1. 1975 (0) GLHEL 201885
GUJARAT HIGH COURT
Hon'ble Judges:S.H.Sheth, J.
Board Of Trustees, Kandla Port Trust Versus State Of Gujarat
SPECIAL CIVIL APPLICATION No. 748 of 1974 ; *J.Date :-
AUGUST 5, 1975
• MAJOR PORT TRUSTS ACT, 1963 Section - 29(1)
• CONSTITUTION OF INDIA Article - 285
Major Port Trusts Act, 1963 - S. 29(1) - Constitution of India - Art. 285 - petitioner
challenged levy of non-agricultural assessment on lands belonging to them -
petitioner is Board of Trustees which was constituted for port of Kandla - purpose
of vesting of property in trustees - consideration as to ownership of Central
Government over land in question - entitlement to exemption from State taxation
with respect to lands in question - held, lands in question were vested in petitioner in
Board of Trustees only for purpose of administration - lands in question continue to
be property of Union of India and are exempt from State taxation - petition allowed.
Cases Referred to :
1. The Fruit & Vegetable Merchants Union V. The Delhi Improvement Trust, AIR
1957 SC 344
2. Village Panchayat Jaspur V. State Of Gujarat And Others, 11 GLR 695 : 1969
GLHEL 213742
Equivalent Citation(s):
1976 GLR 812 : 1975 GLHEL 201885
JUDGEMENT :-
S.H.SHETH, J.
1 The Board of Trustees for the Port of Kandla have filed this petition in which they
challenge the levy of non-agricultural assessment on the lands belonging to them.
2 The facts of the case briefly stated are as under: In 1931 A. D. Kandla port was
constructed by the then princely State of Kutch. On 15th August 1947 when Indian
Independence Act, 1947 came into force Kutch became a sovereign State. On 1st August
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2. 1948 the Ruler of Kutch executed an instrument of accession ceding his State to the
Dominion of India. On 26th January 1950 when the Constitution came into force Kutch
became a Part-C State On 1st April 1950 the Indian Ports Act, 1908 was applied to
Kandla port by a notification which was issued on 31st January 1950 that notification
also laid down the limits of Kandla port. On 27th February 1952 the Central Government
granted a perpetual lease in respect of some lands to the Sindhu Resettlement Corporation
Limited for developing a township outside the limits of Kandla port. On 9th February
1953 Union of India instructed the Chief Commissioner of Kutch to hand over 346. 5
square miles of land to the port authorities. In 1955 the Sindhu Resettlement Corporation
surrendered the lease for land to the Union of India and the Union of India granted a fresh
lease to the Sindhu Resettlement Corporation for a period of 99 years. On 29th March
1955 the Central Government declared Kandla port as a major port with effect from 8th
April 1955 On 1st November 1956 Kutch which was a part C State merged with the then
State of Bombay in the wake of States Reorganisation Act, 1956 With effect from 1st
May 1960 it became a part of the State of Gujarat. On 29th February 1964 the Major Port
Trusts Act, 1963 came into force and in pursuance thereof the Central Government
constituted a Board of Trustees for administering Kandla port. On 24th December 1970
the Mamlatdar of Anjar demanded of the port trust authorities a sum of Rs. 56,06,400.00
account of non-agricultural assessment of the lands under its control for the period from
1963-64 to 1970-71. On 16th June 1971 the port authorities made a representation to the
State Government. On 24th April 1974 the port authorities were informed that the State
Government had rejected their representation and directed that the non-agricultural
assessment demanded of them by the Mamlatdar of Anjar should be recovered.
3 It is this demand of non-agricultural assessment by the State of Gujarat which is
challenged by the petitioner-the port trust authorities of Kandla.
4 Mr. Nanavati who appears for the petitioner has on merits firstly contended before me
that by virtue of the provisions of Art. 285 of the Constitution the lands in respect of
which the non-agricultural assessment has been demanded by the State of Gujarat are not
liable to pay it. In order to appreciate the contention which Mr. Nanavati had raised it is
necessary to turn to Art. 285 of the Constitution. Clause (1) of Art. 285 upon which
reliance has been placed by Mr. Nanavati provides as under :
The property of the Union shall save ill so far as Parliament may by law otherwise
provide be exempt from all taxes imposed by a State or by any authority within a
State.
I do not reproduce clause (2) of Art. 285 because it has not been pressed into
service by any of the parties to this case. It is clear from clause (1) of Art. 285 that
the State of Gujarat is not competent to levy any taxes on the property of the
Union. Art. 289 of the Constitution correspondingly exempts the property and
income of a State from Union taxation. The question which Mr. Nanavati has
argued before me is whether the lands in respect of which the non-agricultural
assessment has been demanded by the State of Gujarat are the properly of the
Union within the meaning of clause (1) of Art. 285. Before I proceed to examine
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3. the contention which Mr. Nanavati has raised before me I may incidentally note
that the exception carved Out by the expression save in so far as Parliament may
by law otherwise provide used in clause (1) of Art. 285 does not come into play in
the present case. None of the parties has pressed that exception into service before
me. Provisions of the Indian Ports Act, 1908 and the Major Port Trusts Act, 1963
have been canvassed by Mr. Nanavati on one hand and by the learned
Government Pleader and Mr. Shall on the other hand in support of their rival
contentions. However in order to examine whether the lands in respect of which
the non-agricultural assessment has been demanded are the property of the Union
it is necessary to turn to the averments made in that behalf. In paragraph 7 of the
petition the petitioner has averred that sometime in 1953 the Ministry of Home
Affairs Government of India instructed the Chief Commissioner of Kutch to hand
over 346.5 square miles of land to the Kandla Port Trust authorities. That land
was submerged in the seawater. The said instructions were given by the Central
Government by its memo dated 9th February 1953 Thereafter it has been averred
by the petitioner that those lands became a part of the area which was included
within the port limits and that a part of those sub-merged lands was reclaimed
from the sea and the present port of Kandla was constructed on the said lands. In
paragraph 19 of the affidavit made by C. M. Parikh Under Secretary to the
Government of Gujarat Revenue Department on behalf of the state of Gujarat it
has been stated that before the lands in question were handed over by the Central
Government to the Kandla Port Trust authorities they vested in the Central
Government and that therefore no question of recovery of Land revenue in respect
of those lands arose. However with effect from the date on which they were
handed over to the Kandla Port Trust authorities they vested in the Board of
Trustees for the Port of Kandla and that they no longer remained the property of
the Central Government. It is therefore contended by the State of Gujarat that they
became subject to the payment of land revenue under the Bombay Land Revenue
Code 1879 It is therefore an admitted position that the lands in question belonged
to and had vested in the Central Government prior to their transfer by the Central
Government to the Kandla Port Trust authorities. On the averments as they are
this position cannot be controverted. In paragraph 3(B) of the same affidavit in
reply filed on behalf of the State of Gujarat it has been averred that the lands in
question were acquired for the Kandla Port Organisation in the year 1950-1952. It
may be noted at this stage that admittedly in 1950-1952 Kandla Port was managed
directly by the Central Government. It came under the administration control and
management of the port trust authorities after the Board of Trustees was
constituted in pursuance of the provisions of the Major Port Trusts Act which was
constituted in 1963. In that paragraph it has been further stated on behalf of the
State of Gujarat that Kandla port was managed in 1950-52 departmentally by the
Ministry of Transport Government of India and that it continued to be so managed
and administered until 1963. With the enactment of the Major Port Trusts Act,
1963 the lands in question were passed on to the Board of Trustees which was
constituted for the port of Kandla. Thereafter by virtue of the provisions of sub-
sec. (1) of sec. 29 of the Major Port Trusts Act, 1963 the lands in question vested
in the Kandla Port Trust authorities. It has next been averred in that paragraph on
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4. behalf of the State of Gujarat that Kandla Port Trust is an independent legal entity
and is distinct and separate from the Central Government. It is pertinent to note
that in paragraph 8 of the said affidavit-in-reply it has been averred on behalf of
the State of Gujarat that in order to determine to whom the lands in Question
belong reference to the legislative power of the Union of India and its executive
power is not relevant. This averment made on behalf of the State of Gujarat is
broadly speaking very correct and yet the learned advocates appearing on both the
sides have made copious reference to the legislative and executive power of the
Union in support of their rival contentions. It has next been averred in that
paragraph of the said affidavit-in-reply on behalf of the State of Gujarat that with
effect from the date of coming into force of the Major Port Trusts Act, 1963 all
properties assets and funds of a major port which had earlier vested in the Central
Government came to be vested in the port authorities. The inference which the
State of Gujarat has drawn therefrom is that with effect from that date there was a
complete divestiture of the Central Government in respect of all such properties
and there was a corresponding vesting of all such properties in the Port Trust
authorities. Similar averments have also been made in other paragraphs of that
affidavit-in-reply. These averments which have been made on behalf of the State
of Gujarat clearly show that prior to the date of coming into force of the Major
Port Trusts Act, 1963 the lands in question belonged to the Central Government
or the Union of India. In other words they had been the property of the Union of
India. The averments made on behalf of the State of Gujarat are incapable of
leading to any conclusion other than the one which I have stated. As a result of
their acquisition in 1950-1952 they vested in the Central Government because the
Central Government had acquired them for the purpose of development of Kandla
port. They continued to so vest in the Central Government until the Board of
Trustees for the part of Kandla was constituted and the lands in question were
directed to be handed over by the Central Government to them.
5 The narrow question which I have therefore to examine is this: What was the nature of
transfer of the lands in question by the Central Government to the Kandla Port Trust
authorities? Mr. Nanavati has invited my attention to some of the sections of the Major
Port Trusts Act-sec. 29 in particular. Before I deal with sec. 29 of the Major Port Trusts
Act, 1963 I would like to note that the Memo which has been referred to in the affidavit-
in-reply filed on behalf of the State of Gujarat and under which the lands in question were
transferred by the Central Government to the Kandla Port authorities has not been
produced on record. If it was produced it would have certainly thrown some light on the
question as to whether the Central Government had completely divested themselves of
those lands or whether they had transferred the lands in question to the Kandla Port Trust
authorities for the purpose of carrying on the administration and management of Kandla
port. Clause (a) of sub-sec. (1) of sec. 29 of the Major Port Trusts Act, 1963 is material
for the present purpose. It provides as follows. As from the appointed day in relation to
any port
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5. (a) all property assets and funds vested in the Central Government or as the case
may be any other authority for the purposes of the port immediately before such
day shall vest in the Board
Clause (b) of sec. 2 defines Board in relation to a port so as to mean the Board of
Trustees constituted under the said Act for that port. The effect of the aforesaid
provision contained in sec. 29 is to vest inter alia all property which earlier vested
in the Central Government for the purpose of Kandla port in the Board of Trustees
for the port of Kandla. Mr. Nanavati has tried to argue that this vesting was not
absolute in the sense of vesting full and exclusive title to the lands in question in
the Board of Trustees for the port of Kandla but it was vesting in the limited sense
of transferring possession for the purpose of administration management and
control of Kandla Port. He has in support of his proposition relied upon some of
the provisions of the said Act and also on the preamble. The preamble to the
Major Port Trusts Act, 1963 inter alia states that it was enacted in order to provide
for the constitution of port authorities for certain major ports in India and to vest
the administration control and management of such ports in such authorities and
for matters connected therewith. It is some times risky and unwise to construe a
statutory provision with reference to the object which has been stated in its
preamble but it is not always so. In my opinion looking to the scheme of the
Major Port Trusts Act, 1963 there is no difficulty in construing clause (a) of sub-
sec. (1) of sec. 29 in light of what has been stated in its preamble. In my opinion
the lands were vested in the Board of Trustees for the port of Kandla by the
Central Government only for the purpose of administration control and
management of Kandla port. They were not vested in them in the sense that the
Central Government had divested itself completely of the lands in question.
6 In order to fortify the conclusion which I have recorded a brief reference to some of the
provisions of the Act may be usefully made. Sec. 3 provides for the constitution of the
Board of the Trustees. Sec. 4 provides for the constitution of the first Board of Trustees.
Sec. 93 lays down that no new work or appliance the estimated cost of which exceeds
such amount as may be fixed by the Central Government in that behalf shall be
commenced or provided by a Board nor shall any contract be entered into by a Board in
respect of any such new work or appliance until a plan of and estimate for such work or
appliance has been submitted to and approved by the Board: and in case the estimated
cost of any such new work or appliance exceeds such amount as may from time to time
be fixed by the Central Government in that behalf the sanction of the Central Government
to the plan and estimate has been obtained before such work is commenced or appliance
provided. Sec. 94 empowers the Chairman of the Board of Trustees to direct the
execution of any work the cost of which does not exceed such maximum limit as may be
fixed by the Central Government in that behalf and may enter into contracts for the
execution of such works. Sec. 109 confers upon the Central Government power to restore
or complete works at the cost of the Board. Sec. 110 empowers the Central Government
to supersede a Board of Trustees under the circumstances specified therein. Sec. 111
empowers the Central Government to issue directions to the Board of Trustees. I have
referred to only a few sections of the Major Port Trusts Act, 1963 in order to bring into
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6. bold relief the fact that the Board of Trustees which is the statutory body appointed under
the said Act functions and discharges its duties under the control and supervision of the
Central Government.
7 Mr. Nanavati has invited my attention to the meaning of vest given in Corpus Juris
Secundum volume 92 page 1002. It states that the expression vest does not denote any
particular meaning. It may denote a vesting in interest. It may denote a vesting in
possession. It may denote the fixation of a present right to the immediate or future
enjoyment of property. It may denote a legal or equitable seizing. It has also been defined
so as to confer ownership of a property upon a person or to invest a person with the full
title to property but it is said that it does not necessarily mean absolute ownership.
8 In THE FRUIT & VEGETABLE MERCHANTS UNION V. THE DELHI
IMPROVEMENT TRUST AIR 1957 SUPREME COURT 344 the expression vest used
in the U.P. Town Improvement Act 1819 came up for construction before the Supreme
Court. The Supreme Court has observed as a matter of general principle that the
expression vest has not got fixed connotation. It therefore does not necessarily mean in
all cases that the property which is vested in an individual or a body of individuals is
owned by him or them. Where the expression vest is used it may connote vesting in title
it may connote vesting in possession or it may connote vesting in a limited sense. Having
construed secs. 45 to 49 and 54 and 54A of the U. P. Town Improvement Act the
Supreme Court has observed that the vesting of property in a trust within the meaning of
the said Act is only for the purpose of executing any improvement scheme which it has
undertaken and not with a view to clothing it with complete title. The Supreme Court has
in that context examined the use of the expression vest in other statutes such as the
provincial Insolvency Act, 1920 and the Land Acquisition Act 1894
9 In VILLAGE PANCHAYAT JASPUR V. STATE OF GUJARAT AND OTHERS 11
GUJARAT LAW REPORTER 695 a Division Bench of this Court has taken the view
that the expression vest has a variety of significations depending upon the context in
which it is used It may mean transfer of proprietary interest in the land or it may mean
transfer of the right to possession of the land or the right to obtain and deal with the land
10 It is clear from these decisions that the expression vest does not necessarily connote
vesting of absolute title but it may connote depending upon the context in which it has
been used a vesting of a limited interest or vesting of possession. The question which
therefore arises for my consideration is: In what context the expression vest has been
used sec. 29(1)(a) of the Major Port Trusts Act, 1963 ? Firstly taking into account its
object as stated in the preamble and taking into account the scheme of the Act as
disclosed by some of the sections to which I have already made a reference it is clear that
the lands in question which had been acquired by the Central Government and in respect
of which absolute title vested in the Central Government were transferred by the Central
Government to the Board of Trustees for the port of Kandla for the limited purpose of
administering managing and controlling the Kandla port. What has therefore vested in the
Board of Trustees for the port of Kandla is possession of the land in question for the
purposes of administration control and management of the port of Kandla.
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7. 11 Support is lent to this conclusion of mine by some of the provisions in the
Constitution. In that context it will be apposite to make a reference to Entries 27 and 28
in the Union List. Entry 27 reads thus :-
Ports declared by or under law made by Parliament or existing law to be major
ports including their delimitation and the constitution and powers of port
authorities therein.
Entry 28 reads thus :-
Port quarantine including hospitals connected therewith seamen's and marine
hospitals.
These two entries make it clear beyond any doubt that the establishment
maintenance administration management and control of ports is within the
legislative competence of the Union of India. Art. 73 of the Constitution provides
that subject to the provisions of the Constitution the executive power of the Union
shall extend to the matters with respect to which Parliament has power to make
laws. It is therefore clear that so far as the ports are concerned it is the Union of
India which exercises legislative and executive powers in relation thereto. It is
therefore one of the constitutional functions which the Union of India has to
discharge. The Union of India itself discharged that constitutional function until
1963 until which date Kandla port was administered managed and controlled by
the Central Government departmentally. It was only for the purpose of better and
more efficient administration management and control of the port of Kandla and
other major ports that Parliament enacted the Major Port Trusts Act, 1963 and
constituted for a limited purpose a separate statutory body Board of Trustees.
Merely because the Union of India has enacted the Major Port Trusts Act, 1963
and created thereunder a separate statutory body assigning to it the character of an
independent legal entity it does not mean that the Union of India has been
divested completely of its constitutional duty to maintain administer manage and
control the major ports in general and to maintain administer and control Kandla
port in particular. Taking into account the scheme of the Constitution in that
behalf and the scheme of the Major Port Trusts Act, 1963 I have no doubt in my
mind that basically and fundamentally it is the Central Government which bears
all responsibilities in respect of Kandla Port It exercises its control and discharges
its duties through the Board of Trustees. It is difficult under these circumstances
to say that all properties attached to and forming part of Kandla port which prior
to 1963 belonged to the Union of India ceased to belong to the Union of India
completely and they came to be owned by the Board of Trustees absolutely as
against the Union of India In my opinion the lands in question even after 1963
have continued to belong to and are the properties of the Union of India which the
Board of Trustees for the port of Kandla have been administering within the limits
laid down in that behalf in the Major Port Trusts Act enacted by the Parliament.
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8. 12 In the result this petition must succeed. I therefore allow the petition and declare that
the lands in question continue to be the property of the Union of India and are exempt
from State taxation by virtue of the provisions of clause (a) of Art. 285 of the
Constitution. Therefore the impugned demand made of the petitioner on behalf of the
State of Gujarat for payment of the non-agricultural assessment in respect thereof is
contrary to clause (a) of Art. 285 of the Constitution and therefore null and void. I
therefore issue a writ of mandamus directing the respondents Nos. 1 2 and 3 to desist and
forbear from giving effect to the impugned notice of demand and from enforcing it.
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