In this article authored by Nidhi Bajaj, of Guru Nanak Dev University, Punjab, you will learn about the meaning of escheat, application of the doctrine of escheats in Indian case laws and the legal provisions relating to the same under the Hindu Succession Act, 1956 and the Constitution of India.  

It has been published by Rachit Garg.

Introduction

If it belongs to none, it belongs to the State.

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The term ‘escheat’ means a reversion to the state in the absence of legal heirs. If a person dies intestate leaving no heirs whatsoever, then the doctrine of escheat can be invoked, whereby the estate of the deceased reverts to the state. For example, if A dies intestate (i.e., without making a will) and it turns out that he has no legal heirs or claimants, then the state shall assume the permanent ownership or temporary custody of his property.

In this article, the author will take you through the meaning of escheat, background of the doctrine of escheat, the legal provisions and relevant case laws governing the law of escheat in India.

Escheat in English and American law

In feudal English Land law, the term ‘escheat’ means the return or forfeiture of the land held by a tenant to the lord of land. Generally, two conditions were required to be fulfilled for the land to escheat:

  1. Death of tenant without heirs,
  2. Conviction of the tenant for a felony. In this case, if a tenant gets convicted for committing a felony, the land would lose its inheritability and escheat to the lord. The lord would hold the land subject to the crown’s right to exploit the felon’s lands for a year and a day. In time, this exploitation right of the crown was commuted in return for a money payment or service rendered to the crown by the lord. 
  3. Conviction of tenant for treason. In this case, the land escheated directly to the crown and the lord had to forfeit all rights in the tenant’s land. 

As per the Black’s Law Dictionary, ‘Escheat’ in American law, signifies a reversion of property to the state in consequence of a want of any individual competent to inherit.

What is escheat

The term “escheat” is derived from the French word “eschoir” which signifies ‘to happen’ because it falls to the lord from an event and an unforeseen circumstance.

Escheat is the right of the government to own unclaimed property and assets. The doctrine of escheat is invoked when a person dies without any will or heirs. However, it also applies to cases where property remains unclaimed for a long period. 

The concept of escheat maintains that property always has a recognised owner, which would be the state or government if no other claimants to ownership exists or are readily identified.

Escheat also refers to the ‘property’ the owner of which has died intestate and without leaving a legal heir.

Doctrine of escheat in India

The doctrine of escheat is a remnant of the English feudal system of land tenure and a companion of its common law counterpart bona vacantia. However, it is interesting to note that the doctrine of escheat was not unknown to India. The Ancient lawgiver Manu has written in Manusawhita(Chapter IX, Verse 189):-

“Aharajyam Brahmanadravyam Rajna Nityamiti Sthiti, Itareshantu Varnanam Sarbabhave Harenripa.”

This means that the King has a right to all the properties belonging to persons who die without leaving any heir. But the King had no right to Brahminical property even on the failure of all heirs.

Legal provisions regarding the doctrine of escheat: Section 29 of the Hindu Succession Act, 1956

In Indian law, the principle/doctrine of escheat is embodied in Section 29 of the Hindu Succession Act, 1956.  Section 29 provides for “Failure of heirs”. It states that “if an intestate has left no heir qualified to succeed to his or her property in accordance with the provisions of this Act, such property shall devolve on the Government; and the Government shall take the property subject to all the obligations and liabilities to which an heir would have been subject.”

Thus, as per the doctrine of escheat, when an individual dies intestate and does not leave behind any heir who is qualified to succeed to the property, the property shall devolve on the Government. However, the government takes the property subject to all its obligations and liabilities.

Case laws : Application of the doctrine of escheats

The Collector of Masulipatam v. Cavaly Vancata Narrainappah (Privy Council, 1860)

The case belongs to the pre-independence era and was decided by the Privy Council. In this case, the question arose that whether on the death of a Brahmin without heirs, the sovereign power in British India is entitled to take his estate by escheat. The Sadar Diwani Adalat held that there is a general right of the Crown by escheat in case of failure of heirs but as per the Hindu law, there lies an exception to such right with regard to the property of Brahmins. As per Manu, and other ancient authorities, it appeared that the beneficial enjoyment of a Brahmin’s property ought not on his death without heirs pass to the King. 

The Privy Council held that the Hindu Law was to be administered in case of succession to properties of a Hindu dying intestate but only in those cases where he had any heir to succeed thereby providing the occasion for private succession. But if there is a total failure of heirs, then the properties and succession ceases to be governed by the personal law of succession and has to be governed by the general law of universal application which was that “private ownership not existing, the State must be the owner as of the ultimate Lord”.

Biswanath Khan and Ors. v. Prafulla Kumar Khan (1988, Cal HC)

In this case, a company, which was a Thika tenant under the plaintiff-appellants in respect of the disputed land was dissolved. The question arose as to whether the tenancy extinguished on such dissolution and the land reverted to the landlords or would the tenancy vest in the state by escheat or as bona vacantia. The Court answered the first question in  negative and affirmed the second.

The Court observed that the doctrine of escheat was declared to be part of the law in India by the decision of the Privy Council in the Collector of Masulipatam v. Cavary Vancata Narrainappah (1860). 

The Court held that the right to acquire by way of escheat is not an attribute of any private law of succession but is an attribute of sovereignty. The Court opined that the right to escheat would very much exist even in the absence of statutory provisions such as Section 29 of the Hindu Succession Act, 1956. The Court held that the interest of a Thika tenant, however limited it may be, is a ‘property’ and therefore liable to be vested in state by escheat or as bona vacantia. 

State of Punjab v. Balwant Singh (1991, SC)

The issue, in this case, relates to the construction of Section 15 and Section 29 of the Hindu Succession Act, 1956. 

The brief facts of the case are as follows:  ‘M’ inherited certain agricultural lands from her husband. Some of the land was under the mortgage and in possession of defendants no. 2 to 6. ‘M’ died intestate after coming into force of the Hindu Succession Act, 1956. Since there was no legal heir, the mutation was sanctioned in favour of the State. M’s grandson filed a suit for possession of the property on the ground that he was a legal heir and also claimed a declaration entitling him to redeem the mortgage from defendant no. 2 to 6. 

The State i.e., defendant no.1 opposed the suit and claimed that the mutation in favour of State was valid as the intestate had left no legal heir. Defendants no. 2 to 6 contended that the right of redemption of the mortgage had been extinguished and they had become the owners of the property as they were in its possession for more than 60 years.

The Trial Court dismissed the suit and held that the plaintiff had no right over the property since the deceased had inherited it from her husband. The question of mortgage was left to be decided between the parties by mutual agreement.

An appeal was filed by the plaintiff to the District Judge but the same was dismissed.

Thereafter, a second appeal was preferred before the High Court which decreed the plaintiff’s suit of possession even against Defendants no. 2 to 6. 

Defendant no. 1 i.e. the State and Defendants no. 2 to 6 preferred appeals by way of special leave before the Hon’ble Supreme Court.

Decision of the Supreme Court

The Supreme Court held that a property is escheated to the  Government only when an intestate has left no heir who is qualified to succeed to his or her property. When the property devolves upon the Government, the Government shall take the property subject to all the obligations and liabilities of the property. Hence, it is only when the deceased has left no heirs to succeed, that the State shall step in to take the property and the State does not take the property as a rival or preferential heir of the deceased but as the Lord paramount of the whole soil of the country. 

Section 29 cannot operate in favour of the State if there is any other heir of the intestate. Section 29 envisages a failure of heirs. There must be ‘failure’ of heirs i.e. total absence of heirs to the intestate.

It was held that if a female Hindu leaves behind any heir either under Section 15(1) or 15(2), her property cannot be escheated. The Court held that Section 15(2) only intended to change the order of succession specified under Section 15(1) and did not eliminate the other classes of heirs. 

Kutchi Lal Rameshwar Ashram Trust v. Collector, Haridwar (2017, SC)

In this case, a person named Mohan Lal died intestate leaving no qualified heir. The Collector held that the property vests in the government under Section 29 of the Hindu Succession Act, 1956, and this decision was affirmed by the Bombay High Court. An appeal was preferred to the Supreme Court against the said decision.

In its decision, the Hon’ble Supreme Court held that the principle that the law does not readily accept a claim to escheat and that the onus rests heavily on the person who asserts that an individual has died intestate, leaving no legal heir, qualified to succeed to the property, is founded on a sound rationale. Escheat recognizes the paramountcy of the State as the ultimate sovereign in whom the property would vest upon a clear and established case of  failure of heirs. The Court opined that this principle is based on the norm that in a society governed by the rule of law, the court will not presume that private titles are overridden in favour of the state, in the absence of a clear case being made out on the basis of a governing statutory provision. 

The Court also held that allowing the administrative authorities such as the Collector to adjudicate upon matters of title involving civil disputes would be destructive to the rule of law. The Court was of the view that it is not necessary to go into the question of credibility of title claimed by the Petitioner trust as the Collector was not competent to decide the matter. The adjudication on titles must follow recourse to the ordinary civil jurisdiction of a court of competent jurisdiction under Section 9 of the Code of Civil Procedure 1908.

Other cases dealing with the doctrine of escheats

Pierce Leslie and Co. Ltd. v. Violet Ouchterlony Wapshare (1968, SC)

In this case, the Supreme Court held that on the dissolution of a company, its properties are vested in the government. The Court noted that the right of the government to take properties by escheat of owners who die without leaving any lawful heirs or as bona vacantia for want of a rightful owner is well recognized in India. As per various Central and state laws, the government is entitled to take by escheat both movable and immovable property for want of an heir. This is an incident of sovereignty and is based on the principle of ultimate ownership by  the State of all property within its jurisdiction.

State of Bihar v. Radha Krishna Singh (1983, SC)

In this case, the Hon’ble Supreme Court reiterated that when a claim of escheat is put forward by the government, the onus to prove the absence of any heir of the respondent anywhere in the world lies heavily on the appellant. The Court shall not allow the taking of an estate by escheat unless all the conditions for escheat are fully and completely satisfied. The Court held that issuing a public notice is a prerequisite for entertaining a plea of escheat. The public notice must be given by the government so that if there is any claimant anywhere in the country or for that matter in the world, he may come forward to contest the claim of the state.

Narendra Bahadur Tandon v. Shankerlal (since deceased) by LRs. and Anr. (1980, SC)

This case dealt with the question of the effect of the dissolution of the company on the lease- hold interest which the company had in the land. In this case, the Supreme Court has held that the property of an intestate dying without leaving any lawful heirs and the property of a dissolved corporation devolves upon the state by way of escheat. It was further held that if a company has any subsisting interest in the lease on the date of dissolution, then such interest shall also pass on to the government by way of escheat or as bona vacantia for want of a rightful owner.

What kind of properties can be acquired by escheat

The doctrine of escheat applies to various kinds of properties(not just tangible property) which include:

  1. Property which belongs to  a dissolved corporation;
  2. Leasehold interest subsisting in a dissolved corporation on the date of dissolution;
  3. Tenancy interest;
  4. Debts, being a species of property;

Article 296 of the Indian Constitution

Article 296 of the Constitution of India provides for ‘Property accruing by escheat or lapse or as bona vacantia’. It states that any property in the territory of India which, if this Constitution had not come into operation, would have accrued to His Majesty or, as the case may be, to the ruler of an Indian State by escheat or lapse, or as bona vacantia for want of a rightful owner, shall, if it is property situate in a State, vest in such State, and shall, in any other case, vest in the Union.

The proviso to Article 296 further states that any property which at the date when it would have so accrued to His Majesty or the ruler of an Indian State was in the possession or under the control of the Government of India or the government of a state shall, according to the purposes for which it was then used or held were purposes of the Union or a State, vest in the Union or in that State.

Thus, Article 296 makes it clear that the principle of escheat as applicable prior to the enactment of the Constitution would continue. 

Important points with respect to the doctrine of escheats in India

Key action points for readers 

  1. Make a will. As mentioned above, your property shall vest in the government only if you die intestate i.e. without making a will.
  2. Ensure that the chosen heirs of your property and assets are aware of the same. Educate yourself on the process of claiming property on demise. 
  3. Make due nominations for your financial assets and other benefits, wherever possible.

Conclusion

In India, the concept of escheat has been there for a long time. However, there is still some inconsistency in the law regarding various aspects such as the fluctuations in the definition of ‘property’ in different states and the absence of an independent institutional framework. In some states, there is a lack of clarity as regards different types of assets i.e. whether an unclaimed asset would go into permanent ownership or temporary custody of the government. Hence, there should be a uniform framework or guidelines regulating the various aspects of the doctrine of escheats including giving of notice etc.

The concept of escheat can be summed as follows: Property has to be owned by someone and the last resort of property left without heirs clearly must be the state. 

References

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