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LAND ACQUISITION BY HOUSING SOCIETIES THROUGH ILLEGAL CONTRACTS CANNOT BE LEGALISED 2012 SC

Justice G.S. Singhvi, and Justice Asok Kumar Ganguly in the case of Bangalore City Cooperative Housing Society Ltd vs State Of Karnataka Decided on 02-02-2012 Discussed following case law on the subject of land acquisition in favour of Housing Societies. In this case also the Estate Agent, namely, M/s. Rejendra Enterprises with whom the appellant had entered into an agreement dated 21.2.1988 had played crucial role in the acquisition of land. The tenor of that agreement does not leave any manner of doubt that the Estate Agent has charged huge money from the appellant for getting the notifications issued under Sections 4(1) and 6(1) of the 1894 Act and sanction of layout plan by the BDA. The respondents could not have produced any direct evidence that the Estate Agent had paid money for facilitating the acquisition of land but it is not too difficult for any person of reasonable prudence to presume that the appellant had parted with crores of rupees knowing fully well that a substantial portion thereof will be used by the Estate Agent for manipulating the State apparatus. Therefore, we do not find any justification to invoke the doctrine of prospective overruling and legitimize what has been found by the Division Bench of the High Court to be ex-facie illegal.


In Narayana Reddy v. State of Karnataka ILR 1991 (3) KAR 2248, the Division Bench of the High Court considered whether the acquisition of land made on behalf of 7 house building cooperative societies including H.M.T. Employees' Cooperative Society and Vyalikaval House Building Cooperative Society was for a public purpose as defined in Section 3(f)(vi) or the same was colourable exercise of power by the State Government. A reading of the judgment shows that when the writ petitions questioning the acquisition of land were placed before the learned Single Judge, he felt that the points which were raised by the petitioners had not been considered in the earlier judgment of the Division Bench in Narayana Raju v. State of Karnataka ILR 1989 KAR 376, which was confirmed by this Court in Narayana Raju v. State of Karnataka ILR 1989 KAR 406 and referred the matter to the Division Bench under Section 9 of the Karnataka High Court Act. The Division Bench first considered whether the acquisition of land on behalf of house building cooperative societies was for a public purpose. After noticing the relevant statutory provisions, the Division Bench referred to the judgments of this Court in State of Gujarat v. Chaturbhai Narsibhai AIR 1975 SC 629, General Government Servants Cooperative Housing Society Limited v. Kedar Nath (1981) 2 SCC 352 and M/s. Fomento Resorts and Hotels Limited v. Gustavo Ranato Da Cruz Pinto AIR 1985 SC 736 and held that the earlier decisions support the writ petitioners' plea that they were entitled to be heard before the Government could grant approval for the acquisition of land on behalf of cooperative societies, but their plea cannot be accepted in view of the latter judgment. The Division Bench further held that the aggrieved person can raise all points during the course of an inquiry held under Section 5A of the 1894 Act. The Division Bench then referred to the averments contained in Writ Petition Nos.7683, 7699/1988 in which the acquisition of land for various House Building Cooperative Societies was challenged, the advertisement issued by the society, agreement entered into between HMT Cooperative Society and the Estate Agent who assured that he will get the acquisition approved at an early date subject to payment of the specified amount, various reports including the one prepared by G.V.K.Rao, order dated 14.1.1991 passed by the State Government and quashed the acquisition. ………. The Division Bench of the High Court held that the whole acquisition was vitiated due to malafides and manipulations done by the House Building Cooperative Societies through the Estate Agent. The Division Bench also referred to Section 23 of the Contract Act, judgment of Supreme Court in Rattan Chand Hira Chand v. Askar Nawaz Jung JT 1991 (1) SC 433 and held as under: “Applying the ratio of the above judgment, there can be no doubt that the Agreements entered into between the six respondent- Societies and their respective agents in which one of the condition was payment of huge sums of money by the Society to the agent in consideration of which the agent had to get the Preliminary and Final Notifications issued by the Government, was for the purpose of influencing the Government and to secure approval for acquisition of the lands and therefore opposed to public policy.” ……. The question however, for our consideration is, whether the impugned Notifications are liable to be quashed. In our opinion, once it is clear that the Agreement entered into between the Societies and the agents concerned, under which the purport of one of the clauses was that the agent should influence the Government and to procure Preliminary and Final Notifications under Sections 4 and 6 of the Act respectively are opposed to public policy, the impugned Notifications being the product or fruits of such an agreement are injurious to public interest and detrimental to purity of administration and therefore cannot be allowed to stand. ………… The irresistible inference flowing from the facts and circumstances of these cases is, whereas the power conferred under the Land Acquisition Act is for acquiring lands for carrying out housing scheme by a housing society, in each of the cases the acquisition of lands is not for a bona fide Housing Scheme but is substantially for the purpose of enabling the concerned office bearers of respondent-Societies and their agents to indulge in sale of sites in the guise of allotment of sites to the Members/Associate Members of the Society and to make money as alleged by the petitioners and therefore it is a clear case of colourable exercise of power. Thus the decision of the Government to acquire the lands suffers from legal mala fides and therefore the impugned Notifications are liable to be struck down. ……….. If requirement of Section 3(f)(vi) is not strictly enforced, every housing cooperative society shall approach the appropriate Government for acquisition by applying Section 3(f) (vi) instead of pursuing the acquisition under Part VII of the Act which has become more rigorous and restrictive. In this background, it has to be held that the prior approval, required by Section 3(f)(vi), of the appropriate Government is not just a formality; it is a condition precedent to the exercise of the power of acquisition by the appropriate Government for a housing scheme of a cooperative society.

LAND ACQUISITION FINAL NOTIFICATION WITHIN ONE YEAR

K.B. Ramachandra Raje Urs vs State Of Karnataka AIR 2001 Kant 512 , The final notification is also bad in law for another reason. Section 6(1)(ii) of the L.A. Act, 1894 (hereinafter referred to as 'L.A. Act') stipulates that no declaration under Section 6 of the L.A. Act shall be made after the expiry of one year from the date of the publication of the notification under Section 4(1) of the Act. In the present case the preliminary notification issued under Section 16(1) of the 1903 Act shall be construed as the notification issued under Section 4(1) of the L.A. Act and the final notification issued under Section 18(1) of the 1903 Act shall be construed as the notification issued under Section 6(1) of the L.A. Act. Since the final notification was not issued within one year from the date of preliminary notification, the final notification is bad in law. This position of law is laid down by the Apex Court in the case of Mariyappa and Ors. v. State of Karnataka and Ors., 1. 1998(4) Kar. L.J. 701 (SC) : AIR 1098 SC 1334 : ILR 1998 Kar. 1339 (SC)

LAND ACQUISITION - IF THE PURPOSE IS CORRUPT THE RESULTANT ACT IS BAD

The Supreme Court in the case of State of Punjab and Anr. v. Gurdial Singh and Others, AIR 1980 SC 319, 1980 SCR (1)1071 has held as under. It is fundamental that compulsory taking of a man's property is a serious matter and the smaller the man the more serious the matter. Hearing him before depriving him is both reasonable and preemptive of arbitrariness, and denial of this administrative fairness is constitutional anathema except for good reasons. Save in real urgency where public interest does not brook even the minimum time needed to give a hearing, land acquisition authorities should not, having regard to Articles 14 (and 19), burke an enquiry under S. 17 of the Land Acquisition Act. In the instant case a slumbering process, pending for years and suddenly exciting itself into immediate forcible taking, makes a travesty of emergency power. ............... Legal malice is gibberish unless juristic clarity keeps it separate from the popular concept of personal vice. Bad faith which invalidates the exercise of power-sometimes called colourable exercise or fraud on power and often times overlaps motives, passions, and satisfactions-is the attainment of ends beyond the sanctioned purposes of power by simulation or pretension of gaining a legitimate goal. If the use of the power is for the fulfillment of a legal object the actuation or catalysation by malice is not legicidal. The action is bad where the true object is to reach an end different from the one for which the power is entrusted, goaded by extraneous considerations, good or bad, but irrelevant to the entrustment. When the custodian of power is influenced in its exercise by considerations outside those for promotion of which the power is vested, the court calls it a colourable exercise and is undeceived by illusion. ........ Fraud on power voids the order if it is not exercised bona fide for the end designed. Fraud in this context is not equal to moral turpitude and embraces all cases in which the action impugned is to effect some object which is beyond the purpose and intent of the power, whether this be malice-laden or even benign. If the purpose is corrupt the resultant act is bad. If considerations, foreign to the scope of the power or extraneous to the statute, enter the verdict or impel the action, mala fides or fraud on power vitiates the acquisition or other official act. ....................




A Division Bench of Karnataka High Court in Narayana Reddy and Anr. v. State of Karnataka and Ors., 1981(3) Kar. L.J. 545 : ELR 1991 Kar. 2248, "29. Now the final question for consideration is whether a notification issued by the State Government under Section 6(1) of the Act notifying that certain lands are required for a public purpose is liable to be struck down on the ground that the exercise of power by the Government was colourable, in that in truth it is not for the purpose for which the lands are stated to have been acquired. It is well-settled position in law that though sub-section (3) of Section 6 of the Act makes the declaration by the Government that the land is needed for a public purpose conclusive, if on the facts and circumstances of a given case it is established that there has been colourable exercise of power, the acquisition notification is liable to be struck down.

MODE OF CALCULATING COMPENSATION FOR LAND ACQUISITION RE-EXPLAINED BY SUPREME COURT 2012 SC

JUSTICE P. Sathasivam, and JUSTICE J. Chelameswar of The Supreme Court of India in the case of Mehrawal Khewaji Trust(Regd) ... vs State Of Punjab & Ors. Decided on 27 April, 2012 has held that "It is clear that when there are several exemplars with reference to similar lands, it is the general rule that the highest of the exemplars, if it is satisfied, that it is a bona fide transaction has to be considered and accepted. When the land is being compulsorily taken away from a person, he is entitled to the highest value which similar land in the locality is shown to have fetched in a bona fide transaction entered into between a willing purchaser and a willing seller near about the time of the acquisition. In our view, it seems to be only fair that where sale deeds pertaining to different transactions are relied on behalf of the Government, the transaction representing the highest value should be preferred to the rest unless there are strong circumstances justifying a different course. It is not desirable to take an average of various sale deeds placed before the authority/court for fixing fair compensation."

QUOTED CITATIONS


In Ranjit Singh vs. Union Territory of Chandigarh (1992) 3 SCC 659, this Court applied the rule of 10% yearly increase for award of higher compensation.


In Delhi Development Authority vs. Bali Ram Sharma & Ors. (2004) 6 SCC 533, this Court considered a batch of appeals and applied the rule of annual increase for grant of higher compensation.


In ONGC Ltd. vs. Rameshbhai Jivanbhai Patel (2008) 14 SCC 745, this Court held that where the acquired land is in urban/semi-urban areas, increase can be to the tune of 10% to 15% per annum and if the acquired land is situated in rural areas, increase can be between 5% to 7.5% per annum.


In Union of India vs. Harpat Singh & Ors. (2009) 14 SCC 375, this Court applied the rule of 10% increase per annum. Based on the above principle, we fix the annual increase at 12% per annum and with that rate of increase, the market value of the appellants’ land would come to Rs.1,82,000 per acre as on the date of notification.

Constitution Bench in the case of Sunder vs. Union of India, (2001) 7 SCC 211. While considering various decisions of the High Courts and approving the decision of the Punjab and Haryana High Court rendered in State of Haryana vs. Kailashwati, AIR 1980 P&H 117, this Court held that the interest awardable under Section 28 would include within its ambit both the market value and the statutory solatium. In view of the same, it is clear that the person entitled to the compensation awarded is also entitled to get interest on the aggregate amount including solatium. The above position has been further clarified by a subsequent Constitution Bench judgment in Gurpreet Singh vs. Union of India, (2006) 8 SCC 457.


Sri Rani M. Vijayalakshmamma Rao Bahadur, Ranee of Vuyyur vs. Collector of Madras, (1969) 1 MLJ 45 (SC). In this case, this Court has held thus: “… where sale deeds pertaining to different transactions are relied on behalf of the Government, that representing the highest value should be preferred to the rest unless there are strong circumstances justifying a different course. In any case we see no reason why an average of two sale deeds should have been taken in this case.”


In State of Punjab and Another vs. Hansraj (Dead) by LRS. Sohan Singh and Others, (1994) 5 SCC 734, this Court has held that method of working out the ‘average price’ paid under different sale transactions is not proper and that one should not have, ordinarily recourse to such method. This Court further held that the bona fide sale transactions proximate to the point of acquisition of the lands situated in the neighbourhood of the acquired lands are the real basis to determine the market value.


Anjani Molu Dessai vs. State of Goa and Another, (2010) 13 SCC 710, after relying upon the earlier decisions of this Court in M.Vijayalakshmamma Rao Bahadur (supra) and Hansraj (supra) held in para 20 as under: “20. The legal position is that even where there are several exemplars with reference to similar lands, usually the highest of the exemplars, which is a bona fide transaction, will be considered.” Again, in para 23, it was held that “the averaging of the prices under the two sale deeds was not justified.”

REFERENCE UNDER SECTION 18 AND ITS LIMITATIONS AND PROCEDURE

In Bhagwan Das v. State of Uttar Pradesh (2010) 3 SCC 545, this Court interpreted Section 18 and laid down the following propositions:
(i) If the award is made in the presence of the person interested (or his authorised representative), he has to make the application within six weeks from the date of the Collector's award itself.
(ii) If the award is not made in the presence of the person interested (or his authorised representative), he has to make the application seeking reference within six weeks of the receipt of the notice from the Collector under Section 12(2).
(iii) If the person interested (or his representative) was not present when the award is made, and if he does not receive the notice under Section 12(2) from the Collector, he has to make the application within six months of the date on which he actually or constructively came to know about the contents of the award.
(iv) If a person interested receives a notice under Section 12(2) of the Act, after the expiry of six weeks from the date of receipt of such notice, he cannot claim the benefit of the provision for six months for making the application on the ground that the date of receipt of notice under Section 12(2) of the Act was the date of knowledge of the contents of the award.

The Court then held: When a person interested makes an application for reference seeking the benefit of six months' period from the date of knowledge, the initial onus is on him to prove that he (or his representative) was not present when the award was made, that he did not receive any notice under Section 12(2) of the Act, and that he did not have the knowledge of the contents of the award during a period of six months prior to the filing the application for reference. This onus is discharged by asserting these facts on oath. He is not expected to prove the negative. Once the initial onus is discharged by the claimant/person interested, it is for the Land Acquisition Collector to establish that the person interested was present either in person or through his representative when the award was made, or that he had received a notice under Section 12(2) of the Act, or that he had knowledge of the contents of the award.
Actual or constructive knowledge of the contents of the award can be established by the Collector by proving that the person interested had received or drawn the compensation amount for the acquired land, or had attested the mahazar/panchnama/proceedings delivering possession of the acquired land in pursuance of the acquisition, or had filed a case challenging the award or had acknowledged the making of the award in any document or in statement on oath or evidence. The person interested, not being in possession of the acquired land and the name of the State or its transferee being entered in the revenue municipal records coupled with delay, can also lead to an inference of constructive knowledge. In the absence of any such evidence by the Collector, the claim of the person interested that he did not have knowledge earlier will be accepted, unless there are compelling circumstances not to do so.

PRINCIPLES TO BE FOLLOWED WHEN EMERGENT LAND ACQUISITION IS MADE 2011 SC


The Apex Court in the case of Radhy Shyam (dead) Through LRs and others vs. State of Uttar Pradesh and others, (2011) 5 SCC 553, has in fact culled out the principles, which are required to be followed in case of exercise of emergent powers for acquisition of the land of a citizen by the sovereign State, curtailing his right of property as enshrined under Article 300-A of the Constitution of India. The principles, which have been specifically laid-down by the Apex Court, are thus :

"(i) Eminent domain is a right inherent in every sovereign to take and appropriate property belonging to citizens for public use. To put it differently, the sovereign is entitled to reassert its dominion over any portion of the soil of the State including private property without its owner's consent provided that such assertion is on account of public exigency and for public good
(ii) The legislations which provide for compulsory acquisition of private property by the State fall in the category of expropriatory legislation and such legislation must be construed strictly
(iii) Though, in exercise of the power of eminent domain, the Government can acquire the private property for public purpose, it must be remembered that compulsory taking of one's property is a serious matter. If the property belongs to economically disadvantaged segment of the society or people suffering from other handicaps, then the court is not only entitled but is duty-bound to scrutinise the action/decision of the State with greater vigilance, care and circumspection keeping in view the fact that the landowner is likely to become landless and deprived of the only source of his livelihood and/ or shelter.
(iv) The property of a citizen cannot be acquired by the State and/or its agencies/ instrumentalities without complying with the mandate of Sections 4, 5-A and 6 of the Act. A public purpose, however, laudable it may be does not entitle the State to invoke the urgency provisions because the same have the effect of depriving the owner of his right to property without being heard. Only in a case of real urgency, the State can invoke the urgency provisions and dispense with the requirement of hearing the landowner or other interested persons.
(v) Section 17(1) read with Section 17(4) confers extraordinary power upon the State to acquire private property without complying with the mandate of Section 5-A. These provisions can be invoked only when the purpose of acquisition cannot brook the delay of even a few weeks or months. Therefore, before excluding the application of Section 5-A, the authority concerned must be fully satisfied that time of few weeks or authority concerned must be fully satisfied that time of few weeks or months likely to be taken in conducting inquiry under Section 5-A will, in all probability, frustrate the public purpose for which land is proposed to be acquired.
(vi) The satisfaction of the Government on the issue of urgency is subjective but is a condition precedent to the exercise of power under Section 17(1) and the same can be challenged on the ground that the purpose for which the private property is sought to be acquired is not a public purpose at all or that the exercise of power is vitiated due to mala fides or that the authorities concerned did not apply their mind to the relevant factors and the records.
(vii) The exercise of power by the Government under Section 17(1) does not necessarily result in exclusion of Section 5-A of the Act in terms of which any person interested in land can file objection and is entitled to be heard in support of his objection. The use of word "may" in sub- section (4) of Section 17 makes it clear that it merely enables the Government to direct that the provisions of Section 5-A would not apply to the cases covered under sub-section (1) or (2) of Section 17. In other words, invoking of Section 17(4) is not a necessary concomitant of the exercise of power under Section 17(1).
(viii) The acquisition of land for residential, commercial, industrial or institutional purposes can be treated as an acquisition for public purposes within the meaning of Section 4 but that, by itself, does not justify the exercise of power by the Government under Sections 17(1) and/or 17(4). The court can take judicial notice of the fact that planning, execution and implementation of the schemes relating to development of residential, commercial, industrial or institutional areas usually take few years. Therefore, the private property cannot be acquired for such purpose by invoking the urgency provision contained in Section 17(1). In any case, exclusion of the rule of audi alteram partem embodied in Sections 5-A(1) and (2) is not at all warranted in such matters.
(ix) If land is acquired for the benefit of private persons, the court should view the invoking of Sections 17(1) and/or 17(4) with suspicion and carefully scrutinise the relevant record before adjudicating upon the legality of such acquisition."

CASE LAW ON LAND LAWS

KARNATAKA LAND LAWS