Acquisition law upheld for public purpose, reasonable compensation scheme, and pith-and-substance legislative competence with limited reading down.

An acquisition law for contract carriages, permits and connected assets was analysed as serving a public purpose because it aimed to curb misuse, improve passenger transport, and place the service under public control. The compensation scheme was upheld because, although inadequacy of amount was not open to challenge, the statute still provided a reasonable mechanism through agreement, arbitration, scheduled factors, liability deductions, and court review, so it was not arbitrary or illusory. On legislative competence, the law was treated in pith and substance as an acquisition measure, with only incidental overlap into inter-State trade; however, the countersigned portion of an inter-State permit was read down as beyond acquisition, while Karnataka-linked vehicles and permits remained validly covered.

---

---

Issues: (i) whether the acquisition of contract carriages, permits and connected assets was for a public purpose within Article 31(2); (ii) whether the statutory scheme for determination and payment of the amount was arbitrary or illusory; and (iii) whether the Act was beyond legislative competence insofar as it dealt with inter-State permits and routes.

Issue (i): Whether the acquisition of contract carriages, permits and connected assets was for a public purpose within Article 31(2).

Analysis: The declaration of public purpose in the Act had to be judged from its objects, preamble and operative provisions. The acquisition was aimed at preventing misuse of contract carriages, improving passenger transport, and bringing the service under public control. Public purpose is not confined to cases of urgent necessity or to acquisitions of items unavailable in the market. The means chosen by the State, including compulsory acquisition of property for a public transport undertaking, did not negate the public character of the object.

Conclusion: The acquisition was held to be for a public purpose and the challenge on that ground failed.

Issue (ii): Whether the statutory scheme for determination and payment of the amount was arbitrary or illusory.

Analysis: Article 31(2), as amended, excludes challenge on the ground of inadequacy of the amount, but the amount cannot be arbitrary or illusory. The Act provided for determination by agreement or arbitration, consideration of the Schedule, deductions of specified liabilities including claims of secured creditors, payment to persons interested, and an appeal to the High Court. Read harmoniously, the provisions left room for a just and reasonable amount and did not compel a confiscatory or illusory result.

Conclusion: The statutory compensation scheme was upheld as constitutionally valid and the attack based on illusory compensation failed.

Issue (iii): Whether the Act was beyond legislative competence insofar as it dealt with inter-State permits and routes.

Analysis: In pith and substance the Act was one of acquisition of property under Entry 42 of List III. Any encroachment upon inter-State trade and commerce was incidental. However, the countersigned portion of an inter-State permit, being in substance a separate permit operative outside Karnataka, could not validly be acquired, and the Act had to be read down to that extent. Vehicles kept and registered in Karnataka with permits initially granted by that State could validly be acquired.

Conclusion: The Act was substantially within legislative competence, subject to reading down so as to exclude acquisition of the countersigned portion of inter-State permits and vehicles not properly connected with Karnataka.

Final Conclusion: The High Court's judgment striking down the Act was set aside, the appeals were allowed, and the acquisition law was upheld in substance, with a limited reading down on the inter-State permit aspect.

Ratio Decidendi: An acquisition law is valid if it serves a public purpose, provides a non-illusory amount through a reasonable statutory scheme, and remains within legislative competence in pith and substance, with incidental encroachment curable by reading down.

---