The U.P. Nazul Properties (Management and Utilization For Public Purposes) Ordinance, 2024 has been promulgated by the Governor of U.P. in exercise of powers under Article 213 of the Constitution of India. The Ordinance, inter alia, seeks to provide for reservation of Nazul properties for public purposes and for matters connected therewith, or incidental thereto. The provisions can be summarized as below:
- Nazul lands shall not be converted into freehold in favor of private persons/entities notwithstanding any judgment, order or decree of any Court, or any other law to the contrary.
- All proceedings or applications pending in any Court or authority seeking conversion of Nazul land into freehold shall lapse and be deemed to be rejected. Money, if any deposited, shall be refunded with 9% simple interest from the date of such deposit.
- Only such lessees who have complied with all the conditions of lease and have duly deposited the lease rent shall be permitted to continue with their leases.
- Upon expiry of the period of lease, the land shall automatically vest in State Government and such land shall be deemed to be re-entered upon by the State Government.
- In case the erstwhile lessee does not himself surrender possession upon expiration of lease, the illegal occupation shall be vacated physically and the rent shall be recovered from the date of expiry of the lease as per the rate fixed by the District Magistrate.
- In cases where leases have not expired, but the land is not being utilized in the manner given in the lease, the State Government may modify the lease by either reducing the lease period or lease area or both or cancelling the lease.
Before mounting any challenge to the aforesaid Ordinance, it is necessary to demystify the concept of (i) Nazul Land, (ii) Freehold Land, (iii) Lease Extension and (iv) Lease Renewal. This will also require us to scan the provisions of the relevant enactments governing grant of lease of Nazul Lands, viz. Government Grant Act, 1895 and Transfer of Property Act, 1882.
NAZUL LANDS
The word “Nazul” is of Arabic origin. The Allahabad High Court has elaborately dealt with the nature and origins of Nazul lands in its judgment reported in Prakati Rai vs State of UP and others[1]. State Government(s) can acquire land in the following ways:
- Acquisition of land under various Land Acquisition enactments; OR
- Direct purchase of Lands; OR
- Annexation of Lands; OR
- By Escheat/Lapse/Bona Vacantia.
Lands falling in categories (iii) and (iv) are classified as Nazul lands. Prior to 1857, several estates were taken over by the East India Company by way of annexation. Also, during the British regime, immoveable properties of individuals, Zamindars, Nawabs and Rajas were confiscated for one reason or the other. Escheat refers to reversion of land to the State upon the death of the owner without legal heir. Likewise, bona vacantia also refers to an ownerless property with no legal claimant. The ownership of these lands stood vested in the Crown, whereafter the respective State/Union Government(s) became its owner by virtue of Article 296 of the Constitution. This is how the ownership of Nazul lands came to be vested in the State Government.
The management of the Nazul land is not done directly by the State Government or its departments. This is what distinguishes a Nazul land from a State land. While a State land is managed directly by the State Government or its departments, Nazul lands are entrusted to local bodies for their management. For this purpose, the State of Uttar Pradesh has issued a slew of executive directions which compendiously form the Uttar Pradesh Nazul Manual.
Rule 13 of the Nazul Manual permits sale or lease of the Nazul land. Rule 22 provides for leases for building purposes. It prescribes a maximum lease period of 90-years including renewals. It also prohibits granting of leases in perpetuity. Rule 27 permits renewal of lease at such enhanced
rates as may be determined by the Collector. Rules 42-45 entrust the management of Nazul lands to local bodies. The State Government and earlier the British regime granted leasehold rights to private persons with respect to such Nazul lands. The instrument of lease determined the jural relationship between the lessor and the lessee.
FREE HOLD LAND
Conversion of Nazul lands into freehold lands has been the main bone of contention between lessees/transferees and the State Government. The State Government has from time to time come out with policies governing conversion of Nazul land into freehold. Freehold refers to conveyance of leasehold lands by way of sale.
For the first time, the State government issued a government order on 02.12.1992 providing for conversion of lease hold rights into freehold rights in respect of Nazul land held by the lessees. The said government order dated 02.12.1992 was in pursuance of the policy of the State government as outlined in the government order dated 23.05.1992. In the said policy it was provided that people who are in unauthorized possession would not be entitled to avail the benefit of conversion in their favour. This policy continued up to 19.11.1998 on which date the State government clarified about the applicability of the rates with respect to those applicants who had applied for conversion up to 18.08.1997. Also, vide government order dated 29.08.1996 the State Government had provided for conversion of lease hold rights into freehold rights in favour of purchasers/agreement holders who had purchased the property from the lessees by an agreement.
The State government thereafter issued government order dated 01.12.1998 providing for a simplified procedure for conversion of lease hold rights into freehold rights. The said government order provided that an application for freehold conversion shall be accompanied by 25% deposit on self-assessment basis and the conversion shall take place in accordance with other details provided in the said government order dated 01.12.1998. Significantly, the said government order dated 01.12.1998 also provided for freehold in favour of unauthorized occupants. Thereafter, the State government took a policy decision on 04.08.2006 not to allow conversion of lease hold right into freehold for unauthorized occupants of Nazul lands. Thus, between 01.12.1998 to 04.08.2006, the State government permitted conversion of leasehold rights into freehold rights even in favour of
unauthorized occupants and land grabbers. The aforesaid policy continued till 04.03.2014 when the State of Uttar Pradesh notified a new policy for conversion to freehold replacing earlier policy dated 23.05.1992. The government order dated 04.03.2014 was modified vide G.O. dated 15.01.2015 and it was provided that all applications which were pending in 2011 would be considered valid and be disposed of in accordance with the government order effective on the date of disposal of the application and circle rate prevailing at that time.
Thus, the aforesaid government orders unmistakably indicate the policy of the State government to convert Nazul lands into freehold. The Allahabad High Court in the case of Sangam Upnivashan Awas Evam Nirman Sahkari Samiti Limited Vs. State of U.P. and others[2] has held that the purpose to grant freehold rights to erstwhile leaseholders, unauthorized occupants or to the nominees of the lessees was to promote stability and access to easy availability of land for housing and commercial purposes in order to speed-up development in urban areas and also to augment the revenue of the State. This also aided in providing certainty to ownership of land and the building of a house or a business premises for a decent living and earning a livelihood. This purpose touched Article 21 of the Constitution of India. Thus, it was found that the aspect of freehold rights has its roots in Article 21 of the Constitution of India.
Unfortunately, the State government was rather inconsistent in converting Nazul land into freehold as per its own government orders issued from time to time. Despite the lessees having complied with the conditions for conversion as mentioned in the government orders, the State government adopted a pick and choose policy in granting freeholds. This led to various litigations by unsuccessful lessees seeking enforcement of the government orders essentially on the ground of parity. The courts have been rather indulgent in allowing such challenges primarily on the ground of estoppel and discrimination. The State government was held bound by its representations under various government orders providing for conversion of Nazul into freehold. The courts also frowned upon the tendency of the State government in being selective towards grant of freehold rights. This policy of discrimination has been consistently called-out by the courts. As such, in a large number of cases there are court orders where the State government has been directed to execute freehold deeds in favour of such lessees who had complied with the terms and conditions of the government orders issued from time to time.
The other aspect of challenge has been with respect to the rate at which the freehold is to be granted. While the lessees fully complied with the government orders and also deposited the requisite self-assessment amount, the decision to grant freehold was taken much later by which time the value of the land had increased considerably. The State government accordingly issued demand notices on the basis of the government orders existing on the date of processing of the application. This led to litigation as the lessees preferred the government orders as it existed on the date of submission of application. A Full Bench of the Allahabad High Court in the case of Anand Kumar Sharma vs State of UP and others[3] resolved the controversy. It held that the lessee or his transferee did not acquire any vested right simply by submitting an application for conversion. It was held that the State could validly rely upon the government orders existing on the date of application of mind, such application of mind happening years after the initial submission notwithstanding. The Full Bench however had no occasion to consider the category of cases where the government expeditiously processed the application of a lessee within a reasonable time as opposed to a similarly situated lessee whose application was kept pending for no reason. In the case of the former, the lessee was extended the benefit of the government order existing at the time of submission of the application (given the proximity between submission and processing of application), while in the case of the latter bureaucratic delay in processing deprived the lessee of the benefit of the government orders existing at the time of submission of the application.
The Allahabad High Court, and later the Hon’ble Supreme Court held that bureaucratic delay in deciding the application could not defeat the fundamental right available to the lessee to be treated equally with a similarly placed lessee in whose favour freehold deed was granted much earlier. We may only profitably refer to the decisions of Mata Deen Bhagwan Das and others Vs. State of U.P.[4], as well as Wajahat Husain Khan Vs. State of U.P.[5], where the Allahabad High Court clearly directed the State government to execute freehold deed in accordance with the rates prevailing at the time of issuance of the government order dated 01.12.1998, notwithstanding the delay in issuing the demand note. Pertinently this benefit is available only to a lessee who can demonstrate discrimination in the matter of grant of freehold, or otherwise the judgment of Anand Kumar Sharma (supra) would apply with full rigor – a point noted in Dr. Ashok Tahiliani vs State of UP and others[6].
From a conspectus of the aforesaid, it readily transpires that the Courts have consistently held the State Government bound by its representations in the form of various government orders. On facts it can be said that the State Government has been selective (and hence discriminatory) in the manner of granting freehold. While mere submission of an application does not give rise to any vested right, yet it does not and cannot take away the fundamental right available to an applicant to be treated equally with other similarly placed lessees. To this extent therefore it can be said that the lessees whose applications were filed in accordance with the government orders have a vested right of consideration of their applications on the principle of Article 14.
LEASE EXTENSION AND RENEWAL
The Hon’ble Supreme Court in the case of State of U.P. and others Vs. Lalji Tandon through LRs[7] has clearly held that the lessor is bound to renew the lease deed in favour of the lessee on the mere asking of the lessee. This right of first renewal vests in the lessee on the strength of the recital contained in the original lease deed. In doing so, the Supreme Court expounded on the distinction between extension of lease and renewal of lease. It held that extension of lease was a mere formality to be done without any tacit act on the part of the lessor. However, renewal of lease deed was necessarily to be carried out through execution of a fresh lease deed incorporating the terms and conditions as agreed between the parties. Significantly, the Hon’ble Supreme Court held that in cases where the original lease instrument provided for a compulsory renewal of lease, the lessor was bound to renew the lease at least for the first time. While renewing the lease however the lessor was at liberty not to provide for further renewals. However, under no circumstances could the lessor refuse to renew the lease in the first instance if the original lease deed provided for renewal of lease on the same terms and conditions.
Thus, in all cases where the original lease provided for renewal of the lease, the lessor was bound to do the same and execute a fresh lease deed in favour of the lessee. Naturally therefore this requires an exercise to be done on an individual lease to lease basis. The judgement of the
Allahabad High Court in the case of P.D. Tandon and others vs State of UP and others[8] traces the history of government orders permitting renewal of leases between 1959-1981. The Allahabad High Court held that right to renewal of lease accrued to the lessees on account of application of the principal of promissory estoppel as well as considerations of Article 14 which mandated the government to accord equal treatment to persons similarly situated, in this case those persons in whose favour renewals had already been granted.
Thus is can be seen from a conspectus of the aforesaid that the basis for ordering freehold or renewals has been the application of the twin concepts of (i) promissory estoppel and (ii) Article 14 which forbids discrimination between two sets of similarly situated lessees. The former may not confer a vested right upon the lessee as held in Anand Kumar Sharma (supra) but the latter does accrue as a valuable right which cannot be taken away by a subsequent change in the policy.
The Ordinance, 2024 effectively inter alia obliterates the concept of freehold rights. The possible grounds of challenge, by no means exhaustive, are enlisted below:
GROUNDS OF CHALLENGE
Whether there existed material on record requiring immediate action of the Governor to promulgate the Ordinance, 2024?
The Supreme Court has held in the case of Krishan Kumar Singh Vs. State of Bihar[9] that the satisfaction of the Governor under Article 213(1) is not immune from judicial review. The courts do not enquire into adequacy or sufficiency of the material placed before the Governor. It is only where the court finds that the exercise of power is based on extraneous grounds and amounts to no satisfaction that the interference of the court may be warranted. The Governor is required to form a satisfaction of the existence of circumstances which makes it necessary to take immediate action. The expression “necessity” coupled with “immediate action” conveys the sense that it is imperative due to emergent situation to promulgate an Ordinance during the period when the legislature is not in session. Thus, the Ordinance making power is contingent upon the prior satisfaction of the Governor of the existence of circumstances necessitating immediate action. Thus judicial scrutiny of the prior satisfaction of the Governor is limited only to the test of “relevant material”. In the present case, the burden is on the State to place material before the court to establish existence of circumstances requiring immediate action. The State government would be required to establish that it could not have waited for the Assembly to reconvene, and the situation was so emergent that it required immediate redressal in the form of Ordinance. The avowed objective of the Ordinance, 2024 is to provide a uniform policy in regard to reservation of Nazul lands and to deal with multiplicity of litigations pending in the courts regarding conversion of Nazul into freehold. None of the two objectives by themselves appear to be of such an emergent character so as to justify promulgation of an Ordinance under Article 213(1). There is absolutely no indication that the situation was so emergent that the Governor could not have waited for the session of the legislative assembly to reconvene.
Whether Section 116 of TP Act applies to Nazul leases? If yes, whether the Ordinance, 2024 is invalid for want of Presidential assent?
Pertinently, grants given by the State government in the form of leases are governed by the Governments Grant Act, 1895 (G.G. Act) read with its U.P. Amendment, 1960. The Allahabad High Court in the case of Prakati Rai (Supra) examined the Governments Grant Act, 1895 vis-à-vis the Transfer of Property Act, 1882. It opined that the Governments Grant Act, 1895 was introduced to tide over the bar of Sections 10 to 12 of the T.P. Act, 1882. Section 2 of the G.G. Act, 1895 provided for inapplicability of the T.P. Act, 1882 to leases governed by the G.G. Act, 1895. At first glance it appears that the provisions of Section 116 and 106 of the Transfer of Property Act, 1882 also stood excluded by virtue of Section 2 of G.G. Act, 1895. However, the Supreme Court in the case of State of U.P. Vs. Zahoor Ahmad and another[10] clearly held that even if the G.G. Act applied to any lease, Section 116 of the T.P. Act was not rendered inapplicable. The effect of Section 2 of the G.G. Act was that in the construction of an instrument governed by it, the court shall construe such grant irrespective of the provisions of the Transfer of Property Act. Where however the lease was silent or the provisions of the lease were not in contravention of any provision of the Transfer of Property Act, the provisions of T.P. Act would also apply. Thus, in a case where the landlord/State accepted rent even after expiry of the lease or otherwise assented to the possession of the tenant, it would amount to holding over as per the provisions of Section 116 of the Transfer of Property Act. As such it would be deemed to have renewed on a year-to-year basis or month-to-month basis
depending upon the purpose of which it was granted in terms of Section 106. Once a tenant validly holds over his tenancy in accordance with Section 116, the same can only be validly terminated under the provisions of Section 106 of the T.P. Act. It is this provision that is being overridden by the Ordinance, 2024.
It would be relevant to mention that the Transfer of Property Act, 1882 is referable to Entry 6 of List III of the Seventh Schedule. For the State Government to enact any law in contravention of TP Act, it will necessarily have to seek Presidential assent in terms of Article 254(2) of the Constitution. However, no such Presidential assent was obtained before promulgating the Ordinance. It would be pertinent to mention that in a large number of cases the State government has accepted rent upon expiry of lease and has explicitly assented to the possession of the tenant. In fact, by permitting such lessees to seek freehold, the State Government has given a clear indication that it intended to secure the possession of the tenants. Thus all such tenants who had applied for free hold or renewal have become tenants holding over upon expiry of their respective leases. Their tenancy therefore can only be terminated in the manner provided in Section 106 of the T.P. Act. It would also be pertinent to mention that the GG Act 1895 has been repealed vide Repealing and Amending (Second) Act, 2017 notified on 05.01.2018. The provisions of TP Act therefore clearly become applicable to all such leases. As such, provisions of Ss. 106/116 of TP Act apply with full rigor. The Ordinance, 2024 cannot prevail over Ss. 106/116 TP Act without Presidential assent.
Whether the Governor ought to have reserved the Ordinance for Presidential assent in view of the Proviso to Article 200 read with Article 213?
The impugned Ordinance, 2024 also directs that all pending cases in any court of law shall be deemed to be rejected. This is a clear encroachment on the powers of the High Court and Supreme Court. Apart from the fact that it curtails judicial review which is a basic feature of the Constitution (albeit the Ordinance, 2024 is not a constitutional amendment), yet in view of the proviso contained in Article 200 read with the second proviso of Article 213, it is clear that the Governor could not have assented to the Bill without first reserving it for the President. It is manifest from the second proviso to Article 200 of the Constitution of India that the Governor shall not assent to, but shall reserve for the consideration of the President, any Bill which in the opinion of the Governor would, if it became law, so derogate from the powers of the High Court as to endanger the position which that court is by the Constitution designed to fill. Fact that the impugned Ordinance, 2024 impinges upon the powers of the High Court to deal with cases pending before it is enough to trigger the second proviso to Article 200. In such circumstances therefore the Governor was under an obligation (as is evident from the use of the word “shall” not once but twice) to reserve the Ordinance for the consideration of the President. This having not been done, the impugned Ordinance, 2024 suffers from a constitutional infirmity.
Whether an Ordinance can nullify court orders without reversing the basis on which such decisions were given?
The Ordinance, 2024 almost unabashedly provides that its provisions shall prevail notwithstanding any judgment or order or decree of any court of law. As has been noticed above, there are several court decisions that have attained finality and which direct the Collector of the respective districts to execute free hold deeds in favour of the lessees. In fact, the Allahabad High Court issued a general mandamus in the case of Dr. Ashok Tahiliani (supra) to all the authorities in the State of U.P. to take decision on all pending applications within 6-months. The basis for rendering these decisions is the application of the principle of Article 14 which forbids discrimination. The legislature cannot encroach upon the domain of the courts. It can however reverse or nullify a courts verdict by altering/removing the very basis on which the decision was given. However, the Ordinance, 2024 does absolutely nothing to reverse the basis of the judgments given by the courts. The impugned Ordinance, 2024 discards the judgments of constitutional courts without reversing the basis on which such decisions were given i.e. Article 14.
Whether the State Government can treat all pending applications as rejected at one stroke without extending parity with similarly placed persons having been granted freehold/extensions/renewals earlier?
The position in administrative law is no longer res integra. The landmark decision of the Supreme Court in the case of Kumari Shrilekha Vidyarthi vs State of UP and others[11] clearly frowns upon any such collective action of the State without application of mind. The principles enunciated in this case can be profitably imported into any challenge to an Ordinance, courtesy doctrine of manifest arbitrariness. Every State action must be fair and reasonable. There can be no justification for (i) keeping applications pending for years despite general directions of the Allahabad High Court, (ii) showing favoritism in executing freehold deeds in blatant violation of Article 14, and (iii) subverting court orders by simply proclaiming them to be ineffective. The Ordinance suffers from arbitrariness and has no rational basis. The laudable objective of public interest does not relieve the State of its obligation to treat all similarly placed stakeholders equally. Article 14 is a standalone ground available under the test of manifest arbitrariness. The lessees may not have a vested interest merely on the filing of an application, yet they are entitled to the protection of Article 14 i.e. to be treated fairly and at par with similarly placed lessees. The Full Bench of the Allahabad High Court in Anand Kumar Sharma (Supra) did not consider the impact of Article 14 on pending applications for freehold. The Supreme Court in the case of State of Jharkhand and others vs Brahmputra Metallics Ltd. and another[12] has held that legitimate expectation is a right available to a person in all cases that involve infraction of Article 14. This aspect was not considered by the FB in the case of Anand Kumar Sharma (Supra). Also, it would be of importance to note that the Allahabad High Court had issued a general mandamus to the District Magistrates in the case of Amar Nath Bhargava vs State of UP[13] and Dr. Ashok Tahiliani (Supra) to decide all pending applications within 6-months. Thus, the general mandamus so issued did confer a valuable right to have the applications decided within the time frame set by the Court. As such the State Government was under an obligation to decide the applications as per the general mandamus. At any rate it could not have simply overturned the judicial verdict without retrospectively without providing any reason therefor.
Thus, for all the aforementioned reasons, the impugned Ordinance deserves to be declared ultra vires for (i) lack of Presidential assent and (ii) violation of Articles 14 and 21.
[1] 2019 SCC Online All 4157
[2] Writ-C No. 19608 of 2010, decided on 11.05.2018
[3] 2014 (2) ADJ 742 (FB)
[4] 2020 (1) ADJ 525 (DB)
[5] 2023 (5) ADJ 681 (DB)
[6] (2019) 9 ADJ 176 (DB)
[7] (2004) 1 SCC 1
[8] 1986 SCC OnLine All 264
[9] (2017) 3 SCC 1
[10] (1973) 2 SCC 547
[11] (1991) 1 SCC 212
[12] (2023) 10 SCC 634
[13] 2019 (8) ADJ 442
