Patna High Court
Kamakshya Narainsingh vs Karanpura Development Co. Ltd. on 27 October, 1949
Equivalent citations: AIR1950PAT134, AIR 1950 PATNA 134
JUDGMENT
1. These two appeals arise out of two suits decided by one judgment of the Additional Subordinate Judge of Hazaribagh, dated 30th April 1943. They raise identical questions regarding the validity of transactions entered into by the Court of Wards on behalf of Raja Kamakshya Narain Singh Bahadur of Ramgarh (who will hereafter be called the appellant Raja) with Meagre. Bird & Co. On behalf of the Karanpura Development Company Limited (who will hereafter be called the respondent Company) evidenced by a prospecting license in reaped of extensive coal lands lying within the estate of the appellant Raja accompanied by an agreement to lease, dated 26th March 1915, and two subsequent deeds, dated 23rd November 1917, and 1st June 1937, and number of leases granted to the respondent company, in pursuance of the prospecting license as varied by the deeds of variation, just mentioned.
2. First Appeal No. 125 of 1943 arises out of suit No. 82 of 1910 by the appellant Raja against the respondent Company foe a declaration that the transactions evidenced by the deeds, just mentioned, were void and inoperative in law, and for possession of the lands covered by them, as also for mesne profits to the tune of about two crores of rupees as being the price of coal extracted by the lessees of the respondent Company during the period that they have been in possession of the lands under the leases granted in pursuance of the impugned prospecting license.
3. The learned Subordinate Judge held that the deed of prospecting license with the agreement to lease and the deed of variation dated 23rd November 1917, were valid transactions binding on the appellant Raja. He, however, held that the deed of variation dated 1st June 1937, was void and inoperative in law. He accordingly dismissed the suit except with regard to the deed of variation of 1937. The Raja therefore has appealed to this Court against the part of the decree dismissing his suit and the Company has filed a cross-objection to the part of the decree holding that the deed of variation of 1937 was void and inoperative.
4. First Appeal No. 127 of 1943 arises out of Suit No. 28 of 1940 instituted by the respondent Company against the appellant Raja for a declaration that the transactions covered by the deeds in question were valid and for specific perform once of the agreement to leaas contained in the deed of prospecting license dated 26th March 1915, as varied by the deeds of 1917 and 1937. The Subordinate Judge decreed the suit of the respondent Company so far as it related to the prospecting license of 1915 and the deed of variation of 1917 but dismissed the suit in respect of the deed of variation of 1937. He ordered that the Company's possession over the lease-hold properties be confirmed and the Raja be ordered to execute, register and perfect in favour of the Company a lease in respect of 250 bighas of land as prayed for in the plaint. He has also issued an injunction restraining the Raja from interfering with the Company in exercise of its rights under the prospecting license of 1915 and the variation deed of 1917. The Raja has appealed.
5. The main question, which arises for consideration in these appeals, is, whether the Court of Wards had power to enter into a transaction like that of a prospecting license with an agreement to lease, and, if so, whether it acted in so doing and in varying its terms from time to time within the ambit of its powers as defined in the Court of Wards Act (Act IX [9] B. C. of 1879 to be referred to hereafter as the Act). It is conceded that if it is held that the impugned deeds were executed by the Court of Wards in excess of its powers under the Act, they will be void and in-operative in law, and that the respondent Company will have no title to the lands in their possession and will be mere trespassers and liable to be ejected.
6. The facts leading up to the execution of the deed of prospecting license of 1915 are these: Mabaraja Ram Narain Singh Bahadur was the grand father of the appellant Raja. While he was in possession of the estate, he granted a prospecting license in respect of another coal field known as Bokaro Ramgarh to two persons Mr. Banustz and Mr. Mitchell, who were asking on behalf of an unincorporated syndicate known as the Bokaro Coal Syndicate on terms and conditions as detailed in Ex. A (g), dated 26th November 1907. It appears that about the same time the agents of Bird and Co. and Beg Dunlop and Co., approached Maharaja Ram Narain Singh Bahadur for prospecting license in respect of the coal fields in question known as Karanpura coal fields. Jugal Kishore Prasad, witness no. 4 for the appellant Raja, states that when the late Raja's manager and and other officials were at Calcutta in connection with the execution of an indenture relating to the Bokaro Ramgarh Company, just mentioned, they were approached on behalf of Messrs, Bird & Co, and Beg Dunlop & Co. for a prospecting license in respect of the Karanpur coal fields and the agents of the company later came to Padma to carry on negotiations with the Raja. He also states that when they failed to persuade the Raja to agree to give them the prospecting license they were asking for. they held out a threat that they would get the mines in spite of the Raja somehoy by hook or by crook.
7. It appears that the members of the junior branches of Raja held Khorposh grants under him which comprised certain villages covering portions of Karaapuca coal fields. These jagir estates were then under the management of the manager appointed under the Encumbered Estates Act. Bird & Co. along with Beg Dunlop & Co. approached the manager of the Encumbered Estates and started negotiations for prospecting licenses in respect of the coal lands comprised in the estates under his charge. They succeeded in obtaining four prospecting licenses in respect of encumbered estate, (1) Hossir (2) Kathemderi and Kothas under four deeds of the same date, 23rd February 1909.
8. Maharaja Ram Narain Singh Bahadur having come to know of these deeds, wrote to the Commissioner, Chota Nagpur Division, objecting to the grant of these prospecting licenses by the manager, Encumbered Estates to Bird & Co. The letter is EX. A (h) I, dated 9th October 1908. He stated in the letter that the persons holding villages given in jagir, khairat and Khorposh had no underground rights, that the Board of Revenue in sanctioning the leases in respect of the minerals by the encumbered estates would be acting entirely prejudicially to his interest and that he expected that the authorities would not do anything to injure his interest.' This protest seems to have gone unheeded. Maharaja Ram Narain Singh was, therefore, compelled to institute four title suits in October 1909, against the khoposhdars and their licensees. Messrs. Bird & Co., contesting the right of the khorposhdars to the minerals and praying that the prospecting licenses, granted by the Encumbered Estates be declared to be void and inoperative and for a perpetual injunction against the licensees, Messrs. Bird & Co. restraining them from prospecting for coal and opening mines and quarries. While these suits were pending the decision of the Privy Council in the case of Sari Narayan Singh v. Sriram Chakravarti, 37 I. A. 136 : (37 Cal. 723 P. C.) was given holding that the right to minerals did not, unless expressly granted, pass to the jagirdars or tenure holders and remained with the proprietor.
9. It appears that on 10th June 1910, Mr. Geake, Commissioner of Chota Nagpur wrote the letter (EX. 155-A) to the Raja that it would be "in the interest both of the district and of the parties concerned that if possible a reasonable compromise should be arrived at", in the litigation then pending between him and the jagirdars in respect of the mineral rights. He asked the Raja to attend a conference at which the matter of compromise could be discussed informally and entirely without prejudice. In reply the Raja informed the Commissioner that he was not willing to compromise the suit, by a letter, dated 26th June 1910 (EX. A (h) 2). He mentioned in the letter the then recent decision of the Privy Council, Hari Narayan v. Sri Ram, 37 I. A. 136 : (37 Cal. 723 P. c.) and stated that in view of that decision, he was advised by his lawyers of Calcutta that be had the fullest right to all minerals in the zamindari as he or his ancestors had not parted with that right in favour of the tenure-holders by any express contract to that effect.
10. On receipt of this reply Mr. Geake wrote a letter (EX. a (i) (2) ) to Mr. Slacks, Member, Board of Revenue, dated 29th June 1910, in which he enclosed a copy of his letter to the Raja and his reply and stated that be felt that the Bokaro Ramgarh Company was responsible for the attitude which the Raja had adopted and further that the Privy Council ruling in the Patna case (referred to above) bad " rather knocked the bottom out of any hopes "of amicable compromise."
11. The correspondence between the Commissioner and the Raja regarding the amicable settlement of the suits which were pending was occasioned, it is contended on behalf of the appellant Raja at the instance of Sir Souther-land who was a partner of Bag Dunlop Company which Company also was interested in the prospecting licenses which were in question in those suits. The suggestion on behalf of the appellant Raja is that the Commissioner and the Member, Board of Revenue, and other officials of the Government of Bengal happened to be within easy approach of the top-most European officers of Messrs. Bird & Co. and Beg Dunlop Co. and these companies attempted to coerce the then Raja of Ramgarh into an amicable settlement of the suits through the intervention of these officers. They knew perfectly well that as a result of the aforesaid decision of the Privy Council the suits were bound to be decreed and they were bound to be turned out of possession. of the lands they hold under those illegal prospecting licenses.
12. While these suits were pending, Raja Bam Narayan Singh died on 26th January 1913. His son Kumar Lakahmi Narain Singh was yet a minor. The Court of Wards took over the management of the estate. It appears that Messrs. Bird & Co. took the earliest opportunity to approach the Board of Eavenue for acquisition of underground mineral rights in the Karanpura fields which they had failed to acquire so long as Raja Ram Narain Singh was alive.
13. On 15th March 1913, Messrs. Bird & Co. wrote to the Board of Revenue (EX. 130) stating that they understood that the estate of the late Raja of Padma had been taken over by the Court of Wards and that they desired to negotiate for the acquisition of all underground mineral rights in the Karanpura field, and they trusted that the Government would not make a settlement of mining rights with any other party without taking cognizance of their application. They addressed a similar letter (EX. 130-B) to the Deputy Commissioner, Hazaribagh.
14. One Mr. W.O. MacGregor (of whom more will have to be said later) came to be appointed manager of the Eamgarh Estate under the Court of Wards, and he took over charge of the estate on 2nd July 1913. He replied to Messrs. Bird & Co. by a letter (Ex. 125), dated 4th September 1913, that the Court of Wards were ready to enter into negotiation for a lease of the whole of the Karanpura coal-fields and asked them to state the terms on which they were willing to take a lease. He further informed Messrs. Bird & Co. that there were other applicants for lease, and that the estate being involved and anxious to pay off the debts, one of the conditions of the lease was to be an advance of about eight to eleven lakhs to the estate on the same terms as the loan advanced by the Bokaro Eamgarh Company. On the subject of this proposed lease, the Deputy Commissioner appears to have written to the Manager, Ramgarh Estate on 10th October 1913, a memo, (EX. P15), stating that the terms offered by one Mr. Bommertz should afford a suitable basis for negotiations.
15. One Mr. Ironside belonging to Messrs. Bird & Co, wrote to the Deputy Commissioner, Hazaribagh, on 26th November 1913 (Ex. 130d), that they were making preparations for a resumption of the suits brought against the Manager, Encumbered Estates, by the Eamgarh Raja, and that they were ready for all eventualities. He also mentioned that Mr. MacGregor, the newly appointed manager of the estate, had written to them on being approached by their Kodarma agent that he was willing to grant a prospecting license of the Karanpura field on certain terms, and that it seemed to his firm that as this might be a means for eventually bringing about a settlement of the present conflicting interests and assisting in the development of the country, he would visit Hazaribagh with a view to discussing the matter with him, and they felt that it was impossible for them to consider Mr. MacGregor's proposal until they had an opportunity of placing their views before him. It was suggested on behalf of the appellant Raja that from the tone of this letter, and from the events which had happened in the lifetime of the late Raja, it was clear that the prospecting licence which Messrs. Bird & Co. obtained from the Encumbered Estates was with a view to bring pressure to bear on Ramgarh Raj to agree to give them a prospecting license of the Karanpura coal fields on their terms. Mr. Ironside's letter, just mentioned, the learned Subordinate Judge has rightly observed, leaves no doubt that his intention was to use the pending ligation as a means of achieving the object that the Company always had in view, namely, securing prospecting license of the Karanpura coalfields.
16. On 12th December 1913 Anderson Weight & Co. wrote to the Manager, Eamgarh Wards Estate, (Ex. P (13)), that they understood that the Court of Wards was prepared to consider offers for a prospecting license with regard to the supposed coal deposits in Karanpura, and that the Syndicate they represented had obtained from the late Raja a parwana on payment of Rs. 25,000 entitling them to a prospecting license on certain terms, and that they had the right under the parwana of first refusal before any settlement with any other party was concluded. In the circumstances, they requested that the Syndicate should be given a fair opportunity of putting forward its proposals. They wrote again on 20th December 1913 to Mr. MacGregor (Ex. p (14)) asking on what terms he would be prepared to grant a concession for the coal rights in Karanpura, to which by a letter (EX.. P (12)) dated 30th December 1913, MacGregor replied that it was for them to make some definite offer in the absence of which it was impossible for the Court of Wards to consider their case. The mat. ter seems to have rested there. On 10th March 1914 the Manager, Wards and Encumbered Estates, appears to have written to Messrs. Bird & Co. that the proprietor of the Hosir II Encumbered Estate was prepared to sell his claim to the underground minerals in his estate for the consideration detailed in the letter, and that if the Company were prepared to purchase it, the Deputy Commissioner would be prepared to recommend the proposals to the Government for sanction. Messrs. Bird & Co. replied through their solicitors, Orr Digham & Co. (Ex.130 (f), that they would possibly have no objection to the terms on which the offer of sale of the claim to the underground minerals was made except one regarding which one of their agents would meet him and diacuss.
17. It appears that on 1st and 2nd April 1914 a conference was held at Hazaribagh at which Messrs. Witlock and White for Messrs. Bird & Co., Manager, Encumbered Estates, Ramgarh Estate, and Mr. Lister, Deputy Commissioner, were present. At this conference terms of the withdrawal of the suits pending between the Ramgarh Estate represented by the Court of Wards on one side, and the Manager, Encumbered Estates, and Messrs Bird & Co. on the other, as also the terms on which the Bamgarh Estate would be prepared to grant prospecting license to Messrs Bird & Co. were discussed. The memoraudum of discussions held at this conference was kept by Mr. Lister which he sent as an enclosure to a letter which he addressed to Messrs. Bird & Co., dated 7th April 1914 (EX. 130 (i)). There seems to be a serious controversy between the parties as to the exact nature and scope of the discussion at this conference. It is contended on behalf of the respondent Company that bat for the Court of Wards agreeing to grant them the prospecting license in respect of the Karanpura Coal Fields on the terms discussed and agreed to at this conference, they would not have compromised the suits pending between them and the Court of Wards regarding underground rights in the khorposh grants in respect of which they had already obtained licenses from the jagirdars. On the other hand, it is urged on behalf of the appellant Raja that the suits after the decision of the Privy Council, already referred to, had no legs to stand upon, and Messrs. Bird & Co. were bound to go out of the litigation and leave the proprietors of the enoumbered estates to their resources to fight the Court of Wards which had much larger resources; and it is wrong to say that the compromise of these suits could ever form a consideration for granting a prospecting license of the Karanpura coal-fields to Messrs. Bird & Co. Mr. P. E. Das appearing for the appellant Raja has drawn our attention to the fact that at the conference the two matters, namely, the suits and granting of the prospecting license to Messrs. Bird & Co. were discussed separately and were kept independent of one another. Our attention has been further drawn to the expression in EX. 130 (i), namely, "Messrs. Bird & Co. will in any case not go on with this litigation," and it has been contended that it is clear that the going out of Messrs. Bird & Co. of the litigation was not dependent on the Court of Wards agreeing to grant the prospecting license in question and regard being had to the strength which the suits had received on account of the then recent decision of the Privy Council in the case of Hari Narayan v. Sriram Ghakravarti, 87 I. A. 136: (37 Cal. 723 P. C.), the Court of Wards was under no compelling necessity to enter into any compromise in regard to these suits. It is contended that two out of the four suits were in fact not compromised, and the Court of Wards had to incur expense in litigation and ultimately succeeded in obtaining a contested decree in those cases. It may be necessary to say more about this compromise when dealing with the question as to whether or not the Court of Wards acted as a prudent owner would have done in the matter of granting the prospecting license in question to the respondent Company.
18. To continue the chronological narrative of events. It appears that on 4th April 1914, Rani Rikhi Nath Kumari, the widow of the late Raja Ram Narain Singh, having come to know of the conference at which the granting of the prospecting license to Messrs. Bird & Co., was decided, addressed a letter (EX. p.3) to the Deputy Commissioner of Hazaribagh, in which she stated that the suits pending against the Jagirdars and Khairatdars in respect of the under ground rights should not be compromised and the Karanpura coal field should not be settled with Messrs. Bird & Co. She brought to the notice of the authorities that Messrs. Bird & Co., had fostered the dispute between the Ramgarh Estate and the Encumbered Estates, and that but for them it would not have been necessary for her husband to have instituted these suits. She further stated that she was definitely of the opinion that it would be harmful to the estate if the Karanpura coal fields were settled with Messrs. Bird & Co. She also stated that to her knowledge there were, besides Messrs. Bird & Co., other applicants who were desirous of taking the settlement of the Karanpura coal-fields, and that there was no reason why the settlement should be made with Messrs. Bird & Co. She appealed to the Government to save the property of the ward and not to compromise the suits and settle the Karanpura coal-fields with the respondent Company. Memo to this letter of the Rani, forwarding it to the Manager, Ramgarh Wards Estate, seems to indicate that the Deputy Commissioner presumed that Babu Saroda Charan Mitra who happened to be the lawyer for the estate had communicated with the Rani and had explained matters to her to allay her apprehensions.
19. It appears from a letter dated 11th April 1914, from the Deputy Commissioner, Hazaribagh, to Messrs Bird & Co., that the proposals which were discussed at the conference held on 1st April were submitted to the Hon'ble Member, Board of Revenue, on 8th April, and that the Board was not averse to the settlement of the Karanpura coal-lands litigation on the lines specified in the note mentioned therein. The precaution was to be taken that the terms of the compromise should be so expressed as not to prejudice either the Ramgarh Estate or Messrs. Bird & Co., in any similar litigation regarding mineral rights against other tenure-holders. In reply to this letter, Messrs. Bird & Co, wrote to the Deputy Commissioner on 15th April 1914, (Ex. A (j) (3)) that they presumed that they correctly read the letter, as formally conveying to them the Board's sanction to the terms re : Karanpura as arrived at the meeting of 1st and 2nd instant. This letter wag replied to by the Deputy Commissioner on 17th April (Ex.. 130 (j)). He stated in reply:
"My letter is to be understood to mean that the terms regarding Karanpura as arrived at, at the meeting of let and 2nd instant have been approved by the Board as right and proper. Their formal sanction cannot be given until the terms are embodied in a formal document."
20. On 17th April 1914, the Manager, Mr. MacGregor wrote to Mr. S.C. Mitra regarding the proposed compromise of the mineral suits pending in the Courts at Hazacibagh and gave him instructions for drawing up petitions to be filed by both parties, and cautioned that the petitions had to be so drafted as not to prejudice the interest of the estate in any manner in suits of similar nature that may have to be filed thereafter.
21. Just about this time, by a letter dated 24th April 1914, (EX. A (i) (5)), Messrs. Andrew Yule & Co., made an offer of taking a licence to prospect the Karanpura coal-fields and stated their terms. On 27th April 1914, it appears that Hon'ble Mr. S.C. Sen on behalf of the Company interviewed the Deputy Commissioner, Hazari. bagh, in this connection and offered some terms. On 2nd May 1914, Messrs. Andrew Yule & Co., wrote to the Manager, Ramgarh Estate; stating that their offer was a provisional one, and they were quite prepared to modify the same to meet the views of the Deputy Commissioner and all that they wanted was an opportunity of doing as before closing the business with other parties.
22. From a note (Ex. 147) of Mr. Walsh dated 10th July 1914, it appears that he considered the offers of the other parties for the lease of the mineral right of the Karanpura coal-field, and he came to the conclusion that the terms offered by Messrs. Bird & Co., were more advantageous to the estate than those offered by Messrs. Andrew Yule Co., as also that of Messrs. Anderaon Wright & Co., and stated that there was no reason to modify the decision already Arrived at to grant the license of the Karanpura coal-field to Messrs. Bird & Co.
23. By a letter dated 14th May 1914, the Board of Revenue through its Secretary informed Messrs. Andrew Yule & Co., that "negotiation for a concession in respect of the mineral rights in Karanpura appertaining to the Ramgarh Wards Estate in the district of Hazaribagh are with the Board's approval in progress with another firm and have already reached an advance state." It is to be noticed that the Board did not tell Messrs. Andrew Yule & Co. that their offer was not up to the mark, and, therefore, merited no consideration. The correspondence relating to offer of Messrs. Andrew Yule & Co., will have to be again referred to later when discussing the question raised on behalf of the appellant Raja, that the authorities of the Court of Wards were bent upon giving the prospecting license to Messrs Bird & Co., and therefore, they did not allow any other offer to materialise and to use the expression of Mr. P.R. Das such other offer as were made were choked off.
24. It appears that Messrs. Bird & Co. submitted to the Manager drafts of prospecting license, mining lease and agreement for mortgage as enclosures to their letter dated 12th May 1914, (Ex. 125 D). They stated in the letter that the documents were based on Messrs. Anderson Wright & Co.'s Bokaro Ramagarh lease and the notes drawn up by the Deputy Commissioner at the joint interview. They suggested that the period during which the land was to be held under the prospecting license free from the minimum royalty should be raised from one year to three years. Mr. MacGregor in reply to this letter wrote to Messrs. Bird & Co., on 16th May 1914, (EX. 125 E). He stated that from acursory glance, the agreement appeared to differ entirely from the terms of Bokaro Ramgarh deed in the matter of the mortgage, and that he was unable to recommend any departure from the terms arrived at in their previous discussions because it was unlikely that the Court of Wards would agree to any such modifications. He also informed the Company that proposal for such modifications would open the door to other parties who were already approaching the Board and Government with gradually increasing offers. Messrs. Bird & Co., in their letter (EX. p. 10), dated 18th May 1914, wrote to the Manager stating that there was no question of departure from the terms arrived at between them, aud that they had no desire for any such departure.
25. It appears that on 25th July 1914, the Commissioner wrote to the Secretary to the Board of Revenue (Ex. 131-B) informing him that the terms between themselves and Messrs. Bird and Co., have been finally agreed, and asking that the documents drawn up by Messrs. Orr Dignam & Co., as approved by Sarda Charan Mitter be now formally approved. On 27th July 1914, (Ex. 130-P), Messrs. Orr Dignam & Co., Solicitors to Messrs Bird & Co., informed the Manager, Wards and Encumbered Estates, that Messrs. Bird & Co. withdrew from defence of the suits regarding mineral rights. On 28th July 1914, the Board intimated by a telegram (Ex. 130 s) to the District Magistrate, Hazaribagh, its approval of Karanpura agreements. The Deputy Commissioner, Hazaribagh, wrote to the Commissioner, Chota Nagpur, on 9th September 1914 (EX. s) that owing to the War Messrs. Bird & Co., wanted to pay only rupees one lakh out of the total sum of rupees ten lakhs, and the balance to be paid as soon as international finance became normal, with the right of immediate commencement of prospecting. On 14th October 1914, (EX. 125 F) Messrs. Bird and Co., paid rupees one lakh. On 16th November 1914, (EX. 130-z), Messrs. Bird & Co. paid Rs. 1,22,750 to the Encumbered Estates payable by them as one of the terms of the compromise of the mining suits. Messrs. Bird & Co., had asked for a postponement of prospecting for one year owing to the difficulties created by War, and the Board agreed to the postponement by its letter (EX. P9), dated 25th November 1914. On 30th November 1914, consent decrees in suits NOS. 303 and 304 were passed. On 27th February 1915, and on 30th March 1915, contested decrees in suits Nos. 301 and 303 were made. On 25th March 1915, the prospecting license in question was executed and rupees nine lakhs as agreed was advanced.
26. Messrs. Bird & Co. floated the respondent Company of which they themselves became the Managing Agents. The prospecting license was transferred to the respondent Company.
27. This prospecting license accompanied by an agreement to grant leases was for a period of six years in respect of coal lands comprised in 312 villages known as the Karanpura coal fields. It may be stated that in Ramgarh Raj there are large areas of coal bearing lands. These lands have been divided by the Geological survey of the district into three broad divisions. The Bokaro Jharia Coal Fields, the Bokaro Ramgarh Coal Fields and the Karanpura Coal Fields. The prospecting license, as already stated. covered the last of them, the Karanpura Coal Fields.
28. Under the terms of this license, Messrs. Bird & Co., had to take up on mining lease in one lot or in parcels either at one time or from time to time within a period of six years an aggregate area of not less than 10,000 bighas, but the Company was at liberty to take up such further area in excess of 10,000 bighas as it might think fit. Further, under the terms of the indenture upon the execution of every such lease the lessee was to pay salami at the rate of Rs. 40 per bigha and a minimum royalty at the rate of Rs. 5 per bigha, provided that, if at the time of taking the lease, no railway connection or railway facilities were available for despatch from the mouth of the pit the coal won from the mines, no salami or premium was to be payable in respect of such coal mines or lands until such time as railway connection and railway facilities should be available. Simultaneously with the execution of the prospecting license, Messrs. Bird & Co,, advanced, as already stated a sum of RS. 9 lakhs. As security for the payment of this sum the Court of Wards, through the Manager, mortgaged to Messrs. Bird & Co., the zimindary interest in 312 villages covered by the prospecting license. The terms regarding the period for which the license was to remain in operation and regarding minimum royalty in respect of any area or areas in excess of 10,000 bighas were subsequently varied by two deeds, which deeds are also impugned and will be dealt with later. It may be stated that no mining leases were taken by the respondent Company during the period of six years from the date of the prospecting license. The terms on which the leases were to be granted in pursuance of the agreement to lease as included in the prospecting license were substantially those as contained in the draft lease incorporated in Bokaro Ramgarh prospecting license, except the cesa clause which, instead of making the lessee liable to pay all impositions by way of cess and taxes made them liable to pay only their own share of cesses and taxes, and the lessor, the appellant Raja, liable to pay all such cesses and other taxes as may be imposed upon him in respect of the leasehold property.
29. Before the grounds on which this deed is attacked on behalf of the appellant Raja are stated and dealt with, it will perhaps be better to give an idea of what this Karanpura Coal Field is like.
30. The Karanpura Coal Fields are divided into two portions known as North Karanpura Coal Field and the South Karanpura Coal Field. The south portion of the field is 77 square miles while the north portion which is much larger in area is 473 square miles. The total area of the entire Karanpura Coal Fields is 550 square miles. Out of the entire fields. Ramgarh Estate has got 350 square miles in North Karanpura and 65 square miles in South Karanpura, the total being 415 square miles. Dr. Jowett in his report (EX. 153-K) states at P. 144 that in these fields some first class coal seams had been discovered and a greater number of second class seams, which were estimated by him to be between 5000 and 10,000 millions of tons at least without considering any coal below 2000 feet from the surface. It appears that other coal fields like Raniganj and Jharia were opened in 1830 or 1840 and 1890 respectively and that both of them have been thoroughly explored and developed. Mr. Russell, the then Deputy Commissioner, Kazari bagh, was perfectly justified in stating in the year 1934 (Ex. 95) that the total deposits of Eamgarh Estate would be one of the most important coal fields in India. dr. Jowett described Karanpura as one of the principal coal fields of country. There can be no doubt, therefore, that the properties which are the subject-matter of the present suits are very valuable and Mr. Roberts, a partner of Messrs. Bird & Co. could not but say in his evidence that the prospecting license held by the respondent Company was a valuable concession.
31. Mr. Das, for the appellant Raja, attacks this deed, in the first place, on the ground that the prospecting license in question also contained a contract to lease and a draft of such a lease, which the Court of Wards had to adopt if the respondent Company applied for a lease within the next six years and the Court of Wards which was in the position of a guardian of a minor had no power to bind the ward by a contract to lease in future. He contends that it is settled law that no guardian can bind a ward or the estate of a ward by a contract to sell or lease. Reliance is placed on the case of Mr. Sarwarjan v. Fakkruddin Mahomad, 39 I.A. 1 : (39 Cal. 232 P. c.) for the proposition that "It is not within the competence of a manager of a minor's estate, within the competence of a guardian of a minor to bind the minor or the minor's estate by a contract for the purchase of immoveable property."
It was, however, conceded by Mr. Das that if power to enter into a contract is conferred by a statute, this rule of common law is abrogated and the guardian will be competent to bind the minor or his estate by a contract to sell or lease. The question, therefore, is whether any of the provisions of the Court of Wards Act confers a power on the Court of Wards to enter into such a contract. None of the sections of the Court of Wards Act (Act IX [9] (B. C.) of 1879) in specific terms confer on the Court of Wards power to enter into an agreement to lease. Section 18 of the Act provides :
"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."
Section 14 of the Act provides:-
"Subject to the provisions of this Act the Court may, through its Manager, do all such things requisite for the proper oare and management of any property...as the proprietor of any suoh property, if not disqualified, might do for its care and management."
Are these provisions wide enough to include by necessary implication the power to enter into an agreement to lease? Mr. Das submits that they are not. The expression "do all such things as the proprietor of any such property, if not disqualified, might do" in Section 14 cannot be said to confer such a power as to enter into a contract to give leases in future and cannot be said to bean Act necessary for the care and management of the property. Section 14, therefore, according to his submission, does not even impliedly confer power on the Court of Wards to enter into an agreement to lease. He next contended that the power to lease conferred by Section 18 of the Act did not include the power to contract to execute a lease. He cited a passage in "Parwell on Power" (p. 394, 3rd Edition):
"If an Act of Parliament speaks of a lease, it means lease and not an agreement to lease."
He also relied on the case of Hukumchand v. Raja Ran Bahadur Singh, 4 P. L. J. 580 at pp. 603, 604 : (A. I. R. (6) 1919 Pat. 146) where Sir Dawaon-Miller C. J., after citing Farwell on Power, held that the power conferred by Section 17, Encumbered Estates Act (Act VI [6] of 1876) on the manager to grant leases did not include the power to enter into an executory contract to grant leases in future. The question whether the Court of Wards Act empowered the Court to enter into an agreement for leases, however, arose in the case of Rudradas Chakravarty v. Kamakhya Narayan Singh, 3 pat. 968 : (A. I. R. (12) 1925 pat. 259) and it was held by Kulwant Sahay, J. who delivered the judgment of the Court that on a careful consideration of the provisions of the Court of Wards Act the Court of Wards had power to enter into an agreement to grant a lease. The case of Bukumchand v. Raja Ran Bahadur Singh, 4 P. l. J. C80: (A. I. R. (6) 1919 pat. 146) was considered and distinguished. It is pointed out by Mr. Das that the case of Hukumehand, (4 P. l. J, 580 : A. i. R. (6) 1919 Pat. 146) went up to the Privy Council and the judgment of this Court was affirmed: Hukumchand v. Ran Bahadur Singh, 511. A. 208 at pp. 216 and 219 : (A. I. R. (11) 1924 P. C. 156). So far as the decision in the case of Rudradas Chakravarty, 3 Pat. 968 : (A. I .R. (12) 1925 pat. 259) on the question at issue is concerned, he rightly contends that it is obiter. The suit for specific performance of a contract was dismissed on other grounds. It was held in that case that there was no concluded agreement, that there was no sanction by the Board, and that the contract was incomplete as no date was fixed for the commencement of the lease. The determination of the question as to whether the Court of Wards had the power to enter into a contract to lease was not necessary for the decision of the case.
32. Looking, however, afresh at the question whether the Court of Wards Act empowers the Court to enter into a contract of this description, it appears to us that the view taken by Kulwant Sahay. J. in the case of Rudra Das, 8 pat. 968 : (A. I. R. (12) 1925 Pat. 259) is the correct view. The concluding words of s. 18, Court of Wards Act "the Court 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", are wide enough to include within their ambit the power to enter into a contract to lease. "Such other acts" it was contended by Mr. Das should be construed ejusdem generis with "the giving of leases or farms" the words used in the first part of the section. We are not inclined to accede to this contention. The section by its concluding portion clearly empowers the Court to do all other acts, the only limitation being that those acts must be, what the Court after applying its mind, judges as being "most for the benefit of the property and the advantage of the ward". In other words, if the entering into a contract to lease is, in the circum. stances of the case, judged by the Court to be necessary to benefit the property and to confer advantage on the ward, the Court will be acting within its power in entering into such a contract. Even conceding to the contention that statutory power must be construed strictly and power to lease doea not include a power to contract to lease, there is no difficulty in construing the last clause of Section 18 as confering upon the Court a power to enter into an executory contract of this nature, if a situation arises which calls for the exercise of such power for the benefit of the property and the advantage of the ward. The teat to be applied for the purpose of finding as to whether the Court has such a power seems to be whether the contract to lease is one which the Court can be said to have judged as being most for the benefit of the property and the advantage of the ward. It may also be added that the decision of their Lordships of the Judicial Committee in the case of Mir Sarwarjan v. Fakhruddin Mahomed Choudhuri, 39 I. A. 1: (39 Cal. 232 P. c.) is not meant to be of universal application. That was a case of a Muslim. The case of a Hindu may present differentiating characteristics in so far as considerations of benefit to the minor may easily be available to the other party who has entered into a contract with the minor's guardian. The latest decision of their Lordships of the Judicial Committee in the case of Subrahmanyam v. K. Subba Rao, 75 I. A. 115: (A. I. R. (35) 1948 P. C. 95) may be referred to with advantage. It may also be added that Mr. Das's contention that a power to sell does not include the power to enter into a contract of sale is not sound. Apart from authority it is manifest that if a person is authorized to sell another person's property, he is also clothed with the authority to enter into a contract of sale which invariably precedes a sale. The observations of a Division Bench of this Court in the case of Loknath Prasad Singh v. Wahib Hussain, 11 P. l. T., 121 at P. 129 : (A. I. R. (17) 1930 Pat. 181) support the same conclusion. The observations of Buckely J. in the case of Rosenbaum v. Belson, (1900) 2 Ch. 267 at p. 271 : (69 L. J. Ch. 569), to the following effect are also in point:
"I have been unable to find any case in which it has been held that instructions given by A B to sell for him his house, and an agreement to pay so much on the purchase price accepted, are not an authority to make a binding contract, including an authority to sign an agreement. If a power of attorney were given to A B to sell an estate, he would, in my opinion, be entitled, in the absence of anything narrowing the meaning of the word 'sell', not only to negotiate for but to sign an agreement for sale; and that would give to the word 'sell' the full meaning--namely, to conclude a binding agreement for sale."
It must therefore be held that Mr. Das's contention that the power to grant a lease given by the Court of Wards to the manager, or the higher officials of the Court of Wards, does not include the power to enter into a contract to lease is not sound.
33. The question to be put and answered in each case is this. Did the Court of Wards in the circumstances of the case judge that to enter into a contract to lease is most for the benefit of the property and the advantage of the ward ? If so, it must he held that the final words of Section 18, Court of Wards Act, empower the Court to direct the entering into such a contract. On the other hand, if the Court without taking thought and exercising its judgment regarding the benefit of the estate and the advantage of the ward sanctioned such a contract, it must be held that it acted in excess of the power conferred by the statute, as also beyond the powers of a trustee or guardian of a minor and the transaction is void and not binding on the ward.
34. In this view of the matter, it seems unnecessary to refer to and to discuss at length the authorities cited by Mr. Das for the proposition that cestui que trust cannot be bound by a personal contract of the trustee or that, the minor cannot be so bound by the contract of his guardian such as, cases of Zeebunmssa v. Mrs. H.B. Danagher 59 Mad. 942: (A. I. R. (23) 1936 Mad. 564), Oceanic Steam Navigation Co. v. Sutherberry, (1881) 16 ch. D. 236: (50 L. J. Ch. 308), Trevelyan on Minors p. 186, Waghela Rajsanji v. Sheikh Masludin, 14 I. A. 89: (11 Bom, 551 P. C.), Indur Chunder Singh v. Badhakishore Ghose, 19 I. A. 90 : (19 Cal. 607 P. c.) Ranmalsinghji v. Vadilal, 20 Bom. 61 and Fatma Bibi v. Debnauth Shah, 20 Coal. 508.
35. The question, therefore, which falls to be decided is whether the transaction in question was judged by the Court of Wards as being most for the benefit of the property and the advantage of the ward, or was entered into without any thought having been taken as to what was beneficial to the ward or his estate. The grounds on which it is contended by Mr. Das for the appellant Raja that no such thought was taken are : (1) The Court of Wards preferred Messrs. Bird and Co. to other applicants without any judgment of their respective merits; (2) it did not apply its mind to the question of the market rate of salami and royalty obtaining in 1915 when the transaction was entered into, and agreed to the rates prevalent in 1907; and (3) it departed from the cess clause from that in Bokaro leases in that it did not make the respondent Company liable for the whole of the ceases, taxes and other impositions on the lease hold property. (After reviewing the evidence their Lordships proceeded).
36. In the state of evidence on the record, it is difficult to accede to the contention of Mr. Das that the Court of Wards before accepting the offer of Measrs. Bird & Co. did not apply its mind to the question of the respective merits of all the applications for this concession Ex. 147, clearly shows that such applications as were made for taking up this concession were analysed by the Commissioner of the Chotanagpur Division who after giving thoughts to their respective merits, came to the conclusion that the terms which had been agreed upon by Messrs. Bird & Co., were distinctly more advantageous than those offered by others. The offer of Messrs. Anderson Wright & Co., who had obtained a parwana from the late Raja on payment of Rs. 25,000 that they would have the first refusal in the matter of this concession was disposed of on the ground that the syndicate which Measrs. Anderson Wright & Co., represented had definitely reported their inability to pay the very high initial salami and advance which were required for this concession. The application of Messrs. Andrew Yale & Co. was disposed of on the assumption that the proposals contained in that Company's letter of 24th April and 2nd May 1914, represented the highest term which that company was willing to offer That company had offered salami of Rs. 20 per bigha and although willing to pay a salami for prospecting license of Rs. 2 lakhs, the advance of Rs. 10 lakhs was to be made at the end of three years and that also only if the company thought it worthwhile to take up the concession. So far as the offer of the Railway Board was concerned, the letter of the Bihar Government shows that they wanted certain informations from the Board of Revenue before entertaining the offer of the Railway Board. The Board of Revenue having already informally approved of the granting of this concession to Messrs. Bird & Co., could not invite the Bihar Government to start negotiations with the Railway Board. It appears that the Bihar Government having been informed by the Board of Revenue in tbeir letter of 24th July that the draft deeds of the license and other documents in connection with this transaction had already been approved unofficially, it did not take any steps because it thought it was no use opening up fresh negotiations. Mr. Das has however contended that none of the reasons given for preferring the offer of Messrs. Bird & Co., was a valid reason. To say that this prospecting license was granted to Messrs. Bird & Co., in consideration of the settlement of the litigation regarding mineral rights was a myth. The question is not as to whether the Court of Wards should have agreed to grant this license to Measrs. Bird & Co., for ending the litigation which was bound to be decided in favour of the estate, but that the Court of Wards on a consideration of the circumstances then prevailing, came to the conclusion that everything being equal, the granting of the license to Messrs. Bird & Co., was going to end the litigation regarding mineral rights. In the note (EX. 147) it was stated that the compromise with Messrs. Bird & Co., was itself pecuniary consideration to the estate as whatever the ultimate result of the litigation, if it were to be carried in appeal the expenses to be incurred by the estate would be considerable. This aspect of the question, the learned Subordinate Judge rightly observes could not be ignored at a time when the estate was heavily involved in debts. It appears, therefore, that as far as this ground is concerned, it cannot be said that the Court of Wards accepted the offer of Bird & Co., without applying its mind to the merits of the other offers before it and without rightly or wrongly judging that it was the most advantageous to the estate.
37. But the matter stands differently so far as the second ground is concerned. It has to be held that no thought wag given by the Court of Wards to the prevailing market rates of salami and royalty on which such mining leases could be given in the year 1915 at the time of the transaction. The Court of Wards, Mr. Das submitted, never applied its mind as to what the market rate of salami and minimum royalty in respect of such mining leases in 1915, when this concession was going to be granted. It agreed without any demur to grant this concession on the same cats of salami and minimum royalty as were considered good enough in the year 1907 at the time when Bokaro Ramgarh license was executed.
38. The Court of Wards agreed to give leases on a salami of RS. 40 per bigha and royalties of four annas per ton on steam coal, three aanas pec ton on rabble coal, two annas per ton on dust coal and 8 annas per ton on hard coke-the rates at which Bokaro Ramgarh leases were given in 1907. There is evidence to show that the rates at which leases could be given in the year 1915 were Rs. 300 par bigha as salami and royalties of eight annaa per ton on steam coal, six annas pec ton on rubble and four annas per ton on all dust coal raised and despatched and twelve annas per ton on all hard coke and ten annas per ton on all soft coke. Ex. 152 (a) mining lease between Bokaro and Eamgarh Ltd. and G. I. P. Railway dated 1st November 1915, may be referred to in this connection. It is argued that there is nothing to indicate why the Court of Wards agreed to adopt the rates of the leases of 1907 and not the market rates obtaining in the year 1915, at the time when the transaction in question was entered. Mr. Das rightly contends that if the Court of Wards had applied its mind to the question as to whether it should agree to lease at the rates prevalent in the year 1907 or at the rate then obtaining, and if it found that the situation was that the estate was under compelling necessity to lease out the coal field in question and no one was available to take it at the market rate then obtaining, it could then be said that the Court of Wards having regard to the situation then prevailing acted to the best of its judgment in entering into the transaction in question, and exercised its power to enter in. to such a contract within the terms of the statute. It must be held that there is clear absence of material to show that any thought was given by the Court of Wards to what was the highest rate of salami and royalty at which the leases could be given in the year 1915, keeping in view the fact that the deposit of coal in Karanpura fields was of a higher and superior quality. Prom the documents on the record, it appears that the sub-leases of parts of the very same coal fields which were covered by the prospecting license in question were given by Messrs. Bird & Co. to other parties at the rate of salami and royalties very much higher than the rates at which Messrs. Bird & Co. had obtained this license. Exhibit O is the sub-lease of the very same area which Messrs. Bird & Co. obtained from the Court of Wards on payment of RS. 2 Lakhs of salami at Rs. 40 per bigha. This sub-lease was granted by the respondent Company in favour of the Secretary of State for India with effect from 17th October 1922, at the salami of Rs. 11,70,000 at the rate of Rs. 175 per bigha. Exhibit E is a sub-lease of B. N. Railway in respect of the same area which Messrs. Bird & Co. had taken from the Court of Warda on 19th March 1924, paying a salami of Rs. 92,000 at the rate of Rs. 40 per bigha. The respondent company received a salami of RS. 7,50,000 at the rate of Rs. 175 per bigha with effect from the date of the head-lease (EX. 6). Similarly, Ex.. F is a sub-lease to B. B. & C. I, Railway on a salami of RS. 14,15,000 and odd in respect of the area which Messrs. Bird & Co. took from the Court of Wards on paying a salami of Rs. 1,64,000 and odd at RS. 40 per bigha. It is clear that if the Court of Wards had applied its mind as to what should have been the proper rates of salami and royalty for a lease of the mining rights at the time when this concession in question was granted it could not but have found that the rates at which Bokaro Ramgarh leases were given in the year 1907 were not the highest rates then obtaining. Non-consideration of the market rate prevailing at the time of the leases was certainly a sad omission on the part of the Court of Wards and there is no escape from the conclusion that the Court of Wards failed to exercise its judgment in this matter. Its failure to do so vitiates the transaction in question for it cannot be said that the transaction was one which in the judgment of the Court of Wards was most for the benefit of the property and the advantage of the ward.
39. Coming now to the third ground regarding the negligence on the part of the Court of Wards in accepting the cess clause as drafted by the solicitors of Messrs. Bird & Co. different from what it was in Bokaro Ramgarh leases, it must be said that there is nothing to indicate as to why the variation against the interest of the ward was made. Mr. Das urged that there was no trace to be found in the voluminous correspondence on the record for any justifiable or unjustifiable reason for its having agreed to execute this document with the cess clause so drafted as to relieve the respondent Company from its liability to pay whole of taxes and cesses, unlike the cess clause in Bokaro Ramgarh leases or other leases executed by the Court of Wards. Mr. Das, therefore, argued that the Court of Wards was grossly negligent and guilty of omission to take care in the matter of entering into this transaction and exceeded it powers as conferred upon it by the Act, which in substance were no larger than the powers of a trustee. What was required of the Court of Wards, he submitted, by the provisions of Sections 14 and 18, Court of Wards Act, was the same degree of diligence on its part as the proprietor of any such property, in other words, a man of ordinary prudence would exercise in the management of his own property. (Reviewing the evidence their Lordships continued :)
40. It has been contended on behalf of the respondent Company that the draft of the document was examined by Mr. Sarda Charan Mitra, counsel for the Court of Wards and was approved by him before it was executed. The Court of Wards, therefore, cannot be held guilty of negligence. It had the document examined carefully by its legal adviser and is, therefore, protected. Exhibit 152, the original draft bears the endorsement "approved" signed by S.C. Mitra, Whether the consequences of this negligence on the part of the Court of Wards can be avoided by showing that the draft of the document was scrutinised and approved by its legal adviser requires consideration. There is no evidence that S.C. Mitra was told as to what the terms agreed between the parties were. There is no evidence that he knew that agreement between the parties was that all the covenants incorporated in the draft lease attached to the Bokaro Ramgarh prospecting license except those which were specifically agreed to be varied had to be incorporated in the draft lease attached to the prospecting license in question. There is nothing to show that he was told as to what the agreement between the parties was in regard to the cess clause. Mr. Das argues that in absence of such evidence, approval of the draft by Mr. Sharda Charan Mitra cannot absolve the Court of Wards of its gross negligence in not applying its mind to this very important term of the agreement which has resulted in considerable loss to the Estate. Reliance was placed by Mr. Das on the case of Devy v. Thornton, 68 E. R. 488, for the proposition that opinion of a counsel cannot exonerate a trustee unless it is known what data were given to the counsel for advice. Assuming, however, that S.C. Mitra had full knowledge of all relevant facts, Mr. Das argued, even then the Court of Wards is not protected. He submits that the trustee cannot free himself from the charge of negligence by merely producing counsel's opinion, and it makes no difference that the trustee acted negligently on the advice of a counsel. For this proposition he relies on Peers v. Ceeley, (1852) 51 E. R. 617 : (15 Beav. 209), in which the Master of Rolls made the following observations :
"The Court can never sanction the proposition, that a party, having acted in a manner which the Court has decided to be improper, can protect himself by shewing that he had received bad advice, however eminent the person may be who gave it."
See also In re Knight's Trusts, (1859) 54 E. R. 18 : (27 Beav. 45) and National Trustees Co., Australasia v. General Finance Co., Australasia, (1905) A. C. 373 at p. 377 : (74 L. J. P. C. 73).
41. To us it appears that the question which has to be decided in the present case is not whether a trustee can escape the consequences of his negligence. The appellant Baja by this suit is not pursuing the Court of Wards for having neglected to protect his interest. What has to be decided in the present case is whether by reason of the negligence of the Court of Wards in not detecting the cess clause drafted by the solicitors of the respondent Company as not rightly incorporating the agreement arrived at between the parties, the document in question is vitiated to such an extent as to cease to be binding on the appellant Baja. Secondly, if the cess clause as incorporated in the document did represent accurately what was agreed between the Court of Wards acting for the appellant Raja and Messrs. Bird & Co., whether such an agreement in regard to the cess clause was arrived at after the Court of Wards had applied its mind to the question and in its judgment it was for the benefit of the property and advantage of the ward that the taxes and cesses were not to be wholly payable by the lessee. It is clear that the cess clause, as it stands in the document in question, was agreed to by the Court of Wards without any thought having been given to its consequences. The Court of Wards acted in utter violation of the last clause of Section 18 of the Act in not bringing to bear its judgment upon the question of payment of taxes and cesses, and the contract to lease with the cess clause in the unusual form contained in the prospecting license in question has to be held to be in excess of its powers and ultra vires.
42. Their Lordships of the Privy Council in the case of Raja Mohammad Mumtaz Ali Khan v. Sakhawat Ali Kkan, 28 I. a. 190; (23 ALL. 394 P. C.), which was a suit for possession by a ward on his attaining majority of the properties alienated by the Court of Wards held that the plaintiff was entitled to recover possession of the property, the act of the Court of Wards being ultra vires of its power under Section 172, Oudh Land Revenue Act, 1876. It will be seen that the final words of Section 172 provided exactly in the same terms as those of Section 18, Court of Wards Act that "the Court of Wards shall have power to give such leases or farms of the whole or part of the immovable property under its charge and to mortgage or sell any part of such property, and to do all such other acts as it may judge to be most for the benefit of the property and the advantage of the disqualified, proprietors."
What had happened in that case was that the junior members of the family of the Baja were held entitled to receive from the estate maintenance allowance by an award of the arbitrators. The arbitrators had also held that two villages were to be allotted to these persons in lieu of their maintenance. The Court of Wards in pursuance of that award allotted two villages to the defendants and put them in possession. The plaintiff brought the suit; to recover possession of the villages so allotted to the defendants. The transaction was attempted to be justified under Section 172 of the Act as having been most for the benefit of the property and the advantage of the plaintiff. There Lordships of the Judicial Committee held :
"Nor can the assignment of the villages to the respondents be justified under Section 172 of the Act. Clearly it cannot, unless it comes within the final words, that the Court may do all such acts as it may judge to be most for the benefit of the property and the advantage of the infant. It was not for the advantage of the appellant or the benefit of his property that two considerable portions of his estate should be disposed of without consideration. And there is not any trace throughout the proceedings of any thought having been taken as to what was beneficial to him or his estate."
43. The position here is no different. Clearly it was not for the advantage of the appellant Raja or the benefit of his property that it was agreed that the cess clause should be in the form in which it stands and to use the language of the Judicial Committee, there is not any trace throughout the proceedings of any thought having been taken as to what was beneficial to him or his estate so far as the question of payment of cesses and taxes was concerned. There is, therefore, no escape from the conclusion that the transaction in question cannot be justified under the final words of Section 18 of the Act.
44. There is, however, the question if by sheer oversight the cess clause remained in the document in a form different than that in Bokaro Ramgarh document, contrary to the agreement between the Court of Wards and Messrs. Bird & Co., whether such negligence vitiates the transaction. Mr. Das for the appellant Raja argues that if the guardian is negligent in looking after the interest of the minor, there is no identity of interest and he ceases to represent the ward. He relies upon the decisions of Mathura Singh v. Ram Rudra Prasad Sinha, 14 pat. 824 at p. 834: (A. I. R. (23) 1936 pat. 23l) and Siraj Fatma v. Mahmud Ali, 54 ALL. 646 at p. 658 : (A.I.R. (19) 1932 ALL. 293 F. B.), which held that where the ward is a party to the suit and the decree is passed against him, and if it is found in a subsequent suit by the ward that the Court of Wards was negligent in looking after the interest of the minor, the Court of Wards ceases to represent the ward and the decree passed against the ward is a nullity, Mr. Das submitted that the same principle will apply to a transaction entered into by the Court of Wards on behalf of the ward, if the Court of Wards is found guilty of negligence in the matter of that transaction. In the circumstances of the present case, he argued, it must be held that the omission on the part of the Court of Wards to detect that the document it was going to sign on behalf of the minor did not correctly represent the terms to which it had agreed, must have the consequence of vitiating the transaction to such an extent as to make it cease to be a transaction to which the ward can be said to have been a party, and the deed void ab initio and as of no effect against the ward.
45. The learned Subordinate Judge has not accepted this contention. His view is that mere negligence or gross negligence on the part of the Court of Wards does not entitle the ward to challenge the transaction as being void and not binding upon him.
46. It is hardly necessary to consider the question in abstract and in such a general form. What calls for decision in this particular case is whether regard being had to the terms of Section 18, Court of Wards Act, the negligence on the part of the Court of Wards to judge whether the terms it agreed to were for the benefit of the property or the advantage of the ward will vitiate the transaction. While it may be true that negligence on the part of the Court of Wards leading it to a wrong judgment as to what was for the benefit of the property and the advantage of the ward will not make the transaction void and as of no effect against the ward, negligence to take any thought as to what was beneficial for the property and advantageous to the ward will bring about that result. The learned Subordinate Judge noticed that Lister's note of 1st and 2nd April and Mr. Walsh's letter of 6th July 1914, (Exs. 130 (1) and 131 (a)) which contained a full report of the discussion and showed how far it agreed to modify the terms of the agreement of Bokaro Ramgarh Co., did not show that it was agreed that the cess clause was to be modified, and that it was not the case of the respondent Company that there was any intention to modify the clause. It is clear, therefore, that failure of the Court of Wards, its officers and its legal advisers to detect that the cess clause in the deed did not correctly incorporate the agreement between the parties or, if it did, their failure to judge whether it was beneficial for the property and advantageous for the ward that the cess clause should be so modified was a kind of negligence which went to the root of the power of the Court of Wards to enter into such a transaction and rendered the deed void and not binding on the appellant Raja.
47. The learned Subordinate Judge thought that even if the modification of the cess clause was due to the negligence on the part of the Court of Wards, the whole transaction cannot be said to be void for that reason, and held that the cess clause did not go to the root of the transaction and it could not affect its validity. The learned Subordinate Judge seems to be clearly wrong in his conclusion in this behalf. It is in evidence that in consequence of the cess clause being what it is, the estate has already suffered loss of lakhs of rupees, and if it is held that the transaction is binding upon the ward, the leases to be granted in pursuance of this agreement to lease, up to 1951 will have to leave the cess clause in this form, caueing considerable loss to the estate injuture. What the learned Subordinate Judge failed to realise is that if any of the covenants of the lease, specially one which means loss of such a considerable amount either to one or the other party, is held void, the covenants of the lease being inter-dependent and not separable, the transaction as a whole becomes void and unenforceable in law.
48. There remains to consider one other point raised on behalf of the appellant Raja. It was contended by Mr. Das that this deed in question should have been executed by the Manager on behalf of the ward and not on behalf of the Court of Wards which was not the owner of the property. The argument is that there is no provision in the Court of Wards Act vesting the property of the ward in the Court of Wards, and, therefore, the Court of Wards is not entitled to deal with the property of the ward on its own behalf. Our attention has been drawn to Section 51, Court of Wards Act, under which suits brought by or against a ward have to be instituted in the name of the ward, and the manager or the Collector of the district, as the case may be, has to be named as the next friend or guardian for the suit. On the analogy of the provisions of this section, it was contended that the ward should have been described in the deed in question as the executant. The learned Subordinate Judge has rightly dealt with this contention. It appears that Rule 242, framed under Section 70, Court of Wards Act prescribes that all leases appertaining to estates under the Court of Wards should be executed by the Manager in accordance with the opinion of the Legal Remembrancer. Such opinion was to the effect that it was not desirable to make the proprietors parties to the lease or to make the proprietors the real lessors. The official acts have to be presumed to have been performed regularly and legally, and there is nothing to show that Rule 242 was not in force at the time when the deed of this prospecting license was executed. It may also be added that Section 7, Transfer of Property Act, contemplates the transfer by another person of property not his own, if that person is authorized to transfer such property by any law for the time being in force. Under Section 14 read with Section 18, Court of Wards Act, the manager could be competent to enter into a transaction of lease, or to contract to grant a lease, if the Court of Wards judged the transaction or the contract to be most for the benefit of the property and the advantage of the ward. Section 41 (g) authorizes the Manager to sign deeds or documents which may be executed by him by virtue of his office and Rules 238 and 242 made under Section 70, Court of Wards Act, are apparently meant to carry out the provisions of the sections referred to above. Hence, it cannot be said that there was any irregularity in the execution of the documents impugned in this case.
49. The conclusions which we reach, so far as the deed of the prospecting license of 1915 is concerned may be summed up as these: (1) Although it may he that a guardian of a minor or a trustee is not entitled under the common law to bind a minor or a cestui que trust by a personal contract to lease in future, the Court of Wards is empowered under the concluding words of Section 18, Court of Wards Act, to enter into such contract provided it judges that to do BO is most for the benefit of the property and the advantage of the ward; (2) While the Court of Wards applied its mind to the question whether it was advantageous to the ward to prefer Messrs. Bird and Co., to other applicants for this concession and rightly or wrongly came to the conclusion that it was so, no thought was taken as to whether the terms regarding the rates of salami and royalty were the highest which could be obtained at the time when this concession was given, and the term regarding the payment of cesses and taxes should have been any different than what was usual and incorporated in Bokaro Ramgarh concession; (3) the failure of the Court of Wards, its officers and its legal advisers to have applied their mind to, and judged that the terms regarding salami, royalty and payment of taxes, which prima facie are not the beat available at the time, puts this transaction beyond the powers conferred by the concluding words of S. 18 of the Act, and renders this deed void and inoperative in law; (4) the deed of prospecting license was executed by the Court of Wards in excess of its power and conferred no title on the respondent Company to the lands in their possession; and (5) the Civil Court has in the circumstances, complete jurisdiction to pass a decree of ejectment in favour of the appellant Raja.
50. On the finding just arrived at by us that the prospecting licence granted by the Court of Wards to the Company under the deed dated 3rd August 1915 is not binding on the appellant Raja, the whole fabric of the Company's title falls to the ground. If we are right in so holding no further question arises between the parties, the very foundation of the Company's title having been found to be not only defective but entirely lacking in validity. The first variation of the licence of 1915, or, as it has been characterized in the course of the arguments at the Bar, the first extension of the licence, is evidenced by the deed dated 23rd November 1917. By this document, the Company got an unconditional extension of the terms of the licence from six years to twelve years, that is, up to 26th March 1927, and a further extension of twelve years, if ten thousand bighas more of coal lands were taken on lease by the Company. Further, find this is the more objectionable part of the transaction, no minimum royalty for an area above ten thousand bighas was payable before 26th March 1939 unless railway communication was available earlier. The terms of this transaction have been attacked by Mr. Das for the appellant Raja on the grounds, (1) that they were entirely for the benefit of the Company without due and proper regard having been paid to the interest of the ward, or the benefit of the property, (2) that the extension was obtained on false pretences; (3) that there was no sanction of the Court of Wards, that is to say, the Board of Revenue, for the terms of the document as finally drawn up; and (4) that, in any view of the matter, the Court of Wards acted beyond its powers in virtually making a gift of large sums of money to the Company in the shape of minimum royalty in so far as it was payable after 26th March 1939 or earlier, only if railway facilities became available, without the Court of Wards insisting upon the railway company giving an undertaking to the effect that they would introduce railway facilities within a certain specified time.
51. It would appear that, about four months after the prospecting licence was granted on 25th March 1915 the Company applied for modification of the terms of the prospecting licence by extending the period of the licence, as also deferring the payment of minimum royalty for additional areas to be taken by the Company, until 26th March 1939, or until the introduction of railway facilities, if they became available earlier. To this end, the Company addressed the letter EX. H (2), dated 3rd August 1915 to the Manager, Court of Wards. In this letter, the Company purported to say that the terms of the licence of 1915 were highly favourable to the Ramgarh Estate, whereas the Company were out of pocket to the extent of ten lacs of rupees without immediate prospects of a fair return from the capital thus invested by them. The Company also stressed the urgency of extension of railway facilities to the coal area necessitating an outlay of at least one and a half million pounds sterling, besides the coat of prospecting, which they estimated at thirty thousand pounds. They pointed out the difficulties in raising the necessary capital owing to the then prevailing war conditions. They further purported to say that the interests of the Company and of the Estate were identical with those circumstances in the background, the Company stated that they were amply justified in "asking for a drastic modification of the present prohibitive terms" of the licence. They, therefore, asked for extension of the six years' term of the licence to twelve years. They also asked for an option to continue the licence for a further period of twelve years, if they took a lease of at least ten thousand standard bighas of coal-bearing lands in the first period of twelve years. And further they asked for an additional period of twelve years, thus making a total period of thirty-six years in all, so that the licence would extend up to the year 1951. As regards minimum royalty, the Company submitted that it should not be asked for until railway facilities were available; but, in the end, they limited their request by stating that no minimum royalty be made payable during the first period of twelve years of the prospecting licence. Mr. Lister, as Deputy Commissioner of Hazaribagh, recorded certain notes on the proposals by the Company, referred to above. Exhibit 130 (AU) contains those notes. Mr. Lister thought that the extension from six to twelve years was justifiable. As regards the request for a total extension of thirty-six years, he thought that that long period was in excess of actual requirements. In his opinion, a total extension of twenty four years, that is, up to 1939, was justifiable. On the question of minimum royalty, Mr. Lister pointed out that the Estate would suffer a loss of fifty thousand rupees a year for six years. In his view, the provision in a prospecting licence for the payment of minimum royalty was in the nature of a penalty against a lessee who unduly put off the raising of coal. In his view, Messrs Bird and Co. could not be expected to be guilty of any such procrastination. He thought that the loss might be divided between the two parties half and half. He, therefore, took the view that RS. 2-8 a bigha, instead of Rs. 5 per bigha, might be fixed as the minimum royalty. Mr. W. C. MacGregor, the Manager of the Ramgarh Estate under the Court of Wards, sent the Company's application to the Government pleader of Hazaribagh, expressing his own opinion on the matter. Mr. MacGregor appears to have agreed with Mr. Lister that the extension of the licence might be granted. Regarding the question of minimum royalty, he observed as follows:
"I am in great doubt as to whether the Court of Wards would be justified in giving what practically comes to a remission of a large sum of money on what could be considered equitable grounds for doing so it the lessees and Government were only concerned, but in the present case there is a third party, a minor, and the Court of Wards is only acting as his trustee during his minority and has to be very careful in dealing with a question of this kind." .... (Vide) Ex. 130 (AV).
As regards Mr. Lister's proposal of dividing the loss of minimum royalty half and half between the parties, Mr. MacGregor took the view that it might be justifiable from the point of view of the State, or the Provincial Government, of a wider point of view, thereby suggesting that it was not in the interest of the ward himself. Nor did Mr. MacGregor agree with Mr. Lister's observations, which are by no means easily intelligible, on the calculations of the ultimate benefit to the Estate, irrespective of immediate gain to the ward. This note, contained in Ex. 130 (AV), was also forwarded to the Government pleader for his opinion. The Government Pleader, for one reason or the other, did not give any categorical opinion on the question submitted to him, but took the view that a legislative enactment offered the only solution of the question as far as the estates under the management of the Court of Wards were concerned. Hence, it would appear that the Government Pleader also was not in agreement with Mr. Lister's opinion that the variations in terms of the licence of 1915 were in the interest of the ward, or his property. Ultimately, he left the question for decision by Government as a matter of general policy affecting, as he thought, a large number of estates. This opinion of the Government Pleader is contained in Ex. 130 (AW), and is dated 16th August 1915. Nothing appears to have happened until 20th of March 1916, when Mr. W. A. Ironside addressed a letter to Mr. MacGregor. Though there is no indication in the official correspondence that Mr. MacGregor's note aforesaid was communicated to the Company, it would appear from the letter that the Company were agreeable to the suggestion of Mr. MacGregor regarding minimum royalty. Mr. Ironside, therefore, proposed redrafting the previous letter of the Company (EX. H (2) ) by eliminating the plea for exemption from minimum royalty, and limiting it to a request for the extension of the prospectiug period only. Mr. Ironside also added this very significant sentence, "Will you please let me know how it appears to you best for me to act in order to save you as much trouble as possible and to prevent misunderstandings." (vide Ex. 125 (J) at p. 312 of Vol. III of the paper book).
This information from Mr. MacGregor, Mr. Iron. side wanted through Cunningham of his office and his nephew who were expected to see Mr. MacGregor in a few days. This sentence has been utilized by Mr. Das for the appellant Raja as supporting his suggestions that Mr. MacGregor, though functioning as the Manager of Court of Wards, was really in the camp of the Company. This aspect of the controversy will be noticed hereafter. To this letter, Mr. MacGregor sent a reply (Ex. 125 (K), dated the 22nd of March 1913) suggesting to the Company that, in continuation of the original letter, he might write another one withdrawing their application for exemption from the minimum royalty, and pressing for the extension clause only. As a result of the correspondence referred to above and a personal interview, apparently between Mr. MacGregor and Mr. Cunnigham, a revised proposal was made by the letter EX. 125 (L) dated 4th April 1916. In this letter, the Company suggested (1) that the prospecting and developing period be definitely fixed as for twelve years; (2) that the Company should have the option of extending the prospecting period for a further period of twelve years without any obligation to take up any fixed area during the extended period; (3) that, at the end of twenty four years, if the Company took on lease not less than twenty thousand bighas, they should have a further extension for twelve years with a guarantee to take up a further area of ten-thousand bighas; and (4) that, with regard to minimum royalty, the terms of the present licence should hold good in respect of ten thousand bighas but that minium royalty in respect of any additional areas taken should not be payable until transport facilities for despatch of coal from mines were available. On the receipt of the revised proposals of the Company as aforesaid, Mr. MacGregor put up the matter before the Deputy Commissioner, expressing his own opinion against extension beyond twenty-four years from the date of the original licence as also against the proposal to forego minimum royalty on the second ten-thousand bighas to be taken during the extended period. Mr. Lister, the Deputy Commissioner, by his note dated 21st April, 1916 (EX. p-5), adhered to his view previously expressed that twenty four years was enough, and that he was opposed to any further extension beyond 1939. He also expressed himself to the effect that, in view of the fact that the Company had withdrawn the proposal for the postponement of the payment of the minimum royalty, the matter might be recongi. dered in a light favourable to the Company. By their letter (EX. H (1) ), dated the 3rd May 1916, the Company further elucidated their proposals of 4th of April by indicating that they will be liable to pay salami at the original rate of five rupees per bigha for any additional area taken, besides the two-thousand bighas covered by the original licence, but adding that no minimum royalty will be payable on such additional areas as may be taken in the extended period until railway transport facilities were available. The company further informed the authorities of the Court of Wards that the results of the survey of northern portion of Karanpura Coal Fields by their geologists were ' most disappointing," and that the previously published records in respect of the coal area had been proved to be most inaccurate. This statement was made with a view to urging strongly the necessity of the proposed extension at the Company's option for the second and the third period of twelve years, On receipt of this letter, Mr. Lister forwarded to the Commissioner of Chota Nagpur Division a long letter (Ex. h), dated 21st June 1916 on the proposal of the Company for the alterations aforesaid in the original licence. In this letter Mr. Lister observed that in his view, extension for twenty four years, that is, until 1939 would be adequate, and that the extension for thirty six years, asked for, was not necessary. But in para. 6 of the letter, which contains his recommendations, it would appear that be was prepared even to grant a third period of twele years and also agreeable to postpone the payment of minimum royalty on any additional areas besides ten thousand bighas to be taken in the first twelve years, but no such concession to be given to them in the third period of twelve years. It may be added that Mr. Lister proceeded on the assumption that the Company will have to invest a very large amount of capital for developing the collieries and building the necessary railway. He also dealt with the quastion of payment of minimum royalty under the impression that it was a sanction against procrastination in the development of the collieries on the part of the Company. He also made calculations' of the investments so far made by the company on the coal areas prospected by them under the original licence. He ended his letter by observing that he was making those recommendations in "the interests of the estate and of the public". Exhibit 130 (AX) is the letter dated 26th June 1916, from the Commissioner of Chota Nagpur Division to the Secretary, Board of Revenue, recommending the Company's proposals for alteration of the original licence in the same terms as the Deputy Commissioner had done. But there are certain observations in this letter to which serious objection has been taken on behalf of the appellant Raja. The first is that there is a suggestion that the Company might give up the concession already granted to them, if the alterations desired by them were not accepted. Mr. Das has vehemently argued that there is no foundation for such a suggestion, and that, as a matter of fact, there is no evidence that the Company ever even thought of surrendering the licence. The second objection raised relates to the remark that the geological examination of the northern portion of the Karanpura Coal Fields had proved disappointing. It was contended on behalf of the Raja that this statement is not based on facts, and that there is no evidence in support of such a statement except the statement already referred to in the letter EX. H (1) by the Company to the Manager, Ramgarh Wards Estate, which it is contended, cannot be evidence except of the fact that such a contention was raised. It was also objected that the authorities of the Court of Wards made prominent reference to the interest of the public which it is contended, is not a matter relevant to be taken into account but the interest of the ward and the advantage of the property. On 3rd July 1916, the officiating Secretary to the Board of Revenue wrote back to the Commissioner, Chota Nagpur Division, with reference to the previous correspondence, already adverted to. This is a very important letter in so far as it has been claimed that this was the sanction of the Board of Revenue to the alteration suggested by the Company in the original licence. The relevant portion of this letter is in these terms:
"I am directed to say that the Board accepts generally the recommendations of the Deputy Commissioner, which have your support, but that the draft deeds embodying the proposed terms should be submitted to it, in order that they may be scrutinized by the Legal Remembrancer." (Ex. 130 (AY)).
It was contended in the Court below, and it has been contended before us also, on behalf of the Company that this letter is the necessary sanction of the Board of Revenue to the proposal for the alterations in the terms of the licence of 1915. The Court below has held that this does not amount to a sanction in as much as, it will presently appear, it was not a categorical acceptance by the Board of the terms offered by the Company. Still something remained to be done by the Board in consultation with their legal advisers before they could finally accord their sanction to the proposal. The learned Subordinate Judge has given very good reasons for holding against the contentions of the company and in our view, this finding is entirely correct. In pursuance of the letter of the Board, the Manager, Ward's Estate, wrote to the Company the letter Ex. (P-2), dated 12th July 1916, informing them of the general approval of the Board, and requesting them to have a draft agreement drawn up for the opinion of the Legal Remembrancer. This letter was acknowledged by the Company by their letter, Ex. 130 (AZ), dated th July 1916. With their letter dated 3rd August 1916 (Ex. 130 (AAA)), the Company enclosed the required draft prepared by their solicitors. From the letter (Ex.. 131 (C)), dated 20th October 1916, it appears that Mr. Shard a Charan Mitra, the legal adviser of the Ramgarh Estate, examined the draft submitted by the Company to the Manager, Court of Wards, and that he suggested certain alterations. By his letter dated 27th October 1916, the Manager, Court of Wards, forwarded to the Company the draft as revised by Mr. Mitra. The Company appear to have sat over this letter until 19th February 1917, when they sent a letter, EX. 130 (AAC), objecting to the alterations suggested by Mr. Mitra as aforesaid, as, in the words of the Company, "these alterations touch two vital important questions". The company, therefore, urged that the draft as made by their Solicitors should be retailed in respect of the matters on which there was a difference between the legal adviser of the Estate and the Solicitors of the Company. In other respects, they accepted the alterations suggested by Mr. Mitra. The letter dated 15th Match 1917, from the Company to their Solicitors (EX. 130 (AAD) refers to an interview between Mr. MacGregor and the Company's officers. They handed over to the Solicitors Mr. MacGregor's note along with Mr. Lister's letter to the Commissioner to the effect that, after taking up the first ten thousand bighas of coal lands during the first period of twelve years, the Company will have no liability for payment of minimum royalty for any additional area taken during the second period of twelve years until railway facilities were available, or until the twenty-fifth year. The Company further informed their Solicitors that they were prepared to agree to those terms. It would further appear from the letter that Mr. MacGregor was in Calcutta, and was ready to interview the Solicitors of the Company with their agent, Mr. White, so as to expedite the matters after discussion of such points as may be necessary. Exhibit 133, dated 30th March 1917, is a letter from Mr. MacGregor to the Deputy Commissioner of Hazaribagh submitting the draft of the proposed alterations in the original license which, the letter states, has been approved by Mr. Sharda Charan Mitra, the legal adviser of the Estate, for sanction. The letter further asked that the enclosures submitted with the letter might be returned with the sanction. It contains a query, dated 31st March 1917 apparently by the Deputy Commissioner, whether it required the Board's sanction and the answer to that query is apparently by the Manager, which is in the affirmative, and is dated 2nd April 1917. Apparently, therefore, the general approval of the Board, dated 3rd July 1916 was not taken by the parties to the transaction as the sanction of the Board to the terms of the extension of the original license. The Commissioner of Chota Nagpur Division by his letter, dated 24th April 1917 (Ex. 131 (d)) submitted to the Board of Revenue the draft of the proposed agreement with a request that the same might be scrutinized by the Legal Remembrancer, and then returned for execution. The letter also added that the draft agreement had been approved by Mr. Sharda Charan Mitra, who had advised the Estate at the time of the drawing up of the original prospecting licence. The Commissioner of Chota Nagpur Division sent another letter to the Board of Revenue on 20th June 1917 in continuation of his letter aforesaid of 24th April 1917. This letter only forwarded Mr. MacGregor's letter to the Deputy Commissioner, requesting him to move the higher authorities "to expedite their sanction to the said agreement." In reply to this letter the Secretary to the Board of Revenue wrote back to the Commissioner on 13th July 1917, (EX. P (4)). This letter makes a pointed reference to the Additional Legal Remembrancer's note of 9th July 1917 (Ex. 147 (B)), in which he had raised four points which required examination and elucidation. The following sentence in that letter is highly significant:
"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 Legal Remembrancer."
The Board further indicate their observations on three of the points raised in the note aforesaid. This letter is of great importance from the point of view suggested on behalf of the appellant Raja, namely, that there were still important points very material to the terms of the proposed alteration in the original licence outstanding between the parties. It was naturally argued on his behalf that this letter made it clear that the Board of Revenue had not granted the necessary sanction by their letter of 3rd July 1916 which is claimed by the respondent Company to have been such a sanction by the Board. The most important outstanding points were, first, whether the obligation to take up ten thousand bighas in the third period of twelve years should be insisted upon, and secondly, whether the minimum royalty was to be suspended only in case of leases taken in the second period of twelve years (which is-wrongly characterized as the second decennial period in that letter). It appears that the questions raised by the Additional Legal Remembrancer, which were forwarded by the Board to the Commissioner, were dealt with by the Manager who wrote some letter to the Company, asking for elucidations of those points. The answer of the Company is contained in the letter Ex, 125 (AC) dated 24th July 1917. The letter makes reference to telegram, copies of which were enclosed. The position which the Company took was that, if an aggregate area of twenty thousand bighas is taken up by the Company within the first twenty-four years, the licence would be further extended for another twelve years; but there was no obligation on the part of the Company to take any further area during the third period of twelve years so extended. On 7th August 1917, MacGregor wrote the letter Ex.. 132 (e) to the Deputy Commissioner of Hazaribagh, in answer to the correspondence contained in the Board's letter of 13th July 1917, and the extract from the Additional Legal Remembrancer's note dated 9th July 1917. With reference to the points raised in the Additional Legal Remembrancer's note, Mr. MacGregor enclosed the letter from Mr. Sharda Charan Mitra (flagged 'A') and his notes (flagged 'E' and 'C'), giving his reasons for accepting the Company's demands. He further mentioned that he bad an opportunity of discussing the matter with the Additional Legal Remembrancer, and the latter was satisfied with the explanations given. He ended his letter by a request that the matter be "put through as soon as possible." Mr. Das, on behalf of the appellant Raja, contended that Mr. MacGregor was very anxious to see the matter through for certain reasons of his own, which will be discussed later, namely, that he had his own axe to grind. On receipt of this letter, the Deputy Commissioner forwarded the same with the enclosures to the Commissioner, He further mentioned the fact that the Manager had seen the Legal Remembrancer as also the Hon'ble Member of the Board, and that they were satisfied with the explanations. He also requested that the matter be expedited (EX. 132 (d)). By his letter dated 25th August 1917, (Ex. 131 (f)), the Commissioner completed the chain of correspondence. He reiterated the fact that the Manager had seen the Hon'ble Member and the Legal Remembrancer. Hence, he did not think it necessary to make any observations of his own. The Board, by its letter dated 14th September 1917, (Ex. 131 (g)), sent the draft to the Legal Remembrancer with a request that the same may be referred to the Solicitor to the Government of India for examination from the point of view of the Estate. It is important to note at this stage that the Board indicated in para. 2 of the letter the changes sought to be introduced in the original prospecting licence, a copy of which was also enclosed. The Board indicated that the changes sought to be introduced were (1) that the original licence for a period of six years was to be extended to twelve years, with a right of renewal for a further period of twelve years on certain conditions therein indicated; (2) that on those conditions being fulfilled, a further period of twelve years would be granted for prospecting, during which period the Company was to undertake the obligation, to take a lease of at least 10,000 bighas; (3) that the dead rent was to be Rs. 8000 for the first six years, and thereafter Rs. 50,000 a year; (4) that the minimum royalty in respect of the additional areas to be taken in excess of 10,000 bighas will not be payable until 26th March 1939, or earlier, if railway facilities were available; and (5) that salami will be payable whenever any excess area is taken under lease. On receipt of the papers by the Solicitor to the Government of India, he wrote back to the Legal Remem. brancer on 25th September 1917. (EX. 131 (b)) and pointed out that two matters still required looking into, namely, (1) the clause relating to three years' grace, whether it was to be allowed during each period of twelve years or only once, and (2) the clause as regards payment of Rs. 8000 per year as dead rent whether it was to be for all the six years or only for five years. The Board of Revenue's letter, he pointed out, made it payable for all the six years. He further pointed out certain amendments in the draft which related to the conditions bearing upon the payment of minimum royalty. On receipt of this letter from the Solicitor to the Government of India, the Legal Remembrancer wrote a letter (Ex. 131 (i)), dated 6th October 1917, to the Board of Revenue. In this letter, he made certain observations on the points raised by the Solicitor to the Government of India. He further pointed out that it was difficult to deal with the question of payment of Rs. 8000 as dead rent without further instructions. He made further suggestions with a view to amending the draft of the terms. Apparently, on receipt of the Legal Remembrancer's letter, the Board of Revenue wrote back to the Commissioner on 9th October 1917, (Ex. 133 (a)), enclasing the Legal Remembrancer's letter of 5th October 1917, just referred to the letter of the Solicitor to the Government of India to the Legal Remembrancer, and the Board's letter to the Legal Remembrancer, which all had raised certain controversies as regards the exact terms of the alterations to be made in the original prospecting licence. These letters were enclosed by the Board to the Commissioner "for information and such action as may be considered necessary." On 13th/16th october 1917, someone on behalf of the Commissioner forwarded the lebter with the enclosures from the Board of Revenue to the Deputy Commissioner, again "for information and such action as may be considered necessary." It further appears from the endorsement on that letter, dated 18th October 1917, apparently by the Deputy Commissioner, that he treated the matter as "most urgent," and gent the copy with the enclosures in original to the Manager to be dealt with by him, if possible, before he made over charge. It is clear from this endorsement that Mr. MacGregor was leaving the service of the Bamgarh Estate, and was about to make over charge. As a matter of fact, he made over charge on 2nd November 1917, vide EX. 125 (AE), the letter from Mr. MacGregor to Mr. Ironside of Bird & Co. On behalf of the Company it was vehemently argued by Sir S. M. Bose that Ex. 133 (a), the memorandum from the Board of Revenue to the Commissioner, was the sanction by the Board to the transaction in question. The learned Subordinate Judge has accepted this contention. On the other hand, on behalf of the appellant Raja, it has been strongly urged that this was a mere routine letter, and not the formal sanction of the Board of Revenue to the terms on which the original licence was to be extended. As this is a very crucial matter determining the validity or otherwise of the transaction, it will have to be discussed in some detail. But, before that is done, it is convenient to complete the narrative of events leading up to the execution of the deed of variation on 23rd November 1917. Mr. MacGregor wrote the letter (Ex. H(3)), dated 18th October 1917, to the Company informing them that the draft with certain suggestions of Government Solicitor and the Legal Remembrancer had been received by him. He also stated that he was anxious that everything connected with the matter, namely, the extension of the prospecting licence, should be settled before he made over charge at the end of the month, or early in the month following. He, therefore, wanted to discuss the matter personally with them. Hence, it appears, there was an inter-view between Messrs. Orr Dignam & Co., Solicitors to Messrs. Bird & Co., and Mr. MacGregor on 26th October 1917, vide the letter Ex. 130 (AAE). The letter by the Company's Solicitors mentions the fact that three additional clauses after Clause 8 and certain other additions had been made to the draft as returned by the Board. They further state that, with the exception of the second point, namely, with regard to the payment of eight thousand rupees as dead rent for the first year, they thought it was not payable by the Company. On 1st November 1917, Mr. MacGregor wrote the letter EX. 132 (b) to the Deputy Commissioner of Hazaribagh, informing him of his interview with the Company and their Solicitors, and of how he had decided the matters in controversy raised by the Board of Revenue at the instance of the Government Solicitor and the Legal Remembrancer, particularly with reference to the question of payment of eight thousand rupees as dead rent for the first year. The Deputy Commissioner, in his turn, informed the Commissioner by his letter EX. 147 (c), dated 5th November 1917, that the Manager, Ramgarh Estate, had accepted the revised terms as drafted by the Company's Solicitors after consultation with him and under his instructions. Apparently, the matter of the revised draft of the terms of extension of the prospecting licence was never sent back to the Board for their final approval, and the manner in which the questions raised by the Board had been determined by the Deputy Commissioner in consultation with the Manager. They apparently thought that nothing more had to be done. As a matter of faot, the Manager and the Company treated the letter of 3rd July 1916, as the sanction of the Board, as would appear from the letter EX. 130 (AAG), dated 9th November 1917, written by the Secretary, Board of Revenue, to Messrs. Bird & Co., enclosing the Board's letter No. 20/308/2, dated 3rd July 1916, for incorporation in the fresh deed to be executed incorporating the terms of the revised licence. Indeed, that very letter is incorporated as the sanctiou by the Board of Revenue. On 23rd November 1917, as already indicated, the variation deed was executed. It was signed by Mr. A. M. Walter as Manager of the Court of Wards, Mr. MacGregor having already left, for service elsewhere.
52. On the question of the validity of this transaction, at the forefront of his argument Mr. Das, on behalf of the appellant Raja, contended that there was really no sanction given by the Court of Wards to the document as finally drawn up and executed on 23rd November 1917. It was contended that the letter of the Board of Revenue, dated 3rd July 1916, could not be the sanction, inasmuch as a number of questions were still outstanding. The learned Subordinate Judge has acceded to that contention, and we have already indicated that we agree with this conclusion of the learned Subordinate Judge. It is not necessary, therefore, to repeat those reasons once again. The learned counsel for the respondent Company, on the other hand, contended that that document was the sanction of the Board of Revenue. But he contended further that, if that was not the sanction of the Board of Revenue, certainly the memorandum of the Board, dated 10th October 1917, was such a sanction. The learned Subordinate Judge has accepted this contention. But, in our opinion, neither in form nor in substance, could the memorandum aforesaid of the Board of Revenue be treated as the sanction of the Board. This memorandum was, as contended on behalf of the appellant, routine communication from the higher authority to the subordinate authority for consideration of the matter raised in the letter of the Legal Remembrancer and the Solicitor to the Government of India. While reciting those letters, the matters which were still outstanding have been noticed, and it will appear therefrom that, rightly or wrongly, the Board had raised the question that eight thousand rupees had to be paid as dead rent for the first year. Certainly, the Board itself and not the Manager, or the Deputy Commissioner, could have been the final authority to dispose of that matter. The Manager, or the Deputy Commissioner, may have been right in thinking that it was not in the contemplation of the parties that the eight thousand rupees would be payable as a result of the alteration of the terms of the licence. But the final say in the matter lay with the Board itself, and the Manager, or the Deputy Commissioner, could have only indicated their reasons for the conclusions they bad arrived at. But it was open to the Board to insist upon the payment of eight thousand rupees for the first of the six years, if it took the view that that should be insisted upon as a consideration for the further concession to be granted to the Company. Furthermore, it cannot be said that the last word in the matter of drafting of the terms of the alteration of the licence lay with solicitors of the Company. The draft as revised by the solicitors of the Company was never submitted to the consideration of the Board. The Board had already indicated in one of the letters, quoted above, that they treated the matter of drafting the terms as of great importance, and, therefore, bad insisted upon the terms being examined not only by the Legal Adviser of the Provincial Government (the Legal Bemembrancei) but also by the solicitor to the Government of India. Hence, in the ordinary course of business, in order to obtain the final sanction of the Board, the revised draft as finally made by the solicitors of the Company should have been submitted through the proper channel to the Board of Revenue for examination by them, or, on their behalf, by the Legal Remembrancer, or the solicitor to the Government of India, as the Board thought fit and proper. This was never done; nor were the other matters raised in the letters of the Solicitor to the Government of India and of the Legal Re. membranoer again submitted to the Board for their consideration and final approval. The Board had not delegated its power to the Deputy Commissioner, or to the Manager, to decide finally the questions in controversy raised by them, and which had not been accepted by the Company or their solicitors in their entirety. On the other I hand, the Company's solicitors had made their own draft of the amendments purporting to carry out the intentions of the Board of Revenue. But certainly it was not for them to have the last say in the matter. The proper authority to deal with the question finally was the Board of Revenue itself.
53. Mr. Das, on behalf of the appellant Raja, pointed out that, whenever the Board accorded its sanction to such a transaction, it did so in unequivocal terms, the instances of which are to be found in (i) Ex. 130 (AS), dated 29th July 1914, the relevant portions of which are as follows :
"In reply to your letter No. 1121, dated 25th July 1914, 1 am directed to convey the sanction of the Board to the agreement arrived at as between the Ramgarh Estate, as represented by the Manager, Mr. W. C. MacGregor and by the Deputy Commissioner on behalf of the Court of Wards, of the one part, and Messrs. Bird & Co., Calcutta, of the other part, which has been embodied in two documents.....'.', then the exact nature of the two documents is recited in two separate paragraphs, and then follows the following:
"The Board also approves the drafts of the above two documents, forwarded with your letter, which have also, it is underatood, been approved by Mr. Sarada Charan Mitter acting on behalf of the Ramgarh Estate."
(2) Exhibit F (9) dated 25th November 1914, the relevant portion of which is in these words:
'With reference to your letter No. 1571 W/I (a)-31, dated 8th October 1914, I am directed to convey the sanction of the Board to the postponement, for one year, of the prospecting license granted to Messrs. Bird and Company in respect of the Karanpura Coal fields belonging to the Ramgarh Wards Estate in the district of Hazaribagh."
(3) Exhibit 98, letter from the Board of Revenue to the Commissioner, dated 4th/6th December 1935, the relevant portions of which is in these terms:
"With reference to your letter No. 1365W/X (a)-11, dated 18th November 1935, I am directed to say that the Board accepts your recommendations and sanctions the extensions tot a further period of 12 years, i. e., up to 26th Match 1951, of the period of exemption under Clause 4 (V) of the lease from payment of minimum royalty on areas held in excess of 10,000 bighas by the Karanpura Development Company limited......,";
and, lastly, (4) Ex. 104, memorandum of the Board of Revenue to the Commissioner bearing date 19th March 1936, which is in these terms:
"In modification of the orders issued in Board's letters Nos. 21-104/4, dated 5th December 1935, and 21-44/3, dated 24th February 1936, it now sanctions the extension for a farther period of 12 years, i. e., up to 26th March 1951, of the period of exemption under Clause 4 (V) of the lease from payment of minimum royalty on areas held in excess of 10,000 bighas by the Company.....,."
These instances of sanction by the Board of final transactions were quoted by Mr. Das. on behalf of appellant Raja, to show that it appears to have been the invariable practice of the Board to use the commencing words of Section 18, Court of Wards Act [IX (B. C.) of 1879] namely, "The Court may sanction. . . ." Mr. Das urged that the Court of Wards invariably uae those words with a view to leaving no doubt in the mind of anyone dealing with the Court of Wards that a particular transaction bad been sanctioned by the Court.
54. On the other band, Sir S.M. Bose, on behalf of the respondent company contended, that though, in form the letter of 9th October 1917, is not a sanction, in substance, it would amount to a sanction, because nothing had been left to be done by the Court of Wards towards completing the transaction, namely, the variation of the original licence. He drew our attention to a number of decisions. The first case relied upon by him is the decision of their Lordships of the Judicial Committee in Gulabsingh v. Seth Gokuldas, 40 I. a. 117: (40 Cal. 784 P. C.). That was a decision under the Central Provinces Government Wards Act (XVII [17] of 1885). In that case, the Chief Commissioner had sanctioned the aasumption by the Court of Wards of the management of the estate of a certain zamindar, and also accepted the proposal for the liquidation of the debt owing from the estate, which was the chief purpose of the assumption of the management of the estate by the Court of Wards. It appears that in that case the Deputy Commissioner had asked for the acceptance of the proposal to raise one lac of rupees from the respondent in that case for the purpose of meeting the liabilities of the estate. Their Lordships of the Judicial Committee considered the latter from the Secretriat to the Commissioner sanctioning the proposal for the liquidation of the debt of the estate as a sufficient sanction by the Court of Wards of (for ?) effecting a mortgage of the property (under?) the management of the Court of Wards to raise a sufficient sum for the liquidations of the indebtedness of the estate. Their Lordships further observed that it was not necessary that the actual mortgage to be made by the Court of Wards should be submitted to the Chief Commissioner for his sanction or that the Court of Wards should have the Chief Commissioner's sanction to the precise terms of the mortgage, It has to be noted that the decision of their Lordships of the Judicial Committee was based on a consideration of the provisions of the Central Provinces Act which may not be in pari materia with the Bengal Court of Wards Act. We have not before us the Central Provinces Act (XVII (17] of 1885); but it would appear from the trend of the decision of their Lordships that the Chief Commissioner in that case had to sanction acts of the Court of Wards itself. In the present ease before us, we are concerned with the sanction of the Court of Wards in relation to the acts of its subordinate officers, namely, the Manager and the Deputy Commissioner or the Commissioner. The scheme of the two Acts does not appear to have been the same. Hence, the argument by analogy in the present cage does not hold good. The next case relied upon on behalf of the respondent is that of Ramkanai Singh Deb v. Mathewson, 42 I. A. 97: (A. I. R. (2) 1915 P. C. 27). This was a decision under the Chota Nagpur Encumbered Estates Act of 1876, In this case, a patni lease was sanctioned by the Commissioner in favour of Robert Watson & Co. A patni lease is a well-defined transaction, the essential features of which had, in that case, been sanctioned by the sanctioning authority, namely, the Commissioner. In those circumstances, it was held by their Lordships of the Judicial Committee that it was not necessary that the document ulimately prepared should also have been submitted for his sanction. In that case, their Lordships further pointed out that what was left to be done by the subordinate of the Commissioner was only entering formal details in the document. In that case, therefore, there were no essential terms outstanding to be settled between the contracting parties, as in the present case. If it were clear that the Board of Revenue as the Court of Wards had sanctioned all the essential particulars of the transaction it may not have been necessary to submit the final draft for the formal sanction of the Board; but, as already indicated, in the present case certain essential terms of the transaction had to be settled, and the draft had to be made accordingly. The correspondence already summarised indicates that the parties were not ad idem on all essential terms of the variation of the original licence. Even after the Board of Revenue had sent back the draft along with the suggestions of the Legal Remembrancer and the Solicitor to the Government of India, the Company's solicitors were suggesting changes in substantial terms of the agreement. Therefore, it was necessary that the terms as finally drafted by the Company's solicitors should have been submitted to the Board of Revenue for their examination and ultimate formal sanction, if the Court of Wards found that their intentions had been fully and properly incorporated in the document as finally drafted. It will be seen that it was not the practice of the Board of Revenue as the Court of Wards to accord formal sanction until the terms were embodied in a formal document. The letter, Ex. 130 (j) dated 16th/17th April 1914 from the Deputy Commissioner to the Company states that "the terms regarding Karanpura as.arrived at the at meeting of the 1st and 2nd instant have been approved by the Board as just and proper. This formal sanction cannot be given until the terms are embodied in a formal document."
So far as the Company were concerned, they may have said their final word, but so far as the other party, the Court of Wards, was concerned, they had not yet done as, though the Manager and the Deputy Commissioner had taken the view that the draft as made by the Company's solicitors truly expressed the intentions of both the parties. Further, it may be mentioned in this connection that Rule 242 framed under Section 70 of the Act requires sanction to be reproduced in the deed to be executed by the Court of Wards. The rule reads thus :
"All leases appertaining to an estate under the Court of Wards should be executed by the Manager in accordance with opinion of the Legal Remembrancer quoted below :
It is not desirable to make ths propietora parties to the lease or to make the proprietors the real lessors.
Words should be added reciting (1) that the manager was appointed on such and such a date, and (2) that the lease was sanctioned by the Court of Wards in exercise of the power conferred by Section 18, Court of Wards Act, 1879, by order dated so and so."
The obvious implication of the rule seems to be that the sanction is to be incorporated in the deed evidencing the transaction, as was done in all other instances. There is nothing to shew that, in the cases cited by Sir S.M. Bose, a similar rule requiring incorporation of the Board's formal sanction in the deed was to be found. Hence, in our opinion, the cases relied upon on behalf of the respondent company do not support their contention that there was a sanction by the Court of Wards to the transaction of the year 1917.
54a. It was also argued on behalf of the appellant Raja that the agreement of 1917, varying the terms of the agreement of 1915, was not for the benefit of the ward, or the advantage of the property, inasmuch as the terms of the transaction of 1907 in favour of Bokaro Ramgarh and Co. could not be the basis for a transaction which could entitle the grantees to have leases up to 1951 on the same terms as regards minimum royalty and salami and royalty. Mr. Das's contention was that the Court of Wards never applied its mind to this aspect of the case. They never considered whether the terms of 1907 would be fair and equitable from the point of view of the Estate for leases to be granted between 1917 and 1951. In our opinion, there is much to be said in support of this contention. The correspondence already discussed above between the Company on the one hand and the officers of the Court of Wards on the other discloses the fact that all the time they were discussing the advantages of the Company, and facilities to be granted to them for further extension of the term of their licence which meant, in effect, the terms of the lease or leases to be ultimately created in favour of the Company. It was never considered by the officers of the Court of Wards as to whether the giving up of the claim to minimum royalty in respect of areas above the first ten thousand bighas would be beneficial to the ward. The question of the market rate and other allied questions will be dealt with in connection with the second extension which was granted in 1937, as it is more convenient to deal with that aspect of the case at one place.
54b. Mr. Das contended further that, on the question of minimum royalty, the officers of the Court of Wards completely misdirected themselves by considering only one aspect of the matter whether the absence of a term regarding payment of minimum royalty for all additional areas taken under the extended licence would lead the Company to procrastinate in raising coal or in working the mines. Mr. Das contended, and, in our opinion, rightly, that the provision in a lease for payment of minimum royalty is directed not only to preventing procrastination on the part of the grantee in opening mines and raising coal but is also meant to ensure a regular flow of income to the grantor. In this connection, reference was made to the following observations of Striling L. J. in In re Aldam's Settlement, (1902) 2 Ch. 46 at p. 60: (71 L. J. Ch. 552) :
"The object of a fixed or minimum rent is two-fold: first, to provide a specified income on which the tenant for life may rely; and secondly (and this is the more important reason), as a security that the mine will be worked, and worked with reasonable rapidity."
Mr. Das contended, therefore, that the officers of the Court of Wards did not consider the question whether it could possibly be in the interest of the ward to forego his claim to substantial sums of money every year in the shape of minimum royalty for all additional areas to be taken in pursuance of the extended terms. It was pointed out that the extension of the term was mainly, if not entirely, for the benefit of the Company, and no thought was given to any corresponding benefit to the owner of the pro. perty. It was also contended that, by the revised terms of the licence, the Company were given the right to take further areas under lease up to year 1951 without any liability for payment of minimum royalty until 26th March 1939, or until railway facilities were available; but at the same time the Court of Wards never insisted on the Company giving an undertaking that they would provide for railway facilities within a reasoable time. Hence, it was argued that the revised terms really meant all rights for the Company but practically no corresponding obligations. In this connection, Mr. Das referred to Ex. P-(16), a letter from Anderson Weight and Co. representing Bokaro and Ramgrh, Ltd. to the Manager. Ramgarh Wards Estate, dated 3rd March 1916, in which they say that the Company had " ..... entered into an arrangement with the East Indian Railway and the B. N. Railway under which these Railways covenanted to put in a Railway Line to serve the coalfields, in consideration for which the Company agreed to give them a sub-lease of extensive blocks of coal-bearing land, for the granting of which no pecuniary benefit would accrue to the Company, either by way of salami or royalty, the whole of the benefit being reserved for the Raj, As you are aware theae Railway Companies have already constructed a line into the field at an expenditure of some sixty lacs of rupees which not only facilitates the opening up of the coalfields but must undoubtedly most materially benefit the Raj ....."
Mr. Das contended that the Court of Wards should have insisted upon the Company doing gome such thing as Bokaro Ramgarh did with a view to bring railway facilities to the coal area.
55. Mr. Das further contended that the extension of the terms of the original licence of 1915 was obtained by the Company on false pretences. In their application of 3rd August 1915, Ex. H (2), they purported to say that they would have to raise capital, namely, thirty thousand pounds, for prospecting and development, two-hundred-thousand pounds for development, machinery and colliery completion, and one and a half million pounds sterling for pro. vision of railway facilities, and that these vast sums of money could not be raised within the six years of the original prospecting license. But, Mr. Das contended, that the Company bad never either intended to work the colliery themselves nor to construct railway for working the colliery. Reliance bas been placed upon the evidence of Mr. Roberts (witness No. 1 for the Company). He joined the Company in 1919. He has admitted in his cross-examination as follows:
"Since I have been a member of the firm, the Development Company has had no Intention of building a Railway at a cost of a million and a half pounds. During 1915, pound was approximately speaking equal to Rs. 15. All records of Bird & Co., relating to the matters relevant in this suit have been filed in Court. Since I became an assistant in the Goal Department of Bird & Co., I have seen no paper which will show that they or the Karanpura Development Company ever intended to build a Railway at a cost of a million and a half pounds."
The same witness has also admitted that "the Company has never worked the mine of its own. We never opened any mine. We have developed the property through prospecting and through sub-leases." The witness has also made the following significant admission:
"All the areas sub-leased by us except one were taken up by Railways. The Railways are still working Bhurkunda. They themselves obtained a prospecting license from us in 1920, and prospected the area themselves..."
Mr. Michalmore, who was examined on commission, on behalf of the Earanpura Development Company, Ltd., has also corroborated the above admissions of Mr. Roberts by admitting that "the Karanpura Development Company Limited is not working coal in any portion of licensed area. As far as I know the company has no intention of working any coal areas."
Mr. Das has, therefore, contended that, when the Company made an application for extension of the term of the prospecting license, they did so on grounds which were entirely unfounded in fact, and that they actually obtained the extension of the terms of the lease on representations which were not true.
56. Mr. Das also contended that the Company had made a misleading representation to the officers of the Court of Wards when they stated in their letter EX. H (1) that the results of the survey by their geologists of the coal fields were most disappointing. Mr. Das's grievance on this score was that the officers of the Court of Wards accepted this statement of the Company at its face value without calling for Dr. Jowett's report on those coal fields. Mr. Das has drawn our attention to the fact, as noted in the judgment of the Court below, and mentioned by us earlier, that, far from being disappointing, even the limited surveying done by Dr. Jowett disclosed that there (were) first-class coal seams and a larger number of second-class coal seams in the areas in question. As to how far those alleged misleading statements by the Company influenced the officers of the Court of Wards is not absolutely clear, But the fact remains that those statements of the Company were incorporated in one of the letters, already set out, of the officers of the Court of Wards (vide EX. 139 (AX)). Summing up Mr. Das's contentions on this part of the case, his grounds for urging that the officers of the Court of Wards were guilty of negligence are (1) in assuming without any foundation, or even a suggestion by the Company, that the Company will give up the concession unless the extension asked for were granted; (2) in not insisting upon the Company to give an undertaking that they will introduce railway facilities within a reasonable specified time, failing which they would be liable to pay minimum royalty in respect of the excess areas taken by them as a result of the extended term of the lease; and (3) that the officers of the Court of Wards did not call upon the Company to produce Dr. Jowett's report on the prospects of the. coal lands.
57. Mr. Das further urged, in connection with the grant of the extension of the term of the prospecting licence, that Mr. MacGregor had himself an interest; in the promotion of the Karanpura Development Company for whom, admittedly, Bird & Co. were acting in the matter of securing the concession from the Court of Wards. Mr. Das pointed out in tbis connection that, as would appear from the sequence of events, Mr. MacGregor was waiting for the deed of alteration of the original licence to be executed, and, as soon as that was hurried through, chiefly by him, he gave up the service of the Court of Wards, and took a double appointment, namely, (1) under the Lachmipur Estate on a salary of one thousand rupees, and (2) a sinecure poat of Rs. 1,250 to Rs. 1600 per month under Bird & Co. Besides these he got 250 Founder's Shares in the Karanpura Development Company as a reward for the services he had rendered to the Company in obtaining the licence, or in obtaining the extension of the term of the license. In this connection, our attention was drawn to the evidence of Mr. Roberts. He admitted that he met Mr. MacGregor first in 1922-23 at Ranchi, when he was in the service of Bird & Co. as a zamindari Manager. Mr. MacGregor was in charge of the Karanpura Coal Field, and was the Company's Liaison Officer. One of his duties as such officer would be to act between Bird & Co. and Ramgarh Wards Estate; and to be in touch with the Ramgarh Wards Estate and to get things done for the Company's benefit. As regards the date of Mr. Mac Gregor's appointment under the Company, he admitted that the books of the Company will show the date of his appointment. The witness had no knowledge if Mr. Mac Gregor helped Bird & Co. materially in obtaining the license of 1915 and the variation of 1917. The witness naturally resented the suggestion made in his cross-examination that Mr. MacGregor, while he was Manager of the Ramgarh Wards Estate, was rewarded by Bird & Co. for having helped and assisted that Company in obtaining the agreements of 1915 and 1917, as the witness naturally admitted, it would amount to bribing Mr. MacGregor. The witness's attention was drawn to Ex. 4 which contains the following recitals :
"And whereas certain firms and individuals had rendered considerable services to the parties hereto of the second part in securing the said license and prospecting the property and in consideration of such services it has been agreed that Ten Thousand Founder's Shares in the capital of the company credited as fully paid up should be allotted to such firms and individuals as the firm shall direct."
The witness admitted that Mr. MacGregor was registered as a holder of 250 shares in 1921 or 1922 or thereabouts. He wag further pressed as to the manner in which those shares were acquir. ed by Mr. MacGregor. The witness expressed his inability but admitted that, if he purchased the shares, that would be shown in the Share Register, that it was by a deed of transfer but that such a deed he could not find. He further admitted that, if such a deed were in existence, he would have found it. The witness, ultimately, being further pressed in cross-examination, had to admit that "if Mr. MacGregor was an original allottee, the shares which were registered in his name must have been a part of 10,000 shares deducted as a reward for services. The Karanpura Development Company was registered on 14th July 1920."
Exhibit A (j) 6, statement filed by the Karanpura Development Company on 20th July 1920, shows that, in consideration of the sale to the Company, the Company will allot to the promoters, or to their nominees, fifty thousand Founders' Shares of ten rupees each credited as fully paid up. It would also appear from that document that the nominal capital of the Company was forty lacs of rupees, out of which thirty five lacs worth of shares were divided into 3,50,000 Ordinary Shares of ten rupees each, and fity thousand Founders' Shares of ten rupees each. From EX. Q, list of share-holders in Karanpura Development Company, it would appear that Mr. W. MaoGregor c/o Bird & Co. held 250 shares out of the fifty thousand Founders' Shares, referred to above. Mr. Das contended that, it being an admitted fact that Bird* Co., were acting as Agents on behalf of the Karanpura Development Company, the allotment of 250 Founders' Shares in favour of Mr. MaoGregor must have been in consideration of the services rendered by him to the Company in obtaining the concession from the Court of Wards. Hence, Mr. Das laid great stress on the following admission of Mr. Roberts:
"It is impossible for me to say why Mr. MacGregor was given 250 Pounders' Shares unless he assisted in securing the license and its modification or in prospecting the property for the benefit of Bird & Co."
It would appear that Mr. MacGregor submitted his resignation of the post of Manager, Court of Wards, on 16th September 1917, his reason being that the then Raja would come of age in about a year and a half, as a result of which the Estate would probably be released from the Court of Wards. He, therefore, had accepted an appointment in the Bhagalpur Division for nine years. Mr. MacGregor made over charge on and November 1917. Mr. Das contended that Mr. MacGregor was only waiting to see the deed of alteration of the original agreement executed, and that the haste with which the variation deed of 23rd November 1917, was finalized without the proper sanction of the Court of Wards is thus accounted for. Though, as a matter of fact, it was Mr. Walter, Mr. MacGregor's sucoessor-in-office who signed the variation deed on 23rd November 1917, he merely put his signature to it, and everything had been done by his predecessor in office. Immediately thereafter, Mr. MacGregor accepted the service of the Company on Rs. 1,250 to Rs. 1,500 a month, besides his salary of RS. 1000 A month from the Lachmipur Estate. But it appears that Mr. MacGregor was, more or less, permanently residing near the coal-fields, and only occasionally went to Bhagalpur aide in connection with his employment as Manager of the Lachmipur Estate. In our opinion, these facts point to the inference that Mr. MacGregor was certainly interested in the Company and in their determined efforts to obtain prospecting license in reapect of the entire Karanpura Coal Fields belonging to the Ramgarh Wards Estate. It would thus appear that Mr. MacGregor's duties were in conflict with his self interest. It is not surprising, therefore, that Mr. MacGregor evinced an unusual anxiety, during the course of the negotiations for the grant of the lisence and the subsequent alteration of the same, that the Company should get the monopoly for searching for coal in the valuable coal fields belonging to Court of Wards, which were still then quite in a virgin state. The learned Subordinate Judge has observed that the evidence was not conclusive. But in a matter like this, no conclusive evidence could be available, as the parties to such a nefarious arrangement would not deliberately or willingly give any clue to the real state of affairs. The appellant Raja could not be expected to adduce any better evidence of the collusion between Mr. MacGregor, the Manager of the Wards Estate, and the Company. The learned Subordinate Judge has also commented on the fact that Mr. MacGregor was a mere subordinate officer of the Court of Wards. But be has not attached sufficient importance to the fact that it was the Manager, Court of Warda, who initiated proposals, and practically gave a lead to the higher officials. There is no doubt that, if the higher officials of the Court of Wards like the Deputy Commissioner and the Commissioner and the Hon'ble Member, Board of Revenue, had any the least suspicion that Mr. MacGregor was in the pay of, or was under a promise by the Company to be awarded for his services, they would have been more circumspect and alert in safe-guarding the interest of the ward of the Court than they appear to have been. It also appears from the official correspondence discussed above that it was Mr. MacGregor who had been moving between the Company, the Deputy Commissioner, the Commissioner and the Board of Revenue in the matter of. the settlement of the terms of the agreement, and naturally much depended on what he orally represented to the officers concerned during the long course of negotiation.
58. In pursuance of the concession as altered by the terms of the deed of variation of 23rd November 1917, six leaaes were executed between the years 1922 and 1937. The first lease was executed on 17th July 1922, in respect of 8,035 bighas, vide EX. 9. Salami at the rate of Rs. 40 per bigha, amounting to Rs. 1,21,400 was paid. Royalty was to be paid at fouc annas per ton for steam coal, three annas for rubble, two annas for dust, eight annas for hard coke, and six annas for soft coke. la respect of this area, a sub-lease (EX..-A) WAS executed on 20th April 1923, in favour of Andrew Yule & Co., with effect from the date of the head lease, that is to say, 17th July 1922, in respect of 2,011 bighas, and another sub-lease (EX. B) was executed on the same date in favour of Villiers, Ltd., in respect of 1,024 bighaa with retrospective effect from 31st December 1921, the total salami for these two areas being Rs. 5,31,125.
59. The second lease was in respect of 1,150 bighas at a salami of RS. 46,000 (vide EX. 8). It was executed on 26th January 1924, but with retrospective effect from 17th October 1922 (as stated in the sub-lease). The sub-leaae (EX. d) in respect of this area was given to South Karanpura Company on 25th April 1927, with retrospective effect from 3rd November 1922, at a salami of five lacs of rupees.
60. The third lease was executed on 19th March 1924, in respect of 2,309 bighas at a salami of Rs. 92,360 (EX. 6) with effect from 24th March 1923. The sub-lease (EX. e) in respect of this area was granted in favour of the Bengal Nagpur Railway Company on 28th February 1927, with effect from the date of the commencement of the head lease, that is to say, 24th March 1923, at a salami of RS. 7,64,685.
61. The fourth lease was executed on 26th November 1923, in respect of 6,800 bighas at a salami of Rs. 2,72,000 (Ex. 7). The sub-lease (EX. c) in respect of this area was given to the Railway Board on 27th March 1923, at a salami of RS. 11,90,000 with effect from 17th October 1922, that is to say, even earlier than the execution of the head lease.
62. The fifth lease is dated 12th April 1927, with effect from 1st April 1924, in respect of village Religara of 4,045 bighas at a salami of Rs. 1,61,800 (EX. 10). The sub-lease (EX. f) in respect of this area was given to B. B. C. I. and M. S. M. Railways on 26th November 1931, with effect from 1st April 1924, at a salami of Rs. 14,15,750.
63. The last and the sixth lease was given on 17th July 1933, in respact of 200 bighas at a salami of RS. 8,000 (EX. 13). The sub-lease (EX. C) in respect of this area was given on 6th March 1935, to South Karanpura Company with effect from 3rd November 1922, at a salami of Rs. 11,843.
64. Patting side by side the two series of transactions, namely, one the leases between the Court of Wards aad the Company, and the other, the sub-leases, between the Company and tha sub-lessees aforesaid, it would appear that the Wards Estate got Rs. 7,01,660 by way of salami; whereas the Company made Rs. 44,12,903 by way of salami from their sub-leasees. It will be noticed farther that the sub-leases, in most of the cases, came into existence before the leases themselves, that is to say, the Company merely played the part of middlemen. They settled to lease out to sub-lessees certain specified areas on their own terms, and then obtained leases from the Raj for the corresponding areas. As regards the rate of royalty, it will appear that the rates to be paid by the Company to the Wards Estate were at a uniform rate stated above, and the rate of royalty payable by the sub-lessees to the Company were double or more than double the rates for the different kinda of coal or coke, though the two series of transactions are, more or less, contemporaneous. Mr. Das argued, on the basis of those figures, that the Court of Wards did not act like prudent men of business in agreeing to extend the period of the licence from 1921 to 1951 on the same terms as regards royalty and salami which obtained in the year 1907, that is to say, the terms on which the lease was granted in favour of Bokaro Samgarh, Ltd., Mr. Das contended that the Court of Wards should have taken into account the rising prices of commodities, particularly during and after the first World War, and that, in so far as they did not take this aspect of the case into their consideration, they were guilty of gross negligence in the discharge of their duties to the Ward of the Court.
65. In view of these considerations, it must be held that the agreement of 1917, the first deed of variatign of the original licence, is vitiated on account of the fact that there is no valid sanction of the Court of Wards to that transaction. It is also void for another equally good reason, namely, that the Court of Wards acted beyond their powers in foregoing the claim of the ward to minimum royalty in reapect of additional areas to be taken in pursuance of the extended term of the licence without any thought being taken as to the benefit of the property and the advantage of tha ward. The transaction is not binding on the appellant Raja also because the Court of Wards were misled by false representations made by the Company as to the reasons for granting the extension of the licence. As Mr. MacGregor, the then Manager of the Court of Wards, was acting not entirely in the interest of the Court of Wards but of the Company, which fact was not known to the Court of Wards, the latter were misled into granting extension of the term of the licence beyond the real necessity of the situation and on terms which are not beneficial to the interest of the proprietor. For all these reasons, it must be held that the first variation of the prospecting licence is not binding upon the appellant Raja. That being so, all the six leases, set out above, granted in pursuance of the variation deed of 1917, must be held to be void.
66. The second deed of variation of the original licence came to be executed on 1st January 1937, the negotiations leading up to this deed may now be summarised. In Ex. V, dated 11th May 1934, recording the minutes of a discussion between the Manager, Court of Wards, and the Company, the suggestion was made that the condition regarding the payment of minimum royalty by March 1939, might be waived, and the period extended for another term of twelve years. Exhibit 95 (c) is the letter, dated 24th April 1934, from the Company to the Manager, Court of of Wards, mentioning that they had already taken leases of 17,539 bighas, and that they had to take a further area of 2,461 bighas in order to be en. titled to a further extension of twelve years, and that the area of 4,045 bighas in mauzas Religara and others still remained to be developed owing to the absence of railway facilities. They also referred to the financial stringency of recent years which led to, they said, complete suspension by the railways of all capital development schemes. The Company, therefore, suggested that the clause regarding remission of minimum royalty on areaa not accessible by rail be extended until the end of the licence, namely, 1951. Upon this letter, the Manager, Mr. Walter, addressed a letter to the Deputy Commissioner (Ex. 95 (a)), dated 19th/23rd May 1934. In this letter, after reciting the facts of the previous transactions between the parties, the Manager strongly supported the Company's request for remission of minimum royalty on all areas in excess of ten thousand bigbas upto 1951. The Deputy Commissioner, by his letter Ex, 121, dated 2nd June 1934, addressed certain queries to the Manager who supplied the information required by the Deputy Commissioner, vide Ex. 122, dated 11th June 1934. By his letter Ex, 118, dated 10th June 1934, the Deputy Commissioner, Mr. Eusael, wrote to the Commissioner, recommending that the further concession asked for the Company be granted. In this letter, the Deputy Commissioner pointed out that, if the concession asked for by the Company were to be refused, the Company will have to pay minimum royalty at five rupees a bigha on 4,045 bighas plus the additional area of 2,461 bighas, which they had to take in order to be entitled to the third period of twelve years. The value of that royalty at the rate of Rs. 32,550 per year was stated to be Rs. 3 90,360 in course of the nest twelve years after 26th March 1939. Mr. Russell also pointed out that one day the coal deposits of this Estate will be the most important coal fields in India, and should be properly developed. There is a suggestion in this letter, to which serious objection has been taken by Mr. Das on behalf of the appellant Raja, that there was a danger of the Company giving up the concession and that it was important that a concern like Bird & Co., should be retained. Mr. Das has rightly pointed out that, in the whole of the record of this case there is not the faintest suggestion that the Company had up to that time expressed their intention to give up the licence, or that there was any apprehension that they may not be able to continue to hold the licence. On the other hand, the materials on the record, as rightly pointed out by Mr. Das show that the Company were very anxious not only to retain the licence but to take further areas in order to be qualified for availing the third period of twelve years, ending with March 1951. The Deputy Commissioner took the view that, in the long run, it may be more paying to the Estate to sacrifice immediate return from minimum royalty. But Mr. Das has rightly pointed out that this was not an admissible consideration; because the Company never intended, as shown above, to work any coal mines, or to provide for railway facilities at their cost. It has also been rightly pointed out that the concession asked for by the Company could not, on the face of it, be judged to be a transaction for the benefit of the wards of the Estate. On 13th August 1934, Mr. Russel wrote back to the Manager, Eamgarh Ward Estate (Ex. 123). In this note, the Deputy Commissioner pointed out that the revision of the prospecting licence in 1917 was granted to the Company on the ground that it had an enormous programme of development of the coal lands, and that the exemption from minimum royalty now asked for a furtber period of twelve years is based on the ground that there is no possibility of development in sight then, that is to say, 'the exemption is to be give not as an inducement to expedite development but simply to enable the company to hold on to the prospecting license without adding to its present loss (if any)."
He, therefore, asked the Manager to collect information from the Company as to the losses which the Company had to bear as a result of the previous transactions, and the losses which they may have to bear in future. The Company, by their letter to the Manager, "Wards Estate (Ex. 25), dated 10th December 1934, purported to give the answers to the queries raised by the Deputy Commissioner. This letter Mr. Das characterized as full of untruths and half truths. The very first item in the letter, saying that they were faced with a loss on royalty as from 1939 of RS. 22, 660 per annum, was found by the Company themselves to the wrong, and was withdrawn by a subsequent letter, vide Ex. 133 (B). They mention the further fact that there average expenditure on prospecting was Rs. 26,000 per year, and that their capital expenditure on that head was over twenty five lacs. They further state that interest on that sum at six per cent per annum amounted to an annual charge of one and a half lacs. Mr. Das commented on these statements by saying that the Company had not informed the Deputy Commissioner through the Manager that they had made forty four lacs twelve thousand and odd only by way of salami, apart from the fact that they had been realising royalty at a rate of twice or more than twice the rate which they were required to pay under their leases to the proprietor of the Estate. Mr. Walter wrote the letter EX. 119 on 14th/15th December 1934, to the Deputy Commissioner recommending that the exemption asked for by the Company should be granted in full. In this letter, the Manager makes use of the wrong statement made and subsequently withdrawn by the Company themselves that they stood to lose on royalty alone the sum of Rs. 22,660 per annum from 1939. Moreover, Mr. Walter repeates a false suggestion, it is so argued by Mr. Das, that, if the concession were not granted, the Company might relinquish their holdings. On 14th/15th March 1935, the Deputy Commissioner addressed a letter (EX. 95) to the Commissioner, giving the history of the transactions between the parties up to date. In this letter also, the Deputy Commissioner emphasises the suggestion, which has been characterised as false that it was important to retain firms like Bird & Co. as if they had given any indication that they would have to relinquish their holding, if the concessions asked for were not granted. In doing so, Mr. Mar wood was only repeating the suggestions made by his predecessor, Mr. Russell. By his letter EX. 26 (a), dated 18th May 1935, the Commissioner pointed out that the Company had yet to take under lease an additional area of 2,461 bighas in order to secure the extension of their prospecting licence. On 6th July 1935, there was a conference between Mr. Philip, then Member of the Board of Revenue, Mr. Marwood, the Deputy Commissioner, Mr. Walter, the Manager and Mr. Roberts, a representative of the Company, and this question of exemption from payment of minimum royalty was discussed. These notes by Mr. Roberts (Ex. 130 (AAAK) are very significant. He remarks:
"Mr. Pbillipa stated that we were aakirg the estate to forego minimum royalty at Rs. 6 a bigha on 4045 bighas, plus the additional area of 2461 bigbas which represented a loss to the estate of Rs. 32,530 a year or a minimum of Rs. 3, 90,360 in the course of 12 years if no further development tabes place."
He adds further :
"The subject was argued for some time and I formed the opinion that Mr. Phillips was unwilling to comit himselt in agreeing that the Estate would forego the minimum royalty, but that if he could, on further examination of the subject, find a precedent for such action be would probably concur.
"He closed the case by stating that he was not finally convinced our application was sound.
"Discussing the matter later with Mr. Walter, he advises me that the precedent exists as Bokaro Ramgarh, Ltd., were granted several extensions free of minimum royalties in the area they hold."
Mr. Das, on behalf of the appellant Raja, contended, and, in our opinion, rightly, that, if matters stood like that, it showed a proper appreciation by the Member, Board of Revenue, of the situation. But he contended further that it was Mr. Walter, the Manager, who misled the higher officials and the Member, Board of Revenue, by citing the false precedent which, in fact, never existed. As will presently appear, it is a fact that Bokaro Ramgarh Ltd. were granted several extensions; but it is not a fact that they were granted exemption from payment of minimum royalty.
67. Thereafter, the Company wrote the letter Ex. 96 (b) on 24th July 1935, to the Manager, referring pointedly to the conference aforesaid and Mr. Phillip's reactions to the Company's re presentations. The Company, apparently taking the cue from the Manager himself, in para. 5 of the letter recited seven reasons why they should be exempted from payment of minimum royalties, one of those reasons being that the Estate had granted extension more than once to Messrs. Bokaro Ramgarh, Ltd., free of payment of royalty. They added the request that the same concession might be shown to the Company also.
Mr. Das, on behalf of the appellant informed us that it was not a fact that Messrs. Bokaro Ramgarh, Ltd., had been exempted from payment of minimum royalty, and the learned counsel for the respondent Company did not controvert that statement of fact. On 14th August 1935, the Company applied for a coal mining lease or leases over an area of 2,461 bighas in Karanpura, vide Ex. 96 (c). Though the Company, in their letter, did not say so, Mr. Walter, in his letter (EX. 120) to the Deputy Commissioner, observed on the Company's application as follows:
"Although the application now made is stated to be under the terms of the prospecting license, i. e. unconditional, in view of the previous correspondence on the subject and the conversation we had with the Hon'ble Member, it muat be assumed that the application is conditional on the exemption of the payment of minimum royalties on areas held on mining lease in excess of 10,000 bighas. By his letter Ex 96, dated 14th October 1935, the Deputy Commissioner reitereted the observations quoted above of the Manager, and recommended that the question of exemption might be submitted to the Board for orders.
Exhibit 98 is the Board's sanction of the extension subject to certain conditions, namely, "that the mining lease over the additional area of 2461 bighas required to complete 20,000 standared bigbas is executed by the Company by the end of February 1936."
This sanction of the Board came after the letter Ex. 155 (c) written by Mr. Philip to Mr. Marwood on 3rd December 1935, which shows that Mr. Walter saw Mr. Philip, and that he had sanctioned the proposal of exemption from payment of minimum royalty by Karanpura on areas in excess of ten thousand bighas. In pursuance of the sanction of the Board, the Manager wrote the letter Ex. 29 on 19th December 1935, to the Company enclosing the Board's order dated 5th December 1935. He further asked them to execute the lease by the end of February 1936. By their letter EX. 99 (a), dated 13th January 1936, the Company requested the Manager to allow them time till the end of December 1936, by which time they may be able to choose the best area of 2,461 bighas to be taken on lease. On 22nd January 1936, the Manager wrote the letter Ex.. 32 to the Deputy Commissioner, recommending the Company's application for extension of time, as asked for by them.. Then follow a series of letters regarding payment of surface rent, which, as ultimately realised, was a mistaken demand. On 20th February 1936, the Company advised the Manager, by their letter Ex. 35, that they had deposited in the Imperial Bank, Calcutta, the sum of Rs. 98,440, being the salami for 2,461 bighas of coal land. The Board then finally sanctioned the extension for a further period of twelve years of the exemption from payment of minimum royalty subject to the condition that the mining lease in respect of the additional area of 2,461 bighas is executed by 31st December 1936, vide EX. 104, dated 19th March 1936. By their letter dated 30th October 1936 (Ex.. 44 (a)), the Board duly approved the draft of the deed of extension. On 9th December 1936, by their letter EX. 46, the Company intimated to the Manager their choice of the area of 2,461 bighas. Then there was a series of letters passing between the Manager, Court of Wards, and the Company regarding the draft of the lease of the additional 2.461 bighaa. It appears that Mr. McLeod Smith took the place of Mr. Walter as the Manager of the Ramgarh Wards Estate. By his letter dated 24th February 1937 (EX. 56), Mr. McLeod Smith pointed out that, out of the area selected by the Company, 1,260 bighas in village Sirka was liable to payment of minimum royalty from 9th December 1936, as railway facilities already existed in respect of those areas. On 10th March 1937, the Company, by their letter Ex. 58, acknowledged liability for payment of minimum royalty in respect of only 561 bighas in Sirka, and further pointed out that 751 bighas in west Sirka was about a mile away from the existing railway line, and, therefore, not liable for payment of minimum royalty. On 1st April 1937, the Manager wrote back to the Company, intimating them that the registration of the engrossed deeds would be held up until the question of the payment of minimum royalty demanded by the Estate in respect of 751 bighas in west Sirka and 1,108 bighas in Saunda was finally settled. Then there was an exchange of letters between the Manager and the Company as regards the question whether the areas in question could be said to be served by railway line. By their letter Ex. 68, dated 21st May 1937, the Company informed the Manager that they were agreeable to paying minimum royalty in respect of the areas pointed out by the Manager as being served by railway. Ultimately, on 1st June 1937, the deed of variation was executed and registered.
68. From the statement of the negotiations and the correspondence between the Company and the officers of the Court of Wards, set forth above, it is clear (1) that the Member, Board of Revenue, agreed to sanction the exemption from payment of minimum royalty up to 25th March 1951, apparently on the ground that there was a precedent afforded by the extension of the term of Bokaro Ramgarh, Ltd. without payment of minimum royalty; and (2) that the sanction given by the Court of Wards was conditional on the fulfilment of the condition laid down in the Board's letter of sanction, set oat above, namely, the execution of the lease by the end of December 1936. But the three lease were executed on 2nd August 1937, that is to say, about a week before the appellant Raja attained majority. Hence, the condition precedent as laid down by the Board was not fulfilled by the Company. But it may be said on their behalf that the question of the selection of coal lands had not been settled until May 1937. The obvious thing for the Company to do was to obtain a fresh sanction by the Board as was done previously when the sanction of the Board of 4th/5th December 1935; not having been carried out by the Company another sanction was given on 19th March 1936, giving them a further period of grace until the end of December 1936. The Court below has rightly taken the view that the condition precedent laid down by the Board in their final sanction was not carried out by the Company. Hence, the three leases executed on 2nd August 1937, were bad, as they must be deemed to have been executed without the sanction of the Board.
69. But, in our opinion, the more serious objection to the legality of the sanction of the Board rests on the consideration that the board was misled by the Manager of the Wards Estate into granting the sanction on the supposition that there were precedents for such a course, namely, that Bokaro Ramgarh Ltd., had been granted several extensions without the liability for payment of minimum royalty, which, as a matter of fact, has been found, as already indicated, not to be based on truth. The sanction of the Board, therefore, is entirely vitiated.
70. Even assuming that the sanction granted by the Board of Revenue is free from the vitiating influences pointed out above, the sanction, on the face of it, is beyond the powers of the Board of Revenue, inasmuch as it amounts to making a gift of large sums of money which would be payable by the Company to the ward of the Court, if they were anxious to avail of the further extension of twelve years. The Court of Wards may have been generous to the Company, but should have been just to the ward of the Court. Certainly, the transaction of the year 1937, extending the period of the licence without the corresponding obligation of payment of minimum royalty, is, on the face of it, not for the benefit of the ward, and there is no trace in the record of any thought being given to this aspect of the question. As a matter of fact, the entire correspondence, set out above, betrays an anxiety on the part of the officers of the Court of Wards beginning from the Manager, Mr. Walter, to secure the maximum benefit to the Company without insisting upon their fulfilling their corresponding obligations. It has been admitted on behalf of the Company that there is no other case in which the term of a licence had been extended without the liability for the payment of minimum royalty. That being so, the action of the Court of Wards in extending the period of the licence without the liability for payment of minimum royalty wag beyond their legitimate powers. It must, therefore, be held that the transaction of 1937 was also void.
71. Another aspect of the question that was raised in connection with the validity of the extension of 1937 is whether the Court of Wards was justified in granting the extension by going to the length of agreeing to write off the minimum royalty payable after 25th March 1939, without considering the question of whether this transaction would be for the benefit of the ward. Connected with this question is the other question whether the Court of Wards at all considered the desirability of extending the licence beyond 1939 on terms as regards salami and rates of royalty which had been settled in 1907. It has been argued that, after the first extension of the year 1917, the Company did nothing but make the middleman's profit by granting sub-leaaes to different parties, as already set forth above, even before taking the leases from the Court of Wards In making those sub-leases, it has already been noticed, the Company obtained much more favour, able terms as regards salami and royalty during the years 1922 to 1927. It was naturally emphasized that the Court of Wards themselves could have found parties to take leases on much better terms than those settled on the basis of the lease in favour of Bokaro Ramgarh. Ltd., in 1907. On the very face of it, there is no doubt that the market rates of salami and royalty in 1937 could not be the same as those in 1907. But nowhere in the lengthy correspondence between the parties is there any trace of the consideration by the officers of the Court of Wards whether it would be beneficial to the ward to grant the extension of the licence, and thus open the door to further leases on the original terms. Not only that the Court of Wards agreed even to release the Company from their obligation to pay minimum royalty after 25th March 1939. It is manifest, therefore, that the Court of Wards practically agreed to make a gift of a large sum of money, which should have come into the coffers of the ward, to the Company. Such a transaction cannot, on the face of it, be justified, apart from any other considerations of the validity of the sanction.
72. It hag not been contended on behalf of the Company that, if the first and the second variation deeds of the years 1917 and 1937, respectively, are void either for want of the necessary sanction of the Board of Revenue or for non-consideration of the benefit of the ward, the several leases executed in pursuance of those extensions would not be equally void.
73. It has been, as noted earlier, agrued on behalf of the respondent company that there being no allegation of fraud against the Company in the matter of obtaining the leases, no action will lie against them, though the plaintiff-appellant may have had a cause of action, if any, against the Court of Wards itself. In this connection, it has been pointed out that the allegations in the plaint, even after the amendments of the same, amount to averments of negligence or even gross negligence on the part of the Court of Warda; but that those allegations could not sustain an action against the Company either for rescission of the contracts or a declaration that the contracts were void. It is true that the action is not baaed on fraud either of the Court of Wards or of the Company; nor is it an action based on negligence. The plaintiff- appellant has alleged negligence on the part of the officers of the Court of Wards, or the Court of Wards itself, only as ancillary to his claim for a declaration that action of the Court of Warda, was not within its competence, inasmuch as it did not consider the benefit of the ward: in other words, negligence is not the cause of action but it has been alleged against the Court of Wards to show that the Court of Wards did not act as it was bound to do, as a prudent man of bueinsss would manage his own property. Hence, it must be held that this contention raised on behalf of the respondent Company is not well, founded in law.
74. It was next contended on behalf of the respondent Company that the suit for possession is barred by limitation, inasmuch as it is contended, the Company came in possession of the coal fields by virtue of the prospecting licence of 1915, that is to say, in the life-time of the appellant Raja's father who died on 10th April 1919. If it can be shown that the Company has been in possession of the coal fields since 1915, they may have acquired title by adverse possession. But there is no evidence of such possession. The Company had only a licence to dig and search for coal. No interest was created by those licences in the land itself. Casual and spasmodic acts of digging or boring holes on different spots within the coal area cannot be said to be such possession as to attract the rule of adverse possession. All the leaaes came into existence after the death of the present Raja's father; hence, certainly the claim for possession in respect of those leases cannot be Eaid to be barred by limitation or adverse possession.
75. Sir S.M. Bose further contended that the persons in actual possession of different areas within the coal fields were not parties to this suit, and that, therefore, the suit for possession was not maintainable. This suit for possession must be taken to be for possession in the same sense in which the defendant Company is in possession, and the plantiff's suit, if it is to be decreed, must be for poaaeasion as against the defendant Company. The rights of third parties, if any, cannot be affected by the decree to be passed in this litigation.
76. Sir S.M. Bose, on behalf of the Company further contended that some of the letters passing between the Court of Wards and the Company were not admissible in evidence. But it is admitted that both Mr. MacGregor and Mr. Walter are dead and their statements made in the course of the correspondence between the Company and the Court of Wards would be admissible under Section 32, Evidence Act, as they were, made in the ordinary course of business. Furthermore, they will be admissible under Section 6, Evidence Act as res gestae. It cannot be denied that those letters passed in the course of the negotiations between the parties for the settlement of the terms of the licence, or the extensions of the original license. It also appears that many of those letters were adduced by the Company themselves, and adduced in evidence on their own behalf. Naturally, therefore, no objection appears to have been taken as to their admissibility in the Court below. But, if they are not relevant under the Evidence Act, mere want of objection on their part will not make them admissible. But, as already pointed out, those letters are admissible under the provisions of the Evidence Act.
77. It was also suggested that the appellant Raja must be deemed to have waived any objections that he may have bad to the validity of the leases executed between the parties, as he received royalties in the years 1938 and 1939 before the suit was instituted by him. The Court below has decided this issue against the defendant Company, and no arguments have been addressed to us to show that the decision of the Court below on this part of the case is erroneous in law or in fact.
78. As all the pleas raised ou behalf of the defendant Company in bar of the suit fail, it must be held that the plaintiff Raja is entitled to a decree for a declaration that the prospecting licence dated 6th March 1915, and its variations in 1917 and 1937 were all void and inoperative, and not binding on the plaintiff, and, consequently, the leases granted by the Court of Wards in pursuance of those transactions, as mentioned in Schedule B. are equally void and inoperative. The plaintiff is also entitled to possession and mesne profits. It must also be held that the plaintiff in Suit No. 28 of 1940 is not entitled to any relief, and the suit must be dismissed with costs throughout. The plaintiff in Suit no. 82 of 1910 is entitled to his costs both here and in the Court below. It follows that both the appeals are allowed, and the cross-objection by the respondent Company is dismissed. Mesne pcofits shall be determined not on the basis claimed by the plaintiff Raja, but on the basis of the profits made by the respondent Company from the coal fields in question.