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CASE NO.:

Appeal (civil) 7133 of 1999

PETITIONER:

Pratibha Nema & Ors.

RESPONDENT:

Vs.

State of M.P. & Ors.

DATE OF JUDGMENT: 30/07/2003

BENCH:

K.G. BALAKRISHNAN & P. VENKATARAMA REDDI.

JUDGMENT:

J U D G M E N T

WITH

Civil Appeal Nos. 7134, 7135, 7136 & 7138 of 1999

P. VENKATARAMA REDDI, J.

Facts and Contentions :

The acquisition of 73.3 hectares of dry land situate in

Rangwasa village of Indore District and Tehsil belonging to the

appellants and others is the subject-matter of challenge in these

appeals filed by the landholders. The said extent of land was notified

for acquisition under Section 4(1) of the Land Acquisition Act

(hereinafter referred to as 'Act') for the alleged public purpose of

'establishment of diamond park'. This parcel of land together with an

extent of 44.8 hectares of Government land was meant to be placed

at the disposal of the Industries Department and/or Madhya Pradesh

Audyogik Kendra Vikas Nigam Ltd. (hereinafter referred to as 'the

Nigam') for the purpose of allotting the same to various industrial

units-the foremost among them being the 9th respondent-Company,

for setting up diamond cutting and polishing units with modern

technology. The proposal in this regard emanated from the General

Manager of District Industries Centre, on the initiative taken by the 9th

Respondent. After the land was located by a joint inspection

committee of officials, the Government of Madhya Pradesh

(Commerce & Industries Department) had given sanction 'in principle'

for the acquisition. The District Collector, Indore through his letter

dated 24.1.1996 sought the approval of the Commissioner, Indore

Division to invoke Section 17(1) of the Act in order to expedite the

process of acquisition. In that letter, the Collector mentioned that

prestigious exporters from India as well as foreign countries were

likely to establish their units in this park which would generate good

deal of foreign exchange and create employment potential.

The Commissioner accorded his approval by a communication

dated 29.1.1996. This resulted in the issuance of the notification

under Section 4(1) of the Act on 30th June, 1996 by the Collector &

Ex-officio Deputy Secretary to Government, to whom it appears the

powers were delegated. By the same Notification, the enquiry under

Section 5A was dispensed with. It was indicated in the Notification

that the land map could be inspected in the office of the SDO, Indore

and General Manager, District Industries Centre. A few days later i.e.,

on 9.2.1996, the declaration under Section 6 of the Act was

published. The Collector (Land Acquisition) was directed to take

possession after the expiry of 15 days from the date of issuance of

notice under Section 9(2) of the Act. Before the possession was

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taken, the writ petitions under Article 226 of the Constitution were

filed and an order of status quo was granted. The writ petitions and

the Letters Patent Appeals were dismissed. In the meanwhile, it

appears that an interim award was made for a sum of Rs.2,14,91,115

representing 80% of the estimated compensation amount. The SLPs

filed in this Court were disposed of on 11.10.1996 on the basis of the

representation made by the learned counsel for the State of Madhya

Pradesh that the Notification under Section 6 will be withdrawn and

the procedure under Section 5A will be followed. Accordingly, the

Collector, Indore District published a Notification on 15.10.1996

withdrawing the declaration under Section 6. After due enquiry, the

Land Acquisition Officer submitted a report under Section 5A

overruling the objections put forward by the appellants. On a perusal

of the report, the Collector as well as the Commissioner decided to go

ahead with the acquisition. Accordingly, a fresh Notification under

Section 6 was issued on 3.1.1997. As in the earlier Notification, the

public purpose was mentioned as 'establishment of a diamond park'.

This was again challenged by the aggrieved landholders including the

appellants. A Division Bench of the High Court dismissed the writ

petitions which were filed by the present appellants having interest in

about 63 acres in Survey No. 684. Against that judgment, these

appeals by special leave have come up. This Court, while taking note

of certain additional facts disclosed in I.A.No. 2/2001, passed an

order on 29.8.2001 formulating four questions in respect of which the

findings of the High Court were called for. The following are the four

questions:

1) Whether M/s. B. Arun Kumar International Ltd. deposited a sum of

Rs.3 crores for payment of compensation to the land holders for

acquisition of land for them.

2) Whether in view of the facts stated in I.A.No.2/2001 and the

counter affidavit and further affidavits the acquisition of land was

for the Company and not for public purpose.

3) If the findings on question No.1 & 2 are in the affirmative, whether

any subsequent withdrawal of compensation amount by M/s. Arun

Kumar International Ltd. would not affect the invalidity of

notification issued under Section 4 of the Act.

4) If the findings on issues Nos. 1 & 2 are in the affirmative, whether

the State Government also contributed partly towards

compensation to be paid to the land holders and in its absence

the acquisition of land for public purpose is invalid.

The questions were framed in the light of the appellants' contention

that the acquisition was not for a public purpose and it was only

meant to benefit the 9th Respondent-Company and its associates

which contributed its own funds for facilitating the acquisition.

The matters were directed to be listed on receipt of the findings

of the High Court with a further direction not to treat the cases as

part-heard.

The High Court has, by its order dated 5-7-2002 recorded its

findings on the four points and transmitted the same to this Court. All

the findings are against the appellants and naturally, therefore, they

are being challenged.

Broadly, four contentions have been urged before us. They are:

1. Acquisition is not for a public purpose. The entire acquisition is a

subterfuge to hand over the acquired land to the Company in the

guise of acquisition for a public purpose. Even the amount paid

towards compensation was not out of public revenues, but out of the

money provided by the Company for the specific purpose of

compensation. 2. The public purpose stated in the Notifications

under Sections 4 & 6 is vague. 3. The area of the land proposed to

be acquired is far in excess of reasonable requirements and

4. Environmental considerations were not kept in view while taking a

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decision to acquire the land for industrial purpose.

Analysis of relevant provisions and the settled legal position :

In order to appreciate the contentions set out above in proper

perspective, it would be appropriate to advert to certain basic

provisions of the Act and recapitulate the well settled principles

relating to public purpose and acquisition of land under Part II and

Part VII of the Act. Section 4(1) which occurs in Part II of the Act

contemplates a notification to be published in the official gazette etc.,

whenever it appears to the appropriate Government that land in any

locality is needed for any public purpose or for a company.

Thereupon, various steps enumerated in sub-Section (2) could be

undertaken by the authorized officer. There is an inclusive definition

of 'public purpose' in clause (f) of Section 3. This clause was inserted

by Central Act 68 of 1984. Many instances of public purpose

specified therein would have perhaps been embraced within the fold

of public purpose as generally understood. May be, by way of

abundant caution or to give quietus to legal controversies, the

inclusive definition has been added. One thing which deserves

particular notice is the rider at the end of clause (f) by which the

acquisition of land for Companies is excluded from the purview of the

expression 'public purpose'. However, notwithstanding this

dichotomy. speaking from the point of view of public purpose, the

provisions of Part II and Part VII are not mutually exclusive as

elaborated later.

The concept of public purpose (sans inclusive definition) was

succinctly set out by Batchelor, J. in a vintage decision of Bombay

High Court. In Hamabai Framjee Petit Vs. Secretary of State for India

[AIR (1914) PC 20], the Privy Council quoted with approval the

following passage from the judgment of Batchelor J:

"General definitions are, I think, rather to be avoided

where the avoidance is possible, and I make no attempt

to define precisely the extent of the phrase 'public

purpose' in the lease; it is enough to say that in my

opinion, the phrase, whatever else it may mean, must

include a purpose, that is, an object or aim in which the

general interest of the community, as opposed to the

particular interest of individuals, is directly and vitally

concerned."

The Privy Council then proceeded to observe that prima facie

the Government are good judges to determine the purpose of

acquisition i.e., whether the purpose is such that the general interest

of the community is served. At the same time, it was aptly said that

they are not absolute Judges. This decision of the Privy Council and

the words of Batchelor, J. were referred to with approval by a

Constitution Bench in Somawanti Vs. State of Punjab [AIR (1963)

SC 151] and various other decisions of this Court.

We may now advert to Section 6. It provides for a declaration to

be made by the Government or its duly authorized officer that a

particular land is needed for a public purpose or for a Company when

the Government is satisfied after considering the report if any made

under Section 5A(2). It is explicitly made clear that such declaration

shall be subject to the provisions of Part VII of the Act which bears

the chapter heading 'Acquisition of Land for Companies'. Thus,

Section 6 reiterates the apparent distinction between acquisition for a

public purpose and acquisition for a Company. There is an important

and crucial proviso to Section 6 which has a bearing on the question

whether the acquisition is for a public purpose or for a Company. The

second proviso lays down that "no such declaration shall be made

unless the compensation to be awarded for such property is to be

paid by a Company, wholly or partly, out of public revenues or some

fund controlled or managed by local authority". Explanation 2 then

makes it clear that where the compensation to be awarded is to be

paid out of the funds of a Corporation owned or controlled by the

State, such compensation shall be deemed to be compensation paid

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out of public revenues. Thus, a provision for payment of

compensation, wholly or partly, out of public revenues or some fund

controlled or managed by a local authority is sine qua non for making

a declaration to the effect that a particular land is needed for a public

purpose. Even if the public purpose is behind the acquisition for a

Company, it shall not be deemed to be an acquisition for a public

purpose unless at least part of the compensation is payable out of

public revenues which includes the fund of a local authority or the

funds of a Corporation owned or controlled by the State. However, it

was laid down in Somavanti's case that the notification under Section

6(1) need not explicitly set out the fact that the Government had

decided to pay a part of the expenses of the acquisition or even to

state that the Government is prepared to make a part of contribution

to the cost of acquisition. It was further clarified that the absence of a

provision in the budget in respect of the cost of acquisition, whole or

part, cannot affect the validity of the declaration. The majority Judges

of the Constitution Bench also clarified that a contribution to be made

by the State need not be substantial and even the token contribution

of Rs.100 which was made in that case satisfied the requirements of

the proviso to Section 6(1). The contribution of a small fraction of the

total probable cost of the acquisition does not necessarily vitiate the

declaration on the ground of colourable exercise of power, according

to the ruling in the said case. Following Somavathi, the same

approach was adopted in Jage Ram Vs. State of Haryana [(1971) 1

SCC 671]. The question, whether the contribution of a nominal

amount from the public exchequer would meet the requirements of

the proviso to Section 6, had again came up for consideration in

Manubhai Jehtalal Patel Vs. State of Gujarat [(1983) 4 SCC Page

553]. D.A. Desai, J. after referring to Somvanti's, speaking for the

three Judge Bench observed thus:

"It is not correct to determine the validity of acquisition

keeping in view the amount of contribution but the

motivation for making the contribution would help in

determining the bona fides of acquisition. Further in

Malimabu case [AIR (1978) SC 515] contribution of Re 1

from the State revenue was held adequate to hold that

acquisition was for public purpose with State fund.

Therefore, the contribution of Re 1 from public exchequer

cannot be dubbed as illusory so as to invalidate the

acquisition."

In Somavanti's case, the following note of caution was

sounded:

"We would, however, guard ourselves against being

understood to say that a token contribution by the State

towards the cost of acquisition will be sufficient

compliance with the law in each and every case. Whether

such contribution meets the requirements of the law

would depend upon the facts of every case. Indeed the

fact that the State's contribution is nominal may well

indicate, in particular circumstances, that the action of the

State was a colourable exercise of power. In our opinion

'part' does not necessarily mean a substantial part and

that it will be open to the Court in every case which

comes up before it to examine whether the contribution

made by the State satisfies the requirement of the law. In

this case we are satisfied that it satisfies the requirement

of law."

A three Judge Bench of this Court in Indrajit C. Parekh Vs.

State of Gujarat [(1975) 1 SCC 824], without much of elaboration,

relegated the observations in the above passage to a very narrow

confines by stating thus:

"In view of the decision in this case that a nominal

contribution out of public revenues would satisfy the

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requirement of the proviso to Section 6(1) the observation

"whether such contribution meets the requirement of the

law would depend upon the facts of every case" must

necessarily be taken to refer to the requirement of some

law other than the proviso to Section 6(1). No such law

was pointed out to us; and it is not necessary for the

purposes of this appeal to enter on a discussion as to

what such other law could be."

Another important provision is Sub-Section (3) of Section 6

which enjoins that the declaration (required to be published in the

official gazette etc.) shall be conclusive evidence that the land is

needed for a public purpose or for a Company and on publication of

declaration, the appropriate Government is enabled to acquire the

land in accordance with the other provisions of the Act. This sub-

Section came up for interpretation of this Court in Somawanti's case

(supra). The Court emphasised that the conclusiveness

contemplated by sub-Section (3) is not merely regarding the

satisfaction of the Government on the question of need but also with

regard to the question that the land is needed for a public purpose or

for a Company, as the case may be. However, the learned Judges

highlighted an important exception to the finality or conclusiveness of

the declaration under Section 6(1). It was observed thus:

"That exception is that if there is a colourable exercise of

power the declaration will be open to challenge at the

instance of the aggrieved party. The power committed to

the Government by the Act is a limited power in the sense

that it can be exercised only where there is a public

purpose, leaving aside for a moment the purpose of a

company. If it appears that what the Government is

satisfied about is not a public purpose but a private

purpose or no purpose at all the action of the Government

would be colourable as not being relatable to the power

conferred upon it by the Act and its declaration will be a

nullity. Subject to this exception, the declaration of the

Government will be final."

The main contention of the learned senior counsel for the

appellant, as already noticed, rests on the plea of colourable exercise

of power.

Colourable exercise of power or mala fides in the province of

exercise of power came up for discussion in State of Punjab Vs.

Gurdial Singh [AIR (1980) SC Page 319]. In the words of Krishna

Iyer, J.-

"Pithily put, bad faith which invalidates the exercise of

power-sometimes called colourable exercise or fraud on

power and oftentimes overlaps motives, passions and

satisfactions-is the attainment of ends beyond the

sanctioned purposes of power by simulation or pretension

of gaining a legitimate goal......................................

When the custodian of power is influenced in its exercise

by considerations outside those for promotion of which

the power is vested the Court calls it a colourable

exercise and is undeceived by illusion........................

Fraud on power voids the order if it is not exercised bona

fide for the end designed. Fraud in this context is not

equal to moral turpitude and embraces all cases in which

the action impugned is to affect some object which is

beyond the purpose and intent of the power, whether this

be malice-laden or even benign. If the purpose is corrupt

the resultant act is bad. If considerations, foreign to the

scope of the power or extraneous to the statute, enter the

verdict or impels the action mala fides or fraud on power

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vitiates the acquisition or other official act."

The above exposition of law unfolds the right direction or the

line of enquiry which the Court has to pursue to test the validity of

declaration made under Section 6(1) exalted by the legal protection

accorded to it under sub-Section (3).

In order to proceed on these lines, the ambit and contours of

public purpose as understood by this Court in certain decided cases

has to be taken note of. We have already noticed the broad and

general meaning of the expression 'public purpose' as stated by

Batchelor, J. nearly a century back. In the particular context of

setting up industries by private enterprise, this Court's perspective of

public purpose is discernible from certain decided cases to which we

shall make reference.

In Jage Ram's case (supra) the public purpose mentioned in

the notifications under Sections 4 & 6 was "the setting up a factory

for the manufacture of China-ware and Porcelain-ware". The State

Government had contributed a sum of Rs.100 as was done in the

case of Somavanti (supra) towards the cost of the land. The

question arose whether it was necessary for the Government to

proceed with the acquisition under Part VII of the Act. Holding that

acquisition under Part VII need not have been resorted to, this Court

proceeded to discuss the question whether the acquisition was

intended for a public purpose. K.S. Hegde, J. speaking for the Court

observed thus:

"There is no denying the fact that starting of a new

industry is in public interest. It is stated in the affidavit filed

on behalf of the State Government that the new State of

Haryana was lacking in industries and consequently it had

become difficult to tackle the problem of unemployment.

There is also no denying the fact that the industrialization

of an area is in public interest. That apart, the question

whether the starting of an industry is in public interest or

not is essentially a question that has to be decided by the

Government. That is a socio-economic question. This

Court is not in a position to go into that question. So long

as it is not established that the acquisition is sought to be

made for some collateral purpose, the declaration of the

Government that it is made for a public purpose is not

open to challenge. Section 6(3) says that the declaration

of the Government that the acquisition made is for public

purpose shall be conclusive evidence that the land is

needed for a public purpose. Unless it is shown that there

was a colourable exercise of power, it is not open to this

Court to go behind that declaration and find out whether

in a particular case the purpose for which the land was

needed was a public purpose or not : see Smt. Somavanti

and Others Vs. The State of Punjab and Raja Anand

Brahma Shah Vs. State of U.P. On the facts of this case,

there can be hardly any doubt that the purpose for which

the land was acquired is a public purpose."

In Somavanti's case, setting up a factory for the manufacture of

refrigeration compressors and ancillary equipment, was held to

subserve public purpose. The importance of such industry to a State

such as Punjab which had surplus food and dairy products, the

possible generation of foreign exchange resources and

employment opportunities were all taken into account to hold that

public purpose was involved in establishing the industry. It was

observed "on the face of it, therefore, bringing into existence a

factory of this kind would be a purpose beneficial to the public even

though, that is a private venture." The decision in Jageram's case

was cited with approval by this Court in Bajirao T. Kate Vs. State of

Maharashtra [(1995) 2 SCC Page 442]. In R.L. Arora Vs. State of

Uttar Pradesh [AIR (1964) SC Page 1230] a Constitution Bench of

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this Court observed that there was definite public purpose behind

the acquisition of land for taking up works in connection with the

setting up of a factory for production of textile machinery parts.

However, that was in the context of a case of acquisition under

Part VII.

These decisions establish that a public purpose is involved in

the acquisition of land for setting up an industry in private sector as

it would ultimately benefit the people. However, we would like to add

that any and every industry need not necessarily promote public

purpose and there could be exceptions which negate the public

purpose. But, it must be borne in mind that the satisfaction of the

Government as to the existence of public purpose cannot be lightly

faulted and it must remain uppermost in the mind of the Court.

Having noted the salient provisions and the settled principles

governing the acquisition for a public purpose, it is time to turn to

part VII dealing with acquisition of land for Companies. The

important point which we would like to highlight at the outset is that

the acquisition under Part VII is not divorced from the element of

public purpose. The concept of public purpose runs through the

gamut of Part VII as well.

'Company' is defined to mean by Section 3(e) as (i) a Company

within the meaning of Section 3 of the Companies Act other than

Government Company, (ii) a Society registered under the Societies

Registration Act other than a Co-operative Society referred to in

clause (cc) and (iii) a Co-operative Society governed by the law

relating to the Co-operative Societies in force in any State other

than a Co-operative Society referred to in clause (cc). An industrial

concern employing not less than 100 workmen and conforming to

the other requirements specified in Section 38-A is also deemed to

be a Company for the purposes of Part VII. In order to acquire land

for a Company as defined above, the previous consent of the

appropriate Government is the first requirement and secondly the

execution of agreement by the Company conforming to the

requirements of Section 41 is another essential formality. Section 40

enjoins that consent should not be given by the appropriate

Government unless it is satisfied that (1) the purpose of the

acquisition is to obtain land for erection of dwelling houses for

workmen or for the provision of amenities connected therewith; (2)

that the acquisition is needed for construction of some building or

work for a Company which is engaged or about to engage itself in

any industry or work which is for a public purpose; and (3) that the

proposed acquisition is for the construction of some work that is

likely to be useful to the public. The agreement contemplated by

Section 41 is meant to ensure the compliance with these

essentialities. It is also meant to ensure that the entire cost of

acquisition is borne by and paid to the Government by the Company

concerned. Thus, it is seen that even in a case of acquisition for a

Company, public purpose is not eschewed. It follows, therefore, that

the existence or non-existence of a public purpose is not a primary

distinguishing factor between the acquisition under Part II and

acquisition under Part VII. The real point of distinction seems to be

the source of funds to cover the cost of acquisition. In other words,

the second proviso to Section 6(1) is the main dividing ground for

the two types of acquisition. This point has been stressed by this

Court in Srinivasa Co-operative House Building Society Limited Vs.

Madam G. Sastry [(1994) 4 SCC Page 675] at paragraph 12:

"...In the case of an acquisition for a company simpliciter,

the declaration cannot be made without satisfying the

requirements of Part VII. But that does not necessarily

mean that an acquisition for a company for a public

purpose cannot be made otherwise than under the

provisions of Part VII, if the cost or a portion of the cost of

the acquisition is to come out of public funds. In other

words, the essential condition for acquisition is for a

public purpose and that the cost of acquisition should be

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borne, wholly or in part, out of public funds..."

The legal position has been neatly and succinctly stated by

Wanchoo, J. speaking for the Constitution Bench in R.L.Arora Vs.

State of Uttar Pradesh [AIR (1962) SC Page 764]. This is what has

been said:

"Therefore, though the words 'public purpose' in Sections

4 & 6 have the same meaning, they have to be read in the

restricted sense in accordance with Section 40 when the

acquisition is for a company under Section 6. In one case,

the notification under Section 6 will say that the

acquisition is for a public purpose, in the other case the

notification will say that it is for a company. The proviso to

Section 6(1) shows that where the acquisition is for a

public purpose, the compensation has to be paid wholly

or partly out of public revenues or some fund controlled or

managed by a local authority. Where however the

acquisition is for a company, the compensation would be

paid wholly by the company. Though, therefore, this

distinction is there where the acquisition is either for a

public purpose or for a company, there is not a complete

dichotomy between acquisitions for the two purposes and

it cannot be maintained that where the acquisition is

primarily for a company it must always be preceded by

action under Part VII and compensation must always be

paid wholly by the company. A third class of cases is

possible where the acquisition may be primarily for a

company but it may also be at the same time for a public

purpose and the whole or part of compensation may be

paid out of public revenues or some fund controlled or

managed by a local authority. In such a case though the

acquisiton may look as if it is primarily for a company it

will be covered by that part of Section 6 which lays down

that acquisition may be made for a public purpose if the

whole part of the compensation is to be paid out of the

public revenues or some fund controlled or managed by a

local authority. Such was the case in Pandit Jhandu Lal

Vs. State of Punjab [AIR (1961) SC 343]................

.....It is only where the acquisition is for a company and

its cost is to be met entirely by the company itself that the

provisions of Part VII apply."

Thus the distinction between public purpose acquisition and

Part VII acquisition has got blurred under the impact of judicial

interpretation of relevant provisions. The main and perhaps the

decisive distinction lies in the fact whether cost of acquisition

comes out of public funds wholly or partly. Here again, even a token

or nominal contribution by the Government was held to be sufficient

compliance with the second proviso to Section 6 as held in a catena

of decisions. The net result is that by contributing even a trifling sum,

the character and pattern of acquisition could be changed by the

Government. In ultimate analysis, what is considered to be an

acquisition for facilitating the setting up of an industry in private sector

could get imbued with the character of public purpose acquisition if

only the Government comes forward to sanction the payment of a

nominal sum towards compensation. In the present state of law, that

seems to be the real position.

Whether 2nd proviso to Section 6(1) has been complied with

Now, we come back to the facts of the present case and test

the validity of acquisition, keeping in view the principles discussed

supra. First, we shall address the question argued at length-viz.,

whether there was compliance with the second proviso to Section

6(1). Obviously, if no part of compensation amount is to be paid out

of the public revenues, then, the declaration that the land was needed

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for a public purpose could not have been validly made and the

acquisition cannot be considered to be for a public purpose. As

already noticed, it was held in Somawanti's case that the notification

under Section 6(1) need not on the face of it contain a recital that the

Government had decided to bear a part of the cost of acquisition or it

was prepared to make a part of contribution. Even the absence of

budgetary provision shall not affect the validity of declaration, it was

observed. Nevertheless, there should be definite indication to the

effect that the Government is going to bear at least a part of the cost

of acquisition. Naturally, the Court has to look into the record

including pleadings and it is not impermissible to take into account

the events prior to and subsequent to the declaration. The High

Court in the findings submitted to this Court noted the statement

made on behalf of the Government that it was prepared to make

necessary budgetary allotment for the amount of compensation

payable. However, no record has been produced either before the

High Court or before this Court reflecting the Government's decision

to meet a part of the expenses of acquisition. But, that is really

immaterial as there is sufficient material to hold that the Nigam which

is undisputedly owned and controlled by the State has itself

proceeded to make payment of substantial amount towards

compensation even at the initial stages in anticipation of the interim

award that was made on 7.6.1996. Payment of Rs. 1.5 crores was

made by Respondent No. 6 (Nigam) through the General Manager,

District Industries Centre by means of a cheque dated 26.2.1996.

This gives an unequivocal pointer that the State owned Corporation,

namely the Nigam, had to bear the cost of acquisition and as a first

step, it made the payment of Rs.1.5 crores. The assurance on the

part of the State Government to sanction the funds, would indicate

that in case of deficit, the Government is prepared to make the

necessary financial provision to enable the Nigam to meet the cost of

acquisition. In the document entitled "Industrial Policy and Action

Plan, 1994" it is stated at para 7.19 that "the Nigam will work as the

nodal agency for the development of large and medium industries in

the State".

According to the appellants, the amount paid by Nigam to the

Land Acquisition Collector was out of the money received from

M/s. Arun Kumar International Limited (hereinafter referred to as 'AKI

Ltd.') towards the advance payment of the compensation amount and

it was merely passed on to the Land Acquisition Officer. It is

submitted that but for the amount provided by AKI Ltd., no funds were

available with the Nigam for making such payment. The sequence of

events coupled with the fact that the respondents have not produced

the covering letter that would have accompanied the Cheque gives

rise to a presumption of fact that the Cheque issued by the Company

towards the compensation amount was simply made over to the Land

Acquisition Officer by the Nigam. Therefore, it is stressed that the

source of funds was not public revenue, but, it was the private fund of

the beneficiary Company. On the other hand, it has been the stand of

the respondents that the Cheque issued by the Company was

towards advance lease premium and such payment was made in

terms of the Memorandum of Understanding (MOU). The High Court

found sufficient support for the plea taken by the Nigam and the State

Government from the documentary evidence viz., the receipt dated

20.2.1996 passed on to AKI Ltd., and the entries in the cash book. In

fact, the original receipt book was placed before us in the course of

hearing. There is absolutely no basis to infer that the particular

receipt was prepared at a later stage after the dispute cropped up.

Moreover, the MOU entered into between the Nigam and the two

Companies, namely, M/s B. Arun Kumar Group of Companies and

Rosy Blue of Antwerp, Belgium makes it clear that the said

Companies were willing to deposit the amount of lease premium with

the Nigam in advance. It is made clear in the sur-rejoinder affidavit

filed in the High Court and it has not been disputed that the Nigam

has been vested with the power to allot land to the industrial units,

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execute lease deeds and charge premium. True, there is nothing on

record to show that the lease premium or the advance amount

payable was determined by the time the Cheque was issued by the

Company. The payment of any amount at that stage on account of

lease premium was rather premature, but, the fact remains that under

the terms of MOU, the Companies which were parties to the MOU did

express their willingness to deposit the amount of lease premium in

advance. Viewed from another angle, no interim compensation was

determined by the time the payment was made by the Company and

there was no reference in the MOU to the compensation amount at all

and if so, there is no reason to presume that the amount was

deposited by the Company as advance compensation amount. In this

state of affairs, the High Court was well justified in relying on the

documents/books maintained in the ordinary course of business and

recording a conclusion that the Cheque for Rs.3 crores was issued by

AKI Ltd., towards advance lease premium. The non-production of

covering letter which according to the sixth respondent is not on its

record, does not clinch the issue in favour of the appellants. Taking

an overall picture, we are unable to hold that the conclusion of the

High Court in this regard is perverse or unsustainable.

It seems to be fairly clear, as contended by the learned counsel

for the appellant, that the amount paid by the Company was utilized

towards payment of a part of interim compensation amount

determined by the Land Acquisition Officer on 7.6.1996 and in the

absence of this amount, the Nigam was not having sufficient cash

balance to make such payment. We may even go to the extent of

inferring that in all probability, the Nigam would have advised or

persuaded the Company to make advance payment towards lease

amount as per the terms of MOU on a rough and ready basis, so that

the said amount could be utilized by the Nigam for making payment

on account of interim compensation. Therefore, it could have been

within the contemplation of both the parties that the amount paid by

the Company will go towards the discharge of the obligation of the

Nigam to make payment towards interim compensation. Even then, it

does not in any way support the appellants' stand that the

compensation amount had not come out of public revenues. Once the

amount paid towards advance lease premium, may be on a rough

and ready basis, is credited to the account of the Nigam, obviously, it

becomes the fund of the Nigam. Such fund, when utilized for the

purpose of payment of compensation, wholly or in part, satisfies the

requirements of the second proviso to Section 6(1) read with

Explanation 2. The genesis of the fund is not the determinative factor,

but its ownership in praesenti that matters.

Whether acquisition is for private purpose and vitated by colourable

exercise of power

We should now take up for consideration the next important

facet of the appellants' argument turning on the question of public

purpose and colourable exercise of power. The proposed acquisition,

it is contended, is primarily and predominantly meant to cater to the

interests of the respondent Company and another Company by name

Rosy Blue of Antwerp which together entered into the Memorandum

Of Understanding (MOU) with the State-owned Corporation.

However, a twist was given to the acquisition as if it were for a public

purpose, bypassing the requirements of Part VII of the Act. The entire

exercise is an instance of colourable exercise of power and is,

therefore, ultra vires the powers of the State Government. The money

for the payment of advance compensation amount came from the

source of respondent Company to whom the Government committed

itself to allot the major chunk of land. This last point has already been

dealt with by us and therefore the attention will be focused to the

other factors that have been highlighted by the learned senior

counsel for the appellants.

According to the learned senior counsel, the following facts and

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circumstances (apart from the source of payment of compensation),

leads to a natural and logical inference that the acquisition, though

styled as a public purpose acquisition, was in reality meant to

subserve a private purpose.

It all started with the personal and written representation on

behalf of AKI Ltd. (R-9/R-10) on 13.9.1995. The very next day, the

Additional Secretary in the Industries Department conveyed to the

Commissioner, Indore Division the assurance given by the Chief

Minister that suitable land of an extent of 150-200 acres near Indore

will be allotted for starting a new ultra modern unit for diamond

polishing and processing. It was indicated in the letter that the

Company proposed to lay foundation stone for its proposed unit on 1st

November, 1995. The Additional Secretary, therefore, requested the

Commissioner to ensure prompt and early administrative action so as

to fulfill the assurance given by the Chief Minister to the Company's

representatives. Within a week, i.e., on 22.9.1995, there was joint

inspection by various State Government officials on the basis of

which the appellants' land was selected despite the objection by the

Zonal Pollution Officer. On 1.11.1995, a Memorandum Of

Understanding was signed by the representatives of the Nigam on

the one hand and M/s B. Arun Kumar Group of Companies and Rosy

Blue of Antwerp, Belgium on the other. According to that MOU, 200-

260 acres will be acquired and will be made available among others

to the said two Companies who were willing to deposit lease premium

in advance. The Nigam agreed to provide water and power facilities

and assist the signatory Companies to obtain necessary sanctions. It

also agreed to provide equity share capital if requested by the

Company. On 22.1.1996, a letter was addressed by the General

Manager, District Industries Centre requesting the Collector, Indore

for acquisition of 73.304 hectares of private land apart from

transferring the Government land of an extent of 44.816 hectares.

According to the synopsis furnished by the appellants' counsel, this

letter clearly shows that the acquisition was for a Company registered

under the Companies Act. However, it may be clarified at this

juncture that the letter dated 22.1.1996 which finds its place at Page

No. 114 of the Paper-book in C.A.No. 7135 of 1999 is something

different and it does not bear testimony to the fact alleged by the

appellants. On 24.1.1996, the Collector requested the

Commissioner's sanction for invoking Section 17(1). The

Commissioner by his communication dated 29.1.1996, gave his

approval to invoke emergency clause under Section 17(1) of the Act.

The Collector issued the Notification under Section 4(1) for the

acquisition of the appellants' land as well as other adjoining lands for

the public purpose, to wit, 'for establishment of diamond park'.

Section 17(1) was invoked in order to dispense with the enquiry

under Section 5A. On 9.2.1996, a Notification under Section 6 was

issued and the Collector was directed to take possession within

stipulated time.

The above facts, according to the learned counsel for the

appellants, would reveal that the machinery under the Land

Acquisition Act was set in motion in record time to comply with the

request of 9th/10th Respondent and the formalities were completed in

post-haste solely with a view to enable the Company to go ahead

with its proposed project.

The learned Advocate-General appearing for the State of

Madhya Pradesh and also for the sixth respondent Corporation

(Nigam) countered the above arguments by placing reliance inter alia

on the findings of the High Court. He stressed on the policy of the

State Government and the genuine effort made by the State

Government and its agencies to develop the notified land to facilitate

the establishment of diamond cutting and processing units with

modern technology. He submitted that public purpose is writ large on

the face of the acquisition and the Government is committed to

pursue the project in public interest notwithstanding the

disinterestedness of the respondent-Company owing to the delay that

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occurred.

On a deep consideration of the respective contentions in the

light of the documents and events relied upon and the settled

principles adverted to supra, we have no doubt in our mind that the

acquisition was thought of with the earnest objective to achieve

industrial growth of the State in public interest. Quite apart from the

view taken by this Court that acquisition in order to enable a

Company in private sector to set up an industry could promote public

purpose, we have enough material in the instant case to conclude

that the proposed acquisition will serve larger public purpose. It is

fairly clear that the State's goal to bring into existence a huge

industrial complex housing a good number of diamond cutting and

polishing units has led to the present acquisition. Such industrial

complex is compendiously termed as 'diamond park'. The State

Government and its agencies including the Nigam acted within the

framework of the 'Industrial Policy and Action Plan, 1994' in taking

the decision to develop diamond park complex. Para 2.22 of the

Industrial Policy specifically states that "the diamond park will be

developed in the State for industries based on diamond cutting".

Mineral based industries have been brought within the scope of

'thrust sector'. Export oriented units will be specially encouraged,

according to the policy. The policy further states that the Nigam will

work as a nodal agency for the development of large and medium

industries in the State and will play the role of a coordinator for the

development of industrial infrastructure in growth sectors in

partnership with the private sector and Industrialists' associations.

The reference to Industrial Policy is found in the resolution passed at

the meeting of Nigam on 23.11.1995 and the letter of the General

Manager, District Industries Centre while forwarding the proposal for

acquisition to the District Collector, Indore. The District Collector while

seeking the approval of the Commissioner stressed that prestigious

exporters from India as well as other foreign countries were likely to

establish their units in the diamond park which would generate good

deal of foreign exchange and create employment potential. The State

Government by its communication dated 18.1.1996 accorded

sanction in principle for acquiring the private land measuring 73

hectares in Rangwasa village 'for industrial purpose' in order to set

up a diamond park. Thus, the considerations of industrial policy and

development weighed prominently with all the concerned authorities

while processing the proposals. It is clear from the stand taken by the

Nigam in the counter-affidavit and the enquiry report of the Land

Acquisition Collector that AKI Ltd., and Rosy Blue of Antwerp are not

the only entrepreneurs who would get the land in the proposed

diamond park area. In the report of the Land Acquisition Officer, it is

specifically mentioned that the land is proposed to be allotted to 12

industrial units after being satisfied about their capacity and bona

fides. Our attention has been drawn by the learned Advocate-General

to the lay out plan in which 12 plots covering an area of 57 hectares

are laid out. The remaining area is earmarked for green belt, housing,

common facilities and other amenities. Even the MOU entered into

between the Nigam and the two Companies do not give us a different

picture. It is specifically stated therein that the Commerce and

Industries Department will handover the land to Nigam for the

development of diamond park and the Nigam in its turn will allot the

land required for setting up the units for cutting and polishing

diamonds on leasehold basis to the two Companies as well as other

Companies. The site has been selected by a team of Government

officials after visiting various places. The fact that AKI Ltd., also

requested for allotment of suitable land near Indore and ultimately the

land close to Indore was selected, does not necessarily mean that the

official team was acting at the dictates of the said Company. Having

regard to the strategic location and importance of Indore city, the

choice of site near Indore cannot be said to be vitiated by any

extraneous considerations. Entering into MOU with the two

Companies and thereafter initiating requisite steps for the acquisition

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of the land does not, in our view, detract from the public purpose

chara

cter of acquisition. MOU, in ultimate analysis, is in the mutual

interest of both the parties and was only directed towards the end of

setting up of an industrial complex under the name of 'diamond park'

which benefits the public at large and incidentally benefits the private

entrepreneurs. One cannot view the planning process in the abstract

and there should be a realistic approach. Industrial projects and

industrial development is possible only when there is initiative,

coordination and participation on the part of both the private

entrepreneurs as well as the Governmental agencies. The active role

and initiative shown by AKI Ltd., cannot give a different colour to the

acquisition which otherwise promotes public purpose. The expression

'foreign collaboration' used in some of the letters which the learned

Advocate-General states, is somewhat inappropriate, does not

negative the existence of public purpose.

Much of support has been drawn by the learned counsel for the

appellant from the letter dated 14.9.1995 addressed by the Additional

Secretary, Industries Department, to the Commissioner, Indore soon

after the meeting of the representatives of AKI Ltd., with the Chief

Minister and other senior officials. Much of the argument has been

built up on it to characterize the acquisition as one for private

purpose. We find no legal basis for such comment. The wording of

the letter read in isolation may convey the impression that the Chief

Minister assured allotment of 150 to 200 acres of land to AKI Ltd., for

starting its modern diamond unit. But, it is fairly clear from the

subsequent acts and correspondence including MOU that the land

sought for was in connection with the proposal for a diamond park

project in which not only AKI Ltd., but also other Companies or firms

are to set up the diamond cutting and polishing industries with

modern technology. Pursuant to the alleged assurance, no offer was

made nor any steps taken to handover 150 acres of land to AKI Ltd.

The said letter may be the starting point for action, but, as already

noticed the authorities concerned proceeded to acquire the land for

the public purpose within the framework of Land Acquisition Act. The

contents of the letter, literally read, were not translated into action.

But, it only provided a starting point to proceed with the acquisition for

industrial purpose.

We are of the view that none of the factors pointed out by the

learned counsel for the appellants make any dent on the orientation

towards public purpose nor do they establish that the acquisition was

resorted to by the Government to achieve oblique ends. The speed at

which the proposal was pursued should be appreciated rather than

condemning it, though the overzealousness on the part of authorities

concerned to short-circuit the procedure has turned out to be counter-

productive. True, the tardy progress of acquisition would have sent

wrong signals to the prospective investors, as contended by the

learned Advocate-General. However, due attention should have been

given to the legal formalities such as holding of enquiry, specification

of public purpose in clear terms and giving sufficient indication of

State meeting the cost of acquisition wholly or in part. At the same

time, we cannot read mala fides in between the lines; in fact, no

personal malice or ulterior motives have been attributed to the Chief

Minister or to any other official. The material placed before us do not

lead to the necessary or even reasonable conclusion that the

Government machinery identified itself with the private interests of the

Company, forsaking public interest. Public purpose does not cease to

be so merely because the acquisition facilitates the setting up of

industry by a private enterprise and benefits it to that extent. Nor the

existence or otherwise of public purpose be judged by the lead and

initiative taken by the entrepreneurs desirous of setting up the

industry and the measure of coordination between them and various

state agencies. The fact that despite the unwillingness expressed by

AKI Ltd., to go ahead with the project, the Government is still

interested in acquisition is yet another pointer that the acquisition was

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motivated by public purpose.

Whether notifications should be struck down on the ground of

vagueness of public purpose

The vagueness of notified public purpose is the next ground of

attack against the notifications issued under Sections 4(1) and 6.

According to the learned counsel for the appellant, the expression

"establishment of diamond park" is vague and unintelligible and

therefore deprives the landholders and the general public of the

valuable right to object to the acquisition on relevant grounds. It is

further contended that the elaboration of the public purpose in the

notice of enquiry issued under Section 5-A by the Land Acquisition

Officer does not cure the vital defect in the notification under Section

4(1) which is an essential prerequisite for all further action under the

Act. Hence it is contended that the notification under Section 4

together with the subsequent proceedings become null and void. The

sheet-anchor of this argument rests on the decision of this Court in

Madhya Pradesh Housing Board Vs. Md. Shafi [(1992) 2 SCC 168].

There, the public purpose was described as 'residential' without even

giving definite indication of the exact location of the lands sought to

be acquired. What is more, in the declaration under Section 6(1), the

public purpose was stated differently as 'housing scheme of Housing

Board'. This Court, inter alia, held that the impugned notification was

vitiated on account of being vague. The Court observed:

"Apart from the defect in the impugned notifiation, as

noticed above, we find that even the "public purpose"

which has been mentioned in the schedule to the

notification as 'residential' is hopelessly vague and

conveys no idea about the purpose of acquisition

rendering the notification as invalid in law. There is no

indication as to what type of residential accommodation

was proposed or for whom or any other details. The State

cannot acquire the land of a citizen for building some

residence for another, unless the same is in 'public

interest' or for the benefit of the 'public' or an identifiable

section thereof. In the absence of the details about the

alleged 'public purpose' for which the land was sought to

be acquired, no one could comprehend as to why the land

was being acquired and therefore was prevented from

taking any further steps in the matter."

The Court relied on the observation in Munshi Singh Vs. Union of

India [(1973) 1 SCR Page 973] to the effect that the public purpose

"needs to be particularized" to satisfy the requirements of law.

We do not think that the ratio of the decision in M.P. Housing

Board's case would come to the rescue o the appellants. Though the

State Government could have discreetly avoided to use sophisticated

industrial jargon, we do not think that the specified public purpose is

so vague and indefinite that the public will not be in a position to

understand its nature and purpose. That such terminology has gained

currency is evident from the fact that the same expression was used

in the Industrial Policy document. It may not be out of place to

mention that in the recent times, the terminology such as Industrial

Park, Information Technology Park is widely in circulation. Moreover,

against the column 'authorised officer under Section 4(2)' (close to

the column 'public purpose'), the designation of Manager, District

Industries Centre, Indore is specified. This is a pointer to the fact that

the land was being acquired for industrial purpose. We are therefore

of the view that in the instant case, the alleged vagueness is not of

such a degree as to defy sense and understanding.

In Aflatoon Vs. Lt. Governor of Delhi [(1975) 4 SCC Page 285]

the public purpose mentioned in the notification under Section 4 was

"planned development of Delhi". The challenge on the ground of

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vagueness of the notification was repelled on several grounds. The

approach of the Court and the crucial consideration to be kept in view

in dealing with this question was highlighted by Mathew, J. speaking

for the Constitution Bench in the following words:

"...According to the Section (Section 4), therefore, it is

only necessary to state in the notification that the land is

needed for a public purpose. The wording of Section 5A

would make it further clear that all that is necessary to be

specified in a notification under Section 4 is that the land

is needed for a public purpose. One reason for

specification of the particular public purpose in the

notification is to enable the person whose land is sought

to be acquired to file objection under Section 5A. Unless a

person is told about the specific purpose of the

acquisition, it may not be possible for him to file a

meaningful objection against the acquisition under

Section 5A. .......

We think that the question whether the purpose specified

in a notification under Section 4 is sufficient to enable an

objection to be filed under Section 5A would depend upon

the facts and circumstances of each case."

Absence of prejudice was highlighted in Paragraph 10 thus:

"That apart, the appellants did not contend before the

High Court that as the particulars of the public purpose

were not specified in the notification issued under Section

4, they were prejudiced in that they could not effectively

exercise their right under Section 5A."

On the facts of the case, it is not possible to draw the

conclusion that the appellants have suffered any prejudice or

handicap on account of the alleged vagueness in the description of

public purpose. First of all, the appellants did not, in the pleadings

before the High Court, point out as to how the alleged ambiguity or

vagueness had resulted in prejudice in the sense that they could not

effectively object to the acquisition. On the other hand, the appellants

filed detailed objections before the Land Acquisition Officer covering

each and every aspect. The objections and representations filed

from time to time would unequivocally indicate that they were fully

aware of the exact purpose of acquisition. Raising the bogey of

vagueness in public purpose is evidently a result of after-thought.

Moreover, by virtue of what is stated in the notices issued by the

Land Acquisition Officer under Section 5A of the Act, no one could

possibly have any doubt about the exact purpose of acquisition. True,

it is not open to the Land Acquisition Officer to alter or expand the

scope of public purpose as it is within the exclusive domain of the

Government. But the Land Acquisition Officer by elaborating and

making explicit what is really implicit in the notification under Section

4(1), had only dispelled the possible doubts in this regard so that no

one will be handicapped in filing objections. It is in that light the step

taken by the Land Acquisition Officer has to be viewed. We cannot

countenance the contention that in doing so, the Land Acquisition

Officer outstepped his jurisdiction.

When no prejudice has been demonstrated nor could be

reasonably inferred, it would be unjust and inappropriate to strike

down the notification under Section 4(1) on the basis of a nebulous

plea, in exercise of writ jurisdiction under Article 226. Even assuming

that there is some ambiguity in particularizing the public purpose and

the possibility of doubt cannot be ruled out, the Constitutional Courts

in exercise of jurisdiction under Article 226 or 136 should not, as a

matter of course, deal a lethal blow to the entire proceedings based

on the theoretical or hypothetical grievance of the petitioner. It would

be sound exercise of discretion to intervene when a real and

substantial grievance is made out, the non redressal of which would

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cause prejudice and injustice to the aggrieved party. Vagueness of

the public purpose, especially, in a matter like this where it is possible

to take two views, is not something which affects the jurisdiction and

it would therefore be proper to bear in mind the considerations of

prejudice and injustice.

Objection on the ground of ecological and security considerations

The last contention is that the proposed diamond park complex

will be objectionable from the point of view of ecology and national

security. Reliance is placed on some of the guidelines spelt out in the

"Policy Statement for Abatement of Pollution" issued by Government

of India, Ministry of Environment and Forests in the year 1992. At the

outset, we must take note of the undisputed fact that the diamond

cutting and polishing equipment and the operations connected

therewith does not give rise to any pollution caused by emission of

fumes, noise or discharge of effluents. The problem of air, water or

soil pollution excepting to a minimal extent, caused on account of

inhabitation and transportation, will not arise. The appellants,

however, relied on the guidelines in order to contend that in locating

the industries, a distance of 25 KMs from ecologically and/or

otherwise sensitive areas should be maintained. It is submitted that

the MHOW-a Defence establishment is within 10 KMs distance and

the Centre for Advanced Technology (Department of Atomic Energy)

is 3 kilo meters from the proposed site of diamond park. However, it

is on record that the Army Headquarters expressed no objection from

military security point of view for setting up the diamond park. So

also, the Centre for the Advanced Technology in its letter addressed

to the Managing Director of the Nigam made it clear that the

establishment of diamond park would not cause any security

problems to the said Centre. The Union Minister of State in the

Ministry of Defence also stated on the floor of the Rajya Sabha on

11.9.1996 that there were no direct national security implications

involved in the setting up of the proposed project. It is also pertinent

to note that in the guidelines themselves, the need to strike a balance

between economic and environmental considerations has been

stressed. One of the guidelines is that no prime agricultural lands

shall be converted into industrial site. But, there is no material on

record to show that the lands in question are prime agricultural lands

which were being utilized for growing crops. The guidelines

enunciated in the policy statement have to be viewed realistically.

The topography of the area and the development around the area are

some of the factors that could be legitimately taken into account. On

the basis of the materials placed before the Court it is not possible to

hold that the proposed diamond park project will be detrimental to

public health, safety or security so as to override the public interest

that is served by setting up export-oriented industries. We have,

therefore, no hesitation in rejecting this contention.

Objection regarding acquisition of excess land

Before parting with the case, we may advert to one more

contention advanced by the learned counsel for the appellant which is

really a facet of the argument on the question of public purpose. It is

contended that such a vast extent of land is in fact not required by

any reasonable standards and there was total non application of mind

as regards the extent of the land required. In reply to this, the learned

Advocate-General has drawn our attention to the Lay Out Plan and

pointed out that it was only on the basis of an assessment of the

requirements, the extent of land to be acquired has been arrived at.

Excepting oral assertions and bald averments, there is no material

before us to reach the conclusion that the requirements were not

properly assessed by the concerned authorities. It is primarily within

the domain of State Government to decide how much extent of land

has to be acquired keeping in view the present and future needs.

Though, we are not inclined to find fault with the notification on this

ground, we would only like to observe that it is desirable that the

State Government makes a fresh assessment in the light of the latest

situation and exclude any part of the land which may be found to be

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in excess.

For the reasons aforesaid, the appeals are dismissed with no

order as to costs.