MUNICIPAL CORPORATION OF THE CITY OF AHMEDABAD & ORS. versus STATE OF GUJARAT & ORS.

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MUNICIPAL CORPORATION OF TIIE CITY OF AHMEDABAD & ORS. v. STATE OF GUJARAT & ORS. March 27, 1972 [S. M. S!KRI, C.J., A. N, GROVER, A. N. RAY, D. G. PALEKAR AND M. H. BEG, JJ.]

The Government of India Act, 1935-S. 299-Constitutio11 of India Act, Art. 31-Compensatlon-Bombay Provincial Municipal Corporation Act, 1949r-Ss. 212, 216--Acquisition building or part of building within "regular liTle of.public" street-Section if prescribes the principles and manner of tdetermination of conipensation.

Bombay Provincial Municipal Corporation Ai:t, 1949-Ss. 412, 216-

Constitutionality of.

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Section 210 of the Bombay Provincial Municipal Cotporation Act, 1949 authorises tbe Municipal Commissioner to prescribe the "regular line of a public street". If a building or a part of building is within the regular line of a public street the Commissioner may undi:r s. 212 re quire the owner to pull down the building or pan thereof, which is within the regular line of the street. On his failure tO do the Commissioner is entitled to pull down the offending part of. the builaing at the cost of the owner. The land so vacated is to vest in the cor poration. Secti0n 216(i) lays down that compensation .shall be paid by the Commission~r to the owner "for any loss" which the owner may sustain and for "any expenst:" incurred by suc:h owner in consequ~D.ce of the <irder made by the Comm.issioner. Proviso (i) to secltion 216 prescribes that "any increa9~ or decrease in the~ value of the remainder of the property of which the building or land so acquired formed part, likely to accrue from the setback to the regular line of the street shall be taken into consi<bration and allowed for in determining the amount of such compensation. Under proviso (ii) "if any such increase in value exceeds the amount of loss sustained or expenses incurred by the said owner, the Commissioner may recover from such owner half-the amount df such excess as betterment charge.". The Act gives the owner who is aggrieved by the amount of compensation offered to him, the right to appoal to the judge of the Small Causes Court and to the District judge in second appeal.

Acting under s. 212 the Commissioner issued notices to the respon dents to pull down parts of their building lying within the regular line of the street. The respondents filed writ petitions contending that section '212 was unconstitutional in so far as it violated the provisions of section 299 of the Government of India Act, 1935, and also of article 31 of It was urged that the Act did not (i) provide for the Constitution. payment of compensation for properly acqui~.,d and (ii) specify the principles on which and the manner in whi<lh the compensation was tc' be determined. The validity of section 212 and other allied sections was also challeng,d on the ground that they infringed articles 14 and 19 of the Constitution. The High Court, upholding the challenge unde'r s. 299 of the Government of India. Act, held that the Act proviqed foe payment of compensation 'out did not specify the principles on which and the manner in which the comp~nsation was to be determined. In view of this finding the High Court did not consider the challenge on

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. the \>1ber. grounds.

In this Court it was argued that the two provisos to sub-Sectio11 (i) of s. 216 if given effect to nullified the direction in sub section .(I) for payment of compensation and when reduced in the Con tingencies visualized in the provisos the compensation turned out to be illusory.

Allowing the appeal,

l'IELD : that the order passed by the High Court had to be set ao;i<I and the proceedings transmitted to the High Court for disposal in acC'or- dance with the law.

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. (i) The High Court was right in holding that the. ,-\ct provided fc.r payment of compensation for property acquired under s. 212. sectkm 216 .and 389 rea\f too,dher make it clear that full indemnification in ferm; of money for the loss caused is to be made to the owrie\' of the pro- perty or other· interest affected by reason of the exercise of the power C under s. 212. that the- compensation may in some rare contingencies be very much reduced after taking into acc.ount the value of the benefit conferred on the owner by reason the widening of the street is no ade quate reason to hold that the Act does not provide for payment of. com peasation. Both the provisos come into play only after. the .compensation for loss is detei'mined under sub-section (i) of •ection 216 and since that sub-section declares that full compensation -must be paid for the Joss or deprivations suffered by the owner it must be held that the Act pro- D vi<!es for the payment of compensation for the property acquired. 11F-G].

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(ii) The Act specilles the principles on which and

which compensation is to be detemrined.

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Havmg regard to the fact that in the course of widening the street the ·corporation may have to acquir"> very irregular, shapeless and small E pieces of land for the purpose of the street, a h\)St of principles may have to be employed to determine the com~ensatlon. This very difficulty in specifying any known rule of compensation is responsible for the word- ing of section 216 and section 389 of the Act which gets over the diffi culty by providing ftill indemnification for the loss or deprivation suffered by the owner of the building or other interests in the property. The involwment of civil courts in finally determining compensation imports judicial norms and since full indemnification in accordance with judicial norms is the goal set by the Act, it is implicit in such a provision that the rules for dc'.crmination of rnmpensation shall be appropriate to the propei'ty acouired and such as will achieve th<o goal of full iridemnitv against loss. - This, by itself, is a specification of a principle for the. deter- mination of compensation. J13-A-DJ

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.Stale of Gujamt v. Shri' Shanti/al Mangalda> & Ors., f,1%9] (3) S.C.R.

34 l at p. 357, referred to.

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Under s. 390 the Commissioner or such other officer as may be autho rised by him shall hold such inquiry as he thinks fit and determine the amount of compcn.sation to be paid. Since there is an appeal from such determination to the judge of the small causes court and a second appeal to the Distrkt court it is clear that the enquiry must be held on broad judicial ·lines. There arc no limitations placed on the powers of the ap- pella~~ judges in determining the loss· in a just and appropriate manner; H therefore, the Commissioner 0r his authorised officer who holds the en quiry in the fir.' t instance, will be guided by princip)es which meet with the approval of the appellate authorities. [13EJ

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CORPORATION v. GUJAllAT (Palekar, 1.)

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CIVIL ApPEJ.LA'iE Ju&ISDICTION : C.A. Nos. 135 tQ 149, 2091,

2092 and 2121 to 2122 of 1968, 41 and 42 and 574 of 1969.

Appeals from the judgment and Order dated tile 5th December, 1966 of the Gujarat High Court ii:t Special Civil Applications Nos. 1454 to 1456 of 1965 etc., eic.

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M. C. Setalvad, V. B. Patel and I. N. Shroff, for the appellant~

<In all the appeals).

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B .. D. Sharma for. S. P. Nayar, for respondent No. 1 (In all the

appeals).

A.H. Mehta, S. K. Dholakia and Vineet Kumar, for respondent C No. 2 (ln C.As. No. 135, 137, 138, 142, 143 of 1968) Respon

dent Nos. 2 to 5 (In C.A. No. 140 of 1968.)

S. S. Khunduja and Pramod Swarup for respondent No. 2 (In

C.A. No. 574 of 1969.)

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The Judgment of the Court was delivered by

Palekar, J.-These Civil Appeals by certificate arise out of 23 Writ Petitions filed by owners of lands and buildings within tbe Municipal limits of, the City of Ahmedabad. The petitioners challenged section 212 and some other allied sections of the Boinbay Provincial Municipal Corporation Act, 1949, (herein after called the Corporations Act) and prayed for the issue of a writ of mandamus directing the Municipal Corporation of the City of Ahmedabad to treat the notice or notices issued to them under section 212 of the Corporations Act as null and void and further dlrectii:ig the Municipal authorities not to act upon the same or in furtherance of the said notice or notices. Besides the Municipal Corporation, the Municipal Commissioners 'Yllre also made parties to the petitions. Since the validity of the .Provisions of the Corporations Act was challeng,ed the State of Gujarat was :1lso made a respondent. All the writ petitions raised the same questions and, therefore, the High Court of Gujarat .disposed of all the petitions by a common judgment. As the decision was against the Municipal authorities, they have n9W come in appeal.

For the purposes of dispos~! of these appeals it would . be mfficient to refer to the allegations made in Special Civil Applica tion No. 1454/ 1965 which is the subject matter of appeal in', Civil Appeal No. 135/1968 before us. The petitioner Girdharlal G~npatram was the owner of Survey Nos. 4222, 4223, 4224/ A-B C and 4225/ A-B of Jamalpur, Ward No. 2 Ahmedabad. On these survey numbers there is a building belongin~ to Gird.harlal. · on the ground floor oi'-which there are shops occupied by Gudhar- . Jal and his tenants.

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The Corporations Act being Act No. LIX/1949 was enacted o~ December 29, !949 and came into force on July l, 1951. By this Act, the previous statute namely the Bombay Municipal Boroughs Act, 1925, was repealed.

Under section 210 of the Corporations Act

the Municipal CommillSionec is entitled to prescribe what is known as the "regular lino of a public street." After following the necessary formilities, the regular line of the public street was prescribed by the Commissioner. Parts of the building of Girdharlal came with i.i this regular line and so on 3-4-1962 the Commissioner issued a Sllow cause notice under section 212(l)(b) of the Corporations Act calling upon Girdharilal to show cause why superstructure standing upon the aforesaid Survey numbers and lying within the regular ~ of the street be not remo-;ed and the land thereunder be acquired under the provisions of the Act for the purposes of a street. Girdharlal filed objections but they were over-ruled. Thereafter, with the approval Of the Standing Committee, the Commissioner acting un<ier sub-section (2) of Section 212 of the Corporations Act issued final notices to Girdharlal requiring him to pull down the building or parts thereof which offended against the regular Ihle of the street within 7 days of the receipt Qf the notice. Certain proceedings followed with which we are not now concerned and thereafter on 6-2-1965, Girdharlal filed the writ petition in the High Court for the relief already referred to, His contention was that section 212 and certain other allied sec tions of the Corporations Act were ultra vires and unconstitutional and hence the notices issued under secion 212 were illegal.

Section 212 which is found in Chapter XIV of the Corpora tions Act deals with streets, their construction, maintenance and improvement. Section 212 is one of the several sections devoted to this subject.

It is as follows :

212. ( 1) If any building or any part thereof is with in the regular line of a public street and if, in the opi nion of the Commissioner, it is necessary to set bar,k the building to the regular line of the street he may, if the provisions of section 211 do not apply, by wntten notice--

(a) require the owner of such building to show cause. within such period as is specified in such notice by a statement in writing subscribed by him or by an agent duly authorised by him in that behalf and address ed to the Commissioner, why such building or any part thereof which is within the regular line of the street shall not be. pulled down and the land witHin the said line acquired by the Commissioner; or

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CORPORATION V. GUJARAT (Palekar, /.)

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(b) require the said owner on such aay at. such time and place as shall be 'specified in such notice to attend personally or by an agent duly authorised by him in that behalf and show cause why such building or any part thereof which is within the regular lini- of the street shall not be pulled down and the land within the said line acquired by the Commissioner.

(2) If such owner fails to show sufficient cause to the satisfaction of the Commissioner why such building or any part thereof, which is within the regular line of the street shall not be pulled down and the land within the said line acquired as aforesaid the Commissioner may, with the approval of the Standing Committee, require the ewner by a written notice, to pull down the building or the part thereof which is within the regular line of the street (and where a part of a building is required to be pulled down, to also enclose the remaining part by putting up a protecting' frontage wall) within such period as is prescribed in the notice.

(3) If within such period the owner of such build~ ing fails to pull down such building or any part there of coming within the said line, the Commissioner may pull down the same (and where a part of a building is pulled down, may also enclose, the remaining part by. putting up a protecting frontage wall) the expenses incurred in so doing shall be paid by the owner.

and all

( 4) The Commissioner shall at once take possession on behalf of the Corporation of the portion of thl' land within the said line theretofore occupied by the said build ing, and such land shall thence forward be deemed a part of the public ~treet and shall vest as such in the Corporation.

(5) ......................... .'

It is common ground that the provisions of section 211 do not apply. It is also not disputed that a part of tho building comes within the regular line of the public street ard notices have been issued by the Commissioner, as in his opinion, it was necessary to set set back the building to the regular line of the street. In pur suance of the power given to him, the Commissiorer required the owner of the building to show cause. Objections raised by the owner were considered and over-ruled. Thereafter under section 212(2) the Commissioner required the owner Girdharlal to pull down the building or the part thereof which was within the regular line of the street within 7 days. It is obvious that on

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!his failure to do so, t)Ie Commissioner was entitled under sub ;;~ti~n (3) of section 2)2 to puHdown the olfonding part of the building at the cost of the owner. After such pulling down of the building the land so yacated was to vest in the Corporation under sub-section ( 4) of "that section.

For the loss thus caused to the o\\'.ner by the action of the Commissioner, provision was made for 'payment of compensation under section 216 which is as follows :

216. (1) Compensation shall be paid by the Com missioner to the owner of any building or land required for a public street under section 211, 212, 213 or 214 for anv loss which such owner mav sustain in conse quence of his building or land being so acquired and for any expense incurred by such owner in consequence of the order made by the Commissioner :

Provided that-

(i) any increase or decrease in the value of

the remainder of the property of which the building land so acquired formed part likely to accrue_ the from the set-back to the regular street· shall be taken into consideration and allowed for in detem1ining the amount of such compensation.

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(ii) if any such increase in value exceeds the amount of loss sustained or expenses incurred by the said owner, the Commissioner may ,recover from such owner half ~he amount of such. excess as a betterment charge."

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Chapter XXIV of the Act deals with the supject of compen-

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sat ion generally. Section 329 (1) provides as follows :

389. ( 1) "In the exercise of the powers under the following provisions of this Act by ·the Commissioner or any other municipal officer or servant or any other person authorised by or under this Act to execute any work, as little damage as can be shall be done and compensation assessed in the manner prescribed by or under this Act shall be paid to any person who sustains damge in consequence of the e;<ercise· of such power, namely ................................. : .. c

(f) acquiring any building or land required public street-under section 216."

for a

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CORPORATION v. GUJARAT (Polekar, /.)

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Section 390 is .as follows :

"Subject to the provisions of this Act,

the Com ~ssi?n'er .or such other officer as~ay be au~or~secl by -him m this behalf shall, after holCling such mqmry as he thinks fit, determine the amount of compensation to be paid under section 389."

This determination, however, is not final because two appeals are provided. Under section 391 it is provided as under :

"Any person aggrieved by the decision of the Com missioner or other officer under section 390 may with in a period .. of one month, appeal to the Judge in accord ance with the provisions of Chapter XXVI."

"the Judge" means under section 2 clause (29) the Judge of the Court of Small Causes in the City of Ahmedabad. Section It says 411 provides for a second appeal to t]:ie District Court. "An appeal shall lie to the District Court Caa) from a decision of the Judge in an appeal under section 391 against an assess ment of compensation under clause (f) of sub-section (1) of section 389." As regards the procedure to be followed in respect, of these appeals, provision is made in section 434 sub-section ( 1) whereof is "Save as expressly provided by this Chapter (Chapter' XXVI) the provisions of the Code of Civil Procedure, 1908, ·elating to appeals from original decrees shall apply to appeals .o the Judge from the orders of the Commissioner and relating to appeals from appellate decrees shall apply, to appeals to the District Court".

These relevant provisions which have been quoted above at one place show that where the Commissioner acquires land for the purposes of the street by asking the owner of the land to pull down nis building or pa_rt of it, the owner is entitled to be paid compensation for the loss suffered by him. The compensation must, in the first instance, _re determined by the Commissioner or an Officer authorised by him. in that behalf and if, on determina tion of such compensation, the owner of the building who loses any part of the land to the street is aggrieved by the amount of compensation offered to him, he is entitled 'to appeal to the Judge of the Small Causes Court and to the District Court in second appeal. It is obvious that if the owner is liot sufficiently compen sated for the loss suffered by him by the Commissioner or his authorised Officer, the Judge in the Court of Small Causes or the District Judge, as the case may be, would be entitled to determine the proper compensation to be paid to him.

· The complaint of the owner in the Writ Petition took various the

'forms. But the principal attack was on the ground

that

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provisions with regard to acquisition in section 212 were un constitutional for several reasons. The Corporations Act was passed before the Constitutj,pn crune into force. when the Govern ment of India Act, 1935 fls in force. Subsections (1) and (2) of section 299 of the Government of India Act, 1935, which are roughly similar in content to clauses (1) and (2) of Article 31 of the Constitution, both before and after the Constitution 4th Amendment Act, 1955, required that the Jaw authorising com pulsory acquisition for a public purpose, ( 1) should provide for the payment of compensation for the property acquired; (2) fix the runount of compensation; or ( 3) specify the princip1es on which and the manner in which it is to be determined. is common ground that the Corporations Act is a Jaw which by itself does not fix the amount of compensation. While the submis sion of the Municipal Corporation is that it provides the payment of compensation for the property acquired and also specifies the principles on which and the manner in which it is to be determined, the contention of the petitioners is that it does neither. Therefore, the pet:tioners contended that section 212 of the Corporations Act was unconstitutional in so far as it violated the provisions of section 299 of the Government of India Act, 1935 and also of Article 31 of the Constitution.

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Certain other challenges were also made in the petiliJns to the validity of section 212 and some other allied sections of the Corporations Act on the ground that they ·infringed the consti tutional sateguards embodied in Articles 14 and 19 of the Consti tution. The High Court rejected the challenge under :~rticle 19 ( 1 )(g). It did not think it necessary to consider the challenge under other heads in view of its finding that the challenge under section 299 of the Government of India Act, 1935 was successful. Learned counsel for the respondents before us did not press the o!11Y the challenge under Article 19 (1 ) ( g) . Therefore, question which survives for consideration is whether the ~1gh Court was right in holding that section 212 of the Corporations Act is unconstitutional on the ground of its alleged violation of the provisions of section ~9~ of the Gov7rnment of ~dia Act or Article 31 of the Constitutton. If the vtew of the High Court in this respect is not upheld, it is obvious that the case will have to go back to the High Court for the c:onsideraion of J><?i!lts not finally decided for the purpose of the disposal of the petitions.

The contention on behalf of the property owners was that the Corporations Act did not provide ( 1) for the payment of com pensation for the property acquired and (2) did not specify the principles on which and the manner in which it is. to be d~ter­ mined. The High Court only partially accepted this c?ntention. It did not agree with the contention that the Corporations Act

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CORPORATION v. GU<fARAT (Palekar, J,)

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did ~ot provide for the payment of compensation for the p~ acqmred. On the second question, however, the ~greed that the Act ~eithe~ sp~ified the principles of compensa uon nor the manner m which 1t was to be determined.

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We are in agreement with the view of the High Coun that the ff Corporations Act does provide for the payment of compensation for Ure property acquired. We have only to refer to section 216 and section 389 of the A~t for this purpose. Section 216(1) clearly lays down that compensation shall be paid by the Com missioner ·to the owner of any building or required for public s•:reet under sections 211, 212, 213 and 214 for any loss c which such owner may sustain· in consequence of his building or land being so acquired, and for any expense incurred by such owner in consequence of the order made by the Commissioner. Then section 389 ( 1) provides that compensation assessed in the manner prescribed by or under the Act shall be paid to any person who sustains damage in consequence of the exercise of such power, namely, "(f) acquiring any building or land roguir ed for 1a .public street under section 216." The.two sections read together make it clear that full indemnification in terms of money for the loss caused is to be made to the owner of the property or other interests affected by reason of the exercise of power under section 212.. Under the latter section what is acquired for the purP\}ses of the street is the land of the owner which falls within the ~egular line of the street. Several provisions are made in Chapter XIV for the widening of streets within the limits of the Corporation. With the enormous increase in traffic in the more congested parts of a growing City, Municipal authorities are constantly u:1der pressure to widen the streets and one of the several methods prescril;>ed in Chapter XIV is cont~ned in sec- tion 212. The regular' line of the street as prescnbed under section 210 often.passes through the properties of owners abutting on the streets and it is impossible to widen the streets unless parts of !!Inds belonging to the owners are acquired. Sometimes a building or a structure or part of it stands on su~h land and un less" that portion of the building which falls within the line 1 is removed ~he acquisition of the land for the purpose of the street is ·not possible. Therefore, in the first instance the section requires that the Commissioner shall issue a show cause notice why the buildings or a part of the building which fa:lls, within the line of street should not be pulled down with a •.view to release the land the uiidemeatli ·for t.lie purposes of the street. H owpel: the Commissioner is of •tl)e ooinion that tJ:e building or part the_reof should be pulled down, he must obt.am the approval of ihe Standing Committee and then serve a nottc~ ~n the. o':"ner to pull down° the offending building' or part of bmldmg w1thm a

If after hearing

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certain time. If the owner cooperates, he will himself remove th~ offending .structure and release. the land underneath it for being If he does not, the Commissioner is em absorbed 1Il the street. powered to pull down the offending structure at the cost of the owner. Then sub-section ( 4) of section 212 provides that the Co~ioner shall at once take possession on behalf of the Corporation of the portion of the land within the said line (line of the public street) theretofore occupied by thtr said bt•ilding, and such land shall thence· forward be deemed a part of the public street and shall vest as such in the Corporation. The pro vfaions of section 212, therefore, clearly declare that what is ac quired under that section is the land lying within the line of the public street. The technical question as to whether there is acqui sition of the building when the owner himself does not pull down the offending part of the structure but the Commissioner do 'S it at the owner's expense is not necessary for the disposal of the ques tion whether the Act provides for the payment of compensation. Since every kind of loss is ·required to be compensated as a con sequence of the order passed by the Commissioner under section 216 of the Act, the question whether the Act need have provided for compensation as on the acquisition of the building or a' part of the building which is pulled down under section 212, does not ".'he ownernas to be comnensated for every depriva survive. tion or loss and, therefore, prima facie it must be held that the Coroorations Act provides for 1he pavm~nt of compensation for the property acquired:

It was, however, argued that the two provisos '.v sub-section ( 1) of section 216 when given effect to may not oniy nullify the direction given in sub-section (1) for payment of compensation but also in certain contingencies compel the owner to -pay the Corporation something out of his own pocket. When sub-section ( l) provides for payment of compensation for the loss suffered it provides for adequate indemnification or compensation. When such compensation is reduced in the contingencies visualized in the two provisos the compensation, it was submitted, may turn out to be illusory and the provision for the payment of compen sation an empty assurance. Proviso ( 1) prescribes that "any increase or decrease in the value of the remainder of the property of which the building or land so acquired formed parl likely to accrue from the set-back to the regular line of the street shall be taken into consideration and allowed for in determining the amount of such compensation." Proviso (ii-) states that "if any such increase in the value exceeds the amount of loss sustained or exnen<.~s incurred ,by 1he said owner, the Commissioner may recover from such owner half the amount of such excess as a betterment charge:" Proviso (i) implies that the , compensation payable under sub-section ( 1) is liable to be increased or reduced

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CORPORATION v. GUJARAT (Palekar, 1.)

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after the set-back. It envisages that by reason of the set-back or the widening of the street the property which still remained with the owner is likely, on account of the new situation, either to increase or decrease in value. If that happens, that is to be takCl!l into consideration and the amount determined under sub--section ( 1) will have to be adjusted accordingly. The High Court is of the view that proviso (1) is unobjectionable as it is a principle governing the determinauon of compensation and can be rightly employed in determining the compensation for the property acquir ed. The High Court, however, was not inclined to hold that proviso (ii) lays down any prim;iple for determination of com~ It held, neverthe pensation payable for the property acquired. less, that the proviso was severable from the main part . of the seetion and did not affect the provisions of sub-section ( l) for It is obvious that it is only in very payment of compensation. rare contingencies that proviso (ii) may become operative. But in considering the question as to whether the Act provides for compensation for acquisition or not, there can be little doubt that it docs so in sub-section (I) of section 216. That it may in some rare contingencies be very much reduced after taking into account the value of the benefit conferred on the owner by reason of the witjening of the street is no adequate reason to hold that the Act does not provide for payment of compensation. As a matter of fact in an actual enquiry for determining the amount of compen sation to be paid the authority charged with the duty will have to assess, in the first instance, the value of the total Joss or depriva tion actually suffered. The provisos may in some rare contingen cies go to reduce the amount so determined. Proviso (ii) envisages a situation where the widening of the street has so much benefited the owner that the value of the benefit even exceeds the actual Joss suffered by him. In such a case iilstead of getting any compen sation for the loss the owner might have to pay out of his own pocket. As to whether proviso (ii) prescribes/ any principle for determination of compensation or not is not relevant for our present purpose. Both the provisos come into play only after the comoensation for loss is determined undec sub-section (1) of section 216 and since that sub-section 'declares that full compen sation must be paid for the loss or deDrivation suffered by the 'owner it will be incorrect to say that the Act does not make pro vision for the payment of compensation for the property acquired. We have, therefore, no hesitation in agreeing with the High Court that the Corp,orations Act provides for the payment of compensa tion for the property acquired under section 212.

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The next question is whether the Act specifies the principles on which and the manner in which compensation is to be deter mined. The High Court has been Of the view that neither, prin-· its ciples for determination of .compensation nor the manner"ef

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determination has been specified and that is the ground on which i.t has held that the provisions of section 212 ~re unconstitutional. We are unable to agree with that view. What is meant by speci fic3tion of principles for determining compensation ? In the State of Gujarat v. Shri Shanti/a/ Mangaldas & Ors.( 1 ) this Court observed:-

"Specification of principles means laying down gene ral guiding rules applicable to all persons or transactions governed thereby. Under the Land Acquisition Act compensation is determined on the basis of "market value" of the land on the date of the notification under s. 4 (1) of that Act. That is a specification of principle."

At a later stage the Court again observed at page 362 :

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"Rules enunciated by the courts

for determining compensation for compulsmy acquisition under the Land Acquisition Act vary according to the nature of the land acquired. For properties which are not marketable com modities, such as lands, buildings and incorporeal rights, valuation has ·to be made on the application of different rules. Principle of capitalisalion of net rent at the current niarket rate on guilt-edged securities, principle of rein statement, principle of determination of original value less depreciation, determination of break-up value in certain types of property which have out-grown their utility, and a host of other so-called principles are em ployed for determination of compensation payable for acquisition of lands, houses, incorporeal rights, etc."

The Land Acquisition Act makes market value at a certain·date the basis for the determination of comuensation. But there is no one sure way of applying the principle. As is well-known when set-back is imposed by the line of the s·.reet, the land actually 0 1acquired by the Corporation may be in some cases a few sq. yards ·/ .. ,or even a few sq. inches. Then again the land acquired. may be ' of no significant use to anybody except to the Corporation as a part of the sireet. The land acquired may be wedge-shaped, wmetimes irregular in contour and often shapeless. If the prin ciple of a willing seller and a willing buyer is applied there can possibly be no market at all for the property acquired. It is not suggested that in every case of acquisition of land for the street this principle will break 1down. But having regard to the fact that in the course of widening the street the Corporation may have to acqu ire very .irregular, shapeless and small pieces of land for the purposes of the street, a host of principles may have to be employed to deter mine the comoensation. We asked learned counsel for the respon-

(1) [1969j(3) S.C.R. 341 at P. 357.

A

B

c

D

E

F

G

H

4

CORPORATION v. GUJARAT (Palekar, J.)

13

dents what one general principle of determination of compensa tion in such cases could have been approp1iately specified. We It appears to us that this very did not get any satisfactory reply. difficulty in specifying any known rule of compensation is respun sible for the wording of section 216 and section 389 of the Act which, in our opinion, gets over tlie difficulty by providing full indemnification {or the loss or deprivation suffered by the owner of the building or other interests in the property. We have refer red to the provisions with regard to appeals. The first appeal lies to the Judge of the Small Causes· courts and a second appeal to the Di<trict Judge. The involvement of Civil Courts in finally judicial norms. Since full determining compensation imports indemnification in accortlance with judicial norms is the goal set by the Act it is implicit in such a provision that the rules for deter mination of compensation-shall be appropriate to the property acquired and such as will achieve the goal of full indemnity against. In other words, the Act provides for compensation loss. to be determined in accordance with judicial principles by the employ ment of appropriate methods of valuation so that the person who loss. i& deprived of property is fully This, by itself, in our opinfon, is a specification of a principle for the determination of compensation.

indemnified against

the

B

c

D

As regards the manner of determination of compensation, it is provided in section 390 of the Corporations Act. Under that section the Commissioner or such other officer as may be authoris ed by him shall hold such enquiry as he tliinks fit and determine the amount of compensation to be paid. Either the Commissioner· or an Officer authorised by him has to hold an appropriate enquiry before determining the amount of compensation. Since, as already . seen. 1here is an app~al from such determination to the Judge of the Small Causes Court under section 391 and a second appeal to tlie District Court under section 411 it is clear that the enquiry must be made on broad judicial lines. Any arbitrary determina tion is bound to be set aside in appeal because the Judges in appeal will be chiefly concerned to see whether the enquiry is made i.1 accordance with nornrnl judicial procedures for evaluati~ the loss by the application of methods of valuation appropriate to 1he particular acquisition before them. Since no limitations are placed on the nowers of the Appellate Judges in determining the loss in a ju~t and a'.)!'ropriate manner, it is expected that the Commissioner or his authorised officer, who holds the enquiry in the first instance. will be guided bv nrincinles which meet with the aPnroval of the In our ooinion. therefore. th'e manner of A-mellate authorities. the determination of compensation is also specified by the Act.

£

F

G

II

It is conceded before us that if this Court holds that the Cor porations Act has provided for th.~ payment of compensation and

14

SUPREME COURT REPORTS

(19'73] l S.C.R.

aJso. specified the principle on which and the manner in which compensation is to be determined, it would not be possible to say that the Act is either in violation of the provisions of. section 299 of the Government of India Act, 1935 or Article 31 of the Consti tution.

Since the High Court had not considered the challenge to the validity of section 212 and the allied sections of the Act on the ground of infringement of fundamental rights under Article 14 and partially under Article 19. of the Constitution, and the foam ed counsel for both sides agree that the cases should be remanded to the High Court for disposal after considering the points raised in that regard, we send down the cases accordingly for disposal.

The ap11eals are allowed. The order passed by the High Court is set aside and the proceedings are or.d~red to b~ transmitted .to the High Court for disposal in accordance with th~ law after hear ing the parties on points kept open and undecid~d by the High Court in its Judgment dated 5-12-1966. The appellants shall get one set of costs from th.~ respondents other t:ian the State of Gujarat in this Court.

A

B

c

K.B.N.

Appeals allowed.