STATE OF MADHYA PRADESH versus RANOJIRAO SHINDE & ANR.

In these connected appeals by certificates the ques· non that arises for decision is whether the Madhya Pradesh Abo· lition of Cash Grants Act of 1963 {Act No. XVI of 1963) is .ultra vires the provisions of tbe Constitution. The respondents in these appeals were entitled to receive cash grants from tbe Government of Madhya Pradesh. The impugned Act abolished such grants but provided for the payment of certain compensation to tbe :grantees. The respondents <;hallenged the vires of the Act before the High Court of Madhya Pradesh in Miscellaneous Petitions Nos. 21 and 22 of 1963, on various grounds. The High Court rejected the contentions advanced on behalf of the respondents excepting one namely that the Act is ultra v/res of Art. 19(l)(f) of the Constitution and is not saved by sub-Art. (5) thereof. After -Obtaining from the High Court certificates under Art. 133(1)(c), the State of Madhya Pradesh has filed these· appeals. The State is challenging the correctness of the decision of the High Court to ·the extent it went against it. The respondents on their part, in addition to supporting the findings of the High Court which are in their favour, relied also on the other pleas taken by them before the High Court. As we are of the opinion that the impugned Act is either violative of Art. 31 (2) or, in the alternative, Art. 19(1) (f) of the Constitution, we have not !bought it necessary to go into the other contentions ta_ken on behalf of the respondents.

p. 490, margin B

Before the impugned Act was enacted, the State of Madhya Bharat which forms part of the new State of Madhya Pradesh, purported to abolish the cash grants payable by it by ineans of an executive order. That order was unsuccessfully challenged by Madhorao Phalke and others before the High Court. But in appeal this Court in Madhorao Plialke v. State of Madhya Bharat(') ·quashed the order in question. holding that the grants in question were recognised by the kalambandis of 1912 and 1935 issued by the Rulers of Gwalior and those knlambandis are existing laws within the meaning of Art. 372 of the Constitution and consequently the same could not be abrogated by means of an executive ·order. Jt may be noted that in that appeal, the appellant challenged the order in question on two grounds, namel>:-(1) tha~ as his right to receive the cash grant had been statutorily recognised by the State of Gwalior, it was not open to the Government of Madhya Bharat to extinguish that right merely by an executive ord~r, and (2) that that right being property the same could not be dives_ted without payment of compensation under Art. 31 of the Constitution. This Coun allowed the appeal on the first ground ~~ consequently it did not <jeal with the second. After the dec1s1on of this Court in that case, the impugned Act was enacted by the Madhya Pradesh legislature on April 5, 1963. It received the assent of the President on July 25, 1963 and was published in the Madhya Pradesh Gazette Extraordinary on August 2, 1963. The Act comes into force on such date as the Government may by notification appoint. Even before that notification was issued, the petitions from which these appeals arise were instituted in ·the High Coun. We are given to understand that in view of those. petitions, the Act has not yet been brought into force.

pp. 490–491, margin F

The long title of the Act says that it is an Act to provide for the discontinuance of cash grants in Madhya Pradesh and to make provisions for other matters connected therewith. It contains twelve sections. Section sets out the short title, extent and commencement of the Act. Section 2 defines some of the expressions found in the Act. Section 3 is the most important section. It purports to abolish certain cash grants. · Section 4 provides for statement of claims by the grantees. Section 5 provides the manner of determining the compensation payable. Section 6 prescribes that appeal, revfsion and review under the Actto be in. accordance v.ith Madhya Pradesh Act No. 20 of 1959. Section 7 provides for the determination of disputes as regards the title of any grantee. Section 8 bars the jurisdiction of civil courts to . issue an i~junction against any person in respect of any proceedings pendmg before the competent authority under s. 5 which shall have the effect of staying the proceedings. Section 9 prescribes the quantum of compensation payable. Section 10 deals with the mode of payment of compensation. Section 11 empowers the State Government to make rules for carrying out all or any of the purposes of the Act. Section 12 says that if any difficulty arises in giving effect to the provisions of the Act, the State Government may by order make such provisions not inconsistent v.ith the purposes of this Act as appears to be necessary or expedient for removing the difficulty.

p. 491, margin C

In these appeals we are mainly concerned with the vires of s 3 read ""!tit the defin_ition of "cash grant" in s. 2(1 ). If sectio~ 3 read with s. 2(1) 1s held to be ultra vi1'11s of the Constitution,. then the who!~ Act falls t? .the gro~ll~ as the rell!aining sections of the Act are merely subsidiary or mc1dental provisions. Section 3 ( •) provides that notwithstanding anything contained in any law, custom, usage, sanad or a decree or order of a court or other authority whatsoever, all cash grants shall be discontinued and cease to have effect from the commencement of this Act. But the proviso thereto makes certain exceptions with which we are not concerned in this case. The case of the respondents falls within the main part. They do not have the benefit of the proviso. A cash grant as defined in s. 2 (1 )( ••) includes a grant of

pp. 491–492, margin G

of contained in any custcm, usage. sanad or a decree or order of a ccurt or have effect from th~ commencement of this Act ; Table below~hecashgrantmay, at the option ofthe grantee exercised in such within

p. 492, margin B

Table~ case a male age.

p. 492, margin C

till th~ disc.>ntinu1nc~ su~ection

p. 492, margin D

if c••)

p. 492, margin E

for-

p. 492, margin F

~r under-

p. 492, margin F

(Estate~ the para s. money which· is enforceable by the grantee against the State Goverliment on the date of the coming into force of the Act but does not include those granis which are specifically excluded. This definition takes in all the cash grants whatever may be the nature or origin of those grants. The definition of a cash grant is wide enough to include cash grants sanctioned by ex-Rulers in lieu of J agirs or other properties resumed or even payments agreed to be made in lieu of loans given to the Rulers. Different considerations may arise if the grants abolished are gratuitous payments, grants in lieu of services to be rendered or other resumable grants. But as mentioned earlier, the definition of cash grants in s. 2(1) does not make any distinction between the various types of cash grants. Hence, the said definition will have to stand or fall as a whole, there being no basis for severing some out of the several grants included therein. It is impennissible for this Court to rewrite that clause ·and confine the definition only to such of the cash grants which the legislature might be competent to abolish.

pp. 492–493, margin G

The doctrine of severability is applicable only if it is possible to separate the legal from the unconstitutional portion of the provision. If it is not possible to do so, the entire provision has to be struck down as unconstitutional. see Kameshwar Prasad v. State of Bihar(').

p. 493, margin C

The High Court has come to the conclusion that a "cash grant" is property within the meaning of that expression in Articles 19(l)(f) and 31. This conclusion was not challenged before us. It is obvious that a right to a sum of money ·is property.

p. 493, margin D

There was controversy before the High Court whether the abolition of cash grants under the Act . can be considered as acquisition under Art. 31 (2). It was urged before that Court on behalf of the State that that abolition of cash grant amounted to compulsory acquisition of property f<JI'. public purpose and as the Act has prescribed the compensation payable to grantees the acquisition in question is completely protected by Art. 31(2). The High Court replied this contention opining that as the law in question cannot be considered as having transferred the rights of the grantees as proyided in Art. 31 (2A) the State cannot seek the protection of Art. 31 (2). This conclusion is debatable. It is possible to view the discontinuance of the payment of cash grants under s. 3 as a statutory transfer of rights of the grantees to the State. But there is no need to pursue this line of reasoning for reasons to be stated presently. Though the language of Art. 31 (2) prima facie comprehends movable properties including choses in action and money there are valid grounds to hold that choses in action and money are outside the reach of Art 31 (2). In the United States of America, opinion is divided among the jurists whether money and choses in action can be acquired the exercise of the power of eminent domain though the prepondel:'llllce of opinion appears to be that it is impermissible. so far as we are concerned; this question is concluded by the cisions of this Court. In State of Bihar v. Kameshwar Singh( this Coun held that under Art. 31 (2) of the Constitution, money and choses in action could not be acquired. Mahajan, J. (as he then was), speaking for the majority, after quoting with approval certain passages from Cooley's Constitutional Limitations, observed (at pp. 943-44 of the Report) :

pp. 493–494, margin D

"It was not necessary to decide in this case whether under the comp_ulsory acquisition power the State has the power to acquire choses in action or money, but it cannot be seriously disputed that such an acquisition amounts to a forced loan and that the desired result can be more appositely obtained in exercise of the police power of the State than of the power of eminent domain or compulsory acquisition of property and that compensation in such a case is the same amount of money that is being taken and in the case Of a chose in action the amount of money that it would produce. In this situation it cannot be. held that fifty per cent of the outstanding arrears was compensation in any sense of that expression for this acquisition. The true position is that the State took over all the arrears and decided to ·refund fifty per cent of them and forfeit the rest. The validity of this acquisition has to be decided independently of the acquisition of the estates. It has no connection with land reform or with any public purpose. It stands on the same footing as other debts due to zamindars or their other movable properties, which it was not the object of the Act to acquire. As already stated, the only j)urpose to support this acquisition ·is to raise revenue t6 ·pay compensation to some of the zamindars whose e5tates are being taken. This piirp0se does not fall within any definition, however wide, of the phrase 'public purpose' and the law therefore to this extent is unconstitutional." In the same case, Mukherjea, J. (as he then was) observed:

p. 494, margin B

"Taking money under the right of emineni domain when it must · be compensated by money afterwards, could be nothing more. or less than a forced loan and it is difficult to say that it comes under the head of acquisilion or requisitioning of property •.•• and is embraced

pp. 494–495, margin G

within its ordinary connotation." Chandrasekhar Aiyar 1., in that very case held that though money and choses in action are movable property and would prima facie come under the power of compulsory acquisition the power under Art 31 (2) could not be used to support such acquisition "on the ground that generally speaking there would be no public purpose in their acquisition"'. The majority view in that case was followed by this Court in Bombay Dyeing and Manufacturing Cb Ltd. v. The State of Bombay( That case considered the validity of s. 3 (1) of the Bombay Labour Welfare Fund Act which provided that there should be constituted a fund called the Bouibay Labour Welfare Fund and notwithstanding anything contained in any other law for the time being in force, the same specified in sub-s. (2) ihereof shall be paid into the fund. Section 3 (2) provided inter alia :

p. 495, margin A

"The Fund shall consist of :- (a) all fines realised from the employees;

p. 495, margin E

(b) all unpaid accumulation." The Court held following the decision of this Court in State of Bihar v. Kameshwar Singh(') that the provision in question is,c invalid and is not protected by Art 31 (2). ;.

p. 495, margin D

From the above decisions it follows that choses in action anif': money could not be acquired under Art. 31 (2). If it is held that State by the exercise of its power of eminent domain can acquire choses in action and money belonging to its citizens, by paying a fraction of the money taken as compensation, the fundamental right guaranteed under Art. 19(1 )(f) would be deprived of all ilS' contents and that Article will cease· to have any meaningful p111-f pose. The power conferred under Art. 31 (2) is not a taxing-< power. That power cannot be _utilised for enriching the coffers( of the State. _ It is true that the abolition of tbe cash grants would' augment the resources of the State but that cannot be considered •as a public purpose under Art. 31 (2). If it is otherwise it would be permissible for the legislatures to enact laws acquiring the public debts due from the State, the annuity deposits returnable by it and provident fund payable by it by providing for the payment of some nominal compensation to the persons whose rights are acquired as the acquisitions in question would augment the resources of the State. But nothing so bad can be said to be within contemplation of Art. 31 (2). That Article must be construed harmoniously with Art. 19(1)(f). If so construed, it is obvious that the public purpose contemplated by that Article does not include enrichment of the coffers of the State. Further the compensation referred to in Art. 31 ( 2) is, as held by this Court in various decisions, is the just equivalent of the value of the property taken. If for every rupee acquired fifty paisas or less is made payable as compensation the vi()lation of Art. 31 (2) would be patent and in tliose circumstances the exercise of the powers by the legislature would be considered as a fraud on its powers and consequently the legislation will be struck down as a colourable piece of legisla-

pp. 495–496, margin D

It is true that in State of Bihar v. K.ameshwar Singh(') and in Bombay Dyeing and Manufacturing Co Limited v. Stat8 of Bom· bay('), this Court was considering the question of taking of monoy by the State that was in the hands of others, but in this case we are. concerned with the abrogation of the liability of the Government. But we fail to see any difference in principle in these two sets: of cases. In the former case the Government was compulsorily taking others' property and in the latter it seeks to appropriate to itself the property of others which is in its hands.

p. 496, margin B

It was next urged that the impugned Act, even if it is held not to be protected by Art. 31(2) is still valid under Art. 31(1). The said Article says that no person shall be deprived of his property save by authority of law. A law which authorises the State to deprive a person of his property must be a valid law. It must not violate Art. 19(1 )(f) which means that it must satisfy the requirements of Art. 19(5). In Kava/appara Kottarathi Kochuni v. State of Madras(•) this Court laid down that the word "law" used by Art. 31(1) indicates its limitations and refers back to Art. 19 and any law made under Art. 31 (1) can be sustained only if the restrictions it imposes are reasonable and in the interest of the general public, . The Act which empowers the State to appropriate some one else's property for itself solely with a view to augment the resources of the State, cannot be considered as a reasonable restriction in the interest of the general public. That conclusion of ours receives support from the ratio of the decisions of this Court in State of Bihar v. Kameshwar Singh(') and in Bombay Dyeing and Manufacturing Co. Limited v. Stale of Bombay(') wherein Venkatarama Aiyar, J. speaking for the Court, observed :

p. 496, margin C

"Assuming that the correct position is what the respondents contend it is that the case falls within Art. 19(l){f), the question that has still to be determined is whether the impugned Act could be supported under Art. l 9(S). There was some discussion before us as to the scope of this provision, the point of the debate being whether the words _'imposing reasonable restriction' would cover a legislation, which not merely regulated the exercise of the rights guaranteed by Art. 19(1 )(f) but totally extinguished them, and whether a law like the present one which deprived the owner of his properties could be held to fall within that provision. It was argued that a law authorising the State to seize and destroy diseased cattle, noxious drugs and the like, could not be brought within Art. 19 ( 5) if the word 'restriction' was to be narrowly construed, and that accordingly . the power to restrict must be held to include, in appropriate case&, the power to prohibit the exercise of the right. That view does find support in the observations of Lord Porter in Commonwealth of Australki v. Bank of New South Wales(') : but the present legislation cannot be sustained even on the above interpretation of the word "restriction", as s. 3 ( 1) of the Act. deals· with moneys and money cannot be likened to diseased cattle or noxious drugs so as to attract the exercise of police power under Art. 19 ( 5). It appears to us that whether we apply Art. 31(2) or Art, 19(5), the impugned Act

pp. 496–497, margin G

cannot be upheld and it must be struck down." If Article 19(5) is interpreted to mean that State can take by authority of law anyone's property for the purpose of increasing its assets or revenues, the guarantee given by Art. 19(1)(f) would become illusory, a proposition to which this Court cannot subscribe.

p. 497, margin D

For the reasons mentioned above we are unable to uphold the validity of Madhya Pradesh Abolition of Cash Grants Act. . These appeals accordingly fail and are dismissed with costs with one set ol hearing fee. Y.P. Appeals disriwed.

p. 497, margin E

235.

p. 497, margin E