judgement:
Civil Appeal No. 576 of 1970.
From the Judgment and Order dated 18 8 1969 of the Allahabad High Court in Writ Petition No. 334 of 1963.
G. N. Dixit and O. P. Rana for the Appellants.
H. K. Puri for the Respondent.
The Judgment of the Court was delivered by VENKATARAMIAH, J.
This appeal by certificate involves the question whether section 3 of the Public Moneys (Recovery of Dues) Act, 1965 (U.P. Act No. XXV of 1965) (hereinafter referred to as 'the Act ') offends Article 14 of the Constitution and it arises in the following circumstances.
The respondent is a resident of Railwayganj, Hardoi in the State of Uttar Pradesh.
He applied to the Government of Uttar Pradesh 1017 for a loan of Rs. 15,000/ for the purpose of setting up a panel pins and wire nails industry in Hardoi.
The State Government which was interested in the industrial development of the State accordingly advanced the loan of Rs. 15,000 to the respondent under a mortgage deed dated March 10, 1960.
The respondent was permitted to repay the loan in ten half yearly instalments commencing from May 1, 1962 together with interest at the rate of 3 per cent per annum calculated from March 25, 1960.
The mortgage deed provided that the respondent should spend Rs. 7,000 out of the loan advanced on the purchase of machineries for manufacturing panel pins and wire nails and the balance of Rs. 8,000 on the construction of a building for the purpose of the said industry and for no other purpose.
The respondent also agreed to observe truly the Uttar Pradesh Rules for the Advance of Loan for Developing Cottage Industries in the Rural Area promulgated by the State Government and also to permit the Director of Industries, U.P. or any official deputed by him to inspect his accounts for the purpose of verifying whether the amount borrowed had been utilised for the specified purpose.
The respondent hypothecated under the deed his house by way of security for the loan.
Clause (8) of the mortgage deed, however, inter alia provided that if any of the instalments payable by the respondent as mentioned in the deed was not paid on the stipulated date then the entire amount due under the deed could be recovered by the State Government as arrears of land revenue.
The mortgage deed was signed by the Director of Industries, U.P. on behalf of and acting under the authority of the Governor of Uttar Pradesh and the respondent.
The respondent committed default in repayment of the loan.
The State Government was, therefore, compelled to take coercive measures to recover the balance of the amount due and payable under the deed as if it were an arrear of land revenue, by resorting to section 3 of the Act read with sections 279/281 of the U.P. Zamindari Abolition and Land Reforms Act, 1950.
At the request of the Director of Industries, U.P., the Collector Hardoi initiated steps to recover the balance of the amount due under the deed as an arrear of land revenue.
Pursuant to the order of the Collector, the Tahsildar of Hardoi issued an order of attachment dated March 12, 1968 of the house of the respondent and also issued a warrant of arrest of the respondent to recover the amount under the provisions governing the procedure prescribed for realising land revenue.
Immediately thereafter, the respondent filed a petition under Article 226 of the Constitution on the file of the High Court of Allahabad (Lucknow Bench) in writ petition No. 334 of 1968 questioning the competence of the revenue authorities to recover the 1018 the balance of the amount due under the deed as if it were an arrear of land revenue.
In that petition, the respondent contended that the Act was discriminatory and was, therefore, violative of Article 14 of the Constitution on the ground that the State Government had two remedies available to it in law one by way of a suit for recovery of the mortgage money and another under the Act which authorised it to recover the amounts due as if they were arrears of land revenue, that the remedy under the Act was more onerous than a suit so far as the respondent was concerned and that there were no guidelines in law as to the circumstances in which the State Government could resort to the provisions of the Act.
The Director of Industries, U.P. and the revenue authorities who were impleaded as respondents in the writ petition contended that the provisions of the Act did not offend Article 14 of the Constitution.
Following the decision of this Court in Northern India Caterers Private Ltd., & Anr.
vs State of Punjab & Anr.(1) the High court declared that section 3 of the Act violated Article 14 of the Constitution by providing an additional remedy to the State Government over and above the remedy by way of a suit, leaving it to the unguided discretion of the State Government to resort to one or the other and that the remedy available under the Act was more drastic or prejudicial to the party concerned than the suit.
Accordingly the High Court quashed the recovery proceedings initiated by the revenue authorities.
Aggrieved by the decision of the High Court, the Director of Industries, U.P. and the revenue authorities have come up in appeal to this Court.
The impugned Act was passed in the year 1965 to provide for speedy recovery of certain classes of dues payable to the State or to the Uttar Pradesh Financial Corporation.
The Act contains three sections.
The first section deals with the title of the Act and extent of its operation.
The second section is the definition clause Section 2 (b) of the Act defines the expression 'financial assistance ' as any financial assistance (i) for establishing, expanding or running any industrial undertaking; or (ii) for purposes of vocational training; or (iii) for the development of animal husbandry; or (iv) for purposes of any other kind of planned development; or (v) for relief against distress.
Section 3 of the Act with which we are now concerned reads as follows: "3.
Recovery of certain dues as arrears of land revenue 1019 (1) Where any person is party (a) to any agreement relating to a loan, advance or grant given to him by the State Government or the Corporation by way of financial assistance, or (b) to any agreement relating to a guarantee given by the State Government or the Corporation in respect of a loan raised by an industrial concern, or (c) to any agreement providing that any money payable thereunder to the State Government shall be recoverable as arrears of land revenue, and such person (i) makes any default in repayment of the loan or advance or any instalment thereof, or (ii) having become liable under the conditions of the grant to refund the grant or any portion thereof, makes any default in repayment of such grant or portion or instalment thereof, or (iii) otherwise fails to comply with the terms of the agreement, then, in the case of the State Government, such officer as may be authorised in this behalf by the State Government by notification in the Official Gazette and in the case of the Corporation, the Managing Director thereof, may, without prejudice to any other mode of recovery under any other law for the time being in force, send a certificate to the Collector, mentioning the sum due from such person and requesting that such sum together with costs of the proceedings be recovered as if it were an arrear of land revenue.
(2) The Collector on receiving the certificate shall proceed to recover the amount stated therein as an arrear of land revenue.
" It may be seen that section 3(1) (c) of the Act provides that where any person is a party to any agreement providing that any money payable thereunder to the State Government shall be recoverable as arrears of land revenue and such person makes any default in repayment of the loan or advance or any instalment thereof then the arrears due and payable by him may be recovered as if it were an arrear of land revenue by issuing a certificate to the Collector.
The remedy of the State Government to recover the amount by instituting a suit also remains unaffected by the Act.
1020 At the outset, it has to be stated that the decision of this Court in Northern India Caterers Private Ltd., & Anr.
(supra) is overruled by this Court in Maganlal Chhagganlal (P) Ltd. vs Municipal Corporation of Greater Bombay & Ors.(1) The question for determination in this case is whether section 3 of the impugned Act violates Article 14 of the Constitution.
In order to decide this question, it is necessary to determine the object of the Act and whether the classification made between the State on the one hand and others who have also advanced moneys under mortgage deeds bears any reasonable relation to the object of the statute.
The Act is passed with the object of providing a speedier remedy to the State Government to realize the loans advanced by it or by the Uttar Pradesh Financial Corporation.
The State Government while advancing loans does not act as an ordinary banker with a view to earning interest.
Ordinarily it advances loans in order to assist the people financially in establishing an industry in the State or for the development of agriculture, animal husbandry and for such other purposes which would advance the economic well being of the people.
The amounts so advanced are repayable in easy instalments with interest which would ordinarily be lower than the rate of interest payable on loans advanced by banking institutions which are run on commercial lines.
The loans are advanced from out of the funds of the State in which all the people of the State are vitally interested.
Moneys advanced by the State Government have got to be recovered expeditiously so that fresh advances may be made to others who have not yet received financial assistance from the State Government.
If the State Government should resort to a remedy by way of a suit on the mortgage deeds or bonds executed in its favour, the realization of the amounts due to the Government is bound to be delayed resulting in non availability of sufficient funds in the hands of the State Government for advancing fresh loans.
It is with the object of avoiding the usual delay involved in the disposal of suits in civil courts and providing for an expeditious remedy, the Act has been enacted.
In the instant case, the mortgage deed provided that the amount due thereunder could be realised as if it were an arrear of land revenue.
It cannot, therefore, be said that there is no reasonable basis for the classification made by the statute and that the classification does not have a reasonable relation to the object of the statute.
It is also argued that the impugned Act does not provide any guidelines to the authorities concerned regarding the circumstances under which the amounts could be realized by resorting to the pro 1021 cedure prescribed for recovering arrears of land revenue.
It is no doubt true that there is no express provision in the Act containing such guidelines.
That, however, in the circumstances of the case is not sufficient to hold that section 3 of the impugned Act confers arbitrary power on the State Government and makes a hostile discrimination.
Under section 3 of the Act, the Collector can proceed to realize the amount due as arrears of land revenue only on the basis of a certificate issued by an officer as may be authorised in that behalf by the State Government mentioning the sum due from any person referred to therein.
Such officer is expected ordinarily to avail himself of the speedier remedy provided under the statute.
We are of the view that the Act which is passed with the object of providing a speedier remedy itself provides sufficient guidance to the officer concerned as to when he should resort to the remedy provided by it.
As observed by this Court in Maganlal Chhgganlal (P) Ltd. 's case (supra), one expects the officer concerned to avail himself of the procedure prescribed by the Act and not to resort to the dilatory procedure of the ordinary civil court.
In that case, the legality of the provisions of the Bombay Government Premises (Eviction) Act, 1955 and the provisions contained in Chapter VA of the Bombay Municipal Corporation Act, 1888 which provided a speedier remedy to recover possession of premises belonging to the State Government and the Bombay Municipal Corporation which were in unauthorised occupation of any person was questioned on the ground that the remedies under the said provisions were more onerous than the remedy by way of a suit which was also available to the State Government and the Corporation.
While upholding the above provisions, Alagiriswami, J. who spoke for the majority observed thus: "The statute itself in the two classes of cases before us clearly lays down the purpose behind them, that is premises belonging to the Corporation and the Government should be subject to speedy procedure in the matter of evicting unauthorized persons occupying them.
This is a sufficient guidance for the authorities on whom the power has been conferred.
With such an indication clearly given in the statutes one expects the officers concerned to avail themselves of the procedures prescribed by the Acts and not resort to the dilatory procedure of the ordinary Civil Court.
Even normally one cannot imagine an officer having the choice of two procedures, one which enables him to get possession of the property quickly and the other which would be a prolonged one, to resort to the latter.
Administrative officers, no 1022 less than the courts, do not function in a vacuum.
It would be extremely unreal to hold that an administrative officer would in taking proceedings for eviction of unauthorised occupants of Government property or Municipal property resort to the procedure prescribed by the two Acts in one case and to the ordinary Civil Courts in the other.
The provisions of these two Acts cannot be struck down on the fanciful theory that power would be exercised in such an unrealistic fashion.
In considering whether the officers would be discriminating between one set of persons and another, one has got to take into account normal human behaviour and not behaviour which is abnormal.
It is not every fancied possibility of discrimination but the real risk of discrimination that we must take into account.
This is not one of those cases where discrimination is writ large on the face of the statute.
Discrimination may be possible but is very improbable.
And if there is discrimination in actual practice this Court is not powerless.
Furthermore, the fact that the Legislature considered that the ordinary procedure is insufficient or ineffective in evicting unauthorised occupants of Government and Corporation property and provided a special speedy procedure therefor is a clear guidance for the authorities charged with the duty of evicting unauthorised occupants.
We therefore, find ourselves unable to agree with the majority in the Northern India Caterers ' case.
Certain provisions similar to the Act impugned in this case enabling a State Government to recover the amounts due to it by resorting to a speedier remedy have been upheld by this Court in two cases Shri Manna Lal & Anr.
vs Collector of Jhalawar & Ors.(1) and Lachhman Das on behalf of firm Tilak Ram Ram Bux vs State of Punjab & Ors.(2).
In the case of Shri Manna Lal & Anr.
(supra) the facts were these: The Jhalawar State Bank was originally a Bank belonging to the princely State of Jhalawar.
Its assets, including moneys due to it, became vested in the United State of Rajasthan under the convenient executed by the Ruler of Jhalawar along with other Rulers by which the United State of Rajasthan was formed.
On the promulgation of the Constitution of India, the United State of Rajasthan became the State of Rajasthan in the Indian Union and all its assets including the Jhalawar State Bank and its dues vested in the State of Rajasthan.
In that case the question which arose for consideration was whether 1023 moneys which had been advanced by the Jhalawar State Bank could be recovered by taking proceedings under the Rajasthan Public Demands Recovery Act.
This Court held that the amounts could be recovered by the State of Rajasthan after the Bank had become vested in it as a public demand under the Rajasthan Public Demands Recovery Act and that the said Act did not offend Article 14 of the Constitution even though it provided a special facility to the Government as a banker for the recovery of the bank 's dues for the Government could legitimately be put in a separate class for this purpose.
In the latter case i.e. the case of Lachhman Das on behalf of Firm Tilak Ram Ram Bux (supra), the right of Patiala State Bank to recover the amounts due to it under the provisions of the Patiala Recovery of State Dues Act was questioned.
This Court held that the Bank established by a State had distinctive features which differentiated it from other Banks and formed a category in itself and the Act in setting up separate authorities for determination of disputes and in prescribing a special procedure to be followed by them for the recovery of the dues by summary process could not be considered to be discriminatory.
We are, therefore, of the view that section 3 of the Act which enables the State Government to recover the sums advanced under the circumstances mentioned therein as if they were arrears of land revenue cannot be held to be discriminatory and violative of Article 14 of the Constitution.
For the foregoing reasons, we allow the appeal, set aside the order passed by the High Court and dismiss the writ petition.
Since the High Court disposed of the case on the basis of the decision of this Court in Northern India Caterers Private Ltd. & Anr.
(supra) which has since been overruled, we make no order as to costs.
V.D.K. Appeal allowed.

summary/full:
A sum of Rs. 15000/ was advanced to the Respondent by the appellant for the purpose of setting up a panel pins and wire nails industry in Hardoi on the former hypothecating under the mortgage deed his house by way of security for the loan.
The respondent committed default in repayment of the loan.
The State Government was compelled to take coercive measures to recover the balance of the amount due and payable under the deed as if it were an arrear of land revenue by resorting to section 3 of the Public Moneys (Recovery of Dues) Act, 1965 read with sections 279/281 of the U.P. Zamindari Abolition and Land Reforms Act, 1950.
The respondent, therefore, filed a petition under Article 226 of the Constitution on the file of the High Court of Allahabad (Lucknow Bench) questioning the competence of the revenue authorities to recover the balance of the amount due under the deed as if it were an arrear of land revenue on the ground of violation of Article 14 of the Constitution.
Following the decision of this Court in Northern Indian Caterers P. Ltd. and Anr.
vs State of Punjab and Anr.
, ; (which held the field at that time and since overruled) the High Court declared that Section 3 of the Act violated Article 14 of the Constitution and quashed the recovery proceedings initiated by the revenue authorities.
Allowing the appeal by certificate, the Court ^ HELD: Section 3 of the Public Moneys (Recovery of Dues) Act 1965 which enables the State Government to recover the sums advanced under the circumstances mentioned therein, as if these were arrears of land revenue cannot be held to be discriminatory and violative of Article 14 of the Constitution.
[1023D E] (a) Section 3(1)(c) of the Act provides that where any person is a party to any agreement providing that any money payable thereunder to the State Government shall be recoverable as arrear of land revenue and such person makes any default in repayment of the loan or advance or any instalment thereof then the arrear due and payable by him may be recovered as if it were an arrear of land revenue by issuing a certificate to the Collector.
The remedy of the State Government to recover the amount by instituting a suit also remains unaffected by the Act.
[1019G H] (b) There is reasonable basis for the classification made by the statute and that the classification does have a reasonable relation to the object of the statute.
The Act is passed with the object of providing a speedier remedy to the State Government to realize the loans advanced by it or by the Uttar Pradesh Financial Corporation.
The State Government while advancing loans does not act as an ordinary banker with a view to earning interest.
1016 Ordinarily it advances loans in order to assist the people financially in establishing an industry in the State or for the development of agriculture, animal husbandry and for such other purposes which would advance the economic well being of the people.
The amounts so advanced are repayable in easy instalments with interest which would ordinarily be lower than the rate of interest payable on loans advanced by banking institutions which are run on commercial lines.
The loans are advanced from out of the funds of the State in which all the people of the State are vitally interested.
Moneys advanced by the State Government have got to be recovered expeditiously so that fresh advances may be made to others who have not yet received financial assistance from the State Government.
If the State Government should resort to a remedy by way of a suit on the mortgage deeds or bonds executed in its favour, the realization of the amounts due to the Government is bound to be delayed resulting in non availability of sufficient funds in the hands of the State Government for advancing fresh loans.
It is with the object of avoiding the usual delay involved in the disposal of suits in civil Courts and providing for an expeditious remedy, the Act has been enacted.
In the instant case, the mortgage deed provided that the amount due thereunder could be realised as if it were an arrear of land revenue: and [1020B G] (c) The mere fact that there is no express provision in the Act containing guidelines to the authorities concerned regarding the circumstances under which the amounts could be realized by resorting to the procedure prescribed for recovering arrears of land revenue, however, in the circumstance of the case is not sufficient to hold that section 3 of the impugned Act confers arbitrary power on the State Government and makes a hostile discrimination.
The Act which is passed with the object of providing a speedier remedy itself provides sufficient guidance to the officer concerned as to when he should resort to the remedy provided for.
[1021A C] Shri Mannalal and Anr.
vs Collector of Jhalwar and Ors, ; ; Lachhman Das on behalf of Firm Tilak Ram Bux vs State of Punjab & Ors., ; and Maganlal Chhagganlal (P) Ltd. vs Municipal Corporation of Greater Bombay and Ors., ; followed.


judgement:
Civil Appeal No. 575 of 1970.
From the Judgment and Decree dated 17 2 1966 of the Allahabad High Court in Special Appeal No. 92 of 1960.
section section Javali and B. R. Aggarwal for the Appellant.
R. K. Garg and V. J. Francis for the Respondent.
The Judgment of the Court was delivered by CHINNAPPA REDDY, J.
Hulas Chand and Bilas Chand, original owners of a certain plot of land in Saharanpur, granted a permanent lease of the land to Patel Mills Ltd., in May, 1930.
The annual rent 823 was Rs. 75/ .
The lease was empowered to use the land for any purpose whatsoever.
The rights of the lessee were expressly made transferable.
Though the lease was permanent, there was a condition that the lessor could forfeit the lease if the lessee failed to pay rent for three consecutive years.
On November 1, 1932 Hulas Chand and Bilas Chand transferred their interest to Budh Singh and Jialal.
Jugal Kishore, became entitled to the rights of Budh Singh and Jialal by purchase under sale deeds dated April 17, 1943 and May 11, 1943.
But, Shankerlal and Piareylal (present plaintiff) filed a suit for presumption against the vendors and Jugal Kishore and as a result of the decree passed in the suit, they became entitled to the lessor 's interest in the suit plot of land on August 13, 1945.
Meanwhile the lessee Patel Mills went into liquidation and Mehra was appointed voluntary liquidator of the company on May 11, 1937 by a special resolution at a meeting of the creditors of the company.
Benaras Bank Ltd., was the biggest creditor of the Company.
So the liquidator negotiated the sale of all the assets of the Company to the Benaras Bank Ltd., for a sum of Rs. 70,000/ and on February 23, 1939 executed an agreement of sale after receiving the consideration.
The lease hold interest in the suit plot was also included as one of the assets in the agreement of sale.
As a meeting held on May 4, 1939 the creditors accepted the final report of the voluntary liquidator.
The report was sent to the Registrar of Joint Stock Companies, and registered on September 9, 1939.
The company thus stood dissolved with effect from December 9, 1939.
Subsequently on March 1, 1940 the Benaras Bank Ltd, itself went into liquidation.
The Official Liquidator of the Benaras Bank Ltd. found that there was no duly executed deed of transfer executed by the voluntary liquidator of the company in favour of the Benaras Bank Ltd. in respect of the lease hold interest in the suit plot of land.
At the instance of the official liquidator of the bank, Shri Mehra the erstwhile voluntary liquidator of the company executed a deed of sale on January 28, 1941 and had it duly registered.
On March 9, 1943 the official liquidator transferred the lease hold interest in the suit plot of land to the defendant appellant.
We have mentioned that Patel Mills Ltd., stood dissolved with effect from December 9, 1939.
Budh Singh and Jialal had earlier, i.e. on April 12, 1939, accepted rent from the voluntary liquidator of the company.
After the dissolution of the company and the transfer of the lease hold interest by the voluntary liquidator to the Benaras Bank Ltd. Budh Singh and Jialal sent a notice dated January 11, 1941 to the liquidator of the Benaras Bank Ltd. through their lawyer demanding payment of arrears of rent for four years and asserting that the 15 91SCI/80 824 lease was forfeited consequent on the lessee 's failure to pay rent for a continuous period of three years.
The liquidator denied the claim of right of the lessor to forfeit the lease but admitted the claim for rent.
Rent was accordingly paid and was accepted by Budh Singh and Jialal.
Later, on March 21, 1946, Jugal Kishore who had purchased the rights of Budh Singh and Jialal also accepted rent from the official liquidator of the Benaras Bank Ltd. Shankerlal and Piarey Lal who became entitled to the lessor 's interest in the suit plot of land as a result of the decree from pre emption which they obtained against Jugal Kishore and his vendors, filed the suit out of which the appeal arises to recover possession of the land.
Their case was that the lease hold interest in the land was not validly transferred by the voluntary liquidator and therefore, the defendant acquired no right in the land.
Several defences were raised.
It was claimed that the voluntary liquidator had the authority in law to execute the deed of sale and formally complete a transaction which had already taken place.
It was also claimed that the predecessors in the interest of the plaintiffs having accepted rent from the official liquidator of the bank, the plaintiffs were estopped from contending that the transfer in favour of the bank was not valid.
Section 53A Transfer of Property Act was also invoked as a defence to the action of the plaintiffs.
It was lastly pleaded that the plaintiffs had no right to sue for possession as the lease hold interest in the land had escheated to the Government on the dissolution of the Company.
The suit was dismissed by the Trial Court.
The judgment and decree of the Trial Court were affirmed by the 1st Appellate Court and a learned single Judge of the High Court in second appeal.
The learned Single Judge found in favour of the defendant on the question of estopped, escheat and authority of the voluntary liquidator to execute the sale deed but found against the defendant on the applicability of section 53A of the Transfer of Property Act.
On appeal by the plaintiffs under clause 10 of the Letters Patent a Division Bench of the High Court reversed the judgment and decree of the Subordinate Courts and decreed the suit.
The Division Bench held that the voluntary liquidator had no authority to execute the deed of sale after the dissolution of the company and that there was neither estopped nor escheat.
The Division Bench also held that section 53A of the Transfer of Property Act did not protect the defendant.
The defendant has preferred this appeal after obtaining a certificate from the High Court under article 133(1)(b) of the Constitution.
The submissions of Shri Javali learned counsel for the appellant on the question of applicability of section 53A of the Transfer of Property 825 Act and the authority of the voluntary liquidator after the dissolution of the company to execute the deed of sale may be easily disposed of.
We do not think that section 53A of the Transfer of Property Act is attracted to the facts of the present case.
The right under section 53A is available against the transferor (effecting the incomplete transfer) and any person claiming under him.
It is difficult to understand how the successor in interest of a lessor can ever be said to a person claiming under a lessee making an incomplete transfer of the lease hold interest.
Nor do we find force in the submission of the learned counsel that the voluntary liquidator had legal authority, after dissolution of the company to execute the deed of sale so as to formally complete the transaction which had already been entered into.
Reliance was placed by the learned counsel for the appellant on the decision of Farwell, J., in Pulsford vs Demanish(1).
In that case a liquidator was guilty of gross dereliction of duty.
In the words of Farwell J., "A more gross dereliction of duty by a liquidator I have seldom heard of".
Though in possession of sufficient assets of the liquidating company to pay all its debts in full the liquidator took no steps to ascertain the creditors of the liquidating company or to see that they were paid.
Instead he sold the business and assets of the company to a purchasing company who covenanted to pay all the debts and liabilities of the liquidating company.
The purchasing company did not pay the debts.
The liquidating company was dissolved.
The creditors had no remedy by which they could recover their debts.
A creditor of the liquidating company sued the liquidator for recovery of damages.
It was held that the liquidator was guilty of negligence in the discharge of his statutory duty and was liable in damages to the unpaid creditors of the liquidating company.
What was decided in the case was not that a liquidator could represent the erstwhile company after it was dissolved but that a liquidator could be sued in damages for breach of a statutory duty which he had failed to perform while functioning as liquidator.
We do not think that this case is of any assistance to the appellant.
We are unable to appreciate how after the company was dissolved the liquidator could still claim to represent the company and execute a registered deed of sale.
Once the company was dissolved it ceased to exist and the liquidator could not represent a non existing company.
If the liquidator was to discharge any duty or perform any function on behalf of the dissolved company he should have express statutory authority.
The Companies Act 1913 contained no provision enabling the liquidator to do any act on behalf of a dissolved company.
section 209(H) of the Companies Act, 1913 enjoined the liquidator as soon as the affairs of the company were wound up to make up an account of the winding up and to call a gene 826 ral meeting of the company and a meeting of the creditors for the purpose of laying the accounts before the meetings.
The liquidator was then required to send to the Registrar a copy of the account and to make a return to him of the holding of the meetings.
The Registrar on receiving the accounts and the returns was required to register them an on the expiration of three months of registration the company was to be deemed as dissolved.
The only duty cast upon the liquidator thereafter was that under section 244(B).
It was that the liquidator should on the dissolution of the company pay into the Reserve Bank of India, to the credit of the Central Government in an account called the Companies Liquidation Account any money representing unclaimed dividend or any undistributed assets in his hands on the day of dissolution.
No other duty was stipulated to be performed by the liquidator under the provisions of the Companies Act, 1913, after the dissolution of the company.
We are, therefore, unable to agree with the submission of the learned counsel that the liquidator had the jurisdiction to execute the deed of sale dated January 28, 1941 after the company had been dissolved.
The next question which we must consider is what was the effect of the dissolution of the company on the lease hold interest which the company had in the land.
No term of the lease has been brought to our notice by which the lease would stand extinguished on the dissolution of the company.
If the company had a subsisting interest in the lease on the date of dissolution such interest must necessarily vest in the Government by escheat or as bona vacantia.
In India the law is well settled that the property of an intestate dying without leaving lawful heirs and the property of a dissolved Corporation passes to the Government by escheat or as bona vacantia.
Of course such property will be subject to trusts and charges, if any, previously effecting its vide M/s. Pierce Leslie & Co. Ltd., vs Violat Ouchterlong Wapshare & Ors.(1).
It is also to be noticed here that section 244(B) of the Companies Act 1913, as well as section 555(2) of the expressly enjoin a duty on the liquidator to deposit, on the dissolution of the company, into an account in the Reserve Bank of India known as the Companies Liquidation Account any money representing unpaid dividend or undisputed assets lying in his hands at the time of dissolution.
The learned counsel for the appellant relied upon the decisions of the Allahabad High Court in Tulshi Ram Sahu & Anr.
vs Gur Dayal Singh & Anr.(2) and Mussamat Ramman Bibi vs Mathura Prasad & Anr.(3).
Both were cases of fixed rate tenancies.
As pointed out 827 by the Full Bench in Tulsi Ram Sahu & Anr.
vs Gur Dayal Singh & Anr.,(1) one of the incidents of a fixed rate tenancy was that provided by section 18 of the Agra Tenancy Act 1901 which prescribed that a right of occupancy would stand extinguished when a fixed rate tenant died leaving no heir entitled under the Act to inherit the right of occupancy.
It followed therefrom that the land had to revert to the landlord and could not go to the Government by escheat.
On the other hand in Sonet Kooer vs Himmat Bahadur & ors.(2).
The Privy Council held that on the failure of heirs to a tenant holding land under Mukerrori Tenure there was nothing in the nature of the tenure which prevented the Crown from taking the Mukerrori by escheat, subject to the payment of rent to the Zamindar.
If the lease hold interest of the company in the land became vested in the government on the dissolution of the company it must follow that the suit at the instance of the plaintiffs was not maintainable.
The next question for consideration is whether the plaintiffs were estopped from denying the validity of the sale in favour of the Benaras Bank Ltd., and the character of the possession of the Benaras Bank.
Ltd., and its successors in interest.
As already mentioned by us Budhsingh and Jialal sent a notice dated January 11, 1941, through their lawyer demanding of the liquidator of the Benaras Bank Ltd., payment of arrears of rent for four years and asserting that the lease was forfeited consequent on the lessee 's failure to pay rent for a continuous period of three years.
The liquidator denied the claim of right of the lessor to forfeit the lease but admitted the claim for rent.
The liquidator paid the rent and it was accepted by Budh Singh and Jialal.
Later also the evidence shows that Jugal Kishore the purchaser from Budh Singh and Jialal also accepted rent from the official liquidator of the Benaras Bank Ltd. This course of conduct of Budh Singh and Jialal and their successor Jugal Kishore clearly indicates the acceptance, by them, of the position that the Benaras Bank Ltd. had succeeded to the rights of the company in the lease hold interest.
Further, the official liquidator of the Benaras Bank Ltd. said first tried to sell the lease hold interest by public auction.
When that sale did not fructify because of the failure of the highest bidder to deposit the sale price, the lease hold interest was sold to the defendant with the sanction of the Company Judge.
At no point of time did the predecessors in interest of the plaintiffs raise the slightest objection to the sale of the leas hold interest.
It was thereafter that the defendant obtained the permission 828 of the Municipal Board, Saharanpur, and raised construction on the land.
The plaintiffs themselves admittedly reside near about the land in dispute.
They did not raise any objection to the raising of the constructions.
The plaintiffs as well as the defendants appeared to proceed on the common understanding that the defendants had succeeded to the interest of Patel Mills Ltd., in the lease hold interest.
We are, therefore, of the view that the plaintiffs were estopped from contending that the defendant had no interest in land.
The amount only right of the plaintiffs was to receive the rent.
The result of our discussion is that the appeal is allowed and the suit is dismissed with costs throughout.
It is, however, made clear that the plaintiffs have the right to receive rent from the defendants.
P.B.R. Appeal allowed.

dataset_name: IN-Abs

summary/full:
The original owners of the land in dispute granted a permanent lease of the land to a company.
The lessee could use the land for any purpose and could also transfer the leasehold interest.
Though a permanent lease the lessor could forfeit the lease if the lessee failed to pay rent for three consecutive years.
The lessors interest changed hands twice and by virtue of a decree in a suit for pre emption filed by the respondents they became entitled to such interest.
In the meanwhile the company went into voluntary liquidation and the liquidator executed an agreement of sale of all its assets including the leasehold interest in favour of a Bank which was the biggest creditor of the Company.
Immediately thereafter the Bank itself went into liquidation.
Sometime later the official liquidator of the Bank found that no deed of transfer was executed by the voluntary liquidator in favour of the Bank, the erstwhile voluntary liquidator therefore executed a deed of sale in favour of the Bank.
Thereafter the official liquidator of the Bank transferred the lease hold interest in the land to the defendant appellant.
Before the company went into liquidation the first transferee of the land accepted rent from the voluntary liquidator.
After the transfer of the leasehold interest to the Bank the second transferee demanded from the official liquidator arrears of rent for four years and claimed that the lease was forfeited by reason of the Bank 's failure to pay rent for a continuous period of three years in terms of the lease.
The official liquidator denied the right to forfeit the lease.
He, however, paid rent which was accepted by the lessors.
Even subsequently rent was accepted by the lessors.
The respondent sued to recover possession of the suit land on the ground that the lease hold interest was not validly transferred by the voluntary liquidator and that therefore neither the Bank nor the defendant acquired any right in the land.
The defendants contended that the voluntary liquidator had the authority in law to execute the deed of sale and formally complete a transaction which had already taken place, that the predecessors in interest of the plaintiff having accepted rent from the official liquidator were estopped 822 from contending that the transfer in favour of the Bank was not valid and that the lease hold interest in the land had escheated to the Government on the dissolution of the company.
The suit was dismissed by the Trial Court and the Appellate Court.
On second appeal, the High Court decreed the suit holding that the voluntary liquidator had no authority to execute the deed of sale after the dissolution of the company and that there was neither estopped nor escheat.
Allowing the appeal, ^ HELD: 1.
The High Court was right in holding that the liquidator had no jurisdiction to execute the deed of sale after the company had been dissolved.
Once the company was dissolved in accordance with the procedure laid down in the Indian Companies Act, 1913 it ceased to exist and therefore the voluntary liquidator could not represent a non existent company.
If the liquidator was to discharge any duty or perform any function on behalf of the dissolved company he should have express statutory authority to do so, which he did not have under the Act.
[826 D, 825 G] 2.
If the company had a subsisting interest in the lease on the date of dissolution, such interest must necessarily vest in the Government by escheat or bona vacantia.
It is well settled that the property of an intestate dying without leaving lawful heirs and the property of a dissolved corporation passes to the Government by escheat or bona vacantia.
If the lease hold interest of company became vested in the Government on its dissolution, a suit at the instance of the plaintiffs was not maintainable.
[826 E, 827 G] 3.
The successors in interest of the original lessors accepted rent from the official liquidator indicating that they accepted the position that the Bank had succeeded to the rights of the company in the lease hold interest.
The official liquidator sold the land to the defendant with the permission of the Company Judge only when he failed to get the highest bid in public auction.
At no point of time did the predecessors in interest of the plaintiffs raise an objection to the sale of the lease hold interest.
When the defendant obtained permission of the Municipal Board and raised constructions on the land, the plaintiffs who resided near about the land did not raise any objection to the constructions.
In the circumstances the plaintiffs were estopped from contending that the defendant had no right in the land.
Their only right is to receive rent.
[827 F 828 B]