Case: Voltas Limited Vs. Tehsildar, Thane & Others

C.K. THAKKER, C.J.Both these petitions have been filed by the petitioners for the reliefs prayed in the petitions. In the first petition (Writ Petition No.1481 of 2002), the petitioner has sought a writ of certiorari or any other appropriate writ, direction or order quashing and setting aside orders dated 5th February, 2002, 18th February, 2002 and a demand notice dated 6th March, 2002. In the second petition (Writ Petition No. 7457 of 2002) a prayer is made for quashing orders dated 30th March, 2002, 13th May, 2002 and 9th October, 2002.2.The case of the petitioner in the first petition (Writ Petition No.1481 of 2002) is that it is a Public Limited Company engaged in manufacturing air conditioners, refrigerators and other items. The establishment is located at Chinchpokli in Bombay. In 1966, the petitioner set up a factory at Thane to carry out manufacturing activities. For the said purpose, it purchased land admeasuring about 98,000 sq.mtrs. at village Majiwade, from a private party. The petitioner, however, felt that additional land would be needed to effectively continue with the manufacturing process. The petitioner, therefore, approached the Government of Maharashtra and requested it to acquire land for the Company under the provisions of the Land Acquisition Act, 1894. Proceedings were initiated under the Land Acquisition Act, 1894 read with the Land Acquisition (Companies) Rules, 1963. More than one lakh square metres of land had been acquired and given to the petitioner. A Sanad was issued in favour of the petitioner on January 20, 1969, which is annexed at Exhibit-A to the petition. The land was allotted to the petitioner on the terms and conditions mentioned in the Sanad as Class II occupant. Condition No.7, which is relevant, read as under:"The Company shall not in anywise whatsoever alienate the said land or any portion thereof by way of sale, mortgage, gift, lease, exchange or otherwise howsoever except with previous permission in writing of the Government."It is also mentioned in the Sanad that the land will be vested in the Company and shall be held by it as its property to be used by the Company for the purpose of constructing dwelling houses for workmen employed by the Company and the provisions of the amenities directly connected therewith, subject to the provisions of the Maharashtra Land Revenue Code, 1966 and the Rules framed thereunder. It was also stated that except with the previous permission in writing of the Government, the land shall not be transferred, for any purpose other than for which it was acquired. A condition regarding construction of work was also imposed. It was stated that if the Company would commit breach of any of the terms and conditions, the transfer of land in favour of the Company would be treated as null and void and the land would revert back to the Government.3.In 1976, the Urban Land (Ceiling and Regulation) Act, 1976 (hereinafter referred to as "the Act"), came to be enacted. In accordance with provisions of Section 20 of the Act, the Company submitted an application for holding land in excess of the ceiling limit by granting an exemption.4.The Company also made an application under Section 21 of the Act for granting an exemption for utilising the land for construction of dwelling units for accommodating weaker sections of the society. The said application was made on 27th March, 1979. On 11th January, 1984, an order was passed under Section 21 of the Act, permitting the petitioner to use the land for constructing dwelling units for weaker sections of the society. According to the petitioner, it complied with the said order. To implement the scheme, it entered into an agreement with one Eversmile Construction Private Limited for development of the land.5.Since one of the conditions of Sanad was that the petitioner could not alienate the land in any manner without prior permission of the Government, the petitioner wrote a letter to the Collector and Competent Authority, Thane on September 30, 1986 and sought clarification whether the conditions imposed under Exemption Orders dated January 11, 1984 would prevail over and supersede conditions of Sanad, dated January 20, 1969.6.On October 29, 1986, the Deputy Collector and Competent Authority, Thane Agglomeration clarified that though condition of exemption order dated 11th January, 1984, was inconsistent with the original Sanad granted in favour of the petitioner, it had an overriding effect.7.By communications dated 15th February, 1989 and 27th February, 1989, the petitioner was informed that order dated 11th January, 1984, granting permission was stayed. The petitioner by applying to the Honble Minister, Revenue and Forest Department, requested to withdraw those orders. Nothing, however, was done in the matter and finally by an order dated 5th February, 2002, the Collector, Thane, alleging that the petitioner company had committed breach of conditions of Sanad and the land was utilised for the purpose other than for construction of residential houses for the workers of the petitioner-company, and had been benefited, it was required to deposit 50 per cent of the unearned income to the Government.8.It was alleged in the said letter that instead of using the property for residential premises of employees for which the land was acquired, it granted rights to the developer for construction of houses and to sell them after development and thereby benefited to large extent. The petitioner was, therefore, called upon to show cause as to why the land should not be forfeited. It was also stated that if the petitioner would fail to provide any explanation on or before February 12, 2002, it would be presumed that the Company had nothing to say in the matter and appropriate action will be taken.9.According to the petitioner, it clarified its position by filing a reply on 15th February, 2002. No personal hearing was afforded to the petitioner nor the explanation was considered and a communication was sent on 18th February, 2002 to the petitioner demanding therein an amount of Rs.14,11,45,851/- as unearned income. On 28th February, 2002, the petitioner again sent a letter to the Collector, Thane, stating that on 15th February, 2002, the Company had brought all facts to the notice of the Collector. It was also stated that the Sanad did not envisage payment of 50 per cent as unearned income. A prayer was, therefore, made to treat letters dated 5th February, 2002 and 18th February, 2002, as show cause notices. A request was also made for affording personal hearing. But finally, on 6th March, 2002, the petitioner received a notice of demand for the entire amount for which orders were made earlier. The petitioner, therefore, was constrained to approach this Court by filing the petition.10.In the second petition (Writ Petition No. 7457 of 2002), the petitioner was called upon to pay 75 per cent of the amount to the extent of Rs.5,63,70,555/- as unearned income which is challenged.11.On 16th March, 2002, the petitions were admitted by issuing rule. Rule on interim relief was made returnable within eight weeks. In the meanwhile ad-interim relief as prayed was granted. The matters have now been placed before us.12.We have heard the matters finally.13.Mr. Abhyankar, learned counsel for the petitioner, contended that the action taken by the respondents are contrary to law and liable to be quashed and set aside. The petitioner had not committed any illegality or irregularity. No proceedings, therefore, could have been initiated against the company for so-called breach or violation of conditions imposed on the petitioner-company. It was also submitted that the land was acquired by the Government and granted to the company on the terms and conditions of Sanad but in view of the passing of the Urban Land (Ceiling and Regulation) Act, 1976 and exemption granted under the provisions of the said Act, conditions imposed in Sanad would not operate. It is also submitted that in view of exemption granted under Section 21 of the Act on 11th January, 1984, the conditions in the said order would operate, even though they were not consistent with the conditions of original Sanad in view of Section 42 (Act to override other laws) of the Act. The counsel also urged that it cannot be said that the company was "holding" the land as defined in clause (1) of Section 2 of the Act. There was no unearned income as alleged and the petitioner was not liable to pay any amount to the respondents. In any case, opportunity of hearing had not been afforded to the Company and the order directing the Company to pay a particular amount was violative of principles of natural justice and fair play and the order deserves to be quashed and set aside.14.The learned Advocate General, on the other hand, supported the order passed by the authorities. An affidavit in reply is filed by the Resident Deputy Collector on 4th October, 2002, wherein it was stated that additional land had been acquired by the State for the petitioner which was to be used for the purpose for which the acquisition was made. The terms and conditions of the acquisition had been specified in Sanad dated 20th January, 1969. The principal object was construction of dwelling houses for the workmen employed by the petitioner Company and amenities to be provided for. It was expressly stated in the Sanad that the Company would not in any way alienate the land or any part thereof either by way of sale, mortgage, gift, lease or otherwise except with the prior written permission of the Government. In case of petitioner committing any breach of any of the conditions, the Government would declare the transaction null and void and land would be reverted back to the Government. It was denied that conditions laid down in the order dated 11th January, 1984 under Section 21 of the Act made conditions of Sanad ineffective, nugatory and inoperative. It was stated that the land was given for dwelling houses of employees of the petitioner Company, but the Company constructed huge housing and commercial complex known as "Vasant Vihar", thereby defeating the main purpose of allotment. Since the land was acquired by the Government for construction of houses of employees of the petitioner Company, the status of the petitioner Company was nothing but Class-II occupant and a condition could be imposed not to sale or dispose of the land, without the prior permission of the Government. Hence, such condition was legal and valid. Therefore, when the petitioner disposed of the land without prior permission of the Government, as per policy of the Government reflected in G.R. dated November 21, 1957, the Company was asked to deposit unearned income which was legal and in consonance with law.15.It was, however, stated in the counter that notices were issued to the petitioner, and though the petitioner had filed a reply, the same was received after the order was passed, and hence, the reply could not be considered. It was, therefore, stated that the respondents had no objection, if this Court remands the matter to the Collector, Thane, for a fresh hearing and by directing him to pass appropriate order in accordance with law.16.A further affidavit was also filed by the Assistant Town Planner, Urban Land Ceiling, Thane, on 27th February, 2003, that in respect of land comprised under Section 21(1) an order was passed on 11th April, 1984 under Section 10(3) of the Act, the excess land was shown to be 1,00,290.96 sq.mtrs. The petitioner made a representation on 21st July, 1986 that the declaration of surplus land was erroneous, since the land which had been surrendered to MHADA in terms of exemption order dated 11th January, 1984 (79,152.45 sq.mtrs.) was required to be considered. A rectification order was, therefore, passed in September, 1986 restricting excess land to 79,152.45 sq.mtrs. The said action is legal and valid and the petitioner is not entitled to any relief.17.Having heard the learned counsel, in our opinion, the petitions deserve to be partly allowed.18.So far as the main grievance of the petitioner that no action could have been taken against the petitioner on the terms and conditions of Sanad and breach thereof in view of passing of the Urban Land Ceiling Act, exemption granted under the Act, is not well-founded and cannot be upheld. As is clear, land has been granted by the Government to the Company under the Land Acquisition Act for a particular purpose. The land was granted to the petitioner Company on those conditions. A Sanad was issued wherein those conditions have been specified. The learned Advocate General is, therefore, in our opinion, right in submitting that the petitioner company was Class-II occupant. Section 29 of the Maharashtra Land Revenue Code, 1966, recognises certain class of persons as occupants. Occupants of Class I hold unalienated land in perpetuity and without any restrictions on the right of transfer. Occupants of Class II, however, hold unalienated land in perpetuity, but subject to the restrictions on the right to transfer. In the instant case, possession of the land was given to the petitioner Company by the Government for a particular purpose. Several conditions were, therefore, imposed in the Sanad and the Company was bound to comply with those conditions. In our opinion, it was not open to the Company to ignore those conditions. Passing of an order of exemption under the Ceiling Act would not wipe out conditions of Sanad. It was, therefore, open to the respondent-authorities to direct the Company to act in accordance with the terms and conditions of Sanad. When the petitioner has not observed those conditions and committed breach thereof by disposing the property, it was open to the respondents to demand unearned income in accordance with the policy of the Government.19.We are also not impressed by the argument that in view of the provisions of the Ceiling Act, terms and conditions imposed in Sanad would not operate.20.It was contended by the learned counsel for the petitioner that once the provisions of the Ceiling Act applied, and a notification was issued under sub-section (3) of Section 10 of the Act, the excess land referred to in the notification shall "be deemed to have been acquired by the State Government and upon the publication of such declaration, such land shall be deemed to have been vested absolutely in the State Government free from all encumbrances". The counsel contended that as soon as such notification is issued, the land would get vested in the State Government from the date the Act came into force i.e. 17th February, 1976. The Government thereafter does not have to acquire the land under any other law, the vesting being deemed vesting. For the said proposition, our attention was invited to a decision of the Supreme Court in Govt. of A.P. vs. H.E.H., The Nizam, Hyderabad, (1996) 3 SCC 282. 21.We are not impressed by the argument of the learned counsel for the petitioner. Section 10(3) enacts that the excess land referred to in the notification under sub-section(1) of the said Section will be vested in the Government "with effect from such date as may be specified in the declaration". Thus, it is the date which is specified in the notification that is material and with effect from that date the land will get vested in the Government. To us, it is clear that in view of the provisions of Section 3 of the Act which declares that except as otherwise provided in the Act, on and from the commencement of 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". It is, therefore, open to the authorities to specify a date from which the excess land shall be deemed to have been vested free from encumbrances in the State. But it is not that in all cases it is the date of operation of the Act i.e. February 17, 1976 which divests the owner over his land. 22.This is also clear from sections 20 and 21 of the Act which provide for exemption from operation of the Act in certain cases. This legal position becomes clear from the decision of the Supreme Court in Smt.Darothi Clare Parreira and others vs. State of Maharashtra and Ors. AIR 1996 SC 2553 , wherein the relevant date for vesting in the State was held to be 12th March, 1979. In paragraph 5, the Court observed;"Having considered the respective contentions, the question that arises for consideration is :whether publication of the notification under Section 10(3) of the Act in the Gazette is in accordance with law No doubt, this question was not squarely put in issue before the High Court in the manner in which Shri Naik and Shri Bobde have posed before us. Having considered the scheme of the Act, we find that there is no force in their contentions. It is true that Section 3 postulates that except as otherwise provided in the Act, on and from the commencement of 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 under sub-section (2) of Section 3. Sections 6 to 10 prescribe the procedure for determination of the excess urban land. Admittedly after filing of statement, opportunity had been given, they had been heard and excess land over the ceiling limit had been determined. Pursuant to the decision taken under Section 10(1) of the Act, objections came to be filed under Section 10(2) and objections also were considered and an opportunity was given before their consideration and objections came to be rejected. The question then is : whether the competent authority has to await the decision under Sections 20 and 21 before declaring and publishing the excess land under Section 10(3) by a notification in the Gazette. The scheme of the Act does indicate that until the date of the publication in the Gazette prescribing a date on and from which the excess land stands vested in the State, the owner continues to be the owner of the excess land and entitled to remain in possession thereof. On publication of the notification under Section 10(3) and after putting a date from which the land stands vested in the State and after publication of the notification in the gazette and on and from the date mentioned therein, the excess vacant land stands vested in the State free from all encumbrances, subject to the decision in appeal, if any, filed according to law." (emphasis supplied)23.In Special Officer & Competent Authority, Urban Land Ceilings, Hyderabad and Anr. vs. P.S.Rao (2000) 2 SCC 451 also, a similar view was taken by the Supreme Court. In paragraph 9 the Court observed;"But, the word "hold" in Section 20(1)(a) or Section 20(1)(b) cannot, in our opinion, have the same meaning that can be attributed to it as in Section 2(1). The very definition in Section 2(1) states that the sub-section applies unless there is anything in the context which suggests a different meaning to be given. In our view, in the context of Section 20(1)(a) and Section 20(1)(b), the definition given in Section 2 (l) cannot be applied. The reason is that such a construction will make Section 20 unworkable and otiose. We have pointed out above that it is not possible to make any meaningful application for exemption under Section 20(1)(a) or (b) unless the exact quantum of excess is determined under Section 10 after following the various provisions of the Act relating to statutory deductions and mode of computation. If the contention of the State referred to above is to be accepted, then the peculiar position will be as follows: as stated by us, before the excess is determined, a person will not be able to seek exemption because he does not know what is the actual excess land held and once the excess is determined, he cannot apply because he is not holding the excess land. Thus, the entire object of Section will be frustrated. That is why we say that the definition of the words "to hold" in Section 2(1) cannot be applied in the context of Section 20(1)(a) or Section 20(1)(b)."24.From the above decisions, to us, it is clear that the conditions imposed on the Company when the land was acquired by the Government under the provisions of the Land Acquisition Act and was given to the petitioner on certain terms and conditions and Sanad was issued in favour of the Company by laying down terms and conditions of use of the land operated and the company was bound by those conditions. When there was breach of conditions, it was open to the respondents to take appropriate proceedings in accordance with law including recovery of unearned profit in accordance with Government policy. The action, therefore, cannot be held to be objectionable in principle and the grievance of the petitioner is not justified.25.So far as the quantum is concerned, it was stated in the affidavit in reply that the respondents have no objection if the matter is remanded to the Collector, Thane, by directing him to pass appropriate order in accordance with law after affording hearing to the petitioner. The learned Advocate General also stated that the appropriate course is to set aside that part of the order by issuing direction to the Collector to pass fresh order. To that extent, therefore, the grievance of the petitioner is justified.

Decision reasoning: 1[ds]18.So far as the main grievance of the petitioner that no action could have been taken against the petitioner on the terms and conditions of Sanad and breach thereof in view of passing of the Urban Land Ceiling Act, exemption granted under the Act, is notand cannot be upheld. As is clear, land has been granted by the Government to the Company under the Land Acquisition Act for a particular purpose. The land was granted to the petitioner Company on those conditions. A Sanad was issued wherein those conditions have been specified. The learned Advocate General is, therefore, in our opinion, right in submitting that the petitioner company wasoccupant. Section 29 of the Maharashtra Land Revenue Code, 1966, recognises certain class of persons as occupants. Occupants of Class I hold unalienated land in perpetuity and without any restrictions on the right of transfer. Occupants of Class II, however, hold unalienated land in perpetuity, but subject to the restrictions on the right to transfer. In the instant case, possession of the land was given to the petitioner Company by the Government for a particular purpose. Several conditions were, therefore, imposed in the Sanad and the Company was bound to comply with those conditions. In our opinion, it was not open to the Company to ignore those conditions. Passing of an order of exemption under the Ceiling Act would not wipe out conditions of Sanad. It was, therefore, open to theto direct the Company to act in accordance with the terms and conditions of Sanad. When the petitioner has not observed those conditions and committed breach thereof by disposing the property, it was open to the respondents to demand unearned income in accordance with the policy of the Government.19.We are also not impressed by the argument that in view of the provisions of the Ceiling Act, terms and conditions imposed in Sanad would notare not impressed by the argument of the learned counsel for the petitioner. Section 10(3) enacts that the excess land referred to in the notification underof the said Section will be vested in the Government "with effect from such date as may be specified in the declaration". Thus, it is the date which is specified in the notification that is material and with effect from that date the land will get vested in the Government. To us, it is clear that in view of the provisions of Section 3 of the Act which declares that except as otherwise provided in the Act, on and from the commencement of 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". It is, therefore, open to the authorities to specify a date from which the excess land shall be deemed to have been vested free from encumbrances in the State. But it is not that in all cases it is the date of operation of the Act i.e. February 17, 1976 which divests the owner over hisis also clear from sections 20 and 21 of the Act which provide for exemption from operation of the Act in certain cases. This legal position becomes clear from the decision of the Supreme Court in Smt.Darothi Clare Parreira and others vs. State of Maharashtra and Ors. AIR 1996 SC 2553  , wherein the relevant date for vesting in the State was held to be 12th March,the above decisions, to us, it is clear that the conditions imposed on the Company when the land was acquired by the Government under the provisions of the Land Acquisition Act and was given to the petitioner on certain terms and conditions and Sanad was issued in favour of the Company by laying down terms and conditions of use of the land operated and the company was bound by those conditions. When there was breach of conditions, it was open to the respondents to take appropriate proceedings in accordance with law including recovery of unearned profit in accordance with Government policy. The action, therefore, cannot be held to be objectionable in principle and the grievance of the petitioner is not justified.25.So far as the quantum is concerned, it was stated in the affidavit in reply that the respondents have no objection if the matter is remanded to the Collector, Thane, by directing him to pass appropriate order in accordance with law after affording hearing to the petitioner. The learned Advocate General also stated that the appropriate course is to set aside that part of the order by issuing direction to the Collector to pass fresh order. To that extent, therefore, the grievance of the petitioner is justified.