1. Prior to July 6, 1949 one Zulfikar AH Shah Nawaz Khan Bhutto was the owner of the lease-hold plot No. 200 situate at Backbay Reclamation, Bombay, whereon stands a building in which Astoria Hotel is being conducted. On June 22. 1948 Bhutto gave a lease of these premises to the 2nd Respondents for a period of 35 months. Bhutto was declared an evacuee and on July 6, 1949 the said premises were declared evacuee property and vested in the Union Government under the displaced persons (Compensation and Rehabilitation) Act, 44 of 1954(hereinafter called the compensation Act). On December 31, 1955 the said promises were auctioned as evacuee property by the Regional Settlement Commissioner when. Respondents 1 were declared the highest bidder for Rs. 13,04,000. On the Jan. 27, 1956 the Regional Settlement Commissioner accepted the bid of Respondent 1, and as they were displaced persons, he called upon them to file compensation applications for themselves and for their association, if any, within 7 days. Respondents 1 were told that if that was not done, 10% of the bid offered by them would be deducted from the net compensation due to them as provided by the indemnity bond executed by them at the conclusion of the said auction. By a Memorandum dated February 1, 1958 the Settlement Commissioner informed respondents 1 that since the auction price as to be adjusted against compensation due to them an effort was made to determine such compensation. But as it was found that process would take some time it was decided to transfer possession of the property to them on a provisional basis. The Memorandum further stated that as the property was in possession of tenants, Respondents 1 could get physical possession only if the tenants were not protected under Section 29 of the Compensation Act. Memorandum, nevertheless, authorised Respondents 1 to realise arrears of rent as also rent as it became due and to carry out repairs for the maintenance of the premises as may be necessary. It also stated that henceforth Respondents 1 would be responsible for the safety, repairs and maintenance of the property as also for municipal rates and taxes thereon. They were, however, not to them sell, mortgage or lease the property as the transfer was made to them on a provisional basis until net compensation due to them was finally determined and adjusted against the price and 'full and final rights of ownership are transferred to you and certificate of sale is issued.' The memorandum further stated that if any amount remained due after the net compensation was adjusted against the price, Respondents 1 could have to pay such amount either in cash or by adjustment of other compensation claims and in case of default of such payment or adjustment the deficit would be recovered as arrears o land revenue and the certificate of sale would be withheld until such amount was paid or adjusted. A copy of this memorandum was sent to the Custodian and the Deputy Custodian, Bombay requesting them to inform the tenants to pay henceforth the rent to respondents 1 Accordingly the 2nd respondents started paying rent to Respondents 1. Respondents 1 could get symbolical possession of the premises, as they were in occupation of the appellants, who were said to be in possession as the subtenants of Respondents 2. On December 30, 1958 and again on April 24, 1959, Respondents 1 serve notices on Respondents 2 terminating their tenancy on several grounds including that of subletting. On February 19 1960 they filed the suit, from which this appeal arises, against Respondents 2 in the small Causes Court Bombay, to which later on the appellants were added as party-defendants. During the tendency of the suit the managing officer issued to respondents 1 a certificate of sale dated July 21, 1963 declaring them to be the purchasers with effect from May 1, 1956. The certificate was issued in the form prescribed by the Displaced Persons (Compensation and Rehabilitation) Rules 1955 framed under Section 40 of the Compensation Act. The certificate was accompanied by two annexures, the first giving the names Respondents 1 and their 13 associates against whose claims the auction price of Rs. 13,04,000 was adjusted; and the second giving 'particulars of adjustments of sale price'.
2. Before the Trial Court 4 preliminary issues were raised.The principal contention of the appellants was that Section 4 of theBombay Rents, Hotel and lodging House Rates Control Act LVIIof 1947 (hereinafter referred to as the Rent Act) exempted interalia properties belonging to the Government from the applicabilityof the Act, that as the property in question still vested in the Central Government on February 19, 1960 when the suit was filedinasmuch as it was only provisionally transferred to respondents1 by the said memorandum and was finally transferred only whenthe certificate of the sale was issused, the small Causes Court, asthe Rent Court under the Rent Act, had no jurisdiction to entertainor try the said suit.
3 Both the Trial Court and Appellate, Bench of the small Causes Court negatived the appellants' contention and held that Court had jurisdiction. In so holding the Appellant Bench was of the view that the title to the property was transferred to Respondents 1 with effect from the date when the auction price was adjusted against the compensation payable to them and their said associates, and that therefore, the title passed to Respondents 1 before the date when the suit was filed. The Bench relied on the certificate issued in the form provided in appendix XXII to the said Rules which was the form substituted for the old form with effect from October 29, 1956 and which contained the declaration that Respondents 1 had become purchasers with effect from May 1, 1956, and thus was validly filed in the Small Causes Court. Thereupon the appellants filed the High Court two revision applications against the said order and the High Court rejecting them held that Respondents 1 had become owners as from May 1, 1956 as declared by the certificate of sale, that though the new form in Appendix XXII came into force after the said auction sale, it was nonetheless applicable as it was only procedural, that Respondents 1 must be held to have become the owners before the suit was filed, and consequently, the exemption in Section 4 in 4 of the Rent Act did not apply. Indeed, the High Court held that inasmuch as the verified claims of Respondents 1 and their associates were lying with the Government unpaid, the auction price must be deemed to have been adjusted against the compensation due under these claims even before the auction took place. The rejection of the appellants' contention as to the non maintainability of the suit in the Small Causes Court by the High Court is challenged in this appeal filed under special leave granted by this Court.
4. From the arguments urged before us by counsel, two points emerge for our decisions : (1) whether the title in the property had passed to Respondents 1 at or prior to the date of the suit and the Central Government had ceased to be the owner thereof on that date, and that therefore, Section 4 of the Rent Act had no application and the Small Court, as the Rent Court under that Act, was the only court which could entertain the suit, and (2) whether the forms of the sale certificate in Appendix XXII of the Rules having been substituted with effect from October 29, 1956, i.e., after the date of the auction sale, it could not apply, and therefore, the certificate could not declare respectively Respondents 1 purchaser as from May 1, 1956. The substantial question thus arising in this appeal is an to whether title in the said property could be said as the High Court had held, to have passed to Respondents 1 on before February 19, 1960 when the suit was filed.
5. Before we proceed to consider these questions it is necessary to read certain provisions of the Compensation Act and the Rules made thereunder which lay down the procedure for payment of compensation to displaced persons, the sale of evacuee property and the adjustment of price of the property so sold against compensation payable to the displaced person who has purchased such property and the transfer of title thereof to such purchaser. Under Section 2(e), a 'verified claim' Act, 1950 in respect of which a final order has been passed under that Act or other Acts mentioned therein. Section 4 requires all displaced persons (Claims) Act, 1959 in respect of which a final order has been passed under that Act or other Acts mentioned therein. Section 4 requires all displaced persons having such verified claims to apply for payment of compensation to the Settlement Officer within the time appointed therein with the particulars set out in Sub-section 3 thereof. Under Section 7, the Commissioner has to determine such compensation having regard to the prescribed scales compensation and after deducting there-from public dues and other amounts specified in the section and pass an order determining the net compensation payable to the applicant Section 8 provides the methods of payment of such not com pensation which includes one by sale of any property from the com pensation pool and setting of the purchase money against such compensation. If there is any dispute as to who are entitled to compensation including a dispute us to who are the successors-in-interest of any deceased claimant, such dispute is to be decided by the Settlement Officer or Settlement Commissioner, as the case may be. Chapter III of the Act lays down provisions for acquisition by the Central Government of evacuee properties, the formation of compensation pool in respect of them, their management and disposal. Section 20 inter alia provides that subject to the Rules made under the Act the managing officer may transfer out of the compensation pool any property by auction or otherwise, as may be prescribed. Under Sub-section 3 of Section 20 where the ownership of a property has passed to the buyer before payment of the whole of the purchase price, such price or any part of it remaining unpaid shall be a first charge on such property and may, on a certificate issued by the Chief Settlement Commissioner, be recovered as an arrear of land revenue. Lastly, Section 40 authorises the Central Government to make rules inter alia laying down the procedure for transfer of property out of the compensation pool and the manner of realisation of its sale proceeds the adjustment of the value of such property against compensation amount. Rule 16 of the Rules provides for payment of compensation of scales laid down in Appendix VIII or IX to the said Rules. Chapter XIV of the Rules contains provisions for the procedure for sale of property from the compensation pool. Under Rule 87, any such property can be sold by public auction or by inviting tenders or in any other manner directed by the Chief settlement Commissioner. Where the property is sold by public auction, the procedure to be followed is the one contained in Rule 90. CI. 8 of that Rule provides that the person declared to be the highest bidder shall pay, in case or by cheques or in such other form as may be required by the Settlement Commissioner, immediately on the fall of the manner a ,deposit of 10% of the amount of his bid to the officer conducting the auction and in the default of such deposit the property may be resold. If the highest bidder is a displaced person, having a verified claim, the compensation in respect of which exceeds the amount of deposit he may instead of making a deposit execute an indemnity bond in the prescribed form. The initial deposit would be refunded under Clause 9 of the Rule if the compensation payable to such purchaser exceeds the purchase price. Under Clause 10, the bid in respect of which the deposit has been accepted or in respect of when an indemnity bond has been executed is subject to the approval of the Settlement Commissioner Clause 11 requires an auction purchaser within 15 days after the receipt by him of such approval to produce before the Settlement Commissioner or an officer appointed by him for that purpose a treasury chalan showing deposit by him of the balance of the purchase price. Clause 12. however, permit adjustment of the balance of purchase price against compensation payable to the auction purchaser in respect of any verified claim held by him or any other person willing to associate himself with him. In such a case the auction purchaser and his associate are required, within 7 days after receipt of the approval of the bid, to apply for payment of compensation and the compensation payable to the auction purchaser is to he adjusted first against the balance of the purchase money before compensation payable to his associate is so adjusted. If after scrutiny of such applications it in found that the compensation amount is not sufficient and a further sum is required to make up the purchase price, the Settlement Commissioner has to call upon the purchaser to deposit in cash or to make up such deficit by associating other persons having verified claims. If such deficit is not made up in the manner aforesaid, Clause 14 authorises the forfeiture of the initial deposit made by the purchaser and lays down that 'he shall not have any claim to the property'. Clause 15 of Rule 90 provides that when the purchase price has been realised in full from the auction purchaser the managing officer shall issue to him a sale certificate and shall send its certified copy to the Registrar within whose territorial jurisdiction the property is situate.
6. These provisions show that a sale of a property from the compensation pool taken place in the following stage:
1. Auction; (2) declaration of the highest bidder by the officer conducting the auction; (3) deposit by such bidder of 10% of the purchase price or execution of an indemnity bond in the case of a displaced person; (4) approval of the bid by the Settlement Commissioner; and (5) payment of the balance of price by deposit thereof in a treasury or by adjustment of compensation due under a verified claim or claim of the purchaser and his associate, if any.
As aforesaid, the sale certificate in the form provided in Appendix XXII and issued under Rule 90(15) certifies(a)that a public auction was held under Section 20 of the Act; (b) that the person named therein was the highest bidder; (c) that bid was accepted by the Settlement Commissioner; (d) that the purchase price was paid by him un cash or by adjustment of compensation; and (e) that he has been declared the purchaser of the property auctioned as above. Under the amended form the certificate would state that he has been declared such purchaser with effect from the date set out therein.
7. When is a sale complete and when does the title in the auctioned property pass to the purchaser? If the transfer is complete and the title passes only when the certificate of sale is issued, can such certificate declare the person, in whose name it is sued, the purchaser with effect from a prior date by issuing it in the amended form which was not in vague at the date of the auction sale?
8. In Bombay S. & C. Industries v. Jownson (1) it was held that the declaration that a person was the highest bidder in an auction sale does not amount to a complete sale and transfer of the property to him. The fact that under the Rules such a bid is subject approval of the Settlement Commissioner and the bidder have yet to pay the balance of the purchase price and has no claim to the property if he fails to do that shows that the approval of the bid makes the contract for the sale of the property to the auction purchaser a binding contract but the transfer of the property takes place upon the issue of the certificate. It is, however, clear from the facts of this case was carried out, there were certain conditions laid down in the nonce of sale permitted by Rule 90(3) and condition 7 of those conditions expressly provided, as stated at page 292 of the report, that it was only when the purchase price had been realised in full that the managing officer should transfer ownership of the property and issue the sale certificate. It was held, therefore, that as the appellants there had not stated that the sale certificate was issued the transfer of title could not be held to have been paid, the transfer of title could not be held to have been proved, without which the appellants could not claim protection from eviction under Section 20 of the Compensation Act. The question thus answered in that decision was whether there was transfer but not he question when and at what stage such transfer take place under the Rules. In Biehan Paul v. Mothu Ram (2) the case of Bombay S. & C. Industries (supra) was distinguished and it was pointed out that the question has to the stage at which title in the sanctioned property passes to the auction-purchaser did not come up for decision and that such a question arose directly in that case. After examining the rules Hidavatullah, J. (as he then was) held that the intention of the Rules was that title would pass when the full price was realised and that it would remain in abeyance until the certificate of sale was issued. The facts is that case, were practically similar to the facts in the present case except that the full price there was paid even before the approval of the bid by the Settlement Commissioner, and it was a case where the price was not paid by adjustment of compensation but in cash. Similarly, in Shiv Nath v. Mala Ram it was held, following Bishan Paul v. Matku Ram (Supra) that 'Normally and auction purchaser does not acquire title to property before he pays the purchase money and obtains a document of transfer in his favour but the case of a transfer by the managing officer under the Displaced Persons (Compensation and Rehabilitation) Act, 1954 and the Rules thereunder stand on a different footing' that the title passed to the auction purchaser on the date of confirmation of the sale and did not remain in abeyance till the said certificate was issued, and finally that such certificate, when issued, would relate back to the date when the sale became absolute.
9. Accordingly, we must held that the title passed to respondents 1 on the approval of their bid by the Settlement Commissioner and the adjustment of the price against compensation payable to them under theirs and their associates, verified claim and that the title did not remain in abeyance till the issuance of the sale certificate. Consequently, it cannot be said that the property of the Central Government till July 31, 1963 when the certificate was issued. The certificate itself declares respondents 1 purchasers with effect from May 1, 1956. This declaration was made as the amended form which was then in vogue, requires such a declaration be made.
10. But Mr. Bishan Nardin argued that the form in which the certificate was issued should have been the one which prevailed at the time of the auction sale and not the amended form, that there was no power in the managing officer to make the declaration with retrospective effect, and that the date May 1, 1956, therefore as no relevance. R. 90(15) provides that a certificate is to be issued only when the price has been fully paid. It follows that it would be issued in the form in vogue at the time when it can be issued, i.e. at the time when the price is fully paid or adjusted and not in the form which was in vogue when the auction sale was held. The contention that the form of the certificate must be the one prevailing at the time of the auction sale is clearly incorrect. Prima facie, the date, May 1, 1956, must be said to have been stated because the authorities considered the price having been fully realise on that date. That would seem to be so for the reason that a certificate can be issued only when the price is fully realised. It can not be presumed that at date was mentioned arbitrarily or in breach of Rule 90(15). No such case was ever canvassed at any stage. If therefore, the managing officer considered that date to be the one when the price was fully realised there can be question of Respondents 1 having been declared purchasers retrospectively or that fact having been stated unauthorisedly.
11. In this connection Mr. Keshwani, for Respondents, urged that May 1, 1956 could not be the date when the price can be said to have been fully adjusted against the compensation payable to Respondents 1 and their associates, and that therefore, the managing officer was not entitled to regard that date as the date when the price was fully realised. In support of his contention he relied on Annexure II to the certificate and pointed out that the applications for payment of compensation by the association of Respondents 1 there set out were of the year 1959 and after, and that therefore, the date May 1, 1956 would not in any case be the date when the price was fully adjusted.
12. Annexure II has a column No. 4, of which the heading is 'Bill No.', which we were told by Mr. Keshwani means compensation application form for payment on verified claims. If that were correct and Annexure II were to mean the particulars of adjustment of the claims of Respondents 1 and their associates, it would undoubtedly mean from the dates mentioned against the bills in column 4 that those applications were made between April 20, 1959 and February 2, 1963, the last being the date of the last application. But then Annexure I contains the names of Respondents 1 as the auction purchasers and their 13 associates. These names do not find place in Annexure II, although the compensation payable to Respondents 1 and adjusted against the price was as much as Rs. 7.54 lacs and the rest of the adjusted amounts together with that amount total Rs. 13,04,000. No evidence was led and no explanation was even sought for the exact meaning of Annexure II. In the absence of any such evidence or explanation, it is difficult to say what Annexure II means. It is, therefore, impossible to agree with the contention that the price was not adjusted untill the last application in Annexure II, which is dated February 2, 1963, was adjusted. This difficulty is enhanced by the fact that whereas Annexure I sets out only 14 names, i.e., the names of Respondents 1 and their 13 associates, whose net compensation amounted to the whole of the auction price, Annexure II contains as many as 63 names. But these 63 names do not include the 14 names in Annexure I If Annexure I is the list of association whose net compensation was adjusted against the purchase price, there would obviously be no necessity in Annexure II. If Annexure I is the list of such associates, the question is why does it not contain the name of Respondents 1 whose net compensation amounting of Rs. 7.54 lacs was in fact adjusted against the purchase price. In view of these difficulties, if the appellants wanted to rely on Annexure II as meaning that the price was not finally adjusted till February 2, 1963, they should have led evidence to explain what that Annexure really meant and thus establish that the auction price was not finally adjusted till that date. In the absence of any explanation gives or sought for by the appellants, it would seem that Respondents 1 might have forwarded the applications for compensation of those persons named in Annexure II in addition to their and the applications of the 13 others mentioned in Annexure I, so that in case the compensation payable to them and their associates mentioned in Annexure I was found short the compensation due to those mentioned in Annexure II could be adjusted towards such shortage. Whatever may be the explanation as to Annexure II, the fact is that the managing Officer has in the certificate declared Responsents I as purchasers with effect from May 1, 1956. No allegation was made at any stage that date was mentioned wrongfully or in collusion with Respondents 1 with a view to defeat the claim, if any, of the appellants or respondents 2 in the property. On the other hand, no objection was taken by either of them when the authorities gave symbolical possession to Respondents 1 as early as February 1, 1958 and gave instructions to Respondents 2 as tenants to attorn to and pay rent to Respondents 1 and made Respondents 1 responsible for municipal taxes, repairs and maintenance of the property. It is true that the authorities stated in that memorandum that all this was done on a provisional basis till compensation due to them and their associates was calculated and just adjusted against the balance of the price But as seen from Annexure I to the certificate, compensation due to Respondents 1 and their associates was sufficient to meet the whole of the price. It must have been known to the managing officer and the Commissioner that his was so when applications were made by Respondents 1 for payment of compensation on their verified claims and that the only thing remaining to re done was to calculate it. It is only on this footing namely, that the authorities were satisfied that the compensation payable on these verified claims was enough to meet the balance of the price that the memorandum of February 1,1958, transferring possession and instructing the tenants to attorn to Respondents 1, could have teen passed. The date May 1, 1956 must, therefore, appear to be the date when the verified claim must have been lodged-for payment and the compensation payable thereunder thought sufficient to meet the balance o price when calculated. That date, were treated as purchasers. Consequently, the question of the certificate having inappropriately declared Respondents 1 as purchasers from May 1, 1956 cannot justifiably be raised by the appellants. Further, if the managing officer retreated that date on the facts before him as one on which the full price could be said to have been adjusted and he did so without any collusion with Respondents 1 or any other disputable intention, the matter of adjustment of price being only between him and Respondents 1, we do not seen how the appellants or Respondents 2 can possibly raise the contention that it was not so or that the certificate was for that reason invalid or inoperative. As to the objection to the amended form having been used, the certificate, as aforesaid, had to be in that prescribed form and since that amended form was in vogue at the time of its issuance it could be that form and not the one which was repealed which could be used.
13. There is thus no ground on which it would be possible to say that the property remained vested in the Central Government when the suit was filed or that therefore Section 4 of the Rent Act applied to it or that the small Causes Court had no jurisdiction to entertain and try the suit. As to the protection under Section 29 of the Compensation Act, since one of the grounds for the prayer of eviction was sub-letting, that section could have no bearing of the the question of the suit being triable by the Rent Court.
In the result appeal fails and is dismissed with costs.