Permitted Use of Waqf Property- Interpreting the Statutory Framework and Judicial Interpretation
A waqf is the permanent dedication of any movable or immovable property by a person for purposes recognized by Muslim law as religious, charitable, or pious[1]. In India, waqf properties are governed by the Waqf Act, 1995 (“Act”). The Act specifically outlines the legal framework for creation, management, and regulation of waqf properties. The objective of this article is to analyse the statutory framework and judicial perspective governing the alienation and permitted use of waqf properties for the waqf upkeep and benefit, in furtherance of its specified charitable or religious purposes.
Restriction on Alienation and Permitted Use of Waqf Properties
Section 104A of the Act strictly prohibits any sale, gift, exchange, mortgage, or transfer of waqf property, declaring such transactions void ab initio. Though Section 104A of the Act does not expressly mention “development” or “lease”, such utilisation of waqf property is expressly regulated under preceding provisions.
Under Section 51(1A) of the Act, waqf board (“Board”) is empowered to permit development of waqf property, but only after being satisfied that such development serves the purposes of the Act. Alongside development, Section 51(1) of the Act also permits the lease of immoveable waqf properties, subject to a prior sanction by the Board. Within this structure of restricted alienability, the Act nonetheless permits certain controlled uses of waqf property, which are detailed below.
1. Development of Waqf Property
Under the Act, the development of waqf property must follow a two-step statutory process to safeguard its perpetual nature. Firstly, under Section 32(4) of the Act, the Board may issue a permission-cum-no-objection certificate if satisfied that a waqf property has potential for development. Secondly, under Section 51(1A) of the Act, the Board must record written reasons and pass a resolution with a 2/3rd majority out of its total membership for development through an appropriate agency.
Various court rulings have considered development arrangements that are in compliance with the provisions of the Act and demonstrably benefit the waqf. In Tamil Nadu Waqf Board v. Tamil Nadu Real Estates Ltd.[2], Madras High Court upheld a joint venture development of waqf property for residential purposes and noted that the Board ratified the arrangement and demonstrated that it benefited the waqf by generating recurring income. The High Court further explained that the development structures that protects ownership and promotes interests of the waqf are recognised and accepted under the Act.
Similarly, in Namira Construction Pvt. Ltd. v. State of Bihar[3], the Patna Hight Court considered a third-party development arrangement relating to a waqf property and held that, although the development agreement had not been placed before the Board for prior approval, the arrangement being of development rather than permanent alienation, did not per se contravene Section 51 of the Act. The Court permitted the transaction subject to subsequent Board’s approval with reasonable conditions, thereby recognising development as a permissible use when it ultimately benefits the waqf and conforms to the statutory framework.
The Supreme Court in Maharashtra State Board of Waqfs v. Shaikh Yusuf Bhai Chawla[4], held that the Board could develop waqf property merely by an agency and in such manner as prescribed under Section 51(1A) of the Act, and that failure to follow this process would invalidate any purported development agreement.
These precedents establish that the development of waqf property is legally permissible only if it: (a) adheres to the procedure laid down under the Act; (b) preserves ownership and title in the waqf; and (c) demonstrably benefits the waqf’s objects.
2. Lease of Waqf Property
Section 51 of the Act provides that a lease of immovable waqf property shall be valid if it is effected with the prior sanction of the Board. The Waqf Properties Lease Rules, 2014 (“Lease Rules”) prescribe the detailed procedures for protection of waqf interests.
Under Rule 17, 19, and 20 of the Lease Rules, the Board may lease immovable properties, built-up spaces, or vacant land for specified durations- (i) up to 10 years for commercial use (such as shops or marriage halls), (ii) up to 30 years for residential, educational, or healthcare purposes and (iii) agricultural leases may extend up to 3 years.
Further, Rule 20(3) of the Lease Rules mandates that for leases exceeding 3 years but less than 30 years, prior approval of the State or Central Government is required. If no decision is communicated within 45 days, approval is deemed to have been granted by default. In the cases of Khan Kareem Khan v. Telangana State Waqf Board and Others[5] and Syed Mustajab Husain v. Additional District Judge[6], it was held that leases for more than 1 year and less than 3 years can be executed with the Board’s approval.
All leases, whether short or long-term, must be preceded by public notice or advertisement inviting bids, for the allotment to occur through open competition and relatives of Board members or the mutawalli are barred from participation. The lease rent must reflect market value, with the minimum annual reserve price fixed at 1% for educational or social use and 2.5% for commercial use. Every lease must be registered, and upon expiry, there is no automatic renewal, and a fresh bidding process must be conducted, with a preference given to the existing lessee only if the existing lessee corresponds to the highest bid.
The Lease Rules also govern the financial and administrative terms of such leases. Lessees are required to provide security deposits proportional to the lease duration, ranging from 1 month’s rent for leases up to 1 year and 12 month’s rent for leases up to 30 years. Rent must be paid in advance, preferably through a nationalized bank, and each lease must include a clause providing for an annual rent increase of at least 5%. The lessee is prohibited from assigning, sub-leasing, pledging, or transferring any interest in the leased property. Notably, if the lessee constructs any building without Board’s prior approval, the ownership of such structure automatically vests in the waqf, and lessee cannot claim any compensation.
Concept of Dual Ownership
Judgements under Indian property law have long acknowledged that land and superstructure can constitute distinct legal ownership. In Bagmane Developers Pvt. Ltd. & Prestige Estates Projects Ltd. v. Regional Commissioner[7], the High Court of Karnataka affirmed that, unlike the English law, Indian jurisprudence accepts dual ownership, where the title in land and the title in the building erected upon it may vest in different persons. Courts in Narayan Das Khettry v. Jatindra Nath Roy Chowdhry[8], R.G. Hiremath v. T. Krishnappa[9], Bishan Das and Others v. State of Punjab[10], and M/s. Laxmi Enterprises v. The Commissioner BBMP[11], have upheld the principle that there may be separation of the ownership of the building from the ownership of the land, and there is no rule of law that whatever is affixed or built on the soil becomes a part of it and is subjected to the same rights of property as the soil itself.
In the context of waqf properties, this judicial recognition of dual ownership raises a question that remains open to settled interpretation, whether the superstructure built upon waqf land can be transferred or sold without violating the blanket prohibition on alienation under the Act, as Section 104A of the Act expressly prohibits any transfer of waqf property.
Conclusion
The statutory scheme under the Act draws a sharp differentiation between development, lease and alienation of waqf property, yet in practice the boundary between them remains doctrinally unsettled. The concept of dual ownership, whereby ownership of land is separate from that of the superstructure gives rise to complexity in legal interpretation of waqf arrangements. While development and alienation are clearly distinguished under the Act and this distinction has been recognised in judicial pronouncements, however, the subsequent sale of units constructed and developed on waqf land remains an issue to be addressed through judicial interpretation. That being said, there is a need for definitive clarity that will emerge when such arrangements are subjected to judicial scrutiny.
References
[1] Section 3(r), The Waqf Act, 1995
[2] Tamil Nadu Waqf Bd. v. Tamil Nadu Real Estates Ltd., (2006) 3 C.T.C. 37 (Mad.).
[3] Namira Construction Pvt. Ltd. v. State of Bihar,2009 SCC OnLine Pat 1392: (2009) 4 PLJR 203: (2010) 1 BBCJ 167
[4] Maharashtra State Board of Waqfs v. Shaikh Yusuf Bhai Chawla, 2022 SCC OnLine SC 1653
[5] Khan Kareem Khan v. Telangana State Waqf Bd. & Others, W.P. No. 12123 of 2020
[6] Syed Mustajab Husain v. Additional District Judge, AIR 1954 All 661.
[7] Bagmane Developers Pvt. Ltd. & Prestige Estates Projects Ltd. v. Regional Commissioner, W.P. Nos. 27947-27948/2021.
[8] Narayan Das Khettry v. Jatindra Nath Roy Chowdhry, R.G. Hiremath v. T. Krishnappa, AIR 1927 PC 135.
[9] R.G. Hiremath v. T. Krishnappa, (1993) 3 SCC 178.
[10] Bishan Das and Others v. State of Punjab, AIR 1961 SC 1570.
[11] M/s. Laxmi Enterprises v. The Commissioner BBMP, ILR 2011 Kar 4859