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CASE NO.: Appeal (civil)  7133 of 1999

PETITIONER: Pratibha Nema & Ors.                                     

RESPONDENT: Vs. State of M.P. & Ors.                                     

DATE OF JUDGMENT: 30/07/2003

BENCH: K.G. BALAKRISHNAN & P. VENKATARAMA REDDI.

JUDGMENT:

J U D G M E N T

WITH

Civil Appeal Nos. 7134, 7135, 7136 & 7138 of 1999

P. VENKATARAMA REDDI, J.

Facts and Contentions :  

The acquisition of 73.3 hectares of dry land situate in  Rangwasa village of Indore District and Tehsil belonging to the  appellants and others is the subject-matter of challenge in these  appeals filed by the landholders. The said extent of land was notified  for acquisition under Section 4(1) of the Land Acquisition Act  (hereinafter referred to as ’Act’) for the alleged public purpose of  ’establishment of diamond park’. This parcel of land together with an  extent of 44.8 hectares of Government land was meant to be placed  at the disposal of the Industries Department and/or Madhya Pradesh  Audyogik Kendra Vikas Nigam Ltd. (hereinafter referred to as ’the  Nigam’) for the purpose of allotting the same to various industrial  units-the foremost among them being the 9th respondent-Company,  for setting up diamond cutting and polishing units with modern  technology. The proposal in this regard emanated from the General  Manager of District Industries Centre, on the initiative taken by the 9th  Respondent. After the land was located by a joint inspection  committee of officials, the Government of Madhya Pradesh  (Commerce & Industries Department) had given sanction ’in principle’  for the acquisition. The District Collector, Indore through his letter  dated 24.1.1996 sought the approval of the Commissioner, Indore  Division to invoke Section 17(1) of the Act in order to expedite the  process of acquisition. In that letter, the Collector mentioned that  prestigious exporters from India as well as foreign countries were  likely to establish their units in this park which would generate good  deal of foreign exchange and create employment potential. The Commissioner accorded his approval by a communication  dated 29.1.1996. This resulted in the issuance of the notification  under Section 4(1) of the Act on 30th June, 1996 by the Collector &  Ex-officio Deputy Secretary to Government, to whom it appears the  powers were delegated. By the same Notification, the enquiry under  Section 5A was dispensed with. It was indicated in the Notification  that the land map could be inspected in the office of the SDO,  Indore  and General Manager, District Industries Centre. A few days later i.e.,  on 9.2.1996, the declaration under Section 6 of the Act was  published. The Collector (Land Acquisition) was directed to take  possession after the expiry of 15 days from the date of issuance of  notice under Section 9(2) of the Act. Before the possession was

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taken, the writ petitions under Article 226 of the Constitution were  filed and an order of status quo was granted. The writ petitions and  the Letters Patent Appeals were dismissed. In the meanwhile, it  appears that an interim award was made for a sum of Rs.2,14,91,115  representing 80% of the estimated compensation amount. The SLPs  filed in this Court were disposed of on 11.10.1996 on the basis of the  representation made by the learned counsel for the State of Madhya  Pradesh that the Notification under Section 6 will be withdrawn and  the procedure under Section 5A will be followed. Accordingly, the  Collector, Indore District published a Notification on 15.10.1996  withdrawing the declaration under Section 6.  After due enquiry, the  Land Acquisition Officer submitted a report under Section 5A  overruling the objections put forward by the appellants. On a perusal  of the report, the Collector as well as the Commissioner decided to go  ahead with the acquisition. Accordingly, a fresh Notification under  Section 6 was issued on 3.1.1997. As in the earlier Notification, the  public purpose was mentioned as ’establishment of a diamond park’.  This was again challenged by the aggrieved landholders including the  appellants. A Division Bench of the High Court dismissed the writ  petitions which were filed by the present appellants having interest in  about 63 acres in Survey No. 684. Against that judgment, these  appeals by special leave have come up. This Court, while taking note  of certain additional facts disclosed in I.A.No. 2/2001, passed an   order on 29.8.2001 formulating four questions in respect of which the  findings of the High Court were called for. The following are the four  questions: 1)      Whether M/s. B. Arun Kumar International Ltd. deposited a sum of  Rs.3 crores for payment of compensation to the land holders for  acquisition of land for them.

2)      Whether in view of the facts stated in I.A.No.2/2001 and the  counter affidavit and further affidavits the acquisition of land was  for the Company and not for public purpose.

3)      If the findings on question No.1 & 2 are in the affirmative, whether  any subsequent withdrawal of compensation amount by M/s. Arun  Kumar International Ltd. would not affect the invalidity of  notification issued under Section 4 of the Act.

4)      If the findings on issues Nos. 1 & 2 are in the affirmative, whether  the State Government also contributed partly towards  compensation to be paid to the land holders and in its absence  the acquisition of land for public purpose is invalid.

The questions were framed in the light of the appellants’ contention  that the acquisition was not for a public purpose and it was only  meant to benefit the 9th Respondent-Company and its associates  which contributed its own funds for facilitating the acquisition. The matters were directed to be listed on receipt of the findings  of the High Court with a further direction not to treat the cases as  part-heard. The High Court has, by its order dated 5-7-2002 recorded its  findings on the four points and transmitted the same to this Court. All  the findings are against the appellants and naturally, therefore, they  are being challenged. Broadly, four contentions have been urged before us. They are:  1. Acquisition is not for a public purpose. The entire acquisition is a  subterfuge to hand over the acquired land to the Company in the  guise of acquisition for a public purpose. Even the amount paid  towards compensation was not out of public revenues, but out of the  money provided by the Company for the specific purpose of  compensation. 2. The public purpose stated in the Notifications  under Sections 4 & 6 is vague. 3. The area of the land proposed to  be acquired is far in excess of reasonable requirements and             4. Environmental considerations were not kept in view while taking a

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decision to acquire the land for industrial purpose. Analysis of relevant provisions and the settled legal position : In order to appreciate the contentions set out above in proper  perspective, it would be appropriate to advert to certain basic  provisions of the Act and recapitulate the well settled principles  relating to public purpose and acquisition of land under Part II and  Part VII of the  Act.  Section 4(1) which occurs in Part II of the Act  contemplates a notification to be published in the official gazette etc.,  whenever it appears to the appropriate Government that land in any  locality is needed for any public purpose or for a company.  Thereupon, various steps enumerated in sub-Section (2) could be  undertaken by the authorized officer. There is an inclusive definition  of ’public purpose’ in clause (f) of Section 3. This clause was inserted  by Central Act 68 of 1984. Many instances of public purpose  specified therein would have perhaps been embraced within the fold  of public purpose as generally understood. May be, by way of  abundant caution or to give quietus to legal controversies, the  inclusive definition has been added. One thing which deserves  particular notice is the rider at the end of clause (f) by which the  acquisition of land for Companies is excluded from the purview of the  expression ’public purpose’.  However, notwithstanding this  dichotomy. speaking from the point of view of public purpose, the  provisions of Part II and Part VII are not mutually exclusive as  elaborated later. The concept of public purpose (sans inclusive definition) was  succinctly set out by Batchelor, J. in a vintage decision of Bombay  High Court.  In Hamabai Framjee Petit Vs. Secretary of State for India  [AIR (1914) PC 20], the Privy Council quoted with approval the  following passage from the judgment of Batchelor J: "General definitions are, I think, rather to be avoided  where the avoidance is possible, and I make no attempt  to define precisely the extent of the phrase ’public  purpose’ in the lease; it is enough to say that in my  opinion, the phrase, whatever else it may mean, must  include a purpose, that is, an object or aim in which the  general interest of the community, as opposed to the  particular interest of individuals, is directly and vitally  concerned."

The Privy Council then proceeded to observe that prima facie  the Government are good judges to determine the purpose of  acquisition i.e., whether the purpose is such that  the general interest  of the community is served. At the same time, it was aptly said that  they are not  absolute Judges. This decision of the Privy Council and  the words of Batchelor, J. were referred to with approval by a  Constitution Bench  in Somawanti Vs. State of Punjab [AIR (1963)   SC 151] and various other decisions of this Court. 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 5A(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, wholly or partly, out of public revenues or some  fund controlled or managed by local authority". 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

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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 the 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 Somavanti’s 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 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 Somavathi, the same  approach was adopted in Jage Ram Vs. State of Haryana [(1971) 1  SCC 671]. 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 came up for consideration in  Manubhai Jehtalal Patel Vs. State of Gujarat [(1983) 4 SCC Page  553]. D.A. Desai, J. after referring to Somvanti’s, speaking for the  three Judge Bench observed thus: "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 [AIR (1978) SC 515] 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."

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

A three Judge Bench of this Court in Indrajit C. Parekh Vs.  State of Gujarat [(1975) 1 SCC 824], without much of elaboration,  relegated the observations in the above passage to a very narrow  confines by stating thus: "In view of the decision in this case that a nominal  contribution out of public revenues would satisfy the

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requirement of the proviso to Section 6(1) the observation  "whether such contribution meets the requirement of the  law would depend upon the facts of every case" must  necessarily be taken to refer to the requirement of some  law other than the proviso to Section 6(1). No such law  was pointed out to us; and it is not necessary for the  purposes of this appeal to enter on a discussion as to  what such other law could be."

Another important provision is Sub-Section (3) of Section 6  which enjoins that the declaration (required to be published in the  official gazette etc.) shall be conclusive evidence that the land is  needed for a public purpose or for a Company and on publication of  declaration, the appropriate Government is enabled to acquire the  land in accordance with the other provisions of the Act. This sub- Section came up for interpretation of this Court in Somawanti’s case  (supra).  The Court emphasised that the conclusiveness  contemplated by sub-Section (3) is not merely regarding the  satisfaction of  the Government on the question of need but also with  regard to the question that the land is needed for a public purpose or  for a Company, as the case may be.   However, the learned Judges  highlighted an important exception to the finality or conclusiveness of  the declaration under Section 6(1). It was observed thus: "That exception is that if there is a colourable exercise of  power the declaration will be open to challenge at the  instance of the aggrieved party. The power committed to  the Government by the Act is a limited power in the sense  that it can be exercised only where there is a public  purpose, leaving aside for a moment the purpose of a  company. If it appears that what the Government is  satisfied about is not a public purpose but a private  purpose or no purpose at all the action of the Government  would be colourable as not being relatable to the power  conferred upon it by the Act and its declaration will be a  nullity. Subject to this exception, the declaration of the  Government will be final."

The main contention of the learned senior counsel for the  appellant, as already noticed, rests on the plea of colourable exercise  of power.  Colourable exercise of power or mala fides in the province of  exercise of power came up for discussion in State of Punjab Vs.  Gurdial Singh [AIR (1980) SC Page 319]. In the words of Krishna  Iyer, J.- "Pithily put, bad faith which invalidates the exercise of  power-sometimes called colourable exercise or fraud on  power and oftentimes overlaps motives, passions and  satisfactions-is the attainment of ends beyond the  sanctioned purposes of power by simulation or pretension  of gaining a legitimate goal......................................

When the custodian of power is influenced in its exercise  by considerations outside those for promotion of which  the power is vested the Court calls it a colourable  exercise and is undeceived by illusion........................

Fraud on power voids the order if it is not exercised bona  fide for the end designed. Fraud in this context is not  equal to moral turpitude and embraces all cases in which  the action impugned is to affect some object which is  beyond the purpose and intent of the power, whether this  be malice-laden or even benign. If the purpose is corrupt  the resultant act is bad. If considerations, foreign to the  scope of the power or extraneous to the statute, enter the  verdict or impels the action mala fides or fraud on power

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vitiates the acquisition or other official act."

The above exposition of law unfolds the right direction or the  line of enquiry which the Court has to pursue to test the validity of  declaration made under Section 6(1) exalted  by the legal protection  accorded to it under sub-Section (3). In order to proceed on these lines, the ambit and contours of  public purpose as understood by this Court in certain decided cases  has to be taken note of. We have already noticed the broad and  general meaning of the expression ’public purpose’ as stated by  Batchelor, J. nearly a century back. In the particular context of  setting up industries by private enterprise, this Court’s perspective of  public purpose is discernible from certain decided cases to which we  shall make reference. In Jage Ram’s case (supra) the public purpose mentioned in  the notifications under Sections 4 & 6 was "the setting up a factory  for the manufacture of China-ware and Porcelain-ware". The State  Government had contributed a sum of Rs.100 as was done in the  case of Somavanti (supra) towards  the cost of the land. The  question arose whether it was necessary for the  Government to  proceed with the acquisition under Part VII of the Act. Holding that  acquisition under Part VII need not have been resorted to, this Court  proceeded to discuss the question whether the acquisition was  intended for a public purpose. K.S. Hegde, J. speaking for the Court  observed thus: "There is no denying the fact that starting of a new  industry is in public interest. It is stated in the affidavit filed  on behalf of the State Government that the new State of  Haryana was lacking in industries and consequently it had  become difficult to tackle the problem of unemployment.  There is also no denying the fact that the industrialization  of an area is in public interest. That apart, the question  whether the starting of an industry is in public interest or  not is essentially a question that has to be decided by the  Government. That is a socio-economic question. This  Court is not in a position to go into that question. So long  as it is not established that the acquisition is sought to be  made for some collateral purpose, the declaration of the  Government that it is made for a public purpose is not  open to challenge. Section 6(3) says that the declaration  of the Government that the acquisition made is for public  purpose shall be conclusive evidence that the land is  needed for a public purpose. Unless it is shown that there  was a colourable exercise of power, it is not open to this  Court to go behind that declaration and find out whether  in a particular case the purpose for which the land was  needed was a public purpose or not : see Smt. Somavanti  and Others Vs. The State of Punjab  and Raja Anand  Brahma Shah Vs. State of U.P. On the facts of this case,  there can be hardly any doubt that the purpose for which  the land was acquired is a public purpose."

In Somavanti’s case, setting up a factory for the manufacture of  refrigeration compressors and ancillary equipment, was held to  subserve public purpose. The importance of such industry to a State  such as Punjab which had surplus food and dairy products, the  possible generation of foreign exchange resources and   employment opportunities were all taken into account to hold that  public purpose was involved in establishing the industry. It was  observed "on the face of it, therefore, bringing into existence a  factory of this kind would be a purpose beneficial to the public even  though, that is a private venture." The decision in Jageram’s case   was cited with approval by this Court in Bajirao T. Kate Vs. State of  Maharashtra [(1995) 2 SCC Page 442]. In R.L. Arora Vs. State of  Uttar Pradesh [AIR (1964) SC Page 1230] a Constitution Bench of

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this Court observed that there was definite public purpose behind   the acquisition of land for taking up works in connection with the  setting up of a factory for production of textile machinery parts.  However, that was in the context of a case of acquisition under    Part VII. These decisions establish that a public purpose is involved in  the acquisition of land for setting up an industry in private sector as  it would ultimately benefit the people. However, we would like to add  that any and every industry need not necessarily promote public  purpose and there could be exceptions which negate the public  purpose. But, it must be borne in mind that the satisfaction of the  Government as to the existence of public purpose cannot be lightly  faulted and it must remain uppermost in the mind of the Court. Having noted the salient provisions and the settled principles  governing the acquisition for a public purpose, it is time to turn to  part VII dealing with acquisition of land for Companies. The  important point which we would like to highlight at the outset is that  the acquisition under Part VII is not divorced from the element of  public purpose. The concept of public purpose runs through the  gamut of Part VII as well. ’Company’ is defined to mean by Section 3(e) as (i) a Company  within the meaning of Section 3 of the Companies Act other than   Government Company, (ii) a Society registered under the Societies  Registration Act other than a Co-operative Society referred to in  clause (cc) and (iii) a Co-operative Society governed by the law  relating to the Co-operative Societies in force in any State other  than a Co-operative Society referred to in clause (cc). An   industrial  concern employing not less than 100 workmen and conforming to  the other requirements specified in Section 38-A is also deemed to  be a Company for the purposes of Part VII. In order to acquire land  for a Company as defined above, the previous consent of the  appropriate Government is the first requirement and secondly the  execution of agreement by the Company conforming to the  requirements of Section 41 is another essential formality. Section 40  enjoins that consent should not be given by the appropriate  Government unless it is satisfied that (1) the purpose of the  acquisition is to obtain land for erection of dwelling houses for  workmen or for the provision of amenities connected therewith; (2)  that the acquisition is needed for construction of some building or  work for a Company which is engaged or about to engage itself in  any industry or work which is for a public purpose; and (3) that the  proposed acquisition is for the construction of some work that is  likely to be useful to the public. The agreement contemplated by  Section 41 is meant to ensure the compliance with these  essentialities. It is also meant to ensure that the entire cost of  acquisition is borne by and paid to the Government by the Company  concerned. Thus, it is seen that even in a case of acquisition for a  Company, public purpose is not eschewed. It follows, therefore, that  the existence or non-existence of a public purpose is not a primary  distinguishing factor between the acquisition under Part II and  acquisition under Part VII. The real point of distinction seems to be  the source of funds to cover the cost of acquisition. In other words,  the second proviso to Section 6(1) is the main dividing ground for  the two types of acquisition. This point has been stressed by this  Court in Srinivasa Co-operative House Building Society Limited Vs.  Madam G. Sastry [(1994) 4 SCC Page 675] at paragraph 12: "...In the case of an acquisition for a company simpliciter,  the declaration cannot be made without satisfying the  requirements of Part VII. But that does not necessarily  mean that an acquisition for a company for a public  purpose cannot be made otherwise than under the  provisions of Part VII, if the cost or a portion of the cost of  the acquisition is to come out of public funds. In other  words, the essential condition for acquisition is for a  public purpose and that the cost of acquisition should be

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borne, wholly or in part, out of public funds..."

The legal position has been neatly and succinctly stated by   Wanchoo, J.  speaking for the Constitution Bench in R.L.Arora Vs.  State of Uttar Pradesh [AIR (1962) SC Page 764]. This is what has  been said: "Therefore, though the words ’public purpose’ in Sections  4 & 6 have the same meaning, they have to be read in the  restricted sense in accordance with Section 40 when the  acquisition is for a company under Section 6. In one case,  the notification under Section 6 will say that the  acquisition is for a public purpose, in the other case the  notification will say that it is for a company. The proviso to  Section 6(1) shows that where the acquisition is for a  public purpose, the compensation has to be paid wholly  or partly out of public revenues or some fund controlled or  managed by a local authority. Where however the  acquisition is for a company, the compensation would be  paid wholly by the company. Though, therefore, this  distinction is there where the acquisition is either for a  public purpose or for a company, there is not a complete  dichotomy between acquisitions for the two purposes and  it cannot be maintained that where the acquisition is  primarily for a company it must always be preceded by  action under Part VII and compensation must always be  paid wholly by the company. A third class of cases is  possible where the acquisition may be primarily for a  company but it may also be at the same time for a public  purpose and the whole or part of compensation may be  paid out of public revenues or some fund controlled or  managed by a local authority. In such a case though the  acquisiton may look as if it is primarily for a company it  will be covered by that part of Section 6 which lays down  that acquisition may be made for a public purpose if the  whole part of the compensation is to be paid out of the  public revenues or some fund controlled or managed by a  local authority. Such was the case in Pandit Jhandu Lal  Vs. State of Punjab [AIR (1961) SC 343]................

.....It is only where the acquisition is for a company and  its cost is to be met entirely by the company itself that the  provisions of Part VII apply."

Thus the distinction between  public purpose   acquisition and     Part VII acquisition has   got  blurred   under  the impact   of   judicial  interpretation  of   relevant   provisions. The main   and   perhaps   the    decisive distinction lies  in   the  fact whether  cost of acquisition  comes out of public funds wholly or partly. Here again, even a token  or nominal contribution by the Government was held to be sufficient  compliance with the second proviso to Section 6 as held in a catena  of decisions. The net result is that by contributing even a trifling sum,  the character and pattern of acquisition could be changed by the  Government. In ultimate analysis, what is considered to be an  acquisition for facilitating the setting up of an industry in private sector  could get imbued with the character of public purpose acquisition if  only the Government comes forward to sanction the payment of a  nominal sum towards compensation. In the present state of law, that  seems to be the real position. Whether 2nd proviso to Section 6(1) has been complied with Now, we come back to the facts of the present case and test  the validity of acquisition, keeping in view the principles discussed  supra. First, we shall address the question argued at length-viz.,  whether there was compliance with the second proviso to Section  6(1).  Obviously, if no part of compensation amount is to be paid out  of the public revenues, then, the declaration that the land was needed

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for a public purpose could not have been validly made and the  acquisition cannot be considered to be for a public purpose.  As  already noticed, it was held in Somawanti’s case that the notification  under Section 6(1) need not on the face of it contain  a recital that the  Government had decided to bear a part of the cost of acquisition or it  was prepared to make a part of contribution.  Even the absence of  budgetary provision shall not affect the validity of declaration, it was  observed.  Nevertheless, there should be definite indication to the  effect that the Government is going to bear at least a part of the cost  of acquisition.  Naturally, the Court has to look into the record  including pleadings and it is not impermissible to take into account  the events prior to and subsequent to the declaration.  The High  Court  in the findings submitted to this Court noted  the statement  made on behalf of the Government that it was prepared to make  necessary budgetary allotment for the amount of compensation  payable. However, no record has been produced either before the  High Court or before this Court reflecting the Government’s decision  to meet a part of the expenses of acquisition. But, that is really  immaterial as there is sufficient material to hold that the Nigam which  is  undisputedly owned and controlled by the State has itself  proceeded to make payment of substantial amount towards  compensation even at the initial stages in anticipation of the interim  award that was made on 7.6.1996. Payment of Rs. 1.5 crores was  made by Respondent No. 6 (Nigam) through the General Manager,  District Industries Centre by means of a cheque dated 26.2.1996.  This gives an unequivocal pointer that the State owned Corporation,  namely the Nigam, had to bear the cost of acquisition and as a first  step, it made the payment of Rs.1.5 crores.  The assurance on the  part of the State Government to sanction the funds, would  indicate  that in case of deficit, the Government is prepared to make the  necessary financial provision to enable the Nigam  to meet the cost of  acquisition. In the document entitled "Industrial Policy and Action  Plan, 1994" it is stated at para 7.19 that "the Nigam will work as the  nodal agency for the development of large and medium industries in  the State". According to the appellants, the amount paid by Nigam to the  Land Acquisition Collector was out of the money received from      M/s. Arun Kumar International Limited (hereinafter referred to as ’AKI  Ltd.’) towards the advance payment of the compensation amount and  it was merely passed on to the Land Acquisition Officer. It is  submitted that but for the amount provided by AKI Ltd., no funds were  available with the Nigam for making such payment. The sequence of  events coupled with the fact that the respondents have not produced  the covering letter that would have accompanied the Cheque gives  rise to a presumption of fact that the Cheque issued by the Company  towards the compensation amount was simply made over to the Land  Acquisition Officer by the Nigam. Therefore, it is stressed that the  source of funds was not public revenue, but, it was the private fund of  the beneficiary Company. On the other hand, it has been the stand of  the respondents that the Cheque issued by the Company was  towards advance lease premium and such payment was made in  terms of the Memorandum of Understanding (MOU). The High Court  found sufficient support for the plea taken by the Nigam and the State  Government from the documentary evidence viz., the receipt dated  20.2.1996 passed on to AKI Ltd., and the entries in the cash book. In  fact, the original receipt book was placed before us in the course of  hearing. There is absolutely no basis to infer that the particular  receipt was prepared at a later stage after the dispute cropped up.  Moreover, the MOU entered into between the Nigam and the two  Companies, namely, M/s B. Arun Kumar Group of Companies and  Rosy Blue of Antwerp, Belgium makes it clear that the said  Companies were willing to deposit the amount of lease premium with  the Nigam in advance. It is made clear in the sur-rejoinder affidavit  filed in the High Court and it has not been disputed that the Nigam  has been vested with the power to allot land to the industrial units,

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execute lease deeds and charge premium. True, there is nothing on  record to show that the lease premium or the advance amount  payable was determined by the time the Cheque was issued by the  Company.  The payment of any amount at that stage on account of  lease premium was rather premature, but, the fact remains that under  the terms of MOU, the Companies which were parties to the MOU did  express their willingness to deposit the amount of lease premium in  advance. Viewed from another angle, no interim compensation was  determined by the time the payment was made by the Company and  there was no reference in the MOU to the compensation amount at all  and if so, there is no reason to presume that the amount was  deposited by the Company as advance compensation amount. In this  state of affairs, the High Court was well justified in relying on the  documents/books maintained in the ordinary course of business and  recording a conclusion that the Cheque for Rs.3 crores was issued by  AKI Ltd., towards advance lease premium. The non-production of  covering letter which according to the sixth respondent is not on its  record, does not clinch the issue in favour of the appellants. Taking  an overall picture, we are unable to hold that the conclusion of the  High Court in this regard is perverse or unsustainable. It seems to be fairly clear, as contended by the learned counsel  for the appellant, that the amount paid by the Company was utilized  towards payment of a part of interim compensation amount  determined by the Land Acquisition Officer on 7.6.1996 and in the  absence of this amount, the Nigam was not having sufficient cash  balance to make such payment. We may even go to the extent of  inferring that in all probability, the Nigam would have advised or  persuaded the Company to make advance payment towards lease  amount as per the terms of MOU on a rough and ready basis, so that  the said amount could be utilized by the Nigam for making payment  on account of interim compensation. Therefore, it could have been  within the contemplation of both the parties that the amount paid by  the Company will go towards the discharge of the obligation of the  Nigam to make payment towards interim compensation. Even then, it  does not in any way support the appellants’ stand that the  compensation amount had not come out of public revenues. Once the  amount paid towards advance lease premium, may be on a rough  and ready basis, is credited to the account of the Nigam, obviously, it  becomes the fund of the Nigam. Such fund, when utilized for the  purpose of payment of compensation, wholly or in part, satisfies the  requirements of the second proviso to Section 6(1) read with  Explanation 2. The genesis of the fund is not the determinative factor,  but its ownership in praesenti that matters.

Whether acquisition is for private purpose and vitated by colourable  exercise of power

We should now take up for consideration  the next important  facet of the appellants’ argument turning on the question of  public  purpose and colourable exercise of power. The proposed acquisition,  it is contended, is primarily  and predominantly meant to cater to the  interests of the respondent Company and another Company by name   Rosy Blue of Antwerp which together entered into the Memorandum  Of Understanding (MOU) with the State-owned Corporation.  However, a twist was given to the acquisition as if it were for a public  purpose, bypassing the requirements of Part VII of the Act. The entire  exercise is an instance of colourable exercise of power and is,  therefore, ultra vires the powers of the State Government. The money  for the payment of advance compensation amount came from the  source of respondent Company to whom the Government committed  itself to allot the major chunk of land. This last point has already been  dealt with by us and therefore the attention will be focused to the  other factors that have been highlighted by the learned senior  counsel for the appellants.         According to the learned senior counsel, the following facts and

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circumstances (apart from the source of payment of compensation),  leads to a natural and logical inference that the acquisition, though  styled as a public purpose acquisition, was in reality meant to  subserve  a private purpose. It all started with the personal and written representation on  behalf of AKI Ltd. (R-9/R-10) on 13.9.1995. The very next day, the  Additional Secretary in the Industries Department conveyed to the  Commissioner, Indore Division the assurance given by the Chief  Minister that suitable land of an extent of 150-200 acres near Indore  will be allotted for starting a new ultra modern unit for diamond  polishing and processing. It was indicated in the letter that the  Company proposed to lay foundation stone for its proposed unit on 1st  November, 1995. The Additional Secretary, therefore, requested the  Commissioner to ensure prompt and early administrative action so as  to fulfill the assurance given by the Chief Minister to the Company’s  representatives. Within a week, i.e., on 22.9.1995, there was joint  inspection by various State Government officials on the basis of  which the appellants’ land was selected despite the objection by the  Zonal Pollution Officer. On 1.11.1995, a Memorandum Of  Understanding was signed by the representatives of the Nigam on  the one hand and M/s B. Arun Kumar Group of Companies and Rosy  Blue of Antwerp, Belgium on the other. According to that MOU, 200- 260 acres will be acquired and will be made available among others  to the said two Companies who were willing to deposit lease premium  in advance. The Nigam agreed to provide water and power facilities  and assist the signatory Companies to obtain necessary sanctions. It  also agreed to provide equity share capital if requested by the  Company. On 22.1.1996, a letter was addressed by the General  Manager, District Industries Centre requesting the Collector, Indore  for acquisition of 73.304 hectares of private land apart from  transferring the Government land of an extent of 44.816 hectares.  According to the synopsis furnished by the appellants’ counsel, this  letter clearly shows that the acquisition was for a Company registered  under the Companies Act. However, it may be clarified at this  juncture that the letter dated 22.1.1996 which finds its place at Page  No. 114 of the Paper-book  in C.A.No. 7135 of 1999 is something  different and it does not bear testimony to the fact alleged by the  appellants. On 24.1.1996, the Collector requested the  Commissioner’s sanction for invoking Section 17(1). The  Commissioner by his communication dated 29.1.1996, gave his  approval to invoke emergency clause under Section 17(1) of the Act.  The Collector issued the Notification under Section 4(1) for the  acquisition of the appellants’ land as well as other adjoining lands for  the public purpose, to wit, ’for establishment of diamond park’.  Section 17(1) was invoked in order to dispense with the enquiry  under Section 5A. On 9.2.1996, a Notification under Section 6 was  issued and the Collector was directed to take possession within  stipulated time. The above facts, according to the learned counsel for the  appellants, would reveal that the machinery under the Land  Acquisition Act was set in motion in record time to comply with the  request of 9th/10th Respondent and the formalities were completed in  post-haste solely with a view to enable the Company to go ahead  with its proposed project. The learned Advocate-General appearing for the State of  Madhya Pradesh and also for the sixth respondent Corporation  (Nigam) countered the above arguments by placing reliance inter alia  on the findings of the High Court. He stressed on the policy of the  State Government and the genuine effort made by the State  Government and its agencies to develop the notified land to facilitate  the establishment of diamond cutting and processing units with  modern technology. He submitted that public purpose is writ large on  the face of the acquisition and the Government is committed to  pursue the project in public interest notwithstanding the  disinterestedness of the respondent-Company owing to the delay that

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occurred. On a deep consideration of the respective contentions in the  light of the documents  and events relied upon and the settled  principles adverted to supra, we have no doubt in our mind that the  acquisition was thought of with the earnest objective to achieve   industrial growth of the State in public interest. Quite apart from the  view taken by this Court that acquisition in order to enable a  Company in private sector to set up an industry could promote public  purpose, we have enough material in the instant case to conclude  that the proposed acquisition will serve larger public purpose. It is  fairly clear that the State’s goal to bring into existence a huge  industrial complex housing a good number of diamond cutting and  polishing units has led to the present acquisition. Such industrial  complex is compendiously termed as ’diamond park’. The State  Government and its agencies including the Nigam acted within the  framework of the ’Industrial Policy and Action Plan, 1994’ in taking  the decision to develop diamond park complex. Para 2.22 of the  Industrial Policy specifically states that "the diamond park will be  developed in the State for industries based on diamond cutting".  Mineral based industries have been brought within the scope of  ’thrust sector’. Export oriented units will be specially encouraged,  according to the policy. The policy further states that the Nigam will  work as a nodal agency for the development of large and medium  industries in the State and will play the role of a coordinator for the  development of industrial infrastructure in growth sectors in  partnership with the private sector and Industrialists’ associations.  The reference to Industrial Policy is found in the resolution passed at  the meeting of Nigam on 23.11.1995 and the letter of the General  Manager, District Industries Centre while forwarding the proposal for  acquisition to the District Collector, Indore. The District Collector while  seeking the approval of the Commissioner stressed that prestigious  exporters from India as well as other foreign countries were likely to  establish their units in the diamond park which would generate good  deal of foreign exchange and create employment potential. The State  Government by its communication dated 18.1.1996 accorded  sanction in principle for acquiring the private land measuring 73  hectares in Rangwasa village  ’for industrial purpose’ in order to set  up a diamond park. Thus, the considerations of industrial policy and  development weighed prominently with all the concerned authorities  while processing the proposals. It is clear from the stand taken by the  Nigam in the counter-affidavit and the enquiry report of the Land  Acquisition Collector that AKI Ltd., and Rosy Blue of Antwerp are not  the only entrepreneurs who would get the land in the proposed  diamond park area. In the report of the Land Acquisition Officer, it is  specifically mentioned that the land is proposed to be allotted to 12  industrial units after being satisfied about their capacity and bona  fides. Our attention has been drawn by the learned Advocate-General  to the lay out plan in which 12 plots covering an area of 57 hectares  are laid out. The remaining area is earmarked for green belt, housing,  common facilities and other amenities. Even the MOU entered into  between the Nigam and the two Companies do not give us a different  picture. It is specifically stated therein that the Commerce and  Industries Department will handover the land to Nigam for the  development of diamond park and the Nigam in its turn will allot the  land required for setting up the units for cutting and polishing  diamonds on leasehold basis to the two Companies as well as other  Companies. The site has been selected by a team of Government  officials after visiting various places. The fact that AKI Ltd., also  requested for allotment of suitable land near Indore and ultimately the  land close to Indore was selected, does not necessarily mean that the  official team was acting at the dictates of the said Company. Having  regard to the strategic location and importance of Indore city, the  choice of site near Indore cannot be said to be vitiated by any  extraneous considerations. Entering into MOU with the two  Companies and thereafter initiating requisite steps for the acquisition

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of the land does not, in our view, detract from the public purpose  chara cter of acquisition. MOU,  in ultimate analysis, is in the mutual  interest of both the parties and was only directed towards the end of  setting up of an industrial complex under the name of ’diamond park’  which benefits the public at large and incidentally benefits the private  entrepreneurs. One cannot  view the planning process in  the abstract  and there should be a realistic approach. Industrial projects and  industrial development is possible only when there is initiative,  coordination and participation on the part of both the private  entrepreneurs as well as the Governmental agencies. The active role  and initiative shown by AKI Ltd., cannot give a different colour to the  acquisition which otherwise promotes public purpose. The expression  ’foreign collaboration’ used in some of the letters which the learned  Advocate-General states, is somewhat inappropriate, does not  negative the existence of public purpose. Much of support has been drawn by the learned counsel for the  appellant from the letter dated 14.9.1995 addressed by the Additional  Secretary, Industries Department, to the Commissioner, Indore  soon  after the meeting of the representatives of AKI Ltd., with the Chief  Minister and other senior officials. Much of the argument has been  built up on it to characterize the acquisition as one for private  purpose. We find no legal basis for such comment. The wording of  the letter read in isolation may convey the impression that the Chief  Minister assured allotment of 150 to 200 acres of land to AKI Ltd., for  starting its modern diamond unit. But, it is fairly clear from the  subsequent acts and correspondence  including MOU that the land  sought for was in connection with the proposal for a diamond park  project in which not only AKI Ltd., but also other Companies or firms  are to set up the diamond cutting and polishing industries with  modern technology. Pursuant to the alleged assurance, no offer was  made nor any steps taken to handover 150 acres of land to AKI Ltd.  The said letter may be the starting point for action, but, as already  noticed the authorities concerned proceeded  to acquire the land for  the public purpose within the framework of  Land Acquisition Act. The  contents of the letter, literally read, were not translated into action.  But, it only provided a starting point to proceed with the acquisition for  industrial purpose. We are of the view that none of the factors pointed out by the  learned counsel for the appellants make any dent on the orientation  towards public purpose nor do they establish that the acquisition was  resorted to by the Government to achieve oblique ends. The speed at  which the proposal was pursued should be appreciated rather than  condemning it, though the overzealousness on the part of authorities  concerned to short-circuit the procedure has turned out to be counter- productive. True, the tardy progress of acquisition would have sent  wrong signals to the prospective investors, as contended by the  learned Advocate-General. However, due attention should have been  given to the legal formalities such as holding of enquiry, specification  of public purpose in clear terms and giving sufficient indication of  State meeting the cost of acquisition wholly or in part. At the same  time, we cannot read mala fides in between the lines; in fact, no  personal malice or ulterior motives have been attributed to the Chief  Minister or to any other official.   The material placed before us do not  lead to the necessary or even reasonable conclusion that the  Government machinery identified itself with the private interests of the  Company, forsaking public interest. Public purpose does not cease to  be so merely because the acquisition facilitates the setting up of  industry by a private enterprise and benefits it to that extent. Nor the  existence or otherwise of public purpose be judged by the lead and  initiative taken by the entrepreneurs desirous of setting up the  industry and the measure of coordination between them and various  state agencies. The fact that despite the unwillingness expressed by  AKI Ltd., to go ahead with the project, the Government is still  interested in acquisition is yet another pointer that the acquisition was

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motivated by public purpose.

Whether notifications should be struck down on the ground of  vagueness of public purpose

The vagueness of notified public purpose is the next ground of  attack against the notifications issued under Sections 4(1) and 6.  According to the learned counsel for the appellant, the expression  "establishment of diamond park" is vague and unintelligible and  therefore deprives the landholders and the general public of the  valuable right to object to the acquisition on relevant grounds. It is  further contended that the elaboration of the public purpose in the  notice of enquiry issued under Section 5-A by the Land Acquisition  Officer does not cure the vital defect in the notification under Section  4(1) which is an essential prerequisite for all further action under the  Act.   Hence  it  is  contended  that  the  notification  under  Section  4  together with the subsequent proceedings become null and void. The  sheet-anchor of this argument rests on the decision of this Court in  Madhya Pradesh Housing Board Vs. Md. Shafi [(1992) 2 SCC 168].  There, the public purpose was described as ’residential’ without even  giving definite indication of the exact location of the lands sought to  be acquired. What is more, in the declaration under Section 6(1), the  public purpose was stated differently as ’housing scheme of Housing  Board’. This Court, inter alia, held that the impugned notification was  vitiated on account of being vague. The Court observed: "Apart from the defect in the impugned notifiation, as  noticed above, we find that even the "public purpose"  which has been mentioned in the schedule to the  notification as ’residential’ is hopelessly vague and  conveys no idea about the purpose of acquisition  rendering the notification as invalid in law. There is no  indication as to what type of residential accommodation  was proposed or for whom or any other details. The State  cannot acquire the land of a citizen for building some  residence for another, unless the same is in ’public  interest’ or for the benefit of the ’public’ or an identifiable  section thereof. In the absence of the details about the  alleged ’public purpose’ for which the land was sought to  be acquired, no one could comprehend as to why the land  was being acquired and therefore was prevented from  taking any further steps in the matter."

The Court relied on the observation in Munshi Singh Vs. Union of  India [(1973) 1 SCR Page 973] to the effect that the public purpose  "needs to be particularized" to satisfy the requirements of law. We do not think that the ratio of the decision in M.P. Housing  Board’s case would come to the rescue o the appellants. Though the  State Government could have discreetly avoided to use sophisticated  industrial jargon, we do not think that the specified public purpose is  so vague and indefinite that the public will not be in a position to  understand its nature and purpose. That such terminology has gained  currency is evident from the fact that the same expression was used  in the Industrial Policy document. It may not be out of place to  mention that in the recent times, the terminology such as Industrial  Park, Information Technology Park is widely in circulation. Moreover,  against the column ’authorised officer under Section 4(2)’ (close to  the column ’public purpose’), the designation of Manager, District  Industries Centre, Indore is specified. This is a pointer to the fact that  the land was being acquired for industrial purpose. We are therefore  of the view that in the instant case, the alleged vagueness is not of  such a degree as to defy sense and understanding. In Aflatoon Vs. Lt. Governor of Delhi [(1975) 4 SCC Page 285]  the public purpose mentioned in the notification under Section 4 was  "planned development of Delhi". The challenge on the ground of

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vagueness of the notification was repelled on several grounds. The  approach of the Court and the crucial consideration to be kept in view  in dealing with this question was highlighted by Mathew, J. speaking  for the Constitution Bench in the following words: "...According to the Section (Section 4), therefore, it is  only necessary to state in the notification that the land is  needed for a public purpose. The wording of Section 5A  would make it further clear that all that is necessary to be  specified in a notification under Section 4 is that the land  is needed for a public purpose. One reason for  specification of the particular public purpose in the  notification is to enable the person whose land is sought  to be acquired to file objection under Section 5A. Unless a  person is told about the specific purpose of the  acquisition, it may not be possible for him to file a  meaningful objection against the acquisition under  Section 5A. .......

We think that the question whether the purpose specified  in a notification under Section 4 is sufficient to enable an  objection to be filed under Section 5A would depend upon  the facts and circumstances of each case."

Absence of prejudice was highlighted in Paragraph 10 thus: "That apart, the appellants did not contend before the  High Court that as the particulars of the public purpose  were not specified in the notification issued under Section  4, they were prejudiced in that they could not effectively  exercise their right under Section 5A."

On the facts of the case, it is not possible to draw the  conclusion that the appellants have suffered any prejudice or  handicap on account of the alleged vagueness in the description of  public purpose. First of all, the appellants did not, in the pleadings  before the High Court, point out as to how the alleged ambiguity or  vagueness had resulted in prejudice in the sense that they could not  effectively object to the acquisition. On the other hand, the appellants  filed detailed objections before the Land Acquisition Officer covering  each and every aspect.  The objections and representations filed  from time to time would unequivocally indicate that they were fully  aware of the exact purpose of acquisition. Raising the bogey of  vagueness in public purpose is evidently  a result of after-thought.  Moreover, by virtue of what is stated in the notices issued by the  Land Acquisition Officer under Section 5A of the Act, no one could  possibly have any doubt about the exact purpose of acquisition. True,  it is not open to the Land Acquisition Officer to alter or expand the  scope of public purpose as it is within the exclusive domain of the  Government. But the Land Acquisition Officer by elaborating and  making explicit what is really implicit in the notification under Section  4(1), had only dispelled the possible doubts in this regard so that no  one will be handicapped in filing objections. It is in that light the step  taken by the Land Acquisition Officer has to be viewed. We cannot  countenance the contention that in doing so, the Land Acquisition  Officer outstepped his jurisdiction. When no prejudice has been demonstrated nor could be  reasonably inferred, it would  be unjust and inappropriate to strike  down the notification under Section 4(1) on the basis of a nebulous  plea, in exercise of writ jurisdiction under Article 226. Even assuming  that there is some ambiguity in particularizing the public purpose and  the possibility of doubt cannot be ruled out, the Constitutional Courts  in exercise of jurisdiction under Article 226 or 136 should not, as a  matter of course, deal a lethal blow to the entire proceedings based  on the theoretical or hypothetical grievance of the petitioner. It would  be sound exercise of discretion to intervene when a real and  substantial grievance is made out, the non redressal of which would

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cause prejudice and injustice to the aggrieved party. Vagueness of  the public purpose, especially, in a matter like this where it is possible  to take two views, is not something which affects the jurisdiction and  it would therefore be proper to bear in mind the considerations of  prejudice and injustice. Objection on the ground of ecological and security considerations The last contention is that the proposed diamond park complex  will be objectionable from the point of view of ecology and national  security. Reliance is placed on some of the guidelines spelt out in the  "Policy Statement for Abatement of Pollution" issued by Government  of India, Ministry of Environment and Forests in the year 1992. At the  outset, we must take note of the undisputed fact that the diamond  cutting and polishing equipment and the operations connected  therewith does not give rise to any pollution caused by emission of  fumes, noise or discharge of  effluents. The problem of air, water or  soil pollution excepting to a minimal extent, caused on account of  inhabitation and transportation, will not arise. The appellants,  however, relied on the guidelines in order to contend that in locating  the industries, a distance of 25 KMs from ecologically and/or  otherwise sensitive areas should be maintained. It is submitted that  the MHOW-a Defence establishment is within 10 KMs distance and  the Centre for Advanced Technology (Department of Atomic Energy)  is 3 kilo meters from the proposed site of diamond park. However, it  is on record that the Army Headquarters expressed no objection from  military security point of view for setting up the diamond park. So  also, the Centre for the Advanced Technology in its letter addressed  to the Managing Director of the Nigam made it clear that the  establishment of diamond park would not cause any security  problems to the said Centre. The Union Minister of State in the  Ministry of Defence also stated on the floor of the Rajya Sabha on  11.9.1996 that there were no direct national security implications  involved in the setting up of the proposed project. It is also pertinent  to note that in the guidelines themselves, the need to strike a balance  between economic and environmental considerations has been  stressed. One of the guidelines is that no prime agricultural lands  shall be converted into industrial site. But, there  is no material on  record to show that the lands in question are prime agricultural lands  which were being utilized for growing crops. The guidelines  enunciated in the policy statement have to be viewed realistically.  The topography of the area and the development around the area are  some of the factors that could be legitimately taken into account. On  the basis of the materials placed before the Court it is not possible to  hold that the proposed diamond park project will be detrimental to  public health, safety or security so as to override the public interest  that is served by setting up export-oriented industries. We have,  therefore, no hesitation in rejecting this contention. Objection regarding acquisition of excess land Before parting with the case, we may advert to one more  contention advanced by the learned counsel for the appellant which is  really a facet of the argument on the question of public purpose. It is  contended that such a vast extent of land is in fact not required by  any reasonable standards and there was total non application of mind  as regards the extent of the land required. In reply to this, the learned  Advocate-General has drawn our attention to the Lay Out Plan and  pointed out that it was only on the basis of an assessment of the  requirements, the extent of land to be acquired has been arrived at.  Excepting oral assertions and bald averments, there is no material  before us to reach the conclusion that the requirements were not  properly assessed by the concerned authorities. It is primarily within  the domain of State Government to decide how much extent of land  has to be acquired keeping in view the present and future needs.  Though, we are not inclined to find fault with the notification on this  ground, we would only like to observe that it is desirable that the  State Government makes a fresh assessment in the light of the latest  situation and exclude any part of the land which may be found to be

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in excess. For the reasons aforesaid, the appeals are dismissed with no  order as to costs.