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NON-REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURSIDICTION

CIVIL APPEAL NO.4536 OF 2017 (Arising out of Special Leave Petition (Civil ) No.30727 of 2016)

Kundla Press and Oil Mill Pvt. Ltd.       ..  Appellant(s)

Versus

State of Gujarat & Ors.         ..Respondent(s)

J U D G M E N T

DEEPAK GUPTA, J.

Leave granted.

2. This  Civil  Appeal  is  directed  against  the  judgment  dated

06.09.2016 delivered in Letters Patent Appeal No. 797 of 2016

whereby the appeal filed by the appellant was dismissed and the

judgment  of  the  learned  Single  Judge  passed  in  Special  Civil

Application No. 352 of 2013 was upheld.

3. The facts necessary for decision of the case are that 28,176

square metres of land in Savarkundla was given on lease to the

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appellant Company in the year 1922 for a period of 30 years for

running  an  oil  mill.   The  lease  expired  in  the  year  1952.

Thereafter,  fresh  lease  deed  was  executed  in  favour  of  the

appellant by the Administrator of the Savarkundla Municipality

on 18.09.1956.  In this lease deed it was mentioned that on this

leased  area,  there  are  factories,  residential  units,  warehouse

(godown), press factory, expeller and office buildings etc. which

were constructed by the appellant.  The lease deed was granted

for a further period of 30 years.  Relevant portion of the lease

deed reads as follows:

“The Deed of Lease would be renewed on expiry of the same.   And based on the conditions prevailing at  that time changes in the amount of rent may be made by the Municipality.   The  Municipality  will  have  the  right  to do so”

The aforesaid lease deed was to expire in the year 1982.

4. It  appears  that,  in  the  meanwhile,  the  Savarkundla

Municipality issued two notices to the appellant company in the

year 1976 asking the appellant company to handover the land to

the  Municipality.   A  dispute  arose since the  company did not

handover the possession of the leased property.  Thereafter, this

dispute was referred to the Arbitration.  The Arbitrator made the

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award in favour of the company on 11.03.1978.  The Arbitrator

held as follows:  

“....The Company can carry out any sort of construction it may deem fit and for any purpose it may find useful for. And  the  Municipality  is  liable  to  grant  permission  for construction  without  laying  any  condition.   In  this regard, as stated above,  the Company has the right to renew the Deed of Lease and so the only question that arises  is  that  whether  the  Company  can  carry  out construction on the aforesaid land or not.  This land has been given this land for its business (sic).   Therefore the Company can carry out construction over this land for its business........”

5. The operative portion of the Award reads as follows:

“3. The Company can carry out on the land construction which  it  deems  proper  and  for  such  use  as  it  deems proper.  Since the Municipality is an autonomous body and the Rent Act is not applicable to the land owned by a local autonomous institution.  In case of such properties the Rights of Tenants and Property Owners are as per the provisions  of  the  Transfer  of  Properties  Act.   The Municipality  is  responsible  to  grant  the  permission for construction  as  per  the  permission  of  construction granted by the Company.”

The Arbitrator held that the appellant company was entitled to

renewal  of  the  lease  deed  and  was  also  entitled  to  make

construction on the land in question connected with its business.

This Award was made Rule of the Court on 26.04.1978.

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6. Though the Award was passed in favour of the company and

the  Decree  in  terms  of  the  Award  had  also  been  passed,  the

Collector,  Savarkundla cancelled the lease deed on the ground

that the appellant was trying to raise construction on the land in

question.   Thereafter,  the  appellant  filed  a  Writ  Petition  being

Special Civil Application No. 845 of 1978.   This Writ Petition was

allowed and the order of the Collector was set aside.  Thereafter

also, no lease deed was executed since the Municipality did not

have the power to execute the lease deed for more than 10 years.

Finally,  on  23.10.1991,  the  Government  of  Gujarat  issued  an

order that the lease deed may be renewed for a further term of 30

years from 01.04.1982.  In actual fact, this lease deed was only

executed on 12.04.2007.   However,  this lease deed was made

effective for a period of 30 years from 01.04.1982 till 31.03.2012.

7. Shri Ashok Desai, learned senior counsel appearing for the

appellant,  submits  that  in  view  of  the  conditions  quoted

hereinabove, the appellant is entitled to renewal of the lease deed

as a matter of right. He further submits since the Municipality

has permitted the appellant to construct and raise buildings on

the land in question the appellant is entitled to renewal of the

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lease.   He  has  candidly  submitted  that  the  Municipality  may

charge enhanced lease rent.   

8. On the other hand, Shri Preetesh Kapoor, learned counsel

appearing for respondents submits that there can be no lease in

perpetuity in favour of any person.  He submits that the State

Government had given permission to the Municipality  to lease

out land only for a period of 30 years in terms of Section 65 (2) of

the Gujarat Municipalities Act, 1963 which reads as follows:

“65.  Powers  of  municipality  to  sell,  lease,  and contract.-

xxx xxx xxx

(2)In  the  case  of  every  lease  or  sale  of  land  under sub-section (1) of section 146 and of a lease of immovable property for a term exceeding ten years and of every sale or other transfer of such immovable property, the market value of which exceeds one lakh of rupees, the previous permission of the State Government is required:

Provided that  in the  case of  a  lease or  sale  of  land under sub-section (1) of section 146 no such permission shall be granted if such land forms a street or part of a street  which  has  been  declared  to  be  a  public  street under section 148.”

9. A bare perusal of the aforesaid section makes it very clear

that  the  Municipality  has  no  authority  to  grant  a  lease  for  a

period exceeding 10 years without prior permission of the State

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Government.  In the present case, the State Government had only

granted  permission  to  lease  the  land  till  the  year  2012.

Therefore, the appellant has no inherent right to claim that fresh

lease be granted in its favour.   

10. Another  factor  which  has  to  be  considered  is  that  the

original lease was granted for running an oil mill and as on date

admittedly there is no oil mill situated on the land.  The leased

property is a public property leased out at a very meagre rent.  It

cannot be utilised for a purpose other than the purpose for which

it was leased out.  True it is that the appellant may have been

permitted  to  raise  construction  on  the  leased  land  but  it  is

obvious  that  the  construction  to  be  raised  should  have

connection with the original business of the company i.e. running

an oil mill.  The appellant has raised a huge commercial complex

earning crores of rupees but is paying only a few hundred rupees

to the Municipality.

11. We  are  of  the  considered  view  that  the  appellant  is  not

entitled to claim that lease deed must be renewed in his favour.

The High Court of Gujarat was perfectly justified in holding that

the appellant cannot claim that he is entitled to renewal of the

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lease deed as a matter of right.  The finding of the High Court

that the appellant is earning huge profits by way of rent is not

denied.  It has also been stated that the land is required by the

Municipality for educational purposes.   

12. Having regard to the rival submissions and the facts and

circumstances of the case, we find no merit in the appeal and the

same is accordingly dismissed.

....................................J. (MADAN B. LOKUR)

....................................J. (DEEPAK GUPTA)

New Delhi March 28, 2017

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ITEM NO.1B               COURT NO.5               SECTION IX (For Judgment)                S U P R E M E  C O U R T  O F  I N D I A                        RECORD OF PROCEEDINGS Petition(s)  for  Special  Leave  to  Appeal  (C)   No(s). 30727/2016 (Arising  out  of  impugned  final  judgment  and  order  dated 06/09/2016 in LPA No. 797/2016 in SCA No. 352/2013 passed by the High Court of Gujarat at Ahmedabad) KUNDLA PRESS AND OIL MILL PVT. LTD.              Petitioner(s)                                 VERSUS STATE OF GUJARAT AND ORS.                        Respondent(s) Date : 28/03/2017 This petition was called on for  

prouncement of judgment today.

For Petitioner(s) Mr. Anirudh Sharma, AOR Mr. Abhaid Parikh, Adv.

                     For Respondent(s) Ms. Hemantika Wahi, AOR

Ms. Jesal, Adv. Ms. Puja Singh, Adv.                    

                     Hon'ble  Mr.  Justice  Deepak  Gupta  pronounced  the

non-reportable judgment of the Bench comprising Hon'ble Mr. Justice Madan B. Lokur and His Lordship.

The  appeal  is  dismissed  in  terms  of  the  signed non-reportable judgment.

(Meenakshi Kohli)                             (Sharda Kapoor)  COURT MASTER                                 COURT MASTER

[Signed non-reportable judgment is placed on the file]