http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 5

PETITIONER:

AMARNATH ASHRAM TRUST SOCIETY AND ANR.

Vs.

RESPONDENT:

THE GOVERNOR OF UTTAR PRADESH & ORS.

DATE OF JUDGMENT: 03/12/1997

BENCH:

G.T. NANAVATI, G.B. PATTANAIK

ACT:

HEADNOTE:

JUDGMENT:

THE 3RD DAY OF DECEMBER, 1997

Present:

Hon'ble Mr. Justice G.T. Nanavati

Hon'ble Mr. Justice G.B.Pattanaik

R.F. Rohtagi, Sr.Adv., R.B.Misra and E.C. Agarwala, Advs.

with him for the Respondents.

J U D G M E N T

The following Judgment of the court was delivered:

WITH

WRIT PETITION @ NO. 716 OF 1996

NANAVATI, J.

Leave granted.

Heard learned counsel for both the sides.

The appellant is a society registered under the Society

Registration Act, 1860. It is running a public school at

Mathura in the name if Amar Nath Vidya Ashram. The school

is duly recognised by the Central Board of Secondary

Education, New Delhi. It is challenging in this appeal the

judgment and order passed by the High Court in Civil Misc.

Writ Petition No. 16241 of 1992.

The appellant wants land adjacent to its school

building for the purpose of a playground for its students.

The land belongs to respondent No.5 So it tried to obtain it

from respondent No.5 by offering a price higher than its

market value but did not succeed. it, therefore, moved the

State Government to acquire that land for it. The

Government agreed and issued Notification under section 4 of

the Land Acquisition Act on 1.8.1986 notifying its intention

to acquire that land for a public purpose namely "playground

of students of Amar Nath Vidya Ashram (Public School),

Mathura". Thereafter, inquiries under section 5-A and under

Rule 4 of the Land Acquisition (Company) Rules, 1963 were

made. The Government also entered into an agreement with

the appellant as required by section 40(1) of the Act on

11.8.1987. it then issued a Declaration under section on

4.9.1987 mentioning fact that the report made under sub-rule

(4) of Rule 4 of the Land Acquisition (Company) Rules, 1964

was considered by the Government that the Land Acquisition

Committee constituted under Rule 3 of the said Rules was

consulted, that the agreement entered between the appellant

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 5

and the Governor was duly published that the Governor was

duly published that the Governor was satisfied that the land

mentioned in the schedule is needed for construction of a

playground for students of Amar Nath Vidya Ashram (Public

School), Mathura by the Amar Nath Ashram Trust, Mathura.

This acquisition of land was challenged by the owner by a

writ petition filed in the Allahabad High Court. An interim

order was passed directing the parties to maintain status

quo as regards possession. During the pendency of the said

petition, on 1.5.1992, the Government denotified the land

from acquisition in exercise of its power under section 48

of the Land Acquisition Act. The appellant challenged that

Notification by filing a writ petition in the High Court.

The petition filed by the appellant and the one filed by the

owner were heard together. The petition filed by the owner

was dismissed as infructuous and the petition filed by the

appellant was dismissed on the ground that the decision of

the Sate Government to withdraw from the acquisition for the

reason that the acquisition having been proclaimed as one

for a public purpose a par of cost of acquisition was

required to be borne by the state and as no such provision

was made, it was not likely to be sustained if challenged,

cannot be said to be contrary or illegal.

Mr. R.F. Nariman, senior advocate, appearing for the

appellants, submitted that when acquisition is under part

VII, i.e, when loan is acquired for a company and when all

the formalities have been completed including execution of

an agreement fro payment of cost of the acquisition and

Section 6 notification has also been issued, it sis not open

to the Government to withdraw from such acquisition without

the consent of the company for which the land has been

acquired. He submitted that the power vested in the

Government to withdraw from acquisition is not absolute and

is fettered by implicit restrictions and hence it is

justiciable. He further submitted that in this case the

State Government decided to withdraw from the acquisition

under a misconception of law that as the acquisition at the

stage of section 4 notification was proclaimed to be for a

public purpose, at least a part of the cost of acquisition

was required to be borne by the State or was required to be

paid out of the public funds or public revenue; and,

therefore, the decision taken by it was vitiated and ought

to have been quashed by the High Court. On the other hand,

the learned counsel appearing for the State of Uttar Pradesh

submitted that the State is under no obligation to give any

reason for withdrawing from the acquisition and when it is

shown that the power was exercised bona fide it is not open

to the Court to invalidate such an action even if the reason

given by the State is found to be erroneous. he submitted

that section 48 contains no words of limitation as regards

the exercise of power and the only limitation put upon the

power of the State Government is that it can excise that

power till possession of the land sought to be acquired is

taken and not thereafter. he also submitted that if as a

result of withdrawal from acquisition any damage is suffered

by any party then be can be paid damages for the loss caused

to him, and that there is one more reason why the decision

of Government to withdraw from acquisition cannot be

interfered with by the court of law.

It is now well established that if the cost of

acquisition is borne either wholly or partly by the

Government, the acquisition can be said to be for a public

purpose within the meaning of the Act. But if the cost is

entirely borne by the company then it is an acquisition for

a company under part VII pf the Act. It was so held by this

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 5

Court in Pandit Jhandu Lal vs. The State of Punjab (1961

(2) SCR 459). This decision was relied upon by the learned

counsel for the State to support his contentions but it is

difficult to appreciate how it supports him. it is held in

that case it is not correct to say that no acquisition for a

company for a public purpose can be made except under part

VII of the Act. In that case a part of the cost was to be

borne by the Government and, therefore, it was held that it

was not necessary to comply with the provisions of part VII

of the Act. Admittedly, in the present case the entire cost

of acquisition is to be borne by the appellant society and,

therefore, it is an acquisitions for a company and not for a

public purpose. That is also born out by the notification

issued under section 6 of the Act which stated "that the

land mentioned in the schedule below is needed for the

construction of play-ground for students of Amar Nath Vidya

Ashram (public school), Mathura in district Mathura by the

Amar Nath Ashram Trust, Mathura" Therefore, simply because

in the notification issued under section 4 of the Act it was

stated that the land was needed for a public purpose,

namely, for a play-ground for students of Amar Nath Vidya

Ashram (public school), Mathura, it cannot be said that the

acquisition is for a public purpose and not under Chapter

VII for the appellant-society in view of subsequent events

and the declaration made under Section 6. The learned

counsel for the State also relied upon the decision of this

Court in Srinivasa Cooperative House Building Society Ltd.

Vs. Madam Gurumurthy Sastry (1994 (4) SCC 675), wherein this

court has held that though there is "no provision in the Act

to say that when a land is required for a company, it may

also be for a public purpose. However, the even acquisition

for a company, unless utilisation of the land so acquisition

for a company, unless utilisation of the land so acquired is

integrally connected with public use, resort to the

compulsory acquisition under Chapter VII cannot be had". it

was submitted on the basis of this observation that even in

case of an acquisition for a company an element of public

purpose has to be there and if for that reason it was

believed by the Government that it was necessary for it to

make substantial contribution from public revenue so as to

avoid the charge of colorable exercise of powers, the

decision of the Government to withdraw from the acquisition

cannot be said to be arbitrary or illegal. The aforesaid

observation was made by this Court in the context of

requirement of Section 40 of the Act and they cannot be

construed to mean that no land cannot be acquired by the

State Government without making substantial contribution

towards the cost of acquisition. We cannot read something

more in the said observation than what they were intended to

convey. The provisions of part VII and particularly the

provisions regarding payment of the entire costs f the

acquisition would otherwise become redundant.

As the acquisition in this case was for the appellant-

society which is running a school, it was an acquisition for

a company and as disclosed by the agreement the entire cost

of the acquisition was to be borne by the appellant-society.

The declaration made under section 6 clearly referred to the

inquiry made under rule 4 of the Land Acquisition

(Companies) Rules, 1963 and the agreement entered into

between the appellant-society and the state. Moreover, it

was not pleaded by the State before the High Court that the

acquisition in this case was for a public purpose and not

under Chapter VII of the Act. Therefore, it is really not

open to the counsel for the State to raise a contention

which is contrary to the case, pleaded before the High

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 5

Court, it was stated on behalf of the State that the

acquisition was for a registered society and as such it was

covered within the meaning of Company as defined by section

3(E)(ii) of the Land Acquisition Act and that the purpose of

acquisition was covered under section 40(I)(b) of the Act

because acquisition for play-ground of students of a school

is a purpose which is likely to prove useful to the public.

On the question of giving reasons the learned counsel

of the State heavily relied upon the decision of this Court

in Special Land Acquisition Officer, Bombay vs. Godrej and

Boyce (1988 (1) SCR 590). In that case this Court examined

the nature and extent of the power of the Government to

withdraw from acquisition after issuance of notification

under section 4 of the Act. In that case the Sate

Government had passed an order under section 48 of the

act withdrawing the lands of Godrej and Boyce from

acquisition. The owner the thereupon challenged the

withdrawal order as mala fide and prayed for quashing of the

same. The writ petition was allowed by a single Judge of

the High Court and his decision was affirmed by a Division

Bench. In an appeal filed by the state this Court held that

under the scheme of the Act neither the notification under

section 4 not the declaration under section 6, not the

notice under section 9 is sufficient to divest the original

owner of, or other person interested in, the land of his

rights therein. Section 16 makes it clear beyond doubt that

the title of the land vests in the Government only when

possession is taken by the Government and till that point of

time, the land continues to be with the original owner and

he is also free to deal with the land just as he likes. So

long as the possession is not taken over, the mere fact of a

notification issued under section 4 or a declaration under

section 6, does not divest the owner of his rights in the

land just as he likes. So long as the possession is not

taken over, the mere fact of a notification issued under

section 4 or a declaration under section 6, does not divest

the owner of his rights in the land to take care of its and

conger on the State Government any right whatsoever to

interfere with the ownership of the land or safeguard the

interests of the owner. Section 48 gives liberty to the

State Government to withdraw from the acquisition at any

stage before the possession of the land is taken by it. By

such withdrawal, no irreparable prejudice is caused to the

owner of the land and, if at all the owner has suffered any

damage in consequence of the acquisition proceedings or

incurred costs in relation thereto, he will be compensated

therefore under section 48(2) of the Act. This Court

further observed that the State can be permitted to exercise

its power to withdraw unilaterally. It further observed that

having regard to the scheme of the Act it is difficult to

see why the state Government should at all be compelled to

give any cogent reasons for its decision not to go ahead

with the acquisition of any land. it is well settled in the

field of specific performance of contracts that no person

will be compelled to acquire any land, as breach of contract

can always be compensated for by damages. That is also the

principle of section 48(2) of the Act. In that case the

Court found that the withdrawal was bona fide and was

justified in view of the facts and circumstances of the

case. That was a case where the decision of the Government

to withdraw from acquisition was challenged by the owner of

the land on the ground that the withdrawal was mala fide and

it was bad because no show cause notice was served to the

company before the withdrawal order was passed. It was in

that context that this Court made the above quoted

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 5

observations. That was not a case where proceedings were

initiated to acquire land for a company under part VII of

the Act. Therefore, it is not an authority laying down the

proposition that in all cases where power is exercised under

section 48 of the Act it is open to the State Government to

act unilaterally and that it can withdraw from acquisition

without giving any reason or for any reason whatsoever.

In an acquisition under part VII of the Act, position

of the company or the body for which the land is acquired is

quire different from that of the owner of the land. As a

result of withdrawal from the acquisition whereas the owner

of land is ordinarily not likely to suffer any prejudice or

irreparable loss, the company for whose benefit the land was

to be acquire, may suffer substantial loss.

However, it is not necessary to go into this larger

question whether in such a case the state Government can

withdraw from acquisition without the consent of the company

as the justification given by the Government is otherwise

not sustainable. As stated earlier the reason given by the

Government for withdrawing from the acquisition is that as

no part of the cost of acquisition was to be born by the

Government the acquisition could not have been sustained as

for a public purpose. We have already pointed out that in

this case the acquisition was not for a public purpose but

it was an acquisition for a company under Chapter VII of the

Act. In respect of an acquisition for a company under

Chapter VII of the Act law does not require that the State

should also bear some cost of the acquisition to make it an

acquisition for public use. Thus the decision of the

Government to withdraw from acquisition was based upon

misconception of the correct legal position. Such a

decision has to be regarded as arbitrary and not bona fide.

Particularly in a case where as a result of a decision taken

by the Government other party is likely to be prejudicially

affected, the Government has to exercise its power bona fide

and not arbitrarily. Even though section 48 of the Act

confers upon the state wide discretion it does not permit it

to act in an arbitrary manner Though the State cannot be

compelled to acquire land compulsorily for a company its

decision to withdraw from acquisition can be challenged on

the ground that power has been exercised mala fide or in an

arbitrary manner. Therefore, we cannot accept the

submission of the learned counsel for the State that the

discretion of the State Government in this behalf is

absolute and not justiciable at all.

We, therefore, allow this appeal and quash the impugned

order dated 16.4.1996. However, we make it clear that it

will be open to the State Government to reconsider this

question of withdrawal from acquisition and take an

appropriate decision in accordance with law. In view of the

facts and circumstances of the case, there shall be no order

as to costs.

Writ Petition C No. 716 of 1996

As we are allowing the appeal the learned counsel for

the petitioner does not press the writ petition at this

stage and reserves his right to challenge the validity of

section 48 if such an occasion arises in future. The writ

petition is, therefore, dismissed as not pressed.