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CASE NO.: Appeal (civil)  7059-7060 of 2000

PETITIONER: H.M.T. Ltd. rep. by its Deputy General Manager (HRM) and Anr

RESPONDENT: Mudappa & Ors

DATE OF JUDGMENT: 08/02/2007

BENCH: C.K. Thakker & Lokeshwar Singh Panta

JUDGMENT: J U D G M E N T

C.K. Thakker, J.

       These two appeals arise out of the judgment and  order dated September 8, 1998 passed by learned Single  Judge of the High Court of Karnataka in Writ Petition  No. 5580 of 1998 and confirmed by the Division Bench  in Writ Appeal Nos. 5051-5052 of 1998 on October 28,  1998.           By the impugned order, the High Court upheld the  contention of the original petitioners and quashed  notification dated November 13, 1997 issued by the  State of Karnataka under sub-section (1) of Section 28 of  the Karnataka Industrial Areas Development Act, 1966  (hereinafter referred to as "the Act").         To appreciate the controversy raised in the appeals,  it is necessary to state relevant facts. The respondents  are heirs and legal representatives of deceased  Akkahonnamma who died somewhere in the year 1993.   She was the owner of land bearing Survey No. 113/3  admeasuring 2 acres, 37 gunthas situated in  Devarayapatna, Tumkur Taluk.  In the year 1978, the  Industrial Area Development Board, Karnataka (’Board’  for short) acquired 120 acres of land of different survey  numbers situated in Devarayapatna for the purpose of  establishing a Watch Factory, namely, H.M.T. Ltd.  (appellant herein).  The land admeasuring 1 acre, 38  gunthas out of 2 acres, 37 gunthas of Survey No. 113/3  owned by the respondents was also acquired in the  acquisition proceedings.  The remaining land to the  extent of 39 gunthas was not acquired.  It was, however,  the case of the respondents that the General Manager,  H.M.T. took possession of the entire area of 2 acres, 37  gunthas even though he was entitled to take possession  of land only of 1 acre, 38 gunthas. He thereby  unauthorisedly took over possession of 39 gunthas of  land. A request was, therefore, made to the General  Manager, H.M.T. to return possession of 39 gunthas to  the owners.  He, however, refused to hand over  possession.  By a communication dated July 20, 1984,  the Board called upon the owners of the land to show  cause as to why the actual extent of acquired land  should not be continued to be occupied by the H.M.T.    The owners did not oblige the Board and filed a suit  against the authorities, being O.S. No. 341 of 1985 for  declaration of title and also for possession of land. The  suit was decreed by the Trial Court.  An appeal filed

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against the said decree came to be dismissed by the First  Appellate Court.  The said order was not challenged and  the decree became final.  Execution proceedings had  been initiated by the owners and by an order dated June  13, 1997, the Executing Court directed H.M.T. to hand  over actual and peaceful possession of the land to the  owners.  The order passed by the Executing Court was  challenged by the H.M.T. by filing a revision which came  to be allowed and the matter was remanded to the  Executing Court with a direction to the Executing Court  to afford an opportunity to H.M.T. of hearing and to pass  an appropriate order in accordance with law.   Meanwhile, however, H.M.T. appears to have requested  the State Government to acquire land and a notification  under sub-section (1) of Section 28 of the Act for  proposed acquisition of land for public purpose, viz. for  developing industry came to be issued on November 13,  1997 which was published in Official Gazette on  December 11, 1997.  The owners of the land came to  know about the issuance of notification and they invoked  the jurisdiction of the High Court of Karnataka under  Article 226 of the Constitution by filing a Writ Petition.   It was alleged that the notification had been issued mala  fide in order to deprive the owners of their rights to  recover possession and to defeat the decree passed by a  court of competent jurisdiction.  A prayer was made for  quashing and setting aside the notification, directing the  authorities to hand over possession of 39 gunthas of  land of Survey No. 113/3 to the owners in view of the  decree passed by a competent court which had become  final.         Before the learned Single Judge, it was contended  on behalf of the appellants (respondents before the High  Court) that the petition was premature and was liable to  be rejected at the threshold as the Notification was  merely a preliminary notification and final declaration  was yet to be made after considering the objections, if  any, to be filed by the owners of the land.  It was also  submitted that the owners had failed to even prima facie  satisfy the Court that the action was mala fide and the  power was exercised for colourable or collateral purpose.   The land was sought to be acquired for public purpose,  namely, for developing industry through Board and  allegation of legal mala fide was baseless.  It was also  urged that Civil Court had reserved the liberty to acquire  the land in accordance with law. But even otherwise, the   decree passed by a court could not take away power of  the State. Moreover, the land was covered by the  provisions of the Official Secrets Act, 1923 having  declared it as ’prohibited area’.         The learned Single Judge described the case as one  of ’exploitation of statutory provisions to defeat the just  rights of an individual decreed by the law Courts, in the  name of public purpose’ and held that the power had  been exercised by the authorities mala fide and the  action was liable to be quashed and set aside.  The Court  noted that the respondents had no right, title or interest  in the land in question and yet it continued to retain  possession of the land for about 18 years. It refused to  vacate the property though request was made by the  owners.  When the suit was decreed, appeal was  dismissed and no further action was taken, the decree  had become final.  In spite of decree in favour of the  owners, possession was never returned to successful  plaintiffs and they were constrained to take out

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execution proceedings.  When warrant for possession  was issued, instead of obeying the decree of the court  and handing over possession of land, the Company  requested the Board to initiate proceedings for  acquisition of land under the Act and notification under  Section 28(1) was issued.  It was also observed that  neither a notification under sub-section (3) of Section 1  nor under sub-section (1) of Section 3 was issued by the  State in accordance with law and the land was sought to  be acquired.  The Court, no doubt, noted that such  notifications were issued, but all the three notifications,  i.e., notification under sub-section (3) of Section 1, sub- section (1) of Section 3 and sub-section (1) of Section 28  were issued on one and the same day. They were also  published simultaneously on December 11, 1997 in the  Official Gazette. Such an action, in the opinion of  learned Single Judge, was in mala fide exercise of power  to deprive the owners of the land who got decree for  possession in their favour. The action was, therefore, bad  in law. Accordingly, the petition was allowed and the  notification under sub-section (1) of Section 28 was  quashed.         Being aggrieved by the order passed by the Single  Judge, intra-court appeals were filed by the appellants  which were dismissed by a Division Bench of the Court  by a cryptic order observing that the notification had  been issued in violation of the provisions of the Act and  to deprive the writ petitioners of fruits of the decree  obtained by them.           When the matter came up before this Court, notice  was issued on March 15, 1999.  It appears that there  was some talk of settlement.  Record reflects that the  matter was adjourned from time to time to explore  possibility of settlement, if any, but settlement could not  be arrived at and on December 1, 2000, leave was  granted.         We have heard the learned advocates for the  parties.         The learned counsel for the appellants strenuously  contended that the High Court has committed an error of  law in allowing the petition filed by the owners and in  setting aside a statutory notification issued by the State  of Karnataka in exercise of power under sub-section (1)  of Section 28 of the Act.  He submitted that it was within  the power of the State Government to issue statutory  notification for acquisition of land and the High Court  was wrong in quashing it on the ground of mala fide  exercise of power.  So far as decree for possession is  concerned, it was submitted by the counsel that  irrespective of the decree of a court of law, statutory  power could be exercised by the State under the Act.   The notification was preliminary in nature reflecting the  intention of the State to acquire the land and the owners  were to get an opportunity to raise objections, if any, and  thereafter the final notification was to be issued.  It was,  therefore, urged that preliminary objection raised on  behalf of the authorities that the petition was premature  ought to have been upheld by granting liberty to the  owners to raise all objections against the proposed  action. It was also submitted that H.M.T. needed the  land for expansion of the factory.  Moreover, the land in  question was covered by the provisions of the Official  Secrets Act, 1923 having declared the land as ’prohibited  area’ and on that ground also, acquisition of land was  necessary. The order passed by the learned Single Judge

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and confirmed by the Division Bench, therefore, deserves  to be set aside.         The learned counsel for the owners, on the other  hand, supported the order passed by the High Court.  He  submitted that initial action of the authorities was wrong  inasmuch as though acquired land was 1 acre, 38  gunthas,  they illegally took possession of the entire land  of Survey No. 113/3 admeasuring 2 acres, 37 gunthas  and thereby the owners were deprived of lawful  ownership and possession of 39 gunthas of land.  In  spite of several requests, nothing was done by H.M.T.  and the owners were compelled to file a suit for  declaration of title and possession which was decreed  and the decree was confirmed in appeal.  Even  thereafter, possession was not handed over to the  successful plaintiffs and execution proceedings were to  be taken out.  It was only when the direction was issued  to the appellants herein to hand over possession that  wheels were moved fast and a request was made to the  State Government to issue notification for acquisition of  39 gunthas of land.  The High Court was, therefore, right  in holding that the action was mala fide and the  notification was liable to be quashed.  No exception can  be made against such just and equitable order and no  fault can be found. The appeals deserve to be dismissed  with exemplary costs.         Ms. Kiran Suri, learned counsel for the State of  Karnataka supported the case of the appellants.  She  submitted that power to issue notification under sub- section (1) of Section 28 is statutory and when it was a  preliminary notification, the High Court should not have  entertained a petition. It was only after the final  notification that aggrieved party may approach a court of  law.  It was, therefore, submitted that the High Court  was wrong in quashing the notification.         Having heard the learned counsel for the parties, in  our opinion, the High Court was not right in quashing  the notification issued under the Act, particularly, when  it was a preliminary notification reflecting the intention  of the State to acquire land for public purpose, i.e. for  the purpose of developing industry.  It is, no doubt, true  that the land bearing Survey No. 113/3 comprises of 2  acres, 37 gunthas and the respondents are the owners  thereof.  It is equally true that by notification dated June  29, 1978, 1 acre, 38 gunthas had been acquired and  award was passed in respect of the said area.  It is also  correct that instead of acquiring and taking over  possession of 1 acre, 38 gunthas, the appellants took  over possession of the entire land of Survey No. 113/3  admeasuring 2 acres, 37 gunthas thereby illegally and  unauthorisedly taking possession of 0 acre, 39 gunthas.   Obviously, therefore, it was open to the owners to make  complaint and also to take appropriate proceedings as  they were illegally deprived of ownership and possession  of 39 gunthas of land.  When the request to return  possession of the excess land was ignored by the  appellants, they naturally approached a court of law and  obtained a decree.  It is not in dispute that the decree  was confirmed in appeal and had become final.   Execution proceedings were taken out and at that stage,  the appellants moved the State Authorities to acquire  land under the Act.  The question, however, is whether  the action of the State Authorities in initiating  acquisition proceedings under a valid law could be said  to be illegal, unlawful or in mala fide exercise of power?  

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So far as the High Court is concerned, it held that the  course adopted by the authorities was contrary to law.  It  is reflected in the approach of the Court wherein the  learned Single Judge observed that it was a case of  exploitation of statutory provisions in the name of public  purpose to defeat just rights of an individual who had  obtained decree in his favour.         In our considered view, however, this approach is  neither legal nor permissible.  Passing of a decree by a  competent court is one thing and exercise of statutory  power by the authority is altogether a different thing.  It  is possible in a given case to come to a conclusion on the  basis of evidence produced and materials placed on  record to conclude that the action has been taken mala  fide or for a collateral purpose or in colourable exercise  of power.  But, in our opinion, issuance of preliminary  notification after a decree by a court of law would not  ipso facto make it vulnerable and exercise of power mala  fide.  To us, therefore, the authorities were right in  raising a preliminary objection that the petition was  premature as by issuance of notification under sub- section (1) of Section 28 of the Act, an intention was  declared by the State to acquire the land for public  purpose i.e. for developing industry. To appreciate the  contention of the appellants, we may reproduce the  section which reads thus\027                         Bare reading of the above provision makes it  abundantly clear that if in the opinion of the State  Government any land is required for purpose of  development by the Board, a notification of its ’intention  to acquire’ the land can be issued for acquisition of such  land. The notification was accordingly issued on  November 13, 1997.  Sub-section (2) of Section 28 then  requires the State Government to serve notice upon the  owner or occupier of the land and all such persons  known or believed to be interested therein to show cause  why the land should not be acquired.  Sub-section (3)  casts an obligation on the State Government to consider  the objections of the owner, occupier or other person  interested in land and to pass such order as it deems fit  after affording an ’opportunity of being heard’. If it is  satisfied that any land should be acquired, a declaration  can be made under sub-section (4) which shall be  notified in Official Gazette.         The scheme of Section 28 is thus similar to the  scheme of acquisition of land under the Land Acquisition  Act, 1894 under which such preliminary notification is  issued, opportunity of being heard is afforded to the  persons interested in the land and only thereafter final  notification can be issued.  At the stage of raising  objections against acquisition, it is open to the  respondents herein to raise all contentions. In spite of  such objections, if final notification is issued by the  State, it is open to them to take appropriate proceedings  or to invoke jurisdiction of the High Court under Article  226 of the Constitution.  Unfortunately, however, the  High Court entertained the petition and quashed the

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preliminary notification overruling well-founded  objection as to maintainability of petition raised by the  State and the appellants herein.         The High Court was also not right in coming to the  conclusion that since a decree was passed by a  competent court, no notification under the Act could  have been issued by the State.  The power exercised by  the State was statutory in nature and irrespective of a  decree in favour of the owners, such notification could be  issued.  A situation similar to one before us had arisen  in State of Andhra Pradesh & Ors. v. Govardhanlal Pitti,  (2003) 4 SCC 739.  In Govardhanlal, a school building  belonging to G was in the possession of the State as a  tenant.  An order of eviction was passed and the State  was directed to hand over possession of property to G  within a particular period.  The State then took out  proceedings under the Land Acquisition Act, 1894 for  acquiring the property for public purpose, namely, for a  school.  G challenged the proceedings as mala fide.  The  High Court upheld the contention observing that there  was ’malice in law’ inasmuch as the proceedings were  initiated to scuttle a valid decree passed by a competent  court.  The State approached this Court.         Allowing the appeal and setting aside the order of  the High Court, this Court held that the school was there  since 1954 and was catering to the educational needs of  children residing in the heart of the city.  It could not,  therefore, be contended that there was no genuine public  purpose.  Exercise of power under the Act in the facts  and circumstances, therefore, could not be held mala  fide.          The Court also explained the concept of legal mala  fide.  By referring to Words and Phrases Legally Defined,  3rd Edn., London Butterworths, 1989, the Court stated;         "The legal meaning of malice is "ill-will or  spite towards a party and any indirect or  improper motive in taking an action". This is  sometimes described as "malice in fact".  "Legal malice" or "malice in law" means  ’something done without lawful excuse’. In  other words, ’it is an act done wrongfully and  willfully without reasonable or probable  cause, and not necessarily an act done from  ill feeling and spite’. It is a deliberate act in  disregard of the rights of others’."

       It was observed that where malice was attributed to  the State, it could not be a case of malice in fact, or   personal ill-will or spite on the part of the State.  It could  only be malice in law, i.e. legal mala fide.  The State, if it  wishes to acquire land, could exercise its power bona  fide for statutory purpose and for none other.  It was  observed that it was only because of the decree passed in  favour of the owner that the proceedings for acquisition  were necessary and hence, notification was issued.   Such an action could not be held mala fide.          In the instant case also, the record reveals that in  1978 itself, the possession of the entire land of Survey  No. 113/3 had been taken over by the appellants albeit  part of it illegally (to the extent of 39 gunthas).  It was  only because of the decree passed in favour of the  owners of the land that the appellants realized that an  appropriate action in consonance with law was to  acquire the land and hence, a request was made to the  State to take an action under the Act and a notification

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was issued.  Such act cannot be said to be illegal,  particularly when the notification was preliminary in  nature and opportunity under the Act was to be afforded  to the owners ’of being heard’.  The High Court, in our  considered opinion, was wrong and had committed an  error of law in entertaining the petition and in allowing it  at the stage of issuance of notification under sub-section  (1) of Section 28.         The learned Single Judge had also found fault with  the State authorities in issuing simultaneous  notifications under sub-section (3) of Section 1 and sub- section (1) of Section 3 of the Act.  Sub-section (2) of  Section 1 of the Act states that the Act ’extends to the  whole of the State of Karnataka’.  Sub-section (3) then  reads\027         (3) This Act except Chapter VII shall  come into force at once: Chapter VII shall  come into force in such area and from such  date as the State Government may, from time  to time, by notification, specify in this behalf.

       It may be noted that Chapter VII relates to  ’Acquisition and Disposal of Land’. Chapter II deals with  ’Industrial Areas’.  Section 3 provides for ’declaration of  industrial areas’ as defined in sub-section (6) of Section  2 of the Act. Sub-section (1) of Section 3 enables the  State Government to declare any area as ’industrial  area’. It reads;         (1) The State Government may, by  notification, declare any area in the State to  be an industrial area for the purposes of this  Act.

       It is on record that notifications under sub-section  (3) of Section 1 and sub-section (1) of Section 3 were  issued by the State.  The learned Single Judge, however,  observed that it is only after the Executing Court  directed the judgment-debtors to deliver possession of  the property that the latter persuaded the State to issue  such notifications.  He also found fault with the State  Authorities in not producing material for the perusal of  the Court for the alleged expansion of the industry. The  learned Judge noted that it was not the case of the  judgment-debtors in execution proceedings that the land  was needed for development of industry and, therefore, a  decision was taken to acquire the land.  According to the  learned Single Judge, the land was situated in one  corner of the area and was lying vacant.         In our opinion, the approach of the learned Single  Judge could not be said to be legal or in consonance  with law.  The State authorities were not required to  produce material for ’perusal’ of the Court as to  expansion of industrial area or development of industry.  It was also not expected of the judgment-debtors to  contend before the Executing Court that the land was  required for expansion of the industry. The reason  weighed with the learned Single Judge, therefore, in our  opinion, could not be made basis for quashing the  notification.  The learned Single Judge also observed  that issuance of simultaneous notifications under  Section 1(3), Section 3(1) and Section 28(1) was illegal.         In this connection, the learned Single Judge  noted\027 "10.            It is seen from the impugned  notification that they have been issued by the

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first respondent and not by the second  respondent. It is not the case of the first  respondent that any representation of the 5th  respondent to acquire any land to expand  their factory was pending consideration before  the decree was made by the Court. On the  other hand, it is contended by the second  respondent that the land in question has been  sought to be acquired for expansion of the  fifth respondent factory. It is not the case of  the second respondent that they  recommended to the Government to acquire  this land for the expansion of the fifth  respondent as no material was produced for  perusal regarding the declaration of  ’industrial area’ to expand the industry. It is  further material to see that the first  respondent in exercise of its power under  sub-section (3) of the Act issued a composite  notification declaring the industrial area and  the application of Chapter VII to such area. It  is further material to see that such  notifications have been issued only in respect  of the lands in question and no other lands  have been included. The notification issued  under Section 3(1) of the Act has been  published in page No.253 of the Karnataka  Gazette dated December 11, 1997 without  mentioning the lands in respect of which such  notification was issued. The notification  issued under Section 1(3) of the Act has been  published in page No.254 of the same Gazette  and the lands in respect of which the said  notification was issued has been published in  page 255. In page No. 256 also the same  schedule is published the purpose of which is  not known. 11.             Section 3(1) of the Act requires that  the State Government shall declare any area  as an industrial area by a notification and a  notification under sub-section (3) of Section 1  of the Act is required to be issued to extend  the provisions of Chapter VII in respect of the  area declared as an industrial area under  Sub-section (1) of Section 3 of the Act by the  notification. It is, therefore, clear that there  shall be two different and independent  notifications issued under two different  provisions of the Act. The composite  notification issued as per Annexure-D under  sub-section (1) of Section 3 without  mentioning the particulars of the land, and  sub-section (3) of Section 1 of the Act is  impermissible in law, consequently the  notification issued under Section 28(1) of the  Act is illegal, void and invalid".

       The learned Single Judge was conscious of the fact  that notification under Section 28(1) was merely a  preliminary notification and in the nature of proposal.   He, however, negatived preliminary objection raised by  the authorities and observed; "12.            It was contended by the respondent  that the petition is premature and hence  liable to be dismissed as the notification

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issued under Section 28(1) of the Act is only a  proposal, which may or may not be perused  after considering the objections is filed by the  petitioners. In the normal course the objection  of the respondents would have been tenable.  But, in the facts and circumstances of this  case, where respondents 4 and 5 have hell  bent upon retainingthe land which they have  illegally occupied and the first respondent  acceded to their request to acquire the same  without considering the past history, within a  span of one month from the date of disposal  of CRP by this Court, their contention s  untenable as the procedure under Section  28(2) & (3) of the Act would be an empty  formality. The respondents did not produce  any material to show that the land in  question is covered by the provisions of  Official Secrets Act. Mere prohibition of entry  to the general public is not sufficient to hold  that the land in question is declared as a  ’prohibited area’ under the provisions of  Official Secrets Act. The conduct of the  respondents particularly of respondents 4 and  5 for whose benefit the land is sought to be  acquired, clearly demonstrates their mala fide  intention to defeat the decree of a court of  competent jurisdiction".

       According to the learned Judge, therefore, giving of  opportunity of being heard was merely an ’empty  formality’ and since it was mala fide exercise of power by  the State to deprive the owners of the fruits of the decree  obtained by them, they were entitled to relief of quashing  of notification at that stage without further delay.         In our judgment, the learned Single Judge was  wholly in error in taking such view and quashing the  notification.  Upholding of such view would make  statutory provisions under the Act or similar provisions  in other laws, (for example, the Land Acquisition Act,  1894) nugatory and otiose. We are also of the view that  the learned Single Judge was not right in finding fault  with the State Authorities in issuing notifications under  Section 1(3), Section 3(1) and Section 28(1)  simultaneously. There is no bar in issuing such  notifications as has been done and no provision has  been shown to us by the learned counsel for the  contesting respondents which prevented the State from  doing so. Even that ground, therefore, cannot help the  land-owners.         The order passed by the learned Single Judge could  not have been upheld by the Division Bench.  Unfortunately however, the Division Bench confirmed  the order of the Single Judge without considering all  aspects of the matter.  The said order also, therefore,  deserves to be set aside.         For the foregoing reasons, the appeals deserve to be  allowed and are, accordingly, allowed.  The order passed  by the learned Single Judge and confirmed by the  Division Bench is set aside.  The authorities are at  liberty to take appropriate proceedings in accordance  with law on the basis of notification under sub-section  (1) of Section 28 of the Act.  It goes without saying that  all proceedings will have to be undertaken in accordance  with Section 28 of the Act and it is open to the owners to

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raise all contentions that under the notification of 1978,  the acquisition was to the extent of 1 acre, 38 gunthas of  land but the appellants took over possession of  additional 39 gunthas of land; that in spite of request  and prayer, possession of 39 gunthas of land was never  restored to them; that they were required to file suit for  possession; that a decree was passed in their favour  which was confirmed by the appellate court which had  become final; that even thereafter, execution proceedings  were taken out wherein direction was issued to the  appellants to hand over possession of the land to them,  and at that stage, the notification under Section 28(1)  was issued. As and when such objections will be taken,  an appropriate order would be passed by the authorities  in accordance with law.  All contentions of the parties  are kept open.  We may clarify that we may not be  understood to have expressed any opinion one way or  the other and all parties are at liberty to put forward  their pleas before the authorities.         The appeals are disposed of accordingly.  There  shall be no order as to costs.