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P. Iya Nadar Vs. State of Madras and ors. - Court Judgment

LegalCrystal Citation
SubjectProperty
CourtChennai High Court
Decided On
Case NumberWrit Appeal No. 58 of 1963
Judge
Reported inAIR1965Mad50
ActsIndustries Development Regulation Act, 1961; Indian Companies Act 1956; Land Acquisition Act - Sections 4(1) and 5-A
AppellantP. Iya Nadar
RespondentState of Madras and ors.
Cases ReferredSomawanti v. State of Punjab
Excerpt:
.....of the said land and made the necessary notifications. further proceedings was pending when the land acquisition act was amended by the amending act xxxi of 1962, which came into force on 12th september 1962. on the question, as to whether the amendment disabled the government from continuing the proceedings properly commenced under part ii,; held, that the effect of the amendment inter alia has been to make applicable, the provisions of part vii of the act, to case where the acquisition is needed for some building or work for a company, which is engaged or taking steps for engaging itself in any industry or work, for a public purpose. this change must have the effect of altering the procedure to be followed with reference to acquisitions of the kind referred to above.; section 40 of..........to secure a part of that land by private treaty. accordingly, a notification under s. 4(1) of the land acquisition act was issued on 19-12-1961 that the remaining area of land proposed to be acquired was for a public purpose.(3) the appellant objected the acquisition in so far as it affected his property and made representations in that behalf under s. 5a of he land acquisition act which will be referred to here after as the act. after receiving the report of the collector and considering the same, the government overruled the objections. on 9-5-1962, the government made a declaration under s. 6 to the effect that they were satisfied that an extent of 19.2 acres of land were required for a public purpose, they having decided already to contribute, out of the public revenues a sum of.....
Judgment:
(1) The appellant, a manufacturer of fireworks and crackers carrying on business under the name of National Fire Works Factory at Sivakasi in Ramanathapuram District has a place of business at Anderson Street G. T. Madras, for distributing his products to various parts of India. His turnover is said to be between thirty to forty lakhs of rupees per year. The demand for crackers and other products of his factory being seasonal, he found need for securing a place for their storage, they being explosives. With that object in view, he acquired an extent of 3 acres and 63 cents of vacant land in Porur village, Saidapet taluk, away from the residential locality, and constructed a magazine for the storage of his products. He had also obtained a licence form the Central Government authorities for the purpose on 20-12-1955, and since then he has been storing crackers etc., manufactured at Sivakasi in his factory, at his Porur magazine.

(2) While so, Messrs. Sethuraman and Thyagarajjan a firm doing business in electrical goods and also undertaking electrical engineering contracts secured a licence from the Government under the Industries Development Regulation Act, 1961 for the establishment of an industrial undertaking near Madras in collaboration with Messrs. Westing-house Electric International Co. of New York (U. S. A.) for the manufacture of electrical insulators, lighting arresters, etc, which are in short supply in this country. The two concerns formed themselves into a company called W. S. Insulators of India Ltd., and after duly registering the same under the Indian Companies Act 1956, they application to the Government for acquisition of about 30 acres of land at Porur village for the establishing factory buildings, administrative office, canteen and quarters for the office staff. The site chosen included within its area the entire property owned by the appellant. The Government acceded to the request of he W. S. Insulator of India Ltd., as in their opinion, the establishment of such a factory would serve a public purpose. Accordingly, the Government issued a notification under G. O. Mis. 5781 I. L. C. (Industries) dated 29-9-1961 directing that an extent of 30.26 acres of land in Porur should be acquired for the benefit of the company. It appears that the company itself was able to secure a part of that land by private treaty. Accordingly, a notification under S. 4(1) of the Land Acquisition Act was issued on 19-12-1961 that the remaining area of land proposed to be acquired was for a public purpose.

(3) The appellant objected the acquisition in so far as it affected his property and made representations in that behalf under S. 5A of he Land Acquisition Act which will be referred to here after as the Act. After receiving the report of the Collector and considering the same, the Government overruled the objections. On 9-5-1962, the Government made a declaration under S. 6 to the effect that they were satisfied that an extent of 19.2 acres of land were required for a public purpose, they having decided already to contribute, out of the public revenues a sum of five nP towards compensation to be awarded for the acquisition of the land. The notification appointed a special Tahsildar (Land Acquisition ), Saidapet, to perform the functions of the Collector under the Act. On 29-1-1963 the Special Tahsildar passed an award under S. 11 of the Act.

(4) In the meanwhile certain events took place, which, from the point of view of this appeal, are of significance. Even before the notification, under S. 6 of the Act was issued, on 15-3-1962, the appellant had applied to this court for the issue of a writ of mandamus--the petition which has given rise to this appeal--to direct the Special Tahsildar to desist from proceeding with the proposed acquisition. Then the Land Acquisition Act underwent a change. Ordinance 3 of 1962 was promulgated on 20-7-1962, effecting temporarily certain amendments to part VII of the Act. That was replaced by the amending Act 31 of 1962, which came into force on 12-9-1962. The effect of the amendment inter alia has been to make applicable the provisions of Part VII of the Act to cases where the acquisition is needed for some building or work for a company which is engaged or taking steps for engaging itself in any industry or work which is for a public purpose. This change, as we shall see, must have the effect of altering the procedure to be followed with respect to acquisitions of the kind, referred to in the provision mentioned above.

(5) The writ petition was heard by Veeraswami J. who held that the provisions of the Amending Act did not make it obligatory on the Government to follow the rules prescribed under part VII of the Act in respect of the acquisition in question.

(6) Mr. M. K. Nambiar appearing for the appellant has challenged the correctness of this view on the ground that the acquisition not having been complete before the amending Act came into force,. the further proceedings in that behalf would be valid only if they had conformed strictly to the provisions contained in Part VII of the Act. The company being a profit making concern, any acquisition for it must, it is argued, came within the ambit of S. 40(1)(aa) and can in no sense be regarded as equivalent to one needed for a purely public utility concern to which Part II of the Act might apply.

(7) On the other hand, the Government's case is that an acquisition of land for the purpose of a company formed with the object of manufacturing article needed for public use would come under Part II of the Act only. But, curiously enough, they do not appear to have been sure of the ground. For on 22-2-1962, they through the District Revenue Officer, Chingleput, entered into a written agreement with the company as if they had decided to adopt the procedure prescribed by Part VII. Indeed, reliance was placed on this agreement before us by the learned Advocate General to meet Mr. Nambiar's objection by attempting to show that the Government having considered the report of the Collector under S. 5-A and entered into the agreement just now mentioned, must be regarded as having substantially compiled with Part VII. This contention cannot, however, be accepted as admittedly the agreement had not been published in the official gazette complying with the provisions of S. 42. The publication under that provision is a real and essential requirement intended to apprise the public that compulsory acquisition of one's property for another juristic entity is one made in public interest and on terms beneficial to it. We are therefore unable to agree with the learned Advocate General that the publication of the agreement in the manner prescribed is a formality, the omission to do which will not affect the acquisition.

(8) The case of the Government itself is that the acquisition will come under Part II only and this was indeed the substantial stand taken on its behalf before us. As we said, the land acquisition proceedings in the instant case commenced before Act 31 of 1962 was enacted. It is not disputed that S. 40 as it stood prior to its amendment by the aforesaid enactment where no part of the compensation is to come from public revenues could not comprehend an acquisition for the purpose of establishing a factory by a company albeit it be for a public purpose. This is indeed the decision in Arora v. Sate of U.P., . Acquisition of land for such purposes and where a

part of he compensation amount is to be paid by the State can if at all be made only under Part II. The Government undoubtedly purported to do that in the present case.

(9) The question then is whether the amendment to S. 40 disables the Government from continuing the proceedings properly commenced under Part II. For a proper consideration of the question we shall have to refer briefly to the provisions of the statute. The Act which was enacted prior to the Constitution, was intended inter alia to provide the conditions under which lands could be acquired for a public purpose and for companies it being implicit that acquisition for the benefit implicit that acquisition for the benefit of the latter should also innocence be for a public purpose.

(10) The proceedings for acquisition commence with a preliminary notification under S. 4, which specifies that the land is needed or is likely to be needed for a public purpose. On such notification certain powers get vested in an officer of the Government designated for the purpose, e.g. to enter, inspect, survey etc. the land. Within 30 days of the notification under S. 4 any person interested may object in writing to the acquisition generally or in so far as it affects him he can follow up his objections by representations. This is provided for in S. 5-A. The is, however, power in the Government in cases of urgency and with respect to specified classes of property to dispense with this provision. But where there is no such order, the Collector has to make a report on the enquiry conducted as a result of the representations made to him; the Government will then decide and that finally, whether the acquisition is to be made or not. This decision is embodied in a declaration to be made under S. 6, the material portion of which runs:

6 (1). Subject to the provisions of Part VII of this Act, when the appropriate Government is satisfied after considering the report, if any made under S. 5-A sub-section (2) that any particular land is needed for a public purpose or for a company a declaration shall be made to that effect under the signature of a secretary to such Government or of some officer duly authorised to certify its orders."

(proviso omitted as not necessary)

Two matters fall to be noticed after the reading of the section (1) that the declaration under S. 6 amounts only to a decision on the part of the Government to acquire; the actual acquisition only comes in later. The declaration only enables the Collector to take further steps in the matter. (2) The provisions of the section being expressly made subject to Part VII, acquisitions for purposes coming within that part should strictly conform to the procedure prescribed therein; the procedure under Part II cannot be applied to them. Again in regard to acquisitions of republic purposes not covered by Part VII the procedure will be governed by Part II.

(11) We shall now refer to the procedure laid down in that part (Part II). After the declaration referred to above, the Collector, if there be need, is required to mark out the land, measure it and prepare a plain (S. 8). Notice is then given to persons interested calling upon them to state the nature of their interest in the land and the compensation claimed. Section 11 provides for an enquiry and the award of compensation amount. There are further provisions regarding the contents, appealability and the finality of the award. After the award has been made, S. 16 invests a power in the Collector to take possession of the land "which shall there upon vest absolutely in the Government free form all encumbrances" Section 18 to 37 provide for reference to the court and procedure thereon, apportionment of compensation payment, temporary occupation of the land etc.

(12) Part VII of the Act deals with the procedure to be followed with respect to acquisitions made for companies for the purposes specified therein in addition to the requirements of Ss. 6 to 37 referred to above. Before a declaration can be made under S. 6 for acquiring the land for the benefit of a company, there should be the previous consent of the appropriate Government in the manner specified under S. 40; the company should have also executed an agreement in accordance with S.

41. Prior to the amending Act 31 of 1962, S. 40 ran thus:

40(1). Such consent shall not be given unless the appropriate Government be satisfied either on the report of the Collector under S. 5-A sub-section (2) or by an enquiry held as hereinafter provided;

(a) that the purpose of the acquisition is to obtain land for the erection of dwelling houses for workmen employed by the company or for the provision of amenities directly connected therewith:

(b) that such acquisition is needed for the construction of some work and that such work is likely to prove useful to the public" (clauses 2 and 3 omitted as not relevant).

Section 42 requires publication of the agreement entered into between the company and the appropriate Government in the official gazette.

(13) To recapitulate, part VII as originally enacted, covered only two cases of acquisition for the purpose of a company, (1) for the erection of dwelling houses for the workmen employed by the company, etc., or for the construction of some works useful to the public or (2) for purposes that may be for the benefit of the company which are akin to public purposes as they are intended to provide for the welfare of a section of the public. It did not cover cases o acquisition for the establishment of a factory etc., by a company although such acquisition might be for public purposes. Those acquisitions, therefore, became possible only if they could be brought under Part II i.e., by the Government contributing part of the compensation out of public funds. This defect had now been removed by the amendment to S. 40 by Act 31 of 1962 which puts in a new clause (aa) to it, viz.

"That such acquisition is needed for the construction of some building or work for a company which is engaging itself in any industry or work which is for a public purpose."

It will be useful now to refer to a few cases to elucidate where the provisions of Part II would apply in acquiring lands for companies.

(14) This court has consistently taken the view that in addition to the two cases provided for in S. 40(1), there could be acquisition of land for a company if it were to be established that a public purpose could be served thereby. In such cases, the cost of acquisition for the company should be wholly or partly borne out of public revenues. In cases coming under Part VII, the entire cost of acquisition should be born by the company. In an unreported judgment of a Bench of this court in App. 131 of 1948 it was held that acquisition of land for extension of the building of a co-operative bank would be a public purpose to justify the acquisition. Natesa Asari v. State of Madras, was also a case where it was recognised that the

could be a public purpose in acquiring lands for a company and that the provisions contained in S. 40(1) of the Act could not abridge the power of the Government in making such acquisitions to which the procedure prescribed in Ss. 6 to 3 would apply. In an unreported decision of this court in W. P. 887 to 890 and 903 to 910, 927 and 928 of 1957 (Mad) Rajagopalan, J. upheld an acquisition by the Government under Part II of the Act for the purpose of a company intending to establish a factory for the manufacture of caustic soda and soda ash. That was a case where the Government contributed a substantial sum out of the public revenues towards the share capital of the company; was also held that the acquisition of the land being outside the scope of S. 40 of the Act, the provisions of part VII would not apply. In Jhandulal v. State of Punjab, the Supreme Court clarified the

position by holding that the essential condition for the acquisition for a public purpose under part II albeit for a company, would be that the cost of the acquisition should be born wholly or in part out of public funds. In such a case it was held that it was not necessary to go through the procedure prescribed by part VII. It was also laid down that if the acquisition for a company were to be made at the cost entirely of the company itself, such an acquisition albeit it be for a public purpose would be governed by the provisions of part VII one, This distinction was reiterated in .

(15) In the former case acquisition of land was for a housing scheme to provide houses of industrial workers and part of he compensation for the acquisition was to be met out of public funds; part II, therefore, applied to it. The later case related to an acquisition for the purpose of a company, for the construction of textile machinery parts factory. No part of the cost of the acquisition was to be met out of public funds. But the acquisition was sought to be justified under the provisions of S. 40(1)(b) of the Act. The Supreme Court negatived the right of the Government to acquire land as the purpose thereof did not strictly come within S. 40(1). It was this decision that led Parliament to amend S. 40 of the Act by interdicting sub-clause (aa) to which we have made reference earlier.

(16) The result of the foregoing discussion is this:

Under the law, as it stood prior to is amendment, the different procedures laid down in part II and part VII were notion the basis of the acquisition being made for a public purpose simplicities and one made for a public company. IN both the cases the acquisitions should be for public purposes; otherwise the would be no power to acquire; otherwise the would be no power to acquire. The distinction was between cases where the State contributed either in whole or in part towards the expenses of the acquisition and cases where it did not do so but required the company for whose benefit the property was acquired the company for whose benefit the property was acquired to meet the entire cost. In the latter type of cases acquisition could be only under S. 40(1)(a) and (b).

(17) To come within the former category the contribution made out of public funds need to be substantial. In Suryanarayana v. Province of Madras, ILR 1946 Mad 153: (AIR 1945 Mad 394 ) a Full Bench of this Court held that even if the contribution by the Government be so insignificant as one Anna towards compensation a declaration under S. 6 of the Act would be valid. This question recently came up for consideration before the Supreme Court in Somawanti v. State of Punjab, where the majority of the learned Judges approved of the view taken in the above case on the principle of are deists observing at the same time (at page 169):

"We would, however guard ourselves against being understood to say that a token contribution by the State towards the cost of acquisition will be sufficient compliance with the law in each and every case. Whether such contribution meets the requirements of the law would depend upon the facts of every case. Indeed the fact that the State's contribution is nominal may well indicate in particular circumstances that the action of the State was a colorable exercise of power. In our opinion, 'part' does not necessarily mean substantial part and that it will be open to the court in every case which comes up before it to examine whether the contribution made by the Sate satisfies the requirement of the law."

It is the case of he Government in the case before us that as they have decided to contribute five nP from out of the public revenue towards compensation to be awarded in relation acquisition of lands it should be regarded as one coming within the scope of Part II of the Act (Ss. 6 to 37) and that the was no need therefore to adopt any other procedure. Two answers have been given to that contention: (1) whatever might be the terms of he notification, the agreement entered into by the Government with the company shows that its contribution is not real and (2) that S. 40(1)(aa) during the pendency of the acquisition proceedings will have the effect of requiring the Government to follow the procedure under Part VII which will thereafter apply to all cases of acquisitions specified in S. 40 and made for the benefit of companies regardless as to who contributes for expenses of acquisition.

(18) We shall consider the arguments seriatim: The agreement provides that the company shall pay to the Government before the said land is transferred to the company the cost of the land as settled by the Collector or if reference is made to court by the final court of appeal and all costs of acquisition inclusive of all payments and allowances in respect thereof payable under the said Act and all court costs etc., in their entirety. It further states that the Government shall not be abound to give possession of the land until all the said moneys have been paid and may withdraw the company shall be liable to indemnify the Government against all expenses incurred and damages sustained as a result of anything done by them in the matter of acquisition till the date of withdrawal.

(19) A further clause in the agreement provides for payment by the company of every kind of expenses incurred by the Government. A strict construction of the agreement will undoubtedly enable the Government to recover even the small contribution of five nP. made by them towards the cost of acquisition as the under taking given by the company is to meet the entire cost of the acquisition. It is very difficult to say whether the agreement's liability to contribute the small sum. That the contribution decided upon by the Government is a colorable one, has not been raised in the pleadings. But the contention of the petitioner (appellant) had all along been that the acquisition in the instant case would be lawful only if it came under S. 40. In other words the acquisition was challenged on the ground of the principle laid down in as it had been settled by that decision that land for a company for the construction of factory or other works etc. so long as the Government had not contributed anything out of public funds, could not be acquired as coming under Ss. 40 (in its original form). There are tow outstanding features in the present case: (1). As the Government have not in effect contributed any sum out of public revenues for the cost of the acquisition of land, the acquisition will be invalid on the rule laid down in the above case; (2) If S. 40(1)(aa) were to be invade to support the acquisition, the procedure under Part VII must have been followed and the has not been done.

(20) It is not, however, necessary to rest our decision on the first point as we are of opinion that the contention of Mr. Nambiar as to the effect of the amendment to S. 40(1) is well founded. Section 40(1)(aa) has included within the ambit of part VII all cases of acquisitions for companies for purposes other than those comprised in clauses (a) and (b) of S. 40(1). The case before us directly comes under that clause. On the terms of the amendment the is no scope for restricting its application to cases of acquisitions where the Government does not contribute any part of the funds necessary for the acquisition. In other words, even those acquisitions which could be made previous to Act 31 of 1962 for a company for the purposes mentioned in clause (aa) under the provisions of Part II, will hereafter come under Part VII. This will be so on the well accepted principle of law, that where there s a specific provision in a statute in regard to a particular matter, it will have to prevail over the general provision, which must be held to apply only to such cases not covered by the special provision, the maxim being specialia generalibus derogate. This view is in a way supported by the terms of S. 7 of Act 31 of 1962. The provision validates all completed transactions which had been made prior to 20th July 1962 under the provisions of Part VII notwithstanding the fact that they do not come within the terms of S. 40(1)(a) or (b) of the Act, provided they were of the character specified in sub-clause (aa) of S. 40(1). In terms, he section does not cover acquisitions not completed; they must governed by Part VII.

(21) Subsequent to the coming into force of the amending Act, the Central Government in exercise of its powers conferred by Section 55 of the Act have promulgated certain Rules called "Land Acquisition (Companies) Rules, 1963 for the guidance of the States in the matter of acquisition of lands for companies. The rules which came into force on 24-6-1963, appear to cover all cases of acquisitions for companies and they are consistent only with the application of part VII of the Act to such acquisition of land for the benefit of a company and that even after coming into force of the amendment, there can be acquisitions for the benefit of a house building co-operative society, which for the purpose of the Land Acquisition Act is regarded as a company. That may be so. In this case we are not concerned with the question whether all cases of acquisition of land for companies must come under part VII of the Act; for the case before us is limited one, viz. whether an acquisition coming directly within S. 40(1)(aa) could be made under part II of the Act, even though a part of the cost of acquisition should be born by the Government. As that sub-clause specifically provides for such acquisition there could, in our opinion, be no authority to proceed under Part II, in respect of cases covered by it. As we have already mentioned, the acquisition had not yet been completed. Section 7 of the Amending Act will not therefore apply to the present case. The result will be that the fresh proceedings have to be initiated in accordance with the provisions of Part VII of the Act. This, however, does not mean that the notification issued under S. 4 of the Act is in any way invalid. Equally valid will be the enquiry conducted by the Collector and his report under S. 5-A. A writ of mandamus will issue accordingly in terms prayed for but making it clear tat proceedings taken upto the stage of the declaration under S. 6 will be valid. The appeal will be allowed, but there will be no order as to costs.

(22) Appeal allowed.


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