UNION OF INDIA AND ANR.versusMIS. MUNDRA SALT & CHEMICAL INDUSTRIES AND ORS.

A                         UNION OF INDIA AND ANR.
                              v.
        MIS. MUNDRA SALT & CHEMICAL INDUSTRIES AND ORS.

                               NOVEMBER 14, 2000

B                      [A.P. MISRA AND RUMA PAL, JJ.]


         Constitution of India, 1950-Article 294, Entry 18 and 45 of List II of
  -Seventh Schedule-Government of India Act, 1935~Section 99 & JOO,
C Legislative entries-Bombay Land Revenue Code of 1879-Section 37-
   Question of ownership of the suit land between the Union of India and the
   State Government-Union basing its claim upon Section 37 of the 1879 code
   according to which the Union Government was presumed to be the owner of
  the land if any individual failed to establish his title-Maintainability of_:_
  Held, Article 294 of the Constitution of India read with Sections 99 and JOO
D and legislative entries under the Government of India Act, 1935 makes the
  legal position clear that it is not the Union but the State Government which
  is the owner of the suit land-After the implementation of the 1935 Act and
  the Constitution of India, both 'land' and 'land revenue' fall under State list
  and are governed by the State-Thus, Section 37 of the 1879 Code would
  have no application-The question of ownership between the Union and the
E State Government is to be tested under Article 294 of the Constitution and
  not under the obsolete Section 37 of 1879 Code-Land Acquisition Act,
  1894-Sections 4,6-Maharashtra Regional and Town Planning Act, 1966-
  Sections 126,128.

F         Respondent no. 1 purchased the land in question on ownership basis
    through public auction to manufacture salt on the said land. Subsequently,
    the names ofall the partners of Respondent no. 1 were entered in the revenue
    records.

          In the land #lcquisition proceedings for a part of the said land for
G construction of highway, ownership of Respondent no. 1 was recognised and
    compensation was held to be payable. The Municipal Corporation of Greater
    Bombay also acquired a portion of the said land and through an award accepted
    the title of the respondents and paid compensation to the partners of the
    respondents. A notification under Section 4 of the Land Acquisition Act, 1894
H   read with Section 128 of the Maharashtra Regional and Town Planning Act,
                                        580
           U.0.1. v. MUNDRA SALT & CHEMICAL INDUSTRIES                      581

1966 was issued by the State Government for acquiring a portion of the land        A
in question. A notification under Section 126 of the Maharashtra Regional
and Town Planning Act, 1966 read with Section 6 of the Land Acquisition
Act, 1894 was also issued.

       The respondents challenged these notifications through a writ petition.
During the course of hearing of the said writ petition, respondents agreed to      B
hand over possession of the aforesaid area which was done accordingly and
submitted their claim for compensation. At this stage, the Salt Department
of the Union of India challenged the O'Vnership of the respondents in respect
of this acquired land. The Land Acquisition Officer referred the matter of
own.ership to the Collector who held respondents to be the owners. Howevet,        C
in review proceedings, the Collector held Union of India to be the owner and
that respondents were only the lessees who were entitled to receive
compensation only for the loss of their business. The respondents challenged
this order in a writ petition. The said order was quashed by the High Court
with a direction to the District Judge to decide the question of ownership of
land in the pending Land Acquisition References. The said references of the        D
respondents were allowed by the District Judge and it was held that
respondents were the owners of the land in question and the grant made by
the Government in their favour was in fact a sale and not merely lease or
licence to manufacture salt on the suit land. The respondents were held entitled
for the compensation calculated at the market value. Aggrieved, the appellz.nts    E
filed the first appeal before the High Court, which was dismissed and
respondents were confirmed to be owners of the acquired land. However, the
rate of compensation was reduced. Hence the present appeals.

      On behalf of the appellants, it was contended that the High Court fell
into error in not applying Section 37 of the Bombay Land Revenue Code, 1879;       F
that application of this Section clearly recognises title of the Union, hence
any finding to the contrary is liable to be set aside; that having regard to the
proclamation issued for selling the land on ownership basis through public
auction including the agreement of sale, it becomes clear that the land which
was given to the respondents was not to confer any ownership but at best confer    G
right as lessee or licensee.

      On behalf of the respondents, it was contended that Section 37 of the
Bombay Land Revenue Code, 1879 would have no application; that Article 294
of the Constitution read with Section 99 and 100 and legislative entries under
the Government of India Act, 1935 makes the legal position clear that it is        H
     582                     SUPREME COURT REPORTS [2000] SUPP. 4 S.C.R.

A    not the Union but the State Government which is the owner of the suit land.

           Dismissing the appeals, the Court

          HELD: 1. There is no sustainable submission to hold Union of India to
   be the owner of the suit land. The question of ownership between the Union
B and the State Government is to be tested under Article 294 of the Constitution
   of India and not under obsolete Section 37of1879 Code. Under Article 294
   of the Constitution of India, all properties immediately before the
   commencement of the Constitution which vested in His Majesty for the purpose
   of the Government of Dominion of India vests in the Union and all properties
                                                                                        -
   which vested in His Majesty for the purposes of the Government of each
C Governor's Province vests in the corresponding State and all rights, liabilities
  and obligations of the Government of Dominion of India and of the Government
   of each Governor's Province are recognised to be the rights, liabilities and
  obligations respectively of the Government of India and Government of each
  corresponding State. The 1935 Act for the first time effectively demarcated
D the legislative powers of the federal legislation and the provincial legislation.
  Sections 99 and 100 of this Act define fields of legislation read with three
  lists contained in the Seventh Schedule. The 'land' under Entry 21 and 'land
  revenue' under Entry 39 fell under the provincial list. When the Constitution
  of India came into force, there were similar entries of the 'land' under Entry
  18 and' land revenue' under Entry 45 of list II of the Seventh Schedule. This
E leave no doubt that both 'land' and 'land revenue' fell under State List and
  was governed by the State even prior to the coming into force of .the
  Constitution of India. After coming into being of the Government of India Act,
  1935 and the Constitution of India, Section 37 of the 1879 Code would have
  no application for the claim by the Union. The question of title of the Union in
F the proceedings under the Land Acquisition Act, which is under consideration,
  admittedly is after the enforcement of the Cons1itution of India. Hence, the
  title over the land in question could not be that of tJie Union of India.
                                                                1588-H; 589-A-FI

           2. Under Section 37 of the 1879 Code, if any individual fails to establish
G his title, the Union Government is presumed to be the owner of the land.
    However, it is to be kept in mind, when 1879 code was promulgated federalism
    was not even born. In other words, then there was no question of any right of
    two Governments to hold the properties between them as it is now between
    the Union and the State Governments. Then the right over the land was
    confined to that of the Crown and an individual. That is why Section 37 of the
H   1879 Code recognises pre-emptory right of the Crown in respect of all lands
   U.0.1. v. MUNDRA SALT & CHEMICAL INDUSTRIES [MISRA, J.]                  583

which are not the property of individuals. This conception of exclusive            A
ownership over all land by the Crown stood dissolved after coming into force
of the Constitution of India, under which right over such land was conferred
both on the Union and the State Governments. 1588-A-CI

      CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2269-70 of
l~~                                                                                B
      .From the Judgment and Order dated 24/25/26/6.96 of the Bombay High
Court in F.A. No. 257-258 of 1994.

      Mukul Rohtagi, Additional Solicitor General, N.N. Goswami, T.L.V ..Iyer,
Ashwini Kumar, Gopal Subramaniam, Rajiv Nanda, Ms. Binu Tamta, A.K.                C
Sharma, M. Vijay Bhaskar, C. Radhakrishna, D.S. Mehra, S.V. Deshpande,
Sushil Kumar Karanjkar and U.U. Lalit for the appearing parties.

      The Judgment of the Court was delivered by

       MISRA, J. The present appeals are directed against the judgment and
                                                                                   D
order of the High Court dismissing the appellants' appeals, challenging the
order of the District Judge holding that the respondents are owners of the
suit land and the grant made by the Government in their favour was in fact
a sale and not merely lease or licence to manufacture salt on the suit land.
                                                                                   E
       The question raised in these appeals is: who is the owner of the suit
land, whether the appellant -Union of India or the State Government? This is
raised in the land acquisition proceeding, in the context of adjudication of the
apportionment of the compensation. In order to appreciate the controversy
it is necessary to give certain facts.
                                                                                   F
       On 22nd May, 1952 Tehsildar issued a notification for sale of Khajan
(Marshy) land on ownership basis through public auction. In the public
auction dated 12th June, 1952 Hanumanbux Lalchand Mundra offered highest
bid and deposited the part amount on the same day towards the price of land.
The balance amount was deposited on 26th June, 1952. On 5th May, 1955 the          G
Collector confirmed the said auction sale. As a consequence, on 25th May,
1955 an agreement was executed with the said purchaser and on 24th November,
1955 the Circle Officer handed over the possession of the land. Through
mutation Entry No. 227 dated 24th February, 1970 the names of all the partners
of Respondent No. 1 were entered in the revenue records. Jn the Jand
acquisition proceedings for the construction of highway a portion of land          H
     584                    SUPREME COURT REPORTS [2000] SUPP. 4 S.C.R.

A    bearing SI. No. 386 (p) Mulund through the award, ownership of Respondent
     No. I was recognised and compensation was held to be payable to the said
     Hanumanbux Lalchand Mundra. The Municipal Corporation of Greater Bombay
     also acquired a portion of the land purchased in public auction held on 12th
     June, 1952 and through an award dated 13th April, 1972 accepted the title of
     the respondents and paid compensation to the partners of the Respondents.
B    A notification under Section 4 of the Land Acquisition Act, 1894 read with
     Section 128 of the Maharashtra Regional and Town Planning Act, 1966
     (hereinafter referred to as 'the said Act') was issued by the Government of
     Maharashtra for acquiring land measuring 32,506 Sq. Mtrs. Out of Gat. No.
     86 (p). A notification dated I Ith November, 1980 under Section 126 of the said
C    Act read with Section 6 of the Land Acquisition Act, 1894 was issued. The
     respondents challenged these notifications through a writ petition, in which
     respondents agreed to hand over possession of the aforesaid area. The
     respondents accordingly handed over possession of the said area and
     submitted their claim for compensation.

D           It is at this stage, the Salt Department of the Union of India challenged
     the ownership of the respondents in respect of this acquired land. The Land
     Acquisition Officer referred the matter of ownership to the Collector who held
     respondents to be the owners. How~ver, on 19th September, 1986 the Collector
     in review proceedings held, Union of India to be the owner and respondents
E    were only the lessees who were entitled to receive compensation only for the
     loss of their business. The respondents challenged this order through a writ
     petition. The High Court quashed the aforesaid order and directed the District
    Judge to decide this question of ownership of land in pending Land Acquisition
    Ref. No. 90 and 91 of 1986. In this, only Union of India and not the Government
    of Maharashtra filed written statement. The aforesaid references of the
F   respondent were allowed. The Court held that respondents were the owners
    and were entitled for the compensation calculated at the market value of Rs.
    80 per sq. mtr. Aggrieved by this the appellants filed the first appeal before
    the High Court, which was also dismissed. The High Court confirmed
    respondents to be owners of the acquired land. However, the rate of
G   compensation was reduced from Rs. 80 per sq. mtr. to Rs. 70 per sq. mtr. The
    High Court held, that Section 37 of the Bombay Land Revenue Code of 1879
    (hereinafter referred to as "the 1879 Code") on which strong reliance was
    placed, cannot confer title on the appellants.

          Learned senior counsel for the appellants - Mr. Mukul Rohtagi, Addi.
H   Solicitor General, submits with vehemence that High Court fell into error in
         U.0.1. v. MUNDRA SALT & CHEMICAL IN.DUSTRIES [MISRA, J.] 585

      not applying Section 37 of the 1879 Code. The submission is, application of       A
      this Section clearly recognises title of the Union hence any finding to the
      contrary is liable to be set aside. He also referred to the proclamation issued
      for selling the land on ownership basis through public auction including the
      agreement of sale to show the land which was given to the respondents was
      not to confer any ownership but at best confer right as a lessee or licensee.
      He also relied on the aforesaid order of the Collector, wherein the appellant     B
      was held to be the owner of the land in question. He also referred to the
I<.   licence issued under the Central Excise and Salt Act, 1944.

              On the other hand, learned senior counsel for the respondents - Mr.
      Gopal Subramaniam submits, High Court findings require no interference. It        C
      is rightly concluded Section 37 will have no application. Further, Article 294
      of the Constitution of India read with Section 99 and I 00 and legislative
      entries under the Government of India Act, 1935 .makes the legal position clear
      that it is not the Union but the State Government which is the owner of the
      suit land.
                                                                                        D
            The main thrust of argument on behalf of the appellants is with reference
      to Section 37 of 1879 Code, which is quoted hereunder:-

             "Section 37 (1): All public roads, lanes and paths, the bridges,
             ditches, dikes, and fences, on, or beside, the same, the bad of the sea    E
             and of harbours and creeks below high-water-mark, and of rivers,
             streams, nallas, lakes, and tanks, and all canals, and water-courses,
             and all standing and flowing water, and all lands wherever situated,
             which are not the property of individuals, or of aggregates of persons
             legally capable of holding property, and except in so far as any rights
             of such persons may be established, in or over the same, and except        F
             ~ may be otherwise provided in any law for the time being in force
             are and are hereby declared to be, with all rights in or over the same,
             or appertaining thereto, the property of the Crown and it shall be
             lawful for the Collector, subject to the orders of the Commissioner, to
             dispose of them in such manner as he may deem fit, or as may be            G
             authorized by general rules sanctioned by the Government concerned,
             subject always to the rights of way, and all other rights of the public
             or of individuals legally subsisting.

                 Explanation - In this section "high-water-mark" means the highest
             point reached by ordinary spring-tides at any season of the year.          H
                                                                                         l



     586                      SUPREME COURT REPORTS [2000) SUPP. 4 S.C.R.

A             (2) Where any property or any right in or over any property is claimed
              by or on behalf of the Crown or by any person as against the Crown,
              it shall be lawful for the Collector or a survey officer, after formal
              inquiry of which due notice has been given, to pass an order deciding
              the claim.

B             (3) Any suit instituted in any Civil Court after the expiration of one
             year from the date of any order passed under sub-section (I) or sub-
             section (2), or, if one or more appeals have been made against such
             order within the period of limitation, then from the date of any order
             passed by the final appellate authority, as determined according to
c            section 204, shall be dismissed (although limitation has not been set
             up as a defence) if the suit is brought to set aside such order or if
             the relief claimed is inconsistent with such order, provided that in the
             case of an order under sub-section (2) the plaintiff has had due notice
             of such order.

D             (4) Any person shall be deemed to have had due notice of an inquiry
             or order under this section if notice thereof has been given in
             accordance with rules made in this behalf by the Provincial
             Government."

                                                                [Emphasis supplied]
E
           The emphasis is that this section makes all public roads, lanes, paths,
    the bridges, ditches, dikes, ..... bed of the sea, harbours and creeks below high-
    water-mark ..... and al/ lands wherever situated, which are not the property of
    individuals are declared to be the property of the Crown. The use of the
    words "all lands wherever situated' is comprehensive to include all lands
F   which would include the suit land and the Crown referred to in the Section,
    at the relevant time, refers to the Crown of England which could only be the
    Central Government now and it by no strete;h of imagination would mean the
    Provincial Government.

G          Having considered the submission of the parties, before considering
    Article 294 of the Constitution, it is necessary to refer to the preceding
    legislative history, in relation to the ownership of the land which has some
    relevance for the consideration of the ownership in question, whether it is the
    Union or the Provincial Government which is the owner of the land.

H          The- first legislation in this regard is Regulation No. I of 1799. This was
    U.0.1. v. MUNDRA SALT & CHEMICAL INDUSTRIES [MISRA, J.]                     587
enacted to constitute a regular code or regulations for the internal Government         A
management of the British territories under the Presidency of Bombay. This
regulation prescribes the manner and method of making the rule or passing
the orders, in respect of the rights and tenures of the cultivators of the soil.
Then came the Regulation No. 1 of 1808, which records that the island of
Salsette was conquered by the Portuguese in 1584, thereafter it was parcelled
out among the European subjects into village allotments for a very small (or)           B
fixed rent. The lands were subject to grants either from the Mohammedan
rulers, the Peshwas or the Portuguese. After the annexation of Salsette by the
East India Company sometime in 1774, the question arose, whether the
properties in the salt vested in the company or the occupants, as salt was
cultivated both on the land of the Government as also on the land purchased             C
by the natives from the Portuguese. Under this regulation, Governor General
in Council recognised the right of the occupants of the .soil by charging
moderate and fixed rent from them. This regulation records, after 180 I, when
deeds were introduced as evidence of the grants of rights to the occupants,
various persons, some of whom named in the Regulation, accepted the deeds.
Next came Regulation IX of 1827 which obligated the authorities to maintain             D
a register of title deeds. It was done as it was thought to be conducive to
the security of titles of the immovable propert,ies, which also greatly facilitated
the transfer of such properties through sale, gift, mortgage etc .. This register
of title deeds was established in each Zilla (District). Under Section VI -
Clause I st , - every deed or other writing, transferring or mortgaging immovable       E
properties, situated within the Zilla, if registered in this Register of title deeds,
shall without regard to the date of its execution, if proved to be valid, be
preferred to, either subsequently registered or not registered at all but this
preference was extended only to the immovable properties. Thus, came the
aforesaid 1879 code followed by the Record of Rights Act, 1903 which required
the detailed enquiry before recording the creating of any right in any person.          F

      Similarly, with reference to the Regulation of Salt Manufacture, the Salt
Act, 1837 was enacted under which no salt could be manufactured on any
land without express permission. Then came the Salt Act, 1850 under which
detailed provision was made to levy duties of custom and excise on the                  G
manufacture of salt. In fact, the Land Revenue Code Rules, 1905 was made
under Section 214 of the aforesaid 1879 Code.

      The legal position which emerges from the aforesaid laws appears to be
that unless an individual proves his claim and title over the land, where the
salt work is being carried on, such land was deemed to be that of the                   H
      588                     SUPREME COURT REPORTS (2000] SUPP. 4 S.C.R.

 A Government. It is in these set of laws, Section 37 of the 1879 Code also
      projects itself in the same manner. Under it, if any individual fails to establish
      his title, the Union Government is presumed to be the owner of the land.
      However, we have to keep in mind, when 1879 Code was promulgated federalism
      was not even born. In other words, then there was no question of any right
 B    of two Governments to hold the properties between them as it is now between
      the Union and the State Governments. Then the right over the land was
      confined to that of the Crown and an individual. That is why Section 37 of
      the 1879 Code recognises pre-emptory right of the Crown in respect of all
      lands which are not the property of individuals. This conception of exclusive
      ownership over all land by the Crown stood dissolved after coming into force
 C    of the Constitution of India, under which right over such land was conferred
      both on the Union and the State Governments.

             In order to adjudicate the controversy in this case it is necessary to
      refer to Article 294 of the Constitution of India, which is quoted hereunder:

             "294. Succession to property, assets, rights, liabilities and obligations
 D
             in certain cases - As from the commencement of this Constitution -

             (a) all property and assets which immediately before such
                  commencement were vested in His Majesty for the purposes of
                 the Government of Dominion of India and all property and assets
                 which immediately before such commencement were vested in
 E
                  His Majesty for the purposes of the Government of each
                 Governor's Province shall vest respectively in the Union and the
                 corresponding State, and

             (b)   all rights, liabilities and obligations of the Government of the
 F                 Dominion of India and of the Government of each Governor's
                   Province, whether arising out of any contract or otherwise, shall
                   be the rights, liabilities and obligations respectively of the
                   Government of India and the Government of each corresponding
                   State,

G            subject to any adjustment made or to be made by reason of the
             creation before the commencement of this Constitution of the Dominion
             of Pakistan or of the Provinces of West Bengal, East Bengal, West
             Punjab and East Punjab."

     This Article declares which property would vest in the Union and which
H    would vest in the State Government. Under it, all properties immediately


\\
   U.0.1. v. MUNDRA SALT & CHEMICAL INDUSTRIES [MISRA, J.] 589

before the commencement of the Constitution which vested in His Majesty A
for the purposes of the Government of Dominion of India vests in the Union
and all properties which vested in His Majesty for the purposes of the
Government of each Governor's Province vests in the corresponding State
and all rights, liabilities and obligations of the Government of Dominion of
India and of the Government of each Governor's Province are recognised to
be the rights, liabilities and obligations respectively of the Government of B
India and the Government of each corresponding State. So under this Article
ownership question between the Union and the State Government is to be
tested and not under obsolete Section 37 of 1879 Code. Faced with this, Mr.
Rohtagi submits this vesting in favour of the State could only be, if before
the commencement of the Constitution the land was used for the purposes C
of Government of Governor's Province. We have already referred to the
historical background as to .how first rights of individual were recognised.
Thereafter a register was brought into the picture for recording the names of
such owners including occupancy right holders and later land revenue was
charged from such holders of such land by the Government of the Province, D
the administration and control of which was with the Government of Provinces
except when licences were issued by the Union under the relevant Salt Act.
This position becomes more clear, after coming into force of the Government
of India Act, 1935. The 1935 Act for the first time effectively demarcated the
legislative powers of the federal legislation and the provincial legislation.
Sections 99 and I 00 of this Act define fields of legislation read with three lists E
contained in the Seventh Schedule. The 'land' under Entry 21 and 'land
revenue' under Entry 39 fell under the provincial list. When the Constitution
of India came into force, we find similar entries of the 'land' under Entry 18
and 'land revenue' under Entry 45 of List II of the Seventh Schedule. This
leaves no doubt that both 'land' and 'land revenue' fell under State List and F
was governed by the State even prior to the coming into force of the
Constitution of India.

      The question of title of the Union in the proceedings under the Land
Acquisition Act, which is under consideratio'l, admittedly is after the           G
enforcement of the Constitution of India hence the title over the land in
question could not be that of the Union of India.

      Lastly, learned counsel for the Union submits that significantly the very
High Court in another set of contest, which is subject matter of consideration
in Civil Appeal Nos. 2286-2343 of 1998 has held, Union of India to be the         H
    590                    SUPREME COURT REPORTS [2000] SUPP. 4 S.C.R.

A owner over such land. We have perused the said judgment, we find, the High
    Court merely relies for drawing such inference on Section 37 of 1879 Code.
    We have already held after Government of India Act, 1935, in any case after
    the Constitution of India, Section 37 of the 1879 Code would have no
    application for the claim by the Union. Hence this submission has no merit.
B   Hence we do not find any sustainable submission to hold Union of India to
    be the owner of the suit land. Consequently, we find no error in the impugned
    judgment of the High Court.

          For all the aforesaid reasons, we do not find any merit in the present
    appeals. Accordingly, the same are dismissed with costs.
c
    M.P.                                                     Appeals dismissed.