State Must Ensure Timely Payment Of Land Acquisition Compensation Even If Private Company Is Ultimately Liable, Delay Violates Art 300A: Supreme Court

The Supreme Court today (September 20) criticised the State of Himachal Pradesh for failing to ensure the timely payment of additional compensation of Rs. 3,05,31,095 awarded to landowners for land acquired in 2008 for a cement project run by JAL(M/s Jaiprakash Associates Limited).

A bench of Justice JB Pardiwala and Justice Manoj Misra said that the state government should have ensured compensation was paid, even if it meant recovering it from JAL, instead of making the landowners go after corporate houses for payment.

“The State Government, in peculiar circumstances, was expected to make the requisite payment towards compensation to the landowners from its own treasury and should have thereafter proceeded to recover the same from JAL. Instead of making the poor landowners to run after the powerful corporate houses, it should have compelled JAL to make the necessary payment.”

The Court held that delay in payment of compensation to landowners whose property is acquired by the state is a violation of their right to property under Article 300A of the Constitution.

“the Government of Himachal Pradesh as a welfare State ought to have proactively intervened in the matter with a view to ensure that the requisite amount towards compensation is paid at the earliest. The State cannot abdicate its constitutional and statutory responsibility of payment of compensation by arguing that its role was limited to initiating acquisition proceedings under the MOU signed between the Appellant, JAL and itself. We find that the delay in the payment of compensation to the landowners after taking away ownership of the subject land from them is in contravention to the spirit of the constitutional scheme of Article 300A and the idea of a welfare State”, the Court stated.

The Court cited its judgment in Kukreja Construction Company & Ors. v. State of Maharashtra & Ors. in which it was held that once compensation is determined, it must be paid immediately without requiring any representation or request from the landowners, and any delay would constitute a violation of Article 300A of the Constitution.

The Court was dealing with a land acquisition dispute involving cement companies Ultra-Tech Cement Ltd and JAL. The issue revolved around determining who was liable to pay compensation under a Supplementary Award for the land acquired by the government for establishing a safety zone for the cement project.

The State of Himachal Pradesh initiated the acquisition of 56.14 bighas of land in 2008, situated in the Arki Tehsil of Solan District, to create a safety zone around the Jaypee Himachal Cement Project, operated by JAL.

Once the acquisition was finalized, an Award was issued on June 8, 2018, determining compensation to be paid to the landowners. JAL paid the compensation determined by the award, and the land was subsequently transferred to JAL.

However, the compensation for standing crops, trees, and structures on the land had not been evaluated at the time, and the HC ordered the Land Acquisition Collector (LAC) to pass a Supplementary Award. This award, issued on May 2, 2022, determined an additional amount of Rs. 3,05,31,095 as compensation, which JAL refused to pay.

In 2017, JAL's cement project was transferred to Ultra-Tech. The dispute arose on whether the liability for the additional compensation under the Supplementary Award should fall on Ultra-Tech Cement or JAL.

The Himachal Pradesh HC directed Ultra-Tech to pay the additional compensation, allowing it to recover the amount from JAL if permissible under their agreement. Thus, Ultra-Tech filed the present appeal before the Supreme Court.

The Supreme Court set aside the HC's order, finding that the compensation for the land fell under the responsibility of JAL. The Court expressed concern over the protracted delay in determining the compensation and transferring it to the landowners, who had been waiting since the acquisition proceedings began in 2008.

The Court cited Kolkata Municipal Corporation v. Bimal Kumar Shah, in which the Court identified seven sub-rights that accrue to a landowner when the State seeks to acquire their property including the right to fair compensation and the right to an efficient process within prescribed timelines.

The Court said that prompt compensation is integral to the acquisition process.

“Acquisition of land for public purpose is undertaken under the power of eminent domain of the government much against the wishes of the owners of the land which gets acquired. When such a power is exercised, it is coupled with a bounden duty and obligation on the part of the government body to ensure that the owners whose lands get acquired are paid compensation/awarded amount as declared by the statutory award at the earliest”, the Court observed.

In this case, the land was acquired using urgency powers under Section 17(4) of the Land Acquisition Act, 1894, which deprived landowners of the chance to object under Section 5A. This placed an increased responsibility on the State to ensure justice by providing fair compensation promptly, the Court held.

The Court held that failure to pay compensation before transferring possession of land was a breach of Section 38 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 and Section 41 of the 1894 Act, which is meant to ensure that compensation is paid before possession is transferred.

“It is regrettable that the State of Himachal Pradesh, being a welfare state, did not ensure payment of compensation to the Respondent Nos. 1-6 before taking possession of their land. In fact, the landowners had to approach the High Court to seek directions to the LAC for passing of the supplementary award which was finally passed on 02.05.2022 that is, after a period of almost four years from the date of passing of the Award of 2018.”

The Supreme Court directed the State of Himachal Pradesh and the Land Acquisition Collector to pay the additional compensation of Rs. 3,05,31,095 to the landowners, along with 9 percent interest from May 2022 and to recover this amount from JAL.

Case Title – M/s Ultra Tech Cement LTd v.Mast Ram and Anr.

Citation : 2024 LiveLaw (SC) 724