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TMI Blog1956 (4) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... is an ancient principality situate in Bihar. It has three coalfields, Bokaro Jharia 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 Ramnarain Singh, the proprietor of the estate, granted in favour of Messrs Anderson Wright and Company, a prospecting license in respect of the Bokaro Ramgarh coal-fields, referred to in these proceedings as the Bokaro license. He was also negotiating for similar license in respect of the Karanpura coal-fields (vide Ex. 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. 3. 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 Company, made an application for a prospecting license for the Karanpura coal-fields, and in reply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cense on the ground that as the result of war conditions, new and unexpected difficulties had cropped up and that to achieve the purpose of the license, it 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 Company, and the Court of Wards on the expediency 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 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 provision 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 te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 7. 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 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thirdly because Mr. MacGregor, the then manager of the Court of Wards, was acting in his own interests and adversely to these 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 Respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers 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 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? 12. The contention of Mr. Gupta for the Respondent is that the words as it may judge do not signify that the jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s '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 he 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 determination 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. 14. That being the true scope of the power conferred by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 16. 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Company should have a license on the same terms as were contained in the Bokaro license unless otherwise agreed, and as Ex. 130(i) shows that there was no special agreement with reference to this matter, 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. 18. To appreciate this contention, it is necessary to refer to the provisions of the Bengal Cess Act 9 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of cess, and this view has been adopted in Balwantrao Naik v. Biswanath Missir 1945 Pat 417 (AIR V. 32) (F) and Ramkumari Devi v. Hari Das 1952 Pat 239 (AIR V. 39) (G). 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 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 operated 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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. 23. 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 disadva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nse, they gave as a reason therefore that the conditions created by war had 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, 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 Company, and also from the point of the State, but that the interests of the minor ward did not as such figure directly and prominently in judging of the propriet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 28. In their application dated 3-8-1915, Messrs. Bird and Company 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 Coalfield 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 wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it yields revenue in 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. 30. 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 Company for extension dated 3-8-1915 was the subject of considerable correspondence and discussions, and that on 26-6-1916 the Commissioner forwarded 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 term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 18 of Act 17 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 28-1-1891, empowered the Court of Wards to mortgage the property under Section 18 of Act 17 of 1885. In Ramkanai Singh v. Mathewson AIR 1915 PC 27 (AIR V. 2) (K), the Commissioner had sanctioned a patni lease, but the lease deed which was actually executed had not been submitted to his approval. In holding 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. 32. The position in law, therefore, is that the requirements as to sanction must be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was executed as amended on 23-11-1917. 34. 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 had been given to it after it had finally shaped itself, the requirements of Section 18 had 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 40 Ind App 117 (PC) (J) and 1915 PC 27 (AIR V. 2) (K) that the document as finally drafted had not bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 937, 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. 37. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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