1. Dispute over properties transferred via sale deed and partnership dissolution between brothers, where one became an evacuee, and the Custodian declared them evacuee properties. (Para 2 , 4 , 14 )
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1961 Supreme(SC) 121
SUPREME COURT OF INDIA
Property, Orissa and Madras)*
21st March, 1961.
B.P. SINHA, C.J.I., S.K. DAS, A.K. SARKAR, K.C. DAS GUPTA AND N. RAJAGOPALA AYYANGAR, JJ.
Fazal Bhai Dhala (in both the Appeals), Appellant
Versus
(1) The Custodian-General, Evacuee Property, New Delhi, and another (In C. A. No. 194 of 56) and (2) The Custodian, Evacuee Property, Madras (In C. A. No. 353 of 58), Respondents.
Civil Appeals Nos. 194 of 1956 and 353 of 1958.
Advocates appeared
Mr. Achhru Ram, Sr. Advocate (Mr. T. R. V. Sastri, Advocate, with him, for Appellant (In both the Appeals); Mr. N. S. Bindra, Sr. Advocate (Mr. D. Gupta, Advocate, with him), for Respondents (In both the Appeals).
Advocates:
ACHHRU RAM, D.GUTPA, N.S.BINDRA, T.R.V.SASTRI
ACHHRU RAM, D.GUTPA, N.S.BINDRA, T.R.V.SASTRI
The court held that formal notice is not mandatory for revisional jurisdiction if a reasonable opportunity to be heard is provided. It further clarified that under the amended Administration of Evacuee Property Act, only the specific share belonging to the evacuee constitutes evacuee property, not the entire property.
Headnote:(A) Administration of Evacuee Property Act, 1950 - Sections 2(f), 26, 40 - Indian Partnership Act - Sections 37, 46, 47, 48 - Revisional jurisdiction - Natural justice - Reasonable opportunity of being heard - The proviso to Section 26(1) requires that no order prejudicial to any person be passed without giving such person a reasonable opportunity of being heard - Formal notice is not mandatory if the party is already before the authority and is given a reasonable opportunity to be heard through counsel (Paras 6-9).
(B) Partnership - Dissolution - Backdated dissolution deed - A mention of a prior date of dissolution in a deed cannot be accepted if the deed was purposely concluded to provide a safeguard for properties to remain in the hands of the partners (Para 10).
(C) Evacuee Property - Definition - Section 2(f) - Amendment - The definition of evacuee property was amended from "any property in which any evacuee has any right or interest" to "any property of an evacuee" - Consequently, only the specific share belonging to the evacuee is treated as evacuee property, rather than the entire property in which the evacuee had an interest (Para 12).
Facts of the case:
Two partners in a business executed a sale deed and a dissolution deed. One partner subsequently migrated, becoming an evacuee. The authority declared the properties as evacuee properties. The other partner challenged this, claiming the partnership had been dissolved at an earlier backdated date and that the transfers of property were bona fide and made for valuable consideration.
Findings of Court:
The revisional order was valid as the party was given a reasonable opportunity to be heard. The dissolution of the partnership is held to have occurred on the date the deed of dissolution was executed, not the backdated date. The transfers were found not to be bona fide. Due to the amendment of Section 2(f), only the specific share of the evacuee in the properties is treated as evacuee property.
Issues: Whether the absence of formal notice under Section 26 of the Administration of Evacuee Property Act invalidated the revisional order; whether the partnership was dissolved on the backdated date mentioned in the deed; and whether the entire property or only the evacuee's share constitutes evacuee property under the amended Act.
Ratio Decidendi: The requirement of "reasonable opportunity of being heard" under the proviso to Section 26(1) is satisfied if the party is heard, even if formal notice was not served. A backdated dissolution deed is not binding if it is found to be a mechanism to safeguard properties. Following the amendment to Section 2(f), only the property actually belonging to the evacuee is "evacuee property."
Result: Appeal dismissed.
Legal Category Hierarchy
Table of Contents
2. Whether the Custodian lacked jurisdiction to revise orders without formal notice and whether dissolved partnership assets could be declared evacuee properties. (Para 5 , 6 , 10 , 11 , 16 )
3. The Custodian exercised revisional jurisdiction; reasonable opportunity of being heard satisfies natural justice even without formal notice; transfers lacking bona fides are void. (Para 5 , 7 , 8 , 10 , 11 , 17 , 18 )
4. Revisional jurisdiction under Section 26 requires a reasonable opportunity to be heard, which may be satisfied without formal notice if the party is already before the authority. (Para 6 , 7 , 8 , 9 )
5. Appeals dismissed; clarification that only the evacuee's share in the properties is treated as evacuee property. (Para 12 , 13 , 19 )
6. Is a formal notice mandatory before the Custodian exercises revisional jurisdiction under Section 26 of the Administration of Evacuee Property Act?
No. While a reasonable opportunity to be heard is required for prejudicial orders, formal notice is not mandatory if the party is already before the Custodian and is given a reasonable opportunity to be heard. (Para 6 , 7 , 8 , 9 )
7. Can the assets of a dissolved partnership be declared as evacuee property?
Yes. A declaration that a dissolved partnership business is evacuee property is construed as a declaration that the property remaining in the evacuee's share upon dissolution is evacuee property. (Para 10 , 11 )
8. What is the effect of a transfer of property to a non-evacuee that is found to be not bona fide under the Evacuee Property Act?
Transfers made without good faith (not bona fide) have no effect under Section 40 of the Evacuee Property Act, and the property remains evacuee property. (Para 2 , 11 , 18 )
9. How is the share of an evacuee in a joint property treated as evacuee property following the amendment to Section 2(f)?
Following the amendment to Section 2(f) of the Administration of Evacuee Property Act, only the specific share belonging to the evacuee is treated as evacuee property, rather than the entire property in which the evacuee had an interest. (Para 12 )
Judgment
DAS GUPTA, J. : Of these two appeals, one (Civil Appeal No. 194 of 1956) is against the order of the Custodian-General of India, declining to interfere with the order of the Custodian of Evacuee Property, Orissa, in respect of certain properties claimed by the appellant as his; and the other appeal (Civil Appeal No. 353 of 1958) is against the order of the Deputy Custodian-General of Indian, declining to interfere with the order of the Custodian of Evacuee Property, Madras, in respect of properties situate in Madras, claimed by the same appellant as belonging to him. Though most of the considerations that arise in the two appeals are identical, it will be convenient to take them up one after the other so as not to confuse a clear understanding of the facts on which these considerations which are all based on question of law arise.
2. The appellant Fazal Bhai Dhala and his brother Abdulla Dhala were partners in a business of hides and skins. A deed of partnership was executed on January 1, 1941, and the firm was registered in the Register of Firms, Cuttack, under S. 59 of the Indian Partnership Act. On August 10, 1949, Abdulla Bhai Dhala executed a deed of sale in respect of some immovable properties at Jharsuguda in Orissa, and also certain properties, at Madras, in favour of Fazal Bhai Dhala. The consideration in the document was mentioned as Rs. 85,000/- of which Rs. 50,000/- was mentioned as the value of the Madras properties and Rs. 35,000/- as the value of the Orissa properties. The sum of Rs. 85,000/- appears to have been paid in the presence of the Registrar by Fazal Bhai to Abdulla Bhai on August 11, 1949. A deed of dissolution of the partnership was also executed on the following day-the 12th August, 1949. It was stated therein that the two partners had agreed "that the said partnership shall stand dissolved as and from 2-11-48 and it has further been agreed that as from that day, 2-11-1948, the said business of Fazalbhoy Dhala & Co., shall belong to and be continued and carried on by Fazalbhoy Dhala." It was also stated that in view of fact that "accounts of the said partnership have not yet been taken or settled and cannot be taken or settled without much delay and trouble it has further been agreed that Fazal Bhai Dhala shall pay to Abdulla Dhala a sum of Rs. 40,000/- in full settlement and satisfaction of all the claims, as partner of Abdulla Bhai Dhala against the partnership, its assets,. goodwill etc., in respect of his share therein." A Receipt of the sum of Rs. 40,000/- was also acknowledged in this deed. On receipt of information that Abdulla Dhala had migrated to Pakistan after transferring his properties to his brother Fazal Bhai Dhala, the Assistant Custodian of Evacuee Property, Sambalpur (Orissa), issued a notice under S. 7(1) of the Ordinance XXVII of 1949 to Fazal Bhai Dhala on December 30, 1949, in respect of immovable properties at Jharsuguda including the properties covered by the sale deed of August 10, 1949, and the business in hides and skins under the name of Fazalbhoy Dhala & Co., and certain immovable properties standing in the name of that firm. In reply to the notice, Fazal Bhai contended that Abdulla Bhai was not an evacuee; and that in any case, he, Fazal Bhai, had become the sole proprietor of the business, with all assets and liabilities, with effect from November 2, 1948, when the partnership was dissolved and that while some of the immovable properties as mentioned in the notice had been conveyed to him by a deed of sale by Abdulla Bhai, the rest being assets of the firm of Fazal Bhai Dhala had vested in him after the dissolution of partnership, he prayed that his "title" in the assets of the firm, and in the immovable properties, mentioned in the notice should be confirmed. The Assistant Custodian held after consideration of the evidence that though the transfer of the properties mentioned in the sale deed was for adequate and valuable consideration it was not at all bona fide
