Protecting Public Interest: The Supreme Court’s Stance On Private Agreements In Land Acquisition

Introduction:

The recent Supreme Court judgment in Delhi Agricultural Marketing Board v. Bhagwan Devi[1] involves the controversial attempt by a statutory body to undo a government land acquisition by returning a portion of the land to the original owner via a private agreement. The judgment reaffirms the fundamental principle that land acquired for public purposes cannot be reverted or fragmented by private arrangements without undermining the sovereign authority of the state.

Background:

The issue arose when the Board for Delhi Agricultural Marketing (hereafter “the Board”), a statutory body, being an instrumental body of the public in the affairs of Agricultural markets (“APMC”), entered into a transaction deviating from public statutory requirements to acquire land by using “land acquisition” method. Back in 1963, as a result of the Land Acquisition Act 1894, the government acquired 33 acres of land for establishing a grain market at Narela, Delhi for a particular public purpose. This whole acquisition of land including land of Bhagwan Devi, was generally a typical exercise of power of eminent domain by the state.

After the acquisition was complete and possession was given, it was expected by the government that the land would be used only for the declared public purpose. However, curiously when taking advantage of pendency of a writ petition filed by Bhagwan Devi an alien situation occurred, where on September 30, 1988 the Board entered into a private agreement with the landowner. Under that agreement half of the acquired land would be handed back to Bhagwan Devi by the Board against payment of damages with 12% interest. Strikingly the agreement was signed on the eve of a change of leadership in the Board

Key Legal Issues:

Central to the Supreme Court’s reasoning were a variety of tangled legal issues cutting across eminent domain, public policy, and statutory interpretation. Whether a beneficiary of the state’s eminent domain power, in this case the Board, can by private arrangement return some part of the land acquired for a public purpose or not. The underpinning of this argument was that allowing such a transaction would lead to defeat of the very purpose of acquisition and inure a dangerous precedent.

Sat on its edge Private agreement was perhaps most memorably described by Court as a “fraud on the state’s power of eminent domain” This phrase sums up that by agreeing to give back some land, the Board was trying to side-step the common interest, the transaction showing a misuse or abuse of the governing authority of the state.

Mostly overlooked in the argument is the fact that the Board had no conveyance deed from the government with it. Absence of such deed meant that its holding of the land could not transfer into absolute ownership. So, besides the Board not having the power of transferring any part of this land to Bhagwan Devi or any other private party. Questions were also raised by Supreme Court on the arbitration proceedings that had earlier upheld the private arrangement. It referred to Section 34(2)(b) of Arbitration and Conciliation Act, 1996 and it can be inferred that enforcement of arbitral award could be set away on public policy. The arbitrator failed to consider the critical aspects of public policy and instead aligned with the agreement that undermined the state’s power of eminent domain.

Section 48 of the Land Acquisition Act, 1894 was also highlighted by the Court, which provides that once the state acquires any land for a public purpose, all power to reverse or modify the acquisition stands extinguished with the government. After the acquisition, any subsequent transaction to return or reassign portions of land by private negotiations will be seen to be against the rules which preside over the acquisition of land.

Analysis:

The Supreme Court decision was based on a detailed examination of not only the statutory provisions involved but also the constitutional principles. The Court pointed out that right of eminent domain is the basic tenet of the state sovereignty. Any mechanism to water down or alter such acquisitions, especially through private processes, will effectively subsume the very essence of the authority that a State enjoys over the property. The Court was very categorical in its observation that once the state has taken over the position of a Landowner, thereafter it must have absolute superiority of the property to be able to put it to its intended public use.

One of the key findings of this judgment was that possession alone cannot be equated with full ownership in the absence of a formal transfer of title. The absence of a conveyance deed was not merely a procedural technicality; it signified that the Board lacked the legal authority to transfer any rights in the acquired property. On this basis, the Court concluded that the private settlement with Bhagwan Devi was ultra vires and unlawful.

The judgment strongly criticized both the Delhi High Court and the arbitral tribunal for failing to evaluate the private agreement through the lens of well-established public policy norms. By not recognizing the agreement for what it truly was — a calculated attempt to reverse the State’s sovereign authority — they effectively endorsed a practice that could undermine the very essence of the principle of eminent domain. Through this order, the Supreme Court aims to reaffirm the judiciary’s role as a vigilant guardian against such misuse of state power.

The Supreme Court expressed deep concern over ensuring that the original public purpose behind the land acquisition remained intact, without any dilution through customary practices. The ruling unequivocally asserted that any deviation from the intended public objective, including private settlements that result in the partial return of land to the original owner, would undermine the State’s ability to implement policies for the benefit of the community. In essence, the judgment reflects a resolute stance that public resources must not fall prey to privatization, which could ultimately compromise both public welfare and administrative efficiency.

Conclusion:

Through its detailed examination of issues ranging from the lack of conveyance authority to the implications for arbitration under the Arbitration and Conciliation Act, 1996, the Court delivered a message that any action undermining public purpose will not be tolerated. In doing so, it has provided clarity on the limits of state power, ensuring that public resources remain dedicated to their intended purposes. The judgment is a reaffirmation that the state’s right to acquire land for public use is a sovereign prerogative that cannot be diluted by private settlements, thereby safeguarding the broader interests of society.

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[1] Civil Appeal No. 10757 of 2017.

King Stubb & Kasiva,
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