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Vishnu Mahadeo Pendse v. Rajen Textile Mills (P) Ltd. And Another

Supreme Court Of India

May 1, 1975

Judgment

Subsequent
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Factual and Procedural Background

Two separate but related suits for possession were filed by brothers Vishnu Mahadeo Pendse and Parashram Mahadeo Pendse. They owned, respectively, Survey Nos. 181 & 182-A and Survey Nos. 176, 179-A & 179-B situated within Barsi, District Sholapur.

On 1 January 1943 the lands were leased for 99 years to Barsi Spinning and Weaving Mills Ltd. (“Barsi Mills”). The Bombay High Court ordered winding-up of Barsi Mills on 10 November 1953. In liquidation, all assets—including the leasehold interests in the disputed lands—were auctioned on 5 October 1954 and purchased by K.N. Madhwani. At the purchaser’s request, the liquidator executed a conveyance on 9 August 1955 in favour of Rajen Textile Mills (P) Ltd. (“respondent Mills”).

In 1957 the appellants approached the Mamlatdar under Section 31 of the Bombay Tenancy and Agricultural Lands Act, 1948 (“1948 Act”), seeking possession for personal cultivation; the application was dismissed for want of jurisdiction. Consequently, in 1961 Suits Nos. 15 and 16 of 1961 were filed before the Civil Judge (Senior Division), Sholapur, for possession and ancillary reliefs. The trial court decreed the suits, holding the auction-sale and conveyance contrary to Sections 27, 28 and 63 of the 1948 Act. On appeal, the Bombay High Court reversed the decrees and dismissed the suits. Certificates of fitness were granted, leading to the present Supreme Court appeals (Civil Appeals Nos. 132 and 133 of 1968).

Legal Issues Presented

Whether the suits for possession were maintainable when the original lessee, Barsi Mills, was not impleaded and the 99-year leases were still subsisting.
Whether the auction-sale and subsequent conveyance of the leasehold rights in favour of respondent Mills were void under Sections 27, 28 and 63 of the 1948 Act.
Whether Section 88(1)(b) of the 1948 Act excluded the application of those sections because the lands were “held on lease for the benefit of an industrial or commercial undertaking.”
Whether, as urged by the appellants, the proviso to Section 43-C (inserted by Act 13 of 1956) rendered the transfer void.

Arguments of the Parties

Appellants' Arguments

The lands are agricultural; therefore Section 88(1)(b) does not apply.
The auction-sale and conveyance contravened Sections 27, 28 and 63 of the 1948 Act and are consequently void.
Under the proviso to Section 43-C (inserted in 1956), the transfer is void ab initio.

Respondents' Arguments

The suits were not maintainable because (a) declaring the transfer void would revive the leases in favour of Barsi Mills, which still had 99-year terms outstanding, and (b) Barsi Mills (through its liquidator) was a necessary party but had not been impleaded.
Sections 27, 28 and 63 are inapplicable by virtue of Section 88(1)(b), as the lands were held on lease for an industrial undertaking.
Even if Section 27 applied, breach only makes the tenancy “liable to termination” and does not ipso facto invalidate the transfer; no termination had been effected before suit.
The proviso to Section 43-C, introduced in 1956, cannot retrospectively affect transactions concluded in 1954-55.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

Preliminary ground—maintainability: Granting the declaration sought would mean the leases to Barsi Mills remained in force; as the 99-year term had not expired, possession could not be claimed. Moreover, Barsi Mills (in liquidation) was not joined, yet any declaration affecting its leasehold rights required its presence. Hence, the suits were inherently defective.

Statutory validity of the transfer:

Sections 27, 28 and 63:
- Section 27 only makes prohibited assignments “liable to termination”; it does not annul them automatically. No termination had occurred.
- Section 28 forbids sale of a tenant’s interest in execution of a decree; the impugned sale was in liquidation proceedings, not execution.
- Section 63 forbids transfer to non-agriculturists without sanction; but its operation, like that of Sections 27 and 28, was excluded by Section 88(1)(b) in the present facts.
Section 88(1)(b): From the inception of the 1948 Act until its amendment on 1 August 1956, Section 88(1)(b) exempted “lands held on lease for the benefit of an industrial or commercial undertaking” from the Act’s earlier provisions, including Sections 27, 28 and 63. The auction-sale (1954) and conveyance (1955) fell squarely within this exemption because Barsi Mills was an industrial undertaking. Even if parts of the land were used agriculturally, they remained “held for the benefit” of the undertaking.
Proviso to Section 43-C: The proviso was inserted only in 1956 and could not retrospectively invalidate transfers completed in 1954-55.

Holding and Implications

APPEALS DISMISSED WITH COSTS.

The Supreme Court affirmed the High Court’s dismissal of the suits. The appellants cannot recover possession during the subsistence of the 99-year leases, and the auction-sale and conveyance remain valid. The decision primarily affects the parties by confirming the respondents’ leasehold rights; no new precedent was set beyond applying the plain language of Section 88(1)(b) of the 1948 Act.

Show all summary ...

A.C Gupta, J.— These two appeals brought on certificate of fitness granted by the High Court of Bombay arise out of two suits for possession. Civil Appeal No. 132 of 1968 has its origin in the suit instituted by appellant Vishnu Mahadeo Pendse as plaintiff. Parashram Mahadeo Pendse, appellant in Civil Appeal No. 133 of 1968, instituted the other suit. The respondents Rajen Textile Mills (P) Ltd., and Shri L.N Madhwani, Director of the said company, were the defendants in both the suits.

2. The facts giving rise to these appeals are briefly these. The lands of Survey Nos. 181 and 182-A, owned by Vishnu Mahadeo Pendse, and the lands of Survey Nos. 176, 179-A and 179-B owned by Parashram Mahadeo Pendse, situate within the municipal limits of Barsi in District Sholapur were leased out by the owners to Barsi Spinning and Weaving Mills Ltd. (hereinafter referred to as “Barsi Mills”); both leases were for a period of 99 years with effect from January 1, 1943. On an application of a creditor of the Barsi Mills, the High Court of Bombay made a winding up order on November 10, 1953. On October 5, 1954 all the assets of Barsi Mills including their tenancy rights in the said lands were sold by auction and purchased by one K.N Madhwani. At the request of the auction-purchaser the liquidator executed a conveyance of the lands in favour of the respondent Rajen Textile Mills (P) Ltd. (hereinafter referred to as “the respondent Mills”) on August 9, 1955. Sometime in 1957 the appellants started proceedings in the Court of the Mamlatdar under Section 31 of the Bombay Tenancy and Agricultural Lands Act, 1948 (hereinafter referred to as “the 1948 Act”) for possession on the ground that they required the lands for personal cultivation. The Mamlatdar dismissed the application for possession on the view that the respondents were trespassers and as such that court had no jurisdiction. Then in 1961 the appellants instituted Suits Nos. 15 and 16 of 1961, out of which these appeals arise, in the Court of the Civil Judge, Senior Division at Sholapur, for recovery of possession of the lands and for several other incidental reliefs. The case made in the plaints was (1) that the leasehold rights of Barsi Mills in the lands were personal rights and not capable of being transferred by a liquidator in winding up proceedings, (2) that the auction-sale and the conveyance in favour of the respondent Mills were contrary to the provisions of Sections 27 and 28 of the 1948 Act and therefore invalid, and (3) that the auction-purchaser not being an agriculturist, the auction-sale and the subsequent conveyance were void under Section 63 of the 1948 Act. The trial court decreed the suits on the view that the auction-sale and the conveyance contravened the provisions of Sections 27, 28 and 63 of the 1948 Act. The respondents preferred appeals to the Bombay High Court challenging the decision of the trial court; the High Court allowed the appeals and dismissed the suits. The High Court was of the view that (1) there was no term in the lease prohibiting Barsi Mills from transferring their leasehold rights nor was there any law prohibiting such transfers, and (2) the lands in dispute were held on lease for the benefit of an industrial undertaking, namely Barsi Mills, within the meaning of Section 88(1)(b) of the 1948 Act; Section 88 specifies the lands and areas to which the 1948 Act did not apply.

3. Mr Patel, learned counsel for the appellants, raised two contentions: (1) the lands are agricultural lands and as such Section 88(1)(b) which excluded from the operation of the 1948 Act lands held on lease for the benefit of an industrial or commercial undertaking has no application, and (2) having regard to the proviso to Section 43-C of the 1948 Act the auction-sale and the subsequent assignment of the leasehold rights were void.

4. Before we proceed to consider the merits of these contentions, it seems to us that the suits for possession must fail on a preliminary ground, as urged by Mr Bal, counsel for the respondents. In the plaint the plaintiff in each case asks for a declaration that the auction-sale and the conveyance are both void. Giving effect to this contention means that the leases in favour of Barsi Mills remain live leases and Barsi Mills continue to be the tenant of the lands. If this is the position, the suits for possession are premature because the leases for 99 years have not yet run out. Further, the declaration asked for cannot be made in the absence of the liquidator representing Barsi Mills, but Barsi Mills have not been impleaded in the suits. It is well known that a company until it is dissolved retains its distinct entity, though in the case of a company in liquidation the administration of its affairs passes to the liquidator. Clearly therefore these suits for possession are not maintainable.

5. On the merits also, the suits are bound to fail. The appellants' contention is that the auction-sale and the conveyance were void in view of Sections 27, 28 and 63 of the 1948 Act. Section 27 prohibits sub-division, sub-letting and assignment of land by a tenant and any such act in violation of the provisions of this section makes the tenancy “liable to termination”. Section 28 bars attachment, seizure or sale in execution of a decree or order by civil court of any interest in the land held by the tenant. Section 63, as it stood at the relevant time, barred transfer of land in favour of a person who was not an agriculturist unless sanctioned by the prescribed authority. It will be seen that any act contrary to the provisions of Section 27 does not ipso facto terminate the tenancy but only makes the tenancy liable to termination. It is not claimed that the tenancy held by Barsi Mills was terminated before the suit was instituted.

6. Apart from this, Section 88(1)(b) of the 1948 Act makes it clear that the aforesaid provisions could have no manner of application. Section 88, so far as it is relevant, is in these terms:

“88. (1) Nothing in the foregoing provisions of this Act shall apply—

(a) * * *

(b) to lands held on lease for the benefit of an industrial or commercial undertaking;

* * *”

There is no dispute that the lands in question were held on lease for the benefit of Barsi Mills which was an industrial undertaking. Section 88 remained in force from the time the 1948 Act came into operation till August 1, 1956 when it was replaced by a new section introduced by the Amendment Act 13 of 1956. The auction-sale and the conveyance having taken place before August 1, 1956, Sections 27, 28 and 63 of the Act did not apply to the lands in dispute which were held on lease by Barsi Mills. Mr Patel for the appellants argued that as the respondent Mills were using the lands largely for agricultural and not industrial purposes. Section 88(1)(b) itself had no application. Admittedly, the respondent Mills had built a few structures on the lands and used a large part of the remaining area for agricultural purposes. It is difficult to see why a land held on lease by an industrial or commercial undertaking, if used for agricultural purposes, would not be land held for the benefit of such industrial or commercial undertaking. But apart from this, there is an obvious answer to this contention as pointed out by counsel for the respondents. The lands in question were given on lease to Barsi Mills in 1943 when the Bombay Tenancy Act, 1939 was in operation. That Act defined “land” as meaning land which was used for agricultural purposes including, inter alia, the sites of farm buildings appurtenant thereto. The definition of land in the 1948 Act, so far as it is material for the present purpose, is:

“ ‘Land’ means land which is used for agricultural purposes, and includes....

(a) the sites of farm buildings appurtenant to land used for agricultural purposes, and

(b) the sites of dwelling houses occupied by agriculturists, agricultural labourers or artisans and land appurtenant to such dwelling houses.