Eminent Domain, Lapsing, and Enhanced Compensation under the RFCTLARR Act

The Constitution (Forty-fourth Amendment) Act, 1978 deleted the right to property from the fundamental rights in Articles 19(1)(f) and 31 and inserted Article 300A, which provides that no person shall be deprived of his property save by authority of law. Property thus remains a constitutional right, and the courts have repeatedly described it as a human right, but a deprivation is challenged ordinarily before the High Court under Article 226 or in a civil suit rather than by a petition under Article 32.

Article 300A does not mention public purpose or compensation, but the courts have read both into it. In K.T. Plantation (P) Ltd. v. State of Karnataka, a Constitution Bench held that public purpose is a precondition for depriving a person of property under Article 300A, that the right to claim compensation is inbuilt in the Article, and that a law providing for deprivation must be just, fair and reasonable and is amenable to judicial review.

The procedural content of the right was spelt out in Kolkata Municipal Corporation v. Bimal Kumar Shah, where the Court identified seven sub-rights that a valid acquisition must respect: the duty to inform the owner, the right to be heard on objections, the right to a reasoned decision, the duty to acquire only for a public purpose, the right to restitution or fair compensation, the right to an efficient and expeditious process, and the right of conclusion, meaning that the proceedings must be brought to a final end. A provision that permitted the corporation to take land without such a procedure could not be treated as a power of compulsory acquisition.

The courts have been particularly firm where the State has taken land without any acquisition proceedings at all. In Tukaram Kana Joshi v. M.I.D.C., where the landowners had been dispossessed decades earlier without the acquisition being completed, the Court held that the State could not take advantage of the delay that its own illegal action had caused, and directed that compensation be determined afresh. In Vidya Devi v. State of Himachal Pradesh, land taken for a road in the late 1960s without acquisition or compensation was treated as having been compulsorily acquired; the Court held that the State cannot claim title to a citizen's land by adverse possession, that forcible dispossession without legal sanction violates Article 300A, and that a continuing wrong of this kind is not defeated by delay. It directed payment of compensation with statutory benefits and interest.

These decisions do not mean that delay is never relevant. Where the claimant has slept over rights for many years after a lawful acquisition, or where third-party rights have intervened, relief may be refused or moulded. The distinction lies between a landowner whom the State deprived without any process and one who failed to pursue the remedies the statute provided.

The 2013 Act came into force on 1 January 2014 and repealed the Land Acquisition Act, 1894. Section 24 deals with acquisitions begun under the old Act. Under Section 24(1), where no award had been made by that date, compensation is determined under the 2013 Act; where an award had been made, the proceedings continue under the 1894 Act. Section 24(2) provides that where an award was made five years or more before the commencement of the new Act but physical possession of the land has not been taken or compensation has not been paid, the proceedings are deemed to have lapsed.

In Pune Municipal Corporation v. Harakchand Misirimal Solanki, a three-judge Bench held that compensation is 'paid' only if it is paid to the landowner or deposited in court, and that a deposit in the government treasury was not enough, so that many acquisitions were treated as having lapsed. A Constitution Bench overruled that decision in Indore Development Authority v. Manoharlal. It held that the word 'or' in Section 24(2) must be read as 'nor', so that an acquisition lapses only where, because of the inaction of the authorities for five years or more before 1 January 2014, possession has not been taken and compensation has not been paid. Compensation is 'paid' when it has been tendered; a failure to deposit it in court entitles the owner to higher interest but does not cause the acquisition to lapse.

The Constitution Bench also held that possession is taken by drawing up a memorandum or panchnama, after which the land vests in the State and any continued occupation by the owner is unauthorised; that periods during which interim orders of courts prevented the authorities from taking possession or paying compensation are excluded in computing the five years; and that Section 24(2) does not revive stale or time-barred claims or permit concluded proceedings to be reopened. Claims of lapse are now examined strictly within this framework.

Section 26 fixes the market value as the highest of three figures: the value specified under the Indian Stamp Act, 1899 for registration of sale deeds in the area; the average sale price of similar land in the nearest village or vicinity, worked out from the sale deeds of the preceding three years by taking the half of them that show the highest prices; and, for acquisitions for private companies or public-private partnership projects, the compensation agreed with the owners. In rural areas, the market value is multiplied by a factor, notified by the appropriate Government within the range set by the First Schedule, depending on the distance of the land from urban areas.

To the market value are added the value of buildings, trees and other assets attached to the land. The total is then increased by a solatium equal to 100 per cent of the compensation under Section 30(1), and by an additional amount at 12 per cent per annum on the market value from the date of the notification of the social impact assessment study to the date of the award or of taking possession, whichever is earlier. Under the 1894 Act, by contrast, the solatium was 30 per cent of the market value, with an additional amount of 12 per cent per annum from the preliminary notification under Section 4. Interest on delayed payment runs at 9 per cent for the first year and 15 per cent thereafter under both statutes.

Under the 1894 Act, the courts treated stamp duty guideline values with caution as evidence of market value; Section 26 now makes them one of the statutory benchmarks. Much of the case law on valuation nonetheless remains relevant: the courts prefer genuine sale transactions of comparable land close in time and location to the acquisition, allow for differences in size and situation, and apply appropriate deductions when the price of small developed plots is used to value a large undeveloped tract. In Lal Chand v. Union of India, the Court explained that the deduction for development in such cases can range widely, from about 20 to 75 per cent, depending on the nature of the development needed.

Land is also acquired under special enactments, such as the National Highways Act, 1956 and the Railways Act, 1989. Section 105 and the Fourth Schedule exempted thirteen such enactments from the 2013 Act, but required the Central Government to extend to them the provisions on compensation and rehabilitation, which it did with effect from 1 January 2015.

For earlier acquisitions under the National Highways Act, the Court in Union of India v. Tarsem Singh held that denying solatium and interest to landowners whose land was acquired under that Act, while landowners under the 1894 Act received them, was discriminatory, and struck down Section 3J of the National Highways Act to that extent. Claims for those benefits in respect of highway acquisitions continue to be litigated.

A landowner who does not accept the Collector's award may seek a reference to the civil court under Section 18 of the 1894 Act or to the Land Acquisition, Rehabilitation and Resettlement Authority under Section 64 of the 2013 Act, generally within six weeks of the award if present or represented when it was made, and otherwise within the periods the statutes specify. An appeal lies to the High Court, under Section 54 of the 1894 Act or Section 74 of the 2013 Act, and from there by special leave to the Supreme Court. Under Section 28A of the 1894 Act, landowners who did not seek a reference could apply for redetermination of compensation on the basis of an award obtained by others in a reference.

Delay is a frequent issue, on both sides. The State often appeals late against enhanced compensation, and landowners often seek parity with neighbours who obtained higher compensation years earlier. The Court has sometimes condoned delay while denying interest for the period of delay, but it has also refused to condone very long delays. In Pathapati Subba Reddy v. Special Deputy Collector (LA), where an appeal to the High Court in a land acquisition reference had been filed more than fifteen years late, the Court upheld the refusal to condone the delay, holding that the fact that others similarly placed had obtained relief did not by itself entitle the petitioners to the same indulgence. The general principles are discussed in the guide to limitation and condonation of delay.

The 2013 Act added safeguards that the 1894 Act did not have. Most acquisitions require a social impact assessment; acquisitions for private companies require the consent of at least 80 per cent of the affected families, and for public-private partnership projects at least 70 per cent; irrigated multi-cropped land is to be acquired only as a demonstrable last resort; and affected families are entitled to rehabilitation and resettlement benefits listed in the Second Schedule. The urgency provisions, which dispense with some of these steps, are confined to defence, national security and emergencies arising from natural calamities, or other emergencies with the approval of Parliament.

Several States have amended the Act in its application to them, with the President's assent, to exempt specified categories of projects from the social impact assessment and consent requirements, so the applicable State law must be checked in each case. Section 101 also provides that land acquired under the Act which remains unutilised for five years from the date of taking possession is to be returned to the original owners or their heirs, or to the State's land bank.