P. Vajravelu Mudaliar Vs. Special
Deputy Collector, Madras & ANR  INSC 214 (5 October 1964)
05/10/1964 SUBBARAO, K.
DAYAL, RAGHUBAR SIKRI, S.M.
CITATION: 1965 AIR 1017 1965 SCR (1) 614
F 1967 SC 637 (4) R 1967 SC1110 (13) R 1968
SC 377 (12,13,16) R 1968 SC 394 (7,18) R 1968 SC1138 (9,33,59,61) R 1968 SC1425
(10,21) D 1969 SC 453 (7) D 1969 SC 634 (1,18,30,47,48,54) E 1970 SC 564
(97,98,99,100,123,194,196,197, R 1972 SC2240 (16) RF 1972 SC2301 (61) F 1973 SC
689 (21,30) RF 1973 SC1461 (483,624,757,1075,1077,1549,20 RF 1975 SC1193 (22) R
1978 SC 215 (15) E 1979 SC 248 (10,11,12,14,16,25) RF 1980 SC1438 (17) RF 1980
SC1955 (29) RF 1986 SC 468 (24,26,27,30) R 1987 SC 579 (7)
Constitution of India, Art. 31-A-Whether
after amendment applied only to acquisition of "estates" for agrarian
reform.-Article 31(2)-Whether after amendment compensation required to be
"Just equivalent"-Whether a law not providing for "Just
equivalent" amounted to fraud on power Whether issue justiciable-Land
Acquisition (Madras Amendment) Act, 1961-Whether violative of Art. 31(2) or of
The petitioners' lands were notified for
acquisition for the purpose of housing schemes and proceedings in respect of
compensation payable to them in accordance with the provisions of the Land
Acquisition (Madras Amendment) Act, 1961, were pending. The constitutional
validity Of this Act was challenged by them on the -round that it infringed
14, 19 and 31(2) of the Constitution.
It was contended on behalf of the respondents
that the Amending Act was protected by Art. 3 1 -A and therefore its validity
could not be questioned on the ground that it was hit by Arts. 14, 19 and 31;
that after the Constitution (Fourth Amendment) Act, 1955, the expression
"compensation" carried a meaning different from that given to it in
Mrs. Bela Banerjee's case; and that after the said amendment the adequacy of
compensation for land acquired ceased to be justiciable.
HELD: (i) Article 31-A applied only to a law
made for acquisition by the State of any "estate" or any rights
therein or for extinguishment or modification of such rights, if such
acquisition, etc., was connected with agrarian reform. This continued to be the
position even after the amendment of Art. 3 1 -A by the Constitution
(Seventeenth Amendment) Act 1964. Under Art. 31(2) and (2A) of the
Constitution, the State was prohibited from making a law for acquiring land
unless it was for a public purpose and unless it fixed the amount of
compensation or specified principles for determining the amount of
compensation. But Art. 31A lifted the ban to enable the State to implement
pressing agrarian reforms and this object is implicit in Art. 31A. This was a
restricted exception, as otherwise, the State would be in a position to acquire
the land of citizens without reference to any agrarian reform in derogation of
their fundamental rights and without payment of compensation and thus deprive
Art. 31(2) practically of its content. [621 H; 622 A-D].
The object of slum clearance for which the
land was stated to have been acquired under the Amending Act could not be
related to agrarian reform in its limited or wider sense.
K. K. Kochuni v. State of Madras  3
S.C.R. 887 and Ranjit Singh v. State of Punjab,  1 S.C.R. 82, considered
(ii0 it was well-settled before art 31(2) was
amended in 1955 that a person who's land was qcquired was entitled to
compensation i.e .; a "just equivalent " of the land of which he was
deprived .the amended art 31(2) also contains the expression s
"compensation " and "principles" and therefore the
legislature must be taken to have accepted the meaning given to 615 these
expressions in Mrs. Bela Banerjee's case. It follows therefore that by virtue
of Art. 31(2), a legislature in making a law of acquisition or requisition must
provide for a "just equivalent" of what the owner has been deprived
of or specify the principles for the purpose of ascertaining such "just
equivalent". [625 E-F, H; 626 A, D-F].
State of West Bengal v. Mrs. Bela Banerjee,
 S.C.R. 558 and State of Madras v. Namasivaya Mudaliar,  6 S.C.R.
The effect of the amended Art. 31(2) is that
a question which pertains to the adequacy of compensation is not justiciable.
For determining compensation in respect of any property acquired, there may be
many possible modes or principles of valuation; where the adoption of one
principle may give a higher and of another, a lesser value, the Court cannot
say that the law should have adopted one principle and not the other, for this
would relate only to the question of adequacy. On the other hand, if a law lays
down principles which are not relevant to the property acquired or to the value
of the property at or about the time it is acquired, it may be said that they
are not principles contemplated by Art. 31(2). If a law says that though a
house is acquired, it shall be valued as land, or that though a house site is
acquired, it shall be valued as agricultural land, or that though it was
acquired in 1950, its value in 1930 should be given, or though 100 acres are
required, compensation should be given only of 50 acres, the principles do not
pertain to the domain of adequacy and in such cases the validity of the
principles could be scrutinised. Therefore the Court would have jurisdiction to
deal with the matter if the legislature, though ex-facie purporting to provide
for compensation or indicating the principles for its ascertainment, in fact and
substance takes away property without providing compensation, or provides for
illusory compensation, or for its ascertainment on arbitrary principles, for in
that case the legislature would be enacting a law in fraud of its power under
31(2). [627 B-H; 628 A-B; 629 B-E].
Gajpati Narayan Deo v. State of Orissa,
 S.C.R. 1 and Gullapalli Nageswara Rao v. A.P. State Road Transport
Corporation,  Supp. 1 S.C.R. 319, referred to.
The impugned provisions of the Amending Act,
which provide for compensation on the basis of the value of the land at the
date of publication of the Notification under s. 4(1) of the Land Acquisition
Act, 1894, or the amount equal to the average market value of the land during 5
years immediately preceding such date, whichever is less, for payment of a
solatium of only 5 per cent instead of 15 per cent under the Principal Act and
for the exclusion of any compensation by reason of the suitability of the land
for any use other than the use to which it was put, only pertain to the method
of ascertaining the compensation and do not constitute a fraud of power. The
Amending Act did not therefore offend Art.
31(2) of the Constitution. [639 E-H; 631
Sri Raja Vyricherla Narayana Gajapatraju
Bahadur Guru v. The Revenue Divisional Officer, Vizianagram, I.L.R.  Mad.
532, referred to.
(iii) A comparative study of the principal
Act and the Amending Act showed that if land was acquired for a housing scheme
under the Amending Act, the claimant would get a lesser value than what he
would get for the same or similar land acquired for some public purpose under
the Principal Act. The discrimination between persons whose lands were acquired
for housing schemes and those whose lands were acquired for other public
purposes was not sustained on the principle of reasonable classification
founded on intelligible differential which had a rational relation to the
object sought to be achieved. Although it was contended that the Amending Act
was passed to meet an urgent demand so as to find a way out to clear up slums,
the Act as finally evolved was not confined to any Ll Sup./65-14 616 such
problem and land could be acquired under the Amending Act for housing schemes
with other objectives. The Amending Act therefore clearly infringed Art. 14 of
the Constitution and was void. [633 B-E; 635 A-B].
ORIGINAL JURISDICTION: Writ Petitions Nos.
144, 227 and 228 of 1963.
Petition under Art. 32 of the Constitution of
India for the enforcement of fundamental rights.
A. V. Viswanatha Sastri, C. S. Prakasa Rao
and R. Gopalakrishnan, for the petitioner (in W. P. No. 144/63).
A. V. Viswanatha Sastri, G. A. Pias, T. N.
Sambasivan and N. S. Mani, for the petitioners (in W. Ps. Nos. 227 and 228 of
A. Ranganadham Chetty, R. Viswanathan and A. V.
Rangam, for the respondents (in W. P. No. 144 of 1963).
R. Ranganadham Chetty and A. V. Rangam, for
the respondents (in W. P. Nos. 227 and 228 of 1963).
S. S. Shukla, for the interveners (W. P. No.
144 of 1963).
C. K. Daphtary, Attorney-General, N. S.
Bindra, R. H.
Dhebar and B. R. G. K. Achar, for the
Attorney-General (in W. P. No. 144 of 1963).
B. R. L. Iyengar, R. H. Dhebar and B. R. G.
K. Achar, for the Advocate-General, Gujarat (in W. P. No. 144,/63).
C. K. Daphtary, Attorney-General, R. H. Dhebar
and B. R. G. K. Achar, for the Advocate-General, Maharashtra, (in W. P. No.
R. N. Sachthey and B. R. G. K. Achar, for the
AdvocateGeneral, Rajasthan (in W. P. No. 144/63).
I. N Shroff, for the Advocate-General, Madhya
Pradesh (in W. P. No. 144/64).
The Judgment of the Court was delivered by
Subba Rao. J. These three petitions filed under Art. 32 of the Constitution
raise the question of the constitutional validity of the Land Acquisition
(Madras Amendment) Act, 1961 (Madras Act 23 of 1961), hereinafter called the
Amending Act. We shall briefly state the facts relevant to the question raised.
The petitioner in Writ Petition No.
144 of 1963, P. Vajravelu Mudaliar, is the
owner of lands bearing survey Nos. 4-2, 40-7 and 43-1 of Peruakudal Village and
of extents 1.82, 1.39 and 3.72 acres respectively. By a notification dated
November 7, 1960, and ,published in the Fort. St. George Gazette, dated
November 16, 617 1960, the Government issued a notification under s. 4(1) of
the Land Acquisition Act (Act 1 of 1894), hereinafter called the Principal Act,
notifying that, among other lands, the said lands of the petitioner were needed
for a public purpose, to wit, for the development of the area as
"neighborhood" in the Madras City in accordance with the Land
Acquisition and Development Scheme of the Government.
On November 23, 1960, the Special Deputy
Collector for Land Acquisition issued a notification under s. 4(1), read with
s. 17(4), of the Principal Act, and under the said notification the first
respondent was authorized to take possession of the petitioner's lands. The
Madras Legislature subsequently enacted the Amending Act providing for the
acquisition of lands for housing schemes and laying down principles for fixing
compensation different from those prescribed in the Principal Act. The
petitioner questions the validity of the Amending Act, inter alia, on the
ground that it infringes Arts. 14, 19 and 31(2) of the Constitution.
The petitioner in Writ Petitions Nos. 227 and
228 of 1963, Most Rev. Dr. L. Mathias, Archbishop of Madras, owns lands bearing
survey Nos. 17-2-B-1 and 127/2B of extent 50.53 acres and 0.62 acre
respectively in Urur, near Madras City.
By notification dated November 13, 1961, and
published in the Fort St. George Gazette, the Government of Madras issued a
notification under s. 4(1) of the Principal Act notifying, among other lands,
that the said lands of the petitioner were needed for a public purpose, to wit,
for the development of the area as the "neighbourhood" in Madras City
in accordance with the Land Acquisition and Development Schemes of the
Government. It was also stated in the notification that in view of the urgency,
under s. 17(4) of the Principal Act, the application of the provisions of s. 5
(a) of the said Act was dispensed with, and that compensation in respect of the
said acquisition would be paid in accordance with the provisions of the
The said petitioner (W. P. No. 228 of 1963)
also owns lands bearing survey Nos. 153/1 and 154/2 at Thiruvanmiyar Village,
Chingleput District, of the extent 21.56 and 10.50 acres respectively totalling
about 32 acres. The said lands were also notified for acquisition and the
petitioner was told that he would be paid compensation under the Amending Act.
The said petitioner in these two petitions
questions the constitutional validity of the said Amending Act on the ground,
inter alia, that it offends Arts. 14, 19 and 31(2) of the Constitution.
618 To the three petitions the Special Deputy
Collector for Land Acquisition, West Madras, and the Government of Madras are
made parties. In their counters the respondents pleaded, among others, that the
said Act was saved under Art. 31-A of the Constitution and, therefore, its
validity could not be questioned on the ground that it infringes either Art.
14, Art. 19 or Art. 31(2) of the Constitution; and that even if Art. 31-A was
not attracted, the provisions of the Amending Act would not infringe any of the
said three provisions. In these petitions some interveners are represented by
their counsel and this Court had also given notices to the Advocates-General of
various States. We have heard the arguments advanced on behalf of the
petitioners, interveners, and the State of Madras and the counsel on behalf of
the Advocates-General of some of the States who supported the State of Madras.
Mr. A. V. Viswanatha Sastri, learned counsel
for the petitioners, raised before us the following points : (i) As the Madras
State Housing Board Act, 1961, and the Madras Town Planning Act, 1920, are
special statutes providing for the execution of housing and improvement schemes
and town planning schemes respectively, property for the said schemes can be
acquired only after following the procedure prescribed there under and the
Government has no power to acquire land for the said purpose under the Amending
Act in derogation of the provisions of the former Act. (ii) The acquisition,
though it purports to be for a housing scheme, is really intended for selling
the lands acquired and raising revenue for the State and it is, therefore, a
colourable exercise of the State's power. (iii) The Amending Act offends Arts.
14 and 19 of the Constitution. And (iv) the Amending Act is also bad, because
it does not provide for payment of compensation within the meaning of Art.
31(2) of the Constitution.
Mr. A. Ranganadham Chetty, learned counsel
for the State of Madras contends that, (i) the Government in its discretion has
the power to acquire land for housing purposes under any one of the three Acts,
namely, the Housing Board Act, the Town Planning Act and Amending Act; (ii) by
reason of the Constitution (Seventeenth Amendment) Act, 1964, which is
retrospective in operation, the petitioners are precluded from questioning the
validity of the Amending Act on the ground that it infringes Art. 14, Art. 19
or Art. 31 of the Constitution; (iii) the Amending Act does not infringe either
Art. 14 or Art. 19 of the Constitution; and (iv) after the Constitution (Fourth
Amendment) Act 1955, the expression "compensation" carries a meaning
619 different from that given to it in Mrs. Bela Banerjee's case(1), and
thereafter the adequacy of the amount given for acquisition of land ceased to
Mr. Palkhivala, appearing for some of the
interveners elaborated the contention of Mr. A. V. Viswanatha Sastri based upon
the meaning of the expression "compensation" in Art.
31(2) of the Constitution. We shall consider
his argument in the relevant context in the course of our judgment.
The first question need not detain us, for
though Mr. Viswanatha Sastri raised the point that the Government can only
acquire the lands for housing schemes in conformity with the provisions of
either the Madras Town-Planning Act, 1920, or the Madras State Housing Board
Act, 1961, but not under the provisions of the Amending Act, he did not pursue
the matter in view of the following two decisions of this Court : Patna
Improvement Trust v. Smt. Lakshmi Devi(1), and Nandeshwar Prasad v. U. P.
Government(3). Therefore, nothing more need be said about this.
Mr. A. Ranganadham Chetty relied upon the
Constitution (Seventeenth Amendment) Act, 1964, and contended that Art.
31-A, as amended, precluded the petitioners
from questioning the validity of the Amending Act on the ground that it
infringed Art. 14, Art. 19 or Art. 31 of the Constitution.
By the said amendment, in the definition of
the expression "estate" sub-cl. (a) of cl. (2) was substituted by a
new sub-clause defining the said expression. The material part of the amended
sub-cl. (a) of cl. (2) reads :
"the expression "estate"
shall, in relation to any local area, have the same meaning as that expression
or its local equivalent has in the existing law relating to Land tenures in
force in that area and shall also include-(ii) any land held under ryotwari
settlement." From the material on record we cannot definitely hold whether
the lands in question are held under ryotwari settlement. But assuming for the
purpose of these petitions that the said lands are held under ryotwari settlement,
the question arises whether the impugned law provides for acquisition by the
State of any "estate" or any rights therein or the extinguishment or
modification of any such rights. The scope of this provision fell to be (1)
 S.C.R. 558. (2)  Supp. 2 S.C.R. 812.
(3) A.I.R. 1964 S.C. 1217.
620 considered by this Court in K. K. Kochuni
v. The State of Madras(1). There it was held that though the impugned Act dealt
with an estate, it was not saved by Art. 31-A of the Constitution, as the Act
had nothing to do with agrarian reform, but simply conferred on junior members
of the tarawad joint rights which they had not got before in the sthanam
properties. Mr. Ranganadham Chetty criticized this decision on the ground that
the said view was based only on a part of the statement of "objects and
reasons" and that the omitted part thereof supported a wider construction
of the provisions so as to include acquisition of a land for slum clearance or
other such social purposes. The omitted part of the statement reads thus :
"(ii) The proper planning of urban and
rural areas require the beneficial utilisation of vacant and waste lands and
the clearance of slum areas." It is true that in the said decision the
statement of objects and reasons relevant to the question raised therein was
extracted; but it was made clear that it was referred to only for the limited
purpose of ascertaining the conditions prevalent at the time the Bill was
introduced in Parliament and the purpose for which the amendment was made. It
is commonplace that a court cannot construe a provision of the Constitution on
the basis of the statement of "objects and reasons", and this Court
did not depart from the said salutary rule of construction. The real basis of
that decision is found at p. 900 and it is :
"The definition of "estate"
refers to an existing law relating to land tenures in a particular area
indicating thereby that the Article is concerned only with the land tenure
described as an "estate". The inclusive definition of the rights of such
an estate also enumerates the rights vested in the proprietor and his
subordinate tenure holders.
The last clause in that definition, viz.,
that those rights also include the rights or privileges in respect of land
revenue, emphasizes the fact that the Article is concerned with land-tenure. It
is, therefore, manifest that the said Article deals with a tenure called "
estate" and provides for its acquisition or the extinguishment or
modification of the rights of the land holder or the various subordinate
tenure-holders in respect of their rights in relation to the estate. The
contrary view would enable the State to divest a proprietor (1)  3 S.C.R.
621 of his estate and vest it in another
without reference to any agrarian reform." his judgment, therefore, in
effect, held that Art. 31-A (i) (a) should be confined to an agrarian reform
and not for acquiring property for the purpose of giving it to another.
This Court in Ranjit Singh v. The State of
Punjab(1) considered the scope of the said decision. The question that arose in
that was whether the East Punjab Holdings (Conservation and Prevention of
Fragmentation) Act, 1948 (Act 50 of 1948), as amended by the East Punjab
Holdings (Consolidation and Prevention of Fragmentation) (2nd Amendment and
Validation) Act, 1960 Act 27 of. 1960), was protected by Art. 31-A against an
attack in the ground that the said Act infringed the fundamental rights under
13, 14, 19 and 31 of the Constitution. This
Court considered the earlier decisions of this Court, including the decision in
K..K. Kochuni v. State of Madras(2).
Adverting to Kochuni's case, Hidayatullah J.,
speaking for the Court, observed :
"But that was a special case and we
cannot apply it to cases where the general scheme of legislation is definitely
agrarian reform and under its provisions something ancillary thereto in the
interests of rural economy has to be undertaken to give full effect to the
reforms." Apropos the Act before it, this Court observed "The scheme
of rural development today envisages not only equitable distribution of land so
that there is no undue imbalance in society resulting in a landless class on
the one hand and a concentration of land in the hands of a few, on the other,
but envisages also the raising of economic standards and bettering rural health
and social conditions." That judgment, therefore, accepts the view that
Art. 31-A was enacted only to implement agrarian reform, but has given a
Comprehensive meaning to the expression "agrarian reform so is to include
provisions made for the development of rural economy.
Under Art. 31(2) and (2A) of the Constitution
a State is Prohibited from making a law for acquiring land unless it is for a
public purpose and unless it fixes the amount of compensation (1)  1
(2)  3 S.C.R. 887.
622 or specifies the principles for
determining the amount of compensation. But Art. 31-A lifts the ban to enable
the State to implement the pressing agrarian reforms. The said object of the
Constitution is implicit in Art. 31-A. If the argument of the respondents be
accepted, it would enable the State to acquired the lands of citizens without
reference to any agrarian reform in derogation of their fundamental rights
without payment of compensation and thus deprive Art.
31(2) practically of its content. If the
intention of Parliament was to make Art. 31(2) a dead-letter, it would have
clearly expressed its intention. This Court cannot by interpretation enlarge
the scope of Art. 31-A. On the other hand, the Article, as pointed out by us
earlier, by necessary implication, is confined only to agrarian reforms.
Therefore, we held that Art. 31-A would apply
only to a law made for acquisition by the State of any "estate" or
any rights therein or for extinguishment or modification of such rights if such
acquisition, extinguishment or modification is connected with agrarian reform.
Mr. Ranganadham Chetty contended that
acquisition for housing under the Amending Act is for slum clearance and for
relieving congestion of housing accommodation and that acquisition for such a
purpose would be in connection with agrarian reform in the enlarged sense of
that expression accepted by this Court. Even accepting the argument of the
learned counsel that the Act was conceived and enacted only for the purpose of
slum clearance which became an urgent problem for the city of Madras, we cannot
hold that such a slum clearance relates to an agrarian reform in its limited or
wider sense. That apart. the Amending Act in its comprehensive phraseology takes
in acquisition for any housing scheme, whether for slum clearance or for
creating modem suburbs or for any other public purpose. The provisions of the
Amending Act are not confined to any agrarian reform and, therefore, do not
attract Art. 31-A of the Constitution.
If Art. 31 -A of the Constitution is out of
the way, Mr. Viswanatha Sastri, learned counsel for the petitioners contended
that the Act is bad as it does not provide for compensation i.e., a "just
equivalent" for the land acquired under the Amending Act and, therefore,
it offends Art. 31(2) of the Constitution. This aspect is elaborated by Mr. Palkhivala,
who appeared for one of the interveners in the petitions. He narrated the
following four situations; (i) when the law provides for adequate compensation
but there is difference of opinion as to the adequacy of it 623 in a given
case; (ii) where the law provides for partially inadequate consideration based
on valid principles related to the property at the time of acquisition; (iii)
where it fixes arbitrarily the compensation based on principles unrelated to
the property or to the time of acquisition or to both; (iv) where the
compensation fixed is illusory; and contended that in the first situation
compensation is paid, that in the second it is a moot question whether the
question of adequacy of compensation is justiciable or not, and that in the
third and fourth situations, the said question is clearly justiciable. Mr.
Ranganadham Chetty, appearing for the State, on the other hand, argued that the
question of adequacy of consideration, however it arose, was not justiciable in
a court of law. To appreciate the contentions it is necessary to consider the
following questions (i) what was the scope of the relevant part of Art. 31 (2)
of the Constitution before the Constitution (Fourth Amendment) Act, 1955 ? (ii)
why was that amendment brought about ? (iii) what was the change the amendment
introduced ? and (iv) what was the effect of the amendment ? Article 31(2)
before the said amendment read as follows:
"No property.......... shall be taken
possession Of or acquired for public purposes.......... unless the law provides
for compensation for the property taken possession of or either fixes the
amount of compensation or specifies the principles on which and the manner in
which the compensation is to be determined and given." In Mrs. Bela
Banerjee's(1) case this Court was called upon to consider the question whether
compensation provided for under the West Bengal Land Development and Planning
Act, 1948, was in compliance with the provisions of Art. 31(2) of the
Constitution. Under the said Act lands could be acquired many years after it
came into force, but it fixed the market value that prevailed on December 31,
1946, as the ceiling on compensation without reference to the value of the land
at the time of acquisition. In that context this Court considered the
provisions of Art. 31(2) of the Constitution and came to the following
conclusion, at p. 563-564 :
"While it is true that the legislature
is given the discretionary power of laying down the principles which should
govern the determination of the amount (1)  S.C.R. 558.
624 to be given to the owner for the property
appropriated, such principles must ensure that what is determined as payable
must be compensation, that is, a just equivalent of what the owner has been
deprived of. Within the limits of this basic requirement of full
indemnification of the expropriated owner, the Constitution allows free play to
the legislative judgment as to what principles should guide the determination
of the amount payable. Whether such principles take into account all the
elements which make up the true value of the property appropriated and exclude
matters which, are to be neglected, is a justiciable issue to be adjudicated by
the court." By applying the said principles this Court held that the
provisions of the said Act fixing a ceiling on compensation without reference
to the value of the land was arbitrary and, therefore, was not in compliance
with, in law and spirit, the requirement of Art. 31(2) of the Constitution.
This decision lays down three points, namely,
(i) the compensation under Art. 31(2) shall be a "just equivalent" of
what the owner has been deprived of; (ii) the principles which the Legislature
can prescribe are only principles for ascertaining a "just
equivalent" of what the owner has been deprived of; and (iii) if the
compensation fixed was not a "just equivalent" of what the owner has
been deprived of or if the principles did not take into account all relevant
elements or took into account irrelevant elements for arriving at the just
equivalent, the question in regard thereto is a justiciable issue. This Court,
therefore, authoritatively interpreted Art. 31(2) of the Constitution and laid
down its scope. This view was reiterated by this Court in State of Madras v.
Namasivaya Mudaliar(1). There the question was whether ss. 2 and 3 of the
Madras Lignite (Acquisition of Land) Act XI of 1953 which sought to amend the
Land Acquisition Act 1 of 1894 were invalid because they infringed the
fundamental rights under Art. 31 of the Constitution of owners of lands whose
property was to be compulsorily acquired. Under that Act, compensation made
,Payable for compulsory acquisition of land was the value of the land on April
28, 1947, together with the value of any agricultural improvements made thereon
after that date and before Publication of the notification under s. 4(1). The
result of that Act was to freeze for the purpose of acquisition the prices of
land in the area to which it applied and the owners were (1)  6 S.C.R.
625 deprived of the benefit of appreciation
of land values since April 28, 1947, whenever the notification under s. 4(1)
might be issued and also of non-agricultural improvements made in the land
after April 28, 1947. That Act was passed before the Constitution (Fourth
Amendment) Act, 1955, was enacted and, therefore, the question fell to be
considered on the Article as it existed before the amendment. After noticing
the relevant provisions and the case-law on the subject, Shah J., speaking for
the Court, said :
"Fixation of compensation for compulsory
acquisition of lands notified many years after that date, on the market value
prevailing on the date on which lignite was discovered is wholly arbitrary and
inconsistent with the letter and spirit of Art. 31 (2) as it stood before it
was amended by the Constitution (Fourth Amendment) Act, 1955. If the owner is
by a constitutional guarantee protected against expropriation of his property
otherwise than for a just monetary equivalent, a law which authorises
acquisition of land not for its true value, but for value frozen on some date
anterior to the acquisition, on the assumption that all appreciation in its
value since that date is attributable to purposes for which the State may use
the land at sometime in future, must be regarded as infringing the fundamental
right." It may, therefore, be taken as settled law that under Art. 31(2)
of the Constitution before the Constitution (Fourth Amendment) Act, 1955, a
person whose land was acquired was entitled to compensation i.e., a "just
equivalent" of the land of which he was deprived. The Constitution (Fourth
Amendment) Act, 1955 amended Art. 31(2) and the amended Article reads "No
property shall be compulsorily acquired or requisitioned save for a public
purpose and save by authority of law which provides for compensation for the
property so acquired or requisitioned and either fixes the amount of
compensation or specifies the principles on which and the manner in which, the
compensation is to be determined and given; and no such law shall be called in
question in any court on the ground that the compensation provided by that law
is not adequate." A scrutiny of the amended Article discloses that it
accepted the meaning of the expressions "compensation" and
"principles as, 626 defined by this Court in Mrs. Bela Banerjee's case(1).
It may be recalled that this Court in the said case defined the scope of the
said expressions and then stated whether the principles laid down take into
account all the elements which make up the true value of the property
appropriated and exclude matters which are to be neglected, is a justiciable
issue to be adjudicated by the court. Under the amended Article, the law fixing
the amount of compensation or laying down the principles governing the said
fixation cannot be questioned in any court on the ground that the compensation
provided by that law was inadequate. If the definition of
"compensation" and the question of justiciability are kept distinct,
much of the cloud raised will be dispelled. Even after the amendment, provision
for compensation or laying down of the principles for determining the
compensation is a condition for the making of a law of acquisition or
requisition. Legislature, -if it intends to make a law for compulsory
acquisition or requisition, must provide for compensation or specify the
principles for ascertaining the compensation. The fact that Parliament used the
same expressions, namely, "compensation" and "principles"
as were found in Art. 31 before the Amendment is a clear indication that it
accepted the meaning given by this Court to those expressions in Mrs. Bela
Banerjee's case(1). It follows that a Legislature in making a law of acquisition
or requisition shall -provide for a just equivalent of what the owner has been
deprived of or specify the principles for the purpose of ascertaining the
"just equivalent" of what the owner has been deprived of.
If Parliament intended to enable a Legislature
to make such a law without providing for compensation so defined, it would have
used other expressions like "Price", "consideration" etc.
In Craies On Statute Law, 6th Edn., at p. 167, the relevant principle of
construction is stated thus :
"There is a well-known principle of
construction, that where the legislature used in an Act a legal term which has
received judicial interpretation, it must be assumed that the term is used in
the sense in which it has been judicially interpreted unless a contrary
intention appears." The said two expressions in Art. 31 (2), before the
Constitution (Fourth Amendment) Act, have received an authoritative
interpretation by the highest court in the land and it must be presume that
Parliament did not intend to depart from the meaning given by this Court to the
(1)  S.C.R. 558.
627 The real difficulty is, what is the
effect of ouster of jurisdiction of the court to question the law on the ground
that the. " compensation provided by the law is not adequate? It will be
noticed that the law of acquisition or requisition is not wholly immune from
scrutiny by the court.
But what is excluded from the court's
jurisdiction is that the said law cannot be questioned on the ground that the
compensation provided by that law is not adequate. It will further be noticed
that the clause excluding the jurisdiction of the court also used the word
"compensation" indicating thereby that what is excluded from the
court's jurisdiction is the adequacy of the compensation fixed by the
Legislature. The argument that the word "compensation" means a just
equivalent for the property acquired and, therefore, the court can ascertain
whether it is a "just equivalent" or not makes the amendment of the
Constitution nugatory. It will be arguing in a circle. Therefore, a more
reasonable interpretation is that neither the principles prescribing the
"just equivalent" nor the "just equivalent" can be
questioned by the court on the ground of the inadequacy of the compensation
fixed or arrived at by the working of the principles. To illustrate : a law is
made to acquire a house; its value at the time of acquisition has to be fixed;
there are many modes of valuation, namely, estimate by an engineer, value
reflected by comparable sales, capitalisation of rent and similar others. The
application of different principles may lead to different results. The adoption
of one principle may give a higher value and the adoption of another principle
may give a lesser value. But nonetheless they are principles on which and the
manner in which compensation is determined.
The court cannot obviously say that the law
should have adopted one principle and not the other, for it relates only to the
question of adequacy. On the other hand, if a law lays down principles which
are not relevant to the property acquired or to the value of the property at or
about the time it is acquired, it may be said that they are not principles
contemplated by Art. 31(2) of the Constitution.
If a law says that though a house is acquired
it shall be valued as a land or that though a house site is acquired it shall
be valued as an agricultural land or that though it is acquired in 1950 its
value in 1930 should be given, or though 100 acres are acquired compensation
shall be given only for 50 acres, the principles do not pertain to the domain
of adequacy but are principles unconnected to the value of the property
acquired. In such cases the validity of the princilples can be scrutinized. The
law may also prescribe a compensation which is illusory; it may provide for the
acquisition of a property worth 628 lakhs of rupees for a paltry sum of Rs.
100. The question in that context does not relate to the adequacy of the
compensation, for it is no compensation at all. The illustrations given by us
are not exhaustive. There may be many others falling on either side ,of the
line. But this much is clear. If the compensation is illusory or if the
principles prescribed are irrelevant to the value of the property at or about
the time of its acquisition, it can be said that the Legislature committed a
fraud on power and, therefore, the law is bad. It is a use of the protection of
Art. 31 in a manner which the Article hardly intended.
This leads us to the consideration of the
question of the ,scope of the doctrine of fraud on power. In Gajapati Narayan
Deo v. The State of Orissa(1), Mukhejee J., as he then was, .explained the
doctrine thus :
"It may be made clear at the outset that
the doctrine of colourable legislation does not involve any question of bona
fides or mala fides on the part of the legislature. The whole doctrine resolves
itself into the question of competency of a particular legislature to enact a
particular law. If the legislature is competent to pass a particular law, the
motives which impelled it to act are really irrelevant. On the other hand, if
the legislature lacks competency, the question of I motive does not arise at
all. Whether a statute is constitutional or not is thus always a question of
power." The learned Judge described how the Legislature may transgress the
limits of its constitutional power thus :
"Such transgression may be patent,
manifest or direct, but it may also be disguised, covert or indirect and it is
to this latter class of cases that the expression "colourable
legislation" has been applied in certain judicial pronouncements."
Court again explained the said doctrine in Gullapalli Nageswara Rao v. Andhra
Pradesh State Road Transport Corporation (2) thus:
"Me legislature can only make laws
within its legislative competence. Its legislative field may be circumscribed
by specific legislative entries or limited by fundamental rights created by the
Constitution. The legislature cannot over-step the field of its competency, (1)
 S.C.R. 1, 10-11.
(2)  Supp. 1 S.C.R. 319,329.
629 directly or indirectly. The Court will
scrutinize the law to ascertain whether the legislature by device purports to
make a law which, though in form appears to be within its sphere, in effect and
substance, reaches beyond it. If, in fact, it has power to make the law, its
motives in making the law are irrelevant." When a Court says that a
particular legislation is a colourable one, it means that the Legislature has
transgressed its legislative, powers in a covert or indirect manner; it adopts
a device to outstep the limits of its power. Applying the doctrine to the
instant case, the Legislature cannot make a law in derogation of Art. 31(2) of
the Constitution. It can, therefore, only make a law of acquisition or
requisition by providing for "compensation" in the manner prescribed
in Art. 31(2) of the Constitution.
If the Legislature, though ex facie purports
to provide for compensation or indicates the principles for ascertaining the
same, but in effect and substance takes away a property without paying
compensation for it will be exercising power which it does not possess. If the
Legislature makes a law for acquiring a property by providing for an illusory
compensation or by indicating the principles for ascertaining the compensation
which do not relate to the property acquired or to the value of such property
at or within a reasonable proximity of the date of acquisition or the
principles are so designed and so arbitrary that they do not provide for
compensation at all, one can easily hold that the Legislature made the law in
fraud of its powers.
Briefly stated the legal position is as
follows : If the question pertains to the adequacy of compensation, it is not
justiciable; if the compensation fixed or the principles evolved for fixing it
disclose that the legislature made the law in fraud of powers in the sense we
have explained, the question is within the jurisdiction of the Court.
The next question is whether the Amending Act
was made in contravention of Art. 31(2) of the Constitution. The Amending Act
prescribes the principles for ascertaining the value of the property acquired.
It was passed to amend the Land Acquisition Act, 1894, in the State of Madras
for the purpose of enabling the State to acquire lands for housing schemes.
"Housing Scheme" is defined to mean "any State Government scheme
the purpose of which is increasing house accommodation" and under s. 3 of
the Amending Act, s. 23 of the Principal Act is made applicable to such
acquisition with certain modifications. In s. 23 of the Principal Act, in
sub-s. (1) for clause first, the following clause is substituted :
"first, the market value of the land at
the date of the publication of the notification under section 4, subsection (1)
or an amount equal to the average market value of the land during the five
years immediately preceding such date, whichever is less." After clause
sixthly, the following clause was added "seventhly, the use to which the
land was put at the date of the publication of the notification under section
4, sub-section (1)." Sub-section (2) of S. 23 of the Principal Act was
amended by substituting the words, in respect of solatium, "fifteen per
centum" by the words "five per centum". In s. 24 of the
Principal Act after the clause seventhly the following clause was added :
"eighthly, any increase to the value of
the land acquired by reason of its suitability or adaptability for any use
other than the use to which the land was put at the date of the publication of
the notification under section 4, sub-section (1)." Under S. 4 of the
Amending Act, the provisions of s. 3 thereof shall apply to every case in which
proceedings have been started before the commencement of the said Act and are
pending. The result of the Amending Act is that if the State Government
acquires a land for a housing purpose, the claimant gets only the value of the
land at the date of the publication of the notification under S. 4(1) of the
Principal Act or an amount equal to the average market value of the land during
the five years immediately preceding such _date, whichever is less. He will get
a solatium of only 5 per centum of such value instead of 15 per centum under
the Principal Act. He will not get any compensation by reason of the
suitability of the land for any use other than the use for which it was put on
the date of publication of the notification. The second principle is only for a
solatium and it is certainly within the powers of the Legislature to fix the
quantum of solatium in acquiring the land. Nor can we say that the first
principle amounts to fraud on power.
In the context of continuous rise in land
prices from year to year depending upon abnormal circumstances it cannot be
said that the fixation of average price over 5 years is not a principle for
ascertaining the price of the land in or about the date of acquisition. The
third principle 631 excludes what is described by Courts as the potential value
of the land acquired. When a land is acquired, compensation is determined by
reference to the price which a willing vendor might reasonably expect to obtain
from a willing purchaser. The Judicial Committee in Sri Raja Vyricherla
Narayana Gajapatraju Bahdur Garu v. The Revenue Divisional Officer,
Vizianagaram(1) held in clear terms that in the case of compulsory acquisition,
"the land is not to be valued merely by reference to the use to which it
is being put at the time at which its value has to be determined........ but
also by reference to the uses to which it is reasonably capable of being put in
the future." In awarding compensation if the potential value of the land
is excluded, it cannot be said that the compensation awarded is the just
equivalent of what the owner has been deprived of. But such an exclusion only
pertains to the method of ascertaining the compensation. One of the elements
that should properly be taken into account in fixing the compensation is
omitted : it results in the inadequacy of the compensation, but that in itself
does, not constitute fraud on power, as we have explained earlier. We,
therefore, hold that the Amending Act does not offend Art.
31(2) of the Constitution.
Mr. Viswanatha Sastri then contended that
though the lands were being acquired for the ostensible purpose of housing
schemes; the real purpose was to provide revenue for the State. it is stated
that the acquisition is made for and on behalf of the State Housing Board at
Rs. 50 or Rs. 60 per ground, that the said Board sells the lands so acquired to
private individuals, including the original owners thereof, if the Housing
Board so pleased, at a price of Rs. 300/per ground, and that it is a device to
get revenue for the State. On behalf of the State counter-affidavits are filed
in the three petitions denying that the lands are being acquired for filling
the coffers of the State and stating that the schemes for acquisition are
worked out at no-profit-no-loss basis. It appears from the counter affidavits
and the documents filed that there cannot possibly be any sinister motive
behind the proposed acquisition. Madras is a growing, city. By letter dated,
October 20, 1959, the Government of India suggested to the States for taking on
hand development schemes. The Government of Madras had considered the question
of development of the "neighborhoods" of the Madras city for relieving
the growing congestion and overcrowding in the city; and after making the
necessary enquiries and investigations, by order dated,.
(1) I.L.R.  Mad. 532. Sup. CI/65-632
February 13, 1960, it directed the State Housing Board to take immediate steps
for preparing composite layouts for the "West Madras" and Vyasarpadi
areas after fixing up the limits of the areas in the manner indicated by the
Board and for the acquisition and development of the areas as
"neighborhoods" in accordance with the Land Acquisition and
Development Scheme of the Government of India. It directed the said Board to
give priority to the "West Madras" over the Vyasarpadi" area in
the matter of preparation of composite layouts and acquisition. pursuant to the
direction schemes were framed and acquisition proceedings were initiated. It is
stated in the counter-affidavit "The lands are being acquired with a view
to develop them into composite housing colonies making provision therein to
persons in various strata of society, from slum dwellers upwards, and
eventually providing for high schools, elementary schools, dispensaries,
shopping centers, police stations, and playgrounds and all other community
It is a composite scheme involving heavy
expenditure and adjustments of civil demands of the rich and the poor.
Whatever profit is made in the sales of land
will be pumped back for improving the colony and for providing amenities for
the poorer classes of the society. Except the bare statement by the petitioners
in their affidavits that the lands cheaply acquired are being sold at higher
prices, the averments of the State that the acquisition is part of a larger
scheme of building up of a housing colony on modern lines providing for the
rich and the poor alike have not been denied. It is not necessary to pursue the
matter further. The petitioners have failed to establish that their lands are
being acquired as a device to improve the revenue of the State. Indeed, we are
satisfied that the lands are being acquired bona fide for developing a housing
The last contention of Mr. Viswanatha Sastri
is that the Amending Act is hit by Art. 14 of the Constitution. The law on the
subject is well-settled. Under Art. 14 the State shall not deny to any person
equality before the law or the equal protection of the laws within the
territory of India.
But this does not preclude the Legislature
from making a reasonable classification for the purpose of legislation.
It has been held in a series of decisions of
this Court that the said classification shall pass two tests, namely, (i) the
classification must be founded on an intelligible differential which
distinguishes persons and things left 633 out of the group; and (ii) the
differential must have a rational relation to the object sought to be achieved
by the statute in question. To ascertain whether the impugned Act satisfies the
said two tests, three questions have to be posed, namely, (i) what is the
object of the Act ? (ii) what are the differences between persons whose lands are
acquired for the housing schemes and these whose lands are acquired for
purposes other than housing schemes or between the lands so acquired? and (iii)
whether those differences have any reasonable relation to the said object. On a
comparative study of the Principal Act and the Amending Act, we have shown
earlier, that if a land is acquired for a housing scheme under the Amending
Act, the claimant gets a lesser value than he would get for the same land or a
similar land if it is acquired for a public purpose like hospital under the
Principal Act. 'Me question is whether this classification between persons
whose lands are acquired for housing schemes and persons whose lands are
acquired for other public purposes has reasonable relation to the object sought
to be achieved. The object of the Amending Act is to acquire lands for housing
schemes. It may be, as the learned counsel contends, the Amending Act was
passed to meet an urgent demand and to find a way out to clear up slums, a
problem which has been baffling the city authorities for a long number of
years, because of want of funds. But the Act as finally evolved is not confined
to any such problem. Under the Amending Act lands can be acquired for housing
schemes whether the object is to clear slums or to improve housing facilities
in the city for rich or poor. It may be assumed that in the Madras city the
housing problem was rather acute and there was abnormal increase in population
and consequent pressure on accommodation, and that there was also an urgent
need for providing houses for the middle-income groups and also to
slum-dwellers. However laudable the objects underlying the Amending Act may be,
it was so framed that under the provisions thereof any land, big or small,
waste or fertile, owned by rich or poor, can be acquired on the ground that it
is required for a housing scheme. The housing scheme need not be confined to
slum clearance; the wide phraseology used in the Amending Act permits
acquisition of land for housing the prosperous section of the community. It
need not necessarily cater to a larger part of the population in the city it
can be confined to a chosen few. The land could have been acquired for all the
said purposes under the Principal Act after paying the market value of the
'Me Amending Act empowers the State to
acquire land for housing schemes at a 634 price lower than that the State has
to pay if the same was acquired under the Principal Act.
Now what are the differences between persons
owning lands in the Madras city or between the lands acquired which have a
reasonable relation to the said object. It is suggested that the differences
between people owning lands rested on the extent, quality and the suitability
of the lands acquired for the said object. The differences based upon the said
criteria have no relevance to the object of the Amending Act. To illustrate :
the extent of the land depends upon the magnitude of the scheme undertaken by
the State. A large extent of land may be acquired for a university or for a
network of hospitals under the provisions of the Principal Act and also for a
housing scheme under the Amending Act. So too, if the housing scheme is a
limited one, the land acquired may not be as big as that required for a big
university. If waste land is good for a housing scheme under the Amending Act,
it will -equally be suitable for a hospital or a school for which the said land
may be acquired under the Principal Act. Nor the financial position or the
number of persons owning the land has any relevance, for in both the cases land
can be acquired from rich or poor, from one individual or from a number of
persons. Out of adjacent lands of the same quality and value, one may be
acquired for a housing scheme under the Amending Act and the other for a
hospital under the Principal Act; out of two adjacent plots belonging to the
same individual and of the same quality and value, one may be acquired under
the Principal Act and the other under the Amending Act. From whatever aspect
the matter is looked at, the alleged differences have no reasonable relation to
the object sought to be achieved. It is said that the object of the Amending
Act in itself may project the differences in the lands sought to be acquired
under the two Acts. This argument puts the cart before the horse. It is one thing
to say that the existing differences between persons and properties have a
reasonable relation to the object sought to be achieved and it is totally a
different thing to say that the object of the Act itself created the
differences. Assuming that the said proposition is sound, we cannot discover
any differences in the people owning lands or ill. the lands on the basis of
the object. The object is to acquire lands for housing schemes at a low -price.
For achieving that, object, any land falling in any of the said categories can
be acquired under the Amending Act. So too, for a public purpose any such land
can be acquired under the Principal Act. We, 635 therefore, hold that
discrimination is writ large on the Amending Act and it cannot be sustained on
the principle of reasonable classification. We, therefore, hold that the
Amending Act clearly infringes Art. 14 of the Constitution and is void.
In this view it is not necessary to express
our opinion on the question whether the Amending Act infringes Art. 19 of the
In the, result it is hereby declared that the
Amending Act is void. We direct the issue of writs of mandamus restraining the
respondents from proceeding with the acquisition under the provisions of the
Amending Act. This order will not preclude the respondents from continuing the
proceedings under the provisions of the Land Acquisition Act, 1894, in
accordance with law. The petitioner in Writ Petition No. 144 of 1963 will get
one set of costs, and the petitioner in Writ Petitions Nos. 227 and 228 of 1963
will get one set of costs. One hearing fee.