STATE OF U.P. Vs UNITED BANK OF INDIA
Bench: M.Y. EQBAL,C. NAGAPPAN
Case number: C.A. No.-005254-005254 / 2010
Diary number: 2483 / 2010
Advocates: ABHISTH KUMAR Vs
MITTER & MITTER CO.
Page 1
Page 2
Page 3
Page 4
Page 5
Page 6
Page 7
Page 8
Page 9
Page 10
Page 11
Page 12
Page 13
Page 14
Page 15
Page 16
Page 17
Page 18
Page 19
Page 20
Page 21
Page 22
Page 23
Page 24
Page 25
Page 26
Page 27
Page 28
Page 29
Page 30
Page 31
Page 32
Page 33
Page 34
Page 35
Page 36
Page 37
Page 38
Page 39
Page 40
Page 41
Page 42
Page 43
Page 44
Page 1
REPORTABLE
IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5254 OF 2010
State of Uttar Pradesh and others Appellant(s)
versus
United Bank of India and others Respondent(s) WITH
CIVIL APPEAL NO. 4688 OF 2010
M/s. Amrita Bazar Patrika Pvt. Ltd. Appellant(s)
versus
M/s. Jvine Development Pvt. Ltd. and others Respondent(s)
CIVIL APPEAL NO. 2462 OF 2010
United Bank of India Appellant(s)
versus
M/s. Jvine Development Pvt. Ltd. and others Respondent(s)
CIVIL APPEAL NOs. 1969-1970 OF 2010
Northern India Patrika A.P.K.S. Morcha Appellant(s)
versus
United Bank of India and others Respondent(s)
1
Page 2
J U D G M E N T
M.Y. Eqbal, J.:
Since all these appeals arise out of 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 petition
filed by the writ petitioner United Bank of India was allowed
and necessary directions were issued. Aggrieved by those
directions, the appellants have come to this Court.
3. In the writ petition No.775 of 1999, the writ petitioner
namely United Bank of India sought the following reliefs:
“a) issue a writ, order or direction in the nature of certiorari quashing the impugned show cause notice dated 19.12.1998 contained in Annexure ‘6’ to this writ 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.
2
Page 3
c) issue a writ, order or direction in the nature of 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 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 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 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 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.
Mortha Anthony on 11.8.1887 for 50 years and the said period
expired on 11.8.1937. On 7.4.1945, the lease was renewed in
favour of Miss Verna Anthony and Miss Leena Anthony for
another 50 years by the Collector Allahabad, for the Governor
of United Provinces, which was made effective from 1.9.1937,
3
Page 4
and as such, the said lease was valid up to 31.8.1987.
Subsequently, on 22.10.1945, the lease was transferred in
favour of M/s. Amrita Bazar Patrika Pvt. Ltd. (in short, “the
ABP Company”) by means of a registered deed. On the basis
of the said transfer deed, a lease deed was executed on
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/XI-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, 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
properties at Allahabad being premises no.19, Clive Road,
Allahabad and premises no.10, Edmonston Road, Allahabad.
4
Page 5
5. Further the case of the appellant is that the United Bank
of India (in short, “the Bank”) had advanced credit 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
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 had filed a
Suit No. 510 of 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 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
5
Page 6
namely the State of Uttar Pradesh was not made party in the
suit and the mortgage decree was passed on the basis of
settlement arrived at between the parties.
6. Some of the important terms of the settlement upon
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, 3 and 7.
(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 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 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) 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 mortgaged to the plaintiff as securities for the payment of the decretal dues with interest and costs, as provided hereinabove.
6
Page 7
(f) There will be a decree for sale of the hypothecated assets mentioned in Annexure K to the plaint for payment 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.
(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 event of default in payment of the decretal dues in the manner, as provided hereinafter.
(h) The Joint Receivers will take symbolical possession of the suit properties and they will not disturb the 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
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 over
19, Clive Road, may not be terminated. The lessee namely
M/s ABP Pvt. Ltd. did not challenge the notice. The appellant
7
Page 8
on the basis of the mortgage decree challenged the notice by
filing Writ Petition No. 775 of 1999 for quashing the above
show cause notice. The Bank further requested that as per
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 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 22 of the counter affidavit filed by the
Company in Writ Petition No.775/99, it has been admitted
that the appellant Bank is their nominee.
8
Page 9
8. Curiously enough, when the terms of the mortgage
decree was not complied with inasmuch as the decretal
amount was not paid to the Bank by the mortgagor-ABP
Company, 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.
9. Surprisingly enough, before the DRT, Calcutta, a
settlement was entered into between the parties. Before the
DRT, five banks viz., United Bank of India, Allahabad Bank,
Bank of Baroda, Canara Bank, Punjab National Bank, were
the applicants and ABP 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
9
Page 10
11.02.2004. The relevant portion of the order dated
11.02.2004 passed by the DRT 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 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:
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 d) Rs.2,07,70,640.81 to applicant no.4 e) Rs.1,98,25,365.55 to applicant no.5 f) The defendants are directed to pay to
each of the applicants interest at the agreed rate from August 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 charged assets of the 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 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
a) Rs.13,58,804.27 to applicant no.1 b) Rs.1,42,52,371.48 to applicant no.2
10
Page 11
c) Rs.1,71,03,802.70 to applicant no.3 d) Rs.1,64,10,410.96 to applicant no.4 e) Rs.1,61,79,866.01 to applicant no.5 f) Interest at the agreed rate from
27.8.1997 till 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’ by public auction for private treaty.
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 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.
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 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.
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 applicant bank. The defendants have admitted these certified claims.
11
Page 12
5) The parties have agreed to settle the decretal amounts of United Bank of India (T.A.No.18 of 1997, T.A. No.19 of 1997), and the claims of the applicant banks in OA No.192 of 1997, OA No.193 of 1997 and OA No.275 of 1997 in the following manner:
a) The consortium banks have agreed to settle their respective claims against the defendants by accepting the following amounts by 30th June, 2004.
i) Rs. 2439.65 lakhs by United Bank of India ii) Rs.304.35 lakhs by Canara Bank. (iii) Rs.303.13 lakhs by Bank of Baroda (iv) Rs.228.16 by Allahabad Bank (v) Rs.230.67 lakhs by Punjab National Bank vi) Rs.57 lakhs towards legal expenses incurred by the consortium banks.”
10. Not only that, by the said order a committee consisting of
receiver was appointed with a direction to take possession of
all hypothecated assets and mortgaged properties and dispose
of the same in the following manner:-
“xxxxxx
(c) Out of the sale proceeds of hypothecated assests and mortgaged properties as contained in Annexure I & II of today’s joint petition the committee pay:
12
Page 13
i) 40% to the Applicant banks (consortium banks) (ii) 40% of the sale proceeds of the assets will be paid to the workers/employees towards their dues to the maximum extent of Rs.15 crore. (iii) 20% of the sale proceeds will be utilized by the said three companies for meeting various dues of other creditor.”
11. It appears that pursuant to the order dated 11.02.2004
an auction sale notice was published on 17/18.5.2004 in
respect of the immovable property situated at Clive Road,
Allahabad, inviting prospective purchasers to participate in
the auction sale of the property allegedly mortgaged to the
appellant United Bank of India.
12. In pursuance to the aforesaid sale notice, one M/s. Jvine
Development Pvt. Ltd. and several other persons deposited the
earnest money and the offer of Jvine Development Pvt. Ltd.
was finally accepted and they were asked to deposit 25 % of
the bid amount within 15 days and remaining 75% within 3
months. Although the said Jvine Development Pvt. Ltd.
13
Page 14
deposited the 25 % amount, it did not 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 issued by the Bank upon the Jvine Development
Pvt. Ltd. on 30.09.2004. In this connection, a writ petition
was filed by the Company before the High Court and the High
Court stayed the show cause notice.
13. The District Magistrate, Allahabad rejected the
application of the Bank for grant of free hold right in respect of
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, Allahabad, the Bank made a
representation 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
14
Page 15
was argued by the writ-petitioner before the High Court that
the legal opinion sought by the State Government from its Law
Department in the aforesaid matter has also recommended
that the said property may be converted into freehold but the
District Magistrate, Allahabad did not pay any heed to the
aforesaid opinion as well as on the recommendation given by
the State Government. Before the High Court, it was pleaded
by learned counsel for prospective auction purchaser Jvine
Development Ltd. that after the decree of Calcutta High Court
and subsequent order of Debt Recovery Tribunal, Kolkata all
the rights, title and interest of M/s. Amrit Bazar Patrika Pvt.
Ltd. ceased and 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 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
15
Page 16
earnest money by way of bank draft and also submitted the
tender.
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
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 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 Development
Pvt. Ltd. The operative portion of the order passed by the High
Court is quoted hereinbelow :-
16
Page 17
“….An important aspect of the case is that the judgements of Hon’ble Calcutta High Court and Debt Recovery Tribunal, Kolkata also deal with welfare of the workers of the Company and 40% of the auction amount 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. 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 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 that general exception in the consideration of particular cases.
xxxxxxx xxxxxxx
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 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 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. Furthermore, the connected writ petition No.46115 of 2004 is allowed and the impugned notice dated 30.9.2004 is hereby quashed and
17
Page 18
the respondents are directed to transfer the land to the petitioner company after receipt of remaining balance amount of 75 % as 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.”
16. Before we proceed to decide the issue involved, 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 given on lease dated 11.08.1887 to Ms. Mortha 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 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. Mortha Anthony, transferred the leasehold property on 22.10.1945 in favour of appellant-Amrit Bazar Patrika Private Limited (for short ABP). 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;
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
18
Page 19
considered and an order of proposed sanction for renewal of lease was take subject to proof of payment of dues and execution of a renewed lease deed on fulfillment of conditions. However, no such renewed lease deed was executed by the State of U.P. after the expiry of period of lease i.e., 11.8.1987;
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.”
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-ABP moved an application
before the Special Secretary, Land Reforms Department,
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 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
19
Page 20
order granting exemption from Urban Land Ceiling Act and
also granted permission for construction of the building. This
fact was never 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. Irshad Ahmad, learned AAG for the State of U.P., Mr.
Rajesh Kumar, learned counsel for the Bank, Mr. Rakesh
Dwivedi, learned senior counsel, Mr. V. Shekhar, learned
senior counsel, Mr. Awanish Sinha, Mr. Rishi Kesh, learned
counsel appearing for the appellants and the respondents,
advanced their arguments.
19. We have gone through the facts of the case and the
documents which reveal that in Case No.510 of 1990 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
ownership of the State of U.P. Hence, the appellant had filed a
20
Page 21
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
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 :-
“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 respective advocates on record.
These defendants submitted to a decree in favour of the plaintiff.
Under those circumstances this Court as per the 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.
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
21
Page 22
of the bar, Dr. Debi Prasad Pal as joint Receivers.
In view of the order passed by this Court in the suit 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 in a signed copy of the minutes of this order on undertaking.
xxxxx”
20. It is submitted by the State that respondent-ABP has
mortgaged the property in question in favour of the appellant,
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, Edmoston 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 is important to note here
22
Page 23
that the appellant 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
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
of the properties in question situated at 19, Clive Road and 10,
Edmoston Road.
22. The contention of the appellant-Bank is that only on the
basis of the notice issued on 9.12.1998, the appellant 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 ABP Pvt. Ltd. vide
letter No. 56/Nazul-(CL)-XXI-8/11(96-97) dated 19th
23
Page 24
December, 1998 in relation to the Nazul land No.25 and 25A,
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 ground of violation of the terms of lease for
which a reply was filed by Shri B.P. Tiwari, Secretary of M/s
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
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, a show cause notice vide letter No.448/Nazul-
(CL)-XXI-8/51(80-81) dated 14th May, 1999 was sent to the
Director/Secretary of M/s ABP Pvt.Ltd through registered post
and its reply was given by Shri B.P. Tiwari, Secretary, ABP 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
24
Page 25
violation of the terms of the lease by unauthorisedly raising
construction 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/s ABP was not in accordance with rules,
the name of M/s ABP was cancelled from the above land vide
order No. 47/Nazul-CL-XXI-8/51(80-81), dated 9th 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 appellant-Bank is having any
relation with both the lands in question nor any lease of the
above land has ever been 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 mainly on
the ground that they were employees of M/s. Amrit Bazar
25
Page 26
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 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
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 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 is
aggrieved by that part of the judgment of the High Court
26
Page 27
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
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 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 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. Rule 13, 14 and 16 are
quoted herein below:-
27
Page 28
“13. Sale or lease of nazul lands- The sale lease of 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 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 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-
(1) the Collector, if the estimated 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.;
(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 may be, unless the terms have already been set forth in 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 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 the rent at a rate lower than the prevailing
28
Page 29
market rate or in which it is propsed to sell or 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 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
provisions of the Transfer of Property Act do not apply to
Government lands. Sections 2 and 3 read as under:
“2. Transfer of Property Act 1882, not to apply to Government grants - Nothing in the Transfer of Property Act, 1882, contained shall apply or be deemed ever to have applied to any grant or other transfer of land or of any interest therein heretofore made or hereafter to be made by or on behalf of the Government to, or in favor of, any person whomsoever; but every such grant and transfer shall be construed and take effect as if the said Act had not been passed.
3. Government Grants to take effect according to their tenor - All provisions, restrictions conditions and limitations 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. “
29
Page 30
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 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 of Transfer of 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 is a government property, which is fully vested in the Government of Uttar Pradesh. Hence even on mortgaging the said property in question by M/s Amrit Bazar Patrika without getting prior sanction of its Lessor/Collector, Allahabad, the United Bank of India has no authority to get it converted into free hold in their favour.”
30. The lease of Nazul land for building purposes 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
30
Page 31
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.
31. In the instant case, the renewal of lease dated 25th July,
1940 was prepared as per Form 4 of the Nazul rule. The said
lease was renewed in accordance with the terms, conditions
and covenants contained in the prescribed forms appended to
the said rules.
32. The primary question which needs consideration is as to
whether there is a valid mortgage created by the ABP 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 by
way of Renewal of Lease to the ABP Co. for 50 years w.e.f. 1st
September 1937, which expired on 31st August 1987.
31
Page 32
Admittedly, ABP Co. mortgaged the said Nazul land in favour
of the Bank, in which the ABP Co. had only a leasehold
interest in the property. There is nothing on record which
shows as to when the alleged mortgage was created by the
ABP Co. in favour of the Bank. If we assume that the mortgage
was created before the expiry of the lease i.e. before 31st
August 1987 then as per the Form 2 read with Form 3 which
governs conditions for renewal of lease of the Nazul Rules any
transfer or sub-lease by the ABP 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 ABP from the State.
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 State Property.
32
Page 33
35. Admittedly, lease was renewed in favour of M/s. ABP Co.
as per the Government order in accordance with the rules
mentioned in the Rules 13 to 16 of the Nazul Rules read with
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
lessor hereby demises upto the Lessee all and singular the
hereditaments and premises comprised in and demised by the
within the written lease, now standing thereon with the same
exceptions and reservations as are therein expressed to hold
unto the Lease…… and subject to and with the benefit of such
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 lease” is the original lease deed as
mentioned in the Form 2 of the Nazul Manual. Form 2 of lease
33
Page 34
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 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 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
sanction in writing of the State.
39. In the present case 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 the
34
Page 35
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 in respect of disputed property
was obtained or no objection from the State Government was
taken by the Bank. Further, even if we hold 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 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 ABP 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
35
Page 36
favour of the Bank by applying the doctrine of legitimate
expectation for issuing the writ of mandamus against the
State, 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 Bihar, (2006) 8 SCC 381, wherein the Court held
that:-
“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 conduct, process or activity of the decision-making 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. 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 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 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
36
Page 37
efficacy of the doctrine is rather weak as its slot is just above 'fairness in action' but far below 'promissory 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 follow the promised 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 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 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 had no previous dealings with the authority and who has 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.”
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
37
Page 38
at all in the eye of law. Moreover, this Court in number 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
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 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.
42. The doctrine of legitimate expectation ordinarily would
not have any application when the legislature has enacted a
38
Page 39
statute. The legitimate expectation should be legitimate,
reasonable and valid. For the application of doctrine 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 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 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 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 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
39
Page 40
discretion of the deciding authority without any such legal bounds and if the decision is taken fairly and objectively, 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 is very much limited. (Vide Hindustan Development Corpn. (1993) 3 SCC 499.”
43. The High Court after having recorded a finding that the
Bank being the nominee of the mortgagee has a right to 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
expectation.
44. In the instant case, admittedly, the State never
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
40
Page 41
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 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
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 by the Government Grants Act, 1895 and Nazul Rules.
(ii) The property was given on lease by the State of U.P.to Mrs. Mortha 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 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 executed in 1949 by the State of U.P. in favour of ABP Co. for the remaining period of lease which expired in 1987.
41
Page 42
(iv) As against the loan taken by the Company from the 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.
(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.
(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 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 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 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.
42
Page 43
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.
…………………………….J. (M.Y. Eqbal)
…..……………………….J. (C. Nagappan)
New Delhi November 26, 2015
43
Page 44
44