State of Karnataka and Others vs Gulf Oil Corporation Ltd.

Raghvendra S. Chauhan, J.—Aggrieved by the order dated 13.2.2008, passed by a learned Single Judge in Writ Petition No. 43578/2004, whereby the learned Single Judge has directed the State of Karnataka to execute and lodge for registration the Deed of transfer within a period of four weeks, the State of Karnataka has approached this Court.

The brief facts of the case are that, initially Mysore Industrial and Testing Laboratory (''MITL'' for short) was a wholly owned subsidiary of M/s. Indian Detonators Limited. Subsequently, the Indian Detonators Limited, which was referred to as a division of IDL Chemicals Limited, changed its name to IDL Chemicals Limited. Thereafter, the Company changed its name to M/s. Gulf Oil Corporation Limited. Pursuant to amalgamation having taken place, the assets and liabilities of MITL were transferred to IDL Chemicals Limited, which is now known as M/s. Gulf Oil Corporation Limited. Henceforth, the appellant shall be referred to as ''the Company'' for short.

On 12.7.1967, the MITL entered into a Sale Deed with the Governor of Mysore, for purchasing 6 acres 1 gunta of land, being Municipal No. 1637/2052 and 1634/2040, situated at Sankey Road, Malleswaram, Bangalore (abutting Sankey Tank). Since there was some land which was abutting the aforesaid land, therefore MITL also requested the Government of Mysore for transfer of the abutting land. However, the abutting land was in possession of Forest Department. Therefore, by letter dated 2/5.1.1971, the Forest Department, Government of Mysore, decided to transfer 1.2 acres of land, Malleshwaram, Bangalore (property presently measuring 4495.372 sq.mtrs.), bearing Municipal No. 277, 2nd Main Road, Malleshwaram, Bangalore, (hereinafter "the said property" shall be referred to as "the said land"). Since the said land was to be transferred on the payment of market value of the land, the Forest Department requested the Public Works Department to value the land; accordingly, the Public Works Department placed on record the market value. By letter dated 28.8.1973, Government of Mysore, Agricultural and Forest Department, informed the MITL that they are willing to transfer the said land at the prevailing price of Rs. 6,43,203/-, provided that the amount is deposited in three installments. Subsequently, by letter dated 10.1.1974, the Government of Karnataka and Forest Department sanctioned the transfer of 1.2 acres of land to M/s. Indian Detonators Limited, Hyderabad. The said order was issued with the concurrence of the Forest Department. According to the said order, certain conditions were imposed upon M/s. Indian Detonators Limited. One of the conditions was viz., condition No. 6, that "the Company shall not alienate, sublet, mortgage or sell the land to any individual or company, and in such an event, the land shall revert to the Forest Department." Condition No. 8 claim that " the entire land should revert to the Forest Department if the Company becomes defunct. However, subsequently, by order dated 13.3.1974, the condition No. 6 was modified and it was agreed by the Government of Mysore that the Company can use the property for any of their purpose, create encumbrance, charge or mortgage the said property for any reason convenient for its business." It was further held out that, "in case the existing company is shifted to any other location in the State of Karnataka, the Company shall be at liberty to dispose of the said property in any manner it deems fit, but not otherwise."

By letter dated 16.8.1974, the Company informed the Secretary to Government of Karnataka, Forest Department, that it has paid the market value of the property, as well as the interest on the delayed payments. Further, by letter dated 31.3.1975, the Government of Karnataka informed the Company that the Chief Conservator of Forests has been instructed to execute the necessary agreement, and also to hand over the possession of the property. Furthermore, although initially the Government had agreed to transfer 1.2 acres of land, subsequently by order dated 22.3.1976, a corrigendum was issued and the extent of land was reduced to 1.1 acre.

Since the land use of the area was for public and semi-public usage, by letter dated 11.7.1986, the Company applied for change of land use from public, semi-public to industrial usage. The Government of Karnataka/Bangalore Development Authority (BDA) permitted the change of land use from public, semi-public to industrial use. Thereafter, the company also applied to the BDA for change of land use from industrial to commercial and residential purpose. The BDA permitted the change in land use and issued a Commencement Certificate dated 28.7.1999. The Company entered into an Agreement of Sale with M/s. Abhishek Developers, Mantri Group, Bangalore, on the same day.

Thus, having come into the ownership of the said land, having got its land usage changed, the Company hoped that the 2nd respondent would complete the formality of execution of the Sale Deed in its favour. Many a times, the Company requested the Government of Karnataka and the 2nd respondent to do the needful, but, no heed was paid to the said requests.

Suddenly, by letter dated 30.6.2004, the Prl. Chief Conservator of Forests, directed the Company to submit all the documents relating to title to the said property. The Company replied to the same, and prayed that the Sale Deed be registered and formalities be completed by the Prl. Chief Conservator of Forests as directed by the Government. However, instead of doing so, by letter dated 1/5-10-2004, the 2nd respondent made certain allegations, and claimed that, since the Company had become defunct, therefore, in compliance of condition No. 8 mentioned above, the land would revert back to the Forest Department. Respondent No. 2 also made a reference to a letter dated 8.12.2003, whereby a notice had been sent to the Company. However, the Company claimed that it had never received the said letter.

Surprised by the letter dated 1/5.10.2004, and fearing that its title over the land may be questioned and that the said land may be taken over by the respondent No. 2, the Company filed a writ petition before this Court viz., Writ Petition No. 43578/2004; it prayed that the respondents be directed to complete the formality of execution of Sale Deed in respect of the said land, and the respondents should be stopped from interfering with the Company''s peaceful possession and enjoyment of the said land. After hearing both the parties, the learned Single Judge passed the impugned judgment dated 13.2.2008. Hence, this Appeal before this Court.

Mr. Y.H. Vijaya Kumar, learned Addl. Government Advocate for the State, has raised the following contentions before this Court: firstly that the relaxation given by the Sate in condition No. 6, by order dated 13th March 1974, is legally untenable as the said relaxation was never placed before the Cabinet. In the absence of a Cabinet decision, the letter could not be issued in the name of the Governor. In order to buttress this contention, the learned Counsel has relied upon the case of Fonseca Private Ltd. and Others Vs. L.C. Gupta and Others, AIR 1973 SC 563 : (1973) 1 SCC 480 and Rajureshwar Associates Vs. State of Maharashtra and Others, AIR 2004 SC 3770 : (2004) 3 BC 437 : (2004) 5 JT 249 : (2004) 6 SCALE 118 : (2004) 6 SCC 362 : (2004) 2 SCR 915 Supp : (2004) 2 UJ 1264 . He further submits that the said relaxation has been given by the Special Officer Ex-Officio, Deputy Secretary to Government. Thus, the relaxation is non est in the eye of law. Therefore, the Company could not have entered into an agreement with M/s. Abhishek Developers for the sale of 29,015.77 sq.mtrs. of the land. Since the Company has violated condition No. 6 as contained under Transfer Order dated 10th January 1974, the land has to revert back to the Government.

Secondly, since the land held by M/s. IDL Chemicals Limited was falling within the limits of the provisions of Chapter III of the Urban Land (Ceiling and Regulation) Act, 1976, the IDL Chemicals Limited had applied to the Government for exemption from the provisions of the said Act. By a letter dated 27th January 1978, vide Annexure-P, the Government had exempted the Company from the provisions of the said Act, provided, as long as the land is being used for the industrial purpose. Moreover, the Company was barred from transferring the said land by way of sale, mortgage, gift, lease or otherwise without prior permission of the Government. According to the learned counsel, therefore the Company could not have changed the land usage from industrial to residential and commercial purpose. Further, it could not have entered into an Agreement of Sale with M/s. Abhishek Developers without the prior permission of the Government.

Thirdly, the very purpose of transferring the land to the Company was to ensure development of a large pharmaceutical complex at the site. But, to enter into a registered Sale Deed, and to permit the Company to transfer the land to M/s. Abhishek Developers, would defeat the very purpose for which the land was transferred to the Company at the initial stage by the order dated 10th January 1974.

Lastly, that the learned Single Judge has ignored the fact that the Company has become defunct. According to condition No. 8 contained in the order dated 10th January 1974, the land automatically reverts back to the Forest Department. The learned Single Judge has ignored these vital facts, and has erred in directing the appellant to complete the formalities of registration of the Sale Deed in favour of the respondent-Company. Thus, according to the learned counsel, the impugned judgment deserves to be interfered with.

On the other hand, Mr. Udaya Holla, the learned Senior Counsel for the respondent, has pleaded firstly that the letter dated 13th March 1974, exempting the Company from condition No. 6 has been passed by the Special Officer Ex Officio to Deputy Secretary to Government "by and in the name of Governor of Karnataka." Moreover, there is presumption in law that once an order has been passed in the name of the Governor, it has been done so after following the procedures established by law. Since the Governor cannot act on his own, but acts on the aid and advice of the Cabinet, the Court shall presume that the Cabinet''s decision has been taken. In fact, it was only on the basis of Cabinet decision dated 9th December 1970 that the Government had agreed to transfer the land from the Forest Department to the Indian Detonators Limited. Therefore, in the absence of any evidence to show that the decision to relax condition No. 6 was not placed before the Cabinet, the contention raised by the appellant is highly misplaced.

Secondly, the contention with regard to the Urban Land (Ceiling and Regulation) Act, 1976, the said plea was not raised before the learned Single Judge. Hence, the said plea cannot be raised at the appellate stage. Moreover, since the entire Act has been repealed in 1999, the appellant cannot rely upon the said order for the purpose of limiting the right of the Company to alienate the property. For, the relaxation given by the Government by order dated 13th March 1974 is still valid and is holding the field. Thus, the Company was justified in entering into an Agreement to Sale with M/s. Abhishek Developers and in insisting that the formalities of registration of Sale Deed be completed by the appellant.

Thirdly, the learned Single Judge himself has noticed that since the Company could not expand its operations in the said land, in 1995, the Karnataka Industrial Areas Development Board (''KIADB'' for short) had permitted the Company to shift its operations to a land, allotted by it, at Yelahanka. Therefore, the Company has shifted its operations to Yelahanka and is still functional. Moreover, merely because the Company has changed its name, that too, after an approved amalgamation, to M/s. Gulf Oil Corporation Limited, it does not mean that the original assignee has become "defunct." Therefore, the appellants are not justified in claiming that since the Company has become defunct, the land automatically reverts back to the Forest Department.

Lastly, that since the Government itself had relaxed the condition, and had permitted the Company to dispose of the said land in case it was relocating itself anywhere in Karnataka, the Company was justified in entering into an agreement with M/s. Abhishek Developers after getting the land usage changed from the Bangalore Development Authority. According to the learned Senior Counsel, these essential facts and circumstances were duly noted by the learned Single Judge. Therefore, the learned Senior Counsel has supported the impugned judgment.

Heard the learned counsel for the parties, perused the impugned judgment, and examined the records placed by the parties.

Needless to say, the State cannot act in an unfair, unreasonable manner with a person or a Company. Once having transferred a land, that too, after realising the market value, once having relaxed the conditions initially imposed upon the Company, the State cannot track back and find flimsy excuse for not taking the transaction to its logical conclusion. Since the State is supposed to act fairly and reasonably, the contentions raised by the learned counsel for the State are clearly untenable.

The first contention raised by the learned counsel for the State was not even whispered when the writ petition was hotly opposed by the State. Therefore, the appellant cannot be permitted to raise a new fact, a new issue at this belated stage. Moreover, a bare perusal of the order dated 13th March 1974 clearly reveals that it is indeed "by order and in the name of the Governor of Karnataka". There is an undisputable presumption of law that an official act has been done in accordance with law. If a party wishes to plead that the procedure established by law has not been followed by the official authority, it is for the party to prove so. Having passed the order dated 13th March 1974, it does not lie in the mouth of the appellant to resile from the said order on the flimsy ground that there is no Cabinet decision permitting such a relaxation to the Company. Therefore, the first contention raised by the learned counsel for the appellant is clearly unacceptable.

The learned Government Advocate for the appellants has relied on the case of Rajureshwar Associates (Supra) in order to contend that in case an agreement to sell has been entered in favour of the party sans Business Rules, said sale is vitiated in law. In the said case, the land was allotted to the Spinning Mill by the Government on the condition that if, in case, any terms of the agreement were violated, the land would be resumed by the Government. Subsequently, Mill owners violated the terms of the grant. Therefore, the Government resumed part of the land. Meanwhile, the Mill owners erected a building on the remaining part of the land. Since the Mill Owners went into liquidation, the Official Liquidator invited offers for sale of the entire land. Although the offer made by the appellant Rajureshwar Associates was accepted by the Textile Ministry, the Revenue Department did not agree to such a sale. However, despite the disagreement of Textile Department and Revenue and Finance Department, the matter was never placed before the Cabinet as per the Maharashtra Government Rules of Business. Subsequently, even the Chief Minister of Maharashtra directed re-tendering. The Government cancelled the Agreement to Sell entered between the Textile Department and Rajeswara Associates. It is in this context that the Hon''ble Supreme Court was of the opinion that, since the decision of the Textile Ministry to execute the Agreement of Sale was dehors the Business Rules, the Agreement to Sell stands vitiated in law. However, the present case is obviously distinguishable on the factual matrix. Therefore, the case of Rajureshwar Associates (supra) does not rush to rescue of the appellant.

Even the case of Fonseca Private Ltd., (Supra) is distinguishable from the present case. In the said case, the Deputy Secretary of Government of India had served an order directing the appellant - Fornseca Private Limited to vacate the disputed premises within seven days. The appellant had challenged the said order before the High Court. The High Court dismissed the petition. Therefore, the appellant approached the Hon''ble Supreme Court. The only issue before the Hon''ble Supreme Court was "whether the Deputy Secretary to the Government of India was authorised to issue such an order under Section 3(48) of the Defence of India Act, 1971 or not?" The Apex Court was of the opinion that since under the Government of India (Transaction of Business) Rules, 1961, it is only the Minister or the officer empowered who alone could have exercised the power in the name of the President, and the Deputy Secretary admittedly had no such power, therefore, the order passed by him was illegal and void. However, in the present case, the learned counsel for the State has not raised the issue that the order dated 10th of March 1974 had been passed by an authority who was not authorised to pass the said order. Therefore, even the case of Fonseca Private Limited (Supra) does not buttress the pleas raised by the State.

The second contention is clearly untenable. Admittedly, the Urban Land (Ceiling and Regulation) Act, 1976 was repealed in 1999. During the tenure of the Act, there was no complaint that the Company had violated the conditions imposed by it, by order dated 27th January 1978. Curiously, even this contention was never raised by the State before the learned Single Judge. Therefore, again a new plea is being raised at a belated stage. But, such plea obviously cannot be submitted at the appellate stage. Therefore, even the second contention is unacceptable.

The learned Single Judge has certainly noted the fact that since the expansion of the unit could not be carried out on the said land, the Company had requested the KIADB to allot a land at Yelahanka. After the said land was allotted by the KIADB, the Company has shifted its operation to the said area. Merely because the Company may have amalgamated and may have changed its name and style from IDL Chemicals Limited to M/s. Gulf Oil Corporation Limited, it would not lead to an inference that the Company has become ''defunct''. At length, the learned Single Judge has discussed and has opined that the word ''defunct'' is not defined in the Companies Act, 1956. But, the definition can be located in the Advanced Law Lexican, 3rd Edition. The word ''defunct Company'' means a Company which is no longer active and has been removed from the Registrar of Companies. Section 560 of the Companies Act empowers the Registrar of Companies to strike off a Company which has become defunct. However, there is no evidence to show that the Company has been struck off by the Registrar of Companies. Hence, the appellant has failed to produce any evidence whatsoever to prove the fact that the respondent Company has become defunct. Since the respondent Company continues to function, the question of the land reverting to the Forest Department does not even arise.

Even the last contention raised by the learned counsel for the State is baseless. Although, initially the land was allotted to the Company for the purpose of establishing a pharmaceuticals complex, but as narrated above, the conditions were relaxed by the Government itself. The Government permitted the Company to transfer the land in case it was relocating to any other part of Karnataka. Once the conditions were relaxed by the Government itself, a plea cannot be raised that such a transfer would frustrate the very purpose for which the land was initially given. After all, while relaxing the conditions the Government was well aware of the fact that some day. The Company may want to transfer the land and relocate to the same place, thereby frustrating the very purpose for which the land was given at the initial stage.

For the reasons stated above, this Court does not find any merit in the Writ Appeal. Therefore, the same is hereby dismissed.