R.C. Cooper v. Union of India

Facts

• Parliament enacted legislation nationalising 14 major commercial banks in India
• R.C. Cooper, a shareholder of one of the nationalised banks, challenged the Act
• The Act provided compensation based on a formula that excluded goodwill and real market value
• Petitioners argued the compensation was illusory and the Act violated fundamental rights

Issues

1. Whether the state can compulsorily acquire private property without paying fair compensation?
2. Does the compensation formula under the impugned Act amount to illusory or arbitrary deprivation?

Held

• The eleven-judge bench held that while the right to property is not absolute and the state can acquire it for public purposes, the law must provide real and fair compensation, not illusory or nominal amounts. The Act was struck down because the compensation formula effectively deprived shareholders of the true value of their property. The court also held that fundamental rights form an integrated scheme and cannot be viewed in watertight compartments.

Ratio Decidendi

The state may acquire private property for public purposes but the law must provide fair and adequate compensation that reflects the real value of the property acquired: compensation that is illusory, arbitrary, or amounts to confiscation without just recompense violates fundamental rights and renders the acquisition constitutionally impermissible.