Shri Kirshna Gyanoday Sugar Ltd. and anr. Vs. State of Bihar - Court Judgment

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constitution - bihar sugar undertakings (acquisition) act, 1976 - section 2, 3, 4(4), 6, 7, 17 - the said act was passed to provide for acquisition and transfer of certain sugar undertakings in the state of bihar - power to acquire property could be exercised by the state - act was passed to nationalize the sick mills and distilleries in the larger public interest and in the interest of the state economy - when to govt. carries out an experiment in the commercial or economic field, it has its own hazards and specifically if interim order is passed against the said act, the objectives cannot be achieved - in this case the act has not been put into full force - distilleries are interconnected with the sugar undertakings by supply of molasses manufactured by the sugar undertakings - distillery can form the subject matter of acquisition under the act - petition dismissed - - interim stay was granted restraining possession beingtaken over on 31.10.1978. on 12.7.1979, the writ petitions were heard togetherand were allowed and the act as well as the notification under section 17 of theact were declared ultra vires and the take-overs were quashed. 5. the act has failed and, therefore, must be declared to be invalid. the state of andhra, [1954]1scr779 .[underlying by us] 8. this decision clearly enunciates that the power to acquire property is aseparate, distinct and independent power and is not an incident of the power tolegislate under other entries. there is thus a long line of decisions which clearly establishes theproposition that power to legislate for acquisition of property is anindependent and separate power and is exercisable only under entry 42,list iii and not as an incident of the power to legislate in respect of aspecific head of legislation in any of the three lists. the argument thatat any rate the take-over of distillery is bad cannot also be sustained inasmuchas the concept of acquisition of an undertaking is an entirely different matter fromthe control and regulation of the industries. and signifies a beneficial rightto or a thing considered as having a money value, especially with injured'.the expression 'undertaking' in section 4 of act 22 of 1969 clearly means agoing concern with all its rights, liabilities and assets-as distinct from thevarious rights and assets which compose it. 567-568] 16. the learned counsel for the petitioners adverted to the sugar undertaking[taking over of management] act, 1978 [hereinafter referred to as 'the 1978 act']which was enacted by parliament to provide for the take-over in public interest ofthe management of certain sugar undertakings and contended that the impugnedenactment is also for better management of sugar industries and, therefore, thetwo enactments overlap the same field. 17. the 1978 act was enacted to provide for temporary taking over of themanagement of certain sugar undertakings in certain situations for the purpose ofmainly to maintain the continuity of production of sugar for avoiding unduehardship to cane producing farmers and to best subserve the interests of allsections of the people for a limited period the management of every sugarundertaking which fails or ceases to manufacture sugar or which fails to paypromptly amounts due for the cane acquired for the purposes of the undertaking. ' 19. the objects and reasons of the central act are clearly to make provisionfor taking over the management of the defaulting sugar undertakings for aspecified period. nor isthe contention that the two enactments, the 1978 act and the impugned actoverlap is also not well founded. in this background it becomes hazardous to examine the contentions putforth on behalf of the petitioners whether if the act had failed or not particularlywhen it has not been put into full force. what was noticed therein is thatwhen the act was enacted, though valid, with the passage of time some of theprovisions thereof like freezing of rent it became irrational and unjust and,therefore, violated article 14 of the constitution. in thiscontext, he placed strong reliance upon the decisions in brett v. that theapparent consideration even if it is equivalent to the fair market value would beindicative of the market value of the property subject to such encumbrances andin such a case the properties would be compulsorily purchased and amount tobe paid for the purchase would be only equal to the apparent consideration andthis apparent consideration would not take into account the value of theencumbrances on the property like mortgages and so on or the leasehold rights. in the said decision, the gujarat high court held that it isonly after all interests -proprietary as well as possessory -are extinguished bythe acquisition of the property that the property vests absolutely in the centralgovernment. the present caseis clearly one for acquisition of property as demonstrated in the earlier part of thisjudgment and not by way of any pre-emptive purchase of the type with whichthis court was concerned in c. 34. it is next contended that the application of section 4(4)(ii)(e)retrospectively from 29.10.1978 to the transfer of distillery without compensationrenders the whole act arbitrary, unreasonable, confiscatory and violative ofarticles 14, 19(1)(g), 19(1)(f) and article 31 or alternatively article 300a for thereason that at the time when the transfer was made, that is, 5.6.1983. in thiscontext, strong reliance has been placed on the decision of this court inchairman, railway board and ors. in the circumstances, we think that the contention of thelearned counsel that retrospective operation of section 4(4)(ii)(e) is bad, cannotbe sustained.rajendra babu, j.w.p.[c] nos. 12598/85, 1600/86, 1487/86 & 1260/86.1. the bihar sugar undertakings [acquisition] act, 1976 [bihar act xiii of1977] [hereinafter referred to as 'the act'] was passed by the state legislatureand received the assent of the president on june 4, 1977 and was published inthe gazette on june 30, 1977. the act was to provide for acquisition andtransfer of certain sugar undertakings in the state of bihar and for mattersconnected therewith or incidental thereto. under section 3 of the act, theundertakings listed in the schedule stood transferred to and vested in thegovernment of bihar or a corporation with all he assets, liabilities, rights, titles,interest and obligation including any mortgage, charge of other encumbrance orlien trust of similar obligations attaching to the undertaking. under section 2(h)of the act 'schedule undertaking' is defined to mean an undertaking engaged inthe manufacture or production of sugar by means of vacuum pans and with theaid of mechanical power in a factory specified in the schedule and compromises ofseveral items as set out therein. 2. the undertakings mentioned in the schedule are eight in number. undersection 17 of the act, the state government was authorised to add other sugarundertakings to be included in the schedule by notification. 3. on 29.10.1978, a notification was issued under section 17 of the act toinclude 16 more sugar undertakings including the three sugar mills of thepetitioners in the schedule to the act. 4. several writ petitions were filed in the calcutta high court challenging thenotification issued under section 17 of the act which included the petitioners'sugar mills thereunder. interim stay was granted restraining possession beingtaken over on 31.10.1978. on 12.7.1979, the writ petitions were heard togetherand were allowed and the act as well as the notification under section 17 of theact were declared ultra vires and the take-overs were quashed. on 28.10.1979,the state government preferred appeals to the division bench of the high court.in the pending appeals, the petitioners sought leave to withdraw their writ petitionc.r. no. 784 of 1978 and the division bench dismissed the writ petition aswithdrawn and set aside the judgment under appeal so far as the petitionerstherein were concerned. on 5.7.1983, the distillery at hathua was sold by thepetitioners to united distilleries (p) ltd. the petitioners, on 21.9.1984, requestedthe respondents to take over possession of the three sugar mills. thereafter anotification was issued by the state government on 29.9.1984 purporting towithdraw the notification dated 29.10.1978 to the extent it related to the threesugar mills of the petitioners stating that this notification was issued pursuant tothe order of the division bench of the high court dated 18.9.1984. writ petitionswere filed in the calcutta high court challenging the notification dated 29.9.1984proposing to withdraw the acquisition. the high court granted stay of theoperation. workers of the petitioners also filed writ petition in the patna highcourt challenging the notification dated 29.9.1984. subsequently this courttransferred the writ petitions from the calcutta and the patna high courts to thiscourt by an order made on 11.2.1985.5. in the meanwhile, an ordinance was issued by the bihar government soas to acquire the sugar mills of the petitioners. writ petition was filed before thiscourt challenging the ordinance. now, the ordinance is replaced by act 12 of1985 and that the act is also under challenge before us.6. on behalf of the petitioners, five major contentions have been urged:1. that the impugned enactment is beyond the legislative competence of thestate of bihar since the industries covered by the enactment fall under entry52 of list i to the seventh schedule to the constitution;2. that the decision in ishwari khetan sugar mills (p) ltd. and ors. v. state ofu.p. and ors., : [1980]3scr331 , stands overruled by the decision insynthetics & chemicals ltd. and ors. v. state of u.p. and ors., ;3. inclusion of alcohol industries in the list of scheduled industries in theindustries [development and regulation] act, 1951 detracts legislative powerof the states to acquire distilleries;4. entry 42 of list iii to the seventh schedule to the constitution provides foracquisition of property and does not deal with take-over of industries underentry 24 of list ii to the seventh schedule to the constitution, which aresubject the provision of entry 57 of list i to the seventh schedule to theconstitution;5. the act has failed and, therefore, must be declared to be invalid.7. before we embark upon the consideration of the various contentionsurged before us, it is necessary for us to refer to the decision of this court inr.c. cooper v. union of india, : [1970]3scr530 . in that decision the scope ofentry 42 of list iii to the seventh schedule to the constitution has beenconsidered in detail. after tracing the history of the different entries in lists i andii in relation to acquisition of property, this is what this court stated:'before the constitution (seventh amendment) act, entry 33 list iiinvested the parliament with power to enact laws with respect toacquisition or requisitioning for the purpose of the union, and entry 33list ii conferred upon the state legislature the power to legislate withrespect to acquisition or requisitioning for the remaining purposes. thoseentries are now deleted, and a single entry 42 list iii invests theparliament and the state legislature with power to legislate with respectto 'acquisition, and requisitioning' of property. by entry 42 in theconcurrent list power was conferred upon the parliament and the statelegislatures to legislate with respect to 'principles on whichcompensation for property acquired or requisitioned for the purpose of theunion or for any other public purpose is to be determined, and the form inwhich such compensation is to be given'. power to legislate foracquisition of property is exercisable only under entry 42 list iii and notas an incident of the power to legislate in respect of a specific head oflegislation in any of the three lists: rajahmundry electric supplycorporation ltd. v. the state of andhra, : [1954]1scr779 .[underlying by us]8. this decision clearly enunciates that the power to acquire property is aseparate, distinct and independent power and is not an incident of the power tolegislate under other entries. therefore, such power could be exercised by thestate and is not covered by either entry 7 or entry 52 of list i.9. shri ranjit kumar submitted that the decision in r.c. cooper's case standson a different footing as at the relevant time, when in that case banknationalisation was challenged article 31 was available and in the present cases,it does not exist. there are no competing entries in list i of the seventhschedule to the constitution because the bank nationalisation was done by thecentral government itself.10. none of these contentions have a bearing upon the aspect we areconsidering. in r.c. cooper, this court considered the scope of entry 42 of listiii to the seventh schedule to the constitution, which did not depend upon theexistence of article 31 of the constitution or the manner or the extent to whichundertakings were taken over. independent of these aspects the ambit andwidth of entry 42 of list iii has been explained by this court which was reiteratedby this court in ishwari khetan's case.11. following decision in r.c. cooper's case, in ishwari khetan's case thiscourt stated as follows:'there is thus a long line of decisions which clearly establishes theproposition that power to legislate for acquisition of property is anindependent and separate power and is exercisable only under entry 42,list iii and not as an incident of the power to legislate in respect of aspecific head of legislation in any of the three lists. this power of thestate legislature to legislate for acquisition of property remains intact anduntrammelled except to the extent where on assumption of control of anindustry by a declaration as envisaged in entry 52, list i, a further powerof acquisition is taken over by a specific legislation.' [p.154]12. though there are two judgments rendered, both the judgments are agreed thatthe matter could be disposed of on the ground that the legislation falls underentry 42 of list iii and cannot be related to entry 7 or entry 52 of list i. whenthe impugned enactment truly falls within entry 42 of list iii - 'acquisition andrequisitioning of property' - there is a reluctance on our part to enter upon anexamination of the mutually competing claims of entry 7 of entry 52 of list i andentry 24 of list ii. entries which deal with 'industries' and 'acquisition' areentirely different subject-matters. therefore, we do not think it is any longer opento the learned counsel for the petitioners to contend that impugned acquisition ofsugar undertakings is beyond the competence of the state legislature.13. the argument advanced on behalf of the petitioners that the decision insynthetics & chemicals ltd.'s case overrules the decision in ishwari khetan'scase is plainly untenable. in synthetics & chemicals ltd.'s case, this court wasconcerned with the question of levy of excise duty on alcohol not fit for humanconsumption and three questions have been posed by this court forconsideration and they are as under:(i) whether the power to levy excise duty in case of industrial alcoholwas with the state legislature or the central legislature?(ii) what is the scope and ambit of entry 8 of list ii of the seventhschedule of the constitution?(iii) whether, the state government has exclusive right or privilege ofmanufacturing, selling, distributing, etc. of alcohols includingindustrial alcohol. in this connection, the extent, scope and ambitof such right or privilege has also to be examined.14. none of these questions cover the aspects raised before us. therefore,we hold that the decision in synthetics & chemicals ltd.'s case does not overruleimpliedly or otherwise the decision in ishwari khetan's case. the argument thatat any rate the take-over of distillery is bad cannot also be sustained inasmuchas the concept of acquisition of an undertaking is an entirely different matter fromthe control and regulation of the industries.15. the argument that a sugar undertaking is a going concern and cannotconstitute property within the meaning of entry 42 of list iii is exploded by thiscourt in r.c. cooper's case in the following words:'under that entry 'property' can be compulsorily acquired. in its normalconnotation 'property' means 'highest right a man can have to anythingbeing that right which depend on another courtesy: it includesownership, estates and interests in corporeal things, and also rights suchas trade-marks, copyrights, patents and even rights in personam capableof transfer or transmission, such as debts; and signifies a beneficial rightto or a thing considered as having a money value, especially with injured'.the expression 'undertaking' in section 4 of act 22 of 1969 clearly means agoing concern with all its rights, liabilities and assets-as distinct from thevarious rights and assets which compose it. in halsbury's laws ofengland, 3rd edn. vol 6, article 75 at p.43, it is stated that 'although variousingredients go to make up an undertaking, the term describes not theingredients but he completed work from which the earnings arise.'transfer of and vesting in the state corporation of the entireundertaking of a going concern is contemplated in many indian statutes;e.g., indian electricity act, 1910, sections 6, 7 & 7a; air corporation act, 1953,sections 16 & 17, imperial bank of india act 1920, sections 3 & 4; state bank of indiaact, 1955, section 6(2), (3) & (4); state bank of india (subsidiary banks) act,1959; banking regulation act, 1949, section 36ae; and cotton textilecompanies act, 1967, sections 4(1) & 5(1). power to legislate for acquisitionof 'property' in entry 42 list iii therefore includes the power to legislatefor acquisition of an undertaking. but, says mr. palkhivala, liabilities of thebanks which are included in the connotation of the expression'undertaking' cannot be treated as 'property'. it is however, the assets,rights and obligations of a going concern which constitute theundertaking; the obligations and liabilities of the business form anintegral part of the undertaking, and for compulsory acquisition cannot bedivorced from the assets, rights and privileges. the expression 'property'in entry 42 list iii has a wide connotation, and it includes not onlyassets, but the organisation, liabilities and obligations of a going concernas a unit. a law may, therefore, be enacted for compulsory acquisition ofan undertaking as defined in section 5 of act 22 of 1969.' [pp. 567-568]16. the learned counsel for the petitioners adverted to the sugar undertaking[taking over of management] act, 1978 [hereinafter referred to as 'the 1978 act']which was enacted by parliament to provide for the take-over in public interest ofthe management of certain sugar undertakings and contended that the impugnedenactment is also for better management of sugar industries and, therefore, thetwo enactments overlap the same field. he also submitted that in the guise ofacquisition of undertaking what is really sought to be done by the stategovernment is to take over the management of the sugar undertakings in themanner as sought to be done under the 1978 act.17. the 1978 act was enacted to provide for temporary taking over of themanagement of certain sugar undertakings in certain situations for the purpose ofmainly to maintain the continuity of production of sugar for avoiding unduehardship to cane producing farmers and to best subserve the interests of allsections of the people for a limited period the management of every sugarundertaking which fails or ceases to manufacture sugar or which fails to paypromptly amounts due for the cane acquired for the purposes of the undertaking.after the expiry of the period mentioned therein which at any rate shall notexceed seven years from the date of vesting, the management of the undertakingshall revert back to the original owners thereof. the industries [development andregulation] act, 1951 also contemplates certain provisions under chapter iii-afor direct management or control of industrial undertakings by the centralgovernment, that is, in certain cases, the central government has alwaysexercised such powers of taking over of the management of the industrialundertakings for a temporary period in certain situations.18. the statement of objects and reasons set out in the impugned act are,inter alia,'.....it is proposed to nationalise these sick mills and the distilleries inthe larger public interest and in the interest of the state economy and alsoin the interest of the cane growers and labourers.'19. the objects and reasons of the central act are clearly to make provisionfor taking over the management of the defaulting sugar undertakings for aspecified period. it is thus clear that the objects, purpose and provisions of thetwo enactments are entirely different. further even when the state becomes theowner of the sugar undertaking, it is possible for the central government inexercise of its power under the 1978 act or under the industries [developmentand regulation] act to take over the management. therefore, the two powersexercised are different and distinct. but a comparison of the provisions of thetwo enactments will make it clear that it is not merely to take over themanagement but to take over the entire undertaking that the impugned act hasbeen brought into effect. it is not merely the management that is vested but theentire undertaking that is vested in the government. further return of theundertaking after a certain period does not arise either. the contention,therefore, urged that the exercise of power under entry 42 of list iii to acquirethe undertaking is not for the avowed purpose of taking over of the entireundertaking but the management is not tenable and, therefore, rejected. nor isthe contention that the two enactments, the 1978 act and the impugned actoverlap is also not well founded.20. the contention advanced now is that the sugar undertakings were takenover by the bihar ordinance 38 of 1985 replaced by act xii of 1985 as early as21.10.1985. now it is urged that none of the objectives of the said act have beenachieved; that the purposes for which the enactment was made having failedimpugned act cannot be enforced, and that act should be declared to be invalidand, in this context, reliance is placed on the decision of this court in malpevishwanath acharya and ors. v. state of maharashtra and anr., : air1998sc602 .21. let us examine the circumstances that have arisen in this case after theact came into force. on the ordinance coming into force, the validity of the samewas challenged and taking over of the distillery was stayed and in fact one of thedistilleries the possession of which had already been taken over was handedback subject to certain conditions. the interim order was in force throughout.when the government carries out an experiment for various purposes in thecommercial or economic field, it has its own hazards particularly when the courtsintercede, grant interim orders, the objectives of the act cannot be achieved atall. in this background it becomes hazardous to examine the contentions putforth on behalf of the petitioners whether if the act had failed or not particularlywhen it has not been put into full force. the situation dealt with the malpevishwanath acharya is altogether different. what was noticed therein is thatwhen the act was enacted, though valid, with the passage of time some of theprovisions thereof like freezing of rent it became irrational and unjust and,therefore, violated article 14 of the constitution. it is in those circumstances thelaw was declared to be invalid and not otherwise. therefore, this contentions alsodoes not appeal to us.22. it was lastly contended by shri ranjit kumar that the valuation of thesugar undertaking on the basis of book value is not reasonable. the manner inwhich value of the properties should be taken either book value or any othervalue cannot be examined by us because book value is one of the methods inwhich the values of undertakings are determined. there is no material placedbefore the court to show as to what other method could be adopted which wouldbe more reasonable or as to how the book value taken does not reflect the truevalue of the undertakings. therefore, it is difficult to conclude one way or theother on the basis of this contention. hence it is rejected.w.p.[c] no. 83 of 198623. this writ petition is filed by united distilleries (p) ltd., which is stated tohave purchased a distillery with the bottling plant under an agreement datedseptember 20, 1982. it is contended on behalf of the petitioners that petitionerdistillery is not covered by the act for the following reasons:1. the object of the act is to acquire only such distilleries as have benoperating till as late as the recent past, that is, the crushing season 1984-85as ancillary units or sister concerns or subsidiary mills of certain specifiedsugar mills;2. the vesting under section 3(1) of the act is only of a sugar scheduleundertaking if they were immediately before the appointed day in theownership, possession, power or control of the undertaking;3. various other provisions, for instance, sections 6, 7, 1st schedule, 2ndschedule etc. do not even mention the petitioners nor provide for anycompensation for it;4. section 4, which provides for consequences of vesting, applies only toproperties which, in the first place, get vested in the state in terms of section3, which have been till as late as immediately before the appointed date, thatis, 16.12.1985 in the ownership, possession, power and control of theundertaking. hence that part of the section, namely, sub-section 4(ii)(e) alsohas applicability only to such an executory agreement or promise [as distinctfrom an executed agreement] of transfer or disposition of property which hasso far, that is, till as late as immediately before the appointed day, i.e.,16.12.1985 not resulted in the absolute, final and complete transfer of theproperty in favour of a third party. the said provision, it is submitted, has noapplicability to transfer or disposition of property which has been finallycompleted long before the appointed day, 16.12.1985. thus the transfer ofthe distillery by skg in favour of the petitioners on 5.6.1983 is not affected bysection 4(4)(ii)(e).24. the other argument advanced on behalf of the petitioners is that in theevent this argument is not accepted, acquisition of property by the state on anyground pertaining to a period anterior to the date 29.9.1984 is per se arbitraryand violative of article 14 of the constitution because on that date the state haditself withdrawn the initial acquisition of the said sugar mills under the 1976 actthereby accepting that all transfers prior to 29.9.1984 were unobjectionable andvalid; that by section 2(h)(i) of the 1976 act, even a distillery owned andcontrolled by a wholly independent and separate person is also roped in; thatfurther the act does not make any provision to exclude the bona fide purchaserfor value and such inclusion treats unequals as equals and does not provide anymachinery for identifying such bona fide purchases for value but on the otherhand, section 4(4)(ii)(e) declares that all transfers after 29.10.1978 shall beinvalid; that the 'adjacent' location of the distillery in the factory premises of thesugar undertaking is merely an accidental circumstances and that does notindicate that the distillery has any connection or is a related distillery and arelated distillery need not necessarily be adjacently located and that aspect isirrelevant for any consideration of finding out whether the distillery has anyconnection with the sugar undertakings or not; that the application of section4(4)(ii)(e) retrospectively from 29.10.1978 to the transfer of property, namely,distillery without compensation renders the act wholly arbitrary, unreasonable,confiscatory and violative of articles 14, 19(1)(g) and also articles 19(1)(f) readwith article 31 [as they stood before the constitution forty fourth amendment] oralternatively, article 300a for the reason that at the time when the transfer infavour of the petitioners was made i.e. on 5.6.1983; that in the earlier act, thedistillery was not sought to be acquired nor was there any restriction on thetransfer of distillery at any time; that it is at that distillery which had beentransferred and the government could not take action by bringing anyretrospective provision to affect the interests of petitioners.25. shri rakesh dwivedi, learned senior counsel appearing for the state ofbihar, drew our attention to the background in which this enactment has beenbrought into force. he pointed out the various circumstances set forth in thecounter affidavit which let to the enactment and which are also available in theshort cause title of the enactment to take over the sugar undertakings and thatenactment having been struck down by the calcutta high court and thereafterwhen the appeal was pending, the writ petitions having been withdrawn thewhole object of the act stood misfired. in the meanwhile, several actions hadbeen taken by several persons to transfer or sell the distilleries which weremaking profits and part of the sugar undertakings. in that background, theenactment was made considering the history of this legislation, certain provisionsof the act have come into force from as early as 29.10.1978. he furthersubmitted that the lease deed itself indicated that the distillery is in existence inthe common premises along with the sugar undertakings. the agreement to sellalso contemplates acquisition of the property. clause (h) of the indenturecontemplated the nationalisation of the sugar mill as a consequence of which thedistillery also being taken over. therefore, it cannot be stated that it is not withinthe contemplation of the parties at all. shri dwivedi further submitted that thoughsection 4(4)(ii)(e) retrospectively comes into force from 29.10.1978 inasmuch asthe sale in favour of the petitioners having been made only on june 5, 1983, it isnot necessary to examine the retrospective nature of the provisions of the actanterior to that date.26. elaborating his first contention, shri gupta for the petitioner submitted thatin the bihar act xiii of 1977 'scheduled undertaking' means an undertakingengaged in the manufacture or production of sugar by means of vacuum pansand with the aid of mechanical power in a factory specified in the schedule andcomprises of several components but does not include a 'distillery'. it is only inthe impugned act 'distillery' is subsequently included by an inclusive definitionwhich reads as follows:-'section 2(h): 'scheduled undertaking' means an undertaking engaged inthe manufacture or production of sugar by means of vacuum pans and withthe aid of mechanical power in a factory specified in the first schedule andincludes:- (i) distillery paper unit and all lands, buildings, works, plants,machinery, equipments, instruments, stores, vehicles, railwaysiding in or adjacent to the mill;x x x x x'(rest is not relevant for our purpose)27. he firstly contended that on the date of the act coming into force thedistillery was no longer in the ownership, possession, power and control of thesugar undertaking on 16.12.1985 when the act came into force and it is onlyassets of the scheduled undertaking which are part thereof that stood taken overor vested in the government; that the statement of objects and reasons andthe preamble indicate that the object of the act was to acquire only suchdistilleries as had been operating till as late as the crushing season 1984-85 andancillary units or sister concerns or subsidiary mills of certain specified sugarmills and various other provisions do not even advert to a person of the nature ofthe petitioner by not providing for any compensation and, therefore, the distilleryin question falls completely outside the scope of the impugned act. in thiscontext, he placed strong reliance upon the decisions in brett v. brett,1824 (34) all e.r. 776; hawkins v. gathercole, 1855 (43) er 1125; utkalcontractors v. state of orissa, : [1987]3scr317 ; girdhari lal v. balbirnath, : [1986]1scr383 , and reserve bank of india v. peerless, : [1987]2scr1 . he also submitted that section 4 as a whole is a provision forenumerating certain consequences of vesting and applies only to propertieswhich in the first place get vested in the state in terms of section 3, that is,properties which have been till as late as immediately before the appointed day(16.12.1985) in the ownership, possession, power and control of the undertaking;that hence a part of section 4(4)(ii)(e) has also applicability only to such anexecutory agreement or promise as distinct from an executed agreement oftransfer or disposition of property which has so far, that is, till as late asimmediately before the appointed day (16.12.1985) not resulted in the absolute,final and complete transfer of the property in favour of a third party; that it has noapplicability to a transfer or disposition of property which has been finallycompleted long before the appointed day (16.12.1985); that thus the transfer ofthe distillery in question in favour of the petitioner on 5.6.1983 is not affected bythe said provision.28. the impugned act seeks to take over the sugar undertakings including a'distillery' operated in such undertaking. what is urged before us comes in theteeth of section 4(4)(ii)(e) and if we correctly understand the scope of thisprovision, the arguments advanced on behalf of the parties can be trulyappreciated and, for that purpose, it is necessary to set out that provision in fullwhich is as follows:-'section 4. certain consequences of vesting.-(4)(ii) for removal of doubts, it is hereby declared that, save asotherwise expressly provided in this section or in any other section of thisact - (e) notwithstanding any provision in any other law, all thetransfer, disposition of properties moveable or immovableeither in part or in whole made after 29th october, 1978 ofthe scheduled under taking shall be invalid and standannulled. the collector shall take possession of suchproperties with the properties of the undertaking.' 29. section 4 falls into different parts. the first part is covered by an non-obstanteclause by which the properties along with encumbrances and to whatextent vest in the state and clause (4)(i) covers such a situation. but clause 4(ii)opens with a clause 'for removal of doubts, it is hereby declared that, save asotherwise expressly provided in this section or in any other section of this act.....and thereafter clause 4(ii)(e) is set out. the opening clause 'removal of doubts'does not fit in the non-obstante clause with which section 4(4)(ii)(e) opens.indeed, the object of section 4(4)(ii)(e) is evident from the very languageemployed in that provision which indicates that irrespective of any provision inany other law transfer, disposition of properties moveable or immoveable eitherin part or in whole made after 29th october, 1978 of the scheduled undertakingshall be invalid and stand annulled and the collector shall take possession ofsuch properties with the properties of the undertaking. in correctly reading theenactment as a whole what we have to do is to treat this provision as anindependent provision which provides for consequences to which we haveadverted to, that is, nullification of all alienation effected after 29th october, 1978of the properties and taking over the same. that is, because under the priorenactment a notification has been issued on 29.10.1978 to take over the sugarmills under section 17 of the act then in force. therefore, there is definitely acloud in relation to properties belonging to the sugar undertaking which weresought to be taken over. not only that day is relevant for the purpose of takingover but also if the objectives of the act have to be achieved situations will haveto be taken note of which have arisen prior to the date of the enactment andtherefore, it becomes absolutely necessary to make proper provisions to coversuch situations. if the said transaction stood nullified the fact that the propertiesstood transferred to the petitioner on 5.6.1983 will not be of any consequenceand that property will have to be treated as the property of the sugar undertakingbeing taken over under the impugned act. therefore, the exercise suggested bythe learned counsel as to the restricted construction that has to be placed on theexpression 'distillery' in section 3(1) or section 4 cannot be accepted. thedecisions referred to by the learned counsel cannot be of any assistance on theconstruction made by us on the provisions of the act. if on the date of cominginto force of the act, the transactions entered into after 29th october, 1978 stoodannulled in respect of the properties that are being taken over, the saidproperties must be held as still the properties of the sugar undertaking. thus ifthe true effect of section 4(4)(ii)(e) is borne in mind, the distillery of the petitionermust be deemed to be in the ownership, possession, power and control of theundertaking on the appointed day. hence, we reject the first contention of thelearned counsel that the act has no applicability to the distillery of the petitioner.30. the contention on behalf of the petitioner that there is no reference to thepetitioner nor any compensation is provided under sections 6 and 7 and firstand second schedules to the act is not correct. there was no need to mentionthe petitioner's name in any one of these provisions. indeed, in c.b. gautam'scase it was held that where the agreement for sale itself provided that theproperty was intended to be sold free from all encumbrances or leasehold rights,and the property vested in the central government free from all encumbrances,the holders of encumbrances and leasehold interests would have to obtain theircompensation from the amount awarded by government as purchase price to theowner of the property. the provision of the impugned enactment in so far ascompensation is concerned is section 7 of the act. the said section does notsay to whom the amount is to be paid and such amount will have to be given toall those persons who are interested in the property after meeting prior claims asindicated in the said provision. therefore, we do not think that we can proceedon the basis that no provision for compensation is made to attract the wrath ofarticle 31 of the constitution.31. the next contention put forth by the learned counsel for the petitioner isthat the acquisition of the petitioner's properties by the state anterior to 29thseptember, 1984 is per se arbitrary because on that day the state had itselfwithdrawn the initial acquisition of the said sugar mills under the 1976 actthereby accepting that all transfers prior to 29.4.1984 were unobjectionable andvalid. this contention plainly has no force. law can be made not onlyprospectively but also retrospectively. the state had enacted earlier act 13 of1977 which was declared to be invalid and thereafter in appeal the said decisionhad been challenged and subsequently the notification dated 29.10.1978 undersection 17 of that act had been issued which stood withdrawn subsequently andwhich was also the subject matter of challenge. in that background, it cannotbe said that by reason of withdrawal of the acquisition of the said sugar millswould result in acceptance of the transfers prior to 29.9.1984. therefore, thisargument of the learned counsel is untenable and is rejected.32. relying upon the decision of the court in c.b. gautam v. union of indiaand ors., : [1993]199itr530(sc) , shri gupta contended that the distillery belongs to awholly independent and separate person who is a bona fide purchaser of valueand no provision is made to identify such purchasers but declares under section4(4)(ii)(e) that all transfers after 29.10.1978 to be invalid; that while interpreting asimilar provision arising under the income tax act under section 269ue underwhich the properties would vest in the government free from all encumbrancesand considering the scheme of the provision of the income tax act, this court inc.b. gautam's case stated that an order made for compulsory purchase undersection 269ud has the effect of vesting the property in the central governmentfree from all encumbrances or leasehold rights the value of which might not bereflected in the apparent consideration mentioned in the agreement for sale; thatsuch encumbrance holders and holders of leasehold rights might not haveanything to do with the attempt at tax evasion which was intended to be pluggedand the government would be liable to pay as compensation to the owner of theproperty an amount equal to the amount of apparent consideration; that theleasehold rights would get destroyed and would be handed over to theappropriate authority; that similar would be the position in a mortgage; that theapparent consideration even if it is equivalent to the fair market value would beindicative of the market value of the property subject to such encumbrances andin such a case the properties would be compulsorily purchased and amount tobe paid for the purchase would be only equal to the apparent consideration andthis apparent consideration would not take into account the value of theencumbrances on the property like mortgages and so on or the leasehold rights.this court in that background held that the provisions of section 269ue insofaras it provides that the property in respect of which an order under sub-section (1)of section 269ud is passed shall vest in the central government free of allencumbrances cannot be valid inasmuch such provision has no rational nexuswith the object of the legislation which is avoiding evasion of tax and therefore,was read down so as to make them inapplicable to bona fide encumbrancesholders in possession. further, this court also noticed a distinction betweenacquisition of property by pre-emptive purchase and acquisition of property.adverting to the decision in rambhai manja nayak v. union of india, : [1983]142itr211(guj) , (affirmed by this court in rambhai manjanath nayakv. union of india, : [1993]201itr422(sc) ) this court in gautam's case held thatthere was a similar provision that the property in question vest in the centralgovernment free from all encumbrances under provision of section 269i(4) ofthe income tax act. in the said decision, the gujarat high court held that it isonly after all interests - proprietary as well as possessory - are extinguished bythe acquisition of the property that the property vests absolutely in the centralgovernment. this view was distinguished by this court by stating that in thatcase the court was concerned with compulsory acquisition under chapter xx-aof the income tax act and such a situation cannot be compared with the casebefore the court which is one of compulsory pre-emptive purchase made by thecentral government in which amount to be paid is only apparent considerationwhich does not take into account the value of encumbrances. the present caseis clearly one for acquisition of property as demonstrated in the earlier part of thisjudgment and not by way of any pre-emptive purchase of the type with whichthis court was concerned in c.b. gautam's case. the decision of this court inharshad shantilal mehta v. custodian and ors., : [1998]231itr871(sc) , merelyfollows the decision in c.b. gautam's case and does not lay down any newprinciple. we think, there is no justification whatsoever for the petitioner tocontend that the provision contained in section 4(4)(ii)(e) is in any way invalid onthe basis of these two decisions.33. the learned counsel contended that only a distillery connected or relatedto the sugar undertaking can be acquired and it cannot be presumed so byreason of its proximity to the location of the sugar undertaking. this argumentdoes not assume any significance in the view we have taken. there cannot beserious dispute that the distillery and sugar undertaking are inter-connected inseveral ways, particularly by supply of molasses manufactured by the latter. byvirtue of section 4(4)(ii)(e), ownership, possession, power or control continues tobe with sugar undertaking and, in addition, its location is an additional factor toascertain whether it is a related industry or not. thus, we find no substance inthe contention that the distillery cannot form subject matter of acquisition.34. it is next contended that the application of section 4(4)(ii)(e)retrospectively from 29.10.1978 to the transfer of distillery without compensationrenders the whole act arbitrary, unreasonable, confiscatory and violative ofarticles 14, 19(1)(g), 19(1)(f) and article 31 or alternatively article 300a for thereason that at the time when the transfer was made, that is, 5.6.1983. in thiscontext, strong reliance has been placed on the decision of this court inchairman, railway board and ors. v. c.r. rangadhamaiah and ors., : air1997sc3828 ; state of a.p. and ors. v. mcdowell & co. and ors., : [1996]3scr721 , and state of gujarat and anr. v. raman lal keshav lal soni and ors., : (1983)illj284sc .35. in chairman, railway board's case, the point that arose for considerationwas whether pension as admissible under the rules in force at the time ofretirement could be retrospectively reduced. this court held the same asunreasonable and arbitrary and, therefore, violative of articles 14 and 16. thiscourt explained the scope of articles 19(1)(f) and 31 which were not in existenceon the date of the notification but in existence when the notifications were madeeffectively retrospectively and so no challenge could be based on them. it is nodoubt true that a challenge could be based on articles 31 and 19(1)(f) in a matterof this nature when the enactment has retrospective operation from 29.10.1978,but there are several reasons why nothing follows from this situation. firstly, thetransfer itself has been in favour of the petitioner on 5.6.1983, that is, long afterthe constitutional provisions stood deleted. the context of a pensioner who hasa prior vested right and was receiving such pension being deprived of suchpension by giving him a lesser sum is altogether a different circumstance and, inthe present case, it cannot be said that there is no provision for payment ofcompensation.36. the decision of this court in state of gujarat and anr. v. raman lalkeshav lal soni has absolutely no relevance to the present case. in that case,it was held that the government servants do not lose their status merely on beingsent to some institution or body controlled by the government and on being paidout of the funds of that institution or body; that a retrospective amendment of theenactment creating a differential classification in relation to their original positionand depriving the ex-municipal employees of their present status of governmentservants and consequential benefits would be violative of articles 14 and 311.no such right arises in so far as petitioner in the present case is concerned.37. further, the learned counsel contended that sugar undertaking sought tobe acquired was defined in a different manner under the earlier enactment, thatis bihar sugar undertakings [acquisition] act, 1976, though several aspects ofthe components of the sugar undertaking were mentioned, it did not referspecifically to a distillery and thus it was never under the contemplation of theact on the earlier occasion to acquire a distillery. but when all properties aresought to be acquired even if not specifically set out therein, it is rather doubtfulto say that a distillery will not be included in it. in the present act position is madeabundantly clear. in the circumstances, we think that the contention of thelearned counsel that retrospective operation of section 4(4)(ii)(e) is bad, cannotbe sustained.38. inasmuch as all the contentions of the petitioner have been rejected, thesepetitions shall stand dismissed.t.c.[c] nos. 26/85 and 66/9939. in view of the order made by us in the writ petitions, t.c.[c] nos. 26/85and 66/99 have become infructuous and stand disposed of accordingly.cont. pet. [c] no. 298/9740. this petition was filed for enforcement of the order made by this court on7.2.1986. the stand of the petitioners is that there is non-compliance of thedirection given by this court in the manner provided therein. various contentionsare put forth before us to interpret the said order and to contend that the mannerof compliance by respondents is not sufficient by a process of circuitousreasoning. it is clear that unless there is a wilful disobedience, which can bespelt out from the conduct of the respondents, no action can be taken incontempt. hence the notice issued shall stand discharged and the proceedingsshall stand dropped.slp[c] no. 7887/9441. the facts that have arisen and the issues involved in this appeal byspecial leave are different from those that have arisen in the aforesaid writpetitions and the transfer cases. hence, this petition be delinked from thepresent batch of cases.