State of Punjab Vs. Sardar Sewa Singh
Gill & Ors  INSC 305 (27 October 1969)
Agreement between State and promoters of
companyConstruction of-Land given to company to revert to State in case of
winding up of company-Machinery etc. to be removed by company with 24 months of
notice-Requirements of valid notice under 4th proviso to cl. 6(a) of Agreement.
Respondent No. 1 was granted certain land in
Patiala State in 1946 for the purpose of promoting a company for the manufacture
of Banaspatighee. After he had paid the costs of the land. possession of the
said land was given to respondent No. 1 on November 17, 1946. On February 12,
1947 a promoting company was formed. There was an Agreement between the Patiala
State and the promoting company. The third proviso to cl. 6(a) of the Agreement
laid down inter alia that if the proposed company was wound up the land granted
to it would revert to Patiala State. On such reversion compensation would be
paid by the State. The fourth proviso to cl. 6(a) further laid down that in the
above case the land would be delivered to Patiala State by the proposed company
within a reasonable time and the company would be under an obligation to remove
its machinery etc. from such land within 24 months after a notice had been
given in this regard by the State. If it was not removed within the notice
period or a further period of 6 months which the State could allow the
machinery etc. would become the property of the State. The proposed company
(respondent No. 2 herein) was incorporated on May 27, 1948 but it never went
into production. In 1951 respondent no. I filed a petition for the winding up
of the company, in the name of the company. Two provisional liquidators were
appointed, but the petition was dismissed as incompetent. Thereafter in, 1955
on a petition by certain shareholders an order for winding up of the company
was passed by the High Court. The voluntary liquidators resigned and the Bank
of Patiala as Official Liquidator entered into possession of the company's
property and auctioned the same in 1959. Considering a claim by respondent No.
1 to the land a Single Judge of the High Court held that the land had vested in
the company and respondent no. I was not entitled to it. The Division Bench held
that the land belonged to the State but -the company would continue in
possession till a valid notice was given in terms of the 4th proviso to cl.
6(a) of the Agreement. In appeal before this Court the State urged that the
notice given by the Director of Industries to the provisional liquidators on
August 14, 1952 was legally sufficient.
HELD : The title to the land had already
vested in the State Government under the third proviso to cl. 6(a) of the
Agreement because of the order of winding up of the company made by the High
Court. There was nothing in the Agreement to 'show that the company was
entitled to be in of the property even after the title had vested in the State
Government. The 4th proviso only said that if the company did not deliver
possession within reasonable time and if any machinery plant, buildings or
structures remained on the land the title to these also would vest in the State
Government if the company did -not remove the structures or the machinery
within 24 months from the date of the notice. In the circumstances of the case
it must be held that the notice given by the Director of Industries dated
August 14, 1952 satisfied the requirements 'of the fourth proviso to cl. 6(a)
of the Agreement. The notice period having expired, the State was entitled to
possession of the land. [17 B-E]
CIVIL APPELLATE JURISDICTION Civil Appeal No.
1434 of 1967.
Appeal from the judgment and order dated May
8, 1964 of the Punjab High Court in Letters Patent Appeals Nos. 230-304 of
V. C. Mahajan and R. N. Sachthey, for the
Harbans Singh, for respondent No. 2.
The Judgment of the Court was delivered by
Ramaswami, J. This appeal is brought by certificate from the judgment of the
Punjab High Court dated May 8, 1964 in L.P.A. Nos. 230/304 of 1962.
Sardar Sewa Singh Gill (respondent no. 1)
wanted to promote a company for the manufacture of Banaspati and for that
purpose he -approached the Maharaja of Patiala for, certain concessions and
grant of land at Doraha. Subsequently by an order of the ijlis-i-khas dated
October 29, 1946 it was decided to give to Sardar Sewa Singh Gill a plot of
land measuring about 96,700 sq. yds. at Doraha. This plot of land wag to be
made over to him on payment of the costs of the land. Certain undertakings were
given by the respondent no. 1. Possession of the land was handed over to
respondent no. 1 on November 17, 1946 vide Ex. P.W. 1/1, report no.
96. On February 4, 1947 an agreement Ex. C.W.
13 was entered into between Sewa Santokh Brothers (P) Ltd., arid the Patiala
State for grant of certain concessions for the establishment of the ghee
factory. The ghee factory that was to be established was styled as the Patiala
Banaspati and Allied Products Co. Ltd., (hereinafter referred to as the
Company). Clause 6 of the agreement states :
"The Patiala State agrees to give the
proposed Company the following among other facilities :
(a) The Patiala State shall provide for the
proposed company land upto 100 acres at Doraha as required by the company. In
respect of such portion of the land as the Government property it shall be made
available at such concessional rates as may be fixed by the Minister in charge
of Development and in regard to such portion as may have to be acquired for the
Company from private owners, such cost shall be paid 15 to the State as may be
assessed under the.
provisions of the Patiala Land Acquisition
Act, 1995 Bk. Besides the above 100 acres as required for the factory site and
the factory farm, another 25 acres of land will be acquired under the said Act
for the brick kilns at a suitable site near the factory area.
Provided firstly, that the Patiala State
shall protect and indemnify the proposed Company against any claims or actions
arising out of the acquisition of the land or the construction of the factory
of the proposed Company thereon.
Provided secondly, that if the Mill of the
proposed Company is not erected on the land provided, within two years after
the receipt of vegetable ghee machinery against orders to be placed by the
proposed Company which period shall in case of Force Majeure be reasonably
extended, the land will revert to the Patiala State, in which case the proposed
Company shall be reimbursed with the full cost of acquisition paid by it.
Provided thirdly, that in the case of winding
up of the proposed Company or before that the land or any part thereof not
required by the proposed Company shall revert to the Patiala State, who shall
pay therefor a price equivalent to the original value of the land within 12
months less such reasonable compensation as may be assessed by the Minister in
charge Development for damages done to the said land by the proposed Company in
consequence of the removal of machinery, buildings, materials etc.
Provided fourthly, that if, as soon as the Company
is free to hand over the possession of such land, the same is not delivered by the
proposed Company to the Patiala State within reasonable time after it is no
longer required for the said purpose, and there shall remain in or upon the
said land any machinery, plant, building, structure stores and other works,
erections and conveniences, the same shall, if not removed by the proposed
Company within 24 calendar months, after notice in writing requiring their
removal be given to the proposed Company by the Minister in charge Development
be deemed to become the property of the Patiala State, and may be sold or
disposed of for the benefit of the Patiala State, in such manner as they shall
deem fit without liability. to pay any compensation or to account to the
proposed company in respect thereof. Provided, however, that the said period of
24 months may be extension is necessary." State, in case they are
satisfied that such an extention is necessary." On February 12, 1947
Messrs Sewa Santokh Brothers was incorporated and on May 27, 1948 the Company
was incorporated. On April 20, 1948 prospectus of the Company as filed with the
Registrar of Joint Stock Company, Patiala and on July 21, 1948 certificate for
the commencement of business was granted to the Company. Admittedly the Company
never went into production or ever erected the factory. On December 24, 1951 a
petition for the winding up of the Company was filed by S. Sewa Singh Gill in
the name of the Company. On February 26, 1952 two provisional liquidators of
the Company were appointed namely S. Kartar Singh Kawatra and R. N. Sanghi.
This petition was, however, dismissed on October 13, 1952 on the ground that it
was not competent.
On October 28, 1954 13 shareholders filed a
petition for compulsory winding up of the Company and on 21st October 1955 an
order for the compulsory winding up of the Company was passed by the PEPSU High
Court. On the passing of this order the voluntary liquidators resigned and the
Bank of Patiala was appointed as the Official Liquidator. The Bank of Patiala
took over possession of the property of the Company and on August 13, 1959
auctioned its machinery.
Various claim petitions were filed including
L.M. 106 of 1957 and L.M. 32 of 1952 wherein, respondent no. 1 claimed various
sums on account of expenses incurred including the land at Doraha. The
petitions were heard by Mahajan, J. who by his order dated May 26, 1962
disallowed the claim of respondent no. 1 to the land but held that the land
remained vested in the respondent Company till such time as State exercised its
rights under the agreement of February 4, 1947. Against the judgment of the
learned Single Judge the State of Punjab filed L.P.A. 304 of 1962 and
1 filed L.P.A. 230 of 1962. The appeals were
heard by Dulat and Pandit, JJ. who on May 8, 1964 allowed the appeal of the
State to the extent that the land in dispute belonged to the State but its
possession would remain with the Company till a valid notice was given by the
In support of this appeal it was contended on
behalf of the State of Punjab that the High Court was in error in holding that
17 the first notice given by the Director of Industries to the provisional
liquidators was not legally sufficient and the respondent no. 2 was not bound
to give possession to the State unless a fresh notice was given. In our opinion
the argument put forward on behalf of the appellant is wellfounded and 'must be
accepted as correct. In the first place it is obvious that the title to the
land has already vested in the State Government under the third proviso to cl.
6(a) of the Agreement because of the order of winding up of the Company made by
the High Court. There is nothing in the agreement to suggest that the Company
was entitled to be in possession of the property even after its title had
vested in the State Government. The 4th proviso only states that if the Company
does not deliver possession within reasonable time and if any machinery, plant,
buildings or structures remain on the land the title to these also will vest in
the State Government if the Company does not remove the structures or the
machinery within 24 months from date of the notice. In the circumstances of the
case we are of opinion that the respondents were given sufficient notice by the
letter of the Director of Industries dated August 14, 1952. That notice
satisfies the requirements of the fourth proviso of cl. 6(a) of the Agreement
and the State is entitled to take possession of the land and other properties
located therein within two years from date of that notice.
It is necessary to state that according to
P.W. 4 Jaswant Singh the buildings on the site are in an area of one bigha, the
structure was pucca but temporary. It is the admitted case that the machinery
has been sold by auction more than seven years back and only grass grows on the
land. The evidence of Tarachand R. W. 1 also shows that a greater part of the
land is barren and the machinery and other valuable properties had already been
removed. Counsel on behalf of respondent no. 2 prayed that some further time
may be given before the State takes possession of the properties. We consider
that a further period of six months' time will be sufficient.
For these reasons' we hold that the order of
the Division Bench May 8, 1964 should be modified and the respondents should be
directed to hand over possession of the land in dispute to the State of Punjab
within six months from this date. We accordingly allow this appeal. But there
will be no order as to costs.