HON’BLE SHRI G.S.SINGHVI, THE CHIEF JUSTICE AND HON’BLE SHRI JUSTICE C.V.NAGARJUNA REDDY WRIT APPEAL No.347 OF 2007 Between: Sri Laxmi Co. Operative Housing Society Limited, Hyderabad, represented by its Secretary. . . .Appellant And Government of Andhra Pradesh, represented by its Principal Secretary, Department of Revenue, Secretariat, Hyderabad and others. . . .Respondents :: J U D G M E N T :: Counsel for the appellants : Sri K.V.Satyanarayana Senior Advocate assisted by Sri Y.Rama Rao 6th August, 2007 Per G.S.SINGHVI, C.J. This appeal is directed against order dated 18.9.2006 passed by the learned Single Judge in Writ Petition No.6281 of 2005, whereby he rejected the appellant’s prayer for quashing Memo No.29862/UC.II (2)/01-9, dated 1.3.2005 issued by Special Chief Secretary to Government, Revenue (UC.II) Department and for issue of a mandamus to the State Government to grant exemption under Section 20 (1) of the Urban Land (Ceiling and Regulation) Act, 1976 (for short, ‘the Act’) in respect of Ac.16.23 gts. and 115 yards land comprised in Survey Nos.105, 110, 113, 114 and 149/3 of Yousufguda Village, Golconda Mandal, Hyderabad (hereinafter referred to as ‘the subject land’). Respondent Nos.5 and 6, who owned the subject land, filed declarations under Section 6 (1) of the Act. By an order dated 7.5.1980, the Special Officer and Competent Authority, Urban Land Ceiling, Hyderabad (respondent No.3 herein) decided the surplus area case of respondent Nos.5 and 6 and declared that they were holding 66,173.15 sq. mtrs. of excess land. During the pendency of the appeal preferred by respondent Nos.5 and 6 against the aforementioned order, the State Government issued G.O.Ms.No.4270, Revenue (U.C.II) Department, dated 10.9.1980 and laid down guidelines for grant of exemption under Section 20 (1)(a) to the vacant land proposed to be transferred by the landholder to the registered cooperative societies. The same was superseded by G.O.Ms.No.136, dated 28.1.1981 and revised guidelines were issued for processing the exemption applications under Section 20(1)(a) of the Act. With a view to take the benefit of the revised policy, respondent Nos.5 and 6 entered into an agreement dated 9.12.1980 with the appellant society for sale of the surplus land. Thereafter, a joint application was filed by respondent Nos.5 and 6 and the appellant for grant of exemption under Section 20 (1)(a) of the Act. Respondent No.3 and the Commissioner of Land Reforms recommended their case, but the State Government rejected the same vide Memorandum No.699/UC.II/81-7, dated 10.2.1983. Writ Petition No.2658 of 1984 filed by the appellant and respondent Nos.5 and 6 for quashing the decision of the State Government was allowed by the Division Bench on 5.4.1989 in terms of the judgment of another Division Bench in Katya Co-operative House Building Society Ltd. v. Govt. of A.P.[1]. Soon after the decision of Writ Petition No.2658 of 1984, the appellant filed Writ Petition No.17409 of 1989 to restrain the respondents from taking possession of the subject land. In the miscellaneous petition (WPMP.No.23059 of 1989) filed by the appellant, the learned Single Judge passed an interim order dated 14.12.1989 and restrained the respondents from interfering with the possession of the subject land or otherwise adversely affecting the right of the appellant or the land-owners i.e. respondent Nos.5 and 6. While the exemption application filed by the appellant and respondent Nos.5 and 6 was pending re-consideration, the State Government proposed transfer of the subject land to the Andhra Pradesh Housing Development Finance Corporation Ltd. under Section 41 of the Land Acquisition Act, 1894. To this effect, notification was issued by Special Deputy Collector, Land Acquisition (Industries). The same was published in “Deccan Chronicle” (English Edition) dated 21-7-1995. Respondent Nos.5 and 6 challenged the proposed transfer of the subject land in Writ Petition No.16440 of 1995 by contending that during the pendency of the application for exemption, the State Government cannot transfer the land to third party. By an order dated 26-3-1996, a learned Single Judge disposed of Writ Petition Nos.17409 of 1989 and 16440 of 1995 and directed the Revenue Department to dispose of the application for exemption within one month from the date of receipt of the order with a further direction that the application made by the Andhra Pradesh Housing Development Finance Corporation Ltd. for allotment of land can be considered only after the decision of exemption application. In compliance of the directions given by the Division Bench in Writ Petition No.2658 of 1984 and the learned Single Judge in Writ Petition Nos.17409 of 1989 and 16440 of 1995, the State Government issued notice to respondent No.5 and Secretary of the appellant society, gave opportunity of hearing to them on 30th August and 20th September, 1997 and rejected the application for exemption. This was conveyed to respondent No.5 and the appellant society vide Memo No.453/UC.II(1)/84-12, dated 31.10.1997. The appellant exhibited ignorance about the rejection of the application for exemption vide memo dated 31.10.1997 and made representations dated 26.2.1998, 20.1.2000, 24.3.2003 and 12.3.2004 for disposal thereof and then filed Writ Petition No.5609 of 2004 for issue of a mandamus to the respondents to decide the application for exemption. The learned Single Judge, vide his order dated 25.3.2004, disposed of the writ petition with a direction to the State Government to decide the exemption application within a period of four months and ordained that till then status quo be maintained. The appellant is shown to have submitted representation dated 6.1.2005 for compliance of the direction contained in order dated 25.3.2004. Thereupon, Special Chief Secretary to Government, Revenue (U.C.II) Department sent memo dated 1.3.2005 to the appellant and counsel for respondent Nos.5 and 6 informing them that the application for exemption had already been rejected vide memo dated 31.10.1997, which was despatched on 11.11.1997. The appellant challenged the refusal of the government to grant exemption by contending that the same is ultra vires the provisions of Section 20(1)(a) of the Act besides being violative of the judgments of this Court and the Supreme Court. Another plea taken by the appellant was that the impugned proceedings are devoid of reasons and are liable to be quashed on the ground of violation of the rules of natural justice. The learned Single Judge noted that the application for exemption had been rejected by the government in 1983 and again in 1997 and held that the decision contained in memo dated 31.10.1997 is not contrary to the orders passed by this Court. The learned Single Judge relied on the judgment of a coordinate Bench in Sri Sarvaraya Sugars Limited, Chelluru v. Government of A.P.[2] and negatived the appellant’s plea that the rejection of the application for exemption is vitiated due to violation of the rules of natural justice. Sri K.V. Satyanarayana, learned Senior Counsel appearing for the appellant argued that memo dated 31.10.1997 is liable to be declared as vitiated due to violation of the rules of natural justice because the State Government has not assigned reasons for refusing to exempt the subject land from the operation of the Act. Learned Senior Counsel submitted that even though Section 20(1)(a) does not, in terms, provide for recording of reasons for rejecting an application for exemption, this requirement must be read implicit in the section, else the same would become vulnerable to the attack of violation of Article 14 of the Constitution. Learned Senior Counsel relied on the judgment of the Supreme Court in Ramchandra Murarilal Bhattad v. State of Maharashtra[3] and argued that the judgment of the learned Single Judge in Sri Sarvaraya Sugars Limited, Chelluru v. Government of A.P. (supra), which has been relied in the order under challenge, does not lay down correct law. He then argued that the appellant did have the locus to file application for exemption and the learned Single Judge committed an error by declining their prayer for quashing the decision contained in memo dated 31.10.1997. We have thoughtfully considered the entire matter and are convinced that the learned Single Judge did not commit any error by declining the appellant’s prayer. Part IV of the Constitution enumerates the Directive Principles of State Policy which, though not enforceable by any Court, are fundamental in the governance of the country and it is the duty of the State to keep these principles in view while enacting laws (Article 37). Article 38 (1) ordains that the State shall strive to promote the welfare of the people by securing and protecting as effectively as it may, a social order in which justice, social, economic and political, shall inform all the institutions of the national life. Clause (2) of Article 38 lays down that the State shall, in particular, strive to minimize the inequalities in income, and endeavour to eliminate inequalities in status, facilities and opportunities, not only amongst individuals, but also amongst groups of people residing in different areas or engaged in different vocations. Article 39 enjoins upon the State to direct its policy towards securing to every citizen the right to an adequate means of livelihood; ensure that the ownership and control of the material resources of the community are so distributed as best to subserve the common good; that the operation of the economic system does not result in concentration of wealth and means of production to the common detriment … Other Articles of this part do not have any bearing on the decision of these petitions and, therefore, detailed reference to those Articles is being avoided. With a view to achieve one of the goals set out in Articles 38 and 39 of the Constitution, the Parliament enacted the Urban Land (Ceiling and Regulation) Act, 1976 with the following main objectives: i) to prevent the concentration of urban property in the hands of few persons and to arrest the speculation and profiteering in the urban property; ii) to bring about socialization of urban land in urban agglomerations to subserve the common good by ensuring its equitable distribution; iii) to discourage construction of luxury housing leading to conspicuous consumption of scarce building materials and to ensure equitable distribution and utilization of such materials; and iv) to secure orderly urbanization. The Act particularly provides for the following measures: i) imposition on ceiling on both ownership and possession of vacant land in urban agglomerations. The ceiling would be on the basis of classification of urban agglomeration. ii) acquisition of the excess vacant urban land by the state governments. The Governments are conferred the powers to dispose of the vacant land to subserve common good; iii) payment of an amount for acquisition of land in excess, in cash and bonds; iv) granting exemptions in respect of certain specific categories of vacant land; v) regulating the transfer of vacant land within the ceiling limit; vi) regulating the transfer of urban land or construction of future residential buildings; and vii) restricting the plinth area for the construction of future residential buildings; and viii) other procedural matters. Part III of the Act, which deals with ceiling on vacant land, contains 22 sections. Section 3 lays down that except as otherwise provided in the Act, no person shall be entitled to hold any vacant land in excess of the ceiling limit in the territories to which the Act applies. Section 4 enumerates ceiling limits for urban agglomeration falling within categories A, B. C and D specified in Schedule-I. Section 5 provides for taking into consideration of the transfers affected during the period commencing on the appointed date and ending with the commencement of the Act for the purpose of determination of the surplus area. 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 specifying the location, extent, value and such other particulars as may be prescribed of all vacant land held by him and also specifying the vacant land within the ceiling limit which he desires to retain. Section 7 provides for filing of statement in cases where vacant land is situated within the jurisdiction of two or more competent authorities. Sections 8 to 10 regulate preparation of draft statement of the vacant land held in excess of the ceiling limit, issue of final statement and acquisition of vacant land in excess of the ceiling limit. Section 11 regulates payment of amount for the vacant land acquired by the State Government by virtue of deeming provision contained in Section 10 (3) of the Act. Section 12 provides for constitution of Urban Land Tribunal for hearing appeals against the orders of the Special Officer and Section 13 provides for second appeal to the High Court. Section 14 prescribes the mode of payment of amount in terms of Section 11. Section 15 prescribes ceiling limit on future acquisition by inheritance, bequest or by sale in execution of decrees etc. Section 16 requires certain persons to file statements when the Act is adopted subsequently. Section 17 confers power on the competent authority or any person acting under the orders of the competent authority to enter upon any vacant land or building. Section 18 provides for penalty for concealment etc. of the particulars of vacant land. Section 19 (1) lays down that the provisions of Chapter III shall not apply to vacant land held by Central Government etc. Section 20 confers power upon the State Government to grant exemption from the provisions of Chapter III. Section 21, which begins with a non-obstante clause, enumerates certain situations in which excess vacant land is not to be treated as excess. Section 22 provides for retention of vacant land in certain circumstances. Section 23 regulates disposal of vacant land acquired under the Act. Section 24 contains special provisions for disposal of vacant land in favour of certain persons. Section 20, which empowers the Government to exempt the particular piece of land from the provisions of Chapter III of the Act, reads as under: “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 public interest so to do, that Government may, by order, exempt, subject to such conditions, if any, as may be specified in the order, such vacant land from the provisions of this Chapter; b) where any person holds vacant land in excess of the ceiling limit and the State Government, either on its own motion or otherwise, is satisfied that the application of the provisions of this Chapter would cause undue hardship to such person, that Government may by order, exempt, subject to such conditions, if any, as may be specified in the order, such vacant land from the provisions of this Chapter: Provided that no order under this clause shall be made unless the reasons for doing so are recorded in writing. 2) If at any time the State Government is satisfied that any of the conditions subject to which any exemption under clause (a) or clause (b) of sub-sec.(1) is granted is not complied with by any person, it shall be competent for the State Government to withdraw, by order, such exemption after giving a reasonable opportunity to such person for making a representation against the proposed withdrawal and thereupon the provisions of this Chapter shall apply accordingly.” If the above reproduced provisions are read in conjunction with other provisions of Chapter III including Sections 6, 8 and 10, it becomes clear that the exemption envisaged under Section 20 (1)(b) is in the nature of a concession which the State Government can give to a person whose land is declared surplus. The exercise of power to grant exemption under Section 20 (1)(b) is hedged with the condition that the State Government must feel satisfied that the application of the provisions of Chapter III would cause undue hardship to the applicant. This necessarily means that State Government cannot grant exemption under Section 20 (1)(b) merely for asking. In each case, the applicant has to produce sufficient evidence to convince the State Government that application of the provisions of Chapter III will cause undue hardship to him. In S. Vasudeva v. State of Karnataka[4], a Division Bench of the Supreme Court interpreted Section 20 (1)(a) and (b) of the Act. P.B. Sawant and N.P.Singh, JJ, who constituted the Bench recorded separate opinions. P.B.Sawant, J expressed his views in the following words: “It would be apparent from clause (a) of sub-section (1) of the section that under it, the State Government is given power to exempt the excess vacant land from the operation of Chapter III only if the State Government is satisfied that having regard to (i) the location of the land and (ii) the purpose for which it is being or is proposed to be used, it is necessary or expedient in the public interest to exempt it. The paramount consideration is the public interest. The exemption granted under this provision may be subject to certain conditions. But, it does not appear that it is obligatory to impose such conditions. Nor is it necessary to record reasons when exemption is granted under this clause. The power to exempt such land under clause (b) of sub-section (1) can be exercised by the State Government, if it is satisfied that the application of Chapter III would cause undue hardship to the landholder. The exemption may be granted under this clause subject to such conditions, if any, as may be specified in the order. But, unlike under clause (a), there is no obligation to prescribe the conditions. The permission given under this clause, however, has to be supported by reasons to 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 it 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 sub-section (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 contemplated 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 growing business or activities or to accommodate his growing family. The clause unfortunately is completely silent on what it intends to convey by the expression ‘undue hardship’. * * * The examination of the aforesaid relevant provisions of the Act shows a clear intention of the legislature and reveals 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 threefold, 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 Act by the State Government under Section 20 or non-declaration of such land as an excess vacant land by the competent authority under Section 21 or the retention of such land with the landholder to be permitted by the competent authority under Section 22 of the Act. The effect of exemption of the land from the provisions of Sections 3 to 19 or of the non-declaration of the land as excess land or of the retention of the land with the landholder under Sections 20, 21 and 22 respectively, is not to permit the landholder to deal with it as he likes including to transfer it. In fact, the exemption, the non- declaration and the retention permitted, is on certain conditions which are required to be prescribed by the State Government or the competent authority as the case may be. If those conditions are not complied with or are contravened, the State Government or the competent authority is given power to withdraw the exemption or to declare the land as excess. This power given to the State Government and the competent authority itself negatives either power to permit the transfer of the right to transfer. What is more, Chapter IV which alone makes provisions for transfer and use of urban property, makes provision for transfer of vacant land within the ceiling limit subject to certain conditions. It also makes provisions for the transfer of land in excess of the ceiling limit with a building thereon or with a portion of such building. It makes, however, no provision for transfer of land in excess of the ceiling limit without a building or a portion of a building thereon. That is consistent with the object of the Act since the Act does not contemplate transfer of the vacant land in excess of the ceiling limit. It only provides for exemption of such land from being acquired and vested in the State Government or for non- declaration of it as an excess land or for the retention of the same with the holder and that too subject to certain conditions which may be prescribed, as stated earlier. * * * The first question that arises is whether the provisions of Section 20(1)(b) permit the State Government to permit the sale of the excess vacant land to a third party. According to us, the answer has to be in the negative for reasons more than one. In the first instance, the central object of the Act, as is evident both from the preamble 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 landholder. 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