State of Rajasthan vs Basant Nahata

8/19/2019 State of Rajasthan vs Basant Nahata

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Roll No. 1233

Property Law CA III: Assignment

IV Semester

Submitted by: Sanjana Yadav

Submitted to: Ms. Rosmy Joan

Case Analysis: State of Rajasthan vs. Basant Nahata

Introduction

This appeal arose out of the Judgement and Order dated 28.11.2000 passed by a Division Bench

of the High Court of Judicature for Rajasthan at Jodhpur in D.B. Civil W.P. No. 354 of 1999

Basant Nahata vs. State of Rajasthan1 in which the writ petition was allowed and Section 22-

A of the Registration Act as inserted by Rajasthan Amendment Act 1976 was declared as

unconstitutional and that the said Section had all the features of deleterious and being violative

of Article 14 of the Constitution of India.

The case assumes significance as it looks at the responsibility of the States to interpret a statute

in a rational manner. The said Section conferred arbitrary powers on the State Government to

determine as regard declaring a particular document being opposed to public policy and was

hence correctly declared unconstitutional in the decision which was in appeal and consequently

the notifications as contained in the writ petition were also quashed.

In the High Court decision it was opined that the question as to whether a transaction is opposed

to public policy or not can be determined only by the courts and not by the Sub-Registrar. It

was held that the impugned legislation invades the right of a citizen to deal with the property

1 AIR 2001 Raj 127.


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and thus is wholly arbitrary and unreasonable. The Supreme Court did not find any merit in the

appeal which was dismissed accordingly.

The Parties

The appellant in the present case was the State of Rajasthan and the respondent was Basant

Nahata a resident of Bikaner City. He was the khatedar tenant of the agricultural lands situated

in Tehsil Khajuwala District Bikaner. The Court while hearing the matter having regard to the

fact that similar amendments have been carried out by the other States and would have wide

repercussions directed issuance of notice to these other States. Pursuant to the said directions

the intervenor States appeared and made their submissions.

Procedural Facts of the Case

The Government of Rajasthan issued notifications under Section 22-A of the Registration Act

dated 26.3.1999 published in the Rajasthan Gazette dated 1.4.1999 which was amended by the

notification published in the Rajasthan Gazette dated 22.4.1999 which declared registration of

a Power of Attorney executed in favour of a person other than in relation as opposed to public

policy where the property is situated outside the District in which the Power of Attorney is

executed.

Another notification dated 1.4.1999 and amended in the Gazette dated 22.4.1999 declared

registration of Power of Attorney executed in favour of a person for a period of more than three

years or unlimited period as opposed to public policy.

The respondent Basant Nahata had filed a writ petition in the High Court of Judicature for

Rajasthan at Jodhpur seeking the quashing of the impugned Section as inserted by the

Rajasthan Legislature and the notifications issued in exercise of the same and the case was

decided on 28.11.2000.


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The fact in issue was whether the notifications were within the scope of Section 22-A and

further whether the impugned Section of the Registration Act as inserted by Rajasthan

Amendment Act 1976 itself is unconstitutional and deleterious and violative of Article 14 of

the Constitution of India. The appellant filed an appeal against this decision in the Supreme

Court of India at New Delhi which was then decided on 7.9.2005. A further question which

arose was whether having regard to the doctrine of separation of powers what is essentially

within the exclusive domain of the judiciary can be delegated to the executive unless policy

behind the same is finally laid down. For reasons which will be elaborated in the latter part of

the assignment the court did not find any merit in the appeal and it was dismissed accordingly.

Summary of the Historical Facts

The respondent had appointed one Sukhdeo Singh as Power of Attorney authorising him to

look after his lands and cultivate them. He was also authorised to deposit the instalments of the

lands and mortgage or sell the lands and execute the sale deed thereof and get it registered.

The respondent presented the Power of Attorney dated 16.7.1999 executed by him in favour of

Sukhdeo Singh on 30.7.1999 before the Sub-Registrar Bikaner. He was advised that the Power

of Attorney executed by him should be authenticated by the Sub-Registrar of the area where

the respondent resides as per the provisions of Sections 32 and 33 of the Registration Act. The

respondent submitted the Power of Attorney for registration.

However the Sub-Registrar Bikaner refused registration on the document making an

endorsement as per which the document could not be registered by the registering authority as

the Govt. Notification dated 26.3.1999 published in the Rajasthan Gazette dated 1.4.1999 as

amended by the Notification published in the Rajasthan Gazette dated 22.4.1999 has banned

the registration of such documents as opposed to public policy.

The respondent herein questioned the constitutionality of Section 22-A as inferred by the

Rajasthan Legislature as also the aforementioned notifications by filing a writ petition before

the Rajasthan High Court.


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Relief sought by the Parties

The respondent had prayed in the case filed by him for:

i.

Quashing Section 22-A of the Rajasthan Act as inserted by the Rajasthan Legislature.

ii. Quashing the notifications issued by the State Government in exercise of the powers

under Section 22-A of the Registration Act.

iii. Directing the Sub-Registrar to register Power of Attorney dated 16.7.1999 which was

presented by the petitioner on 30.7.1999.

The High Court ruled in favour of the respondent and hence the appeal lay before the Supreme

Court.

Arguments of the Parties

I. Contentions of the Respondent

According to the learned counsel for the petitioner Section 22-A confers arbitrary powers on

the State Government to declare registration of any document as opposed to public policy. No

guidelines or principles have been provided in this Section for the exercise of the powers under

Section 22-A of the Act. Therefore the impugned Section is violative of Article 14 of theConstitution as it confers unguided and uncontrolled powers on the State Government and are

thus void.

In this context the learned Counsel for the respondent relied on the judgment of the Supreme

Court reported in B.B. Rajwanshi vs. State of Uttar Pradesh2 in which similar provisions in

Section 6 Sub-Clause (4) of the U.P. Industrial Disputes Act was struck down by the Supreme

Court as violative of Article 14 of the Constitution of India.

2 (1988) II LLJ 238 SC.


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The declaration vide notification dated 26.3.1999 is absolutely arbitrary and void because

classification of authorisations through Power of Attorney on the basis of the properties and its

situation has no rational nexus the object sought to be achieved through prohibition of

registration of such documents. The fact that the property is situated within the District or

outside the District has no rationale relating to the object to be achieved by the Notification.

As per this Notification the Power of Attorney executed in favour of any person within the

District in which the Power of Attorney is executed may be given to any person who is not a

relation referred to in the Notification dated 22.4.1999 but a Power of Attorney for the transfer

of the property situated outside the District is acceptable for registration only if it is made in

favour of relations of the executant of the Power of Attorney referred therein. The Notification

is therefore arbitrary and offends Article 14 of the Constitution of India and is void.

Similarly the notification dated 1.4.1999 as amended by the notification dated 22.4.1999 is also

arbitrary. The classification between the documents in which the period for the exercise of the

power is limited to a period of three years has no relation to the object to be achieved and

therefore is void and unreasonable.

In support of his contention learned counsel also relied on the judgments of the Supreme Court

in Dwarka Prasad Laxmi Narain vs. State of Uttar Pradesh3 and State of Kerala vs. Travancore

Chemicals and Manufacturing Co.4 and it was also submitted that the notifications offend

Section 22 of the Registration Act. Under the said Section a Power of Attorney is to be

produced for authentication in the office of the Sub-Registrar and the Registrar within whose

jurisdiction the executor of the power of attorney resides and not where the property is situate.

The notification which compels the donee of the Power of Attorney to go to Registrar within

whose jurisdiction the property it to which it relates is situated offends the provisions of Section

33 of the Registration Act which is a central legislation and is void. Also there is no basis for

classification on the ground of location of the property.

II. Contentions of the Appellant

3 [1954] 1 SCR 803.4 [1998] SCC (8) 188.


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Section 22-A of the Registration Act introduced by the Rajasthan Amendment Act 1976 is

perfectly legal and the powers conferred on the State Government under this Section cannot be

said to be arbitrary. Moreover there are sufficient guidelines under Section 22-A of the

Registration Act to declare registration of any document and the list of documents as opposed

to the public policy. The discretion conferred upon the State Government in this regard cannot

be called to be arbitrary and Section 22-A is not liable to be struck down and the provision is

in no way violative of Article 14 of the Constitution of India.

The Notifications dated 26.3.1999 and 22.4.1999 are perfectly legal and the same cannot be

said to be arbitrary. So far as the notification dated 26.3.1999 as published in the Gazette dated

1.4.1999 is concerned the same is legal. It will not be out of place to mention that the aforesaid

notification was amended and the period was extended from six months to three years. In

respect of the aforesaid notifications the Advocate General submitted that the matter was

discussed in the seminar organised by the Departmental Officers on 8th and 9th July 1997 at

Jaipur and in order to put a stop to the tactics to get executed a Power of Attorney for an

indefinite period instead of getting the sale deed executed when the real nature of transaction

between the executant of such instrument and holder of Power of Attorney is that of sale or

transfer of immovable property. In such cases only the Power of Attorney is given to the

purchasers and the parties do not opt for execution of sale deed for years together and thereby

postpone the payment of the registration fee and the stamp duty. The notification according to

the learned Advocate General was issued to curb that tendency and also to curb unnecessary

litigations. Therefore it was considered that such type of Power of Attorneys are against the

public policy therefore a limitation of three years has been put for the validity of such Power

of Attorney.

According to the learned Advocate General the restriction had been put in public interest and

it has rightly been considered by the State Government against the public policy if a Power of

Attorney is executed in favour of a person for more than three years or for an unlimited period.

In so far as notification dated 26.3.1999 read with notification dated 22.4.1999 is concerned by

this notification the Power of Attorney conferring power of sale of property situated outside

the District/Sub-District if executed in favour of the person other than a relation have been

declared as documents opposed to public policy and that the said declaration is perfectly valid

and does not suffer from any vice or arbitrariness whatsoever. It is the case of the State that the

limitation of three years has rightly been imposed so that in the garb of power of Attorney the


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purchaser may not get the execution of sale deed postponed for indefinite period and thereby

evade stamp duty and registration charges of the alleged transaction.

According to the respondents the Sub-Registrar has rightly refused to register the document in

the case at hand on account of the notifications issued under Section 22-A of the Act and that

the respondent is not entitled to a direction from this Court to the Sub-Registrar to get it

registered contrary to the directions contained in the impugned notifications. Learned Advocate

General submitted that the respondent is not entitled to any relief as claimed by him in the writ

petition. In support of his contentions he has cited the case of Pannalal Binjraj vs. Union of

India5 and the State of Bihar vs. Bihar Chambers of Commerce and Ors.6

The learned appearing on behalf of the appellant and the intervenor States further raised thefollowing contentions:

i. That a presumption is attached in favour of a validity of a statute and it would be

for the person to establish who alleges violation of fundamental or other rights for

impinging upon the constitutional validity of Section 22-A of the Act

ii. A legislation directing compulsory registration of a document and/or refusal to

register the same being a matter of policy so as to enable the State to regulate

registration of document or class of documents could not be interfered by the High

Court.

iii. The terminologies opposed to public policy or public interest carry precise meaning

having regard to the provisions of Section 23 of the Indian Contract Act and Section

7(1)(b)(ii) of Foreign Awards (Recognition and Enforcement) Act 1961 and Section

3(1) of Uttar Pradesh (Temporary Control of Rent and Evictions) Act 1947 and

Section 34 of Arbitration and Conciliation Act 1996 and thus cannot be said to be

wholly arbitrary.

iv. In exercise of its power of judicial review the superior courts would not invalidate

a statute only on the ground that guidelines have not been laid down by the

legislature for making subordinate legislation or that the legislature has abdicated

its essential legislative function in favour of executive but in a given case may strike

down only the notifications issued by the State if it be found to have exceeded its

5 [1957] 1 SCR 233.6 [1996] 2 SCR 184.


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jurisdiction in that behalf. In any event as such guidelines can be found out either

from the preamble or from other provisions of the Act the same need not be stated

in the offending provision.

Outcome of the Case

The appeal was dismissed without costs and so far as amendments made by other States are

concerned the Court was of the opinion that any order passed by a Sub-Registrar or Registrar

refusing to register a document pursuant to any notification issued under Section 22-A of the

Act would not be reopened.

Reasoning of the Court

The Court held that the essential functions of the legislature cannot be delegated and it must be

judged with touchstone of Article 14 and Article 246 of the Constitution of India. It is thus only

the ancillary and procedural powers which can be delegated and not essential legislative point.

The contention raised on behalf of the appellants that the State being higher authority having

been delegated with the power of making declaration in terms of Section 22-A of the Act would

not be abused was stated to be rejected.

The contention raised to the effect that this Court would not interfere with the policy decision

was again held to be devoid of any merit. A legislative policy must conform to the provisions

of the constitutional mandates. Even otherwise a policy decision can be subjected to judicial

review.

Analysis and Conclusion


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The Court acknowledged the fact that there cannot be any doubt whatsoever that the it shall

not invalidate a legislation on the ground of delegation of essential legislative function or on

the ground of conferring unguided and uncontrolled and vague powers upon the delegate

without taking into account the preamble of the Act as also other provisions of the statute in

the event they provide good means of finding out the meaning of the offending statute. This

aspect of the matter has been considered in some details in People Union for Civil Liberties vs.

Union of India7 and Andhra Bank vs. B. Satyanarayana8 but preamble and statement of object

and reason can only be looked into when there is vagueness or ambiguity present in the

language of the Act as in Arnit Das vs. State of Bihar 9 wherein the Court held that it is only

when the language is itself capable of more than one meaning then the preamble or the

statement of objects and reasons can be looked into and not when something is not capable of

given a precise meaning as in case of public policy.

The Court pointed out that it had not been shown as to how the preamble or any other provisions

of the Act would provide for any guideline in construing Section 22-A of the Act. The principal

contention raised on behalf of the counsel for the appellants was that the terminology opposed

to public policy itself provides for such guidelines.

It has to be understood that this phraseology cannot operate to get over all the constitutional

difficulties posited. It is always in the domain of judiciary to interpret what is morality at a

given point of time and this power cannot be given to the executive and finality cannot be

attached to decisions of executive when such things are in exclusive domain of the judiciary.

The judiciary has been conferred with power to determine as to the factors of public policy

which may form the basis for interference with a contract or award. In this case the Court gaveits opinion that it would not be correct to content that public policy is capable of being given a

precise definition and what is opposed to public policy would be a matter depending upon the

nature of the transaction.

The pleadings of the parties and the materials brought on record are relevant so as to enable

the courts to judge the concept as to what is for public good or in the public interest or what

7

AIR 2004 SC 1442.8 (2004) II LLJ 5 SC.9 2000 Cri LJ 2971.


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would be injurious or harmful to the public good or the public interest at the relevant point of

time as contra-distinguished from the policy of a particular government. A law dealing with

the rights of a citizen is required to be clear and unambiguous. Doctrine of public policy is

contained in a branch of common law and it is governed by precedents.

The principles have been crystallized under different heads and though it may be possible for

the courts to expound and apply them to different situations but it is trite that the said doctrine

should not be taken recourse to in clear and incontestable cases of harm to the public though

the heads are not closed and though theoretically it may be permissible to evolve a new head

under exceptional circumstances of a changing world.

A party in a suit against whom illegality is pleaded also gets an opportunity to defend himself.Hence this essential function to decide on what is public policy cannot be delegated to

executive through a subordinate legislation.

In Chitty on Contracts the author observed that doctrine of public policy is somewhat open

textured and flexible which has been the cause of judicial censure of the doctrine and has been

seen by the courts as being vague and unsatisfactory and a treacherous ground for legal

decision.

The Court said that a doctrine which is so vague or uncertain cannot and does not provide any

guideline whatsoever. Furthermore the executive while making a subordinate legislation

cannot be permitted to open new heads of public policy in its whims. The provisions of the Act

therefore do not lay down any guidelines to render it constitutional. Execution of power of

attorney per se is not invalid and in fact on the other hand it is lawful.

The notifications issued by the State of Rajasthan themselves show that the uncertain position

to which the parties to a transaction evidenced by a deed or a document can be put to. By the

notification dated 1st April 1999 any power of attorney authorizing the attorney to transfer any

immovable property for a term in excess of six months or irrevocable or where the term is not

mentioned was declared to be opposed to public policy whereas by reason of a subsequent

notification dated 22nd April 1999 in place of six months three years was substituted. Similarly

by a notification dated 26th March 1999 power of attorney authorizing the execution of any

document of transfer of immovable property presentation for registration before any office

other than the Sub-Registrar or Registrar respectively in whose District or Sub-District the


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whole or some part of the property to which such power of attorney relates was declared as

opposed to public policy which was amended by a notification dated 22nd April 1999

exempting such power of attorney executed in favour of a relation.

Execution of a power of attorney in terms of the provisions of the Indian Contract Act as also

the Power of Attorney Act is valid. A power of attorney is executed by the donor so as to enable

the donee to act on his behalf. Except in cases where power of attorney is coupled with interest

it is revocable. The donee in exercise of his power under such power of attorney only acts in

place of the donor subject of course to the powers granted to him by reason thereof. He cannot

use the power of attorney for his own benefit. He acts in a fiduciary capacity. Any act of

infidelity or breach of trust is a matter between the donor and the donee.

The Court noted that the State of Rajasthan inserted Section 17(1)(f) and (g) in the Act making

the registration of agreement to sale and irrevocable power of attorney relating to transfer of

immovable property in any way a compulsorily registrable document. The State went further

to amend Article 23 of the Second Schedule of the Stamp Act 1899 making an agreement to

sale of immovable property and irrevocable power of attorney or any other instrument executed

in the course of conveyance etc. with possession to be deemed to be a conveyance and stamp

duty is chargeable thereon accordingly. According to the State despite such enactments sales

were being made by seller on the basis of a power of attorney with a right to sell the property

and such powers of attorney were being executed for an unspecified period. A transaction

between two persons capable of entering into a contract which does not contravene any statute

would be valid in law. The State of Rajasthan does not make such transactions illegal. The

Indian Contract Act or the Power of Attorney Act have not been amended. Execution of a

power of attorney per se therefore is not illegal. Registration of power of attorney except in

cases falling under Section 17 is not compulsorily registrable. Sections 32 and 33 of the Indian

Registration Act also do not bar any such registration.

The Act only strikes at the documents and not at the transactions. The whole aim of the Act is

to govern documents and not the transactions embodied therein. Thereby only the notice of the

public is drawn.

Hence Section 22-A of the Act through a subordinate legislation cannot control the transactions

which fall out of the scope thereof. The Court further noted the effect of a power of attorney

under the Indian Contract Act or the Power of Attorney Act. A subordinate legislation which


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is not backed up by any statutory guideline under the substantive law and opposed to the

enforcement of a legal right thus would not be valid according to the opinion of the Court.

The question can be considered from another angle. A person may not have any near relative

or is otherwise unable to attend the office of the Sub-Registrar or Registrar within whose

jurisdictions the property is situated. He may even be out of the country. In absence of any

substantive provisions contained in a parliamentary or legislative Act he cannot be refrained

from dealing with his property in any manner he likes. Such statutory interdict would be

opposed to the right of property of the person as envisaged under Article 300-A of the

Constitution of India.

The scope and effect of public policy has been construed differently by this Court in differentcases. For instance in Renusagar Power Co. Ltd. vs. General Electric Co.10 and Oil and Natural

Gas Corporation Ltd. vs. Saw Pipes Ltd.11 and hence it becomes amply clear that it is not

possible to define public policy with precision at any point of time. It is not for the executive

to fill these grey areas as the said power rests with judiciary. Whenever interpretation of the

concept public policy is required to be considered it is for the judiciary to do so and in doing

so even the power of the judiciary is very limited. Even for the said purpose the part dealing

with public policy in Section 23 of the Indian Contract Act is required to be construed in

conjunction with other parts of that Act.

A thing which itself is so uncertain cannot be a guideline for anything or cannot be said to be

providing sufficient framework for the executive to work under it. Essential functions of the

legislature cannot be delegated and it must be judged with touchstone of Article 14 and Article

246 of the Constitution of India. It is thus only the ancillary and procedural powers which can

be delegated and not the essential legislative point. A legislative policy must conform to the

provisions of the constitutional mandates. Even otherwise a policy decision can be subjected

to judicial review. The appeal was thus dismissed.

10 AIR 1994 SC 860.11 [2003] 3 SCR 691.

State of Rajasthan vs Basant Nahata

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