Holding

The Tamil Nadu Stage Carriages and Contract Carriages (Acquisition) Act, 1973 is constitutionally valid as it is covered by Article 31C and serves the objects of Article 39(b) and (c).

Summary

The Supreme Court examined the constitutionality of the Tamil Nadu Stage Carriages and Contract Carriages (Acquisition) Act, 1973, which sought to nationalise stage and contract carriage services and their assets. Operators challenged the Act as violative of Articles 14, 19 and 31, alleging it was confiscatory and lacked a nexus with the objectives of Article 39(b) and (c). The Court held that the Act falls within the protective umbrella of Article 31C, serving the policy goals of equitable distribution of material resources and preventing concentration of wealth, and therefore is immune from challenge under the fundamental rights provisions. It further clarified that "material resources" under Article 39(b) includes movable property and that a reasonable nexus between the statute and the directive principles satisfies the constitutional test. The Court also ruled that compensation, if provided, need not be market‑value exact but must be reasonable and not shocking to the conscience. Consequently, the Act was declared constitutionally valid. The appeals were allowed and the writ petitions dismissed.

Issues considered

The Tamil Nadu Stage Carriages and Contract Carriages (Acquisition) Act, 1973, violates Articles 14, 19 and 31 of the Constitution.
The Act fails to fall within the protective umbrella of Article 31C because it does not further the objects of Article 39(b) and (c).
Whether the vesting of permits, vehicles and workshops amounts to a confiscatory taking requiring full compensation.
Whether "material resources" under Article 39(b) includes movable property and whether the Act has a sufficient nexus with the directive principles.
Whether the compensation scheme prescribed in the Act is arbitrary, illusory or monstrous.

Legislation cited

Arbitration Act, 1940
Constitution (25th Amendment) Act, 1971
Constitution (42nd Amendment) Act, 1976
Karnataka Contract Carriages (Acquisition) Act
Motor Vehicles Act, 1939s. 68
Tamil Nadu Stage Carriages and Contract Carriages (Acquisition) Acts. 1, s. 10, s. 11, s. 12, s. 13, s. 14, s. 15, s. 16, s. 17, s. 18, s. 19, s. 2, s. 20, s. 21, s. 25, s. 26, s. 27, s. 28, s. 29, s. 3, s. 30, s. 31, s. 32, s. 4, s. 5, s. 6, s. 7, s. 8, s. 9

Subjects

nationalisationArticle 31CArticle 39(b)Article 39(c)compensationstage carriagescontract carriagesdirective principlespublic purposeconfiscatory legislationconstitutional validity

Judgment

) STATE OF'tAMIL NAi>U, ETC. ETC.
.. • A
v.
,.
' KAVUR BAI.AND ORS. ETC.
L. ABU

O~tober 31, 1983 ·
B
lY:v._CHANDARcHuD, c.J., s •. MmtTAZA FAzAL Au,.
V.D. TULZAPURKAR, 0. CHINNAPPA REDDY AND
A. VARADARA1AN, JJ.]

Constitution of India, 1950,.Articles 14, 19, 31, 39(b)and (c): G
Tamllnadu Stage ·Carriages and Contract -Carriages (Acquisition) Act
1973-Nationalisation of stage car;iages Ond ·contract carriages- Vesting of •
vehicles, workshop etc. In the government on·nationalisatfon-Whether. confiscatory
Jezis/atlon-Constitutionally Valid and permissible-Scope of Articles 39(b) an4
(c)-Whdt is, interpretarion of Statu_tes. ·
D·

Words and Phrases : 11distribution"-" Material resourCt$'~-Mel,ning of-
{ Constitution of fndla 1950, Article ·39(b).·
E
The transport industry can be nationalised by two methods : (i) where
the Government acts under Chapter IV-A, (section 68 (b) and (c) of the Motor
-VehicICs Act 1939), after formulating the scheme fof taking o"ver a· route Or
routes, 1and (ii) the more effective method, to taktp ·over the running of the
entire transport· services by nat.iODalising them, along with their units,
(Vehicles,. workshops .etc.) either by ·one stroke of by stages spread over a · F
short time. ·

The Karnataka State adopled' the second method and the legislation vi_z.,
the Karnataka Contract Carriages (Acqui~ition) _Act, 1976 was upheld by this
Court in .State of Karnataka and .Anr. v. Ranganatha Reddy. and Anr:, [1978]
I S.C.R~ 641.
G
The Tamilnadu State passed, the Tamil Nadu Stage Carriages and Con~

.
tract Garriages (Acquisition) Ordinance, 1973 which later toOk the shape of the
Tamil Nadu Stage Carriages and Con~ract Carriage (Acquisition) Act, 1973 •

The intention of the Act was to start the nationalisation schen1e in one H
district of the State first and then extend it to other districts .. Secti.on 1 provided

..
;726 SUPREME COuRt REPORTS· [1984) 1 S.C.)l.
tha! the policy of nationalisation shall come into force off the 14th January,
A 1973. Clause (iii) of sub-section (4) (b) of section J laid down that wit~ respect
to stage carriages in any other dist~ct -in the State,~ the Act will come into
fore:e on_ such dates as the GOvernmCnt may by notification_ appoint. Section 2
codified one of the clauses of the preamble by enacting a declaration· that the
Act was meant for giving e!Iect to the policy of the State towards securing the
principles specified in clauses (b) and (c)- of. Ariicle 39 of the Constifution and
the acquisitiOn in respect of the_ stage carriages and contract carriages and
B other properties i:C_ferred to in seCtion 4.

SectiOn 4, the pivot~!· section provided that on and from the date as
may be specified by the Government in respect of a·ny stage carriage Or contract
cartiage operator, the perinit issued to the operator shall vest in the Govern-
ment absolutely free from all encuinbrances and stage carriages or contract
c carriages whiCh vest in the Government, shall by fore~ of such ves.ting be freed
and discharged fi'om any trust, obligation and encumbrances etc. ,It was
further provided that any person interested shall have no clahn in relation to
such carriageS or contract carriages taken over by. the State in pur~qance of
the riationalisation Policy and the. clain1, if any, would be limited to the
- amount payable under the Act. Sub-section (3) of section·· 4 contained a decla-
ration that the veSting of the stage carriage·s and other properiies ·shall be
.o de~med to have _been acquired for a public pu~pose and in pllblic interest.

' SeCtiOn 6 provided for,a reasonable_ -amount or" cOmpensation to be paid 1
to the operators· on their properiies vesting in the Government. Where the
amount can be fixed by agreement, the same shall be detern1i11ed in accordance
· wi'th the agreement and in other cases .by an arbitrator appointed by the
E Government. · Se.ftion 1-2 ·provided for "an appeal to the High Court against
the award of the.arbitrator .

., The schedule to the Act fixed the sc3.le of compensation enunciated the
piil?-ciples ori , \Vhis;h it wks to be awarded and contained the guidelines for .
its payment.
F The· operat6rs whose stage carfiages were taken' over by the State
Government.assailed the constitutional_ validitY"of the Act in their writ Petitions
in the ~ligh Court. ...

·The High Court held that the·Act was ultra vires Articles 14 and 19 of
the Constitution as it did not fciH within the scppe of Articles 31 C, and that
G by viftue of~ the Act _the financiers who were the owners of .the stage or
contract carfiages would be compl.etely wiped out of their business and that
therefore Article· 19 was clearly· violated. It further held ihat the objects of
Article 39 (b) & (c) have not bee_n subserVed and, since the vehicles taken over
by . the State under ·the Act were moveable properties A.rticle 39 was not
applicable.
H \
In appeals 'to this .COurt it was· .contended on beh~lf of thC State·that_ the
Act squarelY ·rell within the protective umbrella of Article 31C inasmuch as
TAMIL NADU V. L. ABU 727

in pith and substance, the Act sou1Zht to subserve and· secure the objects ~
contained i~'ciauses·(b) and (c) of Article 39 and was, therefore, fully prote- .A
· ctcd from· the onsiaught of Articles 14, 19 and 31.o1- The provisions of the Act
are almost in pori materia with the ·Karnataka ContraC~ Carriages (A_cquisition)
Act. 19 ,6, which has been upheld by this -Court._ On the other hand, it was
contended on behalf of the operators (ReSpondents · in the appeals arid peti-
tioners in the writ petition) that the manner in_wh_ich _the transport services
had been nationalised under the Act did not fall within the ambit of Article
39 (b) and (c) as, the buses or the vehicles were nOt an integral part of the ll ·
policy of nationalisation. If the Act had nationalised the transport services
..:without taking over the units and the workshops, etc, then the operators could
have had something to fall back upon to earn their livelihood. Complete
deprivation of livel1hood by the Act amouhted to a confisCatory piece of '
legislation and therefore void.

Allow'ing the appe.a1s and dismissing the writ petitions : c
HELD : The Tamilnadu Stages Carriages and Contract· Carriages·
(Acquisition) Act 1973 is constitutionally valid. [766 A]

1. ·By and large ~he p~~visioris of the t~o Acts viz. -.the Karnataka Contract
carriage (Acquisition) Act, 1976 ·and the Tcimil ~adu Stages Carriages and D
Cont_ract Carriages (Acquisition) Act, 1973 appear to be identical in many res-
pCcts and the general structure and the fu0dameiltal features of the two- Acts are
almOst same. In view of the clear decision of this Court regarding the consti-
. " tutional validity of the Karnataka Act, very little survives so far as the
arguments. in this case, advanced on behalf of the resporidents are concerne~.
Further the three important decision in Minerva Mills, U'aman Rao and Sanjeev
Coke Manufacturing cases, "reinforce and rejterate the conclusions reached in
the K.arnataka case .. [751 F, 752 D·EJ

2. · (i) There.appears to be complete unani~ity of judicial opinion on
the point that although· .th.e directive principles are not eriforceable yet ·ti1e
court shbuld make a real attempt ~t harmonising and reconCiling the directive
principles and the fundamental rights and any collision between the twCJ should F
be avoided as far as possible. [736 BJ

(ii) Whereas in the 2sth A:Uend111ent, the protective umbrella given by'
Constitution w~s restiicted to la,ws passed only to promote objects in Cls. (b) &
(c) or Art. 39, by virtue of the 42nd Amendment the limitations which were
confin.ed to Cls. (b) and (c) of Art. 39 \\ere taken away and the Article was G
given· a much wider conn.otaiion by legislating. that Acts or laWs giVing effect
to all or any of the principles laid down in part IY of the· Constitution would
be protected by the umbrella contained in Art. 3l C and would be immune from
. challenge on. the groun~ that they were violative of Art. 14 or· i"9. [738 c:D]

(iii 1 From a combined reading of Bharati's and Minerya Mills' cases as .H
also of the subsequent decisions,_ the undisputed position is that Art._ 31C, as
introduced by the 25th Amendment, is constitutiOnally valid in.all respects.
• [738 G-Hl
128 SUPilEME COURT REi>ORTs (1984] t s.c.it.

• 3. An importa~t facet Of Act 31C, is that there sh"ou1d be a close nexus
A .between the statute passed by the legis_lature and the twin ·objects mentioned in
clauses (b) and (c) of Art. 39. The doctrine of nexus cannot be extended to
suCh an extreme liniit that the very purpose of Art. 39 (b) and (c) is .defeated.
By requiring that thete should be nexus ~etween the law and .Art. 39 (b) what
is- meant is that there must be a reasonable connection between the Act passed
and the objects mentioned in Art .. 39 (b) and (o) before the said Article can
apply. If the nexus· is present in the law then pfotection.of A.rt. 31C becomes
B coTplete and irrevocable. [739 F-740 A] . . • •
·State of Kera/a & Anr. v. N.M.· Thomas & Ors.. [1976] 1 S.C.R. 906 at 99~
to 996; His Holihess Kesavananda Bharati Sripadagafaveru v. Slate of Kera/a,
[1973] Supp. S.C.R. I; Minerva Mills Ltd., & Ors. v. Union of India & Ors.,
[1981] I S.C.R . .206 at 261; Waman Rao & Ors. etc. etc. v. Union of India & Ors.,
C [1981] 2 S.C.R. I at 41; and Sanjeev Coke Manufacturing Co. v. M/s. Bharat
Coking, Coal Ltd. & Anr., [1983] I S.C.C. 147/160, referred to. ·

4. In a cas~ wheie Art.· 31C a~plies, Whether~compensatiOn is nece~sa;ily.
to be Siveti, has the following ~acets :- '

D
(l\) if Art. 31Cis taken, to exclude Art. 31 (2). the.question of ..
compensation becomes ·irrelevant and otiose, [741 DJ

(b) nationalisation of transport service by the Stat(1 is unobjection-
able and unexceptionable and can be accomplished in three
different fuethods :- ·

E (i). nationalisation of servi~es and· not units thereof: (741 EJ

· (ii) nationalisation of the services <ilongwith the entire assets
. ··of the units, and· [741 FJ

(iii) nationalisation of the·services and part of the assets ·of
· · tlie units of the operators. [741 G
I
F
In the instant case, the State of Tamil Nadu has taken recourse t,o
method (iii) above, i.e.· it has n·Rtionilli~ed the' entire transport serviCe as also ·a
part of the entire assests oi the units thereof.· As nationalisation is a policY
decision, an enquiry·into the policy or' the legislature or the considerations
gove;ning the sanle, cannot be:made by the courts unless the policy· is so absurd
G ·as to violate the provisioris of the Constitution. In view of Art. 31C, the court
cannot strike down the Act-merely because the Compensation for taking over
the transport services or its.units is not provided for. ·The -reason for this is
.that Art. 3tc'was not merely a.pragm<\tic a:pproach to socialism but imbibed a
theoretical aspect by Which all means of production, key industries, mines,
minerals, public supplies, utilities <ind services may be taken gradually under
H public ownership, ina.nagement and control. (7~1 H-74i' BJ

Akadasi Padhan v. State, of Orissa [1963) ·Supp,(2) S.C.R. 691, referred
·.to.
'!'AMIL NAbU JI. L. ABU 129
5. From.a perusal of Bharati's a,s· alsO Karnalaka cases the following
'principles for assessing compensation after the amendment of Art'. 31 (2)' by A.
substitution of the wo!d 'amount', .emer~e :

(Ir that compensation~should Dot be arbitrary or illusory,
J- (2) that the amount. fixe4 · as compensation ·sboul? not
uilprincipled,
be

B
(3) that the compensation songht to be paid should not be so
· arbitiary or illusory as to be unconscionably, shocking, an~

... (4) it is not ne-ceSsary that compensation must represent ihe.actllal
. ma~ket value or b;e adequate for even if coµipensation: is
inadequate but not _illusory, the requirement of Art. 31 (2) is
fully compiled with, [755 E-H] ..
c
In the .instant case, on: the question of compensation the relevant sections
of the Act are completely io accordance with the prinCiples enunciated abo'e:
and hence the argument of the counsel for .the respondents that the compen-
sation is wholly inadequate or illusory must be overruled. [756 A] D
6. (i) .The compensAti'on awarded QJ'. the· pri~Ciples ·.coDtained in the
various sections of the Act are not illusory but amount to 'a Just and sufficierit
' compensation to the operators whose properties are taken away. In fact, it was
.to ineet s.ucb situations that Art. 31C was introduced so that any obstacie restil-
ting iD evil consequence to the operators.or- persons Whose prOperti~s are taken
over is completely .removed• [757 BJ E
•
Jn the inst3.nt Case,.the State ·has nationalised the stage and contract
carriages for the purpose of providing a general. and expeditious transport at,
reasonable rateS to the members of the public and such a policy is undoubtediy
i.n public.interest and involves a_n important public purPose .. [758 F]

(ii)' Art. 39 (b) does not mention either move'al;lle or ·immovable property.
F
The actual expression used is •material resources Of the commu-nity'. ''Material
resources" ·are wide eilough to cover' not only natural physical resources
but also moVeable or immoviible prope!ties. :[759 E}

7. (i) If the State chooses to monopo1ise trades in, certain f:Ssential
commodities or properties, th~ purposes mentioned in Art. ~9. (b) ·& \c), Art. G
3l (2)" wou,Id -be completely ex-eluded;- otherwise no State monpoly is_ ever·
possible. It was for this reason that Parliament thought it advisable to prbtect
the ·objec\s cont~ined in. Article 39 (b) & (c) from tfie purview of Art. 31 (2).
. . [761 D'.F].

(ii) Article 31 (2) by virtue· of the 25th Ame~dment omitted the word H
'cotilpensation' and had -substituted the word 'ainount' which gives ample
. discretiori to. the State to fix a reasonable amount if the prOpei:f:y of an individ-
ual is taken over for a public purpose. The court in such matters cannot
730 SUPREME COUll.t REPORTS [1984) 1 s.c.R.
interfere.with the amount so fixed unless it. is .shown to the court's satisfaction·
A that the amount fixed is so monstrous as to shock~ its conscience. £761 G 762 A]
4

·8. The persons whose properties are taken over cannot be heard to
·complain that the compensation awarded to the1n should be according to the
market value which, if conceeded, would defeat the very purpose and objective
of.Article 39 (b)
. . - .
& (c). The principles that emerge are.
.
'"" .
. (I) that in view of the express provisions of Art. 31C which·
excludes Art. 31 _(2) also, where a property is acquired ,in_public
interest for the avow"ed purpose of giving effect to the
principles enshfined in Art. 39 (b) & (c), ·no cofnpensation is
necessary and Art. 31 (2) is out of the harins way, and
c ·'•
(2) That even if the law provides fOr cOmpensation, the' courts
cannot go into the details or adequacy of the compensalion
and it is sufficient for the State to 'prove that the compensation
was reasonable and not monstrous or illusory so as· tO shock.
the conscience of the court. [762 E;·_C-DJ
D
In the instant casi:, both the conditions mentioned above are- fully
satisfied having regard to tlie proyision ~i the· Act.• f.'",'62 FJ

9. It Will not be correct to construe the word 'distribution• in a purely
literal sense so as io mean only division of a particular kind ·or , to particula_r
E persons. The words, apportionment, allotment, ~llocation, classification, ·
clearly fall within the broad sweep of the word 'distribution'. 'so construed,
the word 'distribution' as used in the Art. 39 (b) will include various facets,
aspects, inethods and terminology of a broad-based concept of distribution ..
The word 'distribUtion' does not merely mean·that Property of one _should be
taken oVer and distributed to others like land reforms where the lands from the ·
bi"g landlords are taken away and given to landless -labourers or for that matter
F the_ various urban and rural ceiling Acts. That is only ·one of the modes of
.distribution but not the only mo<\e. [763 G-764 A]

In the instarit case, distriQution is undoubtedly there though in a .
different shape. So far as ·the opefators were concerned they were n1otivated by -·~
mal\ing huge profits and were most reluctant to go to villages or places where '
G the passenger traffic is low or the track is diffic.ult. This naturally ca"used serious
incO-nve:qience to the poorr-111em,bers of the Community who weie denied ·the
facility of visiting the towns or other areiis in a transport. By nationalising the
transport as also the units the vehicles would be able to go to the fafthest cor-
ner of the State and penetrate as deep as possible and provide better 3.n!i quic-
ker and more efficacious facilities. This would undoubtedly be a distribution
H for the common good of the pepple and would.be clearly covered by cl. (b) of
Art. 39. [764 B-C] . '
·TAMIL NADU V. L. ABU 731

JO. Once a poliCy of nationalisation is in public interest 3.nd for public
good, some losses, some dtlmages, SQme .prejudices and some harsh conse~ A
quences ·are bound to follow. but this does not mean that· the aforesaid
considerations should result in a stalemate of the pOlicy Or State monopoly ·or
nation~lisation. f756 HJ

C1v1L APPELLATE JURISD.!CTION : Civil Appeal Nos. 957-966(N)
of 1973 and 435-442 of 1976. B
From the Judgment and Order ·dated the Z4th April, 1973 and
19th Ap~il, 1973 of the High Court of
Madras in Writ Petition Nos.
• 1647, 1900, 1466, 1557, 1559, 1527, 1256, 1488, 1584 and 1585/73
and 741, 157, 132, \23, 288, 1486,l528 and 876/1973 respectively.
c
'
AND
•
Writ Petition Nos. 8818 of 1982 and 312-313 of 1979.

(Under article 32 of the Constitution) - D

S.S. Ray, R.K. Garg and A. V. Rangam for the Appcllailts.

Vineet Kumar fer the respondent No. I in CA. Nos. 965, 966,
437 & 439.

· G.L;Sanxhi and Miss Lily Thomas for the respondent No. in
CAs. 957 & 962 & W.P. No. 8818/82.
-
K.K. Venugopal; A.K. Sen, A.T.M. Sampath, M.N. Ranga'chari,
S~ Srinivasan and Mahabir Singh for the respondent No. I in CAs. F
.
959, 960-961, 963, 964 &.Respd No. I in CAs. 435-42/76.
.
·1 J. Ramamurthi for the respondent No. 1 in C.A. No. 438.

A.T.M. Sampath for th,e petitio_ners in WPs. 312 & 313/79. G
K.G. Bhagat Additional Solicitor General Miss A. Subhashinl,
T. V.S. Narasihma Chari and C. v. Subba for the interveners. (For.
· -Att. Gen!).
H
A. V. Rangam for Eherran Transport .

•
•

732 SUPREME COURT REPORTS .
(1984] l .S.C.R.

A.TM. Sampath, M.N. Rangachari, S. Srinl1•asan and Mahabir
A Singh for K.A. Kanappa Chetty & T.R . .Subhraj.

B. Parthasarthy for Adv. Genl. Orissa and Cherran Trarisport
Employ.ees Union..

B Ashak Grover for Adv. Genl. J & K.

A.K. Sen, A.il'.M..Sampath and[(. Ram Kuinar for D. Kannia
Pillai, M/s. Sundaram Finance 'P.T. Krishnan an"d S.K. Nandy for
State of Assam. ·' ·

c The Judgm~nt of the Court was delivered by.·

. . FAZAL Au, J. One of the planks of building an egalitarian
society in order to achieve socio·economic emancipation is the policy
of nationalisation of industries. Easy, cheap and dependable lrans·
port is a prime social necessity. Unfortunately, no State has beeb.
D able to achieve 1his goal so far .by a full-fledged nationalisation.
Reliance is largely placed on schemes framed under Chapter IV·A
of the Motor Vehicles Act.

Perhaps Karanataka was the only State wliich having become
E 'sadder and wiser' took the lead in enunciating the bold step of
complete nationalisation of the entire transport industry but, unfor·
lunately, ii .has not yet been able to implement it fully.

There are two methods by which the transport industry can

F
·be nationalised :--
. .
(l) where the Government acts under Chapter IV A (s.68 (b)
&(c) of the Motor Veliic!es Act) and after due pub!i~ation formu· ·
!ates a scheme for taking over route or routes and invites objections -+
, thereto. After the objections .have been received they are decided
G and :ultimately processed. This method ·however is dilatory and
involves a time consuming process which leads to delaying tactics
. adopted. by the operators. Even so, after the objections have .been
decided,· the operators or the persons concerned are not satisfied
but go up in appeals to the law courts: · These delaying tactics
H have resulted in most . cases in. an: indefinite postponement Or the
, scheme of nationalisation. Moreover, normally this process is

• . .
TAMIL NADU ~- L. ABU (Fazal 'A.Ii, 1.) 733

applied to a. route or routes selected by the Government and is
accomplished by stages which also takes a long time . A
.(2) Another method which is the· more effective one is to take
J~ . over 'the running of the entire transport services by nationalising
them, alongwith their units (vehicles, workshops, etc.) either by one
strok-e.or by stages·. spread· over· a short time. This cours~ is clearly
permissible under els. (b) & (c) of Art. 39 of. the Constitution· as ·B
would
. be discussed
. .
in a later part of the. judgment.

The Karnataka State tried th.e second method and succeeded, .
• to some extent, but ran into difficulties for one reason or the other. "
The Tamil Nadu State following the Karqataka 'pattern passed the
impugned Ordinance, which later took the shape of the Tamil Nadu
c
Stage C11rriages and Contract Carriages ·(Acquisition) Act, 1973
. (hereinafter referred to as the 'Act') to nationalise the State transport
industry by stages. The Madras High' Court sta~ed the operation
of the Ordinance as also the Act and declared void all Its ptovisions,
-As a result, nationalisation of transport became a still-born child D
and its progressive policy was stifled the day ·it was put into action.

It is this judgment of the High Court which is the subject
· matter of appeals and writ petitio~s .before us. The Madras. High
C0urt declared the Act ult1a vires as being violative of Arts. 14 and
19 of the Constitution as it did not fall within the protective E
umbrella contained in Art. 31C and on a number of other grounds
which-would be examined hereafter.

It is manifest that the attempt of the Tamil Nadu legislature
to·give effect to the principles enshfined in-Art.39(b)&(c) would have
.secured the socialist objective aimed by the Constitution in order to F
build up an egalitarian society. By virtiie of complete nationali-
sation the numbers of the public or the community would. have got
much better and greater facilities than afforded to them by tbe
private operators runnfog vehicles ·under permits. Secondly, the
efficiency and· efficacy of ihe· services would ·undoubtedly m~ke a
'marked· improvement in the manner and method of running ,the
) vehicles as compared to the Services run by private . operators:
/ Thirdly, prior to the passing of the Act, the entire services were
actually run behind the screen through - varioqs financiers in ·the
name of the operators with whom they had entered into hire-
purchase agreements. This obviously led to concentration of wealth
in the .hands of a few. With the coming into force of the total
•

734 SUPREME COURT REPORTS [1984) 1 S.C.R.

nationalisation scheme,. this device of concentration of wealth would
A l;>e completely nipped in· the bud resulting in an equal distribution
of wealth and services among the people of the country. Fourthly,
the private services run by. the operntors mainly inspired. by profit
making motive neither had the will nor the capacity to penetrate as -\
deep as possible into areas so far iaaccessible to the travelling public
B and would confine their running of tb,e services only to serve impor-
tant points. \Vhen the State takes over the entire transport services,
it WQUld ·undoubtedly be its duty to see that the vehicles reach the
most distant part or corner oft.he State and serve as many travelling
. public as possible so that nobody is· caused any inconvenience. These
are.some of the in\tial advantages of a total na.tion.alisation scheme,
c which would be brought to the fore and provide an ideal service
for the members of the community at large.· Jt.may be that in this
process some financiers would suffer loss and some operators may
also be wiped out of the Jiusiness but this cannot be helped as the
scheme of our Constitution is that Individual rights or benefits must
yield to the larger benefits and good of the entire community. Some
n of ihese points were very elaborately d~ali with in the case of State·
. of Karn ataka & Anr. etc. v. Ranganatha Reddy & Anr. · etc.( 1) (for
facility, hereinafter referred to as 'Karnataka case').
f
The Act wa' for the purpose of carrying out and impleuienting ·
E. the objects specified in Art.39(b)&(c) and was,. therefore; immune
from ·challenge on the ground that the Act or its provisions were
violative of Art. 14, 19 or 31. This was accomplished by virtue· ~f
Art.31 C, introduced by the '25th Constitution Amendment, which.
gave ~ protective umbrella to such acts so as lo exclude them from
,.
the operation of Arts.14; 19 or 31. Before dealing ·with the provi-
F sions of the Act we might give a resume of the importance and
significance of the directive principles contained in Art.39(b)&(c).
which may be extracted thus : ·
•
"39. The · State shall, in particular,' direct its policy
G towards securing-
•
(b) that .the ownership and control of the material
resources of the community are so distr'ibuted as best
to subserve the common good;
H
(1) , (1978] I SCR 641. •
,,
TAMIL NADU v. L; ABU (Fazal Ali, J.) 735

(c) that the operation of the economic system does nof
result in the concentration of wealth and means. ·.of A
production to the common detriment."

We would not like to tread on the difficult and delicate ground
as to whether or not the directive principle or the fundamental rights·
have primacy over one or the other. Nevertheless, it would appear
B
that right from 1959 uptooate this ·Court has stressed and empha-
sised the importance of directive principles in a numb~r of cases,
some of which may be listed below :

(a) Mohd. Hanif Quareshi & Ors. v. State oJ Bihar
(1959 SCR 629 at 648) c
(b) In Re the [(lira/a Educatiol} Bill, -1957 (1959 SCR'
995 at 1020, 1022)
,
(c) I.C. (iolak Nath. & Ors. v. State of Punjab & Ors. _D
(1967 (2)SCR 762 a! 789-790)

(d) - Chandra Bhavan Boarding & Lodging, Bangalore v.
The. State of Mysore & Ani'. · (1970 · (2) SCR 600 . .•
at 6J2) . · ·
E
(e) His Holiness Kesavananda · Bharati Sripadagalaveru
v. State of Kera/a (1973 Supp. SCR 1)

In State of Kera/a & Anr. v. N.M. Thomas & Ors.(1 ) one of us
.(Fazal Ali, J) reviewed the earlier cases and has collected the ratio
of all the decisions on this point at one place1 F
-}

In recent decisions on the. subject the view that has crystallised·
• is that the courts should attempt to give a harmonious interpretation
to the directive principles contained in part IV of the Constitution
even though not enforceable. Attempt should, therefore, be made .G
• to reconcile the two ·important provisions rather than to arrive at
. / ,j -
conclusions which -bring into collision these two provisions-one
contained in part III and the other in part IV.· We must appreciate
tliat the reason why the -foundinK ·fathers of our Constitution' did
not advisedly make these· principles· enforceable was perhap~ due to H

.
tlie "vital 'considerat.ion' of giving the Gover!'menf sufficient latitude.
.
(I) [1976] I SCR 906 at 993 to 996•.
736 . SUPREME COURT REroRTS ... (1984] 1 S,C,R. ,
•
· to implement these principles from time to time according to
A capacity, situations· and cfrcunistances that may arise .

.. On a c~reful c.onsideration of the legal and historical aspects· ·
of the directive principles aii.d lhe fundamental rights, there' appears . ,. ·~,
:·to he complete unanimity of judici~I opinion of t]1e various decisions
· B of this Court on the point that although the directive prlncipies are. \- .•
-nQt enforceable yet the court should make a· real. atiempt at harmo·
nising and reconciling the directive p(inciples and the fundamental
rights and any collision between the two ·should be.avoided as far as
possible. · ·

-C . In ti)e instant case, we are really concerned with the. ~econd
· limb of the Constituti<:m, · viz., the Importance and significance of "\ •
. the directive principles contained in part IV. We now propose to
discuss the purport, signific~uce, scope, ambit and rationale of
Art.31 C, which may be extr~cted thus ::
.I)
"31C. Saving of laws giving effept to certain directive principles

.. · Notwithstanding anything contained in article 13,
no law ·giving effect to ihe policy'• oi' the .State towards
securing all or.any of the principles la,id down in part IV
E shall be (jeemed to be v'o-id on the ground that it is.
·inconsistent with, or takes away or ..,bridges any or' the
rights' conferred by article 14 or article 19; and no law
containing a ·declaration· that it is for giving effect to ·.
such policy shall be· called in question in any court on ·
the ground that it doe_s not give effect to such policy :
F
· Provided that where such law is made by the legis-
lature. of a St~te, the. provisions of this article shall not
apply thereto unless such law, having been reserved for +
the consideration of the President,. has. received his
G .assent."

· A brief setiing and origin of this Article is contained in the.
Obj~cts and Reas(mg of the Con.stitution (25th Amendment) Act, ·
1971, .,;hich show that· the amendment was introduced with the
main. objective of getting over· the difficulties· placed in the wP.y of
$ivin(l effect to the c:ljrective prinCiples of Stat~ policy~ ~
·.
TAMIL NADU V:'L, ABU (FtizalA/i, J.)
• .737

It is manifest from- a bare re.ading of the newly added .Art.3\C
· that any law effectuating the policy of the State in· order to secure· A
'
or.comply with the directive principles specified in clauses (b) and
'
. fC.. (c) of Art)9 would not be deemed to·be void even if it is inconsis-
.----1' . tent with or vi 0 Jates Arts. 14, 19 or ·31. It wasfnrthe« provided·
that any law which contains a declaration that it was put on the
statute book for giving effect to such a policy, the same coyld not B.
be called. into qu·estion in any court on the ground that the new·
law does n_ot give effect to the. policy. In other words, the_ position.
, was that once Art.31C was put' on the statute book, the question of.
any law being in . violation or infraction Of the fundamental rights
I contained in part III (Arts.14, 19 and 31) ' ceased t~ be justiciable.

· Art.31C further provided ihat where a ·1aw is inade by the legislature . · C
a. of State, the pr~visions of this Article would . apply only if the law
had received the assent of -the President of India. We might mention
·here that it is undisputed in the instant case that the impugned law .
had received the assent · of the Presihent and is, therefore, fully ·
enforceable in -the State of Tamil . Na du if it fulfils the conditions D
of Art. 3 t C, whfoh it doubtless does. A . ~ubstantial part of . this
amendment appears to have ·been held to be valid by.a majority of
7:6 in His Holiness Kesavan_anda Bharti· Sripadaga/averu v. State of
Ketala(') (he~einafter referred to as 'Bharti's case'), but a portion. of
Art.3 IC was held to be invalid. · ·

While-consdering the scope,' ambit and cons.titutional. validity
of Art.31C, the majority judgment 'in Bharati's case (supra) held
that the first part of Art. 31 C was valid but the second part, vi~ .• ·
'.'and no· iaw containing a declaratipn that if is for giving effect to
such policy shall be called in questio!' in any court on the ground
F
that it does not give effect.to. such"policy" was held to be Invalid .
.In other· wotds, so far as the .present aspect of the case before us
is concerned, the majority judgment clearly held that while Art.3 lC .
permitted Parliament to make .any law giving effect t~ the policy. of
· the State towards securing the principles contaitted}n els. (b) and
(c) of Art.39, such . law could not be declared· void even if such a G
c!lurse of action violates or. abridge any of the . rights conferre9. by
) Art.' 14, 19 or 31. · ·
r·

Anolher cr'ucial- stage in the history of Art.31C arose when
the famous 42nd amendment of the Constitution was passed by the

. (I) [1973} Supp SCR l..
738 SUPREME COURT REPORTS (1984) 1 s.c.R.

Parliament. By virtue of this arriendinent a complete, irrevocable
A and impregnable constitutional' protection was given to Jaws passed
. not only to implement die principles· specified in els. (b) & (c) of
Art.39 bnt also the principles contained in all the clauses of Art.39.
However, to put the record straight and to complete the history of ·~
Art.31 C we may briefly indicate the distinction between the .25th •
and 42nd amendments thus :
B
Whereas in the 25th amendment, the protective. umbrella given
:·by the Constitution was restricted to Jaws passed only to promote
objects in els. (b) & (c) of Art.39, by virtue of ihe 42nd amendment
tbe limitations which were confined to . els. (b) and (c) of Art.39
c were taken away and the Article was given a much wider connota-
tion by legislating that Acts or laws given effect to all or ·any of
the principles laid down in part IV of the .Constitution would be
protected by the umbrella contained in Art.31C and would be
immune from challenge on the ground· that they were violative· of
D Art.14 or 19.

Even so, in Minerya Mills Ltd. & Ors. v. UniOn of India &
Ors.,(') one of us (Chandrachud, CJ) while referring to the ratio of
Bizarati's case on the unamended Art.31C observed as foJlows:

E ~'Indeed, if there 'is one topiC on which all the
· 13 Jud~es.in Kesavananda Bharati were agreed, it is thiS:
that the only question open to judicial review under the
unamended' Art.3/C was whether there is 'a direct and
reasonable nexus betwee~ the . impugned laiv and the
F. pro.visions of Art.39(b) and (c). Reasonableness is regard-
ing the nexus and not regarding the law." • ' "" -
(Emphasis ours) t
•
Thus, it would appear from a combined· reading of Bharati's
and Minerva Mills cases as also of the subsequent decisions·. that the
undisputed position is that Art.3 lC, as. inti:oduced by the 25th
amendment, is constitutioryally valid in all respects .and has survive\\
the stormy decision of Bharati's case. •

(1) {198.lJ I SCR ;!06 at 261,
'i'AMiL NAOU v. L. ABU (Fazal Aii, J.) 739
Similar observations were inade in Woman Rao & Ors. etc.
v. Union of India & Ors.,(1) where one of us (Chandrachud, CJ) A •
observed thus : ·

"Article 31 is now out of harm's way. In fact, far
from damaging ·the basic structure of the Constitution,
laws passed truelY and bona fide for giving 'effect ti) dire• • ·
ctive principles. contained in clauses (b) and (c) of Article B
39 will fortify that struciure." ·
•
(E!i:nphasis supplied)

In the latest Constitution Bench ·decision of this Court in
Sanjeev Coke Manufacturing Co. v. M/s. Bharat Cokinz Coal, Ltd.
c
& Anr.,(') it has 'been emphasised that the constitutional. validity
Of-Art.31C is now beyond challenge and in this 'connection one of
us (Redd;y, J.) speaking for the C,ourt made the folio.wing
· obser~ations .:
.D
"In the second place, the question of the.constitu·
tional validity of Art.31C appears to us to be concll!ded
:-,; by the ·decision of' the Court in Kesavananda Bharati
case."
E
In view of t~e aforesaid decisions, it is not necessary for ·US
to dilate further on the question of the constitutional validity of
Art.31C.

Another important facet of Art.31C which has been empha·
sised by this Court is that there should be a close nexus· between F
the statute passed by the legislatur~ an'd the twin objects .mentioned
in clauses (b) and (c) of Art.39. In approaching this problem and
considering the question· of nexus a narrow approach ought ·not to
be made because it is well.settled that the 'courts should interpret
a constitutional provision in order to suppress tile mischief and
advance the object' of the Act. The · doctrine of nexus cannot be .
.G
extended to such a:n extreme limit that the very purpose of Art.39
(b)&tc) is d~feated. By requiring that there · should be qexus
- . between the law· and Art.39(b)&(c) w):tat is ment is that there must
be a reasonable connection between the Act passed arid the objects H
•
(!) at
[1981] 2 SCR 1 41.
c2> [1983] 1 sec 141/160.

'
140 ' SUPREME· COURT REPORTS [1984] 1 s.c.tt.

. mentioned ill Art.39(b)&(c)before'the said· Artfole can apply. If the
• .A · neimsis present'in the law then. the protection of Att.31C becomes
complete and irrevocable. .

F.utJ1ermore, the fact that there is. a declaration in the Act ·
regarding the purpose mentione in Art.39(b)&(~) may generally be -·· \
·evicjence of the µexus between the law and the objects of Art.39(b) '
&(c). : In this connecti9n, Iyer,J., in the Karnataka case observed.·
'• thus·: '·

"The requisite declaration co~temp1ated. in Article
31 C is thus made iri'the preamble as well as in section 2
of the Act...... . •.. T.he. nexus between . the taking of
:C ··property and the public purpose springs necessarily into .
.existence if the former is capable of answering the latter."

· There iS no particular magical tinsel or .ritualistic formula in
Jhe term 'nexus' . which 'may be closed in .a strait·jac~et. Even a
nationalisation scheme meant for. the purpose of distribution or
· preventing co.ncentration ·of wealth, as in this case, would be suffi.,.
cient nexus to· attract the. operation of Art.39(b)&(c). On this
aspect oftlie matter,· lyer,J. in the.Karnataka case further observed
thus : · t ·

"The next . question is whether natronalisation ·can
have nexus with distribution .......... To.'di.stribute'; even
in its simple dictionary meaning, is to, ·allot, to divid.e
into classes or into groups' . and 'distrilmtion' embraces
··'arrangement, classification, placeme11t, disposition,
• apportionment, the way in which items, a quantity, or
· the like, is divided or apportion~d; the ;ystem· of dispers- ·
ing. goods· throughout a community.''.

.In a 1aier decision in.Sanjay. Coke Manufacturing Co.'s case
(supra), adverting to tills very point, one of u·s (Reddy; J.) made the . f· .
.· )G following observations :

· "We ate firmly of the opinion that where Article· 31C
. comes i.n Ar.ticle 14 goes out.· There is no· scope for ·1....
_bringing in Article 14 by a side wind as it were, that 'is,
H by equating the rule of equality before the law. of Article
· .• · 14 with the broad egalitarianism· of Article 39 (b) or by
treating the principle of Article 14 as included in the
principle.of Article 39 (b)." · ·'

,
TAMIL NADIJ v. 1•. ABU (Fazal Ali, J.) 741
. ' . '

We might. no.w mention in passing · some important facets
of Art. 31C which we shall discuss in detail when we deal with the A.
var~ous provisions of the Act in the light of the reasons given· by. the·
High Court and· ihe contentions adv.ariced before us. At this stage,
suffi~e it to say that on a proper and true construciion of Art. 31C· in
the light ,of the decisions of this Court, the question of compensation
becomes totally irrelevant. If, once the conditions mentioned in Art.
3 lC are fulfilled by the law,. no question of compensation arises
because. the said Article expressly excludes not only Arts. 14 and :19
but also 31 which, l:iy virtue of the 25th amei\dment, had· replaced
the word 'amount' for·tbe word 'compensation( ·in Art. 31 {2). As
already extracted, Chandrach11d, CJ. in· Waman .Ra<>'s case has
observed that once Art. llC is;attracted, Arts. 14, 19 and 31 are out.·
of harm's.way.
c
. The question whether in. a case where Art. 31C applies,
compensation is necessary to be given, has the following facets ;..,-
'
(a) •if Art. 31C is taken, as it must be, tci exclude Art.
• 3 i "2), the question of compensation bec<imes · irrele- .
,.,. vant al\d otiose, . ·

(b) nationalis_ation. of transport services by the State is .
' unobjectionable and· unexceptionable ·and ·c~n be E
accomplished iri three' different methods;..... ~

(i) nationalisation of the services and not · the units
_thereof,
F
(ii) nationalisation of the services alongwith. the
· entire assets of the units, .and

• (iii) nationalisation of the .services and part of t)le
assests of the uni\S of the operators ..
G
1n the instant case, the State. of Tamil Nadu has taken recourse
to method (iii) above., i.e:, it has .nationalised_ the entire transport·
service .as also a part of the entire· assets of_ the · units thereof. It is
. obvious that as_ nationalisation. is a policy..decision, an enquiry .into .H
the policy of the legislature or the considerations governing ·the same
cannot be made by the courts unless the .policy is so absurd as· t-0
violate the provisions of _the Constitution:- In view of Art.. 3 IC,
?42 SUPREME COURT REPoRTS [1984) i.s.C.k.

which gives protective umbrella against Art. 31 (2) also, the court
A cannot strike down the Act merely because the compensation for
taking over the transport services or its units is not provided for.
The reason for this is that Art. 31C was not merely a pragmatic
approach io'socialism but imbibed·a theoretical aspect by which all .. ~

means ofproduction, key industries, mines, minerals, public supplies,
B ntilities and services may be taken gradually under public ownership,
management ·and control. ·

Even a~ far back ·as 1963 in Akadasi Padhan v. State of
Orissa,(1) Gajeiidragadkar, J., speaking for the Constitution Bench,
observed thus :
c '
.. "To the rationalist, nationalisation or State
ownership is a matter of expediency dominated by consi-
derations of economic efficiency and increased output of
production ..... .
•
The apendmerit made by the Legislature in' Art.
19 (6) shows .that according to the Legislature, a· law •
relating to the creation of State monopoly should be
presumed to .be in the interests of the genera!' public.
Art. 19 (6) (ii) clearly shows that there is no limit placed
E on the· power of. the State in respect of the creation of
State monopoly ... ,.. Iri ·our opinion, the amendment
clearly indicates. that State monopoly in respect of. any.
irade or business must be presumed to be reasonable. and
in the interests of general public, so.far as Art. 19 (!) (gj'
F is conc~rned."

Thus, even in 1963 the change in tl\e approach by the Supreme
Court towards social problems had come to be seriously felt so much
so that any policy of nationalisation of assets or State monopoly was
held to be so necessary to acquire the goal of building an egalitarian
•
.G
society as .to make the· restrictions contained in Art. 19 \I) (g)
reasonable. In other·words,.even if Art. 31C was not there, the
policy of nationalisation of transport services could be held. to· be
valid on the basis·ofthis decision and would not violate Art. 19,
H being a reasonable restriction. The major part of the spirit of Art. ·
. 3!C, w.hich was introdµced almost a decade ·after the above decision,

(!) (1963) Supp. 2 S.CR 691.
TAMIL NAl>U v. L: ABU (Pazal Ali, J.) 743

·was clearly anticipated and accepted in Akadasi Padhan'scase (supra).
and this Court in a way paved the way for more socialistic reform A
which niaf destroy any obstacle coming in the way of achieving the
important directive prh1ciples of the Constitniion. More than this
· we would not. like to say anything regarding this decision because
Arts~ 14, 19 and 31 are completely excluded by Art. 31C. The
provisions to validate laws made to secure the objects .in Art. 39 (b) B·
&(c) seem to be.the conclusive chapter of a humble beginnig vlith an
appeal to the courts to make a doctrinaire and pragmatic approach
in such cases.·

· Mr. Ray rightly argued that in view of the prov1s1ons of Art. ·
31C, the Act squarely falls within the protective umbrella of the said
c
Article inasmuch ~as in pith and substance, the Act seeks to subserve
and secure the:objects contaibed in clauses.'(b) & (c) of. Art. 39.and
is, therefore, fully protected from the onslaught of Arts. 14, 19· and
31. To counter the argument of Mr. Ray, S/S.hri Ashoke Sen,
Venugopal a~d Sanghi made two f~ld. submissions. In the first D
place ii was argued that the manner in which the transp.ort services
had been nationalised under the Act does not fall within the·
.,. ambit of Art. 39. (b) & (c) as the buses or the vehicles were
not an integral part of the policy of nationalisation. Secondly,
.Mr. Vonugopal submitted that if. the ~ct would have· nationalised
the transport services without taking over the units and the E
workshops, etc., then the operators could have had something to
fail back upon to earn their livelihood. Complete deprivation of
livelihood by the Act amounts to a confiscatory. piece of legislation
and therefore void. Although the arguments are attractive, on closer
scrutiny they seem to be without substance. Once it is held that the F
policy of,riationalisation 'of transport services is valid, which is no
.- ~ doubt an essential service and a type of a State mµnopoly, any co.nse·
quence that may follow cannot be taken into consideration·· otherwise
. no social reform can ever be brought about. All schemes 'of mono· ·
poly or nationalisation are meant to serve the public. good and
individual interests in such cases must.· yield to the. good· of the G
general public. Moreover, on ·a close examiriatioµ. of the argument
it seems to us tqat it is wholly untenable. The various provisions
of the Act clearly provide for a just and reasonable compensation
which may not be equal to market value of the units taken over but
cannot be said to be illusory or shocking to the consience of the H
court. ·
744 SUPREME COURT REPORTS tI984} l s.c.R.

Alth'ough we have found that Art. JI having been excluded no
A question of compensation arises, even sci it seems to us tMt the
courts while interpreting the policy of total nationalisation and being :
imbued With a keen sense of the doctrine of justice and .fair play
have projected the question of compensatio11 'in. a ·very ·limited sense . ··\
.~nd a:restiicted extent by· holding that the word 'amoOnt' merely

B means spme sort of a reasonable amount w.hich may or -.may not be
adequate in the circuriistances. .We feel that in view of the· explicit
and express provisions of Art. 3JC the question of compensation does
not arise at all and even if it does, t!)e matter is concluded by a ·
7-Judge Bench decision of this Court in the Karnataka case.

c Having dealt with the various aspects of Art. 31C, we now
proceed to examinC: the provisions of the Act in -the light· of the law
laid .do;.vn by this Court and the aforesaid conclllsions reached by us.
To being with, the Act gives a 'detailed preamble describing the. ends
.and. objects of the Act We might mention that in the first paragraph
D of the. pr 0amhle, cl. (c) of Art; 39 was not mentioned in the .
Ordinance but whel) the Ordinance was replaced by the. Act,• cl. (c)
of Art. 39 was inserted. A . perusal. of the various clauses of. the
preamble reveals that the legislation was a purely progressive measure
meant not to confiscate the property or destroy -the business of the
stage carriage operators but to take . absolute control of the State
E transport services.by stages in'various revenue dirtricts.

As already.indicated, the Act was preceded by an Ordinance,
contaii1ing identical·provisions, Which was issued on 12.1.1973.' The.
constitutional validity of the Ordinance was challenged in the Madras
F High Court arid ~bile the judgment of the High Court· wa~ pending,
the Ordinance wanepiaced by tbe Act on March 14, 1973. The
High Court struck down the Ordinance as being unconstitutional and
an interim. order was passed by which all the provisions of the Act
. were stayed, pending appeal to tliis Couri. : ome t~me in June 19'73,
. an interim order was passed by this Court by which tlie transport
G '·vehicles not taken over by the State were stayed from being taken
. over.

Coming to the provisions of ihe Act, it w~uld be seen that so ..
H far as s: I is concerned, it is more. or less descriptive with the only
·difference that 'as (ar .as the Nilgiri District is concerned, the
provision says that the policy· of nationalisation shall come into force -
·. the 14th of January 1973. In other. words, the intention
on ~ - of
. the
•·.. •
TAMIL NADU v. L. ABU .(Paza/ Ai;, J.) 745
AC! is to start the nationalisation scheme with the Nilgiri districl first .
and then extend it to .other districts as and when it becomes A
.. necessary. Clause (iii) of sub-cl. (4) (b) of s. 1 lays down .that with
respecno stage carriages in any oth~r district in the. State, the Act
will come into force on ·such date as the Gov~rnment. may by ·notifica-
tion appoint. Section 2 co<lifies one of the clauses of the prealiible
by enacting a declaration that the Act is meant for giving effect" to
B
·f the policy of the State towards securfog the·principles specified in·
els. (bl and (c} of Art. 39 of the Constitution and the. acquisitfon in
respect of the stage carriages and coniract carriages and other proper-
ties referred to fo. section 4. .After the Act was passed,. by virtue of
the decision in the Bharat i's case whatever may have been the legal
status or position of the directive principles so far as dauses (b) & (c) c.
of Art. 39 are·concerned, they were held to be constitutional-and any
Act passed to enforce these_ principles clearly. fell within the protective
umbrella of Art. 31 C ·and was therefore immune from challenge. We
have.already adverted to thi.s aspect of th.e matter heretofore.
D
Sub·s. 2 (a) of s. 2 provides that the acqu1s1t10n of the stage
carriages _shall commence with the districts wherein .-comparatively·
fewer number of. stage carriages were -operating. This provision
appears to have been incorporated in order to cause the least possible
inconvenience to the bus operaiors so that the op~rators·~f tM other.
districts were the nationalisation of the scheme has not been enforced . E
may make due preparations and alternative arrangements in case the
concerned ·districts are also included ,Jn the nationalisation scheme by
virtue o(the notifications issued from time to time under the Act.

Section 3 orily gives the denuitions of the various expressions F
u.sed in the Act and, for the time being, it may·not be necessary for
us to give a detailed description of els. (a) to (s) of this se~tion.
. . .
Section 4, which is the pivotal section, provides that on and ·
from the date as may be specified by the ·Government in respect of
· any"stage carriage or contract-carriage operato~; the permit issued to G
the operator shall vest in the Government . absolutely. free from all
encumbrances and such carriages or contract carriages, which vest'
in the Government, shall by force of such vestipg be freed and dis-
-· charged fram any trust, obligation and encumbrances, etc. · In other
words, the intention of the Act was tha_t While nationalising·the ·state H
transport services . the State should not .encumber itself with th~
liabilities. that may have been incurrecl by th~ .bus ope~ators ·prior· to
746
• •
SUPREME COURT RBPORTs l19841 i s:c.ll..
the enforcement of t4e Ac! so that the policy of nationalisation may
A run smoothly and without any obstruction or obstacle. At the same
timl:, s. 4 also provides that any person interested shall have ·no claim
. in relation to such carriages or contract carriages taken over by the ..
State in pursuance of the aforesaid nationalisation policy and the
claim, if any, would be limited to the amount payable in respect of
such stage carriages or contract carriages as provided under the Act.
B
Sub-s. (2) of s.. 4 lays down an important sa'feguard that all ·rights,
title and interests of the stage carriage oper.at.ors or contract carriage
operators, including'·lands, buildings, workshops and other places,
stores, instruments, machinery, tools, platits and other equipments
.used in connection with the service of these carriages would also vest
c in the St.ate.

There was a serious controversy regarding .this prov1s10n and
it was vehe~entiy attack~d by the counsel for the respondents on tbe
ground that this is a very hlfrsh and strident provision of ·the Act
which completely. destroys not only the fundamenta.1 right of .the
D operators but also the right to equality under Art. H. Even if Art.
14 or 19 apply, the vesting of machillery, tools, etc., which were the
pers~nal. property. of the operators meant to carry on thei.r business,.
·would amount ·to a confiscatory piece of legislation. We shall . deal
with this aspect of the case when we consider the various contentions
E advanced before us by counsel for both the parties. At this Stage,
it is sufficient to remark that e,ven the books of account, registers,
etc., would vest in the Government on the issue of the notification
and all hire-purchase agreements and transaction, etc .. would be
deemed to have been withdrawn. The main object in enacting this
provision is that when .the Government :decides to· nationalise the
F tran11port services or its units; all the means of business should. vest in
the Government so that after the vesting the Government does not
· feel itself bound by any commitment or contracts made by the
operators which' might make the policy abortive as a result of which
the schemeof nationalisation itself may Fun into rough weather.

Silb-s, (3) of s. 4 contains a declaration that the vesting of-the
stage carriages and other properties shall be deemed ·to have been
. acquired for a public purpose, that is.to say, acquisition of not only
'the stage carriages or the contract carriages used by the operators but
H also their tools, implements and workshops would be in public interest
in· order to prevent any legal or constitutional objection being .taken
against the various moveables which by virtue of the. provisions of
the Act vest in the Govefnment. ·
TAMIL NADU v. L. ABU (Faza/ Ali, J.) . 747

Section 5 contains provisions of a routine nature regarding the
· submission of accounts, agreements, inspection by Government A
officers, furnishing of data and details and the like. . Another impor-
tant provision of the Act is section· 6 Whi~h pFovides for a reasonable
-"mount of compensation to be paid to the' operators on their proper-
ties vesting in the Government. Sub-s. (I) of s. 6 says that every
person interested shall be entitled to receive such amount.as may be B
determined in the second schedule to the Act, that· is ·to say, where
.the amount can be fix~d by agreement, the same shall be determined
.in accordance with the agreement. Secondly, where no agreement
can be reached, the Government shall appoint a.s arbitrator a person
who is or has been or is qualified for appointment as a District
Judge. While appointing an arbitrator, the Government may, if c
necessary, nominate a person having expert knowledge as 'to the
nature ofthe acquired property to assist the arbitrator. · These two
. provisions clearly show the attitude· of fairness that the Act displayed
towards the operators on the vesting· of their properties in the
Government. Cl. (e) of sub·s .. (I) of s. 6 provides that tM arbitrator D
after hearing the dispute and the parties concerned, would determine
the amount which appears to him to be jus! and reasonable and also·
specify the person .or persons who would be entitled to the aforesaid
compensation. Clause I (f} of s. 6 provides that. where there is a
....... 1 dispute of titJe.with respect to the" distribution of the ·amount the
'
same would be apportioned amongst the pers6ns concerned by the E
Arbitrator. At the same time, to exclude any further disputes during
the process of arbitration, cl. (g) of sub-s. (I) of s. 6 provides· that
. the provisions of the Arbitration Act, 1940 (Central Act X of 1940)
shall not apply to the arbitrations made under s. 6..· '

.. ~ . Sections 7 and 8 contaill the usual procedure for Jiling of claims
F

and the conditions thereon. What is important to be noticed is that
the award of the arbitrator is not made final but fo subject Jo an
appeal to the High Court.

G
Section I 2 clearly provides that any per;cin .. aggrieved by an
award, may within 30 days from.the date of such award prefer an
appeal to the High Court. The proviso however empowers the f!igh
Court t<;> condone the del~y in suitable ·cases where stifficieni cause
. preventing a claimant from filing the appeal within the time prescri~ •
bed is !]lade out
H
7.48: SUPREME COURT REPORTS [1984] t s:c.R.

. Before going to other provisions we·. ,;,ould like to. m'ake · a
A reference to the schedule which fixes the scale. of compensation and·
~n.unciates the principles on the basis of which i(is to.be awarded to
the· operators whose ·stage ca,riages or contract cardages are . taken-
over by. the Government. The table containing the · guidelines for
' paym.ent of compensation may be extracted below: ·, ·
B
THE TABLE

. Peria{/ Precentage

,I. Not more than six months prior to the notified date 85
c
2. More than six. months prior to the notified date buf 7.5 .
n,ot. exceeding one year ··

3. More than one year but not exceeding two years 70

D 4. ·Mori
.
than two
.
years
. .
. . but not exceeding three years
'
68
5. More than three.years but not exceeding four years 67

. 6. More than four years but not exoeedfog five years 66-2/3 .
•
E 7. ·. More than five.years but no.t exceeding six years. 59
\
· 8. : More than six years but not exceeding seveu years 41

9. More than seven years but not. exceeding eight 29 ·
. years
F
JO. More than eighi years but not exceeding nine years 21
. '.
t I. · More than nine years but not exceeding ten years ·14

12.
.· .
More· than. . ten years but.not exceeding eleven years 10
G
13. ·More than eleven. years but not exceeding twelve 7
years .

14. More than twelve year.s but not exceeding thirteen 5
Il yea cs

15,. Mo;e than thirteen years 4

'
."
tAMIL NADU v. L. ABU (Faza/ All, J.) 749
it would .be seen from a perusal of these guii:Jelines that heavy
.comp~nsaiion Jias not been provided· for, obviously because if colii-.
pensation at the market ·rate is .given it would amount to a huge·
· drain on the State treasury which. may cause a complete financial
· breakdown ·and, thus frustrate the very pc;>licy of nationalisation.
We inight mention here that the respondents argued that the rates
of compensation were ·wholly inadequate and absolutely illusory.
because the· arbitrator br the High C:olirt cannot travel beyond the
second schedule in assessing the. coinpensation. Mr. S.S. Ray,
appearing for the appellant State fairly conceded that the schedule
·was merely a sort of a guideline' which was not exhaustive for deter-
mining the quantum· of compensation and it may .be. taken as a
concession on behalf of the State tha.t the officer~jixing the com,. c
pensation were ·entitled to make marginal but not vital departures
from the principles of compensatibn laid down ·by the Act which
. '
seems t~ be the real i~tentidn of the statuie iii question by providing
for a broad,based compensation and allowing the same to be decided
by the. highest .court of justice in the State, viz., the High· Coqrt.
· In tbe circumstances, it cannot be said that the compensa(ion provi-
ded is absolutely illusory or shocking to the conscience of the court
·which is the qply requirement of Art. 31(2),.

Then there are other routine provisions contained fa s.11 which
provide the manner· in which the ·payment of the amount adjudieated E
by the compensation authorities. is. to be given: · Clause I-\ , evert
. awardsinterest
"
ai the rate. of 6 1/2 per cerit per.annum on the said
'

amount and cei;tain other options are given to. the operators.

SeCtion 13 pr~vides the legal procedure to b,e adopted in arbi"
tration proceedings and for that. p.urpose the arbitrator would have F
all the powers of a civil court .while· trying a suit under the Code of
Civil Procedure, 1908; Section 13 also applies .·.this procedure ·f~r ·
.·~ summoning and enforcing th.e atteadance of witnesses, requiring
discov~ry-and production of documents; reception· of evidence .on
affidavits, requisitioning any public .record or a copy thereof f~om
any co.urt or office and issuing commissions for examination of.wit-
G
) nesses or documents. · ·
'
Section· 14 however· carves out an exception. regarding 'ihe
acquisition of the stage carriages or contract carriages from applying
for any new permit or renewal of the existing permit· aft~r theacqui- ·
sition of the stage carriages or contract ·carriages .by the State. It
. : [also provides that every application' for grant of a new permit or
'750 .SUPREME COURT REPORTS (1984] I_ S.C.R•..

. renewal of an existing permit or any appeal or revision relating
A 'thereto made or preferred.before the 14th January 1973, the date of
• the enforcement of the Act, ·and pending before any court· or any
officer pr authority or .tribunal ·shall abate. Th.is appears to us to.
be a very salutary provision. in order to prevent future recurring
disputes. !. ,

B
Section 15 provides that the transfer of the stage or contract
carriages on or after 14th January, 1973 and before the notified.date,
is prohibited. It further provides that no person .shall after the
aforesaid date transfer by way of sale or gift any stag~ or contract
carriage liable to be acquired unde_r the Act. ·
c
~ection16 provides for grant of temporary permits to the i .,
operators arid the circumstances ·under which and ·the period for
which they could' be 'extended or transferred and as a consequence
I
of the pivotal section it also provides that no stage .or contract •...
D carriage operator would he able tv obtain any temporary permit in •
respect of any area or route which has been notified in the Act.

.Section. 17 prohibits transfers of any stage or contract carriage
.
and enjoins that if any transfer is made, the shall ·be void' and is .
liable to be acquired liy the Government. Section 18 makes a pro-
E vision for the appointment of administrators for arranging the taking
over of the acquired property and for carrying out the duties assigned
. to them. Seotion 19 also makes an identica!-.provision. for' appoint-
ment of authorised officers .. Section. 20-is also an important provision
which has been introduced for the purpose pf safeguarding the exist-
F ing staff of the operators for being abso·rbed in the State .Transport
Department of the Government, on _a given scale, or any corporation
or company owned by the Government and for this purpose a number
of steps have been detailed in this section. ·

Section 21 gives the resultant consequences of the policy of
G _nationalisation and prescribes the modes in which the newly acquired
siage or contract carriages arc to be run by the. corporation or the
• company or the State Transport Department of the Government to
which the acquired property is transferred.
H
Section 25 is also a sort of a . routine prov1s1on making
provisions for issue of orders, notices and the manner of delivering
the same, etc. · Section _26 is an important section which exempts
TAMIL NADU v. L. ABU (Fazal Ali, J,) 751

·particular types of stage or contract carriages from the operation· of
the Act, such as stage · or contract carriages held by the Central" . A
Government, any State Government, any ·company controlled or
owned by the Central Government or any State Government. Section
27 is the usual section which provides immunity -to· persons dis-
' charging their duties in good faith in pursuance of the. Act. Section
28 bars jurisdiction of civil courts ill. certain matters. Section 29 is a B
penal provision wh~h provides for pµnishment for, offences commit-
ted in violatio~ of the provision_s of the Act. Section 30 invest.s
certain officers like administrators; arbitrators, authorised officers,
etc., with the st~tus of a public servant within tlie meaning of s. 21
of the Indian Penal Code. Section 31 is the saving provision which
ov~rrides other laws on the passing of the Act. Section 32 is the .. C
rule-making power given to the Act.

Before discussing the reasons given by the High Court for
striking down the Act we might dispose o( an important argnment.
advanced before us for the appellant to the effect that the provisions
D
of this Act are almost in pari materia with theKarnataka Act which
formed the subject-matter of a constitution Bench decision of. this
Court by which the Kctrnataka Act was upheld. On the basis of the
aforesaid decision, it was submitted that the matter stands concluded
by· a seven-Judge Bench decision of this Coilrfand the appeal should
be allowed on·this ground alone, On the o(her hand, the respondents E
challenged the correctness of the appellant's submission·. and conten-
ded that there are marked and sharp points of difference between the
two Actj. We are, however, unable to accept this contention for the
reas_ons given hereafter.

.By and the large the prov~ions of the two. Acts appear to be
F
identical in many respects and the general structure and the funda-
mental features of the two Acts are almost the same. The broad •
features of the two Acts may be summarised as follows : ·

(a) both the Acts aim at the policy of nationalisation of ·G
transp\)rt services (Karnataka Act started with only
stage ~arriages but the Act has also taken within its
'fold contra_ct carriages), .
,
• (b) botli the Acts clearly mention that the object of
nationalisation was to secure the ends of Art. ·
39 (b) & (c),
752
...
SUPREMO COURT RBPOR TS (1984) 1 S.C.R.

· (c) both the Acts seem to convey that being a' national
A policy evolved by the Government itself, it wou Id •
undoubtedly be in great public interest;

· (d) · the process of distribution of material. resources and
the u.nits taken over is more or less the sallle,
n (e) by and large the s~opc and ambit,: the manner and
.l ,·
oiethod of formulation of the nationaiisation policy
· are identical, and

(f) the principles of compensation and the machinery
c provided for determining the same in hoth th.e Acts ·
are. absolutely similar with minor and. 1;1egligible
variatfons here and there.

' Thus, all the arguments addres~ed regarding the constitutional
validity of the K;unataka Act before this. Court appJy equally · and
D fully to the present·Act and in view of the·· clear. decision of this
Court in the Karnataka case very little survives so far as the · argu-
ments in this case, advanced on behalf o( the respondents, are
concerned. On the other hand, three important· decisions of this
Cotlrt, viz., .Minerva Mills, Wama.rl Rao and Sanjeev ·Coke_ Mimu-
. facturing ·Ca. cases; which were given after· the Karnataka case,·
E reinforce and reiterate lhe conclusions reached by. this Court. in the
Karnataka case.

-Before 'examining the reasons given by the High Court. we
would like to mention certain important facts which have come into
·existence after the Act was passed by .the Tamil Nadti legislature as
F also after th.e judgment of the·High Court, which· fall unqer .three
A . beads:

(I) thai by virtue of the Constitution (25th Amendment) Act.,
1971 a new article in the shape of Art. 3.IC was inserted in ·the .
G Con·stitution with the avowed object of. highlighting the importance
. of some of the important directive principles contailled· in part IV of .: -
the Constitution. Art. 31C provides that no law made by a legislature
ii1 order to secure the principles specified in Art. 39 (b) & .(c) shalt
.H deemed to be -void on the groiind that it ii.bridges any .of the rights
enshrined in Arts. 14, 19 or- 31. 'the said amendment further provides
that no law containing a declarati01i that it has been passed for giving
~jfe 9 t to s11 cb a policy-.shall be Cl\!led in question in any court 90 the
\
' TAMIL NADU v. L, ABU (F_azal Ali, J.) , 753-

. ground that is does not five effect to such a policy. There is a
proviso to Art. 31 C whic!i mandates that before ihe provisions of the A
· Article can apply, the law must have received· the assent ·of the
President of India.

The Tamil Nadu legislature seems to have taken abundant'
precaution of mentioning the objects contained in Art. 31C by
providing clearly .in its preamble, as ·indicated above, that the Act
. was passed with· the intention ·of giving effect .!o the principles
enunciated in Art. 39 (b}&.(c).

· (2) that when. the' new A~t31C created c9ntroversies, .13 Jqdges

~·
. of the Supreme Court examined not only the said ·article but also a ·
nµmber of other provisions of the Constitution in <ird~r to decide ·..
c
as to bow far the amended provisions affected the basic structure of
the Constitution. It may be sufficient.to state here for the purpose ·
of this case that so fac as Art 3 JC is coni:erned, it was unanimously
b,eld by the entire Court that the first part of Art. 3 LC,. introduced by
the Constitution 25th Amendment Act, was valid. D.

(3) Thus, it is manifest that A.rt. .31 C gives a compleite · protec-
tive umbrella to any law passed with the object ·of achieving the aims
and goals of Art. 39 (b) & (c) §o as to make ·it immune froin cha!-·
lenge on the ground that the said law violates Arts. 14,' 19 or. JL
The. only condition for application of Art. ,3 IC is that there . shou.ld
E
. be a direct and reasonable nexl,ls between the law and the provisions.
of Art. 39 (b) & (c), and the reasonableness would be regarding the
neims rather than the law.'

' In view of the aforesaid developments, most of the conclusions ''
arrived at and the important reasons given by the High Court no
longer surviw and fade into.oblivion. The counsel for. the parties
'
-{'·
. a!So. realising this difficulty did not press all the arguments that ·were
advanced before the High C.ourt or accepted it but coilftned their .
arguments to the framework and applicability of Art'.· 39 (fl) & (er
· .In fairness to the High Court,, we cannot blame it because the faw
G
,) on Art. 31C was crystallised .after the delivery .of its, judgmen.t.'. We,
therefore, propose to give.a very brief summary. of the reasons given
by the High Goµrt for striking down the Act laying stress only on the
points that survive. ·
H
In the first place, the High Court seems· to have accepted the •
argument of Mr. Chari, appcarin~ for the operators, that by virtue
754 SUPREME COURT REPORTS ' [! 984) ! S.C.R.

of the Act the financiers who. were the OW!PfrS of the stage or \:on- ·
A tract carrf;!.ges would be completely wiped out of their. business and
therefore .Art. 19.was clearly violated. As Art. 31C gives complete
immunity from challenge in respect in of any law made to promote ..""
objects enshrined in Art. 39 (b) & (c), this argument .no longer ;
survives and·was wron.gly accepted by the High Court.
B
This now brings us to the nature of compensation awarded to
the operators in the Karnataka case which-appears to be on all fours
'with the facts of this, case. We must hasten to add that as alrefldy
discussed above, in view of Art. 31 C no .compensation is . necessary
as Art. 31 (2) is clearly excluded by Art. 31C but proceeding on. the
c assumption that some sort' of compensatory relief m~y be necessary,
· we approach this questiqn only as a piece of an alternative argument.
· To begin with, while. dealing with the question .of compensation,
U11twalia, J., in the Karnataka case clearly pointed out that by virtue
of the 25th amendment, the. question of compensation may not
D arise, yet right t'rom ilharati's case uptodate it was has nciw been
held that the amount payable in respect of acquired property· should
· be fixed by the legislature or determined on the basis of principles
contained in the law of acquisition and should not be wholly arbi-
trary or illusory or monstrously.undervalued, and in this connection,
the learned Judge-observed thus :

"For th~ purpose of deciding the point which falls
· for consideration in ihese appeals, it will suffic.e to say
· that still the overwhelming view of the majority of Judges
in Kesavananda Bharati's case.is that the amount payable
F for the acquired property either fixed by the legislature or .
determined on the basis of the principle" engrafted in the
law of acquisition cannot be wholly arbitrary and illusory.
When we say so we are not taking into . account the effect
·~
·of Article 31C inserted in' the Constitution by the· 25th
G .
Amendment (leaving, out the invalid part as declared by the
majority).".
'

• (Emphasis supplied) ·

H The lines underlined by us· contain an important emphasis to
show that the ·complexion of the· necessity of compensation· has
completely changed in vie~ of the 25th Amendment' by which Art. ·
••
JI <;:was int.rod11ced and Un.twalia, .r. was, th<;refqr~, careflll enough
' '•
far.Iii. NADU v. L. ABU (Faza/ Aii, J.)

not to imply that ev_en after the passing of the 25th Amendment, the -
question ·of compensati~n -would still be necessary. A
• In the same strain, I}er, J., in that very case observed as
follows :

"Full compensation with a formal difference :
B
The court will not question the 'adequacy' directly,
but 'interpret' the amended artroles - into the same
desideratum.

The Court could satisfy itself only about the amount
not being a monstrous or unprincipled under-value _ .~.
c
The payment may be ,.substantially less- than the
market value, the principles may not be all-inclusive,. but
the court would not, because it could not, upest \he taking
save where the principles of computation were too D
arbitrary and illusory to be unconscionably shocking." .

Thus, from a perusal of Bharat i's as also · Karnataka cases the
following principles for assessing compensation after the amendment
of Art. 31 (2) by substitution _of the word .,amoimt', may be
~umm~rised : E
(l). that con;ipensation should not be arbitrary or
illusory,

(2) that the amount fixed as compensation should not be
unprincipled,

(3) . that th~ compensation sought to be paid should be so .
arbitrary or .illusory as to be unconscionably -
shocking, and ·

(4) it is not necessary" that the compensation must
G
represent the actual market value or be adequate, for
even if compensation is inadequate •but not illusory,
the requirement of Art. 31 (2) is fully complied
with. H
Relevant sections of the Act, on the questi~n of compensation
are completely in actordance with the principles enunciated above
.156 ·siJRREME COURT REPORTS [198411 s.c.R:

and hence the argument of the counsel for .the respondent ihat. the
A · compen~atiori is wholly inadequate or illusory must be overruled.
. ' . . .
Applying these principles to the provisions of compensation,
.
.discussed above, it seems to us that .the facts .of this case are identi·
· cal with those. of the Karnataka case. The principles on which
compensa:tiori was awarded in that case have been bodily lifted· and
B·
placed in the present Aci. · The main feature; of the Act relating to I
compensation
. ·--:---
may be summarised
. .
,'
thus : ·

0) . A regular method 'and the manner in which
· compensation is to be· assessed ino be found in the
c . second schedule to the.Act, · ·

(2) we have already mentioned that Mr. Ray conceded
during the .course of arguments that the.said schedule
is not exch!i.ustive but it .is open to the arbitrator or
the High Court to make marginaLchanges as· _and
D when necessary,

(31 . the factors and circumstances to be taken foto
,·
: consideration vide section 6 and the second schedule
ciearly spell out that if compensation is .allowed on
· the basis. of those· factors it cannot be said te> be
arbitrary, illusory or monstrously unconscionable.

.·it is true that the· compe'nsation awarded· inay not represent
the market value or perhaps may be even inadequate but that is n6w
not the test iaid down in the amended Art. 31 (2). On this ground,
•F therefore, the.constit.utionality of the Act cannot be challenged.

All said and done, it was contended by the respondents that at
least 'th~ 'faking over of both the stage and . the contract carriages
alongwith the workshops, etc. amounts to a very harsh provision so 'i
to b~ confiscatory. We have already dealt with this argument. ·In
addition to what we have stated, it may be .observed that once a
policy of nationalisation is in ·public interest and . for public goqd, , .
some losses; some damages, some prejudices and some harsh conse-
quimces' are bound to follow but this does not mean· that the ·afore•
H said considCrations should result in a stalemate of the policy of State
monopoly or' nationalisation otherwise the country cannot move
forwarded even an ini:h from where it was when out .Constitution
came into force. Gajtndragadkar, J., in: Akadasl Pabhan's case (sl!pra)
''i'Ai.11i. NADU v. L.• ABU. (FazaLfo, J.) · 757
had pointed out that these are m~tters of high policy and the courts ·
cannot go behind the policy· unless the policy itself is patently A
unconsiitutional or arbitrary.

I We have found· that the .compensation ·.awarded· or. the
!'. principles contained in· the various secifons of the Act are· not .
· illusor;r but amount to a just and .sufficient compensation to the
B
operators "{hose properties are taken away. In fact, it was to meet
such situations that Art. 31 C was . introduced · so that .any obstacle
resulting in evil consequence .to. the operators pr persons ·whose
properties are taken· over is completely r~moved. For these reasons,
·we ieject this argument of the respondenif co.unsel as being totally
ill-fou 11ded. · · c
It was then argued for the respondents that the nationalisation
of the entire transport services along with the vehicles and workshops,
etc., cannot be in public interest because it: would .not. serve any
public good. In the same token, it was argtied that ihe manner an<l>
inethod in which the nationalisation policy ·has been enacted in tlie . D
Act does hbt P.er se secure twin objects of Art. 39 (b) & (c) for two
reasons·-
1· I
(I) ·that taking over of the. vehicles, tools, implements
am! the workshops, etc., is· not contemplated by Art. ·
39 (b) as they are 'moveabie properties and therefore E
not material resources,

(2) that the measure, if translated into action, · does not
preventthe concentration-of wealth in the hands of
a few and hence Art. 39 (c). is not attracted at all.
F
We shall deal wi.th these arguments one by one. Coming to the
first argument that the nationalisation is not. in public· interest, the
said argument is. to be stated only to be rejected as . it has been
·clearly p~inted out in the Karnataka case that a nationalisation policy
of this type is undoubtedly in public 'intereSt. ·· G
Iri. Black's L.aw Dictionary (Special Deluxe fifth edftion) at page·

I
) 1107 'the words 'public purpose' have.been defined· thus :

"The term is synonymous with governmental purpose
..... .A public purpose or public business. has· for · its
H
objective the .promotion of the public health, safety,
· morals, general w~lf~re, security, prosperity, and conten-
. SUPREME COURT REPORTs [1984] 1 S.C.R.

ment of all the inhabitants or residents within a given·
A ' political divisfon, as, for example, a state, the sovereign
powers of which are ·exercised to promote such. public
.purpose or public business."

This matter is concluded by a decision of this Court .in the
B Karnataka case where it was held that the purpose .of a public body
to run a public transport service is'undoubtedly in public interesiand
in this connection Iyer, J., observed thus : '

"The purpose of a pubiic body to run a public
transport service for the benefit of the people, operating it •
c . in .ar responsihle manner through exercise of public
.
power
.
· which·is controlled and corttrollable by society through its
organs like the legislature and, at times, even the court,

.. is manifestly a pub Ii~ purpose."
•
. 4,nd Untwalia, J., speaking for the Court made. the following
D observations : ·

"Why can_'i moveables be acquired for commercial
purposes if the exigencies of the situa\ion so require, A
particular commercial activity of the State may itself be
for a public purpose."
E
, In the .instant case also, it would appear that the State has
nationalised the . stage and contract carriages for the purpose of
providing a general'and expeditious transport at reasonable. rates to
the members of the public and in view of the observations referred
·to above, we can conie to no other conclusion except that such a
policy is undonbtedly in pnblic interest and. involves an important
public purpose .

. As a limb of this argument, the High Court held that Art. 39 '1--
G would not be applicable in the· present case:. As extracted above, .
Untwalia, J., in the Karnataka case .summarily rejected this very
argument and furth~r pointed out that where a legislature thought of
• preventing misuse in the runµing of the vehicles by private operators
. and in order fo provide better facilities to the transport passengers or
H. to the general public. acquisition of vehicles or for that.· matter the
rights and interests in t]le contract carriage operators alorigwith their
iand, buildings, workshops, etc., would always be permissible. We
a
'cannot conceive of greater public interest 'in respect of a policy .

•
TAMIL NADti v. L. ABU (F~za/ Ali, J.)

than where the legislature expressly intends to promote· or. secure the
'·• objects of Art. 39 (b) & (c) particularly when, as indicated above, the A
said two clauses have been conferred a speoial status and given an
impregnable protectfon by Art . 3 lC itself. We, therefore, fully agree
~with the view taken by this Court in the Karnatakli case and hold
~·· · that the nationalisation of the transport services is· undoubtedly in
public interest. B
• . As regards the application of Art. 39 (b) & (c), the High Court
.
on the basis of previous decisions of this Court held that -

(1) the objects of Art. 39 (b) & Le) have n6t been
·. subserved, and c
(2) Art. 39 has no application to mo~eable properties
and since the vehicles taken over by the State under '
the Act were moveable properties, Art: 39 was not
applicable in the pres.!nt case.
D
With due respect, this view is not correct and proceeds on a
misconception of the law and interpretation of the words 'material
resources' as mentioned in.Art. 39 (b). In fact, Art. 39 (b)'does not.
mention either moveable. or immoveaQle property. The actual
expression used is· 'material resources of the community'. Material
resources as enshrined in Art. 39 (b} are wide enough to cover not E
only natural or physical' resources but also moveable or. immoveable
properties. Black's Law Di_ctionary· (supra) defined· the word
'resollrces' thus :

"Money or any property that can be converted to F
meet needs; means of raising money or supplies; capabili-
ties 'of raising wealth or 'to supply necessary wants."
J.

(p. 1178)
.4 The mere fact that the resources are mate'rial will make to
· difference in the concept of the word 'resources'.InStroud's Judicial G
Dictionary (Vol. 3) at page 1634, the word 'material' is defined
thus:

"Materials, to_ols, or implements, tobe used. ·by such H •.
artificer in his trade or occupation, if such artificer be
employed in mining; ...... :.'. wooden props or "'spr~gs...
though neither "tools or implements". were "materials"
..
160 .. SUPREME coti~t REPORTS f!9S4J i s.c~R.
'
within these words .......... 'Material; includes a . painter'.s
A bucket of distemper and brush." .

. In Webster's Third New International Dictionary at page 1934 ·
the word 'resources' has been defined thus :

•·available means (as of ·a ·country or business) ·
B · computable wealth (as in money,-.prope~ty.)"

In.words and Phrases (Permanent Edition), Vol. 37A, the word·
'Resources' has ·been define~ at page 16 thus : .

• "Resources·. included products of farm, forest;.
c . manufactUre, ari, ~ducati~n, etc ... · The·"resources"· of a
county include its land, timber,:coal; crops, improvements,
. railways, factories and everything that l!oes to make up its
wealth cir to ·render it desirable'.' •

D .In the Karnattika case, Iyer, J., observed· thus:
•
"And material resources of the community ·in the._
conte~t of re-ordering the national economy embraces ·an
the national weaith, not· merely naturnl resources, all the
. 1 private and public sources of meeting materiar needs,· not
E . merely public possessions.". ·

The question ·as to the connotati.on of ·'material resources, as ·
· mentioned in Art. 39 (b) .& (c) canie up fot consideration in a recent
·constitution-Bench decision of this Court in Sanjeev Coke .Manu-
F· · facturing Co's case (supra) where one of us (Reddy, J.) made the
· tollowing observations :
.
"The next question for consideration is whether the
Coking Coal.Mines (Nationalisation) Act is a law direct-
ing the policy of the State towards securing -"that the
G ownership ·and control ofthe· material -resour.ces of ·the ·
community are so distributed as best to subs~rve the com·
. inon ·good. Coal is, of course;· one of the most important
known sour~es of energy, and, therefore, a vitai national.
resource.
H .... ·
,

'i'AMiL NADU v. L. ABU (Fazal Ali, J.) 16i

. Shri Sen argued that i;naterial resources h.ad first to
be acquired by the State before they could be distributed. A
A law providing for acquisi.tion was not a law for
'distribution. We are unable io appreciate the submissio.n .
. .of Shri Sen.''
. "
The above decisio~ therefore furnishes a complete fnswer to t)le
. reason given by the High Court or the ,arguments advanced before B
us by the counsel for the respondents on the question as to the·
nature and character of material: resources. ..
•Summarising the arguinents relati°ug to compens'ation and the

. .
prejudice caused to the .operators, and ·the nationalisation. -Policy
.
contained in the .Act, the position seeins to. be as follows :•
C

In the first place, as indicaied above, once Art. 31C applies, the
net of tl;te protective umbrella is so.· wide as' to cut at the root of even
Art. 31 (2) which. alone. survives after Bharati's case. We have
already pointed out that if the State chooses to monopolise trades in · · D .
certai~ essential. commodities.or properties, for the purposes men' ·
tioned in Art. 39 (b) & (c), Art. 31 (21 woul;I be completely excluded,
o.therwise ·np State monopoly is ever possible because. a reasonable
amount which may· have to be paid ·as co.mpensation may completely
drain out the financial resources of the State or the public exchequer E.
to such an extent that .the noble endeavour to monopolise a· parti- ·
'cular trade would become almost impossibfo, as a logical result of
which the purposes sanctified in Art. 39 (b) & (c) would also bdcome •
incapale qf implementation. , It was· for these reasons that Parliament
thOught it advisable to protect the objects contained in Art. 39 (b) &
(c) from the purview of Art. 3 l (2).. · F
~ .. Secondly, Art. 31 (2) by virtue of the 25th amendment has
knocked out the word 'compensation' and has substituted the wOrd.
·a~ount' which gives ample discretion _to the State to fix ~ reasonable
4,
..
amount if. the properiy of an individual. is taken over for public
purpose., In the in!tant. case, as an-intense. social purpose which is G
iµdicated by the Constitution, is involved even .an apology· of

/. compensation would be sufficient to comply with the conditions·
required by Art. 31 (2). Even so, in the· instant case, as pointed out
above, there is a· clear mode of compensation previded which is to .
be assessed by an arbitrator an\! is subject to judicial s.crutiny by the;
'highest coilrfin the State, namely, the High Court.· The schedule
which contains the principles 'of compensatfon is wide . enough· to
'762 siJrRBME COURT REPORTS [1984) i S:c,ii.,

ensure a fairly reasonable compensation to be given to the operators
A whose veliicles are taken over. The court in ·such inattets cannot
in.terfere with the amount so fixed unless it is shown to the court's
satisfaction that the aµ10unt fixed is so monstrous as to shock· its
conscience. Having regard to the provisions in the schedule and the
·manner an~ode of grant of compensation, we are unable to hold
B that the compensation provided for is wholly inadequate or absolutely
monstrous.

Thus, so far as this aspect· of the m_atter _is concerned, two ·
~onclusions brodly emerge :--:-
•
c. (ll .. that in view of the -express prov1s1ons of ·Att. 31C
which excludes Art. 31 (2) a)so where a. property is
acquired _in public interest for . the avowed ·purpose
giving effebt to the principles enshrined in Art. 39 (b)
& (c), no compensation is necessary arid Art. 31 (2) is
out of the harm's ~ay, and .
D
·· (2) that even if the law provides for compensation, the·
courts cannot go into the details or adequacy of. the
compensation and it is sufficient for the· State to
prove that·the compensation was reasonable and not
monstrous or illusory so as tO shock the conscience
of the court. ·

• . The persons whose .properties are taken over cannot be heard
to complain that the compensation ·awarded to them. sho11ld be
·according to market value which, if conceded, would defeat the very
F purpose and objective of Art. 39· (b) & (c). In the instant case, both
the conditions mentioned above are fully satisfie<l· having regard to
the provisions 61' the Act. ·

The last.contention raised by the respondents was that the
conditions or objects mentioned in Art. 39 (bl & (c) are not subser-
G
ved by the nationalisation policy codified by the Statute because
there is no.distribution at all in the sense that the property taken
over is distribuied to various member of the community for their
benefit. · Moreover, the members of the community have been depri- .\
ved of the services rendered to them ~Y the operators under permits
H
issued by the transport authority. So far as this argu.ment·is concer•
ned, it is based on a serious misconception.of understandin_g the real
position. The word 'distribetion' used in Art. 39 (b) must.be broadly
TAMIL NADU v. L. ABU (Fi:iza/ Ali, J.) 763

construed so that a court may give full and comprehensive effect to
statutory intent contained in Art. 39 (b). ·A narrow construction -0f A
the word 'distribution' might defeat or frustrate the very object which ·
the Article seeks to subserve. In Black's Law dictionary (supra) the
word 'distribution' bas been defined thus·:

."The giving out or diviSion among a number, sharing
or parcelling out, allo.tting, dispensiµg, apportioning." B

(p. 426)

Similarly, Webster's Thr_id International dictionary at page 660
defines '<listribution' thus :
c
"the position, placement, or arrangement (as · of a mass
or the members of a group); the disposition or arrange-
ment in rational groups or classes : CLASSIFICATIQN
the accurate disttibution of several rare zoological'
specimens; delivery or conveyance(as of newspapers or
goods)· to the members _of a group (the distribution of D
telephone directorieSto consumers) in charge of company .
• · .sales and distribution; a dev'ice, mechanism, or system. b9
which something is distributed (as from a main souree);
the marketiryg or merchandising of commodities."
E
Jn 'Family Word Finder' published by Readers Digest the
word 'distribution'· has been defined at page 237 thus :

"dissemination, scattering, spreading, circulation, group-
ing, organisation, apportionment, allotment, allocation,
division."

.
'
it is obvious, therefore, that ·in view of the vast range 0 (
transactions ·contemplated by the word 'distribution' as mentioned
in the dictionaries referred to above, it will noi .be correct to
construe the word 'distribution; in a· purely literal sense so as to.
mean only division of.a particular kind or to' particular persons. G
The words, apportionment, allotment, allocation, clas'sification,
clearlr fall· within t~e. br?ad. sw;ep of th~ word 'distrib~tio~'· so
construed, the word distnbut10n as used m Art.39(b) wdl mclude
various facets, asp~cts, methods and ·te~minology of a· broad,based
H
concept of dis_tribution. In other words, the word 'distribution'
does. n'ot merely mean that property of one should be taken over and
distributed to others like land reforms where the lands from the big
764 SUPREME COURT REPORTs
• ..
(19841 I s.c.R.

landlords are taken away .and glven to landless labourers or for that
A matter the . various urban and rural ceiling A~ts. That is only one
of the modes of distribution ·but not .the only mode .. In the instant
case, as we have already· pointed out, distribution is undoubtediy·
there th9ugli in. a different shape.· So far as the operators were
concerned they were mainly motivated by making huge profits and
B were mqst reluctant.to go to villages or places where the passenger
tarffic is low or the track is difficult.· This naturally caused serious
inconvenience to the poor members of the community who were·
denied the facility of visiting the towns or other areas in .a transport. .
By nationalising the transport as also the units the vehicles would .
be able to go to the farthest corner of the State. and pepetrate as
c deep as possible and provided bette;· and 'quicker· and more effica- .·
cious facilities.. This would ~ndotlbt~dfy be a distribution for the
·common' good ·of the people. and would be clearly covered by cl.(b)
of Art.39. · •

D In the Karnataka caiie~ the word 'distribution' . clearly fell for
interpretatiori and Iyer,J. made the following observations : . · ·

"The key· word is 'distribute' and the genius of the
article, .if we .may say so, cannot· but. be given full play as
iffullils the basic purpose of restructuring the economic
order. Eacl1 word in the article has a strategic role and
the whole artklc i; a social mission. It embiaces the
entire material resOJJrces of the community. Its task is
to distribute stii:h resourees. Its goal is so to undertake
distribution as best .to subserve the common good. It
reorganizes by such distribution the ownership and
F control .......... ..

·Futhermore, in . the Sanjeev Coke Manufacturing. Co.'s .case,
Reddy,J., observed thus: t
.G . "To 'distribute', even in its simple .dictioqary · mean-
. · ing, is to 'allot, t<;> divide into classes Of irito groups' and . I
'distribution' embraces 'arrangement, cfassification, place-
ment, dispo.sition, apportionment, the way in which items,.
a quantity, or the. like, is divided or apportioned; the
H ' .
a
system of dispersing go'ods throughout community."
. ..
· The very ·pertinent expression used by Reddy,J. is that those
econ~mists who 'believe in bringing a:bout a social· revolution would
..
(
TAMIL NADU v. !;., ABU (Fazal Ali, J.) 765'

hardly find any . difficulty in treating nationaiisation of transport as
a dfat.ributive process for the good of the community. _This is A
4 '
exactly what the, Act seems to achieve in securing the objects eon•
•
taine.d in Art:39(b)&(c) of the .Con,stitution. · ·
' '
By. nationalisin·g the transport services the transport business
which was run by a handful of'capitalists would prevent the· concen-
tration of wealth in the hands <;.f a few and would therefore· benefit
B
the community at large.

This aspect of the . matter was·. also argued in the Karlia{aka
case·btit strongly repelled, were Untwalia,J. pointed out that .taking
over the transport services was undoubtedly for the common good
of the people and was not meant for augmenting the revenue of the
State _because ·the profits, if any, made by the services would ·go to
accomplish project_s for' the bett.erment of the ~omniunity ·and made
. 'the foliowibg observation's :

"The legislature thought that to prevent_ such misuse D
• and to provide.for. better facilities to transport passengers
(
and to t.he general. public it is necessary to acquire the
• :vehicles, permits and all rights, title and.interest of the
·contract carriage operators in or· ·over lands, buildings,
workshops and. other places and all stores, .instruments,' E
machinery: tools, plants, etc., a; mentioned in sub-section
(2) of section4 of the Act." ·

Thus, in short, the position seems to be that by virtue'.of the

.. ·nationalisation policy the twin objects ofArt.39(b)&(c) are fully
secured.
I
F

~··
· Finally, it was argued by the respondents !hat even if the
transport services were nationalised, there_ was absolutely no rationale
. behind the taking over of the vehicles· of , the operators, soni.e of
whom were running on hire-purchase basis; . This argument has no
G
force because once it is recognised that for the purpo;es mentioned
in ATt.39(b)&(c) the entire service including its units, workshops, etc.,
could be taken over . on payrnent of some compensaTion, the fact
that the. xehicles should be spared is only an argument of desperation.
H
. These are, therefore, the iawortant contentions advanced before
,.us by the respondents and the reasons given by. the High Court in
st.riking .. down the Act. We are of the opinion that in fact this
'
..
766 . SUPREME COURT REpORTS (19841 1 s.c:R.

case is .clearly covered by ihe decision of the Karnataka case as· rein·
A forced by the later.decision ofSanjeev Coke Manufacturing Co.'s" case
and· all the contentions raised before ·us by the resp~ndents -
(operators) fail.- The Act is, therefore, held to be constitutionally, 4l .
valid in all respects. We allow the appeals, dismiss the writ petitions, -,~
• set aside the· judgment of the High Court arid hold that the Act is
"B constitutionally valid. ·
•
However, as some portions of the Act, in view of the timelag,
may have become out of date, a few consequential amendments may .
have to be made. Mr:Ray, appearing for the appellant, had also
•conceded that so .far as the question of. compensation was concerned,
C it was open to.the arbitrator or the compensation authority not to
confine itself strictly to . the yardsticl.< contain~d · in the second·
schedule to the Act but they can make marginal changes as the
circumsta11ces require.

As a appellants have succeeded in the appeals, we revoke the
the interim order passed by this Court on June 26,.1973 directing
the appellants to pay Rs. 100 (Rupees one hundred) per day'to the'
respondents •. In the peculiar circ.umstances _of this case we make
no order as to costs. '

N,V.K. Appeals a/lowed.and·
Petitions dismissed.

·\' j

.~-
\

..
*