1967 (9) TMI 145 - SC - Indian Laws

Supreme Court declares Section 8(3)(b) unconstitutional, emphasizes fundamental rights protection

The Supreme Court held that Section 8(3)(b) of the Requisitioning and Acquisition of Immovable Property Act, 1952, was unconstitutional as it failed to ... Just equivalent - compensation for acquisition - constitutional validity under Article 31(2) - mandatory valuation modes - arbitrator's duty under 'have regard to' - delay and maintainability of constitutional remedyArbitrator's duty under 'have regard to' - mandatory valuation modes - The phrase 'and in making the award, he shall have regard to the circumstances of each case and the provisions of subsections (2) and (3), so far as they are applicable' in s. 8(1)(e) does not render the valuation modes in s. 8(3) directory; the arbitrator is bound by the mandatory modes prescribed. - HELD THAT: - The Court rejected the appellant's contention that the opening portion of s. 8(1)(e) was mandatory while the latter part referring to sub-sections (2) and (3) was merely directory. The language of s. 8 shows that the matters in sub-s. (2) are incidental and sub-s. (3) prescribes the measure of just equivalent; hence the words in sub-s. (1)(e) compel the arbitrator to have regard to and be guided by sub-ss. (2) and (3). The Court held that the expression 'have regard to' must be read in its context and does not confer a discretion to ignore the mandatory modes of valuation laid down in sub-s. (3). Consequently the arbitrator has no freedom to choose methods other than those prescribed by s. 8(3).The arbitrator is bound to apply the valuation modes in s. 8(3); the phrase 'have regard to' does not make those modes merely directory.Constitutional validity under Article 31(2) - just equivalent - mandatory valuation modes - Clause (b) of s. 8(3) (the formula of 'twice the price on date of requisition' and the 'whichever is less' rule) is arbitrary and exceeds the constitutional guarantee of 'just equivalent' under Article 31(2), and is therefore ultra vires. - HELD THAT: - Applying established precedents (including Bela Banerjee, State of Madras v. D. Namasivaya Mudaliar and related decisions), the Court emphasised that 'compensation' under Article 31(2) means a just equivalent and that legislative principles for ascertaining compensation must ensure full indemnification. Clause (b) of s. 8(3) prescribes a frozen ex post valuation-twice the market price on the date of requisition-as a cap irrespective of the market value on the date of acquisition. The Court found no rational nexus between that formula and the property's true value at acquisition; it thus arbitrarily denies owners increments in value and fails to secure the just equivalent guaranteed by Article 31(2). For these reasons clause (b) (including the words 'whichever is less') was held unconstitutional.Clause (b) of s. 8(3) is arbitrary and void for being inconsistent with the requirement of a 'just equivalent' under Article 31(2).Delay and maintainability of constitutional remedy - Delay in filing the petition under Article 226 did not bar relief where a fundamental right was infringed; the High Court rightly refused to refuse relief on the ground of delay. - HELD THAT: - The High Court exercised its discretion to entertain the petition despite the interval between acquisition proceedings and the petition, observing that in cases alleging infringement of a fundamental right mere delay would not ordinarily defeat maintainability. The Supreme Court declined to interfere with that discretionary exercise, noting that reversal would require demonstration that the High Court acted on a wrong principle, committed an error of law, or failed to consider matters demanding consideration; no such misdirection was shown.The High Court did not err in declining to refuse relief on the ground of delay; its discretion in the matter was properly exercised.Final Conclusion: The appeal is dismissed. The Court affirmed that the arbitrator is bound by the mandatory valuation modes in s. 8(3), declared clause (b) of s. 8(3) including 'whichever is less' to be ultra vires Article 31(2), and declined to disturb the High Court's exercise of discretion in entertaining the petition despite delay. Issues Involved:1. Constitutionality of Section 8(3)(b) of the Requisitioning and Acquisition of Immovable Property Act, 1952.2. Delay in filing the petition under Article 226 of the Constitution.Issue-Wise Detailed Analysis:1. Constitutionality of Section 8(3)(b) of the Requisitioning and Acquisition of Immovable Property Act, 1952:The Supreme Court examined the constitutionality of Section 8(3)(b) of the Requisitioning and Acquisition of Immovable Property Act, 1952, which stipulates that compensation for acquired property should be the lesser of either the price the requisitioned property would have fetched in the open market if sold on the date of acquisition or twice the price it would have fetched if sold on the date of requisition.The Court referred to the preamble and various sections of the Act, noting that the Act was designed to provide for the requisitioning and acquisition of immovable property for the Union. The Court emphasized that the Act must be analyzed in the context of the Constitution as it stood before the Fourth Amendment Act of 1955.Several precedents were cited, including:- The State of West Bengal v. Mrs. Bela Banerjee and others ([1954] S.C.R. 558): The Court held that compensation under Article 31(2) must be a 'just equivalent' of the property acquired and that fixing an anterior date for valuation without reference to the acquisition date was arbitrary.- State of Madras v. D. Namasivaya Mudaliar ([1964] 6 S.C.R. 936): The Court ruled that fixing compensation based on an outdated market value was arbitrary and inconsistent with Article 31(2) as it stood before the Fourth Amendment.- P. Vajravelu Mudaliar v. Special Deputy Collector ([1965] 1 S.C.R. 614): Reaffirmed that compensation must be a 'just equivalent' of the property.The Court concluded that Section 8(3)(b) was arbitrary as it mandated compensation based on the lesser of two valuations, one of which (twice the price on the date of requisition) had no rational basis. This method did not provide a just equivalent of the property at the time of acquisition, thus violating Article 31(2). The Court stated, 'Clause (b) of sub-s. (3) of s. 8 leaves the arbitrator no choice of assessing the value in terms of cl. (a) even if he was of opinion that the mode fixed thereunder afforded a just equivalent of the property to its owner.'2. Delay in Filing the Petition under Article 226 of the Constitution:The Union of India argued that the petition should be dismissed due to the delay in its filing. The High Court had rejected this argument, noting that while the original acquisition occurred on April 4, 1953, the arbitrator was appointed on June 21, 1961, and the petitioner approached the Court on September 18, 1962.The Supreme Court upheld the High Court's decision, stating that in cases of fundamental rights infringement, mere delay does not affect the maintainability of the petition. The Court emphasized, 'In appeal, we do not feel disposed to take a different view. If the High Court had any discretion in the matter-and it is not suggested that it had not-the exercise of such discretion ought not to be over-ruled by us unless we are satisfied that the High Court had 'acted on some wrong principle or committed some error of law or failed to consider matters which demand consideration.''Conclusion:The Supreme Court dismissed the appeal, affirming the High Court's judgment that Section 8(3)(b) of the Requisitioning and Acquisition of Immovable Property Act, 1952, was ultra vires Article 31(2) of the Constitution. The Court also upheld the High Court's decision to condone the delay in filing the petition, emphasizing the importance of addressing fundamental rights violations. The appeal was dismissed with costs.