Holding

The Food Corporation of India is a "company" within section 3(e) of the Land Acquisition Act, 1894, and because Chapter VII requirements were not complied with, the land acquisition is illegal.

Summary

The State of Punjab sought to acquire nine biswas of land in Morinda for the Food Corporation of India (FCI) to build grain godowns. The respondents challenged the acquisition, arguing that the FCI was not a "company" within section 3(e) of the Land Acquisition Act, 1894, and therefore Chapter VII provisions applicable to companies were not complied with. The Supreme Court held that the FCI, created by the Food Corporation Act, 1964, is a company under the definition of section 3(e) and is not a government department. Consequently, the acquisition had to follow the procedural requirements of Chapter VII, which were absent. The Court therefore declared the acquisition illegal and dismissed the appeal.

Issues considered

Whether the Food Corporation of India qualifies as a "company" under section 3(e) of the Land Acquisition Act, 1894.
Whether land acquisition for the FCI must comply with the provisions of Chapter VII of the Land Acquisition Act.
Whether the acquisition was for a public purpose within the meaning of the Act.
Whether the FCI can be characterised as a government department.

Legislation cited

Food Corporation Act, 1964s. 3(1), s. 3(2), s. 5, s. 7
Land Acquisition Act, 1894s. 17, s. 3(e), s. 4, s. 5, s. 6, s. 7, s. Chapter VII

Subjects

Land acquisitionFood Corporation of IndiaCompany definitionPublic purposeChapter VII complianceStatutory corporationGovernment department

Judgment

712

A STATE OF PUNJAB & ORS.
v.
RAJA RAM & ORS.
January 29, 1981
B [A. D. KOSHAL AND BAHARUL !SLAM, JJ.]

Land Acqui.sition Act, 1894, .51ectio11 3(e) read with section 4-U'hether the
Food l~orporarion, creaf(d by section 3 of the Food Corporation At!, 1964,
is a co111pa11y within the 111eaning of section 3(e) of the Land A('qtd1ition Act.

l)isn1issing the State appeal on certificate, the Court
c I~ELD : ( 1) The acquisition of land for the Food Corporation of India
is not in nccordance \Vith law for the reason that compliance with the pro--
visions of Chapter VII of the Land Acquisition Act had not heen made.
[717A-B]
(2) The Food Corporation of lndia is a Compa11y within the meaning
of the term appearing in clause (e) of section 3 of the Land Acquisition
D Act, 1894. Section 3 (e) mentions in unrnistakable terms that a company
incorporated by an Indian law would be a "Company" for the purposes of
lhe Land Acquisition Act. The Corporation wias adn1ittedly creat'ed by
sc~ction 3 of the Food Corporation Act. 1964. Sub-section (2) of section 3 of
the Food Corporation Act, 1964 is an Indian Law and clothes the Corporation
with the attribute~ of a<- compan)'. [7l 5A-E.]

E (3) A Government department has to be an. organisation which is not
only completely controlled and financed by the Government but has also no
identity of its own. The money earned by such a department goes to the
exchequer of the Government and losses incurred by the department are losses
of the Government. The Corporation, on the other hand, is an autonomous
body capable of ocquiring, holding and disposing of properly and having tho
power to contract. It n1ay also sue or be sued by its own nan1e and tho
Government does not figure in any litigation to which it is a party. It is true
that its original share capital is provided by the Central Government and thati
11 out of the 12 members of its Board of Directors are appointed by the )
Central Government but then these factors may at the most lead to the conclu~ )
sion that the Corporation is an agency or instrumentality of the Central
Government. [715E-H]

G Even the conclusion, ho\\ ever, that the Corporation is an agency or instru·
1

mentality of the Central Government does not lead to the further inference that
rhe Corporation is a Government department. The reason is that the Food
O:Jrporation Act has given the Corporation an individuality apart from that
of the Government. In any case the Corpor::ition cannot be divested Qlf its
character as a ''Company" within the meaning of the definition in clause, (e)
of section 3 of the La-nd Acquisition Act, for it completely fulfils the require~
H ments of that clause. [716G-H, 717A-B]
Raniana Daynrani Shetty v. The International Authority of India and Ors..
[1969] 3 SCR 1014, applied.
PUNJAB v. RAJA RAM (Baharul Islam, J.) 713

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2063 of 1970. A

From the Judgment and Order dated 26-2-1970 of Punjab and
Haryana l'Iigh Court in L.P.A. No. 283/69.
0. P. Sharma and M. S. Dhillon for the Appellant.
S. K. Mehra, P. N. Puri, E. "M'. S. Anam and M. K. Dua for Res- B
pondents Nos. 1-3.
-. K. J. John for Respondent No. 4.
The Judgment of the Court was delivered by

BAHARUL ISLAM, J.-This appeal by the State of Punjab and two c
others, namely, the Collector, Rupar District and the Sub-Divisional
Officer (Civil-cum-Land Acquisition Collector, Rupar, is on a certi-
ficate granted by a Division Bench of the High Court of Punjab and
Haryana in respect of its judgment in a Letters Patent Appeal holding
the acquisition of the land in question to be bad in law on the grounds
that the Food Corporation of India for which the Land in question D
was sought to be acquired was not a "Company" within the meaning
of section 3 ( e) of the Land Acquisition Act that the land had also
not been acquiTed for a public purpose and that the State could
acquire the land under that Act only for a public purpose or for the
purpose of a Company.
E
2. The material facts of the case may be stated thus : Nine biswas
of the disputed land situated within the municipal area of Morinda in
the District of Rupar was owned by respondent No. 1, Raja Ram,
Respondents No. 2 and 3. are Raja Ram's sons. The State of Punjab
issued a notification dated December 17, 1968 under section 4 read
with section 17 of the Land Acquisition Act of 1894 (hereinafter F
called "the L.A. Act"). The notification related to 15 different plots
of land including the land of the present acquisition proceedings. The
material portion of the notification is as follows :
"Whereas it appears to the President of India that the
land is likely to be needed by Government, at public expense, G
for a public purpose, namely, for the construction of go-
downs for storage of food-grains at Morinda, it is hereby
notified that the land in the locality described below is likely
to be required for the above purpose ........ "
"Further in exercise of the powers conferred by the said H
Act, the President of India is pleased to direct that the
action under Section 17 shall be taken in this case on the
714 SUPREME COURT REPORTS [198!] 2 S.C.R.

A grounds of urgency and provisions of Section 5 (A) shall
not apply in regard to this acquisition."
On the same day another notification under Sections 6 and 7
read with Section 17(2)(c) of the L.A. Act was issued. The material
portion of this notification runs thus :
B
"Whereas the President of India is satisfied th-at the land
specified below is needed by Government at the public ex-
pense for a public purpose, namely, for the construction of
godowns for storage of food grains at Marinda, it is hereby
declared that the hmd described in the specification below is
c required for the aforesaid purpose. This declaration is
made under the provisions of Section 6 of the Land Acqui-
sition Act, 1894 .......• "
3. Against the aforesaid notification a writ petition was filed by
respondents No. 1 to 3. The writ petition was heard by a single
'D Judge of the High Court and was dismissed. The learned Single Judge,
inter alia, found that t_he provisions of Part VII of the L.A. Act

-
relating to the acquisition of land for Companies were not applicable
to the present case as the Food Corporation of India (hereinafter
called the Corporation) was a department of Government and not a
Company within the meaning of Section 3 (e) of the L.A Act al-
E though, undoubtedly, accordi!llg to the learned Judge, there was no
manner of doubt about the fact that the land in dispute was in fact
being acquired for the Corporation and that the purpose for which
the land had been acquired was a public purpose.
Against the aforesaid Order of the learned Single Judge a Letters
F Patent Appeal, being L.P.A. No. 1283 of 1969, was filed by respon-
dents No. 1 to 3 before the Division Bench, that allowed the appeal
and quashed the land acquisition proceedings as stated earlier.
4. With respect we find it difficult to agree with the learned
division bench when it held that the Corporation was not a "Company"
G within the meaning of section 3 ( e) of the L.A. Act which runs thus:
"3. In this Act, unless there is something repugnant in the subject
or context- '1
( e) the expression "Company" means a Company regis-
tered under the Indian Companies Act, 1882 or under the
II (English) Companies Act, 1862 to 1890 or incorporated by
an Act of Parliament of the United Kingdom or by an Indian
law or by Royal Charter or Letters Patent and includes a
PUNJAB v. RAJA RAM (Baharul Islam, J.) 71 5

j
society registered under the societies Registration Act, 1860, A
and a registered society within the meaning of the. Co-opera-
tive Societies Act, 1912 or any other law relatmg to co-
operative societies for the time being in force in any State."
The section mentions in unmistakable terms that ll company incor-
porated by an Indian law would be ll 'Company' for the purposes of B
the L.A. Act. Now the corporation was admittedly created by section
3 of the Food Corporation Act, 1964 (hereinafter called the F.C. Act).
That section states :
"3. ( 1) With effect from such date as the Central

~· ..
Government may, by notification in the Official Gazette,
specify in this behalf, the Central Government shall establish c
for the purposes of this Act a Corporation kµown as the
Food Corporation of India.
(2) The Corporation shall be a body corporate with the
name, aforesaid, having perpetual succession and a common
seal with power, subject to the provisions of this Act, to D
acquire, hold and dispose of property and to contract, and
may, by that name, sue and be sued."

Sub-section (2) which we need hardly say, is an Indian law, clothe~
the Corporation with the attributes of a company. It cannot, therefore,
be contended with any plansibility that the Corporation is not a 'Com- E
pany' within the meaning of the definition of that term appearing in
clause (e) of section 3 of the L.A. Act.
5. Learned counsel for the appellant then urged that 111e Corporation
is a Government department. W~. are unable to accept this submission
also. A Government department has to be an organisation which is
not only completely controlled and financed by the Government but F
has also no identity of its own. The money earned by such a depart-
ment goes to the exchequer of the Government and losses incurred by
the d~partment are losses of the Government. The Corporation, on
the other hand, is an autonomous body capable of acquiring, holding
and disposing of property and having the power to contract. It may also
G
sue or be sued by its own name and the Government does not figure
in any litigation to which it is a party. It is true that its original share
capital is provided by the Central Government (section 5 of the F.C.
Act) and that 11 out of the 12 members of its Board of Directors are
appointed by that Government (section 7 of the F.C. Act) but then
" these factors may at the most lead to the conclusion (about which we H
express no final opinion) that the COip9ration is an agency or instru-
mentality of the Central Government. In this connection we may cite
716 SUPREME COURT REPORTS (1981] 2 S.C.R.

A with advantage the following obsenations of this Court in Rama11J1 l
Dayaram Shetty v. The Inter11J1tional Authority of India and Ors.( 1 )
"A Corporation may be created in one of two ways. It
may be either established by statute or incorporated under a
law such as the Companies Act, 1956 or the Societies Regis-
tration Act, 1860. Where a corporation is wholly controlled
B by government not only in its policy making but also in carry-
ing out the functions entrusted to it by the law establishing
it or by the Charter of its incorporation, there can be no doubt
that it would be an instrumentality or agency of Government.
But ordinarily where a corporation is established by statute.
it is autonomous in its working subject only to a provision,
c often times made, that it shall be bound by any directions
that may be issued from time to time by Government in respect
of policy matters. So also a Corporation incorporated under
law is managed by a Board of Directors or committee of
management in accordance with the provisions of the statute
D under which it is incorporated. When does such a corpora-
tion become an instrumentality or agency of Government ?
Is the holding of the entire share capital of the Corporation
by Government enough or is it necessary that in addition,
there should be a certain amount of direct control exercised
by Government and, if so what should be the nature of such
E control? Should ihe functions which the Corporation is charg-
ed to carry out possess any particular characteristic or feature,
or is the nature of the functions immaterial? Now, one thing
is clear that if the entire share capital of the Corporation is
held by Government it would be a long way towards in,Iicat-
ing that the Corporation is an instrumentality or agency of
F Government. But, as is quite often the case the Corporation
established by statute may have no share or shareholders in
which case it would be a relevant factor to consider whether
the administration is in the hands of a Board of Directors
appointed by Government though this consideration also may
not be determinative, because even where the directors are
G
appointed by Government, they may be completely free from
governmental control in the discharge of their functions."

Even the conolusion, however, that the Corporation is an agency or
instrumentality of the Central Government does not lead to the further
inference that the Corportion is a Government department. The reason
H
is that the F.C. Act has given the Corporation an individuality apart
(I) (1%9] 3 S.C.R. 1014.
PUNJAB v. RAJA RAM (Baharul Islam, !.) 71 7

from that of the Government. In any case the Corporation cannot be A
divested of its character as a 'Company' within the meaning of the defini-
tion in clause (e) of section 3 of the L.A. Act, for it completely fulfils
• the requirements of that clause, as held by us above.
6. The Corporation being a 'Company', compliance with the provi-
sions of Chapter VII of the L.A. Act had to be made in order to law-
B
fully acquire any land for its purpose. It is not denied that such com-
pliance is completely lacking in the present case.
7. As a result of the foregoing disc11ssion it must be held that the
land in dispute has not been acquired in accordance with law, although

Ir-··· our reasons in that behalf are different from those forming the basis of
impugned judgment. This appeal is thus found to be without merit and C
is dismissed but with no order as to costs.
S.R. Appeal dismissed.

13-152 SCI/81