Full Judgment Text
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PETITIONER:
MUNICIPAL CORPORATION OF THE CITY OFAHMEDABAD & ORS.
Vs.
RESPONDENT:
STATE OF GUJARAT & ORS.
DATE OF JUDGMENT27/03/1972
BENCH:
PALEKAR, D.G.
BENCH:
PALEKAR, D.G.
SIKRI, S.M. (CJ)
GROVER, A.N.
RAY, A.N.
BEG, M. HAMEEDULLAH
CITATION:
1972 AIR 1730 1973 SCR (1) 1
1972 SCC (1) 802
ACT:
The Government of India Act, 1935-S. 299-Constitution of
India Act, Art. 31-Compensation-Bombay Provincial Municipal
Corporation Act, 1949-Ss. 212, 216-Acquisition building or
part of building within "regular line of public" street-
Section if prescribes the principles and manner of
-determination of compensation.
Bombay Provincial Municipal Corporation Act, 1949-Ss. 212,
216 Constitutionality of.
HEADNOTE:
Section 210 of the Bombay Provincial Municipal Corporation
Act, 1949 authorises the Municipal Commissioner to prescribe
the "regular line of a public street". If a building or a
part of building is within the regular line of a public
street the Commissioner may under s. 212 require the owner
to pull down the building or part thereof, which is within
the regular line of the street. On this failure to do so,
the Commissioner is entitled to pull down the offending part
of the building at the cost of the owner. The land so
vacated is to vest in the corporation. Section 216(i) lays
down that compensation shall be paid by the Commissioner to
the owner "for any loss" which the owner may sustain and for
"any expense" incurred by such owner in consequence of the
order made by the Commissioner. Proviso (i) to section 216
prescribes that "any increase or decrease in the value of
the remainder ,of the property of which the building or land
so acquired formed part, likely to accrue from the setback
to the regular line of the street shall be taken into
consideration and allowed for in determining the amount of
such compensation. Under proviso (ii) "if any such increase
in value exceeds the amount of loss sustained or expenses
incurred by the said owner, the Commissioner may recover
from such owner half the amount of such excess as betterment
charge.". The Act gives the owner who is aggrieved by the
amount of compensation offered to him, the right to appeal
to the judge of the Small Causes Court and to the District
judge in second appeal.
Acting under s. 212 the Commissioner issued notices to the
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respondents to pull down parts of their building lying
within the regular line of the street. The respondents
filed writ petitions contending that section 212 was
unconstitutional in’ so far as it violated the provisions of
section 299 of the Government of India Act, 1935, and also
of article 31 of’ the Constitution. It was urged that the
Act did not (i) provide for payment of compensation for
property acquired and (ii) specify the principles on which
and the manner in which the compensation was to be
determined. The validity of section 212 and other allied
sections was also challenged on the ground that they
infringed articles 14 and 19 of the Constitution. The High
Court, upholding the challenge under s.299 of the Government
of India Act, held that the Act provided for payment of
compensation ’out did not specify the principles on which
and the manner in which the compensation was to be
determined. In view of this finding the High Court did not
consider the challenge ’on
2
the other grounds. In this Court it was argued that the two
provisos to sub-section (i) of s. 216 if given effect to
nullified the direction in subsection (1) for payment of
compensation and when reduced in the Contingencies
visualized in the provisos the compensation turned out to be
illusory.
Allowing the appeal,
HELD: that the order passed by the High Court had to be set
asid and the proceedings transmitted to the High Court for
disposal in accordance with the law.
(i) The High Court was right in holding that the Act
provided for payment of. compensation for property acquired
under s. 212. Section 216 and 389 read together make it
clear that full indemnification in terms of money for the
loss caused is to be made to the owner of the property or
other interest affected by reason of the exercise of the
power under s. 212. That the compensation may in some rare
contingencies be very much reduced after taking into account
the value of the benefit conferred on the owner by reason
the widening of the street is no adequate reason to hold
that the Act does not provide for payment of compensation.
Both the provisos come into play only after the compensation
for loss is determined under sub-section (i) of section 216
and since that subsection declares that full compensation
must be paid for the loss or deprivations suffered by the
owner it must be held that the Act provides for the payment
of compensation for the property acquired. [9D11 F-G].
(ii) The Act specifies the principles on which and the
manner in which compensation is to be determined.
Having regard to the fact that in’ the course of widening
the street the Corporation may have to acquire very
irregular, shapeless and small pieces of land for the
purpose. of the street,, a host of principles may have to be
employed to determine the compensation. This very
difficulty in specifying any known rule of compensation is
responsible for the wording of section 216 and section 3 $9
of the Act which gets over the difficulty by providing full
indemnification for the loss or deprivation suffered by the
owner of the building or other interests in the propert
y. .,The involvement of civil courts in finally
determining compensation imports judicial norms and since
full indemnification in accordance with judicial norms is
the goal set by the Act,. it is, implicit in such a
provision that the rules for determination of compensation
shall be appropriate, to the property acquired and such as
will achieve the goal of full indemnity against loss. This,
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by itself, is a specification of a principle for the deter-
mination of compensation. [13-A-D]
State of Gujarat v. Shri Shantilal Mangaldas & Ors., [1969]
(3) S.C.R. 341 at p. 357, referred to.
Under s. 390 the Commissioner or such other officer as may
be authorised by him shall hold such inquiry as he thinks
fit and determine the amount of compensation to be paid.
Since there is an appeal from such determination to the
judge of the small causes court and a second appeal to the
District court it is clear that the enquiry must be held on
broad judicial lines. There are no limitations placed on
the powers of the appellate judges in determining the loss
in a just and appropriate manner; therefore, the
Commissioner or his authorised officer who holds the enquiry
in, the first instance,, will be guided by principles which
meet with the approval of the appellate authorities. [13E]
3
JUDGMENT:
CIVIL APPELLATE JURISDICTION : C.A. Nos. 135 to, 149, 2091,
2092 and 2121 to 2122 of 1968, 41 and 42 and 574 of 1969.
Appeals from the judgment and Order dated the 5th December,
1966 of the Gujarat High Court in Special Civil Applications
Nos. 1454 to 1456 of 1965 etc., etc.
M. C. Setalvad, V. B. Patel and I. N. Shroff, for the
appellants (In all the ’appeals).
B. D. Sharma for S. P. Nayar, for respondent No. 1 (In all
the appeals).
A. H. Mehta, S. K. Dholakia and Vineet Kumar, for
respondent No. 2 (In C.As. No. 135, 1379 138, 142, 143 of
1968) Respondent Nos. 2 to 5 (In C.A. No. 140 of 1968.)
S. S. Khunduja and Pramod Swarup for respondent No. 2 (In
C.A. No. 574 of 1969.)
The Judgment of the Court was delivered by
Palekar, J.--These Civil Appeals by certificate arise out of
23 Writ Petitions filed by owners of lands and buildings
within the, Municipal limits of the City of Ahmedabad. The
petitioners challenged section 212 and some other allied
sections of the Bombay Provincial Municipal Corporation Act,
1949, (hereinafter called the Corporations Act) and prayed
for the issue of a writ of mandamus directing the Municipal
Corporation of the City of Ahmedabad to treat the notice or
notices issued to them under section 212 of the Corporations
Act as null and void and further directing the Municipal
authorities not to act upon the same or in furtherance of
the said notice or notices. Besides the Municipal
Corporation, the Municipal Commissioners were also made
parties to the petitions. Since the validity of the
provisions of the Corporations Act was challenged the State
of Gujarat was also made a respondent. All the writ
petitions raised the same questions and, therefore, the High
Court of Gujarat disposed of all the petitions by a common
judgment. As the decision was against the Municipal
authorities they have now come in appeal.
For the purposes of disposal of these appeals it would be
sufficient to refer to the allegations made in Special
Civil, Application No. 1454/1965 which is the subject matter
of appeal in Civil Appeal No. 135/1968 before us. The,
petitioner Girdharlal Ganpatram was the owner of Survey Nos.
4222, 4223, 4224/A-BC and 4225/A-B of Jamalpur, Ward No. 2
Ahmedabad. On these survey numbers there is a, building
belonging to Girdharlal, on the ground floor of which there
are shops occupied by Girdharlal and his tenants.
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4
The Corporations Act being Act No. LIX/1949 was enacted ,on
December 29, 1949 and came into force on July 1, 1951. By
this Act, the previous statute namely the Bombay Municipal
Boroughs Act, 1925, was repealed.
Under section 210 of the Corporations Act the Municipal
Commissioner is entitled to prescribe what is known as the
"regular line of a public street." After following the
necessary formalities, the regular line of the public street
was prescribed by the Commissioner. Parts of the building
of Girdharlal came within this regular line and so on 3-4-
1962 the Commissioner issued a show cause notice under
section 212 ( 1 ) (b) of the Corporations Act calling upon
Girdharilal to show cause why superstructure standing upon
the aforesaid Survey numbers and lying within the regular
line of the street be not removed and the land thereunder be
acquired under the provisions of the Act for the purposes
of .a street. Girdharlal filed objections but they were
over-ruled. Thereafter, with the approval of the Standing
Committee, the ,Commissioner acting under sub-section (2) of
Section 212 of the Corporations Act issued final notices to
Girdharlal requiring him to pull down the building or parts
thereof which offended against the, regular line of the
street within 7 days of the receipt of the notice. Certain
proceedings followed with which we are not now concerned and
thereafter on 6-2-1965, Girdharlal filed the writ petition
in the High Court for the relief already referred to, His
contention was that section 212 and certain other allied
sections of the Corporations Act were ultra vires and
unconstitutional and hence the notices issued under section
212 were illegal.
Section 212 which is found in Chapter XIV of the Corpora-
tions Act deals with streets, their construction,
maintenance and improvement. Section 212 is one of the
several sections devoted to this subject. It is as follows
:
212. (1) If any building or any part thereof
is within the regular line of a public street
and if, in the opinion of the Commissioner, it
is necessary to set back the building to the
regular line of the street he may, if the
provisions of section 211 do not apply, by
written notice-
(a) require the owner of such building to
show cause within such period as is specified
in such notice by a statement in writing
subscribed by him or by an agent duly
authorised by him in that behalf and addressed
to the Commissioner, why such building or any
part thereof which is within the regular line
of the street shall not be pulled down and the
land within the said line, acquired by the
Commissioner; or
5
(b) require the said owner on such day at
such time and place as shall be specified in
such notice to attend personally or by an
agent duly authorised by him in that behalf
and show cause why such building or any part
thereof which is within the regular line of
the street shall not be pulled down and the
land within the said line acquired by the
Commissioner.
(2) If such owner fails to show sufficient
cause to the satisfaction of the Commissioner
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why such building or any part thereof, which
is within the regular line of the street shall
not be pulled down and the land within the
said line acquired as aforesaid the
Commissioner may, with the approval of the
Standing Committee, require the owner by a
written notice, to pull down the building or
the part thereof which is within the regular
line of the street (and where a part of a
building is required to be pulled down, to
also enclose the remaining part by putting up
a protecting frontage wall) within such period
as is prescribed in the notice.
(3) If within such period the owner of such
building fails to pull down such building or
any part thereof coming within the said line,
the Commissioner may pull down the same (and
where a part of a building is pulled down, may
also enclose, the remaining part by putting up
a protecting frontage wall) and all the
expenses incurred in so doing shall be paid by
the owner.
(4) The Commissioner shall at once take
possession on behalf of the Corporation of the
portion of the land within the said line
theretofore occupied by the said building, and
such land shall thence forward be deemed a
part of the public street and shall vest as
such in the Corporation.
(5)...........................
It is common ground that the provisions of section 211 do
not apply. It is also not disputed that a part of the
building comes within the regular line of the public street
and notices have been issued by the Commissioner, as in his
opinion, it was necessary to set set back the building to
the regular line of the street. In pursuance of the power
given to him, the Commissioner required the owner of the
building to show cause. objections raised by the owner were
considered and over-ruled. Thereafter under section 212(2)
the Commissioner required the owner Girdharlal to pull down
the building or the part thereof which was within the
regular line of the street within 7 days. It is obvious
that on
6
his failure to do so, the Commissioner was entitled under
sub-section (3) of Section 212 to pull down the offending
part of the building at the cost of the owner. After such
pulling down of the building the land so vacated was to vest
in the Corporation under sub-section (4) of that section.
For the loss thus caused to the owner by the action of the
"Commissioner, provision was made for payment of
compensation ,under section 216 which is as follows :
216. (1) Compensation shall be paid by the Commissioner to
the owner of any building or land required for a public
street under section 211, 212, 213 or 214 for any loss which
such owner may sustain in consequence of his building or
land being so. acquired and for any expense incurred by such
owner in consequence of the order made by the Commissioner
Provided that-
(i) any increase or decrease in the value of
the remainder of the property of which the
building land so acquired formed part likely
to accrue from the set-back to the regular
line of the street shall be taken into
consideration and allowed for in determining
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the amount of such compensation.
(ii) if any such increase in value exceeds
the amount of loss sustained or expenses
incurred by the said owner the Commissioner
may recover from such owner half the amount of
such excess as a betterment charge.;"
Chapter XXIV of the- Act deals with the subject of compen-
sation generally. Section 329(1) provides as follows :
389. (1) "In the exercise of the powers
tinder the following provisions of this Act by
Commissioner ,or any other municipal officer
or servant, or any other person authorised,by
Or under this Act to execute any work, as
little damage as can be shall be done and
compensation assessed in the manner
prescribed by or under this Act shall be paid
to any person who sustains damage in
consequence of the, exercise of such power,
namely......... ............................
(f) acquiring any building or land required
for a public street-under section 216."
7
Section 390 is as follows
"Subject to the provisions of this Act, the
Commissioner or such other officer as may be
authorised by him in this behalf shall, after
holding such inquiry as he thinks fit,
determine the amount of compensation to be
paid under section 389."
This determination, however, is not final
because two appeals are provided. Under
section 391 it is provided as under :
"Any person aggrieved by the decision of the
Commissioner or other officer under section
390 may within a period of one month, appeal
to the Judge in accordance with the provisions
of Chapter XXVI."
"the Judge" means under section 2 clause (29) the Judge of
the Court of Small Causes in the City of Ahmedabad. Section
411 provides for a second appeal to the, District Court. It
says "An appeal shall lie to the District Court (aa) from a
decision of the Judge in an appeal under section 391 against
an assessment of compensation under clause (f) of sub-
section (1) of section 389." As regards the procedure to be
followed in respect of these appeals, provision is made in
section 434 sub-section (1) whereof is "Save as expressly
provided by this Chapter (Chapter XXVI) the provisions of
the Code of Civil Procedure, 1908, relating to appeals from
original decrees shall apply to appeals to the Judge from
the orders of the Commissioner and relating to appeals from
appellate decrees shall apply to appeals to the District
Court".
These relevant provisions which have been quoted above at
one place show that where the Commissioner acquires land for
the purposes of the street by asking the owner of the land
to pull down his building or part of it, the owner is
entitled to be paid compensation for the loss suffered by
him. The compensation must, in the first instance, be
determined by the Commissioner- or an Officer authorised by
him in that behalf and if, on determination of such
compensation, the owner of the building who loses any part
of the land to the street is aggrieved by the amount of
compensation offered to him, he is entitled to appeal to the
Judge of the Small Causes Court and to the District Court in
second appeal. It is obvious that if the owner is not
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sufficiently compensated for the loss suffered by him by the
Commissioner or his authorised Officer, the Judge in the
Court of Small Causes or the District Judge, as the case may
be, would be entitled to determine the proper compensation
to be paid to him.
The complaint of the owner in the Writ Petition took
various forms. But the principal attack was on the ground
that the
8
provisions with regard to acquisition in section 212 were
unconstitutional for several reasons. The Corporations Act
was passed before the Constitution came into force. when the
Government of India Act, 1935 was in force. Subsections (1)
and (2) of section 299 of the Government of India Act, 1935,
which are roughly similar in content to clauses (1) and (2)
of Article 31 of the Constitution, both before and after the
Constitution 4th Amendment Act, 1955, required that the law
authorising compulsory acquisition for a public purpose, (1)
should provide for the payment of compensation for the
property acquired; (2) fix the amount of compensation; or
(3) specify the principles on which and the manner in which
it is to be determined. It is common ground that the
Corporations Act is a law which by itself does not fix the
amount of compensation. While the submission of the
Municipal Corporation is that it provides for the payment of
compensation for the property acquired and also specifies
the principles on which and the manner in which it is to be
determined, the contention of the petitioners is that it
does neither. Therefore, the petitioners, contended that
section 212 of the Corporations Act was unconstitutional in
so far as it violated the provisions of section 299 of the
Government of India Act, 1935 and also of Article 31 of the
Constitution.
Certain other challenges were also made in the petitions to
the validity of section 212 and some other allied sections
of the Corporations Act on the ground that they infringed
the constitutional safeguards embodied in Articles 14 and 19
of the Constitution. The High Court rejected the challenge
under Article 19 (1) (g). It did not think it necessary to
consider the challenge under other heads in view of its
finding that the challenge under section 299 of the
Government of India Act, 1935 was successful. Learned
counsel for the respondents before us did not press the
challenge under Article 19(1)(g). Therefore, the only
question which survives for consideration is whether the
High Court was right in holding that section 212 of the
Corporations Act is unconstitutional on the ground of its
alleged violation of the provisions of section 299 of the
Government of India Act or Article 31 of the Constitution.
If the view of the High Court in this respect is not upheld,
it is obvious that the case will have to go back to the High
Court for the consideration of points not finally decided
for the purpose of the disposal of the petitions.
The contention on behalf of the property owners was that the
Corporations Act did not provide (1) for the payment of
compensation for the property acquired and (2) did not
specify the principles on which and the manner in which it
is to be determined. The High Court only partially accepted
this contention. It did not agree with the contention that
the Corporations Act
9
did not provide for the payment of compensation for the
property acquired. On the second question, however, the
High Court agreed that the Act neither specified the
principles of compensation nor the manner in which it was to
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be determined.
We are in agreement with the view of the High Court that the
Corporations Act does provide for the payment of
compensation for the property acquired. We have only to
refer to section 216 and section 389 of the Act for this
purpose. Section 216(1) clearly lays down that compensation
shall be paid by the Commissioner to the owner of any
building or land required for public street under sections
211, 212, 213 and 214 for any loss which such owner may
sustain in consequence of his building or land being so
acquired, and for any expense, incurred by such owner in
consequence of the order made by the Commissioner. Then
section 389 (1) provides that compensation assessed in the
manner prescribed by or under the Act shall be paid to any
person who sustains damage in consequence of the exercise of
such power, namely, "(f) acquiring any building or land
required for a public street Under section 216." The two
sections read together make it clear that full
indemnification in terms of money for the loss caused is to
be made to the owner of the property or other interests
,affected by reason of the exercise of power under section
212. Under the latter section what is acquired for the
purposes of the street is the land of the owner which falls
within the regular line of the street. Several provisions
are made in Chapter XIV for the widening of streets within
the limits of the Corporation. With the enormous increase
in traffic in the more congested parts of a growing City,
Municipal authorities are constantly under pressure to widen
the, streets and one of the several methods prescribed in
Chapter XIV is contained in section 212. The regular line
of the street as prescribed under section 210 often passes
through the ’properties of owners abutting on the streets
and it is impossible to widen the streets unless parts of
lands belonging to the owners are acquired. Sometimes a
building or a structure or part of it stands on such land
and unless that portion of the building which falls within
the line is removed the, acquisition of the land for the
purpose of the street is not possible. Therefore, in the
first instance the section requires that the Commissioner
shall issue a show cause notice why the buildings or a part
of the building which falls within the line of street should
not be pulled down with a view to release the underneath fur
the purposes of the, street. If after hearing the owner the
Commissioner is of the opinion that the building or part
thereof should be pulled down, he must obtain the, approval
of the Standing Committee and then serve a notice on the
owner to pull down the offending building or part of
building within a
1208 Sup. CI/72
certain time. If the owner cooperates, he will himself
remove the offending structure and release the land
underneath it for being absorbed in the street. If he does
not, the Commissioner is empowered to pull down the
offending structure at the cost of the owner. Then sub-
section (4) of section 212 provides that the Commissioner
shall at once take possession on behalf of the Corporation
of the portion of the land within the said line (line of the
public street) theretofore occupied by the said building,
and such land shall thence forward be deemed a part of the
public street and shall vest as such in the Corporation.
The provisions of section 212, therefore, clearly declare
that what is acquired under that section is the land lying
within the line of the public street. The technical
question as to whether there is acquisition of the building
when the owner himself does not pull down the. offending
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part of the structure but the Commissioner does it at the
owner’s expense is not necessary for the disposal of the
question whether the Act provides for the payment of
compensation. Since every kind of loss is required to be
compensated as a, consequence of the order passed by the
Commissioner under section 216 of the Act, the question
whether the Act need have provided for compensation as on
the acquisition of the building or a part of the building
which is pulled down under section 212, does not survive.
The owner. has to be compensated for every deprivation or
loss and, therefore, prima facie ’it must be held that the
Corporations Act provides for the payment of compensation
for the property acquired.
It was, however, argued that the two provisos to sub-section
(1) of section 216 when given effect to may not only nullify
the direction given in sub-section (1) for payment of
compensation but also in certain contingencies compel the
owner to pay the Corporation something out of his own
pocket. When sub-section (1) provides for payment of
compensation for the loss suffered it provides for adequate
indemnification or compensation. When such compensation is
reduced in the contingencies visualized in the two provisos
the compensation, it was submitted, may turn out to be
illusory and the provision for the payment of compensation
an empty assurance. Proviso (1) prescribes that "any
increase or decrease in the value of the remainder of the
property of which the building or land so acquired formed
part likely to accrue from the set-back to the regular line
of the street shall be taken into consideration and allowed
for in determining the amount of such compensation." Proviso
(ii) states that "if any such increase in the value exceeds
the amount of loss sustained or expenses incurred by ,he
said owner, the Commissioner may recover from such owner
half the amount of such excess as a betterment charge."
Proviso (i) implies that the compensation payable under sub-
section (1) is liable to be increased or reduced
11
after ’the set-back. It envisages that by reason of the
set-back or the widening of the street the Property which
still remained with the owner is likely, on account of the
new situation, either to increase or decrease, in value. If
that happens, that is to be taken into consideration and the
amount determined under sub--section (1) will have to be
adjusted accordingly. The High Court is of the view that
proviso (1) is unobjectionable as it is a principle
governing the determination of compensation and can be
rightly employed in determining the compensation for the
property acquired. The High Court, however, was not inclined
to hold that proviso (ii) lays down any principle for
determination of compensation payable for the property
acquired. It held, nevertheless, that the proviso was
severable from the main part of the section and did not
affect the provisions of sub-section (1) for payment of
compensation. It is obvious that it is only in very rare
contingencies that proviso (ii) may become operative. But
in considering the question as to whether,.the Act provides
for compensation for acquisition or not there can be little
doubt that it does so in sub-section (1) of section 216.
That it may in some rare contingencies be very much reduced
after taking into account the value of the benefit conferred
on the owner by reason of the widening of the street is no
adequate reason to hold that the Act, does not provide for
payment of compensation. As a matter of fact in an actual
enquiry for determining the amount of compensation to be
paid the authority charged with the duty will have to
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assess, in the first instance, the value of the total loss
or deprivation actually suffered. The provisos may in some
rare contingencies go to reduce the amount so determined.
Proviso (ii) envisages a situation where the widening of the
street has so much benefited the owner that the value of the
benefit even exceeds the actual loss suffered by him. In
such a case instead of getting any compensation for the loss
the owner might have to pay out of his own pocket. As to
whether proviso (ii) prescribes any principle for
determination of compensation or not is not relevant for our
present purpose. Both the provisos come into play only
after the compensation for loss is determined under sub-
section (1) of section 216 and since that sub-section
declares that full compensation must be paid for the loss or
deprivation suffered by the owner it will be incorrect to
say that the Act does not make provision for the payment of
compensation for the property acquired. We have, therefore,
no hesitation in agreeing with the High Court that the
Corporations Act provides for the payment of compensation
for the property acquired under section 212.
The next question is whether the Act specifies the
principles on which and the manner in which compensation is
to be determined. The High Court has been of the view that
neither principles for determination of compensation nor the
manner of its
12
determination has been specified and that is the ground on
which it has held that the provisions of section 212 are
unconstitutional. We are unable to agree. with that view.
What is meant by specification of principles for determining
compensation ? In the State of Gujarat v. Shri Shantilal
Mangaldas & Ors.(1) this Court observed:--
"Specification of principles means laying down
general guiding rules applicable to all
persons or transactions governed thereby.
Under the Land Acquisition Act compensation,is
determined on the basis of "market value" of
the land on the date of the notification under
s 4(1) of that Act. That is a specification
of principle."
At a later stage the Court again observed at
page, 362
"Rules enunciated by the courts for
determining compensation for compulsory
acquisition under the Land Acquisition Act
vary according to the nature of the land
acquired. For properties which are not
marketable commodities, such as lands,
buildings and incorporeal rights, valuation
has to be made on the application of different
rules. Principle of capitalisation of net
rent at the current market rate on guilt-edged
securities, principle of reinstatement,
principle of determination of original value
less depreciation, determination of break-up
value in certain types of property which have
out-grown their utility, and a host of other
so-called principles are employed for
determination of compensation payable for
acquisition of lands, houses, incorporeal
rights, etc."
The Land Acquisition Act makes market value at a certain
date the basis for the determination of compensation. But
there is no one sure way of applying the principle. As is
well-known when set-back is imposed by the line of the
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street, the land actually acquired by the Corporation may be
in some cases a few sq. yards or even a few sq. inches.
Then again the land acquired may be of no significant use to
an body except, to the Corporation as a part of the street.
The land acquired may be wedge-shaped, sometimes irregular
in contour and often shapeless. If the principle, of a
willing seller and a willing buyer is applied there can
possibly be no market at all for the property acquired. It
is not suggested that in every case of acquisition of land
for the street this principle will break down. But having
regard to the fact that in the course of widening the street
the Corporation may have to acquire very irregular,
shapeless and small pieces of land for the purposes of the
street, a host of principles may have to be employed to
determine the compensation. We asked learned counsel for
the respon-
(1) [1969](3) S.C.R. 341 at p. 357.
dents what one general principle of determination of
compensation in such cases could have, been appropriately
specified. "We did not get any satisfactory reply. It
appears to us that this very difficulty in specifying any
known rule of compensation is responsible for the wording of
section 216 and section 389 of the Act which, in our
opinion, gets over the difficulty by providing full
indemnification for the loss or deprivation suffered by the
owner of the building.or other interests in the property.
We have referred to the provisions with regard to appeals.
The first appeal lies to the Judge of the Small Causes
courts and a second appeal to the District Judge. , The
involvement of Civil Courts in finally determining
compensation imports judicial norms. Since full
indemnification in accordance with judicial norms is the?
goal set by the Act it is implicit in such a provision that
the rules for determination of compensation shall be
appropriate to the property acquired and such as will
achieve the goal of full indemnity against loss. In other
words, the Act provides for compensation to be determined in
accordance with judicial principles by the employment of
appropriate methods of valuation so that the person who is
deprived of property is fully indemnified against the loss.
This, by itself, in’ our opinion, is a specification of a
principle for the determination of compensation.
As regards the manner of determination of compensation, it
is provided in section 390 of the Corporations, Act. Under
that section the Commissioner or such other officer as may
be authorised by him shall hold such enquiry as he thinks
fit and determine the amount of compensation to be paid.
Either the Commissioner or an Officer authorised by him has
to hold an appropriate enquiry before determining the amount
of compensation. Since, as already seen, there is an appeal
from such determination to the Judge of the small Causes
Court under section 391 and a second appeal to the District
Court under section 411 it is clear that the enquiry must be
made on broad judicial lines.. Any arbitrary determination
is bound to be set aside in appeal because the Judges in
appeal will be chiefly concerned to see whether the enquiry
is made in accordance with normal judicial procedures for
evaluating the loss by the application of methods of
valuation appropriate to the particular acquisition before
them. Since no limitations are placed on the powers of the
Appellate Judges ’in determining the loss in a just and
appropriate manner, it is expected that the Commissioner or
his authorised officer, who holds the enquiry in the first
instance, will be guided by principles which meet with the
approval of the Appellate authorities. In our opinion,
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therefore. the manner of the determination of compensation
is also specified by the Act.
It is conceded before us that if this Court holds that the
Corporations Act has provided for the. payment of
compensation and
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also specified the principle on which, and the manner in
which compensation is to be determined, it would not be
possible to say that the Act is either in violation of the
provisions of section 299 of the Government of India Act,
1935 or Article 31 of the Constitution.
Since the High Court had not considered the challenge to the
validity of section 212 and the allied sections of the Act
on the ground of infringement of fundamental rights under
Article 14 and partially under Article 19 of the
Constitution, and the learned counsel for both sides agree
that the cases should be remanded to the High Court for
disposal after considering the points raised in that regard,
we send down the cases accordingly for disposal.
The appeals are allowed. The order passed by the High Court
is set aside and the proceedings are ordered to be
transmitted to the High Court for disposal in accordance
with the law after hearing the parties on points kept open
and undecided by the High Court in its Judgment dated 5-12-
1966. The appellants shall get one set of costs from the
respondents other thin the I State of
K.B.N.
Appeals allowed.
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