SRINIVASA COOP. HOUSE BUILDING SOCnlTY LTD. i v. MADAM GURUMURTHY SASTRY AND ORS.

The Judgment of the Court was delivered by

B K. RAMASWAMY, J. Admittedly the appellant was registered under the Andhra Pradesh Coop. Societies Act. Its object appears to be to r develop the land and allot plots thereof to its members for construction of houses. Notification under s.4(1) of the Land Acquisition Act 1of1894 for short 'the Act' was published in the State Gazette on February 8, 1979, acquiring an extent of 71 acres 56 cents of land situated in Moolasagararn c near Nandyal in Kurnool Dist. for the aforesaid purpose. A report under s.5A, of the enquiry, was submitted to the Govt. The appellant entered into an agreement under s.41 of the Act dated December 12, 1981 with the Govt. treating the appellant as a company and it was published in the gazette dated February 4, 1982. But it was given up. The state thereafter contributed Rs. 100 for each acquisition and got declarations under s.6, published in the State Gazette on February 4, 1982 to an extent of 54 acres 66 cents and on January 19, 1984 for another extent of 16 acres 19 cents. It is not necessary to mention Jhe previous history of the litigation but suffice to state that a single Judge dismissed one writ petition and allowed other writ petitions on December 9, 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 December 6, 1986, quashed the notification under s.4(1) and the declarations under s.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 acquisi- tion.

Sri Sitararnaiah the learned Senior counsel for the appellant con- tended that once the government contributed Rs. 200 from the public exchequer, the public purpose envisaged under s.3(f) of the Act is satisfied and the requirements envisaged in Chapter VII need not be followed.

, SR!NIVASA BUILDING SOCIETY LTD. ~. MADAM GURUMURTY {K. RAMASWAMY. J.] 853

Alternatively it was contended that once the acquisition was found to be for providing house sites to the members of the Co-op. 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 declaration on the ground that the acquisition of the small farmers inferentially offends Art. 14 and proviso to Art. 3JA of the Constitution is unwarranted. B

Section 2( e) of the Act defined Company under pre 1984 Amend- ment Act as meaning a Company registered under the Indian Companies Act, 1882... and included a society registered under the Societies Registra- tion Act, 1860, and a registered society within the meaning of the Co- C operative Societies Act, 1912, or any other law relating to coop. societies for the time being in force in any State. Section 2(1) 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 t~ make such provision. Chapter VII deals with the acquisition of land for companies D Art. 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 inter~st of the community E 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 F J 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 collectiveiy. Therefore, acquisition for any- thing which is not for a public purpose cannot be done compulsorily. Admittedly, there is no group housing scheme approved by the State G 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.

The Act recognises dicatomy, namely, acquisition for a public pur- H

p. 854 Copy page pinpoint

A pose in Chapter II and acquisition for a private purpose of a type restricted in Chapter VII. There ia 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 co-operative society registered under the Central or State Coop Societies Act, preceding 1984 Amendment Act, it had to acquire the land in strict compliance with Chapter VII. If the company, B (Coop Society) requires land for any purpose other than those mentioned in s. 40, then no compulsory acquisition under the Act is possible. Part VII no where authorises the government to apply the provision of that part to private acquisition. A.P. State Amendment Act expressly included acquisi- tion for providing house sites for the poor; for the execution of any housing c scheme under A.P. Housing Boards Act; godowns for a coop. society as for public and urgent purposes. By necessary implication the acquisition for a Private Coop. House Building Society to construct houses for its members must be a private purpose.

Section 39 (preceding 1984 Amendment Act) provides that the provisions of Ss.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 s1,1.ch consent shall not be given unless the appropriate government be satisfied, either on the report of the Collector under sub-s.(2) of s.5-A or by an enquiry held as hereinafter provided :

(a) . that the purpose of the acquisition is to obtain land for the erection of dwelling-house for workmen employed by the company or for the provision of amenities directly connected, therewith or ; F (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

G (b) that such acquisition is for the construction of some work and that such work is likely to prove useful to the public. f,

Under s.41, if the appropriate government is satisfied, after consider- ing the report, if any, of the Collector under sub-s. (2) of s.5-A, or on the report of the officer making an inquiry under s.40 that the proposed acquisition is for any of the purposes referred to in clauses (a) or (aa) or

SRlNIVASA H!Jll.DING SO''IETY LTD. r. MA['IAM C1URUMURTY [K. RAMASWAMY, J.J 855

\ (b) of sub-s.{1) ot s.40, it shall require the company to enter into an agrei;n1ent \Vith the appropriate goverr.mcnti providing to the satisfaction of the appropriate go\'crnrnent for the following matters, namely :

(1) the payment to the appropri,tc government of the cost of the acquisition; B {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 house Oi the provision of amenities connected therewith, the time wit~in c which, the condition en which and the manner in which the dwelling houses or amenities shail be erected or provided;

(4-A) where the acquisition is for :he construction of any building or \Vork for a cGmpany \vhich is engaged or is taking steps for engaging itself i) 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 tirne within which and the conditions on which, the company shall be E entitled to use the work.

Under s. 42, every such agreement shall as soon as n1ay be after execution, be published in the Official Gazette and shall thereupon, so far as regards the terms on which the pt.blic shall be entitled to use the work, have the same effect as if it had formed part of. the Act. Explanation F engrafted in s.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 bv sale, n1ortgage, gift, lc:ise or uthLr\vise except with the previous sanction of the appropriate government. Section 44-B enjoins that, notwithstanding any- G thing contained in this Act, no land shall be· acquired under this part except for the purpose mentioned in clause (a) of sub-s.(1) of section 40, for a "private company'' wh~ch is not a government company.

y Explanation - 'Private CompJny' and 'Goverhment Company' shall have the meanings respectively assigned to them in the Companies Act, H

856 SUPREME COURT REPORTS (1994[ 3 S.C.R.

A 1956. A plain reading of the fascicule of these provisions clearly indicates I 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 compubory acquisition under Chapter VII cannot be had. Even when Chapter VII was invoked, the requirements of B s.40 and s.41 are mandatory and shall be strictly complied with. It is dearly discernible from scheme of the acquisition in Chapter Vll 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 c 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 of Chapter VII, no land should be acquired under Chapter VII except for the purpose mentioned in clause (a) of sub-s.(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 iand or any part thereof by sale mortgage, gift, lease or other\vise 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 ss.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 F VII may, after the acquisition has become final, divert the land for private profit motive, defeating the purported public purpose for which the ac· quisition was made. The government company obviously does not alienate such property for private gain since the profits merges into public fund. While the private con1pany could get acquisition but thereafter become ' free to dispose of the property. Therefore, the acquisition for a private G company get limited only for purposes envisaged under s.40(1)(a) and thereby the public purposes envisaged therein gel safeguarded and protected. The dominant purpose of public utility pervades the provisions in Chapter VII of the Act.

H A private company as defined under the Companies Act, 1956, the

SRJNIVASA BUILDING SOCIETY LTD.~. MADAM GURU MURTY [K. RAMASWAMY. J.J 857 \ private Coop. House Building Society does not become a private company under s.44-A of the Act and s.44-B prohibi:s transfer by way of sale etc. of the land so acquired under Part VII. Therefore, the Private Coop. Housing Society registered under the A.P. Coop. Societies Act is not a company under s.3( d) of the Act entitling to invoke the provisions in Chapter VII.

The question, therefore, is whether the contribution of Rs. 100 for each declaration from the public exchequer would make the private pur- pose "a public purpose" under s.2(1) of the Act.

Jn Smt. Somavanti & Ors. v. The State of Punjab & Ors., [1963] 2 SCR. 774, the facts were that the Government of Punjab issued a Notification c under s.4(1) acquiring the petitioners lad for a private company to set up a factory to manufacture various ranges of refrigeration compressors and ancillary equipment. An inquiry under s.5-A was dispensed with and a declaration under s.6 was published. The Government contributed Rs. 100 from public exchequer. When it was questioned by a petitioner under Art. D 32, this Court at p.805 and p.818 held that it is for the State Govt. to decide about a public purpose. Jf the pnrPose 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 E token money and when the entire compensation of the land was to be met by a company, declaration under s.6 would be a colourable exercise of the power and thereby the acquisition was ma/a fide and invalid. In that context, this Court considered the question and laid at pp.817-18 that "We would, however, guard ourselves against being understood to say that a F token contribution by the State towards the cost of acquisition will be sufficient compliance \vith the law. In each and every case whether such contribution satisfies the requirement of law would depend upon the facts of a particular case. Indeed the fact that the State's contribution is nominal may well indicate, in particular circumstances that the action of the State G was a colourable exercise of power. In our opinion, part does not neces- sarily 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 c;ubstani:iaJ part of foreign exchange and H

858 SUPREMF COURT REPORTS [1994] 3 S.C.R.

A construction of the qu<trtcrs for \VOrkn1cn \vould also be a public purpose. I Accordingly it \Va~ held that though the company was a private company, acquisition \Vas not a culourabh: d~,·icc lo avoid the rigour of part VII. In that behalf it was amplified that if "the Gm1. 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 s.6(1) is merely a colourable device B to enable respondent No. 6 to do something, which, under termc. of s.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 acquisi- tion was for public purpose. Acquisition without resort lo Part VII did not c constitute a fraud on state's po\ver to acquire land and was not colourable exercise of such powers. In Inde1jit C. Prakash v. State of Gujarat & Ors., I1975] 1 sec 824, nine proposals were sent by E.S.I. Corporation, a Company incorporated under the Indian Companies Act to acquire certain plots of land in Driyapur- Kazipur area of the city of Ahmcdabad bearing D certain numbers to establish a dispensary for Employees' State Insurance Scheme al 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 s. 5-A declaration under s.6 was published. When they were challenged, the High Court E 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 s.6 is a colourable exercise of the power by the State Govt. In the light of those facts it was held that the exercise of the power under s.6 could not be held to be colourable exercise of the power. In Bai Malipabu v. State of Gujarat, [1978] 2 SCC 373 for the const.ruction of staff quarters for employees and of the dispensary etc. of E.S.I., after s.4(1} notification followed by an inquiry under s.5A and a declaration under s.6 of the Act were published, the Govt. contributing Rc.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 & Anr. v. Durga Pada Muklwjee & 01>. (1981] l SCR 573, the Govt. published a notification under s.4(1) of the Act that the lands specified therein was needed for a public purpose, namely, expansion of factory of the company at the expense of the company. When it is objected to another notification was issued that

SRINIVASA BUILDING SOCIEITL"ID. v. MADAM GURUMURTY [K. RAMASWAMY,J.] 859

the land was needed for industrial development at public expense con- A tributing token money. It was contended that it \Vas for the private purpose, namely, for the benefit of the con1pany. A single judge disn1issed the writ petition but the division bench allowed the appeal holding that there was oo evidence produced that the land was needed for public purpose and not for the benefit of the company. On appeal this Court B allowed and held that the public purpose was for the industrial develop- ment which was a public purpose and declaration under s.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 C State.

In Manubhai Jahta/a/ Patel & Anr. v. State of Gujarat & 01'., [1983] 4 SCC 553, the notification issued under s.4(1) and published in the State Gazette followed by an enquiry under s.5-A and declaration under s.6 for D 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 Stale fund and it was not illusory so as to invalidate the acquisition. Infhandula/ v. State of Punjab, AIR (1961) SC 3434, this Court E 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 ;; case there can be an agreement under s.41 for transfer of the land acquired by the F Government to the Company on payment of the cost of acquisition, as also other matters. The agreement contemplated by s.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 G 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 simpliciter, the declaration cannot be made without satisfying the requirements of Part VIL But that does not neces- H

H60 SUPREME COURT REPORTS [1994] 3 S.C.R.

A sarily mean that an acq·uisition for a Company for a public purpose cannot he 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 r·ublic funds. In ' other \VOrds, the essential condition for acquisition is for a public purpose and that the cost of acquisition should be borne, \Vholly or in part, out of public funds. Hence an ac.qui!-lition for a Company may also be made for B 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 the Housing Scheme and substantial amount has been extended on the scheme out of the govern- c ment Revenue in the form of subsidies and loan~.. The acq~isition was also for the construction of the quarters for the workmen under the government sponsoring Housing Scheme for industrial worker$. Under those cir- cumstances 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 D public revenue, under all circumstances cannot be considered to be colourable exercise of power. Each case must furnish its back drop whether the acquisition is for public purpose or for a private purpose. The facts and circumstances must carefully be scrutinised to reach a finding.

This Court in Vintpaxappa Veerappa Kadampur v. State of Mysore, E AIR (1963) SC 849 construing S.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, 5th Edn. Vol.1, p.460, "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 Black Law Dictio11a1y, 6th Edn., p.266 "under colour of any law" of a State include not only acts done by State officials \vithin the bounds or 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

SRINJVASA BUILDING SOCIETY LTD.,.. MADAM GURUMURTY [K. RAMASWAMY.J.] 861

colour of any Jaw, 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 iiran 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 that the exercise of the power of the declaration under section 6 c 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 s.40(1) (a) or under s.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 placed in this court appears to be Advocates, Chartered D Accountant 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 s.SA in this perspective before accepting the report and contributing a sum of Rs. 100 each from the public exchequer within the teeth of Ss. 40, 41, 44A and 44B of the Act. E Thus it must be held that the acquisition and declaration published under s.6 is a colourable exercise of the power.

The appeals are accordingly dismissed with cost quantified at Rs. 10,000.

' U.R. Appeals dismissed.