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M/S Jagdish Chand Radhey Shyam v. State Of Punjab And Others
Factual and Procedural Background
The appellant purchased Site No. 43 in the Grain Market, Chandigarh, at a public auction conducted on 21 December 1958 by the Estate Officer, Capital Project, Chandigarh, for Rs 94,000. Twenty-five percent of the price (Rs 23,500) was paid immediately. Further payments of Rs 21,992 were made toward the first instalment, leaving Rs 3623 outstanding on that instalment, and nothing was paid toward the remaining two instalments of Rs 25,615 each. The appellant nevertheless erected buildings and installed machinery worth about Rs 1,50,000 on the site.
Unable to clear the arrears, the appellant sought additional time, but on 2 January 1962 the Estate Officer, exercising powers under Section 9 of the Capital of Punjab (Development and Regulation) Act, 1952 (“the 1952 Act”), resumed the site and forfeited Rs 42,728.01 already paid.
An appeal under Section 10 of the 1952 Act to the Chief Administrator succeeded; fresh time limits, interest at 4½ % and a 10 % penalty on arrears were imposed. The appellant’s subsequent representation to the Chief Minister was rejected, and a revision before the Financial Commissioner was dismissed on 14 September 1964 as incompetent (being a second revision).
The appellant then filed a writ petition in the High Court of Punjab and Haryana challenging the resumption and forfeiture. The High Court dismissed the petition on 21 February 1966, holding that title remained with the Government until full payment, and that Sections 8 and 9 of the 1952 Act were valid. The present appeal to the Supreme Court is by certificate against that judgment.
Legal Issues Presented
- Whether Section 9 of the Capital of Punjab (Development and Regulation) Act, 1952, permitting resumption of property and forfeiture of monies on default, violates Articles 14 and 19(1)(f) of the Constitution.
- Whether, under the scheme of the 1952 Act, title to the auctioned site passed to the purchaser upon the sale or remained with the Government until full consideration was paid.
- Whether the conferment of parallel remedies (recovery as arrears of land revenue under Section 8 versus resumption and forfeiture under Section 9) constitutes unguided and arbitrary power amounting to unconstitutional discrimination.
Arguments of the Parties
Appellant's Arguments
- Section 9 is ultra vires the Constitution because it empowers resumption and forfeiture without safeguards, amounting to unreasonable restrictions on property rights.
- The simultaneous existence of Sections 8 and 9, without criteria indicating when each will be invoked, results in arbitrary and discriminatory treatment, offending Article 14.
- Upon purchase and part-payment, ownership vested in the appellant; therefore, the Estate Officer could not treat the property as “public premises” for eviction proceedings.
Respondents' Arguments
The opinion does not contain a detailed account of the respondents’ legal arguments.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The Court began by analysing Section 3 of the 1952 Act, which permits the Government to sell land and expressly creates a first charge in favour of the Government for unpaid consideration. This structure, the Court held, implies that ownership passes to the transferee at the time of sale; otherwise, the creation of a charge in the Government’s favour would be meaningless.
Sections 5 and 8 already grant the Government stringent remedies: imposition of penalties and recovery of arrears as land revenue. Section 9, however, authorises total resumption of the property and forfeiture of monies paid, without affording any relief against forfeiture and without guiding principles as to when that drastic remedy should be employed instead of ordinary recovery mechanisms.
The Court emphasised: (1) the absence of statutory guidance on the choice between ordinary suit enforcement, recovery as land revenue, and resumption/forfeiture; (2) the possibility of discriminatory treatment among similarly situated transferees; and (3) the unreasonable nature of resuming property in which the Government already enjoys a secured first charge.
Because Section 9 operates without procedural safeguards or criteria, it confers unguided, arbitrary discretion on the executive, contrary to Article 14. In addition, by allowing forfeiture and deprivation of property for mere monetary default despite the existence of less drastic remedies, it imposes an unreasonable restriction on the right to hold and enjoy property under Article 19(1)(f).
Holding and Implications
Appeal Allowed; Section 9 declared unconstitutional. The Supreme Court set aside the High Court’s judgment, holding that the Government is not entitled to forfeit monies paid or to resume the site under Section 9 of the 1952 Act because the provision violates Articles 14 and 19(1)(f) of the Constitution. The parties were directed to bear their own costs.
Implications: The decision strikes down the offending provision, limiting governmental power to resume property where alternative recovery mechanisms exist and reinforcing constitutional safeguards against arbitrary deprivation of property. It sets a precedent requiring clear legislative guidance where multiple enforcement options are conferred on the executive.
A.N Ray, J.— This appeal is by certificate from the judgment, dated February 21, 1966, of the High Court of Punjab and Haryana at Chandigarh.
2. The appellant at a public auction held by the Estate Officer, Capital Project, Chandigarh on December 21, 1958, purchased site No. 43 in the Grain Market, Chandigarh. The purchase price was Rs 94,000. 25% of the sale price was payable at the fall of the hammer. The balance sum with interest was payable in three equal instalments of Rs 25,615 each. The appellant paid Rs 23,500 being 25% of the sale price at the fall of the hammer. The appellant paid a further sum of Rs 21,992 towards the first instalment. A sum of Rs 3623 was outstanding on the first instalment. The appellant made improvements on the site. The appellant raised construction thereon at his own expense. He invested about Rs 1,50,000 in the shape of building and machinery. The appellant could not pay Rs 3623 being the balance of the first instalment and the second and the third instalments amounting to Rs 25,615 each.
3. The appellant asked for instalments because the appellant was in financial difficulty. Eventually, the Estate Officer on January 2, 1962, resumed the site and forfeited the amount of Rs 42,728.01 paid by the appellant. The order of resumption and forfeiture was made by the Estate Officer (Capital Project), Chandigarh in exercise of powers under Section 9 of the Capital of Punjab (Development and Regulation) Act, 1952 referred to as the 1952 Act.
4. The appellant filed an appeal under Section 10 of the 1952 Act. The appellant's appeal was accepted by the Appellate Authority, the Chief Administrator, Chandigarh. The appellant was given time for the payment of instalments with interest at the rate of 4 1/2% per annum and a penalty of 10% of the amount in arrears was ordered to be paid within 30 days from the date of the appellate order. The conveyance deed in respect of the site was also to be executed immediately.
5. The appellant thereafter made a representation to the Chief Minister and asked for further instalments and prayed that steps be not taken to resume the site. The appellant's representation was rejected.
6. The appellant then filed a revision application before the Financial Commissioner. On September 14, 1964, the Financial Commissioner rejected the revision application. The ground was that the appellant had filed a first revision application. The second application was therefore not competent. It may be stated here that Section 10 aforesaid provides an appeal to the Chief Administrator against the order of the Estate Officer. Section 10 also states that a revision application can be presented before the State Government against the order of the Chief Administrator.
7. The appellant filed a writ petition in the High Court. The appellant challenged the validity of the orders of the respondents. The grounds for challenge were these. First, Section 9 of the 1952 Act, which provides for the resumption of property by the Estate Officer is ultra vires and unconstitutional. Secondly, Section 9 provides for resumption of property and forfeiture of money paid which are unconstitutional and unreasonable restrictions on the right to hold property. Thirdly, the power conferred on the Estate Officer to take action under Section 9 for resumption is unregulated and arbitrary.
8. In the High Court it was contended that the appellant became owner of the site, and, therefore, no resumption of the site could be taken by proceeding under the Punjab Public Premises and Land (Eviction and Rent Recovery) Act, 1959. Secondly, it was contended that Section 9 of the 1952 Act violated Article 14 inasmuch as Sections 8 and 9 of the 1952 Act provide for the same matter and there is no indication as to when action will be taken under either of the sections. It was also said that the sections offended Article 14 of the Constitution by reason of unregulated conferment of power.
9. The High Court held that title would pass only when full price was paid and till then the Government remained the owner and could resume possession. The High Court held that Sections 8 and 9 of the 1952 Act were supplementary to each other and if recovery of the amount due as arrears of land revenue was provided for there could be resumption of the site.
10. Counsel for the appellant repeated the contentions which had been made before the High Court.
11. Broadly stated Section 3 of the 1952 Act indicates these features. The Government has power to sell by auction, allotment or otherwise any land or building. The consideration money is to be paid in such manner as the Government may prescribe. The unpaid portion of the consideration money will be a first charge on the site or the building. The transferee except with the previous permission in writing of the Estate Officer shall not be entitled to sell, mortgage or otherwise transfer any right, title or interest in the site or building until the amount which is a first charge has been paid in full. Section 3 totally repeals the conclusion arrived at by the High Court that the Government remains the owner until the entire consideration money is paid. A charge is created for the unpaid portion of the consideration money. The prohibition against sale, mortgage or transfer by the transferee except with the previous permission of the Estate Officer of any right, title or interest in the site or building establishes the ownership and rights of the transferee. If the Government were the owner it could not be said that the transferee could sell, mortgage or transfer any right, title or interest. The statute speaks of payment of consideration money by sale to the transferee. The Government cannot after sale remain the owner. The statute forbids such construction. If the Government is the owner the Government cannot at the same time be entitled to a charge on the property for the balance of the consideration money. A charge on a property is under the Transfer of Property Act enforced by instituting a suit and bringing the property to sale. If the property yields a higher price than what the charge represents, the owner is entitled to the excess sum.
12. Section 5 of the 1952 Act deals with imposition of penalty and mode of recovery of arrears. If there is any default in payment of consideration money or instalment or any other money due on account of transfer or if there is default in the payment of fee or tax levied the Estate Officer may direct a sum not exceeding that amount due to be recovered by way of penalty. The amount due together with the penalty may be recovered as an arrear of land revenue.
13. Section 9 speaks of resumption of the site or building by the Estate Officer and forfeiture of the whole or part of the money paid on account of consideration in the case of non-payment of consideration money or instalment or breach of any condition of transfer or breach of any rule.
14. Under the ordinary law of the land it is open to the Government to enforce the charge and to recover the due on consideration money, instalments or any other due from the transferee. It is also open to the Government under Section 8 of the Act to proceed against the transferee to realise the amount due on consideration money or on instalment or any other due as an arrear of land revenue. Section 8 provides penalty for default in payment of money and the recovery of the same as an arrear of land revenue. These remedies are deterrent and drastic.
15. Section 9 of the 1952 Act empowers the Government to forfeit the whole or any part of the money in case of non-payment of consideration money or instalments or other dues for breach of covenants. Under the ordinary law of the land there is relief against forfeiture for breach of covenant or provisions. Section 9 does not offer any relief against forfeiture. This feature that the Government can proceed either under the ordinary law of the land or under the 1952 Act shows that there is discrimination. There is nothing in the statute to guide the exercise of power by the Government as to when and how one of the methods will be chosen.
16. Section 9 confers power to resume the site. There is a charge on the land for the unpaid consideration money. This charge can be enforced by instituting a suit in a court of law. The owner will have the opportunity of paying the money and clearing the property of the charge. On the other hand when the Government proceeds under Section 9 of the Act, to resume the land or building the Government proceeds under the Punjab Public Premises and Land (Eviction and Rent Recovery) Act, 1959. There is no guidance in the Act, as to when the Government will resort to either of the remedies.
17. Again in all these cases of recovery of money or resumption of land or building and forfeiture of monies paid the Government may choose and discriminate in proceeding against one person in one manner and another person in another manner.
18. The Act creates a charge on the property. The Act forbids creation of a third party right by the transferee until the amount represented by the charge is paid in full. In the teeth of statutory security and enforce ability it is totally unreasonable restriction on the enjoyment of property by resuming the site for defaults in payments of money and forfeiting the monies paid by the transferee.
19. For these reasons, we are of opinion that the Government is not entitled to forfeit the monies paid and resume the site under the provision contained in Section 9 of the 1952 Act. These provisions violate Articles 14 and 19(1)(f). These provisions are unconstitutional.
20. The judgment of the High Court is set aside. The appeal is allowed. In view of the fact that there is no order as to costs in the High Court the parties will pay and bear their own costs.
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