TaxTMI 
TaxTMI 
1993 (3) TMI 350
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.... a small portion of the said land, the 2nd respondent-firm (hereinafter referred to as the 'firm'), established a granite factory and the rest of the land was vacant when the Urban Land (Ceiling and Regulation) Act, 1976 (the 'Act') was made applicable to the Bangalore Agglomeration consisting of the area within the jurisdiction of the Bangalore City Municipal Corporation and the Trust Board, and the peripheral area of 5 kms. 3. On 9.6.1983, the firm preferred an application to the State Government for exemption of the vacant land from the provisions of Chapter III of the Act. By an order of 17.7.1985, the State Government granted exemption under Section 20 of the Act for industrial use of a granite factory. The exemption related to 16194 sq. mtrs. of land and was granted on the following conditions: [i] The entire land utilisation shall be completed within a period of two years from the date of the order. [ii] The exempted land shall be exclusively used for the purpose for which the exemption was granted and for the purposes related thereto. [iii] The land shall not be transferred by way of sale, mortgage, gift, lease or otherwise without prior permission ....
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.... suffering huge losses specially due to continuing heavy interest burden; that the families of the seven partners of the firm had no other source of income and had been over-drawing from the firms for their maintenance; and that one of the partners was seriously ill in a hospital at Bangalore and he had to borrow money for taking medical treatment. 7. On 6.3.1987, the State Government under Section 20 [1] of the Act permitted the firm to sell land to the extent of 16194 sq. mtrs. to the builders subject to certain conditions. 8. On 23.3.1987, the firm filed another application before the State Government seeking permission to transfer the remaining 3444 sq. mtrs. of vacant land from Survey Nos. 6/1 and 6/2 to the builders on the ground of undue hardship since the firm had incurred debts. On 18.4.1987 the State Government under Section 20 [1](a) of the Act granted exemption for the said land from the purview of Chapter Ill of the Act and also permitted the firm to sell the said 3444 sq. mtrs. of vacant land from Survey Nos. 6/1 and 6/2 subject to certain conditions. 9. By a sale deed of 30.9.1987, i.e., a day before the extension of Chapter XXC of the Income-tax Act providi....
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....al Corporation of Ban- galore to identify the extent of 1 acre, 2 gunthas and 58 square yards which was acquired in 1948 out of the said Survey No. 6/1 and to set them apart for the purpose of road and Boulevard and use it only for said purpose; [vi] remitted the applications dated 9.1.1987 and 24.3.1987 made by the firm to the State Government with the direction to consider them in accordance with law under Section 20 [1](b) of the Act and to exempt them in the light of the extent of the debt owed by the firm to the creditors prior to the coming into force of the Act; [vii] directed that even if after examining the, application in the aforesaid light the State Government granted permission, to the firm to sell the vacant land on the ground of hardship, the Government should see that, in the vacant land, sites are formed of various dimensions not exceeding 60' x 90' keeping in view the sites already formed in the locality. The learned Judge further directed that each such site should be sold by public auction by the competent authority with the condition that no person is entitled to purchase in public auction more than one site, and to credit the sale proceeds in the offic....
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....n urban property also, especially after the imposition of a ceiling on agricultural lands by the State Governments . With the growth of population and increasing urbanisation, a need for orderly development of urban areas has also been felt. It is, therefore, considered necessary to take measures for exercising social control over the scarce resource of urban land with a view to ensuring its equitable distribution amongst the various sections of society and also avoiding speculative transactions relating to land in urban agglomerations. xx xx xx The Bill is intended to achieve the following objectives:- [i] to prevent concentration of urban property in the hands of a few persons and speculation and profiteering therein; [ii]to bring about socialisation of urban land in urban agglomerations to subserve the common good by ensuring its equitable distribution; [iii] to discourage construction of luxury housing leading to conspicuous consumption of scarce building materials and to ensure the equitable utilisation of such materials; and [iv] to secure orderly urbanisation. The Bill mainly provides for the following:- [i] imposition of a ceiling on both owner....
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....h regulations to be kept as open space for the enjoyment of such building, which in no case shall exceed' five hundred square metres; or [ii] in an area where there are no building regulations, an extent of five hundred square metres contiguous to the land occupied by such building, and includes, in the case of any budding constructed before the appointed day with a dwelling unit therein, an additional extent not exceeding five hundred square metres of land, if any, contiguous to the minimum extent referred to in sub-clause [i] or the extent referred to in sub-clause [ii], as the case may be". Section 3 states that except as provided in the Act, on and from the commencement of the Act, no person shall be entitled to hold any vacant land in excess of the ceiling limit. The "ceiling limit" is prescribed in Section 4. The provisions of Section 4, so far as they are relevant for our purpose, may be reproduced verbatim: "4. Ceeling Limit. [1] Subject to the other provisions of this section, in the case of every person, the ceiling limit shall be,- [a] x x x x x x [b] where such land is situated in an urban agglomeration falling within category B specified in Schedule ....
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....ved on the person concerned with the notice requiring him to prefer his objections, if any. Section 9 provides for the final statement with regard to the vacant land in excess of the ceiling limit to be prepared by the competent authority and to be served on the person concerned. After the service of the final statement under Section 9, on the person concerned, the competent authority is required by Section 10(1) to cause a notification to be published in Official Gazette giving the particulars of such vacant land and stating therein [i] that such land is to be acquired by the concerned State Government and [ii] the claims of all the persons interested in such vacant land be made by them giving particulars of the nature of their interest in the land. Under Section 10(2), the competent authority is required to determine the nature and extent of such claims and pass such orders as it deems fit. Section 10(3) provides that at any time after the publication of the notification under Section 10(1), the competent authority may by another notification published in the Official Gazette of the State concerned, declare that the excess vacant land referred to in the notification publish....
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...., that Government may by order, exempt subject to such conditions, if any, as may be specified in the order, such vacant land from the provisions of this Chapter: Provided that no order under this clause shall be made unless the reasons for doing so are recorded in writing. [2] If at any time the State Government is satisfied that any of the conditions subject to which any exemption under clause (a) or clause (b) of sub-section (1) is granted is not complied with by any person, it shall be competent for the State Government to withdraw, by order, such exemption after giving a reasonable opportunity to such person for making a representation against the proposed withdrawal and thereupon the provisions of this Chapter shall apply accordingly. It would be apparent from clause (a) of sub-section [1] of the section that under it, the State Government is given power to exempt the excess vacant land from the operation of Chapter III only if the State Government is satisfied that having regard to [i] the location of the land and [ii] the purpose for which it is being or is proposed to be used, it is necessary or expedient in the public interest to exempt it. The paramount consider....
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....inth area of not more than 80 sq. mtrs. for accommodation of the weaker sections of the society and in accordance with a scheme approved by such authority as the State Government may specify in that behalf. The person desiring exemption under this Section has further to declare his intention for construction of such dwelling units for weaker sections within such time, in such form and in such manner as may be prescribed. Such declaration is to be made before the competent authority. The competent authority, after receiving such declaration may, after making such inquiry as it deems fit, declare such land not to be excess land for the purposes of the said Chapter and permit such person to continue to hold such land for the aforesaid purpose subject to such terms and conditions as may be prescribed. Where any such condition is contravened, the competent authority has been given power to declare the land to be excess land and on such declaration, the, provisions of Chapter III of the Act are to apply. The distinction between Sections 20 and 21 may be noticed at this stage. In the first instance, the power given under Section 20 is to the State Government and not to the competent au....
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....ore, give permission for redevelopment, the provisions of Sections 6 to 14 of the Act become applicable even to such land. Section 23 provides for the disposal by the State Government of the vacant land acquired under the Act or acquired under any other law. The State Government may allot such land to any person for any purpose relating to or in connection with any industry or for providing residential accommodation, of such type as may be approved by the State Government, to the employees of any industry. The 'industry' is defined for the purpose to mean any business, profession, trade, undertaking or manufacture. While making such allotment, the State Government may impose such conditions as may be specified in the order of allotment. A breach of any of the conditions imposed enables the State Government to cancel the allotment, and on such cancellation the land revests in the State Government free from all encumbrances. Sub- section [4] thereof also enjoins the State Government to dispose of the vacant lands to subserve the common good on such terms and conditions as the State Government may deem fit to impose. Sub-section 15] thereof gives the State Government an ove....
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....the building or a portion of the building, as the case may be, and if the option is not exercised within sixty days, the applicant is free to sell the land to any person he may like. For the purpose of calculating the price, where the purchase is made by the authority, the provisions of the Land Acquisition Act, 1894 or of the corresponding- law are made applicable. This Section has since been, struck down by this Court in Maharao Sahib Shri Bhim Singhji etc. etc. v. Union of India & Ors., [1981] 1 SCC 166 to the extent it operates on the vacant lands within the ceiling limit. In other words, as the law stands today, the section applies only to transfer of the urban and urbanisable lands in excess of the ceiling limit and which have a building or a portion of building constructed thereon. Section 29 prohibit s construction of buildings with dwelling units with a plinth area exceeding particular dimensions, depending upon the category to which the urban agglomerations belong. Section 30 gives power to the competent authority to stop or demolish construction which is being made or made in contravention of Section 29. Section 35 gives power to the State Government to issue order....
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....and with the land-holder under Sections 20, 21 and 22 respectively, is not to permit the land-holder to deal with it as he likes including to transfer it. In fact, the exemption, the non-declaration an the retention permitted, is on certain conditions which are required to be prescribed by the State Government or the competent authority as the case may be. If those conditions are not complied with or are contravened, the State Government or the competent authority is given power to withdraw the exemption or to declare the land as excess. This power given to the State Government and the competent authority itself negatives either power to permit the transfer or the right to transfer. What is more, Chapter IV which alone makes provisions for transfer and use of urban property, makes provision for transfer of vacant land within the ceiling limit subject to certain conditions. It also makes provisions for the transfer of land in excess of the ceiling limit with a building thereon or with a portion of such building. It makes, however, no provision for transfer of land in excess of the ceiling limit without a building or a portion of a building thereon. That is consistent with the object....
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....rs from the record that the report of the Special Deputy Commissioner is of 29.1.1987 and not of 20.1.1987. It is possible that there is a typographical error either in the record or in the order. Be that as it may. The said report of the Special Deputy Commissioner refers to the application made by the firm for grant of permission for the sale of the land "for their undue hardship'. The report then mentions the properties declared by the firm. All the properties, which are four in number and one of which is the land in dispute, are situate in Bangalore. There is no mention of the properties which admittedly the appellants had in Madras. What is necessary to note here is that it is also stated in the report that the land in dispute has a building of dwelling units and non-dwelling units over a plinth area of 1618.80 sq. mtrs. constructed prior to the commencement of the Act. It also states that there is a factory on. the land running since 50 years which manufactures the polished stones. exported to foreign countries. The report then refers to what the firm had stated in its application for permission to sell the land. The application had mentioned among other things, as follow....
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....ed the statement of profit and loss account and balance sheet as on 31.3.1986 and copies of suits filed by the Bank of India in Madras and by the said Sri P.D. Narayanaswamy Reddiyar in the High Court of Karnataka. After only reciting the above facts but without mentioning even the price at which the land in dispute was proposed to be sold, the Special Deputy Commissioner has proceeded to recommend the permission to sell the land to the builders under Section 20 of the Act. The application for permission itself had not mentioned the price. The recommendation is in respect of not only 16194 sq. mtrs. but also in respect of 3444 sq. mtrs. It may be mentioned here that the firm had not made any application for exemption or permission to sell the said 3444 sq. mtrs. till at least 24th March, 1987. Yet, the Special Deputy Commissioner recommended in his report of 20/29.1.87 that the earlier exempted land of 16194 sq. mtrs. may be permitted to be sold along with the said 3444 sq. mtrs. He has of course recommended conditions to be imposed while granting the permission to sell. The State Government has also not independently enquired into the genuineness of the debts, the value of all ....
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....abilities to the private parties amounted to Rs. 4,11,279.56. In addition to 13 private creditors, Dena Bank is the 14th and the last editor shown there to whom Rs. 65,420.44 were owed from 15.4.1969. The firm had produced certificates from the creditors and a certificate from the auditors in support of the said liabilities. The report ends by stating that "in the cir- cumstances explained above, the requests of the firm to grant exemption under Section 20 with permission to sell the said balance vacant land of 3444 sq. mtrs. to the builders may be considered." It is not known when the reference of the said application was made to the Special Deputy Commissioner for giving his report. All that is known is that on 18.4.1987, the Government passed an order permitting the firm to sell the land admeasuring 3444 sq. mtrs. on the conditions mentioned therein. This order also does not discuss, like the earlier order of 6.3.1987, the various factors which need to be considered while granting permission to sell. It is, however, not necessary to discuss this aspect of the matter since we are allowing the appeals on the primary ground that the State Government had no power to grant permiss....
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.... only vacant lands within the ceiling limit but without buildings, and of vacant lands in excess of the ceiling limit but with buildings thereon and subject to the conditions laid down there. It cannot be suggested that in defiance of the said provisions, Section 20 [1](b) vests power in the State Government to sanction sales of excess vacant lands with or without building thereon. Under Section 20 [1](b), the State Government can only exempt such excess vacant land from being acquired by it. The Government cannot permit its transfer when the Act does not even by implication authorises it to do so but permits the transfer subject only to the conditions prescribed by Section 27. The legislature cannot be presumed to have prescribed different conditions for transfer of the same or similar lands. Secondly, Section 20 begins with the non-obstante clause "notwithstanding anything contained in any of the foregoing provisions of this Chapter", meaning thereby Chapter III of the Act. The foregoing provisions of Chapter III viz.., Sections 3 to 19, as stated earlier, do not contain any provision permitting or restricting the transfer of the vacant land in excess of the ceiling limit. The....
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.... Chapter III. Since as per the definition of "person" in Section 2 [i], the said provision is applicable not only to individuals, but also to a family, a firm, a company or an association or body of individuals whether incorporated or not, the hardship spoken of there is obviously one related to the user of the land. In fact, it is difficult to understand the precise purpose for which clause (b) has been enacted and the meaning of the expression "undue hardship" there. We are left only to speculate on the subject. The speculation itself may not be valid. The lands are held by companies, trusts and associations for industrial and commercial use, for the use of medical and educational institutes, sports, clubs, cultural activities, gardens, exhibitions etc. There is no special provision made in the Act to protect or take care of such users. The only provision under which a relief can be given to preserve and safeguard such user is Section 20 [1] (a). But that provision can be pressed into service only on the basis of the location of the land and its present or prospective user and only if it passes the test of public interest. However, all lands in excess of the ceiling limit may not....
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....ections 20, 21 and 22 respectively. It can in no case be transferred. However, if it is so encumbered, the provisions of Section 27 become ap- plicable to the transfer of the land and no transfer of such land can be effected in contravention of the provisions of the said section. There is nothing either in Section 20 or Section 27 which exempts the transfer of such land from the operation of the provisions of Section 27, assuming that Section 20 (1) (b) gives power to the State Government to permit the sale of such land. Fourthly, the exemption which is granted under Section 20 [1] (b) has to be supported by reasons to be recorded in writing. This requirement also contemplates an exemption which is related to and prompted by the use or better use of the land. If it is the financial hardship which was under the contemplation of the legislature, there was nothing easier than to make a reference to the same in clause (b) itself and to lay down guidelines for the inquiry into such hardship. Fifthly, the provisions of sub-section [2] of Section 20, directly negative either exemption on account of financial hardship or for the purpose of the transfer of the land, since that sub-sec....
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.... land and secondly the sale can be made by the holder of the excess land at any price that he chooses. In the first instance, such a reading of Section 20 Ill (b) would militate against one of the objects of the Act, viz., to prevent speculation and profiteering in the sale and purchase of land. Secondly, it would be patently discriminatory. Whereas the holder of vacant land within the ceiling limit would have to suffer the restrictions placed by Section 26, the holder of the vacant land in excess of the ceiling limit has not to do so. He would in fact be in a better position. The provisions with regard to granting such exemption subject to certain conditions contained in Section 20 [1] (b) do not in any way mitigate the discrimination. Firstly, when the statute itself places specific restrictions under Section 26 on the sale of land within the ceiling limit, it is not possible to hold that the conditions on which the State Government is empowered to permit the sale can be left to the discretion of the State Government. In fact, such discretion given to the State Government would itself be violative of Article 14 of the Constitution the same being unguided and untrammeled. This als....
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....e land with a building. The vacant land in excess of the ceiling limit may be with or without a building. In fact, the provisions of Section 27 directly negative the conferment of such power, for the said provisions show, firstly, that the legislature did not want the sale of any urban or urbanisable land with a building whether it is within or without the ceiling limit except in accordance with the provisions of Section 27. For Section 27 speaks of transfer of any urban or urbanisable land with a building or a portion only of such building, only with the permission of the competent authority and on the terms mentioned therein. This Court, as stated earlier, has invalidated the provisions of the said section to the extent they apply to the vacant land with a building when the land is within the ceiling limit. But it does apply to land in excess of the ceiling limit and with a building or a portion of it thereon. It is not possible to hold that there are two provisions, viz. Section 20 ill (b) and Section 27 operating at the same time in the same area. For the land permitted to be transferred under Section 20 [1] (b) may also be a land with a building or a portion of a building ther....
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....er of the excess vacant land, so that he may transfer the same in the manner he desires. The object of the Act being imposition of ceiling on vacant land in urban agglomerations and for acquisition of such land in excess of ceiling limit, with a view to prevent the concentration of urban land in the hands of a few persons, speculations and profiteering therein, will that object be not defeated if it is held that power under Section 20(1) of the Act can be exercised by the State Government to exempt the excess vacant lands, from the application of Chapter III of the Act, so that the holder thereof can transfer such lands? Sub-section (1) of section 20 is in two parts. The exemption under clause (a) of the said sub-section is to be granted in the public interest whereas under clause (b) the exemption is to be granted taking into consideration the "undue hardship" of the holder of the land in excess of the ceiling limit. Both the expressions "public interest" and "undue hardship" are com- prehensive in nature. But at the same time, it is not easy even for courts to say as to whether under different circumstances the exemption was in the "public interest" or was necessary in the intere....
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....ant land held by such person". When different provisions take into consideration the lands already transferred by the holder, (i) between the period 17th February, 1975 and the appointed day; (ii) as well as between the period commencing from the appointed day and ending with the commencement of the Act, it should not be easily inferred that the framers of the Act desired that after the commencement of the Act while exercising the power of exemption under section 20(1)(b) permission should be granted to holders of such excess lands to transfer such lands to third parties in order to meet their financial liabilities. Section 21 is yet another provision in the Act under which excess vacant land is not to be treated as excess. Under the said Section exemption is to be granted in respect of such excess vacant land, if the holder undertakes to utilise the same for the constructions of dwelling units for accommodation of the weaker sections of the society in accordance with the scheme approved by the competent authority or the State Government subject to such terms and conditions as may be prescribed. If Section 21 provides for granting exemption in respect of excess land held by the ....
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....ion (4) are "subject to the provisions of sub-sections (1), (2) and (3)" but the provisions of sub-section (1) are enabling and not compulsive and those of sub-sections (2) and (3) are incidental to the provisions of sub-section (1). The disposal of excess vacant lands must therefore be made strictly in accordance with the mandate of sub-section (4) of Section 23, subject to this, that in a given case such land may be allotted to any person, for any purpose relating to, or in connection with, any 'industry' or for the other purposes mentioned in sub-section (1), provided that by such allotment, common good will be subserved. The governing test of disposal of excess land being 'social good', any disposal in any particular case or cases which does not subserve that purpose will be liable to be struck down as being contrary to the scheme and intendment of the Act." If the vacant lands which have vested in the State are also to be disposed of strictly keeping in view the spirit and object of the Act, how under section 20(1)(b) exemption can be granted to holders of such lands to dispose of such lands in the manner they like, the persons they prefer, the price they di....