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7. In this context when the provisions of Section 29 of the Code of 1966 are perused, it indicates that under the Code of 1966 three classes of persons holding land from the State have been identified. Occupants-Class I are those persons who hold unalienated land in perpetuity and without any restriction on the right to transfer. Occupants-Class II are persons who hold unalienated land in perpetuity subject to restrictions on the right of transfer. The third category of persons are Government lessees. As per Condition No.7 of the Sanad, prior permission of the State Government is necessary before the Company can alienate the lands in question by way of sale, mortgage, etc. It thus becomes clear from Condition No.7 that the Company is an Occupant- Class II since it has a right to hold the land in perpetuity but subject to restrictions on the right of transfer. It has been pleaded in the writ petition that various conditions were attached in the Sanad which were not the conditions imposed under the grant initially made under the Code of 1954. It is also the case of the Company that on earlier occasions permission had been sought by the Company for mortgaging its land for obtaining loan and such permission had been so granted on 05.01.2009. Be that as it may, in view of Condition No.7 of the Sanad dated 18.01.1968 the occupancy of the Company would have to be treated as Occupant-Class II.

(c) of the Code of 1966 since the Company has been granted rights which entitle it to hold the land in perpetuity, all provisions of the Code of 1966 relating to the rights, liabilities and responsibilities of Occupants-Class II would be applicable to it as if they were Occupants-Class II under the Code of 1966. Though the grant of land to the Company is not under the Code of 1966 and especially Sections 30 and 31 thereof, nevertheless the rights, liabilities and responsibilities of Occupants-Class II which have been prescribed under the Code of 1966 would be applicable to the Company.

14. On a plain reading of Section 36(4) of the Code, it recognises the right of an Occupant-Class II to mortgage his property while obtaining a loan. The said provision however nowhere empowers the State Government or the Collector to charge any fee while granting permission to mortgage such property. In other words, the said provision empowers an Occupant-Class II to mortgage his property while seeking a loan but it does not empower the State Government to demand any fee while granting such permission to mortgage the land. In fact, Section 36(4) does not contemplate seeking any permission of the State Government or the Collector prior to mortgaging such land before obtaining any loan against the same. However, since the holding of the petitioner is as Occupant-Class II and Condition No. 7 of the Deed of recognition - Sanad requires obtaining of prior permission in writing of the State Government before the Company mortgages the land, it would not be permissible to hold that such prior permission was not liable to be obtained by the Company. However, Section 36(4) nowhere empowers the State Government to demand mortgage fees dependent upon the amount of loan sought to be borrowed by an Occupant-Class II while mortgaging such land. It will thus have to be held that the demand of mortgage fees is not relatable to any power conferred under the Code of 1966 and especially Section 36(4) thereof.

Though the aforesaid observations were made in the context of lands used for agricultural purpose and the provisions of Rule 31 (2) (c) of the Rules of 1971 were noted in the context of lands used for industrial and commercial purposes, the fact remains that only on the basis of executive instructions it would not be permissible for the State Government to levy fees while granting permission to mortgage rights in Occupancy-Class II under Section 36(4) of the Code of 1966.

17. Hence for the aforesaid reasons we are of the considered view that the demand of mortgage fees by the State Government while granting permission to mortgage Occupancy-Class II lands to banks and financial institutions, to the extent of 0.50% when such land is used for industrial and commercial purposes is without any authority being conferred on the State Government by the Code of 1966. While Section 36(4) of the Code of 1966 permits an Occupant-Class II land holder to mortgage his land while seeking loan, it does not empower the State Government to demand fees while granting such permission to mortgage those lands. The Rules of 1971 also cannot be relied upon to support such demand of levy of mortgage fees. Challenge in the present writ petition has been restricted to Clause (B) of Government Resolution dated 27.02.2009 to the extent it prescribes mortgage fees of 0.50% of the loan amount when the land is to be used for industrial and commercial purposes. Said levy is found to be without any authority of law in terms of Article 265 read with Article 366(28) of the Constitution of India. It is held that the Code of 1966 and especially Section 36(4) thereof does not empower the State Government to levy such mortgage fees while granting permission to an Occupant-Class II holder to mortgage such land while seeking loan against the same.