the nature of the Grant; whether the Grant is
an alienation in the sense of a sale; whether
the power of resumption which vested with
the respondent-State continued; what are the
conditions subject to which the said power
would continue to be available to the Grantor;
whether the fact that winding up petition had
been filed and having regard to the terms of
the order of the winding up also, whether it
would be open to the appellant to contend
that the power of resumption has come to an
end; whether an auction purchaser of the land
in an auction, if conducted by Official
Liquidator would acquire a right in land which
would extricate him from the power of the
Grantor to resume the land. We would think
that these questions must now be gone into
by the Division Bench as we have interfered
with the substantial premise of the order of
the Division Bench as we have noted.
20) In such circumstances, the appeal is
allowed partly. The impugned order is set
aside. The matter is remanded to the Division
Bench. We request the Division Bench to
dispose of the matter as early as possible as
we are informed that as of today, the original
11. Thus, on remand by the Supreme Court, we have
heard the appeal. Having set out the facts, we would now
12. As stated that the Syndicate Bank (Now, Canara
Act, 1956. As per the respondent - Bank, the Company
agreement to the tune of Rs.36,24,000/. On the date of
13. The undisputed liability of the Company was above
Rs.2 crores. The dispute was in respect of the rate of
interest. The learned Company Judge, in the winding up
Company. These lands were granted by the State
14. The Company Judge also took note of the
purpose or for conducting mining operations. The learned
later date. In paragraph-11 of Judgment and Order dated
- 16 -
"11. In the light of these provisions in terms of
the grant made in favour of the Company the security
furnished by it cannot be treated as sufficient security
which the Bank could enforce at a later date. The
Company having failed to establish that it has an
absolute title to the lands in question, it cannot
depend on the slender security offered by it to avoid
an order of winding up by this Court. Even otherwise, I
have come to the conclusion that it is a fit case for
winding up under Section 433 (c), (e) & (f) of the Act
and it is well-settled that this Court has the power to
order winding up on anyone of the grounds under
section 433 or on all the grounds mentioned therein.
Two of the creditors who have filed separate petitions
in CO.P. No. 13/87 and 39/87 have also supported the
order of winding up. The other creditors of respondent
have not come forward to oppose the order of winding
up."
15. Thus, it was categorically held by the learned
Company Judge that the Company did not have an
absolute title over the land in question and the land given
in grant did not vest in the Company. The Government
had all the powers to resume the land for public purpose
or for conducting mining operations or in the event of the
violation of the terms and conditions of the grant.
- 17 -
16. The aforesaid findings were never challenged by the
respondent - Bank and became final.
17. The learned Company Judge while dealing with the
various applications filed by the Bank against resumption
proceedings for resuming the land given to the Company
on grant and Company Application No.1036/1996 by the
State seeking permission to continue the proceedings for
resuming the land and Company Application
No.1035/1996 filed by the Bank to set aside the notice
dated 24.09.1986 issued by the Divisional Commissioner
for resuming the land filed in Company Petition
No.34/1986, could be decided vide impugned order dated
03.11.1998, almost after 10 years of the order of winding
up was passed by the Company Judge.
18. The learned Company Judge in the order dated
03.11.1998 noted the fact that the proceedings of
resumption had been commenced on 24.11.1984 and the
show cause notice dated 24.09.1986 refers to the earlier
notice dated 24.11.1984. However, it was concluded that
- 18 -
the notice dated 24.09.1986 was a fresh show cause
notice, whereby the Divisional Commissioner had
commenced the proceedings. It was further held that if the
resumption proceedings were not competent, then, it was
not open to the State at that point of time to apply to the
Court for continuation of those proceedings. Further, the
findings were recorded that the permission granted to the
Company to mortgage the land was a blanket permission,
in respect of the whole of the land of 75 acres inasmuch as
the reading of the order dated 30.11.1963 would not really
put any limitations on the Bank or the Company that if the
loans were to be renewed or extended or increased, the
fresh permission would be required. If the Government
had permitted the mortgage of the land, the consequence
would follow insofar as the rights had been created in
favour of the Bank vis-a-vis the land. It was also held that
even if the Government had the power to continue the
resumption proceedings, it would be subject to whatever
rights the bank was claiming vis-a-vis that land as the
substantial sum of money was advanced by it against the
- 19 -
land which was mortgaged by the Company in favour of
the Bank.
19. In view of the aforesaid, the learned Company Judge
held that the resumption proceedings were not competent
and the Official Liquidator under the over all supervision of
the Court was permitted to advertise for the alienation of
the land in question. It should be done specifying that the
party who would take the land would be doing so in the
same capacity as the original Company. The auction
purchaser would be in possession and use of the land and
building pertaining thereon and that would be subject to
the other terms and conditions under which the Company
held the land and the State would continue to be
represented in those proceedings until the disposal of the
land would get completed.
20. The State filed the present O.S.A.No.9/1999 being
aggrieved by the common judgment dated 03.11.1998
passed by the learned Company Judge in Company
Application Nos.1035 and 1036 of 1996, 481/1998 and
- 20 -
75/1987. The Division Bench, vide the judgment and order
dated 06.09.2007, had set aside the judgment dated
03.11.1998 passed by the learned Company Judge in
Company Application Nos.1035 and 1036/1996, 481/1998
and 75/1987 and liberty was granted to the State to
proceed with the resumption of the entire extent of land.
21. This judgment of the Division Bench was the subject
matter of challenge in Civil Appeal No.2936/2023 before
the Supreme Court. The Supreme Court, after setting
aside the judgment of the Division Bench, has remanded
the matter back for disposal as mentioned hereinabove.
22. The Supreme Court, in Paragraphs 18 and 19 of its
Judgment dated 19.04.2023 passed in Civil Appeal
No.2936/2023, has framed the following questions to be
considered by this Court:
i. what is the nature of the grant;
ii. whether the grant is an alienation in the sense
of a sale;
iii. whether the power of resumption which vested
with the State would continue after the
- 21 -
mortgage of the land by the company in favour
of the respondent bank;
iv. what are the conditions subject to which the
said power of resumption would continue to be
available to the grantor;
v. whether the fact that the winding up the
petition has been filed and having in regard to
the terms of the order of the winding up also,
whether it would be open to the respondent
bank/Official Liquidator to contend that the
power of resumption has come to an end;
vi. whether an auction purchaser of the land in an
auction, if conducted by an Official Liquidator
would acquire a right in land which would
extricate him from the power of the grantor to
resume the land;
vii. whether there was no justification for the State
Government to undertake resumption of land.
SUBMISSIONS ON BEHALF OF THE APPELLANTS:
23. In response to question Nos.i and ii, learned
Additional Advocate General for the State would submit
that if the terms and conditions of the grant dated
16.01.1963 are considered, it would be clearly evident
without any ambiguity that it was not a sale or alienation
- 22 -
of the land in favour of the grantee. The general and
special conditions of the grant and the permission dated
30.11.1963 of the Deputy Commissioner, Bellary in favour
of the Company to mortgage the land would clearly
indicate that what was permitted to be mortgaged was the
limited rights of the grantee under the grant, to avail the
loan. The power of resumption, the annual ground rent of
Rs.6.25 per acre would also clearly indicate that it was not
an alienation of the land in favour of the respondent-
Company, but limited rights were given over the land
regarding its use, etc., to the respondent-Company. The
alienation of the property would mean transfer of all rights
over the property by the transferer in favour of the
transferee.
24. The submission is that on the basis of the grant
dated 16.01.1963, the respondent - Company got limited
rights of use of the land, subject to the terms and
conditions of the grant, and it was not a transfer of the
land under the Transfer of Property Act, 1882 or
- 23 -
alienation. It was not a sale of the land in favour of the
Company by the State.
In respect of question Nos.iii, iv, v and vii, the
learned Additional Advocate General has submitted that
the permission dated 30.11.1963 by the Deputy
Commissioner, Bellary to mortgage the land would suggest
that the permission was granted to mortgage the land
along with the fixed assets of the Company to the Canara
Industrial and Banking Syndicate Limited raising a loan of
Rs.20,00,000/- without possession. It was also made clear
that the mortgage would be only in respect of the limited
rights and title, the respondent - Company would possess
over the land under the general and special conditions of
the grant.
25. The contents of the grant as well as the terms and
conditions of the permission dated 30.11.1963 are not in
dispute. The permission dated 30.11.1963 was issued in
furtherance of Clause-10 of the General and Special Terms
and Conditions of the grant. The Bank fully knew that the
- 24 -
Company possessed limited rights on the land and building
constructed over it. The Company did not have a right to
part with the possession of the land. The amount was also
mentioned in the permission order dated 30.11.1963.
26. The Bank having fully known about the right of the
State to resume the land and permission for mortgage of
the limited right of the Company over the land and the
fixture, cannot contend that the State would not have the
power to resume the land when the Company is not in a
position to carry out the object for which the land was
allotted, and it had violated the terms and conditions of
the grant. There is no dispute regarding the violation or
breach of the terms and conditions of the grant. The initial
notice was issued for resumption of the land on
24.11.1984 and while the said notice was pending, a
second notice in continuation of the first notice was issued
on 24.09.1986, and therefore, the second notice was not
barred as it was a continuation of the first notice.
Therefore, the admission of the company petition was of
no consequence to hold that the second notice was barred
- 25 -
inasmuch as the second notice was nothing but a
continuation of the earlier notice.
27. The learned Additional Advocate General has further
submitted that the Company was granted 75 acres under
the Grant dated 16.01.1963, but it could utilize only 25
acres of land and 50 acres of land was not utilized for any
development or for the purpose of the spinning mill. The
Company had grown coconut trees illegally on 5 acres of
land for which the Company had failed to pay the annual
ground rent for the last 23/25 years. The Company had
put up construction arbitrarily without permission of the
Deputy Commissioner and had availed the loans without
the permission of the Deputy Commissioner over and
above the loan of Rs.20,00,000/- for which the permission
was granted. Rs.20,00,000/- had grown up to the extent
of Rs.2.37 crores and had further grown up to an
astronomical figure which is evident from the letter dated
27.11.1996. As the Company had breached the terms and
conditions of the grant and the land is required for the
public purposes, the State is well within the power to
- 26 -
resume the entire land notwithstanding the institution of
the company petition. The show cause notice issued for
the resumption of the land and cancellation of the grant
would not come within the mischief of Section 446 of the
Companies Act, 1956.
28. The Company Judge, in the judgment and order
dated 19.10.1987 and 06.11.1987 in Company Petition
No.34/1986, had held that the Company did not have the
ownership or title of the land in question. The order of
winding up would not extinguish the power of resumption
of the State and would also not obliterate or wipe out the
terms and conditions of the grant under which the land
was granted to the respondent-Company. The mortgagee/
transferee cannot have better right, title and interest than
the mortgager/transferor. The mortgage was only
permitted in respect of the limited rights of the Company,
and therefore, the Bank cannot claim better right, title or
interest than the Company over the land in question.
- 27 -
29. The Government had issued the first show cause
notice way back on 24.11.1984, and the Company had
replied to the said notice, which is evident from the order
dated 03.11.1998 passed by the Company Judge. The said
notice was issued 3 months prior to the institution of the
Company Petition No.34/1986 and the second show cause
notice dated 24.09.1986 was nothing but an extension of
the first show cause notice in view of the change in
jurisdiction of the officials due to administrative
re-organisation of the State. Even otherwise, under
Section 537 of the Companies Act, 1956, requirement of
taking permission would not arise.
30. With the order of winding up, the possession of the
land, has automatically vested with the State Government.
The Official Liquidator has no power to prevent the grantor
to take back the possession of the grant when specifically
the premises or the property or properties are no longer
being used by the Company for the purposes for which the
grant was conferred in favour of the grantee.
- 28 -
31. Regarding the question No.vi, it has been submitted
that the auction purchaser would merely step into the
shoes of the respondent - Company, and he would have
only limited right as that were conferred over the land
under the grant and its terms and conditions in favour of
the respondent-company.
32. It is further submitted that the land cannot be put to
an auction, as the land has reverted back and vested in
the State, in view of the breach of terms and conditions of
the grant and the purpose for the grant having come to an
end. Therefore, there is no question of permitting the bank
to put the land for auction sale.
33. In view of the aforesaid submission, it has been
submitted that the writ petition or the appeal is to be
allowed and the impugned order passed by the learned
Company Judge setting aside the resumption notices and
refusing the permission is to be set aside.
- 29 -
SUBMISSIONS ON BEHALF OF THE RESPONDENTS
34. Learned Senior Counsel appearing for respondent
No.2-Bank, in response to question Nos.i and ii, submits
that by proceedings dated 16.01.1963, the Government of
Mysore sanctioned the alienation of 75 acres of land in
Sy.No.597 B.1, A2.B4 of Bellary Town in favour of Bellary
Spinning and Weaving Company Limited at an upset price
of Rs.500/- per acre, sub-division fee of Rs.3/- and annual
ground rent of Rs.6.25 per acre. The subject land is
situated in Bellary District, which area was merged with
the erstwhile Mysore State in the year 1953. Section 1(2)
of the (Government) Grants Act, 1895, provides that it
extends to the whole of India except the territories formed
immediately before 01.11.1956 comprised in Part B
States. The State of Mysore was one of the States within
the meaning of Section 1(2) of the (Government) Grants
Act, 1895, and therefore, the provisions of the
(Government) Grants Act, 1895, would not apply to the
State of Mysore. It was only in the year 1973 that the
- 30 -
(Government) Grants Act came to be made applicable to
the State of Karnataka (successor of the State of Mysore).
35. As the State of Mysore was outside the purview of
the provisions of the (Government) Grants Act, the Land
Grant (Madras Area and Bellary District) Rules, 1960
would be applicable to the grant. The grant in favour of
the respondent-Company vide proceedings dated
16.01.1963 can be traceable to Rule 3(4) of the Land
Grant (Madras Area and Bellary District) Rules, 1960.
36. It is further submitted that as per Section 3(19) of
the Mysore Land Revenue Code, 1888, "alienated" means
transfer insofar as the rights of Government to payment of
rent or land revenue are concerned, wholly or partially, to
the ownership of any person. By the grant order dated
16.01.1963, the Government of Mysore had sanctioned
the alienation of land in favour of the respondent-
Company. He further submits that this alienation would
get fortified by the order of the Deputy Commissioner
dated 30.11.1963 permitting the respondent-Company to
- 31 -
mortgage the land measuring 75 acres for obtaining the
loan of Rs.20 lakhs. It is further submitted that as per the
grant order, upset price of Rs.500/- per acre has to be
paid by the respondent-Company to the Government and
"upset price" in the grant order would mean that the grant
was in the nature of sale. The submission is that the
Government has alienated 75 acres of land in favour of the
respondent-Company which amounts to sale in favour of
the respondent-Company.
37. The learned Senior Counsel, in response to question
Nos.iii, iv and vii, has submitted that the power of
resumption under the grant had come to an end by the
order of the Deputy Commissioner dated 30.11.1963
whereby, the respondent-Company was permitted to
mortgage the land measuring 75 acres for obtaining loan
of Rs.20 lakhs. It is the submission that to construe the
power of resumption in any other manner for mortgaging
the land in favour of the Bank to take the loan would
render the permission granted under Clause-10 redundant.
It is also submitted that the power of resumption has not
- 32 -
been exercised within a reasonable time and would not
continue on the ground of delay and laches. It is further
submitted that the resumption proceedings could not have
been initiated in view of the provisions of Section 446(1)
of the Companies Act, 1956. The Company Petition having
been presented on 27.06.1986, and the Company having
been wound up, the proceedings relate back to the date of
presentation of the petition i.e., 27.06.1986 as provided
under Section 441(2) of the Companies Act, 1956.
Therefore, the resumption could not have been initiated
without the leave of the Company Court in view of the
mandatory provisions contained in Section 446(1) of the
Companies Act, and therefore, the initiation of the
resumption proceedings was wholly without jurisdiction.
38. In response of question No.v, the learned Senior
Counsel appearing for the respondent-Bank has submitted
that the observations of the learned Company Judge in
paragraphs 10 and 11 of the winding up order dated
19.10.1987 were only for the purpose of declaring the
insolvency of the respondent-Company, and its inability to
- 33 -
pay its debts to the respondent-Bank. Under these
circumstances, the security was described as slender
security by the learned Company Judge. The observations
in paragraphs 10 and 11 of the winding up order dated
19.10.1987 would not have any material bearing on the
issues raised in the present proceedings.
39. In response to question No.vi, it is submitted that the
grant was in the nature of sale and the State Government
could not have any right to resume the land. The auction
purchaser would acquire title of the land and the grantor
would not have the power to resume the land.
40. The learned counsel for respondent No.1-Official
Liquidator has submitted that besides the claim of the
Bank, which was for Rs.94,79,05,438/-, the other claims
of the secured creditors have been admitted for
Rs.2,20,69,257/-. The summary of claims of the secured
creditors has been presented before this Court in the
memo dated 06.08.2025, which is extracted hereunder:
- 34 -
"Summary of Claims
Sl. Name of the No. of Amount Amount Amount
No. Claimants Claims Claimed Admitted Rejected
(in Rs) (in Rs) (in Rs)
1 EPFO 1 9,64,872 9,64,872
2 Syndicate Bank 1 94,79,05,438 Adjudication
pending*
3 Workmen 537 1,04,09,050 76,80,882 27,28,168
4 Department of 1 5,93,36,736 93,99,313 4,99,37,423
Commercial Taxes
5 Textile Committee 1 23,414 23,414
6 Cotton Corporation 1 43,03,095 Adjudication
of India pending**
7 Depositor/Advance 1 4,50,000 4,50,000
8 GESCOM 1 10,70,000 10,70,000
9 Sri. Mahadevappa 1 2,01,225 2,01,225
10 Employee State 1 22,79,551 22,79,551
Insurance
Corporation
546 102,69,43,381 2,20,69,257 5,26,65,591
* The Claim is filed in the form of letter and not by way of Affidavit in Form 66.
**The Claim has not been adjudicated as Form 66 is filed after due date of
adjudication of claim."
41. In pursuance to the order passed in the winding up
proceedings, the Official Liquidator has taken over the
possession of the assets of the respondent-Company.
However, further proceedings for alienation of the assets
- 35 -
of the respondent-Company have not been undertaken to
liquidate the assets of the Company for satisfying the
debts/liabilities of the secured and unsecured creditors.
He has supported the submission of the respondent-Bank
to some extent.
42. We have considered the submissions and perused the
record as well as the judgment of the Supreme Court in
Civil Appeal No.2936 of 2023.
STATUTORY PRESCRIPTION:
43. Section 2 of the (Government) Grants Act, 1895,
specifically provides that the provisions of the Transfer of
Property Act, 1882, would not apply to any grant or other
transfer of land or any interest therein made by the
Government in favour of any person whomsoever. Section
3 of the (Government) Grants Act, 1895, provides that all
provisions, restrictions, conditions and limitations
contained in any such grant or transfer shall be valid
notwithstanding any rule of law, statute or enactment of
the Legislature to the contrary.
- 36 -
44. Thus, under the (Government) Grants Act, what
would be relevant is the terms, conditions, restrictions,
limitations etc., which are part of the grant or transfer by
the Government in favour of a person. Neither the
provisions of the Transfer of Property Act, 1882, or any
other Rule, statute or enactment would have any
application while construing the rights, liability, power etc.,
in respect of the grant.
45. The provisions of the (Government) Grants Act were
not applicable to the areas which were comprised in Part B
States formed immediately before 01.11.1956. The State
of Mysore was a Part B State. It is vide Gazette
Notification dated 14.06.1973, the Government Grants
(Karnataka Extension) Act, 1972 and the provisions of the
(Government) Grants Act, 1895, were extended to the
whole of the Karnataka (the successor of the State of
Mysore).
- 37 -
46. The question which requires consideration before this
Court is what are the relevant provisions of law under
which the grant dated 16.01.1963 in respect of 75 acres of
land was issued in favour of the respondent-Company.
47. The Rules framed under the Mysore Land Revenue
Code, 1888 particularly, Rule 42 would confer powers on
different Revenue Officers in respect of grant of the lands
of the State. Sub-rules (1) (2) and (3) of Rule 42
empowers the different Officers, the extent of land which
can be granted by these Officers for agricultural purposes.
The sub-rules, however, provide that no grant of land shall
be made by the Deputy Commissioner or other Officer in
excess of the extent prescribed except with the previous
sanction of the Government.
48. Rule 43-L deals with the power of the Government
and that Rule says "notwithstanding anything contained in
the preceding rules, the Government may suo motu or on
the recommendation of the Divisional Commissioner or the
Deputy Commissioner if it is of the opinion that in the
- 38 -
circumstances of any case, it is just and reasonable to
relax any of the provisions under which the land may be
granted under these Rules, it may by order direct such
relaxation subject to such conditions as may be specified
in the order, and thereupon land may be granted in such a
case in accordance with such direction."
49. Rule 43 of the Mysore Land Revenue Rules framed
under Section 233 of the Mysore Land Revenue Code,
1888, would prescribe that all lands shall ordinarily be sold
by public auction after observing the prescribed
formalities. However, the discretion was given to the
Deputy Commissioner in special cases to grant any
occupancy right at an upset price to any bona fide
applicant who is an agriculturist or who was an
agriculturist or who is proposed to cultivate the land
himself. If the Deputy Commissioner was satisfied that in
the event public auction will help, advantage would be
taken of the needs of the applicant to force up the price.
The lands so granted, however, would not exceed 20 acres
in extent or Rs.400/- in value.
- 39 -
50. Rule 43 reads as under:
"43. Procedure for disposal of
lands for cultivation.- (1)
Applications for grant of lands under
the control of the Reserve
Department shall be made to the
Tahsildar of the taluk in which the
land applied for is situated. It shall
be in writing and shall contain the
following particulars.-
(i) The name and address of the
applicant;
(ii) The extent of land, if any,
already owned by him or his family if
he is a member of a joint family;
(iii) The particulars of the land
applied for;
(iv) And whether he belongs to a
Scheduled Caste or a Scheduled
Tribe or is a Political Sufferer or
displaced holder or tenant.
Applications presented to other
authorities shall be forwarded by
them to the Tahsildar.
- 40 -
(2) The Tahsildar shall immediately
on receipt of an application ascertain
if the land in question is available for
grant and is under the control of the
Revenue Department.
(3) If the land applied for is not
available for disposal the application
shall be rejected under intimation to
the applicant provided that where
the land applied for is Government
land but is not under the control of
the Revenue Department, and the
Tahsildar is of the opinion that such
land could be released for
cultivation, he shall make a report to
the Deputy Commissioner who shall,
if necessary take appropriate action
to get such land released for
disposal.
(4) All applications for grant of land
under these rules shall be registered
in the order in which they are
received in a register which shall be
maintained in the Taluk Office."
- 41 -
51. It may also be relevant to note that Rule 11(e) of the
Mysore Land Revenue Rules authorises the Government to
grant the land at reduced upset price for any parties
unconnected with the agriculture.
52. From the tenor and contents of the Mysore Land
Revenue Rules, it is evident that the Rules contemplated
two types of grants of land (1) for agricultural purposes;
and (2) for other purposes. Agricultural purposes
contemplated are those connected with tilling, cultivating
and raising crops. Grant of land for setting up a spinning
mill could not be considered as agricultural purposes and
therefore, the grant dated 16.01.1963 was within the
power of the Government under Rule 11(e) of the Mysore
Land Revenue Rules.
53. If the power of the Government to dispose of the
land vested in it is not taken away or restricted or
regulated by any statute or statutory rules, it must be held
to have that power as executive power of the State.
- 42 -
54. As the grant was not made for the agricultural
purposes, the grant dated 16.01.1963 would relate to the
Government's power under Rule 11(e) of the Mysore Land
Revenue Rules. The High Court of Mysore in MUDDIAH
AND ANOTHER VS STATE OF MYSORE AND ANOTHER
(ILR 1966 MYS 314) held that the grant other than for
agricultural purposes could be grant under Rule 11(e), and
even if it is held that the grant would not fall within the
scope of Rule 11(e) of the Mysore Land Revenue Rules,
the same could, in substance, if not in form, would have
been made under Rule 42(4) of the Mysore Land Revenue
Rules.
55. We have not been shown any provisions or
enactment or the Rule which limited the power of the
State Government of Mysore to confer the grant on the
respondent-Company in respect of 75 acres vide
proceedings dated 16.01.1963.
ANALYSIS AND CONCLUSION:
56. Re: Question Nos.i and ii: Even the Land Grant
(Madras Area and Bellary District) Rules, 1960, on which
- 43 -
the learned Senior Counsel appearing for respondent No.2-
Bank has placed reliance are pari materia to the Rules
made under the Mysore Land Revenue Code, 1888 which
have been noted above. Under the Land Grant (Madras
Area and Bellary District) Rules, the powers of different
Revenue Officers in respect of grant of lands are
prescribed in Rule 3. The Deputy Commissioner would
have the power under sub-rule (3)(i) of the said Rules to
grant land not exceeding five acres of land fit for garden,
cultivation or wet land with assured irrigation facilities
from tanks or channels or ten acres of other kinds of wet
land or ten acres of dry land. The powers conferred under
Rule 3 are in respect of the grant of land on different
officers which is for the agricultural purpose. The grant of
land to certain categories of persons and institutions could
be traceable to Rule 8. Rule 8(3) is in respect of grant of
land by the Deputy Commissioners to Schools, Colleges,
Training Institutions for Social Welfare Workers, Students'
Hostels etc., as well as to the University. Even under Rule
8(3), ten acres of wet land or twenty-five acres of dry or
- 44 -
rain-fed wet land could be granted for the educational
institutions by the Deputy Commissioner and in excess of
ten acres could be granted only with the previous sanction
of the Government.
57. Rule 16 of the Land Grant (Madras Area and Bellary
District) Rules, 1960, would confer the powers on the
Government, which reads as under:
"16. Powers of Government.-
Notwithstanding anything contained
in the preceding rules the
Government may suo motu or on the
recommendation of the Divisional
Commissioner or the Deputy
Commissioner if it is of the opinion
that in the circumstances of any
case or classes of cases it is just and
reasonable to relax any of the
foregoing provisions of these rules, it
may by order direct such relaxation
subject to such conditions as may be
specified in the order and thereupon
land may be granted in such a case
or class of cases in accordance with
such direction."
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58. Thus, under Rule 16, the Government would have
the power notwithstanding anything contained in the said
Rules either on suo motu or on the recommendation of the
Divisional Commissioner or the Deputy Commissioner for
relaxing any of the provisions of the said Rules to grant
the land in favour of a person or classes of persons in
accordance with the said direction. Rule 16 is pari materia
to Rule 43-L of the Mysore Land Revenue Code, 1888.
59. Having considered the relevant provisions of the
Mysore Land Revenue Code and the Land Grant (Madras
Area and Bellary District) Rules, we are of the opinion that
there was no limitation on the power of the State
Government of Mysore to confer the grant on the
respondent-Company in respect of 75 acres of land vide
proceedings dated 16.01.1963.
60. The nature of grant of 75 acres of land in favour of
the respondent-Company has to be deciphered from the
contents of the order dated 16.01.1963. The terms and
conditions of the grant would clearly demonstrate that the
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land was granted to the respondent-Company for a
specific purpose, and it was not an alienation of ownership
of the land in favour of the respondent-Company by the
State. The ownership of the land remained vested in the
Government and certain rights over the said land were
given to the respondent-Company with certain mandatory
conditions for the specific purpose of setting up of the
spinning mill. The State Government would always have
the right to resume the land either on the ground of
violation of the terms and conditions of the grant or for
public purposes or on both grounds. Therefore, we do not
agree with the submission of Mr. Dhyan Chinnappa,
learned Senior Counsel for respondent No.2-Bank that it
was a sale by the Government in favour of the
respondent-Company. The sale would confer all rights
over the land, however, in the present case, only limited
rights, that too, subject to the terms and conditions of the
grant were conferred on the respondent-Company. The
State Government never parted with the ownership right
in favour of the respondent-Company.
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61. As the grant was made in exercise of Rule 43-L of
the Mysore Land Revenue Code, 1888, or Rule 16 of the
Land Grant (Madras Area and Bellary District) Rules, 1960,
the terms and conditions of the grant are integral part of
the grant and therefore, the nature of the grant has to be
adjudged by construing the terms and conditions of the
grant which would clearly show that by the grant, limited
rights were conferred on the respondent-Company and
there was no transfer of the ownership of the land in
favour of the respondent-Company.
62. It is well settled that the Transfer of Property Act,
1882, is not applicable to such Government grants of the
land and only limited rights are transferred under the
grant over the property in favour of the grantee by the
Government, subject to the terms and conditions of the
grant. The respondent-Company cannot claim absolute
ownership of the land inasmuch as the same was not the
intent and purpose of the grant, which is evident from the
terms and conditions of the grant. When it is always open
to the Government to resume the land held on grant terms
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either on violation of the terms and conditions of the grant
or for public purposes or on both, it cannot be said that
the land was alienated by sale in favour of the respondent-
Company. Thus, we answer question Nos.i and ii
accordingly.
63. Re: Question Nos.iii, iv and vii: The rights of the
grantee are to be determined in a Government grant from
the instrument of the grant. As discussed above, the land
was granted in favour of the respondent-Company for
setting up of a spinning and weaving mill by exercising the
powers vested in the Government either under Rule 43-L
of the Mysore Land Revenue Code, 1888 or under Rule 16
of the Land Grant (Madras Area and Bellary District) Rules,
1960. The grant would be outside the purview of the
other Rules and therefore, it would be required to construe
the terms and conditions of the grant to determine
whether the Government would continue to have the
power of resumption.
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64. The terms and conditions of the grant are very
specific and categorical in the sense that on certain
contingency and breach committed by the grantee, the
Government would have the power to resume the land
granted in favour of the respondent-Company. It is not in
dispute that the respondent-Company had breached the
terms and conditions of the grant by not paying the annual
rent etc., and now the Company is not using the land for
the purpose for which it was granted.
65. There is no restriction or time limit prescribed under
the terms and conditions of the grant to the Government
to exercise its option of resumption of the land. When the
respondent-Company is in default and breached the terms
and conditions of the grant and the very purpose for which
the grant was made in favour of the respondent-Company
is no longer in existence, it would be well within the power
of the State Government to resume the land. We are of
the opinion that the Government was well within its power
to resume the land, at any time, if it was required for
public purposes or there was violation of the terms and
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conditions of the grant or the very purpose for which the
land was granted no longer exists. It is not the case of
the respondent-Company or the Bank that the land is not
required for the public purposes or the respondent-
Company has not breached the terms and conditions of
the grant. Thus, we answer question Nos.iii, iv and vii
accordingly.
66. Re: Question No.v: In the winding up order dated
19.10.1987 read with the order dated 06.11.1987 passed
in Company Petition No.34/1986 c/w Company Petition
Nos.13 & 39/1987, the learned Company Judge, in
paragraph 10, specifically held that the land of 75 acres
granted by the Government vide grant dated 16.01.1963
did not vest in the respondent-Company. These lands
were granted by the State Government under certain
conditions, more particularly mentioned in the order of
grant and for that reason, the respondent-Company had to
take permission of the Government for mortgaging its land
to the Bank which would be evident from the grant itself.
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Paragraph 10 of the said judgment is extracted
hereunder:-
"10. However, one contention which
requires some consideration by this
Court is the submission that the
outstanding loans due from the
Company are fully secured by the
mortgage of immovable properties
measuring about 75 acres and odd
as noticed earlier. These lands do
not vest in the Company absolutely.
This is evident from Annexures-A1,
A2 and A3 filed by the petitioner.
These lands were granted by the
State Government under certain
conditions more particularly
mentioned in the order of grant.
That is the reason that the company
had to take the permission of the
State Government for mortgaging
these lands to the petitioner-Bank,
as is evident from Annexure A1 filed
in the writ petition. The Government
has imposed certain special
conditions for the alienation of these
lands. Under clause-IV, "the
Government may resume the land
wholly or in part, with any buildings
thereon if in the opinion of the
Government the land is required for
a public purpose or for conducting
mining operations. In the event of
such resumption or in the event of
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the acquisition of the land for any
reason, the compensation payable
for the land and trees shall in no
case exceed the amount paid for
them by the grantee or their value
at the time of resumption or
acquisition whichever may be
less...the event of resumption under
condition...on the land the
Government shall either purchase
them or direct the grantee to
remove them."
67. The said judgment has become final. Even
otherwise, the respondent-Company was granted limited
rights over the lands by the grant by imposing certain
specific restrictions and conditions as mentioned in the
terms and conditions of the grant, and it was not transfer
of the ownership of the land in favour of the grantee i.e.,
respondent-Company. Once in the winding up order itself,
it has been held that the land vests in the Government
and what was transferred under the Grant was only limited
rights for use of the land for the purposes of setting up of
spinning mill, it would not be open to the respondent-
Company or the respondent-Bank to contend that the
respondent-Company became the true owner of the land.
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Disputing and unsettling such conditions would be
absolutely incorrect and against the findings of the learned
Company Judge recorded in the winding up order
mentioned above. We, therefore, answer question No.v
accordingly.
68. Re: Question No.vi: The permission to mortgage the
land in favour of the respondent-Bank was granted by the
Deputy Commissioner vide order dated 30.11.1963. The
permission was to mortgage whatever limited rights and
title over the land the respondent-Company had. The
Government had never waived its right in favour of the
respondent-Company of ownership and right of
resumption. The respondent-Bank, knowing fully well the
only limited right the respondent-Company had in
accepting the mortgage, now it is not open to the
respondent-Bank to contend at this stage that the grant
was complete alienation of all rights of ownership by the
State Government in favour of the respondent-Company.
The grantee cannot transfer better right and title over the
land/property than it has. Therefore, in the event of an
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auction conducted by the official liquidator, the auction
purchaser would get only the limited right as the
respondent-Company had over the land under the grant
and it would not have the better right, title or interest over
the land than the grantee had. The auction purchaser
would not be entitled to challenge the terms and
conditions of the grant under which the Government is the
owner of the land with right of resumption, and therefore,
the auction purchaser would not acquire right in the land
which would shield him from the power of the
grantor/State to resume the land.
69. We hold that the Government is the owner of the
land and what it transferred in favour of the respondent-
Company was limited rights over the land for the specific
purpose of setting up of spinning mill. The Government
would always have the power and right to resume the
land. Thus, the Government is entitled to resume the
entire 75 acres of land, if it so desires. We do not find any
infraction in the resumption notices dated 24.11.1984 or
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24.09.1986 and we hold that the notice dated 24.09.1986
is continuation of the notice dated 24.11.1984.
70. We, thus, having answered all the questions, allow
the appeal and set aside the judgment and order dated
03.11.1998 passed by the learned Company Judge in
Company Application Nos.1035/1996, 1036/1996,
481/1998 and 75/1987 in Company Petition No.34/1986.
No order as to costs.
Pending IAs, if any, stand dismissed.
SD/-
(D K SINGH)
JUDGE
SD/-
(VENKATESH NAIK T)
JUDGE
RKA/BKV
