Company acquisition under Chapter VII: withdrawal under Section 48 cannot rest on a mistaken view of law or arbitrary reasoning.

In a company acquisition under Chapter VII of the Land Acquisition Act, the State could not lawfully withdraw from acquisition under Section 48 on the mistaken premise that government contribution was required. The acquisition was governed by the company-acquisition scheme because the entire cost was to be borne by the company, with the agreement and declaration under the Act and the Companies Rules already in place. A Section 4 notification describing the object as a public purpose did not change that legal character. The withdrawal was arbitrary, not bona fide, and based on a misconstruction of law, so it was held unlawful.

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Issues: Whether the State Government could withdraw from acquisition under Section 48 of the Land Acquisition Act in a case where the land had been acquired for a company under Chapter VII, and whether the withdrawal could be upheld on the stated ground that no part of the acquisition cost was to be borne by the Government.

Analysis: The acquisition was held to be one for a company, since the entire cost was to be borne by the appellant and the proceedings had progressed under Chapter VII, including the agreement and declaration under the Act and the Companies Rules. The fact that the Section 4 notification described the purpose as a public purpose did not alter the legal character of the acquisition in light of the later declaration and the scheme actually invoked. The State's reliance on general observations regarding withdrawal under Section 48 was rejected because that power, though wide, is not absolute and cannot be exercised on a mistaken view of the law. A decision founded on the erroneous assumption that some public contribution was necessary in a company acquisition was arbitrary and not bona fide.

Conclusion: The withdrawal from acquisition was unlawful and the challenge by the appellant succeeded.

Ratio Decidendi: In a company acquisition under Chapter VII, the State's power to withdraw from acquisition under Section 48 is subject to judicial review and cannot be sustained when exercised on a misconstruction of the governing law or in an arbitrary manner.

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