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Noorullah Ghazanfarullah, Allahabad Vs. Municipal Board of Aligarh and ors. - Court Judgment

LegalCrystal Citation
SubjectConstitution
CourtAllahabad High Court
Decided On
Case NumberCivil Misc. Writ Petn. No. 12220 of 1975
Judge
Reported inAIR1982All469
ActsUttar Pradesh Municipalities Act, 1916 - Sections 224C; Uttar Pradesh Municipalities (Amendment) Act, 1975; Constitution of India - Articles 19(1) and 31; Constitution (Twenty-fifth Amendment) Act, 1971
AppellantNoorullah Ghazanfarullah, Allahabad
RespondentMunicipal Board of Aligarh and ors.
Appellant AdvocateB.C. Day and ;M.P. Singh, Advs.
Respondent AdvocateR.P. Goel, Adv.
DispositionPetition dismissed
Cases ReferredBihar State Electricity Board v. Patna Electric Supply Co. Ltd.
Excerpt:
constitution - amendment whether violative of constitution - section 224-c of u.p. municipalities act, 1916 - principle determining amount payable to person from who water works and ancillaries acquired under section 224-c - not violative of article 31 of constitution - article 19 (f) inapplicable due to amendment - amount paid as compensation for acquisitioned or requisitioned property not questionable. - - 1, 1975, it clearly implies that when the licence was revoked on april 1, 1975 it was the substituted section 224-c which held the field......amount payable to such licensee is determined on the basis of the book value of all completed works, works in progress, stores and spare parts, other fixed assets and all plants and equipments no longer in use if taken over. it was stressed that the licence of the petitioner was revoked by the administrator with effect from 1st of april, 1975, and consequently it was entitled to payment of compensation determined on the basis set out in section 224-c as it stood then. it was contended that the substituted section 224-c which has the effect of depriving the petitioner of the vested right of getting compensation determined on the basis of the fair market value of the water works is viotative of articles 19(1)(f) and 31 of the constitution.5. it may be noted that on 12-6-1975 the state.....
Judgment:

K.N. Seth, J.

1. This petition was dismissed on merits by a Bench of this Court, of which one of us was a member, by its judgment dated May 5, 1980. The petitioner went up in appeal to the Supreme Court. Before the Supreme Court a grievance was made that the High Court while disposing of the writ petition did not consider the question relating to the constitutional validity of the Uttar Pradesh Municipalities (Amendment) Act, 45 of 1975, although the constitutional validity of the aforesaid Act was challenged by amending the writ petition. The respondents asserted that the constitutional validity of the amendment Act was not canvassed before the High Court during the course of hearing and the observation made by the High Court to that effect was correct. The Supreme Court, however, without entering into this controversy, remanded the case to this Court to decide all questions arising before it as have not been so far decided including the question of constitutional validity of the Amendment Act.

2. Sri S. S. Ray and Sri M. P. Singh appearing for the appellant at the outset expressed regret that it was wrongly asserted before the Supreme Court that at the time of hearing the question relating to the constitutional validity of the Amendment Act was canvassed before this Court. It is indeed regrettable that such false assertions are made, which tend to damage the image of the Court with impunity.

3. Learned counsel for the appellant confined his submission to the constitutional validity of Section 224-C, U. P. Municipalities Act, as substituted by Section 3 of U. P. Act, 45 of 1975, and no other point was canvassed for consideration. The validity of the aforesaid provision was challenged on the ground that it was violative of Articles 19(1)(f) and 31 of the Constitution.

4. Section 224-C makes provision where a licence granted to any person or company to supply water within municipal limits is revoked under Section 224-B of the Act. Prior to its substitution by the Amendment Act of 1975 it provided that where a notice of the revocation of a licence has been served on the licensee the board may, within three months after the service of such notice and with the written consent of the State Government, by notice in writing require the licensee to sell, and thereupon the licensee shall sell, to the board the whole of the water works at such value as shall be mutually agreed upon or in default of such agreement at such value as shall be determined by a valuer appointed by the board and the licensee and in case of their disagreement by the State Government. It was further provided that the value of such water works shall be deemed to be their fair market value at the time of purchase, due regard being had to the nature and condition for the time being of such water works and to the state of repair thereof, etc. The basis for determining the compensation payable to tha licensee has been changed in the substituted Section 224-C. Now the gross amount payable to such licensee is determined on the basis of the book value of all completed works, works in progress, stores and spare parts, other fixed assets and all plants and equipments no longer in use if taken over. It was stressed that the licence of the petitioner was revoked by the Administrator with effect from 1st of April, 1975, and consequently it was entitled to payment of compensation determined on the basis set out in Section 224-C as it stood then. It was contended that the substituted Section 224-C which has the effect of depriving the petitioner of the vested right of getting compensation determined on the basis of the fair market value of the water works is vioTative of Articles 19(1)(f) and 31 of the Constitution.

5. It may be noted that on 12-6-1975 the State Government issued Ordinance 16 of 1975, repealing the provisions of Section 224-B and 224-C of the Act and enacted new Sections 224-B and 224-C. The Ordinance was replaced by U. P. Municipalities (Amendment) Act No. 45 of 1975. Section 2 of the aforesaid Act provided that Section 3, which introduced the new Section 224-C in the Act. shall be deemed to have come into force on Jan. 1, 1975 and the remaining provisions of the Act shall be deemed to have come into force on June 13, 1975.

6. Section 224-B provides that every licence granted under Clause (c) of Section 224 shall, if not already revoked, stand revoked with effect from June 13, 1975. Section 224-C provides that where the licence of a licensee is revoked under Section 224-B ms it stood immediately before the commencement of the U. P. Municipalities (Amendment) Act, 1975, or where such licence stands revoked by virtue of the new Section 224-B as substituted by the said Act, all the property pertaining to the water works (namely, all existing water supply services including all plants, machinery, water works, pumping sets, filter beds, water mains and pipes laid down along water or under any public street, and all buildings and other works, materials, stores and things appurtenant thereto) belonging to or vested in the licensee immediately before the date of revocation of the licence shall as from the said date vest in and stand transferred to the Board free from any debt, mortgage, or similar obligation of the licensee attached to such property.

7. Sub-section (5) lays down the principle for determining the value of the property pertaining to the water works as follows :--(i) the book value of all completed works in beneficial use pertaining to the water works and taken over by the Board (excluding works paid for by the consumers), less depreciation calculated in accordance with the Table appended to this section; (ii) the book value of works in progress taken over, excluding works paid for bv the consumers or prospective consumers; (iii) the book value of all stores, Including spare parts taken over, and in the case of used stores and spare parts, if taken over, such sum as may be decided upon by the Special Officer; (iv) the book value of all other fixed assets in use on the said date and taken over, less depreciation calculated in accordance with the said Table; (v) the book value of all plants and equipments existing on the said date, if taken over, (1) No person shall be deprived of his property save by authority of Jaw, (2) No property shall be compulsorily acquired or requisitioned save for a public purpose and save by authority of 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,

8. If we examine Article 31(2) as it stood, before and after the Twenty-fifth Amendment Act, 1971, it will be noticed that whereas before the amendment, Article 31(2) required the law providing for acquisition to make provision for compensation by either fixing the amount of compensation or specifying the principles on which and the manner in which the compensation should be determined. After the amendment Article 31(2) requires such a law to provide for an 'amount' which may be fixed by the law providing for acquisition or requisitioning of which may be determined in accordance with such principles and given in such manner as may be specified in such law. For the idea that compensation should be given, now the idea is that an 'amount' should be given. This amount can be fixed directly by law or may be determined in accordance with such principles as may be specified.

9. Dealing with the change introduced by the Twenty-fifth Amendment Sikri, C. J., in His Holiness Kesavananda Bharati v. State of Kerala (AIR 1973 SC 1461) observed as follows :--

'It seems to me that the change effected is that a person whose property is acquired can no longer claim full compensation or just compensation but he can still claim that the law should lay down principles to determine the amount which he is to get and these principles must have a rational relation to the property sought to be acquired.'

10. Shelat and Grover, JJ. observed that the fixation or determination of 'amount' under Article 31(2) has to be based on some norm or principle which must be relevant for the purpose of arriving at the amount payable in respect of the property acquired or requisitioned; the amount need not be the market value but it should have a reasonable relationship with the value of such property and one or more of the relevant principles have been applied and further that the 'amount' is neither illusory nor it has been fixed arbitrarily, nor at such a figure that it means virtual deprivation of the right under Article 31(2). The question of adequacy or inadequacy, however, cannot be gone into. To the same effect is the observation made by other learned Judges constituting the Bench. Since the Supreme Court in the aforesaid case of Kesavananda Bharati has upheld the validity of the Constitution (Twenty-fifth) Amendment Act, 1971, it is no longer open to a person whose property has been acquired or requisitioned under a valid law that he should be paid compensation for the property acquired calculated at the market rate at the time of acquisition. If the law providing for acquisition or requisition of properties fixes the amount or lays down the principles for determination of the amount payable its validity is not open to challenge on the ground of inadequacy of the amount.

11. Sub-section (5) of Section 224-C lays down the principle for determining the amount payable to the licensee. For all completed works in beneficial use pertaining to the water works and taken over by the Board (excluding works paid for by the consumers), it is the book value less depreciation calculated in accordance with the table appended to the section. For the value of the works in progress, it is the book value excluding works paid for by the consumers or prospective consumers, for stores, including spare parts, it is the book value of such stores including spare parts and in case of used stores and spare parts, it is such sum as may be decided by the Special Officer : for other fixed assets in use it is the book value less depreciation calculated in accordance with the table annexed. With regard to plants and equipments if taken over but no longer in use owing to wear and tear or to obsolescence, the amount payable is the book value to the extent such value has not been written off. The explanation appended to Sub-section (5) further provides that the book value of any fixed asset means its original cost and shall comprise (i) the purchase price paid by the licensee for the asset, including the cost of delivery and all charges properly incurred in erecting and bringing the asset into beneficial use, as shown in the books of the licensee; (ii) the cost of supervision actually incurred, but not exceeding fifteen per cent of the amount referred to in paragraph (i). It has also been provided that before deciding the amount under this subsection, the licensee shall be given an opportunity by the Special Officer of being heard, after giving him a notice of at least 15 days therefor. It cannot possibly be contended that the principle for determination of the amount payable to the licensee is irrelevant to the determination of the value of the property or by working out the compensation according to the principles so specified the compensation becomes illusory.

12. A similar matter came up for consideration before the Supreme Court in Ishwari Khetan Sugar Mills (P.) Ltd. v. State of U. P. (AIR 1980 SC 1955). Under the U. P. Sugar Undertakings (Acquisition) Act, 23 of 1971, twelve sugar undertakings stood transferred and vested in the U. P. State Sugar Corporation Ltd. The constitutional validity of the Act was challenged inter alia on the ground that the Act violated Article 31 of the Constitution and the compensation proposed in the Act was illusory. The question was considered on the basis of Article 31(2) before its amendment by the Constitution (Twenty-fifth Amendment) Act, 1971 when the expression 'compensation' was retained in Article 31(2) after its amendment by the Constitution (Fourth Amendment) Act, 1955 The Supreme Court observed (at p. 1973): --

'Even as the article stood at the relevant time it was open to the Legislature to fix principle for determining compensation and unless it is shown that the principles are irrelevant to the determination of the value of the property or by working out the compensation according to the principles so specified the compensation becomes illusory, the principles themselves are beyond the pale of challenge before a Court of law on the ground that they do not provide adequate compensation.'

The principle laid down by the Supreme Court in the aforesaid case applies with greater vigour after the amendment of Article 31 in 1971.

13. It was further urged by the petitioner that on 1-4-1975 when the licence was revoked all rights, title and interest in the assets of the water works vested in the Board and what was left over with the licensee was only the right to claim and recover the value of the assets determined on the basis of the market value of the assets on the date of revocation and that right could not be subsequently acquired without paying compensation on the basis of the market value of the assets. This part of the argument has been dealt with and repelled in the earlier judgment of this Court dismissing the petition on merits. The argument has been repeated in support of the plea that the substituted provision of the Act which denies compensation at the market value of the assets of the water works is violative of Article 31(2) of the Constitution. Reliance was placed on the decision of the Calcutta High Court in Bihar State Electricity Board v. Patna Electric Supply Co. Ltd. (AIR 1982 Cal 74) and also the decision of the learned single Judge, a copy of which has been supplied to us, which has been affirmed in the aforesaid decision of the Division Bench. The facts of that case are that on Feb. 6, 1924, a licence was granted by the Government of Bihar to Octavius Steel Co. Ltd., for the supply of electrical energy. The said licence was transferred in favour of respondent 1, the Patna Electric Supply Co. Ltd. On Jan. 5, 1973, the Bihar State Electricity Board served a notice upon the company under sub-section (1) of Section 6, Electricity Act, 1910 requiring the company to sell the undertaking to the Bihar State Electricity Board on the expiry of the period of 50 years from the commencement of the licence, that is, at 12 O'clock in the night between the 5th and 6th Feb.. 1974 and further to deliver possession of the undertaking on the expiration of the above period of 50 years pending the determination and payment of the purchase price. Before the company had delivered the undertaking the Governor of Bihar on Feb. 2, 1974 promulgated an Ordinance being Bihar Ordinance, 50 of 1974, amending certain provisions of the Act in its application to the State of Bihar. In the substituted Section 7-A it was provided that the amount shall be the book value of the undertaking instead of the market value as was provided for in the earlier provision. Possession of the undertaking was taken by the Bihar State Electricity Board in the night between the 5th and 6th Feb., 1974, i.e., after the promulgation of the Ordinance and the undertaking vested in the Bihar State Electricity Board. The Ordinance was subsequently replaced by Bihar Act, 15 of 1975. Thereafter the Bihar Legislature passed Act No. 7 of 1976. By this Act the provisions of Section 6 and 7 as substituted by the Ordinances and replaced by the Bihar Act, 15 of 1975 have been validated and made applicable with retrospective effect.

14. The Calcutta High Court found that under the terms of the contract as embodied in the licence, the price which was to be paid in the event of the undertaking being purchased by the local authority or Government was fixed. At the time the option was exercised by the appellant under Section 7-A of the Act, the respondent-company was entitled to the market value of the undertaking to be determined in accordance with the provision of Sub-section (2) of Section 7-A. The Court took the view that there was an implied contract between the respondent-company and the appellant that the appellant would pay to the respondent-company the market price of the undertaking in the event it purchased the undertaking. This option was exercised before the amendment of Section 6 and Section 7-A of the Act. It was further held that since the option to purchase had been exercised under the unamended provisions of Section 6 of the Act, which provided for giving a year's notice, the substituted Section 7-A was not applicable since that section referred to the notice issued under the substituted Section 6. The Court further held that what was subsequently sought to be acquired was debt or chose in action without any public purpose and that was violative of the constitutional guarantee embodied in Article 31(2) of the Constitution. In the case in hand the licence was granted in 1935 for a period of fifty years. Under Clause (7) of the licence option was given to the Board to renew the period for another fifty years or to takeover the water works on payment of the 'fair value' of the properties belonging to the licensee to be determined in the manner laid down in Section 224-C of the Municipalities Act. One of the terms and conditions of the licence was that the licensee would be bound by all the provisions of the U. P. Municipalities Act, 1916 with any amendment or new enactments of the same in future and all the Rules and Regulations from time to time legally made by the Government or by the Board, provided the same are not in any way inconsistent with terms of the licence. The licence of the petitioner was revoked by mutual agreement before the period of the licence had expired. As a result of the revocation, all the powers and the liabilities of the licensee stood determined. There was no automatic vesting of the property in the Board. That event was to happen on the execution of the sale deed for a value to be determined in accordance with the procedure prescribed under Section 224-C (b). Before that stage arrived the Act was amended as noted earlier. As a consequence the licence stood revoked and the property vested arid stood transferred to the Board as provided under Section 224-C. Since Section 224-C was deemed to have come into force with effect from Jan. 1, 1975, it clearly implies that when the licence was revoked on April 1, 1975 it was the substituted Section 224-C which held the field. Under the terms and conditions of the licence the licensee was bound by the amended provisions of the Act The amended provision was not inconsistent with the terms of the licence. There was no express or implied stipulation between the parties that the licensee would be entitled to compensation calculated at the market value of the assets. In view of these features, the rule laid down in Calcutta High Court decision referred to above is not attracted. The impugned provisions, therefore, cannot be held to be violative of the provisions of Article 31(2) of the Constitution.

15. The contention that the impugned provisions are violative of Article 19(1)(f) has also no merit. The Constitution (Twenty-fifth Amendment) Act, 1971, introduced Clause (2B) in Article 31 the effect of which is to make Article 19(1)(f) inapplicable to any such law as is referred to in Clause (2) of Article 31 As ruled by the Supreme Court in Kesavananda Bharati's case Clause (2B) in Article 31 is not an unreasonable abridgment of rights under Article 19(1)(f).

16. We accordingly hold that the provisions of the U. P. Municipalities (Amendment) Act, 1975, are not violative of Articles 19(1)(f) and 31 of the Constitution. The petition shall stand dismissed with costs.


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