Shri Ramtanu Co-Operative Housing Society Ltd. & Anr. v. State of Maharashtra & Ors.

- Ray, J. These petitioners raise two principal questions. First, whether the State of Maharashtra (hereinafter referred to as the State) is competent to enact the Maharashtra Industrial Development Act, 1961 (hereinafter refererd to as the Act) : liecondly, whether there is procedural discrimination between the Maharashtra Industrial Development Act, 1961 and the Land Acquisition ~ct, 1894.

The contentions of the petitioners are that the Act io for the incorporation, regulation and winding np of the Maharashtra D<velopment Corporation (hereinafter referred to as the Corpo-ration) and that 1he Corporation is a trading one and therefore the impugned legislation falls within Entry 43 of List I of the Seventh Schedule of the Constitution. On behalf of the State it n is said on the other hand that the Act is for the growth and

development of industries in the State of Maha:ashtra and for acquisition of land in that behalf and the Corporation is estab-lished for carrying out the purposes of the Act, and, therefore, the legislation is valid.

The true character, scope and intent of the Act is to be ascer-tained with reference to the purposes and the provisions of the Act. The Act is one to make a special provision for securing the orderly establishment in industrial areas and industrial estates of industries in the State of Maharashtra, and to assist generally in the organisation thereof, and· for that purpose to establish an Industrial Development Corporation, and for purposes con-nected with the matters aforesaid. •

The Corporation is established for the purpose of securing and assisting the rapid and orderly establishment and organisa-tion of industries in industrial areas and industrial estates in the State of Maharashtra. The Corporatfon consists of 8 members, two of whom are nominated by the State Government of whom one shall be the Financial Adviser to the Corporation, one mem-ber nominated by the State Electricity Board, one member nomi-nated by the Housing Board and three members nominated by the State Government, from amongst persons appearing to. Gov-ernment to be qualified as having had experience 'of, and having shown capacity in, industry or trade or finance or who are in the opinion of the Government capable of representing the interest of persons engaged or employed therein, and the Chief Execu-tive Officer of the Corporation, who shall be the Secretary of the Corporation. ·

The functions of the Corporation shall be generally to promote and assist in the rapid and orderly establishment, growth and deve-lopment of industries in the State of Maharashtra and to establish and manage industrial ~tates at places selected by the State Gov-ernment, develop industrial are&s seleeted by the State Government for the purpose and make them available for undenakings to estal>- lish themselves, assist financially by loans industries to move their factories into such estates or areas, and to un<iertake schemes or works, either jointly with other corporate bodies or institutions, or L169Sup.Cl(P)71-2 with Government or local authorities, or on agency basis, in fur-iherance of the purposes for which the Corporation is established and all matters connected therewith.

An industrial area under the Act means any area declared to be an industrial area by the State Government by notification in the Official Gazette whlch is to be developed and. where industries are R to be accommodated. An industrial estate under the Act means any site selected by the State Government, where the Corporation builds factories and other buildings and makes them available for any site selected by the State Government, where the Corporation means the carrying out of building, engineering, quarrying or other operations in, on, over or under !and, or the making of any mate-rial cha'lge in any building or land, and includes re-development. 'mt does not include mining operations. Amenity under the Act includes road, supply of water or electricity, street lighting, drain-age, sewerage, conservancy and such other conveniences as the State Government may by notification in the Official Gazette specify to be an amenity for the purposes of the Act.

We have referred to these expressions, industrial area. indus-trial estate, devlopment and amenity in order to appreciate the general powers of the Corporation to_discharge the functions of the Corporation in regard to the establishment, growth and develop-ment of industries in the State. These powers are to acquire and hold property, moveable and intmoveable for the performance of L any of its activties. and to lease, sell, exchange or otherwise trans-fer any property held by the Corporation on such conditions as may be deemed proper by the Corporation and also to purchase by agreement or to take on lease or under any form of tenancy any land, to erect such buildings and to execute such other works as may be necessary for the purpose of carrying out its duties and functions. to nrovide or cause to be provided amenities and com-mon facilites in industrial estates and industrial areas and construct and maintain or cau'e to be maintained works and buildings there-for, to make available buildings on hire or sale to industrialists @r persons intending to start industrial undertakings, to construct buildings for the housing of the employees of such industries. to allot factory sheds or such buildings or parts of buildin!!s. includ-ing residential tenements to suitable persons in the industrial estates established or developed bv the Cornoration. and to do such other things and perform such acts as it mav think necessarv or expedient for the proper conduct of its functions. and the carf\=- ing into effect the purposes of this Act. -

Broadly stated the function, and powers of the Corporation are to. develop industrial areas and industrial estates bv providing amenities of road, supply of water or electricity. stre~t lighting.

drainage, sewerage, conservancy and other converuences, second-ly to construct works and buildings, factory sheds and thirdly, to make available buildings on hire or sale to industrialists or peisons intending to start industrial undertakings and to allot factory sheds, buildings, residential tenements to suitable persons in industrial estates established or developed by the Corporation and to lease, sell, exchange or otherwise transfer any property held by the Corporation on such conditions as may be deemed proper by th• Corporation.

The development of industrial areas and industrial estates i intended to serve two objects. In the first place, there is to be an orderly establishment and growth of industries in the Bombay Poona sector. The second object is to secure dispersal of indus-tries from the congested areas of the Bombay Poona sector to the under-developed parts of the State. The industrial areas are broadly classified into two categories, namely, first, those meant for engineering and other industries which are not obnoxious, and, secondly, those meant for chemical industries. The esta'.- blishment and growth of industries in the State is inextricably bound up with availability of land. Available land in limited. Such limited supply leads to speculation in land. Power is there-fore required for compulsory acquisition of land to achieve the purposes of the Act. At the same time, land owners are not to be deprived of the legitimate benefit of reasonable increase in land values in a developing economy.

Development of chemical industries requires long stretches of pipelines to be laid for moving gas and other liquid chemical products. The growth of industries in the State by establishment of industrial areas and industrial estates also means laying pipe-lines for carrying gas, water, electricity and constructing sewerage and drains. These amenities are essential. The absence of amenities is envisaged and answered in the Act by empowering the Corporation to provide these essential amenities, facilities and conveniences.

The principal functions of the Coqior~tion ~ re~ard to the establishment, growth and development of mdustnes m the State are first to establish and manage industrial estates at selected places and secondly to develo:i industrial areas selected by the the State Government. When industrial areas are selected the neces-sity of acquisition of land in those areas is apparent. The A;ct therefore, contemplates that the State Gover.lfl!ent may acqWI\; land by publishing a notice specifying t~e p~rt1~ular purpose .for which such land is required. Before the pubbcatlon of the notice,· the owner of the land is given an opportunity to show cause as to why the land should not be acquired. The State after consider-ing the cause shown by the owner the State Government may pass such orders as it deems fit. When a notice is published lo;· acqui-sition of land, the land, shall, on and from the date of such publi-cation, vest absolutely in the State Government free from all en-cumbrances. Where the land has been acquired for the Corpora-tion or any local authority, the State Government shall. after it has taken possession of the land, transfer the land to the Corpora-tion or that local authority, for the purposes for which the land has been acquired subject to such terms and conditions which the State Government may deem fit to impose. We have already noticed that for the purpose of the Act, namely, the establishment and development of industries in the State the Corporation will establish industrial estates and develop industrial am1s.

Apart from establishing industrial estates and developing in-dustrial areas the Corporation may dispose of any land ncquired ~y the State Government and tra_nsferred to the Corporation with-out undertaking or carrying out any development thereof or trans- .fer sucJ;i land after undertaking or carrying out any devilopment as it thinks fit. These powers of the Corporation with respect to the disposal of land are to be exercised so far as practicable. that where the Corporation proposes to dispose of by sale any such land without any development having been undertaken or carried out thereon, the Corporation slial! offer the land in the first instance to the persons from whom it was acquired if they desire to. pur-chase it subject to such requirements as to its development and use as the Corporation may think fit to impose. Against, the persons who are residing or carrying on business or other activi-ties on any such land shall, if they desire to obtain aceommodation on land belonging to the Corporation and are willing to comply with any requirements of the Corporation as to its development and use, have an opportunity to obtain thereon accommodation suitable to tl)eir reasonable requirements on terms settled with due· regard to the price at which any such land has been acquired from them.

The other provisions in the Act· are that the State Government may upon such conditions as may be agreed between the State Government and the Corporation, place at the disposal of the Corporation any land vested in the State Government. After any such land has been developed by, or under the control and super-vision of, the Corporation, it shall be dealt with by the Corpora-tion in accordance with the regulations made, and directions given by the State Government in this behalf. Further, if any land placed at the disposal of the C<Yrporation is r~quired at ariy time therafter by the State Government, the Corporation shall replace it at the disposal of the State Government upon such lenm and conditions as may be mutually agreed upon.

There arc two other important provisions in the Act. Jn the first place, the State Government may issue to the Corporation such general or special direc•ions as to policy as it may think necessary or expedient for the purpose of carrying out the pur-poses of the Act. and the Corporation shall be bound to follow and act upon such directions. These directions will be in the field of establishment and mangement of industrial estates and develop-ment of industrial areas and carrying out the other powers of the Corporation in regard to the provision of amenities and common facilities and assisting industrialists or industrial undertakings in obtaining buildings or factory sheds or residential tenements or land for development of industries. The second important provi-sion is that when the State Government is satisfied that the purposes for which the Corporation is established under the Act have been substantially achieved so as to render the continued existence of the Corporation in the opinion of the State Government unneces-sary that Government may by notification in the Official Gazette declare that the Corporation shall be dissolved with effect from such date as may be specified in the notification and the Corpora-tion shall be deemed to be dissolved accordingly. Upon such dis-solution, all properties, funds and dues which are vested in or realisable by the Corporation shall vest in or be realised by the State Government and all liabilities enforceable against the Corpo-ration shall be enforceable against the State Government.

It is in the background of the purposes of the Act and pow~rs and functions of the Corporation that the real and true character of the legislation will be determined. That is the doctrine of find-ing out the pith and substance of an Act. In deciding the pith and suhqance of the legislation, the true test is not to find out whether the Act has encroached upon or invaded any forbidden field but what the pith and substance of the Act is. It is true intent of the Act which will determine the validity of the Act. Industries come within E,'ltry 24 of the State List subject to the provision c;f Entry 7 and Entry 52 of the Union List of the Constitution. Entry 7 of the Union List relates to industries declared by Parliament by Jaw to be necessary for the purpose of defence or for the prosecution of war. Entry 52 of the Union List relates to industries, the control of which by the Union is declared by Parliament by law to be expe-dient in the p•;blic interest. The establisnment, growth and deve-lopment of industries in the State of Maharashtra do_es not fall within Entry 7 and Entry 52 ot the Union List. Establishment, growth and development of industries in the State is within the State List of industries. Furthermore, to effectua,e the purposes of the development of industries in the State it is necessary to inake land available. Such land can be made available by acquisition or requisition. The Act in the present case deals with ·acquisition of land by the State and on such acquisit,ion, the State may transfer the land to the Corporation which again may develop it itself and establish industrial estates or may develop· industrial areas. Acqui-sition or requisition of land falls unc!_er Entry 42 of the Concurrent List. In order to achiev growth of industries it is necessary not only to acquire land but also to implement the purposes of the Act. The Corporation is therefore established for carrying out the pur· poses of the Act. The pith and substance of the Act is establish- . ment, growth and orga.nisation of industries, acquisition of land in that behalf and carrying out the pnrposes of the Act by setting up the Corporation as one of the lfn1bs·or agencies of the Govern-ment. · The powers and functions of the Corporation show in no uncertain terms thanhese are all in aid of the principal and' pre-dominant purpose of establishment, growth and estaliiishment of industries. The Corporation is established for that purpose. When the Government is satisfied that the Corporation has substantially achieved the purpose for which the Corporation is established, the Corporation will be dissolved because the raison d'etre is gone. We, therefore, hold that the Act is a valid piece of legislation.

The petitioners contended that the Corporation was a trading one. The reasons given were that the Corporation could sell pro· perty, namely, transfer land; that the Corporation had borrowing powers; and that the Corporation was entitled to moneys by way of rents and profits. Reliance was placed on the report of the Cor· poration and in particular on the income and expenditure of the Corporation to show that it was making profits. These features of transfer of land, or borrowing of moneys or receipt of rents and profits will by themselves neither be the indicia nor the decisive attributes of the trading character of the Corporation. Ordinarily, a Corporation is established by shareholders with their capital. The shareholders have their Directors for the regulation and manage-ment of the Corporation. Such a Corporation set up by the share-holders carries on business and is intended for making profits. When profits are earned by such a Corporation they are distributed to shareholders by way of dividends or kept in reserve funds. In the present case, these attributes of a trading Corporation are absent. The Corporation is established by the AQt for carrying out the purposes of the Act. The purposes of the Act are development of industries in the State. The Corporation consists of nominees of the State Government, State Electricity Board and the Housing Board. The functions and powers of the Corporation indicate that the Corporation is acting as 'a wing of the State Government in establishing industrial estates and developiflg industrial areas, a'quiring property for thme "purposes, constructing buildings, allorting buildmgs, factory sheds to industrialists or industrial undertakings. 1t is obvious that the Corporation will receive moneys for disposal c.! land, buildings and other properties and also that the Corporation would receive rents and profits in appropriate ca,es. Receipts of these moneys arise not out of any business or 1rade but out of the sole purpose of estiiblishmeot, growth and de,eJopment of indu'1ries.

The Corporation has to provide <.menities and facilities in indus-trial estates and industrial areas. Amenities of road, electricity, sewerage and other facilities in industrial estates and industrial are;1s are within the programme of work of the Corporation. The fund of the Corporation consists of moneys received from the Srate Government, all fees, costs and charges received by the Corpora-tion. all moneys received by the Corporation from the disposal of lands. buildings and other properties and all moneys received by tJ the Corporation bv way c.f rents and profits or in any other manner.

The Corporation shal! have the authority to spend such sums out of tht general funds of the Corporation or from reserve and other funds. The Corporation is to make provision for reserve and other specially denomi.nated funds as the State Government may direct. The Corporation accepts deposits from persons, authori-ties or institutions to whom allotment or sale of land, buildings", or sheds is made or is likely to be made in furtherance of the object of the Act. A budget is prepared showing the estimated receipts I and expenditure. The accounts o.f the Corpora!ion are audited by

an auditor appointed by the State Government. These provisions in regard to the firnrnce of the Corporation indicate the real role of the Corporation. l'i~ .. the agency of the Government in. carrying out the purpose and object of the Act which is the development of industries. If in the ultimate a•nalysis there is excess of income over expenditure that will not establish the trading character of the Corporation. There are various departments of the Government which may haYe excess of income over expenditure.

The Corporation is not a Government compaly within the meaning of section 617 of the Companies Act, 1956 no1 can the Companies Act. 1956 be said to apply to the Corporation because under the provisions contained in section 616 of the Companies Act that Act will apply to a company governed by any special Act except in so far as the provisions of the Companies Act are incon-sistent with the provisions of such special Act. The provisions of the Act in the present case in regard to incorpo~ation. functions, powers and dissolution of the Corporatiorl show that the purpose5 and objects of the Act and the functions and powers of the Corro: ration are like the warf and weft of the fabric of development of industries by the State. ·

There are two provisions of the Act which are not to he found in any trading Corporation. In the first place, the sums payable by any person to the Corporation are recoverable by 1t under this Act as an arrear of land revenue on the application of the Corpo-ration. Secondly, on dissolution of the Corporation the assets vest in and the liabilities become enforceable against the State Govern· ment.

The underlying concept of a trading Corporation is buying and selling. There is no aspect of buying or selling by the Corporation in the present case. The Corporation carries out the purposes of the Act, namely, development of industries in the State. The con-struction of buildings, the establishment of industries by letting buildings on hire or sale. the acquisition and transfer of land in relation to esfablishmem of industrial estates or development cf industrial areas and of setting up of industries cannot be said to be dealing in land or buildings for the obvious reason that the State i' carrying out the objects of the Act with the Corporation as an agent in setting up industries in the State. The Act ainl.s at build· ing an industrial town and the Corporation carries out the objects of the Act, The hard core of trading Corporation is its commercial character. Commerce connotes transactions of purchase and sale of commodities, dealing in goods. The forms of business transac-tions may be varied but the real character is buying and selling. The (rue character of the Corporation in the present case is to act I as an architectural agent of the development and growth of indus-trial towns by establishing and devloping industrial estates and industrial areas. We are of opinion that the Corporation is not a trading on'e.

Counsel on. behalf of the petitioners contended that there was procedural discrimination between the Land Acquisition Act and the Act in the present case. It was said that there was a special procedure designed by the Land Acquisition Act for acquisition of land for the companies whereas in the present case the State was acquiring land for companies without adopting the procedure of theLand Acquisition Act. It is to be remembered that the Act in the present case is a special one having the specific and special pur-pose of growth, develooment and organisation of industries in the· State of Maharashtra. The Act has its own procedure and there is no provision in the Act ror acquisition of land for a company as in the case of Land Acquisition Act. In the present case, acquisi-tion under the Act is for the purpose of development of industrial estates or industrial areas by the Corporation or any other purpose in furtherance of the objects of the Act. The policy underlying the Act is not acquisition of land for any company but for the one and only purpose of development, organisation and growth of industrial e~tates and industrial areas. The Act is designed to have a planned industrial city as opposed to haphazard growth of indus-trial areas in all parts of the State. The Act is intended to prevent growth oi industries in the developed parts of the State. Industries are therdore to be set up in the developing or new parts of the State where new industrial towns will be brought into existence. The object of the Act is to carve out planned areas for industries. _, On one side there will be engineering industries and on the other

there will be chemical industries. There will be localisation of industries with the result that the residents and dwellers of towns and cities "'ill not suffer either from the polluted air or obnoxious chemicals of industries or the dense growth of industries and indus-trial population, within and near about the residential areas. The Land Acquisition Act is a general Act and that is why there is speci-fic provision for acquisition of land by the State for public purpose and acquisition of land by the State for companies. The present Ac on the other hand is designed the sole purpose ct de,·elop-ment of industrial areas and industrial estates and growth and development of industries within the State. Industrial undertakings or persons who are engaged in industries all become entitled to the facilities on such industrial growth. Under the Land Acquisition Act acquisition is at the instance of and for the benefit of a com-pany whereas under the present Act acquisition is solely by the State for public purposes. The two acts are dissimilar in situations and circumstances.

The petitioners contended that the provisions as to compensa-tion were a restriction on the judicial power oi the Collector. Sec-tion 33 of the Act deals with compensation. Tfie amount of com-pensation under the Act can be determihcd by agreement between the State Government and the person to be compensated. Where on the other hand no such agreement can be reached, the State Government shall refer the case to the Collector. That is sub-section (3) of section 33 of the Act. The proviso to that sub-section is that no compensation exceeding such amount as the State Government may by general orders specify to b paid for such acquisition shall be determined by the Collector without the pre-vious approval of the State Government or such officer as the State Government may appoi~t. in that behalf. This proviso was construed on behalf of the petitioners to be a fetter on the j1.1dicial powers of the Collector to to determine compensation. Sub-section ( 5\ of section 33 of the Act states that in detennining the amount of compensation, the. Collector shall be guided by the pro-visions contained in sections 23 and 24 and other relevant provi-sions of the Land Acquisition Act These provisions indicate that if the Collector will determine an amount higher than what the State Government may by general orders specify, the approval of the State Government will be necessary. There is no ceiling fixed by the Go1·ernment. Finally, there is an appeal to the Court from the decision of the Collector. The decision of the Court will finally determine the amount of compensation. We are of opinion that there L' no restriction on the powers of the Collector in the matter of determination of compensation, although the approval of Gov-ernment may be necessary in the Government interest.

All the contentions advanced by the petitioners fail. The peti-tions :ire dismissed with costs. ·

ORIGINAL JURISDICTION : Writ Petitions Nos. 182 of 1969 and 42 to 45 of 1968.

Petition under Art. 32 of the Constitution of India for enforce-ment of the fundamental rights.

D. M. Paru/ekar and A. G. Ratnaparkhi, for the petitioners (in W.P. No. 182 of 1969).

S.S. Shukla, for the petitioners (in W.P. No. 42 to 45 of 1968. S. T. Desai, G. L. Sanghi, B. D. ShllTma for S. P. NayllT, for respondents Nos. 1to3 (in W.P. No. 182 of 1969) and the respon-dents (in W.P. Nos. 42 to 45 of 1968).