Holding

Section 20(1)(b) exempts excess vacant land from the transfer restrictions of Chapter III, so the exemption can permit transfer subject to conditions, and the earlier decision in S. Vasudeva is overruled.

Summary

The petitioner booked a flat in a building constructed on excess vacant land that had been exempted under Section 20(1)(b) of the Urban Land (Ceiling and Regulation) Act, 1976. The promoter refused to transfer the flat and the land share, citing a Karnataka High Court order based on the Supreme Court’s decision in S. Vasudeva, which held that such exemption does not permit transfer. The petitioner filed a writ petition under Article 32 challenging that decision. The Supreme Court examined the language of Section 20, the non‑obstante clause, and the purpose of the Act, concluding that an exemption under clause (b) lifts the transfer restriction subject to conditions and that the Vasudeva ruling was based on an incorrect construction. The Court overruled S. Vasudeva, held that the exemption can allow transfer, and emphasized the need for non‑arbitrariness and written reasons when granting exemptions. The writ petition was dismissed.

Issues considered

The correctness of the Supreme Court’s decision in S. Vasudeva regarding Section 20(1)(b) of the Urban Land (Ceiling and Regulation) Act.
Whether an exemption granted under Section 20(1)(b) permits the transfer of excess vacant land.
The proper interpretation of the term “undue hardship” in clause (b).
Whether the State Government’s power to exempt must satisfy the rule of non‑arbitrariness and require reasons to be recorded in writing.

Legislation cited

Constitution of Indias. Article 14, s. Article 141, s. Article 252, s. Article 32
Karnataka Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1972
Urban Land (Ceiling and Regulation) Act, 1976s. 10, s. 11, s. 20(1)(a), s. 20(1)(b), s. 25-30, s. 3-24, s. 4, s. 5

Subjects

Urban land ceilingExemptionTransfer of landUndue hardshipNon‑arbitrarinessStatutory interpretationArticle 32S. Vasudeva

Judgment

A T.R. THANDUR
v.
UNION OF INDIA AND ORS.

APRIL 8, 1996

B f.1.S. VERMA, S.P. BHARUCl-lA AND
KS. PARIPOORNAN, J.1.J

Urba11 Land (Ceiling a11d Regulatio11) Acf 1976-Ss. 20(J)(a) a11d
(b )---E.xemptio11 of la11d from applicability of the A ct-Supreme Cowt i11 S.
C Vasudeva v. State of Karnataka, {1993/ 3 SCC 467 holding that state govem-
nzent cannot give exen1ption to vacant land in excess of ceiling linzit for the
'
purpose of transfer-State actio11 based on the decisio11 chal/e11ged-Whether
transfer of a11y pait of vaca11t excess land exempted u11der s.20( 1) (b) could
be prohibited i1TC.1pective of the co11ditions of gra11t of exe111ptio11-Held, no;
D such a construction would rew1ite the provision and was in1pe11nissible; S.
Vasudeva 1101 based 011 con·ect constntctio11 of s.2!>-Constitution of India,
Article 141-lnterpretatio11 of Statutes.

Admi11istrative Law-Urba11 La11d (Celing and Regulation) Act
E 1976-Ss.20(J)(a) a11d (b)-Power to exempt land in excess of ceiling
limil-Held, valid exercise of power of the state to p:empt la11d must satisfy
the ntle of non-arbitrariness and requires recording of reasons in w1it-
ing-Constitution of India-A1ticle 14.

The petitioner booked a Oat in a building constructed on the excess
F vacant land belonging to the third respondent and exempted under
s.20(1)(b) of the Urban Land (Ceiling and Regulation) Act, 1976 ('Act')
in Bangalore. Under the agreement the petitioner was to purchase the
flat togethCI' with 1/48 share in the land on which the building was to
be constructed by the fourth respondent. Despite taking necessary steps,
G the petitioner was informed by the fourth respondent that in view of the
order of the Karnataka High Court, based on the decision of this court
in S. Vasudeva v. State of Kamataka, [1993] 3 SCC 467, transfer of any
part of the excess vacant land in respect of which exemption was granted
under S. 20(1)(b) of the Act was prohibited. The petitioner then filed a
H Writ Petition in this court under Article 32 of the Constitution challeng-
26
T.R. THANDUR v. U.0.1. 27

ing the action and questioning the correctness of the decision in S. A
Vasudeva.

Disposing of the Writ Petition, this Court

HELD : 1.1. The effect of the 11011-obstante clause at the beginning
of sub-section (i) and the concluding words in clauses (a) and (b) B
undoubtedly was that on exemption being granted subject to the condi-
tions specified in the order granting the exemption, such vacant land
was exempted from the provisions of Chapter III which contained Ss3
to 24, in spite of the provisions in Ss. 3 to 19. There was no ambiguity
in this behalf in sub-section (1). The plain language of the provision left C
no room for any ambiguity. Thus, if the logical outcome of the exemption
granted subject to the specified conditions was to lift the restriction on
transfer of the exempted land, then it had to be accepted. [44-A-C]

1.2. To hold that any land exempted under clause (b) cannot be D
transferred irrespective of the conditions of the exemption is to rewrite
the provision which enacted that, subject to the conditions specified in
) the order of exemption, such vacant land wonld be exempt from the
provisions of Chapter Ill, which meant the exemption was also from
provisions prohibiting transfer enacted in Chapter III. [48-G-H]
E
13. The conclusion reached in S. Vasudeva which directly relates
to s.20(1)(b) of the Act, was not based on a correct construction of s.20
of the Act. The application of that conclusion in relation to clause (a)
of sub-section 20 by the Government of Kamataka is not justified even
by that decision. [49-E-F] F

S. Vasudeva v. State of Kamataka, [1993] 3 SCC 467, overruled.

2.1. State action must satisly the rule of non-arbitrariness and
recording of reasons in writing for granting exemption under clause (a)
of s. 20(1) of the Act indicating that it is necessary or expedient in the G
public interest so to do, is an essential requirement of valid exercise of
power under clause (a). [46-C-D]

2.2. The enactment of the proviso in clause (b) was to emphasise
the requirement that there must be strong reasons recorded in writing H

....
"l
,
28 SUPREME COURT REPORTS [1996] SUPP. 1 S.C.R.

A to justify the satisfaction of the State Government that the hardship
caused by the aplication of the provisions of Chapter III to such person
amounts to "undue hardship" so that the grant of exemption is judicious,
and in case of a challenge can be judicially tested. (48-B-C]

CIVIL ORIGINAL JURISDICTION : Writ Petition (C) No. 546
B
of 1993.

Under Article 32 of the Constitution of India.

M.K. Banerjee, Attorney General, A.N .Jayaram, Additional Solic-
C tor General, Shanti Bhushan, K.N. Shukla, F.S. Nariman, Ashok Desai,
(Shri Narain, Navkesh Batra, Sandeep Narain, Yashwant Mathur) for
Shri Narain & Co, Naveen Prakash, Hemani Sharma, Ms. Sushrna Suri,
T.C. Sharma, (S.B. Vakil), P.H. Perekh, Ms. Shefali S. Faz!, (Sunil
Dogra} for S.A. Shroff & Co., E.A.K. Faiznllabhai, Ms. Rajni Iyer, S.R.
D Arnn, Manoj Wad, Ms. J.S. Wad and K.R. Nagaraja fot the appearing
parties.

The Judgment of the Court was delivered by

J.S. VERMA, J. The petitioner booked ~ small flat with an area of
E 950 sq. ft. in a multi-storeyed building containing several flats on the
excess vacant land belonging to respondent No. 3, exempted under
Section 20(1)(b) of the Urban Land (Ceiling & Regulation) Act, 1976 to
be constructed by respondent No. 4 in survey No. 44, Marenahalli
Uttarahalli Hobli, Bangalore South taluk. Under the agreement, the
F petitioner was to purchase the flat together with 1/48 share in the land
on which the building was to be constructed. Under the Karnataka
Ownership Flats (Regulation of the Promotion of Construction, Sale,
Management and Transfer) Act, 1972 the promoter, namely respondent
No. 4, is required to convey title and execute documents for the share in
G land of the flat/apartment. The petitioner took necessary steps for
purchase of the flat together with his share of the land on which the
multi-storeyed building is constructed. However, the respondent No. 4
regretted its inability vide letter dated 20.6.1993 to either execute the
conveyance for transfer of the petitioner's share of land or to handover
H possession of the said flat to him because of the order dated 16.6.1993

/':
T.R. THANDUR v. UO.L [J.S. VERMA, J.] 29

of the Karnataka High Court. The petitioner was informed that the A
Karnataka High Court, by the said order, had restrained the State
Government from issuing any orders permitting transfer of the excess
vacant land and therefore, the respondents were not in a position to
comply with the petitioner's demand. This order of the Karnataka High
Court is based on the decision of this Court in S. Vasudeva/D.P. Shanna B
v. State of Kamataka and Ors., [1993] 3 SCC 467, which prohibits transfer
of any part of the excess vacant land in respect of which exemption is
granted under Section 20(1)(b) of Urban Land (Ceiling & Regulation)
Act, 1976. The decision in S. Vasudeva being the basis of the impugned
action, this writ petition has been filed under Article 32 of the Constitu- C
tion challenging this action; and for that reason, correctness of the
decision in S. Vasudeva arises for consideration. No other facts are
material for deciding the question raised in this writ petition.

In S. Vasudeva, a Division Bench comprised of two learned Judges
of this Court (P.B. Sawant and N.P. Singh, JJ .) have held ''that the D
provisions of Section 20(1)(b) of the Act do . not permit the State
Government to give exemption to the vacant land in excess of the ceiling
limit for the purpose of transferring the same''. This is the common
conclusion reached by the two learned Judges in their separate opinions.
The State Government is applying this decision to all cases of exemption E
under Section· 20 of the Act. The question, therefore, is : Whether this
conclusion of restriction on transfer must apply invariably in all cases of
exemption granted under Section 20 of the Act ?

The relevant provisions in the Urban Land (Ceiling & Regulation) F
Act, 1976 may now be referred. Chapter II contains the definitions in
Section 2. Chapter III contains Section 3 to 24 with the heading 'Ceiling
• • on vacant land'. Chapter IV contains Sections 25 to 30 under the heading
'Regulation of Transfer and Use of Urban Property' and Chapter V
contains the miscellaneous provisions in Sections 31 to 47. The relevant G
definitions are as under :

"Chapter IL

Definitions H
30 SUPREME COURT REPORTS [1996J SUPP. 1 S.C.R '
A 2. Definitions : In chis Act, unless' the context otherwise
requires, -

xxx xxx xxxx

(c) "ceiling limit" means the ceiling limit specified in Sec. 4 ;
B
xxx xxx xxxx

(q) "vacant land" means land, not being land mainly used for the
purpose of agriculture, in an urban agglomeration, but does not
c include, -

(i) land on which construction of a building is not permissible
under the building regulations in force in the area in which such
land is situated;
D
(ii) in an area where there are bui\ding regulations, the land
occupied by any building which has been constructed before, or is
being constructed on, the appointed day with the approval of the
appropriate authority and the land appurtenant to such building;
and
E
(iii) in an area where there are no building regulations, the land
occupied by any building which has been constructed before, or is
being constructed on, the appointed d~y and the land appurtenant
to such building :
F
Provided that where any person ordinarily keeps his cattle,
other than for the purpose of dairy farming or for the purpose of
breeding of live-stock, on any land situated in a village within an f •

urban agglomeration (described as a village in the revenue
G records), then, so much extent of the land as has been ordinarily
used for the keeping of such cattle immediately before the ap-
pointed day shall not be deemed to be vacant land for the purposes
of this clause.

H xxx xxx xxxx
T.R. THANDUR v. U.0.1. [J.S. VERM~, J.] 31

Chapter III A

Ceiling 011 Vaca11t La11d

3. Persons not entitled to hold vacant land in excess of the ceiling
limit - Except as otherwise provided in this Act, on and from the
commencement of this Act, no person shall be entitled to hold any B
vacant land in excess of the ceiling limit in the territories to which
this Act applies under sub-section (2) of Sec. 1.

4. Ceiling limit - (1) Subject to the other provisions of this section,
in the case of every person, the ceiling limit shall be, - C
xxx xxx xxxx

(3) Notwithstanding anything contained in sub-section (1), where
in respect of any vacant land any scheme for group housing has
been sanctioned by an authority competent in this behalf immedi- D
ately before the commencement of this Act, then, the person
) holding such vacant land at such commencement shall be entitled
to continue to hold such land for the purpose of group housing;

Provided that not more than one dwelling unit in the group E
housing shall be owned by one single person :

Provided further, that the extent of vacant land which such
person shall be entitled to hold shall, in no case, exceed -

(a) the extent required under any building regulations governing F
such group housing; or
• (b) the extent calculated by multiplying the number of dwelling
units in the group housing and the appropriate ceiling limit
referred to in sub-section (1), whichever is less. G
Explanation - For the purposes of this sub-section and sub-section
(10). -

(i) "group housing" means a building constructed or to be con-
structed with one or more floors, each floor consisting of one or H
32 SUPREME COURT REPORTS [1996] SUPP. 1 S.C.R.

A more dwelling units and having common service facilities;

(ii) "common service facility" includes facility like staircase, balcony
and verandah.

xxx xxx xxx
B
5. Transfer cf vacant land :

xxx xxx xxx

(3) In any State to which this Act applies in the first instance and
c in any State which adopts this Act under Cl. (1) of Art. 252 of the
Constitution, no person holding vacant land in excess of the ceiling
limit immediately before the commencement of this Act shall
transfer any such land or part thereof by way of sale, mortgage,
gift lease or othenvise until he has furnished a statement under
D Sec. 6 and a notification regarding the excess vacant land held by
him has been published under sub-section (1) of Sec. 10; and any
(
such transfer made in contravention of this provision shall be
deemed to be null and void.

E xxx xxx xxx

10. Acquisition of Vacant land in excess of ceiling limit. -

xxx xxx

F (4) During the period commencing on the d~te of publication of
the notification under sub-section (1) and erding with the date
specified in the declaration made under sub-hection (3), -

(i) no person shall transfer by way of sale, mortgage, gift, lease or
otherwise any excess vacant land (including any part thereof)
G specified in the notification aforesaid and any such transfer made
in contravention of this provision shall he deemed to be null and
void; and

(ii) no person shall alter or cause to be altered the use of such
H excess vacant land.
T.R. 1HANDUR v. U.0.1. (J.S. VERMA, J.] 33

xxx xxx xxx A

20. Power lo exempt - (1.J Notwithstanding anything contained in
any of the foregoing provisions of this Chapter -

(a) where any person holds vacant land in excess of the ceiling
limit and the State Government is satisfied, either on its own B
motion or otherwise, that, having regard to the location of such
land the purpose for which such land is being or is proposed to
be used and such other relevant factors as the circumstances of
the case may require, it i' necessary or expedient in the public
interest so to do, that Government may, by order, exempt, subject C
to such conditions, if any, as may be specified in the order, such '
vacant land from the provisions of this Chapter :

(b) where any person holds vacant land in excess of the ceiling
limit and the State Government, either on its own motion or D
otherwise, is satisfied that the application of the provisions of this
Chapter would cause undue hardship to such person, that Govern-
ment may by order, exempt, subject to such conditions, if any, as
may be specified in the order, such vacant land from the provisions
of this Chapter; E
Provided that no order under this clause shall be made unless
the reasons for doing so are recorded in writing.

(2) If at any time the State Government is satisfied that any of the
conditions subject to which any exemption under Cl.(a) or Cl.(b) F
of sub-section (1) is granted is not complied with by any person,
it shall be competent for the State Government to withdraw, by
• order, such exemption after giving a reasonable opportunity to
such person for making a representation against the proposed
withdrawal and thereupon the provisions of this Chapter shall G
apply accordingly.

21. Excess vacant land not to be treated as excess in certain
cases -

(1) Notwithstanding an)1hing contained in any of the foregoing H
34 SUPREME COURT REPORTS (1996] SUPP. 1 S.C.R.

A provisions of this chapter, where a person holds any vacant land
in excess of the ceiling limit and such person, declares within such
time, in such form and in such manner as may be prescribed before
the competent authority that such land is to be utilised for the
construction of dwelling unit (each such dwelling unit having a
B plinth area not exceeding eighty square me(res) for the accom-
modation of the weaker sections of the society, in accordance with
any scheme approved by such authority as t~e State Government
may, by notification in the official Gazette, specify in this behalf,
then, the competent authority may, after makjng such inquiry as it
C deems fit, declare such land not to be excess land for the purposes
• of this chapter and permit such person to continue to hold such
'
land for the aforesaid purpose, subject to such terms and condi-
tions as may be prescribed, including a condition as to the time
limit within which such buildings are to be constructed.

D (2) Where any person contravenes any of the conditions subject
to which the permission has been granted under sub-section (1).
.
the competent authority shall, by order and after giving such
person an opportunity of being heard, declare such land to be
excess land and thereupon all the provisions of this chapter shall
E apply accordingly."

The main question is the meaning of the expression "undue
hardship" in clause (b) of sub-section (1) of Section 20 and the effect of
the exemption granted under Section 20 of the Act.
F
The Urban Land (Ceiling & Regulation) Act, 1976 is specified in
the Ninth Schedule at Item No. 132. The question of its constitutional
validity docs not, therefore arise. The decision in S. Vasudeva is,
therefore, related only to the construction of Section 20(1)(b) to ascertain
G its meaning. Both the learned Judges of the Division Bench have reached
the same conclusion in their separate opinions. Reference may be made
at this stage to that decision. In that case, the State Government granted
exemption under Section 20 of the Act for industrial use of a granite
factory subject to certain conditions which included a condition that the
H land shall not be transferred in any manner without prior permissior, of
T.R. THANDUR v. U.0.1. (J.S. VERMA, J.] 35

the Government. Later, the State Government permitted sale of the A
exempted land subject to certain conditions. Thereafter another applica-
tion was made by the owner of the remaining excess land for permission
to transfer the remaining vacant land on the ground of undue hardship,
which too was granted subject to certain conditions. The transaction
benefited a close relative of the Chief Minister of the State. On these B
undisputed facts, writ petitions were filed, inter alia, for quashing the
orders granting exemption under Section 20 of the Act and certain
consequential reliefs. The que~tions which arose for decision in that case
related to the validity of the permissions granted by the State Government
for transfer of the exempted land. The chalienge to validity of the C
permissions was also on the ground of malafides because of the resultiog
benefit to a close relative of the Chief Mioister of the State.

The main judgment in S. Vasudeva is by P.B. Swant, J. and N.P.
Siogh, J. in his concurring opinion agreed with the conclusion reached D
by P.B. Sawant, J. The question of malafides was not considered and the
State Government's orders were struck down as invalid on the ground
that Section 20(1)(b) does not permit the State Government to exempt
vacant land in excess of the ceiling limit for the purpose of its transfer.
Sawant, J. held as under :
E
"It would be apparent from clause (a) of sub-section (1) of the
Section that under it, the State Government is given power to
exempt the excess vacant land from the operation of Chapter III
only if the State Government is satisfied that having regard to (i)
the location of the land and (ii) the purpose for which it is being F
or is proposed to be used, it is necessary or expedient io the public
• interest 'to exempt it. The paramount consideration is the public
·interest. The exemption granted under this provision may be sub-
ject to certain conditions. But, it does not appear that it is obligatory
to inipose such conditions. Nor is it necessary to record reasons when G
exemption is granted under this clause''.

"The power to exempt such land under clause (b) of sub-section
(1) can le exercised by the State Government, if it is satisfied that
the application· of Chapter III would cause undue hardship to the H
36 SUPREME COURT REPORTS [1996] SUPP. 1 S.C.R.

A land-holder. The exemption may be granted \mder this clause
sub.iect to such conditions, if any, as may be specified in the order.
But, unlike under clause (a), there is 110 obligation to presc1ibe the
conditions. 17ie pennission given under this c/aus~, however, has to
be supported by reasons to be recorded in wliting".
B
"Sub-section (2) of the section enables the Government to
withdraw the exemption granted either under clause (a) or (b), if
is satisfied that any of the conditions subject to which the exemp-
tion is given, is not complied with. Clauses (a) and (b) of sub-sec-
tion (1) read with sub-section (2) make it clear that the exemption
c nzay either be conditional or absolute. Where it is conditional, it
1

may be withdrawn, if any of the conditions are not complied with.
The very fact, howeve1; that the legislature has contemplated imposi-
tion of conditions 011 exemptions granted under both the clauses,
shows that the purpose of the exemption under eitl1er of the clauses
D cannot be the transfer of the land. The exemption under clause (a)
is obviously for the land being put to a particular use which use is
also necessary or expedient in the public interest, while exemption
under clause (b) is for relieving the person concerned from any
undue hardship which may be caused to him personally, by the
E withdrawal of the excess land from his possession probably such
as when the person may require the land for the expansion of the
use to which he has already put it, such as his growing business or
activities or to accommodate his growing family. The clause unfor-
tunately is completely silent on what it intends t/J convey by the
F expression uundue hardship 11•

(paras 31, 32 and 33)

"The examination of the aforesaid relevant provisions of the
G Act shows a clear intention of the legislature and reveals a definite
scheme. It has to be admitted that the provisions of the Act as are
drafted have not succeeded in translating into words the clear
intention of the legislature and to that extent the Act is an inelegant
and confused piece of drafting. However, since the intention is
H clear, a harmonious reading of all the provisions consistent with
,>

T,R, THANDUR v. U.O.l. [J.S. VERMA, J.] 37

that intention is necessary to interpret and understand each of the A
said provisions. The intention of the legislature is to acquire all
vacant land in excess of the ceiling limit prescribed by the Act and
the main purpose of the Act, as stated earlier, is three-fold, viz.,
(i) to prevent concentration of the urban land in the hands of a
few persons and to prevent speculation and profiteering therein; B
(ii) to distribute the urban land equitably and (iii) to regulate the
construction of buildings on the urban lands. Coilsiste11t with these
objectives, the Act provides for acquisition of all urban vacant land
in excess of the ceili11g limit and prohibits its tra11sfer in any fonn
absolutely. All that the Act pem1its in the case of such crcess vacant C
land is either express exemption from the operation of Sections 3 to
19 of Chapter III of the Act by the State Govemme11t u11der Sectio11
20 or 11on-declaratio11 of such la11d as a11 excess vacant la11d by the
compete11t authority u11der Section 21 or the retention of such land
with the la11dholder to be pennitted by the compete11t authority u11der D
Section 22 of the Act".

"The effect of exemption of the la11d from the provisions of
Sectio11s 3 to 19 or of the non-declaration of the land as excess land
or of the retention of the land with the landholder under Sections
20, 21 and 22 re-spectively, is not to pennit the landholder to deal
E
with it as he likes inc/udi11g to transfer it. I11 fact, the exemption, the
non-declaration and the retention permitted, is on certain condi-
tions which are required to be prescribed by the State Government
or the competent authority as the case may be. If those conditions
are not complied with or are contravened, the State Government or F
the competent authority is given power to withdraw the exemption or
• to declare the land as excess. This power give11 to the State Govem-
nzent and the con111etent autho1ity itself negatives either power to
pemtit the transfer or the right to transfer. What is more, Chapter W
which alo11e makes provisions for tra11sfer and use of urban property, G
makes provision for transfer of vacant land within the ceiling limit
subject to certain conditions. It also makes provisions for the
transfer of land in excess of the ceiling limit with a building thereon
or with a portion of such building. It makes, however, no provision
for transfer of land in excess of the ceiling limit without a building H
38 SUPREME COURT REPORTS [1996] SUPP. 1 S.C.R.

A or a pottion of a building thereon. That is consistent with the object
of the Act since the Act does not contemplate transfer of the vacant
land in excess of the ceiling limit. It only provides for exemption of
such land from being acquired and vested in the State Government
or for non-declaration of it as an excess land or for the retention
B of the same with the holder and that too subject to certain condi-
tions which may he prescribed, as stated earlier.

(paras 46 and 47)

"Ihe first question that arises is whether the provisions of Section
c 20(1 )(b) pennit the State Government to pemiit the sale of the excess
vacant land to a third party. According to us, the· answer has to be
in the negative for reasons more than one.

"In the first instance, the central object of tlie Act, as is evident
D
both from the preamble as well as the statement of objects and
reasons, is to acquire vacant land in excess of the ceiling area and
to prevent speculation and profiteering in the same and also to
distribute the land equitably to subserve the common good. It is,
therefore, per se against the said object to pennit the sale of the excess
E vacant land for whatever reasons, including the undue hardship of
the landholder. To construe the provision of Section 20(1)(b) so as
to read in them the conferment of such power on the State
Government for whatever reasons, is to distort and defeat the
whole purpose of the legislation. Futher neither the plain language
F of the clause nor its context and intendment merit si~ch constrnction.
Section 20 itself is titled "Power to exempt". The power given to
the State Governments under·the section is only to exempt cettain •
excess vacant lands flvnz the operation of tlze provisions of Sections
3 to 19 of Chapter Ill, none of which refers to the subject of transfer
G or restrictions on transfer. Those provisions relate to the calculation,
declaration, acquisition and vesting of the excess vacant land. It is
Chapter IV relates to the transfers of vacant lands and the restrictions
thereon. Further, from the scheme of the Act, it is evident that the
transfers of the vacant land were to be regulated by the specific
H provisions made in it. They were nal to be left to be governed by
T.R. THANDUR v. U.0.1. [J.S. VERMA, J.] 39

the unguided discretion of any authority including the State A
Government. The specific provisions for regulating the transfer
have been incorporated in Sections 26 to 28 of the Act. Those
provisions permit transfer of only vacant lands within the ceiling
limit but without buildings, and of vacant lands in excess of the
ceiling limit but with buildings thereon and subject to the condi- B
tions laid down there. It cannot be suggested that in defiance of the
said provisions, Section 20(1)(b) vests power in the State Govem-
ment to sanction sales of excess vacallt lands with or without building
thereon. Under Section 20(1)(b), the State Government can only
exempt such excess vacant land from being acquired by it. The C
Govemment cannot pemtit its transfer when the Act does not even
by implication authmise it to do so but pennits the transfer subject
only to the conditions presc1ibed by Section 27. The legislature
cannot be presumed to have prescribed different conditions for
transfer of the same or similar lands.
D
(paras 55 and 56)
..
"Fourthly, the exemption which is granted under Section
20(1)(b) has to be supported by reasons to be recorded in writing.
This requirement also contemplates an exemption whi.ch is related E
to and prompted by the use or better use of the land. If it is the
financial hardship which was under the contemplation of the legis-
lature, there was nothing easier then to make a reference to the
same in clause (b) itself and to lay down guidelines for the inquiry
into such hardship". F
(para 59)
• "Lastly, if the power to exempt the land for sale is read in Section
20(1)(b) with such conditions as the State Govemment may choose
to place and if either the State Government chooses not to place any G
conditions or to place such conditions as are inconsistent with the
provisions of Sections 29 mid 30, it would create two sets of lands -
one where no restrictions are applicable to the construction there-
on or only such restrictions as the State Government may choose
to impose, and the other where the restrictions on constructions H
40 SUPREME COURT REPORTS [1996] SUPP. 1 S.C.R.

A as provided by Sections 29 and 30 would be applicable".

11
/t is, therefore, 111ore than clear that the prqvisions of Section
20( I )(b) do not pemzit the State Govemment to exempt vacant land
in excess of the ceiling limit for the purposes of transfer".

B (paras 64 and 65)

In his concurring opinion, Singh, J. held as under :

"I agree with brother Sawant, J. that it is not possible to hold that
C State Govemment can grant exemption zmder Section 20( l)(b) of the
Act, to the holder of the excess vacant land, so t1!at he may transfer
the same i11 the manner he desires. The object of the Act being
imposition of ceiling on vacant land in urban agglomerations and
for acquisition of ·such land in excess of ceiling limit, with a view
D to prevent the concentration of urban land in tbe hands of a few
persons, speculations and profiteering therein, will that object be
not defeated if it held that power under Section 20(1) of the Act
can be exercised by the State Government lo exempt the excess
vacant lands from the application of Chapter III "of the Act, so that
the holder thereof can transfer such lands ? Sub-section (1) of
E
Section 20 is in two parts. The exemption under clause (a) of the
said sub-section is to be granted in the public interest whereas
under clause (b) the exemption is to be granted takiog into con-
sideration the "undue hardship" of the holder of the land in excess
of the ceiling limit. Both the expressio11s ''public interest" and "u11due
F hardsltip 11 are coniprehensive in nature. But at the same time, it is
not easy even for courts to say as to whether under different
circumstances the exemption was in the "public, interest" or wa_i;;;
necessary in the interest of the holder of the land because of his •
'undue hardship".
G
Under Indian conditions expression "undue hardship" is nonnally
related to economic hardship. That is why from time to time many
holders of lands in excess of the ceiling limit, while claiming
exemption under clause (b) put forth their bad economic condition
H and indebtedness to claim exemption along with permission to sell

·1
• T.R. THANDUR v. U.0.1. [J.S. VERMA, J.) 41

such excess lands. In the modern set-up many holders of such A
excess lands having undertaken commercial or industrial ventures
with the help of the loans from the Banks and other financial
institutions put the plea of repayment of such loans as undue
hardship for claiming exemption under clause (b) of Section 20(1)
aforesaid. How the holders of excess lands having incurred losses B
or having failed to discharge their debts can claim exemption on
the ground of "undue hardship" in such a situation? Section 4 while
fo:ing the ceiling limit, under sub-section (3) takes notes of the fact
that "where in respect of any vacant land any scheme for group
housing has been sanctioned by an authority competent in this C
behalf immediately before the commencement of this Act, then,
the person holding such vacant land at such commencement shall
be entitled to continue to hold such land for the purpose of group
housing." But at the same time under sub-section (4) of Section 4
it has been specified that "if on or after the 17th day of February, D
1975, but before the appointed day, any person has made any
transfer by way of sale, mortgage, gift, lease or otherwise (other
• than a bona fide sale under a registered deed for valuable con-
sideration) of any vacant land held by him and situated in such
State to any other person, whether or not for consideration, then, E
for the purposes of calculating the extent of vacant land held by
such person the land so transferred shall be taken into account
without prejudice to the rights or interests of the transferee in the
land so transferred". Similarly in Section 5 it has been provided
that "where any person who had held vacant land in excess of the F
ceiling limit at any time during the period commencing on the
appointed day and ending with the commencement of this Act, has
transferred such land or part thereof by way of sale, mortgage, gift,
lease or otherwise, the extent of the land so transferred shall also
be taken into account in calculating the extent of vacant land held G
by such person". When different provisions take into consideration
the lands already transferred by the holder, (i) between the period
February 17, 1975 and the appointed day; (ii) as well as between
the period commencing from the appointed day and ending with
the commencement of the Act, it should not be easily inferred that H
42 SUPREME COURT REPORTS [1996] SUPP. 1 S.C.R.

A the framers of the Act desired that after that commencement of
the Act while exercising the power of exemption under Section
20(1)(b) permission should be granted to holdl'rs of such excess
lands to transfer such lands to third parties in order to meet their
financial liabilities."
B
(paras 66 and 67)

"If the vacant lands which have vested in the State are also to
be disposed of strictly keeping in view the spirit' and object of the
Act, how under Section 20(1)(b) exemption can be granted to
c holders of such lands to dispose of such lands in the manner they
like, the persons they prefer, the price they dictate, for clearing
their debts ? If it is conceded that indebtedness amounts to an
undue hardship, then it may cover the debts incurred even after
the commencement of the Act. The ceiling limit has been fixed by
D Section 3 with reference to the date of the commencement of the
Act, but exception can be granted till snch excess lands vest in the
State Government under sub-section (3) of Section 10, after pub-
lication of the notification, in terms of the said sub-section. Al-
though it was not possible even for the framers of the Act to
E exhaustively indicate as to what shall be deemed to be "undue
hardship" within the meaning of Section 20(1)(b) but it would have
been better, if it had been illustratively indicated, leaving the rest
for the courts to decide.'

(Para 70)
F
The common conclusion of the two learned Judges of the Division Bench
is as under:

"For the reasons given by us above, we are of the view that the •
provisions of Section 20(1)(b) of the Act do not permit the State
G Govermnent to give exemption to the vacant land in excess of the
ceiling limit for the purposes of transferring the same.

In view of our conclusion as above, it is not necessary to go
into the further question, viz., if the State Government has such
H ·power, in which circumstances it can be exercised and whether
'•

T.R. THANDUR v. U.0.J. [J.S. VERMA, J.] 43

financial hardship such as the indebtedness of the landholder is A
sufficient to warrant such exemption or not and with respect to
which date such indebtendness is to be assessed and in what
manner, and whether in the present case, the said aspects of the
indebtendness were investigated or properly investigated or not.
For this very reason, we also do not propose to go into the other B
question regarding the malafides on the part of the authorities
while granting permission to the firm to sell the land to the builders
in question.TT

(paras 72 and 73)
c
It is the reconsideration of the decision in S. Vasudeva which is
involved in this case. Every learned counsel appearing in the case
including the learned Attorney General contended that the view taken in
S. Vasudeva is incorrect and requires reconsideration. For this reason,
we requested Shri A.N. Jayaram, learned Additional Solicitor General to
D
appear as amicus curiae to support the decision so that every aspect
involved could be raised for consideration by us. We are thankful to all
•• the learned counsel including the amicus curiae for the invaluable
assistance rendered by each of them.
E
We would first construe Section 20 of the Act to ascertain its
meaning. It is obvious that there beivg no question of the cons_titutional
validity of the provision, an attempt has to be made to ascertain the true
meaning of every part of Section 20. Section 20 contains the power to
exempt. It has two sub-sections. Sub-section (1) begins with the non- F
obstante clause "Notwithstanding anything contained in any of the forego-
ing provisions of this Chapter", after which occur clauses (a) and (b)
t· therein which provide for exemption, "subject to such conditions, if any,
as may be specified in the order", of "such vacant land from the provisions
of this Chapter". The non-obstante clause clearly indicates that Section G
20 overrides the foregoing provisions of Chapter III, that is, Section 3 to
19 of the Act. This is reaffirmed in clauses (a) and (b) wherein the
concluding part in each is "Government may, by order, exempt, subject
to such conditions, if any, as may be specified in the order, such vacant
land from the provisions of this Chapter". The effect of the non-obstante H
44 SUPREME COURT REPORTS [1996] SUPP. 1 S,C.R. •
A clause at the beginning of sub-section (1) and the concluding words in
clauses (a) and (b) undoubtedly is that on exemption being granted
subject to the conditions specified in the order granting the exemption,
such vacant land is exempted from the provisions of Chapter III which
contains Sections 3 to 24, in spite of the provisions i'n Sections 3 to 19.
B There is no ambiguity in this behalf in sub-section (1). The plain language
of the provision leaves no room for any ambiguity. Thus, if the logical
outcome of the exemption granted subject to the specified conditions, is
to lift the restriction on transfer of the exempted land, then it has to be
accepted. However, the imposition of conditions attached to "the exemp-
C tion and the power of withdrawal of the exemption under Sub-section (2)
is intended to control the transfer in such eases. It has to be seen whether
this plain construction of Section 20 must be abandoned on any settled
rule of construction.

The condition precedent for granting exemption under clause (a)
D or clause (b) must, however, exist but on the exemption being granted
thereunder, the logical consequence of the exemption as indicated must
follow. It must follow that if the restriction on transfer of the vacant land
in excess of the ceiling limit is only because of any provision contained
·in Chapter III in Section 3 to 21, then the effect of the exemption under
E Section 20 is to lift even that embargo. Sub-section (2) gives in the State
Government power to withdraw the exemption under clause (a) or clause
(b) of sub-section (1) if it is satisfied in the manner, indic,,ted that any
of the conditions subject to which the exemption has been granted is not
complied with. The power of withdrawal of exemption in sub-section (2)
F is to ensure full compliance of the conditions subject to which the
exemption is granted. The restriction on transfer may be imposed by
such a condition. In that event, the restriction is by virtue of the condition
imposed _and not because of any statutory prohibition in Chapter Ill of
the Act.
G
Section 3 contains the restriction against holding any land in excess
of the ceiling limit prescribed in Section 4, "except as otherwise provided
in this Act". Section 20 is a provision in the Act which provides otherwise.
It also begins with a non-obstante clause and, therefore, the restriction
H in Section 3 is subject to Section 20. Section 5 relates to transfer of vacant
T.R.1HANDUR v. U.0.1. [J.S. VERMA, J.] 45

land in excess of the ceiling limit. Sub-section (3) of Section 5 contains A
the prohibition against transfer of the excess vacant land indicating that
any such transfer made in contravention of the provision shall be deemed
to be null and void. For the reason stated, because of the provision made
in Section 20, an order of exemption made under Section 20 exempts the
vacant land in excess of the ceiling limit from this restriction of transfer B
because the order of exemption exempts the excess vacant land from the
provisions of Chapter III. Chapter IV containing Sections 25 to 30 relates
to "Regulation of Transfer and Use of Urban Property" and is not
• attracted to determine the meaning of Section 20 and the consequence
of the exemption granted thereunder to the excess vacant land. Section C
10 relates to acquisition of vacant land in excess of ceiling limit.
Sub-section (4) therein prohibits transfer of any excess vacant land during
the period specified therein. Section 5(3) and Section 10(4) are to be
read together as they relate to restrictions on transfer of vacant land in
excess of the ceiling limit. However, both these provisions cease to apply D
on exemption being granted to vacant land in excess of the ceiling limit
under Section 20 of the Act. The restriction, if any, on transfer of the
.. exempted excess vacant land has now to be examined with reference to
Section 20 itself.
E
Clause (a) of sub-section (1) of Section 20 empowers the State
Government to grant the exemptio)l if it is satisfied having regard to the
relevant factors specified in the claese that it is necessary or expedient
to the grant the exemption in the "public interest", subject to the
conditions specified in the order. Clause (a) specifies certain relevant F
factors for the purpose of grant of exemption, namely, "location of such
land", "the purpose for which such land is being or is proposed to be
11
used and such other relevant factors as the circumstances of the case
may require. Apart from the location of the excess vacant land and the
•
purpose of its use, regard must be had to the other relevant factors, which G
is a question of fact in each case. However, these factors must indicate
that the grant of exemption under clause (a) is necessary or expedient in
11
the "public interest The eXpression "public interest" has a legal connota-
•

tion. The broad guidelines for grant of exemption under clause (a) are
enacted in the provision. A safeguard is provided by requiring conditions H
46 SUPREME COURT REPORTS [1996) SUPP. 1 S.C.R.

A to be specified in the order subject to which the exfmption is granted
under clause (a). Even though there is no provision in clause (a) of the
kind enacted thereafter in clause (b), yet the absence of such a proviso
is inconsequential since the requirement of the express!y enacted proviso
in clause (b) is implicit in the manner of exercise of the power under
B clause (a). The requirement in clause (a) of making an order having
regard to the specified relevant circumstances and specifying the condi-
tions attached to the exemption, ensures that the decision is reached for
cogent reasons which are placed on record in writing culminating in the
making of the written order. There is no scope for the view that
C exemption can be granted under clause (a) by an order specifying the
conditions having regard to the specified relevant factprs without record-
ing the reasons for doing so in writing. Every State 'action must satisfy
the rule of non-arbitrariness and, therefore, recording of reasons in
writing for granting the exemption under clause (a) indicating that it is
D necessary or expedient in the public interest so to do, is an essential
requirement of valid exercise of power under clause (a). This is how
clause (a) must be construed and understood.

We now come to clause (b) of sub-section (1) of Section 20 to
which the decision in S. Vasudeva directly relates. The State
E . Government's power to grant exemption under clause (b) depends on its
satisfaction "that the application of the provisions of this Chapter would
case undue hardship to such person". The manner of making the order
specifying conditions to which it is subject, is the same as in clause (a).
In clause (b), a proviso is also enacted as under :
F
"Provided that no order under this clause shall be made unless
the reasons for doing so are recorded in writing."

The requirement of this proviso in clause (b) is implicit in clause
'
(a), as earlier indicated. Since the expression used in the proviso is "this
G clause", the express application of the proviso has to be confined only lo
clause (b). However, this difference in the twci clauses is merely of form
and not of substance, as already indicated.

The question is whether the expression "undue hardship" to such
H person, that is, the person who holds vacant land in excess of the ceiling
T.R. THANDUR v. U.0.1. [J.S. VERMA, J.] 47

limit is a nebulous phrase which permits an uncharted course for the A
exercise of the power under clause (b), or it requires invariably the
imposition of restriction on transfer of the exempted land in spite of the
clear meaning of Section 20 ? In S. Vasudeva, in substance, it has been
held that economic hardship of the owner cannot fall within clause (b)
to permit grant of exemption thereunder to relieve the owner from that B
hardship by granting exemption and permitting transfer of the exempted
land in any case. The question is whether such a construction of the
• provision is warranted.

In clause (b), the power of the State Government to grant the C
exemption depends on its satisfaction "that the application of the
provisions of this Chapter would cause undue hardship to such person".
It is obvious that the undue hardship must be a direct consequence of
the application of the provisions in Chapter lII which provides for the
restriction on the entitlement to hold any vacant land in excess of the D
ceiling limit prescribed and further prohibits the transfer of the excess
vacant land which vests in the State Government in the manner provided
in Section 10 and the owner is entitled only to the amount specified in
Section 11 of the Act. It is clear that the "undue hard,hip" caused to the
owner must be the direct consequence of the provisions contained in E
Chapter III of the Act which disentitles the owner to hold any vacant
land in excess of the prescribed ceiling limit and entitles him only to the
amount payable under Section 11 of the Act. It is also clear that the
expression "undue hardship" indicates that the extent of hardship must be
"undue" and not merely any hardship which is bound to result from the F
application of the provisions of Chapter Ill of the Act. The direct
consequence of the application of the provisions of Chapter III is
economic in nature because of the compulsory acquisition of the excess
vacant land in lieu of the amount payahlc under Section 11, apart fro1n
deprivation of the benefit of the use of the acquired land. In such a G
situation, even though mere economic loss could not be intended to fall
within the expression "undue hardship", yet the expression cannot be
construed to exclude every adverse economic impact even if it be so great
on that person as to amount to "undue hardship" to him. This would,
however, be a question of fact in each case and unless the impact of H

.,.
•
48 SUPREME COURT REPORTS [1996] SUPP. 1 S.C.R.

A economic hardship caused to the owner is so great as to amount to "undue
hardship" resulting from the application of the provisions of Chapter III
of the Act, it would not fall within the ambit of clause (b). It appears
that the enactment of the· proviso in clause (b) is lo emphasise the
requirement that there must be strong reasons re-corded in writing to
B justify the satisfaction of the State Government that the hardship caused
by the application of the provisions of Chapter Ill to &uch person amounts
to "undue hardship" so that the grant of exemption is judicious, and in
case of a challenge can be judicially tested. Suppose the owner has to
repay bonafide outstanding dues under earlier decrees of competent
C courts and admittedly he has no other means of satisfying those decrees
out of the amount payable under Section 11. It may be possible to grant
exemption under clause (b) on the ground of undue hardship to enable
him to satisfy the decree. This is only illustrative. In cases of exemption
granted under clause (b), the possible misuse of the exemption can be
D checked by imposition of suitable conditions attached to the exemption
and the State Government's power under sub-section (2) to withdraw the'
exemption in case of breach of any condition is a further safeguard in
this behalf.

E Cases falling under clause (b) for grant of exemption may he rare,
but it cannot be said that the enactment of clause (b) is an exercise in
futility which does not permit grant of exemption i(l any case of undue
hardship with perm1ss10n also to transfer. Whether there is undue
hardship of the kind envisaged therein, is a question of fact in each case.
F The entire provision in clause (b) has to be given full effect and in a case
falling within the ambit of clause (b), the effect of the order of exemption
is to exempt such vacant land from the provisions of Chapter Ill and,
therefore, also from the restriction on transfer of such land. To hold that
any land exempted under clause (h) cannot he transferred irrespective of
G the conditions of the exemption is to rewrite the provision which enacts
that, subject to the conditions specified in the order of exemption, such
vacant land would be exempt from the provisions of Chapter III, which
means the exemption is also from provisions prohibiting transfer enacted
in Chapter III. It is clear that any case which can legitimately fall within
H clause (b) would be outside the ambit of clause (a), and clause (b) is
T.R. THANDUR v. u.o.I.[J.S. VERMA, J.] 49

restricted in its application. Whether a case falls within the ambit of A
clause (b) is again a question of fact and if any dispute arises it will have
to be tested judicially on the facts of that case. Similarly, the validity of
the exercise of power of exemption under clause (b) would also depend
on the facts nf each case as it would in respect of clause (a). But that is
different from saying that a case of undue economic hardship to the B
owner resulting from the application of the provisions of ·chapter III can
in no case fall under clause (b) to empower the State Government to
grant exemption thereunder subject to appropriate conditions attached to
the order of exemption.

The facts of the present case have also some relevance. In the
c
present case, the restriction against transfer would operate to the extent
of restraining transfer to the individual flat owners of their corresponding
share in the land where a multi-storeyed building for group housing has
been constructed. One of the objects of the enactment is to promote
group housing with a view to provide housing accommodation to more
D
people by promoting group housing schemes instead of the same area of
land being utilised to house lesser number of people. A restriction on
transfer of the exempted land operating in this manner, depriving the
benefit in a group housing scheme to flat owners, does not promote the
object of the legislation. This too is a relevant factor. E

It follows from the above discussion that the conclusion reached in
S. Vasudeva (supra), which directly relates to Section 20(1)(b) of the Act,
is not based on a correct construction of Section 20 of the Act. The
application of that conclusion in relation to clause (a) of sub-section (1) F
of Section 20 by the Government of Karnataka is not justified even by
• that decision. The provisions of Section 20 of the Act and the effect of
an exemption granted under clause (a) or clause (b)_ of sub-section (_1)
of Section 20, including the incidence of transfer, have to be understood
in the manner indicated by us herein. For the reasons given by us, we G
regret our inability to concur with the contrary conclusion reached by the
two learned judges in S. Vasudeva. The impugned order to the extent it
is contrary to the view taken by us in this decision, cannot be upheld.

We may, however, add that in a case where a dispute arises the H
•
50 SUPREME COURT REPORTS [1996] SUPP.1 S.C.R.

A validity of an exemption granted under Section 20 of the Act would
'
depend on the existence of justifiable reasons recorded in writing for
granting the exemption with the conditions attached to it. This decision
is not to be construed as pronouncing on the validity of exemption and
the permission to transfer, if any, even in this case, which, if disputed,
B would have to be examined and adjudicated ~eparatcly.

Consequently, the writ petition is decided in the above manner. No
costs.

S.M. Petn. disposed of.

•