Case: Voltas Limited Vs. Tehsildar, Thane and Ors

The appellant, a Public Limited Company engaged in manufacturing air conditioners, refrigerators and other items, set up a factory in the year 1966 at Thane, to carry out manufacturing activities and for the said purpose, purchased land admeasuring about 98,000 sq. mtrs. at village Majiwada from a private party. For additional land needed to effectively continue with the manufacturing process, the Company approached the Government of Maharashtra with the request to acquire land for the company under the provisions of the Land Acquisition Act, 1894 read with the Land Acquisition (Companies) Rules, 1963. On its request, the State of Maharashtra acquired more than one lakh square metres of land and handed it over to the Company. An order of allotment was issued in favour of the Company on 20.1.1969 with certain terms and conditions mentioned in the said order, the Condition No.7 of which reads as under: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 was also mentioned in the order of allotment, that the land will be vested with the Company and shall be held by it as its property, to be used 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 stipulated that, except with the previous permission in writing of the Government, the land shall not be transferred, for any purpose other than that for which it was acquired. A condition regarding the construction of work was also imposed, with a further proviso, that should the Company commit a breach 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.4. In the year 1976, the Urban Land (Ceiling and Regulation) Act, 1976 (hereinafter referred to asUrban Land Ceilingcame to be enacted. In accordance with the provisions of Section 20 of theUrban Land CeilingAct, the Company submitted an application for holding land in excess of the ceiling limit by grant of an exemption. The Company also made an application under Section 21 of theUrban Land CeilingAct on 23.3.1979 for granting an exemption for utilising the land for construction of dwelling units to accommodate the weaker sections of society. Pursuant to the application, a Scheme under Section 21 of theUrban Land CeilingAct was passed by the competent authority on 11.1.1984, permitting the Company to use the land for the stated purpose.According to the Company, it complied with the said order and to implement it, entered into an agreement with one(hereinafter referred to as ‘developers), for development of the land.5. Since one of the conditions of the allotment order, was that the Company could not alienate the land in any manner without prior permission of the Government, the Company wrote a letter to the Collector and also to the Competent Authority, Thane on 30.9.1986 and sought clarification as to whether the conditions imposed under the Exemption Orders dated 11.1.1984 would prevail over and supersede the conditions of the order of allotment dated 20.1.1969. In reply to the said letter the Deputy Collector and Competent Authority, Thane, Urban Agglomeration issued a clarification on 29.10.1986 stating that the condition relating to alienation of land without prior permission as mentioned in the order of allotment, would stand overridden by the terms of exemption granted under Section 21, which reads asreference to your above letter I have to inform you that the conditions stipulated in this office Order No. ULC/TA/F-62/SR-18 dated 11.1.1984 though inconsistent with the conditions of the original sanad, having over riding effect, stand operative (vide section 42 of the Urban Land (Ceiling & Regulation) Act, 1976.In the meantime, at the instance of the Company and permission of the State Government, the Developer proceeded with the following work:Filed applications to the municipal and other authorities for commencement of work; Cutting and falling of trees and filling of land; Construction of roads as per development plans; Laying down of sewerage lines and water lines; Recreational area providing gardens, parks, pathways, plantation of trees etc.; Sub-stations and electrical cabling etc.On getting permission, over 1200 flats were constructed and possession of over 600 flats was given in between July 1986 and 1989.7. A writ petition was filed by certain employees before the Bombay High Court in Writ Petition No.2197 of 1987, challenging the exemption order dated 11.1.1984, issued under Section 21 of theUrban Land CeilingAct and the order granting development of the land. The said writ petition was dismissed by the Bombay High Court on 18.6.1987.8. In spite of the dismissal of the writ petition, after 25 years of implementation of the housing scheme, the Collector, Thane stayed the said scheme by a letter dated 15.2.1989 followed by the letter dated 27.2.1989.The stay order was however not given effect which is clear from the order dated 25.6.1991, issued by the State Government, whereby the application filed by the builder was entertained and he was further allowed an eight years extension for completion of the housing project.9. Pursuant to the information sought for by the Competent Authority, the Additional Secretary, Housing & Special Assistance Department, Government of Maharashtra by its letter dated 2.12.1991 informed the Competent Authority about the Government policy with regard to lands originally acquired for industrial units but part of which were subsequently declared excess under theUrban Land CeilingAct. By the said letter, the circumstances under which 50% of the unearned income can be recovered from the land holder, if allowed to be retained and developed, was intimated.10. In the meantime, the State Government granted further extension to the builder for completion of the housing project by orders dated 29.12.1993 and 1.7.1999.11. While the work was in progress, the Collector by letter dated 5.2.2002 informed the Company that the land allotted to it for construction of residences for its employees, was not utilized for the said purpose and instead the developer had been given the right for construction of the housing project and to sell them after development. It was alleged that by such action, the Company breached the terms and conditions of the order of allotment and, thereby, was liable to pay 50% of its unearned income to the State Government. As such the amount had not been deposited, the Company was asked to show cause as to why the land should not be confiscated.12. The Company denied the allegation and explained vide reply dated 15.2.2002 but the same was not taken into consideration. The Collector vide impugned order dated 18.2.2002 held that the Company breached the terms and conditions of the order of allotment and thereby was liable to pay 50% of the difference amount of the unearned income amounting to Rs. 14,11,45,851/- .13. Being aggrieved the Company moved before the High Court. Initially a writ petition, W.P.No.1481 of 2002 was filed by the Company to set aside orders dated 5.2.2002, 18.2.2002 and the demand notice dated 6.3.2002. During the pendency of the said writ petition, the respondents issued orders dated 30.3.2002, 13.5.2002 and 9.10.2002 and called upon the Company to pay 75% of the amount, i.e. Rs.5,63,70,555/- towards ‘unearnedwhich was challenged by the Company in the second writ petition, W.P.No.7457 of 2002.14. The respondents in their counter-affidavit informed the High Court that they have no objection if the matter is remanded to the Collector, for fresh determination. Accordingly, the order of demand was set aside and the matter was remitted to the Collector, Thane for a fresh determination ofut with adverse observations against the Company.

Court's reasoning:
28. We, therefore, hold that the State Government allowed the Company to change the use of the land and to develop the surplus land for purposes other than that for which the said land was originally allotted and such permission is in accordance with the terms and conditions as mentioned in the order of allotment dated 20.1.1969. The first question is thus answered in negative, in favour of the company.29. Turning now to the second question, we find that the order of allotment dated 20.1.1969 and the scheme dated 11.1.1984 do not stipulate any charge on the unearned income of the Company. The respondents have failed to show the provision under which the Company is required to pay 50% of its unearned income.In the present case, the respondents have failed to show the category to which the Company belongs for determining its liability towards unearned income.32.Before this Court the respondents have not produced GO dated 21.11.1957; in absence of 1957 policy it is not possible to decide whether the company is liable to pay any amount towards unearned income as per the said policy.The second question is, therefore, not answered and left open for determination.33. So far as the third question is concerned, admittedly, no hearing was given to the Company before passing the impugned orders. There is nothing on record to suggest the basis on which the respondents determined the unearned income.It is a settled law that no Penal order can be passed without giving any notice and hearing to the affected person. In the present case, admittedly, the impugned orders were passed without giving such notice and hearing to the company; the impugned orders were passed in violation of the Rules of Natural Justice. The third question is thus answered in affirmative in favour of the company.34. The High Court failed to notice the aforesaid facts and erred in holding that the Company breached terms and conditions of the order of allotment.35. For the reasons aforesaid, we cannot uphold the impugned orders and the demand notice dated 6.3.2002 issued by the Collector and the order passed by the High Court. All the aforesaid orders are accordingly set aside.