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Judgment
K.A. Swami, C.J.—By a common order dated 12.8.1993. passed by the learned single Judge in W.P. Nos. 3861 to 3863, 6613 to 6615,
6615, 6673 to 6675, 6772, 6839 to 6841, 7796 to 7798 and 9032 of 1993 all the writ petitions were dismissed. W.A. No. 1258 of 1993 is
preferred against the order in W.P. No. 6674 of 1993. In the writ petitions, W.P. Nos. 21426 to 21446 of 1993, the petitioners have challenged
the very same acquisition in question. Hence, the writ appeal and the writ petitions are heard together and are decided by this common judgment.
The appellants are the petitioners in the writ petitions. They sought for quashing the acquisition proceedings initiated under the provisions of the
Land Acquisition Act, 1894, hereinafter referred to as the Act. G.O.Ms. No. 186, Industries (MIE) Department, dated 15.5.1992 was issued u/s
4(1) of the Act proposing to acquire vast extent of land for a public purpose, to wit, for Pig Iron Project to be set up by Southern Iron and Steel
Company Limited (for short, SISCOL), a new Company formed by the Tamil Nadu Industrial Development Corporation (for short TIDCO), and
Government undertaking in association with Messrs. Lakshmi Machine Works Limited, Coimbatore, as Company promoter, G.O.Ms. No. 683,
Industries (MIE)I Department, dated 8.12.1992. was issued u/s 6(1) of the Act declaring that the lands mentioned in the schedule have to be
acquired for a public purpose, viz., for establishing a Pig Iron Project in No. 33, Pottaneri Village, Mettur Taluk, Salem District. About 552 acres
are acquired under the aforesaid notifications. The petitioners who are the appellants before us claim to have interest in certain portions of the vast
extent of land acquired under the aforesaid notifications. They challenged the acquisition on the grounds that since the acquisitions was for a public
purpose, it was vitiated because no contribution towards compensation payable was made out of public revenue that the notifications issued under
Sections 4(1) and 6(1) of the Act were not published in accordance with law, that the provisions contained in Rules 3(b) and 4(b) of the Rules
framed under the Act were not followed inasmuch as the objections filed by the objectors viz., the petitioners, were not sent to the company for
whose benefit the lands in question are acquired and that the notices ought to have been issued to some of the individual petitioners as they are the
joint owners of some of the lands. Learned single Judge has negatived all the contentions.
It has been held by the learned single Judge that as part of the compensation is paid by the TIDCO which is one of the promoters of SISCOL
AND as TIDCO is government owned company, the amount paid by it towards compensation satisfies Explanation 2 to Section 6 of the Act; as
such, there is compliance with the requirement of the Second Proviso to Section 6(1) of the Act, that the objections filed by the objectors were
furnished to the company and the company in turn filed its reply and the reply was also sent to the objectors, therefore, there has been compliance
with Rules 3(b) and 4(b) of the Rules framed under the Act, and that it was not necessary to issue individual notices as one or the joint owners had
been served with the notice. Accordingly, all the writ petitions were dismissed.
Before us, Mr. N.R. Chandran, learned senior counsel appearing for the appellants/petitioners has put forth the very same contentions,
however, concentrated on the point that there is no contribution from the public revenue towards the compensation payable to the persons
interested in the land and, as the acquisition is for a public purpose, the Second Proviso to Section 6(1) of the Act has not been complied with; as
such, the entire acquisition proceeding is vitiated. Before dealing with this point, we shall dispose of the other points.
The contention of the learned senior counsel for the appellants/petitioners is that the substance of the notifications is not published in the local
newspapers and also in the manner as required by Sections 4(1) and 6 of the Act; therefore, the acquisition is vitiated. It is not possible to accept
the contention. Learned single Judge has negatived this contention. In the counter-affidavit, the State Government has specifically stated the
procedure followed in the matter, which clearly shows that the requirements of Sections 4(1), 5-A and 6(1) of the Act have been complied with.
Therefore, the contention is rejected.
It is not contended that the requirements of Rules 3(b) and 4(b) are not complied with. In this regard, the respondent has specifically stated in
the counter-affidavit which has been accepted by the learned single Judge, that the objections filed by the objectors were sent to the company and
the reply sent by the company was also furnished to the objectors. In this regard it is sufficient to extract the relevant portion of the order of the
learned single Judge, and it is as follows:
The argument in this case is that the petitioners submitted an objection in pursuance of the notice under Rule 3(b) on 7.9.1992 and this objection
was not forwarded to the requisitioning company. It is however, admitted that earlier the petitioner participated in the enquiry on 28.9.1992, held
at the office of the Revenue Inspector, Pottaneri. The answer of the respondent is that Rule 3(b) or Rule 4(b) as the case may be had strictly been
followed in this case. The objections of the petitioners has been communicated to the requisitioning body on 20.8.1992, 25.8.1992, 26.8.1992
and 27.8.1992. Therefore, the remarks of the requisitioning body were in turn conveyed back to the writ petitioners in the letter dated 7.9.1992. It
is thereafter that enquiry was held on 28.9.1992, 29.9.1992 and 30.9.1992. Therefore, there is no substance in the argument of the petitioners that
the procedure prescribed under the relevant Rules have not been followed. The objections sent in answer to the notice dated 7.9.1992 was far
subsequent to the earlier objections which had in fact been forwarded to the requisitioning body in the event, the enquiry was held after the second
objection and both the land owners and the requisitioning body had participated in such an enquiry. The land owners cannot invalidate an
acquisition proceedings by filing repeated objections and complaining that each objection had not been forwarded to the requisitioning body. I,
therefore, reject the second contention urged by the petitioners.
Similarly, the contention that individual notices ought to have been sent to all the joint owners of some of the lands also does not have any merit.
In the case of acquisition of land, the person in whose favour the land stands must be served with the notice and that is sufficient and it is not
necessary that all the joint owners whose names do not appear in the land records need be served. Hence, we reject this contention as well.
Now the only contention that remains is about the contribution from the public revenue towards the compensation payable to the persons
interested in the land acquired under the impugned notifications. The Second Proviso to Section 6(1) and the Explanations 1 and 2 thereunder are
relevant for this purpose and the same are as follows:
Provided further that no such declaration shall be made unless the compensation to be awarded for such property is to be paid by a company, or
wholly or partly out of public revenues or some fund controlled or managed by a local authority. Explanation 1: In computing any of the periods
referred to the First Proviso, the period during which any action or proceeding to be taken in pursuance of the notification issued u/s 4, Sub-
section (1) is stayed by an order of a court shall be excluded.
Explanation 2: Where the compensation to be awarded for such property is to be paid out of the funds of a corporation owned or controlled by
the State, such compensation shall be deemed to be compensation paid out of public revenues.
It is not in dispute in this case that the acquisition is for a public purpose. SISCOL has been formed by the TIDCO State Undertaking and another
private company by name Lakshmi Machine Works Limited, Coimbatore. In the counter-affidavit filed by the State Government, as to the
requirement for public purpose and payment of compensation, the following are the relevant paragraphs:
It is respectfully submitted that in Tamil Nadu number of small foundries are situated and the basic raw materials for all these foundries is pig
iron. Since large number of small foundries located in and around Coimbatore were closed for want of this raw material, a body called
''Coimbatore District Small Scale Industries Association (CODISSIA) applied to the first respondent for setting up a pig iron plant. The
Government of Tamil Nadu examined their requirement. Subsequently, Tamil Nadu Industrial Development Corporation Limited (TIDCO) (a
wholly owned Government Company) applied for a licence for production of 1,50,000 tonnes per annum of pig Iron, to the Government of India,
Ministry of Industry for approval for setting up the plant in Tamil Nadu. The Board of TIDCO at the meeting held on 21.9.1990, noted that the
foundry grade pig iron project is techno economically viable and resolved to set up the project in joint/associate sector and to select Tvl. Lakshmi
Machine Works Limited, Coimbatore as co-promoter, In letter (Ms) No. 1232, Industries, dated 13.11.1990, Government of Tamil Nadu
approved the proposal of TIDCO for implementing this project in the ''associate sector'' with Tvl. Lakshmi Machine Works Limited, as co-
promoter.
It is further submitted that after obtaining approval of the Government TIDCO and Tvl. Lakshmi Machine Works Limited, Coimbatore entered
into an agreement on 12.12.1990 to implement the project. Pursuant to this, an associate sector company by name ''southern Iron and Steel
Company Limited (SISCOL) was incorporated on 11.9.1991 and certificate of Incorporation was obtained on 1.11.1991 where Lakshmi
Machine Works Ltd., will contribute 40% of the equity and TIDCO 11% of equity and remaining from public/public financial institutions. This is an
acceptable Sector of TIDCO as per the Industrial Policy and guidelines of the Government of Tamil Nadu.
It is respectfully submitted that at the time of site selection, TIDCO considered the sites at Sevur (near Katpadi) and Arakkonam (near Tamil
Nadu Steels Limited) both in North Arcot Ambedkar District, three alternative sites in P.M. Patti Village of Mettur Taluk, Salem District. All these
sites were rejected on technical grounds. Keeping in mind the present phase of the project and its future growth potential with infrastructure
facilities like wide area of dry land, power, water and railway siding facilities at an acceptable project cost to Government of Tamil Nadu and
TIDCO. The site at Pottaneri and M. Kalipatti Villages near Mecheri Road Railway Station was finally selected purely on techno economic
grounds. Since there are no other suitable poramboke lands in the vicinity suitable for the plant, acquisition proceedings were initiated under the
Land Acquisition Act, 1894, (Central Act 1 of 1894) hereinafter referred to as ''the said Act''. The Government of Tamil Nadu, accorded
administrative sanction in G.O.Ms. No. 92, Industries, dated 9,3.1992. for acquisition of 211.38.5 hectares (522 acres) of patta dry lands in.
Pottaneri and M. Kalipatti Villages of Mettur Taluk Salem District for the purpose of setting up the pig iron project by TIDCO with Tvl. Lakshmi
Machine Works Limited (L.M.W.), Coimbatore.
It is respectfully submitted that the object of the above acquisition is for a ''public purpose''. The setting up of the pig iron project will satisfy the
pig iron requirements of a number of small foundries in the State. It will also guarantee employment to a large number of people employed in the
tiny, small and large foundry sectors in Tamil Nadu. The ultimate direct and indirect employment in the foundries would be of the order of 10,000.
The investment for phase - I of the project will be Rs. 1.60 crores. Apart from providing much direct and indirect employment, the project will
contribute to Gross National Product of a value of between Rs. 600 crores and Rs. 800 crores, and there will be sizeable reductions in the import
bills. Therefore, it cannot be alleged that the acquisition is to satisfy any ''individual'' much less the Southern Iron and Steel Company Limited. The
Government of Tamil Nadu has rightly proceeded to acquire the lands under Part II of the said Act and at each and every stage the procedures
contemplated in the said Act under Part II were followed....
...
The contentions in grounds (a) and (b) of the affidavit are untenable. As stated earlier, SISCOL is an associate sector company wherein the
Government''s contribution through TIDCO is 11% of the total equity of the project. TIDCO is a corporation owned and controlled by the State
Government within the meaning of Sub-section (cc) of Section 3 of the said Act. TIDCO has not only promoted SISCOL but also taken part by
way of equity investment, by getting contribution from the Government, by getting contribution from the Government. Since the acquisition is for a
public purpose and part of the compensation is paid by the State exchequer through TIDCO, the application of procedures contained in Part II of
the said Act is perfectly in order. Inasmuch as a portion of the compensation is paid from the public revenue, it is not essential to comply with the
requirement of Part VII of the said Act because in such a case, the acquisition is not for a company simpliciter but also for a public purpose and
the essential condition for acquisition for a public purpose is that the cost of the acquisition should be borne wholly or part out of public funds,
which has been fulfilled.
With regard to ground (f) of the affidavit, it is submitted that the declaration u/s 6 of the said Act is very clear that the SISCOL is an associate
sector company formed by the TIDCO with Tvl. Lakshmi Machine Works Limited as co-promoter to implement the pug iron project. The
chairman of SISCOL is none other than the Principal Secretary to Government, Industries Department. The petitioners try to take shelter under the
word ''company'' to show that the applying body is only a private company. Petitioners have failed to understand the full fact that the company has
been formed by TIDCO with Tvl. Lakshmi Machine Works Limited as co-promoter. Therefore, it is not correct to say that the applying body is
only a private company. The acquisition is for setting up of a pig iron project to cater to the needs of the small and medium sized foundries engaged
in the manufacture of agriculture implements which are used by common public. This is a project promoted by a Government owned company viz.,
TIDCO for the development of Industrial activities and employment generation in the State which will come under Sub-section (vii) of Section 3(F)
of the said Act. Therefore, the application of the procedure under Part II of the said Act is quite in order.
These averments would amply go to show that the SISCOL itself was formed for the purpose of benefiting several small foundries situated in the
State. The raw material for them was pig iron, which is proposed to be supplied by the plant that is going to be established by the SISCOL. The
TIDCO has got 11 per cent snares in the company, whereas Messrs. Lakshmi Machine Works Limited has got 40 per cent and the remaining 40
per cent shares are from the public institutions and public. Towards its share capital, the TIDCO has given a crore of rupees. It is the case of the
State Government that the contribution by way of share capital by TIDCO to SISCOL would be used for paying the compensation to the persons
interested in the land acquired under the impugned notifications and this would amount to payment towards the compensation out of public
revenue. On this understanding of the legal position, it was also stated in the notifications as such. In the declaration issued u/s 6 of the Act in
G.O.Ms. No. 683, Industries (MIE-I) Department, dated 8.12.1992, it has been specifically stated thus:
No. II(2)/IND/6098/92 - The Government of Tamil Nadu having been satisfied that the lands specified in the Schedule below have to be acquired
for a public purpose and it having already been decided that the entire amount of compensation to be awarded for the lands is to be paid out of the
funds controlled and managed by the Southern Iron and Steel Company Limited, Coimbatore a company promoted by Tamil Nadu Industrial
Development Corporation Limited (a State Government Undertaking) in the Associate Sector, the following declaration is issued u/s 6 of the Land
Acquisition Act, 1894, (Central Act I of 1894)
Declaration
Under Section 6 of the Land Acquisition Act, 1894 (Central Act I of 1894), the Governor of Tamil Nadu hereby declares that the lands specified
in the schedule below and measuring 21.83.0 hecatres, which are needed for a public purpose to wit, for establishing a Pig Iron Project in No. 33
Pottaneri Village, Mettur Taluk, Salem District.
Therefore the Government proceeded on the clear and bona fide understanding of the legal position that the acquisition being one for public
purpose the compensation has to be paid out of the funds controlled and managed by SISCOL, a company promoted by TIDCO - State
undertaking. Learned single Judge has opined that this would satisfy the requirement of Explanation 2 and thereby Second Proviso to Section 6(1)
is satisfied. During the course of hearing of this case, learned Advocate General has produced before us G.O.Ms. No. 197, Industries (MIE-I)
Department, dated 28.7.1994, issued in connection with the acquisition in question. It is necessary to reproduce the entire G.O. because it is on
the basis of this that the learned Advocate General has tried to sustain the acquisition and it read as follows:
In the G.O. read above (G.O.Ms. No. 92 Industries (MIE I) dated 9.3.1992) the Government have accorded administrative sanction for the
acquisition of 21.3 8.5 hectares (about 522 acres) of lands in M. Kalipattu and Pottaneri Villages in Mettur Taluk of Salem District for the purpose
of setting up a Pig Iron Project by Southern Iron and Steel Company Limited (SISCOL) an associate sector co-promoted by Tamil Nadu
Industrial Development Corporation Ltd (TIDCO). Pig Iron is an essential raw material for the industries of this State. The setting up of this plant
will help in the industrialisation of the State and thus in overall economic development. The site has been chosen after careful examination of various
alternatives. As the acquisition is for setting up of a Pig Iron Project to cater to the needs of the small and medium sized foundries engaged in the
manufacture agricultural implements which are used by common public, it was proposed to treat the acquisition as for public purpose and,
accordingly, ordered to acquire the lands under ordinary provisions, of Part II of Land Acquisition Act.
As the lands are required for a public purpose and ordered to be acquired under provisions of Part II of Land Acquisition Act, the Government
hereby sanction a token contribution of Rs. 1,000 from public Revenue towards acquisition of the above lands for the setting up of a Pig Iron
Project by ''SISCOL''.
What we have pointed out in the earlier portion of this judgment that the State Government bona fide believed in the legal position that contribution
of the amount by the TIDCO towards its share capital to SISCOL would be used for payment of compensation to persons interested in the land
acquired for the purpose of SISCOL and that would satisfy the requirement of the Second Proviso read with Explanation 2, is further fortified by
the aforesaid Government Order. We may also point out here that TIDCO only contributed towards share capital to SISCOL. In other words, it
credited the amount to SISCOL towards its share capital and by so doing, the amount contributed to SISCOL became the fund of SISCOL and
as such it changed its original character of public revenue because it becomes the capital of the SISCOL which is a company incorporated under
the Companies Act and as such, it is an independent legal person. Therefore, the payment of compensation out of its funds by the SISCOL cannot
be held to be the payment out of public revenue in fact, the question arose in Valjibhai v. State of Bombay AIR 1963 S.C. 189, and while dealing
with the scope and manner of public revenue occurring in the Proviso to Section 6(1) of the Act, the Supreme Court held as follows:
Even though that may be so, the Corporation is certainly not a department of Government but is a separate legal entity and, therefore, money
coming out of public revenue whether invested, loaned or granted to it would change their original character and become the funds or assets of the
Corporation when they are invested in or transferred or loaned to it. While therefore, the terms of the proviso could be said to have been satisfied
because compensation is to be paid by the Corporation, the acquisition will be bad because the provisions of Part VII of the Land Acquisition Act
have not been complied with.
The contribution made by the TIDCO towards its capital in SISCOL would become the fund of SISCOL and would not have the character of
public revenue, the amount of compensation, paid out of such fund cannot be held to be payment out of the public revenue. As pointed out above
by the Supreme Court, though such payment would satisfy the Second Proviso of Section 6(1) of the Act, but in that event Part VII has to be
followed as it would be an acquisition for the company as the company would be paying the entire compensation. In the instant case, Part VII is
not followed. This deficiency is tried to be supplied or rather, the defect is tried to be rectified by contributing a sum of Rs. 1,000 out of the public
revenue by the aforesaid G.O. which is issued subsequent to the declaration made u/s 6 of the Act.
Now the question for consideration is as to whether the subsequent decision of the State Government to contribute a sum of Rs. 1,000 towards
the compensation payable to the owners of lands acquired under the two notifications would satisfy the requirement of the Second Proviso.
Learned Counsel for the appellant submits that such a decision to contribute out of public revenue must be taken before the declaration is
published u/s 6(1) of the Act and as in the instant case, the decision taken by the State Government was to pay the compensation out of the funds
of SISCOL therefore there is no scope for subsequent decision to make a contribution towards the compensation payable out of the public
revenue and by their subsequent act, neither Section 6 declaration can be held to have been amended nor it can remove the illegality contained in
the declaration u/s 6 of the Act. Learned Counsel has placed reliance on a decision in Syed Dilawar Hussain v. Collector of Madras (1995) I
L.L.J. 306. It may be pointed out here the Government has always been of the view from the beginning that the acquisition being the one for public
purpose, a part of the compensation has to be paid out of the public revenue. As already pointed out, it was of the view that the contribution by the
TIDCO towards its share capital as it is an associate of SISCOL and as the TIDCO is owned by the State Government, would satisfy the
requirement. It is not the case of the appellants/petitioners that in taking such a decision Government lacked bona fides and it amounted to
colourable exercise of its power. The only contention of the learned Counsel is that such contribution does not satisfy the requirement of the
Second Proviso to Section 6 of the Act read with Explanation 2 therefore, the acquisition is bad. A question, more or less under similar
circumstances, arose before the Supreme Court in Smt. Somavanti and Others Vs. The State of Punjab and Others, . Before considering the
aforesaid decision, we may point out that Second Proviso to Section 6(1) of the Act was very much in force when the aforesaid Somawanti''s
case, was decided, but not as a Second Proviso, but as First Proviso to Section 6; however, it does not make any difference. Therefore, the said
decision still governs the acquisition made under the amended Act. In that case, the acquisition was for a public purpose and for the benefit of the
company, but the contribution from the public revenue towards the compensation payable was not made. The entire compensation was decided to
be paid out of the funds of the body for whose benefit the acquisition was made. However, subsequent to the declaration, the State Government
issued the notification sanctioning that the expenses of Rs. 100 towards the cost of acquisition be paid out of the public revenue. Therefore, the
question arose as to whether the decision as to contribution towards compensation out of the public revenue subsequent to the issuance of the
declaration would hold good. The Supreme Court held that it would satisfy the requirement of law. The relevant portion of the said decision, having
a bearing on the point raised in the instant case, is found at paragraph 43 and it reads thus:
It is no doubt true that the financial sanction for the contribution of Rs. 100 as Part of the expenses for acquisition was accorded by the Finance
Department on September 29, 1961. No doubt also that a day prior to the according of sanction this petition had been admitted by this Court and
a stay order issued, but from these two circumstances it would not be reasonable to draw the inference that the declaration made by the
Government was a colourable exercise of its power. The provisions of Sub-section (1) of Section 6, however, do not require that the notification
made thereunder must set out the fact that the Government had decided to pay a part of the expenses of acquisition or even to state the extent to
which the Government is prepared to make a part contribution to the cost of acquisition.
Therefore, the recital in the declaration made u/s 6(1) of the Act in question, that the compensation has to be paid out of the funds of the SISCOL
being unnecessary, cannot be construed as coming in the way of the Government make a contribution towards compensation payable out of public
revenue, as such a decision can be taken even after the declaration is issued u/s 6 of the Act by the Government. However, it is contended that
such a decision would make the exercise of power colourable. No doubt, in the very same decision, the Supreme Court has observed thus:
Moreover, the declaration under Sub-section (1) of Section 6 is clear on the point that the land is being acquired at public expense, and the
provisions of Sub-section (3) of Section 6 preclude a court from going behind such a declaration unless it is shown that the Government has in fact
decided not to contribute any funds out of the public revenues for that purpose. For, if the Government had infact taken a decision of that kind then
the exercise of the power to make an acquisition would be open to challenge as being colourable.
As the decision is taken subsequent to the declaration learned Counsel contends that it is open to challenge that exercise of power is colourable.
We shall now see as to whether in the facts and circumstances of the case it can be held that there is a colourable exercise of power. We have
pointed out earlier that the acquisition was for a public purpose and the Government also was of the view that compensation was to be paid out of
public revenue, but it bona fidely believed that the legal position as contemplated under the Second Proviso to Section 6(1) read with Explanation
2 would be satisfied if such payment of compensation is paid from the revenue controlled by the TIDCO, which is a Government undertaking.
However, we have pointed out already that it would not satisfy the requirement of the Second Proviso and Explanation 2, because TIDCO did not
pay out of its funds any amount towards the compensation payable to the landowners, but it had paid towards the share capital for the 11 per cent
shares held by it in the SISCOL. Once any amount is paid towards the share capital, it ceases to be the amount of TIDCO and becomes that of
SISCOL and thereby loses the character of public revenue. We have also pointed out that it is not the case of the petitioners that the acquisition in
question is bad because it has been made in colourable exercise of power by the State, We have also mentioned that the acquisition is for public
purpose in order to help the several foundaries in the State and SISCOL would establish an industry which would supply raw material viz., pig iron
to all the foundries in the State. The Supreme Court also in Smt. Somavanti and Others Vs. The State of Punjab and Others, held that the decision
as to contribution from out of public revenue can be taken even subsequent to the declaration issued u/s 6(1). In such a case, it would be open to
challenge that the exercise of power is colourable. Taking all these aspects into consideration, we are of the view that the decision taken
subsequent to he declaration is-sued u/s 6 of the Act, to make contribution of a sum of Rs. 1,000 from out of public revenue towards
compensation payable to persons interested in the lands acquired for the purpose of SISCOL, cannot be held to be colourable exercise of power.
The power has been exercised bona fide is also clear from the introductory portion of the Government Order, G.O.Ms. No. 197, dated
28.7.1994. In addition to this, it may also be pointed out that in this case the awards have not been passed except in one case; therefore, the
contribution now made by the State Government out of its public revenue would go towards payment of compensation viz., payable to persons
interested in the lands acquired under the impugned notifications. That being so, we are of the view that the acquisition is entitled to be sustained,
not on the reasons stated by the learned single judge but on the reasons stated by us and in the light of G.O.Ms. No. 197, Industries (MIE I)
Department, dated 28.7.1994. Accordingly it is held that the acquisition is for public purpose and the Second Proviso to Sub-section (1) of
Section 6 is satisfied.
For the reasons stated above, the writ appeal as well as the writ petitions fail and they are dismissed. However, in the facts and circumstances
of the case, there will be no order as to costs.