Land Acquired By Govt Cannot Be Transferred Back By Beneficiary To Original Owner Through Private Agreement : Supreme Court

The Supreme Court today (March 20) ruled that land acquired by the government through its sovereign power of eminent domain for public purposes cannot be transferred back to the original owner by the beneficiary of the acquisition through private agreements.

A bench comprising Chief Justice Sanjiv Khanna and Justice Sanjay Kumar heard a case in which the Delhi Agricultural Marketing Board ("Board") had agreed to transfer half of the total land acquired for establishing an agricultural market back to the landowner.

Describing it as a fraud on the State's power of eminent domain, the Court nullified the agreement by which the Board sought to transfer the acquired land back to the original owner. The Court held that once land is acquired by the government for a public purpose and its possession is vested with the beneficiary, it cannot be returned to the original owner through private agreements.

“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. Validating this dubious enterprise by a statutory beneficiary of a compulsory acquisition would be nothing short of permitting a fraud on the exercise of such sovereign power by the State.”, the court observed.

The Court observed that the facts of the case were "turning the law of land acquisition on its head."

In this case, the government had acquired 33 acres of land under the Land Acquisition Act, 1894, for the establishment of a grain market in Narela, Delhi. The possession of the land was taken over by the beneficiary i.e., Delhi Agricultural Marketing Board (“Board”).

The Respondent-landowner filed a writ petition in the Delhi High Court challenging the land acquisition. Then the case took, as described by the Court, a "curious turn". During the pendency of the petition, an out-of-court settlement was arrived at and, an agreement was entered between the Board and the Respondent-land owner that the Board would transfer half the land acquired by the government to the landowner and in return, she would pay the Board the proportionate compensation awarded for the returned land, along with 12% interest.

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.

The High Court disposed of the Writ Petition filed by the Respondent based on the agreement. Later on, realizing that the agreement entered with the Respondent was against public policy and illegal, the Board filed a recall application before the High Court but the High Court allowed the Respondent to pursue her remedies.

The events turned 'curiouser and curiouser', with the Respondent initiating arbitration under the agreement, and an arbitrator ruled in her favour, directing the Board to execute a conveyance deed for the returned land.

The Board challenged the arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996, but both the Single Judge and Division Bench of the Delhi High Court upheld the award.

Following this, an appeal was preferred before the Supreme Court by the Board.

Setting aside the impugned decisions, the judgment authored by Justice Kumar stressed that the Board was not authorized to execute the conveyance in the Respondent's favor as the Board did not have a conveyance deed from the government, meaning it did not have absolute ownership of the land. Therefore, it could not legally transfer any portion of the land to Bhagwan Devi.

"Admittedly, no such document was ever issued by the Government actually transferring the subject land to the Board, whereby it could claim absolute rights over it."

Also, the Court referenced Section 48 of the Land Acquisition Act, 1894 (“Act”) stating that 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. Because the possession was taken over by the Agriculture Committee under the control of the Board, it was not open even to the Government to withdraw from the acquisition of the subject land after possession was taken over on 22.09.1986, evidenced by proper documentation.

Further, the Court criticized the High Court for failing to address the crucial issues relating to the validity of the award while exercising their powers under Sections 34 and 37 of the Arbitration Act because when the award opposes the principles of public policy of India.

“Neither the Court exercising jurisdiction under Section 34 nor the Court exercising appellate power under Section 37 dealt with these crucial issues. Section 34(2)(b) of the Act of 1996 categorically provides that an Arbitral Award may be set aside if the Court finds that it is in conflict with the public policy of India. Explanation (1) thereto clarifies that an Award would be in conflict with the public policy of India if it is in contravention of the fundamental policy of Indian law or it is in conflict with the most basic notions of morality or justice.”, the court observed.

In terms of the aforesaid, the Court allowed the appeal and set aside the impugned orders.

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

Citation : 2025 LiveLaw (SC) 327

Click here to read/download the judgment

Appearance:

For Appellant(s) Ms. Rachana Srivastava, Sr. Adv. Mr. Brij Bhushan, AOR Ms. Monika, Adv.

For Respondent(s) Mr. Swastik Solanki, Adv. Mr. Gaichangpou Gangmei, AOR Mr. Arjun D. Singh, Adv. Ms. Nisha Pandey, Adv. Mr. Maitreya Mahaley, Adv. Mr. Yimyanger Longkumer, Adv. Mr. J. Prasad, Adv. Mr. Atul Kumar, AOR Ms. Sweety Singh, Adv. Ms. Archana Kumari, Adv. Mr. Rahul Pandey, Adv. Mr. Harsh Kumar, Adv. Mr. Himanshu Raj, Adv. Mr. Sudipta Singha Roy, Adv. Ms. Manika Tripathy, AOR Mr. Kanhaiya Priyadarshi, AOR