrasekhara Abolition of Proprietary l{ights (Estateg, Mahals, Aiyar J. Alienated Lands) Act, 1950 ", and it is Madhya Pradesh Act I of 1951. It came into force on 26th January, 1951. On the very next day, there was a notification under section 3 of the Act putting an end to all proprietary rights in estates, mahals and alienated villages and vesting the same in the State for the purposes of the State free of all encumbrances with effect from 31st March, 1952.
The validity of the Act was questioned by the affected proprietors in Visheshwar Rao v. The State of Madhya Pradesh (1) before this Court, and the Act was held to be valid. The petitioners are concluded.
We have to consider only the other two points raised on behalf of the petitioners. It is clear from the provisions in the impugned Act that only those rights of the proprietor vest in the State which the proprietor had on the specified date. Section 3 provides that on and from a date to be specified by a notification by the State Government, all proprietary rights in an estate or mahal ve8ting in .a proprietor shall pass from him to and vest in the State. 'rhe consequences of vesting are given in section 4 of the Act, and it is provided that the vesting will take place, notwithstanding anything contained in any contract, grant or document or in any other law for the time being in force and save as otherwise provided ~n this Act. But this again deals only with the rights existing on the date of the notification; the section is not retrospective.
(1) [19szJ s.c.R. 1029,
I.
;,
'
480 SUPREME COURT REPORTS [1953)
1952 Clause (a,) speaks of all rights, title and interest - - vesting in the proprietor or any person having Firm Ohhotabhai • t · h · t · ht th h th Jeth~bai Patel 1? ere.st m sue propne ary ng roug e and Co.. proprietor. v. Clause (b) is to this effect: The State of "all grants and confirmation of title of or to land Madhya • · h · h Pradesh· m t e property so vesting or of or to any ng t or privilege in respect of such property or land revenue oi.andrasekhara in respect thereof shall, whether liable to resumption Aiyar J. or not, determine;".
· The right or privilege referred to is the right or privilege of the proprietor qr any person having interest in the proprietary right through the proprietor.
Clause (c) is quite clear on the subject; it runs thus:
" all rents and cesses, in respect of any holding in the property so vesting for any period after the date of vesting and which, but for the vesting, woulil be payable to the proprietor, shall vest iu and be payable to tbe State Government .......... "
'l'he words " after the date of vesting" are important.
Sub-section (3) of section 4 says:
"Nothing contained in sub-section (I) shall operate as a bar to the recovery by the outgoing proprietor of any sum which becomes due to him before the date of vesting by virtue of his proprietary rights and any such sum shall be recoverable by him by any process of law which but for this Act would be available to him."
If the outgoing proprietor is entitled to recover any sums as quid pro quo for what he has parted with under the transfer, it can only be on the basis that the transfer is a good and valid transaction unaffected by the Act. Section 6 is very material, and it is in these terms :
"(1) Except as provided in sub-section (2), the transfer of any right in the property which is liable
S.O.R. SUPREME COURT REPORTS 481
to vest in the vest in the in the the State under this this Act made by made by the pro- 1959 prietor at any time after at any time after any time after after the 16th .March, 1950, shall, 16th .March, 1950, shall, .March, 1950, shall, Firm Ghhotabhai Ghhotabhai as from the date of vesting, be v01d. Jethabai Patel (2) Where on the application of the transferor and Go. or the transferee, the Deputy Commissioner is satisv. fied that any transfer of property e f ere d t o m si: -· b The State Madhya o / section (1) was made by a proprietor m good faith Pradesh. - and in the ordinary course of village management, he may declare that the transfer shall not be void Gha"d:asekha1·a after the date of vesting." A•yar J.
to vest in the vest in the in the the State under this this Act made by made by the pro- 1959 prietor at any time after at any time after any time after after the 16th .March, 1950, shall, 16th .March, 1950, shall, .March, 1950, shall, Firm Ghhotabhai Ghhotabhai as from the date of vesting, be v01d. Jethabai Patel
The date, 16th March, 1950, is prob.ably the date when legislation on these lines was actively thought of, and sub-section (1) hits at transfers made after this date. This means that transfers before that date are not to be regarded as void. Even in the case of transfers after the said date, sub-section (2) provides that the Deputy Commissioner may declare that they are not void after the date of vesting, provided they were made in good faith and in the ordinary course of management.
The scheme of the Act as can be gathered from the provisions referred to above makes it reasonably clear that whatever was done before 16th March, 1950, by the proprietors by way of transfer of rights is not to be disturbed or affected, and that what vests in the State is what the proprietors had OU the vesting date. If the proprietor had any rights after the date of vesting which he could enforce against the transferee such as a lessee or a licensee, those rights would no doubt vest in the State. In all these petitions, the several contracts and agreements were before the date of vesting, and many of them were prior even to the 16th March, 1950. The petitioners had taken possession of the subject-matter of the contracts, namely, tendu leaves, lac palsadies, teak, timber and hardwood, bamboos and miscellaneous forest produce.
Under the Indian Sale of Goods Act, "goods" include growing crops, grass and things attached to or forming part of the land, which are agreed to be severed before sale or under the contract of sa.le
,,
482 SUPREME COURT REPORTS (1953]
wa ·notwithstanding the definition of "immovable pro- Firm . 0- },hotao "h a' . perty" in!seotion 3 (25) oI the General Clauses Act Jethabai Patel of 1897 · ,and Co, • In Petition No. 232 of 1951 t;vo sample· agreev. ments relating to tendu leaves are given as annexures Th• Stat• of A and B to the petitions. They may be quoted in ;:;::;,: extenso for a clear undrstanding of the nature of the right crated. Exhibit A dated 16th November, Ohandra,.khara 1950, is in these terms: Aiyar J. "Receipt wri-tten in favour- of Seth Chhotabhai Jethbai Patel Company shop .Gondia and written by Shri Madhavrao Gangadhar Rao Chitnavis shop Itan receipt is written that we are owners of forests of Tendri leaves of Mouza Sawarla 0-12-0 Manza Khatkheda. 0-5-0 Mouza Nati Kheda 0-16-0 and. Mouza Welwa 0-16-0. We have given contract (Theka) of cutting Tendu leaves from these four villages for one .year that is till the end of June for Rs. 2,500 out of this we had received Rs. 300 on 21st September, 1950,· at Bhandara an(!. the balance Rs. 2,200 was received from your .Bhandara shop through Balubhai. Nothing remains 'to'lle paid to us. Ypu have a right to coppice the trees." The terms. of Exhibit B dated 12th July, 1948, omitting unnecessary portions ar.e as follows: "In the year 1948 A.D. theka patra is' executed that in consideration of the amount received as detailed above I had given the full tendu leaves jungle for taking out teridu leaves for five years from 1949 A.D. to 1953 A.D. I have immediately given possession. Now· you can take tendu leaves of the tendu leaves forests described above every year for five years till the end of June; 1953. You may coppice the plants and take leaves. At the end of June, 1953, you should returri my jungle without damage or loss to me. After tbe end of the period it depends upon my will whether or not I give you the forests on theka (again), If any one obstructs you in coppicing or taking away leaves, I will be responsible for the damages. Hence I.have executed
·.
:(;iJ.R. . SUPREM1E COURT REPORTS 48.8
rrhis theka pathi for five years for consideration. after 1952 reading 12th Jly, and 1948; by pen understanding. I agree with it. of Waman Sadesh1c Amtl) . Dated F" J"othabai Patol 'rrn Chh oa t bh at . Petition Writer Bhandara,." andCo. The contracts and 'agreements appear .-to be. in v. .essence an d e, ect we.uses ff 1. grante d t o .t e h trans_ f ereell .Tho Madhya Slatoo/ to, cut, gather and -carry away the produce m the Prade•h- shape of tendu leaves, or lac, or timber, or wood. A simiiar-agrel)ment came up for consideration by Chandrasehara Chandrase~hara -the Judicial ,Gommittee of the Privy Council in A•v•r ;r,
A simiiar-agrel)ment came up for consideration by Chandrasehara Chandrasehara -the Judicial ,Gommittee of the Privy Council in A•v•r ;r, Mohanlal Hargovind of Jubbulpore v. Commissioner of Incbme-taa;, Central Provinces and Berar; Nagpur(") in ,connection witli a_ question arising cmt of the Income-tax ActSome of the observations contained in the judgment dealip.g .with the nature of such an agreement are useful and may be quote,d here :
" The contract& grant no interest in land and no interes't in the trees or plants hemselv'es. They are simply' and solely. contracts giving· to the grantees the right to pick and carry away leaves, which, of co,n.rse,.impli'es the right to' appro11riate.-them as their ow p"roperty. • _
·'
T)le small right of culti"'?ation given in the first of the, two contracts is merely ancillary and is of .no more significance than woqld qe, e.g., a right to spray a fruit·tree gtv~,n. 'to the person who has bought the crop of apples. The contracts ar'e sh6iP-term' con·tracts. The picirfog of·the leaves under·then'i has to start at once or practically' at once and ·t'.o proceed continuously." ·
Thli)'e is nothing iii. the Act to affect the validity of the several contrac.ts. and agreements. The petitioners are neither propri~tors·.within. the meaning of the·,Act nor persons having.any interest in the proprietary fight through the proprietors.- There is no pro:vision in the Act which extinguishes their rights in fav'our of the State. What' exactly is meant by a "proprietary .right." upder the revenue laws has· been
(r).I.L.R. (1949] Nag. 89>, ~· 6J . -
• ·J
484 SUPREME COURT REPORTS [1953]
ws2 pointed ont at page 217 of Volume I of Baden- F' 1.rni. Ohh o~a , bh ai . Powell's ·Land Systems of B1·itish India, where Jethabai Patel .be says; ·and Co. " The first thing that will strike the student is the v. nse of the term' proprietary right' in these pages and Th',,/!ate of in Indian Revenue Books generally. It does not Pradesh. a hya occur in text-books on English law or J"nrisprudence. I presume that the nse of such a phrase is due to the Ohandrasekhara feeling that we rarely acknowledge anything like a Aiya1· J. complete unfettered right vested in any one person. The interest in the· soil has come to be virtually shared between two or even more grades, the cause of which we just now discussed. It is true that, in many cases, only one person is called 'landlo"rd ' or ' actual proprietor' but his right is limited; the rest of the right, so to speak, is in the hands of the other grades, even though they are called 'tenants' or by some vague title such as 'tenure-holders.' In many cases, as we have seen, this division of right is accentuated by the use of terms like' sub-proprietor' or ' proprietor of his holdip.g'. The 'proprietary right' seems then a natural expression for the interest held by a landlora, when that interest is not the entire 'bundle of rights' (which in the aggregate make np an absolute or complete estate) bnt only some of them, the remainder being enjoyed by other persons.''
The definitions given in the Act do not abrogate or vary this meaning. The respondent State cannot invoke in its aid section 3, sub-clause (1) of the Act which speaks of the vesting of proprietary rights free of all encumbrances, because the rights of the petitioners either as buyers or lessees or licensees are not encumbrances as ordinarily understood. The last part of clause (a) of section 4 ( L) indicates that mortgage debts and charges on the proprietary rig.ht are meant by encumbrances.
In this view, it becomes unnecessary to consider the question as to when title in the property passes to the transferee. Section 4, sub-section (3) of the Indian Sale of Goods Act which lays down that in . h ca,se of saje of future gods the cop.tract 11/mouns
S.C.R. SUPREME COURT REPORTS 485
only to an agreement to sell does not seem to be 1952 applicable to the contracts and agreements here, asp· 0-,,tbl. t e goo s are h d not " f uture goo s d " as e ne m su d fi d · b .- Jethabai Patel '""' ' '° a iai clause (6) of the Act which states that they mean and Go. goods to·be manufactured or produced or acquired by v. the seller after the making of the contract of sale. The State of BenJ·amin says in his treatise on Sale (8th Edition) Madhya P1'adesh. at page 136:
"Things not yet existing which may be sold (that Ghandrasekhara is to say, a right to which may be immediately grant- Aiya,. J. ed) are those which are said to have a potential existence, that is, things which are the natural produce, or expected increase of some thing already owned or possessed by the seller. A man may sell the crop of hay to be grown in his field, the wool to be clipped from his sheep at a future time, the milk that his cows will yield in the coming month, and similar things. Of such things there could be, according to the authorities, an immediate grant or. assignment, whereas there could only be an agreement to sell where the subject of the contract is something to be afterwards acquired, as the wool of any sheep, or the mil'k of any cows, which the seller might buy within the year, or any goods to which he might obtain title within the next six months."
The goods covered by the present petitions are goods which have a potential existence, and according to the decisions discussed by the learned author, there can be a sale of a present right to the goods as soon as they come into existence. Whether title passes on the date of the contract itself or later is really dependent on the intention of the parties, and as already stated, in these petitions the stipulated consideration has passed from the transferees to the proprietors, and possession also has been taken.
We hold that the respondent has no right to interfere with the rights of the several petitioners under the contracts a.nd agreements in their favour set out in their petitions, and we hereby issue a writ prohibiting the State from interfering in any manner whatsoever with the enjoyment of those rights by the
'
486 SUPREME COURT REPORTS [1953]
!962 petitioners. In cases where the periods under the F i.rm. 0-hh otabli' ai-. contracts have expired, or where the proprietors . ) h.have Jethabai Patel st1l to recover anyt mg from the transferees after and ca. the date of vesting, the State will be at perfect liberty v. to assert and enforce its rights standing in the The State of shoes of the proprietors. The respondent will pay Madhya the petitioners their respective costs. Pradesh.
Petition allowed.
Chandra!ekhara Aiyar J. Agent for the .petitioners in Petitions Nos. 232, 233, 286, 309 and 320 : Rajinder Narain.
Agent for the petitioners in Petitions
Nos. 350 and 351: M. S. K. Sastri.
Agent for the petitioners in Petitions Nos. 319, 354 and 490: Harbans Singh.
Agent for the respondents in all petitions : G. H. R~jadhyaksha.
1953 COMMISSIONER OF INCOME-TAX, MADRAS. v. Deo. 22.
K. SRINIVASAN AND K. GOI'ALAN.
[MEHR CHAND MAHAJAN, DAS and BHAGWATI JJ.]
Indian Income-tax Act (XI of 1922), ss. 2 (1), 25 (3) & (4), 26 (2)-Fir'ni charged under Act of 1918-Acc01inting year ending on 30th June each year-Transfer of bnsiness on 1st March, 1940 -Exemption from tax under s. 25 (4)- Period for which exemption ca1' be granted-"End of previoZ<s year", meaning of-Interpretation -Directions in Inoon~e -tax Manual, value of,
.-l,
Two brothers who had been carrying on in partnership a business, which ha.a been assessed to income-tax under the Indian Income-tax Act oi 1918 and the accounting year of which was a period of 12 months ending on the 30th June each year, transfer• red the business to a limited company on the 1st March, 1940, and claimed in the assessment Jar the year 1940-41 that under s. 25 (4) of the Income-tax Act, 1922, they were not liable to pay income-tax on the income of their business from 1st July, 1938, up to 29th February, 1940, a period of 20 months. The Income-tax authorities were of the view that exemption could be claimed only
2 issues framed by the court
Whether contractual rights to pluck tendu leaves, cultivate lac or cut timber from estates vested in the State under the Madhya Pradesh Abolition of Proprietary Rights Act, 1950.
Whether such contract rights were encumbrances extinguished by section 3(1) vesting provisions.
Colour shows how this judgement treated each authority
Visheshwar Rao v. The State of Madhya PradeshApplied¶44
[1952] S.C.R. 1029 · Who else cites this
Mohanlal Hargovind v. Commissioner of Income-tax, C.P. and BerarReferred¶72
(I.L.R. [1949] Nag. 892) · Who else cites this
4 provisions across 2 enactments
Firm Chhotabhai Jethabai Patel and Co.
State of Madhya Pradesh
Mehr Chand Mahajan
Chandrasekhara Aiyar
Bhagwati
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
