Full Judgment Text
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PETITIONER:
ORIENTAL GAS CO. LTD. & ORS.
Vs.
RESPONDENT:
STATE OF WEST BENGAL
DATE OF JUDGMENT12/09/1978
BENCH:
REDDY, O. CHINNAPPA (J)
BENCH:
REDDY, O. CHINNAPPA (J)
SEN, A.P. (J)
CHANDRACHUD, Y.V. ((CJ)
SARKARIA, RANJIT SINGH
UNTWALIA, N.L.
CITATION:
1979 AIR 248 1979 SCR (1) 617
1979 SCC (1) 171
CITATOR INFO :
R 1983 SC1190 (14)
R 1984 SC 774 (15,16)
R 1986 SC1466 (11,12)
ACT:
Oriental Gas Company Act 1970-s. 8(1)(b) Capitalisation
of net income for determining compensation payable-Validity
of-Principles for determining compensation payable on
acquisition of Public Utility Undertakings discussed.
HEADNOTE:
In 1958, the Government of West Bengal, being of the
view that the appellant company which enjoyed a monopoly in
the supply of gas in Calcutta was negligent in looking after
the interest of the consumers appointed a Committee to
enquire into the unsatisfactory condition of supply of gas
in Calcutta and to suggest remedial measures, including
valuation of the Undertaking for the purpose of taking it
over. The Committee reported that the distribution system
was in a bad state of disrepair and that the maintenance
system was in a very poor state. It recommended that the
distribution system should be taken over immediately under
the management of the Government to ensure and maintain
supply of gas to consumers in Calcutta.
On the basis of this recommendation, the oriental Gas
Company (West Bengal Act XV of 1960) was passed by the State
Legislature. Section 3 of the Act provided for the taking
over for a limited period of the management and control and
subsequent acquisition of the Undertaking of the Company
Section 7 provided for the acquisition of the Undertaking of
the Company at any time within a period of five years.
Section 8(1)(b) provided for payment of compensation for the
acquisition of the Undertaking of the Company, by the method
of cost less depreciation or the method of capitalisation
whichever was less. Section 9(2) provided that the
compensation should be paid in bonds carrying interest at 3%
p.a. from the date of issue and payable in 20 equal annual
instalments. The Act was amended in 1968. The amended Act
provided for the determination of compensation on the basis
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of full market value of the Undertaking and payment of
compensation in the shape of bonds carrying interest from
the date of enactment of the 1968 Act. In 1970 the Act was
again amended. It provided for the determination of
compensation by the method of capitalisation and payment of
compensation in bonds carrying interest from the date of
acquisition.
Aggrieved by the method of determination of
compensation the appellant filed a writ petition under Art.
32 of the Constitution questioning the vires of s. 8(1)(b)
and s. 9(2) of the Act.
The petitioner contended that (1) the principle of
capitalising net profit as the sole factor for determining
compensation payable for the acquisition of a public utility
undertaking was not a relevant principle because a public
utility concern was under an obligation to provide services
to the community irrespective of whether its activities
resulted in profit or loss; (2) the choice of the period of
five years immediately preceding the take over of the
management and control of the company for the purpose of
calculating the average annual income was arbitrary; (3) at
the time when the Undertaking was
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acquired in 1962 the gilt edged securities were fetching 6%
p.a. and therefore a higher multiplier than eight should
have been provided and (4) the method of payment of
compensation in the shape of bonds payable in twenty years
at 3% interest had the effect of reducing the compensation
to less than half of what was determined.
Dismissing the petition,
^
HELD: (1) (a) The principles specified by the law for
determination of compensation are beyond the pale of
challenge, if they are relevant to the determination of
compensation and are recognised principles applicable in the
determination of compensation for property compulsorily
acquired and if the principles are appropriate in
determining the value of the class of property sought to be
acquired. The science of valuation of property recognised
several principals or methods for determining the value to
be paid as compensation to the owner for loss of his
property. If an appropriate method or principle for
determination of compensation was applied, the fact that by
the application of another principle which was also
appropriate a different value was reached, would not justify
the court in entertaining the contention that out of the two
appropriate methods, one more generous to the owner should
have been applied by the Legislature. If several principles
were appropriate and one was selected for determination of
the value of the property to be acquired, selection of that
principle to the exclusion of other principles was not open
to challenge since the selection to be left to the wisdom of
the Parliament. [633 F-H]
R. C. Cooper v. Union of India, [1970] 3 SCR 530
followed.
Case law discussed.
(b) It is well established that tangible and intangible
property of a public utility undertaking may not necessarily
be valued separately and it is a sound principle to treat
them as indivisible aqud value the undertaking as an
integrated whole. The authorities also treat capitalisation
of net profit as one of the recognised principles of
valuatior; of Public Utility Undertakings, though it may not
be the best in the sense that it may not yield that result
which is most advantageous to the owner of the undertaking.
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Any purchaser will put himself the question what profit does
the undertaking make ? and how much should he invest to get
the return. He may pay more if the prospects of better
income in the future are bright and if the plant, machinery
and buildings are in an excellent condition. He may pay less
if the future is not so bright and if the plant, machinery
and buildings are in a poor state and require replacement
and repair. He may pay more if the undertaking is possessed
of substantial, unencumbered properties. He may pay less if
the lease of land on which the factory is located is about
to expire. Thus the price may vary depending on various
factors but the basic consideration is bound to be the
profit-yielding capacity of the undertaking. [639 E, G-H]
In the instant case there is nothing in the writ
petition to indicate that lands were purchased by way of
investment and not for the purpose of gas works or that the
lands were capable of being sold independently of the
Undertaking. The petitioner’s assertions are not borne out
by any statement to that ecect in the petition. Therefore,
there would be no justification now to allow the petitioner
to amend the petition filed in 1971. Had there been
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any substance in this assertion the petitioner would have
mentioned it prominently in the petition itself. It would
not have taken it so many years to discover a circumstance
claimed to be so very vital. The case of the petitioner
right through had been that the principle of capitalisation
of income was irrelevant. [640 C-E]
(2)(a). There is no force in the charge of
arbitrariness. There is nothing wrong with the choice of the
period of five years preceding the take-over for the purpose
of calculating the average annual income. [640 F-G]
(b) If the legislature wanted to be unfair to the
company, the previous year’s profit could have been taken as
criterion on the ground that the value to be ascertained was
the value on the date of take-over and not somo hypotheticol
anterior date, or instead of taking the average of the
period of the proceeding five years the legislature could
well have taken the average of the preceding three years. If
either of these courses had been adopted compensation would
be much less. Instead, the legislature fairly adopted a five
year period for calculating the average annual income. It
may be that in the historical part the undertaking was
making much profit It may be that in the past there were
lean years. Neither a specially fat nor a specially lean
period from the past could properly be taken into account as
that would be. irrelevant. The legislature was concerned
with the value of the undertaking on or about the date of
acquisition. It, therefore, very properly chose the period
of five years immediately preceding The take-over. [640 H;
641 A-B]
Appleton Water Co. v. Railroad Commission, 154 Wis.
121, 148, 142, N.W. 476, 47 L.R.A. (N.S.) 770 referred to.
Eminent Domain by Alfred Jahr, Valuation by Bright,
Principles and Practice of Rating Valuation by Roger Emeny
and Hector M. Wilks referred to.
(3) There is equally no force in the argument that the
legislature should have specified a higher multiplier than
’eight’ in fixing the compensation. If the legislature
thought that a. return of 12% in the case of large
industrial undertaking such as the petitioner’s was
reasonable and on that basis adopted the multiplier ’eight’,
it is not for this Court to sit in judgment over that
decision and attempt to determine a more appropriate
multiplier. The use of the term ’normal cases’ used in
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Cooper’s case where this Court pointed out that
capitalisation of the net annual value of the property at a
rate equal in normal cases to the return from gilt-edged
securities was an important method of determination of
compensation, showed that it was not intended to lay down
any invariable rule that whenever a method of capitalisation
of net profits was adopted, return from gilt-edged
securities was to be the basis. That should depend on a
variety of circumstances such as the nature of the property,
the normal return which could be expected on like
investment, the state of the capital market and several such
factors. [641 G-H; 642 A]
JUDGMENT:
ORIGlNAL JURISDICTION: Writ Petition No. 343 of 1972.
(Article 32 of the Constitution.)
A. K. Sen, Anil Bhatnagar, K. Khaitan, S. R. Agarwal
and Praveen Kumar for the Petitioners.
A. P. Chatterjee, Govind Mukhoty and G. S. Chatterjee
for the Respondent.
620
The Judgment of the Court was delivered by
CHINNAPPA REDDY, J. The old question "what is
compensation" is back again, Fortunately, Constitutional
Amendments and Judicial precedents have narrowed the scope
for controversy. The question has arisen this way:
The appellant, the oriental Gas Company Ltd. was
originally constituted in England by a deed of settlement in
April 1853, as the oriental Gas Company for the purpose of
manufacture, supply distribution and sale of fuel gas in
Calcutta. It was later incorporated in accordance with the
provisions of the English Joint Stock Companies Act, 1862.
By a subsequent arrangement the control and management of
the Company passed from British into Indian hands. Over the
course of the years the Company acquired extensive
properties and became the owner of large plants. machinery,
buildings, lands pipelines, stores etc. ’the total market
value of the appellants industrial undertaking was estimated
by the appellant as on 22nd March, 1962, at Rs.
7,00,00,000/-. In 1958, the Government of West Bengal, being
of the view that the Company which enjoyed a monopoly in the
supply of Gas in Calcutta was negligent in looking after the
interest of the consumers, appointed a Committee to inquire
into the unsatisfactory condition of supply of gas in
Calcutta and to suggest remedial measures including
valuation of the undertaking for the purpose of taking over
the gas supply undertaking. The Member of the Committee
were: the Chief Secretary, the Sheriff of Calcutta, the
Secretary, Commerce and Industries Department, the
Administrator, Durgapur Project and the Director, Central
Fuel Research Institute. The Committee was assisted by
several experts. The Committee re-F ported that the present
Gas Works in Calcutta including the distributing system was
in a bad state of disrepair and a very poor state of
maintenance. The Committee recommended that the Gas Works
and the distribution system should be taken over immediately
under the management of the State Govt. in order to ensure
and maintain the supply of gas to the consumers in Calcutta.
After the report of the Committee was received by the
Government of West Bengal, the West Bengal Legislature
enacted the oriental Gas Company Act (West Bengal Act XV of
1960) providing for the taking over for a limited period, of
the management and control and the subsequent acquisition of
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the undertaking of the oriental Gas Co. Ltd. The
"undertaking of the Company" was defined to mean "the
properties of the company, movable or immovable other than
cash balances and reserve funds but including works,
workshops, plants, machineries, furniture, equipments and
stores, and lands appertaining thereto, actually in use
immediately
621
before the commencement of this Act, or intended to be used,
in connection with the production of gas or supply thereof
in Calcutta and its environs;". Section 3 of the Act
provided for the taking over of the management and control
of the undertaking of the Company for a period of five years
from the date specified in a notification to be issued.
Section 7 provided for the acquisition of the undertaking of
the Company at any time within the period of the said five
years. Section 8(])(a) provided for the payment of annual
compensation during the period of the take over of the
management and control of the undertaking of the Company.
Section 8(1)(b) provided for the compensation payable for
the acquisition of the undertaking of the Company. In the
present appeal we are concerned with the compensation
payable for the acquisition of the undertaking of the
Company, that is, we are concerned with Section 8(1) (b)
only. Section 8 (1) (1) as originally enacted was as
follows:
"8 (1) (b) in the case of acquisition of the
undertaking of the company, the total compensation
payable shall be a sum representing the purchase price
of the undertaking of the company reduced by such
depreciation as may he allowed by the Tribunal referred
to in sub-section (2) after considering the period and
the nature of the use and the present condition of the
properties concerned on the date of vesting in the
State Government under Section 7, or a sum representing
eight times the average net income of the undertaking
of the company over a period of five complete years
preceding the year in which the undertaking of the
company has been transferred to the State Government
under clause (a) of Section 4 for the purpose of
management and control, whichever is less.
Explanation-In this sub-section-
(i) "Purchase price of the undertaking of the
company" means the aggregate of the prices of the
different parts of the undertaking of the company at
the respective dates on which parts were purchased,
acquired or constructed by the Company;
(ii) "net income of the undertaking of the
Company" means the difference between the amount of
gross revenue, receipts and other general receipts,
accountable in the assessment of Indian Income-tax
arising from, and ancillary or incidental to, the
business of the company and the amount of expenditure
incurred on the following-
622
(a) rents, rates and taxes,
(b) interest on loans and security deposits,
(c) maintenance and repair,
(d) collection charges,
(e) cost of management, including the
remuneration of managing agents, if any,
(f) other expenses admissible under the law for
the time being in force in the assessment of
Indian income-tax and arising from, and ancillary
or incidental to, the business of the Company, and
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(g) such other expenses as may be prescribed by
rules made under this Act".
Section 8(2) provided that the compensation was to be
deter mined by a Tribunal to be appointed by the State
Government. The decision of the Tribunal was subject to an
appeal to the High Court. Section 9(2) provided that the
amount of compensation was to be paid by the State
Government in bonds carrying interest at the rate of 3% per
annum from the date of issue and payable in 20 equal annual
instalments.
Pursuant to the provisions of the oriental Gas Company
Act, 1960, a notification dated 3rd October, 1960, was
issued to take over the management and control of the
undertaking for a period of five years. Later by a
notification dated 22nd March, 1962, the undertaking of the
oriental Gas Company Ltd., was acquired by the Government
pursuant to the power vested in it by Section 7 of the
Oriental Gas Company Act. In the meanwhile the Company filed
a petition under Article 226 of the Constitution before the
Calcutta High Court challenging the vires of the Act on
various grounds. The Calcutta High Court dismissed the writ
Petition upholding the validity of the Act. Ray, J. (as he
then was) held: (i) The appellant has no legal right to
maintain the petition (2) The appellant could not question
the validity of the Act on the ground that its provisions
infringed its fundamental rights under Articles 14, 19, and
31 in view of Article 31A(1)(b) of the Constitution; (3) The
West Bengal Legislature had the legislative competence to
pass the impugned Act by virtue of Entry 42 of List III of
the Seventh Schedule to the Constitution; (4) Entry 25 of
List IT also conferred sufficient authority and power on the
State Legislature to make laws affecting gas and gas works;
and (5) even if the Act inci-
623
dentally trenched upon any production aspect, the pith and
substance of the legislation was gas and gas-work within the
meaning of entry 25 of List II.
The Company preferred an appeal to the Supreme Court.
The question relating to fundamental rights was not raised
before the Supreme Court. The Supreme Court, while upholding
the locus standi of the Company to file the Writ Petition,
rejected the contention of the Company relating to the
competence of the West Bengal State Legislature to pass the
impugned Act. The decision of the Supreme Court was rendered
on 5th February, 1962, and is reported in The Calcutta Gas
Company (Proprietary) Ltd. v. The State of West Bengal and
others(1).
As mentioned by us earlier, the undertaking of the
Company was acquired on 22nd March, 1962, by a notification
of that date. By further notification issued under Section 8
of the Act a Tribunal was constituted for the purpose of
determining the compensation payable in respect of the
acquisition of the undertaking. In August 1965, the oriental
Gas Company Ltd. filed a petition under Article 226 of the
Constitution challenging the provisions of the Act relating
to compensation. The Writ Petition was, however, dismissed
as withdrawn in May 1969 as the oriental Gas Company Act,
1960 was amended in the meanwhile by the President’s Act is
of 1968, the oriental Gas Company (Amendment) Act 1968. The
Amending Act substituted a different provision for what was
the original Section 8 (1) (b) . Section 8(1)(b) as amended
by the President’s Act is of 1968 was as follows:
"8(1) (b) In the case of acquisition of the
undertaking of the Company, the compensation payable by
the State Government shall be determined in accordance
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with the principles specified in the Schedule".
The schedule referred to in the amended Section 8(1)(b)
was as follows:
"THE SCHEDULE
[See Section 8 (1) (b)]
Principles for determining compensation for acquisition of
the undertaking of the company.
Paragraph 1:- The compensation to! be paid by the State
Government to the Company in respect of acquisition of the
undertaking thereof shall be an amount equal to the sum
total of the value of the
(1) [1962] Suppl. 3 SC.R. 1.
6-549 SCI/78
624
properties and assets of the Company as on the date of
acquisition of the undertaking of the Company calculated in
accordance with the provisions of paragraph II less the sum
total of the liabilities and obligations of the Company as
on that date calculated in accordance with the provisions of
paragraph III, together with the interest on such amount
calculated in accordance with the provisions of paragraph
IV.
Paragraph II:-(a) The market value on the date of
acquisition of the undertaking of the company;
(i) of any land or buildings;
(ii) of any plant, machinery or other equipment;
(iii) of any shares, securities, or other
investments held by the Company;
(b) the total amount of the premiums paid by the
Company up to the date of acquisition of the undertaking of
the Company in respect of all leasehold properties reduced
in the case of each such premium by an amount which bears to
such premium the same proportion as the expired term of the
lease in respect of which such premium shall have been paid
bears to the total term of the lease;
(c) the amount of debts due to the Company on the date
of acquisition of the undertaking of the Company, whether
secured or unsecured, to the extent to which they are
reasonably considered to be recoverable;
(d) the amount of cash held by the Company on the date
of acquisition of the undertaking of the company, whether in
deposit with a Bank or otherwise;
(e) the market value on the date of acquisition of the
undertaking of the company of all tangible assets and
properties other than those falling within any of the
preceding clauses.
Paragraph III:- The total amount of liabilities
and obligations incurred by the Company in connection
with the formation. management and administration of
the under taking of the Company and subsisting
immediately before the date of acquisition of the
undertaking of the company;
Provided that any of the properties, assets,
liabilities or obligations of the Company as on the
date of acquisition of the undertaking of the Company
shall not include such properties or assets as were
added, invested or acquired and such liabilities or
obligations as were incurred in connection with
625
such addition, investment or acquisition by the State
Government during the period of management and control
of the undertaking of the company.
Paragraph IV:- The interest referred to in
Paragraph I shall be on the amount mentioned in the
said paragraph for the period commencing from the date
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of vesting of the under taking of the Company under
sub-section (2) of Section 7 and ending with the date
immediately before the date of enactment of the
oriental Gas Company (Amendment) Act, 1968, calculated
at the average bank rate during the said period".
It should also be mentioned here that Section 9(2) was also
amended and it was provided that the Bonds should carry
interest from the date of enactment of the amending Act and
not from the date of issue. The main provisions of the
amending Act relating to the determination and payment or
compensation were, however, short lived. In 1970 the West
Bengal Legislature passed the Oriental Gas Company
(Amendment) Act, 1970 (West Bengal Act 6 of 1970) once again
substituting a new Section 8(1) (b) and Section 9(2). The
new Section 8(1) (b) was as follows:
"8(1)(b) In the case of acquisition of the
undertaking of the Company, the compensation payable by
the State Government shall be a sum representing eight
times the average net income of the undertaking of the
Company over a period of five complete years preceding
the year in which the under taking of the Company has
been transferred to the State Government under clause
(a) of. Section 4 for the purpose of management and
control.
Explanation:- In this sub-section, "net-annual
income of the undertaking of the Company" means the
difference between the amount of gross revenue receipts
and other general receipts accountable in the
assessment of Indian income-tax arising from, and
ancillary or incidental to, the business of the Company
and the amount of expenditure incurred on the
following-
(a) rents, rates and taxes,
(b) interest on loans and security deposits,
(c) maintenance and repair,
(d) collection charges,
(e) cost of management, including the
remuneration of. Managing Agents, if any,
(f) other expenses admissible under the law for
the time
626
Being force in the assessment of Indian income-tax
and arising from, and ancillary or incidental to,
the business of the Company".
The amended Section 9(2) provided for interest on the bonds
from the date of vesting of the Undertaking of the Company
under Section 7.
It is thus seen that the provisions of the oriental Gas
Company Act as originally enacted in 1960 provided for the
determination of compensation by the method of cost less
depreciation, or the method of capitalisation and directed
the payment of whichever was less, in the shape of bonds
carrying interest at 3% from the date of issue of the bonds.
The Act as amended in 1968 provided for the determination of
compensation on the basis of the full market value of the
undertaking and the payment of the compensation in the shape
of bonds carrying interest from the date of the enactment of
the Amendment Act of 1968 i.e. 7th May, 1968. The Act as
finally amended in 1970 and as it now stands provides for
the determination of the compensation by the method of
capitalisation and the payment of the compensation in bonds
carrying interest from the date of the acquisition. The
appellant Company is aggrieved by the method of
determination of compensation under the Act as amended in
1970 and has filed the present Writ Petition in this Court
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questioning the vires of Sections 8(1)(b) and 9(2) of the
Act.
The submissions of Shri A. K. Sen, learned Counsel for
the appellant were as follows: Article 31(2) of the
Constitution as it stood on the date of the acquisition of
the undertaking required the legislature to specify the
principles on which compensation, i.e. a ’just equivalent’
af what the owner had been deprived of, had to be
determined. The principles so specified had necessarily to
be relevant to the determination of such compensation. The
principle of capitalising net profit as a sole factor was
not a relevant principle in determining the compensation
payable for the acquisition of a public utility undertaking.
It might be a relevant principle to determine the value of
the intangible assets of a public utility undertaking but
was wholly irrelevant to determine the value of the tangible
assets of a public utility undertaking. Section 8(1)(b) of
the oriental Gas Company Act, as amended in 1970, therefore,
offended article 31 (2) of the Constitution. The choice of
the period of five years immediately preceding the take over
for the purpose of calculating the average annual net profit
was inappropriate as it did not reflect the true earning
capacity of the undertaking. There were special reasons why
the profits were
627
low during the two or three years immediately preceding the
takeover. The choice of the multiplier of eight was also not
based on any relevant principle. The provision for payment
in bonds payable in twenty years and carrying interest at 3%
per annum at once had the effect of reducing the
compensation in such a manner as not to approximate to what
was determined. This too was violative of Article 31(2).
Shri Sen relied upon the decision of this Court in Rustom
Cavasjee Cooper v. Union of India(1) and passages from
Alfred Jahr’s Eminent Domain, Valuation and Procedure,
American Jurisprudence Vol. 27 and American Law Reports 2nd
series, Vol. 68.
A resume of Constitutional history and the story of the
ding-dong legal battles that were fought may not be out of
place here. It may help us to understand and, perhaps even
to solve the problem before us. It will enable us to
appreciate the relevance or irrelevance of the principle
specified for determining compensation. Clauses (1) and (2)
of Article 31 of the Constitution, as they stood originally,
were as follows:
"31. Compulsory acquisition of property.-
(1) No person shall be deprived of his property save by
authority of law.
(2) No property, movable or immovable, including any
interest in, or in any company owning, any commercial
or industrial undertaking, shall be taken possession of
or acquired for public purposes under any law
authorising the taking of such possession or such
acquisition, unless the law provides for compensation
for the property taken possession of or acquired and
either fixes the amount of the compensation, or
specifies the principles on which, and the manner in
which, the compensation is to be determined and given".
The word ’compensation’ occurring in Article 31(2) was not
qualified by any adjective such as ’just’ or ’fair’ unlike
Section Sl of the Commonwealth of Australia Constitution Act
and the 5th Amendment to the Constitution of America, in
both of which provisions, the qualifying adjective just is
used. Even, so, in Bela Banerjee’s case(2) the Supreme Court
introduced the concept of a ’just equivalent’ and held that
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compensation meant ’a just equivalent of what the owner had
H
(1) [1970] 3 S.C.R. 530.
(2) [1954] S.C.R. 558.
628
been deprived of. It was said that the principles to be laid
down by the legislature to determine the compensation were
to be subject to the ’basic requirement of full
indemnification of the expropriated owner’. If the
principles did not take into account ’all the elements which
make up the true value of the property appropriated’ the
legislation was liable to be struck down. In other words
what was to be given was full compensation on the basis of
the market value of the property acquired. The decision was
capable of creating great difficulty in the sense of
discomfiting legislation for the taking over of big estates
and the nationalisation of large industrial undertakings. In
the words of Shah, J., in State of Gujarat v. Shri Shantilal
Mangaldas & ors.(l), the decisions in Bela Banerjee’s case
and Subodh Gopal Bose’s(2) case
" .. were therefore likely to give rise to
formidable problems, when the principles specified by
the Legislature as well as the amounts determined by
the application of those principles, were declared
justiciable. By qualifying ’equivalent’ by the
adjective ’just’, the enquiry was made more
‘controversial; and apart from the practical
difficulties, the law declared by this Court also
placed serious obstacles in giving effect to the
directive principles of State policy incorporated in
Art. 39".
So it was that Article 31 was amended by the Constitution
4th Amendment Act in 1955. ‘The second clause of Article 31
as amended by the Constitution 4th Amendment Act was as
follows:
"No property shall be compulsorily acquired or
requisitioned save for a public purpose and save by
authority of a law which provides for compensation for
the property so acquired or requisitioned and either
fixes the amount of the compensation or specifies the
principles on which, and the manner in which, the
compensation is to be determined and given; and no such
law shall be called in question in any court on the
ground that the compensation provided by that law is
not adequate."
The true effect of the amendment was that the adequacy
of the compensation provided by ’the law was made non-
justiciable. Again in the words of Shah, J., in Shantilals
case, "A challenge to a statute that the principles
specified by it do not award a just equivalent will be in
clear violation of the Constitutional declaration that the
inadequacy of the compensation provided is not justiciable".
The intended effect
(1) [1969] 3 S.C.R. 341.
(2) [1954] S.C.R, 587.
629
of the amendment had, however been previously nullified to a
large extent by the decisions in P. Vajravelu Mudaliar v.
Special Deputy Collector, Madras & Anr.(1) (p. 614) and the
Union of India v. The Metal Corporation of India Ltd. &
Anr.(2) where it was reiterated that the word ’compensation’
signified a, ’just equivalent’ of what the owner has been
deprived of.
In Vajravelu’s case it was observed (at p. 626):
"The fact that Parliament used the same
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expressions namely, "compensation" and "principles" as
were found in Art. 31 before the Amendment is a clear
indication that it accepted the meaning given by this
Court to those expressions in Mrs. Bela Banerjee’s
case. It follows that a Legislature in making a law of
acquisition or requisition shall provide for a just
equivalent of what the owner has been deprived of or
specify the principles for the purpose of ascertaining
the ’just equivalent’ of what the owner has been
deprived of. If Parliament intended to enable a
Legislature to make such a law.. without providing for
compensation so defined, it would have used other
expressions like ’price’ ’consideration’ etc."
Having said that, Subba Rao, J., however, went on to
say that the argument that because the word compensation
meant ’just equivalent’ for the property acquired,
therefore, this Court could ascertain whether it was a ’just
equivalent’ would render the amendment of the Constitution
nugatory. He observed that neither the principles
prescribing the ’just equivalent’ nor the ’just equivalent’
could be questioned by the Court on the ground of the
inadequacy of the compensation fixed or arrived at by the
working of the principles. The matter was illustrated by the
statement that the value of a’ house which was acquired
could be fixed in many ways: estimate by an Engineer, value
rejected by comparable sales, capitalisation of rent etc.
The application of (different principles might lead to
different results. No one could insist that only that
principle which yielded the highest result should be
adopted. On the other hand the value of land acquired in
1950 could not be fixed on the basis of its value in 1930 or
though 100 acres were acquired compensation would be given
only for 50 acres. Principles so fixing the compensation
would be irrelevant. Subba Rao, J., summarised the position
thus (at p. 629):
"If the Legislature makes a law for acquiring a
property by providing for an illusory compensation or
by indicating the principles for ascertaining the
compensation which do not
(1) [1965] 1 S. C. R. 614.
(2) [1967] 1 S. C. R. 255.
630
relate to the property acquired or to the value of such
property at or within a reasonable proximity of the
date of acquisition or the principles are so designed
and so arbitrary that they do not provide for
compensation at all, one can easily hold that the
Legislature made the law in fraud of its powers.
Briefly stated the legal position is as follows: If the
question pertains to the adequacy of compensation, it
is not justiciable; if the compensation fixed or the
principles evolved for fixing it disclose that the
legislature made the law in fraud of powers in the
sense we have explained, the question is within the
jurisdiction of the Court".
In Vajravelu’s case the compensation to be paid was the
value of the land at the date of the publication of the
notification under the Land Acquisition Act or an amount
equal to the average market value cf the land during the
five years immediately preceding such date, whichever was
less. It was also provided that compensation. was to be
determine on the basis on the use to which the land was
actually put on the date of publication of the notification
and not on the basis of any potential value of the acquired
land. This Court held that in the context of continuous rise
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of land prices owing to abnormal circumstances it could not
be said that the fixation of average price during the
preceding five years was not a relevant principle for
ascertaining the value of the land on or about the date of
acquisition. It was also held that though the potential
value of the acquired land was generally an element to be
considered in valuing land? the exclusion of such an element
from consideration merely related to the inadequacy of the
compensation and did not constitute a fraud on power so as
to invalidate the provision. The decision amounted to this
that while the principles specified should aim at the
ascertainment of a just equivalent, the principles so aimed
could not be said to be irrelevant merely because the
application of some other principles might have yielded
results more favorable to the owner of the acquired
property.
In the case of Metal Corporation of India & Anr., Subba
Rao, C. J., observed: "The law to justify itself has to
provide for the payment of a ’just equivalent’ to the land
acquired or lay down principles which will lead to that
result. If the principles laid down are relevant to the
fixation of compensation and are not arbitrary, the adequacy
of the resultant product cannot be called in question in a
Court of law. The validity of the principles, judged by the
above tests, falls within judicial scrutiny, and if they
stand the tests, the adequacy of the pro duct falls outside
its jurisdiction". Judging by those tests, the two
631
principles specified for the ward of compensation in the Act
impugned in that case namely "(i) compensation equated to
the cost price in the case of unused machinery in good
condition, and (ii) written down value as understood in the
Incometax law as the value of used machinery" were held to
be irrelevant to the fixation of the value of the machinery
on the date of acquisition.
The case of Vajravelu and Metal Corporation of India &
Anr.. were both considered in great detail in Shantilal’s
case. The decision in the case of Metal Corporation of India
was expressly overruled and the two principles which were
found to be irrelevant in Metal Corporation of India’s case
were held to be relevant principles for determination of
compensation. The observations in Vajravelu’s case
suggesting that compensation meant a ’just equivalent’ and
that the principles to be specified must relate to
ascertainment of a ’just equivalent’ were held to be obiter.
The effect of the amendments of Article 31(2) made by the
Constitution 4th Amendment Act 1955 was stated to be as
follows: D
"it clearly follows from the terms of Art. 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 of compensation. If compensation 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, an 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
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expropriated owner a just equivalent ? In our 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 I
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
632
the application of those principles is not a just
equivalent. The right declared by the Constitution
guarantees that com compensation shall be given before
a person is compulsorily compulsorily of his property
for a public purpose. What is fixed as compensation by
statute, or by the application of principles specified
for determination of compensation is guaranteed: it
does not mean however that some thing 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 he
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 do not award a just equivalent will be in clear
violation of the constitutional declaration that
inadequacy of compensation provided is not
justiciable".
After Shantilal’s case, the effect of the amendment of
Article 31(2) by the Constitution 4th Amendment Act again
fell to be considered by this Court in R. C. Cooper v. Union
of India(l) a decision of the Full Court. There is a
controversy whether this case was a retreat from the
position taken in Shantilal’s case. Later in Keshavananda
Bharti’s(2) case Shelat, Hegde, Grover, Jaganmohan Reddy and
Mukherjee JJ., expressed the view that Cooper’s case did not
over rule Shantilal’s case while Dwivedi and Chandrachud,
JJ. expressed the view that Shantilal’s case was in
substance overruled by Cooper’s case. This uncertainty which
is said to have resulted from the decision e in Cooper’s
case led to the 25th Amendment of the Constitution.. As a
result of the 25th Amendment Article 31(2) came to read as
follows :
"31(2) No property shall be compulsorily acquired
or requisitioned save for a public purpose and save by
authority of a law which provides for requisitioning or
requisitioning of
(1) [1970] 3 S.C.R. 530
(2) [1973] Suppl. S.C.R. 1.
633
the property for an amount which may be fixed by such
law or which may be determined in accordance with such
principles and given in such manner as may be specified
in such law; and no such law shall be called in
question in any court on the ground that the amount so
fixed or deter mined is not adequate or that the whole
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or any part of such amount is to be given otherwise
than in cash:
Provided that in making any law providing for the
compulsory acquisition of any property of an
educational institution established and administered by
a minority referred to in clause (1) of article 30, the
State shall ensure that the amount fixed or determined
under such law for the acquisition of such property is
such as would not restrict or abrogate the right
guaranteed under that clause".
So much for Constitutional history. We are not
concerned in this case. with the 25th Amendment. We are
concerned with Article 31(2) as it stood after the 4th
Amendment and before the 25th Amendment. On a question of
interpretation or Article 31(2) the decision in Cooper’s
case, therefore, has the final word. In Cooper’s case Shah,
J., who spoke for the Court recognised the apparently
conflicting views expressed in Vajravelu’s case and E case
but held, that both the lines of thought converged in the
ultimate result that the principles specified by the law for
determination of compensation were beyond the pale of
challenge, if they were relevant to the determination of
compensation and were recognised principles applicable in
the determination of compensation for properly compulsorily
acquired and if the principles were appropriate in
determining the value of the class of property sought to be
acquired. The provisions of the Banking Companies
(Acquisition and Transfer of Undertaking) Act 22 of 1969
were struck down on the ground that relevant principles were
not specified for the determination of compensation. Instead
of providing for valuing the entire undertaking as a unit,
the Act provided for determining the value, reduced by the
liabilities, of only some of the components which
constituted the undertaking. It also provided for different
methods of determining compensation in respect of different
components. Since the undertaking was sought to be acquired
as a going concern the goodwill and the value of the
un..expired long term leases had also to be included in the
assets of the banks. These important components of the
Undertakings were excluded. It was, therefore, held that the
principles specified were irrelevant for the determination
of compensation of Banking Companies. The Court, however,
observed that the science of valuation of property
recognised
634
several principles or methods for determining the value to
be paid as compensation to the owner for loss of his
property and that if an appropriate method or principle for
determination of compensation was applied, the fact that by
the application of another principle which was also
appropriate, a different value was leached, would not
justify the Court in entertaining the contention that out of
the two appropriate methods, one more generous to the owner
should have been applied by the Legislature. It was observed
that if several principles were appropriate and one was
selected for determination of the value of the property to
be acquired, selection of that principle to the exclusion of
other principles was not open to challenge since the
selection had to be left to the wisdom of the Parliament.
The Court then went on to refer to some of tile important
methods of determination of compensation, and observed (at
p. 600 and 601):
"The important methods of determination of compensation
are-(i) market value determined from sales of
comparable properties, proximate in time to the date of
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acquisition, similarly situate, and possessing the same
or similar advantages and subject to the same or
similar disadvantages. Market value is the price the
property may fetch in the open market if sold by a
willing seller unaffected by the special needs of a
particular purchase; (ii) capitalization of the net
annual profit out of the property at a rate equal in
normal cases to the return from gilt-edged securities.
Ordinarily value of the property may be determined by
capitalizing the net annual value obtainable in the
market at the date of the notice of acquisition; (iii)
where the property is a house, expenditure likely to be
incurred for constructing a similar house? and reduced
by the depreciation for the number of years since it
was constructed; (iv) principle of reinstatement where
it is satisfactorily established that reinstatement in
some other place is bona fide intended, there being no
general market for the property for the purpose for
which it is devoted (the purpose being a public
purpose) and would have continued to be devoted, but
for compulsory acquisition. Here compensation will be
assessed on the basis of reasonable cost of
reinstatement; (v) when the property has outgrown its
utility and it is reasonably incapable of economic use,
it may be valued as land plus the break-up value of the
structure. But the fact that the acquirer does not
intend to use the property for which it is used at the
time of acquisition and desires to demolish it or use
it for other purposes is irrelevant; and (vi) the
property to be acquired has ordinarily to be
635
valued as a unit. Normally an aggregate of the value of
A different components will not be the value of the
unit.
These are, however, not the only methods. The
method or determining the value of property by the
application of an appropriate multiplier to the net
annual income or profit is a satisfactory method of
valuation of lands with buildings, only if the land is
fully developed, i.e., it has been put to full use
legally permissible and economically justifiable, and
the income out of the property is the normal commercial
and not a controlled return, or a return dcpreciated on
account of special circumstances. It the property is
not fully developed, or the return is not commercial
the method may yield a misleading result.
xxx xxx
But when an undertaking is acquired as a unit the
principles for determination of compensation must be
relevant and also appropriate to the acquisition of the
entire under taking. In determining the appropriate
rate of the net pro fits the return from gilt-edged
securities may, unless it is otherwise found
unsuitable, be adopted".
It is worthy of notice that Shall, J., very carefully
refrained, throughout the discussion, from using the
expression ’just compensation’ or ’just equivalent’ nor did
he draw inspiration from any American or Australian cases.
Realising the implication of the use of adjectives like
’just’ or ’fair’, he was content to use the expression
’compensation’ and to say that the principle specified must
be relevant for determination of compensation. F
Dealing with the question whether compensation might be
provided in the form of bonds, the Court said (at p. 608-
609):
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"Compensation may be provided under a statute,
other . than in the form of money . it may be given as
equivalent of money, i.e., a bond. But in judging
whether the law provides for compensation, the money
value at the date of expropriation of what is given as
compensation, must be considered. If the rate of
interest compared with the ruling commercial rate is
low, it will reduce the present value of the bond. The
Constitution guarantees a right to compensation-an
equivalent of the property expropriated and the right
to compensation cannot be converted into a loan on
terms which do not fairly compare with the prevailing
com-
636
mercial terms. If the statute in providing for
compensation devises a scheme for payment of
compensation by giving it in the form of bonds, and the
present value of what is deter mined to be given is
thereby substantially reduced, the statute impairs the
guarantee of compensation.
A scheme for payment of compensation may take many
forms. If the present value of what is given reasonably
approximates to what is determined as compensation
according to the principles provided by the statute, no
fault may be found. But if the law seeks to convert the
compensation determined into a forced loan, or to give
compensation in the form of a bond of which the market
value at the date of expropriation does not approximate
the amount determined as compensation, the Court must
consider whether what is given is in truth compensation
which is inadequate, or that it is not compensation at
all. Since we are of the view that the scheme in Sch.
II of the Act suffers from the vice that it does not
award compensation according to any recognized
principles, we need not dilate upon this matter
further".
We may now examine the submissions of Shri A. K. Sen in
the light of the principles enunciated in Cooper’s case
without confusing ourselves with imported expression
like ’just compensation’ or ’just equivalent’. Shri A. K.
Sen’s primary submission was that the principle of
capitalising net profit as the sole factor for determining
the compensation payable for the acquisition of a public
utility Under taking was not a relevant principle. According
to him a Public. Utility Undertaking was under an obligation
to provide services to the community irrespective of whether
its activities resulted in profit or loss It was subject to
a rigid price control. It did not have the freedom to extend
or curtail its activities based on consideration of profit.
An Undertaking like the appellant’s, he said, was bound to
render services even in unprofitable lines of supply and
areas. Therefore, the method of capitalising income was no.
relevant to determine the compensation payable to a Public
Utility undertaking. It might be relevant to assess the
value of the intangible assets of the Public Utility Under
taking but it was not relevant for valuing its tangible
assets. Shri Sen invited our attention to certain passages
from Alfred Jahr’s Eminent Domain-Valuation and Procedure,
Valuation by Bright, American Jurisprudence 2nd Edn.-Vol. 27
and American Law Reports-2nd series, Vol. 68. It is hardly
necessary tc point out that American authorities are not of
any avail on the question before us since the
637
basic assumption of the American authorities is that what is
payable is a ’just compensation’ and every and all
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principles necessary to arrive at a ’just compensation’ have
to be applied. That, as we have seen, is not the position in
India. What we have to see is whether the particular
principle specified by the statute is a relevant principle.
Even so we will refer to the authorities cited by Shri Sen.
These authorities themselves show that the method of
capitalisation of net profit is an unquestionably relevant
principle in assessing compensation. In fact the very
argument of Shri Sen that the principle of capitalisation of
net profit as a sole factor to determine compensation is not
relevant, appears to us to imply that it is a relevant,
principle alongwith others. C
Alfred Johr in his Eminent Domain Valuation and
Procedure, states in Section 66: "At the outset, we must
bear in mind that when private property is acquired for
public use under the power of eminent domain, just
compensation must be paid to the owner. How is the just
compensation determined ? That is the problem which we will
discuss at some length". Dealing particularly with the
question of valuation of Public Utilities, the author
mentions the reasons why the principles of valuation in the
case of acquisition of Public Utilities are sometimes
different from those pertaining to the usual acquisitions.
Then he proceeds to say that in estimating a ’just
compensation’ of Utility property consideration must be
given to two types of properties, the tangible properties
and the intangible properties. Tangible property such as
land may be valued at the market value while property like
plant etc. may have to be valued on the basis of original
cost, cost of permutation, allowance for depreciation etc.
In the case of intangible property the author states that
the Courts do not indicate the method used in reaching the
intangible item of ’going concern value’ . and confesses
that "there probably is none". After remarking that
valuation of a going concern based on capitalisation of net
earnings assumes too many contingencies, the author refers
to the case of Appleton Water Co. v. Railroad Commission
[154 Wis. 121, 148, 142, N.W. 476, 47 L.R.A. (N.S.) 770],
where the Court said that the fundamental difficulty with an
attempt to set a definite sum as representing going concern
value is "that it is an attempt to divide a thing which is
in its nature practically indivisible. The value of the
plant and business is an indivisible gross amount. It is not
obtained by adding up a number of separate items, but by
taking a comprehensive view of each and all of the elements
of property, tangible and intangible, including property
rights, and considering them all, not as separate things,
hut as inseparable parts of one harmonious entity".
638
Bright in his ’Valuation’, deals with the question
under the heading ’Capitalized Earning Power Versus So-
Called Physical value as a measure of just compensation’.
After referring to various difficulties ‘ in arriving at the
just compensation on the basis of the method of
capitalisation, the author ends the statement:
"No doubt the practical objections urged by the
courts . against capitalized earnings as a basis of
valuation are well founded. But valuations based on
replacement cost are indefensible if judged by the
assumed objective of an award t in condemnation, which
is to indemnify the owners of the property for the
loss. Difficult as it is to determine fairly the value
of a business enterprise by estimating its future
earnings, no alternative method of valuation is
acceptable, unless one is content to use the market
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prices of outstanding stocks and bonds".
In American Jurisprudence, 2nd Edn. Vol. 27, the
discussion of the question of ’Measure and elements of
compensation’ starts in paragraph 266 with the sentence "the
right of Eminent Domain cannot be exercised except upon
condition that just compensation be made to the owner". In
paragraph 339 the valuation of Public Utility properties is
considered and the unique problems presented are mentioned.
It is then said : no rigid measures can be prescribed for
the determination of ’just compensation’ under all
circumstances and in all cases......... The amount of net
income actually received by a public utility company may and
should be considered as a factor in determining the
valuation, although such earnings are not conclusive,
especially if a large sum would be necessary to put the
plant in good condition. Capitalization of earnings, or the
"economic" value, is a method of appraisal in condemnation
cases which has met with approval in some jurisdictions,
although usually rejected as a sole test. This test has its
limitations (primarily because of the speculative factors
involved). but is unquestionably relevant, particularly when
attempting to measure the intangibles of a public utility".
In American Law Reports-2nd series-Vol 68, at pages
398- 399 it is stated that in valuing utility property
various tests have been applied, alone and in combination,
the usual method being the ascertainment of market value. It
is then pointed out that there is a difference in
ascertaining the market value for the purpose‘sc of
condemnation proceedings and for the purpose of rate-making.
It is said: "In condemnation proceedings just compensation
is the market value of the property taken. In rate-making
cases, the standard or market value of the investment cannot
be applied in determining just compensation, for the simple
reason that marker value is dependent upon
639
earning capacity and fluctuates with that capacity;
consequently in determining what earning capacity is just,
the market value of the investment which is a result of
earning capacity cannot be utilised as a basis for the
determination of what constitutes the reasonable or just
earning capacity of the plant".
We may also refer to Principles and Practice of Rating
Valuation by Roger Emeny and Hector M, Wilks. At page 197 of
the 3rd edn., public utility undertakings are considered and
it is said:
’Public Utility Undertakings were prior to 1950
valued by the profits method. This method was used
because public utility undertakings were not generally
speaking let, added to which they enjoyed some element
of monopoly....insofar that there are public utility
undertakings or quasi public utility undertakings which
are not covered by a formula, and in the absence of
rental evidence, it is probable that the profits method
of valuation would be applicable. There is no shortage
of case law to help the valuer when using the profits
method for public utility undertaking".
It is thus clear from the very authorities cited by
Shri Sen. that tangible and intangible property of a public
utility undertaking, may not necessarily be valued
separately and it is a sound principle to treat them as
indivisible and value the undertaking as an integrated
whole. The authorities also treat the capitalisation of net
profit as one of the recognised principles of valuation of
Public Utility Undertaking, though it may not be the best in
the sense that it may not yield that result which is most
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advantageous to the owner of the undertaking. But we are not
concerned with the question which principle will yield the
result most advantageous to the owner of the undertaking but
with the question whether the particular principle is a
relevant principle at all. In the language used in ’American
Jurisprudence’ the principle of capitalisation of net income
is "unquestionably relevant" even in the case of Public
Utility Undertakings. Tn our view, it requires no authority
to say that capitalisation of net income is a sound
principle of valuation. Any purchaser will immediately put
himself the question what profit does the undertaking make
and how much should I invest to get the return’ ? He may pay
more if the prospects of better income in the future are
bright and if the plant, machinery and buildings are in
excellent condition. He may pay less if the future is not so
bright and if the plant, machinery and buildings are in a
poor state and require immediate replacement and repair. He
may pay more ll if the undertaking is possessed of
substantial, unencumbered properties. He may pay less if the
lease of the land on which the factory
640
is located is about to expire. Thus the price may vary
depending - on various factors but the basic consideration
is bound to be the profit yielding capacity of the
undertaking. Shri Sen asserted that the lands belonging to
the company which were purchased by way of investment, can
fetch a price of Rupees six to seven crores. There is
nothing in the petition to indicate that any lands were
purchased by way of investments and not for the purpose of
gas works or that the lands are capable of being sold
independently of the undertaking. Perhaps, no one will come
forward to purchase land next to a gas works. Perhaps there
are other factors which make the land unsale able or which
depreciate the value of the land. We do not know. Suffice it
to say that the assertion of Shri Sen is not borne out by
any statement to that effect in the Writ Petition. Shri Sell
suggested that the petitioner might be given an opportunity
to amend the Writ Petition. We do not think we can do that.
The acquisition was made in 1962. The impugned Act was
passed in 1970. The Writ Petition was filed in 1971 and has
been pending in this Court for sever years. If there was any
substance in the present assertion, the petitioner would
surely have mentioned it prominently in the Writ Petition.
It would not have taken the petitioner so many years to
discover a circumstance claimed by his Counsel to be so very
vital. We do not think we will be justified in permitting
any amendment at this stage. The case of the petitioner
right through has been that the principle of capitalisation
of income was irrelevant. With that submission we
emphatically do not agree.
Shri Sen’s next submission was that the choice of the
period of five years immediately preceding the take over of
the management and control of the Company for the purpose of
calculating the average annual income was arbitrary as those
five years were particularly lean years for the Company
because of some special circumstances. The charge of
arbitrariness is baseless. The five years immediately
preceding the take over of the control and management of the
Company were the years 1955-56, 1956-57, 1957-58, 1958-59
and 1959-60 during which years the profits according to the
balance sheets of the Company, were Rs. 15,86,789, Rs.
13,81,177, Rs. 7,50,582, Rs. 1,64,158 and Rs. 1,82,123/-
respectively. Now, if the Legislature wanted to be unfair to
the Company, the last year’s profit could have been taken as
the criterion on the ground that the value to be ascertained
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was the value on the date of take over and not some
hypothetical anterior date. Or, instead of taking the
advantage of the period of the preceding five years, the
Legislature could well have taken the average of the
preceding three years. If
643
that. We should not however be understood as having decided
that A Section 9 (2) offends Article 31 (2) of the
Constitution. Shri Chatterjee, learned Counsel for the State
of West Bengal, argued that the earlier decision of the
Calcutta High Court in the petition under Article 226 of the
Constitution operated as res judicata. In the view that we
have taken on the main question it is unnecessary to
consider this argument except to say that there does not
appear to be any substance in it. In the result the Writ
Petition is dismissed with costs.
P.B.R. Petition dismissed.
644