ns Nos 182 of 1969 and 42 to 45 of 1968
Petition under article 32 of the Constitution of India for enforcement of the fundamental rights
D M Parulekar and A G Ratnaparkhi for the petitioners in WP No 182 of 1969
section section Shukla for the petitioners in WP No 42 to 45 of 1968
section T Desai G L Sanghi B D Sharma for section P Nayar for respondents Nos 1 to 3 in WP No 182 of 1969 and the respondents in WP Nos
42 to 45 of 1968
The Judgment of the Court was delivered by Ray J
These petitioners raise two principal questions
First whether the State of Maharashtra hereinafter referred to as the State is competent to enact the Maharashtra Industrial Development Act  1961 hereinafter referred to as the Act secondly whether there is procedural discrimination between the Maharashtra Industrial Development Act 1961 and the Land Acquisition Act 1894 721 The contentions of the petitioners are that
the Act is for the incorporation regulation and winding up of the Maharashtra Development Corporation hereinafter referred to as the Corporation and that the Corporation is a trading one and therefore the impugned legislation falls within Entry 43 of List I of the Seventh Schedule of the Constitution
On behalf of the State it is said on the other hand that the Act is for the growth and development of industries in the State of Maharashtra and for acquisition of land in that behalf and the Corporation is established for carrying out the purposes of the Act and thereforethe legislation is valid
The true characterscope and intent of the Act is to be ascertained with reference to the purposes and the provisions of the Act
The Act is one to make a special provision for securing the orderly establishment in industrial areas and industrial estates of industries in the State of Maharashtra and to assist generally in the Organisation thereof and for that purpose to establish an Industrial Development Corporation and for purposes con nected with the matters aforesaid
The Corporation is established for the purpose of securing and assisting the rapid and orderly establishment and organisation of industries in industrial areas and industrial estates in the State of Maharashtra
The Corporation consists of 8 members two of whom are nominated by the
State Government of whom one shall be the Financial Adviser to the Corporation one member nominated by the State Electricity Board one member nominated by the Housing Board and three members nominated by the State Government from amongst person appearing to Government to be qualified as having had experience of  and having shown capacity in industry or trade or finance or who are in the opinion of the Government capable of representing the interest of persons engaged or employed therein and the Chief Executive Officer of the Corporation who shall be the Secretary of the Corporation
The functions of the Corporation shall be generally to promote and assist in the rapid and orderly establishment growth and development of industries in the State of Maharashtra and to establish and manage industrial estates at places selected by the State Government develop industrial areas selected by the State Government for the purpose and make them available for undertakings to estab lish themselves assist financially by loans industries to move their factories into such estates or areas and to undertake schemes or works either jointly with other corporate bodies or institutions or 69Sup
CIP71 2 722 with Government or local authorities or on agency basis in furtherance of the purposes for which the Corporation is established and all matters connected therewith
An industrial area under the Act means any area declared to be an industrial area by the State Government by notification in the Official Gazette which is to be developed and where industries are to be accommodated
An industrial estate under the Act means any site selected by the State Government where the Corporation builds factories and other buildings and makes them available for any site selected by the State Government where the Corporation means the carrying out of building engineering quarrying or other operations in on over or under land or the making of any material change in any building or land and includes redevelopment but does not include mining operations
Amenity under the Act includes road supply of water or electricity street lighting drainage sewerage conservancy and such other conveniences as the State Government may by notification in the Official Gazette specify to be an amenity for the purposes of the Act
We have referred to these expressions industrial area industrial estate development and amenity in order to appreciate the general powers of the Corporation to discharge the functions of the Corporation in regard to the establishment growth and development of industries in the State
These powers are to acquire and hold property movable and immoveable for the performance of any of its activities and to lease sell change or otherwise trans fer any property held by the Corporation on such conditions as may be deemed proper by the Corporation and also to purchase by agreement or to take on lease or under any form of tenancy any land to erect such buildings and to execute such other works as may be necessary for the purpose of carrying out its duties and functions to provide or cause to be provided amenities and common facilities in industrial estates and industrial areas and construct and maintain or cause to be maintained works and buildings therefore to make available buildings on hire or sale to industrialists or persons intending to start industrial undertakings to construct buildings for the housing of the employees of such industries to allot factory sheds or such buildings or parts of buildings including residential tenements to suitable persons in the industrial estates established or developed by the Corporation and to do such other things and perform such acts as it may think necessary or expedient for the proper conduct of its functions and the carrying into effect the purposes of this Act
Broadly stated the functions and powers of the Corporation are to develop industrial areas and industrial estates by providing
amenities of Toad supply of water or electricity street
lighting 723 drainage sewerage conservancy and other conveniences secondly to construct works and buildings factory sheds and thirdly to make available buildings on hire or sale to industrialists or persons intending to start industrial undertakings and to allot factory sheds buildings residential tenements to suitable persons in industrial estates established or developed by the Corporation and to lease sell exchange or otherwise transfer any property held by the Corporation on such conditions as may be deemed proper by the Corporation
The development of industrial areas and industrial estates is intended to serve two objects
In the first place there is to be an orderly establishment and growth of industries in the Bombay Poona sector
The second object is to secure dispersal of industries from the congested areas of the Bombay Poona sector to the under developed parts of the St ate
The industrial areas are broadly classified into two categories namely first those meant for engineering and other industries which are not obnoxious and secondly those meant for chemical industries
The establishment and growth of industries in the State is inextricably bound up with availability of land
Available land in limited
Such limited supply leads to speculation in land
Power is therefore required for compulsory acquisition of land to achieve the purposes of the Act
At the same time land owners are not to be deprived of the legitimate benefit of reasonable increase in land values in a developing economy
Development of chemical industries requires long stretches of pipelines to be laid for moving gas and other liquid  chemical products
The growth of industries in the State by establishment of industrial areas and industrial estates also means laying pipelines for carrying gas water electricity and constructing sewerage and drains
These amenities are essential
The absence of amenities is envisaged and answered in the Act by empowering the Corporation to provide these essential amenities facilities and conveniences
The principal functions of the Corporation in regard to the establishment growth and development of industries in the are first to establish and manage industrial estates at selected places and secondly to develop industrial areas selected by the State Government
When industrial areas are selected the necessity of acquisition of land in those areas is apparent
The Act therefore contemplates that the ate Government may acquire land by publishing a notice specifying the particular purpose for which such land is required
Before the publication of the notice the owner of the land is given an opportunity to show cause as to 724 why the land should not be acquired
The State after considering the cause shown by the owner the State Government may pass such orders as it deems fit
When a notice is published for acquisition of land the land shall on and from the date of such publication vest absolutely in the State Government free from all en cumbrances
Where the land has be en acquired for the Corporation or any local authority the State Government shall after it has taken possession of the land transfer the land to the Corporation or that local authority for the purposes for which the land has been acquired subject to such terms and conditions which the State Government may deem fit to impose
We have already noticed that for the purpose of the Act namely the establishment and development of industries in the State the Corporation will establish industrial estates and develop industrial areas
Apart from establishing industrial estates and developing industrial areas the Corporation may dispose of any land acquired by the State Government and transferred to the Corporation without undertaking or carrying out any development thereof or transfer such land after undertaking or carrying out any development as it thinks fit
These powers of the Corporation with respect to the disposal of land are to be exercised so far as practicable that where the Corporation proposes to dispose of by sale any such land without any development having been undertaken or carried out thereon the Corporation shall offer the land in the first instance to the persons from whom it was acquired if they desire to purchase it subject to such requirements as to its development and use as the Corporation may think fit to impose
Against the persons who are residing or carrying on business or other activities on any such land shall if they desire to obtain accommodation on land belonging to the Corporation and are willing to comply with any requirements of the Corporation as to its development and use have an opportunity to obtain thereon accommodation suitable to their reasonable requirements on terms settled with due regard to the price at which any such land has been
acquired from them
The other provisions in the Act are that the State Government may upon such conditions as may be agreed between the State Government and the Corporation place at the disposal of the Corporation any land vested in the State Government
After any such land has been developed by or under the control and super vision of the Corporation it shall be dealt with by the Corporation in accordance with the regulations made and directions given by the State Government in this behalf
Further if Any land placed at the disposal of the Corporation is required at any time thereafter by the State Government the Corporation shall replace 725 it at the disposal of the State Government upon such terms and conditions as may be mutually agreed upon
There are two other important provisions in the Act
In the first place the State Government may issue to the Corporation such general or special directions as to policy as it may think necessary or expedient for the purpose of carrying out the purposes of the Act_ and the Corporation shall be bound to follow and act upon such directions
These directions will be in the field of  establishment and management of industrial estates and development of industrial areas and carrying out the other powers of the Corporation in regard to the provision of amenities and common facilities and assisting industrialists or industrial undertakings in
obtaining buildings or factory sheds or residential tenements or land for development of industries
The second important provision is that when the State Government is satisfied that the purposes for which the Corporation is established under the Act have been substantially achieved so as to render the continued existence of the Corporation in the opinion of the State Government unnecessary that Government may by notification in the Official Gazette declare that the Corporation shall be dissolved with effect  from such date as may be specified in the notification and the Corporation shall be deemed to be dissolved accordingly
Upon such dissolution all properties funds and dues which are vested  in or realisable by the Corporation shall vest in or be realised by the State Government and all liabilities enforceable against the Corporation shall be enforceable against the State Government
It is in the background of the purposes of the Act and powers and functions of the Corporation that the real and true character of the legislation will be determined
That is the doctrine of finding out the pith and substance of an Act
In deciding the pith and substance of the legislation the true test is not to find out whether the Act has encroached upon or invaded any forbidden field but what the pith and substance of the Act is
It is true intent of the Act which will determine the validity of the Act
Industries come within Entry 24 of the State List subject to the provision of Entry 7 and Entry 52 of the Union List of the Constitution
Entry 7 of the Union List relates to industries declared by Parliament by law to necessary for the purpose of defence or for the prosecution of war
Entry 52 of the Union List relates to industries the control of which by the Union is declared by Parliament by law to be expedient in the public interest
The establishment growth and development of industries in the State of Maharashtra do not fall within Entry 7 and Entry 52 of the Union List
Establishment growth and development of industries in the State is within the 726 State List of industries
Furthermore to effectuate the purposes of the development of industries in the State it is necessary make land available
Such land can be made available by acquisition or requisition
The Act in the present case deals with acquisition of land by the State and on such acquisitions the State may transfer the land to the Corporation which again may develop it itself and establish industrial estates or may develop industrial areas
Acqui sition or requisition of land falls under Entry 42 of the Concurrent List
In order to achieve growth of industries it is necessary not only to acquire land but also to implement the purposes of the Act
The Corporation is therefore established for carrying out the purposes of the Act De pith and substance of the Act is establishment growth and Organisation of industries acquisition of land in that behalf and carrying out the purposes of the Act by setting up the Corporation as one of the limbs or agencies of the Government
The powers and functions of the Corporation show in  no uncertain terms that these are all in aid of the principal and predominant purpose of establishment growth and establishment of industries
The Corporation is established for that purpose
When the Government is satisfied that the Corporation has substantially achieved the purpose for which the Corporation is established the Corporation will be dissolved because the raison detre is gone
We therefore hold that the Act is a valid piece of legislation
The petitioners contended that the Corporation was a trading one
The reasons given were that the Corporation could sell property namely transfer land that the Corporation had borrowing powers  and that the Corporation was entitled to moneys by way of rents and profits
Reliance was placed on the report of the Corporation and in particular on the income and expenditure of the Corporation to show that it was making profits
These features of transfer of land or borrowing of moneys or receipt of rents and profits will by themselves neither be the indicia nor the decisive attributes of the trading character of the Corporation
Ordinarily a Corporation is established by shareholders with their capital
The shareholders have their Directors for the regulation and management of the Corporation
Such a Corporation set up by the shareholders carries on business and is intended for making profits
When profits are earned by such a Corporation they are distributed to shareholders by way of dividends or kept in reserve funds
In the present case these attributes of a trading Corporation are absent
The Corporation is established by the Art for carrying out the purposes of the Act
The purposes of the Act are development of industries in the State
The Corporation consists of nominees of the State Government State Electricity Board and the Housing Board
The functions and powers of the Corporation indicate that the Corporation is acting as I a wing of the State Government 727 in establishing industrial estates and developing industrial areas acquiring property for those purposes constructing buildings allotting buildings factory sheds to industrialists or industrial undertakings
It is obvious that the Corporation will receive moneys for disposal of land buildings and other properties and also that the Corporation would receive rents and profits in appropriate cases
Receipts of these moneys arise not out of any business or trade but out of the sole purpose of establishment growth and development of industries
The Corporation has to provide amenities and facilities in industrial estates and industrial areas
Amenities of road electricity sewerage and other facilities in industrial estates and industrial areas are within the programme of work of the Corporation
The fund of the Corporation consists of moneys received from the State Government all fees costs and charges received by the Corporation all moneys received by the Corporation from the disposal of lands buildings and other properties and all moneys received by the Corporation by way of rents and profits or in any other manner The Corporation shall have the authority to spend such sums out of the general funds of the Corporation or from reserve and other funds
The Corporation is to make provision for reserve and other specially denominated funds as the State Government may direct
The Corporation accepts deposits from persons authorities or institutions to whom allotment or sale of land buildings or sheds is made or is likely to be made in furtherance of the object of the Act
A budget is prepared showing the estimated receipts and expenditure
The accounts of the Corporation are audited by an auditor appointed by the State Government
These provisions in regard to the finance of the Corporation indicate the real role of the Corporation viz the agency of the Government in carrying out the purpose and object of the Act which is the development of industries
If in the ultimate analysis there is excess of income over expenditure that will not establish the trading character of the Corporation
There are various departments of the Government which may have excess of income over expenditure
The Corporation is not a Government company within the meaning of section 617 of the nor can the  be said to apply to the Corporation because under the provisions contained in section 616 of the that Act will apply to a company governed by any special Act except in so far as the provisions of the are inconsistent with the provisions of such special Act
The provisions of the Act in the present case in regard to incorporation functions powers and dissolution of the Corporation show that the purposes 728 and objects of the Act and the functions and powers of the Corporation are like the warf and weft of the fabric of development of industries by the State
There are two provisions of the Act which are not to be found in any trading Corporation
In the first place the sums payable by any person to the Corporation are recoverable by it under this Act as an arrear of land revenue on the application of the Corporation
Secondly on dissolution of the Corporation the assets vest in and the liabilities become enforceable against the State Government
The underlying concept of a trading Corporation is buying and selling
There is no aspect of buying or selling by the Corporation in the present case
The Corporation carries out the purposes of the Act namely development of industries in the State
The construction of buildings the establishment of industries by  letting buildings on hire or sale the acquisition and transfer of land in relation to establishment of industrial estates or development of industrial areas and of setting up of industries cannot be said to be dealing in land or buildings for the obvious reason that the State is carrying out the objects of the Act with the Corporation as an agent insetting up industries in the State
The Act aims at building an industrial town and the Corporation carries out the objects of the Act
The hard core of trading Corporation is its commercial character
Commerce connotes transactions of purchase and sale of commodities dealing in goods
The forms of business transactions may be varied but the real character is buying and selling
The true character of the Corporation in the present case is to act as an architectural agent of the development and growth of indus trial towns by establishing and developing industrial estates and industrial areas
We are of opinion that the Corporation is not a trading one
Counsel on behalf of the petitioners contended that there was procedural discrimination between the Land Acquisition Act and the Act in the present case
It was said that there was a special procedure designed by the Land Acquisition Act for acquisition of land for the companies whereas in the  present case the State was acquiring land for companies without adopting the procedure of  the Land Acquisition Act
It is to be remembered that the Act in the present case is a special one having the specific and special pur pose of growth development and Organisation of industries in the State of Maharashtra
The Act has its own procedure and there is no provision in the Act for acquisition of land for a company as in the case of Land Acquisition Act
In the present case acquisition under the Act is for the purpose of development of industrial 729 estates or industrial areas by the Corporation or any other purpose in furtherance of the objects of the Act
The policy underlying the Act is not acquisition of land for any company but for the one
and only purpose of development Organisation and growth of industrial estates and industrial areas
The Act is designed to have a planned industrial city as opposed to haphazard growth of industrial areas in all parts of the State
The Act is intended to prevent growth of industries in the developed parts of the State
Industries are therefore to be set up in the developing or new parts of the State where new industrial towns will be brought into existence
The object of the Act is to carve out planned areas for industries
On one side there Will be engineering industries and on the other there will be chemical industries
There will be localisation of industries with the result that the residents and dwellers of towns and cities will not suffer either from the polluted air or obnoxious
chemicals of industries or the dense growth of industries and industrial population within and near about the residential areas
The Land Acquisition Act is a general Act and that is why there is specific provision for acquisition of land by the State for public purpose and acquisition of land by the State for companies
The present Act on the other hand is designed the sole purpose of development of industrial areas and industrial estates and growth and development of industries within the State
Industrial undertakings or persons who are engaged in industries all become entitled to the  facilities on such industrial growth
Under the Land Acquisition Act acquisition is at the instance of and for the benefit of a company whereas under the present Act acquisition is solely by the State for public purposes
The two acts are dissimilar in situations and circumstances
The petitioners contended that the provisions as to compensation were a restriction on the judicial power of the Collector
Section 33 of the Act deals with compensation
The amount of compensation under the Act can be determined by agreement between the State Government and the person to be compensated
Where on the other hand no such agreement can be reached the State Government shall refer the case to the Collector
That is subsection 3 of section 33 of the Act
The proviso to that sub section is that no compensation exceeding such amount as the State Government may by general orders specify to b paid for such acquisition shall be determined by the Collector without the previous approval of the State Government or such officer as the State Government may appoint in that behalf
This proviso was construed on behalf of the petitioners to be a fetter on the judicial powers of the Collector to determine compensation
Subsection 5 of section 33 of he
Act states that in determining the amount of compensation the Collector shall be guided by the pro 730 visions contained in sections 23 and 24 and other relevant provisions of the Land Acquisition Act These provisions indicate that if the Collector will determine an amount higher than what the State Government may by general orders specify the approval of the State Government will be necessary
There is no ceiling fixed by the Government
Finally there is an appeal to the Court from the decision of the Collector
The decision of the Court will finally determine the amount of compensation
We are of opinion that there is no restriction on the powers of the Collector in the matter of determination of compensation although the approval of Government may be necessary in the Government interest
All the contentions advanced by the petitioners fail
The petitions are dismissed with costs
GC Petitions dismissed


Summary:
In a petition under article 32 of the Constitution of India the petitioners challenged the validity of the Maharashtra Industrial Development Act 1961
In support of the petition it was contended  i that the Maharashtra legislature was incompetent to enact the Act because the Act was for the incorporation regulation and winding up of the Maharashtra Development Corporation which was a trading corporation accordingly the impugned legislation fell within Entry 43 of List I Union List or the Seventh Schedule of the Constitution ii that there was a special procedure designed by the land Acquisition Act for acquisition of land for the companies whereas in the present case under the provisions of the impugned Act the State was acquiring land for companies without adopting the procedure of the Land Acquisition Act and thus there was procedural discrimination iii that the proviso to section 33 of the impugned Act providing that no compensation exceeding such amount as the State Government may by general order specify to be paid for acquisition shall be determined by the Collector without the previous approval of the State Government or its nominee was restrictive of the judicial power of the Collector
HELD  i It is the true intent of the Act ie its pith and substance which will determine the validity of the Act
Industries come within Entry 24 of the State List subject to the provision of Entry 7 and Entry 52 of the Union List of the Constitution
Entry 7 of the Union list relates to industries declared by Parliament by law to be necessary for the purpose of defence or for the prosecution of war
Entry 52 of the Union List relates industries the control of which by the Union is declared by Parliament by law to be expedient in the public interest
The establishment growth and development of industries in the State of Maharashtra does not fall within Entry 7 and Entry 52 of the Union List
Establishment growth and development of industries in the State is within the State List of industries
The pith and substance of the Act is establishment growth and development of industries and acquisition of land in that behalf carries out the purposes of the Act by setting up the Corporation as one of the limbs or agencies of the Government Me powers and functions of the Corporation show in no certain terms that these are all in aid of the principal and predominant purpose of establishment and growth of industries
When the Government is satisfied that the Corporation has substantially achieved the purposes for which the Corporation is established 720 the Corporation will be dissolved because the raison d etre is gone
It must therefore be held that the Act is a valid piece of legislation
725 F 726 D The contention that the Corporation was a trading one or that it Was a Government company within the meaning of section 617 of the could not be accepted
Reason dissussed The true character of the Corporation in the present case is to act as an architectural agent of the development and growth of industrial towns by establishing and developing industrial estates and industrial areas
727 B 728 F ii The contention that there was procedural discrimination is between the present Act and the Land Acquisition Act could not be accepted
The Maharashtra Industrial Development Act is a special one having the specific and special purpose of growth development and Organisation of industries
That Act has its own procedure
Under the Land Acquisition Act acquisition is at the instance of and for the benefit of a company whereas under the present Act acquisition is solely by the State for public purposes Me two acts arc dissimilar in situation and circumstances
728 H 729 E iii The proviso to section 33 no doubt provides that where the amount of compensation determined by the Collector is higher than what the State Government may by general order specify the approval of the State Government is necessary But sub section 5 of section 33 states that in determining the compensation the Collector shall be guided by the provisions contained in sections 23 and 24 and other relevant provisions of the Land Acquitition Act
There is no ceiling fixed by the Government
Further there is an appeal to the Court from the decision of the Collector
The decision of the Court will finally determine the amount of compensation
There is thus no restriction on the powers of the Collector in the matter of determination of compensation although the approval of Government may be necessary in the Government interest
729 F 730 C