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TMI Blog1983 (10) TMI 269X X X X Extracts X X X X X X X X Extracts X X X X ..... fully. There are two methods by which the transport industry can be nationalised:- (1) where the Government acts under Chapter IV A (s.68 (b) (c) of the Motor Vehicles Act) and after due publication formulates a scheme for taking over route or routes and invites objections thereto. After the objections have been received they are decided and ultimately processed. This method however is dilatory and involves a time consuming process which leads to delaying tactics adopted by the operators. Even so, after the objections have been decided the operators or the persons concerned are not satisfied but go up in appeals to the law courts. These delaying tactics have resulted in most cases in an indefinite postponement of the scheme of nationalisation. Moreover, normally this process is applied to a route or routes selected by the Government and is accomplished by stages which also takes a long time. (2) Another method which is the more effective one is to take over the running of the entire transport services by nationalising them, alongwith their units (vehicles, workshops, etc.) either by one stroke or by stages spread over a short time. This course is clearly permissible unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her had the will nor the capacity to penetrate as deep as possible into areas so far inaccessible to the travelling public and would confine their running of the services only to serve important points. When the State takes over the entire transport services, it would undoubtedly be its duty to see that the vehicles reach the most distant part or corner of the State and serve as many travelling public as possible so that nobody is caused any inconvenience. These are some of the initial advantages of a total nationalisation scheme, which would be brought to the fore and provide an ideal service for the members of the community at large. It may be that in this process some financiers would suffer loss and some operators may also be wiped out of the business but this cannot be helped as the scheme of our Constitution is that individual rights or benefits must yield to the larger benefits and good of the entire community. Some of these points were very elaborately dealt with in the case of State of Karnataka Anr. etc. v. Ranganatha Reddy Anr. etc. (for facility, hereinafter referred to as 'Karnataka case'). The Act was for the purpose of carrying out and implementing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of our Constitution did not advisedly make these principles enforceable was perhaps due to the vital consideration of giving the Government sufficient latitude to implement these principles from time to time according to capacity, situations and circumstances that may arise. On a careful consideration of the legal and historical aspects of the directive principles and the fundamental rights, there appears to be complete unanimity of judicial opinion of the various decisions of this Court on the point that although the directive principles are not enforceable yet the court should make a real attempt at harmonising and reconciling the directive principles and the fundamental rights and any collision between the two should be avoided as far as possible. In the instant case, we are really concerned with the second limb of the Constitution, viz., the importance and significance of the directive principles contained in part IV. We now propose to discuss the purport, significance, scope, ambit and rationale of Art.31C, which may be extracted thus: 31C. Saving of laws giving effect to certain directive principles Notwithstanding anything contained in article 13, no law giving ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ala (hereinafter referred to as 'Bharti's case'), but a portion of Art. 31C was held to be invalid. While considering the scope, ambit and constitutional validity of Art. 31C, the majority judgment in Bhararti's case (supra) held that the first part of Art 31C was valid but the second part, viz., and no law containing a declaration that it is for giving effect to such policy shall be called in question in any court on the ground that it does not give effect to such policy was held to be invalid. In other words, so far as the present aspect of the case before us is concerned, the majority judgment clearly held that while Art. 31C permitted Parliament to make any law giving effect to the policy of the State towards securing the principles contained in cls. (b) and (c) of Art. 39, such law could not be declared void even if such a course of action violates or abridge any of the rights conferred by Art. 14, 19 or 31. Another crucial stage in the history of Art. 31C arose when the famous 42nd amendment of the Constitution was passed by the Parliament. By virtue of this amendment a complete, irrevocable and impregnable constitutional protection was given to laws p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of Art.31C is now beyond challenge and in this connection one of us (Reddy, J.) speaking for the Court made the following observations: In the second place, the question of the constitutional validity of Art.31C appears to us to be concluded by the decision of the Court in Kesavananda Bharati case. In view of the aforesaid decisions, it is not necessary for us to dilate further on the question of the constitutional validity of Art.31C. Another important facet of Art.31C which has been emphasised by this Court is that there should be a close nexus between the statute passed by the legislature and the twin objects mentioned in clauses (b) and (c) of Art.39. In approaching this problem and considering the question of nexus a narrow approach ought not to be made because it is well settled that the courts should interpret a constitutional provision in order to suppress the mischief and advance the object of the Act. The doctrine of nexus cannot be extended to such an extreme limit that the very purpose of Art.39 (b) (c) is defeated. By requiring that there should be nexus between the law and Art.39(b) (c) what is meant is that there must be a reasonable connection between t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y that on a proper and true construction of Art. 31C in the light of the decisions of this Court, the question of compensation becomes totally irrelevant. If, once the conditions mentioned in Art. 31C are fulfilled by the law, no question of compensation arises because the said Article expressly excludes not only Arts. 14 and 19 but also 31 which, by virtue of the 25th amendment, had replaced the word 'amount' for the word 'compensation' in Art. 31 (2). As already extracted, Chandrachud, CJ in Waman Rao's case has observed that once Art. 31C is attracted, Arts. 14, 19 and 31 are out of harm's way. The question whether in a case where Art. 31C applies, compensation is necessary to be given, has the following facets:- (a) if Art. 31C is taken, as it must be, to exclude Art. 31 (2), the question of compensation becomes irrelevant and otiose, (b) nationalisation of transport services by the State is unobjectionable and unexceptionable and can be accomplished in three different methods- (i) nationalisation of the services and not the units thereof, (ii) nationalisation of the services alongwith the entire assets of the units, and (iii) nationali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be valid on the basis of this decision and would not violate Art. 19, being a reasonable restriction. The major part of the spirit of Art. 31C, which was introduced almost a decade after the above decision, was clearly anticipated and accepted in Akadasi Padhan's case (supra) and this Court in a way paved the way for more socialistic reform which may destroy any obstacle coming in the way of achieving the important directive principles of the Constitution. More than this we would not like to say anything regarding this decision because Arts. 14, 19 and 31 are completely excluded by Art. 31C. The provisions to validate laws made to secure the objects in Art. 39 (b) (c) seem to be the conclusive chapter of a humble beginning with an appeal to the courts to make a doctrinaire and pragmatic approach in such cases. Mr. Ray rightly argued that in view of the provisions of Art. 31C, the Act squarely falls within the protective umbrella of the said Article inasmuch as in pith and substance, the Act seeks to subserve and secure the objects contained in clauses (b) (c) of Art. 39 and is, therefore, fully protected from the onslaught of Arts. 14, 19 and 31. To counter the argume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the law laid down by this Court and the aforesaid conclusions reached by us. To being with, the Act gives a detailed preamble describing the ends and objects of the Act. We might mention that in the first paragraph of the preamble, cl. (c) of Art. 39 was not mentioned in the Ordinance but when the Ordinance was replaced by the Act, cl. (c) of Art. 39 was inserted. A perusal of the various clauses of the preamble reveals that the legislation was a purely progressive measure meant not to confiscate the property or destroy the business of the stage carriage operators but to take absolute control of the State transport services by stages in various revenue districts. As already indicated, the Act was preceded by an Ordinance, containing identical provisions, which was issued on 12.1.1973. The constitutional validity of the Ordinance was challenged in the Madras High Court and while the judgment of the High Court was pending, the Ordinance was replaced by the Act on March 14, 1973. The High Court struck down the Ordinance as being unconstitutional and an interim order was passed by which all the provisions of the Act were stayed, pending appeal to this Court. One time in June 197 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssary for us to give a detailed description of cls. (a) to (s) of this section. Section 4, which is the pivotal section, provides that on and from the date as may be specified by the Government in respect of any stage carriage or contract carriage operator, the permit issued to the operator shall vest in the Government absolutely free from all encumbrances and such carriages or contract carriages, which vest in the Government, shall by force of such vesting be freed and discharged from any trust, obligation and encumbrances, etc. In other words, the intention of the Act was that while nationalising the State transport services the State should not encumber itself with the liabilities that may have been incurred by the bus operators prior to the enforcement of the Act so that the policy of nationalisation may run smoothly and without any obstruction or obstacle. At the same time, s. 4 also provides that any person interested shall have no claim in relation to such carriages or contract carriages taken over by the State in pursuance of the aforesaid nationalisation policy and the claim, if any, would be limited to the amount payable in respect of such stage carriages or contract c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of data and details and the like. Another important provision of the Act is section 6 which provides for a reasonable amount of compensation to be paid to the operators on their properties vesting in the Government. Sub-s. (1) of s. 6 says that every person interested shall be entitled to receive such amount as may be determined in the second schedule to the Act, that is to say, where the amount can be fixed by agreement, the same shall be determined in accordance with the agreement. Secondly, where no agreement can be reached, the Government shall appoint as arbitrator a person who is or has been or is qualified for appointment as a District Judge. While appointing an arbitrator, the Government may, if necessary, nominate a person having expert knowledge as to the nature of the acquired property to assist the arbitrator. These two provisions clearly show the attitude of fairness that the Act displayed towards the operators on the vesting of their properties in the Government. Cl. (e) of sub-s. (1) of s. 6 provides that the arbitrator after hearing the dispute and the parties concerned, would determine the amount which appears to him to be just and reasonable and also specify t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perusal of these guidelines that heavy compensation has not been provided for, obviously because if compensation at the market rate is given it would amount to a huge drain on the State treasury which may cause a complete financial breakdown and thus frustrate the very policy of nationalisation. We might mention here that the respondents argued that the rates of compensation were wholly inadequate and absolutely illusory because the arbitrator or the High Court cannot travel beyond the second schedule in assessing the compensation. Mr. S.S. Ray, appearing for the appellant State fairly conceded that the schedule was merely a sort of a guideline which was not exhaustive for determining the quantum of compensation and it may be taken as a concession on behalf of the State that the officers fixing the compensation were entitled to make marginal but not vital departures from the principles of compensation laid down by the Act which seems to be the real intention of the statute in question by providing for a broad-based compensation and allowing the same to be decided by the highest court of justice in the State, viz., the High Court. In the circumstances, it cannot be said that the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hibits transfers of any stage or contract carriage and enjoins that if any transfer is made, the shall be void and is liable to be acquired by the Government. Section 18 makes a provision for the appointment of administrators for arranging the taking over of the acquired property and for carrying out the duties assigned to them. Section 19 also makes an identical provision for appointment of authorised officers. Section 20 is also an important provision which has been introduced for the purpose of safeguarding the existing staff of the operators for being absorbed in the State Transport Department of the Government, on a given scale, or any corporation or company owned by the Government and for this purpose a number of steps have been detailed in this section. Section 21 gives the resultant consequences of the policy of nationalisation and prescribes the modes in which the newly acquired stage or contract carriages are to be run by the corporation or the company or the State Transport Department of the Government to which the acquired property is transferred. Section 25 is also a sort of a routine provision making provisions for issue of orders, notices and the manner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em to convey that being a national policy evolved by the Government itself, it would undoubtedly be in great public interest, (d) the process of distribution of material resources and the units taken over is more or less the same, (e) by and large the scope and ambit, the manner and method of formulation of the nationalisation policy are identical, and (f) the principles of compensation and the machinery provided for determining the same in both the Acts are absolutely similar with minor and negligible variations here and there. Thus, all the arguments addressed regarding the constitutional validity of the Karnataka Act before this Court apply equally and fully to the present Act and in view of the clear decision of this Court in the Karnataka case very little survives so far as the arguments in this case, advanced on behalf of the respondents, are concerned. On the other hand, three important decisions of this Court, viz, Minerva Mills, Waman Rao and Sanjeev Coke Manufacturing Co. cases, which were given after the Karnataka case, reinforce and reiterate the conclusions reached by this Court in the Karnataka case. Before examining the reasons given by the High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exus rather than the law. In view of the aforesaid developments, most of the conclusions arrived at and the important reasons given by the High Court no longer survive and fade into oblivion. The counsel for the parties also realising this difficulty did not press all the arguments that were advanced before the High Court or accepted it but confined their arguments to the framework and applicability of Art. 39 (b) (c). In fairness to the High Court, we cannot blame it because the law on Art. 31C was crystallised after the delivery of its judgment. We, therefore, propose to give a very brief summary of the reasons given by the High Court for striking down the Act laying stress only on the points that survive. In the first place, the High Court seems to have accepted the argument of Mr. Chari, appearing for the operators, that by virtue of the Act the financiers who were the owners of the stage or contract-carriages would be completely wiped out of their business and therefore Art. 19 was clearly violated. As Art. 31C gives complete immunity from challenge in respect in of any law made to promote objects enshrined in Art. 39 (b)(c), this argument no longer survives and was wr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unprincipled under- value...................... The payment may be substantially less than the market value, the principles may not be all-inclusive, but the court would not, because it could not, upset the taking save where the principles of computation were too arbitrary and illusory to be unconscionably shocking. Thus, from a perusal of Bharati's as also Karnataka cases the following principles for assessing compensation after the amendment of Art. 31 (2) by substitution of the word 'amount', may be summarised: (1) that compensation should not be arbitrary or illusory, (2) that the amount fixed as compensation should not be unprincipled, (3) that the compensation sought to be paid should be so arbitrary or illusory as to be unconscionably shocking, and (4) it is not necessary that the compensation must represent the actual market value or be adequate, for even if compensation is inadequate but not illusory, the requirement of Art. 31 (2) is fully complied with. Relevant sections of the Act, on the question of compensation are completely in accordance with the principles enunciated above and hence the argument of the counsel for the respondent that the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to a just and sufficient compensation to the operators whose properties are taken away. In fact, it was to meet such situations that Art. 31C was introduced so that any obstacle resulting in evil consequence to the operators or persons whose properties are taken over is completely removed. For these reasons, we reject this argument of the respondents' counsel as being totally ill-founded. It was then argued for the respondents that the nationalisation of the entire transport services along with the vehicles and workshops, etc., cannot be in public interest because it would not serve any public good. In the same token, it was argued that the manner and method in which the nationalisation policy has been enacted in the Act does not per se secure twin objects of Art. 39 (b) (c) for two reasons- (1) that taking over of the vehicles, tools, implements and the workshops, etc., is not contemplated by Art. 39 (b) as they are moveable properties and therefore not material resources, (2) that the measure, if translated into action, does not prevent the concentration of wealth in the hands of a few and hence Art. 39 (c) is not attracted at all. We shall deal with these argume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y private operators and in order to provide better facilities to the transport passengers or to the general public, acquisition of vehicles or for that matter the rights and interests in the contract carriage operators alongwith their land, buildings, workshops, etc., would always be permissible. We cannot conceive of a greater public interest in respect of a policy than where the legislature expressly intends to promoter or secure the objects of Art. 39 (b) (c) particularly when, as indicated above, the said two clauses have been conferred a special status and given an impregnable protection by Art. 31C itself. We, therefore, fully agree with the view taken by this Court in the Karnataka case and hold that the nationalisation of the transport services is undoubtedly in public interest. As regards the application of Art. 39 (b) (c), the High Court on the basis of previous decisions of this Court held that- (1) the objects of Art. 39 (b) (c) have not been subserved, and (2) Art. 39 has no application to moveable properties and since the vehicles taken over by the State under the Act were moveable properties, Art. 39 was not applicable in the present case. With due res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us (Reddy, J.) made the following observations: The next question for consideration is whether the Coking Coal Mines (Nationalisation) Act is a law directing the policy of the State towards securing that the ownership and control of the material resources of the community are so distributed as best to subserve the common good. Coal is, of course, one of the most important known sources of energy, and, therefore, a vital national resource. Shri Sen argued that material resources had first to be acquired by the State before they could be distributed. A law providing for acquisition was not a law for distribution. We are unable to appreciate the submission of Shri Sen. The above decision therefore furnishes a complete answer to the reason given by the High Court or the arguments advanced before us by the counsel for the respondents on the question as to the nature and character of material resources. Summarising the arguments relating to compensation and the prejudice caused to the operators, and the nationalisation policy contained in the Act, the position seems to be as follows: In the first place, as indicated above, once Art. 31C applies, the net of the protecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acquired in public interest for the avowed purpose giving effect to the principles enshrined in Art. 39 (b) (c), no compensation is necessary and Art. 31 (2) is out of the harm's way, and (2) that even if the law provides for compensation, the courts cannot go into the details or adequacy of the compensation and it is sufficient for the State to prove that the compensation was reasonable and not monstrous or illusory so as to shock the conscience of the court. The persons whose properties are taken over cannot be heard to complain that the compensation awarded to them should be according to market value which, if conceded, would defeat the very purpose and objective of Art. 39 (b) (c). In the instant case, both the conditions mentioned above are fully satisfied having regard to the provisions of the Act. The last contention raised by the respondents was that the conditions or objects mentioned in Art. 39 (b) (c) are not subserved by the nationalisation policy codified by the Statute because there is no distribution at all in the sense that the property taken over is distributed to various member of the community for their benefit. Moreover, the members of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property of one should be taken over and distributed to others like land reforms where the lands from the big landlords are taken away and given to landless labourers or for that matter the various urban and rural ceiling Acts. That is only one of the modes of distribution but not the only mode. In the instant case, as we have already pointed out, distribution is undoubtedly there though in a different shape. So far as the operators were concerned they were mainly motivated by making huge profits and were most reluctant to go to villages or places where the passenger traffic is low or the track is difficult. This naturally caused serious inconvenience to the poor members of the community who were denied the facility of visiting the towns or other areas in a transport. By nationalising the transport as also the units the vehicles would be able to go to the farthest corner of the State and penetrate as deep as possible and provided better and quicker and more efficacious facilities. This would undoubtedly be a distribution for the common good of the people and would be clearly covered by cl.(b) of Art.39. In the Karnataka case, the word 'distribution' clearly fell for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, instruments, machinery, tools, plants, etc., as mentioned in sub-section (2) of section 4 of the Act. Thus, in short, the position seems to be that by virtue of the nationalisation policy the twin objects of Art.39(b) (c) are fully secured. Finally, it was argued by the respondents that even if the transport services were nationalised, there was absolutely no rationale behind the taking over of the vehicles of the operators, some of whom were running on hire-purchase basis. This argument has no force because once it is recognised that for the purposes mentioned in Art.39(b) (c) the entire service including its units, workshops, etc, could be taken over on payment of some compensation, the fact that the vehicles should be spared is only an argument of desperation. These are, therefore, the important contentions advanced before us by the respondents and the reasons given by the High Court in striking down the Act. We are of the opinion that in fact this case is clearly covered by the decision of the Karnataka case as reinforced by the later decision of Sanjeev Coke Manufacturing Co.'s case and all the contentions raised before us by the respondents (operators) fail. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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