Appeal No 2139 of 1968
Appeal by certificate from the judgment and order dated July 16 17 1968 of the Bombay High Court in SCA No 504 of 1967
V M Tarkunde Y R Dandige and A G Ratnaparkhi for appellant No 1 section V Natu K K Khamberker P Kesava Pillai and M R K Pillai for respondent No 1
B D Sharma for respondent No 2
Y section Dharinadhjkari Advocate General Madhya Pradesh and 1
N Shroff for Advocate General Madhya Pradesh InterVener O P Rana for Advocate General UP Intervener
41 D Goburdhan for Advocate General Bihar Intervener
A V Rangam and A Subhashini for Advocate General Tamil Nadu Intervener
K M Nair for Advocate General Kerala Intervener
O N Tikku and Vineet Kumar for AdvocateGeneral J  K Intervener
The Judgment of the Court was delivered by Sikri CJ
This appeal by certificate of fitness granted by the High Court of Judicature at Bombay Nagpur Bench is directed against the Judgment of the High Court in Writ Petition No 504 of 1967 filed under articles 226 and 227 of the Constitution by Vithal Rao respondent fore us hereinafter referred to as the petitioner
The petitioner was a tenant of some fields in village Binakhi in Petwari Circle No 10 Nagpur
He had applied to the Agricultural Lands Tribunal under a local act for fixing the purchase price of the said fields
On May 3 1962 a notice was issued under section 39 of the Nagpur Improvement Trust Act 1936 hereinafter referred to as the Improvement Act
Section 39 of this Act deals with the preparation publication and transmission of notice as to improvement schemes and supply of documents to applicants
On November 17 1961 the Improvement Trust applied for sanction of its scheme by the Government and on January 9 1965 the Government sanctioned the scheme under section 45 of the Improvement Act
On February 28 1966 proceedings were started before the Land Acquisition Officer and on June 12 1967 an award was passed by the Land Acquisition Officer fixing the compensation at Rs 45910 for 4419 acres of land acquired
On June 15 1967 the petitioner filed the writ petition under articles 226 and 227 of the Constitution
In this petition the validity of the Improvement Act was challenged on various grounds one of the grounds being that the Improvement Act was in violation of article 14 of the Constitution inasmuch as it empowered the acquisition of lands at prices lower than those which would have been payable if they had been acquired under the Land Acquisition Act 1894
The High Court held that as the acquisition is by the State in all cases where the property is required to be acquired for the purposes of a scheme framed by the Trust and such being the position it is not permissible without violating the guarantee under Article 14 of the Constitution for the State to acquire any property 42 under the provisions of the Land Acquisition Act as amended by the Improvement Trust Act in so far as they relate to the basis of determination and payment of compensation
It must therefore be held that the provisions of paragraphs 102 and 103 in so far as they add a new Clause 3 a to Section 23 and a proviso to Sub section 2 of Section 23 of the Land Acquisition Act are ultra vires as violating the guarantee of Article 14 of the Constitution
In the result the petition was allowed the award set aside and the matter was remanded to the Land Acquisition Officer for determination of compensation according to the law and in the light of the decision by the High Court
As the case was important the High Court granted a certifi cate under article 1 3 2  1  and article 1 3 1  1  c of the Constitution
Before we deal with the contentions of the learned counsel for the appellant we may briefly examine the relevant provisions of the Improvement Act
This Act came into force on December 25 1936
It was passed before the Government of India Act 1935 came into force
The Preamble states  Whereas it is expedient to make provision for the im provement and expansion of the Town of Nagpur in the manner hereinafter provided  Section 3 of the Act creates the Nagpur Improvement Trust as a body corporate
Chapter IV of the Act deals with the Improvement schemes
Section 26 provides for the matters which may be included in an improvement scheme
One of the matters is the acquisition by purchase exchange or otherwise of any property necessary for or affected by the execution of the scheme Section 27 describes various types of improvement schemes
They are a a general improvement scheme b a re building scheme c a re housing scheme d a street scheme e a deferred street scheme f a development scheme g a housing accommodation scheme h a future expansion or improvement scheme and i a drainage or drainage including sewage disposal scheme
The scheme in pursuance of which the lands in the present case were acquired was a housing accommodation scheme
Section 39 as stated above provides for the issue of a notice after an improvement scheme has been framed
Unders
41 the Trust is obliged to serve a notice of the proposed acquisition of land on certain persons
Section 43 enables the Improvement Trust to abandon an improvement scheme after considering any objection representation or statement of dissent received and after hearing all persons or to apply to the State Government for sanction to 43 the scheme with such modifications if any as the Trust may consider necessary
The decision would be that of the Improvement Trust
Section 44 gives wide powers to the Government to sanction with or without modification or to refuse a sanction or to return for consideration any improvement scheme submitted to it under section 43
Under section 45 the State Government is obliged to notify the sanction of an improvement scheme
Section 46 enables the Trust to alter an improvement scheme before it has been completed subject to certain conditions
Chapter V deals with the powers and duties of the Trust where a scheme has been sanctioned
Chapter VI deals with acquisition and disposal of land
Under section 58 the Trust is enabled  to acquire by purchase lease or exchange any land within the area comprised in a sanctioned scheme
Section 59 deals with compulsory acquisition and may be set out in full  It provides 59 The Trust may with the previous sanction of the State Government acquire land under the provisions of the Land Acquisition Act 1894 as modified by the provisions of this Act for carrying out any of the purposes of this Act
 Section 60 says that a Tribunal shall be constituted as provided in section 62 for the purpose of performing the functions of the Court in reference to the acquisition of land for the Trust under the Land Acquisition Act 1894
 Section 61 modifies the Land Acquisition Act in the following words For the purpose of acquiring land under the Land Acquisition Act 1894 for the Trust a the Tribunal shall except for the purposes of section 54 of that Act be deemed to he the Court and the President of the Tribunal shall be deemed to be the Judge thereunder b the Act shall be subject to the further modifications as indicated in the Schedule c the President
of the Tribunal may summon witnesses and enforce their attendance and may compel the production of documents by the same means and so far as may be in the same manner as is provided in case of a Civil Court under the Code of Civil Procedure 1908 and d the award of the Tribunal shall be deemed to be the award of the
Court under the Land Acqui sition Act 1894 and shall be final
 44 We need not deal with the provisions dealing with the constitution of the Tribunal remuneration of its members etc
Section 68 enables an owner to apply to the Trust requesting that the acquisition of land not required for the purposes of a scheme may be abandoned on his executing an agreement to Observe conditions specified by the Trust in respect of the development of the property and to pay a charge to be calculated in accordance with subsection 2 of section 69 of the Act
The Trust can abandon an acquisition without requiring sanction of the Government
The Schedule modifies the Land Acquisition Act in various respects
The relevant modifications are these  1
After clause e of section 3 the following clause shall be deemed to be inserted namely ee the expression local authority  includes the Trust constituted under the Nagpur improvement Trust Act 1936
1 The first publication of a notice of an im provement scheme under section 39 of the Nagpur Improvement Trust Act 1936 shall be substituted for and have the same effect as publication in the official Gazette and in the locality of a notification under subsection 1 of section 4 except where a declaration under section 4 or section 6 has previously been made and is still in force
2 subject to the provisions of clauses IO and II of this Schedule the issue of a notice under sub section 4of section 32 of the Nagpur Improvement Trust Act 1936 in the case of land acquired under that sub section and in any other case the publication of a notification under section 45 of the Nagpur Improvement Trust Act 1936 shall be substituted for and have the same effect as a declaration by the State Government under section 6 unless a declaration under the last mentioned section has previously been made and is in force
3The full stop at the end of section II shall be deemed to be changed to a semi colon and the following shall be deemed to be added namely and ivthe costs which in his opinion should be allowed to any person who is found to be entitled to compensation and who is not entitled to receive the additionalsum of fifteen percentum mentioned in sub section 2 45 of section 23 as having been actually and reasonably in curred by such person in preparing his claim and putting his case before the Collector
The collector may disallow wholly or in part costs incurred by any person if he considers that the claim made by such person for compensation is extravagant 4     51 In sub section 3 of section 17 after the figure 24  the words figures and letter or section 24 A shall be deemed to be inserted
2To section 17 the following shall be deemed to be added namely 5 When proceedings have been taken under this section for the acquisition of any land and any person sustains damage in consequence of being suddenly dispossessed of such land compensation shall be paid to such person for such dispossession
 Para 6 of the Schedule inserts section 17 A
It reads  17 A
In every case referred to in section 16 or section 17 Collector shall upon payment of the cost of acquisition make overcharge of the land to the Trust and the land shall thereupon vest in the Trust subject to the liability of the Trust to pay any further costs which may be incurred on account of its acquisition
 Para 10 amends section 23 thus  10i      102 The full stop at the end of sub section 2 of section 23 shall be deemed to be changed to a colon and the following proviso shall be deemed to be added  Provided that this sub section shall not apply to any land acquired under the Nagpur Improvement Trust Act 1936 ex cept a buildings in the actual occupation of the owner or occupied free of rent by a relative of the owner and land appurtenant thereto and b gardens not let to tenants but used by the owners as a place of resort
 10 3 For the purposes of clause first of sub section 1 of this section a the market value of the land shall be the market value according to the use to which the land was 46 put at the date with reference to which the market value is to be determined under that clause    Another advantage which is said to accrue to these persons is provided by section 48 A as inserted by para 14
It reads  48 A 1 If within a period of two years from the date of the publication of the declaration under section 6 in respect of any land the Collector has not made an award under section 1 1 with respect to such land the owner of the land shall unless he has been to a material extent responsible for the delay be entitled to receive compensation for the damage suffered by him in consequence of the delay
2The provisions of Part III of this Act shall apply so far as may be to the determination of the compensation payable under this section
 It would be seen that the effect of the modifications in two respe cts is tremendous
First the owner whose land is acquired under the Improvement Act is paid compensation not according to the market value of the land but the market value according to the use to which the land was put at the date with reference to which the market value is to be determined in that clause
In other words if the land is being used for agricultural purposes even though it has a potential value as a building site the potential value is to be ignored
The second respect in which the owner suffers if the land is acquired under the Improvement Act is that he does not get a solatium of 1 5  which he would have got if the land had been acquired under the Land Acquisition Act
It is true that he has some minor advantages which have been pointed out by the learned counsel but they have no comparison in value to the loss suffered by virtue of the market value being determined according to the use to which the land was being put or the loss of 15 of the market value of the land
The first point which was raised was  whether it is the State which is the acquiring authority or it is the Improvement Trust which is the acquiring authority under the Improvement Act
it seems to us that it is quite clear especially in view of
section 17A as inserted by para 6 of the Schedule that the acquisition will be by the Government and it is only on payment of the cost of acquisition to the Government that the lands vest in the Trust
It is true that the acquisition is for the Trust and may be at its instance but nevertheless the acquisition is by the Government
If this is so then it is quite clear that the Government can acquire for a housing accommodation scheme either under the Land Acquisition Act or under the Improvement Act
If this is 47 so it enables the State Government to discriminate between one owner equally situated from another owner
This Court held in Nandeshwar Prasad vs UP Govt1 that the fact that the lands could be acquired for a scheme under the Kanpur Urban Development Act
UP Act VI of 1945 did not preventthe Government from acquiring the lands for the same purposeunder the Land Acquisition Act as amended by the Kanpur Act
We may mention that the Kanpur Act amended acquisition of land for the Board in a similar manner as in the Nagpur Improvement Trust Act
A similar point was abandoned in P Vaijravelu Mudaliar vs Special Deputy Collector Madras2 by Mr Viswanatha Sastri in view of the above decision of this Court in Kanpur case
The question then arises whether the High Court is right in holding that the impugned provisions were hit by article 14 of the Constitution
It is now well settled that the State can make a reasonable classification for the purpose of legislation
It is equally wellsettled that the classification in order to be reasonable must satisfy two tests i the classification must be founded on intelligible differentia and ii the differentia must have a rational relation with the object sought to be achieved by the legislation in question
In this connection it must be borne in mind that the object itself should be lawful
The object itself cannot be discriminatory for otherwise for instance if the object is to discriminate against one section of the minority the discrimination cannot be justified on the ground that there is a reasonable classification because it has rational relation to the object sought to be achieved
What can be reasonable classification for the purpose of determining compensation if the object of the legislation is to compulsorily acquire land for public purposes  It would not be disputed that different principles of compensation cannot be formulated for lands acquired on the basis that the owner is
old or young healthy or ill tall or short or whether the owner has inherited the property or built it With his own efforts or whether the owner is a politician or an advocate
Why is this sort of classification not sustainable  Because the object being to compulsorily acquire for a public purpose the object is equally achieved whether the land belongs to one type or another type
Can classification be made on the basis of the public purpose for the purpose of compensation for which land is acquired  In 1  1   619
48 other words can the legislature lay down different principles of compensation for lands acquired say for a hospital or a school or a Government building  can the legislature
say that for a hosPital land will be acquired at 50 of the market value for a school at 60 of the value and for a Government building at 70 of the market value  All three objects are Public Purposes and as far as  the owner is concerned it does not matter to him whether it is one Public Purpose or other
article 14 confers an individual right and in order to justify a classification there should be something which justifies a different treatment to this individual right
It seems to us that ordinarily a classification based on the public purpose is not permissible under article 14 for the purpose of determining Compensation
The Position is different when the owner of the land himself is the recipient of benefits from an improvement scheme and the benefit to him is taken into consideration in fixing compensation
Can classification be made on the basis of the authority acquiring the land  In other words can different principles of compensation be laid if the land is acquired for or by an Improvement Trust or Municipal Corporation or the Government  It seems to us that the answer is in the negative because as far as the owner is concerned it does not matter to him whether the land is acquired by one authority or the other
It is equally immaterial whether it is one Acquisition Act or another Acquisition Act under which the land is acquired
If the existence of two Acts enables the State to give one owner different treatment from another equally situated the owner who is discriminated against can claim the protection of article 14
It was said that if this is the true position the State would find it impossible to clear slums to do various other laudable thing
If this argument were to be accepted it would be totally destructive of the protection given by article 14
It would enable the State to have one law for acquiring lands for hospital one law for acquiring lands for schools one law acquiring lands for clearing slums anoth er for acquiring lands for Government buildings one for acquiring lands in New Delhi and another for acquiring lands in old Delhi
It was said that in many cases the value of the land has increased not because of any effort by the owner but because of the general development of the city in which the land is situated
There is no doubt that this is so but article 14 prohibits the expropriation of the un earned increment of one owner while leaving his neighbour untouched
This neighbour could sell his land reap the unearned increment
If the object of the legislation is to tax unearned increment it should be done throughout the State
The State cannot achieve this object piece meat by compulsory acquisition of land of some owners leaving others alone
If the object is to clear 49 slums it cannot be done at the expense of the owners whose lands are acquired unless as we have said the owner are directly benefited by the scheme
If the object is to build hospitals it cannot be done at the expense of the owners of the land which is acquired
The hospital schools etc
must be built at the expense of the whole community
It will not be denied that a statute cannot tax some owners of land leaving untaxed others equally situated
If the owners of the land cannot be taxed differently how can some owners be indirectly taxed by way of compulsory acquisition  It is urged that if this were the law itwill tic the hands of the State in undertaking social reforms
We do not agree
There is nothing in the Constitution which debars the State from bettering the lot of millions of our citizens
For instance there is nothing to bar the State from taxing unearned increment if the object is to deny owners the full benefit of increase of value due to development of a town
It seems to us as we have already said that to accede to the contentions of the appellant and e States would be destructive of the protection afforded by article 14 of the Constitution
The States would only have to constitute separate acquiring bodies for each city or Division or indeed to achieve one special public purpose and lay down different principles of compensation
In P Vajravelu Mudaliar vs Special Deputy Collector Madras1 there were two Acts under which the land of an owner could be acquired
The land could have been acquired for various schemes under the Land Acquisition Act referred to as the Principal Act in the judgment and the Amending Act The Land Acquisition Madras Amendment Act 1961
Court observed  The land could have been acquired for all the said purposes under the Principal Act after paying the market value of the land
The Amending Act empowers the State to acquire land for housing scheme at a price lower than that the State has to pay if the same was acquired under the Principal Act
 The Court examined various justifications for the classi fications which were put forth by the State and then con cluded From whatever aspect the matter is looked at the alleged differences have no reasonable relation to the object sought to be achieved
It is said that the object of the Amending Act in itself may project the differences in the lands sought to be  acquired under the two Acts
This argument puts the cart before the horse
It is one thing to say that the existing differ 1  L631 Supreme Court73 50 ences between persons and properties have a reasonable relation to the object sought to be achieved and it is totally a different thing to say that the object of the Act itself created the differences
Assuming that the said proposition is sound we cannot discover any differences in the people owning lands or in the lands on the basis of the object
The object is to acquire lands for housing schemes at a low price
For achieving that object any land falling in any of the said categories can be acquired under the Amending Act
So too for a public purpose any such land can be acquired under the principal Act
We therefore hold that discrimination is writ large on the Amending Act and it cannot be sustained on the principal of reasonable classification
We therefore hold that the Amending Act clearly infringes article 14 of the Constitution and is void
In Balammal  Ors
vs State of Madras1 in which the facts are substantially similar the Board constituted under the Madras City Improvement Trust Act Madras Act 16 of 1945 was authorised by virtue of sec
71 with the previous sanction of the Government to acquire land under the provisions of the Land Acquisition Act 1894 for carrying out any of the purposes of the Act which included Town Expansion Scheme This sec
71 is equivalent to see
59 of the Improvement Act
For the purpose of acquiring land for the Board under the Land Acquisition Act 1894 sec
73 provided inter alia that the said Act shall be subjected to the modifications specified in the Schedule This section 73 corresponds to sec
61 of the Improvement Act
The Schedule to the Act provided for modification in the Land Acquisition Act for certain specific purposes
The Madras Act of 1945 as replaced by the Madras City Improvement Trust Act Madras Act 37 of 1950 made an important change inasmuch as the result was that by the change persons whose lands were compulsorily acquired under the Madras Act 37 of 1950 were deprived of the right to the solatium which would be awardable if the lands were acquired under the Land Acquisition Act
In this connection this Court observed  But in our judgment counsel for the owners is right in contending that sub cl
2 of cl 6 of the Schedule to Act 37 of 1950 insofar as it deprived the owners of the lands of the statutory addition to the market value of the lands under section 23 2 of the Land Acquisition Act is violative of the equality clause of the Constitution and is on that account void
If the 1  51 State had acquired the lands for improvement of the town under the Land Acquisition Act the acquiring authority was bound to award in addition to the market value 15 statutory under section 232 of the Land Acquisition Act
But by acquiring the lands under the Land acquisition Act as modified by the Schedule to the Madras City Improvement Trust Act 37 of 1950 for the Improvement Trust which is also a public pur pose the owners are it is claimed deprived of the right to that statutory addition
An owner of land is ordinarily entitled to receive the solatium in addition to the market value for compulsory acquisition of his land if it is acquired under the Land Acquisition Act but not if it is acquired under the Madras City Improvement Trust Act
A clear case of discrimination which infringes the guarantee of equal protection of the law arises and the owners of the lands which are compulsorily acquired must on the decisions of it his Court be deemed invalid
After reviewing some earlier cases the Court held  We
therefore hold that cl 6 sub cl
2 of the Schedule read with section 73 of Madras Act 37 of 1950 which deprives the owners of the statutory right to solarium at the rate of 15 on the market value of the lands is invalid and the owners of the lands are entitled to the statutory solatium under section 232 of the Land Acquisition Act in consideration of compulsory acquisition of their land
 The learned counsel was not able to satisfy us that the above case was distinguishable
We are of the opinion that the case was rightly decided and must govern this case
In this view of the matter it is not necessary to refer to all the cases referred to us at the Bar
We may mention that Mr Tarkunde also placed reliance on article 31 A 1 a of the Constitution
It is now well settled that article 3 1 A 1 a has relevance to agrarian reforms and development
It has nothing to do with acquisition of land for building of a capital of a State
In the result the appeal fails and is dismissed with costs
UC Appeal dismissed


Summary:
The petitioner was tenant of some fields in a village in Patwari Circle 10 Nagpur
He had applied to the Agricultural Lands Tribunal under a local Act for fixing the purchase price of the said fields
The land in question was however acquired under the Nagpur Improvement Trust Act 1936
Dissatisfied with the compensation awarded the petitioner filed a petition under articles 226 and 227 of the Constitution
In this petition the validity of the Improvement Act was challenged on various grounds one of the grounds being that the Improvement Act was in violation of article 14 of the Constitution inasmuch as it empowered the acquisition of lands at prices lower than those which would have been payable if they had been acquired under the Land Acquisition Act 1894
The High Court allowed the petition and set aside the award
Appeal in this Court against the High Court s judgment was filed with certificate
Dismissing the appeal
HELD  The effect of the modifications made by Improvement Act in the Land Acquisition Act in two respects is tremendous
First the owner where land is acquired under the Improvement Act is paid compensation not according to the market value of the I and but the market value according to the use to which the land was put at the date with reference to which the market value is to be determined in that clause
In other words if the land is being used for agricultural purposes even though it has a potential value as a building site the potential value is to be ignored
The second respect in which the owner suffers if the land is acquired under the Improvement Act is that he does not get a solatium of 15 which he would have got if the land had been acquired under the Land Acquisition Act
It is true that be has some minor advantage but they have no comparison in value to the loss suffered by virtue of the market value being determined according to the use to which the land was being put or the loss of 15 of the market value of the land
146D It is quite clear especially in View of section 17A as inserted in the Land Acquisition Act by para 6 of the Schedule to the Improvement Act that the acquisition will be by the Government and it is only on payment of the cost of acquisition by the Government that the land vest in the Trust
It is true that the acquisition is for the Trust and may be at its instance but nevertheless the acquisition is by the Government
If this is so it enables the State Government to discriminate between one owne r equally situated from another owner
45G 40 It is now well settled that the State can make a reasonable classification for the purpose of the legislation provided it is based on intelligible differentia having a rational relation with the object sought to be achieved by the legislation in question
In this connection it must be home in mind that the object itself should be lawful
47D The legislature cannot lay down different principles of _ compensation for lands acquired say for a hospital or a school or a Government building
An three objects are public purposes and so far as the owner is concerned it does not matter to him whether it is one public purpose or the other
article 14 confers an individual right and in order to justify a classification there should be something which justifies a different treatment to this individual right
Ordinarily a classification based on the public purpose is not permissible under article 14 for the purpose of determining compensation
48A Similarly different principles cannot be laid if the land is acquired for or by an Improvement Trust or Municipal Corporation or Government because so far as the owner is concerned it does not matter to him whether the land is acquired by one authority or the other
48D It is equally immaterial whether it is one Acquisition Act or another Acquisition Act under which the land is acquired if the existence of two Acts enables the State to give one owner different treatment from another equally situated the owner who is discriminated against can claim the protection of article 14
48E TO accede to the contention of the appellant and the intervening states would be destructive of the protection afforded by article 14 of the Constitution
The States would only have to constitute separate acquiring bodies for each city or Division or indeed to achieve one special public purpose and lay down different principles of compensation
49D Nandeshwar Prasad vs UP Govt
   P Vairavelu mudaliar vs Special Deputy Collector Madras   619 and Balammal  Ors
vs State of Madras