Doctrine of estoppel will not apply against Government in exercise of sovereign powers.

The Law laid down by the Apex
Court in the case of M/s.Shrikrishnadas Tikara vs. State
Government of Madhya Pradesh ([1977] 2 SCC 741) is that
doctrine of estoppel will not apply against the Government in exercise
of sovereign powers. In any event, enhanced rent was demanded
from the original leasee and not from M/s.Kalpak or the said society.

As held by the Apex Court in the aforesaid decision, in this case
there is an absence of voluntary and intentional abandonment by the
Government. Hence, the said argument cannot be accepted.
All three authorities under the Maharashtra Land Revenue
41.
Code have recorded a finding of fact that there was a breach
committed by the original lessee of sub-clause (g) of clause 2 of the
Indenture of Lease. All the three authorities held that the said land
was required to be resumed from the Legal Representatives of the
original lessee.
The concurrent findings recorded by the three
authorities have been confirmed by the learned Single Judge. The
original Lessee has done something which was clearly prohibited
under the original Lease. We find no perversity in the view taken by
the learned Single Judge and, therefore, the finding of the learned
Single Judge on this aspect will have to be confirmed. 

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION

Wilfred Anthony Jose Pereira

LETTERS PATENT APPEAL NO.272 OF 2012
IN
WRIT PETITION NO.9449 OF 2009
V
1. The State of Maharashtra
Citation; 2014 (1) AllMR 540 Bom

Both the appeals take exception to the judgment and order
2.
dated 5th November, 2012 passed by the learned Single Judge in Writ
Petition No.3909 of 2012 and Writ Petition No.9449 of 2009. Both the
Petitions were dismissed.
3.
The property in dispute is plot No.228 admeasuring 1858
sq.yards equivalent to 1551.80 sq.metres bearing Survey No.228,
ig
City Survey Nos.B/736, B/737, B/738, B/739 and B/743 (for short, 'the
said land') situated at Bandra, Taluka Andheri in Mumbai Suburban
On 17th December, 1906, the Secretary of State for India in
District.
Council executed Indenture of Lease (for short, “the original lease”)
in respect of the said land. The lessees under the said original lease
were Mrs.E. J. Menesse and five others. The lease was initially for a
period of 50 years from 1st January, 1901 with a covenant for renewal
for a period of 21 years with same covenants including renewal.
4.
Dr.Vincent Pereira, by a Deed of Assignment dated 14 th
May, 1934 acquired the said land together with buildings thereon from
the lessees under the original lease. Dr.Vincent Pereira stepped into
the shoes of the original lessees. On 15 th January, 1975, there was a
registered renewed lease deed executed in respect of the said land
by and between the Hon'ble Governor of Maharashtra and Dr.Vincent
Pereira who was the lessee under the said lease. The said lease

provided that the term thereof will be of 30 years commencing from 1st
January, 1951. The lease also provided that except for the term of 30
years and the rent reserved, the lease was on same terms and
conditions as incorporated in the original lease dated 17 th December,
1906. It provided that all the terms and conditions of the original
lease stand incorporated in the said lease deed dated 15 th January,
5.
ig
1975. The said Dr.Vincent Pereira died on 2nd May, 1981.
Prior to his death, on 27th June, 1978, Dr.Vincent Pereira
(for short, 'the original lessee') executed a development agreement.
One Prakash Shankar Wagh and one Mandar Mohan Bhagwat were
described therein as licensees, who were carrying on business in the
name and style as M/s.Kalpak Builders and Contractors (for short,
'M/s.Kalpak'). Under the said agreement, M/s.Kalpak was allowed to
enter the said land for demolition of the existing bungalow, out house
and a garage and for constructing two multi-storied buildings on the
sites marked as A and B on the plan annexed to the said agreement.
The licence granted to M/s.Kalpak under the said agreement was to
expire on 27th June, 1981. Simultaneously with the execution of the
said agreement, the original lessee executed a General Power of
Attorney dated 27th June, 1978 in favour of the said Prakash Wagh
under which various powers were conferred on the said Mr.Prakash
Wagh such as preparation and submission of the building plans for
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sanction. M/s.Kalpak constructed a seven storied building which was
named as Vinaper Castle. (for short, 'the said building'). M/s.Vinaper
Castle Co-operative Housing Society Ltd. (for short, “the said
society”) was formed by the flat purchasers of the flats in the said
building. On 18th October, 1980, Occupation Certificate was granted
in respect of second to seventh floors of the said building. It is stated
6.
ig
that the plinth area of the said building is 191.20 sq.yards.
On 23rd August, 1986, the Additional Collector, Mumbai
Suburban District issued a show-cause notice in the name of the
original lessee alleging that he had transferred the said land to a
co-operative housing society and a multi-storied building has been
constructed thereon without prior permission. It is alleged that breach
of sub-clause (g) of clause (2) of the lease deed dated 15 th January,
1975 has been committed. The original lessee was called upon to
show cause as to why the said land should not be resumed. There is
no dispute that the reference in the said notice to sub-clause (g) of
clause 2 is to the corresponding clause in the original lease.
7.
A reply dated 28th January, 1987 was issued by one
Malcolm Pereira to the said notice by pointing out that the original
lessee had died.
In the reply, the names of seven legal
representatives were set out. It was denied that the said land was
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transferred to a co-operative society. It was contended that notice
original lessee and to the Court Receiver.
8.
was required to be issued to all the legal representatives of the
The Collector of Mumbai Suburban District informed the
said Malcolm Pereira and Secretary of the said Society by a letter
dated 30th December, 1991 that hearing was fixed on 8 th June, 1992.
On 11th July, 1992, an advocate representing the said society
ig
addressed a letter to the Collector contending that the society should
be recognised as a lessee. It was stated therein that as the original
lessee and his legal representatives have not paid the lease rent, the
said society has paid the rent. It was contended that the members of
the said society belonged to middle class and, therefore, by taking a
sympathetic view, the society may be treated as a lessee. It was
contended that the ex-lessee should be prosecuted for mis-
appropriation and should be debarred from obtaining renewal of
lease. The appellants in Letters Patent Appeal No.272 of 2012
addressed a letter dated 14th July, 1992 to the Additional Collector
contending that the lease in favour of the original lessee was in
perpetuity and the said society and its members were trespassers. It
appears that the Collector also issued notice to the Court Receiver,
who was appointed as a Receiver of the said land pending
Testamentary Petition No.4 of 1982 to which legal representatives of
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remain present at the time of the hearing.
the deceased original lessee were parties. He was called upon to
Another letter was
addressed by the second appellant and the said Malcolm Pereira on
28th September, 1992 to the Collector stating that there was no
violation of the lease conditions and the payments made by the
society were on behalf of the original lessee. On 26 th April, 1993, an
order was passed by the Collector by which the said land was
ig
ordered to be resumed. It was directed that the said Society shall
give an undertaking to clear the liabilities of the legal representatives
lease.
of the original lessee and to accept terms and conditions of transfer of
It was directed that if such undertaking was not furnished
within the stipulated time, the society will be treated as an encroacher
on the said land. Being aggrieved by the said order, the said Malcolm
Pereira preferred an appeal before the Divisional Commissioner. In
the appeal, the said order was stayed.
Even Mr.Percival Joseph
Pereira and the Vinaper Castle Co-operative Society Limited
preferred separate Appeals. In the meanwhile, a Suit was filed by the
said Malcolm Pereira and the second appellant in the Letters Patent
Appeal No.272 of 2012 for declaration that they were Occupants
Class II in respect of the said land and that they have not committed
any breach of the terms and conditions of the original lease. The
challenge in the suit was also to the aforesaid order dated 26 th April,
1993.
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9.
lpa.272.2012 final.doc
By an order dated 4th September, 1997, the Additional
Commissioner proceeded to set aside the order dated 26 th April, 1993
on the ground that the said order was passed without notice to all the
legal representatives of the original lessee. Therefore, an order of
On 25th July, 2006, the Collector addressed a letter to
ig
10.
remand was passed.
Malcolm Pereira and other persons claiming to be the legal
representatives of the original lessee and to the said society. They
were informed about the order of the Additional Commissioner of
setting aside the earlier order and of conducting a fresh enquiry. On
2nd May, 2007, Malcolm Pereira died. It is stated that he made a
bequest of his share in the said land to the second appellant in
Letters Patent Appeal No.272 of 2012. On 13 th September, 2007,
after hearing the parties, the Collector passed an order (1 st impugned
order) holding that the original lessee committed breaches of terms
and conditions of the lease. The Collector held that the plea raised by
the legal representatives of the original lessee that the original lessee
was a Class II occupant cannot be accepted. The Collector held that
in view of the breach committed by the original lessee, the said land
was required to be resumed. The Collector was of the view that the
said building was constructed on the said land 27 years back which

was occupied by the flat purchasers and for the fault of the original
lessee and the builder, the flat purchasers should not be punished.
The Collector directed that the said society should be put in the shoes
of the original lessee on proper terms and conditions and, for that
purpose, the matter should be referred to the State Government.
Being aggrieved by the order of the Collector, three
11.

separate appeals were preferred. The first one was preferred by
Wilfred Anthony Jose Pereira. The second one was by the partners
of M/s.Kalpak and the third one was Percival Joseph Pereira and four
others claiming to be other legal representatives of the original
The additional Commissioner, Konkan Division, by order
lessee.
dated 4th May, 2009, (2nd impugned order), dismissed the three
appeals. He observed that there was a delay in resuming the land
and, therefore, the flat purchasers should not be punished.
Two
Second Appeals were preferred before the State Government against
the orders of the Collector and Additional Commissioner. The first
one was by the appellants in the Letters Patent Appeal No.272 of
2012 and the second one was by M/s.Kalpak. The Hon'ble Minister
of Revenue by his judgment and order dated 18 th July, 2009 (3rd
impugned order) dismissed the appeals by confirming the orders of
the Collector and Additional Commissioner. He directed that a sum
equivalent to 50% of the prevailing market value of the said land as

per the ready reckoner shall be recovered from the said society by
way of unearned income and thereafter, a lease shall be executed in
He directed that the lease rent be
favour of the said society.
recovered from the said society from the date of illegal transfer
alongwith interest thereon. He directed that entry of the name of the
said society shall be made in the revenue records as a lessee. He
directed that the said society shall not be entitled to develop or
ig
redevelop the said land without prior permission of the Collector /
State Government.
On 1st August, 2009, the Collector passed an order
12.
directing the said society to deposit a sum of `7,28,57,010/- being an
amount equivalent to 50% of the unearned income, a sum of
`7,42,500/- towards the arrears of lease rent and a sum of
`22,27,500/- towards interest. It was directed that approval of the
Collector would be required for the existing members and no one
shall be admitted as a member without the permission of the
Collector. After deposit of the sum of `50,00,000/-, the Additional
Collector by letter dated 28th August, 2009 granted liberty to the said
society to deposit the balance amount of `7,08,27,010/- in three equal
installments of `2,36,09,003/- payable on 1st November, 2009, 1st
February, 2010 and 1st May, 2010 respectively. It must be noted here
that a writ petition being Writ Petition No.7476 of 2009 was filed by

M/s.Kalpak challenging the impugned orders of the Collector,
Additional Commissioner and the State Government which came to
be dismissed. The order of dismissal of the Writ Petition has been
confirmed by the Apex Court. On 2nd November, 2009, Writ Petition
No.9449 of 2009 was filed by the appellants in the Letters Patent
Appeal No.272 of 2012 for challenging the orders. It must be noted
that the Respondent Nos.6 to 9 in Letters Patent Appeal No.60 of
ig
2013, who were claiming to be some of the Legal Representatives of
the original lessee filed Writ Petition No.10350 of 2009 challenging
the impugned orders. The said Writ Petition was withdrawn. The
appellant in Letters Patent Appeal No.60 of 2013, who is also
claiming to be a legal representative of the original lessee, filed Writ
Petition No.3909 of 2012 challenging the impugned orders.
13.
By the impugned judgment and order dated 5 th November,
2012, the learned Single Judge dismissed both Writ Petition No.9449
of 2009 and Writ Petition No.3909 of 2012. Letters Patent Appeal
No.272 of 2012 has been preferred by the petitioners in the Writ
Petition No.9449 of 2009. Letters Patent Appeal No.60 of 2013 has
been preferred by the petitioner in Writ Petition No.3909 of 2012. We
must note here that extensive submissions have been made by the
learned Senior Counsel appearing for the appellants in Letters Patent
Appeal No.272 of 2012 and the said submissions have been
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generally adopted by the Counsel for the appellants in Letters Patent
Appeal No.60 of 2013.
SUBMISSIONS OF THE APPELLANTS
14.
The learned Senior Counsel appearing for the appellants
in Letters Patent Appeal No.272 of 2012 urged that show-cause
notice dated 23rd October, 1986 was issued six years after the alleged
ig
breach and that the breach of only sub-clause (g) of clause 2 of the
original lease has been alleged. He urged that subsequent show-
cause notice dated 25th July, 2006 was issued at the behest of the
said society nearly 20 years after the alleged breach. He submitted
that on 15th July, 1991, a demand notice of lease rent was issued to
the original lessee claiming rent at revised rate from 1 st January, 1981
to 31st December, 1990. He urged that in view of this demand notice,
the show-cause notice dated 20th October, 1986 on the basis of which
impugned orders were passed, is deemed to have been waived. He
urged that plea of waiver was raised in Appeal before the Additional
Commissioner as well as before the learned Single Judge. He
submitted that the plea of waiver has not been dealt with. The
learned Senior Counsel urged that there was no breach of sub-clause
(g) of clause 2 of the Indenture of Lease inasmuch as there was no
transfer or assignment of the said land or any part thereof made by
the original lessee. He urged that even the original Lease permitted

He submitted that by
construction of buildings on the said land.
agreement dated 27th June, 1978, only a licence was granted for
M/s.Kalpak to enter the said land and to construct buildings and the
licence was confined to a period of only three years. He relied upon
the decision of the Apex Court in the case of Suraj Lamp &
Industries (P) Ltd. v. State of Haryana, (2012) 1 SCC 656 and
urged that an agreement of sale falls short of a Deed of Conveyance

or transfer and such agreement does not create any right in the
immovable property. He relied upon a decision of this Court in the
case of BEST Workers' Union vs. State of Maharashtra, (2008) 5
ALL MR 848 and urged that an agreement of sale does not create
any legal interest in the immovable property. He urged that the said
decision also holds that in India, dual ownership is recognised in law
and, therefore, transfer of a building on the said land and transfer a
part of the said land are two different things. He relied upon various
clauses in the development agreement executed in favour of
M/s.Kalpak for contending that only upon completion of construction
of two buildings on the said land with the permission of the Collector,
a sub-lease was to be executed in favour of the societies of the flat
purchasers. He urged that only after execution of such sub-lease that
there could have been a transfer. Relying upon the sale agreements
in respect of the flats in the said building, he submitted that the
purchasers of the flats are disentitled to claim any interest in the said

land. He urged that the flat purchasers and the said society can claim
only through M/s.Kalpak and that M/s.Kalpak had no right in respect
He urged that the regularisation of the alleged
of the said land.
breach could have been by regularising the transaction between the
original lessee and M/s.Kalpak and there was no question of
regularising possession of the said society. He urged that the area of
the land under the building is 1160 sq.yards but the Collector has

purported to regularise the possession of the said society to the
extent of the entire said land admeasuring 1664 sq.yards.
He
submitted that if at all any sympathy was required to be shown to the
flat purchasers, only the possession of the land below the said
building could have been regularised and there was no propriety in
granting the entire said land to the society. He submitted that in any
event, by allowing construction of a building, the original lessee did
not commit any breach as the principle of duality of ownership has
been recognised in India and the original Lease was only in respect
of the said land. He pointed out that even under section 11 of the
Maharashtra Ownership Flats (Regulation of the Promotion of
Construction, Sale, Management and Transfer) Act, 1963 (for short,
“MOFA”), a conveyance has to be executed in terms of the
development agreement.

He criticised the findings of the learned Single Judge by
15.
contending that though under the development agreement executed
on 27th June, 1978, only a licence was granted to M/s.Kalpak, the
learned Judge has committed an error by holding that in fact it was a
transfer prohibited by sub-clause (g) of clause 2 of the Indenture of
Lease. He placed reliance on various decisions of the Apex Court
dealing with sections 91 and 92 of the Indian Evidence Act, 1872 and

contended that no one has led evidence to establish an intention
contrary to the written terms of the development agreement.
He
urged that challenge to the development agreement can be only in a
Civil Court and in the absence of any such challenge, the document
will have to be read as it is.
16.
He relied upon a decision of the Apex Court in the case of
Puran Singh Sahni vs. Sundari Bhagwandas Kripalani & Ors.
(1991) 2 SCC 180 by submitting that the intention of the parties
should be discovered from the words used in the agreement. He
submitted that by no stretch of imagination, the development
agreement shows that the original lessee intended to transfer any
part of the said land. He relied upon the observations made by the
Apex Court in the case of MP Housing Board vs. Progressive
Writers and Publishers, (2009) 5 SCC 678.
He urged that the
learned Single Judge has committed an error by holding that though

the development agreement is essentially a transaction of grant of
licence, it is in the nature of a lease. He urged that the said finding is
illegal. He urged that even going by the development agreement, the
transfer was made in favour of the society of flat purchasers and that
also after obtaining the permission of the Collector.
The learned Senior Counsel appearing for the appellants
17.

thereafter submitted that the impugned orders passed by the
Collector, Additional Commissioner and the State Government are
He urged that the Respondent Nos.11 to 13 in Letters
malafide.
Patent Appeal No.272 of 2012 are builders and the said orders have
been passed at their instance, who would be enjoying the benefits of
transfer of lease to the said society.
He pointed out that on 18 th
October, 2009, the said society admitted the respondent Nos.11 to 
as members by stating that the society proposes to construct three
new flats on the balance vacant portion of the said land and the
consideration of each flat was mentioned as `4 crores.
On 26th
October, 2009, possession of the said land was handed over by the
City Survey Officer to Respondent No.10. On 28 th October, 2009, the
said society submitted a list of 16 members to the Collector for his
approval which included the names of Respondent Nos.13 to 16. In
the letter of allotment dated 16th November, 2009 issued by the said
society to respondent Nos.11 to 13, it was stated that they would be

allotted one flat each admeasuring 172.72 sq.metres. The building
was to be constructed within 12 months from the date of issue of
crores.
allotment letters. The consideration of each flat was mentioned as `4
He pointed out that out of 16 members notified to the
Collector, 13 were the original members. He pointed out that the
Respondent Nos.11 to 13 filed three separate disputes under section
91 of the Maharashtra Cooperative Societies Act, 1960 against the

said society. The said three respondents contended that the said
society was under an obligation to construct and give possession of
flats admeasuring 172.74 sq.metres to each of them on 10 th October,
2010. In the general body meeting of the said society, a resolution
was passed providing that Respondent Nos.11 to 13 shall construct a
new building. It was resolved to execute an assignment of lease /
sub-lease / sub-division / surrender directly from the State
Government in favour of Respondent Nos.11 to 13. It was resolved
that the Respondent Nos.11 to 13 would be entitled to enjoy use,
occupy and deal with and dispose of the property including open
terrace, open space, car parking space, etc.
The said society
resolved to execute an irrevocable power of attorney in favour of
respondent Nos.11 to 13. The learned Senior Counsel pointed out
that an Indenture of Lease in terms of the impugned orders was
executed between the Hon'ble Governor of Maharashtra and the said
society on 19th October, 2010.
Three days thereafter, on 22nd

October, 2010, consent terms were filed in the Cooperative Court
between the said society and the Respondent Nos.11 to 13 in the
pending disputes. Consent terms provided that the said society was
unable to construct any building on the said land and, therefore, the
said society had agreed to execute assignment of lease / sub-lease /
sub-division in respect of the plot directly in favour of Respondent
Nos.11 to 13 with the consent of the Collector. Respondent Nos.11 to
ig
13 were permitted to construct a building by availing existing FSI /
future FSI and TDR. They were authorised to construct buildings /
bungalows / row-houses and were granted power to use, occupy or
deal with, dispose of the same including open terrace, open spaces,
The consent terms record that the said
car parking spaces, etc.
society agreed to execute an irrevocable power of attorney in favour
of the respondent Nos.11 to 13. The consent terms record that the
said society has received a sum of `3,04,47,000/- each from
Respondent Nos.11 to 13 and the said respondents were liable to pay
`1 crore each on completion of the building. The learned Senior
Counsel pointed out that on 29th April, 2011 in the general body
meeting of the said society, it was resolved that the consideration
payable by Respondent Nos.11 to 13 will stand reduced from
`4,47,00,000/- to `2,66,66,367/-. It was noted that the respondent
Nos.11 to 13 had made excess payment of `37,80,333/- each. Out of

the said excess payment, a sum of `33,33,333/- would be treated as
interest free refundable deposit and the balance amount of
would
be
treated
as
an
advance
towards
the
`4,47,000/-
maintainance payable to the said society. The said resolution notes
that the amount received from the respondent Nos.11 to 13 was
utilised by the said society for payment of unearned income, arrears
of rent, interest and penalty on the arrears of the rent and on stamp
ig
duty payable on the Indenture of Lease executed on the basis of the
impugned order. The learned Senior Counsel pointed out that in the
year 2011, three more disputes were filed against respondent Nos.11
to 13 in which the consent terms were filed on 30 th July, 2011 in terms
of the general body resolution dated 29 th April, 2011. The learned
Senior Counsel relied upon several documents to show that in fact
the Respondent Nos.11 to 13 have been appointed as developers by
the said society, who are authorised to develop the remaining open
portion of the said land and the said society has not only received
consideration but the amount paid by the Respondent Nos.11 to 13
has been used for payment of unearned income.
The learned
Counsel, therefore, urged that the impugned judgment and order
deserves to be quashed and set aside.

The learned Senior Counsel appearing for the said society
18.
SUBMISSIONS ON BEHALF OF THE SAID SOCIETY
also made detailed submissions. He urged that the three authorities
exercising powers under the Maharashtra Land Revenue Code, 1966
and the learned Single Judge have concurrently held that the original
lessee committed the breach of the terms and conditions of the
original Lease and in fact, there was a transfer effected by the original
ig
lessee by entering into a transaction with M/s.Kalpak. He urged that
in the Letters Patent Appeal, the said finding cannot be disturbed. He
submitted that the submissions made by the learned Senior Counsel
appearing for the appellants regarding malafides on the part of the
three authorities were never canvassed at any stage of the
proceedings and the said submissions were never canvassed before
the learned Single Judge. He urged that the said submissions are
sought to be canvassed for the first time in the Letters Patent Appeal
and, therefore, the said submissions deserve rejection. He submitted
that neither the said society nor Respondent Nos.11 to 13 have
played any role in passing the impugned orders by the three
authorities. He urged that the order of remand was passed on 4 th
September, 1996 and the proceedings after remand, commenced in
2006 as a result of a public notice published at the instance of the
lessees of sale of the said land. He invited our attention to the fact

that the heirs of Mr.Percival Joseph Pereira published a public notice
in a newspaper and tried to sell the said to one Sahana builders. He
pointed out that it is the said public notice which resulted into
commencement of the proceedings after the remand. He pointed out
that on the basis of the said public notice that the Collector issued
notices to the legal representatives of the original lessee on 25 th July,
2006 and the said fact is mentioned in the first impugned notice. He

pointed out that on 18th October, 2009, the said society admitted the
Respondent Nos.11 to 13 as members of the said society. He urged
that the submission that the said land can be divided and the
possession of the said society can be regularised only in respect of
the land below the said building was made for the first time before this
Court in present Appeal.
He urged that there was no submission
made before the learned Single Judge that the said land could be
sub-divided. The learned Senior Counsel invited our attention to the
order passed by the State Government in second appeal which
records that in case of several properties in the city and especially at
Bandra, where the said land is situated, the Government has taken
action of regularisation of the transfer effected by the lessees of the
plots. He pointed out from the order of the second appellate authority
that in case of 31 lessees, it was found that there was a breach
committed of similar clause i.e., sub-clause (g) of clause (2) of the
Leases and the State Government regularised the breaches by

accepting the 50% of the unearned income. He urged that there is a
policy of the State Government to regularise the said breaches of the
building plots which is reflected in the Government Resolution dated
21st November, 1957. He produced for perusal of the Court the said
Government Resolution. He urged that the argument of the waiver of
show-cause notice made by the appellants has no basis as there was
never any voluntary or intentional relinquishment on the part of the
He also refuted the

State Government of its right to resume.
argument made on the basis of concept of dual ownership. He urged
that there was never any challenge to the grant of lease of the entire
said land to the said society. He urged that it was never argued that
only a portion of the said land could have been given to the said
society. He urged that in Letters Patent Appeal, it is not open for this
Court to find fault with the order of the learned Single Judge by
holding that the learned Single Judge ought to have exercised powers
under Article 226 of the Constitution of India and ought to have
modified the order of allotment made in favour of the said society. He
pointed out that the said society has paid a sum of more than `7
crores by way of unearned income. He stated that no interest in the
said land has been created in favour of any of the Respondent
Nos.11 to 13. He urged that the said land cannot be sub-divided
especially when the said society has paid total amount of
`7,58,27,010/- to the State Government.
He urged that the said

society has taken the said money from the Respondent Nos.11 to 13
and the said society is not in a position to repay the amount. He
urged that the Respondent Nos.11 to 13 are not going to make any
profit out of the said land.
19.
He relied upon various decisions in support of his
submissions. As far as the plea of waiver by the State Government is
ig
concerned, he relied upon decisions of the apex Court in the case of
M/s.Shrikrishnadas Tikara vs State Government Of Madhya
Pradesh, (1977) 2 SCC 741; Saroop Singh Gupta vs. Jagdish
Singh & Ors., AIR 2006 SC 1734 and Shantiprasad Devi v.
Shankar Mahto, AIR 2005 SC 2905.
He urged that the word
'transfer' or 'assignment' used in the original Lease will have to be
given a wider meaning. On this point, he relied on the decision of the
Apex Court in the case of Mangalore City Corporation vs. CIT,
West Bengal, AIR 1978 SC 1272
and Gopal Saran vs.
Satyanarayanan, AIR 1989 SC 1141. He urged that the order of
placing the said society in the shoes of the original lessee is based on
the policy decision of the State Government. He relied upon several
decisions which lay down that policy decisions should not be
interfered with in writ jurisdiction unless it is shown that the policy is
inconsistent with the Constitution or that it is arbitrary. Relying upon
the decision of the Apex Court in the case of Madhya Pradesh Oil

Extraction vs. State of Madhya Pradesh, (1997) 7 SCC 592, he
urged that inviting tenders or public auction is not the only method by
which distribution of State largesse can be made. Lastly, he relied
upon the decision of the Apex Court in the case of Wander Ltd. vs.
Antox India P. Ltd., 1990 (Supp) SCC 727 and submitted that the
appellate Court should not interfere with exercise of discretion by the
Court of first instance and substitute it by its own. He urged that the

scope of interference in this Appeal is considerably narrow.
SUBMISSIONS OF THE RESPONDENT NOS.11 TO 13 IN LETTERS
PATENT APPEAL NO.272 OF 2012.
20.
The learned Senior Counsel appearing for the Respondent
Nos.11 to 13 urged that the learned Single Judge while passing the
impugned order has exercised jurisdiction essentially under Article
227 of the Constitution of India and not under Article 226 of the
Constitution of India. He, therefore, submitted that the Letters Patent
Appeal was not maintainable. In support of the plea that the Letters
Patent Appeal was not maintainable, he relied upon the law laid down
in the case of Advani Oerlikon vs. Machindre Govind, AIR 2011
Bom. 1984. He urged that the scope of interference in Letters Patent
Appeal was narrow.
He urged that the appellate Court cannot
interfere with the finding of fact recorded by the learned Single Judge.

Relying upon a decision of the Apex Court in the case of T.K. Mohd.
Abu Bakar vs. TSM Ahmed, AIR 2009 SC 2966, he urged that when
the authorities of the State Government and the learned Single Judge
have considered the material on record thoroughly, this Court dealing
with Letters Patent Appeal should be very slow in interfering with the
He urged that the Letters Patent Appeal cannot be

21.
findings recorded by the learned Single Judge.
converted into a public interest litigation by allowing the appellant to
argue the plea of malafides against the respondent Nos.11 to 13
though the said plea was never raised at any stage of the
proceedings. He submitted that even if this Court is of the view of
that the State Government could have adopted some other method
for disposing of the vacant portion of the said land, in exercise of the
appellate jurisdiction, this Court cannot interfere. Relying upon the
decision of the Apex Court in the case of Dwarkadas & Sons vs.
Board of Trustees, Bombay Port Trust, AIR 1989 SC 1642, he
urged that this Court under the guise of preventing abuse of power,
would be itself guilty of usurping the power which does not vest in it, if
this Court interferes with the order of the Authorities by which the said
society has been placed in the position of the original lessee.
He
urged that this Court cannot embark upon an attempt to frame policy
– economic or otherwise. Lastly, relying upon the decision of the

Apex Court in the National Resource allocation Reference No.1 of
2012 (2012 10 SCC 1), he urged that the auction is not the only
method available for disposal of the government property.
SUBMISSIONS OF THE STATE GOVERNMENT
22.
The learned Senior Counsel appearing for the State
Government contended that the State Government has acted on the

basis of the Government Resolution dated 21 st November, 1957
which incorporates a policy of regularisation. He pointed out that the
said policy has been applied to several properties in the city of
Mumbai as reflected from the order of the State Government in
appeal. He urged that the policy applies not only to regularisation of
illegal sale or transfer but it applies to all categories of illegal
transfers. He urged that the ultimate transferee was the society and,
therefore, the possession of the society has been regularised by
charging unearned income of `7,28,87,010/-. He pointed out that the
said policy has been applied in case of 31 plots in the vicinity of the
said land.
He urged that the Collector has acted in terms of the
mandate of the said policy. He submitted that the appellants never
applied for sub-division of the said land. He urged that the policy
decision of the State Government has to be decided on the principles
of Wednesbury unreasonableness. He urged that in the event the
sub-division is made or Respondent No.10 society is dispossessed of

the vacant land, the said society may take legal action against the
State Government and that the State Government will be embroiled in
litigation and will not be able to get any revenue. He submitted that
the policy leaves no scope for discretion but to regularise such a
transaction.
The learned Senior Counsel appearing for the appellants

23.
REJOINDER OF THE APPELLANTS
made submissions by way of reply by pointing out that that at all
stages including before the appellate authority, a plea was specifically
raised that the said land could be sub-divided. By pointing out the
memorandum of writ petition, he submitted that the jurisdiction of this
Court under Article 226 was specifically invoked by the appellants and
that the learned Single judge has exercised the jurisdiction under
Article 226 of the Constitution of India.
24.
QUESTIONS FOR CONSIDERATION
We have given careful consideration to the submissions.
The main questions which arise for our consideration are as under:
i)
Whether these Letters Patent Appeals are
maintainable?

Whether the action of the State Government of
iii)
resumption of the said land is legal and proper?
ii)
Whether the action of the State Government of
putting the said society in the shoes of the original lessee
by granting leasehold rights to the said society in respect
ig
of the entire said land was legal?
CONSIDERATION OF THE FIRST QUESTION
For the consideration of the first question, we have
25.
perused the memorandum of the Writ Petition No.9449 of 2009. The
first page of the memorandum of the petition shows that the
jurisdiction of this Court under Articles 226 and 227 of the Constitution
of India was invoked. Paragraph 1 of the petition, at three places,
clearly records that the jurisdiction of this Court only under Article 226
of the Constitution of India was invoked. The first prayer in the said
petition is for issue of a writ of Certiorari for quashing and setting
aside the orders of the three authorities. The second prayer is for
issue of a writ of Mandamus and the third prayer is also for issue of a
writ of Mandamus. We have also perused memorandum of the Writ
Petition No.3909 of 2012. The first page of the petition mentions that
the jurisdiction of this Court under Articles 226 and 227 of the

Constitution of India has been invoked. The first paragraph of the
petition clearly asserts that the jurisdiction of this Court under Article
226 of the Constitution of India has been invoked. Perusal of the
prayers made in the petition show that the first prayer is for quashing
and setting aside the orders of the authorities. Two further prayers
are for issuing a writ of Mandamus. We have perused the impugned
judgment and order. In paragraph 3 of the impugned judgment and

order, the learned Single Judge has noted that the Writ Petition
No.9449 of 2009 was filed for invoking the powers under Article 226
The learned judge has quoted the
of the Constitution of India.
prayers in the said petition. As stated earlier, the first prayer is for
issuing a writ of Certiorari and the other prayer was for issuing a writ
of Mandamus. The tenor of the entire impugned judgment and order
shows that the learned Single Judge was exercising jurisdiction under
Article 226 of the Constitution of India.
In paragraph 63 of the
impugned judgment, the learned Single Judge noted that his powers
under Articles 226 and 227 of the Constitution of India were invoked.
The learned Senior Counsel appearing for the respondent Nos.11 to
13 relied upon a decision of the Full Bench of this Court in the case of
M/s.Advani Oerlikon Ltd. vs. Machindra Govind Makasare & Ors.
(supra). We must note that that the orders impugned were passed
by quasi judicial authorities under the Maharashtra Land Revenue
Code, 1966. Considering the grounds urged in both the writ petitions,

there was a justification for invocation of Article 226 of the
Constitution of India. Therefore, in view of what is held in paragraph
20 of the said decision of the Full Bench, the preliminary objection
raised regarding the maintainability of the appeal deserves to be
discarded.
We have perused the original Lease dated 17 th December,
ig
26.
CONSIDERATION OF SECOND QUESTION
1906. The terms and conditions of this Lease will have to be taken
into consideration as it is not in dispute that the original lessee was
bound by the said terms and conditions. The first clause of the said
Lease provides that the lease was in respect of the ground and
premises with their upper terraces which was described as the said
plot of land. Clauses (g) and (h) are relevant which read thus:
“2
And the Lessee does hereby covenant with the
Lessor that he, the Lessee, during the said term
(a)
....
(g)
will not transfer or assign the said plot of land or
any part thereof without the consent in writing of the
Collector;
(h)
and will not at any time have buildings covering
or projecting over more than an area of seven hundred and
seventy three (773) square yards of the said plot of land,
and will not erect any buildings other than those now
existing and indicated by a red colour and the letters F, G,
H, I on the site plan hereto annexed so s to cover or
project over any land within a margin consisting of a strip

27.
ten feet broad along and inside the perimeter of the said
plot.”.
(underline added)
Clause 4 of the Original Lease provides that in case of
breach of the conditions contained therein other than the breach
relating to payment of rent, costs or expenses, the Collector has a
discretion either to impose additional conditions or put an end to the
agreement resuming the land. The first part of clause 4 provides that
ig
in case of breach of terms and conditions, the lessor shall be entitled
to cancel the agreement and resume the said land.
Clause 6
provides for a renewal of the lease after expiry of the term of 50 yeas
for a further period of 25 years with the same covenants and
stipulations Thus, sub-clause (g) of clause 2 puts an embargo on
transfer of assignment of the said land or any part thereof without the
consent of the Collector. If breach of sub-clause (g) is committed, the
Collector has a power to resume the land subject matter of lease.
28.
The proceedings commenced on the basis of the show-
cause notice dated 23rd October, 1986 addressed by the Collector to
the original lessee. The allegation therein is that the said land has
been transferred to a co-operative society and a multi-storied building
has been constructed without the permission of the Collector. The
specific allegation is as regards the breach of sub-clause (g). In this

of Maharashtra
context, we must note here that on 15th January, 1975, the Governor
executed a lease in favour of the original lessee
which specifically provides that the lease will be governed by the
terms of the original Lease.
29.
Thus, the notice is based on transfer effected by the
original lessee by an agreement dated 27 th June, 1978 in which the
partners of M/s.Kalpak have been described as licensees. It is true

that clause 1 thereof provides that the licence was for a period of
three years. It provides that the licence was granted to M/s.Kalpak
for entering the said land for demolition of the bungalow, cottage and
existing garage on the said land and for construction of two multi-
storied buildings on sites marked as A and B on the plan annexed to
the agreement. Clause 6 provides that the said structures were to be
demolished by M/s.Kalpak at its own cost within a period of two years
from the date of the agreement. It provides that M/s.Kalpak was to
construct the building on the site marked A within three years and was
to construct a second multi-storied building on the site marked B
within the same time. It is provided that the flats in building on site
marked B will contain flats admeasuring not less than 500 sq.ft. One
of the material clauses is clause 7 which reads thus:

Therefore, the original lessee was entitled to receive two
30.

“7.
As and by way of compensation to the Lessee
for the value of the bungalow known as “The Rocks” and
the outhouse thereof and of the cottage known as the The
Wig” and of the garage standing on the said land and
premises, which are to be demolished, the Licencees will
allot to the Lessee and/or the Lessee's nominee or
nominees, without any payment whatsoever for the same
being made to the Licencees, the following tenements and
premises in the said new multi-storeyed building at the site
marked 'A' on the plan 'A' hereto annexed to be erected
and completed by the Licencee:
(a)
The terrace flat on the topmost floor of the
building with a built-up area of not less than 1800 square
feet and the open terrace appurtenant thereto.
(b)
A Dispensary-cum-Polyclinic on the first floor
having a built-up area of not less than 1200 square feet.
(c)
Two closed garages on the ground floor, each
20 ft. by 10 ft.”
very large premises in the newly constructed building and two
enclosed garages admeasuring 200 sq.ft each without any payment
whatsoever. Clause 8 provides that the original lessee was entitled to
nominate a nominee who will become the owner of the said premises
and will not be required to pay any cost to M/s.Kalpak. Thus, the
consideration for agreement is a terrace flat on the topmost floor of
the multi-storied building admeasuring not less than 1800 sq.ft with
an open terrace appurtenant thereto and a dispensary cum clinic on
the first floor having built up area of not less than 1200 sq.ft. Thus,
the original lessee was to get an area of not less than 3000 sq.ft in a
newly constructed building as well as two garages admeasuring 200
sq.ft each in a prime locality at Bandra near Bandstand Sea face.

is
described
as
an
agreement
Thus, under the agreement dated 27 th June, 1998, which
31.
creating
licence,
substantial
consideration was received by the original lessee. The consideration
was in the form of very valuable constructed premises as stated
Under the said agreement, M/s.Kalpak was authorised to
ig
32.
above.
demolish three structures on the said land and to erect two multi-
storied buildings. The demolition was to be carried out by M/s.Kalpak
at its own cost and even multi-storied buildings were to be
constructed at its own cost.
A general Power of Attorney was
executed by the original lessee authorising a partner of M/s.Kalpak to
do various acts, things and deeds.
Under the said agreement,
M/s.Kalpak was authorised to sell flats in the buildings to be erected
by it. The agreement provides that the allottees or the owners of the
flats in the buildings shall form a co-operative society or an
association of
owners or a limited company.
The agreement
incorporates a clause for executing a sub-lease of the said land
together with buildings to such co-operative society or association or
a limited company with the permission of the Collector. Clause 33 of
the agreement provides that M/s.Kalpak shall be entitled to make the

said land freehold and if any amount in excess of `25,000/- was
demanded by the Government for making the land freehold, the same
33.
was to be paid by M/s.Kalpak.
Though a clause in the said Agreement provides that no
prospective purchaser or allottee of the flats shall be entitled to claim
any interest in the said land, under the Agreement, there is a

provision for executing a sub-lease in favour of incorporated body
formed by the flat purchasers. In this context, it will be necessary to
make a reference to the agreements of sale executed by M/s.Kalpak
in favour of flat purchasers in relation to the flats in the said building.
The agreement contains a recital that the co-operative society will be
formed of the purchasers of the flats in the said building. Clause 4
records that the flat purchaser will have no claim save and except the
claim over the flat agreed to be purchased. It specifically provides all
the open spaces, unallotted parking spaces, lobbies, staircases, lifts,
etc. will remain the property of M/s.Kalpak till the same are
transferred to a co-operative society or an incorporated body of flat
purchasers. Clause 5 refers to execution of conveyance in favour of
the incorporated body formed by the flat purchasers.
Thus,
M/s.Kalpak claimed that the open spaces in the said land was its
property and will remain to be its property. Paragraph 15 records that
the flat purchaser has accepted the title of M/s.Kalpak in respect of

the said land. Clause 18 is regarding formation of the co-operative
society or a limited company or an incorporated body by the
34.
purchasers of the flats.
In short, after considering the agreement between the
original lessee and M/s.Kalpak and the agreements between
M/s.Kalpak and the flat purchasers, the following factual aspects

emerge:
a) Possession of the said land was parted with by the
original lessee to M/s.Kalpak with full authority to demolish
the existing structures and to erect two multi-storied
buildings;
b) M/s.Kalpak paid substantial consideration to the original
lessee in the form of large constructed premises in the
buildings to be constructed;
(c)
M/s.Kalpak had authority to sell the flats and
tenaments in the buildings agreed to be constructed on the
said land and accordingly, the flats were sold;

(d) M/s.Kalpak represented to the flat purchasers that the
open spaces shall vest in it;
(e) A sub-lease or a conveyance or a document of transfer
was to be executed in respect of the said land and building
for the benefit of the society or the incorporated body
All this was done by the original lessee without obtaining

35.
formed by the flat purchasers.
prior permission of the Collector or the State Government. It is not in
dispute that out of the two buildings, one building (the said building)
was constructed by M/s.Kalpak and except for the tenaments to be
allotted to the original lessee, all the flats have been sold to the flat
purchasers, who are members of the said society formed by the flat
purchasers.
It is in this context that the learned Single Judge
appreciated the findings recorded by the three authorities that the
original lessee transferred or assigned the said land in breach of sub-
clause (g) of the clause 2 of the original Lease. In paragraph 10 of
the impugned judgment, the learned Judge has referred to the Power
of Attorney executed simultaneously with the agreement dated 27th
June, 1978. Sub-clause (g) of clause 2 of the original lease clearly
provides that for sale or transfer of the said land, prior written
permission of the Collector was mandatory. The learned Single judge

in paragraph 49 of the impugned judgement has noted that this was
not a case where original lessee appointed a builder for construction
of his own house but this was a case where the original lessee
authorised M/s.Kalpak to erect new building after demolition of the
original structures and to sell the flats therein on ownership basis. In
the same paragraph, the learned Single Judge noted that the
consideration was in the form of valuable flats in the proposed
ig
building in the Bandstand area at Bandra. The learned Single Judge
observed that the said plot was granted to the original lessee for
constructing a house for his own accommodation. In paragraph 50 of
the impugned judgment and order, the learned Single Judge noted
that after effecting transfer by agreement dated 27 th June, 1978, the
said building was constructed and flats in the buildings were sold.
The learned Single Judge in paragraph 52 noted another aspect that
M/s.Kalpak was granted authority to convert the said land into a
freehold land.
36.
Therefore, the learned Single Judge rightly came to the
conclusion that though the agreement dated 27th June, 1978 purports
to grant a licence, it was, in substance, a transfer or assignment of
the said land to a third party. As noted earlier, very comprehensive
powers were conferred on M/s.Kalpak which could have been
exercised only by a transferee of the said land. It will be necessary to

refer to the original Lease. It enables the original lessee to construct
a building for himself. None of the clauses in original Lease permit
buildings to be constructed for being occupied by any strangers.
Sub-clause (g) of clause (2) provides that the original lessee shall not
transfer or assign the said plot of land or any part thereof without the
consent in writing of the Collector.
A submission was sought to be
made by the learned Senior Counsel appearing for the appellants

based on the decisions of the Apex Court that the word “transfer”
used in sub-clause (g) is a transfer contemplated by the Transfer of
Property Act, 1882. It was sought to be contended that the transfer
contemplated by sub-clause (g) of clause 2 has to be a transfer of all
the interest of the original lessee in the said land. Reliance is placed
by the appellants on the decision of the Apex Court in the case of
Suraj Lamp & Industries (P) Ltd. v. State of Haryana (supra) and
Dattatray Shankar Mote & Ors. Vs. Anand Chantaman Datar &
Ors., (1974) 2 SCC 799. The learned Counsel also sought to place
reliance on the decision of this Court on the case of BEST Workers
Union (supra). The said decision was relied upon by the appellants
before the learned Single Judge.
The learned Single Judge has
rightly dealt with the said decision by coming to the conclusion that
the same will not help the appellants. This aspect has been dealt with
by the leaned Single Judge in paragraph 73 of his judgment. The
learned Single judge observed that in the said decision, it was held

that the agreement for development dated 18th May, 2005 entered into
by and between the BEST workers Union and Respondent No.7
therein cannot be said to be an agreement for lease but it is an
agreement to create a lease in future. The learned Single Judge
observed that the findings of the Division Bench were in the peculiar
The original Lease clearly provides for a power in the

37.
facts and circumstances emerging from the record of the said case.
Government to resume the said land in the event breaches of the
terms and conditions are committed by the original lessee. While
interpreting the original Lease, the Court will have to ascertain what
was prohibited by the same. As we have narrated earlier, the original
lessee took substantial consideration from M/s.Kalpak. The original
lessee allowed M/s.Kalpak to demolish the existing structures, to
erect two multi-storied buildings and to sell the flats and premises
therein to third parties on ownership basis. Except the constructed
premises which were to be allotted to the original lessee under the
agreement executed by M/s.Kalpak, nothing was retained by the
original lessee. What remained to be done after the execution of
Agreement was the execution of sub-lease or assignment to the
society or incorporated body of flat purchasers.

Some argument was canvassed based on the concept of
dual ownership which is recognised in India.
38.
Attempt of the
appellants was to contend that if at all there is a transfer, the same is
only of the building.
Even this argument has been dealt with by the
learned Single Judge and in our view, correctly. We must note here
that the said argument is based on the contention that a flat
purchaser does not get any interest in the land but he gets right to

occupy the flat. The learned Single Judge in paragraph 66 of the
judgment observed that the agreement between the original lessee
The
and M/s.Kalpak was something more than a mere licence.
original lessee granted right to M/s.Kalpak to demolish the existing
The learned
buildings and construct two multi-storied buildings.
Single Judge observed that possession of the said land was parted
with by the original lessee to enable M/s.Kalpak to carry on
construction of two buildings and there is nothing in the agreement to
show that the original lessee retained any right in respect of the said
land except the premises to be allotted by way of consideration.
39.
At this stage, we must note that after the order of remand
by the Additional Commissioner on 25th July, 2006, a fresh notice was
served by the Collector to all concerned parties including the said
society and M/s.Kalpak. In the said notice, there is specific assertion
that on the said land, a multi-storied building has been constructed

While
and the same has been handed over to the said society.
calling the parties to attend the hearing on the basis of the order of
remand, the Collector called upon the parties to produce the
agreement between the original lessee and M/s.Kalpak. We have
already referred to the original show-cause notice served by the
Collector. It is true that in the order passed by the Collector after
remand, apart from recording a finding that there was a clear breach
ig
of sub-clause (g), there is some reference to even breach of sub-
clause (h). However, the show-cause notices of the year 1986 and
2006 clearly allege breach of sub-clause (g) of the Indenture of
Lease. We must note here that one of the arguments made before
the Collector and the Additional Commissioner was that the original
lessee was an Occupant Class II and, therefore, had absolute right of
transfer and assignment of the said land.
However, the said
argument had been negatived. In any event, the said argument is not
pressed into service by the appellants in this appeal.
40.
An argument is canvassed that the action of the State
Government of issuing notice dated 15th July, 1991 demanding the
revised rent in respect of the said property amounts to waiver of the
show cause notice dated 23rd October, 1986. It must be noted here
that when the rent was demanded, the show cause notice was not
disposed of. It must be noted that the revised rent was demanded

from 1st January, 1981 on the basis of order/Memorandum dated 14 th
March, 1986 of revision of rent. The Law laid down by the Apex
Court in the case of M/s.Shrikrishnadas Tikara vs. State
Government of Madhya Pradesh ([1977] 2 SCC 741) is that
doctrine of estoppel will not apply against the Government in exercise
of sovereign powers. In any event, enhanced rent was demanded
from the original leasee and not from M/s.Kalpak or the said society.

As held by the Apex Court in the aforesaid decision, in this case
there is an absence of voluntary and intentional abandonment by the
Government. Hence, the said argument cannot be accepted.
All three authorities under the Maharashtra Land Revenue
41.
Code have recorded a finding of fact that there was a breach
committed by the original lessee of sub-clause (g) of clause 2 of the
Indenture of Lease. All the three authorities held that the said land
was required to be resumed from the Legal Representatives of the
original lessee.
The concurrent findings recorded by the three
authorities have been confirmed by the learned Single Judge. The
original Lessee has done something which was clearly prohibited
under the original Lease. We find no perversity in the view taken by
the learned Single Judge and, therefore, the finding of the learned
Single Judge on this aspect will have to be confirmed. Therefore, the
order of resumption of the said land cannot be faulted with.

42.
CONSIDERATION OF THE THIRD QUESTION

The last issue is as regards the allotment of the entire said
land to the said society. In the first impugned order of the Collector
dated 13th September, 2007, it is observed that for the illegal acts of
the original lessee and M/s.Kalpak, the flat owners should not suffer.
ig
Thereafter, the Collector had observed thus:
“It is no doubt that the breach of condition was committed
during the life time of Dr.V.A. Pereira and it was required to
resume the land at the proper time. In such cases the
government has right to resume the suit land, but today by
way of simple resumption the needy house seekers will be
punished. The violation of terms and condition was made
by late Dr.V.A. Pereira. In this circumstances, I feel that for
the wrong acts of the builder and developer or lessee, the
flat owners should not be punished.
It is true that before purchasing the flats, the
buyers should have verified the government lease rights
and interest and then should have purchased the same.
But the building is constructed 27 years ago and the
physical possession can not be resumed back.
Considering the human problem arising out of wrong,
greedy acts of developers and lease-holders, I feel my
predecessor had taken right approach in his order, dated
26/4/1993. Now there are only two alternatives, either the
society, i.e. entire construction should be held as
encroachment and it should be penalised and regularised
under section – 51 of Maharashtra Land Revenue Code,
1966 or the society which is registered co operative
housing society should put into position of original lessee
on appropriate terms and conditions. Since the land is
lease land second option is preferable. The society was

registered around twenty five years back, automatically it
governs all rights in the plot, and M/s.Kalpak Builder's plea
is not acceptable. But the society should bear all the
charges, rents etc. of lease land, and for the lease the
matter should be referred to the State Government.
Considering all the above fact, I pass the following order:
ORDER-
The claim of the heirs of late Dr.V.A. Pereira for
getting declared as Occupant Class-II in suit
property is hereby denied.
43.
ig
(underline added)
...”
The Co operative Housing society on this plot
should be put into shoes of lessee on proper
terms and conditions and for that purpose the
matter is hereby referred to the Government.
In the operative part, the Collector directed that the said
society should be put in the shoes of the original lessee on proper
terms and conditions and for that purpose, the matter should be
referred to the State Government. Similar view was taken by the
Additional Commissioner in appeal.
The view taken by the State
Government in the second appeal is slightly different.
It will be
necessary to make a reference to the reasoning recorded by the
State Government. The paragraph 2 of the English Translation of
said order reads thus:
.... Collector Mumbai Suburban also informed
that total 48 plots at Village Bandra Mount Merry Road,
were given to various persons only for residential purpose
on lease from the year 1901 to 1906. Separate cases of
the said 48 plots are going on. In the said 48 plot the
period of lease at the beginning was 50 years (101 to
2.
48 / 76
::: Downloaded on - 17/02/2014 20:41:47 :::
lpa.272.2012 final.doc
ig
1950) and thereafter extended for 30 years (1951 to 1980).
Thereafter as per the government resolution dated
5.10.1990 when the process of renewal of lease
agreement started some of the lessor at Village Bandra
Mount Merry Road challenged the said government
resolution in Bombay High Court and during the hearing in
the Court on the said resolution as per the order dated
5.10.1999 as revised lease rent can not be charged it has
been directed to withdraw the said resolution and to decide
revised policy. Accordingly the said decision is withdrawn.
As per the order of Court government has still not decided
revised policy for renewal of lease. It is noticed that out of
the said 48 cases in 31 cases lessor have violated the
condition No.2(G) and 2(H) of the agreement. Out of the
same in 16 cases condition No.2(G) is violated and in 12
cases 2(G) and 2(H) violated. Disciplinary action is being
initiated against them about the same. As also in 6 cases
government granted re-development permission subject to
condition of depositing unearned income amount. In view
of the condition No.2(G) of the said lease agreement for
transferring lease government had issued directions give
memorandum No.LND-2261/77861-1 dated 15.11.1963.
Accordingly, nearly in 16 cases by payment of premium
amount the lease rights has been transferred in the name
of the co-operative housing society standing on the said
plot. As well as in the present case also M/s.Vinapar
Cassel co-operative Housing society by their letter dated
4.9.1991 requested for transferring the lease rights in the
name of their society.”
(underlined supplied)
44.
Thereafter, the second appellate authority i.e., the State
Government proceeded to observe thus:
“2.
.... As there was violation terms and conditions
of the agreements in approximately 48 plots allotted on
lease at Village Bandra, Mount Merry Road, earlier
Collector vide his letter dated 20.4.2007 had submitted
proposal to the government for regularizing violation of
conditions in such cases, government accepted the
proposal that in the case of those plots where prima facie
there is violation of condition, instead of delegating the
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powers of regularizing the violation of conditions to
Collector, Mumbai Suburban in such cases collector
should be directed to submit independent and clear
proposal case wise a to what violation of condition has
been done by concerned plot holder in such matter and
what penal action should be initiated in this regard and
thereafter decision should be taken in such cases
independently matter wise and appropriate directions has
been issued to Collector Mumbai Suburban on 22.6.2001.
ig
The factual position in the present matter is as
aforesaid and various appeals filed before additional
commissioner, konkan division has been decided by his
order dated 4.5.2009 and the order dated 13.09.2007 of
the Collector Mumbai Suburban that Co-operative housing
society on the said plot should be declared lessor on
appropriate terms / conditions and for that purpose case
should be sent to government for decision has been
confirmed.
(underlined added)
Thus, the State Government has recorded that cases of
45.
breach of terms and conditions of lease for regularisation shall not be
dealt with by the Collector, Mumbai Suburban District. It is stated that
the Collector shall submit a detailed proposal in such cases and
thereafter the decision will be taken by the State Government. Thus,
the said order makes it very clear that the Collector had no authority
to direct that the said society should be put in the shoes of the original
lessee. That is the reason why the State Government while deciding
the appeal, imposed different conditions, which read thus:
1.
The order dated 13.9.2007 of Collector Mumbai
Suburban and order dated 4.5.2009 of Additional
Commissioner, Konkan Division are confirmed.
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ig
2.
By recovering 50% amount of the prevailing
market value (valuation as per ready reckoner) of the land
for illegal transfer/sell of the plot bearing No.228 out of
CTS No.B 736 to B 739 and B-743 situated at Village
Bandra Mount Merry Tal. Andheri which given on lease and
their transaction should be regularized and appropriate
lease agreement should be executed with presently
existing society. As well as the amount of rent from the
date of such illegal transfer till this date should be
recovered alongwith simple interest thereon.
3.
After initiating action as aforesaid by recovering
the transfer amount as per the policy of the government
dated 25.5.2007 of allotting land to the co-operative
housing society permission be granted for tenement
transfer. As well as entry be taken in the name of the
society holding the said land as lessor and the provisions
of Government Resolution dated 25.5.2007 should be
made applicable to the said co-operative housing society.
4.
For the said lessor society it shall be necessary
to obtain prior permission of Collector/government for
doing development/re-development of the said land”
(underlined added).
46.
We must record here that both the learned Senior Counsel
appearing for the State Government as well as the learned Senior
Counsel appearing for the society attempted to justify the impugned
orders by relying upon only the Government Resolution dated 21st
November, 1957.
Perusal of the written submissions filed by the
State Government shows that reliance is placed only on the policy
incorporated in Government Resolution dated 21 st November, 1957.
Thus, the stand of the State Government is that the action of
regularisation has been take only on the basis of the said policy. It
will be necessary to make a reference of Government Resolution
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dated 21st November, 1957. Paragraph 1 of the said Government
Resolution reads thus:
ig
“Government has, had under consideration the following
points:
1) Whether permission for sale of non-agricultural plot
held on new tenure should be granted and if so, subject to
what terms and conditions;
2) Whether permission for conversion of the tenure of
non-agricultural plot from new tenure into old tenure should
be granted and if so, subject to what terms and conditions;
3) Whether unauthorised sales of the non-agricultural
plots held on new tenure should be regularized and if so,
subject to what terms and conditions and
4) Whether time limit for the construction of a building on
non-agricultural plot should be extended and if so, subject
to what terms and conditions, and how the breach if any, of
that condition should be dealt with.”
(underlined added)
The decision of the Government is recorded on point (3)
47.
“Point (3):- The Collector should sanction regularisation of
 the unauthorised sale of new tenure plots, by sharing 621⁄2
 % to 75% of the difference between the sale proceeds and
the original price paid by the grantee plus the value of the
improvements made in the plot by the grantee. The
Collector should fix the percentage difference between
621⁄2% to 75% having regard to the circumstances and
facts of individual cases. The conditions subject to which
the plot was originally granted, shall remain intact on
regularisation of such unauthorised sales.
(underlined supplied)
48. The real issue is whether the said Government Resolution
reads thus:
was still in force after the enactment of the Maharashtra Land
Revenue Code, 1966. Assuming that it was applicable, the same

applies only to unauthorised sales. Secondly, answer to point No.3
records that unauthorised sales shall be regularised. In the present
case, the breach alleged is on the basis of development agreement
by and between the original lessee and M/s.Kalpak. The findings of
all the authorities is that there is an unauthorised transfer of the said
land by the original lessee to M/s.Kalpak. There is no finding recorded
by any authority that there is a sale of the said land to the said

society. Therefore, on the basis of the said Government Resolution
dated 21st November, 1957 an order could not have been passed by
the Collector and the State Government of placing the said society in
the shoes of the original lessee. Moreover, it must be noted that none
of the three authorities under the said Code in the impugned order
have held that for placing the said society in the shoes of the original
lessee, the power under Government Resolution dated 21 st
November, 1957 has been exercised. The said argument appears to
have been made for the first time in the Letters Patent Appeal.
49.
There is another aspect which goes to the root of matter.
The said Code (the Maharashtra Land Revenue Code, 1966) was
brought into force on 15th August, 1967. The said Code is brought on
the statute book with a view to unify and amend the law relating to
land and the land revenue in the State of Maharashtra. There is no

dispute between the parties that in view of the provisions of the
Government of India Act, 1935 and the Constitution of India, the said
provisions for grant of leases.
land vested in the State Government. The said Code contains
Section 38 confers power on the
Collector to a lease under a grant or a contract in any unalienated
unoccupied land to any person subject to rules made by the State
Government in this behalf. In the present case, under the orders of

the Collector and the State Government, a lease has been granted to
the said society. This is not a case where unauthorised sale was
regularised. In exercise of powers under section 38, the Maharashtra
Land Revenue (Disposal of the Government Lands) Rules, 1971 (for
short, “Land Disposal Rules”) have been brought into force which
govern the grant of Government land. Rules 26 and 27 of the said
Rules provide for grant of building sites.
Sub-rule (1) of Rule 26
provides for disposal of the building sites by public auction to the
highest bidder unless for reasons to be recorded in writing, the
Collector holds that in any particular case, there is a good reason for
granting the lands without auction. In the present case, none of the
three authorities recorded any such reasons.
50.
There is another important aspect of the matter. By the
impugned orders, the land was resumed. Therefore, on resumption,
the said land ought to have been treated as any other land vesting in

the State Government which ought to have been dealt with as per the
Land Disposal Rules. Even assuming that the Government
Resolution dated 21st November, 1957 was invoked for grant of lease
to the said society, on enactment of the said Code and the Land
Disposal Rules, the said land could not have been disposed of on the
basis of the said Government Resolution as the disposal of the lands
vesting in the State will be governed by the Land Disposal Rules

brought on the statute book in the year 1971. After the Land Disposal
Rules were brought into force in the year 1971, the disposal of a land
vesting in the State cannot be made contrary to the Land Disposal
Rules by relying upon earlier Government Resolution.
The
Government Resolution dated 21st November, 1957 was not at all
applicable in view of the enactment of the Land Disposal Rules in
exercise of power under section 38 of the said Code.
51.
In the first impugned order passed by the Collector, he has
recorded that there was an option open of regularising the
unauthorised occupation of the said society in accordance with
section 51 of the said Code.
Section 51 deals with regularisation of
encroachments on the government land. Section 63 grants power to
the Collector to summarily evict any person unauthorisedly occupying
any land vesting in the State Government. The Collector has referred
to section 51 obviously because he was conscious of the fact that the

possession of the society of the building and the land below the
building was unauthorised. Section 51 of the said Code reads thus:
ig
“51.
Regularisation of encroachments. - Nothing
in Section 50 shall prevent the Collector, if the person
making the encroachment so desires, to charge the said
person a sum not exceeding five times the value of the
land so encroached upon and to fix an assessment not
exceeding five times the ordinary annual land revenue
thereon and to grant the land to the encroacher on such
terms and conditions as the Collector may impose subject
to rules made in this behalf; and then to cause the said
land to be entered in land records in the name of the said
person:
Provided that, no land shall be granted as
aforesaid unless the Collector gives public notice of his
intention so to do in such manner as he considers fit, and
considers any objections or suggestions which may be
received by him before granting the land as aforesaid. The
expenses incurred in giving such public notice shall be
paid by the person making the encroachment; and on his
failure to do so on demand within a reasonable time, shall
be recovered from him as an arrear of land revenue.”
52.
Section
51
provides
that
an
encroachment
on
a
government land can be regularised by granting the same to the
encroacher on the terms and conditions as provided therein. The
proviso to section 51 specifically lays down that no land should be
granted as provided in section 51 unless the Collector gives notice of
his intention to do so and considers the objections or suggestions
received before passing an order of grant of land.
All the three
authorities have concurrently held that possession of the land was
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of the said society is illegal.
unauthorisedly parted with by the original lessee and the possession
Going by the provisions of the said
society by
Code, either a grant could have been made to the
following the Land Disposal Rules or illegal possession of the society
could have been regularised under section 51 of the said Code.
Section 51 mandates that before granting the land by regularisation, a
Rule 26 of the Land Disposal
public notice has to be published.
ig
Rules applicable to building sites contains a provision for inviting
offers by way of auction unless for reasons recorded the requirement
of auction is dispensed with. Looking at the matter from any angle,
the action of directing that the society shall be directly placed in the
shoes of the original lessee in respect of the entire said land is
completely illegal and contrary to the said Code and Rules framed
therein.
53.
At this stage, it will be necessary to make a reference to
the impugned order passed by the State Government. It notes that
from years 1901 to 1906, 48 plots at Bandra, Mount Mary Road, were
given on lease for residential purposes. In 31 cases, the lessees
were found to have committed breach of sub-clauses (g) and (h) of
clause 2 of the Indenture of Lease. It merely notes that in 16 such
cases, possession of the cooperative societies have been regularised
by granting leases. We must note here that merely because in 16
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cases, unauthorised possession of the societies was regularised,
there cannot be any justification for regularising the possession of the
said society in the present case by granting the entire said land to the
society.
54.
There is one more aspect which needs consideration.
Under the agreement executed by the original lessee in favour of
M/s.Kalpak, authority was granted to construct two buildings out of
ig
which only one building has been constructed. The learned Counsel
appearing for the said society has tendered a chart which shows that
total FSI available in respect of the said land is 1533.50 sq.metres.
The said building has been constructed on a portion admeasuring
793.60 sq.metres by consuming FSI of 969.43 sq. metres. The open
portion of the said land is 740 sq.metres for which FSI of 564.07
sq.metres is still available. Thus, admittedly, only a portion of the said
land has been constructed upon. Going by the chart produced by the
said society, even after the construction of the said building,
substantial vacant land admeasuring 740 sq.metres out of the said
land is available on which FSI of 567.07 sq.metres can be consumed.
We must note here that the said land is situated in one of the most
prime localities in the city at Bandra near the Bandra Bandstand.
Even in the year 1997, when the first impugned order was passed,
the property was very valuable.
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Anxiety was expressed by the Collector, Additional
55.
Commissioner as well as the State Government about the problems
which may be faced by the flat purchasers of the flats in the said
building. The authorities were right to an extent when they felt that
effort should be made to regularise the possession of the flats
purchasers. However, the authorities could have considered the case
of regularisation of the said building, the land below the building and
ig
at highest, the land appurtenant to the building which was required to
be kept open as marginal space as per the Rules. The effect of the
impugned orders is that even a very large open portion of the land on
which a very large FSI of 6103 sq.feet (i.e., 567 sq.metres) is
available has also been granted to the society on lease. Perusal of
the impugned orders of the three authorities show that there is
absolutely no application of mind as to why the said society should be
granted bonanza by grant of additional open land having a large and
valuable FSI having market value of crores. Though it is true that
allegations of malafides canvassed by the appellants in these appeals
were not canvassed before the learned Single Judge, the most
significant fact is that after initiation of proceedings of forfeiture, the
said society enrolled three members by taking consideration of `4
crores each from them and an amount of non-earned income of more
than `7 crores payable by the said society has been paid by the said
three members. Moreover, under the consent terms filed in the co-
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56.
construct on the open portion of the said land.
operative Court, the said three members have been allowed to
We must note here that from the agreements for sale
executed by M/s.Kalpak in favour of the flat purchasers, it is very
clear that the flat purchasers are put to notice that the original lessee
was granted the said land on lease on various terms and conditions.
The flat purchasers cannot plead ignorance about the said terms and
ig
conditions. While showing sympathy to the flat purchasers, all the
three authorities have completely ignored that very valuable open
portion of the land having large FSI available in the prime locality near
Bandra Bandstand was granted to the said society whose members
were fully aware of the relevant clauses in the original Lease. There
are no reasons whatsoever assigned by all the three authorities as to
why the entire said land including the open portion with the benefit of
large FSI should be allotted to the said society.
57.
At this stage, it will be necessary to make a reference to
the decision of the Apex Court in the case of Akhil Bharatiya
Upbhokta Congress v. State of Madhya Pradhesh, (2011) 5 SCC
29. In paragraphs 65 and 66, the Apex Court has held thus:
“65. What needs to be emphasised is that the State and/or
its agencies/instrumentalities cannot give largesse to any
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ig
person according to the sweet will and whims of the
political entities and/or officers of the State.
Every
action/decision
of
the
State
and/or
its
agencies/instrumentalities to give largesse or confer
benefit must be founded on a sound, transparent,
discernible and well-defined policy, which shall be made
known to the public by publication in the Official Gazette
and other recognised modes of publicity and such policy
must be implemented/executed by adopting a non-
discriminatory and non-arbitrary method irrespective of the
class or category of persons proposed to be benefited by
the policy. The distribution or largesse like allotment of
land, grant of quota, permit licence, etc. by the State and
its agencies/instrumentalities should always be done in a
fair and equitable manner and the element of favouritism
or nepotism shall not influence the exercise of discretion, if
any, conferred upon the particular functionary or officer of
the State.
66. We may add that there cannot be any policy, much
less, a rational policy of allotting land on the basis of
applications made by individuals, bodies, organisations or
institutions dehors an invitation or advertisement by the
State or its agency/instrumentality.
By entertaining
applications made by individuals, organisations or
institutions for allotment of land or for grant of another type
of largesse the State cannot exclude other eligible persons
from lodging competing claim. Any allotment of land or
grant of other form of largesse by the State or its
agencies/instrumentalities by treating the exercise as a
private venture is liable to be treated as arbitrary,
discriminatory and an act of favouritism and/or nepotism
violating the soul of the equality clause embodied in Article
14 of the Constitution.”
58.
(underline added)
Reliance has been placed by the learned Senior Counsel
appearing for the society as well as the learned Senior Counsel
appearing for Respondent Nos.11 to 13 on the recent judgment of the
Apex Court in Special Reference No.1 of 2012 (2012 (10) SCC 1).

The Apex Court held that public auction may not be always the best
way of distribution of natural resources and disposal to highest bidder
may not necessarily be the only way to subserve the common good.
We must note here that the Land Disposal Rules in certain cases
contemplate public auction. At this stage, it will be necessary to make
reference to a decision of this Court in the case of K.Raheja
Corporation Private Limited and Anr. vs. State of Goa & Ors.,
In paragraph 84 of the said

2010 Vol.112 (10) Bom.L.R. 4729.
decision, this Court considered various decisions of the Apex Court
and in particular, the decisions of the Apex Court in the case of Ram
& Shyam Co. v. State of Haryana (1985) 3 SCC 26 and Kasturi Lal
Lakshmi Reddy v. State of J & K, (1980) 4 SCC 1. The relevant
part of paragraph 84 reads thus:
“84
...
In the very well known decision of the Apex Court in the case of
Ram & Shyam Co. v. State of Haryana laid down that:
12. Let us put into focus the clearly demarcated
approach that distinguishes the use and disposal
of private property and socialist property. Owner
of private property may deal with it in any
manner he likes without causing injury to any
one else. But the socialist or if that word is jarring
to some, the community or further the public
property has to be dealt with for public purpose
and in public interest. The marked difference lies
in this that while the owner of private property
may have a number of considerations which may
permit him to dispose of his property for a song.
On the other hand, disposal of public property

partakes the character of a trust in that in its
disposal there should be nothing hanky panky
and that it must be done at the best price so that
larger revenue coming into the coffers of the
State administration would serve public purpose
viz. the welfare State may be able to expand its
beneficent activities by the availability of larger
funds. This is subject to one important limitation
that socialist property may be disposed at a price
lower than the market price or even for a token
price to achieve some defined constitutionally
recognised public purpose, one such being to
achieve the goals set out in Part IV of the
Constitution. But where disposal is for
augmentation of revenue and nothing else, the
State is under an obligation to secure the best
market price available in a market economy. An
owner of private property need not auction it nor
is he bound to dispose it of at a current market
price. Factors such as personal attachment, or
affinity, kinship, empathy, religious sentiment or
limiting the choice to whom he may be willing to
sell, may permit him to sell the property at a
song and without demur. A welfare State as the
owner of the public property has no such
freedom while disposing of the public property. A
welfare State exists for the largest good of the
largest number more so when it proclaims to be
a socialist State dedicated to eradication of
poverty. All its attempt must be to obtain the best
available price while disposing of its property
because the greater the revenue, the welfare
activities will get a fillip and shot in the arm.
Financial constraint may weaken the tempo of
activities. Such an approach serves the larger
public purpose of expanding welfare activities
primarily for which the Constitution envisages the
setting up of a welfare State. In this connection
we may profitably refer to Ramana Dayaram
Shetty v. International Airport Authority of India
[MANU/SC/0048/1979] in which Bhagwati, J.
speaking for the Court observed: (SCC p. 506,
para 12)

It must, therefore, be taken to be the law that
where the Government is dealing with the public,
whether by way of giving jobs or entering into
contracts or issuing quotas or licences or
granting other forms of largesse, the
Government cannot act arbitrarily at its sweet
will and, like a private individual, deal with any
person it pleases, but its action must be in
conformity with standard or norms which is not
arbitrary, irrational or irrelevant. The power or
discretion of the Government in the matter of
grant of largesse including award of jobs,
contracts, quotas, licences etc. must be confined
and structured by rational, relevant and non-
discriminatory standard or norm and if the
Government departs from such standard or norm
in any particular case or cases, the action of the
Government would be liable to be struck down,
unless it can be shown by the Government that
the departure was not arbitrary, but was based
on some valid principle which in itself was not
irrational, unreasonable or discriminatory
At another place it was observed that the
Government must act in public interest, it cannot
act arbitrarily or without reason and if it does so,
its action would be liable to be invalidated. It was
further observed that the object of holding the
auction is generally to raise the highest revenue.
The Government is entitled to reject the highest
bid if it thought that the price offered was
inadequate. But after rejecting the offer, it is
obligatory upon the Government to act fairly and
at any rate it cannot act arbitrarily.
(Emphasis added)
Another landmark decision of the Apex Court which is material
on this aspect is in the case of Kasturi Lal Lakshmi Reddy v.
State of J & K MANU/SC/0079/1980 : (1980) 4 SCC 1. In
paragraph 11, the Apex Court held thus:
So far as the first limitation is concerned,
it flows directly from the thesis that, unlike a
private individual, the State cannot act as it
pleases in the matter of giving largess. Though
11.

ordinarily a private individual would be guided
by economic considerations of self-gain in any
action taken by him, it is always open to him
under the law to act contrary to his self-interest
or to oblige another in entering into a contract or
dealing with his property. But the Government is
not free to act as it likes in granting largess such
as awarding a contract or selling or leasing out
its property. Whatever be its activity, the
Government is still the Government and is,
subject to restraints inherent in its position in a
democratic society. The constitutional power
conferred on the Government cannot be
exercised by it arbitrarily or capriciously or in an
unprincipled manner; it has to be exercised for
the public good. Every activity of the
Government has a public element in it and it
must therefore, be informed with reason and
guided by public interest. Every action taken by
the Government must be in public interest; the
Government cannot act arbitrarily and without
reason and if it does, its action would be liable
to be invalidated. If the Government awards a
contract or leases out or otherwise deals with its
property or grants any other largess, it would be
liable to be tested for its validity on the
touchstone of reasonableness and public
interest and if it fails to satisfy either test, it
would be unconstitutional and invalid.
lpa.272.2012 final.doc
In paragraphs 14 and 15 of its judgment, the Apex Court
proceeded to observe thus:
14.
Where any governmental action fails to satisfy
the test of reasonableness and public interest
discussed above and is found to be wanting in the
quality of reasonableness or lacking in the element of
public interest, it would be liable to be struck down as
invalid. It must follow as a necessary corollary from
this proposition that the Government cannot act in a
manner which would benefit a private party at the cost
of the State; such an action would be both
unreasonable and contrary to public interest. The
Government, therefore, cannot, for example, give a
contract or sell or lease out its property for a
consideration less than the highest that can be

obtained for it, unless of course there are other
considerations which render it reasonable and in
public interest to do so. Such considerations may be
that some directive principle is sought to be advanced
or implemented or that the contract or the property is
given not with a view to earning revenue but for the
purpose of carrying out a welfare scheme for the
benefit of a particular group or section of people
deserving it or that the person who has offered a
higher consideration is not otherwise fit to be given the
contract or the property. We have referred to these
considerations only illustratively, for there may be an
infinite variety of considerations which may have to be
taken into account by the Government in formulating
its policies and it is on a total evaluation of various
considerations which have weighed with the
Government in taking a particular action, that the court
would have to decide whether the action of the
Government is reasonable and in public interest. But
one basic principle which must guide the court in
arriving at its determination on this question is that
there is always a presumption that the governmental
action is reasonable and in public interest and it is for
the party challenging its validity to show that it is
wanting in reasonableness or is not informed with
public interest. This burden is a heavy one and it has
to be discharged to the satisfaction of the court by
proper and adequate material. The court cannot lightly
assume that the action taken by the Government is
unreasonable or without public interest because, as
we said above, there are a large number of policy
considerations which must necessarily weigh with the
Government in taking action and therefore the court
would not strike down governmental action as invalid
on this ground, unless it is clearly satisfied that the
action is unreasonable or not in public interest. But
where it is so satisfied, it would be the plainest duty of
the court under the Constitution to invalidate the
governmental action. This is one of the most important
functions of the court and also one of the most
essential for preservation of the rule of law. It is
imperative in a democracy governed by the rule of law
that governmental action must be kept within the limits
of the law and if there is any transgression, the court
must be ready to condemn it. It is a matter of historical

experience that there is a tendency in every
Government to assume more and more powers and
since it is not an uncommon phenomenon in some
countries that the legislative check is getting diluted, it
is left to the court as the only other reviewing authority
under the Constitution to be increasingly vigilant to
ensure observance with the rule of law and in this
task, the court must not flinch or falter. It may be
pointed out that this ground of invalidity, namely, that
the governmental action is unreasonable or lacking in
the quality of public interest, is different from that of
mala fides though it may, in a given case, furnish
evidence of mala fides.
15. The second limitation on the discretion of the
Government in grant of largess is in regard to the
persons to whom such largess may be granted. It is
now well settled as a result of the decision of this Court
in Ramana D. Shetty v. International Airport Authority
of India that the Government is not free, like an
ordinary individual, in selecting the recipients for its
largess and it cannot choose to deal with any person it
pleases in its absolute and unfettered discretion. The
law is now well-established that the Government need
not deal with anyone, but if it does so, it must do so
fairly without discrimination and without unfair
procedure. Where the Government is dealing with the
public whether by way of giving jobs or entering into
contracts or granting other forms of largess, the
Government cannot act arbitrarily at its sweet will and,
like a private individual, deal with any person it
pleases, but its action must be in conformity with some
standard or norm which is not arbitrary, irrational or
irrelevant. The governmental action must not be
arbitrary or capricious, but must be based on some
principle which meets the test of reason and
relevance. This rule was enunciated by the court as a
rule of administrative law and it was also validated by
the court as an emanation flowing directly from the
doctrine of equality embodied in Article 14.”
(Emphasis added)
In view of the law laid down by the Apex Court, the
GIDC cannot arbitrarily allot lands vested in it and the
alienations made by the GIDC must stand the test of
reasonableness. The allotment of the public properties

59.
vested in the GIDC can be made only in a fair and
transparent manner and that also in public interest.
Therefore, the action of allotment of large tracts of
lands to the companies will have to be tested on the
touchstone of reasonableness.”
Therefore, the action of the State Government of allotment
of the entire said land to the said society will have to be tested on the
touchstone of reasonableness contemplated by Article 14 of the
Constitution of India. The land could have to been allotted only in a
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fair and transparent manner. The anxiety of the State to protect the
flat purchasers can be appreciated but we fail to understand as to
how even the large vacant portion of the said land with extensive and
very valuable FSI was allotted to the said society without any
application of mind. It is not the case of the State Government that
the said land could not have been sub-divided.
The State
Government could have always adopted a fair and transparent
procedure permissible under the said Code and the Land Disposal
Rules for allotment of vacant portion of the said land.
The flat
purchasers who are indirectly parties to the illegality inasmuch as
they purchased the flats with the knowledge of the terms and
conditions of original lease have been granted the said additional
benefit of a prime open plot of land with large FSI. Fortunately, as of
today, no development has been carried out thereon. As far as the
allotment of the open plot of land is concerned, the State should have

made an attempt to obtain best possible revenue. The action of the
Government has to be in public interest. We fail to see how public
interest is subserved by allotting such a valuable open plot of land to
the said society without following any transparent and fair procedure.
As we have held earlier, the State Government was bound by the
provisions of the said Code and the Land Disposal Rules while
The State Government
considering the case of the said society.
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cannot rely upon the Government Resolution of 1954 which cannot
operate after coming into force of the said Code and Land Disposal
Rules.
An argument is made that in Letters Patent Appeal, this
60.
Court should not interfere with the action of the allotment of the entire
said land to the said society and if such interference is made, this
Court will be treating the Letters Patent Appeal as a Public Interest
Litigation. It was also argued that the contentions which are raised by
the appellants were neither raised before the authorities or before the
learned Single Judge.
It was submitted that the only argument
canvassed before the authorities under the said Code was that the
original lessee was a class II occupant.
61.
It is necessary to make reference to the prayers made in
the Writ Petitions before the learned Single Judge. We must note

here that on 28th August, 2009, a lease agreement was executed by
Respondent No.1 State Government in favour of the said society. In
the Writ Petition, the challenge is not only to the impugned orders of
three authorities but also to the lease deed executed in favour of
Respondent No.10-Society. In fact, in prayer clauses (c2) and (e1)
added by way of amendment, there is challenge to all subsequent
orders passed by which amounts payable by the said society by way

of 50% of the unearned income, arrears of lease rent and interest
were fixed and installments were granted to the said society to pay
We have already pointed out that the petition filed
the amounts.
before the learned Single judge was a petition under Article 226 of the
Constitution of India. The challenge in the petition was specifically to
the grant of the said land to the said society and there was a
challenge to the execution of lease. The learned Single Judge was
dealing with a case of property vesting with the State. The learned
Single Judge was also dealing with the challenge to the order of
allotment of the entire said land to the said society by way of a lease.
Therefore, the learned Single Judge ought to have taken into
consideration the illegality committed by the State by grant of entire
said land to the society. Therefore, in this Letters Patent Appeal,
legality and validity of the orders allotting the entire said land to the
said society can be gone into. This being an intra-court appeal, this
Court can pass all orders which could have been passed by the

learned Single Judge. As held by the Apex Court in the case of
Baddula Lakshmaiah vs. Shri Anjaneya Swami Temple ([1996] 3
SCC 52), Letters Patent Appeal is an intra Court Appeal whereunder
the Letters Patent Bench, sitting as a Court of Correction, corrects its
own orders in exercise of the same jurisdiction as vested in the Single
62.
Bench.
In the impugned order passed by the State Government in

the second appeal, there is a reference to application dated 4 th
September, 1991 made by the society for transfer of lease in the
name of the said society.
In the impugned order dated 13 th
September, 2007 passed by the Collector, he has observed that there
were two options before him.
The first one was that the entire
construction should be treated as encroachment and should be
regularised under section 51 of the said Code. The second one was
that said society should be placed in position of the original lessee.
The decision to place the said society in the shoes of the original
lessee in respect of the entire said land is completely contrary to the
provisions of the said Code and the Land Disposal Rules. Both the
options ought to have been considered in the light of the fact that
substantial portion of the open land alongwith FSI thereon was
available.
The State Government ought to have considered the
request for regularisation of the possession of the said society over

was required to be maintained as marginal open space.
the land below the building and the land appurtenant thereto which
In the
alternative, the State Government could have also considered the
option of grant of lease to the said society in respect of the land below
the said building and the land appurtenant thereto in accordance with
the law. There is a complete non application of mind as regards grant
of open land in respect of which substantial FSI was available.

Therefore, that part of the impugned orders will have to be set aside.
The grant of open land to the said said society by no stretch of
imagination subserves public interest.
The learned Senior Counsel appearing for the said Society
63.
pointed out that very large amount by way of unearned income,
arrears of lease rent and interest has been paid by the said society
by taking money from the respondent Nos.11 to 13.
64.
If the open portion of the plot together with right to utilise
FSI is transferred by the State Government by adopting best possible
method to ensure that the State Government earns maximum
revenue, it cannot be disputed that the State Government will get the
revenue which will be much larger than the unearned income, arrears
of lease rent and interest amount received from the said society.
Therefore, the State Government will have to refund all the amounts

received from the respondent No.10 so that the said amounts can be
65.
returned by Respondent No.10 to the Respondent Nos.11 to 13.
The State Government or the Collector, as the case may
be, will have to grant benefit to the members of the said society by
protecting the possession of the said society over the said building,
the land below the building and the land appurtenant to the building
which is required to be kept open as per the relevant Development
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Control Regulations. We propose to permit the Respondent No.10 to
make a fresh application in that behalf and to enable the State
Government to decide the said application, we propose to direct the
parties to maintain status quo as of today for a reasonable time.
66.
Hence, we pass the following order:
i)
The impugned order dated 13th September,
2007 passed by the Collector of the Mumbai Suburban
District, the impugned order dated 4 th May, 2009 passed by
the Additional Commissioner, Konkan Division and the
impugned order dated 18th July, 2009 passed by the State
Government are set aside to the extent to which a direction
was issued to grant a lease in respect of the entire said
land to M/s.Vinaper Castle Co-operative Housing Society
Ltd. However, we make it clear that the said impugned

orders to the extent to which they hold that the original
lessee committed a breach of the terms and conditions of
the original Lease are confirmed and, therefore, the
direction to resume the said land is upheld;
ii)
All
consequential
orders
passed
by
the
Collector and the State Government on the basis of the
impugned orders by which the lease was granted to the
All amounts paid by the said society to the State
iii)
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said society are also quashed and set aside;
Government on the basis of the impugned orders shall be
refunded by the State Government to the said society
within a period of six months from today;
iv)
We make it clear that the lease granted by the
State Government in respect of the entire said land to the
said society is illegal and the said society shall not be
entitled to claim any benefit thereunder;
v)
It will be open for the said society to apply to the
State Government either for regularisation of its occupancy
in respect of the land below the said building and the land
appurtenant to the said building or for grant of the land
below the said building and the land appurtenant to the

Such application shall be made within a
said building.
period of two months from today;
vi)
The State Government shall decide the said
application on its own merits but in the light of observations
made by this Court in paragraph 65 of this judgment and
order within a period of six months from today;
To enable the said society to take appropriate
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vii)
steps, we direct that for a period of six months from today,
status quo as of today in respect of possession of the said
land and the building thereon shall be maintained by all
concerned parties;
viii)
We make it clear that no additional construction
shall be carried out on the said land for a period of six
months from today. However, this order will not prevent
the said society from carrying out necessary repairs to the
said building after obtaining permission of the competent
authority;
67.
To the aforesaid extent, the impugned judgment and order
passed by the learned Single Judge stands modified.

Letters Patent Appeals are partly allowed on the above
68.
terms with the aforesaid modification.
There shall be no order as to costs.
70. Pending civil applications stand disposed of.
69. 
(A.S. OKA, J.)

(MRS.MRIDULA BHATKAR, J.)

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