Compulsory acquisition must rest on objectively established public purpose and just compensation, not arbitrary statutory ceilings.

Article 31(2) required compulsory acquisition for a public purpose to rest on an objectively established public purpose, so a statutory provision making the Government's declaration conclusive evidence of such purpose was unconstitutional and void. The Court also held that compensation had to be a just equivalent for the property taken; a proviso capping compensation by reference to 31 December 1946, without regard to value at the time of acquisition, could operate arbitrarily and deny full indemnification. That compensation formula was therefore unconstitutional and void, and the High Court's declaration of invalidity was maintained.

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Issues: (i) Whether the provision making the Government's declaration conclusive evidence that the land was needed for a public purpose was protected by Article 31(5) and Article 31(6) of the Constitution of India. (ii) Whether the proviso limiting compensation by reference to the market value on 31 December 1946 was consistent with Article 31(2) of the Constitution of India.

Issue (i): Whether the provision making the Government's declaration conclusive evidence that the land was needed for a public purpose was protected by Article 31(5) and Article 31(6) of the Constitution of India.

Analysis: Article 31(2) required that acquisition for a public purpose rest on an objectively established public purpose. A conclusive declaration by the Government could not displace that constitutional requirement. Article 31(5) saved existing laws, but Article 31(6) showed that a State law enacted within eighteen months before the commencement of the Constitution was not automatically protected unless it had been submitted to the President and certified. Read together, the two clauses did not save the impugned provision from scrutiny under Article 31(2).

Conclusion: The provision making the Government's declaration conclusive evidence of public purpose was unconstitutional and void.

Issue (ii): Whether the proviso limiting compensation by reference to the market value on 31 December 1946 was consistent with Article 31(2) of the Constitution of India.

Analysis: Compensation under Article 31(2) had to be a just equivalent of the property taken. Although the legislature had discretion to prescribe principles for determining compensation, those principles had to ensure full indemnification. A permanent ceiling fixed by reference to an anterior date, without regard to the value at the time of acquisition, could operate arbitrarily and deny the owner the real value of the property acquired. Such a ceiling could not satisfy the constitutional requirement of compensation.

Conclusion: The proviso fixing 31 December 1946 as the maximum basis for compensation was unconstitutional and void.

Final Conclusion: The appeal failed because the challenged compensation provision and the conclusive declaration provision could not be sustained under the Constitution, and the High Court's declaration of invalidity was maintained.

Ratio Decidendi: Compensation for compulsory acquisition must amount to a just equivalent, and any statutory principle that arbitrarily fixes compensation at a level unrelated to the value at the time of acquisition is unconstitutional.

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