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TMI Blog1966 (9) TMI 167X X X X Extracts X X X X X X X X Extracts X X X X ..... the Central Government. Pursuant to the said Ordinance, on or about October 23, 1965, the Central Government took over the possession, control and administration of the said Corporation. The Corporation, the 1st respondent and its Managing Director, the 2nd respondent filed a Writ Petition under Art. 226 of the Constitution in the High Court of Judicature for the State of Punjab, Circuit Bench at New Delhi, being Petition No. 631-D of 1965, challenging the validity of the said Ordinance. In the meantime, the Parliament passed the Act on the same terms as contained in Ordinance No. 6 of 1965 : it received the assent of the President of India on December 12, 1965. The respondent filed another writ petition in the said High Court, being Writ Petition No. 832-D of 1965, for a declaration that the Act was ultra vires the Constitution. The said High Court held that the Ordinance and the Act contravened the relevant provisions of Art. 31 of the Constitution and, therefore, were constitutionally void. The present appeal is preferred against the said judgment of the High Court. 3. It will be convenient at this stage to read the relevant provisions of the Act. The preamble and the relevan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt which bears to such premium the same proportion as the expired term of the lease in respect of which such premium shall have been paid bears to the total term of the lease; (e) the amount of debts due to the company, whether secured or unsecured, to the extent to which they are reasonably considered to be recoverable. (f) the amount of cash held by the company, whether in deposit with a bank or otherwise; (g) the value of all tangible assets and properties other than those falling within any of the preceding clauses. Paragraph III. - The total amount of liabilities and obligations incurred by the company in connection with the formation, management and administration of the undertaking and subsisting immediately before the commencement of this Act. 4. The gist of the said provisions may be given thus. The Act was made to acquire in public interest the undertaking of the Corporation. On the commencement of the Act, the undertaking was transferred and vested in the Central Government. Under s. 10 of the Act, the Government shall pay compensation to the undertaking as a whole; but, in the absence of an agreement between the Government and the Corporation, the compen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... principle for fixing compensation, i.e., a just equivalent to the machinery acquired. 6. The reasoning of the High Court was attacked by the learned Additional Solicitor- General on the ground that it did not appreciate the true scope of the said decision of this court and that, in any view, it went wrong in applying the principle of the said decision to the provisions of the Act. He contended that the Act laid down the broad principle that compensation shall be paid for the entire undertaking as a unit, but provided different modes for the ascertainment of the value of different parts thereof in such a way that the deficiency in the valuation of one part was offset by the liberal valuation of the other part. In that view, he contended, the Act embodied a principle relevant to the ascertainment of compensation for the undertaking acquired and, therefore, the product worked out under the said principle pertained only to the realm of adequacy which was beyond the ken of judicial review. He added that compensation in Art. 31 of the Constitution meant that compensation which was regarded as just in the context of public acquisitions and that that test was satisfied in the present c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e irrelevance of the principle. Suppose in 1950 a machinery was purchased for ₹ 100 and, for some reasons, the same has not been used in the working of the undertaking but has been maintained in good condition. That machinery has not become obsolescent and still can be used effectively. If purchased in open market it will cost the owner ₹ 1,000. A compensation of ₹ 100 for that machinery cannot be said to be a just equivalent of it. It is common knowledge that there has been an upward spiral in prices of the machinery in recent years. The cost price of a machinery purchased about ten years ago is a consideration not relevant for fixing compensation for its acquisition in 1965. The principle must be such as to enable the ascertainment of its price at or about the time of its acquisition. Nor the doctrine of written-down value accepted in the Income-tax law can afford any guide for ascertaining the compensation for the used machinery acquired under the Act. Under the general scheme of the Income-tax Act, the income is to be charged regardless of the diminution in the value of the capital. But the rigour of this hard principle is mitigated by the Act granting allowan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inciples applicable to the present case. Indeed, but for the said decisions, we would have posted this case before a Constitution Bench of five Judges. But, as this appeal involves only the application of the construction put upon Art. 31 of the Constitution by this Court in the said decisions, we did not resort to that course. The first of them is The State of West Bengal v. Mrs. Bela Banerjee [1954]1SCR558 . There, the validity of the West Bengal Land Development and Planning Act, 1948 was under scrutiny. Section 8 thereof provided that compensation to be awarded for compulsory acquisition to owners of land was not to exceed the market value as on December 31, 1946. This Court held that the said Act was ultra vires the Constitution and void under Art. 32(2) thereof. In that context, Patanjali Sastri C.J., observed : Turning now to the provisions relating to compensation under the impugned Act, it will be seen that the latter part of the proviso to section 8 limits the amount of compensation so as not to exceed the market value of the land on December 31, 1946, no matter when the land is acquired. Considering that the impugned Act is a permanent enactment and lands may be acqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ental right of the owner of the land under Art. 31(2) as it stood when the Act was enacted. 1 1 . These two decisions turned upon the construction of Art. 31(2) of the Constitution before the Constitution (Fourth Amendment) Act, 1955. These cases laid down two propositions : (1) Compensation under Art. 31(2) of the Constitution means a just equivalent of what the owner has been deprived of; and (2) the value of land at an anterior date is presumed to be no compensation within the meaning of the said Article. After the Constitution (Fourth Amendment) Act, 1955, this Court had to construe in two decisions the amended provision of Art. 31(2) vis-a-vis the expression compensation found therein. The first decision is that in Vajravelu v. Special Deputy Collector [1965]1SCR614 . There, this Court observed at p. 625-626 : A scrutiny of the amended Article discloses that it accepted the meaning of the expressions compensation and principles as defined by this Court in Mrs. Bela Banerjee's case [1954]1SCR558 . 12. And it held that, if the compensation is illusory or if the principles prescribed are irrelevant to the value of the property at or about the time of its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esultant product cannot be questioned in a court of law. The validity of the principles, judged by the above tests, falls within judicial scrutiny, and if they stand the tests, the adequacy of the product falls outside its jurisdiction. Judged by the said tests, it is manifest that the two principles laid down in clause(b) of para II of the Schedule to the Act, namely, (i) compensation equated to the cost price in the case of unused machinery in good condition, and (ii) written-down value as understood in the Income-tax law as the value of used machinery, are irrelevant to the fixation of the value of the said machinery as on the date of acquisition. It follows that the impugned Act has not provided for compensation within the meaning of Art. 31(2) of the Constitution and, therefore, it is void. 1 5 . The mere fact that in regard to some parts of the undertaking the principles provide for compensation does not affect the real question, for, machinery is the major part of the undertaking and, as the entire undertaking is acquired as a unit, the constitutional invalidity of clause(b) of para II of the Schedule to the Act affects the totality of the compensation payable to the en ..... X X X X Extracts X X X X X X X X Extracts X X X X
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