Civil Appeal Nos 1614 1652 and 1637 of 1979
Appeals by Special Leave from the Judgment and order dated S 3 5 1979 of the Allahabad High Court in Civil Misc
Writ Nos
417071 413071 and 419371
AND PETITIONS FOR SPECIAL LEAVE To APPEAL CIVIL Nos
6246 6252 6373  805079
From the Judgment and order dated 3 5 1979 of the Allahabad High Court in Civil Misc
Writ Nos 4150 4173 4793 and 44271
F section Nariman Bhaskar Gupta Rajesh Khaitan Rohington Nariman and P R Seethrama for the Appellants in CA 161479
A K Sen Manoj Swarup Mis Lalita Kohli and section K Srivastva for the Appellants in CA No 165279 and SLPS
6146 and 637379
R A Gupta for the Petitioner in SLP No 625279
N N Sharma and N N Kacker for the Petitioner in SLP No 805079
Lal Narain Sinha Att
in CA 1614
Rishi Ram Adv
General UP in CA 1652
Raju Ramchandran and o P Rana for the Respondents in All the Appeals
The Judgment of V R Krishna Iyer section Murtaza Fazal Ali and D A Desai JJ was delivered by Desai J R section Pathak J gave a separate opinion on behalf of A D Koshal J and himself
DESAI J Acquisition of industrial undertakings involved in manufacturing sugar a commodity satisfying the basic necessity in larger public interest and the attempt of the owners of the undertakings to thwart the same paints the familiar landscape in this group of appeals
As a sequel to the serious problems created by the owners of certain sugar mills in the State of Uttar Pradesh for cane growers and labour employed in sugar mills having an adverse impact on general economy of the areas where these sugar mills were situated And with a view to ameliorating the situation posing a threat to the economy 335 the Governor of Uttar Pradesh promulgated an ordinance on July 3 to 1971 styled as UP Sugar Undertaking Acquisition ordinance
1971 13 of 1971  ordinance  for short with a view to transferring and vesting sugar undertakings set out in the Schedule to the ordinance in the UP State Sugar Corporation Ltd  Corporation  for short a Government Company within the meaning of section 671 of the 
Subsequently by UP Sugar Undertakings Acquisition Act 1971 UP Act 23 of 1971  Act  for short the ordinance was repealed and was replaced
Schedule to the Act enumerates 12 sugar undertakings referred to as scheduled undertakings  and by the operation of section 3 these scheduled undertakings stood transferred to and vested in the Corporation from the appointed day ie July 3 1971 the date on which the ordinance was issued
On the promulgation of 7 the ordinance 11 writ petitions were filed in the Allahahad High Court under Article 226 of the Constitution challenging the constitutional validity of the ordinance and when the Act replaced the ordinance effective from August 27 1971 the writ petitions were amended incorporating the challenge to the Act also
The ordinance and the Act were challenged in the High Court on the following grounds 1 The State legislature had no legislative competence to enact it 2 The Act violated article 31 of the Constitution because the acquisition was not for a public purpose and the compensation proposed in the Act was illusory 3 The Act was in breach of article 191f and g of the Constitution 4 The Act infringed the gurantee of equality enshrined in article 14 of the Constitution
A Division Bench of the High Court by a common judgment dated May 37 1979 repelled the contentions on behalf of the petitioners and upheld the constitutional validity of the Act
Hence these appeals by the original petitioners the owners of the scheduled undertakings
Mr F section Nariman learned counsel who led on behalf of the appellants confined his attack to two grounds a UP State legislature lacked legislative competence to enact the impugned Act and b compensation awarded for acquisition in violative of article 3123 as it stood prior to its amendment by the Constitution Twenty fifth Amendment Act 1971 which came into force on April 20 1972
Mr R A Gupta who appeared in SLP
625279 canvassed an additional contention that the impugned Act is violative of article 14 inasmuch as those similarly situated and similarly circumstanced sugar under takings have 336 not been acquired and the petitioners  scheduled undertakings have been singled out for a drastic treatment of take over by way of acquisition
The main thrust of the attack was that the UP Legislature lacked legislative competence to enact the impugned Act
There were two distinct limbs of this submission which would be examined separately
The first limb of the submission was that in exercise of legislative power flowing from Entry 52 List I the Parliament made the requisite declaration in section 2 of the Industries Development and Regulation Act 1951  IDR Act  for short and in view of placitum 25 of the first schedule to the IDR Act sugar being a declared industry that industry goes out pf Entry 24 List II and hence U P State legislature was denuded of all legislative power to legislate in respect of sugar industry and as the impugned legislation is in respect of industrial undertaking in sugar industry the impugned legislation is void on account of legislative incompetence
The learned Attorney General countered it by saying that the power to acquire property derived from entry 42 in List III is an independent power and the impugned Act being in pith and substance an Act to acquire scheduled undertakings meaning thereby the properties of the scheduled undertakings the power of the State legislature to legislate in this behalf is referable to entry 42 and remains intact irrespective of the fact that sugar is a declared industry control of which is taken over by the Union Government pursuant to the declaration made under section 42 of the IDR Act
This necessitates an analytical examination of the relevant entries keeping in view legislative perspective and the historical background through which these entries have passed
Entry 7 in the Union List reads as under 7
Industries declared by parliament by law to be necessary for the purpose of defence or for the prosecution of war
 Entry 32 in the same List reads 52
Industries the control of which by the Union is declared by parliament by law to be expedient in the public interest  Entry 24 in List II State List reads as under 24
Industries subject to the provisions of entries 7 and 52 of List I It may be noted here that entry 33 in List I entry 36 in List II and entry 42 in List III were amended by section 26 of the Constitution Seventh Amendment Act by which entry 33 of List I and entry 36 of List II 337 were deleted and entry 42 in List III was amended to read as set out hereinabove
Entry 33 in List I and entry 36 in List II conferred legislative power on the Union and the States respectively for acquisition or requisitioning of property for its own purpose
Constitution Seventh Amendment Act 1956 which made the aforementioned amendment was designed to clear the ambiguity about the power of acquisition and requisitioning of property being not a power incidental to any of the legislative powers but an independent power by itself
The object behind the amendment has been thus explained
The existence of three entries in the legislative lists 33 of List I 36 of List II and 42 of List III relating to the essentially single subject of acquisition and requisitioning of property by the Government gives rise to unnecessary technical difficulties in legislation
In order to avoid these difficulties and simplify the constitutional position it is proposed to omit the entries in the Union and State Lists and replace the entry in the concurrent list by a comprehensive entry covering the whole subject see Statement of objects and Reasons in respect of Constitution Seventh Amendment Act 1956
Having set out the historical background attention may now be turned to the scope and content of legislative power of Union and the States flowing from entry 52 in List I and entry 24 in List II in respect of the topic of industry  The scope and content of entry 52 List I and entry 24 List II has to be demarcated with precision to avoid a possible confusion likely to emanate from an inter dependence and interaction of the two entries Industry  as a head of legislation is to be found in entry 24 List II with this limitation that it is subject to the provisions of entries 7 and 52 List I
The difference in the language in which entries 7 and 52 are couched has a bearing on the interruption of entry 52
In the former case if a declaration is made by the Parliament that the particular industry is necessary for the purpose of defence or for prosecution of the war parliament would be exclusively entitled to legislate in respect of that industry to the exclusion of State legislatures because the requisite declaration will have the effect of taking out that industry from entry 24 List II
A declaration by the parliament by law to assume control over any particular industry in public interest is a sine qua non to clothe Parliament with power under entry 52 List I to legislate in respect of that industry because otherwise industry as a general head of legislation is in the exclusive sphere of State legislative activity pursuant to entry 24 List II
Distribution of legislative powers as enacted in Part XI and article 246 clearly demarcate the field of legislative activity reserved for Parliament and for State legislatures and also the concur 338 rent list in respect of which both can legislate subject to other provisions of part XI
Sub article
3 of article 246 provides that the State legislature has exclusive power to make laws with respect to any of the matters enumerated in List
II in the Seventh Schedule
A fortiori industry being the matter enumerated in List II the State legislature has exclusive power to legislate in respect of it and keeping aside for the time being the words subject to the provisions of entries 7 and 52 of List I  the State legislature alone can legislate in respect of the legislative head industry  Ipso facto parliament would not have power to legislate in respect of industry as a legislative head
Now entry 52 List I on its own language does not provide a field of legislative activity for the Union Parliament unless and until a declaration is made by parliament by law to assume control over specified industries
The embargo on the power of Parliament to legislate in respect of industry which is in List II would be lifted once a declaration is made by Parliament by law as envisaged by entry 52 List I
In the absence of a declaration as envisaged by entry 52 List I it is incontrovertible that Parliament has no power to legislate on the topic of industry
Entry 52 List I on its own language does not contemplate a bald declaration for assuming control over specified industries but the declaration has to be by law to assume control of specified industries in public interest
The legislation enacted pursuant to the power to legislate acquired by declaration must be for assuming control over the industry and the declaration has to be made by law enacted of which declaration would be an integral part
Legislation for assuming control containing the declaration will spell out the limit of control so assumed by the declaration
Therefore the degree and extent of control that would be acquired by Parliament pursuant to the declaration would necessarily depend upon the legislation enacted spelling out the degree of control assumed
A mere declaration unaccompanied by law is incompatible with entry 52 List I A declaration for assuming control of specific industries coupled with law assuming control is a pre requisite for taking legislative action under entry 52 List I The declaration and the legislation pursuant to declaration to that extent denude the power of State legislature to legislate under entry 24 List II
Therefore the erosion of the power of the State legislature to legislate in respect of declared industry would not occur merely by declaration but by the enactment consequent on the declaration prescribing the extent and scope of control
When a declaration is made as contemplated by entry 52 List T in respect of any particular industry it is contended that that industry as a topic of legislation would be removed from the legislative sphere of the state
What is the effect of a declaration made in respect of mines and minerals as contemplated by entry 54 has been succinctly laid down by a Constitution Bench of this 339 Court in Baijnath Kedia vs State of Bihar  Ors
J1 in the following terms Once this declaration is made and the extent laid down the subject of legislation to the extent laid down becomes an exclusive subject for legislation by Parliament
Any legislation by the State after such declaration and trenching upon the field disclosed in the declaration must necessarily be unconstitutional because that field is abstracted from the legislative competence of the State Legislature 
The only dispute therefore can be to what extent the declaration by Parliament leaves any scope for legislation by the State legislature
If the impugned legislation falls within the ambit of such scope it will be valid if outside it then it must be declared invalid  Sugar is a declared industry
Is it however correct to say that once a declaration is made as envisaged by entry 52 List I that industry as a whole is taken out of entry 24 List II In respect of an identical entry 54 List I in the passage extracted above it is said that to the extent declaration is made and extent of control laid that much and that much alone is abstracted from the legislative competence of the State legislature
It is therefore not correct to say that once a declaration is made in respect of an industry that industry as a whole is taken out of entry 24 List II Similarly in State of Haryana  Anr
vs Chanan Mal etc
while upholding the constitutional validity of the Haryana Minerals Vesting of Rights Act 1973 after noticing the declaration made in section 2 of the Mines  Minerals Regulation and Development Act 1957  Mines  Minerals Act  for short as envisaged by entry 54
List I it was held Moreover power to acquire for purposes of development and regulation has not been exercised by Act 67 of 1957
The existence of power of Parliament to legislate on this topic as an incident of legislative power on another subject is one thing
Its actual exercise is another
It is difficult to see how the field of acquisition could become occupied by a central Act in the same way as it had been in the West Bengal case even before Parliament legislates to acquire land in a State These pronouncements demonstrably show that before State legislature is denuded of power to legislate under entry 24 List II in respect of 340 a declared industry the scope of declaration and consequent control assumed by the Union must be demarcated with precision and then proceed to ascertain whether the impugned legislation trenches upon the excepted field The declaration made in s 2 of IDR Act reads as under It is hereby declared that it in expedient in the public interest that the Union should take under its control the industries specified in the First Schedule
 The contention is that as there are no words of limitation to be found in section 2 in respect of the control assumed by the declaration by the Union the necessary concomitant of such declaration is that the State legislature is totally denuded of any power to deal with such declared industry
To buttress this argument reference was made to the declaration made by the Union pursuant to entry 54 List I as set out in section 2 of the Mines  Minerals Act which reads as under It is hereby declared that it is expedient in the public interest that the Union should take under its control the regulation of mines and the development of minerals to the extent hereinafter provided
 Absence of the expression to the extent hereinafter provided was pressed into service to point out that while in respect of mines ind minerals the Union has assumed control to the extent provided in the Mines Minerals Act in the case of declared industries the control is absolute unlimited unfettered or unabridged and therefore everything that would fall within the connotation of the word control  would be within the competence of the Union and to the same extent and degree the State legislature would be denuded of its power to legislate in respect of that industry
It was said that in respect of declared industries total control is assumed by the Union and therefore entry 24 List II on its import must be read industry minus the declared industry because entry 24 List II is subject to entries 7 and 52 List I Undoubtedly the Union is authorised to assume control in respect of any industry if parliament by law considers it expedient in the public interest
The declaration has to be made by the Parliament but the declaration has to be by law not a declaration simpliciter
The words of limitation on the power to make declaration are by law 
Declaration must be an integral part of law enacted pursuant to declaration
The declaration in this case is made in an Act enacted to provide for the development and regulation of certain industries
Therefore the control was assumed not in abstract but for a specific and avowed object viz development 341 and regulation of certain industries
The industries in respect of which control was assumed for the purpose of their development and regulation have been set out in the Schedule
This control is to be exercised in the manner provided in the statute viz IDR Act
The declaration for assuming control is to be found in the same Act which provides for the limit of control
The deducible inference is that Parliament made the declaration for assuming control in respect of declared industries set out in the Schedule to the Act to the extent mentioned in the Act
It is difficult to accept the submission that section 2 has to be read dehors the Act and not forming part of the Act
This would be doing violence to the art of legislative draftsmanship
It is open to Parliament in view of entry 52 List I to make a declaration in respect of industry or industries to the effect that the Union will assume its control in public interest
It is not to be some abstract control
The control has to be concrete and specific and the manner of its exercise has to be laid down in view of the well established proposition that executive authority must have the support of law for its action
In a country governed by rule of law if the Union an instrumentality for the governance of the country has to exercise control over industries by virtue of a declaration made by Parliament it must be exercised by law
Such law must prescribe the extent of control the manner of its exercise and enforcement and consequence of breach
There is no such concept as abstract control
The control has to be concrete and the mode and method of its exercise must be regulated by law
Now Parliament made the declaration not in abstract but as part of the IDR Act and the control was in respect of industries specified in the First Schedule appended to the Act itself
Sections 3 to 30 set out various modes and methodology procedure and power to effectuate the control which the Union acquired by virtue of the declaration contained in section 2
Industry as a legislative head finds its place in entry 24 List II
The State legislature can be denied legislative power under entry 24 to the extent Parliament makes declaration under entry 52 and by such declaration Parliament acquires power to legislate only in respect of those industries in respect of which declaration is made and to the extent as manifested by legislation incorporating the declaration and no more
The Act prescribes the extent of control and specified it
As the declaration trenches upon the State legislative power it has to be construed strictly
Therefore even though the Act enacted under entry 54 which is to some extent in pari materia with entry 52 and in a parallel and cognate statute while making the declaration the Parliament did use the further expression to the extent herein provided while assuming control the absence of such words in the declaration in section 2 would not lead to the conclusion that the control assumed was to be something in abstract total and unfettered and not as per various 342 provisions of the IDR Act
The lacuna if any is made good by hedging the power of making declaration to be made by law
Legislative intention has to be gathered from the Act as a whole and not by piecemeal examination of its provisions
It would therefore be reasonable to hold that to the extent Union acquired control by virtue of declaration in section 2 of the IDR Act as amended from time to time the power of the State legislature under entry 24 List II to enact any legislation in respect of declared industry so as to encroach upon the field of control occupied by IDR Act would be taken away
This is clearly borne out not only by the decision in Baijnath Kedia s case supra where undoubtedly while referring to the control assumed by the Union by a declaration made in section 2 of the Mines  Minerals Act it was said that to what extent such a declaration would go is for Parliament to determine and this must be commensurate with public interest and once this declaration is made and the extent laid down the subject of legislation to the extent laid down becomes an exclusive subject for legislation by Parliament
It is not merely some abstract control but the extent of the control assumed by the Union by the provisions of IDR Act pursuant to declaration made by Parliament that the State Legislature to that extent that is to the extent the provisions of IDR Act occupies this field is denuded of its power to legislate in respect of such declared industry
The respondents assert the validity of the impugned legislation contending that upon its true construction and proper ascertainment of its object it is a legislation for acquisition of scheduled undertakings and the power to acquire by legislation such scheduled undertakings by the State is derived from entry 42 List III
The controversy therefore centers round the question whether the impugned legislation is in respect of a declared industry referable to entry 24 or one for acquition of scheduled undertakings in exercise of the power of acquisition and requisitioning of property derived from entry 42 List III
Appellants contend that a reference to Objects and Reasons for enacting the impugned legislation would show that the owners of scheduled undertakings had created serious problems for the cane growers and labour which created an adverse impact on the general economy of the areas where these undertakings were situated the legislation was enacted to acquire the undertaking and pay compensation and also pay cane growers and labour on high priority and to restart undertakings for crushing season
It was said that these are purely managerial functions discharged by owners of undertakings and if the impugned Act was devised and enacted primarily to assume these managerial functions the Act would be beyond the legislative competence of the State legislature as it trenches upon the field occupied by IDR Act specifically 343 enacted to empower Union Government to provide effective control over industrial undertakings in declared industry to prevent mismanagement or to rectify the same by taking over management
When validity of a legislation is challenged on the ground of want of legislative competence and it becomes necessary to ascertain to which entry in the three lists the legislation is referable to the Court has evolved the theory of pith and substance
If in pith and substance a legislation falls within one entry or the other but some portion of the subject matter of the legislation incidentally trenches upon and might enter a field under another List the Act as a whole would be valid not with standing such incidental trenching
This is well established by a catena of decisions see Union of India vs H section Dhillon1 and Kerala State Electricity Board vs Indian Aluminium Co2
After referring to these decisions in State of Karnataka  Anr
vs Ranganatha Reddy  Anr
etc3 Untwalia J speaking for the Constitution Bench has in terms stated that the pith and substance of the Act has to be looked into and an incidental trespass would not invalidate the law
The challenge in that case was to the Nationalisation of contract carriages by the Karnataka State inter alia on the ground that the statute was invalid as it was a legislation on the subject of interstate trade and commerce
Repelling this contention the Court unanimously held that in pith and substance the impugned legislation was for acquisition of contract carriages and not an Act which deals with inter State trade and commerce
To start with it is necessary first to ascertain in pith and substance to what entry in a particular list the impugned legislation is referable
If it is referable to entry other than 24 List II such as entry 42 List III it would be necessary to precisely ascertain whether it in any way trenches upon the field occupied by the declaration made by Parliament to assume control over sugar industry as manifested by the various provisions of the IDR Act
Section 3 of the Act provides for vesting of scheduled undertakings from the appointed day in the Corporation
Section 4 provides for consequences of vesting
Section 5 makes it obligatory on every person in whose possession or custody or under whose control any property or asset book of account register or other document comprised in that undertaking may be to forthwith deliver the same to the Collector
Section 7 provides for determination and mode of payment of compensation for acquisition of scheduled undertakings
Section 8 provides for claims to be satisfied out of compensation payable to the 344 owners of the undertakings
Section 9 provides for avoidance of certain secured debts consequent upon acquisition
Section 11 provides for appeal and section 12 provides for constitution of a Tribunal to perform the functions assigned to it by the Act
Section 13 provides for powers and procedure of the Tribunal
Section 14 provides for ouster of jurisdiction of civil courts in respect of any dispute arising from the implementation of the Act
Section 16 confers protection on the employees of the scheduled undertaking
The rest are only consequential sections
A comprehensive examination of all the provisions of the Act indisputably shows that in pith and substance the impugned Act is one Act for acquisition of scheduled undertakings and such acquisition by transfer of ownership of the scheduled undertakings to the Corporation would in no way come in conflict with any of the provisions of the IDR Act or would not trench upon any control exercised by the Union under the various provisions of the IDR Act
In fact the IDR Act generally speaking does not deal with the ownership of industrial undertakings in declared industries
The Act is primarily concerned with development and regulation of the declared industries
The Central Government has power under sections 18A and 18AA of the IDR Act to assume direct management or control of industrial undertakings in certain cases and even after acquisition of scheduled undertakings under the impugned legislation the power of the Central Government under sections 18A and 18AA would remain intact
Even section 18FA provides for taking over management or control of a company which is being wound up with the permission of the High Court and in such a situation the authorised person appointed by the Central Government would be deemed to be Official Liquidator under sub section
4 of section 18FA
Provision contained in Chapter IIIAC of IDR Act enables Central Govt
to direct sale of the industrial undertaking under certain circumstances and in the situation as set out in section 18FE7 to purchase the same
But these powers can be exercise irrespective of the fact who at the relevant time the owner of the undertaking is
The IDR Act is not at all concerned with the ownership of industrial undertakings in declared industries except to the extent of control over management of the undertaking by the owner
Owner is defined in section 3f in relation to an industrial undertaking to mean the person who or the authority which has the ultimate control over the affairs of the undertaking and where the said affairs are entrusted to a manager managing director or managing agents such manager managing director or managing agent shall be deemed to be the owner of the undertaking
This deeming fiction enacted in respect of the concept of ownership clearly manifest the legislative intention that IDR Act treats that person to be the owner who has the ultimate control over the affairs of the under 345 taking and if that ultimate control is entrusted to even a manager for the purposes of the IDR Act the manager would be the owner
This must be so in the very nature of things because the IDR Act is essentially concerned with the control over the management of the industrial undertakings in declared industries
By the acquisition under the impugned Act and vesting of the scheduled undertakings in the Corporation the scheduled undertakings will never the less be under the control of the Central Government as exercised by the provisions of the IDR Act because the Corporation would be the owner and would be amenable to the authority and jurisdiction of the Central Government as the provisions of the IDR Act would continue to apply to the scheduled undertakings sugar being a declared industry and scheduled undertakings are industrial undertakings within the meaning of the IDR Act
No provision from IDR Act was pointed out to us to show that in implementing or enforcing such a provision the impugned legislation would be an impediment
Therefore there is no conflict between the impugned legislation and the control exercised by the Central Government under the provisions of the IDR Act and there is not even a remote encroachment on the field occupied by IDR Act
The main thrust of the submission was that the power of acquisition under entry 42 List III is not an independent power but it is incidental to the power to legislate in respect of the various topics in various lists and therefore when by a declaration made by the parliament enacted in section 2 of the IDR Act the control over declared industry is assumed by the Union such control will also comprehend the power to acquire and hence the power of the State legislature to enact legislation for acquisition of property of scheduled undertakings would be denuded as that power as an internal element of control would vest in the Union Government
The focal point of controversy therefore is whether the power of acquisition and requisitioning of property under entry 42 List III is an independent power by itself or it is an integral and inseparable element of the power of control over industry
Constitution amending process bearing on the three relevant entries may be noticed
Before the Constitution Seventh Amendment Act 1956 which came into force on November 1 1956 Entry 33 in List I read Acquisition or requisitioning of property for the purpose of the Union
 Similarly Entry 36 in List II read Acquisition or requisitioning of property except for the purpose of the Union subject to the provisions of entry 42 of List III 346 At that time entry 42 in List III read Principles on which compensation for property acquired or requisitioned for the purposes of the Union or of a State or for any other public purpose is to be determined and the form and the manner in which such compensation is to be given
By the Constitution Seventh Amendment Act the three entries were repealed
Entry 33 in List I and entry 36 in List II were deleted and a single comprehensive entry 42 in List III was substituted to read Acquisition and requisitioning of property 
Accordingly the power to acquire property could be exercised concurrently by the Union and the States
Even if prior to the deletion of Entry 33 in List I and entry 36 in List II an argument could possibly have been advanced that as power of acquisition of property was conferred both on Union and the States to be exercised either for the purpose of the Union or for the State it was incidental to any other legislative power flowing from various entries in the three Lists and not an independent power but since the deletion of entry 33 in List I and entry 36 in List II and substitution of a comprehensive entry in List III it could hardly be urged with confidence that the power of acquisition and requisitioning of property was incidental to other power
It is an independent power provided for in a specific entry
Therefore both the Union and the State would have power of acquisition and requisitioning of property
This position is unquestionably established by the majority decision in Rustom Cavasjee Cooper vs Union of India1 where Shah J speaking for the majority of 10 Judges held as under power to legislate for acquisition of property is exercisable 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
 In reaching this conclusion reliance was placed on Rajamundry Electric Supply Corporation Ltd vs State of Andhra Pradesh2 It was however urged that the proposition culled out from Rajamundry Electric Supply Corporation case by Shah J in R C Cooper s1 case is not borne out by the observation in the first mentioned case
In Rajamundry Electric Supply Corporation2 case the challenge was to the Madras Electric Supply Undertakings Acquisition Act 1949 on the ground that the Madras legislature was not competent to enact the legislation because at the relevant time there was no entry in the Government of India Act 1935 relating to compulsory acquisition of any commercial or industrial undertaking
This challenge failed in the High Court 347 but on appeal the challenge was accepted by a Constitution Bench of this Court
Now it must be remembered that the impugned legislation in that case was a pre Constitution legislation then governed by the Government of India Act 1935
The challenge was that the State legislature had no power to enact a legislation for acquisition of an electrical undertaking
On behalf of the State the Act was sought to be sustained on the ground that the Act was in pith and substance a law with respect to electricity under entry 31 of the Concurrent List and therefore the State legislature was competent to enact the same
After scrutinising the Act this Court came to the conclusion that in pith and substance the Act was one to provide for acquisition of electrical undertaking and therefore the State legislature lacked competence to enact the same
Now in that case the Advocate General of Madras in his effort to save the impugned legislation advanced an argument before the Constitution Bench that There was implicit in every entry in the legislative lists in the Seventh Schedule to the Government of India Act 1935 an inherent power to make a law with respect to a matter ancillary or incidental to the subject matter of each entry  His further argument was that each entry in the list carried with it an inherent power to provide for the compulsory acquisition of any property land or any commercial or industrial undertaking while making a law under such entry
This argument was in terms repelled relying upon an earlier decision of the Constitution Bench in the State of Bihar vs Maharajadhiraja Sir Kameshwar Singh1 Repelling this contention of the Advocate General of Madras would mean that the power of acquisition of property is not ancillary or incidental to the subject matter of each entry but in substance it is an independent power by itself
This also becomes clear from Maharajadhiraja Sir Kameshwar Singh s case supra wherein Das J in his concurring judgment repelled the argument of the learned Attorney General appearing for the State contending that the Bihar Land Reforms Act was a law made with respect to matters mentioned in entry 18 List II and not in entry 36 List II
Entry 18 in List II read Land and Land tenures etc  and it was contended that the impugned legislation was on the subject of land and tenures and would cover acquisition of land also
Negativing this contention it was held that in that event entry 36 in List II would become redundant
The pertinent observation is as under In my opinion to give a meaning and content to each of the two legislative heads under entry 18 and entry 36 in List II the former should be read as a legislative category or head comprising land and land tenures and all matters 348 connected therewith other than acquisition of land which should be read as covered by entry 36 in List II
 It thus clearly transpires that the observation in Cooper s case supra extracted above that power to legislate for acquisition of property is exercisable 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 is borne out from Rajamundary Electric Supply Corporation case and Maharajadhiraja Sir Kameshwar Singh s cases supra
It was however urged that this proposition runs counter to the decision of a Constitution Bench of six judges in State of West Bengal vs Union of India
1 In that case the State of West Bengal filed a suit against the Union of India challenging the constitutional validity of the Coal Bearing Areas Acquisition and Development Act 1957 on the ground that the Act to the extent it applied to the lands vested in or owned by the State was beyond legislative competence of Parliament
Power to acquire coal bearing land owned or possessed by the State of West Bengal was amongst others claimed as an integral element of control acquired by the Union pursuant to a declaration made in section 2 of the IDR Act and Mines and Minerals Act enacted in exercise of the legislative power under entries 52 and 54 respectively as coal was both a declared industry and a specified mineral
This contention was partly accepted to repel the contention that the Union has no power to acquire the property vested in the State since the State itself is also a sovereign authority
The contention that the property of State cannot be acquired by the Union under entry 42 of List III was repelled
In reaching this conclusion another contention was rejected which was also advanced before us
viz that if power of acquisition is treated as an independent power both of the Union and the State and could be exercised by the Union and the State with respect to the same property it would lead to such a confusion that there would be no end to it
A picture of fearful constitutional impasse was drawn urging that the State may acquire property of an Industrial undertaking of a declared industry in exercise of the power under entry 42 List III and the Union may exercise the same power after control is acquired pursuant to declaration made as envisaged in entry 52 in respect of an industry and this merry go round needs to be averted by harmonious construction and reconciliation of power between the Union and the States
Such a situation is beyond the realm of practical possi 349 bility
His wild apprehension stands so effectively answered by West Bengal case supra that we cannot improve upon it
Pertinent observation may be extracted Power to acquire or requisition property may since the amendment be exercised concurrently by the Union and the States
But on that account conflicting exercise of the power cannot be envisaged
Article 312 which deals with acquisition of all property requires two conditions to be fulfilled 1 acquisition or requisitioning must be for a public purpose 2 the law under which the property is acquired or requisitioned must provide for payment of compensation either fixed thereby or on principles specified thereby
By cl
3 of article 31 no such law as is referred to in cl
2 made by the Legislature of a State shall have efficacy unless such law has been reserved for the consideration of the President and has received his assent
As the President exercises his authority with the advice of the Union Ministry conflict by the effective exercise of power of acquisition in respect of the same subject matter simultaneously by the Union and the State or by the State following upon legislation by the Union cannot in practice be envisaged even as a possibility
Article 254 also negatives the possibility of such conflicting legislation
By cl
1 of that Article if a law made by the legislature of a State is repugnant to any provision of a law competently made by Parliament the State law is subject to cl
2 void clause 2 recognizes limited validity of a State law on matters in the Concurrent List if that law is repugnant to an existing or earlier law made by Parliament only if such law has been reserved for the consideration of the President and has received his assent
By the proviso authority is reserved to the Parliament to repeal a law having even this limited validity
Assent of the President to State legislation intended to nullify a law enacted by Parliament for acquisition of State property for the purposes of the Union lies outside the realm of practical possibility
 Therefore the contention that power of acquisition or requisitioning of property in entry 42 List III if held to be an independent power wholly falling outside the control assumed by the Union pursuant to the declaration envisaged by entry 52 List II would lead to a sort of a constitutional impasse is more imaginary than real
350 Further in the minority judgment Subba Rao J has in this context said A declaration under entry 52 of List I would no doubt enable Parliament to make a law in respect of an industry that is to say Parliament may make a law in respect of an existing industry or an industry that may be started subsequently
So too before the declaration a State legislature could have made a law in respect of an industry by virtue of entry 24 of List II
But neither entry 24 of List II nor entry 52 of List I empowers the State legislature before the said declaration or the Parliament after such a declaration to make a law for acquisition of lands
If the State legislature before the declaration or the Parliament after the declaration wanted to acquire the land it can only proceed to make a law by virtue of entry 42 of List III
 Reliance was however placed on the following passage in West Bengal case supra to urge that power of acquisition is an integral and inseparable concomitant of control assumed by the Union By making the requisite declarations under entry 54 of List I the Union Parliament assumed power to regulate mines and minerals and thereby to deny to all agencies not under the control of the Union authority to work the mines
It could scarcely be imagined that the Constitution makers while intending to confer an exclusive power to work mines and minerals under the control of the Union still prevented effective exercise of that power by making it impossible compulsorily to acquire the land vested in the State containing minerals
The effective exercise of the power would depend if such an argument is accepted not upon the exercise of the power to undertake regulation and control by issuing a notification under entry 54 but upon the will of the State in the territory of which mineral bearing land is situated
Power to legislate for regulation and development of mines and minerals under the control of the Union would by necessary implication include the power to acquire mines and minerals
Power to legislate for acquisition of property vested in the States cannot therefore be denied to the Parliament if it be exercised consistently with the protection afforded by article 31
 This observation if properly understood is in the context of the contention that State property could not be subjected to power of 351 eminent domain and hence Union has no power to compulsorily acquire the same
Therefore there is no inner conflict between Cooper case supra and West Bengal case supra on the point that power of acquisition is an independent power referable to entry 42 List III
However even if there is a conflict between West Bengal case supra and Cooper case on this point a later larger constitution Bench judgment in Cooper case would impliedly overrule the former to the extent of conflict
There is on the contrary a good volume of authority for the proposition that the control assumed by the Union pursuant to declaration to the extent indicated in the statute making the declaration does not comprehend the power of acquisition if it is not so specifically spelt out
In Kannan Devan Hills Produce Company Ltd vs The State of Kerala  Another1 constitutional validity of Kannan Devan Hills Resumption of Lands Act 1971 was challenged on the ground of legislative competence of Kerala State legislature to enact the legislation
It was urged that in view of the declaration made in section 2 of the Tea Act 1853 Tea was a controlled industry and therefore the State legislature was denuded of any power to deal with the industry
It was further contended that tea plantation required extensive land and that resumption of land by the impugned legislation would directly and adversely affect the control taken over by the Union and therefore the State legislature was incompetent to enact the impugned legislation
This contention was repelled holding that the impugned legislation was in pith and substance one under entry 18 of List II read with entry 42 List III
In reaching this conclusion the Court held as under It seems to us clear that the State has legislative competence to legislate on entry 18 List II and entry 42 List III
This power cannot be denied on the ground that it has some effect on an industry controlled under entry 52 List I Effect is not the same thing as subject matter
If a State Act otherwise valid has effect on a matter in List I it does not cease to be a legislation with respect to an entry in List II or List III
The object of sections 4 and 5 seems to be to enable the State to acquire all the lands which do not fall within the categories a b and c of section 41
These provisions are really incidental to the exercise of the power of acquisition
The State cannot be denied a power to ascertain what land should be acquired by it in the public interest
352 This conclusion was sought to be buttressed by reference to the decision of the Privy Council in Canadian Pacific Railway Company vs Attorney General1 wherein it is observed as under The appellant the Canadian Pacific Rly Co which owned and managed the Empress Hotel in Victoria British Columbia while not denying that the regulation of hours of work was ordinarily a matter of property and civil rights in the province under head 13 of section 92 of the British North America Act 1867 and accordingly within the legislative competence of the provincial legislature contended inter alia that the company s activities had become such an extensive and important element in the national economy of Canada that the dominion Parliament was entitled under the general powers conferred by the first part of section 91 of the Act of 1867 to regulate all the affairs of the company even where that involved legislating in relation to matters exclusively reserved to the provincial legislatures by section 92
It can therefore be said with a measure of confidence that legislative power of the States under entry 24 List II is eroded only to the extent control is assumed by the Union pursuant to a declaration made by the Parliament in respect of declared industry as spelt out by legislative enactment and the field occupied by such enactment is the measure of erosion
Subject to such erosion on the remainder the State legislature will have power to legislate in respect of declared industry without in any way trenching upon the occupied field
State legislature which is otherwise competent to deal with industry under entry 24 List II can deal with that industry in exercise of other powers enabling it to legislate under different heads set out in Lists II and III and this power cannot be denied to the State
In this connection it would be advantageous to refer to Chanan Mal case supra
In that case constitution validity of Haryana Minerals Vesting of Rights Act 1973 and the two notifications issued thereunder was challenged on the ground that the Act and the notifications issued thereunder were repugnant to the Mines  Minerals Act made by Parliament after making a declaration as contemplated by Entry 54 List I The challenge was that the State legislature was incompetent to legislate on the topic of mines and minerals under entry 23 List II in view of the declaration made under entry 54 List I and the enactment of Act 67 of 1957 Mines  Minerals Act 353 by the Parliament
By the impugned Act and the notifications issued thereunder the State Government of Haryana purported to acquire rights to salt petre a minor mineral in the land described in the Schedule appended to the notification and by the second impugned notification the State Government announced to the general public that certain salt petre bearing areas in the State of Haryana mentioned therein would be auctioned on the dates given there
Repelling the contention regarding legislative incompetence it was observed that it is difficult to see how the field of acquisition could become occupied by a Central Act in the same way as it had been in the West Bengal case supra even before Parliament legislates to acquire land in a State
At least until Parliament has so legislated as it was shown to have done by the statute considered by this Court in the case from West Bengal the field is free for State legislation falling under the express provisions of entry 42 of List III
It was further observed as under It seems difficult to sustain the case that the provisions of the Central Act would be really unworkable by mere change of ownership of land in which mineral deposits are found
We have to judge the character of the Haryana Act by the substance and effect of its provisions and not merely by the purpose given in the statement of reasons and objects behind it
Such statements of reasons are relevant when the object or purpose of an enactment is in dispute or uncertain
They can never override the effect which follows logically from the explicit and unmistakable language of its substantive provisions
Such effect is the best evidence of intention
A statement of objects and reasons is not a part of the statute and therefore not even relevant in a case in which the language of the operative parts of the Act leaves no room whatsoever as it does not in the Haryana Act to doubt what was meant by the legislators It is not disputed here that the object and effect of the Haryana Act was to acquire proprietary right to mineral deposits in land 
There is thus a long line of decisions which clearly establishes the proposition that power to legislate for acquisition of property is an independent and separate power and is exercisable only under entry 42 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
This power of the State legislature to legislate for acquisition of property remains intact and untramelled except to the extent where on 354 assumption of control of an industry by a declaration as envisaged in entry 52 List I a further power of acquisition is taken over by a specific legislation
As already pointed out in pith and substance the impugned legislation is one for acquisition of scheduled undertakings and that field of acquisition is not occupied by the IDR Act which deals with control of management regulation and development of a declared industry and there is no repugnancy between the impugned legislation and the IDR Act
Both can co exist because the power acquired by the Union under the IDR Act can as well effectively be exercised after the acquisition of the scheduled undertakings as it could be exercised before the acquisition
Therefore the contention that the State legislature lacked legislative competence to enact the impugned legislation must be negatived
A faint submission was made that nationalisation of industry as a national policy will have to be determined and enforced by the Union keeping in view its Industrial Policy Resolution and such piece meal nationalisation would certainly encroach upon the control assumed by the Union
Impugned legislation does not purport to nationalise sugar industry in Uttar Pradesh
And there is no bar to a Government owned company or Corporation to set up sugar manufacturing undertaking under an appropriate licence
Therefore the impugned legislation on this account does not encroach upon the occupied field
The second limb of the submission was that in any event the impugned legislation was designed and enacted to prevent mismanagement and to take over management of the scheduled undertakings as a sequel to acquisition and it trenches into the field occupied by the IDR Act a Central legislation and to the extent acquisition enables the Corporation by vesting of the scheduled undertakings in it to take over control and management of the scheduled undertakings the impugned legislation is void and unenforceable
Section 20 of the IDR Act was pressed into service to substantiate the submission
Section 20 of the IDR Act reads as under 20
After the commencement of this Act it shall not be competent for any State Government or a local authority to take over the management or control of any industrial undertaking under any law for the time being in force which authorises any such Government or local authority so to do
355 Section 20 forbids a State Government or local authority from taking over the management or control of any industrial undertaking in declared industry
On a correct interpretation section 20 precludes any State Government or local authority from taking over the control or management of any industrial undertaking under any law for the time being in force which authorises any such Government or local authority so to do
The impugned legislation was not enacted for taking over management or control of any industrial undertaking by the State Government
In pith and substance it was enacted to acquire the scheduled undertakings
If an attempt was made to take over management or control of any industrial undertaking in a declared industry indisputably the bar of section 20 would inhibit exercise of such executive power
However if pursuant to a valid legislation for acquisition of scheduled undertaking the management stands transferred to the acquiring body it cannot be said that this would be in violation of section 20
Section 20 forbids executive action of taking over management or control of any industrial undertaking under any law in force which authorises State Government or a local authority so to do
The inhibition of section 20 is on exercise of executive power but if as a sequel to an acquisition of an industrial undertaking the management or control of the industrial undertaking stands transferred to the acquiring authority section 20 is not attracted at all
Section 20 does not preclude or forbid a State legislature exercising legislative power under an entry other than entry 24 of List II and if in exercise of that legislative power to wit acquisition of an industrial undertaking in a declared industry the consequential transfer of management or control over the industry or undertaking follows as an incident of acquisition such taking over of management or control pursuant to an exercise of legislative power is not within the inhibition of section 20
Therefore the contention that the impugned legislation violates section 20 has no merit
And now to the oft beaten track of legislation being void as being in contravention of article 312 as it stood at the relevant time
The impugned legislation was put on the statute book on August 27 1971
Therefore Art 312 as it stood on the relevant date may be noticed
The Article as amended by Constitution Twentyfifth Amendment Act 1971 will therefore not be attracted
article 312 as it stood at the relevant time reads as under 312
No property shall be compulsorily acquired or requisitioned save for a public purpose and save by authority of a law which provides for compensation for the 356 property so acquired or requisitioned and either fixes the amount of the compensation or specifies the principles on which and the manner in which the compensation is to be determined and given and no such law shall be called in question in any court on the ground that the compensation provided by that law is not adequate
 Emphasis was placed on the word compensation  retained in article 312 after its amendment by the Constitution Fourth Amendment Act 1955 and a reference was made to Vajravelu Mudaliar vs Special Deputy Collector of Land Acquisition West Madras wherein it was held by this Court that even after the amendment of article 31 2 by the Constitution Fourth Amendment Act 1955 it still retains the expression compensation  after its judicial interpretation by this Court in several decisions viz to mean just equivalent to the expropriated owner
Reference was then made to Union of India vs Metal Corporation of India Ltd  Anr
2 in which this Court affirmed the interpretation of the word compensation  to mean just equivalent
Approaching the matter from this angle the Court struck down the Metal Corporation of India Acquisition Act 1965 holding that as the Act has laid down different principles for ascertaining the value of different parts of the undertaking and as all the principles so laid down do not provide for the just equivalent of all parts of the undertaking mentioned therein the sum total also cannot obviously be a just equivalent of the undertaking
In reaching this conclusion exception was taken to assessing the value of the used machinery on the basis of written down value arrived at as per the provisions of the Income Tax Act
This observation cannot be said to be any more good law in view of the decision of a Constitution Bench of this Court in State of Gujarat vs Shantilal Mangaldas  Ors
3 wherein Shah J speaking for the Court specifically overruled the Metal Corporation case supra observing as under The Court then proceeded to hold that the two principles laid down in cl
b of Paragraph II of the Schedule to the Act i that compensation was to be equal to the cost price in the case of unused machinery in good condition and ii written down value as understood in the Income tax law was to be the value of the used machinery were irrelevant to the fixation of the value of the machinery as on the date of acquisition
 357 We are unable to agree with that part of the judgment
The Parliament had specified the principles for determining compensation of the undertaking of the company
The principles expressly related to the determination of compensation payable in respect of unused machinery in good condition and used machinery
The principles were set out avowedly for determination of compensation
The principles were not irrelevant to the determination of compensation and the compensation was not illusory
 It thus appears well settled that if a legislation provides principles for determining compensation to wit written down value as understood in Income tax law to be the value of the used machinery that principle could neither be said to be irrelevant for determining the compensation nor the compensation so awarded could be styled as illusory
It was however said that this decision in Shantilal Mangaldas is overruled in Cooper s case and therefore the wheel has moved the full circle and the expression compensation  and principle for determining the compensation as interpreted in Vajravelu Mudaliar s case supra is restored
This is not borne out by the pertinent observation in Cooper s case supra which may be extracted Both the lines of thought which converge in the ultimate result support the view that the principle specified by the law for determination of compensation is beyond the pale of challenge if it is relevant to the determination of compensation and is a recognized principle applicable in the determination of compensation for property compulsorily acquired and the principle is appropriate in determining the value of the class of property sought to be acquired
On the application of the view expressed in P Vajravelu Mudaliar s case or in Shantilal Mangaldas s case the Act in our judgment is liable to be struck down as it fails to provide to the expropriated banks compensation determined according to relevant principles
Section 4 of the Act transfers the undertaking of every named bank to and vests it in the corresponding new bank
Section 61 provides for payment of compensation for acquisition of the undertaking and the compensation is to be determined in accordance with the principles specified in the Second Schedule
Section 62 then provides that though separate valuations are made in respect of the several matter specified in Sch
II of the Act the amount of compensation shall be deemed to be a single compensation
Compensation being the equivalent in terms 358 of money of the property compulsorily acquired the principle for determination of compensation is intended to award to the expropriated owner the value of the property acquired
The science of valuation of property recognizes several principles or methods for determining the value to be paid as compensation to the owner for loss of his property there are different methods applicable to different classes of property in the determination of the value to be paid as recompense for loss of his property
A method appropriate to the determination of value of one class of property may be wholly inappropriate in determining the value of another class of property
If an appropriate method or principle for determination of compensation is applied the fact that by the application of another principle which is also appropriate a different value is reached the Court will not be justified in entertaining the contention that out of the two appropriate methods one more generous to the owner should have been applied by the legislature
 However it was pointed out that Shelat J speaking for himself and Grover J in His Holiness Kesavananda Bharati Sripadagalavaru vs State of Kerala1 in terms observed as under In State of Gujarat vs Shantilal Mangaldas  Ors
the decision in Metal Corporation of India was overruled which itself was overruled by R C Cooper vs Union of India
 The question is whether the statement of law in Shantilal Mangaldas supra that the principle of awarding compensation on the basis of written down value for used machinery is a valid principle for determining compensation and whether the compensation so awarded was illusory is not overruled by any observation in Cooper s case
Undoubtedly in Kesavananda Bharati case supra it is reiterated by Hegde J speaking for himself and Mukherjea J that it will be for the aggrieved party to clearly satisfy the Court that the basis adopted by the legislature has no reasonable relationship to the value of the property acquired or that the amount to be paid has been arbitrarily fixed or that the same is illusory return for the property taken
Chandrachud J as he then was while interpreting the expression amount  in the amended article 312 observed as under The specific obligation to pay an amount and in the alternative the use of the word principles for determination of that amount must mean that the amount fixed or 359 determined to be paid cannot be illusory
If the right to property still finds a place in the Constitution you cannot mock at the man and ridicule his right
You cannot tell him I will take your fortune for a farthing  But in the next breath it has been observed that the amount fixed for being paid to the owner is wholly beyond the pale of challenge that it is inadequate
The concept of adequacy is directly co related to the market value of the property and therefore such value cannot constitute an element of that challenge
 But this was the situation after amendment of article 312 by the Constitution Twentyfifth Amendment Act
Even as the article stood at the relevant time it was open to the legislature to fix principle for determining compensation and unless it is shown that the principles are irrelevant to the determination of the value of the property or by working out the compensation according to the principles so specified the compensation becomes illusory the principles themselves are beyond the pale of challenge before a court of law on the ground that they do not provide adequate compensation
Now here the compensation is worked out and specified in the schedule to the impugned Act
The compensation is determined in round figure
This Court has in terms accepted that payment of compensation on the basis of written down value calculated according to the Income tax law for used machinery is not irrelevant as a principle for determining compensation
That principle appears to have been adopted for valuing used machinery though the legislation fixes compensation payable to each undertaking in round sum
And that was the only part challenged
It was however said that no principle is discernible because not only none was stated on the floor of the House but to a specific question the reply was that principle is not to be disclosed
Debate in legislature cannot conclude the point
Here the principle is discernible and that appears to be valid
It represents the collective will of the House
To reject it would tantamount to saying that the majority members voted without understanding and appreciating the principles
However the principle is extracted in court room debate and it is a valid principle
A peep into the background leading to the acquisition of the scheduled undertakings would reveal that these scheduled undertakings had a heavy back load of carried forward loss that even though they were taking sugar cane from cane growers ie the farmers they failed to pay them the price of sugar cane
There was labour unrest as labour was not paid
Generally speaking they can be styled as 360 sick undertakings and become a drag on the economy of the area
There was no scope for ploughing back the profits to rejuvenate the machinery because there was no profit
The situation had not improved even when managements of some of the undertakings were taken over under the IDR Act and therefore this desperate situation called for a drastic remedy in public interest and while applying that drastic remedy of acquisition principles which are valid for determining the value of machinery were adopted
The adequacy or otherwise of compensation on the calculus made by applying the principle is beyond the judicial review
It would be a day time hallucination to call such principle irrelevant or compensation illusory
The challenge to the validity of the impugned legislation on the ground of violation of article 31 2 must accordingly fail
There remain two minor and incidental points mentioned in passing
The submissions themselves lacked emphasis
They are that 1 no compensation is provided for the agricultural land taken over by the State 2 good will of the scheduled undertakings was not evaluated as a component of compensation
With reference to Ishwari Khetan Sugar Mills P Ltd it was said that 36 acres of agricultural land belonging to the company owning the scheduled undertaking was taken over without compensation
It was countered by saying that agricultural land is not taken over
It is not clear from the pleadings and record whether agricultural land outside the structures of scheduled undertakings has been acquired and has at all been taken over by the Corporation
It may be that between various structures of scheduled undertakings there might be some open land but that is part and parcel of scheduled undertakings because any other construction would show that a passage or road between two constructions could not be acquired
Unless therefore it is specifically shown that while acquiring scheduled undertakings agricultural land belonging to the company or the owner owning scheduled undertaking was either acquired or taken over as part of the acquisition it is not possible to accept the submission that there was acquisition of agricultural land without providing compensation for the same
And as for the good will less said the better
The scheduled undertakings were sick units and the sickness was chronic
A manufacturing unit with heavy carried forward loss and defaulting in payments possibly facing appointment of Receivers for realising tax arrears asks compensation for the good will generated by it
This good will appears to be more imaginary than real or an argument to support an untenable submission
But the better answer is that there 361 cannot be a good will of a manufacturing undertaking but it can be of a company a partnership or a proprietor owning scheduled undertaking and neither the company nor the partnership nor the proprietory unit if any has been acquired under the impugned legislation
Therefore in evaluating compensation of the scheduled undertakings there is no question of evaluating the good will
Mr R A Gupta appearing in SLP
625279 raised an additional contention that the impugned Act is violative of article 14 in that selection of petitioners  scheduled undertakings for acquisition is wholly arbitrary and there is no difference between those selected for acquisition and those left out through all such sugar undertakings in the State of Uttar Pradesh were similarly situated and similarly circumstanced
Sustenance was largely sought to be drawn from the Report of Justice Bhargava styled as Sugar Industry Inquiry Commission 1974 which inter alia specified 17 sugar undertakings in Uttar Pradesh as prima facie sick sugar mills
After reading out a portion of the Report it was said that classifying the 12 sugar undertakings for acquisition is not based on any intelligible differentia between those included in the group for acquisition and those left out and that this differential treatment has no rational relationship to the object sought to be achieved by the impugned legislation
On behalf of respondents learned Advocate General for the State of Uttar Pradesh countered this contention by pointing out that before acquiring the scheduled undertakings the Government had a close review of the condition of the sugar undertakings done for certain specific period set out in the affidavit and ascertained whether the situation had become desperate on account of the persistent default in payment of cane price purchase tax labour dues etc
The situation in Uttar Pradesh appears to be peculiar in that cane growers go on selling their cane to sugar undertakings probably having little or no option in this behalf because it is a perishable commodity and must be disposed of as early as possible and they have to await payment at the sweet will whim and caprice of the sugar barons
Its unhealthy effect on marginal farmers would be intolerable because the cash crop would not fetch any cash and destitution may be the inevitable outcome
And this phenomenon was repeated year after year
It was pointed out that a close scrutiny was applied to this persistent default and where the situation in respect of sugar undertakings was desparate they were classified together and they were sought to be acquired
Can it be said that this classification is not based on any intelligible differentia
Economic situation of an industrial undertaking may be very good good average bad intolerable and uneconomic in larger national perspective
362 It would have been difficult for the Government to group all sugar undertakings with such as were living on coramine doses
There does appear to be the intelligible differentia by which this classification of those in an intolerable condition has been grouped together
Acquisition was for an avowed object of rejuvenating these undertakings and thereby improving the economy of the area by providing priority in payment to cane growers labour in respect of whom there is no cushion for sufferance
Thus this differentia undoubtedly has a rational relationship to the object sought to be achieved by the Act
The challenge of article 14 was an argument of despair and must be repelled
These were all the contentions in these appeals and special leave petitions and as there is no merit in any of them the appeals and the special leave petitions fail and are dismissed with costs in one set
PATHAK J We have had the benefit of reading the judgment prepared by our brother Desai
While we broadly agree with the final conclusions reached by him on the several points debated before us we would prefer to refrain from expressing any opinion on the question whether the declaration made by Parliament in section 2 of the Industries Development and Regulation Act 1951 in respect of the industries specified in the First Schedule to that Act can be regarded as limited to removing from the scope of Entry 24 of List II of the Seventh Schedule to the Constitution only so much of the legislative field as is covered by the subject matter and content of that Act or it can be regarded as effecting the removal from that Entry of the entire legislative field embracing all matters pertaining to the industries specified in the declaration
It seems to us that the observations made by this court in The Hingir Rampur Coal Co Ltd and Others vs The State of Orissa and Others1 State of Orissa vs M A Tulloch and Co2 Baijnath Kedia vs State of Bihar  Ors3 and State of Haryana  Anr
vs Chanan Mal etc4 cannot be of assistance in this behalf
In each of those cases the declaration made by Parliament in the concerned enactment limited the control of the regulation of the mines and the development of minerals to the extent provided in the enactment
Whether the terms in which the declaration has been framed in section 2 of the Industries Development and Regulation Act a declaration not expressly limiting control of the specific indus 363 tries to the extent provided by the Act can be construed as being so limited is a matter which we think we should deal with in some more appropriate case
The range of considerations encompassed within the field of enquiry to which the point is amenable has not to our mind been sufficiently covered before us
And for good reason
The provocation was limited
For the controversy in the present cases concerning the legislative competence of the State Legislature to enact the UP Sugar Undertakings Acquisition Act 1971 can be adequately disposed of on the ground that the legislation falls within Entry 42 of List III and cannot be related to Entry 52 of List I or Entry 24 of List II
When the impugned enactment truly falls within Entry 42 of List III acquisition and requisitioning of property there is a reluctance to enter upon an examination of the mutually competing claims of Entry 52 of List I and Entry 24 of List II entries which deal with industries an entirely different subject matter
With this reservation we have no hesitation in agreeing with the ultimate conclusions reached by our learned brother on the remaining points of controversy and in concurring with the order proposed by him disposing of these appeals and special leave petitions
PBR Appeals dismissed


Summary:
By the UP Sugar Undertakings Acquisition ordinance 1971 which later became an Act twelve sugar undertakings stood transferred and vested in a Government
undertaking named the UP State Sugar Corporation Limited
The appellants  writ petitions before the High Court impugning the constitutional validity of the Act were dismissed
In appeal to this Court it was contended on behalf of the appellants that since sugar is a declared industry under the Industries Development and Regulation Act 1951 in view of entry 52 in Union List read with entry 24 in state list further read with article 246
Parliament alone is competent to pass the law on the subject and not the State Legislature and therefore the impugned legislation is void
Dismissing the appeals  HELD Industry being a matter enumerated in entry 24 of List II only the State legislature has the exclusive power to legislate in respect of it but this power is subject to the provisions of entries 7 and 52 of List I
While under entry 7 if a declaration is made by Parliament that a particular industry is necessary for defence or for the prosecution of war Parliament to the exclusion of the State legislature would be entitled to legislate in respect of that industry a declaration by Parliament by law to assume control over any particular industry in public interest in a sine qua non to clothe Parliament with power under entry 52 List I to legislate in respect of that industry
The declaration contemplated by this entry is a declaration by law
A mere declaration unaccompanied by law is incompatible with entry 52 of List I
But that does not mean that once a declaration is made in respect of an industry that industry as a whole is taken out of entry 24 List II
337 F H E Baijnath Kedia vs State of Bihar  Ors  at 113 and State of Haryana  Anr
vs Chanan Mal etc
 at 700 referred to
The control under section 2 of the 1951 Act was assumed for a specific and avowed object namely development and regulation of certain industries
This control has to be exercised in the manner provided under the statute
Therefore Parliament has made a declaration for assuming control in respect 332 of the declared industries set out in the schedule of the Act only to the extent provided in the Act
A conspectus of the provisions of the impugned Act shows that in pith and substance it is one for acquisition of scheduled undertakings and such acquisition by transfer of ownership of those undertakings to the Corporation would in no way come in conflict with any of the provisions of the Central Act of 1951
The Central Act is primarily concerned with development and regulation of declared industries and is not concerned with ownership of industrial undertakings in declared industries except to the extent of control over management of the undertaking by the owner
By the acquisition under the impugned Act aud vesting of the undertakings in the Corporation they would still be under the control of the Central Government because the Corporation would be amenable to the authority and jurisdiction of the Central Government
Therefore there is no conflict between the impugned legislation and the control exercised by the Central Government under the provisions of the Central Act
340 H 341 A 344 C G 345 D There is no force in the argument that the power of acquisition under Entry 42 List II is incidental to the power to legislate in respect of various topic in the lists and therefore when the Union assumed control over the declared industry such control comprehends the power to acquire and hence the power of the State Legislature to enact legislation for acquisition of properly of scheduled undertakings would be denude
By the Constitution Seventh Amendment Act Entry 33 in List I and Entry 36 in List II were deleted and a single comprehensive Entry 42 in List III acquisition and requisitioning of property was added
The power to acquire property can now be exercised concurrently by the Union and the States
After the substitution of Entry 42 in List III it cannot be said that the power of acquisition and requisitioning of property is incidental to the other power
It is an independent power provided for in a specific entry
Therefore both the Union and the state would have power of acquisition and requisition of property
345 E F 346 B E There is a long line of decisions which clearly establishes the proposition that power to legislate for acquisition of property is an independent and separate power and is exercisable only under Entry 42 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
This power of the State legislature to legislate for acquisition of property remains intact and untrammeled except to the extent where on assumption of control of an industry by a declaration as envisaged in Entry 52 List I a further power of acquisition is taken over by a specific legislation
353 H 354 A Rustom Cavasjee Cooper vs Union of India  at 567 Rajamundry Electric Supply Corporation Ltd vs State of Andhra Pradesh  State of Bihar vs Maharajadhiraja Sir Kameshwar Singh State of West Bengal vs Union of India 19641 SCR 371 referred to
The argument that the State legislature lacked competence to enact the impugned legislation is without force
Legislative power of the State under Entry 24 List II is eroded only to the extent control is assumed by the Union pursuant to a declaration made by the Parliament in respect of a declared 333 industry as spelt out by the legislative enactment and the field occupied by such enactment is the measure of erosion
Subject to such erosion on the remainder the State legislature will have power to legislate in respect of declared industry without in any way trenching upon the occupied field
State legislature which is otherwise competent to deal with industry under Entry 24 List II can deal with that industry in exercise of other powers enabling it to legislate under different heads set out in Lists II and III and this power cannot be denied to the State
354 C 352 E F The contention that the impugned Act is in violation of section 20 of the Central Act has no merit
The impugned legislation was not enacted for talking over the management or control of any industrial undertaking by the State Government
In pith and substance it was enacted to acquire the scheduled undertakings
If an attempt was made to take over the management or control of any industrial undertaking in a declared industry the bar of section 20 would inhibit exercise of such executive power
The inhibition of section 20 is on the executive power but if as a sequel to an acquisition of an industrial undertaking the management or control of the industrial undertaking stands transferred to the acquiring authority section 20 is not attracted
It does not preclude or forbid a State legislature exercising legislative power under an entry other than Entry 24 of List II and if in exercise of that legislative power the consequential transfer of management or control over the industry or undertaking follows as an incident of acquisition such taking over of management or control pursuant to an exercise of legislative power is not within the inhibition of section 20
355 F A E The challenge to the validity of the impugned legislation on the ground of violation of Article 312 must fail
At the time of acquisition the scheduled undertakings had a heavy backlog of carry forward losses they failed to pay the growers the price of cane purchased the labour was not paid as a result of which there was labour unrest
The situation did not improve even when some of the undertakings were taken over under the Central Act and a drastic remedy was called for in public interest and while applying that drastic remedy of acquisition the principle which are valid for determining the value of machinery were adopted
The adequacy or otherwise of compensation on the calculus made by applying the principles is beyond judicial review
360 C 359 H 360 1 Rustom Cavasjee Cooper vs Union of India  at 567 Vajravelu Mudaliar vs Special Deputy Collector of Land Acquisition West Madras 1965 1 SR 614 Union of India vs Metal Corporation of India  Anr  State of Gujarat vs Shantilal Mangaldas  Ors  and His Holiness Kesavananda Bharati Sripadagaivalu vs State of Kerala referred to
Pathak  Koshal JJ concurring in the result It is not necessary in this case to express any opinion on the question whether the declaration made by Parliament in section 2 of the Industries Development and Regulation ct 1951 in respect of the industries specified in the First schedule to that Act can be regarded as limited to removing from the scope of Entry 2 of List II of the Seventh Schedule to the Constitution only so much of the legislative field as is covered by the subject matter
and content of that Act or it can be regarded as effecting the removal from that entry of the 334 entire legislature field embracing all matters pertaining to the industries specified in
the declaration
The controversy in the preset case can be adequately disposed of on the ground that the legislation falls within Entry 42 of Lt m and cannot be related to Entry 52 of List I or Entry 24 of List II
352 E F 363 Bl The Hingir Rampur Coal Co Ltd and others vs The State of Orissa and others  State of orissa vs M A Tulloch and C 964 4 SCR 461 Baijnath Kedia vs State of Bihar  ors
and State of Haryana  Anr
vs Chanan Mal etc
 held inapplicable