STATE OF ANDHRA PRADESH

S.B.P.V. CHALAPATHI RAO ETC.

OCTOBER 24, 1994

[KULDIP SINGH, B.L. HANSARIA AND S.B. MAJMUDAR, JJ.]

Andhra Pradesh Land Refonns (Ceiling) on Agriculture Holdings Act, 1973--Section, s 7( 1) aitd 21-220 acres of land sold between December 16, C 1971 and December 27, 1971-Transfers made in anticipation of and with a view to avoid and defeat provisions of the Act-H e/d: Transfers to be disregarded for purpose of computation of ceiling area.

Respondents sold 220.25 acres of land by way of fourteen sale deeds executed on five different days between December 16, 1971 and December D 27, 1971. The transfers made were disregarded for the purpose of the computation of ceiling area of the respondents under the Andhra Pradesh Land Reforms (Ceiling) on Agrtcultnral Holdings Act 1973 by the Land Reforms Tribunal holding that the transfer were made in anticipation of and with a view to awaiting or defeating the objects of the Act. This finding was reversed by the Lands Reforms Appellate Tribunal while holding that E the lands were sold to raise funds for setting up of indnstries. The High Court upheld the finding of the Appellate Tribunal by dismissing the revision petitions in limine these appeals by the State are against the order of the Appellate Tribunal as upheld by the High Court.

F The respondents contended that there is no justification whatsoever to reverse the finding of the Appellate Tribunal to the effect that the sales in dispute were made in good faith to meet the expenses to be incurred for the expansion of sugar industry. On the other hand, it was stated by the State that the proposal for the expansion of the sugar industry was mooted sometime in June 1970 but it was thereafter in April 1972 that the applica- G lion for license to expand the industry was made and the license was granted on November 26, 1973. According to the State, in December 1971, when the Lands were sold there was no questionof sending any money on expansion of the industry. It was contended that the only reason to sell the land in December 1971 was to defeat the provisions of the Act which came H to be enforced on May 2, 1972. 714

STATE v. CHALAPATHI RAO 715

The question for consideration was whether the transfers were to be A disregarded for the purpose of computation of the ceiling area of the respondent under the Act.

Allowing the State appeal, this Court

HELD : 1.1. Under the Andhra Pradesh Land Reforms (Ceiling) on Agricultural Holdings Act, 1973, the bonafide or genuine nature of the transfer or the sale being in goods faith has no relevance at all. What is required to be proved under the Act by the land owner is that the transfer was not made in anticipation of and to avoid or defeat the provisions of the

Act. Section 7(1) of the Act not only requires the transfer to be valid and C genuine but also makes it obligatory for the transferor to prove that there was some compelling reason to sell the land at that point of time. Some sort of necessity or compulsion to sell the land has to be proved. [721-C-D]

Meria Venkata Rao v. State of Andhra Pradesh and ors., Civil Appeal D No. 2649177 decided on 11-2-1992 by Supreme Court, relied on.

Brijendra Singh v. State of U.P. and Ors., [1981] 2 SCR287 andlagmal Singh v. State of U.P., AIR (1991) SC 1928, distinguished.

1.2. In the present case the respondents might be wanting to raise E money for the'expansion of the sugar industry but there is nothing on the record to show as to why they chose December 1971 when the Act was in the legislative process to sell more than 220 acres of land. They applied for the licence sometime in 1972 and the licence was in fact granted to them in November 1973. There was no question of making any •xpansion F till the time the licence was granted. They could have waited till November 1973 when they obtained the licence. The only logical conclusion which can be drawn is that they sold huge chunk of lands in December 1971 in anticipation of, and with a view to avoid and defeat the provisions of the Act which came into force on May, 1972. The Appellate Tribunal acted illegally in exercise of its jurisdiction in reversing the order of the Tribunal. The impugned order of the Appellate Tribunal and that of the High Court are set aside. [722-A-D-F]

Forest Officer, Thanjavur and Anr. v. S. Nagnatha AY.Y"' and Ors.,

[19791 3 sec 466, distinguished.

A CIVIL N'PELLATE JURISDICTION: Civil Appeal No. 3353-61

of 1981.

From the Judgment and Order dated 6.7.78, 27.9.78, 11.9.78 & 3.4.79 of the Andhra Pradesh High Court in C.R.P. Nos. 3463-64, 3466, 3462, 3465, 4455, 34Q7 and 5459 of 1978.

T.V.S.N. Chari for the Appellant.

K.K. Venugopal, M. Seshadari and Ms. Seita V aidyalingam for the Respondent CA Nos. 3353-54, 3357 and 3358/81.

Ms. Seita Vaidyalingam, for the Respondent in C.A. Nos. 3355, 3356 & 3359-61/81.

B. Kanta Rao for the Respondent No. in C.A. No. 277-78/83.

K.R. Chowdhary for the Respondent in C.A. No. 2245-46/79.

A. Subba Rao, B. Parthasarthy and K.K. Gupta for the Respondent.

The Judgment of the Court was delivered by

E KULDIP SINGH, J, Chalapathi Rao and his son Ananda Mohan, respondents in the appeals herein, sold 220.25 acres of land by way of fourteen sale-deeds executed on five different days between December 16, 1971 and Dcember 27, 1971. The question for consideration is whether the transfers are to be disregarded for the purpose of computation of the ceiling area of the respondents under the Andhra Pradesh Land Reforms F (Ceiling) on Agricultural Holdings Act, 1973 (the Act). The Land Reforms Tribunal (the Tribunal) by its order dated April 14, 1977 answered the question in the affirmative and held that the transfers were made in anticipation of and with a view to avoiding or defeating the objects of the Act. The Lands Reforms Appellate Tribunal (the Appellate Tribunal), G however, by its order dated December 17, 1977 reversed the findings of the Tribunal and held as under:

"Tlierefore, in these cases we hold that the declarant had given a reasonable explanation for the sale of the lands and there was no intention to avoid the provisions of the Land Ceiling Act. Accord- H ingly, we hold on point -1 that all the sales effected by the appellant,

....

STATE.v. CHALAPATIIIRAO[KULDIPSINGH, J.] 717

his wife and his son are true, genuine and supported by considera- A tion and they were effected for the expansion of their industry and actually the amounts were invested for such expansion of the Sugar Factory and it cannot be said that they were intended to defeat or avoid the provisions of the Land Ceiling Act. It follows that all the extents covered by all the sale deeds have to be excludedfrom the B holding of the appellant's family unit, for the purpose of computa- . tion of the ceiling area of the appellants."

Revision-petitions filed by the State of Andhra Pradesh under Section 21 of the Act were admitted by the High Court on July ii, 1978 on the limited question regarding "the treatment of the lands as single crop wet lands" C and in respect of all other qµestions the revision petitions were dismissed.

The High Court, therefore, upheld the above quoted findings of the Appellate Tribunal. These appeals by the State of Andhra Pradesh are against the order of the Appellate Tribunal as upheld by the High Court

Sections 7(1) and 21 of the Act, which are relevant, are reproduced hereunder:

7'. S#ecial provision in respect of cenain transfers, etc. already made:- Where on or after the 24th January, 1971 but before the notified date, any person has transferred whether by way of sale, E gift, usufructuary mortgage, exchange, settlement surrender or in any other marmer whatsoever, any land held by him or created a trust of any land held by him, then the burden of proving that such transfer or creation of trust has not been effected in anticipation of, and with a view of avoiding or defeating the objects of any law F relating to a reduction in the ceiling on agricultural holdings, shall be on such person, and where he has not so proved, such transfer or creation of trust, shall be disregarded for the purpose of the computation of the ceiling area of such person.'

(May 2, 1972 is the notified date under the Act)

21. Revision : An application for revision from any party aggrieved, including.the Government, shall lie to the High Court, within the prescribed period, from any order passed on appeal by the Appellate Tribunal on any of the following grounds, namely' : H

SUPREMECOURTREPORTS [1994]SUPP.4S.C.R.

(a) that it exercised a jurisdiction not vested in it by law, or

(b) that it failed to exercise a jurisdiction so vested, or

( c) that it acted in the exercise of its jurisdiction illegally or with ml\leriaj irregularity."

The Ordinance, which preceded the Act, came into force on May 2,

1972. Section 7(1) of the Act provides that any transfer of land made during the period. from January 24, 1971 to May 2, 1972 which was made in anticipation of, and with a view to avoiding or defeating the objects of any law relating to reduction in the ceiling of agricultural holdings, shall be C disregarded for the purpose of the computation of the ceiling area under the Act. It further provides that onus to prove that the transfer was not with a view to avoiding or defeating any such law would be on the land owners.

D The case of the respondents before the Tribunal was that as early as 1946 they obtained two licences for setting up of textile industry and sugar industry. According to them during the period from 1939 to 1960 large areas of lands were sold by them for the purposes of setting up of the two industries. The precise reason, according to the respondents, for the sale of the Ian~ in dispute was to expand the sugar industry for which a valid E licence wa8 obtained.

The Tribunal on appreciation of the evidence before it and taking into consideration the relevant material on the record come to the following conc111$ions :

(1) That the recitals in the sale deeds did not mention that the purpose for the sale of lands was to invest the proceeds in the expansion of sugar industry rather it was mentioned that the lands were not convenient for personal cultivation and reasonable price was offered by the purchasers ;

(2) That in respect of all the sales only initial payments were aClcepted and pronotes were got executed in favour of the respondents for the major portion of the sale amounts.

(3) That the purchasers were employees or relatives of the respondnts;

STi,\TE. v. CHALAPATHIRAO [KULDIP SINGH, J.] 719 ;

(4) That the lands were sold at the rate of Rs. 300 to Rs. 1000 A which according to the Tribunal was not the market price of the Janka lands;

(5) That more than 220 acres of lands were transferred on five different dates during the period from December 16, 1971 to B December 27, 1971; and

( 6) That the disposal of large ch links of lands in December 1971 goes to show that the same might not have been sold but for the impending legislation on the land ceiling.

Supported by the above conclusions the Tribunal reached the finding that the transfers were made in anticipation of and with a view to avoid and defeat the provisions of the Act.

The Appellate Tribunal, however, came to the conclusion that the conduct of the respondents regarding the sale of lands owned by them was D consistent. They have been selling the land< to raise funds for setting up of industries and the transfers in dispute were effected to raise money to meet the expenses for the expansion of the sugar industry. The Appellate Tribunal did not agree With the Tribunal that the price for which the lands were sold was not the market price. The Appellate Tribunal felt fully E satisfied that the disputed sales were with a view to meet the expenditure to be incurred by the respondents on the expansion of the sugar industry.

The Appellate Tribunal, therefore, held that the transfers in dispute were not made in anticipation of and with a view to avoid or defeat any provisions of the Act. As mentioned above the High Court upheld the finding of the Appellate Tribunal by dismissing the revision petitions in F limine.

Mr. K.K. Venugopal, learned counsel appearing for the respondents, has vehemently contended that there is no justification whatsoever to reverse the finding of the Appellate Tribunal to the effect that the sales in G dispute were made to meet the expenses to be incurred for the expansion of sugar industry. According to him the finding of the Appellate Tribunal being a finding of fact, this Court in exercise of its jurisdiction under Article 136 of the Constitution of India read with Section 21 of the Act should not ordinarily interfere with the same. Mr. T.V.S.N. Chari, learned counsel appearing for the State of Andhra Pradesh, on the other hand H

A contendd that the proposal for the expansion of the sugar industry was mooted $Ometime in June 1970 but it was two years thereafter in April 1972 that the application for licence to expand the industry was made and the licence, in fact, was granted on November 26, 1973. According to the learned ¢onnsel, in December, 1971, when the lands were sold, there was B no question of spending any money on expansion of the industry because even the application for licence was made on April 26, 1972 and the licence was granted as late as November 26, 1973. It was forcefully contended by Mr. Chati that the only urgency to sell the land in December, 1971 was to defeat the provision of the Act which was on its way and came to be enforced on May 2, 1972. Needless to say that from May 2, 1972 there was C total projiibition on the sale of the lands which were subject matter of the Act. There is plausibility in the argument of Mr. Chari but we proceed on the assumption that the sales in dispute were made with a view to meet the expenses to be incurred on the proposed expansion of the sugar industry.

Mr. Venugopal contended that the sales in dispute, being valid and D genuine, were made in good faith. According to him the sales made in good faith, caiµiot be considered to have been made with a view to avoid or defeat the provisions of the Act. To support his contention he relies on the judgments of this Court in Brijendra Singh v. State of U.P. & Ors., (1981] 2 SCR 287 and Jagmal Singh v. State of U.P., AIR (1991) SC 1928. In these E cases thi$ Court was called upon to interpret sub-section ( 6) of Section 5 of the Uttar Pradesh Imposition of Ceiling on Land Holdings Act, 1960 (U.P. Act) which is reproduced herennder:

1(6) In determining the ceiling area applicable to tenure-holder,

y transfer of land made after the twenty-fourth of January, 1971, which but for the transfer would have been declared surplus land lJflder this Act, shall be ignored and not taken into acconnl :

Provided that nothing in this sub-section shall apply to -

(a) .............................. .

(b) a transfer proved to the satisfaction of the prescribed authority to be in good faith and for adequate consideration and jlnder an irrevocable instrument not being a benami transaction or for immediate or deferred benefit of the tenure-holder or other members of his family. -

STATE. v. CHALAPA1HIRAO [KULDIP SINGH, J.) 721

Explanation I ............................ .

Explanation II. - The burden of proving that a case falls within clause (b) of the proviso shall rest with the party claiming its benefit. 11

The provisions of the Act and the U.P. Act are not pari materia. Under B the U .P. Act where it is proved to the satisfaction of the prescribed authority that the transfer of land in a giving case is in good faith, and satisfies other conditions laid down in clause (b) of the proviso to sub-section ( 6} of Section 5, the transfer is valid and cannot be ignored while determining the ceiling area of the land owner. On the other hand, under C the Act the bona fide or genuine nature of the transfer or the same being made in good faith has no relevance at all. What is required to be proved under the Act by the land owner is that the transfer was not made in anticipation of and to avoid or defeat the provisions of the Act. We are of the view that Section 7(1) of the Act not only requires the transfer to be valid and genuine but also makes it obligatory for the transferor to prove D that there was some compelling reason to sell the land at that point of time.

Some sort of necessity or compulsion to sell the land has to be proved.

The view we have taken on the interpretation of Section 7(1) of the Act, is supported by a three Judge-Bench order of this Court in Meria E Venkata Rao v. State of Andhra Pradesh & Ors., Civil Appeal No. 21)49/77 decided on February 11, 1992. In the said case while interpreting Section 7(1) of the Act this Court held as under :

"As far as the transactions between 24.1.1971 and 2.5.1972 are concerned, the High Court has accepted the conclusions reached F by the Tribunal. The High Court has pointed out that a large extent of over 220 acres of land was alienated by the appellant and his wife within a short period of eight months between 4.6.1971 and 1.2.1972. It was not the case of the appellant that there was any pressure on the estate for the discharge of debts or that the G alienations were in fact made for discharge of, or meeting any binding debts, or for meeting the marriage or educational expenses of any member of the family. It was on the basis of this finding that the Tribunal came to the conclusion that the said transactions were made in anticipation of the said Act and the High Court was, in our view, justified in declining to interfere with the same." H

A In the present case the respondents might be wanting to raise money for the expansion of the sugar industry but there is nothing on the record to show as io why they choose December, 1971 - when the Act was in the legislative )1rocess to sell more than 220 acres of land. They applied for the licence sonje time in 1972 and the licence was in fact granted to them in B November, 1973. There was no question of making any expansion till the time the licence was granted. Needless to say that keeping in view the continuous rise in land-prices the respondents - prudent as they are - should have ordinarily waited till the time it became absolutely necessary for them to sell the land. In any case they could have waited till November, 1973 when they obtained the licence. The only logical conclusion which can C be drawn is that they sold huge chunks of lands in December, 1971 in anticipation of and with a view to avoid and defeat the provisions of the Act which came into force on May 2, 1972. We are, therefore, of the view that the appellate tribunal acted illegally in exercise of its jurisdiction in reversing the order of the Tribunal.

D Mr. Chari sought further support from the judgment of this Court in Forest Officer, Thanjavur and Anr. v. S. Naganatha A)Yar & Ors., (1979] 3 SCC 466 wherein this Court interpreted Section 22 of the Tamil Nadu Reforms (Fixation of Ceiling of Land) Act, 1961 (Tamil Nadu Act). The provisions of the Tamil Nadu Act and the Act are entirely different.

E Therefore, the judgment of this Court in S. Naganatha A)Yar's case relating to Tamil Nadu Act has no relevance whatsoeyer.

The *ppeals are allowed. The impugned orders of the Appellate Tribunal "*d that of the High Court are set aside. The order of the Tribunal is restored. The respondents shall pay the cost of the proceedings F which we qiJantify as Rs. 11,000.

A.G.

Appeals allowed.