2015 (8) TMI 1110 - SC - Indian Laws

Constitutional validity of the Kerala Cashew Factories (Acquisition) Act, 1974 - Held that - No Section of the principal Act had been struck down and hence Section 6 of the Amendment Act did not need to remove the basis of any earlier decision striking down an Act. We repeatedly asked him if action had been taken under Section 3(1) or 3A of the Amendment Act to acquire any of the cashew factories before us. His candid answer was no . The argument that Section 6 contains a third source of power to acquire cashew factories merely by putting them in a schedule has to be rejected on two fundamental grounds. First, no notice or hearing is provided as in Section 3 or Section 5A of the Land Acquisition Act or any other safeguard such as a resolution of the legislative assembly supporting such acquisition as in Section 3A. If acquisition is to take place in conformity with law rules of natural justice cannot be bypassed. - Section 6 directly seeks to upset a final judgment inter-parties and is bad on this count and is thus declared unconstitutional. Kerala Legislature wished to interfere with two judgments of the Supreme Court making no distinction between factories that were managed by the Cashew Development Corporation (the 36 factories) and CAPEX (the 10 factories). It is interesting to note that apart from the Government suffering financially (if the factories are to be handed back), there will be large scale unemployment among workers in the cashew industry. - It is clear that the objects and reasons for the Amendment Act makes no differentiation between the 36 factories handed back and the 10 factories taken over by the Amendment Act. The High Court was in error in saying that there was an intelligible differentia between the two. Further, even otherwise, there is no difference between factories which post acquisition are run by the Cashew Development Corporation or CAPEX regard being had to the object sought to be achieved - namely to avoid unemployment of cashew workers. Both the Cashew Development Corporation and CAPEX, along with the Government, will suffer financially. In fact, the handing back of only 36 factories would be patently discriminatory as all 46 factories are similarly situate and have been treated as such by the State by issuing common notices to all of them under Section 3 of the Act. We have been reliably informed that these 36 factories are functioning under their respective owners for the last twenty years. In the circumstances we hold that there is no intelligible differentia between the 36 factories and the 10 factories taken over having any rational relation with the object sought to be achieved and on this ground also Section 6 of the Amendment Act deserves to be struck down as violating Article 14 of the Constitution. - judgment of the High Court is set aside and it is ordered that the cashew factories and the land appurtenant thereto that have been taken over by the State under the Amending Act must be handed back within a period of eight weeks from the date on which this judgment is pronounced. - Decided in favour of Appellant.

Summary

Issues Involved:
1. Constitutional validity of the Kerala Cashew Factories (Acquisition) Act, 1974.
2. Validity of the notices issued under Section 3 of the Act.
3. Legality of the Kerala Cashew Factories Acquisition (Amendment) Act, 1995.
4. Discrimination between the 10 factories acquired and the 36 factories handed back.

Detailed Analysis:

1. Constitutional Validity of the Kerala Cashew Factories (Acquisition) Act, 1974:
The petitions questioned the constitutional validity of the Kerala Cashew Factories (Acquisition) Act, 1974, which allowed the State Government to acquire cashew factories under certain circumstances. The Act was placed in the 9th Schedule to the Constitution of India, making it immune to judicial review.

2. Validity of the Notices Issued Under Section 3 of the Act:
Identical notices were sent between 1984 and 1986 to 10 cashew factories, and similar notices were sent to 36 other factories in 1988. The Supreme Court in Indian Nut Products v. Union of India (1994) 4 SCC 269 found these notices deficient as they failed to provide specific grounds for acquisition, merely stating that the factory's closure "will lead to large scale unemployment." The Court held that the notices did not comply with the requirement of providing detailed grounds as mandated by Section 3(1) of the Act, thus declaring them null and void.

3. Legality of the Kerala Cashew Factories Acquisition (Amendment) Act, 1995:
The Amendment Act of 1995 was introduced to retrospectively validate the acquisitions of the 10 factories by including them in a schedule to the Act. The Supreme Court found that Section 6 of the Amendment Act directly nullified the Court's earlier judgments without changing the basis of the law, which is impermissible. The Court reiterated that the legislature cannot directly annul a judicial decision and must instead change the law retrospectively to alter the basis of the decision. Thus, Section 6 was declared unconstitutional.

4. Discrimination Between the 10 Factories Acquired and the 36 Factories Handed Back:
The petitioners argued that Section 6 of the Amendment Act violated Article 14 of the Constitution by discriminating between the 10 factories acquired and the 36 factories handed back. The Supreme Court agreed, noting that the Statement of Objects and Reasons for the Amendment Act did not differentiate between the two sets of factories. Both sets of factories were similarly situated and faced identical conditions. The Court held that there was no intelligible differentia between the two groups of factories that had any rational relation to the object sought to be achieved, which was to avoid unemployment of cashew workers. Therefore, Section 6 was struck down as it violated Article 14.

Conclusion:
The Supreme Court allowed the appeals, set aside the judgment of the High Court, and ordered that the cashew factories and the land appurtenant thereto taken over by the State under the Amending Act must be handed back within eight weeks.