SH. JILUBHAI NANBHAI KHACHAR ETC ETC. v. STATE OF GUJARAT AND ANR. ETC. ETC.

Karl Renner in his 1'The Institution of Pn·vate law their Functions", . 1949-Edition by Kahn-Feund, pages 105-08 and 114-22, stated the "Proper- D ty in modern conditions has become a means of control over other people's I labour and life." Private property ownership requires reconciliation with

public interest balancing public needs against private needs. M.R. Cohen in his essay on "Property an.i Sovereignty" [13 Cornell Law Quarterly 8] stated that right is a relation, not between an owner and a thing, but I between the owner and other individuals in reference to things. Therefore, E ' property as a right over things resolves it into component right such as the jus utendi, ) s disponendi, etc. Justice Mathew opined in his right to 1

... property that in law, control of property means control of matter, and, it I becomes control over human beings. The institution of private law imply

the total power of doing with the thing what one likes, has, in fact become F an institution of public law (power of command) and its main functions are exercised by complementary legal institutions developed from the law of 1 obligations. According to Justice Mathew the law eventually takes account of this change of function by giving property an increasing public law character. G According to Sir Henry Maine, in his ''Ancient law, 1931-Edition, 11 "ancient law knows next to nothing of individuals. Individual is an impor- tant and distinct part of the 'social compact' quoting the village community in I11dia as an instance of an organised patriarchal society and an as- 1 scmblage of co-proprietors, he stated thus 1'the personal relations to H

846 SUPREME COURT REPORTS [1994] SUPP. 1 S.C.R.

A each'/other of the men who compose it are indistinguishably confounded with their proprietary rights ....... The village community is known to be of immense antiquity. In whatever direction research has been pushed into Indian history, general of local, it has always found the community in , existence at the farthest point of progress. Friedman in his "Legal Theory" B stated that in modern democracy, by the same process, which has lead to the increasing modification of individual rights by social duties towards neighbours and community., has everywhere has to temper freedom of property with social responsibilities attached to property. He quoted power of taxation, police power and the power of expropriation subject to fair compensation are examples of public restrictions on freedom of property. c He also stated that another kind of interference touches the freedom to use property through the growing number of social obligations attached by law, i.e., use of industrial property or contact of employment. Justice Mathew, therefore, drew the distinction between the individual side and the social side of the property, The social side of the property finds illustration in the right of eminent domain and taxation. It is not regarded as something exceptional. It is an essential of the institution of property itself The Social side limits the institutional side and it is not an absolute private property itself. The two necessarily must go togethei so that, if one perishes, the other must perish. In the words of Prof. Van Ihering, it would result in "the destruction of the society". In the words of Prof. Towney the property becomes functionless. Justice Mathew at p.12 stated that all property might be described as government largesse given on conditions and subject to law. At P.14 he stated that "property is an essential guaran- tee of human dignity for, in order that a man may be able to develop himself in a human fashion, he needs a certain freedom and a certain "'· F security, the one and the other are assured to him only through property. In his concluding observations at p.19 Justice Mathew had stated that the "property is the greatest source of friction in a community, extreme ine- quality in the distribution of property has been and will be a cause of revolution in states. I am not sure the problem will be solved by transferring G the ownership of property in the means production to the state. This will add economic power to political power and will render the individual more helpless than in the capitalistic system where power and responsibility are diffused. This does not mean that the final directing power over economic system should not be in the hands of the community. An individual has a H right to conditions of well being and that consists in the case of many

J.N. KHACHAR v. STATE OFGUJARAT(RAMASWAMY,J.] 847 I

individuals of the right as well as the duty to work. The system should be so organized that no individual can, through possession of property, have power over the lives of others."

I Hidayatullah, C.J., in his 'Right to Property - at p.88 stated that Socialism envisaged reform which would disturb this right and make provision for the resources to be employed in aid of the suffering classes, lis it is contemplated as the common happiness. In this the will of the individual was made subordinate to that of the community. The ine- 9ualities of wealth were the main objects of the socialistic doctrines. It was considered that the legitimate function of the State was to reduce this inequality even by taking from those who had to little. This was to be a c permanent arrangement and not merely an ameliorative measure in some c;alamity. This equality was to be achieve not only by public opinion and forces but by law and the force of the State. I ,

D It is accordingly clear that in a welfare State envisioned in the directive principles of State policy, the basic perquisites are that everyone is entitled to minimum material well being, such as food, clothing, and decent housing. Expanding living standard are possible with the existing or expanding physical resources and scientific knowledge etc., and the State has right and duty to act when private initiative fails. In a democratic society, every individual needs legal protection for the beneficial enjoyment of what he has discovered and appropriated; has created by his own labour (in wider sense); and what he has acquired under the existing social and • economic order subject to law and order. Equally welfare consists in adjusting individual interests with social interest by the aid of law as social engineering, which would mean public restraints on property designed to mitigate the privileges wh~ch property offers in enjoyment of the things that life has to offer. Restraints on the power to use the proµerty as a delegated power of command is mearis as of quasi-governmental private control over the major assets of a nation. Property, thereby, is subject to regulation. The directive principles enjoin the State to reorganise the economic system by law or administrative means and the Fundamental rights are means to that end to make right to life meaningful, equality of opportunity and of status and dignity of person a reality. The fundamental rights and the directive principles are the two wheels of the chariot as an aid to make social and economic democracy a truism. H

848 SUPREME COURT REPORTS (1994] SUPP. 1 S.C.R.

A The word "property" used in Article 300A must be understood in the context in which the sovereign power of eminent domain is exercised by the State and Property expropriated. No abstract principles could be laid. Each case must be considered in the light of its own facts .and setting. The Phrase 'deprivation of the property of a person' must equally be considered in the fact situation of a case. D~privation connotes different concepts. B Article 300A gets attracted to an acquisition or taking possession of private property, by necessary implication for public purpose, in accordance with the law made by the Parliament or a Stale legislature, a rule or a statutory order having force of law. It is inherent in every sovereign State by exercising its power of eminent domain to expropriate private property C without owner's consent. Prima facie, State would be the judge to decide whether a p1;1rpose is a public purpose. But it is not_ the sole judge. This · will be subject to judicial review and it is the duty of the Court to determine whether a particular purpose is a public purpose or not. Public interest has always been considered to be an essential ingredient of public purpose. But D every public purpose does not fall under Article 300A nor every exercise of eminent domain an acquisition or taking possession under Article 300A. Generally speaking preservation of public health or prevention of damage to life and property are considered to be public purposes. Yet deprivation of property for any such purpose would not amount to acquisition or possession "taken under Article 300A. It would be by exercise of the Police E power of the State. In other words, Art. 300A only limits the powers of the State that no person shall be deprived of his property save by authority of law. There has to be no deprivation without any sanction of law. Depriva- tion by any other mode is not acquisition or taking possession under Article 300A. In other words, if there is no law, there is no deprivation. Acquisition .. of mines, minerals and quarries is deprivation under Art. 300A. F The question then is whether the owner of the property is entitled to compensation i.e., just equivalent or indemnification to the owner of the property expropriated. It is common knowledge that when the State exer- cises its executive power to acquire private property, it is under the land G Acquisition Act, 1894 or similar State laws. Acquisition thereunder though is for public purpose, payment of compensation at the prevailing market value as on the date of the relevant notification published in the Official Gazette, is sine qua non. The State when exercises the power of eminent • domain under. Art 300A and acquires or requisitions or taken possession of the property of a citizen to give effect to any of the directive principles

J.N. KHACHAR v. STATE OFGUJARAT(RAMASWAMY.J.] 849

envisaged in Part IV of the Constitution, the question emerges whether the same yardstick of payment of just equivalent or indemnification to the owner of the property expropriated should be applicable or Art. 300A per force bring it in operation? Since Art. 30(2) itself provided payment of compensation, when property was acquired preceding 25th Constitution An1endment Act, 1971,,this Court interpreted the word "coril.pensationn as aforesaid, but when Article 30(2) itself was omitted from the Constitution, the question arises whether payment of compensation is a sine quo non for deprivation of property under Article 300A?. In any democracy governed by rule of law, Constitution is the supreme law of the land. Roscoe Pound, a sociological jurist whose writings have virtually opened new vistas in the sphere of justice, Stated that 'the justice meant not as an individual or idea relations among men but a regime in which the adjustment of human relations and ordering of the human conduct for peaceful existence'. According to him, 'the means of satisfying human claims to have things and to do things should go around, as far as possible, with least friction and waste. In his ''1 Swvey of Social Interests'~ 57th, Harvard Law Review, 1 D at 39(1943), he elaborated thus : 'Looked at functionally the law is an attempt to satisfy, to reconcile, to harmonize, to adjust these overlapping and often conflicting claims and demands, either through securing them directly and immediately, or through securing certain individual interests or through delimitations or compromises of individual interests, so as to give effect to the greatest total of interests or to the interests that weigh E more in our civilization with the least sacrifice of the scheme of interests as a whole". In his 'theory of justice', 1951 Edition, at page 31 he stated that "the law means to balance the competing interests of an individual along with the social interests of the society." In his work, "justice according to Law/1 he observed : "We come to an idea of maximum satisfaction of p human wants or expectations. What we have to do in social control and so in law, is to reconcile and adjust these desires or wants or expectations, so far as we can, so as to secure as much of the totality of them as we can." According to him, therefore, that the claims or interests, namely, in- dividual, physical, social or public interest should harmoniously be recon- ciled "to the balancing the social interests through the instrument of social G control; a task assigned to public law for that matter."

All modern constitutions of democratic character provide payment of compensation as the condition to exercise the right of expropriation. Commonwealth of Autralia Act, a French Civil Code (Article 545), the 5th H

850 SUPREME COURT REPORTS (1994] SU?P. 1 S.C.R.

A Amendment of the Constitution of U.S.A. and the Italian Constitution provided principles of 'just terms' 'just indemnity', 'just compensation' as reimbursement for the property taken, have been provided for. As pointed in Halsburry's laws of England that "when parliament has authorized the compulsory acquisition of land it is almost invariably provided for payment of a money compensation to the person deprived of his interest in it." B Exception for the interest of the owner was of as much nominal value as an owner's interest in the subsoil of the streets.

The Constitution of India, on the other hand in its historical back- ground provided Directive Principles vis-a-vis the fundamental rights to C realise social and economic democracy for successful working of political democracy in wh;ch the state in bound to provide to every person in the society equality of opportunity in economic arrangements. Material resour- ces and operation of the economic system shall be so organised as to established the egalitarian social order. Though Articles 31 and 19(1)(f) of ( D the Constitution accorded to "property" the status as a fundamental right, there emerged conflict between the animation of the founding fathers and the judicial interpretation on the word ncompensation" when private property was expropriated to subserve common good or to prevent com- mon detriment.

E The constitution history of the interpretation of the power of the Parliament to amend the constitution under Art. 368 form Kameshwar Singh v. Kesvananda Bharti to give effect to the directive principles in Part JV vis-a-vis the right to property in Arts. 19(1)(f) and 31 as .well as the interpretation, compensation' from Ms. Bela Banerji to Banks 11 1

F Nationalisation's case do establish that the Parliament has ultimately wrested the power to amend the Constitution, without violating its basic features or structure. Concomitantly legislature has power to acquire the property of private person exercising the power of eminent domain by a law for public purpose. The law may fix an amount or which may be G determined in accordance with such principles as may be laid therein and given in such manner as may be specified in such law. However, such law shall not be questioned on the grounds that the amount so fixed or amount determined is not adequate. The amount fixed must be not be illusory. The principles laid to determine the amount must be relevant to the determina· H tion of the amount. The doctrine of illusory amount or fixation of the

J.N. KHACHAR,·. STATEOFGUJARAT[RAMASWAMY.J.] 851

principles to be arbitrary were evolved drawing support from the language A originally couched in the unamended Entry 42 of List IJJ which stood amended by the Constitution 7th Amendment Act with the words merely 11 "Acquisition and Requisition of Property Nevertheless even thereafter •

this court reiterated this same principles. TherefOre, the amendment to Entry 42 of List III has little bearing on the validity of those principles. We B are conscious that the parliament omitted Art. 31(2) altogether. However when the State exercises its power of eminent domain and acquires the property of private persun or deprives him of his property for public purpose, concomitantly fixation of the amount or its determination be must in accordance \Vith such principles as laid therein and the amoun[ given in such manner as may be specified in such a law. However judicial inter~ c pretation should not be a tool to reinduct to doctrine of compensation as concomitance to acquisition or deprivation of property under Article 300A. This would be manifest from two related relevant provisions of the Con- stitution itself. Articles 30(1A) and 2nd proviso to Art. 31A as exceptions " to the other type of acquisition or deprivation of the property under Article D 300A.

For acquisition of the property of a minority educational institution, the measure is that the State shall ensure that "the amount fixed or determined under such law" would not "restrict or abrogate the right guaranteed" by Art. 30(1). This was simultaneously brought on the Con- stitution by Section 4 of the Forty-fourth Constitution Amendment Act while omitting Arts. 19(1)(1) and 31 from Part III. Equally when the land • 11 11 of a person within the ceiling limit and " in his personal cultivation is 11

acquired, law shall provide "for payment of compensation at a rate which shall not be less then the market value thereof', this was brought by Constitution Seventh Amendment Act. By necessary implication the obliga- tion of the state, to pay compensation for property acquired or indem- nification of property deprived under Article 300A or other public purpose is obviated. G The question then is whether the principles laid in Section 69A(4) of the Code are ultra vires. In Bhim Singhji v. Union of India, [1981] 1 SCC 166, per majority, the Constitution Bench considered Section 11(6) of the Urban Land (Ceiling and Regulation) Act, 1976 (33 of 1976) and fixation of amount of Rs. 2.00 lacs as maximum limited under sub-s. (6) of the H

852 SUPREME COURT REPORTS [1994) SUPP. 1 S.C.R.

A property worth Rs. 2.00 Crores, it was held to be not illusory and the provisions is not confiscatory, and that therefore, it does not violate Art. 14 and Art. 31(2) of the Constitution (proceeding Constitution 44th Amendment). Jn Achutananda Purohit v. State of Orissa, [1976] 3 SCR 919, it was held that fixation of compensation on slab system does not violate B Article 14 and 31(2) of the Constitution. Jn Basant Bai's case this court held that the.provision in s.44(3) of the Maharashtra Housing and Develop- ment Act that in t'ie absence of agreement, the amount shall be equal to 100 times .the net average monthly income actually derived from such land during the period of five consecutive years immediately preceding the date c of the publication of the notification referred to in s. 41, as may be determined by the Land Acquisition Officer, was held to be not violative of Art. 14. Article 21 was held to have no application to the determination of such amount. In Tinsukhiya's case a Constitution Bench held that the limitation of the amount on the basis of the written down book value of the D assets was held to be not violative of Art. 14 and such principle was held / to be not illusory nor arbitrary. The determination of the amount was held to be an integral and inseparable part of the scheme of nationalisation which cannot be cancelled as a distinct provision independent of the scheme. It was also further held that the material resources of the com- E munity mentioned in Art. 39(b) must be widely interpreted and nationalisa- tion and acquisition is one of the methods of distribution of material re"-ources of the community. The economic cost of social and economic reforms is amongst the most vexed problems of social and economic change. The need for constitutional mandates for such legislative efforts at social and economic change recognises otherwise unaffordable economic • F burden of reforms. It is not possible to diverse the economic constitutions or components from the scheme of nationalisation. The main cause of the scheme of the nationalisation lies on its cost and it cannot be isolated. The quantification, therefore, forms part of the integrated scheme and cannot be considered in isolation. G It would thus be clear that acquisition of the property by law laid in furtherance of the directive principles of State policy was to distribute the material resources of the community including acquisition and taking pos- session of private property for public purpose. It does not require payment H of just compensation or indemnification to the owner of the property

J.N. KHACHAR v. STATEOFGUJARAT[RAMASWAMY,J.] 853

expropriated. It is very negation of effectuating the public purpose. Pay- A ment of market value in lieu of acquired property is not sine qua non for acquisition. Acquisition and payment of amount are part of the scheme and they cannot be dissected. However, fixation of the amount or specification of the principles and the manner in which the amount is to be determined must be relevant to the fixation of amount. The amount determined need B not bear reasonable relationship. In other words, it is nut illusory. The adequacy of the resultant amount cannot be questioned in a court of law. However, the validity of irrelevant principles are amenable to judicial scrutiny.

c It is, therefore, clear that the appellants are not entitled to compen- sation or just equivalent of property they are deprived of or indemnification of the property expropriated i.e., mines. whether worked or not, minerals whether discovered or not or quarries deprived by law made under Article .. 300A of the Constitution. The principles under Section 69A(4) of the Code are relevant. The resultant amount is not illusory. Thereby they are not D ·void. We further hold that after the Constitution forty fourth Amendment Act has come into force, the right to property in Arts. 19 (l)(f) and 31 had its obliteration from Chapter III, Fundamental Rights. Its abridgement and curtailment does not retrieve its lost position, nor gets restituted with renewed vigour claiming compensation under the grab 'deprivation of property' in Art. 300A. The Amendment Act neither receives wrath of Art. 13(2), nor does s.69A become ultra vires of Art. 300A.

} The further contention that money value of the rupee from three years preceding May 1, 1960 till date, has considerable been eroded and that, therefore, the foration on the principle of net annual income of three years preceding the date of vesting, namely 1st May, 1960 is arbitrary and amount so determined is illusory is also devoid of substance. In Achutananada's case, it was contended that compensation money should be so calculated that the purchasing power of the amount of compensation to be paid on the date of the actual payment will not be less than its purchasing power on the date of vesting. Repelling the contention this court held that on the date of vesting which was well over two decades ago, the purchasing powers of rupee was mnch higher than its present value. It is more of less the world phenomenon that the erosion in value of unit of currency has been taking place. But this inevitable devaluation due to H

854 SUPREME COURT REPORTS [1994] SUPP. 1 S.C.R. ' A inflationary trends does not affect the quantum of compensation prescribed by the statute for the purpose of allowing compensation in rupee long ago is the same as the rupee of today, although for the purpose of market and cost of living, the housewives' answer may be different. Law is sometimes blind. Therefore, the loss of rupee value is not relevant consideration to adjudge the principle laid by the statute. Giving acceptance to the conten- tion renders every statute ultra vires by the nature of the litigation that the time lag inevitably intervenes an rupee value, during the interregnum gets eroded and every Act thereby because, on its account, unworkable. In normal acquisition, the principle of depletion of rupee value has repeatedly been held to be not relevant to determine market value. The contention, therefore, is rejected.

It is next contended that the act and the related provisions provided different modes of compensation than the one provided in sub-s.(4) of Section 69A of the Code and that, therefore, it is discriminatory, violating D Art. 14 and unfair procedure offending Art. 21. We find no substance in this contention. It is true that different Acts, provide different principles ' to determine the amount payable to the deprived owner. The principle of average of three years net annual income received from production of the mines and minerals preceding the date of the vesting is a relevant and germane principle to fix the amount payable to the owner Comparative evaluation of different principles evolved by each statute may appear to be different and prime facie to be discriminatory from each other, but com- . parative analogy would not furnish satisfactory test to declare a national principle determined by the statute to be discriminatory. It is seen that the principle bears just relation to the object of determining the amount or compensation payable to the owner and the principle of average of three years net annual income is a reasonable classification having relation to the object of modification of the existing rights and extinguishment thereof. Section 69A(4) of the Code is, therefor•, valid. So it is unassailable under G Art. 14. The principle of unfairness of the procedure attracting Art. 21 does not apply to the acquisition or deprivation of property under Article 300A giving effect to the directive principles, are not concerned in these appeals of the effect of mining and mineral lease or leases granted by the appel: !ants to third parties, since that question was neither canvassed in the-High H Court, par any factual foundation laid before us. We declined to go into

J.N. KHACHAR v. STATE OF GUJARAT [RAMASWAMY, J.] 855

that question. For well over twelve years the appellants worked the mines A etc. by obtaining stay of operation of law and had appropriated the mines or minerals or quarries from the respective lands.

The appeals are accordingly dismissed with quantified costs at Rs. 1,00,000 in each set. Compensation or amount payable under Section B 69A(4) of the Code may be worked out and the costs be set off in working out the amount and the balance, if any, be recovered from the appellants. This exercise should be done within three months from the date of the receipt of the judgment. Working the mines etc. should be stopped forthwith by either the appellant, their lessees, or any body in the feigned camouflaged or coloured shoes. The State should take immediate action C is this behalf.

T.N.A. Appeals dismissed.