Supreme Court Clarifies ‘Transfer’ in Land Acquisition Cases: Rameshwar vs. State of Haryana (21 July 2022)

Introduction

Date of the Judgment: 21 July 2022

Citation: Rameshwar and Ors. vs. State of Haryana & Ors., Miscellaneous Application No. 50 of 2019 in Civil Appeal No. 8788 of 2015

Judges: Uday Umesh Lalit, J., S. Ravindra Bhat, J., Pamidighantam Sri Narasimha, J.

What exactly constitutes a ‘transfer’ of land when dealing with complex development agreements? The Supreme Court of India grappled with this question in a series of applications seeking clarification of its earlier judgment in Rameshwar v. State of Haryana. This case revolves around whether various agreements, such as collaboration and development agreements, amount to a ‘transfer’ of land, especially when licenses were issued during the period when the state had initially decided to acquire the land, but later withdrew from the acquisition.

The core issue was whether these agreements, which often involve handing over possession and development rights to colonizers/developers, should be considered ‘transfers’ even if the original landowners retained nominal title. The court needed to determine if such transactions fell under the ambit of its previous judgment, which invalidated transfers made during a specific period to prevent fraudulent land deals. The bench was composed of Justices Uday Umesh Lalit, S. Ravindra Bhat, and Pamidighantam Sri Narasimha.

Case Background

The case originates from a notification issued on 27 August 2004, under Section 4 of the Land Acquisition Act, 1894, for acquiring land in Haryana. This was followed by a declaration under Section 6 of the same Act. However, on 29 January 2010, the State of Haryana decided not to proceed with the acquisition. This decision was made after objections from landowners and after many had transferred their land to colonizers/developers at reduced rates, who in turn obtained licenses from the Department of Town and Country Planning (DTCP).

The Supreme Court, in its main judgment, found that the State’s decision to withdraw from the acquisition was a fraud on power, as the state machinery was used to benefit private entities. The court invalidated all transfers that took place between 27 August 2004 and 29 January 2010, the “suspect period”. This was done to address the exploitation of landowners who were forced to sell their lands at lower prices due to the impending acquisition. The court also issued consequential directions regarding the vesting of land, licenses, and compensation.

Timeline

Legal Framework

The primary legal framework involved in this case is the (now repealed) Land Acquisition Act, 1894. The key sections are:

• Section 4: This section deals with the publication of a preliminary notification indicating the government’s intention to acquire land.
• Section 6: This section involves the declaration that the land is required for a public purpose, solidifying the government’s intent to acquire the land.

The court also considered the implications of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013, specifically in relation to Section 24(2), which deals with the lapse of acquisition proceedings.

The main judgment had invalidated the State’s decision to withdraw from acquisition, deeming it a “fraud on power.” The present judgment clarifies the term “transfer” used in the main judgment, especially in the context of collaboration and development agreements.

Arguments

The colonizers/developers argued that the term ‘transfer’ should only apply to formal transfers of title. They contended that collaboration and development agreements, which grant development rights but not formal ownership, should not be considered transfers. They also claimed that since the original landowners retained title, these agreements were legitimate business transactions.

On the other hand, HSIIDC and the State of Haryana argued that these agreements effectively transferred control and enjoyment of the land to the developers, thereby impeding the landowners’ rights. They emphasized that these agreements were a key part of the scheme to circumvent the acquisition process, leading to the issuance of licenses and the eventual decision not to acquire the land. They contended that the real purpose behind these transactions should be viewed holistically, not just the retention of title by the landowners.

The following table categorizes the sub-submissions made by the parties:

Issues Framed by the Supreme Court

The Supreme Court framed the following key issue for consideration:

1. What is the nature of the term ‘transfer’ as used in para 42 of the main judgment in Rameshwar v. State of Haryana, and does it include collaboration agreements, development agreements, and licenses issued during the suspect period?

The Court also dealt with the following sub-issues:

1. Whether the lands of M/s. Paradise Systems Pvt. Ltd., M/s. Karma Lakelands Pvt. Ltd., and Frontier Home Developers Pvt. Ltd. fall within the ambit of the deemed award?
2. Whether the lands owned by M/s. R.P. Estates Pvt. Ltd. and M/s. Subros Ltd. should be included in the deemed award?
3. What directions should be issued regarding the Express Greens/DLF Home Developer Ltd. project?
4. What directions should be issued regarding the M/s Kalinga Realtors Pvt. Ltd. project?
5. What directions should be issued regarding the ABW Infrastructure Ltd. project?
6. Whether the lands of Speed Town Planners Pvt. Ltd. should be included in the deemed award?
7. What directions should be issued regarding the Innovative Infradevelopers Pvt. Ltd. project?
8. Whether the claims of Dharamvir & Ors. should be considered?

Treatment of the Issue by the Court

The following table demonstrates how the Court decided the issues:

Authorities

The Supreme Court relied on several authorities to interpret the term ‘transfer’ and to understand the nature of collaboration agreements. These authorities were categorized by the legal point they addressed:

Nature of Collaboration Agreements:

• Faqir Chand Gulati vs Uppal Agencies Pvt. Ltd. & Anr., (2008) 10 SCC 345 – Supreme Court of India: This case clarified that a collaboration agreement is essentially a contract for construction, with the landowner being a consumer and the builder a service provider.
• Ashok Kumar Jaiswal v. Ashim Kumar Kar, AIR 2014 Cal 92 – High Court of Calcutta: This case discussed the nature of development agreements, noting that they entail a transfer of immovable property rights.
• Sushil Kumar Agarwal v Meenakshi Sadhu & Ors., (2019) 2 SCC 241 – Supreme Court of India: This case emphasized the need to analyze the terms of collaboration agreements to determine if any ‘charge’ or ‘interest’ had been created in the land.

Definition of ‘Transfer’ under Income Tax Act:

• Unitech Ltd. v. Union of India, (2016) 2 SCC 569 – Supreme Court of India: This case held that a collaboration agreement constitutes a ‘transfer’ under the Income Tax Act, 1961, even without a formal transfer of title.

Land Acquisition Act, 1894:

• Section 4: Publication of preliminary notification for land acquisition.
• Section 6: Declaration that land is required for a public purpose.

The following table shows how the court treated these authorities:

Judgment

The following table summarizes how the Court treated the submissions made by the parties:

The Court’s view of the authorities is as follows:

✓ Faqir Chand Gulati vs Uppal Agencies Pvt. Ltd. & Anr. [(2008) 10 SCC 345]*: The Court used this case to understand the nature of collaboration agreements, recognizing them as contracts for construction where the landowner is a consumer and the builder is a service provider.

✓ Ashok Kumar Jaiswal v. Ashim Kumar Kar [AIR 2014 Cal 92]*: The Court relied on this case to understand the nature of development agreements, noting that they entail a transfer of immovable property rights.

✓ Sushil Kumar Agarwal v Meenakshi Sadhu & Ors. [(2019) 2 SCC 241]*: The Court used this case to emphasize the need to analyze the terms of collaboration agreements to determine if any ‘charge’ or ‘interest’ had been created in the land.

✓ Unitech Ltd. v. Union of India [(2016) 2 SCC 569]*: The Court followed this case to interpret ‘transfer’ broadly, including cases where there is no formal transfer of title but a transfer of rights.

What weighed in the mind of the Court?

The Supreme Court’s reasoning was heavily influenced by the need to prevent the exploitation of landowners, ensure that the state machinery was not used for private gain, and protect the interests of genuine home buyers. The court emphasized that the collaboration agreements, while not transferring formal title, effectively transferred control and enjoyment of the land, which was a key part of the scheme to circumvent the acquisition process. The court also noted that the consideration paid to landowners was far higher than acquisition rates, indicating an intent to profit from the situation.

The following table ranks the sentiment analysis of the reasons given by the Supreme Court:

The ratio of fact to law that influenced the court’s decision is as follows:

Logical Reasoning

The Court’s logical reasoning for the main issue is as follows:

The Court’s logical reasoning for the specific issues is as follows:

Key Takeaways

✓ The term ‘transfer’ is interpreted broadly to include collaboration and development agreements, as well as licenses issued during the suspect period.

✓ Landowners who entered into collaboration agreements during the suspect period, even if they retained title, are considered to have transferred their land.

✓ The court prioritized the protection of genuine home buyers who had invested in projects, while ensuring that those who profited from fraudulent land deals did not escape accountability.

✓ The judgment clarifies that the state machinery should not be used for private gain and that all such transactions will be scrutinized.

Directions

The Supreme Court issued several directions, including:

• Specific payments to be made by Green Heights and Godrej to HSIIDC.
• Inclusion of Karma’s lands in the deemed award.
• Exclusion of R.P. Estates and Subros’ lands from the deemed award.
• Directions for validation of title and completion of projects for Express Greens (DLF).
• Verification of claims and arbitration for Kalinga.
• Refund to allottees for ABW project.
• Inclusion of Speed Town’s lands in the deemed award.
• Directions for allottees’ rights and inclusion of hotel block for Innovative Infradevelopers.
• Rejection of claims of Dharamvir and others; vesting of lands with HSIIDC.
• Directions to State to ensure that all references pertaining to the acquisition are answered as expeditiously as possible.

Development of Law

The ratio decidendi of this case is that the term ‘transfer’ in the context of land acquisition includes not only formal transfers of title but also collaboration agreements, development agreements, and licenses issued during the suspect period. This interpretation broadens the scope of what constitutes a ‘transfer’ in such cases, aiming to prevent the exploitation of landowners and the misuse of state machinery for private gain.

This judgment clarifies and expands upon the main judgment in Rameshwar v. State of Haryana, providing a more comprehensive understanding of land transactions during acquisition proceedings. The court’s decision emphasizes that the substance of the transaction, rather than its form, should be considered when determining if a ‘transfer’ has occurred.

Conclusion

The Supreme Court’s judgment in Rameshwar vs. State of Haryana clarifies the meaning of ‘transfer’ in land acquisition cases, ensuring that those who tried to circumvent the acquisition process do not benefit from their actions. By including development agreements and licenses within the definition of ‘transfer’, the court has broadened the scope of its previous judgment and has provided a robust framework for addressing fraudulent land transactions. The court has also taken steps to protect the interests of genuine home buyers, while also ensuring that the state’s resources are not misused.