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Judgment
Balakrishna Ayyar, J.—The question for determination in all these writ petitions are the same and so we shall deal with them together.
The relevant facts are these. Investigations carried out by the Geological Survey of India revealed that large deposits of brown coal or lignite lay
in and around Cuddalore and Vriddhachalam Taluks in South Arcot District. The Government decided to mine this coal and for that purpose it
was necessary for them to get control over the lignite-bearing areas. Meantime speculators attempted to buy up lands in the area at low prices in
the expectation that prices would rise by the time Government decided to acquire the lands ; they hoped that they would be able to sell the lands to
the Government at a large profit. On 6th October, 1948, Government issued a Press Note which said inter alia:
To prevent such speculative dealings, the Government propose to undertake legislation reserving to themselves the power to compel any person
who has purchased land on or after a date (to be prescribed) in 1947 in the lignite-bearing areas to sell such land to them at the rate at which it
was purchased. The Government therefore advise the owners of the lignite-bearing lands in the Vriddhachalam and Cuddalore taluks not to
dispose of their lands to speculators.
One comment on this document may at once be made. It did not prohibit the construction of any buildings on any of the lands comprised in the
lignite area; it did not warn that legislation would be undertaken to prevent such building and finally it did not warn that no compensation would be
paid for any buildings that might be erected. Whether at that stage the Government had the power by order or notification to prevent the
construction of any building we need not stop to consider. It will be sufficient to mention that as a matter of fact no prohibition or warning was
issued against the construction of any buildings.
On 7th January, 1953, Government published the statement of objects and reasons relating to a Bill which subsequently became Madras Act XI
of 1953-Paragraph 2 of that statement runs a$ follows ;
It is apprehended that the prospect of acquisition of vast areas of private lands in connection with the lignite operations will give rise to speculative
dealings in lands in these areas. The quarrying operations at Neiveli will also lead many people to think of buying lands with a view to selling them
later to Government at higher prices. The Government have already warned the public against such speculative dealings by a Press Note, dated the
6th October, 1948. In the circumstances the Government consider it necessary to promote legislation to prevent speculative dealings in the lignite-
bearing lands by taking power for the Government to acquire these lands at the price that prevailed on the 28th April, 1947, when the first mining
operations were started in the area, providing at the same time for the payment of the value of any agricultural improvements effected on the lands
after that date up to the date of notice of acquisition. The acquisition will be made in accordance with the provisions of the Land Acquisition Act,
1894(Central Act I of 1894) subject to the modification specified above in regard to the valuation of the lands and to the further modification that
the urgency provisions of that Act will be applied for the acquisition of all lands required for this scheme. The Bill is designed to achieve this object.
This was the first warning that payment would not be made for buildings or improvements other than agricultural improvements. The Bill was duly
passed by the State Legislature, and, on 2nd June, 1953, it received the assent of the President. On 10th June, 1953, the Act was published and it
came into force on 20th August, 1953.
So far as is here relevant Madras Act XI of 1953 amended the Land Acquisition Act in two important respects. Section 11 of the Land
Acquisition Act directs the Collector to ascertain the value of the land at the date of the publication of the notification u/s 4(1) that is to say, the
date on which the Government notified that they considered that the land was needed or likely to be needed for a public purpose. Madras Act XI
of 1953 substituted the date, 28th April, 1947, for the date of the notification u/s 4(1) of the Land Acquisition Act. That was one change. The
other change was this. It di ected that compensation was payable only for agricultural improvements on the land commenced or made after 28th
April, 1947, and before, the date of the publication of the notification u/s 4(1) of the Land Acquisition Act. It was only for this class of
improvements that compensation was to be paid by the Collector. Compensation was denied for every other kind of improvement regardless of
their value and regardless of whether they had been lawfully made or not.
Gangaikondan village in Vriddhachalam Taluk is included in the schedule of villages appended to Madras Act XI of 1953. On various dates
between January, 1957 and May, 1957, Government issued notifications u/s 4(1) of the Land Acquisition Act in respect of the lands belonging to
the petitioners, or, in which they claimed some interest or other. Subsequently and during the same period Government issued declarations u/s 6 of
the Land Acquisition Act that the lands were needed for a public purpose. Thereafter and on various dates between May, 1957 and November,
1957, the Land Acquisition Officer passed his awards u/s 11 of the Land Acquisition Act.
In Writ Petition No. 1 of 1958 two fields are involved, viz-, S. No. 180/4C and 258/1B. For the former field the Land Acquisition Officer
awarded a compensation of Rs. 138 and for the latter a compensation of Rs. 938, but he refused to award any compensation in respect of the
buildings standing on the lands. In the affidavit which he filed in Writ Petition No. 1 of 1958 the petitioner alleged that after purchasing the land he
had raised its level at a cost of about Rs. 2,000 and that thereafter he had put up a hotel at a cost of Rs. 8,000 and also a building in which a rice-
mill is located, at a cost of Rs. 16,000.
The petitioner in Writ Petition No. 2 of 1958 alleged that he had put up constructions of the value of about Rs. 32,000.
The affidavit in Writ Petition No. 202 of 1958 was filed by a friend of the petitioner and therein he stated that the petitioner was a lessee of the
land from one Gopalaswami Naidu, and, that in or about 1952 the petitioner had constructed two buildings on the land at a cost of about Rs.
1,000. He is running a tea-stall in one of these and living in the other.
In Writ Petition No. 203 of 1958 the husband of the petitioner filed an affidavit stating that four houses costing Rs. 1,500 had been put up on
the land,
In Writ Petition No. 204 of 1958, the son of the petitioner filed an affidavit alleging that four buildings had been constructed at a total cost of
Rs. 1,500. He also stated that all the four buildings had been in existence from 1946.
The petitioner in Writ Petition No. 309 of 1958 alleged that the market price of the buildings standing on the land would be more than Rs.
30,000. In addition to buildings he had also put up two granaries at a cost of Rs. 1,000 and a cattle-shed at a cost of Rs. 500.
The petitioner in Writ Petition No. 373 of 1958 claimed that he had put up buildings as early as 1940 and that from time to time he had
effected improvements and repairs and that the market price of the buildings would be more than Rs. 3,500.
During the arguments, we were given a tabular statement from which it is clear that the existence of the buildings is not denied. It would,
however, appear from that statement that the value put on the buildings in the various affidavits filed is greatly exaggerated.
The first contention urged on behalf of the petitioners may be briefly disposed of. Mr. G.R. Jagadisan argued : We shall assume for the moment
that Madras Act XI of 1953 is valid and in accordance with the Constitution. It directs the Collector to enquire into the value of the land as on
28th April, 1947. This date applies only to the value of the land and not to the condition of the land on that date so that if even after that date
improvements have been made on the land, they must be paid for. In answer to this argument it is sufficient to say that the words used in the Act
will not bear the distinction between the value of the land and the condition of the land on which Mr. Jagadisan laid emphasis. "" Land "" is defined in
Section 3(a) of the Land Acquisition Act in these terms.
The expression '' land '' includes benefits to arise out of land, and things attached to the earth or permanently fastened to anything attached to the
earth.
The expression "" value of the land on the 28th April, 1947 "" occurring in Madras Act XI of 1953 would, therefore, apply only to the land as it
stood on that date. It would apply both to the condition of the land and the value of the land. Whatever scope for argument may have otherwise
existed, is shut out by the specific provision that enquiry shall be made into the value of any agricultural improvements made on the land between
28th April, 1947 and the date of the notification u/s 4(1) of the Land Acquisition Act. By necessary implication this means that the Act directs that
no compensation should be paid for any other form of improvement.
16.The next objection urged on behalf of the petitioners is more substantial, and it brings us to the real question raised in these petitions, viz.,
whether the provision made in Madras Act XI of 1953 that compensation for the land need be paid only on the basis of its value on 28th April,
1947 and that no compensation need be paid for improvements other than agricultural improvements made thereafter is repugnant to the
Constitution or not.
The argument of Mr. Jagadisan on this part of the case may be thus summarised. Article 31(2) of the Constitution requires that any law
providing for the acquisition of any property should either itself fix the compensation for the property or lay down the principles in accordance with
which the compensation can be computed. When in effect Madras Act XI of 1953 directs that the value of the buildings and other non-agricultural
improvements which the petitioners have made on their property shall not be taken into account in assessing the compensation, what the Act really
says is that those buildings and improvements shall be taken over by the Government without payment of any compensation at all. The Act,
therefore, contravenes Article 31(2) and is therefore bad.
There is no fairness in this either. When the Government published their Press Note, they issued no warning against the construction of any
building or the making of improvements. All the warning that they gave was against speculative dealings in property.
Not merely that. Madras Act XI of 1953 directs that compensation shall be paid on the basis of the value of the land as on 28th April, 1947.
This is a date which has no bearing on the value of the land at the time it was acquired. It is a wholly irrelevant circumstance. Since that date the
value of the land, leaving out all speculative elements, may have gone up owing to quite legitimate causes. To deprive a person of the value that has
accrued to his property owing to natural and lawful causes is also unconstitutional.
Mr. Jagadisan next referred to various passages in Rottschaefer on Constitutional Law, 1939 edition. On page 718, the learned author says:
The measure of just compensation is the fair value of the property taken as of the time of its taking. The compensation must be paid in money
unless the owner of the property is willing to accept payment in some other form.
From this it is clear that compensation must be the fair value of the property and that value must be ascertained as at the time of the taking. And, on
page 719, it is stated:
It is beyond the purview of this text to discuss in detail the numerous matters involved in determing the fair value of the property taken. The
Constitution does not require payment of purely speculative values, nor values based on the adaptability of the property for the uses for which it is
being taken unless these are reflected in the market price that would be offered in a private sale. It is necessary to consider only those factors
affecting value which are reflected in the market value of the property at the time it is taken. In estimating such value consideration may not be given
to the fact that the property could be acquired by eminent domain. If the property taken consists of land, the value of growing crops thereon must
be taken into account in estimating its value. The fact that the property consists of timber or mineral lands must be considered so far as their
presence has affected the market value, but the timber and minerals need not be separately valued. It is the general rule that injury to a business
carried on upon lands taken for public use does not constitute an element in just compensation. The foreging general principles define the minimum
constitutional requirements, but there is nothing in either the Federal or State Constitutions prohibiting compensation in excess thereof.
It will be noticed, that the word used in Article 31(2) of the Constitution is ""compensation"" and not ""just compensation"". But the omission of the
adjective ""just"" does not alter the meaning of the word ""compensation"", and, as we shall presently explain, the absence of the adjective does not
permit the State Legislature to fix arbitrary amounts as compensation, or, lay down arbitrary or irrelevant rules in accordance with which the
computation is to be determined.
Mr. Jagadisan also referred to The State of West Bengal Vs. Bela Banerjee and Others, . The Legislature of West Bengal had passed an Act,
XXI of 1948, directing that in respect of lands acquired for the settlement of Immigrants from East Bengal the compensation payable should not
exceed the market value of the land on December 31, 1946. The High Court of Calcutta held that this provision was void. The Supreme Court
confirmed that view. Patanjali Sastri, C.J., ruled:
It is argued that the term '' compensation '' in Entry 42 could not mean full cash equivalent, for then, the power conferred on the legislature to lay
down the principles on which compensation is to be determined and the form and the manner in which such compensation is to be given would be
rendered nugatory. On the other hand, the entry showed that compensation to be '' given '' was only '' such compensation '' as was determined on
the principles laid down by the law enacted in the exercise of the power, and, as the concluding words used in Article 31(2) are substantially the
same as in the entry, the Constitution, it was claimed, left scope for legislative discretion in determining the measure of the indemnity.
We are unable to agree with this view. While it is true that the legislature is given the discretionary power of laying down the principles which
should govern the determination of the amount to be given to the owner for the property appropriated, such principles must ensure that what is
determined as payable must be compensation, that is, a just equivalent of what the owner has been deprived of. Within the limits of this basic
requirement of full indemnification of the expropriated owner the Constitution allows free play to the legislative judgment as to what principles
should guide the determination of the amount payable. Whether such principles take into account all the elements which make up the true value of
the property appropriated and excluded matters which are to be neglected, is a justiciable issue to be adjudicated by the Court. This, indeed, was
not disputed.
It will be noticed that in one respect the Bengal Act did not go even so far as Madras Act XI of 1953. The Bengal Act did not deny the citizen
compensation for the value of the improvements that he had effected after 31st December, 1946, whereas the Madras Act denies compensation
for all non-agricultural improvements made after 28th April, 1947. The relevant provision of the Bengal Act directed that the value was to be
computed
on the assumption that the land had been at the date in the state in which it in fact was on the date of publication of the said notification.
Nevertheless, that provision was held invalid. In 1948, an Act called the Resettlement of Displaced Persons (Land Acquisition) Act was passed by
the Punjab Legislature. It provided that the market value of the property
shall be deemed to be the market value of such land on the date of publication of the notice u/s 3 or on the 1st day of September, 1939, with an
addition of 40 per cent, whichever is less.
The validity of this Act was questioned and the Punjab High Court in Than Singh v. Union of India AIR 1955 Punj. 55, had no difficulty in holding
that the fixation of an arbitrary date was repugnant to the Constitution. The Court observed:
There can be no doubt that the arbitrary fixing of the dates in the provisos will inevitably result in the payment of less than just compensation to the
owners. There appears to be no justification why the compensation should not equal the market-value of the land on the date on which the
notification u/s 3 is issued.
The learned Judge then referred to the decision of the Supreme Court, which we have already cited and ended:
These observations apply to the provisos to Section 7(1)(e) of Act LX of 1948 with equal force and applying the principle laid down by their
Lordships I must hold that provisos to Section 7(1)(e) are ultra vires the Constitution.
In 1948 the Legislature of the United Provinces passed an Act for the acquisition of land for the rehabilitation of refugees from Pakistan. That Act
provided that
the market value referred to in clause first of the said Sub-section shall be deemed to be the market value of such land on the date of publication of
the notice u/s 7 or 9, as the case may be, or on the first day of September, 1939, whichever is less.
The validity of this Act was questioned in H.P. Khandewal and Another Vs. State of Uttar Pradesh and Another, and the Allahabad High Court
observed:
The properties in dispute of five of the petitioners were acquired by them after 1st April, 1948 and therefore the compensation payable to them
under the Act is limited to the market value of the property on 1st September, 1939. It needs, we think, no argument to show that such payment is
not compensation within the meaning of Article 31(2) or Section 299(2).
In 1951, the Legislature of Bihar passed an Act called the Kosi Area (Restoration of Lands to Raiyats) Act, 1951. The purpose of the Act
was to provide for the restoration to former ryots of lands which had been sold for arrears of rent or from which they had been ejected for arrears
of rent or which were treated as having been abandoned by them, between 1939 and 1950. That Act empowered the Collector to acquire the
lands. The compensation payable was to be ascertained with reference to the amount mentioned in the sale proclamation for the realisation of
which the holding or part there of was sold, or the amount of the arrears of rent and interest thereon for non-payment of which ejectment was
ordered and other similar matters. In addition the Collector was directed to ascertain the cost of improvements, if any had been effected on the
holding after the concerned ryot had lost possession. On the question whether these provisions were in conformity with the Constitution, in Chhaya
Devi and Others Vs. State of Bihar and Others, , the Patna High Court ruled:
The argument presented on behalf of the petitioners is that the statute contravenes the constitutional guarantee under Article 31(2). It was
submitted by Mr. B.C. Ghosh that the fixing of compensation u/s 7(2) is arbitrary and cannot be regarded as due compliance with the requirements
of Article 31(2). It was contended that the Act was a permanent enactment and lands may be acquired under it many years after it had come into
force. It was argued that compensation was fixed u/s 7(2) of the Act with reference to the date of sale of the holding in execution of the rent decree
or with reference to the date of settlement of the holding by the landlord with the third party.
It was submitted that the compensation should be fixed with reference to the value of the land at the time of the restoration to the raiyat in
pursuance of the order passed by the Collector under Sections 3 and 7 of the Act. The argument advanced on behalf of the petitioners was based
upon the decision of the Supreme Court in the The State of West Bengal Vs. Bela Banerjee and Others, . In my view the argument presented by
the learned Counsel for the petitioners is well founded. The present case is directly covered by the decision of the Supreme Court in The State of
West Bengal Vs. Bela Banerjee and Others, , and it must be held that the provisions of Article 31(2) of the Constitution have been violated.
On behalf of the Government it was argued in that case that the Act was saved by the amendments made to the Constitution in 1955. But that
contention was also overruled.
This decision was followed by the Patna High Court in the following year in the case reported in Julius Oraon and Others Vs. Mt. Saniaro and
Others, .
In these circumstances Mr. Jagadisan contended that the provision made in Madras Act XI of 1953 for the payment of compensation is bad
and unconstitutional.
The learned Advocate-General argued that the fact had been widely published and that everybody concerned in the locality knew that
Government intended to acquire these lands, that after such acquisition the lands would be dug up and that if knowing that anybody constructed
buildings he cannot complain if he is not paid the value of those buildings. No doubt most people in the locality did probably know that their lands
were liable to be acquired, but nobody could have said when any particular plot of land would actually be acquired. It may be acquired at once,
or, it may not be acquired for several years, and, in fact, a particular plot of land may not be acquired at all. Merely because at some future time
Government may want to acquire a piece of land they have no right to insist that the owner thereof should not deal with it as the law permits him to
do. If the view put forward on behalf of the Government on this part of the case were right, a ryot who has got only a thatched roof over his house
would be precluded from tiling it. He would be also precluded from converting his mud-hut into a brick one. If his family increased it would not be
permissible to him to add an extra room or two. If he did any such thing and subsequently Government decided that the land was necessary for the
purpose of their projects, they would be entitled to take over the property without paying compensation for the improvements that had been
properly and lawfully effected. All legal considerations apart, it is difficult to see any fairness in a rule that produces such a result.
It will be appreciated that from a strictly legal point of view, this aspect of the matter on which the learned Advocate-General placed some
emphasis is hardly relevant. At the time the various individuals concerned put up their buildings, there was no legal prohibition against their doing
so. The persons concerned were entitled to put up those buildings. Those buildings became part of their property and they can properly insist that
when such properties are taken away from them the requirements of the Constitution should be complied with. After all they had done nothing that
entails the penalty of forfeiture.
The learned Advocate-General next said that Government have made elaborate provisions for resettling the villagers whose lands and
homesteads might be acquired, that various concessions have been provided for them in that regard, and that the persons who have put up
buildings, or several of them, are outsiders who wanted to make quick profits out of boom conditions.
This argument too leads nowhere. It may be as the learned Advocate General explained that Government have made very commendable
provisions to house the persons who might be displaced by the implementation of their mining schemes. But, this is not an answer whatever to the
claim of the petitioners. They are entitled to say : it may be all right as regards the rest, but, what about our lawful rights? It is no consolation to
Peter to know that the money taken from him would benefit Paul. The petitioners may be outsiders to the locality, but, they are not enemy aliens.
They are citizens of the Indian Union and entitled to the protection of the Constitution. If they attempted to utilise the prevailing conditions to earn a
living or to make profits for themselves they set about the work in a manner authorised by the law. Their enterprise in every case was lawful.
Lawful enterprise is not banned by the Constitution.
31 The learned Advocate-General next said that Madras Act XI of 1953 had been reserved for the consideration of the President and had
received his assent under Article 31(3) of the Constitution. But, from this it does not follow that Courts are precluded from considering whether the
Act offends against any of the provisions of the Constitution. At the time the Constitution was framed apprehensions were possibly entertained
about the manner in which some legislatures might be tempted to use their power in relation to the acquisition of property, and, the provision
requiring that the Bill relating to the acquisition of property for a public purpose should be reserved for the consideration of the President and that it
shall not take effect until it had received his assent, appears to be intended as a preliminary safeguard against hasty or ill-considered legislative
activity. Nowhere in the Constitution is it stated that the assent of the President shall be conclusive proof that the requirements of the Constitution
have been complied with. The position here is this. Unless the President gives his assent no part of the law can take effect at all. But a subsequent
scrutiny before the Courts to determine whether any particular provision or set of provisions offends against any particular Article of the
Constitution is not barred. It may be pointed out here that Clause (4) of Article 31 contains a provision to the effect that the laws
so assented to shall not be called in question in any Court on the ground that it contravenes the provisions of Clause (2).
But, there is no such provision in Clause (3) of Article 31.
The learned Advocate-General next said that there is no evidence to show that the price of land in April, 1947, was materially lower than the
price prevailing in 1957 and that before the Land Acquisition Officer no objection was taken to the properties being valued as on 28th April,
1947.
Now, the writ jurisdiction of this Court is circumscribed in various ways and is subject to various limitations. One of these is that when
exercising such jurisdiction it cannot investigate disputed issues of fact. Whether the price of Immovable property in Gangaikondan village in 1947
was materially lower than the price in 1957 is a question of fact, and, not a matter which we can investigate here. But the point remains that the
date fixed in Madras Act XI of 1953 has no relevancy whatever to the value of the property at the time of its acquisition. It may have been entirely
different if the direction given in the Act had been to ignore transactions which were purely speculative in character. But, this is not what the Act
directs. It directs that the price shall be fixed with reference to a date which is entirely irrelevant.
Commenting on the decision in the The State of West Bengal Vs. Bela Banerjee and Others, the learned Advocate-General pointed out that it
was given before the Constitution was amended in 1955 and therefore that decision and the others that followed it are not at present wholly
applicable. But, this is not entirely so. They are inapplicable to the extent that they decided that the question of the adequacy of the compensation is
justiciable, but they do not cease to be applicable in other respects. In particular the view expressed by the Supreme Court as to what constitutes
compensation--we have already extracted the relevant passage above--still very fully and firmly occupies the field. The rule laid down in the
decisions that it is not competent to the Legislature to direct that the value of property acquired for a public purpose shall be ascertained with
reference to an anterior and irrelevant date stays and continues to be good law.
There was a certain amount of argument whether the amendment made to the Constitution in 1955 is retrospective in its operation or not. We
do not think it necessary to go into this matter because the effect of the amendment made in 1955 is to preclude the Courts from going into the
adequacy of the compensation provided. But, that amendment does not preclude the Courts from considering whether what is called compensation
is really compensation and whether what are claimed to be principles on the basis of which the compensation is to be computed are really
principles of the kind envisaged in Article 31(2) of the Constitution.
The learned Advocate-General next argued that it is open to the Legislature to append to its Act a schedule specifying the particular amounts
of money payable in respect of a particular piece of land and that the Courts would be precluded from questioning its adequacy. Now, if the
legislature can do that, he continued, it can lay down principles by which the same result can be produced. He also mantained that it would be
permissible to the legislature when making provision for the acquisition of land to direct that compensation need be paid only, say, in respect of two
cents of land even though a very much larger extent might be acquired and, that the Courts are precluded from going behind these matters.
It will be realised that if this position for which the learned Advocate-General contended is accepted, a very important safeguard incorporated
in the Constitution in respect of property would plainly and definitely cease to exist. It is not to be supposed that in so important a document as the
Constitution of the country its framers intended to write empty words. Wise in their way, they considered it necessary to provide certain safeguards
for private property and to prevent such property being arbitrarily taken away under the guise of legislative or executive power. One such
safeguard was incorporated in Clause (2) of Article 31 of the Constitution. As it originally stood the clause required that any law providing for the
acquisition or taking over of private property for a public purpose should either fix the amount of the compensation or specify the principles on the
basis of which the compensation could be computed. The words used in the Article are compensation and principles, and, to these two words we
shall have to refer again.
The question whether the compensation was adequate or not, and, whether the principles were just and reasonable or not, remained justiciable
till the amendment made to the Constitution in 1955 added the following words to Clause (2) of Article 31
and no such law shall be called in question in any Court on the ground that the compensation provided by that law is not adequate.
The effect of the amendment was to substitute the discretion of the legislature for the discretion of the Courts in deciding the question whether the
compensation provided for was adequate or not. Whereas prior to the amendment Courts could rule that the compensation provided in the Act
was inadequate they could not do so thereafter. The citizen has to be content to accept the compensation provided by the Legislature in the
relevant statute. Be it noted, however, that it is compensation which the statute has to make provision for.
The amendment made to the Constitution in 1955 did not change this clause in the Article in any other way. The original requirements (1) that
compensation should be paid for the property, and (2) that the Statute should specify the amount of the compensation or the principles in
accordance with which the compensation could be ascertained, were not taken away. They still remain in the Constitution in the same sense in
which they stood before 1955.
The Shorter Oxford English Dictionary explains that the word ""compensation"" is formed by combining com and pensare, or pendere meaning
weight. Compensation therefore means to counterbalance, to be an equivalent, to make equal return to, etc. The fact will bear repetition that when
the Constitution was amended in 1955 the idea of an equivalent which is implied in the word ""compensation"" was not given up or abandoned. The
amendment did not delete the word ""compensation"" and substitute any other word like ""price"" or ""consideration"" or ""solatium"" in its place. The
amendment did not do away with the idea of an equal return. Only it was provided that it was for the Legislature to determine what the exact
equivalent should be. As we have mentioned earlier in The State of West Bengal Vs. Bela Banerjee and Others, the Supreme Court stated in
unmistakable terms that the principles referred to in Clause (2) of Article 31
must ensure that what is determined as payable must be compensation, that is, a just equivalent of what the owner has been deprived of.
When after this authoritative pronouncement had been made the Constitution was amended and still the word ""compensation"" was retained and not
replaced by another word, the conclusion cannot be resisted that the Constitution continues to retain its insistence that a citizen should be paid a
just equivalent of the property which is taken away from him. In relation to any property ""compensation"" therefore means the exact equivalent of
that property, in money or other form of property.
On the question what is the exact equivalent, reasonable men may honestly differ and the field of difference may indeed be very wide. For
example, one expert may value an article or an item of Immovable property at say Rs. 5,000 ; a second may put it at Rs. 7,000 and a third may
put it at Rs. 4,000. But, a stage is reached beyond which the scope for honest difference of opinion or estimate ceases to exist; and when what is
offered for the property taken away is less than this, it will no longer be possible to say that what is offered is compensation in any sense of the
word. If, for example, Government were to decide to acquire a row of buildings on Mount Road or Esplanade and offer a payment of Rs. 100 for
Dare House"" or the Mysore Bank building nobody would call that compensation; and this fact will not be altered by the figure of Rs. 100 being
inserted in the schedule to an Act passed by the State Legislature. But, this is exactly what the contentions on behalf of the Government now come
to.
Before any payment can be properly described as compensation, the amount preferred must be such that a fair and reasonably minded person,
uninfluenced by extraneous considerations, can honestly say--subject of course to legitimate allowance or latitude for difference of opinion--that it
is a fair equivalent. We would repeat again that this requirement about a fair equivalent has not been abrogated by the amendment made to the
Constitution in 1955.
Various elements, some of them quite imponderable, often enter into the computation of the value of any given property. Difference of opinion
may also arise on the question whether certain elements should or should not be taken into account in computing compensation. Some of these
matters are referred to in Rot Schaefer on Constitutional Law. See for instance the observations on page 720.
It is a practically universal rule that when part of a given tract of land is taken just compensation includes not only the value of the part taken but
also damages to the remainder. It does not, however, include damages thereto resulting from the use of the adjoining lands of other''s taken for the
same undertaking as that for which his were acquired. It frequently happens that the appropriation of a part results in benefits to the remainder
because of the uses made of the part that is taken. The question whether, and to what extent, these benefits may be considered in determining just
compensation has been much considered. Their consideration can only reduce what would otherwise constitute just compensation. A rule that
made no adjustment for them would raise no constitutional issue. This could arise only so far as benefits were permitted to some extent to offset
what would otherwise be just compensation. There exists a great diversity of opinion on this point. It is held in some States that special benefits to
the retained property may be set off against damages to the latter, but not against the value of the land actually taken; in others that both special
and general benefits may be set off to that extent ; in others that special benefits may be set off against both damages to the part retained and the
value of that taken ; and in others that both special and general benefits may be set off to that extent.
44 As a result of the amendment made in 1955 the legislature received the fullest measure of discretion in dealing with and providing for the diverse
factors that enter into the computation of the price of property. But, having said all this, and, after making every permissible allowance for genuine
differences of opinion, it must still be possible to say that what the Act provides is compensation, and, when as we have already explained, the
stage is reached when it becomes honestly impossible to say that, the conclusion must follow that the Act does not provide for payment of
compensation and therefore does not conform to the requirements of Clause (2) of Article
45 Instead of itself fixing the quantum of compensation for the property to be acquired it is competent to the legislature to specify the principles in
accordance with which the compensation is to be ascertained. But, then, they must he principles, that is to say, rational rules appropriate to the
subject-matter and not devices or formulae compounded of irrelevant considerations. Besides, these principles must be truly designed to ascertain
the proper amount of compensation. They must not be framed with other or ulterior objectives. If we spend some time turning the matter over in
our minds it will become apparent that quite a few ideas are packed into the words, ''the principles on which compensation has to be determined''.
Various matters are here implicit. First, the principles must be appropriate to the nature of the property to which they are applied. If, for example,
the statute were to say that a luxury liner which has just been launched is to be valued as if it were so many tons of firewood, no one will have any
difficulty in saying that it is not a principle at all. Again if the statute were to say that diamonds and sapphires are to be valued as if they constituted
so many oysters, the same comment, that it is not a principle of valuation would be unanimously assented to. These are no doubt extreme
illustrations, but, they will bring out the full force of the criticism that lands on which buildings stand cannot be valued as if they were solely
agricultural lands.
The next idea that is implicit in the words ''principles in accordance with which compensation is to be determined'' is that they must be
applicable to the time at which the property is being acquired. If for any particular reason it is considered expedient to fix a date, that date must be
reasonably proximate to the date of acquisition and must not be fixed with a view to avoid payment for rights or interests that a citizen may have
lawfully acquired in the property which is being taken away for public use. At this stage too we may perhaps give an extreme illustration. If for
example the State Legislature were to pass an Act enabling the acquisition of a property in George Town and were to direct that the price of the
property shall be computed as on the date when the Raja of Chandragiri made a grant to the East India Company of the site on which Fort St.
George now stands, that would not be a principle by which the compensation can be determined : it would be only a device for confiscation.
Finally, the principles relating to the computation of compensation must deal with or cover the whole property that is being acquired and not
merely a portion of it. If for example the property that is being acquired is a tea or coffee-garden, or a plantation consisting of teak or other
valuable hard-wood trees, the principles, if any, laid down in the Act must include provision for compensation in respect of the tea or coffee bushes
and the timber--though they need not be separately valued. To refuse to pay for them and to provide for payment for only the bare land would be
like paying only for a pack-animal and insisting on the delivery of the silks, spices, bullion and jewellery that may have been loaded on the animal''s
back. Legislation which in fixing the principles of compensation refuses to take into account valuable accretions to the property, or, which fixes
dates which are not appropriate to the matter would come perilously close to a fraudulent exercise of power. The legislature of course must be
vigilant against waste of public funds ; but, at the same time, it has no power to confiscate.
In effect, what Madras Act XI of 1953 says is this. No compensation shall be provided for improvements made after 28th April, 1947, unless
they are agricultural improvements. The value of the property shall be determined as on 28th April, 1947. As we explained, it is impossible to
regard these injunctions as principles on the basis of which compensation can be computed. They are more in the nature of devices to refuse
compensation. This provision in the Act offends against Clause (2) of Article 31 of the Constitution, and, it is therefore unconstitutional.
The awards passed on the basis of this provision in the Act cannot therefore be sustained and they are quashed so far as the petitioners are
concerned. It will be open to the Land Acquisition Officer to pass revised awards in conformity with the requirements of Act I of 1894 and without
regard to these amendments made in that Act by Madras Act XI of 1953 which we have held to be bad.
There will be no order as regards costs.