State of Bihar v Kameshwar Singh

Facts

• The Bihar Legislature enacted the Bihar Land Reforms Act 1950 to abolish the zamindari system
• The Act vested all estates and tenures in the State and provided compensation to zamindars
• The compensation was calculated on the basis of a complex formula based on net income
• Kameshwar Singh, a major zamindar in Bihar, challenged the Act arguing the compensation was illusory
• The State relied on Article 31(2) and the principles of compensation laid down in the Act

Issue

1. Whether the compensation provided under the Bihar Land Reforms Act is illusory and therefore amounts to confiscation in violation of Article 31(2), or whether it constitutes valid compensation.

Held

• The legislature has the competence to abolish zamindari as a measure of agrarian reform
• Article 31(2) requires that compensation (not necessarily full market value) be paid
• The word "compensation" implies a just equivalent but need not be the mathematical market value
• Certain provisions of the Bihar Act were struck down because they rendered compensation illusory (particularly provisions reducing compensation to nominal amounts for large estates)
• The legislature can lay down principles of compensation but those principles must yield "compensation" in a meaningful sense

Ratio Decidendi

The legislature's power to abolish zamindari and acquire estates is valid, but the requirement of "compensation" under Article 31(2) imposes a minimum threshold: the amount must not be so derisory as to be illusory. While full market value is not constitutionally mandated, the principles laid down must yield some reasonable relationship to the value of the property taken. The judiciary retains power to examine whether what is provided qualifies as "compensation" in the legal sense.