Makhan Lal Malhotra And Others vs The Union Of India

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Petition No. 44 of 1958

Decision Date: 27 October 1960

Coram: J.L. Kapur, Bhuvneshwar P. Sinha, P.B. Gajendragadkar, K.N. Wanchoo

In the case titled Makhan Lal Malhotra and others versus the Union of India, the Supreme Court delivered its judgment on 27 October 1960. The opinion was written by Justice J. L. Kapur and was heard by a bench consisting of Justice J. L. Kapur, Justice Bhuvneshwar P. Sinha, Justice P. B. Gajendragadkar and Justice K. N. Wanchoo. The petitioners were a group of displaced persons who had come from West Pakistan and who had made claims for their village houses that they had left behind. Their claims were rejected by the rehabilitation authorities. For some petitioners the claimed amount exceeded Rs 20,000 and for the others it exceeded Rs 10,000. Under Rule 5 framed under the Displaced Persons (Claims) Supplementary Act, 1954, a claim could be verified only if, among other conditions, the claimant had been allotted agricultural land in India whose size determined the minimum value of the building: where the allotted land was more than four acres, the building’s assessed value could not be less than Rs 20,000; where the allotted land was four acres or less, the assessed value could not be less than Rs 10,000. Rule 65 of the Displaced Persons (Compensation and Rehabilitation) Act, 1954, reinforced the same limitation, providing that a person allotted more than four acres could not receive separate compensation for a rural building valued at less than Rs 20,000, and a person allotted four acres or less could not receive compensation where the building’s value was below Rs 10,000. The petitioners challenged the validity of these rules on the ground that they were discriminatory and therefore violated Article 14 of the Constitution, arguing that the classifications were not based on an intelligible differentia and that there was no rational nexus between the classification and the objective of rehabilitation. The Court observed that the contested rules were made pursuant to an Inter‑Dominion Agreement between the two Governments concerning the evaluation of evacuee property, an agreement that received recognition under Article 31(5)(b)(iii) of the Constitution. After examining the source and purpose of the rules, the Court held that the classifications embodied in the rules had a reasonable justification, were connected to the purpose of the legislation, and consequently did not contravene Article 14. The judgment cited the reports 1961 AIR 392 and 1961 SCR (2) 120, and noted that the case had been referenced in later reports including 1963 SC 181, 1978 SC 747, and 1978 SC 771.

In this matter the original jurisdiction was invoked through Petition No. 44 of 1958, filed under article 32 of the Constitution of India for the enforcement of fundamental rights. The petitioners were represented by counsel named Naunit Lal and Gopal Singh, while the respondent was defended by the Additional Solicitor‑General of India, H. N. Sanyal, assisted by N. S. Bindra, K. R. Choudhri and R. H. Dhebar. The judgment dated 27 October 1960 was delivered by Justice Kapur. The petitioners, who were displaced persons originally from West Punjab—now part of West Pakistan—had resettled in various locations across India and sought a writ of mandamus against the respondent. Their purpose in invoking the writ was to obtain verification of the claims they had advanced concerning village houses they had abandoned in West Pakistan and to secure compensation for those claims. The petitioners asserted that their claims, which had been examined and ultimately rejected by the rehabilitation authorities, involved sums exceeding rupees 20,000 in the cases of petitioners identified as numbers 1 and 2. Although the specific villages and properties were not detailed in the judgment, it was noted that the claims related to multiple village houses left behind. The petitioners challenged the constitutional validity of two specific provisions: Rule 5 of the Displaced Persons (Claims) Supplementary Act, 1954 (Act 12 of 1954), and Rule 65 of the Rules framed under the Displaced Persons (Compensation and Rehabilitation) Act, 1954 (Act 44 of 1954). Their challenge was premised on an alleged violation of article 14 of the Constitution, contending that the classifications made by those rules were arbitrary and discriminatory. The Court observed that, before addressing the constitutional issue, it was essential to set out the legislative framework governing the verification of displaced persons’ claims and the award of compensation. Accordingly, the Court recalled that on 1 April 1948 the East Punjab Refugees (Registration of Claims) Act, 1948 (East Punjab Act 8 of 1948) was enacted, followed shortly by the East Punjab Refugees (Registration of Land Claims) Act, 1948 (Act 12 of 1948). The later Act defined “land” in section 2(b) as land that is not occupied as the site of any building in a town or village, is used or let for agricultural purposes, for purposes ancillary to agriculture, or for pasture, and also includes the sites of buildings and other structures situated on such land. Moreover, section 2(a) of that statute defined “claim” as a statement of loss or damage suffered by a refugee since 1 March 1947 with respect to his land situated in the territory now comprising the province of Punjab in Pakistan, the North West Frontier Province, Sind, or Baluchistan, or in any State adjoining those provinces and acceding to Pakistan. Section 4(1) of the same Act then provided the procedure for the submission and registration of such claims.

In November 1949 the legislature of East Punjab enacted the East Punjab Displaced Persons (Land Settlement) Act, identified as Act 36 of 1949. Section 2(b) of that statute provided a definition of the term “allottee”. Section 2(d) defined “land” in a manner that differed slightly from the definition contained in the earlier East Punjab Act 12 of 1948. The definition set out in section 2(d) read as follows: “Land means land which is not urban land and is not occupied as the site of any building in a town or village and is occupied or let for agricultural purposes or for purposes subservient to agriculture or for pasture and includes—(i) the sites of buildings and other structures on such land.” A few months later, on 18 May 1950, the Central Legislature passed the Displaced Persons (Claims) Act, designated as Act 44 of 1950. Within that Act, section 2(a) defined “claim” as “the assertion of a right to the ownership of, or to any interest in—such class of property in any part of West Pakistan other than in any urban area as may be notified by the Central Government in this behalf in the Official Gazette.” This Act remained operative for a period of two years before it lapsed. Pursuant to section 2(a)(ii), the Central Government issued a notification on 27 May 1950 specifying the categories of property for which claims could be lodged. The notification listed three classes: (1) any immoveable property in West Pakistan that formed part of the assets of an industrial undertaking and was situated outside an urban area; (2) any other immoveable property in West Pakistan consisting of a building located in a non‑urban area, provided that the estimated construction cost of the building, calculated at prevailing rates, was not less than Rs 20,000; and (3) any agricultural land situated in any part of West Punjab.

The effect of the May 1950 notification was to restrict claimants to submitting claims only with respect to buildings in rural locations whose estimated construction cost met the Rs 20,000 threshold; no comparable monetary restriction was placed on claims involving urban property. On 13 September 1950 the government issued a subsequent amendment that revised clause (2) of the earlier notification. The revised clause read: “Any other immoveable property in West Pakistan comprising a building situated in an area other than an urban area; provided that where the person making the claim has been allotted any agricultural land in India (a) where the agricultural land so allotted exceeds four acres, the value of the building for which the claim is made shall not, according to the present estimated cost of construction, be less than Rs 20,000; (b) where the agricultural land so allotted is four acres or less, the value of the building for which the claim is made shall not, according to the present estimated cost of construction, be less than Rs 10,000.” The amendment was accompanied by explanatory notes labeled Explanation 1 through Explanation 11, which clarified the application of the new valuation thresholds in relation to the size of agricultural land allotted to claimants.

For the purpose of the clause, the Court held that a person was to be regarded as having been allotted agricultural land in India if such land had been allotted to him in any manner, whether on a temporary basis or on a quasipermanent basis. On 23 March 1954, Parliament enacted the Displaced Persons (Claims) Supplementary Act, 1954 (Act 12 of 1954) and authorised the preparation of rules under that Act. Rule 5, issued pursuant to that authority, stipulated that the categories of property for which claims could be verified under the rules were the same as those under the principal Act and its accompanying rules. The rule identified three classes of immovable property: first, any immovable property situated within an urban area of West Pakistan; second, any immovable property in West Pakistan that formed part of the assets of an industrial undertaking and was located outside an urban area; and third, any other immovable property in West Pakistan consisting of a building situated outside an urban area. The rule further provided that where a claimant had been allotted agricultural land in India, the value of the building for which the claim was made could not be less than Rs 20,000 if the allotted agricultural land exceeded four acres, and could not be less than Rs 10,000 if the allotted agricultural land was four acres or less, based on the present estimated cost of construction. Explanation II was drafted in the same terms as the notification dated 13 September 1950.

Subsequently, on 9 October 1954, Parliament passed the Displaced Persons (Compensation and Rehabilitation) Act, 44 of 1954, hereinafter referred to as Act 44 of 1954. Section 2(a) of that Act defined the compensation pool that was to be constituted under section 14. Section 2(e) defined the term “verified claim” to mean any claim registered under the Displaced Persons (Claims) Act, 1950 (44 of 1950) for which a final order had been issued either under that Act or under the Displaced Persons (Claims) Supplementary Act, 1954, but expressly excluded the application for payment of compensation provided for in Section 4. Section 7 dealt with the determination of the amount of compensation, while section 40 authorized the making of rules. The rules under this Act were issued by notification No. S.R.O. 1363 on 21 May 1955. Rule 2(h) defined “urban area” and Rule 2(f) defined “rural area” as any area that was not an urban area. Rule 16 set out the scale of compensation, which was detailed in Appendix 8 or Appendix 9. Under Rule 18, compensation was to be calculated on the total value of all claims, encompassing all types of property other than agricultural land left by claimants in West Pakistan. Finally, Rule 44 addressed the allotment of acquired evacuee houses in rural areas as an alternative to monetary compensation.

In this matter the Court examined the provisions that governed the allocation of houses and the payment of compensation to displaced persons who had been allotted agricultural land in rural areas. Under subsection three of the relevant rule the houses situated in rural areas were assigned a grade. Rule forty‑seven then stipulated that any payment of compensation could be made only after applying rule sixty‑five. Rule fifty‑seven dealt specifically with the allotment of a house in addition to agricultural land. The rule stated that a displaced person who possessed a verified claim for agricultural land, who had settled in a rural area and who had been allotted such land, would receive a house according to the following scale: (1) if the land allotted was up to ten standard acres, the house would be graded as “H”; (2) if the land allotted exceeded ten standard acres but did not exceed fifty standard acres, the house would be graded as “G”. The rule further provided that if the claimant already held a verified claim for any rural building and that claim had been satisfied either wholly or partially before the land was allotted, then the provisions of rule sixty‑five would not apply to that claimant; however, such a claimant would not be entitled to the allotment of a house or a site and building grant in lieu of the building. Explanation one clarified that where no house was available in the same village, an allottee could be granted a site and building grant as follows: (a) if the allotted agricultural land did not exceed ten standard acres, the allottee would receive a site measuring four hundred square yards together with a building grant of four hundred rupees; and (b) if the allotted land exceeded ten standard acres but was not more than fifty standard acres, the allottee would receive a site measuring six hundred square yards together with a building grant of six hundred rupees. Explanation two explained that the reference to grades in this rule corresponded to the grades of houses specified in rule forty‑four. Rule sixty‑one addressed the situation where a person refused to accept an agricultural land allotment. It provided that if any person declined to accept the allotted land, the claim for compensation of that allottee would be considered satisfied to the extent of the value of the land, and the land would become available for allotment to another claimant. The impugned rule sixty‑five was then set out as follows: (1) any person who had been allotted more than four acres of agricultural land would not be entitled to receive separate compensation for any verified claim relating to a rural building whose assessed value was less than twenty thousand rupees; (2) any person who had been allotted four acres or less of agricultural land would not be entitled to receive separate compensation for any verified claim relating to a rural building whose assessed value was less than ten thousand rupees.

The petitioners argued that the purpose of the various Acts and the rules made thereunder was to rehabilitate displaced persons, but the rules created a classification that was discriminatory. They contended that the classification was not based on any intelligible difference and that there was no rational connection between the categories and the objective of rehabilitation. According to their submission, the classification involved (1) a division between urban and rural populations; (2) a division between refugees from rural areas who owned land and those who owned only rural houses; and (3) a division between persons who had quasi‑permanent allotments and those who had permanent allotments. The petitioners maintained that such distinctions lacked a logical basis and therefore violated the principle of equality embodied in the constitutional framework.

In the matter before the Court, the petitioners contended that the classification made by the regulations was discriminatory. They identified three separate classifications: first, between the urban population and the rural population; second, between refugees from rural areas who owned agricultural land and those who owned only rural houses; and third, between persons who received quasi‑permanent allotments and those who received permanent allotments. To decide whether such classifications were constitutionally permissible, the Court found it necessary to recount, in chronological order, the series of measures that had been taken to rehabilitate the millions of persons who were forced to leave their homes and migrate into India, often leaving behind property of varying values.

The authorities, when dealing with displaced persons who had come from West Punjab and other provinces that became part of Pakistan, allocated a specified area of agricultural land to each agricultural family. The purpose of this allocation was twofold: first, to provide temporary shelter for the displaced families, and second, to preserve any crops that the original owners had left behind. At an Inter‑Dominion Conference of the Governments of India and Pakistan held in Karachi from 10 to 13 January 1949, the parties established a permanent Inter‑Dominion Commission to examine the administration, sale, and transfer of evacuee property in both dominions. Pursuant to the Commission’s decision, the question of shops and houses situated in rural areas was examined at a meeting in New Delhi on 11 and 13 March 1949. The Commission recommended that any rural building whose assessed value was Rs 20,000 or more should be treated as a substantial building, while buildings valued below that threshold should be regarded as appendages of agricultural land and therefore classified as “agricultural properties.” This recommendation is recorded in the minutes of that meeting on page 242 of the compilation titled “Documents concerning Evacuee Property” covering the years 1947‑51.

Chapter IX of the Land Resettlement Manual for Displaced Persons, authored by Mr Tarlok Singh and widely regarded as an authentic source, deals specifically with the allotment of rural houses and sites. Rule 3 of that manual sets out the procedure for equitable distribution of houses. To ensure fairness, the manual stipulated that both the size of the land allotted to a displaced person and the type of house that the person had abandoned would be major factors in determining allocation. Under the rule, each standard acre allotted was assigned one “mark,” with a maximum of twenty marks allowed per applicant. Houses abandoned in West Punjab were valued at a rate of one mark for each thousand rupees of the house’s assessed value, but any house whose value exceeded Rs 20,000 was excluded from allocation because it was subject to the terms of an earlier India‑Pakistan agreement. After the relative rights of each claimant were assessed in a village, the allottees were permitted to select houses from a list prepared for that village. Appendix 11 of the manual summarizes the principles governing the allotment of rural evacuee houses. According to those principles, evacuee houses belonging to kamins (menial servants), artisans, and similar groups were to be given to displaced artisans, while evacuee shops were to be allotted to displaced shopkeepers. Rule 3 further provided that a temporary allotment did not create any vested right of entitlement to a quasi‑permanent allotment, thereby limiting the permanence of the allocation.

In this case the Court noted that, although the basic principle allowed allottees to remain undisturbed, the provision required that they not be displaced if they were otherwise eligible for comparable accommodation in the villages. The Chapter containing the detailed rules explained the procedures for making these allotments, including how houses could be partitioned so that two or more families might share a dwelling. Rule 20 was highlighted as particularly important and was quoted in full: “Where necessary, evacuee abadi sites should be extended to suit the layouts of model villages. The Additional Deputy Commissioner should endeavour to persuade the allottees to surrender a part of their holdings in exchange for land out of the common pool or out of areas excluded from allotment.” Rule 21 gave effect to another Inter‑Dominion agreement, and consequently houses whose value was twenty thousand rupees or more, which were subject to exchange or sale, were excluded from allotment. The Court further explained that, pursuant to Rule 97 made under Central Act 44 of 1954, rehabilitation grants were to be paid to allottees of agricultural land of four acres or less in the following manner: any person who had been allotted four acres or less of agricultural land and whose claim for rural buildings left in West Pakistan had been wholly rejected could receive a rehabilitation grant, provided that (a) the person had not accepted the agricultural land allotment or that such allotment had been cancelled, and (b) the person did not hold a verified claim to any other substantial rural building. The Court added that where a person received a rehabilitation grant under Rule 97‑A, he could not also receive a grant under Rule 97‑A, and set out the parallel provision that any person allotted two standard acres or less of agricultural land in the State of Punjab or Patiala and East Punjab States Union under a notification mentioned in Section 10 of the Act could be given a rehabilitation grant at the rate of rupees 450 per standard acre, again subject to the conditions that the land allotment had not been accepted or had been cancelled and that the person held no verified claim to any urban property or substantial rural building. By way of Rule 57, which had already been cited, houses of all grades were allocated to persons who received specified land areas, and provisions were made for the provision of building sites and for payment of building grants where villages lacked houses. The Court concluded that the rules framed under Act 44 of 1954 and those contained in the Land Resettlement Manual prepared by Mr Tarlok Singh demonstrated that every eligible individual was allotted land or otherwise provided with the necessary compensation.

The authorities provided building sites and monetary assistance for constructing houses in rural areas. A rule required that claims for houses valued at ten thousand rupees or more be filed when the allotted land did not exceed four acres, and that claims for houses valued at twenty thousand rupees or more be filed when the allotted land exceeded four acres. This rule was enacted in accordance with an Inter‑Dominion Agreement between the two Governments, an agreement that has been recognised in article thirty‑one clause five sub‑clause (b)(iii). Consequently, the regulations fixing the house‑value thresholds of ten thousand rupees in one instance and twenty thousand rupees in another represent policy decisions that originated from a meeting of the Inter‑Dominion Commission concerning the evaluation of evacuee property. The regulations merely restated the content of the notifications dated twenty‑seven May 1950 and thirteen September 1950, both of which were themselves the products of decisions taken at Inter‑Dominion Commission meetings. Under article fourteen of the Constitution, the State may not deny any person equality before the law or equal protection of the laws throughout the territory of India. Judicial pronouncements have incorporated the doctrine of classification into the equality clause, yet such classification must not be arbitrary; it must be based on differences that are pertinent to the subject and the purpose for which the classification is made. There must exist a reasonable nexus between the classification and the objective sought to be achieved. The purpose of the impugned provisions, read together with the relevant Acts, is to rehabilitate evacuees on an equitable basis. To implement the rehabilitation scheme, the evacuee legislation divided evacuees into distinct categories. In broad terms, the primary division separates persons who resided in Pakistan’s rural areas and engaged in agriculture from those who lived in Pakistan’s urban areas. Rural persons are further divided into two sub‑categories: those who owned agricultural land together with a building that formed part of the holding, and those who owned agricultural land with an independent building that could not be described as part of the holding. The law provides separate treatment for rural and urban areas. In rural areas, land together with a building is treated as a single unit; however, when the building possesses substantial value, it is placed in a different category and compensated separately. This classification bears a reasonable relationship to the rehabilitation objective because the three categories necessitate distinct treatment for the purpose of resettlement on new lands and for the payment of compensation. It is indisputable that a house situated in a rural area cannot be treated in the same manner as a house situated in an urban area. Nevertheless, the petitioners’ principal grievance concerns the distinction made between houses within rural areas. Determining what constitutes a “substantial” building requires a clear standard, and a line must be drawn somewhere to delineate the categories.

In this case the Court considered whether the classification of rural houses had been made arbitrarily and without any sound basis. It noted that it might appear peculiar to describe a property valued at Rs 9,999 in one instance or a property valued at Rs 19,999 in another instance as a building of unsubstantial character, and likewise it might seem strange to suggest that the size of the land – for example four acres in one case and more than four acres in another – should have any relevance to the substantiality of the building. While the Court recognised that such observations could lend support to a plea of discrimination, it also observed that the situation was unprecedented, involving the rehabilitation of a massive number of persons who had been uprooted from their homes. Consequently, an equitable treatment for all of those displaced persons and an equal distribution of the evacuee properties that remained in India were required.

The Court explained that, in order to reduce the heavy burden of resettlement, an inter‑Dominion adjustment became necessary, and the two Dominions entered into an agreement that was presumably based on the relevant circumstances relating to the treatment of rural house property. The reasonableness of the classification, therefore, had to be judged after taking into account those surrounding circumstances and the conditions prevailing at the time. The Court further held that the basis of the classification could be judged by the fact that compensation was provided in every case. It pointed out that Rules 57 and 97‑A framed under Act 44 of 1954 afforded a reasonable justification for the classification.

According to the Court, the Rules provide that every displaced person who settles in a rural area is allotted a house in addition to the land allotted to him; if no house is available in the same village, the allottee is given a site together with a building grant. Where the claim for a house is rejected, the person receives a rehabilitation grant. The impugned provisions, however, provide separate compensation for a rural house whose value exceeds a prescribed limit. The Court therefore concluded that the classification was not arbitrary but was based on sound principles and equitable considerations.

The Court observed that a distinction was made between a rural house that forms part of a holding and a rural house that is an independent unit, and that different principles of rehabilitation were applied to meet the differing situations. Any hardship caused by the division into two categories was mitigated by providing the claimant who fell on the wrong side of the line either a rural house or a rehabilitation grant. Accordingly, the Court held that the challenge on the ground of lack of intelligible differentia must fail.

The Court referred to Appendix XI of the Land Resettlement Manual prepared by Mr Tarlok Singh, which illustrates the principles of allotment of rural evacuee houses and the detailed system of marking that was used to either give houses to land allottees or to give them building sites with a subsidy for constructing houses. Finally, the Court noted that Rules 97 and 97‑A made under Act 44 of 1954 contained detailed provisions for rehabilitation grants, including grants to those allottees of agricultural land whose claim for rural property had been rejected or who had refused the land allotted to them.

The Court observed that Rule 57, which had been quoted earlier in the judgment, expressly provides for the allocation of building sites together with a subsidy intended to enable the construction of houses. By pointing to this provision, the Court held that the rule does not suffer from any defect on the ground of discrimination, because it furnishes both the site and the financial assistance required for house building. Consequently, the Court concluded that there is no infirmity within the rules that would justify the relief claimed in the petition. In light of this finding, the Court determined that the petition could not succeed. Accordingly, the petition was dismissed, and the Court ordered that the costs of the proceedings be borne by the petitioner. The dismissal of the petition with costs thereby concluded the matter.