Full Judgment Text
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CASE NO.:
Appeal (civil) 7133 of 1999
PETITIONER:
Pratibha Nema & Ors.
RESPONDENT:
Vs.
State of M.P. & Ors.
DATE OF JUDGMENT: 30/07/2003
BENCH:
K.G. BALAKRISHNAN & P. VENKATARAMA REDDI.
JUDGMENT:
J U D G M E N T
WITH
Civil Appeal Nos. 7134, 7135, 7136 & 7138 of 1999
P. VENKATARAMA REDDI, J.
Facts and Contentions :
The acquisition of 73.3 hectares of dry land situate in
Rangwasa village of Indore District and Tehsil belonging to the
appellants and others is the subject-matter of challenge in these
appeals filed by the landholders. The said extent of land was notified
for acquisition under Section 4(1) of the Land Acquisition Act
(hereinafter referred to as ’Act’) for the alleged public purpose of
’establishment of diamond park’. This parcel of land together with an
extent of 44.8 hectares of Government land was meant to be placed
at the disposal of the Industries Department and/or Madhya Pradesh
Audyogik Kendra Vikas Nigam Ltd. (hereinafter referred to as ’the
Nigam’) for the purpose of allotting the same to various industrial
units-the foremost among them being the 9th respondent-Company,
for setting up diamond cutting and polishing units with modern
technology. The proposal in this regard emanated from the General
Manager of District Industries Centre, on the initiative taken by the 9th
Respondent. After the land was located by a joint inspection
committee of officials, the Government of Madhya Pradesh
(Commerce & Industries Department) had given sanction ’in principle’
for the acquisition. The District Collector, Indore through his letter
dated 24.1.1996 sought the approval of the Commissioner, Indore
Division to invoke Section 17(1) of the Act in order to expedite the
process of acquisition. In that letter, the Collector mentioned that
prestigious exporters from India as well as foreign countries were
likely to establish their units in this park which would generate good
deal of foreign exchange and create employment potential.
The Commissioner accorded his approval by a communication
dated 29.1.1996. This resulted in the issuance of the notification
under Section 4(1) of the Act on 30th June, 1996 by the Collector &
Ex-officio Deputy Secretary to Government, to whom it appears the
powers were delegated. By the same Notification, the enquiry under
Section 5A was dispensed with. It was indicated in the Notification
that the land map could be inspected in the office of the SDO, Indore
and General Manager, District Industries Centre. A few days later i.e.,
on 9.2.1996, the declaration under Section 6 of the Act was
published. The Collector (Land Acquisition) was directed to take
possession after the expiry of 15 days from the date of issuance of
notice under Section 9(2) of the Act. Before the possession was
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taken, the writ petitions under Article 226 of the Constitution were
filed and an order of status quo was granted. The writ petitions and
the Letters Patent Appeals were dismissed. In the meanwhile, it
appears that an interim award was made for a sum of Rs.2,14,91,115
representing 80% of the estimated compensation amount. The SLPs
filed in this Court were disposed of on 11.10.1996 on the basis of the
representation made by the learned counsel for the State of Madhya
Pradesh that the Notification under Section 6 will be withdrawn and
the procedure under Section 5A will be followed. Accordingly, the
Collector, Indore District published a Notification on 15.10.1996
withdrawing the declaration under Section 6. After due enquiry, the
Land Acquisition Officer submitted a report under Section 5A
overruling the objections put forward by the appellants. On a perusal
of the report, the Collector as well as the Commissioner decided to go
ahead with the acquisition. Accordingly, a fresh Notification under
Section 6 was issued on 3.1.1997. As in the earlier Notification, the
public purpose was mentioned as ’establishment of a diamond park’.
This was again challenged by the aggrieved landholders including the
appellants. A Division Bench of the High Court dismissed the writ
petitions which were filed by the present appellants having interest in
about 63 acres in Survey No. 684. Against that judgment, these
appeals by special leave have come up. This Court, while taking note
of certain additional facts disclosed in I.A.No. 2/2001, passed an
order on 29.8.2001 formulating four questions in respect of which the
findings of the High Court were called for. The following are the four
questions:
1) Whether M/s. B. Arun Kumar International Ltd. deposited a sum of
Rs.3 crores for payment of compensation to the land holders for
acquisition of land for them.
2) Whether in view of the facts stated in I.A.No.2/2001 and the
counter affidavit and further affidavits the acquisition of land was
for the Company and not for public purpose.
3) If the findings on question No.1 & 2 are in the affirmative, whether
any subsequent withdrawal of compensation amount by M/s. Arun
Kumar International Ltd. would not affect the invalidity of
notification issued under Section 4 of the Act.
4) If the findings on issues Nos. 1 & 2 are in the affirmative, whether
the State Government also contributed partly towards
compensation to be paid to the land holders and in its absence
the acquisition of land for public purpose is invalid.
The questions were framed in the light of the appellants’ contention
that the acquisition was not for a public purpose and it was only
meant to benefit the 9th Respondent-Company and its associates
which contributed its own funds for facilitating the acquisition.
The matters were directed to be listed on receipt of the findings
of the High Court with a further direction not to treat the cases as
part-heard.
The High Court has, by its order dated 5-7-2002 recorded its
findings on the four points and transmitted the same to this Court. All
the findings are against the appellants and naturally, therefore, they
are being challenged.
Broadly, four contentions have been urged before us. They are:
1. Acquisition is not for a public purpose. The entire acquisition is a
subterfuge to hand over the acquired land to the Company in the
guise of acquisition for a public purpose. Even the amount paid
towards compensation was not out of public revenues, but out of the
money provided by the Company for the specific purpose of
compensation. 2. The public purpose stated in the Notifications
under Sections 4 & 6 is vague. 3. The area of the land proposed to
be acquired is far in excess of reasonable requirements and
4. Environmental considerations were not kept in view while taking a
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decision to acquire the land for industrial purpose.
Analysis of relevant provisions and the settled legal position :
In order to appreciate the contentions set out above in proper
perspective, it would be appropriate to advert to certain basic
provisions of the Act and recapitulate the well settled principles
relating to public purpose and acquisition of land under Part II and
Part VII of the Act. Section 4(1) which occurs in Part II of the Act
contemplates a notification to be published in the official gazette etc.,
whenever it appears to the appropriate Government that land in any
locality is needed for any public purpose or for a company.
Thereupon, various steps enumerated in sub-Section (2) could be
undertaken by the authorized officer. There is an inclusive definition
of ’public purpose’ in clause (f) of Section 3. This clause was inserted
by Central Act 68 of 1984. Many instances of public purpose
specified therein would have perhaps been embraced within the fold
of public purpose as generally understood. May be, by way of
abundant caution or to give quietus to legal controversies, the
inclusive definition has been added. One thing which deserves
particular notice is the rider at the end of clause (f) by which the
acquisition of land for Companies is excluded from the purview of the
expression ’public purpose’. However, notwithstanding this
dichotomy. speaking from the point of view of public purpose, the
provisions of Part II and Part VII are not mutually exclusive as
elaborated later.
The concept of public purpose (sans inclusive definition) was
succinctly set out by Batchelor, J. in a vintage decision of Bombay
High Court. In Hamabai Framjee Petit Vs. Secretary of State for India
[AIR (1914) PC 20], the Privy Council quoted with approval the
following passage from the judgment of Batchelor J:
"General definitions are, I think, rather to be avoided
where the avoidance is possible, and I make no attempt
to define precisely the extent of the phrase ’public
purpose’ in the lease; it is enough to say that in my
opinion, the phrase, whatever else it may mean, must
include a purpose, that is, an object or aim in which the
general interest of the community, as opposed to the
particular interest of individuals, is directly and vitally
concerned."
The Privy Council then proceeded to observe that prima facie
the Government are good judges to determine the purpose of
acquisition i.e., whether the purpose is such that the general interest
of the community is served. At the same time, it was aptly said that
they are not absolute Judges. This decision of the Privy Council and
the words of Batchelor, J. were referred to with approval by a
Constitution Bench in Somawanti Vs. State of Punjab [AIR (1963)
SC 151] and various other decisions of this Court.
We may now advert to Section 6. It provides for a declaration to
be made by the Government or its duly authorized officer that a
particular land is needed for a public purpose or for a Company when
the Government is satisfied after considering the report if any made
under Section 5A(2). It is explicitly made clear that such declaration
shall be subject to the provisions of Part VII of the Act which bears
the chapter heading ’Acquisition of Land for Companies’. Thus,
Section 6 reiterates the apparent distinction between acquisition for a
public purpose and acquisition for a Company. There is an important
and crucial proviso to Section 6 which has a bearing on the question
whether the acquisition is for a public purpose or for a Company. The
second proviso lays down that "no such declaration shall be made
unless the compensation to be awarded for such property is to be
paid by a Company, wholly or partly, out of public revenues or some
fund controlled or managed by local authority". Explanation 2 then
makes it clear that where the compensation to be awarded is to be
paid out of the funds of a Corporation owned or controlled by the
State, such compensation shall be deemed to be compensation paid
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out of public revenues. Thus, a provision for payment of
compensation, wholly or partly, out of public revenues or some fund
controlled or managed by a local authority is sine qua non for making
a declaration to the effect that a particular land is needed for a public
purpose. Even if the public purpose is behind the acquisition for a
Company, it shall not be deemed to be an acquisition for a public
purpose unless at least part of the compensation is payable out of
public revenues which includes the fund of a local authority or the
funds of a Corporation owned or controlled by the State. However, it
was laid down in Somavanti’s case that the notification under Section
6(1) need not explicitly set out the fact that the Government had
decided to pay a part of the expenses of the acquisition or even to
state that the Government is prepared to make a part of contribution
to the cost of acquisition. It was further clarified that the absence of a
provision in the budget in respect of the cost of acquisition, whole or
part, cannot affect the validity of the declaration. The majority Judges
of the Constitution Bench also clarified that a contribution to be made
by the State need not be substantial and even the token contribution
of Rs.100 which was made in that case satisfied the requirements of
the proviso to Section 6(1). The contribution of a small fraction of the
total probable cost of the acquisition does not necessarily vitiate the
declaration on the ground of colourable exercise of power, according
to the ruling in the said case. Following Somavathi, the same
approach was adopted in Jage Ram Vs. State of Haryana [(1971) 1
SCC 671]. The question, whether the contribution of a nominal
amount from the public exchequer would meet the requirements of
the proviso to Section 6, had again came up for consideration in
Manubhai Jehtalal Patel Vs. State of Gujarat [(1983) 4 SCC Page
553]. D.A. Desai, J. after referring to Somvanti’s, speaking for the
three Judge Bench observed thus:
"It is not correct to determine the validity of acquisition
keeping in view the amount of contribution but the
motivation for making the contribution would help in
determining the bona fides of acquisition. Further in
Malimabu case [AIR (1978) SC 515] contribution of Re 1
from the State revenue was held adequate to hold that
acquisition was for public purpose with State fund.
Therefore, the contribution of Re 1 from public exchequer
cannot be dubbed as illusory so as to invalidate the
acquisition."
In Somavanti’s case, the following note of caution was
sounded:
"We would, however, guard ourselves against being
understood to say that a token contribution by the State
towards the cost of acquisition will be sufficient
compliance with the law in each and every case. Whether
such contribution meets the requirements of the law
would depend upon the facts of every case. Indeed the
fact that the State’s contribution is nominal may well
indicate, in particular circumstances, that the action of the
State was a colourable exercise of power. In our opinion
’part’ does not necessarily mean a substantial part and
that it will be open to the Court in every case which
comes up before it to examine whether the contribution
made by the State satisfies the requirement of the law. In
this case we are satisfied that it satisfies the requirement
of law."
A three Judge Bench of this Court in Indrajit C. Parekh Vs.
State of Gujarat [(1975) 1 SCC 824], without much of elaboration,
relegated the observations in the above passage to a very narrow
confines by stating thus:
"In view of the decision in this case that a nominal
contribution out of public revenues would satisfy the
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requirement of the proviso to Section 6(1) the observation
"whether such contribution meets the requirement of the
law would depend upon the facts of every case" must
necessarily be taken to refer to the requirement of some
law other than the proviso to Section 6(1). No such law
was pointed out to us; and it is not necessary for the
purposes of this appeal to enter on a discussion as to
what such other law could be."
Another important provision is Sub-Section (3) of Section 6
which enjoins that the declaration (required to be published in the
official gazette etc.) shall be conclusive evidence that the land is
needed for a public purpose or for a Company and on publication of
declaration, the appropriate Government is enabled to acquire the
land in accordance with the other provisions of the Act. This sub-
Section came up for interpretation of this Court in Somawanti’s case
(supra). The Court emphasised that the conclusiveness
contemplated by sub-Section (3) is not merely regarding the
satisfaction of the Government on the question of need but also with
regard to the question that the land is needed for a public purpose or
for a Company, as the case may be. However, the learned Judges
highlighted an important exception to the finality or conclusiveness of
the declaration under Section 6(1). It was observed thus:
"That exception is that if there is a colourable exercise of
power the declaration will be open to challenge at the
instance of the aggrieved party. The power committed to
the Government by the Act is a limited power in the sense
that it can be exercised only where there is a public
purpose, leaving aside for a moment the purpose of a
company. If it appears that what the Government is
satisfied about is not a public purpose but a private
purpose or no purpose at all the action of the Government
would be colourable as not being relatable to the power
conferred upon it by the Act and its declaration will be a
nullity. Subject to this exception, the declaration of the
Government will be final."
The main contention of the learned senior counsel for the
appellant, as already noticed, rests on the plea of colourable exercise
of power.
Colourable exercise of power or mala fides in the province of
exercise of power came up for discussion in State of Punjab Vs.
Gurdial Singh [AIR (1980) SC Page 319]. In the words of Krishna
Iyer, J.-
"Pithily put, bad faith which invalidates the exercise of
power-sometimes called colourable exercise or fraud on
power and oftentimes overlaps motives, passions and
satisfactions-is the attainment of ends beyond the
sanctioned purposes of power by simulation or pretension
of gaining a legitimate goal......................................
When the custodian of power is influenced in its exercise
by considerations outside those for promotion of which
the power is vested the Court calls it a colourable
exercise and is undeceived by illusion........................
Fraud on power voids the order if it is not exercised bona
fide for the end designed. Fraud in this context is not
equal to moral turpitude and embraces all cases in which
the action impugned is to affect some object which is
beyond the purpose and intent of the power, whether this
be malice-laden or even benign. If the purpose is corrupt
the resultant act is bad. If considerations, foreign to the
scope of the power or extraneous to the statute, enter the
verdict or impels the action mala fides or fraud on power
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vitiates the acquisition or other official act."
The above exposition of law unfolds the right direction or the
line of enquiry which the Court has to pursue to test the validity of
declaration made under Section 6(1) exalted by the legal protection
accorded to it under sub-Section (3).
In order to proceed on these lines, the ambit and contours of
public purpose as understood by this Court in certain decided cases
has to be taken note of. We have already noticed the broad and
general meaning of the expression ’public purpose’ as stated by
Batchelor, J. nearly a century back. In the particular context of
setting up industries by private enterprise, this Court’s perspective of
public purpose is discernible from certain decided cases to which we
shall make reference.
In Jage Ram’s case (supra) the public purpose mentioned in
the notifications under Sections 4 & 6 was "the setting up a factory
for the manufacture of China-ware and Porcelain-ware". The State
Government had contributed a sum of Rs.100 as was done in the
case of Somavanti (supra) towards the cost of the land. The
question arose whether it was necessary for the Government to
proceed with the acquisition under Part VII of the Act. Holding that
acquisition under Part VII need not have been resorted to, this Court
proceeded to discuss the question whether the acquisition was
intended for a public purpose. K.S. Hegde, J. speaking for the Court
observed thus:
"There is no denying the fact that starting of a new
industry is in public interest. It is stated in the affidavit filed
on behalf of the State Government that the new State of
Haryana was lacking in industries and consequently it had
become difficult to tackle the problem of unemployment.
There is also no denying the fact that the industrialization
of an area is in public interest. That apart, the question
whether the starting of an industry is in public interest or
not is essentially a question that has to be decided by the
Government. That is a socio-economic question. This
Court is not in a position to go into that question. So long
as it is not established that the acquisition is sought to be
made for some collateral purpose, the declaration of the
Government that it is made for a public purpose is not
open to challenge. Section 6(3) says that the declaration
of the Government that the acquisition made is for public
purpose shall be conclusive evidence that the land is
needed for a public purpose. Unless it is shown that there
was a colourable exercise of power, it is not open to this
Court to go behind that declaration and find out whether
in a particular case the purpose for which the land was
needed was a public purpose or not : see Smt. Somavanti
and Others Vs. The State of Punjab and Raja Anand
Brahma Shah Vs. State of U.P. On the facts of this case,
there can be hardly any doubt that the purpose for which
the land was acquired is a public purpose."
In Somavanti’s case, setting up a factory for the manufacture of
refrigeration compressors and ancillary equipment, was held to
subserve public purpose. The importance of such industry to a State
such as Punjab which had surplus food and dairy products, the
possible generation of foreign exchange resources and
employment opportunities were all taken into account to hold that
public purpose was involved in establishing the industry. It was
observed "on the face of it, therefore, bringing into existence a
factory of this kind would be a purpose beneficial to the public even
though, that is a private venture." The decision in Jageram’s case
was cited with approval by this Court in Bajirao T. Kate Vs. State of
Maharashtra [(1995) 2 SCC Page 442]. In R.L. Arora Vs. State of
Uttar Pradesh [AIR (1964) SC Page 1230] a Constitution Bench of
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this Court observed that there was definite public purpose behind
the acquisition of land for taking up works in connection with the
setting up of a factory for production of textile machinery parts.
However, that was in the context of a case of acquisition under
Part VII.
These decisions establish that a public purpose is involved in
the acquisition of land for setting up an industry in private sector as
it would ultimately benefit the people. However, we would like to add
that any and every industry need not necessarily promote public
purpose and there could be exceptions which negate the public
purpose. But, it must be borne in mind that the satisfaction of the
Government as to the existence of public purpose cannot be lightly
faulted and it must remain uppermost in the mind of the Court.
Having noted the salient provisions and the settled principles
governing the acquisition for a public purpose, it is time to turn to
part VII dealing with acquisition of land for Companies. The
important point which we would like to highlight at the outset is that
the acquisition under Part VII is not divorced from the element of
public purpose. The concept of public purpose runs through the
gamut of Part VII as well.
’Company’ is defined to mean by Section 3(e) as (i) a Company
within the meaning of Section 3 of the Companies Act other than
Government Company, (ii) a Society registered under the Societies
Registration Act other than a Co-operative Society referred to in
clause (cc) and (iii) a Co-operative Society governed by the law
relating to the Co-operative Societies in force in any State other
than a Co-operative Society referred to in clause (cc). An industrial
concern employing not less than 100 workmen and conforming to
the other requirements specified in Section 38-A is also deemed to
be a Company for the purposes of Part VII. In order to acquire land
for a Company as defined above, the previous consent of the
appropriate Government is the first requirement and secondly the
execution of agreement by the Company conforming to the
requirements of Section 41 is another essential formality. Section 40
enjoins that consent should not be given by the appropriate
Government unless it is satisfied that (1) the purpose of the
acquisition is to obtain land for erection of dwelling houses for
workmen or for the provision of amenities connected therewith; (2)
that the acquisition is needed for construction of some building or
work for a Company which is engaged or about to engage itself in
any industry or work which is for a public purpose; and (3) that the
proposed acquisition is for the construction of some work that is
likely to be useful to the public. The agreement contemplated by
Section 41 is meant to ensure the compliance with these
essentialities. It is also meant to ensure that the entire cost of
acquisition is borne by and paid to the Government by the Company
concerned. Thus, it is seen that even in a case of acquisition for a
Company, public purpose is not eschewed. It follows, therefore, that
the existence or non-existence of a public purpose is not a primary
distinguishing factor between the acquisition under Part II and
acquisition under Part VII. The real point of distinction seems to be
the source of funds to cover the cost of acquisition. In other words,
the second proviso to Section 6(1) is the main dividing ground for
the two types of acquisition. This point has been stressed by this
Court in Srinivasa Co-operative House Building Society Limited Vs.
Madam G. Sastry [(1994) 4 SCC Page 675] at paragraph 12:
"...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
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borne, wholly or in part, out of public funds..."
The legal position has been neatly and succinctly stated by
Wanchoo, J. speaking for the Constitution Bench in R.L.Arora Vs.
State of Uttar Pradesh [AIR (1962) SC Page 764]. This is what has
been said:
"Therefore, though the words ’public purpose’ in Sections
4 & 6 have the same meaning, they have to be read in the
restricted sense in accordance with Section 40 when the
acquisition is for a company under Section 6. In one case,
the notification under Section 6 will say that the
acquisition is for a public purpose, in the other case the
notification will say that it is for a company. The proviso to
Section 6(1) shows that where the acquisition is for a
public purpose, the compensation has to be paid wholly
or partly out of public revenues or some fund controlled or
managed by a local authority. Where however the
acquisition is for a company, the compensation would be
paid wholly by the company. Though, therefore, this
distinction is there where the acquisition is either for a
public purpose or for a company, there is not a complete
dichotomy between acquisitions for the two purposes and
it cannot be maintained that where the acquisition is
primarily for a company it must always be preceded by
action under Part VII and compensation must always be
paid wholly by the company. A third class of cases is
possible where the acquisition may be primarily for a
company but it may also be at the same time for a public
purpose and the whole or part of compensation may be
paid out of public revenues or some fund controlled or
managed by a local authority. In such a case though the
acquisiton may look as if it is primarily for a company it
will be covered by that part of Section 6 which lays down
that acquisition may be made for a public purpose if the
whole part of the compensation is to be paid out of the
public revenues or some fund controlled or managed by a
local authority. Such was the case in Pandit Jhandu Lal
Vs. State of Punjab [AIR (1961) SC 343]................
.....It is only where the acquisition is for a company and
its cost is to be met entirely by the company itself that the
provisions of Part VII apply."
Thus the distinction between public purpose acquisition and
Part VII acquisition has got blurred under the impact of judicial
interpretation of relevant provisions. The main and perhaps the
decisive distinction lies in the fact whether cost of acquisition
comes out of public funds wholly or partly. Here again, even a token
or nominal contribution by the Government was held to be sufficient
compliance with the second proviso to Section 6 as held in a catena
of decisions. The net result is that by contributing even a trifling sum,
the character and pattern of acquisition could be changed by the
Government. In ultimate analysis, what is considered to be an
acquisition for facilitating the setting up of an industry in private sector
could get imbued with the character of public purpose acquisition if
only the Government comes forward to sanction the payment of a
nominal sum towards compensation. In the present state of law, that
seems to be the real position.
Whether 2nd proviso to Section 6(1) has been complied with
Now, we come back to the facts of the present case and test
the validity of acquisition, keeping in view the principles discussed
supra. First, we shall address the question argued at length-viz.,
whether there was compliance with the second proviso to Section
6(1). Obviously, if no part of compensation amount is to be paid out
of the public revenues, then, the declaration that the land was needed
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for a public purpose could not have been validly made and the
acquisition cannot be considered to be for a public purpose. As
already noticed, it was held in Somawanti’s case that the notification
under Section 6(1) need not on the face of it contain a recital that the
Government had decided to bear a part of the cost of acquisition or it
was prepared to make a part of contribution. Even the absence of
budgetary provision shall not affect the validity of declaration, it was
observed. Nevertheless, there should be definite indication to the
effect that the Government is going to bear at least a part of the cost
of acquisition. Naturally, the Court has to look into the record
including pleadings and it is not impermissible to take into account
the events prior to and subsequent to the declaration. The High
Court in the findings submitted to this Court noted the statement
made on behalf of the Government that it was prepared to make
necessary budgetary allotment for the amount of compensation
payable. However, no record has been produced either before the
High Court or before this Court reflecting the Government’s decision
to meet a part of the expenses of acquisition. But, that is really
immaterial as there is sufficient material to hold that the Nigam which
is undisputedly owned and controlled by the State has itself
proceeded to make payment of substantial amount towards
compensation even at the initial stages in anticipation of the interim
award that was made on 7.6.1996. Payment of Rs. 1.5 crores was
made by Respondent No. 6 (Nigam) through the General Manager,
District Industries Centre by means of a cheque dated 26.2.1996.
This gives an unequivocal pointer that the State owned Corporation,
namely the Nigam, had to bear the cost of acquisition and as a first
step, it made the payment of Rs.1.5 crores. The assurance on the
part of the State Government to sanction the funds, would indicate
that in case of deficit, the Government is prepared to make the
necessary financial provision to enable the Nigam to meet the cost of
acquisition. In the document entitled "Industrial Policy and Action
Plan, 1994" it is stated at para 7.19 that "the Nigam will work as the
nodal agency for the development of large and medium industries in
the State".
According to the appellants, the amount paid by Nigam to the
Land Acquisition Collector was out of the money received from
M/s. Arun Kumar International Limited (hereinafter referred to as ’AKI
Ltd.’) towards the advance payment of the compensation amount and
it was merely passed on to the Land Acquisition Officer. It is
submitted that but for the amount provided by AKI Ltd., no funds were
available with the Nigam for making such payment. The sequence of
events coupled with the fact that the respondents have not produced
the covering letter that would have accompanied the Cheque gives
rise to a presumption of fact that the Cheque issued by the Company
towards the compensation amount was simply made over to the Land
Acquisition Officer by the Nigam. Therefore, it is stressed that the
source of funds was not public revenue, but, it was the private fund of
the beneficiary Company. On the other hand, it has been the stand of
the respondents that the Cheque issued by the Company was
towards advance lease premium and such payment was made in
terms of the Memorandum of Understanding (MOU). The High Court
found sufficient support for the plea taken by the Nigam and the State
Government from the documentary evidence viz., the receipt dated
20.2.1996 passed on to AKI Ltd., and the entries in the cash book. In
fact, the original receipt book was placed before us in the course of
hearing. There is absolutely no basis to infer that the particular
receipt was prepared at a later stage after the dispute cropped up.
Moreover, the MOU entered into between the Nigam and the two
Companies, namely, M/s B. Arun Kumar Group of Companies and
Rosy Blue of Antwerp, Belgium makes it clear that the said
Companies were willing to deposit the amount of lease premium with
the Nigam in advance. It is made clear in the sur-rejoinder affidavit
filed in the High Court and it has not been disputed that the Nigam
has been vested with the power to allot land to the industrial units,
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execute lease deeds and charge premium. True, there is nothing on
record to show that the lease premium or the advance amount
payable was determined by the time the Cheque was issued by the
Company. The payment of any amount at that stage on account of
lease premium was rather premature, but, the fact remains that under
the terms of MOU, the Companies which were parties to the MOU did
express their willingness to deposit the amount of lease premium in
advance. Viewed from another angle, no interim compensation was
determined by the time the payment was made by the Company and
there was no reference in the MOU to the compensation amount at all
and if so, there is no reason to presume that the amount was
deposited by the Company as advance compensation amount. In this
state of affairs, the High Court was well justified in relying on the
documents/books maintained in the ordinary course of business and
recording a conclusion that the Cheque for Rs.3 crores was issued by
AKI Ltd., towards advance lease premium. The non-production of
covering letter which according to the sixth respondent is not on its
record, does not clinch the issue in favour of the appellants. Taking
an overall picture, we are unable to hold that the conclusion of the
High Court in this regard is perverse or unsustainable.
It seems to be fairly clear, as contended by the learned counsel
for the appellant, that the amount paid by the Company was utilized
towards payment of a part of interim compensation amount
determined by the Land Acquisition Officer on 7.6.1996 and in the
absence of this amount, the Nigam was not having sufficient cash
balance to make such payment. We may even go to the extent of
inferring that in all probability, the Nigam would have advised or
persuaded the Company to make advance payment towards lease
amount as per the terms of MOU on a rough and ready basis, so that
the said amount could be utilized by the Nigam for making payment
on account of interim compensation. Therefore, it could have been
within the contemplation of both the parties that the amount paid by
the Company will go towards the discharge of the obligation of the
Nigam to make payment towards interim compensation. Even then, it
does not in any way support the appellants’ stand that the
compensation amount had not come out of public revenues. Once the
amount paid towards advance lease premium, may be on a rough
and ready basis, is credited to the account of the Nigam, obviously, it
becomes the fund of the Nigam. Such fund, when utilized for the
purpose of payment of compensation, wholly or in part, satisfies the
requirements of the second proviso to Section 6(1) read with
Explanation 2. The genesis of the fund is not the determinative factor,
but its ownership in praesenti that matters.
Whether acquisition is for private purpose and vitated by colourable
exercise of power
We should now take up for consideration the next important
facet of the appellants’ argument turning on the question of public
purpose and colourable exercise of power. The proposed acquisition,
it is contended, is primarily and predominantly meant to cater to the
interests of the respondent Company and another Company by name
Rosy Blue of Antwerp which together entered into the Memorandum
Of Understanding (MOU) with the State-owned Corporation.
However, a twist was given to the acquisition as if it were for a public
purpose, bypassing the requirements of Part VII of the Act. The entire
exercise is an instance of colourable exercise of power and is,
therefore, ultra vires the powers of the State Government. The money
for the payment of advance compensation amount came from the
source of respondent Company to whom the Government committed
itself to allot the major chunk of land. This last point has already been
dealt with by us and therefore the attention will be focused to the
other factors that have been highlighted by the learned senior
counsel for the appellants.
According to the learned senior counsel, the following facts and
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circumstances (apart from the source of payment of compensation),
leads to a natural and logical inference that the acquisition, though
styled as a public purpose acquisition, was in reality meant to
subserve a private purpose.
It all started with the personal and written representation on
behalf of AKI Ltd. (R-9/R-10) on 13.9.1995. The very next day, the
Additional Secretary in the Industries Department conveyed to the
Commissioner, Indore Division the assurance given by the Chief
Minister that suitable land of an extent of 150-200 acres near Indore
will be allotted for starting a new ultra modern unit for diamond
polishing and processing. It was indicated in the letter that the
Company proposed to lay foundation stone for its proposed unit on 1st
November, 1995. The Additional Secretary, therefore, requested the
Commissioner to ensure prompt and early administrative action so as
to fulfill the assurance given by the Chief Minister to the Company’s
representatives. Within a week, i.e., on 22.9.1995, there was joint
inspection by various State Government officials on the basis of
which the appellants’ land was selected despite the objection by the
Zonal Pollution Officer. On 1.11.1995, a Memorandum Of
Understanding was signed by the representatives of the Nigam on
the one hand and M/s B. Arun Kumar Group of Companies and Rosy
Blue of Antwerp, Belgium on the other. According to that MOU, 200-
260 acres will be acquired and will be made available among others
to the said two Companies who were willing to deposit lease premium
in advance. The Nigam agreed to provide water and power facilities
and assist the signatory Companies to obtain necessary sanctions. It
also agreed to provide equity share capital if requested by the
Company. On 22.1.1996, a letter was addressed by the General
Manager, District Industries Centre requesting the Collector, Indore
for acquisition of 73.304 hectares of private land apart from
transferring the Government land of an extent of 44.816 hectares.
According to the synopsis furnished by the appellants’ counsel, this
letter clearly shows that the acquisition was for a Company registered
under the Companies Act. However, it may be clarified at this
juncture that the letter dated 22.1.1996 which finds its place at Page
No. 114 of the Paper-book in C.A.No. 7135 of 1999 is something
different and it does not bear testimony to the fact alleged by the
appellants. On 24.1.1996, the Collector requested the
Commissioner’s sanction for invoking Section 17(1). The
Commissioner by his communication dated 29.1.1996, gave his
approval to invoke emergency clause under Section 17(1) of the Act.
The Collector issued the Notification under Section 4(1) for the
acquisition of the appellants’ land as well as other adjoining lands for
the public purpose, to wit, ’for establishment of diamond park’.
Section 17(1) was invoked in order to dispense with the enquiry
under Section 5A. On 9.2.1996, a Notification under Section 6 was
issued and the Collector was directed to take possession within
stipulated time.
The above facts, according to the learned counsel for the
appellants, would reveal that the machinery under the Land
Acquisition Act was set in motion in record time to comply with the
request of 9th/10th Respondent and the formalities were completed in
post-haste solely with a view to enable the Company to go ahead
with its proposed project.
The learned Advocate-General appearing for the State of
Madhya Pradesh and also for the sixth respondent Corporation
(Nigam) countered the above arguments by placing reliance inter alia
on the findings of the High Court. He stressed on the policy of the
State Government and the genuine effort made by the State
Government and its agencies to develop the notified land to facilitate
the establishment of diamond cutting and processing units with
modern technology. He submitted that public purpose is writ large on
the face of the acquisition and the Government is committed to
pursue the project in public interest notwithstanding the
disinterestedness of the respondent-Company owing to the delay that
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occurred.
On a deep consideration of the respective contentions in the
light of the documents and events relied upon and the settled
principles adverted to supra, we have no doubt in our mind that the
acquisition was thought of with the earnest objective to achieve
industrial growth of the State in public interest. Quite apart from the
view taken by this Court that acquisition in order to enable a
Company in private sector to set up an industry could promote public
purpose, we have enough material in the instant case to conclude
that the proposed acquisition will serve larger public purpose. It is
fairly clear that the State’s goal to bring into existence a huge
industrial complex housing a good number of diamond cutting and
polishing units has led to the present acquisition. Such industrial
complex is compendiously termed as ’diamond park’. The State
Government and its agencies including the Nigam acted within the
framework of the ’Industrial Policy and Action Plan, 1994’ in taking
the decision to develop diamond park complex. Para 2.22 of the
Industrial Policy specifically states that "the diamond park will be
developed in the State for industries based on diamond cutting".
Mineral based industries have been brought within the scope of
’thrust sector’. Export oriented units will be specially encouraged,
according to the policy. The policy further states that the Nigam will
work as a nodal agency for the development of large and medium
industries in the State and will play the role of a coordinator for the
development of industrial infrastructure in growth sectors in
partnership with the private sector and Industrialists’ associations.
The reference to Industrial Policy is found in the resolution passed at
the meeting of Nigam on 23.11.1995 and the letter of the General
Manager, District Industries Centre while forwarding the proposal for
acquisition to the District Collector, Indore. The District Collector while
seeking the approval of the Commissioner stressed that prestigious
exporters from India as well as other foreign countries were likely to
establish their units in the diamond park which would generate good
deal of foreign exchange and create employment potential. The State
Government by its communication dated 18.1.1996 accorded
sanction in principle for acquiring the private land measuring 73
hectares in Rangwasa village ’for industrial purpose’ in order to set
up a diamond park. Thus, the considerations of industrial policy and
development weighed prominently with all the concerned authorities
while processing the proposals. It is clear from the stand taken by the
Nigam in the counter-affidavit and the enquiry report of the Land
Acquisition Collector that AKI Ltd., and Rosy Blue of Antwerp are not
the only entrepreneurs who would get the land in the proposed
diamond park area. In the report of the Land Acquisition Officer, it is
specifically mentioned that the land is proposed to be allotted to 12
industrial units after being satisfied about their capacity and bona
fides. Our attention has been drawn by the learned Advocate-General
to the lay out plan in which 12 plots covering an area of 57 hectares
are laid out. The remaining area is earmarked for green belt, housing,
common facilities and other amenities. Even the MOU entered into
between the Nigam and the two Companies do not give us a different
picture. It is specifically stated therein that the Commerce and
Industries Department will handover the land to Nigam for the
development of diamond park and the Nigam in its turn will allot the
land required for setting up the units for cutting and polishing
diamonds on leasehold basis to the two Companies as well as other
Companies. The site has been selected by a team of Government
officials after visiting various places. The fact that AKI Ltd., also
requested for allotment of suitable land near Indore and ultimately the
land close to Indore was selected, does not necessarily mean that the
official team was acting at the dictates of the said Company. Having
regard to the strategic location and importance of Indore city, the
choice of site near Indore cannot be said to be vitiated by any
extraneous considerations. Entering into MOU with the two
Companies and thereafter initiating requisite steps for the acquisition
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of the land does not, in our view, detract from the public purpose
chara
cter of acquisition. MOU, in ultimate analysis, is in the mutual
interest of both the parties and was only directed towards the end of
setting up of an industrial complex under the name of ’diamond park’
which benefits the public at large and incidentally benefits the private
entrepreneurs. One cannot view the planning process in the abstract
and there should be a realistic approach. Industrial projects and
industrial development is possible only when there is initiative,
coordination and participation on the part of both the private
entrepreneurs as well as the Governmental agencies. The active role
and initiative shown by AKI Ltd., cannot give a different colour to the
acquisition which otherwise promotes public purpose. The expression
’foreign collaboration’ used in some of the letters which the learned
Advocate-General states, is somewhat inappropriate, does not
negative the existence of public purpose.
Much of support has been drawn by the learned counsel for the
appellant from the letter dated 14.9.1995 addressed by the Additional
Secretary, Industries Department, to the Commissioner, Indore soon
after the meeting of the representatives of AKI Ltd., with the Chief
Minister and other senior officials. Much of the argument has been
built up on it to characterize the acquisition as one for private
purpose. We find no legal basis for such comment. The wording of
the letter read in isolation may convey the impression that the Chief
Minister assured allotment of 150 to 200 acres of land to AKI Ltd., for
starting its modern diamond unit. But, it is fairly clear from the
subsequent acts and correspondence including MOU that the land
sought for was in connection with the proposal for a diamond park
project in which not only AKI Ltd., but also other Companies or firms
are to set up the diamond cutting and polishing industries with
modern technology. Pursuant to the alleged assurance, no offer was
made nor any steps taken to handover 150 acres of land to AKI Ltd.
The said letter may be the starting point for action, but, as already
noticed the authorities concerned proceeded to acquire the land for
the public purpose within the framework of Land Acquisition Act. The
contents of the letter, literally read, were not translated into action.
But, it only provided a starting point to proceed with the acquisition for
industrial purpose.
We are of the view that none of the factors pointed out by the
learned counsel for the appellants make any dent on the orientation
towards public purpose nor do they establish that the acquisition was
resorted to by the Government to achieve oblique ends. The speed at
which the proposal was pursued should be appreciated rather than
condemning it, though the overzealousness on the part of authorities
concerned to short-circuit the procedure has turned out to be counter-
productive. True, the tardy progress of acquisition would have sent
wrong signals to the prospective investors, as contended by the
learned Advocate-General. However, due attention should have been
given to the legal formalities such as holding of enquiry, specification
of public purpose in clear terms and giving sufficient indication of
State meeting the cost of acquisition wholly or in part. At the same
time, we cannot read mala fides in between the lines; in fact, no
personal malice or ulterior motives have been attributed to the Chief
Minister or to any other official. The material placed before us do not
lead to the necessary or even reasonable conclusion that the
Government machinery identified itself with the private interests of the
Company, forsaking public interest. Public purpose does not cease to
be so merely because the acquisition facilitates the setting up of
industry by a private enterprise and benefits it to that extent. Nor the
existence or otherwise of public purpose be judged by the lead and
initiative taken by the entrepreneurs desirous of setting up the
industry and the measure of coordination between them and various
state agencies. The fact that despite the unwillingness expressed by
AKI Ltd., to go ahead with the project, the Government is still
interested in acquisition is yet another pointer that the acquisition was
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motivated by public purpose.
Whether notifications should be struck down on the ground of
vagueness of public purpose
The vagueness of notified public purpose is the next ground of
attack against the notifications issued under Sections 4(1) and 6.
According to the learned counsel for the appellant, the expression
"establishment of diamond park" is vague and unintelligible and
therefore deprives the landholders and the general public of the
valuable right to object to the acquisition on relevant grounds. It is
further contended that the elaboration of the public purpose in the
notice of enquiry issued under Section 5-A by the Land Acquisition
Officer does not cure the vital defect in the notification under Section
4(1) which is an essential prerequisite for all further action under the
Act. Hence it is contended that the notification under Section 4
together with the subsequent proceedings become null and void. The
sheet-anchor of this argument rests on the decision of this Court in
Madhya Pradesh Housing Board Vs. Md. Shafi [(1992) 2 SCC 168].
There, the public purpose was described as ’residential’ without even
giving definite indication of the exact location of the lands sought to
be acquired. What is more, in the declaration under Section 6(1), the
public purpose was stated differently as ’housing scheme of Housing
Board’. This Court, inter alia, held that the impugned notification was
vitiated on account of being vague. The Court observed:
"Apart from the defect in the impugned notifiation, as
noticed above, we find that even the "public purpose"
which has been mentioned in the schedule to the
notification as ’residential’ is hopelessly vague and
conveys no idea about the purpose of acquisition
rendering the notification as invalid in law. There is no
indication as to what type of residential accommodation
was proposed or for whom or any other details. The State
cannot acquire the land of a citizen for building some
residence for another, unless the same is in ’public
interest’ or for the benefit of the ’public’ or an identifiable
section thereof. In the absence of the details about the
alleged ’public purpose’ for which the land was sought to
be acquired, no one could comprehend as to why the land
was being acquired and therefore was prevented from
taking any further steps in the matter."
The Court relied on the observation in Munshi Singh Vs. Union of
India [(1973) 1 SCR Page 973] to the effect that the public purpose
"needs to be particularized" to satisfy the requirements of law.
We do not think that the ratio of the decision in M.P. Housing
Board’s case would come to the rescue o the appellants. Though the
State Government could have discreetly avoided to use sophisticated
industrial jargon, we do not think that the specified public purpose is
so vague and indefinite that the public will not be in a position to
understand its nature and purpose. That such terminology has gained
currency is evident from the fact that the same expression was used
in the Industrial Policy document. It may not be out of place to
mention that in the recent times, the terminology such as Industrial
Park, Information Technology Park is widely in circulation. Moreover,
against the column ’authorised officer under Section 4(2)’ (close to
the column ’public purpose’), the designation of Manager, District
Industries Centre, Indore is specified. This is a pointer to the fact that
the land was being acquired for industrial purpose. We are therefore
of the view that in the instant case, the alleged vagueness is not of
such a degree as to defy sense and understanding.
In Aflatoon Vs. Lt. Governor of Delhi [(1975) 4 SCC Page 285]
the public purpose mentioned in the notification under Section 4 was
"planned development of Delhi". The challenge on the ground of
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vagueness of the notification was repelled on several grounds. The
approach of the Court and the crucial consideration to be kept in view
in dealing with this question was highlighted by Mathew, J. speaking
for the Constitution Bench in the following words:
"...According to the Section (Section 4), therefore, it is
only necessary to state in the notification that the land is
needed for a public purpose. The wording of Section 5A
would make it further clear that all that is necessary to be
specified in a notification under Section 4 is that the land
is needed for a public purpose. One reason for
specification of the particular public purpose in the
notification is to enable the person whose land is sought
to be acquired to file objection under Section 5A. Unless a
person is told about the specific purpose of the
acquisition, it may not be possible for him to file a
meaningful objection against the acquisition under
Section 5A. .......
We think that the question whether the purpose specified
in a notification under Section 4 is sufficient to enable an
objection to be filed under Section 5A would depend upon
the facts and circumstances of each case."
Absence of prejudice was highlighted in Paragraph 10 thus:
"That apart, the appellants did not contend before the
High Court that as the particulars of the public purpose
were not specified in the notification issued under Section
4, they were prejudiced in that they could not effectively
exercise their right under Section 5A."
On the facts of the case, it is not possible to draw the
conclusion that the appellants have suffered any prejudice or
handicap on account of the alleged vagueness in the description of
public purpose. First of all, the appellants did not, in the pleadings
before the High Court, point out as to how the alleged ambiguity or
vagueness had resulted in prejudice in the sense that they could not
effectively object to the acquisition. On the other hand, the appellants
filed detailed objections before the Land Acquisition Officer covering
each and every aspect. The objections and representations filed
from time to time would unequivocally indicate that they were fully
aware of the exact purpose of acquisition. Raising the bogey of
vagueness in public purpose is evidently a result of after-thought.
Moreover, by virtue of what is stated in the notices issued by the
Land Acquisition Officer under Section 5A of the Act, no one could
possibly have any doubt about the exact purpose of acquisition. True,
it is not open to the Land Acquisition Officer to alter or expand the
scope of public purpose as it is within the exclusive domain of the
Government. But the Land Acquisition Officer by elaborating and
making explicit what is really implicit in the notification under Section
4(1), had only dispelled the possible doubts in this regard so that no
one will be handicapped in filing objections. It is in that light the step
taken by the Land Acquisition Officer has to be viewed. We cannot
countenance the contention that in doing so, the Land Acquisition
Officer outstepped his jurisdiction.
When no prejudice has been demonstrated nor could be
reasonably inferred, it would be unjust and inappropriate to strike
down the notification under Section 4(1) on the basis of a nebulous
plea, in exercise of writ jurisdiction under Article 226. Even assuming
that there is some ambiguity in particularizing the public purpose and
the possibility of doubt cannot be ruled out, the Constitutional Courts
in exercise of jurisdiction under Article 226 or 136 should not, as a
matter of course, deal a lethal blow to the entire proceedings based
on the theoretical or hypothetical grievance of the petitioner. It would
be sound exercise of discretion to intervene when a real and
substantial grievance is made out, the non redressal of which would
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cause prejudice and injustice to the aggrieved party. Vagueness of
the public purpose, especially, in a matter like this where it is possible
to take two views, is not something which affects the jurisdiction and
it would therefore be proper to bear in mind the considerations of
prejudice and injustice.
Objection on the ground of ecological and security considerations
The last contention is that the proposed diamond park complex
will be objectionable from the point of view of ecology and national
security. Reliance is placed on some of the guidelines spelt out in the
"Policy Statement for Abatement of Pollution" issued by Government
of India, Ministry of Environment and Forests in the year 1992. At the
outset, we must take note of the undisputed fact that the diamond
cutting and polishing equipment and the operations connected
therewith does not give rise to any pollution caused by emission of
fumes, noise or discharge of effluents. The problem of air, water or
soil pollution excepting to a minimal extent, caused on account of
inhabitation and transportation, will not arise. The appellants,
however, relied on the guidelines in order to contend that in locating
the industries, a distance of 25 KMs from ecologically and/or
otherwise sensitive areas should be maintained. It is submitted that
the MHOW-a Defence establishment is within 10 KMs distance and
the Centre for Advanced Technology (Department of Atomic Energy)
is 3 kilo meters from the proposed site of diamond park. However, it
is on record that the Army Headquarters expressed no objection from
military security point of view for setting up the diamond park. So
also, the Centre for the Advanced Technology in its letter addressed
to the Managing Director of the Nigam made it clear that the
establishment of diamond park would not cause any security
problems to the said Centre. The Union Minister of State in the
Ministry of Defence also stated on the floor of the Rajya Sabha on
11.9.1996 that there were no direct national security implications
involved in the setting up of the proposed project. It is also pertinent
to note that in the guidelines themselves, the need to strike a balance
between economic and environmental considerations has been
stressed. One of the guidelines is that no prime agricultural lands
shall be converted into industrial site. But, there is no material on
record to show that the lands in question are prime agricultural lands
which were being utilized for growing crops. The guidelines
enunciated in the policy statement have to be viewed realistically.
The topography of the area and the development around the area are
some of the factors that could be legitimately taken into account. On
the basis of the materials placed before the Court it is not possible to
hold that the proposed diamond park project will be detrimental to
public health, safety or security so as to override the public interest
that is served by setting up export-oriented industries. We have,
therefore, no hesitation in rejecting this contention.
Objection regarding acquisition of excess land
Before parting with the case, we may advert to one more
contention advanced by the learned counsel for the appellant which is
really a facet of the argument on the question of public purpose. It is
contended that such a vast extent of land is in fact not required by
any reasonable standards and there was total non application of mind
as regards the extent of the land required. In reply to this, the learned
Advocate-General has drawn our attention to the Lay Out Plan and
pointed out that it was only on the basis of an assessment of the
requirements, the extent of land to be acquired has been arrived at.
Excepting oral assertions and bald averments, there is no material
before us to reach the conclusion that the requirements were not
properly assessed by the concerned authorities. It is primarily within
the domain of State Government to decide how much extent of land
has to be acquired keeping in view the present and future needs.
Though, we are not inclined to find fault with the notification on this
ground, we would only like to observe that it is desirable that the
State Government makes a fresh assessment in the light of the latest
situation and exclude any part of the land which may be found to be
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in excess.
For the reasons aforesaid, the appeals are dismissed with no
order as to costs.