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Dinendro Mullick Vs. Union of India (Uoi) and anr. - Court Judgment

LegalCrystal Citation
CourtKolkata High Court
Decided On
Case NumberA.F.O.D. No. 4 of 1951
Reported inAIR1952Cal915
ActsDefence of India Act, 1939 - Section 19(1); ;Government of India Act - Section 175; ;Transfer of Property Act, 1882 - Section 105
AppellantDinendro Mullick
RespondentUnion of India (Uoi) and anr.
Appellant AdvocateS.M. Bose, Adv. General of West Bengal and ; A.K. Bhattacharjea, Adv.
Respondent AdvocateH.N. Sanyal, ; A.N. Roy and ; S.K. Mukherjee, Advs.
Cases ReferredVenables v. Scottish Department of Agriculture
- .....of the bank appoints the receivers, his agents and attorneys with joint and several powers from time to time in the name of the mortgagor or otherwise to demand and receive the rents and profits of the said mortgaged properties from the present and future tenants and occupiers thereof and from all and every person or persons who are or at any time shall be liable to pay the same respectively and when the same shall from time to time become due and payable and to sue in their names or any of them as such receivers or receiver and if necessary in the name of the mortgagor and enforce all lawful remedies and perform and do all necessary and proper acts and things for recovering the said rents and profits or any part thereof as fully and effectually in all respects as the mortgagor could.....

Banerjee, J.

1. The appellant is the owner of premises No. 8, Esplanade Row East, in Calcutta, situate within the Ordinary Original Civil Jurisdiction of this Court. In July 1927, he created a mortgage in favour of the Imperial Bank of India, by deposit of title deeds relating to the property for money lent.

2. By a registered agreement dated 7-2-1938, made between the mortgagor and the Bank, two Receivers were appointed to take possession of the premises and realise the rents and profits thereof. By another agreement dated 22-12-1938, one of the Receivers was discharged and another appointed in his place, with like powers.

3. In 1939, the Defence of India Act was passed and rules made thereunder. Rule 75A of the Defence of India Rules empowered the Government of India to requisition any property, movable or immovable, if that was needed for the maintenance of public order or the efficient prosecution of the war. But if the Government requisitioned a property, it was liable to pay compensation, the amount of compensation being determined under the provisions of Section 19, Defence of India Act. That section, so far as relevant, is as follows :

'(1) Where by or under any rule made under this Act any action is taken of the nature described in sub-s. (2) of Section 299, Government of India Act, 1935, there shall be paid compensation, the amount of which shall be determined in the manner, and in accordance with the principles, hereinafter set out, that is to say-

(a) Where the amount of compensation can be fixed by Agreement, it shall be paid in accordance with such agreement.

(b) Where no such agreement can be reached, the Central Government shall appoint as arbitrator a person qualified under sub-s. (3) of Section 220 of the above mentioned Act for appointment as a Judge of a High Court.* * * * *

4. Section 299 provides for compulsory acquisition of land etc. Sub-section 2 says that neither the Federal nor a Provincial legislature shall have power to make any law authorising the compulsory acquisition for public purposes of any land .. . .... unless the law provides for the payment of compensation for the property acquired. . .

5. A very considerable part of the property in question was requisitioned in February 1941 by the Government under the Defence of India Rules and it became liable to pay compensation for it. Certain correspondence passed between the Government and the Receivers, and ultimately the Receivers agreed to Rs. 6000 as compensation payable by the Government to the owner. The owner refused to accept the figure and there was a dispute.

6. The agreement regarding the compensation was made at a time when the Government of India Act, 1935, and not the Constitution was in force. The cause of action arose before the Constitution. Therefore the whole matter must be governed by the Government of India Act.

7. The appellant's ease is that the agreement made by the Receivers is not binding on him. He urges two grounds for it : (l) that the agreement was not made in terms of Section 175, Government of India Act, and (2) that the Receivers had no authority under the documents appointing them, to make an agreement relating to compensation, which binds the owner.

8. The relevant portion of Section 175 is as. follows:

'Section 175(3) Subject to the provisions of this Act with respect to the Federal Bailway Authority, all contracts made in the exercise of the executive authority of the Federation or of a Province shall he expressed to be made by the Governor-General, or by the Governor of the Province, as the case may be, and all such contracts and all assurances of property made in the exercise of that authority shall be executed on behalf of the Governor-General or Governor by such persons and in such manner as he may direct or authorise.'

9. There is no dispute that the agreement regarding compensation was not made by the Receivers in the manner provided in Section 175.

10. The material clause of the agreement dated 7-2-1938, appointing the Receivers is as follows :

'.....the mortgagor with the consent of the Bank appoints the Receivers, his agents and attorneys with joint and several powers from time to time in the name of the mortgagor or otherwise to demand and receive the rents and profits of the said mortgaged properties from the present and future tenants and occupiers thereof and from all and every person or persons who are or at any time shall be liable to pay the same respectively and when the same shall from time to time become due and payable and to sue in their names or any of them as such Receivers or Receiver and if necessary in the name of the mortgagor and enforce all lawful remedies and perform and do all necessary and proper acts and things for recovering the said rents and profits or any part thereof as fully and effectually in all respects as the mortgagor could do.

2. The mortgegor hereby directs the tenants and occupiers of the said mortgaged premises and all persons who shall hereafter from time to time during the continuance of the said mortgage become liable to pay the rents and profits of the said mortgaged properties or any part thereof respectively to pay the same to the Receivers or to any substituted Receivers for the time being appointed as hereinafter mentioned and hereby declares that the receipts of the Receivers or any of them or of any of such substituted Receivers shall be a full and effectual discharge to such tenants and occupiers or other persons so paying the same for the sum in such receipts respectively acknowledged to have been paid.

3. The mortgagor hereby authorises the Receivers to make with the consent of the Bank such arrangements with and allowances to the tenants and occupiers from time to time of the said, mortgaged properties or any of them as they may think fit, and generally to do and take such acts, things and proceedings for the determination of any tenancy as the recovery of the possession of any of the said mortgaged properties and to create such new tenants of the said mortgaged properties or any part thereof from time to time as they shall think fit.'

11. The other agreement also contains a like clause. There is no substantial difference. The rest of the documents need not be road.

12. There can be no doubt that the purpose of the appointment of the Receivers was that the rents, outgoings etc. of the mortgaged properties should be regularly realised, and paid to the mortgagee in liquidation of its debt.

13. There was dispute between the appellant and. the Government as to the amount of compensation payable. The appellant contended that the agreement made by the Receivers being not binding on him, the compensation should be determined by arbitration as provided in Section 19. The Government's contention was that the agreement was binding and there was no necessity of any arbitration.

14. The appellant received the amount agreed to by the Receivers under protest, and filed the suit out of which this appeal arises, for, inter alia, a mandatory injunction directing the do fondant to refer the dispute regarding compensation to arbitration under Section 19. The Government filed a written statement. In the written statement the defendant pleaded, inter alia, that the compensation had boon fixed by agreement with the Receiver acting with the consent and concurrence of the Imperial Bank of India : that the plaintiff by receiving payment was estopped from claiming a higher amount for the occupation of the premises.

15. Several issues were framed by the learned trial Judge. For the purpose of this appeal, it will suffico to state two of thorn on which the appeal may be disposed of. And indeed these were the only points argued before us. They arc as follows :

'(1) Is the agreement between the Government and the Receivers fixing the amount of compensation valid in view of Section 175, Government of India Act ?

(2) Is the plaintiff bound by the act of the Receivers in accepting the compensation ?'

16. The suit was heard by Sarkar J. He answered both the issues in favour (sic) of the plaintiff and in view of his finding observed that as there was a sufficient agreement as to the amount of the compensation, no cause has been made for the appointment of an arbitrator under Section 19(l), Defence of India Act. He dismissed the suit with, costs. From this decision the plaintiff has preferred this appeal. The learned Judge had hold, as I have already said, that there was a binding agreement between the owner and the Government as contemplated in Section 19, Defence of India Act. The material portion of his judgment is as follows :

'The agreement was between the Receivers and the Government and is in all respects a good agreement with the Government except that, that it is not in the form prescribed by Section 175 and is, therefore, unenforceable. But how docs that affect the question Section 19, Defence of India Act, does not talk of an enforceable agreement hut only of an agreement. Now an agreement may be enforceable as also unenforceable as the Contract Act would show. Section 175, Government of India Act, naturally enough talks of contracts and, therefore, of enforceable agreements only and is hence different from Section 19, Defence of India Act, which refers simply to agreements. Can there be any reason for holding that Section 19 contemplates only an enforceable agreement 1 am unable to find any.'

17. It is rather difficult to follow the reasoning of the learned Judge. When a person to whom a proposal is made signifies his assent thereto, the proposal is said to be accepted. The proposal, when accepted, becomes a promise. Every promise and every set of promises, forming the consideration for each other, is an agreement. An agreement not enforceable by law is said to be void. An agreement enforceable by law is a contract.

18. The learned Judge said that the agreement is a valid agreement. In other words it is an agreement enforceable by law. That is to say a, contract. If that is so, how can the contract be binding unless it is made in conformity with the provisions of Section 175 ?

19. According to the learned Judge the agreement is binding and, therefore, no arbitration is necessary. Suppose the Government breaks the agreement, how is the owner to enforce it The moment ho goes to Court he will be met with the plea that it is not enforceable by law as there was no compliance with the provisions of Section 175. At the same time, there being a binding agreement under the Defence of India Act, no arbitration impossible. It loads to an intolerable position.

20. Mr. H. N. Sanyal, counsel on behalf of the respondent saw the difficulty and sought to meet it in this way. He said that such an agreement might not be enforceable; yet the appellant could have a remedy, namely, under Section 65, Contract Act, which says that when an agreement is discovered to be void, .... any person who has received any advantage under such agreement .... is bound to restore it, or to make compensation for it, to the person from whom he received it. He said that if the compensation was not paid, the aggrieved party might file a suit under that section and got the appropriate relief.

21. We are unable to hold that such, a state of things was contemplated, by the Defence of India Act or is logical. We cannot understand how vis-a-vis the Government agreement can be a contract and at the same time not be a 'contract' within the meaning of Section 175.

22. Section 173, Government of India Act, requires that such a contract should be made in the manner specified in that section. In this case the contract admittedly was not made in conformity with the section. Therefore there was no contract or valid agreement, the section being mandatory and not permitting any violation of its provisions. We are therefore unable to agree with the learned trial Judge on this point.

23. Assuming however that there was a contract, the question still remains as to whether the Receivers had the requisite authority to make such a contract on behalf of the owner. This depends on the construction of the agreements, the relevant portion of which I have quoted above.

24. The agreements authorised the Receivers to demand, and receive the rents and profits of the mortgaged properties from the 'present and future tenants and occupiers' thereof, and from all and every person or persons who were/or at any time should be liable to pay the same, to sue for such rents and profits and enforce all lawful remedies for the realisation of rents and profits.

25. The agreements referred to 'future tenants and occupiers', which clearly show that the Receivers might induct tenants, create tenancies. Therefore, the Receivers had the authority to enter into contracts of tenancy. Likewise, they could allow a portion of the promises to be occupied by 'future occupiers'.

26. The difference between a tenant and an occupier is well known. There must be contract of tenancy before a person can be a tenant. But if there is no contract, and the possession of a person is permissive, then it is a case of an occupier. Rent is realisable from'the tenant. Profit on the other hand is payable by a person for the use of another's property with his consent, when the rent or the period is not fixed. Occupier is not a tenant. When the rent has been agreed, the tenant pays the agreed rent. Where the rent has not been fixed, the occupier must pay such sum as the occupation is wrorth.

27. The Receivers had been given power to fix the routs and profits. 'Profits' moans the advantages which land yields in the share of rent, issues, or other emoluments: 'Profits' therefore includes rent, and is much more than cent.

28. But wore the Receivers given powers to agree to a compensation? That depends on whether compensation comes within the meaning of 'rents and profits'. If it does, then the Receivers could on behalf of the owner make the contract for compensation with the Government. But if it does not, then they could not. And what the Receivers had done could not bind the owner the appellant.

29. It seems to us that 'compensation' is more comprehensive than 'rents' and profits'. the loss to an owner, whose lands are required or have been taken, omitting all questions of injury to adjoining lands, includes not only the actual value of such lands, but all damage directly consequent on the taking thereof under statutory powers.

30. In Ricket v. Metropolitan Rly., (1865) 34 L. J. Q. B. 257, there is a dictum of Erle C. J. which expresses this principle:

'As to the argument, that compensation is in practice allowed for the profits of trade where the land is taken the distinction is obvious. The company, claiming to take, lands by compulsory powers, expel the owner from his property and are bound to compensate him for all the loss incurred by the expulsion, and the principle of compensation then is the same as in trespass for expulsion, and so it has been determined in Jubb v. Hull Dock Co. (1846-9 Q. B. 443).'

31. If the owner is in occupation of premises, ho is entitled to compensation for damages incurred through the necessity of removal, since these are losses consequent on the taking of his property under statutory powers. Such damages include the cost of the removal by the owner of his furniture and goods, and the consequent depreciation in the value of furniture which has been specially fitted, but which is not a fixture attached to the free-hold.

32. If the claimant is a trader, they will also include any diminution in the value of his stock consequent on its removal or, in the alternative, on a forced sale, if such is shown to be the only practicable course. Whore the claimant incurs a liability to an increased rental or other reasonable exponses in taking equally convenient new premises for the purpose of carrying on his business, such increased rental and other expenses should be taken into account in the assessment of compensation, and this principle applies though the business is not being carried on at a profit. In R. v. Burrow, (1884), the Times, January 24, Bowen L. J. said:

'The company forced the claimants to remove, and assuming that the extra expense was the natural and reasonable consequence of the removal, why should it not be part of the damages given?'

33. The principles just enunciated were quoted with approval by Lord Alnoss in Venables v. Scottish Department of Agriculture, (1932) S. C. 573. (Cripps on Compulsory Acquisition of Land-. 9th edition p. 504-5).

34. Many other instances can be given to show what compensation means and includes. The principles on which compensation is allowed have boon laid down in the Land Acquisition Act of 1894. I have given those examples to show that compensation is of wider implication than rent and profit.

35. Wo cannot accept Mr. Sanyal's argument that compensation is included within the term 'rent and/or profit'. It is something more than rent or profit, as I have endeavoured, to explain before.

36. If, therefore, it is more than rents and profits, can the Receivers settle the compensation with the Government? Certainly not. They have been given the power to settle the rents. They have been given power to settle the profits. But they have not been given the wider power viz. to settle compensation.

37. Nor do we see that there is any injustice in this case to the Government. The order for requisition was served on the Receivers. The Government knew that it was negotiating with the Receivers. Knowing that, it was incumbent on the Government to enquire whether the Receivers had power to settle or agree to the compensation. If the Government had not made the enquiry which it was bound to do, the Government has itself to blame. But certainly such an agreement with the Receivers,-who wore agents and had not the requisite power,-cannot bind the owner.

38. The construction which we have given to the agreements clearly shows that the Receivers had no such power. Therefore we are bound to hold that the compensation agreed to by the Receivers is not binding on the owner.

39. An attempt was made before us to refer to certain correspondence to show the conduct of the parties. But I do not see how that is relevant or helps us in construing the agreements, which must be construed on their plain words. The correspondence that passed between the Government and the Receivers cannot bind the owner. Nothing has been brought to our notice to show that the owner at any time consented to or acquiesced in what the Receivers did in this matter.

40. On this view we are bound to answer the two issues we have stated above in the negative.

41. On these considerations, we allow the appeal and make a mandatory injunction directing the defendant to appoint an arbitrator in terms of Section 19, Defence of India Act for the determination of the compensation payable by the Government to the plaintiff, the appellant before us, unless in the meantimo they agree to a compensation. The arbitrator must be appointed within six weeks from the date of the filing of the order we make.

42. In conclusion we may say that there cannot be any question of estoppel. The plaintiff received the money under protest. Then again there cannot be an estoppel against it statute. The contract is void as it did not comply with provisions of Section 175.

43. The appellant is entitled to costs here and below, including all reserved costs (if any). Certified for two counsel.

Harries, C.J.

44. I agree.

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