REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NOS. 1780-1781 OF 2009

(Arising out of SLP© Nos.16336-16337 of 2007)

Urmila Roy & Ors. ……Appellants

Versus

M/s. Bengal Peerless Housing Development Company Ltd. & Ors. …… Respondents

J U D G M E N T

HARJIT SINGH BEDI, J.      

1. Leave granted.

2. This judgment will dispose of civil appeals arising out of

judgment dated 2nd July, 2007 rendered by a Division Bench

of the Calcutta High Court.  

3.     The facts are as under:  Appellant Urmila Roy and others

in W.P No.1002 (W) of 2002 were the writ petitioners before

the Single Bench of the Calcutta High Court. As per the facts,

6.78 acres of land had been purchased by them avowedly for

putting up an International School, a cultural centre, an I.T.

Park and a Housing Complex and for this purpose they had

been  in  negotiations  with  the  West  Bengal  Housing  Board

(hereinafter referred to as “The Housing Board”).  It appears,

however, that before the project could be finalized, the State

Government  issued  a  Notification  under  Section  4(1)  of  the

Land  Acquisition  Act,  1894  (hereinafter  referred  to  as  “the

Act”)  on 4th December,  2000 seeking to acquire in all  12.67

acres (including 6.78 acres belonging to the writ petitioners)

for  a  housing  scheme.   The  land  owner  appellants  were

allegedly given to understand by the Housing Board that in

the event that they did not object to the acquisition, they too

would be permitted to participate in the proposed project.  It is

the case of the land owners that on account of this assurance,

they  did  not  raise  any serious  objection  to  the  acquisition,

where after a declaration under Section 6 (1) of the Act dated

29th November, 2001 has issued and published in the Asian

Age on 4th December, 2001.  It is further the case of the land

owners that they realized later that they had been cheated as

the  land  had  been  acquired  for  the  development  and

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implementation  of  a  housing  scheme  by  the  Housing

Development Co. Ltd. (hereinafter referred to as “The Bengal

Peerless”).  The Collector subsequently i.e. on 22nd December,

2003 passed an Award determining the compensation payable

and it is the case of the land owners that they first came to

know of the award on receipt of a notice dated 16th February,

2004 whereby they were informed that as the ownership of the

acquired land could not be ascertained, the compensation had

been deposited with the Reference Court under Section 31(2)

of the Act.  The land owners thereupon filed Writ Petition No.

10051(W)  of  2004  challenging  the  acquisition  proceedings

pleading  inter-alia  that  the  said  proceedings  had lapsed  by

efflux of time under Section 11-A of the Act as the declaration

under Section 6 of the Act had been as published on   29th

November,  2001  and  the  Award  had  been  made  on  22nd

December,  2003.   It  was  also  pleaded  that  the  declaration

under Section 6(2) of the Act had not been published in the

manner provided.  It  was further pleaded that the land had

been acquired under the garb of a public  purpose whereas it

was intended to benefit the Bengal Peerless,  a private party

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and an attempt had been made to camouflage the identity of

the beneficiary as it had not been specified in the Notifications

issued  under  Sections  4  and  6  of  the  Act  and  had  been

brought out for the first time in the Notification under Section

9 and in this view of the matter, the land owners had been

deprived  of  their  rights  to  file  appropriate  objections.

Cumulatively, it was submitted that in view of the facts, the

acquisition  itself  was  a  colourable  exercise  of  power  at  the

instance of the State.  

4.   These matters were considered by a learned Single Judge

of the Culcutta High Court, who, by his Judgment dated 16th

September,  2003  concluded  that  the  Notifications  under

Sections 4 and 6 had been properly published as required by

law, that the land had been acquired for a public purpose, as

detailed in the Notification under Section 4 of the Act and that

the State Government was authorized to entrust the housing

project  to  a  Joint  Sector  Company  to  execute  the  housing

scheme  with  the  sanction  of  the  State  Government  under

Section  27A  of  the  West  Bengal  Housing  Board  Act,  1972

(hereinafter  referred  to  as  “the  1972  Act”).   The  Learned

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Judge,  however,  observed that the proposal  for the housing

scheme had been initiated by the Bengal Peerless without the

approval  of  the  State  Government  and  the  fact  that  the

entrustment to the Bengal Peerless was in public interest had

not  been  examined  by  the  State  Government,  and  as  the

scheme itself did not disclose the budget or detail adequately

the residential accommodation that was to be constructed for

the  low  and  middle  income  groups,  the  scheme  itself  was

faulty and finally concluded that it appeared from the record

that the  intention of  the  Government  was to enable  Bengal

Peerless to make huge profits and as such the acquisition was

not for a public purpose and was, therefore,  malafide.   The

learned Single Judge accordingly allowed the writ petition vide

judgment dated  18th May, 2004.      

5. The matter was thereafter taken before a Division Bench

in  FMA  No.  671  of  2004  (Bengal  Peerless  Housing

Development Co.Ltd. vs.Urmila Roy & Ors. ), FMA 672 of 2004

(State of West Begal & Ors. Vs.Urmila Roy & three Ors.) and

FMA 790 of 2006 (Smt. Krishna Majumdar & Ors. Vs. State of

West Bengal  & Ors.)  and was argued at length over several

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days.   The  Division  Bench  by  its  judgment  dated  2nd July

2007,  accepted  the  argument  of  the  Advocate  General

appearing for the State appellant based on several judgments

of this Court that a challenge to an acquisition should not be

permitted after the award had been rendered, and that in any

case,  the  challenge  even  if  permissible,  had  been  made

belatedly.  The Division Bench then went on to the facts of the

case and observed that the conclusion of the learned Single

Judge  that the whole process of acquisition was malafide, was

based  on  a  misconception,  more  particularly  as  several

documents which were relevant had been ignored, that in the

face  of  these  documents,  the  finding  of  the  learned  Single

Judge that the housing scheme had not been prepared with

the approval of the State Government was erroneous, and that

the  evidence  revealed  that  a  substantial  part  of  the

compensation  for  the  acquired  land  had  been  paid  by  the

Government  or  its  agencies.   The  Division  Bench  further

observed that from a perusal of the record that the acquisition

proceedings  themselves  were  transparent  in  nature  and

merely because the name of Bengal Peerless as the ultimate

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beneficiary had come up for the first time in the Notification

under Section 9 of the Act could not lead to the conclusion

that the acquisition proceedings were a colourable exercise of

power.  The  Court  then  examined  the  purpose  behind  the

enactment of the 1972 Act and opined that the Housing Board

had been established under governmental control with a view

to  alleviating  the  shortage  of  housing  and  in  particular

referred to Sections 17 to 21 to highlight that all its members

were appointed by the State Government and the Chairman

was, in fact, the Minister of In-charge of the Housing in the

State Government.  The Division Bench also held that Section

27A  which  had  been  inserted  in  the  parent  act  by  an

amendment  of  1993  was  for  the  specific  purpose  of

authorizing the Housing Board to entrust the execution of a

housing scheme to a joint sector company if it was felt that it

was  unable  to  perform  its  duties  on  account  of  financial

limitations.   The  Division  Bench  then  observed  that  a

Memorandum of Understanding had been signed on 2nd May

1994  providing  that  the  Housing  Board  and  the  Bengal

Peerless would have an equal share capital of 49.5% each and

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the  balance   1% would be held by the public  and that the

company would be run by a nine member independent Board

of Directors of whom five, including the Chairman, were to be

nominated by the  State Government with the result that the

State  Government  was,  in effect,  in  complete  control  of  the

management of Bengal Peerless.  It was finally concluded that

in  view  of  this  feature  and  the  fact  that  as  per  record  a

substantial  part  of  the  compensation had been  paid  out  of

public  funds  by  the  Housing  Board,  a  State  Government

undertaking, it was not open to the land owners to argue that

the  land  had  been  acquired  to  benefit  a  purely  private

company.  The Division Bench also relied upon the judgment

in State of Gujarat & Anr vs. Sankalchand Khodidas Patel

(D) (1977) 4 SCC 590 and Pratibha Nema & Ors. Vs. State

of  M.P.  &  Ors. (2003)  10 SCC 626 to  draw  a  distinction

between acquisition for a public purpose and acquisition for a

company and observed that as some part of the compensation

had  been  paid  by  the  Housing  Board,  the  fact  that  the

procedure  for  acquisition  for  a  public  purpose  had  been

adopted  was  justified  on  the  facts  of  the  case  and  relying

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further  on  Manubhai  Jehtalal  Patel  vs.  State  of  Gujarat

(1983) 4 SCC 553 further held that even a contribution of

Re.1/-  from  the  State  Revenues  could,  in  certain

circumstances, be held adequate to hold that the acquisition

was for a public purpose.  The Division Bench finally observed

thus:

“From  the  above  it  becomes  crystal clear that the contribution to be made by the State need not be substantial and even a token contribution  of  Rs.100  would  satisfy  the requirement  that  the  compensation  has  been paid out of public funds.”

6. The Division Bench thereafter examined the issue as to

whether  the  housing  scheme  had  been  prepared  in

accordance with the provisions of the 1972 Act and once again

differed from the findings of the learned Single Judge that the

provisions  had  been  ignored,  as  a  perusal  of  the  record

revealed  that  the  scheme  had  been  framed  by  the  State

Government pursuant to a meeting held on 17th May 2000 in

the  Office  of  the  Secretary  Housing  in  the  presence  of  the

Commissioner and the Land Acquisition Officer of the Housing

Board and the agenda circulated for the meeting established

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that it had been called to discuss the suitability of the scheme

which had been  designed  to  benefit  the  weaker  sections  of

society  and others  with  modest  means,  as  it  envisaged  the

construction of about 1800 dwelling units of three categories,

namely the low, the middle and the higher income groups and

that at least 50% of the aforesaid units were to be reserved for

the  first  two groups  with  the  price  for  the  former  category

being  substantially  subsidized  and  the  flats  for  the  middle

income group to be provided on “no profit no loss basis” and,

significantly, it was specified that the price once determined

by the Housing Board before  the start  of  the project  would

remain firm and that no escalation on any account was to be

made  for  any  of  the  dwelling  units  of  any  category.   The

aforesaid information led the Division Bench to conclude that

the  non-escalation  Clause  in  particular,  indicated  that  the

scheme was not motivated by profiteering alone  but was in

fact for the benefit of poorer sections, and that if any further

evidence  was  required  to  prove  the  bonafides  of  Bengal

Peerless, the scheme also provided that distribution of plots

was subject to the reservation of plots as per the policy of the

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Housing Board and allotments were to be made by a lottery

system and that scheme was to be completed within 5 years

from the date of the commencement of the work.  Finally, the

Division Bench observed as under:

“In our opinion, these observations of the  Supreme  Court  are  fully  applicable  to the facts and circumstances of the present case.   The  facts  narrated  above  make  it abundantly clear that Housing Scheme has been  prepared  by  the  Government,  after due consideration and it could not be said to have been initiated at the instance of the Bengal  Peerless.  Therefore,  the  learned Single Judge has erroneously held that the acquisition proceedings were null and void.”

7. The Division Bench also repelled the argument raised on

behalf of the land owners that as they too were in the process

of setting up a global village in the land the acquisition was

untenable  by  observing  that  the  letter  dated  8th May  2001

written by Urmila Roy respondent on which primary reliance

had  been  made  by  the  land  owners   with  respect  to  the

aforesaid plea was not acceptable at this belated stage as the

land owners had not raised any objection to the acquisition of

the land by the State Government, and further that no such

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plea had not been raised in the writ petition.   The Court then

observed that Writ Petition No.10002 (W) of 2002 filed by some

other land owners seeking to challenge the same acquisition

had  been  dismissed  by  Justice  Chattopadhyay  on  16th

September 2003 and the issues raised in the present appeal

had  also  been  raised  before  the  said  Judge  and  had  been

repelled and it had been specifically observed that the land

had, indeed, been acquired for a public purpose and not for a

private company, as alleged.  The Division Bench, accordingly,

allowed the appeal leading to the present matters before this

Court.

8. The learned counsel for the appellants has raised several

issues  before  us.  It  has  been  submitted  that  the  Bengal

Peerless was not a Corporation within the meaning of Section

3 (cc) of the Act, inasmuch as 51% of the share capital in the

said company was not held by the State Government or any

Central Government or State Government Undertaking as only

49.5% of the shareholding was held by the Housing Board. It

has  been  submitted  that  Bengal  Peerless  was  also  not  a

company within the meaning of section 617 of the Companies

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Act, 1956 and was therefore a company within the meaning of

Section 3(e) of the Land Acquisition Act, and as such Part VII

of the Act was applicable and not Part II thereof.  It has also

been submitted  that the  housing scheme Annexure  P3 was

not a housing scheme, as envisaged under the 1972 Act but

was merely a proposal that too an incomplete one.  Reliance

for this submission has been placed on Sections 17,18,19,23

27  and  27(A)  of  the  1972  Act.  As  a  corollary,  it  has  been

argued  that  the  finding  that  Bengal  Peerless  had  been

entrusted  with  the  execution  of  the  housing  scheme  was

incorrect,  as  no  terms  and  conditions  of  such  entrustment

had been agreed upon as was a pre-requisite for the execution

of a housing project by a Joint Sector Company under section

27-A of the 1972 Act. It has also been urged that the entire

amount  of  the  acquisition  money  deposited  prior  to  the

publication  of  the  declaration  under  Section  6  of  the  Land

Acquisition Act had been paid by Bengal Peerless and no part

thereof had been paid by the Government of West Bengal or

the  Housing  Board,  and  further  the  finding  of  the  Single

Bench as also of the Division Bench of the High Court to the

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effect that the acquisition proceedings had been set in motion

after the scheme had been duly prepared was incorrect. It has

accordingly been argued that the observation of the Division

Bench in the  State of Tamil Nadu vs.L.Krishnan  (1996) 1

SCC 250 were not applicable to the facts of the case and that

in  any  event  the  Tamil  Nadu  Act  which  was  under

consideration  in  that  matter  did  not  contain  a  provision

analogous to Section 27A of the 1972 Act and as a necessary

consequence,  even  assuming  for  a  moment  that  a  housing

scheme was in fact in existence when the Notification under

Section 4 of  the Land Acquisition Act has been issued,  the

said scheme had not been formalized in terms of Section 27-A

of the 1972 Act.  It  has been submitted that from the facts

writ  large  that  the  purpose  of  the  acquisition  and  the

entrustment to the Bengal Peerless of the development of the

project was with the intention of giving huge financial benefits

to the Bengal Peerless which was not a public purpose and

was in any case unacceptable  in terms of the purpose of a

housing scheme envisaged under the 1972 Act.

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9. The arguments of the learned counsel for the appellants

have  been  controverted  by  the  respondent  State  of  West

Bengal. It has been pointed out that the housing scheme had

been designed in terms of the 1972 Act and all the relevant

provisions had been complied with and that in any case by

virtue of sub-section (2) of Section 17 thereof it was open to

the State Government to entrust the framing and execution of

a Housing  scheme to the Housing Board on such terms and

conditions  as  it  think  fit,  and  that  the  scope  of  a  similar

provision, Section 35 of the Tamil Nadu State Housing Board

Act 1961 had been examined by this Court in  L.Krishnan’s

case (supra).   It has also been argued that acquisition of the

land for the purpose of the execution of the housing scheme

was a public purpose with little or no element of profiteering

as the bare reading of the scheme would show, and that, in

any case, the middle and lower income groups were to have

subsidized housing on “no profit no loss” basis and to ensure

that the conditions of the scheme were scrupulously observed

the State Government had retained complete control over the

activities of Bengal Peerless.  It has also been submitted that

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as the appellants land owners had not filed objections under

Section 5-A of the Land Acquisition Act, they were precluded

from challenging the acquisition, more particularly  after  the

award had been rendered.

10. We have heard the learned counsel for the parties and

gone through the record very carefully.   We find  that three

basic issues arise for consideration in this matter.  They are, i)

as to whether Part II or Part VII of the Act is applicable to the

present  acquisition  proceedings,  ii)  whether  the  Housing

Scheme was one that satisfied the requirement of Section 27A

of  the  1972  Act  and,  iii)  whether  the  acquisition  and  the

Scheme  were  a  colourable  exercise  of  power  so  as  to  give

undue benefit to Bengal Peerless.  We now take up the three

issues cumulatively.

11. It  has  been  submitted  at  the  very  outset  that  Bengal

Peerless was not a Government Company, as understood by

Section 3(cc) of the Act as the Government did not hold 51% of

the  paid-up  share  of  the  capital.  We  find,  however,  that

Section  3(cc)  is  to  be  read  along  with  Section  6  more

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particularly Explanation 2 appended therewith.  The aforesaid

provisions are reproduced hereunder:

“3(cc).the  expression  “corporation owned  or  controlled  by  the  State”  means anybody  corporation  established  by  or under  a  Central,  Provincial  or  State  Act, and  includes  a  Government  company  as defined  in  Section  617  of  the CompaniesAct,1956  (1  of  1956),  a  society registered  under  the  Societies  Registration Act,1860  (21  of  1860),  or  under  any corresponding  law  for  the  time  being  in force in a State, being a society established or administered by Government and a co- operative society within the meaning of any law relating to co-operative societies for the time being in force in any State, being a co- operative  society  in  which  not  less  than fifty-one  per  centum of  the  paid-up  share capital is held by the Central Government, or  by  any  State  Government  or Governments,  or  partly  by  the  Central Government  and  partly  by  one  or  more State Governments.”

Section  6  -  Declaration  that  land  is required for a public purpose.- (1)  Subject to  the  provisions  of  Part  VII  of  this  Act, when  the  Appropriate  Government  is satisfied after considering the report, if any, made  under  section  5  A,  sub-section  (2), that  any  particular  land  is  needed  for  a public  purpose,  or  for  a  company,  a declaration  shall  be  made  to  that  effect under the signature of a Secretary to such Government  or  of  some  officer  duly authorized to certify its orders and different

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declarations may be made from time to time in respect  of  different  parcels  of  any land covered  by  the  same  notification  under section  4,  sub-section  (1),  irrespective  of whether one report or different reports has or  have  been  made  (wherever  required) under section 5-A, sub-section (2):   

[Provided  that  no  declaration  in respect of any particular land covered by a notification  under  section  4,  sub-section (1),-

(i) published  after  the  commencement  of  the Land  Acquisition  (Amendment  and Validation) Ordinance, 1967 but before the commencement  of  the  Land  Acquisition (Amendment) Act,1984 shall be made after the expiry  of  three  years from the date  of the publication of the notification; or

(ii) published  after  the  commencement  of  the Land  Acquisition  (Amendment)  Act,  1984 shall be made after the expiry of one year from  the  date  of  the  publication  of  the notification :   

Provided  further  that  no  such  declaration shall be made unless the compensation to be awarded for such property is to be paid by  a  company,  or  wholly  or  partly  out  of public revenues or some fund controlled or managed by a local authority.  

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[Explanation 1. – In computing any of the periods referred to in the first proviso, the  period  during  which  any  action  or proceeding to be taken in pursuance of the notification  issued  under  Section  4,  sub- section (1),is stayed by an order of a Court shall be excluded.  

Explanation  2.-  Where  the compensation  to  be  awarded  for  such property 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  out  of  public revenues].

(2)  Every  declaration  shall  be published  in  the  Official  Gazette,  [and  in two  daily  newspapers  circulating  in  the locality in which the land is situate of which at  least  one  shall  be  in  the  regional language,  and  the  Collector  shall  cause public  notice  of  the  substance  of  such declaration to be given at convenient places in the said locality (the last  of the date of such  publication  and  the  giving  of  such public  notice,  being hereinafter referred to as  the  date  of  publication  of  the declaration),  and  such  declaration  shall state],  the  district  or  other  territorial division  in  which  the  land  is  situate,  the purpose  for  which  it  is  needed,  its approximate area,  and where  a  plan shall have  been  made  of  the  land,  the  place where such plan may be inspected.  

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(3)  The  said  declaration  shall  be conclusive evidence that the land is needed for a public purpose or for a company, as the case may be;  and, after making such declaration  the  Appropriate  Government may  acquire  the  land  in  a  manner hereinafter appearing.   

12. A perusal of the Second proviso and Explanation 2

in particular reveals that if the compensation awarded for the

property  is  paid  substantially  out  of  the  funds  of  a

Corporation  owned  or  controlled  by  the  State,  such

compensation will be deemed to be paid out of public funds

and as such would satisfy the test of acquisition for a public

purpose.  

13. We see from the record that as per letter issued by

the Land Acquisition Collector on 13th November 2001 to the

Housing Ministry of the State Government, a request had been

made that a sum of Rs.3.00 Crores which represented about

50% of the compensation of the acquired land be deposited.

This memo had been forwarded by the State Government to

the  Housing  Board  and  on  23rd November  2001  a  sum  of

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Rs.1.70  crores  towards  compensation  had  been  sent  by

Bengal Peerless to the Land Acquisition Collector through the

Housing Board. It appears that on 30th October 2003 the State

Government  had  requested  the  Housing  Board  to  make

arrangements  for  the  balance  payment  of  compensation  of

about  Rs.82,04,138 and by a memorandum of  31st October

2003  the  Government  of  West  Bengal  had  directed  the

Housing  Board  to  pay  the  additional  balance  compensation

which too was defrayed by an account payee  cheque dated

03rd November 2003 drawn on the Bank of Maharashtra.  The

account statement of the Bank of Maharashtra was produced

before  us  for  perusal  and  this  statement  supports  the

argument that the aforesaid amount had, indeed, been paid

from  the  funds  of  the  Housing  Board  which  is  completely

owned  and  controlled  by  the  State  Government.    In  their

written submissions the appellants have doubted the accuracy

of this statement, by asserting that they had not been able to

verify its contents as it had been produced for the first time in

this Court.  We find that even if this objection is accepted and

the statement ruled out of consideration, the other evidence

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on  record  does  indicate  that  a  substantial  part  of  the

compensation  had  been  paid  from  Government  funds.   In

Pratibha Nema case (supra), that is what this Court had to

say:

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 5-A(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, or wholly or partly out of public revenues or some fund controlled or managed by a local authority”.

22

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 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 a 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 Somawanti 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

23

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 Somawanti, the same approach was adopted in  Jage  Ram v.  State  of  Haryana.  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  come  up  for consideration in  Manubhai Jehtalal Patel v. State  of  Gujarat.  D.A.  Desai,  J.  after referring  to  Somawanti,  speaking  for  the three-Judge Bench observed thus: (SCC p.  

555, para 4) “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 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.”

14. In Inderjeet Parekh Vs State of Gujarat   in which a

somewhat restricted meaning has been given to the extremely

broad parameters laid down in Pratibha Nema’s case (Supra),

but  it  has  nonetheless  been  observed  that  if  a  reasonable

24

amount  of  compensation  had  been  drawn  out  Government

funds, it would satisfy the requirement of a public purpose as

per the Act.  In the present case, as already mentioned above,

we  find  that  a  substantial  part  of  the  compensation  has,

indeed, been paid by the State Government or by the Housing

Board which clearly satisfies the test of public purpose.   In

this background, we endorse the finding of the Division Bench

that the procedure envisaged in Part II and not in Part VII of

the Act would be applicable.  This is precisely what has been

done.   

15. The  learned  Counsel  for  the  Appellants  has  also

contended that as the housing scheme had not been prepared

in terms of the 1972 Act it had no valid sanction.  It has been

highlighted that the entire scheme had been designed to help

Bengal Peerless to make undue profits and the very purpose of

1972 Act had, thus, been frustrated.   

16.  The  learned  counsel  for  the  respondent  has  on  the

contrary referred us to Sections 17, 18 and 27A of the 1972

Act to submit that the said Act specifically  provided for the

transfer of the acquired land to a Joint Sector Company for

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the purpose of the execution of the Housing Scheme with the

previous  approval  of  the  State  Government  and  that  the

scheme had indeed been framed under Sections 17 and 18

and thereafter entrusted for execution to the Bengal Peerless.

It has been submitted that though Bengal Peerless had been

entrusted with the execution of the scheme the overall control

remained  with  the  Housing  Board  which  was,  in  fact,  an

extension  of  the  State  Government  itself  and  the  State

Government a fortiori retained overall control in the execution

of the scheme.  We find merit in this submission.  The record

indicates  that  as  a  consequence  of  a  Memorandum  of

Understanding  dated  13th  September  1993  a  Joint  Sector

Company for the execution of the housing scheme had been

created on 20th May 1994 and it was provided that 49.5% of

the shares capital would be held by each of the two i.e. the

Housing Board and Bengal Peerless and the balance 1% would

be  held  by  the  public  and  the  company  would  be  run

independently by nine Directors,  of whom five including the

Chairman were to be nominated by the State Government.  It

is also relevant that the scheme had, in fact, been prepared by

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the  State  Government  after  due  deliberation  and  had  been

initiated as per the provisions of the 1972 Act by virtue of a

meeting held on 17th May 2000 in the Office of the Secretary,

Housing  Department,  the  Commissioner  of  the  Housing

Board, the Land Acquisition Collector and several other senior

officials and the proposal had been mooted for the acquisition

of the land for the purpose of a scheme for weaker sections of

society  and  others  with  modest  incomes.  The  scheme  also

provided for the construction of 1800 dwelling units of various

categories with at least 50% to be earmarked for the lower and

middle income groups with the price subsidized for the former

and all flats for the middle income group to be provided on “no

profit no loss” basis, and for facilities for schools, roads etc.

for the benefit of those who were ultimately to reside in the

dwelling units.  Significantly also, the scheme provided that

there  would  be  no  escalation  on  account  of  any  reason

whatsoever for the price  charged for the dwelling units and

that the allotment of the dwelling units would be on the basis

of a lottery.  Section 18 of the 1972 Act which deals with the

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matters to be provided for by housing schemes is reproduced

below:

“Sec.18.  Matters to be provided for by  housing  schemes. –  Notwithstanding anything contained in any other law for the time being in force, a housing scheme may provide  for  all  or  any  of  the  following matters, namely :-

(a)  the  acquisition  by  purchase, exchange  or  otherwise  of  any  property necessary for the scheme;

(b)  the  construction  and reconstruction of buildings;

(c) the sale, letting out or exchange of any property included in the scheme;

(d)  roads,  drainage,  water-supply, lighting, schools,hospitals,dispensaries,marketplace s,parks,playgrounds  and  open  spaces within a housing scheme;

(e)  the  reclamation  or  reservation  of lands  for  markets,  gardens,schools, dispensaries, hospitals and other amenities in a housing scheme;

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(f)  the  letting  out,management  and use, of the Board premises;

(g)  accommodation  for  any  class  of inhabitants;

(h)  the  advancing  of  money  for  the purpose of the scheme;

(i)  the  collection  of  such  information and  statistics  as  may  be  necessary  for successful implementation of the scheme;

(ia) development of any urban or rural area  for  successful  implementation  of housing schemes and for purposes ancillary or incidental thereto;

(j)  any other matter for which, in the opinion  of  the  Board  or  the  State Government,  it  is  expedient  to  make provision with a view to providing housing accommodation  and  to  improving  or developing  of  any  area  included  in  a housing scheme.”

17.  We find that the scheme as laid fully satisfies the tests

laid down in this provision.  Sections 17, 27A and 28 of the

1972 Act read as under:

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“  17. Powers and duties of Board to undertake housing schemes.-

(i) Subject to the provisions of this Act the Board  may,  from  time  to  time,  incur expenditure  and  undertake  works  for  the framing  and  execution  of  such  housing schemes as it may consider necessary and such housing schemes may include housing schemes in relation to lands and buildings vested in or in the possession of the State Government.  

(2)  The  State  Government  may,  on  such terms and conditions as it may think fit to impose,  entrust  to  the  Board  the  framing and  execution  of  any  housing  scheme [,whether provided  for  by this Act  or not,] and  the  Board  shall  thereupon  undertake the framing and execution of such scheme.

(3)  The  Board  may,  on  such  terms  and conditions as may be agreed upon and with the  previous  approval  of  the  State Government,  take  over  for  execution  any housing  scheme,  on  behalf  of  a  local authority  or  co-operative  society,  or  on behalf of an employer,  for building houses mainly for the residence of the employees of such local authority, co-operative society or employer,  as  the  case  may  be  [or  for  the residence  of  the  members  of  such  co- operative society].   

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27A. Power to entrust existing, or new, joint  sector  company  with  housing scheme.- Notwithstanding  anything contained in this Act, the Board may, if it considers it necessary so to do in the public interest and is satisfied that an existing, or new,  joint  sector  company  is  willing  to comply,  or has complied, with such terms and  conditions  as  the  State  Government may  think  fit  to  impose,entrust,  with  the previous  approval  of  the  State Government,any  existing,  or  new,  joint sector  company with any housing  scheme for execution, and different existing, or new, joint sector companies may be so entrusted with  different  housing  schemes  for execution.

28. Power to acquire.-  (1)  Where any land is  needed  for  the  purpose  of  a  housing scheme or for performing any other duties or  functions  of  the  Board,  the  Board  may enter into an agreement with any person for the  acquisition  by  purchase,  lease  or exchange,  of  his  rights  and  interests  in such  land  either  wholly  or  in  part,  on payment of an amount proportionate to the loss or deprivation caused to the enjoyment of the land.

(2)  The Board may also take steps for the compulsory acquisition of any land or any interest therein required for the execution of a  housing  scheme  or  for  performing  any other duties or functions of the Board and such acquisition of any land or any interest therein  shall  be  deemed  to  be  acquisition for a public purpose within the meaning of the Land Acquisition Act.   ”   

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18.  We observe that Section 27-A specifically authorizes the

Housing Board in public interest to entrust a housing scheme

to a Joint Sector Company with the previous approval of the

State Government.   We find that there is no warrant for the

proposition that unless a budgetary provision is made by the

Housing  Board  or  that  a  final  scheme  is  prepared  in

accordance with Section 23 of the 1972 Act, no land can be

acquired for the purpose of execution of a housing scheme. It

is significant that Section 17 of the 1972 Act itself gives the

power  to  the  Housing  Board  to  make  a  scheme  and  that

Section 27A further authorizes the Board in public interest to

entrust  a  housing  scheme  to  a  Joint  Sector  Company  for

execution and for that purpose Section 28(2) of the Act further

authorizes  the  Housing Board to take  steps  for  compulsory

acquisition of any land required for the purpose of a housing

scheme.    While dealing with Section 35 of the Tamil  Nadu

Housing Board Act, 1961 which is akin to Section 17 of the

1972 Act, this is what this Court had to say in L. Krishanan

Case (supra):

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“……The Housing Board  is under an obligation  to  carry  out  certain  other schemes  also  as  are  provided  in  these sections.  Sub-section  (2)  of  Section  35 states  that  the  Government  may  on  such terms and conditions as they may think fit to  impose,  transfer  to  the  Board  the execution  of  any  housing  or  improvement scheme  not  provided  for  by  the  Act.  On such transfer, the Board is under obligation to undertake the execution of such scheme as if such scheme has been provided for by the Housing Board Act.”

Para  15.   These  provisions  make  it abundantly  clear  that  the  duty  of  the Housing Board is not merely the execution of  the  housing  or  improvement  scheme prepared and published by it under the Act but extends to executing other schemes as well, as are made over to it or agreed to be undertaken by it. Now, when Section 35(2) speaks  of  transfer  to  the  Board  the execution  of  any  housing  or  improvement scheme  not  provided  for  by  this  Act,  it certainly  cannot mean a scheme prepared in  accordance  with  the  provisions  of  the Housing  Board  Act.  Moreover,  while transferring the scheme to the Housing or improvement  scheme  prepared  in accordance  with  the  Housing  Board  Act. Here again, the taking over the scheme by the Housing Board is subject to such terms and conditions as may be agreed upon by both. Section 36 indeed discloses that what is entrusted to the Housing Board is the job of  clearance  or  improvement  of  any  slum

33

area.  The Government while directing the Board  to  undertake  the  clearance  or improvement of a particular area can also direct the Board to frame and execute “such housing or improvement scheme under this Act as the Government may specify” and the Board is obliged to execute such scheme as if such scheme is prepared by the Act.”

Para  16.  In  such  circumstances,  it would not be right to contend that unless a final  and  effective  scheme  prepared  in accordance  with the provisions of  Chapter VII of the Housing Board Act is in existence, the Government cannot issue a notification under section 4 of the Land Acquisition Act for acquiring the land required for execution of the schemes by the Housing Board.  To repeat,  the  Housing  Board  is  obliged  to execute  not  only  the  housing  or improvement  schemes  prepared under  the said Chapter but also certain other schemes referred  to  in  Sections  35  and  36.  For example  the  Government  may  conceive  a particular  scheme  and  ask  the  Housing Board  to  execute  on  such  terms  and conditions as the Government may specify. In such a situation, there is no question of preparing  a  housing  or  improvement scheme  by  the  Housing  Board  in accordance with the provisions of Housing Board  over  again.   So  far  as  the  scheme framed  by  the  Government  is  concerned, there is no enactment governing it. It can, therefore,  be  a  scheme  as  ordinarily understood.   Similar  would  be  the  case where  the  scheme  undertaken  by  a  local

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authority is made over the Housing Board by mutual agreement.”

19. In  West  Bengal  Housing  Board  & Ors.  vs.  Brijendra

Prasad  Gupta  &  Ors. (1997)  6  SCC  207  while  taking  an

overall  view  of  the  entire  matter  and  also  dealing  with  the

submission  that  some  profit  motive  could  be  involved  in

favour  of  a  Joint  Sector  Company  executing  a  housing

scheme, this is what this Court had to say:

“Para 19. In this background it is difficult for us to accept the submissions of the Writ Petitioners that the purpose for  which the requisition had been made was not a public purpose  within the meaning  of  the Act  or that the circumstances of the cases did not justify  the  invocation  of  the  provisions  of the Act or that the exercise of powers under that Act was colourable exercise of power.

Para  25.  It  is  a  matter  of  common knowledge  that  there  is  acute  shortage  of housing accommodation both in rural and urban areas of the country.  Since late the prices of the real estate have sky-rocketed making it  beyond the reach of low income and middle income people.  The State has duty to perform to give shelter to homeless people  specially  to  people  in  the  income group.  In  the  present  case  the  State  was unable  to meet  this gigantic  task.   In  the background of shortage of resources which the  State  has  the  legislative  enacted  the

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Housing  Board  Act  and  constituted  the Housing  Board  to  meet  this  challenge  of providing houses to the people falling in the low income group and to others.  Again the Housing  Board  was  unable  to  meet  the challenge.   The  Housing  Board  Act  was amended  to  bring  in  the  concept  of  joint venture in order to tap the resources of the private sector.  Thus a joint venture came into  being  as  disclosed  in  the supplementary  affidavit  of  the  State  as  to how the process of starting of joint venture had been gone into and how the Board of Directors  of  the  joint  sector  company  has been  constituted  and  how  the  State  and Housing  Board  exercise  control  over  this joint sector enterprise.

26. Simply because there is an element of profit, it could not make the whole scheme illegal. A private entrepreneur will certainly look to some profit but to see that the profit motive does not lead to exploitation even of the rich and that the houses are available to the poor people and to middle class people at nominal or affordable prices, or even on no-profit-no-loss basis,  the Housing Board exercises  the  necessary  control.  It  is certainly  a  public  purpose  to  provide houses to the community especially to poor people for whom the prices are beyond their means and they would otherwise never be able to acquire a house.

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27. What has been done in the present case is that the profit earned on sale of flats of  HIG have been pumped in to subsidize the prices of the houses falling in LIG and in this there would certainly be an element of profit both for the Housing Board as well as the private company in the joint venture for selling flats of HIG. We fail to see how public  purpose  is  not  being  served  in  the present case.

28.  The  Court  must  shake  off  its  myth that  public  purpose  is  served  only  if  the State  or  the  Housing  Board  or  the  joint sector  company  does  not  earn  any  profit. There cannot be any better authority than the  State  or  the  statutory  corporation  to supervise  or  monitor  the  functions  of  the joint venture company. Courts will certainly step in if the public purpose is sought to be frustrated.

29.  In  the  present  case  Directors appointed  by the Housing  Board/State  on the Board of Directors of the joint venture company  would  certainly  see  that  no runaway profit is earned and that sale price of  HIG houses  is guided by market  forces but there is no exploitation. Every section of the  society  needs  protection  from exploitation. It is however not possible nor desirable  to  lay  down  any  principle  as  to how this is to be done.

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33. We find in the present backdrop the inability  of  the  State  Government  and the Housing  Board  to  meet  the  challenge  to achieve  the  target  of  even  constructing 50,000dwelling  units  in  urban  areas  to tackle  the  acute  problem of  homelessness for different categories of people particularly those falling in Lower Income Group (LIG) and Middle Income Group (MIG); the State Legislature  amending  the  Housing  Board Act  and  providing  for  incorporation  of  a joint  sector  company  for  executing  the housing  scheme  on  the  terms  and conditions  to  be  approved  by  the Government;  selection  of  the  private entrepreneur  for  incorporation of  the  joint sector  company  with  the  Housing  Board; the constitution of the Board of Directors of the joint sector company; the control of the Housing Board and the State  Government over the joint sector company to execute the scheme  of  the  housing  project;  control  on the  fixation  of  prices  of  the  flats  to  be constructed  by  the  joint  sector  company; relevant factors taken into consideration for execution  of  the  housing  project  and  all these to tackle the urgent and growing need of  providing  shelter  to  the  LIG  and  MIG people  when  it  is  not  possible  for  those people to acquire a house of their own with escalating  real  estate  prices;  it  cannot  be said  that  the  public  purpose  is  not  being served  or  the  incorporation  of  the  joint sector  company,viz.  Bengal  Peerless Housing  Development  Co.Ltd.  and  the execution of the housing project “Anupama” by this joint  sector company,  in the given circumstances,  on  the  land  in  question which is part of the bigger piece of land is

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not  in public  interest.  The  Housing Board acts  as  regulatory  body  and  the  State Government  oversees  the  housing  project and  has  also  imposed  certain  terms  and conditions.   No  ulterior  purpose  has been alleged and it cannot be said that the power exercised by the State authorities are in any way arbitrary or irrational  or  there  is  any abuse  of  power.  Rather  the  legal compulsion  of  the  State  and  the  Housing Board to get the housing project  executed through  a  joint  sector  company  is  quite understandable. We also find the impugned action is within the purview of law and is valid.”

20. In  view  of  what  has  been  observed  above,  and  in  the

background of the present case, it becomes crystal clear that

though  the  execution  of  the  housing  scheme  has  been

entrusted to a Joint Sector Company, the overall control over

the project  has been retained by the Government controlled

Board  of  Directors,  full   details  of  the  scheme  have  been

provided  with  large  provisions  for  the  benefit  of  the  poorer

sections of society, with the allotment of tenements either on a

subsidized price or  on “no profit no loss” basis for the low and

middle income groups respectively, allotment by draw of lots

to avoid any arbitrariness and a complete freeze on the price

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of  residential  accommodation with no escalation whatsoever

for whatever reason and the provision of facilities for effective

and comfortable living such as schools, roads, sewage etc.  We

are,  therefore,  of  the opinion that the housing scheme fully

satisfies the tests laid down by the Supreme Court in the two

cases cited immediately above.  

21. There is yet another aspect which needs to be dealt with.

It appears from the record, and it was so pointed out during

the course of arguments, that the appellants had not filed any

objection to the acquisition on the plea that some assurance

had  been  held  out  that  they  too  would  be  allowed  to

participate in the housing scheme.  This fact has been denied

by the respondents and it has been emphasized that as per

letter  dated  8th March  2001  the  land-owners  had,  in  fact,

waived their right to challenge the acquisition.  This letter is

reproduced hereunder in extenso:

“To Date:8th March 2001

The Special Land Acquisition Officer,

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South 24 – Parganas, 5th Floor, New Treasury Buildings,

Alipore,Kolkata – 700027.

Sir,

Re: Barakhola Mouza J.L.No.21 P.S.Kasba

This  has  reference  to  your acquisition  notice  dated  12.1.2001  for 12.67 acres land in Plot No.125 & 126 of the subject mouza.

In  this  connection,  I  would  like  to submit  that I  am the Power of Attorney (Registered)  holder  of  the  successors  of late Abhay Pada Pain who was the owner of the aforesaid plots as evident from the ROR. A copy of the P/A is  enclosed for your  kind  perusal.  Incidentally  Plot No.126 was duly demarcated showing the vested portions and the retained portions by the District Authorities as per copy of the Map enclosed along with a copy of the Minutes of the meetings held in Chamber of  the  then  ADM  &  L.R.O.South  24  – Parganas on 20.3.1996.

Subsequently  13.56  acres  of  land was  sold  to  the  following  parties  and registered under section 41 on 25.6.1999 of which deed copies are enclosed.  Since the tax has not been assessed, as yet for value to ascertain additional stamp duty,

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the  same  have  not  been  paid  so  far. However, enquiries are under way, but in the meantime Khazna has been paid up – to  –  date  as  per  copies  of  receipts dt.18.1.2001 enclosed herewith.

The transfers are:- a) Sri Debabrata Choudhary : b) Sri Shreekanta Ray : 6.00 acres c) M/s. Anarean Estate Co.Ltd. : d) Sri Swadesh Ghosh : e) Sri Swapan Dey : f) Smt.Ila Dey : 6.58 acres g) Sri Saptashi Dey        : h) Smt.Basanti Ghosh :

The aforesaid  transferees  did  not raise any objection to govt. acquiring. The land for housing, in face, I had moved an idea to West Bengal Housing Board and willing  to  negotiate  along  with  the transferees’ price for your acquisition.

Please  do  let  me  known  for  any further  information  and  clarification  / assistance, a may be required.

   Thanking you, I am Yours faithfully

     Sd/-Urmila Ray     Constituted Attorney of

Smt. Lily Paul

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Smt. Dolly Paul

Smt.  Mira  Rani Basu Enclosed

a) Copies of 8 nos.deed        b) Copy of power of attorney      c) Copy of witness by ADM,DL,LRO d) Copy of Minutes of meeting dt.

26.3.96 e) Copy of Khana receipts

C 735407 dt.Rs.32,277/- C 735408 dt.18.1.01 for Rs.2709”

22. It  is significant  that this letter  written by the Attorney

Urmila Roy, on behalf of all the land owners spells out that the

owners had in fact been willing to negotiate the price for the

land at the time when the acquisition were still incomplete as

only the Notification under Section 4 of the Act had, at that

stage, been issued (4th December 2000).  It is also significant

that the declaration under Section 6 had been issued on 29th

November  2001  and  the  award  rendered  on 27th December

2003.  It  is, therefore,  evident that the land owners had, in

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fact,  acquiesced  to  the  acquisition  and  cannot  now  turn

around to say that the acquisition was bad in law.

23. In view of the above findings, we are of the opinion that

no further discussion on the other marginal issues that have

been raised, needs to be made.  The appeals are, accordingly,

dismissed.

………………………………J. (TARUN CHATTERJEE)

……………………………….J. ( HARJIT SINGH BEDI )

New Delhi, Dated: March 23, 2009

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