PETITIONER:
KARANPURA DEVELOPMENT CO., LTD.
Vs.
RESPONDENT:
RAJA KAMAKSHYA NARAIN SINGH.
DATE OF JUDGMENT:
10/04/1956
BENCH:
AIYYAR, T.L. VENKATARAMA
DAS, SUDHI RANJAN
BHAGWATI, NATWARLAL H.
CITATION:
1956 AIR 446 1956 SCR 325
ACT
Court of Wards-Powers-Transactions by Court of Wards--
Court’s power to review-Court of Wards acting on behalf of a
ward and a guardian acting on behalf of a minor-Difference
in the legal position of-Licences extending beyond the
period of the minority of the ward-Validity-Sanction-
Requirements-Court of Wards Act, 1879 (Bengal Act IX of
1879), s. 18-Guardians and Wards Act, 1890 (VIII of 1890),
s. 29(a).
HEADNOTE
Section 18 of the Court of Wards Act, 1879, provides that
the Court of Wards "may sanction the giving of leases or
farms of the whole or part of any property under its charge,
and may direct the mortgage or sale of any part of such
property, and may direct the doing of all such other acts as
it may judge to be most for the benefit of the property and
the advantage of the ward".
In exercise of the power conferred by this section the Court
of Wards sanctioned a deed of prospecting license in favour
of B, the predecessor in interest of the appellant, and the
same was executed on 26-3-1915. Subsequently, on 23-11-1917
the manager of the Court of Wards executed a deed modifying
the terms of the deed dated 26-3-1915, by virtue of which
the period of license could be extended up to 26-3-1951
under certain conditions. On 10-8-1937 the respondent
having become major assumed management of the estate and
thereafter repudiated the aforesaid deeds and contested
their validity on the grounds, inter alia, (1) that the deed
dated 26-3-1915 was not for the benefit of the ward as the
clause therein relating to the payment of the cess was less
advantageous to him than the corresponding clause in the
prospecting license executed by the then proprietor of the
estate on 26-11-1907 in respect of another property known as
the Bokaro license, and that the Court of Wards executed the
deed in question without bestowing any thought to it, (2)
that the Court of Wards had no power to enter into the
transaction dated 23-11-1917 as it had the effect of
preventing the ward from dealing with his estate for over a
period of 32 years after he attained majority, (3) that in
granting the deed dated 23-11-1917 the Court of Wards
considered only the benefit of the grantee and not that of
the ward and (4) that the deed was void because no sanction
had been given to it by the Court of Wards, as required by
s. 18 of the Court of Wards Act, 1879.
Held, (1) that the Court of Wards is not in the same
position as a guardian of the properties of a minor. It is
a statutory body with powers defined by the Court of Wards
Act, 1879. Under s. 18
326
of the Act the Court of Wards is given the power to judge
for itself whether a transaction entered into by it on
behalf of the ward is for the benefit of the property and
the advantage of the ward and its act cannot be impugned in
a court of law by the ward on attaining majority unless he
shows that it did not act bona fide and in the interests of
the ward and that its action amounted to a fraud on the
power, or that it did not, in fact, apply its mind to the
question whether the act was for the benefit of the
property or the advantage of theward, and that though it
purported to exercise the power unders. 18, it did not,
in fact, come to a. judgment as required bythe section.
Its decision cannot be questioned on the ground that it was
erroneous on the merits, or that it was reached without
considering some aspects which ought to have been
considered, unless the failure to consider them was of such
a character as to amount to there being no exercise of
judgment at all;
Allcroft v. Lord Bishop of London: Lighton v. Lord Bishop of
London, ([1891] A.C. 666), relied on.
(2)that assuming that the cess clause in the deed dated
26-3-1915 was less advantageous to the ward than that in the
Bokaro license, as the Court of Wards had applied its mind
to the question and formed its own judgment on it, its
decision is not open to question;
(3)that the Court of Wards was competent to enter into the
transaction dated 23-11-1917 and extend the period of
license so as to enure for a period beyond the date of the
ward coming of age, as s. 18 of the Act which confers
authority on the Court of Wards is general and unqualified
in terms and there is no provision in the Act such as there
is in s. 29(b) of the Guardians and Wards Act, 1890, that a
lease by the Court of Wards was to enure for a period
related to the minority of the ward;
(4)that assuming that the words in s. 18 that the act should
be "for the benefit of the property and the advantage of the
ward" should be read cumulatively and not disjunctively, the
deed dated 23-11-1917 satisfies the requirements of the
section inasmuch as the benefits which the transaction
conferred on the estate in the form of minimum ground rent,
salami and royalty must also enure to the advantage of the
ward who will be the person who will receive this revenue;
(5)that the requirements as to sanction under s. 18 of the
Act must be held to be satisfied if the transaction in all
its essential particulars had been sanctioned by the Court
of Wards, even though there were details to be worked out in
furtherance of the sanction and the document as finally
drafted had not been submitted again for its approval. A
mere recital in the deed that the transaction was sanctioned
is not conclusive and it must be shown that, as a matter of
fact, sanction was given, and as the order of the Court of
Wards dated 9-10-1917 contained the sanction to the proposal
in
327
all its essential particulars it was sufficient compliance
with the requirements of the section;
Gulabsingh v. Seth Gokuldas, (40 I.A. 117) and Ramkanai
Singh Deb Darpashaha v. Mathewson, (42 I.A. 97), relied on.
and (6) that s. 18 only requires that the transaction should
be entered into with the sanction of the Court of Wards and
if the transaction subsequently turns out to be bad on the
merits, either in part or in toto, it does not render the
sanction originally given ineffective.
JUDGMENT
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 191 & 192
of 1953.
Appeal from the judgment and decree dated the 27th October
1949 of the Patna High Court in Appeals from the Original
Decrees Nos. 127 & 125 of 1943 arising out of the decrees
dated the 30th day of April 1943 of the Court of Additional
Subordinate Judge, Hazaribagh in Suits Nos. 28 & 82 of 1940
respectively.
M.C. Setalvad, Attorney-General for India, N. C.
Chatterjee, S. Chaudhry, S. N. Mukherji and B. N. Ghosh, for
the appellant.
Atul Chandra Gupta and Ganpat Rai, for respondents Nos. 1 &
12.
Atul Chandra Gupta and I. N. Shroff, for respondents Nos. 2,
4, 5, 6 & 13.
Lal Narain Sinha, Bajrang Sahai and R. C. Prasad, for
respondent No. 9.
Sanjib Chaudhry and R. R. Biswas, for respondent No. 10.
Sanjib Chaudhry and Ganpat Rai, for respondent No. 1 1.
Ganpat Rai, for respondents Nos. 3,7 & 8.
1956. April 10. The Judgment of the Court was delivered by
VENKATARAMA AYYAR J.-These appeals raise questions as to the
validity of a prospecting license granted on 26-3-1915 in
favour of Messrs Bird and Co., by the Court of Wards as
representing the Ram-
328
garh Estate and of two deeds dated 23-11-1917 and 1-6-1937
executed by the Court of Wards modifying the terms of the
license dated 26-3-1915.
The Ramgarh Raj is an ancient principality situate in Bihar.
It has three coal-fields, Bokaro Jharia, Bokaro Ramgarh and
Karanpura. Of these, the Karanpura coal-fields are the
largest being of the extent of 550 sq. miles, of which about
415 sq. miles belonged to the estate. On 26-11-1907 Raja
Ram narain Singh, the proprietor of the estate, granted in
favour of Messrs Anderson Wright & Co., a prospecting
license in respect of the Bokaro Ramgarh coal-fields,
referred to in these proceeding as the Bokaro license. He
was also negotiating for a similar license in respect of the
Karanpura coal-fields (vide Exhibit 155-b dated 1-12-1912),
but before anything was concluded, he died on 26-1-1913
leaving him surviving his widow, Rikinath Kaur, and a minor
son, Lakshminarain Singh. At the time of his death, the
debts owing by the estate amounted to about Rs. 9 lakhs.
On 20-5-1913 the Court of Wards took over the management of
the estate, and its first concern was to relieve it from the
pressure of creditors, and for that purpose, to arrange for
a loan on easy terms. It was at this juncture that Messrs
Bird and Co., made an application for a prospecting license
for the Karanpura coal-fields, and in reply thereto, the
manager of the Court of Wards informed them on 4-9-1913 that
"the estate being involved and anxious to pay off the debts,
one of the conditions of the lease would be an advance of
about Rs. 8 to Rs. 11 lakhs including salami, etc., to the
estate on the same terms as advanced by the Bokaro and
Ramgarh Company". Then, there were negotiations extending
over several months, a good deal of correspondence and
personal discussions, and eventually on 29-7-1914 the terms
were finally agreed upon, and on 26-3-1915 the deed of
prospecting license was actually executed. Its main terms
were as follows: It was to be in force for a period of six
years. A sum of Rs. 1,00,000 was paid as salami. The
licensees were to pay a minimum
329
ground rent of Rs. 8,000 per annum commencing from the
second year of the license, and if the leases were actually
taken by the licensees, this amount was to be adjusted
towards royalties payable thereunder. The terms of the
leases which were to be granted in pursuance of the license
were firstly, the lessees were to pay a salami at Rs. 40 per
bigha, the payment to commence either when railway
facilities were ’available for transport of coal from the
mouth of the pit or after a lapse of six years after the
period of the license, that is to say, after 26-3-1927,
whichever was earlier; secondly, royalty was to be paid on
coal, dust and coke at rates specified therein, subject to a
minimum of Rs. 5 per bigha payable after the first year of
the lease; and thirdly, the lessees were to pay the cesses
payable under the law by the occupier or tenant of the land.
As consideration for the grant of the license, Messrs Bird
and Co., were to advance Rs. 9 lakhs as loan to the estate.
This amount was not to carry interest and was to be
discharged by adjusting the royalties which would become
payable under the leases. If no leases were taken and the
license was abandoned, then the amount of the loan was to
carry interest at 4 1/2 per cent per annum from that date
and it had to be repaid in half-yearly instalments such that
the entire debt would be discharged within a period of six
years. A mortgage bond was executed on the same date as the
prospecting license embodying these terms.
The next phase of the transaction begins on 3-8-1915 with
Messrs Bird and Co., applying to the Court of Wards for
extension of the period of the license on the ground that as
the result of war conditions, new and unexpected
difficulties bad cropped up and that to achieve the purpose
of the license, is was necessary to extend the period of six
years fixed therefor. This proposal was subjected to close
scrutiny, and there was prolonged correspondence between
Messrs Bird and Co., and the Court of Wards on the expedi-
ency of extending the period of license and on the terms on
which such extension should be granted. Ultimately, on 23-
11-1917 the manager of the Court
330
of Wards executed a deed modifying the terms of the deed
dated 26-3-1915. Under this deed, the period of license was
extended in the first instance from 6 to 12 years; that is
to say, it would expire on 26-3-1927 instead of on 26-3-1921
as originally fixed. It was then provided that if within
this extended period the licensee took a lease or leases of
mines of the extent of at least 10,000 bighas, then the
period of the license would be extended by a second term of
12 years; i.e., up to 26-3-1939. There was a further pro-
vision that if before 26-3-1939 the licensees took leases of
at least 20,000 bighas, the period of the license would be
extended by another term of 12 years, i.e., up to 26-3-1951.
While under the prospecting license dated 26-3-1915 a
minimum ground rent of Rs. 8,000 was payable from the second
year, under the deed dated 23-11-1917 a minimum ground rent
of Rs. 50,000 per annum at Rs. 5 per bigha on the covenanted
number of 10,000 bighas was payable from the seventh to the
twelfth year. These are the salient features of the license
as revised by the document dated 23-11-1917.
Raja Lakshminarain Singh, the ward, became a major on 6-4-
1919, and died shortly thereafter on 10-4-1919 leaving him
surviving a minor son, Raja Kamakshya Narain Singh, the main
respondent in these appeals. The Court of Wards accordingly
continued in management of the estate on behalf of the Raja
until 10-8-1937, when he became a major. On 14-7-1920, the
appellant Company was registered under the provisions of the
Indian Companies Act, and it took over the interests of
Messrs Bird & Co., under the license dated 26-3-1915 as
modified by the deed of variation dated 23-11-1917. In
pursuance of these deeds, the Company took six leases
covering in all an area of 17,539 bighas on divers dates
between 17-7-1922 and 17-7-1933. Under the terms of the
deed dated 23-11-1917 the appellant would be entitled to
extension of the licence from 26-3-1939 for the third period
of 12 years only if it had taken lease of at least 20,000
bighas before 26-3-1939. Accordingly, it applied for and
obtained three leases
331
on 2-8-1937 covering an area of 2,461 bighas, thus making up
along with the six leases mentioned above, the minimum area
of 20,000 bighas.
There is one more deed to which reference must now be made.
Clause 6 of the deed dated 23-11-1917 provides that the
minimum royalty on areas in excess of 10,000 bighas taken on
lease would not be payable till 26-3-1939. Thereafter, the
appellant would under this clause become liable to pay a
minimum royalty for an area in excess of 10,000 bighas. The
appellant applied to modify this term by postponing the date
of payment by a further period of 12 years. This proposal
was accepted by the Court of Wards, and on 1-6-1937 a deed
was executed providing in modification of clause 6, as it
stood in the deed dated 23-11-1917, that the minimum royalty
for the areas in excess of 10,000 bighas was not to become
payable by the company until railway facilities for
transport of the coal from the mouth of the pit were
available or from 26-3-1951, whichever happened earlier.
These are the three transactions, which form the subject
matter of this litigation.
On 10-8-1937 the Raja became, as already stated, a major,
and assumed management of the estate. On 9-3-1939 he sent a
notice to the appellant repudiating the license dated 26-3-
1915 and the two deeds of variation dated 23-11-1917 and
1-6-1937 as not binding on him. The appellant in turn sent
a notice on 14-5-1940 calling upon the Raja to execute a
lease in respect of 250 bighas in accordance with the deeds
dated 26-3-1915, 23-11-1917 and 1-6-1937, and followed it up
by instituting on 8-6-1940 Title Suit No. 28 of 1940 in the
court of the Subordinate Judge of Hazaribagh for compelling
specific performance thereof. On 9-8-1940 the Raja filed
Title Suit No. 82 of 1940 in the Sub-Court, Hazaribagh, and
therein, he pleaded that the deed dated 26-3-1915 was void,
because the Court of Wards had no power to grant a
prospecting license and also because it had acted with gross
negligence in granting the same; and that the deeds dated
23-11-1917 and 1-6-1937 were bad, because there was no
sanction therefor as required by section 18 of the
332
Bengal Court of Wards Act IX of 1879, hereinafter referred
to as the Act, and also because they were not for the
benefit of the estate. He accordingly prayed for a
declaration that the three deeds aforesaid were void, and
for possession of the properties comprised in the leases,
with mesne profits, past and future.
Both these suits, which were really cross-actions involving
the determination of the same points, were heard together by
the Subordinate Judge of Hazaribagh, and by his judgment
dated 30-4-1943 he held that the deeds dated 26-3-1915 and
23-11-1917 were intra vires the powers of the Court of
Wards, that they were beneficial to the estate, and were
therefore valid, and he accordingly upheld the six leases
granted pursuant to those deeds. He, however, held that the
deed dated 1-6-1937 was not valid, both because the Court of
Wards had not sanctioned it and also because it was not for
the benefit of the estate. In view of this finding, he held
that the clause in the lease deeds dated 2-8-1937 based on
the deed dated 1-6-1937 postponing the payment of minimum
royalty was bad, but that the leases themselves were other-
wise valid. As a result of these, findings, be granted a
decree for specific’ performance in Title Suit No. 28 of
1940 and in Title Suit No. 82 of 1940 he awarded reliefs
consequential on the invalidity of the deed dated 1-6-1937.
Against this judgment, the Raja preferred appeals to the
High Court of Patna, F. A. No. 125 of 1943 against the
decree in Title Suit No. 82 of 1940 and F.A. No. 127 of 1943
against that in Title Suit No. 28 of 1940. The company also
filed cross-objections in F.A. No. 125 of 1943. The learned
Judges agreed with the Subordinate Judge that the Court of
Wards was competent to grant a prospecting license, but they
were of opinion that it had not applied its mind to certain
important aspects of the transaction, that the interests of
the ward bad suffered in consequence, and that the deed
dated 26-3-1915 was therefore not valid. Dealing next with
the deed dated 23-11-1917, they held that it was void,
because the Court of Wards had not sanctioned it. They also
held that it
333
was not binding on the Raja, firstly because its terms were
not beneficial to him, secondly because it had been obtained
by Messrs Bird and Co., on false representation, and thirdly
because Mr. MacGregor, the then manager of the Court of
Wards, was acting in his own interests and adversely to
those of the minor ward, and the Court of Wards had been
misled by him into entering into the transaction. For these
reasons, the learned Judges held that the deed dated 23-11-
1937 was void and inoperative as against the ward. Then, as
regards the deed dated 1-6-1937, the learned Judges agreed
with the Subordinate Judge that it was invalid on both the
grounds given by him. In the result, in Title Suit No. 82
of 1940 a declaration was made that the deeds dated 26-3-
1915, 26-11-1917 and 1-6-1937 as well as the leases granted
pursuant thereto were void and a decree passed in favour of
the Raja for possession of the demised properties with mesne
profits, past and future. Title Suit No. 28 of 1940
instituted by the appellant for specific performance and the
cross-objections filed by it in F.A. No. 125 of 1943 were
dismissed. Against this judgment, the present appeals have
been preferred by the company, C.A. No. 191 of 1953 being
directed against the decree in F.A. No. 127 of 1943 and C.A.
No. 192 of 1953 against the decree in F.A. No. 125 of 1943.
The first respondent in these appeals is the Raja of
Ramgarh, the other respondents being transferees from him,
and he will be referred to in this judgment as the
respondent.
Though the questions that were agitated by the parties in
the courts below ranged over a wide area, many of them have
been abandoned in the argument before us, and the scope of
the controversy in these appeals has been considerably
narrowed down. Thus, the appellant does not challenge the
correctness of the decision of the courts below that the
deed dated 1-6-1937 is not binding on the estate. Mr. Atul
Chandra Gupta, learned counsel for the Raja, has limited his
attack on the deed dated 26-3-1915 to the ground that it was
not for the benefit of the ward, because the clause therein
relating to the payment of
334
cess, or more compendiously, the cess clause was less
advantageous to him than the corresponding clause in the
Bokaro license, and the Court of Wards executed the deed in
question without bestowing any thought to it. He attacked
the deed dated 23-11-1917 on the following grounds: (1) The
Court of Wards had no power to enter into a transaction,
which had the effect of preventing the ward from dealing
with his estate for over a period of 32 years after he
attained majority, and which bound him to grant leases down
to the year 1951 at the rates of salami and royalties fixed
in the year 1915. (2) In granting the deed dated 23-11-1917,
the Court of Wards considered only the benefit of Messrs
Bird and Co., and not of the ward. (3) The deed is void,
because no sanction had been given to it by the Court of
Wards, as required by section 18 of the Act.
Before dealing with these contentions on their merits, it is
necessary to consider the question which was discussed at
the Bar as to the grounds on which the deeds dated 26-3-1915
and 23-11-1917 are open to attack in these proceedings. A
transaction entered into by a guardian on behalf of a minor
will be valid and binding on the latter, only if it is for
proved necessity or benefit. When a transaction is entered
into by a Court of Wards on behalf of the ward, is its
validity to be judged on the same considerations, and is it
open to the ward on attaining majority to challenge it on
the ground that it was not beneficial to him? The Court of
Wards is not in the same position as a guardian of a minor.
It is a statutory body, and its powers are those which are
conferred on it by the statute, which creates it. Section
14 of the Act provides that the Court of Wards may, acting
through its manager, do all such things requisite for the
proper care and management of the property as the proprietor
of such property might do, if not disqualified. Section 18
enacts that:
"The Court may sanction the giving of leases or farms of the
whole or part of any property under its charge, and may
direct the mortgage or sale of any part of such property,
and may direct the doing of all
335
such other acts as it may judge to be most for the, benefit
of the property and the advantage of the ward".
It was in exercise of the power conferred by this section
that the Court of Wards executed the two impugned deeds
dated 26-3-1915 and 23-11-1917. Now,; what is the true
scope of section 18? Is the exercise of the power conferred
by that section conditioned on the act being in fact for the
benefit of the ward, or is it sufficient that the Court of
Wards judges it to be for the benefit of the property and
the advantage of the ward?
The contention of Mr. Gupta for the respondent is that the
words "as it may judge" do not signify that the judgment
could be made without reasonable grounds therefor, that they
should be construed as meaning "as it may on reasonable
grounds judge", and that it is therefore open to the Court
to consider whether the decision of the Court of Wards was a
reasonable one to come to, and that if it came to the
conclusion that it was not, then to hold that it fell out-
side the ambit of the authority conferred by section 18. In
support of this contention, be relied on certain ob-
servations in Nakkuda Ali v-. M. F. De. S. Jayaratne(1).
There, the Board was considering the meaning of the words
"where the Controller has reasonable grounds to believe"
occurring in a Regulation of Ceylon. In an application for
certiorari to quash an order of the Controller made under
this enactment, it was argued for him that the words of the
Regulation left the matter to his subjective satisfaction,
that his decision therefore was not liable to the questioned
on the ground that, in fact, there existed no reasonable
ground therefor; and the decision in Liversidge v.Sir John
Anderson(2) was relied on as establishing that position. In
negativing this contention, Lord Radcliffe observed that the
words "where the Controller had reasonable grounds to
believe" might mean either "where it is made out to his
subjective satisfaction" or "where there are reasonable
grounds on which be could believe", and that whether the
words were
(1) [1951] A.C. 66, 76.
(2) [1942] A.C. 206.
336
used in the one sense or the other in the enactment on
question must depend upon the context. The question then is
ultimately one of construction of the words of the
particular statute.
Now, what do the words "as it may judge" in section 18 mean?
Do they confer on the Court of Wards a power to be exercised
if the act is, in its judgment, for the benefit of the
property or the advantage of the ward, or do they confer a
power to be exercised only if, in fact, the act is for the
benefit of the property or the advantage of the ward? In
Liversidge v. Sir John Anderson(1), Lord Atkin who held that
the words of Regulation 18-B of the Defence Regulations 1939
that "if the Secretary of State has reasonable cause to
believe" meant "if, in fact, there was reasonable cause for
the belief", discussed what words were susceptible of
importing an objective standard as contrasted with
subjective satisfaction, and observed:
"It is surely incapable of dispute that the words "if A has
X’ constitute a condition the essence of which is the
existence of X and the having of it by A. And the words do
not mean and cannot mean ’if A thinks that he has’. ’If A
has a broken ankle’ does not mean and cannot mean ’if A
thinks that be has a broken ankle’. ’If A has a right of
way’ does not mean and cannot mean ’if A thinks that he has
a right of way’. ’Reasonable cause’ for an action or a
belief is just as much a positive fact capable of deter-
mination by a third party as is a broken ankle or a legal
right".
Examining the language of section 18 in the light of these
observations, we are unable to construe the words "as it may
judge most for the benefit of the property and the advantage
of the ward" as equivalent to "as may be for the benefit of
the property and the advantage of the ward" or "as might be
judged to be most for the benefit of the property and the
advantage of the ward". The statute confides in clear and
unambiguous terms the authority to judge whether the act is
beneficial to the estate, to the Court of Wards and not to
any outside authority.
(1)[1942] A.C. 206.
337
That being the true scope of the power conferred by section
18, what are the grounds on which the exercise of such a
power could be impugned in a court of law? It can be
attacked on the ground that the Court of Wards did not act
bona fide and in the interests of the ward, and that its
action amounted to a fraud on the power. It can also be
attacked on the ground that the Court of Wards did not, in
fact, apply its mind to the question whether the act was for
the benefit of the property or the advantage of the ward,
and that though it purported to exercise the power under
section 18, it did not, in fact, come to a judgment as
required by the section. But where it has applied its mind
and given thought to the question whether the act is for the
benefit of the property or the advantage of the ward and
comes to an honest judgment in the matter, its decision is
not liable to be questioned on the ground that it was
erroneous on the merits, or that it was reached without con-
sidering some aspects which ought to have been considered,
unless the failure to consider them is of such a character
as to amount to there being no exercise of judgment at all.
The question as to the limits within which courts could
interfere with the exercise of a power of the nature now in
question was considered at some length in Allcroft v. Lord
Bishop of London: Lighton v. Lord Bishop of London(1).
There, the statute provided for certain action being taken
"unless the Bishop shall be of opinion that proceedings
shall not be taken". Acting under this section the Bishop
of London decided not to take proceedings, and the
correctness of this decision was challenged in an
application for mandamus. It was held by the House of Lords
that the Bishop having acted within his jurisdiction and
exercised his judgment honestly, his decision was not liable
to be questioned on the ground that it was erroneous or that
be had not considered all the aspects of the matter. The
following observations of Lord Bramwell may be quoted:
"Then it was said that there was something he
(1) [1891] A.C. 666.
338
had considered which he ought not to have considered, and
something he had not considered which he ought to have, and
so he had not considered the whole circumstances and them
only. It seems to me that this is equivalent to saying that
his opinion can be reviewed. I am clearly of opinion it
cannot be. If a man is to form an opinion, and his opinion
is to govern, he must form it himself on such reasons and
grounds as seem good to him".
And Lord Herschell observed:
"It is impossible to read the bishop’s statement without
seeing that he has honestly considered what appeared to him
to be all the circumstances bearing on the question whether
the proceedings should be allowed to go on. That being so,
it is not for your Lordships, on this application for a
mandamus; to consider whether the bishop’s reasons are good
or bad; whether they ought or ought not to have led him to
form the opinion he did".
Bearing these principles in mind, the question to be
considered is whether the Raja has, the burden thereof being
on him, established any grounds on which the deeds entered
into by the Court of Wards on 26-3-1915 and 23-11-1917 could
be held to be outside the power conferred on it under
section 18. That leads us to a consideration of the four
contentions on which Mr. Atul Chandra Gupta attacked the two
deeds aforesaid as not binding on the estate. The first is
directed against the deed dated 26-3-1915, the point of the
attack being that the clause relating to the payment of cess
in that deed is less advantageous to the ward than the
corresponding clause in the Bokaro license dated 26-11-1907.
To appreciate this contention, it must be stated that when
Messrs Bird and Co., applied to the Court of Wards for a
prospecting license, negotiations were carried on the under-
standing that the Bokaro license granted by Raja Ramnarain
Singh was to be the basis for the contract, subject to any
variation on which the parties might agree, Pursuant to this
understanding, there was a discussion of the terms of the
license between the representatives of Messrs Bird and Co.,
and the
339
officers of the Court of Wards on the 1st and 2nd April
1914. Exhibit 130(1) is a record of those discussions in
the handwriting of the Deputy Commissioner, Mr. Lister. On
11-4-1914 Messrs Bird and Co. were informed that the Board
had generally approved of the proposal, and there was a
further communication to them on the 17th April 1914 that
"formal sanction cannot be given until the terms are
embodied in a formal document." On 12-5-1914 Messrs Bird and
Co. sent a draft agreement for the approval of the Court of
Wards, and on that, there was further correspondence and
personal discussion, and ultimately, the Board gave its
final sanction on 29-7-1914, and the deed which was executed
by the manager on 26-3-1915 is in accordance with the draft
as approved. This deed, however, differs from the Bokaro
license in one respect. Schedule A to that license contains
a draft of the mining lease to be granted in pursuance
thereto, and one of the covenants contained therein is that
the lessee "will also pay all Government and other cesses,
taxes and other imposition which now are or may at any time
hereafter during the continuance of this lease be assessed
or imposed on the said lands." In the deed dated 26-3-1915
the corresponding clause runs as follows:
"The lessee covenants to bear, pay and discharge all
existing and future Government and other rates, cesses,
taxes, assessments, duties, impositions, out goings and
burdens whatsoever imposed or charged upon the demised
premises........ which may be payable by the occupier or
lessees thereof."
Thus, while under the Bokaro license the lessee had to pay
all the cesses imposed on the land, under the deed dated 26-
3-1915 the lessees had to pay only the cesses payable by the
occupier or lessee of the property.
Now, the contention of the respondent is that as it was the
intention of both parties that Messrs Bird and Co. should
have a license on the same terms as were contained in the
Bokaro license unless otherwise agreed, and as Exhibit
130(1) shows that there was no special agreement with
reference to this matter,
340
the Court of Wards must be held not to have applied its mind
to the cess clause when it agreed to its inclusion in its
present form in the deed of 1915, and that as it related to
a matter of substance going to the root of the transaction,
the deed was in its entirety void. The basic notion on
which this contention rests is that the cess clause in the
deed dated 26-3-1915 is, as compared with that in the Bokaro
license, distinctly disadvantageous to the ward. But this,
however, is controverted by the appellant, which contends
that the difference between the two deeds with reference to
the cess clause is one of form rather than of substance.
To appreciate this contention, it is necessary to refer to
the provisions of the Bengal Cess Act IX of 1880. Under
sections 80 and 81 of that Act, where there is a lease of a
mine, the cess payable thereon is to be borne equally by the
owner and the lessee. The Government, however, is entitled
to realise the whole of it from either of them, in which
case the person who pays the cess has a right to recover
from the other his share of it. The cess clause of the 1915
license is in accordance with the rights of the parties as
declared in section 81 of the Act. The contention of Mr.
Gupta is that it was open to the parties to contract
themselves out of their rights under section 8 1, and he
relied on the decisions in Ashutosh Dhar v. Amir Mollah(1)
and Mahanand Sahai v. Mussmat Sayedunissa Bibi(2) in support
of this position. There, the question related to section 41
of the Act; but it is argued that the principle underlying
those decisions is equally applicable to section 81 and
that, in our opinion, is correct. The next step in the
argument is that the cess clause in the Bokaro license
embodies a contract modifying the rights declared by section
81 of the Act by throwing the liability for the cess wholly
on the tenant; but that the clause in the 1915 deed
restricts it to the obligation as declared in section 81 and
has therein resulted in serious disadvantage to the
proprietor. For the appellant, it is contended that the
clause in the Bokaro license could
(1) [1900] 3 Cal. L J. 337.
(2) [1907] 12 C.W.N. 154.
341
not be construed as modifying the rights declared under
section 81, because it merely provides for payment by the
lessee of the entire cess, which must mean that they had to
pay it in the first instance and then reimburse themselves
from the proprietor, and that was how the clause was
understood by the Court of Wards when it was in management.
If that was the true scope of the cess clause in the Bokaro
license, it cannot be said that the cess clause in the deed
of 26-3-1915 differs in substance from it.
On the question as to the interpretation to be put on the
cess clause in the Bokaro license, the principle applicable
thereto was thus stated in Mahanand Sahai v. Mussmat
Sayedunissa Bibi (1):
"It is indisputable that when an exemption is claimed from
statutory liability, the contract under which exemption is
claimed, must be strictly construed against the claimant and
it must appear from its terms, beyond the possibility of any
dispute, that the parties intended to vary the liability as
imposed by the statute. This rule is especially applicable
where exemption is claimed from taxation imposed by the
State".
It was accordingly held that no contract to the contrary
could be spelt from the clause providing generally for
payment of cess, and this view has been adopted in
Balwantrao Naik v. Biswanath Missir(2) and Ramkumari Devi v.
Hari Das(3). The contention of the appellant, therefore,
that the cess clause in the Bokaro license cannot be
construed as a clear expression of an intention on the part
of the parties to contract themselves out of the statute is
not without force. It is, however, unnecessary to decide
this question, as assuming that the cess clause in the deed
dated 26-3-1915 is less advantageous to the ward than that
in the Bokaro license, the respondent has, before he can
succeed on this contention, still to establish that the
Court of Wards did not apply its mind to this matter. And
what is the evidence which he has adduced to establish it?
In the pleadings, he raised
(1) [1907] 12 C W.N. 151. (2) A.I.R. 1945 Patna 417.
(3) A.I.R. 1952 Patna 239.
45
842
no such question. At a late stage, however, he applied to
amend the plaint so as to raise the contention that the deed
dated 26-3-1915 was not in accordance with the Bokaro
license, but that application was dismissed by the
Subordinate Judge on 24-12-1942. It was contended for the
appellant that the question now sought to be argued should
not be allowed to be raised at this stage as it is purely
one of fact, especially in view of the order dated 24-12-
1942 refusing amendment of the plaint. But it is
unnecessary to say more on this objection, as we are
satisfied on the evidence on record that the Court of Wards
did apply its mind to the cess clause and did adopt it after
giving thought to it. The clause in its present form
appears in the draft prepared by Messrs Bird and Co. and
sent to the Court of Wards for approval on 12-5-1914. Among
the officers of the Court of Wards who examined the draft
was Mr. Lister, the Deputy Commissioner, who took the lead-
ing part in settling the terms of this transaction, and
there is an alteration, though formal, in his hand in this
very clause. It is also in evidence that the draft was sent
for scrutiny to Sri Sarada Charan Mitra, a retired Judge of
the Calcutta High Court, who was also the legal adviser of
the Ramgarh Estate, and there is an endorsement of approval
in his band. And finally, the Board gave sanction on 27-7-
1914 not only to the agreement but to the very draft which
was sent by Messrs Bird and Co., with the cess clause, as it
appears in the deed of 1915. It is idle in the face of all
this to argue that the Court of Wards gave no thought to it.
It should be observed that the stand which the respondent
took with reference to the cess clause in the courts below
was different from that taken in this Court. There, his
contention was that the Court of Wards had acted with gross
negligence in agreeing to a term so manifestly
disadvantageous to the estate. In other words, the argument
was not that the Court of Wards failed to apply its mind to
the cess clause but that it failed to realise the full
implications thereof, and that the minor had consequently
suffered. That
343
would have been a good ground of attack, if the Court of
Wards was in the position of a guardian of the properties of
the minor, but, as already stated, that is not its true
character. It is a statutory body with powers granted to it
by section 18, and its action thereunder cannot be attacked
on the ground that it bad erred or was mistaken in its
conclusion. As we have held that the Court of Wards did
apply its mind to the question and formed its own judgment
on it, its decision is not open to question, and the attack
on the deed dated 26-3-1915 must in consequence fail.
Coming next to the deed dated 23-11-1917, it was attacked on
three grounds. It was firstly contended that it was, on the
very face of it, beyond the competence of the Court of
Wards, and was therefore void. In support of this
contention, Mr. Gupta argued that at the time of the
transaction the ward had only about a year and four months
to become a major, that by extending the period of the
license from 6 to 36 years the agreement in question opera-
ted to tie his hands and to prevent him from dealing with
his estate for a period of 32 years after he became a major,
that the coal mines of Karanpura were known to be very
valuable and the transaction had the effect of binding the
proprietor to grant leases down to 1951 and on the rates of
salami and royalty fixed in 1907 in the Bokaro license and
adopted in the deed of 1915 and that such a transaction was
not within section 18. It was urged that section afforded
protection to a transaction entered into by the Court of
Wards only if it was of such a character that it was
possible on the facts to take the view that it was for the
benefit of the property or the advantage of the ward, but
where such a possibility is ruled out as when the
transaction was manifestly not for the benefit of the
estate, as for example, a gift of the properties of the
minor, then the section would have no application. The
agreement dated 23-11-1917 was, it was contended, in
substance a gift to Messrs Bird and Co., of a license for a
period of 30 years, and that therefore section 18 could not
be invoked in support of it.
344
tion was beyond the competence of the Court of Wards for any
of the above reasons. It has to be remembered that the
action now in question is that of a statutory body, and that
its powers and limitations with reference thereto must be
found within the four corners of the Act. Section 18 which
confers authority on the Court of Wards to enter into the
transaction is general and unqualified in its terms. There
is no provision in the statute such as there is in section
29(b) of the Guardians and Wards Act (VIII of 1890) that a
lease by the Court of Wards was to enure for a period
related to the minority of the ward. Such a limitation
cannot be read into section 18 for the obvious reason that
the wards whose estates are to be administered under the
Act, may, under section 6 of the Act, be females including
majors declared incompetent to manage the properties or
lunatics or persons who themselves apply that their estates
might be taken over by the Court of Wards. Nor is there any
substance in the contention that as the ward would shortly
be attaining majority, no transaction should be entered into
so as to tie his bands or prevent him from dealing with his
estate after be becomes sui juris. The Court of Wards has
not only the power but is under a duty to manage the estate,
so long as it continues to be in its charge in the same
manner as a prudent owner will manage his own estate, and
the fact that the ward would be coming of age cannot operate
to divest it of its powers and duties under the Act, though
it might enter as an element in judging under section 18
whether the transaction should be entered into. We are also
unable to see any force in the contention that the
transaction of 1917 was incompetent because it bad the
effect of binding the ward to grant leases up to 1951 at the
rates of salami and royalty fixed in the deed dated 26-3-
1915. It is not in dispute that mining leases have to be
and usually are for long terms, and the respondent concedes
that the terms of the 1915 license providing for the grant
of a lease for 999 years on the rates of salami and royalty
fixed therein
345
are not themselves open to attack. That being so, it is
difficult to see how it would make any substantial
difference when the lease for 999 years runs from 1951 and
not from 1921 as provided in the deed of 1915.
It was argued for the respondent with reference to certain
sub-leases granted by the appellant in 1922 and thereafter
that the rates of salami and royalty fixed therein were much
higher than those settled under the 1915 deed, and that the
extension of the license period under the 1915 deed must
have consequently resulted in prejudice to the ward. But
then, those leases were mostly of open mines, and stand on a
different footing from prospecting licenses, and even where
there was a prospecting license, there was no payment of
prospecting salami or advance of a loan without interest as
under the deed dated 26-3-1915, and it appears that there
was some prospecting by the appellant itself with reference
to the areas covered by the license. There is accordingly
no evidence on which it could be held that the terms settled
in 1915 were disadvantageous to the estate.
It must be observed in this connection that no contention
was raised by the respondent in his pleadings that the
transaction was bad for the reason that the rates of salami
and royalty fixed therein were less than the current market
rates. No issue was framed on that question, and no
evidence was directed towards it, and there is nothing about
it in the judgment of the trial court. The respondent did
not take this point even in his grounds of appeal in the
court below, and he raised it only in the course of his
argument there. The appellant objects to this point being
raised at this stage, as it is essentially one of fact on
which evidence would have to be adduced and it had no
opportunity to do so. This objection must, in our opinion,
prevail. (Vide Connecticut Fire Insurance Co. v. Kavanagh(1)
and M. E. Moolla Sons Ltd. v. Burjorjee(2)).
The contention that the extension of the period of license
was in the nature of a gift of a period of 30
(1) [1892] A.C. 473.
(2) [1932] L.R. 59 I.A. 161.
346
years, and was therefore outside the power of the Court of
Wards is clearly untenable. Under the deed dated 23-11-
1917, Messrs Bird and Co. were, in consideration of the
extension of the period granted under the deed dated 26-3-
1915, laid under certain obligations. They had to pay a
minimum ground rent of Rs. 50,000 per annum from the seventh
to the twelfth year, and successive extensions of the period
were made to depend on their having taken leases of a
minimum area of 10,000 bighas in each period, which of
course meant payment of royalties with a minimum fixed. The
deed dated 23-11-1917 created mutual rights and obligations
and cannot be regarded as a deed of gift either in form or
in substance. In the result, the deed of 1917 cannot be
held to be incompetent on any of the grounds put forward by
the respondent.
It is next contended for the respondent that the deed dated
23-11-1917 was bad, because in granting an extension of the
period fixed in the deed dated 26-3-1915 the Court of Wards
considered only the benefit of Messrs Bird and Co., and not
that of the ward, and that therefore its act was not within
the protection of section 18. The facts on which this
contention is sought to be supported are these: When Messrs
Bird and Co. applied on 3-8-1915 to the Court of Wards for
extension of the period of the license, they gave as a
reason therefor that the conditions created by war bad
greatly upset their arrangements and calculations, that in
consequence they were unable to raise or transport capital
to India, that they had paid under the license salami of Rs.
1,00,000 and advanced a loan of Rs. 9 lakhs without
interest, and that it was therefore just that the period of
license should be extended so as to enable them to carry out
their venture. In his note dated 13-8-1915 Mr. Lister, the
Deputy Commissioner, considered that this stand was
"justifiable", and on 21-6-1916 he forwarded the proposal to
the Commissioner observing that "extension. of the period
could ’not equitably be refused". In sending this
application on to the Board of Revenue on 26-6-1916, the
Commissioner endorsed this opinion,
347
and also added that the extension would be in the interests
of the public and of the State. On these facts, it is
argued that the Court of Wards had throughout been
considering the proposal from the point of view of Messrs
Bird and Co., and also from the point of view of the State,
but that the interests of the minor ward did not as such
figure directly and prominently in judging of the propriety
of the transaction, and that however equitable it might be
to show concessions to Messrs Bird and Co. in view of their
previous services to the estate, that was not a ground on
which the Court of Wards standing in the position of trustee
to the ward could legally bind his estate, as it did by the
deed dated 23-11-1917.
There would have been considerable force in this contention,
if the facts had been as stated by the respondent; but they,
however, were not so. The correspondence makes it
abundantly clear that the Court of Wards was considering at
all stages and in all its aspects the benefit of the estate
as to whether there should be at all an extension, and if
so, for what period and on what terms. In their application
dated 3-8-1915, Messrs Bird and Co., apart from recounting
their difficulties and the services they had done to the
estate by advancing the loan, also stated that as the area
covered by the license was very extensive consisting of
about 415 sq. miles, it would require a much larger period
of time than that fixed in the 1915 document to survey the
area and work the mines in full, that if the license was to
expire in 1921, they would have to work the best and the
most profitable mines, leaving the other areas to be
exploited under fresh licenses, and the return to the estate
from them must be poor by reason of the unprofitable and un-
economic character of the mines which had been left
unopened, and that it was accordingly in the interests of
the estate to have long term licenses on the same rates.
Referring to this aspect, the Deputy Commissioner stated in
his note dated 13-6-1916 that the experience gained in the
Katras and Jharia coal mines pointed to the wisdom of
granting long term license, so that the mines could be
worked in the best
348
interests of the proprietor and the lessee. On 21-6-1916
when he forwarded the proposal to the Commissioner, he
stated:
"We are convinced that the interests of the estate and of
the public are equally involved in the exploitation of this
field on broad principles. And we see no prospect of this
being done except by a firm prepared to take long views and
undertake the heavy preliminary burdens".
The Commissioner stated in his memorandum dated 26-6-1916
that he agreed "with the Deputy Commissioner and the manager
that this is essential not only in the interests of the
estate but also of the public". In view of this evidence,
it is impossible to contend that in entering into the
transaction dated 23-11-1917, the Court of Wards had failed
to consider the interests of the estate.
In their application dated 3-8-1915, Messrs Bird and Co.
also stated that if the period of the license was not
extended, it would be impossible for them or for others, in
view of the war conditions, to work the mines and that the
license would have to be abandoned by them. In dealing with
this aspect, the Commissioner observed in his note dated 26-
6-1916 as follows:
"If they were to give up the agreement, the estate would not
obtain such advantageous terms from others, both on account
of the present conditions arising from the war and which
will continue for some time after the war, and also owing to
the fact that the Geological examination of the northern
portion of the Coalfied has proved disappointing and not up
to previous expectation".
This again shows that the Court of Wards did apply its mind
to the question whether the extension was for the advantage
of the estate. The value of a mine to an owner lies not in
his abstract ownership thereof but in its being worked, so
that coal and coke might be sold or royalties obtained. The
estate itself was not in a position to work the mines, and
it bad to get it done by others. If, therefore, there was a
license in force for the prospecting and leasing of the
mines,
349
it would certainly be to the advantage of the estate to
extend the life of that license on such terms as might be
for the benefit of the estate and the lessee, and it was
this aspect that was considered by the Commissioner in his
note. It may be mentioned that there was some difference of
opinion among the officers of the Court of Wards whether if
the period of the license was to be extended from 6 to 12
years, the minimum royalty from the 7th to the 12th year
should be fixed at Rs. 5 per bigha or Rs. 2-8-0 per bigha.
In that connection, Mr. MacGregor, the manager, wrote a note
in which he emphasised that they were dealing with the
estate of a minor, that their position was that of trustees,
that considerations based on equitable grounds or public
interest and the like would be out of place, and that the
minimum royalty should be fixed at Rs. 5 per bigba. Thus,
the attention of the Board was pointedly drawn to the very
aspects which the respondent contends ought to have been
considered by it, and it decided on a consideration of all
the materials to grant extension on the terms set out in the
deed dated 23-11-1917. We are unable to see any ground on
which its propriety could be challenged.
It was also contended by Mr. Gupta that section 18 required
that the act should be for the benefit of the property and
the advantage of the ward, that these conditions were
cumulative and should both of them be satisfied and that
even if the license dated 23-11-1917 was for the benefit of
the property, it was not for the advantage of the ward, and
that therefore it was not valid under section 18. The
fallacy in this argument lies in thinking that the reference
to property in section 18 is by way of antithesis to the
ward. For this, however, there is no justification. If a
transaction is for the benefit of the property, the person
who would reap the advantages thereof must be the owner of
the property. It is difficult to conceive of a transaction
which is for the benefit of the property but not to the
advantage of its owner. If the deed dated 23-11-1917 is for
the benefit of the property by reason of the fact that it
yields revenue in
46
350
the form of minimum ground rent, salami and royalty, it must
equally be to the advantage of the ward who will be the
person who will receive this revenue. Assuming that both
the parts of the clause in section 18 have to be read
cumulatively and not disjunctively, even so, the deed dated
23-11-1917 satisfies the requirements of the section, and is
consequently valid. In the result, we must hold that the
deed is not open to attack on the ground that in entering
into the transaction, the Court of Wards did not consider
the interests of the ward.
The last ground of attack on the deed of 1917 is that it was
not sanctioned by the Board as required by section 18 of the
Act, and was therefore void. It will be remembered that the
application of Messrs Bird and Co. for extension dated 3-8-
1915 was the subject of considerable correspondence and
discussions, and that on 26-6-1916 the Commissioner for-
warded the proposal as finally settled for sanction to the
Board of Revenue. On this, an order was passed by the Board
on 3-7-1916 that it "accepts generally the recommendations
of the Deputy Commissioner" and that "the draft deeds
embodying the proposed terms should be submitted to it in
order that they may be scrutinised by the Legal
Remembrance". In communicating this order to Messrs Bird
and Co., the manager. wrote to them on 12-7-1916 to send a
draft of the agreement, and stated the terms on which it
might be drafted. Messrs Bird and Co., then prepared a
draft and sent it on for approval to the manager. It was
then examined by the officers of the Court of Wards and by
Sri Sarada Charan Mitra, and on 24-4-1917 the Commissioner
sent it to the Board for sanction. By his letter dated
13-7-1917 the Secretary to the Board wrote to the Commis-
sioner that "the agreement however is one of such importance
that the Board agrees with the Additional Legal Remembrancer
that it should be referred to the Solicitor to the
Government of India before final acceptance and before it
can be so referred, it is necessary to clear up the four
points within the extract enclosed from a note recorded by
the Additional
351
Legal Remembrancer", and the note with the four points was
enclosed.
Pausing here, the question is whether the letter dated 3-7-
1916 constitutes sanction as contemplated by section 18 of
the Act. It is recited in the deed dated 23-11-1917 that
the agreement was sanctioned by the letter dated 3-7-1916.
Is that correct? It is argued for the appellant that
section 18 does not prescribe any form in which sanction has
to be given, and that further, the sanction to be given is
to the transaction, not to the document embodying it and
that the letter dated 3-7-1916 sanctioning generally the
grant of extension is sufficient to satisfy the requirements
of section 18, even though there may be details remaining to
be worked out. The decision in Gulabsingh v. Seth
Gokuldas(1) was relied on in support of this position.
There, the Deputy Commissioner had sent to the Commissioner
a proposal to borrow Rs. 1,00,000 from the plaintiff’s firm,
and on 28th January 1891 the Commissioner was informed by
the secretariat that the Chief Commissioner had accepted the
proposals for the liquidation of the debt. On the authority
of this letter, the Court of Wards executed a mortgage on
the 10th December 1891. In rejecting the contention that
there was no proper sanction for the mortgage as required by
section 18 of Act XVII of 1885, the Privy Council observed:
" It was not in their Lordships’ opinion necessary under
section 18 of Act XVII of 1885 that the actual mortgage to
be made by the Court of Wards should be submitted to the
Chief Commissioner for his sanction, nor was it necessary
that the Court of Wards should have his sanction to the
precise terms of the mortgage. The sanction which is to be
inferred from the letter of January 28, 1891, empowered the
Court of Wards to mortgage the property under section 18 of
Act XVII of 1885".
In Ramkanai Singh Deb Darpashaha v. Mathewson (2) the
Commissioner had sanctioned a patni lease, but the lease
deed which was actually executed had not been submitted to
his approval. In holding
(1) [1913] L.R. 40 I.A. 117.
(2) [1915] L.R. 42 I.A. 97.
352
that the sanction was sufficient, the Privy Council
observed:
".......... their Lordships are of opinion that when it is
affirmatively established that a transaction itself in all
its essential particulars has obtained the sanction of the
Commissioner, and when it is requisite that the transaction
be carried into effect by the preparation of the appropriate
deeds, a challenge merely on the ground that the document
ultimately prepared had not been submitted for sanction
cannot be sustained".
The position in law, therefore, is that the requirements as
to sanction must be held to be satisfied if the transaction
in all its essential particulars bad been sanctioned, even
though there are details to be worked out in furtherance of
the sanction and there is no further sanction given to the
deed as finally settled. On these principles, there is much
to be said in favour of the view contended for by the
appellant that the communication dated 3-7-1916 is
sufficient sanction for purposes of section 18. But such a
conclusion would be inconsistent with the letter of the
Secretary of the Board dated 13-7-1917 aforesaid. It was
certainly open to the authorities to indicate the lines on
which the document would have to be drafted and reserve the
grant of sanction until they shall have had a full picture
of the transaction, as might appear on the document. The
Board might have, if that was their intention, sanctioned
the transaction unconditionally by its letter dated 3-7-
1916, but it chose to make it conditional on the document
being again approved by them. Under the circumstances, the
letter dated 3-7-1916 cannot be construed as a final
sanction of the transaction, notwithstanding that it was so
recited in the deed dated 23-11-1917.
To continue the narration, in accordance with the note of
the Secretary dated 13-7-1917, the draft deed was again
taken up by Messrs Bird and Co., alterations were made
therein, and the revised draft was submitted to the
authorities for examination. They in their turn scrutinised
the document, and sent it for the opinion of the Legal
Department, and obtained
353
its suggestions. And on 9-10-1917 the revised draft with
the suggestions made in the Legal Department were returned
by the Board to the authorities concerned "for information
and such action as may be considered necessary". It should
be noted that the Board did not again require the document
to be sent to them for scrutiny, as they did by their letter
dated 3-7-1916. In due course, the suggestions of the Legal
Department which were four in number, were examined; three
of them were formal in character, and were carried out. As
regards the fourth, which related to the question of payment
of the minimum royalty of Rs. 8,000 during the first year,
it was found that under the agreement to which the parties
had come, it was not payable during the first-year. The
deed having been amended suitably to the suggestions made by
the Law Department, it was executed as amended on 23-11-
1917.
The contention of the appellant is that the order of the
Board dated 9-10-1917 is a sanction to the proposal in all
its essential particulars, and that this is sufficient
compliance with the requirements of section 18. The
respondent contends that even on the letter dated 9-10-1917
there were four matters reserved to be considered before the
deed could be engrossed, that it was only after these
matters were settled that there would be a completed
agreement, and that as no sanction bad been given to it
after it had finally shaped itself, the requirements of
section 18 bad not been satisfied. We are unable to uphold
this contention. It is not disputed that three of the four
matters were merely formal ones, and that with reference to
the fourth, the suggestion of the Legal Department proceeded
on a misapprehension of what had really been agreed to by
the parties. Thus, all the essential terms of the agreement
must be held to have been sanctioned by the Board by its
letter dated 9-10-1917, and it is of no consequence, as laid
down in Gulabsingh v. Seth Gokuldas(1) and Ramkanai Singh
Deb Darpashaha v. Mathewson(2) that the document as finally
drafted had not been submitted again for its appro-
(1) [1913] L.R. 40 I.A. 117.
(2) [1915] L.R. 42 I.A. 97.
354
val. We should accordingly construe the letter dated 9-10-
1917 as sufficient sanction under section 18.
The learned Judges of the High Court were of the opinion
that Rule 242 framed under section 70 of the Act required
that the sanction should be recited in the deed, and they
referred to the deed dated 26-3-1915 where that had been
done. But Rule 242 applies only to leases, and is in terms
inapplicable to the deed dated 23-11-1917 which is an
agreement. And both sides have argued the case on the
footing that the deed in question is governed by the last
clause of section 18. We have no hesitation in holding that
the Board directed by its letter dated 9-10-1917 the
execution of the agreement dated 23-11-1917, and that it was
validly executed under section 18. The result, therefore,
is that the deed dated 23-11-1917 is not open to attack on
any of the grounds urged by the respondent, and must be
upheld.
One other contention of the respondent remains to be
considered, and that arises on the statement of the
appellant that it does not contest the finding of the High
Court that the deed dated 1-6-1937 is void. It will be
recalled that under the deeds dated 26-3-1915 and 23-11-1917
the licensees would be entitled to an extension of the
period for 12 years from 26-3-1939 to 26-3-1951 provided
that they had taken on lease a minimum area of 20,000
bighas, and that the appellant had, in fact, taken on lease
only a total extent of 17,539 bighas under six leases during
the years 1922 to 1933. It was also provided in those deeds
that for the areas taken in excess of 10,000 bighas, the
minimum royalty would become payable after 26-3-1939. The
appellant applied to the Court of Wards sometime in 1934 for
amendment of the deeds dated 26-3-1915 and 23-11-1917 so as
to provide that the payment of minimum royalty was to
commence from 26-3-1951, unless railway facilities were
available earlier. This was sanctioned by the Board, and
the deed dated 1-6-1937 incorporates this amendment in the
deeds dated 26-3-1915 and 23-11-1917. As a condition of the
grant of this concession, the Board required the appellant
to take a lease of 2,461 bighas
355
to make up the covenanted extent of 20,000 bighas. The
appellant accordingly applied for three leases of the total
extent of 2,461 bighas, and the Board gave sanction to the
same on 15-7-1937, and on 2-8-1937, the lease deeds were
actually executed. One of them, that relating to Mauza
Saunda, contained, in accordance with the terms of the deed
dated 1-6-1937, the following covenant:
"Provided always that no minimum royalty shall be payable
until the expiration of 36 years from the said 26th day of
March 1915 or until railway facilities shall be available as
aforesaid, whichever event shall first happen".
There is some dispute as to whether the other two leases
contained similar covenants, but that is immaterial for the
present discussion, because if the lease of Mauza Saunda is
bad on account of the aforesaid clause as contended by the
respondent, then the total area taken on lease will be less
than the minimum 20,000 bighas, and the appellant will have
no right to the benefit of the third extension, and the suit
for specific performance must fail.
Now, the contention of the respondent is that the leases
dated 2-8-1937 are bad on two grounds. He firstly argues
that as the deed dated 1-6-1937 has been held to be bad, the
clause in the lease providing for the postponement of
payment of minimum royalty based thereon must also be held
to be bad-and that is conceded by the appellant-and that as
a deed cannot be held to be partly good and partly bad, the
whole of it must be held to be void. The fact that a clause
in a deed is not binding on the ground that it is
unauthorised cannot ipso facto render the whole deed void,
unless it forms such an integral part of the transaction as
to render it impossible to sever the good from the bad.
That is not the position here. The effect of declaring the
proviso void will leave the rest of the deed whole and
intact. The leases without the proviso are perfectly valid,
and indeed, they will be more advantageous to the ward.
Secondly, it is contended that the sanction that was
accorded by the Board was to the lease with the
356
covenant which has been held to be void, and that the deed
without that covenant has not been sanctioned. This
contention again is clearly untenable. Section 18 only
requires that the transaction should be entered into with
the sanction of the Board. When that has been done, the
force of the section is spent. Whether the transaction
turns out to be good or bad on the merits can have no effect
on the sanction, which had been granted before it was
entered into. If the deed is bad on the merits, it will
fail on that ground and not on the ground that by reason
thereof, the sanction becomes ineffective. And the result
is the same whether the deed is bad in part or in toto. The
contention therefore that the lease deeds dated 2-8-1937 are
inoperative must be rejected. The result is that the deeds
dated 26-3-1915 and 23-11-1917 are valid but not the deed
dated 1-6-1937, and that the leases granted to the appellant
are valid, but the clause postponing the payment of minimum
royalty in the lease deed or deeds of 2-8-1937 is
inoperative.
The appeals must accordingly be allowed, the decrees of the
court below set aside, and these of the trial court
restored. In Civil Appeal No. 191 of 1953, the appellant
will have its costs both here and in the courts below. In
Civil Appeal No. 192 of 1953, the parties will bear their
own costs throughout.
It must be mentioned that during the pendency of these
appeals, by virtue of notifications issued under sub-section
(1) of section 3 of the Bihar Land Reforms Act XXX of 1950,
the Estate of Ramgarh became vested in the State of Bihar,
which thereafter intervened in these appeals. At the
bearing, the State filed a memo in the following terms:
’State of Bihar recognises and accepts as valid the leases
granted to the appellant Company whether granted by the
Court of Wards or the Raja under the license of 26th March
1915 (as extended by the supplementary documents of 1917 and
1937).
Nothing in this compromise shall preclude the State of Bihar
in future from modifying the terms and conditions of the
leases in accordance with law empowering the State
Government to do so".
357
The respondent raised the contention that the State had no
locus standi to intervene in these proceedings and at the
stage of appeal, but in the view which we have taken of the
rights of the parties, a discussion of this point is purely
of academic interest. It is sufficient to direct that the
above memorandum be filed and included as part of the
record.
Appeals allowed.