TaxTMI 
TaxTMI 
1966 (9) TMI 167
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....providing for the acquisition of the Corporation by the Central Government. Pursuant to the said Ordinance, on or about October 23, 1965, the Central Government took over the possession, control and administration of the said Corporation. The Corporation, the 1st respondent and its Managing Director, the 2nd respondent filed a Writ Petition under Art. 226 of the Constitution in the High Court of Judicature for the State of Punjab, Circuit Bench at New Delhi, being Petition No. 631-D of 1965, challenging the validity of the said Ordinance. In the meantime, the Parliament passed the Act on the same terms as contained in Ordinance No. 6 of 1965 : it received the assent of the President of India on December 12, 1965. The respondent filed another writ petition in the said High Court, being Writ Petition No. 832-D of 1965, for a declaration that the Act was ultra vires the Constitution. The said High Court held that the Ordinance and the Act contravened the relevant provisions of Art. 31 of the Constitution and, therefore, were constitutionally void. The present appeal is preferred against the said judgment of the High Court. 3. It will be convenient at this stage to read the relevant....
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....he premiums paid by the company in respect of all leasehold properties reduced in the case of each such premium by an amount which bears to such premium the same proportion as the expired term of the lease in respect of which such premium shall have been paid bears to the total term of the lease; (e) the amount of debts due to the company, whether secured or unsecured, to the extent to which they are reasonably considered to be recoverable. (f) the amount of cash held by the company, whether in deposit with a bank or otherwise; (g) the value of all tangible assets and properties other than those falling within any of the preceding clauses. Paragraph III. - The total amount of liabilities and obligations incurred by the company in connection with the formation, management and administration of the undertaking and subsisting immediately before the commencement of this Act." 4. The gist of the said provisions may be given thus. The Act was made to acquire in public interest the undertaking of the Corporation. On the commencement of the Act, the undertaking was transferred and vested in the Central Government. Under s. 10 of the Act, the Governmen....
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....e decision of this Court in Vajravelu v. Special Deputy Collector [1965]1SCR614 that the said provision in respect of machinery did not lay down a principle for fixing compensation, i.e., a just equivalent to the machinery acquired. 6. The reasoning of the High Court was attacked by the learned Additional Solicitor- General on the ground that it did not appreciate the true scope of the said decision of this court and that, in any view, it went wrong in applying the principle of the said decision to the provisions of the Act. He contended that the Act laid down the broad principle that compensation shall be paid for the entire undertaking as a unit, but provided different modes for the ascertainment of the value of different parts thereof in such a way that the deficiency in the valuation of one part was offset by the liberal valuation of the other part. In that view, he contended, the Act embodied a principle relevant to the ascertainment of compensation for the undertaking acquired and, therefore, the product worked out under the said principle pertained only to the realm of adequacy which was beyond the ken of judicial review. He added that compensation in Art. 31 of the Const....
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....ch the said machinery was purchased years ago possibly represent its price at the time of its acquisition ? A simple illustration will disclose the irrelevance of the principle. Suppose in 1950 a machinery was purchased for Rs. 100 and, for some reasons, the same has not been used in the working of the undertaking but has been maintained in good condition. That machinery has not become obsolescent and still can be used effectively. If purchased in open market it will cost the owner Rs. 1,000. A compensation of Rs. 100 for that machinery cannot be said to be a just equivalent of it. It is common knowledge that there has been an upward spiral in prices of the machinery in recent years. The cost price of a machinery purchased about ten years ago is a consideration not relevant for fixing compensation for its acquisition in 1965. The principle must be such as to enable the ascertainment of its price at or about the time of its acquisition. Nor the doctrine of written-down value accepted in the Income-tax law can afford any guide for ascertaining the compensation for the used machinery acquired under the Act. Under the general scheme of the Income-tax Act, the income is to be charged re....
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.... that a particular machinery has a fixed value for all times. 8 . Four decisions of this Court laid down the principles applicable to the present case. Indeed, but for the said decisions, we would have posted this case before a Constitution Bench of five Judges. But, as this appeal involves only the application of the construction put upon Art. 31 of the Constitution by this Court in the said decisions, we did not resort to that course. The first of them is The State of West Bengal v. Mrs. Bela Banerjee [1954]1SCR558 . There, the validity of the West Bengal Land Development and Planning Act, 1948 was under scrutiny. Section 8 thereof provided that compensation to be awarded for compulsory acquisition to owners of land was not to exceed the market value as on December 31, 1946. This Court held that the said Act was ultra vires the Constitution and void under Art. 32(2) thereof. In that context, Patanjali Sastri C.J., observed : "Turning now to the provisions relating to compensation under the impugned Act, it will be seen that the latter part of the proviso to section 8 limits the amount of compensation so as not to exceed the market value of the land on December 31, 194....
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....re the date on which the notification under s. 4(1) was issued amounts in the circumstances to a flagrant infringement of the fundamental right of the owner of the land under Art. 31(2) as it stood when the Act was enacted." 1 1 . These two decisions turned upon the construction of Art. 31(2) of the Constitution before the Constitution (Fourth Amendment) Act, 1955. These cases laid down two propositions : (1) "Compensation" under Art. 31(2) of the Constitution means a "just equivalent" of what the owner has been deprived of; and (2) the value of land at an anterior date is presumed to be no compensation within the meaning of the said Article. After the Constitution (Fourth Amendment) Act, 1955, this Court had to construe in two decisions the amended provision of Art. 31(2) vis-a-vis the expression "compensation" found therein. The first decision is that in Vajravelu v. Special Deputy Collector [1965]1SCR614 . There, this Court observed at p. 625-626 : "A scrutiny of the amended Article discloses that it accepted the meaning of the expressions "compensation" and "principles" as defined by this Court in Mrs. Bela Banerjee's case [1954]1SCR558 ." 12. And it held tha....