Singh & Others Vs. State of Punjab &
Others  Insc 1057 (12
Sinha & Harjit Singh Bedi
out of S.L.P. (Civil) No. 9954 of 2006] W I T H CIVIL APPEAL NO. 4844 OF 2007
[Arising out of S.L. P. (Civil) No. 10182 of 2006] S.B. SINHA, J:
Leave granted in both the Special Leave Petitions.
Appellants herein are owners of various tracts of agricultural lands situate in
Village Chak Gujran, Tehsil and District Hoshiarpur in the State of Punjab. Respondent No. 5, M/s International
Tractors Limited, is a Company incorporated under the Companies Act, 1956. It
intended to set up a project named Ganesha Project. It requested the
State to acquire lands in question in terms of the provisions of the Land
Acquisition Act, 1894 (for short, the Act). A notification was issued
by the State purported to be under Section 4 of the Act on 15.02.2002, stating:
it appears to the Governor of Punjab that Land is likely to be required to be
taken by the Government at the public expense, for a public purpose namely for
setting up of Ganesha Project, M/s. International Tractors Ltd. at Village Chak
Gujran, Tehsil & Distt. Hoshiarpur, it is hereby notified that the land in
locality described below is likely to be required for the above purpose.
notification is made under the provisions of Section 4 of the Land Acquisition
Act, 1894 to all whom it may concern.
exercise of powers conferred by the aforesaid section, the Governor of Punjab
is pleased to authorize the officers for the time being engaged in undertaking
with their servants and workmen to enter upon and survey any land in the
locality and do all other acts required or permitted by that section.
person interest who has any objection to the acquisition of any land in the
locality may within thirty days of the publication of this notification file an
objection in writing before the Collector, Land Acquisition Department of
Industries & Commerce, Punjab, 17-Bays Building, Chandigarh.
Objections having been called for, the appellants herein filed their objections
in terms of Section 5A of the Act, inter alia, stating :
That the proposed acquisition by the Punjab Government is unconstitutional,
uncalled for and against law and fact of the case, just in order to cause loss
to the objectors and to give unlawful gain to other party, i.e., the proposed
Ganesha Projectors M/s. International Tractor Ltd.
That the acquisition of the proposed land belonging to the objectors is against
the interest of the objectors keeping in view the policies of the State. The
land in question is cultivable fertile land and the proposed project if any can
be shifted some where else at some barren land as well as in the industrial
zone according to Industries Master Plan and in this way, it is in the interest
of the Pollution Control Department.
That the objectors are cultivating the land for the last over 25 years, it is
consolidated at one place where in the objector has installed electric motors
and planted popular trees around the fields. The objectors do not want that the
land in question be acquired since it is against their interest and objectors
are dependent on this Acquisition land.
Agriculturist/Farmer is entirely dependent on his land for his livelihood.
There are various projects in the name of Escorts Tractors, Mohindra Tractors,
Massy Furgon Tractors and so many other tractors companies/industries
fulfilling the needs of the public and as such there is no need at all of the
proposed industry to be set up in the lands of the objectors.
That in any way the proposed acquisition is against the rules of the
acquisition and the act itself keeping in view the interest of the objectors
thus causing wrongful loss to the objectors and causing wrongful gain to the
Indisputably, a declaration was issued in terms of Section 6 of the Act and an
agreement was entered into by and between the Company and the State on
Writ petitions were filed by the appellants herein questioning the said
purported acquisition proceedings praying, inter alia, for the following relief
Quash the notifications dated 15.02.2002 (Annexure P-2) and 27.02.2003
(Annexure P-5) issued by the respondent No.1 under Sections 4 and 6 of the Land
Acquisition Act, 1894, respectively.
During the pendency of the said writ petitions, notices in terms of Section 9
of the Act were issued on 31.05.2004. An award was made on 18.02.2005.
Allegedly, during the pendency of the said writ petitions, a sum of Rs.100/-
was deposited by the State as a token amount for acquisition of the said lands
reason of the impugned judgment, the High Court opined:
The acquisition was for a public purpose in view of the report submitted under
the Act, relevant portion whereof is as under:
case of M/s. International Tractors Ltd. the company has entered into an
agreement with a Fresh company named M/s. Renault Agriculture France for manufacture of latest
technology tractors. M/s. Renault Agriculture France holds 20% equity in the company.
of these latest technology tractors will boost export, which will contribute to
the general welfare and prosperity of the whole community.
in view of the facts and the relevant law as mentioned above, it is proved
beyond doubt that the profits have actually gone to the general
Acquisition of the lands in question was not a colourable exercise of power.
Acquisition was made in terms of the provisions contained in Part II of the Act
and not Part VII thereof, as the State had also contributed a sum of Rs.100/-
for the purpose of acquisition of lands.
Execution of the agreement with Respondent No.5-Company and declaration made
under Section 6 of the Act although were made on the same day, the same did not
suffer from the vice of non-application of mind.
Respondent No. 5 being not a private company, statutory limitations contained
in Section 44B of the Act are not attracted.
Rule 4 of the Land Acquisition (Companies) Rules, 1963 (for short, the
Companies Rules) being directory in nature, it was not necessary to comply
with the provisions thereof.
P.N. Lekhi, learned Senior Counsel appearing on behalf of the appellants, in
support of these appeals, would, inter alia, submit :
High Court erred in opining that the lands in question could be compulsorily
acquired for a company, other than private company, in accordance with the
provisions of Part II of the Act.
view of the insertion of clause (viii) of sub-section (f) in Section 3 by Act
No. 3 of 1984, provision of Part II were not available for acquisition of land
Action on the part of the State in entering into the agreement and issuing a
declaration under Section 6 of the Act on the same day was in excess of its
power under the Act.
Soli J. Sorabjee, learned Senior Counsel appearing on behalf of Respondent
No.5, on the other hand, submitted :
Acquisition having been made for a public purpose, and a part of the expenses
having been made from the public exchequer, provisions of Part VII of the Act
were not attracted.
Principles of natural justice as contained in Section 5A of the Act having been
complied with, the State was not required to carry out any inquiry as envisaged
under Rule 4 of the Companies Rules.
Declaration made under Section 6 of the Act in regard to the existence of
public purpose being conclusive in nature, the court cannot go beyond the same.
Rule 4 of the Companies Rules being directory in nature, strict compliance
thereof was not necessary.
The Act was enacted to amend the law for the acquisition of land for public
purposes and for companies. Section 3 of the Act provides for interpretation
clauses. Clause (cc) of Section 3 of the Act defined the expression
corporation owned or controlled by the State in the following terms :
the expression corporation owned or controlled by the State means any
body corporate established by or under a Central, Provincial or state Act, and
includes a Government company as defined in Section 617 of the Companies Act,
1956 (1 of 1956), a society registered under the Societies Registration Act,
1860 (21 of 1860), or under any corresponding law for the time being in force in
a State, being a society established or administered by Government and a
co-operative society within the meaning of any law relating to co-operative
societies for the time being in force in any State, being a cooperative society
in which not less than fifty-one per centum of the paid-up share capital is
held by the Central Government, or by any State Government or Governments, or
partly by the Central Government and partly by one or more State
The expression company has been defined under clause (e) of Section 3
of the Act to mean :
a company as defined in section 3 of the Companies Act, 1956 (1 of 1956), other
than a Government company referred to in clause (cc);
society registered under the Societies Registration Act, 1860 (21 of 1860), or
under any corresponding law for the time being in force in a State, other than
a society referred to in clause (cc);
a co-operative society within the meaning of any law relating to co-operative
societies for the time being in force in any State, other than a co- operative
society referred to in clause (cc)) The expression Public purpose has
been defined in Section 3(f) of the Act to mean :
the expression public purpose includes
provision of village-sites, or the extension, planned development or
improvement of existing village-sites;
provision of land for town or rural planning;
provision of land for planned development of land from public funds in
pursuance of any scheme or policy of Government and subsequent disposal thereof
in whole or in part by lease, assignment or outright sale with the object of
securing further development as planned;
provision of land for a corporation owned or controlled by the State;
the provision of land for residential purposes to the poor or landless or to
persons residing in areas affected by natural calamities, or to persons
displaced or affected by reason of the implementation of any scheme undertaken
by Government, any local authority or a corporation owned or controlled by the
the provision of land for carrying out any educational, housing, health or slum
clearance scheme sponsored by Government, or by any authority established by
Government for carrying out any such scheme, or, with the prior approval of the
appropriate Government, by a local authority, or a society registered under the
Societies Registration Act, 1860 (21 of 1860), or under any corresponding law
for the time being in force in a State, or a co-operative society within the
meaning of any law relating to co-operative societies for the time being in
force in any State;
provision of land for any other scheme of development sponsored by Government
or, with the prior approval of the appropriate Government, by a local
the provision of any premises or building for locating a public office, but
does not include acquisition of land for companies.; 12. Indisputably, the
Land Acquisition Act is an expropriatory legislation.
State ordinarily can acquire a property in exercise of its power of
Eminent Domain subject to existence of public purpose and on payment
of reasonable compensation in terms of the provisions of the Act. However, the
State has been empowered to acquire land also for companies and for
purposes other than public purpose.
Companies Act, 1956 provides for different types of company. A Government
Company is defined in Section 617 thereof. Respondent No. 5 may be a public
limited company, but it is not a Government Company.
it filed an application requesting the State to acquire the lands for its
purpose evidently an inquiry was caused to be made.
its counter affidavit, the State has, inter alia, contended that Respondent No.
5 is an existing unit for manufacturing tractors and lands sought to be
acquired are adjoining their factory. The State appointed a Sub- Committee of
Land Acquisition Committee constituted by the State recommending acquisition of
30 acres of lands. Approval of the State, therefor was sought for. Ganesha
Project was not a project of the State but one undertaken by Respondent
No. 5. Such a project would come within the purview of clause (aa) of Section
40(1) of the Act.
When a request is made by any wing of the State or a Government company for
acquisition of land for a public purpose, different procedures are adopted.
Where, however, an application is filed for acquisition of land at the instance
of a company, the procedures to be adopted therefor are laid down in
Part VII of the Act. Although it may not be decisive but the conduct of the
State as to how it intended to deal with such a requisition, is a relevant
factor. The action of the State provides for an important condition to consider
as to whether the purpose wherefor a company requests it for acquisition of
land is a public purpose and/or which could be made at public expenses either
as a whole or in part, wherefor evidently provisions laid down in Part II shall
be resorted to. On the other hand, if the State forms an opinion that the
acquisition of land at the instance of the company may not be for public
purpose or, therefor the expenses to be incurred therefor either in whole or in
part shall not be borne by the State, the procedures laid down in Part VII
thereof have to be resorted to. The procedures laid down under Part VII of the
Act are exhaustive. Rules have been framed prescribing the mode and manner in
which the State vis-`-vis the company should proceed.
provides for previous consent of the Appropriate Government, execution of the
agreement, previous inquiry before a consent is accorded, publication of the
agreement, restriction on transfer, etc. It also provides for statutory
injunction that no land shall be acquired except for the purpose contained in
clause (a) of sub-section (1) Section 40 of the Act for a private company which
is not a Government company. For the purpose of Section 44B of the Act, no
distinction is made between a private company and a public limited company.
The Land Acquisition (Companies) Rules, 1963 for acquisition of land for the
companies have been framed by the Central Government in exercise of its power
under Section 55 of the Act. It is not in dispute that the guidelines provided thereunder
are followed by the State Government.
of constitution of a Land Acquisition Committee appears only from the Companies
Rules; no other provision in respect thereof has been made either under the Act
or the rules framed thereunder. A bare perusal of sub- rule (1) of Rule 4 of
the said Rules categorically states that the same shall be applicable where
acquisition of land is to be made for the company envisaged under Part VII. The
State, as indicated hereinbefore, before this Court has categorically stated
that advice rendered by a Sub-Committee of the Land Acquisition Committee had
been taken into consideration by it with a view to proceed further in the
matter. Rule 4 mandates the appropriate Government to arrive at a satisfaction
in regard to the factors enumerated therein. Rule 4 of the Rules reads as under
Appropriate Government to be satisfied with regard to certain matters before
initiating acquisition proceedings
Whenever a company makes an application to the Appropriate Government for
acquisition of any land, that Government shall direct the Collector to submit a
report to it on the following matters, namely:
the company has made its best endeavour to find out lands in the locality
suitable for the purpose of acquisition;
that the company has made all reasonable efforts to get such lands by
negotiation with the persons interested therein on payment of reasonable price
and such efforts have failed;
the land proposed to be acquired is suitable for the purpose;
the area of land proposed to be acquired is not excessive;
the company is in a position to utilise the land expeditiously; and (vi) where
the land proposed to be acquired is good agricultural land, that no alternative
suitable site can be found so as to avoid acquisition of that land.
The Collector shall, after giving the company a reasonable opportunity, to make
any representation in this behalf, hold an inquiry into the matters referred to
in sub-rule (1) and while holding such enquiry he shall
any case where the land proposed to be acquired is agricultural land consult
the Senior Agricultural Officer of the district whether or not such land is
good agricultural land;
having regard to the provisions of Secs. 23 and 24 of the Act, the approximate
amount of compensation likely to be payable in respect of the land, which, in
the opinion of the Collector, should be acquired for the company; and
whether the company offered a reasonable price (not being less than the
compensation so determined), to the persons interested in the land proposed to
Explanation For the purpose of this rule
good agricultural land means any land which, considering the level of
agricultural production and the crop pattern of the area in which it is
situated, is of average or above average productivity and includes a garden or
soon as may be after holding the enquiry under sub-rule (2), the Collector
shall submit a report to the Appropriate Government and a copy of the same
shall be forwarded by the Government to the Committee.
declaration shall be made by the Appropriate Government under Sec. 6 of the Act
Appropriate Government has consulted the Committee and has considered the
report submitted under this rule and the report, if any, submitted under Sec.
5-A of the Act; and
agreement under Sec. 41 of the Act has been executed by the company.
The State is also enjoined with a duty to make an inquiry wherefor an
opportunity of hearing to the company is required to be given. When the State
intends to proceed with the acquisition of land it must form an opinion that
the lands which are going to be acquired are not good agricultural lands.
rules by and large lay down a statutory policy in that behalf and question of
ignoring the same by the State does not arise.
would consider the question as to whether Rule 4 aforementioned is mandatory or
directory or at what stage an inquiry is required to be made, a little later.
But we must record that it is not the case of the State that Rule 4, despite
the fact that acquisition is made in terms of Part VII of the Act, can be
The High Court proceeded on the basis that as the State formed an opinion that
the purpose for which the provisions of the Act were taken recourse to is a
public purpose, the provisions of Part II would apply in the instant case. We
are not unmindful of the fact that the definition of public purpose
as contained in Section 3(f) of the Act is an inclusive one.
the said definition need not be kept confined to the matters referred to
therein. But with a view to ascertain as to what should be a public purpose, we
may notice its dictionary meaning as contained in Blacks Law Dictionary,
Fifth Edition which is as under :
purpose: In the law of taxation, eminent domain, etc., this is a term of
classification to distinguish the objects for which, according to settled
usage, the government is to provide, from those which, by the like usage, are
left to private interest, inclination, or liberality.
constitutional requirement that the purpose of any tax, police regulation, or
particular exertion of the power of eminent domain shall be the convenience,
safety, or welfare of the entire community and not the welfare of a specific
individual or class of persons.
term is synonymous with governmental purpose. As employed to denote the objects
for which taxes may be levied, it has no relation to the urgency of the public
need or to the extent of the public benefit which is to follow; the essential
requisite being that a public service or use shall affect the inhabitants as a
community, and not merely as individuals. A public purposeor public business
has for its objective the promotion of the public health, safety, morals,
general welfare, security, prosperity, and contentment of all the inhabitants
or residents within a given political division, as, for example, a state, the
sovereign powers of which are exercised to promote such public purpose or
General meaning of the word public policy has always been held to be
an unruly horse by this Court. [See Gherulal Parakh v. Mahadeodas Maiya and
Others [See AIR 1959 SC 781].
Our attention has been drawn to a recent decision of this Court in Pratibha Nema
and Others v. State of M.P. and Others [(2003) 10 SCC 626]. Therein, for
establishment of a diamond park, 73.3 hectares of dry land was to be acquired.
The proposal emanated from the General Manager of the District Industries
Centre. Sanction in principle for acquisition was given by the Government of
Madhya Pradesh; even Section 17 of the Act was taken recourse to. The State
contributed a token sum of Rs.100/- towards the cost of acquisition. This Court
clearly noticed that where the acquisition is for a company, its cost is to be
borne entirely by the company itself, provisions of Part 7 would apply. But we
must hasten to add that the Bench did not have any occasion to consider the
question as to whether the State is entitled to take recourse to the provisions
of both Part II and Part VII of the Act simultaneously. The Bench furthermore
proceeded to consider the requirements to hold that a public purpose need not
be ascertained only from the point of view of applicability of Part II but also
the provisions of Part VII, stating :
Thus the distinction between public purpose acquisition and Part VII
acquisition has got blurred under the impact of judicial interpretation of
relevant provisions. The main and perhaps the deceive distinction lies in the
fact whether cost of acquisition comes out of public funds wholly or partly.
Here again, even a token or nominal contribution by the Government was held to
be sufficient compliance with the second proviso to Section 6 as held in a
catena of decisions. The net result is that by contributing even a trifling
sum, the character and pattern of acquisition could be changed by the
Government. In ultimate analysis, what is considered to be an acquisition for
facilitating the setting up of an industry in the private sector could get
imbued with the character of public purpose acquisition if only the Government
comes forward to sanction the payment of a nominal sum towards compensation. In
the present state of law, that seems to be the real position.
need not go into the nicety of the question, keeping in view the fact that
there are binding precedents in that behalf that in a case of acquisition for a
public company, public purpose is not to be assumed and the point of distinction
between acquisition of lands under Part II and Part VII would be the source of
funds to cover the cost of acquisition. This Court in Pratibha Nema (supra) held
other words, the second proviso to Section 6(1) is the main dividing ground for
the two types of acquisition
The undisputed fact is that apart from the inquiry conducted by the Land
Acquisition Committee in terms of the provisions of Part VII of the Act,
admittedly an agreement had also been entered into on 27.02.2003.
The agreement in terms of the provisions referred to above by the Company and
the Government, a satisfaction of the Government in that behalf for acquisition
of the piece of land described in therein was arrived at on the premise that
the said work is likely to be useful for the company.
Section 41 of the Act has specifically been mentioned for the purpose of
entering into the agreement. The terms and conditions of the agreement envisaged
company was to pay to the Government of Punjab the amount of compensation;
was to deposit all the sums demanded by the Collector in anticipation, which
may be necessary therefor;
on payment by the company it was to get possession wherefor also the Government
reserved its discretion;
by the company of the land only for the purpose for which acquisition was made
in regard to time for completion of the project.
The Government reserved the right of resumption of the land, if time schedule
prescribed therein is not adhered to; in which event land shall vest in the
Government. The opinion of the Government in that behalf is said to be final.
Whether in the aforementioned situation, the provisions of Part II can be said
to have been complied with, is the question.
Submission of Mr. Sorabjee is that any declaration that the land has been
acquired for public purpose is conclusive.
would proceed on the said assumption but it is a well-settled principle of law
that where an action taken is without jurisdiction, even an order which is
conclusive may be subject to judicial review. Jurisdictional errors, as is
well-known, are divided in two broad categories (i) an order passed which is
wholly without jurisdiction; and (ii) Although the action is not ultra vires,
the jurisdictional error has been committed while exercising jurisdiction. [See
John v. Rees and Others (1969) 2 All ER 274].
R.L. Arora v. State of U.P. [(1962) Supp 2 SCR 149], this Court held :
it was urged on behalf of the respondents that s.
makes the purpose noted in the notification under s.
justiciable. We have not been able to understand how that provision helps the
respondents. All that s. 6(3) says is that the declaration shall be conclusive
evidence that the land is needed for a public purpose or for a company. In this
case the declaration was that the land was needed for a company and that
according to s. 6(3) is conclusive evidence that the land is so needed. Now it
is not the case of the appellant that the land was not needed for the Works in
the present case, nor does the appellant say that though the land was needed
for some other purpose, the notification falsely declares that it was needed
for the Works. In the circumstances the conclusiveness envisaged by s. 6(3) is
of no assistance to the solving of the problem with which we are concerned in
the present case. 31. Mr. Sorabjee has strongly relied upon a decision of
this Court in Smt. Somawanti and Others v. The State of Punjab and Others [AIR
1963 SC 151 : 1963 (2) SCR 774].
(supra), this Court opined :
we are of the opinion that the courts are not entitled to go behind the
declaration of the Government to the effect that a particular purpose for which
the land is being acquired is a public purpose we must emphasise that the
declaration of the Government must be relatable to a public purpose as distinct
from a purely private purpose. If the purpose for which the acquisition is
being made is not relatable to a public purpose then a question may well arise
whether in making the declaration there has been, on the part of the Government
a fraud on the power conferred upon it by the Act. In other words the question
would then arise whether that declaration was merely a colourable exercise of
the power conferred by the Act, and, therefore, the declaration is open to
challenge at the instance of the party aggrieved. To such a declaration the
protection of s. 6(3) will not extend. For, the question whether a particular
action was the result of a fraud or not is always justiciable, provisions such
as s. 6(3) notwithstanding. [Emphasis supplied]
When an order is passed without jurisdiction it amounts to colourable exercise
of power. Formation of opinion must precede application of mind.
application of mind must be on the materials brought on records. The materials
should be such which are required to be collected by the authorities entitled therefor.
The authorities must act within the four-corners of the statute. An opinion formed
even on the basis of an advice by an authority which is not contemplated under
the statute render the decision bad in law. A statutory authority is bound by
the procedure laid down in the statute and must act within the four-corners
The effect of contribution of a sum of Rs.100/- by the State purported to be
towards the amount of compensation, may not be noticed.
(supra) although this Court while upholding that contribution of sum of
Rs.100/- as a part of the cost of acquisition may subserve the requirement of
law, proceeded to opined :
would like to add that the view taken in Senga Naicken's case [I.L.R. 50 Mad. 308
: AIR 1927 Mad. 245] has been followed by the various High Courts of India. On
the basis of the correctness of that view the State Governments have been
acquiring private properties all over the country by contributing only token
amounts towards the cost of acquisition. Titles to many such properties would
be unsettled if we were now to take the view that 'partly at public expense'
means substantially at public expense. Therefore, on the principle of stare decisis
the view taken in Senga Naicken's case [I.L.R. 50 Mad. 308 : AIR 1927 Mad. 245]
should not be disturbed. We would, however, guard ourselves against being
understood to say that a token contribution by the State towards the cost of
acquisition will be sufficient compliance with the law in each and every case.
Whether such contribution meets the requirements of the law would depend upon
the facts of every case. Indeed the fact that the State's contribution is
nominal may well indicate, in particular circumstances that the action of the
State was a colourable exercise of power. In our opinion 'part' does not
necessarily mean a substantial part and that it will be open to the Court in
every case which comes up before it to examine whether the contribution made by
the State satisfies the requirement of the law. In this case we are satisfied
that it satisfies the requirement of law. What is next to be considered is
whether the acquisition was only for a company because the compensation was to
come almost entirely out of its coffers and, therefore, it was in reality for a
private purpose as opposed to public purpose. In other words, the question is
whether there was on the part of the Government a colourable exercise of power.
the point it is said that the establishment of a factory for manufacturing
refrigeration equipment is nothing but an ordinary commercial venture and can
by no stretch of imagination fall within the well-accepted meaning of the
expression 'public purpose', that even if it were to fall within that
expression the factory is to be established not by the Government, nor by
Government participation but solely by the respondent No. 6, a public limited
concern and that, therefore, the concern could acquire land for such a purpose
only after complying with the provisions of Part VII and that the use of the
provisions of s. 6(1) is merely a colourable device to enable the respondent
No. 6 to do something which, under terms of s. 6(1), could not be done.
Strong reliance has also been placed by the High Court in Jage Ram and Others
v. The State of Haryana and Others [AIR 1971 SC 1033 : (1971) 1 SCC 671] for
the proposition that once the Government had contributed any sum towards the
cost of the acquisition of land, it was not necessary for the Government to
proceed under Part VII of the Act and, therefore, does not lie in the mouth of
State that acquisition was under Part II.
this case we may notice that purported contribution had been made only after
the writ petitions were filed. Ordinarily, this Court would not have gone into
the said question but the agreement provides for payment of entire compensation
by the company. We do not know as to at what stage the State thought it fit to
meet a part of the expenses for acquisition of land.
an opinion on the part of the State having regard to the statutory scheme
should have been formed prior to entering into the agreement itself.
agreement does not mention about any payment of a part of compensation by the
State. We, in absence of any other material on record, must hold that the State
had not formed any opinion in that behalf at least when the agreement was
executed. The wisdom in all probabilities dawned on the officers of the State
at a later stage.
Satisfaction on the part of the State required to be arrived at upon formation
of opinion on the basis of materials brought on records for the purpose of Part
II of the Act are different from that of Part VII. Once the appropriate
Government arrives at a decision that the land sought to be acquired is needed
for a public purpose, the court would not go behind it, as the same may furnish
a valid argument for upholding an acquisition under Part II. But when an
acquisition is made under Part VII, the conditions precedents therefor as
contained in the Companies Rules must be satisfied.
face of record, if it can be shown that the Government had ignored the
mandatory provisions of the Act, the acquisition would have to be struck down.
Shyam Behari and Others v. State of Madhya Pradesh and Others [1964 (6) SCR 636], it was held :
the second place, the declaration under s. 6 may be made that land is needed
for a company in which case the entire compensation has to be paid by the
company. It is clear therefore that where the entire compensation is to be paid
by a company, the notification under s.6 must contain a declaration that the
land is needed for a company. No notification under s. 6 can be made where the
entire compensation is to be paid by a company declaring that the acquisition
is for a public purpose, for such a declaration requires that either wholly or
in the part, compensation must come out of public revenues or some fund
controlled or managed by a local authority
Distinction between acquisition under Part II and Part VII are self- evident.
The State was not only obligated to issue a notification clearly stating as to
whether the acquisition is for a public purpose or for the company. Section 6
categorically states so, as would appear from the second proviso appended
declaration is to be made either for a public purpose or for a company. It
cannot be for both.
is furthermore trite that Land Acquisition Act is an expropriatory legislation.
[See Hindustan Petroleum Corporation Ltd. v. Darius Shapur Chenai & Ors.
(2005) 7 SCC 627; and Chairman, Indore Vikas Pradhikaran v. M/s Pure Industrial Cock & Chem. Ltd. &
Others [2007 (8) SCALE 110]
legislation, as is well-known, must be strictly construed. When the properties
of a citizen is being compulsorily acquired by a State in exercise of its power
of Eminent Domain, the essential ingredients thereof, namely, existence of a
public purpose and payment of compensation are principal requisites therefor.
In the case of acquisition of land for a private company, existence of a public
purpose being not a requisite criteria, other statutory requirements call for
strict compliance, being imperative in character.
Another question which arises for our consideration is as to whether Rule 4 of
the Companies Rules is mandatory or directory in nature. The High Court held it
to be directory.
Rule 4 of the Rules employs the word shall not once place but twice.
it is imperative in character. No reason has been shown before us as to why it
should be held to be directory provision particularly when the Land Acquisition
Act is an expropriatory legislation.
State of Gujarat and Another v. Patel Chaturbhai Narsibhai and Others [AIR 1975
SC 629], this Court held :
The contention of the State that the enquiry under Rule 4 is administrative and
that the owner of the land is not entitled to be given an opportunity to be
heard at the enquiry cannot be accepted for these reasons. The enquiry under
Rule 4 shows that the Collector is to submit a report among other matters that
the Company has made all reasonable efforts to get such lands by negotiation
with the persons interested therein on payment of reasonable price and such
efforts have failed.
persons interested therein are the owners of the land which is proposed to be
acquired. The Company at such an enquiry has to show that the company made
negotiations with the owners of the land. The owners of the land are,
therefore, entitled to be heard at such an enquiry for the purpose of proving
or disproving the reasonable efforts of the company to get such land by
negotiation. The contention on behalf of the State that the owners of the land
will get an opportunity when an enquiry is made under Section 5A of the Act is
equally unsound. Section 17 of the Act provides that the appropriate Government
may direct that the provisions of Section 5A shall not apply, and if it does so
direct a declaration may be made under Section 6 at any time after the
publication of the notification under Section 4 of the Act. Therefore, the
enquiry under Section 5A may not be held.
General Government Servants Cooperative Housing Society Ltd., Agra etc. v. Sh. Wahab
Uddin and Others etc. [(1981) 2 SCC 352], this Court held :
Sub-rule (1) requires the Government to direct the Collector to submit a report
to it on the matters enumerated in Clauses (i) to (vi) of the Sub-rule (1)
which is for the benefit of the Company. The purpose is to avoid acquisition of
land not suitable for a Company.
(ii) of Sub-rule (1) requires that the Company has to make all reasonable
efforts to get such lands by negotiation with the person interested therein on
payment of reasonable prices and that such efforts have failed. The purpose of
Clause (ii) seems to be to avoid unnecessary land acquisition proceedings and
payment of exorbitant prices. The purpose of Clauses (iii), (iv) and (v) is
obvious. The purpose of Clause (vi) is to avoid acquisition of good
agricultural land, when other alternative land is available for the purpose.
Sub-rule 2 of Rule 4 requires the Collector to give reasonable opportunity to
the Company so that the Collector may hold an inquiry into the matters referred
in Sub-rule (1).
Collector has to comply with Clauses (i), (ii) and (iii) of Sub-rule 2 during
the course of the inquiry under Sub- rule (1). The Collector under Sub-rule 3
then has to send a copy of his report of the inquiry to the appropriate
Government and a copy of the report has to be forwarded by the Government to
the Land Acquisition Committee constituted under Rule 3 for the purpose of
advising the Government in relation to acquisition of land under Part VII of
the Act, the duty of the Committee being to advise the Government on all
matters relating to or arising out of acquisition of land under Part VII of the
Act (Sub-rule (5) of Rule 3). No declaration shall be made by the appropriate
Government under Section 6 of the Act unless the Committee has been consulted
by the Government and has considered the report submitted by the Collector
under Section 5A of the Act. In addition, under Clause (ii) of Sub-rule (4) of
Rule 4, the Company has to execute an agreement under Section 41 of the Act.
above consideration shows that Rule 4 is mandatory;
compliance is no idle formality, unless the directions enjoined by Rule 4 are
complied with, the notification under Section 6 will be invalid. A
consideration of Rule 4 also shows that its compliance precedes the
notification under Section 4 as well as compliance of Section 6 of the
M/s Fomento Resorts and Hotels Ltd. v. Gustavo Ranato Da Cruz Pinto and Others
[(1985) 2 SCC 152], a three-Judge Bench of this Court categorically held :
Reading the Act and the Rules and keeping in view the scheme of the Act, it is
apparent, in our opinion, that before the issuance of Section 4 notification,
there is no requirement as such of compliance with the procedure contemplated
by Rule 4 of the Rules. We are therefore unable to subscribe to the view that
enquiry by Rule 4 must precede the issuance of notification under Section 4(1)
of the Act. Furthermore as indicated before certain matters which are required
to be done under Rule 4 can not be done because the officer or the person authorised
by him would have no authority unless notification under Section 4 is
Repelling a contention that the provisions of Sections 6 to 37 are not required
to be complied with in view of Section 39 thereof, it was held :
Section, in our opinion, has no relevance for determining whether to be a
proper acquisition, enquiry contemplated under Rule 4 must precede issuance of
the notification under Section 4 of the Act
The lands in question are recorded as Shahi lands. It is not in dispute that
they are agricultural lands. The Act contemplates that such lands may not be
may notice that in Collector (District Magistrate) Allahabad and Another etc.
v. Raja Ram Jaiswal etc., (1985) 3 SCC 1] this Court held that such a
contention requires an indepth study, stating :
The validity of the impugned notification was also challenged on the ground
that even though the acquisition is for the Sammelan, a company, the
notification was issued without first complying with the provisions of Rule 4
of the Land Acquisition (Companies) Rules, 1963. The High Court has negatived
this challenge. We must frankly confess that the contention canvassed by Mr. Nariman
in this behalf would necessitate an indepth examination of the contention.
However, we consider it unnecessary in this case to undertake this exercise
because the judgment of the High Court is being upheld for the additional
reason that the acquisition in this case was mala fide. Therefore, we do not
propose to examine the contention under this head. It is, on that premise,
we have undertaken some study in this behalf.
The decision of this Court in Somawanti (supra) holding that the stage at which
Rule 4 is required to be complied with is not the stage prior to issuance of a
notification under Section 4 of the Act, but declaration under Section 6 does
not appear to be correct from the decisions of this Court in Patel Chaturbhai Narsibhai
(supra) and Wahab Uddin (supra), the earlier binding precedent, with utmost
respect, having not been taken into consideration in its entirety.
Abdul Husein Tayabali & Others v. State of Gujarat & Others 1968 (1)
SCR 597], this Court observed :
it was urged that the inquiry under Rule 4 has to be held after the
notification under section 4 is issued and not before and therefore the inquiry
held by Master was not valid. We do not find anything in Rule 4 or in any other
Rule to warrant such a proposition. The inquiry, the report to be made
consequent upon such inquiry, obtaining the opinion of the Land Acquisition
Committee, all these are intended to enable the Government to come to a
tentative conclusion that the lands in question are or are likely to be needed
for a public purpose and to issue thereafter section 4 notification.
Srinivasa Cooperative House Building Society Ltd. v. Madam Gurumurthy Sastry
and Others [(1994) 4 SCC 675], noticing Somavanti (supra) wherein it was held
that the manufacturing of the articles was for the benefit of the community and
to save substantive part of foreign exchange and staff quarters to workmen, it
was held :
the other hand, in the case of an acquisition for a company, the compensation
has to be paid by the company. In such a case there can be an agreement under
Section 41 for transfer of the land acquired by the Government to the company
on payment of the cost of acquisition, as also other matters. The agreement
contemplated by Section 41 is to be entered into between the company and the
appropriate Government only after the latter is satisfied about the purpose of
the proposed acquisition, and subject to the condition precedent that the
previous consent of the appropriate Government has been given to the
acquisition. Section 6 is in terms, made subject to the provisions of Part VII
of the Act. The declaration for acquisition for a company shall not be made
unless the compensation to be awarded for the property is to be paid by a
company. In the case of an acquisition for a company simipliciter, the
declaration cannot be made without satisfying the requirements of Part VII. But
that does not necessarily mean that an acquisition for a company for a public
purpose cannot be made otherwise than under the provisions of Part VII, if the
cost or a portion of the cost of the acquisition is to come out of public
funds. In other words, the essential condition for acquisition is for a public
purpose and that the cost of acquisition should be borne, wholly or in part,
out of public funds. Hence an acquisition for a company may also be made for a
public purpose, within the meaning of the Act, if a part or the whole of the
cost of acquisition is met by public funds. If, on the other hand, the
acquisition, for a company is to be made at the cost entirely of the company
itself, such an acquisition comes under the provisions of Part VII
The approach of the High Court in this behalf, in our opinion, is totally
erroneous. A provision of a statute is either mandatory or directory.
if a provision is directory, the same should be substantially complied with. It
cannot be ignored in its entirety only because the provision is held to be
directory and not an imperative one.
this case admittedly there has been no compliance of Rule 4. If Rule 4 has not
been complied with, the exercise of jurisdiction under Part VII must be held to
have been erroneous.
For the reasons aforementioned, the impugned judgment cannot be sustained, which
is set aside accordingly. The appeals are allowed with costs. Counsels fee
assessed at Rs.25,000/- (Rupees twenty five thousand only).