Supreme Court Holds JAL Liable For Over Rs. 3.05 Crores Land Acquisition Compensation For Cement Project Transferred To Ultra Tech

The Supreme Court held Jaiprakash Associates Ltd (JAL) liable for payment compensation of over Rs. 3.05 Crores under a 2022 Supplementary Award to persons whose land was acquired for establishing a safety zone for a cement project run by JAL in Himachal Pradesh.

A bench of Justice JB Pardiwala and Justice Manoj Misra said that though the project was transferred to Ultra-Tech Cement Ltd. in 2017, the acquisition proceedings began before the “Effective Date” of the Scheme of Arrangement between JAL, Ultra-Tech, and the state government, and thus the liability for compensation was not transferred to Ultra-Tech.

The Court noted that JAL had already made payments under the original 2018 award without protest. Since the Supplementary Award was a continuation of the original acquisition proceedings, JAL could not now shift its liability to Ultra-Tech, the Court said.

“the exercise of determination of compensation amount which is a part of the acquisition proceedings remained pending even after the Effective Date of the Scheme. After the LAC determined the amount under the Award dated 08.06.2018, JAL paid the same without any protest or 23 reference to the Scheme. Therefore, at the stage of the Supplementary Award pertaining to the same land and same original landowners, JAL cannot be allowed to take the plea that the payments with respect to the subject land were required to be made by the Appellant.”

In 2008, the Himachal Pradesh government, under the Land Acquisition Act, 1894, initiated acquisition of approximately 56 bighas of land in Solan district to create a safety zone for a cement project run by JAL. In 2018, the Land Acquisition Collector (LAC) passed an award valuing the compensation at around Rs. 10.77 crores, which was paid by JAL.

The landowners sought additional compensation for damage to crops, structures, and standing trees, which had not been considered in the 2018 award. In 2022, the LAC passed a Supplementary Award determining additional compensation of Rs. 3.05 crore, but JAL failed to make this payment.

During this time, JAL transferred the cement project to Ultra-Tech Cement Ltd. through a scheme of arrangement approved by the National Company Law Tribunal (NCLT). The dispute arose as to which entity—JAL or Ultra-Tech—was liable to pay the additional compensation.

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

Ultra-Tech argued that under the scheme of arrangement with JAL, all liabilities related to pending disputes as of the effective date of the transfer (June 29, 2017) remained with JAL. Ultra-Tech claimed that since the land acquisition and compensation dispute predated the transfer, JAL was responsible for paying the Supplementary Award. Furthermore, Ultra-Tech clarified that it had not taken possession of the specific land in question.

JAL contended that the land was acquired for the cement project, which Ultra-Tech now owned and operated. Therefore, Ultra-Tech should be responsible for maintaining the safety zone and paying the additional compensation.

Clause 7.1 of the Scheme of Arrengement provided that all litigations pertaining to the business and assets being transferred to Ultra-Tech that arose before on the “Effective Date” (June 29, 2017) would not be transferred to Ultra-Tech and will remain with JAL.

The Court said that as the land was acquired for creating a safety zone around JAL's cement plant and mining areas, it pertained to JAL's business. The acquisition process began with a notification issued on July 25, 2008. As the acquisition proceedings started before the Effective Date of the Scheme (June 29, 2017) and compensation was still pending, the case falls under Clause 7.1 of the Scheme, where liability for such proceedings remains with JAL, the Court said.

The Supreme Court determined that the liability for the land acquisition remained with JAL, not Ultra-Tech, as the land in question was not included in the assets transferred to Ultra-Tech. The Court rejected JAL's argument that the subject land was an integral part of the cement project transferred to Ultra-Tech, thus making it responsible for paying compensation under the Supplementary Award. The Court emphasized that the land was acquired to safeguard the lives and property of the original landowners due to safety hazards.

The Court concluded that JAL's liability to pay compensation cannot be shifted to the Appellant based on the land's connection to the cement project, and any ownership disputes should be resolved between JAL and the Appellant without affecting the landowners' right to compensation.

“While we agree that the acquisition of the subject land was done for the purposes of the cement project, we cannot accept the contention of JAL that the liabilities arising out of the said land should be fastened upon the Appellant without any such liabilities being covered by the Scheme, not even on the strength of the argument that the subject land was integral to the cement project”, the Court held.

JAL argued that the land should be returned to the original owners under Section 101 of the Land Acquisition Act, 2013, since it had not been utilized for the intended purpose due to substantial delay in acquisition. The Court found no merit in this argument, observing that the land served its intended purpose of acting as a safety zone for the cement project's mining operations. Thus, the conditions under Section 101 for returning unutilized land were not met, the Court said.

“the acquisition of the subject land was done as a safety measure for the residents of the area and not to be used actively in the cement project. No other use except that the subject land may pose hazard to the residents was envisaged during the acquisition proceedings. JAL cannot pray for return of the land as that would result in endangering the lives and property of the original landowners. We find that the subject land has been in use all throughout the operation of the cement project by serving as a safety zone and the condition of being unutilized is not satisfied”, stated the Court.

The Court concluded that JAL was responsible for paying the supplementary compensation of Rs. 3.05 crores to the landowners. It directed the State of Himachal Pradesh and the Land Acquisition Collector to pay the amount within 15 days and to recover it from JAL. The Supreme Court set aside the HC's order.

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

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

Citation: 2024 LiveLaw (SC) 724

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