Supreme Court Clarifies Vesting of Land Under Uttar Pradesh Sugar Undertakings Act: Gaurav Aseem Avtej vs. U.P. State Sugar Corporation Ltd. (20 April 2018)

Date of the Judgment: 20 April 2018

Citation: (2018) INSC 329

Judges: S.A. Bobde, J., L. Nageswara Rao, J.

Can land leased to a sugar mill be considered part of the “scheduled undertaking” and vest with the government under the Uttar Pradesh Sugar Undertakings (Acquisition) Act, 1971? The Supreme Court addressed this question in a dispute over land leased to a sugar mill, clarifying the scope of vesting under the Act. The Court held that land used for factory purposes, including leased land, vests with the government, not just the leasehold interest. The judgment was delivered by a two-judge bench comprising Justice S.A. Bobde and Justice L. Nageswara Rao, with Justice L. Nageswara Rao authoring the opinion.

Case Background

The case involves a dispute over land in Bijnor, Uttar Pradesh, originally owned by the Plaintiffs, Sh. Vinod Chandra Gupta and his mother, Smt. Prakashwati. The land was leased to M/s Shiv Prasad Banarasi Das Sugar Mills for parking vehicles. The Plaintiffs sought eviction of the Defendant-Corporation (U.P. State Sugar Corporation Ltd.) and recovery of rent arrears. The Defendant-Corporation claimed the land vested with the State Government under the Uttar Pradesh Sugar Undertakings (Acquisition) Act, 1971.

Timeline:

Course of Proceedings

The Trial Court partly decreed the suit, ordering the Defendant-Corporation to pay rent arrears but denying eviction. The First Appellate Court reversed this, decreeing eviction. The High Court overturned the First Appellate Court’s decision, dismissing the suit and holding that the land vested with the State Government under the Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950 and the Uttar Pradesh Sugar Undertakings (Acquisition) Act, 1971. The Plaintiffs then appealed to the Supreme Court.

Legal Framework

The primary legal frameworks in this case are:

• The Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950: Specifically, Section 143, which deals with the declaration of land for non-agricultural purposes, Section 156, which restricts the transfer of land, and Section 167, which deals with the consequences of void transfers.
• The Uttar Pradesh Sugar Undertakings (Acquisition) Act, 1971: Section 2(h) defines “scheduled undertaking” and Section 3 deals with the vesting of undertakings in the State Government.

Section 143 of the Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950:

This section allows for the declaration of land used for non-agricultural purposes. The source document mentions that the S.D.O., Bijnor, declared the land as non-agricultural under this section on 20.01.1972.

Section 156 of the Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950:

This section restricts the transfer of land, and the High Court held that the lease by the Plaintiffs was in violation of this section.

Section 167 of the Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950:

This section specifies the consequences of a void transfer, stating that the land vests with the State Government free from all encumbrances.

Section 2(h) of the Uttar Pradesh Sugar Undertakings (Acquisition) Act, 1971:

This section defines “scheduled undertaking” as:

“2(h) “scheduled undertaking” means an undertaking engaged in the manufacture or production of sugar by means of vacuum pans and with the aid of mechanical power in factory specified [in any of the schedules of this Act], and comprises-
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(vi) all lands (other than lands held or occupied for purposes of cultivation and grovelands) and buildings held or occupied for purposes of that factory (including buildings pertaining to any of the properties and assets hereinbefore specified, and guest houses and residences of directors, managerial personnel, staff and workmen or of any other person as lessee or licensee, and any store houses, molasses, tanks, roads, bridges, drains culverts, tubewells, water storage or distribution system and other civil engineering works) including any leasehold interest therein”

Section 3 of the Uttar Pradesh Sugar Undertakings (Acquisition) Act, 1971:

This section provides for the vesting of every scheduled undertaking on the appointed day free from any debt, mortgage, charge, or any other encumbrances.

Arguments

Appellant’s Arguments:

• The Appellant argued that the Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950 does not apply to the land, as it was not agricultural land.
• They contended that the vesting under the Uttar Pradesh Sugar Undertakings (Acquisition) Act, 1971, is limited to the leasehold rights, and the title of the land remains with the Plaintiffs.
• The Appellant submitted that the land was leased out to the sugar mill, and the vesting is only of the leasehold interest in the land.

Respondent’s Arguments:

• The Defendant-Corporation argued that the Plaintiffs lost all rights to the land as they could not have leased out agricultural land.
• They asserted that the Plaintiffs cannot benefit from the declaration under Section 143 of the Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950.
• The Defendant-Corporation submitted that the land vested with the State Government by virtue of the Uttar Pradesh Sugar Undertakings (Acquisition) Act, 1971, and they became the title holder.
• They also argued that they had made permanent constructions on the land and had become permanent lessees.

Issues Framed by the Supreme Court

The primary issue framed by the Supreme Court was:

1. Whether the land in dispute vested in the Government under the Uttar Pradesh Sugar Undertakings (Acquisition) Act, 1971, and if so, whether such vesting included the land itself or was limited to the leasehold interest.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court considered the following authorities:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• The Court relied on State of U.P. v. Lakshmi Sugar & Oil Mills Ltd. [(2013) 10 SCC 509]* to interpret the scope of “scheduled undertaking,” stating that land held or occupied for factory purposes is part of the undertaking.
• The Court used Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. And Others [(1987) 1 SCC 424]* to emphasize the need to interpret a statute in the context of its enactment.
• The Court used A.G. Varadarajulu v. State of T.N. [(1998) 4 SCC 231]*, State of U.P. v. Sarjoo Devi [(1977) 4 SCC 2]*, Bhudan Singh v. Nabi Bux [(1969) 2 SCC 481]*, State of A.P. v. Mohd. Ashrafuddin [(1982) 2 SCC 1]*, and Hari Ram v. Babu Gokul Prasad [1991 Supp (2) SCC 608]* to define “held” and “holds” as including both ownership and legal possession.
• The Court used the definitions from Black’s Law Dictionary to interpret “hold” and “occupy” as including legal possession and use.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily driven by the intention of the Uttar Pradesh Sugar Undertakings (Acquisition) Act, 1971, which was to secure all assets used for the purposes of the factory. The Court emphasized that the definition of “scheduled undertaking” was broad enough to include all lands held or occupied for the factory, regardless of whether they were owned or leased by the factory. The Court also considered the plain reading of the statute, the historical context of the Act, and the definitions of “held” and “occupied” in legal dictionaries.

The Court also considered the fact that the land was being used for the purpose of the factory, which weighed in favour of the land being vested in the government.

The Court rejected the High Court’s finding that the Plaintiffs were not entitled to compensation, stating that the 1950 Act did not apply to the land, and the Plaintiffs could seek appropriate remedies for compensation.

Logical Reasoning

Judgment

The Supreme Court held that the land in dispute vested in the State Government on the appointed day (03.07.1971) under the Uttar Pradesh Sugar Undertakings (Acquisition) Act, 1971. The Court clarified that the vesting included the land itself and not just the leasehold interest. The Court stated:

“A detailed examination of the provisions of the Act would make it clear that the intention was to secure all assets which were being used for the purposes of the factory.”

The Court rejected the High Court’s finding that the Plaintiffs were not entitled to compensation, stating:

“In view of the above, we are of the opinion that the land did not vest in the Government under the 1950 Act.”

The Court further added:

“The land owners may resort to any remedy available to them for payment of compensation to which they are entitled to.”

The Court reasoned that the definition of “scheduled undertaking” under Section 2(h)(vi) of the Uttar Pradesh Sugar Undertakings (Acquisition) Act, 1971, included all lands held or occupied for the purposes of the factory. The inclusion of “any leasehold interest therein” was interpreted as an extra precaution and not as a limitation on the scope of vesting.

The Court emphasized the broad scope of the term “held” to include legal possession and not just ownership. The Court also noted that the land was being used for the purposes of the factory, which was a key factor in determining that the land vested with the government.

There was no dissenting opinion in this case.

Key Takeaways

• Land used for the purposes of a sugar factory, including leased land, vests with the State Government under the Uttar Pradesh Sugar Undertakings (Acquisition) Act, 1971.
• The vesting is not limited to the leasehold interest but includes the land itself.
• The Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950, does not apply to land that was used for non-agricultural purposes before 1950.
• Landowners are entitled to seek compensation for their vested land.

Directions

The Supreme Court did not give any specific directions in this case. However, it did clarify that the Plaintiffs are not disentitled from seeking compensation for their land.

Development of Law

The ratio decidendi of this case is that under the Uttar Pradesh Sugar Undertakings (Acquisition) Act, 1971, all lands held or occupied for the purposes of a sugar factory, including leased land, vest with the State Government. This clarifies that the vesting is not limited to the leasehold interest but includes the land itself. This interpretation is based on the broad definition of “scheduled undertaking” in the Act and the intention to secure all assets used for the factory.

This judgment clarifies the interpretation of “scheduled undertaking” under the Uttar Pradesh Sugar Undertakings (Acquisition) Act, 1971, and settles the question of whether the vesting is limited to the leasehold interest or includes the land itself. This is a significant development in the interpretation of the Act.

Conclusion

In conclusion, the Supreme Court dismissed the appeals, holding that the land in dispute vested with the State Government under the Uttar Pradesh Sugar Undertakings (Acquisition) Act, 1971. The Court clarified that the vesting included the land itself and not just the leasehold interest. This judgment provides clarity on the scope of vesting under the Act and ensures that all assets used for the purposes of a sugar factory are secured by the government.

Category

• Property Law
  • Land Acquisition
  • Leasehold Interest
  • Vesting of Land
• Uttar Pradesh Sugar Undertakings (Acquisition) Act, 1971
  • Section 2(h), Uttar Pradesh Sugar Undertakings (Acquisition) Act, 1971
  • Section 3, Uttar Pradesh Sugar Undertakings (Acquisition) Act, 1971
• Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950
  • Section 143, Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950
  • Section 156, Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950
  • Section 167, Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950
• Supreme Court Judgments
  • Land Law

FAQ

Q: What was the main issue in the Gaurav Aseem Avtej vs. U.P. State Sugar Corporation Ltd. case?

A: The main issue was whether land leased to a sugar mill vested with the government under the Uttar Pradesh Sugar Undertakings (Acquisition) Act, 1971, and if so, whether it included the land itself or just the leasehold interest.

Q: What did the Supreme Court decide about the vesting of land?

A: The Supreme Court decided that the land, including leased land, vested with the State Government, not just the leasehold interest.

Q: What does “scheduled undertaking” mean under the Uttar Pradesh Sugar Undertakings (Acquisition) Act, 1971?

A: “Scheduled undertaking” includes all lands and buildings held or occupied for the purposes of a sugar factory, including any leasehold interest therein.

Q: What did the Court say about the Uttar Pradesh Zamindari Abolition and Land Reforms Act, 1950?

A: The Court held that the 1950 Act does not apply to land used for non-agricultural purposes before 1950.

Q: Are landowners entitled to compensation if their land vests with the government under the 1971 Act?

A: Yes, the Supreme Court clarified that landowners are entitled to seek compensation for their vested land.