Supreme Court Overturns Arbitrator's Award in Delhi Land Dispute

The Supreme Court of India has delivered a significant judgment in the case of Delhi Agricultural Marketing Board vs. Bhagwan Devi (Dead) through her Legal Representative. The case revolved around a disputed agreement that attempted to return a portion of government-acquired land to an individual claimant, Bhagwan Devi, despite the land having been acquired for a public purpose. The Supreme Court, in its ruling on March 20, 2025, declared the agreement and the subsequent arbitration award as legally untenable and against public policy.

The bench, comprising Sanjiv Khanna and Sanjay Kumar, examined the complex history of the land acquisition, the arbitration proceedings, and the High Court’s previous decisions before arriving at its conclusion.

Background of the Case

In 1963, the Government of Delhi issued a notification under the Land Acquisition Act, 1894, to acquire 33 acres of land for the Delhi Agricultural Marketing Board (referred to as ‘the Board’) to establish a grain market in Narela. This included 6 bighas and 10 biswas of land claimed by Bhagwan Devi. The government formally took possession of the land on September 22, 1986, and handed it over to the Board.

However, Bhagwan Devi, who claimed ownership through sale deeds from 1959 and 1971, challenged the acquisition in the Delhi High Court. Instead of pursuing the litigation, the Board, under the chairmanship of its then leader, entered into a private agreement with Bhagwan Devi on September 30, 1988, agreeing to return half of the land to her in exchange for compensation. This agreement would later become the subject of prolonged legal battles.

Legal Challenges and Arbitration

The agreement provided that Bhagwan Devi would pay a portion of the compensation, plus interest, to the Board in exchange for the return of part of the land. It also included a clause stating that disputes would be referred to the Board’s Chairman for final resolution.

Years later, Bhagwan Devi invoked the arbitration clause, seeking enforcement of the agreement. In 2006, the Delhi High Court appointed an arbitrator, who ruled in favor of Bhagwan Devi in 2007, directing the Board to transfer the land back to her.

Petitioner’s Arguments (Delhi Agricultural Marketing Board)

The Board contended that the land was acquired through the government’s eminent domain powers and could not be returned through a private agreement.
The Board argued that the agreement was executed improperly, as it was signed on the outgoing Chairman’s last day in office and was not properly ratified.
The Board maintained that the agreement violated public policy because government-acquired land cannot be transferred back arbitrarily.
It was pointed out that the agreement was drafted even before the Board had formally approved it, raising suspicions about its legitimacy.

The Board argued, “The land was acquired for a public purpose and had vested in the government. The agreement attempting to return part of the land was unlawful and contrary to public policy.”

Respondent’s Arguments (Legal Representative of Bhagwan Devi)

The respondent contended that the agreement was lawfully executed and should be enforced.
They argued that the Board had the authority to enter into such agreements and that the compensation mechanism in the agreement was fair.
They claimed that the arbitration award was valid, as the dispute resolution mechanism was explicitly mentioned in the agreement.

The respondent’s counsel argued, “The Board willingly entered into the agreement, and the arbitrator’s ruling upholding it must be respected.”

Supreme Court’s Ruling

The Supreme Court overturned the arbitration award, emphasizing that the Board had no authority to transfer land that had vested in the government without proper legal procedures. The Court held:

“When the State uses its sovereign power of eminent domain and acquires land for a public purpose, such an exercise cannot be undone through a private agreement by the beneficiary of such acquisition.”

The bench further stated:

“Validating this dubious enterprise by a statutory beneficiary of compulsory acquisition would amount to permitting a fraud on the exercise of sovereign power by the State.”

The Court also noted that the agreement itself was drafted hastily and with questionable motives, stating:

“The fact that stamp papers were purchased, and the agreement was executed on the very last day of the Chairman’s tenure, raises concerns about the legitimacy of the transaction.”

Final Judgment

The Supreme Court ruled in favor of the Delhi Agricultural Marketing Board and set aside:

The Arbitrator’s Award of July 10, 2007
The Delhi High Court’s Judgment of July 1, 2013, which upheld the award
The Delhi High Court’s Division Bench Ruling of September 27, 2013

The Court concluded:

“The appeal is accordingly allowed. The judgments of the Delhi High Court, along with the arbitration award, are set aside.”

With this ruling, the Supreme Court reaffirmed that government-acquired land must remain with the intended public institution and cannot be arbitrarily reallocated through private agreements.

Petitioner Name: Delhi Agricultural Marketing Board.
Respondent Name: Bhagwan Devi (Dead), through her LR..
Judgment By: Justice Sanjiv Khanna, Justice Sanjay Kumar.
Place Of Incident: Delhi.
Judgment Date: 20-03-2025.

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