P. VAJRA VELU MUDALIAR .... SPECIAL DEPUTY COLLECTOR & Anr. v. Stare of Madras

[639 E-H; 631 A-DJ. Sri Raja Vyricherla Narayana Gajapatraju Bahadui' Guru v. The Rcunue· Divisional Officer, Vizianagram, I.L.R- [1939] Mad. 532, referred to. (iii) A comparative stud:y of the principal Act and the Amending Act showed that if land was acquired for a housmg scheme usder the Amending Act, the claimant would get a lesser value than what he would get for the same or similar land acquked for some public ·purpose under the Principal Act. The discrimination between persons whose lands were acquired for housing schemes and thO.e whose lands were acquired for other public purposes was not sustained on the principle of reasonable classifica tion founded on intelligible differentia which had a rational relation to the. object sought to be achieved. Although it was contended that the Amending Act was passed to meet an urgent demand.so as to find a way out to clear up slums, the Act as finally evolved was not confined to any· L!Sup./6~14 616 SUPREME COURT REPORTS (1965) I S.C.R. such problem and land could be acquired under the Amending Act for A bowing schemes with other objectives.

The Amending Act therefore clearly infringed Art. 14 of the Constitution and was void. (633 B-E; 635 A-BJ. ORIGINAL JURISDICTION : Writ Petitions Nos. 144, 227 and 228 of 1963. Petition under Art. 32 of the Constitution of India for tke enforcement of fundamental rights. A. V. Vlswanatha Sastri, C. S. Prakasa· Rao and R. Gopala krishnan, for the petitioner (in W. P. No. 144/63). A. V. Viswanatha Sastri, G. A. Pias, T. N. Sambasivan anll N. S. Mani, for the petitioners (in W. Ps. Nos. 227 and 228 of 1963). A. Ranganadham Chetty, R. Viswanathan and A. V. Rangam, for the respondents (in W. P. No. 144of1963). R. Ranganadham Chetty and A. V. Rangam, for the re$pon dents (in W. P. Nos. 227 and 228 of 1963). S. S. Shukla, for the interveners (W. P. No. 144 of 1963). C. K. Daphtary, Attorney-Genera/, N. S. Bindra, R. H. Dhebar and B. R. G. K. A.char, for the Attorney-General (in W. P. No. 144 of 1963). B. R. L. Iyengar, R. H. Dhebar and B. R. G. K. Achar, for the Advocate-General, Gujarat (in W. P. No.

144/63). C. K. Daphtary, Attorney-General, R. H. Dhebar and B. R. G. K. Achar, for the Advocate-General, Maharashtra, (in W. P. No. 144/63). R. N. Sachthey and B. R. G. K. Achar, for the Advocate- General, Rajasthan. (in W. P. No. 144/63). I. N. Shroff, for the Advocate-General, Madhya Pradesh (in B c D E F W. P. No. 144/64). The Judgment of the Court was delivered by Subba Rao J. These three petitions filed under Art. 32 of the Constitution raise the question of the constitutional validity of G the Land Acquisition (Madras Amendment) Act, 1961 (Madras Act 23 of 1961), hereina(ter called the Amending Act. We shall briefly state the facts relevant to the question raised. The petitioner in Writ Petition No. 144 of 1963, P. Vajravelu Mudaliar, is the owner of lands bearing sorvey Nos. 4-2, 40-7 and 43-1 of Peruakudal Village and of extents 1.82, 1.39 and 3.72 acres H respectively. By a notification dated November 7, 1960, and published in the Fort St.

George Gai.ette, dated November 16, P. v. ,MUDALIAR v. DY. COLLllCTOR (Subba Rao I.) 617 A 1960, the Government issued a. notification under s. 4 ( 1) of the Land Acquisition Act (Act 1 of 1894), hereinafter called the Principal Act, notifying that, among other lands, the said lands of the petitioner were needed for a public purp0se, to· wit, for the development of the area as "neighbourhood" in the Madras City in accordance with the Land Acquisition and Development Scheme B of the Government. On November 23, 1960, the Special Deputy Collector for Land Acquisition issued a notification under s. 4 ( 1), read with s. 17 ( 4), of the Principal Act, arid under the said notification the first respondent was authorized to take possession of the petitioner's lands. The Madras Legislature subsequently C enacted the Amending Act providing for the acquisition of lands for housing schemes and laying down principles for fixing com pensation different from those prescribed in the Principal Act.

The petitioner questions the validity of the Amending Act, inter alia, on the ground that -it infringes Arts. 14, 19 and 31(2) of the Constitution. D The petitioner in Writ Petitions Nos. 227 and 228 of 1963, Most Rev. Dr. L. Mathias, Archbishop of Madras, owns lands bearing survey Nos. 17-2-B-1 and 127/2B of extent 50.53 acres and 0.62 acre respectively in Urur, near Madras City. By notifica tion dated November 13, 1961, and published in the Fort St. E George Gazette, the Government of Madras issued a notification under s. 4 (1) of the Principal Act notifying, among other lands, that the said lands of the petitioner were needed for a public purpose, to wit, for the development of the area as the "neighbour hood" in Madras City in accordance with the Land Acquisition and Development Schemes of the Government. It was also stated in the notification that in view of the urgency, under s. 17 ( 4) of the Principal Act, the applicl!tion of the provisions of s.

5 (a) of the said Act was dispensed with, and that compensation in respect of the said acquisition would be paid in accordance with the provi sions of the Amending Act. F G The said petitioner (W. P. No. 228 of 1963) also owns lands bearing survey Nos. 153/1 and 154/2 at Thiruvanmiyar Village, Chingleput District, of the extent 21.56 and 10.50 acres respec tively totalling about 32 acres. The said lands were also notified for acquisition and the petitioner was told that he would be paid -::ompensation under the Amending Act. H The said petitioner in these two petitions questions the con- stitutional validity of the said Amending Act on the ground, inter alia, that it offends Arts. 14, 19 and 31 (2) of the Constitution. 618 SUPREME COURT REPORTS ( 1965) I s .. C.R. To the three petitions the Special Deputy Collector for Land A Acquisition, West Madras, and the Government of Madras are In their counters the respondents pleaded, among made parties. others, that the said Act was saved under Art.

31-A of the Con stitution and, therefore, its validity could not be questioned on the ground that it infringes either Art. 14, Art. 19 or Art. 31 (2) of the Constitution; and that even if Art. 31-A was not attracted, B the provisions of the Amending Act would not infringe any of the In these petitions some interveners are said three provisions. represented by their counsel and this Court had also given notices IQ the Advocates-General of various States. We have beard the arguments advanced on behalf of the petitioners, interveners, and C the State of Madras and the counsel on behalf of the Advocates General of some of the States who supported the State of Madras. Mr. A. V. Viswanatha Sastri, learned counsel for the peti tioners, raised before us the following points : (i} As the Madras State Housing Board Act, 1961, and the Madras Town-Planning D Act, 1920, are special statutes providing for the execution of housing and improvement schemes and town-planning schemes respectively, property for the said schemes can be acquired ooly after following the procedure prescribed Government bas no power to acquire land for the said purpose · under the Amending Act in derogation of the provisions of the E former Act.

(ii) The acquisition, though it purports to be for a housing scheme, is really intended for selling the lands acquired and raising revenue for the State and it is, therefore, a colourable exercise of the State's power. (iii) The Amending Act offends Arts. 14 and 19 of the Constitution. And (iv) the Amending Act is also bad, because it does not provide for payment of compen- F sation within the meaning of Art. 31 (2) of the Constitution. thereunder and Mr. A Ranganadbam Chetty, learned counsel for the State of Madras contends that, (i) the Government in its discretion has the power to acquire land for housing purposes under any one of the three Acts, namely, the Housing Board Act, the Town- G Planning Act and Amending Act; (ii) by reason of the Constitu tion (Seventeenth Amendment) Act, 1964, which is retrospec tive in operation, the petitioners are precluded from questioning the validity of the Amending Act on the ground that it infringes Art.

14, Art. 19 or Art. 31 of the Constitution; (iii) the Amend ing Act does not infringe either Art. 14 or Art. 19 of the Con stitution; and (iv) after the Constitution (Fourth Amendment) Act 1955, the expression "compensation". carries a meaning H P. v. MUDALIAR v. DY. COLLECTOR (Subba Rao J.) 619 A different from that given to it in Mrs. Bela Banerjee's case( 1 ), and thereafter the adequacy of the amount given for acquisition of land ceased to be justiciable. B Mr. Palkhivala, appearing for some of the interveners elabo rated the contention of Mr: A. V.. Viswanatha Sastri based upon the meaning of the expression "compensation" in Art. 31(2) of the Constitution. We shall consider his argument in the relevant context in the course of our judgment. The first question need not detain us, for though Mr. Viswa the Government can only natha Sastri raised the point that acquire the lands for housing schemes in conformity with the C provisions cif either the Madras Town·Ptanning Act, 1920, or the Madras State Housing Board Act, 1961, but not under the provisions of the Amending Act, he did not pursue the matter in view of the following two decisions of this Court : Patna Improvement Trust v.

Smt. Lakshmi Devi(~), and Nandeshwar Prasad v. U. P- Government('). Therefore, nothing more need D be said about this. Mr. A. Ranganadham Chetty relied upon the Constitution (Seventeenth Amendment) Act, 1964, and contended that Art. 31 cA, as amended, precluded the petitioners from ·questioning the validity of the Amending Act on the ground that it infringed E Art. 14, Art. 19 or Art. 31 of the Constitution. By the said amendment, in the definition of the expression "estate" sub-cl. (a) of cl. (2) was substituted by a new sub-clause defining the said expression. The material part of the amended sub-cl. (a) of cl. (2) reads~ F "the expression "estate" shall, in relation to any local area, have the same meaning as that expression or its local equivalent has in the existing law relating to Land tenures in force in. that area and shall also include- (ii) any land held under ryotwari settlement. " G From the material on record we cannot definitely hold whether the lands in question are held under ryotwari settlement.

But ~nming for the purpose of these petitions that the said lands are held under ryotwari settlement, the question arises whether the impugned \aw provides for acquisition by the State of any "estate" or any rights therein or the extinguishment or modifica- tion of any such rights. The scope of this provision fell to be H (I) (1954] S.C.R. 558. (2) [1963] Supp. 2 S.C.R. 81.2. (3) A.l.R. 1964 S,C. 1217. 620 SUPREME COURT REPORTS [ 1965] I S.C.R. considered by this Court in K. K. Kochuni v. The State of A Madras( 1 ). There it was held that th~>Ugh the impugned Act dealt with an estate, it was not saved by Art. 31-A of Cons~tution, as the Act had nothing to do with agrarian reform, but sunply conferred on junior members of the rights which they had not got before in the sthanam properties. Mr. Ranganadham Chetty criticized this decision on the ground B that the said view was based only on a part of the statement of "objects and reasons" and that the omitted part thereof supported a wider construction of the provisions so as to include acquisition of a land for slum clearance or other such social purposes.

I The omitted part of the statement reads thus : tarawad c " (ii) The proper planning of urban and areas require the beneficial utilisation of vacant and waste lands and the clearance of slum areas. " It is true that in the said decision the statement of objects and reasons relevant to the question raised therein was extracted; but 0 it was made clear that it was referred to only for the limited pur pose of ascertaining the conditions prevalent at the time the Bill was introduced in Parliament and the purpose for which the amendment was made. It is commonplace that a court cannot construe a provision of the Constitution on the basis of the state ment of ''objects and reasons", and this Court did not depart from E the said salutary rule of construction. The real basis of that deci sion is found at p. 900 and it is : "The definition of "estate" refers to an existing law relating to land tenures in a particular area indicating thereby that the Article is concerned only with the land tenure described as an "estate".

The inclusive defini tion of tho rights of such an estate also enumerates the rights vested in the proprietor and hi~ subordinate tenure-holders. The last clause in that definition, viz., that those rights also include the rights or privileges in· respect of land revenue, emphasizes the fact that the Article is concerned with land-tenure. It is, therefore, manifest that the said Article deals with a tenure called "estate" and provides for its acquisition or the extin guishment or modification of the rights of the land holder or the various subordinate respect of their rights in relation to the estate. The con trary view would enable the State to divest a proprietor tenure-holders F G H (I) [t960J 3 S.C.R. 887, 900. P. v. MUDALIAR v. DY. COLLECTOR (Subba Rao/.) 621 A· of his estate and vest it in another without reference to any agrarian reform. " This judgment, therefore, in effect, held that Art 31-A (i) (a) should be confined to an agrarian reform and not for acquiring property for the purpose of giVi:ng it to another.

This Court in Ji Ranjit Singh v. The State of Punjab(') considered the scope of the said decision. The question that arose in that cue was whether the East Punjab Holdings (Conservation and Prevention of Fragmentation) Act, 1948 (Act 50 of 1948) , as amended by the East Punjab Holdings (Consolidation and Prevention of Fragmentation) (2nd Amendment and Validation) Act,. 1960 (Act 27 of 1960), was protected by Art. 31-A against an attack on the ground that the said Act. infringed the fundamental rights under Arts. 13, 14, 19 and 31 of the Constitution; This Court considered the earlier. deeisions of this Court, including the deci sion In K. K. Kochuni v. State of Madras('). Adverting to the Court, Kochuni' s case, Hidayatullah J., speaking for C D observed: E F "But that was a special case and we cannot apply it to cases where the general scheme of legislation is definitely agrarian: reform and under its . provisions ancillary thereto in the interests of rural something economy has to be undertaken to give full effect to the reforms.

" Apropos the Act before it, this Court observed : "The scheme of rural development today envisages not only equitable distribution of land so that there is no undue imbalance in society resulting in a landless class on the one hand and a concentration of land in the hands of a few, on the other, but envisages also the raising of economic standards and bettering health and social conditions. " That judgment, therefore, accepts the view that Art. 31-A was G enacted only to ·implement agrarian reform, but has given a comprehensive meaning to the expression "agrarian reform" so · as to include provisions made for the development of economy. Under Art. 31 (2) and (2A) of the Constitution a State is H prohibited from making a law for acquiring land unless it is for a public purpose and unless it fixes the amount of compensation II) [1965] I S.C.R. 82. (2) [1960J 3 s.c.R. 887. ~22 SUPREME COURT REPORTS ( 1965] I S.C.R. or specifics the principles for determining the amount of com- A pensation.

But Art. 31-A lifts the ban to enable the State to implement the pressing agrarian reforms. The said object of the Constitution is implicit in Art. 31-A. If the argument of the respondents be accepted, it would enable the State to acquire the lands of citizens without reference to any agrarian reform in derogation of their fundamental rights without payment of com- B pcnsation and thus deprive Art. 31 (2) practically of its content. If the intention of Parliament was to make Art. 31 (:) a dead Ietter, it would have clearly expressed its intention. Tiiis Court cannot by interpretation enlarge the scope of Art. 31-A. On the other hand, the Article, as pointed out by us earlier, by necessary C implication, is confined only to agrarian refonns. therefore, we held that Art. 31-A would apply only to a law made for acquisition by the State of any "estate" or any rights therein or for extinguishment or modification of such rights if such acquisi tion, extinguishment or modification is connected with agrarian refonn.

D Mr. Ranganadham Chetty contended that acquisition housing under the Amending Act is for slum clearance and for relieving congestion of housing accommodation and that acquisi tion for such a purpose would be in connection with agrarian reform in the enlarged sellJie of that expression accepted by this E Court. Even· accepting the argument of the learned counsel that the Act was conceived and enacted only for the purpose of slum clearance which became an urgent problem the city of Madras, we cannot hold that such a slum clearance relates to an agrarian reform in its limited or wider sense. That apart, the Amending Act in its comprehensive phraseology takes in acquisi- F tion for any housing scheme, whether for slum clearance or for creating modern· suburbs or for any other public purpose. The provisions of the Amending Act are not confined to any agrarian refonn and, therefore, do not attract Art.

31-A of the Constitu tion. If Art. 31-A of the Constitution is out of the way, Mr. Viswa- G natha Sastri, learned counsel for the petitioners contended that the Act is bad as it docs not provide for compensation i.e .. a "just equivalent" for the land acquired under the Amending Act and, therefore, it offends Art. 31 (2) of the Constitution. This aspect is elaborated by Mr. Palkhivala, who appeared for one of the interveners in the petitions. He narrated situations; {i) when the law provides for adequate ·compensa tion but there is difference of opinion as to the adequacy of it the following four H P. v. MUDALIAR v. DY. COLLECTOR (Subba Rao!.) 6~3 A related in a given case; (ii) where the Jaw provides for partially inade quate consideration based on valid principles property at the time of acquisition; (iii) where it fixes arbitrarily the compensation based on principles unrelated to the property or to the time of acquisition or to both;_ (iv) where the compensa tion fixed is illusory; and contended that in the first situation B compensation is paid, that in the second it is a moot question whether the question of adequacy of compensation is justiciable or not, and that in the third and fourth . situations, the said justiciable.

Mr. Rahganadham Chetty, question appearing for the State, on the other hand, argued C question of adequacy of consideration, however it arose, was not justiciable in a court of Jaw. To appreciate the contentions it is necessary to consider the following questions: (i) what was the scope of the relevant part of Art. 31 (2) of the Constitution before the Constitution (Fourth Amendment) Act, 1955? (ii) why was that amendment brought about ? (iii) what was the change the amendment introduced ? and (iv) what was the effect of the amendment? is clearly D • E -Article 31(2) before the said amendment read as follows: "No property . . . . . . .... shall be taken possession of or acquired for public purposes. . . . . . . . . . unless the law provides for compensation for the property taken possession of or either fixes the amount of com pensation or specifies the principles on which and the manner in which the compensation is to be determined and given.

" F In Mrs. Bela Banerjee's(') case this Court was called upon to con- sider the question whether compensation provided for under the West Bengal Land Development and Planning Act. 1948, was in compliance with the provisions of Art. 31 (2) of the Comtitu tion. Under the said Act lands could be acquired many years after it came into force. but it fixed the market value that pre vailed on December 31, 1946, as the ceiling on ·compensation G without reference 'to the value of the land at the time of acquisi In that context this Court considered the provisions of following tion. Art. 31 (2) of the Constitution and came conclusion, at p. 563-564 : H "While it is true that the legislature is given the discretionary power of laying down the principles which should govern the determination of the amount (I) [1954] S.C.R. 558_ 624 SUPREME COURT REPORTS [196)] I S.C.R. to be given to the owner for the property appropriated, such prmc1ples must ensure that what is determined as payable must be compensation, that is, a just equivalent of what the owner has been deprived of.

Within the limits of this basic requirement of full indemnification of the expropriated owner, the Constitution allows free play to the legislative judgment as to what principles should guide the detcnnination of the amount payable. Whether such principles take into account all the cle ments which make up the true value of the property to be appropriated and exclude matters which arc neglected. is a justiciable issue to be adjudicated by the court. " By applying the said principles this Court held that the proYi sions of the said Act fixing a ceiling on compensation without reference to the value of the land was arbitrary and, therefore, was not in compliance with, in law and spirit, the requirement of Art. 31 (2) of the Constitution. This decision lays down three points, namely, (i) the compensation under Art. 31 (2) shall be a "just equivalent" of what the owner has been deprived of: (ii) the principles which the Le,:islature can prescribe are only principles for ascertaining a "just equivalent" of what the owner has been deprived of; and (iii) if the col1lpcnsation fixed was not a "just equivalent" of what :he nwncr ha·; heen deprived of or if the principles did not take into account all relevant clements or took imo account irrelevant elements for arriving at the just C{)Uivalcnt, the question in regard thereto is a justici: able issue.

This Court. interpreted Ar!. 31 (2) of the Constitution and laid down its scope. This view was reiterated bv this Court in Stme of Madras v. Nama sivaya Mu(folior('). There the question was whether ss. 2 and 3 of the Madras Lignite ( AcQui~ition of Land) Act XI of 1953 which sought to amend the Land Acquisition Act 1 or 1894 were invalid because they infringed the fundamental right~ under Art. 31 of the Constitution of owners of lands whose proocrty was to be compulsorily acquired. Under that Ace comnemation made payable for coml'ulsory acquisition of land wa• the value of the land on April 28. 1947. together with the v~lue 0( anv agric~ltural impro;,ements-made th~reon after that d8.te and before uublication or th, nntification under s. 4 ( 1). The rc~ult of that Act was to freeze for the purpose of acquisition the prices • •f land in the area to which it applied and the owners were therefore, authoritatively tll [t%4j 6 S.C.R. 936.

A B c D E F G H A B c D E F G 1-1 P. v. MUDALIAR v. DY. COLLECTOR (Subba Rao J.) 625 deprived of the benefi: of appreciation of land values since April 28, 1947, whenever the notification under s. 4(1) might be issued and also of non-agricultural improvements made in the land after April 28, 1947. That Act was passed before the Constitution (Fourth Amendment) Act, 1955, was enacted and, therefore, the question fell to be considered on the Article as it existed before the amendment. After noticing the relevant provi sions and the case-law on the subject, Shah J., speaking for the Court, said : "Fixation of compensation for compulsory acquisi tion of lands notified many years after that date, on the market value prevailing on the date on which lignl'te was discovered is wholly arbitrary and inconsistent with the letter and spirit of Art. 31 (2) as it stood before it was amended by the Constitution (Fourth Amend ment) Act, 1955.

If the owner is by a constitutional guarantee protected against exprnpriation of his pro perty otherwise than for a just monetary equivalent, a Jaw which authorises acquisition of land not for its true value, but for value frozen on some date anterior to the acquistion, on the assumotion tbt all appreciation in its value since that date is attributable to purposes for w'iich the State may use the land at sometime in future, must be regarded as infringing the fundamental right. " It may, therefore, be taken ag settled law that under Art. 31 (2) of the Constitution before the Constitution (Fourth Amendment) Act, 1955, a person whose land was acquired was entitled to compensation i.e., a "just equivalent" of the land of which he (Fourth Amendment) Act, was deprived. The Constitution 1955, amended Art. 31 (2) and the amended Article reads : "No property shall be compulsorily acquired or requisitioned save for a public purpose and save by authority of law which provides for compensation for the property so acquired or requisitioned and either fixes the amount of compensation or specifies principles on which and the manner in which, the com pensation is to be determined and given; and no such Jaw shall be called in question in any court on the ground that the compensation provided by that l:iw i~ not adequate.

" A scrutiny of the amended Article discloses that it accepted the meaning of the expressions "compensation" and "principles" as 626 SIJPREME COURT REPORTS [1965] I S.C.R. ). It may A defined by this Court in Mrs. Bela Banerjee's case ( 1 be recalled that this Court in the said case defined the scope of the said expressions and then stated whether the principles laid down take into account all the elements which make up the true value of the property appropriated and exclude matters which are to be neglected, is a justiciable issue to be adjudicated by the court. Under the amended Article, the !aw fixing the amount 8 of compensation or laying down the principles governing the said fixation cannot be questioned in any court on the ground If that the compensation provided by that law was inadequate. the definition of "compensation" and the question of justiciability are kept distinct, much of the cloud raised will be dispelled.

C Even after the amendment, provision for compensation or laying down of the principles for detennining the compensation is a condition for the making of a law of acquisition or requisition. A Legislature, if it intends to make a Jaw for compulsory acqui sition or requbition, must provide fnr compensation or specify the principles for ascertaining the compensation. The fact that D Parliament used the same expressions, namely, "compensatiQn" and "princinles" as were found in Art. 31 before the Amendment is a clear indication thai it accepted the meaning given by this Court to thme exoressions in Mrs. Bela Baner; ee's case('). It follows that a Lc8islature in making a law of acquisition or requisition shall provide for a just equivalent of what the owner E has been deprived of or specify the principles for the purpose of ascertaining the "just equivalent" of what the owner has been deprived of.

If Parliament intended to enable a Legislature to make such a law without providing for compensation so defined. it would have used other exoressions like "price", "consideration" etc. principle of construction is stated thus : Jn Craies On Statute Law, 6th Edn., at p. 167, the relevant F "There is a well-known principle of construction, that where the legislature used in an Act a legal term which has received judicial interpretation, it must be assumed that the term is used in the sense in which it has been judicially interpreted unless a contrary inten tion appears. " The said two expressions in Art. 31 (2). before the C<'~stitution (Fourth Amendn1ent) Act, have received an authoritative inter pretation by the highest court in the land and it must be presumed that Parliament did not intend to depart from the meaning )!ivcn by this Court to the said expressions. (t) (1954) S.C.R. 558. G H P. v.

MUDALIAR v. DY. COLLECTOR (Subba Rao J.) 627 A The real difficflty is, what is the effect of ouster of jurisdic-- tion of the court to question the law on the ground that tlte It will "compensation" provided by the law is not adequate 1 be noticed that the law of acquisition or requisition is not wholly immune from scrutiny by the court. But what is excluded from the. court's jurisdiction is that the said law cannot be questioned B on the ground that the compensation provided by that law is not adequate. It will further be noticed that the clause excluding the jurisdiction of the court also used the word "compensation" indicating thereby. that what is excluded from the court's jurisdic tion is the adequacy of the compensation fixed by the Legislature. The argument that the ·word "compensation" means a just equi- C valent for the property acquired and, therefore, the court can ascertain whether it is a "just equivalent" or not makes It will be arguing in amendment of the Constitution nugatory. a circle.

Therefore, a more reasonable interpretation is that neither the principles prescribing the "just equivalent" nor the D "just equivalent" can be questioned by the court on the ground of the inadequacy of the compensation fixed or arrived at by the working of the principles. To illustrate : a law is made to· acquire a house; its value at the time of acquisition has to be fixed; there are many modes of valuation, namely, estimate by an engineer, value reflected by· <:omparable sales, capitalisation E of rent and similar others. The application of different principles may lead to different results. Tlie adoption of one principle may give a higher value and the adoption of another principle may give a lesser value. But nonetheless they are principles on which and the manner in which compensation is determined. The court cannot obviously say that the law should have adopted F one principle and not the other, for it relates only to the questiOll' of adequacy.

On the other hand, if a law lays down principles which are not relevant to the property acquired or to the value. of the property at or about the time it is acquired, it may be said that they are not principles contemplated by Art. 3 I (2) of the Constitution. If a Jaw says that though a house is acquired it G shall be valued as a land or that though a house site is acquired it shall be valued as an agricultural land or that though it is acquired in I 950 its value in I 930 should be given, or though shall be given only for 100 acres are acquired compensation 50 acres, the principles do not pertain to the domain of adequacy but are principles unconnected to the value of the property acquired. the validity of the principles can be scrutinized. The law may also prescribe a compensation which is illusory; it may provide for the acquisition of a property worth In such cases H 628 SUPREME COURT REPORTS [1965] I S.C.R. lakhs of rupees for a paltry sum of Rs.

100. The question in that context does not relate to the adequacy of the compensation, for it is no compensation at all. The illustrations given by us are not exhaustive. There may be many others falling on either side of the line. But this much is clear. illusory or if the principles prescribed are irrelevant to the value of tl;e propeny at or about the time of its acquisition, it can be said that the Legislature committed a fraud on power and, there It is a use cif th~ protection of Art. 31 in fore, the law is bad. a manner which the Aniclc hardly intended. If the compensation This leads us to the consideration of the question of the In Gajapati Narayan scope of the doctrine of fraud on power. Drm v. The State of Orissa(' ), Mukherjee J., as he then was, explained the doctrine thus : the outset "It may be made clear at doctrine of colourable legislation does not involve any question of bona {ides or ma/a {ides on the part of the legislature.

The whole doctrine resolves itself into the question of competency of a particular legislature to If the legislature is competeut enact a particular law. to pass a particular law, tile motives which imocllcd it to act arc really irrelevant. On the other hand, if the legislature lacks competency, the question of motive does not arise at all. Whether a statute is constitutional or not is thus always a question of power. " The learned Judge described how the Legislature may transgress the limits of its constitutional power thus : "Such transgression may be patent, manifest or direct, but it may also be disguised, covert or indirect and it is to this latter class of cases that the expression "colourable legislation" has been applied in certain judicial pronouncements. " A B c D E F This Court again explained the said doctrine in Gu/lapal/i Nages- G wara Rao v. Andhra Pradesh State Road Transport Corpora t;n,,(') thus: 'The legislature can only make Its legislative field may be legislative competence. circumscribed by specific legislative entries or limited by fundamental rights created by the Constitution.

The legislature cannot over-step the field of its competency, laws within II (ll [t954)S.C.R.1, IO·tl. (2) [1959J Supp. I S.C.R. 319, 329. P. v. MUDALIAR v. DY. COLLECTOR (Subba Rao J.) 629 A B directly or indirectly. The Court will scrutinize the law to ascertain whether the legislature by device purports to make a Jaw which, though in form appears to be within its sphere, in effect and substance, reaches If, in fact, it has power to make the law, beyond it. its motives ii: making the law are irrelevant. " C Art. 31 ( 2) of the Constitution. When a Court says that a particular legislation is a colourab!e one, it means that the Legislature has transgressed its legislative powers in a covert or indirect manner; it ·adopts a device to outstep the limits of its power. Applying the doctrine to the instant case, the Legislature cannot make a law in derogation of It can, tl1erefore, only make a law of acquisition or requisition by providing for "compensa tion" in the manner prescribed in Art.

31 (2) of the Constitution. If the Legislature, tl1\)ugh ex facie purports to provide for com pensation or indicates the principles for ascertaining the same, but in effect and substance takes away a property without paying compensation for it, it will be exercising power which it does If the Legislature makes a law for acquiring a not possess. property by providing for an illusory compensation or by indi cating the principles for ascertaining the compensation which do not relate to the property acquired or to the value of such property at or within a reasonable proximity of the date of acquisition or the principles are so designed and so arbitrary that they do not provide for compensation at all, one can easily hold that the Legislature made the law in fraud of its powers. Briefly stated the legal position is as follows : If the question pertains to the adequacy of compensation, it is not justiciable; if the compensa tion fixed or the principles evolved for fixing it disclose that the legislature made tile law in fraud of powers in the sense we have explained, the question is within the jurisdiction of the Court.

D E F G H The next question is whetller the Amending Act was made in contravention of Art. 31 (2) of the Constitution. The Amending Act prescribes the principles for ascertaining the value It was passed to amend the Land of the property acquired. Acquisition Act, 1894, in tile State of Madras for the purpose of enabling the State to acquire for housing schemes. "Housing Scheme" is defined to mean "any State Government scheme the purpose of which is increasing house accommoda ·tion" and under s. 3 of the Amending Act, s. 23 of the Princinal Act is made applicable to such acquisition with certain modifica- 630 SUPREME COURT REPORTS [1965) l S.C.R. lions. In s. 23 of the. Principal Act, in sub-s. ( 1) for clause first, A the following clause 1s substituted : "first, the market value of the land at the date of the pubHcation of the notification under section 4, sub section (I) or an amount equal to the average market value of the land during the five years immediately preceding such date, whichever is. less.

" After clause sixthly, the following clause was added : "seventhly, the use to which the land was put at the the publication of the notification under date of section 4, sub-section ( 1 )." Sub-section (2) of s. 23 of the Principal Act was amended by substituting the words, in respect of solatium, "fifteen per centum" by the words "five per centum". In s. 24 of the Principal Act after the clause seventhly the following clause was added : "eighthly, any increase to the value of acquired by reason of its suitability or adaptability for any use other than the use to which the land was put at the date of the publication of the notification under section 4, sub-section (I)." B c D Under s. 4 of the Amending Act, the provisions of s. 3 thereof E shall apply to every case in which proceedings have been started before the commencement of the said Act and are pending. The result of the Amending Act is that if the State Government acquires a land for a housing purpose, the claimant gets olily the value of the land at the date of the publication of the notification under s.

4 (I ) of the Principal Act or an amount equal to the F average market value of the land during the five years im.me diatelv preceding such date, whichever is less. He will get a solatium of only 5 per centum of such value instead of 15 per centurn under the Principal Act. He will .not get any compensa tion by reason of the suitability of the land for any use other than the use for which it was put on the date of publication of the G notification. The second principle is only for a solatium and it is certainly within the powers of the Legislature to fix the quantum of solatiurn in acquiring the land. Nor can we say that the first principle amounts to fraud on power. In the context of continuous rise in land prices from year to year depending upon abnormal circumstances it cannot be said that the fixation of average price H over 5 years is not a principle for ascertaining the price of the !;ind in or about the date of acquisition.

The third principle P. v. MUDALIAR v. DY. COLLECTOR (Subba Rao J.) 631 B A excludes what is described by Courts as the potential value of the land acquired. When a land is acquired, compensation is determined by reference to the price which a willing vendor might reasonably expect to obtain from a willing purchaser. The Judicial Committee in Sri Raja Vyrlcher/a Narayana Gajapatraju Bahdur Garu v. The Revenue Divisional Officer, Vizianagaram(') held in clear terms that in the case of compulsory acquisition, "the la.nd is not to be valued merely by reference to the use to which it is being put at the time at which its value has to be determined . . . . . . . . but also by reference to the uses to which it is reasonably capable of being put in the future. " In awarding compensation if the potential value of the land is excluded, it cannot be said that the compensation awarded is the just equi valent of what the owner has been deprived of.

But such an exclusion only pertains to the method of ascertaining the com pensation. One of the elements that should properly be taken into account in fixing the compensation is omitted : it results in the inadequacy of the compensation, but that in itself does D. not constitute fraud on power, as we have explained earlier. We, therefore, hold that the Amending Act does not offend Art. 31 ( 2} of the Constitution. c F were being acquired for Mr. Viswanatha Sastri then contended that though the lands the ostensible purpose of housing E schemes; the real purpose was to provide revenue for the State. It is stated that the acquisition is made for and on behalf of the State Housing Board at Rs. 50 or Rs. 60 per ground, that the said Board sells the lands so acquired to private individuals, including the original owners thereof, if the Housing Board so pleased, at a price of Rs. 300 /- per ground, and that it is a device to get revenue for the State.

On behalf of the State counter affidavits are filed in the three petitions denying that the lands are bein~ acquired for filling the coffers of the State and stating that the schemes for acquisition are worked out at no-profit-no-loss basis. It appears from the counter-affidavits and the documents filed that there cannot possibly be any sinister motive behind the proposed acquisition. Madras is a growing city. By letter dated, October 20, 1959, the Government of India suggested to the States for taking on hand development schemes. The Govern ment of Madras had considered the question of development of the "neighbourhoods" of the Madras city for relieving the grow- ing congestion and overcrowding in the city; and after making investigations, by order dated. the necessary enquiries and G H (1) I.L.R. (1939] Mad. 532. L!Sup.CI/65- 632 SUPREME COUllT REPORTS (1965) I S.C.R. February 13, 1960, it directed the State Housing Board to take A immediate steps for preparing composite layouts for tho "West Madras" and Vyasarpadi areas after fixing up the limits of the areas in the manner indicated -by. the Board and for the acquisi tion and development of the areas as "neighbourhoods" in accordance with the· Land Acquisition and Development Scheme of the Government of India. priority to the "West Madras" over the Vyasarpadi" area in matter of preparation of composite layouts and acquisition. pursuant to the direction schemes were framed and acquisition proceedings were initiated.

It is stated in the counter-affidavit : It directed. the said Board to give B "The lands are being acquired with a view to develop them into composite housing colonies making provision therein to persons in various strata of society, from slum dwellers upwards, and eventually providing for high schools, elementary schools, dispensaries, shopping centres, police stations, and playgrounds and all other community needs, etc. ". c D It is a composite scheme involving heavy expenditure and adjustments of civil demands of the rich and the poor. Whatever profit is made in the sales of land will be pumped back for improving the colony and for providing amenities for the poorer classes of the society. Except the bare statement by the peti- E tioners in their affidavits that the lands cheaply acquired are being sold at higher prices, the avermcnts of the State that the acquisition is part of a larger scheme of building up of a housing colony on modem lines providing for the rich and the poor alike have not been denied.

It is not necessary to pursue the matter further. The petitioners have failed to establish that their lands F are being acquired as a device to improve tho revenue of the State. Indeed, we are satisfied that the lands are being acquired bona fide for developing a housing colony. The last contention of Mr. Viswanatha Sastri is that the Amending Act is hit by Art. 14 of the Constitution. The law G on the subject is well-settled. Under Art. 14 the State shall not deny to any person equality before the law or the equal protec tion of the laws within the territory of India. But this does not preclude the Legislature frcm making a reasonable classification It has been held in a series of for tho purpose of legislation. decisions of this Court that the said classificalion shall pass founded on an tests, namely, (i) the classification must be intelligible differentia which distinguishes persons and things left two H P. v.

MUDALIAR v. DY. COLLECTOR (Subba Rao I.) 633 D B A out of the group; and (ii) the differentia must have a rational relation to the object sought to be achieved by the statute in question. To ascertain whether the impugned Act satisfies the said two tests, three questions have to be posed, namely, (i) what (ii) what are the differences between is the object of the Act ? persons whose lands are acquired for the housing schemes and these whose lands are acquired for purposes other than housing schemes or between the lands so acquired? and (iii) whether those differences have any reasonable relation to the said object. On a comparative study of the Principal Act and the Amending Act, we have shown earlier that if a land is acquired for a C housing scheme under the Amending Act, the claimant gets a lesser value than he would get for the same land or a similar land if it is acquired for a public purpose like hospital under the Principal Act.

The question is whether this classification between persons whoso lands are acquired for housing schemes and persons whose lands are acquired for other public purposes has reasonable relation to the object sought to be achieved. The object of the Amending Act is to acquire lands for housing schemes. It may be, as Amending Act was passed to meet an urgent demand and to find a way out to clear up slums, a problem which has been balling the city authorities for a long number of years, because of want of funds. But the Act as finally evolved is not confined to any such problem. Under the Amending Act lands can be acquired for housing schemes whether the object is to clear slums or to improve housing facilities in the city for rich or poor. It may be assumed that in the Madras city the housing problem was rather in population and acute and there was abnormal F consequent pressure on accommodation, and that there was also an urgent need for providing houses for the middle-income groups and also to slum-dwellers.

However laudable the objectq underlying the Amending Act may be, it was so framed that under the provisions thereof any land, big or small, waste or fertile, owned by rich or poor. can be acquired on the ground that it is required for a housing scheme. The housing scheme need not be confined to slum clearance; the wide µhraseology used in the Amending Act permits acquisition of It ·need not housing the prosperous section of the community. necessarily cater to a larger part of the population in the city : it can be confined to a chosen few. The land could have been acquired for all the said purposes under the Principal Act after paying the market value of the land. The Amending Act empowers the State to acquire land for housing schemes at a learned counsel contends, increase E G JI 634 SUPREME <.:OURT REPORTS [1965] I S.C.R. price lower than that the State has to pay if the same was acquired A under the Principal Act Now what are the differences between persons owning lands in the Madras city or between the lands acquired which have a It is suggested that the reasonable relation to the said object. differences between people owning lands rested on the extent, B quality and the suitability of the lands acquired for the said object.

The differences based upon the said criteria have no relevance to the object of the Amending Act. To illustrate : the extent of the land depends upon the magnitude of the scheme undertaken by the State. A large extent of land may be acquired for a university or for a network of hospitals under the provisions C of the Principal Act and also for a housing scheme under the Amending Act So too, if the housing scheme is a limited one, the land acquired may not be as big as that required for a big university. If waste land is good for a housing schei.ne under the Amending Act, it will equally be suitable for a hospital or a 0 school for which the said land may be acquired under Principal Act. Nor the financial position or the number of persons owning the land has any relevance, for in both the case·; land can be acquired from rich or poor, from one individual or from a number of persons. Out of adjacent lands of the same quality and value, one may be acquired for a housing scheme E under the Amending Act and the other for a hospital under the Principal Act; out of two adjacent plots belonging to the same individual and of the same quality and value, one may be acquired under the Principal Act and Amending Act.

From whatever aspect the. matter is looked at, the alleged differences have no reasonable relation to the object F sought to be achieved. It is said that the object "Of the Amending Act in itself may project the differences in the lands sought to be acquired under the two Acts. This argument puts the cart the existing before the horse. It is one thing reasonable differences between persons and properties have a relation to the object sought to be achieved and it is totally a G different thing to say that the object of thl' Act itself created the differences. Assuming that the said proposition is sound, we cannot discover any differences in the people OV1'11ing lands or in the lands on the basis of the object. The object is to acquire lands for housing schemes at a low price. For achieving that object, any land falling in any of the said categories can be acquired under the Amending Act. So too, for a public purpose anv such land can be acquired under the Principal Act.

We. the other under to say H • P. v. MUDALIAR v. DY. COLLECTOR (Subba Rao J.) 635 A tlierefore, hold that discrimination is writ large on the Amending Act and it cannot be sustained on the principle of reasonable classification. We, therefore, hold that the Amending Act clearly infringes Art. 14 of the Constitution and is void. In this view it is not necessary to express our opinion on the B. question whether the Amending Act infringes Art. 19 of the Constitution. In the result it is hereby declared that the Amending Act is void. We direct the issue of writs of mandamus restraining the respondents from proceeding with tlie acquisition under the pro- C visions of the Amending Act. This order will not preclude the respondents from continuing the proceedings under the . provisions of the Land Acquisition Act, 1894, in accordance with Jaw. The petitioner in Writ Petition No. 144 of 1963 will get one set of costs, and the petitioner in Writ Petitions Nos. 227 and 228 of 1963 will get one set of costs. One hearing fee. D Petitions allowed.