Full Judgment Text
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PETITIONER:
STATE OF MAHARASHTRA & ANR.
Vs.
RESPONDENT:
BASANTIBAI MOHANLAL KHETAN & ORS.
DATE OF JUDGMENT13/03/1986
BENCH:
VENKATARAMIAH, E.S. (J)
BENCH:
VENKATARAMIAH, E.S. (J)
THAKKAR, M.P. (J)
CITATION:
1986 AIR 1466 1986 SCR (1) 707
1986 SCC (2) 516 1986 SCALE (1)404
CITATOR INFO :
R 1988 SC1989 (12)
F 1990 SC 153 (11)
ACT:
Maharashtra Housing and Development Act, 1976
(Maharashtra Act XXVIII of 1977), sub-sections 3 & 4 of
section 44, Constitutional validity of - Whether infringes
the provisions of Articles 14, 19, 21, 31 and 300A of the
Constitution - Whether provisions of section 44(3) and (4)
are protected by Article 31(c) of the Constitution.
HEADNOTE:
One Mohanlal Fakirchand Khetan was the owner of a piece
of land measuring 3.98.60 hectares bearing Survey No. 28 at
village Bhushi in Maval Taluka of Pune District having
purchased it under the sale deed dated January 18, 1966. The
said land is, however, situated within the municipal limits
of Lonavala town. Mohanlal Fakirchand Khetan died on May 18,
1976 leaving behind him his widow, respondent No. 1, and
children respondents Nos. 2 to 5, as his heirs. In order to
provide housing accommodation to economically weaker
sections and to persons belonging to low income group and
middle income group residing within Lonavala municipal
limits and at the request of the Maharashtra Housing and
Area Development Authority, a notice was published by the
State Government under the proviso to section 41(1) of the
Maharashtra Housing and Development Act, 1976 in Government
Gazette dated August 30, 1979 inviting objections to the
proposed acquisition of lands including the land which
originally belonged to Mohanlal Fakirchand Khetan. Pursuant
to the said notice Chandrakant Mohanlal Khetan, respondent
No. 3 herein lodged his protest on September 6, 1979. After
considering the various objections received from different
people including the objections filed by Chandrakant
Mohanlal Khetan on behalf of himself and the other co-
owners, the State Government published the notification
under sub-section (1) of section 41 in its Gazette dated
July 3, 1980. On the publication of the said notificction
the land of Mohanlal Fakirchand Khetan vested in the State
Government free from all encumbrances. On December 12, 1980
a notice was
708
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issued under section 42(1) of the Act, to the holders of the
lands to surrender and deliver possession of their lands to
the Collector, Pune within a period of 30 days. In January
1981, the legal representatives of Mohanlal Fakirchand
Khetan objected to the notice on the ground that Survey No.
28 of village Bhushi that is, the land belonging to them had
not actually been notified in the notification published in
the Gazette as it had been shown as lying in village Maval
and not in village Bhushi. On discovering the error which
had crept into the notification, on May 15, 1981 the State
Government published a corrigendum making the requisite
correction and thereafter issued a fresh notice on September
15, 1981 to the heirs of Mohanlal Fakirchand Khetan to
deliver possession of the land bearing Survey No. 28 of
village Bhushi situated within the Municipal limits of
Lonavala. The widow and children of Mohanlal Fakirchand
Khetan, respondents herein filed a writ petition in the High
Court of Bombay questioning the validity of proceedings
leading up to the issue of notification under section 41(1)
of the Act and also the notification. The High Court
negatived all the contentions raised by the respondents in
the writ petition except the constitutionality of sub-
section (3) and (4) of section 44 of the Act. It found that
sub-section 3 and sub-section 4 of section 44 of the Act
were unreasonable and discriminatory and therefore ultra
vires Article 14 of the Constitution. It found that the said
provisions were not protected by Article 31C of the
Constitution and further held that the impugned provisions
of the legislation were otherwise unfair, unjust and
unreasonable. The High Court also found that the deprivation
of the property under sections 41 and 42 of the Act had not
been done by authority of law. The High Court accordingly
allowed the writ petition. Aggrieved by the decision of the
High Court the State of Maharashtra and the Maharashtra
Housing and Area Development Authority have filed this
appeal by special leave.
Allowing the appeal the Court,
^
HELD : 1. Sub-sections 3 and 4 of the Maharashtra
Housing and Development Act, 1976 are constitutionally
valid. [730 F-G]
2.1 Every Act carries with it the presumption of
constitutionality and unless a party aggrieved in a writ
petition is able to discharge the said burden by placing
adequate
709
material, the Court should not strike down a legislative
provision particularly by the application of Article 14.
[726 A-C]
In the instant case, sub-sections 3 and 4 of section 44
of the Act cannot be said to be discriminatory and violative
of Article 14 of the Constitution, merely because in the
case of lands in municipal area all the methods of valuation
under the Land Acquisition Act, are not made available. [726
B-C]
2.2 The Act is not introduced for the benefit of areas
like Bombay Corporation area and areas under the
jurisdiction of other corporations and municipalities only.
It is enacted for the whole State more than 90 per cent of
which constitutes rural area. The potentialities of a land
in a municiple area are far higher than the potentialities
of land in a rural area. There is also no occasion under the
Act for the State Government to treat one piece of land in a
municipal area in one way and another piece of land in that
area differently. All lands in a municipal area have to be
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valued in only one way that is in accordance with section
44(3) and (4) of the Act and all lands in rural areas have
also to be valued only in one way and that is in accordance
with the provisions of the Land Acquisition Act, 1894. There
could have been two different Acts one for municipal areas
and another for rural areas, each providing for a different
method of valuation of land. Such a classification would
have been un-exceptionable having regard to the object and
purposes of the two Acts and the difference in the
potentialities of the two types of lands. The method of
capitalization is also one of the recognised methods which
is adopted for the purpose of valuation of properties
acquired under the Land Acquisition Act, 1894. All methods
of valuation adopted under that Act are intended to achieve
the same purpose, namely, determination of the market value
of the land acquired. It is difficult to say whether any of
them is superior to the other in the context of Article 14
of the Constitution and to hold that there will be
discrimination, if any of them is not allowed to be availed
of for purposes of valuation. [723 G-H; 724 A-E]
State of Gujarat v. Shri Shantilal Mangaldas & Ors.,
[1969] 3 S.C.R. 341; Parkash Amichand Shah v. State of
Gujarat & Ors., [1986] 1 S.C.C. 581; Raja Vyricherla
Narayana Gajapatiraju v. The Revenue Divisional Officer,
[1939] 66 IA 104 =
710
A.I.R. 1939 PC 98; Rustam Cavasjee Cooper v. Union of India
[1970] 3 S.C.R. 530; Union of India & Anr. v. Smt. Shanti
Devi & Ors., [1983] 4 S.C.C. 542; Special Land Acquisition
Officer, Davangere v. P. Veerabhadrappa & Ors., [1984] 2
S.C.C. 120; Oriental Gas Co. Ltd. & Ors., v. State of West
Bengal [1979] 1 S.C.R. 617 and Government of Bombay v.
Morwanji Muncherji Cama, 10 Bom. LR 907 referred to.
2.3 Even granting for purposes of argument that
subsections 3 & 4 of section 44 are violative of Article 14
of the Constitution, the said provisions receive the
protection of Article 31C of the Constitution. [726 C-D]
3.1 Article 31C does not say that an Act there should
be a declaration by the appropriate legislature to the
effect that it is being enacted to achieve the object
contained in Article 39(b). In order to ascertain whether it
is protected by Article 31C, the Court has to satisfy itself
about the character of the legislation by studying all parts
of it. The question whether an Act is intended to secure the
objects contained in Article 39(b) or not does not depend
upon the declaration by the legislature but depends on its
contents. [727 B-D]
3.2 The Maharashtra Housing and Development Act, 1976
makes provision for acquisition of private lands for
providing sites for building houses or housing accommodation
to the community. The title to the lands of the private
holders which are acquired first vests in the State
Government. Later on the land is developed and then
distributed amongst the people as house sites. It also
provides for reserving land for providing public amenities
without which people cannot live there. Community centres,
shopping complex, parks, roads, drains, play grounds, are
all necessary for civic life and these amenities are enjoyed
by all. That is also a kind of distribution within the
meaning of Article 39(b) of the Constitution. The Act is
brought into force to implement the directive principle
contained in Article 39(b) and hence even if there is any
infraction of Article 14 it is cured by Article 31C which is
clearly attracted to the case. [727 E-F; 729 A-B]
Sanjeev Coke Manufacturing Company v. Bharat Coking
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Coal Ltd. & Anr., [1983] 1 S.C.R. 1000; His Holiness
Kesavananda Bharati Sripadagalavaru v. State of Kerala,
[1973] Supp. S.C.R.
711
1; Minerva Mills Ltd. & Ors. v. Union of India & Ors.,
[1981] 1 S.C.R. 206 and State of Karnataka & Anr. etc. v.
Shri Ranganatha Reddy & Anr. etc., [1978] 1 S.C.R. 641
referred to.
4. The Maharashtra Housing and Development Act, 1976
does not infringe Article 300A of the Constitution. Article
300A was not in force when the Act was enacted. Article 31
(1) of the Constitution which was couched in the same
language was however in force. Article 31C gave protection
to the Act even if it infringed Article 31. In this case,
sub-section 3 and 4 of section 44 of the Act cannot be
struck down on the ground that they are neither just nor
fair or reasonable. Nothing contrary has been done by the
authorities. Certain vacant lands lying inside a municipal
area are being acquired for providing housing accommodation
after paying an amount which is computed in accordance with
a method considered to be a fair one by Courts. The purpose
for which the lands are acquired is a public purpose. The
owners are given opportunity to make their representations
before the notification is issued. All the requirements of a
valid exercise of the power of eminent domain even in the
sense in which it is understood in the United States of
America where property rights are given greater protection
than what is required to be done in our country are
fulfilled by the Act. [729 B-F]
5. Land ceiling laws, laws providing for acquisition of
land for providing housing accommodation, laws imposing
ceiling on urban property etc. cannot be struck down by
invoking Article 21 of the Constitution. Article 21
essentially deals with personal liberty. It has little to do
with the right to own property as such. This is not a case
where the deprivation of property would lead to deprivation
of life or liberty or livelihood. On the other hand land is
being acquired to improve the living conditions of a larger
number of people. To rely upon Article 21 of the
Constitution for striking down the provisions of the Act
amounts to a clear misapplication of the great doctrine
enshrined in Article 21. [730 A-C]
6. Some problems presenting difficulty of valuation in
the application of clause 5 of First Schedule to section
44(1) of the Act in regard to valuation of open lands
situated in a city like Bombay or lands with building
potentialities situated within the limits of big towns, are
easily surmountable
712
problems of valuation in relation to individual lands and do
not reflect on the constitutionality of the impugned
provision. The concerned authorities entrusted with the
function of making evaluation will doubtless resolve such
problems as are likely to arise appropriately in accordance
with law. [730 D-E]
Basanti Bhai Mohanlal Khetan & Ors. v. State of
Maharashtra A.I.R. 1984 Bombay 366 reversed.
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1177 of
1984.
From the Judgment and order dated 8.11.1983 of the
Bombay High Court in W.P. No. 4192 of 1981.
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Ashok Desai, M. Ganesh, G.B. Sathe and A.S. Bhasme for
the Appellants.
S.B. Bhasme, Mrs. V.D. Khanna, A.M. Khanwalkar and Anil
Kumar Gupta for the Respondents.
The Judgment of the Court was delivered by
VENKATARAMIAH, J. This appeal by special leave is filed
against the judgment dated November 8, 1983 in Writ Petition
No. 4192 of 1981 by which the High Court declared sub-
section (3) and sub-section (4) of section 44 of the
Maharashtra Housing and Development Act, 1976 (Maharashtra
Act No. XXVIII of 1977) (hereinafter referred to as ‘the
Act’) as void and gave certain ancillary directions.
One Mohanlal Fakirchand Khetan was the owner of a piece
of land measuring 3.98.60 hectares bearing Survey No.28 at
village Bhushi in Maval taluka of Pune district having
purchased it under the sale deed dated January 18, 1966. The
said land is, however, situated within the municipal limits
of Lonavala town. Mohanlal Fakirchand Khetan died on May 18,
1976 leaving behind him his widow, respondent No.1, and
children, respondents Nos. 2 to 5 as his heirs. On August 1,
1978 the Maharashtra Housing and Area Development Authority
(hereinafter referred to as ‘the authority’ established
under section 3 of the Act wrote a letter to the Municipal
Council,
713
Lonavala seeking information regarding its needs for
providing housing accommodation to economically weaker
sections and to persons belonging to low income group and
middle income group residing within Lonavala municipal
limits. In order to ascertain the demand for tenements, the
Municipal Council of Lonavala issued two advertisements in
local newspapers on August 3, 1978 and February 10, 1979
inviting applications for housing accommodation from the
general public. After taking into consideration the
representations made by the people and assessing there
requirements, the municipal council informed the authority
about the extent of land needed for providing housing
accommodation for the people. The authority in its turn
informed the State Government by its letter dated September
15, 1979 that an extent of 26 hectares of land was needed
initially for providing accommodation for people within the
limits of Lunavala Municipal Council and requested the State
Government to issue a notification under sub-section (1) or
section 41 of the Act. The proposal was processed by the
Public Works Department and the Housing Department of the
State Government and a notice was publsied under the proviso
to section 41 (1) of the Act in Government Gazette dated
August 30, 1979 inviting objections to the proposed
acquisition. In that notice it was mentioned that the
Government proposed to acquire the land which originally
belonged to Mohanlal Fakirchand Khetan refer to above also.
Pursuant to the said notice Chandrakant Mohanlal Khetan,
respondent No.3 herein lodged his protest on September 6,
1979. After considering the various objections received from
different people including the objections filed by
Chandrakant Mohanlal Khetan on behalf of himself and the
other co-owners the State Government published the
notification under sub-section (1) of 41 in its Gazette
dated July 3, 1980. On the publication of the said
notification the land mentioned in it including the land of
Mohanlal Fakirchand Khetan vested in the State Government
free from all incumbrances. On December 12, 1980 a notice
was issued under section 42(1) of the Act to the holders of
the lands which had been notified under section 41(1) of the
Act to surrender and deliver possession to the Collector,
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Pune within a period of 30 days. In January, 1981 the legal
representatives of Mohanlal Fakirchand Khetan objected to
the notice on the ground that Survey No. 28 of village
Bhushi, that is, the land belonging to them had not actually
been notified in the notification published in the
714
Gazette as it had been shown as lying in village Maval and
not in village Bhushi. On discovering the error which had
crept into the notification, on May 15, 1981 the State
Government published a corrigendum making the requisite
correction and thereafter issued a fresh notice on September
15, 1981 to the heirs of Mohanlal Fakirchand Khetan to
deliver possession of the land bearing Survey No.28 of
village Bhushi situated within the municipal limits of
Lonavala. The widow and children of Mohanlal Fakirchand
Khetan, respondents herein, thereafter filed the writ
petition out of which this appeal arises on December 17,
1981 on the file of the High Court of Bombay questioning the
validity of proceedings leading up to the issue of the
notification under section 41(1) of the Act and also the
notification.
The respondents contended in the writ petition filed by
them inter alia : (1) that there was no material with the
State Government to form an opinion about the need for
issuing the notification under section 41(1) of the Act;
(ii) that the respondents had not been heard personally
after they had filed the objections under the proviso to
section 41(1) of the Act to the proposal of acquisition;
(iii) that the land of the respondents had actually not been
notified; and (iv) that the provisions of sub-sections (3)
and (4) of section 44 of the Act which contained the basis
for the determination of compensation payable in respect of
the land were violative of Article 14, Article 19 and
Article 31 of the Constitution and therefore the said two
sub-sections and the notification were liable to be declared
as void. They also stated that the compensation payable to
them was illusory in its quantum and the procedure
prescribed for the acquisition was not fair and reasonable.
The petition was contested by the State Government and
the Authority. The High Court negatived the contentions of
the respondents namely that there was no material before the
State Government for forming an opinion about the need for
issuing the notification under section 41(1) of the Act,
that the respondents had not been given adequate opportunity
to submit their objections to the notification under the
proviso to section 41(1) of the Act, and that the land
belonging to them had not been included in the notification.
The High Court found that the correspondence which had
preceded the issue of the notification between the
Government, the Authority,
715
Municipal Council, Lonavala and the representations received
by the Municipal Council, Lonavala from the public and the
proceedings of the State Government constituted sufficient
basis for the Gcvernment to form opinion about the need for
issuing the notification under section 41(1) of the Act. The
High Court found that although the names of the respondents
had not been shown in the record of rights after the death
of Mohanlal Fakirchand Khetan, respondent No.3 who was
acting on behalf of all the heirs of Mohanlal Fakirchand
Khetan had lodged his objections under proviso to section
41(1) of the Act and that he had also been personally heard
by the Collector, Pune before the publication of the
notification under sub-section (1) of section 41. The High
Court, therefore, held that the respondents suffered no
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prejudice whatsoever on that account. The High Court further
found that the description of the land of the respondents as
the land bearing Survey No.28 of village Maval had been duly
corrected by the issue of the corrigendum and that there was
no doubt about the identity of the land of the respondents
which was being acquired. After rejecting the above
contention, the High Court however proceeded to uphold the
contention of the respondents as regards the
constitutionality of sub-section (3) and sub-section (4) of
section 44 of the Act. It found that sub-section (3) and
sub-section (4) of section 44 of the Act were unreasonable
and discriminatory and therefore ultra vires Article 14 of
the Constitution. It found that the said provisions were not
protected by Article 31C of the Constitution and further
held that the impugned provisions of the legislation were
otherwise unfair, unjust and unreasonable. The High Court
found that the deprivation of the property under sections 41
and 42 of the Act had not been done by authority of law. The
High Court accordingly allowed the writ petition. Aggrieved
by the decision of the High Court the State of Maharashtra
and the Authority have filed this appeal by special leave.
In the course of this appeal the parties have not
questioned the correctness of the decision of the High Court
as regards the facts which had been found against the
respondents. The arguments were confined to the
constitutional validity of sub-sections (3) and (4) of
section 44 of the Act.
Before the Act was enacted in the year 1976 by the
State H
716
Legislature there were in force in the State of Maharashtra,
the Bombay Housing Board Act, 1948, in the Bombay and
Hyderabad areas of the State, the Madhya Pradesh Housing
Board Act, 1950 in the Vidarbha area of the State, the
Bombay Building Repairs and Reconstruction Board Act, 1969
and the Maharashtra Slum Improvement Board Act, 1973. All
these Acts were repealed by section 188 of the Act and in
their place, the Act was brought into force inter alia with
the object of unifying, consolidating and amending the laws
relating to housing, repairing and reconstructing dangerous
buildings and carrying out improvement works in slum areas.
The Preamble to the Act stated that before the Act was
passed there were in existence various corporate and
statutory bodies in the State for dealing with the problem
of housing, accommodation, for repairing and reconstructing
buildings in a bad state of disrepair and presenting a
dangerous possibility of collapse, for carrying out
improvemental works in slum areas, and for advancing loans
for construction of houses. It took note of the fact that
the programmes undertaken by these bodies were more or less
complementary and there was considerable over lapping in
their working or functioning and hence it was considered
necessary and expedient to co-ordinate the housing
programmes for an orderly development of the urban areas in
the State. It was felt that it was necessary to provide for
a more comprehensive and co-ordinated approach to the entire
problem of housing development in a balanced manner, with
sufficient attention to ecology, pollution, over-crowding
and amenities required for leading a wholesome civic life,
and that it was expedient to establish a single Corporate
Authority for the whole State and establish new Boards for
certain areas of the State to carry out the plans,
programmes and other functions of the Authority. The Act was
passed by the State Legislature for the aforesaid purposes.
It received the assent of the President on April 25, 1977.
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Chapter II of the Act provides for the establishment of
the Authority and Boards. Section 3 of the Act authorises
the State Government to establish the Authority by a
notification in the Official Gazette for securing the
objectives and purposes of the Act. The Authority is a body
corporate having perpetual succession and a common seal with
the powers to own property and to enter into contract.
Section 18 of the Act provides for the establishment of
Boards for implementing the
717
provisions of the Act. Four Boards are constituted for the
four areas of the State namely, Bombay area, Nagpur area,
Aurangabad area and the Pune area. The functions, duties and
powers of the Authority and the Boards are set out in
Chapter III of the Act. Section 28 which is in Chapter III
of the Act provides that subject to the provisions of the
Town Planning Act and the provisions of clauses (b) and (h)
of sub-section (1) of section 12 and section 13 of the
Metropolitan Act it is the duty and function of the
Authority among others to prepare or direct th Boards to
prepare and execute proposals, plans or projects for (i)
housing accommodation in the State or any part thereof,
sale, including transactions in the nature of hire-purchase
of tenements in any building vested in, or belonging to, the
Authority, letting or exchange of property of the Authority
(ii) development including provisions for amenities in areas
within the jurisdiction of the Authority, (iii) clearance
and re-development of slums in urban areas, (iv) development
of peripheral areas of existing urban areas to ensure an
orderly urban overspill, (v) development of commercial
centres, (vi) development of new towns in accordance with
the provisions of the Town Planning Act, (vii) development
of lands vested in the Authority, etc. etc.. The functions
of the Authority as stated above naturally involve
acquisition of land and disposal of property of the
Authority. Chapter V of the Act deals with the acquisition
of land and disposal of property of the Authority. Section
41 of the Act which deals with the power of the State
Government to acquire land reads thus :
"41. (1) Where, on any representation from the
Authority or any Board it appears to the State
Government that, in order to enable the Authority
to discharge any of its functions or to exercise
any of its powers or to carry out any of its
proposals, plans or projects, it is necessary that
any land should be acquired, the State Government
may acquire the land by publishing in the Official
Gazette a notification to the effect that the
State Government has decided to acquire the land
in pursuance of this section :
Provided that, before publishing such
notification, the State Government shall, by
notice published in
718
the Official Gazette and served in the prescribed
manner, call upon the owner of, or any other
person who, in the opinion of that Government, may
be interested in, such land to show cause, why it
should not be acquired, and after considering the
cause, if any, shown by the owner or any other
person interested in the land, the State
Government may pass such order as it thinks fit.
(2) The acquisition of land for any purpose
mentioned in sub-section (1) shall be deemed to be
a public purpose.
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(3) Where a notification as aforesaid is published
in the Official Gazette, the land shall, on and
from the date on which the notification is so
published, vest absolutely in the State Government
free from all encumbrances."
Section 42 of the Act confers power on the State
Government to require the person in possession of land which
is vested under sub-section (3) of section 41 of the Act to
surrender or deliver possession thereof to the State
Government. Section 43 of the Act provides that every person
having any interest in any land acquired under Chapter V of
the Act would be entitled to receive from the State
Government an amount as provided by the provisions contained
in Chapter V, Sections 44 to 49 of the Act deal with
acquisition of lands in municipal areas and section 50 deal
with acquisition of lands in rural areas. The land situated
in any area within the jurisdiction of any Municipal
Corporation or Municipal Council is considered as land lying
in a municipal area for purposes of determination of
compensation and the land outside the jurisdiction of a
Municipal Corporation or a Municipal Council is treated as
land in a rural area for the said purpose. Section 44 which
is material for purposes of this case which lays down the
basis for determination of the amount for acquisition of
lands in municipal areas read thus :
"44. (1) Where any land including any building.
hereon is acquired and vested in the State
Government under this Chapter and such land is
situated in any area within the jurisdiction of
any
719
Municipal Corporatlon or Municipal Council, the A
State ch acquisition an amount which shall be
determined in accordance with the provisions of
this section.
(2) Where the amount has been determined with th
concurrence of the Authority by agreement between
the State Government and the person to whom it is
payable, it shall be determined and paid in
accordance with such agreement.
(3) Where no such agreement can be reached, the
amount payable in respect of any land acquired
shall be an amount equal to one hundred times the
net average monthly income actually derived from
such land, during the period of five consecutive
years immediately preceding the date of
publication of the notification referred to in
section 41 as may be determined by the Land
Acquisition Officer.
(4) The net average monthly income referred to in
sub-section (3) shall be calculated in the manner
and in accordance with the principles set out in
the First Schedule.
(5) The Land Acquisition Officer shall, after
holding an inquiry in the prescribed manner,
determine in accordance with the provisions of
sub-section (4) the net average monthly income
actually derived from the land. The Land
Acquisition Officer shall then publish a notice in
a conspicuous place on the land and serve it in
the prescribed manner calling upon the owner of
the land and every person interested therein to
intimate to him, before a date specified in the
notice, whether such owner or person agrees to the
net average monthly income actually derived from
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the land as determined by the Land Acquisition
Officer. If such owner or person does not agree,
he may intimate to the Land Acquisition Officer
before the specified date what amount he claims to
be such net average monthly income.
720
(6) Any person, who does not agree to the net
average monthly income as determined by the Land
Acquisition Officer under sub-section (5) and the
amount for acquisition to be paid on that basis
and claims a sum in excess of that amount may
prefer an appeal to the Tribunal, within thirty
days from the date specified in the notice
referred to in sub-section (5).
(7) On appeal, the Tribunal shall, after hearing
the appellant, determine the net average monthly
income and the amount to be paid on that basis and
its determination shall be final and shall not be
questioned in any court.
Section 45 of the Act provides for apportionment of
amount payable on acquisition amongst different persons
claiming interest in the amount of compensation. Section 46
of the Act lays down the procedure for payment of amount for
acquisition or for depositing of same in the Court. Section
47 - of the Act lays down the powers of the Land Acquisition
Officer in relation to determination of the amount for
acquisition and section 48 of the Act provides for payment
of interest on that amount at the rates specified therein,
by the State Government. The Land Acquisition Officer is
appointed by the State Government under the powers conferred
by section 49 of the Act. Section 50 of the Act which
contains the provisions relating to the basis for
determination of amount for acquisition of lands in rural
areas and the procedure to be followed in that case reads
thus :
"50. (1) Where any land (including any building
thereon) is acquired and vested in the State
Government under this Chapter and such land is
situated in any area outside the jurisdiction of
any Municipal Corporation or Municipal Council (in
this Chapter referred to as ’a rural area’), the
State Government shall pay for such acquisition an
amount, which shall be determined in accordance
with the provisions of this section.
(2) Where the amount has been determined, with the
concurrence of the Authority, by agreement between
721
the State Government and the person to whom it is
payable it shall be determined and paid in
accordance with such agreement.
(3) Where no such agreement can be reached, the
State Government shall refer the case to the
Collector, who shall determine the amount for
acquisition in accordance with the principles for
determining compensation laid down in the Land
Acquisition Act, 1894, and the provisions of that
Act (including provisions for reference to Court
and appeal) shall apply thereto mutatis mutandis
as if the land has been acquired and compensation
had to be determined, apportioned and paid under
the provisions of that Act, subject to the
modifications that reference in section 23 and 24
of that Act to the date of publication of the
notification under section 4, sub-section (1) were
reference to the date on which the notice under
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the proviso to sub-section (1) of section 41 of
this Act is published, and the references to the
time or date of the publication of the declaration
under section 6 of that Act were references to the
date of publication of the notification refer to
in sub-section (3) of section 41 of this Act in
the Official Gazette.
Explanation - In this section, "Collector" means
the Collector of a District and includes any
officer specially appointed by the State
Government or by the Commissioner to perform the
functions of a Collector under the Land
Acquisition Act, 1894".
Wherever the amount payable on acquisition is settled
by agreement there is no distinction between a land in a
municipal area or a land in a rural area. The point of
distinction which is alleged to be discriminatory between
the two types of land lies in the method of computation of
the amount payable on acquisition where there is no agree-
ment. Whereas in the case of the land situated in a rural
areas section 50 of the Act provides that the valuation of
the land shall be made in accordance with the provisions
contained in section 23 and section 24 of the Land
Acquisition Act, 1894 in
722
the case of the land situated in a municipal area the amount
payable has to be calculated according to sub-section (3) of
section 44 of the Act. Section 44(3) of the Act provides
that the said amount shall be equal to one hundred times the
net average monthly income actually derived from such land
during the period of five consecutive years immediately
preceding the date of publication of the notification
referred to in section 41 of the Act as may be determined by
the Land Acquisition Officer. Under sub-section (4) of
section 44 of the Act the net average monthly income
referred to in sub-section (3) of section 44 is required to
be calculated in the manner and in accordance with the
principles set out in the First Schedule to the Act. The
First Schedule to the Act reads thus :
FIRST SCHEDULE
(See sub-section (1) of section 44)
Principles for determination of the net average
monthly income :-
1. The land Acquisition Officer shall first
determine the gross rent actually derived by the
owner of land acquired, including any building on
such land, during the period of five consecutive
years referred to in sub-section (3) of section
44.
2. For such determination, the Land Acquisition
Officer may hold any local inquiry and obtain, if
necessary, certified copies of extracts from the
property tax assessment books of the local
authority concerned showing the rental value of
such land.
3. The net average monthly income referred to in
sub-section (3) of section 44 shall be sixty per
cent, of the average monthly gross rent which
shall be one-sixtieth of the gross rent during the
five consecutive years as determined by the Land
Acquisition Officer under paragraph 1.
4. Forty per cent, of the gross monthly rental
referred to above shall not be taken into
723
consideration in determining the net average
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monthly income but shall be deducted in lieu of
the expenditure which the owner of the land would
normally incur for payment of any property tax to
the local authority, for collection charges,
income tax or bad debts as well as for works of
repair and maintenance of the building, if any, on
the land.
5. Where the land or any portion thereof has been
unoccupied, or the owner has not been in receipt
of any rent for the occupation of the land during
the whole or any part of the said period of five
years, the gross rent shall be taken to be the
income which the owner would in fact have derived
if the land had been leased out for rent during
the said period, and for this purpose the rent
actually derived from the land during a period
prior or subsequent to the period during which it
remained vacant or from similar land in the
vicinity shall be taken into account."
The High Court does not say that the amount payable
under sub-sections (3) and (4) of section 44 of the Act for
the land situated in municipal area is illusory. It however
says that the method of capitalization set out in section
44(3) and (4) of the Act being the only method out of the
several methods of valuing the land under the Land
Acquisition Act, 1894 the owner of land in a municipal area
is placed in a less advantageous position and is denied
equality of treatment. In order to appreciate this ground of
objection, it is necessary to examine whether the
classification of the land under the Act into the land in
municipal area and the land in rural area for purposes of
determining the amount payable on acquisition is bad. It is
not denied that the land in municipal area commands various
advantages which are not available in the case of land in
rural areas. The Act is not introduced for the benefit of
areas like Bombay Corporation Area and area under the
jurisdiction of other Corporations and municipalities only.
It is enacted for the whole State more than 90 per cent of
which constitutes rural area. The potentialities of a land
in a municipal area are far higher than the potentialities
of land in a rural area. There is also no occasion under the
Act for the State Government to treat one piece of land in a
724
municipal area in one way and another piece of land in that
area differently. All lands in a Municipal area have to be
valued in only one way that is in accordance with section
44(3) and (4) of the Act and all lands in rural areas have
also to be valued only in one way and that is in accordance
with the provisions of the Land Acquisition, 1894. There
could have been two different Acts one for municipal areas
and another for rural areas, each providing for a different
method of valuation of land. Such a classification would
have been unexceptionable having regard to the object and
purposes of the two Acts and the difference in the
potentialities of the two types of lands. It may be noticed
that in State of Gujarat v. Shri Shantilal Mangaldas & Ors.,
[19691 3 S.C.R. 341 this Court has upheld the classification
of land under the same Act for purposes of valuation at
different stages of town planning. This view is adopted and
followed in Prakash Amichand Shah v. State of Gujarat 6
Ors., [1986] 1 S.C.C. 581, recently. The method of
capitalization is also one of the recognised methods which
is adopted for the purpose of valuation of properties
acquired under the Land Acquisition Act, 1894. All methods
of valuation adopted under the Act are intended to achieve
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the same purpose, namely, determination of the market value
of the land acquired. It is difficult to say whether any of
them is superior to the other in the context of Article 14
of the Constitution and to hold that there will be descrimi-
nation, if any of them is not allowed to be availed of for
purposes of valuation. In the case of agricultural lands,
the method of capitalization is followed by our Courts for
several years (See Raja Vyricherla Narayana Gajapatirai v.
The Revenue Divisional Officer. [1939] 66 I.A. 104, A.I.R.
1939 P.C. 98, Rustom Cavasjee Cooper v. Union of India,
[1970] 3 S.C.R. 530, Union of India & Anr. v. Smt. Shanti
Devi & Ors., [1983] 4 S.C.C. 542, Special Land Acquisition
Officer, Davangere v. P. Veerabhadrappa & Ors., [1984] 2
S.C.C. 120 and Oriental Gas Co. Ltd. & Ors. v. State of West
Bengal, [1979] 1 S.C.R. 617). No doubt, such calculation has
been made by adopting varying methods, that is, from 33-1/3
times to 8 times the annual net return as explained in
Shantidevi’s case (supra). Such variation has taken place on
account of the variation of the rate of interest on gilt-
edge securities as pointed out in that case. The higher the
rate of interest, the lower would be the number of years’
purchase adopted by courts to determine the market value of
the property acquired.
725
A reading of the rules contained in the First Schedule
to the Act shows that they lay down fairly appropriate
principles to be followed in determining the net average
monthly income. The net average monthly income referred to
in sub-section (3) of section 44 of the Act is required to
be determined in accordance with paragraph 3 of the First
Schedule to the Act at sixty per cent of the average monthly
gross rent which shall be one sixtieth of the gross rent
during the five consticutive years as determined by the Land
Acquisition Officer under paragraph 1 of the First Schedule.
In paragraph 7 of its judgment the High Court observes that
the Act does not give any indication as to why the amount of
forty per cent out of the gross rental is required to be
deducted. This is an incorrect statement. Paragraph 4 of the
First Schedule gives the reason for such deduction. It says
that forty per cent of the gross monthly rental shall not be
taken into consideration in determining the net average
monthly income but shall be deducted in lieu of the
expenditure which the owner of the land would normally incur
for payment of any property tax to the local authority, for
collection charges, income tax or bad debts as well as for
works of repair and maintenance of the building if any on
the land. In the case of agricultural lands many times one-
half of the annual yield is deducted towards cultivation
charges, land revenue, cost of personal labour etc. before
determining the net annual yield for purposes of
capitalization. In the instant case the Act directs payment
of 100 times the net monthly income, that is, 8 1/3 times
the net annual income from the property as the amount
payable on its acquisition which cannot be considered to be
too low having regard to the rate of interest on safe
investments which is prevailing from 1976-77 onwards. In
Oriental Gas Co’s (supra) eight times the net annual income
was considered to be adequate compensation by this Court.
The High Court erred in relying upon the decision in
Government of Bombay v. Morwanji Muncherji Cama, 10 Bom.
L.R. 907, a decision rendered at the commencement of this
century to say that 16 2/3 years purchase of unsecured
annual ground rent as the basis for determination of market
value by capitalization method in recent years. It may
incidentally be mentioned that even that decision does not
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lay down that the valuation of vacant land by the
application of the rule of capitalization is not a
reasonable method. Paragraph 5 of the First Schedule to the
726
Act provides that method of valuation of unoccupied lands or
lands where the owner is not in receipt of rents. The High
Court while deciding the case before it has overlooked the
principle that every Act carries with it the presumption of
constitutionality and unless the petitioner is able to
discharge the said burden by placing adequate material, the
Court should not strike down a legislative provision
particularly by the application of Article 14. We fail to
see any hostile discrimination in the instant case which
will make sub-section (3) and sub-section (4) of section 44
of the Act violative of Article 14 of the Constitution
merely because in the case of lands in municipal area all
the methods of valuation under the Land Acquisition Act are
not made available.
Even granting for purposes of argument that sub-
sections (3) and (4) of section 44 are violative of Articlel
14 of the Constitution, we are of the view that the said
provisions receive the protection of Article 31C of the
Constitution. We shall proceed to test the validity of the
argument keeping aside for the time being the observations
in Sanjeev Coke Manufacturing Company. v. Bharat Coking Coal
Ltd. & Anr. [1983] 1 S.C.R. 1000. Let us proceed on the
basis that after His Holiness Kesavananda Bharati
Sripadagalavaru v. State of Kerala [1973] Supp. S.C.R. 1.
and Minerva Mills Ltd & Ors. v. Union of India & Ors. [1981]
1 S.C.R. 206, Article 31C reads as "notwithstanding anything
contained in Article 13, no law giving effect to the policy
of the State towards securing the principles specified in
clause (b) or clause (c) of Article 39 shall be deemed to be
void on the ground that it is inconsistent with or takes
away or abridges any of the rights conferred by Article 14
or Article 19. Clause (b) of Article 39 of the Constitution
which is relevant for our purpose states that the State
shall, in particularly direct its policy towards securing
that the ownership and control of material resources of the
community are so distributed as best to subserve common
good. The High Court rightly observed at the end of
paragraph 14 of its judgment following Sanjeev Coke
Manufacturing Company’s case (supra) that the expression
’material resources’ of the community’ would cover the lands
held by private owners also. But it however erred thereafter
in reaching the conclusion that Article 31C was not
applicable to the case for the reason that (i) the Act did
not contain a declaration that it was
727
enacted to give effect to Article 39(b), (ii) by undertaking
development of commercial centres while providing housing
accommodation, the Authority was expected to make profits
and hence following that the power to acquire was not
conferred with a view to achieving the directive principles
in Article 39(b), and (iii) the object of enacting the
legislation was obviously to provide wholesome civic life to
the citizens and not distribution of material resources. We
are of the view that each one of these reasons is invalid
and erroneous. First Article 31C does not say that in an Act
there should be a declaration by the appropriate legislature
to the effect that it is being enacted to achieve the object
contained in Article 39(b). In order to ascertain whether it
is protected by Article 31C, the Court has to satisfy itself
about the character of the legislation by studying all parts
of it. The question whether an Act is intended to secure the
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objects contained in Article 39(b) or not does not depend
upon the declaration by the legislature but depends on its
contents. We have already dealt with the objects of the Act
with which we are concerned in this case. It inter alia
makes provision for acquisition of private lands for
providing sites for building houses or housing accomodation
to the community. The title to the lands of the private
holders which are acquired first vests in the State
Government. Later on the land is developed and then
destributed amongst the people as house sites. It also
provides for reserving land for providing public amenities
without which people cannot live there. Community centres,
shopping complexes, parks, roads, drains, play grounds, are
all necessary for civic life and there amenities are enjoyed
by all. That is also a kind of distribution. In State of
Karnataka & Anr. etc. v. Shri Ranganatha Reddy & Anr.Etc.
[1978] 1 S.C.R. 641 at pages 69 dealing with the question
whether nationalisation of bus transport was covered by
Article 39(b), Justice Krishna Iyer has observed thus :
"The next question is whether nationalisation
can have nexus with distribution. Should we assign
a narrow or spacious sense to this concept?
Doubtless, the latter, for reasons so apparent and
eloquent. To ’distribute’even in its simple
dictionary meaning, is to ’allot, to divide into
classes or into groups and distribution’ embraces
’arrangement, classification, placement,
disposition,
728
apportionment, the way in which items, a quantity,
or the like, is divided or apportioned; the system
of dispersing goods throughout a community’ (See
Random House Dictionary). To classify and allocate
certain industries or services or utilities or
articles between the private and the public
sectors of the national economy is to distribute
those resources. Socially conscious economists
will find little difficulty in treating
nationalisation of transport as a distributive
process for the goods of the community. You cannot
condemn the concept of nationalisation in our Plan
on the score that Article 39(b) does not envelope
it. It is a matter of public policy left to
legislative wisdom whether a particular scheme of
takeover should be undertaken.
Two conclusions strike as quintessential. Part IV,
especially Article 39(b) and (c), is a furturistic
mandate to the state with a message of
transformation of the economic and social order.
Firstly, such change calls for collaborative
effort from all the legal institutions of the
system: the legislature, the judiciary and the
administrative machinery. Secondly and
consequentially, loyalty to the high purpose of
the Constitution, viz. social and economic justice
in the context of material went and utter
inequalities on a massive scale, compass the court
to ascribe expansive meaning to the pregnant words
used with hopeful foresight, not to circumscribe
their connotation into contradiction of the
objectives inspiring the provision. To be
Pharisaic towards the Constitution through
ritualistic construction is to weaken the
socialspiritual thrust of the founding fathers’
dynamic faith."
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These observations are noted with approval by another
Constitution Bench in Sanjeev Coke Manufacturing Company’s
case (supra). It is true that when public money is invested
on the development of land, the Authority is expected to
reimburse itself to some extent. The Authority, however, is
expected to conduct its operations as a public utlity
concern
729
and not as a private land development agency. The High Court
erred in taking a very narrow view of the objects of the Act
and the functions of the Authority under it. We are
satisfied that the Act is brought into force to implement
the directive principle contained in Article 39(b) and hence
even if there is any infraction of Article 14 it is cured by
Article 31C which is clearly attracted to the case.
We next proceed to consider a contention lacking in
merit which has unfortunately been accepted by the High
Court namely that the Act infringes Article 300A of the
Constitution. Article 300A was not in force when the Act was
enacted Article 31(1) of the Constitution which was couched
in the same language was however in force. Article 31C gave
protection to the Act even if it infringed Article 31. Let
us assume that the action of acquiring private properties
should satisfy now Article 300A also because the proceedings
to acquire the land started in the instant case after
Article 300A came into force. Let us also assume that a law
should be fair and reasonable and not arbitrary and that a
law should also satisfy the principle of fairness in order
to be effective and let us also assume that the said
principle of fairness lies outside Article 14. We are
assuming all these, without deciding these questions, since
the action can be upheld even if all these assumptions are
well-founded. What is it that is being done now in the
instant case? Certain vacant lands lying inside a municipal
area are being acquired for providing housing accomodation
after paying an account which is computed in accordance with
a method considered to be a fair one by courts. The purpose
for which the lands are acquired to be is a public purpose.
The owners are given opportunity to make their
representations before the notification is issued. All the
requirements of a valid exercise of the power of eminent
domain even in the sense in which it is understood in the
United States of America where property rights are given
greater protection than what is required to be done in our
country are fulfilled by the Act. Yet the High Court, with
respect, grievously erred in holding that even assuming that
the provisions of Chapter V of the Act are protected from
challenge under Articles 14, 19 and 31 of the Constitution
due to the applicability of Article 31C of the Constitution
still the impugned provisions of the Act are required to be
struck down as the said provisions are neither just nor fair
or reasonable.
730
Then in the end we have to consider the argument based
on Article 21 of the Constitution which is urged on behalf
of the respondents. Article 21 essentially deals with
personal liberty. It has little to do with the right to own
property as such. Here we are not concerned with a case
where the deprivation of property would lead to deprivation
of life or liberty or livelihood. On the other hand land is
being acquired to improve the living conditions of a large
number of people. To rely upon Article 21 of the
Constitution for striking down the provisions of the Act
amounts to a clear misapplication of the great doctrine
enshrined in Article 21. We have no hesitation in rejecting
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the argument. Land ceiling laws, law providing for
acquisition of land for providing housing accommodation,
laws imposing ceiling on urban property etc. cannot struck
down by invoking Article 21 of the Constitution.
Before concluding we may refer to one other point. Our
attention has been called to the fact that some problems
presenting difficulty or valuation will have to be faced in
the application of clause 5 of First Schedule (See Section
44 (1) in regard to valuation of open lands situated in a
city like Bombay or lands with building potentialities
situated within the limits of big towns. These are easily
surmountable problems of valuation in relation to individual
lands and do not reflect on the constitutionality of the
impugned provisions. The concerned authorities entrusted
with the function of making evaluation will doubtless
resolve such problems as are likely to arise appropriately
in accordance with law. Be that as it may the
constitutionality of the impugned provisions remains
unimpaired.
In the result we hold that the judgment of the High
Court is liable to be set aside to the extent that sub-
sections (3) and (4) of Section 44 of the Act have been held
unconstitutional and struck down. We wish to make it clear
that the findings recorded against the writ petitioners on
other points remain unaffected by this judgment. We
accodingly allow this appeal, uphold the provisions
contained in sub-sections (3) and (4) of section 44 of the
Act and dismiss the writ petition filed by the respondents.
There shall, however, be no order as to costs.
S.R. Appeals allowed.
731