Sardarmal Lalwani Vs. State of Madhya
Pradesh & Ors  INSC 297 (11 December 1972)
SIKRI, S.M. (CJ) SIKRI, S.M. (CJ) SHELAT,
BEG, M. HAMEEDULLAH DWIVEDI, S.N.
CITATION: 1973 AIR 1383 1973 SCR (3) 52 1973
SCC (1) 599
Land Acquisition Act, 1894 amended by Land
Acquisition (Madhya Pradesh Amendment) Act 5 of 1959-Compensation for land in
Bhopal area to be an basis of market value as on October 1, 1955-Date found
irrelevant-Section 3 Part C of Act 5 of 1959, making provision for compensation
in Bhopal, area are discriminatory and violative of Art. 14 of Constitution.
The petitioner's land situated in Bhopal area
Was acquired under the provisions of the Land Acquisition Act 1894 as amended
by the Land Acquisition (Madhya Pradesh Amendment) Act 5 of 1959. The
acquisition proceedings were commenced in 1962 and the Land Acquisition Officer
gave his award in 1963. By virtue of Section 3 of the 1959 Act the award was
given on the basis of the market value of the land as on October, 1, 1955 plus
25% extra compensation, and not on the basis of the market value of the land on
or about the date of acquisition. In a petition under Art. 32 of the
Constitution, the petitioner contended that the impugned Act violated Art. 14
of the Constitution as there was no rational classification on the basis of
which the prices of Bhopal area had not been determined by the principle by
which the market prices of other places would be determined.
HELD : The States Reorganisation Commission
in its report submitted on September 30, 1955 had recommended that Jabalpur
should be the capital of the new State of Madhya Pradesh. Bhopal was made the
capital on November 1, 1956.
There was no material to show that on October
1, 1955 it was known that Bhopal may be the capital of the State or that there
was speculation in land because of this fact. In the light of the judgment of
this Court in Vithal Rao's case s.
3 Part C of the impugned Act must be held to
be violative of Art. 14 and the petition must be allowed. [56D] Satish Kumar v.
State of M. P. , A.I.R. 1961 M.P. 880 referred to.
Nagpur Improvement Trust v. Vithal Rao,
 3 S.C.R. 39, applied.
ORIGINAL JURISDICTION : Writ Petition No. 646
(Under Article 32 of the Constitution of
India for the enforcement of fundamental rights.) S. Banerjee and P. K. Ghosh,
for the petitioner.
Y. S. Dharmadhikari and I. N. Shroff, for
respondent No. 1.
Naunit Lal, for Advocate-General, Assam
Santosh Chatterjee and G. S. Chatterjee, for
Advocate- General, Orissa (Intervener).
53 O. P. Rana, for Advocate-General, U.P.
A. V. Rangam and A. Subhashi, for
Advocate-General, Tamil Nadu (Intervener).
The Judgment of the Court was delivered by
Sikri, C.J. This petition was heard along with Civil Appeals Nos. 2139-2140 of
1968. The facts are different but the principles of law to be applied are the
same which we have laid down in our judgment in Civil Appeal No. 2139 of 1968.
The facts in this petition are that the Land
Acquisition Act, 1894 was amended by the Land Acquisition (Madhya Pradesh
Amendment) Act 1959 (Madhya Pradesh Act V of 1959) hereinafter referred to as
the impugned Act.
By section 3 of the impugned Act the Land
Acquisition Act, 1894, in its application to Bhopal area, was amended as
1.After clause (g) of Sec. 3 of it he Act of
1894 a new clause was added defining "Bhopal area".
2.A new section S. 17A, was inserted in the
Land Acquisition Act, 1894, giving to the Government the power to issue a
direction to the Collector that it is urgently necessary to acquire immediate
possession of any building site situated in Bhopal area, and providing that
upon the issue of such a direction the provisions of Sec. 17 would in all
respects apply in the case of such site as they apply in the case of waste or
3.A new proviso was added to the first clause
of Sec. 23(1). The proviso runs thus "Provided that when the market-value
of any land situate in Bhopal area, in respect of which the date of publication
of the notification aforesaid is after the commencement of the Land Acquisition
(Madhya Pradesh Amendment) Act, 1957 (21 of 1958), is in excess of its
market-value as on the 1st day of October, 1955, the market-value thereof shall
be deemed to be its market-value as on the 1st day of October, 1955." 4.-A
new sub-section (3) was inserted in S. 23 enjoining the Court to award a
further sum not exceeding twenty five per cent of the market-value of the land
acquired and an additional sum provided under sub-sec. (2), as the Court may
think fit, "in consideration of the appreciation in the price of the land
concerned by reason of the location of the capital at 'Bhopal, regard being had
to the situation of such land." 54 The notification to acquire the land in
question under s.
4(1) of the Land Acquisition Act, 1894, was
published in the Madhya Pradesh Rajpatra, dated October 3, 1962.
Notification under s. 6(1) of the said Act
was published in the Madhya Pradesh Rajpatra datead November 23, 1962.
Thereafter, the notice under S. 9(1) was
published for general information and notices under s. 9(3) were issued to the
individual interested parties. Ultimately, the Land Acquisition Officer gave
his award in the Land Acquisition Case No. 51/LA/62 on March 25, 1969. The
award was given on the basis of market value of :the land as on October 1, 1955
plus 25% extra compensation, and not on the basis of the market value of the
land on or about the date of acquisition, by virtue of the provisions of S. 3
of the Land Acquisition (M.P. Amendment) Act, 1959.
It is alleged inter alia that Bhopal was made
Capital of Madhya Pradesh on November 1, 1956. We were referred to the report
of the States Reorganisation Commission, 1956.
"486. The new State, which can
appropriately be described as Madhya Pradesh will be a compact unit. It will
bring almost the whole of Bundalkhand and Baghelkhand under one administration.
Jabalpur will be situated at a central place in this unit and has or will soon
have some important facilities like water supply and availability of electrical
power. It will, in our opinion, be a suitable capital." This report was
submitted on September 30, 955. It is quite clear from this para that on the
date of the report the proposed capital was Jabalpur and there could thus be no
speculation in land in Bhopal before the announcement of Bhopal as capital.
In view of these facts, it is submitted in
ground (viii) of the petition that "the impugned Act violates Art. 14 of
the Constitution as there is no rational classification on the basis of which
the prices of Bhopal area have not been determined by the principle by which
the market prices of other places would be determined." It is further
submitted that "there can be no rational basis to differentiate between
Bhopal and other areas for award of compensation merely because Bhopal was made
Capital. The theory that in view of Capital, there was speculative prices at
Bhopal and the prices at any given time might not reflect the real price, is
neither rational nor reasonable." It is also alleged that the date,
October 1, 1955, is an arbitrary date for the purpose of fixing the market
The only reply given to this ground is
contained in para 21 of the counter affidavit on behalf of the State wherein it
is stated 55 "With reference to ground (viii), of the petition, I deny-
that the Amendment Act infringes any- fundamental right of the petitioner and
in particular Article 14 of of the Constitution." The learned Advocate
General was unable to point out to us any material to show that there was any
expectation or speculation on or about the 1st October, 1955 that Bhopal would
be the Capital of Madhya Pradesh. If this fact had been established, it may
have been reasonable to have fixed the date for the purpose of determining the
market value as 1st October 1955.
But this does not mean that for all time to
come for any land acquired by the State for a capital, the date of announcement
of the Capital would be the relevant date. In this case, the acquisition was in
1962 and prices may have risen not only because of speculative dealings but
because of general increase in prices throughout the State.
In Satish Kumar v. State of M.P.(1) the
Madhya Pradesh High Court upheld the validity of the impugned Act. The High
Court justified the basis to differentiate the land located in Bhopal area thus
"In support of this difference, it has
been averred in the return filed by the, State that in the reorganisation of
the States, which was a political exigency, the fixation of the Capital at
Bhopal was "an accident" not due to any economic or industrial
reasons; that when it was decided to locate the Capital of the State in the
underdeveloped town, there was heavy speculation in land prices; and that,
therefore, these artificially inflated prices could not be taken as a proper
basis for fixing the real market-value of the property. The amendments
themselves indicate that it was because of the location of the Capital at
Bhopal that they had to be made. Now, it cannot be denied that whenever a
capital or a big industry is located in a town or even in a city, land values
are suddenly pushed up G by prospective sellers and the increase in them during
the interregnum between the date when it is known that the town will become
more important and the date of acquisition of land may not represent its real
value. The prospect of acquisition of vast areas of private lands in
connection, with a capital or industrial project in town always gives rise to
speculative dealings in lands in the town. When such speculative dealings (1)
A.I.R. 1961 M.P. 280.
56 occur it is not unreasonable and improper
to compute the market-value of the land with reference to a date proximate to
the date of acquisition so as to exclude, speculative rise in determining the
market value of the land.
On the material on record, it is impossible
for us to hold that in this case there has been a discrimination in the matter
of compensation between land acquired in Bhopal area and other areas in the
State. The classification between land in Bhopal area and other parts of the
State is with reason and reasonable, and is for the purpose of enabling the
State to acquire land at a reasonable price in Bhopal for the construction of
the Capital. In our view, the amendments are not hit by Article 14 of the
Constitution." With respect, the High Court has not examined the question
of the validity of the reason for fixing the relevant date as October 1, 1955.
There is no material on the record to show that on October 1, 1955, it was
known that Bhopal may be the Capital of the State or that there was speculation
in land because of this fact.
We have in the judgment delivered in Nagpur
movement Trust v. Vithal Rao(1) examined Art. 14 and its implications as far as
land acquisition is concerned. In our view, in the light of that judgment, the
petition must be allowed.
In the result, the petition is allowed with
costs and it is declared that section 3 part C of the impugned Act is hit by
the provisions of Art. 14 of the Constitution.
(1)  3 S.C.R. 39.