Supreme Court of India
ESCORTS FARMS LTD., PREVIOUSLY KNOWN AS M/S. ESCORTS FARMS (RAM GARH) LTD.versusTHE COMMISSIONER, KUMAON DIVISION, NAINITAL, U.P. AND ORS.
- Citation
- 2004 INSC 122
- Decided
- 20 February 2004
- Disposal
- Dismissed
- Bench
- SHIVARAJ V PATIL
Holding
The ceiling proceedings were valid against the real landholder, the Government grantee, and the post‑cut‑off transfers were not bona‑fide, so they cannot be excluded from the ceiling limit.
Summary
The Supreme Court examined the land‑holding of Escorts Farms Ltd., which occupied land released by the Uttar Pradesh government to the former ruler of Kashipur under a Government Grant and later became subject to the Uttar Pradesh Imposition of Ceiling on Land Holdings Act. The State initiated ceiling proceedings, declared most of the land surplus, and the company transferred portions after the 1973 amendment that lowered the ceiling limit, asserting the transfers were bona‑fide. The Court held that the company, as the Government grantee, was the true holder of the land and that proceedings against the ostensible holder (the Farm) were valid, that the Government Grants Act overrides any tenancy rights claimed by the transferees, and that res judicata does not apply to ceiling proceedings under Sections 38‑A and 38‑B. It further found that the post‑cut‑off transfers were not made in good faith, were intended to evade the ceiling law, and must be ignored for determining the ceiling area. The Court dismissed all appeals, affirmed the High Court’s order except that it set aside the imposition of a Rs 10 lakh cost on the Farm.
Issues considered
- The applicability of the Uttar Pradesh Imposition of Ceiling on Land Holdings Act to land held by a Government grantee and a public company.
- Whether the transfers of land made after the cut‑off date of 24 January 1971 are bona‑fide and can be excluded from the ceiling calculation.
- The effect of the Government Grants Act, 1895 (U.P. Amendment) on any tenancy or Bhumidar rights claimed by the transferees.
- The applicability of the doctrine of res judicata to ceiling proceedings under Sections 38‑A and 38‑B of the amended Act.
- The requirement of granting a hearing to transferees under Explanation (ii) of Section 5(6) and the impact of any procedural lapse on the validity of the appellate order.
- The proper quantification of damages under Section 16 of the Ceiling Act and whether the High Court could award lump‑sum damages.
Legislation cited
Subjects
land ceilinggovernment grantsres judicatabona fide transfertenancy rightspublic company as holdernatural justicedamages under Section 16land reformsceiling amendmentarticle 136article 142
Judgment
ESCORTS FARMS LTD., PREVIOUSLY KNOWN AS M/S. ESCORTS A
FARMS (RAM GARH) LTD.
v.
THE COMMISSIONER, KUMAON DIVISION, NAINITAL, U.P. AND ORS.
FEBRUARY 20, 2004
B
[SHIVARAJ V. PATIL AND D.M. DHARMADHIKARI, JJ.]
UP. Imposition of Ceiling on Land Holdings Act, 1960; Section 5 with
Explanations I & If and Sections 38-A and 38-B with UP. Amendment Act; C
Act No.18 of 1973 and Act No.20 of 1976/Government Grants Act, 1895 with
UP. Amendment Act, 1960/UP. Zamindari Abolition and Land Reforms Act,
1950; Section 131:
Acquisition of lands of erstwhile Ruler and release ofthe same thereafter
by the State in favour of a Company and the Ruler on certain terms and D
conditions-The Company joined other companies constituting Farms-
Initiation of Ceiling proceedings by the authority-Declaring certain area of
land belonging to the Farm as surplus-On appeal, the District Court remanded
the case to the authority-Authority redetermined surplus land excluding the
area of the land, meant for school, treating it as separate entity-Affirmed by
the appellate authority modifying the area of surplus land-Company sold E
certain area of the land allegedly after the amendment in the Act reducing
Ceiling limit-Transferees claiming status of 'Sirdar '/'Bhumidar '-Authority
redetermined surplus area of land, however, the area of the land for school
left undisturbed as barred by res-judicata-Reversed by the appellate authority
holding that principle of res-judicata could not be applied under the Ceiling p
Act-Challenge to-Held: Farm possessing land for and on behalf of the
holder company and the Ruler, hence an ostensible holder-Farm/transferees
could take part in the proceedings---Since the Proceeding before the authority/
appellate authority not objected to by the company, it could be treated to be
proceedings against the Company and the Ruler-Hence, the proceeding valid
and not infructuous-Since transfer of land not permissible under the terms G
of Government Grants, transferee/Firm not entitled to claim status of Sirdar
and Bhumidars-Code of Civil Procedurf!, 1908-Section fl; Society
Registration Act, 1860; UP. Tenancy Act---Section 2(1); U.P. General Clauses
Act---Ss. 3(17) and 9(33).
543 H
5·l4 SUPREME COURT REPORTS [2004] 2 S.C.R.
A Government Grants vis-a-vis tenancy rights--Held: Since the Government
Grant has an overriding effect under the Government Grants Act, recognition
of tenancy rights/Sirdars/Bhumidars rights of transferees under the U.P.
Tenancy Act is of no consequence.
Amendment in the Act-Raising ofceiling limit-Transferees-Effect on--
B Held: Transfer of the land subsequent to amendment could be excluded from
the ceiling limit only if authority satisfied that such transfers were made in
good faith and for adequate consideration-The company and the Ruler lacking
good faith having executed the sale deed after the cut off datelamendment-
The concurrent findings of the Appellate Authority and the High Court were
C finding offacts not vitiated for consideration of any irrelevant circumstances-
Hence, not liable to be interfered with in appeal under Article 136 of the
Constitution of India-Constitution of India-Article 136.
Explanation (ii) to sub-section 6 of Section 5-Denial of opportunity of
hearing to transferees-Held: Transferees are the parties claiming benefits
D under the provisions of law-They would be adversely affected if transfer
found to be lacking good faith-Hence transferees are the necessary parties-
However, denying t~em opportunity of hearing not proved fatal to them-
Hence, it is not appropriate to set aside the order of the appellate authority.
Section 18-A-Quantification of damages-Jurisdiction of High Court-
E lntervenors/subsequent transferees-Rights of-Discussed
Code of Civil procedure, 1908; Section 11:
Principle of Res-judicata-Applicability of-Held: Exemption of land
for school from the extent of holder compa1:.1y was not a decision on the issue
F but it was a clear/apparent mistake-Transfer of lands for school have been
made with full knowledge of the impending legislation proposing reduction in
the ceiling limit with intention to evade the effect of ceiling law-As per
provisions under Section 38-B introduced by Amended Act, bar ofres-judicata
made inapplicable in the ceiling proceedings-Jn the facts and circumstances
G ofthe case, the bar ofres-judicata not available-Constitution of India, 1951-
Article 39(b) and (c).
Words and Phrases:
Holding' and 'tennure holder '-Meaning of in the context of U.P.
H Imposition of Ceiling on Land Holdings Act.
- ESCORTS FARMS LTD. v. COMMR, KUMAON DIVN, NAINITAL 545
The lands owned by Ruler of erstwhile estate of Kashipur, Uttranchal A
were acquired by the then Government of Uttar Pradesh under the U.P.
Imposition of Ceiling on Land Holdings Act. Later, the State Government
released the said lands in favour of the Ruler and a Company for the
development and for making the lands cultivable within the prescribed
period. Since the company could not develop the land within the prescribed
period, they had entered into an agreement with another company and B
constituted a third company, Mis. Escorts Farms, the appellant Farms.
The prescribed authority initiated ceiling proceeding and declared 1163.42
._ acres of the land as surplus as per provisions of the Ceiling Act. On appeal,
the District Court remanded the case to the prescribed authority. The
,-
authority redetermined 98.83 acres of land as surplus and allowed the c
holder to retain the remaining land including 250 acres of land being used
for running Farm Mechanisation School. On appeal, Appellate Authority
declared 153.03 acres of the land as surplus land.
In the meanwhile, the Company sold 18.5 acres of land, when the
State Government made reduction in the ceiling limit by introducing the D
U.P. Imposition of Holdings (Amendment) Act No.18 of 1973; the
Company further transferred 12.50 acres of land in favour of 70
transferees. Under the amended Ceiling Act, fresh ceiling proceedings were
initiated by the prescribed authority against the company and the Ruler
and it declared 867.67 acres of land as surplus. However, 250 acres of land
.._...._ meant for the School which was exempted under the earlier order of the
E
Ceiling Authority was not interfered with as barred by res judicata. The
" Farm and the transferees preferred an appeal. The appellate authority
held that exemption in favour of the land for School was wrongly granted
and that the Company as Government Grantee was not competent to
transfer the land; hence held all such transfers invalid. Aggrieved, the F
Farm and the transferees filed writ petitions which were dismissed by the
High Court. The High Court also imposed cost on the Farm for illegal
use of land by resorting to various unfair tactics by transferring the lands
to evade ceiling law. Hence these appeals.
It was contended for the appellants that the orders passed by the G
prescribed authority/Appellate authority were void and infructuous since
--- the company was not at all a party before the authority; that since the
lessees were in continuous possession of the land, they had acquired the
status of 'Sirdars' and became 'Bhumidars' on payment of land-revenue
and the authorities were estopped from denying possession to them; that
H
546 SUPREME COURT REPORTS [2004] 2 S.C.R.
A since the order of the authority holding that 250 acres of land for the
-
School were not includible in the Ceiling limit of the Amendment Act and
it was not challenged by the State, it became final which could not have
been upset by the appellate authority; and that the bar of res-judicata
would operate in subsequent proceedings for redeterming ceiling limit by
B the authority.
On behalf of the respondent-State, it was submitted that the
Company/Transferor had been represented through the Farm, thus they
were heard by the appellate authorities; that the transferees were not only
necessary but also proper parties; and that the transferor had failed to
C discharge burden of proof to the satisfaction of the authority that the
transfer of the lands were bonafide and for consideration.
f
Dismissing the appeals, the Court )-
HELD: 1.1. The Ruler, a Government Grantee of land, was allowed
D to keep certain portion of it as 'hereditary tenant' and the other portion
in .the name of the company in which he had share holding. The Farm
came in possession of the land through the company and the Ruler. The
Farm was, therefore, only an ostensible holder of the land and the company
of which the ruler was share holder continued to be the real holder. The
Company and the Ruler never objected to the proceedings before the
E prescribed authority nor did they prefer any appeal to challenge those
orders either in appellate forum or in writ proceedings. The proceedings
therefore initiated, conducted and culminated against the Farm have to
be treated in reality to be proceedings against the· company and the Ruler
as the holders of the land and are binding both on ostensible and the real
owner in accordance with Section 5 with Explanations I and II of the U.P.
F
Ii;nposition of Ceiling on Land Holdings Act, and the proceedings cannot
J)e held to be invalid or infructuous. [557-H; 558-A-C, E]
1.2. The holder of the land for the purpose of Ceiling Act was the
company, the Government lessee, even though a formal lease deed was
G not executed by the company. However, it has taken the possession of land
pursuant to the proposal of the Government as per terms and conditions
mentioned thereto. [559-C-D]
1.3. The public limited company holding land would be covered by
definition of 'tenure holder' as contained in clause (17) of Section 3.
H 'Tenure holder' is defined to mean ' a person who is the holder of a
ESCORTS FARMS LTD. v. COMMR., KUMAON DIVN., NAINITAL 54 7
- holding'. The word 'person' has not been defined in the Ceiling Act but
Section 4 (33) of U.P. General Clauses Act defines 'person' to include a
A
'company'. 1559-H]
1.4. The exclusion of public company from sub-section (4) of Section
5 of t>he Act in the matter of distribution of shareholding of the land is
not an indication that public company is not deemed to be a 'holder' of B
land or a legal 'person' as defined in Clauses (9) and (17) of Section 3 of
the Ceiling Act read with Clause (33) of Section 4 of the U.P. General
Clauses Act. 1560-G]
2.1. The claim of the lesse'!s and transferees of having acquired status C
of Sirdars and Bhumidars cannot be accepted. The possession of the land
given to the company under the terms and conditions of the Government
Grant did not permit transfer of land without permission of the
Government. The position of a Government grantee is that of a lessee as
defined in clause (9) of Section 3 of the Ceiling Act. The conditions of the
Grant allow sub-leases of the land but contrary to the terms of the Grant, D
the sub-lessees can claim no independent tenancy right so as to frustrate
the terms and tenure of the Grant. Irrespective of the provisions creating
rights in favour of tenants under U.P. Tenancy Act, 1939 and the recording
of the names of the company or the Farm in the revenue papers as
hereditary tenant and deposit of ten times the land revenue by the sub-
lessee for acquiring Bhumidhari rights were ineffectual in view of the E
provisions of Section 2 of the Government Grants (U.P Amendment) Act,
1960 which give an overriding effect to terms of the Grant. The High
Court, therefore, rightly negatived the claim set up by the lessee/sub-lessees
of the land to the status of 'Sirdars' or 'Bhumidhars'.
(561-H; 562-A-B; 563-C-D] F
2.2. No estoppel can operate against the overriding statute so as to
bind the ceiling authorities to accept the tenancy rights of the lessees/sub-
lessees as indefeasible in application of Ceiling Act to the lands in question.
[563-F]
G
2.3. On conjoint reading of the provisions of the Ceiling Act and the
land Reforms Act, the grantee of land from the Government is a holder
of land in the status of a Bhumidhar and the land can be subjected to
ceiling limit. To the lands held by the company/grantee of the Government,
the provisions of Ceiling Act would be attracted. Such grantee being a
lessee from Government has no right to transfer the land without H
548 SUPREME COURT REPORTS [2004] 2 S.C.R.
A permission of the Government. 1565-C)
Raghubar Dayal v. State of U.P., (1995J Supp. 3 SCC 20, relied on.
-
2.4. In accordance with proviso (b) of the said sub-section (6) of
Section 5 of the Act transfers made after 24.1.1971 can be excluded for
B determining the ceiling area or the holder only if it is proved to the
satisfaction of the prescribed authority that the transfers were made in
good faith and for adequate consideration. 1567-DJ
2.5. The concurrent findings of the appellate authority and the High
Court that the Company and the Farm lack good faith in executing the
C sale deeds after the cut off date 24.1.1971 are not vitiated by consideration
of any irrelevant circumstances and being essentially a finding of fact is
not liable to be interfered with, in the appeals under Article 136 of the
Constitution. (568-B-CJ
3.1. It is true that the order of the prescribed authority excluding
D 250 acres of land belonging to the school in determining the ceiling limit
and it was not questioned by the State in appeal. The finding that the land
was held by the school as a separate legal entity is obviously a mistake
because in all subsequent proceedings before the ceiling authorities, the
High Court and this Court, the land is stated to be held by the company
E or Farm for running the school as one of its activities. The land was in
use for the purposes of educational institution run by the Company or the
Farm. It qualified for exemption under clause (ix) of Section 6 of the Act,
as it stood then. Under the Amendment Act of 1973, the exemption of land
-----••
held by an educational institution was taken away, ceiling limit was
reduced and the cut-off date fixed was 24.1.1971. It was provided that all
F transfers made by the holder of a land after the cut-off date would be
ignored unless, as provided in clause (b) of the sub-section 6 of Section 5
of the Act read with the explanation thereuf\der that the holder discharges
his burden of proving to the satisfaction of the Prescribed Authority, that
the transfers made after 24.1.1971 were in good faith, for adequate
G consideration and were not Benami transactions. It is evident from the
fact that all transfers or sale-deeds have been executed in favour of the
transferees, after the cut-off date viz. 24.1.1971 by the company to which
the provisions of sub-section (6) of Section 5, as introduced by the
Amendment Act of 1973, were Clearly attracted. A finding of fact has been
recorded by the Commissioner and confirmed by the High Court in the
H Writ Petition that transfers of the land used for school have been made
ESCORTS FARMS LTD. v. COMMR, KUMAON DIVN., NAINITAL 549
- with full knowledge of the impending legislation pruposing reduction of A
ceiling limit and intent to evade the effect of ceiling law. Hence, on the
legal and factual premise, the bar of res judicata is not available to the
holder Company or the Farm. Their own subsequent conduct of effecting
transfers of school land estops them from raising a plea of res judicata on
an apparently erroneous finding recorded in the order of Prescribed B
Authority in the course of proceedings under the original unamended Act.
(570-C-G; 571-B-D)
3.2. The inaction of the State in not filing appeal against the
erroneous exclusion of the land from the holding of the company and
treatlng it to be of the school as separate entity, cannot debar, in law, the C
State in subjecting such land to the ceiling limit in the proceedings initiated
under the Amendment Act of 1973 whereby the ceiling limit was further
reduced. On the date of enforcement of the Amendment Act No.18of1973,
the school land was held by the company and not by the school which had
no separate legal existence as an entity. (571-G)
D
3.3. Res judicata is a plea available in civil proceedings in accordance
with Section 11 of the Code of Civil Procedure. It is a doctrine applied to
give finality to '/is' in original or appellate proceedings. Proceedings under
the Ceiling Act are not adversarial as are proceedings in suit. The Ceiling
Act is a legislation to give effect to the Directive Principles contained in
clauses (b) and (c) of Article 39 of the Constitution. The laudable social E
objectives sought to be achieved by the ceiling legislation is to take surplus
land from the holders and distribute the same to the landless agricultural
labourers and peasants surviving on agriculture. In applying the principles
of res judicata, therefore, to the ceiling proceedings, the object of the Act
cannot be lost sight of. All principles of res judicata contained in Section p
11 CPC cannot be strictly and rigorously made applicable to ceiling
proceedings. Section 38-B introduced by Amendment Act of 1976 with the
transitory provisions made both in the Amendment Act No.18of1973 and
Act No.20 of 1976 is a departure from the provisions of Section 11 of the
Code of Civil Procedure and indicate non-applicability of bar of res
judicata in ceiling proceedings under the Act. The exclusion of land of the G
school from the extent of holding of the holder company was not a decision
or a finding on an issue arising between the parties but it was a clear
mistake which is apparent from the fact that this land was throughout
treated by the holder company as its own land and was transferred by
the company by different sale-deeds to the transferees after the cut-off H
550 SUPREME COURT REPORTS [2004] 2 S.C.R.
A date. On these facts and nature of title of the land, plea of res judicata
cannot be allowed to be raised; (572-H; 573-A, D-F; 574-C, DJ
-
State of U.P. v. Budh Singh and Ors., f1995) 6 SCC 146 and State of
U.P. v. Budh Singh (Dead) by Lrs., (1997] 2 SCC 181, relied on.
B Ram Lal"· State of U.P. and Ors., (1978) All L.J. 1197 and Kedar Singh
v. Addi. District Judge, Varanasi and Ors., (1980) All.L.J. 36, referred to.
Black's law Dictionary, Pages 1304-1305, referred to.
4. The transferee is the party likely to be adversely affected by the
C order nullifying the transfer if found to be lacking in good faith. The
transferee is clearly covered by the expression "the party claiming its
benefit" as used in Explanation (ii) of sub-section (6) of Section 5 of the
Act. The burden of proof in respect of bona fides of transfers is also on
the person or 'party claiming its benefit'. It was, therefore, necessary to
make transferees as parties in the appeal and grant them opportunity of
D hearing by the appellate authority. To that extent the order of the appellate
authority can be said to have been vitiated for not following the required
procedure. However, non-joinder of transferees as parties and denial of
opportunity of hearing to them, in the facts and circumstances, cannot be
said to be fatal to the entire ceiling proceedings. Hence, order of the
E appellate authority cannot be set aside. Since, however, the High Court
has already given full opportunity of hearing to the transferees on this
aspect, an order of remand is not justified. In the. instant case, it has been
found that large scale transfers were effected to defeat Ceiling Law.
Therefore, it is not just to upset the concurrent findings of the appellate
authority and the High Court, in exerdse of the discretionary powers
F under Article 136 of the Constitution. Rules of natural justice are to be
followed for doing substantial justice and not for completing a mere ritual
of hearing without possibility of any change in the decision of the case on
merits. (576-C-F; 517-B-C; 578-E)
State ofAndhra Pradesh v. S. Vishwanatha Raju and Ors., (1995) 3 SCC
G
327, relied on.
H
5.1. The quantification of damages payable to the State for use and
occupation of surplus land under Section 16 is required to be done in
accordance with the principles laid down in Rule ISA of the Rules framed
under the Ceiling Act. The provisions of Section 16 read with Section 18-
-
1
\
'
ESCORTS FARMS LTD. v. COMMR., KUMAON DIVN., NAINITAL[DHARMADHIKARI, J.) 551
- A require separate proceedings to be undertaken for determination and
quantification of amount of damages for use and occupation of the surplus
A
land. The said exercise ought to have been left to the Ceiling Authorities.
The High Court should not have awarded lump sum damages by imposing
heavy costs. Hence, a part of the order of the High Court imposing Rupees
Ten lacs as costs on the farm and directing its payment by the Farm or B
by its office bearer is set aside. [579-D-F]
5.2. The subsequent transferees have stepped into the shoes of the
original transferees. They can claim no different or better rights than their
. transferors. The interveners have to work out their independent rights and
remedies, if any, and can claim no right of hearing in these appeals. C
[579-H; 580-A)
CIVIL APPELLATE JURISDICTION Civil Appeal No. 1584 of
1998.
From the Judgment and Order dated 15.5.95 of the Allahabad High D
Court in C.M. W.P. No. 12024 of 1992.
WITH
C.A. Nos. 1581-1583, 1585-1588, 1589-1606, 1607-1626, 1627-1639,
1640-1654, and 1726 of 1998. E
Subodh Markandeya, Dinesh Dwiwedi, Rakesh Dwivedi, Ms. Chitra
Markandeya, Manoj Swarup, Mrs. Lalita Kohli, Anubhav Kumar, Ms. Rachna
Srivastava, Jatinder Kumar Bhatia, Ms. Niranjana Singh, Rohit Singh,
Abhishek Chaudhary, Goodwill Indeevar, Surya Kant, Neeraj Kr. Sharma,
Ashok Kumar Sharma, Debasis Misra and B.K. Jha for the appearing parties. F
The Judgment of the Court was delivered by
DHARMADHIKARI, J. These appeals are directed against a common
judgment dated 15th May, 1995 of the High Court of Allahabad passed in a
batch of writ petitions arising out of proceedings under the UP Imposition of G
Ceiling on Land Holdings Act, 1960 (shortly hereinafter referred to as 'the
Ceiling Act').
The lands, which were subjected <o imposition of ceiling of Villages
Dohrivakil, Kharmasa, Pachwala, Ramnagar of Tehsil Kashipur, District
Nainital in Uttar Pradesh, now form part of new State of Uttranchal. H
552 SUPREME COURT REPORTS (2004] 2 S.C.R.
A
The lands in the aforesaid villages were owned by the Ruler of erstwhile
estate of Kashipur. Sometime before the year 1950, the lands were acquired
by the Government of Uttar Pradesh from the Ruler of Kashipur. On a
-
representation subsequently made by the Ruler of Kashipur, the Government
of UP decided to release the land to the ruler on lease under the Govt. Grants
Act, 1895 as amended in its application to the State of UP by Govt. Grants
B (UP Amendment) Act, 1960 (Shortly referred to as 'the Govt. Grants Act').
The lands were released to the ruler for its development and for making
it cultivable within the prescribed period. The terms of the Govt. Grant are
-
contained in letter dated 26.1.1950 of the Deputy Secretary to the Govt. of
UP addressed to the Director of Colonization, Lucknow, U.P. Consequent to
C the release of the lands in favour of the ruler, no formal lease containing the
terms and conditions of the Govt. Grant came to be executed between the
erstwhile ruler and the Government of U.P. but it is not in dispute that the
possession of the lands under the grant was taken on the basis of the proposal
of the government, contained in the letter dated 29.8.1950. The rights and
D liabilities of the parties are governed by the terms of the said Govt. Grant.
As the contesting parties before us are at issue on the legal effect of the
Grants for application of the provisions of the Ceiling Act, the contents of
the letter containing the terms and conditions of the Grants are required to be
reproduced in full:-
E
"No. C-4599/XII-A-26.1.1950
From
Shri H..W. Ward-Jones, IAS
Dy. Secretary to Government of Uttar Pradesh
F To
The Director of Colonisation,
Uttar Pradesh, Lucknow.
Da~ed, Lucknow August 29, 1950.
G Sir,
am directed to say that on representation being made to
Government by shri Hari Chand Raja Singh, Raja of Kashipur, Nainital
about the release of his land acquired for the colonisation schemes,
government have been pleased to decide that an area of land
aggregating 2,688 acres viz., 597 acres in village Bhagwantpur, 264.36
H
ESCORTS FARMS LTD. 1·. COMMR., KUMAON DIVN., NAINIT AL [DHARMADHIKARI, J.] 553
- acres in Ramnagar, 1,022.64 acres in Kundeshri and 804 acres in
Dearhivakil should be released in the favour and a lease granted
A
under the Crown Grants Act. Out of the released land the Raja will
take a hereditary lease of 597 acres of land lying in village
Bhagwantpur and the remaining area of 2,091 acres is to be leased to
M/s Ramgarh Farms and Industries Ltd., in which the Raja is also a
Shareholder, other conditions of the kase will be as follows :- B
1. The lease will be granted under the Crown Grants Act under
which the lessees will enjoy hereditary rights with certain
restrictions and limitations.
-- 2. The lessees will have to reclaim the lands within one year of the
commencement of the next agricultural operations. The
agricultural operations will start some time in November.
c
3. The lessees shall use the land granted to them for the purposes
of cultivation, horticulture, pasture, poultry and dairy farming
and ancillary objects and for no other purpose. D
4. The lessees shall not parcel out land granted to them and their
rights shall be heritable but the succession will be regulated
according to the law governing impartible estates.
5. The lessees may sublet land permissible under the UP Tenancy
Act but may not transfer or otherwise alienate the land except E
with the written permission of the State Government.
,.......
6. The rent payable will be the same as obtaining in the Tarai and
Bhabar Government Estates.
7. The lessees will be permitted to exchange plots wherever
necessary for consolidation of holdings.
F
I am, therefore, to ask you kindly to execute a lease deed with
Shri Hari Chand Raj Singh on the lines indicated in para 1 above.
Yours faithfully,
G
Sd/- H. W. Warde Jones
Dy. Secretary.
No. C. 4599(i)XIIA.
Copy forwarded to Shri Hari Chand Raj Singh Raja of Kashipur,
Kashipur House, Nainital for information with reference to his
H
554 SUPREME COURT REPORTS [2004] 2 S.C.R.
A representation dated June, 24 and 26, 1950."
[Emphasis added by underlining]
-
As is stipulated in the terms of the Govt. Grants, the ruler and the
company in which he was a shareholder namely Mis Ramgarh Farms and
B Industries Ltd. (formerly the Co.) had to develop and make the lands cultivable
within a period of one year of the commencement of the next agricultural
operations from the date ofrelease of the land. As the aforementioned company
described in the grant was unable to develop the land within the permissible
period, they entered into an agreement with Mis Escorts (Agricultural
C
Machines) Ltd. The two aforementioned companies agreed to form a third
company in the name of Mis Escort Farms (Ramgarh) Ltd. (who is the main
appellant in the leading appeals before us and shall hereinafter be referred to
as 'the Farms').
--
The Farm was incorporated on 30.11.1951 and took possession of the
D lands. In revenue papers of Fasli 1361 (corresponding to 1.7.1953 to
30.6.1954) the Farm was recorded as hereditary tenant, in respect of 1386.08
acres of land. The Ceiling Act was enforced in the State on 3. l.1961 with
ceiling limit of 40 acres in respect of a holder of a holding defined in the
Ceiling Act. By order passed on 28.12.961 - the prescribed authority declared
1163.42 acres of land as surplus with the holder of the lands.
E
On appeal t~e District Judge by order dated 15 .11.1965 remanded the
case to the prescribed authority. On remand the prescribed authority passed ,~,
a fresh order on 11.8.1967 determining 98.83 aqes of land as surplus and the
holder of lands was allowed to retain 1208.64 acres of land which included
250 acres of land claimed to have been used for running Farm Mechanization
F School and treated as belonging to the said school as a separate entity. The
said 250 acres of land was held as not liable to be included in the extent of
holding of the company.
It is not in dispute that on 11.8.1967 when the prescribed authority
G granted exemption to 250 acres of land allegedly in use by the holder
company for running a school of mechanized farn:iing, such exemption was
available. Record of proceedings, however, does not show that the said land
was ever claimed by the Company to have been held by the school as a
separate legal entity. Treating the land to have been held by the school as
a separate legal entity, therefore, seems to be an inadvertent mistake committed
H by the prescribed officer in his order dated 11.8.1967.
-- ESCORTS FARMS LTD. v. COMMR., KU MA ON DIVN ., NAINITAL [DHARMADHIKARI, J) 555
The order of the prescribed authority was varied in appeal by order
dated 18.3.1968 of the appellate authority and inst~ad of93.98 acres 153.03
A
acres was declared surplus.
According to the case of the holder-company, in October 1969 it granted
18.75 acres of land to 50 persons on oral leases for period ending 30.6.1970.
-- Since the leases, as alleged, were oral, there is no proof of the same on
record.
B
U.P. Zamindari Abolition and Land Reforms Act, 1950 (shortly referred
to as the 'Land Reforms Act') was brought into force in the concerned
villages of Kashipur on 26.1.1970. The case of the holders of land on
alleged oral leases is that under Section 131 of the Land Reforms Act they C
acquired status of 'Sirdar' of the land. On 28.3.1970 registered sale/lease
agreements were executed in favour of 50 persons for period up to 30.6.1974
comprising 80.75 acres, on consideration of Rs. 3,000 per acre. The 50
transferees among themselves constituted four partnership firms and claimed
to have obtained possession of the land. D
Before the reduction of ceiling limit by UP Imposition of Holdings
(Amendment) Act No. 18 of 1973, sale-deeds covering 12.50 acres of land
were executed in favour of 70 persons between 25.9.1971 to 27.9.1971.
These - transactions admittedly were after the cut-off date 24.1.1971 as fixed
in sub-section (6) of Section 5 of the Ceiling Act by U. P. (Amendment) Act E
No. 18 of 1973. Under sub-section (6) of Section 5, transfers of land
effected after 24.1.1971 are liable to be ignored in determining the ceiling
area of the holder of land, unless, in accordance with proviso (b) of the said
sub-section, the holder of the land discharges the burden of satisfying the
prescribed authority that the transfers, after the appointed date, were effected F
on good faith and for adequate consideration and were not benami. On the
basis of the aforementioned sale-deeds executed in favour of 74 persons, the
earlier three partnership firms formed by the lessees were dissolved and four
new partnership firms were formed by the purchasers of the land. Shri PN
Mehta was the managing partner of one of the firms.
G
On 8.6.1973, by UP Amendment Act No.18 of 1973 introduced in
Ceiling Act, the ceiling limit was reduced from 40 acres to 18.75 acres.
Under the amended Ceiling Act 18 of 1973 fresh ceiling proceedings were
initiated proposing to declare 1123 .40 acres of land in different villages
under the Govt. Grants as surplus. The 74 transferees of the land mentioned
H
556 SUPREME COURT REPORTS [2004] 2 S.C.R.
A above filed their objections before the prescribed authority. The prescribed
-
authority by its order dated 29.6.1991 declared 867 .67 acres of land as surplus
with the holder company. The land to the extent of 250 acres exempted
under the earlier order of the ceiling authority dated l l.8.l 967 was left
undisturbed. In the order of the prescribed authority passed on 29 .6.1991
under the amended Ceiling Act 18 of 1973, challenge to the validity of
B exemption, even though erroneously granted in respect of 250 acres of land
for the school, was held to be barred by the principle of res judicata.
Against the order of the prescribed authority dated 29.6.1991 the State
did not prefer any appeal but the aggrieved transferees and the Farm who
C represented the holder company, preferred appeals to the Commissioner,
Kumaon Division being the appellate authority. By order dated 14.1.1992
the appellate authority held that exemption in favour of the school of 250
acres of land was wrongly granted and plea of Res Judicata cannot be raised
under the provisions of the Ceiling Act. The appellate authority also held that
the grantee under the Govt. Grants Act was not competent to transfer the land
D and all transfers were, therefore, invalid. Taking into consideration the
background and circumstances in which transfers were made, they were all
held to be sham and lacking in good faith. The appellate authority, therefore,
directed that the surplus land inclusive of 250 acres of land wrongly exempted
in favour of the school vested in the State under the Ceiling Act. The
E Commissioner dismissed the appeal filed by the holder company. Appeals of
the transferees and their subsequent transferees were also dismissed. The
Commissioner, in reversing the judgment of the prescribed authority regarding
250 acres of land exempted in favour of the School of Farm Mechanization
held that principle of res judicata cannot be applied on the basis of the
original order of the prescribed authority passed in proceedings prior to the
F amendment of Ceiling Act in view of bar on plea of res judicata imposed by
Section 328 of the Ceiling Act and the other provisions of the Amendment
No.18 of 1973. The Commissioner also held that the transfers made by the
Fann out of 250 acres of land of the school were not bona fide being made
to favoured parties and with clear intention to evade the ceiling law.
G Aggrieved by the order of the Commissioner passed in appeals,
the Firm, all its transferees and subsequent transferees filed Writ Petitions in
the High Court. The High Court considered their cases by grouping them in
three categories. The Writ Petitioner - holder company and the Farm were
described as Group No.1. 74 transferees from the Farm were described as
H Group No.2 and 18 transferees from the company in respect of 250 acres of
ESCORTS FARMS LTD. v. COMMR., KUMAON DIVN, NAINITAL[DHARMADHIKARl,J.] 557
land of school were described as Group No. 3. A
Applications for intervention made by some parties who are subsequent
transferees of parcels of land involved in this ca~e, have been rejected by this
Court by order made on 16.1.2004. We, however, granted hearing to the
counsel appearing for subsequent transferees and allottees of land who claim
to be in actual cultivating possession of some portions of lands involved. B
The High Court by the impugned judgment passed in common in batch
of writ petitions, filed by parties representing the three groups mentioned
above, dismissed all the Writ Petitions by a very elaborate order containing
all facts and discussion of legal contentions advanced by the contesting parties. C
The order of the Commissioner passed in appeal was maintained by the High
Court. The High Court also imposed cost of Rupees ten lacs on the Farm as
estimated damages for illegal use and occupation of the land made by them
for long more than 30 years by resorting to various unfair tactics to evade
ceiling law.
D
We would not like to burden the record by reproducing the various
findings recorded on issues of fact and law in the impugned judgment of the
High Court as the same contentions have been reiterated somewhat differently
before us by the 'learned counsel appearing on either side. We, therefore,
propose to deal with the legal and factual contentions under the following
~~~ E
1. APPLJCABJLJTY OF THE CEILING ACT TO THE LANDS JN QUESTION
AND VALJDJTY OF THE PROCEEDINGS AGAINST THE FARM
The Learned Counsel for the Farm contended that the land subjected to
ceiling was held by the Company as a Govt. Grantee pursuant to the letter F
of the Deputy Secretary to the Govt. of U.P. dated 26.1.1950 referred above.
The tenure holder of the land, therefore, within the meaning of the Ceiling
Act was the Company i.e. the Govt. Grantee and all proceedings initiated by
notice to the Farm, submission of statement and declaration by the Farm
culminating in the orders passed by the prescribed authority and the appellate G
authority were void and infructuous because the Govt. Grantee, as holder of
the ~and, was not at all a party before the ceiling authority.
The aforesaid contention is misleading and misconceived. We have
already stated all the relevant facts above. The Govt. Grantee i.e. the Ruler
was allowed to keep certain portion of the land as 'hereditary tenant' and the H
558 SUPREME COURT REPORTS [2004] 2 S.C.R.
A other portion in the name of the company in which he had share holding.
The Ruler through the company was unable to develop and make the land '
I-
cultivable within the stipulated period in the terms of the grant and, therefore,
they handed over possession of the land for development to the Farm. The
Farm came in possession of the land through the company and the Ruler.
The possession of Farm was, therefore, for and on behalf of the holder
B company and the ruler. The Farm was, therefore, only an ostensible holder
of the land and the company of which the Ruler was a share holder continued
to be the real holder. The notices issued by the ceiling authority were
responded by submitting statements and returns before the ceiling authority
by the Farm. The Company and the Ruler submitted to those proceedings
C through the Farm. The Company and the Ruler never objected to the
proceedings before the prescribed authority nor did they prefer any appeals
to challenge those orders either in appellate forum or in writ proceedings.
The proceedings therefore initiated, conducted and culminated against the
Farm have to be treated in reality to be proceedings against the company and
!he Ruler as the holders of the land.
D
The Farm being the ostensible owner and agent of the real owners was
competent to take part in ceiling proceedings on behalf of the holder of the
lands and the proceedings cannot be held to be invalid or infructuous. The
learned counsel for the State is right in relying on Explanation 1 and
Explanation II below Section 5 of the Ceiling Act in support of his submission
E that where the land is held by an ostensible holder it would be presumed to
have been held by the real owner. The status of the Farm on the land was
merely as a licensee or an agent. The possession of the Farm was clearly as
an ostensible owner. The proceedings initiated, conducted and concluded
against the ostensible owner are binding both on ostensible and the real
F owner in accordance with Section 5 with Explanations 1 and II thereunder
which read as under:-
"Section 5. Imposition of ceiling - ( 1) On and from the commencement
of the Uttar Pradesh Imposition of Ceiling on Land Holdings
(Amendment) Act, 1972, no tenure-holder shall be entitled to hold in
G the aggregate throughout Uttar Pradesh, any land in excess of ceiling
area applicable to him.
-
Explanation I: In determining the ceiling area applicable to a tenure-
holder, all land held by him in his own right, whether in his own
name or ostensibly in the name of any other person, shall be taken
H into account.
ESCORTS FARMS LTD. v. COM MR, KUMAON DIVN., NA IN IT AL [DHARMADHIKARI, J.] 559
Explanation II: If on or before January 24, 1971, any land was held by a A
•' person who continues to be in its actual cultivatory possession and the
name of any other person is entered in the annual register after the
said date either in addition to or to the exclusion of the former and
whether on the basis of a deed of transfer or licence or on the basis
of a decree, it shall be presumed, unless the contrary is proved to the B
--- satisfaction of the Prescribed Authority, that the first mentioned person
continues to hold the land and that it is so held by him ostensibly in
the name of the second mentioned person."
- [Underlining to add emphasis]
The Fann.., therefore even if recorded in revenue papers as hereditary
tenant could not have claimed independent status of being the holder of the
land as the land was admittedly taken possession of by the company under
c
the Govt. Grants Act. The holder of the land for the purpose of Ceiling Act
was the company which was the Govt. lessee. Even though a formal lease
deed was not executed pursuant to the letter of the Govt. of the year 1950 D
the company has never disputed that the possession of land was taken pursuant
to the proposal of the Govt. contained in its letter dated 26.1.1950 and on the
terms and conditions mentioned therein. The aforementioned letter can be
looked into to ascertain the nature of possession of the company which was
placed in possession of the land by the Govt. The possession of the company E
therefore, as a Govt. Grantee is beyond any doubt and, in fact, it has never
been the stand of any of the parties before the ceiling authority or before the
High Court or before us that the company was not a Govt. Grantee or a Govt.
lessee. Clause (9) of Section 3 defines the word 'holding' to include a Govt.
lessee. The definition clause (9) in Section 3 of holding reads thus:
F
"Section 3 (9). 'Holding' means the land or land held by a person as
a Bhumidar, Sildar, Asami or Gaon Sabha or an Asami mentioned in
Section 11 of the Uttar Pradesh Zamindari Abolition and Land Reforms
Act 1950, or as a tenant under the U.P. Tenancy Act 1939, other than
a sub-tenant, or as Government lessee, or as a sub-lessee of a
Government lessee, where the period of sub-lease is co-extensive G
with the period of the lease."
[Underlining to add emphasis]
The public limited company holding land would be covered by definition
of 'tenure holder' as contained in clause ( 17) of Section 3. 'Tenure ho Ide;' H
560 SUPREME COURT )lEPORTS [2004) 2 S.C.R.
A is defined to mean 'a person who is the holder of a holding.' The word
'person' has not been defined in the Ceiling Act but Section 4 (33) of U.P.
General Clauses Act defines 'person' to include a 'company'.
Learned counsel appearing for a group of transferees placed reliance on
sub-section (4) of Section 5 of the Ceiling 1\ct to contend that as in determining
B the ceiling limit of firms, co-operative societies and Associations of persons,
whether incorporated or not, a 'public company, is excluded, the company
cannot be held to be a holder of land to impose ceiling. The above argument
advanced on behalf of appellants-transferees does not stand to reason on
proper interpretation of the provisions of sub-section (4) of Section 5 read
C with the Definition Clauses (9) and (17) of Section 13. Section 5(4) reads
thus:-
"Section 5 (4). Where any holding is held by a firm or co-operative
society or other society or association of persons (whether incorporated
or not, but not including a public company), its members (whether
D called partners, shareholders or by any other name) shall, for purposes
of this Act, be deemed to hold that holding in proportion to their
respective shares in that firm, co-operative society or other society or
association of persons:
Provided that where a person immediately before his admission to
E the firm, co-operative society, or other society or association of
persons, held no land or an area of land less than the area proportionate
to his aforesaid share than he shall be deemed to hold no share, or as
the case may be, only the lesser area in that holding, and the entire
or the remaining area of the holding, as the case may be, shall be
F deemed to be held by the remaining members in proportion to their
respective shares in the firm, co-operative society or other society or
association of persons."
The limited purpose of sub-section (4) of Section 5, as is clear from the
language employed, is to treat the land as being held in proportion to the
G respective shares of the shareholders in the case of firm, co-operative society
or other society and association of persons. Exclusion of public company
from sub-section (4) of Section 5 is with intention to keep out public companies
from the application of the said sub-section in the matter of distribution of
land holdings amongst shareholders. The exclusion of public company from ~
I
H §Uh-section (4) in the matter of distribution of shareholding of the land is not
--- ESCORTS FARMS LTD. r. COM MR., KUMAON DIVN., NAINIT AL [DHARMADHIKARI, l] 561
an indication that public company is not deemed to be a 'holder' of land
or a legal 'person' as defined in Clauses (9) and (17) of Section 3 of the
A
Ceiling Act read with Clause (33) of Section 4 of the U.P. General Clauses
Act. The contention, tht.refore, advanced that the ceiling proceedings could
-r not have been initiated and concluded againstthe company through the Farm
and they were all invalid and non est, has to be rejected.
B
2. LEGAL EFFECT OF THE PROVISIONS OF GOVT GRANTS ACT, 1895
AS AMENDED BY GOVT GRANTS (UP.) ACT, 1960.
One of the most important issues, which arose in writ petition before
the High Court was regarding findings of the Appellate Authority on the C
validity of the transfers of land made by company in favour of the Farm and
through the Fann in favour of the different partnership firms and individuals.
We have already reproduced above the terms and conditions of the Govt.
Grant contained in the letter dated 26.1.1950 of the Government of Uttar
Pradesh whereunder erstwhile Ruler of Kashipur was allowed to lease the
lands to the company for development. The terms of the grant show that 597 D
acres of land was allowed to be held by the ex-ruler with hereditary rights
and 2091 acres were allowed to be leased to the company of which the Ruler
was the main shareholder. In condition No.4 it is clearly stipulated that the
land held under the lease shall be heritable but the succession will be regulated
according to law governing impartible estates. E
Condition No.5 of the Grant imposes complete prohibition on transfer
of the land granted. The grantee was only allowed to ~ub-let the land in
accordance with U.P. Tenancy Act but was given no right to transfer or
alienate the land except with the permission of the State Government.
F
Learned counsel on behalf of Farm and the lessees and transferees from
the Farm while separately addressing this Court claimed an indefeasible
right to continue to hold and possess the land on the ground that the Govt.
Grantee came to be recorded as hereditary tenant since 1953-54 and under
the provisions of UP Zamindari Abolition and Land Refonns Act, 1950 read
with UP Tenancy Act, 1939 the lessees have acquired the status of 'Sirdars' G
and thereafter on paying ten times the land revenue of the land, they have
become 'Bhumidars' of the lands in their possession. It is contended that
acceptance of ten times the land revenue for the land for conferral of
'Bhumidars' right on the tenants of the land are actions of the state which are
binding on them and the ceiling authorities were estopped from depriving H
562 SUPREM~ COURT REPORf' (2004] 2 S.C.R.
A the tenants of their status and possession of the lind
The abov~ claim of the lessees and tr~fere~s of having acquired
status of Sirdars and Bhumidars cannot be a/e'~;ed. The possession of the
land was given to the company admittedly lrtder the terms and conditions of
the Govt. Grant which did not permit transfer of land without permission of
B the Government. · The position of a government grantee is of a lessee as
contained in definition Clause (9) of Section 3 of the Ceiling Act. The
conditions of the Grant allow sub-leases of the land but contrary to the terms
of the Grant, the sub-lessees can claim no independent tenancy right so as to
-.
frustrate the terms and tenure of the drant. Irrespective of the provisions
C creating rights in favour of tenants under the UP Tenancy Act 1939, the
terms and conditions of the Grant have been given an overriding effect by
provisions contained in Section 2, as inserted by UP Amendment Act of 1960
to the Govt. Grants Act with retrospective effect. Section 2 as introduced to
the Govt. Grants Act in its application to the State of UP clearly provides that
the rights and obligations inter se between Government as granter of the land
D and its grantee would in no way be affected by the sub-leases granted by the
Govt. grantee in accordance with the provisions of the UP Tenancy Act.
"Section 2(1 ). Transfer of Property Act, 1882, not to apply to
Government Grants - Nothing contained in the Transfer of Property
Act, 1882, shall apply or be deemed ever to have applied to any grant
E or other transfer of land or of any interest therein, heretofore made
or hereafter to be made, by or on behalf of the government to or in
favour of any person whomsoever; and every such grant and transfer
shall be construed and take effect as if the said Act had not been
passed.
F
(2) UP Tenancy Act, 1939, and Agra Tenancy Act, 1926 not to affect
certain leases made by or on behalf of the Government - Nothing
contained in the UP Tenancy Act, 1939, or the Agra Tenancy Act,
1926, shall affect, or be deemed to have. ever affected any rights,
created, conferred or granted, whether before or after the date of the
G passing of the Government Grants (UP Amendment) Act 1960, by
leases of land by, or on behalf of, the Government in favour of any
person; and every such creation, conferment or grant shall be construed
and take effect notwithstanding anything to the contrary contained in
the UP Tenancy Act, 1939, or the Agra Tenancy Act, 1926.
H
ESCORTS FARMS LTD. v. COMMR., KUMAON DIVN., NAINITAL [DHARMADHIKARI, J.] 563
(3) Certain leases made by or on behalf of the Government to take A
effect according to their tenor - All provisions, restrictions, conditions
and limitations contained in any such creation, conferment or grant
referred to in Section 2, shall be valid and take effect according to
their tenor; any decree or direction of a court of law or any rule of
law, statute or enactment of the Legislature, to the contrary - B
notwithstanding:
Provided that nothing in this section shall prevent, or be deemed ever
to have prevented, the effect of any enactment relating to the
acquisition of property, land reforms or the imposition of ceiling on
...... agricultural land.''
c
[Emphasis added by underlining]
The recording of the names of the company or the Farm in the revenue
papers on 5.3.1954 as hereditary tenant and deposit of tep. times the land
revenue by the sub-lessee for acquiring Bhumidari rights were ineffectual in D
view of the provisions of Section 2 of the Govt. Grants (UP Amendment)
Act, 1960 which give an overriding effect to terms of the Grant. The High
Court, therefore, rightly negatived the claim set up by the lessee/sub-lessees
of the land from the company through the Farm, to the status of 'Sirdars' or
'Bhum idh ...rs'.
E
No action of the revenue authorities can, therefore, estop the ceiling
authorities from ignoring the claims of tenancy rights on the land set up by
the lessees/sub-lessees. The rights between the government and the grantee
are strictly to be regulated by the telTils of the grant and in accordance with
the Govt. Grants (UP Amendment) Act, 1960. The entries in revenue records
and recognition of any tenancy rights of the lessee and/or sub-lessee as F
hereditary tenant, Sirdars or Bhumidhars under the UP Tenancy Act can
have no adverse legal effect on the Govt. Grant which has an overriding
effect under the Govt. Grants Act. No estoppel can operate against the
overriding statute so as to bind the ceiling authorities to accept the tenancy
rights of the lessees/sub-lessees as indefeasible in application of Ceiling Act G
to the lands in question.
The Statement of Objects and Reasons for amending Section 2 of the
Govt. Grants Act, 1895 by UP Amendment Act of 1960 makes it clear that
the State Legislature intended to apply only the provisions of Land Refo!Tils
Act and Ceiling Act to the lands held by persons under the Govt. Grants Act. H
564 SUPREME COURT REPORTS [2004) 2 S.C.R.
A The statements of objects and reasons read thus:
"Provisions of Section 2 of the Government Grants (UP Amendment)
Act, 1959, have the effect of saving a grant of an agricultural lease
by or on behalf of the Government from the operation not only on the
Acts mentioned therein, but also of any other law, including the law
B for imposition of ceiling on land holdings, that might be made in
future. There is also an apprehension that the result of the wordings
of section 2 may be to undo the vesting of estates of government
grantees under section 4 of the UP Zamindari Abolition and Land
Reforms Act, 1950. With a view, therefore, to remove any such
c apprehension and to put the UP Imposition of Ceiling on Land
Holdings Bill, 1959, when enacted, beyond the purview of the
Government Grants Acts, this Bill is being introduced. Vide UP
Gazette Extraordinary, dated February 3, 1960".
Land Reforms Act, 1950 being saved by sub-section (3) of Section 2
D of Govt. Grants Act is applicable to the govt. grants. Under Section 18
(l)(c) of Land Reforms Act, a govt. grantee holding land rent-free was allowed
to retain possession of the land as 'Bhum idhar.' Section 18 of the Land
Reforms Act with clause (c) in sub-section (1) reads thus:-
"Section 18. Settlement of certain lands with intermediaries or
E cultivators as Bhumidar - (1) Subject to the provisions of Sections
10,15,16 and 17, all lands -
(a) in possession of or held or deemed to be held by an intermediary
as sir, khudkasht or an intermediary" grove.
(b) held as a grove by, or in the personal cultivation of a permanent
F
lessee in Avadh.
(c) held by a fixed-rate tenant or a rent-free grantee as such, or
(d) held as such by -
i) an occupancy tenant,
G ii) a hereditary tenant,
Possessing the
right to transfer
? iii) a tenant on Patta the holding by sale
Dawami or lstamrari referred to in Section 17,
..
(e) held by a grove holder.
:r.~· H
ESCORTS FARMS LTD. v. COMMR., KU MA ON DIVN., NAINIT AL [DHARMADHIKARI, .I.] 565
On the date immediately preceding the date of vesting shall be deemed A
to be settled by the State Government with such intermediary, [lessee,
tenant, grantee or grove-holder] as the case may be, who shall, subject
to the provisions of this Act, be entitled to take or retain possession
as a bhumidhar thereof. "
[Underling to add emphasis] B
As seen above, proviso below sub-section (3) of Section 2, of Govt.
Grants (UP Amendment) Act makes applicable Ceiling Act to the land held
by a grantee under the Govt. Grant. It has already been noted that a 'Govt.
Grantee' or a 'lessee' is covered within the definition of 'tenure holder'
given in unde1 clause ( 17) read with clause (9) of Ceiling Act and the definition C
of 'person' in Section 4 (33) of the UP General Clauses· Act. Thus conjointly
reading the provisions of the Ceiling Act and the Land Reforms Act, the
grantee of land from the government is a holder of land in the status of a
Bhumidhar and the land can be subjected to ceiling limit. To the lands held
by the company, which is grantee of the Govt., the provisions of Ceiling Act D
would be attracted. Such grantee being a lessee from Government has no
right to transfer the land without permission of the Government. It can grant
leases or sub-leases under the UP Tenancy Act but the lessees/sub-lessees
can claim no rights contrary to the terms of the grant. All the transfers made
by the Company or Farm by sale or lease contrary to the terms of the Govt.
Grant create no independent rights in favour of the said transferees or lessees. E
The claims of transferees and lessees based on the provisions of UP Tenancy
Act were, therefore, rightly negatived by the ceiling authority and the High
Court.
We rely on the ratio of the decision of this Court in the case of Raghubar
Dayal v. State of U.P., [1995] Supp. 3 SCC 20 and particularly the following F
observations therein:
"Thus it could be seen that though it is a grant made under the
Government Grants Act, it is in substance a lease of agricultural land
granted by the Government to the appellant for cultivation subject to G
the covenants contained thereunder, some of which have been
mentioned herein before. Section l 05 of the Transfer of Property Act
defines lease as transfer of right to enjoy immovable property made
for a certain time, express or implied or in perpetuity, in consideration
of a price paid or promised, or of money etc. to the transferor by the
transferee who accepts the transfer on such terms. The grant in H
566 SUPREME COURT REPORTS [2004) 2 S.C.R.
A substance, therefore, is a lease of the agriculture land for personal
cultivation on improved methods of cultivation during the period of
the subsistence of the lease for consideration, terminable on notice by
either side. Accordingly, the appellant is a holder of agriculture lands
within the meaning of section 3(d) of the Act.
B Even otherwise, we find that the Government Grants Act itself
prescribed the applicability of the Act to the lands covered by the
grant. The proviso to sub-section (3) of section reads thus :-
Provided that nothing in this section shall prevent, or deemed ever to
have prevented the effect of any enactment relating to the acquisition
c of' property, land reforms or the imposition of ceiling on agricultural
lands i.e. UP Act 13 of 1960.
That was inserted with retrospective effect. Thus, it could be seen
even if the present is construed as a grant of the agricultural lands
under the Government Grants Act, by operation of the proviso to
D sub-section (3) of section 3 of the Act, the Act is clearly applied for
the purpose of computation of the ceiling area of the agricultural
lands. It would appear that the Government Grants Act intended that
even the grantee under that Act shall not be in excess of the ceiling
area prescribed under the Act. Thereby, the lessee of the Government
land, though had a grant under the Government Grants Act, cannot
E
claim to have been outside the purview of the Act."
3. BONA FIDES OF THE TRANSFEREES IN FAVOUR OF TRANSFEREES
COMPRISED IN GROUPS I & II.
F Section 5 (3) prescribes the ceiling limit for holders. In case of company
which is a tenure holder not having a family sub-clause (e) of the said sub-
section (3) of Section 5, prescribes ceiling limit of 7.30 hectares of irrigated
land. Sub-section (6) of Section 5 is relevant for the purpose of deciding the
question of bona fides. of the transactions of sale of the lands. It reads as
under:
G
"Section 5 (6): In determining the ceiling area applicable to a tenure-
holder, any transfer of land made after the twenty-fourth day of January
1971, which but for the transfer would have been declared surplus
land under this Act, shall be ignored and not taken into account:
H Provided that nothing in this sub-section shall apply to -
ESCORTS FARMS LTD. v. COMMR., KUMAON DIVN., NAINITAL [DHARMADHIKARI, J.) 567
(a) a transfer in favour of any person (including Government) referred A
to in sub-section (2);
(b) a transfer proved to the satisfaction of the Prescribed Authority to
be in good faith and for adequate consideration and under an
irrevocable instrument not being a 'Benami' transaction or for
immediate or deferred benefit of the tenure-holder or other m~mbers B
of his family."
Explanation 1.. .................. .
Explanation II - The burden of proving that a case fails within clause
(b) of the proviso shall rest with the party claiming its benefit. C
[Emphasis added]
In determining ceiling area applicable to a holder any transfer of land
made after 24.1.197 l is to be ignored. In accordance with proviso (b) of the
said sub-section (6) of Section 5 transfers made after 24.l.1971, can be D
excluded for determining the ceiling area of the holder only if it is proved
to the satisfaction of the prescribed authority that the transfers were made in
good faith and for adequate consideration. In accordance with Explanation-
11 the burden of proving that the transfers were bona fide and for adequate
consideration is on the party claiming benefit of the transfer.
E
The High Court has in great details considered the claims based on the
transfers made after the cut-off date. There is no evidence of oral leases
alleged to have been granted to the extent of total 18. 75 acres of land in
favour of 50 persons, although in the recitals of the sale deeds, there is
mention of such oral leases. All sale-deeds admittedly have been executed
after the .cut off date fixed in sub-section (6) of Section 5. Prior to the sales, F
on the basis of alleged oral leases three partnership firms were said to have
been formed and later on increased to four, which it is alleged, have taken
possession of the lands transferred to them.
The Managing Paitner of one of the partnership firms was Mr. P.N. G
Mehta who was invited in the meeting of the Board of Directors of the
company. The resolution of the Board of Directors quoted and heavily relied
by the appellate authority and the High Court in their orders clearly shows
that the sale-deeds were executed in anticipation of Amendment Act of l 9'13
and at a time when proposed reduction of ceiling limit had already been
made public. The High Court has also found that the alleged oral leases H
A
568 SUPREME COURT REPORTS [2004] 2 S.C.R.
followed by sale-deeds were mostly in favour of persons closely connected
-
with Shri PN Mehta and Shri HP Handa. Shri HP Handa was also nominated
as an arbitrator in the event of disputes in the firms. The High Court also
found the consideration received was not duly accounted for in the balance
sheet of the company. It is on these facts that the High Court confirmed the
conclusion of the appellate authority that all transfers were made to related
B parties and only to evade the effect of impending amendment to ceiling law.
The concurrent findings in the judgment of appellate authority and of the
High Court of lack of good faith on the part of the Company and the Firm
in executing the sale-deeds after the cut off date 24.1.1971 are not vitiated
by consideration of any irrelevant circumstances and being essentially a finding
C of fact is not liable to be interfered with, in these appeals under Article 136
of the Constitution.
4. LAND TO THE EXTENT OF 250 ACRES HELD FOR RUNNING A
MECHANISED FARMING SCHOOL.
D Various contentions advanced by private parties with regard to 250
acres of school land are being considered under following sub-heads :-
Res Judicata
The transferees of parcels of land described as held by the school for
E farm mechanisation constitute Group No.III and their case has been separately
considered in the impugned judgment of the Commissioner in appeal and of
the High Court in the writ petition. On behalf of such transferees of portions
of school land, the contention advanced by the learned counsel on their
behalf is that in the original Ceiling Act which came into force on 3. l .1961
under clause (ix) of Section 6, land held for the purposes of an educational
F institution either by a society registered under the Societies Registration Act,
1860 or by any corporate body was exempt from the operation of the Ceiling
Act. It is pointed out that in the earliest order of the prescribed authority
Kashipur passed on 2. 7.1964 and the second order passed on 11.8.1967 after
remand of the case by the appellate authority, 250 acres of land, used in Farm
G Mechanization for school was held to be exempt from being included in the
ceiling area of the Company or the Farm. The order of the prescribed authority
dated 11.8.1967 excluding 250 acres of land as not includible in the ceiling ....
area of Company or the Farm was not challenged by the State in appeal. The
learned counsel contends that the said order of the prescribed authority had
become final which could not have been interfered with or upset by the
H appellate authority in its order dated 14.1.1992 in ceiling proceedings initiated
ESCORTS FARMS LTD. v. COMMR., KUMAON DIVN., NAINITAL [DHARMADHIKARI, J] 569
afresh after the ceiling limit was further curtailed by Amendment Act of 1973 A
with effect from 05 .6.1973. In this respect, the argument advanced is that the
bar of res judicata in respect of 250 acres of land held to be exempt as
belonging to the school, would operate in subsequent proceedings taken under
r. the Amendment Act of 1973. The contention is that it was not open to the
appellate authority to take a different view and hold that 250 acres of school
land should be included within the ceiling limit of the Company or the Farm. B
The argument on the face of it seems plausible but on closer scrutiny
of the finding on the aforesaid 250 acres of school land, in the light of the
provisions of the original Act and the Amendment Act of 1973, is
unacceptable. Section 6(ix) of the original Act before its deletion and C
substitution of new Section 6 in the Amendment Act of 1973 reads thus :-
"Section 6. Notwithstanding anything contained in this Act, land falling
in any of the categories mentioned below shall not be taken into
consideration for the purposes of determining the ceiling area
applicable to, and the surplus land of, a tenure holder - D
(i) ...................... ..
(ii) ..................... .
(ix) land held for the purposes of an educational institution by a E
society registered under the Societies Registration Act, 1860, or by
any body corporate".
[Underlining for pointed attention]
We have looked into the order of the prescribed authority dated
11.8.1967 passed under the Original unamended Act. In excluding 250 acres F
of land of the school, the finding reads thus :-
"It is to be noted that the resolutions Ex. Ka-13 to Ex. Ka-20, passed
by the two corporate bodies i.e. Escorts Limited, and Escorts Farms
(Ramgarh) Ltd., as far back as l 953-54 reiates to the transfer of the G
land permanently to the Escorts School of Farm Mechanization. The
heavy expenditure shown in Ex. Ka-3 l supported with the entries in
the balance-sheet Ex. Ka-29 to Ex. Ka-53 of the years 1962 to 1966
duly audited by Chartered Accountants and filed with the Registrar of
Companies all go to show that this school of Farm Mechanization has
a separate and independent entity, other than the objector company. H
570 SUPREME COURT REPORTS [20041 2 S.C.R.
A The school owns 250 acres of land as its own property. I, therefore,
exclude this area from the holding of the tenure-holder.
[Underlining for pointed attention]
From the above part of the order of the prescribed authority, it becomes
clear that 250 acres of land was found to be held by the school as a separate
B legal entity. Exemption clause (ix) of Section 6 as it stood in original section
6 was deleted by re-substitution of new Section 6 by Amendment Act No. 18
of 1973 with effect from 8.6.1973. By insertion of new Section 6, the
exemption earlier available to land held by educational institution has been
done away with effect from 8.6.1973.
c It is true that the above order of the prescribed authority dated 11.8.1967
excluding 250 acres of land as belonging to the school was not questioned
by the State in appeal. The finding that the land was held by the school as
a separate legal entity is obviously a mistake because in all subsequent
proceedings before the ceiling authorities, the High Court and in this Court
D the land is stated to be held by the company or Farm for running the school
as one of its activities. The land was in use for the purposes of educational
institution run by the Company or the Farm. It qualified for exemption unrler
clause (ix) of Section 6, as it stood then. It is to be noted that when the
ceiling limit was reduced by Amendment Act of 1973, which was brought
into force with effect from 5th June, 1973, the land measuring 250 acres,
E although excluded from ceiling limit of the holder, in law and in reality
continued to be held and recorded in the name of the Farm which was its
agent. Under the Amendment Act of 1973, the exemption of land held by an
educational institution was taken away by substitution of new Section 6 to
the Act. Under Section 5, ceiling limit was reduced and under sub-Section (6)
F of Section 5, as inserted by Amendment Act of 1973, the cut-off date fixed
was 24.1.1971. It was provided that all transfers made by the holder of a
land after the above date would be ignored unless, as provided in clause (b)
of the sub-section 6 of Section 5 read with the explanation thereunder, the
holder discharges his burden of proving to the satisfaction of the Prescribed
Authority, that the transfers made after 24.l.1971 were in good faith, for
G adequate consideration and were not Benami transactions.
Tt is not disputed that all the 74 transfers of parcels of land from 250
acres of school land were made after the cut-off date 24.1. I 971. The named
transferor in all the transfer-deeds or sale-deeds is the holder company and
H not the school which has, in reality, no separate existence in law. The school
ESCORTS FARMS LTD. v. COMMR., KUMAON DIVN , NAINIT AL [DHARMADHIKARJ,J.] 5 71
was not registered as a Society and was not a separate legal entity. Although, A
the prescribed authority in its order made under the original Act (prior to the
Amendment Act of 1972) held the land to be belonging to the school as a
separate legal entity and such a finding was not challenged by way of appeal
by the State. The factual and legal position admittedly existing on 5.6.1973,
when the Amendment Act, 1973 was brought in force, was that the land was
held by the Company. It is evident from the fact that all transfers or sale- B
deeds have been executed in favour vf 75 transferees, after the cut-off date
24.1.1971 by the Company to which the provisions of sub-section (6) of
Section 5, as introduced by the Amendment Act of 1973, were clearly attracted.
A finding of fact has been recorded by the Commissioner and confirmed by
the High court in the Writ Petition that transfers of the land used for school C
have been made with full knowledge of the impending legislation proposing
reduction of ceiling limit and intent to evade the effect of ceiling law. In our
considered opinion, on the above admitted legal and factual premise, the bar
of res judicata is not available to the holder Company or the Farm. Their
own subsequent conduct of effecting transfers of school land estops them
from raising a plea of res judicata on an apparently erroneous finding recorded D
in the order of Prescribed Authority in the course of proceedings under the
original unamended Act.
For determining the ceiling limit and the surplus area of a holder, in
proceedings under the Amer lment Act of 1973, it was competent for the E
prescribed authority to accept the admitted position of the land used for
school as being owned and held throughout by the holder Company through
the Farm and ignore the apparently erroneous statement of the earlier
Prescribed Authority recorded in the order passed on 11.8.67 in original
proceedings under the Ceiling Act that the land belonged to the school as a
separate legal entity. The land excluded from the holding of the company or F
the Farm, treating it to have been held by the school as a separate legal entity,
even otherwise was entitled to be exempted from determination of the ceiling
limit of the holder company or the Farm because, in accordance with clause
(ix) of Section 6 of the original unamended Act, the said land was in use for
purposes of an educational institution. The inaction of the State in not filing G
appeal against the erroneous exclusion of the land from the holding of the
company and treating it to be of the school as separate entity, cannot debar,
in law, the State in subjecting such land to the ceiling limit in the proceedings
initiated under the Amendment Act of 1973 whereby the ceiling limit was
further reduced. On the date of enforcement of the Amendment Act No. 18
of 1973, school land was held by the company and not by the school which H
572 SUPREME COURT REPORTS [2004] 2 S.C.R.
A had no separate legal existence as an entity. On the cut-off date 24. 1.1971 as
fixed in sub-section (6) of Section 5 of the Amendment Act of 1973, admittedly
the school land was claimed to be held by the company and its exclusion was
sought on the basis of its transfer in various portions to different parties by
the company on the premise that, having been excluded in the earlier {
proceedings from the holding of the company, it was so transferable and the
B transfers were, therefore, bona fide.
The learned counsel for the State seems to be right in his submission
that on the aforesaid admitted facts the finding in the original proceeding
regarding 250 acres of land to be belonging to the school as separate legal
C entity, was apparently a mistake which is clear from the holder company's
own action of transferring separate portions of that land in its own name.
On behalf of the State, it is submitted that with the purpose of giving
full effect to the ceiling provisions, in Amendment Act of 1973 by subsequent
Amendment Act of 1976, which was brought into force with effect from
D 10.10.1975, Sections 38-A and 38-8 were introduced for creating a bar on
raising plea of res judicaia based on proceedings concluded under the original
unamended Act existing prior to 1973.
"38-A. Power to call for particulars of land from tenure-holders. -
(I) Where the prescribed authority or the appellate court considers it
E necessary for the enforcement of the provisions of this Act, it may,
at any stage of the proceedings under this Act, require any tenure-
holder to furnish such particulars by affidavit in resp~ct of the land
held by him and members of his family as may be prescribed.
(2) The particulars of land filed under sub-section (I) may be taken
F into consideration in determining the surplus land of such tenure-
holder.
3 8-8. Bar against res judicata. - No finding or decision given before
the commencement of this section in any proceeding or on any issue
(including any order, decree or judgment) by any court, tribunal or
G authority in respect of any matter governed by this Act, shall bar the
re-trial of such proceeding or issue under this Act, in accordance with
the provisions of this Act as amended from time to time."
[Emphasis added ]
Res judicata is a plea available in civil proceedings in accordance with
H
ESCORTS FARMS LTD. v. COMMR., KUMAON DIVN., NAINIT AL [DHARMAOHIKARJ, J ] 5 73
Section 11 of the Code of Civil Procedure. It is a doctrine applied to give A
finality to '/is' in original or appellate proceedings. The doctrine in substance
means that an issue or a point decided and attaining finality should not be
allowed to be reopened and re-agitated twice over. The literal meaning of res
is 'everything that may form an object of rights and includes an object,
subject-matter or status' and res judicata literally means: 'a matter adjudged; B
a thing judicially acted up'Jn or decided; a thing or matter settled by
judgement.' Section 11 of CPC en grafts this doctrine with a purpose that
'a final judgment rendered by a court of competent jurisdiction on the merits
is conclusive as to the rights of the parties and their privies, and, as to them,
constitutes an absolute bar to a subsequent action involving the same claim,
demand or cause of action.' [See : Black's Law Dictionary at pages 1304- C
1305]
Proceedings under the Ceiling Act, are not adversarial as are proceedings
in suit. The Ceiling Act is a legislation to give effect to the Directive Principles
contained clauses (b) and (c) of Article 39 of the Constitution. The State is
advised by the Directive Principles contained in the Constitution to take D
necessary legislative measures so as to ensure social justice by equitable
distribution of ownership and control of material resources and avoid
concentration of wealth and means of production in few hands. The laudable
social objectives sought to be achieved by the ceiling legislation is to take
surplus land from the holders l:l'ld distribute the same to the landless agricultural E
labourers and peasants surviving on agriculture. In applying the principles of
res judicata, therefore, to the ceiling proceedings, the object of the Act cannot
be lost sight of. All principles of res judicata contained in Section 11 of the
CPC cannot be strictly and rigorously made applicable to ceiling proceedings.
Section 38-B introduced by Amendment Act of 1976 with the transitory
provisions made both in the Amendment Act No. 18 of 1973 and Act No. 20 F
of 1976 is a departure from the provisions of Section 11 of the Code of Civil
Procedure and indicate non-applicability of bar of res judicata in ceiling
proceedings under the Act.
Plea of res judicata is also not available where there is no contest on
an issue between the parties and there is no conscious adjudication of an G
issue. In the original order dated 11.8.67 of the prescribed authority passed
..., under the unamended Ceiling Act, the school land to the extent of 250 acres,
u.
...... under an obvious mistake, was treated to be land held, not by the holder
Company but by the school treating the latter to be a separate legal entity. It
was never the case of the holder Company or the Farm that 250 acres of land H
574 SUPREME COURT REPORTS [2004] 2 S.C.R. ·
A was held not by company but by the school as a separate legal entity. Their
claim with regard to the school land was for exemption under clause (ix) of
Section 6, as it stood prior to the Act of 1973. The company was claiming
exemption for 250 acres of land being the land held by the holder Company
for educational purposes and such claim for exemption could be laid on
B behalf of the company in accordance with clause (ix) of Section 6, as it stood
in the original Amendment Act. The Prescribed Authority, it appears, by an
inadvertent mistake, instead of considering the claim of the holder company
for exemption of land under clause (ix) of Section 6, as it stood then, excluded
the land as belonging to the school as separate legal entity. This exclusion of
250 acres of land of the school from the extent of holding of the holder
C company was not a decision or a finding on an issue arising between the
parties but it was a clear mistake which is apparent from the fact that this
land was throughout treated by the holder company as its own land and was
transferred by the company by different sale-deeds to 75 persons after the
cut-off date 24.1.1971. On the date of second ceiling introduced by the
Amendment Act of 1973, the so called land belonging to the school is claimed
D to be held by the holder Company as the Company had transferred it to
various persons. On these admitted facts and nature of title of the land, plea
of res judicata cannot be allowed to be raised. The case initiated and proceeded
with in Ceiling Law is not an adversarial litigation between the State anlthe
land owners. It is enforcement of a social welfare legislation enacted in
E accordance with the Directive Principles of the State Policy enshrined in
Article 39 of the Constitution. '
The plea of res judicata has been held to be barred in proceedings
under Ceiling Law in the decisions of Allahabad High Court reported in
Ram Lal v. State of UP. and Ors., (1978) All. L. J. I I97; Kedar Singh v.
F Addi. District Judge, Varanasi and Ors., [1980] All. L.J. 36 which have held
the field in the State of UP as a settled legal position.
Ambit and effect of provisions of Section 38-B imposing bar on plea
of res judicata in civil proceedings came up before this Court in State of
UP. v. Budh Singh and Ors., [1995] 6 SCC 146 and State of UP. v. Budh
G Singh (Dead) by Lrs., [1997] 2 SCC 181. The decision of Division Bench of
Allahabad High Court in Krishan Kumar's case was considered . It was held
that amendments made to the Ceiling Act justify reopening of proceedings
undertaken under the Act prior to the amendment and Section 38-B bars plea
of res judicata to the parties on the basis of findings and decisions in the
H earlier ceiling proceedings. The relevant part of the judgment of this Court
ESCORTS FARMS LTD. v. COMMR., KUMAON DIVN., NAINITAL [DHARMADHIKARI, J ] 575
in the second case of Budh Singh (Dead) by LRs (supra) reads thus :- A
"This appeal was once heard earlier and in the order passed on
25.9.1995, it was stated that as the High Court in the impugned
judgment has relied on the earlier pronouncement by the Division
Bench of the same High Court in Krishan Kumar case it would be
- appropriate to peruse that judgment, which being not on record a
direction was given to place the same for our perusal. It has been so
done. We have gone through the judgment and, accordance to us, the
learned Single Judge who rendered the impugned judgment misread
B
the view taken by the Division Bench in Krishan Kumar case. In that
judgment, the Division Bench has really held that Section 38-B was C
wide enough to "capture findings or decisions given under the Ceiling
Act as well as prior to' the commencement of section 38-B". It has
really not been held in that case that "in the subsequent ceiling
proceedings, the earlier finding would be binding unless it can be
shown that after the earlier ceiling proceedings there occurred some
amendments in the Ceiling Act which justified that reopening of a D
finding recorded in the earlier ceiling proceedings" as observed in th:e
impugned judgment. No doubt in Krisban Kumar case an argument
was advanced to cut down the width of section 38-B by inviting the
attention of the Bench of Section 31(5); the Bench, however, held
that that section had no impact on the applicability of Section 38-B." E
In view of our above discussion on the issue of applicability of the
doctrine of res judicata, it is not necessary for us to deal and discuss cases
cited by the counsel for the parties on the power of the Appellate Authority,
by invoking provisions of Order 41 Rule 3 3 of the Code of Civil Procedure,
to hold the land of school as includible for determination of ceiling area, in F
--- the appeals instituted against the order of the Prescribed Authority by the
holder of the land and the transferees and without any appeal by the State.
5. Denial of opportunity of hearing to the transferees of /and/Breach of
Principles of Natural Justice.
G
A serious grievance has been raised on behalf of the transferees from
250 acres of land earlier exempted in favour of the school that they were
neither made parties to the appellate proceedings nor were heard before
denying exemption from ceiling to such lands and nullifying the transfers in
their favour by describing them as lacking in bona fides.
H
576 SUPREME COURT REPORTS (2004) 2 S.C.R.
A Learned counsel appearing for the State contended that as the transferor
i.e. the company through the Farm were parties before the Appellate Authority
and were heard, the transferee who derived title from the transferors were not
necessary but only proper parties. Their interest was protected by the transferor.
lit is also submitted that the burden of proof that the transfers were bona fide
B was on the transferor who failed in successfully discharging the said burden
of proof to the satisfaction of the ceiling authorities and the High Court.
Reading the provision of sub-section (6) of Section 5 with proviso (b)
Explanation II thereunder, it is difficult to accept the contention advanced on
behalf of the State that the transferees were merely proper parties and were
C not entitled to be arrayed, noticed and heard in the proceedings under the
Ceiling Act. The transfer made .after the cut-off date could have been saved
only on proof of good faith and payment of adequate consideration for the
transfers. This burden of proof can be discharged jointly or singly either by
the transferor or transferee. The transferee is the party likely to be adversely
affected by the order nullifying the transfer if found to be lacking in good·
D faith. The transferee is clearly covered by the expression "the party claiming
its benefit" as used in Explanation II of sub-section (6) of Section 5." The
burden of proof in respect of bona fides of transfers is also on the person or
'party claiming its benefit.' It was therefore necessary to make transferees
as parties in the appeal and grant them opportunity of hearing by the Appellate
E Authority. To that extent the order of the Appellate Authority can be said
to have been vitiated for not following the required procedure.
For a different reason, however, we decline to set aside the appellate
order of the Commissioner which has been confirmed by the High Court.
Non-joinder of transferees as parties and denial of opportunity of hearing to
p them, in the facts and circumstances found here, cannot be said to be fatal
to the entire ceiling proceedings.
The transferees of the school land were not parties and were not heard
by the appellate authority but when on being aggrieved by the order of the
Appellate Authority, they preferred writ petitions in the High Court, a very
G detailed hearing with full opportunity to them to prove good faith and payment
of adequate consideration for the transfers made in their favour was granted
to them by the High Court. All necessary information showbg the background
of the sales and their claims of bona fides, as furnished both by the transferor
and transferees have been fully gone into by the High Court and a definite
finding has been reached that the transfers lacked in good faith and were
H
ESCORTS FARMS LTD. v. COM MR., KUMAON DIVN., NAINIT AL [DHARMADHIKARI, J) 577
obviously effected to evade ceiling law. All possible pleas available to the A
transferees, were projected before the High Court in the writ petition preferred
by the transferees. Thus, all available material facts and evidence were placed
and considered by the High Court. The High Court has in great detail critically
examined all the relevant evidence produced by the transferees before arriving
at an adverse conclusion against them. This Court would have been inclined
- and justified in making a remand of the case to the Appellate Authority to
make all transferees as parties and give them another opportunity of hearing
B
in respect of the portions of land purchased by them from out of 250 acres
of land held in the name of the school. Since, however, the High Court has
_.... already given full opportunity of hearing to the transferees on this aspect we
refrain from making any order of remand just for the sake of completing a c
formality of granting them similar opportunity of hearing by the Appellate
Authority with no likelihood of any conciusion different from the one reached
by the High Court and this Court on merits of the case.
In similar case, involving large scale sales effected to defeat provision
of ceiling law, this Court took recourse to Article 142 of the Constitution and D
observed in the case of State of Andhra Pradesh v. S. Vishwanatha Raju and
Ors., [1995] 3 SCC 327 thus:-"
" ........... It cannot be said that in appropriate cases, this Court is
prevented to take suo motu judicial notice of glaring injustice having
recourse to Article 142 of the Constitution for serving the ends of E
justice. The very purpose of the Land Reforms (Ceiling on Agricultural
Holdings) Act, 1973 is to prescribe the maximum holding so that the
excess land becomes available for distribution among the landless
persons so as to serve the object of socio-economic justice envisaged
in the Preamble to the Constitution and its Directive Principles of
F
State Policy. When a large extent of land of about 900 acres is sought
to be taken out of the purview of the Act by the device of agreements
of sale and the officers overlook the same because of their negligence
or otherwise in not carrying the orders of authorities in revision and
when the facts came to the notice, this Court having taken suo motu
notice of the same, mete out justice. Accordingly suo motu notice is G
taken of the cases concerned and they are treated as special leave
- petitions against the orders passed by the appellate authority and
considered its legality by granting leave. Hence, we hold that the
lands covered under Ex. A-1 and Ex. A-4 should be treated as lands
held by the vendor and the vendee. The Land Reforms Tribunal
H
A
578 SUPREME COURT REPORTS [2004) 2 S.C.R.
concerned is, therefore, directed to reopen the CCs filed by the
respective partners and the managing partners of the company and
·-
determine the surplus lands according to law and then pass the
appropriate orders according to law".
Similarly in the instant case, it has been found that large scale transfers
B were effected to defeat Ceiling Law. We, therefore, decline to upset the
concurrent findings of the Appellate Authority and the High Court in our
discretionary powers under Article 136 of the Constitution. We have also
come to the same conclusion that the transfers made after the cut-off date
were not in good faith hence liable to be ignored for determining the extent
C of surplus land with the holder. That apart we have also recorded a conclusion
that the entire land being held under a Govt. Grant the lands were not
transferable without permission of the government and the transfers were
invalid being in clear breach of the conditions of the Grant.
Right of hearing to a necessary party is a valuable right of Denial such
D right is serious breach of statutory procedure prescribed and violation of
rules of natural justice. In these appeals preferred by the holder of lands and
some other transferees, we have found that the terms of Govt. Grant did not
permit transfers of land without permission of the State as grantor. Remand
of cases of a group of transferees who were not heard, would, therefore, be
of no legal consequence, more so, when on this legal question all affected
E parties have got full opportunity of hearing before High Court and in this
appeal before this Court. Rules of natural justice are to be followed for doing
substantial justice and not for completing a mere ritual of hearing without
possibility of any change in the decision of the case on merits. In view of the
legal position ·explained by us above, we, therefore, refrain from remanding
F these cases in exercise of our discretionary powers under Article 136 of the
Constitution of India.
6. Costs imposed as damages.
The High Court has imposed heavy costs of rupees ten lacs on the
G Farms and has further directed its deposit within one month. In case of
default its recovery is directed to be made from the Farm or Shri P.N. Mehta.
The justification given by the High Court for imposing such heavy cost is
that by maneuvering and manipulating transactions the Farm, with the help
of Shri P.N. Mehta and the Company, were able to retain possession of the
land and take its advantage and usufruct for long period of seventeen years.
H
ESCORTS FARMS LTD. v. COM MR, KU MA ON DIVN ., NAINITAL [DHARMADHIKARI, J.] 579
We find that in the name of imposing costs, the High Court has, in A
effect, awarded lump sum damages for unauthorized use and occupation of
surplus land. Section 16 of the Ceiling Act empowers levy of damages for
use and occupation of surplus land and reads thus :-
"Section 16. Damages for use and occupation of surplus land where
any tenure holder holds any land on or after the commencement of B
the Uttar Pradesh Imposition of Ceiling on Land Holdings
(Amendment) Act 1972, in excess of the ceiling area applicable to
him, he shall be liable to pay to the State Government for the period
commencing from the first day of July 1973, until the date on which
the Collector takes possession of such surplus land under Section 14, C
or the date in which the tenure holder voluntarily delivers possession
to the Collector under the said sub-section, whichever is earlier, such
compensation for use and occupation as mily be prescribed."
The quantification of damages payable to the State for use and
occupation of surplus land under Section 16 is required to be done in D
accordance with the principles laid down in Rule l 8A of the rules framed
under the Ceiling Act. The provisions of Section 16 read with Section 18-
A require separate proceedings to be undertaken for determination and
quantification of amount of damages for use and occupation of the surplus
land. The said exercise ought to have been left to the Ceiling authorities. The
High Court, in our opinion, should not have awarded Jump sum damages by E
imposing heavy costs. Shri P. N. Mehta was found to have taken active part
in formation of pannership firms and obtaining the transfers for favoured
parties. He did it not in his individual capacity but as a managing partner of
one of the partnership firms and on being invited by the holder Company in
the meeting of the Board of Directors to help out the company from the F
effect of ceiling law. In the event of default of payment of costs by the
company, the direction made by the High Court to Shri P. N. Mehta to pay
the cost is not justified. This part of the order of the High Court imposing
Rupees Ten Lacs as costs on the Farm and directing its payment by the Farm
or by Shri P.N. Mehta is liable to be set aside.
G
Before parting with the case, only mention has to be made of the
submissions made by the learned counsel appearing for subsequent transferees
of the lands involved and by some of the interveners who claim to have been
· allotted some lands. In our opinion the subsequent transferees and such
interveners deserve no indulgence in this appeal. The subsequent transferees
H
580 SUPREME COURT REPORTS [2004] 2 S.C.R.
A have stepped into the shoes of the original transferees. They can claim no
different or better rights than their tr~~sferors. The contentions raised on
-
'
their behalf are, therefore, not entertained. No relief can be granted to them.
The intervenors have to work out their independent rights and remedies, if
any, and can claim no right of hearing in these appeals.
B In the result, all the appeals are dismissed. The order of the High Court
under appeal, which confirms the order of the appellate authority, is maintained
except to the extent of imposition of costs of rupees ten lacs. The costs
imposed in the impugned order is hereby set aside. Taking into consideration
the nature of the controversy involved and the acts and omission!> both on the
part of the State Authorities and the private parties, we leave them all to bear
their own costs and expenses in these appeals.
S.K.S. Appeals· dismissed.
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