TMI Blog1969 (1) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... pt separate and the whole of the matter was discussed in a case in which it was not necessary for the ultimate conclusion. Because of the close proximity of the decisions, 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 [1965]1SCR614 : [1965]1SCR614 must be treated as obiter and not binding on us. I am also of the opinion that the Metal Corporation case [1967]1SCR255 : [1967]1SCR255 was wrongly decided and should be overruled. J.C. Shah, J. 2. In a writ petition field by the first respondent Shantilal Mangaldas the High Court of Gujarat has declared Sections 53 and 67 of the Bombay Town P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the High Court of Gujarat (which had jurisdiction after reorganization of the State of Bombay) challenging the validity of Act 27 of 1955 and acquisition of plot No. 178 on the plea that the Act infringed the fundamental right of the first respondent guaranteed by Article 31(2) of the Constitution. 6. 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 s6 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. 7 . The declaration of intention, preparation of the draft schem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Union, any State, any local authority or any other authority established by law in India; and (e) such other proposals for public or other purposes as may from time to time 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. 10. 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. 11. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grounds, schools, markets, green belts and similar public purposes, and provide for drainage, lighting, water-supply, filling up or reclamation of low-lying, swamp or unhealthy areas or levelling up of land so that the total area included in the scheme may conduce to the health and well-being of the residents. Since the townplanning 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. 1 3 . Under the Act the cost of the scheme is 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 increment which is estimated to accrue in respect of each plot. 1 4 . To ensure that no undue hardship is caused and owners of plots have an opportunity of raising objections to the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allotted to another person; and the lands needed for public purposes may be earmarked for those purposes. 16. The re-arrangement of titles in the various plots and reservation of lands for public purposes require financial adjustments to be made. The owner who is deprived of his land has to be compensated, and the owner who obtains a re-constituted 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 unearned 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 Section 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 imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2), of the Constitution. Since the Act authorises compulsory transfer of ownership in land to the local authority for public purposes the High Court held it clearly falls within the terms of Article 31(2A) of the Constitution, and on that account there is acquisition of land within the meaning of Article 31(2) of the Constitution, and the Act is not protected by Article 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erms of money of the property expropriated it could not be upheld under Article 31(2) of the Constitution. 19. Mr. Bindra appearing on behalf of the State of Gujarat contends that Bombay Act 27 of 1955 is not a law relating to acquisition of lands, but it is a law dealing with health and public sanitation for it is enacted with the object of promotion of public health and on that account falls within the terms of Article 31(5)(ii) of the Constitution, and is exempt from the operation of Clause (2) of Article 31. Alternatively, Mr. Bindra contends that the Act specifies the principles on which compensation is to be determined and the guarantee under Article 31(2) is on that account not infringed. 20. 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 II of the Seventh Schedule- Public health and sanitation , and Entry 20 of List III- Economic and social planning . But the competence of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, 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 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 A 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. 2 2 . The following princ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle 31(5)(b)(ii). It was observed at p. 574 : A law authorising the abatement of a public menace by destroying or taking temporary possession of private properties if the peril cannot be abated in some other way can be regarded as a law for promotion of public health or prevention of danger to life or property within the purview of Clause (5)(b) (ii). But it 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 Clause (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 Clause (5)(b)(ii) without payment of compensation. 25. The first contention urged by Mr. Bindra cannot, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s framed, in lieu of the ownership of the original plot, the owner is given a reconstituted plot by the local authority, and compensation in money is determined in respect of the land appropriated to public purposes according to the rules contained in Sections 67 71 of the Act. Such a scheme for compensation is, it was urged, inconsistent with the guarantee under Article 31(2) for two reasons- (1) that compensation 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 Section 53 provides for statutory re-adjustment of the rights of the owners of the original 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 pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scheme of the Act which provides for adjustment of the market value of land at the date of the declaration of intention of making a scheme against market value of the land which goes to form the reconstituted plot, if any, specifies a principle for determination of compensation to be given within the meaning of Article 31(2). Two arguments were urged on behalf of the first respondent-(1) that the Act specifies no principles on which the compensation is 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 Article 31(2). Specification of principles mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of acquisition, the plea that what is provided as compensation by Sections 67 and 71 as the value to be adjusted against the amount of contribution, if any, infringes the guarantee of Article 31(2), would be unassailable. 3 2 . The argument raised by counsel for the first respondent raises a question of importance as to the true effect of Article 31 of the Constitution and requires careful consideration in the light of the historical development of the principles governing payment of compensation by the State for compulsory acquisition of property. 3 3 . 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. (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... But the amendments made by the Constitution (First Amendment) Act were inadequate to deal with questions relating to payment of compensation to an owner of property (not covered by legislation falling within Articles 31A and 31B) who was deprived of it by compulsory acquisition. 34. Two cases decided by this Court in the month of December 1953 require to be noticed : In Mrs. Bela Banerjee's case [1954] S.C.R. 558 validity of the West Bengal Land Development and Planning Act, 1948, which was enacted primarily for acquisition 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 Section 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 Arti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eminent domain; that power could only be exercised by giving a just equivalent of what the owner has been deprived; and that whether the law made in exercise of power under Entry 42 of List III laid down principles which took into account the elements which made up the true value of the property appropriated, and excluded such matters which are to be neglected, was a justiciable issue. 3 6 . The power to legislate for compulsory acquisition of property was originally distributed under three entries. Entry 33 List I- Acquisition or requisitioning 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 provisions of Entry 42 of List III ; 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 Clause (2) of Article 31 exercise of the power to legislate for compulsory acquisition of property was subject to the condition that the law for compulsory acquisition for pub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulsory acquisition under the Land Acquisition Act vary according to the nature of the land acquired. For properties which are not marketable, commodities, such as lands buildings and incorporeal rights, valuation has to be made on the application of different rules. Principle of capitalisation of net rent at the current market rate on guilt-edged securities, principle of reinstatement, principle of determination of original value less depreciation, determination of break-up value in certain types of property which have outgrown their utility, and a host of other so-called principles are employed for determination 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 reference to the market value subject to certain matters being taken into account and some others being excluded as set out in Sections 23 and 24 of that Act. The rules relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given; and that the law for acquisition or requisition shall not be called in question in any court on the ground that the compensation provided thereby is not adequate. By the amendment made in Article 31A certain classes of statutes were placed with retrospective effect outside the purview of attack before the Courts on the ground of infringement of the fundamental rights under Article 14, 19 and 31, and by the addition of certain Acts in the Ninth Schedule a challenge to those Acts that they infringed any fundamental rights in Part III could not be entertained. But the amendments made in Article 31 were not given any retrospective 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 [1964] S.C.R. 558 and Subodh Gopal Bose's case [1954]1SCR587 : [1954]1SCR587 continued to apply. 42. In State of Madras v. D. Namasivaya Mudaliar and Ors. [1964]6SCR936 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 lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o him a just recompense at the date of expropriation must be deemed void. 46. Before considering this part of the argument, it is necessary to refer to one other Constitutional Amendment. By the Constitution (Seventh Amendment) Act, 1956, which came into force on November 1, 1956, Entries 33 of List I and 36 of List II were deleted from the Seventh Schedule and Entry 42 of List III was amended and now reads- Acquisition and requisitioning of property . The effect of that amendment is that the power of acquisition and requisitioning of property falls in the concurrent list and it makes no reference to the principles on which compensation for acquisition or requisitioning is to be determined. 47. Reverting to the amendment made in Clause (2) of Article 31 by the Constitution (Fourth Amendment) Act, 1955, it is clear dial 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 Article 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... just equivalent will be in clear violation of the Constitutional declaration that inadequacy of compensation provided is not justiciable. 48. The true effect of the amended Article 31(2) fell to be determined for the first time before this Court in P. Vajravelu Mudaliar's case [1965]1SCR614 : [1965]1SCR614 . In that case lands belonging to a person were notified for acquisition for the purpose of housing schemes and proceedings in respect of compensation payable to him in accordance with the provisions of the Land Acquisition (Madras Amendment) Act. 1961, were pending. The owner challenged the vires of the Land Acquisition (Madras Amendment) Act, 1961, on the ground that it infringed the fundamental rights under Articles 14, 19 and 31(2) of the Constitution. 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 Section 4(1) of the Land Acquisition Act or the market value on the date of the notification whichever was less; (2) the solatium paya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the court on the ground of inadequacy of the compensation fixed or arrived at by the working of the principles. At p. 629, he summarised the legal position as follows : If the question pertains to the adequacy of compensation, it is not justiciable; if the compensation fixed or the principles evolved for fixing it disclose that the legislature made the law in fraud of powers in the sense we have explained, the question is within the jurisdiction of the Court. These observations were, however, not necessary for the purpose of the decision in P. Vajravelu Mudaliar's case(1). The Court held that the Amending Act did in fact specify principles for ascertaining the value of the property acquired, and the principles were not irrelevant in the determination of compensation; 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 Article 31(2). In our judgment, the observation made by the Court that Article 31(2) as amended means that neither the principles prescribing the just equivalent' nor the 'just equivalent' can be questioned by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pensation payable to the Corporation was to be an amount equal to the sum total of the value of the properties and assets of the Corporation on the date of the commencement of the Act calculated in accordance with the provisions of Paragraph II of the Schedule to the Act, less the liabilities on the said date, calculated in accordance with the provisions of Paragraph III of the Schedule. One of the clauses laying down principles of compensation, viz. Clause (b) of Paragraph II was in two parts. The first part provided for the valuation of plant, machinery or other equipment which had not been worked or used and was in good condition, and the second part provided for the valuation of any other plant, machinery or equipment. The former, according to the Schedule, had to be valued at the actual cost incurred 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 Article 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 set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sory. In our judgment, the Metal Corporation of India Ltd.'s case [1967| 1 S.C.R. 255 was wrongly decided and must be overruled. 52. Turning to the Bombay Town Planning Act, 1955, it was clear that the Legislature has specified principles for determination of compensation which has to be adjusted in determining the amount of contribution. The principle for determination of compensation cannot be said to be irrelevant, nor can the compensation determined be regarded as illusory. Being a principle relating to compensation, in our judgment, it was not liable to be challenged. If what is specified is a principle for determination of compensation, the challenge to that principle on the ground that a just equivalent of what the owner is deprived is not provided is excluded by the plain words of Article 31(2) of the Constitution. 53. 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 5m/. Sitabati Debi and Anr. v. State of West Bengal [1967]2SCR949 that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is included in a town planning scheme is needed by the State Government for a public purpose other than that for which it is included in the scheme. In such a case the State Government may make a declaration to that effect and the provisions of the Land Acquisition Act, 1894, as modified by the Schedule apply. We are not concerned in this case with any such notification issued by the Government, nor has it any relevance to the question in issue. 5 5 . One more contention which was apparently not raised on behalf of the first respondent before the High Court may be briefly referred to. Counsel contends that Sections 53 and 67 in any event infringe Article 14 of the Constitution and were on that account void. Counsel relies principally upon that part of the judgment in P. Vajravelu Mudaliar's case [1965]1SCR614 : [1965]1SCR614 which deals with the infringement of the equality clause of the Constitution by the 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 La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clear : the acquisition was struck down in P. Vajravelu Mudaliar's case [1965]1SCR614 : [1965]1SCR614 because the State Government could resort to one of the two methods of acquisition-the Land Acquisition Act, 1894, and the Land Acquisition (Madras Amendment) Act. 1961-and no guidance was given by the Legislature about the statute which should be resorted to in a given case of acquisition for a housing scheme. Power to choose could, therefore, be exercised arbitrarily. Under the Bombay Town Planning Act 1955, there is no acquisition by the State Government of land needed for a town-planning scheme. When the Town Planning Scheme comes into operation the land needed by a local authority vests by virtue of Section 53(a) and that vesting for purposes of the guarantee under Article 31(2) is deemed compulsory acquisition for a public purpose. To lands which are subject to the scheme, the provisions of Sections 53 and 67 apply, and the compensation is determined only in 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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