Shri Ramtanu Co-Operative Housing
Society Ltd. & ANR Vs. State of Maharashtra & Ors [1970] INSC 149 (5
August 1970)
05/08/1970 RAY, A.N.
RAY, A.N.
HIDAYATULLAH, M. (CJ) SHELAT, J.M.
MITTER, G.K.
VAIDYIALINGAM, C.A.
CITATION: 1970 AIR 1771 1971 SCR (1) 719 1970
SCC (3) 323
CITATOR INFO:
F 1971 SC1188 (4) R 1976 SC1031 (18) F 1977
SC 183 (6)
ACT:
Maharashtra Industrial Development Act,
1961-Maharashtra Development Corporation formed under the Act whether a trading
corporation Legislative competence-Legislation falls under Entry 24 of the
State List and not under Entry 43 of Union List-Act is valid-No discrimination
in procedure for acquisition under above Act and Land Requisition Act, 1894Proviso
to s. 33 of Maharashtra Act does not restrict judicial power of Collector in
determining compensation.
HEADNOTE:
In a petition under Art. 32 of the
Constitution of India the petitioners challenged the validity of the
Maharashtra Industrial Development Act, 1961. In support of the petition it was
contended : (i) that the Maharashtra legislature was incompetent to enact the
Act because the Act was for the incorporation, regulation and winding up of the
Maharashtra Development Corporation which was a trading corporation;
accordingly the impugned legislation fell within Entry 43 of List I (.Union
List) or the Seventh Schedule of the Constitution; (ii) that there was a
special procedure designed by the land Acquisition Act for acquisition of land
for the companies whereas in the present case under the provisions of the impugned
Act the State was acquiring land for companies without adopting the procedure
of the Land Acquisition Act and thus there was procedural discrimination; (iii)
that the proviso to s. 33 of the impugned Act providing that no compensation
exceeding such amount as the State Government may by general order specify to
be paid for acquisition shall be determined by the Collector without the
previous approval of the State Government or its nominee, was restrictive of
the judicial power of the Collector.
HELD : (i) It is the true intent of the Act
i.e. its pith and substance which will determine the validity of the Act.
Industries come within Entry 24 of the State
List subject to the provision of Entry 7 and Entry 52 of the Union List of the
Constitution. Entry 7 of the Union list relates to industries declared by
Parliament by law to be necessary for the purpose of defence or for the
prosecution of war. Entry 52 of the Union List relates industries the control
of which by the Union is declared by Parliament by law to be expedient in the
public interest. The establishment, growth and development of industries in the
State of Maharashtra does not fall within Entry 7 and Entry, 52 of the Union
List. Establishment growth and development of industries in the State is within
the State List of industries. The, pith and substance of the Act is
establishment growth and development of industries, and acquisition of land in
that behalf carries out the purposes of the Act by setting up the Corporation
as one of the limbs or agencies of the Government. 'Me powers and functions of
the Corporation show in no certain terms that these are all in aid of the
principal and predominant purpose of establishment and growth of industries.
When the Government is satisfied that the Corporation has substantially
achieved the purposes for which the Corporation is established, 720 the
Corporation will be dissolved because the raison d'etre is gone. It must,
therefore, be held that the Act is a valid piece of legislation. [725 F-726 D]
The contention that the Corporation was a trading one, or that it Was -a
Government company within the meaning of s. 617 of the Companies Act, 1956
could not be accepted.
[Reason discussed] The true character of the
Corporation in the present case is to act as an architectural agent of the
development and growth of industrial towns by establishing and developing
industrial estates and industrial areas. [727 B-728 F] (ii) The contention that
there was procedural discrimination is between the present Act and the Land
Acquisition Act could not be accepted.
The Maharashtra Industrial Development Act is
a special one having the specific and special purpose of growth, development
and Organisation of industries. That Act has its own procedure. Under the Land
Acquisition Act acquisition is at the instance of and for the benefit of a
company whereas under the present Act acquisition is solely by the State for
public purposes. 'Me two acts arc dissimilar in situation and circumstances.
[728 H-729 E] (iii) The proviso to s. 33 no doubt provides that where the
amount of compensation determined by the Collector is higher than what the
State Government may by general order specify the approval of the State Government
is necessary, But subs. (5) of s. 33 states that in determining the
compensation the Collector shall be guided by the provisions contained in
sections 23 and 24 and other relevant provisions of the Land Acquitition Act.
There is no ceiling fixed by the Government. Further there is an appeal to the
Court from the decision of the Collector. The decision of the Court will
finally determine the amount of compensation. There is thus no restriction on
the powers of the Collector in the matter of determination of compensation,
although the approval of Government may be necessary in the Government
interest. [729 F-730 C]
ORIGINAL JURISDICTION: Writ Petitions Nos.
182 of 1969 and 42 to 45 of 1968.
Petition under Art. 32 of the Constitution of
India for enforcement of the fundamental rights.
D. M. Parulekar and A. G. Ratnaparkhi, for
the petitioners (in W.P. No. 182 of 1969).
S. S. Shukla, for the petitioners (in W.P.
No. 42 to 45 of 1968.
S. T. Desai, G. L. Sanghi, B. D. Sharma for
S. P. Nayar, for respondents Nos. 1 to 3 (in W.P. No. 182 of 1969) and the
respondents (in W.P. Nos. 42 to 45 of 1968).
The Judgment of the Court was delivered byRay,
J. These petitioners raise two principal questions.
First, whether the State of Maharashtra
(hereinafter referred to as the State) is competent to enact the Maharashtra
Industrial Development Act, + 1961 (hereinafter referred to as the Act):
secondly, whether there is procedural discrimination between the Maharashtra
Industrial Development Act, 1961 and the Land Acquisition Act, 1894, 721 The
contentions of the petitioners are that. the Act is for the incorporation,
regulation -and winding up of the Maharashtra Development Corporation
(hereinafter referred to as the Corporation) and that the Corporation is a
trading one and therefore the impugned legislation falls within Entry 43 of
List I of the Seventh Schedule of the Constitution. On behalf of the State-it
is said on the other hand that the Act is for the growth and development of
industries in the State of Maharashtra and for acquisition of land in that
behalf and the Corporation is established for carrying out the purposes of the
Act, and, therefore the legislation is valid.
The true character scope and intent of the
Act is to be ascertained with reference to the purposes and the provisions of
the Act. The Act is one to make a special provision for securing the orderly
establishment in industrial areas and industrial estates of industries in the
State of Maharashtra, and to assist generally in the Organisation thereof, and
for that purpose to establish an Industrial Development Corporation, and for
purposes connected with the matters aforesaid.
The Corporation is established for the
purpose of securing and assisting the rapid and orderly establishment and
organisation of industries in industrial areas and industrial estates in the
State of Maharashtra. The Corporation consists of 8 members, two of whom are
nominated by the. State Government of whom one shall be the Financial Adviser
to the Corporation, one member nominated by the State Electricity Board, one
member nominated by the Housing Board and three members nominated by the State
Government, from amongst person appearing to Government to be qualified as
having had experience of , and having shown capacity in, industry or trade or
finance or who are in the opinion of the Government capable of representing the
interest of persons engaged or employed therein, and the Chief Executive
Officer of the Corporation, who shall be the Secretary of the Corporation.
The functions of the Corporation shall, be
generally to promote and assist in the rapid and orderly establishment, growth
and development of industries in the State of Maharashtra and to establish and
manage industrial estates at places selected by the State Government, develop
industrial areas selected by the State Government for the purpose and make them
available for undertakings to establish themselves, assist financially by loans
industries to move their factories into such estates or areas, and to undertake
schemes or works, either jointly with other corporate bodies or institutions,
or 69Sup.CI(P)71-2 722 with Government or local authorities, or on agency
basis, in furtherance of the purposes for which the Corporation is established
and all matters connected therewith.
An industrial area under the Act means any
area declared to be an industrial area by the State Government by notification
in the Official Gazette which is to be developed and where industries are to be
accommodated. An industrial estate under the Act means any site selected by the
State Government, where the Corporation builds factories and other buildings
and makes them available for any site selected by the State Government, where
the Corporation means the carrying out of building, engineering, quarrying or
other operations in, on, over or under land, or the making of any material
change in any building or land, and includes redevelopment, but does not
include mining operations. Amenity under the Act includes road, supply of water
or electricity, street lighting, drainage, sewerage, conservancy and such other
conveniences as the State Government may by notification in the Official
Gazette specify to be an amenity for the purposes of the Act.
We have referred to these expressions,
industrial area, industrial 'estate, development and amenity in order to
appreciate the general powers of the Corporation to discharge the functions of
the Corporation in regard to the establishment, growth and development of
industries, in the State. These powers are to acquire and hold property,
movable and, immoveable for the performance of any of its activities, and to
lease, sell, "change or otherwise transfer any property held by the
Corporation on such conditions as may be deemed proper by the Corporation and
also to purchase by agreement or to take on lease or under any form of tenancy
any land, to erect such buildings and to "execute such other works as may
be necessary for the purpose of carrying out its duties and functions, to
provide or cause to be provided amenities and common facilities in industrial
estates and industrial areas and construct and maintain or cause to be
maintained works and buildings therefore, to make available buildings on hire
or sale to industrialists or persons intending to start industrial
undertakings, to construct buildings for the housing of the employees of such
industries, to allot factory sheds or such buildings or parts of buildings,
including residential tenements to suitable persons in the industrial estates
established or developed by the Corporation, and to, do such other things and
perform such acts as it may think necessary or expedient for the proper conduct
of its functions, and the carrying into effect the purposes of this Act.
Broadly stated 'the functions and powers of
the Corporation are to-develop industrial areas and industrial estates by
providing. amenities of Toad, supply of water or electricity, street,.
lighting, 723 drainage, sewerage, conservancy and other conveniences, secondly
to construct works and buildings, factory sheds and thirdly, to make available
buildings on hire or sale to industrialists or persons intending to start
industrial undertakings and to allot factory sheds, buildings, residential
tenements to suitable persons in industrial estates established or developed by
the Corporation and to lease, sell, exchange or otherwise transfer any property
held by the Corporation on such conditions as may be deemed proper by the
Corporation.
The development of industrial areas and
industrial estates is intended to serve two objects. In the first place, there
is to be an orderly establishment and growth of industries in the Bombay Poona
sector. The second object is to secure dispersal of industries from the
congested areas of the Bombay Poona sector to the under-developed parts of the
State. The industrial areas are broadly classified into two categories, namely,
first, those meant for engineering and other industries which are not
obnoxious, and, secondly, those meant for chemical industries. The establishment
and growth of industries in the State is inextricably bound up with
availability of land. Available land in limited Such limited supply leads to
speculation in land. Power is therefore required for compulsory acquisition of
land to achieve the purposes of the Act. At the same time, land owners are not
to be deprived of the legitimate benefit of reasonable increase in land values
in a developing economy.
Development of chemical industries requires
long stretches of pipelines to be laid for moving gas and other liquid ,
chemical products. The growth of industries in the State by establishment of
industrial areas and industrial estates also means laying pipelines for
carrying gas, water, electricity and constructing sewerage and drains. These
amenities are essential. The absence of amenities is envisaged and answered in
the Act by empowering the Corporation to provide these essential amenities,
facilities and conveniences.
The principal functions of the Corporation in
regard to the establishment, growth and development of industries in the are
first to establish and manage industrial, estates at selected places and
secondly to develop industrial areas selected by the State Government. When
industrial areas are selected the necessity of acquisition of land in those
areas is apparent. The 'Act, therefore, contemplates that the, ate Government
may acquire land by publishing a notice specifying the particular purpose for
which such land is required. Before: the publication of the notice the owner of
the land is given an -opportunity, to show cause as to 724 why the land should
not be acquired. The State after considering the cause shown by the owner the
State Government may pass such orders as it deems fit. When a notice is
published for acquisition of land, the land, shall, on and from the date of
such publication, vest absolutely in the State, Government free from all encumbrances.
Where the land has be-en acquired for the Corporation or any local authority,
the State Government shall, after it has taken possession of the land, transfer
the land to the Corporation or that local authority, for the purposes for which
the land has been acquired subject to such terms and conditions which the
-State Government may deem fit to impose. We have already noticed that for the
purpose of the Act, namely, the establishment -and development of industries in
the State the Corporation will establish industrial estates and develop
industrial areas.
Apart from establishing industrial estates
and developing industrial areas the Corporation may dispose of any land
acquired by the State Government and transferred to the Corporation without
undertaking or carrying out any development thereof or transfer such land after
undertaking or carrying out any development as it thinks fit. These powers of
the Corporation with respect to the disposal of land are to be exercised so far
as practicable, that where the Corporation proposes to dispose of by sale any
such land without any development having been undertaken or carried ,out there on,
the Corporation shall offer the land in the first instance to the persons from
whom it was acquired if they desire to purchase it subject to such requirements
as to its development and use as the Corporation may think fit to impose.
Against, the -persons who are residing or carrying on business or other
activities on any such land shall, if they desire to obtain accommodation -on
land belonging to the Corporation and are willing to comply with any
requirements of the Corporation as to its development and use, have an
opportunity to obtain thereon accommodation suitable to their reasonable
requirements on terms settled with due regard to the price at which any such
land has been. acquired 'from them.
The other provisions in the Act are that the
State Government may upon such conditions as may be agreed between the State
'Government and the Corporation, place at the disposal of the Corporation any
land vested in the, State Government. After any such land has been developed
by, or under the control and super-vision of, the Corporation, it shall be
dealt with by the Corporation in accordance with the regulations made, and
directions given -by the State Government in this behalf. Further, if any land
placed at the disposal of the Corporation is required at any time thereafter by
the State Government, the Corporation shall replace 725 it at the disposal of
the State Government upon such terms and conditions as may be mutually agreed
upon.
There are two-other important provisions in
the Act. In the first place, the State Government may issue to the Corporation
such general or special directions as to policy as it may think necessary or
expedient for the purpose of carrying out the purposes of the Act,_ and the
Corporation shall be bound to follow and act upon such directions.
These directions will be in the field of'
establishment and management of industrial estates and development of
industrial areas and carrying out the other powers of the Corporation in regard
to the provision of amenities and common facilities, and assisting
industrialists or industrial undertakings in. obtaining buildings or factory
sheds or residential tenements or land for development of industries. The
second important provision is that when the State Government is satisfied that
the purposes for which the Corporation is established under the Act have been
substantially achieved so as to render the continued existence of the
Corporation in the opinion of the State Government unnecessary that Government
may by notification in the Official Gazette declare that the Corporation shall
be dissolved with effect , from such date as may be specified in the
notification and the Corporation shall be deemed to be dissolved 'accordingly.
Upon such dissolution, all properties, funds and dues which are vested' in or realisable
by the Corporation shall vest in or be realised by the State Government and all
liabilities enforceable against the Corporation shall be enforceable against
the State Government.
It is in the background of the purposes of
the Act and powers and functions of the Corporation that the real and true
character of the legislation will be determined. That is the doctrine of
finding out the pith and substance of an Act. In deciding the pith and
substance of the legislation, the true test is not to find out whether the Act
has encroached upon or invaded any forbidden field but what the pith and
substance of the Act is. It is true intent of the Act which will determine the
validity of the Act.
Industries come within Entry 24 of the State
List subject to the provision of Entry 7 and Entry 52 of the Union List of the
Constitution. Entry 7 of the Union List relates to industries declared by
Parliament by law to necessary for the purpose of defence or for the
prosecution of war.
Entry 52 of the Union List relates to
industries, the control of which by the Union is declared by Parliament by law
to be expedient in the public interest. The establishment, growth and
development of industries in the State of Maharashtra do not fall within Entry
7 and Entry 52 of the Union List. Establishment, growth and development of
industries in the State is within the 726 State List of industries. Furthermore
to effectuate the purposes of the development of industries in the State it is
necessary make land available. Such land can be made available by acquisition
or requisition. The Act in the present case deals with acquisition of land by
the State and on such acquisitions the State may transfer the land to the
Corporation which again may develop it itself and establish industrial estates
or may develop industrial areas. Acquisition or requisition of land falls under
Entry 42 of the Concurrent List. In order to achieve growth of industries it is
necessary not only to acquire land but also to implement the purposes of the
Act. The Corporation is therefore established for carrying out the purposes of
the Act. 'De pith and substance of the Act is establishment, growth and
Organisation of industries, acquisition of land in that behalf and carrying out
the purposes of the Act by setting up the Corporation as one of the limbs or
agencies of the Government. The powers and functions of the Corporation show
in' no ,uncertain terms that theseare all in aid of the -principal
and-predominant purpose of establishment, growth and establishment of
,industries. The Corporation is established for that purpose. When the
Government is satisfied that the Corporation has substantially achieved the
purpose for which the Corporation is established, the Corporation will be
dissolved because the raison detre is gone. We, therefore, hold that the Act is
a valid piece of legislation.
The petitioners contended that -the
Corporation was a trading one. The reasons given were that the Corporation
could sell property, namely, transfer land; that the Corporation had borrowing
powers-, and that the Corporation was entitled to moneys by way of rents and
profits.
Reliance was placed on the report of the
Corporation and in particular on the income and expenditure of the Corporation
to show that it was making profits. These features of transfer of land, or
borrowing of moneys or receipt of rents and profits will by themselves neither
be the indicia nor the decisive attributes of the trading character of the
Corporation. Ordinarily, a Corporation is established by shareholders with
their capital. The shareholders have their Directors for the regulation and
management of the Corporation. Such a Corporation set up by the shareholders,
carries on business and is intended for making profits.
When profits are earned by such a Corporation
they are distributed to shareholders by way of dividends or kept in reserve
funds. In the present case, these attributes of a trading Corporation are
absent. The Corporation is established by the Art for carrying out the purposes
of the Act. The purposes of the Act are development of industries in the State.
The Corporation consists of nominees -of the State Government, State
Electricity Board and the Housing Board. The functions and powers of the
Corporation indicate 'that the Corporation is acting as I a wing of the State
Government 727 in establishing industrial estates and developing industrial
areas, acquiring property for those purposes, constructing buildings, allotting
buildings, factory sheds to industrialists or industrial undertakings. It is
obvious that the Corporation will receive moneys for disposal of land,
buildings and other properties and also that the Corporation would receive rents
and profits in appropriate cases. Receipts of these moneys arise not out of any
business or trade but out of the sole purpose of establishment, growth and
development of industries.
The Corporation has to provide amenities and
facilities in industrial estates and industrial areas. Amenities of road,
electricity, sewerage and other facilities in industrial estates and industrial
areas are within the programme of work of the Corporation. The fund of the
Corporation consists of moneys received from the State Government, all fees,
costs and charges received by the Corporation, all moneys received by the
Corporation from the disposal of lands, buildings and other properties and all
moneys received by the Corporation by way of rents and profits or in any other
manner The Corporation shall have the authority to spend such sums out of the
general funds of the Corporation or from reserve and other funds. The
Corporation is to make provision for reserve and other specially denominated
funds as the State Government may direct. The Corporation accepts deposits from
persons, authorities or institutions to whom allotment or sale of land,
buildings, or sheds is made or is likely to be made in furtherance of the
object of the Act. A budget is prepared showing the estimated receipts and
expenditure. The accounts of the Corporation are audited by -an auditor
appointed by the State Government. These provisions in regard to the finance of
the Corporation indicate the real role of the Corporation, viz., the agency of
the Government in carrying out the purpose and object of the Act which is the
development of industries. If in the ultimate analysis there is excess of
income over expenditure that will not establish the trading character of the
Corporation. There are various departments of the Government which may have
excess of income over expenditure.
The Corporation is not a Government company
within the meaning of section 617 of the Companies Act, 1956 nor can the 'Companies
Act, 1956 be said to apply to the Corporation because under the provisions
contained in section 616 of the Companies Act that Act will apply to a company
governed by any special Act except in so far as the provisions of the Companies
Act are inconsistent with the provisions of such special Act. The provisions of
the Act in the present case in regard to incorporation, functions, powers and
dissolution of the Corporation show that the purposes 728 and objects of the
Act and the functions and powers of the Corporation are like the ward and weft
of the fabric of development of industries by the State.
There are two provisions of the Act which are
not to be found in any trading Corporation. In the first place, the sums
payable by any person to the Corporation are recoverable by it under this Act
as an arrear of land revenue on the application of the, Corporation. Secondly,
on dissolution of the Corporation the assets vest in and the liabilities become
enforceable against the State Government.
The underlying concept of a trading
Corporation is buying and selling. There is no aspect of buying or selling by the
Corporation in the, present case. The Corporation carries out the purposes of
the Act, namely, development of industries in the State. The construction of
buildings, the establishment of industries by' letting buildings on hire or
sale, the acquisition and transfer of land in relation to establishment of
industrial estates or development of industrial areas and of setting up of
industries cannot be said to be dealing in land or buildings for the obvious
reason that the State is carrying out the objects of the Act with the
Corporation as an agent in setting up industries in the State. The Act aims at
building an industrial town and the Corporation carries out the objects of the
Act. The hard core of trading Corporation is its commercial character. Commerce
connotes transactions of purchase and sale of commodities, dealing in goods.
The forms 'of business transactions may be varied but the real character is
buying and selling. The true character of the Corporation in the present case
is to act as an architectural agent of the development and growth of industrial
towns by establishing and developing industrial estates and industrial areas.
We are of opinion that the Corporation is not a trading one.
Counsel on behalf of the petitioners
contended that there was procedural discrimination between the Land Acquisition
Act and the Act in the present case. It was said that there was a special
procedure designed by the Land Acquisition Act for acquisition of land for the
companies whereas in the' present case the State was acquiring land for companies
without adopting the procedure of , the Land Acquisition Act. It is to be
remembered that the Act in the present case is a special one having the
specific and special purpose of growth, development and Organisation of
industries in the State of Maharashtra. The Act has its own procedure and there
is no provision in the Act for acquisition of land for a company as in the case
of Land Acquisition Act. In the present case, acquisition under the Act is for
the purpose of development of industrial 729 estates or industrial areas by the
Corporation or any other purpose in furtherance of the objects of the Act. The
policy underlying, the Act is not acquisition of land for any company but for
the one. and only purpose of development, Organisation and growth of industrial
estates and industrial areas. The Act is designed to have a planned industrial
city as opposed to haphazard growth of industrial areas in all parts of the
State. The Act is intended to prevent, .growth of industries in the developed
parts of the State. Industries are therefore to be set up in the developing or,
new parts of the State where new industrial towns will be brought into
existence.. The object of, the Act is to carve out planned areas for
industries.. On one side there will be engineering industries and on the other
there will be chemical industries. There will be localisation of industries
with the result that the residents and dwellers of towns and cities will not
suffer either from the polluted air or obnoxious. Chemicals of industries or
the dense growth of industries and industrial population, within and near about
the residential areas.
The Land Acquisition Act is a general Act and
that is why there is specific provision for acquisition of land by the, State
for public purpose and acquisition of land by the State for companies. The
present Act on the other hand is designed the sole purpose of development of
industrial areas and industrial estates and growth and development of
industries within the State. Industrial undertakings or persons who are engaged
in industries all become entitled to the' facilities on such industrial growth.
Under the Land Acquisition Act acquisition is at the instance of and for the
benefit of a company whereas under the present Act acquisition is solely by the
State for public purposes. The two acts are dissimilar in situations and
circumstances.
The petitioners contended that the provisions
as to compensation were a restriction on the judicial power of the Collector.
Section 33 of the Act deals with compensation.
The amount of compensation under the Act can
be determined by agreement between the State Government and the person to be
compensated. Where on the other hand no such agreement can be reached, the
State Government shall refer the case to the Collector. That is subsection (3)
of section 33 of the Act. The proviso to that sub-section is that no
compensation exceeding such amount as the State Government may by general
orders specify to b paid for such acquisition shall be determined by the
Collector without the previous approval of the State Government or such officer
as the State Government may appoint in that behalf. This proviso was construed
on behalf of the petitioners to be -a fetter on the judicial powers of the
Collector to determine compensation. Subsection (5) of section 33 of ',.he Act
states that in determining the amount of compensation the Collector shall be
guided by the pro730 visions contained in sections 23 and 24 and other relevant
provisions of the Land Acquisition Act These provisions indicate that if the
Collector will determine an amount higher than what the State Government may by
general orders specify, the approval of the State Government will be necessary.
There is no ceiling fixed by the Government.
Finally, there is an appeal to the Court from
the decision of the Collector. The decision of the Court will finally determine
the amount of compensation. We are of opinion that there is no restriction on
the, powers of the Collector in the matter -of determination of compensation,
although the approval of Government may be necessary in the Government
interest.
All the contentions advanced by the
petitioners fail. The petitions 'are dismissed with costs.
G.C. Petitions dismissed.
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