PETITIONER: SRINIVASA COOP. HOUSE BUILDING SOCIETY LTD. Vs. RESPONDENT: MADAM G.SASTRY DATE OF JUDGMENT03/05/1994 BENCH: RAMASWAMY, K. BENCH: RAMASWAMY, K. VENKATACHALA N. (J) CITATION: 1994 SCC (4) 675 JT 1994 (4) 197 1994 SCALE (2)785 ACT: HEADNOTE: JUDGMENT:
The Judgment of the Court was delivered by
K.RAMASWAMY, J.- Admittedly the appellant was registered
under the Andhra Pradesh Cooperative Societies Act. Its
object appears to be to develop the land and allot plots
thereof to its members for construction of houses.
Notification under Section 4(1) of the Land Acquisition Act
1 of 1894 for short ‘the Act’ was published in the State
Gazette on 8-2-1979, acquiring an extent of 71 acres 56
cents of land situated in Moolasagaram near Nandyal in
Kurnool District for the aforesaid purpose. A report under
Section 5-A, of the inquiry, was submitted to the
Government. The appellant entered into an agreement under
Section 41 of the Act dated 12-12-1981 with the Government
treating the appellant as a company and it was published in
the Gazette dated 4-2-1982. But it was given up. The State
thereafter contributed Rs 100 for each acquisition and got
declarations under Section 6, published In the State Gazette
on 4-2-1982 to an extent of 54 acres 66 cents and on 19-2-
1984 for another extent of 16 acres 19 cents. It is not
necessary to mention the previous history of the litigation
but suffice to state that a Single Judge dismissed one writ
petition and allowed other writ petitions on 9-12-1985 on
the ground that the procedure prescribed in Part VII of the
Act had not been followed holding when the acquisition was
for public purpose. On appeals the Division Bench in Writ
Appeal No. 316 of 1986 etc. by judgment dated 6-12-1986,
quashed the notification under Section 4(1) and the
declarations under Section 6, primarily on two grounds,
namely, (1) that the respondents are small farmers; (2) the
appellant-society consists of members who could afford to
construct houses by themselves, (3) acquiring the lands of
the poor small farmers for the benefit of the rich is
arbitrary and the contribution of Rs 100 each by the
Government is a colourable exercise of the power to avoid
the mandatory requirements in Chapter VII of the Act. In
these appeals we are concerned with 40 acres of land, since
other owners have not challenged the acquisition.
2. Shri Sitaramiah, the learned Senior Counsel for the
appellant contended that once the Government contributed Rs
200 from the public exchequer, the public purpose envisaged
under Section 3(f) of the Act is satisfied and the
requirements envisaged in Chapter VII need not be followed.
Alternatively it was contended that once the acquisition was
found to be for providing house sites to the members of the
Cooperative Society, it was a public purpose and that,
therefore, mandatory requirement of Chapter VII was not
required to be followed. In either event, it was contended
that the High Court was wrong in quashing the notification
and the declarations on the ground that the acquisition of
the small farmers inferentially offends Articles 14 and
proviso to Article 3 1 -A of the Constitution is
unwarranted.
3. Section 3(e) of the Act defined ‘company’ under pre-
1984 Amendment Act as meaning a company registered under the
Indian
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Companies Act, 1882 … and included a society registered
under the Societies Registration Act, 1860, and a registered
society within the meaning of the Cooperative Societies Act,
1912, or any other law relating to cooperative societies for
the time being in force in any State. Section 3(f) defined
the expression ‘public purpose’ to include the provision of
village-sites in districts in which the appropriate
Government shall have declared by notification in the
Official Gazette that it is customary for the Government to
make such provision. Chapter VII deals with the acquisition
of land for companies. Article 31 of the Constitution
(preceding 44th Constitution Amendment Act, 1978) prohibits
compulsory acquisition of the property for anything except
for a public purpose. Public purpose is not capable of
precise definition. Each case has to be considered in the
light of the purpose for which acquisition is sought for.
It is to serve the general interest of the community as
opposed to the particular interest of the individual.
Public purpose broadly speaking would include the purpose in
which the general interest of the society as opposed to the
particular interest of the individual is directly and
vitally concerned. Generally the executive would be the
best judge to determine whether or not the impugned purpose
is a public purpose. Yet it is not beyond the purview of
judicial scrutiny. The interest of a section of the society
may be public purpose when it is benefited by the
acquisition. The acquisition in question must indicate that
it was towards the welfare of the people and not to benefit
a private individual or group of individuals joined
collectively. Therefore, acquisition for anything which is
not for a public purpose cannot be done compulsorily.
Admittedly, there is no group housing scheme approved by the
State Government. On the other hand, housing schemes are
being executed by the A.P. Housing Board under the Act. We
are not concerned with the public purpose as amended under
the 1984 Act.
4. The Act recognises dichotomy, namely, acquisition for a
public purpose in Chapter 11 and acquisition for a private
purpose of a type restricted in Chapter VII. There is no
provision in the Act to say that when a land is required for
a company, it may also be for a public purpose. Therefore,
if a company, namely a Cooperative Society registered under
the Central or State Cooperative Societies Act, preceding
1984 Amendment Act, had to acquire the land it had to do so
in strict compliance with Chapter VII. If the company,
(Cooperative Society) requires land for any purpose other
than those mentioned in Section 40, then no compulsory
acquisition under the Act is possible. Part VII nowhere
authorises the Government to apply the provision of that
part to private acquisition. A.P. State Amendment Act
expressly included acquisition for providing house sites for
the poor; for the execution of any housing scheme under A.P.
Housing Boards Act; godowns for a cooperative society as for
public and urgent purposes. By necessary implication the
acquisition for a Private Cooperative House Building Society
to construct houses for its members must be a private
purpose.
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5. Section 39 (preceding 1984 Amendment Act) provides that
the provisions of Sections 6 to 37 both inclusive shall not
be put into force in order to acquire land for any company,
unless with the previous consent of the appropriate
Government or unless the company shall have executed the
agreement thereinafter mentioned. Section 40 enjoins that
such consent shall not be given unless the appropriate
Government be satisfied, either on the report of the
Collector under sub-section (2) of Section 5-A, or by an
inquiry held as hereinafter provided-
(a)that the purpose of the acquisition is
to obtain land for the erection of dwelling
houses for workmen employed by the company or
for the provision of amenities directly
connected therewith, or
(aa) that such acquisition is for the
construction of some building or work for a
company which is engaged or is taking steps
for engaging itself in any industry or work
which is for a public purpose, or
(b)that such acquisition is for the
construction of some work, and that such work
is likely to prove useful to the public.
6. Under Section 41, if the appropriate Government is
satisfied, after considering the report, if any, of the
Collector under sub-section (2) of Section 5-A, or on the
report of the officer making an inquiry under Section 40,
that the proposed acquisition is for any of the purposes
referred to in clauses (a) or (aa) or (b) of sub-section (1)
of Section 40, it shall require the company to enter into an
agreement with the appropriate Government, providing to the
satisfaction of the appropriate Government for the following
matters, namely,-
(1)the payment to the appropriate
Government of the cost of the acquisition;
(2) the transfer, on such payment, of the
land to the company;
(3) the terms on which the land shall be
held by the company;
(4) where the acquisition is for the purpose
of erecting dwelling houses or the provision
of amenities connected therewith, the time
within which, the conditions on which and the
manner in which the dwelling houses or
amenities shall be erected or provided;
(4-A) where acquisition is for the
construction of any building or work for a
company which is engaged or is taking steps
for engaging itself in any industry or work
which is for public purpose, the time within
which, and the condition on which, the
building or work shall be constructed or
executed; and
(5)where the acquisition is for the
construction of any other work, the time
within which and the conditions on which, the
work shall be executed and maintained, and the
terms on which the public is entitled to use
the work.
7. Under Section 42, every such agreement shall as soon as
may be after its execution, be published in the Official
Gazette and shall thereupon, so far as regards the terms on
which the public shall be entitled to use the work,
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have the same effect as if it had formed part of the Act.
Explanation engrafted in Section 43 is not material for the
purpose of the case. Section 44-A provides that no company
for which any land is acquired under this Part shall be
entitled to transfer the said land or any part thereof by
sale, mortgage, gift, lease or otherwise except with the
previous sanction of the appropriate Government. Section
44-B enjoins that, notwithstanding anything contained in
this Act, no land shall be acquired under this Part except
for the purpose mentioned in clause (a) of sub-section (1)
of Section 40, for a “private company” which is not a
Government company.
8. Explanation.- ‘Private company’ and ‘Government
company’ shall have the meanings respectively assigned to
them in the Companies Act, 1956 (1 of 1956). A plain
reading of the fascicule of these provisions clearly
indicates the distinction, statute has envisaged, namely,
acquisition for a public purpose and acquisition for a
private purpose. Even the acquisition for a company, unless
utilisation of the land so acquired is integrally connected
with public use, resort to the compulsory acquisition under
Chapter VII cannot be had. Even when Chapter VII was
invoked, the requirements of Section 40 and Section 41 are
mandatory and shall be strictly complied with. It is
clearly discernible from scheme of the acquisition in
Chapter VII that the land can be acquired for the erection
of dwelling-houses for workmen employed by the company or
for the provisions of amenities directly connected therewith
or needed for the construction of some building or work for
a company which is engaged or is taking steps for engaging
itself in any industry or work which is for a public purpose
or is needed for the construction of some work which is
likely to prove useful to the public. Notwithstanding
anything contained in the Act, i.e., despite the compliance
with Chapter VII, DO land should be acquired under Chapter
VII except for the purpose mentioned in clause (a) of sub-
section (1) of Section 40, for a private company which is
not a Government company and that such company shall not be
entitled after the acquisition under Chapter VII to transfer
the said land or any part thereof by sale, mortgage, gift,
lease or otherwise except with the previous sanction of the
appropriate Government. The object therefore, appears to be
that the land acquired under Chapter VII shall always remain
to serve the public purpose, beneficial to the public, It is
not open to the Government to waive any of the provisions in
Part VII. The provisions contained therein have mandatory
operation. The object of Sections 44-A and 44-B appears to
be that they intend to safeguard public interest. The
company acquiring the land for a public purpose in Chapter
VII may, after the acquisition has become final, divert the
land for private profit motive, defeating the purported
public purpose for which the acquisition was made. The
Government company obviously does not alienate such property
for private gain since the profits merge into public fund.
While the private company could get acquisition but
thereafter become free to dispose of the property.
Therefore, the acquisition for a private company get limited
only for purposes envisaged under Section 40(1)(a) and
thereby the public
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purposes envisaged therein get safeguarded and protected.
The dominant purpose of public utility pervades the
provisions in Chapter VII of the Act.
9. A private company is defined under the Companies Act,
1956. The private Cooperative House Building Society does
not become a private company under Section 44-A of the Act
and Section 44-B prohibits transfer by way of sale etc. of
the land so acquired under Part VII. Therefore, the Private
Cooperative Housing Society registered under the A.P.
Cooperative Societies Act is not a company under Section
3(e) of the Act entitling to invoke the provisions in
Chapter VII.
10.The question, therefore, is whether the contribution of
Rs 100 for each declaration from the public exchequer would
make the private purpose “a public purpose” under Section
3(f) of the Act.
11.In Somavanti Smt v. State of Punjab, the facts were
that the Government of Punjab issued a notification under
Section 4(1) acquiring the petitioners’ land for a private
company to set up a factory to manufacture various ranges of
refrigeration compressors and ancillary equipment. An
inquiry under Section 5-A was dispensed with and a
declaration under Section 6 was published. The Government
contributed Rs 100 from public exchequer. When it was
questioned by a petitioner under Article 32, this Court at
p. 805 and p. 818 held that it is for the State Government
to decide about a public purpose. If the purpose is within
the legislative competence, the declaration of the
Government in that behalf will be final, however, subject to
one exception, being that if there is a colourable exercise
of power, the declaration will be open to challenge at the
instance of the aggrieved party. It was contended that when
the Government contributed a token money and when the entire
compensation of the land was to be met by a company,
declaration under Section 6 would be a colourable exercise
of the power and thereby the acquisition was mala fide and
invalid. In that context, this Court considered the
question and laid at p. 817 that:
“We would, however, guard ourselves against
being understood to say that a token
contribution by the State towards the cost of
acquisition will be sufficient compliance with
the law in each and every case. Whether such
contribution meets the requirement of law
would depend upon the facts of every case.
Indeed the fact that the State’s contribution
is nominal may well indicate, in particular
circumstances that the action of the State was
a colourable exercise of power. In our
opinion, ‘part’ does not necessarily mean a
substantial part, and that it would be open to
the Court in every case which comes up before
it to examine whether the contribution made by
the State satisfies the requirement of law.”
In that case it was found that the company was to
manufacture refrigeration equipment and its accessories
which would save substantial part of foreign exchange and
construction of the quarters for workmen would also be a
public purpose. Accordingly it was held that though the
company was a
1 (1963) 2 SCR 774 : AIR 1963 SC 151 : (1963) 33 Comp Cas
745
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private company, acquisition was not a colourable device to
avoid the rigour of Part VII. In that behalf it was
amplified that if
“[T]he concern could acquire land for such a
purpose (private) only after complying with
the provisions of Part VII and that the use of
the provisions of Section 6(1) is merely a
colourable device to enable respondent 6 to do
something, which under terms of Section 6(1),
could not be done.”
In view of the finding that the manufacturing of the
articles was for the benefit of the community and to save
substantial part of foreign exchange and staff quarters to
workmen it was held that acquisition was for public purpose.
Acquisition without resort to Part VII did not constitute a
fraud on State’s power to acquire land and was not
colourable exercise of such powers. In Indrajit C. Parekh
v. State of Gujarat2 nine proposals were sent by E.S.I
Corporation, a company incorporated under the Indian
Companies Act to acquire certain plots of land in Dariyapur-
Kazipur area of the city of Ahmedabad bearing certain
numbers to establish a dispensary for Employees’ State
Insurance Scheme at Ahmedabad. The Government contributed
one rupee to each of the proposals and passed resolution to
acquire the private plots of land for the above purpose.
After receipt of the report under Section 5-A a declaration
under Section 6 was published. When they were challenged,
the High Court dismissed the writ petition. On appeal, this
Court held that the public purpose of the E.S.I. Scheme was
not disputed. The only question was whether publication of
declaration under Section 6 is a colourable exercise of the
power by the State Government. In the light of those facts
it was held that the exercise of the power under Section 6
could not be held to be colourable exercise of the power.
In Bai Malimabu v. State of Gujarat3 for the construction of
staff quarters for employees and of the dispensary etc. of
E.S.I. after Section 4(1) notification followed by an
inquiry under Section 5-A and a declaration under Section 6
of the Act were published, the Government contributing Re 1
towards the cost of acquisition. This Court negatived the
contention that contribution of Re 1 from the public
exchequer for the purpose of acquisition of the land for the
use of E.S.I. Corporation was a colourable exercise of the
power. In Land Acquisition Collector v. Durga Pada
Mukherjee4 the Government published a notification under
Section 4(1) of the Act that the lands specified therein
were needed for a public purpose, namely, expansion of
factory of the company at the expense of the company. When
it was objected to another notification was issued that the
land was needed for industrial development at public expense
contributing token money. It was contended that it was for
the private purpose, namely, for the benefit of the company.
A Single Judge dismissed the writ petition but the Division
Bench allowed the appeal
2 (1975) 1 SCC 824
3 (1978) 2 SCC 373
4 (1980) 4 SCC 271 : (198 1) 1 SCR 573
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holding that there was no evidence produced that the land
was needed for public purpose and not for the benefit of the
company. On appeal this Court allowed and held that the
public purpose was for the industrial development which was
a public purpose and declaration under Section 6 was
conclusive. The person impugning on the ground of mala fide
or colourable exercise of the power must prove
affirmatively. Even in the absence of production of
documentary evidence by the State, the onus does not shift
the burden that it is a mala fide or colourable exercise of
power on the part of the State.
12.In Manubhai Jehtalal Patel v. State of Gujarat5, the
notification issued under Section 4(1) and published in the
State Gazette followed by an inquiry under Section 5-A and
declaration under Section 6 for acquiring the land for the
State Road Transport Corporation with a contribution from
the Gujarat State Revenue was impugned as being ultra vires
of the power. This Court held that the contribution of Re 1
from the State Revenue was adequate to hold that the
acquisition was for public purpose with the State fund and
it was not illusory so as to invalidate the acquisition. In
Jhandulal v. State of Punjab6, this Court held that where
acquisition is made for a public purpose, the cost of
acquisition for payment of compensation has to be paid
wholly or partly out of Public Revenues, or some fund
controlled or managed by a local authority. On the other
hand, in the case of an acquisition for a company, the
compensation has to be paid by the company. In such a case
there can be an agreement under Section 41 for transfer of
the land acquired by the Government to the company on
payment of the cost of acquisition, as also other matters.
The agreement contemplated by Section 41 is to be entered
into between the company and the appropriate Government only
after the latter is satisfied about the purpose of the
proposed acquisition, and subject to the condition precedent
that the previous consent of the appropriate Government has
been given to the acquisition. Section 6 is in terms, made
subject to the provisions of Part VII of the Act. The
declaration for acquisition for a company shall not be made
unless the compensation to be awarded for the property is to
be paid by a company. In the case of an acquisition for a
company simipliciter, the declaration cannot be made without
satisfying the requirements of Part VII. But that does not
necessarily mean that an acquisition for a company for a
public purpose cannot be made otherwise than under the
provisions of Part VII, if the cost or a portion of the cost
of the acquisition is to come out of public funds. In other
words, the essential condition for acquisition is for a
public purpose and that the cost of acquisition should be
borne, wholly or in part, out of public funds. Hence an
acquisition for a company may also be made for a public
purpose, within the meaning of the Act, if a part or the
whole of the cost of acquisition is met by public funds.
If, on the other hand, the acquisition, for a company is to
be made at the cost entirely of the company itself, such an
acquisition comes under the provisions of Part VII. In that
case the Government have sponsored
5 (1983) 4 SCC 553
6 AIR 1961 SC 343 : (1961) 2 SCR 459
685
the Housing Scheme and substantial amount has been extended
on the scheme out of the Government revenue in the form of
subsidies and loans. The acquisition was also for the
construction of the quarters for the workmen under the
Government sponsoring Housing Scheme for industrial workers.
Under those circumstances it was held that the acquisition
for the company was for public purpose. We may make it
clear at once that a token contribution from public revenue,
under all circumstances cannot be considered to be
colourable exercise of power. Each case must furnish its
backdrop whether the acquisition is for public purpose or
for a private purpose. The facts and circumstances must
carefully be scrutinised to reach a finding.
13.This Court in Virupaxappa Veerappa Kadampur v. State of
Mysore7 construing Section 161(1) of the Police Act and the
words (under the colour of duty) interpreted to include acts
done under the cloak of duty, even though not by virtue of
the duty, when the police officer prepares a false panchnama
or a false report, he is clearly using the existence of his
legal duty as a cloak for his corrupt action or as a veil of
his falsehood. The acts thus done in dereliction of his
duty must be held to have been done under colour of the
duty. In Stroud’s Judicial Dictionary, “Colour of office”
was defined as is always taken in the worst part, and
signifies an act evil done by the countenance of an office,
and it bears a dissembling face of the right of the office,
whereas the office is but a veil to the falsehood, and the
thing is grounded upon vice, and the office is as a shadow
to it. In Blacks Law Dictionary, “under color of any law”
of a State include not only acts done by State officials
within the bounds on limits of their lawful authority, but
also acts done without and beyond the bounds of their lawful
authority; provided that, in order for unlawful acts of an
official to be done under colour of any law, the unlawful
acts must be done while such official is purporting or
pretending to act in the performance of his official duties;
that is to say, the unlawful acts must consist in an abuse
or misuse of power which is possessed by the official only
because he is an official; and the unlawful acts must be of
such a nature or character, and be committed under such
circumstances, that they would not have occurred but for the
fact that the person committing them was an official then
and there exercising his official powers outside the bounds
of lawful authority. It would thus be clear that when an
act is done by the State under colour of authority of law it
must be for the lawful purpose envisaged under the Act. If
the purpose, namely, public purpose envisaged under the Act
is not served then the exercise of the power of the
declaration under Section 6 must be held to be colourable
exercise of the power, though not with evil motive. It is
seen that the appellant is a private society and it is not
for any of the purposes under Section 40(1)(a) or under
Section 3(e) of the Act. It is for the transfer of the
acquired land to the members of the society who are now as
per the record
7 AIR 1963 SC 849 : 1963 Supp 2 SCR 6 : (1963) 1 Cri LJ 814
686
placed in this Court appear to be Advocates, Chartered
Accountants, Businessmen and alleged to be possessed of more
than one house. The Government does not appear to have
bestowed its thought to these aspects while considering the
report under Section 5-A in this perspective before
accepting the report and contributing a sum of Rs 100 each
from the public exchequer within the teeth of Sections 40;
41; 44-A and 44-B of the Act. Thus it must be held that the
acquisition and declaration published under Section 6 is a
colourable exercise of the power.
14.The appeals are accordingly dismissed with cost
quantified at Rs 10,000.