Case: State Of Gujarat Vs. Shri Shantilal Mangaldas &amp; Ors

3. By Resolution dated April 18,1927, the Borough Municipality of Ahmedabad which was a local authority under the Bombay Town Planning Act 1 of 1915 declared its intention to make a town planning scheme known as the City Wall Improvement Town Planning Scheme" in respect of a specified area. A plot of land No. 221 measuring 18,219 square yards belonging to the first respondent was covered by the scheme. The Provincial Government sanctioned the intention to make the scheme, and a draft scheme was then prepared under which the area of plot No. 221 was reconstituted into two plots- Plot No. 176 measuring 15,403 square yards reserved for the first respondent and Plot No. 178 measuring 2,816 square yards, reserved for the local authority for constructing quarters for municipal employees. The draft scheme was sanctioned by the Government of Bombay on August 7, 1942. On August 13, 1942, the Government of Bombay appointed an arbitrator under Act 1 of 1915 to decide matters set out, in Section 30 of the Act. From time to time several arbitrators were appointed, but apparently little progress was made in the adjudication of matters to be decided by them under the Act.4. The Bombay Town Planning Act 1 of 1915 was repealed by Section 90 of the Bombay Town Planning Act 27 of 1955 with effect from April 1, 1957. By Section 90 (2) making of any scheme commenced under the repealed Act was to be continued and the provisions of the new Act were to have effect in relation to the publication, declaration of intention, draft scheme, final scheme, sanction, variation, restriction, proceedings, suspension, and recovery to be made or compensation to be given. The arbitrator appointed under Act 1 of 1915 was designated "Town Planning Officer" under Act 27 of 1955, and the proceedings under the City Wall Improvement Town Planning scheme were continued before him. On August 28, 1957, the Town Planning Officer informed the first respondent that Rs. 25,411 were awarded to him as compensation for plot No. 178.5. The first respondent then filed a petition in the High Court of Gujarat (which had jurisdiction alter reorganisation of the State of Bombay) challenging the validity of Act 27 of 1955 and acquisition of plot No. 178 on the plea that the Act infringed the fundamental right of the first respondent guaranteed by Article 31 (2) of the Constitution.6. The scheme was sanctioned by the Government of Gujarat on July 21, 1965, and the final scheme came into operation on September 1, 1965. The High Court entered upon an elaborate analysis of the provisions of the Act and53 read with Section 67 in so far as it authorises acquisition of land by the local authority under pending schemes continued under Section 90 of the new Act must, therefore, be held to be violative of Article 31 (2) and the acquisition of petitioners lands in the various petitions under the City Wall Improvement, Town Planning Scheme No. 5 must be held to be invalid",and on that view the High Court did not consider the other contentions raised on behalf of the first respondent. With certificate granted by the High Court, this appeal is preferred by the State of Gujarat.

Court's reasoning:
It is settled law that clauses (1) and (2) under the amended Article guarantee different rights to owners of property. Clause (1) operates as a protection against deprivation of property save by authority of law, which , it is beyond question, must be a valid law, i.e., it must be within the legislative competence of the State Legislature and must not infringe any other fundamental right.Clause (2) guarantees that property shall not be acquired or requisitioned (except in cases provided by clause (5) save by authority of law providing for compulsory acquisition or requisition and further providing for compensation for the property so acquired or requisitioned and either fixes the amount of compensation or specifies the principles on which, and the manner in which, the compensation is to be determined and given. If the conditions for compulsory acquisition or requisition are fulfilled, the law is not liable to be called in question before the Courts on the ground that the compensation provided by the law is not adequate. Clause (2A) is in substance a definition clause: a law which does not provide for the transfer of the ownership or right to possession of any property to the State or to a corporation owned or controlled by the State is not to be deemed to provide for the compulsory acquisition or requisitioning of property, notwithstanding that it deprives any person of his property.22. The following principles emerge from an analysis of cls. (2) and (2A): compulsory acquisition or requisition may be made for a public purpose alone, and must be made by authority of law. Law which deprives a person of property but does not transfer ownership of the property or right to possession of the property to the State or a corporation owned or controlled by the State is not a law for compulsory acquisition or requisition. The law, under the authority of which property is compulsorily acquired or requisitioned, must either fix the amount of compensation or specify the principles on which, and the manner in which, the compensation is to be determined and given. If these conditions are fulfilled the validity of the law cannot be questioned on the plea that it does not provide adequate compensation to the owner.It is common ground that a law for compulsory acquisition of property by a local authority for public purposes is a law for acquisition of property by the State within the meaning of that expression at defined in Article 12. The Act was reserved for the consideration of the President and received his assent on August 1, 1955, and since it provides expressly by Section 53 (a) that on the coming into force of the scheme the ownership in the lands required by the local authority for public purposes shall, unless it is otherwise determined in such scheme, vest absolutely in the local authority free from all encumbrances, the clause contemplates transfer of ownership by law from private owners to the local authority. The Act is, therefore, a law for compulsory acquisition of land.23. We are unable to agree with counsel for the State that because the object of the Act is intended to promote public health, it falls within the exception in Article 31 (5) (b) (ii). The question is now sealed by a recent judgment of this Court Deputy Commissioner and Collector, Kamrup v. Durga Nath Sharmas case 1 SCR 561  =(AIR 1968 SC 394  ).This Court held in Durga Nath Sharmas case, (1968) 1 SCR 561  =(AIR 1968 SC 394  ) that the Assam Acquisition of Land for Flood Control and Provision of Erosion Act 6 of 1955, which provided for the acquisition of land on payment of compensation in accordance with the principles in Section 6 of that Act was a purely exproprietary measure, and being a law for acquisition of land, though for prevention of danger to life and property, was not protected by Article 31(5) (b) (ii).The first contention urged by Mr. Bindra cannot, therefore, be accepted.But, in our judgment, the contention urged by Mr. Bindra for the State of Gujarat that Sections 53 and 67 of the Act regarded as law for acquisition of land for public purposes do not infringe the fundamental right under Article 31 (2) of the Constitution is acceptable, because the Act specifies the principles on which compensation is to be determined and given.25. Article 31 guarantees that the law providing for compulsory acquisition must provide for determining and giving compensation for the property acquired. The expression "compensation" is not defined in the Constitution. Under the Land Acquisition Act compensation is always paid in terms of money. But that is no reason for holding that compensation which is guaranteed by Article 31 (2) for compulsory acquisition must be paid in terms of money alone. A law which provides for making satisfaction to an expropriated owner by allotment of other property may be deemed to be a law providing for compensation.In ordinary parlance the expression "compensation" means any thing given to make things equivalent; a thing given to or to make amends for loss, recompense, remuneration or pay: it need not therefore necessarily be in terms of money. The phraseology of the constitutional provision also indicates that compensation need not necessarily be in terms of money, because it expressly provides that the law may specify the principles on which, and the manner in which, compensation is to be determined and "given".If it were to be in terms of money alone, the expression paid" would have been moresecond branch of the argument is not sustainable for reasons already set out, and the first branch of the argument is wholly without substance. Section 53 does not provide that the reconstituted plot is transferred or is to be deemed to be transferred from the local authority to the owner of the original plot. In terms Section 53 provides or statutory re-adjustment of the rights of the owners of the original plots of land. When the scheme comes into force all rights in the original plots are extinguished and simultaneously therewith ownership springs in the reconstituted plots. There is no vesting of the original plots in the local authority, nor transfer of the rights of the local authority in the reconstituted plots. A part or even the whole plot belonging to an owner may go to form a reconstituted plot which may be allotted to another person, or may be appropriated to public purposes under the scheme. The source of the power to appropriate the whole or a part of the original plot in forming a reconstituted plot is statutory. It does not predicate ownership of the plot in the local authority, and no process - actual or notional - of transfer is contemplated in that appropriation. The lands covered by the scheme are subjected by the Act to the power of the local authority to readjust titles, but no reconstituted plot vests at any stage in the local authority unless it is needed for a purpose of the authority. Even under clause (a) of Section 53 the vesting in a local authority of land required by it is on the coming into force of the scheme. The concept that lands vest in the local authority when the intention to make a scheme is notified is against the plain intendment of theis true that under the Act the market value of the land of which the owner is deprived at the date of declaration of intention to make a scheme determines the amount to be adjusted, and that is the guiding rule in respect of all lands covered by the scheme.The High Court was, in our judgment, right in holding that enactment of a rule determining payment or adjustment of price of land of which the owner was deprived by the scheme estimated on the market value on the date of declaration of the intention to make a scheme amounted to specification of a principle of compensation within the meaning of Article 31 (2). Specification of principles means laying down general guiding rules applicable to all persons or transactions governed thereby. Under the Land Acquisition Act compensation is determined on the basis of "market value" of the land on the date of the notification under Section 4 (1) of that Act. That is a specification of principle. Compensation determined on the basis of market value prevailing on a date anterior to the date of extinction of interest is still determined on a principle specified. Whether an owner of land is given a reconstituted plot or not, the rule for determining what is to be given as recompense remains the same. It is a principle applicable to all cases in which by virtue of the operation of the Town Planning Act a person is deprived of his land whether in whole or in part.Reverting to the amendment made in Cl. (2) of Art. 31 by the Constitution. (4th Amendment) Act, 1955 it is clear that adequacy of compensation fixed by the Legislature or awarded according to the principles specified by the legislature for determination is not justiciable. It clearly follows from the terms of Article 31(2) as amended that the amount of compensation payable, if fixed by the Legislature is not justiciable, because the challenge in such a case, apart from a plea of abuse of legislative power, would be only a challenge to the adequacy ofcompensation fixed by the Legislature - and by the use of the expression "compensation" we mean what the Legislature justly regards as proper and fair recompense for compulsory expropriation of property and not something which by abuse of legislative power though called compensation is not a recompense at all or is something illusory-is not justiciable, on the plea that it is not a just equivalent of the property compulsorily acquired, is it open to the Courts to enter upon an enquiry whether the principles which are specified by the Legislature for determining compensation do not award to the expropriated owner a justour view, such an enquiry is not open to the Courts under the statutes enacted after the amendments made in the Constitution by the Constitution (Fourth Amendment) Act. If the quantum of compensation fixed by the Legislature is not liable to be canvassed before the Court on the ground that it is not a just equivalent, the principles specified for determination of compensation will also not be open to challenge on the plea that the compensation determined by the application of those principles is not a just equivalent. The right declared by the Constitution guarantees that compensation shall be given before a person is compulsorily expropriated of his property for a publicis fixed as compensation by statute, or by the application of principles specified or determination of compensation is guaranteed: it does not mean however that something fixed or determined by the application of specified principles which is illusory or can in no sense be regarded as compensation must be upheld by the Courts, for, to do so, would be to grant a charter of arbitrariness, and permit a device to defeat the constitutional guarantee. But compensation fixed or determined on principles specified by the Legislature cannot be permitted to be challenged on the somewhat indefinite plea that it is not a just or fair equivalent.Principles may be challenged on the ground that they are irrelevant to the determination of compensation, but not on the plea that what is awarded as a result of the application of those principles is not just or fair compensation. A challenge to a statute that the principles specified by it to do not award a just equivalent will be in clear violation of the constitutional declaration that inadequacy of compensation provided is not justiciable.48.In our view, Article 31 (2) as amended is clear in its purport. If what is fixed or is determined by the application of specified principles is compensation for compulsory acquisition of property, the Courts cannot be invited to determine whether it is a just equivalent of the value of the property expropriated. In P. Vajravelu Mudaliars case, (1965) 1 SCR 614   = (AIR 1965 SC 1017  ) the Court held that the principles laid down by the impugned statute were not open to question. That was sufficient for the purpose of the decision of the case, and the other observations were not necessary for deciding that case, and cannot be regarded as a binding decision.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. In our judgment, the Metal Corporation of India Ltd.s case, (1967) 1 SCR 255   = (AIR 1967 SC 637  ) was wrongly decided and must be overruled.Turning to the Bombay Town Planning Act, 1955, it was clear that the Legislature has specified principles for determination of compensation which has to be adjusted in determining the amount of contribution. The principle for determination of compensation cannot be said to be irrelevant, nor can the compensation determined be regarded as illusory. Being a principle relating to compensation in our judgment, it was not liable to be challenged. If what is specified is a principle for determination of compensation, the challenge to that principle on the ground that a just equivalent of what the owner is deprived is not provided, is excluded by the plain words of Article 31 (2) of the Constitution.It was urged that in any event the statute which permits the property of an owner to be compulsorily acquired by payment of market value at a date which is many years before the date on which the title of the owner is extinguished is unreasonable.This Court has, however, held in Smt. Sitabati Debi v. State of West Bengal, (1967) 2 SCR 949     that a law made under clause (2) of Article 31 is not liable to be challenged on the ground that it imposes unreasonable restrictions upon the right to hold or dispose of property within the meaning of Art. 19 (1) (f) of the Constitution.In Smt. Sitabati Debis case, (1967) 2 SCR 949     an owner of land whose property was requisitioned under the West Bengal Land (Requisition and Acquisition) Act, 1948, questioned the validity of the Act by a writ petition filed in the High Court of Calcutta on the plea that it offended Article 19 (1) (f) of the Constitution. This Court unanimously held that the validity of the Act relating to acquisition and requisition cannot be questioned on the ground that it offended Article 19 (1) (f) and cannot be decided by the criterion under Article 19 (5).Again the validity of the statute cannot depend upon whether in a given case it operates harshly. If the scheme came into force within a reasonable distance of time from the date on which the declaration of intention to make a scheme was notified, it could not be contended that fixation of compensation according to the scheme of Section 67 per se made the scheme invalid. The fact that considerable time has elapsed since the declaration of intention to make a scheme, cannot be a ground for declaring the section ultra vires. It is also contended that in cases where no reconstituted plot is allotted to a person and his land is wholly appropriate for a public purpose in a scheme, the owner would be entitled to the value of the land as prevailing many years before the extinction of interest without the benefit of the steep rise in prices which has taken place all over the country. But if Section 71 read with Section 67 lays down a principle of valuation it cannot be struck down on the ground that because of the exigencies of the scheme, it is, not possible to allot a reconstituted plot to an owner of land covered by the scheme.Our attention was invited to Sections 81 and 84 of the Bombay Town Planning Act, 1955. Section 81 merely provides that the land needed for the purpose of a town planning scheme or development plan shall be deemed to be land needed for a public purpose within the meaning of the Land Acquisition Act, 1894. This provision only declares what is implicit in the scheme of the Act. Section 84 only contemplates a special class of cases in which the land which is included in a town planning scheme is needed by the State Government for a public purpose other than that for which it is included in the scheme. In such a case the State Government may make a declaration to that effect and the provisions of the Land Acquisition Act, 1894, as modified by the Schedule apply.We are not concerned in this case with any such notification issued by the Government, nor has it any relevance to the question inthe Bombay Town Planning Act, 1955, there is no acquisition by the State Government of land needed for a town-planning scheme. When the Town Planning Scheme comes into operation the land needed by a local authority vests by virtue of S. 53(a) and that vesting, for purposes of the guarantee under Art. 31 (2) is deemed compulsory acquisition for a public purpose. To lands which are subject to the scheme, the provisions of Sections 53 and 67 apply, and the compensation is determined only in the manner prescribed by the Act. There are therefore two separate provisions, one for acquisition by the State Government, and the other in which the statutory vesting of land operates as acquisition for the purpose of town-planning by the local authority. The State Government can acquire the land under the Land Acquisition Act, and the local authority only under the Bombay Town Planning Act. There is no option to the local authority to resort to one or the other of the alternative methods which result in acquisition. The contention that the provisions of Sections 53 and 67 ore invalid on the ground that they deny the equal protection of the laws or equality before the laws must, therefore, standThe High Court has apparently not considered the other arguments which were advanced at the Bar, and has observed that it was not necessary to consider those other contentions raised in the petition. As the petition has not been heard by the High Court in respect of the other contentions which the first respondent may choose to raise, we set aside the order passed by the High Court declaring Section 53 read with Section 67 insofar as it authorised acquisition of land by the local authority under a town-planning scheme, as violative of Article 31 (2) of the Constitution, and the acquisition of the first respondents land under the City Wall Improvement Town Planning Scheme No. 5 as invalid