Urmila Roy Vs M/s Bengal Peerless Hng.Devt.Co.Ltd.&ors

REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NOS. 1780-1781 OF 2009

(Arising out of SLP© Nos.16336-16337 of 2007)

Urmila Roy & Ors. ……Appellants

Versus

M/s. Bengal Peerless Housing Development Company Ltd. & Ors. …… Respondents

J U D G M E N T

HARJIT SINGH BEDI, J.

1. Leave granted.

2. This judgment will dispose of civil appeals arising out of

judgment dated 2nd July, 2007 rendered by a Division Bench

of the Calcutta High Court.

3. The facts are as under: Appellant Urmila Roy and others

in W.P No.1002 (W) of 2002 were the writ petitioners before

the Single Bench of the Calcutta High Court. As per the facts,

6.78 acres of land had been purchased by them avowedly for

putting up an International School, a cultural centre, an I.T.

Park and a Housing Complex and for this purpose they had

been in negotiations with the West Bengal Housing Board

(hereinafter referred to as “The Housing Board”). It appears,

however, that before the project could be finalized, the State

Government issued a Notification under Section 4(1) of the

Land Acquisition Act, 1894 (hereinafter referred to as “the

Act”) on 4th December, 2000 seeking to acquire in all 12.67

acres (including 6.78 acres belonging to the writ petitioners)

for a housing scheme. The land owner appellants were

allegedly given to understand by the Housing Board that in

the event that they did not object to the acquisition, they too

would be permitted to participate in the proposed project. It is

the case of the land owners that on account of this assurance,

they did not raise any serious objection to the acquisition,

where after a declaration under Section 6 (1) of the Act dated

29th November, 2001 has issued and published in the Asian

Age on 4th December, 2001. It is further the case of the land

owners that they realized later that they had been cheated as

the land had been acquired for the development and

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implementation of a housing scheme by the Housing

Development Co. Ltd. (hereinafter referred to as “The Bengal

Peerless”). The Collector subsequently i.e. on 22nd December,

2003 passed an Award determining the compensation payable

and it is the case of the land owners that they first came to

know of the award on receipt of a notice dated 16th February,

2004 whereby they were informed that as the ownership of the

acquired land could not be ascertained, the compensation had

been deposited with the Reference Court under Section 31(2)

of the Act. The land owners thereupon filed Writ Petition No.

10051(W) of 2004 challenging the acquisition proceedings

pleading inter-alia that the said proceedings had lapsed by

efflux of time under Section 11-A of the Act as the declaration

under Section 6 of the Act had been as published on 29th

November, 2001 and the Award had been made on 22nd

December, 2003. It was also pleaded that the declaration

under Section 6(2) of the Act had not been published in the

manner provided. It was further pleaded that the land had

been acquired under the garb of a public purpose whereas it

was intended to benefit the Bengal Peerless, a private party

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and an attempt had been made to camouflage the identity of

the beneficiary as it had not been specified in the Notifications

issued under Sections 4 and 6 of the Act and had been

brought out for the first time in the Notification under Section

9 and in this view of the matter, the land owners had been

deprived of their rights to file appropriate objections.

Cumulatively, it was submitted that in view of the facts, the

acquisition itself was a colourable exercise of power at the

instance of the State.

4. These matters were considered by a learned Single Judge

of the Culcutta High Court, who, by his Judgment dated 16th

September, 2003 concluded that the Notifications under

Sections 4 and 6 had been properly published as required by

law, that the land had been acquired for a public purpose, as

detailed in the Notification under Section 4 of the Act and that

the State Government was authorized to entrust the housing

project to a Joint Sector Company to execute the housing

scheme with the sanction of the State Government under

Section 27A of the West Bengal Housing Board Act, 1972

(hereinafter referred to as “the 1972 Act”). The Learned

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Judge, however, observed that the proposal for the housing

scheme had been initiated by the Bengal Peerless without the

approval of the State Government and the fact that the

entrustment to the Bengal Peerless was in public interest had

not been examined by the State Government, and as the

scheme itself did not disclose the budget or detail adequately

the residential accommodation that was to be constructed for

the low and middle income groups, the scheme itself was

faulty and finally concluded that it appeared from the record

that the intention of the Government was to enable Bengal

Peerless to make huge profits and as such the acquisition was

not for a public purpose and was, therefore, malafide. The

learned Single Judge accordingly allowed the writ petition vide

judgment dated 18th May, 2004.

5. The matter was thereafter taken before a Division Bench

in FMA No. 671 of 2004 (Bengal Peerless Housing

Development Co.Ltd. vs.Urmila Roy & Ors. ), FMA 672 of 2004

(State of West Begal & Ors. Vs.Urmila Roy & three Ors.) and

FMA 790 of 2006 (Smt. Krishna Majumdar & Ors. Vs. State of

West Bengal & Ors.) and was argued at length over several

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days. The Division Bench by its judgment dated 2nd July

2007, accepted the argument of the Advocate General

appearing for the State appellant based on several judgments

of this Court that a challenge to an acquisition should not be

permitted after the award had been rendered, and that in any

case, the challenge even if permissible, had been made

belatedly. The Division Bench then went on to the facts of the

case and observed that the conclusion of the learned Single

Judge that the whole process of acquisition was malafide, was

based on a misconception, more particularly as several

documents which were relevant had been ignored, that in the

face of these documents, the finding of the learned Single

Judge that the housing scheme had not been prepared with

the approval of the State Government was erroneous, and that

the evidence revealed that a substantial part of the

compensation for the acquired land had been paid by the

Government or its agencies. The Division Bench further

observed that from a perusal of the record that the acquisition

proceedings themselves were transparent in nature and

merely because the name of Bengal Peerless as the ultimate

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beneficiary had come up for the first time in the Notification

under Section 9 of the Act could not lead to the conclusion

that the acquisition proceedings were a colourable exercise of

power. The Court then examined the purpose behind the

enactment of the 1972 Act and opined that the Housing Board

had been established under governmental control with a view

to alleviating the shortage of housing and in particular

referred to Sections 17 to 21 to highlight that all its members

were appointed by the State Government and the Chairman

was, in fact, the Minister of In-charge of the Housing in the

State Government. The Division Bench also held that Section

27A which had been inserted in the parent act by an

amendment of 1993 was for the specific purpose of

authorizing the Housing Board to entrust the execution of a

housing scheme to a joint sector company if it was felt that it

was unable to perform its duties on account of financial

limitations. The Division Bench then observed that a

Memorandum of Understanding had been signed on 2nd May

1994 providing that the Housing Board and the Bengal

Peerless would have an equal share capital of 49.5% each and

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the balance 1% would be held by the public and that the

company would be run by a nine member independent Board

of Directors of whom five, including the Chairman, were to be

nominated by the State Government with the result that the

State Government was, in effect, in complete control of the

management of Bengal Peerless. It was finally concluded that

in view of this feature and the fact that as per record a

substantial part of the compensation had been paid out of

public funds by the Housing Board, a State Government

undertaking, it was not open to the land owners to argue that

the land had been acquired to benefit a purely private

company. The Division Bench also relied upon the judgment

in State of Gujarat & Anr vs. Sankalchand Khodidas Patel

(D) (1977) 4 SCC 590 and Pratibha Nema & Ors. Vs. State

of M.P. & Ors. (2003) 10 SCC 626 to draw a distinction

between acquisition for a public purpose and acquisition for a

company and observed that as some part of the compensation

had been paid by the Housing Board, the fact that the

procedure for acquisition for a public purpose had been

adopted was justified on the facts of the case and relying

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further on Manubhai Jehtalal Patel vs. State of Gujarat

(1983) 4 SCC 553 further held that even a contribution of

Re.1/- from the State Revenues could, in certain

circumstances, be held adequate to hold that the acquisition

was for a public purpose. The Division Bench finally observed

thus:

“From the above it becomes crystal clear that the contribution to be made by the State need not be substantial and even a token contribution of Rs.100 would satisfy the requirement that the compensation has been paid out of public funds.”

6. The Division Bench thereafter examined the issue as to

whether the housing scheme had been prepared in

accordance with the provisions of the 1972 Act and once again

differed from the findings of the learned Single Judge that the

provisions had been ignored, as a perusal of the record

revealed that the scheme had been framed by the State

Government pursuant to a meeting held on 17th May 2000 in

the Office of the Secretary Housing in the presence of the

Commissioner and the Land Acquisition Officer of the Housing

Board and the agenda circulated for the meeting established

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that it had been called to discuss the suitability of the scheme

which had been designed to benefit the weaker sections of

society and others with modest means, as it envisaged the

construction of about 1800 dwelling units of three categories,

namely the low, the middle and the higher income groups and

that at least 50% of the aforesaid units were to be reserved for

the first two groups with the price for the former category

being substantially subsidized and the flats for the middle

income group to be provided on “no profit no loss basis” and,

significantly, it was specified that the price once determined

by the Housing Board before the start of the project would

remain firm and that no escalation on any account was to be

made for any of the dwelling units of any category. The

aforesaid information led the Division Bench to conclude that

the non-escalation Clause in particular, indicated that the

scheme was not motivated by profiteering alone but was in

fact for the benefit of poorer sections, and that if any further

evidence was required to prove the bonafides of Bengal

Peerless, the scheme also provided that distribution of plots

was subject to the reservation of plots as per the policy of the

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Housing Board and allotments were to be made by a lottery

system and that scheme was to be completed within 5 years

from the date of the commencement of the work. Finally, the

Division Bench observed as under:

“In our opinion, these observations of the Supreme Court are fully applicable to the facts and circumstances of the present case. The facts narrated above make it abundantly clear that Housing Scheme has been prepared by the Government, after due consideration and it could not be said to have been initiated at the instance of the Bengal Peerless. Therefore, the learned Single Judge has erroneously held that the acquisition proceedings were null and void.”

7. The Division Bench also repelled the argument raised on

behalf of the land owners that as they too were in the process

of setting up a global village in the land the acquisition was

untenable by observing that the letter dated 8th May 2001

written by Urmila Roy respondent on which primary reliance

had been made by the land owners with respect to the

aforesaid plea was not acceptable at this belated stage as the

land owners had not raised any objection to the acquisition of

the land by the State Government, and further that no such

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plea had not been raised in the writ petition. The Court then

observed that Writ Petition No.10002 (W) of 2002 filed by some

other land owners seeking to challenge the same acquisition

had been dismissed by Justice Chattopadhyay on 16th

September 2003 and the issues raised in the present appeal

had also been raised before the said Judge and had been

repelled and it had been specifically observed that the land

had, indeed, been acquired for a public purpose and not for a

private company, as alleged. The Division Bench, accordingly,

allowed the appeal leading to the present matters before this

Court.

8. The learned counsel for the appellants has raised several

issues before us. It has been submitted that the Bengal

Peerless was not a Corporation within the meaning of Section

3 (cc) of the Act, inasmuch as 51% of the share capital in the

said company was not held by the State Government or any

Central Government or State Government Undertaking as only

49.5% of the shareholding was held by the Housing Board. It

has been submitted that Bengal Peerless was also not a

company within the meaning of section 617 of the Companies

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Act, 1956 and was therefore a company within the meaning of

Section 3(e) of the Land Acquisition Act, and as such Part VII

of the Act was applicable and not Part II thereof. It has also

been submitted that the housing scheme Annexure P3 was

not a housing scheme, as envisaged under the 1972 Act but

was merely a proposal that too an incomplete one. Reliance

for this submission has been placed on Sections 17,18,19,23

27 and 27(A) of the 1972 Act. As a corollary, it has been

argued that the finding that Bengal Peerless had been

entrusted with the execution of the housing scheme was

incorrect, as no terms and conditions of such entrustment

had been agreed upon as was a pre-requisite for the execution

of a housing project by a Joint Sector Company under section

27-A of the 1972 Act. It has also been urged that the entire

amount of the acquisition money deposited prior to the

publication of the declaration under Section 6 of the Land

Acquisition Act had been paid by Bengal Peerless and no part

thereof had been paid by the Government of West Bengal or

the Housing Board, and further the finding of the Single

Bench as also of the Division Bench of the High Court to the

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effect that the acquisition proceedings had been set in motion

after the scheme had been duly prepared was incorrect. It has

accordingly been argued that the observation of the Division

Bench in the State of Tamil Nadu vs.L.Krishnan (1996) 1

SCC 250 were not applicable to the facts of the case and that

in any event the Tamil Nadu Act which was under

consideration in that matter did not contain a provision

analogous to Section 27A of the 1972 Act and as a necessary

consequence, even assuming for a moment that a housing

scheme was in fact in existence when the Notification under

Section 4 of the Land Acquisition Act has been issued, the

said scheme had not been formalized in terms of Section 27-A

of the 1972 Act. It has been submitted that from the facts

writ large that the purpose of the acquisition and the

entrustment to the Bengal Peerless of the development of the

project was with the intention of giving huge financial benefits

to the Bengal Peerless which was not a public purpose and

was in any case unacceptable in terms of the purpose of a

housing scheme envisaged under the 1972 Act.

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9. The arguments of the learned counsel for the appellants

have been controverted by the respondent State of West

Bengal. It has been pointed out that the housing scheme had

been designed in terms of the 1972 Act and all the relevant

provisions had been complied with and that in any case by

virtue of sub-section (2) of Section 17 thereof it was open to

the State Government to entrust the framing and execution of

a Housing scheme to the Housing Board on such terms and

conditions as it think fit, and that the scope of a similar

provision, Section 35 of the Tamil Nadu State Housing Board

Act 1961 had been examined by this Court in L.Krishnan’s

case (supra). It has also been argued that acquisition of the

land for the purpose of the execution of the housing scheme

was a public purpose with little or no element of profiteering

as the bare reading of the scheme would show, and that, in

any case, the middle and lower income groups were to have

subsidized housing on “no profit no loss” basis and to ensure

that the conditions of the scheme were scrupulously observed

the State Government had retained complete control over the

activities of Bengal Peerless. It has also been submitted that

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as the appellants land owners had not filed objections under

Section 5-A of the Land Acquisition Act, they were precluded

from challenging the acquisition, more particularly after the

award had been rendered.

10. We have heard the learned counsel for the parties and

gone through the record very carefully. We find that three

basic issues arise for consideration in this matter. They are, i)

as to whether Part II or Part VII of the Act is applicable to the

present acquisition proceedings, ii) whether the Housing

Scheme was one that satisfied the requirement of Section 27A

of the 1972 Act and, iii) whether the acquisition and the

Scheme were a colourable exercise of power so as to give

undue benefit to Bengal Peerless. We now take up the three

issues cumulatively.

11. It has been submitted at the very outset that Bengal

Peerless was not a Government Company, as understood by

Section 3(cc) of the Act as the Government did not hold 51% of

the paid-up share of the capital. We find, however, that

Section 3(cc) is to be read along with Section 6 more

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particularly Explanation 2 appended therewith. The aforesaid

provisions are reproduced hereunder:

“3(cc).the expression “corporation owned or controlled by the State” means anybody corporation established by or under a Central, Provincial or State Act, and includes a Government company as defined in Section 617 of the CompaniesAct,1956 (1 of 1956), a society registered under the Societies Registration Act,1860 (21 of 1860), or under any corresponding law for the time being in force in a State, being a society established or administered by Government and a co- operative society within the meaning of any law relating to co-operative societies for the time being in force in any State, being a co- operative 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.”

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

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declarations may be made from time to time in respect of different parcels of any land covered by the same notification under section 4, sub-section (1), irrespective of whether one report or different reports has or have been made (wherever required) under section 5-A, sub-section (2):

[Provided that no declaration in respect of any particular land covered by a notification under section 4, sub-section (1),-

(i) published after the commencement of the Land Acquisition (Amendment and Validation) Ordinance, 1967 but before the commencement of the Land Acquisition (Amendment) Act,1984 shall be made after the expiry of three years from the date of the publication of the notification; or

(ii) published after the commencement of the Land Acquisition (Amendment) Act, 1984 shall be made after the expiry of one year from the date of the publication of the notification :

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.

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[Explanation 1. – In computing any of the periods referred to in the first proviso, the period during which any action or proceeding to be taken in pursuance of the notification issued under Section 4, sub- section (1),is stayed by an order of a Court shall be excluded.

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].

(2) Every declaration shall be published in the Official Gazette, [and in two daily newspapers circulating in the locality in which the land is situate of which at least one shall be in the regional language, and the Collector shall cause public notice of the substance of such declaration to be given at convenient places in the said locality (the last of the date of such publication and the giving of such public notice, being hereinafter referred to as the date of publication of the declaration), and such declaration 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.

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(3) 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 declaration the Appropriate Government may acquire the land in a manner hereinafter appearing.

12. A perusal of the Second proviso and Explanation 2

in particular reveals that if the compensation awarded for the

property is paid substantially out of the funds of a

Corporation owned or controlled by the State, such

compensation will be deemed to be paid out of public funds

and as such would satisfy the test of acquisition for a public

purpose.

13. We see from the record that as per letter issued by

the Land Acquisition Collector on 13th November 2001 to the

Housing Ministry of the State Government, a request had been

made that a sum of Rs.3.00 Crores which represented about

50% of the compensation of the acquired land be deposited.

This memo had been forwarded by the State Government to

the Housing Board and on 23rd November 2001 a sum of

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Rs.1.70 crores towards compensation had been sent by

Bengal Peerless to the Land Acquisition Collector through the

Housing Board. It appears that on 30th October 2003 the State

Government had requested the Housing Board to make

arrangements for the balance payment of compensation of

about Rs.82,04,138 and by a memorandum of 31st October

2003 the Government of West Bengal had directed the

Housing Board to pay the additional balance compensation

which too was defrayed by an account payee cheque dated

03rd November 2003 drawn on the Bank of Maharashtra. The

account statement of the Bank of Maharashtra was produced

before us for perusal and this statement supports the

argument that the aforesaid amount had, indeed, been paid

from the funds of the Housing Board which is completely

owned and controlled by the State Government. In their

written submissions the appellants have doubted the accuracy

of this statement, by asserting that they had not been able to

verify its contents as it had been produced for the first time in

this Court. We find that even if this objection is accepted and

the statement ruled out of consideration, the other evidence

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on record does indicate that a substantial part of the

compensation had been paid from Government funds. In

Pratibha Nema case (supra), that is what this Court had to

say:

We may now advert to Section 6. It provides for a declaration to be made by the Government or its duly authorized officer that a particular land is needed for a public purpose or for a company when the Government is satisfied after considering the report, if any, made under Section 5-A(2). It is explicitly made clear that such declaration shall be subject to the provisions of Part VII of the Act which bears the chapter heading “Acquisition of Land for Companies”. Thus, Section 6 reiterates the apparent distinction between acquisition for a public purpose and acquisition for a company. There is an important and crucial proviso to Section 6 which has a bearing on the question whether the acquisition is for a public purpose or for a company. The second proviso lays down 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”.

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Explanation 2 then makes it clear that where the compensation to be awarded 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. Thus, a provision for payment of compensation, wholly or partly, out of public revenues or some fund controlled or managed by a local authority is sine qua non for making a declaration to the effect that a particular land is needed for a public purpose. Even if a public purpose is behind the acquisition for a company, it shall not be deemed to be an acquisition for a public purpose unless at least part of the compensation is payable out of public revenues which includes the fund of a local authority or the funds of a corporation owned or controlled by the State. However, it was laid down in Somawanti case that the notification under Section 6(1) need not explicitly set out the fact that the Government had decided to pay a part of the expenses of the acquisition or even to state that the Government is prepared to make a part of contribution to the cost of acquisition. It was further clarified that the absence of a provision in the budget in respect of the cost of acquisition, whole or part, cannot affect the validity of the declaration. The majority Judges of the Constitution Bench also clarified that a contribution to be made by the State need not be substantial and even the token contribution of Rs 100 which was made in that case satisfied the requirements of the proviso to Section 6(1). The contribution of a small fraction of the total probable cost

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of the acquisition does not necessarily vitiate the declaration on the ground of colourable exercise of power, according to the ruling in the said case. Following Somawanti, the same approach was adopted in Jage Ram v. State of Haryana. The question, whether the contribution of a nominal amount from the public exchequer would meet the requirements of the proviso to Section 6, had again come up for consideration in Manubhai Jehtalal Patel v. State of Gujarat. D.A. Desai, J. after referring to Somawanti, speaking for the three-Judge Bench observed thus: (SCC p.

555, para 4) “It is not correct to determine the validity

of acquisition keeping in view the amount of contribution but the motivation for making the contribution would help in determining the bona fides of acquisition. Further in Malimabu case contribution of Re 1 from the State revenue was held adequate to hold that acquisition was for public purpose with State fund. Therefore, the contribution of Re 1 from public exchequer cannot be dubbed as illusory so as to invalidate the acquisition.”

14. In Inderjeet Parekh Vs State of Gujarat in which a

somewhat restricted meaning has been given to the extremely

broad parameters laid down in Pratibha Nema’s case (Supra),

but it has nonetheless been observed that if a reasonable

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amount of compensation had been drawn out Government

funds, it would satisfy the requirement of a public purpose as

per the Act. In the present case, as already mentioned above,

we find that a substantial part of the compensation has,

indeed, been paid by the State Government or by the Housing

Board which clearly satisfies the test of public purpose. In

this background, we endorse the finding of the Division Bench

that the procedure envisaged in Part II and not in Part VII of

the Act would be applicable. This is precisely what has been

done.

15. The learned Counsel for the Appellants has also

contended that as the housing scheme had not been prepared

in terms of the 1972 Act it had no valid sanction. It has been

highlighted that the entire scheme had been designed to help

Bengal Peerless to make undue profits and the very purpose of

1972 Act had, thus, been frustrated.

16. The learned counsel for the respondent has on the

contrary referred us to Sections 17, 18 and 27A of the 1972

Act to submit that the said Act specifically provided for the

transfer of the acquired land to a Joint Sector Company for

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the purpose of the execution of the Housing Scheme with the

previous approval of the State Government and that the

scheme had indeed been framed under Sections 17 and 18

and thereafter entrusted for execution to the Bengal Peerless.

It has been submitted that though Bengal Peerless had been

entrusted with the execution of the scheme the overall control

remained with the Housing Board which was, in fact, an

extension of the State Government itself and the State

Government a fortiori retained overall control in the execution

of the scheme. We find merit in this submission. The record

indicates that as a consequence of a Memorandum of

Understanding dated 13th September 1993 a Joint Sector

Company for the execution of the housing scheme had been

created on 20th May 1994 and it was provided that 49.5% of

the shares capital would be held by each of the two i.e. the

Housing Board and Bengal Peerless and the balance 1% would

be held by the public and the company would be run

independently by nine Directors, of whom five including the

Chairman were to be nominated by the State Government. It

is also relevant that the scheme had, in fact, been prepared by

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the State Government after due deliberation and had been

initiated as per the provisions of the 1972 Act by virtue of a

meeting held on 17th May 2000 in the Office of the Secretary,

Housing Department, the Commissioner of the Housing

Board, the Land Acquisition Collector and several other senior

officials and the proposal had been mooted for the acquisition

of the land for the purpose of a scheme for weaker sections of

society and others with modest incomes. The scheme also

provided for the construction of 1800 dwelling units of various

categories with at least 50% to be earmarked for the lower and

middle income groups with the price subsidized for the former

and all flats for the middle income group to be provided on “no

profit no loss” basis, and for facilities for schools, roads etc.

for the benefit of those who were ultimately to reside in the

dwelling units. Significantly also, the scheme provided that

there would be no escalation on account of any reason

whatsoever for the price charged for the dwelling units and

that the allotment of the dwelling units would be on the basis

of a lottery. Section 18 of the 1972 Act which deals with the

27

matters to be provided for by housing schemes is reproduced

below:

“Sec.18. Matters to be provided for by housing schemes. – Notwithstanding anything contained in any other law for the time being in force, a housing scheme may provide for all or any of the following matters, namely :-

(a) the acquisition by purchase, exchange or otherwise of any property necessary for the scheme;

(b) the construction and reconstruction of buildings;

(c) the sale, letting out or exchange of any property included in the scheme;

(d) roads, drainage, water-supply, lighting, schools,hospitals,dispensaries,marketplace s,parks,playgrounds and open spaces within a housing scheme;

(e) the reclamation or reservation of lands for markets, gardens,schools, dispensaries, hospitals and other amenities in a housing scheme;

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(f) the letting out,management and use, of the Board premises;

(g) accommodation for any class of inhabitants;

(h) the advancing of money for the purpose of the scheme;

(i) the collection of such information and statistics as may be necessary for successful implementation of the scheme;

(ia) development of any urban or rural area for successful implementation of housing schemes and for purposes ancillary or incidental thereto;

(j) any other matter for which, in the opinion of the Board or the State Government, it is expedient to make provision with a view to providing housing accommodation and to improving or developing of any area included in a housing scheme.”

17. We find that the scheme as laid fully satisfies the tests

laid down in this provision. Sections 17, 27A and 28 of the

1972 Act read as under:

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“ 17. Powers and duties of Board to undertake housing schemes.-

(i) Subject to the provisions of this Act the Board may, from time to time, incur expenditure and undertake works for the framing and execution of such housing schemes as it may consider necessary and such housing schemes may include housing schemes in relation to lands and buildings vested in or in the possession of the State Government.

(2) The State Government may, on such terms and conditions as it may think fit to impose, entrust to the Board the framing and execution of any housing scheme [,whether provided for by this Act or not,] and the Board shall thereupon undertake the framing and execution of such scheme.

(3) The Board may, on such terms and conditions as may be agreed upon and with the previous approval of the State Government, take over for execution any housing scheme, on behalf of a local authority or co-operative society, or on behalf of an employer, for building houses mainly for the residence of the employees of such local authority, co-operative society or employer, as the case may be [or for the residence of the members of such co- operative society].

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27A. Power to entrust existing, or new, joint sector company with housing scheme.- Notwithstanding anything contained in this Act, the Board may, if it considers it necessary so to do in the public interest and is satisfied that an existing, or new, joint sector company is willing to comply, or has complied, with such terms and conditions as the State Government may think fit to impose,entrust, with the previous approval of the State Government,any existing, or new, joint sector company with any housing scheme for execution, and different existing, or new, joint sector companies may be so entrusted with different housing schemes for execution.

28. Power to acquire.- (1) Where any land is needed for the purpose of a housing scheme or for performing any other duties or functions of the Board, the Board may enter into an agreement with any person for the acquisition by purchase, lease or exchange, of his rights and interests in such land either wholly or in part, on payment of an amount proportionate to the loss or deprivation caused to the enjoyment of the land.

(2) The Board may also take steps for the compulsory acquisition of any land or any interest therein required for the execution of a housing scheme or for performing any other duties or functions of the Board and such acquisition of any land or any interest therein shall be deemed to be acquisition for a public purpose within the meaning of the Land Acquisition Act. ”

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18. We observe that Section 27-A specifically authorizes the

Housing Board in public interest to entrust a housing scheme

to a Joint Sector Company with the previous approval of the

State Government. We find that there is no warrant for the

proposition that unless a budgetary provision is made by the

Housing Board or that a final scheme is prepared in

accordance with Section 23 of the 1972 Act, no land can be

acquired for the purpose of execution of a housing scheme. It

is significant that Section 17 of the 1972 Act itself gives the

power to the Housing Board to make a scheme and that

Section 27A further authorizes the Board in public interest to

entrust a housing scheme to a Joint Sector Company for

execution and for that purpose Section 28(2) of the Act further

authorizes the Housing Board to take steps for compulsory

acquisition of any land required for the purpose of a housing

scheme. While dealing with Section 35 of the Tamil Nadu

Housing Board Act, 1961 which is akin to Section 17 of the

1972 Act, this is what this Court had to say in L. Krishanan

Case (supra):

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“……The Housing Board is under an obligation to carry out certain other schemes also as are provided in these sections. Sub-section (2) of Section 35 states that the Government may on such terms and conditions as they may think fit to impose, transfer to the Board the execution of any housing or improvement scheme not provided for by the Act. On such transfer, the Board is under obligation to undertake the execution of such scheme as if such scheme has been provided for by the Housing Board Act.”

Para 15. These provisions make it abundantly clear that the duty of the Housing Board is not merely the execution of the housing or improvement scheme prepared and published by it under the Act but extends to executing other schemes as well, as are made over to it or agreed to be undertaken by it. Now, when Section 35(2) speaks of transfer to the Board the execution of any housing or improvement scheme not provided for by this Act, it certainly cannot mean a scheme prepared in accordance with the provisions of the Housing Board Act. Moreover, while transferring the scheme to the Housing or improvement scheme prepared in accordance with the Housing Board Act. Here again, the taking over the scheme by the Housing Board is subject to such terms and conditions as may be agreed upon by both. Section 36 indeed discloses that what is entrusted to the Housing Board is the job of clearance or improvement of any slum

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area. The Government while directing the Board to undertake the clearance or improvement of a particular area can also direct the Board to frame and execute “such housing or improvement scheme under this Act as the Government may specify” and the Board is obliged to execute such scheme as if such scheme is prepared by the Act.”

Para 16. In such circumstances, it would not be right to contend that unless a final and effective scheme prepared in accordance with the provisions of Chapter VII of the Housing Board Act is in existence, the Government cannot issue a notification under section 4 of the Land Acquisition Act for acquiring the land required for execution of the schemes by the Housing Board. To repeat, the Housing Board is obliged to execute not only the housing or improvement schemes prepared under the said Chapter but also certain other schemes referred to in Sections 35 and 36. For example the Government may conceive a particular scheme and ask the Housing Board to execute on such terms and conditions as the Government may specify. In such a situation, there is no question of preparing a housing or improvement scheme by the Housing Board in accordance with the provisions of Housing Board over again. So far as the scheme framed by the Government is concerned, there is no enactment governing it. It can, therefore, be a scheme as ordinarily understood. Similar would be the case where the scheme undertaken by a local

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authority is made over the Housing Board by mutual agreement.”

19. In West Bengal Housing Board & Ors. vs. Brijendra

Prasad Gupta & Ors. (1997) 6 SCC 207 while taking an

overall view of the entire matter and also dealing with the

submission that some profit motive could be involved in

favour of a Joint Sector Company executing a housing

scheme, this is what this Court had to say:

“Para 19. In this background it is difficult for us to accept the submissions of the Writ Petitioners that the purpose for which the requisition had been made was not a public purpose within the meaning of the Act or that the circumstances of the cases did not justify the invocation of the provisions of the Act or that the exercise of powers under that Act was colourable exercise of power.

Para 25. It is a matter of common knowledge that there is acute shortage of housing accommodation both in rural and urban areas of the country. Since late the prices of the real estate have sky-rocketed making it beyond the reach of low income and middle income people. The State has duty to perform to give shelter to homeless people specially to people in the income group. In the present case the State was unable to meet this gigantic task. In the background of shortage of resources which the State has the legislative enacted the

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Housing Board Act and constituted the Housing Board to meet this challenge of providing houses to the people falling in the low income group and to others. Again the Housing Board was unable to meet the challenge. The Housing Board Act was amended to bring in the concept of joint venture in order to tap the resources of the private sector. Thus a joint venture came into being as disclosed in the supplementary affidavit of the State as to how the process of starting of joint venture had been gone into and how the Board of Directors of the joint sector company has been constituted and how the State and Housing Board exercise control over this joint sector enterprise.

26. Simply because there is an element of profit, it could not make the whole scheme illegal. A private entrepreneur will certainly look to some profit but to see that the profit motive does not lead to exploitation even of the rich and that the houses are available to the poor people and to middle class people at nominal or affordable prices, or even on no-profit-no-loss basis, the Housing Board exercises the necessary control. It is certainly a public purpose to provide houses to the community especially to poor people for whom the prices are beyond their means and they would otherwise never be able to acquire a house.

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27. What has been done in the present case is that the profit earned on sale of flats of HIG have been pumped in to subsidize the prices of the houses falling in LIG and in this there would certainly be an element of profit both for the Housing Board as well as the private company in the joint venture for selling flats of HIG. We fail to see how public purpose is not being served in the present case.

28. The Court must shake off its myth that public purpose is served only if the State or the Housing Board or the joint sector company does not earn any profit. There cannot be any better authority than the State or the statutory corporation to supervise or monitor the functions of the joint venture company. Courts will certainly step in if the public purpose is sought to be frustrated.

29. In the present case Directors appointed by the Housing Board/State on the Board of Directors of the joint venture company would certainly see that no runaway profit is earned and that sale price of HIG houses is guided by market forces but there is no exploitation. Every section of the society needs protection from exploitation. It is however not possible nor desirable to lay down any principle as to how this is to be done.

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33. We find in the present backdrop the inability of the State Government and the Housing Board to meet the challenge to achieve the target of even constructing 50,000dwelling units in urban areas to tackle the acute problem of homelessness for different categories of people particularly those falling in Lower Income Group (LIG) and Middle Income Group (MIG); the State Legislature amending the Housing Board Act and providing for incorporation of a joint sector company for executing the housing scheme on the terms and conditions to be approved by the Government; selection of the private entrepreneur for incorporation of the joint sector company with the Housing Board; the constitution of the Board of Directors of the joint sector company; the control of the Housing Board and the State Government over the joint sector company to execute the scheme of the housing project; control on the fixation of prices of the flats to be constructed by the joint sector company; relevant factors taken into consideration for execution of the housing project and all these to tackle the urgent and growing need of providing shelter to the LIG and MIG people when it is not possible for those people to acquire a house of their own with escalating real estate prices; it cannot be said that the public purpose is not being served or the incorporation of the joint sector company,viz. Bengal Peerless Housing Development Co.Ltd. and the execution of the housing project “Anupama” by this joint sector company, in the given circumstances, on the land in question which is part of the bigger piece of land is

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not in public interest. The Housing Board acts as regulatory body and the State Government oversees the housing project and has also imposed certain terms and conditions. No ulterior purpose has been alleged and it cannot be said that the power exercised by the State authorities are in any way arbitrary or irrational or there is any abuse of power. Rather the legal compulsion of the State and the Housing Board to get the housing project executed through a joint sector company is quite understandable. We also find the impugned action is within the purview of law and is valid.”

20. In view of what has been observed above, and in the

background of the present case, it becomes crystal clear that

though the execution of the housing scheme has been

entrusted to a Joint Sector Company, the overall control over

the project has been retained by the Government controlled

Board of Directors, full details of the scheme have been

provided with large provisions for the benefit of the poorer

sections of society, with the allotment of tenements either on a

subsidized price or on “no profit no loss” basis for the low and

middle income groups respectively, allotment by draw of lots

to avoid any arbitrariness and a complete freeze on the price

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of residential accommodation with no escalation whatsoever

for whatever reason and the provision of facilities for effective

and comfortable living such as schools, roads, sewage etc. We

are, therefore, of the opinion that the housing scheme fully

satisfies the tests laid down by the Supreme Court in the two

cases cited immediately above.

21. There is yet another aspect which needs to be dealt with.

It appears from the record, and it was so pointed out during

the course of arguments, that the appellants had not filed any

objection to the acquisition on the plea that some assurance

had been held out that they too would be allowed to

participate in the housing scheme. This fact has been denied

by the respondents and it has been emphasized that as per

letter dated 8th March 2001 the land-owners had, in fact,

waived their right to challenge the acquisition. This letter is

reproduced hereunder in extenso:

“To Date:8th March 2001

The Special Land Acquisition Officer,

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South 24 – Parganas, 5th Floor, New Treasury Buildings,

Alipore,Kolkata – 700027.

Sir,

Re: Barakhola Mouza J.L.No.21 P.S.Kasba

This has reference to your acquisition notice dated 12.1.2001 for 12.67 acres land in Plot No.125 & 126 of the subject mouza.

In this connection, I would like to submit that I am the Power of Attorney (Registered) holder of the successors of late Abhay Pada Pain who was the owner of the aforesaid plots as evident from the ROR. A copy of the P/A is enclosed for your kind perusal. Incidentally Plot No.126 was duly demarcated showing the vested portions and the retained portions by the District Authorities as per copy of the Map enclosed along with a copy of the Minutes of the meetings held in Chamber of the then ADM & L.R.O.South 24 – Parganas on 20.3.1996.

Subsequently 13.56 acres of land was sold to the following parties and registered under section 41 on 25.6.1999 of which deed copies are enclosed. Since the tax has not been assessed, as yet for value to ascertain additional stamp duty,

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the same have not been paid so far. However, enquiries are under way, but in the meantime Khazna has been paid up – to – date as per copies of receipts dt.18.1.2001 enclosed herewith.

The transfers are:- a) Sri Debabrata Choudhary : b) Sri Shreekanta Ray : 6.00 acres c) M/s. Anarean Estate Co.Ltd. : d) Sri Swadesh Ghosh : e) Sri Swapan Dey : f) Smt.Ila Dey : 6.58 acres g) Sri Saptashi Dey : h) Smt.Basanti Ghosh :

The aforesaid transferees did not raise any objection to govt. acquiring. The land for housing, in face, I had moved an idea to West Bengal Housing Board and willing to negotiate along with the transferees’ price for your acquisition.

Please do let me known for any further information and clarification / assistance, a may be required.

Thanking you, I am Yours faithfully

Sd/-Urmila Ray Constituted Attorney of

Smt. Lily Paul

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Smt. Dolly Paul

Smt. Mira Rani Basu Enclosed

a) Copies of 8 nos.deed b) Copy of power of attorney c) Copy of witness by ADM,DL,LRO d) Copy of Minutes of meeting dt.

26.3.96 e) Copy of Khana receipts

C 735407 dt.Rs.32,277/- C 735408 dt.18.1.01 for Rs.2709”

22. It is significant that this letter written by the Attorney

Urmila Roy, on behalf of all the land owners spells out that the

owners had in fact been willing to negotiate the price for the

land at the time when the acquisition were still incomplete as

only the Notification under Section 4 of the Act had, at that

stage, been issued (4th December 2000). It is also significant

that the declaration under Section 6 had been issued on 29th

November 2001 and the award rendered on 27th December

2003. It is, therefore, evident that the land owners had, in

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fact, acquiesced to the acquisition and cannot now turn

around to say that the acquisition was bad in law.

23. In view of the above findings, we are of the opinion that

no further discussion on the other marginal issues that have

been raised, needs to be made. The appeals are, accordingly,

dismissed.

………………………………J. (TARUN CHATTERJEE)

……………………………….J. ( HARJIT SINGH BEDI )

New Delhi, Dated: March 23, 2009

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URMILA ROY Vs M/S BENGAL PEERLESS HNG.DEVT.CO.LTD.&ORS

URMILA ROY Vs M/S BENGAL PEERLESS HNG.DEVT.CO.LTD.&ORS