TaxTMI 
TaxTMI 
1970 (2) TMI 130
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...., R. H. Dhebar and S. P. Nayar, S. Mohan Kumaramangalam and A. V. Rangam, Lal Narain Sinha, Advocate-General, Bihar, R. K. Garg and D. P. Singh, V. K. Krishna Menon, M. R. K. Pillai and D. P. Singh, P. Ram Reddy and P. Parameswara Rao, for intervener No. 6. M. C. Chagla, Santosh Chatterjee and G. S. Chatterjee JUDGMENT SHAH J. A. N. RAY, J. gave a dissenting Opinion. Shah, J. Rustom Cavasjee Cooper-hereinafter called 'the petitioner'-holds shares in the Central Bank of India Ltd., the Bank of Baroda Ltd., the Union Bank of India Ltd., and the Bank of India Ltd., and has accounts-current and fixed deposit -with those Banks : he is also a director of the Central Bank of India Ltd. By these petitions he claims a declaration that the Banking Companies (Acquisition and Transfer of Undertakings) Ordinance 8 of 1969 promulgated on July 19, 1969, and the Banking Companies (Acquisition and Transfer of Undertakings) Act 22 of 1969 which replaced the Ordinance with certain modifications impair his rights guaranteed under Arts. 14, 19 and 31 of the Constitution, and are on that account invalid. In India there was till 1949 no comprehensive legislation governing banking busi....
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....to commercial banks and to appoint directors or observers in the interest of depositors or proper management of the Banking Companies, or in the interest of Banking policy (which expression was defined by s. 5 (ca) as "any policy which is specified from time to time by the Reserve Bank in the interest of the banking system or in the interest of monetary stability or sound economic growth, having due regard to the interests of the depositors, volume of deposits and other resources of the bank -and the need for equitable allocation and the efficient use of these deposits and resources". The Reserve Bank was also invested with power to remove managerial and other personnel from office and to appoint additional directors, and to issue directions prohibiting certain activities in relation to Banking Companies. The Central Government was given power to acquire the business of any Bank if it failed repeatedly to comply with any direction issued by the Reserve Bank under certain specific provision in regard to any matter concerning the affairs of the Bank and if acquisition of the Bank was considered necessary in the interest of the depositors or in the interest of the banking policy or fo....
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.... meaning " a banking company specified in column 1 of the First Schedule, being a company the deposits of which, as shown in the return as on the last Friday of June, 1969, furnished to the Reserve Bank under section 27 of the Banking Regulation Act, 1949, were not less than rupees fifty crores". In the Schedule to the Act were included the names of fourteen commercial banks 1. The Central Bank of India Ltd. 2. The Bank of India Ltd. 3. The Punjab National Bank Ltd. 4. The Bank of Baroda Ltd. 5. The United Commercial Bank Ltd. 6. Canara Bank Ltd. 7. United Bank of India Ltd. 8. Dena Bank Ltd. 9. Syndicate Bank Ltd. 10. The Union Bank of India Ltd. 11. Allahabad Bank Ltd. 12. The Indian Bank Ltd. 13. The Bank of Maharashtra Ltd. 14. The Indian Overseas Bank Ltd. These banks are hereinafter referred to as the named banks. A "corresponding new bank" was defined in relation to an existing bank as meaning "the body corporate specified against such bank in column 2 of the First Schedule". By s. 2 (g) it was provided that the words and expressions used in the Ordinance and not defined, but defined in the Banking Regulation Act, 1949, had the....
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....p the affairs of that bank. All contracts, deeds, bonds, agreements, powers of attorney, grants of legal representation and other instruments of whatever nature subsisting or having effect immediately before the commencement of the Ordinance, and to which the named bank is a party or which are in favour of the named bank shall be of as full force and effect against or in favour of the corresponding new bank, and be enforced or acted upon as fully and effectively as if in the place of the named bank the corresponding new bank is a party thereto or as if they are issued in favour of the corresponding new bank. In pending suits or other proceedings by or against the named bank, the corresponding new bank shall be substituted in those suits or proceedings. Any reference to any named bank in any law, other than the Ordinance, or in any contract or other instrument shall be construed as a reference to the corresponding new bank in relation to it. (3) The Central Government shall have power to frame a scheme for carrying out the provisions of the Act, and for that purpose to make provisions for the corresponding new banks relating to capital structure, constitution of the Board of Dire....
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....ecutive officer ceased to hold office and assumed the office of Custodian of the corresponding new bank, its directors vacated office; and the services of the administrative and other staff stood transferred to the corresponding new bank. The named bank had thereafter no assets, no business, and no managerial, administrative or other staff, it was incompetent to use the word "Bank" in its name, because of the provisions contained in s. 7 (1) of the Banking Regulation Act, 1949, and was liable to be dissolved by a notification of the Central Government. Petitions challenging the competence of the President to promulgate the Ordinance were lodged in this Court on July 21, 1969. But before the petitions could be heard by this Court, a Bill to enact provisions relating to acquisition and transfer of undertakings of the existing banks was introduced in the Parliament, and was enacted on August 9, 1969, as "The Banking Companies (Acquisition and Transfer of Undertakings) Act 22 of 1969". The long title of the Act was in terms identical with the long title of the Ordinance. By sub-s. (1) of s. 27 of the Act, Ordinance 8 of 1969 was repealed. In the First Schedule were included the-name....
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....erence to the corresponding new bank in relation to it, but not in cases where the named bank may carry on any business and in relation to that business. (2) Principles for determination of compensation and the manner of payment are modified. Interim compensation may be paid to a named bank if it agrees to distribute to its shareholders in accordance with their rights and interests. A major change is made in the principles for determining compensation set out in Sch. 11. By Explanation I to cl. (e) of Part I of Sch. II, the value of any land or buildings to be taken into account in valuing the assets is to be the market value of the land or buildings, but where such market value exceeds the "ascertained value", that "ascertained value" is to be taken into account, and by Explanation II the "ascertained value" of any building wholly occupied on the date of the commencement of the Act is to be twelve times the amount of the annual rent or the rent for which the building may reasonably be expected to be let out from year to year, and reduced by one-sixth of the amount of the rent on account of maintenance and repairs, annual premium paid to insure the building against risk of damag....
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....2 of 1969 is ineffective, since there was no valid Ordinance in existence. The provision in the Act retrospectively validating infringement of the fundamental rights of citizens was not within the competence of the Parliament. That sub-sections (1) & (2) of s. 11 and s. 26 are invalid. The Attorney-General contended that the petitions are not maintainable, because no fundamental right of the petitioner is,' directly impaired by the enactment of the Ordinance and the Act, or by any action taken thereunder. He submitted that the petitioner who claims to be a shareholder, director and holder of deposit and current accounts with the Banks is not the owner of the property of the undertaking taken over by the corresponding new banks and is on that account incompetent to maintain the petitions complaining that the rights guaranteed under Arts. 14, 19 and 31 of the Constitution were impaired. A company registered under the Companies Act is a legal person, separate and distinct from its individual members. Property of the Company is not the property of the shareholders. A shareholder has merely an interest in the Company arising under its Articles of Association, measured by a sum....
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....inance are invalid because they vest the undertaking of the named banks in the new corporations without a public purpose and without setting out principles and the basis for determination and payment of a just equivalent for the property expropriated. He says that in consequence of the hostile discrimination practised by the State the value of his investment in the shares is substantially reduced, his right to receive dividend from his investment has ceased, and he has suffered great financial loss, he is deprived of the right as a shareholder to carry on business through the agency of the Company, and that in respect of the deposits the obligations of the-corresponding new banks -not of his choice are substituted without his consent. In Dwarkadas Shrinivas v. The Sholapur Spinning & Weaving Co. Ltd. and Others([1950] SCR 869) this Court held that a preference shareholder of a company is competent to maintain a suit challenging the validity of the "Sholapur Spinning and Weaving Company (Emergency Provisions) Ordinance" 2 of 1950 (which was later replaced by Act 27 of 1950), which deprived the Company of its property without payment of compensation within the meaning of Art. 31. ....
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....ers were identical and the shareholders were entitled to maintain the petition. The Court rejected that contention, observing that what the Company could not achieve directly, it could not relying upon the "doctrine of lifting the veil" achieve indirectly. The petitioner seeks in this case to challenge the infringement of his own rights and not of the Banks of which he is a shareholder and a director and with which he has accounts-, current and fixed deposit. It was urged that in any event the guarantee of freedom of trade does not occur in Part III of the Constitution, and the petitioner is not entitled to maintain a petition for breach of that guarantee in this Court. But the petitioner does not seek by these petitions to enforce the guarantee of freedom of trade and commerce in Art 301: he claims that in enacting the Act the Parliament has violated a constitutional restriction imposed by Part XIII of its legislative power and in determining the extent to which his fundamental freedoms are impaired, the statute which the Parliament is incompetent to enact must be ignored. It is not necessary to consider whether Art. 31 A ( 1 ) (d) of the Constitution bars the petitioner's ....
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....The President is under the Constitution not the repository of the legislative power of the Union, but with a view to meet extraordinary situations demanding immediate enactment of laws, provision is made in the Constitution investing the President with power to legislate by promulgating Ordinances. Power to promulgate such Ordinance as the circumstances appear to the President to require is exercised-(a) when both Houses of Parliament are not in session; (b) the provision intended to be made is within the competence of the Parliament to enact; and (c) the President is satisfied that circumstances exist which render it necessary for him to take immediate action. Exercise of the power is strictly conditioned. The clause relating to the satisfaction is composite: the satisfaction relates to the existence of circumstances, as well as to the necessity to take immediate action on account of those circumstances. Determination by the. President of the existence of circumstances and the necessity to take immediate action on which the satisfaction depends, is not declared final. The Attorney-General contended that the condition of satisfaction of the President in both the branches is pure....
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....le on satisfaction of the specified circumstances upon the President and upon officers of the State, are not different. The nature of the power to perform an official act where the authority is of a certain opinion, or that in his view certain circumstances exist or that he has reasonable grounds to believe, or that he has reasons to believe, or that he is satisfied, springing from a constitutional provision is in no manner different from a similar power under a parliamentary statute, and no greater sanctity may attach to the exercise of the power merely because the source of the power is in the Constitution and not in a parliamentary statute. There is, it was urged, nothing, in the constitutional scheme which supports the contention that the clause relating to satisfaction is not a condition of the exercise of the power. Counsel relied upon the judgments of this Court in Barium Chemical Ltd. and Another v. The Company Law Board and Ors.( [1966] Supp. S.C.R. 311) and Rohtas Industries Ltd. v. S. D. Agarwal and Anr;([1969] 3 S.C.R. 108) upon the decisions of the House of Lords in Padfield & Others v. Minister of Agriculture, Fisheries and Food and Others ([1968] 1 All E. R. 694) ....
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....rity with respect to the following subjects in List II : Entry 26-"Trade and commerce within the Stale, subject to the provisions of entry 33 of List III;" Entry 30-"Money-lending and money-lenders; relief of agricultural indebtedness." The Parliament and the States have concurrent legislative authority with respect to the following subjects in List III : Entry 33-"Trade and commerce in, and the production, supply and distribution of,- (a) the products of any industry where the control of such industry by the Union is declared by Parliament by law to be expedient in the public interest, and imported goods of the same kind as such products; (b) foodstuffs, including edible oil-seeds and oils; (c) cattle fodder, including oilcakes and other concentrates; (d) raw cotton, whether ginned or unginned and cotton seed; and (e) raw jute." Entry 42-"Acquisition and requisition of property." 563 The argument raised 'by Mr. Setalvad, intervening on behalf of the State of Maharashtra and the State of Jammu and Kashmir, that the Parliament is competent to enact Act 22 of 1969, because the subject-matter of the Act is "with respect to" regulation of trading corpo....
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.... determination of compensation and method of payment thereof to each named bank for transfer of its undertaking; and that the named bank may not carry on banking business, but may carry out business other than banking. Mr. Palkhivala submitted that the Parliament may legislate in respect of the business of banking as defined in S. 5 (b) of the Banking Regulation Act, 1949, and matters incidental thereto, and also for acquisition of that part of the undertaking of each named bank which relates to the business of banking, but not in respect of any other business not incidental to banking in which the named bank was engaged prior to July 19, 1969, for the power to legislate in respect of such other business falls within Entry 26 of List II. As a corollary thereto, counsel submitted that power to legislate in respect of acquisition under Entry 42 of List III may be exercised by the Parliament only for effectuating legislation under a head falling in List I or List III of the Seventh Schedule. It is necessary to determine the true scope of "banking" in Entry 45 List I, the meaning of the expression "property", and the limitations on the power of the Parliament to legislate in resp....
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....try 45 List I means all forms of business which since the introduction of western methods of banking in India, banking institutions have been carrying on in addition to banking as defined in s. 5(b) of the Banking Regulation Act, and on that account all forms of business described in s. 6(1) of the Banking Regulation Act in cls. (a) to (n) are, if carried on in addition to the "hardcore of banking", banking, and the Parliament is competent to legislate in respect of that business under Entry 45 List I. In support of his contention that apart from the business of accepting money from the public for lending or investment, and withdrawable by cheque, draft or otherwise, banking includes many allied business activities which banking institutions engaged in, the Attorney-General invited our attention to cl. 21 of the Charter of the Bank of Bengal (Act VI of 1839) : s. 27 of Act 4 of 1862; to ss. 36 & 37 of the Presidency Banks Act XI of 1876; to s. 91(15) of the British North America Act; to Paget's Law of Banking, 7th Edn., at p. 5; to the standard form of memorandum of association of a Banking Company in Palmer's Company Precedents Form 138; and to the statement of objects and....
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....f "banking" cannot be extended to, include trading activities which not being incidental to banking encroach upon the substance of the entry "trade and commerce" in List II. Rejection of the argument of the Attorney-General does not lend any practical Support to the argument of Mr. Palkhivala that Act 22 of 1969, to the extent it makes provisions in respect of the undertaking of the named banks relating to non-banking business, is ultra vires the Parliament. In the first instance there is no evidence that the named banks were before July 19, 1969, carrying on non-banking business distinct and independent of the banking business, or that the banks held distinct assets for any non-banking business, apart from the assets of the banking business. Again by Act-22 of 1969 the corresponding banks are entitled to engage in business of banking and non-banking which the named banks were engaged in or competent to engage in prior to July 19, 1969, and the named banks are entitled to engage in business other than banking as di.-fined in s. 5(b) of the Banking Regulation Act, but not the business of banking. By enacting that the corresponding new banks may carry on business specified in s. 6....
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....The expression "undertaking" in s. 4 of Act 22 of 1969 clearly means a going concern with all its rights, liabilities and assets-as distinct from the various rights and assets which compose it. In Halsbury's Laws of England, 3rd Edn., Vol. 6, Art. 75 at p. 43, it is stated that "Although various ingredients go to make up an undertaking, the term describes not the ingredients but the completed work from which the earnings arise." Transfer of and vesting in the State Corporations of the entire undertaking of a going concern is contemplated in many Indian Statutes: e.g., Indian Electricity Act, 1910, ss. 6, 7 & 7A; Air Corporation Act, 1953, ss. 16 & 17; Imperial Bank of India: Act, 1920, ss. 3 & 4; State Bank of India Act, 1955, S. 6(2), (3) & (4); State Bank of India (Subsidiary Banks) Act, 1959; Banking Regulation Act, 1949, S. 36 AE; and Cotton Textile Companies Act, 1967, ss. 4-(1) & 5(1). Power to legislate for acquisition of "property" in Entry 42 List III therefore includes the power to legislate for acquisition of an undertaking. But, says Mr. Palkhivala, liabilities of the banks which are included in the connotation of the expression "undertaking", cannot be treated a....
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....clusive, a law directly providing for acquisition of property for a public purpose cannot be tested for its validity on the plea that it imposes limitations on the right to property which are not reasonable. By Arts. 31 ( 1 ) & (2) the right to property of individuals is protected against specific invasions by State action. The function of the two clauses-cls. (1) & (2) of Art. 31-is to impose limitations on the power of the State and to declare the corresponding guarantee of the individual to his right to property. Limitation on the power of the State and the guarantee of right are plainly complementary. Protection of the guarantee is ensured by declaring that a person may be deprived of his property by "authority of law": Art. 31 ( 1 and that private property may be compulsorily acquired for a public purpose -and by the "authority of a law" containing provisions fixing or providing for determination and payment of compensation: Art. 31(2). Exercise of either power by State action results in abridgement-total or partial-of the right to property of the individual. Article 19(1) (f) is a positive declaration in the widest terms of the right to acquire, hold and dispose of propert....
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....tions within their allotted fields, fundamental, got blurred and gave impetus to a theory that certain Articles of the Constitutions enact a code dealing exclusively with matters dealt with therein, and the protection which an aggrieved person may claim is circumscribed by the object of the State action. Protection of the right to property or personal freedom is most needed when there is an actual threat. To argue that State action which deprives a person permanently or temporarily of his right to property, or personal freedom, operates to extinguish the right or the remedy is to reduce the guarantee to an empty platitude. Again to hold that the extent of, and the circumstances in which, the guarantee of protection is available depends upon the object of the State action, is to seriously erode its effectiveness. Examining the problem not merely in semantics but in the broader and more appropriate context of the constitutional scheme which aims at affording the Individual the fullest protection of his basic rights and on that foundation to erect a structure of a truly democratic polity, the conclusion, in our judgment, is inevitable that the validity of the State action must be adju....
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....ms, etc., the question whether that legislation is saved by the relevant saving clause of article 19 will arise. If, however, the legislation is not directly in respect of any of these subjects, but as a result of the operation of other legislation, . . . . the question of the application of article 19 does not arise. The true approach is only to consider the directness of the legislation and not what will be the result of the detention otherwise valid, on the mode of the detenue's life." The learned Chief Justice also observed that Art. 19 (1) (d) had nothing to do with detention, preventive or punitive, and I the concept of personal liberty in Art. 21 being entirely different from the concept of the right to move freely throughout the territory of India, Art. 22 was a complete code dealing with preventive detention. Patanjali Sastri, J., observed at p. 191 ".... article 19 seems to pre-suppose that the citizens to whom the possession of these fundamental rights is secured retains the substratum of personal freedom on which alone the enjoyment of these rights necessarily rests article 19 guarantees to the citizens the enjoyment of certain civil liberties while they ar....
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....em." Fazl Ali, J., struck a different note: he observed at p. 148: rights does not contemplate ... that each article is a code by itself and is independent of the others........ The case of a person who is convicted of an offence will come under article 20 and 21 and also under article 22 so far as his arrest and detention in custody before trial are concerned. Preventive detention, which is dealt with in article 22, also amounts to deprivation of personal liberty which is referred to in article 21, and is a violation of the right of freedom of movement dealt with in article 19(1) At p. 149 the learned Judge observed " The words used in article 19 (1) (d) must be, construed as they stand, and we have to decide upon the words themselves whether in the case preventive detention the right under article 19 (1 ) (d) is or is not infringed. But, . . ., however, literally we may construe the words used in article 19 (1 ) (d) and however restricted may be the meaning we may attribute to those words, there can be no escape from the conclusion that preventive detention is a direct infringement of the right guaranteed in article 19(1)(d)." At p. 170 he observed : " .... this....
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.... the right to acquire, hold or dispose it of, and as clause (5) contemplates the placing of reasonable restrictions on the exercise of those rights it must follow that the Article postulates the existence of property over which the rights are to be exercised." Bhanji Munji's case ([1955] 1 S.C.R. 777) was accepted without -any discussion in Babu Barkya Thakur v. The State of Bombay([1961] 1 S.C.R. 128) ; Smt. Sitabati Debi and Anr. v. State of West Bengal and Another([1967] 2 S.C.R. 940), and other cases. In these cases it was held that the substantive provisions of a law relating to acquisition of property were not liable to be challenged on the ground that they imposed unreasonable restrictions on the right to hold property. Bhanji Munji's, case, it must be remembered, arose under Art. 31 before it was amended by the Constitution (Fourth Amendment) Act. It was held by this Court that cls. (1) & (2) of Art. 31 as they then stood dealt with the same subject matter, i.e. compulsory acquisition of property;: see Subodh Gopal's case([1954] S.C.R. 674) and Dwarkadas Shriniwas's case([1954] S.C.R. 587). But since the amendment by the Constitution (Fourth Amendment)....
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....at determines the protection he can claim: it is the effect of the law and of the action upon the right which attract the jurisdiction of the Court to grant relief. If this be the true view, and we think it is, in determining the impact of State action upon constitutional guarantees which are fundamental, it follows that the extent of protection against impairment of a fundamental right is determined not by the object of the Legislature nor by the form of the action, but by its direct operation upon the individual's rights. We are of the view that the theory that the object and form of the, State action determine the extent of protection which the aggrieved party may claim is not consistent with the constitutional scheme. Each freedom has different dimensions. Article 19 (1 ) (f ) enunciates the right to acquire, hold and dispose of property: cl. (5) of Art. 19 authorize imposition of restrictions upon the right. Article 31 assures the right to property and grants protection against the exercise of the authority of the State. Clause (5) of Art. 19 and cis. (1) & (2) of Art. 31 prescribe restrictions upon State action, subject to which the right to property may be exercised. ....
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....gislative or executive--Arts. 14, 15, 16, 20, 21, 22(1), 27 and 28; in some others, it takes the form of a positive declaration and simultaneously enunciates the restriction there on : Arts. 19(1) and 19(2) to (6); in some cases, it arises as an implication from the delimitation of the authority of the State, e.g., Arts. 31(1) and 31(2); in still others, it takes the form of a general prohibition against the State as well as others : Arts. 17, 23 & 24. The enunciation of rights either express or by implication does not follow a uniform pattern. But one thread runs through them : they seek to protect the rights of the individual or groups of individuals against infringement -of those rights within specific limits. Part III of the Constitution weaves a pattern of guarantees on the texture of basic human rights. The guarantees delimit the protection of those rights in their allotted fields: they do not -attempt to enunciate distinct rights. We are therefore unable to hold that the challenge to the validity of the provision for acquisition is liable to be tested only on the ground of non-compliance with Art. 31(2). Article 31(2) requires that property must be acquired for a public p....
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....general public. It is immaterial that the, scope for such challenge. may be attenuated because of the nature of the law of acquisition which providing as it does for expropriation of property of the individual for' public purpose may be presumed to impose reasonable restrictions in the interests of the general public. Whether the provisions of ss. 4 & 5 of Act 22. of 1969 and the other related provisions of the Act impair the fundamental freedoms under Art. 19 ( I ) (f ) & (g) now falls to, be considered By s. 4 the entire undertaking of each named bank vests in the Union, and the Bank is prohibited from engaging in the business of banking in India and even in a foreign country, except where by the laws of a foreign country banking business owned or controlled by Government cannot be carried on, the named bank will be entitled to continue the business in that country. The business which the named banks carried on was-(1) the business of banking as defined in s. 5 (b) of the Banking Regulation Act, 1949, and business incidental thereto; and (2) other business which by virtue of s. 6(1) they were not prohibited from carrying on, though not part of or incidental to the business....
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.... of the general public, reasonable restrictions on the exercise of the right ,conferred by that sub-clause either in the interests of the general public or for the protection of the interests of any Scheduled 'Tribe. Clause (6) as amended by the Constitution (First -Amendment) Act, 1951, reads " Nothing in sub-clause (g) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, in the interests of the general public, reasonable restrictions on the exercise of the right conferred by the said sub-clause, and, in particular, nothing in the said sub-clause, shall affect the operation of any existing law in so far as it relates to, or prevent the State from making law relating to- (i) the professional or technical qualifications necessary for practising any profession or carrying on any occupation, trade or business, or (ii).the carrying on by the State, or by a corporation owned or controlled by the State, of any trade, business, industry or service, whether to the exclusion, complete or partial, of citizens or otherwise." Clause (6) of Art. 19 consists of two parts : (1) the right decla....
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....onopoly in its own favour in respect of any trade or business; but the amendment does not make the establishment of such monopoly a reasonable restriction within the meaning of the first clause of Art. 19(6). The result of the amendment is that the State would not have to justify such action as reasonable at all in a court of law, and no objection could be taken to it on the ground that it is an infringement of the rights guaranteed under Art. 19 (1 ) (g) of the Constitution." In dealing with the validity of a law creating a State monopoly in Akadasi Padhan v. State of Orissa, ([1963] Supp. 2 S.C.R. 691) this Court unanimously held, that the validity of a law creating a State monopoly which "indirectly impinges on any other right" cannot be challenged on the, -round that it imposes restrictions which are not reasonable restrictions in the interests of the general' public. But if the law contains other incidental provisions, which do not constitute an essential and integral part of the monopoly created by it, the validity of those provisios is liable to be tested under the first part of Art. 19(6) If they directly, impair any other fundamental right guaranteed by Art. 19(1), ....
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....l not be exposed to the challenge that they impair the guarantee under Art. 19(1)(g), whether the citizens are excluded completely or partially from carrying on that trade, -or the trade is competitive. Imposition of restrictions which are incidental or subsidiary to the carrying on of trade by the State whether to the exclusion of the citizens or not must, however, satisfy the test of the main limb. The law which prohibits after July 19, 1969, the named banks from carrying on banking business, being a necessary incident of the right assumed by the Union, is not liable to be challenged because of Art' 19 (6) (ii) in so far as it affects the right to carry on business. There is no satisfactory proof in support of the plea that the enactment of Act 22 of 1969 was not in the larger interest of the nation, but to serve political ends, i.e. not with the object to ensure better banking facilities, or to make them available to a wider public, but only to take control over the deposits of the public with the major banks, and to use them as a political lever against industrialists who had built up industries by decades of industrial planning and careful management. It is true that....
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....en unequal development of facilities in different parts of the country and deserving sections were deprived of the benefit of an important national resource resulting in economic disparities, especially because the major banks catered to the large-scale industries. , This Court is not the forum in which these conflicting claims may be debated. Whether there is a genuine need for banking facility in the rural areas, whether certain classes of the community are deprived of the benefit of the resources of the banking industry, whether administration by the Government of the commercial banking sector will not prove beneficial to the community and will lead to rigidity in the administration, whether the Government administration will eschew the profit-motive, and -even if it be eschewed, there will accrue substantial benefits to the public, whether an undue accent on banking as a means of social regeneration, especially in the, backward areas, is a doctrinaire approach to a rational order of priorities -for attaining the national objectives enshrined in our Constitution, and whether the policy followed by the Government in office or the policy propounded by its opponents may reasonab....
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.... restrictions as unreasonable. In Mohammad Yasin v. The Town Area Committee, Jalalabad and Another([1952] S.C.R. 572) this Court -observed that under Art. 19(1)(g) of the Constitution a citizen has the right to carry on any occupation, trade or business and the only restriction on 'this right is the authority of the State to make a law relating to the carrying on of such occupation, trade or business as mentioned in cl. (6) of that Article as amended by the Constitution (First Amendment) Act, 1951. In Mohammad Yasin's case by the, bye--laws of the Municipal Committee, it was provided that no person shall sell or purchase any vegetables or fruit within the limits of the municipal area of Jalalabad, wholesale or by auction, without paying the prescribed fee. It was urged on behalf of a wholesale dealer 'in vegetables that although there was no prohibition against carrying on business, in vegetables by anybody, in effect the bye-laws brought about a total stoppage of the wholesaler's business in a commercial sense, for, he had to pay prescribed fee to the contractor, and under the bye-laws the wholesale dealer could not charge a higher rate of commission than the contr....
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....kes it impossible in a commercial sense for the banks to carry on any business, Protection of Art. 14-- By Art. 14 of the Constitution the State is enjoined not to deny any person equality before the law or the equal protection of the laws within the territory of India. The Article forbids class legislation, 'but not reasonable classification in making laws. The test of permissible classification under an Act lies in two cumulative conditions : (i) classification under the Act must be founded on an intelligible differentia distinguishing persons, transactions or things grouped together from others left out of the group; and (ii) the differentia has a rational relation to the object sought to be achieved by the Act : there must be a nexus between the basis of classification and the object of the Act : Chiranjit Lal Chowduri's case([1950] S.C.R. 869); The State of Bombay v. F. N. Balsara([1951] S.C.R. 682); The State of West Bengal v. Anwar Ali Sarar([1952] S.C.R. 284); Budhan Choudhry and Others v. The State of Bihar([1955] I S.C.R. 1045); Shri Ram Kishan Dalmia v. Shri Justice S. R. Tendolkar and Others,( [1959] S.C.R. 279, 300); and State of Rajasthan v. Mukandcha....
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.... at more than 9% in the case of shares of Bank of India, Bank of Maharashtra, Canara Bank, Indian Bank, Indian Overseas Bank and United Bank of India. In the case of Allahabad Bank it worked out at 5%, and in the case of shares of Punjab National Bank and Syndicate Bank the rates are not available. This statement is not challenged. Since the taking over of the undertaking, there has resulted a steep fall in the ruling market quotations of the shares of a majority of the named banks. The market quotations have slumped to less than 50% in the case of Bank of India, Central Bank, Bank of Baroda and even at the quoted rates probably there are no transactions. Dividend may no longer be distributed, for the banks have no liquid assets and they are not engaged in any commercial activity. It may take many years before the compensation payable to the banks may even be finalized, and be available to the named banks for utilising it in any commercial venture open to the banks under the Act. Under the scheme of determination of compensation, the total amount payable to the banks will be a fraction of the value of their net assets, and that compensation will not be available to the banks immedi....
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.... better trained and equipped. These are primarily grounds for classification and not for explaining the relation between the classification and the object of the Act. But in the absence of any reliable data, we do not think it necessary to express an opinion on the question whether selection of the undertaking of some out of many banking institutions, for compulsory acquisition, is liable to be struck down as hostile discrimination, on the ground that there is no reasonable relation between the differentia and the object of the Act which cannot be substantially served even by the acquisition of the undertakings of all the banks out of which the selection is made. It is claimed that the depositors with the named banks have also a grievance. Those -depositors who had made long-term deposits, taking into account the confidence they had in the management of the banks and theservice they rendered, are now called upon to trust the management of a statutory corporation not selected by them, without an opportunity of being placed in the same position in which they would have been if they were permitted to transfer their deposits elsewhere. The argument is based on several imponderables ....
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.... have already pointed out that the named banks are also, (though theoretically, competent) in substance prohibited from carrying on nonbanking business. For reasons set out by us for holding that the restriction is unreasonable, it must also be held that the guarantee of equality is impaired by preventing the named banks carrying on the non-banking business. Protection of the guarantee under Art. 31(2)The guarantee under Art. 31(2) arises directly out of -the restrictions imposed upon the power of the State to acquire private property, without the consent of the owner for a public purpose. Upon the exercise of the power to acquire or requisition property, by cl. 2) two restrictions are placed : (a) power to acquire shall not be exercised save for a public purpose; and (b) that it shall not be exercised save by authority of a law which provides for compensation for the property acquired or requisitioned, and fixes the amount of compensation or specifies the principles on which and the manner in which the compensation is to be determined and given. Sub-clause (2A) in substance provides a definition of "compulsory acquisition or requisitioning of property". Existence of a public pu....
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....bleness of the compensation". Two questions immediately arise for determination. What is the true meaning of the expression "compensation" as used in Art. 31(2), and what is the extent of the, jurisdiction of the Court when the validity of a law providing for compulsory acquisition of property for a public purpose is challenged ? In -its dictionary meaning "compensation" means anything given to make things equal in value : anything given as an equivalent, to make amends for loss or damage. In all States where the rule of law prevails, the right to compensation is guaranteed by the Constitution or regarded as inextricably involved in the right to property. By the 5th Amendment in the Constitution of the U.S.A. the right of eminent domain is expressly circumscribed by providing "Nor shall private property be taken for public use, without just, compensation". Such a provision is to be found also in every State Constitution in the United States : Lewis Eminent Domain, 3rd Edn., (pp. 28-50). The Japanese Constitution, 1946, by Art. 25 provides a similar guarantee. Under the Commonwealth of Australia Constitution, 1900, the Commonwealth Parliament is invested with the power of acqu....
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....amended by the Constitution (Fourth Amendment) Act, 1955, followed substantially the same pattern. Prior to the amendment of Art. 31(2) this Court interpreted the expression "compensation" as meaning "full indemnification". Patanjali Sastri, C.J., in The State of West Bengal v. Mrs. Bela Banerjee L.R. [1920] A.C. 508 & Others ([1954] S. C. R. 558) in interpreting the guarantee under Art. 31(2), speaking on behalf of the Court, observed : " While it is true that the legislature is given the discretionary power of laying " down the principles which should govern the determination of the amount to be given to the owner for the property appropriated, such principles must ensure that what is determined as payable must be compensation, that is, a just equivalent of what the owner has been deprived of. Within the limits of this basic requirement of full indemnification of the expropriated owner, the Constitution allows free play to the legislative judgment as to what principles should guide the determination of the amount payable. Whether such principles take into account all the elements which make 'up the true value of the property appropriated and exclude matters which ....
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....in State of Gujarat v. Shantilal Mangaldas and Others([1968] 3 S.C.R. 489) observed that compensation payable for compulsory acquisition of property is not, by the application of any principles, determinable as a precise sum, and by calling it a "just" or "fair" equivalent, no definiteness could be attached thereto; that valuation of lands, buildings and incorporeal rights has to be made on the application of different principles, e.g. capitalization of net income at appropriate rates, reinstatement, determination of original value reduced by depreciation, break-up value of properties which had outgrown their utility; that the rules relating to determination of value of lands, buildings, machinery and other classes of property differ, and the application of several methods or principles lead to widely divergent amounts, and since compensation is not capable of precise determination by the application of recognized rules, by qualifying the expression "compensation" by the adjective "just", the determination was made more controversial. It was observed that the Parliament amended the Constitution by the Fourth Amendment Act declaring that adequacy of compensation fixed by the Legisla....
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....ore and after it was amended guaranteed a right to compensation for compulsory acquisition of property and that by giving to the owner, for compulsory acquisition of his property, compensation which was illusory, or determined by the application of principles which were irrelevant, the constitutional guarantee of compensation was not complied with. There was difference of opinion on one matter between the decisions in P. Vajravelu Mudaliar's case and Shantilal Mangaldas's case([1969] 3 S.C.R. 341. at p. 368). In the former case it was observed that the constitutional guarantee was satisfied only if a just equivalent of the property was given to the owner : in the latter case it was held that "compensation" being itself incapable of any precise determination, no definite connotation could be attached thereto by calling it "just equivalent" or "full indemnification", and under Acts enacted after the amendment of Art. 31 (2) it is not open to the Court to call in question the law providing for compensation on the ground that it is inadequate, whether the amount of compensation is fixed by the law or is to be determined according to principles specified therein. It was observed....
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....whichever was less; (ii) the owner shall get a solatium of only 5% and not 15% and (iii) in valuing the land acquired any increase in its suitability or adaptability for any use other than the use to which the land was put at the date of the notification under s. 4(1) of the Land Acquisition Act, 1894, shall not be taken into consideration, did not impair the right to receive compensation. The Court observed at p. 631 : "In awarding compensation if the potential value of the land is excluded, it cannot be said that the compensation awarded is the just equivalent of what the owner has been deprived of. But such an exclusion only pertains to the method of ascertaining the compensation. One of the elements that should properly be taken into account in fixing the compensation is omitted : it results in the adequacy of the compensation, . . . ... We, therefore, hold that the Amending Act does not offend Art. 31 (2) of the Constitution." The compensation provided by the Madras Act, according to the principles specified, was not the full market value at the date of acquisition. It did not amount to "full indemnification" of the owner : the Court still held that the law did not offend t....
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....he determination of the value to be paid as recompense for loss of his property. A method appropriate to the determination of value of one class of property may be wholly inappropriate in determining the -value of another class of property. If an appropriate method or principle for determination of compensation is applied, the fact that by the application of another, principle which is also appropriate, a different value is reached, the Court will not be justified in entertaining the contention that out of the two appropriate methods, one more generous to the owner should have been applied by the Legislature. We are unable to hold that a principle specified by the Parliament for determining compensation of the property to be acquired is conclusive. If that view be accepted, the Parliament will be invested with a charter of arbitrariness and by abuse of legislative process, the constitutional guarantee of the right to compensation may be severely impaired. The principle specified must be appropriate to the determination of compensation for the particular class of property sought to be acquired. If several principles are appropriate and one is selected for determination of the value ....
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....ation will be assessed on the basis of reasonable cost of reinstatement; (v) when the property has outgrown its utility and it is reasonably incapable of economic use, it may be valued as land plus the break-up value of the structure. But the fact that the acquirer does not intend to use the property for which it is used at the time of acquisition and desires to demolish it or use it for other purpose is irrelevant; and (vi) the property to be acquired has ordinarily to be valued as a unit. Normally an aggregate of the value of different components will not be the value of the unit. These are, however, not the only methods. The method of determining the value of property by the application of an appropriate multiplier to the net annual income or profit is a satisfactory method of valuation of lands with buildings,' only if the land is fully developed, i.e., it has been put to full use legally permissible and economically justifiable, and the income out of the property is the normal commercial and not a controlled return, or a return depreciated on account of special circumstances. It the property is not fully developed, or the return is not commercial themethod may yield a m....
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.... undertaking thereof shall be an amount equal to the sum total of the value of the assets of the existing bank as on the commencement of this Act, calculated in accordance with the provisions of Part 1, less the sum-total of the liabilities computed and obligations of the existing bank calculated in accordance with the provisions of Part IT." For the purpose of Part 1 "assets" mean the total of the heads(a) to (h) and the expression "liabilities" is defined as meaning the total amount of all outside liabilities existing at the commencement of the Act and contingent liabilities which the corresponding new bank may reasonably be expected to be required to meet out of its own resources. Compensation payable to the named banks is accordingly the aggregate of some of the components of the undertaking, reduced by the aggregate of liabilities determined in the manner provided in the Schedule. It appears clear that in determining the compensation for undertaking-(i) certain important classes of assets are omitted from the heads (a) to (h); (ii) the method specified for valuation of lands and buildings is not relevant to determination of compensation, and the Value determined thereby in ....
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....ersonal goodwill of the management. The regulatory provisions of the Banking Companies Act and the control which the Reserve Bank exercises over the banks may to a certain extent reduce the chance of the resources of the banks being misused, but a banking company for its business still largely depends upon the reputation of its management. We are unable to agree with the contention raised in the Union's affidavit that a banking establishment has no goodwill, not are we able to accept the plea raised by the Attorney-General that the value of the goodwill of a bank is insignificant and it may be ignored in valuing the undertaking as a going concern. Under cl. (f) of Sch. II provision is made for valuing a proportionate part of the premium paid in respect of all leasehold properties to the unexpired duration of the leases, but there is no provision made for payment of compensation for the unexpired period of the leases. Having regard to the present-day conditions it is clear that with rent control on leases operating in various States the unexpired period of lease has also a substantial value. The value determined by excluding important components of the undertaking, such as the g....
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....ertain specific items. This provision, in our judgment, does not Jay down a relevant principle of value of buildings. In the first place, making a provision for payment of capitalised annual rental at.......... twelve times the amount of rent cannot reasonably be regarded as payment of compensation having regard to the conditions prevailing in the money market. Capitalization of annual rent which is generally based on controlled rent under some State Acts at rates pegged down to the rates prevailing in 1940 and on the footing that investment in buildings yields 8-1/3% return furnishes a wholly misleading result which cannot be called compensation. Value of immovable property has spiralled during the last few years and the rental which is mostly controlled does not bear any reasonable relation to the economic return from property. If the building is partly occupied by the Bank itself and partly by a tenant, the ascertained value will be twelve times the annual rental received, and the rent for which the remaining part occupied by the Bank may reasonably be expected to be let out. By the Act the corresponding new banks take over vacant possession of the lands and buildings belonging ....
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....ide the entire amount of mortgage liability would be debited. The method provided by the Act permits the annual interest on the amount of the encumbrance to be deducted before capitalization, and the capitalized value is again reduced by the amount of the encumbrance. In effect, a single debt is, in determining the compensation debited twice, first, in computing the value of assets, and again, in computing the liabilities. We are unable to accept the argument raised by the AttorneyGeneral that under the head "liabilities" in Part II only those mortgages or capital charges in respect of which the amount has fallen due are liable to be included on the liabilities side. Under the head "liabilities" the total amount of all outside liabilities existing at the commencement of the Act, and all contingent liabilities which the corresponding new bank may reasonably be expected to be required to meet out of its own resources on or after the date of commencement of the Act will have to be included. When even contingent liabilities are included in the total amount of all outside liabilities, a mortgage debt or capital charge must be taken into account in determining the liabilities by which....
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....ion, organizational expenses and brokerage, losses incurred and similar other items. Mr. Palkhivala urged that certain assets which do not appear in the books of account still have substantial value, and they are omitted from consideration in computing the aggregate of the value of assets. Counsel said that every bank is permitted to have secret reserve and those secret reserves may not appear in the books of account of the banks. We are unable to accept that contention. A banking company is entitled to withhold from the balance-sheet its secret reserve, but there must be some account in respect of those secret reserves. The expression "books of the Bank" may not be equated with the balance sheets or the books of account only. The expression "liabilities" existing at the commencement of the Act includes "all debts due or to become due." Under the head "liabilities" contingent liabilities which the corresponding new bank may reasonably be expected to be required to meet out of its own resources on or after the date of commencement of the Act are to be debited. The clause is badly drafted. The present value of the contingent liabilities at the date of the acquisition and not th....
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....reaking it up into several heads of assets, and important -heads are excluded and others valued by the application of irrelevant principles, or principles of which the only claim for acceptance is their novelty. The Constitution guarantees that the expropriated owner must be given the value of his property, i.e., what may be regarded reasonably as compensation for loss of the property and that such compensation should not be illusory and not reached by the application of irrelevant principles. In our view, determination of compensation to be paid fox the acquisition of an undertaking as a unit after awarding compensation for some items which go to make up the undertaking and omitting important items amounts to adopting an irrelevant principle in the determination of the value of the undertaking, and does not furnish compensation to the expropriated owner. The Attorney-General contended that the total value of the undertaking of the named banks even calculated according to the method provided in Sch. II exceeded the total market value of the shares, and on that account there is no ground for holding that the law providing for compensation denies to the shareholders the guarantee of ....
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....some of which are irrelevant and some not recognised are adopted. What is determined by the adoption of the method adopted in Sch. 11 does not award to the named banks compensation for loss of their undertaking. The ultimate result substantially impairs the guarantee of compensation, and on that account the Act is liable to be struck down. IV. Infringement of the guarantee of freedom of trade, commerce and intercourse under Art. 301-- in the view we have taken the provisions relating to determination and payment of compensation for compulsory acquisition of the undertaking of the named banks impair the guarantee under Art. 31(2) of the Constitution, we do not deem it necessary to decide whether Act 22 of 1969 violates the guarantee of freedom of trade, commerce and intercourse in respect of the (1) agency business; (2) business of guarantee and indemnity carried on by thenamed banks. V. Validity of the retrospective operation given to Act 22 of 1969 by s. 1(2) and S. 27- The argument raised by Mr. Palkhivala that, even if the Act is within the competence of the Parliament and does not impair the fundamental rights under Arts. 14, 19(1)(f) & (g), and 31(2) in their prosp....
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....of Undertakings) Ordinance No. 8 of 1969 (hereinafter referred to for the sake of brevity as the 1969 Ordinance) and the Banking Companies (Acquisition and Transfer of Undertakings) Act No. 22 of 1969 (hereinafter referred to for the sake of brevity as the 1969 Act) and 36 banks which are outside the scope of the 1969 Act. The State Banks have 27 per cent of the aggregate deposit of all commercial banks and 32 per cent of the credit of all commercial banks. The State Bank and its 7 subsidiaries have Rs. 1239 crores including current account in the total deposit and the total credit of the State Bank and its subsidiaries is Rs. 1186 crores. The 14 Scheduled Banks each of which has over Rs. 500 crores of deposit which are the subject matter of the 1969 Ordinance and the 1969 Act (hereinafter referred to for the, sake of brevity as the 14 banks) and have Rs. 2632 crores of deposit and the credit amounts to Rs. 1829 crores. In other words, these 14 banks have 56 per cent of the total deposit and little over 50 per cent of the total credit of the commercial banks. The36 scheduled banks which are 'outside the 1969 Ordinance and the 1969 Act have Rs. 296 crores of deposit, viz., 6.3 p....
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....ested in the corresponding new batik on the commencement of the Act. The existing banks mean the 14 banks. The corresponding new banks mean the banks mentioned in the First Schedule to the 1969 Act in which is vested the undertakings of the existing banks. Section 5 of the 1969 Act deals with the effect of vesting. First, the undertaking shall be deemed to include all assets, rights, powers, authorities and privileges and all property, movable or immovable, cash balances, reserve funds, investments and all other rights and interests arising out of such property as were immediately before the commencement of the Act in the; ownership, possession, power or control of the existing banks in relation to the under'taking, whether within or without India, and all books of accounts, registers, records and all other documents of whatever nature relating thereto. Secondly, the undertaking shall also be deemed to include all borrowings, liabilities (including contingent liabilities) and obligations of whatever kind then subsisting of the existing bank in relation to the undertaking. Thirdly, if according to the laws of any country outside India, the provisions of the 1969 Act by themselve....
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..... Section 13 of the Act provides power of the Central Government to make scheme. Section 15 is an important provision in the Act. Under that section a Chairman, managing or whole-time director of an existing bank shall, on the commencement of the Act, be deemed to have vacated office and every other director of Such bank shall, until directors are duly elected by such existing bank, be deemed to continue to hold such office. 'The said Board may transact all or any of the various kinds of business mentioned in section 15. The other provision in section 15 is that the existing bank may carry on any business other than banking. The Act of 1969 by reason of section 1(2) thereof is deemed to have come into force on 19 July, 1969. Section 27 of the Act contains four sub-sections providing for the repeal of the Ordinance and enacting first, that notwithstanding the repeal of the Ordinance, anything done or any action taken including any order made, notification issued or direction given, under the said Ordinance shall be deemed to have been done, taken, made, issued or given, as the case may be, under the corresponding provisions of this Act; secondly, that no action or thing done ....
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....f the Constitution. Article 20(1) refers to law in force at the time of the commission of the actcharged as an offence whereas Article 31(2) does not contain any such word of limitation as to law being in force at the time but speaks only of authority of a law. This vital distinction between Article 20(1) and Article 31(2) is to be kept in the forefront in appreciating the soundness of the proposition that retrospective legislation as to acquisition of property does not violate Article 31(2). In the case of M/s. West Ramnad Electric Distribution Company([1963] 2 S.C.R. 747) the 1954 Madras Act incorporated the main provisions of the earlier Madras Act of 1949 in validating actions taken under the earlier 1949 Act. The 1949 Act had been challenged in earlier proceedings when this Court held the 1949 Act to be ultra vires. Section 24 of the 1954 Madras Act was intended to validate a notification of acquisition of undertaking issued on 21 September, 1951 under the, 1949 Act by providing that orders made, decisions or directions given, notifications, issued, if they would have been validly made under the 1949 Act were declared to have been validly made except the extent to which the....
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....re sought to be reopened or set aside and the same could not be within the legislative competence of section 298 of the Government of India Act, 1935 which conferred power to prohibit the sale or mortgage of transactions. The words 'prohibit sale or mortgage' in section 298 of the Government of India Act, 1935 were construed to mean prospective or future prohibition as the words used plainly refer to things or transactions in future. The decisions of this Court in M/s. West Ramnad Electric Distribution Company (2) and State of Mysore v. Achiah Chetty([1969] 3 S.C.R. 55) are ample authorities for the proposition that there can be retrospective legislation affecting acquisition of property and such retrospective operation and validation of actions with regard to acquisition does not offend Article 31 (2) of the Constitution. In State of Mysore and Anr. v. D. Achiah Chetty etc.( [1963] 2 S.C.R. 747) Hidayatullah, C.J. considered the Bangalore Acquisition of Lands Act, 1962 which consisted of two sections whereof the second was in relation to validation of certain acquisition of lands and orders connected therewith. In short that section provided that all acquisition, procee....
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....isition or requisition of property under Article 31(2) are : first, that the acquisition or requisition of property can' be made only for a public purpose, and secondly, it can only be by authority of a law which provides for compensation. Article 31(2A) further enacts that where a law does not provide for the transfer of the ownership or right to possession of any property to the State or to a corporation owned or controlled by the State, it shall not be deemed to provide for the compulsory acquisition or requisitioning of property. The question for interpretation of Article 22 of the Constitution in the light of Article 19 came up for consideration in the case of A. K. Gopalan v. State of Madras([1950] S.C.R. 88), Kania, C.J., Patanjali Sastri, Mahajan, Mukherjea and Das, JJ. expressed the opinion that Article 19 of the Constitution had no application to a law which related directly to preventive detention even though as a result of an order of detention, the rights referred to in sub,clauses (a) to (e) and (g) in general and sub-clause (d) in particular, of clause (1) of Article 19 might be restricted or abridged. Fazl Ali, J. however expressed a contrary opinion. The ....
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....ticle 31 as these stood before the Constitution Fourth Amendment Act, 1955 are not mutually exclusive in scope and content but are to be read together and understood as dealing with the same subject, namely, the protection of the right to property by means of limitations on the power of the State and the deprivation contemplated in clause (1) was held to be no other than the acquisition or taking possession of the property referred to in clause (2). The view in Gopalan's case([1950] S.C.R. 88) was again applied by this Court in State of Bombay v. Banji Munji and Anr. (2) also a pre-Amendment case-where it was contended that Article 31(2) did not exclude the operation of Article 19(1)(f) in relation to Bombay Land Acquisition Act, 1940. In dealing with the contention as to whether the Bombay Act was hit by Article 19(1)(f) on the --round of unreasonable restriction having been imposed on the right of the respondent to acquire, hold and dispose of property Bose, J. said at page 780 of the Report "It is enough to say that Article 19(1)(f) read with clause (5) postulates the existence of property which can be enjoyed and over which rights can be exercised because otherwise the r....
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....Constitution Fourth Amendment Act this Court held that clauses (1) and (2) of Article 31 were not mutually exclusivein scope and content but were to be read together, namely, that the words "acquisition or taking possession" referred to in clause (2) of Article 31 prior to the Amendment in 1955 were to be read as an instance of deprivation of property within the meaning of Article 31 (1) and therefore the same was not subject to Article 19. This is how the decision in Bhanji Munji's case(2) was explained by Subba Rao, J. in Kochuni's case(3) with the observation that "the decision in Bhanji Munji's case(') no longer holds the held after the Constitution Fourth Amendment Act, 1955". It may be stated here that Kochuni's case(') was decided after the amendment of Article 31 and that was emphasised by Subba Rao, J. to establish that Article 3 1 ( 1 ) which dealt with deprivation of property other than by way of acquisition by the State was to be a valid law or in compliance with limitations imposed in Article 19(1) (f) and (5). The question whether Article 19(1) (f) is to be, read alongwith Article 31 (1) again raised its head in the case of Smt. Sitabati Dev....
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....f) will not enter the arena of acquisition' or requisition of property by the State. This Court in the recent decision of State of Gujarat v. Shantilal Mangaldas and others([1969] 3 S.C.R. 341) again considered the applicability of Article 19(1)(f) in relation to acquisition or requisition of property under the authority of a law mentioned in Article 31(2). The Bombay Town Planning Act of 1955 was challenged as unreasonable and a violation of Article 19(1)(f) and (5). Shah, J. speaking for. the Court considered Article 31(2) as it stood after the Constitution Fourth Amendment Act, 1955 and said "clause (1) operates as a protection against deprivation of property save by authority of law which it is beyond question, must be a valid law, i.e. it must be within the legislative competence of the State legislature and must not infringe any other fundamental right. Clause (2) Guarantees that property shall not be acquired or requisitioned [except in cases provided by clause (5)] save by authority of law providing for compulsory acquisition or requisition and further providing for compensation for the property so acquired or requisitioned and either fixes the amount of compensation....
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....erate with full vigour in its own legitimate field. If acquisition or requisition of property for a public purpose has to satisfy again the test of reasonable restriction in the interest of the general public then harmony is repelled and Article 31(2) becomes a mere repetition and meaningless. It could not be said that when Article 31(2) was specifically enacted to deal with a case of acquisition or requisition of property for a public purpose the framers of the Constitution were not aware that it was a form of public deprivation of property. That is why it is important to notice the distinction between deprivation of property under Article 3 1 (1) which will relate to all kinds of deprivation of property other than acquisition or requisition by the State and Article 31(2) which deals only with such acquisition or requisition of property. Thirdly, Article 31(2) and 31(2A) is a self contained code because (a) it provides for acquisition or requisition with authority of a law, (b) the acquisition or requisition is to be for a public purpose, (c) the law should provide for compensation by fixing the amount of compensation or specifying the principles on which, and the manner in which,....
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....s are acquired for the purpose of developing the national economy. It is intended to confer benefit on weaker sections and sectors. It is not that the legislation win have; the effect of denuding the depositors in the 14 banks of their deposits. The deposits will all be there. The object of the Act according to the legislation is to use the deposits in wider public interest. What was true of public purpose when the Constitution was ushered in the mid-century is a greater truth after two decades. One cannot be guided either by passion for property on the one hand or prejudice against deprivation on the other. Public purpose steers clear of both passion and prejudice. In regard to property rights the State generally has power to take away property and justify such deprivation on the ground of reasonable restriction in the interest of the general public, but in case of deprivation of property by acquisition or requisition the Constitution has conferred power when the law passed provides compensation for the property acquired by the State. Therefore the acquisition or requisition for public purpose is a restriction recognised by the Constitution in regard to property rights. In Koch....
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....prise business of banking in all branches including the receiving. of money and valuables on deposit or for safe custody, or otherwise, the collecting and transmitting money and securities and transacting all kinds of agency business commonly transacted by bankers. The other objects in the form are to undertake and execute any trusts the undertaking whereof may seem desirable, and also to undertake the office of executor, administrator, receiver, treasurer, registrar or auditor. In Banbury v. Bank of Montreal([1918] A.C. 624) the House of Lords considered the authority of the bank to give advice as to investments and Lord Finday, L.C. said that "the limits of banker's business cannot be laid down as a matter of law. The nature of business is a question of fact, on which the jury are entitled to have-regard to thier own knowledge of business and it is in this context that the present case must be considered. It cannot be treated as if it was a matter of Pure law". In India, the Negotiable Instruments Act, 1881, Stamp Act, 1889 and Bankers Book Evidence Act, 1891 refer to the expression banking without a definition. In the Indian Companies Act. 1913 for the first time in 1936 ....
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....to (o). In sub-section (2) of section 6 of the 1949 Act it is encated that no banking company shall engage in any business other than those referred to in sub-section (1). Clause (a) of section 6(1) enumerates the various forms of business, inter alia, the borrowing, raising or taking up of money, the lending or advancing of money either upon or without security, the drawing, making, accepting, discounting, buying, selling collecting and dealing in bills of exchange, hoondees, promissory notes, coupons, drafts, bills of lading, railway receipts, warrants, debentures, certificates, scripts and other instruments and securities whether transferable or negotiable or not, the granting and issuing of letters of credit, traveller's cheques and circular notes, the buying, selling and dealing in bullion and specie, the receiving of all kinds of bonds, scrips or valuables on deposit or for safe custody or otherwise, the providing of safe deposit vaults, the collecting and transmitting of money and securities. Clause (b) speaks of acting as agents for any Goverment or local authority or any other person or persons; the carrying on of agency business of any description including the cleari....
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.... to engage' in a form of business which is not a usual type of business done by a banking company. In the first place, it would not be reasonable to think that the Government would ask a bank to do business of that type. Secondly, even if a bank were asked to do so that would not. rob the other permissible and legitimate forms of business mentioned in section 6(1) of the Act of their true character. Section 6(2) of the 1949 Act provides that no banking company shall engage in any form of business other titan those referred to in sub-section (1). The restriction contained in sub-section (2) establishes that the various types of business mentioned in sub-section (1) are normal recognised legitimate businesses and a banking company is therefore not entitled to participate in any other form of business. In the case of Commonwealth of Australia and others v. Bank of New South Wales and others([1950] A.C. 235), the Judicial Committee in hearing the appeal from the High Court of Australia considered the meaning and content of banking. The question for consideration was the effect of the Australian Banking Act, 1947 and section 46 thereof. At page 303 of the Report the Judicial Comm....
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....ee with specific security or otherwise, the administration of estates for any purpose whether as an executor, trustee or otherwise, and the acting, as agent on commission in the transaction of various kinds of business mentioned therein. The Indian Companies Act, 1913 did not define banking company or banking business though various sections, namely, 4, 133, 136, 138 and 145 and Schedule Form G referred to banking companies. The Indian Companies Amendment Act in 1936 for the first time defined a banking company in section 277F as a company which carried on the principal business of accepting of deposits on current account or otherwise, notwithstanding that it engaged in any one or more of the businesses as mentioned in clauses (1) to (17) thereof. It may be stated here that clauses (1) to (17) in section 277F of the Indian Companies Act, 1913 are similar to the various forms of business mentioned in section 6(1) of the 1949 Banking Regulation Act. In 1942, the Indian Companies Act, 1913 was amended by Act 21 of 1942 and it will appear from the statement of objects and reasons there that the definition of banking companies in section 277F of the Indian Companies Act created difficul....
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.... the 1949 Act are the statutory restatement of the gradual evolution over a century of the various kinds of business of banking companies which are similar to those to be found in the State Bank of India Act, 1955 hereinafter called the State Bank Act. The business with regard' to deposit of valuables and safe deposit vaults is to be found in section 3(viii) of the State Bank Act, the agency business is mentioned in section 33(xii) of the State Bank Act. The business of guarantee, underwriting and indemnity is found in section 33(xi)(xii)(a) of the State Bank Act and the business of trusteeship and executorship is specifically found in the Banking Regulation Act, 1949 and in the previous Acts referred to hereinbefore. It was suggested by counsel for the petitioner that by banking business is meant only the hard core of banking as defined in section 5(b) of the 1949 Act. It is unthinkable that the business of banks is only confined to that aspect and not to the various forms of business mentioned in section 6(1) of the 1949 Act. Receiving valuables on deposit or for safe custody and providing for safe deposit vaults which are contemplated in clause (a) of section 6(1) of the ....
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.... account of the trust are met out of the general funds of the trustee bank. Payments to beneficiaries are made by crediting the beneficiaries' accounts in the trustee bank and if they are not constituents other modes of payment through other banks are adopted. The position of the banks as executor is similar to that of a trustee. Whatever moneys the bank may spent are recouped by the bank out of the accounts of the trust estate. After the definition of banking company had been introduced for the first time in 1936 in the Indian Companies Act, 1913 it appeared that the banks were not being managed proprely and the definition of a banking company gave rise to administrative difficulties in determining whether a company was as banking company or not. A number of banking and loan companies particularly in Bengal claimed that they were not banking companies within the scope of the definition given in section 277F of the companies Act and in some cases their contention was upheld by the Court. The failure of the Travancore National & Quilon Bank Ltd. in 1938 and the subsequent banking crisis in South India posed a big question as to the desirability of better legislation. An attem....
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....f the interests of its depositors, may prohibit the banking ,company from receiving fresh deposits or direct the Reserve Bank to apply under section 38 of the winding up of the banking company. Another important provision in the 1949 Act is found in section 27 which provides for monthly returns in the prescribed form and manner showing assets and liabilities. The power of the Reserve Bank under sections 27 and 35 of the 1949 Act relates to the affairs of the banking company which comprehend the various forms of business of the bank mentioned in section 6 of the 1949 Act. Then again section 29 of the 1949 Act contemplates accounts relating to accounts of all business transacted by the bank. Section -35-A of the 1949 Act confers power on the Reserve Bank to give directions with regard to the affairs of a bank. These provisions indicate beyond any measure of doubt that all forms of business mentioned in section 6(1) of the 1949 Act are lawful, legitimate businesses of a bank as these have grown along with increase of trade and commerce. The word 'banking' has never had any static meaning and the only meaning will be the common understanding of men and the established practice ....
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....he petitioner contended that undertaking of banking companies could not be the subject matter of acquisition and acquisition of all properties in the undertaking must satisfy public purpose as contemplated in Article 31(2). This contention was amplified to mean that undertaking was not property capable of being acquired and some assets like cash money could not be the subject matter of acquisition. The Attorney General on the other hand contended first that undertaking is property within the meaning of Article 31(2), secondly, undertaking in its normal meaning refers to a going concern and thirdly it is a complete unit as distinct from the ingredients composing it and therefore it could not be said that acquisition of the undertaking was an infraction of any constitutional provision. The term ,undertaking' is explained in Halsbury's Laws of England, 3rd Ed. Vol. 6 paragraph 75 at page 43 to mean not the various ingredients which go to make up an undertaking but the completed work from which the earnings arise. As an illustration reference is made to mortgage of the undertaking of a company. In Gardner v. London Chatham and Dover Railway Co.(') the undertaking of a ra....
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....en legislative provisions for acquisition of some of these undertakings. Under section 5 of the Act of 1969 the undertaking of each existing bank shall be deemed to include all assets, rights, powers, authorities and privileges and all property, movable and immovable, cash balances, reserve funds, investments and all other rights and interests arising out of such property as were immediately before the commencement of this Act in the ownership, possession, power or control of the existing bank in relation to the undertaking. This Court accepted the meaning of property given by Rich, J. in the Minister for State for the Army v. Dalziel(2) to be a bundle of rights which the owner has over or in respect of a thing, tangible or intangible, or the word 'property' may mean the thing itself over or in respect of which the owner may exercise those rights. In the case of Commissioner,, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt("), this Court again gave wide meaning to the word 'property' and Mukherjea, J. said that there is no reason why the word 'property' as used in Article 19(1)(f) of the Constitution should not be....
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....6) consisted of two sub-articles the first sub-,article relating to qualifications for practising profession or carrying on any occupation, trade or business and the second sub-article relating to carrying on by the State of trade, business industry to the exclusion 'complete or partial of citizens or otherwise. The second sub-article was really an enlargement of clause (6) of Article 19 as a result of the amendment. The main contention of counsel for -the petitioner was that the second limb of Article 19(6) after the expression 'in particular' must also satisfy the test of reasonable restriction contained in the first limb of Article 19(6) and emphasis was placed on the word 'in particular' to show that it -indicated that the second limb was only an instance of the first limb of the Article. The Constitution First Amendment Act -of 1951 was enacted really to enable the State to carry on business to the exclusion, complete or partial of citizens or otherwise as will appear from the amendment of Article 19(6). In the case of Akadasi Padhan v. State of Orissa(') this Court considered the Orissa Kendu Leaves (Control of Trade) Act, 1961 by which the State ac....
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....ular may so acquire any land for the purpose of disposing of it for development for which permission has been granted under Part III of this Act on terms inclusive of any development charge payable under those provisions in respect of that development". It was held that the sub-section conferred a single power on the Central Land Board and not two powers, viz., that the boards have. power to acquire land for the purpose connected with the ,performance of their functions and the words in the second limb ,of the section were no more than a particular instance of that which the legislature regarded as part of the Board's functions. The purpose referred to in the second part of the sub-section there introduced by the words 'in particular' was held to be a purpose connected with the performance of the function within the meaning of the first part of the sub-section. The language of the subsection in the case before the House of Lords is entirely different from the language in Article 19(6). Article 19(6) in the two limbs and in the two sub-articles of the second limb deals with separate matters and in any event State monopoly in respect of -trade or business is not open t....
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....siness from others belonging to "non-banking business" because assets are not in fact divided on any such basis. Furthermore that would be striking at the root of acquisition of the entire undertaking. It would be strange to hold in the teeth of express provisions in the Act of 1969 permitting the banks to carry on business other than banking that the same will amount to a prohibition on the bank to carry on those businesses. I find it difficult to comprehend the contention of the petitioner that a permissive provision allowing the banks to carry on these businesses other than banking becomes unreasonable. If that provision was not-there the businesses could be carried on and the argument would not be available at all. The express making of the provision obviously for greater safety cannot change the position. The petitioner's contention on Article 19(6) therefore fails. Counsel for the petitioner contended that section 11 of the 1969 Act suffered from the vice of excessive delegation and there were no guidelines for reaching the objectives set out in the Preamble of the Act and the decision of Government regarding policy involving public interest was made final and therefor....
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....creation of reserve fund, restrictions on subsidiary company, restrictions on loans and advances, power of the Reserve Bank to control -advances by banking companies, restrictions on the opening of new places of business, maintenance of percentage of assets, return of unclaimed deposits, furnishing of returns to the Reserve Bank, publication of information by the Reserve Bank, submission of accounts and balance sheet to the Reserve Bank, inspection by the Reserve Bank, power of the Reserve Bank to give directions with regard to management, and imposition of penalties for contravention of the provisions of the Act. There are other statutes which provide powers of the Central Government to give directions. I have already referred to the Reserve Bank of India Act, 1934. There are similar statutes conferring, powers on the Government to give directions, namely, State Bank of India Act, 1955, State Financial Corporation Act, 1951, University Grants Commission Act, 1956 Life Insurance Act, 1956, Deposit Insurance Act, 1961, National Cooperative Development Corporation Act, .1962, Agricultural Refinance Corporation Act, 1963 and State Agricultural Credit Corporations Act, 1968. There a....
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.... Article 301. Article 305 to my mind directly applies to a law relating to bank and all businesses necessarily incidental to it carried on by the State to the complete or partial exclusion of 14 banks. Article 302 can have no application in such a case. An individual cannot complain of violation of Article 301. (1). Article 305 applied in the present case and therefore neither Article 301 nor Article 302 will apply. Article 302 is an enabling provision and it has to be read in relation to Article 301. Acquisition of property by itself cannot viol-ate Article 301 which relates to free trade, commerce throughout India. The object of acquisition is that the State shall carry on business to the exclusion, complete or partial, of the 14 banks. Counsel for the-petitioner contended that the 1969 Act violated the provisions of Article 14 on these grounds : First, the Act discriminated against 14 banks as against other Indian scheduled banks, secondly, the selection of 14 banks has no reasonable connection to the objects of the Act; thirdly, banks which may be described to be inefficient and which are liable to, be acquired under section 36AE of the 1949 Act are not acquired whereas 1....
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....s is not only intelligible but is also a sound classification. From the point of view of resources these 14 banks are better suited than others and therefore speed and efficiency which are necessary for implementing the objectives of the Act can be ensured by such classification. In the case of Shri Ram Krishna Dalmia v. Shri Justice S. R. Tendolkar & Others([1959] S.C.R. 279), it was said that the Court would take into consideration the history of the times and could also assume the state of facts existing at the time of legislation. A presumption also arises in regard to constitutionality of -a piece of legislation. In the case of P. V. Sivarajan v. The Union of India & Anr. ([1959] 1 Supp. S.C.R. 779) the Coir Industry Act was considered in relation to registration of dealers for export. The Act provided minimum quantity of export preceding 12 months the commencement of the Act as one of the qualifying terms for registration. This quantitative test was held good. The legislative policy as to the necessity is a matter of legislative judgment and the Court will not examine the propriety of it. The legislation need not be all embracing and it is for the legislature to determine wha....
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....iscerning some kind of inequality and therefore grouping has to be made. where the legislature finds that public need is great and these 14 banks will be able to supply that need for the development of national economy classification is reasonable and not arbitrary and is based on practical grounds and consideration supported by the large resources of over Rs. 50 crores of each of these 14 banks and their administration and management. I am, therefore, of opinion that the acquisition of the undertakings does not offend Article 14 because of intelligible differentia and their rational relation to the object to be achieved by the Act of 1969 and it follows that these banks cannot therefore be allowed to carry on banking business to nullify the very object of the Act. Counsel for the petitioner contended that the Act of 1.969 infringed Article 31(2) because there was no just compensation. It was said that compensation in Article 31 (2) meant just compensation and it the 1969 Act did not -aim at just compensation, it would be unconstitutional. It was contended that cash could not be taken and further that the four disputed businesses could not be acquired. I have already expressed m....
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....ableness of compensation and the Court could not also go into the question of result of -application propriety of principle or reasonableness of the compensation. In Vajravelu Mudaliar's case([1965] 1 S.C.R. 614) this Court referred to the decision of Bela Banerjee's case([1954] S.C.R. 558) where it was held that compensation in Article 31(2) meant just equivalent or full indemnification. In Vajravelu Mudaliar's case([1969] 3 S.C.R. 341) it was contended that the Land Acquisition Madras Amendment Act, 1961 had provided for acquisition of land for housing schemes and laid down principles for compensation different from those prescribed in the Land Acquisition Act, 1894 and thereby Article 31-(2) was infringed because the Act did not provide for payment of compensation within the meaning of Article 31 (2). Subba Rao, J. speaking for the Court said that if the term 'compensation' had received judicial interpretation it must be assumed that the term was used in the sense in which it had been judicially interpreted unless a contrary intention appeared. That is how reference was made to the decision of this Court in Bela Banerjee's case(') to emphasise t....
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....id down in Vajravelu Mudaliar's case ([1965] 1 S.C.R. 614) are these. First, if principles are not relevant to the property acquired or not relevant to the value of the property at or about the time it is acquired, these are not relevant principles. The second proposition is that if a law prescribes a compensation which is illusory the Court could question it on the ground that it is not compensation at all. In the case of Shantilal Mangaldas(1) the Bombay Town Planning Act of 1950 which was repealed by the Bombay Town Planning Act of 1955 came up for consideration. There was a challenge to the Bombay Act of 1955 on the ground of infringement of Article 31(2) of the Constitution. Section 53 of the Bombay Act contemplated transfer of ownership by law from private owners to the local authority. It was -argued that under section 53 of the Bombay Act when a plot was reconstituted and out of that plot a smaller area was given to the owner and the remaining area was utilised for public purpose the area so utilised vested in the local authority for a public purpose, but the Act did not provide for giving compensation which was a just equivalent of the land expropriated at the date ....
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....d or the time of acquisition of the property but not on the plea that the principles are not relevant to the determination of a fair or just equivalent of the property acquired. A challenge to the statute that a principle specified by it does not provide or award a just equivalent will be a clear violation of the constitutional declaration that inadequacy of compensation provided for is not justiciable. Shah, J. referred to the decision of this Court in the case of Union of India v. The Metal Corporation of India Ltd. & Anr. ([1967] 1 S.C.R. 255) and expressed disagreement with the following view "pressed in the Metal Corporation case(') "the law to justify itself has to provide a payment of just equivalent to the land acquired or lay down principles which will lead to that result. If the principles laid down are relevant to the-fixation of compensation and are not arbitrary the adequacy of the resultant product cannot be questioned in the court of law. The validity of the principles judged by the above tests falls within judicial scrutiny and if they stand the test the adequacy of the product falls outside justification". In Metal Corporation case(') compensation was to....
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....ust compensation cannot be inadequate and anything which is impeached as unjust or unfair is impinging on adequacy. Therefore. just equivalent cannot be the criterion in finding out whether the principles are relevant to compensation or whether compensation is illusory. In Vajravelu Mudaliar's case(1) the Court noticed continuous rise in land price but accepted an average price of 5 years as a principle. An average price over 5 years in the teeth of a continued rise in price would not aim at just equivalent according to the petitioner's contention there. Again potential value of land which was excluded in the Act in Vajravelu Mudaliar's case([1965] 1 S.C.R. 614) was said there to pertain to the method of ascertaining compensation and its exclusion resulting in inadequacy of compensation. I am, therefore, of opinion that if the amount fixed is not obviously -and shockingly illusory or the principles are relevant to determination of compensation, namely, they are principles in relation to property acquired or are principles relevant to the time of acquisition of property there is no infraction of Article 31(2) and the owner cannot impeach it on the ground of 'just equ....
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....t no compensation has 'been provided for any particular asset that will be questioning adequacy of -compensation because compensation has been provided for the entire undertaking' The compensation provided for the undertaking cannot be called illusory because in the present case principles have been laid down. The Second Schedule of the Act of 1969 deals with the principles of compensation for the undertaking. The Second Schedule is in two parts. Part 1 relates to assets and Part 1 relates to liabilities. The compensation to be paid shall be equal to the sum total of the value of assets calculated in accordance with the provisions of Part 1 less the sum total of liabilities computed and obligations of existing banks calculated in accordance with the provisions of Part II. in Part 1 assets are enumerated. Counsel for the petitioner contended that with regard to assets either there was no principle or the principle was irrelevant or the compensation was illusory or it was not just equivalent. As to securities, shares, debentures Part 1 (c) explanation (iv) was criticised on the ground that there was no principle because period was not fixed and was left to be determined &#....
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....get more than the former and in the former standard rent was applied and the value of land was ignored and therefore it was an irrelevant principle. That will not be illusoriness.Standard rent necessarily takes into account value of land on which the building is situated because no rent can be thought of without a building situated on a plot of land. Article 31(2) does not enjoin the payment of full or just equivalent or the payment of market value of land and buildings.There should be a relevant principle for determining compensation for the property acquired. Capitalisation method is not available for land because land is not generally let out. If rental method be applied to land the value may be little. In any event, it is a principle relevant to determination of compensation. Furthermore, there was no case in the petition that there was land with building side by side with vacant land. Another criticism with regard to Explanation 2 (1) (i) was that amount required for repairs which was to be deducted in finding , out ascertained value should not be deducted against capital value. I am unable to accept the contention because this deduction on account of maintenance and repairs i....
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.... finding out ascertained value in the case of building which is wholly occupied. Explanation 2(2) relates to the case of a building which is partially occupied. Explanation 2(3) refers to land on which no building is erected or which is not appurtenant to any building. In the case of partial occupation Explanation 2(2) sets out the principle of compensation of partially occupied building. Again in Explanation 2(3) the criticism on behalf Of the petitioner that if there is a garage or one storeyed structure the principle will not apply is explained on the ground that the expression 'appurtenant' means land belonging to the premises. If there is a small garage or a one storeyed building the land will not be appurtenant to the garage or building. Counsel for the petitioner contended that Part 1(h) which spoke of market or resaleable value of other assets did not include goodwill, benefit of contract, agencies, claims in litigation, and, therefore, there was no compensation for these. Part 1 (h) is 'a residuary provision, Whatever appears in books would be included. Goodwill does not appear in the books. Goodwill may arise when an undertaking is sold as a going concern. ....
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....ner that interest from the date of acquisition was not provided for. That would again appertain to the adequacy of compensation. Furthermore, interest has been provided for under section 6(3) (a) (b) of the 1969 Act. It was also said that if there was a large scale sale of promissory notes or stock certificates the value would depreciate. Possibility of depreciation does not vitiate the principle or constitutionality of a measure. The principles which have been set out in the 1969 Act 'are relevant to the determination of compensation. When it is said that principles will have to be relevant to the compensation, the relevancy will not be as to adequacy of compensation but to the property acquired and the time of acquisition. It may be that adoption of one principle may confer lesser sum of money than another but that will not be, a ground for saying that the principle is not relevant. The criticism on behalf of the petitioner that compensation was illusory is utterly unmeritorious. The Attorney General contended that even if Article 1 9 (1) (f) -or 19(1) (g) applied the 1969 Act would be upheld as a reasonable -restriction in the interest of the general public. It is said....
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....rnment is to take up direct management of credit resources for massive expansion of branches, vigorous principles for mobilisation of deposits and wide range programme to fill the credit gaps of agriculture, small scale industries, small artisans, retail trade and consumer credit. This policy can be achieved only by direct management by State and not merely by social control. Almost all the banks are in favour of large scale industry. This direct control and expansion of bank credit is intended to make available deposit resources and expand the same to serve the country in the light of Directive Principles. These are the various reasons which are rightly said by the Attorney General to be reasonable restrictions in the interest of the general public. I wish to make it clear that in my opinion Articles 19 (1) (f ) and (g) do not at all enter the domain of Article 3 1 (2) because a legislation for acquisition and requisition of property for public purpose is not required to be tested again on the touchstone of reasonableness of restriction. Such reasonable restriction is inherent and implicit in public purpose. That is why purpose is dealt with separately in Article 31(2). The ....
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....able cause to believe". It is obvious that when the words used are "reasonable cause to believe" it is to be found out whether the cause itself has reason to support it and the Court goes into the question of ascertaining reasons. In Liversidge's case(') it was said that the words "has reasons to believe" meant an objective belief whereas the words "if it appears" or "if satisfied" would be a subjective satisfaction. The words 'if it appears' came up for consideration in two English cases of Ayr Collieries(2) and the Carltona(3) and the decision was that it was not within the province "of the Court to enquire into the reasonableness of the policy. The interpretation of Article 123 is to 'be made first on the language of the Article and secondly the context in which that power is reposed in the President. When power is conferred on the President to promulgate Ordinances the satisfaction of the President is subjective for these reasons. The power in Article 123 is vested in the President who is the executive head and the circumstances contemplated in Article 123 are a guide to the President for exercise of such power. Parliament is not in session throughout the....
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....(1) and Rohtas Industries('). The decisions in Barium Chemicals([1966] Supp. S.C.R. 311) and Rohtas Industries Ltd.( [1969] 2 S.C.R ) turned on the interpretation of section 237 of the Companies Act and executive acts thereunder. The language used in that section is 'in the opinion of', The Judicial Committee in the Hubli Electricity case(76 I.A. 57) interpreted the words "the Provincial Government may, if in its opinion the public interest so requires, revoke a licence in any of the following cases" to mean that the relevant matter was the opinion and not the ground on which the opinion was based. This Court in the Barium Chemical's, case(') however found that there were no materials upon which the authority could form the requisite opinion. That, is the ratio of the decision in Barium Chemicals case(-). In order to entitle the Central Government to take action under section 237 of the Companies Act, 1956 there is to be the requisite opinion of the Central Government and the circumstances should exist to suggest that the company's business was being conducted as laid down in sub-clause (1) or that the persons mentioned in sub-clause (2) were guilty of fr....
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....ection. The House of Lords held that the Minister had full or unfettered discretion but he was bound to exercise it lawfully that. is to say not to misdirect himself in law, nor to take into account irrelevant matters-nor to omit relevant matters from consideration That was an instance of a writ of mandamus directing exercising of' discretion to act on the ground that it was a power coupled with. duty. The only way-in which the exercise of power by the President can be challenged is by establishing bad faith or mala fide and corrupt motive. Bad faith will destroy any action. Such bad faith, will be a matter to be established by a party propounding bad faith. He should affirm the state of facts. He is not only to allege the same but also to prove it. In the present case there is no allegation of Mala fide. It was said on behalf of the petitioner that the fact that Parliament would be in session on 21 July, 1969 and that the Ordinance was promulgated on Saturday, 19 July, 1969 was indicative of the fact that the Ordinance was not promulgated legitimately but in a hasty manner and the President should have waited. If the President has power when the House is not in session he c....