Holding

The Supreme Court held that the notifications under Section 16 of the Gujarat Industrial Development Act and the accompanying government resolution are valid, do not violate constitutional provisions, and the Act operates in a separate sphere with no inter‑se conflict, while the procedural and natural‑justice requirements were satisfied.

Summary

The State of Gujarat issued notifications under Section 16 of the Gujarat Industrial Development Act, 1962 declaring the Kaloi Industrial Area a notified area under the Gujarat Municipalities Act and simultaneously excluded it from Saij Gram Panchayat under the Gujarat Panchayat Act, 1961, along with a resolution allocating one‑third of the consolidated tax to the Gram Panchayat. Saij Gram Panchayat challenged the notifications and resolution, alleging violations of Parts IX and IXA of the Constitution, non‑compliance with procedural requirements of the Municipalities Act, and denial of a hearing violating natural justice. The High Court dismissed the writ petition and the matter was appealed to the Supreme Court. The Supreme Court held that the notifications and the resolution are valid, do not contravene constitutional provisions, and that the Gujarat Industrial Development Act operates in a distinct sphere, rendering any alleged inter‑se conflict moot. It further held that Section 16 expressly overrides the procedural requirements of the Municipalities Act, and that extensive consultations satisfied the principles of natural justice. Consequently, the appeal was dismissed.

Issues considered

Whether notifications under Section 16 of the Gujarat Industrial Development Act, 1962, declaring an industrial area as a notified area and excluding it from a Gram Panchayat violate the constitutional provisions of Part IX (Panchayats) and Part IXA (Municipalities).
Whether the State was required to follow the procedure prescribed in Section 4 of the Gujarat Municipalities Act before declaring a notified area under Section 16.
Whether the exclusion of the area from the Gram Panchayat without a prior hearing infringes the principles of natural justice (audi alteram partem).
Whether there is an inter‑se conflict between the Gujarat Industrial Development Act, 1962 and the Gujarat Panchayat Act, 1961 / Gujarat Municipalities Act, 1963.
Whether the government resolution allocating one‑third of the consolidated tax to the Gram Panchayat is constitutionally valid.

Legislation cited

Gujarat Industrial Development Act, 1962s. 16, s. 2(g)
Gujarat Municipalities Act, 1963s. 264A, s. 264D, s. 4

Subjects

Industrial Development ActNotified areaMunicipal lawPanchayat lawConstitutional law73rd Amendment74th AmendmentNatural justiceInter se conflictStatutory interpretation

Judgment

SAU GRAM PANCHAYAT A
v.
STATE OF GUJARAT AND ORS.

JANUARY 27, 1999

[MRS. SUJATA V. MANOHAR AND G.B. PATTANAIK, JJ.)
B

Industrial Law :

Gujarat Industrial Development Act, 196rSection 16-Notification
issued notifying Kaloi Industrial Area as notified aretr-Another Notification, C
excluding the notified area from Gram Panchayat-Consolidated tax
recovered by the proposed notified area authority-Government resolution
passed-Notifications and Government resolution challenged as contrary to
Part IX and XI-A of the Constitution-Writ Petition dismissed by High
Court-Held, no violation of Constitutional provision-Constitution of India D
195()-l'art IX-XIA, Article 243 : Gujarat Municipalities Act, 1963-Section
264(A) : Gujarat Panchayat Act, 1961, Section 9(2)~

Notified area declared-Civil consequences-Opportunity of hear-
ing-People of the area concerned-Natural justice-Audi Alteram Par- E
tern-Held, long drawn out exchange of views, consultations,
consideration of objections and decision to provide revenue to Gram
Panchayat constitute sufficient compliance of natural justice-Adminis-
trative Law.

Statute law-Inter se conflicf-Vujarat Industrial Development Act, F
196rSection 16-Notifications--Notified area declared under Gujarat
Municipalities Act-Excluding the said area from Gram Panchayat-Held,
Gujarat Industrial Development Act operates in a totally different sphere.
Hence no inter se conflict.
G
The Gujarat Industrial Development Act, 1962 was enacted to make
special provision for securing the orderly establishment and organization
of Industries in State. The Gujarat Municipalities Act, 1963 was amended,
in view or the insertion of parts IX and XI A of the Constitution, which
dealt with the Panchayats and Municipalities respectively. H
263
264 SUPREME COURT REPORTS [1999] 1 S.C.R.
A On 07-09-1993 State of Gujarat issued two notifications one under
section 16 of the Gujarat Industrial Development Act, 1962 declaring that
Kaloi Industrial Area as a notified area under Section 264-A of the Gujarat
Municipalities Act, 1963 and another notification excluding the notified
area from Saij Gram Panchayat under Section 9(2) of the Gujarat
Panchayat Act, 1961. Earlier the State Government had issued a Govern-
B
ment resolution dated 30.8.1993 stating that 1/3rd of the amount recovered
as consolidated tax by the proposed notified area authority shall be used
for the benefit of the Gram Panchayat. The appellant-Saij Gram Panchayat
filed a writ petition for quashing the notification and government resolu-
tion. High Court dismissed the writ petition. Hence this appeal.
c
On behalf of the appellant, it was contended that if any area forms
a part of panchayat under Part IX of the Constitution, it cannot be treated
as an industrial township under Part XI-A of the Constitution; that clause
2(1) of Article 243 applies to urban areas only, not to a transitional area;
and that the Respondent State did not follow certain procedure prescribed
D in Gujarat Municipalities Act before enforcing the provisions relating to
notified area. It was also contended by the appellants that before any
notification issued under the Gujarat Industrial Development Act a hear-
ing should be given to the residents because notifying an area has civil
consequences.
E
Dismissing the appeal, this Court

HELD : 1.1. There is no violation of any constitutional provision; the
notifications and the Government resolution in question are valid. [271-H]

p 1.2. Under Chapter 3 of the Gujarat Industrial Development Act 1962
the Gujarat Industrial Development Corporation has been given power inter
alia to develop land for the purpose of facilitating the location of industries
and commercial centres. It has been given the power to provide amenities
and common facilities in such areas including provisions of roads, lighting,
water supply, drainage facilities and so on. It may do this either jointly with
G Govetnment or local authorities or on an agency basis in furtherance of the
purpose for which the corporation is established. The industrial area thus
has separate, provision for municipal· services being provided by the In-
dustrial Development Corporation once such an area is deemed notified
area under Gujarat Municipalities Act 1964. It is equated with an industrial
H township under Part IXA of the Constitution where municipal services may
SAIJ GRAMPANCHAYATv. STATE 265
be provided by industries. [271-F-H] A
2.1. In respect of any of these three types of areas set out in clause
(1) of Article 243-A, having regard to the size of the area, the municipal
services being provided or proposed to be provided by an industrial
establishment in that area, and such other factors as the Governor may
deem fit to consider he may by public notification specify such area to be B
an industrial township. All these relevant factors should be in operation
in an industrial area already notified many years back under an Industrial
Development ·corporation Act as in the present case. Therefore, there is
no breach of Article 243-A if such an area is under the provisions of an
Industrial Development Act, equated with an Industrial Township under c
Article 243-Q. [272-G-H]

3.1. Gujarat Industrial Development Act 1962 operates in a totally
different sphere from Parts IX and XIA of Constitution as well as Gujarat
Panchayat Act, 1961 and the Gujarat Municipal Act, 1961, the latter being
provisions dealing with local self government while the former being an D
Act for industrial development and orderly establishment and organisa-
tion of industries in a State. Therefore there is no inter se conflict between
them. [271-C; 272-A)

Solapur MIDC Industries Assn. v. State of Maharashtra, JT (1996) 7 E
SC 14, relied on.

4.1. It is not necessary for the State Government to follow the
procedure prescribed in Section 4 of the Gujarat Municipalities Act before
enforcing the provisions relating to notified areas contained in the Gujarat
Municipalities Act in the Industrial Areas in question. Therefore, the F
requirements of sections 264A and 264D were not required to be complied
with before a notification is issued under Section 16. [273-C-D)

Naroda Nagar Panchayat v. State of Gujarat, (1997) 18 Guj. LR 814,
approved.
G
5.1. In the present case, there has been a long drawn out exchange
of views, consultations as well as considerations of objections over the
issue of the notification and also providing revenue to- the Gram
Panchayats from out of the taxes collected from notified area constitutes
sufficient compliance with the requirements of natural justice. [275-B·CJ H
266 SUPREME COURT REPORTS [1999] 1 S.C.R.

A Baldev Singh v. State of H.P., AIR (1987) SC 1239 and State of U.P.
v. Pradhan Singh Kshettra Samiti, (1995] Suppl. 2 S.C.C. 305, relied on.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 364 of
1999 Etc. Etc.

B From the Judgment and Order dated 8.12.97 of the Gujarat High
Court in S.C. Application No. 9631 of 1993.

R.F. Nariman, R.P. Bhatt, T.R. Andhyarujina, K.G. Shah, Mahesh
Agarwala, Tushar Mehta, (K.C. Jain,) for E.C. Agrawala, H.A. Ahmad,
Ms. Meenakshi Arora, Ms. Suvira Lal,,M.N. Shroff, Ms. Kumud Lata Das,
C Vimal Dave, Shailendra Narayan Singh, Devang S. Nanavati, Anip Sach-
they, Sanjeev Dave, I.M. Nanavati, Yashank Adhyaru, Prashant Kumar,
Mrs. Alka Agarwal, S.K. Sabharwal, Devang S. Nanavati, Anupam Lal Das,
Ms. Sandhya. Raj Pal, J.P. Pathak, V.K. Bhatt, S.B. Vakil, P.H. Parekh and
Ms. Musharaff Choudhary for the appearing parties.
D
The Judgment of the Court was delivered by

l\IRS. SUJATA V. MANOHAR, J. Leave granted.

All these appeals raise common questions of law. For the sake of
E convenience we are referring to the facts pertaining to Saij Gram
Panchayat in appeal arising from SLP(C) No. 3765 of 1998.

The Gujarat Industrial Development Act, 1962 was enacted to make
special provisions for securing the orderly establishment and organisation
of industries in industrial areas and industrial estates in the State of Gujarat
F and for the purpose of establishing commercial centres in connection with
the establishment and organisation of such industries; and for that purpose .
to establish. an Industrial Development Corporation and, for purposes
. connected with these matters, This is the avowed purpose of the Act as set
out in the preamble. Under Section 2(g) of the Gujarat Industrial Develop-
G ment Act, 1962, "industrial area" means "any area declared to be an
industrial area by the State Government by notification in the Official
Gazette, which is to be developed and where industries are to be accom-
modated".

On 29.9.1972 a notification was issued by the State Government
H under Section 2(g) of the Gujarat Industrial Development Act, 1962, ,:
SAIJGRAMPANCHAYATv. STATE[SUJATA V.MANOHAR,J.] 267

declaring certain lands of village Saij, Kalol Taluka, District Mehsana as A
Kaloi Industrial Area. By a subsequent notification of 24.8.1978 issued by
,ne State Government under Section 2(g), the survey numbers described
in the earlier notification pertaining to Kaloi Industrial Area were
modified.
B
Under Section 16 of the Gujarat Industrial Development Act, 1962
which was in force at all material times it is provided as follows :-

"Section 16: Notwithstanding anything contained in the provisions
for the time being in force relating to notified area in the Gujarat
Municipalities Act, 1963, the State Government may, by notifica- c
tion, in the official gazette, (a) declare that the provisions relating
to notified areas and any other provisions of that Act shall extend
to and be brought into force in any industrial area, and thereupon
such area shall be deemed to be a notified area under that Act;
D

Section 16 gives power to the State Government to issue a notifica-
tion under which it can declare that an industrial area as defined in the
Gujarat Industrial Development Act, 1962 would also be a deemed notified E
area under the Gujarat Municipalities Act, 1963. This can be done simply
by a notification issued by the State Government and it does not require
the formalities prescribed under the Gujarat Municipalities Act, 1963 for
creating a notified area, because the section begins with the words "not-
withstanding anything contained in the provisions for the time being in
force relating to notified areas in the Gujarat Municipalities Act, 1963". F
Therefore, there are two important aspects of Section 16 of the Gujarat
Industrial Development Act, 1962. First, it enables the State Government
to equate an industrial area under the Gujarat Industrial Development Act,
1962 with a notified area under the Gujarat Municipalities Act, 1963 by a
fiction. This fiction can be brought into existence by a notification. There- G
fore, the provisions of the Gujarat Municipalities Act, 1963 for the creation
of a notified area will not apply to a notified area created under Section
16. Also, a notified area, so created, would be governed by all the
provisions of the Gujarat Municipalities Act, 1963, applicable to notified
areas under that Act. H
268 SUPREME.COURT REPORTS [1999) 1 S.C.R.
A Section 264-A(l) of the Gujarat Municipalities Act, 1963 as it stood
prior to its amendment on 20.8.1993, dealt with the creation of a notified
area. It provided that the State Government could, by notification declare
that with respect to some or all of the matters upon which a municipal fund
may be expended, improved arrangements are required within a specified
B area, which, nevertheless, it is not expedient to constitute as a municipal
borough under Section 4. On such declaration by a notification, under
sub-section (2), an area in regard to which such a notifitation has been
issued would be called a notified area. An industrial area notified under
Section 16 of the Gujarat Industrial Development ~ct would also be such
a notified area.
c
In 1988 the State Government made a proposal for declaring certain
industrial areas of different panchayats in the Kaloi Industrial Area as
notified areas under Section 16 of the Gujarat Industrial Development Act,
1962. In 1990 a committee was appointed to submit a report as to whether
D it was in the interest of the local inhabitants to declare these areas as
notified areas. The committee submitted a report in August, 1991. After
negotiations with different panchayats, it came to a conclusion that decla-
ration of a notified area may not serve any purpose. Instead a provision
could be made for a lump sum contribution from industrial units in lieu of
E taxes levied by the panchayats in question.

With effect from l.6.l993 the Constitution 73rd and 74th Amend-
ments came into effect. As a result, Parts IX and IXA were introduced in
the Constitution. Part IX of the Constitution which dealt with the
F panchayats provided under Article 243B, for constitution in every State of
panchayats at the village, intermediate and district levels in accordance
with the provisions of that part. Under Article 243N, any provision of law
relating to panchayats in force in a State immediately before the commen-
cement of the 73rd Amendment which is inconsistent with the provisions
of this Part shall continue to be in force until amended or repealed or until
G the expiration of one year from such commencement, whichever is earlier.
Part IXA which came into force under the Constitution 74th Amendment
Act of 1992 deals with municipalities. Under Article 2430 which deals with
the constitution of municipalities, it is provided as follows:-

H "243Q. Constitution of Municipalities-
SAIJGRAMPANCHAYATv. STATE[SUJATAV.MANOHAR,J.] 269

(1) There shall be constituted in every State - A
(a) a Nagar Panchayat (by whatever name called) for a
transitional area, that is to say, an area in transition from a
rural area to an urban area;

(b) a Municipal Council for a smaller urban area; and B
(c) a Municipal Corporation for a larger urban area,

in accordance with the provisions of this Part :

Provided that a Municipality under this clause may not be c
constituted in such urban area or part thereof as the Governor
may, having regard to the size of the area and the municipal
services being provided or proposed to be provided by an industrial
establishment in that area and such other factors as he may deem
fit, by public notification, specify to be an industrial township.
D
(2) In this article, "a transitional area", "a smaller urban area" or
"a larger urban area" means such area as the Governor may, having
regard to the population of the area, the density of the population
therein, the revenue generated for local administration, the per-
centage of employment in non-agricultural activities, the economic E
importance or such other factors as he may deem fit, specify by
public notification for the purposes of this Part."

Under Article 243ZF, any provision of any law relating to Municipalities
in force in a State immediately before the commencement of the Constitu-
tion (Seventy-fourth Amendment) Act, 1992, which is inconsistent with the F
provisions of this Part, shall continue to be in force until amended or
repealed or until the expiration of one year from such commencement,
whichever is earlier. The Gujarat Municipalities Act, therefore, continued
to operate and would do so until 1.6.1994 unless earlier repealed or
amended.
G
The Gujarat Municipalities Act, 1962 was amended on 20.8.1993 in
~ view of the insertion of Part IXA in the Constitution. Section 264A was
substantially amended. It now provided that "for the purpose of this chap-
ter notified area means an urban area or part thereof specified to be an
industrial township area under the proviso to clause (1) to Article 2430 of H
270 SUPREME COURT REPORTS (1999) 1 S.C.R.
A the Constitution of India". Thus, as a result of this amendment in the
Gujarat Municipalities Act, an industrial area under the Gujarat Industrial
Development Act, which is notified under Section 16 of the Gujarat
Industrial Development Act would become a notified area under the new ·
section 264A of the Gujarat Municipalities Act and would mean an in-
B dustrial township area under the proviso to Clause (1) of Article 2430 of
the Constitution of India.

On 7.9.1993 the Government of Gujarat issued a notification under
Section 16 · of the Gujarat Industrial Development Act declaring Kaloi
Industrial Area as notified area under Section 264A of the Gujarat
C Municipalities Act. By another notification of the same date 7.9 .1993 the
Government of Gujarat excluded the notified area from Saij Gram
Panchayat under Section 9(2) of the Gujarat Panchayat Act, 1961.

Earlier the State Government had also issued a Government resolu-
tion dated 30.8.1993 whereby l/3rd of the amount recovered as con-
D solidated tax by the proposed notified area authority shall be used for the
benefit of the gram panchayats.
y

By another subsequent notification dated 14th of April, 1994 issued
by the Gujarat Government in exercise of powers conferred by Clause (2)
E of Article 2430 of the Constitution the Gujarat Government specified
certain local areas comprised in a Gram or a Nagar as the case may be,
declared as such under Section 9 of the Gujarat Gram Panchayats Act,
1961 to be a transitional area mentioned against it in column 3 of the
schedule attached to that notification. The areas which are the impugned
notified areas in these appeals are covered by that notification.
F
The appellants filed a writ petition in the High Court for quashing
the impugned notifications of7.9.1993 as well as the Government resolution •
dated 30.8.1993. The writ p.etition has been dismissed by the High Court
and hence these appeals have come before us.

G The Gram Panchayats affected have contended that the notification
of 7.9.1993 issued under Section 16 of the Gujarat Industrial Development ..
Act is contrary to Parts IX and IXA of the Constitution brought into force
by the 73rd and 74th Amendments. Hence the notification is illegal and
void. The said Gram Panchayats also contend that the notification of
H 7.9.1993 issued under Section 9(2) of the Gujarat Panchayat Act, 1961
SAU GRAMPANCHAYATv. STATE[SUJATA V. MANOHAR,J.] 271

-">; excluding the notified area from the gram panchayat is also contrary to A
Parts IX and IXA of the Constitution. The contention appears to be that
if any area forms a part of a panchayat under Part IX of the Constitution
_it cannot be treated as an industrial township under Part IXA of the
Constitution.
..,.
B
, The contention is based on a misconception about the relationship
of the provisions of Parts IX and IXA of the Constitution with any
legislation pertaining to industrial development. The Gujarat Industrial
Development Act operates in a totally different sphere from Parts IX and
· IXA of the Constitution as well as the Gujarat Panchayats Act, 1961 and
the Gujarat Municipalities Act, 1962 - the latter being provisions dealing c
with local self Government while the former being an Act for industrial
development, and orderly establishment and organisation of industries in
a State. The industrial areas which have been notified under Section 16 of
the Gujarat Industrial Development Act on 7.9.1993 were notified as
industrial areas under the Gujarat Industrial Development Act long back D
..,.., in the year 1972. These industrial areas have been developed by the Gujarat
Industrial Development Corporation and they can hardly be looked upon
as rural areas covered by Part IX of the Constitution. It is only such
industrial areas which can be notified under Section 16 of the Gujarat
Industrial Development Act, 1%3. If by a notification issued under Section
16, these industrial areas are deemed to be notified areas under the Gujarat E
Municipalities Act and are equated with industrial townships under the
proviso to Clause (1) of Article 2430, the constitutional scheme is not
violated. In fact, under Chapter 3 of the Gujarat Industrial Development
Act, 1962, the Gujarat Industrial Development Corporation, has been given
power, inter alia, to develop land for the purpose of facilitating the location F
.,. of industries and commercial centres. It has also been given the power to
provide amenities and common facilities in such areas including provision
of roads, lighting, water supply, drainage facilities and so on. It may do this
either jointly with Government or local authorities or on an agency basis
in furtherance of the purposes for which the corporation is established. The
industrial area thus has separate provision for municipal services being G
provided by the Industrial Development Corporation. Once such an area
.....
is a deemed notified area under the Gujarat Municipalities Act, 1964, it is
equated with an industrial township under Part IXA of the Constitution,
where municipal services may be provided by industries. We do not see
any violation of a constitutional provision in this scheme. H
272 SUPREME COURT REPORTS [1999] 1 S.C.R.
A As held by this Court in So/apur MIDC Industries Association Etc. v.
State of Maharashtra & Ors., JT {1996) 7 SC 14, a Municipal Corporation
Act and an Industrial Development Act have distinct fields of operation
and there. is no inter se conflict between the two. By reason of the notifica-
tions of 7.9.1993, the industrial area developed under the Gujarat Industrial
B Development Act is also deemed to be an industrial township for the
purposes of local self Government. Any possible conflict is also removed
by the second notification of 7.9.1993 removing this area from the ambit of r
the Gujarat Panchayats Act, 1961. The contention, therefore, that an area
forming a part of a panchayat under the Gujarat Panchayats Act, 1961
cannot be a notified area under the Gujarat Municipalities Act loses all
C force.

It is next contended that the proviso to Clause {1) of Article 2430
applies only to urban areas. It does not apply to a transitional area. Since
the industrial areas in question have been subsequently notified as transi-
D tional areas they cannot be equated with industrial townships. This conten-
tion also cannot be accepted. Article 2430 deals with constitution of
municipalities. Municipality is defined under Article 243P{ e) to mean "an
institution of self-government constituted under Article 2430. Article 2430
constitutes three types of municipalities - (a) a Nagar Panchayat {b) a
Municipal Council and (c) a Municipal Corporation. The proviso to Article
E 2430 deals with all three types of municipalities constituted under Clause
(1). It provides that a municipality under Clause {1) may not be constituted
in certain circumstances. This would refer to any of the three types of
municipalities. Although the proviso refers to such urban area or part
thereof, this "urban" area also covers a transitional area, in transition from
p rural to urban. It is because this area is also in the process of turning into
an urban area that it is put under Part IXA which deals with municipalities
in urban areas. Therefore, in respect of any of these three types of areas
set out in Clause (1) of Article 2430, having regard to the size of the area,
the municipal services being provided or proposed to be provided by an
industrial establishment in that area, and such other factors as the Gover-
G nor will deem fit to consider, he may, by public notification specify such
area to be an industrial township. All these relevant factors would be in
operation in an industrial area already notified many years back under an
Industrial Development Corporation Act as in the present case. Therefore,
there is no breach of Article 2430 if such an area is, under the provisions
H of an Industrial Development Act, equated with an industrial township
SAIJ GRAM PANCHAYATv. STATE [SUJATA V. MANO HAR, J.] 273
.... under Article 2430 . A

It was also contended that in order to be a notified area under the
Gujarat Municipalities Act, certain procedure is required to be followed.
Therefore, unless this procedure is followed an industrial area cannot
become a notified area simply by issuing a notification under Section 16 of B
the Gujarat Industrial Development Act, 1962. This contention was earlier
raised before the Gujarat High Court in the case of Naroda Nagar-
panchayat Ahmedabad v. State of Gujarat & Ors., (1977) GLR 814). The
High Court repelled this contention by pointing out that on a proper
construction of Section 16 it is not necessary for the State Government to
follow the procedure prescribed in Section 4 of the Gujarat Municipalities c
Act before enforcing the provisions relating to notified areas contained in
the Gujarat Municipalities Act in the industrial areas in question. It,
therefore, held that the requirements of Section 264A and 264D as then in
force, were not required to be complied with before a notification is issued
under Section 16. D

Explaining the purpose behind Section 16 the High Court has rightly
held that having regard to the power conferred upon the Gujarat Industrial
Development Corporation in the matter of provision of amenities and
common facilities in industrial estates and industrial areas, on levy of E
certain charges upon those who set up industries therein, an industrial area
would ordinarily be a self-sufficient township in itself which provides its
own amenities and recovers charges therefor. A local authority having
jurisdiction over such area will have to perform very few of its statutory or
discretionary duties in respect of such area. Yet it may levy and collect F
taJCes from those who set up industries in the area. It is to avoid this virtual
dual control and administration which might impede the growth and
development of industries that provision has, presumably, been made in
Section 16 for constituting an industrial area into a notified area and
thereby converting it into a separate administrative unit. As we have stated
earlier, creation of such a separate administrative unit is not contrary to G
,4 the scheme of Parts IX and IXA of the Constitution when Article 2430
provides for the creation of such a separate administrative unit in the form
of an industrial township. It has also been pointed out by the respondents
that neither Article 243N nor 243ZF invalidates any Industrial Develop-
ment Act. H
274 SUPREME COURT REPORTS (1999] 1 s:t.R.
A It was also contended by the appellants that under Section 9(2) of
the Gujarat Panchayats Act, 1961 the Gram Panchayats have to be con-
sulted before issuing a notification under Section 9(2). The respondents
have, however, pointed out that in the present case there has been extensive
consultation with the panchayats before the notifications of 7.9.1993 were
B issued. The appellants-Panchayats as well as the Taluka and District
Panchayats were consulted through the District Development Officer. He
had also asked for resolutions from the appellant-Panchayats, the Taluka
Panchayats and District Panchayats for being forwarded to the Develop-
ment Commissioner. All these have been taken into account before issuing
the notifications in question. The respondents have also pointed out that
C the Government has taken care to issue a resolution dated 30th August,
1993 by which 1/3rd of the revenue recovered as consolidated tax by the
notified area committee would be given for the benefit of the concerned
Gram Panchayats, thus avoiding any financial prejudice to them.

D It was also contended by the appellants that before any notification
could be issued under Section 16 of the Gujarat Industrial Development
Act, 1962, a hearing should have been given to the residents. Because
notifying an area under Section 16 of the said Act has civil consequences.
If the residents had any objections, they should have been considered.
Reliance was placed upon a decision of this Court in Baldev Singh and Ors.
E v. State of Himachal Pradesh and Ors., AIR (1987) SC 1239. In that case
under the Himachal Pradesh Municipal Act, a notified area had been
declared under Section 256. This Court said that the inclusion of an area
governed by a Gram Panchayat within a notified area would certainly
involve civil consequences. In such circumstances it is necessary that people
F who will be affected by the change should be given an opportunity of being
heard otherwise they would be visited with serious consequences like loss
of office in Gram Panchayats, an imposition of a way of life, higher
incidence of tax and the like. Although the section did not, in clear terms,
provide a right of hearing, the Court held that denial of such an opportunity
was not in consonance with the scheme of the Rule of Law governing our
G society. A similar view has been taken in State of U.P. and Ors. v. Pradhan
Sangh Kshettra Samiti and Ors., [1995] Supp. 2 SCC 305 at page 334. In this
case delimitation of panchayat areas and Gram Sabhas under the U.P.
Panchayat Raj Act of 1947 was considered by this Court. It said that an
opportunity of being heard should have been given to the people of the
H areas concerned. In that case, action having already been taken without
SAUGRAMPANCHAYATv. STATE(SUJATA V.MANOHAR,J.] 275
-'I- giving an opportunity of hearing, in view of the urgency, post-decisional A
... hearing was considered as sufficient compliance with the principle of audi
alteram partem. In the present case, however, there has been a long drawn
out exchange of views, consultations as well as consideration of objections
over the issuing of a notification under Section 16 of the Gujarat Industrial
Development Act, 1962 which was also linked with the exclusion of this
area from the panchayat area under Section 9(2) of the Gujarat Panchayats
B
' Act, 1961. It was precisely because of these consultations that GR of
30.8.1993 was also issued to provide revenue to the gram panchayats from
out of taxes collected from notified areas which were removed from the
.,•
jurisdiction of gram panchayats, therefore, the appellants cannot complain
of any violation of the principles of natural justice in the present case. c
In the premises, we do not see any reason to take a view different
from the view taken by the High Court The appeals are, therefore,
dismissed. There will, however, be no order as to costs.

P.T. Appeals dismissed. D

"'