LAND ACQUISITION

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Land Acquisition for “Companies” : Part II Or Part VII?
by Dr Avinash Mandke M.S. (Orth)

Cite as : (2004) PL WebJour 15


A.a When lands are acquired for a “company” under the Land Acquisition Act, 1894, the acquisition has to be done under Part VII of the Act. If instead, the acquisition is made under Part II of the Act, purportedly for a “Public Purpose”, then the entire proceedings are “ultra vires”, vitiated and a “fraud upon the statute”. This was always so, and is especially true after the Land Acquisition (Amendment) Act, 1984.

There is a clear-cut difference between the acquisition of lands for a “Public Purpose” and the acquisition of lands for the purposes of a “company”. Such acquisition of lands for a “company” always had to be in the “larger public interest” and clearly was never meant for the “private purposes” of a “company”. Acquisition of lands for a “company” has and always had, to be done under Part VII of the Act. By this statutory requirement the “on-going control” of the State was exercised over the “utilisation” of the acquired lands, when the sovereign power of Eminent Domain was brought into play for the benefit of a “company”.

A.b Further, any contribution whether “wholly or partly”, made from the “Public Revenue” towards the cost of acquisition, i.e. invocation of the (now) second proviso to sub-section (1) of the Declaration under Section 6 of the Act, or even a “prior approval” purportedly under Section 3(f)(vi) of the amended Act, cannot convert the acquisition made for a “company”, into an acquisition for a “Public Purpose”, and thereafter said to be “legally and validly” done under Part II of the Act.

Thus, the recent decision of the Hon’ble Supreme Court in Pratibha Nema case1 ..has necessitated these submissions at resolving the said question i.e. the “question of Part II/ Part VII”.

B.a Clearly, prior to the Land Acquisition (Amendment) Act, 1984, the definition of Section 3(e) shows that the Land Acquisition Act, 1894, did not distinguish at all between the companies, registered societies and cooperative societies over whom the Government had “a deep and pervasive control”, and on the other hand the companies, registered societies and cooperative societies which were private enterprises, and where the Government only had the usual statutory and regulatory controls. Thus Section 3(e) as it had then stood, defining “Companies”, contained a mélange of “government” and “non-government” companies, and read as under:

“(e) the expression ‘company’ means a company registered under the Indian Companies Act, 1882, or under the (English) Companies Act, 1862 to 1890 or incorporated by an Act of Parliament of the United Kingdom or by an Indian Law, or by Royal Charter or Letters Patent and includes a society registered under the Societies Registration Act, 1860, and a registered society within the meaning of the Cooperative Societies Act, 1912, or any other law relating to cooperative societies for the time being in force in any State;”

Also, prior to the Land Acquisition (Amendment) Act, 1984, Section 3(f) as it originally stood, read as under:

“(f) the expression ‘public purpose’ includes the provision of village sites in districts in which the appropriate Government shall have declared by notification in the Official Gazette that it is customary for the Government to make such provision;”

B.b Thus, more than four decades ago, in Jhandu Lal case2 the same issue as posited here at the outset, was considered by a Constitution Bench of the Hon’ble Supreme Court, as under:

“(5) It is manifest that the main point for determination in this appeal is: Whether or not the acquisition proceedings had been vitiated by reason of the admitted fact that there was no attempt made by the Government to comply with the requirements of Part VII of the Act.”

The said Constitution Bench of the Hon’ble Supreme Court went on to answer the question posed in Jhandu Lal case2 in the negative; and considering the proviso [now second, resulting from the insertion of the first proviso by the Land Acquisition (Amendment and Validation) Act, 1967] to sub-section (1) of the Declaration under Section 6 of the Land Acquisition Act, 1894, had laid down that if the cost of the acquisition was “wholly or partly” met through the public revenue, it would be an acquisition for a “Public Purpose” even though the acquisition was actually for a “company”. This ratio, was emphasized, by two Constitution Benches of the Hon’ble Supreme Court in the “First R.L. Arora” case3 and also in Somawanti case4.

B.c It should be appreciated that any acquisition proceedings for a “company” simpliciter, i.e. a non-Government entity, cannot be made under Part II of the Act, even when the cost is borne wholly/partly from public revenues, especially in view of the Land Acquisition (Amendment) Act, 1984 (68 of 1984), which received the assent of the President of India on 24-9-1984 and published in the Gazette of India (Ext.), Part II Sec. I, No. 86, pp. 1-11, dated 24-9-1984.

By the Statement of the Objects and Reasons of the Bill No. 63 of 1984, which was introduced in the Lok Sabha on 6-8-1984, and published in the Gazette of India (Ext.), Part II, Section 2, No. 41, dated 6-8-1984, pp. 1-14 whereby the Land Acquisition (Amendment) Act, 1984 was sought to be enacted, the “mischief, defect and lacuna” in the existing Law that was identified, was as under:

“Again, acquisition of land for private enterprises ought not to be placed on the same footing as acquisition for the State or for an enterprise under it.” (emphasis supplied)

Therefore, the Statement of the Objects and Reasons of the Bill No. 63 of 1984, introducing the said Land Acquisition (Amendment) Act, 1984, put forward as one of the main proposals, seeking to promote “the remedy to cure the mischief, defect and lacuna” in the existing Law, as below:

“(II) Acquisition of land for non-government companies under the act will henceforth be made in pursuance of Part VII of the Act in all cases.” (emphasis supplied)

In fact, this very same “mischief, defect and lacuna” in the existing Law, and the very same “remedy” was identified and proposed in the previous Bill No. 67 of 1982, which was introduced in the Lok Sabha on 30-4-1982, and which was withdrawn in “deference” to the various suggestions received from Members of Parliament, State Governments and eminent and knowledgeable persons. Thus, the duly modified Bill No. 63 of 1984 had come to be introduced on 6-8-1984, in place of the previous Bill No. 67 of 1982.

At the time of the consideration of the aforesaid Bill No. 63 of 1984 in the Lok Sabha on 25-8-1984 (Lok Sabha Debates, 7th Series, Vol. 51, No. 24, dated 25-8-1984, col 54), it was pointed out by the Hon’ble Minister of State for Ministry of Rural Development, Smt Mohsina Kidwai, (who introduced the Bill earlier on and piloted it through), and reiterated in the Rajya Sabha (Rajya Sabha Debates, Vol. 131, No. 26, dated 28-8-1984, col 113), that:

“I would now like to draw the attention of the Hon’ble Members to some other provisions of the Bill. ... The scope of the term ‘public purpose’ has been revised so as to provide for acquisition of land for all socially important purposes, but at the same time to obviate the possibility of misuse of this provision. ...” (emphasis supplied)

This said “misuse” of the ambit of “Public Purpose” was sought to be obviated by the “exclusionary” rider, at the end of the proposed Section 3(f), which newly defined the term “Public Purpose”.

From the identified “mischief, defect and lacuna” and the proposed “remedy” as aforesaid, and the statement of the Hon’ble Minister on the floor of the Lok Sabha, it is clearly evident that the “misuse” of the scope and ambit of the term “Public Purpose” that was envisaged was that of the acquisition of lands for “non-government companies” being made under Part II of the Act, when the Land Acquisition Proceedings should have been done under Part VII of the Land Acquisition Act, 1894.

Thus, after the decision in Jhandu Lal case2 and more so especially after the decision in the “First R.L. Arora” case3 which was also a Constitution Bench decision, the “misuse” of the provisions of “Public Purpose” and of Part II of the Act, was often done, by invoking the (now) second proviso to sub-section (1) of the Declaration under Section 6 of the Land Acquisition Act, 1894. Thus by purporting to contribute a “part” of the cost of acquisition and compensation to be paid from the public revenue, the acquisition was sought to be given a cloak of “acquisition for a Public Purpose”, and the acquisition was then said to have been “validly and legally” done under the provisions of Part II of the Act; whereas when the acquisition was actually for the purposes of a “company” simpliciter, then in reality, it should have been done under Part VII of the principal Act.

It was to preclude such a “misuse”, that the changes in the definition of “Public Purpose” by the new Section 3(f) were proposed in the aforesaid Bill No. 63 of 1984.

B.d In fact, the scope of acquisitions for a “Public Purpose” or for a “company” received the closest legislative attention in the aftermath of the landmark judgment in the case of the “First R.L. Arora” case3 where it was held that land acquired for a company could be regarded as for a public purpose only if the public shall not only have right to a direct access and a direct participation in the work, but also that the products of the enterprise shall be “directly” useful to the public. Otherwise, the Hon’ble Supreme Court pointed out, the Government will become a general agent for companies to acquire lands for them for their private profit, simply because the company might produce goods which were likely to prove to be useful to the public.

The judgment in the “First R.L. Arora” case3 threatened to invalidate all acquisitions for public companies made through agency of the Government. To meet this difficult situation, a Presidential Ordinance was promulgated on 20-7-1962 amending Sections 40 and 41 of the Land Acquisition Act, 1894, to provide for acquisition of land for construction of any building or works for a company engaged or to be engaged in an industry, which is essential to the life of the community or is likely to promote economic development of the country. It became necessary because at that time, the Act had provided that lands could be acquired for a company only for the erection of dwelling houses for its workmen or for provision of amenities to them or for the construction of works likely to prove useful to the public.

When on 21-8-1962, the Government brought forth a Bill to convert the Ordinance into an Act, there were sharp reactions in the Lok Sabha with Treasury members joining forces with the Opposition in denouncing the said measure. The Lok Sabha was not prepared to endorse such a wide extension in the power of compulsory acquisition of land for companies. It clearly forced the Government to accept an amendment in the proposed clause 40 of the said Bill, so as to reduce it to an acquisition “for the construction of some building or work for a company which is engaged or is taking steps for engaging itself in any industry or work which is for a public purpose”. Members of the Government as well as on Opposition Benches strongly felt, that lands should be acquired by the Government for a “company”, only when a majority of its shares were owned by the State or if it was in the cooperative sector. But the amendment seeking to define a “company” for the purposes of the Act, as one “owned” by the Central or State Government or a public corporation was defeated. Many other proposals were debated and ultimately the Land Acquisition (Amendment) Act, 1962 (Act 31 of 1962), enabled the Government to acquire land needed for construction of a building or work provided that building or work was for a “company” which was engaged or was likely to be engaged in an industry or work which was for a public purpose (Lok Sabha Debates, 3rd Series, Vol. 7, dated 21-8-1962, 298-1962 and 30-8-1962).

Besides, Sections 44A and 44B were also inserted in the principal Act, providing for restriction on transfer of lands so acquired, and restricting the purpose of acquisition of land for a non-government “Private” company.

Thus, after the “First R.L. Arora” case3 [wherein, though the (now) second proviso to the Declaration under Section 6(1) of the Act was not under consideration, but the decision in Jhandu Lal case2 was approvingly noted], and in the immediate aftermath of the decision in Somawanti case4 (decided on 2-5-1962), in this situation at the time of the consideration in the Lok Sabha of the Bill that had resulted in the Land Acquisition (Amendment) Act, 1962 (31 of 1962), it was this “misuse” of the ambit of “Public Purpose”, that was pointed out (vide Lok Sabha Debates, 3rd Series, Vol. 7, dated 30-8-1962, cols. 5129 & 5130), by the Hon’ble Minister for Food and Agriculture, Shri S.K. Patil (who had moved and piloted the said Bill, till it was passed by the Lok Sabha), as under:

“... If this Bill is withdrawn, the immediate consequence of it would be that the Ordinance would lapse. That apart, — leave that Ordinance — if the Bill is withdrawn and the Ordinance is allowed to lapse, it will be open, under this very Act which we are amending just now, to the State Government, under Part II, to acquire everything and to do everything which we do not want to be done. (Interruption). You imagine as if this is not possible for that Government to do. But here is an indication. As soon as the judgment was given by the Supreme Court in the case Arora v. State of U.P.3 immediately every other Government saw that to acquire anything under Chapter VII was a dangerous thing because the courts would sit upon such cases and difficulties would arise. Therefore, for purposes like air-conditioning plants onwards.... I do not know between the two which is in the larger national interest, whether it is the textile machinery for our textile industry which is a main industry for us or it is the air-conditioning plant ... lands have been acquired under part II of the Act, which they can do. The Supreme Court and a bigger Bench of five Judges have told that it could be done. There is no compensation also. It is not justiciable. Therefore, I am anxious to see that such things are not allowed. If the whole Act was under discussion, I could understand many of the suggestions that hon. Members have made. The whole Act is not being amended. The thing under discussion is only that part which I am seeking to amend....” (emphasis supplied)

Further, it was reiterated in the Rajya Sabha, by the then Hon’ble Minister for Food and Agriculture, Shri S.K. Patil (vide Rajya Sabha Debates, Vol. 40, dated 5-9-1962, cols. 5305 and 5306), that:

“... What happened after this Arora case3? After this Arora case3 when the judgment was against those words, a similar case arose in Punjab only last month or 3 or 4 months back, in May. They had to acquire some land for air-conditioning. I do not know out of the two, machinery for textile or air-conditioning, which is a larger public purpose. According to me the first is. The textile machinery is surely a larger public purpose. Even then, I do not go into that but the Government saw that they were likely to be attacked if they acquired lands under Chapter VII or Part VII. Therefore, they were wise enough and they went to Part II. Part II puts no obligation on the Government of any type. Not only they could acquire but they have got to pay some money. Therefore, do you know, how much they paid? They paid Rs 100 for the land. Technically they have to pay some money. In the other Part, when it is acquired for a company, the money is to be paid wholly by that company. Therefore in order to satisfy the requirement of law, they paid Rs 100 and acquired the land for themselves which they have a right to do and then they gave it for the air-conditioning plant, etc. The case went to the Court and this judgment of Arora v. State of U.P.3 was quoted in that court also and the judgment of the 5 Judges of the Supreme Court said: ‘Whatever it might be, once the State Government, in its wisdom, acquires the land for a public purpose, its decision is final and unchallengeable. We have no right to challenge the decision of it because the wording of Section 4 of Chapter II does not give us any loophole that we might go through it and change the meaning of it. They are competent and the compensation is also not justiciable’. You can see. Therefore we are trying to prevent these, that hereafter the State Governments should not go to the length of acquiring land under Part II even for companies. Therefore, my friend opposite will see that I am restricting the law in order to take away the liberty of the States to acquire lands under Part II in which the final decision is only what they decide and not as is given here and many other things might happen. Here I am making it under Part VII so that all those restrictive measures that have been put including the compensation should be applied to it and it should not be very easy for the State Government to acquire it for anything and everything. This is the distinction that is sought to be made.” (emphasis supplied)

While the reference of the Hon’ble Minister Shri S.K. Patil to “textile machinery for our textile industry” was to the decision in the “First R.L. Arora” case3 which had lead to the Bill that was under consideration of the Lok Sabha at that time, the allusion to “air-conditioning plant”, and also the allusion to “a bigger Bench of five Judges” was with respect to the decision of another Constitution Bench of the Hon’ble Supreme Court in Somawanti case4.

Since at that time, Part II of the principal Act was not being sought to be amended, the then Hon’ble Minister for Food and Agriculture, Shri S.K. Patil, (who had moved and piloted the said Bill till it was passed by the Lok Sabha), assured the Lok Sabha that a more “comprehensive” Bill would be placed before the House regarding amendments to Part II of the principal Act, and that till then, by the rules under Part VII which were being formulated, it would be tried to be seen that acquisitions which were supposed to be done under Part VII of the Act, would be done only under Part VII of the Act.

Thus, at the end of the marathon debate in the Lok Sabha, which spilled over from the four hours originally allotted for the Bill’s consideration, on 21-8-1962 to 29-8-1962 and further to the end of the day, on 30-8-1962, when the “clause-by-clause” consideration of the Bill had been accomplished, the Hon’ble Member Shri Homi F. Daji had cautioned, (Lok Sabha Debates, 3rd Series, Vol. 7, dated 30-8-1962, cols. 5177 and 5178), that:

“... What I would say is that the Government by having this Bill amended has taken upon itself a very serious responsibility, a responsibility for acquiring land not for public purpose but for privately owned companies. It is a contradiction and it has to walk on a razor’s edge. It has to do some tight-rope walking. And if it slips over so little, the House which has been vigilant this time, shall be doubly vigilant in seeing that the powers are not abused or misused.

I would, therefore say that the Government in the exercise of its rule-making should be, like Caesar’s wife, not only chaste, but also above suspicion....”

and then, further observed, that

“Lastly, a word. Because of the legal position, we have not been able to give rule-making powers with regard to Part II to the Central Government. But I think it should be possible for the Minister, by directives or otherwise, to say that when lands are acquired for a private company that should be done only under Part VII and not under Part II, because there is always a temptation on the part of the State Government to do it under the other part. It is because of that temptation that the amendment of the whole Act is delayed. The temptation should be stopped; and a new Bill, giving justice to the persons whose lands are acquired, should be brought early.”

However, twenty-two years had to elapse before the said Bill No. 63 of 1984 was placed before the Lok Sabha.

B.e Thus, in order to fulfill the aims and objectives as were set out in the aforesaid Bill No. 63 of 1984, for preventing and prohibiting “misuse” of the provisions of “Public Purpose”, and in order to ensure that the “proposed remedy” to cure the “mischief, defect and lacuna” in the existing Law be unfailingly implemented, the Land Acquisition (Amendment) Act, 1984, (68 of 1984), had brought about amendments to Section 3 of the Land Acquisition Act, 1894, and the new Section 3(cc) was inserted, the new Sections 3(e) and 3(f) were substituted, which were exactly as were proposed in the Bill No. 63 of 1984.

The Land Acquisition (Amendment) Act, 1984 (68 of 1984), also brought about amendments to the Notification under Section 4 of the Land Acquisition Act, 1894. Further, Explanation 2 to the said proviso to the Declaration under Section 6(1) was added; and Section 39 amended, so as to negate invocation of the urgency powers under Section 17 of the Act for the purposes of a “company”.

Thus by the new Section 3(cc), the expression “Corporation owned or controlled by the State” (i.e. instrumentalities/agencies of the State, covered by the ambit of Article 12 of the Constitution), was also clearly defined as under:

“(cc) the expression ‘Corporation owned or controlled by the State’ means any body corporate established by or under a Central, Provincial or State Act, and includes a Government company as defined in Section 617 of the Companies Act, 1956, a society registered under the Societies Registration Act, 1860, or under any corresponding law for the time being in force in a State, being a society established or administered by the Government and a cooperative society within the meaning of any law relating to cooperative societies for the time being in force in any State, being a cooperative society in which not less than fifty-one per centum of the paid-up share capital is held by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments;”

By the newly substituted Section 3(e), the said expression “company” was also clearly defined as under:

“(e) the expression ‘company’ means—

(i) a company as defined in Section 3 of the Companies Act, 1956, other than a government company referred to in clause (cc);

(ii) a society registered under the Societies Registration Act, 1860, or under any corresponding law for the time being in force in a State, other than a society referred to in clause (cc);

(iii) a cooperative society within the meaning of any law relating to cooperative societies for the time being in force in any State, other than a cooperative society referred to in clause (cc);”

Thus, by definition, “non-government” and “government” companies (i.e. “instrumentalities/agencies of the State”) clearly were separated from the common mélange. Also, the substituted Section 3(f), defined “Public Purpose” as under:

“3. (f) the expression ‘public purpose’ includes—

(i) the provision of village sites, or the extension, planned development or improvement of existing village sites;

(ii) the provision of land for town or rural planning;

(iii) the provision of land for planned development of land from public funds in pursuance of any scheme or policy of the Government and subsequent disposal thereof in whole or in part by lease, assignment or outright sale with the object of securing further development as planned;

(iv) the provision of land for a corporation owned or controlled by the State;

(v) the provision of land for residential purposes to the poor or landless or to persons residing in areas affected by natural calamities, or to persons displaced or affected by reason of the implementation of any scheme undertaken by the Government, any local authority or a corporation owned or controlled by the State;

(vi) the provision of land for carrying out any educational, housing, health or slum-clearance scheme sponsored by the Government or by any authority established by the Government for carrying out any such scheme, or, with the prior approval of the appropriate Government, by a local authority, or a society registered under the Societies Registration Act, 1860, or under any corresponding law for the time being in force in a State, or a cooperative society within the meaning of any law relating to cooperative societies for the time being in force in any State;

(vii) the provision of land for any scheme of development sponsored by the Government, or, with the prior approval of the Government, by a local authority;

(viii) the provision of any premises or building for locating a public office;

But does not include acquisition of land for companies.”

(emphasis supplied)

Pertinently, a Constitution Bench of the Hon’ble Supreme Court in M. Pentiah case5 has held that:

15. … Negative words are clearly prohibitory and are ordinarily used as a legislative device to make a statute imperative.”

(emphasis supplied)

This principle of law has been reiterated, after a review of a number of case-laws, by a three member Bench of the Hon’ble Supreme Court in Mannalal Khetan case6. This principle, that the use of the negative words plainly makes the requirements of the section imperative, was reaffirmed in A.K. Roy case7 wherein Craies on Statute Law, 6th Edn., p. 263, was approvingly quoted at para 10 therein, as under:

“If the requirement of a Statute which prescribes the manner in which something is to be done are expressed in negative language, that is to say, if the statute enacts that it shall be done in such a manner and in no other manner, it has been laid down that those requirements are in all cases absolute, and that neglect to attend to them will invalidate the whole proceeding.” (Italics as supplied in the said A.K. Roy case7.)

It also should be noted that in some publications and case reports, the exclusionary rider at the end of Section 3(f) has been printed, as if it was in “continuation” of clause (viii) of the illustrative examples of Public Purpose, leading to the implication that the rider is applicable to only clause (viii). However, in Bill No. 67 of 1982 : Gazette of India (Ext.), Part II, Sec. 2, dated 30-4-1982, pp. 14-23; Bill No. 63 of 1984 : Gazette of India (Ext.), Part II, Sec. 2, No. 41, dated 6-8-1984, pp. 1-14, and also the Land Acquisition (Amendment) Act, 1984 : Gazette of India (Ext.), Part II Sec. I, No. 86, pp. 1-11, dated 24-9-1984, the exclusionary rider is set apart from clause (viii), has a different indent, and is applicable across the board i.e. to the entire section and all its clauses. This is how, the rider had been extracted by the Hon’ble Supreme Court in HMT House Building Coop. Society case8, in Jnanedaya Yogam case9 where in both the cases the new Section 3(f) was extracted in its entirety; and further, the construct that the exclusionary rider is applicable in all illustrative cases, is in consonance with the identified “mischief, defect and lacuna” and “the remedy to cure the mischief, defect and lacuna” as contemplated by the Statement of Objects and reasons of Bill No. 63 of 1984, and also the aforesaid words of the Hon’ble Minister Smt Mohsina Kidwai, who had introduced and piloted Bill No. 63 of 1984 till its enactment into the Land Acquisition (Amendment) Act, 1984.

Clearly, Section 3(f)(vi) is the only ambiguous sub-section, and when reading the sub-section in isolation, the nature of the “society” or the “cooperative society” is uncertain; but the Court, like Lord Denning in “Seaford Court Estates Ltd. v. Asher10 need not be detained by the “parliamentary draftsman”. Thus, when the sub-section is read with the “exclusionary rider” at the end, along with the mischief, defect and lacuna, and also the proposed remedy as was identified and proposed by the Statement of Objects and Reasons of the Bill introducing the Land Acquisition (Amendment) Act, 1984, it is evident that the said society or the cooperative society, would have to be encompassed within Section 3(cc) of the amended Act, i.e. “instrumentality/agency of the State” and covered by the ambit of Article 12 of the Constitution, and thus making the acquisition as “an acquisition for the State or for an enterprise under it”. The said societies or cooperative societies cannot be the societies or cooperative societies that are covered by Section 3(e) of the amended Act, (and which are not “instrumentalities/agencies of the State”, nor covered by the ambit of Article 12 of the Constitution of India), and over whom the Government would not have the “deep and pervasive control”. In such a case, the acquisition of lands for any of such entities would indisputably be “an acquisition of land for private enterprises”, (as had been noted in the said Statement of Objects and Reasons of Bill No. 63 of 1984).

Also, the society or the cooperative society mentioned in Section 3(f)(vi), cannot be a society or cooperative society covered by Section 3(e), for otherwise, there would be an “internal contradiction” between clause (vi) of Section 3(f) and the exclusionary rider at the end of the “illustrative and inclusive” Section 3(f), i.e.

“... But does not include acquisition of land for companies.” (emphasis supplied)

And thus, the “illustrative and inclusive” definition of the “Public Purpose” in Section 3(f) of the amended Land Acquisition Act, 1894, was also made an “exclusionary” definition, in view of fact that the purpose of acquisition for “Companies” (as defined by the new Section 3(e) of the amended Act), had been specifically “excluded” from the ambit of “Public Purpose”. Therefore, vis-à-vis “Public Purpose” and Part II of any Land Acquisition Proceedings, the principle of “ejusdem generis” had been specifically negativated, insofar as “Companies” simpliciter [defined by Section 3(e) of the amended Act], were concerned.

After the Land Acquisition (Amendment) Act, 1984, such a consent as per Section 3(f)(vi) can be given only in cases of acquisition of lands for the State, or an “instrumentality/agency of the State”, or for a “local authority”, or for a “Corporation owned or controlled by the Government” [as defined by Section 3(cc) of the amended Land Acquisition Act, 1894 and by Section 617 of the Companies Act, 1956]. Furthermore, after the Land Acquisition (Amendment) Act, 1984, such a “consent” as per Section 3(f)(vi) cannot be given in the cases of acquisition for purposes of a “company” as defined by the new Section 3(e), and in all such cases, the acquisition clearly has to be done under Part VII of the Land Acquisition Act, 1894, and the required consent has to be given as per Sections 40(1)(a), 40(1)(aa) or 40(1)(b) in the cases of “Public Companies”, and only as per Section 40(1)(a) in cases of acquisition for “Private Companies” in view of the non-obstante Section 44B and where the “Public Companies” and the “Private Companies” are as defined by Section 3(1)(iii) & (iv) of the Companies Act, 1956.

B.f Furthermore, in order to effectively promote the proposed remedy to cure the mischief, defect and the lacuna in the existing law, and in order to leave no doubt regarding the “differentiation” between the “acquisition for a private enterprise” and an “acquisition for the State or for an enterprise under it”, it was proposed by clause 4 of the aforesaid Bill No. 63 of 1984, that:

“4. In sub-section (1) of Section 4 of the principal Act,—

(a) after the words ‘any public purpose’, the words ‘or for a company’ shall be inserted;

(b)-(c) * * *”

(emphasis supplied)

This proposed amendment to the Notification issued under Section 4 of the Land Acquisition Act, 1894, was approved and incorporated in toto, in the amended Act.

It is thus submitted, that as a direct result of the Land Acquisition (Amendment) Act, 1984, (Act 68 of 1984), the decision in the case of “Babu Barkya Thakur v. State of Bombay11 has to be appreciated in a better light. In Babu Barkya case11 while observing that:

10. ... acquisition for a company also is in substance for a Public Purpose....;”

it had been held by the Hon’ble Supreme Court, that the Notification which is issued under Section 4 of the said Act need not specify whether the acquisition was for a “Public Purpose” or for a “company”. It had also been further held that, only in the declaration under Section 6 of the Land Acquisition Act, 1894, was it necessary to specify whether the acquisition was for a “Public Purpose” or whether the acquisition was for a “company”. However, after the Land Acquisition (Amendment) Act, 1984, it can be seen that the statute had itself mandated that it must be specified in the notification issued under Section 4 of the Act, whether the acquisition was for a “Public Purpose”, or for a “company”, both as defined by the amended Land Acquisition Act, 1894.

Further, in order to highlight the differences between the entities covered by Section 3(cc) and the “Companies” which are encompassed within Section 3(e), by the Land Acquisition (Amendment) Act, 1984, “Explanation 2” to the provisos, had been inserted in the principal Act after Section 6(1), and which read as under:

Explanation 2.—Where the compensation to be awarded for such property is to be paid out of the funds of a corporation owned or controlled by the State, such compensation shall be deemed to be compensation paid out of public revenues.”

Furthermore, after the Land Acquisition (Amendment) Act, 1984, the special powers in cases of “urgency”, as given by Section 17 of the Act, were not to be put into force (vide Section 39 of the amended Act) in cases of acquisition of lands for the purposes of “Companies” simpliciter.

B.g It can be appreciated, especially after the Land Acquisition (Amendment) Act, 1984, that the only question which remains to be resolved is the role and scope of the second proviso to the declaration under Section 6 of the Act, which reads:

“Provided further that no such declaration shall be made unless the compensation to be awarded for such property is to be paid by a company, or wholly or partly out of public revenues or some fund controlled or managed by a local authority.”

There was no problem in the compliance of this proviso in the cases of the acquisition of lands for the State, a Local Authority or even in the case of a “company” simpliciter. The problem arose in the cases of acquisition for entities now covered by Section 3(cc) (an acquisition for whom is an acquisition for a “public purpose”), and which by the definition are “Corporations owned and controlled by the State” but financially, legally and juristically, are entities “different and distinct” from the State, and where the funds of such entities are not “Public Revenue”. To overcome this difficulty, a legal fiction was created. By Explanation 2, to sub-section (1) of the declaration issued under Section 6 of the principal Act, the funds of all such entities covered by Section 3(cc) are deemed to be “Public Revenue” (clearly for the sole purposes of the Land Acquisition Act, 1894). The tenor of this “explanation” is also found in the explanation, no longer extant, inserted in the pre-1984 Act by Section 3 of Land Acquisition (Maharashtra Amendment & Validation of certain Proceedings for Acquisition of Lands) Act, 1965, (Mah. Act XXIV of 1965), which was specifically enacted consequent to the decision in “Sadruddin Suleman Jhaveri v. J.H. Patwardhan”.12 The said explanation in the Maharashtra Act, read as under:

Explanation.—Where compensation to be awarded for such property is paid or to be paid out of any money provided by the State Government to a company, being a corporation owned or controlled by the State, whether provided as loan, grant or otherwise howsoever, for the purpose of payment of the whole or part of the compensation, such compensation shall be deemed to be compensation paid or to be paid out of public revenues.” (emphasis supplied)

It should be noted that this deeming facility was meant only for the Companies, which were “owned or controlled by the State”, i.e. were “instrumentalities/agencies of the State”. If by the simple stratagem of contributing “wholly or partly” towards the cost of acquisition, the acquisition could be done under Part II, then there was no need at all to amend the Land Acquisition Act, 1894, and to enact the said Explanation 2, to sub-section (1) of the Declaration issued under Section 6 of the principal Act; nor was there any need at all to separate and differentiate the entities in Sections 3(cc) & 3(e); nor was there any need at all to enact the exclusionary rider at the end of Section 3(f) defining the term “Public Purpose”. The legislature does not amend an enactment without a reason.

B.h The second proviso to sub-section (1) of the declaration under Section 6 of the Land Acquisition Act, 1894, as it stands, has stood unchanged in the statute since 1894. In fact, it should be clearly seen that the only role and scope that was envisaged, at the time of the enactment of the Land Acquisition Act, 1894 (1 of 1894), for the (now) second proviso to sub-section (1) of the declaration under Section 6 of the Land Acquisition Act, 1894, i.e. providing for the payment of the compensation to be awarded “wholly or partly” out of public revenues or some fund controlled or managed by a local authority, was in cases of acquisition for the purposes of entities which, in today’s terminology, are “instrumentalities/agencies of the State”.

Thus a detailed examination, while applying Heydon’s rule or the “mischief” rule, of the legislative history of the Act and the proviso is necessary to substantiate this contention. Historically, laws governing the acquisition of lands in India, included the Bengal Regulation 1 of 1824, and extended to Calcutta by Act 1 of 1850 and Act 42 of 1850. In the Madras Presidency, Act XX of 1852 with so much of Act XLII of 1850 as extended, and Act I of 1854, were in operation. In the Bombay Presidency Act (28 of 1839), extended by Act 17 of 1850 covered the field. All these enactments had been repealed by Act 6 of 1857, an act “for the acquisition of land for public purposes”, (Bombay Government Gazette, dated 11-6-1857, Vol. 27, No. 24, pp. 2219 to 2222).

Furthermore, Act 22 of 1863 (Supplement to Bombay Government Gazette, dated 23-4-1863, pp. 243j to 243p) was another separate act “to provide for taking land for works of public utility to be constructed by private persons or companies and for regulating the construction and use of works on land so taken”.

Thereafter, both these Acts were proposed to be combined into a single Act by Bill No. 9 of 1869, and to be called as the “Indian Expropriation Act, 1869” (Bombay Government Gazette, Part VI, 8-4-1869, pp. 64 to 72 and also 72y to 72gg). From the Proceedings of the Council of the Governor General of India : Bombay Government Gazette, Part V, 8-4-1869 pp. 205-209, it can be seen that predominant concern was about aspects of the “scandalous” amounts of public money being “thrown away” by the misdeeds of the arbitrators, and the need for the role of a judge i.e. the Civil Court, was acutely felt, and quite rightly. However, it can also be seen that this proposed combined Act did not clearly separate the procedures for acquisition of lands for “public purposes” and “works of public utility”; but, by the declaration to be made under the proposed Section 7 (which did not have any proviso, as mooted later on), the nature of the “works of public utility” to be undertaken by the said “companies” or “private persons”, were specified as under:

“7. * * *

Works of public utility shall, for the purposes of this section, be held to comprise the following, and no others:

(1) Bridges, roads, railways, tramways;

(2) Canals;

(3) Works for the storage or for the supply of water;

(4) Improvement of rivers or harbours;

(5) Docks, quays, jetties;

(6) Drainage works;

(7) Works for the protection of land from floods or erosion by rivers;

(8) Electric telegraphs;

and all works subsidiary thereto.

* * *”

Unlike Act 22 of 1863 (by Section 18 therein), there was no provision for an agreement to be executed by the company/private person, nor was there any equivalent of the second proviso to sub-section (1) of the declaration to be made under Section 6 of the present Act. However, the nature of these works of public utility were such, as would be “directly” useful to the public (see First R.L. Arora case3). Thus Bill No. 9 of 1869 was then referred to a Select Committee. (Bombay Government Gazette, Part V, 30-12-1869 pp. 442 to 448.)

On 25-3-1870, the Report of the Select Committee was tabled before the Council of the Governor General of India: Bombay Government Gazette, Part V, 14-4-1870, p. 594. The Proceedings of the Council of the Governor General of India : Bombay Government Gazette, Part V, 21-4-1870 pp. 648-653, show that it was urged on 1-4-1870 when the Council met, that “as the Bill had been greatly altered in Committee, the proposed amendments should be published and time given for the public to become acquainted with their purport ere they were finally adopted by the Council”. However, in order to avoid further delay, the publication of the Report was ultimately felt not to be necessary. Hence, the Report of the Select Committee was accepted without publication and the Bill, as amended, was passed. Thus, the published rationale for separation of acquisitions for “Public Purposes” and “Companies” vide Parts II and VII of the Act, the insertion of the proviso (vide infra), to the Declaration of intended Acquisition that was made under Section 6 of Part II of the Act, and reasons for the change in the name and the designation of the Act, is unavailable. Nuances of language and the intent of the Act, (since also thereafter, “solatium” was to be given and the award or any agreement was not to be chargeable to stamp duty, and further no fees were to be paid for obtaining a copy of the same; and which liberal measures were incompatible with the term, “expropriation”), may have dictated the change in the name of the Act, now termed as the Land Acquisition Act, 1870.

Thus, both Act 6 of 1857 as amended by Act 2 of 1861, and Act 22 of 1863, were repealed and their provisions incorporated, as amended, into the consolidated Act 10 of 1870, i.e. the renamed Land Acquisition Act, 1870, which was a common Act “for the acquisition of land for public purposes and for Companies”. It can be seen that by the Land Acquisition Act, 1870, acquisition could not be made for private persons. The procedure of acquisition for a “Public Purpose” was laid out in Part II of the Act, and the procedure of acquisition for a “company” was detailed in Part VII of the Act. Sections 49 and 50 provided for the execution of the agreement between the Government and the company, and terms thereof.

By the provisions of the Land Acquisition Act, 1870 (10 of 1870), the declaration of the intended Acquisition was to be made under Section 6 of Part II of the said Act, as under:

“6. Subject to the provisions of Part VII of this Act, whenever it appears to the Local Government 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 authorized to certify its orders:

Provided that no such declaration shall be made unless the compensation to be awarded for such property is to be paid out of public revenues, out of some municipal fund, or by a company.

The declaration shall be published in the local official gazette and shall state the district or other territorial division in which the land is situate, the purpose for which it is needed, its approximate area, and where a plan shall have been made of the land, the place where such plan may be inspected.

The said declaration shall be conclusive evidence that the land is needed for a public purpose or for a company, as the case may be; and, after making such a declaration, the local Government may acquire the land in manner hereinafter appearing.” (emphasis supplied)

As had been noted later on, the Land Acquisition Act, 1870 (10 of 1870 : Gazette of India, Part IV, 20-4-1870, pp. 153-61 : Bombay Government Gazette, Part IV, 14-4-1870, pp. 242-49), “had not, in practice, been found to be entirely effective for the protection either of the persons interested in the lands taken up or of the public purse”, and hence, it was proposed to amend the said Act.

Thus Bill No. 6 of 1892 came to be introduced, (Gazette of India, Part V, 12-3-1892, pp. 27-42), and the proviso to the declaration that was to be made under Section 6 of the Land Acquisition Act, 1870, had also been proposed to be modified, so as to read as under:

“Provided that no such declaration shall be made unless the compensation to be awarded for such property is to be paid out of public revenues, or out of some fund controlled or managed by a local authority as defined in Section 3(6) of the General Clauses Act, 1887, or by a company.” (Italics as in the Bill)

The Proceedings of the Council of the Governor General of India: Gazette of India Part VI, 12-3-1892, pp. 25-32, show that the Hon’ble Mr H.W. BLISS (who introduced the said amendment Bill, and while outlining the procedure for acquisition of land under the then existing law), explained at p. 26 therein, the reasons for the proposed amendment by Bill No. 6 of 1892, of the said proviso as under:

“The particular land which will be needed having been thus ascertained, a formal declaration has to be published by the Local Government that it is so needed, and for what purpose it is needed; and it is provided that such declaration shall be conclusive evidence that the land is needed for a public purpose, or for a company, but shall not be made unless the compensation to be awarded is to be paid out of public revenues, or from some Municipal Fund, or by a company. Herein is a matter in regard to which an amendment of the existing law seems desirable. When the Act was passed, District or Local Funds hardly existed. They were therefore not mentioned. Now, their operations extend to almost, or quite, the whole of India. But it has been held by the Law Officers of the Bombay Government that the Act, as it stands, does not warrant the compulsory acquisition of land for such purposes as the construction of a local road or the erection of a school-house from local funds. Obviously it should do so.” (emphasis supplied)

Further, the nature of these ‘Local Funds’ can be gathered, for example, from the Bombay Local Funds Act, 1869 (3 of 1869): Bombay Government Gazette, Part IV, 3-4-1869, pp. 147-149; (for the Report of the Select Committee see proceedings of the Legislative Department, Bombay, vide Bombay Government Gazette, Part V, 9-2-1869, pp. 88-91, in respect of Bill No. 7 of 1868). These “Local Funds” were statutory bodies, and the Government notified the district limits and also the Committee (which even had non-official members) for the purposes of the Act. The Committee could sue or be sued, hold or convey immovable property, and enter into contracts etc., for the purposes of the Act, by and in the name of its President. The Government could also statutorily impose a cess on certain lands, which was then handed over to the Committee; the said amount was to be utilised for “works and undertakings calculated to promote the local public health, education, and convenience, including Roads, Schools, Hospitals, Dispensaries, Dharamshalas, Markets and Wells and other works for improving the water supply”. Thus, the Local Funds were Local Authorities as defined by Section 3(6) of the General Clauses Act, 1887.

After a reference of the said Bill No. 6 of 1892, the Report of the first Select Committee, dated 1-2-1893: Bombay Government Gazette, Part VI, 92-1893, pp. 17-33, and presented to the Council of the Governor General of India, proposed to amend the said proviso as under:

“Provided that no such declaration shall be made unless the compensation to be awarded for such property is to be paid out of public revenues, out of some fund controlled or managed by a local authority, or by a company.” (Italics as in the Bill)

The other proposed amendments had not been found to be entirely satisfactory, and thus the matter had been referred back to the Select Committee. The further and final report of the first Select Committee, dated 22-3-1893: Bombay Government Gazette, Part VI, 30-3-1893, pp. 42-44, which was presented to the Council of the Governor General of India, shows that while Act 10 of 1870 was sought to be repealed and replaced by the newly proposed Land Acquisition Act, 1893, no further amendment was sought to be made in the said proviso, except that it was set out as a proviso to the newly delineated sub-section (1) of the declaration under Section 6 of the Act. However, even this reconsidered proposed Land Acquisition Act, 1893, was not found to be satisfactory.

Thereafter, the freshly constituted second Select Committee had duly submitted its report dated 24-1-1894: Bombay Government Gazette, Part VI, dated 1-2-1894, pp. 18-29 : Gazette of India Part V, 27-1-1894, pp. 23 and 24, to the Council of the Governor General of India, proposing to amend the said proviso to sub-section (1) of the Declaration under Section 6, to an even greater intent and extent than what had been explained by the Hon’ble Mr H.W. Bliss, as aforesaid, so that the proviso would read, as under:

“Provided that no such declaration shall be made unless the compensation to be awarded for such property is to be paid by a company, or wholly or partly out of public revenues or out of some fund controlled or managed by a local authority.” (Italics as in the Bill)

It is important to note, that the second Select Committee in its Report dated 24-1-1894, submitted to the Council of the Governor General of India, clearly explained that:

“6. The object of the amendment we have suggested in the proviso to Section 6 is to enable land to be acquired under the Bill for the purposes of colleges, hospitals and other public institutions which are in some cases only partly supported out of public revenue or the funds of local authorities.” (emphasis supplied)

The Proceedings of the Council of the Governor General of India: Gazette of India Part VI, 10-2-1894, pp. 24-42, show that a further amendment was sought to be made to the said proviso by Hon’ble Sir Alexander Miller, who headed the aforesaid second Select Committee, and who had moved (Gazette of India Part VI, 3-2-1894, p. 19), that the Reports of the Select Committee on the Bill to amend the Land Acquisition Act, 1870, be taken into consideration, as under:

“The Hon’ble Sir Alexander Miller moved that in Section 6, proviso of the Bill, as amended, the words ‘out of’ where they occur the second time (in line 5) be omitted. He said: ‘The amendment is a purely formal one and arises in this way.’ The Bill as it originally came out of Select Committee provided that—

‘no such declaration’ (of intended acquisition) ‘shall be made unless the compensation to be awarded for such property is to be paid out of public revenues, out of some fund controlled or managed by a local authority, or by a company’.

Then, in deference to a representation from Bombay, the words ‘wholly or partly’ were put in before the words ‘out of public revenues’. But the words following, ‘out of some fund,’ read grammatically, would imply that ‘wholly or partly’ should be confined to ‘public revenues,’ whereas they were intended to apply also to ‘some fund controlled or managed by a local authority’. In order to make that clear I propose the amendment in question.’

The amendment was put and agreed to.”

It is patently clear that the intent and object of the second Select Committee, in making the aforesaid amendment to the said proviso, as pointed out hereinabove, was clearly accepted by the Council of the Governor General of India without any dissent, and thus the wording of the proviso, after removal of misleading and surplus words i.e. “out of”, is how the (now) second proviso to sub-section (1) of the Declaration under Section 6 of the Land Acquisition Act, 1894, stands in the statute with all its intent and nuances.

Thus, the use of words with all the intent and grammatical nuances, by the second Select Committee while explaining the object of its proposed amendment to the said proviso, i.e. the use of words “public institutions which are in some cases only partly supported out of public revenue or the funds of local authorities”, (emphasis further supplied), shows that rest of the cases, i.e. other than those entities partly supported out of public revenue or the local funds i.e. funds of local authorities, considered by the second Select Committee, would only be “public institutions which were wholly supported out of public revenue or the funds of local authorities”.

Thus it is clear that the proposed amendment to the said proviso was meant only to make it an enabling proviso for purposes of acquisition for “public institutions which are in some cases only partly supported out of public revenue or the funds of local authorities”. It was not meant to be an enabling proviso for the acquisition of lands for the purposes of a “company” simpliciter. Acquisition for an “institution not supported out of public revenue or funds of local authorities” i.e. the acquisition of lands for cases of private unaided institutions, without the element of public control, had not been considered at all, by the second Select Committee.

Further, the use of the emphasised words by the second Select Committee shows the intent that the object was to enable the acquisition for public institutions supported out of public revenues or the funds of local authorities, where such public institutions were only partly supported. Where the public institutions were wholly supported out of public revenues or the funds of local authorities, the cost of acquisition and compensation to be paid was obviously to be entirely borne from public revenues or the funds of local authorities. However, where the public institutions were only partly supported out of public revenues or funds of the local authorities, then the cost of acquisition and the compensation to be awarded could be partly borne from public revenues or the funds of local authorities even if so desired, on a “pro rata” basis, with the other responsible organisation or entity bearing the rest of the expenses of acquisition and the compensation to be paid. Further, where the public institutions were only partly supported out of public revenues or the funds of local authorities, and if the expense of acquisition and compensation to be paid by the said other responsible organisation/ entity was more than what it could bear financially, or even otherwise if the said “local Government” so felt it necessary, then it would be open for a larger portion or even the whole of the cost of acquisition and compensation to be paid from the public revenues or from funds of local authorities, but only where such public institutions were already partly supported out of public revenue or funds of local authorities.

On the other hand, in a situation where the Local Fund [i.e. the Local Authority vide Section 3(6) of the General Clauses Act, 1887], did not have sufficient funds to contribute even its pro rata share towards the cost of the said acquisition, made for the purposes of the public institutions which were already partly supported out of its funds, then it could be open for the “shortfall” to be made good from the Public Revenue. These Local Funds were not always “flush with funds”, and thus by the Local Public Works Loan Act, 1871 (Act 24 of 1871: Bombay Government Gazette, Part IV, 21-9-1871 pp. 146 and 147; for Proceedings of the Council of the Governor General of India; see inter alia, Bombay Government Gazette, Part V, 14-4-1870, p. 596), provision was made for Local Funds etc., to take loans and advances from the Local Government or other persons with sanction of the Government, for carrying out works of public utility.

Furthermore, the use of the words “public institutions which are in some cases only partly supported out of public revenue or the funds of local authorities”, obviously indicates that the entities i.e. the said public institutions were in regular receipt of “funds” i.e. “grant-in-aid” as it is also called, either “wholly or even partly” on an “on-going basis”, and thus at all times the State or the local authority would be having a “deep and pervasive control” over such entities. Hence by the principles as later culled by the Hon’ble Supreme Court in Ajay Hasia case13 such entities would be “instrumentalities/agencies of the State”.

Thus it could be said that way back in 1894 itself, it had been clearly contemplated that “wholly or partly”, the cost of acquisition was to be expended from the public revenue or the fund of a local authority, only for purposes of “the State or an enterprise under it”, (as was set out in the Statement of Objects and Reasons of the said Bill No. 63 of 1984), i.e. all the entities that would come to be covered by Article 12 of the Constitution, after it came into force.

B.i} Thus the Land Acquisition (Amendment) Act, 1984, sought to separate and to set out that the purposes of the “State or an enterprise under it” i.e. to separate and set out that the purposes of entities which are covered by Article 12 of the Constitution of India would be “Public Purposes” and the acquisition would be done under Part II of the Act; and that the purposes of “Companies” simpliciter as defined by the newly substituted Section 3(e), would not be included within the ambit of “Public Purposes”, and acquisition for the purposes of the said “Companies” would necessarily have to be done under Part VII of the principal Act.

Undoubtedly, acquisition could not be done for the “private purposes” of a company, and even Act 22 of 1863 meant “to provide for taking land for works of public utility to be constructed by private persons or Companies and for regulating the construction and use of works on land so taken”. Furthermore, Act 10 of 1870, by Sections 48(1) and (2), had clearly mandated that before undertaking acquisition of land for a “company”, that the Local Government must be satisfied that the land is needed for the construction of some work and that such work is likely to prove useful to the public. This requirement was also carried forward in Section 40(1)(a) and (b) in the Land Acquisition Act, 1894 (1 of 1894), when it came into force. Further amendments to the requirements of Section 40 by Act 16 of 1933 and also by Act 31 of 1962, did not change the requirement that the acquisition for “Companies” simpliciter had to be made in the “larger public interest”.

Moreover, acquisition of lands for purposes of a “company” simpliciter was not to be lightly undertaken, merely on a “demand” made by the company. Thus, the proceedings of the Council of the Governor General of India : Gazette of India Part VI, 12-3-1892, pp. 25 at p. 28, show that Hon’ble Mr H.W. Bliss (and who had introduced the said 1892 amendment Bill), while outlining the procedure for the “acquisition of land” under the then existing law, and the defects and difficulties therein, clearly explained that:

“Part VII of the Act lays down the procedure to be adopted when it is sought to acquire land for companies. It indicates, though perhaps not so clearly as desirable, that it is not intended that the law shall be put in force for the acquisition of land for all Companies, even though registered under the Indian Companies’ Act of 1882, or formed in pursuance of an Act of Parliament or by Royal Charter or Letters Patent. It is not intended, that is to say, that the Act shall be used for the acquisition of land for any company in which the public has merely an indirect interest and of the works carried out by which the public can make no direct use. The Act cannot therefore be put into motion for the benefit of such a company as a Spinning or Weaving Company or an Iron Foundry, for although the works of such companies are distinctly ‘likely to prove useful to the public’ (to use the words of Section 48), it is not possible to predicate of them ‘the terms on which the public shall be entitled to use’ them, a condition precedent to the acquisition of land laid down in Section 49. On the other hand, if the Government is determined to entrust to a company the working of coal or other minerals owned by it, on such conditions as to the payment of royalties or otherwise as it may deem fit, the operations of such a company would be for a public purpose, for the furtherance of which the provisions of the Act might properly be applied. I mention this point because the question of the kind of Companies, for the purposes of which land may be acquired under the Act, has more than once been raised; and it is important both that the public should understand that the Act will not be used in furtherance of private speculations and that the Local Governments should not be subject to pressure, which it might possibly sometimes be difficult to resist, on behalf of enterprises in which the public have no direct interest. The only defect which has been found in this part of the Act is that its terms are such as to throw unnecessary difficulties in the way of acquisition of land for companies, such as railway companies, for the purposes of which the Government has contracted to provide land, and which are therefore, so far, Government Undertakings. The Bill contains provisions which are designed to obviate those difficulties and to simplify the procedure applicable to such cases.”

(emphasis supplied)

This said “difficulty” in undertaking acquisition of lands for purposes of railway companies, which were Government undertakings, was obviated ultimately by Sections 43 and 44 of the parent Act, as it now stands today. In fact, the insertion of Sections 43 and 44 by Act I of 1894, was clearly an attempt to distinguish and separate out entities which were “Government undertakings” i.e. “instrumentalities/agencies of the State” from the ambit of the definition of “company”; and the insertion of the new Section 3(cc) and the substitution of Section 3(e), by the Land Acquisition (Amendment) Act, 1984, was clearly a further continuation of that attempt. The other difficulty that had been found by the second Select Committee, as aforesaid, was in the respect of acquisition of land for the purposes of public institutions which were only partly supported out of public revenue or the funds of a local authority, and which said “difficulty” was obviated by the amendment, as aforesaid, to the (now) second proviso to sub-section (1) of the declaration under Section 6 of the Act.

It is most important to note that no “difficulty” at all had been found in the cases of acquisition of land for “Companies” simpliciter. When as aforesaid, acquisition of land for the purposes of “Companies” simpliciter had always to be for a purpose in the “larger public interest”, and when the said acquisition was not to be made for the private purposes or for speculation and not for all or any company merely on “demand”, and when no “difficulty” or any “defect” was found in the existing law in respect of the procedure for the acquisition of lands for the purposes of “Companies” simpliciter, there is clearly no justification or rationale for the evasion of statutory provisions by a malafide invocation of the (now) second proviso to sub-section (1) of the declaration under Section 6 of the Land Acquisition Act, 1894, and thereby “converting” the acquisition into an acquisition for a “Public Purpose” made under Part II, and to thus subvert the provisions of Part VII of the Land Acquisition Act, 1894.

B.j The other aspect which needs to be clearly examined is the interplay, if any, between the new “exclusionary” rider at the end of Section 3(f) and the second proviso to sub-section (1) of the declaration under Section 6 of the principal Act. Clearly, use of the second proviso to sub-section (1) of the declaration under Section 6 cannot be made to “convert” the acquisition for the purposes of a company and which has to be done under the provisions of Part VII into a “Public Purpose”, and that thereby the acquisition could then be done under Part II, and to thus defeat the “exclusionary” rider at the end of the newly substituted Section 3(f) of the principal Act. This clearly leads to an obvious internal contradiction and repugnancy, and the “exclusionary” rider at the end of the newly substituted Section 3(f) of the Act would merely remain a “dead letter” in the statute. The entire exercise of inserting the new Section 3(cc), and the substitution of the new Sections 3(e) and 3(f) would be rendered nugatory and futile, the “exclusionary” rider at the end of the said newly substituted Section 3(f) would be rendered otiose and redundant, and there would be no change in the pre-1984 and post-1984 situations, insofar as acquisitions for “Companies” were concerned, and the said misuse of the second proviso to sub-section (1) of the declaration made under Section 6 of the principal Act would continue unabated and unchallenged.

The Hon’ble Supreme Court has held in Jagdish Singh v. Lt. Governor, Delhi14 that:

7. ... It is a cardinal principle of construction of a statute or the statutory rule that efforts should be made in constructing the different provisions, so that, each provision will have its play and in the event of any conflict a harmonious construction should be given. Further a statute or a rule made thereunder should be read as a whole and one provision should be construed with reference to the other provision so as to make the rule consistent and any construction which would bring any inconsistency or repugnancy between one provision and the other should be avoided. One rule cannot be used to defeat another rule in the same rules unless it is impossible to effect harmonisation between them. The well-known principle of harmonious construction is that effect should be given to all provisions, and therefore, this Court has held in several cases that a construction that reduces one of the provisions to a ‘dead letter’ is not a harmonious construction as one part is being destroyed and consequently court should avoid such a construction.”
(emphasis supplied)

Lord Shaw of Dunfermline, in “Shannon Realties Ltd. v. St. Michel (Ville De)”15 was quoted by Shri G.P. Singh in Principles of Statutory Interpretation, 6th Edn., Wadhwa & Co., as under:

“… where words of a statute are clear, they must, of course, be followed but in their lordships’ opinion, where alternative constructions are equally open that alternative is to be chosen which will be consistent with the smooth working of the system which the statute purports to be regulating, and that alternative is to be rejected which will introduce uncertainty, friction or confusion into the working of the system.” (emphasis supplied)

Therefore, to use words of Lord Denning in “Seaford Court Estates Ltd. v. Asher”10 i.e. in order “to iron out the creases”, a harmonious interpretation is necessary, on one hand, of:

(a) the intent of the second Select Committee at the time of the initial enactment of the principal Act with respect to the proposed amendment to the (now) second proviso to sub-section (1) of the declaration under Section 6, and which intent was clearly accepted and also confirmed by the Council of the Governor General of India on 9-2-1894, when the Land Acquisition Act, 1894 came into force;

(b) the intent of the Lok Sabha at the time of enactment of the Land Acquisition (Amendment) Act, 1962 and the words, as aforesaid, of the then Hon’ble Minister for Food and Agriculture, Shri S.K. Patil, (Lok Sabha Debates, 3rd Series, Vol. 7, dated 30-8-1962, col 5129 & 5130; and vide Rajya Sabha Debates, Vol. 40, dated 5-9-1962 Col. 5305 & 5306);

(c) the Statement of Objects and Reasons of Bill No. 63 of 1984 identifying the mischief, defect and the lacuna and proposing the remedy, as aforesaid,

(d) the intent of the Lok Sabha at the time of enactment of the Land Acquisition (Amendment) Act, 1984, and the statement of the then Hon’ble Minister of State for the Ministry of Rural Development, Smt Mohsina Kidwai (Lok Sabha Debates, 7th Series, Vol. 51, No. 24, dated 25-8-1984, col 54; and the Rajya Sabha Debates, Vol. 131, No. 26, dated 28-8-1984, col 113), clarifying that the “misuse” of the scope of the term “Public Purpose” had been sought to be obviated by the aforesaid Bill,

(e) and the newly inserted Section 3(cc), the newly substituted Section 3(e), and the newly substituted Section 3(f) along with its exclusionary rider at the end, in the amended principal Act, amended by the said Land Acquisition (Amendment) Act, 1984, clarifying that the revised scope of the definition of the term “Public Purpose” clearly does not include acquisition of land for “Companies”,

and a harmonious interpretation, on the other hand, of the existing second proviso to the sub-section (1) of the Declaration under Section 6 of the principal Act, and the catena of decisions regarding the said proviso.

This harmonious interpretation of the statutory provisions, in the light of the aforesaid legislative intent, leads to the inescapable and unavoidable conclusion that the use of the second proviso to sub-section (1) of the Declaration under Section 6 of the Act can be made only to enable the acquisition of lands under Part II of the Act, for entities which are “enterprises under the State” as desired by the aforesaid Bill No. 63 of 1984, i.e. those entities which are “instrumentalities/agencies of the State” and which are covered by the ambit of Article 12 of the Constitution of India. Clearly, in cases of “Non-Government Companies”, which are not “instrumentalities/agencies of the State” and are not covered by the ambit of Article 12 of the Constitution, in all such cases, acquisition of land has to be done under Part VII of the principal Act only, and cannot be done under Part II of the principal Act, and the “misuse” of the second proviso to sub-section (1) of the Declaration under Section 6, cannot be made to “convert” any such acquisition of lands for purposes of a “company” simpliciter, into one that can be made under Part II of the Land Acquisition Act, 1894, which would be ultra vires.

C.a At this point, it is necessary to consider the Land Acquisition (Companies) Rules, 1963, as they stand amended. Thus, Rule 9, after the Land Acquisition (Companies) (Amendment) Rules, 1986, reads as under:

“9. Special provision in relation to a company — When an application is made to the Appropriate Government for acquisition of any land by a company, such acquisition shall ordinarily be made in accordance with the provisions of Part VII of the Act.”
(emphasis supplied)

The question clearly arises, as to whether this rule can be construed to mean that under “extraordinary” circumstances, (which incidentally are not delineated), it would always be open to the Government to acquire lands for a “company” simpliciter under Part II of the Act. The aforesaid Rule 9 seems to apparently be merely directory, and it could be argued that the facts and circumstances of each case would necessarily have to be looked into, before invalidating right at the outset, an acquisition made for a “company” simpliciter under Part II of the Act.

C.b In the first place, even as amended “consequently” and made under the statute, no rule can be interpreted so as to overcome the statutory provisions specifically enacted by the Land Acquisition (Amendment) Act, 1984, in order to remedy the identified mischief, defect and lacuna in the existing law as it stood then. As detailed hereinabove, the Statement of Objects and Reasons of Bill No. 63 of 1984, had identified the mischief as “Again, acquisition of land for private enterprises ought not to be placed on the same footing as acquisition for the State or for an enterprise under it”, and also proposed the remedy that “Acquisition of land for non-Government companies under the Act will henceforth be made in pursuance of Part VII of the Act in all cases” and thus, in the newly amended Act, Section 3(cc) was inserted, the new Sections 3(e) was substituted, the new Section 3(f) was substituted, and changes had also been made in Section 4 of the parent Act, all as proposed by the Bill No. 63 of 1984. The import of all these changes have been emphasised hereinabove.

Secondly, for a proper understanding of the said Rule 9, it is clearly necessary to examine the genesis and aspects of the legislative history of the Land Acquisition (Companies) Rules, 1963.

Since at the time of the discussion upon the said Bill that resulted in the Land Acquisition (Amendment) Act, 1962, (Act 31 of 1962), Part II of the principal Act was not being sought to be amended, the then Hon’ble Minister for Food and Agriculture, Shri S.K. Patil, (who had moved and piloted the said Bill till it was passed by the Lok Sabha), assured the Lok Sabha that a more comprehensive Bill would be placed before the House regarding amendments to Part II of the principal Act, and that till then, by the rules under Part VII which were then being formulated, it would be tried to be seen that “acquisitions” which were supposed to be done under “Part VII of the Act”, would be done only under Part VII of the Act.

Therefore, in order to implement the said Public Policy as a National Public Policy, by the said Land Acquisition (Amendment) Act, 1962, (Act 31 of 1962), the first proviso to Section 55 of the principal Act was reinserted, and by the proviso, the power to make rules for carrying out the purposes of Part VII of the amended Land Acquisition Act, 1894, was to be exercised by the Central Government. Such rules were for the guidance of the State Governments and Officers of the Central and State Governments. Thus the Land Acquisition (Companies) Rules, 1963, were formulated, which are applicable in all the States.

It is most pertinent to note that the Hon’ble Minister Shri S.K. Patil had explained (vide Rajya Sabha Debates, Vol. 40, dated 5-9-1962 Col. 5314), the considerations behind the choice of words and the particular phraseology of the proposed amendment to Section 55 of the Act, and the Rules for acquisition for “Companies”, that were then being formulated, as under:

“... These are rules which are to be made by the Government of India in Part VII. We wanted that all the rules under the Act should be made by us and an amendment moved but it would have been naturally out of order because this is not the whole Act but only an amendment. Therefore we have now applied it to the particular set of circumstances under which the rules are made. Under Section 55 of the Land Acquisition Act rules are made by the States and those are there already. We do not say that when we make our rules those rules will go. They will have to be amended so far as Part VII is concerned to be in consonance with the rules that we shall be making. Now, we have had no time to consult the States about it. It is wrong for the Government of India to do anything like that but it had immediately to be done because there was no time to consult them which would have taken quite some time. When I come with the whole Act I would consult the State Governments but this time we had no time. Therefore we used a clever phraseology and said that we make the rules for the guidance of the State Governments. The idea is the same; if you can do something by persuasion why use coercion? That is the reply. Therefore if Orissa has got some statute under which land is acquired the tenor of these rules that we make will be in a sense obligatory on that Government also because so far as Part VII is concerned the rules that we shall make will be binding on the Orissa Government.” (emphasis supplied)

C.c Thus, Rule 9 of the Land Acquisition (Companies) Rules, 1963, vide Notification No. G.S.R. 1073 dated 22-6-1963, (before its amendment in 1986), read as under:

“9. Special provision in relation to certain Companies—

(1) When an application is made to the Appropriate Government for acquisition of any land by a company, other than a company owned or controlled by the Central Government or any State Government, such acquisition shall ordinarily be made in accordance with the provisions of Part VII of the Act.

(2) Where the land is proposed to be acquired for a company, other than a company owned or controlled by the Central Government, the special power conferred on the Appropriate Government under Section 17 of the Act shall not be exercisable unless it is satisfied that it is necessary to do so in order to avoid danger to life or property or that it is otherwise necessary to do so in public interest.” (emphasis supplied)

Thus a plain reading of the said Rule 9 shows that even in 1963, a clear distinction had been envisaged between “Companies” simpliciter and “Government” Companies, i.e. between an “acquisition for private enterprises”, and an “acquisition for the State or an enterprise under the State”. Further, use of the word “ordinarily” becomes self-evident in light of the explanation given by the Hon’ble Minister Shri S.K. Patil, that “clever phraseology” had been utilised.

C.d} Thereafter, came the Land Acquisition (Amendment) Act, 1984, with the consequent changes as brought about by the insertion of the new Section 3(cc), the substitution of Sections 3(e) and 3(f), as also Section 4 of the Act, so as to effectuate the proposed remedy i.e., that after the Land Acquisition (Amendment) Act, 1984, acquisition of lands for “private enterprises” i.e. “Companies” as defined, was to be done only under Part VII of the Act, in all cases. As a further consequence, changes were also brought about in Rule 9 of the Land Acquisition (Companies) Rules, 1963. The substituted Rule 9, brought about by the Notification No. G.S.R. 1150 (E) dated 9-10-1986, published in the Gazette of India (Extraordinary), Part II — Section 3 — sub-section (i) at pp. 1 & 2, dated 15-10-1986, reads as under:

“9. Special provision in relation to a company — When an application is made to the Appropriate Government for acquisition of any land by a company, such acquisition shall ordinarily be made in accordance with the provisions of Part VII of the Act.”

(emphasis supplied)

This shows that the special provision was in relation to “a company” rather than in relation to “certain Companies”; and while the “persuasive” choice of words was retained, however, as a result of the insertion of the new Section 3(cc) in the principal Act, there remained no necessity at all for retaining any reference to “Government Companies” in clause (1) of the previous Rule 9, and thus the reference consequently was deleted.

Further, with Section 39 of the principal Act being amended by Sections 23(a) and (b) of the Land Acquisition (Amendment) Act, 1984, whereby urgency provisions of Section 17 could NOT be invoked for the purposes of the newly defined “Companies”, (also reiterated by the Hon’ble Minister Smt Mohsina Kidwai vide Lok Sabha Debates, 7th Series, Vol. 51, No. 24, dated 25-8-1984, col 54, and Rajya Sabha Debates, Vol. 131, No. 26, dated 28-8-1984, col 113) and also that thereafter, an acquisition for a “Government Company” i.e. a “Corporation owned or controlled by the State” was to be done under Part II; there was no necessity for retaining clause (2) of the previous Rule 9, which was deleted and also the necessary deletion was made in sub-rule (1) of Rule 6 of the Land Acquisition (Companies) Rules, 1963.

C.e The mere retention and usage of the “persuasive” word “ordinarily”, in Rule 9 of the Land Acquisition (Companies) (Amendment) Rules, 1986, explained as aforesaid, by the “clever phraseology” of the Hon’ble Minister Shri S.K. Patil, cannot be interpreted to mean, that under cases of some special “extraordinary” circumstances, even after amendment of the principal Act by the Land Acquisition (Amendment) Act, 1984, acquisition for “companies” simpliciter can be done under Part II of the Act. Such an acquisition would be counter to the statute and the said intent of the legislature (vide the proposed “remedy” to correct the “mischief”), that:

“(II) Acquisition of land for Non-Government Companies under the Act will henceforth be made in pursuance of Part VII of the Act in all cases.” (emphasis supplied)

D.a When on at least three occasions, from 1894 to 1984, the intent of the legislature was made clear, that acquisitions for “Companies” were to be done only under Part VII of the present Act; thereafter to seek to do so under Part II is a “misuse” of statutory provisions.

Thus, after the Land Acquisition (Amendment) Act, 1984, acquisition of land for purposes of Non-Government “Companies” under the said Act, has to be made in pursuance of PART VII of the Act in all cases and invocation of the (now) second proviso to sub-section (1) of the Declaration under Section 6 of the Act, cannot convert the acquisition made for purposes of a “company”, into an acquisition for a “Public Purpose”.

D.b In such a situation, what now is the role and scope of the second proviso to sub-section (1) of the Declaration under Section 6 of the Act, which is unchanged since 1894?

The entire issue can be seen from a different perspective. It should be noted that the legislature has not touched the (now) second proviso to sub-section (1) of the declaration to be made under Section 6 of the Act. This too, especially after decisions of three Constitution Benches in Jhandu Lal case2, First R.L. Arora case3 and Somawanti case4, preceding the Land Acquisition (Amendment) Act, 1962, and a further catena of decisions of the Hon’ble Supreme Court prior to the Land Acquisition (Amendment) Act, 1984.

What could have been the results that the legislature had desired to be continued to be achieved?

Clearly, the intention of the legislature could not have been that by contributing “wholly or partly”, towards the cost of acquisition and compensation, the Government-of-the-day can convert an “acquisition” required to be done under Part VII of the Act for the “purposes” of a company, into an “acquisition” for a “Public Purpose”, which can thereafter be said to have been “validly” done under Part II of the Act.

D.c By such a stratagem, it is not that the “private” purpose of a company is converted into a “Public” purpose. The purpose of the acquisition for a company always had to be in the larger public interest and not for the furtherance of “private speculations”, which assurance had been given by the Hon’ble Mr H.W. BLISS, vide supra, at the time of enactment of the principal Land Acquisition Act, 1894.

In fact, it was at the insistence of the legislature that the proposed words “in the interests of the general public” were replaced by the words “public purpose” in Section 40(1)(aa) when enacting the Land Acquisition (Amendment) Act, 1962, since connotations of the words “public purpose” were well established by judicial decisions; even though the Hon’ble Minister Shri S.K. Patil pointed out that both the phrases meant the same, (vide Lok Sabha Debates, 3rd Series, Vol. 7, dated 21-8-1962, 29-8-1962 & 30-8-1962).

D.d It also could not be said, that the time schedule would be shortened. Had that been a concern of the legislature, then in the aftermath of the stormy parliamentary debates prior to the enactment of the Land Acquisition (Amendment) Act, 1962 (31 of 1962), and when the major issue before the legislature concerned acquisition for “companies”, then by sub-rule (2) of Rule 9 of the Land Acquisition (Companies) Rules, 1963 (before amendment), the cautionary note that the urgency provisions of Section 17 of the Act were not to be routinely invoked, would not have been sounded. Further, by the Land Acquisition Act, 1984, Section 39 of the Act would not have been substituted, so as to negate invocation of the urgency powers under Section 17 of the Act for the purposes of a “company”. In fact, the Hon’ble Minister Smt Mohsina Kidwai specifically drew attention to this proposed substitution (Lok Sabha Debates, 7th Series, Vol. 51, No. 24, dated 25-8-1984, col 54, and Rajya Sabha Debates, Vol. 131, No. 26, dated 28-8-1984, col 113).

D.e Clearly, it could not be said that the invocation of the said second proviso was intended to enable the Government to ensure that the land-owner would be paid a greater/lesser amount of compensation. The amount of compensation paid is and also always was the same, regardless of whether the acquisition is done under Part II or Part VII of the Act.

Further, vis-à-vis payment of compensation, it also cannot be said that by purporting to contribute a part of the cost of acquisition, the State was acting as a surety/guarantor when the acquisition was done for a company. When the power of Eminent Domain is exercised, the Local Authority or the “Corporation owned or controlled by the State” or the company for whose purposes the acquisition is done, have to deposit the estimated amount of compensation with the State, which thereafter, makes an “offer” to the land-owner/person interested, vide the “Award”. The Local authority or the company (and the Corporation owned or controlled by the State) can only appear before the Collector or the Court for the sole purpose of adducing evidence as to the amount of compensation, vide Section 50(2) of the Act. But it is the State, exercising the power of Eminent Domain, which is liable to pay the compensation. The State may or may not initiate the acquisition, unless the “Local authority” or the “company” or the “Corporation owned or controlled by the State”, initially deposits the estimated amount; but even if the acquisition is completed before the deposit is made or even otherwise if the deposit is not made at all, it is the State only that is liable to pay the compensation, and may separately recover the amount from the concerned bodies.

In Hissar Improvement Trust case16 the Hon’ble Supreme Court had laid down as under:

“7. We make it clear that insofar as the landowner is concerned, his right to be compensated is enforceable against the State. It is the liability of the Collector in terms of the relevant provisions to pay the amount awarded, together with interest in the event of the amount not being paid in time. ...” (emphasis supplied)

D.f In fact, it is the public at large, which is the loser. When the said second proviso is invoked for the purposes of a company, then the mandatory agreement under Section 41 with its stringent conditions need not be executed. But by this, it is the State, which loses its “on-going” control over the utilisation of the lands acquired for the purposes of the company. The execution of such an agreement imposing conditions, and publication in the Gazette, was a mandatory feature by Sections 49 and 50 of the Land Acquisition Act, 1870 (Gazette of India Part IV, 2-4-1870 pp. 153-161 and Section XVIII of Act No. XXII of 1863 : Supplement to Bombay Government Gazette, 23-4-1863 pp. 243j to 243p.

Furthermore, the inflexibility of Section 44A would clearly be bypassed. Section 44A prohibits subsequent transfer of the acquired land by the company, without express sanction of the appropriate Government. Section 44A, though not originally proposed, was inserted by the Land Acquisition (Amendment) Act, 1962, considering the vehement feelings of the legislature (vide Lok Sabha Debates, 3rd Series, Vol. 7, dated 21-8-1962, 29-8-1962 & 30-8-1962).

D.g In such a situation, it could be conjectured that the part of the said proviso providing for payment of the compensation to be awarded, wholly or partly out of the public revenues or some fund controlled or managed by a local authority, has probably been retained in the statute, to cater for cases where the acquisition is for the purpose of an “enterprise under the State” i.e. an “instrumentality/agency of the State” i.e. an entity covered by Article 12 of the Constitution, and where such an entity cannot be categorically stated to be “Corporation owned and controlled by the State” as is defined by the new Section 3(cc) i.e. its original intention; the classic example of this contention is Ganapathi National Middle School case17.

E.a It can be appreciated that acquisition for “Companies” and the second proviso to the Declaration under Section 6(1) of the Land Acquisition Act, 1894, had come to be considered in a number of decisions of various Courts. Thus, the first of these seems to have been in Ponnaia case18 and which in turn, was overturned in Vedlapatla Suryanarayana case19 while approving the view taken in Senga Naicken case20.

In Ponnaia case18 the acquisition had been set aside on the ground that the “part” contribution from “public revenue” towards the compensation and thus the cost of acquisition, should be a “substantial” part and not a “particle”. However, the nuances of the words of the Select Committees, prior to the time of the enactment of the Land Acquisition Act, 1894, as are detailed hereinabove, were never considered. This is understandable, in view of the fact, that canons of statutory interpretations, at that point of time, did not envisage that the reports of Select Committees, the Statements of Objects and Reasons of Bills etc., nor statements made on the floor of the legislature by the Mover of the Bill, leading to the various Acts, could be considered by the Courts, and thus were not pointed out.

A catena of decisions by the Hon’ble Supreme Court have dealt with the (now) second proviso to the Declaration under Section 6(1) of the principal Act, as it stood prior to the Land Acquisition (Amendment) Act, 1984, and interpreted it, holding to the effect, that a part contribution from the public revenue can convert an acquisition for the purposes of a “company” into an acquisition for a “Public Purpose”.

Thus, in Pratibha Nema case1 (vide infra), apart from the decisions in Jhandu Lal case2, Somawanti case4 and “First R.L. Arora” case3 reliance was placed on the decisions in Jage Ram case21, Indrajit Parekh case22, Bai Malimabu case23, Manubhai Jethalal Patel case24. In Bajirao Kote case25 the matter remained pending before the Hon’ble Supreme Court since 1979. In Srinivasa Coop. House Building Society case26 the acquisition and the initial challenge were prior to the Land Acquisition (Amendment) Act, 1984. Hence in all these said cases, the import of the changes brought about by the Land Acquisition (Amendment) Act, 1984 did not arise for consideration.

On the other hand, Raja Ram case27 is a very significant Judgment; the Hon’ble Supreme Court while extracting the Notification under Section 4 and also the Declaration under Section 6 (both of which clearly said that the acquisition was “for a public purpose at public expense”), held that the Food Corporation of India was a “company” as per the then existing statutory provisions and, therefore inspite of the second proviso to sub-section (1) of Section 6 of the Act, had set aside the acquisition for non-compliance of the provisions of Part VII of the Act.

It should be noted that in Hukam Singh case28 the acquisition and the appeal (i.e. Civil Appeals Nos. 1980-82 of 1979, decided on 10-9-1992) were prior to the Land Acquisition (Amendment) Act, 1984, and the ratio does not have any consequence under the changed circumstances. Furthermore, the matter was not contested at all before the Hon’ble Supreme Court.

E.b Then came the Land Acquisition (Amendment) Act, 1984. By this time it was well settled law that in case of “ambiguity”, during interpretation of statutes, “Judicial Notice” could be taken of the reports of Select Committees, the Statement of Objects and Reasons of the Bills and the Statements made on the floor of the House by the Mover of the Bill, inter alia vide Sole Trustee, Lok Shikshana Trust case29, Indian Chamber of Commerce case30, K.P. Varghese case31, the decision of the Constitution Bench of the Hon’ble Supreme Court in Surat A.S.C. Manufacturers’ Assn. case32 and the decision of a seven member Constitution Bench of the Hon’ble Supreme Court, in the case of S.P. Gupta v. Union of India33: (first Judges’ case), which was in advance of the decision of the seven member Bench of the House of Lords in the case of “Pepper v. Hart34: vis-à-vis the principle, that “Judicial notice” can be taken in cases of “ambiguity” while interpreting statutes, of the Hansard and statements made on the floor of the House by the “Mover of the Bill” introducing the proposed legislation.

E.c After the Land Acquisition (Amendment) Act, 1984, the contention that Land Acquisition Proceedings for a “company”, have to be undertaken only under Part VII of the principal Act, finds full support in the Judgments of the Hon’ble High Courts in Shankar Prasad Banik case35 and in Chaitram Verma case36, wherein, in both the decisions, it had been held that after the Land Acquisition (Amendment) Act, 1984, the proceedings in all cases of acquisition of lands for “Companies”, have to be undertaken under Part VII, and as clearly held in Chaitram Verma case36, an attempt to bypass the provisions of Part VII of the Act, would be a colorable exercise of power.

However even after the Land Acquisition (Amendment) Act, 1984, in a number of cases, the attention of the Hon’ble Supreme Court does not seem to have been drawn to the aforesaid reports of the Select Committees at the time of enactment of the Land Acquisition Act, 1894, statements made on the floor of the Lok Sabha by the Hon’ble Shri S.K. Patil in 1962, the Statement of Objects and reasons of Bill No. 63 of 1984, statements made on the floor of the Lok Sabha by the Hon’ble Smt Mohsina Kidwai in 1984, nor a detailed analysis made of all changes brought about in the principal Act vis-à-vis acquisition of lands for a “Public Purpose” as opposed to acquisition of lands for the purposes of “Companies”, (which undoubtedly always had to subserve the Larger Public Interest).

E.d Thus, a three member Bench of the Hon’ble Supreme Court in HMT House Building Coop. Society case8 recorded that the Notification under Section 4 had purportedly been made for a “Public Purpose” and also that the said society was a “company” encompassed by Section 3(e)(iii) of the amended Act; and Sections 3(cc), 3(e) and Section 3(f) with its exclusionary rider had been extracted in entirety. For the other reasons given in the decision, the Land Acquisition Proceedings were rightly quashed. However, the Hon’ble Supreme Court had observed that:

“14. In view of the substituted definition of the expression ‘public purpose’, in Section 3(f)(vi), the provision for carrying out any housing scheme sponsored by the Government or by any authority established by Government for carrying out any such scheme shall be deemed to be a ‘public purpose’. It further says that the provision of land for carrying out any housing scheme with prior approval of the State Government by a cooperative society within the meaning of any law relating to cooperative societies for the time being in force in any State, shall be deemed to be a ‘public purpose’. As such for any housing cooperative society lands can be acquired by the appropriate Government, treating the same as acquisition for the public purpose. But, in that event, there has to be a prior approval of such scheme by the appropriate Government. When the lands are acquired for any cooperative society with prior approval of the scheme by the State Government, there is no question of application of the provisions of Part VII of the Act. Such acquisition shall be on the mode of acquisition by the appropriate Government for any public purpose.” (emphasis supplied)

It is submitted that this ratio, reiterated in para 19 therein, is not in consonance with the identified “mischief, defect and lacuna” and the “the remedy to cure the mischief, defect and lacuna” as contemplated by the Statement of Objects and reasons of the aforesaid Bill No. 63 of 1984, nor was the import of the “exclusionary” rider at the end of the definition Section 3(f) appreciated. Clearly, the society or cooperative society as mentioned in Section 3(f)(vi) have to be those encompassed within Section 3(cc).

E.e In Venkataswamappa case37 the Hon’ble Supreme Court held as under:

3. It is strenuously contended for the appellants that since some of the lands of the appellants were acquired, one on 2-3-1973 for defense purposes and second on 28-7-1988 for the HMT House Building Cooperative Society, the acquisition of the lands under this notification is malafide and, therefore, is not valid in law. We find no force in the contention. Providing house sites for construction of homes for the members of the second respondent, Cooperative Society registered under State Cooperative Societies’ Act, is a public purpose is not in question and cannot be questioned in view of the enlarged definition of ‘public purpose’ under Section 3(f)(vi) of the Act as amended by Act 68 of 1984. Therefore, so long as providing house sites to the members of the Cooperative Society is a ‘public purpose’, the contention that on earlier occasion also some of the lands belonging to the appellants were acquired for such or some other public purpose, cannot be held to be mala fide.” (emphasis supplied)

It seems that the attention of the Hon’ble Supreme Court was not drawn to the fact that as per the Land Acquisition (Amendment) Act, 1984, there are two types of Cooperative Societies, both being required to be registered under the State laws for the time being in force, i.e. a Cooperative Society covered by the newly inserted Section 3(cc) being a “Corporation owned or controlled by the State” (i.e. essentially instrumentalities/agencies of the State, and covered by the ambit of Article 12 of the Constitution), and acquisition for whose purposes would be for a “Public Purpose”; and the second type of a Cooperative Society would be covered by Section 3(e)(iii) of the amended Act, which by definition would be a “company” and for whose purposes the acquisition would have to be done under Part VII of the Act, in view of the exclusionary rider at the end of the definition Section 3(f) of the amended Act.

E.f While the final decision in Amarnath Ashram Trust Society case38 is not in issue herein, the Hon’ble Supreme Court had noted that:

“6. It is now well established that if the cost of acquisition is borne either wholly or partly by the Government, the acquisition can be said to be for a public purpose within the meaning of the Act. ...”

Further, where it was examined and found by the Hon’ble Supreme Court that the acquisition in Amarnath Ashram case38 was an acquisition for a “company”, then the said Notification under Section 4 of the amended Act (stating that the acquisition was for a public purpose) was vitiated; since by the amended requirement it was necessary to be stated in the Notification under Section 4 as to whether the said acquisition was for a “public purpose” or for a “company”. Clearly, the two pathways diverged from the stage of the Notification under Section 4 of the amended Act, unlike the case earlier, when the separation took place at the stage of the Declaration under Section 6, prior to 1984.

E.g In State Govt. Houseless Harijan Employees’ Assn. v. State of Karnataka39 the Hon’ble Supreme Court had extracted Section 3(f)(vi) and also extracted the exclusionary rider at the end of Section 3(f) of the amended Land Acquisition Act, 1894, and had thereafter considered Section 3(f)(vi), but did not consider the implications of the exclusionary rider, which seems to have been “noted, without being noticed”. Attention was not drawn to Section 3(cc) and Section 3(e)(ii) of the amended Act. It is the registered Societies covered by Section 3(cc) of the amended Land Acquisition Act, 1894, for whom the “sanction” can be given, as per Section 3(f)(vi); whereas the registered Societies covered by Section 3(e)(ii) of the amended Land Acquisition Act, 1894, would be “Companies” for whom sanction under Section 3(f)(vi) cannot be given. In that particular case, there are no details to prove that the said Society had been “established/administered” by the Government, though all its members were Government Employees. Merely by virtue of the fact that the members were Government employees and the term “Government” formed a part of the “name” of the society, would not make the society as one which was “established/administered” by Government, and thus covered by the newly inserted Section 3(cc) of the amended Land Acquisition Act, 1894, (see General Govt. Servants Coop. Housing Society case40). It was not contended, that the “Society” was a “corporation owned or controlled by the State”, or even that it was “an instrumentality/agency of the State”. Clearly the Society was a “company” as defined by Section 3(e)(ii) of the amended Act, and the acquisition had to be done under Part VII of the Act.

E.h Again in Kanaka Gruha Nirmana Sahakara Sangha case41 the acquisition of land for a Cooperative Housing Society was upheld and the Hon’ble Supreme Court had extracted Section 3(f)(vi) of the Act, but not the said exclusionary rider which is applicable across the board to all clauses of the Section 3(f). Thus, the decision again reflects that an acquisition for a Cooperative Housing Society, though covered by Section 3(e)(iii) of the amended Act, can be done under Part II and that sanction can be given under Section 3(f)(vi), so long as there is a “prior approval” of the Government.

F.a Attention, thus, never seems to have been drawn to the Statement of Objects and Reasons of Bill No. 63 of 1984, which clearly identified the mischief as “Again, acquisition of land for private enterprises ought not to be placed on the same footing as acquisition for the State or for an enterprise under it”, and the proposed remedy that “Acquisition of land for non-Government companies under the Act will henceforth be made in pursuance of Part VII of the Act in all cases”, nor to the import of the aforesaid exclusionary rider.

Hence, in HMT House Building Coop. Society case8, State Govt. Houseless Harijan Employees’ Assn. case39 and in Kanaka Gruha Nirmana Sahakara Sangha case41 with the implication in Venkataswamappa case37 being the same vide supra, the “prior approval” seems to be the crux of the matter. Thus, so long as the prior approval is accorded by the appropriate Government, acquisition proceedings for a registered society or cooperative society can be done under Part II of the Act, purportedly for a “Public Purpose”, regardless of the fact that it is covered by Section 3(e). Thus, Judicial imprimatur seems to have been given to a new and a novel method to convert an acquisition for a “company” into an acquisition for a “Public Purpose”, apart from the “use” of the second proviso to the Declaration under Section 6(1) of the Act. Also no contribution, wholly or partly, is to be made towards the cost of acquisition. This is a further obliteration of the distinction between acquisition for a “Public Purpose” and for the purposes of a “company”, which was not the intent of the legislature as seen from the Statement of Objects and Reasons of Bill No. 63 of 1984.

F.b On the other hand, in Jnanedaya Yogam case9 the Hon’ble Supreme Court laid down as under:

8. In the light of the aforesaid rival contentions, it is necessary to have a look at the relevant provisions of the Act. It is not in dispute between the parties that the impugned acquisition is for a society which is managing the Temple in question. Therefore, acquisition for the purpose of the said society would not fall within the definition of ‘public purpose’ as per Section 3(f) of the Act. The said definition as amended by Act 68 of 1984, reads as follows:

[Here the entire newly substituted Section 3(f) along with its exclusionary rider, was extracted and it was construed by the Hon’ble Supreme Court that:]

Such acquisition, therefore, will be governed admittedly by Part VII of the Act which deals with acquisition of lands for companies. Section 3(e) of the Act defines the expression ‘company’ to mean, amongst others, a society registered under the Societies Registration Act, 1860, or under any corresponding law for the time being in force in a State, other than a society referred to in clause (cc). .” (emphasis supplied)

Thus, in Jnanedaya Yogam case9 the import of the changes brought about by the Land Acquisition (Amendment) Act, 1984, was noted; though it should be clear that there was no contention regarding the role of the second proviso to the Declaration under Section 6(1) of the amended Land Acquisition Act, 1894, nor about any “prior approval” given vide Section 3(f)(vi) of the Act. In fact, the decision in Jnanedaya Yogam case9 reiterates the ratio of the First R.L. Arora case3 that when lands are acquired for a “company” the use has to be “directly useful” to the public. Attention does not seem to have been drawn to the backdrop and the legislative intent behind the Land Acquisition (Amendment) Act, 1962.

G.a The ultimate result in Pratibha Nema case1 cannot be faulted. Thus, the Madhya Pradesh Audyogik Kendra Vikas Nigam Ltd., was “undisputedly owned and controlled by the State” i.e. covered by Section 3(cc) of the amended Land Acquisition Act, 1894; was to act as the “nodal agency for the development of large and medium industries in the State”; was “vested with the power to allot land to the industrial units, execute lease deeds and charge premium”; the documentary evidence examined by the Hon’ble High Court showed that the amounts paid to the Nigam by the entities who were to be allotted parts of the lands was an “advance lease premium”; and thus it is seen that, by virtue of Explanation 2 to the provisos to the Declaration under Section 6(1), compensation paid out of such moneys is deemed to be compensation paid out of “public revenues”. It should be noted that the subsequent allotment of the lands to the lessees is covered by the newly inserted Section 3(f)(iii) of the amended Act. Therefore, the Land Acquisition Proceedings had been correctly undertaken under Part II of the Land Acquisition Act, 1894. It is the interpretation of the “exclusionary rider” at the end of the Section 3(f), and the second proviso to the Declaration under Section 6(1) of the Act, which is assailed herein.

In Pratibha Nema case1 it was laid down as under:

6. ... There is an inclusive definition of ‘public purpose’ in clause (f) of Section 3. This clause was inserted by Central Act 68 of 1984. Many instances of public purpose specified therein would have perhaps been embraced within the fold of public purpose as generally understood. May be, by way of abundant caution or to give quietus to legal controversies, the inclusive definition has been added. One thing which deserves particular notice is the rider at the end of clause (f) by which the acquisition of land for Companies is excluded from the purview of the expression ‘public purpose’. However, notwithstanding this dichotomy, speaking from the point of view of public purpose, the provisions of Part II and Part VII are not mutually exclusive..

22. Thus the distinction between public purpose acquisition and Part VII acquisition has got blurred under the impact of judicial interpretation of relevant provisions. The main and perhaps the decisive distinction lies in the fact whether the cost of acquisition comes out of public funds wholly or partly. Here again, even a token or nominal contribution by the Government was held to be sufficient compliance with the second proviso to Section 6 as held in a catena of decisions. The net result is that by contributing even a trifling sum, the character and pattern of acquisition could be changed by the Government. In ultimate analysis, what is considered to be an acquisition for facilitating the setting up of an industry in private sector could get imbued with the character of public purpose acquisition if only the Government comes forward to sanction the payment of a nominal sum towards compensation. In the present State of law, that seems to be the real position.” (emphasis supplied)

It is submitted that it was such blurring of the distinction between acquisition for a “Public Purpose” and acquisition for a “company” by “Judicial decisions” that was objected to, in 1962, by the Hon’ble Minister Shri S.K. Patil and the legislature, as is detailed hereinabove. Also, the Statement of Objects and Reasons of the Bill No. 63 of 1984, leading to the Land Acquisition (Amendment) Act, 1984, noting the “mischief, defect and lacuna” and proposing the remedy, shows that it was probably introduced to obviate such a blurring.

The insertion of Section 3(cc), the substitution of Sections 3(e), 3(f) (with its exclusionary rider), the insertion of the words “or for a company” in Section 4, the insertion of the said Explanation 2 to the provisos to the Declaration under Section 6(1) and the amendment of Section 39 (so as to negate invocation of the urgency powers under Section 17 for the purposes of a “company”) by the Land Acquisition (Amendment) Act, 1984, insofar as the principal Act was concerned, were all aimed at bringing out the differences and to preclude such blurring between acquisition of lands for a “Public Purpose” and acquisition for a “company”.

Also, vis-à-vis the role and import of the exclusionary rider at the end of Section 3(f), there is a clear discrepancy in the observations in Pratibha Nema case1 and the elucidation made on the floor of the Lok Sabha as well as the Rajya Sabha, by the Hon’ble Minister Smt Mohsina Kidwai (vide supra), that:

“I would now like to draw the attention of the Honourable Members to some other provisions of the Bill. ... The scope of the term ‘public purpose’ has been revised so as to provide for acquisition of land for all socially important purposes, but at the same time to obviate the possibility of misuse of this provision. ...” (emphasis supplied)

G.b The Land Acquisition Act, 1894, a pre-Constitutional Act, has been amended, adapted and modified from time to time, and effect should be given to all its objectives, of its amended and also the intentionally ‘non-amended’ provisions. Whilst all judgments in the various cases decided prior to 1984, in respect of the second proviso to sub-section (1) of the Declaration under Section 6 of the principal Act, need not be disturbed and could be treated as “conclusive” vis-à-vis those particular cases, however those decisions cannot and should not be held to be “stare decisis”, and operative as a general principle of law.

It is salutary to note, that a Constitution Bench of the Hon’ble Supreme Court in Distributors (Baroda) (P) Ltd. v. Union of India42 held that:

19. … Ordinarily we would be reluctant to overturn a decision given by a Bench of this Court, because it is essential that there should be continuity and consistency in judicial decisions and law should be certain and definite. It is almost as important that the law should be settled correctly. But there may be circumstances where public interest demands that the previous decision be reviewed and reconsidered. The doctrine of stare decisis should not deter the Court from overruling an earlier decision, if it is satisfied that such decision is manifestly wrong or proceeds upon a mistaken assumption in regard to the existence or continuance of a statutory provision or is contrary to another decision of the Court. It was Jackson, J. who said in his dissenting opinion in Massachusetts v. United States43:

‘I see no reason why I should consciously wrong today because I was unconsciously wrong yesterday.’

Lord Denning also said to the same effect when he observed in Ostime (Inspector of Taxes) v. Australian Mutual Provident Society case44 as under:

‘… The doctrine of precedent does not compel your Lordships to follow the wrong path until you fall over the edge of the cliff. As soon as you find that you are going in the wrong direction, you must at least be permitted to strike off in the right direction, even if you are not allowed to retrace your steps. And that is what I would ask your Lordships to do. ...’ ”

G.c Thus, the ratio laid down in Pratibha Nema case1 vis-à-vis the import of the (now) second proviso to the sub-section (1) of the Declaration under Section 6 of the said Act, needs to be reconsidered. As seen hereinabove, the “ultimate decision” in Pratibha Nema case1 would not change at all, but it is in “public interest” that the correct position in law be laid down as early as possible, in respect of the acquisition of lands made for the purposes of “Companies” under the Land Acquisition Act, 1894; and the role of the second proviso to sub-section (1) of the Declaration which is to be made under Section 6 of the Land Acquisition Act, 1894, and the scope of “prior approval” vide Section 3(f)(vi) of the Act.

1. Pratibha Nema v. State of M.P., (2003) 10 SCC 626 Return to Text

2. Pandit Jhandu Lal v. State of Punjab, (1961) 2 SCR 459 : AIR 1961 SC 343 Return to Text

3. R.L. Arora v. State of U.P., 1962 Supp (2) SCR 149 : AIR 1962 SC 764 Return to Text

4. Somavanti v. State of Punjab, (1963) 2 SCR 774 : AIR 1963 SC 151 Return to Text

5. M. Pentiah v. Muddala Veeramallappa, (1961) 2 SCR 295 : AIR 1961 SC 1107 Return to Text

6. Mannalal Khetan v. Kedar Nath Khetan, (1977) 2 SCC 424 Return to Text

7. A.K. Roy v. State of Punjab, (1986) 4 SCC 326 Return to Text

8. H.M.T. House Building Coop. Society v. Syed Khader, (1995) 2 SCC 677 Return to Text

9. Jnanedaya Yogam v. K.K. Pankajakshy, (1999) 9 SCC 492 Return to Text

10. (1949) 2 All ER 155 (CA) Return to Text

11. (1961) 1 SCR 128 : AIR 1960 SC 1203 Return to Text

12. AIR 1965 Bom 224 Return to Text

13. Ajay Hasia v. Khalid Mujib Sehravardi, (1981) 1 SCC 722 Return to Text

14. (1997) 4 SCC 435 Return to Text

15. 1924 AC 185 (PC) Return to Text

16. Hissar Improvement Trust v. Rukmani Devi, 1990 Supp SCC 806 Return to Text

17. Ganapathi National Middle School v. M. Durai Kannan, (1996) 6 SCC 464 Return to Text

18. Ponnaia v. Secy. of State, AIR 1926 Mad 1099 Return to Text

19. Vedlapatla Suryanarayana v. Province of Madras, AIR 1945 Mad 394 (FB) Return to Text

20. K. Senga Naicken v. Secy. of State, AIR 1927 Mad 245 Return to Text

21. Jage Ram v. State of Haryana, (1971) 1 SCC 671 Return to Text

22. Indrajit C. Parekh v. State of Gujarat, (1975) 1 SCC 824 Return to Text

23. Bai Malibabu v. State of Gujarat, (1978) 2 SCC 373 Return to Text

24. Manubhai Jethalal Patel v. State of Gujarat, (1983) 4 SCC 553 Return to Text

25. Bajirao T. Kote v. State of Maharashtra, (1995) 2 SCC 442 Return to Text

26. Srinivasa Coop. House Building Society Ltd. v. Madam Gurumurthy Sastry, (1994) 4 SCC 675 Return to Text

27. State of Punjab v. Raja Ram, (1981) 2 SCC 66 Return to Text

28. Hukam Singh v. State of Haryana, 1995 Supp (4) SCC 488 Return to Text

29. Sole Trustee, Lok Shikshana Trust v. CIT, (1976) 1 SCC 254 Return to Text

30. Indian Chamber of Commerce v. CIT, (1976) 1 SCC 324 Return to Text

31. K.P. Varghese v. ITO, (1981) 4 SCC 173 Return to Text

32. CIT v. Surat Art Silk Cloth Manufacturers’ Assn., (1980) 2 SCC 31 Return to Text

33. 1981 Supp SCC 87 Return to Text

34. (1993) 1 All ER 42 (HL) Return to Text

35. Shankar Prasad Banik v. Collector, Karimganj, AIR 1994 Gau 56 Return to Text

36. Chaitram Verma v. Land Acquisition Officer, AIR 1994 MP 74 Return to Text

37. Venkataswamappa v. Special Dy. Commr. (Revenue), (1997) 9 SCC 128 Return to Text

38. Amarnath Ashram Trust Society v. Governor of U.P., (1998) 1 SCC 591 Return to Text

39. (2001) 1 SCC 610 Return to Text

40. General Govt. Servants Coop. Housing Society Ltd. v. Wahab Uddin, (1981) 2 SCC 352 Return to Text

41. Kanaka Gruha Nirmana Sahakara Sangha v. Narayanamma, (2003) 1 SCC 228 Return to Text

42. (1986) 1 SCC 43 Return to Text

43. 333 US 611 (1947) Return to Text

44. (1959) 3 All ER 245 (HL) Return to Text

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