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NAMDEO

COLLECTOR, EAST NEEMAR, KHANDWA AND ORS.

AUGUST 22, 1995

(K. RAMASWAMY AND B.L. HANSARIA, JJ.}

M.P. Samaj Ke Kamjor Wa1gon ke Krishi Bhumidharankon Ka Udhar Dene Walon Ke Bhumi Hadapane Sambandhi Kuchakron Se Paritran Tatha Mukti Adhiniyam, 1977: Sections 2(a), (c), 4, 6(4) and 7.

"Holder of Agricultural Land'!._..Weaker .Section-Obtaining of loan-Sale of land for-Prohibited transaction-On facts held transaction was prohibited and thus void-Extent of land covered by prohibition-Power of authorities to declare prohibited transaction as void-Compliance with statutory requirement.

Retrospective operation of Ac~Agreement to sell before coming into force of the Act-Documents purporting to be sale deed not intended to be a conveyance-Act held applicable to such a transaction.

R, owner of certain lands obtained loan from L, a money lender, by oral mortgage of his land in 1964. L got the sale-deed executed in favour E of his son D who later sold the land in question to the appellant. On the application of the original owner the Sub-Divisional Officer found tha~ it was not a transaction of real sale but of prohibited loan because even after several years of the transaction the original owner was in possession of the disputed land. Consequently, an order was passed declaring that the initial F sale as well as subsequent sale-deed by D in favour of the appellant was void under the provisions of the 1977 Adhiniyam and accordingly directed the appellant to deliver possession of the land to the original owner. This order was confirmed in appeal by the Tribunal and upheld by the High Court. In appeal to this Court it was contended for the appellant that (i) G the Act has no application because (a) the land covered by the 1964 sale deed is not covered within the specified extent of land declared in the Act;

(b) the transaction took place in 1964 while the Act came into force in 1971;

(c) the transaction dates back to the date of agreement to sell which was effected in 1969; (ii) failure to record a finding by Sub-Division Officer as required under section 6 relating to conditions enumerated in sub-section H 869

(4) resulted in failure of justice; (iii) the order passed by the authorities 1

was in violation of section 7(2) of the Act; and (iv) the appellant is ready to pay the market value of land, therefore, an order to that effect be passed.

Dismissing the appeal, this Court

HELD :1. A reading of section 2(c) indicates that a holder of an agricultural land not exceeding 8 hectares of unirrigated land or 4 hectares of irrigated land within the State as a Bhoomiswami or occupancy tenant or a Government lessee either in any one or all of the capacities together C is a holder of agricultural land. The Sub-Division Officer had recorded a finding that what remained in possession of L, money lender and his son D was 8 acres 20 gunthas and, therefore, it is within the specification of 4 hectares of irrigated land. The Act thereby clearly becomes applicable to be lands in this case. [873-A-B]

2. The Sub-Divisional officer found that though sales were effected

only in 1974 but the document which purported to have been a sale deed of 1964 was not really intended to be a conveyance. The Tribunal found that R never intended to sell the land; and L, being a money lender, made the document as if a sale deed, which was intended to be a mortgage deed. This. fact gets corroboration from the finding and revenue entries that the owner remained in possession of the lands. Therefore, even if the sales were effected in 1974, the Act becomes applicable to such transactions. [873-D-E]

3. An agreement of sale does not convey any right, title or interest.

It would create only an enforceable right in a court of law and parties could act thereon. The right, title and interest in the land of D stood extinguished only on execution and registration of the sale deed in 1974. Therefore, the sale deeds are within the prohibited period. [873-F]

4. The High Court had agreed with the finding by the statutory G authorities that the Sub-Divisional Officer had substantially complied with the provisions in sub-section (4) of section 6 of the Act. So, the non-consideration of the enumerated circumstances did not cause any failure of , justice. [874-E]

5. Sub-section (2) of Section 7 comes into operation only when no H positive finding under section 7(1) is recorded. 0Dly the authorities are

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~ required to go into the questions envisaged in sub-section (2) and other A follow-up action mentioned in that behalf in sub-section ( 4) of section 6 of the Act. Since the finding of the authorities was that there was no adequate consideration and the sale was within the prohibited period, the findings recorded are under section 7(1)(a) of the Act; consequently, the need to make enquiry as is necessary under clause (b) of section 7(1)(ii) read with B sub-section (4) of section 6, does not arise. [875-C-D]

6. In view of the finding that the transaction is vitiated, because of which it was set aside exercising power under section 7(1)(a) of the Act, there is no justification to interfere with that order and given a direction to pay the market value. [875-E] c

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 7458 of 1995.

From the Judgment and Order dated 4.3.91 of the Madhya Pradesh High Court in Misc. P. No. 1276 of 1983.

....

P.P. Rao, Vivek Gambhir and S.K. Gambhir for the Appellants . -- S.S. Khanduja, Ms. Suchitra Chitale for S.K. Agnihotri for the Respondents.

E The Judgment of the Court was delivered by

K. RAMASWAMY, J.: Leave granted.

The appellant is a subsequent purchaser from Devi Prakash son of

r Laxman Prasad. The case of Rama Krishna, the original owner, is that he F had obtained loan from Laxman Prasad, admittedly a moneylender, by an oral mortgage of 12 acres and 20 gunthas of land. Laxman Prasad had delivered 4 acres and odd and got the sale deed executed for 8 acres 30 gunthas of th~ land in the name of his minor son Devi Prakash. Therefore, he comes within the provisions of M.P. Samaj Ke Kamjor Wargon Ke G Krishi Bhumidharakon Ka Udhar Dene Walon Ke Bhumi Hadapane Sambandhi Kuchakron Se Paritran Tatha Mukti Adhiniyam (for short, 'the Act'). The Sub-Divisional Officer by his order dated August 27, 1982 recorded a finding that:

"Applicant's witness No. 2 Ram Krishna Matharam and applicant's H

witness No. 3 Kadulal have supported this statement. Alongwith this, non-applicant Eknath (one of the subsequent purchasers) has admitted that upon execution of the instrument of the transaction . possession continued and remained with Ram Krishna. It is thus clear from the testimony of these witnesses that for several years after the transaction effected in 1964, Ram Krishna was in possession of the disputed land. It is noticeable that in Khasra 1969-70 also, his partial possession has been shown. Thus from these facts it appears prima facie that the transaction in question was a prohibited transaction of loan because, if it was a transation of real sale, then Laxman Prasad and Devi Prakash must have taken the land in their possession soon after the execution of the instrument of transaction."

Thus, it was declared that the initial sale dated March, 17, 1964 and the subsequent sale deed executed by Devi Prakash in favour of the appellant and another sale deed in favour of Eknath on May 23, 1974 are D void and directed the appellant and Eknath to deliver possession of the lands to Ram Krishna. On appeal it was confirmed. When the appellant and another challenged under Article 226 in Misc. Petition No. 1276/83 and another, the Division Bench of M.P. High Court by order dated March 4, 1991 upheld that the orders of the tribunals. Thus this appeal by special E leave.

Shri P .P. Rao, the Learned Senior counsel has contended that the Act has no application for the reason that the land covered by 1964 sale deed relates to 12 acres 20 gunthas while the Act would become applicable when sale transactions are covered within a specified extent of land declared in the Act. We find no force in the contention.

Section 2( c) of the Act states that :

(c) " holder of agricultural land" in the weaker sections of the people means a holder of land used for purposes of agriculture not exceeding eight hectares of unirrigated land or four hectares of irrigated land within the State whether as a Bhumiswami or an occupancy tenant or a Government lessee either in any one or all of the capacities together within the meaning of the Code."

H A reading thereof indicates that a holder of an agricultural land not

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" exceeding 8 hectares of unirrigated land or 4 hectares of irrigated land A within the State as a Bhoomiswami or occupancy tenant or a Government lessee either in any one or all of the capacities together is a holder of agricultural land. It is seen that the Sub-Division Officer had recorded a finding that what remained in possession of Lakshman Prasad and his son Devi Prasad was 8 acres 20 gunthas and, therefore, it is within the specifica- B tion of 4 hectares of irrigated land. The Act thereby clearly becomes applicable to the lands in this case.

It is next contended that the Act applies only to sale transactions effected from the appointed date, namely, January 1, 1971 as specified in Section 2(a). Since the original transaction had taken place in 1964 the Act c cannot be applied retrospectively. It is seen that the Sub-Divisional officer recorded that though sales were effected only in 1974 but the document which purported to have been a sale deed of 1964 was not really intended to be conveyance. The finding recorded by the Tribunals below was that Ram Krishna never intended to sell the land; and Laxman Prasad, being a D money lender, made the document as if a sale deed, which was intended

~ to be a mortgage deed. This fact gets corroboration from the finding and revenue entiries that the owner remained in possession of the lands . ..

Therefore, even if the sales w, ere effected in 1974, the Act becomes applicable to such transactions.

E The further contention is that there was an agreement of sale by Devi Prasad with the appellant in the year 1969 and that deed was executed in 1974, it dates back to the date of agreement and, therefore, the Act is inapplicable. We find no force in the contention. An agreement of sale does .not convey any right, title or interest. It would create only an enfor- F ceable right in a court law and parties could act thereon. The right, title and interest in the land of Devi Prasad stood extinguished only on execution and registration of the sale deed and admittedly it is done in 1974.

Therefore, thesale deeds are within the prohibited period.

It is also urged that the Sub-Divisional Officer has to consider and G

record a finding, as enjoined under s.6 of the Act relating the conditions

...- enumerated in sub-s.(4) thereof. The authorities have not considered, more particularly, with reference to the urgency of the loan, availability of other sources; also the market value of the land at the time of the transaction and the adequacy of the consideration passed under the documents. It is H

A true that the enumerated circumstances are required to be considered in 1'

juxtaposition with the power under s.4 of the Act, which reads :

"4. All prohibited transactions of loan to be subject to protection and relief under this Act -

B It is hereby declared that all claims in relation to a prohibited transaction of loan subsisting on the appointed day or entered into thereafter but on or before the date of publication of this Act in

'-'( the Gazette shall, notwithstanding anything contained in the Code or any other enactment for the time being in force or any decree c or order, if any of any court or authority, be subject to protection and relief in accordance with the provisions of this Act."

On recording a finding by the authority that the transaction in question was a prohibited transaction of loan, it would be entitled to declare, under s.7 that the sale is a void sale or unenforceable. The D authorities have recorded the findings that Rama Krishna never intended to sell the land, he had obtained loan of a sum of Rs. 2000 and odd, and he repaid the amount with interest. These consideration obviously weighed

,..J.

with the authorities and the High Court had agreed with the finding by the .... statutory authorities that the Sub-Divisional Officer had substantially com-

E plied with the provisions in sub-s.( 4) of s.6 of the Act. So, the non-consideration of the above-mentioned circumstances did not cause any failure of justice. Of course, it would have been better to record findings qua these also.

It is brought to our notice that under sub-s.(2) s.7 an attempt has to F be made by the authority to find out what was the actual consideration that 1 had passed and what was the prevailing price of the lands at the date of sale. The authorities are then entitled to direct the moneylender to pay the difference to the holder of the agricultural land. The object of the Act is to see that the debtor gets adequate consideration for his land. No such

G attempt was made by the authorities, and so, the order passed is illegal.

We find no force in the contention. It is seen that sub-s.(1) of s.7 mandates that when the Sub-Divisional Officer is satisfied that the transaction of loan is not a prohibited transaction of loan, he shall dismiss the application or

"' close the proceedings. But if he records a finding that the transaction is of I

loan "in substance" and is a prohibited transaction of loan, he should H declare such transaction to be void, should pass an order, setting aside the

transfer of the land to the creditor or money-lender's nominee or sub- A sequent seller and he should restore possession of the land to the debtor, i.e., holder of the agricultural land. Sub-s.(2) comes into operation only when no positive finding under s.7(1) is recorded. Clause (b) of Section 7(1)(ii) states that :

"(b) where in his opinion it is not feasible to restore the possession B

of land, pass order directing the lender of money to pay the difference of price under sub-s.(2)."

In the aforesaid situation only the authorities are required to go into the questions envisaged in sub-s.(2) and other follow-up action mentioned in c that behalf in sub-section (4) of s.6 of the Act. Since the finding of the authorities was that there was no adequate consideration and the sale was within the prohibited period, the findings recorded are under s.7(1)(a) of the Act; consequently, the need to make enquiry as is necessary under clause (b) of s.7 (1) (ii) read with sub-s.(4) s.6, does not arise.

D The final submission is that since 1974 the appellant has been in possession of the lands and he has improved the land, he is prepared to pay the prevailing market value as on dati;: and a direction in this behalf may be given. Learned counsel for the contesting respondents has stated that his client is interested to get back possession of the land, and not E money. In view of the finding that the transaction is vitiated, because of which it was set aside exercising power under s.7(a) of the Act, we do not think that we will be justified to interfere with that order and give a direction to pay the market value.

r The appeal is accordingly dismissed. No costs. .

T.N.A.

Appeal dismissed.