Land Acquisition Act – Under the Scanner of the Supreme Court!
In India the government is empowered by the central law passed by the union legislature, which is known as the Land Acquisition Act, 1894. The objective of this Act is to amend the laws relating to land acquisition for public purpose and for companies and also to determine the compensation, which is required to be made in cases of land acquisition. The enactment states that the expression land includes benefits that arise of land and things attached to the earth or permanently attached to the anything fastened to the earth.
Further the Land Acquisition Act also specifies the public officers who are authorized for such acquiring of land on behalf of the State. They include the Collector, Deputy Commissioner and also any officer who is specially appointed by the appropriate government under the authority of law. The collector prepares the declaration and copies are forwarded to the administrative departments and all the concerned parties. This declaration is then required to be published in the same manner as in case of the notification issued. The collector issues the awards, further allows a time of not less than 15 days for any objections to be filed.
Moreover if the compensation given is under protest than as per the enactment the awardees are entitled to refer the matter to the court for determination of requisite amount of compensation.
The 44th Amendment – Article 300A
According to the Constitution, Parliament and the state legislatures in India have the power to make laws within their respective jurisdictions. This power is not absolute in nature. The Constitution vests in the judiciary, the power to adjudicate upon the constitutional validity of all laws. If a law made by Parliament or the state legislatures violates any provision of the Constitution, the Supreme Court has the power to declare such a law invalid or ultra vires. This check notwithstanding, the founding fathers wanted the Constitution to be an adaptable document rather than a rigid framework for governance. Hence Parliament was invested with the power to amend the Constitution. Article 368 of the Constitution gives the impression that Parliament’s amending powers are absolute and encompass all parts of the document. But the Supreme Court has acted as a brake to the legislative enthusiasm of Parliament ever since independence.
With the intention of preserving the original ideals envisioned by the constitution-makers, the Apex court pronounced that Parliament could not distort damage or alter the basic features of the Constitution under the pretext of amending it. The phrase ‘basic structure’ itself cannot be found in the Constitution. The Supreme Court recognized this concept for the first time in the historic Kesavananda Bharati case in 1973. Ever since, the Supreme Court has been the interpreter of the Constitution and the arbiter of all amendments made by Parliament.
The doctrine of basic structure lays down that all parts of our Constitution can be amended in the exercise of the power conferred by Article 368 provided that such amendments do not destroy or damage the basic structure of the Constitution. This doctrine was first laid down in the “Fundamental Rights Case.” was accepted and made the basis of the decision given in Indira Nehru Gandhi v. Raj Narain
The pre-Kesavanada position
Parliament’s authority to amend the Constitution, particularly the chapter on the fundamental rights of citizens, was challenged as early as in 1951. After independence, several laws were enacted in the states with the aim of reforming land ownership and tenancy structures. This was in keeping with the ruling Congress party’s electoral promise of implementing the socialistic goals of the Constitution [contained in Article 39 (b) and (c) of the Directive Principles of State Policy] that required equitable distribution of resources of production among all citizens and prevention of concentration of wealth in the hands of a few. Property owners - adversely affected by these laws -- petitioned the courts. The courts struck down the land reforms laws saying that they transgressed the fundamental right to property guaranteed by the Constitution. Piqued by the unfavourable judgments, Parliament placed these laws in the Ninth Schedule of the Constitution through the First and Fourth Amendments (1951 and 1952 respectively), thereby effectively removing them from the scope of judicial review.
[Parliament added the Ninth Schedule to the Constitution through the very first amendment in 1951 as a means of immunizing certain laws against judicial review. Under the provisions of Article 31, which themselves were amended several times later, laws placed in the Ninth Schedule – pertaining to acquisition of private property and compensation payable for such acquisition – cannot be challenged in a court of law on the ground that they violated the fundamental rights of citizens. This protective umbrella covers more than 250 laws passed by state legislatures with the aim of regulating the size of land holdings and abolishing various tenancy systems. The Ninth Schedule was created with the primary objective of preventing the judiciary – which upheld the citizens’ right to property on several occasions - from derailing the Congress party led government’s agenda for a social revolution.
Property owners again challenged the constitutional amendments which placed land reforms laws in the Ninth Schedule before the Supreme Court, saying that they violated Article 13 (2) of the Constitution. Article 13 (2) provides for the protection of the fundamental rights of the citizen. Parliament and the state legislatures are clearly prohibited from making laws that may take away or abridge the fundamental rights guaranteed to the citizen. They argued that any amendment to the Constitution had the status of a law as understood by Article 13 (2). In 1952 (Sankari Prasad Singh Deo v. Union of India and 1955 (Sajjan Singh v. Rajasthan, the Supreme Court rejected both arguments and upheld the power of Parliament to amend any part of the Constitution including that which affects the fundamental rights of citizens. Significantly though, two dissenting judges in Sajjan Singh v. Rajasthan case raised doubts whether the fundamental rights of citizens could become a plaything of the majority party in Parliament.
The Golaknath verdict
In 1967 an eleven-judge bench of the Supreme Court reversed its position. Delivering its 6:5 majority judgment in the Golaknath v. State of Punjab case, Chief Justice Subba Rao put forth the curious position that Article 368, that contained provisions related to the amendment of the Constitution, merely laid down the amending procedure. Article 368 did not confer upon Parliament the power to amend the Constitution. The amending power (constituent power) of Parliament arose from other provisions contained in the Constitution (Articles 245, 246, 248) which gave it the power to make laws (plenary legislative power). Thus, the Apex Court held that the amending power and legislative powers of Parliament were essentially the same. Therefore, any amendment of the Constitution must be deemed law as understood in Article 13 (2).
The majority judgment invoked the concept of implied limitations on Parliament’s power to amend the Constitution. This view held that the Constitution gives a place of permanence to the fundamental freedoms of the citizen. In giving the Constitution to themselves, the people had reserved the fundamental rights for themselves. Article 13, according to the majority view, expressed this limitation on the powers of Parliament. Parliament could not modify, restrict or impair fundamental freedoms due to this very scheme of the Constitution and the nature of the freedoms granted under it. The judges stated that the fundamental rights were so sacrosanct and transcendental in importance that they could not be restricted even if such a move were to receive unanimous approval of both houses of Parliament. They observed that a Constituent Assembly might be summoned by Parliament for the purpose of amending the fundamental rights if necessary.
In other words, the Apex Court held that some features of the Constitution lay at its core and required much more than the usual procedures to change them.
The phrase ‘basic structure’ was introduced for the first time by M.K. Nambiar and other counsels while arguing for the petitioners in the Golaknath case, but it was only in 1973 that the concept surfaced in the text of the apex court’s verdict.
Basic structure doctrine reaffirmed – the Minerva Mills and Waman Rao cases
Within less than two years of the restoration of Parliament’s amending powers to near absolute terms, the Forty-second Amendment was challenged before the Supreme Court by the owners of Minerva Mills (Bangalore) a sick industrial firm which was nationalized by the government in 1974.
Mr. N. A. Palkhivala, renowned constitutional lawyer and counsel for the petitioners, chose not to challenge the government’s action merely in terms of an infringement of the fundamental right to property. Instead, he framed the challenge in terms of Parliament’s power to amend the Constitution. Mr. Palkhivala argued that Section 55 of the Amendment had placed unlimited amending power in the hands of Parliament. The attempt to immunize constitutional amendments against judicial review violated the doctrine of basic structure which had been recognized by the Supreme Court in the Kesavananda Bharati and Indira Gandhi Election Cases. He further contended that the amended Article 31C was constitutionally bad as it violated the Preamble of the Constitution and the fundamental rights of citizens. It also took away the power of judicial review. Chief Justice Y. V. Chandrachud, delivering the majority judgment (4:1), upheld both contentions. The majority view upheld the power of judicial review of constitutional amendments. They maintained that clauses (4) and (5) of Article 368 conferred unlimited power on Parliament to amend the Constitution. They said that this deprived courts of the ability to question the amendment even if it damaged or destroyed the Constitution’s basic structure. The judges, who concurred with Chandrachud, C.J. ruled that a limited amending power itself is a basic feature of the Constitution. Bhagwati, J. the dissenting judge also agreed with this view stating that no authority howsoever superior, could claim to be the sole judge of its power and actions under the Constitution. The majority held the amendment to Article 31C unconstitutional as it destroyed the harmony and balance between fundamental rights and directive principles which is an essential or basic feature of the Constitution. The amendment to Article 31C remains a dead letter as it has not been repealed or deleted by Parliament. Nevertheless cases under it are decided as it existed prior to the Forty-second amendment.
In another case relating to a similar dispute involving agricultural property the apex court, held that all constitutional amendments made after the date of the Kesavananda Bharati judgment were open to judicial review. All laws placed in the Ninth Schedule after the date of the Kesavananda Bharati judgment were also open to review in the courts. They can be challenged on the ground that they are beyond Parliament’s constituent power or that they have damaged the basic structure of the Constitution. In essence, the Supreme Court struck a balance between its authority to interpret the Constitution and Parliament’s power to amend it.
Right to Property
“Right to acquire a property, although is not a fundamental right, but is a constitutional and human right. Before a person can be deprived of his right to acquire property, the law and/or a contract must expressly and explicitly state so.”
The answer to the question, whether the property amendments violate the basic structure of our Constitution is in negative. The answer to this question depends upon the correct interpretation of the nature and effect of those amendments and their effect on fundamental rights and other basic features of our Constitution.
The right conferred by Article 19(1) (f) and Article 31 read with the under noted entries were closely interwoven with the whole fabric of the Indian Constitution that those rights cannot be torn out without leaving a jagged hole and broken threads replaced so as to harmonize with the other parts of the Constitution
Article 19(1) (f) and Article 31 (2) dealt with different, but connected aspects of the right to property. The above mentioned two articles were mutually exclusive. However, there was a difference in opinion in this regard which was clarified by the 25th Amendment which introduced in Article 31 a new clause (2-B) which provided that “Nothing in Article 19(1) (f) shall affect any such law as is referred to in clause (2).” The validity of this amendment was unanimously upheld in the Fundamental Rights case. The reason for this mutual exclusiveness was that when property is acquired for a public purpose on payment of compensation, the right of a citizen to hold property is gone, and the question of his right to hold that property subject to reasonable restrictions does not arise.
Further Article 19(1) (f) which conferred on citizens the right to acquire, hold and dispose of property formed part of a group of articles under the heading “Right to Freedom.” It requires no elaborate argument to demonstrate that property is intimately connected with the right to freedom. Article 31 appeared under the heading “Right to Property”; for the right to freedom conferred by Article 19(1) (f) would be worth little if the property when acquired could be taken away by law. Hence Article 31 provided that private property could be acquired only for public purpose and on payment of compensation. There is nothing in the Statement of Objects and Reasons to show that the Parliament no longer looked upon the right to acquire hold and dispose of property as part of the Right to Freedom.
Challenge to certain land reform Acts –
In State of Bihar v. Kameshwar Singh the validity of Bihar Land Reforms Act, 1950 was impugned, but after the Constitution (1st Amendment) Act, 1951, the basis for the challenge had disappeared. However, it was argued that the Act was not enacted for a public purpose, and therefore, Article 31(4) did not protect the Act. The requirement of a public purpose was involved in the very concept of acquisition, and could not be spelt out by reading entry 36, List II, with entry 42, List III to Schedule 7. The majority held that Article 31(2) prescribed two conditions for the acquisition of property:
(i) a public purpose; and
(ii) payment of compensation and that public purpose could not be spelt out from the concept of acquisition or from legislative entries.
Mahajan, J. held that Article 31(2) did not provide for a public purpose which according to him was a part of the concept of acquisition; but he held that the impugned law acquired lands for a public purpose, namely to bring about a reform in the land distribution system of Bihar for the general benefit of the community, a purpose which was in accord with the Directive Principles of State Policy embodied in Article 39(b) and (c). The general challenge to the Act therefore failed.
Kameshwar Singh’s case was followed in Raja Surya Pal Singh v. State of U.P. In this case the validity of the U.P Zamindari Abolition and Land Reforms Act, 1951 was upheld. The arguments that some of the provisions of this Act was a fraud on the Constitution and resulted in non – payment of compensation was rejected on an examination of the provisions.
Further in K. C. Gajapati Narayan Deo v. State of Orissa, Kameshwar Singh’s case was distinguished and Surya Pal Singh’s case was followed. The appellant impugned the Orissa Estates Abolition Act, 1952. In an appeal to the Supreme Court, the principal attack was on the validity of the Orissa Agricultural Income-tax (Amendment) Act, 1950 and the Madras Estates and Land (Amendment) Act, 1947, in so far as they affected the calculation of the net income of an estate for determining the compensation payable under the Estates Abolition Act. It was contended that the Orissa Agricultural Income-tax (Amendment) Act, which imposed a tax on agricultural income, was not a bona fide tax at all, but was a colorable device to reduce the compensation payable in respect of the land by drastically reducing the income, since the compensation was to be given on the basis of merits; but held further that even if it were assumed that the object of the Act was to reduce the compensation payable under the Estates Abolition Act, there was nothing colorable in the Income-tax Act, because the Abolition Act was covered by Article 31(4), and no objection as to the amount or adequacy of compensation could arise at all.
Again in Zamindar of Ettayapuram v. State of Madras the challenge to the Madras Estates (Abolition and Conversion into Ryotwari) Act, 1948 failed because it had been reserved for the certification of the President and had been certified in April 1950, and was therefore protected by Article 31(6).
The Constitution (1st Amendment) Act, 1951, which has a retrospective effect, inserted Article 31A which protected land reform laws, or “estates” legislation. Further it also introduces Article 31B and Schedule IX in the Constitution which retrospectively protected 13 specified Acts from challenge under Part III. The Bihar Land Reforms Act, 1950 appeared as entry I in Schedule IX.
Doctrine Of Eminent Domain And Police Power –
The power of compulsory acquisition is described by the term “eminent domain”. This term seems to have been originated in 1525 by Hugo Grotius, who wrote of this power in his work “De Jure Belli et Pacis” as follows:
“The property of subjects is under the eminent domain of the State, so that the State or he who acts for it may use and even alienate and destroy such property, not only in the case of extreme necessity, in which even private persons have a right over the property of others, but for ends of public utility, to which ends those who founded civil society must be supposed to have intended that private ends should give way. But it is to be added that when this is done the State is bound to make good the loss to those who lose their property.”
In State of West Bengal v. Subodh Gopal Bose the West Bengal Revenue Sales (W.B. Amendment) Act, 1950, substituted a new Section 37 in the Bengal Revenue Sales Act, 1859, and provided by section 7 that all pending suits, appeals and other proceedings which had not already resulted in delivery of possession should abate. One B who had filed a suit to evict certain tenants under section 37, Bengal Act of 1859, thereupon contended that section 7 was void as violating Article 19(1) (f) and Article 31. Under Article 228 the matter was moved to the High Court which declared section 7 as void as violating Article 19(1) (f). Subodh Gopal’s case involved no acquisition or requisition of property; the impugned law regulated the relation of landlord and tenant and was in line with normal tenancy legislation in India.
Sastri, C.J., in Subodh Gopal’s case held (i) that whereas Article 19(1) (f) dealt with the abstract right to own property, Article 31 afforded protection to the concrete right to own property; (ii) that the doctrines of “police power” and “eminent domain” were inapplicable to the Indian Constitution; (iii) that the derivation referred to in Article 31(1) must be read with Article 31(2) and where such deprivation was so substantial that it amounted to acquisition or taking possession of property, Article 31(2) was attracted; (iv) the acquisition did not involve any transfer or vesting of title; (v) that it was unnecessary to determine the precise scope of the expression “taking possession” except to say that it did not include “taking of property for public use” as interpreted in the United States. Applying these tests, Sastri, C.J. held that the deprivation and abridgment of the purchaser’s rights were not so substantial as to amount were not as substantial as to amount to deprivation within the construction of Article 31(1) and (2).
ahajan, J. said that he agreed with the construction put by the Chief Justice on Article 31, for the reasons given in his own judgment in Dwarakadas Shrinivas v. Sholapur Spg. & Wvg. Ltd. That judgment shows that he agreed with the proposition “that the derivation referred to in Article 31(1) must be read with Article 31(2) and where such deprivation was so substantial that it amounted to acquisition or taking possession of property, Article 31(2) was attracted.” However he held that Article 31 dealt with the field of “eminent domain”, the saving clause in Article 31(5) providing for “police power” and taxes. If a law for deprivation of property was outside Article 31(5), it fell under Article 31(2). For instance, if a law deprived a person of property in the interest of morality, the deprivation fell outside Article 31(5), and Article 31(2) applied with the result that compensation would have to be paid for the deprivation.
Das, J. in Dwarakadas Shrinivas’s case held that the impugned law fell under Article 19(1) (f) and amounted to a reasonable restriction within the meaning of Article 19(5). He held that Article 31(1) dealt with “police power” and Article 31(2) dealt with the power of “eminent domain.” If Article 31(1) did not contain “police power”, then except for the limited extent of police power in Article 31(5), police power was nowhere to be found in our Constitution. Such a conclusion would lead to absurd results, e.g. that the destruction of obscene literature would have to be compensated for in money. In Dwarakadas Shrinivas’s case he held that if there was deprivation of property of the shareholder of a company, it was by authority of law; however he held that the State had taken the possession of the property, and therefore, the impugned law was void as it did not provide for compensation.
In Dwarakadas Shrinivas’s case Bose, J. condemned the use of expressions like “police power” and “eminent domain.” He held that Article 19 did not apply and that the deprivation referred to in Article 31(1) was that kind of deprivation which amounted to substantially acquiring or taking possession of a man’s property and these concepts represented matters of substance and not of form.
In Dy. Commr. Kamrup v. Durganath, Bachwat, J. observed that
“From the several conflicting opinions expressed in those two cases it s difficult to say that the Court or a majority of Judges held that Cl. (5)(b)(ii) saved the police power of the State in the strict technical sense as understood in American law. All we need to say is that if Cl. (5)(b)(ii) is construed as saving the police power of the States, such police power mist be exercised subject to the constitutional restrictions as evolved by the American judicial decisions that private property cannot be appropriated to public use without payment of compensation. But we prefer to construe Article 31 and Cl (5)(b)(ii) uninfluenced by the American concepts of eminent domain and police power.”
It is submitted (i) that the fact that Parliament nullified the effect of these decisions would itself suggest that the interpretation out by the Supreme Court on Article 31 did not effectuate the intention of the makers of the Constitution; (ii) that in any event, except for the proposition that acquisition or taking possession of property is a matter of substance, every major proposition in the various judgments representing the majority view has been undermined by subsequent decision of the Supreme Court itself. Till it was finally settled that “restrictions” in Article 19 included deprivation, there might have been some reason to bring deprivation of property under Article 31. Since it is now settled that deprivation of property which falls outside Article 31(2) falls within Article 31(1), thereby attracting Article 19(1) (f) and (5), it is no longer necessary to follow decisions which have been deprived of their authority by being deprived of their foundation. However, it may be added that the orders passed in the two cases were correct.
Public Purpose –
The requirement of public purpose is implicit in compulsory acquisition of property by the State or, what is called, the exercise of its power of ‘Eminent Domain’. The principle of compulsory acquisition of property, is founded on the superior claims of the whole community over an individual citizen but is applicable only in those cases where private property is wanted that public use, or demanded by the public welfare and that no instance is known in which it has been taken for the mere purpose of raising a revenue by sale or otherwise and the exercise of such a power is utterly destructive of individual right.
In the State of Bombay v. R. S. Nanji, the Court observed that it is impossible to precisely define the expression ‘public purpose’. In each case all the facts and circumstances will require to be closely examined in order to determine whether a public purpose has been established. Prima facie, the Government is the best judge as to whether public purpose is served by issuing a requisition order, but it is not the sole judge. The courts have the jurisdiction and it is their duty to determine the matter whenever a question is raised whether a requisition order is or is not for a public purpose.
In the said case, the Court observed that the phrase ‘public purpose’ includes a purpose, that is, an object or aim, in which the general interest of the community, as opposed to the particular interest of individuals is directly and vitally concerned. It is impossible to define precisely the expression ‘public purpose’. In each case all the facts and circumstances will require to be closely examined to determine whether a public purpose has been established.
In Somawanti v. State of Punjab, the Court observed that public purpose must include an object in which the general interest of the community, as opposed to the particular interest of individuals, is directly and vitally concerned. Public purpose is bound to change with the times and the prevailing conditions in a given area and, therefore, it would not be a practical proposition even to attempt an extensive definition of it. It is because of this that the legislature has left it to the Government to say what a public purpose is and also to declare the need of a given land for a public purpose.
The Constitution Bench of this Court in Somawanti observed that whether in a particular case the purpose for which land was needed was a public purpose or not was for the Government to be satisfied about and the declaration of the Government would be final subject to one exception, namely that where there was a colourable exercise of the power the declarations would be open to challenge at the instance of the aggrieved party.
In Babu Barkya Thakur v. The State of Bombay & Others, the Court observed as under:
“It will thus be noticed that the expression ‘public purpose’ has been used in its generic sense of including any purpose in which even a fraction of the community may be interested or by which it may be benefited.”
The Constitution Bench in Satya Narain Singh v. District Engineer, P.W.D., Ballia and Anr while describing public service observed:-
“It is undoubtedly not easy to define what is “public service” and each activity has to be considered by itself for deciding whether it is carried on as a public service or not. Certain activities will undoubtedly be regarded as public services, as for instance, those undertaken in the exercise of the sovereign power of the State or of governmental functions. About these there can be no doubt. Similarly a pure business undertaking though run by the Government cannot be classified as public service. But where a particular activity concerns a public utility a question may arise whether it falls in the first or the second category. The mere fact that that activity may be useful to the public would not necessarily render it public service. An activity however beneficial to the people and however useful cannot, in our opinion, be reasonably regarded as public service if it is of a type which may be carried on by private individuals and is carried on by government with a distinct profit motive. It may be that plying stage carriage buses even though for hire is an activity undertaken by the Government for ensuring the people a cheap, regular and reliable mode of transport and is in that sense beneficial to the public”.
In Arnold Rodricks v. State of Maharashtra, while Justice Wanchoo and Justice Shah dissenting from judgment observed that there can be no doubt that the phrase ‘public purpose’ has not a static connotation, which is fixed for all times. There can also be no doubt that it is not possible to lay down a definition of what public purpose is, particularly as the concept of public purpose may change from time to time. There is no doubt however that public purpose involves in it an element of general interest of the community and whatever furthers the general interest must be regarded as a public purpose.
In Bhim Singhji v. Union of India, as per Sen, J., the concept of public purpose necessarily implies that it should be a law for the acquisition or requisition of property in the interest of the general public, and the purpose of such a law directly and vitally subserve public interest.
Broadly speaking the expression ‘public purpose’ would however include a purpose in which the general interest of the community as opposed to the particular interest of the individuals is directly and virtually concerned.
In Laxman Rao Bapurao Jadhav v. State of Maharashtra this Court observed that “it is for the State Government to decide whether the land is needed or is likely to be needed for a public purpose and whether it is suitable or adaptable for the purpose for which the acquisition was sought to be made. The mere fact that the authorized officer was empowered to inspect and find out whether the land would be adaptable for the public purpose, it is needed or is likely to be needed, does not take away the power of the Government to take a decision ultimately”
In Scindia Employees’ Union v. State of Maharashtra & Others reported in, this Court observed as under:
“The very object of compulsory acquisition is in exercise of the power of eminent domain by the State against the wishes or willingness of the owner or person interested in the land. Therefore, so long as the public purpose subsists the exercise of the power of eminent domain cannot be questioned. Publication of declaration under Section 6 is conclusive evidence of public purpose. In view of the finding that it is a question of expansion of dockyard for defence purpose, it is a public purpose.”
The right of eminent domain is the right of the State to reassert either temporarily or permanently its dominion over any piece of land on account of public exigency and for public good. In the case of Coffee Board v. Commissioner of Commercial Taxes reported in, the Court observed that the eminent domain is an essential attribute of sovereignty of every State and authorities are universal in support of the definition of eminent domain as the power of the sovereign to take property for public use without the owner’s consent upon making just compensation.
The power of eminent domain is not exercisable in Anglo-Saxon jurisprudence except on condition of payment of compensation. In United States, the power of eminent domain is founded both on the Federal (Fifth Amendment) and on the State Constitutions. The scope of the doctrine in America stands considerably circumscribed by the State Constitutions. Now, the Constitution limits the power to taking for a public purpose and prohibits the exercise of power of eminent domain without just compensation. The process of exercising the power of eminent domain now is commonly referred to as ‘condemnation’ or ‘expropriation.’
A seven-Judge Bench of this Court in the State of Karnataka & Another v. Shri Ranganatha Reddy & Another reported in, explained the expression ‘public purpose’ in the following words:
“6. It is indisputable and beyond the pale of any controversy now as held by this Court in several decisions including the decision in the case of His Holiness Kesavananda Bharati Sripadagalaveru v. State of Kerala  Supp. 1 S.C.R. 1 - popularly known as Fundamental Rights case - that any law providing for acquisition of property must be for a public purpose. Whether the law of acquisition is for public purpose or not is a justifiable issue. But the decision in that regard is not to be given by any detailed inquiry or investigation of facts. The intention of the legislature has to be gathered mainly from the Statement of Objects and Reasons of the Act and its Preamble. The matter has to be examined with reference to the various provisions of the Act, its context and set up, the purpose of acquisition has to be culled out therefrom and then it has to be judged whether the acquisition is for a public purpose within the meaning of Article 31(2) and the law providing for such acquisition.
61. When we ascertain the content of ‘public purpose’, we have to bear the above factors in mind which mean that acquisition of road transport undertakings by the State will undoubtedly be a public purpose. Indeed, even in England, ‘public purposes’ have been defined to mean such ‘purposes’ of the administration of the government of the country (p. 228, Words & Phrases Legally defined, II Edn.). Theoretically, or even otherwise, there is no warrant for linking up public purpose with State necessity, or in the court throwing off the State’s declaration of public purposes to make an economic research on its own. It is indeed significant that in Section 40 (b) of the Land Acquisition Act, 1894, the concept of ‘public use’ took in acquisition for the construction of some work even for the benefit of a company, provided such work as likely to prove useful to the public. Even the American Constitution, in the 5th Amendment, uses the expression ‘public use’ and it has been held in India in Kameshwar that ‘public purpose’ is wider than ‘public use’.”
Ambiguity, indefiniteness and vagueness of public purpose are usually the grounds on which notifications under Section 4(1) of the Land Acquisition Act are assailed.
Public purpose cannot and should not be precisely defined and its scope and ambit be limited as far as acquisition of land for the public purpose is concerned. Public purpose is not static. It also changes with the passage of time, need and requirements of the community. Broadly speaking, public purpose means the general interest of the community as opposed to the interest of an individual.
The power of compulsory acquisition as described by the term ‘eminent domain’ can be exercised only in the interest and for the welfare of the people. The concept of public purpose should include the matters, such as, safety, security, health, welfare and prosperity of the community or public at large.
The concept of ‘eminent domain’ is an essential attribute of every State. This concept is based on the fundamental principle that the interest and claim of the whole community is always superior to the interest of an individual.
Principle of Determining Compensation –
Both under amended and unamended Article 31(2), legislatures have an option either to fix the compensation in the law itself, or to lay down principles for determining compensation to be paid. Confining to the first option, if after the 4th Amendment, Parliament passed a law fixing compensation ranging from 90 to 50 per cent, or less, of the full and fair money equivalent (market value) of the property to be acquired, no court could set aside the law, for the challenge would be to the adequacy of compensation. In the result, the law would be a valid law although the compensation provided fell short, or far short, of the market value.
If the question is asked “why the law has fixed the compensation amounting to 60%, and not 70 or 50 per cent of the market value?” the answer would be that in the legislative judgment the amount fixed by the law was a fair and just compensation for the acquisition of property under that law. And if a law fixing compensation at amounts ranging from 90 to 50 per cent, or less, of the market value of the property acquired cannot be struck down by a court, equally, “principles of compensation” cannot be struck down when they produce the same result. The consequence of the transformation brought about by the 4th Amendment is that “principles of compensation do not mean the same thing before and after the 4th Amendment. The 4th Amendment clearly explained the meaning of “principle of compensation” as rules, the application of which would enable a person to determine the full and fair money equivalent. The 4th Amendment took away the yardstick of full and fair money equivalent and put no determinate yardstick in its place.
After the 4th Amendment, principles of compensation only meant general rules, the application of which would produce an amount which the legislature considered was just and fair compensation for the property acquired. The framers of the Constitution knew that to substitute the fixed yardstick of a full and fair equivalent by the changing yardstick of the legislative judgment of what is fair and just to the individual whose property is to be acquired, was to put wide powers in the hands of Parliament which were capable of abuse. But the framers considered it necessary that Parliament should have those powers, and that necessary powers cannot be withheld because they can be abused. As regards the State legislatures, the requirement of obtaining the President’s assent [i.e. approval of the Union Government] was considered a sufficient safeguard. As years went by, it was seen that the presumption that the elected representatives of the people would not enact unfair laws of acquisition was seen to be unfounded, because the power was gravely abused and at times, the power became a weapon of blackmail.
The above analysis shows that the 4th Amendment expressly made compensation and principles of compensation non-justifiable. One question still remain open to judicial review, namely, whether the amount fixed or the amount derived from the principles laid down for determining the compensation could be described as compensation at all. If, for example, a law fixed Re. 1 for acquiring property of the market value Rs. 1 lac, it is obvious that the legislature was observing the form but denying the substance of compensation. Such compensation would be struck down as illusory, i.e. in a practical sense, as no compensation at all. Where illusory compensation ends and grossly inadequate compensation begins, is a matter of difficulty which would have to be solved on the facts and circumstances for which the law provides. But apart from this limitation, the 4th Amendment was designed to exclude judicial review of “compensation” or principles of compensation for the acquisition of property.
In Vejravelu’s case, the petitioner impugned the Land Acquisition (Madras Amendment) Act, 1961 which amended the Land Acquisition Act, 1894, by providing that for acquisition of land for housing purposes the compensation to be paid was to be the market value at the date of acquisition or the amount equal to the average market value during the five years immediately preceding the date of acquisition, whichever was less. The Amendment Act also excluded potential value of land. Since Subba Rao, C.J. struck down the impugned Act for violating Article 14m it was wholly unnecessary for him to go into the challenge to the said Act under Article 31. In fact, in the view which Subba Rao, C.J. took of the impugned Act under Article 14, he himself found it unnecessary to go into the challenge to the said Act under Article 19. The discussion in Vajravelu’s case of the effect of 4th Amendment is confused and self-contradictory. At one place Subba Rao, C.J. observed that if the 4th Amendment is amending Article 31(2) retained the word “compensation”, the word must be treated as having the meaning of “just equivalent.” However, he realized that to put this meaning would be to destroy the very object with which the 4th Amendment was enacted, namely, to nullify Bela Banerjee’s case. He therefore inconsistently upheld the grossly inadequate compensation provided for in the impugned Act. This judgment need not detain us further because Subba Rao, C.J.’s observation that “compensation” as used in the 4th Amendment mean “a just equivalent” was treated in State of Gujarat v. Shantilal Magaldas as not merely obiter but also erroneous.
In Shantilal Magaldas’s case Shah, J. held that the Transfer of Property Act laid down a relevant principle when it provided for compensation being determined on the basis of market value prevailing on a date anterior to the extinction of interest of the property acquired. The value of Shantilal’s land was determined as on 18th April, 1927. The draft shceme was not sanctioned by Government till 7th August, 1942, (that is, not till after 15 years). The compensation payable was communicated to Shantilal on 23rd August, 1957 (that is, not till after 30 years). Yet Shah, J. held that after the 4th Amendment the Act and the scheme were valid under Article 31(2).
The common features of the five provisions laying down the principles of compensation which Shah, J. held were “relevant” (not irrelevant) are as under:
Firstly, they did not profess to aim at a just equivalent or the market value of the property at or about the time of acquisition; i.e. to say that the standard of just equivalent was discarded.
Secondly, the compensation actually awarded was grossly inadequate, judged by the value of the property in the open market, at or about the time of acquisition.
Finally, the compensation was not illusory.
In addition to these principles Shah, J. showed that the principles of compensation are “relevant” if they deliberately omit an admitted element of market value, or disregard the continuous rise in the market value by taking the average of 5 years, or disregard the rise by taking the actual cost.
The judgment given in Shantilal’s case vanished when the same learned judges delivered the judgment in the Bank Nationalization Case which nullified the 4th Amendment. Following propositions emerged from the majority decision:
Compensation being the equivalent n terms of money of the property acquired the principle for determination of compensation is intended to award to the expropriated owner the value of the property acquired. The Constitution guarantees a right to compensation – an equivalent in money of the property acquired. That is the basic guarantee. The law must therefore, provide compensation, and for determining compensation relevant principles must be specified; if the principles are not relevant the ultimate value determined is not compensation.
If appropriate method or principle is applied, the fact that by the application of another principle which is also appropriate a different value is realized, the court will not be justified in entertaining the contention that out of the two appropriate methods, one more generous to the owner should have been applied.
Both the lines of thought (i.e. Vajravelu’s case and Shantilal’s case) which converge in the ultimate result, support the view that the principles specified by the law for the determination of compensation is beyond the pale of challenge, if it is relevant to determination of compensation and is recognized principle applicable in the determination of compensation for property compulsorily acquired and the principle is appropriate in determining the value of the class of property sought to be acquired.
The value determined by the exclusion of important components of the undertaking such as goodwill and the value of unexpired period of leases, will not, in our judgment, be compensation for the undertaking.
Cases Under Land Acquisition Act Held Violative Of Article 31(2)
Following Vejravelu’s case it was held that in Assam, the Land Acquisition Act, 1894, was in force side by side with the Assam Acquisition of Land for Flood Control and Prevention of Erosion Act, 1955. As the latter Act did not provide for just compensation as required by Article 31(2) before the Constitution (4th Amendment) Act, 1955, the Act violated Article 14 because “… the classification of land required for works and other measures in connection with flood control and prevention of erosion and land required for other public purposes has no reasonable relation to the object sough to be achieved, viz. acquisition of the land by the State. In either case, the owner loses his land and in his place, the State becomes the owner. There is unjust discrimination between the owners of land being required for purposes mentioned in Assam Act No. 6 of 1955 and some land being required for other purposes.”
In Balaji Industries v. Land Acquisition Commissioner, following Vejravelu’s case it was held that section 40-B, A. P. (Telengana Area) Housing Board Act, 1956, as amended in 1962 violated Article 14 as the basis provided for assessing compensation under that section was different from that provided by section 23 of the Land Acquisition Act, 1894.
Article 31(3) provides that no law such as is referred to in Cl. 2, made by the legislature of a State , shall have effect unless such law having been reserved for the consideration of the President has received his assent.
Non-compliance with Article 31(3) has this effect, that unless a law is protected by Articles 31(4), (5) and (6), a law for the acquisition or requisition of property has no effect, and such purported law must be held invalid. Accordingly, it was held that the Hyderabad Tenancy and Agricultural Lands Act, 1950, was a post-Constitution law providing for the acquisition and requisition of land and was inoperative as it had not received the President’s assent as required by Article 31(3)
In Rameshwar Kumar v. R. P. Mishra, it was held that Land Acquisition (Bihar Amendment) Act, 1958, was a law of the description contemplated by Article 31(2) and as it had not been reserved for the consideration of the President and had not received his assent it had no legal effect and the proceedings started under it were illegal and ultra vires.
In Kodarap Laxmiah v. State of Hyderabad it was held that as the Hyderabad City Improvement Board (Land Acquisition) Act, 1951, was not protected by Article 31(5)(b)(ii) it was governed by Article 31(2) and as it had not received the President’s assent, it was invalid.
In Jatindernath v. Jadhavpur University, it was held that though Article 31(3) is not attracted unless the law falls within Article 31(2) therefore Jadhavpur University Act did not contravene Article 31(3) because it was not a law for acquisition or requisition of property within the meaning of Article 31(2A).Article 31A is available not only to laws which themselves provide for compulsory acquisition of property for public purposes, but also to laws amending such laws, provided that such amendments has received the President’s assent. The assent of the President to the Orissa Estates Abolition Act, 1952, brought in the protection of Article 31A. In assenting to such a law, the President assents to new categories of properties being brought within the operation of existing law and he, in effect, assents to a law for the compulsory acquisition for public purposes of these new categories of property.
In Venkatrao v. State of Bombay, the Supreme Court held that if the assent of the President had been given to amending Acts, it would be difficult to hold that the President had never assented to the parent Act. Even if such assent had not been accorded earlier, it must be taken to have been granted when he assented to the first of the amending Acts.
In S. N. Medhi v. State of Maharashtra, the Supreme Court held that the protection of Article 31A was available “not only to Acts which come within its terms but also to Acts amending such Acts to include new items of property or which change some details of the scheme of the Act provided firstly that the change is not such as would take it out of Article 31A or by itself is not such as would not b protected by it and secondly that the assent of the president had been given to the amending statute.”
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