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TMI Blog1970 (2) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... ohan Kumaramangalam and A. V. Rangam, Lal Narain Sinha, Advocate-General, Bihar, R. K. Garg and D. P. Singh, V. K. Krishna Menon, M. R. K. Pillai and D. P. Singh, P. Ram Reddy and P. Parameswara Rao, for intervener No. 6. M. C. Chagla, Santosh Chatterjee and G. S. Chatterjee JUDGMENT SHAH J. A. N. RAY, J. gave a dissenting Opinion. Shah, J. Rustom Cavasjee Cooper-hereinafter called 'the petitioner'-holds shares in the Central Bank of India Ltd., the Bank of Baroda Ltd., the Union Bank of India Ltd., and the Bank of India Ltd., and has accounts-current and fixed deposit -with those Banks : he is also a director of the Central Bank of India Ltd. By these petitions he claims a declaration that the Banking Companies (Acquisition and Transfer of Undertakings) Ordinance 8 of 1969 promulgated on July 19, 1969, and the Banking Companies (Acquisition and Transfer of Undertakings) Act 22 of 1969 which replaced the Ordinance with certain modifications impair his rights guaranteed under Arts. 14, 19 and 31 of the Constitution, and are on that account invalid. In India there was till 1949 no comprehensive legislation governing banking business and banking institutions. The Central L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r observers in the interest of depositors or proper management of the Banking Companies, or in the interest of Banking policy (which expression was defined by s. 5 (ca) as "any policy which is specified from time to time by the Reserve Bank in the interest of the banking system or in the interest of monetary stability or sound economic growth, having due regard to the interests of the depositors, volume of deposits and other resources of the bank -and the need for equitable allocation and the efficient use of these deposits and resources". The Reserve Bank was also invested with power to remove managerial and other personnel from office and to appoint additional directors, and to issue directions prohibiting certain activities in relation to Banking Companies. The Central Government was given power to acquire the business of any Bank if it failed repeatedly to comply with any direction issued by the Reserve Bank under certain specific provision in regard to any matter concerning the affairs of the Bank and if acquisition of the Bank was considered necessary in the interest of the depositors or in the interest of the banking policy or for the better provision of credit generally or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn as on the last Friday of June, 1969, furnished to the Reserve Bank under section 27 of the Banking Regulation Act, 1949, were not less than rupees fifty crores". In the Schedule to the Act were included the names of fourteen commercial banks 1. The Central Bank of India Ltd. 2. The Bank of India Ltd. 3. The Punjab National Bank Ltd. 4. The Bank of Baroda Ltd. 5. The United Commercial Bank Ltd. 6. Canara Bank Ltd. 7. United Bank of India Ltd. 8. Dena Bank Ltd. 9. Syndicate Bank Ltd. 10. The Union Bank of India Ltd. 11. Allahabad Bank Ltd. 12. The Indian Bank Ltd. 13. The Bank of Maharashtra Ltd. 14. The Indian Overseas Bank Ltd. These banks are hereinafter referred to as the named banks. A "corresponding new bank" was defined in relation to an existing bank as meaning "the body corporate specified against such bank in column 2 of the First Schedule". By s. 2 (g) it was provided that the words and expressions used in the Ordinance and not defined, but defined in the Banking Regulation Act, 1949, had the meaning respectively assigned to them in that Act. Thereby the definitions of "banking" and "banking company" in s. 5 (b) and s. 5 (c) of the Banking Regulation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sisting or having effect immediately before the commencement of the Ordinance, and to which the named bank is a party or which are in favour of the named bank shall be of as full force and effect against or in favour of the corresponding new bank, and be enforced or acted upon as fully and effectively as if in the place of the named bank the corresponding new bank is a party thereto or as if they are issued in favour of the corresponding new bank. In pending suits or other proceedings by or against the named bank, the corresponding new bank shall be substituted in those suits or proceedings. Any reference to any named bank in any law, other than the Ordinance, or in any contract or other instrument shall be construed as a reference to the corresponding new bank in relation to it. (3) The Central Government shall have power to frame a scheme for carrying out the provisions of the Act, and for that purpose to make provisions for the corresponding new banks relating to capital structure, constitution of the Board of Directors, manner of payment of compensation to the shareholders, and matters incidental, consequential and supplemental. Corresponding new banks shall also be guided in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f stood transferred to the corresponding new bank. The named bank had thereafter no assets, no business, and no managerial, administrative or other staff, it was incompetent to use the word "Bank" in its name, because of the provisions contained in s. 7 (1) of the Banking Regulation Act, 1949, and was liable to be dissolved by a notification of the Central Government. Petitions challenging the competence of the President to promulgate the Ordinance were lodged in this Court on July 21, 1969. But before the petitions could be heard by this Court, a Bill to enact provisions relating to acquisition and transfer of undertakings of the existing banks was introduced in the Parliament, and was enacted on August 9, 1969, as "The Banking Companies (Acquisition and Transfer of Undertakings) Act 22 of 1969". The long title of the Act was in terms identical with the long title of the Ordinance. By sub-s. (1) of s. 27 of the Act, Ordinance 8 of 1969 was repealed. In the First Schedule were included the-names of the 14 banks named in the Ordinance in juxtaposition with the names of the corresponding new banks. By sub-s. (2) of s. 1, the Act came into force on July 19, 1969, and the undertaking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompensation and the manner of payment are modified. Interim compensation may be paid to a named bank if it agrees to distribute to its shareholders in accordance with their rights and interests. A major change is made in the principles for determining compensation set out in Sch. 11. By Explanation I to cl. (e) of Part I of Sch. II, the value of any land or buildings to be taken into account in valuing the assets is to be the market value of the land or buildings, but where such market value exceeds the "ascertained value", that "ascertained value" is to be taken into account, and by Explanation II the "ascertained value" of any building wholly occupied on the date of the commencement of the Act is to be twelve times the amount of the annual rent or the rent for which the building may reasonably be expected to be let out from year to year, and reduced by one-sixth of the amount of the rent on account of maintenance and repairs, annual premium paid to insure the building against risk of damage or destruction, annual charge, if any, on the building, ground rent, interest on any mortgage or other capital charge on the building, interest on borrowed capital if the building has been acq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Parliament. That sub-sections (1) & (2) of s. 11 and s. 26 are invalid. The Attorney-General contended that the petitions are not maintainable, because no fundamental right of the petitioner is,' directly impaired by the enactment of the Ordinance and the Act, or by any action taken thereunder. He submitted that the petitioner who claims to be a shareholder, director and holder of deposit and current accounts with the Banks is not the owner of the property of the undertaking taken over by the corresponding new banks and is on that account incompetent to maintain the petitions complaining that the rights guaranteed under Arts. 14, 19 and 31 of the Constitution were impaired. A company registered under the Companies Act is a legal person, separate and distinct from its individual members. Property of the Company is not the property of the shareholders. A shareholder has merely an interest in the Company arising under its Articles of Association, measured by a sum of money for the purpose of liability, and by a share in the profit. Again a director of a Company is merely its agent for the purpose of management. The holder of a deposit account in a Company is its creditor : he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the property expropriated. He says that in consequence of the hostile discrimination practised by the State the value of his investment in the shares is substantially reduced, his right to receive dividend from his investment has ceased, and he has suffered great financial loss, he is deprived of the right as a shareholder to carry on business through the agency of the Company, and that in respect of the deposits the obligations of the-corresponding new banks -not of his choice are substituted without his consent. In Dwarkadas Shrinivas v. The Sholapur Spinning & Weaving Co. Ltd. and Others([1950] SCR 869) this Court held that a preference shareholder of a company is competent to maintain a suit challenging the validity of the "Sholapur Spinning and Weaving Company (Emergency Provisions) Ordinance" 2 of 1950 (which was later replaced by Act 27 of 1950), which deprived the Company of its property without payment of compensation within the meaning of Art. 31. Mahajan, J., observed : "The plaintiff and the other preference shareholders are in imminent danger of sustaining direct injury as a result of the enforcement of this Ordinance, the direct injury being the amount of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve indirectly. The petitioner seeks in this case to challenge the infringement of his own rights and not of the Banks of which he is a shareholder and a director and with which he has accounts-, current and fixed deposit. It was urged that in any event the guarantee of freedom of trade does not occur in Part III of the Constitution, and the petitioner is not entitled to maintain a petition for breach of that guarantee in this Court. But the petitioner does not seek by these petitions to enforce the guarantee of freedom of trade and commerce in Art 301: he claims that in enacting the Act the Parliament has violated a constitutional restriction imposed by Part XIII of its legislative power and in determining the extent to which his fundamental freedoms are impaired, the statute which the Parliament is incompetent to enact must be ignored. It is not necessary to consider whether Art. 31 A ( 1 ) (d) of the Constitution bars the petitioner's claim to enforce his rights as a director. The Act prima facie does not (though the Ordinance purported to) seek to extinguish or modify the right of the petitioner as a director : it seeks to take away expressly the right of the named Banks to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er to legislate by promulgating Ordinances. Power to promulgate such Ordinance as the circumstances appear to the President to require is exercised-(a) when both Houses of Parliament are not in session; (b) the provision intended to be made is within the competence of the Parliament to enact; and (c) the President is satisfied that circumstances exist which render it necessary for him to take immediate action. Exercise of the power is strictly conditioned. The clause relating to the satisfaction is composite: the satisfaction relates to the existence of circumstances, as well as to the necessity to take immediate action on account of those circumstances. Determination by the. President of the existence of circumstances and the necessity to take immediate action on which the satisfaction depends, is not declared final. The Attorney-General contended that the condition of satisfaction of the President in both the branches is purely subjective and the Union of India is under no obligation to disclose the existence of, or to justify the circumstances of the necessity to take immediate action. He relied upon the decisions of the Judicial Committee in Bhagat Singh v. The King Emperor(L. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ist or that he has reasonable grounds to believe, or that he has reasons to believe, or that he is satisfied, springing from a constitutional provision is in no manner different from a similar power under a parliamentary statute, and no greater sanctity may attach to the exercise of the power merely because the source of the power is in the Constitution and not in a parliamentary statute. There is, it was urged, nothing, in the constitutional scheme which supports the contention that the clause relating to satisfaction is not a condition of the exercise of the power. Counsel relied upon the judgments of this Court in Barium Chemical Ltd. and Another v. The Company Law Board and Ors.( [1966] Supp. S.C.R. 311) and Rohtas Industries Ltd. v. S. D. Agarwal and Anr;([1969] 3 S.C.R. 108) upon the decisions of the House of Lords in Padfield & Others v. Minister of Agriculture, Fisheries and Food and Others ([1968] 1 All E. R. 694) and of the Judicial Committee in Durayappah v. Fernando and Others(L.R. [1967] A.C. 337); Nakkuda Ali v. M. F. De S. Jayaratne(L.R. [1951] A.C. 66); RossClunis v. Papadopoullos([1958] 2 All E.R. 23), and contended that the decisions of the Judicial Committee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve concurrent legislative authority with respect to the following subjects in List III : Entry 33-"Trade and commerce in, and the production, supply and distribution of,- (a) the products of any industry where the control of such industry by the Union is declared by Parliament by law to be expedient in the public interest, and imported goods of the same kind as such products; (b) foodstuffs, including edible oil-seeds and oils; (c) cattle fodder, including oilcakes and other concentrates; (d) raw cotton, whether ginned or unginned and cotton seed; and (e) raw jute." Entry 42-"Acquisition and requisition of property." 563 The argument raised 'by Mr. Setalvad, intervening on behalf of the State of Maharashtra and the State of Jammu and Kashmir, that the Parliament is competent to enact Act 22 of 1969, because the subject-matter of the Act is "with respect to" regulation of trading corporations and matters subsidiary and incidental thereto, and on that account is covered in its entirety by Entries 43 and 44 of List I of the Seventh Schedule cannot be upheld. Entry 43 deals with incorporation, regulation and winding up of trading corporations including banking companies. Law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he business of banking as defined in S. 5 (b) of the Banking Regulation Act, 1949, and matters incidental thereto, and also for acquisition of that part of the undertaking of each named bank which relates to the business of banking, but not in respect of any other business not incidental to banking in which the named bank was engaged prior to July 19, 1969, for the power to legislate in respect of such other business falls within Entry 26 of List II. As a corollary thereto, counsel submitted that power to legislate in respect of acquisition under Entry 42 of List III may be exercised by the Parliament only for effectuating legislation under a head falling in List I or List III of the Seventh Schedule. It is necessary to determine the true scope of "banking" in Entry 45 List I, the meaning of the expression "property", and the limitations on the power of the Parliament to legislate in respect of acquisition of property in Entry, 42 List III. Matters not in contest may be eliminated. Power to legislate for setting up corporations to carry on banking and other business and to acquire, hold and dispose of property and to provide for administration of the corporations is conferred upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Act in cls. (a) to (n) are, if carried on in addition to the "hardcore of banking", banking, and the Parliament is competent to legislate in respect of that business under Entry 45 List I. In support of his contention that apart from the business of accepting money from the public for lending or investment, and withdrawable by cheque, draft or otherwise, banking includes many allied business activities which banking institutions engaged in, the Attorney-General invited our attention to cl. 21 of the Charter of the Bank of Bengal (Act VI of 1839) : s. 27 of Act 4 of 1862; to ss. 36 & 37 of the Presidency Banks Act XI of 1876; to s. 91(15) of the British North America Act; to Paget's Law of Banking, 7th Edn., at p. 5; to the standard form of memorandum of association of a Banking Company in Palmer's Company Precedents Form 138; and to the statement of objects and reasons in support of the Bill which was enacted as the Indian Companies (Amendment) Act, 1936. The Charter of the Bank of Bengal, the Presidency Banks Act 4 of 1862, Ch. X-A of the Indian Companies Act, 1913, as incorporated by the Indian Companies (Amendment) Act, 1936, merely described the business which a ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extent it makes provisions in respect of the undertaking of the named banks relating to non-banking business, is ultra vires the Parliament. In the first instance there is no evidence that the named banks were before July 19, 1969, carrying on non-banking business distinct and independent of the banking business, or that the banks held distinct assets for any non-banking business, apart from the assets of the banking business. Again by Act-22 of 1969 the corresponding banks are entitled to engage in business of banking and non-banking which the named banks were engaged in or competent to engage in prior to July 19, 1969, and the named banks are entitled to engage in business other than banking as di.-fined in s. 5(b) of the Banking Regulation Act, but not the business of banking. By enacting that the corresponding new banks may carry on business specified in s. 6(1) of the Banking Regulation Act and that the named banks shall not carry on banking business as defined in s. 5 (b) of that Act, the impugned Act did not encroach upon any entry in the State List. By s. 15 (2) (e) of the impugned , Act the named banks are expressly reserved the right to carry on business other than banki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an undertaking, the term describes not the ingredients but the completed work from which the earnings arise." Transfer of and vesting in the State Corporations of the entire undertaking of a going concern is contemplated in many Indian Statutes: e.g., Indian Electricity Act, 1910, ss. 6, 7 & 7A; Air Corporation Act, 1953, ss. 16 & 17; Imperial Bank of India: Act, 1920, ss. 3 & 4; State Bank of India Act, 1955, S. 6(2), (3) & (4); State Bank of India (Subsidiary Banks) Act, 1959; Banking Regulation Act, 1949, S. 36 AE; and Cotton Textile Companies Act, 1967, ss. 4-(1) & 5(1). Power to legislate for acquisition of "property" in Entry 42 List III therefore includes the power to legislate for acquisition of an undertaking. But, says Mr. Palkhivala, liabilities of the banks which are included in the connotation of the expression "undertaking", cannot be treated as " property". It is however the assets, rights and obligations of a going concern which constitute the undertaking: the obligations and liabilities of the business form an integral part of the undertaking, and for compulsory acquisition cannot be divorced from the assets, rights and privileges. The expression "property" in En ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unction of the two clauses-cls. (1) & (2) of Art. 31-is to impose limitations on the power of the State and to declare the corresponding guarantee of the individual to his right to property. Limitation on the power of the State and the guarantee of right are plainly complementary. Protection of the guarantee is ensured by declaring that a person may be deprived of his property by "authority of law": Art. 31 ( 1 and that private property may be compulsorily acquired for a public purpose -and by the "authority of a law" containing provisions fixing or providing for determination and payment of compensation: Art. 31(2). Exercise of either power by State action results in abridgement-total or partial-of the right to property of the individual. Article 19(1) (f) is a positive declaration in the widest terms of the right to acquire, hold and dispose of property, subject to restrictions (which may assume the form of limitations or complete prohibition) imposed by law in the interests of the general public. The guarantee under Art. 19(1)(f) does not protect merely an abstract right to property: it extends to concrete rights to property as well Swami Motor Transport Co. (P) Ltd.'s case( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty or personal freedom is most needed when there is an actual threat. To argue that State action which deprives a person permanently or temporarily of his right to property, or personal freedom, operates to extinguish the right or the remedy is to reduce the guarantee to an empty platitude. Again to hold that the extent of, and the circumstances in which, the guarantee of protection is available depends upon the object of the State action, is to seriously erode its effectiveness. Examining the problem not merely in semantics but in the broader and more appropriate context of the constitutional scheme which aims at affording the Individual the fullest protection of his basic rights and on that foundation to erect a structure of a truly democratic polity, the conclusion, in our judgment, is inevitable that the validity of the State action must be adjudged in the light of its operation upon the rights of the individual and groups of individuals in all their dimensions. But this Court has held in some cases to be presently noticed that Art. 19 (1) (f) and Art. 31 (2) are mutually exclusive. Early in the history of this Court the question of interrelation between the diverse provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly to consider the directness of the legislation and not what will be the result of the detention otherwise valid, on the mode of the detenue's life." The learned Chief Justice also observed that Art. 19 (1) (d) had nothing to do with detention, preventive or punitive, and I the concept of personal liberty in Art. 21 being entirely different from the concept of the right to move freely throughout the territory of India, Art. 22 was a complete code dealing with preventive detention. Patanjali Sastri, J., observed at p. 191 ".... article 19 seems to pre-suppose that the citizens to whom the possession of these fundamental rights is secured retains the substratum of personal freedom on which alone the enjoyment of these rights necessarily rests article 19 guarantees to the citizens the enjoyment of certain civil liberties while they are free, while articles 20-22 secure to all persons-citizens and non-citizens--certain constitutional guarantees in regard to punishment and prevention of crime." Mahajan, J., was of the view that Art. 22 was " selfcontained in respect of laws on the subject of preventive detention". Mukherjea, J., observed (at p. 254) that there was no conflict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e detention, which is dealt with in article 22, also amounts to deprivation of personal liberty which is referred to in article 21, and is a violation of the right of freedom of movement dealt with in article 19(1) At p. 149 the learned Judge observed " The words used in article 19 (1) (d) must be, construed as they stand, and we have to decide upon the words themselves whether in the case preventive detention the right under article 19 (1 ) (d) is or is not infringed. But, . . ., however, literally we may construe the words used in article 19 (1 ) (d) and however restricted may be the meaning we may attribute to those words, there can be no escape from the conclusion that preventive detention is a direct infringement of the right guaranteed in article 19(1)(d)." At p. 170 he observed : " .... this article (Art. 22) clude the operation of articles 19 and 21, and it must be read subject to those two articles, in the same way as articles 19 and 21 must be read subject to article 22. The correct position is that article 22 must prevail in so far as there are specific provisions therein regarding preventive detention, but, where there are no such provisions in that article, the ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R. 128) ; Smt. Sitabati Debi and Anr. v. State of West Bengal and Another([1967] 2 S.C.R. 940), and other cases. In these cases it was held that the substantive provisions of a law relating to acquisition of property were not liable to be challenged on the ground that they imposed unreasonable restrictions on the right to hold property. Bhanji Munji's, case, it must be remembered, arose under Art. 31 before it was amended by the Constitution (Fourth Amendment) Act. It was held by this Court that cls. (1) & (2) of Art. 31 as they then stood dealt with the same subject matter, i.e. compulsory acquisition of property;: see Subodh Gopal's case([1954] S.C.R. 674) and Dwarkadas Shriniwas's case([1954] S.C.R. 587). But since the amendment by the Constitution (Fourth Amendment) Act it has been held that cls. (1) & (2) dealt with different subjectmatters. In Kavalppara Kottarathil Kochuni's case(3), Subba Rao, J.delivering the judgment of the majority of the Court observed that cl. (2) of Art. 31 alone deals with compulsory acquisition of property by the State for a public purpose, and not Art. 31 (1), and he proceeded to hold that the expression "authority of law" means au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the object of the Legislature nor by the form of the action, but by its direct operation upon the individual's rights. We are of the view that the theory that the object and form of the, State action determine the extent of protection which the aggrieved party may claim is not consistent with the constitutional scheme. Each freedom has different dimensions. Article 19 (1 ) (f ) enunciates the right to acquire, hold and dispose of property: cl. (5) of Art. 19 authorize imposition of restrictions upon the right. Article 31 assures the right to property and grants protection against the exercise of the authority of the State. Clause (5) of Art. 19 and cis. (1) & (2) of Art. 31 prescribe restrictions upon State action, subject to which the right to property may be exercised. Article 19(5) is a broad generalization dealing with the nature of limitations which may be placed by law on the right to property. The guarantees under Arts. 31 (1) & (2) arise out of the limitations imposed on the authority of the State by law to take over the individual's property. The true character of the limitations under the two provisions is not different. Clause (5) of Art. 19 and cls. (1) & (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate as well as others : Arts. 17, 23 & 24. The enunciation of rights either express or by implication does not follow a uniform pattern. But one thread runs through them : they seek to protect the rights of the individual or groups of individuals against infringement -of those rights within specific limits. Part III of the Constitution weaves a pattern of guarantees on the texture of basic human rights. The guarantees delimit the protection of those rights in their allotted fields: they do not -attempt to enunciate distinct rights. We are therefore unable to hold that the challenge to the validity of the provision for acquisition is liable to be tested only on the ground of non-compliance with Art. 31(2). Article 31(2) requires that property must be acquired for a public purpose and that it must be acquired under a law with characteristics set out in that Article. Formal compliance with the conditions under Art. 31(2) is not sufficient to negative the protection of the guarantee of the right to property. Acquisition must be under the authority of a law and the expression "law" means a law which is within the competence of the Legislature, and does not impair the guarantee of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act impair the fundamental freedoms under Art. 19 ( I ) (f ) & (g) now falls to, be considered By s. 4 the entire undertaking of each named bank vests in the Union, and the Bank is prohibited from engaging in the business of banking in India and even in a foreign country, except where by the laws of a foreign country banking business owned or controlled by Government cannot be carried on, the named bank will be entitled to continue the business in that country. The business which the named banks carried on was-(1) the business of banking as defined in s. 5 (b) of the Banking Regulation Act, 1949, and business incidental thereto; and (2) other business which by virtue of s. 6(1) they were not prohibited from carrying on, though not part of or incidental to the business of banking. It may be recalled that by Act 22 of 1969 the named banks cannot engage in business of banking as defined in s. 5(b) of the Banking Regulation Act, 1949, but may engage in other forms of business. By the Act, however, the entire undertaking of each named bank is vested in the new corporation set up with a name identical with the name of that Bank, and authorised to carry on banking business previously car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prevent the State from making any law imposing, in the interests of the general public, reasonable restrictions on the exercise of the right conferred by the said sub-clause, and, in particular, nothing in the said sub-clause, shall affect the operation of any existing law in so far as it relates to, or prevent the State from making law relating to- (i) the professional or technical qualifications necessary for practising any profession or carrying on any occupation, trade or business, or (ii).the carrying on by the State, or by a corporation owned or controlled by the State, of any trade, business, industry or service, whether to the exclusion, complete or partial, of citizens or otherwise." Clause (6) of Art. 19 consists of two parts : (1) the right declared by sub-cl. (g) is not protected against the operation of any law imposing, in the interests of the general public, reasonable restrictions on the exercise of the right conferred by that sub-clause; and (2) in particular sub-cl. (g) does not affect the operation of any law relating, inter alia, to carrying on by the State or by a corporation owned or controlled by the State, of any trade, business, industry or service, whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Art. 19 (1 ) (g) of the Constitution." In dealing with the validity of a law creating a State monopoly in Akadasi Padhan v. State of Orissa, ([1963] Supp. 2 S.C.R. 691) this Court unanimously held, that the validity of a law creating a State monopoly which "indirectly impinges on any other right" cannot be challenged on the, -round that it imposes restrictions which are not reasonable restrictions in the interests of the general' public. But if the law contains other incidental provisions, which do not constitute an essential and integral part of the monopoly created by it, the validity of those provisios is liable to be tested under the first part of Art. 19(6) If they directly, impair any other fundamental right guaranteed by Art. 19(1), the validity of those provisions will be tested by reference to the corresponding clauses of Art. 19. The Court also observed that the essential attributes of the law creating a monopoly will vary with the nature of the trade or business in which the monopoly is created. They will depend upon the nature of the commodity, the nature of trade in which it is involved and other Circumstances. At p. 707, Gajendragadkar, J. speaking for the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med banks from carrying on banking business, being a necessary incident of the right assumed by the Union, is not liable to be challenged because of Art' 19 (6) (ii) in so far as it affects the right to carry on business. There is no satisfactory proof in support of the plea that the enactment of Act 22 of 1969 was not in the larger interest of the nation, but to serve political ends, i.e. not with the object to ensure better banking facilities, or to make them available to a wider public, but only to take control over the deposits of the public with the major banks, and to use them as a political lever against industrialists who had built up industries by decades of industrial planning and careful management. It is true that social control legislation enacted by the Banking Laws (Amendment) Act 58 of 1968 was in operation and the named banks were subject to rigorous control which the Reserve Bank was competent to. exercise and did in fact exercise. Granting that the objectives laid down by the Reserve Bank were being carried out, it cannot be said that the Act was enacted in abuse of legislative power. Our attention was invited to a mass of evidence from the speeches of the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are deprived of the benefit of the resources of the banking industry, whether administration by the Government of the commercial banking sector will not prove beneficial to the community and will lead to rigidity in the administration, whether the Government administration will eschew the profit-motive, and -even if it be eschewed, there will accrue substantial benefits to the public, whether an undue accent on banking as a means of social regeneration, especially in the, backward areas, is a doctrinaire approach to a rational order of priorities -for attaining the national objectives enshrined in our Constitution, and whether the policy followed by the Government in office or the policy propounded by its opponents may reasonably attain the national objectives are matters which have little relevance in determining the legality of the measure. It is again not for this Court to consider the relative merits of the different political theories or economic policies. The Parliament has under Entry 45 List I the power to legislate in respect of banking and other commercial activities of the named banks necessarily incidental thereto; it has the power to legislate for acquiring the undert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Constitution (First Amendment) Act, 1951. In Mohammad Yasin's case by the, bye--laws of the Municipal Committee, it was provided that no person shall sell or purchase any vegetables or fruit within the limits of the municipal area of Jalalabad, wholesale or by auction, without paying the prescribed fee. It was urged on behalf of a wholesale dealer 'in vegetables that although there was no prohibition against carrying on business, in vegetables by anybody, in effect the bye-laws brought about a total stoppage of the wholesaler's business in a commercial sense, for, he had to pay prescribed fee to the contractor, and under the bye-laws the wholesale dealer could not charge a higher rate of commission than the contractor. The wholesale ,dealer, therefore, could charge the growers of vegetables and fruit only the commission permissible under the bye-laws, and he had to make over the entire commission to the contractor without retaining any part thereof. The wholesale dealer was -thereby converted into a mere tax collector for the contractor or the Town Area Committee without any remuneration The bye-laws in this situation were struck down as impairing the freedom to carry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation under the Act must be founded on an intelligible differentia distinguishing persons, transactions or things grouped together from others left out of the group; and (ii) the differentia has a rational relation to the object sought to be achieved by the Act : there must be a nexus between the basis of classification and the object of the Act : Chiranjit Lal Chowduri's case([1950] S.C.R. 869); The State of Bombay v. F. N. Balsara([1951] S.C.R. 682); The State of West Bengal v. Anwar Ali Sarar([1952] S.C.R. 284); Budhan Choudhry and Others v. The State of Bihar([1955] I S.C.R. 1045); Shri Ram Kishan Dalmia v. Shri Justice S. R. Tendolkar and Others,( [1959] S.C.R. 279, 300); and State of Rajasthan v. Mukandchand & Ors [1964] 6 S.C.R. 903, 910. The Courts recognize in the Legislature some degree of elasticity in the matter of making a classification between persons, objects and transactions. Provided the classification is based on some intelligible ground, the Courts will not strike down that classification, 'because in the view of the Court it should have proceeded on some other ground or should have included in the class selected for special treatment some other persons, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... named banks. The market quotations have slumped to less than 50% in the case of Bank of India, Central Bank, Bank of Baroda and even at the quoted rates probably there are no transactions. Dividend may no longer be distributed, for the banks have no liquid assets and they are not engaged in any commercial activity. It may take many years before the compensation payable to the banks may even be finalized, and be available to the named banks for utilising it in any commercial venture open to the banks under the Act. Under the scheme of determination of compensation, the total amount payable to the banks will be a fraction of the value of their net assets, and that compensation will not be available to the banks immediately. The ground for select-ion of the 14 banks is that those banks held deposits, as shown in the return as on the last Friday of June 1969 furnished to the Reserve Bank under s. 27 of the Banking Regulation Act, 1949, of not less than rupees fifty crores. The object of Act 22 of 1969 is according to the long title to provide for the acquisition and transfer of the undertakings of certain banking companies in order to serve better the needs of development of the econo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e relation between the differentia and the object of the Act which cannot be substantially served even by the acquisition of the undertakings of all the banks out of which the selection is made. It is claimed that the depositors with the named banks have also a grievance. Those -depositors who had made long-term deposits, taking into account the confidence they had in the management of the banks and theservice they rendered, are now called upon to trust the management of a statutory corporation not selected by them, without an opportunity of being placed in the same position in which they would have been if they were permitted to transfer their deposits elsewhere. The argument is based on several imponderables and does not require any detailed consideration. But two other grounds in support of the plea of impairment of the guarantee of equality clause require to be noticed. The fourteen named banks are prohibited from carrying on banking business--a disability for which there is no rational explanation. Banks other than the named banks may carry on banking business in India and abroad : new banks may be floated for carrying on banking business, but the named banks are prohibited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed upon the power of the State to acquire private property, without the consent of the owner for a public purpose. Upon the exercise of the power to acquire or requisition property, by cl. 2) two restrictions are placed : (a) power to acquire shall not be exercised save for a public purpose; and (b) that it shall not be exercised save by authority of a law which provides for compensation for the property acquired or requisitioned, and fixes the amount of compensation or specifies the principles on which and the manner in which the compensation is to be determined and given. Sub-clause (2A) in substance provides a definition of "compulsory acquisition or requisitioning of property". Existence of a public purpose and provision for giving compensation for compulsory acquisition of property of an individual are conditions of the exercise of the power. If either condition be absent, the guarantee under Art. 31(2) is impaired, and the law providing for acquisition will be invalid. But jurisdiction of the Court to question the law on the ground that compensation provided thereby is not (adequate is expressly excluded. In the case before us we need not express any opinion on the question w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r damage. In all States where the rule of law prevails, the right to compensation is guaranteed by the Constitution or regarded as inextricably involved in the right to property. By the 5th Amendment in the Constitution of the U.S.A. the right of eminent domain is expressly circumscribed by providing "Nor shall private property be taken for public use, without just, compensation". Such a provision is to be found also in every State Constitution in the United States : Lewis Eminent Domain, 3rd Edn., (pp. 28-50). The Japanese Constitution, 1946, by Art. 25 provides a similar guarantee. Under the Commonwealth of Australia Constitution, 1900, the Commonwealth Parliament is invested with the power of acquisition of property on "just terms" : s. 57 (XXXI). Under the Common Law of England, principles for payment of compensation for acquisition of property by the State are stated by Blackstone in his "Commentaries on the-Laws of England", 4th Edn., Vol. I, at p. 109 "So great moreover is the regard of the law for private property, that it will not authorize the least violation of it; no, not even for the general good of the whole community........ Besides, the public good is in nothing m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... power of laying " down the principles which should govern the determination of the amount to be given to the owner for the property appropriated, such principles must ensure that what is determined as payable must be compensation, that is, a just equivalent of what the owner has been deprived of. Within the limits of this basic requirement of full indemnification of the expropriated owner, the Constitution allows free play to the legislative judgment as to what principles should guide the determination of the amount payable. Whether such principles take into account all the elements which make 'up the true value of the property appropriated and exclude matters which are to be neglected, is a justiciable issue to be adjudicated by the court." In the view of the learned Chief Justice the expression "just equivalent" meant "full indemnification" and the expropriated owner was on that account entitled to the market value of the property on the date of deprivation of the property. This case was decided under a statute enacted before the Constitution (Fourth Amendment) Act, 1955. The principle of that case was approved in N. B. Jeejeebhoy v. Assistant Collector, Thalia Prant, Thana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... original value reduced by depreciation, break-up value of properties which had outgrown their utility; that the rules relating to determination of value of lands, buildings, machinery and other classes of property differ, and the application of several methods or principles lead to widely divergent amounts, and since compensation is not capable of precise determination by the application of recognized rules, by qualifying the expression "compensation" by the adjective "just", the determination was made more controversial. It was observed that the Parliament amended the Constitution by the Fourth Amendment Act declaring that adequacy of compensation fixed by the Legislature as amended according to the principles specified by the Legislature for determination will not be justiciable. It was then observed that "The right declared by the Constitute guarantees that compensation shall be given before a person is compulsorily expropriated of his property for a public purpose. What is fixed as compensation by statute, or by the application of principles specified for determination of compensation is guaranteed : it does not mean however that something fixed or determined by the applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormer case it was observed that the constitutional guarantee was satisfied only if a just equivalent of the property was given to the owner : in the latter case it was held that "compensation" being itself incapable of any precise determination, no definite connotation could be attached thereto by calling it "just equivalent" or "full indemnification", and under Acts enacted after the amendment of Art. 31 (2) it is not open to the Court to call in question the law providing for compensation on the ground that it is inadequate, whether the amount of compensation is fixed by the law or is to be determined according to principles specified therein. It was observed in the judgment in Shantilal Mangaldas's case: "Whatever may have been the meaning of the expression "compensation" under the unamended Article 31(2), when the Parliament has expressly enacted under the amended clause that "no such law shall be called in question in any court on the ground that the compensation provided by that law is not adequate", it was intended clearly to exclude from the jurisdiction of the court an enquiry that what is fixed or determined by the application of the principles specified as compensa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the just equivalent of what the owner has been deprived of. But such an exclusion only pertains to the method of ascertaining the compensation. One of the elements that should properly be taken into account in fixing the compensation is omitted : it results in the adequacy of the compensation, . . . ... We, therefore, hold that the Amending Act does not offend Art. 31 (2) of the Constitution." The compensation provided by the Madras Act, according to the principles specified, was not the full market value at the date of acquisition. It did not amount to "full indemnification" of the owner : the Court still held that the law did not offend the guarantee under Art. 31(2) as amended, because the objection was only as to the adequacy of compensation. In Shantilal Mangaldas's case(1), the Court held that the Constitution (Fourth Amendment) Act, Art. 31(2) guarantees a right to receive compensation for loss of property compulsorily acquired, but compensation does not mean a just equivalent of the property. If compensation is provided by law to be paid and the compensation is not illusory or is not determinable by the application of irrelevant principles, the law is not open to cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enerous to the owner should have been applied by the Legislature. We are unable to hold that a principle specified by the Parliament for determining compensation of the property to be acquired is conclusive. If that view be accepted, the Parliament will be invested with a charter of arbitrariness and by abuse of legislative process, the constitutional guarantee of the right to compensation may be severely impaired. The principle specified must be appropriate to the determination of compensation for the particular class of property sought to be acquired. If several principles are appropriate and one is selected for determination of the value of the property to be acquired, selection of that principle to the exclusion of other principles is not open to challenge, for the selection must be left to the wisdom of the Parliament. The broad object underlying the principle of valuation is to award to the owner, the equivalent of his property with its existing advantages and its potentialities. Where there is an established market for the property acquired, the problem of valuation presents little difficulty. Where there is no established market for the property, the object of the principl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will not be the value of the unit. These are, however, not the only methods. The method of determining the value of property by the application of an appropriate multiplier to the net annual income or profit is a satisfactory method of valuation of lands with buildings,' only if the land is fully developed, i.e., it has been put to full use legally permissible and economically justifiable, and the income out of the property is the normal commercial and not a controlled return, or a return depreciated on account of special circumstances. It the property is not fully developed, or the return is not commercial themethod may yield a misleading result. The expression "property" in Art. 31(2) as in Entry 42 of List II is wide enough to include an undertaking, and an undertaking subject to obligations may be compulsorily acquired under a law made in exercise of power under Entry 42 List III. The language of the amended clause (2) of Art. 31 compared with the language of the clause before it was amended by the Constitution (Fourth Amendment) Act leaves no room for doubt. Before it was amended, the guarantee covered the acquisition of "property movable or immovable including, any inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingent liabilities which the corresponding new bank may reasonably be expected to be required to meet out of its own resources. Compensation payable to the named banks is accordingly the aggregate of some of the components of the undertaking, reduced by the aggregate of liabilities determined in the manner provided in the Schedule. It appears clear that in determining the compensation for undertaking-(i) certain important classes of assets are omitted from the heads (a) to (h); (ii) the method specified for valuation of lands and buildings is not relevant to determination of compensation, and the Value determined thereby in certain circumstances is illusory as compensation; and (iii) the principle for determination of the aggregate value of liabilities is also irrelevant. The undertaking of a banking company taken over as a going concern would ordinarily include the goodwill and the value of the unexpired period of long-term leases in the prevailing conditions in urban areas. But goodwill of the banks is not one of the items in the assets in the Schedule, and in cl. (f) though provision is made for including a part of the premium paid in respect of leasehold properties proportionat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank is insignificant and it may be ignored in valuing the undertaking as a going concern. Under cl. (f) of Sch. II provision is made for valuing a proportionate part of the premium paid in respect of all leasehold properties to the unexpired duration of the leases, but there is no provision made for payment of compensation for the unexpired period of the leases. Having regard to the present-day conditions it is clear that with rent control on leases operating in various States the unexpired period of lease has also a substantial value. The value determined by excluding important components of the undertaking, such as the goodwill and value of the unexpired period of leases, will not, in our judgment, be compensation for the undertaking. The other defects in the method of valuation, it was claimed by Mr. Palkhivala, are the inclusion of certain assets such as cash, choses in action and similar assets, which under the law are not regarded as capable of being acquired as property. This inclusion, it is contended, vitiates the scheme of acquisition. Under cl. (a) of Part 1-Assets-the amount of cash in hand and with the Reserve Bank and the State Bank of India (including foreign curren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return furnishes a wholly misleading result which cannot be called compensation. Value of immovable property has spiralled during the last few years and the rental which is mostly controlled does not bear any reasonable relation to the economic return from property. If the building is partly occupied by the Bank itself and partly by a tenant, the ascertained value will be twelve times the annual rental received, and the rent for which the remaining part occupied by the Bank may reasonably be expected to be let out. By the Act the corresponding new banks take over vacant possession of the lands and buildings belonging to the named banks. There is in the present conditions considerable value attached to vacant business premises in urban areas. True compensation for vacant premises can be ascertained by finding out the market value of comparable premises at or about the time of the vesting of the undertaking and not by capitalising the rental-actual or estimated. Vacant premises, have a considerably larger value than business premises which are occupied by tenants. The Act instead' of taking into account the value of the premises as vacant premises adopted a method which cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges in respect of which the amount has fallen due are liable to be included on the liabilities side. Under the head "liabilities" the total amount of all outside liabilities existing at the commencement of the Act, and all contingent liabilities which the corresponding new bank may reasonably be expected to be required to meet out of its own resources on or after the date of commencement of the Act will have to be included. When even contingent liabilities are included in the total amount of all outside liabilities, a mortgage debt or capital charge must be taken into account in determining the liabilities by which the aggregate of the value of assets is to be reduced, even if the period of the mortgage or capital charge has not expired. The liability under a mortgage or capital charge exists whether the period stipulated under the deed creating the encumbrance has expired or not. Under cl. (2) of Explanation 2, it. is provided that buildings which are partly occupied, the valuation shall be made on the basis of the "plinth area" occupied and multiplying it by the proportion which that area bears to the total plinth area of the buildings. The use of the expression "plinth area" ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account in respect of those secret reserves. The expression "books of the Bank" may not be equated with the balance sheets or the books of account only. The expression "liabilities" existing at the commencement of the Act includes "all debts due or to become due." Under the head "liabilities" contingent liabilities which the corresponding new bank may reasonably be expected to be required to meet out of its own resources on or after the date of commencement of the Act are to be debited. The clause is badly drafted. The present value of the contingent liabilities at the date of the acquisition and not the total contingent liabilities may on any rational system of accounting be debited against the aggregate value of the assets. For instance, if a banking company is liable to pay to its employees gratuity, the present value of the liability to pay gratuity at the date of the acquisition made on acturial calculation may alone be debited, and not the total face-value of the liability. The Attorney-General contended that even if the goodwill of a banking company is of substantial value, and inclusion of the goodwill is not provided for, or the value of buildings and lands is not the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a unit after awarding compensation for some items which go to make up the undertaking and omitting important items amounts to adopting an irrelevant principle in the determination of the value of the undertaking, and does not furnish compensation to the expropriated owner. The Attorney-General contended that the total value of the undertaking of the named banks even calculated according to the method provided in Sch. II exceeded the total market value of the shares, and on that account there is no ground for holding that the law providing for compensation denies to the shareholders the guarantee of the right to compensation under Art. 31(2). But there is no evidence on this part of the case. Compensation may be provided under a statute, otherwise than in the form of money : it may be given as equivalent of money, i.e. a bond. But in judging whether the law provides for compensation, the money value at the date of expropriation of what is given as compensation, must be considered. If the rate of interest compared with the ruling commercial rate is low, it will reduce the present value of the bond. The Constitution guarantees a right to compensation-an equivalent of the property e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks impair the guarantee under Art. 31(2) of the Constitution, we do not deem it necessary to decide whether Act 22 of 1969 violates the guarantee of freedom of trade, commerce and intercourse in respect of the (1) agency business; (2) business of guarantee and indemnity carried on by thenamed banks. V. Validity of the retrospective operation given to Act 22 of 1969 by s. 1(2) and S. 27- The argument raised by Mr. Palkhivala that, even if the Act is within the competence of the Parliament and does not impair the fundamental rights under Arts. 14, 19(1)(f) & (g), and 31(2) in their prospective operation, S. 1(2) and S. 27(2), (3) & (4) which give, retrospective operation as from July 19, 1969, are invalid, need not also be considered. Nor does the argument about the validity of sub-ss. (1) & (2) of S. II and S. 26 of the Act survive for consideration. Accordingly we hold that- (a) the Act is within the legislative competence of the Parliament; but (b) it makes hostile discrimination against the named banks in that it prohibits the named banks from carrying on banking business, whereas other Banks-Indian and Foreign-are permitted to carry on banking business, and even new Banks m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aries is Rs. 1186 crores. The 14 Scheduled Banks each of which has over Rs. 500 crores of deposit which are the subject matter of the 1969 Ordinance and the 1969 Act (hereinafter referred to for the, sake of brevity as the 14 banks) and have Rs. 2632 crores of deposit and the credit amounts to Rs. 1829 crores. In other words, these 14 banks have 56 per cent of the total deposit and little over 50 per cent of the total credit of the commercial banks. The36 scheduled banks which are 'outside the 1969 Ordinance and the 1969 Act have Rs. 296 crores of deposit, viz., 6.3 per centof the aggregate deposit and the credit is Rs. 197 crores, or in other words, 4.5 per cent of the total credit of the commercial banks. The 15 foreign banks have 10 per cent of the credit and 10 per cent of the deposit. These foreign banks have Rs. 478 crores of deposit and the credit is Rs. 385 crores. The 16 nonscheduled banks have Rs. 28 crores of deposit and the credit is about Rs. 16 crores. The non-scheduled banks have less than 1 per cent of the total credit and of the deposit. The aggregate deposits of the State Bank of India and its 7 subsidiaries and of the 14 banks is 82.8 per cent (26.5 % + 56.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e; ownership, possession, power or control of the existing banks in relation to the under'taking, whether within or without India, and all books of accounts, registers, records and all other documents of whatever nature relating thereto. Secondly, the undertaking shall also be deemed to include all borrowings, liabilities (including contingent liabilities) and obligations of whatever kind then subsisting of the existing bank in relation to the undertaking. Thirdly, if according to the laws of any country outside India, the provisions of the 1969 Act by themselves are not effective to transfer or vest any asset or liability situated in that country which forms part of the undertaking of an existing bank to, or in, the corresponding new bank, the affairs of the existing bank in relation to such asset or liability shall, on and from the commencement of this Act, stand entrusted to the chief executive officer for the time being of the corresponding new bank who will take all steps as required by the laws of the foreign country for the purpose of affecting such transfer or vesting. Fourthly, all contracts, deeds, bonds, agreements, powers of attorney, grants of legal representation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... banking. The Act of 1969 by reason of section 1(2) thereof is deemed to have come into force on 19 July, 1969. Section 27 of the Act contains four sub-sections providing for the repeal of the Ordinance and enacting first, that notwithstanding the repeal of the Ordinance, anything done or any action taken including any order made, notification issued or direction given, under the said Ordinance shall be deemed to have been done, taken, made, issued or given, as the case may be, under the corresponding provisions of this Act; secondly, that no action or thing done under the said Ordinance shall, if it is inconsistent with the provisions of this Act, be of any force or effect and thirdly notwithstanding anything contained in the Ordinance no right, privilege, obligation or liability shall be deemed to have been acquired, accrued or incurred thereunder. The petitioner Rustom Cavasjee Cooper is a share-holder of the Central Bank of India Ltd. and of 3 other existing banks and has current and fixed deposit accounts with these banks and is also a director of the Central Bank of India. The petitioner has challenged the validity of the 1969 Ordinance and the 1969 Act and has contended tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the earlier Madras Act of 1949 in validating actions taken under the earlier 1949 Act. The 1949 Act had been challenged in earlier proceedings when this Court held the 1949 Act to be ultra vires. Section 24 of the 1954 Madras Act was intended to validate a notification of acquisition of undertaking issued on 21 September, 1951 under the, 1949 Act by providing that orders made, decisions or directions given, notifications, issued, if they would have been validly made under the 1949 Act were declared to have been validly made except the extent to which the order was repugnant to the provisions of the later 1954 Act. In the Madras case it was contended that the notification under the 1949 Act in the year 1951 was not supported by any authority or any pre-existing law because there was no valid law. That contention was repelled by Gajendragadkar, J. who spoke for the Court, "If the Act is retrospective in operation and section 24 has been enacted for the purpose of retrospectively validating actions taken under the provisions of the earlier Act, it must follow by the very retrospective operation of the relevant provisions that at the time when the impugned notification was issued, thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be retrospective legislation affecting acquisition of property and such retrospective operation and validation of actions with regard to acquisition does not offend Article 31 (2) of the Constitution. In State of Mysore and Anr. v. D. Achiah Chetty etc.( [1963] 2 S.C.R. 747) Hidayatullah, C.J. considered the Bangalore Acquisition of Lands Act, 1962 which consisted of two sections whereof the second was in relation to validation of certain acquisition of lands and orders connected therewith. In short that section provided that all acquisition, proceedings, notifications or orders were validly made, held or issued with the result that the Act validated all past actions notwithstanding any breach of City of Bangalore Improvement Act, 1945. Hidayatullah, C.J. said "What the legislation has done, is to make retrospectively a single law for the acquisition of these properties. The legislature could always have repealed retrospectively the Improvement Act rendering all acquisitions to be -governed by the Mysore Land Acquisition Act alone. This power of the legislature is not denied. The resulting position after the Validating Act is not different. By the non-obstante clause the Improveme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p for consideration in the case of A. K. Gopalan v. State of Madras([1950] S.C.R. 88), Kania, C.J., Patanjali Sastri, Mahajan, Mukherjea and Das, JJ. expressed the opinion that Article 19 of the Constitution had no application to a law which related directly to preventive detention even though as a result of an order of detention, the rights referred to in sub,clauses (a) to (e) and (g) in general and sub-clause (d) in particular, of clause (1) of Article 19 might be restricted or abridged. Fazl Ali, J. however expressed a contrary opinion. The consensus of opinion in Gopalan's case(') was that so far as substantive law was concerned, Article 22 of the Constitution gave a clear authority to the legislature to take away fundamental rights relating to arrest and detention which were secured by the first two clauses of that Article. Mukherjea, J. said about preventive detention in relation to right of freedom under Article 19. ','Any legislation on the subject would only have to conform to the requirements of clauses (4) to (7) and provided that is done, there is nothing in the language employed nor in the context in which it appears which affords any ground for sugge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id not exclude the operation of Article 19(1)(f) in relation to Bombay Land Acquisition Act, 1940. In dealing with the contention as to whether the Bombay Act was hit by Article 19(1)(f) on the --round of unreasonable restriction having been imposed on the right of the respondent to acquire, hold and dispose of property Bose, J. said at page 780 of the Report "It is enough to say that Article 19(1)(f) read with clause (5) postulates the existence of property which can be enjoyed and over which rights can be exercised because otherwise the reasonable restrictions contemplated by clause (5) could not be brought into play. If there is no property which can be acquired, held or disposed of, no restriction can be placed on the exercise of the, right to acquire, hold or dispose of it, and as clause (5) contemplates the placing of reasonable restrictions on the exercise of those rights it must follow that Article postulates the existence of property over which these rights can be exercised". Bose, J. thereafter said that when every form of enjoyment of and interest in property is taken away leaving the mere husk of title Article 19(1)(f) is not attracted. The principle laid down in Bhanj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter the Constitution Fourth Amendment Act, 1955". It may be stated here that Kochuni's case(') was decided after the amendment of Article 31 and that was emphasised by Subba Rao, J. to establish that Article 3 1 ( 1 ) which dealt with deprivation of property other than by way of acquisition by the State was to be a valid law or in compliance with limitations imposed in Article 19(1) (f) and (5). The question whether Article 19(1) (f) is to be, read alongwith Article 31 (1) again raised its head in the case of Smt. Sitabati Devi' and Anr. v. State of West Bengal and Anr.( [1960] 3 S.C.R. 887) Kochuni's case(')was decided on 4 May, 1960 and Smt. Sitabati's case(') was decided on 1 December, 1961 though it was reported much later in the Supreme Court Reports. In Smt. Sitabati's case(') the question for consideration was the validity of the West Bengal Land (Requisition and Acquisition) Act, 1948. The Act provided for requisition and also for acquisition of land by the State Government for maintaining supplies and services essential to the life of the community and for other purposes mentioned therein. The Act also provided for payment of compensat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of property save by authority of law which it is beyond question, must be a valid law, i.e. it must be within the legislative competence of the State legislature and must not infringe any other fundamental right. Clause (2) Guarantees that property shall not be acquired or requisitioned [except in cases provided by clause (5)] save by authority of law providing for compulsory acquisition or requisition and further providing for compensation for the property so acquired or requisitioned and either fixes the amount of compensation or specifies the principles on which, and the manner in which the compensation is to be determined or given". Thereafter Shah, J. speaking for the Court said in repelling the contention advanced that the impugned statute was unreasonable. "This Court however held in Smt. Sitabati Devi v. State of West Bengal ([1967] 2 S.C.R. 949) that a law made under clause (2) of Article 31 is not liable to be challenged on the ground that it imposes unreasonable restrictions upon the right to hold or dispose of property within the meaning of Article 19(1) (f) of the Constitution. In Smt. Sitabati Devi's case(') an owner of land whose property was requisitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch will relate to all kinds of deprivation of property other than acquisition or requisition by the State and Article 31(2) which deals only with such acquisition or requisition of property. Thirdly, Article 31(2) and 31(2A) is a self contained code because (a) it provides for acquisition or requisition with authority of a law, (b) the acquisition or requisition is to be for a public purpose, (c) the law should provide for compensation by fixing the amount of compensation or specifying the principles on which, and the manner in which, the compensation is to be determined and given and (d) finally, it enacts that adequacy of compensation is not to be questioned. In the case of acquisition or requisition of property for public purpose with the authority of a law providing for compensation there is nothing more to guide and govern the law for acquisition or requisition than those crucial words occurring in clause (2). Finally, the amendment of Article 31 indicates in bold relief the separate and distinctive field of law for acquisition and requisition by the State of property for public purpose. Mahajan, J. in the case of State of Bihar v. Maharaja Darbhanga(1) spoke of public purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d prejudice. In regard to property rights the State generally has power to take away property and justify such deprivation on the ground of reasonable restriction in the interest of the general public, but in case of deprivation of property by acquisition or requisition the Constitution has conferred power when the law passed provides compensation for the property acquired by the State. Therefore the acquisition or requisition for public purpose is a restriction recognised by the Constitution in regard to property rights. In Kochuni's case() [1960] 3 S.C.R. 887) this Court approved the observation of Harries, C.J. in the case of Iswari Prosad v. N. R.Sen () A.T.R 1952 Cal. 273) that the phrase 'in the interest of the general public' means nothing more than 'in the public interest'. A public purpose is a purpose affecting the interest of the general public and therefore the Welfare State is given of guarantee, giving of indemnity and underwriting and (4) busiprinciple as to what the legitimate business of a bank is. Counsel for the petitioner contended that the word 'banking' would have the same meaning as the definition of 'banking' occurring i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f banker's business cannot be laid down as a matter of law. The nature of business is a question of fact, on which the jury are entitled to have-regard to thier own knowledge of business and it is in this context that the present case must be considered. It cannot be treated as if it was a matter of Pure law". In India, the Negotiable Instruments Act, 1881, Stamp Act, 1889 and Bankers Book Evidence Act, 1891 refer to the expression banking without a definition. In the Indian Companies Act. 1913 for the first time in 1936 provisions were introduced to govern banking companies. Entry 38 in List 1 of the Government of India Act, 1935 used the words "banking that is to say the conduct of banking business of a Corporation carried on only in that State". It must be observed that Entry 45 in List 1 of the 7th Schedule to the Constitution is only 'banking' and it does not contain any qualifying words like the conduct of business occurring in Entry 38 of the Government of India Act, 1935. The Indian Companies Act, 1913 in section 277 however defined `banking company' but not 'banking' by reference to the principal business and other businesses usually undertaken by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or not, the granting and issuing of letters of credit, traveller's cheques and circular notes, the buying, selling and dealing in bullion and specie, the receiving of all kinds of bonds, scrips or valuables on deposit or for safe custody or otherwise, the providing of safe deposit vaults, the collecting and transmitting of money and securities. Clause (b) speaks of acting as agents for any Goverment or local authority or any other person or persons; the carrying on of agency business of any description including the clearing and forwarding of goods, giving of receipts and discharges and otherwise acting as an attorney on behalf of the customers, but excluding the business of a company. Clause (h) speaks of undertaking and executing trusts. Clause (i) speaks of undertaking the administration of estates as executor, trustee or otherwise. It will, therefore, appear that under section 6(1) of the 1949 Act the four types of business disputed by counsel for the petitioner not to be within the businesses of a bank are recognised by the statute as letigimate forms of business of a banking company. Keeping valuables for safe custody, the providing of safe deposit vaults occur in clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (1) are normal recognised legitimate businesses and a banking company is therefore not entitled to participate in any other form of business. In the case of Commonwealth of Australia and others v. Bank of New South Wales and others([1950] A.C. 235), the Judicial Committee in hearing the appeal from the High Court of Australia considered the meaning and content of banking. The question for consideration was the effect of the Australian Banking Act, 1947 and section 46 thereof. At page 303 of the Report the Judicial Committee said "the business of banking, Consisting of the creation and transfer of credit, the making of loans, the purchase and disposal of investments and other kindred activities is a part of the trade, commerce and intercourse of a modern society and. in so far as it is carried on by means of inter-State transactions, is within the ambit of section 92". The business of a bank will therefore consist not only of the hard core of banking business defined in the 1949 Act but also of the diverse kinds of lawful business which have grown to be inextricably bound up in the form of chain or string transactions. The words 'banker' 'banking' have different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged in any one or more of the businesses as mentioned in clauses (1) to (17) thereof. It may be stated here that clauses (1) to (17) in section 277F of the Indian Companies Act, 1913 are similar to the various forms of business mentioned in section 6(1) of the 1949 Banking Regulation Act. In 1942, the Indian Companies Act, 1913 was amended by Act 21 of 1942 and it will appear from the statement of objects and reasons there that the definition of banking companies in section 277F of the Indian Companies Act created difficulties in deciding whether a company was a banking company or not. The chief difficulty arose out of the use of the term 'principal business' in section 277F. With the object of removing these difficulties a proposal was made that any company which used as part of its name the word 'bank', 'banker' or 'banking' shall be deemed to be a banking company irrespective of whether the business of accepting deposits of money on current account or otherwise subject to withdrawal by cheque, draft or order was its principal business or not. In that context Ordinance No. 4 of 1946 was promulgated under section 72 of the Govt. of India Act, 1935 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1949 and in the previous Acts referred to hereinbefore. It was suggested by counsel for the petitioner that by banking business is meant only the hard core of banking as defined in section 5(b) of the 1949 Act. It is unthinkable that the business of banks is only confined to that aspect and not to the various forms of business mentioned in section 6(1) of the 1949 Act. Receiving valuables on deposit or for safe custody and providing for safe deposit vaults which are contemplated in clause (a) of section 6(1) of the 1949 Act cannot be dissociated from other forms of unchallenged business of a bank mentioned in that clause because any such severance would be illogical particularly when deposit for safe custody and safe deposit vaults are mentioned in the long catalogue of businesses in clause (a). The agency business which is mentioned in clause (b) of section 6(1) is one of the recognised forms of business of commercial banks with regard to mercantile transactions and payment or collection of price. Agency is after all a comprehensive word to describe the relationship of appointment of the bank as the constituent's representative. The forms of agency transactions may be var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inistrative difficulties in determining whether a company was as banking company or not. A number of banking and loan companies particularly in Bengal claimed that they were not banking companies within the scope of the definition given in section 277F of the companies Act and in some cases their contention was upheld by the Court. The failure of the Travancore National & Quilon Bank Ltd. in 1938 and the subsequent banking crisis in South India posed a big question as to the desirability of better legislation. An attempt was made to prescribe certain minimum capital, the amount of capital depending upon the area of them operation of the bank. The banks were also asked to maintain a percentage of their assets in cash or approved securities, Thereafter the Indian Companies (Amendment) Act was passed in 1942 by which a proviso I was added to section 277F. to the effect that ;any ,company which used as part of its name the word 'bank', 'banker' or 'banking' shall be deemed to be a banking company notwithstanding the fact that the acceptance of deposits on current account subject to withdrawal by cheque is not the principal business of the company. In the mid-for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsacted by the bank. Section -35-A of the 1949 Act confers power on the Reserve Bank to give directions with regard to the affairs of a bank. These provisions indicate beyond any measure of doubt that all forms of business mentioned in section 6(1) of the 1949 Act are lawful, legitimate businesses of a bank as these have grown along with increase of trade and commerce. The word 'banking' has never had any static meaning and the only meaning will be the common understanding of men and the established practice in relation to banking. That is why all these disputed forms of business come within the legitimate business of a bank. The next question is the legislative competence in regard to the Act of 1969. Counsel for the petitioner contended that the Act was for nationalisation of banks and there was no legislative entry regarding nationalisation and therefore that was incompetent. There is no merit in that contention. The Act is for acquisition of property; the undertaking of a banking company is acquired. The legislative competence is under Entry 42 in List III of the 7th Schedule and also under Entry 45 in List 1 of the 7th Schedule. Entry 42 in List III is acquisition and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore it could not be said that acquisition of the undertaking was an infraction of any constitutional provision. The term ,undertaking' is explained in Halsbury's Laws of England, 3rd Ed. Vol. 6 paragraph 75 at page 43 to mean not the various ingredients which go to make up an undertaking but the completed work from which the earnings arise. As an illustration reference is made to mortgage of the undertaking of a company. In Gardner v. London Chatham and Dover Railway Co.(') the undertaking of a railway company which was pledged was held to be a railway which was to be made and maintained, by which tolls and profits were to be earned, which was to be worked and managed by a company, according to certain rules of management, and under a certain responsibility. In an undertaking there will be money for the working of the undertaking and money will be earned thereby. Again in Re: Panama, New Zealand and Australian Royal Mail Company the undertaking of a steamship company was explained to have reference not only to all the property of the company which existed at the date of the debenture but which might become the, property of the company and further that the word ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner has over or in respect of a thing, tangible or intangible, or the word 'property' may mean the thing itself over or in respect of which the owner may exercise those rights. In the case of Commissioner,, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt("), this Court again gave wide meaning to the word 'property' and Mukherjea, J. said that there is no reason why the word 'property' as used in Article 19(1)(f) of the Constitution should not be given a liberal and wide connotation and would not be extended to those well recognised types of interest which have the insignia or characteristics of proprietary Tight. In the case of J. K. Trust, Bombay M. The Commissioner of Income Tax Excess Profits Tax, Bombay (4 ) this Court held the managing agency business to be a property. The undertaking of a bank will therefore be the entire integrated Organisation consisting of all property, movable or immovable and the totality of undertaking is one concept which is not divisible into components or ingredients. That is why in relation to a company the word 'undertaking' is used in various statutes in order to reach every ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the word 'in particular' to show that it -indicated that the second limb was only an instance of the first limb of the Article. The Constitution First Amendment Act -of 1951 was enacted really to enable the State to carry on business to the exclusion, complete or partial of citizens or otherwise as will appear from the amendment of Article 19(6). In the case of Akadasi Padhan v. State of Orissa(') this Court considered the Orissa Kendu Leaves (Control of Trade) Act, 1961 by which the State acquired monopoly in the trade of Kendu leaves and put restrict-ions on the fundamental rights of the petitioner. In that case, Gajendragadkar, J. speaking for the Court referred to the decision of the Allahabad High Court in Motilal v. Government of State of Uttar pradesh (2) where a monopoly of transport sought to be created by the U.P. Government in favour of the State operated Bus Service known as the'Government Roadways' was struck down as unconstitutional because such a monopoly totally deprived the citizens of their rights and that is why Article 19(6) came to be amended. The necessity of the amendment of Article 19(6) was explained in the case of Akadasi Padhan(1). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -section there introduced by the words 'in particular' was held to be a purpose connected with the performance of the function within the meaning of the first part of the sub-section. The language of the subsection in the case before the House of Lords is entirely different from the language in Article 19(6). Article 19(6) in the two limbs and in the two sub-articles of the second limb deals with separate matters and in any event State monopoly in respect of -trade or business is not open to be reviewed in Courts on the ,-round of reasonableness. This Court in the case of Municipal Committee of Amritsar v. State of Punjab([1969] 3 S.C.R. 447) held that so far as monopoly business by the State was concerned under Article 19(6) it was not open to challenge. The four businesses which were disputed by counsel for the petitioner to be within the business of banking were contended to be not only acquisition of property in violation of Article 19 (1) (f) but also not to be reasonable restriction in the interest of the general public under Article 19(5) or under Article 19(6). Emphasis was placed on section 15(2) of the Act of 1969 to contend ,that after the acquisition of the und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not be available at all. The express making of the provision obviously for greater safety cannot change the position. The petitioner's contention on Article 19(6) therefore fails. Counsel for the petitioner contended that section 11 of the 1969 Act suffered from the vice of excessive delegation and there were no guidelines for reaching the objectives set out in the Preamble of the Act and the decision of Government regarding policy involving public interest was made final and therefore it was unconstitutional. Sect-ion 11 of the Act of 1969 is in two subsections. The first subsection enacts that corresponding new bank shall, in the discharge of its functions, be guided by such directions in regard to matters of policy involving public interest as the Central Government may, after consultation with the Governor of the Reserve Bank, give. The second sub-section enacts that if any question arises whether a direction relates to a matter of policy involving public interest, it shall be referred to the Central Government and the decision of the Central Government thereon shall be final. Section 25(1)(c) of the Act of 1969 provides that the words 'corresponding new bank cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directions. I have already referred to the Reserve Bank of India Act, 1934. There are similar statutes conferring, powers on the Government to give directions, namely, State Bank of India Act, 1955, State Financial Corporation Act, 1951, University Grants Commission Act, 1956 Life Insurance Act, 1956, Deposit Insurance Act, 1961, National Cooperative Development Corporation Act, .1962, Agricultural Refinance Corporation Act, 1963 and State Agricultural Credit Corporations Act, 1968. There are English statutes which contain similar provisions of exercise of power or directions by the Government in regard to the affairs of the undertakings covered by the statutes.' These are the Bank of England Act, 1946, Cotton (Centralised Buying) Act, 1947, Coal Industry Nationalisation Act, 1946, Civil Aviation Act, 1946, Electricity Act, 1947, Gas Act, 1948, Iron and Steel Act, 1949 and Air Corporations Act, 1949. It is explicable that where the Government acquires undertakings of industries, the matters of policy involving public interest or national interest should be left to be decided by the Government. There is nothing unconstitutional in such provisions. The Preamble to the Act of 196 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, complete or partial, of the 14 banks. Counsel for the-petitioner contended that the 1969 Act violated the provisions of Article 14 on these grounds : First, the Act discriminated against 14 banks as against other Indian scheduled banks, secondly, the selection of 14 banks has no reasonable connection to the objects of the Act; thirdly, banks which may be described to be inefficient and which are liable to, be acquired under section 36AE of the 1949 Act are not acquired whereas 14 banks who have carried on their affairs with efficiency are acquired; fourthly under section 15 (2) (d) (e) of the 1969 Act the 14 banks cannot do any banking business whereas other Indian scheduled banks or any other new banking company can do banking business. In other to appreciate these contentions it is necessary to remember the background of growth of Indian banks. At the beginning I referred to the position that State Bank of India and its several subsidiaries and the 14 banks occupy today in contrast with foreign banks and other scheduled or non-scheduled Indian banks. These 14 banks are not in the same class as other scheduled banks. The classification is on the basis of the 14 banks having d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Coir Industry Act was considered in relation to registration of dealers for export. The Act provided minimum quantity of export preceding 12 months the commencement of the Act as one of the qualifying terms for registration. This quantitative test was held good. The legislative policy as to the necessity is a matter of legislative judgment and the Court will not examine the propriety of it. The legislation need not be all embracing and it is for the legislature to determine what categories will be embraced. In Dalmia's case(') it was said that the two tests of classification were first that there should be an intelligible differentia which distinguished persons or things grouped from others left out and secondly the differentia must have a rational relation to the object sought to be achieved by the statute. There has to. be a line of demarcation somewhere and it is reasonable that these 14 banks which are in a class by themselves because of their special features in regard to deposit, credit, administration, Organisation should be prohibited from carrying on banking business. These special circumstances are the reasons for classification. This distinction between the 14 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... banking business to nullify the very object of the Act. Counsel for the petitioner contended that the Act of 1.969 infringed Article 31(2) because there was no just compensation. It was said that compensation in Article 31 (2) meant just compensation and it the 1969 Act did not -aim at just compensation, it would be unconstitutional. It was contended that cash could not be taken and further that the four disputed businesses could not be acquired. I have already expressed my view that the Act required the entire undertaking of the banks, and, therefore, there is no question of taking of cash. I have also expressed my view that the four disputed businesses are all within the business of bank, and, therefore, the Act is valid. It was said by counsel for the petitioner that the word compensation in Article 31(2) was given the meaning of just equivalent in earlier decisions of this Court and since the word compensation' was retained in Article 3 1 (2) after the Constitution Fourth Amendment Act, 1955 there was no change in the meaning of the expression 'compensation' and it would have the same meaning of just equivalent. In view of the fact that after the Constitution Four ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fringed because the Act did not provide for payment of compensation within the meaning of Article 31 (2). Subba Rao, J. speaking for the Court said that if the term 'compensation' had received judicial interpretation it must be assumed that the term was used in the sense in which it had been judicially interpreted unless a contrary intention appeared. That is how reference was made to the decision of this Court in Bela Banerjee's case(') to emphasise that a law for requisition or acquisition should provide for a just equivalent of what the owner has been deprived of. Subba Rao, J. then dealt with the clause excluding the jurisdiction of the Court where the word 'compensation' was used and said at page 627. of the Report "The argument that the word "compensation" means 'just equivalent' for the property acquired, and, therefore, the Court can ascertain whether it is just equivalent or not makes the amendment of the Constitution nugatory. It will be arguing in a circle. Therefore, a more reasonable interpretation is that neither the principles prescribing the "just equivalent" nor the "just equivalent" can be questioned by the Court on the ground of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated transfer of ownership by law from private owners to the local authority. It was -argued that under section 53 of the Bombay Act when a plot was reconstituted and out of that plot a smaller area was given to the owner and the remaining area was utilised for public purpose the area so utilised vested in the local authority for a public purpose, but the Act did not provide for giving compensation which was a just equivalent of the land expropriated at the date of extinction of interest and therefore Article 31(2) was infringed. It was also -argued that when the final scheme was framed in lieu of the ownership of the original plot and compensation in money was determined in respect of the land appropriated to public purpose such a scheme for compensation violated Article 31(2) because compensation for the entire land was not provided and secondly payment of compensation in money was not provided in respect of the land appropriated to public use. Shah, J. speaking for the Court in the case of Shantilal Mangaldas([1969] 3 S.C.R. 341) said that the decision of this Court in the cases of Bela Banerjee([1954] S.C.R. 558) and Subodh Gopal Bose([1954] S.C.R. 587) "raised more problems t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uired or lay down principles which will lead to that result. If the principles laid down are relevant to the-fixation of compensation and are not arbitrary the adequacy of the resultant product cannot be questioned in the court of law. The validity of the principles judged by the above tests falls within judicial scrutiny and if they stand the test the adequacy of the product falls outside justification". In Metal Corporation case(') compensation was to be equated to the cost price in the case of unused machinery in good condition and written down value as understood in income-tax law was to be the value of the used machinery and both were said to be irrelevant to the fixation of the value of machinery as on the date of acquisition. Shah, J. speaking for the Court expressed inability to agree with the part of the judgment and then said "the Parliament has specified the principles for determining compensation of undertaking of the company. The principles expressly related to the determination of compensation payable in respect of unused machinery in good condition and used machinery. The principles were not irrelevant to the determination of compensation and the compensation was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpensation and its exclusion resulting in inadequacy of compensation. I am, therefore, of opinion that if the amount fixed is not obviously -and shockingly illusory or the principles are relevant to determination of compensation, namely, they are principles in relation to property acquired or are principles relevant to the time of acquisition of property there is no infraction of Article 31(2) and the owner cannot impeach it on the ground of 'just equivalent' of the property -acquired. Counsel on behalf of the petitioner contended that section 6 of the 1969 Act was an infraction of Article 31(2) on these grounds. First, no time limit was mentioned with regard to payment of compensation in section 6(1); secondly, section 6(6) was an unreasonable restriction; thirdly, the four disputed businesses are not subject matter of acquisition for public purpose; fourthly, debentures cannot be subject matter of acquisition; fifthly, currency notes, cash, coins cannot be subject matter of acquisition. It was said that securities and cash which are maintained under section 42 of the Reserve Bank Act, 1934 and section 24 of the 1949 Act can be taken but reserves and investments and share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordance with the provisions of Part II. in Part 1 assets are enumerated. Counsel for the petitioner contended that with regard to assets either there was no principle or the principle was irrelevant or the compensation was illusory or it was not just equivalent. As to securities, shares, debentures Part 1 (c) explanation (iv) was criticised on the ground that there was no principle because period was not fixed and was left to be determined 'by some other authority. Explanations (iv) and (v) to Part 1 (c) will be operative only when market value of shares, debentures is not considered reasonable by reason of its having been affected by abnormal factors or when market value of shares debentures is not ascertainable. In the -former case the basis of average market value over any reasonable period and in the latter case the dividend paid during 5 years and other relevant factors will be considered. In both cases principles have been laid down, namely, how valuation will be made taking into account various factors and these principles are relevant to determination of compensation for the property. Part 1(c) Explanation I was criticised by counsel for the petitioner to be an instan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to determination of compensation. Furthermore, there was no case in the petition that there was land with building side by side with vacant land. Another criticism with regard to Explanation 2 (1) (i) was that amount required for repairs which was to be deducted in finding , out ascertained value should not be deducted against capital value. I am unable to accept the contention because this deduction on account of maintenance and repairs is essential in the capitalisation method. It was next said by counsel for the petitioner that Explanation 2(1) (ii) which speaks of deduction of insurance premium would reduce the value. Insurance would also be an essential deduction in the capitalisation method and it could not be assumed that the bank would insure for a value higher than what was necessary. Annual rent would also vary in different buildings. Amounts mentioned in Explanations 2(1) (iii) and (iv) were said on behalf of the petitioner not to be deductible against capital value because annual charge or ground rent would be paid from income. These relate to Municipal tax and ground rent which are also taken into consideration in capitalisation method. Payment of fax or ground rent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g. Counsel for the petitioner contended that Part 1(h) which spoke of market or resaleable value of other assets did not include goodwill, benefit of contract, agencies, claims in litigation, and, therefore, there was no compensation for these. Part 1 (h) is 'a residuary provision, Whatever appears in books would be included. Goodwill does not appear in the books. Goodwill may arise when an undertaking is sold as a going concern. The contention as to exclusion of goodwill goes to the question of adequacy and will not vitiate the principle of valuation which has been -laid down. Reference may be made to Schedule VI of the Companies Act which refers to goodwill under Fixed Assets but the Banking Regulation Act, 1949 does not contain goodwill under property and assets. Goodwill in the words of Lord Elden in Cruttwell v. -Lye(') means "the probability that tile old customers will resort to the old place". The term 'goodwill' is generally used to denote the benefit arising from connection and reputation. Whether or not the, goodwill has a saleable value the question of fact is to be determined in each case. Upon sale of a business there may be restriction as to user of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f one principle may confer lesser sum of money than another but that will not be, a ground for saying that the principle is not relevant. The criticism on behalf of the petitioner that compensation was illusory is utterly unmeritorious. The Attorney General contended that even if Article 1 9 (1) (f) -or 19(1) (g) applied the 1969 Act would be upheld as a reasonable -restriction in the interest of the general public. It is said that social control scheme is a constitutional way of fulfilling the Directive Principles of State Policy. The 14 banks paid a total of 4.35 crores of rupees as dividend in 1968. This amount is said in the affidavit of the respondent not to be of great significance and that the bank should expand and attract more deposits. The comparative position of India along with other countries is focussed in the study group Report referred to in the affidavit in opposition. Commercial bank deposits and credit as proportion of national income form hardly 14% and 10% respectively in India as against 84% and 19% in Japan, 56% and 36% in U.S.A., 49% and 29% in Canada whereas the average population served in India by banks is as high as 73000 as against 4000 in U.S.A. and C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to make it clear that in my opinion Articles 19 (1) (f ) and (g) do not at all enter the domain of Article 3 1 (2) because a legislation for acquisition and requisition of property for public purpose is not required to be tested again on the touchstone of reasonableness of restriction. Such reasonable restriction is inherent and implicit in public purpose. That is why purpose is dealt with separately in Article 31(2). The validity of the Ordinance of 1969 was challenged by contending that the satisfaction of the President under Article 123 was open to challenge in a court of law. It was said that the satisfaction of the President was objective and not subjective. The power of the President under Article 123 of the Constitution to promulgate Ordinances is when both the Houses of Parliament are not in session, ,and this power is co-extensive with that of the legislature and the President exercises this power when he is, satisfied that circumstances exist which render it necessary for him to take immediate action. The power of promulgating Ordinance is of historical antiquity and it has undergone, change from. time to 'time. In the East India Company Act, 1773 under section 36 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he context in which that power is reposed in the President. When power is conferred on the President to promulgate Ordinances the satisfaction of the President is subjective for these reasons. The power in Article 123 is vested in the President who is the executive head and the circumstances contemplated in Article 123 are a guide to the President for exercise of such power. Parliament is not in session throughout the year and during the gaps between sessions the legislative power of promulgating Ordinance is reposed in the President in cases of urgency and emergency. The President is the sole judge whether he will make the Ordinance. The President under Article 74(1) of the Constitution acts on the advice of Ministers. Under Article 74(2) the advice of the Ministers is not to be enquired into by any Court. The Ministers under Article 75(3) are responsible to Parliament. Under Article 123 the Ordinances are limited in life and the Ordinance must be laid before Parliament and the life of the Ordinance may be further shortened. The President under Article 361 (1) is not answerable to any Court for acts done in the performance of his duties. The Ministers are under oath of secrecy und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the ratio of the decision in Barium Chemicals case(-). In order to entitle the Central Government to take action under section 237 of the Companies Act, 1956 there is to be the requisite opinion of the Central Government and the circumstances should exist to suggest that the company's business was being conducted as laid down in sub-clause (1) or that the persons mentioned in sub-clause (2) were guilty of fraud, misfeasance or misconduct. The opinion of the Central Government was subjective but it was said that the condition precedent to the formation of such opinion was that there should be circumstances in existence and the recitals of the existence of those circumstances did not preclude the court from going behind those recitals and determining whether in fact the circumstances existed and whether the Central Government in making the order had taken into consideration any extraneous consideration. In the case of Rohtas Industries reference was made to English, Canadian and New Zealand decisions. The Canadian decision related to power of the Liquor Commission to cancel the liquor licence and it was held to be an exercise of discretion. The New Zealand decision related to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here is no allegation of Mala fide. It was said on behalf of the petitioner that the fact that Parliament would be in session on 21 July, 1969 and that the Ordinance was promulgated on Saturday, 19 July, 1969 was indicative of the fact that the Ordinance was not promulgated legitimately but in a hasty manner and the President should have waited. If the President has power when the House is not in session he can exercise that power when he is satisfied that there is an emergency to take immediate action. That emergency may take place even a short time before Parliament goes into session. It will depend upon the circumstances which were before the President. The fact that the Ordinance was passed shortly before the Parliament session began does not show any mala fide. It was said that circumstances were not set out in the affidavit and therefore the Court was deprived of examining the same. The Attorney General rightly contended that it was not for the Union to furnish facts and information which were before President because first such information might be a State secret, secondly, it was for the party who alleged non-existence of circumstances to prove the same and thirdly the res ..... X X X X Extracts X X X X X X X X Extracts X X X X
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