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PETITIONER: AMARNATH ASHRAM TRUST SOCIETY AND ANR.

       Vs.

RESPONDENT: THE GOVERNOR OF UTTAR PRADESH & ORS.

DATE OF JUDGMENT:       03/12/1997

BENCH: G.T. NANAVATI, G.B. PATTANAIK

ACT:

HEADNOTE:

JUDGMENT:                THE 3RD DAY OF DECEMBER, 1997 Present:              Hon’ble Mr. Justice G.T. Nanavati              Hon’ble Mr. Justice G.B.Pattanaik R.F. Rohtagi,  Sr.Adv., R.B.Misra  and E.C.  Agarwala, Advs. with him for the Respondents.                       J U D G M E N T      The following Judgment of the court was delivered:                             WITH               WRIT PETITION @ NO. 716 OF 1996 NANAVATI, J.      Leave granted.      Heard learned counsel for both the sides.      The appellant is a society registered under the Society Registration Act,  1860.   It is  running a public school at Mathura in  the name  if Amar Nath Vidya Ashram.  The school is  duly  recognised  by  the  Central  Board  of  Secondary Education, New  Delhi.  It is challenging in this appeal the judgment and  order passed  by the High Court in Civil Misc. Writ Petition No. 16241 of 1992.      The  appellant   wants  land  adjacent  to  its  school building for  the purpose  of a playground for its students. The land belongs to respondent No.5 So it tried to obtain it from respondent  No.5 by  offering a  price higher  than its market value  but did not succeed.  it, therefore, moved the State  Government   to  acquire  that  land  for  it.    The Government agreed and issued Notification under section 4 of the Land Acquisition Act on 1.8.1986 notifying its intention to acquire that land for a public purpose namely "playground of students  of Amar  Nath  Vidya  Ashram  (Public  School), Mathura".  Thereafter, inquiries under section 5-A and under Rule 4  of the  Land Acquisition  (Company) Rules, 1963 were made.   The Government  also entered  into an agreement with the appellant  as required  by section  40(1) of  the Act on 11.8.1987.   it then  issued a  Declaration under section on 4.9.1987 mentioning fact that the report made under sub-rule (4) of  Rule 4 of the Land Acquisition (Company) Rules, 1964 was considered  by the  Government that the Land Acquisition Committee constituted  under Rule  3 of  the said  Rules was consulted, that  the agreement entered between the appellant

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and the  Governor was  duly published  that the Governor was duly published that the Governor was satisfied that the land mentioned in  the schedule  is needed  for construction of a playground for  students of  Amar Nath  Vidya Ashram (Public School), Mathura  by the  Amar Nath  Ashram Trust,  Mathura. This acquisition  of land  was challenged by the  owner by a writ petition filed in the Allahabad High Court.  An interim order was  passed directing  the parties  to maintain status quo as  regards possession.  During the pendency of the said petition, on  1.5.1992, the  Government denotified  the land from acquisition  in exercise  of its power under section 48 of the  Land Acquisition Act.  The appellant challenged that Notification by  filing a  writ petition  in the High Court. The petition filed by the appellant and the one filed by the owner were  heard together.  The petition filed by the owner was dismissed  as infructuous  and the petition filed by the appellant was  dismissed on  the ground that the decision of the Sate Government to withdraw from the acquisition for the reason that  the acquisition  having been  proclaimed as one for a  public purpose  a par  of  cost  of  acquisition  was required to  be borne  by the state and as no such provision was made,  it was  not likely to be sustained if challenged, cannot be said to be contrary or illegal.      Mr. R.F.  Nariman, senior  advocate, appearing  for the appellants, submitted  that when  acquisition is  under part VII, i.e,  when loan  is acquired for a company and when all the formalities  have been  completed including execution of an agreement  fro payment  of cost  of the  acquisition  and Section 6 notification has also been issued, it sis not open to the  Government to withdraw from such acquisition without the consent  of the  company for  which the  land  has  been acquired.   He  submitted  that  the  power  vested  in  the Government to  withdraw from acquisition is not absolute and is  fettered  by  implicit  restrictions  and  hence  it  is justiciable. He  further submitted  that in  this  case  the State Government  decided to  withdraw from  the acquisition under a  misconception of law that as the acquisition at the stage of  section 4  notification was proclaimed to be for a public purpose,  at least  a part of the cost of acquisition was required  to be borne by the State or was required to be paid out  of  the  public  funds  or  public  revenue;  and, therefore, the  decision taken  by it was vitiated and ought to have  been quashed by the High Court.  On the other hand, the learned counsel appearing for the State of Uttar Pradesh submitted that  the State is under no obligation to give any reason for  withdrawing from  the acquisition and when it is shown that  the power was exercised bona fide it is not open to the Court to invalidate such an action even if the reason given by  the State  is found to be erroneous.  he submitted that section  48 contains  no words of limitation as regards the exercise  of power  and the only limitation put upon the power of  the State  Government is  that it  can excise that power till  possession of  the land sought to be acquired is taken and  not thereafter.   he  also submitted that if as a result of withdrawal from acquisition any damage is suffered by any party then be can be paid damages for the loss caused to him,  and that  there is one more reason why the decision of  Government   to  withdraw  from  acquisition  cannot  be interfered with by the court of law.      It  is  now  well  established  that  if  the  cost  of acquisition  is   borne  either  wholly  or  partly  by  the Government, the  acquisition can  be said to be for a public purpose within  the meaning  of the Act.  But if the cost is entirely borne  by the company then it is an acquisition for a company  under part VII pf the Act. It was so held by this

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Court in  Pandit Jhandu  Lal vs.   The State of Punjab (1961 (2) SCR  459).  This decision was relied upon by the learned counsel for  the State  to support his contentions but it is difficult to  appreciate how it supports him.  it is held in that case it is not correct to say that no acquisition for a company for   a public purpose can be made except under part VII of  the Act.   In that case a part of the cost was to be borne by  the Government and, therefore, it was held that it was not  necessary to comply with the provisions of part VII of the Act.  Admittedly, in the present case the entire cost of acquisition  is to be borne by the appellant society and, therefore, it is an acquisitions for a company and not for a public purpose.   That  is also born out by the notification issued under  section 6  of the  Act which  stated "that the land mentioned  in the  schedule below  is  needed  for  the construction of  play-ground for students of Amar Nath Vidya Ashram (public  school), Mathura  in district Mathura by the Amar Nath  Ashram Trust, Mathura"  Therefore, simply because in the notification issued under section 4 of the Act it was stated that  the land  was  needed  for  a  public  purpose, namely, for  a play-ground  for students  of Amar Nath Vidya Ashram (public  school), Mathura, it cannot be said that the acquisition is  for a  public purpose  and not under Chapter VII for  the appellant-society  in view of subsequent events and the  declaration made  under Section  6.    The  learned counsel for  the State also relied upon the decision of this Court in  Srinivasa Cooperative  House Building Society Ltd. Vs. Madam Gurumurthy Sastry (1994 (4) SCC 675), wherein this court has held that though there is "no provision in the Act to say  that when  a land  is required for a company, it may also be for a public purpose.  However, the even acquisition for a company, unless utilisation of the land so acquisition for a company, unless utilisation of the land so acquired is integrally  connected   with  public   use,  resort  to  the compulsory acquisition under Chapter VII cannot be had".  it was submitted  on the basis of this observation that even in case of  an acquisition  for a  company an element of public purpose has  to be  there and  if for  that  reason  it  was believed by  the Government  that it was necessary for it to make substantial  contribution from  public revenue so as to avoid the  charge  of  colorable  exercise  of  powers,  the decision of  the Government to withdraw from the acquisition cannot be  said to  be arbitrary  or illegal.  The aforesaid observation was  made  by  this  Court  in  the  context  of requirement of  Section 40  of the  Act and  they cannot  be construed to  mean that  no land  cannot be  acquired by the State Government  without  making  substantial  contribution towards the  cost of  acquisition.  We cannot read something more in the said observation than what they were intended to convey.   The provisions  of part  VII and  particularly the provisions regarding  payment of  the  entire  costs  f  the acquisition would otherwise become redundant.      As the  acquisition in this case was for the appellant- society which is running a school, it was an acquisition for a company  and as disclosed by the agreement the entire cost of the acquisition was to be borne by the appellant-society. The declaration made under section 6 clearly referred to the inquiry  made   under  rule   4  of   the  Land  Acquisition (Companies) Rules,  1963  and  the  agreement  entered  into between the  appellant-society and  the state.  Moreover, it was not  pleaded by the State before the High Court that the acquisition in  this case  was for  a public purpose and not under Chapter  VII of  the Act.  Therefore, it is really not open to  the counsel  for the  State to  raise a  contention which is  contrary to  the case,  pleaded  before  the  High

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Court, it  was stated  on  behalf  of  the  State  that  the acquisition was  for a registered society and as such it was covered within  the meaning of Company as defined by section 3(E)(ii) of the Land Acquisition Act and that the purpose of acquisition was  covered under  section 40(I)(b)  of the Act because acquisition  for play-ground of students of a school is a purpose which is likely to prove useful to the public.      On the  question of  giving reasons the learned counsel of the  State heavily relied upon the decision of this Court in Special  Land Acquisition  Officer, Bombay vs. Godrej and Boyce (1988  (1) SCR 590).  In that case this Court examined the nature  and extent  of the  power of  the Government  to withdraw from  acquisition after  issuance  of  notification under section  4  of  the  Act.    In  that  case  the  Sate Government had passed an       order under section 48 of the act  withdrawing   the  lands   of  Godrej  and  Boyce  from acquisition.     The  owner  the  thereupon  challenged  the withdrawal order as mala fide and prayed for quashing of the same.   The writ  petition was  allowed by a single Judge of the High  Court and  his decision was affirmed by a Division Bench.  In an appeal filed by the state this Court held that under the  scheme of  the Act neither the notification under section 4  not the  declaration under  section  6,  not  the notice under  section 9 is sufficient to divest the original owner of,  or other  person interested  in, the  land of his rights therein.  Section 16 makes it clear beyond doubt that the title  of the  land vests  in the  Government only  when possession is taken by the Government and till that point of time, the  land continues  to be with the original owner and he is  also free to deal with the land just as he likes.  So long as the possession is not taken over, the mere fact of a notification issued  under section  4 or a declaration under section 6,  does not  divest the  owner of his rights in the land just  as he  likes.   So long  as the possession is not taken over,  the mere  fact of  a notification  issued under section 4  or a declaration under section 6, does not divest the owner  of his rights in the land to take care of its and conger on  the State  Government  any  right  whatsoever  to interfere with  the ownership  of the  land or safeguard the interests of  the owner.  Section 48  gives liberty  to  the State Government  to withdraw  from the  acquisition at  any stage before  the possession of the land is taken by it.  By such withdrawal,  no irreparable  prejudice is caused to the owner of  the land and, if at all the owner has suffered any damage in  consequence of  the  acquisition  proceedings  or incurred costs  in relation  thereto, he will be compensated therefore under  section 48(2)  of  the  Act.    This  Court further observed that the State can be permitted to exercise its power to withdraw unilaterally. It further observed that having regard  to the  scheme of  the Act it is difficult to see why  the state  Government should at all be compelled to give any cogent  reasons for  its decision  not to  go ahead with the acquisition of any land.  it is well settled in the field of  specific performance  of contracts  that no person will be compelled to acquire any land, as breach of contract can always  be compensated for by damages.  That is also the principle of  section 48(2)  of the  Act.   In that case the Court found  that the  withdrawal  was  bona  fide  and  was justified in  view of  the facts  and circumstances  of  the case.   That was a case where the decision of the Government to withdraw  from acquisition was challenged by the owner of the land on the ground that the withdrawal was mala fide and it was  bad because  no show  cause notice was served to the company before  the withdrawal  order was passed.  It was in that  context   that  this   Court  made  the  above  quoted

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observations.   That was  not a  case where proceedings were initiated to  acquire land  for a  company under part VII of the Act.   Therefore, it is not an authority laying down the proposition that in all cases where power is exercised under section 48  of the Act it is open to the State Government to act unilaterally  and that  it can withdraw from acquisition without giving any reason or for any reason whatsoever.      In an  acquisition under  part VII of the Act, position of the company or the body for which the land is acquired is quire different  from that  of the  owner of the land.  As a result of  withdrawal from the acquisition whereas the owner of land  is ordinarily not likely to suffer any prejudice or irreparable loss, the company for whose benefit the land was to be acquire, may suffer substantial loss.      However, it  is not  necessary to  go into  this larger question whether  in such  a case  the state  Government can withdraw from acquisition without the consent of the company as the  justification given  by the  Government is otherwise not sustainable.   As stated earlier the reason given by the Government for  withdrawing from  the acquisition is that as no part  of the  cost of  acquisition was  to be born by the Government the  acquisition could not have been sustained as for a  public purpose.   We have already pointed out that in this case  the acquisition  was not for a public purpose but it was an acquisition for a company under Chapter VII of the Act.   In respect  of an  acquisition for  a  company  under Chapter VII  of the  Act law does not require that the State should also  bear some cost of the acquisition to make it an acquisition for  public use.    Thus  the  decision  of  the Government to  withdraw  from  acquisition  was  based  upon misconception  of  the  correct  legal  position.    Such  a decision has  to be regarded as arbitrary and not bona fide. Particularly in a case where as a result of a decision taken by the  Government other party is likely to be prejudicially affected, the Government has to exercise its power bona fide and not  arbitrarily.   Even though  section 48  of the  Act confers upon the state wide discretion it does not permit it to act  in an  arbitrary manner  Though the  State cannot be compelled to  acquire land  compulsorily for  a company  its decision to  withdraw from  acquisition can be challenged on the ground  that power has been exercised mala fide or in an arbitrary  manner.     Therefore,   we  cannot   accept  the submission of  the learned  counsel for  the State  that the discretion  of  the  State  Government  in  this  behalf  is absolute and not justiciable at all.      We, therefore, allow this appeal and quash the impugned order dated  16.4.1996.   However, we  make it clear that it will be  open to  the State  Government to  reconsider  this question  of   withdrawal  from   acquisition  and  take  an appropriate decision in accordance with law.  In view of the facts and circumstances of the case, there shall be no order as to costs.      Writ Petition C No. 716 of 1996      As we  are allowing  the appeal the learned counsel for the petitioner  does not  press the  writ petition  at  this stage and  reserves his  right to  challenge the validity of section 48  if such  an occasion arises in future.  The writ petition is, therefore, dismissed as not pressed.