Case Note & Summary
The case concerned a water supply licence granted in 1935 to a partnership firm by the Municipal Board of Aligarh under the U.P. Municipalities Act, 1916. The licence was for 50 years, renewable, and the Board could take over the water works on expiry or revocation under Sections 224-B and 224-C. In 1975, the licensee requested revocation due to difficulties, and the Administrator revoked the licence on 1.4.1975, ordering vesting of the water works in the Board and stating that compensation would be determined under the Act. The licensee replied treating the order as notice under Section 224-C and handed over under protest. Before any sale, the State issued Ordinance No. 16 of 1975 on 13.6.1975 substituting Sections 224-B and 224-C, with new Section 224-C deemed effective from 1.1.1975. The Ordinance was replaced by Act No. 45 of 1975. The licensee filed a writ petition in Allahabad High Court seeking fair market value without invoking the new provision, and also challenged the constitutional validity of Act 45 of 1975. The High Court dismissed the writ; on first appeal, the Supreme Court remanded for fresh consideration; the High Court again dismissed on 26.4.1982, leading to the present appeal. During pendency, compensation of Rs.5,39,755 was computed under the new Section 224-C and paid on 1.2.1989. Legal issues included whether the property vested on 1.4.1975, whether Act 45 of 1975 acquiring a chose in action was unconstitutional, whether interest was payable for delayed compensation, and whether the deposited amount should be released. Arguments for the appellant contended that the revocation order vested property, leaving only a chose in action; that the amendment acquiring that chose in action unconstitutional; and that interest was payable. Respondents refuted these. The Supreme Court analysed old Section 224-C and found it did not provide for automatic vesting; it only required notice and an option to purchase within three months. Therefore the revocation order did not vest property on 1.4.1975; vesting occurred under the new Section 224-C. The constitutional challenge failed because the Act did not acquire a chose in action but provided for acquisition and compensation. The Court further held that interest was payable under the proviso to Section 224-C(2) from the date of vesting to the date of payment, and directed release of the deposited interest amount. The appeal was partly allowed.
Headnote
A) Constitutional Law - Acquisition of Property - Chose in Action - Constitution of India, Articles 19(1)(f) and 31 - The appellant contended that vesting on 1.4.1975 created a chose in action and that U.P. Act 45 of 1975 acquiring it was unconstitutional. The Court examined old Section 224-C and concluded that the property did not vest on 1.4.1975 as the old provision did not provide for automatic vesting; therefore the Act did not acquire a chose in action and was valid. Held that the constitutional challenge failed (Paras 12, 14-15).
B) U.P. Municipalities Act, 1916 - Revocation of Licence and Vesting of Water Works - Section 224-C (old and substituted) - The old Section 224-C required notice within three months for purchase, not immediate vesting. The substituted Section 224-C by U.P. Act 45 of 1975 provided for vesting and compensation. Held that the appellant's water works property vested only under the substituted provision, not from the revocation order of 1.4.1975 (Paras 14-15).
C) Interest on Compensation - Delayed Payment - Proviso to Section 224-C(2), U.P. Municipalities Act, 1916 - The appellant claimed interest from 1.4.1975 to 1.2.1989 on compensation of Rs.5,39,755. The Court held that interest was payable as per proviso to Section 224-C(2) for delayed payment. (Paras 11-12).
D) Interim Orders - Deposit of Interest - Court Ordered Deposit of Rs.2,50,000 - The respondent deposited Rs.2,50,000 as interest with the High Court Registrar pursuant to Supreme Court order dated 3.12.1990. Held that the appellant was entitled to release of that sum. (Paras 11-12).
Issue of Consideration
Whether the Administrator's order dated 1.4.1975 vested the water works property in the Municipal Board under old Section 224-C, creating a chose in action for compensation; whether the substituted Section 224-C by U.P. Act 45 of 1975 was constitutionally invalid as acquiring a chose in action in violation of Articles 19(1)(f) and 31; whether the appellant was entitled to interest on compensation from 1.4.1975 to 1.2.1989 under the proviso to Section 224-C(2); and whether the deposited sum of Rs.2,50,000 was liable to be paid to the appellant.
Final Decision
The Supreme Court partly allowed the appeal, upholding the constitutional validity of U.P. Act 45 of 1975 but directing payment of interest on the compensation amount from 1.4.1975 to 1.2.1989 in accordance with the proviso to Section 224-C(2) of the U.P. Municipalities Act, 1916, and ordering release of the deposited sum of Rs.2,50,000 to the appellant.
Law Points
- The substituted Section 224-C of the U.P. Municipalities Act
- 1916 did not acquire a chose in action but provided for acquisition of water works property and determination of compensation
- hence did not violate Articles 19(1)(f) and 31 of the Constitution. The old Section 224-C did not provide for automatic vesting of licensee's property upon revocation
- vesting occurred only under the new Section 224-C as substituted by U.P. Act 45 of 1975. Interest was payable under the proviso to Section 224-C(2) for delayed payment of compensation.
Case Details
N. Venkatachala, P.B. Sawant
1995 AIR 1058, 1995 SCC Supp. (2) 667, JT 1995 (2) 249, 1995 SCALE (1)643
Harish N. Salve (for appellant); Not mentioned (for respondents)
Messrs Noorulla Ghazanfarulla
The Municipal Board of Aligarh, Aligarh
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Nature of Litigation
Civil appeal by special leave against the High Court's dismissal of a writ petition challenging the constitutional validity of the substituted Section 224-C of the U.P. Municipalities Act, 1916 and seeking fair market value compensation for water works properties taken over by the Municipal Board.
Remedy Sought
The appellant/licensee sought directions to the respondents to pay fair market value of water works properties without invoking the amended Section 224-C, and later sought interest on the compensation amount.
Filing Reason
The Municipal Board revoked the appellant's water supply licence and took over the water works; the appellant claimed the property vested on 1.4.1975 and that the substituted Section 224-C was unconstitutional as it sought to acquire a chose in action (money value) rather than physical property, thereby violating Articles 19(1)(f) and 31.
Previous Decisions
The High Court of Allahabad dismissed Civil Misc. Writ Petition No. 12220 of 1975 on 26.4.1982 after remand by the Supreme Court in Civil Appeal No.352/81, upholding the constitutional validity of the substituted Section 224-C. Earlier, the High Court had dismissed the same writ petition, which was set aside by the Supreme Court and remanded for fresh decision.
Issues
Whether the Administrator's order dated 1.4.1975 vested the water works property in the Municipal Board under old Section 224-C, creating a chose in action for compensation.
Whether the substituted Section 224-C by U.P. Act 45 of 1975 was constitutionally invalid as acquiring a chose in action in violation of Articles 19(1)(f) and 31 of the Constitution.
Whether the appellant was entitled to interest on compensation from 1.4.1975 to 1.2.1989 under the proviso to Section 224-C(2) of the U.P. Municipalities Act, 1916.
Whether the deposited sum of Rs.2,50,000 as interest was liable to be paid to the appellant.
Submissions/Arguments
The appellant contended that the revocation order dated 1.4.1975 vested the water works property in the Board, leaving only a chose in action (money value) with the appellant.
The appellant argued that U.P. Act 45 of 1975 acquiring such chose in action was constitutionally invalid under Articles 19(1)(f) and 31.
The appellant claimed that even if the substituted Section 224-C was valid and Rs.5,39,755 was correct compensation, interest was payable from 1.4.1975 to 1.2.1989 under the proviso to Section 224-C(2).
The appellant sought release of Rs.2,50,000 deposited by the respondent as part interest pursuant to Supreme Court order dated 3.12.1990.
The respondents refuted the appellant's contentions.
Ratio Decidendi
The substituted Section 224-C of the U.P. Municipalities Act, 1916 did not acquire a chose in action but provided for acquisition of water works property and determination of compensation, hence did not violate Articles 19(1)(f) and 31 of the Constitution. The old Section 224-C did not provide for automatic vesting of licensee's property upon revocation; vesting occurred only under the new Section 224-C as substituted by U.P. Act 45 of 1975. Interest was payable under the proviso to Section 224-C(2) for delayed payment of compensation.
Judgment Excerpts
This licence shall remain in force for a period of 50 years from its commencement. On the expiry of the said period of 50 years the board may at its option either renew this licence for another period of 50 years and on the same terms and conditions, or if the board and the licensees agree, for a different term and on different conditions, or may take over the whole water works on payment of the fair value of the properties belonging to the Licensees to be determined in the manner laid down in section 224-C of the United Provinces Municipalities Act.
The licence dated 10.10.1935 granted to M/s. Noorullah Allahabad to supply water within Aligarh Municipal limits is revoked with effect from 1st April 1975 and the of the Aligarh Water works will be taken over by Aligarh Municipal Board with effect from the same date.
Although, the order sent by you is not actually a notice, but as the order also states clearly that the revocation will take effect from 1.4.75 presume the order is meant by you to serve the purpose of the notice as required under section 224C(a) of the U.P. Municipalities Act and take it as such.
Where the licence of a licensee is revoked under the preceding section, the following provisions shall have effect, namely (a) The board shall serve a notice of the revocation upon the licensee and shall in the notice fix a date on which the revocation shall take effect; and on and with effect from such date all the powers and liabilities of the licensee under the licence shall absolutely cease and determine;
Procedural History
On 10.10.1935, the Municipal Board granted a 50-year water supply licence to the appellant. In 1975, the appellant requested revocation under Section 224-B(2)(a). On 1.4.1975, the Administrator revoked the licence and ordered vesting of water works property in the Board. On 13.6.1975, Ordinance No. 16 of 1975 substituted sections 224-B and 224-C, deemed effective from 1.1.1975 for new Section 224-C. On 8.9.1975, Act No. 45 of 1975 replaced the Ordinance. On 20.10.1975, the appellant filed Writ Petition No. 12220/75 in Allahabad High Court. The High Court dismissed the writ, but on appeal, the Supreme Court in Civil Appeal No.352/81 set aside the dismissal and remanded for fresh consideration. On rehearing, the High Court again dismissed the writ on 26.4.1982, upholding constitutional validity. The appellant then filed the present appeal by special leave. During pendency, compensation of Rs.5,39,755 was determined and paid on 1.2.1989, and later Rs.2,50,000 was deposited as interest with the High Court Registrar.
Acts & Sections
- U.P. Municipalities Act, 1916: Section 224, Section 224-A, Section 224-B, Section 224-B(2)(a), Section 224-C, Section 224-C(a), Section 224-C(b), Section 224-C(2) proviso
- Constitution of India: Article 19(1)(f), Article 31, Article 226
- U.P. Ordinance No. 16 of 1975: Section 2
- U.P. Act No. 45 of 1975: Section 2
