Supreme Court sets aside demand for market value of tenements under Urban Land Ceiling Act: Shridhar C. Shetty vs. The Additional Collector (2020)

Introduction

Date of the Judgment: 02 September 2020
Citation: 2020 INSC 706
Judges: Rohinton Fali Nariman, J. and Navin Sinha, J.

Can a competent authority under the Urban Land (Ceiling and Regulation) Act, 1976 (since repealed), demand the market value of tenements if a person fails to hand over possession as required by an exemption order? The Supreme Court of India addressed this question in a case where the appellant was asked to pay the market value of seven tenements for not complying with the conditions of an exemption granted under the Act. This judgment clarifies the limits of a competent authority’s powers under the Act.

The bench comprised Justices Rohinton Fali Nariman and Navin Sinha. The judgment was authored by Justice Navin Sinha.

Case Background

The case revolves around an exemption granted to the appellant, Shridhar C. Shetty, under Sections 20 and 21 of the Urban Land (Ceiling and Regulation) Act, 1976. The exemption was for constructing tenements on two plots of land, with a condition to surrender 20% of the constructed area to government nominees. The appellant constructed on only one plot but was later asked to pay the market value of the tenements he failed to hand over. The Additional Collector demanded Rs. 51,97,196 plus interest, penalty, and recovery expenses as arrears of land revenue due to the appellant’s failure to hand over seven tenements to government nominees as required by the exemption conditions.

The appellant argued that the competent authority lacked the statutory power to levy such a demand and that the liability should fall on the developers with whom he had a development agreement. The authorities contended that the appellant was responsible for complying with the exemption conditions, as he was the one who applied for and received the exemption.

Timeline:

Legal Framework

The judgment refers to several key sections of the Urban Land (Ceiling and Regulation) Act, 1976:

• Section 2(d) defines “competent authority” as a person or authority authorized by the State Government to perform functions under the Act.
• Section 20 empowers the State Government to exempt vacant land from the provisions of the Act, subject to conditions. It also allows the government to withdraw the exemption if conditions are not met. Specifically, Section 20(2) states:
  “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.”
• Section 21 allows the competent authority to declare land not to be excess if it is to be used for constructing dwelling units for weaker sections, subject to terms and conditions. Section 21(2) states:
  “Where any person contravenes any of the conditions subject to which the permission has been granted under sub-section (1), the competent authority shall, by order, and after giving such person an opportunity of being heard, declare such land to be excess land and thereupon all the provisions of this Chapter shall apply accordingly.”
• Section 38(4) provides for penalties for contravening the provisions of the Act for which no specific penalty is mentioned. It states:
  “If any person contravenes any of the provisions of this Act for which no penalty has been expressly provided for, he shall be punishable with imprisonment for a term which may extend to two years or with fine which may extend to one thousand rupees or with both.”

The Court noted that both Sections 20 and 21 of the Act provide for withdrawal of exemption or declaration of land as excess if the conditions of the exemption are not met.

Arguments

Appellant’s Submissions:

• The exemption was granted under Section 20 of the Act, and the competent authority was aware that construction was only on one plot but did not withdraw the exemption.
• The competent authority even issued a “No Objection Certificate” acknowledging the handover of seven tenements.
• If there was a breach, the authorities could only withdraw the exemption, not levy a monetary demand.
• Section 38(4) of the Act only provides for a punishment of fine or imprisonment, not a monetary demand.
• The appellant relied on the case of Naraindas Indurkhya vs. The State of Madhya Pradesh and Others, (1974) 4 SCC 788, to argue that the demand was outside the provisions of the Act.
• Following the judgment in M/s Shantistar Builders vs. Narayan Khimalal Totame and Others (1990) 1 SCC 520, the authorities could have enforced only a 5% limit for handing over tenements to government nominees.
• The appellant had entered into a development agreement with respondents 2 to 4, making them responsible for any breaches.

Respondents’ Submissions:

• The appellant could not have transferred development rights to respondents 2 to 4 as per the exemption order.
• The exemption was for both plots, and the appellant cannot claim relief for constructing on only one plot.
• The “No Objection Certificate” was not conclusive and indicated that seven tenements were still to be handed over.
• The appellant was the one who applied for the exemption and submitted building plans, so he is liable for the breach.
• The appellant had undertaken to purchase seven tenements or pay their market value.
• The judgment in M/s Shantistar Builders (supra) was interpreted as prospective in nature by the Mumbai High Court, relying on Karmarahi Kanji Chandan vs. The State of Maharashtra and Ors., Writ Petition No. 2629 of 1992 dated 03.12.1992 and followed in other writ petitions. This was also supported by the Supreme Court in Nargis Jal Haradhvala vs. State of Maharashtra and ors., (2015) 4 SCC 259.
• Any dispute between the appellant and respondents 2 to 4 is a private matter and does not concern the authorities.

Submissions of Parties

Issues Framed by the Supreme Court

The Supreme Court considered the following issue:

1. Whether the competent authority under the Urban Land (Ceiling and Regulation) Act, 1976, possesses the power to recover the market value of seven tenements for failure to hand over possession in terms of the order of exemption.

Treatment of the Issue by the Court

Authorities

The Court considered the following authorities and legal provisions:

• S. Vasudeva vs. State of Karnataka and ors., (1993) 3 SCC 467: The Court discussed the distinction between Sections 20 and 21 of the Act. It clarified that Section 20 deals with the State Government’s power to grant exemptions, while Section 21 deals with the competent authority’s power to declare land not to be excess.
• Naraindas Indurkhya vs. The State of Madhya Pradesh and Others, (1974) 4 SCC 788: The appellant relied on this case to argue that the demand was outside the provisions of the Act.
• M/s Shantistar Builders vs. Narayan Khimalal Totame and Others (1990) 1 SCC 520: The Court clarified that this judgment was prospective in nature, and therefore, the 5% limit for handing over tenements was not applicable in the present case.
• Karmarahi Kanji Chandan vs. The State of Maharashtra and Ors., Writ Petition No. 2629 of 1992 dated 03.12.1992: The Mumbai High Court interpreted M/s Shantistar Builders (supra) as prospective in this case.
• Nargis Jal Haradhvala vs. State of Maharashtra and ors., (2015) 4 SCC 259: The Supreme Court referred to this case in the context of the prospective nature of M/s Shantistar Builders (supra).
• Section 2(d) of the Urban Land (Ceiling and Regulation) Act, 1976: Definition of “competent authority”.
• Section 20 of the Urban Land (Ceiling and Regulation) Act, 1976: Power to exempt land.
• Section 21 of the Urban Land (Ceiling and Regulation) Act, 1976: Excess vacant land not to be treated as excess in certain cases.
• Section 38(4) of the Urban Land (Ceiling and Regulation) Act, 1976: Penalties for contravention of the Act.

Authorities Considered by the Court

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 S. Vasudeva vs. State of Karnataka and ors., (1993) 3 SCC 467 to distinguish between the powers under Sections 20 and 21 of the Act.
• The Court accepted the appellant’s reliance on Naraindas Indurkhya vs. The State of Madhya Pradesh and Others, (1974) 4 SCC 788, to conclude that the demand was outside the scope of the Act.
• The Court held that M/s Shantistar Builders vs. Narayan Khimalal Totame and Others (1990) 1 SCC 520 was prospective in nature, and therefore, the 5% limit for handing over tenements was not applicable in this case.

What weighed in the mind of the Court?

The Court’s reasoning was primarily driven by the principle that a statutory authority, like the competent authority under the Urban Land (Ceiling and Regulation) Act, 1976, cannot act beyond the powers conferred upon it by the statute. The Court emphasized that the authority’s actions must be within the confines of the Act and that it cannot expand its jurisdiction through an undertaking by a party. The Court also noted that while the authority could have withdrawn the exemption, it did not have the power to demand the market value of the tenements.

The Court’s decision was heavily influenced by the legal framework and the interpretation of the statute, with a relatively lower emphasis on the factual aspects of the case.

Logical Reasoning

Judgment

The Supreme Court held that the competent authority under the Urban Land (Ceiling and Regulation) Act, 1976, did not have the power to demand the market value of the tenements for failure to hand over possession. The Court reasoned that:

• The competent authority is a creature of the statute and cannot act beyond its statutory jurisdiction.
• The powers of the competent authority are circumscribed by the provisions of the Act.
• While the authority could have withdrawn the exemption, it did not have the power to demand the market value of the tenements.
• The undertaking by the appellant to pay the market value could not expand the statutory powers of the competent authority.
• The demand for the market value of the remaining seven tenements was outside the purview of the Act and could not be construed as money due to the Government.

The Court quoted the following from the judgment:

“But the competent authority being a creature of the statute under Section 2(d) of the Act, cannot act beyond its statutory jurisdiction and the exercise of its powers shall remain circumscribed by the provisions of the Act.”

“Any undertaking by the appellant cannot expand the statutory jurisdiction of the competent authority.”

“The demand for the market value of the remaining seven tenements, falling outside the purview of the Act, cannot be construed as money due to the Government so as to vest in it the nature of an arrears of land revenue recoverable under Section 265 of the Maharashtra Land Revenue Code, 1966.”

The Court rejected the argument that the judgment in M/s Shantistar Builders (supra) should apply, holding that it was prospective in nature.

There were no dissenting opinions in this case.

Key Takeaways

✓ Statutory authorities must act within the boundaries of the powers conferred upon them by the statute.

✓ Undertakings by individuals cannot expand the statutory jurisdiction of authorities.

✓ The Urban Land (Ceiling and Regulation) Act, 1976, does not empower competent authorities to demand the market value of tenements for failure to hand over possession.

✓ This judgment clarifies the limits of a competent authority’s powers under the Urban Land Ceiling Act.

Directions

No specific directions were given by the Supreme Court in this case.

Specific Amendments Analysis

There were no specific amendments discussed in this judgment.

Development of Law

The ratio decidendi of this case is that a competent authority under the Urban Land (Ceiling and Regulation) Act, 1976, cannot demand the market value of tenements for failure to hand over possession as per the exemption order. This judgment reinforces the principle that statutory authorities must act within the confines of their statutory powers and cannot expand their jurisdiction through undertakings or other means. There is no change in previous position of law but a clarification of the extant legal position.

Conclusion

The Supreme Court set aside the High Court’s order and allowed the appeal, holding that the demand for the market value of the tenements was beyond the statutory powers of the competent authority under the Urban Land (Ceiling and Regulation) Act, 1976. The Court emphasized that statutory authorities must operate within the confines of their enabling statutes.