In a significant ruling interpreting the Urban Land (Ceiling and Regulation) Act, 1976 (“ULC Act”) and its subsequent repeal, the Supreme Court of India has held that mere “vesting” of excess land in the State Government is insufficient to negate the rights of landholders if “de facto” (actual) possession was not taken prior to the repeal of the Act.
The Bench, comprising Justice B.V. Nagarathna and Justice R. Mahadevan, set aside a 2014 judgment of the Gujarat High Court, ruling that the failure of the Competent Authority to serve the mandatory notice under Section 10(5) of the ULC Act to the persons actually in possession of the land resulted in the abatement of proceedings under Section 4 of the Urban Land (Ceiling and Regulation) Repeal Act, 1999 (“Repealing Act”).
The Court allowed the appeal in the case of Dalsukhbhai Bachubhai Satasia & Others v. State of Gujarat & Others (2026 INSC 21), declaring the appellants entitled to all consequential reliefs, including the issuance of No Objection Certificates (NOCs).
Background of the Case
The dispute concerned land admeasuring 9,303 square metres in Village Katargam, Surat. Originally owned by one Kuberbhai Nathubhai, the land was subject to proceedings under the ULC Act. While initially declared exempt, a portion of the land (662.18 square metres) was later declared “excess land” by the Competent Authority in January 1989 following a remand by the State Government.
Between 1983 and 1984, the appellants (sub-plot holders) had purchased units on the land and taken physical possession, establishing small industrial units such as diamond cutting and polishing factories.
On November 22, 1990, the Competent Authority issued a notice under Section 10(5) of the ULC Act directing the surrender of the excess land. However, this notice was issued to the original landowner, not the appellants who were in actual possession. Subsequently, on January 21, 1992, the Deputy Collector drew a Panchnama claiming to take possession of the excess land, noting it was “open on the site.”
The appellants remained in possession but faced hurdles in 2007 and 2008 when the authorities refused to grant NOCs for the sale of the sub-plots, citing that the land had vested in the government. The Gujarat High Court dismissed their writ petitions and subsequent Letters Patent Appeals, branding the appellants as “illegal occupants” and ruling that electricity bills did not establish possession under the ULC Act.
Arguments of the Parties
The appellants argued that under Section 10(5) of the ULC Act, notice must be served to the person in possession. They contended that since they were in physical possession and no notice was served upon them, the possession of the land was never legally transferred to the State. Consequently, they argued that the proceedings should be deemed “abated” under Section 4 of the Repealing Act, which saves landholders from acquisition if possession has not been taken by the State.
The State of Gujarat contended that the proceedings had concluded with a final order regarding compensation in 1992, prior to the Repeal Act. They argued that the land had vested in the State and that the subsequent sale to the appellants was void under Section 5(3) of the ULC Act. The State relied on the fact that possession was restored to the original landowner after a prior auction was cancelled, and thus notice to the landowner was sufficient.
Court’s Analysis
The Supreme Court rejected the High Court’s view and the State’s contentions, relying heavily on the precedent set in State of U.P. v. Hari Ram (2013). The Court drew a sharp distinction between “vesting” of land under Section 10(3) and the taking of “possession” under Section 10(5) and 10(6).
Vesting vs. Actual Possession The Court observed that “vesting” under Section 10(3) refers to de jure (legal) possession, not de facto (actual) possession. For the State to claim the land, it must establish that it took actual possession through one of three methods:
- Voluntary surrender.
- Peaceful dispossession following a notice under Section 10(5).
- Forceful dispossession under Section 10(6) upon failure to comply with the notice.
Mandatory Nature of Section 10(5) Notice The Bench emphasized that Section 10(5) mandates the service of notice upon “any person who may be in possession.” Citing the recent decision in AP Electrical Equipment Corporation v. Tahsildar (2025), the Court held:
“The requirement of giving notice under sub-sections (5) and (6) of Section 10 respectively is mandatory… Although the word ‘may’ has been used therein, yet the word ‘may’ in both the sub-sections should be understood as ‘shall’.”
Paper Possession Insufficient The Court found that the Panchnama drawn in 1992 amounted only to “paper possession.” Since the appellants were in actual possession and were not served notice, the State failed to take possession in accordance with the law. The Court stated:
“The mere vesting of ‘land declared surplus’ under the Act without resuming ‘de facto possession’ is of no consequence and the land holder is entitled to the benefit of the Repeal Act, 1999.”
Decision
The Supreme Court held that the omission to issue notice to the appellants violated the mandatory requirements of the ULC Act. As actual possession remained with the appellants on the date the Repealing Act came into force, the proceedings for acquiring the excess land abated under Section 4 of the Repealing Act.
Justice Nagarathna, writing for the Bench, concluded:
“The Division Bench of the High Court was not right in holding that the appellants were not in possession of the subject land on the date on which the ULC Act came into force… Consequently, the impugned orders of the High Court… are set aside.”
The appeal was allowed, confirming the appellants’ entitlement to the land and the necessary NOCs.
