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1941 Supreme(SC) 26
Privy Council At Patna
Sir George Rankin, Lord Russell of Killowen, Justice Lords Atkin, JJ.
S.N. Banerji and another -Appellant
Versus
Kuchwar Lime and Stone Co. Ltd. (in Liquidation) and another -Resopndent
Privy Council Appeal No.8 of 1941; Patna Appeal No.36 of 1939
Decided On : 30-07-1941
Sanderson Lee and Co., S.L. Polak and Co., W.W.K. Page, Sir T. Strangman, J.M. Pringle
Section 53A of the Transfer of Property Act creates rights of estoppel between the transferor and transferee but does not create a real right or a form of transfer exempt from registration that can be asserted against third parties.
Headnote:(A) Civil Procedure Code, 1908 - Sections 144 and 151 - Restitution of possession - Inherent power of the Court - The power under Section 151 is the inherent power of the Court to make such orders as may be necessary for the ends of justice to ensure that the act of the Court does not cause injury to suitors - Restitution cannot be granted to a party who, upon the determination of rights, is found to be a trespasser, as it would be contrary to the ends of justice to oust a lawful lessee to reinstate a party with no legal right to possession.
(B) Transfer of Property Act, 1882 - Section 53A - Registration - Agreement to transfer interest - Section 53A does not operate to create a form of transfer of property exempt from registration - It creates no real right but merely creates rights of estoppel between the proposed transferee and transferor, which have no operation against third persons not claiming under those persons - An unregistered agreement that purports to transfer an interest in property is invalid if registration is required, and such an invalid transfer cannot operate as a breach of covenant to cause forfeiture of a lease.
Facts of the case:
A company held quarrying leases containing a covenant that the lessee would not assign or transfer any interest without official assent, with a provision for forfeiture upon breach. The lessee company entered into an unregistered agreement to sell the rights under the leases to a third party. The government subsequently forfeited the leases for breach of covenant and permitted another party to work the quarries. The original lessee company challenged the forfeiture, and it was eventually held that the unregistered agreement was invalid and did not trigger forfeiture. After a subsequent order in contempt proceedings was set aside, the party that had been working the quarries sought restitution of possession under the inherent powers of the court.
Findings of Court:
The applicants were trespassers because a valid lease continued to exist in favor of the respondents. The lessors could not grant rights to the applicants that were inconsistent with the existing valid lease. Consequently, no injury was caused to the applicants by directing them to give up possession, and justice does not require reinstating them into a position they have no right to occupy.
Issues: Whether the applicants were entitled to restitution of possession under the inherent powers of the court and whether an unregistered agreement to transfer a partial interest in property is exempt from registration under Section 53A of the Transfer of Property Act.
Ratio Decidendi: Section 53A of the Transfer of Property Act creates only a right of estoppel between the transferor and the transferee and does not create a real right or a transferable interest exempt from registration that can be asserted against third parties. Since the transfer was unregistered and invalid, the lease was not forfeited, rendering the applicants trespassers who had no legal right to possession.
Result: Appeal dismissed.
Legal Category Hierarchy
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practice and procedure
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civil procedure
- inherent powers of court
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civil procedure
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property law
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transfer of property
- registration
- part performance
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lease
- forfeiture
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transfer of property
Lord Atkin:-
These are two consolidated appeals from orders made by the High Court at Patna refusing to the appellants restoration of possession of limestone quarries in the district of Shababad. There are two appeals because application was originally made by the first two appellants, managing director and manager, respectively of the appellant company. A separate application was afterwards made by the company, the appellants in the second appeal. No separate point arises in respect of them. The disputes between the parties have already twice been carried to this Board and the judgments given have made it unnecessary to go into detail in deciding this appeal. In 1928 the Secretary of State granted to the Kuchwar Lime and Stone Co., Ltd., the present respondents, quarrying leases for the term of 20 years of the quarries in question. There were covenants in each lease that the lessees would not assign the lease or transfer any right or interest thereunder or underlet the whole or any portion of the premises without the assent of the Board of Revenue of Bihar and Orissa, with a provision for forfeiture on breach. In 1933 the lessee company went into liquidation and in the same year the company agreed with one Bose for the sale to him of the rights under both leases, subject to the sanction of the Board of Revenue. In the meantime, Bose was to act as agent for the company, pay to the company the dues payable by it to the Government, and work the quarries for his own profit. The agreement was not registered.
In 1934 the Government purported to forfeit the leases for breach of the above covenant and gave permission to the appellant company to enter and work the quarries, which they did. No formal lease to the appellants was executed. In September 1934, the respondent company brought a suit against the Secretary of State for a declaration that their leases had not been forfeited; and for an injunction to restrain the defendant, his servants or agents, from granting leases to the present appellants or others or authorizing them to carry on quarrying operations on the premises. The Subordinate Judge dismissed the suit, but in February 1936 the High Court allowed the appeal See ('36) 23 AIR 1936 Pat 372: 163 IC 501: 15 Pat 460: 17 PLT 217, Kuchwar Lime and Stone Co. Ltd. v. Secretary of State and made the declaration and granted the injunction claimed. On appeal by the Secretary of State to the Privy Council in November 1937, their Lordships dismissed the appeal See ('38) 25 AIR 1938 PC 20: 172 IC 443: 17 Pat 69: 65 IA 45: 32 SLR 276 (PC), Secretary of State v. Kuchwar Lime and Stone Co. Ltd. holding that though the agreement with Bose purported to transfer to him "pending the assent of the Board of Revenue a definite interest in the property, yet as the transfer was not registered it was invalid and did not operate to create a forfeiture.
In the meantime, in August 1936, the respondent company filed a petition in the High Court in the action alleging that the Secretary of State and the present appellants, Banerji and Ghose, had been guilty of contempt See ('37) 24 AIR 1937 Pat 65: 166 IC 966: 16 Pat 159: 18 PLT 95 (SB), Kuchwar Lime and Stone Co. Ltd. v. Secretary of State in working the quarries. The High Court found all the parties to be in contempt: and on receiving an apology ordered them to pay the costs. The appellant company thereupon withdrew from the quarries and ceased to work them. The Secretary of State and the appellants, Banerji and Ghose, appealed to the Privy Council from the order made on the contempt application. In October 1938, the appeal was allowed See ('38) 25 AIR 1938 PC 295: 178 IC 490: 17 Pat 770: ILR (1939) Kar PC 42 (PC), S.N. Banerjee v. Kuchwar Lime and Stone Co. Ltd. , the Board holding that the Secretary of State had committed no breach of the injunction, and that the other two appellants were not within its terms. In November 1938, the appellants applied by petition to the High Court for restitution of
