Holding

The mortgage of Nazul land without State sanction is void, and the bank has no right over the government property; thus the High Court order converting the leasehold to freehold is set aside.

Summary

The State of Uttar Pradesh leased a Nazul (government) property at 19 Clive Road, Allahabad to a private company, which later mortgaged its leasehold interest to United Bank of India without obtaining prior State sanction. The Bank obtained a mortgage decree and later sought conversion of the leasehold into freehold, invoking the doctrine of legitimate expectation. The Supreme Court examined whether the mortgage was valid under the Government Grants Act, 1895 and Nazul Rules, and whether the doctrine of legitimate expectation could be applied to a bank with no recognized legal relationship with the State. It held that the lease prohibited sub‑letting or mortgaging without written State approval, making the mortgage void ab initio and the decree unenforceable against the State. Consequently, the High Court’s order directing conversion of the leasehold to freehold was set aside and the appeal was allowed.

Issues considered

Whether a mortgage of Nazul (government) land executed by a lessee without prior State sanction is valid.
Whether the mortgage decree obtained by the bank is enforceable against the State, the paramount title holder.
Whether the doctrine of legitimate expectation can be invoked by a bank to compel conversion of leasehold land into freehold.
Whether the bank, not being a lessee, can claim any right or interest over the government‑owned Nazul property.

Legislation cited

Subjects

Government landNazul landLeaseholdMortgageLegitimate expectationConversion to freeholdGovernment Grants ActSupreme Court

Judgment

[2015] 14 S.C.R. 118

A STATE OF UTTAR PRADESH AND OTHERS
v.
UNITED BANK OF INDIA AND OTHERS
(Civil Appeal No. 5254 of 2010 etc.)
B
NOVEMBER 26, 2015
[M. Y. EQBAL AND C. NAGAPPAN, JJ.]
Government Grants Act, 1895 - ss. 2 and 3 - Transfer
c of Government land - Property in question leased out by
State of Uttar Pradesh, in favour of a Company for a period
of 50 years __: The company mutated as lessee in Nazul
property register - The lessee-company mortgaged the
property in question to the appellant-Bank against credit
D facilities - On company's failure to pay outstanding dues,
suit by appellant-Bank before Calcutta High Court -
Mortgage decree passed by the High Court on the basis of
settlement arrived at between the parties - Show cause notice
to the company by the State authority for termination of its
E leasehold rights on the property in question - Notice was
challenged by appellant-Bank by filing writ petition - The Bank
made application for getting conversion of leasehold land
into freehold status which was rejected by the competent
authority - On non-compliance of terms of the mortgage
F decree, debt recovery proceedings initiated - On the basis
of settlement between the parties Debts Recovery Tribunal
(ORT) directed to dispose of the mortgaged property -
Property in question auction-sold pursuant to order of
ORT - The prospective auction-purchaser asked the
G appellant-Bank to get the property converted into freehold -
The Bank issued show cause notice against the auction-
purchaser - Writ petition filed by auction-purchaser
challenging the show cause notice~ High Court allowed the
writ petitions filed.by the Bank and the auction-purchaser -
H
118
STATE OF UTTAR PRADESH AND OTHERS v. UNITED 119
BANK OF IN DIA AND OTHERS

On appeal, held: The land in dispute was a Government A
property (Nazul land) maintained by State authorities in
accordance with Nazul Rules - The lessee is not authorised
to transfer or sublet the demised premises without previous
sanction of the lessor - There is nothing on record to show
that the lessee in the present case had obtained any written B
sanction from the lessor before mortgaging its leasehold
interest in the property and hence the mortgage is bad in
law- The appeffant,Bank not being lessee of the land, cannot
get any right over it - Mortgage decree is also bad in law as
the same was passed without issuing notice to the State of C
U.P. -The High Court erred in giving direction to convert the
leasehold as freehold interest in favour of the Bank by
appiying doctrine of legitimate expectation -The doctrine
could not have been applied in cases of invalid
expectation - Nazul Rules - rr. 13 and 16 - Doctrine of D
Legitimate expectation - Transfer of Property.

Doctrines/Principles - Doctrine of legitimate
expectation - Applicability of - When - Discussed and
explained. E

Words and Phrases - 'Legitimate expectation' -
Meaning of- Explained.

Disposing of the appeals, the Court
F
Held: 1. The land in dispute being a Government
property, the appellant-Bank cannot get any right over
it. Moreover, neither the appellant-Bank is a lessee of the
land in question nor any lease has ever been sanctioned
by the Govt of U.P. in its favour. Hence, the appellant is G
not entitled to get any right or to keep possession of the
properties in question. [Para 21] [139-F-G]
2. There is no dispute that the land and building in
question is Nazul property being the property of H
120 SUPREME COURT REPORTS [2015] 14S.C.R.

A Government maintained by the State authorities in
accordance with the Nazul Rules. Chapter 1 of the Nazul
Rules lays down the provision for maintenance of Nazul
register, procedure for entering names of persons in
possession of Nazul land and building. Rule 13 provides
B the procedure for sale or lease of Nazul land, whereas
Rule 16 makes it mandatory for obtaining prior approval
of the State Government before sale or lease or renewal
of leases of nazul lands. [Para 26][141-H; 142-A]
c 3. Indisputably the lease of Nazul land is governed
by the Government Grants Act, 1895. Sections 2 and 3
of the Gov 0 rnment Grants Act, 1895 very specifically
provide that the provisions of the Transfer of Property
Act do not apply to Government lands. [Para 28][143-E]
D
4. The aforesaid legal position was known to the
lessee-Company and also to the Bank to whom the
property in question was mortgaged. In reply to the
application filed by the Bank with the authorities of the
E State of Uttar Pradesh for conversion of the land into
free hold land in favour of the Bank, the Authority made
it clear that conversion of land cannot be allowed in
favour of the Bank. [Para 29][144-B-C]
5. The lease of Nazul land for building purposes
F was sanctioned under G.O. No. 2035/IX-150 dated 27th
November, 1940 as amended by G.O. No. 1119-IX/54-1952
dated 25th June, 1952. The form of lease is provided in
Form 2 in the Appendix to the said rule according to the
G terms and conditions of the lease. The lessee will not in
any way transfer or sublet the demised premises or
building erected thereon without the previous sanction
in writing of the lessor. [Para 30][144-G-H]
6. The disputed property, which is a Nazul Land
H and governed by the Government grant, was given by
STATE OF UTTAR PRADESH AND OTHERS v. UNITED 121
BANK OF IND IA AND OTHERS

way of Renewal of Lease to the lessee-Company for 50 A
years w.e.f.1st September 1937, which expired on 31st ·
August 1987. Admittedly, the lessee-company mortgaged
the said Nazul land in favour of the Bank, in which the
Company had only a leasehold interest. There is nothing
on record which shows as to when the alleged mortgage B
was created by the lessee-company in favour of the
Bank. If it is assumed that the mortgage was created
before the expiry of the lease i.e. before 31st August
1987 then as per Form 2 read with Form 3 which governs
conditions for renewal of lease of the Nazul Rules any . C
transfer or sub-lease by the lessee-company had to be
done with the previous sanction of the State, but in
the present case not a single document is produced to
show that any such sanction was obtained by the lesee- D
Company from the State. [Para 33)[145-C-F] .
7. In the present case there was nothing on the
.record to show that the lessee- Company has obtained
any written sanction from the lessor i.e. Government
before mortgaging his leasehold interest in the Nazul E
land. Meaning thereby that the mortgage done by the
lessee in favour of the Bank itself is bad in law, which
was done in clear violation of the terms of the lease deed
i.e. mortgage of the Nazul land without previous
sanction in writing of the State. [Para 38)[146-F-G] F

8. The appellant-Bank, which is a nationalized
bank, before lending public money by way of loan as
against the security of disputed property by way of
depositing title deed, was supposed to verify the title of G
the mortgagor in respect of the disputed property. But
neither any evidence nor a single sheet of paper has
been produced by the Bank to show that the title of the
mortgagor was verified and non-encumbrance certificate
H
122 SUPREME COURT REPORTS [2015] 14 S.C.R.

A in respect of disputed property was obtained · or no
objection from the State Government was taken by the
Bank. [Para 39][146-H; 147-A·B]
9. Even if it is held that the mortgage was valid,
8 in the cases of Government grant, the Government is
very much a necessary party and the Calcutta High
Court should not have passed the so called compromise
mortgage decree without issuing notice to the
Government of Uttar Pradesh. This is an infirmity done
c by the High Court and accordingly the mortgage decree
is bad in law. Moreover, the High Court should have
taken into account the fact that the Company is only
having the leasehold interest and the Bank could not
have been given right to auction the property as the
D Company had only limited right which had expi.red in
the year 1987. [Para 39][147-B·D]
10.1 The High Court of Allahabad also erred in
giving the direction to convert leasehold interest as
E freehold interest in favour of the Bank by applying the
doctrine of legitimate expectation for issuing the writ
of mandamus against the State. The doctrine of legitimate
expectation cannot be applied in cases of Invalid
expectation, and the mortgage done by the lessee-
F company itself is bad in law. This expectation is not valid
at all in the eye of law. Moreover, doctrine of legitimate
expectation cannot be invoked by someone who has no
dealing or transaction or negotiations with an authority
or by someone who has a recognized legal relationship
G with the authority. Therefore, as the Bank is not having
any recognized legal relationship with the State in view
of the fact that the mortgage by the lessee-company in
favour of the Bank itself is bad in law, there is no question
of invoking doctrine of legitimate expectation in the
H
STATE OF UTTAR PRADESH AND OTHERS v. UNITED 123
BANK OF INDIAAND OTHERS

present case as it applies to a regular, consistent A
predictable and certain conduct, process or activity of
the decision-making· autho.rity. The expectation should
be legitimate, that is, reasonable, logiC:al and valid.
Any expectation which is based on sporadic or casual
or random acts, or which is unreasonable, illogical .or B
invalid, cannot be a legitimate expectation. [Paras 40, 41
and 42][147-E]
.10.2 In the instant case, the State never
recognized the appellant Bank as a mortgagee. Further c
the State was not aware about the alleged mortgage said
to have been created by the lessee company by deposit
of Lease document. Moreover, the State never
represented or promised either to the lessee or to the
Bank to give any benefit under the lease. In such D
circumstances, the High Court has committed grave
error in applying the doctrine of legitimate expectation
in favour of the Bank. [Para 44][151-A-B]
Ram Parvesh Singh v. State of Bihar 2006 (6) E
Suppl. SCR 512: (2006) 8 SCC 381; Sethi Auto
Service Station and another v. Delhi Development
Authority and others 2008 (14) SCR 598 : (2009)
1 sec 180 '.'"relied on.
Case Law Reference F

2006 (6) Suppl. ?CR 512 relied on Para 40
2008 (14) SCR 598 relied on Para 42
CIVIL APPELLATE JURISDICTION : Civil Appeal No. G
5254 of 2010.
From the Judgment and Order dated 03.11.2009 of the
High Court of Judicature at Allahabad in Civil Misc. Writ
Petition No. 775 of 1999. H
124 SUPREME COURT REPORTS [2015] 14S.C.R.

A WITH
C. A. Nos. 4688, 2462, 1969-1970 of 2010.
Rakesh Dwvidedi, V. Shekhar, Sr. Advs., lrshad Ahmad,
AAG, Ms. Mukti Chowdhary, Ms. Apoorva Garg, Utkarsh Kulvi
B (For M/s. Mitter & Mitter Co.), Balraj Dewan, Ms. Archana
Singh, Abhisth Kumar, Som Raj Choudhary, Awanish Sinha,
Dr. Aurobindo Ghose, Ghan Shyam Vasisht, Pankaj Kumar
Singh, Vivek Vishnoi, Pawan Kumar Shukla, K. L. Janjani,
C Rishi Kesh, Rajesh Kumar, Gaurav Kumar Singh, Rakesh
Chaurasiya, C. D. Singh for the appearing parties.
The Judgment of the Court was delivered by
M. Y. EQBAL, J. 1. Since all these appeals arise out of
D a common judgment and order dated 3.11.2009, they have
, been heard together and disposed of by this common
judgment.
2. By the impugned judgment dated 3.11.2009 passed
by a Division Bench of the Allahabad High Court, the writ
E petition filed by the writ petitioner United Bank of India was
allowed and necessary directions were issued. Aggrieved by
those directionsJtie appellants have come to this Court.
3. In the writ petition No.775 of 1999, the writ petitioner
F namely United Bank of India sought the following reliefs:
"a) issue a writ, order or direction in the nature of
certiorari quashing the impugned shciw cause notice
dated 19.12.1998 contained in Annexure '6' to this writ
G petition.
b) issue a writ, order or direction in the nature of
prohibition restraining the respondents from canceling
the lease with regard to property no.19, Clive Road,
Allahabad.
H
STATE OF UTTAR PRADESH AND OTHERS v. UNITED 125
BANK OF INDIAAND OTHERS [M. Y. EQBAL, J.]

c) issue a writ, order or direction in the nature of A
prohibition restraining the respondents from converting
the lease of property no.19, Clive Road, Allahabad, into
. free hold in favour of any other person ..
d) issue a writ, order or direction in the nature of B
mandamus directing the respondents nos.1 to 4 to
accept the application and money for conversion of .
lease hold rights with regard to property no.19, Clive
Road, Allahabad, into free hold, as per Government
order dated 4.12.1998, contained in Annexure '7' to this c
writ petition in favour of the petitioner bank.
e) issue a writ, order or direction in the nature of
mandamus directing respondents nos.1 to 4 to renew·
the lease in respect of the premises No.19, Clive Road,
Allahabad, and to execute the necessary lease deed D
with reference to the decretal rights of the petitioner
bank.
f) Issue any other suitable writ, order or direction which
this Hon'ble Court may deem just and proper in the E
circumstances of the case."
4. The facts of the case in brief as narrated in the writ
petition are that the property in question i.e. Bungalow no.19,
Clive Road, Allahabad was initially leased out to one Ms.
Martha Anthony on 11 .8.1887 for 50 years and the said period F
expired on 11.8.1937. On 7.4.1945, the lease was renewed
in favour of Miss Verna Anthony and Miss Leena Anthpny for
another 50 years by the Collector Allahabad,.for the Governor
of United Provinces, which was made effective from 1.9.1937, G
and as such, the said lease was valid up to 31.8.1987.
Subsequently, on 2i 10.1945, the lease was transferred in
favour of M/s. Amrita Bazar Patrika Pvt. Ltd. (in short; "the ABP
Company") by nieans of a registered deed .. On the basis of
the said transfer deed, a lease deed was executed on H
126 SUPREME COURT REPORTS [2015] 14 S.C.R.

A 25.07.1949 by the State of Uttar Pradesh in favour of the ABP
Company for 50 years from the first day of September 1937 in
pursuance of G.O. No.1286/Xl-780/45 dated 22.03.1947.
Consequent thereupon, the name of the Company was mutated
as lessee in respect of the property situated at 19, Clive Road,
B Allahabad in the Nazul property register. The ABP Company,
having its registered office in Calcutta, its Managing Director
has been carrying on two businesses of publishing
newspapers from Calcutta as well as from Allahabad and other
regional offices all over the country. The Company owns two
C properties at Allahabad being premises no.19, Clive Road,
Allahabad and premises no.10, Edmonston Road, Allahabad.
5. Further the case of the appellant is that the United
Bank of India (in short, "the Bank") had advanced credit
D facilities to the Company M/s ABP Pvt. Ltd. and the said
Company had taken loan for the purposes of giving salaries
to their staff as well as to modernize its printing technology for
which the company alleged to have mortgaged their immovable
properties at Calcutta and Allahabad, including leasehold
E property situated at 19, Clive Road, Allahabad by means of
deposit of title deeds. Since the Company became irregular
in paying the loan instalments, the Bank issued a demand
notice calling upon the Company and others to pay the
outstanding dues. Thereafter, for recovery of its dues, the Bank
F had filed a Suit No. 51 Oof 1990 at Calcutta High Court in the
capacity of mortgagee of the various properties of the said
Company including 19, Clive Road, (25 and 25-A Chikatpur
Nasibpur Bakhtiyara), Allahabad, which was held by the said
Company as lessee. The said suit was decreed on
G 09.10.1991 and a mortgage decree was passed in favour of
Bank. It would be relevant to mention here that the paramount
title holder namely the State of Uttar Pradesh was not made
party in the suit and the mortgage decree was passed on the
H basis of settlement arrived at between the parties.
STATE OF UTIAR PRADESH AND OTHERS v. UNITED 127
BANK OF INDIAAND OTHERS [M. Y. EQBAL, J.]

6. Some of the important terms of the settlement upon A ·
which the Bank's suit was decreed, inter alia, are as follows:-
. "(a) There will be a decree for Rs.10,84,34,870.37 in
favour of the plaintiff and against the defendant nos:· 1,
2,3and7. B
(b) There will be a decree for interest on the decretal
due of Rs.10,84,34,870.37 at 6% per annum simple from
August 21, 1991 till realisation of the decretal dues and ·
in terms of clause 17 herein below. '
(c) There will be a decree for costs assessed at
c
Rs.2,31,442.08. Such costs shall be paid on or before
December 31, 1991.
(d) There will be a decree for Rs.33,30,000/- of the
plaintiff against defendant no.8 with interest at 6% per D .
annum simple from August 21, 1991, till realisation of
the decretal dues and in terms of Clause 17 herein. This
amount, however, is included in the amount stated in
paragraph (a) hereinabove.
E
(e) There will be a declaration that the suit properties
mentioned in Annexure K to the plaint, a copy whereof
is annexed hereto, remain hypothecated and the
immovable properties mentioned in Annexure L to the
plaint, a copy whereof is annexed hereto, remain F
mortgaged to the plaintiff as securities for the payment
of the decretal dues with interest and costs, as provided
hereinabove. ·
(f) There will be a decree for sale of the hypothecated
assets mentioned in Annexure Kto the plaint for payment G
of the decretal dues. Such sale, however, shall not be
effected except. as provided hereinafter or unless.and
until there is a default in payment of the decretal dues in
the manner, as provided hereinafter. •
H
128 SUPREME COURT REPORTS (2015] 14 S.C.R.

A (g) There will be a preliminary-cum-final decree for sale
of the mortgaged properties mentioned in Annexure L
for payment of the decretal amount with interest and
costs, as provided hereinafter, but such sale shall not
be effected except as provided hereinafter or in the
B event of default in payment of the decretal dues in the
manner, as provided hereinafter.
(h) The Joint Receivers wilrtake symbolical possession
of the suit properties and they will not disturb the
c possession of the said defendants with the carrying on
the business of the said defendants-judgment debtors
unless requested by the plaintiff."
7. The Bank alleged that it had further granted credit
facilities to the ABP Company on the request made by it along
D with four other banks in order to rehabilitate the Company. In
the meanwhile, the Additional District Magistrate (F & R)
Allahabad issued a show cause notice dated 19.12.1998 to
the Company M/s. ABP Pvt. Ltd. as to why their lease right
E over 19, Clive Road, may not be terminated. The lessee namely
M/sABP Pvt. Ltd. did not challenge the notice. The appellant
on the basis of the mortgage decree challenged the notice by
filing Writ Petition No. 775 of 1999 for qu'ashing the above
show cause notice. The Bank further requested that as per
F the G.O. dated 01.12.1998 issued by the State Government,
which lays down a detailed policy along with various provisions
about entitlement for getting conversion of lease land into free
hold status, the property situated at 19, Clive Road may be
converted into free hold. The Bank as a mortgagee decree
G holder and as a nominee of the lessee Company subsequently
submitted an application along with relevant challans.in respect
of part-payment of free hold charges depositing a sum of
Rs.21 ,85,200.00 on 15.06.1999 in the State Bank of India,
Allahabad Main Branch. Moreover, in paragraphs 14, 16 and
H 22 of the counter affidavit filed by the Company in Writ Petition
STATE OF UTTAR PRADESH AND OTHERS v. UNITED 129
BANK OF INDIAAND OTHERS [M. Y. EQBAL, J.) ·

No.775199, it has been admitted th~t the appellant Bank is A
.. their norninee. .
8. Curiously enough, when ihe terms of the mortgage
decree was not.complied with inasmuch as the decretal amount
was not paid to the Bank by the mortgagor-ASP Company, B
the Bank filed an application in the Calcutta High Court for
transfer of execution applications to the Debt Recovery Tribunal
for issuance of recovery certificates. Upon such transfer the
cases were registered before the Debt Recovery Tribunal,
Calcutta. C
9. Surprisingly enough, before the ORT, Calcutta, a
settlement was entered into between the parties. Before the
ORT, five banks viz., United Bank of India, Allahabad Bank,
Bank of Baroda, Canara Bank, Punjab National Bank, were
0
the applicants andABP Company (mortgagor) and guarantors
were the respondents. Here also, the State of U. P. was not a
party to the debt recovery proceeding. On the basis of consent
of the parties the Debt Recovery Tribunal passed an order on
11.02.2004. The relevant portion of the order dated 11.02.2004 E
passed by the ORT is quoted hereinbelow :-
"Heard the parties and examined the contents of the
joint petition and the records filed. The aforesaid cases
are disposed of on the basis of the settlement in the F
following way:-
1) By consent of the parties application being O.A.
No.192 of 1997 is disposed of by the issuing
certificate and directing the defendants jointly and
severally, to pay: G
a) Rs.6,54,221.00 to applicant no.1
b) Rs.2, 13,62, 183.04 to applicant no.2
c) Rs.2,02,31,071.21 to applicant no.3
H
130 SUPREME COURT REPORTS [2015] 14S.C.R.

A d) Rs.2,07,70,640.81 to applicant no.4
e) Rs.1,98,25,365.55 to applicant no.5
O The defendants are directed to pay to each of the
applicants interest at the agreed rate from August
B 27, 1997 till realization.
g) In default of payment Recovery officer is directed
to sell by public auction or private treaty the
hypothecated assets, mortgaged properties and
c charged assets·ofthe respondents including those
mentioned in Annexure 'G' and 'H' by public auction
or by private treaty.
h) Defendants are also directed to pay the cost of the
proceedings jointly and severally to each of the
D applicants.
2) By consent of the parties application being OA No.193
is disposed of by issuing certificate and directed the
defendants jointly and severally pay
E
a) Rs.13,58,804.27 to applicant no.1
b) Rs.1,42,52,371.48 to applicant no.2
c) Rs.1,71,03,802.70 to applicant no.3
F
d) Rs.1,64, 10,410.96 to applicant no.4
e) Rs.1,61,79,866.01 to applicant no.5
O Interest at the agreed rate from 27.8.1997 till
G realization
g) In default of payment the Recovery officer is
directed to take proceedings for recovery of the
certificate debt including the sale of the mortgaged
and charged assets described in scheduled 'G' and
H
STATE OF UTIAR PRADESH AND OTHERS v. UNITED 131
BANK OF IN DIA AND OTHERS [M. Y. EQBAL, J.]

'H' by public auction for private treaty. . A
h) Defendants are also directed to pay the cost of the
proceedings jointly and severally to each of the
applicants.
3) By consent of the parties application being 275 of B
1997 is disposed of by issuing certificate directing
the defendants jointly and severally to pay :-
a) Certified sum Rs.2,57,61,088.94 against the
defendants. C
b) Defendants are directed to pay to the applicant
interest at the agreed rate from 11.12.1997 till the
amount is repaid.
c) In default of payment, the Recovery Officer is D
directed to sell by public auction or private treaty
the hypothecated assets of the respondents
including in those mentioned in Annexure X by
public auction or private treaty.
E
d) Defendants are directed to pay the cost of the
proceedings jointly and severally to the applicant.
4) In TA/18/97 and TA/19/97 this Tribunal has already
issued the certificate for recovery in favour of the F
applicant bank. The defendants have admitted these
certified claims.
5) The parties have agreed to settle the decretal amounts
of United Bank of India (T.A.No.18of1997, T.A. No.19 G
of 1997), and the claims of the applicant banks in QA
No.192 of 199.7, OA No.193 of 1997 and QA No.275
of 1997 in the following manner:
a) The consortium banks have agreed to settle their
H
. . , I

I·
' . SUPREME COURT REPORTS.
I
[2015] 14 S.C.R.
"' t • . ,"' .. ' ' .
• ' ; ~". ·...... _.. ,· . : .. i

/ \
I

""· ..·· ·. . ·. A · respective. claims against the defendants by
~ ·..., . ·. accepting the following amounts by 30'h June, 2004.
,, ~-.: ,~·-'.: •.. ·.- ,,.·;i,, -·~-.,' ;:· ::_._._ ·r,: ·,-- .:- -·, ... · •

· \} : ;:~~ , '.: : •. I? •.. :.· Rs: 2439.65 ~a~hs by ~nit~d Bank of India
. ii . ~ : ii)·. ·. Rs.304.35
.
lakhs
'
by Canara
. Bank.
•.. B. . ; I
:; · (iii). ·Rs.303.13 l~khs by Banko! Baroda .
. . . "'"·'..... 't.::,·, . \'. . . ' \ . ' ' •'...
. _:,
: '

'' ; (i\/j Rs.228.16 byAllahabad
·... ' . . ·.· . Bank ·
C . · :;: ;:· · ;, ··~·· (v) .. Rs;230.67 lakhs by Punjab National Bank
· vi) Rs.57 lakhs towards legal expenses
• ·" • .1 •. ·"·· incurredbytheconsortiumbanks." · ·
r . ." ·~~,,-~ r ~ ;..: .:·. __·: :;: _.i,,:··. ·.> -- .· : .. -_ .. -: ·::. ,,;_::· .. ·.
:~-:·i';~ ;-:.~·~··
'
I' :
· · 10. Not only that, by:the'said order a committee
·. · D consistin? of re?eiver was appoint~d with a direction to take
.. · . possession of all hypothecated assets and mortgaged
. . . properties and dispose of the same in the following mariner:-
.....
., ; ~-;
.. · ...
.. \ ....
l,i
I! . .. · ..;- ·.·.... ' ..
:_
. -~ . ..... ' c . "
,.
..''xxxxxx . ' ·,'

- .
,·

E ·. ·· .· (c)Out of the sale proceeds of hypothecated assests
: : . al1d mortgaged properties as contained in Annexure I
· ·. . ·.. : & II of today's joinfpetition the committee pay: .
-. . 1 • .: .• ·. '._ -.'.-1. ·: . '. '. •' -. ... . . ' : .

.. '
-· i).. 40% to the Applicant banks (c(;msortium banks)
' ... - . •' . ' '· - \; '

., . ~·" ; .•. ·.·(ii) 40%. of the sale proceeds of the assets will be .
. . ' ' '.paid tO the workers/employees towards the_ir dues to
·. the maximum extent of Rs.15 crore; ·
: (iii) 20%. of the'sale p·roceeds will be utilized by the
.. G . .· said three companies for meeting various dues of
... : ·-~- othercreditor." ,.\ ......., ':.".,.
I . '. . . . ·, . ,,: '' . :';; . :· . . '' ~. ' ' - . :·. : ~ . , ..

c
. . ·. 11: It appears that pursua11t to the order dated
. -11.02.2004 an auctionsale notice was published on 17/
H ·. 18.. 5.2004 in respect of the immovable p~operty situated at

1
' •
. ·. I
STATE OF UTTAR PRADESH AND OTHERS v: UNITED _ 13.3
BANK
.
OF' INDIAAND
. . .
OTHERS
.
[M. Y. EQBAL; J.] . ' '

Clive Road, Allahabad; inviting prospective purchasers tci A ·
participate in the auction s~le o(the prop~rty allegedly. . ..
mortgaged to the appellant United Bank of India. . - ·_..
· · 12. In pursuance to th~ ~foresaid sale n~tice, one M/s'.'
Jvine Development Pvt. Ltd, ·and se\'e'ral other persons . B
deposited.... · the 'earnest
"
money
... and the .offer
"'"''',,,' . ,. ,Of., .Jvine
,·\~'·• ._,,., __

Development Pvt. Ltd. was finally accepted and they were ·
asked !0 deposit 25 O/~()f the bid amount Within 15 days aiid '
remaining 15% ·within' 3. months: Alttiougti ttie. sai'd Jvine' ·.•
Development Pvt. Ltd. deposited the 25 % amciunt; it did riot' C .. ·.
deposit the remaining amount. The Jvine Co. then asked the •- ..
Bank to first get the said property 'converted into freehold or ·
have a transferable' right' in' respect of the said property..
Thereafter, a show cause notice was 'is'sued by the Bank u·pari ..
the Jvine Development Pvt. Ltd.1 on. 30.09.2004.· .·. In this · D'.
connection, a writ petition was filed by the Company.before ·' .,
the High Court and the High Court stayed t~e show cause
notiCe. . ,_ "'<. . ··,-:-,·~_ . \_·~·~\',·>·;~--::t\;ii·:···'.·'..;_
. , ........ · ._.-·, ',--:.,.:J:_r,.-"c~:_.~r;;··-·_.; <::i·t·'·... ;i'.--·,,~·-_!.~ ,. __ :
13 ..The· District Magistrate, Allahabad ,rejected the · E ·· -·
application of the Bank for grant of free hold right in respect of ..
. ' . • . . ',' , • ' ·- ' ' .. . - ·. ; . ' ... , - • . ' .) • . ~ . ', ' ' I ; • .

. the .land in question
.
i.e.19,
.. ' Clive
. .
Road,
'
Allahabad on the
,_
ground
\
· '

that Bank does not come 'within the eligibility criteria under ...
G.O. dated 01.12.1998. Pursuant to the order passed by the· ·
. District Magistrate, Allahaba~. the' Bank made a repr,esentatior' . F ·
to the State Government on 30.08.2005 under Paragraph 7 of•·
· G.o. dated 17.02.1996 merged in G.O. dated 01.12;1998 for. ·· ·
passing orders for grant of free hold rights, It was argued by - ..
. the writ-petitioner before the High Court t~at the legal opinion .
· sought by the State GovernfT!ent from its Law Department in· G · .. ·
the aforesaid matter has also recommended that the said .. - .
property may be converted into freetiold· but the District .. -·
Magistrate.Allahabad did not pay any heed to the aforesaid
opinion as well as ori ihe recommendation given. by the State
• r-_ .• . . . _) '"' " • • . . , : ·( • . - H:·'... ~
134 SUPREME COURT REPORTS [2015] 14 S.C.R.

A Government. Before the High Court, it was pleaded by learned
counsel for prospective auction purchaser Jvine Development
Ltd. that afterthe decree of Calcutta High Court and subsequent
order of Debt Recovery Tribunal, Kolkata all the rights, title
and interest of Mis. Amrit Bazar Patrika Pvt. Ltd. ceased and
B it vested with the Bank and the Bank had acquired first charge
over the aforesaid property. As per the order of Debt Recovery
Tribunal, Kolkata, a sale committee was formed, which started
its function by calling bids for the aforesaid property.
Accordingly, a sale notice was published on 18.5.2004 in 'The
C Times of India' in respect of the immovable properties situated
at 19, Clive Road, Allahabad. In reply to this auction sale notice,
the writ-petitioner deposited the earnest money by way of bank
draft and also submitted the tender.
D 14. The State of U.P. for the first time after having come
to know about all the aforementioned developments when it
was made party in the writ petition, filed a detailed counter
affidavit. According to the State of U.P. the suit property is a
Nazul Land No. 25 and 25A which was given on lease to ABP
E and the period of lease expired on 31.08.1987 and on account
of expiry of the lease and for violation of the terms of lease a
show cause notice was issued on 14.05.1999 for resumption
of the property. The case of the State of U.P. is that the
proposed decision for renewal of lease was not given effect
F to and the same was finally rejected by order dated
09.05.2005.
15. The Division Bench of the High Court allowed the
writ petitions preferred by the Bank and M/s. Jvine
G Development Pvt. Ltd. The operative portion of the order
passed by the High Court is quoted hereinbelow :-
" .... An important aspect of the case is that the
judgements of Hon'ble Calcutta High Court and Debt
H Recovery Tribunal, Kolkata also deal with welfare of the
STATE OF UTTAR PRADESH AND OTHERS v. UNITED 135
BANK OF INDIAAND OTHERS [M. Y. EQBAL, J.] .

. workers of the Company and 40°io of the auction amount A
is directed to be released in favour of workers. The·
abovementioned judgements of Hon'ble Calcutta High
Court and the Debt Recovery Tribunal, Calcutta were
never challenged by the State Govt., though it was well
within the knowledge of its authorities. B
In the facts and circumstances of the case, the maxim
of equity, namely, actus curiae neminem gravabit- an
act of court shall prejudice no man, shall be applicable.
This maxim is founded upon justice and good sense C
which serves a safe and certain guide for the
administration of law. The law itself and its
administration is understood to disclaim as it does in
its general aphorisms, all intention of compelling
impossibilities, and the administration of law must adopt D
that general exception in the consideration of particular
cases.
)()()()()()()(

)()()()()()()(
E
From the ongoing discussion and submission advanced
before us and also taking into account the equity, the
legal opinion of the law Secretary and undue delay in
disposal of the free hold application by the State, we
are of the view that writ of mandamus be issued to the F
respondents to convert the land in question as free hold
in favour of the Petitioner- Bank.
In the result, the writ petition is hereby allowed and the
show cause notice dated 19.12.1998 is hereby G
quashed. The respondents are hereby directed by the
writ of mandamus to issue a demand notice forthwith
and convert the land in question into free hold after taking
the necessary 75 % balance amount from the petitioner-
bank as per the G.O. dated 1.12.1998. H
136 SUPREME COURT REPORTS [2015] 14 S.C.R.

A Furthermore, the connected writ petition No.46115 of
2004 is allowed and the impugned notice dated
30.9.2004 is hereby quashed and the respondents are
directed to transfer the land to the petitiQ11er company
after receipt of remaining balance amount of 75 % as
B per the terms of the auction. The Land is transferred in
the name of the Bank, it is made clear that respondents
shall raise the demand of remaining 75 % as soon as
the land is transferred in the name of the bank."

c 16. Before we proceed to decide the issue invo]ved, it
would be appropriate to narrate the following facts which are
not in dispute:-
"i) The property in question i.e., Bungalow No.19,
Clive Road, Allahabad in the State of U.P. was initially
D
given on lease dated 11.08.1887 to Ms. Martha Anthony
for a period of 50 years commencing from 11.08.1887
ending on 11.08.1937. The said lease was renewed
for another term of 50 years on 7.4.1945 by the
E Government of United Province of Allahabad. The said
lease was scheduled to expire on 31.8.1987;
ii) Before the expiry of lease the lessee viz., Ms.
Martha Anthony, transferred the leasehold property on
22.10.1945 in favour of appellant-Amrit Bazar Patrika
F Private Limited (for shortABP). Consequent upon the
transfer the lease deed was executed by the Secretary,
Government of U.P. in favour of ABP on 25.7.1943 for
the remaining.period of lease;
G iii) Although the lease granted to the ABP expired
on 11 .8.1987, the lessee ABP moved an application in
the year 1996 before the State Government for renewal
of the lease in their favour. The said application was
considered and an order of proposed sanction for
H
·STATE OF UTTAR PRADESH AND OTHERS v. UNITED 137
BANK OF INDIAAND OTHERS [M. Y. EQBAL, J.]

· renewal of lease was take subjectto proof of payment A
of dues and execution of a renewed lease deed on
fulfillment ofconditions. However, no suc.h renewed lease
deed was executed by the State of U.P. after the expiry
. of period of lease i.e., 11.8.1987;
8
iv) A show cause notice dated 19.12.1998 was
issued by the State government calling upon the lessee
namely ABP to show cause as to why possession of
the leased property be not taken by the Government as
per the Government Grants Act, 1895." c
17. Curiously enough, lease was granted by the State of
U.P. in respect of the said property situated in Allahabad in the
State of U.P. but the ·appellant-ASP moved an application
before the Special Secretary, Land Reforms Department, D
Urban Land Ceiling Branch, Government of West Bengal, in
the year 1997 seeking exemption under Section 20 and 21 of
the Land Ceiling Act, 1976 and submitted a proposal for
construction of residential unit on the portion of the land for the .
use of financially backward class and also sought permission E
for using the land. The concerned Land Reforms Department
without appreciating the fact that the land and building was
owned by the State of U. P., issued a conditional order granting
exemption from Urban Land Ceiling Act and also granted
. permission for construction of the building. This fact was never F
· brought to the notice of the government of U.P. either by the
lessee ABP or by the concerned Land Reforms Department
of State of West Bengal.
18. Mr. lrshad Ahmad, learned AAG for the State of U.P., G
Mr. Rajesh Kumar, learned counsel for the Bank, Mr. Rakesh
Dwivedi; learned senior counsel, Mr. V. Shekhar, learned senior
counsel, Mr. Awariish Sinha, Mr. Rishi Kesh, learned counsel
appearing for the appellants and the respondents, adv.anced
. their arguments. H
. 138 SUPREME COURT REPORTS [2015] 14S.C.R .

A 19. We have gone through the facts of the case and the
documents which reveal that in Case No.51Oof1990 filed by
the appellant-Bank before the Calcutta High Court, the State
of U.P. and the Collector were not made parties although the
property in question being the Nazul property under the
B ownership of the State of U.P. Hence, the appellant had filed a
case before the High Court of Calcutta by concealing the facts
and as such the order dated 09.10.1991 is not binding upon
respondent nos. 1, 2 and 3. It has been specifically mentioned
in the mortgage decree that the decree will not be binding to
C persons who are not parties. Extract of the order dated
09.10.91 passed by the Calcutta High Court by which the suit
was decreed in terms of the settlement is reproduced
hereinbelow :-
D "xxxx
The court: the defendants Nos. 1,2,3, 7 and 8 have
entered into an agreement with the United 'Bank of India
in terms of the settlement which have been signed by
the defendants as also on behalf of the plaintiff and their
E respective advocates on record.
These defendants submitted to a decree in favour of
the plaintiff.
Under those circumstances this Court as per the
F terms of settlement agreed upon by·and between the
parties passes a decree in terms of the settlement filed.
However, this decree will not affect the interest of any of
the parties other than the parties to the settlement.
G This court appoints as per suggestion of the plaintiff
Bank Mr. Abhijit Roy, Deputy General Manager,
Reconstruction (Counselling), United Bank of India, 16,
Old Court House Street, Calcutta together with a senior
member of the bar, Dr. Debi Prasad Pal as joint
H Receivers.
STATE OF UTTAR PRADESH AND OTHERS v. UNITED 139
BANK OF INDIAAND OTHERS [M. Y. EQBAL, J.]

In view of the order passed by this Court in the suit A
there will be no order on this application taken out by
Mr. B.K. Chatterji's client for being added as a party
defendant to the suit.
All parties including the Joint Receivers are to Jn a
8
signed copy of the minutes of this order on undertaking.
xxxt:!('

20. It is submitted by the' State that respondent-ASP has
mortgaged the property in question in favour of the appellant, C
by way of equitable mortgage but in support of its case, the
appellant-Bank has not filed any document. It is also important
to mention here that the Nazul Land No.25 and 25A, Chikatpur
Nasibpur Bakhtiara (situated at 19, Clive Road), and the Nazul
Land No.120-1/2 Civil Station which is situated at 10, D
Edmeston Road, being the Nazul properties, are the properties
of the Government of Uttar Pradesh. Hence, the respondent- .
ABP was not having any authority to mortgage the same in
favour of appellant without prior sanction of the Government of
U.P. or the lessor. It ip important to note here that the appellant E
has intentionally did not make respondent nos. 1,2,3 as party
in Case No.510/1990, hence orders passed in that case are
not binding upon the said respondents.
21. It is pertinent to mention here that the land in dispute F
being a Government property, the appellant-Bank cannot get
any right over it. Moreover, neither the appellant-Bank is a ·
lessee of the land in question nor any lease has ever been
sanctioned by the Govt, of U.P. in its favour. Hence, the
appellant is not entitled to get any right or to keep possession G
of the properties in question situated at 19, Clive Road and
10, Edmeston Road.
22. The contention of the appellant-Bank is that only on
the basis of the notice issued on 9.12.1998; the appellant H
140 SUPREME COURT REPORTS (2015) 14 S.C.R.

A cannot be deprived of its rights. It is pertinent to mention here
that the above notice was not issued to the appellant Bank,
but was issued to the Secretary/Director of M/s ASP Pvt. Ltd.
vide letter No. 56/Nazul-(CL)-XXl-8/11 (96-97) dated 19'h
December, 1998 in relation to the Nazul land No.25 and 25A,
B Chikatpur, Nasibpur Bakhtiara. Hence, the appellant is not
competent to file any petition and challenge the above notice.
It is worthwhile to mention that the above show cause notice
was issued on the grourid of violation of the terms of lease for
which a reply was filed by Shri B.P. Tiwari, Secretary of Mis
C ABP Co. Ltd. dated 13.01.1999. This Court vide order dated
8.1.1999 in the writ petition has stayed further proceedings of
the above show cause notice issued on 19.12.1998. It is also
worthwhile to mention here that in the case of Nazul Land
D No.120-1/2 Civil Station (which is situated at 10, Edmoston ·
Road), on violating the terms of lease by raising illegal
construction without prior sanction and for other irregularities,
ashow cause notice vide letter No.448/Nazul-(CL)-XXl-8/
. 51 (80-81) dated 14'h May, 1999 was sent to the Director/
E Secretary of M/s ABP Pvt.Ltd through regi_stered post and its
reply was given by Shri 8.P. Tiwari, Secretary, ASP Pvt. Ltd.
on 27.5.1999 and in that reply no justified reasons have been
given by the Secretary of the above Company for the violation
of the terms of the lease by unauthorisedly raising construction
F and for unauthorisedly running a workshop for repairing LML
Vespa Scooter. Hence, after thorough consideration when it
was found that the issuance of new lease in favour of M/sABP
was not in accordance with rules, the name of M/s ABP was
cancelled from the above land vide order No. 47/Nazul-CL-
G XXl-8/51 (80-81 ), dated g•h May, 2005 and the entire area of
Nazul Land No.120-1 /2 Civil Station has been vested with the
Government of Uttar Pradesh. Admittedly, no notice was issued
to the appellant Bank by the State. Hence, the appellant was
not aggrieved by these notices in any manner. Neither the
H appellant-Bank is having any relation with both the lands in
STATE OF UTTAR PRADESH AND OTHERS v. UNITED 141
BANK OF INDIAAND OTHERS [M. Y. EQBAL, J.]

question nor any lease of the above land has ever been A
sanctioned in its favour.
23. In Civil Appeal Nos.1969-1970 of 2010, filed by
Northern India Patrika Amrit Prabhat Karamchari Sanyukt
Morcha against the same impugned order of the High Court B
mainly on the ground that they were employees of M/s. Amrit
Bazar Patrika Ltd. and have their legitimate dues against the
ABP Company, the appellants have raised objection with
regard to the order passed by the High Court giving direction
to the State Government to convert the Nazul land as free hold c
land in favour of the Bank. According to this appellant, the
Bank is not entitled to get the land converted into free hold
land.
24. In Civil Appeal No. 4688 of 2010, the lessee, namely D
ABP, is also aggrieved by the impugned judgment passed by
the High Court mainly on the ground inter alia that the auction
of the property in question is absolutely on a very less price .
and is erroneous. According to the appellant, the High Court
/'
erred in law in not permitting respondent nos.2 & 3 to forfeit E
the earnest money of respondent no.1 Company on the ground
that the said Company has breached terms of the auction
without any valid justification.
25. In Civil Appeal No.2462 of 2010, the appellant Bank
F
is aggrieved by that part of the judgment of the High Court
whereby the High Court failed to appreciate that after
conversion of the properties from the leasehold to freehold,
the land in question will fetch more price which will benefit the
interest of the Bank and the workers. So many other grounds
G
have also been taken by the appellant.
26. There is no dispute that the land and building in
question is Nazul property being the property of Government
maintained by the State authorities in accordance with the Nazul
H
142 SUPREME COURT REPORTS [2015] 14S.C.R.

A Rules. Chapter 1 of the Nazul Rules lays down the provision
for maintenance of Nazul register, procedure for entering names
of persons in possession of Nazul land and building.
27. Rule 13 provides the procedure for sale or lease of
B Nazul land, whereas Rule 16 makes it mandatory for obtaining
prior approval of the State Government before sale or le;ase
or renewal of leases of nazul lands. Rule 13, 14 and 16 are
quoted herein below:-
"13. Sale or lease of nazul lands- The sale lease of
c nazul shall in all cases be carried out under the
Collector's orders and when it is proposed to lease or
· sale nazul, in the occupation of any department, other
than the Revenue Department, the nazul shall be
D
transferred to the Collector for the purpose of lease or
sale:
Provided that before the nazul in the occupation of a
department is transferred to the Collector for disposal
it shall be the duty of the department concerned to
E ascertain whether the nazul in question is required by
any other department of Government.
14. Sale or lease of a plot for building purposes shall,
subject to provisions of Rule 16, be sanctioned by-
F
(1) the Collector, ifthe estimateo value does not exceed
Rs. 2,500;
(2) the Commissioner, if the estimated value exceeds
Rs. 2,500 but does not exceed Rs. 10,00.;
G
(3) the State Government in other cases.
In such cases, the terms of sale or lease as finally
arranged, shall be subject also to confirmation by the
Commissioner or the State Government as the case
H
STATE OF UTTAR PRADESH AND OTHERS v. UNITED ·143
BANK OF INDIAAND OTHERS [M. Y. EQBAL, J.]

may be, unless the terms have already been set forth in A
the proposal for sale or lease and have been approved.
Copies of orders sanctioning sale of nazul property shall
be forwarded to the Accountant General, Uttar Pradesh.
16. In all cases, whether of sale or of new leases or of B
renewal of leases which have expired without option of
renewal, which involve a concession in favour of the
vendee or the lessee e.g. in which it is proposed to fix
the sale price or tAe rent at a rate lower than the
prevailing market rate or in which it is propsed to sell or c
lease the land without holding a public auction or inviting
public tenders, prior approval of the State Government
shall be obtained before sanction even though such
cases, owing to the value of the land being within the·
limits laid· down in the rules, could otherwise be D
sanctioned without reference to the State Government."
28. Indisputably the lease of Nazul land is governed by
the Government Grants Act, 1895. Sections 2 and 3 of the
Government Grants Act, 1895 very specifically provide that the E
provisions of the Transfer of Property Act do not apply to
Government lands. Sections 2 and 3 read as under:
"2. Transfer of Property Act1882, not to apply to
Government grants - Nothing in the Transfer of
Property Act, 1882, contained shall apply or be deemed F
ever to have applied to any grant or other transfer of.
land or of any interest therein heretofore made or
hereafter to be made by or on behalf of the Government
to, or in favor of, any person whomsoever; but every such G
grant and transfer shall be construed and take effect as
if the said Act had not been passed.
3. Government Grants to take effect according to
their tenor -All provisions, restrictions conditions and
H
144 SUPREME COURT REPORTS (2015] 14 S.C.R.

A limitations ever contained in any such grant or transfer
as aforesaid shall be valid and take effect according to
their tenor, any rule of law stature or enactment of the
Legislature to the contrary notwithstanding. "

8 29. The aforesaid legal position was known to the ABP
Company and also the Bank. In reply to the application filed
by the Bank with the authorities of the State of Uttar Pradesh
for conversion of the land into free hold land in favour of the
Bank, the Authority made it clear that conversion of land cannot
c be allowed in favour of the Bank. The relevant portion of the ·
Collector's order is extracted hereinbelow:
"It is also pertinent to mention here that the lease of
Nazul land is sanctioned under the provisions of
Government Grants Act, 1895 on which the provisions
D
of Transfer o( Property Act, 1882 are not made
applicable, as such the act of mortgaging the above
property by the management of the M/s. Amrit Bazar
Patrika is without any authority and is illegal. Nazul land
E is a government property, which is fully vested in the
Government' of Uttar Pradesh. Hence even on
mortgaging the said property in question by Mis Amrit
Bazar Patrika without getting prior sanction of its Lessor/
Collector, Allahabad, the United Bank of India has no
F authority to get it converted into free hold in their favour."
30. The lease of Nazul land for building purposes was
sanctioned under GO. No. 2035/IX-150 dated 27'h November,
1940 as amended by G.O. No. 1119-IX/54-1952 dated
G 25'h June, 1952. The form of lease is provided in Form 2 in the
Appendix to the said rule according to the terms and conditions
of the lease. The lessee will not in any way transfer or sublet
the demised premises or building erected thereon without the
previous sanction in writing of the lessor.
H
STATE OF UTTAR PRADESH AND OTHERS v. UNITED 145
BANK OF INDIAAND OTHERS [M. Y. EQBAL, J.)

31. In the instant case, the renewal of lease dated 25th A
July, 1940 was prepared as per Form 4 of the Nazul rule. The
said lease was renewed in accordance with the terms,
conditions ?nd covenants contained in the prescribed forms
appended to the said rules.
8
32. The primary question which needs consideration is
as to whether there is a valid mortgage created by the ASP
Pvt. Ltd in favour of the Union Bank of India?
. 33. As stated above the disputed property, which is a
Nazul Land and governed by the Government grant, was given C
byway of Renewal of Lease to the ASP Co. for 50 years w.e.f.
1•1 September 1937, which expired on 31st August 1987.
Admittedly, ASP Co. mortgaged the said Nazul land in favour
of the Bank, in which the ASP Co. had only a leasehold interest D
in the property. There is nothing on record which shows as to
when the alleged mortgage was created by the ASP Co. in
favour of the Bank. If we assume thatthe mortgage was created
before the expiry of the lease i.e. before 31 51 August1987 then
as per the Form 2 read with Form 3 which governs conditions E
for renewal of lease of the Nazul Rules any transfer or sub-
lease by the ASP Co. had to be done with the previous sanction
of the State, but in the present case not a single document is
produced to show that any such sanction was obtained by the
ASP from the State. F
34. It is admitted fact that the suit property is the Nazul
Land, and as per the definition of Nazul, as provided in the
Rule 1 of the Nazul Rules, it means any land or building which,
being the property of Government is not administered as a G
State Property.
35. Admittedly, lease was renewed in favour of Mis. ASP
Co. as per the Government order in accordance with the rules
· mentioned in the Rules 13 to 16 of the Nazul Rules read with
H
146 SUPREME COURT REPORTS (2015] 14 S.C.R.

A Form 3 of the Nazul Manual which talks about Renewal of a
Lease.
36. In Form 3 of the Nazul Manual it is mentioned in the
renewal lease deed that "In pursuance of the premises the
B . lessor hereby demises upto the Lessee all and singular the
hereditaments and premises comprised in and demised by
the within the written tease, now standing thereon with the same
exceptions and reservations as are therein expressedto hold
unto the Lease ...... and subject to and with the benefit of such
c and the like lessee's and Lessor's convenants respectively
and the like provisions and conditions in all respects
(including the proviso for re-entry) as are contained in the
within written lease.

37. This "within written /ease"is the original lease deed
0
as mentioned in the Form 2 of the Nazul Manual. Form 2 of
lease of Nazul land for building purposes it is one of the
condition between the lessor and the lessee that" the lessee
will not in any way transfer or sublet the demised premises or
E buildings erected thereon without the previous sanction in
writing of the lessor".
38. In the present case there was nothing on the record
to show that the lessee i.e. (ABP) has obtained any written
· sanction from the lessor i.e. Government before mortgaging
F his leasehold interest in the Nazul Land. Meaning thereby the
mortgage done by the lessee in favour of the Bank itself is
bad in law, which was done in clear violation of the terms of
the lease deed i.e. mortgage of the Nazul land without previous
G sanction in writing of the State.
39. In the present case the appellant-Bank, which is a
. nationalized bank beforeiending public money oy way of loan
as against the security of disputed property by way of
depositing title deed, was supposed to verify the title of the
H
STATE OF UTTAR PRADESH AND OTHERS v. UNITED 147
BANK OF INDIAAND OTHERS [M. Y. EQBAL, J.)

mortgagor in respect of the disputed property. But neither any A
evidence nor a single sheet of paper has been produced by
the Bank to show that the title of the mortgagor was verified
and non-encumbrance certificate in respect of disputed
property was obtained or no objection from the State
Government was taken by the Bank. Further, even if we hold B
that the mortgage was valid, in the cases of government grant,
the government is very much a necessary party and the
Calcutta High Court should not have passed the so called
compromise mortgage decree without issuing notice to the
Government. This is an infirmity done by the High Court and C
accordingly the mortgage decree is bad in law. Moreover, the
High Court should have taken into account the fact that the
ABP Co. is only have the leasehold interest and the Bank could
not have been given right to auction the property as the AB~ D.
had only limited right which had expired in the year 1987:
40. The High Court of Allahabad also erred in giving the
direction to convert leasehold interest as freehold interest in
favour of the Bank by applying the doctrine of legitimate
expectation for.issuing the writ of mandamus against the State, E
which in our view is not the correct approach of the High Court.
The High Court relied on two decisions of this Court, one of
which is the case of Ram Parvesh Singh vs. State of Blhar,
(2006) 8 SCC 381, wherein the Court held that:-
F
"15. What is legitimate expectation? Obviously, it is not
a legal right. It is an expectation of a benefit, relief or
remedy, that may ordinarily flow from a promise or
established practice. The term 'established practice'
refers to a regular, consistent predictable and certain G
conduct, process or activity of the decision-making
authority. The expectation should be legitimate, that is,
reasonable, logical ar.id valid. Any expectation which is
based on sporadic or·casual or random acts, or .which
H
148 SUPREME COURT REPORTS [2015] 14S.C.R.

A. is unreasonable, illogical or invalid cannot be a
legitimate expectation. Not being a right, it is not
enforceable as such. It is a concept fashioned by courts,
for judicial review of administrative action. It is
procedural in character based on the requirement of a
B higher degree of fairness in administrative action, as a
consequence of the promise made, or practice
established. In short, a person can be said to have a
'legitimate expectation' of a particular treatment, if any
representation or promise is made by an authority, either
c expressly or impliedly, or if the regular and consistent
past practice of the authority gives room for such
expectation in the normal course. As a ground for relief,
the efficacy of the doctrine is rather weak as its slot is
just above 'fairness in action' but far below 'promissory
D
estoppel'. It may only entitle an expectant: (a) to an
opportunity to show cause before the expectation is
dashed; or (b) to an explanation as to the cause for
denial. In appropriate cases, courts may grant a
direction requiring the Authority to followthe promised
E
procedure or established practice. A legitimate
expectation, even when made out, does not always
entitle the expectant to a relief. Public interest, change
in policy, conduct of the expectant or any other valid or
F bonafide reason given by the decision-maker, may be
sufficient to negative the 'legitimate expectation'.

The doctrine of legitimate expectation based on
established practice (as contrasted from legitimate
expectation based on a promise), can be invoked only
G
by someone who has dealings or transactions or
negotiations with an authority, on which such established
practice has a bearing, or by someone who has a
recognized legal relationship with the authority. A total
stranger unconnected with the authority or a person who
H
STATE OF UTTAR PRADESH AND OTHERS v. UNITED 149
BANK OF INDIAAND OTHERS [M. Y. EQBAL, J.]

had no previous dealings with the authority and who has A
not entered into any transaction or negotiations with the
authority, cannot invoke the doctrine of legitimate
expectation, merely on the ground that the authority has
a general obligation to act fairly."
B
41. The aforesaid decision makes it clear that this
doctrine cannot be applied in cases of invalid expectation, and
as in the present case, the mortgage done by the ABP itself is
bad in law. We are of the clear view that this expectation is
not valid at all in the eye of law. Moreover, this Court in number C
of decisions has held clearly that doctrine of legitimate
expectation cannot be invoked by someone who has no dealing
or transaction or negotiations with an authority or by someone
who has a recognized legal relationship with the authority.
Therefore, as the Bank is· not having any recognized legal D
relationship with the State in view of the fact that the mortgage
by the ABP in favour of the Bank itself is bad in law, there is no
question of invoking doctrine of legitimate expectation in the
present case as it applies to a regular, consistent predictable
and certain conduct, process or activity of the decision-making E
authority. The expectation should be legitimate, that is,
reasonable, logical and valid. Any expectation which is based
. on sporadic or casual or random acts, or which is
unreasonable, illogical or invalid, cannot be a legitimate
expectation. F
42. The doctrine of legitimate expectation ordinarily
would not have any application when the legislature has
enacted a statute. The legitimate expectation should be
legitimate, reasonable and valid. For the application of doctrine G
of legitimate expectation, any representation or promise should
be made by an authority. A person unconnected with the
authority, who had no previous dealing and who has not entered
into any transaction or negotiations with the authority cannot
H
150 SUPREME COURT REPORTS [2015] 14 S.C.R.

A invoke the doctrine of legitimate expectation. A person, who
bases his claim on the doctrine of legitimate expectation has
to satisfy that he has relied on the said representation and the
denial of that expectation has worked to his detriment. This
Court in the case of Sethi Auto Service Station and another
B vs. Delhi Development Authority and others, (2009) 1 SCC
180, while considering the doctrine observed:-
"33. It is well settled that the concept of legitimate
expectation has no role to play where the State action
c is as a public policy or in the public interest unless the
action taken amounts to an abuse of power. The court
must not usurp the discretion of the public authority which
is empowered to taKe the decisions under law and the
court is expected to apply an objective standard which
D leaves to the deciding authority the full range of choice
which the legislature is presumed to have intended. Even
in a case where the decision is left entirely to the
discretion of the deciding authority without any such legal
bounds and if the decision is taken fairly and objectively,
E the court will not interfere on the ground of procedural
fairness to a person whose interest based on legitimate
expectation might be affected. Therefore, a legitimate
expectation can at the most be one of the grounds which
may give rise to judicial review but the granting of relief
F is very much limited. (Vide Hindustan Development
Corpn. (1993) 3 sec 499."

43. The High Court after having recorded a finding that
the Bank° being the nominee of the mortgagee has a right to
G make an application for conversion of Nazul land into a freehold
land, without appreciating the fact that the Bank has not having
any subsistence interest in the leasehold property obtained a
mortgage decree behind the back of the State being the
paramount title holder applied the doctrine of legitimate
H expectation.
STATE OF UTTAR PRADESH AND OTHERS v. UNITED 151
BANK OF INDIAAND OTHERS [M. Y. EQBAL, J.]

44. In the instant case, admittedly, the State never A
recognized the appellant Bank as a mortgagee. Further the
State was not aware about the alleged mortgage said to have
been created by the lessee ABP Co. by deposit of Lease
document. Moreover, the State never represented or promised
either to the lessee or to the Bank to give any benefit under the 'B
lease. In such circumstances, we are of the definite opinion
that the High Court has committed grave error in applying the
doctrine of legitimate expectation in favour of the bank.
45. After considering the entire facts of the case and the c
submissions made by learned counsel appearing for the
parties, we come to the following conclusion:-
(i) Indisputably, the property in question i.e. Premises
No.19, Clive Road, Allahabad is a Nazul land governed D
by the Government Grants Act, 1895 and Nazul Rules.
(ii) The property was given on lease by the State of
U.P.to Mrs. Martha Anthony and second time the lease
was renewed in favour of Ms. Verna Anthony and Ms.
Leena Anthony for a further period of 50 years which E
was valid up to 31.8.1987.
(iii) During the subsistence of lease, the leasehold
interest was transferred in 1945 in favour of ABP Co.
and on the basis of the said transfer a lease was F
executed in 1949 by the State of U.P. in favour of ABP
Co. for the remaining period of lease which expired in
1987.
(iv) As against the loan taken by the Company from the G
Bank, a mortgage was created in respect of the property
by the Company in favour of Bank. The lease in respect
of the leasehold interest in the property admittedly
expired in 1987.
H
152 SUPREME COURT REPORTS [2015] 14S.C.R.

A (v) The mortgage so created by the Company in favour
of the Bank in respect of Nazul land without the sanction
of the State of Uttar Pradesh in terms of the lease, is ab
initio void, hence no right was created in favour of the
Bank by reason of the said mortgage.
B
(vi) Consequently, a mortgage decree obtained by the
Bank on the basis of settlement, in absence of and
behind the back of the State of U. P. could not have been
enforced against the State. The subsequent
c proceedings of transferring the decree to the Debt
Recovery Tribunal and again passing an order for
auction sale of the property on the basis of settlement
is wholly illegal and without jurisdiction.
(vii) The appellant Bank has no right, title or interest in
D
the property so as to claim a right of conversion of the
property into a freehold property.
(viii) The impugned notice issued by the State of U.P.
directing resumption of the property is legal and valid
E and cannot be quashed at the instance of the Bank.
46. For the reasons aforesaid, Civil Appeal No. 5254 of
2010 is bound to be allowed and the judgment and order
passed by the High Court is liable to be set aside.
F
47. In the result, other appeals filed by the appellants i.e.
Civil Appeal Nos. 1969-1970 of 2010, Civil Appeal No. 4688
of 2010 and Civil Appeal No.2462 of 2010 are dismissed.
Kalpana K. Tripathy Appeals disposed of.