IMPORTANT POINT
The decision of the Government to withdraw from acquisition under Section 48 of the Land Acquisition Act, based upon misconception of the correct legal position, has to be regarded as arbitrary and not bona fide, particularly in a case where as a result of this decision other party is likely to be prejudicially affected.

Headnote:Land Acquisition Act, 1894-Sections 4, 6, 40(1) & 48-Land Acquisition (Company) Rules, 1963-Rule 4-Denotification under Section 48-Challenged-Acquisition of land for appellant society which is running a school-Acquisition for a company-Entire cost of acquisition was to be borne by appellant society -Acquisition was for play ground of students of the school-Government withdrawing from acquisition stating that as no part of cost of acquisition was to be borne by the Government, the acquisition could not have been sustained as for a public purpose-Decision of Government to withdraw from acquisition based upon misconception of correct legal position-Such a decision to be regarded as arbitrary and not bona fide-Discretion of State Government in this behalf is not absolute.
Held; the reason given by the Government for withdrawing from the acquisition is that as no part of the cost of acquisition was to be born by the Government the acquisition could not have been sustained as for a public purpose. We have already pointed out that in this case the acquisition was not for a public purpose but it was an acquisition for a company under Chapter VII of the Act. In respect of an acquisition for a company under Chapter VII of the Act law does not require that the State should also bear some cost of the acquisition to make it an acquisition for public use. Thus the decision of the Government to withdraw from acquisition was based upon misconception of the correct legal position. Such a decision has to be regarded as arbitrary and not bona fide. Particularly in a case where as a result of a decision taken by the Government other party is likely to be prejudicially affected, the Government has to exercise its power bona fide and not arbitrarily. Even though Section 48 of the Act confers upon the State wide discretion it does not permit it to act in an arbitrary manner. Though the State cannot be compelled to acquire land compulsorily for a company its decision to withdraw from acquisition can be challenged on the ground that power has been exercised mala fide or in an arbitrary manner. Therefore, we cannot accept the submission of the learned counsel for the State that the discretion of the State Government in this behalf is absolute and not justiciable at all. (Para 9)

JUDGMENT

Nanavati, J.-Leave granted.

Heard learned counsel for both the sides.

2. The appellant is a society registered under the Society Registration Act, 1860. It is running a public school at Mathura in the name of Amar Nath Vidya Ashram. The school is duly recognised by the Central Board of Secondary Education, New Delhi. It is challenging in this appeal the judgment and order passed by the High Court in Civil Misc. Writ Petition No. 16241 of 1992.

3. The appellant wants land adjacent to its school building for the purpose of a playground for its students. The land belongs to respondent No. 5. So it tried to obtain it from respondent No. 5 by offering a price higher than its market value but did not succeed. It, therefore, moved the State Government to acquire that land for it. The Government agreed and issued Notification under Section 4 of the Land Acquisition Act on 1.8.1986 notifying its intention to acquire that land for a public purpose namely "playground of students of Amar Nath Vidya Ashram (Public School), Mathura". Thereafter, inquiries under Section 5-A and under Rule 4 of the Land Acquisition (Company) Rules, 1963 were made. The Government also entered into an agreement with the appellant as required by Section 40(1) of the Act on 11.8.1987. It then issued a Declaration under Section 6 on 4.9.1987 mentioning fact that the report made under sub-rule (4) of Rule 4 of the Land Acquisition (Company) Rules, 1963 was considered by the Government that the Land Acquisition Committee constituted under Rule 3 of the said Rules was consulted, that the agreement entered between the appellant and the Governor was duly published that the Governor was satisfied that the land mentioned in the schedule is needed for construction of a playground for students of Amar Nath Vidya Ashram (Public School), Mathura by the Amar Nath Ashram Trust, Mathura. This acquisition of land was challenged by the owner by a writ petition filed in the Allahabad High Court. An interim order was passed directing the parties to maintain status quo as regards possession. During the pendency of the said petition, on 1.5.1992, the Government denotified the land from acquisition in exercise of its power under Section 48 of the Land Acquisition Act. The appellant challenged that Notification by filing a writ petition in the High Court. The petition filed by the appellant and the one filed by the owner were heard together. The petition filed by the owner was dismissed as infructuous and the petition filed by the appellant was dismissed on the ground that the decision of the State Government to withdraw from the acquisition for the reason that the acquisition having been proclaimed as one for a public purpose a part of cost of acquisition was required to be borne by the State and as no such provision was made, it was not likely to be sustained if challenged, cannot be said to be contrary or illegal.

4. Mr. R.F. Nariman, senior advocate, appearing for the appellants, submitted that when acquisition is under part VII, i.e., when land is acquired for a company and when all the formalities have been completed including execution of an agreement for payment of cost of the acquisition and Section 6 notification has also been issued, it is not open to the Government to withdraw from such acquisition without the consent of the company for which the land has been acquired. He submitted that the power vested in the Government to withdraw from acquisition is not absolute and is fettered by implicit restrictions and hence it is justiciable. He further submitted that in this case the State Government decided to withdraw from the acquisition under a misconception of law that as the acquisition, at the stage of Section 4 notification was proclaimed to be for a public purpose, at least a part of the cost of acquisition was required to be borne by the State or was required to be paid out of the public funds or public revenue; and, therefore, the decision taken by it was vitiated a

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1997 Supreme(SC) 1578

Cases Referred (3)