Factory land under lease can vest with the scheduled undertaking when used for sugar operations under acquisition law.

Land lawfully held or occupied for factory purposes, including leased land, was treated under the Uttar Pradesh Sugar Undertakings (Acquisition) Act, 1971 as part of the scheduled undertaking, because the statutory definition covered lands used for the factory and any leasehold interest therein. The acquisition scheme therefore extended to possession used for the undertaking, not merely to the leasehold interest in isolation, and the land vested in the State on the appointed day. The text also notes that the land did not vest under the Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950, because it had already been put to non-agricultural use and did not attract the consequences applicable to agricultural land.

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Issues: (i) Whether the land in dispute, though held under a lease and used for the factory, formed part of the scheduled undertaking and vested in the State Government under the Uttar Pradesh Sugar Undertakings (Acquisition) Act, 1971. (ii) Whether the land vested in the State Government under the Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950 so as to defeat the plaintiffs' title and claim for compensation.

Issue (i): Whether the land in dispute, though held under a lease and used for the factory, formed part of the scheduled undertaking and vested in the State Government under the Uttar Pradesh Sugar Undertakings (Acquisition) Act, 1971.

Analysis: The 1971 Act was enacted to acquire specified sugar undertakings and Section 3 provided for vesting of every scheduled undertaking on the appointed day free from encumbrances. The definition of scheduled undertaking in Section 2(h)(vi) included all lands, other than cultivation and grove lands, held or occupied for the purposes of the factory, including any leasehold interest therein. The land was in the lawful possession of the sugar factory and was being used for factory purposes. The phrase "held or occupied" was construed in a wide sense to include possession under lawful title, and the words "including any leasehold interest therein" did not confine vesting only to the leasehold interest. The statutory scheme and object showed an intention to acquire all assets used for the factory.

Conclusion: The land formed part of the scheduled undertaking and vested in the State Government on 03.07.1971.

Issue (ii): Whether the land vested in the State Government under the Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950 so as to defeat the plaintiffs' title and claim for compensation.

Analysis: The lease had been entered into before the 1950 Act came into force, and the land was being used for non-agricultural purposes. Section 143 had already declared the land to be non-agricultural. In that situation, the land did not answer the statutory definition of agricultural land under Section 3(14), and the prohibitions and consequences under Sections 156 and 167 were not attracted. The High Court's view that the land vested under the 1950 Act and that the plaintiffs lost all rights in the property was therefore unsustainable.

Conclusion: The land did not vest in the State Government under the 1950 Act, and the plaintiffs were not disentitled to pursue compensation.

Final Conclusion: The controversy was resolved in favour of the respondents, the land was held to have vested under the 1971 acquisition law, and the appeals were dismissed.

Ratio Decidendi: Under the 1971 acquisition scheme, land lawfully held or occupied for the purposes of a sugar factory, including leased land, forms part of the scheduled undertaking and vests in the State on the appointed day; vesting is not confined to the leasehold interest alone.

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