Sunday, April 2, 2017

Kundla Press and Oil Mill Pvt. Ltd V/s.State of Gujarat March 28, 2017

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURSIDICTION

                        CIVIL APPEAL NO.4536 OF 2017
      (Arising out of Special Leave Petition (Civil ) No.30727 of 2016)

Kundla Press and Oil Mill Pvt. Ltd.                      ..  Appellant(s)


State of Gujarat & Ors.                                ..Respondent(s)

                               J U D G M E N T


      Leave granted.

2.    This Civil Appeal is directed against the  judgment  dated  06.09.2016
delivered in Letters Patent Appeal No. 797 of 2016 whereby the appeal  filed
by the appellant was dismissed and the judgment of the learned Single  Judge
passed in Special Civil Application No. 352 of 2013 was upheld.

3.    The facts necessary for decision of the case are  that  28,176  square
metres of land in Savarkundla was given on lease to  the  appellant  Company
in the year 1922 for a period of 30 years for  running  an  oil  mill.   The
lease expired in the year 1952.  Thereafter, fresh lease deed  was  executed
in  favour  of  the  appellant  by  the  Administrator  of  the  Savarkundla
Municipality on 18.09.1956.  In this lease deed it  was  mentioned  that  on
this  leased  area,  there  are  factories,  residential  units,   warehouse
(godown), press factory, expeller  and  office  buildings  etc.  which  were
constructed by the appellant.  The lease deed  was  granted  for  a  further
period of 30 years.  Relevant portion of the lease deed reads as follows:

“The Deed of Lease would be renewed on expiry of the  same.   And  based  on
the conditions prevailing at that time changes in the amount of rent may  be
made by the Municipality.  The Municipality will have the right  to       do

The aforesaid lease deed was to expire in the year 1982.

4.    It appears  that,  in  the  meanwhile,  the  Savarkundla  Municipality
issued two notices to the appellant company in  the  year  1976  asking  the
appellant company to handover the  land  to  the  Municipality.   A  dispute
arose since the company did  not  handover  the  possession  of  the  leased
property.  Thereafter, this dispute was referred to  the  Arbitration.   The
Arbitrator made the award in favour  of  the  company  on  11.03.1978.   The
Arbitrator held as follows:

“....The Company can carry out any sort of construction it may deem fit  and
for any purpose it may find useful for.  And the Municipality is  liable  to
grant permission for construction without laying  any  condition.   In  this
regard, as stated above, the Company has the right  to  renew  the  Deed  of
Lease and so the only question that arises is that whether the  Company  can
carry out construction on the aforesaid land or not.   This  land  has  been
given this land for its business (sic).   Therefore the  Company  can  carry
out construction over this land for its business........”

5.    The operative portion of the Award reads as follows:

“3. The Company can carry out  on  the  land  construction  which  it  deems
proper and for such use as it deems proper.  Since the  Municipality  is  an
autonomous body and the Rent Act is not applicable to the land  owned  by  a
local autonomous institution.  In case of  such  properties  the  Rights  of
Tenants and Property Owners are as per the provisions  of  the  Transfer  of
Properties Act.  The Municipality is responsible  to  grant  the  permission
for construction as per  the  permission  of  construction  granted  by  the

The Arbitrator held that the appellant company was entitled  to  renewal  of
the lease deed and was also entitled to make construction  on  the  land  in
question connected with its business.  This  Award  was  made  Rule  of  the
Court on 26.04.1978.

6.    Though the Award was passed in favour of the company  and  the  Decree
in terms of the Award had  also  been  passed,  the  Collector,  Savarkundla
cancelled the lease deed on the ground that  the  appellant  was  trying  to
raise construction on the  land  in  question.   Thereafter,  the  appellant
filed a Writ Petition being Special  Civil  Application  No.  845  of  1978.
This Writ Petition was allowed and  the  order  of  the  Collector  was  set
aside.  Thereafter also, no lease deed was executed since  the  Municipality
did not have the power to execute the lease deed for  more  than  10  years.
Finally, on 23.10.1991, the Government of Gujarat issued an order  that  the
lease deed may be renewed for a further term of 30  years  from  01.04.1982.
In actual fact, this lease deed was only executed on 12.04.2007.    However,
this lease deed was made effective for a period of 30 years from  01.04.1982
till 31.03.2012.

7.    Shri Ashok Desai, learned senior counsel appearing for the  appellant,
submits that in view of the conditions quoted hereinabove, the appellant  is
entitled to renewal of the lease deed as  a  matter  of  right.  He  further
submits since the Municipality has permitted the appellant to construct  and
raise buildings on the  land  in  question  the  appellant  is  entitled  to
renewal of the lease.  He has candidly submitted that the  Municipality  may
charge enhanced lease rent.

8.    On the other hand, Shri Preetesh  Kapoor,  learned  counsel  appearing
for respondents submits that there can be no lease in perpetuity  in  favour
of any person.  He submits that the State Government  had  given  permission
to the Municipality to lease out land only for  a  period  of  30  years  in
terms of Section 65 (2) of the Gujarat Municipalities Act, 1963 which  reads
as follows:

“65. Powers of municipality to sell, lease, and contract.-

xxx              xxx              xxx

(2)   In the case of every lease or sale of land under  sub-section  (1)  of
section 146 and of a lease of immovable property for a  term  exceeding  ten
years and of every sale or other transfer of such  immovable  property,  the
market value of which exceeds one lakh of rupees,  the  previous  permission
of the State Government is required:

      Provided that in the case of a  lease  or  sale  of  land  under  sub-
section (1) of section 146 no such permission shall be granted if such  land
forms a street or part of a street which has been declared to  be  a  public
street under section 148.”

9.    A bare perusal of the aforesaid section makes it very clear  that  the
Municipality has no authority to grant a lease for  a  period  exceeding  10
years without prior permission of the  State  Government.   In  the  present
case, the State Government had only granted permission  to  lease  the  land
till the year 2012.  Therefore, the  appellant  has  no  inherent  right  to
claim that fresh lease be granted in its favour.

10.   Another factor which has to be considered is that the  original  lease
was granted for running an oil mill and as on date admittedly  there  is  no
oil mill situated on the land.  The leased property  is  a  public  property
leased out at a very meagre rent.  It  cannot  be  utilised  for  a  purpose
other than the purpose for which it was leased out.  True  it  is  that  the
appellant may have been permitted to raise construction on the  leased  land
but it is obvious that the construction to be raised should have  connection
with the original business of the company i.e. running  an  oil  mill.   The
appellant has raised a huge commercial complex earning crores of rupees  but
is paying only a few hundred rupees to the Municipality.

11.   We are of the considered view that the appellant is  not  entitled  to
claim that lease deed must be renewed in his favour.    The  High  Court  of
Gujarat was perfectly justified in holding that the appellant  cannot  claim
that he is entitled to renewal of the lease deed as a matter of right.   The
finding of the High Court that the appellant is earning huge profits by  way
of rent is not denied.  It has also been stated that the  land  is  required
by the Municipality for educational purposes.

12.    Having  regard  to  the  rival  submissions   and   the   facts   and
circumstances of the case, we find no merit in the appeal and  the  same  is
accordingly dismissed.

                                                            (MADAN B. LOKUR)

                                                              (DEEPAK GUPTA)

New Delhi
March 28, 2017
ITEM NO.1B               COURT NO.5               SECTION IX
(For Judgment)
               S U P R E M E  C O U R T  O F  I N D I A
                       RECORD OF PROCEEDINGS

Petition(s) for Special Leave to Appeal (C)  No(s).  30727/2016

(Arising out of impugned final judgment and order dated  06/09/2016  in  LPA
No. 797/2016 in SCA No. 352/2013 passed by the  High  Court  of  Gujarat  at

KUNDLA PRESS AND OIL MILL PVT. LTD.              Petitioner(s)


STATE OF GUJARAT AND ORS.                        Respondent(s)

Date   :   28/03/2017         This    petition    was    called    on    for
      prouncement of judgment today.

For Petitioner(s)      Mr. Anirudh Sharma, AOR
                       Mr. Abhaid Parikh, Adv.

For Respondent(s)      Ms. Hemantika Wahi, AOR
                       Ms. Jesal, Adv.
                       Ms. Puja Singh, Adv.

       Hon'ble  Mr.  Justice  Deepak  Gupta  pronounced  the  non-reportable
judgment of the Bench comprising Hon'ble Mr. Justice Madan B. Lokur and  His
      The  appeal  is  dismissed  in  terms  of  the  signed  non-reportable

(Meenakshi Kohli)                             (Sharda Kapoor)    COURT
MASTER                                   COURT MASTER

           [Signed non-reportable judgment is placed on the file]

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