Land Acquisition for Private Company: Supreme Court Quashes Orissa Land Acquisition for Vedanta University (2023)

Introduction

Date of the Judgment: April 12, 2023

Citation: 2023 INSC 361

Judges: M.R. Shah, J., Krishna Murari, J.

Can a State Government acquire vast tracts of agricultural land for a private company, especially when the project’s purpose is a proposed, not yet established, university? The Supreme Court of India recently addressed this critical question in a case involving the Anil Agarwal Foundation and the State of Orissa. The Court’s decision highlights the importance of adhering to the Land Acquisition Act, 1894, and the Land Acquisition (Companies) Rules, 1963, particularly when private entities are involved. The judgment underscores the need for transparency and adherence to legal procedures in land acquisition, especially when it impacts a large number of people. The bench comprised Justices M.R. Shah and Krishna Murari, who delivered a unanimous verdict.

Case Background

The case revolves around the acquisition of approximately 6000 acres of land in Orissa, affecting about 6000 families and 30,000 people, for the proposed Vedanta University. The process began with an application by Mohit Kumar Rana of A.T. Kearney Limited on June 23, 2006, stating that Vedanta Resources Limited intended to establish a university in Orissa. The application requested the State Government to provide 15,000 acres of land near Puri and to coordinate the land acquisition process.

A Memorandum of Understanding (MoU) was signed between the Government of Orissa and Vedanta Foundation on July 19, 2006, where the government confirmed the availability of approximately 8000 acres of contiguous land. Initially, the land was to be acquired for Sterlite Foundation, which later changed its name to Vedanta Foundation and then to Anil Agarwal Foundation. The State Government sought legal opinions on whether the foundation was an educational foundation and if the land acquisition was for a public purpose.

After several correspondences and changes in the company’s status from private to public, notifications under Section 4(1) of the Land Acquisition Act, 1894, were issued between December 13, 2006, and August 21, 2007, for 6917.63 acres. Declarations under Section 6 were issued for 5619.05 acres. The possession of 3342 acres of acquired land and 495 acres of government land was handed over to the beneficiary, with compensation of Rs. 41.96 crores disbursed.

Timeline

Course of Proceedings

The High Court of Orissa allowed the writ petitions, including a public interest litigation (PIL), and quashed the land acquisition proceedings. The High Court held that the acquisition proceedings violated Sections 4, 5A, 6, 9, 10, 11, 12(2), 23, and 24 of the Land Acquisition Act, 1894, along with Part VII of the Act. It also found that the acquisition was initiated based on misrepresentations and fraud by the Vedanta Foundation. The High Court directed that the possession of the acquired lands be restored to the landowners, who were to refund the compensation received. Additionally, the grant of government land to the beneficiary company was quashed, with directions for the State Government to resume the leased lands.

The High Court’s decision was based on the grounds that the land acquisition process was flawed from the beginning, with the beneficiary company misrepresenting facts and playing fraud on the State Government. The High Court also emphasized that the public interest was affected, and there was a violation of the rule of law. The PIL was deemed maintainable as it was filed on behalf of small landholders who could not approach the court themselves.

Legal Framework

The judgment primarily concerns the interpretation and application of the Land Acquisition Act, 1894, and the Land Acquisition (Companies) Rules, 1963. Key provisions include:

• Section 4(1), Land Acquisition Act, 1894: This section deals with the publication of a preliminary notification for land acquisition. The notification must be published in the Official Gazette and in two daily newspapers circulating in the locality. The Collector must also give public notice of the substance of the notification.
• Section 5A, Land Acquisition Act, 1894: This section provides an opportunity for persons interested in the land to file objections to the proposed acquisition. The Collector must hear these objections and submit a report to the government.
• Section 6, Land Acquisition Act, 1894: This section deals with the declaration of intended acquisition after considering objections under Section 5A.
• Section 9, Land Acquisition Act, 1894: This section mandates the issuance of notices to interested persons to file claims for compensation.
• Section 11, Land Acquisition Act, 1894: This section deals with the inquiry into claims and the passing of an award.
• Section 12(2), Land Acquisition Act, 1894: This section requires the Collector to give notice of the award to the interested persons.
• Sections 23 and 24, Land Acquisition Act, 1894: These sections outline the factors to be considered in determining compensation.
• Section 39, Land Acquisition Act, 1894: This section states that the provisions of Sections 6 to 16 and 18 to 37 shall not be put in force to acquire land for any company unless the previous consent of the appropriate Government is obtained and the company has executed the agreement.
• Section 40, Land Acquisition Act, 1894: This section specifies the conditions under which the government can give consent for land acquisition for a company. It includes that the purpose of the acquisition is for erecting dwelling houses for workmen or for a public purpose.
• Section 41, Land Acquisition Act, 1894: This section requires the company to execute an agreement with the government, outlining the terms and conditions of the acquisition.
• Section 44B, Land Acquisition Act, 1894: This section restricts the acquisition of land for private companies (other than government companies) under Part VII, except for purposes mentioned in Section 40(1)(a).
• Rule 3, Land Acquisition (Companies) Rules, 1963: This rule mandates the constitution of a Land Acquisition Committee to advise the government on matters related to land acquisition for companies.
• Rule 4, Land Acquisition (Companies) Rules, 1963: This rule outlines the matters the government must be satisfied with before initiating acquisition proceedings, including the company’s efforts to find suitable land and negotiate a reasonable price.

The Court emphasized that these provisions and rules must be strictly complied with, especially when acquiring land for private companies. The legal framework also includes the Companies Act, 1956, which defines public and private companies.

Arguments

The appellants, represented by Shri C. Aryama Sundaram and Shri Rakesh Dwivedi, argued that the High Court erred in quashing the entire acquisition proceedings, especially since many landowners did not object under Section 5A of the Act. They highlighted that notifications under Section 4 were issued, objections were invited, and possession of a significant portion of the land was handed over to the beneficiary. They also pointed out that the beneficiary company was converted to a public company before the Section 4 notifications were issued. The appellants also argued that the acquisition was for a public purpose, as the beneficiary company intended to establish a renowned university. They contended that the Land Acquisition (Companies) Rules, 1963, were complied with, and the rehabilitation measures were taken.

The respondents, represented by Shri Prashant Bhushan, argued that the land was identified by the appellant company, not the Government, and that the Government acted arbitrarily by favoring the company. They contended that the Vedanta Foundation had no prior track record in education and that the Government did not consider the company’s history of violations. The respondents also argued that the company was never a valid public company, that the Section 41 agreement was executed on false premises, and that no inquiry was conducted under the Rules, 1963. They also highlighted the environmental impact of the acquisition, including the presence of rivers and the proximity to a wildlife sanctuary. The respondents emphasized that the land acquisition was a violation of the Land Acquisition Act, 1894, and the Rules, 1963.

The arguments were broadly categorized as follows:

Issues Framed by the Supreme Court

The Supreme Court considered the following issues, as identified by the High Court:

1. Whether the Anil Agarwal Foundation, the beneficiary company, is a public company under Section 3(1)(IV) of the Companies Act, 1956, and whether a private guarantee limited company can be converted to a public company under Section 25 of the Companies Act?
2. Whether the State Government can acquire the lands for the proposed Vedanta University, considering Section 44-B of the Land Acquisition Act, 1894?
3. Whether the State Government could initiate acquisition proceedings without complying with Sections 39, 41, and 42 of the Land Acquisition Act and Rules 3(2) and 4 of the Land Acquisition (Companies) Rules, 1963?
4. (A) Whether the Collector was required to conduct an inquiry under Section 5A even without objections and (B) Whether the Collector was required to submit a report under Rule 4?
5. (A) Whether the owners waived their rights by not objecting and (B) Whether there was delay in filing the writ petitions?
6. Whether the Core Committee complied with Section 40(2) of the Land Acquisition Act, 1894, and whether it dispensed with Rules 3 and 4 of the Land Acquisition (Companies) Rules, 1963? and Whether the State Government complied with Rules 3(2) and 4 of the Rules, 1963?
7. Whether the beneficiary company executed a valid agreement under Section 41 of the Land Acquisition Act? and Whether the MoU dated 19/07/2006 can be considered a valid agreement under Section 41?
8. Whether the Collector determined the approximate amount of compensation under Sections 23 and 24 of the Land Acquisition Act?
9. Whether the awards were passed in compliance with Sections 9, 10, and 11 of the Land Acquisition Act and whether possession was taken correctly?
10. (A) Whether the acquisition is legal considering the presence of a wildlife sanctuary and rivers and (B) Whether it violates environmental laws?
11. Whether the PIL must succeed if issues 12(A) and (B) are answered in favor of the appellants and for violation of the Land Acquisition Act and Rules, 1963? and Whether the acquisition proceedings are liable to be quashed? and What relief are the petitioners entitled to?

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues:

Authorities

The Court considered the following cases and legal provisions:

Final Judgment

The Supreme Court upheld the High Court’s decision, dismissing the appeals filed by the Anil Agarwal Foundation and the State of Orissa. The Court held that the land acquisition proceedings were illegal and violated the Land Acquisition Act, 1894, and the Land Acquisition (Companies) Rules, 1963. The Court emphasized that the acquisition was not for a public purpose and that the beneficiary company was not a valid public company at the relevant time. The Court also noted the environmental concerns and the violation of the doctrine of public trust.

The Court directed that the possession of the acquired lands be restored to the original landowners, who were to refund the compensation received. The grant of government land to the beneficiary company was also quashed, with directions for the State Government to resume the leased lands. The Court emphasized the importance of adhering to legal procedures and ensuring transparency in land acquisition, particularly when private entities are involved.

Flowchart of Land Acquisition Process

Key Takeaways

The Supreme Court’s judgment in the Vedanta University case serves as a significant precedent for land acquisition cases in India. The key takeaways include:

• Strict Compliance: Strict compliance with the provisions of the Land Acquisition Act, 1894, and the Land Acquisition (Companies) Rules, 1963, is mandatory, especially when acquiring land for private companies.
• Public Purpose: Land cannot be acquired for a private company unless it serves a genuine public purpose, as defined under the Land Acquisition Act. The purpose must be clearly defined and not merely a proposed project.
• Section 5A Inquiry: A proper inquiry under Section 5A of the Act is mandatory, irrespective of whether objections are filed by the landowners. This inquiry must be conducted fairly and impartially.
• Land Acquisition Committee: The Land Acquisition Committee must be properly constituted and must conduct a thorough inquiry as per the Rules, 1963.
• Transparency: Transparency and adherence to legal procedures are essential in land acquisition, particularly when it involves private companies and a large number of people.
• Public Interest Litigation: Public Interest Litigation (PIL) is maintainable in cases involving large-scale land acquisitions that affect the public interest, especially when the affected people are unable to approach the court themselves.
• Environmental Concerns: Environmental concerns, including the presence of rivers and wildlife sanctuaries, must be considered in land acquisition decisions. The doctrine of public trust must be upheld.
• Public Company Status: A private company cannot be converted to a public company merely to circumvent the provisions of the Land Acquisition Act. The company must fulfill the criteria to be considered a public company under the Companies Act.

Conclusion

The Supreme Court’s decision in the Vedanta University case is a landmark judgment that emphasizes the importance of adhering to legal procedures and ensuring transparency in land acquisition. The judgment underscores the need for a fair and just process, particularly when the acquisition involves private companies and affects a large number of people. It serves as a reminder that the rule of law must be upheld, and the rights of landowners must be protected. This case will have a lasting impact on land acquisition laws in India and will serve as a guide for future cases. The judgment reaffirms the judiciary’s role in protecting the rights of citizens and ensuring that the State acts within the bounds of the law.