TMI Blog1969 (1) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... ecause of the close proximity of the decisions I it escaped me that the discussion was in the wrong case and the other merely followed it. My brother Shah has not made the two cases to fall in their proper places. It is certainly out of the question that the adequacy ,of compensation (apart from compensation which is illusory or proceeds upon principles irrelevant to its determination) should be questioned after the Amendment of the Constitution The Amendment was expressly made to get over the effect of the earlier cases which had defined compensation as just equivalent. Such a question could not arise after the amendment. I am in agreement that the remarks in P. Vajravelu s case(1) must be treated as obiter and not binding on us. I am also of the opinion that the Metal Corporation case(s) was wrongly decided and should be overruled. Shah, J. In a writ petition field by the first respondent Shantilal Mangaldas the High Court of Gujarat has declared ss. 53 and 67 of the Bombay Town Planning Act 27 of 1955, ultra vires, insofar. as they authorise the local authority, 2nd respondent in this appeal, to acquire lands under a town-planning scheme, and as a corollary to that view has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isition of plot No. 178 on the plea that the Act infringed the fundamental right of the first respondent guaranteed by Art. 31(2) of the Constitution. The scheme was sanctioned by the Government of Gujarat on July 21, 1965, and the final scheme came into operation on September 1, 1965. The High Court entered upon an elaborate analysis of the provisions of the Act and held : Section 53 read with section 67 in so far as it authorises acquisition of land by the local authority under pending schemes continued under section 90 of the new Act must, therefore, be held to be violative of Article 31(2) and the acquisition of petitioners lands in the various petitions under the City Wall Improvement Town Planning Scheme No. 5 must be held to be invalid. , and on that view the High Court did not consider the other contentions raised on behalf of the first respondent. With certificate granted by the High Court, this appeal is preferred by the State of Gujarat. The declaration of intention, preparation of the draft scheme and proceeding for preparation of the final scheme were made under Act 1 of 1915. Intimation of the amount of compensation determined to be payable to the first respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e be approved by a local authority or directed by the State Government in that behalf, By making it obligatory upon a local authority to prepare a development plan under Bombay Act 27 of 1955 it was clearly intended that the Town Planning Schemes should form part of a single cohesive pattern for development of the entire area over which the local authority had jurisdiction. Chapter III of, Bombay Act 27 of 1955 relates to the making of the Town Planning Scheme. Chapter IV deals with the declaration of intention to make a scheme and making of a draft scheme. Chapter V deals with the appointment of Town Planning Officers and the Board of Appeal and their powers. Chapter VI deals with the splitting up of schemes into sections and preliminary schemes. Chapter VII deals with Joint Town Planning Schemes and Ch. VIII with finance. Under Bombay Act 27 of 1955 after a development plan is sanctioned, the local authority makes a declaration of its intention to make a scheme and then prepares a draft scheme setting out the size and shape of every reconstituted plot, so far as may be, to render it suitable for building purposes and where the plot is already built upon, to ensure that the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and so that the total area included in the schem e may conduce to the health and well-being of the residents. Since the town-planning scheme is intended to improve the sanitary conditions prevailing in a locality, the owners of plots are required to maintain land open around their buildings. The object of the scheme being to provide amenities for the benefit of the residents generally the area in the occupation of the individual holders of land is generally reduced, for they have to contribute out of their plots, areas which are required for maintaining the services beneficial to the community. Under the Act the cost of the scheme is to be met wholly Pr in part by contributions to be levied by the local authority on each plot included in the final scheme calculated in proportion to the increment which is estimated to accrue in respect of each plot. To ensure that no undue hardship is caused and owners of plots have an opportunity of raising objections to the provisions of the scheme including its financial provisions, power is conferred upon the Town Planning Officer to entertain and hear objections against the reconstitution of the plots and relating to: matters specified in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The owner who is deprived of his land has to be compensated, and the owner who obtains a reconstituted plot in surroundings which are conducive to better sanitary living conditions has to contribute towards the expenses of the scheme. This is because on the making of a town planning scheme the value of the plot rises and a part of the benefit which arises out of the un L8Sup.C.I/69--4 earned rise in prices is directed to be contributed towards financing of the scheme which enables the residents in that area to more amenities, better facilities and healthier living conditions. For that purpose provision is made in S. 65 that the increment shall be deemed to be the amount by which at the date of the, declaration of intention to make a scheme, the market value of a plot included in the final scheme, estimated on the assumption that the scheme has been completed, would exceed at that, the market value of the same plot estimated without reference to improvements contemplated by the scheme. By S. 66 the cost of the scheme is required to be met wholly or in part by contributions to be levied by the local authority on each plot included in the final scheme calculated in proportion to the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Constitution, and on that account there is acquisition of land within the meaning of Art. 31(2) of the Constitution, and the Act is not protected by Art. 31(5)(b)(ii). The High Court further held that in determining the compensation payable to the owner of the land which is appropriated to public purposes, the increase in the value of the reconstituted plot allotted cannot be taken into account, because it is not attributable or relatable to the acquisition of their plots, but is a benefit which they share in common with the other members of the community as a result of the scheme, quite irrespective whether their plots are acquired or not , and it is, therefore, not liable to be taken into account in determining whether the compensation received by them for acquisition of their plots was adequate, that in any event the increment in the value of the, plot allotted to the owner is uncertain as well. as irrelevant as a principle for determining compensation, since it is quite possible that no Plot may, be allotted to an owner of land in a Town Planning Scheme. Further, observed the High Court, compensation for loss of land being determined under s. 67 of the Act only on the basi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sanitation for it is enacted with the object of promotion of public health and on that account falls within the terms of Art. 31(5) (ii) of the Constitution, and is exempt from the operation of cl. (2) of Art. 31. Alternatively, Mr. Bindra contends that the Act specifies the principles on which compensation is to be determined and the guarantee under Art. 31(2) is on that account not infringed. Counsel urges that the object of the Town Planning Act in pith and substance is to facilitate planned development, to ensure healthy surroundings to the people living in congested localities and to provide them with sanitation and other urban facilities conducive to healthy living and on that account is an Act falling within Entry 6 of List If of the Seventh Schedule- Public health and sanitation , and Entry 20 of List III- Economic and social planning . But the competence of the Legislature to enact legislation on the subject matter of the Act and for the object intended to be served thereby are irrelevant in determining whether any fundamental right of a person is infringed by the impugned Act. The doctrine of pith and substance is applicable in determining whether a statute is within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and given. If the conditions for compulsory acquisition or requisition are fulfilled, the law is not liable to be called in question before the courts on the ground that the compensation provided by the law is not adequate. Clause (2A) is in substance a definition clause : a law which does not provide for the transfer of the ownership or right to possession of any property to the State or to a corporation owned or controlled by the State is not to be deemed to provide for the compulsory acquisition or requisitioning of property, notwithstanding that it deprives any person of his property. The following principles emerge from an analysis of clauses (2) and (2A): compulsory acquisition or requisition may be made for a public purpose alone, and must be made by authority of law. Law which deprives a person of property but does not transfer ownership of the property or right to possession of the property to the State or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not possible to say that a law for permanent acquisition of property is such a law. The object of the acquisition may be the opening of a public park for the improvement of public health or the erection of an embankment to prevent danger to life or property from flood. Whatever the object of the acquisition may be, the acquired property belongs to the State. . . Clause (5)(b)(ii) was intended to be an exception to cl. (2) and must be strictly construed. Acquisition of property for the opening of a public park or for the erection of dams and embankments were always made under the Land Acquisition Act, and it could not have been intended that such acquisition could be made under laws coming within the purview of cl. (5)(b)(ii) without payment of compensation. The first contention urged by Mr. Bindra cannot, therefore, be accepted. But, in our judgment, the contention urged by Mr. Bindra for the State of Gujarat that ss. 53 and 67 of the Act regarded as law for acquisition of land for public purposes do not infringe the fundamental right under Art. 31(2) of the Constitution is acceptable, because the Act specifies the principles on which compensation is to be determined and g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ensation for the entire land is not provided; and (2) that payment of compensation in money is not provided even in respect of land appropriated to public use. The second branch of the argument is not sustainable for reasons already set out, and the first branch of the argument is wholly without substance. Section- 53 does not provide that the reconstituted plot is transferred or is to be deemed to be transferred from the local authority to the owner of the original plot. In terms s. 53 provides for statutory readjustment of the rights of the owners of the or plots of land. When the scheme comes into force all rights in the original plots are extinguished and simultaneously therewith ownership. springs in the reconstituted plots. There is no vesting of the original plots in the local authority nor transfer of the rights of the local authority in the reconstituted plots. A part or even the whole plot belonging to an owner may go to form a reconstituted plot which may be allotted to another person, or may be appropriated to public purposes under the scheme. Me source of the power to appropriate the whole or a part of the original plot in forming a reconstituted plot is statutory. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be determined and given; and (2) that the scheme for recompense for loss is not a scheme providing for compensation. It is true that under the Act the market value of the land at the date of declaration of intention to make a scheme determines the amount to be adjusted, and that is the guiding rule in respect of all lands covered by the scheme. The High Court was, in our judgment, right in holding that enactment of a rule determining payment or adjustment of price of land of which the owner was deprived by the scheme estimated on the market value on the date of declaration of the intention to make a scheme amounted to specification of a principle of compensation within the meaning of Art. 31(2). specification of principles means laying down general guiding rules applicable to all persons or transactions governed thereby. Under the Land Acquisition Act compensation is determined on the basis of market value of the land on the date of the notification under s. 4(1) of that Act. That is a specification of principle. Compensation determined on the, basis of market value prevailing on a date anterior to the date of extinction of interest is still determined on a principle specifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty. Section 299 of the Government of India Act, 1935, insofar as it is material, provided:- (1) No person shall be deprived of his property save by authority of law. (1) [1965] 1 S.C.R. 614. (2) [1967] 1 S.C.R. 255. (2) Neither the Federal or a Provincial Legislature shall have power to make any law authorising the compulsory acquisition for public purposes of any land, or any commercial or industrial undertaking, or any interest in, or in any company owning, any commercial or industrial undertaking, unless the law provides for the payment of compensation for the property acquired and either fixes the amount of the compensation, or specifies the principles on which, and the manner in which, it is to be determined. Article 31 as originally enacted in the Constitution was substantially in the same terms as s. 299. Clause (1) of Art. 31 was enacted verbatim in the same terms as cl. (1) of s 299. Clause (2) of Art. 31 reproduced with some variation the principle of s. 299(2). It was thereby enacted: No property, movable or immovable, including any interest in, or in any company owning, any commercial or industrial undertaking, shall be taken possession of or acquired ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isition of land for setting migrants from East Bengal on account of communal disturbances, fell to be determined. Compensation payable for compulsory acquisition of land needed for the purposes specified was under the Act was not to exceed the market value of the land on December 31, 1946. The Calcutta High Court declared the provisions of s. 8 ultra vires, and this Court confirmed that decision. It was observed by this Court that Entry 42 of List III of the Seventh Schedule conferred on the Legislature the discretionary power of laying down the principles which govern the determination of the amount to be given to the owner of the property acquired and Art. 31(2) required that such principles must ensure that what is determined as payable is compensation, that is, a just equivalent of what the owner has been deprived. In delivering the judgment of the Court, Patanjali Sastri, C.J. observed While it is true that the legislature is given the discretionary 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 princ iples must ensure that what is determined as payable must be compensati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isitioning of property for the purposes of the Union ; Entry 36 of List II- Acquisition or requisitioning of property, except for the purposes of the Union, subject to the pro- visions of Entry 42 of List 111 ; and Entry 42 of List III- Principles on which compensation for property acquired or requisitioned for the purposes of the Union or of a State or for any other public purpose is to be determined, and the form and the manner in which such compensation is to be given . By cl. (2) of Art. 31 exercise of the power to legislate for compulsory acquisition of property was subject to the condition that the law for Compulsory acquisition for public purposes either fixed the amount of the compensation or specified the principles on which, and the manner in which the compensation was to be determined and given. The expression compensation according to this Court in Mrs. Bela Banerjee s case(1) meant a just equivalent or full indemnification of the expropriated owner, and the expression deprived had the same connotation as taking possession of or acquisition. According to Subadh Gopals CaSe(2) the law providing for acquisition or extinction of interest of private owners in propertie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of compensation payable for acquisition of lands houses, incorporeal rights, etc. in determining compensation payable under the Land Acquisition Act, special adaptability to schemes of development and potentialities, but not the urgent need of the acquirer and the disinclination of the vendor, have to be taken into account. The Land Acquisition Act provides for determination of compensation by(1) L.R. 66 I.A. 104. (2) [1954] S.C.R. 558. reference to the market value subject to certain matters being taken into account and some others being excluded as set out in ss. 23 and 24 of that Act. The rules relating to determination of value in regard to the agricultural and non-agricultural lands, house-sites, buildings, machinery and other properties, greatly vary and the value in respect of the same item of property by the application of different rules may lead to vast disparities. Right to compensation, in the view of this Court, was intended by the Constitution to be a right to a just equivalent of the property of which a person was deprived. But the just equivalent was not capable of precise determination by the application of any recognized rules. The decisions of this Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive operation. The result was that in cases where acquisition was made pursuant to the statutes enacted before April 27, 1955, the law declared in Mrs. Bela Banerjee s case(1) and Subodh Gopal Bose s case(2) continued to apply . In State of Madras v. D. Namasivaya Mudaliar and Others(3) this Court held that the Madras Lignite, (Acquisition of Land) Act 1953, which came into force on August 20, 1953 in so far as it purported to provide for award of compensation for compulsory acquisition of land, which was not to include any rise in value between a fixed date and the date of issue of the notification under S. 4(1) of the Land Acquisition Act and denied compensation for the value of nonagricultural improvements since that fixed date, was invalid as infringing the guarantee under Art. 31(2) of the Constitution before it was amended. In N. B. jeejeebhoy s case(4) this Court held that ascertainment of compensation on the basis of the value of the lands acquired as on January 1, 1948, and not as on the date on which the notification under s. 4 of the Land Acquisition Act was issued under the provisions of the Land Acquisition (Bombay Amendment) Act, 1948, was arbitrary and violated S. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to the amendment made in cl. (2) of Art. 31 by the Constitution (Fourth Amendment) Act, 1955, it is clear that adequacy of compensation fixed by the Legislature or awarded according to the principles specified by the legislature for determination is not justiciable. it clearly follows from the terms of Art. 31 (2) as amended that the amount of compensation payable, if fixed by the Legislature, is not justiciable, because the challenge in such a case, apart from a plea of abuse of legislative power, would be only a challenge to the adequacy of compensation. If compensation, fixed by the Legislature-and by the use of the expression compensation we mean what the Legislature justly regards as proper and fair recompense for compulsory expropriation of property and not something which by abuse of legislative power though called compensation is not a recompense at all or is something illusory-is not justiciable, on the plea that it is not a just equivalent of the property compulsorily acquired, is it open to the Courts to enter upon an enquiry whether the principles which are specified by the Legislature for determining compensation do not award to the expropriated owner a just equiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stitution. The Act made provisions which departed from the Land Acquisition Act, 1894, in determining compensation in three respects- (1) compensation was to be determined on the basis of average market value of the land during five years immediately preceding the date of the notification under S. 4(1) of the Land Acquisition Act or the market value on the date of the notification whichever was less; (2) the solarium payable to the owner for compulsory acquisition was to be 5% of the market value; and (3) that the owner was not to get any compensation for the suitability of the land for use other than the use to which it was put on the date of publication of the notification i.e. potentiality of the land was to be discarded. This Court held that in making this three-fold modification in the application of the Land Acquisition Act for determining compensation payable the statute did not infringe the guarantee contained in Art. 31(2). It only specified certain principles for determination of compensation. Those principles may result in inadequacy of compensation, but did not constitute fraud on power and therefore the Amending(1) [1965] 1 S.C.R. 614. Act did not offered Art. 31(2) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determination of compensation;(1) [1865] S.C.R. 614. if there was inadequacy in the compensation awarded by the application of those principles it was not open to question in view of the express provision made in the last clause of Art. 31(2). In our judgment, the observation made by the Court that Art. 31(2) as amended means that neither the principles prescribing the just equivalent nor the just equivalent can be questioned by the Courts on the ground of inadequacy of the compensation fixed or arrived at by the working of the principles needs to be clarified. If by that observation it is intended that the attack on the principles specified for determining compensation is excluded only when it is founded on a plea of inadequacy of compensation, a restricted meaning is given to Art. 31(2) which practically nullifies the amendment. Whatever may have been the meaning of the expression compensation under the unmended 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 juri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curred by the Corporation in acquiring them, and the latter at the written down value determined in accordance with the provisions of the Income-tax Act, 1961. The validity of the Act was challenged, and this Court held that the Act contravened Art. 31(2) of the Constitution and was therefore void. The judgment of the Division Bench is open to review by this Court. The Court after setting out the principles laid down by this Court in Mrs. Bela Banerjee s case(2); D. Namasivaya Mudaliar s case(3) and N. B. Jeejeebhoy s case(3) observed at p. 264 : . - - - the relevant aspect of the legal position evolved by the said decisions may be stated thus : Under Art. 31(2) of the Constitution, no property shall be compulsorily acquired except under a law which provides for compensation for the property acquired and either fixes the amount of compensation or specifies the principles on which, and the manner in which, compensation is to be determined and given. The second limb of the provision says that no such law shall be called in question in any court on the ground that the compensation provided by the law is not adequate. If the two concepts, namely, compensation and the jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was urged that in any event the statute which permits the property of an owner to be compulsorily, acquired by payment of market value at a date which is many years before the date on which the title of the owner is extinguished is unreasonable. This Court has, however held in Smt. Sitabati Debi and Anr. v. State of West Bengal(2) that a law made under cl. (2) of Art. 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 Art. 19(1) (f) of the Constitution. In Smt. Sitabati Debi s case ([1967] 2 S.C.R. 949. ) an owner of land whose property was requisitioned under the West Bengal Land (Requisition and Acquisition) Act, 1948, questioned the validity of the Act by a writ petition filed in the High Court of Calcutta on the plea that it offended Art. 19(1)(f) of the Constitution. This Court unanimously held that the validity of the Act relating to acquisi- tion and requisition cannot be questioned on the ground that it offended Art. 19(1) (f) and cannot be decided by the criterion under Art. 19(5). Again the validity of the statute cannot depend upon whether in a given case it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e impugned Madras Act. Counsel submits that it is always open to the State Government to acquire lands for a public purpose of a local authority and after acquiring the lands to vest them in the local ,authority. If that be done, compensation will be payable under the Land Acquisition Act, 1894, but says counsel, when land is acquired: 1 for a public purpose of a local authority under the provisions of the Bombay Town Planning Act the compensation which is payable is determined at a rate prevailing many years before the date on which the notification under S. 4-of the Land Acquisition Act is issued. The argument is based on no solid foundation. The method of determining compensation in respect of lands which are subject to the town-planning schemes is prescribed in the Town Planning Act. There is no option under that Act to acquire the land either under the Land Acquisition Act or under the Town Planning Act. Once the draft town planning scheme is sanctioned, the- land becomes subject to the provisions of the Town Planning Act, and the final townplanning scheme being sanctioned, by statutory operation the title of the various owners is readjusted and the lands needed for a public ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the, manner prescribed by the Act. There are therefore two separate provisions, one for acquisition by the State Government, and the other in which the statutory vesting of land operates as acquisition for the purpose of townplanning by the local authority. The State Government can acquire the land under the Land Acquisition Act, and the local authority only under the Bombay Town Planning Act. There is no option to the local authority to resort to one or the other of the alternative methods which result in acquisition. The contention that the provisions of ss. 53 and 67 are invalid on the ground that they deny the equal protection of the laws or equality before the laws must,, therefore, stand rejected. The High Court has apparently not considered the other arguments which were advanced at the Bar, and has observed that it was not necessary to consider those other contentions raised in the petition. As the petition has not been heard by the High Court in respect of the other contentions which the first respondent may choose to raise, we set aside the order passed by the High Court declaring s. 53 read with s. 67 insofar as it authorised acquisition of land by the local authori ..... X X X X Extracts X X X X X X X X Extracts X X X X
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