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TMI Blog1970 (2) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... ry, V. A. Seyid Muhammad, R. H. Dhebar, R. N. Sachthey and S. P. Nayar, S. Mohan Kumaramangalam, R. K. Garg, S. C. Agarwal and V. J. Francis, R. H. Dhebar and S. P. Nayar, S. Mohan Kumaramangalam and A. V. Rangam, Lal Narain Sinha, Advocate-General, Bihar, R. K. Garg and D. P. Singh, V. K. Krishna Menon, M. R. K. Pillai and D. P. Singh, P. Ram Reddy and P. Parameswara Rao, for intervener No. 6. M. C. Chagla, Santosh Chatterjee and G. S. Chatterjee JUDGMENT SHAH J. A. N. RAY, J. gave a dissenting Opinion. Shah, J. Rustom Cavasjee Cooper-hereinafter called 'the petitioner'-holds shares in the Central Bank of India Ltd., the Bank of Baroda Ltd., the Union Bank of India Ltd., and the Bank of India Ltd., and has accounts-current and fixed deposit -with those Banks : he is also a director of the Central Bank of India Ltd. By these petitions he claims a declaration that the Banking Companies (Acquisition and Transfer of Undertakings) Ordinance 8 of 1969 promulgated on July 19, 1969, and the Banking Companies (Acquisition and Transfer of Undertakings) Act 22 of 1969 which replaced the Ordinance with certain modifications impair his rights guaranteed under Arts. 14, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Manager, employee, or guarantor or partner or in which he holds substantial interest. The Reserve Bank was invested with power to give directions to commercial banks and to appoint directors or observers in the interest of depositors or proper management of the Banking Companies, or in the interest of Banking policy (which expression was defined by s. 5 (ca) as any policy which is specified from time to time by the Reserve Bank in the interest of the banking system or in the interest of monetary stability or sound economic growth, having due regard to the interests of the depositors, volume of deposits and other resources of the bank -and the need for equitable allocation and the efficient use of these deposits and resources . The Reserve Bank was also invested with power to remove managerial and other personnel from office and to appoint additional directors, and to issue directions prohibiting certain activities in relation to Banking Companies. The Central Government was given power to acquire the business of any Bank if it failed repeatedly to comply with any direction issued by the Reserve Bank under certain specific provision in regard to any matter concerning the affairs o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the undertaking of 14 named commercial banks in corresponding new banks set up under the Ordinance. The long little of the Ordinance read as follows: An Ordinance to provide for the acquisition and transfer of the undertakings of certain banking companies in order to serve better the needs of development of the economy in conformity with national policy and objectives and for matters connected therewith or incidental thereto. By S. 2 banking company was defined as not including a foreign company within the meaning of S. 591 of the Companies Act, 1956. An existing bank was defined by s. 2(b) as meaning a banking company specified in column 1 of the First Schedule, being a company the deposits of which, as shown in the return as on the last Friday of June, 1969, furnished to the Reserve Bank under section 27 of the Banking Regulation Act, 1949, were not less than rupees fifty crores . In the Schedule to the Act were included the names of fourteen commercial banks 1. The Central Bank of India Ltd. 2. The Bank of India Ltd. 3. The Punjab National Bank Ltd. 4. The Bank of Baroda Ltd. 5. The United Commercial Bank Ltd. 6. Canara Bank Ltd. 7. United Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds and all other documents of whatever nature relating thereto. It shall also include all borrowings, liabilities and obligations of whatever kind then subsisting of the named bank in relation to the under-taking. If according to the law of any foreign country, the provisions of the Ordinance by themselves do not effectively transfer or vest any asset or liability situated in that country in the corresponding new bank, the affairs of the named bank in relation to such asset or liability shall stand entrusted to the chief executive officer of the corresponding new bank with authority to take steps to wind up the affairs of that bank. All contracts, deeds, bonds, agreements, powers of attorney, grants of legal representation and other instruments of whatever nature subsisting or having effect immediately before the commencement of the Ordinance, and to which the named bank is a party or which are in favour of the named bank shall be of as full force and effect against or in favour of the corresponding new bank, and be enforced or acted upon as fully and effectively as if in the place of the named bank the corresponding new bank is a party thereto or as if they are issued in favour o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l bank was taken over by the corresponding new bank, and all assets and contractual rights and all obligations to which the named bank was subject stood transferred to the corresponding new bank. The Chairman and the Directors of the Banks vacated their respective officers. To the named banks survived only the right to receive compensation to be determined in the manner prescribed. Compensation, unless settled by agreement, was to be determined by the Tribunal, and was to be given in marketable Government securities. The entire business of each named bank was accordingly taken over, its chief executive officer ceased to hold office and assumed the office of Custodian of the corresponding new bank, its directors vacated office; and the services of the administrative and other staff stood transferred to the corresponding new bank. The named bank had thereafter no assets, no business, and no managerial, administrative or other staff, it was incompetent to use the word Bank in its name, because of the provisions contained in s. 7 (1) of the Banking Regulation Act, 1949, and was liable to be dissolved by a notification of the Central Government. Petitions challenging the competence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the acquisition of its undertaking; carry on the business of banking in any country outside India if under the law in force in that country any bank, owned or controlled by Government, is prohibited from carrying on the business of banking there; an carry on any business other than the business of banking. The Central Government has power to authorise the corresponding new bank to advance the amount required by the named bank in connection with the functions which the directors may perform. Reference to any named bank in any law, or in any contract or other instrument shall be construed as a reference to the corresponding new bank in relation to it, but not in cases where the named bank may carry on any business and in relation to that business. (2) Principles for determination of compensation and the manner of payment are modified. Interim compensation may be paid to a named bank if it agrees to distribute to its shareholders in accordance with their rights and interests. A major change is made in the principles for determining compensation set out in Sch. 11. By Explanation I to cl. (e) of Part I of Sch. II, the value of any land or buildings to be taken into account in valuin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because the condition precedent to the exercise of the power did not exist; (ii) That in enacting the Act the Parliament encroached upon the State List in the Seventh Schedule of the Constitution, and to that extent the Act is outside the legislative competence of the Parliament; (iii) That by enactment of the Act, fundamental rights of the petitioner guaranteed by the Constitution under Arts. 14, 19 (1) (f) (g) and 31(2) are impaired; (iv) That by the Act the guarantee of freedom of trade under Art. 301 is violated; and (v) That in any event retrospective operation given to Act 22 of 1969 is ineffective, since there was no valid Ordinance in existence. The provision in the Act retrospectively validating infringement of the fundamental rights of citizens was not within the competence of the Parliament. That sub-sections (1) (2) of s. 11 and s. 26 are invalid. The Attorney-General contended that the petitions are not maintainable, because no fundamental right of the petitioner is,' directly impaired by the enactment of the Ordinance and the Act, or by any action taken thereunder. He submitted that the petitioner who claims to be a shareholder, director and ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to grant relief. The petitioner claims that by the Act and by the Ordinance the rights guaranteed to him under Arts. 14, 19 and 31 of the Constitution are impaired. He says that the Act and the Ordinance are without legislative competence in that they interfere with the guarantee of freedom of trade and are not made in the public interest; that the Parliament had no legislative competence, to enact the Act and the President had no power to promulgate the Ordinance, because the subject-matter of the Act and the Ordinance is (partially at least) within the State List; and that the Act and Ordinance are invalid because they vest the undertaking of the named banks in the new corporations without a public purpose and without setting out principles and the basis for determination and payment of a just equivalent for the property expropriated. He says that in consequence of the hostile discrimination practised by the State the value of his investment in the shares is substantially reduced, his right to receive dividend from his investment has ceased, and he has suffered great financial loss, he is deprived of the right as a shareholder to carry on business through the agency of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (g) of the Constitution and this Court opined that the Corporation not being a citizen was incompetent to enforce the rights guaranteed by Art. 19. Nor has the judgment in Tata Engineering and Locomotive Co. Ltd. v. State of Bihar and Ors. (1) any bearing on the question arising in these petitions. In a petition under Art. 32, of the Constitution filed by a Company challenging the levy of sales-tax by the State of Bihar, two shareholders were also impleaded as petitioners. It was urged on behalf of the shareholders that in substance the interests of the Company and of the shareholders were identical and the shareholders were entitled to maintain the petition. The Court rejected that contention, observing that what the Company could not achieve directly, it could not relying upon the doctrine of lifting the veil achieve indirectly. The petitioner seeks in this case to challenge the infringement of his own rights and not of the Banks of which he is a shareholder and a director and with which he has accounts-, current and fixed deposit. It was urged that in any event the guarantee of freedom of trade does not occur in Part III of the Constitution, and the petitioner is not enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Constitution be competent to enact, it shall be void. Under the Constitution, the President being the constitutional head, normally acts in all matters including the promulgation of an Ordinance on the advice of his Council of Ministers. Whether in a given case the President may decline to be guided by the advice of his Council of Ministers is a matter which need not detain us. The Ordinance is promulgated in the name of the President and in a constitutional sense on his satisfaction: it is in truth promulgated on the advice of his Council of Ministers and on their satisfaction. The President is under the Constitution not the repository of the legislative power of the Union, but with a view to meet extraordinary situations demanding immediate enactment of laws, provision is made in the Constitution investing the President with power to legislate by promulgating Ordinances. Power to promulgate such Ordinance as the circumstances appear to the President to require is exercised-(a) when both Houses of Parliament are not in session; (b) the provision intended to be made is within the competence of the Parliament to enact; and (c) the President is satisfied that circumstances exi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he final arbiter of the existence of the conditions on which the power to promulgate an Ordinance may be exercised. Power to promulgate an Ordinance being conditional, counsel urged, this Court in the absence of a provision-express or necessarily implicit in the Constitution-to the contrary, is competent to determine whether the power was exercised not for a collateral purpose, but on relevant circumstances (1). which, prima facie, establish the necessity to take immediate action. Counsel submitted that the rules applicable to the interpretation of statutes conferring power exercisable on satisfaction of the specified circumstances upon the President and upon officers of the State, are not different. The nature of the power to perform an official act where the authority is of a certain opinion, or that in his view certain circumstances exist or that he has reasonable grounds to believe, or that he has reasons to believe, or that he is satisfied, springing from a constitutional provision is in no manner different from a similar power under a parliamentary statute, and no greater sanctity may attach to the exercise of the power merely because the source of the power is in the Constit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he question of acquisition and taking over of undertaking of a bank may first be read. The Parliament has exclusive legislative power with respect to Banking Entry 45 List I; Incorporation, regulation and winding up of trading Corporations including banking, insurance and financial corporations, but not including cooperative societies : Entry 43 List I; and Incorporation, regulation and winding up of corporations, whether trading or not, with objects not confined to one State, but not including Universities : Entry 44 List I. The States have exclusive legislative authority with respect to the following subjects in List II : Entry 26- Trade and commerce within the Stale, subject to the provisions of entry 33 of List III; Entry 30- Money-lending and money-lenders; relief of agricultural indebtedness. The Parliament and the States have concurrent legislative authority with respect to the following subjects in List III : Entry 33- Trade and commerce in, and the production, supply and distribution of,- (a) the products of any industry where the control of such industry by the Union is declared by Parliament by law to be expedient in the public interest, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up of corresponding new banks as statutory corporations to carry on and transact the business of banking as defined in s. 5 (b) of the Banking Regulation Act, 1949, and one or more other forms of business specified in s. 6 (1) of that Act, with power to acquire and hold property for the purpose of the business, and to dispose of the same; administration of the corresponding pew banks as institutions carrying on banking and other business; the undertaking of each named bank in its entirety stands transferred to and vested in a new corporation set up for that purpose; principles for determination of compensation and method of payment thereof to each named bank for transfer of its undertaking; and that the named bank may not carry on banking business, but may carry out business other than banking. Mr. Palkhivala submitted that the Parliament may legislate in respect of the business of banking as defined in S. 5 (b) of the Banking Regulation Act, 1949, and matters incidental thereto, and also for acquisition of that part of the undertaking of each named bank which relates to the business of banking, but not in respect of any other business not incidental to banking in which the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on current or deposit account and the payment of cheques drawn by and the collection of cheques paid by a customer , and in the foot-note (g) at p. 151 that Numerous other functions are undertaken at the present day by banks such as the payment of domiciled bills, custody of valuables, discounting bills, executor and trustee business, or acting in relation to stock exchange transactions, and banks have functions under certain financial legislation, . . These functions are not strictly banking business. The Attorney-General said that the expression banking in Entry 45 List I means all forms of business which since the introduction of western methods of banking in India, banking institutions have been carrying on in addition to banking as defined in s. 5(b) of the Banking Regulation Act, and on that account all forms of business described in s. 6(1) of the Banking Regulation Act in cls. (a) to (n) are, if carried on in addition to the hardcore of banking , banking, and the Parliament is competent to legislate in respect of that business under Entry 45 List I. In support of his contention that apart from the business of accepting money from the public for lending or invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gislate in respect of-all commercial activities which a banker by the custom of bankers or authority of law engages in would result in re-writing the Constitution. Investment of power to legislate on a designated topic covers all matters incidental to the topic. A legislative entry being expressed in a broad designation indicating the contour of plenary power must receive a meaning conducive to the widest amplitude, subject however to limitations inherent in the federal scheme which distributes legislative power between the Union and the constituent units. But the field of banking cannot be extended to, include trading activities which not being incidental to banking encroach upon the substance of the entry trade and commerce in List II. Rejection of the argument of the Attorney-General does not lend any practical Support to the argument of Mr. Palkhivala that Act 22 of 1969, to the extent it makes provisions in respect of the undertaking of the named banks relating to non-banking business, is ultra vires the Parliament. In the first instance there is no evidence that the named banks were before July 19, 1969, carrying on non-banking business distinct and independent of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnotation property means the highest right a man can have to anything, being that right which one has to lands or tenements, goods or chattels which does not depend on another's courtesy : it includes ownership, estates and interests in corporeal things, and also rights such as trade-marks, copyrights, patents and even rights in personam capable of transfer or transmission, such as debts; and signifies a beneficial right to or a thing considered as having a money value, I especially with reference to transfer or succession, and to their capacity of being injured . The expression undertaking in s. 4 of Act 22 of 1969 clearly means a going concern with all its rights, liabilities and assets-as distinct from the various rights and assets which compose it. In Halsbury's Laws of England, 3rd Edn., Vol. 6, Art. 75 at p. 43, it is stated that Although various ingredients go to make up an undertaking, the term describes not the ingredients but the completed work from which the earnings arise. Transfer of and vesting in the State Corporations of the entire undertaking of a going concern is contemplated in many Indian Statutes: e.g., Indian Electricity Act, 1910, ss. 6, 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] Supp. 2 S.C.R. 411, 433) that a person may. be deprived of his property by authority of a statute only if it does not impair the fundamental rights guaranteed to him. It is again not contested on behalf of the Union that the law authorising acquisition of property must be within the competence of the law-making authority and must not violate a constitutional prohibition or impair the guarantee of any of the fundamental rights in Part 111. But it is claimed that since Art. 31(2) and Art. 19(1) (f) while operating on the same field of the right to property are mutually exclusive, a law directly providing for acquisition of property for a public purpose cannot be tested for its validity on the plea that it imposes limitations on the right to property which are not reasonable. By Arts. 31 ( 1 ) (2) the right to property of individuals is protected against specific invasions by State action. The function of the two clauses-cls. (1) (2) of Art. 31-is to impose limitations on the power of the State and to declare the corresponding guarantee of the individual to his right to property. Limitation on the power of the State and the guarantee of right are plainly complementary. Protec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bject of the State in taking the impugned action, is the measure of protection. To concentrate merely on power of the State and the object of the State action in exercising that power is therefore to ignore the true intent of the Constitution. In this Court, there is, however, a body of authority that the nature and extent of the protection of the fundamental rights is measured not by the operation of the State action upon the rights of the individual, but by its object. Thereby the constitutional scheme which makes the guaranteed rights subject to the permissible restrictions within their allotted fields, fundamental, got blurred and gave impetus to a theory that certain Articles of the Constitutions enact a code dealing exclusively with matters dealt with therein, and the protection which an aggrieved person may claim is circumscribed by the object of the State action. Protection of the right to property or personal freedom is most needed when there is an actual threat. To argue that State action which deprives a person permanently or temporarily of his right to property, or personal freedom, operates to extinguish the right or the remedy is to reduce the guarantee to an empty pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as a corollary thereto, that the freedoms under Arts. 19, 21, 22 31 are exclusive-each article enacting a code relating to protection of distinct rights. Kania, C.J., proceeded on the theory that different articles guarantee distinct rights. He observed at p. 100 ...... it (Art. 19) .... means that the legislation to be examined must be directly in respect of one of the rights mentioned in the sub-clauses. If there is a legislation directly attempting to control a citizen's freedom of speech or expression', or his right to assemble peaceably and without arms, etc., the question whether that legislation is saved by the relevant saving clause of article 19 will arise. If, however, the legislation is not directly in respect of any of these subjects, but as a result of the operation of other legislation, . . . . the question of the application of article 19 does not arise. The true approach is only to consider the directness of the legislation and not what will be the result of the detention otherwise valid, on the mode of the detenue's life. The learned Chief Justice also observed that Art. 19 (1) (d) had nothing to do with detention, preventive or punitive, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g), are rights which only a free citizen, who has the freedom of his person unimpaired, can exercise. The learned Judge further observed a lawful detention, whether punitive or preventive, does not offend against the protection confer red by article 19 (1) (a) to (e) and (g), for those rights must necessarily cease when the freedom of the person is lawfully taken away. In short, those rights end where the lawful detention begins. So construed, article 19 and article 21 may, therefore, easily go together and there is, in reality, no conflict between them. Fazl Ali, J., struck a different note: he observed at p. 148: rights does not contemplate ... that each article is a code by itself and is independent of the others........ The case of a person who is convicted of an offence will come under article 20 and 21 and also under article 22 so far as his arrest and detention in custody before trial are concerned. Preventive detention, which is dealt with in article 22, also amounts to deprivation of personal liberty which is referred to in article 21, and is a violation of the right of freedom of movement dealt with in article 19(1) At p. 149 the learned Judge observed T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in a later decision : State of Bombay v. Bhanji Munji Another 5 In Bhanji, Munji's case(1), speaking for a unanimous Court, Bose,, J., observed ...... it is enough to say that Art. 19 ( I ) (f ) read with clause (5) postulates the existence of property which can be enjoyed, and over which rights can be exercised because otherwise -the reasonable restrictions contemplated by clause (5) could not be brought into play. If there is no property which can be acquired, held or disposed of, no restriction can be placed on the exercise of the right to acquire, hold or dispose it of, and as clause (5) contemplates the placing of reasonable restrictions on the exercise of those rights it must follow that the Article postulates the existence of property over which the rights are to be exercised. Bhanji Munji's case ([1955] 1 S.C.R. 777) was accepted without -any discussion in Babu Barkya Thakur v. The State of Bombay([1961] 1 S.C.R. 128) ; Smt. Sitabati Debi and Anr. v. State of West Bengal and Another([1967] 2 S.C.R. 940), and other cases. In these cases it was held that the substantive provisions of a law relating to acquisition of property were not liable to be chall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities which related to the inter-relation ,between Art. 31(2) and Art. 19(1) (f). We have carefully considered the weighty pronouncements of the eminent Judges who gave shape to the concept that the extent of protection of important guarantees, such as the liberty of person, and right to property, depends upon the form and object of the State action, and not upon its direct operation upon the individual's freedom. But it is not the object of the authority making the law impairing the right of a citizen, nor the form of .action that determines the protection he can claim: it is the effect of the law and of the action upon the right which attract the jurisdiction of the Court to grant relief. If this be the true view, and we think it is, in determining the impact of State action upon constitutional guarantees which are fundamental, it follows that the extent of protection against impairment of a fundamental right is determined not by the object of the Legislature nor by the form of the action, but by its direct operation upon the individual's rights. We are of the view that the theory that the object and form of the, State action determine the extent of protection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omplete code relating to infringement of the right to property by compulsory acquisition, and the validity of the law is not liable to be tested in the light of the reasonableness of the restrictions imposed thereby, it is necessary to bear in mind the enunciation of the guarantee of fundamental rights which has taken different forms. In some cages it is an express declaration of a guaranteed right : Arts. 29(1), 30(1), 26, 25 32; in others to ensure protection of individual rights they take specific forms of restrictions on State action-legislative or executive--Arts. 14, 15, 16, 20, 21, 22(1), 27 and 28; in some others, it takes the form of a positive declaration and simultaneously enunciates the restriction there on : Arts. 19(1) and 19(2) to (6); in some cases, it arises as an implication from the delimitation of the authority of the State, e.g., Arts. 31(1) and 31(2); in still others, it takes the form of a general prohibition against the State as well as others : Arts. 17, 23 24. The enunciation of rights either express or by implication does not follow a uniform pattern. But one thread runs through them : they seek to protect the rights of the individual or groups of ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect of the laws on fundamental rights of the individuals in general will be Ignored cannot be accepted as correct. We hold that the validity of law which authorises deprivation of property and a law which authorises compulsory acquisition of property for a public purpose must be adjudged by the application of the same tests. A citizen may claim in an appropriate case that the law authorising compulsory acquisition of property imposes fetters upon his right to hold property which are not reasonable restrictions in the interests of the general public. It is immaterial that the, scope for such challenge. may be attenuated because of the nature of the law of acquisition which providing as it does for expropriation of property of the individual for' public purpose may be presumed to impose reasonable restrictions in the interests of the general public. Whether the provisions of ss. 4 5 of Act 22. of 1969 and the other related provisions of the Act impair the fundamental freedoms under Art. 19 ( I ) (f ) (g) now falls to, be considered By s. 4 the entire undertaking of each named bank vests in the Union, and the Bank is prohibited from engaging in the business of banki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acquire, hold and dispose of property is guaranteed to the citizens; and by Art. 19 (1) (g) the right to practise any profession, or to carry on any occupation, trade or business is guaranteed to the citizens. These rights are not absolute: they are subject to the restrictions prescribed in ;the appropriate clauses of Art. 19. By cl. (5) it is provided, inter alia, that nothing in sub-cl.(f) of cl. (1) shall affect the -operation of any existing law in so far as it imposes, or prevent -the State from making any law, imposing in the interests of the general public, reasonable restrictions on the exercise of the right ,conferred by that sub-clause either in the interests of the general public or for the protection of the interests of any Scheduled 'Tribe. Clause (6) as amended by the Constitution (First -Amendment) Act, 1951, reads Nothing in sub-clause (g) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, in the interests of the general public, reasonable restrictions on the exercise of the right conferred by the said sub-clause, and, in particular, nothing in the said sub-clause, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion in particular was not intended to confer a separate and distinct power wholly independent of that contained in the first limb. It cannot be said that the expression in particular used in Art,. 19(1)(g) is intended either to particularise or to illustrate the general law set out in the first limb. It was observed in Saghir Ahmad v. The State of U.P. and' Others ([1955] 1 S.C.R. 707, 727) by Mukherjea, J. at p. 727 : The new clause-Art. 19(6)--has no doubt been introduced with a view to provide that a State can create a monopoly in its own favour in respect of any trade or business; but the amendment does not make the establishment of such monopoly a reasonable restriction within the meaning of the first clause of Art. 19(6). The result of the amendment is that the State would not have to justify such action as reasonable at all in a court of law, and no objection could be taken to it on the ground that it is an infringement of the rights guaranteed under Art. 19 (1 ) (g) of the Constitution. In dealing with the validity of a law creating a State monopoly in Akadasi Padhan v. State of Orissa, ([1963] Supp. 2 S.C.R. 691) this Court unanimously held, that the valid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... however not restricted to laws creating State monopolies, and the rule enunciated in Akadasi Padhan's case([1963] Supp. 2 S.C.R. 691) applies to all laws relating to the carrying on by the State of any trade, business, industry or service. By Art. 298 the State is authorized to carry on trade which is competitive, or excludes the citizens from that trade completely or partially. The basic and essential provisions of law which are integrally and essentially connected with the carrying on of a trade by the State will not be exposed to the challenge that they impair the guarantee under Art. 19(1)(g), whether the citizens are excluded completely or partially from carrying on that trade, -or the trade is competitive. Imposition of restrictions which are incidental or subsidiary to the carrying on of trade by the State whether to the exclusion of the citizens or not must, however, satisfy the test of the main limb. The law which prohibits after July 19, 1969, the named banks from carrying on banking business, being a necessary incident of the right assumed by the Union, is not liable to be challenged because of Art' 19 (6) (ii) in so far as it affects the right to carry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the other hand, the Attorney-General said that the commercial banks followed a conservative policy because they had to lookprimarily to the interests of the shareholders, and on that account could not adopt bold policies or schemes for financing the needy and worthy causes; that if the resources of the banking industry are properly utilised for the weaker sections of the people economic regeneration of the nation may be speedily achieved, that 28% of the towns in India were not served by commercial banks; that there had been unequal development of facilities in different parts of the country and deserving sections were deprived of the benefit of an important national resource resulting in economic disparities, especially because the major banks catered to the large-scale industries. , This Court is not the forum in which these conflicting claims may be debated. Whether there is a genuine need for banking facility in the rural areas, whether certain classes of the community are deprived of the benefit of the resources of the banking industry, whether administration by the Government of the commercial banking sector will not prove beneficial to the community and will lead to rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ously the fund will not be available to the, Bank. It is true that under s. 15(3) of the Act the Central Government may authorise the corresponding new banks to make advances to the named banks for any of the purposes mentioned in s. 15(2). But that is a matter which rests only upon the will of the Central Government and no right can be founded upon it. Where restrictions imposed upon the carrying on of a business are so stringent that the business cannot in practice be carried on, the Court will regard the imposition of the restrictions as unreasonable. In Mohammad Yasin v. The Town Area Committee, Jalalabad and Another([1952] S.C.R. 572) this Court -observed that under Art. 19(1)(g) of the Constitution a citizen has the right to carry on any occupation, trade or business and the only restriction on 'this right is the authority of the State to make a law relating to the carrying on of such occupation, trade or business as mentioned in cl. (6) of that Article as amended by the Constitution (First Amendment) Act, 1951. In Mohammad Yasin's case by the, bye--laws of the Municipal Committee, it was provided that no person shall sell or purchase any vegetables or fruit within th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formality, when the entire undertaking of the named banks is transferred to and vests in the new banks, together with the premises and the names of the banks, and the named banks are deprived of the services of its administrative and other staff. The restriction imposed upon the right of the named banks to carry on non-banking business is' in our judgment, plainly unreasonable. No attempt is made to Support the Act which while theoretically declaring the right of the named banks to carry on non-banking business makes it impossible in a commercial sense for the banks to carry on any business, Protection of Art. 14-- By Art. 14 of the Constitution the State is enjoined not to deny any person equality before the law or the equal protection of the laws within the territory of India. The Article forbids class legislation, 'but not reasonable classification in making laws. The test of permissible classification under an Act lies in two cumulative conditions : (i) classification under the Act must be founded on an intelligible differentia distinguishing persons, transactions or things grouped together from others left out of the group; and (ii) the differentia has a rati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the banks and the shareholders are vitally affected. Investment in bank-shares is regarded in India, especially in the shares of larger banks, as a safe investment on attractive terms with a steady return and fluidity of conversion. Mr. Palkhivala has handed in a statement setting out the percentage return of dividend on market-rates in 1968. The rate works out at more than, 10% in the case of. the shares of Bank of Baroda, Central Bank of India, Dena Bank, Indian Bank, United Bank and United Commercial Bank; and at more than 9% in the case of shares of Bank of India, Bank of Maharashtra, Canara Bank, Indian Bank, Indian Overseas Bank and United Bank of India. In the case of Allahabad Bank it worked out at 5%, and in the case of shares of Punjab National Bank and Syndicate Bank the rates are not available. This statement is not challenged. Since the taking over of the undertaking, there has resulted a steep fall in the ruling market quotations of the shares of a majority of the named banks. The market quotations have slumped to less than 50% in the case of Bank of India, Central Bank, Bank of Baroda and even at the quoted rates probably there are no transactions. Dividend may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... economic resources of such enterprises for inclusion in such law as would be essential orsubstantially conducive to the achievement of the national objectives and policy . it is apparently claimed that the object of the Government-not of statute-is to acquire ultimately all banking institutions, but the 14 named banks are selected for acquisition because they have larger business and wider coverage in comparison with other banks not selected, and had also larger organization, better managerial resources and employees better trained and equipped. These are primarily grounds for classification and not for explaining the relation between the classification and the object of the Act. But in the absence of any reliable data, we do not think it necessary to express an opinion on the question whether selection of the undertaking of some out of many banking institutions, for compulsory acquisition, is liable to be struck down as hostile discrimination, on the ground that there is no reasonable relation between the differentia and the object of the Act which cannot be substantially served even by the acquisition of the undertakings of all the banks out of which the selection is made. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile discrimination is practised. Section 15(2) of the Act which by the clearest implication prohibits the named banks from carrying on banking business is, therefore, liable to be struck down. It is immaterial whether the entire sub-s. (2) is struck down, or as suggested by the Attorney-General that only the 'words other than the business of banking in s. 15(2)(e) be struck down. Again, in considering the validity of s. 15 (2) (e) in its relation to the guarantee of freedom to carry on business other than banking, we have already pointed out that the named banks are also, (though theoretically, competent) in substance prohibited from carrying on nonbanking business. For reasons set out by us for holding that the restriction is unreasonable, it must also be held that the guarantee of equality is impaired by preventing the named banks carrying on the non-banking business. Protection of the guarantee under Art. 31(2)The guarantee under Art. 31(2) arises directly out of -the restrictions imposed upon the power of the State to acquire private property, without the consent of the owner for a public purpose. Upon the exercise of the power to acquire or requisition property, by cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uarantee merely on the ,ground that the compensation paid to the owner is inadequate. The Attorney-General on the other hand says that compensation in Art. 31(2) does not mean a just equivalent, and it is not predicated of the validity of a law relating to compulsory ,acquisition that it must aim at awarding a just equivalent, for, if the law is not confiscatory, or the principles for determination ,of compensation are not irrelevant, the Courts cannot go 'into the propriety of such principles or adequacy or reasonableness of the compensation . Two questions immediately arise for determination. What is the true meaning of the expression compensation as used in Art. 31(2), and what is the extent of the, jurisdiction of the Court when the validity of a law providing for compulsory acquisition of property for a public purpose is challenged ? In -its dictionary meaning compensation means anything given to make things equal in value : anything given as an equivalent, to make amends for loss or damage. In all States where the rule of law prevails, the right to compensation is guaranteed by the Constitution or regarded as inextricably involved in the right to property. By ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9; a Provincial Legislature shall have power to make any law authorising the compulsory acquisition for public purposes of any land, or any commercial or industrial undertaking, or any interest in, or in any company owning, any commercial or industrial undertaking, unless the law provides for the payment of compensation for the property acquired and either fixes the amount of the compensation, or specifies the principles on which, and the manner in which, it is to be determined. Article 31(2) before it was amended by the Constitution (Fourth Amendment) Act, 1955, followed substantially the same pattern. Prior to the amendment of Art. 31(2) this Court interpreted the expression compensation as meaning full indemnification . Patanjali Sastri, C.J., in The State of West Bengal v. Mrs. Bela Banerjee L.R. [1920] A.C. 508 Others ([1954] S. C. R. 558) in interpreting the guarantee under Art. 31(2), speaking on behalf of the Court, observed : While it is true that the legislature is given the discretionary power of laying down the principles which should govern the determination of the amount to be given to the owner for the property appropriated, such principles must en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of India (Acquisition of Under-takings Act 44 of 1955; Lachhman Dass and Others v. Municipal Committee, Jalalabad(A.I.R. [1969] S.C. 1126) under s. 20B of the Displaced Persons (Compensation and Rehabilitation) Act, 1954, as amended by Act 2 of 1960. In Ranojirao Shinde's case() dealing with a case under the Madhya Pradesh Abolition of Cash Grants Act 16 of 1963 it was observed that the compensation referred to in Art. 31 (2) is a just equivalent of the value of the property taken. But this Court in State of Gujarat v. Shantilal Mangaldas and Others([1968] 3 S.C.R. 489) observed that compensation payable for compulsory acquisition of property is not, by the application of any principles, determinable as a precise sum, and by calling it a just or fair equivalent, no definiteness could be attached thereto; that valuation of lands, buildings and incorporeal rights has to be made on the application of different principles, e.g. capitalization of net income at appropriate rates, reinstatement, determination of original value reduced by depreciation, break-up value of properties which had outgrown their utility; that the rules relating to determination of value of lands, buil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after the addition of the words and no such law shall be called in question in any Court on the ground that the compensation provided by that law is not adequate , the expression compensation occuring in Art. 31 (2) after the Constitution (Fourth Amendment) Act continued to have the same meaning as it had in S. 299(2) of the Government of India Act, 1935, and Art. 31(2) before it was amended, viz. just equivalent or full indemnifications. There was apparently no dispute that Art. 31(2) before and after it was amended guaranteed a right to compensation for compulsory acquisition of property and that by giving to the owner, for compulsory acquisition of his property, compensation which was illusory, or determined by the application of principles which were irrelevant, the constitutional guarantee of compensation was not complied with. There was difference of opinion on one matter between the decisions in P. Vajravelu Mudaliar's case and Shantilal Mangaldas's case([1969] 3 S.C.R. 341. at p. 368). In the former case it was observed that the constitutional guarantee was satisfied only if a just equivalent of the property was given to the owner : in the latter case it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inciples contemplated by Art. 31 (2) of the Constitution. The Court then applied that principle to the facts of the case and held that the Land Acquisition (Madras Amendment) Act, 1961, which provided that-(i) the owner of land acquired for housing shall get only the value of the land at the date of the notification under s. 4(1) of the Land Acquisition Act, 1894, or an amount equivalent to the average market value of the land during the last five years immediately preceding such date, whichever was less; (ii) the owner shall get a solatium of only 5% and not 15% and (iii) in valuing the land acquired any increase in its suitability or adaptability for any use other than the use to which the land was put at the date of the notification under s. 4(1) of the Land Acquisition Act, 1894, shall not be taken into consideration, did not impair the right to receive compensation. The Court observed at p. 631 : In awarding compensation if the potential value of the land is excluded, it cannot be said that the compensation awarded is the just equivalent of what the owner has been deprived of. But such an exclusion only pertains to the method of ascertaining the compensation. One of the elem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a single compensation. Compensation being the equivalent in terms of money of the property compulsorily acquired, the principle for determination of compensation is intended to award to the expropriated owner the value of the property acquired. The science of valuation of property recognizes several principles or methods for determining the value to be paid as compensation to the owner for loss of his property : there are different methods applicable to different classes of property in the determination of the value to be paid as recompense for loss of his property. A method appropriate to the determination of value of one class of property may be wholly inappropriate in determining the -value of another class of property. If an appropriate method or principle for determination of compensation is applied, the fact that by the application of another, principle which is also appropriate, a different value is reached, the Court will not be justified in entertaining the contention that out of the two appropriate methods, one more generous to the owner should have been applied by the Legislature. We are unable to hold that a principle specified by the Parliament for determining compensa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure likely to be incurred for constructing a similar house, and reduced by the depreciation for the number of years since it was constructed; (iv) principle of reinstatement, where it is satisfactorily established that reinstatement in some other place is bona fide intended, there being no general market for the property for the purpose for which it is devoted (the purpose being a public purpose) and would have continued to be devoted, but for compulsory acquisition. Here compensation will be assessed on the basis of reasonable cost of reinstatement; (v) when the property has outgrown its utility and it is reasonably incapable of economic use, it may be valued as land plus the break-up value of the structure. But the fact that the acquirer does not intend to use the property for which it is used at the time of acquisition and desires to demolish it or use it for other purpose is irrelevant; and (vi) the property to be acquired has ordinarily to be valued as a unit. Normally an aggregate of the value of different components will not be the value of the unit. These are, however, not the only methods. The method of determining the value of property by the application of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, for it impairs the constitutional guarantee for payment of compensation for acquisition of property by law. Even if it be, assumed that the aggregate value of the different components will be equal to the value of the undertaking of the named bank as a going concern the principles specified, in our judgment, do, not give a true recompense to the banks for the loss of the under-taking. Schedule 11 by cl. (1) provides The compensation . . . in respect of the acquisition of the undertaking thereof shall be an amount equal to the sum total of the value of the assets of the existing bank as on the commencement of this Act, calculated in accordance with the provisions of Part 1, less the sum-total of the liabilities computed and obligations of the existing bank calculated in accordance with the provisions of Part IT. For the purpose of Part 1 assets mean the total of the heads(a) to (h) and the expression liabilities is defined as meaning the total amount of all outside liabilities existing at the commencement of the Act and contingent liabilities which the corresponding new bank may reasonably be expected to be required to meet out of its own resources. Compensation payab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es in the management. A bank is not like a grocer's shop : a customer does not extend his patronage to a bank merely because it has a branch easily accessible to him. Outside the public sector, there are 50 Indian -scheduled banks, 13 foreign banks, beside 16 non-scheduled banks. The deposits in the banks not taken over under the Act range between ₹ 400 crores and a few lakhs of rupees. Deposits attracted by the major private commercial banks are attributable largely to the personal goodwill of the management. The regulatory provisions of the Banking Companies Act and the control which the Reserve Bank exercises over the banks may to a certain extent reduce the chance of the resources of the banks being misused, but a banking company for its business still largely depends upon the reputation of its management. We are unable to agree with the contention raised in the Union's affidavit that a banking establishment has no goodwill, not are we able to accept the plea raised by the Attorney-General that the value of the goodwill of a bank is insignificant and it may be ignored in valuing the undertaking as a going concern. Under cl. (f) of Sch. II provision is made for val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecified in Explanation 2, the value shall be deemed to mean such ascertained value . The value of the land and buildings is therefore the market value or the ascertained value whichever is less. Under Explanation 2, cl. (1) ascertained value in respect of buildings which are wholly occupied on the date of the commencement of the Act is twelve times the amount of the annual rent or the rent for which the building may reasonably be expected to be let from year to year reduced by certain specific items. This provision, in our judgment, does not Jay down a relevant principle of value of buildings. In the first place, making a provision for payment of capitalised annual rental at.......... twelve times the amount of rent cannot reasonably be regarded as payment of compensation having regard to the conditions prevailing in the money market. Capitalization of annual rent which is generally based on controlled rent under some State Acts at rates pegged down to the rates prevailing in 1940 and on the footing that investment in buildings yields 8-1/3% return furnishes a wholly misleading result which cannot be called compensation. Value of immovable property has spiralled during the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to pinpoint the inequity of the method. In respect of a building owned by a bank of the value of ₹ 10 lakhs and mortgaged for say ₹ 7,50,000 interest at the rate of 8% (which may be regarded as the current commercial rate) would amount to ₹ 60,000. The estimated annual rental which would ordinarily not exceed ₹ 60,000 has under cl. (e) to be reduced in the first instance by other outgoing. The assets would show a minus figure as value of the building, and on the liabilities side the entire amount of mortgage liability would be debited. The method provided by the Act permits the annual interest on the amount of the encumbrance to be deducted before capitalization, and the capitalized value is again reduced by the amount of the encumbrance. In effect, a single debt is, in determining the compensation debited twice, first, in computing the value of assets, and again, in computing the liabilities. We are unable to accept the argument raised by the AttorneyGeneral that under the head liabilities in Part II only those mortgages or capital charges in respect of which the amount has fallen due are liable to be included on the liabilities side. Under the head ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f buildings which is not relevant the amount determined cannot be regarded as compensation. We have already referred to item (f) under which a proportionate part of the premium paid is liable to be included in the assets but not the value for the unexpired period of the leases. Item (h) provides for the inclusion of the market or realizable value, as may be appropriate, of other assets appearing on the books of the bank, no value being allowed for capitalized expenses, such as share-selling commission, organizational expenses and brokerage, losses incurred and similar other items. Mr. Palkhivala urged that certain assets which do not appear in the books of account still have substantial value, and they are omitted from consideration in computing the aggregate of the value of assets. Counsel said that every bank is permitted to have secret reserve and those secret reserves may not appear in the books of account of the banks. We are unable to accept that contention. A banking company is entitled to withhold from the balance-sheet its secret reserve, but there must be some account in respect of those secret reserves. The expression books of the Bank may not be equated with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u Mudaliar's case([1965] 1 S.C.R 614), (at p. 631), which we have already quoted in another context in relation to the challenge to the validity of the Land Acquisition (Madras Amendment) Act, 1961, which excluded in determining compensation, the potential value of the land. The Court held that exclusion of potential value amounted to giving inadequate compensation and was not a fraud on power. The principle of that case has no application when valuation of a undertaking is sought, to be made by breaking it up into several heads of assets, and important -heads are excluded and others valued by the application of irrelevant principles, or principles of which the only claim for acceptance is their novelty. The Constitution guarantees that the expropriated owner must be given the value of his property, i.e., what may be regarded reasonably as compensation for loss of the property and that such compensation should not be illusory and not reached by the application of irrelevant principles. In our view, determination of compensation to be paid fox the acquisition of an undertaking as a unit after awarding compensation for some items which go to make up the undertaking and omitting i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in bonds of the face-,value of the amount determined maturing -after many years and carrying a certain rate of interest, the constitutional guarantee is not necessarily complied with. If the market value of the bonds is not approximately equal to the face-value, the expropriated owner may raise a grievance that the guarantee under Art. 31(2) is impaired. We are of the view that by the method adopted for valuation of the undertaking, important items of assets have been excluded, and principles some of which are irrelevant and some not recognised are adopted. What is determined by the adoption of the method adopted in Sch. 11 does not award to the named banks compensation for loss of their undertaking. The ultimate result substantially impairs the guarantee of compensation, and on that account the Act is liable to be struck down. IV. Infringement of the guarantee of freedom of trade, commerce and intercourse under Art. 301-- in the view we have taken the provisions relating to determination and payment of compensation for compulsory acquisition of the undertaking of the named banks impair the guarantee under Art. 31(2) of the Constitution, we do not deem it necessary to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en or deemed to be taken in exercise of the powers under the Act is declared unauthorised. Petition No. 222 of 1969 is dismissed. There will be no order as to costs in these three petitions. Ray, J. There are 89 commercial banks operating in India. Of these 89 banks 73 are Scheduled and 16 are non-Scheduled banks. The 73 Scheduled banks comprise State Banks with 7 subsidiaries aggregating 8, 15 foreign banks, 14 banks which -are the subject matter of the Banking Companies (Acquisition and Transfer of Undertakings) Ordinance No. 8 of 1969 (hereinafter referred to for the sake of brevity as the 1969 Ordinance) and the Banking Companies (Acquisition and Transfer of Undertakings) Act No. 22 of 1969 (hereinafter referred to for the sake of brevity as the 1969 Act) and 36 banks which are outside the scope of the 1969 Act. The State Banks have 27 per cent of the aggregate deposit of all commercial banks and 32 per cent of the credit of all commercial banks. The State Bank and its 7 subsidiaries have ₹ 1239 crores including current account in the total deposit and the total credit of the State Bank and its subsidiaries is ₹ 1186 crores. The 14 Scheduled Banks each of which h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or incidental thereto. The Ordinance came into force on 19 July, 1969. The Ordinance was repealed on 9 August, 1969 by the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1969 which came into force on 9 August, 1969. The object of the Act was similar to that of the Ordinance. There are some differences between the Ordinance and the Act but it is not necessary for the purpose of the present matter to refer to the same. Broadly stated, as a result of the 1969 Act the undertaking of every existing bank was transferred to and vested in the corresponding new batik on the commencement of the Act. The existing banks mean the 14 banks. The corresponding new banks mean the banks mentioned in the First Schedule to the 1969 Act in which is vested the undertakings of the existing banks. Section 5 of the 1969 Act deals with the effect of vesting. First, the undertaking shall be deemed to include all assets, rights, powers, authorities and privileges and all property, movable or immovable, cash balances, reserve funds, investments and all other rights and interests arising out of such property as were immediately before the commencement of the Act in the; ownership, possessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f policy involving public interest, it shall be referred to the Central Government and the decision of the Central Government thereon shall be final. Section 12 provides for appointment of an Advisory Board to advise the custodian of the corresponding new bank. The custodian is the chief executive officer of the corresponding new bank. The Chairman of the existing bank holding office before the commencement of the-Act becomes a custodian of the corresponding new bank. The custodian is to hold office during the pleasure of the Central Government. Section 13 of the Act provides power of the Central Government to make scheme. Section 15 is an important provision in the Act. Under that section a Chairman, managing or whole-time director of an existing bank shall, on the commencement of the Act, be deemed to have vacated office and every other director of Such bank shall, until directors are duly elected by such existing bank, be deemed to continue to hold such office. 'The said Board may transact all or any of the various kinds of business mentioned in section 15. The other provision in section 15 is that the existing bank may carry on any business other than banking. The Act of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the validity of a law either prospective or retrospective acquiring property has to be judged by the requirements laid down in Article 31(2). This Court dealt with retrospective legislations in the cases of M/s. West Ramnad Electric Distribution Company Ltd. v. State of Madras([1963] 2 S.C.R. 747) and State of Mysore v. Achiah Chetty (A.1.R. [1969] S.C. 477). In the case of M/s. West Ramnad Electric Distribution Company Ltd.(') this Court held that there was difference between the provisions contained in Article 20(1) and Article 31(2) of the Constitution. Article 20(1) refers to law in force at the time of the commission of the actcharged as an offence whereas Article 31(2) does not contain any such word of limitation as to law being in force at the time but speaks only of authority of a law. This vital distinction between Article 20(1) and Article 31(2) is to be kept in the forefront in appreciating the soundness of the proposition that retrospective legislation as to acquisition of property does not violate Article 31(2). In the case of M/s. West Ramnad Electric Distribution Company([1963] 2 S.C.R. 747) the 1954 Madras Act incorporated the main provisions of the earlie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therein specified which were entered into either before or after the commencement of the Act of 1938 held that the same was ultra vires the Provincial Legislature because it would operate as a prohibition to affect the past transactions. The retrospective element however was severed in that case by the deletion of the words either before or in the section and the rest of the provisions were left to operate prospectively and validly. The ratio of the decision is that past transactions which had been closed and title which had been acquired were sought to be reopened or set aside and the same could not be within the legislative competence of section 298 of the Government of India Act, 1935 which conferred power to prohibit the sale or mortgage of transactions. The words 'prohibit sale or mortgage' in section 298 of the Government of India Act, 1935 were construed to mean prospective or future prohibition as the words used plainly refer to things or transactions in future. The decisions of this Court in M/s. West Ramnad Electric Distribution Company (2) and State of Mysore v. Achiah Chetty([1969] 3 S.C.R. 55) are ample authorities for the proposition that there can be re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ental rights. The Attorney General contended that Article 31(2) and 31(2A) constituted a self contained code relating to acquisition and requisition of property, and once a property had been acquired by a law in compliance with the requirements of Article 31(2) there would not be any right left under Article 19(1)(f) and the validity of such a law of acquisition of property for public purpose could not be examined again by the requirements of Article 19(5) which is a relaxation of Article 19(1)(f). The two requirements of a law relating to acquisition or requisition of property under Article 31(2) are : first, that the acquisition or requisition of property can' be made only for a public purpose, and secondly, it can only be by authority of a law which provides for compensation. Article 31(2A) further enacts that where a law does not provide for the transfer of the ownership or right to possession of any property to the State or to a corporation owned or controlled by the State, it shall not be deemed to provide for the compulsory acquisition or requisitioning of property. The question for interpretation of Article 22 of the Constitution in the light of Article 19 came up fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unts to acquisition or requisition of property for a public purpose under Article 31(2). When Article 31(2) was amended by the Constitution Fourth Amendment Act, 1955, the decisions of this Court on that Article held that Article 19(1)(f) applies only to a deprivation of property under Article 31(1) but not to a law of acquisition of property for public purpose under Article 31(2). I shall now refer to these decisions. In the case of State of West Bengal v. Subodh Gopal Bose(v) the majority view of this Court was that clauses (1) and (2) of Article 31 as these stood before the Constitution Fourth Amendment Act, 1955 are not mutually exclusive in scope and content but are to be read together and understood as dealing with the same subject, namely, the protection of the right to property by means of limitations on the power of the State and the deprivation contemplated in clause (1) was held to be no other than the acquisition or taking possession of the property referred to in clause (2). The view in Gopalan's case([1950] S.C.R. 88) was again applied by this Court in State of Bombay v. Banji Munji and Anr. (2) also a pre-Amendment case-where it was contended that Article 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal rights were recognised in Article 19 . In that context this Court held that a law made depriving a citizen of his property shall be void, unless the law so made complied with the provisions of cl. (5) On Article 19 of the Constitution. At page 916 of the Report Subba Rao, J. said that the observations in Gopalan's case(') would have no bearing on Article 31(1) of the Constitution after clause (2) of Article 31 had been amended and clause (2A) had been inserted in that Article by the Constitution Fourth Amendment Act, 1955. Before the Constitution Fourth Amendment Act this Court held that clauses (1) and (2) of Article 31 were not mutually exclusivein scope and content but were to be read together, namely, that the words acquisition or taking possession referred to in clause (2) of Article 31 prior to the Amendment in 1955 were to be read as an instance of deprivation of property within the meaning of Article 31 (1) and therefore the same was not subject to Article 19. This is how the decision in Bhanji Munji's case(2) was explained by Subba Rao, J. in Kochuni's case(3) with the observation that the decision in Bhanji Munji's case(') no longer holds th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld was to be understood as meaning that it no longer governed the case of deprivation of property by means other than requisition and acquisition by the State. To my mind it appears that the view of this Court in Kochuni's case([1960] 3 S.C.R. 887) and Smt. Sitabati's case([1955] 1 S.C.R. 777) is that Article 31(2) after the Constitution Fourth Amendment Act. 1955 relates entirely to acquisition or requisition of property by the State and is totally distinct from the scope and content of Article 31(1) with the result that Article 19(1)(f) will not enter the arena of acquisition' or requisition of property by the State. This Court in the recent decision of State of Gujarat v. Shantilal Mangaldas and others([1969] 3 S.C.R. 341) again considered the applicability of Article 19(1)(f) in relation to acquisition or requisition of property under the authority of a law mentioned in Article 31(2). The Bombay Town Planning Act of 1955 was challenged as unreasonable and a violation of Article 19(1)(f) and (5). Shah, J. speaking for. the Court considered Article 31(2) as it stood after the Constitution Fourth Amendment Act, 1955 and said clause (1) operates as a protection ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of the petitioner that Article.31(2) will have to be read along with Article 19(1)(f) for the purpose of deciding the piece of legislation on the anvil of reasonableness of restrictions in the interest of the general public will mean that acquisition or requisition for a public purpose under Article 31 (2) is embraced within Article 19 (5). That would be not only depriving the provisions of the Constitution of harmony but also making Article 31(2) otiose and a dead letter. By harmonising is meant that each provision is rendered free to ,operate with full vigour in its own legitimate field. If acquisition or requisition of property for a public purpose has to satisfy again the test of reasonable restriction in the interest of the general public then harmony is repelled and Article 31(2) becomes a mere repetition and meaningless. It could not be said that when Article 31(2) was specifically enacted to deal with a case of acquisition or requisition of property for a public purpose the framers of the Constitution were not aware that it was a form of public deprivation of property. That is why it is important to notice the distinction between deprivation of property under Article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted for the welfare of the community and sought to be achieved by process of legislation so far as to carry on the policy of nationalization of land can fall on the ground of public purpose. The phrase public purpose has to be construed according to the spirit of the times in which particular legislation is enacted and so constructed, the acquisition of the estates has to be held to have been made for public purpose . The meaning of the phrase 'public purpose' is predominantly a purpose for the welfare of the general public. These 14 banks are acquired for the purpose of developing the national economy. It is intended to confer benefit on weaker sections and sectors. It is not that the legislation win have; the effect of denuding the depositors in the 14 banks of their deposits. The deposits will all be there. The object of the Act according to the legislation is to use the deposits in wider public interest. What was true of public purpose when the Constitution was ushered in the mid-century is a greater truth after two decades. One cannot be guided either by passion for property on the one hand or prejudice against deprivation on the other. Public purpose steers clear of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he course of business of banking, are matters coming within the class of subjects described in section 91, sub-section. 15 of the British North America Act, namely, 'banking, incorporation of Banks, and the issue of paper money'. Lord Watson said that the word 'banking' comprehends an expression which is, wide enough to embrace every transaction coming within the legitimate business of a banker. In Palmer's Company Precedents, 17th Ed. page 317 form No. 98 will be found the usual memorandum of object of a bank. These objects comprise business of banking in all branches including the receiving. of money and valuables on deposit or for safe custody, or otherwise, the collecting and transmitting money and securities and transacting all kinds of agency business commonly transacted by bankers. The other objects in the form are to undertake and execute any trusts the undertaking whereof may seem desirable, and also to undertake the office of executor, administrator, receiver, treasurer, registrar or auditor. In Banbury v. Bank of Montreal([1918] A.C. 624) the House of Lords considered the authority of the bank to give advice as to investments and Lord Finday, L.C. sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Regulation Act was enacted. 'Banking' is defined in section 5(b) of the 1949 Act as meaning the acceptance for the purpose of lending or investment of deposits of money from the public repayable on demand .or otherwise and withdrawable by cheque, draft order or otherwise. Section 6 of the 1949 Act contains two sub-sections. In .sub-section (1) it is enacted that in addition to the business of banking, a banking company may engage in one or more of the forms of businesses mentioned therein. In sub-section (1) there are clauses marked (a) to (o). In sub-section (2) of section 6 of the 1949 Act it is encated that no banking company shall engage in any business other than those referred to in sub-section (1). Clause (a) of section 6(1) enumerates the various forms of business, inter alia, the borrowing, raising or taking up of money, the lending or advancing of money either upon or without security, the drawing, making, accepting, discounting, buying, selling collecting and dealing in bills of exchange, hoondees, promissory notes, coupons, drafts, bills of lading, railway receipts, warrants, debentures, certificates, scripts and other instruments and securities whether trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion on behalf of the petitioner that the four disputed businesses are not banking businesses is not supportable either on logic or on principle when businesses mentioned in the sub-clauses of section 6(1) of the 1949 Act are recognised to be legitimate business activities of a banking company by statute and practice and usage fully supports that view. Clause (o) of section 6 (1) of the 1949 Act contemplates that .the Central Government might by notification specify any other form of business and therefore the Government could ask a banking company to engage' in a form of business which is not a usual type of business done by a banking company. In the first place, it would not be reasonable to think that the Government would ask a bank to do business of that type. Secondly, even if a bank were asked to do so that would not. rob the other permissible and legitimate forms of business mentioned in section 6(1) of the Act of their true character. Section 6(2) of the 1949 Act provides that no banking company shall engage in any form of business other titan those referred to in sub-section (1). The restriction contained in sub-section (2) establishes that the various types of busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n mortgage or in other manner upon the security of any immovable property, or the documents of title relating thereto. The Imperial Bank of India Act, 1920 in Schedule 1 as mentioned in section 8 of the Act authorised the bank to carry on several kinds of business including receiving of deposits, keeping cash accounts, the acceptance of the charge and management of plate, jewels, title deeds or other valuable goods on terms, transacting Of pecuniary agency business on commission and the entering into Of contracts of indemnity, suretyship or guarantee with specific security or otherwise, the administration of estates for any purpose whether as an executor, trustee or otherwise, and the acting, as agent on commission in the transaction of various kinds of business mentioned therein. The Indian Companies Act, 1913 did not define banking company or banking business though various sections, namely, 4, 133, 136, 138 and 145 and Schedule Form G referred to banking companies. The Indian Companies Amendment Act in 1936 for the first time defined a banking company in section 277F as a company which carried on the principal business of accepting of deposits on current account or otherwise, no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Banking Regulation Act, 1949 was enacted. I have already referred to the provisions of sections 5 and 6 of the 1949 Act and the businesses mentioned in section 6(1) and the definition of banking business in section 5(b). A most noticeable feature with regard to all these types of business of a banking company is thata banking company engages not only in the banking business but other businesses mentioned in section 6 of the 1949 Act with depositors' money. The entire business is one integrated whole. The provisions contained in section 6 (1) of the 1949 Act are the statutory restatement of the gradual evolution over a century of the various kinds of business of banking companies which are similar to those to be found in the State Bank of India Act, 1955 hereinafter called the State Bank Act. The business with regard' to deposit of valuables and safe deposit vaults is to be found in section 3(viii) of the State Bank Act, the agency business is mentioned in section 33(xii) of the State Bank Act. The business of guarantee, underwriting and indemnity is found in section 33(xi)(xii)(a) of the State Bank Act and the business of trusteeship and executorship is specifically found i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of death or any other incapacity. It is needless to state that these four disputed forms of business all spring out of the relation between the bank on the one hand and the customer on the other and the bank earns commission on these transactions or charges fees for the services rendered. Although trust accounts may be kept in a separate account all moneys arising out of the trust money go to the general pool of the bank and the bank utilises the money and very often trust moneys may be kept in fixed deposit with the trustee bank and expenses on account of the trust are met out of the general funds of the trustee bank. Payments to beneficiaries are made by crediting the beneficiaries' accounts in the trustee bank and if they are not constituents other modes of payment through other banks are adopted. The position of the banks as executor is similar to that of a trustee. Whatever moneys the bank may spent are recouped by the bank out of the accounts of the trust estate. After the definition of banking company had been introduced for the first time in 1936 in the Indian Companies Act, 1913 it appeared that the banks were not being managed proprely and the definition of a ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y or whose remuneration is in the opinion of the Reserve Bank excessive. One of the most important provisions in section 35 of 1949 Act, which states that the Reserve Bank at any time may and on being directed so to do by the Central Government cause an inspection to be made by one or more of its officers of the books of account and to report to the Central Government on any inspection and the Central Government thereafter if it is of opinion after considering the report that the affairs of the banking company are being conducted to the detriment of the interests of its depositors, may prohibit the banking ,company from receiving fresh deposits or direct the Reserve Bank to apply under section 38 of the winding up of the banking company. Another important provision in the 1949 Act is found in section 27 which provides for monthly returns in the prescribed form and manner showing assets and liabilities. The power of the Reserve Bank under sections 27 and 35 of the 1949 Act relates to the affairs of the banking company which comprehend the various forms of business of the bank mentioned in section 6 of the 1949 Act. Then again section 29 of the 1949 Act contemplates accounts relating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ories and to describe each of them by a word of broad and general import. The doctrine of pith and substance used in Union Colliery Company of British Columbia when the legislation is referable to one or more entries the Courts try to find out what the pith and substance of the legislation is. In the present case the Act is beyond any doubt one for acquisition of property and is also in relation to banking. The legislation is valid with reference to the entries, namely, Entry 42 (Requisition) in List 111, Entry 45 (Banking) in List 1. Counsel for the petitioner contended that undertaking of banking companies could not be the subject matter of acquisition and acquisition of all properties in the undertaking must satisfy public purpose as contemplated in Article 31(2). This contention was amplified to mean that undertaking was not property capable of being acquired and some assets like cash money could not be the subject matter of acquisition. The Attorney General on the other hand contended first that undertaking is property within the meaning of Article 31(2), secondly, undertaking in its normal meaning refers to a going concern and thirdly it is a complete unit as distinct from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of sale of an undertaking as happened in Doughty v. Lomagunda Reefs, Ltd.(') the purchaser was required to pay all debts due by and to perform outstanding contracts comprised in the entire undertaking. The word 'undertaking' is used in the Indian Electricity Act, the Air Corporation Act, 1953, the Imperial Bank of India Act, 1920 (sections 3, 4, 6 and 7), the State Bank of India Act, 1955 [Section 6(1)(g)], the State Bank Subsidiaries Banks Act, 1959 [Section 10(1)], the Banking Regulation Act, 1949 [section 36AE(1)] and there have been legislative provisions for acquisition of some of these undertakings. Under section 5 of the Act of 1969 the undertaking of each existing bank shall be deemed to include all assets, rights, powers, authorities and privileges and all property, movable and immovable, cash balances, reserve funds, investments and all other rights and interests arising out of such property as were immediately before the commencement of this Act in the ownership, possession, power or control of the existing bank in relation to the undertaking. This Court accepted the meaning of property given by Rich, J. in the Minister for State for the Army v. Dalziel( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attracted. Counsel for the petitioner contended that as a result of the Constitution First Amendment Act. 1951 Article 19(6) was clarified to the effect that the word 'restrictions' would include prohibition or exclusion which was dealt with the second limb of Article 19(6). It may be stated here that prior to the amendment of Article 19(6) the second limb spoke only of law prescribing qualifications for practising any profession or carrying on any occupation, trade or business. As a result of the amendment of the second limb of Article 19(6) consisted of two sub-articles the first sub-,article relating to qualifications for practising profession or carrying on any occupation, trade or business and the second sub-article relating to carrying on by the State of trade, business industry to the exclusion 'complete or partial of citizens or otherwise. The second sub-article was really an enlargement of clause (6) of Article 19 as a result of the amendment. The main contention of counsel for -the petitioner was that the second limb of Article 19(6) after the expression 'in particular' must also satisfy the test of reasonable restriction contained in the first limb of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Earl Fitzwilliam's Wentworth Estates Co.v.Minister of Housing and Local Government and another(3) in support of the proposition that the words 'in particular' in Article 19(6) were used to place the accent on reasonable restrictions in that clause as the saving feature of a law affecting Article 19(1)(g). Section 43(1) of the Town and Country Planning Act, 1947 which was considered was as follows: purpose connected with the performance of their functions under the following provisions of this Act, and in particular may so acquire any land for the purpose of disposing of it for development for which permission has been granted under Part III of this Act on terms inclusive of any development charge payable under those provisions in respect of that development . It was held that the sub-section conferred a single power on the Central Land Board and not two powers, viz., that the boards have. power to acquire land for the purpose connected with the ,performance of their functions and the words in the second limb ,of the section were no more than a particular instance of that which the legislature regarded as part of the Board's functions. The purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces to carry on business. In the present case, the acquisition is not unconstitutional and the bank is free to carry on all businesses other than banking. It cannot be suggested that. after compensation has been provided for the State will have to provide moneys to enable the existing bank to carry on these businesses. That would be asking for something beyond the limits of the Constitution. If the entire undertaking of a banking company is taken by way of acquisition the assets cannot be separated to distinguish those belonging to banking business from others belonging to non-banking business because assets are not in fact divided on any such basis. Furthermore that would be striking at the root of acquisition of the entire undertaking. It would be strange to hold in the teeth of express provisions in the Act of 1969 permitting the banks to carry on business other than banking that the same will amount to a prohibition on the bank to carry on those businesses. I find it difficult to comprehend the contention of the petitioner that a permissive provision allowing the banks to carry on these businesses other than banking becomes unreasonable. If that provision was not-there the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vernment are in regard to matters involving public interest which means that this is objective and subject to judicial scrutiny and both the Central Government and the Governor of Reserve Bank are high authorities. As a result of section 25(1) (c) of the Act of 1969, 14 banks will be subject to the provisions of the 1949 Act enumerated in sections 15, 17, 19, 20, 21, 23, 24, 25, 26, 27, 28, 29, 31, 34, 35, 35A, 36 and 48. These sections principally deal with restrictions as to payment of dividend, prohibition of floating charge on assets, creation of reserve fund, restrictions on subsidiary company, restrictions on loans and advances, power of the Reserve Bank to control -advances by banking companies, restrictions on the opening of new places of business, maintenance of percentage of assets, return of unclaimed deposits, furnishing of returns to the Reserve Bank, publication of information by the Reserve Bank, submission of accounts and balance sheet to the Reserve Bank, inspection by the Reserve Bank, power of the Reserve Bank to give directions with regard to management, and imposition of penalties for contravention of the provisions of the Act. There are other statutes wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in working the Act of 1969 directions from the Central Government are necessary to deal with policy and other matters to serve the needs of national economy. Counsel on behalf of the petitioner next contended that acquisition of the 14 banks and the prohibition of banking business by the existing banks violated Article 301 and was not saved by Article 302 because it is not required in the public interest, As to the four disputed businesses which the existing banks can under the Act carry on, it was said that the same was an infraction of Article 301. Article 305 to my mind directly applies to a law relating to bank and all businesses necessarily incidental to it carried on by the State to the complete or partial exclusion of 14 banks. Article 302 can have no application in such a case. An individual cannot complain of violation of Article 301. (1). Article 305 applied in the present case and therefore neither Article 301 nor Article 302 will apply. Article 302 is an enabling provision and it has to be read in relation to Article 301. Acquisition of property by itself cannot viol-ate Article 301 which relates to free trade, commerce throughout India. The object of acquisitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ections of the economy, namely, agriculture, small scale industry and retail trade. The Act of 1969 is for development of national economy with the aid of banks. There are needs of various sectors. The legislature is the best judge of what should subserve public interest. The relative need is a matter of legislative judgment. The legislature found 14 banks to have special features, namely, large resources and credit structure and good administration. The categorisation of ₹ 50 crores and over vis-a-vis other banks with less than ₹ 50 crores is not only intelligible but is also a sound classification. From the point of view of resources these 14 banks are better suited than others and therefore speed and efficiency which are necessary for implementing the objectives of the Act can be ensured by such classification. In the case of Shri Ram Krishna Dalmia v. Shri Justice S. R. Tendolkar Others([1959] S.C.R. 279), it was said that the Court would take into consideration the history of the times and could also assume the state of facts existing at the time of legislation. A presumption also arises in regard to constitutionality of -a piece of legislation. In the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und to form a basis of classification in the case of Mohd. Hanif Quareshi v. State of Bihar([1954] S.C.R. 371). In the case of Harnam Singh and Ors. v. Regional Transport Authority, Calcutta and Ors.(4) Mahajan, J. said that in considering Article 14 the Court should not adopt an attitude which might well choke all beneficial legislation and legislation which was based on a rational classification was permissible. It will not be sound to suggest that there are other banks which can be acquired and these 14 banks should be spared. There is always possibility of discerning some kind of inequality and therefore grouping has to be made. where the legislature finds that public need is great and these 14 banks will be able to supply that need for the development of national economy classification is reasonable and not arbitrary and is based on practical grounds and consideration supported by the large resources of over ₹ 50 crores of each of these 14 banks and their administration and management. I am, therefore, of opinion that the acquisition of the undertakings does not offend Article 14 because of intelligible differentia and their rational relation to the object to be achieved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner's arguments were accepted the Constitution would read that unless law provided for a just equivalent it shall be called in question. It was, therefore, said by the Attorney-General that if just equivalent was to be aimed at the second limb of Article 31(2), namely, that inadequacy would not be questioned would become redunant and meaningless. If the law enjoined that there was to be compensation and either principle for determination of compensation or -amount of compensation was fixed the Court could not go into the question of adequacy or reasonableness of compensation and the Court could not also go into the question of result of -application propriety of principle or reasonableness of the compensation. In Vajravelu Mudaliar's case([1965] 1 S.C.R. 614) this Court referred to the decision of Bela Banerjee's case([1954] S.C.R. 558) where it was held that compensation in Article 31(2) meant just equivalent or full indemnification. In Vajravelu Mudaliar's case([1969] 3 S.C.R. 341) it was contended that the Land Acquisition Madras Amendment Act, 1961 had provided for acquisition of land for housing schemes and laid down principles for compensation di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its value in 1930 should be given and though 100 acres are acquired only 50 acres will be paid for, these would not enter the question or area of adequacy of compensation. Another rule which was laid down in Vajravelu Mudaliar's case([1954] S.C.R. 558) is that the law may prescribe compensation which is illusory. To illustrate, a property worth a lakh of rupees might be paid for at the sum of ₹ 100 and the question in that context would not relate to the adequacy of compensation because there was no compensation at all. Two broad propositions which were laid down in Vajravelu Mudaliar's case ([1965] 1 S.C.R. 614) are these. First, if principles are not relevant to the property acquired or not relevant to the value of the property at or about the time it is acquired, these are not relevant principles. The second proposition is that if a law prescribes a compensation which is illusory the Court could question it on the ground that it is not compensation at all. In the case of Shantilal Mangaldas(1) the Bombay Town Planning Act of 1950 which was repealed by the Bombay Town Planning Act of 1955 came up for consideration. There was a challenge to the Bombay Act of 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of compensation fixed by the legislature is not liable to be challenged before the Court onthe ground that it is not a just equivalent the principles specified for determination of compensation will also not be open to challenge on the plea that the compensation determined by the application of these principles is not a just equivalent. The right declared by the Constitution guarantees compensation before a person is compulsorily expropriated of the property for public purpose. Principles may be challenged on the ground that they are not relevant to the property acquired or the time of acquisition of the property but not on the plea that the principles are not relevant to the determination of a fair or just equivalent of the property acquired. A challenge to the statute that a principle specified by it does not provide or award a just equivalent will be a clear violation of the constitutional declaration that inadequacy of compensation provided for is not justiciable. Shah, J. referred to the decision of this Court in the case of Union of India v. The Metal Corporation of India Ltd. Anr. ([1967] 1 S.C.R. 255) and expressed disagreement with the following view pressed in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that when the relevant principle set out is ascertained value the petitioner could yet contend that market value should be the principle. It would really be going into adequacy of compensation by preferring the merits of the principle, to those of the other for the oblique purpose of arriving at what is suggested to be just equivalent. To my mind it is unthinkable that the legislature after the Constitution Fourth Amendment Act intended that the word 'compensation' would mean just equivalent when the legislature put a bar on challenge to the adequacy of compensation. Just compensation cannot be inadequate and anything which is impeached as unjust or unfair is impinging on adequacy. Therefore. just equivalent cannot be the criterion in finding out whether the principles are relevant to compensation or whether compensation is illusory. In Vajravelu Mudaliar's case(1) the Court noticed continuous rise in land price but accepted an average price of 5 years as a principle. An average price over 5 years in the teeth of a continued rise in price would not aim at just equivalent according to the petitioner's contention there. Again potential value of land which was exclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore they are valid subject matter of acquisition. No acquisition or requisition of the undertaking of the banking company is complete or comprehensive without all businesses which are incidental -and conducive to the entire business of the bank. The entire undertaking is the subject matter of acquisition and compensation is to be paid for the undertaking and not for each of the 'assets of the undertaking. There is no uniform established principle for valuing an undertaking as a going concern but the usual principle is assets minus liabilities. If it be suggested that no compensation has 'been provided for any particular asset that will be questioning adequacy of -compensation because compensation has been provided for the entire undertaking' The compensation provided for the undertaking cannot be called illusory because in the present case principles have been laid down. The Second Schedule of the Act of 1969 deals with the principles of compensation for the undertaking. The Second Schedule is in two parts. Part 1 relates to assets and Part 1 relates to liabilities. The compensation to be paid shall be equal to the sum total of the value of assets calculated i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on capitalisation method which is accepted for valuation of land and properties. It was next said by counsel for the petitioner that Explanation 2(1) in Part 1 was an irrelevant principle because it was -a concept borrowed from Income Tax Act for calculating income and not capital value. It was said that 12 times the annual rent was not a relevant principle and was not an absolute rule and compensation might be illusory. It was also said that Explanation 2(1) would be irrelevant where 2 plots were side by side, one with building and the other vacant land because the latter would get more than the former and in the former standard rent was applied and the value of land was ignored and therefore it was an irrelevant principle. That will not be illusoriness.Standard rent necessarily takes into account value of land on which the building is situated because no rent can be thought of without a building situated on a plot of land. Article 31(2) does not enjoin the payment of full or just equivalent or the payment of market value of land and buildings.There should be a relevant principle for determining compensation for the property acquired. Capitalisation method is not available for lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the corresponding new bank may reasonably be expected to be required to meet out of its own resources on or after the commencement of the Act. Interest payable on mortgage or borrowed capital at or after the commencement of the Act will not be taken into account as outgoings deducted under capitalisation method. Explanation 2(2) was criticised by counsel for the petitioner on the ground that plinth area related to the floor area and if a floor was not occupied the plinth area thereof was not taken into account. Explanation 2(1) relates to determination of compensation by finding out ascertained value in the case of building which is wholly occupied. Explanation 2(2) relates to the case of a building which is partially occupied. Explanation 2(3) refers to land on which no building is erected or which is not appurtenant to any building. In the case of partial occupation Explanation 2(2) sets out the principle of compensation of partially occupied building. Again in Explanation 2(3) the criticism on behalf Of the petitioner that if there is a garage or one storeyed structure the principle will not apply is explained on the ground that the expression 'appurtenant' mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allenge as to compensation for goodwill falls within the area of adequacy. As to Part II of the Schedule counsel for the petitioner said that liabilities not appearing in the books would be deducted but in the case of assets only those appearing in the books will be taken into account. Nothing has 'been shown in the petition that there ,are assets apart from those appearing in the books. It would not be appropriate to speak of liabilities like current income tax liability, gratuity, bonus claims as liabilities appearing in the books. It was said on behalf of the petitioner that interest from the date of acquisition was not provided for. That would again appertain to the adequacy of compensation. Furthermore, interest has been provided for under section 6(3) (a) (b) of the 1969 Act. It was also said that if there was a large scale sale of promissory notes or stock certificates the value would depreciate. Possibility of depreciation does not vitiate the principle or constitutionality of a measure. The principles which have been set out in the 1969 Act 'are relevant to the determination of compensation. When it is said that principles will have to be relevant to the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portance. Agriculturists have 34 per cent credit from Co-operatives, 5 per cent from banks and the rest from money lenders. The requirements are said to be ₹ 2,000 crores for agriculturists. The small scale industries are said to employ one third of the total industrial population and 40% of the industrial workers are in small scale industries. Banks will have to meet their needs. Small artisans and retail trade have all need for credit. It is said that barely 1.8% of the total bank advances goes to small scale industries. It is said in the affidavit that the policy of the Government is to take up direct management of credit resources for massive expansion of branches, vigorous principles for mobilisation of deposits and wide range programme to fill the credit gaps of agriculture, small scale industries, small artisans, retail trade and consumer credit. This policy can be achieved only by direct management by State and not merely by social control. Almost all the banks are in favour of large scale industry. This direct control and expansion of bank credit is intended to make available deposit resources and expand the same to serve the country in the light of Directive Princip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Narain Singh's case(3) took a similar view that the Governor General was the sole judge of the state of emergency for promulgating Ordinances. The sole question is whether the power of the President in Article 123 is open to judicial scrutiny. It was said by counsel for the petitioner that the Court would go into the question as to whether the President was satisfied that circumstances existed which rendered it necessary for the President to promulgate an Ordinance. Liversidge's case(1) was relied upon by counsel for the petitioner. That case interpreted the words reasonable cause to believe . It is obvious that when the words used are reasonable cause to believe it is to be found out whether the cause itself has reason to support it and the Court goes into the question of ascertaining reasons. In Liversidge's case(') it was said that the words has reasons to believe meant an objective belief whereas the words if it appears or if satisfied would be a subjective satisfaction. The words 'if it appears' came up for consideration in two English cases of Ayr Collieries(2) and the Carltona(3) and the decision was that it was not within the province ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he opinion of the Central Government there are circumstances suggesting, that the business of the company is not properly conducted, appoint competent persons to investigate the affairs of the company. The opinion which is to be formed by the Central Government under the Companies Act in that section is in relation to various facts and circumstances about the business of a company and that is why this Court came to the conclusion that the existence of circumstances but not the opinion was open to judicial scrutiny. This was the view of this Court in the cases of Barium Chemical's(1) and Rohtas Industries('). The decisions in Barium Chemicals([1966] Supp. S.C.R. 311) and Rohtas Industries Ltd.( [1969] 2 S.C.R ) turned on the interpretation of section 237 of the Companies Act and executive acts thereunder. The language used in that section is 'in the opinion of', The Judicial Committee in the Hubli Electricity case(76 I.A. 57) interpreted the words the Provincial Government may, if in its opinion the public interest so requires, revoke a licence in any of the following cases to mean that the relevant matter was the opinion and not the ground on which the opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of the House of Lords in Padfield v: Minister of, Agriculture Fisheries and Food(') on which counsel for the petitioner relied turned on interpretation of section 19(3) of the Agricultural Marketing Act which contemplated a committee of investigation, if the Minister so directed, to consider and report to the Minister on any report made by the consumer' committee and any complaint made to the Minister as to the operation of any scheme which in the opinion of the Minister could not be considered, by a consumers' committee under one of the sub-sections in that. section. The House of Lords held that the Minister had full or unfettered discretion but he was bound to exercise it lawfully that. is to say not to misdirect himself in law, nor to take into account irrelevant matters-nor to omit relevant matters from consideration That was an instance of a writ of mandamus directing exercising of' discretion to act on the ground that it was a power coupled with. duty. The only way-in which the exercise of power by the President can be challenged is by establishing bad faith or mala fide and corrupt motive. Bad faith will destroy any action. Such bad faith, will be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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