t Petition Nos 751 794 and 798 of 1986
Under Article 32 of the Constitution of India Dr YS Chitale Soli J Sorabiee AB Diwan BV Desai Ms Madavi Gupta Bharat Sangal Harish N Salve TVSN Chari Ms Sunita Modigunda Ms Vrinda Grover and SK Bhattacharya for the Petitioners
G Ramaswamy Additional Solicitor General Anil Dev Singh PS Shroff SS Shroff R Karanjawala Mrs M Karanjawala Ejaz Maqbool Mrs Shobha Dikshit EC Aggar wal BV Desai Ms Madhavi Gupta CS Vaidyanathan and SV Deshpande for the Respondents
The Judgment of the Court was delivered by RANGANATH MISRA J
These are three petitions under article 32 of the Constitution by three different groups of peti tioners
In each of these writ petitions petitioner No 1 is a private limited company and the second petitioner is a shareholder thereof
The petitionercompany in each of these cases obtained the right to collect oleo resin 260 gum or to process the same for industrial purposes from the State of Jammu  Kashmir and each of them seeks to challenge the vires of the provisions of the Jammu  Kashmir Extrac tion of Resin Act 7 of 1986 hereinafter referred to as the Act 
Though there are some variations of facts relevant to each of the writ petitions the allegations are more or less similar in regard to the relevant contentions both factual and legal
When rule was issued the respondent State came with almost the same plea traversing common grounds and revealing a common stand in its returns to the Court
These three writ petitions were heard at a time and are now being disposed of by a common judgment
Resin is the secretion extracted by tapping or otherwise from chir chil and kail trees wildly growing in the forests of Jammu  Kashmir
It is an exudate and when subjected to chemical treatment and distillation with the aid of steam yields 70 resin 15 turpentine and the remaining 15 of waste material
The down stream products which are manufac tured from this raw material are varnish camphor paints and turpene chemicals
The petitioner company in writ petition No 75186 obtained under Government order dated 2741979 allotment of 10 to 12 lacs of blazes annually for extraction of resin from the inaccessible forests in Poonch Reasi and Ramban Divisions of the State for a period of 10 years on terms and conditions set out in the said Government order
Government order had also been made granting rights in favour of the petitioner company in writ petition No 79486
The petitio nercompany in writ petition No 79886 was a processor only and had not undertaken to work as a tapper
Applications under article 32 of the Constitution were filed in this Court at that point of time on the ground that the Government orders andor contracts were hit by articles 14 and 19 of the Constitution and the grant of forest rights in favour of the present petitioners was arbitrary mala fide and not in public interest
It was further contended that State lar gesse had been conferred on the petitioners at the cost of the State exchequer
The petitioners therein also pleaded that a monopoly had been created in favour of the private grantees and was not protected under article 191g of the Constitution
According to Kasturilal the petitioner before this Court then the benefits should have been thrown open and opportunity should have been provided to all interested persons to compete for the obtaining of the contract
A three Judge Bench consisting one of us the learned Chief Justice dealt with the matter at length and ulti 261 mately dismissed the petition holding that there was no substance in any of the contentions advanced on behalf of Kasturilal
Kasturi Lal Lakshmi Reddy vs State of Jammu  Kashmir  Anr The order made in favour of the petitioner company in writ petition No 79486 and incorporated in the agreement dated 611
1978 had also been challenged in a separate writ petition before this Court and the reasoned order for rejection of the writ petition is found in Brij Bhushan  Ors
vs State of Jammu  Kashmir  Ors
 While the petitioner company in writ petition No 75186 had agreed to work as tapper and processor on the stipula tion that 25 of the annual collection of gum subject to minimum of 1500 metric tonnes would be made over to the Government company J  K Industries Limited and out of the rest not exceeding the limit of 3500 metric tonnes would be used by them the petitioner company in writ petition No 79486 who had been operating from before as tappers only entered into a formal agreement with the State claiming to process and manufacture down stream goods
The writ peti tioner company in writ petition No 79886 had agreed to work as processor only
In the seventies the State of Jammu  Kashmir decided to industrialise the hitherto under developed State and with that end in view came forward with scheme and threw open invitation to outsiders to set up industries at convenient places within the State
As stimulus Government offered land and other facilities
The petitioners in these three writ petitions and another who has since withdrawn the writ petition went into the State of Jammu  Kashmir in response and negotiated the arrangements we have already adverted to
While the petitioners were carrying on their business activities Governor s Act 7 of 1986 the provisions whereof are impugned in these petitions by which all their existing rights came to terminate came into force with effect from 2341986
The Act sought to create a monopoly with refer ence to resin in favour of J  K Industries Limited which is a respondent to these petitions
The Act has seven sections in all
Section 1 gives the short title extent and the date of commencement while section 2 defines four terms namely prescribed  resin  resin depot  and resin products 
Section 3 bans extraction and other dealings of resin by private persons while s 4 makes provision for disposal of resin
Section 5 provides the manner of fixation of price
Section 6 provides for penalty for offences 262 and section 7 clothes the State Government with power to make rules for carrying out the purposes of the Act
Challenge in the writ petitions has been to the provisions contained in sections 3 4 and 5 of the Act
We propose to excerpt these provisions for convenience 3 Ban on extraction by private persons Notwithstanding anything to the contrary contained in any law rule order instrument agreement or contract or in any judgment decree or order of any Court or Authority no person other than the Government shall as from the commencement of this Act  a extract resin by tapping or otherwise from Chit Chil or Kail trees in the State whether such trees belong to the State or not b transport resin from one place to other in the State except under and in accord ance with the permit granted under this Act c acquire possess store dispose of or otherwise deal with any resin extracted and manufactured in the State
Disposal of resin 1 All resin extracted under section 3 shall be stored at resin depots and thereaf ter shall be sold by the Government to the Jammu  Kashmir Industries Limited for proc essing
2 After processing it by the Jammu  Kashmir Industries Limited the resin products if any surplus shall be sold by it to the small scale units and medium scale units in the State in such manner as may be provided for and at such price as may be fixed by the Jammu  Kashmir Industries Limit ed in consultation with the Government
Fixation of price 1 The Government shall having due regard to the following facts fix the price at which resin shall be sold by it during a year namely 263 a the sale price of resin if any fixed under this Act during the preceding three years b the cost of transport c the cost of extraction of resin d the cost of packing of resin including the cost of container in which resin is delivered e the prevalent sale price at which resin is being sold in other resin producing States f any other factor which the Gov ernment considers relevant
2 The price so fixed shall be published in the Official Gazette and shall not be altered during the year to which it relates
 In exercise of the rule making power the State Government has brought into force a set of rules known as the Jammu  Kashmir Extraction of Resin Rules 1986 with effect from 2791986
It is not in dispute that by the provisions of this Act all the existing contracts between parties and the State and existing grants in respect of collection transport storage and otherwise dealing with resin have come to forthwith terminate and a monopoly situation has been created qua these operations in resin in favour of the Government compa ny
The Act does not provide for any compensation and the petitioners maintain that the existing rights in their favour amounted to property  and could not have been expro priated in contravention of the guarantee in Part III of the Constitution
It is the stand of the State that the benefits and privileges conferred on the three petitioners either under contract or under Government orders did not constitute property and by the provisions of the Act no transfer of such property has taken place
It is relevant to point out at this stage that sub clause f was deleted from article 191 of the Constitution by the Forty fourth Amendment with effect from 20th of June 1979 and acquisition holding andor disposal of property ceased to be a fundamental right
The same constitutional amendment deleted article 31 but so far as the State 264 of Jammu  Kashmir is concerned the Forty fourth Amendment did not bring about any change and right to property there fore continues to be fundamental and law enunciated by this Court treating property be one of the fundamental rights still applies to Jammu  Kashmir
That is why sumptuous reference has been made by counsel for the petitioners to a catena of precedents touching upon right to property as a fundamental one
The petitioners maintained that the Government orders and contracts under which they have got the right to exploit or utilise the particular forest product does amount to property  and the petitioners were entitled to protection thereof against expropriation and in case no compensation was provided the relevant provisions of the Act became exposed to challenge
They have similarly contended that the impugned provisions of section 3 are hit for contravening the fundamental right guaranteed by article 191g which confers upon them the right to carry on any occupation trade or business
The Government orders made in 1979 did confer the right to exploit the forest and appropriate a part of the collec tion of the gums for purposes of business
The concept of property  known to jurisprudence has expanded through several pronouncements of this Court
Ramana Dayaram Shetty vs The International Airport Authority of India  Ors
   to which one of us the learned Chief Justice was party held Today the Government in a welfare State is the regulator and dispenser of special serv ices and provider of a large number of bene fits including jobs contracts licences quotas mineral rights etc
The Government pours forth wealth money benefits services contracts quotas and licences
The valuables dispensed by Government take many forms but they all share one characteristic
They are steadily taking the place of traditional forms of wealth
These valuables which derive from relationships to Government are of many kinds
They comprise social security benefits cash grants for political sufferers and the whole scheme of State and the local welfare
Then again thousands of people are employed in the State and the Central Governments and local authorities
Licences are required before one can engage in many kinds of business or work
The power of giving licences means power to withhold them and this gives control to the Government or to 265 the agents of Government on the lives of many people  
It is virtually impossible to lose money on them and many enterprises are set up primarily to do business with Govern ment
Government owns and controls hundreds of acres of public land valuable for mining and other purposes
These resources are available for utilisation by private corporations and individuals by way of lease or licence
All these mean growth in the Government largess and with the increasing magnitude and range of governmental functions as we move closer to a welfare State more and more of our wealth consists of these new forms
Some of these forms of wealth may be in the nature of legal rights but the large majority of them are in the nature of privileges
But on that account can it be said that they do not enjoy any legal protection Can they be regarded as gratuity furnished by the State so that the State may withhold grant or revoke it at its pleasure  
The law has not been slow to recognise the importance of this new kind of wealth and the need to protect individual interest in it and with that end in view it has developed new forms of protection
Some interests in Government largess formerly regarded as privileges have been recognised as rights while others have been given legal protection not only by forging procedural safeguards but also by confiningstructuring and checking Government discretion in the matter of grant of such largers  
It is insisted as pointed out or  Prof Reich in an especially stimulating article on The New Property  in  that Government action be based on standards that are not arbitrary or unauthorised
 In Kasturi Lal Lakshmi Reddy vs State of Jammu  Kashmir  Anr supra the interest created in favour of the petitioners in the forest assets of the State which has now been fatally hit by section 3 was considered to be proper ty
At page 1354 of the Reports this Court stated It was pointed out by this Court in Ramana Dayaram Shetty vs The International Airport Authority of India  Ors supra that with the growth of the welfare state new forms of property in the shape of Government largess are developing since the Government is in creasingly assuming the role of regulator and dispenser of social services and provider of a large number of benefits including jobs con 266 tracts licences quotas minerals rights etc
 In Subodh Gopal Bose s case   this Court had pointed out The word property  in the context of Article 31 the same should be the meaning under Article 191f which is designed to protect private property in all its forms must be understood both in a corporeal sense as having reference to all those specific things that are susceptible of private appropriation and enjoyment as well as in its juridical or legal sense of a bundle of rights which the owner can exercise under the municipal law with respect to the user and enjoyment of those things to the exclusion of all others Again in Dwarkadas Shrinivas of Bombay vs The Sholapur Spinning  Weaving Co Ltd  Ors   this Court held A contract or agreement which a person may have with the company and which may be can celled by the Directors in exercise of powers under ordinance will undoubtedly be property within the meaning of the two articles
 In RC Cooper vs Union of India  an eleven Judge Bench at page 567 of the Reports stated By Entry 42 in the Concurrent List power was conferred upon the Parliament and the State Legislatures to legislate with respect to Principles on which compensation for property acquired or requisitioned for the purpose of the Union or for any other public purpose is to be determined and the form in which such compensation is to be given 
Power to legis late for acquisition of property is exercisa ble only under Entry 42 of List III and not as an incident of the power to legislate in respect of a specific head of legislation in any of the three lists
Under that Entry property can be compulsorily acquired
In its normal connotation property means the highest right a man can to anything being that right which one has to lands or tene ments goods or chatties which does not depend on another s courtesy it includes ownership estates 267 and interests in corporeal things and also rights such as trade marks copyrights pat ents and even rights in personam capable of transfer or transmission such as debts and signifies a beneficial right to or a thing considered as having a money value especially with reference to transfer or succession and to their capacity of being injured In Madan Mohan Pathak vs Union of India  Ors  this Court was examining the validity of the Life Insurance Corporation Modification of Settlement Act of 1976
The settlement had created a right to bonus in favour of the Class 111 and Class IV employees of the Corporation and the Act adversely interfered with that settlement
The question for consideration of the seven Judge Bench was whether bonus payable under the settlement was property  within the meaning of article 312 and whether stopping pay ment of bonus amounted to compulsory acquisition of property without payment of compensation
The Court ultimately held that bonus was property and the legislation was bad
At p 358 of the Reports this Court said It is clear from  the scheme of fundamental rights embodied in Part III of the Constitu tion that the guarantee of the right to property is contained in Article 191f and clauses 1 and 2 of Article 31
It stands to reason that property  cannot have one meaning in Article 191f another in Arti cle 31 clause 1 and still another in Article 31 clause 2
Property  must have the same connotation in all the three Articles and since these are constitutional provisions intended to secure a fundamental right they must receive the widest interpretation and must be held to refer to property of every kind At p 360 of the Reports the Court again stated that every form of property tangible or intangible including debts and choses in action constituted property In this group of cases before us the executive grant or the contract created interest in the petitioners and there is no room to doubt that by such process in favour of the petitioners property right had been created
Learned Additional Solicitor General appearing for the State had contended that the contractual interest or the interest in terms of the Government order did not constitute property and relied upon certain precedents of this Court
The Coal Nationalisation case on which reliance was mainly placed is clearly distinguishable on facts
268 We do not think it necessary to refer to other authorities as the ones referred to above are binding precedents and unequivocally indicate that the interests which are in dispute before us do constitute property entitled to protec tion under article 191f and are covered by article 312 of the Constitution
Reliance has been placed by learned Additional Solicitor General on the restrictive provision contained in sub article
5 whereby reasonable restrictions in public interest could be imposed on the exercise of right to property
There are situations the learned counsel has argued where the re strictions could go to the point of almost wiping out the right
He relied upon some precedents in support of this proposition
Section 3 is a total annihilation of existing rights and nothing of the interest created either under the executive orders or contract is allowed to survive
We do not think there is room within the legal frame to sustain such a situation under sub article
Sub article
6 like sub article
5 protects restrictive law in public interest
What we have said in regard to sub article 5 perhaps equally applies to sub article
Article 312 provided No property shall be compulsorily acquired or requisitioned save for a public purpose and save by authority of a law which provides for acquisition or requisitioning of the property for an amount which may be fixed by such law or which may be determined in accordance with such principles and given in such manner as may be specified in such law and no such law shall be called in question in any court on the ground that the amount so fixed or deter mined is not adequate or that the whole or any part of such amount is to be given otherwise than in cash It has already been stated that the Act does not provide for any compensation
Section 3 has an overriding applica tion
It provides that it shall not only apply to the clas sified trees belonging to the State but it shall also apply to such trees belonging to private persons and rights of such private owners to carry on the various operations described in section 3 are completely taken away without provi sion of any compensation
It cannot be contended in view of what we have stated above that the right of beneficial enjoyment of the trees by carrying out the processes named in section 3 do not constitute property 
Unless the position is 269 covered by clause 2A of article 31 in view of our conclusion that the interest created under the contract Government order or the right of beneficial enjoyment vested in the private owner of the trees amount to property  the Act would be hit by article 312
Sub article
2A provides Where a law 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 it shall not be deemed to provide for the compulsory acqui sition or requisitioning of property notwith standing that it deprives any person of his property Learned Additional Solicitor General s contention has been that under the provisions of section 3 of the Act the rights that vested in the petitioners stand wiped out or extin guished but those rights have not been vested in either the State or the Government company
This contention overlooks the resultant outcome of the provisions of the Act
Section 3 which takes away private fights and authorises Government alone to extract transport it and acquire possess or dispose of or otherwise deal with the resin extracted and manufactured within the State and section 4 authorises Government to sell the same to the Government company for processing
What is taken away under section 3 from the hands of private parties is undoubtedly given by the same provision to Gov ernment
In Madan Mohan Pathak s case supra this Court had pointed out The verbal veil constructed by employing the device of extinguishment of debt cannot be permitted to conceal or hide the real nature of the transaction
It is necessary to remem ber that we are dealing here with a case where a constitutionally guaranteed right is sought to be enforced and the protection of such right should not be allowed to be defeated or rendered illusory by legislative stratagems
The courts should be ready to rip open such stratagems and devices and find out whether in effect and substance the legislation trenches upon any fundamental rights
The encroachments on fundamental rights are often subtle and sophisticated and they are disguised in lan guage which apparently seems to steer clear of the constitutional inhibitions
 It is not necessary to multiply precedents As we have already pointed 270 out section 3 of the Act extinguishes private rights and confers the right to deal with the subject matter of such rights on the State
An attempt was made to distinguish the rule in Pathak s case by relying upon the decision in Tara Prasad Singh vs Union of India  Ors  That seven Judge Bench was dealing with the Coal Mines Nationalisation Amendment Act of 1976
The Court referred to the two previous decisions in Ajit Singh vs State of Punjab  and Madan Mohan Pathak vs Union of India supra and observed These decisions have no application to the instant case because the interest of the lessees and sub lessees which was brought to termination by section 33b of the Nation alisation Amendment Act does not come to be vested in the State
The Act provides that excepting a certain class of leases and sub leases all other leases and subleases shall stand terminated in so far as they relate to the winning or mining of coal
There is no provision in the Act by which the interest so terminated is vested in the State Nor does such vesting flow as a necessary consequence of any of the provisions of the Act
Sub section 4 of section 4 of the Act provides that where a mining lease stands terminated under sub section 3 it shall be lawful for the Central Government or a Government Company or a corporation owned or controlled by the Central Government to obtain a prospecting licence or a mining lease in respect of the whole or part of the land covered by the mining lease which stands so terminated
The plain intendment of the Act which may it be reiterated is neither a pretense nor a fa cade is that once the outstanding leases and sub leases are terminated the Central Govern ment and the other authorities will be free to apply for a mining lease
Any lease hold interest which the Central Government for example may thus obtain does not directly or immediately flow from the termination brought about by section 33b
Another event has to intervene between the termination of existing leases and the creation of new interests
The Central Government etc
have to take a posi tive step for obtaining a prospecting licence or a mining lease
Without it the Act would be ineffective to create of its own force any right or interest in favour of the Central Government a Government Company or a Corpora tion 271 owned managed or controlled by the Central Government
 The statutory scheme of the Act which we are considering is to extinguish private rights both in respect of Govern ment owned trees as also trees in private ownership and to vest those rights in the State Government or the Government company
The facts in this group of cases therefore clear ly indicate that there is a direct relationship between nullification of the private rights and vesting of those in the State or the Government company
In other words where the contract was given by the Government in respect of the trees belonging to the State the nullification of the contract would result in the automatic transfer by reversion of the property in the contract to the Government
Similar ly where the ownership vested in the private persons by operation of section 3 of the Act the right to appropriate the usufruct of the trees is taken away from the private owner and is vested in the State
The rule in Pathak s case therefore is applicable
Sub article
2A of article 31 there fore does not apply to the facts of the present case
Consequently sub article
2 applies and compensation there fore was payable before the property could be taken over by the State
Petitioners in writ petition No 79486 had claimed that pursuant to the arrangement entered into between them and the State following the invitation by the State they had invested Rs 168 crores in shape of plant and machinery and 63 lacs of rupees by way of land and buildings
The peti tioner in the other two cases stated that investments had been made by them as well
The petitioners were invited to set up industries by assuring them supply of the raw materi al
They changed their position on the basis of representa tions made by the State and when the factories were ready and they were in a position to utilise the raw material the impugned Act came into force to obliterate their rights and enabled the State to get out of the commitments
We are inclined to agree with the submissions made on behalf of the petitioners that the circumstances gave rise to a fact situation of estoppel
It is true that there is no estoppel against the legislature and the vires of the Act cannot be tested by invoking the plea but so far as the State Govern ment is concerned the rule of estoppel does apply and the precedents of this Court are clear
It is unnecessary to go into that aspect of the matter as in our considered opinion the impugned Act suffers from the vice of taking away rights to property without providing for compensation at all and is hit by article 312 of the Constitution
Connected proceedings had been taken for interim arrangement 272 regarding provision of raw material to the petitioners and certain other parties
We do not propose to deal with those aspects in this judgment but liberty is given to parties to apply for such directions as they consider appropriate and such applications when filed will be dealt with separate ly
In the result each of the writ petitions succeeds
We declare the provisions of sections 3 and 4 of the Act to be ultra vires the Constitution and since these provisions contain the soul of the Act and without them the Act cannot oper ate the entire Act has to suffer
The petitioners shall have their costs to these proceedings
Hearing fee of Rs3000 is awarded in each of the petitions
YL Petition allowed


Summary:
Upon the sale of certain village land the appellants filed a suit for pre emption and a compromise decree was passed allowing pre emption provided the appellants deposited the purchase amountbvacertaindate
The appellants Posited the amount and got Possession of the land
Before the appellants deposited 879 the amount the respondents who were pre emptors of an equal degree filed a suit to enforce their right of pre emption
The appellants contended that the land could be divided between two equal pre emptors only when both the suits were pending before the court at the time of the passing of the decree and that the appellants having obtained the decree and paid the amount got substituted in place of the vendees and the respondents could succeed only by establishing a superior right of pre emption
The respondents countered that they had a statutory right under section 17 Of the Punjab Pre emption Act to share the land with the appellants and that the appellants having been substituted in place of the vendees Pendente lite were hit by the doctrine of lis pendens and could not claim a higher right than the vendees Held that the respondents  suit could not succeed as they lid not have a superior right of pre emption over the appellants who had become substituted in place of the vendees upon payment of the purchase money under their decree
A pre emptor has two rights i inherent or primary right to the offer of a thing about to be sold and 2 a secondary or remedial right to follow the thing sold
The secondary right is simply a right of substitution in place of the original vendee
Dhani Nath vs Budhu 136 P R 1894 at P 511 and Gobind Dayal vs Inayatullah All 775 followed
In a suit for pre emption the plaintiff must show that his right is superior to that of the vendee and that it subsists at the time he exercises his right
This right is lost if before he exercises it another person with an equal or superior right has been substituted in place of the original vendee
The Punjab Preemption Act defines the right of pre emption and provides a procedure for enforcing it
It does not enlarge the content of this right nor does it introduce any change in the incidents of the right
Section 28 Of the Act does not preclude the Court from giving a decree for pre emption in a case where the suits are not joined together and one of the suits has been decreed separately
The doctrine of lis pendens applies only to a transfer Pendente lite but it cannot affect a pre existing right
If the sale is a transfer in recognition of a preexisting and subsisting right it would not be affected by the doctrine as the transfer does not create a new right Pendente lite but if the preexisting right became unenforceable by reason of limitation or otherwise the transfer though ostensibly made in recognition of such a right in fact creates only a new right pendente lite
The appellants  right of pre emption was subsisting and was not barred by limitation at the time of the transfer in their favour as they had filed a suit and had obtained a decree and the coercive 112 880 process was still in operation
Consequently the appellants were not hit by the doctrine of lis pentlens and they acquired an indefeasible right to the land when they took possession of it after depositing the purchase money in court
Mool Chand vs Ganga jal Lah
258 Mt Sant Kaor vs Teja Singh ILR  Mohammad Sadhiq vs Ghasi Ram AIR 1946 Lah
322 and Wazir Ali Khan vs Zahir Ahmad Khan AIR 1949 East Punj
193 approved
Kundan Lal vs Amar Singh AIR 1927 All
664 disapproved
The right of pre emption is effectively exercised or enforced only when the pre emptor has been substituted for the vendee
A conditional decree whereunder the pre emptor gets possession only if he pays a specified amount within a prescribed time and which also provides for the dismissal of the suit in case the condition is not fulfilled cannot bring about the substitution of the decree holder for the vendee before the condition is fulfilled
Such substitution takes effect only when the decree holder fulfils the condition and takes possession of the land
Deonandan prashad Singh vs Ramdhari Choudhyi 1916 L R 44 I A 80 followed