03 March 1964
Supreme Court


Case number: Appeal (civil) 6 of 1963






DATE OF JUDGMENT: 03/03/1964


CITATION:  1965 AIR  190            1964 SCR  (6) 936  CITATOR INFO :  RF         1965 SC1017  (14)  F          1967 SC 637  (8)  E          1968 SC 377  (10,16,20)  RF         1968 SC 394  (17)  R          1968 SC1138  (9,31,58)  R          1968 SC1425  (9)  D          1969 SC 453  (7)  RF         1969 SC 634  (41,49)  RF         1970 SC 564  (96)

ACT: Madras Lignite (Acquisition of Land) Act (XI of 1953), ss. 2 and  3  -Acquisition  of lignite  lands-Compensation  to  be assessed on market value prevailing on April 28,  1947-Value of  non-agricultural improvements after that date not to  be taken  into  consideration-Act  passed  before  Constitution (Fourth Amendment)-Validity of Act-Compensations now  fixed- Constitution  of  India, Art. 31 Prior to  the  Constitution (Fourth Amendment) Act, 1955.

HEADNOTE: The  respondents in the above appeals are owners of  certain lands  which  are to be compulsorily acquired  udder  Madras Lignite  (Acquion  of Land) Act, 1953.  This Act  came  into force  on August 20, 53 before Art. 31 of  the  Constitution was amended by the Constituion (Fourth Amendment) Act, 1955. By  the  said  Act  substantially  o  provisions  which  are material to the present appeals were made. ,e first was that compensation  for acquisition of lignite-bearing  lands  der the  Land  Acquisition Act is to be assessed on  the  market value the land prevailing on August 28, 1947 and not on  the date  on which notification is issued under s. 4(1)  of  the Land  Acquisition  Act.  condly  it  was  provided  that  in awarding   compensation  the  value   of    non-agricultural improvements  commenced since April 28, 1947 win  not  taken into consideration. In  accordance with the above provisions, after issuing  the notices  as  acquired  under  ss. 4(1) and  6  of  the  Land Acquisition  Act  the Land acquisition Officer  made  awards



regarding  the  lands  of the  respondents.  he  respondents thereupon  filed petitions under Art. 226 of the  Constition before the High Court of Madras challenging the validity  of the  ward  on  the ground that the  provisions  of  the  Act relating  to the ward of compensation violate Art. 31(2)  of the Constitution [as it food before the Constitution (Fourth Amendment)   Act,   [955].   The  High  Court   upheld   the contention.  In appeal, Held:     (i)  The  validity  of the  Act  impugned  in  the present  appeal  ,is  to be examined in  the  light  of  the provisions  of  Art. 31 of the constitution  as  they  stood before the Constitution (Fourth Amendment) Act, 1955. Chiranjit  Lai  Chowdhuri V. Union of India,  [1950]  S.C.R. 869,  State  of  West Bengal v. Subodh  Gopal  Bose,  [1954] S.C.R. 587, and State of lest Bengal v. Mrs. Bela  Banerjee, [1954] S.C.R. 558, relied.  937 (ii) The  principle laid down in Bela Banerjee’s case,  that the  ceiling  on the compensation without reference  to  the value  of  the  land  at the  time  of  the  acquisition  is arbitrary  and  cannot be regarded as  due  compensation  in letter  and  spirit within the requirement  of  Art.  31(2), would  apply to the impugned Act.  Fixation of  compensation for compulsory acquisition of land notified many years after that  date  on the market value prevailing on  the  date  on which  lignite  was  discovered  is  wholly  arbitrary   and inconsistent with the letter and spirit of Art. 31(2) as  it stood before the Constitution (Fourth Amendment) Act, 1955. (iii)     Any  principle for determination  of  compensation denying to the owner all increments in value between a fixed date  and the date of issue of the notice under s.  4(1)  of the  Land Acquisition Act must prima facie, be  regarded  as denying  him  the true equivalent of the land which  is  ex- propriated and it is for the State to show that fixation  of compensation  on the market value on an anterior  date  does not  amount to a violation of the Constitutional  guarantee. In the present appeals no materials have been placed by  the State which would support any such case. (iv) Denial   of   compensation  for  the  value   of   non- agricultural  improvements  would  be denying  to  him  just compensation  for  the loss suffered by him  on  account  of compulsory  acquisition of his holding and would  amount  to infringement of Art. 31(2) of the Constitution.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 6 to  12 of 1963. Appeals from the judgment and decree dated February 2, 1959 of the Madras High Court in Writ Petition Nos. 1. 2,   202, 203, 204, 309 and 373 of 1958. A.  Ranganadham Chetty and A. V. Rangam, for the  appellants (in all the appeals). -R.  Gopalakrishnan, for the respondent (in C.A. No. 11/63). S. V. Gupte, Additional Solicitor-General and R. H.  Dhebar, for interveners Nos.  1 and 2. M.   C.  Setalvad,  N.  S.  Bindra and  R.  H.  Dhebar,  for intervener No. 3. G.   C. Kasliwal, Advocate-General, Rajasthan, R. H.  Dhebar and B. R. G. K. Achar, for intervener No. 4. 938 March 3, 1964.  The Judgment of the Court was delivered by SHAH,  J.-"Whether  ss.  2  and  3  of  the  Madras  Lignite (Acquisition of Land) Act XI of 1953 which seek to amend the



Land  Acquisition  Act  1 of 1894 in  their  application  to acquisition  of  lignite-bearing lands are  invalid  because they  infringe  the fundamental right under Art. 31  of  the Constitution  of  owners of lands whose property  is  to  be compulsorily acquired is the only question which falls to be determined in this group of appeals. Investigations  conducted by the Geological Survey of  India in  1947  revealed deposits of lignite in  the  South  Arcot District  of  the State of Madras,  and  exploratory  mining operations  were  commenced  by the  Government  of  Madras. Discovery  of  deposits  of lignite led  to  speculation  in lands.  On October 6, 1948, the Government of Madras  issued a  "Press-Note" announcing that the Government  proposed  to undertake  legislation reserving power to compel any  person who  had purchased land on or after a date to be  prescribed in  1947 in the lignite-bearing areas to sell such lands  to the  Government at the rate at which it was purchased.   The Government  also advised the owners of  the  lignite-bearing lands in the Vriddhachalam and Cuddalore taluks not to  sell their  lands  to  speculators.   On  January  7,  1953,  the Government  of  Madras published a Bill to  amend  the  Land Acquisition Act 1 of 1894 in certain respects.  The Bill was duly  passed  by the State Legislature on June 2,  1953  and received  the assent of the President.  It was published  as an  Act on June 10, 1953 and came into force on  August  20, 1953.  By this Act substantially three provisions are made:               (1)   that  compensation  for  acquisition  of               lignitebearing    lands   under    the    Land               Acquisition Act as amended, is to be  assessed               on the market value of the land prevailing  on               April  28, 1947, and not on the date on  which               the  notification is issued under s.  4(1)  of               the Land Acquisition Act;  939               (2)   power  is  reserved under s. 17  of  the               Land  Acquisition  Act to take  possession  in               cases  of urgency of lands for the purpose  of               working  lignite mines in the areas  in  which               the  Madras Lignite (Acquisition of Land)  Act               XI of 1953 extends; and               (3)   in  assessing  the market value  of  the               land  on  April 28, 1947, value  of  any  non-               agricultural   improvements   on   the    land               commenced,  made or effected after  that  date               are not to be taken into account, even if such               improvements  were  made before  the  date  of               publication of the notification under s.  4(1)               of the Land Acquisition Act. Pursuant  to  this Act, notifications under s. 4(1)  of  the Land  Acquisition  Act  were issued between  the  months  of January and May 1957 notifying for acquisition certain lands in  Vriddachalam taluk of the South Arcot  District.   These notifications  were followed by notifications under s. 6  of the  Land  Acquisition Act.  Between the months of  May  and November  1957 the Land Acquisition Officer made his  awards under   s.  11  of  the  Land  Acquisition   Act   assessing compensation  on  the basis of market value of the  lads  on April   28,  1947  and  ignoring  in  the   computation   of compensation  the  value  of  houses  built  or  other  non- agricultural improvements made on the land since that  date. The  owners of the lands affected by these awards  submitted petitions  under  Art. 226 of the Constitution to  the  High Court  of Judicature at Madras challenging the  validity  of the  awards on the ground that the provisions of Madras  Act XI  of 1953 violated the fundamental right of the owners  of



the  lands  under  Art. 31(2)  of  the  Constitution.   They claimed that the Land Acquisition Officer was bound to award compensation for acquisition of their lands and buildings at the  market value prevailing on the respective dates of  the notifications  under  s. 4(1), and that awards  valuing  the lands  at the market rate prevailing on April 28, 1947,  and excluding the value of buildings constructed after that date and   trees   thereon  were   without   jurisdiction.    The petitioners accordingly claimed that writs of mandamus be 940 issued  directing the State of Madras and the Land  Acquisi- tion Officers to refrain from taking possession of the land& and  buildings  from  the  petitioners  without  payment  of adequate compensation and for other appropriate relief.  The High  Court  upheld the contention of  the  petitioners  and declared that the awards made on the basis of the provisions of  Madras Act XI of 1953 could not be  sustained.   Against the order passed by the High Court, these appeals have  been preferred  by  the  State of  Madras,  with  certificate  of fitness  granted  by the High Court under Art.  132  of  the Constitution. The Madras Act XI of 1953 makes an important departure  from the scheme of the Land Acquisition Act 1 of 1894.  Under the Land  Acquisition Act 1 of 1894, a person interested in  any land. compulsorily acquired is entitled to the market  value of  his interest in the land at the date of the  publication of  the  notification under s. 4(1), and  this  compensation includes the value of all improvements agricultural and non- agricultural  made  in  the  land  upto  the  date  of   the notification.   By Madras Act XI of 1953, compensation  made payable  for compulsory acquisition of land is the value  of the land on April 28, 1947, together with the value, of  any agricultural  improvements made thereon after that date  and before  publication of the notification under s. 4(1).   The result  of  the Madras Act is therefore to  freeze  for  the purpose  of  acquisition the prices of land in the  area  to which it applies, and the owners are deprived of the benefit of  appreciation  of  land  values  since  April  28,  1947, whenever  the notification under s. 4(1) may be  issued  and also of non-agricultural improvements made in the land after April  28, 1947.  Departure from the provisions of the  Land Acquisition Act is challenged as illegal on the ground  that it  deprives the owner of the land of just compensation  for compulsory acquisition of his property. Madras  Act  XI of 1953 was passed before  the  Constitution (Fourth  Amendment)  Act, 1955 was enacted, and we  have  to deal  with  the question of the validity of the Act  in  the light of the constitutional provisions contained in Art.  31 before the constitutional amendment.  We may 941 :make  it  clear that for the purpose of this  judgment,  we -express  no opinion on the question whether it is  possible by enacting legislation after the amendment of Art. 31(2) by the Constitution (Fourth Amendment) Act, 1955 (which is  not given   any   retrospective  operation)  to   provide   that compensation for compulsory acquisition of land may be fixed on  the basis of market value prevailing on a date  Anterior to the date of the issue of the notification under S.  4(1). Article 31 before it was amended by the Constitution (Fourth Amendment) Act 1955, by its cls. (1) and (2) provided:               "(1)  No  person  shall  be  deprived  of  his               property save by authority of law.               (2)   No   property,  movable  or   immovable,               including  any interest in, or in any  company               owning,    any   commercial   or    industrial



             undertaking,  shall be taken possession of  or               acquired  for  public purposes under  any  law               authorising  the taking of such possession  or               such acquisition, unless the law provides  for               compensation for the property taken possession               of or acquired and either fixes the amount  of               the compensation, or specifies the  principles               on  which,  and  the  manner  in  which,   the               compensation is to be determined and given." It  was  held by this Court in Chiranjit Lal  Chowdhuri  v., Union of India and others(1) and The State of West Benga  v. Subhodh  Gopal Bose and others(2) that cls. (1) and  (2,  of Art.  31 relate to the same subject of "eminent domain",  By Art.  31  therefore  every  person  was  protected   agains, deprivation,  of his property save by authority of law,  an( the  law  authorising taking possession  or  acquisition  of property  for  public  purposes had to  fix  the  quantum  o compensation,  or to specify principles on  which  compensa- tion  was  to  be  determined  for  the,  property.   -taken possession of or acquired.  Power to legislate,, in  respect of  compensa  tion  for acquisition  and  requisitioning  of property was (1)  [1950] S.C.R. 869. (2)  [1954] S.C.R. 587. 942 contained  in Entry 42 List III of the Seventh Schedule  and read as follows :               "Principles on which compensation for property               acquired  or requisitioned for the purpose  of               the  Union  or  of a State or  for  any  other               public  purpose is to be determined,  and  the               form and the manner in which such compensation               is to be given." The   Constitution   therefore  conferred  by   Art.   31(2) fundamental right upon every person, protecting his property against  compulsory acquisition otherwise than by  authority of  law, and without just indemnification for loss  suffered by  him.  In The State of West Bengal v. Mrs. Bela  Banerjee and  others(1) this Court observed that when under Entry  42 List  III the Legislature was given discretionary power  to, lay down the principles which should govern determination of the  amount  to  be  given to  the  owner  of  the  property appropriated,  such  principles must ensure  that  what  is, determined as payable must be a just equivalent of what  the owner  has been deprived of, and that subject to this  basic limitation  the  Constitution  allowed  free  play  to   the legislative judgment as to what principles should guide  the determination  of the amount payable.  The  Court  therefore held that the West Bengal Land Development and Planning Act, 1948,  which  was enacted primarily for  the  settlement  of immigrants  who  had  migrated  into  West  Bengal  due  to, communal  disturbances  in  East Bengal and which  by  s.  8 provided that the compensation to be awarded for  compulsory acquisition  to the owner of the land was not to exceed  the market  value  on  December 31,  1946,  was  ultravires  the Constitution and void under Art. 31(2) of the  Constitution. It was observed at p. 564 :               "Turning  now  to the provisions  relating  to               compensation  under the impugned Act, it  will               be seen that the latter part of the proviso to               section 8 limits the amount of compensation so               as not to exceed the market ’value of the land (1)  [1954] S.C.R. 558.  943               on December 31, 1946, no matter when the  land



             is  acquired.  Considering that  the  impugned               Act is a permanent enactment and lands may  be               acquired  under  it many years after  it  came               into force, the fixing of the market value  on               December   31,   1946,  as  the   ceiling   on               compensation,  without reference to the  value               of the land at the time of the acquisition  is               arbitrary  and cannot be regarded as due  com-               pensation  in  letter  and  spirit  with   the               requirement of article 31(2)." That  principle  must  apply in adjudging  the  validity  of Madras  Act  XI of 1953.  It may be assumed that  April  28, 1947, was the date on which lignite deposits were discovered in the areas to which the Act is extended.  But there is  no true relation between the acquisition of the lands in  these cases  and fixation of compensation based on their value  on the  market rate prevailing on April 28, 1947.  Fixation  of compensation  for compulsory acquisition of  lands  notified many  years after that date, on the market value  prevailing on  the  date  on which lignite  was  discovered  is  wholly arbitrary  and  inconsistent with the letter and  spirit  of Art.  31(2)  as  it  stood before  it  was  amended  by  the Constitution, (Fourth Amendment) Act, 1955.  If the owner is by    a,   constitutional   guarantee   protected    against expropriation  of’  his property otherwise than for  a  just monetary  equivalent, a law which authorises acquisition  of land  not for its true. value, but for value frozen on  some date anterior to the acquisition, on the assumption that all appreciation in its value since that date is attributable to purposes  for which the State may use the land at some  time in  future, must be, regarded as infringing the  fundamental right. Counsel  for the State of Madras relying upon the  following observation   of  Patanjali  Sastri,  C.J.,  in  Mrs.   Bela Banerjee’s case(1) at p. 564: "The  fixing  of an anterior date for the  ascertainment  of Value may not, in certain circumstances, be (1)  [1954] S.C.R. 558. 944 .lm15 a  violation  of  the  constitutional  requirement  as,  for instance,  when the proposed scheme of  acquisition  becomes known  before  it  is launched and prices  rise  sharply  in anticipation of the benefits to be derived under it, but the fixing of an anterior date, which might have no relation  to the  value  of the land when it is acquired,  may  be,  many years later, cannot but be regarded as arbitrary", submitted that a law which merely fixes the market value  on a  date  anterior to the date on which the owner  is  expro- priated of his land, as determinative of the market value on which  the  compensation  is to  be  based,  cannot  without further  enquiry be regarded as infringing Art. 3 1  (2)  of the Constitution.  In  our view this observation  cannot  assist the State of   Madras in saving the provisions of Madras Act XI of 1953     from    the    vice   of    infringing    the constitutional   guarantee   under  Art.  31  (2)   of   the Constitution.  The right which is guaranteed is  undoubtedly the   right   to    just  indemnification   for   loss,   and appreciation in the market value of the land because of  the proposed  acquisition  may  in  assessing  compensation   be ignored.   Even  the  Land  Acquisition  Act  provides   for assessment of compensation ,on the basis of market value  of the  land not on the date on which interest of the owner  of land is extinguished under S. 16, but on the basis of market



value  prevailing  oil the date on  which  the  notification under  s.  4(1) is issued.  Whether this rule in  all  cases irrespective   of  subsequent  developments   ensures   just indemnification of the expropriated owner so as to be immune from  attack, does not call for comment in this  case.   But any  principle for determination of compensation denying  to the  owner all increments in value between a fixed date  and the  date of issue of the notification under s. 4(1 ),  must prima  facie,  be  regarded  as  denying  to  him  the  true equivalent of, the land which is expropriated and it is  for the  State  to  show that fixation of  compensation  on  the market  value  on  an anterior date does  not  amount  to  a violation  of  the constitutional guarantee.   No  materials have been placed by the State before this Court ,which would support any such case. 945 it is true that, the Province of Madras had issued a ’Press- Note"  in  1948 announcing that the Government  proposed  to undertake  legislation  reserving the power  to  compel  any person  who had purchased land in the lignite bearing  areas to  sell  such  land to them at the rate  at  which  it  was purchased.  The only intimation given thereby to the  owners of  lands was that the Government may undertake  legislation for  the purpose of purchasing lands at the price  at  which the  speculators in land may have purchased them.  There  is no  evidence  that any scheme for acquisition  of  land  for mining of lignite was prepared in 1947 by the Government  of Madras.   The  mining operations in 1947 must, in  the  very nature  of things, have been exploratory.  The statement  of objects  and  reasons  for the Act  clearly  discloses  that initially  mining operations were started by the  Government on  a  small  area.  Assuming  that  in  appropriate  cases, fixation  of  a  date anterior to  the  publication  of  the notification under s. 4(1) for ascertainment of market value of the land to be acquired, may not always be regarded as  a violation of the constitutional guarantee, in the absence of evidence  that compensation assessed on the basis of  market value  on  such anterior date, awards  to  the  expropriated owner  a just monetary value of his property at the date  on which  his interest is extinguished, the provisions  of  the Act  arbitrarily  fixing compensation based  on  the  market value at a date many years before the notification under  s. 4(1)  was  issued,  cannot be regarded as valid.   It  is  a matter  of  common knowledge that since the  termination  of hostilities  in the last World War there has been an  upward tendency  in land values resulting in appreciation  In  some areas  many times the original value of lands.   No  attempt has been made by the State to prove that appreciation in the market  value  of  lands in the area since  April  1947  was solely  attributable  to  a scheme of  land  acquisition  of lignite  bearing  lands.  To deny to the owner of  the  land compensation  at  rates which justly indemnify him  for  his loss  by awarding him compensation at rates  prevailing  ten years  before  the date on which the notification  under  s. 4(1)  was issued amounts in the circumstances to a  flagrant infringement  of the fundamental right of the owner  of  the land under Art. 31 (2) as it stood when the Act was enacted. 134-159 S.C.-60 946 The  validity  of  the provision  relating  to  fixation  of compensation  had  to  be  adjudged  in  the  light  of  the constitutional  protection guaranteed at the date  when  the Act  was brought into operation, and any restriction of  the constitutional  protection by subsequent amendment  of  Art. 31(2) which has not been given retrospective effect, must be



entirely ignored. The provision which denies to the owner of land compensation for  non-agricultural improvements made by him  since  April 28,  1947,  also  infringes the protection  of  Art.  31(2). Under s. 3(a) of the Land Acquisition Act "land" is  defined as  including  benefits  to arise out of  land,  and  things attached  to the earth or permanently fastened  to  anything attached  to  the  earth, and when tinder s.  4(1)  land  is notified for acquisition, the acquisition is of the entirety of  the  interest  of  the  owner  in  the  land   including underground rights if any, crops, trees and superstructures. By the Madras Act the owner is deprived of the value of  all non-agricultural  improvements including the value  of  non- agricultural buildings, erected on the land after April  28, 1947.   It is not clear whether the non-agricultural  build- ings  constructed after the specified date are forfeited  to the State on acquisition, or the owner is entitled to remove them.  In either case the owner is deprived of just value of his land including the superstructure, of which he is expro- priated.   Denial to the owner of the land of the  value  of the  structures  constructed by him (even of  those  put  up after April 28, 1947, with the knowledge that the Government may  undertake  legislation for the  purpose  of  compulsory acquisition of the land) would still be denying to him  just compensation  for  the loss suffered by him  on  account  of compulsory  acquisition of his holding, and would amount  to infringement of Art. 31(2) of the Constitution. We  are  therefore  of the view that  the  provisions  which require the Land Acquisition Officer and the Court to assess compensation  of the land compulsorily acquired only on  the market  value of the land on April 28, 1947,  together  with the   value  of  agricultural  improvements  on   the   land commenced, made or effected after that date, and before  the date of the publication of the notification under s. 4(1), 947 without taking into consideration the value of  non-agricul- tural improvements made after that date, must be regarded as invalid. We  are  not  called  upon to express  any  opinion  on  the question whether the power reserved under s. 17 of the  Land Acquisition Act as amended by s. 2 of Madras Act XI of  1953 to  take possession of lands under the emergency clause  for the  purpose of working lignite mines in the areas to  which the Madras Lignite (Acquisition of Land) Act, 1953,  extends is invalid.    No argument has been advanced by either  side before    us  on  this  question.  Nor was  the  High  Court called upon to consider the validity of that provision. The   appeals  therefore  fail  and  are   dismissed.    The respondents  in this group of appeals, except in appeal  No. 11 of 1963, have not appeared in this, Court.  Therefore  in appeal  No. 11 of 1963 alone, the State of Madras  will  pay the  costs of the respondent.  There will be no order as  to costs in other appeals. Appeals dismissed.