It is a general and natural duty of the Sovereign to take steps towards areal development of its territories and its subjects. That is the basic reason behind creation of governance system within a territory. In past, when most of the world was witnessing monarchy as the most prominent form of governance, it was considered that the entire land on which a monarch rules, belongs to that monarch i.e. the sovereign only. The entire land of the kingdom was owned and controlled by the king only. But in order to promote the basic elements of welfare of its subjects, the kings started to grant lands for specific purposes of public welfare. Later, this practice took shape of written statutes. For example, in 1895, a law was enacted by the British Parliament as the Crown Grants Act, 1895 (XV of 1895). It came into force on 10th October, 1895. The basic reason for this enactment was to secure the purpose of the Crown to demise land for specific purposes of public welfare.

After independence, by virtue of Article 372 (1) of the Constitution of India, all the laws in force in the territory of India immediately before the commencement of this Constitution were continued to be in force therein until altered or repealed or amended by a competent Legislature or other competent authority and such power to adopt or modify any such law by any means was solely vested upon the President of India as per Clause (2) of Article 372. Therefore, in exercise of his powers conferred under Article 372(2) of the Constitution, the First President of India Dr. Rajendra Prasad (In office 26 January 1950 – 13 May 1962) was pleased to enact the Adaptation of Laws Order, 1950, whereby the word “Crown” used in the Crown Grants Act, 1895 was substituted by the word “Government” and thereafter, the Act was called The Government Grants Act, 1895.

An Insight to Government Grants Act, 1895- Scope & Ambit

  • What is a Government’s Grant? Example:

In general sense a “Government Grant” means a property vested in the Government, granted by the Government to a specific person for specific purpose for a specific period. The word “Grant” has been used in the Act in its etymological sense and therefore, it should get its widest import. It could envelop within it everything granted by the Government to any person- Vide Hajee S.V.M. Mohd. Jamaluddin Bros. & Co. v. Government of Tamil Nadu [1997(3) SCC 466].

Example- Saltlake City in Kolkata. All the lands in Saltlake City belong to the Government only and the residents of the area are lessees in the eye of law.

Mother Judgement- The first landmark judgement deciding and describing a grant, its effect and the scope of rights and duties of grantor and grantee was Surja Kanta Roy Choudhury And Ors. vs Secretary Of State [AIR 1938 Cal 229] which was decided by the Hon’ble High Court at Calcutta on 3rd December, 1937. In this case the issue involved was whether a lotdar who is holding under a grant on the terms specified is entitled to get abatement of the amount payable by him to Government under his engagement, on account of some portion of his grant being diluviated, under the provisions of Section 52 of Bengal Tenancy Act? The High Court at Calcutta while deciding this issue, had explained as follows- 

“13. ….. In the view we have taken of the status of the plaintiff, it is not necessary to decide the point. The Crown Grants Act applies to grants by Government of Sunderban lands. The scope of the Act is not limited to affecting the provisions of the Transfer of Property Act only. The Crown has unfettered discretion to impose any condition, limitation, or restriction in its grants and the right, privileges and obligations of the grantee would be regulated according to the terms of the grant, notwithstanding any provisions of any statutory or common law. These matters have been discussed in detail in Jnanendra Nath Nanda v. Jadunath Banerjee . The grant, assuming it to be a lease, is for a term of 99 years. It gives the grantee the right to have the lands measured once and only once, between 20th and 30th year of the grant, and the adjustment of the Government demand on the results of the said measurement was to be the only adjustment during the currency of the term of 99 years. This view of the terms of the lease (assuming it to be a lease) militates against the right conferred by Section 52 (2), Ben. Ten. Act, which section must consequently give way in view of the provisions of the Crown Grants Act….”

  • Overriding effect of Government Grants Act, 1895:

Section 3 of the Act reads as follows-

“3. Government grants to take effect according to their tenor- All provisions, restrictions, conditions and limitations over contained in any such grant or transfer as aforesaid shall be valid and take effect according to their tenor, any rule of law, statute or enactment of the Legislature to the contrary notwithstanding.

It means that any property vested in the Government, which is demised by it in favour of a person in the form of a “Grant” as per provisions of the Act, shall be excluded from the scope of application of the provisions of any other law/ statute for the time being in force. Therefore, statute, enactment of any legislature which is contrary to that of the Government Grant, shall not apply to a government property granted in favour of a specific person. The provisions of this Act shall have overriding effect over any other law, in force, which is contrary thereto.

  • Applicability of Transfer of Property Act, 1882:

The Transfer of Property Act, 1882 has expressly been excluded from the arena of Government Grants. Therefore, in case of a Government property demised in the form of a Grant under this Act, no provision of the Transfer of Property Act, 1882 shall be applied. The same has been mentioned under Section 2 of the Act, which reads as follows-

“2. Transfer of Property Act, 1882, not to apply to Government grants .-Nothing in the Transfer of Property Act, 1882 (4 of 1882), contained shall apply or by deemed ever to have applied to any grants or other transfer of land or of any interest therein heretofore made or hereafter to be made by or on behalf of the Government to, or in favour of any person whomsoever; but every such grant and transfer shall be construed and take effect as if the said Act had not been passed.” 

As the Government is not bound by the Transfer of Property Act, 1882, therefore, the provisions of the Transfer of Property Act, 1882 are not applicable to a Government Grant- Vide Tata Steel Ltd v. State of Jharkhand [2015 (15) SCC 55].

That is why any document which is executed by or in favour of the Government are also expressly excluded from the purview of Registration. Section 90 of the Registration Act, 1908 says that any document which is executed by or in favour of the Government such as-

(a) documents issued, received or attested by any officer engaged in making a settlement or revision or settlement of land-revenue, and which form part of the records of such settlement; or

(b) documents and maps issued, received or authenticated by any officer engaged on behalf of Government in making or revising the survey of any land, and which form part of the record of such survey; or

(c) documents which, under any law for the time being in force, are filed periodically in any revenue office by patwaris or other officers charged with the preparation of village records; or

(d) sanads, inam, title-deeds and other documents purporting to be or to evidence grants or assignments by Government of land or of any interest in land; or

(e) notices given under section 74 or section 76 of the Bombay Land-Revenue Code, 1879, or relinquishment of occupancy by occupants, or of alienated land by holders of such land.”

–shall not be required to be registered. All such documents and maps shall, for the purposes of sections 48 and 49 of the Registration Act, 1908, be deemed to have been and to be registered in accordance with the provisions of this Act.

  • Difference between Grant and Gift:

A grant by the Government and a gift by the Government are generally misconstrued as to be alike/ similar to each other. But they are in fact completely different as per law. In case of a grant given by the government, it is actually a Government property demised for a specific purpose of pubic welfare. The Government is the paramount title holder i.e the owner of such property and the person to whom such property has been demised, is merely a lessee. Therefore, a grant is given by executing a Lease Deed in favour of the grantee/ lessee. On the other hand, in case of a gift by the Government, the Donor i.e the Government transfers the absolute right, title and interest in the property in favour of the person to whom the property is gifted i.e the donnee. So, in case of a gift by the government, a Gift Deed is executed by the President or Governor, as the case may be, in favour of the donnee. In case of a grant, the Government is the owner of the property and therefore, it reserves its rights to revoke the lease at any time or as per the terms of the lease deed. While in case of a gift, it is a voluntary, non-reciprocal and permanent transfer of right, title and interest. A grantee/ lessee can use the property granted only for the purpose specified in the terms of the grant/ lease. A donee of a property gifted by the government, becomes the absolute owner of the property, so, he can use the property in any manner he wants.

  • Can a grant property be mortgaged?

No. A grant given by the Government by execution of a lease deed, cannot be mortgaged by the lessee. It is a general rule of Jurisprudence that Ownership is a bundle of rights. Mere parting with a single right out of the entire bundle, does not preclude the owner from exercising his rights over the property owned. By lease, a lessor grants few rights in favour of the lessee. It is not a transfer of title, but it is a transfer of few rights/ interests associated to the property. So, a lessee, without the prior permission of the lessor, cannot mortgage a leasehold property.

Here in case of a Government Grant, the Government is the paramount title holder of the property granted. Therefore, the grantee/ lessee without the prior sanction of the government cannot mortgage the government’s property. Moreover, a mortgage is governed under section 58 to 99 of the Transfer of Property Act, 1882 which is not applicable in case of a government Grant.

In State of Uttar Pradesh v. United Bank of India [2016 (2) SCC 757] it was held that a lessee cannot mortgage a leasehold property without prior permission of the lessor. Therefore, without prior sanction of the government, a lessee/ grantee under the Government Grants Act, 1895 cannot mortgage such property for availing any loan or credit facility from any bank or financial institution.

In M/s. Bhatia Co-operative Housing Society v. D.C. Patil [AIR 1953 SC 16] in para 12 the Apex Court held that a Lessee cannot use the property leased in any manner he likes. He must use the property as per the terms & conditions of the lease deed only. So, a lessee/ grantee is bound by the terms & conditions of the lease deed executed by the Government in favour of the lessee/ grantee.

In Stressed Asset Stabilization Fund v. West Bengal Small Scale and Development Corporation Limited [2019 (10) SCC 148] the Supreme Court in para 11 and 13 held that a lessee cannot secure advance from any bank through equitable mortgage of leasehold property unless the grantor made provisions in the lease deed to that effect. Even assuming that the lessor/ grantor made such provisions in the lease deed that the lessee can mortgage the leasehold property to avail any credit facility or get advance from any bank, then also the position of the lessee is at per with the position of the mortgagee and the grantor’s/ lessor’s rights upon the property are always superior to that of the lessee/ mortgagee.

  • Conclusion:

The scope of grant is vast and it is governed only by the terms and conditions of the grant/ lease. But mere fact that in the instrument the grantee is described as a licensee does not make it a license. A grant is by all means and in whatever way it has been demised, shall be a grant and shall always be governed by the specific clauses of the grant mentioned in the lease deed- Vide Pradip Oil Corporation v. Municipal Corporation of Delhi [2011 (5) SCC 270]. Therefore, a grantee/ lessee cannot enter into any contract or agreement with any other party qua the property granted, without prior approval of the Government or if such power is not given to such grantee/ lessee by virtue of the terms of the lease deed. Ultimate title holder i.e the absolute owner of such properties is the Government only. Therefore, if the grantee enters into any agreement to further transfer or by any means to encumber such property granted, that shall not be a good agreement in the eye of law and in view of the maxim in pari delicto potior est conditio defendentis et possidentis, the Courts of Equity interpose no relief to them- Vide Smt. Narayanamma & anr. etc. v. Sri Govindappa & Ors. [2019 (19) SCC 42].

Author Bio

Qualification: LL.B / Advocate
Company: High Court at Calcutta & National Company Law Tribunal
Location: KOLKATA, West Bengal, India
Member Since: 10 Apr 2020 | Total Posts: 3

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