# PRA TIBHA NEMA AND ORS v. STA TE OF M.P. AND ORS

- **Citation:** [2003] Supp. 1 S.C.R. 890
- **Court:** Supreme Court of India
- **Decided:** 2003-07-30
- **Case number:** Civil Appeal No. 7133of1999
- **Bench:** K.G. Balakrishnan, P. Venka Tarama Redd!
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/pra-tibha-nema-and-ors-v-sta-te-of-m-p-and-ors-19237
- **Pages:** 30

## Headnote

Land Laws:
Land Acquisition Act; Part II and Part VII, Sections 3(j), 4(1), 5(A), 6,
C and 9(2)/lndustrial Policy and Action Plan 1994:
Acquisition of land for setting up an industry in private sector-Validity
of-Held, land was acquired for industrial growth in the public interestActive role/initiative shown by the private company and expeditious action
in processing of the acquisition proceedings by the Government could not
D be given different colour as it promotes public purpose-When the Government
satisfies about the existence of public purpose for acquisition of land, no
fault could be found with such act of the Government-However, State
Government to make afresh assessment as to the requirement of land to meet
present and future requirements-No personal malice could be attributed to
E the public representatives/authorities-It cannot be concluded that the
Government machinery identified itself with the private interest of the company
forsaking public interest.
Public purpose-Proof of-Held, even contribution of a nominal SU'11
towards the cost of acquisition/assurance to sanction the funds by the
F Government could be considered as sufficient compliance with the Proviso
to Section 6-Acquires the character of public purpose-Interpretation of
Statutes.
G
Words and Phrases: 'public purpose' and 'vagueness in public
purpose'-Meaning of in the context of Land Acquisition Act.
The State Government, at the instance of a private company/one of the
respondents, had notified certain land of the appellants for acquisition under
the Land Acquisition Act for the purpose of establishment of a diamond park in
public interest. The land so acquisitioned was proposed to be utilized for setting
up of industries by private companies-respondents. Later, declaration under
H
890
PRA TIBHA NEMA v. ST A TE.
891
Section 6(A) of the Act was published. Before the concerned authority could A
take over possession, aggrieved land-holders filed writ petitions in which High
Court granted status quo. Writ petitions were dismissed thereafter. Land holders
had filed SLPs. Supreme Court disposed of the SLPs on the basis of an
undertaking given by the State that the notifications issued under Section 6
would be withdrawn and instead the procedure as provided under Section 5(A)
would be followed. State followed the procedure and later issued a fresh B
notification under Section 6 of the Act. Aggrieved, landholders challenged the
notification which was dismissed by the High Court. Hen,:e t1•e present appeals.
In an I.A., the Court framed questions pertaining tL contributions by
the private companies towards payment of compensation to the land holders
for consideration by the High Court. The findings submitted by the High Court C
were against the appellants and as such challenged by them.
It was contended for the appellants that the Land proposed to be acquired
for public purpose at the instance of and intended to be handed over to the
private company and therefore Part VII of L.A. Act should have been complied
with; that the public purpose as mentioned in the notification was vague; that D
the area of land proposed to be acquired was in excess of reasonable
requirements; and that environmental norms were not taken into consideration
by the State Government.
Dismissing the appea.ls, the Court
HELD: 1.1. A public purpose is involved in the acquisition of land for
setting up an industry in private sector as it would ultimately benefit the
people. However, any and every industry need not necessarily promote public
purpose and there could be exceptions which negate the public purpose. But,
E
it must be borne in mind that the satisfaction of the Government as to the
existence of public purpose cannot be lightly faulted and it must remain F
uppermost in the mind of the Court. The acquisition under Part VII of the
Land Acquisition Act is not divorced from the element of public purpose. The
concept of public purpose runs through the gamut of Part VII as well.
(904-F-H[

## Text

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A
PRA TIBHA NEMA AND ORS.
v.
STA TE OF M.P. AND ORS.
JULY 30, 2003
B
[K.G. BALAKRISHNAN AND P. VENKA TARAMA REDD!, JJ.]
Land Laws:
Land Acquisition Act; Part II and Part VII, Sections 3(j), 4(1), 5(A), 6,
C and 9(2)/lndustrial Policy and Action Plan 1994:
Acquisition of land for setting up an industry in private sector-Validity
of-Held, land was acquired for industrial growth in the public interestActive role/initiative shown by the private company and expeditious action
in processing of the acquisition proceedings by the Government could not
D be given different colour as it promotes public purpose-When the Government
satisfies about the existence of public purpose for acquisition of land, no
fault could be found with such act of the Government-However, State
Government to make afresh assessment as to the requirement of land to meet
present and future requirements-No personal malice could be attributed to
E the public representatives/authorities-It cannot be concluded that the
Government machinery identified itself with the private interest of the company
forsaking public interest.
Public purpose-Proof of-Held, even contribution of a nominal SU'11
towards the cost of acquisition/assurance to sanction the funds by the
F Government could be considered as sufficient compliance with the Proviso
to Section 6-Acquires the character of public purpose-Interpretation of
Statutes.
G
Words and Phrases: 'public purpose' and 'vagueness in public
purpose'-Meaning of in the context of Land Acquisition Act.
The State Government, at the instance of a private company/one of the
respondents, had notified certain land of the appellants for acquisition under
the Land Acquisition Act for the purpose of establishment of a diamond park in
public interest. The land so acquisitioned was proposed to be utilized for setting
up of industries by private companies-respondents. Later, declaration under
H
890
PRA TIBHA NEMA v. ST A TE.
891
Section 6(A) of the Act was published. Before the concerned authority could A
take over possession, aggrieved land-holders filed writ petitions in which High
Court granted status quo. Writ petitions were dismissed thereafter. Land holders
had filed SLPs. Supreme Court disposed of the SLPs on the basis of an
undertaking given by the State that the notifications issued under Section 6
would be withdrawn and instead the procedure as provided under Section 5(A)
would be followed. State followed the procedure and later issued a fresh B
notification under Section 6 of the Act. Aggrieved, landholders challenged the
notification which was dismissed by the High Court. Hen,:e t1•e present appeals.
In an I.A., the Court framed questions pertaining tL contributions by
the private companies towards payment of compensation to the land holders
for consideration by the High Court. The findings submitted by the High Court C
were against the appellants and as such challenged by them.
It was contended for the appellants that the Land proposed to be acquired
for public purpose at the instance of and intended to be handed over to the
private company and therefore Part VII of L.A. Act should have been complied
with; that the public purpose as mentioned in the notification was vague; that D
the area of land proposed to be acquired was in excess of reasonable
requirements; and that environmental norms were not taken into consideration
by the State Government.
Dismissing the appea.ls, the Court
HELD: 1.1. A public purpose is involved in the acquisition of land for
setting up an industry in private sector as it would ultimately benefit the
people. However, any and every industry need not necessarily promote public
purpose and there could be exceptions which negate the public purpose. But,
E
it must be borne in mind that the satisfaction of the Government as to the
existence of public purpose cannot be lightly faulted and it must remain F
uppermost in the mind of the Court. The acquisition under Part VII of the
Land Acquisition Act is not divorced from the element of public purpose. The
concept of public purpose runs through the gamut of Part VII as well.
(904-F-H[
Somawantiv.Stateof Punjab, AIR(1963)SC 151 andR.l. Arorav.State
of Uttar Pradesh, AIR (1964) SC 1230, followed.
Jage Ram v. State of Haryana, (197011 SCC 671; Manubhai Jehtalal
Patel v. State a/Gujarat, [1983( 4 SCC 553 and Bajirao T. Kate v. State of
-G
Maharashtra, !19951 2 sec 442, relied on.
H
892
SUPREME COURT REPORTS [2003] SUPP. I S.C.R.
A
1.2. The existence or non-existence of a public purpose is not a primary
B
distinguishing factor between the acquisition under Part II and acquisition
under Part VII of the Act. The real point of distinction seems to be the source
of funds to cover the cost of acquisition. In other words, the second proviso to
Section 6(1) is the main dividing ground for the two types of acquisition. Thus
the distinction between public purpose acquisition and Part VII acquisition
has got blurred under the impact of judicial interpretation of relevant
provisions. The main and perhaps the decisive distinction lies in the fact
whether cost of acquisition comes out of public funds wholly or partly. Even a
token or nominal contribution towards the cost of acquisition by the
Government was held to be sufficient compliance with the second proviso to
C Section 6. The result is that by contributing even a trifling sum, the character
and pattern of acquisition could be changed by the Government. In ultimate
analysis, what is considered to be an acquisition for facilitating the setting
up of an industry in private sector could get imbued with the character of
public purpose acquisition if only the Government comes forward to sanction
the payment of a nominal sum towards compensation. If no part of
D compensation amount is to be paid out of the public revenues, then, the
declaration that the land was needed for a public purpose could not have been
validly made and the acquisition cannot be considered to be for a public
purpose. In the instant case, there is sufficient material to hold that the Nigam
which is owned and controlled by the State has itself proceeded to make
E payment of substantial amount towards compensation even at the initial stages
in anticipation of an interim award. This is an unequivocal pointer that the
State owned Corporation, the Nigam, had to bear the cost of acquisition.
1905-E, F; 906-H, 907-A-C, G; 908-AI
F
G
R.l. Arora v. State of Uttar Pradesh, AIR (1964) SC 1230, followed.
Srinivasa Co-operative House Building Society limited v. Madam G.
Sastry, 1199413 SCC 675, relied on.
1.3. There is nothing on record to show that the lease premium or the
advance amount payable was determined by the time the Cheque was issued
by the Company. The payment of any amount at that stage on account of lease
premium was rather premature, but, the fact remains that under the terms of
MOU, the Companies which were parties to the MOU did express their
willingness to deposit the amount of lease premium in advance. Viewed from
another angle, no interim compensation was determined by the time the
payment was made by the Company and there was no reference in the MOU to
H the compensation amount at all and if so, there is no reason to presume that
PRA TIBHA NEMA v. STA TE
893
the amount was deposited by the Company as an advance compensation amount A
The High Court was well justified in relying on the documents/books
maintained in the ordinary course of business and recording a conclusion
that the Cheque for a certain sum was issued by the Company towards advance
lease premium. Hence, the conclusion of the High Court in this regard is not
perverse but sustainable. [908-H; 909-A-C[
B
1.4. Once the amount paid towards advance lease premium, may be on a
rough and ready basis, is credited to the amount of the Nigam, obviously, it
becomes the fund of the Nigam. Such fund, when utilized for the purpose of
payment of compensation, wholly or in part, satisfies the requirements of the
second proviso to Section 6(1) read with Explanation 2. The genesis of the C
fund is not the determinative factor, but its ownership in praesenti that matters.
[909-F-G[
1.5. The State Government and its agencies including the Nigam acted
within the framework of the 'Industrial Policy and Action Plan, 1994' in
taking the decision to develop diamond park complex. The considerations of D
industrial policy and development weighed prominently with all the concerned
authorities while processing the acquisition proposals that these Companies
are not the only entrepreneurs who would get the land in the proposed diamond
park area; that the land is proposed to be allotted to 12 industrial units after
being satisfied about their capacity and bonajides. The remaining area is
earmarked for green belt, housing, common facilities and other amenities. E
Even the MOU entered into between the Nigam and the two Companies do not
give a different picture. Having regard to the strategic location and importance
of Indore city, the choice of the site near Indore cannot be said to be vitiated
by any extraneous considerations. Entering into MOU with the two Companies
and thereafter initiating requisite steps for the acquisition of the land does F
not detract from the public purpose character of acquisition.
[912-C, F-H; 913-A, D[
1.6. One cannot view the planning process in the abstract and there
should be a realistic approach. Industrial projects and industrial development
is possible only when there is initiative, coordination and participation on the G
part of both the private entrepreneurs as well as the Governmental agencies.
The active role and initiative shown by the Company cannot give a different
colour to the acquisition which otherwise promotes public purpose:
[913-D-E[
I. 7. The speed at which the acquisition proposal was pursued should be H
894
SUPREME COURT REPORTS (2003] SUPP. I S.C.R.
A appreciated rather than condemning it, though the overzealousness on the
part of authorities concerned to short-circuit the procedure has turned out to
be counter-productive. True, the tardy progress of acquisition would have sent
wrong signals to the prospective investors. However, due attention should have
been given to the legal formalities. At the same time, malafides cannot be
read in between the lines; in fact, no personal malice or ulterior motives have
B been attributed to the Chief Minister or to any other official. It cannot be
concluded that the Government machinery identified itself with the private
interests of the Company, forsaking public interest. Public purpose does not
cease to be so merely because the acquisition facilitates the setting up of
industry by a private enterprise and benefits it to that extent. Nor the existence
C or otherwise of public purpose be judged by the lead and initiative taker. by
the entrepreneurs desirous of setting up the industry and the measure of
coordi!lation between them and various State agencies. The fact that despite
the unwillingness expressed by the Company to go ahead with the project, the
Government was still interested in acquisition is yet another pointer that the
acquisition was motivated by public purpose. [914-C-G)
D
Somawanti v. State of Punjab, AIR (1963) SC 151 and State of Punjab,
v. Gurdial Singh, AIR (1980) SC 319, referred to.
2.1. Though the State Government could have discreetly avoided to use
sophisticated industrial jargon, however, the specified public purpose is not
E so vague and indefinite that the public would not be in a position to understand
its nature and purpose. That such terminology has gained currency is evident
from the fact that the same expression was used in the Industrial Policy
document. Moreover, the Manager, District Industries Centre, was specified
as an authorized officer. This is a pointer to the fact that the land was being
acquired for industrial purpose. Hence the alleged vagueness is not of such
F a degree as to defy sense and understanding. The objections and
representations filed from time to time would unequivocally indicate that they
were fully aware of the exact purpose of acquisition. Raising the bogey of
vagueness in public purpose is evidently a result of after-thought.
G
(915-G-H; 916-A-B; 917-8)
2.2. True, it is not open to the Land Acquisition Officer to alter or expand
the scope of public purpose as it is within the exclusive domain of the
Government. But the Land Acquisition Officer by elaborating and making
explicit what is really implicit in the notification under Section 4(1), had only
dispelled the possible doubts in this regard so that no one will be handicapped
H in filing objections. Hence, it cannot be said that the Land Acquisition Officer
PRA TIBHA NEMA v. STATE
895
outstepped his jurisdiction. 1917-C-DI
Madhya Pradesh Housing Board v. Md. Shafi, 119921 2 SCC 168,
distinguished.
Ajlatoon v. Li. Governor of Delhi, 119751 4 SCC 285, referred to.
A
2.3. When no prejudice has been demonstrated nor it could be reasonably B
inferred, it would be unjust and inappropriate to strike down the notification
under Section 4(1) on the basis of a nebulous plea, in exercise of writ
jurisdiction under Article 226. Even assuming that there is some ambiguity
in particularizing the public purpose and the possibility of doubt cannot be
ruled out, the Constitutional Courts in exercise of jurisdiction under Article C
226 or 136 should not, as a matter of course, deal a lethal blow to the entire
proceedings based on the theoretical or hypothetical grievance of the
petitioner. It would be sound exercise of discretion to intervene when a real
and substantial grievance is made out, the non-redressal of which would cause
prejudice and injustice to the aggrieved party. Vagueness of the public purpose,
especially, in a matter like this where it is possible to take two views, is not D
something which affects the jurisdiction and it would therefore be proper to
bear in mind the considerations of prejudice and injustice.1917-E-GI
3. The guidelines enunciated in the policy statement have to be viewed
realistically. One of the guidelines is that no prime agrii.:ultural lands shall
be converted into industrial site. But, there is no material on record to show E
that the lands in question are prime agricultural lands which were being
utilized for growing crops. Further, on the basis of the materials placed before
the Court it is not possible to hold that the proposed diamond park project
will be detrimental to public health, safety or security so as to override the
public interest that is served by setting up export-oriented industries. ·
(918-F-Gl F
4. It is primarily within the domain of State Government to decide how
much extent of land has to be acquired keeping in view the present and future
needs. Though, no fault could be found with the notification on this ground.
However, it is desirable that the State Government should make assessment
afresh in the light of the latest situation and exclude any part of the land which G
may found to be in excess.1919-B-C[
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 7133of1999.
from the Judgment and Order dated 23.7.1999 of the Madhya Pradesh
High Court in W.P. No. 403of1997.
H
A
896
SUPREME COURT REPORTS [2003] SUPP. I S.C.R.
WITH
C.A. Nos. 7134, 7135, 7136 and 7138of1999.
S.S. Ray, N.N. Goswami, S.K. Jain, Pradeep Aggarwal, A. Ranganathan,
Kumar Kartikay, Anil Vyas, Ms. Anjali doshi, Ms. Ruchhi Kohli, L.P. Singh,
B A.P. Dhamija, B.K. Satija, Ms. Pratibha Jain, V.K. Tankha, Adv. General ofM.P.,
Ashok K. Gupta, Farrukh Rasheed, Mukesh Kumar, Rajesh Pancholi, R.C.
Venna, Mukesh Venna, Manish Shanker, RN. Poddar, S.N. Terdol, B.V. Bairam
Das, P.C. Sen and S.K. Agnihotri for appearing parties.
The Judgment of the Court was delivered by
c
P. VEN KAT ARAMA RED DI, J. Facts and Contentions :
The acquisition of 73.3 hectares of dry land situate in Rangwasa village
of Indore District and Tehsil belonging to the appellants and others is the
subject-matter of challenge in these appeals tiled by the landholders. The said
extent of land was notified for acquisition under Section 4( I) of the Land
D Acquisition Act (hereinafter referred to as 'Act') for the alleged public purpose
of 'establishment of diamond park'. This parcel of land together with an extent
of 44.8 hectares of Government land was meant to be placed at the disposal
of the Industries Department and/or Madhya Pradesh Audyogik Kendra Vikas
Nigam Ltd. (hereinafter referred to as 'the Nigam ') for the purpose of allotting
E the same to various industrial units-the foremost among them being the 9th
respondent-Company, for setting up diamond cutting and polishing units with
modem technology. The proposal in this regard emanated from the General
Manager of District Industries Centre, on the initiative taken by the 9th
Respondent. After the land was located by a joint inspection committee of
officials, the Government of Madhya Pradesh (Commerce & Industries
F Department) had given sanction 'in principle' for the acquisition. The District
Collector, Indore through his letter dated 24.1.1996 sought the approval of the
Commissioner, Indore Division to invoke Section 17(1) of the Act in order to
expedite the process of acquisition. In that letter, the Collector mentioned that
prestigious exporters from India as well as foreign countries were likely to
G establish their units in this park which would generate good deal of foreign
exchange and create employment potential.
The Commissioner accorded his approval by a communication dated
29.1.1996. This resulted in the issuance of the notification under Section 4(1)
of the Act un 30th June, 1996 by the Collector & Ex-officio Deputy Secretary
H to Government, to whom it appears the powers were delegated. By the same
_,
~
PRATIBHA NEMA v. STATE [REDD!. J.]
897
Notification, the enquiry under Section 5A was dispensed with. It was indicated A
in the Notification that the land map could be inspected in the office of the
SDO, Indore and General Manager, District Industries Centre. A few days later
i.e., on 9.2. I 996, the declaration under Section 6 of the Act was published. The
Collector (Land Acquisition) was directed to take possession after the expiry
of I 5 days from the date of issuance of notice under Section 9(2) of the Act.
Before the possession was taken, the writ petitions under Article 226 of the B
Constitution were filed and an order of status quo was granted. The writ
petitions and the Letters Patent Appeals were dismissed. In the meanwhile,
it appears that an interim award was made for a sum of Rs.2,14,91,115
representing 80% of the estimated compensation amount. The SLPs filed in
this Court were disposed of on I 1.10. I 996 on the basis of the representation C
made by the learned counsel for the State of Madhya Pradesh that the
Notification under Section 6 will be withdrawn and the procedure under
Section 5A will be followed. Accordingly, the Collector, Indore District
published a Notification on 15. I 0. I 996 withdrawing the declaration under
Section 6. After due enquiry, the Land Acquisition Officer submitted a report
D
under Section SA overruling the objections put forward by the appellants. On
a perusal of the report, the Collector as well as the Commissioner decided to
go ahead with the acquisition. Accordingly, a fresh Notification under Section
6 was issued on 3.1.1997. As in the earlier Notification, the public purpose
was mentioned as 'establishment of a diamond park'. This was again
challenged by the aggrieved landholders including the appellants. A Division E
Bench of the High Court dismissed the writ petitions which were filed by the
present appellants having interest in about 63 acres in Survey No. 684.
Against that judgment, these appeals by special leave have come up. This
Court, while taking note of certain additional facts disclosed in I.A.No. 2/2001,
passed an order on 29.8.2001 formulating four questions in respect of which
the findings of the High Court were called for. The following are the four F
questions:
(1)
Whether Mis. B. Arun Kumar International Ltd. deposited a sum
of Rs.3 crores for payment of compensation to the land holders
for acquisition of land for them.
(2)
Whether in view of the facts stated in l.A.No.2/200 I and the
counter affidavit and further affidavits the acquisition of land
was for the Company and not for public purpose.
G
(3)
If the findings on question No. I & 2 are in the affirmative,
whether any subsequent withdrawal of compensation amount by H
A
B
c
898
SUPREME COURT REPORTS (2003] SUPP. I S.C.R.
M/s. Arun Kumar International Ltd. would not affect the invalidity
of notification issued under Section 4 of the Act.
(4)
If the findings on issues Nos. I & 2 are in the affirmative, whether
the State Government also contributed partly towards
compensation to be paid to the land holders and in its absence
the acquisition of land for public purpose is invalid.
The questions were frame<l in the light of the appellants' contention that the
acquisition was not for a public purpose and it was only meant to benefit the
9th Respondent-Company and its associates which contributed its own funds
for facilitating the acquisition.
The matters were directed to be listed on receipt of the findings of the
High Court with a further direction not to treat the cases as p:trt-heard.
The High Court has, by its order dated 5-7-2002 recorded its findings
on the four points and transmitted the same to this Court. All the findings
D are against the appellants and naturally, therefore, they are being challenged.
Broadly, four contentions have been urged before us. They are: I.
Acquisition is not for a public purpose. The entire acquisition is a subterfuge
to hand over the acquired land to the Company in the guise of acquisition
for a public purpose. Even the amount paid towards compensation was not
E out of public revenues, but out of the money provided by the Company for
the specific purpose of compensation. 2. The public purpose stated in the
Notifications under Sections 4 & 6 is vague. 3. The area of the land proposed
to be acquired is far in excess of reasonable requirements and 4. Environmental
considerations were not kept in view while taking a decision to acquire the
F land for industrial purpose.
Analysis of relevant provisions and the settled legal position :
In order to appreciate the contentions set out above in proper
perspective, it would be appropriate to advert to certain basic provisions of
G the Act and recapitulate the well settled principles relating to public purpose
and acquisition of land under Part II and Part VII of the Act. Section 4( I)
which occurs in Part II of the Act contemplates a notification to be published
in the official gazette etc., whenever it appears to the appropriate Government
that land in any locality is needed for any public purpose or for a company.
Thereupon, various steps enumerated in sub-Section (2) could be undertaken
H by the authorized officer. There is an inclusive definition of 'public purpose'
..
PRA TIBHA NEMA v. STATE [REDDI, J.)
899
in clause (f) of Section 3. This clause was inserted by Central Act 68of1984. A
Many instances of public purpose specified therein would have perhaps been
embraced within the fold of public purpose as generally understood. May be,
by way of abundant caution or to give quietus to legal controversies, the
inclusive definition has been added. One thing which deserves particular
notice is the rider at the end of clause (f) by which the acquisition of land
for Companies is excluded from the purview of the expression 'public purpose'. B
However, notwithstanding this dichotomy, speaking from the point of view of
public purpose, the provisions of Part II and Part VII are not mutually exclusive
as elaborated later.
The concept of public purpose (sans inclusive definition) was succinctly C
set out by Batchelor, J. in a vintage decision of Bombay High Court. In
Hamabai Framjee Petit v. Secretary of State for India, AIR (1914) PC 20, the
Privy Council quoted with approval the following passage from the judgment
of Batchelor J:
"General definition5 are, I think, rather to be avoided where the D
avoidance is possible, and I make no attempt to define precisely the
extent of the phrase 'public purpose' in the lease; it is enough to say
that in my opinion, the phrase, whatever else it may mean, must
include a purpose, that is, an object or aim in which the general
interest of the community, as opposed to the particular interest of
individuals, is directly and vitally concerned."
E
The Privy Council then proceeded to observe that prima facie the
Government are good judges to determine the purpose of acquisition i.e.,
whether the purpose is such that the general interest of the community is
served. At the same time, it was aptly said that they are not absolute Judges.
This decision of the Privy Council and the words of Batchelor, J. were referred F
to with approval by a Constitution Bench in Somawanti v. State of Punjab,
AIR (1963) SC 151 and various other decisions of this Court.
We may now advert to Section 6. It provides for a declaration to be
made by the Government or its duly authorized officer that a particular land G
is needed for a public purpose or for a Company when the Government is
satisfied after considering the report if any made under Section 5A(2). It is
explicitly made clear that such declaration shall be subject to the provisions
of Part VII of the Act which bears the chapter heading 'Acquisition of Land
for Companies'. Thus, Section 6 reiterates the apparent distinction between
acquisition for a public purpose and acquisition for a Company. There is an H
900
SUPREME COURT REPORTS (2003] SUPP. I S.C.R.
A important and crucial proviso to Section 6 which has a bearing on the question
whether the acquisition is for a public purpose or for a Company. The second
proviso lays down that "no such declaration shall be made unless the
compensation to be awarded for such propeny is to be paid by a Company,
wholly or partly, out of public revenues or some fund controlled or managed
B by local authority". Explanation 2 then makes it clear that where the
compensation to be awarded is to be paid out of the funds of a Corporation
owned or controlled by the State, such compensation shall be deemed to be
compensation paid out of public revenues. Thus, a provision for payment of
compensation, wholly or partly, out of public revenues or some fund controlled
or managed by a local authority is sine qua non for making a declaration to
C the effect that a particular land is needed for a public purpose. Even if the
public purpose is behind the acquisition for a Company, it shall not be
deemed to be an acquisition for a public purpose unless at least part of the
compensation is payable out of public revenues which includes the fund of
a local authority or the funds of a Corporation owned or controlled by the
State. However, it was laid down in Somavanti 's case that the notification
D under Section 6(1) need not explicitly set out the fact that the Government
had decided to pay a part of the expenses of the acquisition or even to state
that the Government is prepared to make a part of contribution to the cost
of acquisition. It was further clarified that the absence of a provision in the
budget in respect of the cost of acquisition, whole or part, cannot affect the
E validity of the declaration. The majority Judges of the Constitution Bench
also clarified that a contribution to be made by the State need not be substantial
and even the token contribution of Rs. 100 which was made in that case
satisfied the requirements of the proviso to Section 6( I). The contribution of
a small fraction of the total probable cost of the acquisition does not
necessarily vitiate the declaration on the ground of colourable exercise of
F power, according to the ruling in the said case. Following Somavanti, the
same approach was adopted in Jage Ram v. State of Haryana, (1971] 1 SCC
671]. The question, whether the contribution of a nominal amount from the
public exchequer would meet the requirements of the proviso to Section 6,
had again came up for consideration in Manubhai Jehta/a/ Patel v. State of
G Gujarat, (1983] 4 SCC Page 553. D.A. Desai, J. after referring to Somavanti 's,
speaking for the three Judge Bench observed thus:
"It is not correct to determine the validity of acquisition keeping in
view the amount of contribution but the motivation for making the
contribution would help in determining the bonafides of acquisition.
H
Further in Ma/imabu case AIR (1978) SC 515 contribution of Re 1 from
PRA TIBHA NEMA v. ST A TE [REDDL J.]
901
the State revenue was held· adequate to hold that acquisition was for A
public purpose with State fund. Therefore, the contribution of Re I
from public exchequer cannot be dubbed as illusory so as to invalidate
the acquisition."
In Somavanti 's ~ase, the following note of caution was sounded:
B
"We would, however, guard ourselves against being understood to
say that a token contribution by the State towards the cost of
acquisition will be sufficient compliance with the law in each and
every case. Whether such contribution meets the requirements of the
law would depend upon the facts of every case. Indeed the fact that
the State's contribution is nominal may well indicate, in particular C
circumstances, that the action of the State was a colourable exercise
of power. In our opinion 'part' does not necessarily mean a substantial
part and that it will 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 the law. In this case we are satisfied that D
it satisfies the requirement of law."
A three Judge Bench of this Court in Jndrajit C. Parekh v. State of
Gujarat, [ 1975] I SCC 824, without much of elaboration, relegated the
observations in the above passage to a very narrow confines by stating thus:
"In view of the decision in this case that a nominal contribution out E
of public revenues would satisfy the requirement of the proviso to
Section 6( I) the observation "whether such contribution meets the
requireme~t of the law would depend upon the facts of every c,_se"
must necessarily be taken to refer to the requirement of some law
other than the proviso to Section 6(1). No such law was pointed out F
to us; and it is not ·necessary for the purposes of this appeal to enter
on a discussion as to what such other law could be."
Another important provision is Sub-Section (3) of Section 6 which
enjoins that the declaration (required to be published in the official gazette
etc.) shall be conclusive evidence that the land is needed for a public purpose G
or for a Company and on publication of declaration, the appropriate
Government is enabled to acquire the land in accordance with the other
provisions of the Act. This sub-Section came up for interpretation of this
Court in Somawanti 's case (supra). The Court emphasised that the
conclusiveness contemplated by sub-Section (3) is not merely regarding the H
902
SUPREME COURT REPORTS [2003] SUPP I S.C.R.
A satisfaction of the Government on the question of need but also with regard
to the question that the land is needed for a public purpose or for a Company,
as the case may be. However, the learned Judges highlighted an important
exception to the finality or conclusiveness of the declaration under Section
6( I). It was observed thus:
B
c
D
"That exception is that if there is a colourable exercise of power the
declaration wi II be open to challenge at the instance of the aggrieved
party. The power committed to the Government by the Act is a limited
power in the sense that it can be exercised only where there is a public
purpose, leaving aside for a moment the purpose of a company. If it
appears th~t what the Government is satisfied about is not a public
purpose but a private purpose or no purpose at all the action of the
Government would be colourable as not being relatable to the power
conferred upon it by the Act and its declaration will be a nullity.
Subject to this exception, the declaration of the Government will be
fmal."
The main contention of the learned senior counsel for the appellant, as
already noticed, resg en the plea of colourable exercise of power.
Colourable exercise of power or ma/a jides in the province of exercise
of power came up for discussion in State of Punjab v. Gurdial Singh, AIR
E (1980) SC Page 319]. In the words of Krishna Iyer, J.-
"Pithily put, bad faith which invalidates the exercise of powersometimes called colourable exercise or fraud on power and oftentimes
overlaps motives, passions and satisfactions-is the attainment of ends
beyond the sanctioned purposes of power by simulation or pretension
F
of gaining a legitimate goal.
G
H
When the custodian of power is influenced in its exercise by
considerations outside those for promotion of which the power is
vested the Court calls it a colourable exercise and is undeceived by
illusion ....................... .
Fraud on power voids the order if it is not exercised bona fide for the
end de>igned. Fraud in this context is not equal to moral turpitude and
embraces all cases in which the action impugned is to affect some
object which is beyond the purpose and intent of the power, whether
this be malice-laden or even benign. If the purpose is corrupt the
PRATIBHA NEMA v. STATE [REDDL J.)
903
resultant act is bad. If considerations, foreign to the scope of the A
power or extraneous to the statute, enter the verdict or impels the
action mala tides or fraud on power vitiates the acquisition or other
official act."
The above exposition of law unfolds the right direction or the line of
enquiry which the Court has to pursue to test the validity of declaration made B
under Section 6(1) exalted by the legal protection accorded to it under subsection (3).
In order to proceed on these lines, the ambit and contours of public
purpose as understood by this Court in certain decided cases has to be taken
note of. We have already noticed the broad and general meaning of the C
expression 'public purpose' as stated by Batchelor, J. nearly a century back.
In the particular context of setting up industries by private enterprise, this
Court's perspective of public purpose is discernible from certain decided
cases to which we shall make reference.
In Jage Ram's case (supra) the. public purpose mentioned in the
notifications under Sections 4 & 6 was "the setting up a factory for the
manufacture of China-ware and Porcelain-ware". The State Government had
contributed a sum of Rs. 100 as was done in ihe case of Somavanti (supra)
towards the cost of the land. The question arose whether it was necessary
D
for the Government to proceed with the acquisition under Part VII of the Act. E
Holding that acquisition under Part Vil need not have been resorted to, this
Court proceeded to discuss the question whether the acquisition was intended
for a public purpose. K.S. Hegde, J. speaking for the Court observed thus:
"There is no denying the fact that starting of a new industry is in
public interest. It is stated in the affidavit filed on behalf of the State F
Government that the new State of Haryana was lacking in industries
and consequently it had become difficult to tackle the problem of
unemployment. There is also no denying the fact that the
industrialization of an area is in public interest. That apart, the question
whether the starting of an industry is in public interest or not is G
essentially a question that has to be decided by the Government. That
is a socio-economic question. This Court is not in a position to go
into that question. So long as it is not established that the acquisition
is sought to be made for some collateral purpose, the declaration of
the Government that it is made for a public purpose is not open to
challenge. Section 6(3) says that the declaration of the Government H
904
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SUPREME COURT REPORTS [2003) SUPP. I S.C.R.
that the acquisition made is for public purpose shall be conclusive
evidence that the land is needed for a public purpose. Unless it is
shown that there was a colourable exercise of power, it is not open
to this Court to go behind that declaration and find out whether in
a particular case the purpose for which the land was needed was a
public purpose or not : see Smt. Somavanti and Ors. v. The State of
Punjab and Raja Anand Brahma Shah v. State of UP. 011 the facts
of this case, there can be hardly any doubt that the purpose for which
the land was acquired is a public purpose."
In Somavanti 's case, setting up a factory for the manufacture of
C refrigeration compressors and ancillary equipment, was held to subserve
public purpose. The importance of such industry to a State such as Punjab
which had surplus food and dairy products, the possible generation of foreign
exchange resources and employment opportunities were all taken into account
to hold that public purpose was involved in establishing the industry. It was
observed "on the face of it, therefore, bringing into existence a factory of this
D kind would be a purpbse beneficial to the public even though, that is a private
venture." The decision in Jageram 's case was cited with approval by this
Court in Bajirao T. Kate v. State of Maharashtra, [1995] 2 SCC Page 442]. In
R.l. Arora v. State of Uttar Pradesh, AIR (1964) SC Page 1230 a Constitution
Bench of this Court observed that there was definite public purpose behind
E the acquisition of land for taking up works in connection with the setting up
of a factory for production of textile machinery parts. However, that was in
the context of a case of acquisition under Part VII.
F
G
These decisions establish that a public purpose is involved in the
acquisition of land for setting up an industry in private sector as it would
ultimately benefit the people. However, we would like to add that any and
every industry need not necessarily promote public purpose and there could
be exceptions which negate the public purpose. But, it must be borne in mind
that the satisfaction of the Government as to the existence of public purpose
cannot be lightly faulted and it must remain uppermost in the mind of the
Court.
Having noted the salient provisions and the settled principles governing
the acquisition for a public purpose, it is time to turn to Part Vil dealing with
acquisition of land for Companies. The important point which we would like
to highlight at the outset is that the acquisition under Part Vil is not divorced
from the element of public purpose. The concept of public purpose runs
H through the gamut cf Part VII as well.
,.;
PRATIBHA NEMA v. STATE [REDDL .I.)
905
'Company' is defined to mean by Section 3(e) as (i) a Company within A
the meaning of Section 3 of the Companies Act other than Government
Company, (ii) a Society registered under the Societies Registration Act other
than a Co-operative Society referred to in clause (cc) and (iii) a Co-operative
Society governed by the law relating to the Co-operative Societies in force
in any State other than a Co-operative Society referred to in clause (cc). An
industrial concern employing not less than I 00 workmen and conforming to B
the other requirements specified in Section 38-A is also deemed to be a
Company for the purposes of Part Vil. In order to acquii,'. Jar.d for a Company
as defined above, the previous consent of the appropriate Government is the
first requirement and secondly the execution of agreement by the Company
conforming to the requirements of Section 41 is another essential formality.