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May 15, 1969
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Cite as : (1969) 1 SCC (Jour) 17

(In this series, there will be a discussion whenever necessary as to the ratio decidendi of a decision in correlation to prior precedents. The pros and cons of the legal doctrine laid down will be discussed. The historical development of the doctrine and the future perspective will be focussed. Though mainly Supreme Court decisions may be chosen yet when occasion calls for it important decisions of the High Courts also may be commented upon by competent jurists.)

I. State of Gujarat v. Shantilal Mangaldas, (1969) 1 SCC 509. (Civil Appeal No. 1377 of 1968, Supreme Court Judgment on 13-1-1969).

The Supreme Court decision in State of Gujarat v. Shantilal Mangaldas1 breaks new ground in that it is a complete departure from the ratio decidendi formulated in P. Vajravelu Mudaliar v. Special Deputy Collector2 and seeks to overrule the decision in Union of India v. Metal Corporation of India3.

The matter directly involved is the much litigated Article 31 of the Constitution of India relating to acquisition of property and compensation therefore. It may be therefore necessary to restate Article 31; clause (2) as it was originally and as it was subsequently amended by the Fourth (Constitution) Amendment of 1955 after the decision in State of West Bengal v. Mrs Bela Banerjee4.

Before Amendment

After Amendment


No property movable or immovable, including any interest in or in any company owning any commercial or Industrial Undertaking shall be taken possession of or acquired for public purposes under any law authorising the taking of such possession or such acquisition, unless the law provides for compensation for the property taken possession of or acquired and either fixes the amount of compensation or specifies the principles on which and the manner in which compensation is to be determined and given.



It is necessary to recall that prior to 1955 there was the Constitution First Amendment Act, 1951, incorporating Article 31-A and Article 31-B and the Ninth Schedule placing certain Acts and Regulations beyond the challenge that they were inconsistent with or took away or abridged any of the rights envisaged in Part III of the Constitution. This was necessitated by the crop of decisions relating Zamindari rights and rights in estates, e.g., Kameshwar Singh v. State of Bihar5, Suryalal v. State of U.P.6 and Vishweswar v. State of Madhya Pradesh7. But the problem in the matter of acquisition yet remained; as the above amendment of 1951 was not adequate to deal with the question relating to payment of compensation to an owner of property not covered by legislation falling within Articles 31-A and 31-B who was deprived of it by compulsory acquisition.

This situation was prominently occasioned by the controversy envisaged as to payment of compensation in Mrs Bela Banerjee case8 and in West Bengal v. Subodh Gopal9. In the second case10, it was made clear by the Supreme Court that the constitutional obligation of paying compensation arose only when the State action resulted in the substantial deprivation of the individual's private property. It was further postulated that clauses (1) and (2) of Article 31 are not mutually exclusive in scope and content but should be read together and understood as dealing with the same subject, namely the protection of the right to property. The limitations envisaged on the power of the State to take away property is the same when included in clauses 1 and 2 of Article 31.

Further the words 'taking of . . . possession, in Article 31(2) and the words 'acquisition or requisitioning' in Entry 33 of List I and Entry 36 of List II as also the words 'acquired or requisitioned' in Entry 42 of List III are different expressions connoting the same concept and instances of different kinds of deprivation of property within the meaning of Article 31(1) of the Constitution.

In State of West Bengal v. Mrs Bela Banerjee8 the issue was whether the compensation provided for under the West Bengal Land Development and Planning Act, 1948, was in compliance with the provision in Article 31(2). For under the State Act, lands could be acquired many years after it came into force but nevertheless it fixed the market value as it prevailed on December 31, 1946, as ceiling on compensation without reference to the value of the land at the time of the acquisition. The Calcutta High Court's decision that Section 8 of the Act was ultra vires was confirmed by the Supreme Court which also held that Entry 42 of List III of the Seventh Schedule conferred on the Legislature the discretionary power of laying down the principles which govern the determination of the amount to be given to the owner of the property acquired and Article 31(2) required that such principles must ensure that what is determined as payable is compensation, that is a just equivalent of what the owner has been deprived of. Patanjali Sastri, C.J., then declared (and this is often quoted):

"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 ensure that what is determined as payable must be compensation, that is just equivalent of what the owner has been deprived of.

Within the limits of this basic requirement of the full indemnification of the expropriated owner, the Constitution allows free play to the legislative Judgment as to what principles should guide the determination of the amount payable. Whether such principles take into account all the elements which make up the true value of the property appropriated and exclude matters which are to be neglected, is a justiciable issue to be adjudicated by the court."

The italicised lines are ours to indicate the importance of the law so declared. The Chief Justice clearly postulates that the basic requirement is the full indemnification of the expropriated owner by giving him a just equivalent of what he had been deprived of. It was further made clear that the ambit of legislative power included the taking into consideration all the elements that go to make up the true value of the appropriated property. This was made justiciable. So in effect the decision lays down three main points:—

(i) the compensation under Article 31(2) shall be a just equivalent of what the owner has been deprived of;

(ii) the principles which the Legislature can prescribe are only principles for ascertaining just equivalent of what the owner was deprived of;

(iii) and if the compensation fixed was not a just equivalent of what the owner has been deprived of; or if the principles did not take into account all relevant elements or take into account irrelevant elements for arriving at a just equivalent, the question in regard thereto a is justiciable issue.

The above view was substantially reiterated by the Supreme Court in State of Madras v. Namasivaya Mudaliar11 which decided the matter vis-...-vis Article 31(2) on 3-3-1964 as it existed before the Amendment Act of 1955 which came into force on 27-4-1955. It is interesting to note that this judgment of the court in Namasivaya case was delivered by Shah, J.12

What is the change effected by the 1955 Amendment? In the words of Justice K. Subba Rao13, "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 case. It may be recalled that this court in the said case defined the scope of the said expressions and then stated whether the principles laid down take into account all the elements which make up the true value of the property appropriated and exclude matters which are to be neglected, is a justiciable issue to be adjudicated by the court. Under the amended Article the law fixing the amount of compensation or laying down the principles governing the said fixation cannot be questioned in any court on the ground that the compensation provided by that law is inadequate."

It is demonstrably clear that the Legislature may fix "compensation" lay down the "principles" for such fixation of compensation. The word "compensation" has not been defined in Article 31 or under the Land Acquisition Act. The dictionary meaning14 of compensation is 'equivalent'. 'To compensate' means to 'balance'. This brings in the concept of justness as what balances is just. In America, the fifth amendment no doubt has the word 'just compensation' explicitly. Even the absence of the word 'just' will not affect the meaning of the word 'compensation'. Nichols in his work on 'Eminent Domain'15 states "The adjective 'Just' only emphasis what would be true if omitted, that the compensation should be equivalent. It has been said in this regard that it is difficult to imagine an unjust compensation". In Australia the test is laid down in Section 51 (* * *) as merely 'just terms'. Though in India the word 'just' is not explicitly there, judicial decisions have categorically held that justness is very much in 'compensation'. In fact, in Bela Banerjee case it is considered that the basic requirement of 'compensation' is this justness which is the synonym for 'equivalent'. So, when the Constitution Fourth Amendment Act, 1955, continues to use the word 'compensation' it is demonstrably clear that the judicial connotation of the word compensation as implying just equivalent is not at all given up or eschewed.

This is made very clear in Vajravelu case by Justice K. Subba Rao when he categorically declares:16 "If the definition of 'compensation and the question of justiciability are kept distinct much of the cloud raised will be dispelled. Even after the amendment, provision for compensation or laying down of the principles for determining the compensation is a condition for the making of a law of acquisition or requisition. A Legislature, if it intends to make a law for compulsory acquisition or requisition, must provide for compensation or specify the principles for ascertaining the compensation. The fact that Parliament used the same expression, namely 'compensation' and 'principles' as were found in Article 31 before the Amendment is a clear indication that it accepted the meaning given by this Court to those expressions in Mrs Bela Banerjee case. It follows that a Legislature in making a law of acquisition or requisition shall provide for a just equivalent of what the owner has been deprived of or specify the principles for the purpose of ascertaining the 'just equivalent' of what the owner had been deprived of.17 If Parliament intended to enable a Legislature to make such a law without providing for compensation so defined it would have used other expressions like 'price', 'consideration', etc. In Craies on Statute Law, 6th Edition at p. 167, the relevant principle of construction is stated thus: "There is a well known principle of construction that where the Legislature used in an Act a legal term which has received judicial interpretation it must be assumed that the term is used in the sense in which it has been judicially interpreted unless a contrary intention appears. The said expressions in Article 31(2) before the constitution (Fourth Amendment) Act, have received an authoritative interpretation by the Highest Court of the land and it must be presumed that Parliament did not intend to depart from the meaning given by this court to the said expressions."18

We have in the above para 10 cited the relevant passage in full. But peculiarly enough, Shah, J., in State of Gujarat v. Shantilal Mangaldas omits the passage from 16-17 (as noted above) and many more relevant passages as will be discussed later. His Lordship would however add "that these observations (i.e., Note 16 above, etc.,) were, however, not necessary for the purpose of the decision in P. Vajravelu Mudaliar case". It is clear that in Vajravelu case what was directly for decision of the court was whether the Madras Legislature enacted the Madras Amendment Act, 23 of 1961 laying down principles for fixing compensation in accordance with Article 31(2) as amended. In such an issue, the Court had necessarily to consider the implication of the word 'compensation'; and 'principles'. For His Lordship Shah to observe that these were unnecessary appears unsound. Further, His Lordship omitted the passage (16-17 as cited above), where it is more clear that even if the word 'just' is not tacked on to 'compensation' judicial authority as well as cases on 'constitutional construction' make it demonstrably clear that 'justness' is very much in the concept of compensation.

His Lordship Justice Shah's dictum that Justice Subba Rao's observations as further below are mere obiter appears erroneous. The Justice (Subba Rao) as quoted says,".... It will be noticed that the law of acquisition or requisition is not wholly immune from scrutiny by the Court. But what is excluded from the court's jurisdiction is that cannot be questioned on the ground that the compensation provided by that law is not adequate. It will be further noticed that the clause excluding the jurisdiction of the court also used the word 'compensation' indicating thereby that what is excluded from the court's jurisdiction is the adequacy of the compensation fixed by the Legislature.... a more reasonable interpretation is that neither the principles prescribing that 'just equivalent' nor the 'just equivalent' can be questioned by the court on ground of inadequacy of the compensation fixed or arrived at by the working of the principles."

These observations of Justice K. Subba Rao were germane in giving a finding as to whether the Madras Amendment was quite in accordance with the provision in Article 31(2) as amended by the 1955 Act. How could these observations be deemed as obiter at all?

Furthermore, Justice Shah goes on citing what he termed as Justice K. Subba Rao's summary of the legal position at p. 629 of (1965) 1 SCR 614 cited thus:

"If the question pertains to the adequacy of compensation it is not justiciable; if the compensation fixed or the principles evolved for fixing it disclose that the Legislature made the law in fraud of powers in the sense we have explained the question is within the jurisdiction of the court."

Here again His Lordship Justice Shah should have in fairness to Justice K. Subba Rao quoted the entire passage without restricting it to the last six lines of para 16 in the AIR report of the decision.19 The prior lines read as under:

"When a court says that a particular legislation is a colourable one, it means that the Legislature has transgressed its legislative powers in covert or indirect manner; it adopts a device to outstep the limits of its power. Applying the doctrine to the instant case, the Legislature cannot make a law in derogation of Article 31(2) of the Constitution. It can therefore only make a law of acquisition or requisition by providing for 'compensation' in the manner prescribed in Article 31(2) of the Constitution. If the Legislature though ex facie purports to provide for compensation or indicates the principles for ascertaining the same, but in effect and substance takes away a property without paying compensation for it, it will be then exercising power which it does not possess. If the Legislature makes a law for acquiring a property by providing for an illusory compensation or by indicating to principles for ascertaining the compensation which do not relate to the property acquired or to the value of such property at or within reasonable proximity of the date of acquisition or the principles are so designed and so arbitrary that they do not provide for compensation at all, one can easily hold that the Legislature made the law in fraud of its powers. Briefly stated the legal position is as follows:—...."20

It has to be remembered that in Vajravelu case the attack on the impugned Act was that the provision contravened Article 31(2) and Article 14. So His Lordship Justice K. Subba Rao had necessarily to consider the question of the provision in Article 31(2) in all its facets—'compensation', 'procedure', 'just equivalent', etc. If in doing so, he had to consider that the impugned Act was or was not in fraud of legislative powers and came to the ultimate conclusion that the impugned Madras provision was quite competent and was in accordance with all the requirements of Article 31(2), it is fallacious to suggest that the cited passages of Mr Justice K. Subba Rao were all obiter. That Mr Subba Rao found the impugned provision contravening Article 31(2), is clearly a judicial weighment of the pros and cons of the issue involved. To say that since the Justice struck down the provision only under Article 14 and effortiorari, the observations relating to the finding on Article 31(2) are obiter is an extraordinary way of getting out of a difficulty. If Mr Justice Shah felt that Vajravelu wrongly enunciated the principle of 'compensation' as 'just compensation', it is open to him to say so plainly and seek a bigger Bench of the Supreme Court21 to overrule the Vajravelu five-Bench decision. The Vajravelu Bench consisted of Justices K. Subba Rao, K.N. Wanchoo, M. Hidayatullah22, Raghubar Dayal and S.N. Sikri. It is noteworthy further that it was a unanimous decision in Vajravelu to which Justice M. Hidayatullah was a consenting Judge. There was no divided opinion on the question of 'just compensation'. Bela Banerjee was reiterated as also Namasivaya Mudaliar23 and Jeejeebhoy24 cases. This catena of considered judicial opinion of the Supreme Court laying down that 'compensation' should be only 'just compensation', i.e., 'just equivalent' cannot be brushed aside, in Mangaldas case by Shah, J., on the suprious reasoning that the opinion in Vajravelu was obiter. As of fact, as stated above, it was not obiter at all. 'One cannot escape the conclusion that the Mangaldas Bench took a short cut to circumvent Vajravelu by dubbing it wrongly as obiter.'

What is obiter and what is not obiter is well known. Whatever was necessary for the determination of a particular case cannot be called obiter. It is verily the ratio decidendi. Where the opinion of the Tribunal on the question was not necessary at all for decision of the case it is an obiter. Even in this area it would appear there is a difference between a casual observation and an expression of opinion after the Judge applying his judicial mind and deciding the question. In Vajravelu case, it cannot be said the cited quotes of Justice Subba Rao (vide supra) were casual observations. They were considered opinion of a Supreme Court Judge applying his juristic mind as to the concept of compensation embodied in Article 31(2) of the Constitution. After weighing the pros and cons the Justice found the Madras Act intra vires of Article 31(2). Simply because the Justice found that only Article 14 was contravened and not Article 31, it cannot reduce at all his observations on Article 31(2) as mere obiter.

It is petite to cite the well known jurist Shri M.M. Seerwai25 from his treatise26 on the subject of obiter. He says "In England obiter dicta" are not binding on any court27, but in India it had been held that the obiter dicta of the Privy Council were binding on all courts in India.28 This was on the ground that if the Highest court of appeal had applied its mind and decided a question, judicial discipline required that the decision should be followed.29 It is necessary however to distinguish considered obiter dicta from casual observations made in a judgment on a point not calling for decision and not argued before the court. A full and accurate discussion of the subject will be found in Mohandas Issardas v. A.N. Sattanandhan30 where Chagla, C.J., held that the observations of Bhagwati, J., that the maximum penalty which customs officials could inflict was Rs 1000, were casual observations not binding on any court and were not correct—a view confirmed by the Supreme Court in Atma Ram case31 cited earlier. The result is that the considered obiter dicta of the Supreme Court on questions of law, declare the law within the meaning of Article 141.

Thus if K. Subba Rao J.'s opinion was not casual but the considered opinion by applying the judicial mind, then that opinion is clearly the law of the land under Article 141 of the Constitution binding on all courts of the land including the Supreme Court.

In Atma Ram case,32 the question was if under Section 167 of the Sea Customs Act , a penalty in excess of Rs 1000 can be imposed, Sarkar, J. said:33

"In discussing the scheme of the Act, it was observed in connection with Item 8 in Section 167 that 'this court has held that the minimum is the alternative'.34 Here again it is clear that the court was not deciding the question that has now arisen before us. It only made a passing reference to the observations in Maqbool Husssain case35. It was not necessary for the decision in Babulal case36 to have pronounced on the correctness of the observations in Maqbool Hussain case and no such pronouncement was clearly intended. Nor was it necessary in Babulal case to express any view as to the maximum penalty that could be imposed under Item 8 in Section 167 . . . . Some of the High Courts have thought that this Court had decided in those cases that the maximum penalty permissible under the provision is Rs 1000. The fact is that the question was never required to be decided in any of these cases and could not therefore have been or be treated as decided by this Court."

Thus it is clear that a passing reference or a casual observation in a case cannot be treated as binding. But in Vajravelu case it was not a passing reference or a casual observation. It was the considered opinion of Subba Rao, J., delivering the judgment of the whole court. It also arose in respect of the attack on the vires of the impugned provision. Even otherwise it is a considered judicial opinion. So, it cannot be deemed by any standards as an obiter dicta not binding on the Supreme Court while delivering the Mangaldas Judgment.

What is an obiter which is not binding has been enunciated by Chagla, C.J., and Shah, J.37, in Mohandas Issardas v. A.N. Sattanandhan. "The observations of Bhagwati, J., in the Supreme Court decision in Maqbool Hussain v. State of Bombay38 to the effect that the highest penalty which can be inflicted by the Customs Officers under the Sea Customs Act, 1878, is Rs 1000, is not an obiter dictum but a casual observation, made in considering the whole scheme of the Act and is therefore not binding upon the High Court on a question of interpretation of Section 167, Item 8 of the Act."

So it follows that the crucial point is if it is a casual observation or an expression of the Supreme Court's opinion after applying its mind and deciding a question. May be the Supreme Court like the Privy Council may deliver a considered judgment to merely settle the law, though all the issues covered by the law may not arise in the particular case. Thus, in Mama v. Flora Sasoon39, the Privy Council's whole judgment on specific performance was obiter since the Privy Council held there was no concluded contract at all. Nevertheless the decision is binding on all courts as settling the law on specific performance. So, if the Supreme Court gave a considered opinion (as was indeed done by Justice K. Subba Rao in Vajravelu case,) as to all facets of 'compensation' it is law within the meaning of Article 141 binding on all courts inclusive of the Supreme Court, unless the latter court is inclined to (i) review the case suo mottu or on application, or (ii) to overrule the decision by a fuller Bench. In Mangaldas case neither of these were done. So Vajravelu opinion stands. It is in no way affected by Justice Shah's dictum in Mangaldas case for the simple reason that Mangaldas Bench was composed only of five judges just as the Bench constituted in Vajravelu. By Justice Shah merely dubbing the opinion in Vajravelu as obiter cannot give him the jurisdiction to declare that Vajravelu opinion is not binding on the Mangaldas Bench. Why the learned Chief Justice M. Hidayatullah did not constitute a fuller Bench is difficult to comprehend. If a fuller Bench was convened then certainly either Vajravelu would have been accepted or even if it was overruled, there would have been a minority dissenting judgment too. Such a contingency must have been squarely faced as a matter of law, i.e., if 'compensation' means 'just compensation' must be viewed in the most authoritative way to settle the law once for all.

So it appears to us that Mangaldas has only disposed of the case in a way but not the problem at all. Till Vajravelu is overruled, the law of the land under Article 141 is what Vajravelu stated and not what 'Mangaldas' enunciated. It is strange that Shah, J., who has expressed himself with Chagla, C.J., in Mohandas Issardas case above cited, as to what is obiter, and as to what obiter is binding, should ignore that principle altogether when he sat in the Mangaldas Bench. More than that, in Namasivaya Mudaliar case, Shah, J., had categorically accepted the interpretation of Article 31(2) in Bela Banerjee case, namely, that in the word 'compensation' is embedded 'justness of compensation'. This is the considered judicial interpretation of the term in the catena of cases already cited. It is not open now for Shah, J., or the Chief Justice to bypass that definition. The manner their Lordships bypass this is discussed in a subsequent para. Extraneous considerations such as the directive principles of State policy appear to have affected their Lordship's trend of opinion.

It is also a pity that the learned Chief Justice who was a party to the Vajravelu judgment should explain it away that His Lordship misjudged the matter, due to the confusion arising in the judgment in Jeejeebhoy case40 which was delivered on the same day as Vajravelu and that he was under the impression that the reasonings in Vajravelu were for the Jeejeebhoy case.

We submit there is some mistake when His Lordship the Chief Justice says41, "Because of the close proximity of the decisions it escaped me that the discussion was in the wrong case and the other merely followed it. My brother Shah has now made the two cases to fall in their proper places. It is certainly out of the question that the adequacy of compensation (apart from compensation which is illusory or proceeds upon principles irrelevant to its determination) should be questioned after the amendment of the Constitution."

For one thing Jeejeebhoy case was with respect to the vires of the Bombay Act, 4 of 1948. A pre-Constitution enactment. The decision of the court (judgment of Subba Rao, J., for the Court) was that the Act was void from the inception and was not saved by the Article 31-A and that Article 31-B was not governed by Article 31 and there was a violation of Article 31(2). It was further clearly stated by the Court that "as we held that the Amending Act is void, it is not necessary to express our opinion on the question whether it infringes the provision of Article 14 of the Constitution".

Now in Vajravelu case it was a post-Constitution Statute—The Madras Amendment Act, 23 of 1961—which was attacked as violating both Article 31(2) and Article 14. The Court held the Act to be intra vires under Article 31(2) but ultra vires under Article 14.

So it is rather not comprehensible as to how the Chief Justice could at all mistake the reasoning in Vajravelu case as belonging to Jeejeebhoy case. The Vajravelu reasonings cannot at all apply to Jeejeebhoy case for the simple reason that Subba Rao, J., had made it clear indeed. The extract of the reasoning42 which we made earlier which was characterised by Justice Shah as "not necessary for the purpose of the decision in Vajravelu Mudaliar case" is immediately followed by another para of Justice K. Subba Rao43:

"(17) The next question is whether the Amending Act was made in contravention of Article 31(2) of the Constitution . . . . It was passed to amend the Land Acquisition Act, 1894, in the State of Madras for the purpose of enabling the State to acquire lands for housing schemes."

We have to submit that the Amending Madras Act is post Constitution (1961) and the reference is to Housing Schemes. Both these are vividly absent in the Jeejeebhoy case which refers to Bombay Act, 4 of 1948, and has nothing to do with Housing Schemes.

So, we fail to comprehend how Chief Justice M. Hidayatullah could at all mistake the one case for the other. But His Lordship statement that "my brother Shah has now made the two cases to fall in their proper places" is too true.

It is true that His Lordship Justice Shah has been at great pains to now make the two cases to fall in their proper places. His Lordship agrees that the decision in Vajravelu is right. There is no difference on that score. The difference is on the statement of the law as to "what is compensation" (just or not just) which was the basis of that decision. His Lordship would get over this obstacle by calling it an obiter. That the "reasoning" is not an obiter we have already adverted to. It is rather difficult to agree with Justice Shah when he says:

"In our view Article 31(2) as amended is clear in its purport. If what is fixed or is determined by the application of specified principles is compensation for compulsory acquisition of property, the courts cannot be invited to determine whether it is a just equivalent of the value of the property expropriated. In P. Vajravelu Mudaliar case the court held that the principles laid down by the impugned statute were not open to question. That was sufficient for the purpose of the decision of the case, and the other observations were not necessary for deciding the case and cannot be regarded as a binding decision."

What was sufficient for coming to a decision in Vajravelu case was well known to Justice Subba Rao and Hidyatullah, J. That the principles stated in the impugned Act were not open to question is a finding which can be come to, only after discusing the pros and cons. So the entire discussion and reasoning is very germane, necessary and sufficient for coming to a conclusion in Vajravelu case. It appears to be not proper to say that the reasoning is unnecessary though the finding is all right. Why should Justice Shah take such a stand? If it is due to a clear view that the law as laid down in Vajravelu is wrong then the obvious thing is not to treat the reasoning as obiter but squarely face it and overrule Vajravelu by a fuller Bench decision.

In our humble opinion, the clue to Justice Shah anxiety in treating Vjravelu opinion as obiter, appears to be contained in the following para of His Lordship's Judgment in Mangaldas case:

"Right to compensation in the view of this court was intended by the Constitution to be a right to a just equivalent of the property of which a person was deprived. But the just equivalent was not capable of precise determination by the application of any recognised rules. The decision of this court in Mrs Bela Banerjee case (supra) and Subodh Gopal case (supra) were therefore likely to give rise to formidable problems, when the principles specified by the Legislature as well as the amount determined by the application of those principles were declared justiciable. By qualifying 'equivalent' by adjunctive 'just' the enquiry was made more controversial, and apart from the practical difficulties, the law declared by this court also placed serious obstacles in giving effect to the directive principles of State policy incorporated in Article 39."44

We have italicised the important lines just to highlight His Lordship's difficulties. It had become settled law from a catena of decisions from Bela Banerjee to Vajravelu that compensation is always to be just compensation. Judicial definition of compensation has been only that, despite the Constitution Fourth Amendment. In Mangaldas case, the town planning scheme had to be upheld. The draft scheme was sanctioned by the Government on August 17, 1942, under the Bombay Town Planning Act, 1 of 1955, and the scheme so commenced continued under the Bombay Town Planning Act, 27 of 1955. Under the scheme, a plot of respondent's land measuring 18, 219 square yards was acquired and the plot was reconstituted into two one measuring 15,403 square yards was reserved for the respondent and the other measuring 2816 square yards was reserved for the purposes of the local authority. The scheme was sanctioned by the Government on July 21, 1965 and the final scheme came into operation on September 1, 1965. On August 23, 1957, the respondent was informed that Rs 25,411 were awarded to him for the plot of land reserved for the purposes of local authority on the market value as on April 18, 1927, in accordance with Section 67 of the Act. The High Court of Gujarat felt bound by P. Vajaravelu Mudaliar v. Deputy Collector45 and held Section 67 was ultra vires of Article 31(2). But the Supreme Court held that Section 67 was intra vires, that it provided that the difference between the market value of the plot with all buildings and works thereon at the date of the declaration of intention to make a scheme and the market value of the plot as reconstituted on the same date and without reference to improvements contemplated. Section 71 provides that if the original landowner is not allotted a plot at all he shall be paid the value of the original plot at the date of the declaration of intention to make a scheme. Shah, J. further held that the scheme of the Act is intra vires of Article 31. Enactment of a rule determining payment or adjustment of price of land of which the owner was deprived by the scheme estimated on the market value on the date of the declaration of the intention to make a scheme amounted to a specification of a principle of compensation within the meaning of Article 31(2). Whether an owner of land is given a reconstituted plot or not, the rules for determining what is to be given as compensation remains the same. It is a principle applicable to all cases under the scheme. If the scheme was made in 1927 and published in 1957, it may be contented that the compensation as on 1927 is not compensation? Shah, J., recognises that as per Vajravelu and Metal Corporation cases, when compensation is given as on 1927 and not as in 1957 it is not just compensation. Then His Lordship is at pains to trace the history of compensation law from the Government of India Act, 1935 and put forward the theory that Vajravelu opinion was mere obiter and that when the Constitution Fourth Amendment Act, 1935 was enacted, the 'just compensation' thereby of Bela Banerjee case was exploded and effortiorari after 1955 there can be no questioning any compensation on the ground of unjustness except where it is altogether illusory or when it is based on principles not relevant to the concept of fixation of compensation.

Thus, we see the Herculean effort of Shah, J., in overcoming Vajravelu and other cases by this novel reasoning which really is not legally sustainable. If Vajravelu concept of just compensation is allowed to stand then in Mangaldas the appeal of the State of Gujarat should be dismissed. His Lordship had another desire not to place serious obstacles in giving effect to the Directive Principles of State Policy incorporated in Article 39.46 Article 39(b) declares a directive principle this wise: "That the ownership and control of the material resources of the community are so distributed as best to subserve the common good."

We beg to submit that it is not the province of the court to give effect to the Directive Principles of State Policy. It is for the Legislature to frame laws to implement the Directive Principles and also see that they satisfy the constitutional requirement of Article 31. If Article 31(2) is defective there should be an amendment to the same. As Justice Subba Rao mentioned, the word 'compensation' may be dropped and the word 'price' substituted. So long as the judicial definition of compensation is 'just compensation' even after the 1955 Constitutional Amendment it is not for the Supreme Court to disown this concept without overruling Vajravelu decision outright. It is the province of the court to safeguard the rights under Part III subject only to the restrictions in that part. To restrict them further by invoking Directive Principles is to make Part III subservient to Part IV which position was not conceded to so far by the Supreme Court.

It was in Champakam Dorai Rajan case47, Das, J., observed in 1951 that 'the Directive Principles' of State policy have to conform to and run subsidiary to the chapter on Fundamental Rights, for otherwise the protecting provisions of Chapter III will be a mere rope of sand.

It may be therefore be asked if the departure from Vajravelu stand by Shah, J., in Mangaldas stands to weaken the import of the guarantee in Article 31(2) as to compensation. Later in 1958 In re Kerala Education Bill48, no doubt the Supreme Court opined that the Court may not entirely ignore the Directive Principles of State Policy laid down in Part IV of the Constitution but should adopt the principle of harmonious construction and should attempt to give effect to both as much as possible. Thus, wherever in Part III the rights are subject to reasonable restrictions e.g., clauses 19(2) to (6), it may be appropriate if the court construes a restriction as reasonable when it appears to be in accordance with the principles enumerated in Part IV of the Constitution. But Article 31 is self-contained and has no clauses for imposing reasonable restrictions. It declares in clause 1 that no person shall be deprived of his property save by authority of law and the declaration in clause (2) is that no property shall be compulsorily acquired save for a public purpose and save by authority of law which provides for compensation of the property, etc. There is no clause whittling down this concept of compensation which has been always construed as a just equivalent of what the owner is deprived of. There is no question of any reasonable restriction in the interests of the general public as 'property' is personal to the citizen. But Article 39(b) declares a remote ideal of ownership and control of material resources to be vested in the community and so distributed as best to subserve the common good. This is altogether a socialist doctrine in contradistinction to the concept of private property envisaged as a Fundamental Right of the citizen in Article 31. Such a socialistic society is not in vogue in India as yet. There can be therefore no question of harmonious construction attempted between Article 31 and Article 39. It is not the province of the court to implement Article 39. Such revolution cannot be attempted through the agency of courts. If that were so, the whole of Part III can be erased by court action in implementing only Part IV of the Constitution. It is left to the executive and the Legislature to ascertain the wishes and mandate of the people and then give effect to Part IV, if the people as a whole desire a change over to the socialist doctrine that ownership of all property should vest in the community as a whole and so distributed as best to subserve the common good. In Mangaldas case no doubt in giving effect to the Town Planning Scheme as envisaged in the Bombay Act, acquisition of all private property in an area was made and redistributed to the residents from where such acquisition was made, in a manner so as to give effect to the scheme. This does not mean that Article 39(b) governs the situation and that the guarantee in Article 31(2) should be in any way whittled down.

It would appear that while the Supreme Court in Golakhnath case49, would deny Parliament the right to amend any of the provisions guaranteeing Fundamental Rights enshrined in Part III of the Constitution, it cannot by itself assume any power to whittle down those rights. The jurisdiction of the Supreme Court in the interpretative sphere cannot go to the extent of abrogating or whittling down the right to property specifically guaranteed in Article 31. If this is done it will tantamount to Judicial Legislation which will be ultra vires of the provisions of the Constitution.

We submit therefore that so long as the Vajravelu decision remains not overruled it is not permissible to urge that the word 'compensation' does not mean 'justness in compensation'. In fact Mangaldas judgment affirms the decision in Vajravelu but adds the declaration of the law as to compensation is an obiter and not binding on it. This we have already discussed as without any legal basis, that there is no obiter at all. It was a considered opinion of the court in the course of its determination as to the vires of the impugned statute vis-a-vis Article 31. When Shah, J., distinguishes Vajravelu and Mangaldas50 vis-...-vis the application of Article 14, His Lordship is in fact upholding the decision in Vajravelu.

The observations of Justice Shah, vis-...-vis Metal Corporation case51 cannot also be supported. His Lordship said that in the Metal Corporation Case "the court then proceeded to hold that the two principles laid down in clause (b) of paragraph II of the Schedule to the Act (i) that compensation was to be equal 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 was to be the value of the used machinery, were irrelevant to the fixation of the value of the machinery as on the date of acquisition". We are unable to agree with that Part of the Judgment. The Parliament had specified the principles for determining compensation of the undertaking of the Company. The principles expressly related to the determination of compensation payable in respect of unused machinery. The principles were set out avowedly for determination of compensation. The principles were not irrelevant to the determination of compensation and the compensation was not illusory. In our judgment, Metal Corporation of India Ltd. case was wrongly decided and must be overruled".

His Lordship Shah, J., overrules not the decision inter partes in Metal Corporation but the statement of the law therein that compensation means just compensation. Since Metal Corporation case was decided by a Bench of two judges it was easy for Mangaldas composed of five judges to review the law laid down in the Metal Corporation case. But the real hurdle was Vajravelu composed of five judges whose judgment is followed in Metal case. This hurdle is sought to be cleared by Shah, J., by calling erroneously the opinion in Vajravelu as obiter.

We beg to submit that Subba Rao, J., was right in declaring in the Metal case52 "it follows that the impugned Act has not provided for 'compensation' within the meaning of Article 31(2) of the Constitution and therefore it is void. 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 validity of clause (b) of para 11 of the Schedule to the Act affects the totality of the compensation payable to the entire undertaking. In the context of compensation for the entire undertaking the clauses of para 11 of the Schedule to the Act are nonseverable. In the result the Act not having provided for compensation, is unconstitutional and the conclusion arrived at by the High Court is correct". The Division Bench therefore dismissed the appeal preferred by the Union of India.

Subba Rao, J. rightly pointed out in the Metal case53: "Nor can the doctrine of inherent worth of a machinery has any relevance in the matter of giving compensation for its acquisition at a particular point of time, for the simple reason that the worth of an article depends upon the market conditions obtaining at the time of its acquisition. It is impossible to predicate irrespective of such conditions that a particular machinery has a fixed value for all times. Four decisions54 of this court laid down the principles applicable to the present case. Indeed but for the said decisions we would have posed this case before a constitution of five Benches. But as appeal involves only the application of the construction put upon Article 31 of the Constitution by this court in the said decisions we did not resort to that course".

The above is specially apposite since in a matter where the law as to justness of compensation was settled by four Supreme Court decisions55, Justice Subba Rao felt that where it is a mere application of the law a Bench of two Judges is enough. Applying this sound criterion since all the four cases 52 were decided by a Bench of five Judges, if in Mangaldas the Chief Justice and Justice Shah desired that the settled law in those four cases must be revised as to 'justness of compensation', then the obvious and proper thing would have been to have the case posted before a Bench of seven or even nine Judges, taking into consideration the importance of the matter as one affecting the Fundamental Right of a citizen to get a just equivalent of the property he has been deprived of. Instead of that the Justices in Mangaldas hear it before a Bench of only five judges and treat the Vajravelu opinion as obiter and not binding, overrule Metal Corporation , it being a decision of two Judges (an easy thing to do). This is indeed not proper or legal.

The need for a consideration of the question by a Bench of nine Judges appears more necessary since in the Metal Corporation case, Subba Rao, J., makes a marked reference to the aforesaid four cases53 and further cites Justice Shah's own observation in Namasivaya case53 thus: "This court speaking through Shah, J.53 observed: 'Assuming that in appropriate cases fixation of a date anterior to the publication of the notification under Section 4(1) for ascertainment of market value of the land to be acquired, may not always be regarded as a violation of the Constitutional guarantee, in the absence of evidence that compensation assessed on the basis of market value on such anterior date, awards to the expropriated owner of a just monetary value of his property at the date on which his interest is extinguished, the provisions of the Act arbitrarily fixing compensation based on the market value at a date many years before the notification under Section 4(1) was issued cannot be regarded as valid.' "

Then the learned Judge56 proceeded to state: "To deny the owner of the land compensation at rates which justily indemnify him for his loss by awarding him compensation at rates prevailing ten years before the date on which the notification under Section 4(1) was issued amounts in the circumstances to a flagrant infringement of the Fundamental Right of the owner of the land under Article 31(2) as it stood when the Act was enacted."

If Justice Shah in Mangaldas comes to a different view, basing his opinion on the fact that the impugned Act in Mangaldas case was after the 1955 Constitution Amendment while the impugned Act in Namasivaya was before the 1955 Amendment Act, even then since in Vajravelu the opinion was that the law was the same as to 'justness of compensation' whether before or after the 1955 Amendment, it is but sound judicial practice that the entire position should be re-examined by a Fuller Bench of seven or nine Judges.

The opinion in Metal Corporation to the following effect57 has the authority of Vajravelu and it is not open in Mangaldas to question this at all. Said Subba Rao, J.54: "The second limb of the provision Article 31(2) says that no such law shall be called in question in any court on the ground that the compensation provided by the law is not adequate. If the two concepts, namely 'compensation' and 'the jurisdiction of court, are kept apart, the meaning of the provision is clear. The law to justify itself has to provide for the payment of a 'just equivalent' to the land acquired or lay down principles which will lead to that result. If the principles laid down are relevant to the fixation of compensation and are not arbitrary, the adequacy of the resultant product cannot be questioned in a court of law."

How then does Mangaldas get over Vajravelu from which alone the basic law as to justness of compensation was relied upon in Metal Corporation. There is no reasoning at all given that Vajravelu is wrong in the Mangaldas judgment, except that the opinion is obiter. The matter cannot legally be disposed of in that fashion. The highest court of the land owes a duty to itself and to the nation by authoritatively giving a reasoned opinion as to the concept of 'compensation', and as to whether the Fourth Constitution Amendment Act, 1955, has abrogated the 'justness' aspect of it and as to whether Vajravelu opinion has to be overruled, in full or in part and if so for what reasons.

We are therefore of the opinion that the problem is not at all solved by the opinion given in State of Gujarat v. Mangaldas. The case has been disposed of but the problem remains. We invite the same to be considered by a fuller Bench of the Supreme Court composed of seven or nine Judges. The Fuller Bench so constituted may not only review the ratio decidendi in Vajravelu Mudaliar case but also constructively point out the directions in which the concept of compensation can be canalised. In other words the principles will have to be stated as to what will be reasonable compensation as that appears to be the essence of the just compensation doctrine enunciated by Subba Rao, J. We have already two categories of what are unjust, i.e.—

(i) Compensation which is illusory ;

(ii) Compensation based on principles not relevant to the fixation of compensation.

We may add a category such as :

(iii) Where in the matter of acquisition for town planning, the scheme is made in one year but published long afterwards after a number of years, e.g., 10 years, compensation may as well be fixed as on the date of the scheme provided in order to satisfy the justness doctrine, it is not less than 70% (this may be even fixed between 60% to 70%) of the value as on the date when the scheme was published.

(iv) the Judiciary has the power to determine what is just compensation from time to time on enunciated principles taking into consideration the changing social conditions, subordinate to the extent necessary the personal interests of the citizen to the social needs of the community as a whole.

The above may be the basis on which the justness doctrine may be expounded in the future. This will solve the conundrum as to whether the decision in Vajravelu should be overruled or reviewed at all.

We have only to make more research into categories of just compensation. The Supreme Court may as well enunciate the basic structure of what is just compensation, and the rationale of working it out. That will indeed be far better than treating the decisions of the Legislature as final in this regard.

  1. (1969) 1 SCC 509. Return to Text
  2. (1965) 1 SCR 614. Return to Text
  3. (1967) 1 SCR 255. Return to Text
  4. (1954) SCR 558. Return to Text
  5. ILR 30 Pat 454. Return to Text
  6. ILR (1952) 2 All 46. Return to Text
  7. (1952) SCR 1020. Return to Text
  8. (1954) SCR 558, supra. Return to Text
  9. (1954) SCR 587. Return to Text
  10. (1954) SCR 587. Return to Text
  11. (1964) 6 SCR 35. Return to Text
  12. Gajendragadkar, C.J., Wanchoo, Rajagopala Ayyangar and Sikri, JJ., concurring. Return to Text
  13. Vajravelu v. Spl. Dy. Collector, AIR 1965 SC 1017 at page 1028-29. Return to Text
  14. Murrays Oxford Dictionary. Return to Text
  15. Vol. III, p. 29. Return to Text
  16. AIR 1965 SC at p. 1024. Return to Text
  17. The citation of Shah, J., in Mangal Das case ends herewith. Return to Text
  18. From 16 to 17 the passage is not cited by Shah, J. Return to Text
  19. AIR 1965 SC 1019 at 1025 Return to Text
  20. . . . Here follow the lines already cited beginning with "if the questions pertain . . . the Court". Return to Text
  21. Here it was only a Bench of 5 Judges. Return to Text
  22. Now C.J. and who sat in the Mangaldas case also. Return to Text
  23. (1964) 6 SCR 936. Return to Text
  24. (1965) 1 SCR 635. Return to Text
  25. Advocate General of Maharashtra & Author of 'Constitutional Law of India'. Return to Text
  26. Ibid., page 1024. Return to Text
  27. Halsbury, Vol. 22, p. 797. Return to Text
  28. Mohandass Issardass v. A.N. Sattanadhan, 56 Bom LR 1156. Return to Text
  29. Ibid. Return to Text
  30. Ibid. Return to Text
  31. Ranchodev V. Atma Ram v. Union of India, (1961) 3 SCR 718: AIR 1961 SC 935. Return to Text
  32. Ranchodev V. Atma Ram v. Union of India, (1961) 3 SCR 718: AIR 1961 SC 935. Return to Text
  33. Ibid. in AIR 1960 at pp. 936-937. Return to Text
  34. See AIR 1953 SC 325. Return to Text
  35. AIR 1953 SC 325. Return to Text
  36. AIR 1957 SC 877. Return to Text
  37. Shah, J., was then Judge of the Bombay High Court. The same Shah, J., as Supreme Court Judge delivered the Mangaldas Judgment. Return to Text
  38. (1953) 56 Bom LR 13 (s.i.). Return to Text
  39. 55 IA 360. Return to Text
  40. (1965) 1 SCR 635. Return to Text
  41. In State of Gujarat v. Mangaldas, etc. Return to Text
  42. Vide supra particuarly ending with p. 629 of SCR "If the question pertains . . . within jurisdiction of the court". This is para 16 of AIR 1965 SC 9 at 1025. Return to Text
  43. (1954) SCR 587. Return to Text
  44. See Article 39. Return to Text
  45. (1965) 1 SCR 614. See also (1954) SCR 558 (Bela Banerjee case); (1965) 1 SCR 635 (Jeejeebhoy case); (1965) 1 SCR 635 (Metal Corporation case). Return to Text
  46. Vide full quotation supra 43. Return to Text
  47. AIR 1951 SC 226. Return to Text
  48. AIR 1958 SC 956. Return to Text
  49. AIR 1967 SC 1647. Return to Text
  50. Vajravelu strikes down the impugned provision as ultra vires of Article 14. While Mangaldas does not. Return to Text
  51. (1967) 1 SCR 255. Return to Text
  52. AIR 1967 SC 637 at page 643. Return to Text
  53. Ibid. at p. 641. Return to Text
  54. (i)State of West Bengal v. Mrs Bela Banerjee, 1954 SCR 558 at p. 568 : AIR 1954 SC 170 at 173. (ii)(1964) 6 SCR 936 at 945 : AIR 1965 SC 190 at 194. (iii)(1965) 1 SCR 614 : AIR 1965 SC 1017 at 1023. (iv)(1965) SCR 636: AIR 1965 SC 1096. Return to Text
  55. See AIR 1967 SC 642. Return to Text
  56. Justice Shah. Return to Text
  57. AIR 1967 SC 637, 642. Return to Text
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