PETITIONER:
CUSTODIAN OF EVACUEE PROPERTY
Vs.
RESPONDENT:
SMT. RABIA BAI
DATE OF JUDGMENT19/08/1976
BENCH:
SARKARIA, RANJIT SINGH
CHANDRACHUD, Y.V.
SHINGAL, P.N.
CITATION:
1976 AIR 2557 1977 SCR (1) 255
1976 SCC (4) 270
ACT
Administration of Evacuee Property Act, 1950---S.
40(4)(a) and rule 22-- Scope of--S. 10(2)(n) "out of the
funds in his possession" meaning of.
Rehabilitation Act, 1954--S. 14(1) (b)--"Such cash bal-
ances"---Meaning of
Words and phrases--"out of the funds in his possession"
and ",such cash, balances"--Meaning of.
HEADNOTE
Section 40(1) of Administration of Evacuee Property
Act. 1950 provides that no transfer of any property belong-
ing to an evacuee, which may subsequently be declared to be
evacuee property, shall be effective unless the transfer was
confirmed by the Custodian. Sub-section (4)(a) provides that
where an application had been made to the Custodian for
confirmation, he may reject the application if he is of
opinion that the transaction had not been entered into in
good faith or for valuable consideration.
In 1949 the respondent purchased house property from an
evacuee and paid the consideration. She made an application
under s. 40 to the Assistant Custodian for confirmation of
the sale. The application was rejected by him on the ground
of want of good faith on the part of the vendor in entering
into the transaction. Her appeal to the Custodian and
revision to the Custodian General were dismissed. In the
meantime, under r. 22, of the Administration of Evacuee
Property (Central Rules) 1950, the respondent registered her
claim for the return of the sale consideration to her.
Thereafter r. 22 was deleted. She was informed by the
Deputy Custodian that no third party claim against immovable
property was payable since r. 22 was deleted. In 1966 the
Government transferred to Compensation Pool the ’surplus
balance’ of the evacuee pool lying in the personal deposit
account of the Custodian. The respondent later made a
petition to the Custodian, which was rejected mainly on the
ground that the sale proceeds had been credited to the
compensation pool, that there was no amount in the bands of
the Custodian from which her claim could be paid and’ that
the words "out of funds in his possession" occurring in s.
10(2)(n) of the Act showed that the clause would be attract-
ed only where funds were lying with the Custodian.
The High Court held that payment made by the respondent
to the evacuee in pursuance of the infructuous sale, was not
vitiated in any manner as the sale was refused confirmation,
not because of want of bona fides in the transferee, but on
account of want of bona fides in the transferor, and as such
the Custodian was under a statutory obligation to refund the
sale price paid by her and that the Custodian was competent
to transfer only surplus fund left with him, in excess of
what was required by him for meeting the outstanding claims
registered under r. 22.
In appeal to this Court it was contended that (i) the
order of the Assistant custodian registering the claim was a
nullity because since the sale was not confirmed under s.
40(4)(a) it could not be deemed to be a bona fide transac-
tion for the purposes of registration of claim under r. 22;
(i;) registration . was an administrative act required to be
done for statistical purposes; and (iii) as a result of the
deletion of r. 22 the Custodian was no longer under an
obligation to meet the claim and no part of the compensa-
tion pool was available to satisfy the claims of third
parties who were neither displaced persons nor evacuees.
Dismissing the appeal,
HELD: (1 ) The High Court was right in directing the
Custodian is refund the sale price to the respondent in
payment of her claim and in further directing
256
the Central Government to place at the disposal of the
Custodian the said sum for the purpose of refund. [268 A-B]
(1)(a) Under r. 22, before a claim for refund. of money
paid as consideration for the transfer by an evacuee of any
property is registered by the Custodian, he should be satis-
fied: (i) that such transfer has not been confirmed under s.
40 of the Act, (ii) that such transfer is a bona fide trans-
action; (iii) that the amount for which the claim is being
registered is proved to have been paid as consideration for
the transfer of the property. [262 G]
In the instant case, the validity of the, Assistant
Custodian’s order registering the respondent’s claim is
unassailable because all the three conditions aforesaid to
give authenticity to the registration of her claim were
satisfied. The sale was not confirmed by the Custodian but
he found that the whole of the price had actually been paid
by the claimant. [263 A]
(b) In order to qualify for confirmation under s.
40(4)(a) on the ground of good faith, a sale has to pass a
much more stringent test than the one required to hold it "a
bona fide transaction" for the purposes of r. 22. While
under s. 40(4)(a), lack of good faith either in the trans-
feror or the transferee would be sufficient to disqualify
the transfer for confirmation, the position under r. 22 is
different. Under r. 22 it is the character of the conduct
of the claimant which primarily determines the character of
the transaction. Therefore, if the vendee-claimant in
purchasing the property acted in good faith, for the pur-
poses of r. 22, the sale would be a bona fide transaction,
notwithstanding the fact that there was lack of good faith
on the part of the vendor. Again, the test of the vendee’s.
bona fides under this Rule would be, whether he had pur-
chased the property for adequate valuable consideration.
[264 A-B]
Rabia Bai v. Custodian General of Evacuee Property
[1961] 3, SCR 448 followed.
In the instant case, the Assistant Custodian found that
this test was amply satisfied. This finding of fact was not
challenged before the High Court. It is therefore too late
in the day to urge that the respondent’s claim was not duly
registered in accordance with r. 22. [264 C]
(2) Registration of claim of a vendee under r. 22
amounts to a, preliminary adjudication as to the genuineness
of the claim and its eligibility for discharge under the
relevant substantive provisions of the Act. While mere
registration of a claim under this rule does not ipso facto
confer a right to payment, it is not correct to say that the
only purpose served by such, registration is statistical and
nothing else. Before registering a claim the Custodian is
required to determine objectively that the transaction is
bona fide the claimant having entered into it in good faith
on payment of adequate valuable consideration. The determi-
nation of this preliminary fact, which is an essential pre-
requisite of registration, is a judicial function enjoined
on the Custodian by the statutory provision. [264 E-F]
(3)(a) The words "out of the funds in his possession"
in s. 10(2)(n) have reference only to the funds relatable to
the particular evacuee against whom or against whose proper-
ty, the claim for refund was made by a claimant. The use of
the expression ’in the opinion of the Custodian’ in s.
10(2)(m) was not intended to invest the Custodian with
arbitrary authority. In forming his opinion, he was bound
to act judicially. [266 A-B]
Raja Bhanupratap Singh v. Custodian [1966] 1, SCR 304 fol-
lowed.
In the instant case, the Custodian had formed an opinion
about the respondents claim being genuine. In the exercise
of that power the only thing that remained to be done by the
Custodian was to ascertain whether there were adequate
’funds in his possession’ to meet the respondent’s claim.
The property was’ sold by the Government for a consideration
which had been far in excess of her claim, and the sale
proceeds were credited to the compensation pool. It could
not be said that at the material time the Custodian was not
in . possession of sufficient funds to meet the respondent’s
claim. [266 B]
(b) The expression ’such cash balances’ used in s.
14(1)(b) of the Rehabilitation Act cannot be interpreted to
cover total cash deposits with the Custodian.
257
The expression has to be construed as the excess of credits
over debits. The word ’balances’ had been advisedly used in
preference to ’deposits’ because the intention was that only
that much amount in deposit with the Custodian should be
transferred to the Compensation Pool which would be in
excess of the amounts required for meeting the due claims
against the evacuees or their properties. What can be di-
rected to be transferred to the Compensation pool by the
Government under s. 14(1)(b) is the ’cash balances’ and not
the total cash deposits with the Custodian [267 A-B]
(c) The Custodian bad neither the power nor the authori-
ty to transfer the entirety of funds to the Compensation
Pool. The word ’surplus,’ used in the Government order puts
the matter beyond doubt that only those balances which were
surplus or in excess over what was required to meet the
liabilities of the evacuees, were to be transferred to the
Compensation Pool. It was the duty of the Custodian, there-
fore. to keep back with him so much of the funds in his
deposit as were necessary to. meet the verified claims
against evacuees or their properties. Such a course would
have been perfectly legal and also in conformity with the
final directions issued for transfer of ’surplus balances’
by the Central Government. Only the ’cash balances’ which
were validly transferred could legally form part of the
Compensation Pool. [267 E-G]
JUDGMENT
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 882 of 1975.
(Appeal by Special Leave from the Judgment and Order
dated 13-12-1974 of the Madras High Court in Writ Appeal No.
101/73).
Gobind Das, and Girish Chandra, for the Appellant.
V.M. Tarkunde, K. Rajendra Chaudhury, Mrs. Veena Khan-
na, S.L. Setia & Miss Manek Tarkunde, for the Respondent.
The Judgment of the Court was delivered by
SARKARIA, J. This appeal by special leave. directed
against a judgment dated December 13, [974, of the High
Court of Madras, arises out of these facts:
Respondent Rabia Bai, is a citizen of India. She has her
residence at Grange Yercund. Salem District. She came to
know in 1949 that premises No. 20, Godown Street, G.T.
Madras (known as Gani Market) was for sale. Consequent-
ly, by a sale-deed, dated April 29, 1949, she purchased this
property from one Abdul Gani Jan Mohd. who had left for
Pakistan in 1947, soon after the partition of the Indian
sub-continent. Abdul Gani came to Madras in April 1949 and
executed the sale-deed in her favour for a consideration
of Rs. 2,40,000/- out of which Rs. 1,50,000/- was paid
immediately in the form of bank drafts. Thereafter, the
sale-deed was duly engrossed and sent to. Karachi for execu-
tion by the vendor. who duly executed it and sent it back.
It was presented at the Collector’s Office, Madras and was
duly stamped on June 27, 1949. After obtaining the clear-
ance certificate from the Income-tax Department. the Regis-
trar registered it on August 11, 1949. Rs. 30.000/-, the
balance of the consideration was paid before the Registering
Officer to Mr. M. H, Gani who held a power of attorney from
the vendor.
On June 13, 1949. Ordinance XII of 1949 was promulgated.
The Ordinance was extended to. Madras on August 23, Ordi-
nance XII of 1940 was repealed by Ordinance 27 of 1949,
which in turn was replaced by the Administration of the
Evacuee Property Act, 1950
258
(Central Act 31 of 1950) (hereinafter referred to as the
Act). The Act had retrospective operation with effect from
August 14, 1947. Section 40 of the Act [corresponding to s.
25(2) of Ord. 121, provided that no transfer made after the
14th day of August, 1947 but before the 7th day of May, 1954
by any person of any property belonging to trim which may
subsequently be declared to be evacuee property, would be
valid unless the transfer was confirmed by the Custodian.
General of Evacuee Property.
On December 19, 1949, the vendee Rabia Bai, applied for
confirmation of the sale transaction in her favour. The
application was resisted by some tenants on several grounds.
On January 11, 1951, the Assistant Custodian Evacuee Proper-
ty, Madras City, declared the property in question as
evacuee property under s. 7( 1 ) of the Act.
The Assistant Custodian considered Rabia Bai’s applica-
tion for confirmation of the sale in the light of the decla-
ration already made by him, that the vendor being an evacu-
ee, the property was evacuee property. He referred to the
relevant features of the transaction and came to the conclu-
sion that he would not be justified in confirming it. In
reaching this conclusion, he relied on the provisions of s.
40(4)(c) of the Act. In his opinion, the feverish hurry
disclosed that in making the sale, the vendor was not moti-
vated by good faith. Accordingly on July 31, 1951, he made
an order refusing to confirm the transaction. Rabia Bai went
in appeal against the order of the Assistant Custodian to
the Custodian. The Custodian found that the sale transac-
tion was supported by valuable consideration. Even so, he
proceeded to examine the question as to whether it could be
said to have been entered into in good faith. Relying On a
letter written by the vendor to one Mohideen on July 4, 1949
wherein he had stated that "if the matter is delayed
there would be many sort of new difficulties as you know the
government are passing new rules every day", the Custodian
took the view that the vendor’s intention was to dispose of
and convert his properties in India into cash and to take
them away to Pakistan as quickly as possible so as to evade
the restrictions of the evacuee law which he apprehended
could be extended to Madras any day. On this reasoning, the
Custodian came to the conclusion that the transaction had
been entered into otherwise than in good faith, and so it
could not be confirmed under s. 40(4)(a) of the Act. This
appellate order was pronounced by the Custodian on February
4, 1953.
Rabia Bai then moved the Custodian-General in revision,
who dismissed the same. Against that order Of the Custodi-
an-General, Rabia Bai came in appeal by special leave to
this Court.
While that appeal was pending, Rabia Bai on August 27,
1954, made an application under Rule 22 of the Administra-
tion of Evacuee Property (Central Rules) 1950 (for short the
Rules) for registration of her claim for the return of the
sale consideration of Rs. 2,40,000/The claim was registered
by the Assistant Custodian On October 1, 1954.
Thereafter, the Act was amended by Act 91 of 1956. By a
notification, dated February 20, 1957, the aforesaid Rule 22
was deleted.
259
Rabia Bai’s aforesaid appeal (Civil Appeal No. 22 of
1956) was dismissed by this Court on January 12, 1961. That
judgment is reported as Rabia Bai v. Custodian General of
Evacuee Property(1).
Rabia Bai repeatedly petitioned for the return of the
sale consideration of Rs. 2,40,000/- to her but without
success. She petitioned to the Prime Minister on May 16,
1966. Thereupon, she was informed by a letter, dated August
1, 1966, by the Deputy Custodian, Evacuee Property, Bombay,
that no third party claim against the immoveable property is
payable by his office as Rule 22 of the Administration of
Evacuee Property (Central) Rules has since been deleted as a
result of the amendment of s. 10(m) by Act 91 of 1956.
By an order, dated August 18, 1966, Government of India
directed that all the ’surplus balance’ of the evacuee pool
lying in the personal deposit account of the Custodian be
transferred to the Dy. Accountant General, New Delhi to form
part of the compensation pool under s. 14(1) (b) of the
Displaced Persons Compensation and Rehabilitation Act of
1954.
In 1968, Rabia Bai filed a writ petition in the High
Court for return of the sale consideration. The writ peti-
tion was withdrawn on July 11, 1968. Thereafter on August
3, 1968, she made a petition under s. 10(2) (m) and (n) of
the Act read with Rule 22 before the Custodian. This peti-
tion was rejected by the Custodian under an order, dated
November 2, 1968, mainly on the ground that the properties
of the evacuee were acquired by the Central Government under
s. 12 of the Displaced Persons (C. & R.) Act, 1954 and the
sale proceeds of the said properties have been credited to
the compensation pool. There is at present, no amount in
the hands of the Custodian from which the petitioner’s
claims would be paid".
In his view the words "out of funds in his possession"
in s. 10(2) (n) of the Act show that it would be attracted
only where funds are lying with the Custodian.
To impugn this order, dated November 2, 1968, of the
Custodian, Rabia Bai filed writ petition No. 1259 of 1971 in
the High Court. The petition came up for hearing before a
learned single Judge (Ramaprasada Rao J.) who took the
view that having regard to the scheme of the Rehabilita-
tion Act and the policy reflected therein and the transfer
of the cash balances with the Custodian to the compensation
pool, it was not open tO the writ-petitioner to assail
transfer funds or any orders passed in that behalf and
therefore she was not entitled to a writ of certiorari
sought for, much less a writ of mandamus. On this ground, he
dismissed the writ petition. With regard to the
petitioner’s claim for return of the sale price, it was held
that she still continues to be entitled to get the money
from and out of the funds that may subsequently come into
the hands of the Custodian. It was added that "the
petitioner as at present, should only be satisfied with her
entitlement to claim and await the collection of funds or
accumulation of funds with the Custodian in future".
(1) [1961] 3 S.C.R. 448.
260
Aggrieved by that order, Rabia Bai appealed under C1. 15
of the Letters Patent to a Bench of the High Court. The
Bench held that since it was not denied or refuted by the
respondents (Custodian, Evacuee Property, Bombay, Regional
Settlement Commissioner and Union of India) that payment of
Rs. 2,40,000/- was made by Rabia Bai to the evacuee in
pursuance of the infructuous sale, "the payment is also not
vitiated in any manner as the sale was refused confirmation,
not because of want of bona fides in the transferee, but on
account of want of bona fides in the transferor. The re-
spondents are, therefore under a statutory obligation to
refund to the appellant the sale price paid by her".
With regard to the argument that she could not be paid
because the fund with the Custodian had been transferred in
compliance with the orders of the Government of India to the
compensation pool formed trader s. 14(1)(b) of the Rehabili-
tation Act, it was held that the Custodian was competent
to transfer only surplus fund left with him, in excess of
what was required by him for meeting the outstanding
claims registered under r. 22. The Appellate Bench spelled
out this conclusion from a construction of the words "such
cash balances" occurring in s. 14(1)(b), and the expression
"surplus fund" used in the Central Government order asking
the Custodian to transfer funds to the account of the Deputy
Accountant General as part of the compensation pool. In
this view, the .Bench allowed the appeal and by a writ of
certiorari quashed the impugned orders and notifications. It
was further directed that a writ of mandamus shall issue
requiring the 1st respondent (Resp. Custodian) to refund the
sum of Rs. 2,40,000/to Rabia Bai. The third Respondent,
Union of India was further directed to place at the dis-
posal of the Custodian the said sum for the purpose of the
refund. It was specified that the direction regarding the
refund and payment shall be complied with within three
months.
Hence this appeal by the Custodian and the other re-
spondents before the High Court.
Let us now have a look at the relevant statutory provi-
sions. The material part of s. 10, as it stood before the
amendment effected by Act 91 of 1956, read as follows:
"10(1) Subject to the provisions of any rules
that may be made in this behalf, the Custodian may
take such measures as he considers necessary or
expedient for the purposes of securing, administer-
ing, preserving and managing any evacuee property
and generally for the purpose of enabling him
satisfactorily to discharge any of the duties
imposed on him by or under this Act and may, for
any such purpose as aforesaid, do all acts and
incur all expenses necessary or incidental thereto.
(2) Without prejudice to the generality of the
provision contained in sub-section (1), the Custo-
dian may, for any of the purposes aforesaid,
(a) to (1) ......
261
(m) incur any expenditure, including the payment
of taxes, duties, cesses, and rates to Government
or to any local authority (or of any amount due to
an employee of the evacuee or of any debt by the
evacuee to any person).
(n) pay to the evacuee or to any member of his
family or to any other person as in the opinion of
the Custodian is entitled thereto, any sums of
money out of the funds in his possession..."
That part of clause (m), winch is shown within
the brackets was deleted by Act 91 of 1956 with
effect from October 22, 1956.
Section 40 reads as under:
"40. (1) No transfer made after the 14th of
August, 1947, but before the 7th day of May, 1954,
by or on behalf of any person in any manner whatso-
ever of any property belonging to him shall be
effective so as to confer any rights or remedies in
respect of the transfer on the parties thereto or
any person claiming under them or either of them,
if, at any time after the transfer, the transferor
becomes an evacuee within the meaning of section 2
or the property of the transferor is declared or
notified to be evacuee property within the meaning
of this Act, unless the transfer is confirmed by
the Custodian in accordance with the provisions of
this Act.
(2) * * *
(3) An application under sub-section (1) for
the confirmation of any transfer may be made by the
transferor or the transferee or any person claiming
under or lawfully authorised by either of them to
the Custodian within two months from the date of
the transfer or within two months from the date of
the declaration or notification referred to in
sub-section (1) whichever is later, and the provi-
sions of section 5 of the Indian Limitation Act,
1908 shall apply to any such application.
(4) Where an application under sub-section
(1) has been made to the Custodian for confirma-
tion, he shall hold an inquiry in respect thereof
in the prescribed manner and may reject the appli-
cation if he is of opinion that--
(a) the transaction has not been entered into in
good faith or for valuable consideration; or
(b) the transaction is prohibited under any law
for the time being in force; or
(c) the transaction ought not to be confirmed
for any other reason.
262
In this connection, Rule 22 may also be seen.
The material part of this rule ran as under:
"Claim by third parties :--
(1 ) Any person claiming the right to re-
ceive any payment from any evacuee or from the
property of such evacuee, whether in repayment of
any loan advanced or otherwise may present a peti-
tion to the Custodian for registration of his
claim ......
Explanation.--An application under this
sub-rule shall be in respect of a claim for refund
of money paid as consideration for the transfer by
an evacuee of any property, where such transfer is
not confirmed by the Custodian under s. 10 of the
Act.
(2) (a) * *
(i) to (iV) * *
(b) Where such claim is of the nature re-
ferred to in the Explanation to sub-rule (1) and
the Custodian holds that the transfer of the
property ’in respect of which the claim is made was
a bona fide transaction, the Custodian may register
the claim or such part thereof as has not been
satisfied:
Provided that in the case of a claim of
the nature referred to in the Explanation to sub-
rule (1), the claim shah be registered only for
that amount of money which is proved to have been
paid as consideration for the transfer of the
property.
2A.
* . .
(3) The mere registration of a claim shall
not entitle the claimant to payment and the Custo-
dian may for reasons to be recorded refuse
payment ......
It may be noted that Rabia Bai had made an application
under tiffs rule for the registration of her claim to the
refund of the sale consideration. Indeed, it was under this
rule that her claim for Rs. 2,40,000/- was registered.
From a plain reading of Rule 22, it is clear that before
a claim for refund of money paid as consideration for the
transfer by an evacuee of any property is registered by the
Custodian, he should be satisfied: (a) that such transfer
has not been confirmed under s. 40 of the Act; (b) that such
transfer is a bona fide transaction; (c) that the amount for
which the claim is being registered is proved to have been
paid as consideration for the transfer of the property.
In the instant case, the validity of the Assistant
Custodian’s order dated October 1, 1954, registering the
claim of Rabia Bai appears to be unassailable because all
the three conditions aforesaid to give
263
authenticity to the registration of her claim were satis-
fied. The sale was not confirmed by the Custodian, but he
found that the whole of the price had actually been paid by
the claimant as under:
"That by 29.4.1949, Rabia Bai had paid a sum of Rs.
1,50,000/- to the evacuee, and by 30.5.1949, she had paid
Rs. 2,10,000/- to the evacuee, and a further sum of Rs.
30,000/- was paid to the evacuee’s agent on the date of
registration of the document i.e. 11.8.1949 before the Sub-
Registrar." He further found that so far as the vendee was
concerned, she had purchased the property in good faith for
very valuable consideration and there was no mala fides on
her part. It was on these findings that he registered her
claim under Rule 22 for Rs. 2,40,000/- against "Gani Market"
No. 20. Godown Street, G.T. Madras."
Mr. S.N. Prasad, appearing for the appellants contends
that the order of the Assistant Custodian registering Rabia
Bai’s claim for Rs. 2,40,000/- was a nullity because the
transaction was not a bonafide one there being lack of good
faith both on the, part of the vendor and the vendee. In
any case, proceeds the argument, a sale which is not con-
firmed under s. 40(4) (a) owing to the absence of good faith
either in the vendor or the vendee, cannot be deemed to be a
bona fide transaction for the purpose of registration of a
claim made by the vendee, under Rule 22. Reference in this
connection has been made to the observations of this Court,
in the judgment in the earlier appeal of Rabia Bai arising
out of the Custodian’s order refusing to confirm the sale
under s. 40(4)(a) of the Act to the effect, that the vendor
had not entered into the transaction in "good faith".
The contention is misconceived and cannot be accept-
ed. Under s. 40(4)(a) of the Act, one of the grounds on
which the Custodian is bound to reject an application for
confirmation of a transfer, is that if in his opinion, the
transaction has not been entered into in good faith. This
clause came up for interpretation before this Court in the
earlier appeal, Rabai Bai v. Custodian General (supra). It
was held that the expression "good faith" in s. 40(4)(a)
when construed in the context of s. 40(1) means "that if a
transaction is affected by absence of good faith either in
the vendor or the vendee its confirmation may properly be
rejected under s. 40(4)(a); in other words, good faith is
required both in the vendor and vendee". With reference to
the facts of the case, it was further observed: "Therefore
the fact that the appellant paid valuable consideration for
the transaction and is not shown to have acted otherwise
than in good faith in entering into the transaction would
not justify her claim for confirmation of the said transac-
tion if it is shown that the vendor had not acted in good
faith in entering into the said transaction. The fact that
consideration was paid by the appellant and that she was
acting in good faith may perhaps be relevant in determining
the character of her conduct in regard to the transaction,
but it would not be relevant or material in determining the
character or the conduct of the vendor in relation to the
transfer. This position is not seriously disputed before
us."
264
It is clear that in order to qualify for confirmation
under s. 40(4) (a) on the ground of good faith, a sale has
to pass a much more stringent test than the one required to
hold it "a bona fide transaction" for the purposes of Rule
22(e) (b). While under s. 40(4) (a) lack of good faith
either in the transferor or the transferee would be suffi-
cient to disqualify the transfer for confirmation, the posi-
tion under Rule 22 is different. Under Rule 22, it is the
character of the conduct of the claimant which primarily
determines the character of the transaction. Therefore, if
the Vendee claimant in purchasing the property acted in good
faith, for the purposes of Rule 22, the sale would be a bona
fide transaction, notwithstanding the fact that there was
lack of good faith on the part of the vendor. Again, the
acid test of the vendor’s bona fides under this Rule would
be, whether he had purchased the property for adequate
valuable consideration ?
In the instant case, the Assistant Custodian found that
this test was amply satisfied. This finding of fact was
not--and indeed could not be---challenged before the High
Court. It is therefore too late in the day to urge that
Rabia Bai’s claim was not duly registered in accordance with
Rule 22.
Further question that falls to be considered is: What
was the consequence of this registration ?
According to Mr. Prasad, the registration was an admin-
istrative act required to be done merely for a statistical
purpose. Our attention has been invited to sub-rule (3) of
the Rule, which provided that "merely registration of a
claim shall not entitle the claimant to payment .... "
While it is true that mere registration of a claim under
this Rule does not ipso facto confer a right to payment, it
is not correct to say that the only purpose served by such
registration is statistical and nothing else. As has been
discussed already, before registering a claim the Custodian
is required to determine objectively that the transaction
is bona fide, the claimant having entered into it in good
faith on payment of adequate valuable consideration. The
determination of this preliminary fact which is an essential
pre-requisite of registration is a judicial function en-
joined on the Custodian by the statutory provision.
Registration of claim of a vendee under this Rule, there-
fore, amounts to a preliminary adjudication as to the genu-
ineness of the claim. and its eligibility for discharge
under the relevant substantive provisions of the Act.
The next question to be considered is the effect of the
deletion of r. 22 by notification dated February 20, 1957,
and the omission by Act 91 of 1956 of the words "or of any
amounts due to any employee of the evacuee or of any debt
due by the evacuee to any person" from s. 10(2)(m) of the
Act. It is contended by Mr. Prasad that since registration
under the deleted Rule 22 did not confer a vested right on
the claimant, the claim does not survive for consideration
under s. 10 (2) of the Act. Clause (m) of s. 10(2), accord-
ing to Counsel, would not cover the case because of deletion
caused by the amending Act 91 of 1956. Clause (n) of
s.10(2), it is maintained, also
265
will be of no avail because firstly, as a result of the
deletion of r. 22, the Custodian is no longer under any
legal obligation to meet the claim, and secondly, the Custo-
dian has no funds with him for payment of the claim as those
funds have since been transferred to the Compensation Pool
formed under s. 14 of the Displaced Persons Compensation and
Rehabilitation Act 1954 (for short, the Rehabilitation Act).
It is contended that every penny in the Custodian’s account
once transferred to the Compensation Pool, can be utilised
only (a) to compensate displaced persons and (b) to compen-
sate the evacuee according to Indo-Pak Agreement (s.15), and
that no part of the Compensation Pool is available to satis-
fy the claims of third parties who are neither displaced
persons, nor evacuees.
So far as the first contention relating to the effect of
deletion of r. 22 and the amendment of s.10(2) is concerned,
the same is no longer res integra. In Raja Bhanupratap
Singh v. Custodian,(1) a similar argument was advanced.
Shah J. (as he then was) speaking for the Court, negatived
the argument, thus:
"We are, however, unable to agree that be-
cause of the amendment made in s.10(2)(m) and the
deletion of Rule 22 the power which is vested in
the Custodian under s.10(2) (n) must be held re-
stricted. Sub-section (1) of s. 10 sets out the
powers of the Custodian generally, and the diverse
clauses in sub-s. (2) illustrate the specific
purposes for which the powers may be exercised, and
there is no reason to think that the clauses in
sub-s. (2) are mutually exclusive. If power to pay
the debts was derived both under cls. (m) and (n)
as it appears it was, deletion of the provision
which authorised the Custodian to pay debts due by
the evacuee to any person from el. (m) and Rule 22
setting up the machinery for registration of debts
did not, in our judgment, affect the power which is
conferred by cl.(n) by sub-s.(2) and also by s.
10(1). In our judgment, the power to administer
is not merely a power to manage on behalf of the
evacuee so as to authorise the Custodian merely to
recover and collect the assets of the evacuee but
to discharge his obligations as well."
From the above enunciation, it is clear that the substantive
provision which empowers the Custodian to recover and pre-
serve the assets of the evacuee and to discharge his obliga-
tions as well is in s. 10(1). The diverse clauses of subs s.
(2) are not mutually exclusive, and illustrate the various
purposes which are included in the general power to adminis-
ter the properties of the evacuee conferred on the Custodi-
an by sub-s.(1) of s.10. Clause (n),of s.10(2) specifical-
ly authorises the Custodian to pay to "any other person as
in, the opinion of the Custodian is .entitled thereto any
sums of money out of the funds in his possession." As was
explained in Bhanupratap Singh’s case (supra), the use of
the expression "in the opinion of the Custodian" was not
intended to invest the Custodian with arbitrary authority.
(1) [1966] 1 S.C.R. 304.
266
In forming his opinion, he was bound to act judicially. in
the instant case, the Custodian had, in accordance with the
machinery provided in r. 22 for effectuating the exercise of
the power conferred by s. 10(2)(n), formed an opinion about
Rabia Bais claim being genuine. In the exercise of that
power the only thing that remained to be done by the
Custodian was to ascertain whether there were adequate
"funds in his possession" to meet Rabia Bai’s claim which
was a genuine liability of the evacuee. The words "out of
the funds in his possession" in cl.(n) of s. 10(2) have
reference only to the funds relatable to the particular
evacuee against whom or against whose property, the claim
for refund is made by a claimant. in the case before us,
it is pointed out, the property in question was fetching
huge rental income. The property was acquired under s. 12 of
the Rehabilitation Act by the Government on February 24,
1961. It was thereafter sold by the Government on January
18, 1962 for Rs. 3,10,100/-, that is, for a consideration
substantially in excess of Rabia Bai’s claim. The sale
proceeds were credited to the Compensation Pool. At the
material time, therefore, it could not be said that the
Custodian was not possessed of sufficient funds to meet the
claim of Rabia Bai.
Section 14 of the Rehabilitation Act, which came into
force on October 9, 1954 conceives the constitution of a
Compensation Pool. It provides that such Pool shall consist
of:
(a) all evacuee property acquired under s.12,
including the sale proceeds of any such property
and all profits and income accruing from such
property;
(b) such cash balances lying with the Custodian
as may, by order of the Central Government, be
transferred to the compensation pool;
(c) such contributions, in any form whatsoever,
as may be made to the compensation pool by the
Central Government or any State Government;
(d) such other assets as may be prescribed.
Sub-s. (2) further provides that the Compensation Pool
shall vest in the Central Government free from all encum-
brances and shall be utilised in accordance with the provi-
sions of the Act and the rules made thereunder.
The controversy is about the true import of the expres-
sion "cash balances lying with the Custodian" used in cl.
(b) of sub-s. (1) of s. 14.
According to Mr. Prasad "such cash balances" will cover
all funds in their entirety lying in the deposit account of
the Custodian which may be transferred by an order of the
Central Government to the Compensation Pool.
In our opinion, the expression "such cash balances"
used in s. 14(1)(b) cannot be interpreted so as to cover
total cash deposits.
267
with the Custodian. The use of the word "balances" is
significant. The connotation of the term "balances" is well
known. According to Websters’ Dictionary, it means "the
difference, if any, between the debit and credit side of an
account." It is the result of a comparative reckoning.
The expression "cash balances" in clause (b) therefore, has
to be construed as the excess of credits over debits. The
word "balances" appears to have been advisedly used in
preference to "deposits" because the intention was that
only that much amount in deposit with the Custodian should
be transferred to the Compensation Pool which would be in
excess of the amounts required for meeting the due claims
against the evacuees or their properties. It is thus clear
that what can be directed to be transferred to the Compensa-
tion Pool by the Government under s. 14(1)(b) is the "cash
balances" and not the total cash deposits with the Custodi-
an.
The above being the legal position, it is to be seen as
to what was actually directed to be transferred to the
Compensation Pool. The first order of such transfer made
by the Central Government is dated March 19, 1956. It
purports to have been issued under s.14(1)(b) of the Reha-
bilitation Act. Thereby the Government directed that a sum
of Rs. 10 crores out of the balances centralised under the
Head "S-Deposits and advances-Part II-Deposits not bearing
interest-(C)other Deposits of the Custodians of Evacuee
Property" be ,’transferred to the Compensation Pool. The
second order is dated February 26, 1957 whereby the sum of
Rupees one crore was directed to be transferred out of the
Custodian’s cash balances to the Compensation Pool. The last
order is dated August 18, 1966, whereby it was directed that
all the surplus balances in the deposit account of the
Custodians be transferred to the Compensation Pool. The
use of the word "surplus" in this Government order is sig-
nificant. It puts the matter beyond doubt that only those
balances which were surplus or in excess over what was
required to meet the liabilities of the evacuees or the
registered verified claims against the evacuees or their
properties, were to be transferred to the Compensation Pool.
It was the duty of the Custodian therefore to keep back
with him so much of the funds in his deposit as were neces-
sary to meet the verified claims against evacuees or their
properties. Such. a course on his part would have been
perfectly legal and also in conformity with the final direc-
tions issued for transfer of "surplus balances" by the
Central Government. Only the ’cash balances’ which were
validly transferred could legally form part of the Compensa-
tion Pool. On this point we agree with the High Court
that the Custodian had neither’ the power nor the, authority
to transfer the entirety of funds to the Compensation Pool.
Even if it is considered for the sake of argument that
the last order of the Government was a direction to transfer
the entirety of funds including those relating to the
property of the evacuee, Abdul Ghani Jan Muhammad, without
keeping back what was required for paying the registered
claims of Rabia Bai, then the same would be contrary to the
intendment of cl.(b) of s. I4(1) to the extent of Rabia
Bai’s claim.
268
We are of opinion that in the peculiar circumstances of
the case, the Appellate Bench of the High Court was right in
directing the Custodian to refund a sum of Rs. 2,40,000/-
to the respondent, Rabia Bai, in ’payment of her claim and
in further directing the Central Government to place at the
disposal of the Custodian, appellant herein, the said sum
for the purpose of refund. The time for refund is further
extended by 3 months from today, if the same has not already
been done. Accordingly, we dismiss this appeal. The appel-
lant shall pay the costs of the respondents in this Court.
P.B.R. Appeal dismissed.
269