Holding

The Supreme Court held that the State Government must comply with the statutory requirement of recorded reasons for non‑auction disposal of lease‑hold nazul land and that the High Court was correct in quashing the grant to the appellants.

Summary

The respondents, displaced persons, applied for plots of nazul land to build shops, as did the appellants. The State Government initially rejected all applications, but later reversed its policy and granted the plots to the appellants on permanent lease (Bhumidhari rights) without holding a public auction and without recording any written reasons. The respondents challenged the grant, arguing that the law required an auction or, if dispensed with, a written justification, and that the power to allot lay with the Collector, not the State Government. The High Court quashed the grant, holding that the State Government had violated Sections 149(2) and 164(3) of the Madhya Pradesh Land Revenue Code, 1954 and Rules 22 and 26 which mandate written reasons for non‑auction disposal and require consideration of all claimants. The Supreme Court affirmed the High Court’s decision, dismissing the appeal and ordering the State Government to reconsider all applications in accordance with the statutory provisions.

Issues considered

Whether the State Government may dispose of lease‑hold rights in nazul land without a public auction absent written reasons under s.149(2) and s.164(3) of the Madhya Pradesh Land Revenue Code, 1954 and the corresponding rules.
Whether the power to grant such plots resides with the State Government or the Collector.
Whether a reversal of an earlier policy of non‑allotment, without considering other claimants, is valid under the same statutory framework.

Legislation cited

Madhya Pradesh Land Revenue Code, 1954s. 149, s. 164
Madhya Pradesh Land Revenue Code Rules, 1956s. 22, s. 24, s. 26

Subjects

Nazul landLease‑hold rightsPublic auctionBhumidhari rightsDisplaced personsLand allotmentAdministrative lawStatutory interpretation

Judgment

A 288 .

PARASHRAM THAKUR DASS & OTHERS

v.
RAM CHAND S/O SHRI RADHUMAL & OTHERS
B
February 17, 1982

[R.S. PATHAK AND 0. CHINNAPA REDDY, JJ.)

Madhya Pradesh Land Revenue Code, 1954 Ss. 149(2) and 164(3) & Madhya
Pradesh Land Revenue Code Rules, 1956, Rules 2 to 26.
c
Allotment of nazul land to displaced persons-Applications from claimants~
State Government ini1ially deciding not to grant plots-Subsequent decision to allot .)..-~- -
plots taken-Plots allotted to some claimants-Claims of other parties not consider-
ed-Such action-Whether valid.

Grant of lease-Hold right in nazul land without auction-Rea,,ons to hi
D recorded in writing-Whether essential.

Respondents Nos. I to 16 applied for the grant of plots of land for purpo-
ses of constructing shops, alleging that they were displaced- persons and entitled to
the grant of plots. The appellants also made a similar application. There were
applications from other claimants. The State Government acting on the report
of the Commissioner rejected all the applications. Subsequently the Government
E at the instance of the appeJlants who had sought a review 1 reversed its earlier
or®r and df'cided to grant plots on permanent lease to the appellants. The deci·
sion was conveyed in a memorandum by the State Government, who granted the
plots to the appellants as shop sites ·in Bhumidhari rights without auction on
payment of premium. The allotment was assailed by the respondents and they
repre.sented to the State Government that only after further inquiry should the
land be reserved for do!serving claimants.
F
The respondents filed a writ petition in the High Court challenging the
allotment made by the Government in favour of the appellants contending that
no reasonable opportunity had been given to them to press their claim for grant
of plots, after reversal of the earlier decision not to grant land, that the apoellants
had been unduly favoured, and that the power to grant plot's was 't"ested in the
Collector and not in the State .Government. The appellants contested aHeging
that they bad acquired a right to the land that -they could not be divested of those
rights. The High Court quashed the order granting plots to the appellants and
directed the State Government to take appropriate action on the several claims
for allotment of lalld. It held that under sub--sect.ion (2) of section 149 read with
sub·section (3) of section 164 of the Madhya Pradesh Land Revenue Code, 1954,
e and rules 22 and 26 framed under the Code it was not open to the State Govern-
ment to dispose of the plots without holding a public auction unless there were
reasons recorded in writing for doing so and that after initially deciding not to
•

PARASRAM v. RAMCHAND 289
grant the plots, the su ~sequent decision to allot them was contrary to law as the A
claims of others had not been considered.

Dismissing the appeal,

HELD : I. The High Court was right in quashing the order granting plots
to the appellants and directing the State Government to consider the several
_ claims for allotment. [296 C-D] B
2. The grant cannot be attributed to clause (c) of sub-section (2) of section
149. _The land was disposed of in Bhumidhari right. It was not given on favour-
able terms to the appellants, tlie market value of the plots was taken for fixing
the premium. From the nature of the grant, it was clear that action under sub-
section (I) of section 149 was intended. [293 El

3. Under Rules 24 to 26 of the Land Revenue Code, lease-hold rights in
c
nazul land are to be disposed of by public auction. If in any particular case the
State Government or the Collector considers that there is good reason for grant·
ing the land without auction the reasons must be recorded in writing.· The exis·
tence of good reason for departillg from the general principle and the recording
of the reason in writing are essential prerequisites which must be satisfied before
lease hold rights are granted without auction. [295 A-CJ
D
In the instant case there is no evidence that the State Government has
recorded any reasons in writing for prcfcring the mode of disposing of the land
without auction. It had also no good reason for favouring that mode. In these
circumstances the gfant ot land to the appellants was rightly quashed by the High
Court. [295 E-F]

4. The State Government hRd decided earlier, as a matter of policy, not to E
allot nazul land to displace.d persons, and pursuant to the decision all the appli·
cations for a11otment were rejected. The applications 'illCre not rejected on the
merits of their respective claims. Subsequently, when the State Government made
an allotment of the plots to the appellants, it was consequent to a decision,
which. must be regarded as a composite of two decisions. one a policy decision
to throw open the land to allotment in reversal of the earlier policy and, two,
to allot the land to the appellants. The applications of the respondents for allot- F
ment of plots were rejected on t~e ground that the land was not available for
a1lotment. That was a policy decision. When it was reversed it was incumbent
on the State Government to reconsider those applications or to notify that the
land was available for allotment and to invite fresh applications in that behalf.
It was not open to thC State Government to allot the plots to the appeUailts in
disregard of the claims of others who bad also applied for allotment.
[295 G-H; 296 A·B] G
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 440 (N)
of 1970.

Appeal by special leave from the judgment and order dated
H
the 18th June 1969 of the Bombay High Co4rt in Misc. Civil Appln.
No. 139 of 1968.
29() SUPREME COURT REPORTS (1982] j s.c.I!..

A Naunit Lal, for the Appellant.

A.G.. Ratnaparkhi for Respondents Nos. 1-6.

M.N. Shroff, for Respondents Nos. 17-19.

The Judgment of the Court was delivered by
B
PATHAK, J. This appeal by special leave is directed against
the judgment of the Nagpur Bench of the Bombay High Court
quashing the grant of Nazul land to the appellants on a writ peti-
tion filed by the respondents Nos. I to 16.

c The respondents Nos. 1to16 applied on March 15, 1963 for
the grant of sixteen plots of land included in Government Nazul
Plot No. 31/l (Sheet No. 49-D) in Yeotmal Town for the purpose
of constructing shops thereon. They alleged that they had not been
allotted any land yet for carrying on business at Yeotmal, and inas-
D much as land sites were being released to refugeea or displaced
persons they claimed that having been compelled to migrate from
West Pakistan to India during the partition of 1947 they were
entitled to the grant of such plots. The appellants made a similar·
application on May 16, 1964 and it is their case that they had also
applied earlier in the same behalf on February 27, !962. There were
E applications from other claimants also. The State Government,
acting on the report of the Commissioner, Nagpur Division,
rejected all the ap~lications. The appellants say that they sought
a review of the order of the Government, and on June 28, 1965 the

-
Government reversed its order and decided to grant plots on perma-
nent lease to the appellants. The Collector, Yeotmal submitted a
F report to the Government pointing out that each plot would be
192 sq. ft. in area and having regard to its market value each allottee
should be required to pay a premium of Rs. 960. The State Govern-
ment granted the plots to the appellants as shop sites in Bhumidhari •I
right without auction on payment of premium, and the decision. was /-
conveyed in a Memorandum dated March 3, 1966. The allotment
G was assailed by the respondents, and they represented to the State
Government that after further inquiry the land should be reserved
for deserving claimants.

H The respondents filed a writ petition before the Nagpur Bench
of the Bombay High Court challenging allotment made by the
Government in favour of the appellants. They urged that no reason-
l>ARASRAM V, RAM CHAND (Pathak, J.) 291
· able opportunity had been given to them to ·press their claims for A
grant of plots after the Government had reversed its earlier decision ·
not to grant land, that the appellants had been unduly favoured and
that the order was bad in law because the plots had been granted
without holding an auction. It was also contended that the power
to grant the plots was vested in the Collector and not the State
Government. B
During the pendency of the writ petition a statement was made
on behalf of the State Government that it was prepared to consider
the claims of the respondents. The appellants, however, maintained
that they had acquired a right to the land in terms of the order
dated March 3, 1966 and that they could not be divested of those
rights,
c
-.:.- By its judgment dated March 14, 1968 the High Court allowed
the writ petition, quashed the order granting plots to the appellants
and directed the State Government and its officers to take appro-
priate action on the several claims for allotment of land. The High
Court held that in view of sub•s. (2) s. 149 read with sub-s. (3) of D
s. 164 of the Madhya Pradesh land Revenue Code, 1954, as applied
to the Vidharba region of Maharashtra, and rules 22 and 26 framed
under the Code, it was not open to the State Government to dispose
of the plots without holding a public auction unless there were
reasons recorded in writing for doing so, and that after initially
deciding not to grant the plots the subsequent decision to allot them E
to the appellants was contrary to law inasmuch as the claims of
others had not been considered.

-
~-
In this appeal, it is urged by the appellants that the High
Court erred in applying sub-s. (3) of s. 164 and rule 26, and there-
fore in holding that the lease of the plots without auction and witli-
out recording any reasons was invalid.
F

When the Government decided to grant land to the appellants,
it thought that the grant should take the form of a permanent lease
in their favour. The Collector was requested to frame suitable G
proposals and to submit them to th~ Govenment. The Collector
submitted a report dated November 23, 1965. suggesting the allot-
ment of plots for the construction of shops on the footing that each'

- plot would measure 192 sq. ft. and its market value, worked out on
the basis of recorded sale transactions, and taking into regard the
commercial purpose for which the land was intended, indicated a
premium of Rs. 960. He recommended further that the plots may
H
SUPaEMB COURT REPORTs [i 982] j s.C.i<.

A be granted without auction and in Bhumidhari right on payment of
premium for constructing shops thereon for -carryin!l on business.
On March 3, 1966 the State Government made an order
accordingly.

Now s. 149 of the Madhya Pradesh Land Revenue Code 1954
B provides:

"149. (I) Subject to rules made under this Code, land
belonging to the State Government, not being- land herein-
after mentioned in sub-section (2), shall be disposed of
in Bhumidhari or Bhumiswami rights by the Deputy
c Commissioner who may require payment of a premium for
such right or sell the same by auction.

(2) The land referred to in sub-section (11 shall be the
following, namely :-
D (a) land situate in the bed of a river of a tank ;

(b) land reserved for communal purposes such as
common grazing ground and cremation grounds;

(c) 'land given out on favourable terms for the pro-
E motion of religious, charitable, educational,
public or social purposes;

(d) land given out to persons on the condition that
it shall be used only for grazing cattle;
F
• (e) land given out for temporary purposes or for
limited periods or for mining and purposes sub-
sidiary thereto or for industrial or commercial
purposes;

G (f) land given out to persons on favourable terms for
rendering service as a kotwar;

(g) any other land which the State Government
may, by notification issued in this behalf,
H specify."

Section 164 of the Code may also be set forth :
•
PARASRAM v. RAM CHAND (Pathak, J.) 29j
A
"164. (1) Every person who holds land from the State Govern-
ment or to whom a right to occupy land is granted by
the State Government or the Deputy Commissioner
and who is not entitled to hold land as a tenure·holder
shall be called a Government lessee in respeet of such
land . B
• -4- j
(2) The Government lessee shall, subject to any
I
express provision in this Code, hold his land in
II ,-.
.. . accordance with the terms and conditions of the
........ grant which shall be deemed to be a grant within the
meaning of the Government Grants Act, 1895 . 0
•
(3) The State Government or the Deputy Commissioner
may, subject to rules made under this Code, dispose
of the right to occupy the land specified in sub-section
(2) of section 149 on payment of a premium or by D
auction or on such terms and conditions as may be pres-
cribed."

It is apparent that the grant cannot be attributed to clause (c) of
sub-s. (2) of s. 149. The land was disposed of in Bhumidhari right. E
Moreover, it was not given on favourable terms to the appellants; the
market value of the plots was taken for fixing the premium. From
the nature of the grant, it is clear that action under sub-s. (I)
of s. 149 was intended. Now Part III of the Notification
No. 1118-1832·55-XXVIII dated May 22, 1956 sets forth the rules
framed with reference to sub-section (I) of s. 149. These rules pro- F
vide for the grant of Bhumiswami and Bhumidhari rights in nazul
land for dwelling houses and ancillary purposes. Rule 24 defines
the expression "Nazul Land" to mean land belonging to the State
Government which is used for building on, or for roads, markets and
other public purposes. Rule 26 applies the provisions of rules 18
to 36 contained in Part V of the Notification No. I I J 9. J832-55- G
XXVIII dated May 22, 1956 to the disposal of nazul land under
Part Ill. The provise to rule 26 declares that where nazul land is
put to auction it should normally be i;ranted ·in Bhumiswami right,
and where it is disposed of without auction it should normally be
granted in Bhumidhari right. Rule 22 of Part V defines the power .H
of the State Government and of the Collector to dispose of nazul
plots with or without auction. Rule 22 provides :-
•
294 SUPREME coi.JkT REPoRTS (J982) 3 S.C.R.

A "22. Power to dispose of nazul plots with or without
auction shall be exercised in accordance with these Rlues-

(I) by the State Government in the case of-

(i) plots of which the freehold market value is not
8 Jess than Rs. 5,000;

(ii) plots within the limits of the Municipal Corpora-
tion of the City of Nagpur, whether or not
included in the Schemes of Nagur Improvement
Trust;
c (iii) plots reserved for specific purposes under
rule 20;

(iv) strips of land not being 1ndependent plots to be
settled with the occupants of adjoining land where
D the freehold value of the strip is not less ihan
Rs. 5,000;

(v) small strips of land adjacent to occupied plot,
which cannot be disposed of as a separate site
and in respect of which there is a difference of
E opinion betvyeen the Collector and the Officer-in-
charge, Town Planning and Valuation;

(vi) independent plots not included in the approved
lists where there is a difference of opinion between
the Collector and the Officer-in-charge, Town
F Planning an<;} Valuation;

(vii) plots granted without auction.

(2) by the Collector, in case of the other plots."
G
Sub-rule (I) of rule 26 in Part V declares:-

"26. (I) . Leasehold rights in nazul land shall be disposed of by
public auction except when in any particular case the
H State Government or as the case may be, the Collect\lr
thinks for reasons to be recorded in writing that there
is good reast>n for granting the land without auction."
PA!l.ASRAM i•. 11.AM t!IANI> (Pathak, J) 29~

lt seems indisputable that under the Rules as a general
principle leasehold rights in nazul land are to be disposed of by
public auction. If in any particular case the State Govern·
ment or, as the case may · be, the Collector considers that
there is good reason for granting the land without auction
the reasons must. be recorded in writing. The existence of 8
good reason for departing from the general principle, and the
recording of the reason in writing are essential prerequisites which
must be satisfied before leasehold rights are granted without auction.
It is pointed out that under clause (vii) of sub-rule (I) of rule 22 the
State Government is empowered to dispose of nazul plots without
auction. We have no doubt it can do so, but only after full com- c
pliance with sub-rule (l) of rule 26. The sub-rule (I) controls the
power of the State Government conferred by clause (vii) of sub-
rule (I) of rule 22. To hold otherwise would be to confer an
arbitrary power on the State Government to dispose of nazul plots.
It would be in the absolute discretion of the State Government to
decide whether nazul plots should be granted with auction or with· D
out auction. If that construction is accepted, it is clear that
sub-rule (I) of rule 26 would be negatived. The only reason-
ble construction, it seems to us, is to read the two provisions
together.
E
In the present case there is no evidence that the State Govern-
ment has recorded any reasons in writing for preferring the mode of
disposing of the land without auction and we are not satisfied that it
had good reason for favouring that mode. In the circumstances
/
the grant of land to the appellants has been rightly quashed by the
High Court. F

There is also sufficient justification in the _grievance of the
respondents that the State Government did not .!onsider the claims
of other persons, .including the respondents, when making an allot·
ment of the plots. The State Government had decided earlier, as a
matter of policy, not to allot nazul land to displaced persons, and
pursuant to that decision all the applications for allotment were
rejected. The applications were not rejected on the merits of the
·respective claims set out therein. Subsequently when the State
Government made an allotment of the plots to the appellants, it was· H
consequent to a decision which analytically must be reg~ded as
a composite of two decisions, one, a policy de~ision to throw open
296 SUPREME COUR1 REPORTS (J982j 3 S,C,R.

A the land to allotment in reversal of the earlier policy and, two, to
allot the land to the appellants. It will be remembered that the
applications of the respondents for allotment of plots were rejected
on the.ground that the land was not available for allotment. That
was a policy decision. When it was reversed, it was incumbent on
the State Government to reconsider those applications or to notify
B
that the land was available for allotment and to invite fresh applica-
tions in that behalf. It was not open to the State Govenment to
allot the plots to the appellants in disregard of the claims of others
who had also applied for allotment.

c In quashing the order granting plots to the appellants and
directing the State Government or its appropriate officers to consider .t,·
the several claims for allotment the High Court, in our opinion, did
that which was plainly right.

D
The appellants say that the respondents must be taken to have
accepted the rejection of their applications for allotment, and it
was only the appellants who pursued the matter and obtained a
reversal of the order of the Government and therefore the
appellants alone were entitled to the allotment of plots. The sub-
E mission would have had force but for the circumstance that the
State Government effected what was a change of general policy.
The change of policy altered the situation completely, and all the
claimants were entitled to the benefit of that change. By adopting
the new policy, the State Government must be taken to have
declared that the land was now open to allotment to the claimants
F
who were found most deserving. There were several applicants for
allotment, and a selection had to be made. It cannot be contended,
as indeed it is urged before us, that the appellants constitute a dis-
tinct and separate ~lass from the respondents only because the
appellants agitated against the rejection of their applications . While
G the respondents did not. ·

The controversy which remains is whether it is the State
Government or the Collector who has power to dispose of the plots
·in view of their market value. That is a matter on which we need
H
express ~o opinion, having regard to the quashing of the entire
allotment proceeding from its inception .. It will ~ for the Govern·
•
••
PARASHRAM v. RAM CHAND (Pathak, J.) 297

ment or the appropriate authority to decide what should be the A
nature of the rights to be conferred on the allottees and, therefore,
what should be the premium to he fixed.

In the result, the appeal is dismissed with costs.

B
N.V.K. Appeal dismissed.

\