Land Acquisition : No Lapse Of Proceedings Under Old Act If Compensation Is Deposited In Treasury ; SC 5-Judge Bench Upholds Indore Development Authority Decision [Read Judgment]

A 5-judge bench of the Supreme Court on Friday held that proceedings under the Land Acquisition Act 1894 will not lapse if the compensation has been tendered by deposit in treasury. 

The Court held that land owners cannot insist that the amount should be deposited in Court so as to sustain the land acquisition proceedings under the old Act on the commencement of the new land acquisition law with effect from January 1, 2014.

"Deposit in treasury in place of deposit in court causes no prejudice to the landowner or any other stakeholder as their interest is adequately safeguarded by the provisions contained in Section 34 of the Act of 1894, as it ensures higher rate of interest than any other Government securities. Their money is safe and credited in the earmarked quantified amount and can be made available for disbursement to him/them. There is no prejudice caused and every infraction of law would not vitiate the act", the bench observed.

Land owners cannot insist that the proceedings have lapsed if the government has tendered the amount by deposit in treasury, said Justice Arun Mishra, while reading out the judgment for the bench. The obligation to pay compensation is complete on government tendering the amount. There is no need to actually deposit the amount with the land owners or in the concerned Court.

Thus, the bench has affirmed the view in the 2018 Indore Development Authority case, overruling the 2014 judgment in Pune Municipal Corporation case. A bench comprising Justices Arun Mishra, Indira Banerjee, Vineet Saran, M R Shah and Ravindra Bhat had heard the matter.

The case involved the interpretation of Section 24(2) of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act 2013. As per this provision, compensation proceedings under the Land Acquisition Act 1894 will lapse on the commencement of the 2013 Act, if "compensation has not been paid".

The question in the case was whether deposit of compensation by the Government in Government treasury can be regarded as "paid" within the meaning of Section 24(2).

 The 5-judge bench also held that the word "or" in Section 24(2) should be read as "and". This means that the proceedings under old LA Act will lapse only if if there is failure to take possession "and" failure to pay compensation.

If possession taken but compensation not paid, there is no lapse.

If compensation paid but possession not taken, then also no lapse of proceedings under 1894 Land Acquisition Act. 

The questions referred to the Constitution Bench were answered in the following manner :

1. Under the provisions of Section 24(1)(a) in case the award is not made as on 1.1.2014 the date of commencement of Act of 2013, there is no lapse of proceedings. Compensation has to be determined under the provisions of Act of 2013.
2. In case the award has been passed within the window period of five years excluding the period covered by an interim order of the court, then proceedings shall continue as provided under Section 24(1)(b) of the Act of 2013 under the Act of 1894 as if it has not been repealed.
3. The word 'or' used in Section 24(2) between possession and compensation has to be read as 'nor' or as 'and'. The deemed lapse of land acquisition proceedings under Section  24(2) of the Act of 2013 takes place where due to inaction of authorities for five years or more prior to commencement of the said Act, the possession of land has not been taken nor compensation has been paid. In other words, in case possession has been taken, compensation has not been paid then there is no lapse. Similarly, if compensation has been paid, possession has not been taken then there is no lapse.
4. The expression 'paid' in the main part of Section 24(2) of the Act of 2013 does not include a deposit of compensation in court. The consequence of non-deposit is provided in proviso to Section 24(2) in case it has not been deposited with respect to majority of land holdings then all beneficiaries (landowners) as on the date of notification for land acquisition under Section 4 of the Act of 1894 shall be entitled to compensation in accordance with the provisions of the Act of 2013. In case the obligation under Section 31 of the Land  Acquisition Act of 1894 has not been fulfilled, interest under Section 34 of the said Act can be granted. Non-deposit of compensation (in court) does not result in the lapse of land acquisition proceedings. In case of non-deposit with respect to the majority of holdings for five years or more, compensation under the Act of 2013 has to be paid to the "landowners" as on the date of notification for land acquisition under Section 4 of the Act of 1894.
5. In case a person has been tendered the compensation as provided under Section 31(1) of the Act of 1894, it is not open to him to claim that acquisition has lapsed under Section 24(2) due to non-payment or non-deposit of compensation in court. The obligation to pay is complete by tendering the amount under Section 31(1). 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 Act of 2013.
6. The proviso to Section 24(2) of the Act of 2013 is to be treated as part of Section 24(2) not part of Section 24(1)(b).
7. The mode of taking possession under the Act of 1894 and as contemplated under Section 24(2) is by drawing of inquest report/memorandum. Once award has been passed on taking possession under Section 16 of the Act of 1894, the land vests in State there is no divesting provided under Section 24(2) of the Act of 2013, as once possession has been taken there is no lapse under Section 24(2).
8. The provisions of Section 24(2) providing for a deemed lapse of proceedings are applicable in case authorities have failed due to their inaction to take possession and pay compensation for five years or more before the Act of 2013 came into force, in a proceeding for land acquisition pending with concerned authority as on 1.1.2014. The period of subsistence of interim orders passed by court has to be excluded in the computation of five years. 
9. Section 24(2) of the Act of 2013 does not give rise to new cause of action to question the legality of concluded proceedings of land acquisition. Section 24 applies to a proceeding pending on the date of enforcement of the Act of 2013, i.e., 1.1.2014. It does not revive stale and time-barred claims and does not reopen concluded proceedings nor allow landowners to question the legality of mode of taking possession to reopen proceedings or mode of deposit of compensation in the treasury instead of court to invalidate acquisition. 

Case Background

The underlying issue, in broad terms, was whether deposit of compensation by government in treasury can be deemed as payment to landowner as per Section 24(2) of the 2013 Land Acquisition Act so as to save the proceedings taken under the 1894 Land Acquisition Act from being lapsed.

In 2014, a three judge bench (Justices R M Lodha, M B Lokur and Kurian Joseph) in Pune Municipal Corporation case held that in case land owners are not willing to accept the compensation, the same has to be deposited in Court. Mere deposit of compensation in treasury cannot be regarded as payment as per Section 24(2), added the bench. In other words, land acquisition proceedings under the 1894 Act will lapse

This view held field for nearly over three years, until a two judges bench comprising Justice Arun Mishra and Amitava Roy doubted its correctness in the Indore Development Authority case in December 2017 and referred it to larger bench.

The larger bench (a three judge bench) which considered the reference was also headed by Justice Arun Mishra. This three judge bench (by 2:1 majority) held the decision in Pune Municipal Corporation to be per incuriam. While Justices Arun Mishra and A K Goel were in the majority, Justice Mohan M Shantanagoudar dissented by stating that a three judge bench cannot overrule a precedent laid down by a co-ordinate bench.

Shortly, another three-judge bench (Justices Madan B Lokur, Kurian Joseph and Deepak Gupta) took objection to this course adopted by Justice Arun Mishra-led bench in the Indore Development Authority case, and stayed the operation of Indore Development Authority case.

It was only after this that a two-judge bench headed by Justice Arun Mishra thought it fit to refer the issue to the CJI for determination by a larger bench.

Request for Justice Arun Mishra's recusal

At the beginning of the hearing, some of the parties made a request for the recusal of Justice Arun Mishra from the bench on the ground that the bench was examining the correctness of the judgment authored by him was under examination. They argued that Justice Arun Mishra appeared to be pre-disposed to a particular stand on the interpretation of Section 24(2) in view of the consistent stands taken by him throughout, and said that this created a likelihood of bias.

After an elaborate hearing on the preliminary issue of recusal, Justice Arun Mishra turned down the request. Justice Mishra said that previous judgment cannot constitute bias, and added that a litigant cannot be allowed to choose the bench on the basis of untenable apprehensions.

(Story to be updated after receiving judgment)

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