From Mysore Maharajas to Mantri Developers: A fascinating tale of land transaction

The land abutting Sankey lake where an apartment from Mantri Developers is proposed to come up. Pic courtesy: Google Earth

No one will miss the pristine forest area abutting Sankey Tank in Malleshwaram, just next to Aranya Bhavan, the State Forest Department building. The cool water in the lake and the woods nearby make the place a walkers’ paradise, with the chirping birds and thriving vegetation. This sight, it looks like will not last longer, with the Karnataka Government losing its appeal in the High Court against the land transaction and the owner of the land ready with a development plan in place.

While hearing the state’s appeal, Justice Ram Mohan Reddy ordered the State to “execute and lodge for registration of the Deed of transfer” in favour of Gulf Oil Corporation, which will enable Mantri Developers, which owns the land now, to execute its plan of constructing high rise luxury apartments, just next to the lake.

Following a protest from a number of organisations on the Sankey lake banks on Sunday May 3rd, Citizen Matters looked into the details of how the forest land became owned by a private builder. This is a story of the subsequent governments taking decisions not putting enough thought. Here’s the fascinating story of how Mantri Developers got the land abutting a lake in a perfectly legal way.

Mysore govt gives land to testing lab

The Government Industrial and Testing Laboratory was set up in 1931, under the British rule. Its purpose was to manufacture pharmaceutical requirements of several government departments and of testing and research laboratories, investigating the prevalent industrial problems and assisting the government in proper purchase of materials and the like.

Following a Government Order on March 8th 1945, this laboratory was converted into a joint stock company under the name of “The Mysore Industrial and Testing Laboratory Limited” (MITL). Approximately six acres of land, along with the building of the government quarters located off Sankey Road, which was initially leased out for a period of 20 years, was later given to the MITL by the State through a Sale Deed signed on August 17th 1967.

Six years later, on September 21st 1973, the company was amalgamated with Indian Detonators Limited (IDL). Subsequently the name of this company was changed to IDL Chemicals Limited and then to IDL Industries Limited, and finally, on August 22nd 2004, to Gulf Oil Corporation Limited.

Chronology: 1971-2006

Following is the chronology of events that unfolded when MITL showed interest in buying the 1.2 acres of land owned by the Forest Department, adjacent to its property:

January 5th 1971: Under-Secretary of Government, Agriculture and Forest Department, wrote a letter to MITL, informing that the Government of Mysore has decided to transfer the 1.2 acres of land, along with the building and the shed used for storage of sandalwood, on payment of the market price for the land and the structures built on it.

August 28th 1973: Following the valuation of the total market price by the Public Works Department (PWD), the Government of Mysore informed MITL that the land would be transferred on a total payment of Rs 6,43,203. This amount had to be paid in three installments, first of which was Rs 2.62 lakhs for the transfer of land; the second, to be paid six months after the first installment, was a sum of 0.89 lakh rupees for the transfer of residential quarters; and the final installment of Rs 2,92,203 was to be paid a year after the first installment for transfer of the Sandalwood storage shed and the surrounding areas of the Forest department.

January 10th 1974: A Government Order notified the dates on which the three installments had to be made, as January 31st 1974 for the first, the second on or before 31st July of the same year, followed by the third on January 31st of next year, 1975. It was informed in this order that failure to make the payments on time would incur on the company a simple interest of 9% for the first year of default, followed by a penal interest of 13% on the subsequent delays until the date of payment.

The market value evaluated for the property was, Rs 4,26, 800 for the 1.2 acres of land, Rs 1,91,356 for the Sandalwood godown and Rs. 25,047 for the one building that stood on this land.

The same order also imposed a number of conditions which restrained IDL from alienating, sub-letting, mortgaging or selling the land to any individual or company; required the land to be reverted back to the Forest Department in case the company became defunct; and reserved to the State the right to use the roads and paths inside the premises until the entire rough wood stored in the building was removed within a period of one year.

March 13th 1974: A Government Order withdrew the condition of non-alienation, permitting IDL and its subsidiaries to mortgage the property for borrowing the loans.  IDL was also given the liberty to sell the land, only if its existing factory is shifted to a different location within the State of Karnataka.

August 8th 1974: IDL paid Rs. 6,55,936 including some interest and sought the transfer of the property

February 19th 1975: The State of Karnataka wrote a letter to the Chief Conservator of Forest instructing him to execute the necessary agreement and transfer the property.

April 8th1975: The Forest Department informed the company that instructions were issued to the Divisional Forest Officer to hand over the possession of the property.  

September 18th 1975: The Forest Department delivered the possession of the officers’ quarters to IDL.

December 15th 1975: The possession of Sandalwood godown was also transferred to IDL.

March 22nd 1976: The State of Karnataka issued a correction, stating that the property transferred was 1.1 acres and not 1.2, and that the value of the garage in the property, which was previously unaccounted for, was Rs. 2,671.

July 11th 1986: This land, which was till then registered for use of public purposes, was then changed to industrial purpose by the BDA.

January 27th 1978: A government Order exempted IDL from the restrictions imposed by the Urban Land (Ceiling & Regulation) Act of 1976, on the condition that land was to be used for industrial purpose.

July 28th 1999: BDA permitted the IDL to change the land use from industrial to 20% for residential and 80% for commercial.

June 28th 2003: IDL entered into an agreement to sell this land to Abhishek Developers, a subsidiary of Mantri Group, exactly a month after both parties signed development agreement.

October 10th 2004: The Forest department sent a notice to Gulf Oil Corporation, asking the land to be reverted on the grounds that IDL had sold the property to it and had, as a result, become defunct. One of the conditions, as stated before, required the land to be returned to the Forest Department if the company in possession of it became defunct.

October 28th 2004: Gulf Oil Corporation filed a Writ Petition in High Court, praying the Court to direct the state of Karnataka and Forest department to execute the sale deed and to quash this communication from the Forest Department.  

January 21st 2006: State of Karnataka and Forest Department filed statement of objections, contending that the property was transferred to IDL subject to the condition of non-alienation and that in event the company becomes defunct, the property is to be reverted to the Forest Department. A joint statement claimed that the government had not directed the sale of land, but only its transfer subject to certain conditions.

Contentions of the Forest Department

The Forest Department contended that it had sent the notice because of development agreement dated June 28th 2003 and the agreement of sale dated July 28th 2003 between Gulf Oil Corporation and Abhishek Developers for the sale of 29,015.77 sq mt of land, which is a portion of this property.

Some of the main justifications given by the Forest Department for its notice are:

  1. IDL changed its name to Gulf Oil Corporation Limited, but the purpose for which the land was transferred – to build a pharmaceutical complex – had not changed.
  2. Since the company had become defunct, as per the terms of conditions laid out in the Government Order, the property in question ought to be reverted to the Forest Department.
  3. Given the location of this property, it is in public interest to retain the land under government ownership rather than handing it over to Gulf Oil Corporation which is dealing as real estate developer for commercial exploitation.

Court rules against the state

The first reason was disregarded by the court. By the virtue of the fact that the State Government had exempted the company from holding excess vacant land and that the BDA had already changed the purpose of land use from public to industrial and from industrial to 20% residential and 80% commercial, “the State Government accepted, as a matter of fact, IDL’s ownership rights over the land..”

While probing the second contention about the company being defunct, the court, after examining the legal definition of “defunct company” and the procedure of declaring a company as defunct, said that IDL cannot be regarded as a defunct company.

Before any company is declared as defunct, the registrar who has a reasonable cause to believe that it is not carrying out any business or operation must write a letter to the company enquiring whether it is operating. In case the registrar does not receive a response within a month of sending this letter, he must write another letter to the company within the next 14 days, stating that no response has been received for the first letter and that the company’s name will be struck off from the register if there is no response from the company, for this second letter within a month.

Only if there is a failure to respond within this stipulated time or if the response from the company states that it is not in operation, the registrar will notify in the official gazette and send a notice to the company stating that name of the company will be struck from the register and will be dissolved by the end of three months from the date of this notice, unless the company comes forward with a reasonable cause for not doing so.

However the Forest Department did not produce any material to establish that the Registrar of Companies (RoC) has struck off the company’s name from the register. Hence, the Forest Department’s conclusion in the notice sent to IDL, the Judge said, was “illegal and irrational”, and the notice itself is “inappropriate, incompetent (and) unsustainable”.

The third contention of that public interest demands the land to be held under government control was also ruled out by the court. The Judge observed that the fact that State had permitted the change of land use for residential and commercial purpose makes it clear that “the State did not intend to retain this property in public interest, and it appears to be ruse and an afterthought to resile from its earlier commitments and legal obligation.”

It was also held by the judge that since neither the State of Karnataka nor the Forest Department had produced any material before the court to justify the contention of public interest, to give a decision based on this contention would mean basing it on “imperfect knowledge”.

Judge also observed that while the state did not decline to complete the transfer of land, it was the “Principal Conservator of Forest who had put the spokes into the wheel since his official residence is located adjacent to the land in question”, adding that the interest in the present case seems to be not that of public but of the Principal Conservator of Forest.

Noting that the Forest department thwarted the attempts of the State to transfer the land on the premise that the government order did not disclose who is to bear the stamp duty and the registration charges and whether the State reserved a claim over the trees grown on the land, the Judge said, “Government Orders are binding.. and the non-carrying out of the instructions issued… is nothing short of flouting the government directives. In these circumstances, the State cannot wriggle out its commitment to transfer the immovable property to M/s IDL…”

On this reasoning, the High court, in its final order, quashed the notice sent by the Forest Department to Gulf Oil Corporation and instructed the State of Karnataka and its authorities to “execute and lodge for registration the Deed of transfer.. within four weeks”, while the Gulf Oil Corporation was required to pay the required stamp duty and registration charges.

‘Governor approved the exemption on selling’

Aggrieved by this order, the State of Karnataka and the Principal Chief Conservator of the Forests filed a Writ Appeal against the order on March 24th 2008. In the proceedings of this case, the following were the major contentions raised:

The Government’s advocate argued that order dated March 13th 1974, which relaxed of the condition imposed on the company, restricting it from mortgaging, sub-letting or selling the property, is not legally tenable as the it was never placed before the cabinet for approval, but was rather given by the Special Officer Ex-Officio, Deputy Secretary to the Government.

Hence agreement for sale between Gulf Oil Corporation and Abhishek Developers is a violation of the condition laid down in the transfer order, which barred the company from doing so, and on those grounds the land has to be reverted to the government.

This contention was countered by the counsel for Gulf Oil Corporation, who argued that this order was passed by the Special Officer Ex-Officio, Deputy Secretary to the Government, “in the name of the Governor”. Since the Governor cannot act on his own, but only with aid and advice from the cabinet, it is a presumption in law that once an order has been passed in the name of the Governor, it has been done so after following the procedure established by law.

Hence, the counsel argued, in absence of any evidence proving otherwise, the court shall presume that the Cabinet’s decision has been taken.

‘Land ceiling act not applicable’

The government’s advocate also contended that IDL’s application for exemption from provisions of Chapter 3 of the Urban Land (Ceiling and Regulation) Act, 1976, was accepted on the condition that the land must be used for industrial purpose only. Hence the company was not allowed to change its land use to residential and commercial purpose, which consequentially prohibits the company from entering into an agreement of sale with Abhishek Developers without prior permission of the government.

The counter-argument proposed by the counsel for company was that this contention was not raised before the single judge, against whose order this appeal has been filed. Hence the appellants cannot raise this plea at the appellate stage. Moreover, since the act itself has been repealed in 1999, the government cannot rely on this to limit the company’s right to alienate the property.

‘Government itself relaxed conditions’

The very purpose of transferring the land to the company, which was to ensure development of large pharmaceutical complex at the site, would be defeated by allowing the company to transfer the land to Abhishek Developers, said the government advocate.

This was countered on the grounds that the government itself had relaxed the condition which prohibited sale or mortgaging of this land, permitting the company to sell the land as it sees fit, in case it was relocating to another place within Karnataka. Since the company had shifted its operation to Yelahanka, it was justified and legal to sell the land to Abhishek Developers, after getting the purpose of land use changed to residential and commercial by the BDA.

On hearing the arguments from both parties, the court dismissed the Writ Appeal, declaring there was no merit in it. This, in effect, retains the validity of the previous order given by the single judge. As a result the Government now has an obligation to execute the sale deed and to refrain from interfering with the sale of this land to Abhishek Developers, Mantri Group.

With various civic organisations and lake protection groups now opposing the move, it remains to be seen what turn will the events take.

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About Pavan Kulkarni 22 Articles
Pavan Kulkarni was associated with Citizen Matters as a staff journalist.

1 Comment

  1. Argument of Developer that Governor approved exemption on selling is ridiculous. Why it should be presumed that just because a letter was issued in the name of Governor, it has approval of the Cabinet? Why records about the date of approval by the cabinet and all records of inward and outwards at Government office and governor’s office were not called by the Court? What is the guarantee that the then Governor had the knowledge about all these happenings?. If the letter is forgery then what? All these doubts comes to our mind, though our knowledge level is limited.

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