ESCORTS FARMS LTD., PREVIOUSLY KNOWN AS M-S. ESCORTS FARMS (RAM GARH) LTD. v. THE COMMISSIONER, KUMAON DIVISION, NAINITAL, U.P. AND ORS

Citation: [2004] 2 S.C.R. 543

Court: Supreme Court of India

Bench: SHIVARAJ V. PATIL, D.M. DHARMADHIKARI

Case summary

ESCORTS FARMS LTD., PREVIOUSLY KNOWN AS M-S. ESCORTS FARMS (RAM GARH) LTD. v. THE COMMISSIONER, KUMAON DIVISION, NAINITAL, U.P. AND ORS.pdf

Judgment text

ESCORTS FARMS LTD. , PREVIOUSLY KNOWN AS M/S. ESCORTS FARMS (RAM GARH) LTD. v. THE COMMISSIONER, KUMAON DIVISION, NAINITAL, U. P. AND ORS. FEBRUARY 20, 2004 [SHIVARAJ V. PATIL AND D. M. DHARMADHIKARI, JJ. ] UP. Imposition ofCeiling on Land Holdings Act, 1960; Section 5 with Explanations I & If and Sections 38-A and 38-B with UP. Amendment Act; Act No. 18 of 1973 and Act No. 20 of 1976/Government Grants Act, 1895 with UP. Amendment Act, 1960/UP.

Zamindari Abolition and Land Reforms Act, 1950; Section 131: Acquisition oflands oferstwhile Ruler and release ofthe same thereafter by the State in favour of a Company and the Ruler on certain terms and conditions-The Company joined other companies constituting Farms- Initiation ofCeiling proceedings by the authority-Declaring certain area of land belonging to the Farm as surplus-On appeal, the District Court remanded the case to the authority-Authority redetermined surplus land excluding the area ofthe land, meant for school, treating it as separate entity-Affirmed by the appellate authority modifying the area of surplus land-Company sold certain area of the land allegedly after the amendment in the Act reducing Ceiling limit-Transferees claiming status of 'Sirdar '/'Bhumidar '-Authority redetermined surplus area of land, however, the area of the land for school left undisturbed as barred by res-judicata-Reversed by the appellate authority holding that principle ofres-judicata could not be applied under the Ceiling p Act-Challenge to-Held: Farm possessing land for and on behalf of the holder company and the Ruler, hence an ostensible holder-Farm/transferees could take part in the proceedings---Since the Proceeding before the authority/ appellate authority not objected to by the company, it could be treated to be proceedings against the Company and the Ruler-Hence, the proceeding valid and not infructuous-Since transfer ofland not permissible under the terms ofGovernment Grants, transferee/Firm not entitled to claim status ofSirdar and Bhumidars-Code of Civil Procedurf!

, 1908-Section fl; Society Registration Act, 1860; UP. Tenancy Act---Section 2(1); U. P. General Clauses Act---Ss. 3(17) and 9(33). Government Grants vis-a-vis tenancy rights--Held: Since the Government Grant has an overriding effect under the Government Grants Act, recognition of tenancy rights/Sirdars/Bhumidars rights of transferees under the U. P. Tenancy Act is of no consequence.

Amendment in the Act-Raising ofceiling limit-Transferees-Effect on-- Held: Transfer ofthe land subsequent to amendment could be excluded from the ceiling limit only if authority satisfied that such transfers were made in goodfaith andfor adequate consideration-The company and the Ruler lacking good faith having executed the sale deed after the cut offdatelamendment- The concurrent findings ofthe Appellate Authority and the High Court were finding offacts not vitiatedfor consideration ofany irrelevant circumstances- Hence, not liable to be interfered with in appeal under Article 136 of the Constitution of India-Constitution of India-Article 136.

Explanation (ii) to sub-section 6 ofSection 5-Denial ofopportunity of hearing to transferees-Held: Transferees are the parties claiming benefits under the provisions of law-They would be adversely affected if transfer found to be lacking goodfaith-Hence transferees are the necessary parties- However, denying t~em opportunity of hearing not proved fatal to them- Hence, it is not appropriate to set aside the order ofthe appellate authority. Section 18-A-Quantification ofdamages-Jurisdiction ofHigh Courtlntervenors/subsequent transferees-Rights of-Discussed Code of Civil procedure, 1908; Section 11: Principle of Res-judicata-Applicability of-Held: Exemption of land for school from the extent ofholder compa1:.

1y was not a decision on the issue but it was a clear/apparent mistake-Transfer oflands for school have been made with full knowledge ofthe impending legislation proposing reduction in the ceiling limit with intention to evade the effect of ceiling law-As per provisions under Section 38-B introduced by AmendedAct, bar ofres-judicata made inapplicable in the ceiling proceedings-Jn the facts and circumstances ofthe case, the bar ofres-judicata not available-Constitution ofIndia, 1951- Article 39(b) and (c). Words and Phrases: Holding' and 'tennure holder '-Meaning of in the context of U. P. Imposition of Ceiling on Land Holdings Act. ESCORTS FARMS LTD. v. COMMR, KUMAON DIVN,NAINITAL 545 - The lands owned by Ruler of erstwhile estate of Kashipur, Uttranchal were acquired by the then Government of Uttar Pradesh under the U. P. Imposition of Ceiling on Land Holdings Act.

Later, the State Government released the said lands in favour of the Ruler and a Company for the development and for making the lands cultivable within the prescribed period. Since the company could not develop the land within the prescribed period, they had entered into an agreement with another company and constituted a third company, Mis. Escorts Farms, the appellant Farms. The prescribed authority initiated ceiling proceeding and declared 1163. 42 acres of the land as surplus as per provisions of the Ceiling Act. On appeal, .. _ the District Court remanded the case to the prescribed authority. The ,authority redetermined 98. 83 acres of land as surplus and allowed the holder to retain the remaining land including 250 acres of land being used for running Farm Mechanisation School. On appeal, Appellate Authority declared 153. 03 acres of the land as surplus land. In the meanwhile, the Company sold 18.

5 acres of land, when the State Government made reduction in the ceiling limit by introducing the U. P. Imposition of Holdings (Amendment) Act No. 18 of 1973; the Company further transferred 12. 50 acres of land in favour of 70 transferees. Under the amended Ceiling Act, fresh ceiling proceedings were initiated by the prescribed authority against the company and the Ruler and it declared 867. 67 acres of land as surplus. However, 250 acres of land .. _.... _ meant for the School which was exempted under the earlier order of the Ceiling Authority was not interfered with as barred by res judicata. The Farm and the transferees preferred an appeal. The appellate authority held that exemption in favour of the land for School was wrongly granted and that the Company as Government Grantee was not competent to transfer the land; hence held all such transfers invalid. Aggrieved, the Farm and the transferees filed writ petitions which were dismissed by the High Court.

The High Court also imposed cost on the Farm for illegal use of land by resorting to various unfair tactics by transferring the lands to evade ceiling law. Hence these appeals. It was contended for the appellants that the orders passed by the prescribed authority/Appellate authority were void and infructuous since the company was not at all a party before the authority; that since the --- lessees were in continuous possession of the land, they had acquired the status of 'Sirdars' and became 'Bhumidars' on payment of land-revenue and the authorities were estopped from denying possession to them; that since the order of the authority holding that 250 acres of land for the School were not includible in the Ceiling limit of the Amendment Act and it was not challenged by the State, it became final which could not have been upset by the appellate authority; and that the bar of res-judicata would operate in subsequent proceedings for redeterming ceiling limit by the authority.

On behalf of the respondent-State, it was submitted that the Company/Transferor had been represented through the Farm, thus they were heard by the appellate authorities; that the transferees were not only necessary but also proper parties; and that the transferor had failed to discharge burden of proof to the satisfaction of the authority that the transfer of the lands were bonafide and for consideration. f Dismissing the appeals, the Court )- HELD: 1. 1. The Ruler, a Government Grantee of land, was allowed to keep certain portion of it as 'hereditary tenant' and the other portion in . the name of the company in which he had share holding. The Farm came in possession of the land through the company and the Ruler. The Farm was, therefore, only an ostensible holder of the land and the company of which the ruler was share holder continued to be the real holder.

The Company and the Ruler never objected to the proceedings before the prescribed authority nor did they prefer any appeal to challenge those orders either in appellate forum or in writ proceedings. The proceedings therefore initiated, conducted and culminated against the Farm have to be treated in reality to be proceedings against the· company and the Ruler as the holders of the land and are binding both on ostensible and the real owner in accordance with Section 5 with Explanations I and II of the U. P. Ii;nposition of Ceiling on Land Holdings Act, and the proceedings cannot J)e held to be invalid or infructuous. [557-H; 558-A-C, E] 1. 2. The holder of the land for the purpose of Ceiling Act was the company, the Government lessee, even though a formal lease deed was not executed by the company. However, it has taken the possession of land pursuant to the proposal of the Governmentas per terms and conditions mentioned thereto. [559-C-D] 1. 3.

The public limited company holding land would be covered by definition of 'tenure holder' as contained in clause (17) of Section 3. 'Tenure holder' is defined to mean ' a person who is the holder of a ESCORTS FARMS LTD. v. COMMR. , KUMAON DIVN. , NAINITAL 547 holding'. The word 'person' has not been defined in the Ceiling Act but - Section 4 (33) of U. P. General Clauses Act defines 'person' to include a 'company'. 1559-H] 1. 4. The exclusion of public company from sub-section (4) of Section 5 of t>he Act in the matter of distribution of shareholding of the land is not an indication that public company is not deemed to be a 'holder' of land or a legal 'person' as defined in Clauses (9) and (17) of Section 3 of the Ceiling Act read with Clause (33) of Section 4 of the U. P. General Clauses Act. 1560-G] 2. 1. The claim of the lesse'! s and transferees of having acquired status of Sirdars and Bhumidars cannot be accepted.

The possession of the land given to the company under the terms and conditions of the Government Grant did not permit transfer of land without permission of the Government. The position of a Government grantee is that of a lessee as defined in clause (9) of Section 3 of the Ceiling Act. The conditions of the Grant allow sub-leases of the land but contrary to the terms of the Grant, the sub-lessees can claim no independent tenancy right so as to frustrate the terms and tenure of the Grant. Irrespective of the provisions creating rights in favour of tenants under U. P. Tenancy Act, 1939 and the recording of the names of the company or the Farm in the revenue papers as hereditary tenant and deposit of ten times the land revenue by the sublessee for acquiring Bhumidhari rights were ineffectual in view of the provisions of Section 2 of the Government Grants (U. P Amendment) Act, 1960 which give an overriding effect to terms of the Grant.

The High Court, therefore, rightly negatived the claim set up by the lessee/sub-lessees of the land to the status of 'Sirdars' or 'Bhumidhars'. (561-H; 562-A-B; 563-C-D] 2. 2. No estoppel can operate against the overriding statute so as to bind the ceiling authorities to accept the tenancy rights of the lessees/sublessees as indefeasible in application ofCeiling Act to the lands in question. [563-F] 2. 3. On conjoint reading of the provisions of the Ceiling Act and the land Reforms Act, the grantee of land from the Government is a holder of land in the status of a Bhumidhar and the land can be subjected to ceiling limit. To the lands held by the company/grantee of the Government, the provisions of Ceiling Act would be attracted. Such grantee being a lessee from Government has no right to transfer the land without permission of the Government. 1565-C) - Raghubar Dayal v. State of U. P. , (1995J Supp. 3 SCC 20, relied on. 2. 4.

In accordance with proviso (b) of the said sub-section (6) of Section 5 of the Act transfers made after 24. 1. 1971 can be excluded for determining the ceiling area or the holder only if it is proved to the satisfaction of the prescribed authority that the transfers were made in good faith and for adequate consideration. 1567-DJ 2. 5. The concurrent findings of the appellate authority and the High Court that the Company and the Farm lack good faith in executing the sale deeds after the cut off date 24. 1. 1971 are not vitiated by consideration of any irrelevant circumstances and being essentially a finding of fact is not liable to be interfered with, in the appeals under Article 136 of the Constitution. (568-B-CJ 3. 1. It is true that the order of the prescribed authority excluding 250 acres of land belonging to the school in determining the ceiling limit and it was not questioned by the State in appeal.

The finding that the land was held by the school as a separate legal entity is obviously a mistake because in all subsequent proceedings before the ceiling authorities, the High Court and this Court, the land is stated to be held by the company or Farm for running the school as one of its activities. The land was in use for the purposes of educational institution run by the Company or the Farm. It qualified for exemption under clause (ix) of Section 6 of the Act, •• ----as it stood then. Under the Amendment Act of 1973, the exemption of land held by an educational institution was taken away, ceiling limit was reduced and the cut-off date fixed was 24. 1. 1971.

It was provided that all transfers made by the holder of a land after the cut-off date would be ignored unless, as provided in clause (b) of the sub-section 6 of Section 5 of the Act read with the explanation thereuf\der that the holder discharges his burden of proving to the satisfaction of the Prescribed Authority, that the transfers made after 24. 1. 1971 were in good faith, for adequate consideration and were not Benami transactions. It is evident from the fact that all transfers or sale-deeds have been executed in favour of the transferees, after the cut-off date viz. 24. 1. 1971 by the company to which the provisions of sub-section (6) of Section 5, as introduced by the Amendment Act of 1973, were Clearly attracted. A finding of fact has been recorded by the Commissioner and confirmed by the High Court in the Writ Petition that transfers of the land used for school have been made ESCORTS FARMS LTD. v. COMMR, KUMAON DIVN.

, NAINITAL 549 with full knowledge of the impending legislation pruposing reduction of ceiling limit and intent to evade the effect of ceiling law. Hence, on the legal and factual premise, the bar of res judicata is not available to the holder Company or the Farm. Their own subsequent conduct of effecting transfers of school land estops them from raising a plea of res judicata on an apparently erroneous finding recorded in the order of Prescribed Authority in the course of proceedings under the original unamended Act. (570-C-G; 571-B-D) 3. 2. The inaction of the State in not filing appeal against the erroneous exclusion of the land from the holding of the company and treatlng it to be of the school as separate entity, cannot debar, in law, the State in subjecting such land to the ceiling limit in the proceedings initiated under the Amendment Act of 1973 whereby the ceiling limit was further reduced. On the date ofenforcement of the Amendment Act No.

18of1973, the school land was held by the company and not by the school which had no separate legal existence as an entity. (571-G) 3. 3. Res judicata is a plea available in civil proceedings in accordance with Section 11 of the Code of Civil Procedure. It is a doctrine applied to give finality to '/is' in original or appellate proceedings. Proceedings under the Ceiling Act are not adversarial as are proceedings in suit. The Ceiling Act is a legislation to give effect to the Directive Principles contained in clauses (b) and (c) of Article 39 of the Constitution. The laudable social objectives sought to be achieved by the ceiling legislation is to take surplus land from the holders and distribute the same to the landless agricultural labourers and peasants surviving on agriculture. In applying the principles of res judicata, therefore, to the ceiling proceedings, the object of the Act cannot be lost sight of.

All principles of res judicata contained in Section p 11 CPC cannot be strictly and rigorously made applicable to ceiling proceedings. Section 38-B introduced by Amendment Act of 1976 with the transitory provisions made both in the Amendment Act No. 18of1973 and Act No. 20 of 1976 is a departure from the provisions of Section 11 of the Code of Civil Procedure and indicate non-applicability of bar of res judicata in ceiling proceedings under the Act. The exclusion of land of the school from the extent of holding of the holder company was not a decision or a finding on an issue arising between the parties but it was a clear mistake which is apparent from the fact that this land was throughout treated by the holder company as its own land and was transferred by the company by different sale-deeds to the transferees after the cut-off date. On these facts and nature of title of the land, plea of res judicata cannot be allowed to be raised; (572-H; 573-A, D-F; 574-C, DJ State ofU. P. v.

Budh Singh and Ors. , f1995) 6 SCC 146 and State of U. P. v. Budh Singh (Dead) by Lrs. , (1997] 2 SCC 181, relied on. Ram Lal"· State ofU. P. and Ors. , (1978) All L. J. 1197 and Kedar Singh v. Addi. District Judge, Varanasi and Ors. , (1980) All. L. J. 36, referred to. Black's law Dictionary, Pages 1304-1305, referred to. 4. The transferee is the party likely to be adversely affected by the order nullifying the transfer if found to be lacking in good faith. The transferee is clearly covered by the expression "the party claiming its benefit" as used in Explanation (ii) of sub-section (6) of Section 5 of the Act. The burden of proof in respect of bona fides of transfers is also on the person or 'party claiming its benefit'. It was, therefore, necessary to make transferees as parties in the appeal and grant them opportunity of hearing by the appellate authority.

To that extent the order of the appellate authority can be said to have been vitiated for not following the required procedure. However, non-joinder of transferees as parties and denial of opportunity of hearing to them, in the facts and circumstances, cannot be said to be fatal to the entire ceiling proceedings. Hence, order of the appellate authority cannot be set aside. Since, however, the High Court has already given full opportunity of hearing to the transferees on this aspect, an order of remand is not justified. In the. instant case, it has been found that large scale transfers were effected to defeat Ceiling Law. Therefore, it is not just to upset the concurrent findings of the appellate authority and the High Court, in exerdse of the discretionary powers under Article 136 of the Constitution.

Rules of natural justice are to be followed for doing substantial justice and not for completing a mere ritual of hearing without possibility of any change in the decision of the case on merits. (576-C-F; 517-B-C; 578-E) State ofAndhra Pradesh v. S. Vishwanatha Raju and Ors. , (1995) 3 SCC 327, relied on. 5. 1. The quantification of damages payable to the State for use and occupation of surplus land under Section 16 is required to be done in accordance with the principles laid down in Rule ISA of the Rules framed - \ under the Ceiling Act. The provisions of Section 16 read with Section 18- ' - A require separate proceedings to be undertaken for determination and quantification of amount of damages for use and occupation of the surplus land. The said exercise ought to have been left to the Ceiling Authorities. The High Court should not have awarded lump sum damages by imposing heavy costs.

Hence, a part of the order of the High Court imposing Rupees Ten lacs as costs on the farm and directing its payment by the Farm or by its office bearer is set aside. [579-D-F] 5. 2. The subsequent transferees have stepped into the shoes of the original transferees. They can claim no different or better rights than their . transferors. The interveners have to work out their independent rights and remedies, if any, and can claim no right of hearing in these appeals. [579-H; 580-A) CIVIL APPELLATE JURISDICTION Civil Appeal No. 1584 of 1998. From the Judgment and Order dated 15. 5. 95 of the Allahabad High Court in C. M. W. P. No. 12024 of 1992. WITH C. A. Nos. 1581-1583, 1585-1588, 1589-1606, 1607-1626, 1627-1639, 1640-1654, and 1726 of 1998. Subodh Markandeya, Dinesh Dwiwedi, Rakesh Dwivedi, Ms. Chitra Markandeya, Manoj Swarup, Mrs. Lalita Kohli, Anubhav Kumar, Ms. Rachna Srivastava, Jatinder Kumar Bhatia, Ms.

Niranjana Singh, Rohit Singh, Abhishek Chaudhary, Goodwill Indeevar, Surya Kant, Neeraj Kr. Sharma, Ashok Kumar Sharma, Debasis Misra and B. K. Jha for the appearing parties. The Judgment of the Court was delivered by DHARMADHIKARI, J. These appeals are directed against a common judgment dated 15th May, 1995 of the High Court of Allahabad passed in batch of writ petitions arising out of proceedings under the UP Imposition of Ceiling on Land Holdings Act, 1960 (shortly hereinafter referred to as 'the Ceiling Act'). The lands, which were subjected both on the part of the State Authorities and the private parties, we leave them all to bear their own costs and expenses in these appeals. S. K. S. Appeals· dismissed.