Shyam Behari And Others vs State Of Madhya Pradesh And Others

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

Court: Supreme Court of India

Case Number: Civil Appeal No. 177 of 1962

Decision Date: 3 February, 1964

Coram: K.N. Wanchoo, P.B. Gajendragadkar, K.C. Das Gupta, J.C. Shah, N. Rajagopala Ayyangar

In the matter of Shyam Behari and others versus the State of Madhya Pradesh and others, the Supreme Court of India delivered its judgment on 3 February 1964. The judgment was authored by Justice K.N. Wanchoo and was pronounced by a five‑member bench consisting of Justices K.N. Wanchoo, P.B. Gajendragadkar, K.C. Das Gupta, J.C. Shah and N. Rajagopala Ayyangar. The case is reported in the 1965 All India Reporter at page 427 and in the 1964 Supplementary Court Reporter (sixth series) at page 636, with additional citations in later reports. The dispute concerned the Land Acquisition Act of 1894, specifically sections 4 and 6(1), and the question of whether a notification made under section 6 could be valid when the entire compensation for the land was to be paid by a private company. The Government had issued a notification on 3 December 1960 under section 6 of the Act, stating that the land described in the annexure was required for a public purpose, namely the construction of buildings for godowns and an administrative office. The petitioners challenged this notification in the Madhya Pradesh High Court, arguing that the notice failed to describe the land with sufficient particularity and that the declared public purpose was in reality intended for a private company, which they said made the notification invalid. After the petition was filed, the State Government issued a second notification on 19 April 1961, primarily under sections 17(1) and 17(4) of the Act, again declaring under section 6 that the land was required for a public purpose described as “for the Premier Refractory Factory and work connected therewith.” The petitioners maintained that both the December 1960 and April 1961 notifications were void because the acquisition was not truly for a public purpose but for a private company, which they said was distinct from the Government.

The High Court dismissed the writ petition and held that, in substance and in law, the notifications issued under section 6 had to be treated as if they were made for the acquisition of land for a company in the present case. The Court explained that when the whole amount of compensation is to be paid by a private company, the notification under section 6 must expressly state that the land is needed for a company. A notification that merely declares the acquisition to be for a public purpose is insufficient, because such a declaration presupposes that either the entire compensation or a part of it must be drawn from public revenues or from a fund controlled by a local authority. Consequently, the Court concluded that no notification under section 6 could be valid where the compensation is to be borne entirely by a private company without an explicit declaration that the land is required for that company. The Court therefore found the two notifications of 3 December 1960 and 19 April 1961 to be invalid under the proviso to section 6(1) of the Land Acquisition Act, and it held that any proceedings based on those notifications had no legal effect.

In this case, the Court noted that the earlier authority Pandif Jhandu Lal v. State of Punjab, reported in [1961] 2 S.C.R. 459, was applicable. The Court observed that because the entire amount of compensation was to be paid by a private company, the notification made under section 6 of the Land Acquisition Act, No. 1 of 1894, was required to state expressly that the land was needed for that company. The Court found that neither of the two notifications dated 3 December 1960 nor 19 April 1961 contained any wording indicating that the land was required for a company. Consequently, the Court held that both notifications were invalid under the proviso to section 6(1) of the Act, and that any further proceedings based on those notifications could not have any legal effect. The judgment concerned Civil Appeal No. 177 of 1962, which was filed by special leave against the order of the Madhya Pradesh High Court dated 8 August 1961 in Miscellaneous Petition No. 81 of 1961. Counsel for the appellant presented the case, while counsel for the respondents and counsel for the intervener represented the other parties. The judgment was delivered on 3 February 1964. The Court explained that the appellant had originally filed a writ petition in the High Court challenging the validity of a notification issued under section 6 of the Land Acquisition Act. The appellants claimed ownership of certain lands in the village of Chhaparwah. On 8 July 1960, a notification under section 4 of the Act declared that land in Chhaparwah was required for a public purpose, specifically for the construction of buildings, godowns and an administrative office. Subsequent proceedings were apparently initiated under section 5A, and an inquiry was conducted by the Collector. The acquisition was pursued at the request of Premier Refractories of India Private Limited, Katni, which is a corporate entity. The Collector’s report stated that the land was essential for the company and also served a public purpose, and that the land‑owners’ objections lacked merit. Accordingly, the Collector recommended that a declaration under section 6 be made and submitted a draft agreement, required by section 41 of the Act, together with a draft notification. This report was dated 17 October 1960. On 3 December 1960, the State Government issued a notification under section 6, affirming that it was satisfied the land described in the annexure was needed for the public purpose of constructing buildings, godowns and an administrative office, but it made no reference to the land being required for the company. Following this, the appellants filed a writ petition on 20 March 1960, asserting two main contentions: first, that the section 6 notification lacked sufficient particularity to describe the land to be acquired; and second, that although the notification claimed a public purpose, the land was actually required for a private company, making the notification invalid.

In the writ petition the appellants put forward two principal submissions. First, they argued that the notification issued under section 6 of the Act on 3 December 1960 failed to describe the land to be acquired with sufficient particularity, and therefore the notification could not have any legal effect. Second, they contended that although the notification stated that the land was required for a public purpose, in reality the land was intended for use by a private company, which was entirely different from a government purpose, and consequently the notification was invalid.

Shortly after the filing of the writ petition, the State Government issued a new notification dated 19 April 1961. This later notification was issued primarily under section 17(1) read with section 17(4) of the Act, which authorises the State Government, in cases of urgency, to direct the Collector—prior to the issuance of an award—to take possession of any waste or arable land that is needed either for a public purpose or for a company. The April 19 notification unusually included a statement that the State Government had decided that the provisions of section 5‑A would not apply, even though an inquiry under section 5‑A had already been conducted before the earlier December 3, 1960 notification was released.

The April 19 notification also declared, under section 6 of the Act, that the land was required for a public purpose, specifically “for the Premier Refractory Factory and work connected therewith”. It appears that the purpose of issuing this second notification in that particular form was to remedy the deficiency in the December 3 notification, namely the lack of a sufficiently particular description of the property to be acquired. However, the April 19 notification, although treated as a section 6 notification, did not mention that the land was required for a company; it merely reiterated that the land was needed for a public purpose, namely the Premier Refractory Factory and its associated work.

When the matter was argued before the High Court, the appellant’s main argument was that both the December 3, 1960 notification and the April 19, 1961 notification issued under section 6 were invalid because the acquisition was not truly for a public purpose as claimed; rather, the acquisition was for a private company, which is fundamentally distinct from a governmental purpose. The High Court, however, observed that the substance of the two notifications indicated that the land was being required both for a public purpose and for the purpose of a company. The Court further held that, although the declaration spoke of acquisition for a public purpose, it was ineffective in that respect because the compensation for the property was to be paid entirely by the private company and none of it would come from public funds. Nevertheless, the High Court concluded that the declaration must be read, both substantively and legally, as an acquisition for a company, specifically the Premier Refractories of India Private Limited.

The writ petition was dismissed. The sole issue that the appellants sought to raise before the Court was the allegation that the High Court had erred in interpreting the two notifications as, in substance, a declaration that the land was required for a company. Section 6(1) of the governing Act stipulates that whenever any land is needed either for a public purpose or for a company, a declaration to that effect must be made. The proviso to Section 6(1) adds that such a declaration may be issued only if the compensation payable for the property is either to be paid by a company or is to be drawn wholly or partly from public revenues or from a fund that is controlled or managed by a local authority. This provision clearly envisions two distinct categories of declarations. First, a declaration may state that land is required for a public purpose; in that situation, the proviso requires that the compensation for the acquired property must be sourced wholly or partially from public revenues or from a fund under the control or management of a local authority. No declaration under Section 6 for acquisition of land for a public purpose is permissible unless either the entire or a portion of the compensation is to be paid out of public funds or a locally administered fund, as illustrated in the decision of Pandit Jhandu Lal v. State of Punjab. Second, a declaration under Section 6 may state that land is needed for a company, and in that circumstance the whole amount of compensation must be paid by the company itself. Consequently, where the entire compensation is to be borne by a company, the notification issued under Section 6 must expressly declare that the land is required for a company. A notification under Section 6 cannot validly declare that the acquisition is for a public purpose while the entire compensation is to be paid by a company, because such a public‑purpose declaration mandates that at least a part of the compensation be drawn from public revenues or a locally controlled fund. In the present matter, it was not contested that no portion of the compensation was to be sourced from public revenues or any locally administered fund; rather, the whole compensation was to be paid by the company. Accordingly, for a notification under Section 6 to be valid in these circumstances, it would have been necessary to declare that the land was required for a company. No valid notification under Section 6 could be issued in the facts of this case that declared the land was needed for a public purpose, because no part of the compensation was to be funded by public revenues or a local authority’s fund. This explains why the High Court regarded the notification that declared the land was

In this case, the Court noted that the High Court had held the notifications issued under section 6 of the Act to be, in substance and in law, equivalent to an acquisition of land for a company. The Court disagreed with that view. It observed that neither of the two notifications—one dated 3 December 1960 and the other dated 19 April 1961—contained any statement indicating that the land was required for a company. The notification of 3 December 1960 expressly described the land as needed for a public purpose, specifically for constructing buildings to be used as godowns and an administrative office. The Court emphasized that a plain reading of this notification left no room for the conclusion that the acquisition was intended for a company. Likewise, the notification of 19 April 1961 declared the land necessary for a public purpose, namely for the Premier Refractory Factory and work connected therewith. Although the actual user of the land turned out to be Premier Refractories of India Private Limited, Katni, the Court observed that the notification itself made no reference to that company or to any private entity. It merely identified the public purpose as the establishment of the Premier Refractory Factory and its associated works. The Court therefore concluded that the High Court’s inference—that the purpose described amounted to an acquisition for the named company—was unsupported by the language of the notification.

The Court further explained that the fact that a public purpose involved the construction of a factory did not automatically imply that the land was being taken for a private company. It pointed out that a factory could be owned by the Government, a local authority, an individual, or a private company, and the notification did not clarify which ownership applied. Consequently, the mere reference to “the Premier Refractory Factory and work connected therewith” could only be understood as indicating a public purpose involving the erection of a factory, not as a declaration that the land was required for any particular company. The Court therefore held that the two notifications, by stating that the land was needed for a public purpose, did not satisfy the requirement that a notification for acquisition by a company must indicate that the compensation would be drawn from public revenues or a fund controlled by a local authority. As a result, the Court found that the notifications could not be construed as acquisitions for a company.

In this case the Court observed that the two notifications declared that the land was required for a public purpose, yet the notifications did not provide for any part of the compensation to be drawn from public revenues or from any fund that was controlled or managed by a local authority. Because this circumstance was contrary to the proviso to section 6(1) of the Act, the Court held that the notifications were invalid. The Court further explained that any legal proceedings that were initiated on the basis of such invalid notifications could not have any effect under the provisions of the Act. Accordingly, the Court allowed the appeal, set aside the order that had been passed by the High Court, and expressly quashed the two notifications pursuant to section 6 of the Act. The Court also issued an injunction restraining the respondents from taking any steps that would lead to the acquisition of the land that had been notified under the invalid notifications. The Court noted, however, that the specific ground on which the appellants succeeded was not expressly raised in the writ petition. For that reason, the Court directed that each party should bear its own costs for the entire litigation. In the final order the Court recorded that the appeal was allowed.