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PETITIONER: STATE OF MADHYA PRADESH

       Vs.

RESPONDENT: RANOJIRAO SHINDE & ANR.

DATE OF JUDGMENT: 21/03/1968

BENCH: HEGDE, K.S. BENCH: HEGDE, K.S. HIDAYATULLAH, M. (CJ) BACHAWAT, R.S. VAIDYIALINGAM, C.A. GROVER, A.N.

CITATION:  1968 AIR 1053            1968 SCR  (3) 489  CITATOR INFO :  R          1970 SC 564  (55,97,112,176)  R          1970 SC1292  (10)  RF         1971 SC 530  (54,329)  RF         1971 SC1409  (33)  RF         1973 SC1461  (12,19)  RF         1974 SC2364  (4)  D          1975 SC1058  (8)  RF         1977 SC1361  (192)  R          1978 SC 597  (58)  O          1978 SC 803  (30,31,32,33,34,37)  RF         1986 SC1126  (48)  RF         1989 SC1741  (10)

ACT: Constitution of India, Arts, 19(1)(f), (5) and  31-Enactment abolishing  cash  grant-If violative of  Art.  19(1)(f)  and 31(2)-Choses in action and money, if could be acquired under Art. 31(2). Madhya  Pradesh  Abolition of Cash Grants Act  (M.P.  16  of 1963)-If  violates  Art.  19(1)(f)  or  Art.  31(2)  of  the Constitution.

HEADNOTE: The  appellant-State  abolished by an executive  order  cash grants payable by it.  This order was quashed by this Court. Thereupon  the State passed the Madhya Pradesh Abolition  of Cash  Grants  Act,  1963 to abolish  the  cash  grants,  but provided  for  the payment of certain  compensation  to  the grantees-respondents.  the respondents challenged the  vires of  the Act before the High Court.  The High Court held  the Act to be ultra vires of Art. 19(1) (f) of the  Constitution and not saved by sub-Art. (5) thereof.    In   appeals    by certificate, this Court, HELD:     The  Act is either violative of 31(2) or,  in  the alternative, Art. 19(1) (f) of the Constitution. [490 F] Choses in action and money could not be acquired under  Art. 31(2).   If  it is held that State by the  exercise  of  its power  of  eminent domain can acquire choses in  action  and money belonging to its citizens, by paying a fraction of the

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money   taken   as  compensation,  the   fundamental   right guaranteed under Art. 19(1)(f) would be deprived of all  its contents and that Article will cease to have any  meaningful purpose.  Article 31(2) must be construed harmoniously  with Art.  19(1)  (f).  If so construed, it is obvious  that  the public purpose contemplated by the Article does not  include enrichment  of  the  coffers  of  the  State.   Further  the compensation   referred  to  in  Art.  31(2)  is  the   just equivalent of the value of the property taken. [495 E-H] A law which authorises the State to deprive a person of  his property must be a valid law. it must not violate Art. 19(1) (f)  which  means that it must satisfy the  requirements  of Art. 19(5).  The word "law" used in-Art. 31(1) indicates its limitations  and  refers back to Art. 19 and  any  law  made under  Art. 31(1) can be sustained only if the  restrictions it  impose&  are reasonable and in the interest  of  general public.   The  Act which empowers the State  to  appropriate some  one else’& property for itself solely with a  view  to augment the resources of the State cannot be considered as a reasonable  restriction-in  the  interest  of  the   general public..,  If  Art. 19(5) is interpreted to  mean  that  the State can take by authority of law anyone’s property for the purpose of increasing its assets or revenues, the  guarantee given by Art. 19(1)(f) would become illusory (496 -497 E] Madhorao  Phalke v. State of Madhya Bharat [1961]  1  S.C.R. 957,  Kameshwar Prasad v. State of Bihar , A.I.R. 1962  S.C. 1166, State of Bihar v. Kameshwar Singh, [1952] S.C.R.  889, Kavalappara Kottarathil’ Kochuni v. State of Madras’, [1960] 3 -S.C.R. 887, followed. Bombay Dyeing and Manufacturing Co. Ltd. v. Stat of  Bombay, [1958] S.C.R. 1122, referred to. 490

JUDGMENT: CIVIL  APPELLATE JURISDICTION : Civil Appeals Nos. 1730  and 1731 of 1966. Appeals  from  the judgment and order dated August 18,  1964 of the Madhya Pradesh High Court in Misc.  Petition Nos.  21 and 22 of 1963 (G.). I. N. Shroff, for the appellant (in both the appeals). B.  Sin,  P.  W. Sahasrabuddhe, S. K.  Dholakia  and  A.  G. Ratnaparkhi, for the respondent (in both the appeals). The Judgment of the Court was delivered by Hegde,  J.  In these connected appeals by  certificates  the question  that  arises for decision is  whether  the  Madhya Pradesh Abolition of Cash Grants Act of 1963 (Act No. XVI of 1963)  is  ultra vires the provisions of  the  Constitution. The  respondents in these appeals were entitled  to  receive cash  grants  from the Government of  Madhya  Pradesh.   The impugned  Act  abolished such grants but  provided  for  the payment  of  certain  compensation  to  the  grantees.   The respondents challenged the vires of the Act before the  High Court  of Madhya Pradesh in Miscellaneous Petitions Nos.  21 and 22 of 1963, on various grounds.  The High Court rejected all  the contentions advanced on behalf of  the  respondents excepting  one, namely that the Act is ultra vires  of  Art. 19(1)  (f) of the Constitution and is not saved by  sub-Art. (5)   thereof.    After  obtaining  from  the   High   Court Certificates  under  Art.  133(1)(c), the  State  of  Madhya Pradesh  has filed these appeals.  The State is  challenging the  correctness  of the decision of the High Court  to  the extent  it went against it.  The respondents on their  part, in  addition  to supporting the findings of the  High  Court

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which  are in their favour, relied also on the  other  pleas taken  by  them  before the High Court.  As we  are  of  the opinion  that the impugned Act is either violative  of  Art. 31(2)  or,  in  the  alternative,  Art.  19(1)  (f)  of  the Constitution,  we have not thought it necessary to  go  into the other contentions taken on behalf of the respondents. Before  the  impugned Act was enacted, the State  of  Madhya Bharat which forms part of the new State of Madhya  Pradesh, purported to abolish -the cash grants payable by it by means of  an  executive  order.   That  order  was  unsuccessfully challenged  by  Madhorao Phalke and others before  the  High Court.  But in apPeal this Court in Madhorao Phalke v. State of  Madhya Bharat(’) quashed the order in question,  holding that   the  grants  in  question  were  recognised  by   the kalambandis of 1912 and 1935 issued by the Rulers of Gwalior and those’ kalambandis are existing laws within the  meaning of  Art. 372 of the Constitution and consequently  the  same could  not be abrogated by means of an executive order.   It may be noted that in that appeal, the appellant challenged (1)  [1961] 1 S.C.R.957. 491 the  order in question on two grounds, namely- (1)  that  as his  right to receive the cash  grant had  been  statutorily recognised  by the State of Gwalior, it was not open to  the Government of Madhya Bharat to exiting that right merely  by an  executive order, and (2) that that right being  property the   same  could  not  be  divested  ,without  payment   of compensation  under Art 31 of the Constitution.  This  Court allowed  the appeal on the first ground and consequently  it did  not deal with the second.  After the decision  of  this Court  in  that case, the impugned Act was  enacted  by  the Madhya  Pradesh legislature on April, 5, 1963.  It  received the  assent  of  the  President on July  25,  1963  and  was published  in  the Madhya Pradesh Gazette  Extraordinary  on August  2, 1963.  The Act comes into force on such  date  as the  Government  may by notification appoint.   Even  before that notification was issued, the petitions from which these appeals  arise  were instituted in the High Court.   We  are given  to under stand that in view of those  petitions,  the Act has’ yet been brought into force. The long title of the Act says that it is an Act to  provide for the discontinuance of cash grants in Madhya Pradesh  and to  make provisions for other matters  connected  therewith. It  contains  twelve sections.  Section 11  sets  out  their short title, extent and commencement of the Act.  Section  2 defines some, of the expressions found in the Act.   Section 3  is  the most important section. it  purports  to  abolish certain  cash grants.  Section 4 provides for  statement  of claims  by the grantees.  Section 5 provides the  manner  of determining the compensation payable.  Section 6  prescribes that  appeal,  revision and review under the Act  to  be  in accordance  with Madhya Pradesh Act No. 20 of 1959.  Section 7 provides for the determination of disputes as regards  the title  of any grantee.  Section 8 bars the  jurisdiction  of civil  courts to issue an injunction against any  person  in respect  of  any proceedings pending  before  the  competent authority under s. 5 which shall have the effect of  staying the  proceedings.   Section  9  prescribes  the  quantum  of compensation  payable.   Section 10 deals with the  mode  of payment  of  compensation.  Section 1 1 empowers  the  State Government to make rules for carrying out all or any of  the purpose of the Act.  Section 12 says that if any  difficulty arises  in giving effect to the provisions of -the Act,  the ’State  Government  May by order make  such  provisions  not inconsistent with the purposes Of this Act as appears to  be

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necessary or expedient for removing the difficulty. In these aPpeals we are mainly conceded with the vires of s. 3  read  with the definition of "cash grant" in  s.  2(1).If section 3 read with s. 2(1) is held to be ultra vires of the Constitution,  then  the whole Act falls to the  ground  the remaining  sections  of  the Act are  merely  subsidiary  or incidental provisions.  Section L7Sup.C.1/68-7 492 3:(*)  provides that notwithstanding anything’ contained  in any law custom, usage, sanad or a decree or order of a court or  other  authority whatsoever, all cash  grants  shall  be discontinued and cease to have effect from the  commencement of  this Act.  But the pro thereto makes certain  exceptions with  which we am not -concerned in this case.  The case  of the  respondents  falls within the main-part.  They  do  not have  the benefit of the proviso A cash grant as defined  in S. 2(1) (**) includes a grant of ----------------------------- "3.   Abolition of certain cash  grants-(1)  Notwithstanding anything  contained  in any law, custom, usage, sanad  or  a decree  or order of a court or other  authority  whatsoever, all  cash  grants shall be discontinued and  cease  to  have effect from the commencement of this Act : Provided  that  where the grantee is a person  specified  in column  (1)  of the Table below the cash grant may,  at  the option of the grantee exercised in such manner, within  such period  and in such form as may be prescribed, be  continued subject to the conditions and during the period mentioned in the corresponding entry in column (2) of the said Table.                          TABLE -------------------------------------------------------------          (1)                                (2) -------------------------------------------------------------      (i) A widow .  . .   So lone as she remains a widow.      (ii) A minor (a) in the case of a male .  Till the date he attains 21                              years of age. (b) in the case of a female  Till the date of her marriage                              or till she attains 21 years                              of age, which ever is earlier. (iii) A Person above the age of 60 years                   During his life time. (iv)A person subject to phys- ical disability or mental in-  During his life time. firmety owing to which he is incapable of earning his livelihood. (2)  Upon  the discontinuance - of a cash grant  under  sub- section (I not be, obligatory on the grantee to perform  the function or discharge t any attached to such grant". (**)  "2(1)-Cash  grant’  means a grant of  money  which  is enforceable  by the grantee against the State Government  on the date -of the coming into force of this Act but does  not include- (i)  a grant of money for-      (a)  services  of Public temples, mosque or church;  or (b)  worship  of public temples, mosque or  church;  or  (c) public temples; (ii)a   grant   of  money  to   charitable   or   religious institutions; (iii)a grant of money or Pension or annuity or  special or Perpetual annuity sanctioned under- (a)  S.  5.of the Central Provinces and Berar Revocation  of land Revenue Exemptions Act, 1948 (XXXVII of 1948); (b)  S.  77  or S. 81-A of the Madhya Pradesh  Abolition  of

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Proprietary  Rights (Estates, Mahals Alienated  Lands)  Act, 1950 (1 of 1951); (c)  S.  41 of the Vindhya Pradesh Abolition of  Jagirs  and Land Reforms Act, 1952 (XI of 1952); (d)  the  orders  relating  to  Jagirs  in  Bhopal’  ’Ihekam Khusravi,  1949,  para 30 read with s.-45-A  of  the  Bhopal Abolition  of Jagirs and Land Reforms Act, 1953 (No.   X  of 1953); and (e) sub.S. (2) of S. 160 of the Madhya Pradesh Land  Revenue Code, 1959, (20 of 1959);" 493 money which is enforceable by the grantee against the  State Government  on the date of the coming into force of the  Act but   does  This  not  include  those  ,,rants   which   are specifically  excluded.  definition takes in  all  the  cash grants whatever may be the nature or origin of those grants. The  definitiOn  of a cash grant is wide enough  to  include cash  grants  sanctioned by ex-Rulers in lieu of  Jagirs  or other  properties resumed or even, en payments agreed to  be made  in  lieu  of loans given  to  the  Rulers.   Different considerations  may  arise  if  the  grants  abolished   are Gratuitous  payments,  grants  in lieu  of  services  to  be rendered  or  other  resumable  grants.   But  as  mentioned earlier,  the definition of cash grants in s. 2(1) does  not make,  any  distinction between the various  types  of  cash grants.   Hence, the said definition will have to  stand  or fall as a whole, there being no basis for severing some  out of the several grants included therein.  It is impermissible for  this  Court  to rewrite that  clause  and  confine  the definition  only  to  such  of the  cash  grants  which  the legislature might be competent to abolish. The  doctrine  of severability is applicable only if  it  is possible  to  separate the legal from  the  unconstitutional portion  of the Provision.  If it is not possible to do  so, the   entire   provision   has  to   be   struck   down   as unconstitutional.   see  Kameshivar  Prasad  v.   State   of Bihar(’). The  High  Court  has come to the conclusion  that  a  "cash grants is property within the meaning of that expression  in Articles   19(1)(f)  and  31.   This  conclusion   was   not challenged before us. It is obvious that a right to a sum of money is property. There  was  controversy before the High  Court  whether  the abolition of cash grants under the Act can be considered  as acquisition  under  Art. 31 (2).  It was urged  before  that Court  on  behalf of the State that that abolition  of  cash grant  amounted  to compulsory acquisition of  property  for public   purpose   and  as  the  Act  has   prescribed   the compensation payable to grantees the acquisition in question is  completely  protected  by Art.  31(2).   The-High  Court replied this contention opining that as the law in  question cannot be considered as having transferred the rights of the grantees  as provided in Art. 31 (2A) the State cannot  seek the  protection  of  Art.  31 (2).   Ibis  I  conclusion  is debatable,.   It is possible to view the  discontinuance  of the  payment  of  cash  grants under s.  3  as  a  statutory transfer of rights of the grantees  to the State.  But there is no need to pursue this line’ of reasoning for reasons  to be  stated  presently.  Though the language  of  Art.31  (2) prima  facie  comprehends  movable     properties  including choses in action and money  there are valid grounds to  hold that  choses  in action and money are outside the  reach  of Art.  31 (2).  In the United States of America,  opinion  is divided among the (1) A.I.R. 1962 S.C. 1166.

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494 jurists  whether money and choses in action can be  acquired in  the exercise of the power of eminent domain  though  the preponderance   of  opinion  appears  to  be  that   it   is impermissible  ,  But  so  far as  we  are  concerned,  this question  is concluded by the decisions of this  Court.   In State  of  Bihar v. Kameshwar Singh(’) this Court held  that under  Art. 31 (2) of the Constitution, money and choses  in action  could not be acquired.  Mahajan, (as he then was  ), speaking  for  the  majority -after  quoting  with  approval certain  passages from Cooley’s  Constitutional  Limitations observed (at pp. 943 44 of the Report)               "It  was not necessary to decide in this  case               whether under the compulsory acquisition power               the  State has the power to acquire choses  in               action  or money, but it cannot  be  seriously               disputed that such an acquisition amounts to a               forced loan and that the desired result can be               more  appositely obtained in, exercise of  the               police power of the State than of the power of               eminent  domain or compulsory acquisitions  of                             property  and that compensation in suc h a  case               is  the  same amount of money  that  is  being               taken and in the case of a chose in action the               amount  of  money that it would  produce..  In               this  situation it cannot be held  that  fifty               per  cent  of  the  outstanding  arrears   was               compensation  in any sense of that  expression               for is acquisition.  The true position is that               the  State  tool  over  all  the  arrears  and               decided  to refund fifty per cent of them  and               forfeit  the  rest.   The  validity  of   this               acquisition has to be decided independently of               the  acquisition of the, estates.  It  has  no               connection with land reform or with any public               purpose  It  stands on the  same  footing  as-               other  debts due to zamindars or  their  other               movable  properties,  which  it  was  not  the               object  of  the Act to  acquire.   As  already               stated,  the  only  purpose  to  support  this               acquisition   is  to  raise  revenue  to   pay               compensation  to some of the  zamindars  whose               estates  are being taken.  This  purpose  does               not fill within any definition, however  wide,               of  the  phrase public purpose’  and  the  law               therefore to this extent is unconstitutional." In the same case, Mukherjea,’J. (as he then was) observed:               "Taking  money  under  the  tight  of  eminent               domain  when it must be compensated  by  money               afterwards, could be nothing more or less than               a forced loan and it is difficult to say  that               it comes under the head of acquisi- (1) [1952] S.C.R. 889. 495               tion  or requisitioning of  property...and  is               embraced within its ordinary connotation." Chandrasekhar  Aiyar J., in that very case held that  though money  and choses in action are movable property  and  would prima  facie come under the power of compulsory  acquisition the  power  under Art. 31 (2) could not be used  to  support such acquisition on the ground that generally speaking there would  be  no public purpose, in  their  acquisition".   The majority  view in that case was followed by this.-Court  -in Bombay  Dyeing  and Manufacturing Co Ltd. v.  The  State  of

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Bombay(’).   That lease considered the validity of S. 3  (1) of  the Bombay Labour Welfare Fund Act which  provided  that there should be constituted a fund called the’ Bombay Labour Welfare  Fund and notwithstanding anything contained in  any other law for the time being in force, the same specified in sub-s. (2) thereof shall be paid into the fund.  Section 3 (2)  provided inter alia: "The Fund shall consist of (a)  all fines realised from the employees; (b)  all unpaid accumulation." The Court held following the decision of this Court in State of  Bihar  v.  Kameshwar  Singh(2)  that  the  provision  in question is invalid -and is not protected by Art. 31 (2). From  the above decisions it follows that -choses in  action and money could not be acquired under Art. 31 (2).  If it is held  that’,, State by the exercise of its power of  eminent domain can acquire choses in action and money belonging  ’to its  citizens, by paying’ a fraction of the money  taken  as compensation, the fundamentals. right guaranteed under  Art. 19(1)(f)  would  be deprived of all its  contents  and  that Article  will  cease to have any  meaningful  purpose.   The power  conferred under Art’. 31 (2) is not a  taxing  power. That  power cannot be utilised for enriching the coffers  of the State.  It is true that the abolition of the cash grants would argument the resources of the State but that cannot be considered as a public purpose under Art. 31 (2).  If it  is otherwise  it would be permissible for the  legislatures  to enact laws acquiring the public debts due from the State,  t he  annuity  deposits returnable by it  and  provident  fund payable  by it by providing for the payment of some  nominal compensation,  to the persons whose rights are  acquired  as the acquisitions in question would augment the resources  of the  State.   But nothing so bad can be said  to  be  within contemplation of Art. 31(2).  That Article must be construed harmoniously  with  Art. 19(1)(f).  If so construed,  it  is obviously  that  the  public purpose  contemplated  by  that Article  does not include enrichment of the coffers  of  the State.   Further the compensation referred to in Art.  31(2) is, as held by this Court in various (1) [1958] S.C.R. 1122. (2) (1952) S.C.R. 889. 496 decisions,  is  the  just equivalent of  the  value  of  the property taken.  If for every rupee acquired fifty paisas or less is made -payable as compensation the violation of -Art. 31  (2)  would  be patent and  in  those  circumstances  the exercise   of  the  powers  by  the  legislature  would   be considered  as  a fraud on its powers and  consequently  the legislation  ’will be struck down as a colourable  piece  of legislation. It  is true that in State of Bihar v. Kameshwar Singh()  and in  Bombay Dyeing and Manufacturing Co Limited v.  State  of Bombay(’), this Court was considering the question of taking of money ’by the State that was in the hands of others,  but in  this  case we are concerned with the abrogation  of  the liability  of  the  Government  But  we  fail  to  see   any difference in principle in these two sets of cases.  In  the former  case the Government was compulsorily taking  others’ property and in the latter it seeks to appropriate to itself the property of others which is in its hands. It was next urged that the impugned Act, even if it is  held not to be protected by Art. 31(2) is still valid under  Art. 31(1).   The  said  Article says that  no  person  shall  be deprived  of his property save by authority of law.   A  law Which  authorises  the  State to, deprive a  person  of  his

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property  must  be a valid law.  It must  not  violate  Art. 19(1) (f) which means that it must satisfy the  requirements of  Art. 19(5).  In Kavalaopara Kottarathi Kochuni v.  State of Madras(-3) this Court laid down that the word "law"  used by  Art. 31(1) indicates its limitations and refers back  to Art. 19 and any law made under Art. 31 (1) can be  sustained only  if the restrictions it imposes are reasonable  and  in the  interest of the general public, The Act which  empowers the  State  to,  appropriate some one  else’s  property  for itself  solely with a view to augment the resources  of  the State, cannot be considered as a reasonable restriction-  in the  interest   of the general public.  That  conclusion  of ours  receives  support from the ratio of the  decisions  of this  Court  in State of Bihar v. Kameshwar Singh()  and  in Bombay  Dyeing  and Manufacturing Co. Limited  v.  State  of Bombay(2)  wherein  Venkatarama Aiyar, J. speaking  for  the Court, observed               "Assuming  that the correct position  is  what               the  respondents contend it is that  the  case               falls within Art. 19(1)(f), the question  that               has  still  to be determined  is  whether  the               impugned  Act  could be supported  under  Art.               19(5).  There was some discussion before us as               to  the scope of this provision, the point  of               the  debate being whether the words  ’imposing               reasonable restriction’ (1) [1952] S.C.R. 889.      (2) [1958] S.C.R. 1122. (3) [1960] 3 S.C.R. 887. 497               would  cover a legislation, which  not  merely               regulated   the   exercise   of   the   rights               guaranteed   by  Art.  19(1)(f)  but   totally               extinguished them, and whether a law like  the               present  one which deprived the owner  of  his               properties  could be held to fall within  that               provision.    It   was  argued  that   a   law               authorising  the  State to seize  and  destroy               diseased  cattle, noxious drugs and the  like,               could not be brought within Art. 19(5) if  the               word   ’restriction’   was  to   be   narrowly               construed,  and that accordingly the power  to               restrict   must   be  held  to   include,   in               appropriate  cases, the power to prohibit  the               exercise  of the right.  That view  does  find               support in the observations of Lord Porter  in               Commonwealth of Australia v. Bank of New South               Wales(’) : but the present legislation  cannot               be sustained even on the above  interpretation               of  the word "restriction " as s. 3 ( 1  )  of               the Act deals with moneys and money cannot  be               likened to diseased cattle or noxious drugs so               as  to  attract the exercise of  police  power               under  Art.  19 (5).  It appears  to  us  that               whether  we  apply under Art.  31(2)  or  Art.               19(5),  the impugned Act cannot be upheld  and               it must be struck down." If Article 19(5) is interpreted to mean that State can  take by  authority of law anyone’s property for the.  purpose  of increasing  its assets or revenues, the guarantee  given  by Art. 19(1)(f) would become illusory, a proposition to  which this Court cannot subscribe. For the reasons mentioned above we are unable to uphold  the validity  of  Madhya Pradesh Abolition of Cash  Grants  Act. These appeals accordingly fail and are dismissed with ’Costs with one set of hearing fee.

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Y.P.    Appeal dissmissed. (1) [1950] A.C. 235. 498