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TMI Blog1993 (3) TMI 350X X X X Extracts X X X X X X X X Extracts X X X X ..... and under Section 20 [1] (b), the orders dated 6.3.87 and 18.4.87 granting exemption and permission to the firm for sale of the land are void ab initio having been passed without jurisdiction. Accordingly, the sale-deed dated 30.9.1987 executed by the 2nd respondent firm in favour of the 3rd respondent-builders is held invalid and inoperative, as the respondent-firm had no legal right to transfer the land in favour of the builders. We accordiigly allow the appeals and set aside the impugned order of the High Court. The respondents State of Karnataka, M/s. Narayanaswamy & Sons and M/s. Reevajethu, Builders & Developers will pay the costs to the appellants in one set. - C.A. 1454 OF 1993 - - - Dated:- 30-3-1993 - P. B. SWANT AND N.P. SINGH, JJ JUDGMENT Leave granted. 2.These appeals arise out of the same facts and judgments of the Karnataka High Court and are being disposed of by this common judgment. For the sake of the narration of events Civil Appeal Nos. 1461-72/ 1993 arising out of SLP (Civil) Nos. 7230-41 of 1991 may be referred to. The 2nd respondent M/s Naryanaswamy Sons is a partnership firm. While it was carrying on the business of manufacturing and sel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss as may be mutually agreed upon by all the partners . It is not in dispute that Smt. Shobha Makhija is the sister of the son-in-law of the 4th respondent who was then the Chief Minister of the State of Karnataka.. 5. On 9.1.1987, the competent authority under the Act came to the conclusion that the excess vacant land out of the said Survey Nos. 6/1 and 6/2 after the grant of exemption by the Government Order dated 17.7.1985, was 3444 sq. mtrs. The competent authority accordingly directed the publication of a notification under Section 10 [1] of the Act for the acquisition of the said excess vacant land. 6. On the same day, i.e., 9.1.1987, the firm made an application to the State Government for permission to sell land to the extent of 5 acres and 24 gunthas comprised in the said Survey Nos. 6/1 and 6/2 to the builders. The grounds made out in the application were that due to stiff competition, and nationalisation of black and pink granite by the southern States including Karnataka, the firm was running under losses; that its Woodlands Hotel at Madras was also not making profits since the hotel building had become very old and there were no funds for modernising it; that its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orders dated 63.1987. and 18.4.1987 granting exemption to the land in question from the purview of the Act under Section 20 111(a) (b) of the Act and for declaring the sale deeds dated 30.9.1987 executed by the firm in favour of the builders as void and inoperative; (d). for directing the State Government to take action under Section 6 of the Karnataka Parks, Play-fields, and Open Space [Reservation and Regulation] Act, 1985 and for other reliefs. 11. The learned Single Judge by his judgment and order dated 8.9.1989allowed the writ petition, and among others, [1] quashed the Group Housing Policy of the State Government as embodied in the decision of the Committee held on 22.10.1986 and communicated under letter dated 24.11.1986 insofar as it encouraged the Group Housing Scheme through individuals and partnership of individuals by transferring vacant land to such persons; [ii] restrained the State Government from enforcing the said Policy through individuals and partnership of individuals against the vacant land; [iii] declared as null and void and quashed the orders dated 6.3.1987 and 18.4.1987 granting exemption; [iv] declared the sale deed dated 30.9.1987 executed by the fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the Division Bench gave separate but concurring judgments and set aside the findings as well as the directions given by the learned Single Judge and dismissed the writ petitions. 13. The precise questions which arise for our consideration in these appeals are: [i] Were the permissions granted by the State Government to sell land admeasuring 16194 sq. mtrs. and 3444 sq. mtrs. by its orders of 6.3.1987 and 18.4.1987 respectively valid under the Act? [ii] Were the said orders motivated by mala fides ? and [iii] Is the sale deed executed by the firm in favour of the builders on 30.9.1987 void and inoperative? 14. In order to appreciate the answer to the first and the third question, it is necessary to understand the scheme of the Act which came into force on 17.2.1976. As the preamble of the Act states, it has been placed on the statute book [i] to provide for the imposition of a ceiling on vacant land in urban agglomerations;, [ii] to provide for the acquisition of which vacant land in excess of the ceiling limit; and [iii] to regulate the construction of buildings on such land and for matters connected therewith with a view to [a] preventing the concentration of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the legislation or the construction of the building whichever is later; [vii] restricting the plinth area for the construction of future residential buildings; and [viii] other procedural and miscellaneous matters. It is needless to emphasise that while interpreting the various provisions of the Act the said objects will have to be kept in view, constantly. However, only those provisions of the Act which have a bearing on the controversy before us may be referred to. The 'vacant land has been defined in Section 2 (q) as follows: vacant land' means land, not being land mainly used for the purpose of agriculture,, in an urban agglomeration, but does not include [i] land on which construction of a building is not permissible under the building regulations in force in the area in which such land is situated, [ii]in an area where there are building regulations, the land occupied by any building which has been constructed before or is being constructed on, the appointed day with the approval of the appropriate authority and the land appurtenant to such building; and [iii] in an area where there are no building regulations, the land occupied by any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... governing such group housing; or [b] the extent calculated by multiplying the number of dwelling units in the group housing and the appropriate ceiling limit referred to in sub-section [1], whichever is less. Section 5(3) prohibits transfer of the vacant land in excess of the ceiling limit or any part thereof by way of sale, mortgage, gift, lease or otherwise until the land-holder has furnished a statement under Section 6 of the Act and a notification regarding the excess vacant land held by him, has been published under sub-section [1] of Section 10. Any such transfer is deemed to be null and void. Section 6(1) requires every person holding vacant land in excess of the ceiling limit at the commencement of the Act, to file a statement before the competent authority under the Act. Read with Section 7, it is clear that the statement to be filed under Section 6(1) has to include vacant land not only situate in the same State but also in other States to which the Act applies. In the present case, admittedly, the firm held land also in Madras in addition to the land in dispute in the city of Bangalore. It is not known whether the firm had vacant land in its possession in Madras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equires the State Government to pay compensation to the person or persons having interest in the vacant land acquired under Section 10(3), at the rates mentioned therein. Section 19 exempts certain lands from the provisions of Chapter III of the Act which comprises Sections 3 to 24. Then come the provisions of Section 20 to 24 of Chapter 111. We are directly concerned in the present appeals with the said sections along with the provisions of chapter IV of the Act. Section 20 permits the State Government to give exemption to any vacant land in excess of the ceiling limit, from the provisions of Chapter III, for two distinct purposes. It is necessary to reproduce here the said section: 20. Power to exempt. (1) Notwithstanding anything contained in any of the foregoing provisions of this Chapter,- (a) where any person holds vacant land in excess of the ceiling limit and the State Government is satisfied, either on its own motion or otherwise, that, having regard to the location of such land, the purpose for which such land is being or is proposed to be used and such other relevant factors as the circumstances of the case may require, it is necessary or expedient in the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be recorded in writing. Sub-section [2] of the section enables the government to withdraw the exemption granted either under clause (a) or (b), if is satisfied that any of the conditions subject to which the exemption is given, is not complied' with. Clauses (a) and (b) of sub-section [1] read with subsection [2] make it clear that the exemption may either be conditional or absolute. Where it is conditional, it may be withdrawn, if any of the conditions are not complied with. The very fact, however, that the legislature has con- templated imposition of conditions on exemptions granted under both the clauses, shows that the purpose of the exemption under either of the clauses cannot be the transfer of the land. The exemption under clause (a) is obviously for the land being put to a particular use which use is also necessary or expedient in the public interest, while exemption under clause (b) is for relieving the person concerned from any undue hardship which may be caused to him personally, by the withdrawal of the excess land from his possession probably such as when the person may require the land for the expansion of the use to which he has already put it, such as his gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce. That circumstance is that the holder of the vacant land should declare before it within a specified time and in the prescribed form and manner, that he desires to utilise the land for the construction of the dwelling units of not more than the particular size mentioned therein for accommodating the weaker sections and in accordance with any scheme approved by the specified authority. it is the competent authority which is required to make inquiry as it deems fit into such a declaration, and if it is satisfied, to declare that such land shall not be excess within the meaning of the said Chapter. However, it appears that the competent authority is required to prescribe certain terms and conditions while declaring the land not to be an excess land, including a condition with regard to the time limit within which such buildings are to be constructed, and on the breach of any of the conditions, the competent authority is also given power to declare the land to be an excess land. Section 22 enables a person to hold the vacant land on which there stood a building which he demolished or destroyed or which was demolished or destroyed on account of natural causes. The holder of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ority, of the intended transfer. Where the notice is given, the competent authority shall have the first option to purchase the land on behalf of the State Government at a price calculated in accordance with the provisions of the Land Acquisition Act, 1894 or of any other corresponding law for the time being in force. The option has, however, to be exercised within a period of sixty days from the date of the receipt of the notice and if no such option is exercised, it will be presumed that the competent authority has no intention to purchase the land, and it shall then be lawful for such person to transfer the land to whomsoever, he may like. Section 27 prohibits transfer of any urban or urbanisable land by way of sale, mortgage, gift, lease for a period exceeding ten years, or otherwise, if such land is with a building, whether constructed before or after the commencement of the Act. It also prohibits a similar transfer of the land with a portion only of such building. The restriction on the transfer of Such land is for a period of ten years of the commencement of the Act or from the date on which the building is constructed whichever is later, except with the previous permissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eveals a definite scheme. It has to be admitted that the provisions of the Act as are drafted have not succeeded in translating into, words the clear intention of the legislature and to that extent the Act is an inelegant and confused piece of drafting. However, since the intention is clear, a harmonious reading of all the provisions consistent with that intention is necessary to interpret and understand each of the said provisions. The intention of the legislature is to acquire all vacant land in excess of the ceiling limit prescribed by the Act and the main purpose of the Act, as stated earlier, is three-fold, viz., [i] to prevent concentration of the urban land in the hands of a few persons and to prevent speculation and profiteering therein; [ii] to distribute the urban land equitably and [iii] to regulate the construction of buildings on the urban lands. Consistent with these objectives, the Act provides for acquisition of all urban vacant land in excess of the ceiling limit and prohibits its transfer in any form absolutely. All that the Act permits in the case of such excess vacant land is either express exemption from the operation of Sections 3 to 19 of Chapter III of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision of Section 20 (1) the exemption is granted, viz., whether under clause (a) or (b) thereof It is, however, conceded before us on behalf of the respondents that the exemption is not under clause (a) but. is under clause (b). We have, therefore, to examine the said exemption with reference to the provisions of clause (b). Section 20 (1)(b), as stated earlier, permits the State Government to exempt the vacant land from the provisions of Chapter III of the Act, if either on its own motion or otherwise, it is satisfied that the application of the said Chapter would cause undue hardship to such person . The order of exemption may further be subject to such conditions, if any, as in any be specified in it. The reasons for passing the order have further to be recorded in writing. The preamble of the present order states that by the earlier order dated 17.7.1985, the firm was granted exemption of the very same land for locating industry on conditions contained in it. One of the conditions was that the declarant shall not transfer the land in question without prior permission of the Government. The order then proceeds to refer to a letter dated 20.1.1987 of the Special Deputy Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Madras firm has suffered heavy loss to a tune, of Rs. 22,23,016.26 as on 31.3.1986. [The firm has under this head shown term loan (if Rs. 57.57 lakhs from the Andhra Bank and Rs. 19.03 lakhs from the Bank of India and Rs. 17.29 lakhs from the State Bank of Mysore. They have also mentioned Rs. 51.80 lakhs from private parties but their names are not disclosed. They have also mentioned other liabilities to the tune of Rs. 3.87 lakhs but their details are not given.] [f] that the net capital and current accounts show a debit balance of Rs. 47.94 lakhs . [They also further state that if the loan from 1.4J986 to 31.12.1986 is taken into account, the debit balance of the partners would be about Rs. 68 lakhs.] [g] that the bank-authorities have filed suits in the High Court of Madras to attach their properties both in Bangalore and Madras; [h] that a private party by the name of Sri P.L. Narayanaswamy Reddivar has also filed a suit in the Karnataka High Court to recover the loan due to them from, the Madras firm; The application had further stated that the Madras firm is not able even to pay the interest as it is running at a huge loss. It had also been stated that it had be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d relying upon another report of the Special Deputy Commissioner. The record before us shows that the said report is of 27.3.1989. We may, however, presume a typographical error and construe it as a report of 27.3.1987.However, what is worth nothing is that the application for permission to sell the said 3444 sq. mtrs. was filed by the firm allegedly on 24.3.87. It seems that with commendable alacrity the Special Deputy Commissioner made his report on the said application, on 27.3.1987 [if we are to read the year as 1987 instead of 1989 as the document shows]. What he has stated in his report may be summarised as under: That the Government by its order dated 6.3.1987 had already accorded permission to sell excess vacant land admeasuring 16194 sq. mtrs. The remaining excess vacant land held by the firm is 3444 sq. mtrs. Orders had been passed as required under Section 8(4) of the Act on 9.1.1987 confirming the said excess vacant land. In the meanwhile, the firm presented another application on 24.3.1987 to the Government requesting for grant of exemption under Section 20 with permission to sell the said excess land admeasuring 3444 sq. mtrs. and another land admeasuring 5,648 sq. mt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well as the statement of objects and reasons, is to acquire vacant land in excess of the ceiling area and to prevent speculation and profiteering in the same and also to distribute the land equitably to subserve the common good. It is, therefore, per se against the said object to permit the sale of the excess vacant land for whatever reasons, including the undue hardship of the' land-holder. To construe the provisions of Section 20 [1] (b) so as to read in them the conferment of such power on the State Government for whatever reasons, is to distort and defeat the whole purpose of the legislation. Further, neither the plain language of the clause nor its context and intendment merit such construction.Section 20 itself is titled Power to exempt . The power given to the State Governments under the Section is only to exempt certain excess vacant lands from the operation of the provisions of Sections 3 to 19 of Chapter III, none of which refers to the subject of transfer or restrictions on transfer. Those provisions relate to the calculation, declaration, acquisition and vesting of the excess vacant land. It is Chapter IV which relates to the transfers of vacant lands and the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has upheld the validity of the rest of the Act including that of Section 26. The result is, the restriction on transfer even of vacant land within the ceiling limit but without building is deemed to be valid. Thus the transfer of the vacant land without building even if it is within the ceiling limit and of the vacant land in excess of the ceiling limit with a building or a portion of the building are subject to the restrictions placed by the Act. Section 20, as pointed out earlier, is subject to the provisions of sections which follow it including Sections 26 to 28. Hence no construction can be placed on clause (b) of sub-section [1] thereof which will be in conflict with the provisions of Sections 26 to 28. Thirdly, the provisions of clauses (a) and (b) of sub- section [1] of Section 20 make it clear that what the legislature has in mind is an exemption for the purposes of the use- of the land and not for the purposes of selling it. Sub-section Ill (a) speaks of exemption of such land having regard to its location, the purposes for which the land is being or is proposed to be used and such other relevant factors as the circumstances of the case may require. The said provisions f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hardship or from indebtedness to the land- holder of such land is alien both to the object and the scheme of the Act. Even the debates in the Parliament do not refer to financial hardship or to the power of the State Government to exempt the land to permit its transfer on that account. To hold that indebtedness and financial hardship would entitle the landholder to get exemption for sale of the excess vacant land in his possession is to place the holders of land with debts in an advantageous position as against those who were unwise enough to manage their affairs with financial discipline. The classification of the owners of land for this purpose between debtors and non-debtors is itself irrational and has no plausible nexus with the object of the Act. Such a classification is, therefore, discriminatory and violative of Article 14 of the Constitution. It is not, therefore, possible to agree with the view taken by the Gujarat High Court in Thakorbhai Dajibhai Desai v. State of Gujarat, AIR 1980 Guj. 189 that the indebtedness of the land-holder on the date of the commencement of the Act can be a ground for exemption under Section 20 [1] (b). Much less can such a ground vest the Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of such sales. Section 26 restricts the sale of land even if it is within the ceiling limit except after giving notice in writing of the intended transfer to the competent authority. When such notice is given, the competent authority has the first option to purchase the land on behalf of the State Government and at a price calculated in accordance with the provisions of the Land Acquisition Act, 1894 or of any other corresponding law for the time being in force. It is only when the competent authority does not exercise its option to purchase the land within sixty days from the date of receipt of the notice, that it is lawful for the holder of the land to transfer the same to whomsoever he may like. The provisions of Section 26 further show that the price to be calculated for the purchase of the land when the competent authority exercises its option is on the basis that the notification under sub-section [1] of Section 4 of the Land Acquisition Act or under the relevant provision of any other corresponding law had been issued on the date on which the notice was given of the intended transfer by the holder of the land, to the competent authority. This provision makes it abundantly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) or Section 26, the legislature intended to permit the sale of such land at a price above the fair market price payable under the Land Acquisition Act, 1894 or the corresponding law and thereby encourage speculation and profiteering, the very evils which the Act intended to curb. Seventhly, section 27 in Chapter IV is another provision which prohibits the transfer of any urban or urbanisable land with a building whether constructed before or after the commencement of the Act or a portion only of such building, for a period of ten years from the commencement of the Act or from the date on which the building is constructed, whichever is later, except with the previous permission of the competent authority. Sub-section 151 thereof again gives the first option to the competent authority to purchase such land and at a price either as agreed upon between the competent authority and the land-holder or where there is no such agreement at a price to be calculated in accordance with the provisions of the Land Acquisition Act, 1894 or any other corresponding law for the time being in force. It is only if the option is not exercised within sixty days or the competent authority has not refused ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence to the transfer permitted by the State Government under Section 20 [1] (b). In other words, the holder of the vacant land in excess of the ceiling limit has not to face the restriction on the registration of the document of transfer of his land provided under Section 28 when such transfer is permitted by the State Government under Section 20 [1] (b), whereas the holder of similar lend who does not approach the State Government has to suffer the same when he transfers the land held by him. The discrimination between the transfers under the different provisions is irrational and has no nexus with the object ought to be achieved by the classification. Lastly, if the power to exempt the land for sale is read in Section 20 [1] (b) with such conditions as the State Government may choose to place and if either the State Government chooses not to place any conditions or to place such conditions as are inconsistent with the provisions of Sections 29 and 30, it would create two sets of lands-one where no restriction are applicable to the construction thereon or only such restrictions as the State Government may choose to impose, and the other where the restrictions on constructions as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having failed to discharge their debts can claim exemption on the ground of undue hardship in such a situation? Section 4 while fixing the ceiling limit, under subsection (3) takes note of the fact that where in respect of any vacant land any scheme for group housing has been sanctioned by an authority competent in this behalf immediately before the commencement of this Act, then, the person holding such vacant land at such commencement shall be entitled to continue to hold such land for the purpose of group housing . But at the same time under sub-section (4) of section 4 it has been specified that if on or after the 17th day of February, 1975, but before the appointed day, any person has made any transfer by way of sale, mortgage, gift, lease or otherwise (other than a bona fide sale under a registered deed for valuable consideration) of any vacant land held by him and situated in such State to any other person, whether or not for consideration, then, for the purposes of calculating the extent of vacant land held by such person the land so transferred shall be taken into account, without prejudice to the rights or interests of the transferee in the land so transferred . Simil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd holder the maximum price fetched by sale of such land will be the solution of his hardship, whereas that will run counter to the object of the Act to prevent speculations and profiteering . It is futile to urge that even in such transfers the dominant purpose of the legislation to prevent the concentration of urban land in hands of few persons is none the less served. The concentration of urban land in hands of few persons has to be prevented with a view to bring about an equitable distribution of land in urban agglomerations to subserve the common good . Section 23 prescribes the priorities for disposal or distribution of excess vacant lands after such lands vest in the State under the provisions of the Act. In the case of Bhim Singhji v. Union of India, [1981] 1 SCC 166, it has been said:- The definition of the word 'industry' in clause (b) of the Explanation to that section is undoubtedly unduly wide since it includes any business, profession, trade, undertaking or manufacture . If sub-section (1) of Section 23 were to stand alone, no doubt could have arisen that the Urban Land Ceiling Act is a facade of a social welfare legislation and that its true, though ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade no reference to Section 26 or Section 27 of the Act, while considering the question whether on the ground of undue hardship the holder of the excess vacant land can be granted exemption and then permission to sell such excess land, because he is financially crippled or burdened with liabilities. In the case of Blim Singhji v. Union of India (supra) this court held that Section 27(1) in so far as it imposes restriction on transfer of any urban or urbanisable land with a building or of a portion of such building which is within ceiling area, was invalid. The said sub-section (1) of Section 27 was struck down being unconstitutional. Section 26 of the Act also imposes certain restrictions on transfer of vacant land even within ceding limit. It can be urged that Section 26(1) suffers from the same vice which was pointed out in respect of sub-section (1) of Section 27 of Act, in the aforesaid case of bhim Singhji v. Union of India (supra) by this Court. But neither in the aforesaid case nor in this case this court was or is concerned with Section 26 and as such, according to me, it is not necessary to express any opinion in respect of Section 26 of the Act, while considering the is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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