Case: Amarnath Ashram Trust Society  Vs. Governor Of U.P.

Land Acquisition Officer, Bombay v. Godrej and Boyce, 1988(1) RRR 403. In that case this Court examined the nature and extent of the power of the Government to withdraw from acquisition after issuance of notification under section 4 of the Act. In that case the State Government had passed an order under section 48 of the Act withdrawing the lands of Godrej and Boyce from acquisition. The owner thereupon challenged the withdrawal order as mala fide and prayed for quashing of the same. The writ petition was allowed by a Single Judge of the High Court and his decision was affirmed by a Division Bench. In an appeal filed by the State, this Court held that under the scheme of the Act neither the notification under section 4 nor the declaration under section 6, nor the notice under section 9 is sufficient to divest the original owner of, or other person interested in, the land of his rights therein. Section 16 makes it clear beyond doubt that the title of the land vests in the Government only when possession is taken by the Government and till that point of time, the land continues to be with the original owner and he is also free to deal with the land just as he likes. So long as the possession is not taken over, the mere fact of a notification issued under section 4 or a declaration under section 6, does not divest the owner of his rights in the land to take care of it and confer on the State Government any right whatsoever to interfere with the ownership of the land or safeguard the interests of the owner. Section 48 gives liberty to the State Government to withdraw from the acquisition at any stage before the possession of the land is taken by it. By such withdrawal, no irreparable prejudice is caused to the owner of the land and, if at all the owner has suffered any damage in consequence of the acquisition proceedings or incurred costs in relation thereto, he will be compensated therefor under section 48(2) of the Act. This Court further observed that the State can be permitted to exercise its power to withdraw unilaterally. It further observed that having regard to the scheme of the Act, it is difficult to see why the State Government should at all be compelled to give any cogent reasons for its decision not to go ahead with the acquisition of any land. It is well settled in the field of specific performance of contracts that no person will be compelled to acquire any land, as a breach of contract can always be compensated for by damages. That is also the principle of section 48(2) of the Act. In that case the Court found that the withdrawal was bona fide and was justified in view of the facts and circumstances of the case. That was a case where the decision of the Government to withdraw from acquisition was challenged by the owner of the land on the ground that the withdrawal was mala fide and it was bad because no show cause notice was served to the company before the withdrawal order was passed. It was in that context that this Court made the above quoted observations. That was not a case where proceedings were initiated to acquire land for a company under part VII of the Act. Therefore, it is not an authority laying down the proposition that in all cases where power is exercised under section 48 of the Act it is open to the State Government to act unilaterally and that it can withdraw from acquisition without giving any reason or for any reason whatsoever. 9. In an acquisition under part VII of the Act, position of the company or the body for which the land is acquired is quite different from that of the owner of the land. As a result of withdrawal from the acquisition whereas the owner of land is ordinarily not likely to suffer any prejudice or irreparable loss, the company for whose benefit the land was to be acquired, may suffer substantial loss. 10. However, it is not necessary to go into this larger question whether in such a case the State Government can withdraw from acquisition without the consent of the company as the justification given by the Government is otherwise not sustainable. As stated earlier, the reason given by the Government for withdrawing from the acquisition is that as no part of the cost of acquisition was to be borne by the Government the acquisition could not have been sustained as for a public purpose. We have already pointed out that in this case the acquisition was not for a public purpose but it was an acquisition for a company under Chapter VII of the Act. In respect of an acquisition for a company under Chapter VII of the Act, law does not require that the State should also bear some cost of the acquisition to make it an acquisition for public use. Thus the decision of the Government to withdraw from acquisition was based upon misconception of the correct legal position. Such a decision has to be regarded as arbitrary and not bona fide. Particularly in a case where as a result of a decision taken by the Government other party is likely to be prejudicially affected, the Government has to exercise its power bona fide and not arbitrarily. Even though section 48 of the Act confers upon the State wide discretion it does not permit it to act in an arbitrary manner. Though the State cannot be compelled to acquire land compulsorily for a company, its decision to withdraw from acquisition can be challenged on the ground that power has been exercised mala fide or in an arbitrary manner. Therefore, we cannot accept the submission of the learned counsel for the State that the discretion of the State Government in this behalf is absolute and not justiciable at all.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 1

Reasoning from the judgment:
1[ds]6. It is now well established that if the cost of acquisition is borne either wholly or partly by the Government, the acquisition can be said to be for a public purpose within the meaning of the Act. But if the cost is entirely borne by the company then it is an acquisition for a company under part VII of thestated earlier, the reason given by the Government for withdrawing from the acquisition is that as no part of the cost of acquisition was to be borne by the Government the acquisition could not have been sustained as for a public purpose. We have already pointed out that in this case the acquisition was not for a public purpose but it was an acquisition for a company under Chapter VII of the Act. In respect of an acquisition for a company under Chapter VII of the Act, law does not require that the State should also bear some cost of the acquisition to make it an acquisition for public use. Thus the decision of the Government to withdraw from acquisition was based upon misconception of the correct legal position. Such a decision has to be regarded as arbitrary and not bona fide. Particularly in a case where as a result of a decision taken by the Government other party is likely to be prejudicially affected, the Government has to exercise its power bona fide and not arbitrarily. Even though section 48 of the Act confers upon the State wide discretion it does not permit it to act in an arbitrary manner. Though the State cannot be compelled to acquire land compulsorily for a company, its decision to withdraw from acquisition can be challenged on the ground that power has been exercised mala fide or in an arbitrary manner. Therefore, we cannot accept the submission of the learned counsel for the State that the discretion of the State Government in this behalf is absolute and not justiciable at all.