Case: Custodian of Evacuee Property Vs. Smt. Rabia Bai

This appeal by special leave. directed against a judgment dated December 13, 1974, of the High Court of Madras, arises out of theseRabia Bai, is a citizen of India. She has her residence at Grange Yercund. Salem District. She came to know in 1949 that premises No. 20, Godown Street, G.T. Madras (known as Gani Market) was for sale. Consequently, by a sale-deed, dated April 29, 1949, she purchased this property from one Abdul Gani Jan Mohd. who had left for Pakistan in 1947, soon after the partition of the Indian sub-continent. Abdul Gani came to Madras in April 1949 and executed the sale-deed in her favour for a consideration of Rs. 2, 40, 000/- out of which Rs. 1, 50, 000/- was paid immediately in the form of bank drafts. Thereafter, the sale-deed was duly engrossed and sent to. Karachi for execution by the vendor. who duly executed it and sent it back. It was presented at the Collectors Office, Madras and was duly stamped on June 27, 1949. After obtaining the clearance certificate from the Income-tax Department. t he Registrar registered it on August 11, 1949. Rs. 30.000/-, the balance of the consideration was paid before the Registering Officer to Mr. M. H, Gani who held a power of attorney from the vendor. On Jun e 13, 1949. Ordinance XII of 1949 was promulgated. The Ordinance was extended to. Madras on August 23, Ordinance XII of 1940 was repealed by Ordinance 27 of 1949, which in turn was replaced by the Administration of the Evacuee Property Act, 1950 (Central Act 31 of 1950) (hereinafter referred to as the Act). The Act had retrospective operation with effect from August 14, 1947. Section 40 of the Act [corresponding to s. 25(2) of Ord. 121, provided that no transfer made after the 14th day of August, 1947 but before the 7th day of May, 1954 by any person of any property belonging to trim which may subsequently be declared to be evacuee property, would be valid unless the transfer was confirmed by the Custodian. General of Evacuee Property.On December 19, 1949, the vendee Rabia Bai, applied for confirmation of the sale transaction in her favour. The application was resisted by some tenants on several grounds. On January 11, 1951, the Assistant Custodian Evacuee Property, Madras City, declared the property in question as evacuee property under s. 7( 1 ) of theAssistant Custodian considered Rabia Bais application for confirmation of the sale in the light of the declaration already made by him, that the vendor being an evacuee, the 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. In reaching this conclusion, he relied on the provisions of s. 40(4)( c) of the Act. In his opinion, the feverish hurry disclosed that in making the sale, the vendor was not motivated by good faith. Accordingly on July 31, 1951, he made an order refusing to confirm the transaction. Rabia Bai went in appeal against the order of the Assistant Custodian to the Custodian. The Custodian found that the sale transaction 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. Relying On a letter written by the vendor to one Mohideen on July 4, 1949 wherein he had stated that "if the matter is delayed there would be many sort of new difficulties as you know the government are passing new rules every day", the Custodian took the view that the vendors intention was to dispose of and convert his properties in India into cash and to take them away to Pakistan as quickly as possible so as to evade the restrictions of the evacuee law which he apprehended could be extended to Madras any day. On this reasoning, the Custodian came to the conclusion that the transaction had been entered into otherwise than in good faith, and so it could not be confirmed under s. 40(4)(a) of the Act. This appellate order was pronounced by the Custodian on February 4, 1953.Rabia Bai then moved the Custodian-General in revision, who dismissed the same. Against that order Of the Custodian-General, Rabia Bai came in appeal by special leave to thisthat appeal was pending, Rabia Bai on August 27, 1954, made an application under Rule 22 of the Administration of Evacuee Property (Central Rules) 1950 (for short the Rules) for registration of her claim for the return of the sale consideration of Rs. 2, 40, 000/The claim was registered by the Assistant Custodian On October 1, 1954.Thereafter, the Act was amended by Act 91 of 1956. By a notification, dated February 20, 1957, the aforesaid Rule 22 wasBais aforesaid appeal (Civil Appeal No. 22 of 1956) was dismissed by this Court on January 12, 1961. That judgment is reported as Rabia Bai v. Custodian General of Evacuee Property([1961] 3 S.C.R. 448.).Rabia Bai repeatedly petitioned for the return of the sale consideration of Rs. 2, 40, 000/- to her but without success. She petitioned to the Prime Minister on May 16, 1966. Thereupon, she was informed by a letter , dated August 1, 1966, by the Deputy Custodian, Evacuee Property, Bombay, that no third party claim against the immoveable property is payable by his office as Rule 22 of the Administration of Evacuee Property (Central) Rules has since been deleted as a result of the amendment of s. 10(m) by Act 91 of 1956.By an order, dated August 18, 1966, Government of India directed that all the surplus balance of the evacuee pool lying in the personal deposit account of the Custodian be transferred to the Dy. Accountant General, New Delhi to form part of the compensation pool under s. 14(1) (b) of the Displaced Persons Compensation and Rehabilitation Act of 1954.In 1968, Rabia Bai filed a writ petition in the High Court for return of the sale consideration. The writ petition was withdrawn on July 11, 1968. Thereafter on August 3, 1968, she made a petition under s. 10(2) (m) and (n) of the Act read with Rule 22 before the Custodian. This petition was rejected by the Custodian under an order, dated November 2, 1968, mainly on the ground that the properties of the evacuee were acquired by the Central Government under s. 12 of the Displaced Persons (C. &R.) Act, 1954 and the sale proceeds of the said properties have been credited to the compensation pool. There is at present, no amount in the hands of the Custodian from which the petitioners claims would be paid".In his view the words "out of funds in his possession" in s. 10(2) (n) of the Act show that it would be attracted only where funds are lying with theimpugn this order, dated November 2, 1968, of the Custodian, Rabia Bai filed writ petition No. 1259 of 1971 in the High Court. The petition came up for hearing before a learned single Judge (Ramaprasada Rao J.) who took the view that having regard to the scheme of the Rehabilitation Act and the policy reflected therein and the transfer of the cash balances with the Custodian to the compensation pool, it was not open to the writ-petitioner to assail transfer funds or any orders passed in that behalf and therefore she was not entitled to a writ of certiorari sought for, much less a writ of mandamus. On this ground, he dismissed the writ petition. With regard to the petitioners claim for return of the sale price, it was held that she still continues to be entitled to get the money from an d out of the funds that may subsequently come into the hands of the Custodian. It was added that "the petitioner as at present, should only be satisfied with her entitlement to claim and await the collection of funds or accumulation of funds with the Custodian inby that order, Rabia Bai appealed under C1. 15 of the Letters Patent to a Bench of the High Court. The Bench held that since it was not denied or refuted by the respondents (Custodian, Evacuee Property, Bombay, Regional Settlement Commissioner and Union of India) that payment of Rs. 2, 40, 000/- was made by Rabia Bai to the evacuee in pursuance of the infructuous sale, "the payment is also not vitiated in any manner as the sale was refused confirmation, not because of want of bona fides in the transferee, but on account of want of bona fides in the transferor. The respondents are, therefore under a statutory obligation to refund to the appellant the sale price paid by her".With regard to the argument that she could not be paid because the fund with the Custodian had been transferred in compliance with the orders of the Government of India to the compensation pool formed trader s. 14(1)(b) of the Rehabilitation Act, it was held that the Custodian was competent to transfer only surplus fund left with him, in excess of what was required by him for meeting the outstanding claims registered under r. 22. The Appellate Bench spelled out this conclusion from a construction of the words "such cash balances" occurring in s. 14(1)(b), and the expression "surplus fund" used in the Central Government order asking the Custodian to transfer funds to the account of the Deputy Accountant General as p art of the compensation pool. In this view, the .Bench allowed the appeal and by a writ of certiorari quashed the impugned orders and notifications. It was further directed that a writ of mandamus shall issue requiring the 1st respondent (Resp. Custodian) to refund the sum of Rs. 2, 40, 000/to Rabia Bai. The third Respondent, Union of India was further directed to place at the disposal of the Custodian the said sum for the purpose of the refund. It was specified that the direction regarding the refund and payment shall be complied with within threethis appeal by the Custodian and the other respondents before the High Court.

Court's reasoning:
While it is true that mere registration of a claim under this Rule does not ipso facto confer a right to payment, it is not correct to say that the only purpose served by such registration is statistical and nothing else. As has been discussed already, before registering a claim the Custodian is required to determine objectively that the transaction is bona fide, the claimant having entered into it in good faith on payment of adequate valuable consideration. The determination of this preliminary fact which is an essential pre-requisite of registration is a judicial function enjoined on the Custodian by the statutory provision. Registration of claim of a vendee under this Rule, therefore, amounts to a preliminary adjudication as to the genuineness of the claim. and its eligibility for discharge under the relevant substantive provisions of theour opinion, the expression "such cash balances" used in s. 14(1)(b) cannot be interpreted so as to cover total cash deposits with the Custodian. The use of the word "balances" is significant. The connotation of the term "balances" is well known. According to Websters Dictionary, it means "the difference, if any, between the debit and credit side of an account." It is the result of a comparative reckoning. The expression "cash balances" in clause (b) therefore, has to be construed as the excess of credits over debits. The word "balances" appears to have been advisedly used in preference to "deposits" because the intention was that only that much amount in deposit with the Custodian should be transferred to the Compensation Pool which would be in excess of the amounts required for meeting the due claims against the evacuees or their properties. It is thus clear that what can be directed to be transferred to the Compensation Pool by the Government under s. 14(1)(b) is the "cash balances" and not the total cash deposits with the Custodian.The above being the legal position, it is to be seen as to what was actually directed to be transferred to the Compensation Pool. The first order of such transfer made by the Central Government is dated March 19, 1956. It purports to have been issued under s.14(1)(b) of the Rehabilitation Act. Thereby the Government directed that a sum of Rs. 10 crores out of the balances centralised under the Head "S-Deposits and advances-Part II-Deposits not bearing interest-(C)other Deposits of the Custodians of Evacuee Property" be , transferred to the Compensation Pool. The second order is dated February 26, 1957 whereby the sum of Rupees one crore was directed to be transferred out of the Custodians cash balances to the Compensation Pool. The last order is dated August 18, 1966, whereby it was directed that all the surplus balances in the deposit account of the Custodians be transferred to the Compensation Pool. The use of the word "surplus" in this Government order is significant. It puts the matter beyond doubt that only those balances which were surplus or in excess over what was required to meet the liabilities of the evacuees or the registered verified claims against the evacuees or their properties, were to be transferred to the Compensation Pool. It was the duty of the Custodian therefore to keep back wi th him so much of the funds in his deposit as were necessary to meet the verified claims against evacuees or their properties. Such. a course on his part would have been perfectly legal and also in conformity with the fin al directions issued for transfer of "surplus balances" by the Central Government. Only the cash balances which were validly transferred could legally form part of the Compensation Pool. On this point we agree with the High Court that the Custodian had neither the power nor the, authority to transfer the entirety of funds to the Compensation Pool.Even if it is considered for the sake of argument that the last order of the Government was a direction to transfer the entirety of funds including those relating to the property of the evacuee, Abdul Ghani Jan Muhammad, without keeping back what was required for paying the registered claims of Rabia Bai, then the same would be contrary to the intendment of cl.(b) of s. I4(1) to the extent of Rabia Baisare of opinion that in the peculiar circumstances of the case the Appellate Bench of the High Court was right in directing the Custodian to refund a sum of Rs. 2, 40, 000/- to the respondent, Rabia Bai, in payment of her claim and in further directing the Central Government to place at the disposal of the Custodian, appellant herein, the said sum for the purpose of refund. The time for refund is further extended by 3 months from today, if the same has not already been done.