1924 (11) TMI 1 - Commissioner - Companies Law

Summary

Issues Involved:
1. Validity of the transaction, specifically the surrender and sale of villages.
2. Legality of the agreement to relinquish occupancy rights.
3. Separation of legal and illegal parts of the transaction.
4. Necessity and benefit of the sale of villages.
5. Consideration and refund related to the transaction.

Issue-wise Detailed Analysis:

1. Validity of the Transaction:
The primary question in this appeal concerns the validity of the transaction, which is divided into two parts: the surrender alleged by the respondents to invalidate the whole transaction and the sale of the villages as a separate transaction. The court opined that the sale of the villages and the surrender formed one transaction, referencing Exhibit P. 57 and Exhibit P. 9, which indicated that the agreement to sell the villages and the occupancy rights in the sir lands was a single transaction, despite the surrender occurring nine months after the sale.

2. Legality of the Agreement to Relinquish Occupancy Rights:
The court referred to several leading cases, such as Mir Dad Khan v. Ramzan Khan and Ikram-Ullah Khan v. Moti Chand, which established that if a covenant to relinquish the sir lands is part of the transaction of sale or mortgage, then the agreement to surrender is void and unenforceable. The court found that the facts of the present case were similar to these precedents, concluding that the agreement to relinquish the occupancy rights in the sir lands was part of the sale agreement and was a device to defeat the Tenancy law, rendering it unenforceable.

3. Separation of Legal and Illegal Parts of the Transaction:
The respondents argued that part of the consideration being illegal rendered the whole transaction void. However, the court noted that where legal and illegal portions of a transaction can be separated, the legal part can be upheld. The court found that the sale of the villages, which was lawful, could be separated from the sale of the occupancy rights. The consideration was apportioned between the two objects, with Rs. 15,000 for the villages and Rs. 5,000 for the occupancy rights, indicating an intentional separation by the parties. Thus, the court agreed with the lower court that only the part of the transaction related to the surrender of the occupancy rights was void.

4. Necessity and Benefit of the Sale of Villages:
The court examined whether the alienation of the villages was justified. It found no pressing necessity for the sale and no danger to the estate to be averted. The reasons given by Venkatrao for the sale, such as the distance of the villages from Nagpur and the malarial climate, were not sufficient justifications. The court noted that Venkatrao was not in embarrassed circumstances and had considerable other property. The bulk of the consideration from the sale was lent on mortgage to Venkatrao's brother-in-law, which increased the family's income. The court concluded that the sale resulted in an actual benefit to the family and should be upheld.

5. Consideration and Refund Related to the Transaction:
The court addressed the argument that Venkatrao agreed to refund the consideration if the defendant was dispossessed by his heirs. It held that this aspect of the case was not put before the lower court and that the defendant could not have a right of action while the present case was pending. The court concluded that the plaintiffs were not bound to repay the Rs. 5,000 related to the surrender of the occupancy rights, as this part of the transaction was void.

Conclusion:
The court modified the decree of the lower court, dismissing the plaintiffs' suit regarding the claim to set aside the sale of the villages but confirming the claim for joint possession of the sir land. Each party was directed to bear its own costs in both courts. The decree was thus modified.