# • • STATE OF KARNATAKA AND ANR ETC v. SHRI RANGANATHA REDDY & ANR. ETC. October. 11. 1977 '

- **Citation:** [1978] 1 S.C.R. 641
- **Court:** Supreme Court of India
- **Decided:** 1976-01-30
- **Bench:** M. H. Beg, Y. V. Chandrachud, P. N. Bhagwati, V. R. Kuishna Iyer, N. L. Untwalia, Jaswant Singh, P. S. Kailasam
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/state-of-karnataka-and-anr-etc-v-shri-ranganatha-reddy-anr-etc-october-11-1977-7306
- **Pages:** 52

## Headnote

Constitution of .Irulid; -Article-31(2)-"Public purpose" Scope of, whether
includes compulsory acquisition for Road Transport Corporation-Part acqui·
sition pf undertaking, validity of-"Amount" in lieu of acquired property. quan·
tum and principles of evaluation, ·whether questionable under Art. -31(2).
A
B
Karnataka Contract Carriages, (Acquisition) Act, 1976, vis-a-vis Constilution -
C
of India, Articles 31(2) and 39(b) and (c) and_ Schedule List 1 Entry 42iVhethPr on acquisition the State Govt. can transfer counter signed portions of
Inter-State pern1its td Road Transport Corporation-S.4(3)y "deemed", l,:/ietlier
introduce~ legal fiction--S.6(1), fixation of amount
by- arbitrator
S.
6(1)
Schedule, Para 1(1). Explanation-Interpretation of "acquisition cost".
The Karnataka State Ro.id Tr.trisPort Corporation published in the Karnataka
Gazette dated ~lay 16, .1974 a draft scheme for nationalisation of
contract·
carria~es in the State. under Chapter IV-A of the ~lotor Vehicles Act. 1939.
Objections were preferred by some of the respondents, but the State Govem·
ment and the Corporation dropped the idea of proceedin~ with the scheme
\vithout concluding the hearing. Later, on January 30, 1976 the State Govern·
n1ent pro!llulgatcd an ordinance followed by a number of notifications by which
all contract carriages operating in Kamataka, and the permits specified in the
notifications, vested in the State. Under Clause 20( 1) of the Ordinance. the
State Government transferred them to the Corporation which seized the vehicles
and the relative permits. The High 'Court stayed the seizure of six vehicles
operating under lnL!r-State permits. and quashed some of the notifications, hold·
ing that the ordinance did not empower the acquisition of the vehicles
not
covered by valid contract permits. The ordinance was replaced by the Karna- ·
taka contract carriages (.\.cquisition) Act,· 1976, published in the Karnataka
Gazette dated l\larch 12. 1976. The Act was made effective retrospectively
from January 30, 1976, and everything done under the Ordinance was deemed
to have been done' under the Act.
\Vrit Petitions \Vere filed by various contract
carriage operators. fin."l.r..ciers and others including those who had successfully
· filed the earlier \Vrit Petitions. The High Court allowed the writ petitions,
struck. down. the Act as unconstitutional, and quashed the notifications.
(Judg·
n1ent reported in K. Jayaraj Balla! and Ors. v. State of JCarnatakd
anti Ors .•
I.LR. Karnataka 1976. Vol. 26, P. 1478).
Allo\loir..g the app.ea!<J anr.l upholding the constitutional validity of the Act on
merits, the Court
HELD : Per UntwaEa. J. (Also on behalf of M. H. Beg.
C.J., V. Y.
Chandrachud, and P. S. Kailasam, JJ.)
1. whether the law of ocquisition is for public purpose or not has to be
i;:athered mainly from th.e statement of Objects and Reasons of the Act and
its preamble. The matter has to be examined v.·ith reference to the various
provisions of the Act. it'i context and set up and then it has to be judged
'vhether the acqui5itio:i is for a public purpose , .... ithin the meaning of Article
3 t (2) and the law t:""roviJin_g ror such acquisition v.·hile establishin.!?: a
Road
. Transport· Corporation. L.'1.e State Government is obliged to keep in mind primarily the public interest. The acquisition for the purpose of the Corporation
\\·os, therefore. in pubt:c interest. [64_8 C--E]
fl. JI. Keshavanand.i Bharati Sripadagalai·aru ,._
State of Kera/a (1973]
Suppl. S.C.R. I, Aprlie-1 .
D
E
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H
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D
E
F
G
H
•
642
~r, '_,..--:· -~
. ._,;·
SUPRE].lE COURT REPORTS
Thi? court observed :
[1978] 1 s.c.R.
There may be many circumstances and,facts to justify the acqui.sition. of
even a movable property for a public purpose. _ A particular commercial activity
of tl1e State may itself be for a public purpos~. In a larger se_nse one can say
that augmentation of the coffers of the State is also for a. pubhc purpose: Acquisition of property eitber·movable or immovable

## Text

_Characters 0–39,957 of 162,767. This is a partial read: ask again with offset=39957 for what follows._

•
•
STATE OF KARNATAKA AND ANR ETC.
v.
SHRI RANGANATHA REDDY & ANR. ETC.
October. 11. 1977
'
[M. H. BEG, C.J., Y. V. CHANDRACHUD, P. N. BHAGWATI, V. R.
KUISHNA IYER, N. L. UNTWALIA, JASWANT SINGH AND
P. S. KAILASAM, JJ.]
Constitution of .Irulid; -Article-31(2)-"Public purpose" Scope of, whether
includes compulsory acquisition for Road Transport Corporation-Part acqui·
sition pf undertaking, validity of-"Amount" in lieu of acquired property. quan·
tum and principles of evaluation, ·whether questionable under Art. -31(2).
A
B
Karnataka Contract Carriages, (Acquisition) Act, 1976, vis-a-vis Constilution -
C
of India, Articles 31(2) and 39(b) and (c) and_ Schedule List 1 Entry 42iVhethPr on acquisition the State Govt. can transfer counter signed portions of
Inter-State pern1its td Road Transport Corporation-S.4(3)y "deemed", l,:/ietlier
introduce~ legal fiction--S.6(1), fixation of amount
by- arbitrator
S.
6(1)
Schedule, Para 1(1). Explanation-Interpretation of "acquisition cost".
The Karnataka State Ro.id Tr.trisPort Corporation published in the Karnataka
Gazette dated ~lay 16, .1974 a draft scheme for nationalisation of
contract·
carria~es in the State. under Chapter IV-A of the ~lotor Vehicles Act. 1939.
Objections were preferred by some of the respondents, but the State Govem·
ment and the Corporation dropped the idea of proceedin~ with the scheme
\vithout concluding the hearing. Later, on January 30, 1976 the State Govern·
n1ent pro!llulgatcd an ordinance followed by a number of notifications by which
all contract carriages operating in Kamataka, and the permits specified in the
notifications, vested in the State. Under Clause 20( 1) of the Ordinance. the
State Government transferred them to the Corporation which seized the vehicles
and the relative permits. The High 'Court stayed the seizure of six vehicles
operating under lnL!r-State permits. and quashed some of the notifications, hold·
ing that the ordinance did not empower the acquisition of the vehicles
not
covered by valid contract permits. The ordinance was replaced by the Karna- ·
taka contract carriages (.\.cquisition) Act,· 1976, published in the Karnataka
Gazette dated l\larch 12. 1976. The Act was made effective retrospectively
from January 30, 1976, and everything done under the Ordinance was deemed
to have been done' under the Act.
\Vrit Petitions \Vere filed by various contract
carriage operators. fin."l.r..ciers and others including those who had successfully
· filed the earlier \Vrit Petitions. The High Court allowed the writ petitions,
struck. down. the Act as unconstitutional, and quashed the notifications.
(Judg·
n1ent reported in K. Jayaraj Balla! and Ors. v. State of JCarnatakd
anti Ors .•
I.LR. Karnataka 1976. Vol. 26, P. 1478).
Allo\loir..g the app.ea!<J anr.l upholding the constitutional validity of the Act on
merits, the Court
HELD : Per UntwaEa. J. (Also on behalf of M. H. Beg.
C.J., V. Y.
Chandrachud, and P. S. Kailasam, JJ.)
1. whether the law of ocquisition is for public purpose or not has to be
i;:athered mainly from th.e statement of Objects and Reasons of the Act and
its preamble. The matter has to be examined v.·ith reference to the various
provisions of the Act. it'i context and set up and then it has to be judged
'vhether the acqui5itio:i is for a public purpose , .... ithin the meaning of Article
3 t (2) and the law t:""roviJin_g ror such acquisition v.·hile establishin.!?: a
Road
. Transport· Corporation. L.'1.e State Government is obliged to keep in mind primarily the public interest. The acquisition for the purpose of the Corporation
\\·os, therefore. in pubt:c interest. [64_8 C--E]
fl. JI. Keshavanand.i Bharati Sripadagalai·aru ,._
State of Kera/a (1973]
Suppl. S.C.R. I, Aprlie-1 .
D
E
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H
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c
D
E
F
G
H
•
642
~r, '_,..--:· -~
. ._,;·
SUPRE].lE COURT REPORTS
Thi? court observed :
[1978] 1 s.c.R.
There may be many circumstances and,facts to justify the acqui.sition. of
even a movable property for a public purpose. _ A particular commercial activity
of tl1e State may itself be for a public purpos~. In a larger se_nse one can say
that augmentation of the coffers of the State is also for a. pubhc purpose: Acquisition of property eitber·movable or immovable,-may in such a situation be
for a public purpose. [651 ~D] _
-
"·-
\
The State of Bihar v. Maliarajadhiraja Sir Kameshwar. Singh of_ Darbhangff
lltul Ors.- [1952]-SCR 889, referred to.
(2) The .scheme for the compulsory acquisiti-~n-may be for a i::art of the
undertaking also and that would mean a part of the- property of the undertaking or_ a branch of the undertaking [651 ·F-G]
l3) The··~mount p;Yable for the acquired- property either fixed by the legislature or determined on the basis of the principles engrafted in the !aw of
acquisition cannot be \vholly arbitrary and illusory. In some respects it may
be inadequate but that cannot be a ground for challenge of the constitutionality of the law under Article 31(2). (653 B-CJ
H. H. Kesha1:anarida Bharati Sripadagalavaru v. Stale of
K£r.n!a
[1973]
Suppl. SCR I, applied.
The State of West- BenRal v. Mrs. JJala Banerjee ~nd ·ors. [195"1.l SCR. 558,
P. Vajravelu Mudaliar v. The Special Deputy Collector, Jlf11dras [IS651 1 SCR
614. Union of India v. The Metal Corporation of India Ltd. & Anr. [1967] l
SCR 255, State al Gujarat v. Shri Shantilal Mangaldas and Ors. [1969] 3 SC-R
341 and Rustom covarjee Cooper v. Union of Jndia [19i0] 3 SCR 530, referred
to.
(4) The Karnataka Contract Carriages (Acquisition) Act. 1975 does not
seek to legislate in regard to any Inter-State trade and commerce. Iii pith and
substance it is an Act to provide for the acquisition of contract c;;.rria:::e. the
Inter-State permits and the other properties situated in the State of Karnataka.
Any incidental encroachment on the topic of Inter-State trade and commerce
car.not invalidate.the Act. (661 _D-E}"•
Prafulla Kumar Mukherjee & Ors. and Bank of Commerce Ltd.-, Khulna v •
.,,.:Ji·ocate General of Bengal (1947] Federal Court Reports • 28,
Kerala State
Electricity- Board v. Indian Aluniinium Co .• [1976] 1 S.C.R. 552 - S. K. Peseri
v. -Abdul Ghafoor and Ors .• Civil Appeal No. 306/1964 decided o:i 4-5-196..J,
Z\'arayanappa v. State of Mysore (1960] 3 S.C.R .. 7..i2. and Tar1sukh Ra/ Jain v.
Nilratan Prasad Shaw and Ors .• (1965] 2 S.C.R. 6 applied.
A. S. Krishna v. State of Madras [1957] S.C.R. 399, U.S.A .• Plff. in Crr.
v. Car. Iii/I 63 Law Ed. 337. Claude R. Wickard. Secy. of Agriculture of the
Utbitcd States etal v. Roscoe C. Filburn 87 Law Ed. 122 and the Steamer Denial
Ball, Bayron D. Ball and Jessie Ganoe. Claimant's, Aptt.·v. United States 19 Law
EJ. 999 referred to.
·
.
(5) The acquisition of permits of the vehides kept and
registered in the
State of Kamataka. in respect of which initially Inter-State permits, had been .
- granted by the State. would be an acquisition of the permit operative within
the territory of the State.
Permits granted by one regional Authority and counter-signed by another Regional Authority either in the same state Or in different
states are reallv different permits rolled into one. - The counter-sigr.,ed portion
of the permit is in substance and in effect a separate permit authorising
the
permit holder to ply the bus in another State. and cannot be acquired.
Such
an acquisition would fall within the extra-territorial operation of the law. -
The State Govt. on acquisition and the vestin.s:r of acquired permits~ therefore.
cannot transfer their counter-si_gned portions to the Road Transport Corporation.
Any particular vehicle which is kept and re.gistered, or is plying. on an
initial permit granted by another State, also could not be acquired under the
Act and the notification issued, thereundet. (662 C-D, 663 B, C-D]
.~Is Bundelk/land 'Afotor Transport Company. Nowgaon v. Behari
Lal
Chaurasia and Anr. [1966] 1 S.C.R. 485, and Punjab
Sikh Regular
Motor
S,·rvice, 1'.foudhapara v. The Regional Transport Authority, Raipur and Anr.
[1966) 2 S.C.R. 221; applied •
•
•
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KARNATAKA V. RANGANATHA
643
The Bengal lmn1unity Co. Ltd. v. Tile Stale of Bihar
and
Ors. [1955] 2
S.C.R. 603, R.1'1.D.
Chan1arbaugwa!a v. Union of
India
and
Ors. [1957}
S.C.R. 930, Gulabha: Vallab/lbhai Desai etc. v. Union of India and Ors., [1967]
1 S.C.R. 602; and In re. a Special Reference. under Section 213 of the Go.vt.
of India Act, 1935 [1941] Federal Court Reports 12; referred to.
A
( 6) Section 4 (3) of the Karnataka contract carriages
(Acquisition)
Act,
1976, is worded with the object of putting the challenge to the factum of public
purpose beyond the paJe of any attack. r The use of the '\'Ord "deemed" does
not in\-ariably and necessarily imply an introduction of a legal fiction, but it B
has to be read and understood in the context of the w-hole statute. r651 A-BJ
(7) Jn the absence of an agreement, the State Government shall appoint an
arbitrator for fixing the amount payable in lieu of the acquired property. The
arbitrator, reading section 6(1) of the Karnataka Contract Carriages (Acquisition) Act:, as a whole, is not obliged to fix the amount as specified in
the
Schedule, but he has to fix an amount '"hich appears to him just and reasonable
on: the totality of the facts and circumstances keeping primarily in mind
the
amount mentioned in the Schedule occurring in Sec. 611).
[657 E-F, 658
D-E]
Sara.nrati Industrial Syndicate Ltd., etc. v. Union of Jndia [19751 l S.C.R.
956, Illingworth v. Walnsley (1900) 2 Q.B. 142 and Perry v. Wright (1908)
1 K. B. 441; referred to.
(8) The correct meaning of ';acquisition cost'', used in the Explanation in
the light of Para 1 ( 1) of the Schedule of Sec. 6 ( 1) of the Karnataka Act. would
mean, the cost of the chassis fixed by the manufacturers for their dealers to
charge from the purchasers.
The acquisition cost qua the
purchaser is the
price which he pays to the manufacturer's dealer from whom he purchases
an<l not the n1anufacturer's actual
cost of manufacturing the
chassis. The
acquisition cost of the body of a schedule would be the actual cost charg;ed
by the body builder. [659 B-C]
Per Tyer. J. (i\..lso on behalf of P. N. Bhagwati and Ja<;want Singh, J.J.)
c
D
(1) The purpose of a public body to run a public transport service for the
E
benefit of the people, operating it in a responsible manner through exercise of
public power 'vhich is controlled <1nd controllable by society through its organs
like the le.e:islature and, at times, even the court, is manifestly a public purpose.
If the purpose subserves some public use or interest, or produces some public
good or utility then everything considered for subserving such public purpose
falls under the broad and expanding rubric.
Tf the purpose is a private or nonpublic one, the mere fact that the hand that acquires or requires is Government or a public corporation, does not make the purpose automatically a public
purpose. The acquisition of road transport undertakings by the State \Vill unF
doubtedly be a public purpose, and it is a fallacy to deny the presence of public
purpose merely because its satisfaction by readily available private purchase is
possible. [672 D-E, 673 B. 676 DJ
Black's Le_gal Dictionary, ;The Supreme Court of India' by Raieev Dhavan
(Tripathi Publications), 'Words and Phrases Lecally defined' TT Ecln. P. 228;
Sir Alladi KrishnaS\\-ami Ayyar's speech irr the Constituent _\ssen1bly; ~fr. Justice
Mathev/s speech in the second Kerala· State Lawyer's Conference;
JI. F. Pcti
v. Secy. of State for India. 42 LA. 44; The State of Biliar v. Maharaiadhiraia
G
Sir Kanieshwar Singh of Darbltanga & Ors. [19521 SCR 889;
Tllt
Stare
of
Bomba}' v. Ali Gulshan, AIR 1955 SC 810; A. K. Gopala11 v. State of i\1'1.dtas,
AIR 1950 SC 27; The State of West Benual v. Anwar Ali Sarkar l1952l SCR
284 and The Stale of lVest Ber!Ral v. S. B. Bose & Ors. / 19541 SCR 5'8.7. referred to.
(2) The nmount payable when private property is taken bv the State is
a
matter of le.e;islative policy and not of judicial fixation.
The 25th Amendment
H
of the Constitution, while restructuring Article 31 and bringin_g in Article 31 C,
has exc1uded judicial examination even of the principles of evaluation.
The
Court can only satisfy itself about the amount not being a monstrous
or
unprincipJed under-value.
The payment may be substantially less than
the
A
B
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II
644
SUPREME COURT REPORTS
[1978] l S.C.R
market value and the principles may not be all-inclusive. but the court can
upset the taking 011lv \vhere the principles of computation are· too arbitrary and
illusory to be unconscionably shockin~. The quantum of the amount or the
reasonableness of the principles are out of bounds for the court. [680 B. 682 C',
685 A, C, G, H.J
'
H. H. Kesava11anda Bliarati Sripada,;alavaru v. Srate of Kera/a (supra)
follOVi'ed.
Speech by M~·hatma Gandhi at the Round Table Conference; Fundamental Rights & Socio-Economic Justice by K. P. Krishna Shetty. pp. 123 and
127-128; The 46th
Report of the Law
Commission and R. S. Cooper v.
Union of India (supra), referred to.
(3) Article 39(b) fulfils the basic purpose of re-~lructuring th~ cconumtc
order an:l undertakes to distribute the entire material resources of the comn1unity, as best to subserve the common good. To exclude ownership of privat~
resources fron1 its coils. is to cipberise its very purpose of redistribution
the
socialist \Vay.
Article 39(b) is ample enough to rope in buses. as motor vehicles, are part of the material resources of the operators.
Socially conscious
economists \Vill find little difficulty in treating nationalisation of transport as a
distributive progress for the good of lhe community. [689 C-b. E-··f. 690 01
The Court obsen·ed :
( 1) The State symbolises, represents and acts for the good of societv.
[ts
concerns are the ways of n1eeting the wants of the
community, directly
or
otherwise, and the public
sector in our constitutional system. is a
strategic
tool in the national plan for transformation from stark poverty to social justice,
transcending administrative and judicial allergies. r672 D-E]
(2) Serious constitutional problems cannot be studied in a socio-economic
vacuum, since socio-cultural changes are the source of new values.
Our em··
phasis is on abandoning formal legalistics or sterile logomachy in assessing the
vires of statutes regulating vital economic areas, and adopting instead, a dynamic, goal-based approach to problen1s of constitutionality.
Our nation has, as
its >dynamic doctrine,
economic
democracy sans which political democracy
is chimerical.
The Constitution ensouls suCh a value system in Parts III and
IV and elsewhere, and the dialectics of social justice should not be missed if
their synthesis is to influence State action and Court pronouncement. Illusory
ccmpensation, nexus doctrine and 'distributed
to subserve the con1mon good,
should not reduce lofty constitutional considerations into hollo\v concepts.
[666 F. 667 Al
R. S, Cooper v. Union of 111dia (Supra); Town<: v. Eigner 245 U.S. 418=
62 L. ed. 372, 376; Dias Jurisprudence 4th Edn. p. 625
H. H. Kesal·ananda
Bharati Srfpadaga/a1·aru v. State of Kerala (supra); Legal Theory and
Social
Evolution 5th Edn. p. 81 and Dr. A.mbedkar's speech in the Constituent Assem--
bly. referred to.
( 3) Bills without sufficient .study of their economic project.
occasionaUy
result in incomprehens1bil ty and incongruity of the la\\ fo1 the lay and the
legal.
A radicalisation of the methodology and philosophy of legal drafting,
and ability for the legislative manpo\ver to express themselves in strean1lined,
si1nple, project-oriented fa·shion is, therefore, essentiaL [667 C-Fl
'Law.s arc not for layn1en'-Guardian Miscellany
dated
May
29. 1975,
referred to.
(4) Sheer legalisn1 cannot lightly upset legislative wisdom or efficiencv while
passing on th~ constitutionality of economic legislation based on national plan·-
ning, public finance, private investments. cost accounting, policy decisions his·-
torical factors and a host of complex social variables.
Ra\v realities like poverty
and stark inequalities to abolish \Vhich. Article 31(2). 3IC-. 38 and 39
have
been enacted, must inform legal interpretation. The Courts n1ust be circumspect not to rush in where serious reflection will make them fear to tread, not
to resort to adroit circumvention because of economic allergy to a particular
legi<lotive policy. [669 F. 670 A-BJ
•
',
•
•
KAR~ATAKA V. RA .... '\'GANATHA
645
------..
B;;r:on v. I
-J?,(.<n -\
._. ·a6 CLR 169, 179;· Preface to ihe English Legal
Aid System by ~eton 1:-l itck (Orient Longmans); referred to.
· (5) 'Part JV- of --the Constitution, especi~lly Article 39(b) '·and (c) - is a
futuristic mandate to the State with the message -of transformation of the economic md social order.
Such. change· cans_ for collaborative effort_ from all
the 1egal institutions of the system ; the
legislature,. the
judiciary and
the
administrative machinery. The Court and counsel ha·ve a justice constituency -
with economic oYertones, the
~ manifesto being the constitution
designed
to
uphold the humanist values of life. liberty and the equal -pursuit of happiness,
material and spiritual.' [690 D-El
'iav.~·ers for Social Change; Perspectives on Public Interest Law' by Robert
L Rab~ Standord Law Review Vol. 28, No. 2 January 1976; Law in America
p .. 34 ·by ne-rnard Schwartz; The nature of judicial Process by Cardozo, 1932,
p. 170; The Indian Constitution by Granville Austin; British Coal Corporation
v.' The Kind 1935 AC 500; Attorney Gett2ral of Ontario v. Attorney General
·of Canada 1947 AC 503; I Constituent Assembly Debates, p. 61. referred to.
A
B
c
'Crv!L APPELLATE JURSDICTION: Civil Appeal No. 1085 and 1522-c
1894176.
Fmn the Judgment and Order dt. 20th September 1976 of the Kar- ,
nataka High Court in IV. P. Nos. 817. and 818-826176 etc. etc.
L. N. Sinha, R. N. Byra Reddy,
Adv. Genl.,
Narayan Nettar,
K. S. P:ittawany (For A. 2 in CA. No5. 1085 & 1522) and Mr. AmD·
neshw::r ~upta, Advs. for the appellants : .,
-
A. :;{. Sen,
K. N. Bhatt, and M. R. V. Achar, for the Res-
. pcn~ll!5 in Civil Appeals Nos. 1537, 1538-48, 1549, 1551-52, 1555,
. 1557~69, 1562, 1564-66 1967-68, 1569-72, 1574, 1576-80, 1586-89
1593-94, 1597-1611, 1612-1613, 1618-24 1628-29, 1631-32, 1635-36
1638-42, 1644, 1646-48 1660, 1662-63, 1664-65, 1668, 1670-74,
1676, 1684-85, 1689 1695, 1697, 1700, 1701, 1703-4, 1710, 1712- . E
16, 1724-27 1729-30, 1732, 1734-37, 1738-39, 1741, 1746, 1748-50,
1753, 1759-60, 1761, 1763, 1765-66, 1768-69, 1771, 1774-76, 1786,
1785, 1803, 1805 (R-1) 1806-7, 1809, 1814-17, 1825, 1828, 1832,
1836-37 1840-41, 1844-46, 1850, 1858-59, 1863, 1865-66, 1868-71,
1873-77, 1879, 1882, 1884, 1887 & 1889/76:
A. K. Sen, A. T. M. Sampath, and M. R, V. Achar, fer the
F
Respondents in Civil Appeals Nos. 1677, 1758 & 1778/76:
·
G. · L. Sanghl, S. K. Mehta, K. R. Nagraja · & P. N.
Puri
and A. K. Sanghi, · for the Respondents in Civil Appeals Nos.
1523-24 1528, 1530, 1532-33 1575, 1581, 1583, 1595-96.
1626,
1678-83, 1686-88, · 1691-94, 1996 (R-I) 1717, 1720, I 723: I 742, .
1747, 1755-56, 1779-80, 1782-83, 1785, 1787-90 1792, 1798. 1810,
1823; 1830, 1861 & 1878176.
Gs. S. , Javali,
A. K. Srivastava,
and B. P. Singh,
for the
Respondents In Civil Appeals Nos, 1630, 1656, 1657 & 1854/76
CA. 1085/76.
1
Girish Chandra, (Not present) for Respondent No. 2 in CA
. 1085/76.
S. Narayana Bh~t (In person) for Respondent in CA. No. 180.+/76:
ff
R. N. Byra Reddy,. Adv Gnl. Narayan Nettar, for the' Adv.
Genl/Kamataka .
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646
SUPREME COURT REPORTS
[1978) 1 S.C.R·
The following Judgment were delivered :
.UNTWALIA, J .. This batch of 374 appeals by certificate is from the
dec1s1on of the High Court of Karnataka given in 374 Writ Petition
filed by different persons having various kinds of interest in the Contract Carriages which were taken over by the State of Karnataka Contract Carriages (Acquisition) Ordinance,
1976 (Kamataka
Ordinance No. 7 of 1976) (for brevity, hereinafter. the Ordinance) followed by the Karnataka Contract Carriages (Acquisition) Act, 1976
IKarnataka Act No. 21 of 1976) (hereinafter to be referred to as the
Act).
The judgment of the High Court is reported in K.
Jayaraj
Balla/, and others v. State of Karnataka and others.(')
For the sake
of conv.enience hereinafter
in this judgment, reference to the Higl1
Court judgment wherever necessary will be made from the said
1eport.
FACTS
The broad and the common facts of the various cases arc in a
narrow compass and not in dispute.
At the out,et, we shall state
them mostly from the High Court judgment.
We were not concerned
to go into the special facts of some cases in these appeals.
They may
have to ~ looked into, if necessary, by the High Court in the light of
this judgment.
The Karnataka State Road Transport Corporation
(hereinafter called the Corporation) was
established by the State
Government of Karnataka on August 1, 1961 under section 3 of the
Road Transport Corporations Act, (Central Act 64 of 1950).
TI1e Corporation was a party respondent to the writ petitions and is an
appellant before us alongwith the State of Karnataka.
We are stating
the facts mostly from Civil Appeal No. 1985 of 1976 arising out of
Writ Petition No'. 817 of 1976. The Corporation published in the Karnataka Gazette dated May 16, 1974 a draft scheme for nationalisation
of Contract Carriages in the State under Chapter IV-A of the Moto1·
Vehicles Act, 193'9 (Central Act 4 of 1939).
Objections were invited.
Some of the writ-petitioners preferred their objections.
It
appears the State Government and the Corporation dropped the idea
of proceeding with the scheme and without concluding the hearing and
the disposal of the objections and the finalization of their scheme the
Government came out with the Ordinance which was promulgated on
January 30, 1976.
As per clause 1 (3) of the Ordinance. it applisd
to "all contract carriage(s) operating in the State of Karnahka". By
a number of notifications issued under the Ordinance almost all the
contract carriages and the permits specified in the notifications vested
in the State.
They were transferred to the Corporation under clause
20( 1) of the Ordinance.
The officers of the Corporation seized the
vehicles ond the relative permits pursuant to the notifications aore<>aid
except six vehicles which were operating under Inter-State
permits
celonoing to some of the writ petitioners.
The seizure of the said six
vehicles was stayed by the Order of the High Court made on 5th April,
1976 in some of the earlier writ petitions.
The earlier writ petitions
were decided on February 26. 1976 and March 3, 1976 by a learned
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KARNATAKA v. RANGANATHA (Untwalia, !.)
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single Judge of the High Court who held that the Ordinance did not
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empower the acqu~$tion of the vehicles not covered by valid contract
pennito and consequently quashed some of the notifications.
The
Ordina:1ce with some changes was replaced by the Act which received
the ass~nt of the President on March 11, 1976 and was published in
the Karnataka Gazette dated the 12th March, 1976.
The operation
of the Act was, however, made retrospective from the 30th January,
1976---:he day when the Ordinance had been promulgated and come
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into force.
The Ordinance was repealed by section 31 of the Act
and tbe saving clause in sub-section (2) says :
"N<J-twithstanding such repeal -
(i) an}thing done or any action taken under the said
Ordinance, shall be deemed. to have been
done or taken
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under the corresponding provisions of this Act;"
;Fresh notifications were also issued under the Act.
The combined
effect of all these actions was that whatever was done on and from the
30th January, 1976 either under the Ordinance or under the Act was
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all deemed to have been done or done under the Act.
Fresh writ
petitions numbering 374 were filed in the High Court by the various
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contract carriages operators, financiers and others including those who
had filed or succeeded in the earlier writ petitions.
The High Court has allowed all the writ petitions, struck down the
Act as lillconstitutional and has declared it null and void.
The notifications have been quashed.
The respondents in the writ petitiollS,
namely 1he appellants before us, were directed to restore the vehicles
with the relative permits and all other assets to the operators from whon1
they were taken over.
Some consequential directives for detennination of damages in some later proceedings were also given.
We now proceed to state the findings of the High Court on the
various points argued before it not in the order as finally recorded in
para 98 of its judgment at page 1530 but in the order the points were
urged before us by Mr. Lal Narayan Sinha, learned counsel for the
appellants.
They are as follows :
( 1) The acquisition is not for a public purpose.
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(2) The compensation or the amount provided for or the
principles laid doW!l in the Act for payment in lieu of the
various vehicles, permits and other assets is wholly illusory
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and arbitrary.
For the two reasons aforesaid, the Act is violative of Article 31 (2) of the Constitution and is a fraud on it.
It is,
therefore, null and void.
13) The acquisition of contract carriages with Inter-State permits and other assets pertaining to such operators is ultra
vires the legislative power and the competence of the State
Legislature.
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(-+) Article 31 C does not bar the challenge to the Act &s being
violative of Article 31 (2) of the Constitution as there iS
no rea·sonable and substantial nexus between the purpooe
of the acquisitions and securing the princip1es spei:ified in
clauses (b) and (c) of Article 39.
We now proceed to deal with the points aforesaid seriatim in the
above ordec.
PUBLIC PURPOSE
It is indisputable and beyond the pale of any controversy now as
held by this Court in several decisions including the decision in the case
of His Holiness Kesavananda Bharati Sripadagalavem v. State of
Kera/a(') popularly known as Fundamental Rigpts case-that _any law
providing for acquisition of property must be for a public purpose.
Whether the law of acquisition is for public purpose or not is a justiciable issue. But the decision in that regard is not to be given by any
·detailed inquiry or investigation of facts.
The intention of the legislature has to be gathered mainly from the Statement of Objects and
Reasons of the Act and its Preamble.
The matter has to be examined
with reference to' the various provisions of the Act, its context and set
up, the purpose of acquisition has to be culled out therefrom and then
it has to be judged whether the acquisition is for a public purpose within
the meaning of Article 31(2) and the law providing for such acquisition.
The acquisition of the vehicles namely the contract carriages,
their permits and other assets for running them for the purposes of the
Corporation could not be challenged as being not for a public purpose
merely because it was for the purposes of transferring them. to the Corporation.
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Statement of Objects and Reasons for the impugned law runs as
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follows :
"A large number' of contract carriages were being operated
in the State to the detriment of public interest and were ajso
functioning stealthily as stage carriages.
This had to be pre·
vented.
Article 39(b) and (c) enjoins upon the State to see
that the ownership and control of the material resources of the
community are so distributed as best to snbserve the comn:on
good and that the operation of the economic system does not
result in the concentration of wealth to the common
detriment.
In view of the aforesaid it was considered necessarv to
acquire the contract carriages run by private operators."·
Accordingly the Karnataka Contract Carriages (Acquisition) Ordinance, 1976 was promulgated.
The Bill seeks to
replace the Ordinance."
The title of the Act indicates that it is "An Act to provide for the
acquisition of contract carriagei; and for matters incidental, anc'l!ary or
(I) [1973] Suppl. S.C.R.1.
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KARNATAKA v. RANGANATHA (Untwa/ia, .!.)
649
;ubservient thereto."
In the Preamble it is stated :-
"Whereas contract carriages and certain other categories
of public service vehicles are being operated in the State in a
manner highly detrimental and prejudicial to public interest;
And whereas with a view to prevent such misuse and also
to provide better facilities for the transport of passengers by
road and to give effect to the policy of the State towards
securing that the ownership and control of the material resources of the community are so distributed as best to subserve
the common good and that the operation of the economic system does not result in the concentratiol) of wealth and means
of production to the common detriment;
And whereas for the aforesaid purposes it is considered
necessary to. provide for the acquisition of contract carriages
and certain other categories of public service vehicles in the
State and for matters incidental, ancillary or subservient
thereto:"
A declaration was also made in section 2 that the Act is for giving effect
to the p0licy of the State towards securing the principles specified in
clauses (b) and (c) of Article 39.
A deep probe into and investi~a
tion of the facts stated in the Statement of Objects and Reasons and the
Preamble of the Act was-neither permissible nor was it gone. into by the
High Court.
Mr. A. K. Sen advanced the leading argument on behalf
of the respondents followed by some other Advocates and one of the
respondents in person.
The main plank of the argument advanced on
behalf of the respondents was that acquisition of vehicles which are available for sale in the market cannot be said to be for a public purpose.
Counsel submitted that the scheme of nationalisation in Chapter IV-A ol
the Motor Vehicles Act was given up, whole Undertaking of the various operators was not acquired but what was acquired was certain assets
most of which were available in the market. Acquisition of chattels or
movables can never be for a public purpose. The High Court in support
of its view, also refers to the wordings of sub-section (3) of section 4 of
the Act wherein it has been provided that the contract carriage and other
property ~sting in the State Government shall "be deemed to have been
acquired for a public purpose".
We are of the opinion that neither
the argument nor the decision of the High Court that the acquisition is
not for a public purpose is correct.
On the fact of the Statement of Objects and Reasons of the Act as
also from its Preamble it is clear, apart from further facts which were
stated in the various affidavits filed on behalf of the State, that the operators were misusing their permits granted to them as contract carriages
permits.
In many cases the vehicles were used as stage carriages picking up and dropping passengers in the way.
The Legislature thought
that to prevent such misuse and to provide for better facilities to transport passengers and to the general public it is necessary to acquire the
vehicles, permits and all rights, title and interest of the contract carriage
operators in or over lands, buildings, workshops and other places and
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all stores, instruments, machinery, tools, plants etc. as mentioned in
sub-section (2) of Section 4 of the Act.
It was not a case where some
chattels or movables were merely acquirnd for augmenting the revenue
of the State or for its commercial purposes.
Mr. Sen heavily relied
upon some passages in the judgment of this Court in The State of Bihar
v. Maharajadhiraja Sir Kameshwar.Singh of Darbhanga and others(1 )
to strengthen his submission.
The said decision was concerned y,ith the
vires of the Bihar Land Reforms Act, 1950 by which the Zamindaries
or intermediaries' interest were acquired by the State.
One of the provisions in the' Act was for acquisition of arrears of rent due to the intermediaries from their respective tenants.
This provision was struck
down as being un~onstitutional. And in that cormection, Mahajan, J,
as he then. was, said at page 944 :
"It has no connection with land reform or with any public
purpose.
It stands on the same footing as other debts due to
zamindars or their other movable properties, which it was not
the object of the Act to acquire.
As already stated, the only
purpose to support this acquisition is to raise revenue to pay
compensation to some of the zamindars whose estates are being
taken.
This purpose does not fall within any definition, however wide, of the phrase "public purpose" and the law ther~
fore to this extent is unconstitutional."
Mukherjee J., as he then was agreed with this view at page 957. Das
J.,as he then was and Chandrasekhara Aiyar J., also concurred in the
same.
But the said decision given in respect of the debts due to the
Zamindars from their tenants, which wern merely choses in action is of
no help to the respondents.
In these appeals we are not called upon to decide and express any
final opinion as to whether an acquisition of chattels or movables can be
for a public purpose or not. What may only add that the preposition so
broadly but is not quite correct.
There may be many circumstances
and facts to justify the acquisition of even a movable property for a public purpose.
It may not be universally so, but the converse is also not
correct.
In the instant cases what has been acquired under the Act is
not only movables and chattels namely the vehicles but also the permits,
the workshops, land and bulldings etc. Although the whole transport
undertaking of any carriage operator was not acquired, the acquisition
in no sense was of more movable properties available easily for purchase
in the market.
Several hundred vehicles were acquired by the various
notifications.
Tn substance it was a nationalisation of the contract
transport service in the State of Kamataka.
Undoubtedly it was for a
public purpose.
We may just quote a few lines from the judgment of
Mahajan J., in the case of The SMe of Bihar v.
Maharajadhiraja Sir
Kameshwar Singh of Darb/zanga and others (supra) occurring at page
941
"Iu other words, shortly put, the purpose behind the Act is to
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bring about a reform in the land distribution system of Bihar
for the general benefit of the community as advised.
The
(!) [1952] 3 S.C.R. 889
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KARNATAKA v. RANGANATHA (Untwalia, J.)
65 J
Legislature is the best judge of what is good for the community, by whose suffrage it comes into existence and it is not
possible for this Conrt to say that there was no public purpose
behind the acquisition contemplated by the impugned statute."
The language of section 4 ( 3) of the Act is not for the purpose of
introducing a legal fiction as observed by the High Court but with the
object of putting the challenge to the factum of public purpose beyond
the pale of any attack.
The use of the word "deemed" does not
invariably and necessarily implies an intorduction of a legal fiction but it
has to be read and understood in the context of the whole statute.
It
may well be that the State is not authorised to compulsorily acquire
any property merely to augment its revenue although in a larger sense
one can say that augmentation of the coffers of the State is also for a
public purpose.
But it is not always correct to say that a property
cannot be acquired merely for a commercial need of the Government.
Under the Land Acquisition Act, 1894 land can be acquired for commercial purposes of the Government a Public Corporation or a Company.
Why can't movables be acquired for commercial purposes if the
exigencies of the situation so require ? A particular commercial activity of the State may itself be for a public purpose.
Acquisition of property either movable or immovable may in such a situation be for a public purpose.
Mr. Sen referred to section 19 of the Road Transport Corporations
Act and specially to clause (c) of sub-section (2) to knd support to his
argument that without acquiring the whole undertaking only a portion of
its assets leaving out the liabilities could not be acquired.
For this purpose, he relied upon the provisions of Chapter JV-A of the Motor Vehicles Act also.
The nationalisation of routes under the said Chapter of
the Motor Vehicles Act does not necessarily imply the acquisition of the
transport undertakings of the various operators, their vehicles or properties.
That is a separate and distinct method altogether.
In section 19
of the Road Transport Corporations Act are enumerated the powers of
the Corporation.
Sub-section (2) ( c) gives a power to the Constitution "to prepare schemes for the acquisition of, and to acquire, either
by agreement or compulsorily in accordance with the law of acquisition
for the time being in force the state concerned and with such procedure
as may be prescribed, whether absolutely or for any period, the whole or
any part of any undertaking of any other person to the extent to which
the activities thereof consist of the operation of road transport services in
that State or in any area". It is plain that the scheme for the compulsory acquisition may be for a part of the undertaking also and: that would
mean a part of the property of the undertaking or a branch of the undertaking.
Of course, the Corporation can purchase vehicles as provided
for in clauses (a) arid (g) of sub-section (2) of section 19.
But it does
not follow therefrom that in all cases it is obliged to do so.
Compulsory
acquisition is also provided for in clause (c).
Under motion 3 of Act
64 of 1950 while establishing a Road Transport Corporation the State
Government is obliged to keep in mind primarily the public interest as
provided for in clauses (a) to (c) thereof.
The acquisition in question
for the purpose of the Corporation was, therefore, in public interest.
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In our judgment, therefore, the decision of the High Court on the
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question of public purpose is erroneous.
We hold that the impugned
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Jaw of acquisition and the acquisitions are for public purpose.
AMOUNT TO BE PAID FOR THE PROPERTY ACQUIRED.
The High Court in paragraph 92 at page 1527 has come to the conclusion " ...... the scheme for payment for the property acquired under
the Act is wholly illusory and therefore the Act violates the fundamental
rights of the petitioners secured under Article 31 (2) ."
The history in relation to the provision of payment of compensation
or the amount in Article 31 (2) of the Constitution is interesting and
clearly points out the difference in the approach to the question by this
Court and the Parliament resulting in the amendments in the provisions
from time to time as and when some important and leading judgmc11t
were handed down by this Court which according to the Constituent
Body did not correctly Jay down the Jaw as it intended the Article to
mean. The word used in the original Article 31 (2) was 'compensation'.
In The State of West Bengal v. Mrs. Bela Banerjee and others(1) compensation was held to mean a just equivalent of what the owner has
been deprived of. Then came an amendment in the Article by the Constitution (4th Amendment), Act, 1955 stating in clause (2) of Article
31 " ...... no such law shall be called in question in any court on the
ground that the compensation provided by that law is not adequate."
In spite of the amendment, this Court in some decisions-to with P.
Vajravelu Mudaliar v. The Special Deputy Collector, Madras (') and
Union of India v. The Metal Corporation of India Ltd. and Another ( 3 )
largely, if not fully, stuck to its view in Mrs. Bela Banerjee'.' case
(supra).
Then came the decision in State of Gujarat v. S/11i Shanti-
/al Mangaldas N Ors (') where Shah J., as he then was in his leading
judgment to which was appended a short concurring note by Hidayatullah C.