CASE NO.: Appeal (civil) 364 of 1999 PETITIONER: SAIJ GRAM PANCHAYAT RESPONDENT: STATE OF GUJARAT AND ORS. DATE OF JUDGMENT: 27/01/1999 BENCH: MRS. SUJATA V. MANOHAR & G.B. PATTANAIK JUDGMENT:
JUDGMENT
1999 (1) SCR 263
The Judgment of the Court was delivered by MRS. SUJATA V. MANOHAR, J. Leave
granted.
All these appeals raise common questions of law. For the sake of
convenience we are referring to the facts pertaining to Saij Gram Panchayat
in appeal arising from SLP(C) No. 3765 of 1998.
The Gujarat Industrial Development Act, 1962 was enacted to make special
provisions for securing the orderly establishment and organisation of
industries in industrial areas and industrial estates in the State of
Gujarat and for the purpose of establishing commercial centres in
connection with the establishment and organisation of such industries; and
for that purpose to establish an Industrial Development Corporation and,
for purposes connected with these matters, This is the avowed purpose of
the Act as set out in the preamble. Under Section 2(g) of the Gujarat
Industrial Develop-ment Act, 1962, “industrial area” means “any area
declared to be an industrial area by the State Government by notification
in the Official Gazette, which is to be developed and where industries are
to be accom-modated”.
On 29.9.1972 a notification was issued by the State Government under
Section 2(g) of the Gujarat Industrial Development Act, 1962, declaring
certain lands of village Saij, Kalol Taluka, District Mehsana as Kalol
Industrial Area. By a subsequent notification of 24.8.1978 issued by the
State Government under Section 2(g), the survey numbers described in the
earlier notification pertaining to Kalol Industrial Area were modified.
Under Section 16 of the Gujarat Industrial Development Act, 1962 which was
in force at all material times it is provided as follows :-
“Section 16: Notwithstanding anything contained in the provisions for the
time being in force relating to notified area in the Gujarat Municipalities
Act, 1963, the State Government may, by notifica-tion, in the official
gazette, (a) declare that the provisions relating to notified areas and any
other provisions of that Act shall extend to and be brought into force in
any industrial area, and thereupon such area shall be deemed to be a
notified area under that Act;
………..”
Section 16 gives power to the State Government to issue a notifica-tion
under which it can declare that an industrial area as defined in the
Gujarat Industrial Development Act, 1962 would also be a deemed notified
area under the Gujarat Municipalities Act, 1963. This can be done simply by
a notification issued by the State Government and it does not require the
formalities prescribed under the Gujarat Municipalities Act, 1963 for
creating a notified area, because the section begins with the words “not-
withstanding anything contained in the provisions for the time being in
force relating to notified areas in the Gujarat Municipalities Act, 1963”.
Therefore, there are two important aspects of Section 16 of the Gujarat
Industrial Development Act, 1962. First, it enables the State Government to
equate an industrial area under the Gujarat Industrial Development Act,
1962 with a notified area under the Gujarat Municipalities Act, 1963 by a
fiction. This fiction can be brought into existence by a notification.
There-fore, the provisions of the Gujarat Municipalities Act, 1963 for the
creation of a notified area will not apply to a notified area created under
Section 16. Also, a notified area, so created, would be governed by all the
provisions of the Gujarat Municipalities Act, 1963, applicable to notified
areas under that Act. Section 264-A(l) of the Gujarat Municipalities Act,
1963 as it stood prior to its amendment on 20.8.1993, dealt with the
creation of a notified area. It provided that the State Government could,
by notification declare that with respect to some or all of the matters
upon which a municipal fund may be expended, improved arrangements are
required within a specified area, which, nevertheless, it is not expedient
to constitute as a municipal borough under Section 4. On such declaration
by a notification, under sub-section (2), an area in regard to which such a
notification has been issued would be called a notified area. An industrial
area notified under Section 16 of the Gujarat Industrial Development Act
would also be such a notified area.
In 1988 the State Government made a proposal for declaring certain
industrial areas of different panchayats in the Kalol Industrial Area as
notified areas under Section 16 of the Gujarat Industrial Development Act,
1962. In 1990 a committee was appointed to submit a report as to whether it
was in the interest of the local inhabitants to declare these areas as
notified areas. The committee submitted a report in August, 1991. After
negotiations with different panchayats, it came to a conclusion that decla-
ration of a notified area may not serve any purpose. Instead a provision
could be made for a lump sum contribution from industrial units in lieu of
taxes levied by the panchayats in question.
With effect from 1.6.1993 the Constitution 73rd and 74th Amend-ments came
into effect. As a result, Parts IX and IXA were introduced in the
Constitution. Part IX of the Constitution which dealt with the panchayats
provided under Article 243B, for constitution in every State of panchayats
at the village, intermediate and district levels in accordance with the
provisions of that part. Under Article 243N, any provision of law relating
to panchayats in force in a State immediately before the commen-cement of
the 73rd Amendment which is inconsistent with the provisions of this Part
shall continue to be in force until amended or repealed or until the
expiration of one year from such commencement, whichever is earlier. Part
IXA which came into force under the Constitution 74th Amendment Act of 1992
deals with municipalities. Under Article 243Q which deals with the
constitution of municipalities, it is provided as follows:-
“243Q. Constitution of Municipalities-
(1) There shall be constituted in every State –
(a) a Nagar Panchayat (by whatever name called) for a transitional area,
that is to say, an area in transition from a rural area to an urban area;
(b) a Municipal Council for a smaller urban area; and
(c) a Municipal Corporation for a larger urban area, in accordance with
the provisions of this Part :
Provided that a Municipality under this clause may not be constituted in
such urban area or part thereof as the Governor may, having regard to the
size of the area and the municipal services being provided or proposed to
be provided by an industrial establishment in that area and such other
factors as he may deem fit, by public notification, specify to be an
industrial township.
(2) In this article, “a transitional area”, “a smaller urban area” or “a
larger urban area” means such area as the Governor may, having regard to
the population of the area, the density of the population therein, the
revenue generated for local administration, the per-centage of employment
in non-agricultural activities, the economic importance or such other
factors as he may deem fit, specify by public notification for the purposes
of this Part.”
Under Article 243ZF, any provision of any law relating to Municipalities in
force in a State immediately before the commencement of the Constitu-tion
(Seventy-fourth Amendment) Act, 1992, which is inconsistent with the
provisions of this Part, shall continue to be in force until amended or
repealed or until the expiration of one year from such commencement,
whichever is earlier. The Gujarat Municipalities Act, therefore, continued
to operate and would do so until 1.6.1994 unless earlier repealed or
amended.
The Gujarat Municipalities Act, 1962 was amended on 20.8.1993 in view of
the insertion of Part IXA in the Constitution. Section 264A was
substantially amended. It now provided that “for the purpose of this chap-
ter notified area means an urban area or part thereof specified to be an
industrial township area under the proviso to clause (1) to Article 243Q of
the Constitution of India”. Thus, as a result of this amendment in the
Gujarat Municipalities Act, an industrial area under the Gujarat Industrial
Development Act, which is notified under Section 16 of the Gujarat
Industrial Development Act would become a notified area under the new
section 264A of the Gujarat Municipalities Act and would mean an in-
dustrial township area under the proviso to Clause (1) of Article 243Q of
the Constitution of India.
On 7.9.1993 the Government of Gujarat issued a notification under Section
16 of the Gujarat Industrial Development Act declaring Kalol Industrial
Area as notified area under Section 264A of the Gujarat Municipalities Act.
By another notification of the same date 7.9.1993 the Government of Gujarat
excluded the notified area from Saij Gram Panchayat under Section 9(2) of
the Gujarat Panchayat Act, 1961.
Earlier the State Government had also issued a Government resolu-tion dated
30.8.1993 whereby l/3rd of the amount recovered as con-solidated tax by the
proposed notified area authority shall be used for the benefit of the gram
panchayats.
By another subsequent notification dated 14th of April, 1994 issued by the
Gujarat Government in exercise of powers conferred by Clause (2) of Article
243Q of the Constitution the Gujarat Government specified certain local
areas comprised in a Gram or a Nagar as the case may be, declared as such
under Section 9 of the Gujarat Gram Panchayats Act, 1961 to be a
transitional area mentioned against it in column 3 of the schedule attached
to that notification. The areas which are the impugned notified areas in
these appeals are covered by that notification.
The appellants filed a writ petition in the High Court for quashing the
impugned notifications of 7.9.1993 as well as the Government resolution
dated 30.8.1993. The writ petition has been dismissed by the High Court and
hence these appeals have come before us.
The Gram Panchayats affected have contended that the notification of
7.9.1993 issued under Section 16 of the Gujarat Industrial Development Act
is contrary to Parts IX and IXA of the Constitution brought into force by
the 73rd and 74th Amendments. Hence the notification is illegal and void.
The said Gram Panchayats also contend that the notification of 7.9.1993
issued under Section 9(2) of the Gujarat Panchayat Act, 1961 excluding the
notified area from the gram panchayat is also contrary to Parts IX and IXA
of the Constitution. The contention appears to be that if any area forms a
part of a panchayat under Part IX of the Constitution it cannot be treated
as an industrial township under Part IXA of the Constitution.
The contention is based on a misconception about the relationship of the
provisions of Parts IX and IXA of the Constitution with any legislation
pertaining to industrial development. The Gujarat Industrial Development
Act operates in a totally different sphere from Parts IX and IXA of the
Constitution as well as the Gujarat Panchayats Act, 1961 and the Gujarat
Municipalities Act, 1962 – the latter being provisions dealing with local
self Government while the former being an Act for industrial development,
and orderly establishment and organisation of industries in a State. The
industrial areas which have been notified under Section 16 of the Gujarat
Industrial Development Act on 7.9.1993 were notified as industrial areas
under the Gujarat Industrial Development Act long back in the year 1972.
These industrial areas have been developed by the Gujarat Industrial
Development Corporation and they can hardly be looked upon as rural areas
covered by Part IX of the Constitution. It is only such industrial areas
which can be notified under Section 16 of the Gujarat Industrial
Development Act, 1963. If by a notification issued under Section 16, these
industrial areas are deemed to be notified areas under the Gujarat
Municipalities Act and are equated with industrial townships under the
proviso to Clause (1) of Article 243Q, the constitutional scheme is not
violated. In fact, under Chapter 3 of the Gujarat Industrial Development
Act, 1962, the Gujarat Industrial Development Corporation, has been given
power, inter alia, to develop land for the purpose of facilitating the
location of industries and commercial centres. It has also been given the
power to provide amenities and common facilities in such areas including
provision of roads, lighting, water supply, drainage facilities and so on.
It may do this either jointly with Government or local authorities or on an
agency basis in furtherance of the purposes for which the corporation is
established. The industrial area thus has separate provision for municipal
services being provided by the Industrial Development Corporation. Once
such an area is a deemed notified area under the Gujarat Municipalities
Act, 1964, it is equated with an industrial township under Part IXA of the
Constitution, where municipal services may be provided by industries. We do
not see any violation of a constitutional provision in this scheme. As held
by this Court in Solapur MIDC Industries Association Etc. v. State of
Maharashtra & Ors., JT (1996) 7 SC 14, a Municipal Corporation Act and an
Industrial Development Act have distinct fields of operation and there is
no inter se conflict between the two. By reason of the notifica-tions of
7.9.1993, the industrial area developed under the Gujarat Industrial
Development Act is also deemed to be an industrial township for the
purposes of local self Government. Any possible conflict is also removed by
the second notification of 7.9.1993 removing this area from the ambit of
the Gujarat Panchayats Act, 1961. The contention, therefore, that an area
forming a part of a panchayat under the Gujarat Panchayats Act, 1961 cannot
be a notified area under the Gujarat Municipalities Act loses all force.
It is next contended that the proviso to Clause (1) of Article 243Q applies
only to urban areas. It does not apply to a transitional area. Since the
industrial areas in question have been subsequently notified as transi-
tional areas they cannot be equated with industrial townships. This conten-
tion also cannot be accepted. Article 243Q deals with constitution of
municipalities. Municipality is defined under Article 243P(e) to mean “an
institution of self-government constituted under Article 243Q. Article 243Q
constitutes three types of municipalities – (a) a Nagar Panchayat (b) a
Municipal Council and (c) a Municipal Corporation. The proviso to Article
243Q deals with all three types of municipalities constituted under Clause
(1). It provides that a municipality under Clause (1) may not be
constituted in certain circumstances. This would refer to any of the three
types of municipalities. Although the proviso refers to such urban area or
part thereof, this “urban” area also covers a transitional area, in
transition from rural to urban. It is because this area is also in the
process of turning into an urban area that it is put under Part IXA which
deals with municipalities in urban areas. Therefore, in respect of any of
these three types of areas set out in Clause (1) of Article 243Q, having
regard to the size of the area, the municipal services being provided or
proposed to be provided by an industrial establishment in that area, and
such other factors as the Gover-nor will deem fit to consider, he may, by
public notification specify such area to be an industrial township. All
these relevant factors would be in operation in an industrial area already
notified many years back under an Industrial Development Corporation Act as
in the present case. Therefore, there is no breach of Article 243Q if such
an area is, under the provisions of an Industrial Development Act, equated
with an industrial township under Article 243Q.
It was also contended that in order to be a notified area under the Gujarat
Municipalities Act, certain procedure is required to be followed.
Therefore, unless this procedure is followed an industrial area cannot
become a notified area simply by issuing a notification under Section 16 of
the Gujarat Industrial Development Act, 1962. This contention was earlier
raised before the Gujarat High Court in the case of Naroda Nagar-panchayat
Ahmedabad v. State of Gujarat & Ors., (1977) GLR 814). The High Court
repelled this contention by pointing out that on a proper construction of
Section 16 it is not necessary for the State Government to follow the
procedure prescribed in Section 4 of the Gujarat Municipalities Act before
enforcing the provisions relating to notified areas contained in the
Gujarat Municipalities Act in the industrial areas in question. It,
therefore, held that the requirements of Section 264A and 264D as then in
force, were not required to be complied with before a notification is
issued under Section 16.
Explaining the purpose behind Section 16 the High Court has rightly held
that having regard to the power conferred upon the Gujarat Industrial
Development Corporation in the matter of provision of amenities and common
facilities in industrial estates and industrial areas, on levy of certain
charges upon those who set up industries therein, an industrial area would
ordinarily be a self-sufficient township in itself which provides its own
amenities and recovers charges therefor. A local authority having
jurisdiction over such area will have to perform very few of its statutory
or discretionary duties in respect of such area. Yet it may levy and
collect taxes from those who set up industries in the area. It is to avoid
this virtual dual control and administration which might impede the growth
and development of industries that provision has, presumably, been made in
Section 16 for constituting an industrial area into a notified area and
thereby converting it into a separate administrative unit. As we have
stated earlier, creation of such a separate administrative unit is not
contrary to the scheme of Parts IX and IXA of the Constitution when Article
243Q provides for the creation of such a separate administrative unit in
the form of an industrial township. It has also been pointed out by the
respondents that neither Article 243N nor 243ZF invalidates any Industrial
Develop-ment Act. It was also contended by the appellants that under
Section 9(2) of the Gujarat Panchayats Act, 1961 the Gram Panchayats have
to be con-sulted before issuing a notification under Section 9(2). The
respondents have, however, pointed out that in the present case there has
been extensive consultation with the panchayats before the notifications of
7.9.1993 were issued. The appellants-Panchayats as well as the Taluka and
District Panchayats were consulted through the District Development
Officer. He had also asked for resolutions from the appellant-Panchayats,
the Taluka Panchayats and District Panchayats for being forwarded to the
Develop-ment Commissioner. All these have been taken into account before
issuing the notifications in question. The respondents have also pointed
out that the Government has taken care to issue a resolution dated 30th
August, 1993 by which l/3rd of the revenue recovered as consolidated tax by
the notified area committee would be given for the benefit of the concerned
Gram Panchayats, thus avoiding any financial prejudice to them.
It was also contended by the appellants that before any notification could
be issued under Section 16 of the Gujarat Industrial Development Act, 1962,
a hearing should have been given to the residents. Because notifying an
area under Section 16 of the said Act has civil consequences. If the
residents had any objections, they should have been considered. Reliance
was placed upon a decision of this Court in Baldev Singh and Ors. v. State
of Himachal Pradesh and Ors., AIR (1987) SC 1239. In that case under the
Himachal Pradesh Municipal Act, a notified area had been declared under
Section 256. This Court said that the inclusion of an area governed by a
Gram Panchayat within a notified area would certainly involve civil
consequences. In such circumstances it is necessary that people who will be
affected by the change should be given an opportunity of being heard
otherwise they would be visited with serious consequences like loss of
office in Gram Panchayats, an imposition of a way of life, higher incidence
of tax and the like. Although the section did not, in clear terms, provide
a right of hearing, the Court held that denial of such an opportunity was
not in consonance with the scheme of the Rule of Law governing our society.
A similar view has been taken in State of U.P. and Ors. v. Pradhan Sangh
Kshettra Samiti and Ors., [1995] Supp. 2 SCC 305 at page 334. In this case
delimitation of panchayat areas and Gram Sabhas under the U.P. Panchayat
Raj Act of 1947 was considered by this Court. It said that an opportunity
of being heard should have been given to the people of the areas concerned.
In that case, action having already been taken without giving an
opportunity of hearing, in view of the urgency, post-decisional hearing was
considered as sufficient compliance with the principle of audi alteram
partem. In the present case, however, there has been a long drawn out
exchange of views, consultations as well as consideration of objections
over the issuing of a notification under Section 16 of the Gujarat
Industrial Development Act, 1962 which was also linked with the exclusion
of this area from the panchayat area under Section 9(2) of the Gujarat
Panchayats Act, 1961. It was precisely because of these consultations that
GR of 30.8.1993 was also issued to provide revenue to the gram panchayats
from out of taxes collected from notified areas which were removed from the
jurisdiction of gram panchayats, therefore, the appellants cannot complain
of any violation of the principles of natural justice in the present case.
In the premises, we do not see any reason to take a view different from the
view taken by the High Court The appeals are, therefore, dismissed. There
will, however, be no order as to costs.