CASE NO.: Appeal (civil) 1584 of 1998 PETITIONER: ESCORTS FARMS LTD., PREVIOUSLY KNOWN AS M/S. ESCORTS FARMS (RAM GARH) LTD. RESPONDENT: THE COMMISSIONER, KUMAON DIVISION, NAINITAL, U.P. AND ORS. DATE OF JUDGMENT: 20/02/2004 BENCH: SHIVARAJ V. PATIL & D.M. DHARMADHIKARI JUDGMENT:
JUDGMENT
2004(2)SCR 543
The Judgment of the Court was delivered by
DHARMADHIKARI, J. These appeals are directed against a common judgment
dated 15th May, 1995 of the High Court of Allahabad passed in a batch of
writ petitions arising out of proceedings under the UP Imposition of
Ceiling on Land Holdings Act, 1960 (shortly hereinafter referred to as ‘the
Ceiling Act’).
The lands, which were subjected to imposition of ceiling of Villages
Dohrivakil, Kharmasa, Pachwala, Ramnagar of Tehsil Kashipur, District
Nainital in Uttar Pradesh, now form part of new State of Uttranchal. The
lands in the aforesaid villages were owned by the Ruler of erstwhile estate
of Kashipur. Sometime before the year 1950, the lands were acquired by the
Government of Uttar Pradesh from the Ruler of Kashipur. On a representation
subsequently made by the Ruler of Kashipur, the Government of UP decided to
release the land to the ruler on lease under the Govt. Grants Act, 1895 as
amended in its application to the State of UP by Govt. Grants (UP
Amendment) Act, 1960 (Shortly referred to as ‘the Govt. Grants Act’).
The lands were released to the ruler for its development and for making it
cultivable within the prescribed period. The terms of the Govt. Grant are
contained in letter dated 26.1.1950 of the Deputy Secretary to the Govt. of
UP addressed to the Director of Colonization, Lucknow, U.P. Consequent to
the release of the lands in favour of the ruler, no formal lease containing
the terms and conditions of the Govt. Grant came to be executed between the
erstwhile ruler and the Government of U.P. but it is not in dispute that
the possession of the lands under the grant was taken on the basis of the
proposal of the government, contained in the letter dated 29.8.1950. The
rights and liabilities of the parties are governed by the terms of the said
Govt. Grant.
As the contesting parties before us are at issue on the legal effect of the
Grants for application of the provisions of the Ceiling Act, the contents
of the letter containing the terms and conditions of the Grants are
required to be reproduced in full:-
“No. C-4599/XII-A-26.1.1950
From
Shri H.W. Ward-Jones, IAS
Dy. Secretary to Government of Uttar Pradesh
To
The Director of Colonisation, Uttar Pradesh, Lucknow.
Dated, Lucknow August 29, 1950.
Sir,
I am directed to say that on representation being made to Government by
shri Hari Chand Raja Singh, Raja of Kashipur, Nainital about the release of
his land acquired for the colonisation schemes, government have been
pleased to decide that an area of land aggregating 2,688 acres viz., 597
acres in village Bhagwantpur, 264.36 acres in Ramnagar, 1,022.64 acres in
Kundeshri and 804 acres in Dearhivakil should be released in the favour and
a lease granted under the Crown Grants Act. Out of” the released land the
Raja will take a hereditary lease of 597 acres of land lying in village
Bhagwantpur and the remaining area of 2,091 acres is to be leased to M/s
Ramgarh Farms and Industries Ltd., in which the Raja is also a Shareholder,
other conditions of the lease will be as follows :-
1. The lease will be granted under the Crown Grants Act under which
the lessees will enjoy hereditary rights with certain restrictions and
limitations.
2. The lessees will have to reclaim the lands within one year of the
commencement of the next agricultural operations. The agricultural
operations will start some time in November.
3. The lessees shall use the land granted to them for the purposes of
cultivation, horticulture, pasture, poultry and dairy farming and ancillary
objects and for no other purpose.
4. The lessees shall not parcel out land granted to them and their
rights shall be heritable but the succession will be regulated according to
the law governing impartible estates.
5. The lessees may sublet land permissible under the UP Tenancy Act
but may not transfer or otherwise alienate the land except with the written
permission of the State Government.
6. The rent payable will be the same as obtaining in the Tarai and
Bhabar Government Estates.
7. The lessees will be permitted to exchange plots wherever necessary
for consolidation of holdings.
I am, therefore, to ask you kindly to execute a lease deed with Shri Hari
Chand Raj Singh on the lines indicated in para 1 above.
Yours faithfully,
Sd/- H.W. Warde Jones Dy. Secretary.
No. C. 4599(i)XIIA.
Copy forwarded to Shri Hari Chand Raj Singh Raja of Kashipur,
Kashipur House, Nainital for information with reference to his
representation dated June, 24 and 26, 1950.”
[Emphasis added by underlining]
As is stipulated in the terms of the Govt. Grants, the ruler and the
company in which he was a shareholder namely M/s Ramgarh Farms and
Industries Ltd. ( formerly the Co.) had to develop and make the lands
cultivable within a period of one year of the commencement of the next
agricultural operations from the date of release of the land. As the
aforementioned company described in the grant was unable to develop the
land within the permissible period, they entered into an agreement with M/s
Escorts (Agricultural Machines) Ltd. The two aforementioned companies
agreed to form a third company in the name of M/s Escort Farms (Ramgarh)
Ltd. (who is the main appellant in the leading appeals before us and shall
hereinafter be referred to as ‘the Farms’).
The Farm was incorporated on 30.11.1951 and took possession of the lands.
In revenue papers of Fasli 1361 (corresponding to 1.7.1953 to 30.6.1954)
the Farm was recorded as hereditary tenant, in respect of 1386.08 acres of
land. The Ceiling Act was enforced in the State on 3.1.1961 with ceiling
limit of 40 acres in respect of a holder of a holding defined in the
Ceiling Act. By order passed on 28.12.961 – the prescribed authority
declared 1163.42 acres of land as surplus with the holder of the lands.
On appeal the District Judge by order dated 15.11.1965 remanded the case to
the prescribed authority. On remand the prescribed authority passed a fresh
order on 11.8.1967 determining 98.83 acres of land as surplus and the
holder of lands was allowed to retain 1208.64 acres of land which included
250 acres of land claimed to have been used for running Farm Mechanization
School and treated as belonging to the said school as a separate entity.
The said 250 acres of land was held as not liable to be included in the
extent of holding of the company.
It is not in dispute that on 11.8.1967 when the prescribed authority
granted exemption to 250 acres of land allegedly in use by the holder
company for running a school of mechanized farming, such exemption was
available. Record of proceedings, however, does not show that the said land
was ever claimed by the Company to have been held by the school as a
separate legal entity. Treating the land to have been held by the school as
a separate legal entity, therefore, seems to be an inadvertent mistake
committed by the prescribed officer in his order dated 11.8.1967. The order
of the prescribed authority was varied in appeal by order dated 18.3.1968
of the appellate authority and instead of 93.98 acres 153.03 acres was
declared surplus.
According to the case of the holder-company, in October 1969 it granted
18.75 acres of land to 50 persons on oral leases for period ending
30.6.1970. Since the leases, as alleged, were oral, there is no proof of
the same on record.
U.P. Zamindari Abolition and Land Reforms Act, 1950 (shortly referred to as
the ‘Land Reforms Act’) was brought into force in the concerned villages of
Kashipur on 26.1.1970. The case of the holders of land on alleged oral
leases is that under Section 131 of the Land Reforms Act they acquired
status of ‘Sirdar’ of the land. On 28.3.1970 registered sale/lease
agreements were executed in favour of 50 persons for period up to 30.6.1974
comprising 80.75 acres, on consideration of Rs. 3,000 per acre. The 50
transferees among themselves constituted four partnership firms and claimed
to have obtained possession of the land.
Before the reduction of ceiling limit by UP Imposition of Holdings
(Amendment) Act No. 18 of 1973, sale-deeds covering 12.50 acres of land
were executed in favour of 70 persons between 25.9.1971 to 27.9.1971. These
– transactions admittedly were after the cut-off date 24.1.1971 as fixed in
sub-section (6) of Section 5 of the Ceiling Act by U. P. (Amendment) Act
No. 18 of 1973. Under sub-section (6) of Section 5, transfers of land
effected after 24.1.1971 are liable to be ignored in determining the
ceiling area of the holder of land, unless, in accordance with proviso (b)
of the said sub-section, the holder of the land discharges the burden of
satisfying the prescribed authority that the transfers, after the appointed
date, were effected on good faith and for adequate consideration and were
not benami. On the basis of the aforementioned sale-deeds executed in
favour of 74 persons, the earlier three partnership firms formed by the
lessees were dissolved and four new partnership firms were formed by the
purchasers of the land. Shri PN Mehta was the managing partner of one of
the firms.
On 8.6.1973, by UP Amendment Act No.18 of 1973 introduced in Ceiling Act,
the ceiling limit was reduced from 40 acres to 18.75 acres. Under the
amended Ceiling Act 18 of 1973 fresh ceiling proceedings were initiated
proposing to declare 1123.40 acres of land in different villages under the
Govt. Grants as surplus. The 74 transferees of the land mentioned above
filed their objections before the prescribed authority. The prescribed
authority by its order dated 29.6.1991 declared 867.67 acres of land as
surplus with the holder company. The land to the extent of 250 acres
exempted under the earlier order of the ceiling authority dated 11.8.1967
was left undisturbed. In the order of the prescribed authority passed on
29.6.1991 under the amended Ceiling Act 18 of 1973, challenge to the
validity of exemption, even though erroneously granted in respect of 250
acres of land for the school, was held to be barred by the principle of res
judicata.
Against the order of the prescribed authority dated 29.6.1991 the State did
not prefer any appeal but the aggrieved transferees and the Farm who
represented the holder company, preferred appeals to the Commissioner,
Kumaon Division being the appellate authority. By order dated 14.1.1992 the
appellate authority held that exemption in favour of the school of 250
acres of land was wrongly granted and plea of Res Judicata cannot be raised
under the provisions of the Ceiling Act. The appellate authority also held
that the grantee under the Govt. Grants Act was not competent to transfer
the land and all transfers were, therefore, invalid. Taking into
consideration the background and circumstances in which transfers were
made, they were all held to be sham and lacking in good faith. The
appellate authority, therefore, directed that the surplus land inclusive of
250 acres of land wrongly exempted in favour of the school vested in the
State under the Ceiling Act. The Commissioner dismissed the appeal filed by
the holder company. Appeals of the transferees and their subsequent
transferees were also dismissed. The Commissioner, in reversing the
judgment of the prescribed authority regarding 250 acres of land exempted
in favour of the School of Farm Mechanization held that principle of res
judicata cannot be applied on the basis of the original order of the
prescribed authority passed in proceedings prior to the amendment of
Ceiling Act in view of bar on plea of res judicata imposed by Section 32B
of the Ceiling Act and the other provisions of the Amendment No.18 of 1973.
The Commissioner also held that the transfers made by the Farm out of 250
acres of land of the school were not bona fide being made to favoured
parties and with clear intention to evade the ceiling law.
Aggrieved by the order of the Commissioner passed in appeals, the Firm, all
its transferees and subsequent transferees filed Writ Petitions in the High
Court. The High Court considered their cases by grouping them in three
categories. The Writ Petitioner – holder company and the Farm were
described as Group No.l. 74 transferees from the Farm were described as
Group No.2 and 18 transferees from the company in respect of 250 acres of
land of school were described as Group No. 3.
Applications for intervention made by some parties who are subsequent
transferees of parcels of land involved in this case, have been rejected by
this Court by order made on 16.1.2004. We, however, granted hearing to the
counsel appearing for subsequent transferees and allottees of land who
claim to be in actual cultivating possession of some portions of lands
involved.
The High Court by the impugned judgment passed in common in batch of writ
petitions, filed by parties representing the three groups mentioned above,
dismissed all the Writ Petitions by a very elaborate order containing all
facts and discussion of legal contentions advanced by the contesting
parties. The order of the Commissioner passed in appeal was maintained by
the High Court. The High Court also imposed cost of Rupees ten lacs on the
Farm as estimated damages for illegal use and occupation of the land made
by them for long more than 30 years by resorting to various unfair tactics
to evade ceiling law.
We would not like to burden the record by reproducing the various findings
recorded on issues of fact and law in the impugned judgment of the High
Court as the same contentions have been reiterated somewhat differently
before us by the learned counsel appearing on either side. We, therefore,
propose to deal with the legal and factual contentions under the following
heads:
1. APPLICABILITY OF THE CEILING ACT TO THE LANDS IN QUESTION AND VALIDITY
OF THE PROCEEDINGS AGAINST THE FARM.
The Learned Counsel for the Farm contended that the land subjected to
ceiling was held by the Company as a Govt. Grantee pursuant to the letter
of the Deputy Secretary to the Govt. of U.P. dated 26.1.1950 referred
above. The tenure holder of the land, therefore, within the meaning of the
Ceiling Act was the Company i.e. the Govt. Grantee and all proceedings
initiated by notice to the Farm, submission of statement and declaration by
the Farm culminating in the orders passed by the prescribed authority and
the appellate authority were void and infructuous because the Govt.
Grantee, as holder of the land, was not at all a party before the ceiling
authority.
The aforesaid contention is misleading and misconceived. We have already
stated all the relevant facts above. The Govt. Grantee i.e. the Ruler was
allowed to keep certain portion of the land as ‘hereditary tenant’ and the
other portion in the name of the company in which he had share holding. The
Ruler through the company was unable to develop and make the land
cultivable within the stipulated period in the terms of the grant and,
therefore, they handed over possession of the land for development to the
Farm. The Farm came in possession of the land through the company and the
Ruler. The possession of Farm was, therefore, for and on behalf of the
holder company and the ruler. The Farm was, therefore, only an ostensible
holder of the land and the company of which the Ruler was a share holder
continued to be the real holder. The notices issued by the ceiling
authority were responded by submitting statements and returns before the
ceiling authority by the Farm. The Company and the Ruler submitted to those
proceedings through the Farm. The Company and the Ruler never objected to
the proceedings before the prescribed authority nor did they prefer any
appeals to challenge those orders either in appellate forum or in writ
proceedings. The proceedings therefore initiated, conducted and culminated
against the Farm have to be treated in reality to be proceedings against
the company and the Ruler as the holders of the land.
The Farm being the ostensible owner and agent of the real owners was
competent to take part in ceiling proceedings on behalf of the holder of
the lands and the proceedings cannot be held to be invalid or infructuous.
The learned counsel for the State is right in relying on Explanation 1 and
Explanation II below Section 5 of the Ceiling Act in support of his
submission that where the land is held by an ostensible holder it would be
presumed to have been held by the real owner. The status of the Farm on the
land was merely as a licensee or an agent. The possession of the Farm was
clearly as an ostensible owner. The proceedings initiated, conducted and
concluded against the ostensible owner are binding both on ostensible and
the real owner in accordance with Section 5 with Explanations 1 and II
thereunder which read as under:-
” Section 5. Imposition of ceiling – (1) On and from the commencement of
the Uttar Pradesh Imposition of Ceiling on Land Holdings (Amendment) Act,
1972, no tenure-holder shall be entitled to hold in the aggregate
throughout Uttar Pradesh, any land in excess of ceiling area applicable to
him.
Explanation I: In determining the ceiling area applicable to a tenure-
holder, all land held by him in his own right, whether in his own name or
ostensibly in the name of any other person, shall be taken into account.
Explanation II: If on or before January 24, 1971, any land was held by a
person who continues to be in its actual cultivatory possession and the
name of any other person is entered in the annual register after the said
date either in addition to or to the exclusion of the former and whether on
the basis of a deed of transfer or licence or on the basis of a decree, it
shall be presumed, unless the contrary is proved to the satisfaction of the
Prescribed Authority, that the first mentioned person continues to hold the
land and that it is so held by him ostensibly in the name of the second
mentioned person.”
[Underlining to add emphasis]
The Farm,, therefore even if recorded in revenue papers as hereditary
tenant could not have claimed independent status of being the holder of the
land as the land was admittedly taken possession of by the company under
the Govt. Grants Act. The holder of the land for the purpose of Ceiling Act
was the company which was the Govt. lessee. Even though a formal lease deed
was not executed pursuant to the letter of the Govt. of the year 1950 the
company has never disputed that the possession of land was taken pursuant
to the proposal of the Govt. contained in its letter dated 26.1.1950 and on
the terms and conditions mentioned therein. The aforementioned letter can
be looked into to ascertain the nature of possession of the company which
was placed in possession of the land by the Govt. The possession of the
company therefore, as a Govt. Grantee is beyond any doubt and, in fact, it
has never been the stand of any of the parties before the ceiling authority
or before the High Court or before us that the company was not a Govt.
Grantee or a Govt. lessee. Clause (9) of Section 3 defines the word
‘holding’ to include a Govt. lessee. The definition clause (9) in Section 3
of holding reads thus:
“Section 3 (9). ‘Holding’ means the land or land held by a person as a
Bhumidar, Sildar, Asami or Gaon Sabha or an Asami mentioned in Section 11
of the Uttar Pradesh Zamindari Abolition and Land Reforms Act 1950, or as a
tenant under the U.P. Tenancy Act 1939, other than a sub-tenant, or as
Government lessee, or as a sub-lessee of a Government lessee, where the
period of sub-lease is co-extensive with the period of the lease.”
[Underlining to add emphasis]
The public limited company holding land would be covered by definition of
‘tenure holder’ as contained in clause (17) of Section 3. ‘Tenure holder’
is defined to mean ‘a person who is the holder of a holding.’ The word
‘person’ has not been defined in the Ceiling Act but Section 4 (33) of U.P.
General Clauses Act defines ‘person’ to include a ‘company’.
Learned counsel appearing for a group of transferees placed reliance on
sub-section (4) of Section 5 of the Ceiling Act to contend that as in
determining the ceiling limit of firms, co-operative societies and
Associations of persons, whether incorporated or not, a ‘public company, is
excluded, the company cannot be held to be a holder of land to impose
ceiling. The above argument advanced on behalf of appellants-transferees
does not stand to reason or proper interpretation of the provisions of sub-
section (4) of Section 5 read with the Definition Clauses (9) and (17) of
Section 13. Section 5(4) reads thus:-
“Section 5 (4). Where any holding is held by a firm or co-operative society
or other society or association of persons (whether incorporated or not,
but not including a public company), its members (whether called partners,
shareholders or by any other name) shall, for purposes of this Act, be
deemed to hold that holding in proportion to their respective shares in
that firm, co-operative society or other society or association of persons:
Provided that where a person immediately before his admission to the firm,
co-operative society, or other society or association of persons, held no
land or an area of land less than the area proportionate to his aforesaid
share than he shall be deemed to hold no share, or as the case may be, only
the lesser area in that holding, and the entire or the remaining area of
the holding, as the case may be, shall be deemed to be held by the
remaining members in proportion to their respective shares in the firm, co-
operative society or other society or association of persons.”
The limited purpose of sub-section (4) of Section 5, as is clear from the
language employed, is to treat the land as being held in proportion to the
respective shares of the shareholders in the case of firm, co-operative
society or other society and association of persons. Exclusion of public
company from sub-section (4) of Section 5 is with intention to keep out
public companies from the application of the said sub-section in the matter
of distribution of land holdings amongst shareholders. The exclusion of
public company from sub-section (4) in the matter of distribution of
shareholding of the land is not an indication that public company is not
deemed to be a ‘holder’ of land or a legal ‘person’ as defined in Clauses
(9) and (17) of Section 3 of the Ceiling Act read with Clause (33) of
Section 4 of the U.P. General Clauses Act. The contention, therefore,
advanced that the ceiling proceedings could not have been initiated and
concluded against the company through the Farm and they were all invalid
and non est, has to be rejected.
2. LEGAL EFFECT OF THE PROVISIONS OF GOVT. GRANTS ACT. 1895 AS AMENDED BY
GO IT. ( RANTS (U.P.) ACT. 1960.
One of the most important issues, which arose in writ petition before the
High Court was regarding findings of the Appellate Authority on the
validity of the transfers of land made by company in favour of the Farm and
through the Farm in favour of the different partnership firms and
individuals. We have already reproduced above the terms and conditions of
the Govt. Grant contained in the letter dated 26.1.1950 of the Government
of Uttar Pradesh whereunder erstwhile Ruler of Kashipur was allowed to
lease the lands to the company for development. The terms of the grant show
that 597 acres of land was allowed to be held by the ex-ruler with
hereditary rights and 2091 acres were allowed to be leased to the company
of which the Ruler was the main shareholder. In condition No.4 it is
clearly stipulated that the land held under the lease shall be heritable
but the succession will be regulated according to law governing impartible
estates.
Condition No.5 of the Grant imposes complete prohibition on transfer of the
land granted. The grantee was only allowed to sub-let the land in
accordance with U.P. Tenancy Act but was given no right to transfer or
alienate the land except with the permission of the State Government.
Learned counsel on behalf of Farm and the lessees and transferees from the
Farm while separately addressing this Court claimed an indefeasible right
to continue to hold and possess the land on the ground that the Govt.
Grantee came to be recorded as hereditary tenant since 1953-54 and under
the provisions of UP Zamindari Abolition and Land Reforms Act, 1950 read
with UP Tenancy Act, 1939 the lessees have acquired the status of ‘Sirdars’
and thereafter on paying ten times the land revenue of the land, they have
become ‘Bhumidars’ of the lands in their possession. It is contended that
acceptance of ten times the land revenue for the land for conferral of
‘Bhumidars’ right on the tenants of the land are actions of the state which
are binding on them and the ceiling authorities were estopped from
depriving the tenants of their status and possession of the land.
The above claim of the lessees and transferees of having acquired status of
Sirdars and Bhumidars cannot be accepted. The possession of the land was
given to the company admittedly under the terms and conditions of the Govt.
Grant which did not permit transfer of land without permission of the
Government. The position of a government grantee is of a lessee as
contained in definition Clause (9) of Section 3 of the Ceiling Act. The
conditions of the Grant allow sub-leases of the land but contrary to the
terms of the Grant, the sub-lessees can claim no independent tenancy right
so as to frustrate the terms and tenure of the Grant. Irrespective of the
provisions creating rights in favour of tenants under the UP Tenancy Act
1939, the terms and conditions of the Grant have been given an overriding
effect by provisions contained in Section 2, as inserted by UP Amendment
Act of 1960 to the Govt. Grants Act with retrospective effect. Section 2 as
introduced to the Govt. Grants Act in its application to the State of UP
clearly provides that the rights and obligations inter se between
Government as granter of the land and its grantee would in no way be
affected by the sub-leases granted by the Govt. grantee in accordance with
the provisions of the UP Tenancy Act.
“Section 2(1). Transfer of Property Act, 1882, not to apply to Government
Grants – Nothing contained in the Transfer of Property Act, 1882, shall
apply or be deemed ever to have applied to any grant or other transfer of
land or of any interest therein, heretofore made or hereafter to be made,
by or on behalf of the government to or in favour of any person whomsoever;
and every such grant and transfer shall be construed and take effect as if
the said Act had not been passed.
(2) UP Tenancy Act, 1939, and Agra Tenancy Act, 1926 not to affect certain
leases made by or on behalf of the Government – Nothing contained in the UP
Tenancy Act, 1939, or the Agra Tenancy Act, 1926, shall affect, or be
deemed to have ever affected any rights, created, conferred or granted,
whether before or after the date of the passing of the Government Grants
(UP Amendment) Act 1960, by leases of land by, or on behalf of, the
Government in favour of any person; and every such creation, conferment or
grant shall be construed and take effect notwithstanding anything to the
contrary contained in the UP Tenancy Act, 1939, or the Agra Tenancy Act,
1926.
(3) Certain leases made by or on behalf of the Government to take effect
according to their tenor – All provisions, restrictions, conditions and
limitations contained in any such creation, conferment or grant referred to
in Section 2, shall be valid and take effect according to their tenor; any
decree or direction of a court of law or any rule of law, statute or
enactment of the Legislature, to the contrary -notwithstanding:
Provided that nothing in this section shall prevent, or be deemed ever to
have prevented, the effect of any enactment relating to the acquisition of
property, land reforms or the imposition of ceiling on agricultural land.”
[Emphasis added by underlining]
The recording of the names of the company or the Farm in the revenue papers
on 5.3.1954 as hereditary tenant and deposit of ten times the land revenue
by the sub-lessee for acquiring Bhumidari rights were ineffectual in view
of the provisions of Section 2 of the Govt. Grants (UP Amendment) Act, 1960
which give an overriding effect to terms of the Grant. The High Court,
therefore, rightly negatived the claim set up by the lessee/sub-lessees of
the land from the company through the Farm, to the status of ‘Sirdars’ or
Bhumidars.’
No action of the revenue authorities can, therefore, estop the ceiling
authorities from ignoring the claims of tenancy rights on the land set up
by the lessees/sub-lessees. The rights between the government and the
grantee are strictly to be regulated by the terms of the grant and in
accordance with the Govt. Grants (UP Amendment) Act, 1960. The entries in
revenue records and recognition of any tenancy rights of the lessee and/or
sub-lessee as hereditary tenant, Sirdars or Bhumidhars under the UP Tenancy
Act can have no adverse legal effect on the Govt. Grant which has an
overriding effect under the Govt. Grants Act. No estoppel can operate
against the overriding statute so as to bind the ceiling authorities to
accept the tenancy rights of the lessees/sub-lessees as indefeasible in
application of Ceiling Act to the lands in question.
The Statement of Objects and Reasons for amending Section 2 of the Govt.
Grants Act, 1895 by UP Amendment Act of 1960 makes it clear that the State
Legislature intended to apply only the provisions of Land Reforms Act and
Ceiling Act to the lands held by persons under the Govt. Grants Act. The
statements of objects and reasons read thus:
“Provisions of Section 2 of the Government Grants (UP Amendment) Act, 1959,
have the effect of saving a grant of an agricultural lease by or on behalf
of the Government from the operation not only on the Acts mentioned
therein, but also of any other law, including the law for imposition of
ceiling on land holdings, that might be made in future. There is also an
apprehension that the result of the wordings of section 2 may be to undo
the vesting of estates of government grantees under section 4 of the UP
Zamindari Abolition and Land Reforms Act, 1950. With a view, therefore, to
remove any such apprehension and to put the UP Imposition of Ceiling on
Land Holdings Bill, 1959, when enacted, beyond the purview of the
Government Grants Acts, this Bill is being introduced. Vide UP Gazette
Extraordinary, dated February 3, 1960”.
Land Reforms Act, 1950 being saved by sub-section (3) of Section 2 of Govt.
Grants Act is applicable to the govt. grants. Under Section 18 (l)(c) of
Land Reforms Act, a govt. grantee holding land rent-free was allowed to
retain possession of the land as ‘Bhumidhar.’ Section 18 of the Land
Reforms Act with clause (c) in sub-section (1) reads thus:-
“Section 18. Settlement of certain lands with intermediaries or cultivators
as Bhumidar – (1) Subject to the provisions of Sections 10,15,16 and 17,
all lands –
(a) in possession of or held or deemed to be held by an intermediary as
sir, khudkasht or an intermediary” grove.
(b) held as a grove by, or in the personal cultivation of a permanent
lessee in Avadh.
(c) held by a fixed-rate tenant or a rent-free grantee as such, or
(d) held as such by –
i) an occupancy tenant, Possessing the ii) a hereditary tenant, right to transfer iii) a tenant on Patta the holding by sale Dawami or Istamrari referred to in Section 17, (e) held by a grove holder.
On the dale immediately preceding the date of vesting shall be deemed to be
sell led by the State Government with such intermediary, [lessee, tenant,
grantee or grove-holder] as the case may be, who shall, subject to the
provisions of this Act. be entitled to take or retain possession as a
bhumidhar thereof. ”
[Underling to add emphasis]
As seen above, proviso below sub-section (3) of Section 2, of Govt. Grants
(UP Amendment) Act makes applicable Ceiling Act to the land held by a
grantee under the Govt. Grant. It has already been noted that a ‘Govt.
Grantee’ or a ”lessee’ is covered within the definition of ‘tenure holder’
given in under clause (17) read with clause (9) of Ceiling Act and the
definition of ‘person’ in Section 4 (33) of the UP General Clauses Act.
Thus conjointly reading the provisions of the Ceiling Act and the Land
Reforms Act, the grantee of land from the government is a holder of land in
the status of a Bhumidhar and the land can be subjected to ceiling limit.
To the lands held by the company, which is grantee of the Govt., the
provisions of Ceiling Act would be attracted. Such grantee being a lessee
from Government has no right to transfer the land without permission of the
Government. It can grant leases or sub-leases under the UP Tenancy Act but
the lessees/sub-lessees can claim no rights contrary to the terms of the
grant. All the transfers made by the Company or Farm by sale or lease
contrary to the terms of the Govt. Grant create no independent rights in
favour of the said transferees or lessees. The claims of transferees and
lessees based on the provisions of UP Tenancy Act were, therefore, rightly
negatived by the ceiling authority and the High Court.
We rely on the ratio of the decision of this Court in the case of Raghubar
Dayal v. State of U.P., [1995] Supp. 3 SCC 20 and particularly the
following observations therein:
“Thus it could be seen that though it is a grant made under the Government
Grants Act, it is in substance a lease of agricultural land granted by the
Government to the appellant for cultivation subject to the covenants
contained thereunder, some of which have been mentioned hereinbefore.
Section 105 of the Transfer of Property Act defines lease as transfer of
right to enjoy immovable property made for a certain time, express or
implied or in perpetuity, in consideration of a price paid or promised, or
of money etc. to the transferor by the transferee who accepts the transfer
on such terms. The grant in substance, therefore, is a lease of the
agriculture land for personal cultivation on improved methods of
cultivation during the period of the subsistence of the lease for
consideration, terminable on notice by either side. Accordingly, the
appellant is a holder of agriculture lands within the meaning of section
3(d) of the Act.
Even otherwise, we find that the Government Grants Act itself prescribed
the applicability of the Act to the lands covered by the grant. The proviso
to sub-section (3) of section reads thus :-
Provided that nothing in this section shall prevent, or deemed ever to have
prevented the effect of any enactment relating to the acquisition of
property, land reforms or the imposition of ceiling on agricultural lands
i.e. UP Act 13 of 1960.
That was inserted with retrospective effect. Thus, it could be seen even if
the present is construed as a grant of the agricultural lands under the
Government Grants Act, by operation of the proviso to sub-section (3) of
section 3 of the Act, the Act is clearly applied for the purpose of
computation of the ceiling area of the agricultural lands. It would appear
that the Government Grants Act intended that even the grantee under that
Act shall not be in excess of the ceiling area prescribed under the Act.
Thereby, the lessee of the Government land, though had a grant under the
Government Grants Act, cannot claim to have been outside the purview of the
Act.”
3. BONA FIDES OF THE TRANSFEREES IN FA VOUR OF TRANSFEREES COMPRISED IN
GROUPS I & II.
Section 5 (3) prescribes the ceiling limit for holders. In case of company
which is a tenure holder not having a family sub-clause (e) of the said
subsection (3) of Section 5, prescribes ceiling limit of 7.30 hectares of
irrigated land. Sub-section (6) of Section 5 is relevant for the purpose of
deciding the question of bona fides of the transactions of sale of the
lands. It reads as under:
“Section 5 (6): In determining the ceiling area applicable to a tenure-
holder, any transfer of land made after the twenty-fourth day of January
1971, which but for the transfer would have been declared surplus land
under this Act, shall be ignored and not taken into account:
Provided that nothing in this sub-section shall apply to –
(a) a transfer in favour of any person (including Government) referred to
in sub-section (2);
(b) a transfer proved to the satisfaction of the Prescribed Authority to be
in good faith and for adequate consideration and under an irrevocable
instrument not being a ‘Benami’ transaction or for immediate or deferred
benefit of the tenure-holder or other members of his family.”
Explanation I…………………
Explanation II – The burden of proving that a case falls within clause (b)
of the proviso shall rest with the party claiming its benefit.
[Emphasis added]
In determining ceiling area applicable to a holder any transfer of land
made after 24.1.1971 is to be ignored. In accordance with proviso (b) of
the said sub-section (6) of Section 5 transfers made after 24.1.1971, can
be excluded for determining the ceiling area of the holder only if it is
proved to the satisfaction of the prescribed authority that the transfers
were made in good faith and for adequate consideration. In accordance with
Explanation-II the burden of proving that the transfers were bona fide and
for adequate consideration is on the party claiming benefit of the
transfer.
The High Court has in great details considered the claims based on the
transfers made after the cut-off date. There is no evidence of oral leases
alleged to have been granted to the extent of total 18.75 acres of land in
favour of 50 persons, although in the recitals of the sale deeds, there is
mention of such oral leases. All sale-deeds admittedly have been executed
after the cut off date fixed in sub-section (6) of Section 5. Prior to the
sales, on the basis of alleged oral leases three partnership firms were
said to have been formed and later on increased to four, which it is
alleged, have taken possession of the lands transferred to them.
The Managing Partner of one of the partnership firms was Mr. P.N. Mehta who
was invited in the meeting of the Board of Directors of the company. The
resolution of the Board of Directors quoted and heavily relied by the
appellate authority and the High Court in their orders clearly shows that
the sale-deeds were executed in anticipation of Amendment Act of 1973 and
at a time when proposed reduction of ceiling limit had already been made
public. The High Court has also found that the alleged oral leases followed
by sale-deeds were mostly in favour of persons closely connected with Shri
PN Mehta and Shri HP Handa. Shri HP Handa was also nominated as an
arbitrator in the event of disputes in the firms. The High Court also found
the consideration received was not duly accounted for in the balance sheet
of the company. It is on these facts that the High Court confirmed the
conclusion of the appellate authority that all transfers were made to
related parties and only to evade the effect of impending amendment to
ceiling law. The concurrent findings in the judgment of appellate authority
and of the High Court of lack of good faith on the part of the Company and
the Firm in executing the sale-deeds after the cut off date 24.1.1971 are
not vitiated by consideration of any irrelevant circumstances and being
essentially a finding of fact is not liable to be interfered with, in these
appeals under Article 136 of the Constitution.
4. LAND TO THE EXTENT OF 250 ACRES HELD FOR RUNNING A MECHANISED FARMING
SCHOOL.
Various contentions advanced by private parties with regard to 250 acres of
school land are being considered under following sub-heads :-
Res Judicata
The transferees of parcels of land described as held by the school for farm
mechanisation constitute Group No.III and their case has been separately
considered in the impugned judgment of the Commissioner in appeal and of
the High Court in the writ petition. On behalf of such transferees of
portions of school land, the contention advanced by the learned counsel on
their behalf is that in the original Ceiling Act which came into force on
3.1.1961 under clause (ix) of Section 6, land held for the purposes of an
educational institution either by a society registered under the Societies
Registration Act, 1860 or by any corporate body was exempt from the
operation of the Ceiling Act. It is pointed out that in the earliest order
of the prescribed authority Kashipur passed on 2.7.1964 and the second
order passed on 11.8.1967 after remand of the case by the appellate
authority, 250 acres of land, used in Farm Mechanization for school was
held to be exempt from being included in the ceiling area of the Company or
the Farm. The order of the prescribed authority dated 11.8.1967 excluding
250 acres of land as not includible in the ceiling area of Company or the
Farm was not challenged by the State in appeal. The learned counsel
contends that the said order of the prescribed authority had become final
which could not have been interfered with or upset by the appellate
authority in its order dated 14.1.1992 in ceiling proceedings initiated
afresh after the ceiling limit was further curtailed by Amendment Act of
1973 with effect from 05.6.1973. In this respect, the argument advanced is
that the bar of res judicata in respect of 250 acres of land held to be
exempt as belonging to the school, would operate in subsequent proceedings
taken under the Amendment Act of 1973. The contention is that it was not
open to the appellate authority to take a different view and hold that 250
acres of school land should be included within the ceiling limit of the
Company or the Farm.
The argument on the face of it seems plausible but on closer scrutiny of
the finding on the aforesaid 250 acres of school land, in the light of the
provisions of the original Act and the Amendment Act of 1973, is
unacceptable. Section 6(ix) of the original Act before its deletion and
substitution of new Section 6 in the Amendment Act of 1973 reads thus :-
“Section 6. Notwithstanding anything contained in this Act, land falling in
any of the categories mentioned below shall not be taken into consideration
for the purposes of determining the ceiling area applicable to, and the
surplus land of, a tenure holder –
(ix) land held for the purposes of an educational institution by a society
registered under the Societies Registration Act, 1860, or by any body
corporate”.
[Underlining for pointed attention]
We have looked into the order of the prescribed authority dated 11.8.1967
passed under the Original unamended Act. In excluding 250 acres of land of
the school, the finding reads thus :-
“It is to be noted that the resolutions Ex. Ka-13 to Ex. Ka-20, passed by
the two corporate bodies i.e. Escorts Limited, and Escorts Farms (Ramgarh)
Ltd., as far back as 1953-54 relates to the transfer of the land
permanently to the Escorts School of Farm Mechanization. The heavy
expenditure shown in Ex. Ka-3 1 supported with the entries in the balance-
sheet Ex. Ka-29 to Ex. Ka-53 of the years 1962 to 1966 duly audited by
Chartered Accountants and filed with the Registrar of Companies all go to
show that this school of Farm Mechanization has a separate and independent
entity, other than the objector company. The school owns 250 acres of land
as its own property. 1, therefore, exclude this area from the holding of
the tenure-holder.
[Underlining for pointed attention]
From the above part of the order of the prescribed authority, it becomes
clear that 250 acres of land was found to be held by the school as a
separate legal entity. Exemption clause (ix) of Section 6 as it stood in
original section 6 was deleted by re-substitution of new Section 6 by
Amendment Act No. 18 of 1973 with effect from 8.6.1973. By insertion of new
Section 6, the exemption earlier available to land held by educational
institution has been done away with effect from 8.6.1973.
It is true that the above order of the prescribed authority dated 11.8.1967
excluding 250 acres of land as belonging to the school was not questioned
by the State in appeal. The finding that the land was held by the school as
a separate legal entity is obviously a mistake because in all subsequent
proceedings before the ceiling authorities, the High Court and in this
Court the land is stated to be held by the company or Farm for running the
school as one of its activities. The land was in use for the purposes of
educational institution run by the Company or the Farm. It qualified for
exemption under clause (ix) of Section 6, as it stood then. It is to be
noted that when the ceiling limit was reduced by Amendment Act of 1973,
which was brought into force with effect from 5th June, 1973, the land
measuring 250 acres, although excluded from ceiling limit of the holder, in
law and in reality continued to be held and recorded in the name of the
Farm which was its agent. Under the Amendment Act of 1973, the exemption of
land held by an educational institution was taken away by substitution of
new Section 6 to the Act. Under Section 5, ceiling limit was reduced and
under sub-Section (6) of Section 5, as inserted by Amendment Act of 1973,
the cut-off date fixed was 24.1.1971. It was provided that all transfers
made by the holder of a land after the above date would be ignored unless,
as provided in clause (b) of the sub-section 6 of Section 5 read with the
explanation thereunder, the holder discharges his burden of proving to the
satisfaction of the Prescribed Authority, that the transfers made after
24.1.1971 were in good faith, for adequate consideration and were not
Benami transactions.
It is not disputed that all the 74 transfers of parcels of land from 250
acres of school land were made after the cut-off date 24.1.1971. The named
transferor in all the transfer-deeds or sale-deeds is the holder company
and not the school which has, in reality, no separate existence in law. The
school was not registered as a Society and was not a separate legal entity.
Although, the prescribed authority in its order made under the original Act
(prior to the Amendment Act of 1972) held the land to be belonging to the
school as a separate legal entity and such a finding was not challenged by
way of appeal by the State. The factual and legal position admittedly
existing on 5.6.1973, when the Amendment Act, 1973 was brought in force,
was that the land was held by the Company. It is evident from the fact that
all transfers or sale-deeds have been executed in favour of 75 transferees,
after the cut-off date 24.1.1971 by the Company to which the provisions of
sub-section (6) of Section 5, as introduced by the Amendment Act of 1973,
were clearly attracted. A finding of fact has been recorded by the
Commissioner and confirmed by the High court in the Writ Petition that
transfers of the land used for school have been made with full knowledge of
the impending legislation proposing reduction of ceiling limit and intent
to evade the effect of ceiling law. In our considered opinion, on the above
admitted legal and factual premise, the bar of res judicata is not
available to the holder Company or the Farm. Their own subsequent conduct
of effecting transfers of school land estops them from raising a plea of
res judicata on an apparently erroneous finding recorded in the order of
Prescribed Authority in the course of proceedings under the original
unamended Act.
For determining the ceiling limit and the surplus area of a holder, in
proceedings under the Amer Iment Act of 1973, it was competent for the
prescribed authority to accept the admitted position of the land used for
school as being owned and held throughout by the holder Company through the
Farm and ignore the apparently erroneous statement of the earlier
Prescribed Authority recorded in the order passed on 11.8.67 in original
proceedings under the Ceiling Act that the land belonged to the school as a
separate legal entity. The land excluded from the holding of the company or
the Farm, treating it to have been held by the school as a separate legal
entity, even otherwise was entitled to be exempted from determination of
the ceiling limit of the holder company or the Farm because, in accordance
with clause (ix) of Section 6 of the original unamended Act, the said land
was in use for purposes of an educational institution. The inaction of the
State in not filing appeal against the erroneous exclusion of the land from
the holding of the company and treating it to be of the school as separate
entity, cannot debar, in law, the State in subjecting such land to the
ceiling limit in the proceedings initiated under the Amendment Act of 1973
whereby the ceiling limit was further reduced. On the date of enforcement
of the Amendment Act No. 18 of 1973, school land was held by the company
and not by the school which had no separate legal existence as an entity.
On the cut-off date 24.1.1971 as fixed in sub-section (6) of Section 5 of
the Amendment Act of 1973, admittedly the school land was claimed to be
held by the company and its exclusion was sought on the basis of its
transfer in various portions to different parties by the company on the
premise that, having been excluded in the earlier proceedings from the
holding of the company, it was so transferable and the transfers were,
therefore, bona fide.
The learned counsel for the State seems to be right in his submission that
on the aforesaid admitted facts the finding in the original proceeding
regarding 250 acres of land to be belonging to the school as separate legal
entity, was apparently a mistake which is clear from the holder company s
own action of transferring separate portions of that land in its own name.
On behalf of the State, it is submitted that with the purpose of giving
full effect to the ceiling provisions, in Amendment Act of 1973 by
subsequent Amendment Act of 1976, which was brought into force with effect
from 10.10.1975, Sections 38-A and 38-B were introduced for creating a bar
on raising plea of res judicata based on proceedings concluded under the
original unamended Act existing prior to 1973.
“38-A. Power to call for particulars of land from tenure-holders. –
(1) Where the prescribed authority or the appellate court considers it
necessary for the enforcement of the provisions of this Act, it may, at any
stage of the proceedings under this Act, require any tenure-holder to
furnish such particulars by affidavit in respect of the land held by him
and members of his family as may be prescribed.
(2) The particulars of land filed under sub-section (1) may be taken into
consideration in determining the surplus land of such tenure-holder.
38-B. Bar against res judicata. – No finding or decision given before the
commencement of this section in any proceeding or on any issue (including
any order, decree or judgment) by any court, tribunal or authority in
respect of any matter governed by this Act, shall bar the re-trial of such
proceeding or issue under this Act, in accordance with the provisions of
this Act as amended from time to time.”
[Emphasis added ]
Res judicata is a plea available in civil proceedings in accordance with
Section 11of the Code of civil Procedure It is a doctrine applied to give
finality to lis in original or appellate proceedings. the doctrine in
substance means that an issue or a point decided and attaining finality
should not be allowed to be reopened and re-agitated twice over. The
literal meaning of rex is ‘everything that may form an object of rights and
includes an object, subject-matter or status’ and res judicata literally
means: a matter adjudged; a thing judicially acted upon or decided: a thing
or matter settled by judgement.’ Section 11 of CPC engrafts this doctrine
with a purpose that ‘a final judgment rendered by a court of competent
jurisdiction on the merits is conclusive as to the rights of the parties
and their privies, and. as to them, constitutes an absolute bar to a
subsequent action involving the same claim, demand or cause of action.’
[See : Black’s Law Dictionary at pages 1304-1305]
Proceedings under the Ceiling Act, are not adversarial as are proceedings
in suit. The Ceiling Act is a legislation to give effect to the Directive
Principles contained clauses (b) and (c) of Article 39 of the Constitution.
The State is advised by the Directive Principles contained in the
Constitution to take necessary legislative measures so as to ensure social
justice by equitable distribution of ownership and control of material
resources and avoid concentration of wealth and means of production in few
hands. The laudable social objectives sought to be achieved by the ceiling
legislation is to take surplus land from the holders and distribute the
same to the landless agricultural labourers and peasants surviving on
agriculture. In applying the principles of res judicata, therefore, to the
ceiling proceedings, the object of the Act cannot be lost sight of. All
principles of res judicata contained in Section 11 of the CPC cannot be
strictly and rigorously made applicable to ceiling proceedings. Section 38-
B introduced by Amendment Act of 1976 with the transitory provisions made
both in the Amendment Act No. 18 of 1973 and Act No. 20 of 1976 is a
departure from the provisions of Section 11 of the Code of Civil Procedure
and indicate non-applicability of bar of res judicata in ceiling
proceedings under the Act.
Plea of res judicata is also not available where there is no contest on an
issue between the parties and there is no conscious adjudication of an
issue. In the original order dated 11.8.67 of the prescribed authority
passed under the unamended Ceiling Act. the school land to the extent of
250 acres, under an obvious mistake, was treated to be land held, not by
the holder Company but by the school treating the latter to be a separate
legal entity. It was never the case of the holder Company or the Farm that
250 acres of land was held not by company but by the school as a separate
legal entity. Their claim with regard to the school land was for exemption
under clause (ix) of Section 6, as it stood prior to the Act of 1973. The
company was claiming exemption for 250 acres of land being the land held by
the holder Company for educational purposes and such claim for exemption
could be laid on behalf of the company in accordance with clause (ix) of
Section 6, as it stood in the original Amendment Act. The Prescribed
Authority, it appears, by an inadvertent mistake, instead of considering
the claim of the holder company for exemption of land under clause (ix) of
Section 6, as it stood then, excluded the land as belonging to the school
as separate legal entity. This exclusion of 250 acres of land of the school
from the extent of holding of the holder company was not a decision or a
finding on an issue arising between the parties but it was a clear mistake
which is apparent from the fact that this land was throughout treated by
the holder company as its own land and was transferred by the company by
different sale-deeds to 75 persons after the cut-off date 24.1.1971. On the
date of second ceiling introduced by the Amendment Act of 1973, the so
called land belonging to the school is claimed to be held by the holder
Company as the Company had transferred it to various persons. On these
admitted facts and nature of title of the land, plea of res judicata cannot
be allowed to be raised. The case initiated and proceeded with in Ceiling
Law is not an adversarial litigation between the State and the land owners.
It is enforcement of a social welfare legislation enacted in accordance
with the Directive Principles of the State Policy enshrined in Article 39
of the Constitution.
The plea of res judicata has been held to be barred in proceedings under
Ceiling Law in the decisions of Allahabad High Court reported in Ram Lal v.
State of U.P. and Ors., (1978) All. L. J. 1197; Kedar Singh v. Addl.
District Judge, Varanasi and Ors., [1980] All. L.J. 36 which have held the
field in the State of UP as a settled legal position.
Ambit and effect of provisions of Section 38-B imposing bar on plea of res
judicata in civil proceedings came up before this Court in State of U.P. v.
Budh Singh and Ors., [1995] 6 SCC 146 and State of U.P. v. Budh Singh
(Dead) by Lrs., [1997] 2 SCC 181. The decision of Division Bench of
Allahabad High Court in Krishan Kumar’s case was considered . It was held
that amendments made to the Ceiling Act justify reopening of proceedings
undertaken under the Act prior to the amendment and Section 38-B bars plea
of res judicata to the parties on the basis of findings and decisions in
the earlier ceiling proceedings. The relevant part of the judgment of this
Court in the second case of Budh Singh (Dead) by LRs (supra) reads thus :-
“This appeal was once heard earlier and in the order passed on 25.9.1995,
it was stated that as the High Court in the impugned judgment has relied on
the earlier pronouncement by the Division Bench of the same High Court in
Krishan Kumar case it would be appropriate to peruse that judgment, which
being not on record a direction was given to place the same for our
perusal. It has been so done. We have gone through the judgment and,
accordance to us, the learned Single Judge who rendered the impugned
judgment misread the view taken by the Division Bench in Krishan Kumar
case. In that judgment, the Division Bench has really held that Section 38-
B was wide enough to “capture findings or decisions given under the Ceiling
Act as well as prior to the commencement of section 38-B”. It has really
not been held in that case that “in the subsequent ceiling proceedings, the
earlier finding would be binding unless it can be shown that after the
earlier ceiling proceedings there occurred some amendments in the Ceiling
Act which justified that reopening of a finding recorded in the earlier
ceiling proceedings” as observed in the impugned judgment. No doubt in
Krishan Kumar case an argument was advanced to cut down the width of
section 38-B by inviting the attention of the Bench of Section 31(5); the
Bench, however, held that that section had no impact on the applicability
of Section 38-B.”
In view of our above discussion on the issue of applicability of the
doctrine of res judicata, it is not necessary for us to deal and discuss
cases cited by the counsel for the parties on the power of the Appellate
Authority, by invoking provisions of Order 41 Rule 33 of the Code of Civil
Procedure, to hold the land of school as includible for determination of
ceiling area, in the appeals instituted against the order of the Prescribed
Authority by the holder of the land and the transferees and without any
appeal by the State.
5. Denial of opportunity of hearing to the transferees of land/Breach of
Principles of Natural Justice.
A serious grievance has been raised on behalf of the transferees from 250
acres of land earlier exempted in favour of the school that they were
neither made parties to the appellate proceedings nor were heard before
denying exemption from ceiling to such lands and nullifying the transfers
in their favour by describing them as lacking in bona fides. Learned
counsel appearing for the State contended that as the transferor i.e. the
company through the Farm were parties before the Appellate Authority and
were heard, the transferee who derived title from the transferors were not
necessary but only proper parties. Their interest was protected by the
transferor. It is also submitted that the burden of proof that the
transfers were bona fide was on the transferor who failed in successfully
discharging the said burden of proof to the satisfaction of the ceiling
authorities and the High Court.
Reading the provision of sub-section (6) of Section 5 with proviso (b)
Explanation II thereunder, it is difficult to accept the contention
advanced on behalf of the State that the transferees were merely proper
parties and were not entitled to be arrayed, noticed and heard in the
proceedings under the Ceiling Act. The transfer made after the cut-off date
could have been saved only on proof of good faith and payment of adequate
consideration for the transfers. This burden of proof can be discharged
jointly or singly either by the transferor or transferee. The transferee is
the party likely to be adversely affected by the order nullifying the
transfer if found to be lacking in good faith. The transferee is clearly
covered by the expression “the party claiming its benefit” as used in
Explanation II of sub-section (6) of Section 5.” The burden of proof in
respect of bona fides of transfers is also on the person or ‘party claiming
its benefit.’ It was therefore necessary to make transferees as parties in
the appeal and grant them opportunity of hearing by the Appellate
Authority. To that extent the order of the Appellate Authority can be said
to have been vitiated for not following the required procedure.
For a different reason, however, we decline to set aside the appellate
order of the Commissioner which has been confirmed by the High Court. Non-
joinder of transferees as parties and denial of opportunity of hearing to
them, in the facts and circumstances found here, cannot be said to be fatal
to the entire ceiling proceedings.
The transferees of the school land were not parties and were not heard by
the appellate authority but when on being aggrieved by the order of the
Appellate Authority, they preferred writ petitions in the High Court, a
very detailed hearing with full opportunity to them to prove good faith and
payment of adequate consideration for the transfers made in their favour
was granted to them by the High Court. All necessary information showing
the background of the sales and their claims of bona fides, as furnished
both by the transferor and transferees have been fully gone into by the
High Court and a definite finding has been reached that the transfers
lacked in good faith and were obviously effected to evade ceiling law. All
possible pleas available to the transferees, were projected before the High
Court in the writ petition preferred by the transferees. Thus, all
available material facts and evidence were placed and considered by the
High Court. The High Court has in great detail critically examined all the
relevant evidence produced by the transferees before arriving at an adverse
conclusion against them. This Court would have been inclined and justified
in making a remand of the case to the Appellate Authority to make all
transferees as parties and give them another opportunity of hearing in
respect of the portions of land purchased by them from out of 250 acres of
land held in the name of the school. Since, however, the High Court has
already given full opportunity of hearing to the transferees on this aspect
we refrain from making any order of remand just for the sake of completing
a formality of granting them similar opportunity of hearing by the
Appellate Authority with no likelihood of any conclusion different from the
one reached by the High Court and this Court on merits of the case.
In similar case, involving large scale sales effected to defeat provision
of ceiling law, this Court took recourse to Article 142 of the Constitution
and observed in the case of State of Andhra Pradesh v. S. Vishwanatha Raju
and Ors., [1995] 3 SCC 327 thus:-”
“……….. It cannot be said that in appropriate cases, this Court is
prevented to take suo motu judicial notice of glaring injustice having
recourse to Article 142 of the Constitution for serving the ends of
justice. The very purpose of the Land Reforms (Ceiling on Agricultural
Holdings) Act, 1973 is to prescribe the maximum holding so that the excess
land becomes available for distribution among the landless persons so as to
serve the object of socio-economic justice envisaged in the Preamble to the
Constitution and its Directive Principles of State Policy. When a large
extent of land of about 900 acres is sought to be taken out of the purview
of the Act by the device of agreements of sale and the officers overlook
the same because of their negligence or otherwise in not carrying the
orders of authorities in revision and when the facts came to the notice,
this Court having taken suo motu notice of the same, mete out justice.
Accordingly suo motu notice is taken of the cases concerned and they are
treated as special leave petitions against the orders passed by the
appellate authority and considered its legality by granting leave. Hence,
we hold that the lands covered under Ex. A-l and Ex. A-4 should be treated
as lands held by the vendor and the vendee. The Land Reforms Tribunal
concerned is, therefore, directed to reopen the CCs filed by the respective
partners and the managing partners of the company and determine the surplus
lands according to law and then pass the appropriate orders according to
law”.
Similarly in the instant case, it has been found that large scale transfers
were effected to defeat Ceiling Law. We, therefore, decline to upset the
concurrent findings of the Appellate Authority and the High Court in our
discretionary powers under Article 136 of the Constitution. We have also
come to the same conclusion that the transfers made after the cut-off date
were not in good faith hence liable to be ignored for determining the
extent of surplus land with the holder. That apart we have also recorded a
conclusion that the entire land being held under a Govt. Grant the lands
were not transferable without permission of the government and the
transfers were invalid being in clear breach of the conditions of the
Grant.
Right of hearing to a necessary party is a valuable right of Denial such
right is serious breach of statutory procedure prescribed and violation of
rules of natural justice. In these appeals preferred by the holder of lands
and some other transferees, we have found that the terms of Govt. Grant did
not permit transfers of land without permission of the State as grantor.
Remand of cases of a group of transferees who were not heard, would,
therefore, be of no legal consequence, more so, when on this legal question
all affected parties have got full opportunity of hearing before High Court
and in this appeal before this Court. Rules of natural justice are to be
followed for doing substantial justice and not for completing a mere ritual
of hearing without possibility of any change in the decision of the case on
merits. In view of the legal position explained by us above, we, therefore,
refrain from remanding these cases in exercise of our discretionary powers
under Article 136 of the Constitution of India.
6. Costs imposed as damages.
The High Court has imposed heavy costs of rupees ten lacs on the Farms and
has further directed its deposit within one month. In case of default its
recovery is directed to be made from the Farm or Shri P.N. Mehta. The
justification given by the High Court for imposing such heavy cost is that
by maneuvering and manipulating transactions the Farm, with the help of
Shri P.N. Mehta and the Company, were able to retain possession of the land
and take its advantage and usufruct for long period of seventeen years. We
find that in the name of imposing costs, the High Court has, in effect,
awarded lump sum damages for unauthorized use and occupation of surplus
land. Section 16 of the Ceiling Act empowers levy of damages for use and
occupation of surplus land and reads thus :-
“Section 16. Damages for use and occupation of surplus land where any
tenure holder holds any land on or after the commencement of the Uttar
Pradesh Imposition of Ceiling on Land Holdings (Amendment) Act 1972, in
excess of the ceiling area applicable to him, he shall be liable to pay to
the State Government for the period commencing from the first day of July
1973, until the date on which the Collector takes possession of such
surplus land under Section 14, or the date in which the tenure holder
voluntarily delivers possession to the Collector under the said sub-
section, whichever is earlier, such compensation for use and occupation as
may be prescribed.”
The quantification of damages payable to the State for use and occupation
of surplus land under Section 16 is required to be done in accordance with
the principles laid down in Rule 18A of the rules framed under the Ceiling
Act. The provisions of Section 16 read with Section 18-A require separate
proceedings to be undertaken for determination and quantification of amount
of damages for use and occupation of the surplus land. The said exercise
ought to have been left to the Ceiling authorities. The High Court, in our
opinion, should not have awarded lump sum damages by imposing heavy costs.
Shri P. N. Mehta was found to have taken active part in formation of
partnership firms and obtaining the transfers for favoured parties. He did
it not in his individual capacity but as a managing partner of one of the
partnership firms and on being invited by the holder Company in the meeting
of the Board of Directors to help out the company from the effect of
ceiling law. In the event of default of payment of costs by the company,
the direction made by the High Court to Shri P. N. Mehta to pay the cost is
not justified. This part of the order of the High Court imposing Rupees Ten
Lacs as costs on the Farm and directing its payment by the Farm or by Shri
P.N. Mehta is liable to be set aside.
Before parting with the case, only mention has to be made of the
submissions made by the learned counsel appearing for subsequent
transferees of the lands involved and by some of the intervenes who claim
to have been allotted some lands. In our opinion the subsequent transferees
and such interveners deserve no indulgence in this appeal. The subsequent
transferees have stepped into the shoes of the original transferees. They
can claim no different or better rights than their transferors. The
contentions raised on their behalf are, therefore, not entertained. No
relief can be granted to them. The intervenors have to work out their
independent rights and remedies, if any, and can claim no right of hearing
in these appeals.
In the result, all the appeals are dismissed. The order of the High Court
under appeal, which confirms the order of the appellate authority, is
maintained except to the extent of imposition of costs of rupees ten lacs.
The costs imposed in the impugned order is hereby set aside. Taking into
consideration the nature of the controversy involved and the acts and
omissions both on the part of the State Authorities and the private
parties, we leave them all to bear their own costs and expenses in these
appeals.
