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PETITIONER: S.VASUDEVA ETC.  ETC.

       Vs.

RESPONDENT: STATE OF KARNATAKA AND ORS.

DATE OF JUDGMENT30/03/1993

BENCH: SAWANT, P.B. BENCH: SAWANT, P.B. SINGH N.P. (J)

CITATION:  1994 AIR  923            1993 SCR  (2) 715  1993 SCC  (3) 467        JT 1993 (2)   465  1993 SCALE  (2)244

ACT: Urban Land (Ceiling & Regulation) Act, 1976: Sections  20(1)(a)  & (b) and 21--Vacant land in  excess  of ceiling  Iimit--Exemption  could  be granted  only  for  the purpose   of  user  of  such  land--Not  for   purposes   of transfer--State  Government has no power to permit  sale  of such land even on ground of undue hardship. Section  20(1)(b): Exemption--Permission to transfer  excess vacant  land--Classification of land-owners as  debtors  and non-debtors--Reasonableness    of--Discretion    of    State Government     in    granting    exemption--Unguided     and untrammelled--Transfer of land--Restriction on  registration in respect of land not exempted--Discrimination Irrational-- Hence  S.20(1)(b)  held  violative  of  Article  14  of  the Constitution of India, 1950. Sections  26, 27, 28.  Transfer of excess  vacant  land--Not permissible  unless  encumbered with a building  or  portion thereof. Constitution of India, 1950: Article 14--Whether S.20(1)(b) of the Urban Land (Ceiling  & Regulation) Act, 1976 is violative of. Words & Phrases: "Person", "Undue hardship"-- Meaning in the context of Urban Land  (Ceiling  & Regulation) Act, 1976--Sections  2(1)  and 20(1)(b) respectively.

HEADNOTE: The  second respondent, a partnership firm was  carrying  on the business of manufacturing and selling polished granites. It  was running its factory in a small portion of  the  land owned  by  it and the rest of the land was vacant  when  the Urban  Land  (Ceiling  &  Regulation)  Act,  1976  was  made applicable  to that area.  The firm made an application  to. the  State Government for exemption of the vacant land  from the provisions of 715 716 the  said  Act,  and the exemption was  granted  subject  to certain conditions. The Competent Authority under the Act came to the conclusion that  there  was some excess vacant land  and  directed  the publication  of  a  notification u/s 10(1) of  the  Act  for

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acquisition   of  the  same.   Later,  the  firm   made   an application  to the State Government for permission to  sell the vacant land to the third respondent (builders) mainly on the  ground that the firm had been incurring huge losses  in its  business.  On 6.3.1987 the State  Government  permitted the  firm  to  sell the land to the builders,  only  to  the extent  of  16194 sq. mtrs.  Again the  firm  riled  another application to transfer the remaining 3444 sq. mtrs. of land to  the  builders,  and on 18.4.1987  the  State  Government permitted the same subject to certain conditions. Consequently,  by  a  sale deed  dated  30.9.1987  the  firm entered  into a deed of absolute sale with the builders  for sale of the entire vacant land. Writ  Petitions  by way of Public Interest  Litigation  were riled  in the High Court challenging the exemptions  granted by  the State Government, for declaring the sale  deed  void and  inoperative and for acquiring the land for  the  weaker sections.   A  Single Judge allowed the Writ  Petitions  and gave certain directions including sale of plots to be carved out from the land and only such number of plots as would  be necessary to discharge the debts of the firm were to be sold and  the  remaining  portion of the vacant land  was  to  be acquired  under  the Act.  He also held that there  were  no mala  fides in the State Government granting  exemptions  by its orders date 63.1987and 18.4.1987. Against  the  decision  of the Single  Judge,  appeals  were preferred  before the Division Bench of the High  Court  and the  Division  Bench set aside the findings as well  as  the direction  given  by  the Single Judge.   Aggrieved  by  the Judgment of the Division Bench, the appellants preferred the present appeals. Allowing the appeals, this Court, HELD: BY THE COURT. I.I.The  provisions of Section 20(1)(b) of the  Urban  Land (Ceiling  and Regulation) Act, 1976 do not permit the  State Government to give exemption to the vacant land in excess of the ceiling limit for the purposes 717 of transferring the same. [757 C] 1.2.The   orders  dated  63.1987  and  18.4.1987   granting exemption  and permission to the firm for sale of  the  land are void ab initio having been passed without  jurisdiction. Accordingly,  the sale-deed dated 30.9.1987 executed by  the 2nd  respondent-firm  in  favour  of  the  3rd   respondent. builders is invalid and inoperative, as the  respondent-firm had  no  legal right to transfer the land in favour  of  the builders. [757 F, G] 13.In  view of the above conclusions, it is not  necessary to go into the questionsas to whether the State  Government has the power to grant exemption; thecircumstances     in which  it can be exercised; and whether  financial  hardship such as the indebtedness of the land-holder is sufficient to warrant  such exemption or not; and the date on  which  such indebtedness  is  to  be assessed and in  what  manner;  and whether  in  the  present  case, the  said  aspects  of  the indebtedness were properly investigated or not for this very reason,  there  is  no need to go into  the  other  question regarding the mala fide on the part of the authorities while granting  permission  to the firm to sell the  land  to  the builders in question. [757 D, E] Per Sawant, J. 1.The  provisions  of  Section 20(1)(b) of  the  Urban  Land (Ceiling  &  Regulation) Act, 1976 do not permit  the  State Government  to exempt vacant land in excess of  the  ceiling

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limit for the purposes of transfer. [753 B] 2.The central object of the Act, as is evident both from the preamble as well as the statement of objects and reasons, is to acquire vacant land in excess of the ceiling area and  to prevent speculation and profiteering in the same and also to distribute  the land equitably to subserve the common  good. It  is, therefore, per se against the said object to  permit the  sale  of the excess vacant land for  whatever  reasons, including  the  undue  hardship  of  the  land-holder.    To construe the provisions of Section 20 (1) (b) so as to  read in them the conferment of such power on the State Government for  whatever  reasons, is to distort and defeat  the  whole purpose  of  the legislation.  Further,  neither  the  plain language of the clause nor its context and intendment  merit such  construction.  Section 20 itself is titled  "Power  to exempt".  The power given to the State Government under  the Section  is only to exempt certain excess vacant lands  from the  operation  of  the provisions of Sections 3  to  19  of Chapter 111, none of which refers to the subject of transfer or 718 restrictions  on transfer.  Those provisions relate  to  the calculation.  declaration,  acquisition and vesting  of  the excess  vacant land.  It is Chapter IV which relates to  the transfers  of  vacant lands and  the  restrictions  thereon. Further, from the scheme of the Act. it is evident that  the transfers  of  the vacant land were to be regulated  by  the specific provisions made in it.  They were not to be left to be  governed  by the unguided discretion  of  any  authority including the State Government.  The specific provisions for regulating  the transfer have been incorporated in  Sections 26  to 28 of the Act.  Those provisions permit  transfer  of only  vacant  lands  within the ceiling  limit  but  without buildings,  and  of vacant lands in excess  of  the  ceiling limit  but  with  buildings  thereon  and  subject  to   the condition s laid down there.  It cannot be suggested that in defiance  of  the said provisions,  Section  20(1)(b)  vests power  in the State Government to sanction sales  of  excess vacant lands with or without building thereon.Under  Section 20(1) (b), the State Government can only exempt such  excess vacant  land  from  being acquired by  it.   The  Government cannot  permit its transfer when the Act, does not  even  by implication, authorise it to do so but permits the  transfer subject  only  to the conditions prescribed by  Section  27. The  legislature  cannot  be  presumed  to  have  prescribed different  conditions  for transfer of the same  or  similar lands. [746 C-H; 747 A] 3.  The restriction on transfer even of vacant  land  within the  ceiling  limit  but without building is  deemed  to  be valid.  Thus the transfer of the   vacant    land    without building  even if it is within the ceiling limit and of  the vacant  land in excess of the ceiling limit with a  building or a portion of the building are subject to the restrictions placed by the Act.  Section 20 is subject to the  provisions of  sections  which follow it including Sections 26  to  28. Hence  no construction can be placed on clause (b)  of  sub- section  (1)  thereof  which will be in  conflict  with  the provisions of sections 26 to 28. [747 E, F] Maharao Sahib Shri Bhim?  Singhji v. Union of India,  [1981] 1 SCC 166, referred to. 4. Since as per the definition of "person" in Section  2(i), the said provision viz.  S.20(1) (a) is applicable not  only to  individuals, but also to a family, a firm, a company  or an  association or body of individuals whether  incorporated or  not,  the  hardship spoken of there,  is  obviously  one

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related  to the user of the land.  In fact, it is  difficult to  understand the precise purpose for which clause (b)  has been  enacted  and the meaning of  the  expression    "undue hardship"  there.   One  is left only to  speculate  on  the subject.  The 719 speculation itself may not be valid.  The lands are held  by companies,  trusts  and  associations  for  industrial   and commercial  use,  for  the use of  medical  and  educational institutes,  sports,  clubs, cultural  activities,  gardens, exhibitions etc.  There is no special provision made in  the Act  to  protect  or  take care of  such  users.   The  only provision under which a relief can be given to preserve  and safeguard  such  user  is  Section  20(1)  (a).   But   that provision  can be pressed into service only on the basis  of the location of the land and its present or prospective user and  only if it passes the test of public interest  However, all lands in excess of the ceiling limit may not strictly be necessary  for such user, even if the user is in the  public interest.   Nevertheless,  the withdrawal of a part  of  the land  found to be in excess may cause an avoidable  hardship to  the  land-holder which may  be  disproportionate.to  the benefit  that is to accrue to the public on account of  such withdrawal.   The  excess  of  land may  be  meager  or  the severance   of  such  excess  land  itself  may  result   in unnecessary  hardship.The hardship further has to  be  undue and  not  merely an ordinary hardship which is bound  to  be caused  on  account of the application of the Act  to  every holder  of the excess vacant land.  The undue hardship  must be  one which cannot be avoided except by granting a  relief of  exemption  as contemplated by the said  provision.   The relief  from financial hardship or from indebtedness to  the land-holder of such land is alien both to the object and the scheme of the Act.  The classification of the owners of land for  this purpose between debtors and non-debtors is  itself irrational and has no plausible nexus with the object of the Act.   Such a classification is,  therefore,  discriminatory and  violative of Article 14 of the Constitution. (748  B-H; 749 Al Thakorbhai Dajibhai Desai v. State of Gujarat, AIR 1980 Guj. 1891, overruled. 5.The  exemption which is granted under Section  20(1)(b) has  to be supported by reasons to be recorded  in  writing. This  requirement  also contemplates an exemption  which  is related  to  and promoted by the use or better  use  of  the land.   If it is the financial hardship which was under  the contemplation  of the legislature, them was  nothing  easier than  to make a reference to the same in clause  (b)  itself and  to  lay  down  guidelines for  the  inquiry  into  such hardship.  The provisions of sub-section (2) of Section  20, directly  negative either exemption on account of  financial hardship  or  for the purpose of the transfer of  the  land, since  that  sub-section empowers the  State  Government  to withdraw the exemption already granted If the 720 State  Government  is satisfied that any of  the  conditions subject  to  which  the exemption is  granted  either  under clause (a) or clause (b) of sub-section (1) is not  complied with.  It is inconceivable that the legislature had in  mind the  cancellation  of  the transfer  including  sale,  which cannot be done when it has already taken place. [749 E-G] 6.It  cannot  be said that the legislature  which  places restrictions on the transfer of the land within the  ceiling limit  would at the same time give a carte blanche  for  the sale  of  the land in excess of the ceiling limit.   For  it

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would mean, that the State Government cannot have an  option to  purchase such land and that the sale can be made by  the holder  of  the excess land at any price  that  he  chooses. Such  a reading of Section 20(i)(b) would  militate  against one of the objects of the Act, viz., to prevent  speculation and   profiteering  in  the  sale  and  purchase  of   land. Moreover, it would be patently discriminatory.  Whereas  the holder of vacant land within the ceiling limit would have to suffer the restrictions placed by Section 26, the holder  of the vacant land in excess of the ceiling limit has not to do so.   He  would  in  fact be  in  a  better  position.   The provisions with regard to granting such exemption subject to certain  conditions contained in Section 20(1)(b) do not  in any  way  mitigate  the discrimination.   When  the  statute itself places specific restrictions under Section 26 on  the sale of land within the ceiling limit, it is not possible to reach  a conclusion that the conditions on which  the  State Government  is empowered to permit the sale can be  left  to the  discretion  of  the State Government.   In  fact,  such discretion  given  to the State Government would  itself  be violative of Article 14 of the Constitution, the same  being unguided   and   untrammeled  This  also  shows   that   the legislature  has  not given power to  the  State  Government under  Section 20(1)(b) to permit exemption for sale of  the land.   Otherwise  it  would have provided  in  the  section itself  for the conditions on which the permission  to  sell can  be given and such conditions could not be less  onerous than  those  provided under Section 26 of the Act.   If  the power,  to permit sale of the land was intended to be  given only   for  relieving  the  land-holder  of  his   financial hardship, the section could very well have provided for sale of  such land under Section 26 of the Act or made  provision in Section 20(1)(b) itself for the first option of the State Government  to purchase it.  It cannot be said that  by  not making such provision either in Section 20(1)(b) or  Section 26, the legislature intended to permit the sale of such land at  a  price above the fair market price payable  under  the Land  Acquisition  Act, 1894 or the  corresponding  law  and thereby encourage 721 speculation  and profiteering, the very evils which the  Act intended to curb-A [750 E-H; 751 A-C] 7.The provisions of Section 27 also militate against  the conferment  of the power on the State Government  to  permit exemption  of  land for the purpose of  its  transfer.   The provisions  of Section 27 refer to any urban or  urbanisable land  with  a building.  The vacant land in  excess  of  the ceiling  limit may be with or without a building.  In  fact, the   provisions  of  Section  27  directly   negative   the conferment of such power, for the said provisions show  that the  legislature  did  not want the sale  of  any  urban  or urbanisable  land  with a building whether it is  within  or without  the  ceiling limit except in  accordance  with  the provisions of Section 27.  For Section 27 speaks of transfer of  any  urban  or urbanisable land with  a  building  or  a portion  only of such building, only with the permission  of the competent authority and on the terms mentioned  therein. This  Court  has  invalidated the  provisions  of  the  said section  to the extent they apply to the vacant land with  a building when the land is within the ceiling limit.  But  it does apply to land in excess of the ceiling limit and with a building or a portion of it thereon.  It is not possible  to accept that there are two provisions, viz.  Section 20(1)(b) and Section 27 operating at the same time in the same  area. Also there is nothing either in Section 20(1)(b) or  Section

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27 to exclude the operation of Section 27. [751 G, H; 752 A] Maharao Sahib Shri Bhim Singhji etc. etc. v. Union of  India JUDGMENT: 8.Section 28 does not make any reference to the  transfer permitted  by the State Government under Section 20(1)  (b). The holder of the vacant land in excess of the ceiling limit has  not to face the restriction on the registration of  the document  of transfer of his land provided under Section  28 when  such  transfer is permitted by  the  State  Government under  Section 20(1)(b), whereas the holder of similar  land who does not approach the State Government has to suffer the same   when  he  transfers  the  land  held  by  him.    The discrimination  between  the transfers under  the  different provisions  is irrational and, has no nexus with the  object ought to be achieved by the classification. [752 E-G] 9.If  the  power to exempt the land for sale is  read  in Section  20  (1)  (b)  with such  conditions  as  the  State Government  may  choose  to place and if  either  the  State Government chooses not to place any conditions or to 722 place   such  conditions  as  are  inconsistent   with   the provisions  of Sections 29 and 30, it would create two  sets of  lands  one where no restrictions are applicable  to  the construction thereon or only such restrictions as the  State Government  may  choose to impose, and the other  where  the restrictions on constructions as provided by Section 29  and 30 would be applicable. [752 G-H; 753 A] Per N.P. Singh, J. (Concurring): 1.The  object of the Act being imposition of  ceiling  on vacant  land in urban agglomerations and for acquisition  of such land in excess of ceiling limit, with a view to prevent the  concentration  of  urban land in the  hands  of  a  few persons, speculations and profiteering therein, that  object will be defeated if the power under Section 20(1) of the Act is  exercised by the State Government to exempt  the  excess vacant  lands,  from the application of Chapter III  of  the Act,  so  that the holder thereof can transfer  such  lands. [753 C, D] 2.Under Indian conditions the expression "undue hardship" is normally related to economic hardship.  That is why  from time to time many holders of lands in excess of the  ceiling limit,  while claiming exemption under clause (b) put  forth their  bad  economic  condition and  indebtedness  to  claim exemption  along with permission to sell such excess  lands. In  the  modern  set up many holders of  such  excess  lands having undertaken commercial or industrial ventures with the help  of  the  loans  from the  Banks  and  other  financial institutions,  put  the plea of repayment of such  loans  as undue  hardship for claiming exemption under clause  (b)  of section  20(1)  aforesaid.  When different  provisions  take into  consideration  the lands already  transferred  by  the holder, between the period 17th February, 1975 (as specified in  sub. sec. (4) of S.4; and the appointed day as  well  as between  the  period commencing from the appointed  day  and ending  with the commencement of the Act, it should  not  be easily  inferred  that the framers of the Act  desired  that after the commencement of the Act while exercising the power of  exemption under section 20(1) (b) permission  should  be granted  to  holders of such excess lands to  transfer  such lands  to  third parties in order to  meet  their  financial liabilities. [753 G, H; 754 A-F] 3.If  Section  21  provides  for  granting  exemption  in respect of excess land held by the holder only on a specific condition  that  the holder shall utilise the same  for  the construction of dwelling units for weaker section, to

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723 serve a public cause, the framers of the Act could not  have conceived  the grant of exemption under Section 20(1)(b)  to the  holder of the excess land, only to serve his  interest, by selling such excess lands. [754 H; 755 A-F] 4.If the State Government can exempt the vacant land held by the  land  holder in excess of the ceiling limit,  from  the applicability  of the provisions of Chapter III of the  Act, in  order that the said holder sells such land to  liquidate his  debts which amounts to an "undue hardship", then  there will  be  an apparent conflict between the interest  of  the land holder and the public interest.  In the interest of the land  holder the maximum price fetched by sale of such  land will be the solution of his hardship, whereas that will  run counter,  to the object of the Act to  prevent  speculations and  profiteering".   It cannot be said that  even  in  such transfers  the  dominant  purpose  of  the  legislation,  to prevent  "the  concentration of urban land in hands  of  few persons" is nonetheless served.  The concentration of  urban land in hands of few persons has to be prevented with a view to  bring about "an equitable distribution of land in  urban agglomerations to subserve the common good". [755 B-D] 5.If  the  vacant lands which have vested in the  State  are also  to  be disposed of as stipulated under  S.23  strictly keeping in view the spirit and object or the Act,  exemption u/s20(1)(b)  cannot be granted to holders of such  lands  to dispose of the lands in the manner they like, to the persons they  prefer, at the price they dictate, for clearing  their debts.   If it is conceded that indebtedness amounts  to  an undue  hardship, then it may cover the debts  incurred  even after the commencement of the Act. [756 D, E] 6.This  Court has already held that Section 27(1) in so  far as  it  imposes  restriction on transfer  of  any  urban  or urbanisable  land  with a building or of a portion  of  such building  which  is within ceiling area, was  invalid.   The said  sub-section  (1) of Section 27 was struck  down  being unconstitutional.   Section  26  of  the  Act  also  imposes certain restrictions on transfer of vacant land even  within ceiling  limit.   It can therefore be  stated  that  Section 26(1) suffers from the same vice.  But neither in that  case nor  in  this  case, this court was  or  is  concerned  with Section  26.   As such, it is not necessary to  express  any opinion  in  respect  of  Section  26  of  the  Act,   while considering the issue involved in the present appeals.  [756 G, H; 757 A, B] Maharao Sahib Shri Bhim Singhji etc. etc. v. Union of  India & Ors., [1981] 1 SCC 166, referred to. 724

& CIVIL  APPELLATE JURISDICTION: Civil Appeal Nos. 1454-56  of 1993 etc. etc. From the Judgment and Order dated 15.2.1991 of the Karnataka High Court in Writ Appeal Nos. 2083, 2084 and 2085 of 1989. K.Madhava Reddy, P.P. Rao, N.D.B. Raju, Guntur Prabhakar, Dr. Sumand Bhardwaj, Yatish Mohan Verma and Ranjit Kumar for the Appellants. Soli  J.  Sorabjee,  N.B.  Shetye,  R.N.  Narasimha  murthy, S.Ganesh,  Vineet  Kumar,  M. Veerappa,  Nobin  Singh,  P.R. Ramasesh,  P. Mahale (NP), S.K. Kulkarni and Surya Kant  for the Respondents. The Judgment of the Court was delivered by SAWANT, J. Leave granted.

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2.These appeals arise out of the same facts and judgments of the  Karnataka High Court and are being disposed of by  this common  judgment.  For the sake of the narration  of  events Civil  Appeal Nos. 1461-72/ 1993 arising out of SLP  (Civil) Nos. 7230-41 of 1991 may be referred to. The 2nd respondent M/s Naryanaswamy & Sons is a  partnership firm.    While   it  was  carrying  on   the   business   of manufacturing and selling of polished granites, it  acquired on  30.9.1953, 6 acres and 4 gunthas of land in Survey  Nos. 6/1 and 6/2 of Dasarahalli in the heart of Jayanagar  Exten- sion of the city of Bangalore.  Out of the said land, 1 acre and  2  gunthas  had  already  been  acquired  by  the   1st respondent-State   Government   under   notification   dated 1.4.1948.  The acquisition proceedings had culminated in  an award, granting compensation to the land owner on  3.3.1955. In a small portion of the said land, the 2nd respondent-firm (hereinafter  referred  to  as the  ’firm’),  established  a granite factory and the rest of the land was vacant when the Urban  Land (Ceiling and Regulation) Act, 1976  (the  ’Act’) was   made   applicable  to  the   Bangalore   Agglomeration consisting  of  the  area within  the  jurisdiction  of  the Bangalore  City Municipal Corporation and the  Trust  Board, and the peripheral area of 5 kms. 3.On  9.6.1983, the firm preferred an application to  the State  Government for exemption of the vacant land from  the provisions  of  Chapter  III of the Act.   By  an  order  of 17.7.1985, the State Government granted 725 exemption under Section 20 of the Act for industrial use  of a granite factory.  The exemption related to 16194 sq. mtrs. of land and was granted on the following conditions:                [i]  The  entire land  utilisation  shall  be               completed  within a period of two  years  from               the date of the order.               [ii]  The exempted land shall  be  exclusively               used  for the purpose for which the  exemption               was  granted  and  for  the  purposes  related               thereto.               [iii] The land shall not be transferred by way               of  sale, mortgage, gift, lease  or  otherwise               without prior permission of the Government and               that  such  permission, when given,  shall  be               subject  to such conditions as the  Government               may deem fit to impose. 4.The  3rd  respondent-partnership firm   M/s.   Reevajethu, Builders and Developers [the ’builders’] was constituted  on 6.1.1987 with Smt.  Shobha Makhija as the major partner with 50%  share  and other 18 partners, mainly  "to  develop  the immovable  property to be acquired by the firm of an  extent of  5 acres and 24 gunthas situated at Survey Nos.  6/1  and 6/2  of  Dasarahalli of Bangalore City and to carry  on  the business  as  builders  and  developers  of  flats,   shops, commercial  complexes and other types of buildings,  dealers in real estate and all other allied business and activities" and  to  "carry  on any other business as  may  be  mutually agreed upon by all the partners".  It is not in dispute that Smt.  Shobha Makhija is the sister of the son-in-law of  the 4th respondent who was then the Chief Minister of the  State of Karnataka.. 5.On 9.1.1987, the competent authority under the Act came to the  conclusion that the excess vacant land out of the  said Survey Nos. 6/1 and 6/2 after the grant of exemption by  the Government  Order dated 17.7.1985, was 3444 sq.  mtrs.   The competent authority accordingly directed the publication  of a  notification  under  Section 10 [1] of the  Act  for  the

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acquisition of the said excess vacant land. 6.On  the  same  day,  i.e.,  9.1.1987,  the  firm  made  an application  to the State Government for permission to  sell land  to the extent of 5 acres and 24 gunthas  comprised  in the said Survey Nos. 6/1 and 6/2 to the 726 builders.  The grounds made out in the application were that due  to stiff competition, and nationalisation of black  and pink granite by the southern States including Karnataka, the firm  was running under losses; that its Woodlands Hotel  at Madras was also not making profits since the hotel  building had become very old and there were no funds for  modernising it;  that  its  theaters in Madras were  also  not  yielding profits due to unhealthy competition by the video piracy and the advent of the television; that the partners of the  firm individually  and jointly were indebted to Andhra Bank,   of India,  State  Bank of Mysore and Dena Bank; that  the  said debts were of more than Rs. 1 crore 65 lakhs; that suits had been filed in the High Court of Madras against the partners; that  the business of the partners had been  suffering  huge losses  specially due to continuing heavy  interest  burden; that  the families of the seven partners of the firm had  no other  source of income and had been over-drawing  from  the firms  for their maintenance; and that one of  the  partners was  seriously ill in a hospital at Bangalore and he had  to borrow money for taking medical treatment. 7.On 6.3.1987, the State Government under Section 20 [1]  of the  Act  permitted the firm to sell land to the  extent  of 16194   sq.  mtrs.  to  the  builders  subject  to   certain conditions. 8.On  23.3.1987, the firm filed another  application  before the  State  Government seeking permission  to  transfer  the remaining 3444 sq. mtrs. of vacant land from Survey Nos. 6/1 and  6/2  to the builders on the ground  of  undue  hardship since  the firm had incurred debts.  On 18.4.1987 the  State Government  under  Section  20 [1](a)  of  the  Act  granted exemption for the said land from the purview of Chapter  Ill of the Act and also permitted the firm to sell the said 3444 sq.  mtrs.  of  vacant land from Survey  Nos.  6/1  and  6/2 subject to certain conditions. 9.By  a  sale  deed of 30.9.1987, i.e.,  a  day  before  the extension of Chapter XXC of the Income-tax Act providing for preemptive  purchase by the Central Government of  immovable property in certain cases on transfer, the firm entered into a  deed  of  absolute  sale for the  sale  of  the  property consisting  of land to the extent of 5 acres and 24  gunthas situated in the said Survey Nos. 6/1 and 6/2. 10.On  this undisputed factual matrix, writ  petitions  were filed  by way of public interest litigation,  under  Article 226  and 227 of the Constitution before the High  Court  for issue  of a writ of mandamus [a] directing  the  respondent- Government  to  take action for forfeiture of the  land  for con- 727 travention of Section 79 of the Karnataka Land Reforms  Act; [b]  for  acquiring  the  land for  the  purpose  of  weaker sections  under the provisions of the Act; [c] for  quashing the  orders dated 63.1987. and 18.4.1987 granting  exemption to  the land in question from the purview of the  Act  under Section  20  111(a) & (b) of the Act and for  declaring  the sale deeds dated 30.9.1987 executed by the firm in favour of the builders as void and inoperative; (d). for directing the State  Government  to  take action under Section  6  of  the Karnataka  Parks, Play-fields, and Open  Space  [Reservation and Regulation] Act, 1985 and for other reliefs.

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11.  The  learned  Single Judge by his  judgment  and  order dated 8.9.1989allowed the writ petition, and among  others, [1] quashed the Group Housing Policy of the State Government as  embodied  in  the  decision of  the  Committee  held  on 22.10.1986  and communicated under letter  dated  24.11.1986 insofar  as it encouraged the Group Housing  Scheme  through individuals  and partnership of individuals by  transferring vacant  land  to  such persons; [ii]  restrained  the  State Government   from   enforcing  the   said   Policy   through individuals  and  partnership  of  individuals  against  the vacant land; [iii] declared as null and void and quashed the orders dated 6.3.1987 and 18.4.1987 granting exemption; [iv] declared the sale deed dated 30.9.1987 executed by the  firm in  favour  of  the builders as nun and void so  far  as  it related  to the extent of land admeasuring 19368  Sq.  mtrs. covered  by the exemption orders of 6.3.1987 and  18.4.1987. The  validity of the sale deed so far as it related  to  the remaining land mentioned therein was, however, saved by  the said  declaration;  [v] directed the State  Government,  the Special  Deputy  Commissioner under the Act,  the  Bangalore Development Authority and the Municipal Corporation of  Ban- galore  to identify the extent of 1 acre, 2 gunthas  and  58 square  yards  which was acquired in 1948 out  of  the  said Survey No. 6/1 and to set them apart for the purpose of road and  Boulevard  and  use  it only  for  said  purpose;  [vi] remitted the applications dated 9.1.1987 and 24.3.1987  made by  the firm to the State Government with the  direction  to consider them in accordance with law under Section 20 [1](b) of the Act and to exempt them in the light of the extent  of the  debt  owed by the firm to the creditors  prior  to  the coming  into force of the Act; [vii] directed that  even  if after examining the, application in the aforesaid light  the State Government granted permission, to the firm to sell the vacant land on the ground of hardship, the Government should see  that, in the vacant land, sites are formed  of  various dimensions not exceeding 60’ x 90’ keeping in view the sites already formed 728 in  the locality.  The learned Judge further  directed  that each  such  site  should be sold by public  auction  by  the competent  authority  with the condition that no  person  is entitled  to purchase in public auction more than one  site, and  to  credit  the  sale proceeds in  the  office  of  the competent  authority under the Act who would pay the  amount to  the  creditors  of the firm.   The  learned  Judge  also further  directed that only such number of sites  should  be sold  which  are necessary to discharge the  debts  and  the remaining  portion  of the vacant land  should  be  acquired under the Act.  It may be noted here that the learned  Judge held  that  the  allegations  of  mala  fides  in   granting exemptions  by the orders of 6.3.1987 and 18.4.1987  against respondents 4 and 8, were not proved. 12.Against the said decision of the learned Single  Judge, appeals were preferred before the Division Bench of the High Court, among others, by writ petitioners as well as the firm and  the builders.  All the appeals were heard together  and the  learned Judges of the Division Bench gave separate  but concurring  judgments and set aside the findings as well  as the  directions  given  by  the  learned  Single  Judge  and dismissed the writ petitions. 13.The precise questions which arise for our consideration in these appeals are:               [i] Were the permissions granted by the  State               Government to sell land admeasuring 16194  sq.               mtrs.  and  3444 sq. mtrs. by  its  orders  of

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             6.3.1987  and  18.4.1987  respectively   valid               under the Act?               [ii]  Were the said orders motivated  by  mala               fides ? and               [iii] Is the sale deed executed by the firm in               favour  of the builders on 30.9.1987 void  and               inoperative? 14.In order to appreciate the answer to the first and  the third question, it is necessary to understand the scheme  of the Act which came into force on 17.2.1976. As the  preamble of  the Act states, it has been placed on the  statute  book [i]  to  provide for the imposition of a ceiling  on  vacant land  in  urban  agglomerations;, [ii] to  provide  for  the acquisition  of which vacant land in excess of  the  ceiling limit;  and [iii] to regulate the construction of  buildings on such land and for matters connected therewith with a view to  [a]  preventing the concentration of urban land  in  the hands 729 of  a few persons and speculation and  profiteering  therein and [b] bringing, about an equitable distribution of land in urban  agglomerations  to subserve the common  good.   These objects  which are otherwise clear from the preamble of  the Act  have  been explained in the statement  of  objects  and reasons  accompanying  the Bill which, among  other  things, states as follows:               "There  has  been  a  demand  for  imposing  a               ceiling  on  urban property  also,  especially               after   the   imposition  of  a   ceiling   on                             agricultural  lands by the  State  Governments .               With  the growth of population and  increasing               urbanisation,  a need for orderly  development               of  urban  areas has also been felt.   It  is,               therefore,   considered  necessary   to   take               measures  for exercising social  control  over               the scarce resource of urban land with a  view               to ensuring its equitable distribution amongst               the  various  sections  of  society  and  also               avoiding speculative transactions relating  to               land in urban agglomerations.                xx                 xx                 xx               The Bill is intended to achieve the  following               objectives:-               [i] to prevent concentration of urban property               in the hands of a few persons and  speculation               and profiteering therein;               [ii]to  bring about socialisation  of  urban               land  in urban agglomerations to subserve  the               common   good   by  ensuring   its   equitable               distribution;               [iii]  to  discourage construction  of  luxury               housing leading to conspicuous consumption  of               scarce  building materials and to  ensure  the               equitable utilisation of such materials; and               [iv] to secure orderly urbanisation.               The Bill mainly provides for the following:-               [i] imposition of a ceiling on both ownership and posses-               730               sion  of vacant land in urban  agglomerations,               the ceiling being on a graded basis  according               to    the   classification   of   the    urban               agglomeration;               [ii] acquisition of the excess vacant land  by               the State Government with powers to dispose of

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             the vacant land to subserve the common good;               [iii] payment of an amount for the acquisition               of the excess               vacant land, in cash and in bonds;               [iv] granting exemptions in respect of certain               specific categories of vacant land;               [v]  regulating  the transfer of  vacant  land               within the ceiling limit;               [vi]  regulating  the  transfer  of  urban  or               urbanisable  land with any  building  [whether               constructed  before or after the  commencement                             of  the proposed legislation], for a period  o f               10   years  from  the  commencement   of   the               legislation   or  the  construction   of   the               building whichever is later;               [vii]  restricting  the plinth  area  for  the               construction of future residential  buildings;               and               [viii]  other  procedural  and   miscellaneous               matters." It  is  needless to emphasise that  while  interpreting  the various provisions of the Act the said objects will have  to be kept in view, constantly. However, only those  provisions of the Act which have a bearing on the controversy before us may be referred to. The  ’vacant  land"  has been defined in Section  2  (q)  as follows:               "vacant  land’  means  land,  not  being  land               mainly  used for the purpose of  agriculture,,               in  an  urban  agglomeration,  but  does   not               include               [i]  land on which construction of a  building               is   not   permissible  under   the   building               regulations in force in the area in which such               land is situated,               731               [ii]in  an  area where  there  are  building               regulations, the land occupied by any building               which has been constructed before or is  being               constructed  on,  the appointed day  with  the               approval of the appropriate authority and  the               land appurtenant to such building; and               [iii]  in an area where there are no  building               regulations, the land occupied by any building               which has been constructed before, or is being               constructed on, the appointed day and the land               appurtenant to such building;               Provided......................" The  "land  appurtenant’, in relation to any  building,  has been defined in Section 2(g) ’as follows:               " land appurtenant", in relation to any building,                 means                [i]  in  an  area where  there  are  building               regulations,   the  minimum  extent  of   land               required under such regulations to be kept  as               open space for the enjoyment of such building,               which  in no case shall exceed’  five  hundred               square metres; or                [ii]  in an area where there are no  building               regulations, an extent of five hundred  square                             metres contiguous to the land occupied by such               building,               and  includes,  in  the case  of  any  budding               constructed  before the appointed day  with  a

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             dwelling  unit therein, an  additional  extent               not  exceeding five hundred square  metres  of               land, if any, contiguous to the minimum extent               referred  to in sub-clause [i] or  the  extent               referred  to in sub-clause [ii], as  the  case               may be". Section 3 states that except as provided in the Act, on  and from  the  commencement  of  the Act,  no  person  shall  be entitled  to hold any vacant land in excess of  the  ceiling limit.  The "ceiling limit" is prescribed in Section 4.  The provisions of Section 4, so far as they are relevant for our purpose, 732 may be reproduced verbatim:                "4. Ceeling Limit.  [1] Subject to the  other               provisions  of  this section, in the  case  of               every person, the ceiling limit shall be,-               [a] x x x x x x               [b]  where such land is situated in  an  urban               agglomeration   falling  within   category   B               specified  in Schedule 1, one thousand  square               metres;               [c] x x x x x x x               [d] x x x x x x x               2.    x x x x x x x                3.Notwithstanding anything contained in  sub-               section  [1], where in respect of  any  vacant               land  any  scheme for group housing  has  been               sanctioned by any authority competent in  this               behalf immediately before the commencement  of               this Act, then, the person holding such vacant               land at such commencement shall be entitled to               continue to hold such land for the,purpose  of               group housing:               Provided  that no more than one dwelling  unit               in  the  group housing shall be owned  by  one               single person;               Provided  further, that the extent  of  vacant               land  which such person shall be  entitled  to               hold shall, in no case, exceed-               [a]  the  extent required under  any  building               regulations governing such group housing; or               [b]  the extent calculated by multiplying  the                             number  of dwelling units in the group  housin g               and the appropriate ceiling limit referred  to               in sub-section [1],               whichever is less."               733 Section 5(3) prohibits transfer of the vacant land in excess of  the  ceiling limit or any part thereof by way  of  sale, mortgage, gift, lease or otherwise until the land-holder has furnished  a  statement  under Section 6 of the  Act  and  a notification  regarding the excess vacant land held by  him, has been published under sub-section [1] of Section 10.  Any such transfer is deemed to be null and void. Section  6(1) requires every person holding vacant  land  in excess of the ceiling limit at the commencement of the  Act, to file a statement before the competent authority under the Act.  Read with Section 7, it is clear that the statement to be  filed under Section 6(1) has to include vacant land  not only  situate in the same State but also in other States  to which the Act applies.  In the present case, admittedly, the firm  held  land also in Madras in addition to the  land  in dispute  in the city of Bangalore.  It is not known  whether

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the  firm  had vacant land in its possession  in  Madras  in addition  to  the land in dispute and whether it  had  shown such  land in its return.  However, that is not the  subject matter of dispute before us. Section  8 provides for a draft statement to be prepared  by the competent authority, as regards the vacant land held  by the  person  concerned and calculated on the  basis  of  the statement  filed  by him under Section 6  after  holding  an inquiry  into  the  matter.  The draft statement  is  to  be served on the person concerned with the notice requiring him to prefer his objections, if any. Section  9 provides for the final statement with  regard  to the  vacant  land  in  excess of the  ceiling  limit  to  be prepared by the competent authority and to be served on  the person concerned. After the service of the final statement under Section 9, on the person concerned, the competent authority is required by Section  10(1)  to cause a notification to be  published  in Official Gazette giving the particulars of such vacant  land and stating therein [i] that such land is to be acquired  by the  concerned State Government and [ii] the claims  of  all the  persons interested in such vacant land be made by  them giving  particulars of the nature of their interest  in  the land.   Under  Section  10(2), the  competent  authority  is required  to determine the nature and extent of such  claims and  pass  such  orders  as it  deems  fit.   Section  10(3) provides  that  at  any time after the  publication  of  the notification  under Section 10(1), the  competent  authority may by another notification published in the Official 734 Gazette  of  the State concerned, declare  that  the  excess vacant land referred to in the notification published  under Section  10(1)  shall with effect from such date as  may  be specified  in  the  declaration,  be  deemed  to  have  been acquired  by the State Government.  Upon the publication  of such  declaration,  the vacant land is deemed to  have  been vested  absolutely  in the State Government  free  from  all encumbrances  with  effect  from  the  date  so   specified. Section 10 (4) then prohibits transfer of the excess  vacant land and also the alteration of the use of such land between the  date of notification published under Section 10(1)  and that  of  the notification published  under  Section  10(3). Section  10(5)  enables the competent authority to  pass  an order  requiring  the  person in possession  of  the  excess vacant land to surrender the same to the State Government. Section 11 requires the State Government to pay compensation to the person or persons having interest in the vacant  land acquired  under  Section  10(3),  at  the  rates   mentioned therein. Section  19  exempts certain lands from  the  provisions  of Chapter III of the Act which comprises Sections 3 to 24. Then come the provisions of Section 20 to 24 of Chapter 111. We  are directly concerned in the present appeals  with  the said sections along with the provisions of chapter IV of the Act. Section 20 permits the State Government to give exemption to any  vacant  land in excess of the ceiling limit,  from  the provisions of Chapter III, for two distinct purposes.  It is necessary to reproduce here the said section:                20.Power  to exempt.   (1)  Notwithstanding               anything  contained  in any of  the  foregoing               provisions of this Chapter,-                (a)  where  any person holds vacant  land  in               excess of the   ceiling  limit and  the  State               Government  is  satisfied, either on  its  own

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             motion  or otherwise, that, having  regard  to               the  location  of such land, the  purpose  for               which such land is being or is proposed to  be               used  and such other relevant factors  as  the               circumstances  of the case may require, it  is               necessary or expedient in the public  interest               so  to  do,  that Government  may,  by  order,               exempt, subject to such con-               735               ditions,  if  any as may be specified  in  the               order, such vacant land from the provisions of               this Chapter;               (b)   where  any person holds vacant  land  in               excess  of  the ceiling limit  and  the  State               Government,  either  on  its  own  motion   or               otherwise,  is satisfied that the  application               of the provisions of this Chapter would  cause               undue hardship to such person, that Government               may   by   order,  exempt  subject   to   such               conditions, if any, as may be specified in the               order, such vacant land from the provisions of               this Chapter:               Provided that no order under this clause shall               be  made unless the reasons for doing  so  are               recorded in writing.               [2]  If  at any time the State  Government  is               satisfied  that any of the conditions  subject               to  which  any exemption under clause  (a)  or               clause  (b) of sub-section (1) is  granted  is               not  complied with by any person, it shall  be               competent   for   the  State   Government   to               withdraw,  by  order,  such  exemption   after               giving a reasonable opportunity to such person               for   making  a  representation  against   the               proposed   withdrawal   and   thereupon    the               provisions   of  this  Chapter   shall   apply               accordingly. It  would be apparent from clause (a) of sub-section [1]  of the  section  that under it, the State Government  is  given power to exempt the excess vacant land from the operation of Chapter  III only if the State Government is satisfied  that having  regard to [i] the location of the land and [ii]  the purpose for which it is being or is proposed to be used,  it is  necessary or expedient in the public interest to  exempt it.   The  paramount consideration is the  public  interest. The exemption granted under this provision may be subject to certain  conditions.   But, it does not appear  that  it  is obligatory  to impose such conditions.  Nor is it  necessary to  record  reasons  when exemption is  granted  under  this clause. The  power  to  exempt such land under clause  (b)  of  sub- section [1] can be exercised by the State Government, if  it is satisfied that the application of Chapter III would cause undue  hardship  to the landholder.  The  exemption  may  be granted under this clause subject to such conditions, if 736 any,  as may be specified in the order.  But,  unlike  under clause  (a),  there  is  no  obligation  to  prescribe   the conditions.   The  ’permission  given  under  this   clause, however,  has to be supported by reasons to be  recorded  in writing. Sub-section  [2]  of the section enables the  government  to withdraw  the exemption granted either under clause  (a)  or (b),  if is satisfied that any of the conditions subject  to which  the  exemption  is  given,  is  not  complied’  with.

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Clauses (a) and (b) of sub-section [1] read with  subsection [2]  make  it  clear  that  the  exemption  may  either   be conditional or absolute.  Where it is conditional, it may be withdrawn,  if any of the conditions are not complied  with. The  very  fact,  however, that  the  legislature  has  con- templated  imposition  of conditions on  exemptions  granted under  both  the  clauses, shows that  the  purpose  of  the exemption under either of the clauses cannot be the transfer of  the land.  The exemption under clause (a)  is  obviously for the land being put to a particular use which use is also necessary  or  expedient  in  the  public  interest,   while exemption under clause (b)    is  for relieving  the  person concerned from any undue hardship which may  be  caused   to him  personally, by the withdrawal of the excess  land  from his  possession probably such as when the person may require the land for the    expansion  of  the use to which  he  has already  put it, such as his growing business or  activities or   to   accommodate  his  growing  family.    The   clause unfortunately  is  completely silent on what it  intends  to convey by the expression "undue hardship". Section 21 also contemplates exemption of the excess  vacant land  from  the  operation of the said  Chapter  but  for  a purpose other than for   the use of the holder of  the land. The  purpose  contemplated  there  is  the  construction  of dwelling  units of the plinth area of not more than  80  sq. mtrs.  for  accommodation  of the  weaker  sections  of  the society  and  in accordance with a scheme approved  by  such authority  as  the  State Government  may  specify  in  that behalf.  The person desiring exemption under this    Section has  further  to declare his intention for  construction  of such dwelling units for weaker sections within such time, in such  form  and in such manner as may be  prescribed.   Such declaration  is to be made before the  competent  authority. The  competent authority, after receiving  such  declaration may, after making such inquiry as it deems fit, declare such land  not  to be excess land for the purposes  of  the  said Chapter and permit such person to continue to hold such land for the aforesaid purpose subject to 737 such  terms and conditions as may be prescribed.  Where  any such  condition is contravened, the competent authority  has been  given power to declare the land to be excess land  and on  such declaration, the, provisions of Chapter III of  the Act are to apply. The distinction between Sections 20 and 21 may be noticed at this  stage.  In the first instance, the power  given  under Section  20  is  to  the State Government  and  not  to  the competent authority.  The power given is to exempt the land, and the exemption is to be granted to a person.  The purpose of  exemption  is  either public  interest  or  relief  from personal   undue  hardship.   It  does  not  appear  to   be obligatory   on  the  State  Government  to  prescribe   any conditions  while granting the exemption.  However,  if  any conditions are specified and if the State Government   later satisfied  that  there  is  non-compliance  of  any  of  the conditions, the State Government is given power to  withdraw the exemption. As far as Section 21 is concerned, the power conferred by it is not to exempt the land but to declare it not to be excess for the purposes of Chapter III.  The power is given to  the competent  authority  itself.  It is to be exercised  by  it only under one circumstance.  That circumstance is that  the holder of the vacant land should declare before it within  a specified  time and in the prescribed form and manner,  that he  desires to utilise the land for the construction of  the

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dwelling  units  of  not  more  than  the  particular   size mentioned therein for accommodating the weaker sections  and in  accordance  with any scheme approved  by  the  specified authority.  it is the competent authority which is  required to make inquiry as it deems fit into such a declaration, and if  it is satisfied, to declare that such land shall not  be excess within the meaning of the said Chapter.  However,  it appears   that  the  competent  authority  is  required   to prescribe  certain terms and conditions while declaring  the land  not to be an excess land, including a  condition  with regard to the time limit within which such buildings are  to be constructed, and on the breach of any of the  conditions, the  competent authority is also given power to declare  the land to be an excess land. Section 22 enables a person to hold the vacant land on which there  stood a building which he demolished or destroyed  or which  was  demolished or destroyed on  account  of  natural causes.   The  holder  of such land is required  to  file  a statement in that behalf within the specified time 738 and  if the competent authority is satisfied that such  land is  required by the holder for the purpose of  redevelopment in  accordance  with  the master plan,  the  authority  may, subject  to  such conditions and  restrictions,  permit  the holder  to retain such land for such purpose.   However,  if the  competent authority is not so. satisfied and  does  not therefore, give permission for redevelopment, the provisions of  Sections  6 to 14 of the Act become applicable  even  to such land. Section 23 provides for the disposal by the State Government of the vacant land acquired under the Act or acquired  under any other law.  The State Government may allot such land  to any person for any purpose relating to or in connection with any industry or for providing residential accommodation,  of such type as may be approved by the State Government, to the employees  of any industry.  The ’industry’ is  defined  for the  purpose  to  mean  any  business,  profession,   trade, undertaking  or manufacture.  While making  such  allotment, the  State Government may impose such conditions as  may  be specified in the order of allotment.  A breach of any of the conditions  imposed enables the State Government  to  cancel the allotment, and on such cancellation the land revests  in the  State  Government  free from  all  encumbrances.   Sub- section  [4]  thereof also enjoins the State  Government  to dispose  of the vacant lands to subserve the common good  on such  terms and conditions as the State Government may  deem fit  to  impose.  Sub-section 15] thereof  gives  the  State Government  an overriding power and enables it to retain  or reserve  any  vacant  land acquired under the  Act  for  the benefit of the public, notwithstanding anything contained in sub-sections [1] to [4]. Section 24 enables the State Government to assign a part  or whole  of the acquired land to those persons who had  leased out  or mortgaged with possession, of the said land  or  had given  such  land under a hire-purchase agreement and  as  a consequence  of which they are left with no vacant land  or. are  left with vacant land which is less in extent than  the ceiling limit. Chapter IV of the Act deals with the regulation of  transfer and use of urban property.  Section 26 prohibits the sale of vacant  land  within the ceiling limit except  after  giving notice  in  writing  to  the  competent  authority,  of  the intended transfer.  Where the notice is given, the competent authority  shall have the first option to purchase the  land on behalf of the State

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739 Government  at  a price calculated in  accordance  with  the provisions of the Land Acquisition Act, 1894 or of any other corresponding  law for the time being in force.  The  option has, however, to be exercised within a period of sixty  days from  the date of the receipt of the notice and if  no  such option is exercised, it will be presumed that the  competent authority  has  no intention to purchase the  land,  and  it shall then be lawful for such person to transfer the land to whomsoever, he may like. Section  27 prohibits transfer of any urban  or  urbanisable land  by  way of sale, mortgage, gift, lease  for  a  period exceeding  ten years, or otherwise, if such land is  with  a building,   whether   constructed  before   or   after   the commencement  of  the  Act.  It  also  prohibits  a  similar transfer  of the land with a portion only of such  building. The restriction on the transfer of Such land is for a period of ten years of the commencement of the Act or from the date on  which  the building is constructed whichever  is  later, except  with  the  previous  permission  of  the   competent authority.  The competent authority is given power to  grant or refuse permission to transfer, after holding an  inquiry. If  the permission is not refused within sixty days  of  the receipt of the application, the permission is deemed to have been  granted.   If the permission applied for  is  for  the transfer  of  such  land  by  way  of  sale,  the  competent authority  is given the first option to purchase  such  land with the building or a portion of the building, as the  case may  be,  and if the option is not  exercised  within  sixty days,  the applicant is free to sell the land to any  person he  may  like.  For the purpose of  calculating  the  price, where the purchase is made by the authority, the  provisions of  the Land Acquisition Act, 1894 or of the  corresponding- law  are  made  applicable.  This Section  has  since  been, struck down by this Court in Maharao Sahib Shri Bhim Singhji etc. etc. v. Union of India & Ors., [1981] 1 SCC 166 to  the extent  it operates on the vacant lands within  the  ceiling limit.  In other words, as the law stands today, the section applies only to transfer of the urban and urbanisable  lands in excess of the ceiling limit and which have a building  or a portion of building constructed thereon. Section  29  prohibit  s  construction  of  buildings   with dwelling  units  with  a plinth  area  exceeding  particular dimensions,  depending upon the category to which the  urban agglomerations belong. Section 30 gives power to the competent authority to stop or demolish  construction  which  is  being  made  or  made  in contravention of 740 Section 29. Section  35  gives power to the State  Government  to  issue orders  and  directions  of a general character  as  it  may consider necessary in respect of any matter relating to  the powers  and  duties  of  the  competent  authority  and  the competent  authority has to give effect to such  orders  and directions. Section  36 gives power to the Central Government  to.  give such  directions  to  any State as may appear to  it  to  be necessary   for  carrying  into  execution  in   the   State concerned, any of the provisions of the Act or-of any  rules made thereunder.  The Central Government may also under this Section  require  any  State  Government  to  furnish   such returns,  statistics, accounts and other information as  may be deemed necessary. 15.The examination of the aforesaid relevant provisions of

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the  Act  shows  a clear intention of  the  legislature  and reveals  a definite scheme.  It has to be admitted that  the provisions  of the Act as are drafted have not succeeded  in translating   into,  words  the  clear  intention   of   the legislature  and to that extent the Act is an inelegant  and confused piece of drafting.  However, since the intention is clear, a harmonious reading of all the provisions consistent with that intention is necessary to interpret and understand each   of  the  said  provisions.   The  intention  of   the legislature  is to acquire all vacant land in excess of  the ceiling limit prescribed by the Act and the main purpose  of the  Act,  as stated earlier, is three-fold,  viz.,  [i]  to prevent  concentration of the urban land in the hands  of  a few  persons  and to prevent  speculation  and  profiteering therein;  [ii]  to distribute the urban land  equitably  and [iii] to regulate the construction of buildings on the urban lands.   Consistent with these objectives, the Act  provides for  acquisition of all urban vacant land in excess  of  the ceiling  limit  and  prohibits  its  transfer  in  any  form absolutely.   All that the Act permits in the case  of  such excess  vacant  land is either express  exemption  from  the operation  of Sections 3 to 19 of Chapter III of the Act  by the State Government under Section 20 or non-declaration  of such  land  as  an  excess  vacant  land  by  the  competent authority  under  Section 21 or the retention of  such  land with  the  land-holder  to be  permitted  by  the  competent authority under Section 22 of the Act. The  effect of exemption of the land from the provisions  of Sections  3 to 19 or of the non-declaration of the  land  as excess land or of the 741 retention  of the land with the land-holder  under  Sections 20, 21 and 22 respectively, is not to permit the land-holder to  deal with it as he likes including to transfer  it.   In fact,  the exemption, the non-declaration an  the  retention permitted, is on certain conditions which are required to be prescribed   by  the  State  Government  or  the   competent authority  as the case may be.  If those conditions are  not complied  with or are contravened, the State  Government  or the  competent  authority  is given power  to  withdraw  the exemption  or  to declare the land as  excess.   This  power given  to the State Government and the  competent  authority itself negatives either power to permit the transfer or  the right  to  transfer.  What is more, Chapter IV  which  alone makes  provisions  for transfer and use of  urban  property, makes  provision  for  transfer of vacant  land  within  the ceiling limit subject to certain conditions.  It also  makes provisions for the transfer of land in excess of the ceiling limit  with  a building thereon or with a  portion  of  such building.   It makes, however, no provision for transfer  of land in excess of the ceiling limit without a building or  a portion of a building thereon.  That is consistent with  the object  of  the  Act  since the  Act  does  not  contemplate transfer of the vacant land in excess of the ceiling  limit. It  only  provides  for exemption of such  land  from  being acquired  and  vested in the State‘ Government or  for  non- declaration of it as an excess land or for the retention  of the  same  with the holder and that too subject  to  certain conditions which may be prescribed, as stated earlier. 16.It   is  against  the  background  of   the   aforesaid provisions  of the Act that we have to consider whether  the two permissions given by the State Government to the firm on 6.3.1987  and  18.4.1987  to  sell  land  admeasuring  16194 sq.mtrs.  and 3444 Sq. mtrs. respectively under  Section  20 (1), are legal.

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17.Taking,  first, the order dated 6.3.1987, it  does  not mention  under  which  provision  of  Section  20  (1)   the exemption is granted, viz., whether under clause (a) or  (b) thereof It is, however, conceded before us on behalf of  the respondents that the exemption is not under clause (a)  but. is  under  clause (b).  We have, therefore, to  examine  the said  exemption with reference to the provisions  of  clause (b).   Section  20 (1)(b), as stated  earlier,  permits  the State  Government  to  exempt  the  vacant  land  from   the provisions  of Chapter III of the Act, if either on its  own motion or otherwise, it is satisfied that the application of the  said  Chapter  "would  cause  undue  hardship  to  such person".  The order of exemption may further 742 be  subject  to  such  conditions, if  any,  as  in  any  be specified  in  it.  The reasons for passing the  order  have further  to  be recorded in writing.  The  preamble  of  the present  order  states  that  by  the  earlier  order  dated 17.7.1985,  the firm was granted exemption of the very  same land  for locating industry on conditions contained  in  it. One  of  the  conditions was that the  declarant  shall  not transfer  the land in question without prior  permission  of the  Government.   The  order then proceeds to  refer  to  a letter  dated 20.1.1987 of the Special Deputy  Commissioner, Bangalore  recommending the grant if permission to sell  the said land on certain conditions.  The order states that  the Government   has  considered  the  undue  hardship  of   the applicants  and agrees to grant permission to sell the  said land.  The order does not discuss the undue hardship of  the applicants.   It  is possible that the Government  for  that purpose  relied  upon  the  report  of  the  Special  Deputy Commissioner.  It appears from the record that the report of the  Special Deputy Commissioner is of 29.1.1987 and not  of 20.1.1987.  It  is possible that there  is  a  typographical error  either in the record or in the order.  Be that as  it may.   The  said report of the Special  Deputy  Commissioner refers  to  the application made by the firm  for  grant  of permission  for  the  sale  of the  land  "for  their  undue hardship’.  The report then mentions the properties declared by  the firm.  All the properties, which are four in  number and  one  of which is the land in dispute,  are  situate  in Bangalore.   There  is no mention of  the  properties  which admittedly  the appellants had in Madras. What is  necessary to  note here is that it is also stated in the  report  that the  land  in dispute has a building of dwelling  units  and non-dwelling  units over a plinth area of 1618.80 sq.  mtrs. constructed  prior to the commencement of the Act.  It  also states that there is a factory on. the land running since 50 years  which manufactures the polished stones.  exported  to foreign countries.  The report then refers to what the  firm had  stated  in its application for permission to  sell  the land.  The application had mentioned among other things,  as follows               "[a]   due   to   lot   of   competition   and               nationalisation of the black and pink granites               by  southern States including  Karnataka,  the               firm   had  been  suffering  losses   in   the               abovesaid business;               [b] the partners of this firm are the partners               of a firm known as "Woodlands" which has  been               carrying  business in hoteliers and  the  said               hotel is not making profits due               743               to  the fact that the buildings are  very  old               and due to paucity of funds;

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             [el that firm has constructed twin-theatres on               the front side of the hotel just to  diversify               the business.               [d]  that they have incurred heavy loans  from               banks  and private parties for the purpose  of               construction of theaters and the partners  who               are  the  partners of the applicant  firm  are               responsible to liquidate the loans;               [e] the Madras firm has suffered heavy loss to               a tune, of Rs. 22,23,016.26 as on 31.3.1986."               [The firm has under this head shown term  loan               (if  Rs. 57.57 lakhs from the Andhra Bank  and               Rs. 19.03 lakhs from the Bank of India and Rs.               17.29  lakhs  from the State Bank  of  Mysore.               They have also mentioned Rs. 51.80 lakhs  from               private  parties  but  their  names  are   not               disclosed.   They  have also  mentioned  other               liabilities to the tune of Rs. 3.87 lakhs  but               their details are not given.]               "[f] that the net capital and current accounts               show a debit balance of Rs. 47.94 lakhs".               [They also further state that if the loan from               1.4J986  to 31.12.1986 is taken into  account,                             the  debit  balance of the  partners  would  b e               about Rs. 68 lakhs.]               "[g]  that  the  bank-authorities  have  filed               suits  in the High Court of Madras  to  attach               their properties both in Bangalore and Madras;               [h]  that a private party by the name  of  Sri               P.L.  Narayanaswamy Reddivar has also filed  a               suit  in the Karnataka High Court  to  recover               the loan due to them from, the Madras firm;" The  application had further stated that the Madras firm  is not able even to pay the interest as it is running at a huge loss.   It had also been stated that it had become a  mental torture to clear the liabilities and to 744 face  the court cases pending for attachment.  It  had  then gone  on to state that there was no other way to dispose  of the  property in Bangalore, i.e., the disputed  property  to clear the above debts and that even the amount derived  from the sale of the land in question would not be sufficient  to liquidate the liabilities. The  report  further states that the firm had  produced  the statement of profit and loss account and balance sheet as on 31.3.1986 and copies of suits filed by the Bank of India  in Madras  and by the said Sri P.D. Narayanaswamy  Reddiyar  in the High Court of Karnataka.  After only reciting the  above facts  but  without mentioning even the price at  which  the land in dispute was proposed to be sold, the Special  Deputy Commissioner  has proceeded to recommend the  permission  to sell  the land to the builders under Section 20 of the  Act. The application for permission itself had not mentioned  the price.   The recommendation is in respect of not only  16194 sq.  mtrs. but also in respect of 3444 sq. mtrs.  It may  be mentioned  here that the firm had not made  any  application for exemption or permission to sell the said 3444 sq.  mtrs. till  at  least 24th March, 1987.  Yet, the  Special  Deputy Commissioner  recommended in his report of  20/29.1.87  that the  earlier  exempted  land  of  16194  sq.  mtrs.  may  be permitted to be sold along with the said 3444 sq. mtrs.   He has  of  course recommended conditions to be  imposed  while granting the permission to sell. The  State  Government has also not  independently  enquired

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into  the  genuineness of the debts, the value  of  all  the assets  of  the  firm held by it  in  Bangalore,  Madras  or elsewhere, and whether the debts were as on the date of  the commencement  of the Act and whether any of the  debts  were incurred subsequent to the said date, what was the price  at which  the land was proposed to be sold, whether the  assets other than the land in question could not have been sold  to meet  the debts and if at all it was necessary to  sell  the land  in  question, whether the sale only of a part  of  the land  would not have relieved the firm of  its  obligations. Without  such  inquiry,  the  Government  by  its  order  in question granted permission to sell 16194 sq. mtrs. of land. Close  on the heels, however, followed another  order  dated 18.4.1987  by  which  the  balance of  3444  sq.  mtrs.  was permitted  to  be sold relying upon another  report  of  the Special  Deputy  Commissioner.  The record before  us  shows that  the  said  report is of 27.3.1989.  We  may,  however, presume a typographical error and construe it as a report of 27.3.1987.However,  what is worth nothing is  that  the application for 745 permission to sell the said 3444 sq. mtrs. was filed by  the firm  allegedly on 24.3.87. It seems that  with  commendable alacrity the Special Deputy Commissioner made his report  on the  said application, on 27.3.1987 [if we are to  read  the year  as 1987 instead of 1989 as the document shows].   What he has stated in his report may be summarised as under: That the Government by its order dated 6.3.1987 had  already accorded  permission to sell excess vacant land  admeasuring 16194  sq. mtrs.  The remaining excess vacant land  held  by the  firm  is  3444 sq. mtrs.  Orders  had  been  passed  as required   under  Section  8(4)  of  the  Act  on   9.1.1987 confirming  the said excess vacant land.  In the  meanwhile, the  firm presented another application on 24.3.1987 to  the Government  requesting for grant of exemption under  Section 20 with permission to sell the said excess land  admeasuring 3444 sq. mtrs. and another land admeasuring 5,648 sq.  mtrs. which  consisted  of  land with building as  per  Section  4 (1)(b)  of the Act, to the builders.  That the  firm  stated that  they  had got the liabilities to the  private  parties [who  were for the first time named there].  They are 13  in number.  The liabilities were shown as having arisen between 20.1.1975  and  7.12.1977 with a specific mention  that  the liabilities were from a date prior to the coming into  force of  the  Act.   These liabilities  to  the  private  parties amounted  to  Rs.  4,11,279.56. In addition  to  13  private creditors,  Dena Bank is the 14th and the last editor  shown there  to whom Rs. 65,420.44 were owed from  15.4.1969.  The firm  had  produced certificates from the  creditors  and  a certificate  from  the  auditors  in  support  of  the  said liabilities.   The report ends by stating that "in the  cir- cumstances  explained  above, the requests of  the  firm  to grant exemption under Section 20 with permission to sell the said  balance vacant land of 3444 sq. mtrs. to the  builders may be considered." It  is not known when the reference of the said  application was  made to the Special Deputy Commissioner for giving  his report.   All  that  is  known is  that  on  18.4.1987,  the Government  passed an order permitting the firm to sell  the land admeasuring 3444 sq. mtrs. on the conditions  mentioned therein.  This order also does not discuss, like the earlier order  of  6.3.1987, the various factors which  need  to  be considered  while  granting  permission  to  sell.   It  is, however, not necessary to discuss this aspect of the  matter since we are allowing the appeals on the primary ground that

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the State Government had no power to grant permission to the firm  to  sell the land in question.  If,  however,  it  was necessary  to go into the said question, it must  be  stated that there is much force in the contention of the appellants that the State Government had 746 not applied its mind to the relevant factors relating to the alleged  indebtedness of the firm and hence  the  permission granted to the firm to sell the land was liable to be struck down on that ground also. 18.The first question that arises is whether the  provisions of  Section 20111 (b) permit the State Government to  permit the  sale  of  the  excess vacant land  to  a  third  party. According  to us, the answer has to be in the  negative  for reasons more than one. In the first instance, the central object of the Act, as  is evident  both from the preamble as well as the statement  of objects and reasons, is to acquire vacant land in excess  of the ceiling area and to prevent speculation and profiteering in  the  same and also to distribute the land  equitably  to subserve the common good.  It is, therefore, per se  against the said object to permit the sale of the excess vacant land for  whatever reasons, including the undue hardship of  the’ land-holder.   To construe the provisions of Section 20  [1] (b)  so as to read in them the conferment of such  power  on the State Government for whatever reasons, is to distort and defeat  the  whole  purpose of  the  legislation.   Further, neither the plain language of the clause nor its context and intendment  merit  such construction.Section  20  itself  is titled  "Power  to exempt".  The power given  to  the  State Governments  under  the Section is only  to  exempt  certain excess vacant lands from the operation of the provisions  of Sections 3 to 19 of Chapter III, none of which refers to the subject  of  transfer or restrictions  on  transfer.   Those provisions   relate   to   the   calculation,   declaration, acquisition  and vesting of the excess vacant land.   It  is Chapter  IV which relates to the transfers of  vacant  lands and  the restrictions thereon.  Further, from the scheme  of the Act, it is evident that the transfers of the vacant land were to be regulated by the specific provisions made in  it. They  were  not to be left to be governed  by  the  unguided discretion of any authority including the State  Government. The  specific  provisions for regulating the  transfer  have been  incorporated in Sections 20 to 28 of the  Act.   Those provisions  permit transfer of only vacant lands within  the ceiling limit but without buildings, and of vacant lands  in excess  of the ceiling limit but with buildings thereon  and subject  to  the conditions laid down there.  It  cannot  be suggested  that in defiance of the said provisions,  Section 20  [1](b) vests power in the State Government  to  sanction sales  of  excess  vacant lands  with  or  without  building thereon.  Under Section 20 [1](b), the State Government  can only  exempt such excess vacant land from being acquired  by it.  The Government 747 cannot  permit  its transfer when the Act does not  even  by implication authorises it to do so but permits the  transfer subject  only  to the conditions prescribed by  Section  27. The  legislature  cannot  be  presumed  to  have  prescribed different  conditions  for transfer of the same  or  similar lands. Secondly,  Section  20 begins with the  non-obstante  clause "notwithstanding anything contained in any of the  foregoing provisions of this Chapter", meaning thereby Chapter III  of the  Act.   The foregoing provisions of Chapter  III  viz..,

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Sections  3  to 19, as stated earlier, do  not  contain  any provision  permitting  or restricting the  transfer  of  the vacant land in excess of the ceiling limit.  The  provisions relating to the transfer of the vacant land are contained in Sections  26  to  28 of Chapter IV.  Section  26  lays  down restrictions  on the transfer of the vacant land even if  it is  within  the  ceiling  limit,  while  Section  27  places restriction on the transfer of any urban or urbanisable land with  a building or portion of such building thereon  for  a period of ten years from the commencement of the Act or from the date on which the building is constructed, whichever  is later, except with the previous permission of the  competent authority.  Section 27 as couched is wide in its implication and hence this Court by its decision in Bhuimsinghji’s  case Supral  restricted  its operation to  lands  with  buildings which  are above the ceiling limit.  However, the court  has upheld the validity of the rest of the Act including that of Section 26.  The result is, the restriction on transfer even of vacant land within the ceiling limit but without building is deemed to be valid.  Thus the transfer of the vacant land without building even if it is within the ceiling limit  and of  the  vacant land in excess of the ceiling limit  with  a building  or  a portion of the building are subject  to  the restrictions placed by the Act.  Section 20, as pointed  out earlier,  is  subject to the provisions  of  sections  which follow   it   including  Sections  26  to  28.    Hence   no construction can be placed on clause (b) of sub-section  [1] thereof  which  will be in conflict with the  provisions  of Sections 26 to 28. Thirdly,  the  provisions  of clauses (a) and  (b)  of  sub- section  [1]  of  Section 20 make it  clear  that  what  the legislature has in mind is an exemption for the purposes  of the use- of the land and not for the purposes of selling it. Sub-section Ill (a) speaks of exemption of such land  having regard  to its location, the purposes for which the land  is being  or  is proposed to be used and  such  other  relevant factors  as the circumstances of the case may require.   The said provisions further require that even after taking  into consideration  the said circumstances, the State  Government has to examine, before giving ex- 748 emption, whether it is necessary or expedient in the  public interest  to do so.  The Government is also empowered  under the  said provisions to grant such exemption  conditionally. Sub-section [1] (b) similarly, speaks of the undue  hardship caused  on account of the application of the  provisions  of Chapter  III.   Since as per the definition of  "person"  in Section 2 [i], the said provision is applicable not only  to individuals,  but also to a family, a firm, a company or  an association  or body of individuals whether incorporated  or not,  the hardship spoken of there is obviously one  related to  the  user  of the land.  In fact,  it  is  difficult  to understand the precise purpose for which clause (b) has been enacted  and the meaning of the expression "undue  hardship" there.   We are left only to speculate on the  subject.  The speculation  itself may not be valid. The lands are held  by companies,  trusts  and  associations  for  industrial   and commercial  use,  for  the use of  medical  and  educational institutes,  sports,  clubs, cultural  activities,  gardens, exhibitions  etc. There is no special provision made in  the Act  to  protect  or  take care  of  such  users.  The  only provision under which a relief can be given to preserve  and safeguard  such  user  is  Section  20  [1]  (a).  But  that provision  can be pressed into service only on the basis  of the location of the land and its present or prospective user

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and only if it passes the test of public interest.  However, all lands in excess of the ceiling limit may not strictly be necessary  for such user, even if the user is in the  public interest. Nevertheless, the withdrawal of a part of the land found to be in excess may cause an avoidable hardship to the land-holder  which  may be disproportionate to  the  benefit that  is  to  accrue  to  the  public  on  account  of  such withdrawal.  The  excess  of  land  may  be  meager  or  the severance   of  such  excess  land  itself  may  result   in unnecessary  hardship. The hardship further has to be  undue and  not  merely an ordinary hardship which is bound  to  be caused  on  account of the application of the Act  to  every holder of the excess vacant land. The undue hardship must be one  which cannot be avoided except by granting a relief  of exemption as contemplated by the said provision. The  relief from  financial hardship or from indebtedness to  the  land- holder  of  such land is alien both to the  object  and  the scheme of the Act. Even the debates in the Parliament do not refer  to  financial hardship or to the power of  the  State Government to exempt the land to permit its transfer on that account.  To hold that indebtedness and  financial  hardship would  entitle the landholder to get exemption for  sale  of the  excess  vacant land in his possession is to  place  the holders  of land with debts in an advantageous  position  as against those who   were  unwise  enough  to  manage   their affairs with financial discipline. The classification of the owners of land for this purpose between debtors and 749 non-debtors is itself irrational and has no plausible  nexus with  the  object  of the Act.  Such  a  classification  is, therefore, discriminatory and violative of Article 14 of the Constitution.  It is not, therefore, possible to agree  with the  view  taken  by the Gujarat High  Court  in  Thakorbhai Dajibhai  Desai v. State of Gujarat, AIR 1980 Guj. 189  that the  indebtedness  of  the land-holder on the  date  of  the commencement of the Act can be a ground for exemption  under Section  20 [1] (b).  Much less can such a ground  vest  the State  Government with the power to permit the sale  of  the land.   As  has  been explained earlier, under  the  Act  no transfer  of vacant land in excess of the ceiling  limit  is permitted  whether with or without condition, if it  is  not encumbered  with a building or a portion of a building.   It can either be acquired by the State Government under Section 10  [3]  of  the  Act or exempted  from  being  acquired  or permitted  to  be  retained under Sections  20,  21  and  22 respectively.  It can in no case be transferred. However, if it is so encumbered, the provisions of Section 27 become ap- plicable to the transfer of the land and no transfer of such land  can be effected in contravention of the provisions  of the said section.  There is nothing either in Section 20  or Section 27 which exempts the transfer of such land from  the operation  of  the provisions of Section 27,  assuming  that Section  20 (1) (b) gives power to the State  Government  to permit the sale of such land. Fourthly,  the exemption which is granted under  Section  20 [1]  (b)  has to be supported by reasons to be  recorded  in writing.   This requirement also contemplates  an  exemption which is related to and prompted by the use or better use of the  land.  If it is the financial hardship which was  under the  contemplation  of the legislature,  there  was  nothing easier  than to make a reference to the same in  clause  (b) itself and to lay down guidelines for the inquiry into  such hardship. Fifthly,  the provisions of sub-section [2] of  Section  20, directly  negative either exemption on account of  financial

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hardship  or  for the purpose of the transfer of  the  land, since  that  sub-section empowers the  State  Government  to withdraw   the  exemption  already  granted  if  the   State Government  is satisfied that any of the conditions  subject to which the exemption is granted either under clause (a) or clause  (b) of sub-section [1] is not complied with.  It  is inconceivable   that  the  legislature  had  in   mind   the cancellation of the transfer including sale, which cannot be done when it has already taken place. Sixthly, as pointed out earlier, when the legislature wanted to provide 750 for  sale  or transfer of the vacant land, it  has  done  so specifically in Chapter IV which exclusively deals with  the "Regulation   of  transfer  and  use  of  urban   property’. Sections  26,27 and 28 of the said Chapter together  provide for  sales of vacant land and for the registration  of  such sales.  Section 26 restricts the sale of land even if it  is within  the  ceiling  limit except after  giving  notice  in writing of the intended transfer to the competent authority. When  such notice is given, the competent authority has  the first  option  to purchase the land on behalf of  the  State Government and at a price calculated in accordance with  the provisions of the Land Acquisition Act, 1894 or of any other corresponding  law for the time being in force.  It is  only when the competent authority does not exercise its option to purchase the land within sixty days from the date of receipt of the notice, that it is lawful for the holder of the  land to  transfer  the  same  to whomsoever  he  may  like.   The provisions  of Section 26 further show that the price to  be calculated  for the purchase of the land when the  competent authority  exercises  its option is on the  basis  that  the notification under sub-section [1] of Section 4 of the  Land Acquisition Act or under the relevant provision of any other corresponding  law had been issued on the date on which  the notice  was given of the intended transfer by the holder  of the land, to the competent authority.  This provision  makes it  abundantly clear that the exemption to be granted  under Section 20 1 11 (b) is not for the sale of the excess vacant land.   It is difficult to hold that the  legislature  which places  restrictions on the transfer of the land within  the ceiling limit would at the same time give a carte blanch for the sale of the land in excess of the ceiling limit.  For it would  mean, firstly, that the State Government cannot  have an option to purchase such land and secondly the sale can be made  by the holder of the excess land at any price that  he chooses.   In the first instance, such a reading of  Section 20 Ill (b) would militate against one of the objects of  the Act,  viz., to prevent speculation and profiteering  in  the sale  and purchase of land.  Secondly, it would be  patently discriminatory.   Whereas the holder of vacant  land  within the  ceiling  limit would have to  suffer  the  restrictions placed  by  Section  26, the holder of the  vacant  land  in excess  of the ceiling limit has not to do so.  He would  in fact be in a better position.  The provisions with regard to granting  such  exemption  subject  to  certain   conditions contained  in Section 20 [1] (b) do not in any way  mitigate the discrimination.  Firstly, when the statute itself places specific  restrictions under Section 26 on the sale of  land within  the ceiling limit, it is not possible to  hold  that the conditions on which the State Government is empowered to permit  the sale can be left to the discretion of the  State Government.   In  fact, such discretion given to  the  State Government 751

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would itself be violative of Article 14 of the  Constitution the  same being unguided and untrammeled.  This  also  shows that  the  legislature  has not given  power  to  the  State Government under Section 20 ill (b) to permit exemption  for sale  of the land.  Otherwise it would have provided in  the section itself for the conditions on which the permission to sell  can  be given and such conditions could  not  be  less onerous  than  those provided under Section 26 of  the  Act. Secondly,  if  the  power to permit sale  of  the  land  was intended  to be given only for relieving the land-holder  of his  financial  hardship, the section could very  well  have provided  for sale of such land under Section 26 of the  Act or made provision in Section 20 ill (b) itself for the first option  of the State Government to purchase it.  It  is  not suggested  that  by  not making  such  provision  either  in Section  20 111 (b) or Section 26, the legislature  intended to  permit the sale of such land at a price above  the  fair market price payable under the Land Acquisition Act, 1894 or the corresponding law and thereby encourage speculation  and profiteering, the very evils which the Act intended to curb. Seventhly,  section  27 in Chapter IV is  another  provision which  prohibits  the transfer of any urban  or  urbanisable land with a building whether constructed before or after the commencement of the Act or a portion only of such  building, for  a period of ten years from the commencement of the  Act or  from  the  date on which the  building  is  constructed, whichever  is later, except with the previous permission  of the  competent  authority.  Sub-section  151  thereof  again gives  the  first  option  to  the  competent  authority  to purchase  such  land and at a price either  as  agreed  upon between the competent authority and the land-holder or where there  is no such agreement at a price to be  calculated  in accordance with the provisions of the Land Acquisition  Act, 1894  or any other corresponding law for the time  being  in force.   It  is only if the option is not  exercised  within sixty  days  or  the competent  authority  has  not  refused permission to sell the land that the holder of the land  can legally transfer the same to whomsoever he may like.   These provisions   of  Section  27  also  militate   against   the conferment  of the power on the State Government  to  permit exemption  of land for the purpose of its transfer  for  the same  ’reasons as are based on the provisions of Section  26 discussed above.  The provisions of Section 27 refer to  any urban or urbanisable land with a building.  The vacant  land in  excess  of the ceiling limit may be with  or  without  a building.   In fact, the provisions of Section  27  directly negative  the  conferment  of  such  power,  for  the   said provisions show, firstly, that the legislature did not  want the 752 sale  of  any  urban or urbanisable  land  with  a  building whether it is within or without the ceiling limit except  in accordance  with the provisions of Section 27.  For  Section 27 speaks of transfer of any urban or urbanisable land  with a building or a portion only of such building, only with the permission  of  the  competent authority and  on  the  terms mentioned  therein.   This  Court, as  stated  earlier,  has invalidated the provisions of the said section to the extent they apply to the vacant land with a building when the  land is  within the ceiling limit.  But it does apply to land  in excess of the ceiling limit and with a building or a portion of  it thereon.  It is not possible to hold that  there  are two  provisions,  viz.  Section 20 ill (b)  and  Section  27 operating  at the same time in the same area.  For the  land permitted  to  be transferred under Section 20 [1]  (b)  may

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also  be a land with a building or a portion of  a  building thereon.  In one case the restriction imposed by Section  27 on  the  transfer would not apply and the  State  Government will  be deemed to have been given power to permit the  sale even  in contravention of the provisions of Section 27.   In another case, the holder of similar land will have to suffer the  restrictions  placed by Section 27.  There  is  nothing either  in Section 20 [1] (b) or Section 27 to  exclude  the operation of the section, as pointed out earlier. Eighthly,  the  provisions of Section 28 require  a  special procedure  to be followed by the registering  officer  under the Registration Act, 1908 while registering documents under Section  17 [1] (a) to (e) of that Act when the transfer  of the land is either under Section 26 or Section 27.   Section 28 does not make any reference to the transfer permitted  by the  State  Government under Section 20 [1] (b).   In  other words,  the  holder  of the vacant land  in  excess  of  the ceiling  limit  has  not  to face  the  restriction  on  the registration  of  the  document  of  transfer  of  his  land provided under Section 28 when such transfer is permitted by the  State Government under Section 20 [1] (b), whereas  the holder  of  similar  lend who does not  approach  the  State Government has to suffer the same when he transfers the land held by him.  The discrimination between the transfers under the different provisions is irrational and has no nexus with the object ought to be achieved by the classification. Lastly, if the power to exempt the land for sale is read  in Section  20  [1]  (b)  with such  conditions  as  the  State Government  may  choose  to place and if  either  the  State Government  chooses not to place any conditions or to  place such  conditions as are inconsistent with the provisions  of Sections  29 and 30, it would create two sets  of  lands-one where no restriction are applicable to the 753 construction thereon or only such restrictions as the  State Government  may  choose to impose, and the other  where  the restrictions on constructions as provided by Sections 29 and 30 would be applicable. It  is,  therefore, more than clear that the  provisions  of Section  20  (11 (b) do not permit the State  Government  to exempt  vacant land in excess of the ceiling limit  for  the purposes of transfer. N.P.  SINGH, J. I agree with brother Sawant, J. that  it  is not  possible  to  hold  that  State  Government  can  grant exemption under Section 20 [1] (b) of the Act, to the holder of the excess vacant land, so that he may transfer the  same in  the  manner  he desires.  The object of  the  Act  being imposition of ceiling on vacant land in urban agglomerations and for acquisition of such land in excess of ceiling limit, with  a view to prevent the concentration of urban  land  in the  hands of a few persons, speculations  and  profiteering therein, will that object be not defeated if it is held that power under Section 20(1) of the Act can be exercised by the State Government to exempt the excess vacant lands, from the application  of Chapter III of the Act, so that  the  holder thereof can transfer such lands?  Sub-section (1) of section 20  is in two parts.  The exemption under clause (a) of  the said  sub-section  is to be granted in the  public  interest whereas  under  clause (b) the exemption is  to  be  granted taking into consideration the "undue hardship" of the holder of  the  land  in excess of the  ceiling  limit.   Both  the expressions "public interest" and "undue hardship" are  com- prehensive in nature.  But at the same time, it is not  easy even  for  courts  to  say as  to  whether  under  different circumstances the exemption was in the "public interest"  or

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was  necessary  in the interest of the holder of  the  .land because of his "undue hardship". Under  Indian  conditions  expression  "undue  hardship"  is normally  related  to economic hardship.  That is  why  from time to time many holders of lands in excess of the  ceiling limit,  while claiming exemption under clause (b) put  forth their  bad  economic  condition and  indebtedness  to  claim exemption  along with permission to sell such excess  lands. In  the  modern  set up many holders of  such  excess  lands having undertaken commercial or industrial ventures with the help  of  the  loans  from the  Banks  and  other  financial institutions,  put  the plea of repayment of such  loans  as undue  hardship for claiming exemption under clause  (b)  of section  20(1) aforesaid.  How the holders of  excess  lands having  incurred losses or having failed to discharge  their debts can 754 claim exemption on the ground of "undue hardship" in such  a situation?  Section 4 while fixing the ceiling limit,  under subsection (3) takes note of the fact that "where in respect of  any  vacant land any scheme for group housing  has  been sanctioned   by  an  authority  competent  in  this   behalf immediately  before the commencement of this Act, then,  the person  holding such vacant land at such commencement  shall be entitled to continue to hold such land for the purpose of group housing".  But at the same time under sub-section  (4) of section 4 it has been specified that "if on or after  the 17th  day of February, 1975, but before the  appointed  day, any  person has made any transfer by way of sale,  mortgage, gift, lease or otherwise (other than a bona fide sale  under a registered deed for valuable consideration) of any  vacant land  held  by him and situated in such State to  any  other person,  whether  or not for consideration,  then,  for  the purposes  of calculating the extent of vacant land  held  by such  person  the land so transferred shall  be  taken  into account, without prejudice to the rights or interests of the transferee  in  the  land  so  transferred".   Similarly  in section  5 it has been provided that "where any  person  who had  held vacant land in excess of the ceiling limit at  any time  during the period commencing on the appointed day  and ending  with the commencement of this Act,  has  transferred such  land or part thereof by way of sale,  mortgage,  gift, lease  or otherwise, the extent of the land  so  transferred shall  also be taken into account in calculating the  extent of  vacant  land  held  by  such  person".   When  different provisions   take  into  consideration  the  lands   already transferred  by  the  holder, (i) between  the  period  17th February,  1975  and  the appointed day;  (ii)  as  well  as between  the  period commencing from the appointed  day  and ending  with the commencement of the Act, it should  not  be easily  inferred  that the framers of the Act  desired  that after the commencement of the Act while exercising the power of  exemption  under section 20(1)(b) permission  should  be granted  to  holders of such excess lands to  transfer  such lands  to  third parties in order to  meet  their  financial liabilities. Section  21 is yet another provision in the Act under  which excess  vacant land is not to be treated as  excess.   Under the  said Section exemption is to be granted in  respect  of such excess vacant land, if the holder undertakes to utilise the  same  for  the  constructions  of  dwelling  units  for accommodation  of  the  weaker sections of  the  society  in accordance  with  the  scheme  approved  by  the   competent authority or the State Government subject to such terms  and conditions as may be prescribed.  If Section 21 provides for

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granting  exemption  in respect of excess land held  by  the holder  only on a specific condition that the  holder  shall utilise the same 755 for  the construction of dwelling units for weaker  section, to  serve a public cause, how the framers of the  Act  could have  conceived the grant of exemption under  Section  20(1) (b)  to  the holder of the excess land, only  to  serve  his interest, by selling such excess lands. If  it  is  held that the State Government  can  exempt  the vacant land held by the land holder in excess of the ceiling limit,  from the applicability of the provisions of  Chapter III  of  the Act, in order that the said holder  sells  such land  to  liquidate  his debts which amounts  to  an  "undue hardship",  then there will be an apparent conflict  between the interest of the land holder and the public interest.  In the interest of the land holder the maximum price fetched by sale  of  such land will be the solution  of  his  hardship, whereas  that will run counter to the object of the  Act  to prevent  " speculations and profiteering".  It is futile  to urge that even in such transfers the dominant purpose of the legislation  to prevent "the concentration of urban land  in hands  of  few  persons"  is  none  the  less  served.   The concentration  of urban land in hands of few persons has  to be  prevented  with  a view to  bring  about  "an  equitable distribution of land in urban agglomerations to subserve the common  good".   Section 23 prescribes  the  priorities  for disposal  or distribution of excess vacant lands after  such lands vest in the State under the provisions of the Act.  In the case of Bhim Singhji v.   Union  of India, [1981] 1  SCC 166, it has been said:-               "The  definition  of the  word  ’industry’  in               clause (b) of the Explanation to that  section               is  undoubtedly unduly wide since it  includes               "any business, profession, trade,  undertaking               or   manufacture".   If  sub-section  (1)   of               Section 23 were to stand alone, no doubt could               have arisen that the Urban Land Ceiling Act is               a  facade of a social welfare legislation  and               that its true, though concealed, purpose Is to               benefit   favored   private   individuals   or               associations   of   individuals.    But    the               preponderating    provision   governing    the               disposal of excess vacant land acquired  under               the  Act is the one contained  in  sub-section               (4)  of  Section 23 whereby all  vacant  lands               deemed  to  have been acquired  by  the  State               Government  under the Act "shall  be  disposed               of  ...  to subserve the  common  good".   The               provisions of sub-section (4) are "subject  to               the  provisions of sub-sections (1),  (2)  and               (3)" but the provisions of sub-section (1)               756                are enabling and not compulsive and those  of               sub-sections (2)     and (3) are incidental to               the   provisions  of  sub-section   (1).   The               disposal of excess vacant lands must therefore               be  made  strictly  in  accordance  with   the               mandate  of  sub-section (4)  of  Section  23,               subject  to  this, that in a given  case  such               land  may be allotted to any person,  for  any               purpose  relating to, or in  connection  with,               any  ’industry’  or  for  the  other  purposes               mentioned in sub-section (1), provided that by               such allotment, common good will be subserved.

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             The governing test of disposal of excess  land               being  ’social  good’,  any  disposal  in  any               particular  case  or  cases  which  does   not               subserve  that  purpose will be liable  to  be               struck  down as being contrary to  the  scheme               and intendment of the Act." If the vacant lands which have vested in the State are  also to  be disposed of strictly keeping in view the  spirit  and object of the Act, how under section 20(1)(b) exemption  can be granted to holders of such lands to dispose of such lands in the manner they like, the persons they prefer, the  price they  dictate, for clearing their debts?  If it is  conceded that indebtedness amounts to an undue hardship, then it  may cover the debts incurred even after the commencement of  the Act.   The  ceiling limit has been fixed by section  3  with reference  to the date of the commencement of the  Act,  but exception can be granted till such excess lands vest in  the State Government under sub-section (3) of section 10,  after publication  of the notification, in terms of the said  sub- section.  Although it was not possible even for the  framers of  the  Act to exhaustively indicate as to  what  shall  be deemed to be "undue hardship" within the meaning of  section 20(1)(b)  but  it  would have been better, if  it  had  been illustratively indicated, leaving the rest for the courts to decide. 20.1  have made no reference to Section 26 or Section 27  of the  Act,  while  considering the question  whether  on  the ground  of "undue hardship" the holder of the excess  vacant land  can be granted exemption and then permission  to  sell such  excess  land, because he is  financially  crippled  or burdened  with liabilities.  In the case of Blim Singhji  v. Union of India (supra) this court held that Section 27(1) in so far as it imposes restriction on transfer of any urban or urbanisable  land  with a building or of a portion  of  such building  which  is within ceiling area, was  invalid.   The said sub-section (1) of Section 27 757 was  struck down being unconstitutional.  Section 26 of  the Act also imposes certain restrictions on transfer of  vacant land even within ceding limit.  It can be urged that Section 26(1)  suffers from the same vice which was pointed  out  in respect  of  sub-section (1) of Section 27 of  Act,  in  the aforesaid case of bhim Singhji v. Union of India (supra)  by this  Court.  But neither in the aforesaid case nor in  this case  this court was or is concerned with Section 26 and  as such,  according to me, it is not necessary to  express  any opinion  in  respect  of  Section  26  of  the  Act,   while considering the issue involved in the present appeals. ORDER 21.For the reasons given by us above, we are of view  that the  provisions  of  Section 20 [1] (b) of the  Act  do  not permit the State Government to give exemption to the  vacant in  excess  of  the  ceiling  limit  for  the  purposes   of transferring the same. 22.In view of our conclusion as above, it is not necessary to  go  into  the  further  question,  viz.,  if  the  State Government has such power, in which circumstances it can  be exercised  and  whether  financial  hardship  such  as   the indebtedness  of  the land-holder is sufficient  to  warrant such  exemption or not and with respect to which  date  such indebtedness  is  to  be assessed and in  what  manner,  and whether  in  the  present  case, the  said  aspects  of  the indebtedness  were investigated or properly investigated  or not.   For  this very reason, we also do not propose  to  go into the other question regarding the mala fides on the part

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of the authorities while granting permission to the firm  to sell the land to the builders in question. 23,  Since  we have come to the conclusion  that  the  State Government has no power to grant permission to sell the land under  Section  20  [1] (b), the  orders  dated  6.3.87  and 18.4.87  granting exemption and permission to the  firm  for sale  of  the  land are void ab initio  having  been  passed without  jurisdiction.   Accordingly,  the  sale-deed  dated 30.9.1987  executed by the 2nd respondent firm in favour  of the 3rd respondent-builders is held invalid and inoperative, as  the respondent-firm had no legal right to  transfer  the land  in favour of the builders.  We accordiigly  allow  the appeals and set aside the impugned order of the High  Court. The  respondents  State of Karnataka, M/s.  Narayanaswamy  & Sons  and M/s.  Reevajethu, Builders & Developers  will  pay the costs to the appellants in one set. G.N. Appeals allowed. 758