Holding

The U.P. Sugar Undertakings (Acquisition) Act, 1971 is a valid law under Entry 42 of List III and does not violate the Constitution.

Summary

The petitioners, owners of twelve sugar undertakings, challenged the constitutional validity of the U.P. Sugar Undertakings (Acquisition) Act, 1971, which transferred those undertakings to a government corporation. They argued that the State legislature lacked competence because sugar is a "declared industry" under the Industries (Development and Regulation) Act, 1951, invoking Entry 52 of List I and contending that the Act violated Articles 31(2) and 14 of the Constitution. The Supreme Court held that the Act falls within Entry 42 of List III, an independent power to acquire property, and is not in conflict with the central IDR Act, thus the State had legislative competence. The Court also rejected the claim that the compensation principles were illusory and that the selection of undertakings was arbitrary, finding a rational basis for acquisition. Consequently, all appeals and special leave petitions were dismissed.

Issues considered

Whether the U.P. Sugar Undertakings (Acquisition) Act, 1971 is within the legislative competence of the Uttar Pradesh State Legislature.
Whether the Act violates Article 31(2) of the Constitution concerning compensation for acquisition.
Whether the Act infringes Article 14 by arbitrarily selecting certain sugar undertakings for acquisition.
Whether the Act encroaches upon the Union's power under Entry 52 of List I and the Industries (Development and Regulation) Act, 1951.
Whether Section 20 of the IDR Act bars the State from acquiring the scheduled undertakings.

Legislation cited

Subjects

legislative competenceacquisition of propertyEntry 42 List IIIEntry 24 List IIEntry 52 List Ideclared industrysugar industrycompensationArticle 31Article 14pith and substanceIndustries (Development and Regulation) Act

Judgment

,, 331

THE ISHWARI KHETAN SUGAR MILLS (P.) LTD.
f & ANOTHER ETC.
v.
THE STATE OF UTTAR PRADESH & ORS. ETC.
• April 2, 1980
[V. R. KRISHNA IYER, S, MURTAZA FAZAL ALI, D. A. DESAI, 8
R. S. PA<HAK AND A. D. KOSHAL, JJ;]
• U,P. Sugar Undertakings (Acquisition) Act 1971. States kgislatur;, if comp•·
ient to enact a law on declared industry.

•. Constitution of India Entry 51 List I, Entry 14, List II and Entry 42 of
~ill~~ c
By the U,P, Sugar Undertakings (Acquisition) Ordinanre, 1971 (which later
be<:ame an Act) twelve sngar undertakings stood transferred and veslfd in a
Government undertaking named the U.P. State' SUgar Corporation Limited. Tho
appellants' writ petitions before ther High Court impugning the constitutional
validity of the Act were dismissed.

In appeal to this Court it was contended on behalf of the appellants thal
since sugar is a declared industry under the Industries (Development and
Regnlation) Act, 1951 in view of entry 52 in Union List read with entry 24
in ·state list further read with Art. 246. Parliament alone is. competent to pass
the law on the subject and not the State Legislature and, therefore, the impugned
legislation is void.
Dismissing the appeals, E

HELD : Industry being a matier enumerated in entry 24 of List JI. only
the State legislature has the excIUSive power to legislate in respect of it, but
.thisr power is subject to the provisions of entries 7 and 52 o;f List I. While
under entry 7, if a declaration is made by Parliament that a particular industry
is necessary for defence or for the prosecution of war, Parliament, to the
exclusion of the State legislature, would be entitled to legislate in respect of that F
industry, a declaration by Parliament by law to assume control over any parti-
cular industry in public interest in a sine qua non to clothe Parliament with power
under entry 52, List I to legislate in respect of that industry. The declaration
t;ontemplated by this entry is , a declaration by law. A merei declaration un-
• accompanied by law is ineompalible with entry 52 of List l But that doe.
not mean that once a declaration is made in respect of anl industry that industry
as a whole is taken out of entry 24, List IL [337 F-H; 338 D, F; 339 E] G
Baiinath Kedia v. State of Bihm~ & Ors. [1970] 2 ~ 100 at 113 and
State of Haryana & Anr. v, Chanan Mal, etc, [1976] 3 SCR 688 at 700 referred
to.

The control under section 2 of the 1951 Act was assumed for a specific
and avowed object namely' development and regulation of certain industri<s. B
.TbJs control has to be exercised in the manner provided under the statuk:.
"Therefore, Parliament, has made a declaration for assuming control in respect
332 SUPREME COURT REPCTRTS [1980] 3 S.C.R.-

A of tho declared industries set out in the schedule of the Act only to the extont·
provided in tho Act.
A conspectUs of tho provisions of tho impugned Act shows that in pith an~·
substance it is one for acquisition of scheduled undertakings and such acquisition·
by transfer Of ownership of those undertakings to the Corporation would in n~· •
way come in conftict with any of tho provisions of the Central Act of 19 5I.
B Tho Central Act is primarily concerned with development and regulation of
declared indnstries and is not concerned with ownership of industrial undertakings-
in declared industries, except to the extC.Ut of control over management of. •
tho undertaking by tho owner. By the acquisition under the impugned Act ruuf
vesting of the undertakings in the Corporation they would still be' under the·
c<>ntrol of tho Central Government because the Corporation wonld be amenable
co the authority and jurisdiction of the Central Government. Therefore, the.:a
C i• no conJlict between the impugned legislation and the control exercised hy
the Central Government under the provisions of the Central Act. [340 H-341 A;.
344 C-G, 345 DJ

There is no force in the argument that thlj power of acquisition under
Entry 42, List ill is incidental to tho power to legilJlate in respect of various
topic; in the lists and, therefore, when the Union assumed control over the·
declared industry such control comprehends the power to acquire and henco
D the power of tho State Legislature to enact legislation for acquisition of property
of scheduled undertakings would be denuded. By the Constitution (Seventh·
Amemmeni) Act, Entzy 33 in List I and Entry 36 in List II were deleted
and a single comprehensive Entry 42 in List IIll (acquisition and requisitioninir
of property) was added. The power to acquire property can now be exercised·
concurrently by tho Union aud the States. After the substitution of Entzy 42
in List III it cannot be said that the power of acquisition and requisitioning of
prOperty is incidental to the other power. It is an independent power provided
foc in a specific entry. Therefore, both the Union and the State would have
power of acquisition and requisition of property. [345 E-F; 346 B-EJ
Thero is a long line of decisions whicll clearly establishes the proposition
that power to legislate for acquisition of property is an independent and separa.t<J
power end is exercisable only under Entry 42, List IIT and not as an incid.ent
<I the power to legislate in respect of a specific head of legislation in any
of the three lislli. This power of the State legislature tc:> legislate for acquisition
of property remains intact and untramelled except to the extent where on assump-
tion of control of an industzy by a decla1Jttion .. envisaged in Entry 52, list I
a further power of aajuisition is taken over by a specific legislation. [353 H-
354 A] .

G Ru.rtom Cavasjee Cooper v. Union of India [1970] 3 SCR 530 at 567, Raja-
mundry Electric Supply Corporation Ltd. v. State of Andlira Pradesh [1954] SCR
779. "•
State of Bihar v. Maharajadhiraja Sir Kameshlvar Singh [1952) S.C.R. 88?,
State of West Bengal v. Union of !11dia [1964] I S.C.R. 371, refe17ed to.
The argument that the State legislature tack~d con1petence to enact the
B impugned legislation is without force. Legislative power of tho State under
Entcy 24, List II is eroded only to the extent control -is assumed by the UniOn
pursuant to a declaration made by the Parliament in respect of a declared.

I
ISHWARI KHETAN SUGAR MILLS V. U-P. STATE 333

industry as spelt out by the legislative .,.,actment and the field occupied by •uch A.
t enactment is the measure of erosion. Subject to such erosion, on the remainder
tre Slate legislature will have power, to legislate in respect of " declared industry
wi1hout in any way trenching upon the occupied field. State legislature, which
is · otherwi!ie competent to deal with industry under Entry 24, List II, can
• du{ with that industry in exarcise of other powers enabling it to legislate under
.till'«ent heads set out in Llsts II and Ill a<1d this power cannot be denied to
the.State. [354 C, 352 E-F] S

• The contention. that the impugned Act is in violation of section 20 of the
Central Act ha~ no merit. 'fhc impugned legislation was not enacted for taking
ovel" tho management or control of any industrial undertaking by the Slate
Government. In pith and substance it was enacted to acquire the 6cheduled
undertakings. If an attempt was made to take over the management or control
of any industrial undertaking in a declared industry the bar oll section 20 would C
inhiltit exercise of such executive power. The inhibition of section 20 is on
tlie M:ecutive pOWet" but if as a sequel tol an acquisition of an industrial under~
taking the management or control of the industrial undertakinlll stands transfe~
to the acquiring authority section 20 is not attracted. It does not preclude or
fori>ld a State legislature rocercising legislative power under an entry other than
Enl1l' 24 of List II and if in exercise of that legislative power the consequential
:transfer of management or conttol over the industry or undertaking follows M: D
an incident of acquisition such taking over of management or control pursuant
to an exercise of legislative power is not within the inhibition of section 20.
[355 F, A·El
The challenge to the validity of the impugned legislation on the .gronnd of
viQlation of Article 31 (2) must fail. At the time of acquisition the scheduled
nnderiakings had a1 heavy backlog of carry forward losses, they failed I<> pay the J&
growers the price of cane purchased, the labour was not paid as a result of
which there was labour unrest. The situation did not improve etven when some
of !he undertakings were taken over under the Central Act acd a drastic remedy
was called for in public interest and while applying that drastic remedy of
acquisition tho principles which are valid foc determining the value of machinery
wero adopted. The adequacy or otherwise of compensation on thei calculus
made by applying the principles is beyond iudicial review. [360 C, 359 H· p
360 Bl
Rustom Cavasjee, Cooper v. Union of India [1970] 3 SCR 530 at 567, Vajra,
velll Mudafiar v. Special Deputy Collector of Land Acquisition West Madras [19651
1 SCll 614, Union of India v. Metal Corpoi·aticn of India Ltd. & Anr. [1967]
• 1 sat 256, State of Guiarat v. Shanti/at Manga/das & Ors. [1969] 3 SCR 341
and His Holiness Kesavananda Bharati 'Sripadagaivaru v. State of Kerala [1973]
Suppl. SCR 1 referred to. G
rathak & Koshal II (concurring in the result)
It is not necessMy in' this case to express any opinion1 on the question whether
the declaration made by Parliament in section 2 of the Industries (Development
arui Regulation) Act, 1951 in respect of the indust~ies specified in the Firsq
iclteduie to that Act can be regarded as limited to removing from the scope of
Enli:v 24 of List II of tho Seventh Schedule to the Constitution only so much H
of tire legislative field as is covered. by the subject matter and content of thlit
Act or it can be reg&rded as effecting the removal from that entry of the
334 SUPREME COURT REPORTS [1980] 3 S.C.R.

A entire legislature field embracing all matters pertaining to the industries specified
in the declaration.. The controversy in the prese1n.t case can be adeqUately
disposed of on the ground that .the legislation falls within Entry 42 of rm m
and cannot be related to Entj 52 of List I or Entry 24 of List n. [362 E-F,
363 BJ ·
The Hingir Rar.zpur Coal Co. Ltd. and Others v. The State of Oris.ra and
•
Other. [1961] 2 SCR 537, State of Orissa v. M. A. Tulloch and'Co. [1964] -4
B SCR 461, Baijnath Kedia v. State of Bihar & Ors. and Stale of Haryana &: Anr~
v. Chanan Mal, etc. [1976] 3 SCR 688 held inapplicable.

Civrr. APPELLATE JURISDICTION: Civil Appeal Nos. 1614, 1652
and 1637 of 1979.
Appeals by Special Leave from the Judgment and Order dated
c 3-5-1979 of the Allahabad High Court in Civil Misc.. Writ Nos.
4170/71, ~130171 and 4193/71.
AND
PETITIONS FOR SPECIAL LEAVE TO APPEAL (CIVIL) Nos.
6246, 6252, 6373 & 8050/79.
From the Judgment and Order dated 3-5-1979 of the Allahabad
D High Court in Civil Misc. Writ Nos. 4150, 4173, 4793 and 4422/71.
· F. S. Nariman, Bhaskar Gupta, Rajesh Khaitan, Rohington Nari-
man and P. R. Seethrama for the Appellants in CA 1614/79.
A. K. Sen, Manoj Swarup, Miss I,alita Kohli and S. K. Srivastava
for the Appellants in CA No. 1652/79 and SLPS. 6146 and 6373/79. .""
E R. A. Gupta for the Petitioner in SLP No. 6252/79.
N. N. Sharma and N. N. Kacker for the Petitioner in SLP No. ·
8050/79.
Lal Narain Sinha Att. GenL in C.A. 1614.
Rishi Ram Adv. General, U.P. in C.A. 1652.
F Raju. Ramchandran and 0. P. Rana for the RespondentS in All the
Appeals.
Th~ Judgment of V. R. KriShna Iyer, S. Murtaza Fazal Ali and
D. A. Desai, JJ. was delivered by Desai, J., R. S. Pathak, J. gave a
separate Opinion on behalf of A. D. Koshal, J. and himsel[ •
DESAI, J.-Acquisition of industrial undertakings involved in .manu-
G
facturing sugar, a commodity satisfying the basic necessity, in larger
public interest and the attempt of the owners of the undertakin~ to
thwart the same, paints the famili_ar landscape in this group of appeals.
As a sequel to the serious problems created by the owners of cer-
tain sugar mills in the State of Uttar. Pradesh for cane growers and
H labour employed in sugar mills, having an adverse impact on the
general economy of tbe areas where these sugar mills were-situated and
with a view to ameliorating the situation posing a threat to tlie economy,
ISHWARI Kl!ETAN SUGAR MILLS v. U.P. STATE (Desai, J.) 335

the Governor of Uttar Pradesh promulgated an Ordinance on July 3, A
1971, styled as U.P. Sugar Undertaking (Acquisition) Ordinance, 1971
f (13 of 1971) ('Ordinance' ~ot short), with a view to transferring and
vesting sugar undertakings set out in the Schedule to the Ordinance in
the U.P. State Sugar Corporation Ltd. ('Corporation' for short), a
• Government Company within the meaning of s. 671 of the Companies
B
Act, 1956. Subsequently, by U.P. Sugar Undertakings (Acquisition)
Act, 1971, (U.P. Act 23 of 1971) ('Act' for short), the Ordinance was
repealed and was replaced. Schedule to the Act enumerates 12 sugar
undertakings (referred to as 'scheduled undertakings') and by the
operation of s. 3, these scheduled undertakings stood transferred to and
vested in the Corporation from the appointed day, i.e. July 3, 1971,
the date on which the Ordinance was issued. On .the promulgation of
c
the Ordinance 11 writ petitions were filed in the Allahabad High Court
under Article 226 of the Constitution challenging the constitutional
f validity of the Ordinance and when the Act replaced the Ordinance
' effective from August 27, 1971, the writ petitions were amended
incorporating the challeng(\ to the Act also. The Ordinance and the D
Act were challenged in the High Court on the following grounds :
( 1) The State legislature had no legislative competence to
enact it;
(2) The Act violated Art. 31 of the Constitution because
the acquisition was not for a public purpose and the
j E
compensation proposed in the Act was illusory;
(3) The Act was in breach of Art. 19(l)(f) and (g) of
the Constitution;
( 4) The Act infringed the gurantee of equality enshrined
in Art. 14 of the Constitution.

A Division Bench of the High Court by a common judgment dated
May 3, 1979, repelled the contentions on behalf of the petitioners and
upheld the constitutional validity of the Act. Hence these appeals by
the original petitioners, the owners ,of the scheduled undertakings .
• Mr. F. S. Nariman, learned counsel who led on behalf of the G
appellants, confined his attack to two grounds : (a) U.P. State legisla-
ture lacked legislative competence to enact the impugned Act; and (b)
compensation awarded f.or acquisition in violative of Art. 31 (2) as it
stood prior to its amendment by the Constitution (Twentyfifth Amend-
ment) Act, 1971, which came in.to force on April 20, 1972. Mr. R. A.
Gupta who appeared in SLP. 6252/79, canvassed an additional con- H
tention that the impugned Act is viplative of Art. 14 inasmnch as those
similarly situated and similarly circum9tanced sugar undertakings have
336 SUPRE)'dE COURT. REPO)lTS 11980] 3 S.C.R.

not been acquired and the petitioners' scheduled undertakings hav•
~=~ single~.d out for a drastic treatment of take-over by way of acqtlfsi-

The m ·n thrust of the attack was that the U.P. Legislature Jack,ed
legislative . ompetence to enact the impugned Act. There were two
a distinct limbs of this submission which would be examined separately. •
The first limb of the submission was that in exercise of legislative power
flowing frr: Entry 52 Llst I the Parliament made the requisite declara~ •
tion ins. of the Industries (Development and Regulation) Act, 1951
('IDR Ac for short), and in view of placitum 25 of the first schedule
'
to the ID . Act sugar being a declared industry, that industry goes out
c pf Entry 24 List II, and hence U. P. State legislature was denuded of
all legislative power to legislate in respect of sugar industry and as the
impugned legislation is in respect of industrial undertaking in sugar in-
dustry, thel impugned legislation is void on account of legislative incom-
petence. 'Ij:e learned Attorney General countered it by saying that the
power to acquire property derived from entry 42 in List III is an inde-
D pendent wwer and the impugned Act being in pith and substance an
Act to acquire scheduled undertakings, meaning thereby the properties
of the scheduled undertakings, the power of the State legislature to
legislate in~·s behalf is referable to entry 42 and remains intact irrespec-
tive of the act that sugar is a declared industry, control of which is taken
over by th, Union Government pursuant to the declaration made under
E s. 42 of the IDR Act. This necessitates an analytical examination of the
relevant entries keeping in view legislative perspective and the historical
background through which these entries have passed.
I
Entry i in the Union List reads as under :
f "7.1Industries declared by parliament by law to be
necessary for the purpose of defence or for the prosecution •
f
of war."
Entry 2 in the same List reads :
" 2. Indusries, the control of which by the Union is
G decla d by parliament by law to be expedient in the public
1
•
interest."
Entry 24 in List II (State List) reads as under :
"24. Industries subject to the provisions of entries 7 and -
52 o~ List I."
H It may be noted here that entry 33 in List I, entry 36 in Llst II and
entry 42 · Llst III were amended bys. 26 of the Constitution (Seventh
Amendment) Act by which entry 33 of List I and entry 36 of List II
ISHWARI KHETAN SUGAR MILLS V. U.P. STATE (Desai,/.) 337

were deleted and entry 42 in List Ill was. amended to read as set out A
liereinabove. Entry 33 in List I and entry 36 in List II conferred legis-
I lative power on the Union and the States respectively for acquisition or
requisitioning of property for its own purpose. Constitution (Seventh
Amendment) Act. 1956, which made the aforementioned amendment
-was designed to clear the ambiguity about the power of acquisition and
• requisitioning of property being not a power incidental to any of the
logislative powers but an independent power by itself. The object be-
•
·hind the amendment has been thus explained. "The existence of three
entries in the legislative lists (33 of List I, 36 of List II and 42 of List
III) relating to the essentially single subject of acquisition and requisi-
tioning of property by the Government gives rise to unnecessary techni-
cal difficulties in legislation. In order to avoid these difficulties and
c
simplify the constitutional position, it is propo'sed to omit the entries
in the Union and State Lists and replace the entry in the concurrent
list by a comprehensive entry covering the whole subject" (see State-
ment of Objects and Reasons in respect of Constitution (Seventh
Amendment) Act, 1956). D
Having set out the historical background, attention may now be
turned t_o the scope and content of legislative power of Union and the
-States flowing from entry 52 in List I and entry 24 in List II in respect
-0f the topic of 'industry.'
E
The scope and content of entry 52, List I and entry 24, Llst II
has to be demarcated with precision to avoid a possible confusion likely
to emanate from an inter-dependence and interaction of the two entries.
'Industry' as a head of legislation is to be found in entry 24, List II
with this limitation that it is subject to the provisions of entries 7 and
52, List I. The difference in the language in which entries 7 and 52 are
couched has a bearing on the interruption of entry 52. In the former
-case if a declaration is made by the Parliament that the particular indus-
try is necessary for the purpose of defence or for prosecution of the
war, parliament would be exclusively entitled to legislate in respect of
that industry to the exclusion of State legislatures because the requisite
• .declaration will have the effect of taldng out that industry from entry G
24, List 11 A declaration by the parliament by Jaw to assume control
over any particular industry in public interest is a sine qua 1Wn to
clothe Parliament with power under entry 52, List I to legisiate in res-
pect of that industry because otherwise industry as a general head of
·Jegislation is in the exclusive sphere of State legislative activity pursuant
to entry 24, List II. Distribution of legislative powers as enacted in H
.Part XI and Art. 246 clearly demarcate the field of legislative activity
J'eserved for parliament and for State legislatures and also the concur-
338 SUPREME COURT REPO'.RTS {1980] 3 S.C.R •.

A rent list in respect of which both can legislate subject to other provisions.
of part XI. Sub-art. (3) of Art. 246 provides that the State legislature
has exclusive power to make laws with respect to any of the matters
enumerated in List II in the Seventh Schedule. A fortiori, industry
being the matter enumerated in List II the State legislature has exoln-
i;ive power to legislate in respect of it and keeping aside for the time
B being the words 'subject Ip the provisions of entries 7 and 52 of List •
I', the State legislature alone can legislate in respect of the legislative
head 'industry.' Ipso fqcto, parliament would not have power to
legislate in respect of industry as a legislative head. Now,
entry 52 , List I on its own language do·es not provide
a field of legislative activity for the Union Parliament
c unless and until a declaration is made by parliament by law to assume J_
I
control over specified industries. The embargo on the power of Parlia-
ment to legislate in respect of industry which is in List II would be lifted
once a declaration is made by Parliam<:nt by l~w as envisaged by entry
52, List I. In the absence of a declaration as envisaged by entry 52,
List I, it is incontrovertible that Parliament has no power to legislate on
D
the t;opic of industry. Etitry 52, List I on its own language does not
contemplate a bald declaration for assuming control over specified
industries, but the declaration has to be by faw to assume control of
specified industries in public interest. The legislation enacted pursuant
to the power to legislate acquired by declaration must be for assuming •
control over the industry and the declaration has to be made by law
enacted, of which declaration would be an integral part. Legislation for
assuming control containing the declaration will spell out the limit of
control so assumed by the declaration. Therefore, the degree and·
extent of c:ontrol that would be acquired by Parliament pursuant to the
declaration would necessarily depend upon the legislation enactect
I!' spelling out the degree of control assumed. A mere declaration unac-
companied by law is incompatible with entry 52, List I. A declaration
for assuming control of specific industries coupled with Jaw assuming
control is a pre-requisite for takllig legislative action under entry 52,
List I. The declaration and the legislation pursuant to declaration to,
that extent denude the power of State legislature to legislate under entry
G 24, List II. Thereilore, the erosion of the power of the State legislature
to legislate in respect of declared industry would not occur merely by
declaration but by the enactment consequent on the declaration pres-
cribing the extent and scope of control. When a declaration is made
as contemplated by entry 52, List I in respect Of any particular industry.
r
it is contended that, that industry as a topic of legislation would be re-
H moved from the legislative sphere of the state. What is the effect of. a
declaration made in respect of mines and minerals as contemplated by
entry 54 has been succinctly laid down by a Constitution Bench of this
ISHWARI KHETAN SUGAR MILLS v. U.P. STATE (Desai, J.) 3 39

Court in Baij11ath Kedia v. State of Bihar & Ors.,(') in the following A
terms:
"Once this declaration is made and the extent laid down,
the subject of legislation to the extent laid down becomes
• •
)
an exclusive subject for legislation by Parliament. Any
legislation by the .State after such declaration and trenching B
upon the field disclosed in the declaration must necessarily
be unconstitutional because that field is abstracted from the
• legislative competence of the State Legislature .... The only
dispute, therefore, can be to what extent the declaration by
Parliament leaves any scope for legislation by the State legis-
lai!ure. If the impugned legislation falls within the ambit of c
such scope it will be valid, if outside it, then it must be
declared invalid."

Sugar is a declared industry. Is it, however, correct to say that once
a declaration is made as envisaged by entry 52 List I, that industry as
a whole is taken out of entry 24, List II? In respect of an identical D
entry 54, List I in the passage extracted above it is said that to the
extent declaration. is made and extent of control laid, that much and
that much alone is abstracted from the legislative competence of the
State legislature. It is, therefore, not correct to say that once a declara-
tion is made in respect of an industry that industry as a whole is
) taken out of entry 24, List II. Similarly, in State of Haryana & Anr. o/. E
Chanan Mal, etc.(') while upholding the constitutional validity of the
Haryana Minerals (Vesting of Rights) Act, 1973, after noticing the
cleclaration made in s. 2 of the Mines & Minerals (Regulation and
Development) Act, 1957, ('Mines & Minerals Act' for short), as envi-
saged by entry 54, List I it was held :
F
"Moreover, power to acquire for purposes of develop-
,.....
..
ment and regulation has not been exercised by Act 67 of
1957. The existence of power of Parliament to legislate on
this topic as an incident of legislative power on another sub-
l • ject is one thing. Its actual exercise is another. It is difficult
to see how the field of acquisition could become occupied G
hy a central Act in the same way as it had been in the
West Bengal case even before Parliament legislates to acquire
land in a State."

These pronouncements demonstrably show that before State legislature
is denuded of power to legislate under entry 24, List II in respect of H
(I) [1970] 2S.C.R.1001tllJ.
(2) [19761 J S. C. R. 688 at 700.
2-289SCI/80
340 SUPREME COURT REPORTS [1980] 3 S.C.R.

A a declared industry, the scope of declaration and consequent control
assumed by the Union must be demarcated with precision and. then
proceed to ascertain whether the impugned legislation trenches upon
the excepted field.

The declaration made in s·. 2 of IDR Act reads as under :
B •
"It is hereby declared that it in expedient in the public
interest that the Union should take under its control the
industries specified in the First Schedule."

The contention is that as there are no words of limitation to be
c found in s. '2 in respect of the control assumed by the declaration by
the Union, the necessary concomitant of such declaration is that the
State legislature is totally denuded of any power to deal with such
-.f
declared industry. To buttress this argument reference was made to
the declaration made by the Union pursuant to entry 54, List I, as
set out in s. 2 of the Mines & Minerals Act which reads as under :
D
"It is hereby declared that it is expedient in the public
interest that the Union should take under its control the
regulation of mines and the development of minerals to the
extent hereinafter provided."

E Absence of the expression "to the extent hereinafter provided" was
pressed into service to point out that while in respect of mines and
minerals the Union has assumed control to the extent provided in the
Mines & Minerals Act, in the case of declared industries the control
is absolute, unlimited, unfettered or unabridged and, therefore, every-
thing that would fall within the connotation of the word 'control' would
F be within the competence of the Union and to the same extent and
degree the State legislature would be denuded of its power to legislate
in respect of that industry. It was said that in respect of declared indus-
tries total control is assumed by the Union and, therefore, entry 24,
List II on its import must be read industry minus the declared industry ~
because entry 24, List II is subject to entries 7 and 52, List I. Undoub-
G tedly the Union is authorised to assume control in respect of any indus-
try if parliament by Jaw considers it expedient in the public interest.
•
The declaration has to be made by the Parliament, but the declaration
has to be by law not a declaration simpliciter. The words of limitation {
on the power to make declaration are 'by law'. Declaration must be
an integral part of law enacted pursuant to declaration. The declaration
H in this case is made in an Act enacted to provide for the development \
and regulation of certain industries. Therefore, the control was assumed
not in abstract but for a specific and avowed object, viz., development
..r
ISHWARI KHETAN SUGAR MILLS v. U.P. STATE (Desai, J.) 341

and regulation of certain industries. The industries in respect of which A
contro1 was assumed for the purpose of their development and regula-
tion have been set out in the Schedule. This control is to be exercis-
' ed in the manner provided in the statute, viz., IDR Act. The declara-
tion for assuming control is to be found in the same Act which pro-
• vides for the limit of control. The deducible inference is that Parlia-
ment made the declaration for assuming control in respect of declared B
industries set out in the Schedule to the Act to the extent mentioned
in the Act. It is difficult to accept the submission that s. 2 has to be
• read dehors the Act and not forming part of the Act. This would be
doing violence to the art of legislative draftmanship. It is open to
Parliament in view of entry 52, List I, to make a declaration in respect
of industry or industries to the effect that the Union will assume its
c
control in public interest. It is not to be some abstract control. The
control has to be concrete and specific and the manner of its exercise
has to be laid down in view of the well-established proposition that
executive authority must have the support of law for its action. In a
country governed by rule of Jaw, if the Union, an instrumentality for
D
the governance of the country, has to exercise control over industries
by virtue of a declaration made by Parliament, it must be exercised by
law. Such law must prescribe the extent of control, the manner of
its exercise and enforcement and consequence of breach. There is no
such concept as abstract contro1. The control has to be concrete and
j the mode and method of its exercise must be regulated by law. Now, E
Parliament made the declaration not in abstract but as part of the IDR
Act and the control was in respect of industries specified in the First
Schedule appended to the Act itself. Sections 3 to 30 set out various
modes and methodology, procedure and power, to effectuate the control
which the Union acquired by virtue of the declaration contained in s.
2. Industry as a legislative head finds its place in entry· 24, List II. F
The State legislature can be denied legislative power under entry 24
to the extent Parliament makes declaration under entry 52 and by such
declaration Parliament acquires power to legislate only in respect of
those industries in respect of which declaration is made and to the
extent as manifested by legislation incorporating the declaration and no
• more. The Act prescribes the extent of control and specified it. As G
the declaration trenches upon the State legislative power it has to be
construed strictly. Therefore, even though the Act enacted under entry

' 54 which is to some extent in pari materi'a with entry 52 and in a
parallel and cognate statute while making the declaration the Parlia-
ment did use the further expression "to the extent herein provided"
while assuming control, the absence of such words in the declaration H
in s. 2 would not lead to the conclusion that the control assumed was
to be something in abstract, total and unfettered and not as per various
342 SUPREME COURT REPO;ns [1980] 3 S.C.R.

A prp'Visions of the IDR Act. The lacuna, if any, is made good by hedg-
ing the power of making declaration to be made by Jaw. Legislative
intention has to be gathered from the Act as a whole and not by piece-
meal examination of its provisions. It would, therefore, be reasonable
to hold that to the extent Union acquired control by virtue of declara-
tion in s. 2 of the IPR Act as amended from time to time, the power •
B of the State legislature under entry 24, List II to enact any legislation
in respect of declared industry so as to encroach upon the field of con-
trol occupied by IDR Act would be taken away. This is clearly borne
out not only by the decision in Baijnath Kedia's case (supra) where
undoubtedly while referring to the control assumed by the Union by a
declaration made in s. 2 of the Mines & Minerals Act, it was said that to
c what extent such a declaration would go is for Parliament to determine
and this must be commensurate with public interest, and once this
declaration is made and the extent laid down, the subject of legislation
to the extent laid down becomes an exclusive subject for legislation by
Parliament. It is not merely some abstract control but the extent of the
D control assumed by the Union by the provisions of IDR Act pursuant
to declaration made by Parliament that the State Legislature to that
extent, that is, to the extent the provisions of IDR Act occupies this
field, is denuded of its power to legislate in respect of such declared
industry.
The respondents assert the validity of the impugned legislation
E
contending that up.on its true construction and proper ascertainment
of its object, it is a legislation for acquisition of scheduled undertakings
and the power to acquire by legislation such scheduled undertakings
by the State is derived from entry 42, List III. The controversy, there-
fore, centres round the question whether the impugned legislation is
in respect of a declared industry referable to entry 24 or one for acqui-
tion of scheduled undertakings in exercise of the power of acquisition
and requisitioning of property derived from entry 42, List III. Appel-
lants contend that a reference to Objects and Reasons for enacting the ~
r
impugned legislation would show that the owners of scheduled under-
takings had created serious problems for the cane growers and labour
which created an adverse impact on the general economy of the areas •
G
where these undertakings were situated, the legislation was enacted
to acquire the undertaking and pay compensation and also pay cane
growers and labour on high priority and to restart undertakings for f
crushing season. It was said that these are purely managerial functions
discharged by owners of undertakings and if the impugned Act was
ff devised and enacted primarily to assume these managerial functions,
the Act would be beyond the legislative competence of the State legis-
lature a8 it trenches upon the field occupied by IDR Act specifically
ISHWARI KHETAN SUGAR MILLS v. U.P. STATE (Desai,!.) 343

enacted to empower Union Government to provide effective control A
1 over industrial undertakings in declared industry to prevent mismanage-
ment, or to rectify the same by taking over management.
When validity of a legislation i~ challenged on the ground of want
• of legislative competence and it becomes necessary to ascertain to which
entry in the three lists the legislation is referable to, the Court has evolv- 8
ed the theory pf pith and substance. If in pith and substance a legisla-
tion falls within one entry or the other but some portion of the subject-
matter of the legislation incidentally trenches upon and might enter
a field under another List, the Act as a whole would be valid not with
standing such incidental trenching. This is well established by a catena
of decisions [see Union of India v. H. S. Dhilkm,(I) and Kerala c
State Electricity Board v. lndian Aluminium Co.(2 )]. After referring to
these decisions in State of Karnataka & Anr. etc. v. Ranganatha Reddy
& Anr. etc.( 3 ) Untwalia, J. speaking for the Constitution Bench has in
terms stated that the pith and substance of the Act has to be looked
into and an incidental trespass would not invalidate the law. The chal-
lenge in that case was to the Nationalisation of contract carriages by D
the Karnataka State, inter alia, on the ground that the statute was in-
valid as it was a legislation on the subject of interstate trade and com-
merce. Repelling this contention the Court unanimously held that in
pith and substance the impugned legislation was for acquisition of con-
j tract carriages and not an Act which deals wiih intet-State trade and
commerce. E
To start with, it is necessary first to ascertain in pith and substance
to what entry in a particular list the impugned legislation is referable.
If it is referable to entry other than 24, List II, such as entry 42, List
III, it would be necessary to precisely ascertain whether it ·in any way
trenches upon the field occupied by the declaration made by Parlia- p
ment to assume control over sugar industry as manifested by the
various provisions of the IDR Act.
Section 3 of the Act provides for vesting of scheduled underta-
kings from the appointed day in the Corp,otation. Section 4 provides
• for consequences of vesting. Section 5 makes it obligatory on every per-
son in whose possession or custody or under wh,ose control any ~ro G
perty or asset, book of account, register or other document comprised
in that undertaking may be, to forthwith deliver the same to the Collec-
tor. Section 7 provides for determination and mode of payment of
<::ompensation for acquisition of scheduled undertakings. Section 8 pro-
vide6 for claims to be satisfied ont of compensation payable to the
n
(I) [1972] 2 S. C.R. 33.
(2) [1976] 1 S. C.R. 552.
(3) [1978] 1. S. C. R. 641.
344 SUPREME COURT REPORTS [1980] 3 S·C.R.

A owners of the undertakings. Section 9 provides for avoidance of certain
secnred debts consequent upon acquisition. Section 11 provides for
appeal and s. 12 provides for constitution of a Tribunal to perform
the functions assigned to it by the Act. Section 13 provides for powers
and procedure of the Tribunal. Section 14 provides for ouster of juris- •
dication of civil conrts in respect of any dispute arising from the
B implementation of the Act. Section 16 confers protection on the emp-
'
loyees of the scheduled undertaking. The rest are only consequential
sections. A comprehensive examination of all the provisions of the Act
indisputably shows that in pith and substance the impugned Act is one
Act for acquisition of scheduled undertakings and such acqaisition
c tiontransfer
by of ownership of the scheduled undertakings to the Corpora-
would in no way come in conflict with any of the provisions of
the IDR Act or would not trench upon any control exercised by the
Unipn under the various provisions of the IDR .Act. In fact the IDR
Act, generally speaking, does not deal with the ownership of indust-
rial undertakings in declared industries. The Act is primarily concerned
D with development and regulation of the declared industries. The Cent-
ral Government has power under ss. 18A and 18AA of the IDR Act
to assume direct management or control of industrial undertakings in
certain cases and even after acquisition of scheduled undertakings
under the impugned legislation the power of the Central Government
under ss. ! SA and l SAA would remain intact. Even s. 1SFA provides
E for taking over management or control of a company which is being
wound up with the permission of the High Conrt and in such a situa-
tion the authorised perso'n appointed by the Central Government would
be deemed to be Official Liquidator under sub-s. (4) of s. !SFA. Pro-
vision contained in Chapter IIIAC of IDR Act enables Central Goyt.
to direct sale of the industrial undertaking under certain circnrnstances
F and in the situation as set out ins. 18FE(7) to pnrchase the same. But
these powers can be exercise irrespective of the fact who at the rele-
vant time, the owner of the undertaking is. The IDR Act is not at all
concerned with the ownership of industrial undertakings in declared
industries, except to the extent of control over management of the •
undertaking by the owner. Owner is defined in s. 3(f) in relation td
' G an industrial undertaking, to mean the person who, or the authority
which, has the ultimate control over the affairs of the undertaking, and,
where the said affairs are entrusted to a manager, managing director
pr managing agents, such manager, managing director or managing
agent shall be deemed to be the owner of the undertaking. This deeming
H fiction enacted in respect of the concept of ownership clearly mani-
fest the legislative intention that IDR Act treats that person to be
the owner who has the ultimate control over the affairs of the under-
ISHWARI KHETAN SUGAR MILLS v. U.P. STATE (Desai, J.) 345

taking and if that ultimate control is entrusted to even a manager, for A
the purposes of the IDR Act the manager would be the owner. This
must be so in the very nature of things because the IDR Act is essen-
tially concerned with the control over the management of the industrial
• undertakings in declared industries. By the acquisition under the im-
pugned Act and vesting of the scheduled undertakings in the Corpora-
B
tion the scheduled undertakings will never the less be under the con-
trol of the Central Government as exercised by the provisions of the
IDR Act because the Corporation would be the owner and would be
amenahle to the authority and jurisdiction of the Central Government
as the provisions of the IDR Act would continue to apply to the
scheduleJ undertakings, sugar being a declared industry, and ,;cheduled c
undertakings are industrial undertakings within the meaning of the !DR
Act. Nu provision from IDR Act was pointed out to us to show that
in impkmcnting or enforcing such a provision the impugned legisla-
tion would be an impediment. Therefore, there is no conflict between
the impc:gned legislation and the control exercised by the Central
Government under the provisions of the IDR Act and there is not D
even a remote encroachment on the field occupied by IDR Act.
The main thrust of the submission was that the power of acquisition
under entry 42, List III is not an independent power but it is incidental
to the power to legislate in respect of the various topics in various
j
lists and. therefore, when by a declaration made by the parliament
E
enacted in s. 2 of the IDR Act the cpntrol over declared industry is
assumed by the Union, such control will also comprehend the power
to acquire and hence the power of the State legislature to enact legis-
lation for acquisition of property of scheduled undertakings would be
denuded as that power as an intergral element of control would vest
in the Union Government. The focal point of controversy, therefore, F
is whether ihe power of acquisition and requisitioning of property
under entry 42. List III is an independent power by itself or it is an
integral and in,eparahle element of the power of contrcl over industry.
• Ccmstitution amending process bearing on the three relevant entries
may he noticed. Before the Constitution (Seventh Amendment) Act,
1956. which came into force gn November l. 1956. Entry 33 in List I G
read:
"Acquisition or requisitioning of propcrlv for the purpose
of the LTnion."
Similarly. Entry 36 in List II read :
"Acquisition or requisitioning of property except for the H
purpose of the Union subject to the provisions of entry 42 of
List III.''
346 SUPREME COURT REPORTS [1980] 3 S.C.R.

A At that time entry 42 in List III read :
"Principles on which compensati,on for property acquired
or requisitioned for the purposes of the Union or of a State
or for any other public purpose is to be determined, and the
form and the manner in which such compensation is to be
given".
•
B
By the Constitution (Seventh Amendment) Act, the three entries
were repealed. Entry 33 in List I and entry 36 in List II were deleted
and a single comprehensive entry 42 in List III was substituted to read :
'Acquisition and requisitioning of property'. Accordingly, the power
to acquire property could be exercised concurrently by the Union and
C the States. Even if prior to the deletion of Entry 33 in List I and
entry 3 6 in List II an argument could possibly have been advanced
, that as power of acquisition of property was conferred both on Union
and the States to be exercised either for the purpose of the Union or
for the State it was incidental to any other legislative power flowini:
from various entries in the three Lists and not an independent power,
D but since the deletion of entry 33 in List I and entry 36 in List II and
substitution of a comprehensive entry in List III, it could hardly be
urged with confidence that the power of acquisition and requisitioning
of property was incidental to other power. It is an independent power
pcovided for in a specific entry. Therefore, both the Union and the
State would have power of acquisition and requisitioning of property.
E This position is unquestionably established by the majority decision
in Rustom Cavasjee Cooper v. Union of India(') where Shah, J.
speaking for the majority of 10 Judges held as under :
"power to legislate for acquisition of property is exer-
cisable only under entry 42 of List III and not as an incident
of the power to legislate in respect of a specific head of legis-
F
lation in any of the three lists."
In reaching this conclusion reliance was placed on Rajamundry Electric
Supply Corporation Ltd. v. State of Andhra Pradesh.(') It was, how-
ever, urged that the proposition culled out from Rajamundry Electric
Supply Corporation case by Shah, J. in R. C. Cooper's(') case is not •
G borne out by the observation 'in the first mentioned case. In Rajamundry
Electric Supply Corporation( 2 ) case the challenge was to the Madras
Electric Supply Undertakings (Acquisitipn) Act, 1949, on the ground
that the Madras legislature was not competent to enact the legislation
because at the relevant time there was no entry in the Government
of India Act, 1935, relating to compulsory acquisition of any commer-
H cial or industrial undertaking. This challenge failed in the High Court
(1) [19701 3 S. C.R. 530 at 567.
(2) [1954] S. C. R. 779.
ISHWARI KHETAN SUGAR MILLS v. U.P. STATE (Desai, J.) 347

but on appeal the challenge was accepted by a Constitution Bench of A
this Court. Now, it must be remembered that the impugned legislation
in that case was a pre-Constitution legislation then governed by the
Government of India Act, 1935. The challenge was that the State
• legislature had no power td enact a legislation for acquisition of an
electrical undertaking. On behalf of the State the Act was sought to be
sustained on the ground that the Act was in pith and substance a law B
with respect to electricity under entry 31 of the Concurrent List and,
therefore, the State legislature was competent to enact the same. After
scrutinising the Act this Court came to the conclusion that in pith and
substance the Act was one to provide for acquisition of electrical under-
taking and, therefore the State legislature lacked competence to enact
the same. Now, in that case the Advocate-General ,of Madras in his
c
effort to save the impugned legislation advanced an argument before the
Constitution Bench that : 'There was implicit in every entry in the
legislative lists in the Seventh Schedule to the Government of India Act,
1935, an inherent power to make a law with respect to a matter ancil-
lary or incidental to the subject-matter of each entry.' His further D
argument was that each entry in the l\st carried with it an inherent
power to provide for the compulsory acquisition of any property, land
or any commercial or industrial undertaking, while making a law under
suoh entry. This argument was in terms repelled relying upon an earlier
J decision of the Constitution Bench in the State of Bihar v. Maharaja-
dhiraja Sir Kameshwar Singh('): Repelling this contention of the Ad- E
vocate-General of Madras would mean that the power of acquisition
of property is not ancillary or incidental to the subject-matter of each
entry but in substance it is an independent power by itself. This also
becomes clear from Maharajadhiraja Sir Kameshwar Singh's case
(supra)wherein Das, J. in his concurring judgment repelled the argu-
ment of the learned Attorney-General appearing for the State contend- F
ing that the Bihar Land Reforms Act was a law made with respect to
matters mentioned in entry 18, List II and not in entry 36, List IT.
Entry 18 in List II read : 'Land and Land tenures, etc.' and it was
• contended that the impugned legislation was on the subject of land and
tenures and would cover acquisition of land also. Negativing this
G
contention it was held that in that event entry 36 in List II would be-
come redundant. The pertinent observation is as under :

"In my opinion, to give a meaning and content to each
of the two legislative heads under entry 18 and entry 36 in
List II the former should be read as a legislative category or H
head comprising land and land tenures and all matters
(ll [1952] S. C. R. 889.
348 SUPREME COURT REPORTS [1980] 3 S.C.R.
,
A
connected therewith other than acquisition of land which
should be read as covered by entry 36 in List l l."

It thus clearly transpires that the observation in Cooper"s case •
supra extracted above that power to legislate. for acquisition of property
B is exercisable only under entry 42 oI list III and not as an incident
of the power to legislate in respect of a specific head of legislation in
any of the three Lists, is borne out from Raiamundary Electric Supply
Corporation case and Maharajadhiraja Sir Kameshwar Singh's cases
(supra). j I

c It was, however, urged that this propos1t10n runs counter to the
decision of a Constitution Bench of six judges in State of West Bengal
v. Union of India. (1) In that case the State of West Bengal filed a suit
against the Union of India challenging the constitutional validity of
the Coal Bearing Areas (Acquisition and Development) Act, 1957,
on the ground that the Act to the extent it applied to the lands vested
D
in or owned by the State was beyond legislative competence of Parlia-
ment. Power to acquire coal bearing land owned iir possessed by the
State of West Bengal was amongst others claimed as an integral ele-
ment of control acquired by the Union pursuant to a declaration made
in s. 2 of the IDR Act and Mines and Minerals Act enacted in exercise \
E of the legislative power under entries 52 and 54 respectively as coal
was both a declared industry and a specified mineral. This contention
was partly accepted to repel! the contention that the Union has no .
power to acquire the property vested in the State since the State
itself is also a sovereign awhority. The contention that the p;·npcrty of
State cannot be acquired by the Union under entry 42 of List III was
F repelled. In reaching this conclusion, another contention was rejected
w])ich was also advanced before us. viz., that if power of acquisition
is treated as an independent power both of the Union and the State
and could be exercised by the Union and the State with respect to
the same property it would lead to such a confusion that there would •
be no end to it. A picture of fearful constitutional impasse was drawn
G urging that the State may acquire_ property of nn Industrial underta-
king of a declared industry in exercise of the power under entry 42,
List III, and the Union -may exercise the same power after control is
acquired pursuant to declaration made as envisaged in entry 52 in
respect of an ir,dustry and this merry-go-round needs to be averted by
harmonious construction and reconciliation of power be!wcen the Union
H and the States. Such a situation is beyond the realm of practical possi-
II) [1964J I S. C. R. 371.
ISHWARI KHETAN SUGAR MILLS v. U.P. STATE (Desai,!.) 349

bility. His ;\ild apprehension stands so effectively •answered by West A
Bengal case (supra) that we cannot improve upon it. Pertinent
observation may be extracted :

•
"Power to acquiic or requisition property may since the
amendment, be exercised concurrently by the Union and
the States. But on that account confticting exercise of the
" p,1wer cannot be cnvihagcd. Article 31 (2) which deals with
acquisition of all property requires two conditions to be ful-
filled : (1) acquisition or requisitioning must be for a public
purpo'se, (2) the law under which the property is acquired or
requisitioned must provide for payment of compensation
c
either fixed thereby, or on principles specified thereby. By
cl. (3) of Art. 31 no such law as is referred to' in cl. (2)
made by the Legislature of a State shall have efficacy unless
such law has been reserved for the consideration of the Presi-
dent and has received his assent. As the President.exercises D
his authority with the advice of the Union Ministry, conflict
by the effective exercise of power of acquisition in respect of
the same subject-matter simultaneously by the Union, and
the State, or by the S-tate following upon legislation by the
.J Union cannot in practice be envisaged even as a possibility.
Article• 254, also negatives the possibility of such conflicting E
legislation. By cl. (I) of that Article if a law made by the
legislature of a State is repugnant to any provision of a law
competently made by Parliament, the State law is, subject to
cl. 12) void. clause (2) recognizes limited validity of a State
law on matters in the Concurrent List if that law is repugnant
to an existing or earlier law made by Parliament, only if such F
law has been reserved for the consideration of the Presi-
dent. and has received his assent. By the proviso authority
is reserved to the Parbment to repeal a law having even this
•• limited validity. Assent of the President to State legislation
intended to nullify a !aw enacted by Parliament for acquisition
pf State property for the purposes of the Union lies outside G
the realm of practical possibility."

1berefcire, the contention that power of acquisition or requisition-
in& of property in entry 42, List TU, if held to be an independent
power wholly falling outside the control assumed by foe Union pur- II
suant to the declaration envisaged by entry 52, List II, would lead
to a sort of a constitutional impasse, is more imaginary than real.
350 SUPREME COURT REPORTS [1980] 3 S.C.R.

A Further, in the minority judgment, Subba Rao, J. has in this context
said

"A declaration under entry 52 of List I would no doubt
enable Parliament to make a law in respect of an industry,
that is to say Parliament may mak;~ a law in respect of an
•
B existing industry or an industry that may be started subse-
quently. So too. before the declaration a State Jegislatnre
cou:d have made a law in respect of an industry by virtue
of entry 24 of List II. But neither entry 24 of List II nor
entry 52 of List I empowers the State legislature before the
said declaration or the Parliament after such a declaration
c to make a law for acquisition of lands. If the State legis-
latnre before the declaration or the Parliament after the
declaration wanted to acquire the land it can only proceed
to make a law by virtue of entry 42 of List III."
Reliance was, however, placed on the following passage in West
D Bengal case (supra) to urge that power of acquisition is an integral
and inseparable concomitant of control assumed by the Union :
"By making the requisite decliµations under entry 54
of List I, the Union Parliament assumed power to regulate
mim~s and minerals and thereby to deny to all agencies
E not under the control of the Union, authority to work the
mines. It could scarcely be imagined that the Constitution
makers while intending to confer an exclusive power to
work mines and minerals under the control of the Unio'n,
still prevented effective exercise of that power by making it
impossible compulsorily to acquire the land vested in the
F State containing minerals. The effective exercise of the
power would depend-if such an argument is accepted-
not upon the exercise of the power to undertake regulation
arid control by issuing a notification under entry 54, but
upon the will of the State in the territory. of which mineral •
bearing land is situated. Power to legislate for regulation
and devdopment of mines and minerals under the control
of the Union would, by necessary implication include the
power to acquire mines and minerals. Power to legislate
for acquisition of property vested in the States cannot there-
fom be denied to the Parliament if it be exercised consis-
tently with the protection afforded by Art. 31."
II
This observation, if properly understood. is in the context of the
contention that State property could not be subjected to power of
ISHWARI KHETAN SUGAR MILLS v. U.P. STATE (Desai, J.) 351

eminent domain and, hence,· Union has no power to compulsorily A
acqnire the same. Therefore, there is no inner co"nflict between
f Cooper case (supra) and West Bengal case (supra) on the point that
power of acquisition is an independent power referable to entry 42,
List III. However, even if there is a conflict between West Bengal
• case (supra) and Cooper case on this point, a later larger constitu-
tion Bench judgment in Cooper case would impliedly overrule the B
former to the extent of conflict.
Th~re is on the contrary a good volume of authority for the
proposition tha: the control assumed by the Union pursuant to dec-
laration to the extent indicated in the statute making the declaration
does not comprehend the power of acquisition if it is not so speci- c
fically spelt out. In Kannan Devan Hills Produce Company Ltd. v.
The Stalt of Kera/a & Another,(') constitutional validity of Kannan
Devan Hills (Resnmption of Lands) Act, 1971, was challenged on
the ground of legislative competence of Kerala State legislature to
enact the legislation. It was urged that in view of the declaration
made rn s. 2 of the Tea Act, 1853, Tea was a controlled industry D
a·nd, therefore, the State legislature was denuded of any power to deal
with the industry. It was further contended that tea plantation
required extensive land and that resumption of land by the impugned
legislation would directly and adversely affect the control taken over
by the Union and, therefore, the State legislature was incompetent to
J enact the impugned legislation. This contention was repelled hold-
E
ing that the impugned legislation was in pith and substance one under
entry 18 of List II read with entry 42, List III. In reaching this
conclusion the Court held as under :
"It seems to us clear that the State has legislative com-
petence to legisla'.e on entry 18, List II and entry 42 List F
III. This power cannot be denied on the ground that it has
some effect on an industry controlled under entry 52 List I.
Effect is not the same thing as subject-macter. If a State
Act, oth•crwisc valid, has effect on a matter in List I it does
• not cease to be a legislation with respect to an entry in
List II or List III. The object of ss. 4 and 5 seems to G
be to enable the State to acquire all the .lands which do not
fall within the categories (a), (b) and (c) of s. 4(1).
These provisions are really incidental to the exercise of the
power of acquisition. The State cannot be denied a power
to ascertain what land should be acquired by it in the public
R
interest".
(I) (1973) J· SCR 356.
352 SUPREME COURT REPORTS [1980] 3 s.c.R.

A This conclusion was sought to be buttressed bv reference to the
decision of the Privy Council in Canadian Pacific ·Railway Campany
v. Attorney General,(') wherein it is observed as under :

"The appellant, the Candian Pacific R:y. Co., which
own~d
B
and managed the Empress Ho:c; in Victoria,
Ilritish Columbia, while not denying that the regulation of
•
hours of work was ordinarily a matter of "property and
civil rights in the province" under head 13 of s. 92 of the
British North America Act, 1867, and accordingly within
the legislative competence of the provincial legislature, con-
tended, inter alia, that the company's activities had become
c snch an extensive and important element in the natio'nal
economy of Canada that the dominion Parliament was
entitled under the general powers conferred by the first part
of s. 91 of the Act of 1867 to regulate all the affairs of the
company, even where that involved legislating in relation to
D matters exclusively reserved to the provincial legislatures
by s. 92".

It can, therefore, be said with a _measure of confid!nce that legis·
lative power of the States under entry 24, List Il is eroded only to
the extent control is assumed by the Union pursuant to a ckclaratio'n
E made by the Parliament in respect of declared industry as spelt out
by legislative enactment and the field occupied by such enactment
is the measure of erosion. Subject to such erosion, on the remain-
der the State legislature will have power to legislate in respect of
declared industry without in any way trenching upon the occupied
field. State legislature which is otherwise competent to deal with
F industry under entry 24, List II, can deal with that industry in exer-
cise of other powern enabling it to legislate under different heads set
out in Lists II and III and this power cannot be denied to the State.
In this connection it would be advantageous to refer to Chanarl. Mal
case (supra). In that case constitution validity of Haryana Minerals
(Vesting of Rights) Act, 1973, and tho two notifications issued
G thereunder was challenged on the ground that the Act and the noti-
•
fications issued thereunder were repugnant to the Mines & Minerals
Act made by Parliament after making a declaration as co'n'.emp1ated
by Entry 54, List I. The challenge was that the State legislature
was incompetent to legislate on the topic of mines and minerals under
entry 23, List II in view of the declaration made under entry 54,
H List I and the enactment of Act 67 of 1957 (Mines & Minerals Act)

fl) [19501 A. C. 122.
ISHWARI KHETAN SUGAR MILLS v. U.P. STATE (Desai, J.) 353

by the Parliament. By the impugned Act and the notifications issued A
thereunder the State Government of Haryana purported to acquire
rights to salt petre, a minor mineral in the land described in the
Schedule appended to the notificcrtion and by the second impugned
notification the State Government announced to the g~neral public
that certain salt petre bearing areas in the State of Haryana men-
• tioned therein would k auction~d on the dates given there. Repel- B
ling the con:ention regarding legislative incompe'.ence it was observed
that it is difficult to see how the field of acquisition could become
occupied by a Central' Act in the same way as it had been i'n the
West Bengal case (supra) even before Parliament legislates to acquire
land in a State. At least until Parliament has so legislated as it
was shown to have done by the statut·~ considered by this Court in
c
the case from West Bengal, the field is free for State legislation fall-
. ing under the express provisions of e'ntry 42 of List III. It was
further ob•~rved as under :
"It seems difficult to sustain the case that the provisions
of the Central Act would be really unworkable by mere D
change of ownership of land in which mineral deposits are
found. We have :o judg·:> the character of the Haryana
Act by the ·substance and effect of its provisions and not
merely by the purpose given in the statement of reasons
and objects behind it. Such statements of reasons are rele-
E
J vant when the object or purpose of an enaC:ment is in
dispute or uncertain. They can never override the effect which
follows logically from the explicit and unmistakable langu-
age of its substantive provisions. Such effect is the .best
evidence of intention. A statement of objects and reasons
is not a part of the statute, and, therefore, not even relevant F
in a case in which the language of the operative parts of
the Act leaves no room whatsoever as it does not in the
Haryana Act, to donbt what was meant by the legislators :
It is not disputed here that the object and effect of the Har-
yana Act was to acquire proprietary right to mineral deposits
• in 'land"' . G

There is thus a long line of decisions which clearly establishes
the proposition that power to legislate for acqnisition of property is
an independent and separate power and is exercisable only under
entry 42, List III and not as a'n incident of th·~ power to legislate
in respect of a specific head of legislation in any of the three lists. H
This power of the State legislature to legislate for acquisition of pro-
perty remains intact and untramdled except to the extent where on
354 SUPREME COURT REPORTS (1980] 3 S.C.R. '

A assumptiou of control of an industry by a declaration as envisaged
in entry 52, List I, a further power of acquisition is taken over by a
specific legislation.

As already pointed ou', in pith and substance the impugned legis-
lation is one for acquisition of scheduled undertakrngs and that field
B of acquisition is not occupied by the IDR Act which deals with cou-
trol of management, regulation and development of a declared indus-
try and there is no repugnancy between the impugned legislation and
.>
the IDR Act. Both can co-exist because the power acquired by the
Union under the IDR Act can as well effectively be exercised after
the acquisition of the scheduled undertakings as it could be exercised
c before the acquisition. Therefore. the contention that the State
legislature lacked legislative competence to enact the impugned
legislation must be negatived.

A faint submission was made that nationalisation of industry as
a national policy will have to be determined and enforced by the
D Union keeping in view i'.s Indmtrial Policy Resolntioh and such
piece-meal nationalisation would certainly encroach upon the control
assumed by the Union. Impugned legislation does not purport .to
nationalise sugar industry in Uttar Pradesh. And th::re is no bar to
a Government owned company or Corporation to set up sugar rnanu-
facturing undertaking under an appropriate licence. Therefore, the
E impugned legislatio'n on this account does not encroach upon the \
occupied field.

The second limb of the submission was that in any event the
impugned legislation was designed and enacted to prevent mismanage-
ment and to take over management of the scheduled undertakings '·
F as a seqnel to acquisition and it trenches into the field occupied by the
IDR Act, a Central legislation, and to the extent acquisition enables
the Corporation by vesting of the scheduled undertakings in it to
take over control and manag::ment of the scheduled u'ndertakingl', the
impugned legislation is void and umnforceable. Scc'.ion 20 of the
IDR Act was pressed into service to substantiate the submission.
G
Section 20 of the IDR Act reads as under :-
"20. After the commencement of this Act, it shall not
be competent for. any State Government or a local anthority
to take over the management or control of any industrial
H undertaking under any law for the time being in force which
authorises any such Gov~rnment or local authority so te>
do".
ISHWARI KHETAN SUGAR MILLS v. U.P. STATE (Desai, J.) 355

Section 20 forbids a State Government or local authority A
from taki'ng over the ·management or control of any industrial under-
taking in declared industry. On a correct interpretation, s. 20 precludes
any State Government or local authority from taking over the con-
trol or management of any industrial undertaking under any law for
the time beiilg in farce which authorises any such Government or
~
• local authority so to do.
B
r,f(J
The impugned legislation was not enacted for taking over manage-
I ment or control of any industrial undertaking by the State Govern-
<
ment. In pith and substance it was enacted to a~uire the scheduled
' undertakings. If an attempt was made to take over management or
.c
.__ control of any industrial undertaking in a declared industry indis-
putably the bar of s. 20 would inhibit exercise of such executive
power. However, if pursuant to a valid legislation for acquisition
, of scheduled undertaking the management stands transferred to the
acquiring body it cannot ·be said .that ·this would be in violatien ef
s. 20. ·Section 20 forbids. eJfecutive action of taking over manage-
ment oF contrnl of any industrial undertaking under any law in force.,
which authorises State Government or a local authority so to do .. The.
inhibition of s. 20 is on exercise of executive power but if as a sequel
Ill to an-. acquisition · of an industrial undertaking the management or.
I conti;ol of .the industrial undertaikng stands transferred to the acquir-.
ing ;mthority s. 20 is not attracted at all. Section 20 does not pre-
~·
;;) E
clude- or forbid a State legislature exercising legislative power under
I
an ent.ry other than .entry 24 of List II, and if in exercise of that
f legislative power" to wit,. acquisition of an industrial .undertaking in a
declared industry the consequential transfer of management or control
over the industry or undertaking follows as an incident of acquisition,
·'~
Cl. such taking over of management or control pursuant to ail exercise of F
.. ,. legislative power is not within the inhibition of ·s . .20. Therefore,
the contention that the impugned legislation violates s. 20 has no
merit
-"' And now t9 the .oft J;>eaten track of Jegislatjon Qeiiig ;~id as being
in contravention of Art. 31 (2) as it stood at the relevant time. The
G
' impugned legislation was put on the statute book on August 27, 1971.
Therefore, Art. 31 (2) as it stood on. the relevant date may be noticed.
~ The Article as amended by Constitution (Twentyfifth Amendment)
"·'f
~ Act, 1971, will, therefore, not be attracted. Art. 31 (2) as it stood
at the relevant time reads as under .:
"31 ( 2) . No property shall be compulsorily acquired H '
or requisitioned save for a public purpooe and save by
authority of a law which provides for compensation for the
3.:.,.289SCl/80
356 SUPREME COURT REPORTS [1980] 3 s.c.R.

A property so acquired or requisitioned and either fixes Im
amount of the compensation or specifies the principles on
which, and the manner in which, the compensation is to be
detem1ined and given; and no such law shall be called in
question in any court, on the ground that the compensa-
tio)l provided by that law is n_(lt adequate." I
B l:
Emphasis was placed on the word 'compensation' retained in Art.
31 (2) after_ its amendment by the Constitution (Fourth Amendment)
Act, 1955, and a reference, was made to Vajravelu Mudaliar v. Spe-
cial Deputy Collector of Land Acquisition, West Madras,(')wherein
it was held by this Court that even after the amendment of Art. 31 (2)
c by the Constitution (Fourth Ame'ndment) Act, 1955, it still retains
the expression 'compensation' after its judicial interpretation by this
Court in several decisions, viz., to mean just equivalent to the ex-
propriated owner. Reference was then made to Union of India v.
Metal Corporation of India Ltd. & Anr.,( 2) in which this Court
affirmed the interpretation of the word 'compensation' to mean just
D
equivalent. Approaching the matter from this angle the Court struck
down the Metal Corporation of India (Acquisition) Act, 1965, hold-
ing that as the Act has laid down different principles for ascertaining
the value of different parts of the undertaking and as all the princi-
ples so laid down do not provide for the just equivalent of all parts
E of the undertaking mentioned therein, the sum total also cannot
obviously be a just equivalent of the undertaking. In reaching this \
conclusion exception was taken to assessing the value of the used
machinery on the basis of written down value arrived at as per the
provisions of the Income Tax Act. This observation cannot be said
'
to be any more good law in view of the decision of a Constitution
F Bench of this Court in State of Gujarat v. Shanti/al Mangaldas &
Ors., (S) wherein Shall, J ., speaking for the Court specifically over-
ruled the Metal Corporation case (supra) observing as under:
"The Court then proceeded to hold that the two prin-
ciples laid down in cl. (b) of Paragraph II of the Schedule
G to the Act-(i) that compensation was to be equal to the
cost price in the case of unused machinery in good condi.- '
tion, and (ii) written down value as understood in the
Income-tax law was to be the value of the used machinery
were irrelevant to the fixation of the value of the machinery
as on the date of acquisition."
B (I) [19651 1 S. C. R. 614.
(2) [19671 1 S. c. R. 256
(3) [19691 3 S. C.R. 341.
ISHWARI KHETAN SUC!AR MILLS v. U.P. STATE (Desai,!.) 357

"We are unable to agree with that part of the judgment. A
The P.arliament had specified the principles for determining
compensation of the undertaking of the company. The
principles expressly related to the determination of compen-
sation payable in respxt of unused machinery in good con-
dition and used machinery. The principles were set out
• avowedly for determination of compensation. The princi-
B
ples were not irrelevant to the determination of compen-
sation and the compensation was not illusory.'"
It thus appears well settled that if a legislation provides principles
for determining compensation, to wit, written down value as under-
stood in Income-tax law to be the value of the used machinery, that c
principle could neither be said to be irrelevant for determining the
compensation nor the compensation so awarded could be styled as
illusory.. It was, however, said that this decision in Shanti/al Man-
ga/das is overruled in Cooper's case and, therefore, the wheel has
moved the full circle and the expression 'compensation' and principle
for determining the compensation as interpreted in Vajravelu Muda- D
liar's case (supra) is restored. This is not borne out by the perti-
nent observation i'n Cooper's case (supra) which may be extracted :
"Both the lines of thought which converge in the ultimate
result, support the view that the principle specified by the
law for determination of compensation is beyond the pale of E
I challenge, if it is relevant to the determination of compen-
sation and is a recognized principle applicable in the deter-
mination of compensation for property compulsorily acquir-
ed and the principle is appropriate in determining the value
of the class of property sought to be acquired. On the
application of the view expressed in P. Vajravelu Mudaliar's F
case or in Shanti/al Mangaldas's case the Act, in our judgment,
is liab:e to be struck down as it fails to provide to the ex-
propriated banks compensation determined according to
relevant principles. Section 4 of the Act transfers the under-
taking of ev~ named bank to and vests it in the corres- G
ponding new bank. Section 6 ( 1) provides for payment of
compensation for acquisition of the undertaking and the com-
pensation is to be determined, in accordance with the prin-
ciples specified in the Second Schedule. Section 6(2) then
provides that though separa!e valuations are made in res-
pect of the several matter specified in Sch. II of the Act, B
the amount of compensation shall be deemed to be a single
compensation. Compensation being the equivalent in terms
358 SUPREME COURT REPORTS [1980] 3 S.C.R.

A of money of the property compulsorily acquired, the prin-
ciple for determination of compensation is intended to award
to the expropriated owner the value of the property
acquired. The science of valuation of property recognizes
several principles or methods for determining the value to
be paid as compensation to the owner for loss of his pro-
B
pe1ty : there are different methods applicable to different
classes of property in the d~terminatio'n of the value to
be paid as recompense for loss of his property. A method
appropriate to the determination of value of one class of
property may be wholly inappropriate in determining the
value of another class of property. If an appropriate
c method or principle for determination of compensation is
applied, the fact that by the application of another pri'n-
··~
ciple which is also appropriate, a different value is reached,
the Court will not be justified in entertaining the conten-
tion that ont of the two appropriate methods, one more
D generons to the owner should have been applied by the
legislature."
However, it was pointed ont that Shela!, J. speaking for hintself
and Grover, J. in His Holiness Kesavananda Bharati Sripadagalavaru
v. State of Kerala,(') in terms observed as under :
"in State of Gujarat v. Shanti/al Mangaldas & Ors. the
E decision in Metal Corporation of India was overruled which
itself was overruled by R. C. Cooper v. Union of India."
The question is whether the statement of law in ShantilaJ Mangal-
das (supra) that the principle of awarding compensation on the basis
of written down value for used machinery is a valid principle for
F determining compensation and whether the compensation so awarded
was illusory is not overruled by any observation in Cooper's case.
Undoubtedly, in Kesavananda Bharati case (supra) it is reiterat-
ed by Hegde, J. speaking for hintself and Mukherjeao, J. that it will
be for the aggrieved party to clearly satisfy the Court that the basis
adopted by the legislature has no reasonable relationship to the value
G of the property acquired or that the amount to be paid has been arbi- '
trarily fixed or that the same is illusory return for the property taken.
Chandrachud, J. (as he then was), while interpreting the expression
'amount' in the amended Art. 31 (2) observed as under :
"The specific obligation to pay an "amount" and i'n the
B alternative the use of the word "principles" for determi-
nation Qf that amount must mean that the amount fixed or I
(1) [1973] Suppl: S. CR. 1
ISHWARI KHETAN SUGAR MILLS v. U.P. STATE (Desai, J.) 359

determined to be paid cannot be illusory. If the right to A
f property still finds a place in the Constitution, you cannot
mock at the man and ridicule hi~ right. You cannot tell
him 'I will take your fortune for a farthing'."
• But in the next breath it has been observed that "the amount
fixed for being paid to the owner is wholly beyond the paie of cha!· B
lenge that it is i'nadecjuate. The concept of adequacy is directly
co-related to the market value of the property and therefore, such
value cannot constitute an element of that challenge." But this was
the situation after amendment of Art. 31 (2) by the Constitution
(Tvrentyfifth Amendment) Act. Even as the article stood at the
relevant time it was open to the legislature to fix pri'nciple for deter- c
mining compensation and unless it is shown that the principles are
irrelevant to the determination of the value of the property or by
working out the compensation according to the principles so speci-
fied the compensation becomes illusory, the principles themselves are
beyond the pale of challenge before a court of law on the ground that
they do not provide adequate compensation. Now, here the com- D
pensation is worked out and specified in the schedule to the impugned
Act. The compensation is determined in rou'nd figure. This Court
has in terms accepted that payment of compensation on the basis of
j written down value calculated according to the Income·tax law for
used machinery is not irrelevant as a principle for determining com-
E
pensation. That principle appears to haw been adopted for valuing
used machinery though the Jegis!atfon fixes compensation payable to
each undertaking in round sum. And that was the only part challeng-
ed.
It was, however, said that no principle is discernible because not
only none was stated on the floor 'Of the House but to a specific F
question the reply was that principle is not to be disclosed. Debate ,
in legislature cannot conclude the point. Here the principle is dis-
cernible and that appears to be valid. It represents the collective will
of the House. To reject it would tantamount to saying that the
majority members voted without understanding and appreciating the
principles. However, the principle is extracted in court room debate G
and it i§ a valid principle.
A peep into the background leading to the acquisition of the sche-
~uled undertakings would reveal that these scheduled undertakings
had a heavy back-load of carried forward loss, that even though they
were taking sugar cane from cane growers, i.e. the farmers, they B'
failed to pay them the price of sugar cane. There was labour unrest
as labour was not paid. Generally speaking, they can be styled as
360 SUPREME COURT REPORTS [1980] 3 S.C.R.

A sick undertakings and become a drag on the economy of the area.
There was no scope for ploughing back the profits to rejuvenate the
machill!~ry because there was no profit. The situation had not im-
proV'oo even when managements of some of the undertakings were
taken over under the IDR Act and, therefore, this desparate situation •
B called for a drastic remedy in public interest and while applying that
drastic remedy of acquisition principles which are valid for determin-
ing the value of machinery were adopted. The adequacy or other-
wise of compensation on the calculus made by applying the principle
is beyond the judicial review. It would be a day time hallucination
to call such principle irrelevant or compensation illusory. The
c challenge to the validity of the impugned legislation on the ground
of violation of Art. 31 (2) niust accordingly fail.
There remain two minor and incidental points mentioned ill pass-
ing. The submissions themselves lacked emphasis. They are, that
( 1) no compensation is provided for the agricultural land taken over
by the State; (2) good-will of the scheduled undertakings was not
D
evaluated as a component of compensation.
With reference to Ishwari Khetan Sugar Mills (P) Ltd., it was
said that 36 acres of agricultural land belonging to the company
owning too scheduled undertaking was taken over without compen-
sation. It was countered by saying that agricultural land is not \
E taken over. It is not clear from the pleadings and record whether
agricultural land outside the structures of scheduled undertaking has
been acquired and has at all be~n taken over by the Corporation. It
may be that between various structures of scheduled undertakings
there might be some open land but that is part and parcel of sche-
duled uncfortakings because any other co'nstruction would show that
F a passage or road between two constructions could not be acquired.
Unless, therefore, it is specifically shown that while acquiring sche-
duled undertakings agricultural land belonging to the company or the
owner owning scheduled undertaking was either acquired or taken
over as part of the acquisition it is not possible to accept the sub- '
mission that there was acquisition of agricultural land without provid-
G
ing compensation for the same.
And as for the good-will, less said the better. The scheduled
undertakings were sick units and the sickness was chronic. A manu-
facturing unit with heavy carried forward loss and defaulting in pay-
ments, possibly facing appointment of Receivers for realising tax
H arrears, asks compensation for the good-will generated by it. This
good-will appears to be more imaginary than real or an argument to
support an untenable submission. But the better answer is that there
JSHWARI KHETAN SUGAR MILLS v. U.P. STATE (Desai, l.) 361

cannot be a good-will of a manufacturing undertaking but it can be
A
f of a company, a partnership, or a proprietor owning scheduled under·
taking and neither the company nor the partnership nor the proprie-
tory unit, if any, has been acquired under the impugned legislation .
• Therefore, i'n evaluating compensation of the scheduled undertakings
there is no question of evaluating the good-will.
B

Mr. R. A. Gupta appearing in SLP. 6252/79 raised an additional
contention that the impugned Act is violative of Art. 14 in. that selec-
tion of petitioners' scheduled undertakings for acquisition is wholly
arbitrary and there is no difference between those selected for acquisi-
tion and those left out through all such sugar, undertakings in the c
State of Uttar Pradesh were similarly situated and similarly circums-
tanced. Sustenance was largely sought to be drawn from the Report
of Justice Bhargava styled as Sugar Industry Inquiry Commission,
1974, which inter alia, specified 17 sugar undertakings in Uttar Pra-
desh as prima facie sick sugar mills. After reading out a portion of
the Report it was said that classifying the 12 sugar undertakings for D
acquisition is not based on any intelligible differentia between those
included in the group for acquisitiou aud those left out and that this
differential treatment has no rational relationship to the object sought
to be achieved by the impugned legislation. On behalf of respondents
J learned Advocate-General for the State of Uttar Pradesh countered
this contention by pointing out that, before acquiring the scheduled E
undertakings the Government had a close review of the condition of
the sugar undertakings done for certain specific period set out in the
affidavit and ascertained whether the situation had become desperate
on acconnt of the persistent default in paymen_t of cane price, purchase
tax, labour dues, etc. The situation in Uttar Pradesh appears to be
F
peculiar in that cane growers go on selling their cane to sugar under-
takings probably having little or no option in this behalf because it
is a perishable commodity and must be disposed of as early as possible
and they have to await payment at the sweet will, whim and caprice
of the sugar barons. Its unhealthy effect on marginal farmers wo'uld
be intolerable because the cash crop would not fetch any cash and G
destitution may be the inevitable outcome. And this phenomenon
was repeated y~ar after year. It was pointed out that a close scrutiny
was applied to' this persistent default and where the situation in respect ·
of sugar undertakings was desj:l\lrate they were classified together and
they were sought to be acquired. Can it be said , that this
classification is not based on any intelligible differentia. Economic H
situation of an industrial undertaking may be very good, good, aver-
age, bad, intolerable and uneconomic in larger national perspective.
362 SUPREME COURT REPORTS [1980] 3 S.C.R.

A It would. have bee·n difficult for the Gove=ent to group all sugar
undertakings with such as were living on coramine doses. There
does app~ar to be the intelligible differentia by which this c!assificatioa
of those in an intolerable condition has been grouped together. Acqui-
sition was for an avowed object of rejuvenating these undertakings
and thereby improving the economy of the area by providing priority
B
in payment to cane growers, labour, in respect of whom there is no
ct1Shio11 for sufferance. Thus, this differentia undoubtedly has a ratio-
nal relationship to the obj-xt sought to be achieved by the Act. The
challenge of Art. 14 was an argument of despair and must be repell-
ed.
-c These were all the contentions in these appeals and SlJ"..Cial leave
petitions and as there is no merit in any of them, the appeals and
the special leave petitions fail and are dismissed with costs in o"nO
set.
PATHAK, J.-We have had the benefit of reading the judgment
D prepared by our brother Desai. While we broadly agree with the
final conclusions reached by him on the several points debated before
us, we would prefer to refrain from expressing any opinion on the
question whether the declaration made by Parliament in S. 2 of the
Industries (Development and Regulation) Act, 1951 in respect of the

.E
industries specified in the First Schedule to that Act caa be regarded \
as limited to removing from the scope of Entry 24 of List ll of the
Seventh Schedule to the Constitution only so much of the legislative
field as is covered by the subject matter and content of that Act or
it can be regarded as effecting the removal from that Entry of the
entire legislative field embracing all matters pertaining to the industries
II specified in the declaration. It seems to ns that the observations made
by this court in The Hingir-Rampur Coal Co., Ltd. and Others v. The
St'ate of Orissa and Others,(') State of Orissa v. M. A. Tulloch and
Co.,( 2 ) Baijnath Kedia v. State of Bihar & Ors.(') and State of
Haryana & Anr. v. Chanan Mal, etc.( 4 ) cannot be of assistance in
this behalf. In each of those cases, the declaration made by Parlia- '
ment in the concerned enactment limited the control of the regulation
of tlie mines and the development of minerals to the extent provided
in the enactment. Whether the terms in which the declaration has
been framed in s. 2 of the Industries (Development and Regulation)
Act-a tlu:laration not expressly limiting control of the specific indus-
(1) [1961] 2 s. c. R. 537.
(2) [1964) 4 s. c. R. 461.
(3) [1970] 2 S. C.R. 100.
(4) [1976] 3 S. C.R. 688.
ISHWARI KHETAN SUGAR MILLS v. U.P. STATE (Pathak, !.) 363

tries to the extent provided by the Act---<:an be construed ~s being so A
limited is a matter which, we think, we should deal with m some more
appropriate case. The range of considerations encompassed within
the field of enquiry to which the point is amenable has not, to our
mind, been sufficiently covered before us. And for good reason.
The provocation was limited. For the controversy tn the present
B
cases concerning the legislative competence of the State Legislature
to enact the U.P. Sugar_ Undertakings (Acquisition) Act, 1971 can
be adoquate!y disposed of on the ground that the legislation falls
within Entry 42 of List III and cannot be related to Entry 52 of List
I or Entry 24 of List II. When the impugned enactment ·tmly falls
within Entry 42 of List III-"acquisition and requisitioning of pro- c
perty"-there is a reluctance to enter upon an examination of the -
mutually competing claims of Entry 52 of List I and Entry 24 of List
II-entries which deal with "industries", an entirely different subject
matter.
With this reservation, we have no hesitation in agreeing with the _ D
ultimate conclusions reached by our learned brother on the remaining
points ol controversy and in concurring with the order proposed by
him cli>posing of these appeals and special leave petitions.

I P.B.R. Appealo< dismissed.