Appeal No 22 of 1956
Appeal by special leave from the judgment and order dated July 4 1954 of the Custodian General Evacuee Property in Revenue Case No 427R Judl
A V Viswanatha Sastri and R Ganapathy Iyer for the appellant
HN SanyalAdditional Solicitor General of India N SBindra and D Gupta for the respondent
January 12
The Judgment of the Court was delivered by GAJENDRAGADKAR J
This appeal by special leave is directed against the order passed by the respondent the Custodian General of Evacuee Property New Delhi in a revision petition confirming the orders of the subordinate authorities whereby the application made by the appellant for confirmation of the sale transaction in question has been rejected under section 40 4 a of the Administration of Evacuee Property Act XXXI of 1950
The appellant Rabia Bai who is a citizen of India having her residence at Grange Yercaud in the Salem District came to know in 1949 that premises No 20 Godown Street GT Madras was for sale
Since the appellant desired to acquire some immoveable property she arranged for 57 450 the purchase of the said premises through her husband
The said premises belonged to one Mohamad Gani Jan Mohamad who had left for Pakistan in 1947 and had settled there
The said Mohamad Gani Jan Mohamad had executed a power of attorney in favour of his nephew Ahmed Abdul Gani
The said Gani came to Madras in April 1949 and arranged for the sale and as a result of negotiations between him and the appellant s husband the latter entered into a written agreement with the former on April 29 1949 to purchase the said property for Rs 240000 
A substantial part of the consideration to the extent of Rs 150000  was paid immediately in the form of cash and bank drafts
Thereafter the sale deed was duly engrossed and sent to Karachi for execution by the vendor
After it was received back duly executed it was presented at the Collector s Office Madras and was duly stamped on June 27 1949
Income tax clearance certificate had however to be obtained before the said document could be registered and soon after the said certificate was obtained the document was presented for registration and was duly registered on August 11 1949
The balance of the consideration of Rs 30000 was paid before the registering officer to Mr M H Ganni who also held a power of attorney from the vendor
That is how the appellant obtained title to the property in suit
As we will point out the appellant applied for confirmation of this sale deed and her application has been rejected
Before we refer to the relevant facts in connection with the said proceedings it is material to set out very briefly the history of the application of the evacuee laws to the State of Madras
Within a fortnight after the registration of the sale deed in favour of the appellant Ordinance No XII of 1949 which had been promulgated on June 131949 was extended to Madras on August 23 1949
Section 251 of the Ordinance imposed restrictions on transfers by evacuees
In substance this sub section provided that transfers made by or on behalf of evacuees of any right or interest in their property after such date as may be specified in that behalf with reference to any 451 Province by the Central Government by notification in the official gazette shall not be effective unless they are confirmed by the Custodian
Section 252 provided that an application for confirmation of such transfer may be made by the transferor or the transferor or any person claiming under or lawfully authorised by either of them to the Custodian within two months from the date of registration of the deed of transfer or within two months from the commence ment of the Ordinance whichever is later
The proviso to the said sub section empowered the Custodian to admit an application even if it was made after the period of limitation prescribed therefor if he was satisfied that there were sufficient reasons for doing so and it imposed on the Custodian an obligation to record such reasons
Sub section 3 required the Custodian to hold a summary enquiry into the application in the prescribed manner and authorised him to reject the application for confirmation if he was of opinion that a the transaction had not been entered into in good faith or for valuable consideration or b the transaction was prohibited under any law for the time being in force or c the transaction ought not to be confirmed for any other reason
Sub section
4 provides that if the application is not rejected under sub section
3 the Custodian may confirm the transfer either unconditionally or subject to such terms and conditions as he thinks fit to impose
Ordinance No XII of 1949 was however repealed by Ordinance No XXVII of 1949 which came into force on October 18 1949
Section 38 of this latter Ordinance corresponds to section 25 of the earlier Ordinance except in one material particular
It provides that no transfer of any right or interest in the property made in any manner whatsoever after the 14th day of August 1947 by or on behalf of an evacuee as therein specified shall be effective unless it is con firmed by the Custodian In other words whereas section 25 of the earlier Ordinance left it to the Central Government to specify the relevant date in reference to any Province by notification in the official gazette section 381 has prescribed the date for all the Provinces 452 where the Ordinance applied
The rest of the relevant provisions of section 38 are the same as those of section 25 of the earlier Ordinance
On April 17 1950 this Ordinance was in turn repealed by Act XXXI of 1950 by section 58
Section 401 and 4 are similar to the relevant provisions of sections 25 and 38 of the earlier Ordinances
One of the changes made is in regard to the relevant dates prescribed by section 401
Under section 401 the transfers which are affected by its provisions are those which are made after the 14th day of August 1947 but before the 7th day of May 1954 and in respect of them the said section provides inter alia that they shall not confer any rights on the parties thereto if at any time after the transfer the transferor becomes an evacuee within the meaning of section 2 or the property of the transferor is declared or notified to be evacuee property within the meaning of this Act unless the transfer is confirmed by the Custodian in accordance with the provisions of this Act
Section 404 deals with an application made under sub section
1 for the confirmation of the transfer
This sub section and its three clauses a b and c correspond to sections 253 a b and c and 384a b and c of the two earlier Ordinances
Thus it is clear that the relevant provisions which conferred power on the Custodian to hold an enquiry on the application made for the confirmation of the transfer and to reject confirmation in certain cases continued to be the same
The position therefore is that Ordinance No XII of 1949 which was extended to Madras on August 23 1949 was in operation only until October 18 1949
Thereafter Ordinance No XXVII of 1949 took its place and in turn this Ordinance was repealed by Act XXXI of 1950 on April 17 1950
The application made by the appellant for confirmation of her purchase has been dealt with under the relevant provisions of the Act and we would therefore refer to the said provisions hereafter
On December 19 1949 the appellant applied for confirmation of the sale transaction in her favour
This application was resisted by the tenants who urged several grounds in support of their plea that the 453 transfer should not be confirmed
It appears that on January 11 1951 the Assistant Custodian of Evacuee Property Madras City had declared the property of the vendor to be evacuee property since he was of the opinion that the vendor s case fell within the four corners of the definition of  an evacuee  under section 2dii of the Act
The declaration that the vendor s property was evacuee property was made under section 71 of the Act
The Assistant Custodian considered the appellant s application for confirmation of the transfer in the light of the declaration already made by him that the vendor was an evacuee and that his property was evacuee property
He referred to the relevant features of the transaction and came to the conclusion that he would not be justified in confirming it
It appears that in reaching this conclusion he relied on the provisions of section 404c of the Act
In his opinion the feverish hurry disclosed by the conduct of the vendor attracted the provisions of section 404c
The order refusing to confirm the transaction was passed on July 31 1951
The appellant challenged the correctness of this conclusion by preferring an appeal before the Custodian
The Custodian found in favour of the appellant that the sale transaction in question was supported by valuable consideration even so he proceeded to examine the question as to whether it could be said to have been entered into in good faith
In dealing with this question the appellate authority considered the fact that the vendor had left for Pakistan in June 1947 evidently on account of civil disturbances or in fear of such disturbances and that it was obvious that he was permanently settled in Pakistan
According to the appellate authority the vendor was desirous of disposing of his properties in India in order to convert them into cash and take them away to Pakistan
In this connection reliance was placed on a letter written by the vendor to Mohideen on July 4 1949
In this letter the vendor had stated that  if the matter is delayed there would be many sort of new difficulties as you know that the Government are passing new rules every day 
He took the view that this letter 454 clearly disclosed that the vendor s intention was to dispose of his properties as quickly as possible so as to evade the restrictions of the evacuee laws which he apprehended would be extended to Madras any day
this finding the appellate authority came to the conclusion that the transaction had been entered into otherwise than in good faith and so it could not be confirmed under section 404a
The appellate judgment shows that according to the appellate authority the request for confirmation could be rejected also under section 404c of the Act
This order was pronounced on February 41953
The appellant then moved the respondent the Custodian General in his revisional jurisdiction
The respondent considered the matter afresh and agreed with the finding of the appellate authority that though the transaction was supported by valuable consideration it could not be said to have been entered into in good faith
In support of this conclusion he relied on the conduct of the vendor the haste with which the transaction was attempted to be completed and the anxiety disclosed by him in his letter to Mohideen
In substance the respondent came to the conclusion that the vendor wanted to evade the restrictions of the evacuee law which he knew would soon be extended to Madras and that showed that he was not acting in good faith
It is on this view that the revisional application preferred before him by the appellant was dismissed by him on July 4 1954
In his opinion the appellant s case fell under section 404a of the Act
He did not therefore consider the question about the applicability of section 404c
It is clear that if a transaction is affected by absence of good faith either in the vendor or the vendee its confirmation may properly be rejected under section 404a in other words good faith is required both in the vendor and the vendee
In that sense the provisions of section 404a are more rigorous and stringent than those of section 531 of the Transfer of Property Act
Under the latter section which deals with fraudulent transfers the rights of a transferee in good faith and for consideration are expressly protected that 455 however is not the position under section 404a
Therefore the fact that the appellant paid valuable consideration for the transaction and is not shown to have acted otherwise than in good faith in entering into the transaction would not justify her claim for confirmation of the said transaction if it is shown that the vendor had not acted in good faith in entering into the said transaction
The fact that consideration was paid by the appellant and that she was acting in good faith may perhaps be relevant in determining the character of her conduct in regard to the transaction but it would not be relevant or material in determining the character of the conduct of the vendor in relation to the transfer
This position is not seriously disputed before us
Mr Sastri however contends that in considering the good faith of the vendor it would be necessary to bear in mind that at the relevant time when negotiations were going on between the parties in respect of the transaction in question evacuee law had not been applied to Madras and so evacuees like the appellant s vendor were absolutely free to deal with their properties as they liked
He also attempted to argue that even where the evacuee law applied the policy adopted by the Government of India was to confirm transfers made by Mohammedan evacuees in favour of Indian nationals unless a certificate signed by the prescribed income tax authority certifying that the transferor had paid all taxes due from him to the income tax department in respect of his property business or undertaking or has made satisfactory arrangements for the payment thereof had not been produced and unless he had failed to pay any other dues outstanding against him in the Custodian s register in respect of his own property and third party claims recognised exparte by the Custodian
This argument is based upon a copy of the press note alleged to have been issued by the Government of India in the Ministry of Rehabilitation on May 13 1949
On the other hand the learned Additional Solicitor General has relied on a copy of a circular issued by the Government of India on March 9 1950 where it has been stated that the instructions 456 issued by the Government of India are subject to other requirements of section 384 of the Central Ordinance No XXVII of 1949  in other words whatever may be the nature of the circulars and directions issued by the Government of India the appropriate authorities administering the provisions of the evacuee law had to deal with the matters brought before them under the relevant provisions of the said law
We do not think we can attach much importance to the argument that even where the evacuee law applied confirmation of sale transactions was intended to be automatic subject to the satisfaction of the two conditions specified in the press note
We are bound to assume that the question about confirming sale transactions was required to be and was in fact dealt with by the appropriate authorities under the relevant statutory provisions which were in force at the material time
It is however true that no evacuee law had been extended to Madras at the time when the impugned transaction was completed and that naturally raises the question as to whether if a transaction had been entered into deliberately and consciously with the object of evading the application of evacuee law which it was apprehended would soon be extended to Madras does that fact attract the provisions of section 404a of the Act As we have already indicated the respondent has answered this question in the affirmative and Mr Sastri contends that this conclusion is erroneous in law
Mr Sastri s argument is that the expression  good faith  in section 404a should be construed in the sense attributed to the said expression by section 3 sub section
22 of the General Clauses Act X of 1897
The said provision lays down that a thing shall be deemed to be done in good faith where it is in fact done honestly whether it is done negligently or not
The argument is that the vendor could not be said to have acted dishonestly when no evacuee law applied to Madras and an intention to avoid a law which may be applied to Madras in future cannot be said to introduce an element of dishonesty in his conduct
In our opinion this argument cannot be accepted
In this connection it is necessary to bear in mind that section 3 of the General 457 Clauses Act itself provides that the definitions prescribed by the said section are applicable  unless there is anything repugnant in the subject or context  and so it would not be unreasonable to hold that the content of the expression  good faith  would depend substantially on the context of the statute which uses it
In determining the denotation of the said expression in section 404a it would be essential to take into account the scope and effect of the main provisions of section 401
As we have already noticed this section provides inter alia that no transfer made after the 14th day of August 1947 shall be effective so as to confer any rights in respect of the said transfer on the parties thereto if at any time after the transfer the transferor becomes an evacuee within the meaning of section 2 or the property of the transferor is declared or notified to be An evacuee property within the meaning of the Act unless the transfer is confirmed by the Custodian in accordance with the provisions of this Act
It would thus be clear that all transfers made after the 14th day of August 1947 but before the 7th day of May 1954 are hit by this section and that obviously would bring within the mischief of the section a large number of transfers effected at a time when no evacuee law was in force in respect of them
Reading section 401 and 4 together it appears that the transfers hit by the former provision would be valid only if they are confirmed under the latter provision
It is possible that a transfer made during the prohibited period may have been entered into in good faith or was for valuable consideration and did not attract any of the provisions contained in cls
a b and c of a 404
In such a case merely because it was affected within the prohibited period it would not become void and the Custodian may have to confirm it but where such a transfer attracts the provisions of section 404a for instance it would not be affirmed and it would remain inoperative
This shows that the main object of the Act was to preserve the property of persons who had migrated to Pakistan till the Government of India could come to some understanding with the Pakistan Government in regard to adjustment of claims of Indian 58 458 evacuees in respect of the properties left by them in Pakistan
The idea then presumably was that the two Governments should agree on the valuation of the evacuee properties left by evacuees in the two respective countries and the difference in the said valuation should be amicably adjusted between them
After such adjustment was made it was intended to compensate the evacuees in regard to the loss incurred by them in respect of the properties left by them in the two respective countries
That this intention did not succeed is an other matter
There can however be no doubt about the policy and object of the Act and in determining the content of the expression  good faith  in the context of the main provision of section 401 this object and policy of the Act must be borne in mind
Section 404 refers to three kinds of cases where the transfer may not be confirmed cl
a deals with transactions which are not entered into in good faith or for valuable consideration cl
b deals with transactions which are prohibited under any law for the time being in force and cl
c deals with cases of transactions which are not confirmed for any other reason
It would thus be seen that the scope of the three clauses is very wide
It is not only transactions prohibited under any law that fall within the mischief of section 404 but transactions which are not entered into in good faith or for valuable consideration also fall within its mischief Now if the test prescribed by section 322 of the General Clauses Act as interpreted by Mr Sastri is held to be relevant a large number of transactions may have to be confirmed even though they are shown to have been deliberately entered into with the object of evading the provisions of section 401
In our opinion the fact that the evacuee law had not been extended at the relevant time to Madras would not be decisive in the matter
It was well known that the said law was being extended from Province to Province as it was deemed necessary and indeed the letter written by the vendor to Mohideen clearly shows that the vendor knew as much
The history of the evacuee laws passed in several States and by the 459 Central Government and Legislature from time to time shows that the Legislatures were attempting to meet with an unprecedented problem and the laws passed by them in India and Pakistan at the material time made it perfectly clear to the evacuees from both the countries that the two countries were adopting appropriate legislative measures to protect the evacuee properties and prevent their transfers
Therefore if a vendor sold his property not for any necessity or for any other legitimate purpose but solely with the object of converting it into cash and removing it to Pakistan that clearly was intended to defeat the provisions of the Act which he knew would soon be extended to Madras and so it would be difficult to hold that he was acting honestly within the meaning of section 404a of the Act
An intention to defeat the provisions of the Act cannot be said to be honest in the context
If despite his intention to defeat the application of the Act a transaction is upheld as entered into in good faith many transactions may escape the application of section 401 and that clearly would defeat the purpose of the Act
It is significant that though the provisions of section 401 are drastic they have been deliberately made retrospective and that emphatically brings out the aim and object of the Act and it would be unreasonable to ignore this aim and object of the Act in construing the expression  good faith  in section 404a
We would therefore hold that having regard to the aim and object of the emergency legislation with which we are concerned in the present case the expression  good faith  used in section 404a has been property construed by the respondent when he held that a deliberate intention to defeat the apprehended application of the evacuee law which was responsible for the transfer in question brings the transfer within the  mischief of section 404a
The result is the appeal fails and is dismissed with costs
Appeal dismissed


Summary:
By section 312 of the  Any assignment of his office made after the commencement of this Act by any direc tor of a company shall be void
 42 330 The managing director of a private company empowered by the terms of the agreement between him and the company and the articles thereof to appoint by deed or by will any person to be the managing director in his place and stead died leaving a will whereby he appointed one of the appellants the managing director in his place from the date of his death
The High Court took the view that the word assignment  in the section included appointment  and as such the appointment in question was void
Held that section 312 of the  cannot be interpreted in such a way as to bring it into conflict with section 255 of the Act since its language does not compel such an interpretation
The word assignment  in that section does not mean appointment and the section is intended to render a transfer of his office by a director void and not an appointment by him of his successor
Section 255 of the Act which expressly permits directors to be appointed otherwise than by the company shows that sub ject to the limit as to numbers prescribed by it a director authorised by the articles of the company can appoint another to take his office when rendered vacant by his resignation or death or on expiry of his term of office
The proviso to section 86B of the old Act cannot lend any support to the argument that the word assignment  in section 312 of the new Act includes appointment 
The Guardians of the Poor of the West Derby Union vs The Metropolitan Life Assurance Society  referred to