Judgement

SHAH, J. : On September 30, 1940 the appellant - a private limited Company - obtained a lease from the owners of 3300 acres of mica bearing land in village Sapahi in the District of Gaya, for a period of fifteen years. Clause 29 of the indentures of lease read as follows:

"If on the expiry of the term of the thika we executant Nos. 1 and 2, first party, the lessors, desire to let out in thika the thika property or any portion thereof and if any other person wants to take it in thika, then in such circumstances it will be incumbent upon us, executant Nos. 1 and 2, first party, the lessors, to inform about it to executant No. 3, second party, the lessee, first. If on the same terms and stipulations and jama executant No. 3, second party, the lessee, wants to take it in thika then in that case, we executant Nos. 1 and 2, first party, the lessors, shall let it out in thika to him (executant No. 3), and we shall execute a fresh thika deed in respect thereof in favour of executant No. 3, second party, the lessee, and executant No. 3, second party, the lessee, shall be competent to get the deed executed."

By virtue of a notification issued under Section 3 of the Bihar Land Reforms Act, 1950, the right of the owners in the lands, vested on June 27, 1953 in the State of Bihar. The appellant Company remained thereafter in occupation under a statutory lease deemed to be granted by the State for the remaining period of the contractual lease. On February 22, 1955, the Company served a notice upon the State exercising the option of renewal granted by Clause 29 of the indenture. On January 6, 1956, the State granted a lease to the appellant of 410 acres out of the lands for 20 years and the remaining area was granted in lease to one Sant Saran Bhadani a director of the appellant Company. In a writ petition moved by the one Sudha Devi the leases granted to the appellant company and Bhadani were set aside by order dated July 5, 1956, of the High Court of Patna, on the ground that in granting fresh leases to the appellant Company and Bhadani the State of Bihar had violated Rr. 67 and 68 of the Mineral Concession Rules, 1949.

2. The appellant Company then instituted in the Court of the Subordinate Judge, Second Grade, Gaya, an action for specific performance of the covenant of renewal in the indentures of lease dated September 30, 1940. The Subordinate Judge dismissed the action holding that by the stipulation in Cl. 29 a right of pre-emption and not of renewal was granted to the appellant Company. The High Court of Patna confirmed the decree passed by the Trial Court but on different grounds. The High Court held that the right granted by C. 29 gave rise to an "encumbrance" which was extinguished when the interest of the owners in the land vested in the State. With certificate granted by the High Court, this appeal has been preferred by the Company.

3. A notification under S. 3 (1) of the Bihar Land Reforms Act, 1952 (1950?), on June 27, 1953 was issued in respect of the land of the owners. Section 4 of the Act prescribes the consequences of the publication of the notification under Section 3 (1): it provides, insofar as it is relevant:

"Notwithstanding anything contained in any other law for the time being in force or in any contract, on the publication of the notification under sub-section (1) of Section 3, or sub-section (1) or (2) of Section 3-A, the following consequences shall ensue, namely:

(a) Such estate or tenure including the interests of the proprietor or tenure-holder in any building or part of a building comprised in such estate or tenure and use primarily as office or cutchery for the collection of rent of such estate or tenure, and his interests in trees, forests, fisheries, jalkars, hats, bazar, mela and ferries and all other sairati interests as also his interest in all sub-soil including any rights in mines and minerals, whether discovered or undiscovered, whether being worked or not, inclusive of such rights of a lessee o