Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.8247 OF 2001
Kerala State Cashew Development
Corporation ..Appellant
Versus
Shahal Hassan Mussaliar & Anr. ..Respondents
WITH
Civil Appeal No.8249/2001,
Civil Appeal No.8248/2001
Civil Appeal No.8250/2001
Civil Appeal No.8251/2001
Civil Appeal No.8252/2001
J U D G M E N T
Dr. ARIJIT PASAYAT, J.
1. In all these appeals challenge is to the judgment of a Division Bench
of the Kerala High Court in several writ appeals and original petitions.
2. The High Court referred to the factual position in Writ Appeal
No.1835/97 which was directed against the judgment of learned Single
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Judge, dated 4 September, 1997 in O.P. No.16424/94. The High Court
noted that the factual basis in all the cases is similar except the dates and the
areas involved and the location of the factories.
3. Since the grounds of challenge raised by the appellant and the
responses of the respondents are common, they are taken up together. The
background facts are to be noted in brief:
4. The first respondent is the owner of a factory situated in an extent of
2.29 acres of land in Kotttarakkara Taluk of Kollam District. The factory
comprises several buildings like godown, office, shelling and peeling sheds,
grading shed etc. with necessary machineries and equipments installed
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therein for facilitating the work of the factory. This factory was being run by
the first respondent, up to the year 1969. Sometime in the year 1969, first
respondent who was managing the factory himself, desired to go abroad.
So, he leased out his factory to the second respondent-Kerala State Cashew
Development Corporation (hereinafter referred to as the ‘Corporation’), a
statutory corporation set up in the State of Kerala, for development of the
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cashew industry. Ext. P1 is the copy of the lease deed dated 17 July, 1970
by which the cashew factory of the first respondent was leased out to the
second respondent on a monthly lease rent of Rs.1,500/-. The lease was
initially for a period of three years and, on the expiry of the said terms, a
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fresh lease deed was executed, which too expired on 16 July, 1976. It is
the case of the first respondent that, while he was running the factory, he
used to provide employment to the workers for about 300 days in a year.
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After the expiry of the lease deed on 16 July, 1976, the first
respondent, being unwilling to further lease out the factory, called upon the
second respondent Corporation to release and hand over the factory and its
assets to him. The Corporation, however, did not release the factory and, in
the meanwhile, the State of Kerala passed the Kerala Cashew Factories
(Requisitioning) Act, 1979 (hereinafter referred to as the ‘Act’). This act
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was passed for the following purpose, as indicted in the preamble which
reads as follows:
“Whereas certain cashew factories had been leased
out by the owners thereof to the Kerala State Cashew
Development Corporation Limited, which is a company
owned by the Government of Kerala;
And whereas such cashew factories were at the
time of the lease either closed down or run by persons
other than the owners thereof;
And whereas the term of lease in respect of some
of such cashew factories has expired and the owners of
some of such factories are not willing to extend the terms
of the lease;
And whereas suits have been filed in the courts by
the owners of some of such cashew factories for delivery
of possession thereof;
And whereas in the interests of the workers of the
cashew factories it is considered necessary to enable the
said Corporation to continue in possession and
management of such of those cashew factories which if
given back to the owners thereof could not be run
properly and in accordance with law and would either be
sold or leased out to private individuals.”
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The object of the Act appears to be that, there were large number of
such cashew factories which have been leased out to the second respondent
Corporation under leases which had expired and it was intended to legalise
the continuing possession of the lessee Corporation. The preamble to the
Act suggests that the Act was intended to protect the interests of the
workers, for which purpose it was necessary to enable the second
respondent Corporation to continue in possession and management of those
cashew factories and further that, if the factories were given back to the
owners they would not be run properly and in accordance with law, and
would either be sold or leased out to private individuals. Section 3 of the
Act gives power to the Government to requisition a cashew factory in the
possession of Corporation under a lease, even if the lease is current or time
expires. Section 3 of the Act, which is the focus of attention, reads as under:
“3. Power to requisition cashew factories:
(1) When the Government IS satisfied that if
the owner of a cashew factory which is in the
possession of the Corporation under a lease,
whether current or time-expires, is put in
possession thereof, such owner could not run that
factory properly and in accordance with law and
would either sell it or lease it out to any private
individual and there would be large scale
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unemployment of the workers of that factory or
their conditions of service would be adversely
affected, the Government may, notwithstanding
any judgment, decree or order of any court, by
order published in the Gazette, requisition that
cashew factory for such period not exceeding five
years as may be specified in the order and may
make such further orders as appear to them to be
necessary or expedient in connection with the
requisition;
Provided that before making an order under
this sub-section in respect of a cashew factory, the
Government shall give the owner of that factory
and every person interested in that factory a notice
of their intention to take action under this sub-
section and the grounds therefor and consider the
objection that may be preferred in pursuance of
such notice.
(2) Where a cashew factory is
requisitioned under sub-section (1), such cashew
factory together with all machinery, other
accessories and other movable properties as were
immediately before the date of publication of
order under sub-section (1) in the possession of
the corporation and all books of account, registers
and other documents relating thereto shall vest in
the Government with effect from the said date.
(3) The Government may, by order in
writing direct that a cashew factory vested in them
under sub-section (2) shall, instead of continuing
to vest in them, vest in the Corporation with effect
from such date, not being a date earlier than the
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date of publication of the order under sub-section
(1), as may be specified in the order.
(4) Where an order vesting a cashew
factory in the Corporation is made under sub-
section (3), all rights, liabilities and obligations of
the Government in relation to such factory shall,
on and from the date of such vesting, be deemed to
have become the rights and liabilities and
obligations respectively of the Corporation.
One salient factor of Section 3 which immediately
strikes the eye is that the power of the State Government
to requisition the factory was for such period “not
exceeding five years”. In other words, there was a
maximum period of five years upto which the cashew
factory could be requisitioned in pursuit of the objective
with which the legislation was enacted. Section 4 of the
Act provides that the Government may at any time
release from requisition any cashew factory requisitioned
under Section 3 and upon this happening the
Government shall restore the factory in as good a
condition as it was when possession thereof was taken by
virtue of the lease executed by it with the owner of the
cashew factory, subject to the provisions contained in
such lease and to changes caused by reasonable wear and
tear and irresistible force. Section 4 also requires the
Government to restore the cashew factory and its assets
on the factory being released from requisition. Section 5
empowers the Government to determine the rent for
requisitioning the factory, in accordance with the
principles laid down therein. Section 11 of the Act bars
the jurisdiction of the Civil Court in regard to any
dispute in respect of any matter which the Government
or the second respondent-Corporation is empowered to
determine under the Act and protects action taken in
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good faith in pursuance of any power conferred by or
under the Act.”
5. The Kerala Cashew Factories (Requisitioning) Act, 1979 was
amended by Act 26 of 1985 (hereinafter referred to as ‘Amending Act’).
Section 2 of Amending Act amends Section 3 of the Act, the effect of which
is to remove the outer limit or five years on requisition, imposed under
Section 3 of Act. As a result of amendment carried out by Amending Act,
the Government may by order published in the Gazette:-
(a) requisition that cashew factory for such period not exceeding
five years as may be specified in the order;
(b) extend the period of requisition by five years at a time;
(c) make such further orders as appear to them to be necessary or
expedient in connection with the requisition.
6. The objection of the factory owner apart from substantive challenge
to the power of requisition raised to the challenge stating that there was no
material in existence which is requisitioned for subjective satisfaction of the
Government about different factors as noted in each of the requisitioning
orders. To put differently, the substantive challenge was that the Amending
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Act enables the State Government to requisition the cashew factory for an
indefinite period of time; virtually thereby enabling the State Government to
acquire the factory without following the provisions of any law and
therefore, was contrary to Articles 145, 19(1)(g) and 300A of the
Constitution of India, 1950 (in short the ‘Constitution’). Coming to the
factual aspect as noted that while private cashew factories was giving 250
days of work in year, the Corporation on account of financial situation was
unable to give, on an average, more than 60 days of work in a year for the
earlier ten years. With reference to the factual scenario of 1993 it was
pointed out that while the factory was run by the Corporation and it gave
work to the workers for 12 days and during the subsequent year 1994 only
for 13 days. It was pointed out that the factory was returned, there was
scope for greater number of days work for the workers. The objections were
rejected and subsequent requisitioning orders were passed by merely
reproducing the conditions precedent in the Amending Act. It was,
therefore, submitted that the action of the Corporation and the State
Government is illegal and unconstitutional.
7. Before learned Single Judge stand was that where any statute
empowers the State to continue to extend a requisition order for an
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indefinite period, it is nothing but an order for acquisition and, therefore, it
is a colourable exercise of power which is not available to the State under
the Act. The conceptual difference between the requisition and acquisition
of property was highlighted. The stand was opposed by the State and the
Corporation. The High Court after noticing the factual scenario came to
hold that power of requisition granted to the Government under Section 3 of
the Parent Act was limited to a maximum period of five years. By the
Amending Act, 1985 this limitation was removed and the Government was
empowered to extend the lease indefinitely by instalments of five years at a
time. The learned Single Judge held that his power is bad for reasons
enunciated in H.D. Vora’s case. By this case, it virtually amount to a power
of acquisition.
8. The stand of the State and the Corporation was that in view of what
has been stated by this Court in Kesavananda Bharati v. State of Kerala
(1973 (4) SCC 225) and Sonia Bhatia v. State of U.P. (AIR 1981 SC 1274)
when a law was enacted to further the directive principles of State policy
enumerated in Part IV of the Constitution then, irrespective of other
considerations, it must be upheld. The High Court did not accept the stand.
It was noted that the principle of law highlighted in the decisions in
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Keshvananda Bharati’s and Sonia Bhatia’s cases (supra) were not applicable
to the facts of the present case.
9. The High Court referred to salient features of Section 3 which relates
to the power of the State Government to requisition the factory for such
period “not exceeding five years”. In other words, there was a maximum
period of five years up to which the cashew factory in question could be
requisitioned in line with the objective with which the legislation was
enacted. Section 4 of the Act provides that the Government may at any time
release from requisition any cashew factory requisitioned under Section 3
and upon this happening the Government shall restore the factory in as good
a condition as it was when the possession thereof was taken by virtue of the
lease executed by it with the owner of the cashew factory, subject to the
provisions contained in such lease and to changes caused by reasonable
wear and tear and irrespective force. Under the said provision the
Government is required to restore the cashew factory and its assets on the
factory being released from requisition. Section 4 empowers the
Government to determine the rent for requisitioning the factory. While
doing so, the principles laid down therein have to be kept in view. Section
11 of the Act bars the jurisdiction of the Civil Court in regard to any dispute
in respect of any matter which the Government or the Corporation is
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empowered to determine under the Act and protects action taken in good
faith in pursuance of any power conferred by or under the Act.
10. The grievance of the factory owner was that the authority declined to
extend the lease and refused to renew the lease in favour of the Corporation.
A request was made to return the concerned cashew factory with all its
assets. That prayer was also not complied with. There were pleas of set up
of certain amounts/dues. Having failed in his attempt to persuade the
authorities to return its factory and its assets, the Original Petition
No.16424/1994 was filed for a direction to the authorities to hand back the
possession of the concerned cashew factory with all its assets. During the
pendency of the original petition, notice was served under Section 3(1) of
the Act, notifying the intention to requisition the concerned cashew factory
under the Act for a further period of five years on the ground that if the
owner is put in possession of the cashew factory, he may not run the factory
properly, in accordance with law and may either sell it or lease it out to
private individuals resulting larger scale unemployment of workers and
adversely affecting their part of service. A statement of objection was filed,
inter alia, taking the stand that the Government has no right to extend the
lease for an indefinite period. It was stated that no such fact existed which
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could have enabled the State Government to arrive at a decision that upon
return of the factory, they would not run it or close it down or lease it out to
the private individuals resulting in large scale unemployment of workers or
thereby adversely affecting the conditions of workers. By another notice,
the Government extended the period of requisition for a period of five years.
Objection was also filed.
11. Section 3 of the Amending Act validated the continued possession of
the cashew factories requisitioned under Section 3(1) of the Act which had
vested in the second respondent Corporation under sub-section (3) of that
Section notwithstanding the expiry of the lease period and notwithstanding
anything contained in any law, or any decree or order of any court, and
notwithstanding anything to the contrary in the terms of the contract or
agreement. The result of Amending Act was that it validated the action of
the appellant and the second respondent even if contrary to the terms of the
lease, even if time had expired, and even if there was a decree for eviction
made by a competent court of law.
12. The High Court referred to a decision of this Court in Minerva Mills
v. Union of India (AIR 1980 SC 1789) to hold that a fundamental
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distinction was drawn by this Court between the constitutional law and
ordinary law as in the criterion of validity. Learned Single Judge accepted
the challenges in the writ petitions. The writ appeals were also dismissed.
The Division Bench also took note of the observation of learned Single
Judge about the period of employment offered by the factory under
requisition. It also noted that the financial condition of the Corporation was
far from satisfactory and, therefore, there was no material to show that it
was in a better position to manage and run the factory than the owner
himself. Appellants and respondent-writ petitioner reiterated the stands
before the High Court.
13. While in the case of Constitutional law its validity is inherent, in the
case of ordinary law its validity is to be tested on the touchstone of the
Constitution.
14. It was noted that in Sonia Bhatia’s case (supra) this Court upheld the
validity of the U.P. Imposition of Ceiling on Land Holdings Act, 1961 on
the ground that it was a valuable piece of social legislation with the object
of ensuring equitable distribution of land by taking away land from large
tenure holders and distributing the amount among the landless tenants or
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using the same for public utility schemes which was in the larger interest of
the community. The High Court noted that the question to be answered was,
however, justifying the initial requisitioning of the cashew factory was,
since requisition by definition must be of temporary character and it cannot
be tuned into a permanent deprivation of proprietary rights so as to amount
to acquisition at back door. This is precisely what this Court has described
as a fraud on the power in H.D. Vohra’s case. It was submitted that the
High Court should not have treated an action of the State Government and
of the Corporation to be actually an opinion or acquisition under the colour
of requisition. Learned counsel for the respondent on the other hand
submitted that both the learned Single Judge and the Division Bench have
analysed factual scenario in great detail keeping in view the statutory
provisions. The conclusion as submitted would not warrant any
interference.
15. The first contention which weighed with the learned Single Judge
was that any statute which empowers the State to continue to extend a
requisition order for an indefinite period was nothing but an order for
acquisition, it was a colourable exercise of power, which the State did not
possess under the Act. The distinction between requisition and acquisition
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of property has been the subject matter of several decisions of the Supreme
Court and the line of demarcation between the two is well defined in the
celebrated judgment in H.D. Vora v. State of Maharashtra (AIR 1984 SC
866). In this case this Court had occasion to consider the validity of
repeated continued requisitions of private premises initially acquired under
the emergency powers during war years. This Court pointed out that the
two concepts, one of requisition and the other of acquisition, are totally
distinct and independent. Acquisition means the acquiring of the entire title
of the expropriated owner, whatever the nature and extent of that title may
be. The entire bundle of rights which was vested in the original holder
passes on acquisition to the acquirer, leaving nothing to the former. The
concept of acquisition has an air of permanence and finality in that there is
transference of the title of the original holder to the acquiring authority. In
contradistinction, the concept of requisition involves merely taking of
domain or control over property without acquiring rights of ownership and
must by its very nature be of temporary duration. This Court summed up by
pointing out that, the State cannot under the guise of requisition continue
dominion over some one’s property for an indefinite period of time, because
that would be a fraud on the power conferred on the government. If the
Government wants to take over the property for an indefinite period of time,
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the Government must acquire the property, but it cannot use the power of
requisition which is exercisable by the Government only for a public
purpose which is of a transitory character. If the public purpose for which
the premises are required is of a perennial or permanent character from the
very inception, no order can be passed requisitioning the premises and, in
such a case, the order of requisition, if passed, would be a fraud upon the
statute, for the Government would be requisitioning the premises, when
really speaking they want the premises for acquisition, the object of taking
the premises being not transitory but permanent in character. Where the
purpose for which the premises are required is of such a character that from
the very inception it can never be served by requisitioning the premises, but
it can be achieved only by acquiring the property, which would the case
where the purpose is of a permanent character or likely to subsist for an
indefinite period of time, the Government may acquire the premises, but it
certainly cannot requisition the premises and continue the requisitioning
indefinitely.
16. In Grahak Sanstha Manch v. State of Maharashtra (1994 (4) SCC
192), a Constitution Bench of this Court approved of the decision in H.D.
Vora’s case (supra) and held that the said decision did not require
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reconsideration. However, the Constitution Bench did not approve the
reasoning in H.D. Vora’s case (supra) that the requisition order cannot be
made for a permanent purpose leaving the question open and holding that
the order of requisition can continue for a reasonable period of time though
in H.D. Vora’s case (supra) it was considered to be unreasonable in the facts
of the case. In Rajendra Kumar Gupta v. State of U.P. (1997 (4) SCC 511),
the same principle has been reiterated by this Court.
17. In Union of India v. Elphinstone Spinning and Weaving Co. Ltd.
(AIR 2001 SC 724), this Court was concerned with a challenge to the
Textile Undertakings Act, under which the Government was empowered to
take over the management of certain textile mills whose financial condition
had deteriorated “pending natioalisation”. The question was whether this
power was liable to be challenged on the ground that it amounted to
acquisition in reality. Repelling the challenge, it was held by this Court that
power was not even liable to challenge as abridging Article 31-A (1) of the
Constitution introduced by the Constitution First Amendment Act of 1951,
clause (1)(b) of which provides that, notwithstanding anything contained in
Article 13, no law providing for the taking over of the management of any
property by the State for a limited period either in the public interest or in
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order to secure the proper management of the property shall be deemed to
be void on the ground that it is inconsistent with, or takes away or abridges
any of the rights conferred by Article 14 and Article 19. This Court was of
the view that parliament had in enacting the Textile Industries Act, 1983
clearly indicated that the taking over was for a temporary period “pending
nationalization of Textile Mills”. Merely because nationalization would
take long time, it cannot be urged that the power was to be exercised for
indefinitely long time since the exercise of the power was delimited by the
happening of a contingency. Thus, the power of requisitioning is liable to
be upheld, if it is to be exercised for a temporary duration, which is limited
either in terms of time or by reason of a contingency.
18. In Charanjit v. Union of India (AIR 1951 SC 41) the difference
between the temporary and transitory nature of requisition and permanent
nature of acquisition was highlighted by this Court. It was inter alia held
that upon acquisition the entire bundle of rights which were vested in the
former original holder would pass on to the acquirer leaving nothing in the
former, while requisition would keep merely possession in the person
requisitioning while leaving the title of the owner in tact. In other words, if
the possession of property by exercise of dominion thereupon is continued
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indefinitely, it would amount to colourable exercise of or fraud on the
power and nothing but a back door expropriation of property. As was
observed in Raghubir Singh v. Court of Wards, Ajmer (AIR 1953 SC 373)
and Corporation of Calcutta v. Cal. Tramways Co. Ltd. (AIR 1964 SC 1279)
that though it is open to the State to impose reasonable restrictions upon
fundamental rights guaranteed under the Constitution, the nature of the
restrictions should not be such that right guaranteed becomes illusory. If
that happens then the restrictions should cease to be reasonable. We find
there is no merit in all these appeals which are to be dismissed. We direct
accordingly. It is, however, brought to our notice by learned counsel for the
appellant that the State Government intends to limit the period by another
ten years. This is a matter about which we express no opinion. The appeals
fail and are dismissed with no orders as to costs.
………………………………….J.
(Dr. ARIJIT PASAYAT)
………………………………….J.
(P. SATHASIVAM)
New Delhi,
March 16, 2009
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