M J Antony: Public purpose fig leaf

OUT OF COURT

Land acquisition notifications must clarify whether they are for the common benefit or for a company.

Public limited companies which want to acquire land for industrial expansion have often adopted a stratagem to get it cheap: get the government to contribute a little sum and turn the whole project into one for 'public purpose'. Then the financial burden is substantially passed on to the willing state government.

In 1960, one company persuaded the Andhra government to contribute one anna and the high court upheld public purpose in the project in the judgement, Raja Kendregula vs State of AP. In Madhya Pradesh, at the same time, one company got away by getting the government to pay Re 1 to turn its purely commercial venture into one for public purpose (Abdul Hafiz vs State). When the Andhra government paid nothing and still a company claimed public purpose, the high court thought it was too much and rejected its plea (Inabathini Subba Rao vs State of AP, 1979).

Such forays still continue, even when land acquisition for industries is a hot potato among politicians these days. Acknowledging the rate of inflation, the contribution of one anna has now gone up to Rs 100 in recent cases dealt with by the Supreme Court. The latest one was Devinder Singh vs State of Punjab.

In this case, International Tractors Ltd wanted to set up a new project. The farmers whose lands were proposed to be acquired moved the high court, pointing out various violations of law. Meanwhile, the Punjab government deposited Rs 100 as a token amount for the acquisition. The high court then found public purpose in the project, as the production of tractors would contribute to the general welfare and prosperity of the community. "It is proved beyond doubt that the profits have actually gone to the general public," the high court said.

The farmers successfully moved the Supreme Court to get the high court judgement overruled. As a result, the cost of the acquisition must now be borne by the company according to Part VII of the Land Acquisition Act. If the government takes over land for public purpose, the procedure prescribed in Part II of the Act would be followed. The government would pay the compensation from public funds. Therefore, resourceful companies try to get the government see public purpose in their venture, by whatever means, and pass the burden to the public.

The present judgement stalled the acquisition under Part II for the moment, but as the Supreme Court remarked, public purpose is an "unruly horse" and difficult to define. New projects and investments by companies are bound to have public benefit but would that justify the government taking the land acquisition burden entirely on itself? This is a vague area and the amendments to the Land Acquisition Act have not thrown any light on this problem. As the law stands now, any business would be public purpose; and the business may be set up now or in future.

The courts also leave the law as it is. In another Rs 100 case, Pratibha Nema vs State of MP, the Supreme Court noted the problem thus: "The net result is that by contributing even a trifling sum, the character and pattern of acquisition could be changed by the government. In the ultimate analysis, what is considered to be an acquisition for facilitating the setting up of an industry in the private sector could be imbued with the character of public purpose acquisition if only the government comes forward to sanction the payment of a nominal sum towards compensation. In the present state of law, that seems to be the real position."

In yet another Rs 100 case, Somawanti vs State of Punjab, the Supreme Court did not want to upset the apple cart though it noted that "the state governments have been acquiring private properties all over the country by contributing only token amounts towards the cost of acquisition." Whether such token amounts would meet the requirements of law would depend upon individual cases. The fact that the contribution was nominal would indicate that the state action was a 'colourable exercise of power'. The court left the matter at that.

In the latest case, the Supreme Court confined the ruling to the facts of the case. It said that once the government declared that the acquisition was for public purpose, courts would not go behind the decision. It remarked that in future, the state must clarify in the notifications whether the acquisition is for public purpose or for a company. It cannot be vague and leave the impression that the acquisition is for both purposes. This principle, though buried inconspicuously in a long judgement, would help defuse a lot of social tension if it is taken seriously and given wide publicity.