Extinguishment of Right of Property in India

Extinguishment of Right of Property in India: A Legal Analysis

Introduction

The concept of property, a cornerstone of civil society, entails a bundle of rights that an individual or entity holds over an asset. In the Indian legal system, while the right to property has undergone significant constitutional evolution, its protection remains a critical aspect of the rule of law. The extinguishment of this right signifies the cessation or termination of such proprietary claims. This article provides a comprehensive analysis of the various modes through which the right of property can be extinguished under Indian law, examining the constitutional safeguards, statutory provisions, and judicial pronouncements that shape this complex area of jurisprudence. The focus will be on how property rights, once vested, can be legally brought to an end, either by operation of law, actions of the state, or through specific legal processes such as adverse possession.

Constitutional Framework for Property Rights

The Indian Constitution originally enshrined the right to property as a fundamental right. However, through constitutional amendments, its status has been altered, though not entirely abrogated. Understanding this evolution is crucial to comprehending the state's power to affect property rights, leading to their extinguishment.

Evolution from Fundamental Right to Constitutional Right

Initially, Article 19(1)(f) guaranteed citizens the right to acquire, hold, and dispose of property, and Article 31 provided protection against deprivation of property save by authority of law and for public purpose with compensation. The Supreme Court in State Of West Bengal v. Bela Banerjee And Others[1] interpreted "compensation" under Article 31(2) to mean a "just equivalent" or full indemnification of the owner. This interpretation led to several constitutional amendments. The Constitution (Forty-Fourth Amendment) Act, 1978, marked a watershed moment by repealing Article 19(1)(f) and Article 31, and inserting Article 300-A.

Article 300-A: Deprivation of Property by Authority of Law

Article 300-A of the Constitution of India states: "No person shall be deprived of his property save by authority of law." While no longer a fundamental right, the right to property is now a constitutional and human right.[2] The Supreme Court in Vidya Devi v. State Of Himachal Pradesh And Others[3] emphasized that the state cannot dispossess a citizen of their property except in accordance with the procedure established by law. This was reiterated in Jilubhai Nanbhai Khachar And Others v. State Of Gujarat And Another,[4] which clarified that deprivation under Article 300-A must be by sanction of law. The Court in K.T Plantation Private Limited And Another v. State Of Karnataka[5] further affirmed that Article 300-A necessitates a public purpose and compensation, though the adequacy of compensation may not be as rigorously justiciable as it was under the original Article 31.

Principles of Public Purpose and Compensation

Even under Article 300-A, the deprivation of property must generally be for a public purpose and accompanied by compensation. The Supreme Court in State Of Gujarat v. Shantilal Mangaldas And Others[6] held that if a law specifies principles for compensation, the courts would not scrutinize its adequacy unless the principles are irrelevant or arbitrary. However, the requirement for "fair compensation" or "just equivalent," as established in Bela Banerjee,[1] continues to influence judicial thought, ensuring that compensation is not illusory. In Rajiv Sarin And Another v. State Of Uttarakhand And Others,[7] the Court mandated compensation for forest land vested in the state, even if it was not income-generating, reinforcing the principle that lawful deprivation necessitates recompense.

The Calcutta High Court, in a series of cases including STATE OF WEST BENGAL & ORS v. ASIT BARAN SARKAR & ORS,[8] has consistently held that where the state utilizes private land without initiating acquisition proceedings, such de facto acquisition must be regularized under the prevailing land acquisition law (currently The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013), and compensation must be paid, drawing upon the principles laid down in Vidya Devi.[3]

Statutory Extinguishment of Property Rights

Various statutes in India provide for the extinguishment of property rights under specific circumstances. Key among these are the Limitation Act, 1963, land reform legislations, and laws governing state acquisition.

The Limitation Act, 1963

The Limitation Act, 1963, plays a pivotal role in the extinguishment of property rights, primarily through the doctrine of adverse possession and the specific provision of Section 27.

Section 27: Extinguishment of Right to Property

Section 27 of the Limitation Act, 1963, provides: "At the determination of the period hereby limited to any person for instituting a suit for possession of any property, his right to such property shall be extinguished." As observed in Janatha Dal Party, Bangalore v. The Indian National Congress And Others,[9] this section is an exception to the general rule that limitation only bars the remedy but does not extinguish the right. For property, the expiry of the limitation period for suing for possession results in the extinguishment of the title of the true owner. The Supreme Court in Eureka Builders v. Gulabchand[10] affirmed that if a suit for possession is not filed within the 12-year period prescribed under Articles 64 or 65, the title of the original owner is extinguished by virtue of Section 27. A plea of extinguishment of right under Section 27 essentially amounts to a plea of adverse possession, as noted in Anil S/O Vishwanath Jadhav… v. Pankaj S/O Indrajeet Bassi….[11]

Adverse Possession as a Mode of Extinguishment and Acquisition

Adverse possession is a process by which title to another's real property is acquired without compensation, by holding the property in a manner that conflicts with the true owner's rights for a specified statutory period. For adverse possession to be established, possession must be actual, open, notorious, exclusive, continuous, and hostile for the statutory period (typically 12 years).[12] The Supreme Court in P.T Munichikkanna Reddy And Others v. Revamma And Others[13] emphasized the necessity of animus possidendi (intention to possess exclusively) and characterized property rights as human rights, thus requiring strict proof for adverse possession. The Court in Karnataka Board Of Wakf v. Government Of India And Others[14] reiterated the essential elements for a valid claim of adverse possession. The right to recover possession based on title is absolute unless adverse possession for 12 years is successfully pleaded and proved by the defendant.[15]

Significantly, the Supreme Court in Ravinder Kaur Grewal And Others (S) v. Manjit Kaur And Others (S)[16] held that a person who has perfected title by adverse possession can file a suit for declaration of title and to protect possession, effectively using adverse possession as a "sword" and not merely a "shield." This decision overruled earlier contrary views and affirmed that adverse possession extinguishes the true owner's title and confers it upon the adverse possessor.

However, the state, being a protector of citizens' rights, cannot claim title by adverse possession against its own citizens. This principle was firmly established in State Of Haryana v. Mukesh Kumar And Others[17] and reiterated in Vidya Devi.[3]

Nature of "Right" Extinguished

The Kerala High Court in Treesa Mohanan v. O.V. Alexander[18] deliberated on whether the "right" extinguished under Section 27 of the Limitation Act includes "title." The prevailing judicial consensus, particularly after Ravinder Kaur Grewal,[16] is that the extinguishment under Section 27 encompasses the entire title of the original owner, which then vests in the adverse possessor.

Land Reform and Tenure Abolition Laws

Post-independence India witnessed extensive land reforms aimed at abolishing intermediary tenures and ensuring equitable distribution of land. Legislations like the Bombay Land Revenue Code and Land Tenure Abolition Laws (Gujarat Amendment) Act, 1982, challenged in Jilubhai Nanbhai Khachar,[4] led to the extinguishment of traditional rights of Girasdars and Barkhalidars, vesting such lands in the state or tillers. Such laws, often placed in the Ninth Schedule of the Constitution, were upheld as promoting socio-economic justice, even if they resulted in the extinguishment or modification of existing property rights. The Supreme Court in K.T Plantation[5] also upheld state actions under land reform acts. In Manchegowda And Others v. State Of Karnataka And Others,[19] an act aimed at protecting lands granted to Scheduled Castes and Scheduled Tribes by declaring certain transfers void was upheld, effectively extinguishing the rights of transferees in contravention of grant conditions.

Acquisition by the State

Due Process of Law

The state has the power of eminent domain to acquire private property for public purposes. However, this power must be exercised strictly in accordance with the law. As held in Vidya Devi,[3] any deprivation of property without following the due process stipulated by the relevant Land Acquisition Act is illegal and void. This principle is reinforced by cases like Om Prakash v. Rajasthan State Road Transport,[20] stating that even an unauthorized occupant can only be ejected in the manner provided by law. The Calcutta High Court judgments[8] underscore that de facto acquisition without legal process necessitates regularization and payment of compensation under the current acquisition law.

Compulsory Acquisition and "Extinguishment"

The term "extinguishment" in the context of constitutional provisions like Article 31A (now largely historical but relevant for understanding the term's scope) was interpreted in Kunjukutty Sahib v. State Of Kerala And Another.[21] The Supreme Court held that "extinguishment" could include the transfer of land from one person to another, such as the extinguishment of a landlord's rights and their transfer to a tenant, and was not limited to a total annihilation of rights without substitution.

Extinguishment under Other Specific Statutes

Transfer of Property Act, 1882

The Transfer of Property Act, 1882, also contains provisions leading to the extinguishment of certain rights. For instance, Section 60 provides for the right of redemption of a mortgage, which can be extinguished only by an act of the parties (e.g., a registered deed) or by a decree of a court, as held in Mr v. S.A. Kamtam And Another Reported.[22]

Income Tax Act, 1961

The term "extinguishment of any rights therein" in relation to a capital asset is included in the definition of "transfer" under Section 2(47) of the Income Tax Act, 1961, making such extinguishment a taxable event for capital gains. The Gujarat High Court in Commissioner Of Income-Tax, Gujarat-Ii v. Vania Silk Mills (P.) Ltd.[23] and KISHORBHAI HARJIBHAI PATEL v. INCOME TAX OFFICER WARD 1(2)(4)[24] defined "extinguishment" broadly as complete wiping out, destruction, or termination. The Karnataka High Court in The Commissioner Of Income Tax v. Sri H Anil Kumar[25] held that giving up the right to claim specific performance of a contract for consideration amounted to extinguishment of a right in property, thus a transfer. Even the destruction of an asset leading to extinguishment of rights therein could be a "transfer."[26] However, not all cessations of rights constitute a "transfer" by extinguishment for tax purposes. For instance, receipt of insurance money for loss of machinery was not treated as capital gain arising from extinguishment in Anarkali Sarabhai, Shahibag House, Ahmedabad v. Commissioner Of Income Tax, Ahmedabad .,[27] and a partner's retirement and receipt of their share was not considered an extinguishment of rights in goodwill for gift tax purposes in Commissioner Of Income-Tax v. Smt. Asha Gulati.[28]

Judicial Interpretation of "Extinguishment"

The judiciary has played a crucial role in defining the contours of "extinguishment" of property rights.

Meaning and Scope

Courts have generally interpreted "extinguishment" to mean a complete termination or wiping out of rights.[23][24] However, as seen in Kunjukutty Sahib,[21] in specific constitutional contexts like agrarian reforms, it can also encompass modification or transfer of rights from one entity to another, rather than absolute annihilation.

Hostile Animus and Other Elements in Adverse Possession

In the context of adverse possession, judicial interpretation has focused on the stringent requirements for establishing such a claim. The necessity of animus possidendi (the intention to possess hostilely and to the exclusion of the true owner) was underscored in P.T Munichikkanna Reddy.[13] Mere long possession is insufficient; it must be coupled with the requisite hostile intent and other elements like openness, continuity, and exclusivity.[14]

Adverse Possession as a Sword, Not Just a Shield

The decision in Ravinder Kaur Grewal[16] is a landmark, clarifying that a person who perfects title through adverse possession can affirmatively sue to establish that title and protect their possession. This interpretation empowers the adverse possessor and solidifies the extinguishment of the original owner's title upon the expiry of the limitation period.

State's Inability to Claim Adverse Possession Against Citizens

The judiciary has been vigilant in preventing the misuse of the doctrine of adverse possession by the state. The Supreme Court in State Of Haryana v. Mukesh Kumar[17] and Vidya Devi[3] firmly established that the state, as a guardian of citizens' rights, cannot invoke adverse possession to usurp private property. Such an act would be contrary to the principles of a welfare state and the rule of law.

Conclusion

The extinguishment of the right of property in India is a multifaceted legal concept, governed by constitutional provisions, diverse statutes, and evolving judicial interpretations. From the operation of the Limitation Act, particularly Section 27 and the doctrine of adverse possession, to state-led acquisitions and land reforms, property rights can cease to exist through various legally sanctioned mechanisms. The transition of the right to property from a fundamental to a constitutional right under Article 300-A has reshaped the landscape, emphasizing deprivation only by "authority of law," which implicitly includes due process, public purpose, and fair compensation. Landmark judgments have clarified the meaning of "extinguishment," the rigorous standards for adverse possession, and the limitations on the state's power. The legal framework seeks to balance the sanctity of individual property rights with the state's legitimate needs for public welfare and socio-economic reform, ensuring that any extinguishment of property rights is, in principle, just, fair, and in accordance with the law.

References

  1. State Of West Bengal v. Bela Banerjee And Others (1954 AIR SC 170, Supreme Court Of India, 1953)
  2. K.T Plantation Private Limited And Another v. State Of Karnataka . (2011 SCC 9 1, Supreme Court Of India, 2011); Vidya Devi v. State Of Himachal Pradesh And Others (2020 SCC 2 569, Supreme Court Of India, 2020)
  3. Vidya Devi v. State Of Himachal Pradesh And Others (2020 SCC 2 569, Supreme Court Of India, 2020)
  4. Jilubhai Nanbhai Khachar And Others v. State Of Gujarat And Another (1995 SUPP SCC 1 596, Supreme Court Of India, 1994)
  5. K.T Plantation Private Limited And Another v. State Of Karnataka . (2011 SCC 9 1, Supreme Court Of India, 2011)
  6. State Of Gujarat v. Shantilal Mangaldas And Others (1969 SCC 1 509, Supreme Court Of India, 1969)
  7. Rajiv Sarin And Another v. State Of Uttarakhand And Others (2011 SCC 8 708, Supreme Court Of India, 2011)
  8. STATE OF WEST BENGAL & ORS v. ASIT BARAN SARKAR & ORS (Calcutta High Court, 2023); STATE OF WEST BENGAL & ORS v. BASANTI SARKAR & ORS (Calcutta High Court, 2023); STATE OF WEST BENGAL & ORS v. NIKHIL SARKAR & ORS (Calcutta High Court, 2023)
  9. Janatha Dal Party, Bangalore v. The Indian National Congress And Others (Karnataka High Court, 2013)
  10. Eureka Builders v. Gulabchand (Supreme Court Of India, 2018)
  11. Anil S/O Vishwanath Jadhav… v. Pankaj S/O Indrajeet Bassi…. (Bombay High Court, 2009)
  12. P.T Munichikkanna Reddy And Others v. Revamma And Others (2007 SCC 6 59, Supreme Court Of India, 2007); Karnataka Board Of Wakf v. Government Of India And Others (2004 SCC 10 779, Supreme Court Of India, 2004)
  13. P.T Munichikkanna Reddy And Others v. Revamma And Others (2007 SCC 6 59, Supreme Court Of India, 2007)
  14. Karnataka Board Of Wakf v. Government Of India And Others (2004 SCC 10 779, Supreme Court Of India, 2004)
  15. Kiran Kochhar and Others v. Mohit Gupta and Another (Himachal Pradesh High Court, 2024), referencing Ravinder Kaur Grewal And Others (S) v. Manjit Kaur And Others (S) (2019 SCC ONLINE SC 975, Supreme Court Of India, 2019)
  16. Ravinder Kaur Grewal And Others (S) v. Manjit Kaur And Others (S). (2019 SCC ONLINE SC 975, Supreme Court Of India, 2019)
  17. State Of Haryana v. Mukesh Kumar And Others (2011 SCC 10 404, Supreme Court Of India, 2011)
  18. Treesa Mohanan v. O.V. Alexander (2017 SCC ONLINE KER 1423, Kerala High Court, 2017)
  19. Manchegowda And Others v. State Of Karnataka And Others (1984 SCC 3 301, Supreme Court Of India, 1984)
  20. Om Prakash v. Rajasthan State Road Transport (Rajasthan High Court, 1997)
  21. Kunjukutty Sahib v. State Of Kerala And Another (Supreme Court Of India, 1972)
  22. Mr v. S.A. Kamtam And Another Reported (Gujarat High Court, 2013)
  23. Commissioner Of Income-Tax, Gujarat-Ii v. Vania Silk Mills (P.) Ltd. (Gujarat High Court, 1976)
  24. KISHORBHAI HARJIBHAI PATEL v. INCOME TAX OFFICER WARD 1(2)(4) (Gujarat High Court, 2019)
  25. The Commissioner Of Income Tax v. Sri H Anil Kumar (2011 CTR KAR 242 537, Karnataka High Court, 2011)
  26. Commissioner Of Income-Tax v. J.K Cotton Spinning & Weaving Mills Co. Ltd. (Allahabad High Court, 1986)
  27. Anarkali Sarabhai, Shahibag House, Ahmedabad v. Commissioner Of Income Tax, Ahmedabad . (Supreme Court Of India, 1997)
  28. Commissioner Of Income-Tax v. Smt. Asha Gulati (2003 SCC ONLINE DEL 1248, Delhi High Court, 2003)