Case: H.M.T. House Building Co-Op. Society Vs. Syed Khader

2. The appellant is a House Building Co-operative Society of the employees of H.M.T. Limited, a Government Company (hereinafter referred to as the Society). The Society was registered for the purpose of acquiring land by purchase, mortgage, lease exchange, gift or otherwise, and to develop the same by construction of roads, drains, parks, play grounds, schools, hospitals, water works, post-office and other amenities, required for a residential housing colony. The Society has been registered under the provisions of Karnataka Co-operative Societies Act.3. The Society submitted its housing scheme to the State Government on 19-9-1984, for the purpose of acquisition of lands situated at Thindlu and Chikkabettahalli, for 1001 members of the Society. It is the case of the appellant that the Government being fully satisfied with the scheme submitted by the appellant, approved the same by an order dated 7-11-1984 and accorded approval for initiation of acquisition proceeding for the lands. On 17-3-1988 the Society entered into an agreement with the State Government agreeing to the conditions for acquisition, as required by Section 39 and 40 of Part-VII of the Land Acquisition Act (hereinafter referred to as the Act). But on 12-7-1988 a notification under Section 4(1) of the Act was issued proposing to acquire lands for the Society to the extent of 133.33 acres in the aforesaid two villages, saying it was needed for public purpose.4. The writ petitioners-respondents questioned the validity of the aforesaid notification under Section 4(1) of the Act on several grounds including that the acquisition itself was not for public purpose. During the pendency of the writ application on 11-8-1989 the State Government issued declaration under Section 6(1) of the Act in respect of 99.01 acres of lands in the aforesaid two villages for the appellants Society. On 19-3-1991 awards were made in respect of the aforesaid lands. However, on 18-6-1991 the High Court allowed the writ application and quashed all steps taken in connection with acquisition thereof. According to the High Court, the acquisition was not for allotment to the bona fide members of the Society and as the Society had indulged in commercial venture for sales of sites, the acquisition of the lands under the provision of the Act was a colourable exercise of the power. The High Court was also of the opinion that procedure adopted by the State Government for acquisition of lands for the Society was likely to defeat the schemes under Bangalore Development Authority Act.5. From the facts of the present case, it appears that on 19-9-1984 the appellant society submitted the housing scheme to the State Government. On 1-2-1985 the appellant society entered into an agreement with M/s. S. R. Constructions, respondent No.1 in which the appellant society was described as First party and M/s. S. R. Constructions as Second party. The relevant parts whereof are as followsWHEREAS THE FIRST PARTY is a registered Housing Building Co-operative Society under the Karnataka Co-operative Societies Act, its main object being to procure lands around Bangalore and forming layouts and sites to cater to the needs of its members by allotting sites for purposes of construction of dwelling houses on the sites and the Second Party is an Architects, Engineers, Builders and Layout Contractors.3. AND WHEREAS THE SECOND PARTY approached the First Party and offered to assist the First Party to secure lands in Thindlu and Chikkabettahally villages to the extent of 80 Acres approximately as specified in the Annexures to this Agreement and to get the lands acquired in favour of the First Party and further offered to take up the work of layout and formation of sites so formed through the B.D.A. and/or from any other competent authority.4. AND WHEREAS at on a representation from the FIRST PARTY the SECOND PARTY with his efforts has secured directions from Revenue Secretary, Government of Karnataka addressed to the Special D.C. Bangalore to issue Notification under Sec.4(1) of Land Acquisition Act in favour of the First Party Society vide No.RD.257 AQB 84 dated 7-11-1984.The Second Party shall secure to the First Party lands at Thindlu and Chikkabettahally to an extent of 80 acres as specified in the annexures to this agreement to begin with and such further extent as the First Party may require and shall arrange for agreements to be executed between a period of 2-3 months from this day to facilitate the acquisition of lands in favour of the First party. The Second Party hereby agrees strictly to conform and act according to the terms of this agreement.The Second Party who has already entered into sale agreement with the owners of land (the details of the land fully described in the schedule to this agreement) has agreed to negotiate and ensure the acquisition of the land in favour of First Party.The First Party after inspection of the lands and discussions with the Second Party has agreed to have the lands from the owners acquired for the First Party subject to the other Services to be rendered by the Second Party as agreed to hereinafter.NOW THIS AGREEMENT spells out the terms and conditions, rights, powers, obligations and liabilities of the parties to this agreement.1. It is agreed that the Second Party shall carry out the following works for the First Party in respect of the lands to be acquired for the First Party.2. It is agreed that in respect of the lands to be acquired for the First Party the Second Party shall undertake to do the following :(a) To get Notification under Section 4(1) of the Land Acquisition Act issued for acquisition of the required extent of land mentioned in the annexure for the First Party in Thindlu and Chikkabettahally Villages, in one continuous plot and enter into necessary agreements with the owners of the land confirming that the lands are free from encumbrance and that there are no claims on the lands and that they have no objection for the acquisition proceedings in respect of the land;(b) To get the Notification as required under Section 4(1) to be issued within 3 months from the date of agreement with lands owners;(c) To get the Enquiry as required under Section 5(1) of the Land Acquisition Act by proper authorities completed within 3-4 months from the date of agreement with land owners;(d) To get the Notification as required under Section 6(1) of the Land Acquisition Act within 10 months from the date of the Agreement;(e) To secure possession of the land from the land owners to the First Party after all the formalities of acquisition are completed and orders passed acquiring the lands for the First Party within 12 months from the date of the agreement;(f) To get the layout plan approved and sanctioned and also permission to execute the civil portion of the layout work comprising of formation of roads, drains, culverts etc., by the B.D.A within 2 months from the date of securing possession of lands;(g) Executing the civil portion of the layout work comprising of formation of roads, drains, culverts, etc., as specified by the B.D.A. according to the sanctioned plan, specification and under supervisions of the B.D.A. within 8 months of the sanction of layout plan and receipt of work order from the B.D.A. for the layout work;(h) Securing the permission from B.D.A. to execute the layout work under their supervision and the layout comprising of laying of water supplying, sewerage lines and chip carpeting which is agreed to be completed within 6 months after the completion of civil portion layout;(i) Executing and doing all other acts, and things necessary for forming full fledged layout of residential building sites on the lands required complete in all respects, fit and ready for construction of houses on the completion of civil portion of layout works;(j) To get all the sites released from the B.D.A. or any other competent authority within 2 months of completion of layout works.3. The Second Party has agreed and undertaken to take up the above mentioned works and has agreed to carry out the works within 245 months time from the date of this agreement subject to any delay caused at the B.D.A. and other authorities in procuring the land, sanctioning or issuing layout plan and work order.4. The First Party agrees to pay to the Second Party an amount calculated at Rs.112/- per Sq.Yard based on the actual vital area (inclusive of the cost of the land acquired and the compensation payable thereto either under the award or any enhanced compensation under any proceedings, security fee and amounts payable to the B.D.A. towards supervision charges, chip carpeting, tree planting, maintenance etc., amount and sewerage mains within the layout amount payable to K.E.B. for electricity and the cost of layout to be deposited with B.D.A.) excluding the cost of the area to be left for roads, drains and the civic amenities according to the layout plan approved bysupplied)6. In the schedule of the said agreement, the details of the lands, which have been acquired and which are subject matter of controversy, have been given.7. It further appears that agreements were also executed in favour of the appellant society by the land holders, some of whom are writ petitioners - respondents, agreeing to sell their lands to the appellant society or to their nominee. In such agreements, the land holders said that the terms and conditions of the agreement entered into between M/s. S. R. Constructions and the appellants society was totally agreeable to them including the terms of payment and time limit. They also agreed to receive the sale consideration through M/s. S. R. Constructions (respondent No.11) and admitted to have received advance on behalf of the appellant society from M/s. S. R. Constructions. They further agreed that if the Government intended to acquire the land for the housing purpose of the appellant society, they will agree to give consent to notifications under Section 4(1) and 6(1) of the Act.8. Before the High Court, on behalf of the writ petitioners, it was pointed out that respondent No.11, M/s. S. R. Constructions had played dubious role of a middle man. The said respondent entered into agreement with the land holders for sale of their lands by negotiation. At the same time it entered into an agreement with the appellant society to get notifications under Section 4(1) and 6(1) issued by the appropriate Government acquiring those lands through the procedure prescribed under the Act. In this process, the said respondent No.11 has influenced the exercise of statutory power by the appropriate Government, for the huge amount paid by the appellant society to the said respondent as consideration for the same. In this background, according to the writ petitioners, it cannot be held that the appropriate Government has exercised its own independent discretion, that the lands in question were needed for any public purpose. In other words, the exercise of the statutory power under Sections 4(1) and 6(1) of the Act is not based on objective considerations of the materials, on the basis of which the appropriate Government could have formed an opinion that the lands of the writ petitioners were required for public purpose and because of that it was necessary to acquire the same.9. The High Court came to the conclusion, on this questionHouse Building Co-operative Society v. M. Venkataswamappa and others.SPECIAL LEAVE PETITION (C) NOS. 1155-57 of 1991WITH(SLP (Civil) Nos. 12104-07, 12600-03, 1315080, 18297-300, 13114, 12032-37, 12535-37 of 1991 and ..../92 (CC 16194/92).27. The connected Appeals Nos. 3011-19 of 1995 (arising out of S.L.P. (C) Nos. 11482-90 of 1991) H.M.T. House Building Co-op. Society v. Syed Khader & others* have already been disposed of by a reasoned judgment. The reasons given for dismissing the said appeals are equally applicable in the facts and circumstances of the presentHouse Building Co-operative Society Ltd. v. Narayana Reddy and Ors. etc. etc.SPECIAL LEAVE PETITION (C) NOS. 12104-07, 12600-03, 13150-80, 18297-300 OF 1991.Lands on basis of the notifications issued under Sections 4(1) and 6(1) of the Land Acquisition Act, had been acquired for the petitioner-House Building Society, treating the said acquisition to be for a public purpose. No order of the State Government as required by Section 3(f)(vii) granting prior approval for acquisition of the lands in question for the housing scheme of the petitioner society has been produced. The petitioner society had also entered into an agreement with the contractor more or less on the same terms and conditions as was in the case of H.M.T. Housing Building Co-operative Society, assuring that the lands in question shall be acquired on basis of the notification issued by the State Government under Sections 4(1) and 6(1) of the Act. The High Court in its impugned judgment has given details of the allegations made against the petitioner society regarding collection of huge amounts from different applicants for site who were not even members of the society and how the society had entered into an agreement with agents, who with their influence have got the lands acquired. The High Court has also referred to an advertisement issued by the petitioner society inviting persons who want to have mansions in the city of Bangalore. It also gave the name and address of a representative at Dubai. On basis of the aforesaid materials, the High Court has come to the conclusion that the Society itself was not a bona fide House Building Society. The High Court has also recorded a finding that the notification under Sections 4(1) and 6(1) of the Act had been issued at the instance of the agents appointed by the petitioner society, to whom huge amounts had been paid for influencing the Government to issue the aforesaidHousing Building Co-operative Society Ltd. v. State of Karnataka and Ors. etc.SPECIAL LEAVE PETITION (C) NOS. 13114 AND 13339 OF 199131. These special leave petitions have been filed on behalf of the petitioner Amarjyoti House Building Co-operative Society Ltd. for setting aside the judgment of the High Court, quashing the notification under Section 4(1) and 6(1) of the Land Acquisition Act, acquiring lands for the petitioner society. From the judgment of the High Court, it appears that this society also had entered into an agreement with a developer who had assured to get the lands in question acquired in accordance with the provisions of the Act. Petitioner society paid huge amount to the said developer for the said object. In this case also there is no order of the State Government, granting prior approval for acquisition of the lands in question, as required by Section 3(f)(vii) of the Act. The High Court has also referred to the Report of Mr. G.V.K. Rao, about the bogusBangalore City Chickpet House Building Co-operative Society Ltd. v. Venkamma @ Venkatamma & Ors.SPECIAL LEAVE PETITION (C) NOS. 12032-37 OF 199133. These special leave petitions have been filed for setting aside the judgment of the High Court, quashing the notification under Section 4(1) and 6(1) of the Land Acquisition Act, on the ground that the said notifications had been issued at the instance of the agents, appointed by the petitioner society. The High Court has also referred to the agreement entered into by the petitioner and the said middleman, who had undertaken to get the lands in question acquired. The agent had undertaken in the agreement to manage all concerned "at all levels". No order granting prior approval by the State Government for the acquisition of the lands, as required by Section 3(f)(vi) of the Act has beenLEAVE PETITION (C) NOS. 12535-37 OF 199135. These special leave petitions have been filed against the judgment of the High Court, quashing the notification under Section 4(1) and 6(1) of the Land Acquisition Act, on the ground that the notifications had been issued at the instance of the agent, appointed by the petitioner society. The learned counsel, appearing for the petitioner, could not point out as to how the facts of the present case are different from the facts of the H.M.T. House Building Society, so far this aspect is concerned. He has, however, pointed out that in the present case, an order had been issued by the State Government granting prior approval. In this connection, reference was made to an order dated 9-8-1984 by which it is said that the Government had granted prior approval for the acquisition of the lands inof Karnataka and Ors. v. Narayan Reddy and Ors.SPECIAL LEAVE PETITION (C) NO. 5824-5920 OF 199537. The special leave petition has been filed on behalf of the State of Karnataka against the same judgment of the High Court, quashing the notification under Sections 4(1) and 6(1) of the Land Acquisition Act, acquiring lands for different House Building Co-operative Societies. The State of Karnataka has purported to justify the issuance of thoseOfficers and Officials House Buildingg Co-operative Society Ltd. v. Sanjeeva and Ors.Civil Appeal Nos. 3020-24 of 1995 (Arising out of S.L.P. (C) Nos. 12530-34 of 1991)ANDThe Bank Officers and OfficialsHouse Building Co-operative Society Ltd. v. N. Jayarama and Ors.Civil Appeal Nos. 3025 of 1995(Arising out of S.L.P. (C) Nos. 13189 of 1991)39. Leave granted.40. On behalf of the appellant society, it was pointed out that in these cases, the appellant society had not entered into any agreement with any agent or contractor as had been done in other cases referred to above. It was also pointed out that some of the land holders in the present case had filed writ applications, whcih had been dismissed by the High Court. Special Leave Petitions against the order of the High Court have also been dismissed by this Court. It was urged that in this back-ground the High COurt should not have quashed the notifications under Sections 4(1) and 6(1) of the Land Acquisition Act, so far the acquisition for the appellant society isstand taken on behalf of the appellants, in these appeals was not challenged on behalf of the respondents. The special feature of the present case as already pointed out above is that the appellant society had not entered into any agreement with any agent or contractor to get the lands acquired. It was not stated that there was no prior approval of the appropriate Government to the scheme in question.

Reasoning:
10. From the judgment of the High Court, it further appears that not only the acquisition of lands in favour of seven Housing Co-operative Societies, who were respondents to the different Writ Petitions, but also the acquisition of lands in favour of more than one hundred housing societies, which had sprung up within the Bangalore Metropolitan Planning Area became the matter of public debate and criticism. As a result of which a statutory enquiry under Section 64 of the Karnataka Co-operative Societies Act was directed by the Registered of Co-operative Societies. The enquiry was held by Shri G.V.K. Rao, the Controller of Weights and Measures, who submitted his Report in respect of different housing societies including the appellant Society. The said Report was produced before the High Court. In the Report, it has been pointed out that most predominant irregularities committed by many of the Societies was in respect of admission of members. In many cases, the committees of management did not consider the applications for membership and there was no proper resolutions specifying the persons who were admitted as members of the Society. There was no record on which date the said members were admitted by the different Housing Co-operative Societies. It was also said in the Report that the societies admitted persons, who were not eligible to become members. In respect of the appellant society, it was said in the Report, which has been referred to by the High Court in its judgment that membership was open to any person above 18 years of age and it left scope for admitting non-employees of HMT as members. From the scrutiny of the applications, it transpired that many who had been admitted as members, were neither employees of the HMT nor residents within the jurisdiction of the Society. It was also pointed out that the appellant had entered into an agreement with the Estate Agent S.R. Constructions and had paid a total amount of Rs.92,52,938/- to the said agent and Rs.35 lakhs to special Land Acquisitionwas said that it was necessary that the Government should frame rules for according previous approval for acquisition of lands for the housing co-operative societies inter alia prescribing the essential requirements of a housing scheme and also prescribing the procedure for inquiry and report to aid the Government to come to the conclusion as to whether the previous approval should be given for any scheme prepared by any of the house building societies which requires the Government to acquire any land for carrying out any such scheme.There is no dispute that the Society with which we are concerned shall not be covered by the expression "corporation owned or controlled by the State", because the said expression shall include a co-operative society, being a co-operative society in which not less than 51 per centum of the paid-up share capital is held by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments.15. The substituted definition of the expression "Company" in Section 3(e)(iii) will certainly include the appellant society. The substituted definition of the expression "Company" shall include co-operative society, within the meaning of any law relating to co-operative societies other than those referred to in Clause (cc) of Section 3 of the Act. Such co-operative society shall be deemed to be a company, to which provisions of Chapter VII relating to acquisition of land for company shall be applicable.16. In view of the substituted definition of the expression "public purpose", in Section 3(f)(vi), the provision for carrying out any housing scheme sponsored by the Government or by any authority established by Government for carrying out any such scheme shall be deemed to be a "public purpose". It further says that the provision of land for carrying out any housing scheme with prior approval of the State Government by a co-operative society within the meaning of any law relating to co-operative societies for the time being in force in any State, shall be deemed to be a "public purpose". As such for any housing co-operative society lands can be acquired by the appropriate Government, treating the same as acquisition for the public purpose. But, in that event, there has to be a prior approval of such scheme by the appropriate Government. When the lands are acquired for any co-operative society with prior approval of the scheme by the State Government, there is no question of application of the provisions of Part-VII of the Act. Such acquisition shall be on the mode of acquisition by the appropriate Government for any public purpose.17. If lands are acquired for any co-operative society treating it to be a company within the meaning of Section 3(e), then in view of Section 39 of the Act the provisions of Section 6 to 16 and Section 18 to 37 shall not be put in force unless there is previous consent of the appropriate Government, and the co-operative society has executed an agreement. The consent required under Section 39 of the Act has to be given by the appropriate Government only after the conditions mentioned in Section 40 are fulfilled.According to us, in Section 3(f)(vi) the expression "housing" has been used along with educational and health schemes. As such the housing scheme contemplated by Section 3(f)(vi) shall be such housing scheme which shall serve the maximum number of members of the society. Such housing scheme should prove to be useful to the public. That is why the Parliament while introducing a new definition of "public purpose", said that any scheme submitted by any co-operative society relating to housing, must receive prior approval of the appropriate Government and then only the acquisition of the land for such scheme can be held to be for public purpose. If requirement of Section 3(f)(vi) is not strictly enforced, every housing co-operative society shall approach the appropriate Government for acquisition by applying Section 3(f)(vi) instead of pursuing the acquisition under Part VII of the Act which has become more rigorous and restrictive. In this background, it has to be held that the prior approval, required by Section 3(f)(vi), of the appropriate Government is not just a formality; it is a condition precedent to the exercise of the power of acquisition by the appropriate Government for a housing scheme of a co-operative society.22. In the present case, a hybrid procedure appears to have been followed. Initially, the appellant society through M/s. S. R. Constructions purported to acquire the lands by negotiation and sale by the land holders. Then from terms of the agreement dated 17-3-1988, it appears that the procedure prescribed in Part-VII was to be followed and the lands were to be acquired at the cost of the appellant society treating it to be a "company". The allegation made on behalf of the appellant society that the housing scheme had been approved by the appropriate Government on 7-11-1984 shall not be deemed to be a prior approval within the meaning of Section 3(f)(vi) but an order giving previous consent as required by Section 39 of Part-VII of the Act. In the agreement dated 17-3-1988 it has been specifically stated "And whereas the Government having caused inquiry to be made in conformity with the provisions of the said Act and being satisfied as a result of such inquiry that the acquisition of the said land is needed for the purpose referred to above has consented to the provisions of the said act being in force in order to acquire the said land for the benefit of the society members to enter in the agreement hereinafter contained with the Government". (emphasis supplied)But, ultimately, the lands have been acquired on behalf of the appropriate Government treating the requirement of the appellant society as for a public purpose within the meaning of Section 3(f)(vi). It is surprising as to how respondent M/s. S. R. Constructions entered into agreement with the appellant society assuring it that the lands, details of which were given in the agreement itself, shall be acquired by the State Government by following the procedure of Sections 4(1) and 6(1) and for this, more than one crore of rupees was paid to M/s. S. R. Constructions (respondentis no dispute that in terms of agreement dated 1-2-1985 payments have been made by the appellant society to M/s. S. R. Constructions. This circumstances alone goes a long way to support the contention of the writ petitioners that their lands have not been acquired in normal course or for any public purpose. In spite of the repeated query, the learned counsel appearing for the appellant society could not point out or produce any order of the State Government under Section 3(f)(vi) of the Act granting prior approval and prescribing conditions and restrictions in respect of the use of the lands which were to be acquired for a public purpose. There is no restriction or bar on the part of the appellant society on carving out the size of the plots or the manner of allotment or in respect of construction over the same. That is why the framers of the Act have required the appropriate Government to grant prior approval of any housing scheme presented by any co-operative society before the lands are acquired treating such requirement and acquisition for public purpose. It is incumbent on part of the appropriate Government while granting approval to examine different aspects of the matter so that it may serve the public interest and not the interest of few who can as well afford to acquire such lands by negotiation in open market. According to us, the State Government has not granted the prior approval in terms of Section 3(f)(vi) of the Act to the housing scheme in question. The power under Sections 4(1) and 6(1) of the Act has been exercised for extraneous consideration and at the instance of the persons, who had no role in the decision making process - whether the acquisition of the lands in question shall be for a public purpose. This itself is enough to vitiate the whole acquisition proceeding and render the same as invalid.24. In the present case there has been contravention of Section 3(f)(vi) of the Act inasmuch as there was no prior approval of the State Government as required by the said Section before steps for acquisition of the lands were taken. The report of Shri G.K.V. Rao points out as to how the appellant society admitted large number of persons as members who cannot be held to be genuine members, the sole object being to transfer the lands acquired for public purpose to outsiders as part of commercial venture, undertaken by the officer bearer of the appellant society. We are in agreement with the finding of the High Court that the statutory notifications issued under Section 4(1) and 6(1) of the Act have been issued due to the role played by M/s. S. R. Constructions, respondent No.11. On the materials on record High Court was justified in coming to the conclusion that the proceedings for acquisition of the lands had not been initiated because the State Government was satisfied about the existence of the public purpose but at the instance of agent who had collected more than a crore of rupees for getting the lands acquired by the StateHouse Building Co-operative Society Ltd. v. Narayana Reddy and Ors. etc. etc.SPECIAL LEAVE PETITION (C) NOS. 12104-07, 12600-03, 13150-80, 18297-300 OFaccording to us, the facts of the present case are similar to the case of H.M.T. House Building Co-operative Society and there is no scope to interfere with the order of the High Court, quashing the notifications under Sections 4(1) andHousing Building Co-operative Society Ltd. v. State of Karnataka and Ors. etc.SPECIAL LEAVE PETITION (C) NOS. 13114 AND 13339 OFto the finding, the Society had admitted 4,050 bogus members. As such, there is no scope for taking a view ontrary one which we have taken while disposing of the appeals Nos.3011-19/95 (arising out of S.L.P. (C) Nos. 11482-90 of 1991) filed on behalf of the H.M.T. House Building Co-operativee City Chickpet House Building Co-operative Society Ltd. v. Venkamma @ Venkatamma & Ors.SPECIAL LEAVE PETITION (C) NOS. 12032-37 OFto us, the facts of the present case are no way different from that of the H.M.T. House Building Co-operative Society, which has been disposed of by a reasoned(BHEL) House Building Co-op. Society Ltd. v. Sri Neelakantaiah & Ors.) House Building Co-op. Society Ltd. v. Sri Neelakantaiah &Ors.SPECIAL LEAVE PETITION (C) NOS.ng to us, an order dated 9-8-1984 cannot be an order under Section 3(f)(vi) because the definition of public purpose which was introduced by Act 68 of 1984 came in force with effect from 24-9-1984. As such there was no occasion for the State Government to exercise power under Section 3(f)(vi) on 9-8-1984. Any such order must be in terms of Section 39 read with Section 40 of Part VII of the Act, which part is applicable when acquisition of land is made for companies. It is surprising as to how the present House Building Co-op. Society was being treated even as a company on 9-8-1984, because the new definition of company was also introduced in Section 3(e) with effect from