SC ruling on lapse of land acquisition proceedings

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Summary: The Supreme Court ruled that land acquisition proceedings cannot lapse merely because the State could not deposit compensation in account of landowner because of refusal to accept.

The Land Acquisition Act, 1894 and subsequent amendment

The Preamble of the Land Acquisition Act 1894 was to make good rules and directives for the acquisition of land needed for various public purposes, proximate to the territories under the East India Company rule and for the purpose to calculate the amount of reward for the property acquired under this Act. Originally, the collector was empowered to fix the amount of compensation by agreement and if the Agreement lacked provision, the dispute had to be referred to arbitrators whose decision was to be final. Section 31 of the old 1894 Act offered for payment of compensation or deposit of the same in the court and the Collector had to tender payment of compensation to the persons interested, who was entitled to compensation as per the law. Further, Section 18 provided for reference to court, in the event any land owner has any objection to the award of compensation. On the other hand, Collector had to deposit the amount of compensation in the court to which the reference was made in case, any contingency contemplated in Section 31(2) took place.

The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act 2013, repealed and replaced the Land Acquisition Act, 1894, which as we know has been in force for almost 120 years as a broad-spectrum law for acquisition of land for various public purposes. Thus, this new Act put an end to the old colonial law of 1894. However, the Act of 2013 was prospective and saved proceedings already initiated under the Act of 1894 before its repeal, subject to provisions of Section 24 of the Act of 2013. The Indian Government believed there was a need for sensitivity on land acquisition issues in India more particularly under the India's Land Acquisition Act of 1894, where there was an absence of a cohesive national law that addressed fair compensation when private land is acquired for public use. The Indian Government felt that a coalesced law was necessary, one that legally requires convalescence and exodus concurrently in order to be used for government acquisition of land for public purposes. This Act was expected to affect directly 13.2 crore hectares (32.6 crore acres) of rural land in India viz: families whose livelihood depends on farming land, the number of such dependent families per acre changed widely every year and the Act provided to compensate rural households, individually land owners and livelihood losers. The Act goes beyond compensation, it assigned definite series of privileges to rural households affected.

Supreme Court Lays Down Two Conditions For Pending Cases

Under the new Act, Section 24(2) provided for the hiatus of proceedings initiated under the earlier law, if the payment of compensation was prior to five or more years before the commencement of the 2013 Act and the government did not take physical possession of the land or if the compensation was not yet paid. In 2014, a three-judge bench headed by then Chief Justice RM Lodha in the case of  Pune Municipal Corporation v. Harakchand Misirmal Solanki  held that if the compensation is not deposited in the bank accounts of the land owners meant that they have not received the payment. The judgment elucidated that even if the payment was kept in government treasury, it would not mean that the payment has been made. Therefore, it ruled that compensation must be either paid to landowners or deposited in the court for lands awarded under the 1894 Act. Thus, just a meagre deposit of the amount in a government treasury was not at all sufficient and led to a lapse of the land acquisition process under the 2013 Act. After around four years, another bench led by Justice Arun Mishra in the case of the  Indore Development Authority said that failure to deposit compensation in court did not result in a lapse of the land acquisition process, on condition that the landowner had been offered compensation but has refused. Therefore, it could not be ruled that there has been a failure to deposit the amount and such acquisition cannot be held to have lapsed as per Section 24(2) of the Act. Thus, land acquisitions could not lapse due to a land-owner's refusal to accept compensation within 5 years. It ruled that once compensation has been tendered, but the person refuses to accept it, this amounts to a discharge of obligation under section 31(1) of the Land Acquisition Act, 1894.Nevertheless, there was a contradiction in the above 2 judgments over whether a land acquired by the government would lapse, if it fails to deposit the compensation within a span of five years in the bank account of the land owners.

After the flare-up of the controversy, the presiding CJI Dipak Misra on February 26, 2018 formed a Constitution Bench, the task was to resolve, if the 2018 Bench had quashed the earlier decision of the 2014 Bench. In March this year the same Bench of the Supreme Court ruled an important criteria for pending cases under the Land Acquisition Act of 2013, and clarified that under two conditions such cases will lapse and acquisitions will need to start afresh. In its landmark judgment pronounced by the 5-judge bench of Arun Mishra, Indira Banerjee, Vineet Saran, MR Shah, and Ravindra Bhat, JJ  it was unanimously held that the land owners who had refused to accept compensation or who sought reference for higher compensation, cannot claim that the acquisition proceedings had lapsed under Section 24(2) of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013. Sketchily, landowners had argued that acquisitions under the Land Acquisition Act of 1894 had lapsed, and fresh proceedings must start under the new Act of 2013. The Court laid down the circumstances under which acquisitions under the old law can be said to be lapsed. It has ruled that fresh proceedings under the new land acquisition law will need to be initiated under the following circumstances

  • Possession of land hasn’t taken place.

  • Compensation amount has not been paid to landowners. It also indicated that payment of compensation not only referred to compensation paid to landowners or deposited in court, but the amount deposited in a government treasury will also be considered. This meant even if the compensation amount was retained with the government, fresh acquisition under the 2013 law will not apply.

Hence, as we see the Supreme Court regurgitated its February 2018 ruling on Section 24 about land acquisition compensation awards, which it had held in a three-judge bench, in the Indore Development Authority case headed by Justice Arun Mishra. It reiterated that once amount has been proffered that would amount to payment. Simply because a person receiving compensation clings on to possession of the land, the proceedings cannot be said to have lapsed. However, in cases where landowners have taken out proceedings in the Court successfully with stay orders, it may not be possible for the authorities or state officials to take the possession or to make payment of the compensation. Hence, the Court added that the state cannot be penalised by insisting that the proceedings must lapse. Then again, it became very clear that land acquisition proceedings cannot lapse merely due to a failure to pay compensation to landowners but a lapse will only occur, if the State failed to take physical possession of the land. Further, it held that payment does not require the State to deposit money in a landowner's account but tendering compensation is sufficient.


Thus by this judgment the Apex Court clarified the correct interpretation of Section 24(2) of the 2013 Land Acquisition Act and finally held that land acquisition proceedings cannot lapse merely because the State could not deposit compensation in a landowner's account because of refusal to accept.

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