Case: Srinivasa Coop. House Building Society Ltd Vs. Madam Gurumurthy Sastry

Admittedly the appellant was registered under the Andhra Pradesh Cooperative Societies Act. Its object appears to be to develop the land and allot plots thereof to its members for construction of houses. Notification under Section 4(1) of the Land Acquisition Act 1 of 1894 for short the Act was published in the State Gazette onacquiring an extent of 71 acres 56 cents of land situated in Moolasagaram near Nandyal in Kurnool District for the aforesaid purpose. A report under Sectionof the inquiry, was submitted to the Government. The appellant entered into an agreement under Section 41 of the Act datedwith the Government treating the appellant as a company and it was published in the Gazette datedBut it was given up. The State thereafter contributed Rs 100 for each acquisition and got declarations under Section 6, published In the State Gazette onto an extent of 54 acres 66 cents and on1984 for another extent of 16 acres 19 cents. It is not necessary to mention the previous history of the litigation but suffice to state that a Single Judge dismissed one writ petition and allowed other writ petitions onon the ground that the procedure prescribed in Part VII of the Act had not been followed holding when the acquisition was for public purpose. On appeals the Division Bench in Writ Appeal No. 316 of 1986 etc. by judgment datedquashed the notification under Section 4(1) and the declarations under Section 6, primarily on two grounds, namely, (1) that the respondents are small farmers; (2) theconsists of members who could afford to construct houses by themselves, (3) acquiring the lands of the poor small farmers for the benefit of the rich is arbitrary and the contribution of Rs 100 each by the Government is a colourable exercise of the power to avoid the mandatory requirements in Chapter VII of the Act. In these appeals we are concerned with 40 acres of land, since other owners have not challenged the acquisition.

Court's reasoning:
It is to serve the general interest of the community as opposed to the particular interest of the individual. Public purpose broadly speaking would include the purpose in which the general interest of the society as opposed to the particular interest of the individual is directly and vitally concerned. Generally the executive would be the best judge to determine whether or not the impugned purpose is a public purpose. Yet it is not beyond the purview of judicial scrutiny. The interest of a section of the society may be public purpose when it is benefited by the acquisition. The acquisition in question must indicate that it was towards the welfare of the people and not to benefit a private individual or group of individuals joined collectively. Therefore, acquisition for anything which is not for a public purpose cannot be done compulsorily. Admittedly, there is no group housing scheme approved by the State Government. On the other hand, housing schemes are being executed by the A.P. Housing Board under the Act. We are not concerned with the public purpose as amended under the 1984plain reading of the fascicule of these provisions clearly indicates the distinction, statute has envisaged, namely, acquisition for a public purpose and acquisition for a private purpose. Even the acquisition for a company, unless utilisation of the land so acquired is integrally connected with public use, resort to the compulsory acquisition under Chapter VII cannot be had. Even when Chapter VII was invoked, the requirements of Section 40 and Section 41 are mandatory and shall be strictly complied with. It is clearly discernible from scheme of the acquisition in Chapter VII that the land can be acquired for the erection offor workmen employed by the company or for the provisions of amenities directly connected therewith or needed for the construction of some building or work for a company which is engaged or is taking steps for engaging itself in any industry or work which is for a public purpose or is needed for the construction of some work which is likely to prove useful to the public. Notwithstanding anything contained in the Act, i.e., despite the compliance with Chapter VII, DO land should be acquired under Chapter VII except for the purpose mentioned in clause (a) of subsection (1) of Section 40, for a private company which is not a Government company and that such company shall not be entitled after the acquisition under Chapter VII to transfer the said land or any part thereof by sale, mortgage, gift, lease or otherwise except with the previous sanction of the appropriate Government. The object therefore, appears to be that the land acquired under Chapter VII shall always remain to serve the public purpose, beneficial to the public, It is not open to the Government to waive any of the provisions in Part VII. The provisions contained therein have mandatory operation. The object of Sectionsappears to be that they intend to safeguard public interest. The company acquiring the land for a public purpose in Chapter VII may, after the acquisition has become final, divert the land for private profit motive, defeating the purported public purpose for which the acquisition was made. The Government company obviously does not alienate such property for private gain since the profits merge into public fund. While the private company could get acquisition but thereafter become free to dispose of the property. Therefore, the acquisition for a private company get limited only for purposes envisaged under Section 40(1)(a) and thereby the public purposes envisaged therein get safeguarded and protected. The dominant purpose of public utility pervades the provisions in Chapter VII of thedeclaration for acquisition for a company shall not be made unless the compensation to be awarded for the property is to be paid by a company. In the case of an acquisition for a company simpliciter, the declaration cannot be made without satisfying the requirements of Part VII. But that does not necessarily mean that an acquisition for a company for a public purpose cannot be made otherwise than under the provisions of Part VII, if the cost or a portion of the cost of the acquisition is to come out of public funds. In other words, the essential condition for acquisition is for a public purpose and that the cost of acquisition should be borne, wholly or in part, out of public funds. Hence an acquisition for a company may also be made for a public purpose, within the meaning of the Act, if a part or the whole of the cost of acquisition is met by public funds. If, on the other hand, the acquisition, for a company is to be made at the cost entirely of the company itself, such an acquisition comes under the provisions of Part VII. In that case the Government have sponsored the Housing Scheme and substantial amount has been extended on the scheme out of the Government revenue in the form of subsidies and loans. The acquisition was also for the construction of the quarters for the workmen under the Government sponsoring Housing Scheme for industrial workers. Under those circumstances it was held that the acquisition for the company was for public purpose. We may make it clear at once that a token contribution from public revenue, under all circumstances cannot be considered to be colourable exercise of power. Each case must furnish its backdrop whether the acquisition is for public purpose or for a private purpose. The facts and circumstances must carefully be scrutinised to reach awould thus be clear that when an act is done by the State under colour of authority of law it must be for the lawful purpose envisaged under the Act. If the purpose, namely, public purpose envisaged under the Act is not served then the exercise of the power of the declaration under Section 6 must be held to be colourable exercise of the power, though not with evil motive. It is seen that the appellant is a private society and it is not for any of the purposes under Section 40(1)(a) or under Section 3(e) of the Act. It is for the transfer of the acquired land to the members of the society who are now as per the record placed in this Court appear to be Advocates, Chartered Accountants, Businessmen and alleged to be possessed of more than one house. The Government does not appear to have bestowed its thought to these aspects while considering the report under Sectionin this perspective before accepting the report and contributing a sum of Rs 100 each from the public exchequer within the teeth of Sections 40; 41;of the Act. Thus it must be held that the acquisition and declaration published under Section 6 is a colourable exercise of the power.