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PETITIONER: STATE OF PUNJAB & ORS.

       Vs.

RESPONDENT: RAJA RAM & ORS.

DATE OF JUDGMENT29/01/1981

BENCH: ISLAM, BAHARUL (J) BENCH: ISLAM, BAHARUL (J) KOSHAL, A.D.

CITATION:  1981 AIR 1694            1981 SCR  (2) 712  1981 SCC  (2)  66        1981 SCALE  (1)218

ACT:      Land Acquisition  Act, 1894,  section  3(e)  read  with section 4-Whether the Food Corporation, created by section 3 of the  Food Corporation  Act, 1964, is a company within the meaning of section 3(e) of the Land Acquisition Act.

HEADNOTE:      Dismissing the State appeal on certificate, the Court ^      HELD:  (1)   The  acquisition  of  land  for  the  Food Corporation of  India is  not in accordance with law for the reason that compliance with the provisions of Chapter VII of the Land Acquisition Act had not been made. [717 A-B]      (2) The  Food Corporation  of India is a Company within the meaning of the term appearing in clause (e) of section 3 of the Land Acquisition Act, 1894. Section 3 (e) mentions in unmistakable terms  that a company incorporated by an Indian law would  be a  "Company" for  the  purposes  of  the  Land Acquisition Act.  The Corporation  was admittedly created by section 3 of the Food Corporation Act, 1964. Sub-section (2) of section  3 of the Food Corporation Act, 1964 is an Indian Law and  clothes the  Corporation with  the attributes  of a company. [715A-E]      (3) A  Government department  has to be an organisation which is  not only completely controlled and financed by the Government but  has also  no identity  of its own. The money earned by  such a  department goes  to the  exchequer of the Government and  losses incurred by the department are losses of the Government. The Corporation, on the other hand, is an autonomous body  capable of acquiring, holding and disposing of property  and having  the power  to contract. It may also sue or  be sued  by its own name and the Government does not figure in  any litigation to which it is a party. It is true that its  original share  capital is provided by the Central Government and that 11 out of the 12 members of its Board of Directors are  appointed by  the Central Government but then these factors  may at  the most  lead to the conclusion that the Corporation  is an  agency  or  instrumentality  of  the Central Government. [715E-H]      Even the  conclusion, however,  that the Corporation is an agency  or instrumentality of the Central Government does

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not lead  to the further inference that the Corporation is a Government  department.   The  reason   is  that   the  Food Corporation Act  has given  the Corporation an individuality apart  from   that  of  the  Government.  In  any  case  the Corporation  cannot  be  divested  of  its  character  as  a "Company" within the meaning of the definition in clause (e) of section  3 of the Land Acquisition Act, for it completely fulfils the requirements of that clause. [716G-H, 717A-B]      Ramana Dayaram Shetty v. The International Authority of India and Ors., [1969] 3 SCR 1014, applied. 713

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 2063 of 1970.      From the  Judgment and  Order dated 26-2-1970 of Punjab and Haryana High Court in L.P.A. No. 283/69.      O. P. Sharma and M. S. Dhillon for the Appellant.      S. K.  Mehra, P.  N. Puri,  E. M. S. Anam and M. K. Dua for Respondents Nos. 1-3.      K. J. John for Respondent No. 4.      The Judgment of the Court was delivered by      BAHARUL ISLAM,  J.-This appeal  by the  State of Punjab and two  others, namely,  the Collector,  Rupar District and the  Sub-Divisional   Officer  (Civil-cum-Land   Acquisition Collector, Rupar,  is on a certificate granted by a Division Bench of  the High Court of Punjab and Haryana in respect of its  judgment   in  a  Letters  Patent  Appeal  holding  the acquisition of  the land in question to be bad in law on the grounds that  the Food  Corporation of  India for  which the Land in  question was  sought  to  be  acquired  was  not  a "Company" within  the meaning  of section  3(e) of  the Land Acquisition Act that the land had also not been acquired for a public  purpose and  that the State could acquire the land under that  Act only for a public purpose or for the purpose of a Company.      2. The  material facts  of the case may be stated thus: Nine  biswas  of  the  disputed  land  situated  within  the municipal area of Morinda in the District of Rupar was owned by respondent  No. 1,  Raja Ram, Respondents No. 2 and 3 are Raja Ram’s  sons. The  State of Punjab issued a notification dated December 17, 1968 under section 4 read with section 17 of the Land Acquisition Act of 1894 (hereinafter called "the L.A. Act").  The notification  related to 15 different plots of land  including  the  land  of  the  present  acquisition proceedings. The  material portion of the notification is as follows:      "Whereas it  appears to the President of India that the      land is  likely to  be needed  by Government, at public      expense,  for   a  public   purpose,  namely,  for  the      construction of  godowns for  storage of food-grains at      Morinda, it  is hereby  notified that  the land  in the      locality described  below is  likely to be required for      the above purpose..........................."      "Further in  exercise of  the powers  conferred by  the      said Act,  the President  of India is pleased to direct      that the action under Section 17 shall be taken in this      case on the 714      grounds of  urgency and  provisions of  Section  5  (A)      shall not apply in regard to this acquisition."      On the  same day  another notification under Sections 6 and 7 read with Section 17(2)(c) of the L.A. Act was issued.

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The material portion of this notification runs thus:      "Whereas the  President of  India is satisfied that the      land specified  below is  needed by  Government at  the      public expense  for a  public purpose,  namely, for the      construction of  godowns for  storage of food grains at      Morinda, it  is hereby declared that the land described      in  the   specification  below   is  required  for  the      aforesaid purpose.  This declaration  is made under the      provisions of  Section 6  of the  Land Acquisition Act,      1894................"      3. Against  the aforesaid  notification a writ petition was filed  by respondents  No. 1 to 3. The writ petition was heard by a single Judge of the High Court and was dismissed. The  learned  Single  Judge,  inter  alia,  found  that  the provisions of  Part VII  of the  L.A. Act  relating  to  the acquisition of land for Companies were not applicable to the present case  as the  Food Corporation of India (hereinafter called the  Corporation) was  a department of Government and not a Company within the meaning of Section 3(e) of the L.A. Act although,  undoubtedly, according  to the learned Judge, there was no manner of doubt about the fact that the land in dispute was  in fact  being acquired for the Corporation and that the  purpose for which the land had been acquired was a public purpose.      Against the aforesaid Order of the learned Single Judge a Letters  Patent Appeal, being L.P.A. No. 1283 of 1969, was filed by  respondents No.  1 to 3 before the Division Bench, that allowed  the appeal  and quashed  the land  acquisition proceedings as stated earlier.      4. With  respect we find it difficult to agree with the learned division bench when it held that the Corporation was not a  "Company" within  the meaning  of section 3(e) of the L.A. Act which runs thus:      "3. In this Act, unless there is something repugnant in the subject or context-           (e)  the  expression  "Company"  means  a  Company      registered under  the Indian  Companies  Act,  1882  or      under the  (English) Companies  Act, 1862  to  1890  or      incorporated by  an Act  of Parliament  of  the  United      Kingdom or  by an  Indian law  or by  Royal Charter  or      Letters Patent and includes a 715      society registered  under  the  societies  Registration      Act, 1860,  and a registered society within the meaning      of the  Co-operative Societies  Act, 1912  or any other      law relating  to co-operative  societies for  the  time      being in force in any State."      The section  mentions  in  unmistakable  terms  that  a company incorporated  by an  Indian law would be a ’Company’ for the  purposes of  the L.A.  Act. Now the corporation was admittedly created by section 3 of the Food Corporation Act, 1964 (hereinafter  called the F.C. Act). That section states :           "3. (1)  With effect from such date as the Central      Government  may,   by  notification   in  the  Official      Gazette, specify in this behalf, the Central Government      shall  establish   for  the  purposes  of  this  Act  a      Corporation known as the Food Corporation of India.           (2) The Corporation shall be a body corporate with      the name,  aforesaid, having perpetual succession and a      common seal  with power,  subject to  the provisions of      this Act,  to acquire, hold and dispose of property and      to contract, and may, by that name, sue and be sued."      Sub-section (2)  which we need hardly say, is an Indian law, clothes  the  Corporation  with  the  attributes  of  a

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company.  It   cannot,  therefore,  be  contended  with  any plausibility that  the Corporation is not a ’Company’ within the meaning  of the  definition of  that term  appearing  in clause (e) of section 3 of the L.A. Act.      5. Learned  counsel for  the appellant  then urged that the Corporation is a Government department. We are unable to accept this  submission also. A Government department has to be an  organisation which  is not only completely controlled and financed  by the  Government but has also no identity of its own.  The money  earned by such a department goes to the exchequer of  the Government  and  losses  incurred  by  the department are losses of the Government. The Corporation, on the other  hand, is an autonomous body capable of acquiring, holding and  disposing of  property and  having the power to contract. It may also sue or be sued by its own name and the Government does  not figure in any litigation to which it is a party.  It is  true that  its original  share  capital  is provided by  the Central  Government (section  5 of the F.C. Act) and  that 11  out of  the 12  members of  its Board  of Directors are appointed by that Government (section 7 of the F.C. Act) but then these factors may at the most lead to the conclusion (about  which we  express no  final opinion) that the Corporation  is an  agency  or  instrumentality  of  the Central Government. In this connection we may cite 716 with advantage  the following  observations of this Court in Ramana Dayaram  Shetty v.  The  International  Authority  of India and Ors.           "A Corporation  may be created in one of two ways.      It may be either established by statute or incorporated      under a  law such  as the  Companies Act,  1956 or  the      Societies Registration  Act, 1860.  Where a corporation      is wholly  controlled by  government not  only  in  its      policy making  but also  in carrying  out the functions      entrusted to  it by  the law  establishing it or by the      Charter of  its incorporation,  there can  be no  doubt      that it  would  be  an  instrumentality  or  agency  of      Government.  But  ordinarily  where  a  corporation  is      established by statute, it is autonomous in its working      subject only  to a provision, often times made, that it      shall be  bound by  any directions  that may  be issued      from time  to time  by Government  in respect of policy      matters. So  also a  Corporation incorporated under law      is managed  by a  Board of  Directors or  committee  of      management in  accordance with  the provisions  of  the      statute under  which it is incorporated. When does such      a corporation  become an  instrumentality or  agency of      Government ? Is the holding of the entire share capital      of the  Corporation  by  Government  enough  or  is  it      necessary that  in addition,  there should be a certain      amount of  direct control  exercised by Government and,      if so what should be the nature of such control? Should      the functions which the Corporation is charged to carry      out possess  any particular  characteristic or feature,      or is the nature of the functions immaterial ? Now, one      thing is  clear that if the entire share capital of the      Corporation is  held by  Government it  would be a long      way towards  indicating  that  the  Corporation  is  an      instrumentality or  agency of  Government. But,  as  is      quite often  the case  the Corporation  established  by      statute may have no share or shareholders in which case      it would  be a  relevant factor to consider whether the      administration is  in the hands of a Board of Directors      appointed by  Government though this consideration also      may  not  be  determinative,  because  even  where  the

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    directors are  appointed by  Government,  they  may  be      completely  free   from  governmental  control  in  the      discharge of their functions."      Even the  conclusion, however,  that the Corporation is an agency  or instrumentality of the Central Government does not lead  to the further inference that the Corporation is a Government department.  The reason  is that the F.C. Act has given the Corporation an individuality apart 717 from that  of the  Government. In  any case  the Corporation cannot be  divested of  its character  as a ’Company’ within the meaning  of the definition in clause (e) of section 3 of the L.A.  Act, for it completely fulfils the requirements of that clause, as held by us above.      6. The  Corporation being  a ’Company’, compliance with the provisions of Chapter VII of the L.A. Act had to be made in order to lawfully acquire any land for its purpose. It is not denied that such compliance is completely lacking in the present case.      7. As  a result  of the foregoing discussion it must be held that  the land  in dispute  has not  been  acquired  in accordance with law, although our reasons in that behalf are different from those forming the basis of impugned judgment. This appeal  is thus  found  to  be  without  merit  and  is dismissed but with no order as to costs. S.R.                                       Appeal dismissed. 718