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Urban Land (Ceiling and Regulation)Repeal Ordinance, 1999 : rationale and gray areas
by K.C. Jain*

Cite as : (1999) 2 SCC (Jour) 1

After prolonged uncertainties, the Urban Land (Ceiling & Regulation) Act, 1976 (in short "the ULCRA") has been scrapped, thanks to the Ordinance[1] . Vide its Section 1(2), it applies in the first instance to the whole of the States of Haryana and Punjab and to all the Union Territories and it would apply to such other State as would adopt it by resolution passed in that behalf under Article 252(2) of the Constitution.

Since the Ordinance is to be replaced soon[2]  by an Act of Parliament after wide debate thereon and the other States are yet to adopt it, it would be apposite to analytically examine the rationale of the Ordinance along with its grey areas which should help to evolve a pragmatic approach to the issue. Hence, this paper.

Legislative background of the Ordinance

The ULCRA was enacted with a laudable purpose[3]  and stood the test of judicial scrutiny[4] . But since its enactment, its implementation was doubted, the demands for its modifications also kept on mounting, year after year, inside and outside Parliament. But no headway could be made.

With the liberalisation move of the economy in 1991, the demands to scrap the ULCRA gained momentum. I.K. Gujral's Cabinet, on its last legs, on 13-11-1997, took, in principle, the decision to repeal it, provided necessary resolutions were passed by the legislatures of the requisite number of States for its repeal[5] .

The Central Government then solicited the views of the State Governments. Two States, namely, Punjab and Haryana sent their resolutions, leading the path to the government decision to introduce the Bill to repeal the ULCRA in the 1998 Budget Session of Parliament[6] .

Finally, the Urban Land (Ceiling and Regulation) Repeal Bill, 1998 (in brief "the Bill") was introduced in the Lok Sabha on 11-6-1998. But even before the Bill could see the light of day, Ms Shabana Azmi, MP, opposed the move[7]  and a memorandum signed by her and 63 other Members of Parliament was sent to the PM. The thrust of the antagonists against the repeal was that the repeal would hardly benefit the urban poor, unless adequate checks were incorporated; a legislation could not be blamed for its non-implementation. Hence, the antagonists pleaded for more teeth to the ULCRA and also asked to plug its loopholes that allowed for graft and corruption[8] . The opposition to the Bill culminated in its reference to the 45-member Standing Committee on Rural and Urban Development on 23-6-1998 for examination and report.

Pursuant to the reference, the Standing Committee ascertained the views from the cross-sections of the society and also examined witnesses[9] . Finally, on 19-12-1998, the Committee by its Report recommended for repeal but with certain suggestions and modifications to the Bill. However, a note of dissent to the Report was given by Ms Shabana Azmi, MP and Mr N.R. Dasari, MP, who, though agreed with the broad formulations of the Report, did not agree with the conclusion of repeal, and recommended for a serious attempt to amend the principal Act. The Government, acting upon the recommendations of the Standing Committee, promulgated the Ordinance on 11-1-1999. To borrow the words of the Repeal Bill (introduced on 5-3-1999), "[t]he proposed repeal, along with some other incentives and simplification of administrative procedures, is expected to revive the stagnant housing industry. The repeal will facilitate construction of dwelling units both in the public and private sector and help achievement of targets".

Rationale for repeal

"The Urban Land (Ceiling & Regulation) Act has failed to achieve its objectives due to its poor performance. Out of 2,20,675 ha. of estimated excess vacant land, 50,046 ha. of vacant land vested in the State Governments. Physical possession was acquired only of 19,020 ha. of vacant land by the State Governments. There has been a demand to repeal this Act so that the stock of urban land increases and development of urban land for various sectors, namely, housing, transport, industry, etc. may be available. ... The Government has decided to repeal this Act. Repeal of this Act will also facilitate the availability and affordability of urban land, by increasing supply of urban land....", was stated by the Minister of Urban Affairs and Employment in the Rajya Sabha[10] .

The figures given in the above statement eloquently speak that though 23 years elapsed since the ULCRA came in force in 64 towns, yet no effective results (9% only) could be achieved. Its dismal performance was attributable to a plurality of reasons. Amongst them, one of the main reasons was the illusory amount of compensation (Re 1 to Rs 10 per sq. mt.), evidencing its confiscatory nature. For that reason, the ULCRA institutionalised corruption.

The repeal of the ULCRA was also necessitated to accelerate the growth rate of the housing stock. As per the 1991 Census, 162 million households were living in 131 million usable housing stock, indicating a backlog of about 31 million, which is to rise to 41 million in 2001.

Moreover, the overall negative effects of the ULCRA, as were experienced, were enormous. The ULCRA froze the building activity substantially by proving to be regulatory impediments to housing and land development. With the repeal of the ULCRA, the greater availability of land would naturally push down the price-line effectively. The market forces would govern the prices without there being artificial scarcity. Any apprehension that the urban land would be cornered by the rich seems unfounded, if the State Governments adhere to the advice of the Central Government, as was assured to be given before the Standing Committee thus:

"... We will advise the State Governments, which adopt the repeal, to ensure that the land does not remain vacant by imposing a stiff vacant land tax. By such disincentives, we feel that people will be discouraged to keep land vacant and construction activities will come forward...."[11] 

It cannot be gainsaid that the worst victims of the ULCRA were the marginal and small farmers, who had their holdings in the peripheral areas of the urban agglomerations. The deplorable part of the ULCRA was that it was responsible for creation of a class of persons, who with their political links, made quick money in shabby deals of the urban vacant lands, as Sections 20 and 21 of the ULCRA vested the authorities with unbridled discretionary powers. The competent authorities also misused their powers while determining excess vacant lands. The procedural hassles of the ULCRA including right to appeal (vide Section 33) and the right to revision (vide Section 34) against every order had also led to endless innings of litigation. The determination of excess vacant land, though theoretically looked simple, was found to be most tedious in practice.

The concern for the urban poor felt by the antagonists to the repeal can be well appreciated. But their interest can be effectively served by other means also. One of the ways can be to legislate a special law for the shelter to the poor. In retrospect, the Supreme Court has upheld such law. To illustrate, the Tamil Nadu Acquisition of Land for Harijan Welfare Scheme Act, 1978 and the Tamil Nadu Slum Areas (Improvement and Clearance) Act, 1971 were upheld in the State of T.N. v. Ananthi Ammal[12]  though they provided lesser amount of compensation. Other means can be by creating "shelter fund", imposing stiff taxes on vacant land, higher rate of capital gains arising from transfer of such lands, higher stamp duty, tariff etc. From various standpoints, the view taken by the Standing Committee as well as the decision of the Government for the repeal reflects a well-considered policy decision, which deserves to be commended as a pragmatic and progressive step in the right earnest.

Grey areas of the Ordinance

This now brings us to the provisions of the Ordinance. The Ordinance consists of only 4 sections. But, unfortunately, it suffers from some inherent drafting flaws, which if not removed, may lead to unintended consequences and avoidable litigation. Identifying its grey areas would help the law-makers to appreciate them and to remove them while enacting the Act, which is to replace the Ordinance.

Section 3(1)(b) of the Ordinance

Sub-clause (b) of sub-section (1) of Section 3 of the Ordinance postulates that the repeal shall not affect "the validity of any order granting exemption under sub-section (1) of Section 20 or any action taken thereunder, notwithstanding any judgment of any court to the contrary". Rather, it is difficult to comprehend the reasons for enactment of this sub-clause. It may be recalled that a similar provision was also proposed in the Repeal Bill [vide its clause 3(b)] and in the "Statement of Objects and Reasons" appended thereto, it was mentioned that "(t)he repeal will not, however, affect land on which building activity has already commenced. For that limited purpose, exemptions granted under Section 20 of the Act will continue to be operative".

The above Statement appended to the Bill, showed the anxiety of the Government to protect the rights of the holders of the exempted vacant lands[13] . But, to the contrary, the existence of the sub-clause in question would be counterproductive. The reason being: the exemptions granted by the State Government were conditional, and if the exemption orders were to remain valid and operative, the necessary corollary would be that the holders would be under the legal obligation to continue to comply with the conditions of exemption in future also. This would be contrary to the spirit of repeal. While the holders of unexempted vacant lands would be at liberty to use their lands in the manner as deemed fit by them, it would be unjust and arbitrary if the holders of the exempted lands should be obliged to observe the onerous conditions of exemption. This unintended implication of the sub-clause needs to be appreciated, and the sub-clause merits to be omitted or in the alternative, the holders be relieved from the rigours of the conditions of the exemption orders. It may be recalled that the Standing Committee itself solicited views in regard to clause 3(b) of the Bill, which proposed to keep Section 20 of the ULCRA operative, but it seems that the matter escaped its attention and the Report finds no mention thereof.

Section 3(2) of the Ordinance

The Bill vide the first proviso to its clause 3(a), originally postulated that where the use of the acquired land for the purposes of the ULCRA has not commenced, "then the State Government shall restore such land to the person from whom it was taken over and the amount paid shall be liable to be refunded".

In the Ordinance, the above proviso has been reshaped vide its Section 3(2). It merely creates an embargo for restoration of land without refund of amount. It deserves mention that the interest and title of a holder of excess vacant land extinguishes with the vesting of land under Section 10 sub-section (3) of the ULCRA. Despite that the Ordinance does not specifically provide for "restoration" of acquired land to the person from whom it was acquired. The Ordinance also does not lay any procedure for restoration. At best, it can be said that Section 3(2) of the Ordinance impliedly requires "restoration". But in law, there is need for express provision for restoration. Hence, this flaw needs to be removed. It would go a long way if a provision contemplating automatic restoration of the acquired land to its holders is incorporated. Such automatic restoration by fiction of law would also obviate procedural and bureaucratic hassles.

Section 4 of the Ordinance

Section 4 of the Ordinance contemplates that "all proceedings relating to any order made or purported to be made under the principal Act prevailing immediately before the commencement of this Ordinance, before any court, tribunal or any authority shall abate".

In the Bill, no such provision was originally proposed. The Standing Committee found that the proceedings would continue even after the repeal in view of Section 6(c) of the General Clauses Act, 1897, as the repealing Act was proposed in the Bill to come in force from the date of its commencement and not since the inception of the ULCRA. The Standing Committee, therefore, categorically recommended that "it should be clearly mentioned in the Bill that all the proceedings in the different courts in the country shall abate with the enactment of the Repeal Bill".[14]  That is how Section 4 became a part of the Ordinance, but Section 4 in its present form is defective as it takes into its sweep all proceedings whether they are at the instance of the State or at the instance of the holder of land.

The underlying idea for enactment of Section 4 was abatement of proceedings pending in connection with the determination of excess vacant land (except where the possession stands taken on the date of the Ordinance coming in force). It was neither intended nor could have been intended that the proceedings, which were at the instance of the persons holding the excess vacant land, should also stand terminated, though such persons were aggrieved by the taking of possession on some legitimate ground. To remove this flaw, it is necessary that the expression "all proceedings" should be given a restricted meaning and the proceedings which are at the instance of and for the benefit of the holders of vacant land, should be excluded therefrom. Accordingly, Section 4 of the Ordinance should be circumscribed in its application by modifying its language or inserting a proviso thereto.

Further, Section 4 suffers from another flaw also. It takes into its sweep the proceedings pending only before "any court, tribunal or any authority". The expression "tribunal" is a defined term [vide Section 3(m)], while the term "authority" is referable to Section 33 of the ULCRA. Incidentally, Section 4 does not refer to the proceedings pending before the "State Government", which is also defined in Section 2(k) of the ULCRA. Since the ULCRA permits proceedings to be also undertaken by the State Government [e.g. Section 20(2) or Section 34], the scope of Section 4 be widened to include therein "State Government" so that the proceedings that were pending before the "State Government" should also abate.

It is also pertinent to note that Section 4 applies to the proceedings that were pending immediately before the commencement of the Ordinance and the same does come in play against initiation of fresh proceedings. If in a given case, the holder of excess vacant land failed to file his statement under Section 6(1) of the ULCRA, no proceedings can be said to be "pending" relating to "any order made or purported to be made under the ULCRA" and, therefore, the authority concerned would be in law entitled to commence proceedings under Section 6(2) of the ULCRA. To avoid such situations, it is suggested that Section 4 of the Ordinance be suitably modified to create a legal embargo for commencement/initiation of the proceedings under the ULCRA. Else, it leads to unnecessary legal hassles.

The language of Section 4 needs further modification by deletion of the phrase "relating to any order made or purported to be made under the principal Act", as it restricts applicability of Section 4 only in connection with the "order made or purported to be made". There may be cases where the proceedings may be pending in connection with the determination of excess vacant land pursuant to the filing of the statement and not pursuant to any "order made or purported to be made" under the ULCRA. Hence, the said phrase, which unduly restricts the ambit of Section 4, needs to be deleted.

Savings clause - its scope

Vide Section 1(3) of the Ordinance, it has come into force in the States of Haryana and Punjab and in all Union Territories from the date of promulgation of the Ordinance (i.e., 11-1-1999). Section 3 of the Ordinance saves certain actions, as mentioned therein. A glance over Section 3 of the Ordinance reveals that the draftsman thought that the actions that were to survive after repeal are contained therein. In other words, he thought that the "savings" clause was exhaustive of what has been sought to be saved. Such assumption seems fallacious. The reason being that consequent to the enactment of the ULCRA, the right of the State to acquire the excess vacant land was not merely an inchoate right but a "right accrued" within the meaning of Section 6(c) of the General Clauses Act, 1897 which would continue to remain operative unless a contrary intention is expressed and they are specifically taken away by the repealing law.

As to the scope of a savings clause, Sabyasachi Mukharji, J. (as his Lordship then was), in CIT v. Shah Sadiq and Sons[15]  ruled: (SCC p. 524, para 15)

"... the 'savings' provision in the repealing statute is not exhaustive of the rights which are saved or which survive the repeal of the statute under which such rights had accrued. In other words, whatever rights are expressly saved by the 'savings' provision stand saved. But, that does not mean that rights which are not saved by the 'savings' provision are extinguished or stand ipso facto terminated by mere fact that a new statute repealing the old statute is enacted. Rights which have accrued are saved unless they are taken away expressly. This is the principle behind Section 6(c) of the General Clauses Act, 1897."

In Bansidhar v. State of Rajasthan[16]  also, M.N. Venkatachaliah, J. (as he then was) for a Constitution Bench observed that "a saving provision in a repealing statute is not exhaustive of the rights and obligations so saved or the rights that survive the repeal".

The Ordinance does not transpire that it wipes off the entire rights which accrued in favour of the State under the ULCRA. It would have been a better legislative device to have repealed the ULCRA since its inception, and then to have saved the actions, as intended by the Government. For that purpose, Section 2 of the Ordinance should be suitably amended to bring the Ordinance in force since the inception of the ULCRA.

Restoring acquired land

The Bill, as per proviso 1 to clause 3(a), proposed that where the use of the acquired land for the purposes of the principal Act has not commenced, there the State Government shall restore such land to the person from whom it has taken over and the amount paid shall be liable to be refunded.

As per the available statistics, the Government could physically take possession of 19,082.22 hectares of land during the last 22 years. Out of that, 10,909.85 hectares of land was put to use for the purposes of the Act, while the remaining 8172.37 hectares of land could not be put to use. To the proposal, as contained in the Bill, about restoring the land which has not been put to use, the Standing Committee had certain reservations and remarked thus:

"The Committee feel that the land which is yet to be put to the use for the purpose of the Act and which is physically under the possession of the Government should not be restored to the person from whom it was taken over, as such restoration would lead to avoidable discrimination between the person whose land was acquired and put to use and the one whose land could not be put to use. Necessary amendments may accordingly be made in the repealing Bill."[17]

In view of the above stand of the Standing Committee, the Ordinance does not contemplate for restoring that land whose possession stood taken under the ULCRA. In fact, the view taken by the Standing Committee does not seem to be well founded. The persons whose lands were acquired and put to use constitute a separate class in comparison to those whose lands were acquired but not put to use. Use of a land often creates third-party interest, which as a matter of sound legislative policy, is not disturbed[18] . It would be wise on the part of the Government that the restoration provisions, as were originally proposed in the Bill, are enacted as law.

Sum up

The Ordinance is undoubtedly a piece of pragmatic and progressive legislation. But to ensure that its benefits finally reach the beneficiaries, its provisions need to be reworked and the above flaws be removed. It would then achieve the desired objectives and also avoid the litigation.

* Advocate, Supreme Court of India, New Delhi. Return to Text

  1. The Urban Land (Ceiling and Regulation) Repeal Ordinance, 1999 (No. 5 of 1999) has been promulgated on 11-1-1999 in exercise of the powers conferred by Article 123(1) of the Constitution. Return to Text
  2. The Budget Session has begun on 22-2-1999, and the Government has introduced the Urban Land (Ceiling and Regulation) Repeal Bill, 1999 (Bill No. 17 of 1999) on 5-3-1999 to replace the Ordinance by an Act. Vide Article 123(2) of the Constitution, the Ordinance would cease to operate at the expiration of six weeks from the reassembly of Parliament. Return to Text
  3. The Statement of Objects and Reasons, appended to Bill No. 25 of 1976, which was enacted as the ULCRA, read thus: "... With the growth of population and increasing urbanisation, a need for orderly development of urban areas has also been felt. It is, therefore, considered necessary to take measures for exercising social control over the scarce resource of urban land with a view to ensuring its equitable distribution amongst the various sections of society and also avoiding speculative transactions relating to land in urban agglomerations." Return to Text
  4. Union of India v. Valluri Basaraiah Chaudhary, (1979) 3 SCC 324; Maharao Sahib Shri Bhim Singhji v. Union of India, (1981) 1 SCC 166 and (1986) 4 SCC 615. Return to Text
  5. Para 1.21 of Report No. 12 of the Standing Committee on Rural and Urban Development dated 19-12-1998, which was laid in the Lok Sabha on 21-12-1998. It may also be recalled that the ULCRA was a Central Act on a State subject (Entry 18 of List II of the Seventh Schedule to the Constitution) and was enacted under Article 252(1) of the Constitution after the legislatures of 11 States passed the necessary resolution authorising Parliament to enact a law in that behalf. It applied to 64 urban agglomerations. For its repeal also, resolutions under Article 252(2) were needed. Return to Text
  6. Government of India, Economic Survey 1997-98, p. 148 (para 57). Return to Text
  7. See: The Statesman, New Delhi dated 4-6-1998. Return to Text
  8. Ms Shabana Azmi, MP, in her article "Problems of repealing Land Ceiling Act" (Hindustan Times, New Delhi, 29-5-1998) argued: "Can we blame a legislation for its non-implementation by the Government? ... There has been a singular lack of will to implement the Act...." Return to Text
  9. Notably, the Committee invited comments/memoranda by wide publicity on AIR/Doordarshan/Press release. In response thereof, 171 memoranda/letters were received. Pursuant thereto, 14 persons were examined as witnesses by the Committee. This author also testified before the Committee as expert witness on 2-12-1998. Return to Text
  10. The statement was given in the Rajya Sabha in reply to the Starred Question No. 172 on 8-6-1998. In the Statement of Objects and Reasons appended to the Urban Land (Ceiling and Regulation) Repeal Bill, 1999 (No. 17 of 1999) also, it has been succinctly stated that the ULCRA "has on the contrary pushed up land prices, practically brought the housing industry to a stop and provided opportunities for corruption. There is a widespread demand for removing this irritant to land assembly and construction activity. During the implementation of the Urban Land (Ceiling and Regulation) Act, 1976, there have been a spate of litigations giving rise to serious hurdles in taking over possession of land, by the State Governments. Public opinion is nearly unanimous that the Act has failed to achieve its objectives as expected". Return to Text
  11. Para 2.8 of the Report Return to Text
  12. (1995) 1 SCC 519 Return to Text
  13. 52,508.54 hectares vide para 1.10 of the Report. Return to Text
  14. Para 2.21 of the Report. Return to Text
  15. (1987) 3 SCC 516 : 1987 SCC (Tax) 270 Return to Text
  16. (1989) 2 SCC 557 Return to Text
  17. Para 2.18 of the Report. Return to Text
  18. In Aflatoon v. Lt. Governor of Delhi, (1975) 4 SCC 285, the Court refused to quash the acquisition of the land involved therein, as "Government have allotted a large portion of the land, after the acquisition proceedings were finalised to cooperative housing societies. To quash the notification at this stage would disturb the rights of third parties...." Similar view was also taken in Ram Chand v. Union of India, (1994) 1 SCC 44 vide its para 25 (p. 59-b).
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