1. Land acquired under Land Acquisition Act, 1894 — Possession taken — Private agreement by statutory beneficiary to return part of land — Arbitration award upholding agreement. (Para 2 , 3 , 6 , 7 )
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2025 Supreme(SC) 505
SUPREME COURT OF INDIA
Sanjiv Khanna, CJI., Sanjay Kumar, JJ.
Delhi Agricultural Marketing Board, through its Chairman – Appellant
Versus
Bhagwan Devi (Dead), through her LR. – Respondent
Civil Appeal No. 10757 of 2017
Decided On : 20-03-2025
Important Points
IMPORTANT POINT
Appeal against arbitral award – When State uses its sovereign power of eminent domain and acquires land for a public purpose, such an exercise cannot be set at naught by beneficiary of such acquisition, by entering into a private agreement shortly after acquisition so as to reverse usage of power of eminent domain by State.
Appeal against arbitral award – When State uses its sovereign power of eminent domain and acquires land for a public purpose, such an exercise cannot be set at naught by beneficiary of such acquisition, by entering into a private agreement shortly after acquisition so as to reverse usage of power of eminent domain by State.
Subject
Civil Law - Land Acquisition
Act Referred
Headnote
Arbitration and Conciliation Act, 1996 – Sections 34 and 37 – Land Acquisition Act, 1894 – Section 48 – Appeal against arbitral award – When State uses its sovereign power of eminent domain and acquires land for a public purpose, such an exercise cannot be set at naught by beneficiary of such acquisition (Statutory Board), by entering into a private agreement shortly after acquisition so as to reverse usage of power of eminent domain by State – Validating this dubious enterprise by a statutory beneficiary of a compulsory acquisition would be nothing short of permitting fraud on exercise of such sovereign power by State – Power of withdrawal from acquisition, under Section 48 of Act 1894, can be exercised by Government only in respect of an acquisition where possession of land has not been taken – It was not open even to Government to withdraw from acquisition of subject land after possession was taken over – Agreement executed by Board was clearly in contravention of fundamental policy of Indian law and Arbitral Award , upholding the agreement, was equally so – Only objective of agreement was to thwart compulsory acquisition of subject land by returning a portion thereof to respondent – Judgment of High Court and Arbitral Award that had upheld agreement, set aside. (Paras 13, 16 and 19)
Facts of the case:
Question that arises is whether Board, for whose benefit land was acquired, could have achieved equivalent of such withdrawal by entering into an agreement with respondent for returning part of acquired land. Question would also arise whether Board could exercise such power when there was no document of conveyance in its favour in respect of this land.
Findings of Court:
Courts exercising jurisdiction under Sections 34 and 37 of Arbitration and Conciliation Act, 1996, erred grievously in not setting aside Arbitral Award dated 10.07.2007 that had upheld agreement dated 30.09.1988.
Result : Appeal allowed.
Legal Category Hierarchy
Table of Contents
2. Statutory beneficiary contended agreement was void ab initio as land vested in Government and acquisition could not be returned without government consent. (Para 6 )
3. Sovereign power of eminent domain cannot be reversed by a private agreement between the beneficiary and the owner; such an act constitutes a fraud on sovereign power. (Para 14 , 16 , 17 )
4. An agreement to return compulsorily acquired land via private contract, after possession is taken, contravenes the fundamental policy of Indian law and public policy. (Para 13 , 16 )
5. Appeal allowed — Arbitral award and High Court judgments upholding the agreement are set aside. (Para 19 )
6. Can a statutory beneficiary of land acquired via eminent domain return the land to the original owner through a private agreement?
No. Once the State exercises the sovereign power of eminent domain for a public purpose, the beneficiary cannot reverse this through a private agreement. Validating such an enterprise would be a fraud on the exercise of the State's sovereign power. (Para 16 )
7. When does acquired land vest in the Government under the Land Acquisition Act, 1894?
Under Section 16 of the Act of 1894, the acquired land vests absolutely in the Government, free from all encumbrances, upon the taking of possession. (Para 13 )
8. Can the Government withdraw from land acquisition after possession has been taken?
No. Under Section 48 of the Act of 1894, the power of withdrawal from an acquisition can be exercised by the Government only in respect of acquisitions where possession of the land has not been taken. (Para 13 )
9. On what grounds can an arbitral award be set aside under Section 34 of the Arbitration and Conciliation Act, 1996, regarding public policy?
An award may be set aside if it is in conflict with the public policy of India, which includes contravention of the fundamental policy of Indian law or conflict with the most basic notions of morality or justice. (Para 15 , 16 )
JUDGMENT
SANJAY KUMAR, J
1. Turning the law of land acquisition on its head, the astonishing events that this appeal is founded on need to be narrated in some detail.
2. An extent of 33 acres of land abutting the Narela-Bawana Road was acquired by the Government to enable the Delhi Agricultural Marketing Board (hereinafter, ‘the Board’) to shift and establish its grain market in Narela. Notification under Section 4(1) of the Land Acquisition Act, 1894 (for brevity, ‘the Act of 1894’), was issued on 30.10.1963. Declaration under Section 6 of the Act of 1894 was issued on 10.01.1969 and the Award, determining the compensation, was made on 19.09.1986. The acquired land included an extent of 6 bighas and 10 biswas situated in Khasra Nos. 296, 298 and 303 of Village Mamoorpur. Bhagwan Devi claimed ownership over this smaller extent under registered sale deeds of the years 1959 and 1971. Possession of the acquired land was taken and handed over on 22.09.1986 to the Agricultural Produce Marketing Committee, Narela, under the control of the Board. This ostensibly included the extent of 6 bighas and 10 biswas claimed by Bhagwan Devi. She, then, filed W.P. No. 149 of 1987 before the Delhi High Court challenging the acquisition of her land.
3. It is at this stage that the story took a curious turn. 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 on 30.09.1988 by the Board, through its then Chairman, with Bhagwan Devi. This agreement stated that Bhagwan Devi would claim compensation as per the Award dated 19.09.1986 from the Land Acquisition Collector and would have all the rights and remedies provided to her under the Act of 1894. The agreement further recorded that, with the prior consent of the Land Acquisition Collector, the Board, which had become the absolute owner of the acquired land that was mutated in its favour in the revenue records, would execute a proper conveyance deed in respect of the portion of land proposed to be returned to her thereunder, for valuable consideration. The consideration to be paid by Bhagwan Devi was quantified as the proportionate compensation for half the land, as was granted to her under the Award dated 19.09.1986, along with interest @ 12 per cent per annum from the date of deposit of the compensation amount by the Board with the Land Acquisition Collector till the date of actual payment by Bhagwan Devi to the Board.
4. Clause (k) of the agreement provided that any dispute arising between the parties touching upon the effect and meaning of the agreement should be referred to the Chairman of the Board, whose decision thereon would be final and binding upon the parties. This agreement is stated to have been executed on behalf of the Board by its then Chairman, just one day prior to his tenure coming to an end. Though it is asserted that this action of the then Chairman was based on the Minutes of the Board meeting held on 29.09.1988, there is no mention of the same in the body of the agreement.
5. In any event, Writ Petition No. 149 of 1987 was disposed of on 05.10.1988 in the light of this agreement. The Board seems to have then realized that the land acquired for its benefit could not be released in this manner and the issue was reconsidered in the Board’s meeting held on 22.11.1988. The Minutes of this meeting recorded that, upon enquiry, the authorities had informed the Board that though possession of the acquired land was handed over to the Board, the land still vested in the Government as no conveyance deed had been executed by the Government in favour of the Board. The Board, therefore, opined that it was necessary to review the whole matter. This was brought to the notice of the Delhi High Court by filing an application to recall the order dated 05.10.1988 passed in W.P. No. 149 of 1987. Bhagwan Dev
