Law Web: Whether Govt can terminate lease granted by it if lessees committed breach of terms of contract?

The Court then proceeded to hold that leases in question were given for a period of 30 years containing clause of perpetual renewal. It then found that the lessees have option to terminate the lease but so long as they continue as lessee, it is not possible for the Government to terminate lease unless lessees committed breach of terms of the contract or failed to pay the rent. The Court

positively found that the leases have got a character which is akin to a perpetual lease.

Bombay High Court

Smt. Jaikumari Amarbahadursingh vs The State Of Maharashtra, Through on 30 September, 2008

Bench: A.M. Khanwilkar, R. C. Chavan

1. In all these matters, overlapping issues have been raised by the respective Petitioners, for which reason, by consent, the same were heard together and are being disposed of by this common Judgment.

2. These matters broadly form two groups. One group pertains to land from erstwhile Central Provinces area (i.e.Nagpur, Bhandara, Gondia, Wardha and Chandrapur). The second group is in relation to lands from erstwhile Berar area (i.e.Amravati, Akola, Washim, Buldhana and Yeotmal). In most of the Petitions, it is asserted that the land in question is Nazul land. In other words, only in few matters the land in question may be a non-Nazul land. Nevertheless, the issue that needs to be addressed in all these matters is common. The term Nazul land as observed by the Apex Court in Narain Prasad Aggarwal V. State of M.P. reported in (2007) 11 SCC 736 means land or : 5 :

buildings in or near towns or villages which have escheated to the Government; property escheated or lapsed to State; commonly applied to any land or house property belonging to the Government either as an escheat or as having belonged to a former Government. As per Revenue Book Circular Section 4, Nazul Land is a land which has "site value" as opposed to "Agricultural Value". It further states that it is plots under building whether Government or Private encompassing grounds, parks, plots as used as building markets Symmetric, Potential building sites and lands likely to be needed for public purposes in near future. Nazul will also include the Government plots occupied by or vested in local bodies for schools, sarias, pounds, market.

3. Insofar as the matters pertaining to the Central Provinces Area, those matters can be further sub-divided into two groups. In the first group of cases, the Petitioners assert that the land in question was allotted to them and/or their predecessors pursuant to a Lease Deed executed by the competent Authority. In the second group of : 6 :

cases, it is asserted that no Lease Deed was either executed and/or is available.

4. In relation to matters where land in question was allotted pursuant to a Lease Deed, it is the case of the Petitioners that the lease condition provided for right to transfer or alienate and inheritance. Further, the lease condition postulates that on expiry of the lease period the Authority will renew the lease for further period on the same terms and conditions. However, on expiry of the lease period, the competent authority failed to execute the requisite renewal lease in favour of the concerned Petitioners; and instead was insisting that the Petitioners should accept new conditions to be incorporated at the time of renewal of lease, which conditions are prejudicial to the right and interest of the Petitioners. In the said set of cases, it is stated that insistence by the Authority to impose any new condition such as putting restriction on the right to alienate the land only after taking prior approval of the Competent Authority and upon payment of unearned : 7 :

income, was ex-facie illegal, impermissible and ultra vires. Whereas, in law, the Authority was obliged to renew the lease on the same terms and conditions which obtained in the former lease.

5. In cases where no lease is executed and/or available, the Petitioners are relying on the governing provisions of the Act and the Rules as were applicable at the relevant time in the concerned areas as well as the extant regulations governing grant of lease and the terms and conditions thereof. Even these Petitioners assert that they were enjoying right to transfer and inheritance. For that reason the Competent Authority was bound to recognise transfer of land effected by the lessee/grantee in favour of third party, irrespective of permission therefor of the Competent Authority is not obtained. For, there is no obligation to take prior permission- as the Petitioners(Grantee) had complete and unconditional freedom of alienation and inheritance of the land in question. It is also asserted that neither the concerned Act nor the Rules contemplate any power bestowed upon the Competent Authority to claim or : 8 :

levy unearned income as pre-condition to legitimise the transfer by the grantee/lessee.

6. Insofar as Petitions from Berar area, in almost all cases (except about 14 matters), the Petitioners have asserted that they have had a 'B' tenure patta in relation to the land in question. As a result, they were recognised as occupants Class-I having complete and unconditional right of alienation and inheritance of the concerned land. It is asserted that having regard to that status, it was not open to the Competent Authority to insist for its prior permission to legitimise the transfer of the land in question. Even in this set of Petitions, it is asserted that there was no power in the revenue authority to levy or claim unearned income as precondition to legitimise the transfer in respect of the concerned land. To buttress this stand, the Petitioners have relied on the relevant provisions of the Act and Rules as applicable at the relevant time as also the extant provisions of law. In cases where the occupant does not have a 'B' tenure patta (occupant Class I status), this plea is unavailable. For, the : 9 :

occupation or holding of land would not be free from condition regarding alienation and inheritance.

7. Be that as it may, during the pendency of most of these cases, the State Government issued Government Resolution dated 19th June 2007. The issues raised in the present set of Petitions would revolve around the terms of the said Resolution issued by the Deputy Secretary, Revenue and Forest Department. The preamble of the said Resolution records that the Government considered the recommendation made by the Committee to the Government and other facts, whereafter the Government took decision regarding the renewal of lease, regularisation of violation of terms and conditions of allotment/grant of Government land in the region. The free translation of the said Government Resolution has been placed on record. The said Resolution reads thus:

"REVISED POLICY ABOUT THE

NAZUL/GOVT. LAND LEASED IN

NAGPUR & AMRAVATI REGION.

: 10 :

GOVT.OF MAHARASHTRA

Revenue & Forest Department

Govt.Resolution No.land 2499/C.N.23/J-8,

Mantralaya, Mumbai - 400 032,

Date:- 19th June, 2007.

INTRODUCTION :-

The fact of bringing coordination in the existing orders pertaining to Nazul/Govt. lands in Nagpur & Amravati region leased for residential, commercial & Industrial purpose by the then Madhya Pradesh or C.P.& Berar Govt. and renewal of lease,regularization of violation of condition and in view of other matters,the fact of determining revised & full proof policy was under the consideration of the Government. In various writs filed before the Hon'ble Court has observed that prima facie the assessment of unearned income being done for the violation of conditions of lease in Vidarbha is more. Similarly as ordered by the Hon'ble High Court,a one man committee was set up for making recommendations in connection with unearned amount to be assessed for violation of terms & conditions.On taking into consideration recommendations made by the committee to the Govt.and other facts, the Govt. has taken following decision in view of renewal of lease,regularization of violation of terms & conditions and other facts of Nazul/ Govt. lands in Nagpur & Amravati region given on lease for residential,commercial and Industrial purpose by the then Madhya Pradesh & C.P. & Berar Govt.

GOVT.RESOLUTION:-

GOVT.RESOLUTION

1. The provisions in Madhya Pradesh Land Revenue Code,1954 pertaining to the lease of Nazul Lands in Nagpur & Amravati Region and the rules incidental thereto framed by the then Madhya Pradesh Govt. on 22nd May, 1956 and amendments thereto carried out by the Govt. of Maharashtra on 23.05.1961 and 14.8.1963 are repealed hereby. : 11 :

2. As to the regularization of the violation of terms & conditions:

(A) Those who have violated the terms & conditions in the lease of the land or transferred lands unauthorizedly for more than ones,in such cases the lands in questions in whose possession those lands are shall be regularised in the name of that person as below:

------------------------------------------------------------- Point The land Land is Land is is currently currently

currently used for used for

used for commerc Educatio

residenti ial/ nal/

al industrial Charitable

purpose purpose purpose.

----------- --------------- ---------- ---------- ---------- Regulari- (1) In case of 20% 25% 10% zation of submission of unearned unearned unearned Violation registered amount of amount of amount of of Terms & document as the the the Conditions evidence for market market market /unautho purchase of value of value of value of rized land or change the land the land the land transfer. of user of the as on the as on the as on the land. date of date of date of violation violation violation

of the of the of the

condition. condition. condition.

(2) In case 20% 25% 10% registered unearned unearned unearned document is amount of amount of amount of not submitted the the the then in such existing existing existing cases it is market market market necessary to value of value of value of register first the land. the land. the land. the transfer

and after

submission of

registered

document.

----------------------------------------------------------- : 12 :

(B) While acting as above,the responsibility of making available the authorised papers pertaining to the transfer or change of user shall be of the concerned person.

(C) Those lessee who have used the land jointly for residential, commercial,social,educational purpose then in that case the unearned amount admissible in para 2 (A) above shall be charged in the proportion of land used for that purpose as per the admissible F.S.I.

(D) In cases in which both the terms for

instance unauthorized sale purchase and change of user have been violated then in such cases the action as per para (A) and (2) above shall be taken.

3. As to the allotment of land by ownership right.

(A) 4% rise shall be done per year in the amount of annual lease in that year in which the lease was expired from the date of its expiry till the issuance of orders of Govt. in that regard and arrears of lease till the date of this order be circulated and arrears of said lease shall be recovered from the person in whose possession it is at present and later on from the date of this order the land shall be categorized in occupancy Class-2 by charging the amount of ownership right as below: -------------------------------------------------------------- Point The land is Land is Land is currently currently currently used for used for used for residential commercial/ Educational/ purpose industrial Charitable purpose purpose.

-------------- -------------- -------------- -------------- Allotment of 20% amount of 25% amount of 10% amount of Land on ownership ownership ownership ownership right of the right of the right of the right existing existing market value market value market value of the land. of the land. of the land.

-------------- -------------- -------------- -------------- : 13 :

(B) In cases in which the lease was not expired and the concern lessee wants the land on ownership right, then in such cases the option of taking land on ownership right by paying amount of ownership right as per para 3 (A) above shall be kept open for the lessee.

(C) In such cases interest shall not be charged on the outstanding amount for the period from the date of issuance of Govt. resolution and serving of notice for payment of amount.

(D) In case of above paras Nos. 2 & 3 that

means the provisions of the options of regularization of terms & conditions/ unauthorized transfer and allotting land on ownership right shall be applicable for only two years from the date of this order. Thereafter, action as per existing policy will be taken.

4. Holding land on lease.

The earlier Govt.Resolution NO.Revenue &

Forest Department No.LND-4981/14707/G-8, Dated 11.1.1983 & Govt. Resolution No.Revenue & Forest Department No.LND- 4977/405/C.No.173/G-8, Dated 28.1.1983 issued for Amravati & Nagpur region regarding the renewal of lease are repealed

hereby. Action as below shall be taken in

case of those lessee who wants to hold land

on lease instead of ownership right.

(A) 4% rise shall be done per year in the amount of annual lease in that year in which the lease was expired from the date of its

expiry till the issuance of orders of Govt.

in that regard and arrears of lease till the date of this order be calculated and arrears of said leased shall be recovered from the

person in whose possession it is at present. No interest shall be charged till issuance

of notice to the lessee for payment of the

said amount. Thereafter, the lease shall be

renewed for further 30 years and while

renewing as such;

: 14 :

-------------------------------------------------------------- Point The land is Land is Land is currently currently currently used for used for used for residential commercial/ Educational/ purpose industrial Charitable purpose purpose.

-------------- -------------- -------------- -------------- Allotting Annual lease Annual lease Annual lease Land on equal to the equal to the equal to the lease prime lending prime lending prime lending rate on 20% rate on 25% rate on 10% amount of amount of amount of the existing existing existing market value market value market value of the land. of the land. of the land. -------------- -------------- -------------- -------------- (B) In this manner the lessee can purchase land on ownership right by paying amount of

ownership right as provided in para 3 above

in future (However upto 2 years from the

date of this order) for this purpose lease

shall be charged as per para 4(A) above till the date of sanctioning land on ownership

right and land shall be sanctioned on

ownership right.

case the amount of ownership right shall be

charged as per para 2 & 3 above and amount

of lease shall be charged as per para 4 in

the proportion of land used for that purpose as per the admissible F.S.I.

(D) Every after 10 years the rate of the lease shall be revised on the basis of the market rate prevailing at that time by assessing lease as per the provisions in (A) above.

5. As to the Transfer hereafter/Change of User. (A) After taking action as above as per para 2 : 15 :

or para 3 above, regularizing the violation

of terms & condition or change of user, on

regularizing the lease in the name of the

new person or in case if the land is in the

name of the original person in the absence

of any transfer or on sanctioning land on

ownership right or lease as per para 3 & 4

above, while granting permission hereinafter for every sale / transfer or change of user

and moreover while regularizing unathorized

transfer / sale hereinafter or regularizing

the change in user, the unearned amount

shall be recovered as follows:

------------------------------------------------------------- Point The land Land is Land is is currently currently

currently used for used for

used for commerc Educatio

residenti ial/ nal/

al industrial Charitable

purpose purpose purpose.

------------ --------------- ---------- ---------- ---------- Sale / Granting 20% 25% 10% Transfer or prior unearned unearned unearned change in permission. amount of amount of amount of user the the the hereinafter market market market (Every value of value of value of time). the land the land. the land. (only in

case of

transfer)

Regularization 40% 50% 20% of transfer/ unearned unearned unearned change in user amount of amount of amount of without the the market the market obtaining market value of value of prior value of the land. the land. permission. the land

(only in

case of

transfer)

------------ --------------- ---------- ---------- ---------- : 16 :

(B) The provisions in this para will be applicable for the State of Maharashtra till coming into existence revised policy regarding violation of terms and on coming

into existence the revised policy action

shall be taken as per the provisions in that policy.

of land will hold the land on lease and

moreover on sale/transfer of land sanctioned on ownership right, the purchaser of said

land will hold the land in occupancy class-2.

6. The current market rate of the land for all the abvoe purpose shall be determined on the basis of the ready reckoner and for this

purpose the rate of developed land shall be

considered (cost of construction on the land shall not be considered in the said rate

whereby the rate of the said land will be

less than the rate of the open land).

7. The powers for allotting land on ownership right or renewal of lease as the case may be as per this Govt. Resolution are hereby

conferred upon the Collector.

8. While taking action in this regard as per para 2, 3, 4 & 5 above, the Collector shall

calculate the amount to be paid as per rules on due verification of the request of the

lessee and inform the concern for payment of the said amount and on making available the

copy of the challan in that regard by the

concerned, the Collector shall issue necessary orders in that regard.

The said order issued with the concurrence

of the finance department vide its unofficial reference No.267/07/Exp-9, dated 6.6.2007.

The said Govt. Resolution has been made

available on the web site of the Govt.(www.maharashtra.gov.in) and its Computer : 17 :

Code No.is 20070619124117001.

By Order & in the name of the Governor of Maharashtra,

Sd/-Rajendra Surve

Dy.Secretary,

Revenue & Forest Department

8. At the cost of repetition, we may reiterate that the principal challenge in all these Petitions is to the power of the Revenue Authority to - (i) impose new condition in the subsisting lease providing for seeking prior permission of the Authority to legitimise the proposed transfer of the land in question;

(ii) insist for inserting new condition requiring the grantee/lessee to take prior permission of the Revenue Authority before effecting transfer of the land in question at the time of renewal of the lease which has already expired or was likely to expire in the near future;

(iii) delete the existing condition in the lease which permits the lessee of free transfer or : 18 :

alienability and inheritance;

(iv) impose condition to claim/levy unearned charges so as to legitimise and regularise the transfer of the land by the grantee/lessee; and (v) demand enhanced annual rent in respect of land in question which was not only ex-facie unjust and unfair but absurdly excessive.

9. According to the Petitioners, if the original Lease Deed does not contain restriction regarding permission of the Competent Authority or of payment of unearned income to recognise or legitimise the proposed transfer of the land in question, it is not open to the Revenue Authority to insert such condition at a later point of time or for that matter, at the time of renewal of the lease. In that, in law, the the Competent Authority is obliged to honour the terms of the subsisting lease as it is as also to renew the lease on same terms and conditions which prevailed during the earlier lease period. The Authority could do otherwise only if the provisions of the : 19 :

Municipal Law expressly empowers it in that behalf. For the present, neither the erstwhile laws nor the extant regulations expressly authorise the Revenue Authority to do so. To buttress this contention the Petitioners have essentially relied on the exposition of the Division Bench of our High Court in the case of State of Bombay vs.Damodhar Tukaram Mangalmurti in Appeal No.699 of 1946 and 700 of 1946 dated 19th June 1959, which part of the said decision has been upheld by the Apex Court in Civil Appeal No.215 of 1962 filed by the State of Bombay (now the State of Maharashtra) decided on August 27, 1964. The said decision was rendered in a Suit filed by the Plaintiff therein in representative capacity. That decision having become final, is binding on the State and its Officials. The impugned action of the Revenue Authorities which is inconsistent with the principle expounded in the said decision, will have to be treated as void ab initio. Even with regard to the grievance that it is impermissible to increase the annual lease rent at absurdly excessive level, according to the Petitioners, has been answered in the said Judgment. The Petitioners would submit that the : 20 :

well established position is that the lease amount should be just and fair and that principle should be kept in mind even at the time of renewal of lease. These are the broad issues that have been agitated before this Court in all these matters.

10. For the view that we would take, we do not think it necessary to burden this judgment with the facts of each case. Instead, we would deal with the general issues and arguments pressed before us at the time of hearing; and relegate the parties before the concerned Revenue Authority who in turn will have to decide each matter on its own facts applying the established legal principles and the observations in the present decision. In the said enquiry the concerned Petitioner to succeed, will necessarily have to establish before the Revenue Authority that his occupation of the land in question was as occupant Class-I as defined in Section 29 of the Maharashtra Land Revenue Code, 1966 (hereinafter referred to as 'the MLRC') or that he held the land in full occupancy and the grant/lease (original and/or renewed) in his favour did not place any restriction on his right to : 21 :

transfer the land in question in accordance with the provisions of any law relating to land revenue in force.

11. Insofar as Writ Petition No.1607 of 1990 and Writ Petition No.908 of 1991 are concerned, these Petitions pertain to land governed by the provisions of Nagpur, Improvement Trust Act, 1936. It is common ground that provisions of MLRC will not be applicable to those two cases. Even in those two cases, some of the questions raised in other companion cases have been raised, for which reason, the same are dealt with together.

12. The principal question that needs to be examined is: whether the State has authority to levy or claim unearned income? The argument of the Petitioners is twofold.

13. In the first place, contends Counsel for the Petitioners that claim of unearned income by the State Government is in the nature of levy of tax. If so, that claim will impinge upon the subject covered by Entry 82 of List I of Schedule VII of : 22 :

the Constitution of India. Reliance was placed on the decision of Apex Court in the case ofCalcutta Municipal Corporation & Ors. vs. M/s.Shrey Mercantile Pvt.Ltd. & Ors. reported in AIR 2005 SC 1879.

1879 The Apex Court has noted the main distinction between tax and fee. It has observed that a charge or fee, if levied for the purpose of raising revenue under the taxing power is a "tax". Similarly, imposition of fees for the primary purpose of "regulation and control" may be classified as fees as it is in the exercise of "police power", but if revenue is the primary purpose and the regulation is merely incidental, then the imposition is a "tax". In that case on analysing the provisions of the relevant Regulations the Court opined that the inevitable conclusion is that the levy of fees on ad volarem basis was in "exercise of power of taxation" under the Act to augment the revenues primarily and not as a part of regulatory measure. It found that no special benefit results to the transferee who is made statutorily liable to inform the Corporation of the change, if any, in the name of the person primarily liable to pay the tax. Further, the : 23 :

mutation enquiry is instituted in the interest of the Corporation for tax purposes and not for the benefit of the tax payer.

14. Indubitably, the claim regarding unearned income will fall within the expansive definition of Land Revenue in Section 2(19) of the MLRC, which reads thus:

"2.Definitions

In this Code, unless the context otherwise requires.-

(1) to (18) ......

(19) "land revenue" means all sums and

payments,in money received or legally claimable by or on behalf of the State

Government from any person on account of any land or interest in or right exercisable

over land held by or vested in him, under

whatever designation such sum may be payable and any cess or rate authorised by the State Government under the provisions of any law

for the time being in force; and includes

premium, rent, lease money, quit, rent, judi payable by a inamdar or any other payment

provided under any Act, rule, contract or

deed on account of any land;

15. The question is whether the amount claimed by the Revenue Authority towards "unearned income" to legitimise the proposed transfer of the land in question is for the purpose of raising revenue : 24 :

under the taxing power as such. The answer is an emphatic 'No'. For, the claim towards unearned income is essentially to levy charge in respect of the property in question legally claimable by the Competent Authority from the Grantee or the prospective purchaser as the case may be in relation to the land or interest in or right exercisable over land held by or vested in him. That claim is ascribable to power of regulation and control in respect of the land, which is exercised as a police power of the State. Indeed, the State would incidentally generate revenue but the primary purpose of the levy of charges under designation "unearned income" is regulation and control of the Government property. The levy of unearned income being land revenue is also specifically referable to, amongst others, Entries 18 and 45 of list II of the Seventh Schedule of the Constitution. Notably, Entry 45 is an inclusive entry. It postulates all kinds of land revenue or charges; and would envelope charges collected from the grantee or the prospective purchaser to regulate and control the land(Government property) or interest in or right exercisable over land held by or vested in him. : 25 :

16. The demand of unearned income is essentially relating to the difference between the premium paid by the grantee/allottee at the time of original allotment and the market value of the plot at the time of proposed transfer. That is a price to be paid towards the entire bundle of rights held by the State Government in the land as landlord and enabling the grantee/lessee only to transfer his remaining rights which were enjoyed by him or her under the grant/lease. It is well established position that the Government is the real owner of the land. If the original grant/lease is not exempted from revenue, the Legislature of the State has power to direct levy of revenue on all lands under whatever title they may be held whenever and so long as the exigencies of the State may render such levy necessary. That power is vested in the Legislature, which position is restated in the proviso to Section 64 of the MLRC. If the Legislature were to enact law on that subject, the Authority could legitimately exercise the power to levy revenue such as unearned income on all lands under whatever title which may include even lands : 26 :

held by occupants - Class-I, if the law so permits. In other words, even if the Government Grant should necessarily be regulated by its own terms, that would not preclude the State to enact a law at any time in future to provide for restrictions so as to regulate the transfer of land subject however to the Constitution. Such Law can even govern the subsisting grants so as to expressly or by implication repeal or revoke or modify not only all the provisions of the grant or transfer but also the relevant governing enactments on the subject. We can usefully refer to the decision of the Apex Court in Kanwarlal Vs. IInd Add. Dist. Judge, Nainital reported in AIR 1995 SC 2078. In that case the question posed was whether the State could amend the Grants Act, which is a pre-Constitutional Central Statute by its own enactment. That is answered in the affirmative on the basis that the State enactment concerns the rights in or over the land etc., which are all subjects covered by Entry 18 of List II. Reliance is rightly placed by the Counsel for the State on the exposition of the Privy Council in the case of Thakur Jagannath Baksh Singh Vs. The United Provinces reported in AIR : 27 :

1946 PC 127, wherein it is observed that no 127 Court can annul the enactment of a legislative body acting within the legitimate scope of its Sovereign Competence.

17. Ordinarily, unearned income would mean income from investment rather than from labour. It is the difference between the premium paid and the market value of the lease plot at the time of sale. Nevertheless, in law, it is a land revenue recoverable from the grantee/lessee by the State Government if the law enacted on the subject or the terms of lease or grant so permits. Suffice it to observe that the State Legislature has authority to enact law authorising the State Government to claim unearned income from the grantee/lessee for recognising or approving the transfer of land in question. The law enacted by the State Legislature on that subject can never be covered by entry 82 in List I of Schedule VII of the Constitution of India but in substance, is a law legislated by the State Legislature on the subject of "land" and "land revenue" and matters related thereto of regulation and control, which is well within its competence. : 28 :

Though it may appear that the State Government would share income of the grantee; but in substance, it is the price to be paid for approving the transfer of the land by the grantee/lessee to third party and recognising the right so transferred to enable the transferee to enjoy the Government property in question. The State remains the owner of the land and the right enjoyed by the grantee/lessee is a limited right granted under the Grant and not the entire bundle of rights of the State Government who is the real owner thereof. Indeed, the State Government can do so only if the State Legislature specifically authorises it in that behalf.

18. The Petitioners would then contend that for over 100 years the State had never demanded unearned income to recognise transfer effected by the original grantee. Therefore, the State was estopped from claiming unearned income. This argument deserves to be stated to be rejected. For, if the law authorises State to levy unearned income, then there can be no estoppel against the statute. The fact that the State abdicated its : 29 :

authority to levy unearned income though permissible in law cannot take the matter any further. In fact, any enactment permitting State to levy such charges would cast duty upon the Executive to recover the same. Counsel for the Petitioners relied on the exposition of the Apex Court in the case of State of Orissa Vs. Mangalam Timber Products reported in 2003(9) Scale 578 and State of Punjab Vs. Nestle India Ltd. reported in 2004(5) Scale 529. In the former reported case the State intended to recover royalty from back date. Besides, whether the Petitioners were given any promise will be a disputed question of fact. In the present case, however, it is unnecessary to elaborate any further for the view that we intend to take.

19. For the time being, we may safely proceed on the basis that as of now, there is no legislation enacted by the State Legislature which would govern the field of power to levy unearned income. We hasten to record this opinion after having analysed the relevant enactment and in particular the provisions of M.L.R.C. There is no express : 30 :

provision therein nor it is possible to suggest that the State Legislature purports to do so by implication. The learned Counsel for the State is unable to substantiate with reference to any specific provision of M.L.R.C. which would suggest to the contrary. Indeed, the statutory rules framed under the MLRC, titled as the Maharashtra Land Revenue (Disbursal of Government Lands) Rules, 1971, carve out exception about existence of such authority in relation to grant of land for industrial and commercial purposes. That position is spelt out from clause (c) of sub-rule (2) of Rule 31 read with Rules 35 and 41 of the said Rules. There is no corresponding provision enabling the State Government to claim or levy unearned income in respect of grant of land for Agricultural use under Part III or residential use under Part IV of the said Rules. Besides, going by the provisions of the said Rules it would apply to fresh grants in respect of unoccupied lands. In other words, the State Government as of now has no authority to levy unearned income in respect of lands in question under whatever title, which would obviously include lands held by occupants-Class I. : 31 :

In absence of a specific law on this subject, the State Government or its Officers cannot usurp to itself power to levy such charges on the basis of a Government Resolution. That power to levy unearned income can be invested in the State Government only if the State Legislature expressly or by implication authorises it to do so and not otherwise. By no means such power can be usurped by an Executive fiat in the form of a Government Resolution. Suffice it to observe that a Government Resolution cannot be substitute for a "law" to be enacted by the competent legislature- so as to affect the unconditional right of the Grantees to transfer and inherit the property. Till such law is enacted, the State Government and its Officers are bound to honour the commitment in the Lease Deed if already executed and in any case, give effect to the extant provisions of law. To that extent, the Resolution will have to be held as inconsistent with the Scheme of MLRC and the Rules framed thereunder; In particular, with reference to grant of land other than for commercial or industrial purpose. In that, insofar as grant of land for commercial and industrial purposes, there : 32 :

is express provision in the Rule 31(2)(c) enabling the State Government to claim half the unearned income where the land is sold without any construction. We are not called upon to consider the validity of that provision.

20. Counsel for the Petitioners had relied on the decision in the case of Sunil Vasudeva & Ors.vs.Delhi Development Authority reported in AIR 1988 Delhi 184.

184 That decision proceeds on the finding that the transfer was covered by the Government Grants Act, 1895 and in view of Section 3 of that Act the lease is supreme and cannot be superseded. It is also found as of fact that the terms of lease do not provide for charging of any fee, levy, cess or payment for grant of consent by the DDA. It is for that reason the recovery in relation to transfer of the property on the land under lease was held to be not valid. We have no difficulty in accepting this proposition. However, we respectfully disagree with the wide statement that the terms of lease cannot be superseded even by a (subsequent) law.

: 33 :

21. According to the Learned Counsel for the State, the enactment which is in vogue empowers the State to demand unearned income. For that reliance was placed on the provisions of the Government Grants Act, 1895(hereinafter referred to as Grants Act") The Statement of Objects and Reasons of the said Act explains the need of enacting the said legislation. It reads thus:

. "The Transfer of Property Act,

1882, Sections 10-12 invalidate with certain exceptions all conditions for the forfeiture of the transferred property on alienation by the transferee and all limitations over

consequent upon any such alienation or any

insolvency of or attempted alienation by

him. The Crown is not specifically mentioned in the Act, and it may be assumed

that it was not designed to impose fetters

of this description upon the discretion of

the Crown, especially as to the creation of

inalienable jahgirs in grants made for

public service; but it has been thought

better to set the question at rest by

express legislation.

. Upon a late occasion the Government of India were advised that it is

not competent for the Crown to create an

inalienable and impartible estate in the

land comprised in any Crown grant, unless

such land has heretofore descended by custom as an impartible Raj. The second sub-section of the Bill is intended to

obviate this inconvenience by providing that all Crown grants are to be construed according to their tenor, notwithstanding

any rule of law which might otherwise affect : 34 :

their operation."-Gazette of India, 1895, Part V, page 169."

Preamble of the Act postulates that it is an act to explain the Transfer of Property Act, 1882, so far as it relates to grants from the Government and to remove certain doubts as to the powers of the Government in relation to such grants. It is further mentioned that doubts have arisen to the extent and operation of the Transfer of Property Act, 1882 and as to the power of the Government to impose limitations and restrictions upon grants and other transfers of land made by it or under its authority, and it is expedient to remove such doubts. In this backdrop, the Grants Act was enacted to explain the provisions of Transfer of Property Act. Section 2 of the said Act envisages that provisions of Transfer of Property Act, 1882 shall not apply to the Government grants. Section 3 of the said Act postulates that the Government grants shall take effect according to its tenor. The said provisions read thus:

"2. Transfer of Property Act, 1882, not to apply to Government grants.- Nothing in the

Transfer of Property Act, 1882, contained

: 35 :

shall apply or be deemed ever to have

applied to any grant or other transfer of

land or of any interest therein heretofore

made or hereafter to be made [by or on

behalf of the Government)] to, or in favour

of, any person whomsoever; but every such

grant and transfer shall be construed and

take effect as if the said Act had not been

passed."

3. Government grants to take effect according to their tenor- All provisions,

restrictions, conditions and limitations

over contained in any such grant or transfer as aforesaid shall be valid and the effect

according to their tenor, any rule of law,

statute or enactment of the Legislature to

the contrary notwithstanding."

The purport of the above said provisions is no more res integra. The Apex Court in the case of Hajee S.V.M.Mohamed

.V.M.Mohamed Jamaludeen Vs. Government of TamilNadu reported in (1997) 3 SCC 466 has examined 1997)

the same. The question posed in the said decision was: can the Government unilaterally rescind a contract if the terms thereof so provide? According to the Government, the Agreement was created only as a licence which was revocable at the will of the grantor. The Government therefore, defended its action of revoking the contract as necessitated in the larger public interest. For that the Government had relied on Clause-7 of the Agreement which empowered the Government to remove : 36 :

the Contractor. The Learned Single Judge of the High Court accepted the stand of the grantee that Clause-7 was unenforceable. On that finding, the Court went on to hold that the grantee was entitled to entire damages claimed by him and the Suit came to be decreed accordingly. In Appeal, The Division Bench of the High Court set aside the decree and dismissed the Suit holding that Clause-7 of the Agreement was valid and enforceable in view of the provisions of the Grants Act. The Apex Court while referring to Sections 2 and 3 of the Grants Act, in paragraph-10, has observed as follows:

"10. The combined effect of the above two

sections of the Grants Act is that terms of

any grant or terms of any transfer of land

made by a Government would stand insulated

from the tentacles of any statutory law.

Section 3 places the terms of such grant

beyond the reach of any restrictive provision contained in any enacted law or

even the equitable principles of justice,

equity and good conscience adumbrated by

common law if such principles are inconsistent with such terms. The two provisions are so framed as to confer

unfettered discretion on the Government to

enforce any condition or limitation or restriction in all types of grants made by

the Government to any person. In other words, the rights, privileges and obligations of any grantee of the Government would be completely regulated by the terms

of the grant, even if such terms are inconsistent with the provisions of any

: 37 :

other law." (emphasis supplied)

There is no difficulty in applying the said principle to answer the point in issue. However, the question as to whether the terms of the grant provide for such power is a question which will have to be addressed on case to case basis by the appropriate authority in the first instance. If the Authority were to hold that the grant makes provision to empower the State Government either to impose new conditions during the lease period or for that matter at the time of renewal of the lease and/or to claim unearned income as precondition for recognising the transfer effected by the grantee of the subject land, then obviously the principle expounded in this Judgment will come into play. However, on the other hand, if there is no provision in the grant or lease deed authorising the Government to resort to any of the above option, obviously in such a case, the provisions of Grants Act cannot come to the aid of the State Government. Counsel for the State invited our attention to the exposition of the Apex Court in the case of The State of U.P. Vs. Zahoor Ahmad & : 38 :

Anr. reported in AIR 1973 SC 2520, to contend that the Government Grants Act declares the unfettered discretion of the Government to impose such conditions and limitation as it thinks fit, no matter what the general law of the land be. Indeed, there can be no difficulty in accepting this proposition. However, the question that needs to be addressed is at what stage and in which cases such discretion is available. That is available till the lease is executed and before the grantee is put in possession of the land. Once the grantee is put in possession of the land, parties are bound by the terms of the lease; and by virtue of the provisions of the Grants Act, the lease would prevail. If the lease does not keep the option to the Government to add, modify, alter or delete any condition of the lease, then the discretion of the Government cannot be taken forward unless the lessee put in possession of the land was to accept such change. Similarly, if there is renewal clause in the lease the Government will be obliged to renew the lease on the same terms and conditions.

22. Here we may usefully refer to the decision : 39 :

of the Apex Court in the case of Express Newspapers Pvt.Ltd.Vs.Union of India reported in AIR 1986 SC

872. Reliance is placed by the Petitioners on para-79 of this decision wherein the purport of provisions of the Grants Act has been considered. The Apex Court went on to restate the well-established legal position that the overriding effect of Section 3 of the Grants Act is that a grant of the property by the Government partakes the nature of law since it overrides even legal provisions which are contrary to the tenor of the document. As aforesaid, the Competent Authority will have to examine the fact as to whether the terms of the grant provide that it is open to the Government to delete any of the conditions therein or to add a new condition so as to levy unearned income and only then answer the controversy on case to case basis.

23. To get over this position, learned Counsel for the State would contend that on conjoint reading of the provisions of Sections 2 and 3 of Grants Act, it is possible to take the view that the Government is free to impose new condition at : 40 :

any time including during subsistence of lease and also at the time of renewal of the lease. This argument has been rightly countered by the Counsel for the Petitioners by additionally placing reliance on the decision of the Division Bench of our High Court in Mangalmurti(Supra). Mangalmurti That

decision arose out of the appeals filed by the State of Bombay against the decree passed by the trial Court in a Suit filed by the Respondent/Plaintiff in representative capacity. The case made out by the Plaintiff was that the lease given in respect of the plots was for 30 years with a covenant for renewal in each successive period of 30 years. The Plot was leased to be for building purpose only with condition that the lessee shall commence the construction within one year from the date he is put in possession of the land leased to him. The Lease Deed also made provision for renewal of the lease. It was agreed that the lessor at the end of the terms of 30 years and thereafter from time to time at the end of each successive further term of years as shall be granted at the request and cost of the lessee execute to him a renewed lease of the land for the : 41 :

term of 30 years provided, rent of the land shall be subject to such fair and equitable enhancement as the lessor shall determine on the grant of every renewal of lease. The Covenant further provided that every such renewed lease of the land shall contain such of the covenants, provisions and conditions in the said presents contained as shall be applicable and shall always contain a covenant for further renewal of the lease. When the lease period was to expire and the lessee requested for renewal of the lease, the Revenue authority offered lease for enhanced lease rent and also proposed certain terms which did not originally exist in the former lease. The Plot holders did not agree to the said proposal of the Government for enhancement of lease rent and in respect of certain conditions which were to be newly added in the renewed lease. In that backdrop, the suit was filed in a representative capacity on the cause of action that the Government refused to renew lease on the same terms offered in the earlier lease. The first Appellate Court, amongst others, held that the State Government had no right to insist on adding new condition in the renewal lease to the prejudice : 42 :

of the lessees. This view is unambiguously recorded by the Division Bench of our High Court in the said decision which has approved the opinion of the first Appellate Court. The Division Bench has then adverted to the principal contention argued on behalf of the Government-as regards the question of fair and equitable enhancement of the rent-in the following words:

"We have, therefore, now to give our

decision on two questions, namely, whether

the decision as given by the learned lower

Appellate Court as regards the fair and

equitable enhancement of the rent should be

set aside and secondly whether the State

Government, that is, the defendant, was

entitled to insert new conditions in the

leases to be granted to the Plot-holders by

way of renewal of the original leases."

positively found that the leases have got a character which is akin to a perpetual lease. It is then noted that there is no term in the lease that the fresh premium would be demanded at the time of renewal of the lease or the rent would be revised as existing on the date of the renewal. It is further held that renewal of the lease cannot be considered on the same footing like fresh grant of the lease. The Court has also adverted to the question as to whether the insertion of new condition in the lease deed to be granted by the renewal of the original lease could be insisted by the Government. The Court rejected the argument of the Government that renewal of the lease would mean grant of a fresh lease of the land or that the Government had right to add new conditions at the time of renewal. The correctness of this opinion of the Division Bench of our High Court was tested in appeal filed by the then State of Bombay before the Apex Court being Civil appeal No.215 of 1962, which was dismissed on 27th August, 1964. Significantly, the Apex Court while narrating the facts has clearly noticed that the finding of the High Court that no new additional conditions can be : 44 :

imposed has not been challenged before it. The Apex Court has also adverted to the finding given by the Division Bench of our High Court that the renewal of the leases cannot be placed on the same footing as that of granting a fresh lease for the first time and so the market value of the land should not be made sole basis for determining the fair and equitable rent which could be charged at the time of renewal. No doubt the only issue contested before the Apex Court was whether the enhancement of lease rent at the time of renewal insisted by the Government could be said to be just and fair approach. In the penultimate paragraph of the decision that aspect has been considered. The Apex Court went on to observe as follows:

". It is obvious that in a case of this kind it is not easy to determine

definitely as to what should be treated as

fair and equitable enhancement in 1939. It

is true that in deciding the question, the

Court should not ignore the position as it

obtained in 1905 when the plots were acquired by the Government as well as the

position that obtained in 1909 when the

plots were let out to the respective lessees. The premium paid by each one of

the lessees has also to be taken into

account and its relation to the then prevailing market value cannot be ignored.

Nevertheless, it would, we think, be : 45 :

unrealistic not to take into account the

increase in the market value of the property. It is true that the importance of

this fact should not be unduly exaggerated

and there would no difficulty in accepting

the argument of the respondents that in

fixing fair and equitable enhancement, the

increase in the market value should not be

treated as a decisive factor by itself. But

it seems to us that the High Court has not

attached any significance to this factor,

and that, in our opinion, is an infirmity in the approach adopted by the High Court...."

Relying on the abovesaid decision in the case of Mangalmurti(supra), the Petitioners have rightly contended that it was not open to the State Government to delete the condition in the lease/grant which permitted the grantee to transfer the leased plot and/or at the same time introduce a new condition for the first time, inter alia, providing for levy of unearned income, during subsistence of the lease or for that matter at the time of renewal of the lease. For, renewal of lease is not the same as granting a fresh lease especially when the former lease provides for renewal on same terms and conditions. The Petitioners have relied on the principle underlying the exposition of the Apex Court in the case of Biman Krishna Bose V/s. United Insurance Co. : 46 :

reported in 2001(4) Scale 675 in particular para-5 thereof, wherein it is held that a renewal of an insurance policy means repetition of the original policy. The only change brought about is in relation to a different date of its expiration albeit on identical terms of the original policy. We may usefully also refer to the exposition of the Apex Court in the case of Shri Sudarshan Mineral Co. Ltd. V/s. Union of India reported in (1975) 1 SCC 527. That was a "converse case" where the original lease had "no renewal clause". Yet the Government granted renewal of the lease for further period of 20 years in accordance with Rule 26 of the Mineral Concession Rules, 1960, while fixing dead rent for the renewed lease at enhanced rate. The Apex Court observed that if the original lease had contained renewal clause giving a right to the lessee of renewal for further period of 20 years at its option then it was possible that the renewal had to be done on the same terms and conditions. In such a case the clause inserted in the original lease could possibly be said to override the mandatory requirement of Rule 27(1) (c) of the said Rules. It went to further observe that in absence : 47 :

of such a right of renewal to the lessee the clauses in the original lease would be operative and effective only during the period of the original lease; and in that case the lease renewed for the subsequent period was renewal of the original lease in once sense and a fresh lease in another. In such a case the governmental authority will have to grant fresh lease in conformity with the statutory provisions and would have no power to relax the same contrary to the Rules in vogue. It necessarily follows that if the original(former) lease did not provide for obligation to pay unearned income to the State, such condition could not be introduced at a subsequent point of time during the subsistence of the lease or for that matter at the time of renewal of lease. On the other hand, if the original or previous lease contains condition authorising the Governmental authority to introduce new condition or is silent about renewal clause, it will be open to the authority to introduce new condition consistent with the law enacted by the State legislature on that subject. Suffice it to observe that the provisions of Grants Act would save and protect the : 48 :

restrictions, conditions and limitations contained in the grant or lease deed, but cannot be pressed into service by the State Government to assert that the same would enable the State Government to do so in manner otherwise than by enacting a specific law on that subject.

24. To get over this position, Learned Counsel for the State would contend that the decision in the Mangalmurti(supra) is distinguishable as it does not specifically deal with the point in issue. It is not possible to countenance this submission. Indeed, in the case of Mangalmurti(supra), the Apex Mangalmurt

Court was called upon to consider only one issue of whether the revision of lease rent can be said to be fair and just. However, in our opinion, the Division Bench of our High Court, while upholding the view taken by the first Appellate Court, specifically adverted to the issue as to whether new conditions can be imposed by the State Government at the time of renewal of the lease and that stand of the Government has unambiguously been rejected. At the cost of repetition we may observe that the decision of Mangalmurti was in respect of Mangalmurt

: 49 :

a suit filed in the representative capacity. We are conscious of the fact pointed out by the Counsel for the State that the said matter dealt with the terms of the lease produced in that case. Nevertheless, in our opinion, the said decision would bind the State Government atleast in cases having similar leases, unless the State legislature was to enact a law to overcome the said decision and to empower the State Government to add new conditions at the time of renewal of the lease or for that matter to levy unearned income. In absence thereof, we have no hesitation in taking the view that it is not open to the State Government to impose new conditions for the first time either during subsistence of the lease or at the time of renewal of the lease which conditions may be prejudicial to the grantee and inconsistent with the tenor of the original lease in absence of law on that subject or condition incorporated in the original lease in that behalf. The Government pleader would then contend that the decision in Mangalmurti's case is not binding on the State Government. Even this submission does not commend to us. We have already adverted to the issues : 50 :

raised in Mangalmurti's case before this Court and the Apex Court in appeal. The view taken on the points in issue has become final. It is not only binding on the State Government but also on us. It was then argued that the decision in Mangalmurti's case is per incuriam as it has not adverted to the efficacy of Sections 2 and 3 of the Grants Act. Indeed, neither this Court nor the Apex Court has specifically adverted to the provisions of the Grants Act. However, for the view we have taken, in our opinion, it would make no difference on account of the fact that the provisions of Grants Act have not been adverted to in Mangalmurti's case.

25. As aforesaid, the exposition in that case will apply on all fours to the occupants who are covered by the definition of the Occupants Class-I as specified in Section 29 of the MLRC. Inasmuch as, occupants class-I have unfettered right to alienate their interest in the land in question. In some of the Petitions reliance was placed on condition which permitted the grantee to transfer the lands in question. It would necessarily follow : 51 :

that these grantees have had full occupancy and complete right to alienate the property; Whereas, in case of occupants covered by occupants class II and Government lessees situation would be somewhat different. In that, sofar as the occupants Class-II and Government Lessees are concerned, their right is not an absolute or unfettered right but is restricted as is provided in the governing statutes. In other words, the State Government will be free to impose such conditions and restrictions permissible by law in respect of occupants Class-II and Government lessees, which may include levying of unearned income.

26. To get over this position, Counsel for the Petitioners would contend that "Government lessees" would be covered as occupants Class-I category and would possess rights and privileges similar to occupants Class-I. This argument deserves to be stated to be rejected. Inasmuch as the legislature has noted the distinction between three classes of person holding land as mentioned in Section 29 of the MLRC. Section 29 reads thus:

: 52 :

"29. Classes of persons holding land

29.

(1) There shall be under this Code the

following classes of persons holding land

from the State, that is to say-

(a) Occupants -Class I

(b) Occupants -Class II

(2) Occupants - Class I shall consist of persons who -

(a) hold unalienated land in perpetuity and

without any restrictions on the right to

transfer;

(b) immediately before the commencement of

this Code hold land in full occupancy or

Bhumiswami rights without any restrictions

on the right to transfer in accordance with

the provisions of any law relating to land

revenue in force in any part of the State

immediately before such commencement; and

order issued under Section 150 of the Madhya Pradesh Land Revenue Code, 1954, and holders of land in Bhumidhari rights in any local

area in Vidarbha and are permitted hereafter, subject to the rules made by the

State Government in this behalf, on payment

of a premium (not exceeding three times the

assessment payable in respect of such land)

to be included in occupants -Class I.

(3) Occupants -Class II shall consist of persons who,-

(a) hold unalienated land in perpetuity

subject to restrictions on the right to

transfer;

(b) immediately before the commencement of this Code hold-

(i) land in Vidarbha in

: 53 :

Bhumiswami rights with

restrictions on the right to

transfer or in Bhumidhari

rights under the Madhya Pradesh

Land Revenue Code, 1954; and

(ii) elsewhere hold hand in

occupancy rights with

restrictions on the right to

transfer under any other law

relating to land revenue; and

have been granted rights in unalienated land under leases which entitle them to hold the

land in perpetuity, or for a period not less than fifty years with option to renew on

fixed rent, under any law relating to land

revenue and in force before the commencement of this Code; and all provisions of this

Code relating to the rights, liabilities and responsibilities of Occupants - Class II

shall apply to them as if they were Occupants - Class II under this Code."

Besides, section 29 even section 39 of the MLRC would throw light on this issue. Section 39 reads thus:

"39.

39. Occupant to pay land revenue and Government lessee to pay rent fixed

Every occupant shall pay as land revenue the assessment fixed under the provisions of

this Code and rules made thereunder; and every Government lessee shall pay as land

revenue lease money fixed under the terms of the lease."

When it comes to the payment of revenue, even at : 54 :

that stage, distinction between the occupants referred to in Clauses (a) and (b) of sub-section 1 of section 29 in contradiction to the Class of Holder, i.e. Government lessees in clause (c) has been kept in mind by the Legislature. The Occupants referred to in clauses (a) and (b) are obliged to pay "land revenue", whereas the Government lessee covered by clause (c) has to pay "rent". Notably, a "Government Lessee" is defined in Section 2(11) of the MLRC to mean a person holding land from Government under a lease provided by Section 38 of MLRC. Whereas, an "Occupant" is defined in Section 2(23) of MLRC to mean a holder in actual possession of unalienated land, "other than a tenant or Government lessee", provided that, where a holder in actual possession is a tenant, the land holder or the superior landlord, as the case may be, shall be deemed to be occupant.

27. We shall now examine the legislative history governing the issue of grant of land by the Government. As has been observed earlier, in all these cases, the Petitioners claim to be in possession of the respective land as : 55 :

grantee/lessees either on account of grant directly in their favour or in the name of their predecessor. Insofar as the lands which were then covered by erstwhile Central Provinces areas, there may be cases where the grant was given even before the Central Provinces Land Revenue Act, 1881 was enacted(hereinafter referred to as CPLRA). As we have noted earlier, insofar as Central Provinces area is concerned, we have one set of cases where lease deed has been executed. On expiry of the original lease in some cases the lease has been renewed, but in some cases renewal lease deed has not been executed. In cases where the lease deed has been renewed it is noticed that the renewal was on the same terms and conditions as in the original lease. However, in cases where renewal has not been done so far is either on account of opposition of the grantee to the insistence of the Government to impose new conditions for the first time for the renewal of lease or may be on account of failure of the lessees to apply for renewal. Insofar as the latter category is concerned, it is doubtful whether the occupation of the land by the concerned person can be said to be on the same terms and : 56 :

conditions as in the original lease or unauthorised. That is a question of fact which will have to be addressed on case to case basis. However, in cases where renewal has been delayed because of insistence by the State Government to impose new condition and opposition of the lessees to accept those conditions, those matters will have to be considered independently keeping in mind the legal position.

28. In cases where the lease deed is silent about Government power to add new condition but the Government is insisting to impose new conditions, there can be no doubt that such insistence of the State Government is without authority. However, in those cases, limited enquiry to be done is whether the lease deed relied by the concerned occupants expressly or by implication authorises the Government to add new conditions during the subsistence of the lease and/or at the time of renewal. All these matters essentially, being questions of fact and in some cases disputed, we would leave the same open to be decided by the Competent Authority in the first instance. Hence : 57 :

we would relegate all the Petitioners before the appropriate authority who in turn will have to consider the relevant aspects and record finding of fact on case to case basis.

29. Reverting to the provisions applied to erstwhile Central Provinces area, the earliest enactment was CPLRA of 1881 which was followed by Central Provinces Land Revenue Act, 1917(hereinafter referred to as CPLRA, 1917). The Central Provinces Area thereafter was merged in the State of Madhya Pradesh which area was governed by Madhya Pradesh Land Revenue Code, 1954. Later on Central Provinces Area after reorganisation of the States became part of State of Maharashtra and is governed by Maharashtra Land Revenue Code, 1966. Significantly none of the above enactments make specific provision empowering the State Government to alter or modifying the subsisting lease conditions at the time of renewal of the lease or for that matter to levy unearned income to legitimise proposed transfer.

30. Insofar as the lands situated in the : 58 :

erstwhile Berar area, same were governed by the Hyderabad Assigned District Land Revenue Code, 1896. Later on Berar Land Revenue Code, 1928 was introduced which became applicable to the said lands. The said Berar area later on amalgamated with the Central Provinces, which area was governed by Madhya Pradesh Land Revenue Code, 1954; and after reorganisation of the States now the same are governed by provisions of Maharashtra Land Revenue Code, 1966. Even these enactments make no specific provision to empower the State Government to alter or modify the subsisting lease conditions or to impose new conditions at the time of renewal of the lease or for that matter to levy unearned income to legitimise the proposed transfer.

31. Indubitably, as of now the provisions of Maharashtra Land Revenue Code, 1966 uniformly apply to the erstwhile Central Provinces area as well as Berar area. Insofar as provisions of MLRC are concerned, Section 20 unambiguously provides that title of State in all lands, public roads etc, which are not property of persons legally capable of holding property, and except insofar as any : 59 :

rights of such persons may be established, in or over the same, and except as may be otherwise provided in any law for the time being in force are and are hereby declared to be, with all rights in or over the same, or appertaining thereto the property of the State Government. It enables the Collector subject to the Orders of the Commissioner, to dispose of the property of the State Government in such manner as may be prescribed by the State Government in this behalf, subject always to the rights of way, and all other rights of the public or of individuals legally subsisting. Section 22 of the Code provides that subject to the general orders of the State Government, it shall be lawful for a Survey Officer during the course of survey operations under this Code, and at any other time for the Collector, to set apart unoccupied lands (not in the lawful occupation of any person) in villages or parts thereof for forest or fuel reserve, for free pasturage of village cattle or for grass or fodder reserve, for burial or cremation ground, for gaothan,

gaothan for camping ground, for threshing floor, for bazaar, for skinning ground, for public : 60 :

purposes such as roads, lanes, parks, drains or for any other public purposes; and, the lands assigned shall not be otherwise used without the sanction of the Collector and in the disposal of lands under Section 20 due regard shall be had to all such special assignments. Chapter III deals with aspects relating to lands. Section 29 which is part of Chapter III defines the classes of persons holding land from the State to which reference is already made earlier.

32. Section 31 envisages that it shall be lawful for the Collector subject to such rules as may from time to time be made by the State Government in this behalf, to require the payment of a price for unalienated land or to sell the same by auction, and to annex such condition to the grant as may be prescribed by such rules "before land is entered upon" under section 30. The price(if any) paid for such land shall include the price of the Government right to trees thereon and shall be recoverable as an arrears of land revenue. The language of section 31 reinforces the position that conditions to grant are to be annexed as may be prescribed by : 61 :

the Rules "before land is entered upon under section 30". This express provision would militate against the argument of the State Government that condition can be annexed even after land is entered upon under section 30 after the grant.

33. What is significant to note is the sweep of Section 36 of MRLC which postulates that an occupancy shall, subject to the provisions contained in Section 72 and to any conditions lawfully annexed to the tenure, and save as otherwise provided by law be deemed as heritable and transferable property. This provision presupposes that if no condition regarding transfer has been annexed to the tenure, the occupant would enjoy complete right to transfer his interest therein. In a given case if contrary condition is annexed to the tenure then the enquiry to be undertaken is whether such condition is lawfully annexed. Even this provision reinforces the argument of the Petitioners that State Government by its fiat in the form of Government Resolution cannot unilaterally alter the conditions of the tenure or for that matter add new conditions. Once : 62 :

the grantee has already entered upon the land pursuant to a lawful grant, if the condition to be added or modified is acceptable to the grantee, only then it can be said to be lawful tenure and not otherwise. We have already noticed that merely because the lease is due for renewal, that cannot be taken as occasion by the State Government to insist insertion of a new condition though not acceptable to the holder. Besides, the condition to be so annexed should be as provided by law which is enacted by the competent legislature. In absence thereof, such condition can neither be said to be lawfully annexed to the tenure nor affect the indefeasible right in the holder created by legal fiction to have heritable and transferable property. No doubt section 37 would reveal that an occupant is entitled to the use and occupation of his land in perpetuity conditionally on the payment of the amount due on account of the land revenue for the same, according to the provisions of this Code, or of any rules made under this Code or of any other law for the time being in force, and on the fulfilment of any other terms or conditions lawfully annexed to his tenure. However, this : 63 :

provision does not dilute the efficacy of right flowing from Section 36 of MLRC to enjoy the right of transferability and inheritance, so long as the lease tenure does not put any restriction thereon.

34. Power to grant leases is bestowed on the Collector in terms of section 38 of the MLRC. We may reproduce Section 38 to 40 as the same are of some relevance which read thus:

"38. Power to grant leases

38.

. It shall be lawful for the

Collector at any time to lease under grant

or contract any unalienated unoccupied land

to any person, for such period, for such

purpose and on such conditions as he may,

subject to rules made by the State Government in this behalf, determine, and in any such case the land shall, whether a

survey settlement has been extended to it or not, be held only for the period and for the purpose and subject to the conditions so

determined. The grantee shall be called a

Government lessee in respect of the land so

granted.

39. Occupant to pay land revenue and Government lessee to pay rent fixed

. Every occupant shall pay as

land revenue the assessment fixed under the

provisions of this Code and rules made

thereunder; and every Government lessee

shall pay as land revenue lease money fixed

under the terms of the lease.

40. Saving of powers of Government

: 64 :

. Nothing contained in any provision of this Code shall derogate from

the right of the State Government to dispose of any land, the property of Government, on

such terms and conditions as it deems fit."

Indeed section 38 authorises the Collector to grant leases of any unalienated, unoccupied land to any person, for such period, for such purpose and on such conditions subject to rules made by the State Government in that behalf. It is further provided that the grantee shall be called a Government lessee in respect of the land so granted. The Government lessee is one who has been granted land by the Government under this Code. The other holders are either falling in Class of occupants Class-I or occupants Class-II as the case may be. The purport of Section 40 no doubt is wide enough to enable the State Government to dispose of any land, which is the property of the Government on such terms and conditions as it deems fit and the provisions of the Code shall not derogate that right of the Government in any manner. In our view, however, this provision will be of no avail to the State Government so as to contend that it can impose new conditions for the first time either : 65 :

during the subsistence of the lease or at the time of renewal of the lease.

35. Section 41 to 49 provide for use of land and the restrictions in that regard. Section 50 to 54 deal with encroachment of land and measures to remove the same. Section 55 to 60 deal with relinquishment of land and section 61 to 63 deal with protection of certain occupancies for process of courts. Chapter IV however deals with the issues of land revenue. Even on close scrutiny of provisions under section 64 to 78 enacted under chapter IV, it is not possible to take the view that the State Government can impose new conditions or modify the existing conditions of subsisting lease or at the time of renewal of lease.

36. The learned Counsel for the State argued that leases executed since 1921, the renewal of leases is in Form which contains condition enabling the State to alter, modify or add new condition. According to the learned Counsel even Rules 34 of the Maharashtra Land Revenue (Disposal of Government Lands) Rules 1971 empowers the Collector : 66 :

to grant temporary leases on such terms and conditions as he may annex to the grant. In so far as the existence of condition in the grant, that is a matter to be enquired into by the Competent Authority on case to case basis. We express no opinion in that behalf. In so far as Rule 34 is concerned, that is a provision empowering the Collector to annex such terms and conditions to the grant. That provision will be of no avail to contend that it would authorise the Collector to add, delete or modify any condition during the subsistence of the grant or at the time of renewal. Besides, this provision governs only temporary leases.

37. Taking over all view of the matter, we have no difficulty in accepting the claim of the petitioners that provisions enacted by the State Legislature as of now would not authorise the State Government to insert new conditions or modify any condition during the subsistence of lease period or for that matter at the time of renewal of the lease. The renewal of the lease necessarily should be on same terms and conditions as in the earlier : 67 :

lease except the change or revision in respect of Annual lease rent.

38. The next question is whether the enhancement of annual lease rent by the Government in terms of Resolution dated 19th June, 2007 can be said to be illegal, unjust and unfair. There can be no dispute that the Government is entitled to increase the lease rent from time to time. Indeed, revision in annual lease rent at the time of renewal of the lease cannot be said to be addition of new condition as such. The only limitation on the State Government would be to revise the lease rent on fair and just basis. Indeed, there is no provision in the Code-atleast brought to our notice, which would limit the power of the State Government to enhance the lease rent in a particular manner or in terms of quantum. As there is no such limitation placed in the land revenue code, the only test to be applied is whether the proposed revision is just and fair. While dealing with the point under consideration we have kept in mind the principle expounded by the Apex Court in both the decisions of Mangalmurti's case, namely, : 68 :

the first decision reported in AIR 1959 SC 639 and the subsequent unreported decision dated August 27, 1964. We find that the State Government has introduced the Government Resolution dated 19th June, 2007 on this subject after due deliberation. The State Government was anxious to evolve a formula for revision of lease rent which could be uniformly applied throughout the State. Relying on the recommendation of the one man Committee appointed for that purpose, the Government has taken a policy decision to revise the lease rent as per the stated formula. The formula for determining the annual lease rent is that of amount equal to the prime lending rate only on the 20% of existing market value of the land. In other words, if the prevailing prime lending rate is 10% and the existing market value of the land is around Rs.One Lakh, the Annual lease rent would be around Rs.2000/-(i.e. 10% of Rs.20,000/-). That would be only about 2% of the prevailing market value of the property. This formula attempts to factorise the inflation cost, cost of administration and escalation impact. This basis will be uniformly applied to all leases in the State. Obviously : 69 :

while fixing this parameter the State was conscious of the fact that the grantees have already paid premium when the grant was made. As a result, the attempt is to arrive at a realistic and fair return on the property whose owner is primarily the State Government. The formula is arrived at on just and fair basis and not capricious or arbitrary.

39. However, the Counsel for the Petitioners would contend that the annual lease rent which was fixed while executing the earlier lease was very nominal. Whereas, on applying the above formula the annual lease amount to be fixed at the time of renewal will be staggering and absurdly excessive. The argument though attractive at the first blush will have to be rejected. In the first place, there is no legislation limiting the quantum of annual lease rent to be levied by the State Government. The grievance is that, when the lease was granted in some cases in the year 1900, for a nominal amount of Rs.7/-, that will now be substantially enhanced manifold. In some cases it may even be to the extent of 2000 times the last annual rent. That cannot be the basis to hold that : 70 :

the formula evolved by the State Government is unjust and unfair. One cannot be oblivious of the degeneration of Rupee value over the years. In our opinion, the State Government has taken a policy decision to recover fair uniform returns in relation to the Government property throughout the State which amount would factorise the inflation cost, cost of administration and escalation impact. The formula adopted by the State Government on the recommendation of the committee, is "equivalent to prime lending rate only on the 1/5th(20%) (not the full) value" of the existing market rate of the property. That would not work out to be even two digits percentage of the market value of the land, to be paid as the annual lease rent. To make the annual lease rent upto two digits percentage of the market value, the prime lending rate itself will have to reach upto 100% on the investment- which is almost next to impossible. No material is produced before us to indicate that as per the prevailing Commercial market practise almost same amount is payable towards lease rent in respect of free hold lands. In absence of such evidence it is not possible for us to assume that the formulae evolved : 71 :

by the Government results in indulging in profiteering or being comparable to commercial trend- so as to be labelled as unreasonable, unjust and unfair. Accordingly, the formulae adopted by the State cannot be said to be unreasonable and arbitrary or unconscionable at all. Besides, there is sound rationale behind such formulae. We may usefully refer to the decision of the Apex Court in the case of Style (Dress land) V/s. Union Territory, Chandigarh reported in (1997) 7 SCC 89. The Apex Court rejected similar challenge that the annual lease rent was increased manifold (from Rs.2671/- per month to Rs.14000/- per month within 10 years) at the time of renewal of lease. In that case the Court proceeded on the finding that the procedure adopted and made the basis for enhancing the rent, could not be termed arbitrary, discriminatory or unreasonable.

40. Much emphasis is placed on the observations of the Apex Court in Mangalmurti's case(supra) which has noted that the Court cannot ignore the position that when the plots were let out to the respective lessees, the lessees have paid premium. : 72 :

The fact remains that the earlier lease period either had expired or was likely to expire and new lease is to be entered. Significantly, the Apex Court had noted that it would be unrealistic not to take into account increase in the market value of the property. Indeed, the Apex Court added word of caution that importance of that fact should not be exaggerated and that should not be a decisive factor itself. However, the proposed revision of annual lease rent is founded on the policy decision of the State Government to introduce lease rent fixation formula to be uniformly applied to all the Government leases in the State. Ostensibly, it may appear that the formula adopted by the State Government is a complete departure from the modality of fixation of annual rent in the past. But that has been necessitated in larger public interest both for deriving realistic and fair return on the Government property and also to bring in uniformity and simplification of procedure for computation and levy of such charges. To wit, if in the same area, two different leases were to become due for renewal around the same time and the earlier lease rent was to be taken as the sole : 73 :

basis, it is quite likely that the two plot holders will end up in paying different rates of annual lease rent after its renewal. In that case, certainly, the holder who is required to pay higher lease rent can complain of discrimination by the State. By applying uniform pattern to revise the annual lease, such anomaly will be ruled out. Suffice it to note that the State has taken a considered and conscious policy decision and has advisedly simplified the revision of annual lease rent by applying a uniform formula of amount commensurate with the amount of prime market lending return only on 20%(1/5th) of the existing market value of the property. By no standard, such approach can be said to be unjust and unfair or rack-renting, profiteering and indulging in whimsical or unreasonable bargains. The argument of the Petitioners that such enhanced or revised annual lease rent is unconscionable and would result in confiscatory action will have to be stated to be rejected. The State has acted in the larger public interest and has taken policy decision based on the recommendation of the experts' opinion in that behalf. The larger public : 74 :

interest reckoned by the State Government in relation to regulation and control of the Government property shall necessarily prevail over the private interest of the Petitioners. Just and equitable does not mean that the annual lease rent should be so structured that in the perception of the lessee the same is affordable to him; irrespective of the fact that such low rent may not be able to subsume the inflation cost, cost of administration and escalation impact. That would militate against the larger public interest and of economics of sustainable regulation and control of the Government property. A priori, to this extent, the Government Resolution will have to be upheld.

41. To sum up, we hold that the principle stated in Mangalmurti's case (supra) that it is not open to the State Government to add new condition during the subsistence of the lease or at the time of renewal of the lease unless the conditions of the tenure so provide is binding. However, if the conditions of the grant or lease imposes such restriction, condition or limitation, obviously, that would be protected by Section 3 of the : 75 :

Government Grants Act, 1895. In cases where such condition has been imposed, obviously, those cases will not be covered by the definition of "occupants Class-I" so as to enjoy permanent and transferable right in the land.

42. According to the Petitioners insofar as Berar Land Revenue Code, 1928 is concerned, Section 56 thereof provided that subject to personal law, the rights of occupant shall be permanent and transferable and on his death shall pass by inheritance, bequest or survivorship, as the case may be. According to the Petitioners they were enjoying the lands in question as Bhumiswami. It was argued that, that right was protected by the subsequent legislation of Madhya Pradesh Land Revenue Code, 1954 (Section 152) or for that matter, MLRC(Sections 336, 337). Indeed, if the holder of the land possessed permanent and transferable right in the property, he would fall within the definition of "occupant-Class-I" within the meaning of Section 29 of the MLRC. Whether he is covered by definition of occupant-Class-I or not is a question of fact to be examined by the : 76 :

appropriate authority on case to case basis.

43. For the time being, suffice it to observe that if any restriction has been noted in the Lease Deed, such cases will have to be considered independently. We are conscious of the fact that insofar as Berar area is concerned, the holders were having B-tenure patta and not a formal Lease Deed as in the case of Central Provinces Area. The appropriate Authority will have to examine every case on its own merits as the nature of right of the party will have to be established in the first place. That will have to be decided keeping in mind the governing provisions of the relevant enactments at the time of grant and subsequent legislations as would be applicable to that case. Similar approach will have to be adopted in relation to lands covered by the then Central Provinces area where the Petitioners are unable to produce the lease deed/grant. In those cases the Competent Authority will have to examine the matter on the assumption that the lease was as per the governing provisions of the concerned enactment when the grant was made. That will mean that the : 77 :

Competent Authority will be justified in assuming that the grant was on terms provided in the "Form of Grant/Lease" prevailing at the relevant time of grant prescribed under the relevant Act and Rules formed thereunder. In other words, if the prescribed "Form" at the relevant time incorporates any condition authorising the Government to delete any condition or add any new condition during the subsistence of the lease or at the time of renewal, it may be legitimate for the Authority to do so. Dependent on the nature of right possessed by the holder, the question whether he would fall in occupant class-I or otherwise, can be addressed. In other words, where the alienation has been permitted under the Lease Deed, such holders would be covered by definition of occupants-Class-I. On the other hand, where the relevant lease or the governing law imposed restriction on transfer or alienation of right in the property, any alienation made by the holder without prior approval of the local authority, such alienation will be illegal, unless regularised by the Authority. Indeed, regularisation will have to be done as per the terms to be imposed in that behalf including upon : 78 :

payment of unearned income. In such cases, the argument that no new condition can be imposed, cannot be pressed into service. All these matters will have to be examined by the appropriate authority in the first place and only then, the Authority can insist for imposing new condition on the occupants of the land, if permissible in law.

44. We shall now revert to the Government Resolution dated 19th June 2007. We are in agreement with the argument of the Petitioners that by Government Resolution, it is not open to the State Government to repeal provisions of Madhya Pradesh Land Revenue Code, 1954 pertaining to the lease of Nazul lands in Nagpur and Amravati region and the Rules incidental thereto framed by the Government dated 22nd May 1956 and amendments thereto carried out by the Government of Maharashtra on 23rd May 1961 and 14th August 1963. The repeal of enactment will have to be done by the State Legislature. Assuming that the purport of Clause (1) of the Government Resolution is to indicate that the provisions of the stated enactment were inapplicable to the lands now : 79 :

governed by the MLRC hereafter, even so, that could not have been done by issuing a Government Resolution in absence of delegation by the Code in that behalf. As such, clause (1) of the said Government Resolution cannot be sustained.

45. Insofar as clause (2) of the Resolution is concerned, it provides for regularisation of the violation of terms and conditions. The Petitioners who have violated the terms and conditions of the lease would suffer the consequence of such violation if the same was not to be regularised. The violation will have to be reckoned only in those cases which expressly provide for such restriction in the Lease Deed or by virtue of some statutory provision. That is a matter to be enquired into on case to case basis by the appropriate authority. If Clause (2) of this Resolution was to be set-aside, there would be no other option available to the concerned land holders but to suffer the consequence of having violated the terms and conditions by transferring the lands unauthorisedly. In that case, along with the original land holder, even the subsequent : 80 :

purchaser would suffer the same consequence. The provision is in the nature of allowing the concerned holders of land to get the irregularity validated but on payment of specified unearned amount of the market value of the land as on the date of violation of the condition. We find no merit in the stand taken on behalf of the Petitioners that such mechanism provided by the State Government to enable the land holders to regularise the violation as illegal in any manner.

46. Insofar as clause (3) of the said Government Resolution is concerned, it is an opportunity provided to the land holders of allotment of land on ownership right basis subject to paying specified amount of ownership right of the existing market value of the land. Once again, this would apply to occupants who are not covered by the occupants Class-I category. They would get ownership rights and would be reckoned as occupants Class-I, on payment of specified amount and complying with other formalities. The option was available only for two years from the date of the Resolution. That period has already expired. It : 81 :

is for the State Government to consider whether to extend the period provided in sub-clause (b) of Clause (3) of the Resolution. We express no opinion in that behalf. Suffice it to observe that we find no merit in the challenge to Clause (3) of the stated Resolution.

47. Insofar as challenge to Clause (4) of the Resolution which deals with holding land on lease and the annual lease rent, we have already held that the same is just and fair and in larger public interest.

48. Insofar as Clause (5) is concerned, that deals with the transfer after coming into force of the Resolution and change of user. Insofar as regularisation of change of user is concerned, that presupposes that there has been violation of terms and conditions of lease. If the concerned land holder has to avail of the opportunity of regularisation, he cannot be heard to complain that the amount specified is excessive. In our opinion, the amount specified for such regularisation is a fair and just amount provided in the Government : 82 :

Resolution. If the concerned land holder was to succeed in the challenge to this clause, it would necessarily follow that the said land holder will have to suffer the consequence of having violated the terms and conditions of lease, which may include eviction from the property. Thus understood, we find no basis even in this challenge.

49. The remaining provisions in the Resolution are consequential in nature. As we have expressed our opinion with regard to substantive provisions, it is not necessary to dilate any further on this aspect.

50. We may place on record that the Advocates appearing for the respective parties invited our attention to the relevant documents including Government Resolutions/Circulars as well as provisions of enactment and reported decisions in support of their contention. However, we do not think it necessary to elaborate on those aspects for the reasons already recorded in the earlier part of the Judgment. Moreover, we are not : 83 :

expressing any opinion either way on the efficacy of the documents or the status of any of the Petitioners before us. Instead, we keep all questions in that behalf open to be considered by the Competent Authority in the first place.

51. Accordingly, we would relegate the Petitioners to the appropriate authority who in turn will examine all relevant aspects on case to case basis and pass appropriate order in accordance with law.

52. The Petitioners shall approach the appropriate authority within eight weeks from the date of this decision. We make it clear that the present decision governs only the subsisting lease at the relevant time of transfer. In case, the transfers have been effected after the expiry of lease period, it is for the appropriate authority to consider whether such transfer is legitimate and in any case, could be regularised. All questions in that behalf will have to be considered on its own merits. In the event, the appropriate Authority finds that the occupant is unauthorised : 84 :

occupant, it will be free to take such action as may be permissible in accordance with law. The question where applications for renewal of leases are pending with the Government or the appropriate authority, whether they are legitimate occupants or otherwise is also an issue which will have to be considered by the appropriate authority on its own merits and in accordance with law.

Re: Writ Petition No.1607 of 1990

53. That takes us to Writ Petition No.1607 of 1990. As has been mentioned in the opening part of this Judgment, this Writ Petition is in respect of Plot No.32 purchased in the year 1952 for commercial use from Nagpur Improvement Trust. It is common ground that provisions of MLRC are not applicable to this case. The Petitioners have more or less adopted the same argument referred to earlier. In that, the Nagpur Improvement Trust had no power to impose condition of unearned income in absence of express provision in the Nagpur Improvement Trust Act in that behalf. It was : 85 :

further argued that the Resolution passed by the Trust on 2nd May 1982 provided that in case of sub-division of Trust plot, if found divisible as per Nagpur Improvement Trust Rules and the lease holder is sub-dividing the plot for the purpose of selling, in that case, permission for sub-division shall be granted subject to agreement to deposit 50% (unearned income) being difference of market value prevailing at the time of application and the original purchase price. According to the Petitioner, the amount of 50% demand under this Resolution, assuming it to be legitimate, cannot be sustained as it is unconscionable provision. Besides, such a new condition cannot be imposed at the time of renewal of the lease. It was also argued that the mechanism provided by the Trust results in discrimination between the auction purchaser and direct lessee and also because it is applicable only in case of sub-division of the plot and not to transfer of the entire plot. It is argued that the plot lease holder has had no option but to succumb to the pressure of the Trust to pay the demanded amount under protest.

: 86 :

54. The argument though attractive at the first blush, clearly overlooks the fact that in the original lease, no sub-division was allowed. It is the Petitioner who asked for such permission and in that context condition has been incorporated by way of modification at the instance of the Petitioner on condition that he would pay unearned income, to which he agreed upon. It is therefore not a case of renewal of the lease agreement as such. Whereas, it is a case of modification of the lease term at the request of the lease plot holder and in the nature of a fresh lease. In such a case, we would hold that the Petitioner himself was responsible for introducing such change in the lease terms. Thus understood, it is not open to the Petitioner to now challenge that action. The Petitioner cannot be allowed to aprobate and reprobate at the same time. Hence, this Petition will have to be rejected.

Writ Petition No.908 of 1991:

55. Insofar as Writ Petition No.908 of 1991 is concerned, even this Petition is in respect of land : 87 :

which is leased by the Nagpur Improvement Trust to the Petitioner. Even in this Petition, similar stand is taken as in the companion Petition referred to above. However, on perusal of the lease deed of 5th December 1986, it is noticed that express condition has been imposed that the lessee shall not assign, transfer or part with the possession of the demised premises so as to cause any sub-division therein or otherwise to alter the nature of present demise. Proviso to clause (i) further postulates that the lessor may subject to such terms and conditions as it may fix, grant permission to the lessee to assign, transfer or to part with possession of demised premises so as to cause any sub-division therein or otherwise alter the nature of this present demise. The second proviso to clause (i) further provides that where sub-division of the demised plot is permissible as per the Rules and the lessee with an intention to sell the sub-divided plot, applies for sub-division and the permission to sell the sub-divided plot and when such permission is granted, then the lessee shall have to pay 50% of the unearned income. It further provides that in case there is dispute : 88 :

regarding market price of the sub-divided plot, the decision of the Chairman shall be conclusive and final and binding on the lessee. Clause (h-1) reads thus:

"(h-1) The lessee shall not disturb,or build over, or otherwise deal or interfere with

any of the service lines referred to in

sub-clause (g) without the previous permission in writing of the authority which laid the service line

(i) The lessee shall not assign, transfer or part-with the possession of the demised

premises so as to cause any sub-division

therein or otherwise to alter the nature of

this present demise.

Provided, however, that the lessor may

subject to such terms and conditions as it

may fix grant permission to the lessee to

assign,transfer or to part-with possession

of the demised premises so as to cause any

sub-division therein or otherwise alter the

nature of this present demise.

Provided further that where sub-division of

the demised plot is permissible as per the

rules and the lessee with an intention to

sell the sub-divided plot applies for

sub-division and the permission to sell the

sub-divided plot and when such permission is granted,then the lessee shall have to pay

50% of the unearned income i.e.,difference

between premium paid and the market price of the land prevailing on the date of sale. In

case there is dispute regarding market price of sub-divided plot, the decision of the

Chairman,shall be conclusive and final and

binding to the lessee."

: 89 :

56. On a fair reading of Clause (h-1), there is no manner of doubt that the restriction on transfer of whole plot is unaffected. The limited indulgence shown to the lease holder is of allowing him to sub-divide the plot if permissible as per the rules so as to enable him to sell the sub-divided plot. This provision in fact is to allow the lease holder to sell the sub-divided plot, but on payment of specified unearned income. The Petitioner having agreed to such lease terms, has bound himself by the contractual obligation stated therein. The argument that there is no provision in the Nagpur Improvement Trust Act that would authorise the Trust to demand unearned income, cannot be countenanced at the instance of the Petitioner who willingly accepted such condition or restriction, which, to his understanding, was in his interest. In fact, such lease condition is saved by the provisions of the Grants Act and would prevail. Accordingly, there is no merits in the grievance made by the Petitioner in this Petition as well.

57. We place on record our appreciation for the : 90 :

able assistance given by the Counsel appearing for the respective parties, without which it would not have been possible for us to conclude the argument in shortest possible time irrespective of the large number of Petitions, which are required to be disposed of by this common judgment.

58. Accordingly, we proceed to pass following order :

(1) Writ Petition No.1607 of 1990 and 908 of 1991 are dismissed. Rule stands discharged in both the Petitions.

(2) All other companion Petitions are partly allowed. The relief claimed by the respective Petitioners to challenge the revision of annual lease rent is rejected. The Government Resolution dated 19th June, 2007 is upheld to this extent.

(3) Insofar as the other reliefs claimed in the respective Petitions, the Petitioners are relegated before the appropriate : 91 :

authority. The Petitioners shall file proceedings before the appropriate authority within eight weeks from today asking for reliefs as may be permissible in law. All questions in that behalf are left open, to be decided by the appropriate authority on its own merits in accordance with law keeping in mind the observations made in the earlier part of this Judgment.

(4) The State Government will be free to consider extending the time to apply for allotment of land on ownership right under clause 3(D) of the Government Resolution dated 19th June 2007, if so advised.

(5) No order as to costs.

(R.C.CHAVAN,J) (A.M.KHANWILKAR, J).

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Sunday, 16 February 2014

Whether Govt can terminate lease granted by it if lessees committed breach of terms of contract?

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