Old grant

You have not posted the material facts.

Yes, why not. Any person in possession of a property can definitely rent it out to any person of his choice may it be a grant property or self acquired, however, the terms of the grant should be taken care of. If there is a specific prohibition then it cannot be.

Cantonment land can not be granted to any one without proper / specific military purpose.

Recheck your statement/ documents..

Unbelievable statement/ facts.

However, it is better to consult and engage a local prudent lawyer for appreciation of facts, professional guidance and necessary proceeding, if there is some truth in the story.