Vij
Resins Pvt. Ltd. & Anr Vs. State of Jammu & Kashmir & Ors [1989] INSC
188 (12 May 1989)
Pathak,
R.S. (Cj) Pathak, R.S. (Cj) Misra Rangnath
CITATION:
1989 AIR 1629 1989 SCR (3) 257 1989 SCC (3) 115 JT 1989 Supl. 214 1989 SCALE
(1)1303
ACT:
Articles
19(1)(f), 31(2) and 31(2A)--Constitutional validity of Jammu & Kashmir
Extraction of Resin Act, 1986:
Jammu
& Kashmir Extraction of Resin Act, 1986--Sections 3, 4 and 5--Whether
constitutionally valid--Resin--Ban on extraction by Private persons--Right to
appropriate usufruct of trees--Held right to property--Compensation payable
before property could be taken.
HEAD NOTE:
These
three Writ Petitions have been filed by three different Private Limited
Companies and their share-holders challenging the vires of the Jammu &
Kashmir Extraction of Resin Act (7 of 1986). The circumstances that led to the
filing of these Writ Petitions may be stated thus:
The
State of Jammu & Kashmir with a view to industrialise the under-developed
State formulated schemes and invited outsiders to set up industries in the
State and as a stimulus the Government offered land and other facilities.
The
Petitioner-Companies, in response to the said invitation went to the State of
Jammu & Kashmir and negotiated the arrangements, as a result of which each
Company had obtained a right to collect resin gum to process the same for
industrial purposes.
The
Petitioner Company in Writ Petition No. 751 of 1986 had obtained under
Government order dated 27.4.79 allotment of 10 to 12 lacs of blazes annually
for extraction of resin from the forests in Poonch and Rambam Divisions for a
period of 10 years. Government order granting rights had been made in favour of
the Petitioner Company in W.P. No. 794 of 1986.
The
Petitioner-Company in W.P. No. 798 of 1986 was a processor only and had
undertaken to work as a tapper. The orders passed in favour of these Companies
referred to above were challenged before this Court as being violative of Arts.
14 and 19 of the Constitution on the ground that grant of forest rights to the
Petitioners were arbitrary, mala fide and not in public interest. It was
contended that State largesse had been created in favour of the Petitioners at
the cost of State Exchequer and the grant created monopoly.
This
Court dismissed the Writ Petitions holding that there was no substance 258 in
any of the contentions advanced by the Petitioners.
Kasturi
Lal Lakshmi Reddy v. State of Jammu & Kashmir & Anr., [1980] 3 SCR
1336.
The
order made in favour of the Petitioner in W.P. No. 794 of 1986 and incorporated
in the agreement dated 6.11.1978 was also challenged but this Court rejected
the Petition.
Brij Bhushan
& Ors. v. State of Jammu & Kashmir & Ors., [1986] 2 SCC 354.
While
the Petitioners were carrying on with the business contracted for, Governor's
Act of 1986 came into force. The provisions of the said Act particularly ss. 3,
4 and 5 have been impugned in these Petitions.
It is
contended on behalf of the Petitioners that Government orders and contracts
under which they have got the right to exploit or utilize the particular forest
product amounts to "property" and they are entitled to protection
thereof against expropriation and in case no compensation was provided, the
provisions of the Act are hit for contravening the fundamental right guaranteed
by Art. 19(1)(g) which confers upon them the right to carry on any occupation,
trade or business. On the other hand the case put forward by the State is that
the benefits and privileges conferred on the three Petitioners either under
contract or under Government orders did not constitute property and by the
provisions of the Act no transfer of such property has taken place.
Allowing
the Writ Petition, this Court,
HELD:
The statutory scheme of Jammu & Kashmir Extraction of Resin Act, 1986 is to
extinguish private rights both in respect of Government owned trees as also
trees in private ownership and to vest those1 rights in the State Government or
the Government Company. [271A-B] The Executive grant or the contract created
interest in the Petitioners and there is no room to doubt that by such process
in favour of the Petitioners property right had been created. The interests which
are in dispute before this Court do constitute property entitled to protection
under Art. 19(1)(1) and are covered by Art. 31(2). [267G; 268A-B] 259 Ramana Dayaram
Shetty v. The International Airport Authority of India & Ors., [1979] 3 SCR 1014 and Kasturi
Lal Lakshmi Reddy v. State of Jammu & Kashmir & Anr., [1979] 3 SCR
1014.
The
ownership vested in the private persons, by operation of s. 3 of the Act, the
right to appropriate the usufruct of the trees is taken away from the private
owner and is vested in the State. Sub-Art. (2A) of Art. 31, therefore, does not
apply. Consequently, sub-Art. (2) applies and compensation, therefore, was
payable before the property could be taken over by the State. Provisions of ss.
3 and 4 of the Act are ultra vires of the Constitution and since these
provisions contain the soul of the Act, without them the Act cannot operate,
the entire Act has to suffer.
[271C-D;
272B-C] Subodh Gopal Bose's case [1954] SCR 587; Dwarkadas Shrinivas of Bombay v. The Sholapur Spinning & Weaving Co. Ltd. & Ors., [1954] SCR 674; R.C. Cooper v.
Union of India, [1970] 3 SCR 530; Madan Mohan Pathak v. Union of India &
Ors., [1978] 3 SCR 334 and Tara Prasad Singh v. Union of India & Ors.,
[1980] 3 SCR 1042, referred to.
CIVIL
ORIGINAL JURISDICTION: Writ Petition Nos. 751, 794 and 798 of 1986.
(Under
Article 32 of the Constitution of India.) Dr. Y.S. Chitale, Soli J. Sorabiee, A.B. Diwan, B.V.
Desai,
Ms. Madavi Gupta, Bharat Sangal, Harish N. Salve, T.V.S.N. Chari, Ms. Sunita Modigunda,
Ms. Vrinda Grover and S.K. Bhattacharya for the Petitioners.
G. Ramaswamy,
Additional Solicitor General Anil Dev Singh, P.S. Shroff, S.S. Shroff, R. Karanjawala,
Mrs. M. Karanjawala, Ejaz Maqbool, Mrs. Shobha Dikshit, E.C. Aggarwal, B.V.
Desai, Ms. Madhavi Gupta, C.S. Vaidyanathan and S.V. Deshpande for the
Respondents.
The
Judgment of the Court was delivered by RANGANATH MISRA, J. These are three
petitions under Art.
32 of
the Constitution by three different groups of petitioners. In each of these
writ petitions petitioner No. 1 is a private limited company and the second
petitioner is a shareholder thereof. The petitionercompany in each of these
cases obtained the right to collect oleo resin 260 gum or to process the same
for industrial purposes from the State of Jammu & Kashmir and each of them
seeks to challenge the vires of the provisions of the Jammu & Kashmir
Extraction of Resin Act (7 of 1986) (hereinafter referred to as the 'Act').
Though
there are some variations of facts relevant to each of the writ petitions, the
allegations are more or less similar in regard to the relevant
contentions--both factual and legal. When rule was issued the respondent-State
came with almost the same plea, traversing common grounds and revealing a
common stand in its returns to the Court. These three writ petitions were heard
at a time and are now being disposed of by a common judgment.
Resin
is the secretion extracted by tapping or otherwise from chir, chil and kail
trees wildly growing in the forests of Jammu & Kashmir. It is an exudate
and when subjected to chemical treatment and distillation with the aid of steam
yields 70% resin, 15% turpentine and the remaining 15% of waste material. The
down-stream products which are manufactured from this raw material are varnish,
camphor, paints and turpene chemicals.
The
petitioner-company in writ petition No. 751/86 obtained under Government order
dated 27.4.1979 allotment of 10 to 12 lacs of blazes annually for extraction of
resin from the inaccessible forests in Poonch, Reasi and Ramban Divisions of
the State for a period of 10 years on terms and conditions set out in the said
Government order. Government order had also been made granting rights in favour
of the petitioner-company in writ petition No. 794/86. The petitionercompany in
writ petition No. 798/86 was a processor only and had not undertaken to work as
a tapper. Applications under Art. 32 of the Constitution were filed in this
Court at that point of time on the ground that the Government orders and/or
contracts were hit by Arts. 14 and 19 of the Constitution and the grant of
forest rights in favour of the present petitioners was arbitrary, mala fide and
not in public interest. It was further contended that State largesse had been
conferred on the petitioners at the cost of the State exchequer. The
petitioners therein also pleaded that a monopoly had been created in favour of
the private grantees and was not protected under Art. 19(1)(g) of the
Constitution. According to Kasturilal, the petitioner before this Court then,
the benefits should have been thrown open and opportunity should have been
provided to all interested persons to compete for the obtaining of the
contract. A three-Judge Bench consisting one of us (the learned Chief Justice)
dealt with the matter at length and ulti261 mately dismissed the petition
holding that there was no substance in any of the contentions advanced on
behalf of Kasturilal. (Kasturi Lal Lakshmi Reddy v. State of Jammu &
Kashmir & Anr., [1980] 3 SCR 1336). The order made in favour of the
petitioner-company in writ petition No. 794/86 and incorporated in the
agreement dated 6.11. 1978 had also been challenged in a separate writ petition
before this Court and the reasoned order for rejection of the writ petition is
found in Brij Bhushan & Ors. v. State of Jammu & Kashmir & Ors.,
[1986] 2 SCC 354.
While
the petitioner-company in writ petition No. 751/86 had agreed to work as tapper
and processor on the stipulation that 25% of the annual collection of gum
subject to minimum of 1500 metric tonnes would be made over to the Government
company (J & K Industries Limited) and out of the rest not exceeding the
limit of 3500 metric tonnes would be used by them, the petitioner-company in
writ petition No. 794/86 who had been operating from before as tappers only
entered into a formal agreement with the State claiming to process and
manufacture down-stream goods. The writ petitioner-company in writ petition No.
798/86 had agreed to work as processor only.
In the
seventies, the State of Jammu & Kashmir decided to industrialise the
hitherto under-developed State and with that end in view came forward with
scheme and threw open invitation to outsiders to set up industries at
convenient places within the State. As stimulus Government offered land and
other facilities. The petitioners in these three writ petitions and another who
has since withdrawn the writ petition, went into the State of Jammu &
Kashmir in response and negotiated the arrangements we have already adverted
to.
While
the petitioners were carrying on their business activities, Governor's Act 7 of
1986, the provisions whereof are impugned in these petitions by which all their
existing rights came to terminate, came into force with effect from 23.4.1986.
The Act sought to create a monopoly with reference to resin in favour of J
& K Industries Limited, which is a respondent to these petitions.
The
Act has seven sections in all. Section 1 gives the short title, extent and the
date of commencement while s. 2 defines four terms, namely, 'prescribed',
'resin', 'resin depot' and 'resin products'. Section 3 bans extraction and
other dealings of resin by private persons while s, 4 makes provision for
disposal of resin. Section 5 provides the manner of fixation of price. Section
6 provides for penalty for offences 262 and s. 7 clothes the State Government
with power to make rules for carrying out the purposes of the Act. Challenge in
the writ petitions has been to the provisions contained in ss. 3, 4 and 5 of
the Act. We propose to excerpt these provisions for convenience:
"3.
Ban on extraction by private persons Notwithstanding anything to the contrary
contained in any law, rule, order, instrument, agreement or contract or in any
judgment, decree or order of any Court or Authority, no person, other than the
Government shall as from the commencement of this Act ,-(a) extract resin by
tapping or otherwise from Chit/ Chil or Kail trees in the State whether such
trees belong to the State or not;
(b) transport
resin from one place to other in the State except under and in accordance with
the permit granted under this Act;
(c) acquire,
possess, store, dispose of or otherwise deal with any resin extracted and
manufactured in the State.
4.
Disposal of resin (1) All resin extracted under section 3 shall be stored at
resin depots and thereafter shall be sold by the Government to the Jammu &
Kashmir Industries Limited for processing.
(2)
After processing it by the Jammu & Kashmir Industries Limited, the resin
products, if any surplus, shall be sold by it to the small scale units and
medium scale units in the State in such manner as may be provided for, and at
such price as may be fixed by the Jammu & Kashmir Industries Limited in
consultation with the Government.
5.
Fixation of price-(1) The Government shall, having due regard to the following
facts, fix the price at which resin shall be sold by it during a year, namely
263 (a) the sale price of resin, if any, fixed under this Act during the
preceding three years;
(b) the
cost of transport;
(c) the
cost of extraction of resin;
(d) the
cost of packing of resin including the cost of container in which resin is
delivered;
(e) the
prevalent sale price at which resin is being sold in other resin producing
States;
(f) any
other factor which the Government considers relevant.
(2)
The price so fixed shall be published in the Official Gazette and shall not be
altered during the year to which it relates." In exercise of the
rule-making power, the State Government has brought into force a set of rules
known as the Jammu & Kashmir Extraction of Resin Rules, 1986 with effect
from 27.9.1986.
It is
not in dispute that by the provisions of this Act all the existing contracts
between parties and the State and existing grants in respect of collection,
transport, storage and otherwise dealing with resin have come to forthwith
terminate and a monopoly situation has been created qua these operations in
resin in favour of the Government company. The Act does not provide for any
compensation and the petitioners maintain that the existing rights in their favour
amounted to 'property' and could not have been expropriated in contravention of
the guarantee in Part III of the Constitution. It is the stand of the State
that the benefits and privileges conferred on the three petitioners either
under contract or under Government orders did not constitute property and by
the provisions of the Act no transfer of such property has taken place.
It is
relevant to point out at this stage that subclause (f) was deleted from Art.
19(1) of the Constitution by the Forty-fourth Amendment with effect from 20th
of June, 1979 and acquisition, holding and/or disposal of property ceased to be
a fundamental right. The same constitutional amendment deleted Art. 31 but so
far as the State 264 of Jammu & Kashmir is concerned the Forty-fourth
Amendment did not bring about any change and right to property, therefore,
continues to be fundamental and law enunciated by this Court treating property
be one of the fundamental rights still applies to Jammu & Kashmir. That is why,
sumptuous reference has been made by counsel for the petitioners to a catena of
precedents touching upon right to property as a fundamental one.
The
petitioners maintained that the Government orders and contracts under which
they have got the right to exploit or utilise the particular forest product
does amount to 'property' and the petitioners were entitled to protection
thereof against expropriation and in case no compensation was provided the
relevant provisions of the Act became exposed to challenge. They have similarly
contended that the impugned provisions of s. 3 are hit for contravening the
fundamental right guaranteed by Art. 19(1)(g) which confers upon them the right
to carry on any occupation, trade or business.
The
Government orders made in 1979 did confer the right to exploit the forest and
appropriate a part of the collection of the gums for purposes of business. The
concept of 'property' known to jurisprudence has expanded through several
pronouncements of this Court. Ramana Dayaram Shetty v. The International
Airport Authority of India & Ors., [1979] 3 SCR 1014, to which one of us
(the learned Chief Justice) was party held:
"Today
the Government in a welfare State is the regulator and dispenser of special
services and provider of a large number of benefits, including jobs, contracts,
licences, quotas, mineral rights etc. The Government pours forth wealth, money,
benefits, services, contracts, quotas and licences. The valuables dispensed by
Government take many forms, but they all share one characteristic. They are
steadily taking the place of traditional forms of wealth. These valuables which
derive from relationships to Government are of many kinds.
They
comprise social security benefits, cash grants for political sufferers and the
whole scheme of State and the local welfare. Then again, thousands of people
are employed in the State and the Central Governments and local authorities. Licences
are required before one can engage in many kinds of business or work.
The
power of giving licences means power to withhold them and this gives control to
the Government or to 265 the agents of Government on the lives of many people
........ It is virtually impossible to lose money on them and many enterprises
are set up primarily to do business with Government. Government owns and
controls hundreds of acres of public land valuable for mining and other
purposes. These resources are available for utilisation by private corporations
and individuals by way of lease or licence. All these mean growth in the
Government largess and with the increasing magnitude and range of governmental
functions as we move closer to a welfare State, more and more of our wealth
consists of these new forms. Some of these forms of wealth may be in the nature
of legal rights but the large majority of them are in the nature of privileges.
But on that account, can it be said that they do not enjoy any legal
protection? Can they be regarded as gratuity furnished by the State so that the
State may withhold grant or revoke it at its pleasure ..... The law has not
been slow to recognise the importance of this new kind of wealth and the need
to protect individual interest in it and with that end in view, it has
developed new forms of protection. Some interests in Government largess,
formerly regarded as privileges, have been recognised as rights while others
have been given legal protection not only by forging procedural safeguards but
also by confining/structuring and checking Government discretion in the matter
of grant of such largers ..... It is insisted, as pointed out or' Prof. Reich
in an especially stimulating article on The New Property' in 73 Yale Law
Journal 733, 'that Government action be based on standards that are not
arbitrary or unauthorised." In Kasturi Lal Lakshmi Reddy v. State of Jammu
& Kashmir & Anr., (supra), the interest created in favour of the
petitioners in the forest assets of the State (which has now been fatally hit
by section 3) was considered to be property. At page 1354 of the Reports this
Court stated:
"It
was pointed out by this Court in Ramana Dayaram Shetty v. The International
Airport Authority of India & Ors., (supra) that with the growth of the
welfare state, new forms of property in the shape of Government largess are
developing, since the Government is increasingly assuming the role of regulator
and dispenser of social services and provider of a large number of benefits
including jobs, con266 tracts, licences, quotas, minerals rights etc." In Subodh
Gopal Bose's case [1954] SCR 587, this Court had pointed out:
"The
word 'property' in the context of Article 31 (the same should be the meaning
under Article 19(1)(f) which is designed to protect private property in all its
forms, must be understood both in a corporeal sense as having reference to all
those specific things that are susceptible of private appropriation and
enjoyment as well as in its juridical or legal sense of a bundle of rights
which the owner can exercise under the municipal law with respect to the user
and enjoyment of those things to the exclusion of all others." Again, in Dwarkadas
Shrinivas of Bombay v. The Sholapur Spinning & Weaving Co. Ltd. & Ors., [1954] SCR 674, this Court held:
"A
contract or agreement which a person may have with the company and which may be
cancelled by the Directors in exercise of powers under ordinance will
undoubtedly be property within the meaning of the two articles." In R.C.
Cooper v. Union of India, [1970] 3 SCR 530 an eleven-Judge Bench at page 567 of
the Reports, stated:
"By
Entry 42 in the Concurrent List power was conferred upon the Parliament and the
State Legislatures to legislate with respect to 'Principles on which
compensation for property acquired or requisitioned for the purpose of the
Union or for any other public purpose is to be determined, and the form in
which such compensation is to be given'. Power to legislate for acquisition of
property is exercisable only under Entry 42 of List III, and not as an incident
of the power to legislate in respect of a specific head of legislation in any
of the three lists. Under that Entry property can be compulsorily acquired.
In its
normal connotation property means the 'highest right a man can to anything,
being that right which one has to lands or tenements, goods or chatties which
does not depend on another's courtesy; it includes ownership, estates 267 and
interests in corporeal things, and also rights such as trade-marks, copyrights,
patents and even rights in personam capable of transfer or transmission, such
as debts; and signifies a beneficial right to or a thing considered as having a
money value, especially with reference to transfer or succession, and to their capacity
of being injured." In Madan Mohan Pathak v. Union of India & Ors.,
[1978] 3 SCR 334 this Court was examining the validity of the Life Insurance
Corporation (Modification of Settlement) Act of 1976. The settlement had
created a right to bonus in favour of the Class 111 and Class IV employees of
the Corporation and the Act adversely interfered with that settlement. The
question for consideration of the seven-Judge Bench was whether bonus payable
under the settlement was 'property' within the meaning of Art. 31(2) and
whether stopping payment of bonus amounted to compulsory acquisition of
property without payment of compensation. The Court ultimately held that bonus
was property and the legislation was bad. At p. 358 of the Reports, this Court
said:
"It
is clear from' the scheme of fundamental rights embodied in Part III of the
Constitution that the guarantee of the right to property is contained in
Article 19(1)(f) and clauses (1) and (2) of Article 31. It stands to reason
that 'property' cannot have one meaning in Article 19(1)(f), another in Article
31 clause (1) and still another in Article 31, clause (2). 'Property' must have
the same connotation in all the three Articles and since these are
constitutional provisions intended to secure a fundamental right, they must
receive the widest interpretation and must be held to refer to property of
every kind." At p. 360 of the Reports, the Court again stated that every
form of property, tangible or intangible, including debts and choses in action
constituted property, In this group of cases before us the executive grant or
the contract created interest in the petitioners and there is no room to doubt
that by such process in favour of the petitioners property right had been
created.
Learned
Additional Solicitor General appearing for the State had contended that the
contractual interest or the interest in terms of the Government order did not
constitute property and relied upon certain precedents of this Court.
The
Coal Nationalisation case on which reliance was mainly placed is clearly
distinguishable on facts.
268 We
do not think it necessary to refer to other authorities as the ones referred to
above are binding precedents and unequivocally indicate that the interests which
are in dispute before us do constitute property entitled to protection under
Art. 19(1)(f) and are covered by Art. 31(2) of the Constitution.
Reliance
has been placed by learned Additional Solicitor General on the restrictive
provision contained in sub-Art.
(5) whereby
reasonable restrictions in public interest could be imposed on the exercise of
right to property. There are situations, the learned counsel has argued, where
the restrictions could go to the point of almost wiping out the right. He
relied upon some precedents in support of this proposition. Section 3 is a
total annihilation of existing rights and nothing of the interest created
either under the executive orders or contract is allowed to survive. We do not
think there is room within the legal frame to sustain such a situation under
sub-Art. (5).
Sub-Art.
(6), like sub-Art. (5), protects restrictive law in public interest. What we
have said in regard to subArt. (5) perhaps equally applies to sub-Art. (6).
Article
31(2) provided:
"No
property shall be compulsorily acquired or requisitioned save for a public
purpose and save by authority of a law which provides for acquisition or
requisitioning of the property for an amount which may be fixed by such law or
which may be determined in accordance with such principles and given in such
manner as may be specified in such law; and no such law shall be called in
question in any court on the ground that the amount so fixed or determined is
not adequate or that the whole or any part of such amount is to be given
otherwise than in cash:" It has already been stated that the Act does not
provide for any compensation. Section 3 has an overriding application. It
provides that it shall not only apply to the classified trees belonging to the
State but it shall also apply to such trees belonging to private persons and
rights of such private owners to carry on the various operations described in
s. 3 are completely taken away without provision of any compensation. It cannot
be contended in view of what we have stated above that the right of beneficial
enjoyment of the trees by carrying out the processes named in s. 3 do not
constitute 'property'. Unless the position is 269 covered by clause (2A) of
Art. 31, in view of our conclusion that the interest created under the
contract, Government order or the right of beneficial enjoyment vested in the
private owner of the trees amount to 'property', the Act would be hit by Art. 31(2).
Sub-Art. (2A) provides:
"Where
a law does not provide for the transfer of the ownership or right to possession
of any property to the State or to a corporation owned or controlled by the
State, it shall not be deemed to provide for the compulsory acquisition or
requisitioning of property, notwithstanding that it deprives any person of his
property." Learned Additional Solicitor General's contention has been that
under the provisions of s. 3 of the Act the rights that vested in the
petitioners stand wiped out or extinguished but those rights have not been
vested in either the State or the Government company. This contention overlooks
the resultant outcome of the provisions of the Act. Section 3 which takes away
private fights and authorises Government alone to extract, transport it and
acquire, possess or dispose of or otherwise deal with the resin extracted and
manufactured within the State and s. 4 authorises Government to sell the same
to the Government company for processing.
What
is taken away under s. 3 from the hands of private parties is undoubtedly given
by the same provision to Government. In Madan Mohan Pathak's case (supra), this
Court had pointed out:
"The
verbal veil constructed by employing the device of extinguishment of debt
cannot be permitted to conceal or hide the real nature of the transaction. It
is necessary to remember that we are dealing here with a case where a
constitutionally guaranteed right is sought to be enforced and the protection
of such right should not be allowed to be defeated or rendered illusory by
legislative stratagems.
The
courts should be ready to rip open such stratagems and devices and find out
whether in effect and substance the legislation trenches upon any fundamental
rights. The encroachments on fundamental rights are often subtle and
sophisticated and they are disguised in language which apparently seems to
steer clear of the constitutional inhibitions." It is not necessary to
multiply precedents, As we have already pointed 270 out, s. 3 of the Act
extinguishes private rights and confers the right to deal with the subject
matter of such rights on the State.
An
attempt was made to distinguish the rule in Pathak's case by relying upon the
decision in Tara Prasad Singh v. Union of India & Ors., [1980] 3 SCR 1042.
That seven-Judge Bench was dealing with the Coal Mines Nationalisation
(Amendment) Act of 1976. The Court referred to the two previous decisions in Ajit
Singh v. State of Punjab, [1967] 2 SCR 143 and Madan Mohan Pathak
v. Union of India, (supra), and observed:
"These
decisions have no application to the instant case because the interest of the
lessees and sub-lessees which was brought to termination by section 3(3)(b) of
the Nationalisation Amendment Act does not come to be vested in the State. The
Act provides that excepting a certain class of leases and subleases, all other
leases and subleases shall stand terminated in so far as they relate to the
winning or mining of coal. There is no provision in the Act by which the
interest so terminated is vested in the State; Nor does such vesting flow as a
necessary consequence of any of the provisions of the Act. Subsection (4) of section
4 of the Act provides that where a mining lease stands terminated under
sub-section (3), it shall be lawful for the Central Government or a Government
Company or a corporation owned or controlled by the Central Government to
obtain a prospecting licence or a mining lease in respect of the whole or part
of the land covered by the mining lease which stands so terminated. The plain
intendment of the Act, which, may it be reiterated, is neither a pretense nor a
facade, is that once the outstanding leases and sub-leases are terminated, the
Central Government and the other authorities will be free to apply for a mining
lease. Any lease-hold interest which the Central Government, for example, may
thus obtain does not directly or immediately flow from the termination brought
about by section 3(3)(b). Another event has to intervene between the
termination of existing leases and the creation of new interests. The Central
Government, etc. have to take a positive step for obtaining a prospecting licence
or a mining lease. Without it, the Act would be ineffective to create of its
own force any right or interest in favour of the Central Government, a
Government Company or a Corporation 271 owned, managed or controlled by the
Central Government." The statutory scheme of the Act which we are
considering is to extinguish private rights both in respect of Government owned
trees as also trees in private ownership and to vest those rights in the State
Government or the Government company. The facts in this group of cases, therefore,
clearly indicate that there is a direct relationship between nullification of
the private rights and vesting of those in the State or the Government company.
In other words, where the contract was given by the Government in respect of
the trees belonging to the State, the nullification of the contract would
result in the automatic transfer by reversion of the property in the contract
to the Government. Similarly, where the ownership vested in the private persons
by operation of s. 3 of the Act, the right to appropriate the usufruct of the
trees is taken away from the private owner and is vested in the State. The rule
in Pathak's case, therefore, is applicable. Sub-Art. (2A) of Art. 31,
therefore, does not apply to the facts of the present case.
Consequently,
sub-Art. (2) applies and compensation, therefore, was payable before the
property could be taken over by the State.
Petitioners
in writ petition No. 794/86 had claimed that pursuant to the arrangement
entered into between them and the State following the invitation by the State
they had invested Rs. 1.68 crores in shape of plant and machinery and 63 lacs
of rupees by way of land and buildings. The petitioner in the other two cases
stated that investments had been made by them as well. The petitioners were
invited to set up industries by assuring them supply of the raw material. They
changed their position on the basis of representations made by the State and
when the factories were ready and they were in a position to utilise the raw
material, the impugned Act came into force to obliterate their rights and
enabled the State to get out of the commitments. We are inclined to agree with
the submissions made on behalf of the petitioners that the circumstances gave
rise to a fact situation of estoppel. It is true that there is no estoppel
against the legislature and the vires of the Act cannot be tested by invoking
the plea but so far as the State Government is concerned the rule of estoppel
does apply and the precedents of this Court are clear. It is unnecessary to go
into that aspect of the matter as in our considered opinion the impugned Act
suffers from the vice of taking away rights to property without providing for
compensation at all and is hit by Art. 31(2) of the Constitution.
Connected
proceedings had been taken for interim arrangement 272 regarding provision of
raw material to the petitioners and certain other parties. We do not propose to
deal with those aspects in this judgment but liberty is given to parties to
apply for such directions as they consider appropriate and such applications,
when filed, will be dealt with separately.
In the
result, each of the writ petitions succeeds. We declare the provisions of ss. 3
and 4 of the Act to be ultra vires the Constitution and since these provisions
contain the soul of the Act and without them, the Act cannot operate, the
entire Act has to suffer. The petitioners shall have their costs to these
proceedings. Hearing fee of Rs.3,000 is awarded in each of the petitions.
Y.L.
Petition allowed.
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