Bombay High Court
Bilt Graphic Paper Products ... vs The State Of Maharashtra, Through ... on 29 August, 2022
Bench: A.S. Chandurkar, Urmila Sachin Phalke
WP-4086-2011(J) 1/27
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH, NAGPUR.
WRIT PETITION NO. 4086 OF 2011
BILT Graphic Paper Products Limited,
A Company incorporated under the
Companies Act, 1956, having its
Registered Office at P. O. Ballarpur Paper Mills,
District Chandrapur (Maharashtra) 442 901,
through its Manager (Legal). ....... PETITIONER
...V E R S U S...
1. The State of Maharashtra through Secretary,
Department of Revenue, Mantralaya,
Madam Cama Road, Mumbai-400 032.
2. The Collector, Chandrapur, having his
Office at Collectorate, Chandrapur.
3. Sub Divisional Officer, Chandrapur.
4. Tahsildar, Ballarpur, District Chandrapur. ....... RESPONDENTS
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Shri Sunil Manohar, Senior Advocate with Shri Akshay Naik, Advocate for
petitioner.
Ms N. P. Mehta, Assistant Government Pleader for respondents.
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CORAM :- A.S.CHANDURKAR AND URMILA JOSHI-PHALKE, JJ.
ARGUMENTS WERE HEARD ON :10.06.2022
JUDGMENT IS PRONOUNCED ON :29.08.2022
JUDGMENT (Per A.S.Chandurkar, J.)
The challenge raised in this writ petition filed under Article 226 of
the Constitution of India is to the Government Resolution dated 27.02.2009
prescribing payment of fees while granting permission to mortgage Occupancy-
WP-4086-2011(J) 2/27
Class II lands as being unconstitutional, without authority of law and violative
of Article 14 of the Constitution of India. Condition No.5 of the order dated
09.05.2011 passed by the Sub-Divisional Officer, Chandrapur thereby directing
compliance of the terms and conditions stipulated in Government Resolution
dated 27.02.2009 while granting permission to the petitioner to mortgage the
lands acquired for it is also under challenge.
2. The facts relevant for considering the aforesaid challenges are that
the petitioner is a Company incorporated under the provisions of the
Companies Act, 1956. It is in the business of manufacturing paper. The
manufacturing unit of the Company was to be located at Ballarpur, District
Chandrapur and for that purpose an agreement dated 31.07.1947 was entered
into between the then Governor of Central Provinces and Berar and the
Company agreeing to invest money in the purchase of shares of the Company
as well as to acquire land for the Company to set up its paper factory. The
State of Madhya Pradesh thereafter initiated proceedings for acquisition of
land under the provisions of the Land Acquisition Act, 1894 (for short, the Act
of 1894). After acquiring such land, the same was transferred to the Company
on 21.01.1950 under the provisions of Madhya Pradesh Land Revenue Code,
1954 (for short, the Code of 1954). After the States Re-organisation Act, 1960
came into force, Chandrapur District which was earlier part of the Central
WP-4086-2011(J) 3/27
Provinces and Berar was included in the State of Maharashtra. Pursuant to the
initial grant of aforesaid land, the Collector, Chandrapur on 18.01.1968
executed a Deed of recognition of title - Sanad in favour of the Company under
the provisions of the Maharashtra Land Revenue Code, 1966 (for short, the
Code of 1966). In the said Sanad it was stated that the Government of
Madhya Pradesh at the request of the Company had acquired various lands at
Ballarpur and the Company had paid the costs of acquisition to the then
Government of Madhya Pradesh. In the Sanad certain terms and conditions
were incorporated. As per Condition No.7 it was not permissible for the
Company to alienate the said lands or any portion thereof by way of sale,
mortgage, gift, lease, exchange or otherwise except with the previous
permission in writing of the Government. It is stated that the Company
continues to enjoy the said land for the purpose for which it was acquired and
transferred to it. On 18.05.1972 another agreement was executed with the
Company by which land admeasuring 162.30 acres from Survey No.31/1 was
allotted to it for the construction of its residential colony.
3 The Company intended to mortgage the aforesaid land with a view
to raise finance to facilitate its activities. Accordingly, on 05.01.2009 the Sub-
Divisional Officer granted permission to the Company under Section 36 (4) of
the Code of 1966 to mortgage part of its land on certain terms and conditions.
WP-4086-2011(J) 4/27
It was stated that if the Company failed to repay the loan obtained by it and
the mortgaged land was required to be sold, 50% of the amount equivalent of
the market value would have to be deposited with the State Government and
from the balance amount the loan could be recovered. Thereafter on
04.02.2011 the Company made another application to the Sub-Divisional
Officer seeking grant of general permission to create mortgage with regard to
the lands mentioned in the schedule thereto. The Office of the Sub-Divisional
Officer on 28.03.2011 pointed out certain deficiencies to the Company and
also required payment of 0.50% mortgage fees as per Government Resolution
dated 27.02.2009. The Company removed the deficiencies and paid an
amount of Rs.3,26,25,000/- towards 0.50% mortgage fees as per Government
Resolution dated 27.02.2009 however by reserving the right of the Company
to challenge the aforesaid Government Resolution. Permission was accordingly
granted by the Sub-Divisional Officer on 09.05.2011. In the said order, the
conditions existing in the Government Resolution dated 27.02.2009 were
imposed and being aggrieved by the imposition of the condition to pay 0.50%
mortgage fees, the petitioner has challenged the same in this writ petition.
4. Shri Sunil Manohar, learned Senior Advocate for the petitioners
raised the following challenges in support of the prayers made in the writ
petition:
WP-4086-2011(J) 5/27
(a) The land in question had been acquired by the State of Madhya
Pradesh to facilitate setting up of the petitioner's paper manufacturing unit.
The entire cost of acquisition was paid to the State of Madhya Pradesh
pursuant to which the land was allotted to the Company on 21.01.1950. The
initial grant of that land was under the Code of 1954. Condition No.7 in the
grant dated 18.01.1968 requiring the Company to obtain the previous
permission of the Government before alienating the same by way of mortgage
would not entitle the Government to seek recovery of mortgage fees from the
Company while granting such permission. Inviting attention to Article 265 and
Article 366 (28) of the Constitution of India, it was submitted that for levy or
collection of any tax there ought to be an authority of law to do so. The
expression "taxation" includes the imposition of any tax or impost whether
general or local or special and tax was required to be construed accordingly.
The expression "fee" was also comprehended in the expression "tax" for the
purpose of Article 265 of the Constitution of India and hence even for
collection of "fee", authority of law was necessary. Thus, for any impost or tax
to be levied, it was necessary for the State to point out the authority in law
which empowered it to recover its demand. It was submitted that in the reply
filed on behalf of the State Government a specific stand was taken that the
Government Resolution dated 27.02.2009 was based on the provisions of
Section 31 of the Code of 1966 as well as the provisions of the Maharashtra
WP-4086-2011(J) 6/27
Land Revenue (Disposal of Government Lands) Rules, 1971 (for short, the
Rules of 1971). It was submitted that the provisions of Section 31 of the Code
of 1966 would not be attracted in the present case since the land in question
was granted to the Company in the year 1950 and the Company had paid the
price of acquiring the said land to the State of Madhya Pradesh. Under Section
31 of the Code of 1966 payment of the price for unalienated land was required
to be made before the land was entered upon under Section 30 of the Code of
1966. Similarly, the provisions of Section 30 of the Code of 1966 were also
not attracted in the facts of the present case. While it was open for the State
Government to require the Company to obtain its previous permission in
writing before alienating the land in question, the same could not be made
subject to payment of any mortgage fee. Levy of 0.50% mortgage fees
therefore did not have any statutory or legal support for it to be sustainable in
law. On this ground, it was urged that the demand of 0.50% mortgage charges
was without the authority of law in terms of Article 265 of the Constitution of
India. In this regard, reliance was placed on the decision in Commissioner of
Customs (Import) Mumbai vs. Dilip Kumar and Company and others [(2018) 9
SCC 1].
(b) In the absence of any charging provision in the Code of 1966 or the
Rules framed thereunder, it was not permissible for the State Government
WP-4086-2011(J) 7/27
to demand mortgage fees by issuing executive instructions in the form of
Government Resolution dated 27.02.2009. Neither Section 30 nor Section 31
of the Code of 1966 empowered the State Government to demand mortgage
fees while granting permission to mortgage the lands. While the Legislature
was empowered to enact a charging provision, its legislative power could not
be taken by the executive for such purpose. Reliance in that regard was placed
on the decision in Tata Iron and Steel Company and another vs. State of Bihar
and others [(2018) 12 SCC 107]. Though Government Resolution dated
27.02.2009 was under challenge, such challenge was restricted to clause (b)
thereof prescribing payment of 0.50% of the loan amount as mortgage fees
while granting permission to obtain loan from a financial institution.
(c) It was not permissible for the State Government to demand 0.50%
mortgage fees which was in the nature of unearned income being demanded
by the State. Inviting attention to the judgment of the Division Bench in Smt.
Jaikumari Amarbahadursingh and others vs. State of Maharashtra, through the
Secretary, Revenue and Forest Department and another [2009 (1) All M R
343] it was submitted that it was held by this Court in clear terms that the
revenue authorities could not demand any amount towards "unearned income"
for legitimising the proposed transfer of any land with a view to raise revenue.
The Division Bench after examining the Code of 1966 had held in clear terms
WP-4086-2011(J) 8/27
that the State had no the authority in law to make such demand of unearned
income. Moreover, it was held that in the absence of any specific law on the
said subject, the State Government or its officers could not usurp to themselves
the power to levy such fees on the basis of any Government Resolution. The
Government Resolution dated 19.06.2007 was held to be unsustainable with
the scheme of the Code of 1966 and the Rules framed thereunder. Though the
aforesaid judgment considered the grant of such land for purposes other than
commercial or industrial purpose, the ratio therein dis-entitled the State
Government to make a demand in the nature of unearned income even in the
present case.
(d) Without prejudice to the aforesaid, it was submitted that even if it
was assumed that the demand of 0.50% mortgage fees was in the nature of a
fee, it ought to be seen that there was no service being provided by the State
Government while granting such permission to mortgage the said lands. The
levy was only for the purposes of raising a general revenue of the State. There
were no pleadings made on behalf of the State Government to indicate the
nature of services being provided as the existence of quid pro quo was vital for
justifying the levy and demand of fee. There was absence of any co-relation
between the service rendered by granting permission to alienate the land and
the fee sought to be recovered. In fact, no service was being rendered while
WP-4086-2011(J) 9/27
granting such permission. It was further submitted that by demand of ad
valorem fee at 0.50% was in the absence of any justification for the demand as
made. Inviting attention to the observations made by the Honourable
Supreme Court in the decision Calcutta Municipal Corporation and others vs.
Shrey Mercantile (P) Limited and others [(2005) 4 SCC 245] it was submitted
that when identical services are provided then the quantum of fees could not
be demanded on ad valorem basis and it would result in incidence of the levy
falling differently on persons who were similarly situated and thus, violative of
Article 14 of the Constitution of India. The levy of 0.50% mortgage fees was in
the nature of a tax without any support of law. Neither Section 31 of the Code
of 1966 nor executive instructions in the form of the Government Resolution
dated 27.02.2009 could permit the State Government from demanding such
mortgage fees. Attention was also invited to the judgment of the Full Bench of
this Court in Bharat Cotton Press Company and others vs. Municipal Council,
Arvi and another[1989 Mh L J 703] in that context.
It was thus submitted that on the grounds as urged it be declared
that the demand of 0.50% mortgage fees as made by the Sub-Divisional Officer
as a condition precedent for granting permission to mortgage the lands in
question was without any authority in law and was liable to be set aside. The
mortgage fees paid under protest were thus liable to be returned to the
Company alongwith interest. It was thus submitted that the prayers made in
WP-4086-2011(J) 10/27
the writ petition be granted.
5. Ms. N. P. Mehta, learned Assistant Government Pleader for the
respondents opposed the aforesaid submissions. It was submitted that the
grant of land to the Company was in the nature of a contract and as per
Condition No.7 of the Sanad dated 18.01.1968 it was necessary for the
Company to obtain prior permission of the State Government before seeking to
alienate the said lands. Since the Company was granted the lands on aforesaid
conditions, the same were binding on the Company and it was required to
comply with the same. The demand for 0.50% mortgage fees was based on
the Government Resolution dated 27.02.2009 and there was nothing illegal in
such demand. The same was in the nature of a fee and it was not a tax. The
Government Resolution dated 27.02.2009 was issued in the name of the
Governor as required by Article 166(1) of the Constitution of India. Reference
was then made to Sections 31 and Section 328 (2) (x) of the Code of 1966
alongwith the Rules of 1971 under which such conditions could be imposed
under the orders of the State Government. Reference was also made to the
affidavit filed by the Tahsildar on behalf of the respondents in support of the
stand taken while opposing the prayers made in the writ petition. It was thus
submitted that the demand of 0.50% mortgage fees was in accordance with
law and there was no reason to interfere in the writ petition.
WP-4086-2011(J) 11/27
6. We have heard the learned counsel for the parties and we have
perused the documentary material on record. At the outset, it would necessary
to refer to certain relevant factual aspects. Perusal of the Sanad dated
18.01.1968 indicates that reference therein has been made to an agreement
dated 31.03.1947 between the Governor of the then Central Provinces and
Berar on one part and the Company on the other. It is stated that from
26.01.1950 the provinces of Central Provinces and Berar came to be known as
State of Madhya Pradesh. Pursuant to an agreement between the Government
of Madhya Pradesh and the Company, the lands situated at Ballarpur were
acquired and the Company paid the cost of acquisition of the said lands to the
Government of Madhya Pradesh. The Company had made a request to the
State Government to issue to it Deed of recognition of title of the said land and
pursuant to that request the Sanad dated 18.01.1968 was executed under the
signature of the Collector, Chanda on behalf of the Governor of the
Maharashtra State. It was declared that the land was held by the Company as
its property to be used by the Company for the purpose of construction of the
paper mill subject to payment of agricultural, non-agricultural or other
assessment under the Code of 1966 or any other law in that behalf for the time
being in force and the Rules made thereunder. Various terms and conditions
have been mentioned in the Sanad and Condition No.7 which is relevant for
WP-4086-2011(J) 12/27
the present purpose reads as under:
"7 . The Company shall not in any wise alienate the said land or
any portion thereof by way of sale, mortgage, gift, lease
exchange or otherwise however, except with the previous
permission in writing of the Government."
From the aforesaid it becomes clear that though the lands were acquired by
the State of Madhya Pradesh to enable the Company to set up its paper
manufacturing unit and the Company had paid the State Government the
entire cost of acquisition, as per Condition No.7 it was not permissible for the
Company in any manner to alienate the said lands or portion thereof in any
mode without obtaining the previous permission of the Government in writing.
7. In this context when the provisions of Section 29 of the Code of 1966
are perused, it indicates that under the Code of 1966 three classes of persons
holding land from the State have been identified. Occupants-Class I are those
persons who hold unalienated land in perpetuity and without any restriction
on the right to transfer. Occupants-Class II are persons who hold unalienated
land in perpetuity subject to restrictions on the right of transfer. The third
category of persons are Government lessees. As per Condition No.7 of the
Sanad, prior permission of the State Government is necessary before the
Company can alienate the lands in question by way of sale, mortgage, etc. It
thus becomes clear from Condition No.7 that the Company is an Occupant-
Class II since it has a right to hold the land in perpetuity but subject to
WP-4086-2011(J) 13/27
restrictions on the right of transfer. It has been pleaded in the writ petition
that various conditions were attached in the Sanad which were not the
conditions imposed under the grant initially made under the Code of 1954. It
is also the case of the Company that on earlier occasions permission had been
sought by the Company for mortgaging its land for obtaining loan and such
permission had been so granted on 05.01.2009. Be that as it may, in view of
Condition No.7 of the Sanad dated 18.01.1968 the occupancy of the Company
would have to be treated as Occupant-Class II.
8. It is also necessary to refer to the provisions of Section 31 of the
Code of 1966. Section 31 reads as under:
"31. It shall be lawful for the Collector subject to such rules as
may from time to time be made by the State Government in this
behalf, to require the payment of a price for unalienated land or
to sell the same by auction, and to annex such conditions to the
grant as may be prescribed by such rules before land is entered
upon under section 30. The price (if any) paid for such land
shall include the price of the Government right to all trees
thereon and shall be recoverable as an arrear of land revenue"
The said provision indicates the power of the Collector to grant unoccupied
land on such conditions as may be prescribed by such Rules before the land is
entered upon under Section 30. Section 30 of the Code of 1966 refers to
occupation of unalienated land granted under the provisions of the Code of
1966. It states when such land is granted under any provision of the Code of
1966, it would be the duty of the Tahsildar to call upon such person to enter
WP-4086-2011(J) 14/27
upon the occupation of such land in accordance with the terms of the grant.
It is clear from the aforesaid provisions that what is contemplated is a grant
made of unalienated/unoccupied land under the provisions of the Code of
1966. Section 30 requires payment of the price of such land before it is
entered upon under Section 30 of the Code. In the present case, the grant of
the land is prior to coming into force of the Code of 1966. Further it is also
clear from the Sanad dated 18.01.1968 that the Company has already paid the
entire cost of acquisition of the said land to the State of Madhya Pradesh. It
is however to be kept in mind that in view of the provisions of Section 29 (3)
(c) of the Code of 1966 since the Company has been granted rights which
entitle it to hold the land in perpetuity, all provisions of the Code of 1966
relating to the rights, liabilities and responsibilities of Occupants-Class II would
be applicable to it as if they were Occupants-Class II under the Code of 1966.
Though the grant of land to the Company is not under the Code of 1966 and
especially Sections 30 and 31 thereof, nevertheless the rights, liabilities and
responsibilities of Occupants-Class II which have been prescribed under the
Code of 1966 would be applicable to the Company.
9. The Rules of 1971 have been made in exercise of powers conferred
in that regard by the Code of 1966. Reference has been made to Rule 41 of
the Rules of 1971 by the respondents in their affidavit in reply. Rule 41
WP-4086-2011(J) 15/27
prescribes conditions of grant of land for non-agricultural purpose. It
contemplates disposal of unoccupied land under Section 20 read with Section
31 for any non-agricultural purpose for being used for the purpose for which it
is granted. Such grant is subject to terms and conditions as the Collector may
annex to the grant in accordance with the Rules of 1971 and the payment of
non-agricultural assessment as may be fixed by the Collector under the
provisions of Chapter-VII of the Code of 1966 and the Rules made thereunder.
Under Rule 41(2)(viii) the Collector can impose such other conditions under
the orders of the State Government.
Rule 41 also indicates that it would be applicable to the grant
made of lands for non-agricultural purpose when such land is disposed of
under Section 20 read with Section 31 of the Code of 1966. In other words,
the Rules of 1971 are specifically made applicable where unoccupied land is
disposed of under the Code of 1966.
10. The basis for the demand for mortgage fees is the Government
Resolution dated 27.02.2009. Perusal of the said Government Resolution
indicates that in the preamble it has been stated that the lands vesting with the
Government are granted for various purposes with Occupancy Class-II rights.
While granting land for non-agricultural purpose, permission of the State
Government is contemplated before obtaining any financial assistance from
WP-4086-2011(J) 16/27
banks, co-operative societies, etc. Since no fees/charges were being imposed
while granting such permission, it was proposed by the State Government to
levy the same. Thereafter the Government Resolution states that when such
lands are allotted on lease with Occupancy-Class II rights under the Rules of
1971 and the grantees desire to obtain loan by mortgaging such lands,
mortgage fees would be payable in the manner stated therein. Various terms
and conditions have thereafter been stipulated in Annexure-A to the said
Government Resolution.
On a complete reading of the Government Resolution dated
27.02.2009, it is apparent that the State Government was of the view that
when unoccupied land was being granted to various Institutions and
Companies on lease with Occupancy-Class II rights under the Rules of 1971, it
was necessary to levy mortgage fees whenever the said land was proposed to
be mortgaged for raising loans. The Government Resolution also refers to the
Code of 1966 and the Rules made thereunder. It is thus apparent that the
Government Resolution dated 27.02.2009 seeks to regulate the matter with
regard to grant of permission to alienate/mortgage the lands of Occupancy-
Class II holders by demanding mortgage fees as stipulated. There is no
reference to any statutory provision in the said Government Resolution to
indicate the source of power for the State to levy mortgage fees. Mention
however has been made to the allotment of such lands under the Rules of
WP-4086-2011(J) 17/27
1971. It is undisputed that the lands in the present case have been acquired by
the Government of Madhya Pradesh and the Company had paid the cost of
acquisition of such land to the said Government.
11. The demand of mortgage fees in view of Government Resolution
dated 27.02.2009 having been challenged as being a demand without any
authority of law, it would be necessary to keep in mind the observations in
paragraphs 24 and 29 of the judgment of the Hon'ble Supreme Court in Dilip
Kumar and Company and others (supra). It has been observed as under:
"24. .......Insofar as taxation statutes are concerned, Article 265
of the Constitution prohibits the State from extracting tax from
the citizens without authority of law. It is axiomatic that
taxation statute has to be interpreted strictly because the State
cannot at their whims and fancies burden the citizens without
authority of law."......
"29. .........We may reiterate at the cost of repetition that strict
interpretation of a statute certainly involves literal or plain
meaning test. The other tools of interpretation, namely,
contextual or purposive interpretation cannot be applied nor
any resort be made to look to other supporting material,
especially in taxation statutes. Indeed, it is well settled that in a
taxation statute, there is no room for any intendment; that
regard must be had to the clear meaning of the words and that
the matter should be governed wholly by the language of the
notification. Equity has no place in interpretation of a tax
statute. Strictly one has to look to the language used; there is no
room for searching intendment nor drawing any presumption.
Furthermore, nothing has to be read into nor should anything
be implied other than essential inferences while considering a
taxation statute."
WP-4086-2011(J) 18/27
12. To consider whether the Code of 1966 empowers the State to
recover mortgage fees while granting permission to mortgage Occupancy-Class
II lands, it would be necessary to consider the provisions of the Code of 1966.
The objects and reasons behind enactment of the Code of 1966 indicate that
different legislations on the subject of "land and land revenue" were in force in
the State prior to 1966. The Code was enacted with a view to consolidate and
unify various enactments so as to have a common land revenue Code for the
State. Section 2(19) of the Code defines the expression "land revenue".
Chapter VII of the Code of 1966 relates to assessment and settlement of land
revenue of lands for non-agricultural purposes. Chapter IV of the Code of
1966 deals with land revenue. All lands whether applied for agricultural or
other purposes are liable for payment of land revenue as per Section 64. The
manner of assessment and its alteration is stipulated by Section 67 and Section
68 requires the Collector to fix the assessment. Under Section 71 the fixing of
assessment under the Code of 1966 is limited to ordinary land revenue.
Under the Deed of recognition - Sanad, the Company is liable to
pay agricultural, non-agricultural or other assessments as the case may be
under the Code of 1966. There is no challenge to this clause of the Sanad and
the Company is under an obligation to pay non-agricultural assessments under
the Code of 1966.
WP-4086-2011(J) 19/27
13. In this context it is necessary to refer to the provisions of Section 36
of the Code of 1966. Under this provision an occupancy is transferable and
heritable subject to certain restrictions. Section 36(4) which is found relevant
for the present purpose reads as under:
"36 (4) Notwithstanding anything contained in sub-section (1)
or in any other provisions of this Code, or any law for the time
being in force it shall be lawful for an Occupant Class-II to
mortgage his property in favour of the State Government in
consideration of a loan advanced to him by the State
Government under the Land Improvement Loan Act, 1883, the
Agriculturists Loans Act, 1884, or the Bombay Non-
Agriculturists Loans Act, 1928 or in favour of a co-operative
society [or the State Bank of India constituted under Section 3
of the State Bank of India Act, 1955, or a corresponding new
bank within the meaning of clause(d) of Section 2 of the
Banking Companies (Acquisition and Transfer of Undertakings)
Act, 1970, or the Maharashtra State Financial Corporation
established under the relevant law] in consideration of a loan
advanced to him by such co-operative society, [State Bank of
India, corresponding new bank, or as the case may be,
Maharashtra State Financial Corporation], and without
prejudice to any other remedy open to the State Government,
[the co-operative society, the State Bank of India, the
corresponding new bank or as the case may be, the Maharashtra
State Financial Corporation] in the event of such occupant
making default in payment of such loan in accordance with
terms on which such loan is granted, it shall be lawful for the
State Government, [the co-operative society, the State Bank of
India, the corresponding new bank, or as the case may be, the
Maharashtra State Financial Corporation] to cause the
occupancy to be attached and sold and the proceeds to be
applied towards the payment of such loan.
The Collector may,[on the application of the co-operative
society, the State Bank of India, the corresponding new bank or
the Maharashtra State Financial Corporation,] and payment of
the premium prescribed by the State Government in this behalf,
by order in writing reclassify the occupant as Occupant-Class I;
and on such reclassification, the occupant shall hold the
occupancy of the land without any restriction on transfer under
WP-4086-2011(J) 20/27
this Code."
It can be seen from the aforesaid provision that an Occupant-Class II
can lawfully mortgage his property while seeking any loan or financial
assistance from the State Government or the authorities/bodies specified
therein. It is further provided that in case of default in repayment of such loan
it would be lawful for the State Government or the authorities/bodies who
have granted such loan to cause the occupancy to be attached and sold. The
proceeds thereof can be applied towards re-payment of such loan. Further on
an application made by such creditor who has advanced the amount of loan,
the Collector can on payment of premium prescribed by the State Government
re-classify the occupancy as Occupant-Class I. On such re-classification the
occupant would be entitled to hold the land without any restriction on transfer
under the Code of 1966.
14. On a plain reading of Section 36(4) of the Code, it recognises the
right of an Occupant-Class II to mortgage his property while obtaining a loan.
The said provision however nowhere empowers the State Government or the
Collector to charge any fee while granting permission to mortgage such
property. In other words, the said provision empowers an Occupant-Class II to
mortgage his property while seeking a loan but it does not empower the State
Government to demand any fee while granting such permission to mortgage
WP-4086-2011(J) 21/27
the land. In fact, Section 36(4) does not contemplate seeking any permission
of the State Government or the Collector prior to mortgaging such land before
obtaining any loan against the same. However, since the holding of the
petitioner is as Occupant-Class II and Condition No. 7 of the Deed of
recognition - Sanad requires obtaining of prior permission in writing of the
State Government before the Company mortgages the land, it would not be
permissible to hold that such prior permission was not liable to be obtained by
the Company. However, Section 36(4) nowhere empowers the State
Government to demand mortgage fees dependent upon the amount of loan
sought to be borrowed by an Occupant-Class II while mortgaging such land. It
will thus have to be held that the demand of mortgage fees is not relatable to
any power conferred under the Code of 1966 and especially Section 36(4)
thereof.
15. This aspect is also clear on the perusal of Section 328 of the Code of
1966. Under the said provision the State Government can make rules that are
not inconsistent with the provisions of the Code with a view to carry into effect
the provisions of the Code of 1966. Reference in sub-section 2(xiii) of Section
328 can be found to the provisions of Section 36(3) of the Code of 1966
but the said provision is not attracted in the present case. Reference to Section
36(4) cannot be found in any of the clauses of Section 328(2) of the Code of
WP-4086-2011(J) 22/27
1966 thereby empowering the State Government to make rules for carrying
out the provisions of the Code. Since the State Government under Section 328
(1) cannot make rules which are inconsistent with the provisions of the Code,
the reliance placed on the Rules of 1971 is misconceived. According to the
State Government such demand of mortgage fees can be supported by relying
upon Rule 41(2)(viii) of the Rules of 1971. Clause (viii) of sub-rule (2) of
Rule 41 merely permits the Collector under the orders of the State Government
to impose conditions while granting land for non-agricultural purpose. Such
residuary power cannot clothe the State Government with the power to
demand mortgage fees especially when Section 36(4) of the Code does not
empower the State Government to demand such mortgage fees while seeking
permission to mortgage Occupancy-Class II land.
It is well settled that for supporting the collection of tax/fee the
same would mean an act of Legislature and not exercise of executive power
under Article 162 of the Constitution of India by the State Government.
Reference in this regard can be usefully made to the following observations in
Tata Iron and Steel Company Limited and another (supra). Paragraphs 20 and
21 it has been observed as under:
"20. ........ In CIT v. McDowell and Co. Ltd. held :(SCC 763,
paras 21-22)
21. "Tax", "duty", "cess" or "fee" constituting a class
denotes to various kinds of imposts by State in its
sovereign power of taxation to raise revenue for the
WP-4086-2011(J) 23/27
State. Within the expression of each specie each
expression denotes different kind of impost depending
on the purpose for which they are levied. This power can
be exercised in any of its manifestation only under any
law authorizing levy and collection of tax as envisaged
under Article 265 which uses only the expression that no
"tax" shall be levied and collected except authorised by
law. It in its elementary meaning conveys that to support
a tax legislative action is essential, it cannot be levied
and collected in the absence of any legislative sanction
by exercise of executive power of State under Article 73
by the Union or Article 162 by the State.
22. Under Article 366(28) "Taxation" has been defined
to include the imposition of any tax or impost whether
general or local or special and tax shall be construed
accordingly. "Impost" means compulsory levy. The well-
known and well-settled characteristic of "tax" in its
wider sense includes all imposts. Imposts in the context
have following characteristics:
i) The power to tax is an incident of sovereignty.
ii) "Law" in the context of Article 265 means an
Act of legislature and cannot comprise an
executive order or rule without express
statutory authority.
iii) The term "tax" under Article 265 read with
Article 366(28) includes imposts of every kind
viz. tax, duty,cess or fees.
iv) As an incident of sovereignty and in the
nature of compulsory exaction, a liability
founded on principle of contract cannot be a
"tax" in its technical sense as an impost,
general, local or special."
"21. A nine-judge Constitution Bench of this Court in Jindal
Stainless Ltd. & Another v. State of Haryana & Others, quoted
the above mentioned statement of law with approval. Therefore,
it is now well settled that the expression "fee" is also
comprehended in the expression "tax" for the purpose of Article
265 and even for the collection of a "fee", authority of law (i.e.
legislative support) is mandatorily required under the
Constitution."
WP-4086-2011(J) 24/27
16. Similarly, the Division Bench of this Court in Jaikumari
Amarbahadursingh (supra) while considering the question as to whether the
State Government had the authority to levy or claim unearned income has
after considering the provisions of Rules of 1971 observed in paragraph 19 as
under:
"19......... There is no corresponding provision enabling the
State Government to claim or levy unearned income in respect
of grant of land for Agricultural use under Part III or residential
use under Part IV of the said Rules. Besides, going by the
provisions of the said Rules it would apply to fresh grants in
respect of unoccupied lands. In other words, the State
Government as of now has no authority to levy unearned
income in respect of lands in question under whatever title,
which would obviously include lands held by occupants-Class I.
In absence of a specific law on this subject, the State
Government or its Officers cannot usurp to itself power to levy
such charges on the basis of a Government Resolution. That
power to levy unearned income can be invested in the State
Government only if the State Legislature expressly or by
implication authorises it to do so and not otherwise. By no
means such power can be usurped by an Executive fiat in the
form of a Government Resolution. Suffice it to observe that a
Government Resolution cannot be substitute for a "law" to be
enacted by the competent legislature so as to affect the
unconditional right of the Grantees to transfer and inherit the
property......"
Though the aforesaid observations were made in the context of lands used for
agricultural purpose and the provisions of Rule 31 (2) (c) of the Rules of 1971
were noted in the context of lands used for industrial and commercial
purposes, the fact remains that only on the basis of executive instructions it
would not be permissible for the State Government to levy fees while granting
WP-4086-2011(J) 25/27
permission to mortgage rights in Occupancy-Class II under Section 36(4) of the
Code of 1966.
17. Hence for the aforesaid reasons we are of the considered view that
the demand of mortgage fees by the State Government while granting
permission to mortgage Occupancy-Class II lands to banks and financial
institutions, to the extent of 0.50% when such land is used for industrial and
commercial purposes is without any authority being conferred on the State
Government by the Code of 1966. While Section 36(4) of the Code of 1966
permits an Occupant-Class II land holder to mortgage his land while seeking
loan, it does not empower the State Government to demand fees while
granting such permission to mortgage those lands. The Rules of 1971 also
cannot be relied upon to support such demand of levy of mortgage fees.
Challenge in the present writ petition has been restricted to Clause (B) of
Government Resolution dated 27.02.2009 to the extent it prescribes mortgage
fees of 0.50% of the loan amount when the land is to be used for industrial
and commercial purposes. Said levy is found to be without any authority of
law in terms of Article 265 read with Article 366(28) of the Constitution of
India. It is held that the Code of 1966 and especially Section 36(4) thereof
does not empower the State Government to levy such mortgage fees while
granting permission to an Occupant-Class II holder to mortgage such land
WP-4086-2011(J) 26/27
while seeking loan against the same.
18. Having found that the demand of mortgage fees pursuant to
Government Resolution dated 27.02.2009 is without any authority of law, the
prayer for refund of the amount of mortgage fees paid under protest would
have to be considered. In State of Madhya Pradesh vs. Bhailal Bhai and others
[1964 Mh.L.J.601 (SC)] the Constitution Bench of the Hon'ble Supreme Court
has held that the High Court under Article 226 of the Constitution of India has
the power while enforcing fundamental rights and statutory rights to grant
consequential relief by ordering repayment of money realised by the
Government without the authority of law.
Admittedly the Company has in terms of the Government Resolution
dated 27.02.2009 paid the mortgage fees under protest. In the circumstances
of the case, the respondents are directed to refund the amount of
Rs.3,26,25,000/- with simple interest @4% per annum from the date of
deposit till realisation.
19. Resultantly, the following order is passed:
(i) Clause (B) of the Government Resolution dated 27.02.2009
seeking to levy mortgage fees is held to be without any authority of
law and hence the same is quashed as being unconstitutional and
invalid.
WP-4086-2011(J) 27/27
(ii) Condition No.5 in the order dated 09.05.2011 passed by
the Sub-Divisional Officer to the extent the demand for mortgage
fees has been made is set aside. Rest of the provisions of the said
Government Resolution would continue to operate vide Condition
No.5 in the order dated 09.05.2011.
(iii) Since it has been found that the demand of mortgage fees
by the State Government by relying upon Government Resolution
dated 27.02.2009 is without any authority of law and as the
petitioner had deposited an amount of Rs.3,26,25,000/- with the
Sub-Divisional Officer, Chandrapur, under protest, the petitioner
would be entitled to receive back said amount with interest @ 4%
per annum from the date of such deposit till the actual repayment.
(iv) The writ petition is allowed. Rule is made absolute in
aforesaid terms with no order as to costs.
(URMILA JOSHI-PHALKE, J.) (A.S.CHANDURKAR, J.)
Andurkar..
Digitally Signed byJAYANT S
ANDURKAR
Personal Assistant
Signing Date:
29.08.2022 13:28
