Motipur Zamindari Co. v. State Of Bihar

Ramaswami, J.:— In these two applications which have been heard together an important question of law arises, viz., whether the Bihar Land Reforms Act is upon its true construction intended to apply to the zamindari estate of companies incorporated under the Companies Act of 1913.

In Miscellaneous Judicial Case no. 242 the petitioner is and incorporates company called Raja Janakinath Roy and Narendranath Roy & Co., Ltd. The company was registered in the year 1933 and its head-office is located at Calcutta. One of the objects of the company was to own and deal in zamindari land and house properties in the States of Bengal and Bihar. It is alleged on petitioner's behalf that on 6th November 1951, the State of Bihar acting under its authority under section 3(1) of the Bihar Land Reforms Act issued a notification declaring that the proprietary estates of the petitioner have passed to and become vested in the State of Bihar. On 6th June, 1952, the State Government issued notice to the petitioner under section 4(g) of the Act requiring that the possession of the properties should be given to the Collector on the date specified in the notice. The petitioner was also ordered under section 40 of the Act to produce documents, papers and registers relating to the zamindari estate. It is contended on behalf of the petitioner that on its proper construction the Bihar Land Reforms' Act did not operate on the zamindari properties of the incorporated companies. The petitioner submits that the notification issued by the State Government under section 3(1) and the notices issued under sections 4(g) and 40 of the Act were illegal, void, and without jurisdiction. The petitioner therefore prays that a writ in the nature of mandamus should be issued to the State of Bihar recommending it not to take possession of the zamindari estates owned by the petitioners.

In Miscellaneous Judicial Case no. 238, the material facts are similar. In this case the petitioner is Motipur Zamindari Company, Ltd., which has its registered office at Motipur within the State of Bihar. The notification under section 3(1) was issued by the State Government on the 25th September 1950, declaring that the properties of the petitioner had vested in the State of Bihar. There is an additional ground mentioned in the petitioner's affidavit, viz., that the petitioner is a subsidiary of the Motipur Sugar Factory, Ltd., to which the petitioner supplies sugarcane; that if the State acquires the zamindari estate of the petitioner the production of sugar in the Motipur Sugar Factory will be seriously affected. It is said that the control of Sugar Industry has been declared by Parliament by law to be expedient in the public interest. It is alleged that Sugar industry falls under item 52 of the Union List and the zamindari properties of the petitioner cannot be acquired under the Bihar Land Reforms Act.

The main question to be determined is whether upon a proper interpretation, the Bihar Land Reforms Act is intended to apply to companies incorporated under the Companies Act (Act VII of 1913).

The argument presented on behalf of the petitioners is that the State Legislature has no authority to legislate with respect to trading corporations or with non-trading corporations whose objects are not confined to one State. Mr. P.R Das referred to entry nos. 43, 44 and 45 of List I. Entry no. 43 relates to

“Incorporation, regulation and winding up of trading corporations, including banking, insurance and financial corporations but not including co-operative societies.”

Entry no. 44 is:

“Incorporation, regulation and winding up of corporations, whether trading or not, with objects not confined to one State, but not including universities.”

Entry no. 45 relates to “banking”. Learned counsel, also referred to entry no. 32 in List II which relates to:

“Incorporation, regulation and winding up of corporations other than those specified in List I.”

It was contended by the learned counsel that if the impugned Act operated on the zamindari assets of incorporated companies the State Legislature would be invading the Union field, that it would be legislating on subjects expressly forbidden to it and expressly reserved to Union Legislature. In such a case the learned counsel maintained that there would be usurpation of legislative power of the Union under, items 43, 44 and 45 of List I. Proceeding to elaborate this agrument Mr. P.R Das referred to the principle that if two constructions of a statute are possible, the Court must favour such a construction as to make the operation of the Act intra vires. It was contended that the language used in the Bihar Land Reforms Act must be read down, so as not to apply to companies incorporated under the Companies Act. The principle is that no intention can be imputed to the Legislature that it will exceed its own jurisdiction. On the contrary, the Court must presume that the Legislature in enacting the statute was dealing with things or persons within its own jurisdiction. Mr. P.R Das relied upon Macleod v. Attorney-General for New South Wales(1), in which the Legislature of New South Wales had enacted a law providing that “whosoever being married marries another person during the life of the former husband or wife, wheresoever such second marriage takes place, shall be liable to penal servitude for seven years”. The appellant, who had during the lifetime of his wife married another woman in the United States of America, contended that the Court had no jurisdiction to try him for the alleged offence, since the Act under which he was tried, according to its true construction, was limited to offences committed within the jurisdiction of the local Legislature by persons Subject at the time of the offence to its jurisdiction; and that upon any other construction the Act would be ultra vires. The Judicial Committee observed that if the statute was construed as it stood and upon the bare words, any person, married to any other person, who married a second time anywhere in the habitable globe, was amenable to the criminal jurisdiction of New South Wales, if he could be caught in that Colony. At page 457, Lord Halsbury states: “That seems to their Lordships, to be an impossible construction of the statute, the Colony can have no such jurisdiction, and their Lordships do, not desire to attribute to the Colonial Legislature an effort to enlarge their jurisdiction to such an extent as would be inconsistent with the powers committed to a colony, and indeed, inconsistent with the most familiar principles of international law. It therefore becomes necessary to search for limitations, to see what would be the reasonable limitation to apply to words so general; and their Lordships take it that the words “Whosoever being married” means “Whosoever being married, and who is amenable, at the time of the offence committed, to the jurisdiction of the Colony of New South Wales'”. And again at page 459: “It appears to their Lordships that the effect of giving the wider interpretation to this statute necessary to sustain this indictment would be to comprehend a great deal more than Her Majesty's subjects; more than any persons who may be within the jurisdiction of the Colony by any means whatsoever; and that, therefore, if that construction were given to the statute, it would follow as a necessary result that the statute was ultra vires of the Colonial Legislature to pass. Their Lordships are far from suggesting that the Legislature of the Colony did mean to give to themselves so wide a jurisdiction. The more reasonable theory to adopt is that the language was used, subject to the well-knows and well-considered limitation, that they were only legislating for those who were actually within their jurisdiction, and within the limits of the Colony”. The principle applies to all law-making bodies with limited powers. In D'Emden v. Pedder, the High Court of Australia held that there was no justification for assuming that a State Parliament intended general words in an enactment to have an application which would conflict with the constitution of the Commonwealth: “It is, in our opinion, a sound principle of construction that Act of a sovereign legislature, and indeed of subordinate legislatures, such as a municipal authority, should, if possible, receive such an interpretation as will make them operative and not inoperative………It is a settled rule in the interpretation of statutes that general words will be taken to have been used in the wider or in the more restricted sense according to the general scope and object of the enactment”. Mr. P.R Das, also relied upon the decision of the Federal Court in In Re The Hindu Women's Rights to Property Act, in which it was held that the word ‘property’ in the Hindu Women's Rights to Property Act must be construed as referring to property other than agricultural land. It was observed that when a Legislature with limited and restricted powers makes use in an Act of a word of such wide and general import as ‘property’, the presumption must be that it is using it with reference to that kind of property with respect to which it is competent to legislate and to no other.

The argument of Mr. P.R Das is attractive but the agrument has hardly any relevance in the context of the present case. It is true enough to state as a general proposition that a Legislature must not be presumed to exceed its own jurisdiction and if two constructions of a statute are possible, one of which would make it intra vires and the other ultra vires, the Court must lean to that construction which would make the statute intra vires. But the whole argument of Mr. P.R Das is built upon the underlying assumption that if the Bihar Land Reforms Act applied to incorporated companies, the Bihar Legislature would be acting in excess of its legislative powers. The question is whether the assumption is valid. Is it correct to state that if the Bihar Land Reforms Act applied to the zamindari assets of the incorporated companies, the statute would be unconstitutional and beyond the ambit of the power of the State Legislature? In this connection learned counsel referred to the provisions of the Companies Act, namely, sections 169, 170, 171A, 178, 179(b); 179(c) and 194. All the sections relate; to the winding up by Court of the business, of incorporated companies. Learned counsel referred to section 162 which states that a company may he wound up by the Court in certain circumstances specified in the section. It was argued by learned counsel that if the zamindari estate is acquired by the Government and bonds are given as compensation payable in forty annual instalments it will be impossible for the High Court to wind up any company. Reference was also made by learned counsel to section 4(d) of the Land Reforms Act which states that no suit shall lie in any Civil Court for the recovery of any money due from such proprietor or tenure-holder, the payment of which is secured by a mortgage or is a charge on such estate or tenure and all suits and proceedings for the recovery of any such money which may be pending on the date of vesting shall be dropped. Learned counsel maintained that section 4(d) was in conflict with section 166 of the Companies Act which entitled a secured creditor to make an application for winding up of a company. Again, section 4(e) of the Bihar Land Reforms Act states that:

“no such estate or tenure shall be liable to attachment or sals under the processes of any Court and any order of attachment passed in respect of such estate or tenure before the date of vesting shall cease to be in force.”

It was argued for the petitioner that this provision was in coflict with the provisions of the Companies Act which state that all the assets of a company are liable to be sold in course of liquidation proceedings. Learned counsel then referred to section 14 of the Act:

“Every creditor, whose debt is secured by the mortgage of, ??? is a charge on, any estate or tenure or part thereof vested in the State under section 3 may, within six months of date of such vesting………… notify in the prescribed manner his claim in writing to a Claims Officer to be appointed by the State Government for the purpose of determining the amount of debt legally and justly payable to each creditor in respect of his claim.”

It was argued by the learned counsel that this section made it impossible for any liquidation proceedings to be initiated in the High Court, Learned counsel maintained that even if such liuqidation proceedings are started there would be conflict of jurisdiction between High Court and the State Government and that it must be presumed that there was no intention on the part of the State Legislature in making the enactment that there should be such a conflict.

It is not necessary to analyse in detail the argument of the learned counsel on this point. Assuming but without affirming; that there is a conflict between the Bihar Land Reforms Act and certain sections of the Companies Act relating to winding up of companies there would still be no basis for the argument that the Act is unconstitutional and void. The assumption underlying the argument on behalf of the petitioners is that the Act is legislation with respect to trading corporations falling within items 40, 43 and 45 of the Union List. But this assumption is unsound. Merely because the Act affects the zamindari assets of the companies it is not correct to argue that the Act is legislation ‘with respect to’ companies or trading corporations. The problem in this case is the problem of characterisation. In other words, the question must be asked what is the subject-matter of legislation in its “pith and substance” or in its true nature and character. We must find what is the primary matter dealt with in order to ascertain the class of subject to which it belongs. Is the Bihar Land Reforms Act a law substantially with respect to acquisitioning land, or is it a law substantially with respect to trading corporations? In Huddart Parker v. Moorehead, Higgins, J. observed: “Now, how are we to determine what is the subject of any law, or any legislation, when two or more things that might be subjects of legislation are mentioned in it? The mere fact of mentioning corporations in these sections 5 and 8 does not necessarily make them a law “with respect to”—on the subject of—corporations. If a Licensing Act provides that the Licensing Court shall not transfer the license of a wife to her husband unless the husband be approved, by the Court holder of a license, we should not call it legislation “with respect to” marriage or marital relations. If an Act provides that every marriage shall be celebrated in the presence of two witnesses of full age, and shall be registered, we should not call it legislation “with respect to” witnesses, or “with respect to” infancy, or “with respect to” registration. The first is a law “with respect to” dealing in intoxicating liquors; the second is a law ‘with respect to’ marriage”. In the recent Bank Nationalisation Case(2), Latham, C.J, said: “It is not enough that a law should refer to the subject-matter or apply to the subject matter; for example, income-tax laws apply to clergymen and to hotel-keepers as members of the public; but no one would describe an income-tax law as being, for that reason, a law with respect to clergymen or hotel-keepers. Building regulations apply to buildings erected for or by banks; but such regulations could not properly be described as laws with respect to banks or to banking”.

In the present case what is the subject-matter of the legislation in its true nature and character? The Act is entitled as Bihar Land Reforms Act, 1950. The preamble states that it is expedient to provide for the transference to the State of the interests of the proprietors and tenure-holders in land and of the mortgagees and lessees of such interests, and to provide for the constitution of a, land Commission for the State of Bihar with powers to advise the State Government on the agrarian policy to be pursued. The main provisions of the Act are designed to carry out the purpose stated in the preamble. It is manifest that the legislation falls entirely within item 36 of the State List viz.

“Acquisition of requisitioning of property, except for the purposes of the Union, subject to the provisions of entry 42 of List III.”

In fact the question was much debated in Kameshwar Singh v. State of Bihari in which the Full Bench held that the Bihar Land Reforms Act was covered by entry 36 of List II of the Constitution. In appeal the Supreme Court affirmed this view holding that the pith and substance of the legislation was transference of ownership of estates to State Government and falls within the ambit of legislative head entry no. 36 of List II.

Since the Act deals in pith and substance with item 36 of the State List the Act would be constitutionally valid though it incidentally trenches on matters reserved for Union Legislature. It is not a material consideration in such a case to what extent the Union field is invaded by the impugned statute. In Prafulla Kumar Mukherjee v. Bank of Commerce, Ltd., the Judicial Committee had to consider the Bengal Money Lenders Act, 1940. The Act undoubtedly restricted the rights of the holders of promissory notes to recover interest beyond a certain rate, and to that extent the legislation could be regarded as legislation in respect of items 28 and 38 in the Federal Legislative List. But the Judicial Committee held that the Act was in pith and substance an Act dealing with money lending within entry 23 in the Provincial Legislative List, and that the Act was intra vires and valid. At page 44 Lord Porter observed: “No doubt where they come in conflict list I has priority over lists III and II and list III has priority over list II, but the question still remains, priority in what respect? Does the priority of the Federal Legislature prevent the provincial legislature from dealing with any matter which may incidentally affect any item in its list, or in each case has one to consider what the substance of an Act is and, whatever its ancillary effect, attribute it to the appropriate list according to its true character? In their Lordships' opinion the latter is the true view”. The question of conflict between lists II and III arose directly in another, case, namely, Megh Raj v. Allah Rakhia, in which it was held that section 107 of the Government of India Act had no application in a case where the Province could show, as it did in that case, that it was acting wholly within its powers under the………Provincial List, and was not relying on any power conferred on it by List III of the Concurrent List. In that case it was argued that the Punjab Restitution of Mortgaged Lands Act, 1938, was invalid in that a number of its provisions were in fact legislation on matters falling within list III, namely, items 7, 8 and 10 of that list. The Judicial Committee, however, held the it the impugned Act which dealt with mortgages on agricultural lands was legislation falling entirely within item 21 of the Provincial Legislative List, that is, land or any interest in land and, therefore, no question of repugnancy could arise by reason of the fact that the Act might trench to a certain extent upon the items in the Concurrent Legislative List. The whole argument in that case turned upon the effect of sections 100 and 107 of the Government of India Act. At page 22 Lord Wright observed: “It follows that in their Lordships' judgment there is not sufficient ground for holding that the impugned Act, or any part of it, was invalid. As a whole it fell within the powers given to the province by items 2 and 21 of list II, without any necessity to invoke any powers from the Concurrent List, list III. Accordingly, questions of repugnancy under section 107 of the Constitution Act do not arise and need not be considered here”. These cases demonstrate the principle that if the subject-matter of State legislation falls as a whole within a particular item in the State List then the legislation is valid and no question of invalidity can arise even if the legislation trenches incidentally upon the items in the Union List. In the present case even if the Bihar Land Reforms Act trenches to some extent on the provisions of the Companies Act of 1913, the legislation would be valid since the State Legislature was acting wholly within its powers under the State Legislative List. The argument of Mr. P.R Das on this part of the case must fail.

The next branch of the argument on behalf of the petitioner is that even if the Bihar Legislature could validly legislate for acquiring the zamindari estates of the incorporated companies, the Bihar Legislature has not manifested any such intention in enacting the Bihar Land Reforms Act. In support of this contention Mr. P.R Das referred to section 3(1) which states that:

“the State Government may, from time to time, by notification, declare that the estates or tenures of proprietor or tenure-holder, specified in the notification have passed to and become vested in the State.”

Learned counsel referred to section 2(o) which defines ‘proprietor’ to mean:

“a person holding in trust or owning, for his own benefit an estate or part of an estate………where a proprietor is a minor or of unsound mind or an idiot, his guardian, committee or other legal curator.”

Learned counsel pointed out that the Act does not in express terms apply to companies incorporated under the Companies Act. Learned counsel conceded that under section 4(40) of the Bihar General Clauses Act a ‘person’ shall be interpreted to:

“include any company or association or body of individuals, whether incorporated or not.”

unless there is anything repugnant in the subject or context. The argument on behalf of the petitioners is that there are important provisions of the Act, which indicate that the Legislature did not intend that companies should be affected. Learned counsel referred to section 14 of the Act and contended that if section 14 applied to companies, liquidation proceedings would become impossible. This in itself is no sound reason for holding that the Act does not apply to incorporated companies. Reference was also made to section 39 which grants protection to trustees of religious or charitable endowments. Learned counsel pointed out that section 39 did not make provision for directors of companies. But the obvious reason is that the trustees are under legal obligation to apply the proceeds of a particular property for the purpose of beneficiaries. The directors are under no such obligation though they stand in certain respects in a fiduciary position with shareholders. Reference was also made to section 41 which states that:

“If any person wilfully fails or neglects to comply with any lawful order passed under this Act………. he shall, on conviction by a magistrate, be punishable with imprisonment or with fine or with both.”

Mr. P.R Das argued that if a company wilfully failed or neglected to comply with any lawful order passed under the Act the company cannot be punished with imprisonment or sent to jail. But the argument has no substance for section 41 refers to any person who wilfully fails or neglects to comply with any lawful order passed under the Act. The ‘person’ mentioned in section 41 may not necessarily be the proprietor of the estate but may be some one connected with its management. If the director or manager of a company wilfully fails or neglects to comply with a lawful order there is no insuperable difficulty in holding that he would certainly be liable to be punished with imprisonment or fine under the provisions of section 41. The argument of Mr. P.R Das on this aspect of the case is hardly tenable. On the contrary, there are important considerations to suggest that the Legislature intended the Act to apply to the zamindari assets of the incorporated companies. In the first place the Bihar General Clauses Act states that ‘person’ shall include a company or association or body of individuals, whether incorporated or not. There is nothing repugnant in the scheme or in the context of the act in accepting this meaning. On the other hand, the policy of the Act will be achieved only if this meaning is accepted. As pointed out by Mahajan, J. in State of Bihar v. Kameshwar Singh, the purpose behind the Act is to bring about a reform in the land distribution system of Bihar for the general benefit of the community. The purpose of the Act is to prevent the concentration of big blocks, of land and means of production in the hands of a few individuals and to so distribute the ownership and control of the material resources which, come in the hands of the State as to subserve the common good as best as possible. In other words, the object is the nationalization of land by breaking up concentration of big blocks in the hands of the zamindars. It cannot, therefore be supposed that the Legislature contemplated that companies should be exempted from the operation of the Act. Otherwise it would be very easy on the part of the zamindars to defeat the purposed of the Act by creating fictitious companies and transferring the zamindari assets to such companies. The construction for which M.P.R Das contends is against the whole scheme and policy of the Bihar Land Reforms Act. It is a sound rule of interpretation that statute must be so construed as to prevent the mischief and to advance the remedy according to the true, intent of the makers of the statute. It is apposite in this connection to quote the language of Lord Justice Denning in Seaford Court Estates, Ltd. v. Asher: “It would certainly save the Judges trouble if Acts of Parliament were drafted with divine prescience and perfect clarity. In the absence of it, when a defect appears a Judge cannot simply fold his hands and blame the draftsman. He must set to work on the constructive task of finding the intention of Parliament, and he must do this not only from the language of the statute, but also from a consideration of the social conditions which gave rise to it, and of the mischief which it was passed to remedy, and then he must supplement the written word so as to give ‘force and life’ to the intention of the Legislature. That was clearly laid down by the Resolution of the Judges in Haydon's Case which is set out by Lord Coke in the third volume, of his Reports (pt. 3, 7b)”.

My conclusion is that upon a proper interpretation, the Bihar Land Reforms Act is intended to apply to the zamindari assets of incorporated companies.

Two other points were urged on behalf of the petitioners. It was said in the first place that the zamindari estate of the petitioner was situated both in Purnea district of Bihar and in Malda district of West Bengal. It was stated that the touzis covered by the notifications, viz., 22/1, 22/2, 38/1 and 38/2, are of Purnea Collector ate. The land in Purnea covers an area of 135,357 acres and the land in Malda covers an area of 127,068 acres. The learned Government Pleader submitted that the notification referred only to the land which was situated within the territorial limits of Bihar. It is true that the Government revenue is payable by the petitioner jointly for the lands in Purnea and in Malda. The question merely resolves itself into one of apportionment and there is no warrant for holding that the notifications are for this reason invalid. The second point urged is that the zamindari has been let out in patni leases. It was argued by the learned counsel that all the lands in Malda are covered by patni lease, that each patni was in respect of land in both Malda and Purnea and that one single rent was paid by each tenant jointly for the land in Purnea and in Malda. It was argued that the Act cannot apply to such a case. There is no substance in this argument for the question is of apportionment of rent payable by the holders of the patni lease. There is no valid reason for holding that the zamindari assets of the petitioners cannot be acquired under the Bihar Land Reforms Act.

In Miscellaneous Judicial Case no. 238 an additional argument was addressed that the Bihar 9 Land Reforms Act encroached to some extent on item, 52 of the Union List since the control of sugar industry had been declared by Union Parliament to be in public interest. For the reasons I have already given I am of opinion that the Bihar Land Reforms Act is not legislation, with respect to item 52 or any other entry in the Union List but that it is legislation with respect to item 36 of the State List and the constitutional objection raised on behalf of the petitioners, must fail.

For the reasons, I have attempted to state, I think that both these applications must be dismissed with costs. Heading fee ten gold mohars in each case.

Sarjoo Prosad, J.:— I entirely agree and have nothing useful to add.

K.D

Applications dismissed.