judgement:
Appeal No. 255 of 1954.
Appeal by Special Leave from the judgment and decree dated April 29, 1953, of the former Pepsu High Court in R. section A. Nos. 57 and 130 of 1952, arising out of the judgment and decree dated March 8, 1952, of the Court of Addl.
Judge, Faridkot, in Civil Appeal No. 10 of 1952, against the judgment and decree dated December 4, 1951, of the Court of `ubJudge 11 Class, Faridkot, in File No. 13 of 1951.
Jagan Nath Kaushal and K. L. Mehta, for the appellant.
Kapur Chand Puri and Tarachand Brijmohan Lal, for respondents Nos. 1 to 3. 1958.
May 20.
The Judgment of the Court was delivered by SUBBA RAO J.
This appeal by Special Leave against the judgment and decree of the High Court of Patiala and East Punjab States Union raises an interesting question pertaining to the Law of Preemption.
881 The material facts are not in dispute and may be briefly stated: The dispute relates to a land measuring 179 kanals and 2 marlas, situate in village Wanderjatana.
On August 26, 1949, defendants 3 to 7 sold the said land to defendants I and 2 for a consideration of Rs. 37,611.
On August 26, 1950, defendants 8 to 11 instituted a suit, Suit No. 231 of 1950 (Exhibit P. 26/1) in the Court of the Subordinate Judge, 11 Class, Faridkot, to pre empt the said sale on the ground, among others, that they bad a right of preemption.
On January 6, 1951, the vendees, i. e., defendants I and 2, and the plaintiffs therein, i. e., defendants 8 to 11 (appellants in the present appeal), entered into a compromise.
Under the terms of the compromise, the vendees admitted that they had received Rs. 1,700 from defendants 8 to II and that defendants 8 to 1 1 agreed to pay the balance of the consideration, amounting to Rs. 35,911 on the 27th April, 1951,.
It was further agreed that on the payment of the said amount, they should get possession through Court.
As the amount agreed to be paid was in excess of the pecuniary jurisdiction of the Court of the Subordinate Judge, they filed the compromise deed in the Court of the District Judge and on the basis of the said compromise, the District Judge made a decree dated January 23, 1951.
It was provided in the decree that in case defendants 8 to I I failed to pay the balance to the vendees on April 27, 1951, the suit should stand dismissed and that if the said balance was paid on that date, the vendees should deliver possession of the land in dispute to them.
Defendants 8 to 11 deposited the balance of Rs. 35,911 on April 23, 1.951, and got possession of the land on May 17, 1951.
Before the said defendants (8 to 11) deposited the amount in Court under the terms of the compromise decree, the resondents herein, claiming to be owners of land in the same patti, filed Suit No. 13 of 1951 in the Court of the Subordinate Judge, 11 Class, Faridkot, to enforce their right of pre emption.
To that suit the original vendors were impleaded as defendants 3 to 7, the vendees as defendants I and 2 and the plaintiffs in Suit No. 231 of 1950 as defendants 8 to 11.
882 Defendants 8 to 11 contested the suit, inter alia, on the grounds that the plaintiffs had no right of preemption superior to that of theirs, that the suit was barred by limitation and that the whole of the sale consideration had been fixed in good faith and paid.
The learned Subordinate Judge found all the issues in favour of defendants 8 to 11 and dismissed the suit.
On the main issue he found that the said defendants, by obtaining a decree for pre emption before the rival claimants had filed their suit, had become vendees through Court and so the plaintiffs could not succeed unless they had a superior right.
The plaintiffs preferred an appeal to.
the Additionl District Judge, Faridkot, against the said decree.
The District Judge held that the plaintiffs and defendants 8 to 11 had equal rights of pre emption and were entitled to share the sale in the proportion of 3/7 and 4/7 respectively on payment of the proportionate amount of the consideration.
On the main question, he took the view that defendants 8 to 11 did not exercise their right of pre emption when the present suit was instituted for the reason that by the date of the filing of the suit they had not deposited the purchase money in Court.
Both the parties filed Second Appeals against the decision of the District Judge in the High Court of Patiala questioning that part of the decree which went against them.
The High Court upheld that part of the decree of the learned District Judge holding that the plaintiffs were entitled to a share in the suit property but remanded the suit to the District Judge to give his findings on the following two questions: (1) What was the amount paid by defendants 8 to 11 to the original vendees and whether they paid it in good faith; (2) Whether the case would come under section 17C, cl.
(e) of the Punjab Pre emption Act (hereinafter to be referred to as the Act).
As the High Court refused to certify that the case was a fit one for appeal to the Supreme Court, defendants 8 to 11 preferred the above appeal by obtaining special leave of this Court.
The learned Counsel for the appellants raises the following two contentions before us: (1) Section 28 of 883 the Pre emption Act indicates that a property can be divided between equal pre emptors in terms of section 17 of the Pre emption Act only when both the suits are pending before the Court at the time of the passing of the decree ; (2) the appellants exercised their right of pre emption by obtaining a decree or at any rate when they deposited the money payable under the decree and thereby got themselves substituted in place of the original vendees and thereafter, the plaintiff 's can succeed only by proving their superior right to them.
The learned Counsel for the respondents countered the aforesaid argument by stating that the plaintiffs, being pre emptors of equal degree, have got a statutory right under section 17 of the Pre emption Act to share the land with the appellants, and the appellants, having been substituted in place of the original vendees pendente lite, are hit by the doctrine of lis _pendens and therefore, they cannot claim higher rights than those possessed by the original vendees at the time of the filing of the suit.
Before attempting to give a satisfactory answered to the question raised, it would be convenient at the outset to notice and define the material incidents of the right of pre emption.
A concise but lucid statement of the law is given by Plowden J. in Dhani Nath vs Budhu (1) thus: A preferential right to acquire land, belonging to another person upon the occasion of a transfer by the latter, does not appear to me to be either a right to or a right in that land.
It is,jus ad rem aliens acquirendum and not a jus ? 'In re aliena. .
A right to the offer of a thing about to be sold is not identical with a right to the thing itself, and that is the primary right of the pre emptor.
The secondary right is to follow the thing sold, when sold without the proper offer to the pre emptor, and to acquire it, if he thinks fit, in spite of the sale, made in disregard of his preferential right." The aforesaid passage indicates that a pre emptor has two rights: (1) inherent or primary right, i.e., a right (1)136 P. R. 1894 at p. 5ii.
884 to the offer of a thing about to be sold and (2) secondary or remedial right to follow the thing sold.
Mahmood J. in his classic judgment in Gobind Dayal vs Inayatullah (1) explained the scope of the secondary right in the following terms: " It (right of pre emption) is simply a right of sub stitution, entitling the pre emptor, by means of a legal incident to which sale itself was subject, to stand in the shoes of the vendee in respect of all the rights and obligations arising from the sale, under which lie, derived his title.
It is, in effect, as if in a sale deed the vendee 's name were rubbed out and pre emptor 's name inserted in its place".
The doctrine adumbrated by the learned Judge, namely, the secondary right of pre emption is simply a right of substitution in place of the original vendee, has been accepted and followed by subsequent decisions.
The general law of pre emption does not recognize any right to claim a share in the property sold when there are rival claimants.
It is well established that the right of pre emption is a right to acquire the whole of the property sold in preference to other persons (See Mool Chand vs Ganga Jal (2)).
The plaintiff is bound to show not only that his right is as good as that of the vendee but that it is superior to that of the vendee.
Decided cases have recognized that this superior right must subsist at the time the pre emptor exercises his right and that that right is lost if by that time another person with equal or superior right has been substituted in place of the original vendee.
Courts have not looked upon this right with great favour, presumably, for the reason that it operates as a clog on the right of the owner to alienate his property.
The vendor and the vendeeire, therefore, permitted to avoid accrual of the right of pre emption by all lawful means.
The vendee may defeat the right by selling the property to a rival pre emptor with preferential or equal right.
To summarize: (1) The right of pre emption is not a right to the thing sold but a right to the offer of a thing about to be sold.
(i) All. 775, 809.
(2) Lah.
258, 273.
885 This right is called the primary or inherent right.
(2) The pre emptor has a secondary right or a remedial right to follow the thing sold.
(3) It is a right of substitution but not of re purchase, i. e., the pre emptor takes the entire bargain and steps into the shoes of the original vendee.
(4) It is a right to acquire the whole of the property sold and not a share of the property sold.
(5) Preference being the essence of the right, the plaintiff must have a superior right to that of the vendee or the person substituted in his place.
(6) The right being a very weak right, it can be defeated by all legitimate methods, such as the vendee allowing the claimant of a superior or equal right being substituted in his place.
The next question is whether this right is modified or otherwise enlarged by the ' provisions of the Act.
Relevant provisions of the Act, material to the present purpose, read thus: Section 4: " The right of pre emption shall mean the right of a person to acquire agricultural land or village immovable property or urban immovable property in preference to other persons, and it arises in respect of such land only in the case of sales and in respect of such property only in the case of sales or of foreclosures of the right to redeem such property".
Section 13: " Whenever according to the provisions of this Act, a right of pre emption vests in any class or group of persons the right may be exercised by all the members of such class or group joint, and, if not exercised by them all jointly, by any two or more of them jointly, and, if not exercised by any two or more of them jointly, by them severally".
Section 17: " Where several pre emptors are found by the Court to be equally entitled to the right of preemption, the said right shall be exercised, (a)if they claim as co shares, in proportion among themselves to the shares they already hold in the land or property ; (b)if they claim as heirs, whether co sharers or not, in proportion among themselves to the shares in which but for such sale, they would inherit the land or property in the event of the vendor 's decease without other heirs; 886 (c)if they claim as owners of the estate or recognised subdivision thereof, in proportion among themselves to the shares which they would take if the land or property were common land in the estate or the subdivision, as the case may be; (d)if they claim as occupancy tenants, in proportion among themselves to the areas respectively held by them in occupancy right; (e)in any other case, by such pre emptors in equal shares.
" Section 19: " When any person proposes to sell any agricultural land or village immovable property or urban immovable property or to foreclose the right to redeem any village immovable property or urban immovable property, in respect of which any persons have a right of preemption, lie may give notice to all such persons of the price at which he is willing to sell such land or property or of the amount due in respect of the mortgage, as the case may be.
Such notice shall be given through any Court within the local limits of whose jurisdiction such land or property or any part thereof is situate, and shall be deemed sufficiently given if it be stuck up on the chaupal or other public place of the village, town or place in which the land or property is situate.
" Section 20: " The right of pre emption of any person shall be extinguished unless such person shall, within the period of three months from the date on which the notice tinder section 19 is duly given or within such further period not exceeding one year from such date as the court may allow, present to the Court a notice for service on the vendor or mortgagee of his intention to enforce his right of pre emption.
Such notice shall state whether the preemptor accepts the price or amount due on the footing of the mortgage as correct or not, and if not, what sum he is willing to pay." " When the Court is satisfied that tile said notice has been duly served on the vendor or mortgagee the proceedings shall be filed.
" Section 28: " When more suits than one arising out of the same sale or foreclosure are pending the plaintiff 887 in each suit shall be joined as defendant in each of the other suits, and in deciding the suits the court shall in each decree state the order in which each claimant is entitled to exercise his right".
The Act defines the right and provides a procedure for enforcing that right.
It does not enlarge the content of that right or introduce any change in the incidents of that right.
Section 4 embodies the preexisting law by defining the right as a right of a person to acquire land in preference to other persons in respect of ,ales of agricultural lands.
Section 13 cannot be read, as we are asked to do, as a statutory recognition of a right of preemptors of equal degree to exercise their rights piece meal confined to their shares in the land.
Section 13 confers on a group of persons, in whom the right of preemption vests, to exercise that right either jointly or severally, that is to say, either the group of persons or one of them may enforce the right in respect of the entire sale.
Section 17 regulates the distribution of preempted land when the Court finds that several pre emptors are equally entitled to the right of pre emption.
But this Section applies only where (1) the right is yet to be exercised and (2) the pre emptors are found by the Court to be equally entitled to exercise the right.
The section does not confer the right on or against a person, who has already exercised the right and ceased to be a preemptor by his being legitimately substituted in place of the original vendee.
(See Mool Chand vs ganga Jal (1) at p. 274 and Lokha Singh vs Sermukh Singh (2)).
Sections 19 and 20 prescribe the procedure for the exercise of the primary right, while section 28 confers a power on the Court to join together two or more suits arising out of the same sale, so that suitable directions may be given in the decree in regard to the order in which each claimant is entitled to exercise the right.
This section is enacted presumably to avoid conflict of decisions and finally determine the rights of the various claimants.
The aforesaid provisions do not materially affect the characteristics of the right of pre (1) Lah.
113 (2) A.I.R. 1952 Punj.
206, 207.
888 emption as existed before the Act.
They provide a convenient and effective procedure for disposing of together different suits, arising out of the same transaction, to avoid conflict of decisions, to fix the order of priority for the exercise of their rights and also to regulate the distribution of the preempted land between rival pre emptors.
The provisions do not in any way enable the preemptor to exercise his right without establishing his superior right over the vendee or the person substituted in his place or to prevent the vendor or the vendee, by legitimate means, to defeat his right by getting substituted in place of the vendee a pre emptor with a superior right to or an equal right with that of the plaintiff.
Nor can we accept the argument of the learned counsel for the appellants that section 28 precludes the Court from giving a decree for pre emption in a case where the two suits were not joined together but one of the suits was decreed separately.
Section 28 enacts a convenient procedure, but it cannot affect the substantative rights of the parties.
We do not see that, if the plaintiffs were entitled to a right of pre emption, they would have lost it by the appellants obtaining a decree before the plaintiffs instituted the suit, unless it be held that the decree itself had the effect of substituting them in place of the original vendees.
We cannot, therefore, hold that the plaintiffs ' suit is in any way barred under the provisions of the Act.
This leads us to the main question in this case, namely, whether the appellants having obtained a consent decree oil January 23, 1951, in their suit against the vendees and having paid the amount due under the decree and having taken delivery of the property and thus having got themselves substituted in place of the original vendees, can legitimately defeat the rights of the plaintiffs, who, by reason of the aforesaid substitution, were only in the position of pre emptors of equal degree vis a vis the appellants and therefore ceased to have any superior rights.
The learned Counsel for the respondents contends that the appellants are hit by the doctrine of lis pendens and 889 therefore the act of substitution, which was effected on April 23, 1951, could not be in derogation of their right of pre emption, which they have exercised by filing their suit on February 15, 1951.
It is now settled law in the Punjab that the rule of lis pendens is as much applicable to a suit to enforce the right of pre emption as to any other suit.
The principle on which the doctrine rests is explained in the leading case of Bellami vs Sabine (1), where the Lord Chancellor said that pendente lite neither party to the litigation can alienate. . the property so as to affect his opponent.
In other words, the law does not allow litigant parties, pending the litigation, to transfer their rights to the property in dispute so as to prejudice the other party.
As a corollary to this rule it is laid down that this principle will not affect the right existing before the suit.
The rule, with its limitations, was considered by a Full Bench of the Lahore High Court in Mool Chand vs Ganga Jal (2).
In that case, during the pendency of a pre emption suit, the vendee sold the property which was the subject matter of the litigation to a person possessing a right of pre emption equal to that of the pre emptor in recognition of that person 's right of pre emption.
This re sale took place before the expiry of the period of limitation for instituting a pre emption suit with respect to the original sale.
The Full Bench held that the doctrine of lis pendens applied to preemption suits; but in that case, the resale in question did not conflict with the doctrine of lis pendens.
Bhide J. gave the reason for the said conclusion at page 272 thus: " All that the vendee does in such a case is to take the bargain in the assertion of his pre existing pre emptive right, and hence the sale does not offend against the doctrine of lis pendens ".
Another Full Bench of the Lahore High Court accepted and followed the aforesaid doctrine in Mt. Sant Kaur vs Teja Singh (3).
In that case, pending the suit for pre emption, the vendee sold the land purchased (i) ; ; (2) Lah. 258, 273.
(3) I.L.R. [1946] Lah.
467, 890 by him to a person in recognition of a superior right of pre emption.
Thereafter, the second purchaser was brought onrecord and was added as a defendant to the suit.
At the time of the purchase by the person having a superior right of pre emption, his right to enforce it was barred by limitation.
The ]High Court held that that circumstance made a difference in the application of the rule of lis pendens.
The distinction between the two categories of cases was brought out in bold relief at page 145 thus: " Where the subsequent vendee has still the means of coercing, by means of legal action, the original vendee into surrendering the bargain in his favour, a surrender as a result of a private treaty, and out of Court, in recognition of the right to compel such surrender by means of a suit cannot properly be regarded as a voluntary transfer so as to attract the application of the rule of lis pendens.
The correct way to look at the matter, in a case of this kind, is to regard the subsequent transferee as having simply been substituted for the vendee in the original bargain of sale.
He can defend the suit on all the pleas which he could have taken had the sale been initially in his own favour. " " However, where the subsequent transferee has lost the means of making use of the coercive machinery of the law to compel the vendee to surrender the original bargain to him, a re transfer of the property in the former 's favour cannot be looked upon as anything more than a voluntary transfer in the former 's favour of such title as he had himself acquired under the original sale.
Such transfer has not the effect of substituting the subsequent transferee in place of the vendee in the original bargain.
Such a transferee takes the property only subject to the result of the suit.
Even if lie is impleaded as a defendant in such suit, he cannot be regarded as anything more than a representative in interest of the original vendee, having no right to defend the suit except on the pleas that were open to such vendee himself ".
This case, therefore, expressly introduces a new element in the applicability of the doctrine of lis pendens 891 to a suit to enforce the pre emptive right.
If the right of the pre emptor of a superior or equal degree was subsisting and enforceable by coercive process or otherwise, his purchase would be considered to be in exercise of that pre existing right and therefore not hit by the doctrine of lis pendens.
On the other hand, if he purchased the land from the original vendee after his superior or equal right to enforce the right of preemption was barred by Limitation, he would only be in the position of a representative in interest of the vendee, or to put it in other words, if his right is barred by limitation, it would be treated as a non existing right.
Much to the same effect was the decision of another Full Bench of the Lahore High Court in Mohammad Sadiq vs Ghasi Ram (1).
There, before the institution of the suit for pre emption, an agreement to sell the property had been executed by the vendee in favour of another prospective pre emptor with an equal degree of right of pre emption; subsequent to the institution of the suit, in pursuance of the agreement, a sale deed had been executed and registered in the latter 's favour, after the expiry of the limitation for a suit to enforce his own pre emptive right.
The Full Bench held that the doctrine of lis pendens applied to the case.
The principle underlying this decision is the same as that in Mt. Sant Kaur vs Te a Singh (2), where the barred right was treated as a non existent right.
The same view was restated by another Full Bench of the East Punjab High Court in Wazir Ali Khan vs Zahir Ahmad Khan (3).
At p. 195, the learned Judges observed: " It is settled law that unless a transfer pendente lite can be held to be a transfer in recognition of a subsisting pre emptive right, the rule of lis pendens applies and the transferee takes the property subject to the result of the suit during the pendency where of it took place".
The Allahabad High Court has applied the doctrine of lis pendens to a suit for pre emption ignoring the limitation implicit in the doctrine that it cannot affect (i) A.I.R. 1946 Lah.
(2) I.L.R. , (3) A.I.R. [1949 East Punj.
[93. 892 a pre existing right.
(See Kundan Lal vs Amar Singh (1)).
We accept the view expressed by the Lahore High Court and East Punjab High Court in preference to that of the Allahabad High Court.
In view of the aforesaid four Full Bench decisions three of the Lahore High Court and the fourth of the East Punjab High Court a further consideration of the case is unnecessary.
The settled law in the Punjab may be summarized thus: The doctrine of lis pendens applies only to a transfer pendente lite, but it cannot affect a pre existing right.
If the sale is a transfer in recognition of a pre existing and subsisting right, it would not be affected by the doctrine, as the said transfer did not create now right pendente lite ; but if the pre existing right became unenforceable by reason of the fact of limitation or otherwise, the transfer, though ostensibly made in recognition of such a right, in fact created only a new right pendente lite.
Even so, it is contended that the right of the appellants to enforce their right of pre emption was barred by limitation at the time of the transfer in their favour and therefore the transfer would be hit by the doctrine of lis pendens.
This argument ignores the admitted facts of the case.
The material facts may be recapitulated: Defendants 3 to 7 sold the land in dispute to defendants 1 and 2 on August 26, 1949, and the sale deed was registered on February 15, 1950.
The appellants instituted their suit to pre empt the said sale on August 26, 1950, and obtained a compromise decree on January 23, 195 1.
They deposited the balance of the amount payable on April 23, 1951, and took possession of the land on May 17, 1951.
It would be seen from the aforesaid facts that the appellants ' right of pre emption was clearly subsisting at the time when the appellants deposited the amount and took possession of the land, for they not only filed the suit but obtained a decree therein and complied with the terms of the decree within the time prescribed thereunder.
The coercive process was still in operation.
if so, it follows that the appellants are not hit by the (i)A.I.R. 1927 All.
VI 893 doctrine of lis pendens and they acquired an indefeasible right to the suit land, at any rate, when they took possession of the land pursuant to the terms of the decree, after depositing in Court the balance of the amount due to the vendors.
We shall briefly touch upon another argument of the learned Counsel for the appellants, namely, that the compromise decree obtained by them, whereunder their right of pre emption was recognized, clothed them with the title to the property so as to deprive the plaintiffs of the equal right of pre emption.
The right of pre emption can be effectively exercised or enforced only when the pre emptor has been sub stituted by the vendee in the original bargain of sale.
A conditional decree, such as that with which we are concerned, whereunder a pre emptor gets possession only if he pays a specified amount within a prescribed time and which also provides for the dismissal of the suit in case the condition is not complied with, cannot obviously bring about the substitution of the decreeholder in place of the vendee before the condition is complied with.
Such a substitution takes effect only when the decree holder complies with the condition and takes possession of the land.
The decision of the Judicial Committee in Deonandan Prashad Singh vs Ramdhari Chowdhri (1) throws considerable light on the question whether in similar circumstances the pre emptor can be deemed to have been substituted in the place of the original vendee.
There the Subordinate Judge made a pre emption decree under which the pre emptors were in possession from 1900 to 1904, when the decree was reversed by the High Court and the original purchaser regained possession and in 1908, the Privy Council, upon further appeal, declared the pre emptors ' right to purchase, but at a higher price than decreed by the Subordinate Judge.
In 1909 the pre eimptors paid the additional price and thereupon again obtained possession.
The question arose whether the pre emptors were not entitled to mesne profits for the period between 1904 to 1909, i.e., during the period the judg (i)(1916) L. R. 44 1.
A. 80.
894 ment of the first appellate Court was in force.
The Privy Council held that during that period the preemptors were not entitled to mesne profits.
The reason for that conclusion was stated at page 84 thus: " It therefore follows that where a suit is brought it is on payment of the purchase money on the specified date that the plaintiff obtains possession of the property, and until that time the original purchaser retains possession and is entitled to the rents and profits.
This was so held in the case of Deokinandan vs Sri Ram (1) and there Mahmud J. whose authority is well recognized by all, stated that it was only when the terms of the decree were fulfilled and enforced that the persons having the right of pre emption become owners of the property, that such ownership did not vest from the date of sale, notwithstanding success in the suit, and that the actual substitution of the owner of the pre empted property dates with possession under the decree ".
This judgment is, therefore, a, clear authority for the position that the pre emptor is not substituted in the place of the original vendee till conditions laid down in the decree are fulfilled.
We cannot, therefore, agree with the learned Counsel that the compromise decree itself perfected his clients ' right in derogation to that of the plaintiffs.
But as we have held that the appellants complied with the conditions laid down in the compromise decree, they were substituted in the place of the vendee before the present suit was disposed of.
In the aforesaid view, the other questions raised by the appellants do not arise for consideration.
In the result, the appeal is allowed and the suit is dismissed with cost, , throughout.
Appeal allowed.
(1) All.

summary/full:
Upon the sale of certain village land the appellants filed a suit for pre emption, and a compromise decree was passed allowing pre emption provided the appellants deposited the purchase amountbvacertaindate.
The appellants Posited the amount and got Possession of the land.
Before the appellants deposited 879 the amount, the respondents who were pre emptors of an equal degree, filed a suit to enforce their right of pre emption.
The appellants contended that the land could be divided between two equal pre emptors only when both the suits were pending before the court at the time of the passing of the decree, and that the appellants having obtained the decree and paid the amount got substituted in place of the vendees and the respondents could succeed only by establishing a superior right of pre emption.
The respondents countered that they had a statutory right under section 17 Of the Punjab Pre emption Act to share the land with the appellants and that the appellants, having been substituted in place of the vendees Pendente lite, were hit by the doctrine of lis pendens and could not claim a higher right than the vendees: Held, that the respondents ' suit could not succeed as they (lid not have a superior right of pre emption over the appellants who had become substituted in place of the vendees upon payment of the purchase money under their decree.
A pre emptor has two rights: (i) inherent or primary right to the offer of a thing about to be sold and (2) a secondary or remedial right to follow the thing sold.
The secondary right is simply a right of substitution in place of the original vendee.
Dhani Nath vs Budhu, 136 P. R. 1894 at P. 511 and Gobind Dayal vs Inayatullah, All. 775, followed.
In a suit for pre emption the plaintiff must show that his right is superior to that of the vendee and that it subsists at the time he exercises his right.
This right is lost if before he exercises it another person with an equal or superior right has been substituted in place of the original vendee.
The Punjab Preemption Act defines the right of pre emption and provides a procedure for enforcing it.
It does not enlarge the content of this right nor does it introduce any change in the incidents of the right.
Section 28 Of the Act does not preclude the Court from giving a decree for pre emption in a case where the suits are not joined together and one of the suits has been decreed separately.
The doctrine of lis pendens applies only to a transfer Pendente lite, but it cannot affect a pre existing right.
If the sale is a transfer in recognition of a preexisting and subsisting right, it would not be affected by the doctrine, as the transfer does not create a new right Pendente lite but if the preexisting right became unenforceable by reason of limitation or otherwise, the transfer, though ostensibly made in recognition of such a right, in fact creates only a new right pendente lite.
The appellants ' right of pre emption was subsisting and was not barred by limitation at the time of the transfer in their favour as they had filed a suit and had obtained a decree and the coercive 112 880 process was still in operation.
Consequently the appellants were not hit by the doctrine of lis pentlens and they acquired an indefeasible right to the land when they took possession of it after depositing the purchase money in court.
Mool Chand vs Ganga jal, Lah.
258, Mt. Sant Kaor vs Teja Singh, I.L.R. , Mohammad Sadhiq vs Ghasi Ram, A.I.R. 1946 Lah.
322 and Wazir Ali Khan vs Zahir Ahmad Khan, A.I.R. 1949 East Punj.
193, approved.
Kundan Lal vs Amar Singh, A.I.R. 1927 All.
664, disapproved.
The right of pre emption is effectively exercised or enforced only when the pre emptor has been substituted for the vendee.
A conditional decree whereunder the pre emptor gets possession only if he pays a specified amount within a prescribed time and which also provides for the dismissal of the suit in case the condition is not fulfilled, cannot bring about the substitution of the decree holder for the vendee before the condition is fulfilled.
Such substitution takes effect only when the decree holder fulfils the condition and takes possession of the land.
Deonandan prashad Singh vs Ramdhari Choudhyi, (1916) L. R. 44 I. A. 80, followed.


judgement:
ON: Civil Appeal No. 1529 of 197 1.
From the Judgment and Order dated 31.7.70 of the Calcut ta High Court in Appeal No. 29 of 1969.
G. Ramaswamy, Additional Solicitor general, A.K. Gan guli, P. Parmeshwaran and A.K. Srivastava for the Appel lants.
D.N. Mukharjee and P.K. Ghosh for the respondents.
The judgment of the Court was delivered by PATHAK, CJ.
This appeal by certificate granted by the High Court of Calcutta is directed against the judgment dated 31 July, 1970 of that High Court partly allowing a writ petition arising out of proceedings under the .
On 5 May, 1966.
noticing an advertisement in a newspaper offering imported manual and electric typewriters, adding and calculating machines, the Customs authorities raided the premises of Messrs. Typewriters and Stationery Operation Private Limited, Calcutta, on the same day and recovered fifteen typewriters, adding and calculating machines.
The machines had been sold to the company by R.N. Bagh, who in turn disclosed that he had purchased them from the crew members of some vessels.
On 7 May, 1966, the Customs Offi cers searched the residence and business premises of Messrs. Central Typewriter Company and recovered several typewriters and calculating and adding machines.
From some documents seized during the raid and statements recorded, it appeared that there was a conspiracy between the respondents and some of the crew members of certain vessels where it was agreed that the respondents would look after and maintain the families of the crew members in India while they were abroad, would advance them money and the crew members would draw their wages abroad in foreign currency and purchase with those moneys second hand typewriters, adding and calcu lating machines and then bring them to India and deliver them to the respondents after clearance under the conces sions provided in the Baggage Rules in order to circumvent the restrictions imposed under the Import Trade Control 286 Regulations.
It appeared that during the period 1961 to 1965 about 200 pieces of typewriters, adding and calculating machines had been acquired by the respondents for a sum of about Rupees one lakh and out of which forty six had been sold.
The goods were seized on 5/7 May, 1966 and notices were due to issue under section 124(a) of the within six months from that date.
Meanwhile, the Subordinate Offi cers, Customs Department, showed cause to the Additional Collector of Customs, Calcutta (who had the same powers under the Act as the Collector) for granting an extension of time for serving the show cause notice.
On 3 November, 1966, the Additional Collector granted an extension of time for a further six months in terms of the proviso to section 110(2) of the .
On 6 December, 1966 the Assistant Collector of Customs issued notice to each of the respondents calling upon him to show cause why the said seized machines should not be con fiscated under section 111(d) and section 111(o) of the read with s.3(2) of the Import and Export Control Act, 1947 and why penal action should not be taken against the respondents under section 112 of the .
On 18 April, 1967, the respondents filed a writ petition in the High Court at Calcutta challenging the proceedings initiated against them by the customs authorities including the seizure of the machines.
On 11 December, 1968 a learned Single Judge of the High Court repelled the contention of the appellants that the proceeding was administrative in nature and held that the order of extension to be made under section 110(2) of the was a quasi judicial order and as the order had been made ex parte and without notice to the owner of the goods it was in breach of the principles of Natural justice and therefore void.
He observed that as the order, moreover, was not communicated to the respondents before the expiry of six months from the date of seizure, the order of extension was invalid and the respondents had become entitled as of right to the return of the goods.
The writ petition was allowed, and the proceedings initiated by the respondents against the appellants were quashed by the learned Single Judge by his judgment and order dated 11 December, 1969.
The appellants appealed to the Appellate Bench and the Appellate Bench of the High Court by judgment dated 31 July, 1970 allowed the appeal in part, quashing the order of extension dated 3 November, 1966 and directing the appel lants to restore the machines and docu 287 ments seized from the respondents.
The Customs authorities were permitted to initiate and complete such other proceed ings against the, respondents as were open to them in law.
The appellants now appeal to this Court in so far as the judgment and order of the Appellate Bench proceeds against them.
Section 110(1) of the provides that if the proper officer has reason to believe that any goods are liable to confiscation under that Act he may seize such goods.
Section 110(2) provides: "Where any goods are seized under sub section (1) and no notice in respect thereof is given under clause (a) of Section 124 within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized: Provided that the aforesaid period of six months may, on sufficient cause being shown, be extended by the Collector of Customs for a period not exceeding six months." Section 124(a), to which reference has been made in section 110(2), provides that no order confiscating any goods or imposing any penalty on any person shall be made under Chapter XIV unless the owner of the goods or such person is given notice in writing informing him of the grounds on which it is proposed to confiscate the goods or to impose a penalty and is given an opportunity of making a representa tion in writing, and is also given a reasonable opportunity of being heard in the matter.
It is apparent that goods liable to confiscation may be seized by virtue of section 110(1) but that those goods cannot be confiscated or penalty imposed without notice, opportunity to represent and to be heard to the owner of the goods or the person on whom penalty is proposed.
This notice must be given within six months of the seizure of the goods, as envisaged by section 110(2) of the Act, and if it is not, the goods must be returned to the person from whom the goods were seized.
The proviso to section 110(2) of the Act allows the period of six months to be extended by the Collector of Customs for a period not exceeding six months on sufficient cause being shown to him in that behalf.
The Appellate Bench of the High Court is of opinion that the 288 decision of the High Court in Assistant Collector of Customs vs Charan Das Malhotra, ; lays down the correct law and applies to the facts of this case, that there is a duty on the part of the Collector of Customs to act judicially in exercising the power conferred under the proviso to section 110(2) of the Act and that, therefore, notice should have gone to the owner of the goods before the exten sion was ordered under the proviso.
It has been held further that the order of extension should have been communicated to the owner and as that was not done the order was ineffec tive.
When this appeal came up for hearing before a Bench of this Court, reliance was placed by learned counsel for the respondents on Charan Das Malhotra, (supra).
That decision was rendered by two learned Judges of this Court.
Reference was also made in M/s Lokenath Tolaram etc.
B.N. Rangwani and Others, ; which was a decision rendered by four learned Judges of this Court, and in which reference was made to Charan Das Malhotra, (supra).
The learned Judges hearing this appeal were of the opinion that the view taken in the two cases required reconsideration, and therefore this appeal was referred to a larger Bench for a decision on the question whether the Collector is bound to issue notice to the persons from whose possession the goods are seized and to give him an opportunity to make his representation on the point whether the time for issuing notice under section 124(a) of the Act should be extended beyond six months.
That is how the appeal has come before us.
In Charan Das Malhotra, (supra) the Court referred to the consideration that seizure was authorised under section 110(1) on the mere "reasonable belief" of the concerned officer, that it was an extraordinary power and that there fore Parliament had envisaged a period of six months from the date of seizure for completing an enquiry on whether the goods should be confiscated and that if the enquiry was not completed within that period the goods must be returned.
In some cases it is possible that the enquiry requires longer than six months, and accordingly power was conferred on the Collector, an officer superior in rank and also an Appellate Authority under section 128, to extend the time subject to two conditions, that it did not exceed one year, and that suffi cient cause must be shown for such extension.
The Court observed that the Collector was not expected to propose the extension mechanically or as a matter of routine but only on being satisfied that facts exist which indicate that the investigation could not be completed for bona fide reasons within the time provided in section 110(2), and that therefore extension of the period has become neces 289 sary.
The Collector, the Court emphasized cannot extend the time unless he is satisfied on facts placed before him that there is sufficient cause necessitating extension, in which case the burden of proof would clearly lie on the Customs authorities applying for extension to show that such exten sion was necessary.
Taking these consideration into record the Court held that the words "sufficient cause being shown" required an objective examination of the matter by the Collector.
It was pointed out that ordinarily on the expiry of the period of six months from the date of seizure the owner of the goods would be entitled as of right to restora tion of the seized goods, and that right could not be de feated without notice to him that an extension was proposed.
The Court rejected the contention that the continuing inves tigation would be jeopardised if such notice was given.
The Court held that the power under the proviso to section 110(2) was quasi judicial, at any rate one requiring a judicial ap proach, and consequently the person from whom the goods were seized was entitled to notice before the period of six months envisaged by section 110(2) was extended.
The point was considered again in M/s. Lokenath Tolaram etc.
B.N. Rang wani and Others, (supra) by a Bench of four Judges of this Court and the Court referred to the view taken in Charan Das Malhotra, (supra) but it declined to interfere because the appellants in that case had themselves waived notice con cerning extension of the time.
The Court did not specifical ly give the stamp of approval to the law laid down in Charan Das Malhotra, (supra).
There is no doubt that the words "on sufficient cause being shown" in the proviso to section 110(2) of the Act indi cates that the Collector of Customs must apply his mind to the point whether a case for extending the period of six months is made out.
What is envisaged is an objective con sideration of the case and a decision to be rendered after considering the material placed before him to justify the request for extension.
The Customs Officer concerned who seeks the extension must show good reason for seeking the extension, and in this behalf he would probably want to establish that the investigation is not complete and it cannot yet be said whether a final order confiscating the goods should be made or not.
As more time is required for investigation, he applies for extension of time.
The Collec tor must be satisfied that the investigation is being pur sued seriously and that there is need for more time for taking it to its conclusion.
The question is whether the person claiming restoration of goods is entitled to notice before time is extended.
The right to notice flows not from the mere circumstance that there is a proceeding of a judi cial nature, but indeed it goes beyond to the basic reason which gives to the proceeding its character, and that 290 reason is that a right of a person may be effected and there may.
be prejudice to that right if he is not accorded an opportunity to put forward his case in the proceeding.
In the other words, the issue is whether there is a right in a person from whose possession goods are seized and which right may be prejudiced or placed in jeopardy unless he is heard in the matter.
It cannot be disputed that section 110 sub section (2) contemplates either notice (within six months from the date of seizure) to the person from whose possession the goods have been seized in order to determine whether the goods should be confiscated or the restoration of the goods to such person on the expiry of that period.
If the notice is not issued in the confiscation proceedings within six months from the date of seizure the person from whose pos session the goods have been seized becomes immediately entitled to the return of the goods.
It is that right to the immediate restoration of the goods upon the expiry of six months from the date of seizure that is defeated by the extension of time under the proviso to section 110(2).
When we speak of the right of the person being prejudiced or placed in jeopardy we necessarily envisage some damage or injury or hardship to that right and it becomes necessary to inquire into the nature of such damage or injury or hardship for any case to be set up by such person must indicate the damage or injury or hardship apprehended by such person.
In the present case, one possibility is that the person from whose possession the goods have been seized may want to establish the need for immediate possession, having regard to the nature of the goods and the critical conditions then pre vailing in the market or that the goods are such as are required urgently to meet an emergency in relation to a vocational or private need, and that any delay in restora tion would cause material damage or injury or hardship either by reason of some circumstance special to the person or of market conditions or of any particular quality of requirement for the preservation of the goods.
But it will not be open to him to question whether the stage of the investigation, and the need for further investigation, call for an extension of time.
It is impossible to conceive that a person from whose possession the goods have been seized with a view to confiscation should be entitled to know and to monitor, how the investigation against him is proceeding, the material collected against him at that stage, and what is the utility of pursuing the investigation further.
These are matters of a confidential nature, knowledge of which such person is entitled to only upon the investigation being completed and a decision being taken to issue notice to show cause why the goods should not be confiscated.
There can be no right in any person to be informed midway, during an investigation, of the material collected in the case against him.
Consequently, while notice may be necessary to such person to show why 291 time should not be extended he is not entitled to informa tion as to the investigation which is in process.
In such circumstances, the right of a person, from whose possession the goods have been seized, to notice of the proposed exten sion must be conceded, but the opportunity open to him on such notice cannot extend to information concerning the nature and course of the investigation.
In that sense, the opportunity which the law can contemplate upon notice to him of the application for extension must be limited by the pragmatic necessities of the case.
If these considerations are kept in mind, we have no doubt that notice must issue to the person from whose possession the goods have been seized of the proposal to extend the period of six months.
In the normal course, notice must go to such person before the expiry of the original period of six months.
It is true that the further period of six months contemplated as the maximum period of extension is a short period, but Parliament has contemplated an original period of six months only and when it has fixed upon such period it must be assumed to have taken into consideration that the further detention of the goods can produce damage or injury or hardship to the person from whose possession the goods are seized.
We have said that notice must go to the person, from whose possession the goods have been seized, before the expiry of the original period of six months.
It is possible that while notice is issued before the expiry of that peri od, service of such notice may not be effected on the person concerned in sufficient time to enable the Collector to make the order of extension before that period expires.
Service of the notice may be postponed or delayed or rendered inef fective by reason of the person sought to be served attempt ing to avoid service of notice or for any other reason beyond the control of the Customs authorities.
In that event, it would be open to the Collector, if he finds that sufficient cause has been made out before him in that behalf to extend the time beyond the original period of six months, and thereafter, after notice has been served on the person concerned, to afford a postdecisional hearing to him in order to determine whether the order of extension should be cancelled or not.
Having regard to the seriousness and the magnitude of injury to the public interest in the case of the illicit importation of goods, and having regard to considerations of the damage to economic policy underlying the formulation of import and export planning, it seems necessary to reconcile the need to afford an opportunity to the person effected with the larger considerations of public interest.
Our attention has been drawn to Ganeshmul Channilal Gandhi 292 and another vs Collector of Central Excise and Asstt.
Col lector, Bangalore, A.I.R. where the High Court of Mysore has held that no notice is necessary to the person from whose possession the goods are seized when the Collector proceeds to consider whether the original period of six months should be extended.
Reliance has also been placed on Sheikh Mohammed Sayeed vs Assistant Collector of Customs for Preventive and others, A.I.R. 1970 Calcutta 134 which proceeds on the view that the Collector has to satisfy himself only subjectively on the point whether extension is called for.
In Karsandas Pepatlal Dhineja & Others vs Union of India and Another, the High Court de fined the implications of the use of the words "on suffi cient cause being shown" in a statutory proceeding.
None of these cases convince us that the person from whose posses sion the goods have been seized is not entitled to notice of the proposal to extend the period.
In our opinion, the person from whose possession the goods have been seized is entitled to notice of the proposal before the Collector of Customs for the extension of the original period of six months mentioned in section 110(2) of the , and he is entitled to be heard upon such pro posal but subject to the restrictions referred to earlier in regard to the need for maintaining confidentiality of the investigation proceedings.
The appeal is allowed accordingly and to the extent set forth in our judgment the orders of the High Court are modified, but there is no order as to costs.
Y. Lal Appeal al lowed.

dataset_name: IN-Abs

summary/full:
Acting on the basis of the information contained in an advertisement in a newspapers offering the sale of imported manual and electric typewriters, adding and calculating machines, the customs authorities raided the premises of M/s Typewriters and Stationary Operation Private Ltd., Calcutta on 5th May, 1966 and recovered fifteen typewriters, adding & calculating machines.
On inquiry it was learnt that the said machines had been sold to the Company by R.N. Bagh, who in turn disclosed that the machines in question had been pur chased from crew members of the vessels.
On 7.5.66 the customs authorities searched the business premises of the Company and found several machines from the documents seized during the search it came to light that there was a conspir acy between the Respondents and some of the crew members of certain vessels whereunder it had been agreed that the Respondents would look after the families of the crew mem bers in India and the crew personnel would draw their wages abroad in foreign currency and after purchasing the said machines.
would supply to the Respondents after clearance under the concessions provided under the Baggage Rules.
The goods in question were seized on 5/7th May, 1966 and as required by Rule 124(a) of the Customs Act, notices as to why the goods should not be confiscated were due to issue within six months thereof.
Section 110(2) of the Customs Act provided that if a notice as contemplated by Section 124(a) is not issued within a period of six months as provided thereunder, the goods shall have to be returned to the person from whose possession, they were seized.
However a proviso to Sec.
110(2) makes a provision that the period of six months can be extended, 283 on sufficient cause being shown, by the Collector for a period not exceeding six months.
The officers of the Customs Department showed cause to the Additional Collector of Customs, Calcutta for extension of time to serve a show cause notice on Respondents and extension of six months was granted for the purpose under the proviso to Section 110(2) of the Customs Act.
No notice of the proceedings relating to the said extension was given to the persons from whose custody the goods were seized.
On 6th December 1966, the Assistant Collector of Customs issued a notice to each of the Respondents calling upon them to show cause why the goods should not be confiscated.
On April 18, 1967, the Respondents filed a Writ Petition in the High Court at Calcutta challenging the proceedings initiated against them by Customs Authorities.
The learned Single Judge of the High Court who heard the Writ Petition held that the Order of extension to be made under Section 110(2) of the Customs Act is not an administrative order but a quasi judicial order and as the order has been passed ex parte without notice to the owner of the goods, it was in breach of principle of Natural Justice.
The order of exten sion was accordingly quashed and it was held that the owner was entitled to the return of his goods.
The appellants appealed to the Appellate Bench.
The appellate Bench allowed the appeal in part, quashed the order of extension dated 3rd November, 1966 directed the appellants to restore the machines and documents seized from the Respondents.
However the Customs Authorities were per mitted to initiate and complete such other proceedings against the Respondents as were open to them in law.
The appellate Bench was of the opinion that the decision in Assistant Collector of Customs vs Charan Das, ; lays down the correct law and notice of extension should have been given to the owner of the goods before the Order of extension had been passed.
Hence this appeal by the Customs Department.
At the hearing of the appeal Respondents placed reliance upon Charan Das Malhotra, (supra).
Reference was also made to the decision in M/s Lokenath Tolaram etc.
B.N. Rangwani appeal were of the opinion that the view taken in the said two cases required reconsideration and the 284 appeal has been referred to a larger Bench for a decision on the question whether the Collector is bound to issue notice to the persons from whose possession the goods were seized and to give him an opportunity to make his representation on the point whether the time for issuing notice under Section 124(a) of the Act should be extended beyond six months.
Partly allowing the appeal this Court, HELD: The words "on sufficient cause being shown" in the proviso to Section 110(2) of the Customs Act indicates that the Collector of Customs must apply his mind to the point whether a case for extending the period of six months is made out.
[289E F] The right to notice flows not from the mere circumstance that there is a proceeding of a judicial nature, but indeed it goes beyond to the basic reason which gives to the pro ceeding its character, and that reason is that a right of a person may be affected and there may be prejudice to that right if he is not afforded an opportunity to put forward his case in the proceeding.
If the notice is not issued in the confiscation proceedings within six months from the date of the seizure the person from whose possession the goods have been seized becomes immediately entitled to the return of goods.
It is that right to the immediate restoration of goods upon the expiry of six months from the date of the seizure that is defeated by the extension of time under the provio to Section 110(2).
[289H; 290B C] There can be no right in any person to be informed midway, during an investigation, of the material collected in the case against him.
While notice may be necessary to such person to show why time should not be extended, he is not entitled to information as to the investigation which is in process.
[290H; 291A] The person from whose possession the goods have been seized is, therefore, entitled to notice of the proposal before the Collector of Customs for the extension of the original period of six months mentioned in Section 110(2) of the Customs Act and he is entitled to be heard upon such proposal but subject to the restrictions in regard to the need for maintaining confidentiality of the investigation proceedings.
[292D E] Ganeshmul Channilal Gandhi & Anr., vs Collector of Central Excise and Asstt.
Collector, Bangalore, A.I.R. , Sheikh 285 Mohammed Sayeed vs Assistant Collector of Customs for Pre ventive & Others, A.I.R. 1970 Calcutta 134 and Karsandas Pepatlal Dhineja & Ors., vs Union of India & Anr., not applicable.


judgement:
t Petition Nos. 751, 794 and 798 of 1986.
(Under Article 32 of the Constitution of India.) Dr. Y.S. Chitale, Soli J. Sorabiee, A.B. Diwan, B.V. Desai, Ms. Madavi Gupta, Bharat Sangal, Harish N. Salve, T.V.S.N. Chari, Ms. Sunita Modigunda, Ms. Vrinda Grover and S.K. Bhattacharya for the Petitioners.
G. Ramaswamy, Additional Solicitor General Anil Dev Singh, P.S. Shroff, S.S. Shroff, R. Karanjawala, Mrs. M. Karanjawala, Ejaz Maqbool, Mrs. Shobha Dikshit, E.C. Aggar wal, B.V. Desai, Ms. Madhavi Gupta, C.S. Vaidyanathan and S.V. Deshpande for the Respondents.
The Judgment of the Court was delivered by RANGANATH MISRA, J.
These are three petitions under article 32 of the Constitution by three different groups of peti tioners.
In each of these writ petitions petitioner No. 1 is a private limited company and the second petitioner is a shareholder thereof.
The petitionercompany in each of these cases obtained the right to collect oleo resin 260 gum or to process the same for industrial purposes from the State of Jammu & Kashmir and each of them seeks to challenge the vires of the provisions of the Jammu & Kashmir Extrac tion of Resin Act (7 of 1986) (hereinafter referred to as the 'Act ').
Though there are some variations of facts relevant to each of the writ petitions, the allegations are more or less similar in regard to the relevant contentions both factual and legal.
When rule was issued the respondent State came with almost the same plea, traversing common grounds and revealing a common stand in its returns to the Court.
These three writ petitions were heard at a time and are now being disposed of by a common judgment.
Resin is the secretion extracted by tapping or otherwise from chir, chil and kail trees wildly growing in the forests of Jammu & Kashmir.
It is an exudate and when subjected to chemical treatment and distillation with the aid of steam yields 70% resin, 15% turpentine and the remaining 15% of waste material.
The down stream products which are manufac tured from this raw material are varnish, camphor, paints and turpene chemicals.
The petitioner company in writ petition No. 751/86 obtained under Government order dated 27.4.1979 allotment of 10 to 12 lacs of blazes annually for extraction of resin from the inaccessible forests in Poonch, Reasi and Ramban Divisions of the State for a period of 10 years on terms and conditions set out in the said Government order.
Government order had also been made granting rights in favour of the petitioner company in writ petition No. 794/86.
The petitio nercompany in writ petition No. 798/86 was a processor only and had not undertaken to work as a tapper.
Applications under article 32 of the Constitution were filed in this Court at that point of time on the ground that the Government orders and/or contracts were hit by articles 14 and 19 of the Constitution and the grant of forest rights in favour of the present petitioners was arbitrary, mala fide and not in public interest.
It was further contended that State lar gesse had been conferred on the petitioners at the cost of the State exchequer.
The petitioners therein also pleaded that a monopoly had been created in favour of the private grantees and was not protected under article 19(1)(g) of the Constitution.
According to Kasturilal, the petitioner before this Court then, the benefits should have been thrown open and opportunity should have been provided to all interested persons to compete for the obtaining of the contract.
A three Judge Bench consisting one of us (the learned Chief Justice) dealt with the matter at length and ulti 261 mately dismissed the petition holding that there was no substance in any of the contentions advanced on behalf of Kasturilal.
(Kasturi Lal Lakshmi Reddy vs State of Jammu & Kashmir & Anr., The order made in favour of the petitioner company in writ petition No. 794/86 and incorporated in the agreement dated 6.11.
1978 had also been challenged in a separate writ petition before this Court and the reasoned order for rejection of the writ petition is found in Brij Bhushan & Ors.
vs State of Jammu & Kashmir & Ors.
, While the petitioner company in writ petition No. 751/86 had agreed to work as tapper and processor on the stipula tion that 25% of the annual collection of gum subject to minimum of 1500 metric tonnes would be made over to the Government company (J & K Industries Limited) and out of the rest not exceeding the limit of 3500 metric tonnes would be used by them, the petitioner company in writ petition No. 794/86 who had been operating from before as tappers only entered into a formal agreement with the State claiming to process and manufacture down stream goods.
The writ peti tioner company in writ petition No. 798/86 had agreed to work as processor only.
In the seventies, the State of Jammu & Kashmir decided to industrialise the hitherto under developed State and with that end in view came forward with scheme and threw open invitation to outsiders to set up industries at convenient places within the State.
As stimulus Government offered land and other facilities.
The petitioners in these three writ petitions and another who has since withdrawn the writ petition, went into the State of Jammu & Kashmir in response and negotiated the arrangements we have already adverted to.
While the petitioners were carrying on their business activities, Governor 's Act 7 of 1986, the provisions whereof are impugned in these petitions by which all their existing rights came to terminate, came into force with effect from 23.4.1986.
The Act sought to create a monopoly with refer ence to resin in favour of J & K Industries Limited, which is a respondent to these petitions.
The Act has seven sections in all.
Section 1 gives the short title, extent and the date of commencement while section 2 defines four terms, namely, 'prescribed ', 'resin ', 'resin depot ' and 'resin products '.
Section 3 bans extraction and other dealings of resin by private persons while s, 4 makes provision for disposal of resin.
Section 5 provides the manner of fixation of price.
Section 6 provides for penalty for offences 262 and section 7 clothes the State Government with power to make rules for carrying out the purposes of the Act.
Challenge in the writ petitions has been to the provisions contained in sections 3, 4 and 5 of the Act.
We propose to excerpt these provisions for convenience: "3. Ban on extraction by private persons Notwithstanding anything to the contrary contained in any law, rule, order, instrument, agreement or contract or in any judgment, decree or order of any Court or Authority, no person, other than the Government shall as from the commencement of this Act , (a) extract resin by tapping or otherwise from Chit/ Chil or Kail trees in the State whether such trees belong to the State or not; (b) transport resin from one place to other in the State except under and in accord ance with the permit granted under this Act; (c) acquire, possess, store, dispose of or otherwise deal with any resin extracted and manufactured in the State.
Disposal of resin (1) All resin extracted under section 3 shall be stored at resin depots and thereaf ter shall be sold by the Government to the Jammu & Kashmir Industries Limited for proc essing.
(2) After processing it by the Jammu & Kashmir Industries Limited, the resin products, if any surplus, shall be sold by it to the small scale units and medium scale units in the State in such manner as may be provided for, and at such price as may be fixed by the Jammu & Kashmir Industries Limit ed in consultation with the Government.
Fixation of price (1) The Government shall, having due regard to the following facts, fix the price at which resin shall be sold by it during a year, namely 263 (a) the sale price of resin, if any, fixed under this Act during the preceding three years; (b) the cost of transport; (c) the cost of extraction of resin; (d) the cost of packing of resin including the cost of container in which resin is delivered; (e) the prevalent sale price at which resin is being sold in other resin producing States; (f) any other factor which the Gov ernment considers relevant.
(2) The price so fixed shall be published in the Official Gazette and shall not be altered during the year to which it relates.
" In exercise of the rule making power, the State Government has brought into force a set of rules known as the Jammu & Kashmir Extraction of Resin Rules, 1986 with effect from 27.9.1986.
It is not in dispute that by the provisions of this Act all the existing contracts between parties and the State and existing grants in respect of collection, transport, storage and otherwise dealing with resin have come to forthwith terminate and a monopoly situation has been created qua these operations in resin in favour of the Government compa ny.
The Act does not provide for any compensation and the petitioners maintain that the existing rights in their favour amounted to 'property ' and could not have been expro priated in contravention of the guarantee in Part III of the Constitution.
It is the stand of the State that the benefits and privileges conferred on the three petitioners either under contract or under Government orders did not constitute property and by the provisions of the Act no transfer of such property has taken place.
It is relevant to point out at this stage that sub clause (f) was deleted from article 19(1) of the Constitution by the Forty fourth Amendment with effect from 20th of June, 1979 and acquisition, holding and/or disposal of property ceased to be a fundamental right.
The same constitutional amendment deleted article 31 but so far as the State 264 of Jammu & Kashmir is concerned the Forty fourth Amendment did not bring about any change and right to property, there fore, continues to be fundamental and law enunciated by this Court treating property be one of the fundamental rights still applies to Jammu & Kashmir.
That is why, sumptuous reference has been made by counsel for the petitioners to a catena of precedents touching upon right to property as a fundamental one.
The petitioners maintained that the Government orders and contracts under which they have got the right to exploit or utilise the particular forest product does amount to 'property ' and the petitioners were entitled to protection thereof against expropriation and in case no compensation was provided the relevant provisions of the Act became exposed to challenge.
They have similarly contended that the impugned provisions of section 3 are hit for contravening the fundamental right guaranteed by article 19(1)(g) which confers upon them the right to carry on any occupation, trade or business.
The Government orders made in 1979 did confer the right to exploit the forest and appropriate a part of the collec tion of the gums for purposes of business.
The concept of 'property ' known to jurisprudence has expanded through several pronouncements of this Court.
Ramana Dayaram Shetty vs The International Airport Authority of India & Ors.
, ; , to which one of us (the learned Chief Justice) was party held: "Today the Government in a welfare State is the regulator and dispenser of special serv ices and provider of a large number of bene fits, including jobs, contracts, licences, quotas, mineral rights etc.
The Government pours forth wealth, money, benefits, services, contracts, quotas and licences.
The valuables dispensed by Government take many forms, but they all share one characteristic.
They are steadily taking the place of traditional forms of wealth.
These valuables which derive from relationships to Government are of many kinds.
They comprise social security benefits, cash grants for political sufferers and the whole scheme of State and the local welfare.
Then again, thousands of people are employed in the State and the Central Governments and local authorities.
Licences are required before one can engage in many kinds of business or work.
The power of giving licences means power to withhold them and this gives control to the Government or to 265 the agents of Government on the lives of many people . .
It is virtually impossible to lose money on them and many enterprises are set up primarily to do business with Govern ment.
Government owns and controls hundreds of acres of public land valuable for mining and other purposes.
These resources are available for utilisation by private corporations and individuals by way of lease or licence.
All these mean growth in the Government largess and with the increasing magnitude and range of governmental functions as we move closer to a welfare State, more and more of our wealth consists of these new forms.
Some of these forms of wealth may be in the nature of legal rights but the large majority of them are in the nature of privileges.
But on that account, can it be said that they do not enjoy any legal protection? Can they be regarded as gratuity furnished by the State so that the State may withhold grant or revoke it at its pleasure . .
The law has not been slow to recognise the importance of this new kind of wealth and the need to protect individual interest in it and with that end in view, it has developed new forms of protection.
Some interests in Government largess, formerly regarded as privileges, have been recognised as rights while others have been given legal protection not only by forging procedural safeguards but also by confining/structuring and checking Government discretion in the matter of grant of such largers . .
It is insisted, as pointed out or ' Prof. Reich in an especially stimulating article on The New Property ' in , 'that Government action be based on standards that are not arbitrary or unauthorised.
" In Kasturi Lal Lakshmi Reddy vs State of Jammu & Kashmir & Anr., (supra), the interest created in favour of the petitioners in the forest assets of the State (which has now been fatally hit by section 3) was considered to be proper ty.
At page 1354 of the Reports this Court stated: "It was pointed out by this Court in Ramana Dayaram Shetty vs The International Airport Authority of India & Ors., (supra) that with the growth of the welfare state, new forms of property in the shape of Government largess are developing, since the Government is in creasingly assuming the role of regulator and dispenser of social services and provider of a large number of benefits including jobs, con 266 tracts, licences, quotas, minerals rights etc.
" In Subodh Gopal Bose 's case ; , this Court had pointed out: "The word 'property ' in the context of Article 31 (the same should be the meaning under Article 19(1)(f) which is designed to protect private property in all its forms, must be understood both in a corporeal sense as having reference to all those specific things that are susceptible of private appropriation and enjoyment as well as in its juridical or legal sense of a bundle of rights which the owner can exercise under the municipal law with respect to the user and enjoyment of those things to the exclusion of all others." Again, in Dwarkadas Shrinivas of Bombay vs The Sholapur Spinning & Weaving Co. Ltd. & Ors., ; , this Court held: "A contract or agreement which a person may have with the company and which may be can celled by the Directors in exercise of powers under ordinance will undoubtedly be property within the meaning of the two articles.
" In R.C. Cooper vs Union of India, ; an eleven Judge Bench at page 567 of the Reports, stated: "By Entry 42 in the Concurrent List power was conferred upon the Parliament and the State Legislatures to legislate with respect to 'Principles on which compensation for property acquired or requisitioned for the purpose of the Union or for any other public purpose is to be determined, and the form in which such compensation is to be given '.
Power to legis late for acquisition of property is exercisa ble only under Entry 42 of List III, and not as an incident of the power to legislate in respect of a specific head of legislation in any of the three lists.
Under that Entry property can be compulsorily acquired.
In its normal connotation property means the 'highest right a man can to anything, being that right which one has to lands or tene ments, goods or chatties which does not depend on another 's courtesy; it includes ownership, estates 267 and interests in corporeal things, and also rights such as trade marks, copyrights, pat ents and even rights in personam capable of transfer or transmission, such as debts; and signifies a beneficial right to or a thing considered as having a money value, especially with reference to transfer or succession, and to their capacity of being injured." In Madan Mohan Pathak vs Union of India & Ors., ; this Court was examining the validity of the Life Insurance Corporation (Modification of Settlement) Act of 1976.
The settlement had created a right to bonus in favour of the Class 111 and Class IV employees of the Corporation and the Act adversely interfered with that settlement.
The question for consideration of the seven Judge Bench was whether bonus payable under the settlement was 'property ' within the meaning of article 31(2) and whether stopping pay ment of bonus amounted to compulsory acquisition of property without payment of compensation.
The Court ultimately held that bonus was property and the legislation was bad.
At p. 358 of the Reports, this Court said: "It is clear from ' the scheme of fundamental rights embodied in Part III of the Constitu tion that the guarantee of the right to property is contained in Article 19(1)(f) and clauses (1) and (2) of Article 31.
It stands to reason that 'property ' cannot have one meaning in Article 19(1)(f), another in Arti cle 31 clause (1) and still another in Article 31, clause (2).
'Property ' must have the same connotation in all the three Articles and since these are constitutional provisions intended to secure a fundamental right, they must receive the widest interpretation and must be held to refer to property of every kind." At p. 360 of the Reports, the Court again stated that every form of property, tangible or intangible, including debts and choses in action constituted property, In this group of cases before us the executive grant or the contract created interest in the petitioners and there is no room to doubt that by such process in favour of the petitioners property right had been created.
Learned Additional Solicitor General appearing for the State had contended that the contractual interest or the interest in terms of the Government order did not constitute property and relied upon certain precedents of this Court.
The Coal Nationalisation case on which reliance was mainly placed is clearly distinguishable on facts.
268 We do not think it necessary to refer to other authorities as the ones referred to above are binding precedents and unequivocally indicate that the interests which are in dispute before us do constitute property entitled to protec tion under article 19(1)(f) and are covered by article 31(2) of the Constitution.
Reliance has been placed by learned Additional Solicitor General on the restrictive provision contained in sub article
(5) whereby reasonable restrictions in public interest could be imposed on the exercise of right to property.
There are situations, the learned counsel has argued, where the re strictions could go to the point of almost wiping out the right.
He relied upon some precedents in support of this proposition.
Section 3 is a total annihilation of existing rights and nothing of the interest created either under the executive orders or contract is allowed to survive.
We do not think there is room within the legal frame to sustain such a situation under sub article
Sub article
(6), like sub article
(5), protects restrictive law in public interest.
What we have said in regard to sub article (5) perhaps equally applies to sub article
Article 31(2) provided: "No property shall be compulsorily acquired or requisitioned save for a public purpose and save by authority of a law which provides for acquisition or requisitioning of the property for an amount which may be fixed by such law or which may be determined in accordance with such principles and given in such manner as may be specified in such law; and no such law shall be called in question in any court on the ground that the amount so fixed or deter mined is not adequate or that the whole or any part of such amount is to be given otherwise than in cash:" It has already been stated that the Act does not provide for any compensation.
Section 3 has an overriding applica tion.
It provides that it shall not only apply to the clas sified trees belonging to the State but it shall also apply to such trees belonging to private persons and rights of such private owners to carry on the various operations described in section 3 are completely taken away without provi sion of any compensation.
It cannot be contended in view of what we have stated above that the right of beneficial enjoyment of the trees by carrying out the processes named in section 3 do not constitute 'property '.
Unless the position is 269 covered by clause (2A) of article 31, in view of our conclusion that the interest created under the contract, Government order or the right of beneficial enjoyment vested in the private owner of the trees amount to 'property ', the Act would be hit by article 31(2).
Sub article
(2A) provides: "Where a law does not provide for the transfer of the ownership or right to possession of any property to the State or to a corporation owned or controlled by the State, it shall not be deemed to provide for the compulsory acqui sition or requisitioning of property, notwith standing that it deprives any person of his property." Learned Additional Solicitor General 's contention has been that under the provisions of section 3 of the Act the rights that vested in the petitioners stand wiped out or extin guished but those rights have not been vested in either the State or the Government company.
This contention overlooks the resultant outcome of the provisions of the Act.
Section 3 which takes away private fights and authorises Government alone to extract, transport it and acquire, possess or dispose of or otherwise deal with the resin extracted and manufactured within the State and section 4 authorises Government to sell the same to the Government company for processing.
What is taken away under section 3 from the hands of private parties is undoubtedly given by the same provision to Gov ernment.
In Madan Mohan Pathak 's case (supra), this Court had pointed out: "The verbal veil constructed by employing the device of extinguishment of debt cannot be permitted to conceal or hide the real nature of the transaction.
It is necessary to remem ber that we are dealing here with a case where a constitutionally guaranteed right is sought to be enforced and the protection of such right should not be allowed to be defeated or rendered illusory by legislative stratagems.
The courts should be ready to rip open such stratagems and devices and find out whether in effect and substance the legislation trenches upon any fundamental rights.
The encroachments on fundamental rights are often subtle and sophisticated and they are disguised in lan guage which apparently seems to steer clear of the constitutional inhibitions.
" It is not necessary to multiply precedents, As we have already pointed 270 out, section 3 of the Act extinguishes private rights and confers the right to deal with the subject matter of such rights on the State.
An attempt was made to distinguish the rule in Pathak 's case by relying upon the decision in Tara Prasad Singh vs Union of India & Ors., ; That seven Judge Bench was dealing with the Coal Mines Nationalisation (Amendment) Act of 1976.
The Court referred to the two previous decisions in Ajit Singh vs State of Punjab, ; and Madan Mohan Pathak vs Union of India, (supra), and observed: "These decisions have no application to the instant case because the interest of the lessees and sub lessees which was brought to termination by section 3(3)(b) of the Nation alisation Amendment Act does not come to be vested in the State.
The Act provides that excepting a certain class of leases and sub leases, all other leases and subleases shall stand terminated in so far as they relate to the winning or mining of coal.
There is no provision in the Act by which the interest so terminated is vested in the State; Nor does such vesting flow as a necessary consequence of any of the provisions of the Act.
Sub section (4) of section 4 of the Act provides that where a mining lease stands terminated under sub section (3), it shall be lawful for the Central Government or a Government Company or a corporation owned or controlled by the Central Government to obtain a prospecting licence or a mining lease in respect of the whole or part of the land covered by the mining lease which stands so terminated.
The plain intendment of the Act, which, may it be reiterated, is neither a pretense nor a fa cade, is that once the outstanding leases and sub leases are terminated, the Central Govern ment and the other authorities will be free to apply for a mining lease.
Any lease hold interest which the Central Government, for example, may thus obtain does not directly or immediately flow from the termination brought about by section 3(3)(b).
Another event has to intervene between the termination of existing leases and the creation of new interests.
The Central Government, etc.
have to take a posi tive step for obtaining a prospecting licence or a mining lease.
Without it, the Act would be ineffective to create of its own force any right or interest in favour of the Central Government, a Government Company or a Corpora tion 271 owned, managed or controlled by the Central Government.
" The statutory scheme of the Act which we are considering is to extinguish private rights both in respect of Govern ment owned trees as also trees in private ownership and to vest those rights in the State Government or the Government company.
The facts in this group of cases, therefore, clear ly indicate that there is a direct relationship between nullification of the private rights and vesting of those in the State or the Government company.
In other words, where the contract was given by the Government in respect of the trees belonging to the State, the nullification of the contract would result in the automatic transfer by reversion of the property in the contract to the Government.
Similar ly, where the ownership vested in the private persons by operation of section 3 of the Act, the right to appropriate the usufruct of the trees is taken away from the private owner and is vested in the State.
The rule in Pathak 's case, therefore, is applicable.
Sub article
(2A) of article 31, there fore, does not apply to the facts of the present case.
Consequently, sub article
(2) applies and compensation, there fore, was payable before the property could be taken over by the State.
Petitioners in writ petition No. 794/86 had claimed that pursuant to the arrangement entered into between them and the State following the invitation by the State they had invested Rs. 1.68 crores in shape of plant and machinery and 63 lacs of rupees by way of land and buildings.
The peti tioner in the other two cases stated that investments had been made by them as well.
The petitioners were invited to set up industries by assuring them supply of the raw materi al.
They changed their position on the basis of representa tions made by the State and when the factories were ready and they were in a position to utilise the raw material, the impugned Act came into force to obliterate their rights and enabled the State to get out of the commitments.
We are inclined to agree with the submissions made on behalf of the petitioners that the circumstances gave rise to a fact situation of estoppel.
It is true that there is no estoppel against the legislature and the vires of the Act cannot be tested by invoking the plea but so far as the State Govern ment is concerned the rule of estoppel does apply and the precedents of this Court are clear.
It is unnecessary to go into that aspect of the matter as in our considered opinion the impugned Act suffers from the vice of taking away rights to property without providing for compensation at all and is hit by article 31(2) of the Constitution.
Connected proceedings had been taken for interim arrangement 272 regarding provision of raw material to the petitioners and certain other parties.
We do not propose to deal with those aspects in this judgment but liberty is given to parties to apply for such directions as they consider appropriate and such applications, when filed, will be dealt with separate ly.
In the result, each of the writ petitions succeeds.
We declare the provisions of sections 3 and 4 of the Act to be ultra vires the Constitution and since these provisions contain the soul of the Act and without them, the Act cannot oper ate, the entire Act has to suffer.
The petitioners shall have their costs to these proceedings.
Hearing fee of Rs.3,000 is awarded in each of the petitions.
Y.L. Petition allowed.

summary/full:
These three Writ Petitions have been filed by three different Private Limited Companies and their share holders challenging the vires of the Jammu & Kashmir Extraction of Resin Act (7 of 1986).
The circumstances that led to the filing of these Writ Petitions may be stated thus: The State of Jammu & Kashmir with a view to industria lise the under developed State formulated schemes and invit ed outsiders to set up industries in the State and as a stimulus the Government offered land and other facilities.
The Petitioner Companies, in response to the said invitation went to the State of Jammu & Kashmir and negotiated the arrangements, as a result of which each Company had obtained a right to collect resin gum to process the same for indus trial purposes.
The Petitioner Company in Writ Petition No. 751 of 1986 had obtained under Government order dated 27.4.79 allotment of 10 to 12 lacs of blazes annually for extraction of resin from the forests in Poonch and Rambam Divisions for a period of 10 years.
Government order granting rights had been made in favour of the Petitioner Company in W.P. No. 794 of 1986.
The Petitioner Company in W.P. No. 798 of 1986 was a proces sor only and had undertaken to work as a tapper.
The orders passed in favour of these Companies referred to above were challenged before this Court as being violative of articles 14 and 19 of the Constitution on the ground that grant of forest rights to the Petitioners were arbitrary, mala fide and not in public interest.
It was contended that State largesse had been created in favour of the Petitioners at the cost of State Exchequer and the grant created monopoly.
This Court dismissed the Writ Petitions holding that there was no substance 258 in any of the contentions advanced by the Petitioners.
Kasturi Lal Lakshmi Reddy vs State of Jammu & Kashmir & Anr.
, The order made in favour of the Petitioner in W.P. No. 794 of 1986 and incorporated in the agreement dated 6.11.1978 was also challenged but this Court rejected the Petition.
Brij Bhushan & Ors.
vs State of Jammu & Kashmir & Ors.
, While the Petitioners were carrying on with the business contracted for, Governor 's Act of 1986 came into force.
The provisions of the said Act particularly sections 3, 4 and 5 have been impugned in these Petitions.
It is contended on behalf of the Petitioners that Gov ernment orders and contracts under which they have got the right to exploit or utilize the particular forest product amounts to "property" and they are entitled to protection thereof against expropriation and in case no compensation was provided, the provisions of the Act are hit for contra vening the fundamental right guaranteed by article 19(1)(g) which confers upon them the right to carry on any occupa tion, trade or business.
On the other hand the case put forward by the State is that the benefits and privileges conferred on the three Petitioners either under contract or under Government orders did not constitute property and by the provisions of the Act no transfer of such property has taken place.
Allowing the Writ Petition, this Court, HELD: The statutory scheme of Jammu & Kashmir Extraction of Resin Act, 1986 is to extinguish private rights both in respect of Government owned trees as also trees in private ownership and to vest those1 rights in the State Government or the Government Company.
[271A B] The Executive grant or the contract created interest in the Petitioners and there is no room to doubt that by such process in favour of the Petitioners property right had been created.
The interests which are in dispute before this Court do constitute property entitled to protection under article 19(1)(1) and are covered by article 31(2).
[267G; 268A B] 259 Ramana Dayaram Shetty vs The International Airport Authority of India & Ors., ; and Kasturi Lal Lakshmi Reddy vs State of Jammu & Kashmir & Anr., ; The ownership vested in the private persons, by opera tion of section 3 of the Act, the right to appropriate the usu fruct of the trees is taken away from the private owner and is vested in the State.
Sub article
(2A) of article 31, therefore, does not apply.
Consequently, sub article
(2) applies and compensation, therefore, was payable before the property could be taken over by the State.
Provisions of sections 3 and 4 of the Act are ultra vires of the Constitution and since these provisions contain the soul of the Act, without them the Act cannot operate, the entire Act has to suffer.
[271C D; 272B C] Subodh Gopal Bose 's case ; ; Dwarkadas Shrinivas of Bombay vs The Sholapur Spinning & Weaving Co. Ltd. & Ors., ; ; R.C. Cooper vs Union of India, ; ; Madan Mohan Pathak vs Union of India & Ors., ; and Tara Prasad Singh vs Union of India & Ors., ; , referred to.