PRAMOD C BHAT Vs. KANWAR RAJ NATH

JUDGEMENT

(1.) THIS appeal raises a very important question as to the right of the Custodian of evacuee property to terminate a lease granted by him in respect of evacuee property, and also the right of the Custodian to give certain directions under Section 10 of the Administration of Evacuee Property Act, 1950. On 12-9-1951, Messrs. Ahmed Abdul Karim Bros. , Ltd. , were declared to be evacuees and their property vested in the Custodian. On 30-8-1952, the Custodian entered into an agreement of lease with the petitioners in respect of some of the properties of Ahmed Abdul Karim Bros. , Ltd. , which had been declared to be evacuee properties, and the properties in respect of which the lease was executed were three mills with bungalows and chawls attached thereto at Ambernath, and a Bobbin Factory, and the agreement of lease provided that the petitioners should have a lease of these properties for a period of five years. It was provided that on the execution of the agreement the lessees shall deposit with the lessor a sum of Rs. 1,50,000 as security for the due fulfilment and observance of the term as to regular payment of the instalments of rents provided by the agreement, and this security of Rs. 1,50,000 was liable to be forfeited if any instalment of rent was not paid on the due date. The rent payable by the lessees in respect of the demised premises was fixed at Rs. 6,00,000 and the rent was to be paid by quarterly instalments of Rs. 1,50,000 each. It was also provided that within 30 days from the completion of valuation of all stocks of raw materials, unsold finished goods, stores, spare parts and other articles referred to in the next clause, the lessees should deposit with the lessor a sum of Rs. 7,00,000 or furnish to the Custodian a guarantee for the like amount by a bank acceptable to the Custodian as security for payment of the value of these goods. Then clause. 6 embodied an agreement of the sale of stocks of raw materials and unsold finished goods, etc. , to which we have just referred, by the Custodian to the lessees and the price of the goods was to be fixed through one or more experts who would be the representatives of a recognised mercantile association dealing in goods of similar nature, to be nominated by the Custodian. The sale was to be completed within a period of three months from the date of the agreement and the balance of the purchase price was to be paid on or before the date of completion of the sale. There was also a provision by which the lessees had to insure and keep insured the demised premises and the machinery lying therein, in the joint names of the lessor and the lessees, and the insurance was to be effected with a company acceptable to the lessor. There was also a submission clause by which disputes between the parties were to be referred to arbitration. The lessees were put into possession of the demised premises and all the stocks which they had purchased on 31-8-1952.

(2.) ON 12-2-1954, the Custodian issued a notice against the petitioners to show cause and in this notice the Custodian stated that the petitioners had generally failed to observe and fulfil most of the important terms and conditions of the agreement of lease and in particular they had committed breaches of and violated the terms and conditions specified in the schedule annexed to this notice. By this notice, which the Custodian said he, was issuing in exercise of the powers, vested in him by Section 12 of the Administration of Evacuee Property Act, 1950, read with Sub-rules (2), (4) and (5) of Rule 14, being the rules framed under the Act, he was calling upon the petitioners to show cause on 22-2-1954, why the agreement of lease should not be forthwith cancelled and terminated and the petitioners be evicted from the demised premises. In the schedule the Custodian set out the various important defaults committed by the lessees. According to the Custodian, the lessees had committed default in paying the sixth quarterly instalment of rent which fell due on 30-11-1953, and which should have been paid on 30-12-1953, at the latest, and it is pointed out that although a cheque for Rs. 1,50,000 was given on 31-12-1953, that cheque was not honoured, and then a sum of Rs. 50,000 was paid towards this liability on 6-1-1954, a further sum of Rs. 25,000 was paid on 20-1-1954, and a further sum of Rs. 25,000 on 9-2-1954, and a sum of Rs. 50,000 still remained due from the lessees on account of the sixth instalment. Then it was pointed out that the lessees had failed to pay the sum of Rs. 7,00,000 and also failed to give a bank guarantee as required by Clause 5 of the agreement. It was also pointed out that the lessees had deliberately raised disputes and evaded completion of the sale on frivolous and false grounds; and finally the lessees had failed to insure the premises to the full insurable value, and they had also failed to obtain the approval of the Custodian to the insurance effected by them. This notice also gave certain directions, to the petitioners and by this notice the Custodian stated that for the purpose of preservation of the demised premises and the goods and the stock-in-trade lying in the demised premises, he considered it necessary to give the following directions, and he called upon the petitioners to comply with the same, and the directions substantially are that the petitioners were directed not to remove stocks of raw materials, finished goods, goods in process, stores, spare parts and other moveables as well as books of account, etc. , lying on the premises without the express permission in writing of certain Inspectors who were posted by the Custodian at the mills factory, godowns and offices. The petitioners were further prohibited from raising any money on the security of the stock of finished goods, goods in process, etc. They were directed to submit a daily report to the Custodian of all the transactions entered into by the petitioners including payments made and received by them in connection with the affairs of the mills and the Bobbin Factory from the date of the notice till the disposal of the show cause notice proceedings. Finally, the petitioners were directed to furnish to the Custodian in writing such information as may be required by him from time to time, and they were further required to furnish to him information in writing regarding the quality, quantity, nature, approximate value and place of storage of raw materials, finished goods and goods in process before 2 p. m. on the 13th instant.

(3.) THE petitioners filed this petition from which this appeal arises on 15-2-1954, and by this petition they challenged the authority of the Custodian to proceed under Section 12 and his authority either to issue a notice to show cause or ultimately to terminate the lease as threatened by him in the event of the petitioners failing to show cause. They also challenged the authority of the Custodian to issue the directions which he issued in the notice.