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Synopsis

The Supreme Court has said when the State uses its sovereign power of eminent domain and acquires land for a public purpose, such an exercise cannot be set at naught by the beneficiary of such acquisition, by entering into a private agreement shortly after the acquisition so as to reverse the usage of the power.   

A bench of Chief Justice of India Sanjiv Khanna and Justice Sanjay Kumar held that validating such dubious enterprise by a statutory beneficiary of a compulsory acquisition would be nothing short of permitting a fraud on the exercise of the sovereign power by the State.

The court allowed an appeal filed by the Delhi Agricultural Marketing Board and set aside the judgments of the Delhi High Court's division and single judge bench of 2013 and the Arbitral award of 2007.  

The bench noted the instant case disclosed astonishing events, turning the law of land acquisition on its head.

An extent of 33 acres of land abutting the Narela-Bawana Road was acquired by the Government to enable the Delhi Agricultural Marketing Board to shift and establish its grain market in Narela. Notification under Section 4(1) of the Land Acquisition Act, 1894 was issued in 1963. Declaration under Section 6 of the Act of 1894 was issued in 1969 and the Award, determining the compensation, was made in 1986.   

However, of the acquired land, Bhagwan Devi claimed ownership of a smaller portion of land to the extent of 6 bighas and 10 biswas. She filed a writ petition. The Board resolved to settle the matter out of court with Bhagwan Devi by releasing and returning to her half of the acquired extent claimed by her and retaining the remaining half, i.e., 3 bighas and 5 biswas. The agreement in this regard was executed in 1988 by the Board, through its then Chairman, with Bhagwan Devi. 

However, the Board decided to review this decision and filed a plea in the high court and Bhagwan Devi also sought implementation of the agreement. In 2002, the high court disposed of the applications, leaving the parties to avail the remedies under the law. Two years after, Bhagwan Devi filed a plea for arbitration under the clause of the agreement. The Arbitrator passed an Award in 2007 in favour of Bhagwan Devi, holding that the Board was competent to enter into the agreement of 1988 and return 3 bighas and 5 biswas of land to her. The High Court's single and division bench declined to interfere into the matter.

Examining the appeal, the bench referred to the provisions of the Delhi Agricultural Produce Marketing (Regulation) Act, 1998, to point out, the power of the Board to acquire property, be it by private negotiation or by compulsory acquisition through the aegis of the Government, always stood protected. Such acquisition of property, however, has to be in accordance with law, i.e., by way of a document of conveyance, it emphasised.

"Further, as matters now stand, divesting of title in or a different usage of the property compulsorily acquired for the Board is not within its sole discretion," the bench said. 

In the case, the court noted, upon possession being taken over in 1986, the acquired land vested absolutely in the Government free from all encumbrances. Significantly, the power of withdrawal from an acquisition, under Section 48 of the Act 1894, can be exercised by the Government only in respect of an acquisition where possession of the land has not been taken. "Therefore, it was not open even to the Government to withdraw from the acquisition of the subject land after possession was taken over in 1986, evidenced by proper documentation," it said.

The bench said, "When the State uses its sovereign power of eminent domain and acquires land for a public purpose, as in the case on hand, i.e., for establishment of a grain market under the control of a statutory Board, such an exercise cannot be set at naught by the beneficiary of such acquisition, viz., the statutory Board, by entering into a private agreement shortly after the acquisition so as to reverse the usage of the power of eminent domain by the State".

The court held the agreement of September 30, 1988, was clearly in contravention of the fundamental policy of Indian law and the Arbitral Award of July 10, 2007, upholding the said agreement, was equally so. 

The court also noted the fact that the preparation of the agreement, by purchase of stamp papers for the same and the drafting thereof, took place even before the matter was considered by the Board clearly revealing that there was something suspect about the transaction. 

"Given the further fact that the only objective of the said agreement was to thwart the compulsory acquisition of the subject land by returning a portion thereof to Bhagwan Devi, the agreement was patently opposed to all tenets of law," it said.

The bench held that the courts exercising jurisdiction under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, erred grievously in not setting aside the Arbitral Award that had upheld the agreement.

Case Title: Delhi Agricultural Marketing Board through its Chairman Vs Bhagwan Devi (Dead) Through her LR