Land Acquisition and Compensation: Key Supreme Court Verdict on Lapsing of Proceedings

The Supreme Court, in a landmark judgment, has provided clarity on the interpretation of Section 24 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation, and Resettlement Act, 2013. The case involved multiple appeals and special leave petitions concerning whether land acquisition proceedings initiated under the Land Acquisition Act, 1894, had lapsed due to non-payment of compensation or non-taking of possession.

The central issue before the Court was the meaning of the phrase ‘or’ in Section 24(2) of the 2013 Act, which states that if an award was made five years before the commencement of the Act but possession was not taken or compensation not paid, the acquisition proceedings shall be deemed to have lapsed. The Court had to determine whether ‘or’ should be read disjunctively, meaning that if either condition was satisfied, the proceedings lapsed, or conjunctively, meaning that both conditions needed to be met for lapsing to occur.

Background of the Case

The case arose from a dispute between the Indore Development Authority and landowners over whether land acquisition proceedings under the 1894 Act had lapsed. The landowners argued that since compensation had not been deposited and possession had not been taken, the proceedings should be deemed to have lapsed under Section 24(2) of the 2013 Act.

The petitioners relied on previous rulings such as Pune Municipal Corporation v. Harakchand Misrimal Solanki, which interpreted Section 24(2) in favor of landowners, holding that non-deposit of compensation resulted in the lapsing of acquisition.

Arguments by the Petitioner

The petitioner, Indore Development Authority, argued that the interpretation in Pune Municipal Corporation was flawed and led to unintended consequences. They contended that:

• The word ‘or’ in Section 24(2) should be read conjunctively as ‘and,’ meaning that lapsing occurs only when both conditions—failure to take possession and failure to pay compensation—are met.
• Once possession is taken, land vests with the government, and proceedings cannot lapse merely due to non-payment of compensation.
• Allowing lapse merely because compensation was not deposited in court would lead to reopening settled acquisitions and jeopardizing development projects.
• The Court should clarify that compensation paid to landowners or deposited in the government treasury, as per financial rules, should be considered as ‘paid.’

Arguments by the Respondents

The landowners and other respondents contended that:

• The language of Section 24(2) is clear—if either possession is not taken or compensation is not paid, the acquisition lapses.
• Previous rulings such as Pune Municipal Corporation correctly interpreted the provision to protect landowners from indefinite deprivation of land without payment.
• Compensation must be deposited in court, not just in government accounts, for it to be considered ‘paid.’
• Reading ‘or’ as ‘and’ would dilute the legislative intent and deprive landowners of their rights.

Supreme Court’s Decision

The five-judge bench ruled in favor of the petitioner and overruled Pune Municipal Corporation. The Court held that:

• The word ‘or’ in Section 24(2) should be read conjunctively, meaning that for acquisition to lapse, both conditions—failure to take possession and failure to pay compensation—must be met.
• Once possession is taken, land vests absolutely with the government and cannot be divested even if compensation has not been paid.
• Compensation is considered ‘paid’ if it has been tendered to the landowners, deposited in court, or placed in government accounts per financial regulations.
• The period during which legal proceedings prevented possession-taking should be excluded from the five-year calculation under Section 24(2).

The Court emphasized that interpreting Section 24(2) as requiring both conditions to be met prevents unnecessary lapsing of valid acquisitions, which could disrupt public infrastructure projects.

Conclusion

This ruling provides much-needed clarity on the lapsing of land acquisition proceedings under the 2013 Act. By reading ‘or’ conjunctively, the Court has ensured that only cases where both possession has not been taken and compensation has not been paid will lead to lapsing. This decision balances the rights of landowners with the need to uphold valid acquisitions for public welfare.

The judgment has significant implications for land acquisition across the country, as it prevents large-scale lapsing of acquisitions due to technicalities while ensuring fair compensation for landowners.

Petitioner Name: Indore Development Authority.
Respondent Name: Manoharlal & Ors..
Judgment By: Justice Arun Mishra.
Place Of Incident: Indore.
Judgment Date: 06-03-2020.

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