JUDGMENT

SAWANT, J.:- The respondent is a public limited company and owned a total land of 49 acres and 38.25 guntas in Davanagere village. At the relevant time, it had its factory in an area of 13 acres and 32.25 guntas which was converted into non-agricultural land under S. 95(2) of the Karnataka Land Revenue Act ( hereinafter referred to as the Revenue Act ). The remaining land, viz., 36 acres and 6.5 guntas was not converted into non-agricultural land (hereinafter referred to as the disputed land) with the result that for the purposes of the Revenue Act, it continued to be considered as agricultural land.

Improvement Board, Davanagere, sought to acquire land to the extent of 28 acres and 14 guntas from the disputed land for the purpose of Devraj Urs Lay-out. The acquisition proceedings were started under the provisions of Karnataka Improvement Boards Act, 1976. In pursuance of the final notification issued in the year 1977, the possession of the land was taken by the Improvement Board on 9th August, 1978. Since the Land Acquisition Officer did not make the award in respect of the acquired land, the respondent-company approached the High Court for relief by a writ petition in which an order was passed on 4th February, 1983 directing the Land Acquisition Officer to pass the award. The appeal filed by the Improvement Board against the said order was dismissed on 13th November, 1983. Thereafter the Land Acquisition Officer made his award. Since, however, the amount payable under the Award exceeded Rs. one lakh, the award was referred to the Divisional Commissioner, Bangalore for approval as provided under the rules on the subject. The Divisional Commissioner did not approve of the award. Hence the company filed another writ petition seeking a direction to the Divisional Commissioner to deal with the award in accordance with law. That writ petition was allowed on 19th July, 1984 and the Divisional Commissioner was directed to dispose of the proceedings arising out of the award within a period of two months from the date of receipt of the order of the Court. In spite of this direction, the Divisional Commissioner did not pass any order in the said proceedings.

During the pendency of these proceedings, the respondent-company filed a declaration under S. 79-B(2)(a) of the Karnataka Land Reforms Act, 1961 (for short the Act) stating therein that it held the entire disputed land as agricultural land. It further appears that the respondent-company claimed exemption from the provisions of the said S. 79-B, under S.81(b)(ii) of the Act on the ground that the disputed land was mortgaged to the Mysore State Financial Corporation on 3rd June, 1982.The Special Deputy Commissioner passed an order exempting the disputed land from the provisions of S. 79-B. Against the said order, the State preferred an appeal before the Appellate Tribunal which was allowed with the direction to take action under S. 79-B of the Act.

Against the said order of the Appellate Tribunal, the respondent-company approached the High Court by way of a writ petition. The High Court by the impugned decision allowed the writ petition by holding that the Improvement Board as an agency of the Government having taken possession of the land under S. 16 of the Land Acquisition Act, in the acquisition proceedings, the land had vested in the Government free from all encumbrances. Hence the question of the Government exercising its power to withdraw from acquisition of the land did not arise. The Court further held that there was no automatic vesting of the disputed land in the State under S. 79-B of the Act, since the vesting under the said provision could take place only upon a declaration by notification under S. 79-B(3) of the Act. For this purpose, the Court relied upon its earlier decision in Mysore Feeds Ltd. v. State of Karnataka, (1988) 1 Kant LJ 310. The Court held, relying upon the said decision, that the land which is agricultural may cease to be agricultural by its usag