1959

552 SUPREME COURT REPORTS [1960(1)]

SRI RAJAH VELUGOTI VENKATA SESHA

VARDA RAJA GOPALA KRISHNA YACHANDRA

BAHADUR KUMAR RAJAH, VENKATAGIRI

v.

THE STATE OF ANDHRA PRADESH

(S. R. DAS, C.J., s. K. DAS, A. K. SARKAR,

K. N. WANCHOO and M. HIDAYATULLAH, JJ.)

Estates Abolition-Termination of lease-Service of notice and

payment of compensation,

if and when necessa1y-Madras Estate

(Abolition and

Convcrsio" iitto Ryotwari) Act (Madras XXVI of

r948). s. 20.

The principal question for determination in these appeals.

arising

out of writ petitions filed in the High

Court, related to

the validity of an order passed by the Board of Revenue (Andhra)

terminating

the appellant's lease in respect of certain state

quarries situated in the Venkatagiri Estate, which had been

notified under

s. 3 of the Madras Estate (Abolition and Conver­

sion into Ryotwari) Act,

1948 (Mad.

XXVI of 1948), under the

second proviso to s. 20(1) of the Act, on the finding that the said

lease was

granted subsequent to July

1, 1945, an.d was for a

period exceeding one year, without giving the appellant three

months' notice under

the third proviso to that section or provid­

ing for compensation under sub-s.

(2) thereof. The appellant

had also claimed renewal

of the lease under r. 47 of the Mineral

Concession Rules, 1949· which was rejected by the Board as well

as by

the High

Court. The contention on behalf of the appellant,

in substance, was

that the words

"such right" in the third

proviso to s. 20(1) referred to the right mentioned in the second

proviso"namely, the right created on or after July I, 1945, and

thus made applicable to it the provision of sub-s. (2) of the section,

and before such right could be terminated

the provisions of the

third proviso relating to notice and sub-s. (z) as to compensation

had to be complied with.

Held,

that the contention raised on behalf of the appellant

was without substance

and must be negatived.

The scheme

of the Act was to render all rights created after

July l, 1945, and for a period exceeding one year, ineffective and

s.

20, properly construed, made it amply clear that its second

proviso was a self-contained provision

that rendered such rights

void against

the Government and, even if they were voidable and

not void, the aid of the third

proviso· was wholly uncalled for.

The third proviso must be held to refer solely

to termination of

rights created before

July

1, 1945·

A. M. S.S. V. M. & Co, v. The State of Madras, l.L.R. (1953)

Mad. n75, referred to.

S.C.R. SUPREME COURT REPORTS 553

The rule framed by the Madras Governor in exercise of the r959

powers conferred on him by s. 67(6) and (2) of the Act could not -

attract the operation of the third proviso nor could it change the Raja of Venkatagiri

true meaning of s. 20 of the Act. v.

Held, further, that r. 47 of the Mineral Concession Rules, Stats of

1949, which could at best insert a few terms in the lease, could Andhra Pradesh

not apply to a case, such as the present one, where the lease itself

stood determined under the second proviso

of s.

20 of the Act

and its terms fell with it.

CIVIL APPELLA'IE JURISDICTION; Civil Appeals Nos.

188 to 190 of 1958.

Appeals from the judgment

and order dated

Novem­

ber 20, 1957, of the Andhra Pradesh High Court, in

Writ Petitions Nos. 1 of 1956, 19 and 470 of 1957.

A. V. Viswanatha Sastri, V. Vedantachari and

K. Sundararajan, for the appellant.

H. N. Sanyal, Additional Solicitor-General of India,

D. Venkatappiah Sastri and T. M. Sen for respondent

No.

1.

K. R.

Ohowlhuri, for respondent No. 2.

1959. August 14. The Judgment of the Court was

delivered by

DAS C: J.-These three appeals are directed against D«sC. J.

the judgment and order pronounced by a Bench of

the Andhra Pradesh High Court on November 20,

1957, whereby three writ petitions, namely, No. 1 of

1956, No. 19 of 1957 and No. 470 of 1957, which had

been filed by the appellant and were heard together,

were dismissed with costs. These appeals have been

filed with certificates granted by the High Court of

Andhra Pradesh.

The circumstances under which

the three writ

petitions came to be filed by the appellant

may

. now

be narrated.

It is alleged that on January

10, 1942,

an agreement was entered into between the Rajah of

Venkatagiri and one Sri Balumuri Nageswara Rao

whereby the

Rajah agreed to give annual leases in

respect

of certain slate quarries within his estate for

five yea.rs in succession commencing from February

1942

if the Rajah was satisfied with the .work carried

on by the lessee during the preceding year. It was

55' SUPREME COURT REPORTS [1960(1)]

z959 further stipulated that if the leases were given

R

. .,-v kat .. continuously for five years, then the lessee would be

a1a oJ en agiri . .

v. entitled at the end of the fifth year to obtam a. lease

state of from the Rajah for a period of 20 years commenc-

Attdhra Pradesh ing from the termination of the fifth year. On the

Das C. f.

expiry of the fifth year, however, the Rajah granted

another lease to the said Balumuri Nageswara Rao

for a short period commencing from February 1,

1947,

and ending on November 30, 1947.

On Decem­

ber 10, 1947 the saidlBalumuri Negeswara Rao is said

to

have assigned his right, title and interest under the

said agreement dated January

10, 1942, to the appel­

lant, one of the sons of the Rajah. The Rajah on the

same day granted a lease for twenty years to the

appellant. On September 7, 1949, the Venkatagiri

estate was notified under s. 3

of the Madras Estate

(Abolition and

Conversion . into· Ryotwari) Act 1948

(Madras Act

XXVI of 1948), hereinafter referred to

as the abolition Act.

On the same date the appellant

applied

to the

Collector for confirmation of the lease

granted by the Rajah to him. Nothing appears to

have happened until February 12, 1952, when a notice

was issued

from the office of the Board of Revenue

(Andhra) calling upon

the appellant to

show cause

within two

months from the date of receipt of that

notice as to why the lease should not be terminated

without any compensation under the second proviso

to s.

20(1) of the Abolition Act. The appellant showed

cause which

apparently did not satisfy the said

autho­

rities. Instructions appear to have been issued to the

manager of the Venkatagiri estate requiring him to

take over possession of the slate quarries which were

then being worked by the appellant immediately after

the expiry of two months' notice issued to him. The

appellant promptly filed a writ petition, No. 287 of

1952 in the Madras High Court praying for the issue

of a writ in the nature of a writ of mandamus direct­

ing the Madras State to forbear from terminating the

leasehold right of the petitioner in the slate quarries

and from interfering with his possession and working

of the slate quarries and other ancillary reliefs. The

writ petition having come up for hearing before

S.C.R. SUPREME COURT REPORTS 555

Umamaheswaram, J., the learned Judge on July 18, x959

1955, made an order directing the Government to hold R . ,,-v k

1

..

' d f h-Ab l' ' A d d 'd a;a

0

' en a agm

an enqmry un er s. 20 o t e o rt10n ct an eCI e v.

whether the lease had been granted prior or subse- state of

quent to July l, 1945. The order required the Andhra Pradesh

Government to hold the enquiry and pass the appropri-

ate orders within three months from the date of that Das C. ].

order. The Board of Revenue caused an enquiry to

made by the Director of Settlements who, after taking

evidence, oral and documentary, made his report to

the Board of Hevenue. The Board of R.evenue sub-

mitted a report to the Government on October 20,

1955, and the Government after considering the

Board's report instructed the latter to dispose of the

case on merits. Thereupon the Board of R.evenue

passed an order on December 27, 1955, declaring that

the lease to the appellant had been granted subse-

quent to July 1, 1945, and that, as the lease was for

a period exceeding one year,

it was not enforceable

against

the Government, according to the second

proviso to

s.

20 (1) of the Abolition Act. On that

finding the Board of Revenue declined to ratify the

lease and terminated it under the powers delegated to

it under the R.ules framed under the Abolition Act.

The Board of Revenue also directed the Collector to

take possession of the slate quarries from the appel-

lant. The appellant

promptly filed writ petition No. 1

of 1956 praying for the issue of a writ of mandamus

directing the

State of Andhra Pradesh to forbear from

terminating his leasehold right in the s.Jate quarries.

He filed another petition, being writ petition No. 19

of 1957, for the issue of a writ of certiorari to quash

the order made by the Board of Revenue on Decem-

ber 27, 1955.

In the meantime on September 21, 1955, the appel­

lant had applied to the Board of Revenue, Andhra

for renewal of the lease under r. 47 of the Mineral

Concession Rules, 1949. That application was dis­

missed on May 23, 1957. The appellant thereupon filed

a

writ petition No. 476 of 1957 for quashing the last

mentioned order passed by the Board of Revenue or,

in the alternative, for the issue of a writ of

mandamus

556 SUPREME COURT REPORTS [1960(1)]

r959 directing the State of Andhra Pradesh to issue a fresh

R

. .,-v k t . .lease in accordance with r. 47 of the Mineral Concession

a;ao1 en a a1iri l A h . . .

v. Ru es, 1949. ll t ese writ pet1t10ns were heard

state of together and were disposed of by a common judgment

Andhra P,adesh against which these appeals have been filed.

Dase. j.

The principal question canvassed before us is that

the termination of the appellant's lease by the order

dated December 27, 1955, was

bad as it did not give

three months' notice

to the appellant or provide for

any compensation as required by s.

·20 of the Aboli­

tion Act. The answer to the question depends on a

true construction of that section which runs thus:-

" 20. (1) Saving of rights of certain lessees and others.

-In cases not governed by sections 18 and 19; where

before

the notified date, a landholder has created any

right in any land (whether by way of lease or

other­

wise) including rights in any forest, mines or mine­

rals, quarries, fisheries or ferries, the transaction

shall be deemed to be valid; and all rights and oblig­

ations arising thereunder, on or after the notified

date, shall be enforceable

by or against the

Govern­

ment:

Provided that the transaction was not void or

illegal under any law in force at the time:

Provided further that any such right created on

or after . the 1st day of July 1945 shall not be

enforceable against

the Government, unless it was

created for a period

not exceeding one year :

Provided also

that where such right was created

for a period exceeding one year, unless

it relates to

the private land of the landholder within the

mean­

ing of section 3, clause (10), of the Estates Land Act,

the Government may, if, in their opinion, it is in the

public interest to do so, by notice given to the person

concerned, terminate

the right with effect from such

date as may be specified in the notice, not being

earlier

than three months from the date thereof.

(2) The person, whose right has been terminated

by the Government under the foregoing proviso,

shall be entitled

to compensation from the

Govern­

ment which shall be determined by the Board of

S.C.R. SUPREME COURT REPORTS 557

Revenue in such

manner as may be prescribed, x959

having regard to the value of the right and

the . - ..

unexpired portion of the period for which the right Ra1a ofVenkatagm

was created. The decision of the Board of Revenue Sta~~ of

shall be final and not be liable to be questioned in Andhra Pradesh

any Court of law.

The. long title

and the preamble to the Abolition Das c. J.

Act indicate, it is urged, that the object of the Act is to

provide for the acquisition of the rights of landholders

and that the policy of the Act is not to interfere with

the rights of other persons in the estate. This assump-

tion, however, is

not borne out by the substantive pro-

visions

of the Act itself. Section 3 sets forth the

consequences which ensue on

the notification of an

estate and it is clear that on an estate being notified

the entire estate is to stand transferred to the Govern-

ment and all rights and interests created in or over

the estate before the notified date by the principal or

any other landholder must, as against the Government

cease

and determine.

We are next reminded

that the Abolition Act was

enacted when

s. 299 of the Government of India Act,

1935, was

in force.

Under that section no property

could be acquired save for a public purpose and save

by authority of a law which provides for compensa­

tion.

The Abolition Act was enacted by the Madras

Legislature

in exercise of the legislative power con­

ferred on

it by the Government of India Act, 1935.

According to learned counsel for

the appellant, the Court

must assume that the Madras legislatur.e acted pro­

perly

and within the limits of powers conferred on it.

The

C0urt must, therefore, interpret the provisions

of the Abolition Act on the footing that it is a valid

piece

of legislation and that its provisions do not offend

s. 299 of the Government of India Act, 1935. The

Abolition Act is a

law for the compulsory acquisition

of property and, therefore, the court must put that

interpretation on the relevant sections which will

result in the

payment of compensation to the person

who is deprived

of his property. It may be conceded

71

558 SUPREME COURT REPORTS [1960(1))

r959 that normally this is the correct approach to the pro.

Raja of ;:katagi i blem, but the argument loses much of its force. When

v. ' we advert to the provisions of Art. 31(6) and 31 B of

Stat. of the Constitution of India read with the Ninth Schedule

AndAra Pradesh thereto. Those provisions proceed on the assumption

Das C. ].

that certain laws passed under the Government of

India Act, 1935, did offend s. 299 of that Act and

expressly save those Acts. The Abolition Act is one

of the Acts included in the Ninth Scheclule and is pro­

tected by Art. 31B. In the circumstances, the court

must interpret the Abolition Act as it finds it by giving

the ordinary and natural meaning to the words used

by the Madras legislature and uninfluenced by any

pre-conceived notion as to validity of the Abolition

Act.

Provision for

payment of compensation for the

determination of rights created before the notified

date is provided in sub-s. (2) of s.

20 of the Abolition

Act. Under that sub-section a person can claim com­

pensation only when his right is terminated by the

Government under "the foregoing proviso". The

words "foregoing proviso", it is conceded, refer to the

third proviso to sub-s. ( 1 ). The endeavour of Jrarned

counsel for the appellant, therefore, is to induce us to

hold that the termination of the appellant's leasehold

rights which were created on or after July 1, 1945,

could

only be done under the third proviso, for

other­

wise the provisions of sub-s. (2) which provide for com­

pensation will not be attracted. Action taken by the

Government under the third proviso to sub-s. (1) can

be supported only if the conditions laid down in that

proviso can be shown to have been complied with,

namely, that the Government had formed the opinion

that it was in the public interest to terminate such lease

and that three months' notice had been given before

such termination. The argument is that the second

proviso

is merely declaratory and the third proviso

supplies the machinery for giving effect to the

provi­

sions of the second proviso. According to the argument

the third proviso is not an independent proviso but

is a sort of proviso to the second proviso. In other

words, the third proviso, according to learned counsel

S.C.R. SUPREME COURT REPORTS 559

for the appellant, merely enables the Government to z959

exercise the right conferred on it by the second proviso R .

1

-k

and therefore, the Government, if it intends to avail aJao v:_n ata

5

itself of the right under the second proviso, must state of

comply with the conditions laid down in the third pro-Andhra Praded..

viso. It is said that the words " such right " in the

third proviso relate to the rights mentioned in the Das c. J.

second proviso, that is to say, rights created on or after

July 1, 1945. The scheme ofs. 20 of the Abolition Act

is said

to

oe to provide, firstly that rights created by

w,.y of lease or otherwise by the landholder prior to

t]i).e notified date should be deemed to be valid and all

rights

and obligations arising thereunder on or after

the notified date should be enforceable by or against

the Government. We start with this broad proposition.

Then

we come to the provisos. We may omit the first

proviso, for

it has no application to the facts of this

case. The implications of the second proviso, learned

counsel for

the appellant points out, are two fold,

namely, (a)

that all rights created before the notified

date but after July 1, 1945, for a period not exceeding

one

year would be valid and enforceable both by and

against the Government by the operation of the body

of sub-s. (1) itself and (b) that rights created before the

notified date but after July 1, 1945, for a period

exceeding one

year would also be valid and enforceable

by the Government against the person in whose favour

such

right had been created by reason of s. 20(1 ). Then

we have

-the express provision of the second proviso,

namely,

that rights created before the notified

dat" but

after July 1, 1945, for a period exceeding one year

would not be enforceable against the Government. In

other words, the true meaning of the second proviso is

said

to be that rights created after July 1, 1945, are

only voidable

at the instance of the Government and

that that being the position, the Government must do

some overt

act to terminate the transaction. The

machinery for such a termination,

it is urged, is to be

found

in the third proviso and

the conclusion is pressed

upon us

that such termination can be brought about

only on

the fulfilment of the conditions laid down in

t.he third proviso. The final step in the argument is

560 SUPR.EME COURT REPORTS [1960(1)]

x959 that the person whose rights are terminated under the

R

. ,,-h .. third proviso which is the "foregoing proviso " refer-

a1ao1 Ven atagiri . ' .

v red to m sub-s. (2) must, therefore, be entitled to com-

Stat; of pensation under sub-s. (2). We are unable to accept

Andhr• Prad"h this line of argument as correct.

Das C. ].

The provision of s. 20 of the Abolition Act has been

considered

and construed by a Bench of the Madras

High

Court. We may, with advantage, quote here a

part of the views expressed by Venkatarama Ayyar, J.,

in delivering the judgment of that Bench in A.M.S.S.

V.M. & Co. v. The State of Madras(').

" The argument of the petitioners is that the words

"such rights" in the third proviso have reference

to the rights created after the 1st July, 1945, men­

tioned in the previous proviso and on that construc­

tion, the lease in favour of the petitioners could be

terminated only in accordance with that proviso by

giving

three months' notice. But this is to read the

third proviso as a proviso not to the section, but to

the second proviso and there is no warrant in law

for such a construction.

The words

" such rights"

refer in t.he second proviso on!~-to the right dealt

with in the body of the section and those words

occurring in the third proviso, should also bear the

mune interpretation. That· the third proviso does

not govern t.he second proviso is also clear if the

scope of the two provisos is examined. Under the

second proviso, leases for a period exceeding one

year and created after 1st July, 1945, are not enforce­

able against the Government. That is to say, the

Government can elect to disaffirm them and they

become, on such disaffirmance, void. If the third

proviso also a pp lies to such leases, as the petitioners

contend,

then the lease can be terminated only if the

Government

is satisfied that it is in the public

interest that it should be terminated and that

further, in such cases, the lessee will also be entitled

to compensation under s. 20(2). In other words,

while

under the second proviso the Government can

terminate

th~ lease at its option and unconditionally,

under proviso (iii) that can be done only if it is in

(1) l.L.R. (1953)_Mad. 1175, 1195.

S.C.R. SUPJ{EME COURT REPORTS 561

public interest and, in that event, on payment of r959

compensation, and this repugnancy can be avoidedR . ,,-v k ..

1 b

. h fi . t d' Cl'.' t a;a o, en atag"'

on y y construmg t em as re errmg o iueren v.

subjects. Then again, there is in proviso (iii) an state of

exception with reference to rights created over Atidh•a Pradesh

private lands; there is nothing corresponding to it in

the second 'proviso and that also shows that the Das c. J.

scope of the two proviims is different. The true

effect of the section can ue t:itated in three proposi-

tions: (i) Rights validly ercated prior to 1st July,

1945, will be valid; (ii) :mc:h rights, however, may be

determined under

the third proviso if it is in the

public interest to do so and in such cases, compensa-

tion will be payable

under-section 20(2); and (iii)

rights created aft.er 1st July, 1945, if they are for a

period exceeding one year, are liable to be avoided

under

the second proviso. In this view, we are of

opinion that the notice, dated 13th March 1951, falls

under

the second proviso and is

valid."

It is pointed out that the attention of the Madras High

Court was not drawn to the rule framed by the

Governor of Madras in exercise of powers conferred on

him bys. 67 (1) and (2) of the Abolition Act. That

rule runs as follows:-

"Rule

ln the case of any right in any land created by a

landholder on

or after the 1st day of July 1945 for a

period exceeding oue

year a.nd falling nnder the

second proviso to t:iect.ion 20(1) of the .said Act, the

authority to decide whether the right should be ter­

minated or allowed to continue shall be the Board of

Revenue. Any order passed by the Board of Reve­

nue under this rule shall be subject to revision by

the Government."

We do not think that the rule in any way impairs the

correctness of the Madras decision. It will be noticed

that that rule only indicates the authority who is to

decide whether

the right falling under the second

pro­

vise should be terminated or allowed to continue. It

does not purport to lay down the manner in which

such termination is

to be brought about. In other

words, that rule does not, in terms, attract the

562 SUPREME COURT REPORTS [1960(1))

z959 operation of the third proviso at all. Even if that rule

- has the effect contended for, it cannot, in our view,

RajaofVenkatagfri change the meaning of s. 20 which we gather on a

si:i~ of true construction thereof.

Andhra Pradesh In our view the scheme of the Act is to render inffect-

ive all

rights created after

July 1, 1945, for a period

Dos c. f. exceeding one year. In one view of the matter it may

well be taken as meaning that the creation of rights

after July 1, 1945 is, by the force of the second proviso

itself,

void as against the Government without any

further necessity for any overt act to be done by the

Government to avoid the same. In that

sense,the

second proviso would be a self contained provisio and

the aid of the third proviso would be wholly uncalled

for.

But assuming that the

effoct of the second pro­

viso is to make the rights created after July 1, 1945,

only voidable and not void, all that follows is that the

Government must do something to avoid them. There

is no warrant for saying that the avoidance must be

under the terms of the third proviso. If the third

proviso at all applied to rights created after July 1,

1945,

then the second proviso

would be otiose and need

not have been enacted at all. In our opinion the third

proviso deals with the termination of rights created

before July 1, 1945. The second proviso makes rights

created after July 1, 1945, unenforceable as against the

Government. The reason for conferment of such an

unconditional right on the Government is well known,

for

it was on that cru.cial date that the party which

came

into power later declared its intention to abolish

all zemindaries

and intermidiary interest in land. The

second proviso was enacted to nullify the creation of

rights in anticipation of the impending legislation and

hence it was made unconditional. If any condition

was intended to be super.imposed on the right of the

Government to terminate the rights created after July

1, 1945, one would have expected those conditions to

be mentioned in the second proviso itself. In our

opinion, there is no substance in the principal point

urged by learned counsel appearing for the appellant

before us.

It was somewhat faintly argued by learned counsel

for the appellant that the Government should have

S.C.R. SUPREME COURT REPORTS 563

allowed the appellant's application for the renewal of z959

his lease under r. 47 of the Mineral Concession RulesR .

1

-v k ..

. a1a o en ala~,,.

of 1949. The argument is wholly untenable. That v.

rule provides that a mining lease granted by a private s1ate of

person shftll be subject to certain conditions therein Andhra Pradesh

specified. Th0 first condition thus laid down is that

the term of the lease should be renewed at the option of

the lessee for one period not exceeding the duration of

the original lease. The effect of this rule is, as it were,

to insert statutorily some new terms in the lease itself.

In other words, this rule does not do anything more

than add some terms to the lease. When, however,

the lease is determined under the second proviso, these

terms must also fall with it.

No other point

has been urged before us and for

reasons

stated above, we think that these appeals

should be dismissed with costs

and we order accord-

ingly.

Appeals dismissed.

THE

HINDUSTAN FOREST COMPANY

v.

LAL CHAND AND OTHERS

(S. R. DAS, C.J., s. K. DAS, A. K. SARKAR,

K. N. W ANCHOO and M. HIDAYATULI,AH, JJ.)

Limitation-M ietual accO'unt--Reciprocal demands-Contract

for supply of goods-Delivery of goods and payments, whether

independent

obligations-] ammu and Kashmir Limitation Act, I995

(]ammu

and Kashmir IX of

r995), art. rr5-Indian Limitation

Act, z908 (9 of r908), art. 8 5·

Under a contract for the sale of goods, the buyer paid an

advance. amount t~~ards the price of the goods to be supplied

and

yanous

quantities of goods were thereafter delivered by the

., sellers. The buyer from time to time made various other

payments towards the price

of the goods after they had been

delivered. The last delivery

of goods was made on June 23,

1947, and the suit was brought on October ro, 1950, by the sellers

for

the balance of the price due for goods delivered. The sellers

pleaded

that the suit was within time and relied on art. IIS of

the

Jammu and

Ka~hmir Limitation Act under which the period

of limitation was six years for a suit " for the balance due on a

mutual, open and current account, where there

have been

re­

ciprocal demands between the parties. "

Das C. J

I959

August x9·